-----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, Bo0UBEpLwVtaGGOXXtRAT9MbCL4XCnugP9li0J6xAMyYPluN7VCD3v1pf9FemuaE xZPotZL+JtzFQxbfaQQcgw== 0000852254-96-000004.txt : 19960617 0000852254-96-000004.hdr.sgml : 19960617 ACCESSION NUMBER: 0000852254-96-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960614 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: 96581261 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT STREET STREET 2: LEGAL DEPARTMENT 7TH FLOOR CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 N-30D 1 Semiannual Report April 30, 1996 Foreign Equity Fund Fellow Shareholders International stock markets and your fund made steady progress during the period under review. Economic activity overseas was much more muted than in the U.S. but, in Europe at least, this allowed further declines in interest rates. In Japan the signs of recovery were widespread, but the pace was far slower than previous recoveries. Southeast Asian markets came to life following a long dull patch, and the markets of Latin America performed strongly as confidence returned following the peso crisis 18 months ago. In currency markets, the U.S. dollar was firm against both the yen and European currencies. PERFORMANCE REVIEW The return from the Foreign Equity Fund over the six-month period ended April 30 was strong in absolute terms and was just behind the unmanaged Morgan Stanley Capital International Europe, Australia and Far East (EAFE) Index. During this period, country weightings against the index were moderately helpful, and stock selection added significant value with our quality growth stocks performing well in a number of markets. Performance Comparison Periods Ended 4/30/96 __________________________ 6 Months 12 Months __________ __________ Foreign Equity Fund 13.31% 17.77% MSCI EAFE Index 13.38 11.74 Over the 12-month period, the fund's returns were well ahead of the EAFE Index. Stock selection again added value over this period, and the underweighting in Japan helped relative returns as the Tokyo market fell behind. An overweighting in the buoyant markets of Southeast Asia was also positive, while the portfolio's Latin American positions performed strongly. INVESTMENT REVIEW Far East In Japan the economy continued to grow at a steady if modest pace. In common with most developed countries, consumer expenditure is the largest component of the economy and this sector finally showed some signs of life. Department store sales were again positive after almost four years of decline. A year ago, when the yen was at an all-time high, producer prices were in decline and there was serious concern that a deflationary spiral could take hold. Today the yen is significantly lower, but the Bank of Japan is still able to pursue a supportive monetary policy without any serious risk of inflation. The financial press is still dominated by the debate over who should pay for the debts incurred by the failed housing loan companies. The banks have already recognized large amounts of their bad debts and will report sharp losses in the fiscal year just ended. The stock market performed reasonably well in local currency terms but, given the weakness of the yen, dollar returns were less compelling. Our strategy in Tokyo was to avoid the banking sector (a large part of the index) and to focus on international technology companies such as Kyocera, NEC, and Canon. In Southeast Asia, stock markets have performed well since the beginning of the year. A number of these markets traditionally rally at the time of Chinese New Year, but there were also clear signs that U.S. investors have returned following two years of underperformance compared with the U.S. Most of the economies in the region showed high rates of growth but have still managed to keep inflation and their balance of payments under reasonable control. Valuations compared with the rest of the world began to look reasonable again, and an added attraction for the U.S. investor was that many of these currencies are linked to the strengthening U.S. dollar. Malaysia was one of the best performers in the region, up 28% during the past six months. Foreign investors had become excessively cautious about the Malaysian economy last year, but following a surprisingly strong trade surplus in December and increasing signs of an economic soft landing, they rushed back in February. With its abundance of natural resources, stable politics, and sensible economic policies, Malaysia remained a core part of our Southeast Asian positions. Our holdings in United Engineers and Renong are well placed to benefit from the current infrastructure spending boom. In Korea the market also rallied strongly. A slush fund scandal involving two previous presidents held the market back earlier in the year, but sentiment has now improved. With interest rates falling again and a recent increase in the permitted levels of foreign ownership, we took the opportunity to increase our positions here. Many of Korea's better-managed companies are selling for under five times cash flow and they remain fierce competitors in world markets. Not all the markets in the region were so buoyant. Hong Kong has been dull recently, with better sentiment in the property sector counterbalanced by caution over the future of U.S. interest rates. Singapore also made little progress with export growth affected by a worldwide slowdown in the electronics industry. However, the Singapore economy continues to be very well managed, and with interest rates staying low, our positions in property stocks and bank stocks were able to make progress. Market Performance 6 Months Ended 4/30/96 ___________________________________________ Local Currency Local vs. U.S. In U.S. Currency Dollars Dollars ___________________________________________ Australia 12.5% 3.4% 16.3% France 21.4 - 5.5 14.8 Germany 13.9 - 8.2 4.6 Hong Kong 16.0 - 0.1 16.0 Italy 15.2 1.9 17.4 Japan 21.1 - 2.4 18.2 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 Switzerland 18.5 - 8.7 8.2 United Kingdom 10.8 - 4.9 5.4 Source: Randall Helms Database, using MSCI Indices. Europe The broad picture in Europe was one of stagnant economic activity countered by looser monetary policy from most of the central banks. Germany would be typical here. For some time now the economy has been suffering from high wage costs, rising taxes, and a strong currency; therefore the recent moves by the Bundesbank to lower interest rates together with a weaker deutschemark must be welcome news for the German manufacturing industry. Given the preponderance of large cyclical and interest rate-sensitive stocks, we remained underweighted in this market but our positions in the health care stocks Bayer and Rhoen Klinikum performed well. We also recently added to an old favorite, Gehe, a pharmaceutical wholesaler. Monetary easing in Germany was welcome news in France where the Chirac administration was making better progress in tackling the country's large budget deficit. The economy has also been depressed for some time, and a combination of lower interest rates and a weak currency could provide a much needed kick start. After a period of disappointing performance, the French stock market rose strongly with growth stocks leading the way. We maintained our overweighted position; Eaux Cie Generale, a conglomerate based on water services, LVMH, a leader in luxury goods, and supermarket chain Carrefour remained core holdings. The fund was also overweighted in the Netherlands, which continued to perform well. Our optimism here was based on individual holdings, the bulk of which are multinational companies, rather than on the fundamentals of the Dutch economy. Publishers Elsevier and Wolters Kluwer led the market, but we recently trimmed our positions here following a period of outstanding performance. It is interesting to note that a number of our Dutch holdings are parts of Anglo-Dutch combines in which we also invest through the U.K.-listed entity. The Royal Dutch Shell Group is jointly owned by Royal Dutch Petroleum in the Netherlands and Shell Transport & Trading in the U.K. Similarly, Reed Elsevier is now an international publishing business which can be bought through Reed International in London and Elsevier in Amsterdam. We owned all four stocks in the portfolio, a useful reminder that market weightings are to a significant extent a function of the relative attractiveness of individual companies. In the U.K. the economy has recently decelerated, reviving optimism that interest rates can fall again. With sterling weakening against the dollar, attention focused on the large multinationals that dominate the index. Our core holdings Glaxo Wellcome and Smithkline Beecham are two of the world's leading pharmaceutical companies, but we also own Grand Metropolitan, the international drinks group, and Cable & Wireless, the telecommunications company with important interests in the Far East. Chart 1 - Geographic Diversification Turning to the smaller markets, in Italy both the market and the currency performed well. Following the elections in April, the prime minister-designate made encouraging statements about fiscal reform and returning the lira to the European monetary system. Spain also performed well following the election of a pro-business government, although the party failed to win an outright majority. In Switzerland the overall market was dull but there was a strong performance from pharmaceutical companies Ciba-Geigy and Sandoz, both holdings in the portfolio, which announced a merger. Latin America The stock markets of Latin America have performed well since the beginning of the year. In Brazil, a sharp decline in inflation combined with strong economic growth boosted confidence and gave President Cardoso a high rating in the opinion polls. This in turn will help him push through much-needed fiscal reforms. With economic policy on track and the trade account in moderate surplus, the currency remained steady with positive implications for both inflation and interest rates. Mexico has seen the first signs of economic recovery, and with the peso now more stable, the stock market blazed ahead on increasing confidence that interest rates can fall from here. Our overweighting in the region versus the benchmark helped fund performance. INVESTMENT POLICY AND OUTLOOK Our current investment policy for the fund is to maintain a neutral weighting in Europe, an underweighting in Japan, and an overweighting in the smaller markets of Southeast Asia and Latin America. This strategy is based on several assumptions. In Europe we see a helpful mix of improving economies and falling interest rates and we can also find quality growth stocks with reasonable valuations by world standards. In Japan, we expect the economic recovery to continue, but our confidence is tempered by the high valuations in certain areas of the market and a suspicion that interest rates have reached the bottom of their cycle. The overweighting of Southeast Asia assumes that this part of the world will continue to see high rates of economic growth. Valuations are attractive following a long period of dull market performance. In Latin America, we remain optimistic about the long-term prospects. The portfolio remains well diversified, and we believe that our preference for established growth companies is appropriate given a background of muted economic activity. This broad strategy has served the fund well recently and we believe it will continue to do so in the future. 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. INDUSTRY DIVERSIFICATION April 30, 1996 _____________________________________________________________________________ Percent of Net Assets _____________________________________________________________________________ Services 23.5% Finance 17.5 Consumer Goods 15.9 Capital Equipment 15.3 Energy 10.5 Materials 8.2 Multi-Industry 3.0 Miscellaneous 0.1 Reserves 6.0 _____________________________________________________________________________ Net Assets 1100.0% EXCHANGE RATES TO U.S. DOLLARS April 30, 1996 _____________________________________________________________________________ Country Exchange Rate _____________________________________________________________________________ Argentina 0.9999 Australia 1.2730 Austria 10.7650 Belgium 31.4800 Brazil 0.9921 Canada 1.3615 Czech Republic 27.773 Denmark 5.9020 Finland 4.8396 France 5.1675 Germany 1.5309 Hong Kong 7.7355 Italy 1,562.0000 Japan 104.6050 Malaysia 2.4933 Mexico 7.4300 Netherlands 1.7135 New Zealand 1.4557 Norway 6.5696 Peru 2.3705 Portugal 156.8600 Singapore 1.4058 South Korea 778.2500 Spain 127.2000 Sweden 6.7816 Switzerland 1.2416 Thailand 25.2445 United Kingdom 0.6643 SECURITY CLASSIFICATION April 30, 1996 _____________________________________________________________________________ Percent of Cost Market Net Assets (000) Value (000) Common Stocks, Rights, and Warrants 91.2% $1,588,131 $1,850,847 Preferred Stocks and Warrants 2.8 49,511 55,533 Bonds 0.0 537 604 Short-Term Investments 4.6 93,627 93,627 Total Investments 98.6 1,731,806 2,000,611 Other Assets Less Liabilities 1.4 28,412 28,318 _____________________________________________________________________________ Net Assets 100.0% $1,760,218 $2,028,929 TWENTY-FIVE LARGEST HOLDINGS April 30, 1996 _____________________________________________________________________________ Percent of Company Country Net Assets _____________________________________________________________________________ Wolters Kluwer Netherlands 2.1% Elsevier Netherlands 1.6 Royal Dutch Petroleum Netherlands 1.6 Smithkline Beecham United Kingdom 1.1 National Westminster Bank United Kingdom 1.1 Reed International United Kingdom 1.1 Eaux Cie Generale France 1.0 Roche Holdings Switzerland 0.9 Kyocera Japan 0.9 Telecomunicacoes Brasileiras Brazil 0.9 Astra Sweden 0.9 Mitsubishi Heavy Industries Japan 0.9 NEC Japan 0.9 Nestle Switzerland 0.9 Nippon Denso Japan 0.8 Internationale Nederlanden Groep Netherlands 0.8 Canon Japan 0.8 Nomura Securities Japan 0.7 Norsk Hydro Norway 0.7 Mitsui Fudosan Japan 0.7 Shell Transport & Trading United Kingdom 0.7 Carrefour France 0.7 Technology Resources Industries Malaysia 0.7 Gehe Germany 0.7 Sumitomo Electric Japan 0.7 _____________________________________________________________________________ Total 23.9% SUMMARY OF INVESTMENTS AND CASH April 30, 1996 _____________________________________________________________________________ Percent of Country Equities! Cash Total MSCI EAFE _____________________________________________________________________________ Austria 0.1 - 0.1 0.4 Belgium 1.0 - 1.0 1.1 Czech Republic 0.1 - 0.1 - Denmark 0.2 - 0.2 0.8 Finland 0.1 - 0.1 0.5 France 7.5 - 7.5 6.6 Germany 4.1 - 4.1 7.0 Ireland - - - 0.3 Italy 1.9 - 1.9 2.2 Netherlands 9.1 - 9.1 4.1 Norway 1.4 - 1.4 0.5 Portugal 0.4 - 0.4 - Spain 2.4 - 2.4 1.8 Sweden 2.3 - 2.3 2.2 Switzerland 3.9 - 3.9 6.2 United Kingdom 14.0 - 14.0 16.3 _____________________________________________________________________________ Total Europe 48.5% - 48.5% 50.0% _____________________________________________________________________________ Australia 1.8 - 1.8 2.6 China 0.5 - 0.5 - Hong Kong 4.3 - 4.3 3.4 Japan 24.2 - 24.2 40.0 Malaysia 3.1 - 3.1 2.4 New Zealand 0.6 - 0.6 0.4 Singapore 2.3 - 2.3 1.2 South Korea 1.6 - 1.6 - Thailand 0.8 - 0.8 - _____________________________________________________________________________ Total Pacific Basin 39.2% - 39.2% 50.0% _____________________________________________________________________________ Argentina 0.7 - 0.7 - Brazil 2.7 - 2.7 - Canada 0.4 - 0.4 - Chile 0.8 - 0.8 - Mexico 1.7 - 1.7 - Peru 0.0 - 0.0 - United States - 4.6 4.6 - _____________________________________________________________________________ Total Americas 6.3% 4.6% 10.9% - _____________________________________________________________________________ Other Assets Less Liabilities - 1.4 1.4 - _____________________________________________________________________________ Total 94.0% 6.0% 100.0% 100.0% ! Includes bonds convertible into equities. TOTAL RETURN PERFORMANCE Periods Ended April 30, 1996 _____________________________________________________________________________ Calendar One Three Year- One Three Five Since Month Months to-Date Year Years** Years** 9/7/89** _____________________________________________________________________________ Foreign Equity Fund* 3.00% 5.82% 8.80% 17.77% 14.26% 11.48% 9.61% T. Rowe Price International Stock Fund 3.09 5.88 8.99 17.97 14.15 11.51 9.82 S&P 500 Index 1.47 3.40 6.92 30.21 17.23 14.95 13.26 MSCI EAFE Index 2.93 5.53 5.98 11.74 11.43 9.17 5.35*** FT-A Euro Pacific Index 3.33 5.73 6.20 11.45 10.90 8.61 5.06*** * An "institutional only" no-load mutual fund comparable to the T. Rowe Price International Stock Fund. Net assets $2,028.9 million. Inception 9/07/89. ** 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. PERFORMANCE COMPARISON As of April 30, 1996 _____________________________________________________________________________ Chart 3 - Performance Comparison Note: The index return does not reflect expenses, which have been deducted from the fund's return. * MSCI EAFE Index net of withholding taxes from 8/31/89. ** Commencement of operations. STATEMENT OF NET ASSETS Foreign Equity Fund / April 30, 1996 (Unaudited) Value ARGENTINA - 0.7% (000) COMMON STOCKS 40,335 shs Banco de Galicia Buenos Aires (Class B) ADR (USD) . . . . . . . . . . . . $ 948 30,699 Banco Frances del Rio de la Plata ADR (USD) 883 15,093 Buenos Aires Embotelladora (Class B) ADR (USD) . . . . . . . . . . . . 240 13,780 Enron Global Power & Pipeline (USD) . . . . 339 340,532 Naviera Perez (Class B) . . . . . . . . . . 2,118 214,150 * Sociedad Comercial del Plata . . . . . . . . 640 19,896 * Sociedad Comercial del Plata ADR (144a) (USD) . . . . . . . . . . . . . . . . 594 114,560 Telecom Argentina Stet (Class B) . . . . . . 518 20,037 Telecom Argentina Stet (Class B) ADR (USD) . . . . . . . . . . . . . . . . . 907 124,094 Telefonica de Argentina (Class B) ADR (USD) . . . . . . . . . . . . . . . . . 3,630 21,200 Telefonica de Argentina (Class B) ADS (USD) . . . . . . . . . . . . . . . . . 620 32,868 Transportadora de Gas del Sur ADR (USD) . . 423 124,967 YPF Sociedad Anonima (Class D) ADR (USD) . . 2,734 _______ Total Argentina . . . . . . . . . . . . . . . . . . . . . . 14,594 AUSTRALIA - 1.8% COMMON STOCKS 318,000 Amcor . . . . . . . . . . . . . . . . . . . 2,283 750,273 Australia Gas & Light . . . . . . . . . . . 3,124 354,338 Broken Hill Proprietary . . . . . . . . . . 5,453 572,537 Burns Philp & Company . . . . . . . . . . . 1,174 168,789 Coca Cola Amatil . . . . . . . . . . . . . . 1,775 386,089 Howard Smith . . . . . . . . . . . . . . . . 2,244 114,017 Lend Lease . . . . . . . . . . . . . . . . . 1,738 196,000 National Australia Bank . . . . . . . . . . 1,758 430,258 News Corporation . . . . . . . . . . . . . . 2,521 441,124 Publishing and Broadcasting . . . . . . . . 2,027 641,000 Tabcorp Holdings . . . . . . . . . . . . . . 2,654 576,000 * TNT . . . . . . . . . . . . . . . . . . . . 765 522,000 Westpac Banking . . . . . . . . . . . . . . 2,534 324,258 WMC . . . . . . . . . . . . . . . . . . . . 2,364 458,000 Woodside Petroleum . . . . . . . . . . . . . 2,648 _______ 35,062 _______ PREFERRED STOCKS 789,000 * Sydney Harbour Casino Holdings . . . . . . . 1,196 148,000 TNT, cum. cv., 8.00%, 5/31/97 . . . . . . . 212 _______ 1,408 _______ Total Australia . . . . . . . . . . . . . . . . . . . . . . 36,470 AUSTRIA - 0.1% COMMON STOCKS 3,530 EVN . . . . . . . . . . . . . . . . . . . . 516 15,482 Flughafen Wien . . . . . . . . . . . . . . . 1,086 _______ 1,602 _______ PREFERRED STOCK 11,471 Creditanstalt Bankverein . . . . . . . . . . 641 _______ Total Austria . . . . . . . . . . . . . . . . . . . . . . 2,243 BELGIUM - 1.0% COMMON STOCKS 13,934 Generale Banque . . . . . . . . . . . . . . 4,913 36,121 Kredietbank . . . . . . . . . . . . . . . . 10,327 2,238 UCB . . . . . . . . . . . . . . . . . . . . 3,768 _______ 19,008 _______ CONVERTIBLE BOND 14,782,500 BEL Kredietbank, 5.75%, 11/30/03 . . . . . . . . $ 542 _______ Total Belgium . . . . . . . . . . . . . . . . . . . . . . 19,550 BRAZIL - 2.7% COMMON STOCKS 58,780 shs Brazil Fund (USD) . . . . . . . . . . . . . 1,271 49,720,000 Companhia Siderurgica Nacional . . . . . . . 1,403 9,970,768 Eletrobras . . . . . . . . . . . . . . . . . 2,402 20,340 Eletrobras ADR (USD) . . . . . . . . . . . . 246 37,430,000 Telecomunicacoes Brasileiras . . . . . . . . 1,588 _______ 6,910 _______ PREFERRED STOCKS AND WARRANTS 391,093,493 Banco Bradesco . . . . . . . . . . . . . . . 4,415 2,166,000 Banco Itau . . . . . . . . . . . . . . . . . 847 5,261,543 Brahma . . . . . . . . . . . . . . . . . . . 2,530 267,777 wts * Brahma, 9/30/96 . . . . . . . . . . . . . . 68 5,547,410 shs Brasmotor . . . . . . . . . . . . . . . . . 1,510 3,725,000 Cia Cimento Portland Itau . . . . . . . . . 1,070 20,600 * Cia Energetica de Sao Paulo ADS (USD) . . . 185 66,062,577 Cia Energetica Minas Gerais . . . . . . . . 1,665 16,530 * Cia Energetica Minas Gerias ADR (USD) . . . 415 23,337 * Cia Energetica Minas Gerias ADR, cv. (USD) . . . . . . . . . . . . . . . 586 79,555 * Cia Energetica Minas Gerais ADR, non voting (USD) . . . . . . . . . . . . . . 1,999 3,724,770 Cia Tecidos Norte de Minas . . . . . . . . . 1,562 37,644,000 Lojas Americanas . . . . . . . . . . . . . . 873 7,900,000 Petrol Brasileiros . . . . . . . . . . . . . 920 60,434,525 Telecomunicacoes Brasileiras . . . . . . . . 3,271 2,213 Telecomunicacoes Brasileiras ADR (USD) . . . 120 255,939 Telecomunicacoes Brasileiras ADR, level II (USD) . . . . . . . . . . . . . . . 13,853 22,573,681 Telecomunicacoes de Sao Paulo . . . . . . . 4,027 51,829,000 Unibanco . . . . . . . . . . . . . . . . . . 2,215 2,500,560,000 Usiminas . . . . . . . . . . . . . . . . . . 2,848 12,540 Usiminas ADR (USD) . . . . . . . . . . . . . 143 296,810 Usiminas ADS (USD) . . . . . . . . . . . . . 3,395 _______ 48,517 _______ Total Brazil . . . . . . . . . . . . . . . . . . . . . . 55,427 CANADA - 0.4% COMMON STOCKS 151,960 Alcan Aluminum . . . . . . . . . . . . . . . 4,833 76,770 Macmillan Bloedel . . . . . . . . . . . . . 1,021 61,480 Royal Bank of Canada . . . . . . . . . . . . 1,456 _______ Total Canada . . . . . . . . . . . . . . . . . . . . . . 7,310 CHILE - 0.8% COMMON STOCKS AND WARRANTS 10,996 AFP Providia ADR (USD) . . . . . . . . . . . 252 92,740 Chile Fund (USD) . . . . . . . . . . . . . . 2,272 33,009 Chilectra ADR (144a) (USD) . . . . . . . . . 1,815 40,191 Chilgener ADS (USD) . . . . . . . . . . . . 899 17,198 Cia de Telecomunicaciones de Chile ADR (USD) . . . . . . . . . . . . . . . . . 1,569 26,194 Compania Cervecerias Unidas ADS (USD) . . . 557 108,717 Empresa Nacional de Electric ADS (USD) . . . 2,120 65,396 Enersis ADS (USD) . . . . . . . . . . . . . 1,946 663,410 Five Arrows Chile Investment Trust (USD) . . 1,930 36,758 wts * Five Arrows Chile Investment Trust, 5/31/99 (USD) . . . . . . . . . . . . . . . 19 66,410 shs Genesis Chile Fund (USD) . . . . . . . . . . 2,706 _______ Total Chile . . . . . . . . . . . . . . . . . . . . . . 16,085 CHINA - 0.5% COMMON STOCKS 332,700 shs * Huaneng Power International (Class N) ADR (USD) . . . . . . . . . . . . $ 4,824 10,407,000 Shanghai Petrochemical (Class H) (HKD) . . . 3,095 8,500,000 Yizheng Chemical Fibre (Class H) (HKD) . . . 2,280 _______ Total China . . . . . . . . . . . . . . . . . . . . . . 10,199 CZECH REPUBLIC - 0.1% COMMON STOCK 8,781 * SPT Telecom . . . . . . . . . . . . . . . . 1,075 DENMARK - 0.2% COMMON STOCKS 37,470 Den Danske Bank . . . . . . . . . . . . . . 2,444 13,050 Tele Danmark (Class B) . . . . . . . . . . . 657 33,911 Unidanmark (Class A) . . . . . . . . . . . . 1,511 _______ Total Denmark . . . . . . . . . . . . . . . . . . . . . . 4,612 FINLAND - 0.1% COMMON STOCK 67,160 Nokia (Class A) . . . . . . . . . . . . . . 2,399 FRANCE - 7.5% COMMON STOCKS AND WARRANTS 26,090 Accor . . . . . . . . . . . . . . . . . . . 3,625 20,800 Alcatel Alsthom . . . . . . . . . . . . . . 1,956 52,132 Assurances Generales de France . . . . . . . 1,424 8,100 Canal Plus . . . . . . . . . . . . . . . . . 1,984 18,525 Carrefour . . . . . . . . . . . . . . . . . 14,476 10,359 Castorama Dubois . . . . . . . . . . . . . . 1,983 15,368 Chargeurs . . . . . . . . . . . . . . . . . 4,089 60,866 Cie de St. Gobain . . . . . . . . . . . . . 7,291 33,086 Credit Local de France . . . . . . . . . . . 2,613 192,562 Eaux Cie Generale . . . . . . . . . . . . . 20,942 29,532 Ecco . . . . . . . . . . . . . . . . . . . . 6,635 648 Ecco Travail Temporaire . . . . . . . . . . 54 78,150 Elf Aquitaine . . . . . . . . . . . . . . . 5,812 25,080 GTM Entrepose . . . . . . . . . . . . . . . 1,616 16,982 Guilbert . . . . . . . . . . . . . . . . . . 2,790 22,490 Havas . . . . . . . . . . . . . . . . . . . 1,868 1,339 Hermes International . . . . . . . . . . . . 355 7,832 L'Oreal . . . . . . . . . . . . . . . . . . 2,421 50,720 Lapeyre . . . . . . . . . . . . . . . . . . 2,796 9,846 Legrand . . . . . . . . . . . . . . . . . . 1,915 54,146 LVMH . . . . . . . . . . . . . . . . . . . . 13,852 40,153 Pinault Printemps . . . . . . . . . . . . . 12,192 50,460 Poliet . . . . . . . . . . . . . . . . . . . 5,175 27,076 Primagaz . . . . . . . . . . . . . . . . . . 2,903 2,012 wts * Primagaz, 6/30/98 . . . . . . . . . . . . . 39 6,340 shs Promodes . . . . . . . . . . . . . . . . . . 1,822 11,290 Rexel . . . . . . . . . . . . . . . . . . . 2,707 29,884 Sanofi . . . . . . . . . . . . . . . . . . . 2,412 40,320 * Schneider . . . . . . . . . . . . . . . . . 1,879 12,790 Societe Generale de France . . . . . . . . . 1,485 11,550 Sodexho . . . . . . . . . . . . . . . . . . 4,580 97,576 Television Francaise . . . . . . . . . . . . 10,574 89,180 Total (Class B) . . . . . . . . . . . . . . 6,052 _______ Total France . . . . . . . . . . . . . . . . . . . . . . 152,317 GERMANY - 4.1% COMMON STOCKS AND WARRANTS 6,250 Allianz Holdings . . . . . . . . . . . . . . 10,680 13,000 wts * Allianz Holdings, 2/23/98 . . . . . . . . . $ 603 1,686 shs Altana . . . . . . . . . . . . . . . . . . . 1,040 34,677 Bayer . . . . . . . . . . . . . . . . . . . 11,132 6,356 Bilfinger & Berger . . . . . . . . . . . . . 2,406 4,012 Buderus . . . . . . . . . . . . . . . . . . 1,468 91,060 Deutsche Bank . . . . . . . . . . . . . . . 4,334 20,983 Gehe . . . . . . . . . . . . . . . . . . . . 12,116 3,503 * Gehe, new . . . . . . . . . . . . . . . . . 1,995 7,035 Hoechst . . . . . . . . . . . . . . . . . . 2,279 14,770 Hornbach Baumarkt . . . . . . . . . . . . . 560 10,227 Mannesmann . . . . . . . . . . . . . . . . . 3,494 32,915 Praktiker . . . . . . . . . . . . . . . . . 737 43,234 Rhoen Klinikum . . . . . . . . . . . . . . . 5,225 41,862 Schering . . . . . . . . . . . . . . . . . . 3,030 6,224 Siemens . . . . . . . . . . . . . . . . . . 3,408 172,030 Veba . . . . . . . . . . . . . . . . . . . . 8,551 13,526 wts * Veba, 4/06/98 . . . . . . . . . . . . . . . 3,242 4,834 shs Volkswagen . . . . . . . . . . . . . . . . . 1,658 _______ 77,958 _______ PREFERRED STOCKS 27,225 Fielmann . . . . . . . . . . . . . . . . . . 1,196 32,830 Hornbach . . . . . . . . . . . . . . . . . . 2,102 4,621 Krones . . . . . . . . . . . . . . . . . . . 1,612 _______ 4,910 _______ Total Germany . . . . . . . . . . . . . . . . . . . . . . 82,868 HONG KONG - 4.3% COMMON STOCKS 1,342,000 Dao Heng Bank Group . . . . . . . . . . . . 5,135 7,292,000 First Pacific . . . . . . . . . . . . . . . 9,709 5,846,000 Guangdong Investment . . . . . . . . . . . . 3,609 20,598,000 Guangzhou Investment . . . . . . . . . . . . 5,113 1,431,000 Guoco Group . . . . . . . . . . . . . . . . 7,122 5,680,478 Hong Kong Land Holdings (USD) . . . . . . . 12,156 15,148,000 Hopewell Holdings . . . . . . . . . . . . . 9,253 1,552,000 Hutchison Whampoa . . . . . . . . . . . . . 9,630 1,958,000 New World Development . . . . . . . . . . . 8,783 987,000 Swire Pacific (Class A) . . . . . . . . . . 8,421 2,451,000 Wharf Holdings . . . . . . . . . . . . . . . 9,078 _______ Total Hong Kong . . . . . . . . . . . . . . . . . . . . . . 88,009 ITALY - 1.9% COMMON STOCKS AND WARRANTS 602 Alleanza Assicurazioni, savings shares . . . 4 318,761 Assicurazioni Generali . . . . . . . . . . . 7,949 2,056,300 Banca Fideuram . . . . . . . . . . . . . . . 3,554 177,983 Danieli & Company, savings shares . . . . . 640 17,945 wts * Danieli & Company, 11/30/99 . . . . . . . . 16 440,000 shs * ENI . . . . . . . . . . . . . . . . . . . . 1,901 152,088 * Finanziaria Autogrill . . . . . . . . . . . 162 118,467 IMI . . . . . . . . . . . . . . . . . . . . 941 10,150 Industrie Natuzzi ADR (USD) . . . . . . . . 528 555,000 Istituto Nazionale delle Assicurazioni . . . 853 552,325 Italgas . . . . . . . . . . . . . . . . . . 1,909 25,961 RAS . . . . . . . . . . . . . . . . . . . . 290 202,500 Rinascente . . . . . . . . . . . . . . . . . 1,401 299,282 Sasib, savings shares . . . . . . . . . . . 583 152,088 SME . . . . . . . . . . . . . . . . . . . . 169 1,564,680 Stet . . . . . . . . . . . . . . . . . . . . 5,289 661,120 Stet, savings shares . . . . . . . . . . . . 1,733 1,494,258 Telecom Italia . . . . . . . . . . . . . . . 3,047 2,715,866 shs * Telecom Italia Mobile . . . . . . . . . . . $ 5,999 872,266 * Telecom Italia Mobile, savings shares . . . 1,223 84,206 * Unicem . . . . . . . . . . . . . . . . . . . 577 _______ 38,768 _______ CORPORATE BOND 107,670,000 ITL Danieli & Company, 7.25%, 1/01/00 . . . . . 62 _______ Total Italy . . . . . . . . . . . . . . . . . . . . . . 38,830 JAPAN - 24.2% COMMON STOCKS 29,800 shs Advantest . . . . . . . . . . . . . . . . . 1,479 318,000 Alps Electric . . . . . . . . . . . . . . . 3,739 695,000 Amada . . . . . . . . . . . . . . . . . . . 8,106 773,000 Canon . . . . . . . . . . . . . . . . . . . 15,371 398,000 Citizen Watch . . . . . . . . . . . . . . . 3,481 126,000 Daifuku . . . . . . . . . . . . . . . . . . 1,987 566,000 Daiichi Pharmaceutical . . . . . . . . . . . 9,523 611,000 DaiNippon Screen Manufacturing . . . . . . . 6,191 715,000 Daiwa House . . . . . . . . . . . . . . . . 11,415 925 DDI . . . . . . . . . . . . . . . . . . . . 7,950 1,949 East Japan Railway . . . . . . . . . . . . . 10,415 153,000 Fanuc . . . . . . . . . . . . . . . . . . . 6,655 952,000 Hitachi . . . . . . . . . . . . . . . . . . 10,284 862,000 Hitachi Zosen . . . . . . . . . . . . . . . 4,730 132,000 Honda Motor . . . . . . . . . . . . . . . . 3,016 288,000 Inax . . . . . . . . . . . . . . . . . . . . 3,139 270,000 * Ishihara Sangyo Kaisha . . . . . . . . . . . 1,001 200,000 Ito-Yokado . . . . . . . . . . . . . . . . . 11,797 107,000 Kawada Industries . . . . . . . . . . . . . 972 288,000 Kokuyo . . . . . . . . . . . . . . . . . . . 7,984 776,000 Komatsu . . . . . . . . . . . . . . . . . . 7,493 244,000 Komori . . . . . . . . . . . . . . . . . . . 6,485 541,000 Kumagai Gumi . . . . . . . . . . . . . . . . 2,322 593,000 Kuraray . . . . . . . . . . . . . . . . . . 6,859 250,000 Kyocera . . . . . . . . . . . . . . . . . . 18,833 462,000 Makita . . . . . . . . . . . . . . . . . . . 7,464 525,000 Marui . . . . . . . . . . . . . . . . . . . 11,594 673,000 Matsushita Electric Industrial . . . . . . . 11,902 452,000 Mitsubishi . . . . . . . . . . . . . . . . . 6,438 1,995,000 Mitsubishi Heavy Industries . . . . . . . . 17,813 392,000 Mitsubishi Paper Mills . . . . . . . . . . . 2,518 1,123,000 Mitsui Fudosan . . . . . . . . . . . . . . . 14,815 269,000 Mitsui Petrochemical Industries . . . . . . 2,271 265,000 Murata Manufacturing . . . . . . . . . . . . 10,285 170,000 National House Industrial . . . . . . . . . 3,007 1,393,000 NEC . . . . . . . . . . . . . . . . . . . . 17,711 761,000 Nippon Denso . . . . . . . . . . . . . . . . 16,587 148,000 Nippon Hodo . . . . . . . . . . . . . . . . 2,632 3,336,000 Nippon Steel . . . . . . . . . . . . . . . . 12,055 904 Nippon Telephone & Telecom . . . . . . . . . 7,009 682,000 Nomura Securities . . . . . . . . . . . . . 14,865 376,000 Pioneer Electronic . . . . . . . . . . . . . 8,411 111,000 Sangetsu . . . . . . . . . . . . . . . . . . 2,759 524,000 Sankyo . . . . . . . . . . . . . . . . . . . 12,724 101,150 Sega Enterprises . . . . . . . . . . . . . . 5,164 706,000 Sekisui Chemical . . . . . . . . . . . . . . 8,909 548,000 Sekisui House . . . . . . . . . . . . . . . 6,810 81,000 Seven Eleven Japan . . . . . . . . . . . . . 5,738 668,000 Sharp . . . . . . . . . . . . . . . . . . . 11,622 401,950 Shin-Etsu Chemical . . . . . . . . . . . . . 8,799 204,900 Sony . . . . . . . . . . . . . . . . . . . . 13,320 1,029,000 shs Sumitomo . . . . . . . . . . . . . . . . . . $ 12,296 973,000 Sumitomo Electric . . . . . . . . . . . . . 13,953 360,000 Sumitomo Forestry . . . . . . . . . . . . . 5,541 184,000 TDK . . . . . . . . . . . . . . . . . . . . 10,536 1,414,000 Teijin . . . . . . . . . . . . . . . . . . . 7,773 307,000 Tokio Marine & Fire Insurance . . . . . . . 4,226 113,000 Tokyo Electronics . . . . . . . . . . . . . 4,202 325,000 Tokyo Steel Manufacturing . . . . . . . . . 6,556 548,000 Toppan Printing . . . . . . . . . . . . . . 8,068 147,000 Yurtec . . . . . . . . . . . . . . . . . . . 2,782 _______ Total Japan . . . . . . . . . . . . . . . . . . . . . . 490,382 MALAYSIA - 3.1% COMMON STOCKS, RIGHTS, AND WARRANTS 4,412,000 Affin Holdings . . . . . . . . . . . . . . . 10,883 604,000 wts * Affin Holdings, 11/15/99 . . . . . . . . . . 635 1,451,000 shs Berjaya Sports Toto . . . . . . . . . . . . 4,656 707,333 wts * Commerce Asset Holdings, 6/27/98 . . . . . . 2,837 2,608,000 shs MBF Capital . . . . . . . . . . . . . . . . 3,912 4,307,000 Multi-Purpose Holdings . . . . . . . . . . . 7,497 3,722,000 Renong . . . . . . . . . . . . . . . . . . . 6,479 696,200 rts * Renong, rights cv. into loan stock . . . . . 4 435,125 * Renong, rights cv. into warrants . . . . . . 122 767,000 shs Tanjong . . . . . . . . . . . . . . . . . . 2,922 4,160,000 Technology Resources Industries . . . . . . 14,182 1,423,000 United Engineers . . . . . . . . . . . . . . 9,759 _______ Total Malaysia . . . . . . . . . . . . . . . . . . . . . . 63,888 MEXICO - 1.7% COMMON STOCKS 325,840 Cemex (Class B) . . . . . . . . . . . . . . 1,382 95,160 * Cemex ADS (USD) . . . . . . . . . . . . . . 749 410,812 * Cemex (144a) ADS (USD) . . . . . . . . . . . 3,235 3,729,827 * Cifra (Class B) ADR (USD) . . . . . . . . . 5,017 678,962 Fomentos Economico Mexicano (Class B) . . . 2,047 564,920 * Gruma (Class B) . . . . . . . . . . . . . . 2,281 554,992 * Grupo Embotellador de Mexico . . . . . . . . 844 768,552 * Grupo Financiero Banamex (Class B) . . . . . 1,771 31,801 * Grupo Financiero Banamex (Class L) . . . . . 65 8,266 * Grupo Financiero Bancomer (Class L) . . . . 3 1,247,467 Grupo Industrial Maseca (Class B) . . . . . 1,219 111,794 Grupo Modelo (Class C) . . . . . . . . . . . 526 64,492 * Grupo Televisa GDR (USD) . . . . . . . . . . 1,999 130,087 Kimberly-Clark Mexico (Class A) . . . . . . 2,381 64,584 Panamerican Beverages (Class A) ADR (USD) . 2,834 209,184 Telefonos de Mexico (Class L) ADS (USD) . . 7,112 _______ Total Mexico . . . . . . . . . . . . . . . . . . . . . . 33,465 NETHERLANDS - 9.1% COMMON STOCKS 161,040 ABN Amro Holdings . . . . . . . . . . . . . 8,336 94,998 Ahold . . . . . . . . . . . . . . . . . . . 4,685 16,188 Akzo Nobel . . . . . . . . . . . . . . . . . 1,880 204,770 CSM . . . . . . . . . . . . . . . . . . . . 9,871 2,163,948 Elsevier . . . . . . . . . . . . . . . . . . 32,582 89,151 Fortis AMEV . . . . . . . . . . . . . . . . 6,368 38,420 Hagemeyer . . . . . . . . . . . . . . . . . 2,630 198,726 Internationale Nederlanden Groep . . . . . . 15,344 77,335 Koninklijke PTT Nederland . . . . . . . . . 2,902 31,794 Nutricia . . . . . . . . . . . . . . . . . . 3,397 215,999 Polygram . . . . . . . . . . . . . . . . . . 12,858 223,287 shs Royal Dutch Petroleum . . . . . . . . . . . $ 31,809 68,206 Unilever . . . . . . . . . . . . . . . . . . 9,307 390,023 Wolters Kluwer . . . . . . . . . . . . . . . 42,633 _______ 184,602 _______ PREFERRED STOCK 10,797 Internationale Nederlanden Groep . . . . . . 57 _______ Total Netherlands . . . . . . . . . . . . . . . . . . . . . . 184,659 NEW ZEALAND - 0.6% COMMON STOCKS 511,736 Air New Zealand (Class B) . . . . . . . . . 1,793 663,115 Carter Holt Harvey . . . . . . . . . . . . . 1,572 393,080 Fernz . . . . . . . . . . . . . . . . . . . 1,215 158,044 * Fletcher Challenge Building . . . . . . . . 375 158,044 * Fletcher Challenge Energy . . . . . . . . . 339 316,089 * Fletcher Challenge Paper . . . . . . . . . . 651 1,258,094 Fletcher Challenge, Forests Division . . . . 1,625 978,372 Telecom Corporation of New Zealand . . . . . 4,153 _______ Total New Zealand . . . . . . . . . . . . . . . . . . . . . . 11,723 NORWAY - 1.4% COMMON STOCKS 46,430 Bergesen (Class A) . . . . . . . . . . . . . 834 29,059 Kvaerner (Class A) . . . . . . . . . . . . . 1,194 325,232 Norsk Hydro . . . . . . . . . . . . . . . . 14,852 208,340 Orkla (Class A) . . . . . . . . . . . . . . 10,180 57,910 Saga Petroleum (Class B) . . . . . . . . . . 784 _______ Total Norway . . . . . . . . . . . . . . . . . . . . . . 27,844 PERU - 0.0% COMMON STOCK 316,910 Telefonica de Peru (Class B) . . . . . . . . 709 PORTUGAL - 0.4% COMMON STOCK 108,734 Jeronimo Martins . . . . . . . . . . . . . . 8,741 SINGAPORE - 2.3% COMMON STOCKS AND WARRANTS 973,000 DBS Land . . . . . . . . . . . . . . . . . . 3,945 257,000 Development Bank of Singapore . . . . . . . 3,254 295,000 Far East Levingston Shipbuilding . . . . . . 1,721 154,400 Fraser & Neave . . . . . . . . . . . . . . . 1,713 347,000 Jurong Shipyard . . . . . . . . . . . . . . 1,987 177,000 Keppel . . . . . . . . . . . . . . . . . . . 1,599 828,000 Neptune Orient Lines . . . . . . . . . . . . 919 1,008,000 Overseas Union Bank . . . . . . . . . . . . 7,816 175,000 Overseas Union Enterprises . . . . . . . . . 1,002 281,000 Sembawang . . . . . . . . . . . . . . . . . 1,459 86,000 Singapore Airlines . . . . . . . . . . . . . 869 1,006,000 Singapore Land . . . . . . . . . . . . . . . 7,156 203,820 Singapore Press . . . . . . . . . . . . . . 3,857 1,458,000 United Industrial . . . . . . . . . . . . . 1,483 742,352 United Overseas Bank . . . . . . . . . . . . 7,234 192,940 wts * United Overseas Bank, 6/17/97 . . . . . . . 823 _______ Total Singapore . . . . . . . . . . . . . . . . . . . . . . 46,837 SOUTH KOREA - 1.6% COMMON STOCKS 170,000 shs Cho Hung Bank . . . . . . . . . . . . . . . 2,642 107,000 shs Hanil Bank . . . . . . . . . . . . . . . . . $ 1,482 98,987 Hanil Securities . . . . . . . . . . . . . . 1,615 98,238 Kook Min Bank . . . . . . . . . . . . . . . 2,439 136,400 Korea Electric Power . . . . . . . . . . . . 6,516 50,660 Pohang Iron & Steel . . . . . . . . . . . . 4,784 24,867 Samsung Electronic . . . . . . . . . . . . . 3,387 22,266 * Samsung Electronic GDR (USD) . . . . . . . . 876 1,464 * Samsung Electronic GDS (USD) . . . . . . . . 97 69,887 Samsung Electronic GDS, 1/2 non voting (USD) . . . . . . . . . . . . 2,918 4,859 Samsung Electronic GDS, 1/2 voting (USD) . . 369 6,379 Samsung Electronic, new . . . . . . . . . . 848 250 Samsung Fire & Marine Insurance . . . . . . 180 138,000 * Seoul Bank . . . . . . . . . . . . . . . . . 1,264 11,760 Shinhan Bank . . . . . . . . . . . . . . . . 299 46,122 Yukong . . . . . . . . . . . . . . . . . . . 1,719 _______ Total South Korea . . . . . . . . . . . . . . . . . . . . . . 31,435 SPAIN - 2.4% COMMON STOCKS 67,680 Argentaria Banca de Espana . . . . . . . . . 2,740 33,181 Banco Popular Espanol . . . . . . . . . . . 5,499 111,053 Banco Santander . . . . . . . . . . . . . . 5,160 91,773 Centros Comerciales Pryca . . . . . . . . . 2,118 194,338 Empresa Nacional de Electricidad . . . . . . 12,207 11,758 Fomento de Construcciones y Contra . . . . . 1,003 34,818 Gas Natural . . . . . . . . . . . . . . . . 6,328 455,956 Iberdrola . . . . . . . . . . . . . . . . . 4,463 236,852 Repsol . . . . . . . . . . . . . . . . . . . 8,686 _______ Total Spain . . . . . . . . . . . . . . . . . . . . . . 48,204 SWEDEN - 2.3% COMMON STOCKS 38,170 Asea (Class A) . . . . . . . . . . . . . . . 3,906 421,807 Astra (Class B) . . . . . . . . . . . . . . 18,629 198,882 Atlas Copco (Class B) . . . . . . . . . . . 3,783 131,287 Electrolux (Class B) . . . . . . . . . . . . 6,621 49,870 Esselte (Class B) . . . . . . . . . . . . . 1,000 55,261 Hennes & Mauritz (Class B) . . . . . . . . . 3,814 40,050 Sandvik (Class A) . . . . . . . . . . . . . 883 224,880 Sandvik (Class B) . . . . . . . . . . . . . 4,957 49,060 Scribona (Class B) . . . . . . . . . . . . . 470 147,510 Stora Kopparbergs (Class B) . . . . . . . . 1,979 _______ Total Sweden . . . . . . . . . . . . . . . . . . . . . . 46,042 SWITZERLAND - 3.9% COMMON STOCKS 10,970 BBC Brown Boveri . . . . . . . . . . . . . . 13,218 7,120 Ciba-Geigy . . . . . . . . . . . . . . . . . 8,263 36,245 CS Holding . . . . . . . . . . . . . . . . . 3,291 15,803 Nestle . . . . . . . . . . . . . . . . . . . 17,577 2,450 Roche Holdings . . . . . . . . . . . . . . . 19,269 9,485 Sandoz . . . . . . . . . . . . . . . . . . . 10,359 1,674 Schweizerische Bankgesellschaft . . . . . . 1,664 15,697 Schweizerischer Bankverein . . . . . . . . . 5,879 _______ Total Switzerland . . . . . . . . . . . . . . . . . . . . . . 79,520 THAILAND - 0.8% COMMON STOCKS 139,974 Advanced Information Service . . . . . . . . 2,373 295,817 Bangkok Bank . . . . . . . . . . . . . . . . 4,289 284,197 Bank of Ayudhya . . . . . . . . . . . . . . 1,677 46,940 shs Land & Houses . . . . . . . . . . . . . . . $ 725 26,025 Siam Cement . . . . . . . . . . . . . . . . 1,340 228,627 Siam Commercial Bank . . . . . . . . . . . . 3,369 197,576 Thai Farmers Bank . . . . . . . . . . . . . 2,270 105,630 Total Access Communications (USD) . . . . . 930 _______ Total Thailand . . . . . . . . . . . . . . . . . . . . . . 16,973 UNITED KINGDOM - 14.0% COMMON STOCKS 1,478,440 Abbey National . . . . . . . . . . . . . . . 12,641 942,000 Argos . . . . . . . . . . . . . . . . . . . 9,132 1,231,200 Argyll Group . . . . . . . . . . . . . . . . 6,144 4,059,530 Asda Group . . . . . . . . . . . . . . . . . 6,936 195,000 BAA . . . . . . . . . . . . . . . . . . . . 1,606 788,200 British Gas . . . . . . . . . . . . . . . . 2,788 488,000 British Petroleum . . . . . . . . . . . . . 4,397 1,482,200 Cable & Wireless . . . . . . . . . . . . . . 11,647 1,118,578 Cadbury Schweppes . . . . . . . . . . . . . 8,705 1,822,350 Caradon . . . . . . . . . . . . . . . . . . 6,310 709,000 Coats Viyella . . . . . . . . . . . . . . . 2,033 557,000 Compass Group . . . . . . . . . . . . . . . 4,570 978,500 David S. Smith . . . . . . . . . . . . . . . 4,404 434,619 East Midlands Electricity . . . . . . . . . 4,089 310,000 Electrocomponents . . . . . . . . . . . . . 1,853 110,000 GKN . . . . . . . . . . . . . . . . . . . . 1,631 876,650 Glaxo Wellcome . . . . . . . . . . . . . . . 10,623 1,590,000 Grand Metropolitan . . . . . . . . . . . . . 10,412 1,354,000 Guinness . . . . . . . . . . . . . . . . . . 9,763 249,576 Heywood Williams Group . . . . . . . . . . . 928 573,300 Hillsdown Holdings . . . . . . . . . . . . . 1,553 594,300 John Laing (Class A) . . . . . . . . . . . . 2,755 1,308,977 Kingfisher . . . . . . . . . . . . . . . . . 11,724 982,000 Ladbroke Group . . . . . . . . . . . . . . . 2,883 524,288 London Electricity . . . . . . . . . . . . . 6,511 799,800 National Grid Group . . . . . . . . . . . . 2,480 2,447,490 National Westminster Bank . . . . . . . . . 22,622 1,075,000 Rank Organisation . . . . . . . . . . . . . 8,658 1,307,570 Reed International . . . . . . . . . . . . . 22,400 543,851 Rolls Royce . . . . . . . . . . . . . . . . 1,932 646,960 RTZ . . . . . . . . . . . . . . . . . . . . 10,160 504,000 Sears . . . . . . . . . . . . . . . . . . . 759 1,102,000 Shell Transport & Trading . . . . . . . . . 14,532 2,179,560 Smithkline Beecham . . . . . . . . . . . . . 23,033 103,888 Spring Ram . . . . . . . . . . . . . . . . . 40 1,224,000 T & N . . . . . . . . . . . . . . . . . . . 3,298 968,903 Tesco . . . . . . . . . . . . . . . . . . . 4,098 3,031,080 Tomkins . . . . . . . . . . . . . . . . . . 12,479 1,154,620 United Newspapers . . . . . . . . . . . . . 12,045 _______ Total United Kingdom . . . . . . . . . . . . . . . . . . . . . . 284,574 SHORT-TERM INVESTMENTS - 4.6% COMMERCIAL PAPER $10,000,000 Bank One Milwaukee, 5.32%, 6/07/96 . . . . . 10,000 10,000,000 Barnett Banks, 5.32%, 5/15/96 . . . . . . . 9,972 10,000,000 Bex America Finance, 5.03%, 6/06/96 . . . . 9,832 10,000,000 Delaware Funding, 4(2), 5.30%, 5/03/96 . . . 9,994 10,000,000 Korea Development Bank, 5.09%, 5/28/96 . . . 9,870 10,000,000 National Australia Funding (Delaware), 5.33%, 5/09/96 . . . . . . . . . . . . . . . 9,956 4,004,202 Investments in Commercial Paper through a joint account, 5.36 - 5.37%, 5/01/96 . . . . 4,004 _______ 63,628 OTHER $10,000,000 Federal National Mortgage Association, Floating Rate Medium-Term Note, 9/27/96 (Currently 5.565%) . . . . . . . . . $ 10,000 10,000,000 SMM Trust, Floating Rate Medium-Term Note, 3/26/97 (Currently 5.487%) . . . . . . . . . 9,999 10,000,000 Societe Generale, Certificate of Deposit, 5.39%, 6/14/96 . . . . . . . . . . . . . . . 10,000 _________ 29,999 _________ Total Short-Term Investments . . . . . . . . . . . . . . . . . . 93,627 Total Investments in Securities - 98.6% of Net Assets (Cost $1,731,806) $2,000,611 Other Assets Less Liabilities. . . . . . . . . . . . . . . . . . 28,318 _________ Net Assets Consist of: Value (000) _________ Accumulated net investment income - net of distributions . . . . . . . . . . . . . . . $ 15,889 Accumulated net realized gain/loss - net of distributions . . . . . . . . . . . . . . . 31,864 Net unrealized gain (loss) . . . . . . . . . . . . 268,711 Paid-in-capital applicable to 131,254,585 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares authorized . . . 1,712,465 _________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,028,929 _________ _________ NET ASSET VALUE PER SHARE. . . . . . . . . . . . . . . . . . . . $ 15.46 ______ ______ * Non-income producing BEL Belgian franc HKD Hong Kong dollar ITL Italian lira USD U.S. dollar 144a Security was purchased pursuant to Rule 144a under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers - total of such securities at year-end amounts to 0.3% of net assets. 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. STATEMENT OF OPERATIONS Foreign Equity Fund (Unaudited) (in thousands) 6 Months Ended 4/30/96 _________ INVESTMENT INCOME Income Dividend (net of foreign taxes of $2,659) . . . . . . . $ 20,126 Interest. . . . . . . . . . . . . . . . . . . . . . . . 2,987 ________ Total income. . . . . . . . . . . . . . . . . . . . . . 23,113 ________ Expenses Investment management . . . . . . . . . . . . . . . . . 6,241 Custody and accounting. . . . . . . . . . . . . . . . . 390 Registration. . . . . . . . . . . . . . . . . . . . . . 164 Legal and audit . . . . . . . . . . . . . . . . . . . . 17 Directors . . . . . . . . . . . . . . . . . . . . . . . 8 Prospectus and shareholder reports. . . . . . . . . . . 5 Shareholder servicing . . . . . . . . . . . . . . . . . 3 Miscellaneous . . . . . . . . . . . . . . . . . . . . . 3 ________ Total expenses. . . . . . . . . . . . . . . . . . . . . 6,831 ________ Net investment income. . . . . . . . . . . . . . . . . . . 16,282 ________ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Securities. . . . . . . . . . . . . . . . . . . . . . . 36,573 Foreign currency transactions . . . . . . . . . . . . . (667) ________ Net realized gain (loss). . . . . . . . . . . . . . . . 35,906 ________ Change in net unrealized gain or loss Securities. . . . . . . . . . . . . . . . . . . . . . . 173,191 Other assets and liabilities denominated in foreign currencies . . . . . . . . . . . . . . . . . (88) ________ Change in net unrealized gain or loss . . . . . . . . . 173,103 ________ Net realized and unrealized gain (loss). . . . . . . . . . 209,009 ________ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. . . . . $ 225,291 ________ ________ The accompanying notes are an integral part of these financial statements. STATEMENT OF CHANGES IN NET ASSETS Foreign Equity Fund (Unaudited) (in thousands) 6 Months Year Ended Ended 4/30/96 10/31/95 __________ __________ INCREASE (DECREASE) IN NET ASSETS Operations Net investment income . . . . . . . . . . . $ 16,282 $ 20,980 Net realized gain (loss). . . . . . . . . . 35,906 19,425 Change in net unrealized gain or loss . . . 173,103 (19,253) __________ __________ Increase (decrease) in net assets from operations . . . . . . . . . . . . . . 225,291 21,152 __________ __________ Distributions to shareholders Net investment income . . . . . . . . . . . (21,229) (9,573) Net realized gain . . . . . . . . . . . . . (21,229) (41,487) __________ __________ Decrease in net assets from distributions. . . . . . . . . . . . . (42,458) (51,060) __________ __________ Capital share transactions* Shares sold . . . . . . . . . . . . . . . . 376,304 632,538 Distributions reinvested. . . . . . . . . . 30,404 35,819 Shares redeemed . . . . . . . . . . . . . . (120,231) (137,308) __________ __________ Increase (decrease) in net assets from capital share transactions. . . . . . . . . 286,477 531,049 __________ __________ NET ASSETS Increase (decrease) during period. . . . . . . 469,310 501,141 Beginning of period. . . . . . . . . . . . . . 1,559,619 1,058,478 __________ __________ End of period. . . . . . . . . . . . . . . . . $2,028,929 $1,559,619 __________ __________ __________ __________ *Share information Shares sold . . . . . . . . . . . . . . . . 25,771 46,409 Distributions reinvested. . . . . . . . . . 2,138 2,775 Shares redeemed . . . . . . . . . . . . . . (8,131) (10,263) __________ __________ Increase (decrease) in shares outstanding. . . . . . . . . . . . . 19,778 38,921 The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS Foreign Equity Fund / April 30, 1996 (Unaudited) Note 1 - Significant Accounting Policies T. Rowe Price Institutional International Funds, Inc. (the Corporation) is registered under the Investment Company Act of 1940. The Foreign Equity Fund (the fund), a diversified, open-end management investment company, is the sole portfolio currently established by the Corporation and commenced operations on September 7, 1989. Valuation - Equity securities 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. 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. Other - Purchases and sales of portfolio securities, other than short-term securities, aggregated $432,130,000 and $180,172,000, 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. At April 30, 1996, the aggregate cost of investments for federal income tax and financial reporting purposes was $1,731,806,000 and net unrealized gain aggregated $268,805,000, of which $310,983,000 related to appreciated investments and $42,178,000 to depreciated investments. Note 4 - Related Party Transactions The fund is managed by Rowe Price-Fleming International, Inc. (the Manager), which is owned by T. Rowe Price Associates, Inc. (Price Associates), Robert Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a joint venture agreement. The investment management agreement between the fund and the Manager provides for an annual investment management fee, of which $1,133,000 was payable at April 30, 1996. The fee is computed daily and paid monthly, and is equal to 0.70% of average daily net assets. In addition, the fund has entered into agreements with Price Associates and two wholly owned subsidiaries of Price Associates, pursuant to which the fund receives certain other services. Price Associates computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc., is the fund's transfer and dividend disbursing agent and provides shareholder and administrative services to the fund. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. The fund incurred expenses pursuant to these related party agreements totaling approximately $53,000 for the six months ended April 30, 1996, of which $26,000 was payable at period-end. During the six months ended April 30, 1996, the fund, in the ordinary course of business, paid commissions of $129,000 to, and placed security purchase and sale orders aggregating $45,986,000 with, certain affiliates of the Manager in connection with the execution of various portfolio transactions. During fiscal year 1995, Price Waterhouse LLP succeeded Coopers & Lybrand, L.L.P. as independent accountants for the Foreign Equity Fund, a decision that was approved by the fund's Board of Directors. During fiscal years 1993 and 1994, the fund has received unqualified opinions and has had no disagreements with Coopers & Lybrand, L.L.P. or reportable events that caused the change. FINANCIAL HIGHLIGHTS Foreign Equity Fund (Unaudited) 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 $13.99 $14.59 $13.32 $10.05 $10.73 $ 9.54 $10.62 ______ ______ ______ ______ ______ ______ ______ Investment activities Net investment income 0.11 0.18 0.09 0.13 0.17 0.18* 0.23* Net realized and unrealized gain (loss) 1.72 (0.14)+ 1.48 3.14 (0.57) 1.28 (1.10) ______ ______ ______ ______ ______ ______ ______ Total from investment activities 1.83 0.04 1.57 3.27 (0.40) 1.46 (0.87) ______ ______ ______ ______ ______ ______ ______ Distributions Net investment income (0.18) (0.12) (0.09) - (0.18) (0.18) (0.21) Net realized gain (0.18) (0.52) (0.21) - (0.10) (0.09) - ______ ______ ______ ______ ______ ______ ______ Total dis- tributions (0.36) (0.64) (0.30) - (0.28) (0.27) (0.21) ______ ______ ______ ______ ______ ______ ______ NET ASSET VALUE END OF PERIOD $15.46 $13.99 $14.59 $13.32 $10.05 $10.73 $ 9.54 ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ RATIOS/SUPPLEMENTAL DATA Total return 13.3% 0.6% 12.0% 32.5% (3.7)% 15.4%* (8.2)%* Ratio of expenses to average net assets 0.77%! 0.80% 0.82% 0.86%! 0.99% 1.00%* 1.01%* Ratio of net investment income to average net assets 1.82%! 1.69% 1.26% 1.65%! 1.49% 1.64%* 2.23%* Portfolio turnover rate 21.4%! 18.8% 22.0% 27.4%! 35.1% 46.7% 44.6% Average commission rate paid $0.0076 - - - - - - Net assets, end of period (in millions) $2,029 $1,560 $1,058 $489 $239 $144 $84 * Excludes expenses in excess of a 1.10% voluntary expense limitation in effect through 2/28/90, and a 1.00% voluntary expense limitation in effect from 3/01/90 through 12/31/91. ! Annualized. # The fund's fiscal year-end was changed to 10/31. + The amount presented is calculated pursuant to a methodology prescribed by the Securities and Exchange Commission for a share outstanding throughout the period. This amount is inconsistent with the fund's aggregate gains and losses because of the timing of sales and redemptions of the fund's shares in relation to fluctuating market values for the investment portfolio. Chart 1 - Geographic Diversification - pie chart showing: Europe 49%, Japan 24%, Far East 15%, Latin America 6%, Other and Reserves 6%. Chart 2 - Correlation of Returns - A bar chart showing the correlation of total returns of various international countries with the US 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 - Performance Comparison - A two-line graph showing performance of a $10,000 investment in the Foreign Equity Fund and the MSCI EAFE Index from 9/7/89 through 4/30/96. -----END PRIVACY-ENHANCED MESSAGE-----