-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LkISCUQL0IZ2EnMCEFRv4cx2JOUpkBMphl083RRLPvw+1heXBZUDZn8cBBqmAF/B WwR7wo0HHnUtX2JJTQtO1Q== 0000313212-96-000076.txt : 19960613 0000313212-96-000076.hdr.sgml : 19960613 ACCESSION NUMBER: 0000313212-96-000076 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960612 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUNDS INC CENTRAL INDEX KEY: 0000313212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521175211 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02958 FILM NUMBER: 96579852 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL TRUST DATE OF NAME CHANGE: 19900301 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUND INC DATE OF NAME CHANGE: 19890914 N-30D 1 Semiannual Report International Discovery Fund April 30, 1996 T. Rowe Price REPORT HIGHLIGHTS o Smaller foreign companies performed well over the last six months. In general, returns to U.S. investors were only slightly dampened by a strengthening of the dollar. o Southeast Asian markets performed best, led by Malaysia and Indonesia. Japan continued its recovery. European markets performed well, although Germany and the U.K. trailed. Latin American markets were mixed. o The International Discovery Fund outpaced its benchmark for the 12 months ended April 30. While producing a solid 13.4% return for the last six months, it trailed its benchmark. o Small international stocks should continue to do well for the rest of the year, especially in Asia and Latin America. The economic environment is generally favorable, earnings growth is good, and we believe valuations are reasonable. Fellow Shareholders Smaller foreign companies generally performed well over the last six months, although returns to U.S. investors were dampened slightly by a strengthening in the dollar. Southeast Asian markets performed best, particularly Malaysia and Indonesia. European markets, paced by Spain and Italy, provided mostly good returns, while Germany and the U.K. trailed. The Japanese market continued to recover even though some yen weakness trimmed U.S. dollar returns. Latin American markets were mixed, with Mexico up robustly but Chile showing a loss. Performance Comparison Periods Ended 4/30/96 6 Months 12 Months _____________________________________________________________________________ International Discovery Fund 13.42% 16.74% FTA Euro-Pacific Small Cap Index 18.56 12.28 The International Discovery Fund outperformed its benchmark for the 12 months ended April 30 due to advantageous stock selection and country weightings. While showing good results for the last six months, the fund lagged its benchmark because of relatively low exposure to the surging Japanese market and some poor stock selection in Southeast Asia. MARKET REVIEW Europe European smaller companies rebounded strongly early in 1996 after the lackluster final months of 1995. The prospect of lower interest rates and some pickup in growth combined with seasonal factors to push prices higher. Europe remained your fund's largest regional weighting at 40% of net assets. We don't expect French small companies to sustain their recent exceptional performance and therefore took profits in SITA, a waste disposal contractor, and Manutan, a mail order wholesaler. However, we made a new investment in radio operator NRJ because its recovery from international difficulties could lead to higher earnings. In Belgium, we added shares in Barco, a diversified electronics company that is growing strongly. Italian small companies also produced nice gains. We reduced our stake in Safilo, a manufacturer of ophthalmic and fashion sunglasses, which is benefiting from global fashion trends, and sold Editoriale la Republica, a newspaper publisher facing increased competition. We added to holdings in Pagnossin, a ceramics manufacturer, and La Doria, a food processor benefiting from industrywide restructuring. _____________________________________________________________________________ AFTER LAGGING SHARPLY LAST YEAR, SMALLER STOCKS IN THE U.K. REGAINED SOME GROUND, BUOYED BY THE PROSPECT OF STRONGER CONSUMER DEMAND AND PICKUPS IN THE HOUSING AND RETAIL SECTORS. In Germany, the market performed reasonably well despite concerns that the economy is fundamentally uncompetitive. On a positive note, the deutschemark fell back to early-1995 levels, which should help exports, and the Bundesbank led the move toward lower European interest rates, which should encourage economic growth. Of course, returns to U.S. investors were significantly dampened by the weakening deutschemark. We expect smaller companies to move ahead once the economy shows signs of improvement. In the Netherlands, we made two big purchases, Getronics and Atag. Getronics has been unique in the Dutch technology sector, producing consistently good earnings. Atag, a manufacturer of bicycles, cooking appliances, light fittings, and other consumer products, is acquiring companies and aggressively cutting costs. We believe it will produce earnings growth of around 15% a year. After lagging sharply last year, smaller stocks in the U.K. regained some ground, buoyed by the prospect of stronger consumer demand and pickups in the housing and retail sectors. We bought a position in Cordiant, the advertising group being revived by new management. We also bought more shares in Corporate Services Group, a contract labor provider whose recent acquisition of the Blue Arrow recruitment business could boost profits. The Norwegian economy remained robust, and this strength was reflected in significantly higher valuations. Therefore, we trimmed our overweighting here, reducing our holdings in Sysdeco Group, a computer software company, and Transocean, a drilling rig operator. Japan The economy continued its rebound from last year's deflation, exhibiting modest but steady growth. Wholesale prices, which fell for most of last year due to the strong yen's negative effect on international demand, clawed their way out of negative territory and remained essentially flat. After nearly four years of declines, department store sales showed a slight increase for the year to April 30. However, our optimism is tempered somewhat because these increases are measured against the abnormally low levels following last year's Kobe earthquake and the Tokyo subway gas attacks. We feel that consumption will rise slowly as job security and incomes improve. Market Performance Six Months Local Local Currency U.S. Ended 4/30/96 Currency vs. U.S. Dollars Dollars _____________________________________________________________________________ France 21.4% - 5.5% 14.8% Germany 13.9 - 8.2 4.6 Hong Kong 16.0 - 0.1 16.0 Indonesia 31.4 - 2.5 28.1 Italy 15.2 1.9 17.4 Japan 21.1 - 2.4 18.2 Malaysia 25.5 2.0 28.0 Mexico 36.1 - 4.5 30.1 Netherlands 24.8 - 7.9 14.9 Norway 18.2 - 5.4 11.8 Singapore 15.2 0.6 15.9 Sweden 12.4 - 2.3 9.9 United Kingdom 10.8 - 4.9 5.4 Source: Randall Helms Database, using MSCI Indices. Capital expenditures should continue to show modest growth despite the long-range strategy of moving production offshore because simple replacement capacity is now needed. Although it got a late start in combatting deflation, the Bank of Japan continued to print money in an effort to spur the economy, with the money supply as measured by M1 growing 16% in the year through March. We expect small-capitalization companies to outperform their larger counterparts, as they typically do in an improving economy, although investors may wait for higher bond yields to provide evidence that deflation has been licked. Small-cap valuations remained cheaper than large-caps, but not markedly so. By our estimates, the Tokyo Stock Exchange First Section (large companies) was selling for 40 times 1996 earnings, excluding the loss-riddled banking sector, while the Exchange's Second Section (smaller companies) was selling for 35 times earnings. We see no shortage of attractive smaller companies with healthy balance sheets in interesting niches. During the last six months, we added to positions in real estate and services while trimming our exposure to capital equipment stocks. With an improving outlook for commercial property, we added to positions in Toc and Daibiru, both of which were priced at substantial discounts to book value, and initiated positions in the construction machinery lease companies, Nishio Rent All and Wakita. Southeast Asia Hong Kong stocks drew some strength from the real estate sector, where prices showed signs of bottoming. After a strong run through January, however, the market hit a bump when U.S. bond prices dropped (Hong Kong is sensitive to U.S. interest rates because its currency is pegged to the dollar). Tensions between Taiwan and mainland China exacerbated the market's problems. Nevertheless, your fund benefited from the first signs in five years of a small-cap recovery. We trimmed some holdings that had risen rapidly, but bought more shares in China Apollo Holdings, a health drink concern in mainland China. Chart 1 - Geographic Diversification Malaysia was one of the star markets of the last six months, rising 28% in dollar terms. Investors became excessively gloomy on Malaysia last autumn, and foreigners sold aggressively. However, a surprisingly good trade surplus report for December caught the bears off-guard, and foreigners rushed back into the market in February. We trimmed our exposure to Malaysia last August but have remained overweighted based on the depth and energy of the economy, sensible and prescient infrastructure spending, and policies that seem to be cooling the economy without freezing it. We recently added stockbroker, TA Enterprise; newspaper company, Star Publications, on the strength of lower paper prices and booming advertising; Time Engineering, whose optical fiber network is the target of a merger; and Tan Chong Motor Holdings, whose Singapore property will be redeveloped. We took profits on information technology consultant, Lityan Holdings, and sold more of our real estate holdings. In Indonesia, regulatory risk again dominated the headlines, reflecting what continued to be a highly controlled economy. This time, a new National Auto Policy was announced, giving an exclusive license with key tax advantages to a company connected to President Suharto's family. Nevertheless, the Indonesian market gained a resounding 28% over the half, led by strong earnings from the market's largest stock, Telekom Indonesia. Industry Diversification Percent of Percent of Net Assets Net Assets 10/31/95 4/30/96 _____________________________________________________________________________ Services 22.5% 25.0% Capital Equipment 25.1 22.5 Consumer Goods 16.2 16.2 Finance 14.3 15.3 Materials 13.8 9.8 Energy 2.2 2.2 Multi-Industry 2.0 2.0 Gold Mines - 0.3 Miscellaneous 0.8 0.2 Reserves 3.1 6.5 _____________________________________________________________________________ Total 100.0% 100.0% In Singapore, the economy continued slowing, with non-oil exports up a mere 5.2% through the year ended in February. Blame can be placed on the slowing growth of global demand for electronics. Earnings reports were disappointing, with manufacturing companies, notably the ship-repair sector, showing the worst results. However, with continued low interest rates, asset prices again improved, which benefited our overweighting in real estate stocks, such as Parkway Holdings. Latin America Smaller stocks in Latin America endured a miserable 1995 but have generally picked up in 1996, with the larger markets of Brazil and Mexico leading the recovery. In Brazil, the rapid drop in inflation and strong economic growth have dramatically improved the lot of the average Brazilian, as well as President Cardoso's standing in the opinion polls. The economy appears sound over the short term, with the currency steady, the trade account in balance, and interest rates falling. However, constitutional reform is a must for this rosy scenario to continue. Congress passed some tax legislation, and the much-delayed privatization of the main electricity distributor is scheduled for the second quarter. Private sector companies, particularly appliance manufacturers, steel producers, and retailers, have enjoyed good performance due to increased demand. We remain enthusiastic about Brazil over the long term. In Mexico, the economy showed signs of recovery, with slight increases in retail and car sales. The peso steadied and interest rates inched downward. With the expectation that this modest revival will continue, we purchased shares in Controladora Commercial Mexicana, a food retailer that was attractively priced, and Grupo Cementos de Chihuahua, a regional cement producer. In Chile, fears of surging economic growth pushed interest rates higher. Meanwhile, a lack of growth restrained Argentina's stock market, and continued tension between President Menem and Finance Minister Cavallo offered little support. Political instability also caused investor concern in Colombia, with President Samper struggling to avoid impeachment for misuse of campaign funds, and in Peru, where Prime Minister Cordova resigned over policy differences with President Fujimori. INVESTMENT POLICY AND OUTLOOK Smaller companies have started the year well, and we are hopeful that this trend will continue through the rest of 1996. The economic backdrop remains reasonable, corporate earnings growth is good, bond markets should not weaken from present levels, and valuations are generally acceptable. We believe smaller companies in Asia and Latin America can make further progress this year, and attractive investment opportunities can also be found in both Japan and Europe. Respectfully submitted, Martin G. Wade President May 24, 1996 Revisiting the Case for International Equity Investing Chart 2 - Correlation of Returns Over the past 15 years, a growing number of U.S. investors have added international stocks to their portfolios, mixing domestic and foreign stocks in the pursuit of higher overall returns with lower volatility. In recent months, however, some naysayers have questioned the benefits of international diversification. Some claim that the era of higher international returns is over, citing the recent superior performance of U.S. stocks. Others point to short periods when U.S. and international markets moved in tandem, so-called "high correlation," as proof that foreign stocks no longer offer adequate diversification. On the contrary, performance and correlation, when viewed over the long term, reinforce the case for international diversification. For instance, although U.S. stocks have recently outperformed, foreign stocks have outpaced them in seven of the last 12 years. (We used the MSCI Europe, Australia, and Far East Index - EAFE - to measure foreign stocks and the Standard & Poor's 500 Stock Index for domestic equities.) Furthermore, correlations have remained low over the long term. The chart shows the correlation of various foreign markets to the U.S. over two 10-year periods. A measurement of 100% would indicate that foreign stocks moved in the same direction as U.S. stocks all of the time. The overall correlation of foreign stocks has actually declined: from 1981 through 1990, the EAFE and the S&P 500 moved in the same direction 41% of the time, but from 1986 through 1995, the correlation dropped to 34%. Correlations declined in the Netherlands, Germany, and Japan and rose only modestly in the U.K. and Hong Kong. Inevitably, there are short periods when foreign markets move with the U.S. market, usually when the latter is experiencing significant volatility. In general, however, foreign markets follow their own path depending mostly on the unique fundamentals of each country. In our opinion, the case for international diversification remains solid. Foreign stocks may be poised to regain leadership because many international economies are at earlier stages of expansion than the U.S. economy. If correlations remain low over the long term, as we expect, diversifying into foreign stocks could continue to be an effective way to limit risk and enhance returns. T. Rowe Price International Discovery Fund Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 4/30/96 _____________________________________________________________________________ Telekom Indonesia, Indonesia 0.9% Phileo Allied, Malaysia 0.8 China Trust, Taiwan 0.8 Otra, Netherlands 0.8 JBA Holdings, United Kingdom 0.7 _____________________________________________________________________________ Ranstad Holdings, Netherlands 0.7 Test Rite International, Taiwan 0.6 Yageo, Taiwan 0.6 Corporate Services Group, United Kingdom 0.6 MTD Capital, Malaysia 0.6 _____________________________________________________________________________ Regal Hotel Group, United Kingdom 0.6 Keyence, Japan 0.6 British Biotechnology, United Kingdom 0.5 Matthew Clark, United Kingdom 0.5 Ashtead Group, United Kingdom 0.5 _____________________________________________________________________________ HTV Group, United Kingdom 0.5 Druck Holdings, United Kingdom 0.5 Mayflower, United Kingdom 0.5 Britton Group, United Kingdom 0.5 TA Enterprise, Malaysia 0.5 _____________________________________________________________________________ Rhoen Klinikum, Germany 0.4 Mirror Group, United Kingdom 0.4 Malaysian Assurance Alliance, Malaysia 0.4 Hoganas, Sweden 0.4 China Apollo Holdings, China 0.4 _____________________________________________________________________________ Total 14.3% T. Rowe Price International Discovery Fund 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. Chart 3 - SEC Graph - International Discovery Fund Average Annual Compound Total Return 1 3 5 Since Inception Periods Ended 4/30/96 Year Years Years Inception Date _____________________________________________________________________________ International Discovery Fund 16.74% 8.56% 5.70% 8.97% 12/30/88 Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. T. Rowe Price International Discovery Fund Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Year 10 Months# Year Ended Ended Ended Ended 4/30/96 10/31/95 10/31/94 10/31/93 12/31/92 12/31/91 12/31/90 NET ASSET VALUE Beginning of period $ 14.43 $ 17.63 $ 16.16 $11.68 $ 12.99 $ 11.75 $ 13.94 Investment activities Net investment income 0.01 0.10 0.04 0.07* 0.13* 0.13* 0.14* Net realized and unrealized gain (loss) 1.91 (2.38) 1.52 4.41 (1.31) 1.24 (1.91) Total from investment activities 1.92 (2.28) 1.56 4.48 (1.18) 1.37 (1.77) Distributions Net investment income (0.10) (0.06) (0.07) - (0.13) (0.13) (0.15) Net realized gain (0.02) (0.87) (0.02) - - - (0.27) Total distri- butions (0.12) (0.93) (0.09) - (0.13) (0.13) (0.42) Redemption fees added to paid- in-capital - 0.01 - - - - - NET ASSET VALUE End of period $ 16.23 $ 14.43 $ 17.63 $16.16 $ 11.68 $ 12.99 $ 11.75 Ratios/Supplemental Data Total return 13.4% (13.1)% 9.7% 38.4%* (9.1)%* 11.7%* (12.8)%* Ratio of expenses to average net assets 1.47%! 1.50% 1.50% 1.50%!* 1.50%* 1.50%* 1.50%* Ratio of net investment income to average net assets 0.12%! 0.55% 0.38% 0.81%!* 1.07%* 1.03%* 1.10%* Portfolio turnover rate 52.2%! 43.5% 57.4% 71.8%! 38.0% 56.3% 44.0% Average commission rate paid $0.0036 - - - - - - Net assets, end of period (in thousands) $334,562 $325,374 $503,442 $329,001 $166,362 $166,819 $136,660 * Excludes expenses in excess of a 1.50% voluntary expense limitation in effect through 12/31/93. ! Annualized. # The fund's fiscal year-end was changed to 10/31. The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund Unaudited April 30, 1996 Statement of Net Assets Shares/Par Value In thousands ARGENTINA 0.9% Common Stocks 0.9% Astra Cia Argentina de Petroleo 179,000 $ 381 Capex (Class A) GDR (USD) 23,500 347 Enron Global Power & Pipeline (USD) 31,000 763 Fiplasto (Class B) * 90,000 311 Juan Minetti 12,471 50 Mirgor ADS (USD) 70,000 214 Polledo (Class B) * 351,294 265 Quilmes Industrial (USD) 20,930 251 Sociedad Comercial del Plata * 111,200 333 _____________________________________________________________________________ 2,915 Preferred Stocks 0.0% Quilmes Industrial ADR, new (USD) * 10,465 124 _____________________________________________________________________________ 124 _____________________________________________________________________________ Total Argentina (Cost $3,952) 3,039 AUSTRALIA 1.4% Common Stocks 1.4% AAPC Limited 602,865 403 Acacia Resources * 259,000 651 Advance Bank of Australia 188,153 774 BRL Hardy 154,421 309 ERG Limited 340,791 407 ERG Limited, new * 90,447 107 Henry Walker Group 224,850 350 JNA Telecommunications 163,000 90 Just Jeans Holdings 218,000 368 Leighton Holdings 131,759 424 Stanilite Pacific 209,476 62 Tyndall Australia 440,005 594 Tyndall Australia, new * 48,300 65 Walker 342,000 132 _____________________________________________________________________________ Total Australia (Cost $4,658) 4,736 BELGIUM 0.2% Common Stocks and Warrants 0.2% Barco 5,000 $ 789 National Portefeuille, warrants, exp. 6/15/99 * 25,000 52 _____________________________________________________________________________ Total Belgium (Cost $760) 841 BELIZE 0.1% Common Stocks 0.1% BHI (USD) 20,750 301 _____________________________________________________________________________ Total Belize (Cost $367) 301 BRAZIL 3.6% Common Stocks 0.5% Ceteco Holding (NLG) 33,000 1,396 Cia Paulista de Forca e Luz 6,000,000 388 Telecomunicacoes de Minas Gerais 175,900 12 _____________________________________________________________________________ 1,796 Preferred Stocks 3.1% Artex 257,298,371 348 Banco Nacional 45,992,000 0 Ceval Alimentos 30,200,000 350 Cia Acos Especiais Itabira 89,430,973 386 Cia Bras de Frigorificos 550,000 305 Cia Tecidos Norte de Minas 2,592,018 1,087 Dixie Toga * 1,162,114 1,089 Duratex 18,478,720 885 Eluma * 10,888,000 296 Eucatex 1,044,000 147 Industia e Comercio Chapeco 451,392,000 86 Ipiranga Petroleo 43,600,000 409 Lojas Americanas 4 0 Lojas Arapua 30,100,000 310 Lojas Renner 25,628,220 917 Mesbla * 7,379,900 141 Multibras Eletrodomesticos 407,000 427 Pettenati 7,300,000 88 Refrigeracao Parana 213,387,676 $ 531 Serrana * 535,000 351 Sifco * 3,601,516 163 Telecomunicacoes de Minas Gerais 3,014,000 246 Weg 1,940,910 835 Wentex Textile * 485,230 1,027 _____________________________________________________________________________ 10,424 _____________________________________________________________________________ Total Brazil (Cost $16,029) 12,220 CANADA 0.1% Common Stocks 0.1% Arakis Energy (USD) * 54,000 240 _____________________________________________________________________________ Total Canada (Cost $325) 240 CHILE 0.4% Common Stocks 0.4% Chilquinta ADR (USD) 32,000 516 Genesis Chile Fund (USD) 9,150 373 Sociedad Quimica Minera de Chile ADR (USD) 6,550 350 _____________________________________________________________________________ Total Chile (Cost $1,089) 1,239 CHINA 0.8% Common Stocks 0.8% China Apollo Holdings (HKD) * 5,152,000 1,432 China Merchants Shekou Port Service (Class B) (HKD) 240,600 85 China North Industries Investment (USD) * 288,000 216 Shanghai Diesel Engine (Class B) (USD) 857,500 489 Shanghai New Asia (Class B) (USD) * 646,000 381 _____________________________________________________________________________ Total China (Cost $2,338) 2,603 COLOMBIA 0.3% Common Stocks 0.3% Cementos Diamante (Class B) GDS (USD) 15,000 296 Gran Cadena Almacenes (Class B) ADS (USD) 20,000 340 Maderas y Sinteticos Sociedad Anoma ADR (USD) 14,500 230 _____________________________________________________________________________ Total Colombia (Cost $831) 866 CZECH REPUBLIC 0.2% Common Stocks 0.2% IPS Praha 6,297 $ 710 _____________________________________________________________________________ Total Czech Republic (Cost $453) 710 DENMARK 0.8% Common Stocks 0.6% Bang & Olufsen 8,000 255 Crisplant Industries * 9,200 647 ISS International (Class B) 35,000 990 _____________________________________________________________________________ 1,892 Convertible Bonds 0.2% Danske Traelastkompagni, 5.25%, 1/01/02 DKK 3,100,000 647 _____________________________________________________________________________ 647 _____________________________________________________________________________ Total Denmark (Cost $2,336) 2,539 ECUADOR 0.1% Common Stocks 0.1% La Cemento Nacional GDS (USD) * 1,705 268 _____________________________________________________________________________ Total Ecuador (Cost $369) 268 FINLAND 0.2% Common Stocks 0.2% Huhtamaki 15,000 496 Orion (Class B) 10,000 275 _____________________________________________________________________________ Total Finland (Cost $798) 771 FRANCE 3.0% Common Stocks 3.0% Assystem * 8,811 1,066 But 11,300 755 Cardif 6,400 1,147 Cipe France 11,780 1,026 Concorde * 1,620 260 Ecco Travail Temporaire 8,771 730 Guilbert 7,636 $ 1,255 NRJ 5,000 627 Rexel 3,100 743 Rochefortaise Communication 19,037 766 Societe des Immeubles de France 5,906 405 Spir Communication 4,740 528 Television Francaise 6,000 650 _____________________________________________________________________________ Total France (Cost $6,855) 9,958 GERMANY 3.2% Common Stocks and Warrants 1.0% Altana 1,590 980 Balcke Durr 1,030 205 Buderus 1,250 457 Duerr Beteiligungs 1,000 342 Kampa Haus 9,142 314 Pfleiderer Bau und Verkehrssysteme 1,125 312 Pittler Maschinenfabrik * 9,300 304 Sixt 92 25 Sixt, warrants, exp. 5/17/00 * 125 95 Vereinigte Baubeschlag Handel 2,250 519 _____________________________________________________________________________ 3,553 Preferred Stocks 2.2% Berentzen Gruppe 17,600 627 Edding 1,600 520 Hach 1,600 562 Leffers 2,000 196 Marschollek Lautenschlaeger 1,070 1,080 Rhoen Klinikum 12,610 1,491 Signalbau Huber 4,050 391 Sixt 268 70 Spar Handells 3,110 626 Sto 1,246 525 Villeroy & Boch 3,200 431 Westag & Getalit 3,924 718 _____________________________________________________________________________ 7,237 _____________________________________________________________________________ Total Germany (Cost $10,686) 10,790 GUATEMALA 0.2% Common Stocks 0.2% Basic Petroleum (USD) * 24,580 $ 713 _____________________________________________________________________________ Total Guatemala (Cost $275) 713 HONG KONG 5.0% Common Stocks and Warrants 4.9% Aeon Credit Service * 1,929,000 580 Amway Asia Pacific (USD) 39,000 1,170 Chaifa Holdings 602,000 167 Chaifa Holdings, warrants, exp. 3/31/97 * 480,000 64 Champion Technology 326,000 38 China Hong Kong Photo Products 1,633,035 807 Dah Sing Financial 258,000 717 Fairyoung Holdings 880,000 353 Fairyoung Holdings, warrants, exp. 6/30/96 * 343,200 1 Golden Harvest Entertainment 2,166,000 763 Goldlion Holdings 642,000 539 Harbour Ring International, warrants, exp. 7/17/97 * 1,023,166 8 HKR International, warrants, exp. 6/23/00 * 725,200 230 Hualing Holdings 3,472,000 458 JCG Holdings 1,230,000 1,137 Lai Sun Development 3,609,000 616 Lai Sun Development, warrants, 3/23/99 * 360,900 16 Liu Chong Hing Bank 372,000 515 National Mutual Asia 815,000 690 Orient Overseas International 808,000 627 Pacific Basin Bulk Shipping (USD) 95,000 1,045 Pacific Basin Bulk Shipping, warrants, exp. 9/30/99 (USD) * 113,000 49 Pokphand 808,000 342 QPL International 1,256,000 1,291 Seapower Resources International 3,609,000 387 Sing Tao Holdings 96,000 57 Siu Fung Ceramics 2,916,540 486 South China Morning Post 241,000 164 Union Bank of Hong Kong 720,000 740 Wah Kwong Shipping 400,000 $ 608 Wai Kee Holdings 1,757,926 443 Wing Hang Bank 149,000 545 Winton Holdings 2,406,000 591 World Houseware 1,291,943 157 Yeebo, warrants, exp. 8/31/96 * 83,800 0 _____________________________________________________________________________ 16,401 Corporate Bonds 0.1% Goldlion Capital, 4.875%, 2/01/99 USD 315,000 417 _____________________________________________________________________________ 417 _____________________________________________________________________________ Total Hong Kong (Cost $15,019) 16,818 HUNGARY 0.2% Common Stocks 0.2% Richter Gedeon * 19,360 675 _____________________________________________________________________________ Total Hungary (Cost $318) 675 INDIA 1.6% Common Stocks 1.4% Ashok Leyland GDR (USD) 25,000 334 East India Hotels GDR (USD) 8,000 236 Grasim Industries GDS (USD) 23,300 454 Gujarat Ambuja Cement GDR (USD) 94,920 1,092 Hindalco GDR (USD) 19,800 873 Indian Aluminium GDS (USD) 10,000 76 Indian Hotels GDR (USD) * 11,000 325 ITC GDR (USD) 45,000 399 Reliance Industries GDS (USD) 42,000 704 Videocon International GDR (USD) 109,000 300 _____________________________________________________________________________ 4,793 Convertible Bonds 0.2% Essar Gujarat, 5.50%, 8/05/98 USD 540,000 530 _____________________________________________________________________________ 530 _____________________________________________________________________________ Total India (Cost $4,820) 5,323 INDONESIA 3.9% Common Stocks 3.9% Bank International Indonesia 195,000 $ 959 Hanjaya Mandala Sampoerna 106,500 1,175 Indofoods Sukses Makmur 142,350 654 Indorama Synthetic 172,600 559 Indosat (Class B) 119,000 413 Indosat (Class B) ADR (USD) 14,000 485 Jaya Real Property 226,500 786 Mayora Indah 692,000 475 Modern Photo Film 107,000 527 Modernland Realty 94,500 106 Mulia Industrindo 471,680 910 Pabrik Kertas Tjiwi Kimia 913,021 959 Panin Bank 510,125 519 Semen Cibinong 265,200 784 Semen Gresik 211,000 730 Telekom Indonesia * 875,000 1,453 Telekom Indonesia ADS (USD) * 48,000 1,626 _____________________________________________________________________________ 13,120 Convertible Bonds 0.0% Modernland Realty, 6.00%, 1/04/03 IDR 265,200,000 89 _____________________________________________________________________________ 89 _____________________________________________________________________________ Total Indonesia (Cost $11,318) 13,209 IRELAND 0.5% Common Stocks 0.5% Barlo Group 600,000 294 Dragon Oil (GBP) 494,505 6 Kenmare Resources (GBP) * 643,000 307 Kingspan Group 215,080 1,021 _____________________________________________________________________________ Total Ireland (Cost $1,220) 1,628 ISRAEL 0.7% Common Stocks 0.7% Bank Hapoalim 314,000 469 Blue Square * 106,000 $ 770 Elco Holdings 3,900 163 Teva Pharmaceutical ADR (USD) 18,000 823 _____________________________________________________________________________ Total Israel (Cost $1,849) 2,225 ITALY 2.8% Common Stocks and Warrants 2.7% Cementeria di Augusta * 69,000 106 Danieli & Company, savings shares 305,000 1,097 Danieli & Company, warrants, exp. 11/30/99 * 55,500 50 Fila Holdings ADR (USD) 11,200 757 Industria Macchine Automatiche * 152,000 1,071 Industrie Natuzzi ADR (USD) 19,800 1,030 La Doria 184,000 795 Merloni Elettrodomestici, savings shares 549,081 529 Pagnossin * 80,000 487 Saes Getters 38,200 966 Safilo 51,000 1,033 Tecnost 524,500 910 Telecocavi, savings shares 58,000 124 Vianini Lavori 90,000 156 _____________________________________________________________________________ 9,111 Corporate Bonds 0.1% Danieli & Company, 7.25%, 1/01/00 ITL 333,000,000 192 _____________________________________________________________________________ 192 _____________________________________________________________________________ Total Italy (Cost $6,910) 9,303 JAPAN 14.6% Common Stocks and Warrants 14.6% Amway Japan 23,000 1,185 Apollo Electronics 63,000 1,313 Asatsu 20,900 919 Avon Products 66,000 328 Chofu Seisakusho 28,000 731 Daibiru 100,000 1,348 Daifuku 37,000 584 Disco 10,000 333 Eidensha 21,000 $ 283 Emoto Industry 20,000 220 Enix 26,000 756 Enplas 3,000 70 Fanuc 6,000 261 FCC 27,500 1,025 Glory 27,000 968 Hamada Printing Press 80,000 570 Higashi Nihon House 10,500 171 Hirose Electric 11,300 698 Hitachi Tool Engineering 63,000 506 Homac 41,800 927 Home Wide 8,000 103 Horiba 42,000 598 Idec Izumi 95,000 945 Iwata Air Compressor Manufacturing 83,000 524 Japan Airport Terminal 72,000 1,039 Japan Living Service 70,000 632 Juel Verite Ohkubo 34,000 321 Juel Verite Ohkubo, warrants, exp. 3/10/98 (CHF) * 100 28 Juken Sangyo 69,000 805 Juntendo 66,550 576 Kato Denki 24,900 550 Keyence 14,200 1,873 Kirin Beverage 49,000 693 KOA 30,000 482 KTK Telecommunications Engineering 17,000 190 Kyokuto Kaihatsu Kogyo 23,100 528 Levi Strauss Japan Kabushiki Kaisha 11,000 226 Lintec 18,000 317 Mabuchi Motor 14,700 905 Masaru 23,000 187 Matsumotokiyoshi 10,100 323 Meitec 25,000 552 Meitetsu Transport 79,000 481 Meitetsu Transport, warrants, exp. 4/30/97 (CHF) * 1,300 70 Mori Seiki 31,000 708 Mos Food Services 26,400 $ 681 Namura Shipbuilding 21,000 127 New Japan Securities * 34,000 236 Nichicon 45,000 749 Nichiei 14,000 937 Nihon Dempa Kogyo 6,000 141 Nippon Denwa Shisetsu 40,000 377 Nippon Kagaku Yakin 35,000 381 Nippon Konpo Unyu Soko 51,000 461 Nippon Seiki 24,000 365 Nippon Yusoki 52,000 326 Nishio Rent All 14,000 355 Nissha Printing 11,000 174 Nitta 47,000 827 Okasan Securities * 32,000 198 Osaka Organic Chemical 27,000 395 Paltac 48,000 789 Promise 19,000 808 Rinnai 21,400 536 Sanken Electric 20,000 181 Sankyo Engineering * 18,000 282 Sansei Yusoki 53,000 694 Santen Pharmaceutical 33,700 783 Seiko 25,000 614 Senshukai 21,000 349 Shimachu 16,000 543 Shinkawa 13,500 379 Sintokogio 117,000 1,063 Sodick * 80,000 1,025 Sogo Denki 84,000 482 Sony Music Entertainment 8,000 434 Tamura 25,000 172 Techno Ryowa 21,000 422 Toc 96,000 1,110 Tokai Rubber Industries 28,000 361 Tokyo Ohka Kogyo 8,000 243 Toshiba Tungaloy * 37,000 240 Toyo Communication Equipment 7,000 $ 150 Trusco Nakayama 11,400 287 Tsuchiya Home 25,000 490 Uniden 14,000 308 Wakita 25,000 449 Wako Securities 61,000 565 Xebio 8,000 298 Yamatane Securities * 61,000 300 Yamato Kogyo 62,000 711 Zuiko 14,000 325 _____________________________________________________________________________ Total Japan (Cost $49,670) 48,975 MALAYSIA 5.3% Common Stocks, Rights and Warrants 5.3% Bandar Raya Developments, warrants, exp. 9/01/97 * 364,000 400 Chemical Company of Malaysia 298,000 950 Chemical Company of Malaysia, rights * 74,500 48 Intiplus 497,000 544 Jaya Tiasa Holdings 124,000 771 Kampong Lanjut Tin Dredging * 197,000 1,145 LB Aluminum 157,000 463 Lityan Holdings 41,000 253 Malaysian Assurance Alliance 246,125 1,471 MTD Capital 334,666 1,946 Peladang Kimia 156,000 485 Phileo Allied 473,000 2,826 RJ Reynolds 272,000 862 Star Publications * 418,000 1,232 Sunway Building Technology 159,000 791 TA Enterprise 516,000 890 TA Enterprise, warrants, exp. 11/22/98 * 632,000 649 Tan Chong Motor Holdings 372,000 600 Time Engineering 240,000 703 Westmont Industries 90,000 195 Westmont Industries (Class A) * 211,400 441 _____________________________________________________________________________ Total Malaysia (Cost $13,876) 17,665 MEXICO 2.5% Common Stocks 2.5% Altos Hornos de Mexico * 97,589 $ 708 Apasco 121,108 657 Banco Quadrum ADR (USD) *! 100,210 589 Controladora Commercial Mexicana (Class B) * 538,590 490 Embotelladores del Valle Anahuac (Class B) * 738,850 477 Grupo Cementos de Chihuahua (Class B) 261,000 245 Grupo Elektra 153,252 1,028 Grupo Financiero Inbursa (Class B) 153,000 595 Grupo Herdez (Class A) * 1,796,917 559 Grupo Industrial Maseca (Class B) 301,600 295 Grupo Mexicano de Desarrollo (Class B) ADS (USD) * 14,926 34 Grupo Mexicano de Desarrollo (Class L) ADS (USD) * 26,000 71 Grupo Radio Centro ADS (USD) 39,000 346 Internacional de Ceramica * 180,888 265 Internacional de Ceramica ADR (USD) * 50,000 375 Jugos de Valle (Class B) * 290,000 383 Sears Roebuck de Mexico (Class B) ADS (USD) * 20,380 102 Sears Roebuck de Mexico (Class B) GDS (USD) * 56,000 280 Seguros Comercial Americana (Class B) * 1,125,000 386 Sigma Alimentos (Class B) 47,700 343 _____________________________________________________________________________ Total Mexico (Cost $11,928) 8,228 NETHERLANDS 3.1% Common Stocks 3.1% Aalberts Industries 8,884 713 Ahrend Groep 25,775 1,124 Atag 15,450 1,190 Content Beheer 22,500 716 Getronics 11,609 806 Hagemeyer 16,930 1,159 Otra 103,700 2,572 Randstad Holdings 34,020 2,180 _____________________________________________________________________________ Total Netherlands (Cost $6,860) 10,460 NEW ZEALAND 0.7% Common Stocks 0.7% CDL Hotels * 618,000 $ 238 Independent Newspapers 141,000 523 PDL Holdings 28,000 160 Sky City * 164,000 697 Warehouse Group 211,000 616 _____________________________________________________________________________ Total New Zealand (Cost $2,294) 2,234 NORWAY 2.4% Common Stocks 2.4% Computer Advances * 12,400 170 Kverneland Gruppen 30,670 682 Merkantildata * 96,400 946 Multisoft 12,600 479 Nera 15,100 549 Norske Skogsindustrier 17,700 542 Ringcom 39,800 200 Schibsted 61,840 904 Sensonor * 72,150 604 Smedvig 32,980 811 Sysdeco Group * 36,000 433 Tomra Systems 116,500 1,082 Transocean * 24,436 684 _____________________________________________________________________________ Total Norway (Cost $4,982) 8,086 PAKISTAN 0.2% Common Stocks 0.2% Pakistan Telecom GDS (USD) * 7,000 718 _____________________________________________________________________________ Total Pakistan (Cost $606) 718 PERU 0.7% Common Stocks 0.6% Cementos Lima 24,225 285 Cementos Yura (Class C) (USD) 34,100 264 Compania de Seguard la Fenix Peruana 26,071 $ 275 Compania Embotelladora del Pacifico (Class B) (USD) * 280,000 188 Enrique Ferreyros 129,838 175 Explosivos (Class C) * 155,647 154 Explosivos (Class T) * 155,647 154 Minsur 28,222 229 Peru Real Estate (Class B) * 1,013,333 364 Southern Peru Copper (Class T) 1 0 _____________________________________________________________________________ 2,088 Corporate Bonds 0.1% International Financial Holdings, 6.50%, 8/01/99 USD 250,000 372 _____________________________________________________________________________ 372 _____________________________________________________________________________ Total Peru (Cost $3,637) 2,460 PHILIPPINES 2.3% Common Stocks 2.1% Ayala Land (Class B) 177,000 274 C & P Homes 501,000 431 EEI 10,246,000 799 First Philippine Holdings (Class B) 286,168 651 Manila Electric 25,000 233 Mondragon International * 248,000 201 Philippine Commercial International Bank 76,000 1,016 Philippine National Bank 49,000 730 Pilipino Telephone 433,000 637 Southeast Asia Cement * 7,926,000 1,166 Universal Robina 244,000 123 William Gothong & Aboitiz 2,664,000 825 _____________________________________________________________________________ 7,086 Convertible Bonds 0.2% Benpres Holdings, 4.20%, 11/26/49 USD 253,300 469 _____________________________________________________________________________ 469 _____________________________________________________________________________ Total Philippines (Cost $6,149) 7,555 POLAND 0.7% Common Stocks 0.7% Bank Rozwoju Eksportu 14,000 334 Bank Slaski 9,000 $ 673 Gorazdze * 9,429 303 International UNP Holdings (CAD) * 1,679,372 494 Mostostal Export * 200,000 586 _____________________________________________________________________________ Total Poland (Cost $2,701) 2,390 PORTUGAL 0.3% Common Stocks 0.2% Sempa * 47,250 509 _____________________________________________________________________________ 509 Preferred Stocks 0.1% Filmes Lusomundo * 41,610 358 _____________________________________________________________________________ 358 _____________________________________________________________________________ Total Portugal (Cost $791) 867 PUERTO RICO 0.1% Common Stocks 0.1% Pepsi Cola Puerto Rico Bottling Company (USD) 30,900 290 _____________________________________________________________________________ Total Puerto Rico (Cost $433) 290 RUSSIA 0.4% Common Stocks 0.4% Lukoil ADR (USD) 22,500 534 Petersburg Long Distance (USD) * 96,000 480 Petersburg Long Distance (CAD) * 35,000 175 Star Mining (AUD) * 2,750,000 313 _____________________________________________________________________________ Total Russia (Cost $2,037) 1,502 SINGAPORE 1.4% Common Stocks and Warrants 1.4% Acer Computer International (USD) * 456,000 866 Far East Levingston Shipbuilding 62,000 362 Hong Fok 308,000 522 Hour Glass 179,000 169 Hwa Tat Lee 332,000 145 Malayan Credit 215,000 442 Parkway Holdings 225,000 $ 672 Republic Hotels & Resorts 150,000 206 Republic Hotels & Resorts, warrants, exp. 7/12/00 * 184,000 113 Tiger Medicals 187,000 322 Venture Manufacturing 175,000 598 Wing Tai Holdings 98,000 254 _____________________________________________________________________________ Total Singapore (Cost $4,641) 4,671 SOUTH AFRICA 1.2% Common Stocks 1.2% Anglo America Industrial 6,750 311 Barlow Limited 106,900 1,231 Iscor 519,200 475 Murray & Roberts Holdings 66,000 302 Rembrandt Group 123,800 1,060 Sasol 53,800 560 Speciality Stores (Class N) 96,000 117 _____________________________________________________________________________ Total South Africa (Cost $3,652) 4,056 SOUTH KOREA 0.8% Common Stocks 0.8% Coryo Securities 10,000 174 Daehan City Gas 200 20 Korea Growth Trust IDR (USD) 22 781 Kun Young Construction 25,502 223 LG Information & Communications 6,000 844 Samsung GDR, 1/2 voting (USD) * 1,321 18 Seoul City Gas 5,760 478 _____________________________________________________________________________ Total South Korea (Cost $2,241) 2,538 SPAIN 1.7% Common Stocks 1.6% Algodonera de St. Antonia * 57,250 405 Amper * 24,000 270 Azkoyen 13,330 931 Corporacion Financiaera Reunida 187,500 660 Cristaleria Espanola * 11,020 $ 696 Filo 135,000 655 Grupo Anaya 23,821 490 Marco Iberica 62,870 426 Marco Iberica, new 2,553 17 Prosegur Compania Securidad 27,000 985 _____________________________________________________________________________ 5,535 Convertible Bonds 0.1% Grupo Anaya, 7.00%, 3/18/98 ESP 32,910,000 239 _____________________________________________________________________________ 239 _____________________________________________________________________________ Total Spain (Cost $6,437) 5,774 SWEDEN 3.0% Common Stocks and Warrants 3.0% Angpanne Foreningen (Class B) 32,870 591 BPA (Class A) * 371,800 757 BPA, warrants, exp. 12/15/00 * 164,400 99 Catena (Class A) 100,500 771 Finnveden (Class B) 91,337 970 Getinge Industrier (Class B) 22,100 1,163 Hoganas (Class B) 43,950 1,458 ICB Shipping (Class B) 84,670 799 Kalmar Industries 42,000 762 Linjebuss (Class A) 29,770 272 Securitas (Class B) 24,000 1,380 TV 4 (Class A) 51,690 957 _____________________________________________________________________________ 9,979 Convertible Bonds 0.0% Stena Line, 7.00%, 4/30/01 SEK 900,000 125 _____________________________________________________________________________ 125 _____________________________________________________________________________ Total Sweden (Cost $7,919) 10,104 SWITZERLAND 2.4% Common Stocks 2.4% Belimo Automation 3,000 623 Bossard Holdings 410 892 Bucher Holding 1,820 1,363 Edipresse 2,000 $ 541 Generale d'Affichage 2,850 1,297 Gurit Heberlien 360 795 Hilti 1,070 827 Lem Holdings 2,500 775 Liechtenstein Global Trust 1,655 845 Von Moos * 2,000 129 _____________________________________________________________________________ Total Switzerland (Cost $6,537) 8,087 TAIWAN 2.8% Common Stocks 2.6% Bank Sino Pacific * 108,000 87 China Trust 1,332,000 2,721 National Investment Trust * 253,000 642 Test Rite International 2,323,000 2,094 Wan Hai Lines * 561,000 1,239 Yageo * 1,018,000 2,061 _____________________________________________________________________________ 8,844 Convertible Bonds 0.2% Acer, 4.00%, 6/10/01 USD 120,000 314 United Micro Electronics, 1.25%, 6/08/04 USD 150,000 185 _____________________________________________________________________________ 499 _____________________________________________________________________________ Total Taiwan (Cost $8,097) 9,343 THAILAND 0.9% Common Stocks and Warrants 0.9% Bangkok Insurance 20,000 349 Hana Microelectronics 62,000 356 Industrial Finance of Thailand 206,000 832 Precious Shipping 131,800 720 Property Perfect 29,500 150 Property Perfect, warrants, exp. 7/07/99 * 20,444 33 Robinson Department Store 85,000 202 Sahavirya Steel * 104,000 98 Sanyo Universal Electric 67,000 220 _____________________________________________________________________________ Total Thailand (Cost $3,001) 2,960 UNITED KINGDOM 15.1% Common Stocks, Rights and Warrants 14.6% Abtrust Lloyds Insurance, warrants, exp. 11/24/98 * 99,000 $ 43 Acorn Computer Group * 264,000 1,025 Ashtead Group 627,998 1,796 BCE Holdings 3,175,000 932 Berisford International 192,000 613 British Biotechnology * 41,288 1,833 Britton Group 628,047 1,550 Carpetright 148,000 1,297 Chamberlain Phipps 223,000 228 Chiroscience Group * 100,000 670 Cordiant * 285,000 571 Corporate Services Group 992,250 2,046 CRT Group 352,222 766 Devro International 252,500 886 Druck Holdings 32,000 1,596 Enviromed * 587,734 203 FII Group 105,000 743 First Technology 83,000 566 Frost Group 212,200 406 Graystone 6,067,860 1,370 Helical Bar 134,000 758 Henderson Administration Group 32,500 545 HTV Group 300,000 1,666 Iceland Group 111,000 254 Inn Business Group * 626,720 505 JBA Holdings 286,500 2,191 JKX Oil & Gas * 180,000 480 Kewill Systems 83,000 592 Knox D'Arcy Trust 938,889 509 Knox D'Arcy Trust, rights * 300,000 7 London & Overseas Freighters 215,330 276 Mackie International Group 93,000 497 Matthew Clark 155,000 1,806 Mayflower 924,000 1,586 Mirror Group 432,000 1,483 Oliver Group 300,000 $ 230 Pentos * 733,333 0 Peter Black Holdings 141,000 601 Pizza Express 140,000 735 Powerscreen International 139,000 956 Princedale Group 1,414,856 724 Prowting 263,575 548 Quadramatic 104,979 384 Quality Software 60,000 247 Regal Hotel Group 2,314,422 1,533 RJB Mining 103,140 955 Ronson 263,000 174 Roxspur * 6,329,228 453 Select Appointment 1,200,000 343 Serco Group 50,000 395 Shire Pharmaceuticals Group * 165,500 511 Stakis 543,750 892 Standard Platforms * 800,000 144 Stordata Solutions * 903,333 224 Stoves 94,000 358 Taylor Nelson 618,530 396 Transtec 669,000 1,098 Ugland International Holdings * 644,423 582 Verity Group 3,269,501 763 Videologic Group * 991,000 1,134 Visual Action Holdings * 92,950 353 Wickes 323,888 636 Wiggins Group * 1,515,000 160 WPP Group 351,000 1,065 _____________________________________________________________________________ 48,889 Preferred Stocks 0.5% Berisford International, 5.00% cv. loan stock, 2015 427,000 591 Iceland Group, cum. cv. 120,000 217 Knox D'Arcy Trust, cv. loan stock, 9/30/07 638,889 346 Regal Hotel Group, 8.00% cv. loan stock, 2001 264,505 398 _____________________________________________________________________________ 1,552 _____________________________________________________________________________ Total United Kingdom (Cost $37,874) 50,441 VENEZUELA 0.4% Common Stocks 0.4% Mavesa ADR (USD) 14,982 $ 80 Mavesa ADR, sponsored (USD) 19,930 106 Mavesa ADS (USD) 112,066 595 Sudamtex de Venezuela (Class B) ADR (USD) 55,440 270 Venezolana de Prerreducidos Caroni GDS (USD) 28,000 168 _____________________________________________________________________________ Total Venezuela (Cost $1,514) 1,219 VIETNAM 0.3% Common Stocks 0.3% Lazard Freres & Co. Vietnam Fund (USD) * 106,600 1,133 _____________________________________________________________________________ Total Vietnam (Cost $1,098) 1,133 SHORT-TERM INVESTMENTS 5.0% Commercial Paper 5.0% Asset Securitization Cooperative, 4(2), 5.30%, 6/10/96 $ 5,000,000 4,970 Delaware Funding, 5.30%, 5/16/96 2,000,000 1,992 Den Danske, 5.305%, 5/28/96 5,000,000 4,976 Mobil Australia Finance, 4(2), 5.32%, 5/16/96 2,000,000 1,991 Investments in Commercial Paper through a joint account, 5.36 - 5.37%, 5/01/96 2,967,242 2,967 _____________________________________________________________________________ Total Short-Term Investments (Cost $16,896) 16,896 Total Investments in Securities 98.5% of Net Assets (Cost $299,446) $ 329,667 Other Assets Less Liabilities 4,895 NET ASSETS $ 334,562 Net Assets Consist of: Accumulated net investment income - net of distributions $ 80 Accumulated net realized gain/loss - net of distributions (13,693) Net unrealized gain (loss) 30,224 Paid-in-capital applicable to 20,608,917 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized 317,951 NET ASSETS $ 334,562 NET ASSET VALUE PER SHARE $ 16.23 * Non-income producing ! Affiliated company AUD Australian dollar CAD Canadian dollar CHF Swiss franc DKK Danish krone ESP Spanish peseta GBP British sterling HKD Hong Kong dollar IDR Indonesian rupia ITL Italian lira NLG Dutch guilder SEK Swedish krona USD U.S. dollar 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." The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund Unaudited Statement of Operations In thousands 6 Months Ended 4/30/96 Investment Income Income Dividend (net of foreign taxes of $ 223) $ 2,056 Interest 441 Total income 2,497 Expenses Investment management 1,711 Shareholder servicing 364 Custody and accounting 136 Prospectus and shareholder reports 47 Registration 25 Legal and audit 20 Directors 4 Miscellaneous 8 Total expenses 2,315 Net investment income 182 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (4,213) Foreign currency transactions (168) Net realized gain (loss) (4,381) Change in net unrealized gain or loss Securities 43,995 Other assets and liabilities denominated in foreign currencies 4 Change in net unrealized gain or loss 43,999 Net realized and unrealized gain (loss) 39,618 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 39,800 The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund Unaudited Statement of Changes in Net Assets In thousands 6 Months Year Ended Ended 4/30/96 10/31/95 Increase (Decrease) in Net Assets Operations Net investment income $ 182 $ 2,142 Net realized gain (loss) (4,381) (7,501) Change in net unrealized gain or loss 43,999 (59,637) Increase (decrease) in net assets from operations 39,800 (64,996) Distributions to shareholders Net investment income (2,150) (1,593) Net realized gain (429) (23,937) Decrease in net assets from distributions (2,579) (25,530) Capital share transactions* Shares sold 31,450 55,318 Distributions reinvested 2,296 23,502 Shares redeemed (61,809) (166,714) Redemption fees received 30 352 Increase (decrease) in net assets from capital share transactions (28,033) (87,542) Net Assets Increase (decrease) during period 9,188 (178,068) Beginning of period 325,374 503,442 End of period $ 334,562 $ 325,374 *Share information Shares sold 2,090 3,750 Distributions reinvested 160 1,573 Shares redeemed (4,186) (11,326) Increase (decrease) in shares outstanding (1,936) (6,003) The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund Unaudited April 30, 1996 Notes to Financial Statements Note 1 - Significant Accounting Policies T. Rowe Price International Funds, Inc., (the Corporation) is registered under the Investment Company Act of 1940. The International Discovery Fund (the fund), a diversified, open-end management investment company, is one of the portfolios established by the Corporation and commenced operations on December 30, 1988. Valuation Equity securities listed or regularly traded on a securities exchange (including Nasdaq) are valued at the last quoted sales price at the time the valuations are made. A security which is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Other equity securities and those listed securities that are not traded on a particular day are valued at a price within the limits of the latest bid and asked prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. Short-term debt securities are valued at their cost which, when combined with accrued interest, approximates fair value. For purposes of determining the fund's net asset value per share, the U.S. dollar value of all assets and liabilities initially expressed in foreign currencies is determined by using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. Affiliated Companies Investments in companies 5% or more of whose outstanding voting securities are held by the fund are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940. Currency Translation Assets and liabilities are translated into U.S. dollars at the prevailing exchange rate at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing exchange rate on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains and losses is reflected as a component of such gains and losses. Other Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Dividend income and distributions to shareholders are recorded by the fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from those determined in accordance with generally accepted accounting principles. Note 2 - Investment Transactions Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund's prospectus and Statement of Additional Information. Emerging Markets At April 30, 1996, the fund held investments in securities of companies located in emerging markets. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. Commercial Paper Joint Account The fund, and other affiliated funds, may transfer uninvested cash into a commercial paper joint account, the daily aggregate balance of which is invested in high-grade commercial paper. All securities purchased by the joint account satisfy the fund's criteria as to quality, yield, and liquidity. Securities Lending To earn additional income, the fund lends its securities to approved brokers. At April 30, 1996, the market value of securities on loan was $8,538,000, which was fully collateralized with cash. Although the risk is mitigated by the collateral, the fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return them. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $83,219,000 and $125,467,000, respectively, for the six months ended April 30, 1996. Note 3 - Federal Income Taxes No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. The fund has unused realized capital loss carryforwards for federal income tax purposes of $8,323,000 which expire in 2003. The fund intends to retain gains realized in future periods that may be offset by available capital loss carryforwards. At April 30, 1996, the aggregate cost of investments for federal income tax and financial reporting purposes was $299,446,000 and net unrealized gain aggregated $30,221,000, of which $66,081,000 related to appreciated investments and $35,860,000 to depreciated investments. Note 4 - Related Party Transactions The fund is managed by Rowe Price-Fleming International, Inc. (the Manager), which is owned by T. Rowe Price Associates, Inc. (Price Associates), Robert Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a joint venture agreement. The investment management agreement between the fund and the Manager provides for an annual investment management fee, of which $289,000 was payable at April 30, 1996. The fee is computed daily and paid monthly, consisting of an Individual Fund Fee equal to 0.75% of average daily net assets and a Group Fee. The Group Fee is based on the combined assets of certain mutual funds sponsored by the Manager or Price Associates (the Group). The Group Fee rate ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in excess of $34 billion. At April 30, 1996, and for the six months then ended, the effective annual Group Fee rate was 0.33%. The fund pays a pro rata share of the Group Fee based on the ratio of its net assets to those of the Group. 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 $367,000 for the six months ended April 30, 1996, of which $92,000 was payable at period-end. During the six months ended April 30, 1996, the fund, in the ordinary course of business, paid commissions of $182,000 to, and placed security purchase and sale orders aggregating $37,235,000 with, certain affiliates of the Manager in connection with the execution of various portfolio transactions. T. Rowe Price Shareholder Services To help shareholders monitor their current investments and make decisions that accurately reflect their financial goals, T. Rowe Price offers a wide variety of information and services - at no extra cost. Knowledgeable Service Representatives By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m. and weekends from 8:30 a.m. to 5 p.m. In Person Available in T. Rowe Price Investor Centers. Account Services Checking Available on most fixed income funds. Automatic Investing From your bank account or paycheck. Automatic Withdrawal Scheduled, automatic redemptions. Distribution Options Reinvest all, some, or none of your distributions. Automated 24-Hour Services Including Tele*Access(registered trademark) and PC*Access(registered trademark). Discount Brokerage Individual Investments Stocks, bonds, options, precious metals, and other securities; potentially large savings on commissions. Investment Information Combined Statement An overview of your T. Rowe Price accounts. Shareholder Reports Fund managers' reviews of their strategies and results. The T. Rowe Price Report A quarterly investment newsletter discussing markets and financial strategies. Performance Update Quarterly review of all T. Rowe Price fund results. Insights Educational reports on investment strategies and financial markets. Investment Guides Asset Mix Worksheet, College Planning Kit, Personal Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit. T. Rowe Price Mutual Funds Stock Funds Domestic Balanced Blue Chip Growth Capital Appreciation Capital Opportunity Dividend Growth Equity Income Equity Index Growth & Income Growth Stock Health Sciences Mid-Cap Growth New America Growth New Era New Horizons OTC Science & Technology Small-Cap Value Spectrum Growth Value International/Global Emerging Markets Stock European Stock Global Stock International Discovery International Stock Japan Latin America New Asia Bond Funds Domestic Taxable Corporate Income GNMA High Yield New Income Short-Term Bond Short-Term U.S. Government Spectrum Income Summit GNMA Summit Limited-Term Bond U.S. Treasury Intermediate U.S. Treasury Long-Term Domestic Tax-Free California Tax-Free Bond Florida Insured Intermediate Tax-Free Georgia Tax-Free Bond Maryland Short-Term Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Summit Municipal Intermediate Tax-Free High Yield Tax-Free Income Tax-Free Insured Intermediate Bond Tax-Free Short-Intermediate Virginia Short-Term Tax-Free Bond Virginia Tax-Free Bond International/Global Global Government Bond Emerging Markets Bond International Bond Short-Term Global Income Money Market Taxable Prime Reserve Summit Cash Reserves U.S. Treasury Money Tax-Free California Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money Blended Asset Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income T. Rowe Price No-Load Variable Annuity Equity Income Portfolio International Stock Portfolio Limited-Term Bond Portfolio New America Growth Portfolio Personal Strategy Balanced Portfolio For yield, price, last transaction, and current balance, 24 hours, 7 days a week, call: 1-800-638-2587 toll free 625-7676 Baltimore area For assistance with your existing fund account, call: Shareholder Service Center 1-800-225-5132 toll free 625-6500 Baltimore area T. Rowe Price 100 East Pratt Street Baltimore, Maryland 21202 This report is authorized for distribution only to shareholders and to others who have received a copy of the prospectus of the T. Rowe Price International Discovery Fund. Invest With Confidence(registered trademark) T. Rowe Price T. Rowe Price Investment Services, Inc., Distributor REPTIDF 4/30/96 Chart 1 - Geographic Diversification - A pie chart showing geographic diversification of net assets as of 4/30/96 as follows: Europe 40%; Far East 26%; Japan 15%; Latin America 9%; Other and Reserves 10%. Chart 2 - Correlation of Returns - a bar chart showing the correlation of total returns of various international countries with the U.S. stock market from 1981-1990 and from 1986-1995. Footnote: Percentage of time that foreign markets moved in the same direction as the U.S. market. Sources: Morgan Stanley Capital International indexes, Standard & Poor's 500 Stock Index, and Frank Russell Company. Chart 3 - SEC Graph - International Discovery Fund - A two-line graph showing performance of a $10,000 investment in the International Discovery Fund and the MSCI EAFE Index (Net) from 12/30/88 through 4/30/96. -----END PRIVACY-ENHANCED MESSAGE-----