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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 15
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<PAGE> PAGE 16
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<PAGE> PAGE 18
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<PAGE> PAGE 19
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<PAGE> PAGE 20
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<PAGE> PAGE 21
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<PAGE> PAGE 22
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<PAGE> PAGE 23
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<PAGE> PAGE 24
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<PAGE> PAGE 25
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<PAGE> PAGE 26
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<PAGE> PAGE 27
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<PAGE> PAGE 28
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<PAGE> PAGE 29
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<PAGE> PAGE 30
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<PAGE> PAGE 31
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<PAGE> PAGE 32
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<PAGE> PAGE 33
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<PAGE> PAGE 34
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SIGNATURE JOHN PASCO, III
TITLE CHAIRMAN
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<NAME> VONTOBEL EMERGING MARKETS EQUITY FUND
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<NAME> VONTOBEL EASTERN EUROPEAN EQUITY FUND
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<NUMBER> 2
<NAME> VONTOBEL INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 116,136,380
<INVESTMENTS-AT-VALUE> 148,678,290
<RECEIVABLES> 19,743,842
<ASSETS-OTHER> 23,322
<OTHER-ITEMS-ASSETS> 12,322,742
<TOTAL-ASSETS> 180,768,196
<PAYABLE-FOR-SECURITIES> 19,402,935
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 544,263
<TOTAL-LIABILITIES> 19,947,198
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,597,225
<SHARES-COMMON-STOCK> 8,860,684
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,314,540
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,090,767)
<NET-ASSETS> 160,820,998
<DIVIDEND-INCOME> 2,110,785
<INTEREST-INCOME> 2,566
<OTHER-INCOME> 0
<EXPENSES-NET> 2,383,010
<NET-INVESTMENT-INCOME> (269,659)
<REALIZED-GAINS-CURRENT> 11,288,347
<APPREC-INCREASE-CURRENT> 2,518,629
<NET-CHANGE-FROM-OPS> 13,537,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (14,484,891)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,418,086
<NUMBER-OF-SHARES-REDEEMED> (2,586,904)
<SHARES-REINVESTED> 703,496
<NET-CHANGE-IN-ASSETS> 9,111,247
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,443,062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,483,010
<AVERAGE-NET-ASSETS> 164,756,000
<PER-SHARE-NAV-BEGIN> 18.22
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 1.74
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.78)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.15
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> VONTOBEL INTERNATIONAL BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 10,871,773
<INVESTMENTS-AT-VALUE> 10,026,983
<RECEIVABLES> 371,927
<ASSETS-OTHER> 8,238
<OTHER-ITEMS-ASSETS> 385,696
<TOTAL-ASSETS> 10,792,844
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,647,333
<SHARES-COMMON-STOCK> 1,091,804
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (854,489)
<NET-ASSETS> 10,792,844
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,411,450
<OTHER-INCOME> 0
<EXPENSES-NET> 264,773
<NET-INVESTMENT-INCOME> 1,146,677
<REALIZED-GAINS-CURRENT> (1,022,601)
<APPREC-INCREASE-CURRENT> (2,092,635)
<NET-CHANGE-FROM-OPS> (1,968,559)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (401,372)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 208,557
<NUMBER-OF-SHARES-REDEEMED> (1,616,069)
<SHARES-REINVESTED> 39,686
<NET-CHANGE-IN-ASSETS> (16,085,725)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 193,299
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 416,572
<AVERAGE-NET-ASSETS> 19,329,397
<PER-SHARE-NAV-BEGIN> 10.93
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> (1.27)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.38)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> VONTOBEL EASTERN EUROPEAN DEBT FUND
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> AUG-25-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 12,162,957
<INVESTMENTS-AT-VALUE> 11,645,954
<RECEIVABLES> 883,061
<ASSETS-OTHER> 66,289
<OTHER-ITEMS-ASSETS> 1,969,314
<TOTAL-ASSETS> 14,564,618
<PAYABLE-FOR-SECURITIES> 92,158
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,535
<TOTAL-LIABILITIES> 126,693
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,873,074
<SHARES-COMMON-STOCK> 1,488,541
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 120,586
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (555,735)
<NET-ASSETS> 14,437,925
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 478,719
<OTHER-INCOME> 0
<EXPENSES-NET> 100,209
<NET-INVESTMENT-INCOME> 378,510
<REALIZED-GAINS-CURRENT> 87,300
<APPREC-INCREASE-CURRENT> (555,735)
<NET-CHANGE-FROM-OPS> (89,925)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (345,224)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,479,779
<NUMBER-OF-SHARES-REDEEMED> (22,655)
<SHARES-REINVESTED> 31,417
<NET-CHANGE-IN-ASSETS> 14,437,925
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 57,164
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 108,775
<AVERAGE-NET-ASSETS> 13,040,659
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> (.32)
<PER-SHARE-DIVIDEND> (.24)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.70
<EXPENSE-RATIO> 2.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON INTERNAL CONTROL
STRUCTURE
Board of Directors
The Vontobel Funds, Inc.
Richmond, Virginia
In planning and performing our audit of the financial statements of Vontobel
U.S. Value Fund, Vontobel Eastern European Fund, Vontobel International
Bond Fund, Vontobel Emerging Markets Fund, Vontobel Eastern European Debt
Fund and Vontobel International Equity Fund, (the "Funds"), each a series
of shares of The Vontobel Funds, Inc., for the year ended December 31, 1997,
we considered their internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance on the
internal control structure.
The management of the Funds is responsible for establishing and maintaining
an internal control structure. In fulfilling this responsibility, estimates
and judgments by management are required to assess the expected benefits and
related costs of internal control structure policies and procedures. Two
of the objectives of an internal control structure are to provide management
with reasonable, but not absolute, assurance that assets are safeguarded
against loss from unauthorized use or disposition, and that transactions are
executed in accordance with management's authorization and recorded properly
to permit preparation of financial statements in conformity with generally
accepted accounting principles.
Because of the inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the effective-
ness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design
or operation of the specific internal control structure elements does not
reduce to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by employees in
the normal course of performing their assigned functions. However, we noted
no matters involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses, as
defined above, as of December 31, 1997.
This report is intended soley for the information and use of management and
the Securities and Exchange Commission, and should not be used for any other
purpose.
TAIT, WELLER AND BAKER
Philadelphia, Pennsylvania
January 23, 1998
VONTOBEL FUNDS, INC
1500 Forest Ave
Suite 223
Richmond, Virginia 23229
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS OF VONTOBLE U.S. VALUE FUND
June 2, 1997
To Shareholders:
A special Meeting of Shareholders of Vontobel U.S. Value Fund (the "U.S. Value
Fund") of Vontobel Funds, Inc. (the "Vontobel Funds") will be held at the
offices of the Vontobel Funds at 1500 Forest Avenue, Suite 223, Richmond,
Virginia 23229 at 10:00 a.m. local time, on June 30, 1997 for the following
purposes:
1. To approve or disapprove a change in the classification of the U.S. Value
Fund from a diversified to a non-diversified investment company.
2. To approve or disapprove a change in the U.S. Value Fund's fundamental
investment policies to permit the U.S. Value Fund to borrow up to 33 1/3% of
its assets from banks to meet redemptions.
3. To transact such other business as may properly come before the Meeting.
Shareholders of record at the close of business on May 15, 1997 are entitled
to vote at the meeting or any adjournment thereof.
By order of the Board of Directors
John Pasco III
Chairman
June 2, 1997
Richmond, Virginia
IMPORTANT
Whether or not you plan to attend the meeting, please mark your voting
instructions on the enclosed proxy and promptly date, sign and return it in
the enclosed envelope. No postage is required if mailed in the United States.
No postage is required if mailed in the United States. We ask your
cooperation in helping the Fund by mailing your proxy promptly.
INDEX OF EXHIBITS
Exhibit A: Financial Data Schedules
Exhibit B: Report of Independent Certified Public Accountants on Internal
Control Structure
Exhibit C: Vontobel U.S. Value Fund Proxy summary page.
