-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, U5Klb76+xmO5VEgZkfP5iPZjYTqxjED0ll4KMEB/2JthwgacWHr1rk0qyrvLSPuY hvX/uvLj8Fu47UaELbleow== 0000852254-94-000011.txt : 19941212 0000852254-94-000011.hdr.sgml : 19941212 ACCESSION NUMBER: 0000852254-94-000011 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19941209 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTITUTIONAL INTERNATIONAL FUNDS INC CENTRAL INDEX KEY: 0000852254 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05833 FILM NUMBER: 94564014 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 N-30D 1 Annual Report _____________________________________________________________________________ Foreign Equity Fund October 31, 1994 _____________________________________________________________________________ Dear Shareholders Although overseas stock markets grew more difficult during the final quarter, the fiscal year ended October 31 was a good one for the Foreign Equity Fund. During the last three months, your Fund's return of 3.4% was slightly better than the unmanaged Morgan Stanley Capital International Europe, Australia and Far East (MSCI EAFE) Index, and also better than the EAFE Index over the 12-month period. Results were well ahead of the U.S. stock market as represented by the unmanaged Standard & Poor's 500 Stock Index for the fiscal year. Our weighting in Japan, which was generally strong until the last quarter, made a modest contribution to the Fund's positive results relative to the Index over its fiscal year. However, in the final quarter, a strong rally in the markets of Latin America and Southeast Asia fueled most of the gain against the Index. Superior results compared with the U.S. market were mostly attributed to the strength of the Japanese and European currencies, in which about three-quarters of the Fund's holdings is denominated. However, the portfolio has significant positions in markets such as Malaysia, Singapore and Mexico, which performed strongly without help from their local currencies. Market Performance 3 Months Ended 10/31/94 _______________________________ Local Currency Local vs. U.S. In U.S. Currency Dollars Dollars _______________________________ Australia 1.4% 0.4% 1.8% France -7.7 5.1 -2.9 Germany -2.3 5.4 3.0 Hong Kong 2.0 0.0 1.9 Italy -9.9 3.0 -7.1 Japan -2.4 3.3 0.9 Netherlands 1.9 5.4 7.4 Norway -6.0 5.7 -0.7 Singapore 11.6 2.8 14.7 Spain -5.0 4.0 -1.2 Sweden 1.6 7.7 9.4 Switzerland -2.4 7.0 4.4 United Kingdom 0.6 6.1 6.7 The fiscal year was a turbulent one for world stock markets. The first three months saw a final surge of the 1993 bull markets but, following the U.S. Federal Reserve's move to increase interest rates in February, the middle of 1994 was a much more difficult period. This tightening was quickly translated to the smaller markets of Southeast Asia and Latin America where the currencies bear a close relationship with the U.S. dollar, and these markets corrected sharply. European markets held up better during this period. The most important exception to a generally weak trend was Japan where the market performed well and the strength of the yen was an added benefit to the U.S. investor. Turning to the world economy, there have been signs of recovery in both Japan and Continental Europe, which are the last regions to emerge from the world recession of the early '90s. In the Far East there is increasing confidence that the runaway Chinese economy can be brought under control, but the "tiger" economies of the region have continued to show strong growth with little pressure on the inflation front. The economy in Mexico has been sluggish. Although President-elect Zedillo has outlined a conservative programme for his new administration, there should be some acceleration in 1995. In Brazil the most important development was the introduction of the real, a new currency linked to the U.S. dollar, resulting in a dramatic drop in the country's inflation rate. Fernando Henrique Cardoso, the architect of this latest plan to stabilise Brazil's currency and inflation rate, was elected president, but it remains to be seen whether Congress can introduce fiscal measures to underpin these reforms. Market Review Far East In Japan the economy is picking up, although the recovery is muted compared with past cycles. Areas of strength include capital investment, with machine tool orders now showing positive growth and private construction orders clearly bottoming out. However, with half the economy accounted for by consumer expenditure, it is likely to remain sluggish until consumers play their part. Here the signs are discouraging; historically high unemployment levels and slow income growth have affected sentiment and retail sales remain dull. The construction sector is showing signs of life with orders picking up after the vast overbuilding of the bubble period, although optimism has been tempered by a recent fall in housing starts. The political scene seems to have stabilised with the unlikely partnership of Japan's Liberal Democratic and Socialist Parties lasting longer than many expected. Having performed strongly for the first half of the calendar year, the stock market is now becalmed with volume at very low levels. A sharp earnings recovery is already priced into the market but, with the yen now at new highs against the dollar, there is less confidence about the pace of the recovery in corporate profits. Elsewhere in the region, economic growth has remained strong, fueled by the dynamics of increasing regional trade and the continuation of rapid growth in China. If anything, the Chinese economy is probably too strong and the authorities must be concerned with inflation levels running at over 20%. Another worry is the continued trade deficit. This is due principally to high levels of capital goods imports as overseas companies have developed their manufacturing capacity in China's Special Economic Zones. However, recently there have been signs that this capacity is now coming on stream, suggesting that the trade account could soon move into surplus through lower imports and rising exports. With strong trading links to China, Hong Kong has also shown high rates of growth. However, inflation has remained stubbornly high and interest rates are bound to rise, bearing in mind that further tightening by the U.S. Federal Reserve will immediately affect Hong Kong whose currency is pegged to the dollar. Following its speculative binge at the end of 1993, the Hong Kong stock market corrected sharply during the spring but recovered modestly during the final quarter. It is unlikely to make further progress until the Federal Reserve makes its move and the Chinese economy shows signs of a soft landing. The best performing markets of the region were in Malaysia and Singapore. The Malaysian economy has shown four consecutive years of 8% growth fueled by manufacturing exports and infrastructure development. With domestic consumption constrained, inflation has been surprisingly low, but it will be difficult for the economy to sustain these growth rates without triggering higher inflation. Singapore has shown equally high rates of growth and has also kept inflation low. The current account surplus has benefited from strong electronic exports, which in turn have contributed to high rates of growth. Against the background of a strong economy and increased levels of equity investment permitted in the state-sponsored saving scheme, the stock market has performed well. The Korean economy is well placed to benefit from accelerating world growth given its strength in heavy industry and the prospect of improved competitiveness with Japan as the yen strengthens. On a short-term basis, this high growth will strain the current account and put upward pressure on inflation. Longer term, the Japanese development path remains the model as Korea tracks it almost perfectly with a 15-year lag. In Australasia, both economies have shown above-trend rates of growth with inflation sustained at remarkably low levels. In Australia, a severe drought has affected agricultural production, but the economy is increasingly integrated with fast-growing Southeast Asia and a pickup in the commodity cycle also bodes well. New Zealand continues to be one of the world's most remarkable turnaround situations with steady growth, inflation at less than 2%, and a strong current account surplus. As one of the few countries in the region where interest rates can fall, the stock market has performed particularly well over the last three months. Europe For most of the 12 months under review, the economies of Continental Europe have been sluggish, but recently they exhibited distinct signs of life. In Germany, the economy is entering a broad-based recovery led by exports and capital investment. With the prospect of further tax surcharges to finance reunification, consumer expenditure is likely to remain subdued. However, longer term the whole economy is well placed to benefit from any economic renaissance in the ex-communist states immediately to the east. The stock market has made little progress over the year, although dollar returns in the last quarter have been helped by deutschemark strength. With valuations already looking stretched, the Fund's position in Germany is relatively small. In the Netherlands, we find valuations more attractive, especially for a number of large, international companies well positioned to benefit from a recovery across Europe. Our largest holdings continue to be the two publishing companies, Elsevier and Wolters Kluwer, which exhibit steady growth; the former sees great potential from its recent purchase of the online data businesses of Mead of the U.S. In Switzerland, we can also find attractively valued multinationals in areas of traditional Swiss strength such as pharmaceuticals and engineering. This market has performed reasonably well although, in line with other European markets, recent performance in dollars has been greatly assisted by currency strength. In France, the economic recovery is broadening and, with manageable government finances and a presidential election looming in 1995, this recovery is likely to be more sustainable than others in Europe. The stock market has been one of the weaker performers as local insurance companies have sold equities to cover bond losses. Our own selections have held up reasonably well and we have been adding to our favourites on weakness. The UK market leads the cycle in Europe and the economy has shown steady if unspectacular growth for over two years. Although inflation remains at remarkably low levels, the next move in UK interest rates is likely to be upward, and we have reduced our UK holdings especially in the small-cap area which has performed so well. The Nordic markets are a bright spot in Europe, with Finland taking the prize as the best performing market this year. This remarkable accomplishment was led by mobile phone manufacturer Nokia, in which the Fund has a small position. In Sweden, the move away from full employment will help manufacturing competitiveness, and exports will continue to lead the recovery. We have increased the portfolio's exposure to this market throughout the year, focusing our attention on multinationals that will benefit from recovery in overseas markets. Latin America Latin America provides its share of excitement with drama in both the stock market and on the political scene. In Mexico, the assassination of a presidential candidate at the beginning of the year and the uprising in the southern state of Chiapas called into question the stability of Mexican politics, but the PRI's victory in late summer was convincing enough. Partly influenced by political developments, the stock market had its usual roller coaster ride. The new government under Ernesto Zedillo will continue the reforms which have been so successful, but in the latest accord with the unions he has signaled a commitment to low inflation at the expense of growth. In Brazil, investors have spent most of the year awaiting the introduction of the real and the outcome of the presidential election. The news has been encouraging on both fronts. Brazil's new currency was successfully introduced in July and has more than held its ground against the U.S. dollar. Mr. Cardoso's first-round win in the presidential election was well received by the stock market, but tougher budgetary disciplines are needed for the stabilisation to succeed. Investment Policy & Outlook In recent months, world stock markets have entered an uncertain period, with attention focused on when the U.S. Federal Reserve will further tighten and to what extent U.S. interest rates will rise. These developments will be a key influence on overseas bond markets where historically high real yields compete with equities for the investor's dollar. World markets are unlikely to make much progress until this issue is resolved, but, outside the U.S., prospects for corporate earnings growth remain attractive. In Japan and Europe, widening evidence of economic recovery supports the outlook for better company profits, and we see rapid growth in the dynamic economies of Southeast Asia. The heart of our strategy is to invest in corporate earnings growth where we see it attractively valued. We continue to find this in Europe, which accounts for just under half the portfolio, and we also find it in the less developed countries of Asia and Latin America. Thus, we remain optimistic for the future, although investors may have to be patient for a little longer before stock markets make a confident upward move. Respectfully submitted, Martin G. Wade President November 18, 1994 Reviewing Your International Strategy Not so very long ago, we probably would not have addressed this issue, because relatively few U.S. investors had an international investing strategy to review. In recent years, however, investor focus has broadened appreciably, and now global investing seems finally to be catching up with "global consuming." The merits of placing a portion of your financial assets in overseas investments have become widely recognized, as evidenced by the dramatic growth of international mutual fund assets. Amid all the investment uncertainties generated by rising interest rates this year - both in the U.S. and a number of other countries - our international equity funds continued to expand impressively. The historic evidence is clear that a prudent equity diversification strategy that includes foreign stocks can reduce the year-to-year volatility of an equity portfolio and, over time, enhance overall returns. Volatility may be reduced because foreign stocks often move in divergent directions from the U.S. market. With over half of all stocks in the world originating and trading outside the U.S. - many in countries growing faster than the U.S. - it can be argued that the investor who restricts his or her portfolio entirely to U.S. securities is less prudent than the one who diversifies more widely. Since you are an international investor, we do not want to preach to the converted. Rather, we want to suggest you take a minute to review your T. Rowe Price international investments to ensure they are in line with your financial strategy and your overall portfolio. An International Allocation Except in unusual circumstances, we believe a majority of an investor's international equity exposure should be in a core fund that has a broadly diversified portfolio of well-established companies around the world. Our International Stock Fund is designed to be such a core holding. If you have a particular interest in a certain region, you may want to put some assets in a more specialized fund. The New Asia, Europe, Latin America, and Japan Funds have narrow geographic focuses, while our International Discovery Fund emphasizes rapidly growing smaller companies in all of those areas. Without the conviction to stick through potentially tough periods, you should be cautious about investing in regional funds, which may have greater price volatility. Don't base your allocation decisions solely on the past performance of any stock market, and keep in mind the risks of foreign investing, including the possibility of unfavorable currency exchange rates. You may want to consider shifting a portion of your investment dollars into a particular international asset over a period of time, instead of all at once. By focusing on your particular financial objectives, the length of time in which you hope to achieve them, and your willingness to accept risks represented by various investments, you should be in a good position to structure your international investment portfolio. This report has been preceded or is accompanied by a prospectus. _____________________________________________________________________________ TWENTY-FIVE LARGEST HOLDINGS October 31, 1994 _____________________________________________________________________________ Percent of Company Country Net Assets _____________________________________________________________________________ Wolters Kluwer Netherlands 1.7% _____________________________________________________________________________ Elsevier Netherlands 1.5 _____________________________________________________________________________ Royal Dutch Petroleum Netherlands 1.2 _____________________________________________________________________________ Swire Pacific 'A' Hong Kong 1.2 _____________________________________________________________________________ TMX ADS Mexico 1.1 _____________________________________________________________________________ Kyocera Japan 1.0 _____________________________________________________________________________ National Westminster Bank United Kingdom 1.0 _____________________________________________________________________________ Fletcher Challenge New Zealand 0.9 _____________________________________________________________________________ Technology Resources Industries Malaysia 0.9 _____________________________________________________________________________ Nippon Steel Japan 0.8 _____________________________________________________________________________ Wharf Holdings Hong Kong 0.8 _____________________________________________________________________________ Telebras Brazil 0.8 _____________________________________________________________________________ Eaux Cie Generale France 0.8 _____________________________________________________________________________ Cable & Wireless United Kingdom 0.8 _____________________________________________________________________________ BBC Brown Boveri United Kingdom 0.8 _____________________________________________________________________________ Mitsubishi Heavy Industries Japan 0.7 _____________________________________________________________________________ Nippon Denso Japan 0.7 _____________________________________________________________________________ Nestle Switzerland 0.7 _____________________________________________________________________________ Sharp Japan 0.7 _____________________________________________________________________________ Sumitomo Electric Japan 0.7 _____________________________________________________________________________ Cifra Mexico 0.7 _____________________________________________________________________________ Reed International United Kingdom 0.7 _____________________________________________________________________________ Telecom Italia Italy 0.7 _____________________________________________________________________________ United Engineers Malaysia 0.6 _____________________________________________________________________________ Valeo France 0.6 _____________________________________________________________________________ Total 22.1% _____________________________________________________________________________ _____________________________________________________________________________ INDUSTRY DIVERSIFICATION October 31, 1994 _____________________________________________________________________________ Percent of Net Assets _____________________________________________________________________________ Consumer Goods 28.3% _____________________________________________________________________________ Basic Industry 16.6 _____________________________________________________________________________ Financial/Insurance 16.3 _____________________________________________________________________________ Capital Goods 14.4 _____________________________________________________________________________ Utilities 8.1 _____________________________________________________________________________ Energy 4.2 _____________________________________________________________________________ Transport/Storage 2.9 _____________________________________________________________________________ Miscellaneous 0.2 _____________________________________________________________________________ Total Investments 91.0 _____________________________________________________________________________ Short-Term Investments 7.3 _____________________________________________________________________________ Other Assets Less Liabilities 1.7 _____________________________________________________________________________ Total Net Assets 100.0% _____________________________________________________________________________ _____________________________________________________________________________ SECURITY CLASSIFICATION October 31, 1994 _____________________________________________________________________________ Percent Market of Net Cost Value Assets (000) (000) _____________________________________________________________________________ Common Stocks & Warrants 89.6% $839,469 $949,438 _____________________________________________________________________________ Preferred Stocks, Rights & Warrants 1.3 8,587 14,080 _____________________________________________________________________________ Bonds 0.1 218 215 _____________________________________________________________________________ Short-Term Investments 7.3 76,964 76,964 _____________________________________________________________________________ Total Investments 98.3 925,238 1,040,697 _____________________________________________________________________________ Other Assets Less Liabilities 1.7 18,379 17,781 _____________________________________________________________________________ Net Assets 100.0% $943,617 $1,058,478 _____________________________________________________________________________ _____________________________________________________________________________ GEOGRAPHIC DIVERSIFICATION October 31, 1994 _____________________________________________________________________________ Percent of Net Assets _____________________________________________________________________________ Japan 22% _____________________________________________________________________________ United Kingdom 13 _____________________________________________________________________________ Netherlands 8 _____________________________________________________________________________ France 7 _____________________________________________________________________________ Mexico 4 _____________________________________________________________________________ Malaysia 4 _____________________________________________________________________________ All Others 42 _____________________________________________________________________________ _____________________________________________________________________________ TOTAL RETURN PERFORMANCE Periods Ended October 31, 1994 _____________________________________________________________________________ Calendar One Three Year- One Three Since Month Months to-Date Year Years** 9/7/89** _____________________________________________________________________________ Foreign Equity Fund* 1.81% 3.40% 5.42% 11.96% 13.32% 9.73% _____________________________________________________________________________ TRP International Stock Fund 1.90 3.55 5.59 12.03 13.31 9.98 _____________________________________________________________________________ S&P 500 Index 2.25 3.84 3.61 3.87 9.49 9.43 _____________________________________________________________________________ MSCI EAFE Index 3.35 2.51 12.76 10.38 9.85 4.39*** _____________________________________________________________________________ FT-A Euro Pacific Index 3.40 2.40 14.17 10.83 9.28 4.18*** _____________________________________________________________________________ * An "institutional only" no-load mutual fund comparable to the T. Rowe Price International Stock Fund. Total assets $1,058.5 million. Inception 9/7/89. ** Average Annual Compound Total Return *** From 8/31/89. Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Chart 1 - FISCAL-YEAR PERFORMANCE COMPARISON The accompanying notes are an integral part of these financial statements. Statement of Net Assets (Value in thousands) Foreign Equity Fund / October 31, 1994 Value ARGENTINA - 0.8% (000) _____________________________________________________________________________ Common Stocks 32,122 shs. Banco de Galicia Buenos Aires ADR (USD). . . . . . . . . . . . . . . . $ 875 19,535 Banco Frances del Rio de la Plata ADR (USD). . . . . . . . . . . . . 501 34,660 * Buenos Aires Embotelladora ADR (USD). . . . . . . . . . . . . . . . 1,330 190,131 Naviera Perez. . . . . . . . . . . . . . . 1,042 145,160 Sociedad Comercial del Plata . . . . . . . 497 12,686 Sociedad Comercial del Plata ADS (USD). . . . . . . . . . . . . . . . 422 26,330 Telefonica de Argentina ADR (USD). . . . . 1,632 10,600 Telefonica de Argentina ADS (USD). . . . . 665 26,395 Transportadora de Gas del Sur ADS (USD). . . . . . . . . . . . . . . . 315 52,010 YPF Sociedad Anonima ADR (USD) . . . . . . 1,268 _________ Total Argentina . . . . . . . . . . . . . . . . . . . . 8,547 AUSTRALIA - 2.8% _____________________________________________________________________________ Common Stocks 1,007,019 ANI. . . . . . . . . . . . . . . . . . . . 1,084 351,000 Australia & New Zealand Bank Group . . . . 1,017 239,000 Australia Gas & Light. . . . . . . . . . . 772 160,829 Broken Hill Property . . . . . . . . . . . 2,467 235,440 Email. . . . . . . . . . . . . . . . . . . 708 307,000 Howard Smith . . . . . . . . . . . . . . . 1,413 1,066,000 John Fairfax Holdings. . . . . . . . . . . 2,201 304,775 MIM. . . . . . . . . . . . . . . . . . . . 663 564,328 Mayne Nickless . . . . . . . . . . . . . . 2,980 436,988 News Corporation . . . . . . . . . . . . . 2,690 631,124 Nine Network . . . . . . . . . . . . . . . 1,903 279,788 Philip Burns . . . . . . . . . . . . . . . 715 1,685,657 * TNT. . . . . . . . . . . . . . . . . . . . 3,017 856,258 Western Mining . . . . . . . . . . . . . . 5,335 625,328 Woolworths . . . . . . . . . . . . . . . . 1,337 _________ 28,302 Preferred Stock 556,000 TNT, Cum. Cv., 8.00% . . . . . . . . . . . 1,024 _________ Total Australia . . . . . . . . . . . . . . . . . . . . 29,326 AUSTRIA - 0.1% _____________________________________________________________________________ Common Stock 11,110 Oesterreische Elektrik Wirtsch . . . . . . 696 Preferred Stock 6,841 Creditanstalt Bankverein . . . . . . . . . 408 _________ Total Austria . . . . . . . . . . . . . . . . . . . . 1,104 BELGIUM - 1.2% _____________________________________________________________________________ Common Stocks 7,771 AG Finanz. . . . . . . . . . . . . . . . . 624 14,705 Delhaize Freres. . . . . . . . . . . . . . 590 8,250 Generale Banque. . . . . . . . . . . . . . 2,001 18,143 Kredietbank. . . . . . . . . . . . . . . . 3,586 120 Obourg Financiere. . . . . . . . . . . . . 106 6,790 UCB. . . . . . . . . . . . . . . . . . . . 5,241 _________ 12,148 Value BELGIUM - (Cont'd) (000) _____________________________________________________________________________ Corporate Bond 5,445,000 BEL Kredietbank, 5.75%, 11/30/03 . . . . . . . $ 160 _________ Total Belgium . . . . . . . . . . . . . . . . . . . . 12,308 BRAZIL - 2.0% _____________________________________________________________________________ Common Stocks 30 shs. Brazil Fund (USD). . . . . . . . . . . . . 1 20,600 * Cia Energetica de Sao Paulo GDS (USD). . . . . . . . . . . . . . . . 340 45,140 * Companhia Energetica Minas Gerais ADR (USD) . . . . . . . . . . . . 1,236 22,480,000 Companhia Siderurgica Nacional . . . . . . 1,025 3,601,928 Eletrobras . . . . . . . . . . . . . . . . 1,450 25,830,000 Telebras . . . . . . . . . . . . . . . . . 1,101 120,852 Telebras ADR (USD) . . . . . . . . . . . . 6,224 138,670 * Usiminas ADR (USD) . . . . . . . . . . . . 2,339 _________ 13,716 Preferred Stocks, Rights & Warrants 1,150,333 Banco Bradesco . . . . . . . . . . . . . . 11 3,268,000 Brahma . . . . . . . . . . . . . . . . . . 1,141 267,777 wts. * Brahma, 9/30/96 . . . . . . . . . . . . . 24 2,686,000 shs. Cia Cimento Portland Itau. . . . . . . . . 1,200 15,281,000 Lojas Americanas . . . . . . . . . . . . . 476 25,135,975 Telebras . . . . . . . . . . . . . . . . . 1,280 2,421,227 Telesp . . . . . . . . . . . . . . . . . . 1,232 35,805 rts. * Telesp . . . . . . . . . . . . . . . . . . 1 1,273,000 shs. Usiminas . . . . . . . . . . . . . . . . . 2,156 _________ 7,521 _________ Total Brazil . . . . . . . . . . . . . . . . . . . . 21,237 CANADA - 0.3% _____________________________________________________________________________ Common Stocks 80,110 Alcan Aluminium. . . . . . . . . . . . . . 2,147 57,560 MacMillan Bloedel. . . . . . . . . . . . . 792 27,710 Royal Bank of Canada . . . . . . . . . . . 584 _________ Total Canada . . . . . . . . . . . . . . . . . . . . 3,523 CHILE - 0.8% _____________________________________________________________________________ Common Stocks & Warrants 85,801 Chile Fund (USD) . . . . . . . . . . . . . 4,247 27,940 Chilectra ADR (USD). . . . . . . . . . . . 1,428 11,750 Compania de Telefonos de Chile ADR (USD). . . . . . . . . . . . . . . . 1,096 101,230 Five Arrows Chile Fund (USD) . . . . . . . 280 20,246 wts. * Five Arrows Chile Fund, 5/31/99 (USD). . . . . . . . . . . . . . 14 43,910 shs. Genesis Chile Fund (USD) . . . . . . . . . 1,482 _________ Total Chile . . . . . . . . . . . . . . . . . . . . 8,547 DENMARK - 0.2% _____________________________________________________________________________ Common Stocks 19,540 Den Danske Bank. . . . . . . . . . . . . . 1,050 8,200 Teledanmark. . . . . . . . . . . . . . . . 472 20,260 * Unidanmark . . . . . . . . . . . . . . . . 813 _________ Total Denmark . . . . . . . . . . . . . . . . . . . . 2,335 FINLAND - 0.3% _____________________________________________________________________________ Preferred Stock 20,010 Nokia. . . . . . . . . . . . . . . . . . . 3,017 Value FRANCE - 7.0% (000) _____________________________________________________________________________ Common Stocks & Warrants 38,460 shs. Accor. . . . . . . . . . . . . . . . . . . $ 4,564 25,300 CMB Packaging. . . . . . . . . . . . . . . 903 10,870 Carrefour. . . . . . . . . . . . . . . . . 4,793 8,230 Chargeurs. . . . . . . . . . . . . . . . . 2,054 49,536 Cie de St. Gobain. . . . . . . . . . . . . 6,283 4,970 Clarins. . . . . . . . . . . . . . . . . . 480 91,832 Eaux Cie Generale. . . . . . . . . . . . . 8,410 14,717 Ecco . . . . . . . . . . . . . . . . . . . 1,901 540 Ecco Travail Temporaire. . . . . . . . . . 34 14,500 GTM Entrepose. . . . . . . . . . . . . . . 1,107 4,696 L'Oreal. . . . . . . . . . . . . . . . . . 1,020 19,816 LVMH . . . . . . . . . . . . . . . . . . . 3,195 36,666 Lafarge Coppee . . . . . . . . . . . . . . 2,908 35,370 Lapeyre. . . . . . . . . . . . . . . . . . 1,924 1,770 Legrand. . . . . . . . . . . . . . . . . . 2,372 32,990 * Peugeot. . . . . . . . . . . . . . . . . . 4,940 14,038 Pinault Printemps Redoute. . . . . . . . . 2,533 28,160 Poliet . . . . . . . . . . . . . . . . . . 2,160 3,302 Primagaz . . . . . . . . . . . . . . . . . 566 662 wts. * Primagaz, 6/30/95. . . . . . . . . . . . . 9 4,410 shs. Promodes . . . . . . . . . . . . . . . . . 859 7,350 Rexel. . . . . . . . . . . . . . . . . . . 1,019 7,950 Societe Generale de France . . . . . . . . 897 45,820 Societe Nationale Elf Aquitaine. . . . . . 3,386 59,256 Television Francaise . . . . . . . . . . . 6,146 39,050 Total. . . . . . . . . . . . . . . . . . . 2,533 126,390 Valeo. . . . . . . . . . . . . . . . . . . 6,861 _________ Total France . . . . . . . . . . . . . . . . . . . . 73,857 GERMANY - 3.8% _____________________________________________________________________________ Common Stocks & Warrants 2,148 Allianz Holdings . . . . . . . . . . . . . 3,285 107 * Allianz Holdings, new. . . . . . . . . . . 164 400 wts. * Allianz Holdings, 3/29/96 . . . . . . . . 274 2,098 shs. Ava Allgemeine Handels - Der Verbr. . . . . . . . . . . . . . . . 792 13,390 Bayer. . . . . . . . . . . . . . . . . . . 3,112 2,422 Bayerische Motoren Werke . . . . . . . . . 1,248 2,040 Bilfinger & Berger . . . . . . . . . . . . 1,152 7,172 Deutsche Bank. . . . . . . . . . . . . . . 3,489 14,713 Gehe . . . . . . . . . . . . . . . . . . . 5,028 8,960 Hoechst. . . . . . . . . . . . . . . . . . 1,945 1,923 Kaufhof Holdings . . . . . . . . . . . . . 651 20,112 Mannesmann . . . . . . . . . . . . . . . . 5,376 3,528 Rhon Klinikum. . . . . . . . . . . . . . . 3,143 4,049 Schering . . . . . . . . . . . . . . . . . 2,694 5,751 Veba . . . . . . . . . . . . . . . . . . . 1,927 6,800 wts. * Veba International Finance, 4/6/98. . . . . . . . . . . . . 744 10,392 shs. Volkswagen . . . . . . . . . . . . . . . . 3,020 4,800 wts. * Volkswagen International Finance, 10/27/98. . . . . . . . . . . . 479 _________ 38,523 Preferred Stocks 15,464 shs. * Fielmann . . . . . . . . . . . . . . . . . 542 1,476 Krones Finance . . . . . . . . . . . . . . 1,350 _________ 1,892 _________ Total Germany . . . . . . . . . . . . . . . . . . . . 40,415 Value HONG KONG - 3.8% (000) _____________________________________________________________________________ Common Stocks 489,000 shs. Citic Pacific. . . . . . . . . . . . . . . $ 1,471 6,986,000 Great Eagle Holdings . . . . . . . . . . . 3,978 1,735,208 Hong Kong Land Holdings. . . . . . . . . . 4,446 3,264,000 Hopewell Holdings. . . . . . . . . . . . . 3,358 1,214,000 Hutchison Whampoa. . . . . . . . . . . . . 5,609 1,602,000 Swire Pacific 'A'. . . . . . . . . . . . . 12,231 2,192,000 Wharf Holdings . . . . . . . . . . . . . . 8,652 _________ Total Hong Kong . . . . . . . . . . . . . . . . . . . . 39,745 ITALY - 2.3% _____________________________________________________________________________ Common Stocks & Warrants 372 Alleanza Assicurazioni, savings shares . . . . . . . . . . . . . 3 170,561 Assicurazioni Generali . . . . . . . . . . 4,257 1,053,880 Banca Fideuram . . . . . . . . . . . . . . 1,250 71,780 Danieli & Company, savings shares . . . . . . . . . . . . . . . . . 233 17,945 wts. * Danieli & Company, 11/30/99. . . . . . . . 15 79,467 shs. Imi. . . . . . . . . . . . . . . . . . . . 521 368,000 Istituto Naz Delle Assicurazioni. . . . . . . . . . . . . . 532 380,630 Italgas. . . . . . . . . . . . . . . . . . 1,162 2,745,812 * Montedison . . . . . . . . . . . . . . . . 2,258 24,510 RAS. . . . . . . . . . . . . . . . . . . . 304 112,500 Rinascente . . . . . . . . . . . . . . . . 603 386,000 SME Meridonale Di. . . . . . . . . . . . . 984 268,000 Sasib, savings shares. . . . . . . . . . . 854 896,680 Stet . . . . . . . . . . . . . . . . . . . 2,708 381,120 Stet, savings shares . . . . . . . . . . . 943 1,694,777 Telecom Italia . . . . . . . . . . . . . . 4,631 1,186,016 Telecom Italia, savings shares . . . . . . . . . . . . . . . . . 2,633 _________ 23,891 Corporate Bond 107,670,000 ITL Danieli & Company, 7.25%, 1/1/00 . . . . . 55 _________ Total Italy . . . . . . . . . . . . . . . . . . . . 23,946 JAPAN - 22.1% Common Stocks 59,000 shs. Advantest. . . . . . . . . . . . . . . . . 2,071 213,000 * Alps Electric. . . . . . . . . . . . . . . 2,881 369,000 Amada. . . . . . . . . . . . . . . . . . . 4,877 97,000 Aoyama Trading . . . . . . . . . . . . . . 2,985 369,000 Canon. . . . . . . . . . . . . . . . . . . 6,858 220,000 Citizen Watch Company. . . . . . . . . . . 1,817 309,000 * Dai Nippon Screen Manufacturing. . . . . . 2,492 84,000 Daifuku. . . . . . . . . . . . . . . . . . 1,284 324,000 Daiichi Pharmaceutical . . . . . . . . . . 4,918 407,000 Daiwa House. . . . . . . . . . . . . . . . 5,631 702 East Japan Railway . . . . . . . . . . . . 3,501 80,000 Fanuc. . . . . . . . . . . . . . . . . . . 3,882 545,000 Hitachi. . . . . . . . . . . . . . . . . . 5,684 354,000 Hitachi Zosen. . . . . . . . . . . . . . . 2,072 126,000 Honda Motor Company. . . . . . . . . . . . 2,199 213,000 Inax . . . . . . . . . . . . . . . . . . . 2,265 209,000 * Ishihara Sangyo. . . . . . . . . . . . . . 934 103,000 Ito-Yokado . . . . . . . . . . . . . . . . 5,626 74,000 Kawada Industries. . . . . . . . . . . . . 818 175,000 Kokuyo . . . . . . . . . . . . . . . . . . 4,499 Value JAPAN - (Cont'd) (000) _____________________________________________________________________________ 692,000 shs. Komatsu. . . . . . . . . . . . . . . . . . $ 6,573 145,000 Komori . . . . . . . . . . . . . . . . . . 3,878 408,000 Kumagai Gumi . . . . . . . . . . . . . . . 2,052 394,000 Kuraray. . . . . . . . . . . . . . . . . . 5,004 133,000 Kyocera. . . . . . . . . . . . . . . . . . 10,135 236,000 Makita Electric Works. . . . . . . . . . . 4,459 179,000 Marui. . . . . . . . . . . . . . . . . . . 3,271 369,000 Matsushita Electric Industries . . . . . . 6,134 195,000 Mitsubishi . . . . . . . . . . . . . . . . 2,658 970,000 Mitsubishi Heavy Industries. . . . . . . . 7,902 119,000 Mitsubishi Paper . . . . . . . . . . . . . 909 544,000 Mitsui Fudosan . . . . . . . . . . . . . . 6,122 177,000 Mitsui Petrochemical Industries. . . . . . 1,670 96,100 Murata Manufacturing . . . . . . . . . . . 3,929 252,000 NEC. . . . . . . . . . . . . . . . . . . . 3,226 126,000 National House . . . . . . . . . . . . . . 1,886 369,000 Nippon Denso . . . . . . . . . . . . . . . 7,887 117,000 Nippon Hodo. . . . . . . . . . . . . . . . 2,066 2,125,000 Nippon Steel . . . . . . . . . . . . . . . 8,776 192,000 Pioneer Electronic . . . . . . . . . . . . 5,016 50,000 Sangetsu . . . . . . . . . . . . . . . . . 1,487 147,000 Sankyo . . . . . . . . . . . . . . . . . . 3,825 39,700 Sega Enterprises . . . . . . . . . . . . . 2,062 471,000 Sekisui Chemical . . . . . . . . . . . . . 4,839 388,000 Sekisui House. . . . . . . . . . . . . . . 4,407 28,000 Seven-Eleven Japan . . . . . . . . . . . . 2,295 407,000 Sharp. . . . . . . . . . . . . . . . . . . 7,606 133,000 Shinetsu Chemical. . . . . . . . . . . . . 2,829 87,800 Sony . . . . . . . . . . . . . . . . . . . 5,358 631,000 Sumitomo . . . . . . . . . . . . . . . . . 6,515 501,000 Sumitomo Electric. . . . . . . . . . . . . 7,501 191,000 Sumitomo Forestry. . . . . . . . . . . . . 3,215 78,000 TDK. . . . . . . . . . . . . . . . . . . . 3,834 73,000 Taisho Pharmaceutical. . . . . . . . . . . 1,342 501,000 Teijin . . . . . . . . . . . . . . . . . . 2,969 280,000 Tokio Marine & Fire Insurance. . . . . . . 3,325 87,000 Tokyo Electronics. . . . . . . . . . . . . 2,910 87,000 Tokyo Steel Manufacturing. . . . . . . . . 2,183 99,000 Toppan Printing. . . . . . . . . . . . . . 1,462 122,850 Yurtec . . . . . . . . . . . . . . . . . . 2,664 _________ Total Japan . . . . . . . . . . . . . . . . . . . . 233,475 MALAYSIA - 4.1% _____________________________________________________________________________ Common Stocks & Warrants 2,969,000 Affin Holdings . . . . . . . . . . . . . . 4,997 448,000 Aokam Perdana. . . . . . . . . . . . . . . 3,700 138,000 * Aokam Perdana 'A'. . . . . . . . . . . . . 1,080 2,066,000 Berjaya Sports Toto. . . . . . . . . . . . 3,218 398,333 wts. * Commerce Asset Holdings, 6/27/98 . . . . . 803 1,668,000 shs. MBF Capital. . . . . . . . . . . . . . . . 2,011 837,600 Malaysian Helicopter . . . . . . . . . . . 2,065 2,407,000 Renong . . . . . . . . . . . . . . . . . . 3,768 855,000 Resorts World. . . . . . . . . . . . . . . 5,421 2,338,000 * Technology Resources Industries. . . . . . 9,105 1,320,000 United Engineers . . . . . . . . . . . . . 7,130 _________ Total Malaysia . . . . . . . . . . . . . . . . . . . . 43,298 Value MEXICO - 4.3% (000) _____________________________________________________________________________ Common Stocks 248,469 shs. Cemex 'B'. . . . . . . . . . . . . . . . . $ 2,336 38,560 Cifra 'C'. . . . . . . . . . . . . . . . . 104 2,589,232 * Cifra ADR (USD). . . . . . . . . . . . . . 7,373 142,715 Desc 'B' . . . . . . . . . . . . . . . . . 1,080 392,712 Grupo Embotellador de Mexico . . . . . . . 5,047 140,889 Grupo Financiero Banamex 'C' . . . . . . . 968 763,929 Grupo Financiero Bancomer 'C'. . . . . . . 885 67,245 Grupo Financiero Bancomer ADS (USD). . . . . . . . . . . . . . . . 1,563 11,160 Grupo Financiero Bancomer GDS (USD). . . . . . . . . . . . . . . . . 258 611,771 Grupo Industrial Maseca. . . . . . . . . . 997 16,040 * Grupo Iusacell ADS (USD) . . . . . . . . . 485 51,683 * Grupo Mexicano de Desarrollo (Series B) ADS (USD) . . . . . . . . . . 937 72,196 Grupo Televisa GDS (USD) . . . . . . . . . 3,213 51,419 Panamerican Beverages ADR (USD). . . . . . 1,774 209,798 TMX ADS (USD) . . . . . . . . . . . . . . 11,723 451,068 Tolmex 'B' . . . . . . . . . . . . . . . . 6,696 _________ Total Mexico . . . . . . . . . . . . . . . . . . . . 45,439 NETHERLANDS - 7.5% _____________________________________________________________________________ Common Stocks 71,478 ABN Amro . . . . . . . . . . . . . . . . . 2,539 54,545 AMEV . . . . . . . . . . . . . . . . . . . 2,268 53,658 Ahold. . . . . . . . . . . . . . . . . . . 1,578 43,605 Akzo . . . . . . . . . . . . . . . . . . . 5,506 106,668 CSM. . . . . . . . . . . . . . . . . . . . 4,397 1,561,230 Elsevier . . . . . . . . . . . . . . . . . 15,928 101,260 International Nederlanden Groep. . . . . . 4,739 30,415 Koninklijke PTT Nederland. . . . . . . . . 969 17,094 Nutricia . . . . . . . . . . . . . . . . . 923 108,731 Polygram . . . . . . . . . . . . . . . . . 4,837 108,200 Royal Dutch Petroleum. . . . . . . . . . . 12,592 39,035 Unilever . . . . . . . . . . . . . . . . . 4,647 254,753 Wolters Kluwer . . . . . . . . . . . . . . 18,419 _________ 79,342 Preferred Stock 10,797 International Nederlanden Groep. . . . . . 46 _________ Total Netherlands . . . . . . . . . . . . . . . . . . . . 79,388 NEW ZEALAND - 2.3% _____________________________________________________________________________ Common Stocks 833,500 Air New Zealand 'B'. . . . . . . . . . . . 2,386 44,391 Brierley Investments . . . . . . . . . . . 33 1,994,497 Carter Holt Harvey . . . . . . . . . . . . 4,837 190,080 Fernz. . . . . . . . . . . . . . . . . . . 679 3,074,000 Fletcher Challenge . . . . . . . . . . . . 8,287 1,302,750 Fletcher Challenge, Forests Division . . . . . . . . . . . . 1,724 133,125 Independent Newspapers . . . . . . . . . . 397 1,043,200 Telecom Corporation of New Zealand. . . . . . . . . . . . . . . 3,634 291,000 * Trust Bank . . . . . . . . . . . . . . . . 278 426,125 Wilson & Horton. . . . . . . . . . . . . . 2,098 _________ Total New Zealand 24,353 NORWAY - 1.1% _____________________________________________________________________________ Common Stocks 34,740 Bergesen 'A' . . . . . . . . . . . . . . . 754 Value NORWAY - (Cont'd) (000) _____________________________________________________________________________ 39,870 shs. Kvaerner Industier 'A' . . . . . . . . . . $ 1,646 149,671 Norsk Hydro. . . . . . . . . . . . . . . . 6,032 105,456 Orkla 'A'. . . . . . . . . . . . . . . . . 3,097 35,100 Saga Petroleum 'B' . . . . . . . . . . . . 400 _________ Total Norway 11,929 PORTUGAL - 0.2% _____________________________________________________________________________ Common Stocks 34,362 Jeronimo Martins . . . . . . . . . . . . . 1,541 22,812 * Jeronimo Martins, new. . . . . . . . . . . 1,023 _________ Total Portugal . . . . . . . . . . . . . . . . . . . . 2,564 SINGAPORE - 2.3% _____________________________________________________________________________ Common Stocks & Warrants 690,000 DBS Land . . . . . . . . . . . . . . . . . 2,420 207,000 Far East Levingston Shipbuilding . . . . . . . . . . . . . . 1,022 271,000 Jurong Shipyard. . . . . . . . . . . . . . 2,436 121,000 Keppel . . . . . . . . . . . . . . . . . . 1,112 595,000 Neptune Orient Lines . . . . . . . . . . . 887 379,000 Overseas Union Enterprises . . . . . . . . 2,426 320,000 Sembawang Shipyard . . . . . . . . . . . . 2,484 233,000 Singapore Airlines . . . . . . . . . . . . 2,237 445,000 Singapore Land . . . . . . . . . . . . . . 2,864 50,800 Singapore Press. . . . . . . . . . . . . . 931 1,052,000 United Industrial. . . . . . . . . . . . . 1,089 328,627 United Overseas Bank . . . . . . . . . . . 3,603 164,117 wts. * United Overseas Bank, 6/17/97. . . . . . . 972 _________ Total Singapore . . . . . . . . . . . . . . . . . . . . 24,483 SOUTH KOREA - 0.6% _____________________________________________________________________________ Common Stocks 12,240 shs. Hanil Securities . . . . . . . . . . . . . 223 20,400 Korea Electric Power . . . . . . . . . . . 776 26,000 Pohang Iron & Steel. . . . . . . . . . . . 3,004 400 Samsung Electronic . . . . . . . . . . . . 68 1,847 * Samsung Electronics GDR (USD). . . . . . . . . . . . . . . . 113 44,600 * Samsung Electronics GDS (USD). . . . . . . . . . . . . . . . 2,698 _________ Total South Korea . . . . . . . . . . . . . . . . . . . . 6,882 SPAIN - 1.7% _____________________________________________________________________________ Common Stocks 10,511 Banco Popular Espanol. . . . . . . . . . . 1,320 60,000 Banco Santander. . . . . . . . . . . . . . 2,441 104,330 Centros Commerciales Pryca . . . . . . . . 1,718 111,488 ENDESA . . . . . . . . . . . . . . . . . . 5,115 16,290 FOSCA. . . . . . . . . . . . . . . . . . . 1,640 17,098 Gas Natural. . . . . . . . . . . . . . . . 1,449 97,560 Repsol . . . . . . . . . . . . . . . . . . 3,123 121,603 Telefonica de Espana . . . . . . . . . . . 1,647 _________ Total Spain . . . . . . . . . . . . . . . . . . . . 18,453 SWEDEN - 1.7% _____________________________________________________________________________ Common Stocks 24,130 Asea 'A' . . . . . . . . . . . . . . . . . 1,755 237,175 Astra 'B'. . . . . . . . . . . . . . . . . 6,331 131,600 Atlas Copco 'B'. . . . . . . . . . . . . . 1,793 Value SWEDEN - (Cont'd) (000) _____________________________________________________________________________ 75,530 shs. Electrolux 'B' . . . . . . . . . . . . . . $ 3,922 34,270 Esselte 'B'. . . . . . . . . . . . . . . . 472 25,800 Hennes & Mauritz 'B' . . . . . . . . . . . 1,428 76,900 Sandvik 'B'. . . . . . . . . . . . . . . . 1,304 10,220 Scribona 'B' . . . . . . . . . . . . . . . 73 20,240 Stora Kopparberg 'B' . . . . . . . . . . . 1,261 _________ Total Sweden 18,339 SWITZERLAND - 3.2% Common Stocks & Warrants 9,432 BBC Brown Boveri . . . . . . . . . . . . . 8,097 4,195 CS Holdings. . . . . . . . . . . . . . . . 1,834 2,585 wts. * CS Holdings, 12/16/94. . . . . . . . . . . 22 3,081 shs. Ciba Geigy . . . . . . . . . . . . . . . . 1,795 1,350 wts. * Landis & Gyr, 2/15/95. . . . . . . . . . . 1 8,336 shs. Nestle . . . . . . . . . . . . . . . . . . 7,794 1,033 Roche Holdings . . . . . . . . . . . . . . 4,594 8,047 Sandoz . . . . . . . . . . . . . . . . . . 4,012 9,130 Swiss Bank . . . . . . . . . . . . . . . . 2,632 3,120 Union Bank of Switzerland. . . . . . . . . 2,924 _________ Total Switzerland . . . . . . . . . . . . . . . . . . . . 33,705 THAILAND - 1.7% _____________________________________________________________________________ Common Stocks 62,400 Advanced Information Service . . . . . . . 1,082 330,200 Bangkok Bank . . . . . . . . . . . . . . . 3,577 391,000 Bank of Ayudhya. . . . . . . . . . . . . . 1,530 39,000 Land & House . . . . . . . . . . . . . . . 801 29,000 Shinawatra Computer & Communication. . . . . . . . . . . . . . 903 33,200 Siam Cement. . . . . . . . . . . . . . . . 1,916 198,800 Siam Commercial Bank . . . . . . . . . . . 2,058 334,800 Siam Pulp & Paper. . . . . . . . . . . . . 1,182 383,500 Thai Farmers Bank. . . . . . . . . . . . . 3,385 48,000 United Communications. . . . . . . . . . . 1,417 _________ Total Thailand . . . . . . . . . . . . . . . . . . . . 17,851 UNITED KINGDOM - 12.8% _____________________________________________________________________________ Common Stocks 825,440 Abbey National . . . . . . . . . . . . . . 5,602 486,000 Argos. . . . . . . . . . . . . . . . . . . 2,567 727,200 Argyll Group . . . . . . . . . . . . . . . 3,121 2,044,530 Asda Group . . . . . . . . . . . . . . . . 2,006 214,000 BAA. . . . . . . . . . . . . . . . . . . . 1,799 522,200 British Gas. . . . . . . . . . . . . . . . 2,485 309,000 British Petroleum. . . . . . . . . . . . . 2,203 1,193,200 Cable & Wireless . . . . . . . . . . . . . 8,234 484,444 Cadbury Schweppes. . . . . . . . . . . . . 3,460 1,328,350 Caradon. . . . . . . . . . . . . . . . . . 5,800 389,000 Coats Viyella. . . . . . . . . . . . . . . 1,244 294,750 David S. Smith . . . . . . . . . . . . . . 2,470 431,840 East Midlands Electricity. . . . . . . . . 4,844 97,000 Eastern Electricity. . . . . . . . . . . . 1,259 221,000 First National Finance . . . . . . . . . . 242 470,650 Glaxo Holdings . . . . . . . . . . . . . . 4,595 840,000 Grand Metropolitan . . . . . . . . . . . . 5,728 738,000 Guinness . . . . . . . . . . . . . . . . . 5,624 Value UNITED KINGDOM - (Cont'd) (000) _____________________________________________________________________________ 89,000 shs. Heath. . . . . . . . . . . . . . . . . . . $ 339 198,576 Heywood Williams Group . . . . . . . . . . 935 406,300 Hillsdown Holdings . . . . . . . . . . . . 1,113 450,300 John Laing . . . . . . . . . . . . . . . . 1,741 564,977 Kingfisher . . . . . . . . . . . . . . . . 4,351 624,000 Ladbroke Group . . . . . . . . . . . . . . 1,531 418,670 London Electricity . . . . . . . . . . . . 4,950 1,231,490 National Westminster Bank. . . . . . . . . 10,109 149,600 * Polly Peck International . . . . . . . . . 7 358,960 RTZ. . . . . . . . . . . . . . . . . . . . 5,025 655,000 Rank Organisation. . . . . . . . . . . . . 4,295 601,570 Reed International . . . . . . . . . . . . 7,368 242,000 Rolls Royce. . . . . . . . . . . . . . . . 689 331,000 Sears. . . . . . . . . . . . . . . . . . . 576 497,990 Shell Transport & Trading. . . . . . . . . 5,969 1,058,560 Smithkline Beecham, equity units . . . . . 6,457 104,000 South Western Electricity. . . . . . . . . 1,350 103,888 Spring Ram . . . . . . . . . . . . . . . . 76 863,000 T & N. . . . . . . . . . . . . . . . . . . 3,034 586,903 Tesco. . . . . . . . . . . . . . . . . . . 2,251 1,698,080 Tomkins. . . . . . . . . . . . . . . . . . 5,887 500,620 United Newspapers. . . . . . . . . . . . . 4,159 _________ 135,495 Preferred Stock 84,000 First National Finance, Cum. Cv., 7.00%. . . . . . . . . . . . . 172 _________ Total United Kingdom . . . . . . . . . . . . . . . . . . . . 135,667 SHORT-TERM INVESTMENTS - 7.3% _____________________________________________________________________________ Commercial Paper $10,000,000 American General Investment, 4.90%, 11/21/94. . . . . . . . . . . . . 9,955 5,000,000 Banque Nationale de Paris, 5.02%, 12/1/94 . . . . . . . . . . . . . 5,000 10,000,000 British Telecommunications, 5.00%, 11/29/94. . . . . . . . . . . . . 9,935 5,000,000 Caisse des Depots, 4.90%, 11/23/94. . . . . . . . . . . . . 4,976 5,000,000 Canadian Wheat Board, 4.83%, 11/15/94. . . . . . . . . . . . . 4,940 4,000,000 Ciesco L.P., 4.90%, 11/22/94 . . . . . . . 3,981 5,280,000 Delaware Funding Corporation, 4.85%, 11/18/94. . . . . . . . . . . . . 5,259 5,000,000 Hanson Finance, 4.90%, 12/1/94 . . . . . . 4,948 1,240,000 Harvard University, 4.75%, 11/1/94 . . . . . . . . . . . . . 1,240 5,000,000 New South Wales Treasury, 5.00%, 11/10/94. . . . . . . . . . . . . 4,975 5,000,000 Preferred Receivables Funding, 4.85%, 12/12/94. . . . . . . . . . . . . 4,937 3,000,000 Republic National Bank New York, 4.86%, 11/16/94. . . . . . . . . . . . . 2,964 12,000,000 Walt Disney Company, 5.40%, 1/10/95 . . . . . . . . . . . . . 11,854 _________ 74,964 Other 2,000,000 Corporate Asset Funding, Floating Rate Medium-Term Note, 4.98%, 12/12/94 . . . . . . . . . . . . 2,000 _________ Total Short-Term Investments . . . . . . . . . . . . . . . . . 76,964 Total Investments in Securities - 98.3% (Cost - $925,238) . . . . . . . . . . . . . . . . . . . .$1,040,697 Other Assets Less Liabilities - 1.7% . . . . . . . . . . . . . 17,781 _________ Net Assets Consisting of: Accumulated net investment income - net of distributions . . . . . . . . . . . . . . $ 9,429 Accumulated realized gains/losses - net of distributions . . . . . . . . . . . . . . 39,249 Net unrealized appreciation of investments . . . . . . . . . . . . . . 114,861 Paid-in-capital applicable to 72,555,704 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares authorized . . . . . . . . . . . . . . 894,939 _________ Net Assets - 100.0% . . . . . . . . . . . . . . $1,058,478 _________ _________ Net Asset Value Per Share. . . . . . . . . . . . . $14.59 ______ ______ * - Non-income producing (BEL) - Belgian franc denominated (DEM) - German deutschemark denominated (FRF) - French franc denominated (ITL) - Italian lira denominated (JPY) - Japanese yen denominated (NLG) - Dutch guilder denominated (UK) - British pound denominated (USD) - U.S. dollar denominated The accompanying notes are an integral part of these financial statements. _____________________________________________________________________________ STATEMENT OF OPERATIONS Foreign Equity Fund / Year Ended October 31, 1994 _____________________________________________________________________________ Amounts in Thousands ______________________ Investment Income Income Dividends (net of foreign taxes of $1,856) . . . . $12,653 Interest . . . . . . . . . . . . . . . . . . . . . 2,620 _______ Total income . . . . . . . . . . . . . . . . . . . $15,273 Expenses Investment management fees . . . . . . . . . . . . 5,137 Custodian and accounting fees & expenses . . . . . . . . . . . . . . . . . . . 531 Shareholder servicing fees & expenses . . . . . . . . . . . . . . . . . . . 182 Registration fees & expenses . . . . . . . . . . . 132 Legal & auditing fees. . . . . . . . . . . . . . . 35 Directors' fees & expenses . . . . . . . . . . . . 18 Prospectus & shareholder reports . . . . . . . . . 4 _______ Total expenses . . . . . . . . . . . . . . . . . . 6,039 _______ Net investment income. . . . . . . . . . . . . . . . 9,234 _______ Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) Securities . . . . . . . . . . . . . . . . . . . . 41,026 Foreign currency transactions. . . . . . . . . . . (543) _______ Net realized gain . . . . . . . . . . . . . . . . . 40,483 Change in net unrealized appreciation or depreciation Securities . . . . . . . . . . . . . . . . . . . . 29,416 Other assets and liabilities denominated in foreign currencies . . . . . . . . (1,410) _______ Change in net unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . 28,006 _______ Net gain on investments. . . . . . . . . . . . . . . 68,489 _______ Increase in Net Assets from Operations. . . . . . . . . . . . . . . . . . $77,723 _______ _______ The accompanying notes are an integral part of these financial statements. _____________________________________________________________________________ STATEMENT OF CHANGES IN NET ASSETS Foreign Equity Fund _____________________________________________________________________________ Year Ten Months Year Ended Ended Ended October 31, October 31, December 31, 1994 1993* 1992 __________ __________ __________ Amounts in Thousands ____________________________________ Increase (Decrease) in Net Assets Operations Net investment income. . . . . . . . $ 9,234 $ 4,866 $ 2,813 Net realized gain on investments. . . . . . . . . . . 40,483 7,964 2,203 Change in net unrealized appreciation or depreciation of investments. . . . . . . . . . . 28,006 92,464 (12,676) _________ _________ _________ Increase (decrease) in net assets from operations. . . . . . . . . . . . . 77,723 105,294 (7,660) _________ _________ _________ Distributions to shareholders Net investment income. . . . . . . . (3,387) - (4,204) Net realized gain on investments . . . . . . . . . . . . (7,901) - (2,336) _________ _________ _________ Decrease in net assets from distributions to shareholders . . . . . . . . . . . . (11,288) - (6,540) _________ _________ _________ Capital share transactions Sold 42,077, 18,423, and 10,947 shares . . . . . . . . . 589,524 209,581 114,053 Distributions reinvested of 532, 0, and 367 shares. . . . . 7,219 - 3,699 Redeemed 6,787, 5,474, and 934 shares. . . . . . . . . . . (94,089) (64,465) (9,768) _________ _________ _________ Increase in net assets from capital share transactions. . . . . 502,654 145,116 107,984 _________ _________ _________ Net equalization . . . . . . . . . . . - - 1,373 _________ _________ _________ Total increase . . . . . . . . . . . . 569,089 250,410 95,157 Net Assets Beginning of period. . . . . . . . . 489,389 238,979 143,822 _________ _________ _________ End of period. . . . . . . . . . . . $1,058,478 $ 489,389 $ 238,979 _________ _________ _________ _________ _________ _________ *The Fund's fiscal year-end was changed to October 31. The accompanying notes are an integral part of these financial statements. _____________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS Foreign Equity Fund / October 31, 1994 _____________________________________________________________________________ Note 1 - Significant Accounting Policies _____________________________________________________________________________ Institutional International Funds, Inc. (the Corporation) is registered under the Investment Company Act of 1940. The Foreign Equity Fund (the Fund), a diversified, open-end management investment company, is the sole portfolio currently established by the Corporation. A) Valuation - Equity securities listed or regularly traded on a securities exchange (including NASDAQ) are valued at the last quoted sales price at the time the valuations are made. A security which is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Other equity securities and those listed securities that are not traded on a particular day are valued at a price within the limits of the latest bid and asked prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. Short-term debt securities are valued at their cost which, when combined with accrued interest, approximates fair value. For purposes of determining the Fund's net asset value per share, the U.S. dollar value of all assets and liabilities initially expressed in foreign currencies is determined by using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the Fund, as authorized by the Board of Directors. B) Currency translation - Foreign currency amounts are translated into U.S. dollars at prevailing exchange rates as follows: assets and liabilities at the rate of exchange at the end of the respective period, purchases and sales of securities and income and expenses at the rate of exchange prevailing on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. C) 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 an 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 which may differ from generally accepted accounting principles. Effective January 1, 1993, the Fund discontinued its practice of equalization. The results of operations and net assets were not affected by this change. Note 2 - Investment Transactions _____________________________________________________________________________ As a part of its investment program, the Fund engages in the following activities, the nature and risk of which are set forth more fully in the Fund's Prospectus and Statement of Additional Information. A) Emerging Markets - The Fund has investments in securities of companies located in emerging markets. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. B) Forward Currency Exchange Contracts - At October 31, 1994, the Fund was a party to various forward currency exchange contracts under which it is obligated to exchange currencies at specified future dates. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in currency values. Outstanding contracts at October 31, 1994, are as follows: Unrealized Contract to Apprec. Value ________________________________ (Deprec.) Date Receive Deliver in USD Counterparty _____ _______________ _______________ _______ ___________ Amounts in Thousands _________________________________ 11/94 NLG 14,101 JPY 816,556 (86) Chase Manhattan Bank 11/94 JPY 785,922 NLG 14,101 (231) Chase Manhattan Bank 11/94 FRF 43,068 JPY 813,432 (55) Chase Manhattan Bank 11/94 JPY 784,060 FRF 43,068 (249) Chase Manhattan Bank 11/94 JPY 785,500 DEM 12,568 (230) Chase Manhattan Bank 11/94 DEM 12,568 JPY 788,956 194 Chase Manhattan Bank Net unrealized depreciation of $657,000 on these contracts at October 31, 1994, is included in the accompanying financial statements, of which $194,000 relates to appreciated contracts and $851,000 to depreciated contracts C) Other - Purchases and sales of portfolio securities, other than short-term and U.S. Government securities, aggregated $576,292,000 and $148,457,000, respectively, for the year ended October 31, 1994. Note 3 - Federal Income Taxes _____________________________________________________________________________ No provision for federal income taxes is required since the Fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. In order for the Fund's capital accounts and distributions to shareholders to reflect the tax character of certain transactions, $2,141,000 of undistributed net investment income was reclassified as an increase to undistributed net realized gains during the year ended October 31, 1994. The results of operations and net assets were not affected by the reclassifications. At October 31, 1994, the aggregate cost of investments for federal income tax and financial reporting purposes was $925,238,000 and net unrealized appreciation aggregated $115,459,000, of which $132,073,000 related to appreciated investments and $16,614,000 to depreciated investments. Note 4 - Related Party Transactions _____________________________________________________________________________ The Fund is managed by Rowe Price-Fleming International, Inc. (Price-Fleming) 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 Price-Fleming (the Manager) provides for an annual investment management fee, computed daily and paid monthly, equal to 0.70% of average daily net assets. During the year ended October 31, 1994, the Fund, in the ordinary course of business, paid commissions of $289,000 to, and placed security purchase and sale orders aggregating $71,164,000 with, certain affiliates of the Manager in connection with the execution of various portfolio transactions at the direction of Price-Fleming. T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc. (RPS) are wholly owned subsidiaries of Price Associates. TRPS provides transfer and dividend disbursing agent functions and shareholder services for all accounts. RPS provides subaccounting and recordkeeping services for certain retirement accounts invested in the Fund. Price Associates, under a separate agreement, calculates the daily share price and maintains the financial records of the Fund. For the year ended October 31, 1994, the Fund incurred fees totalling approximately $276,000 for these services provided by related parties. At October 31, 1994, these investment management and service fees payable were $618,000. ____________________________________________________________________________________________________________ FINANCIAL HIGHLIGHTS Foreign Equity Fund ____________________________________________________________________________________________________________
For a share outstanding throughout each period _________________________________________________________________ Ten From Year Months September 7, 1989 Ended Ended Year Ended December 31, (Commencement of October 31, October 31, _______________________ Operations) to 1994 1993# 1992 1991 1990 December 31, 1989 _________________________________________________________________ NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $13.32 $10.05 $10.73 $ 9.54 $10.62 $10.00 ______ ______ ______ ______ ______ ______ Investment Activities Net investment income . . . . . . 0.09 0.13 0.17 0.18+ 0.23*+ 0.05* Net realized and unrealized gain (loss). . . . . . . . . . 1.48 3.14 (0.57) 1.28 (1.10) 0.61 ______ ______ ______ ______ ______ ______ Total from Investment Activities. . . . . . . . . . . . 1.57 3.27 (0.40) 1.46 (0.87) 0.66 ______ ______ ______ ______ ______ ______ Distributions Net investment income . . . . . . (0.09) - (0.18) (0.18) (0.21) (0.04) Net realized gain . . . . . . . . (0.21) - (0.10) (0.09) - - ______ ______ ______ ______ ______ ______ Total Distributions. . . . . . . . . (0.30) - (0.28) (0.27) (0.21) (0.04) ______ ______ ______ ______ ______ ______ NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $14.59 $13.32 $10.05 $10.73 $ 9.54 $10.62 ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ____________________________________________________________________________________________________________ RATIOS/SUPPLEMENTAL DATA Total Return . . . . . . . . . . . . 12.0% 32.5% (3.7)% 15.4% (8.2)% 6.6% Ratio of Expenses to Average Net Assets. . . . . . . . . . . . 0.82% 0.86%! 0.99% 1.00%+ 1.01%*+ 1.10%!* Ratio of Net Investment Income to Average Net Assets. . . . . . . . 1.26% 1.65%! 1.49% 1.64% 2.23% 1.43%! Portfolio Turnover Rate. . . . . . . 22.0% 27.4%! 35.1% 46.7% 44.6% 13.80%! Net Assets, End of Period (in thousands). . . . .$1,058,478 $489,389 $238,979 $143,822 $83,645 $50,252 # The Fund's fiscal year-end was changed to October 31. + Excludes expenses in excess of a 1.00% voluntary expense limitation in effect from March 1, 1990, through December 31, 1991. * Excludes expenses in excess of a 1.10% voluntary expense limitation in effect through February 28, 1990. ! Annualized.
_____________________________________________________________________________ REPORT OF INDEPENDENT ACCOUNTANTS _____________________________________________________________________________ To the Board of Directors of Institutional International Funds, Inc. and Shareholders of the Foreign Equity Fund We have audited the accompanying statement of net assets of Foreign Equity Fund, (the sole portfolio of Institutional International Funds, Inc.), as of October 31, 1994, and the related statement of operations for the year then ended, the statement of changes in net assets for the year ended October 31, 1994, the ten month period ended October 31, 1993 and the year ended December 31, 1992, and the financial highlights for the year ended October 31, 1994, the ten month period ended October 31, 1993 and each of the three years in the period ended December 31, 1992 and for the period September 7, 1989 (commencement of operations) to December 31, 1989. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of October 31, 1994 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Foreign Equity Fund as of October 31, 1994, the results of its operations, the changes in its net assets and financial highlights for each of the respective periods stated in the first paragraph in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Baltimore, Maryland November 17, 1994 Chart 1 - FISCAL-YEAR PERFORMANCE COMPARISON Shows growth of $10,000 investment in Foreign Equity Fund in September 1989 to $16,135 on October 31, 1994, and growth of $10,000 investment in MSCIEAFE Index in September 1989 to $12,289 on October 31, 1994. -----END PRIVACY-ENHANCED MESSAGE-----