<PAGE> 1
VANGUARD INTERNATIONAL
EQUITY INDEX FUND
- ----------------------------------------------
VANGUARD TOTAL
INTERNATIONAL PORTFOLIO
Semiannual Report
June 30, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
<PAGE> 2
[PHOTO]
THE VANGUARD GROUP: LINKING TRADITION AND INNOVATION
At Vanguard, we treasure our rich nautical heritage--even as we steer our
course toward the twenty-first century. Our Report cover reflects that blending
of tradition and innovation, of past, present, and future. The montage includes
a bronze medallion with a likeness of our namesake, HMS Vanguard (Lord Nelson's
flagship at The Battle of the Nile); a clock built circa 1816 in Scotland,
featuring a portrait of Nelson; and several views of our recently completed
campus, which is steeped in nautical imagery--from our buildings named after
Nelson's warships (Victory, Majestic, and Goliath are three shown), to our
artwork and ornamental compass rose.
CONTENTS
A Message To
Our Shareholders
1
The Markets
In Perspective
4
Performance
Summaries
6
Financial
Statements
8
Directors, Trustees,
And Officers
INSIDE BACK COVER
All comparative mutual fund data
are from Lipper Analytical Services, Inc.
or Morningstar unless otherwise noted.
<PAGE> 3
[PHOTO]
FELLOW SHAREHOLDER,
Foreign equity markets provided solid returns during the first six months
of Vanguard International Equity Index Fund's 1997 fiscal year. European stock
markets and emerging markets made strong advances, while the Japanese market
rebounded somewhat from a deep slump.
For the period ended June 30, the Morgan Stanley Capital International
Total International Index provided a return of +11.6%--a stellar absolute
performance for only six months, but one that paled in comparison with the
+17.6% return on U.S. stocks (as measured by the Wilshire 5000 Equity Index).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JUNE 30, 1997
- ---------------------------------------------------------------------------
<S> <C>
VANGUARD EUROPEAN PORTFOLIO +14.9%
MSCI Europe Index +14.4
- ---------------------------------------------------------------------------
VANGUARD PACIFIC PORTFOLIO + 7.6%
MSCI Pacific Free Index + 7.0
- ---------------------------------------------------------------------------
VANGUARD EMERGING MARKETS PORTFOLIO +12.1%
MSCI Select Emerging Markets Free Index +12.1
- ---------------------------------------------------------------------------
VANGUARD TOTAL INTERNATIONAL PORTFOLIO +11.7%
MSCI Total International Index +11.6
- ---------------------------------------------------------------------------
</TABLE>
Our four international index portfolios provided total returns (capital
change plus reinvested dividends) that closely paralleled those of their target
market indexes; in fact, the returns of our European, Pacific, and Total
International Portfolios surpassed the returns of their benchmarks, while our
Emerging Markets Portfolio exactly matched its target. The table at right
presents the performance of each Portfolio, compared with its MSCI benchmark.
The net asset values of the Portfolios at the beginning and end of the
period, along with any distributions of net realized capital gains, are
presented in the table that follows this letter. None of the Portfolios issued
dividends from net investment income during the half-year.
THE PERIOD IN REVIEW
Though financial markets elsewhere had trouble keeping up with the blistering
pace set by U.S. stocks, non-U.S. stocks nonetheless turned in an impressive
performance during the six months. Returns from European markets were
particularly bountiful, buoyed by strong corporate earnings. Japan was aided by
signs--however tenuous--of economic recovery. Returns from the world's emerging
markets were a mixed bag, as they often are, but were generous overall.
The first four months of 1997 were generally lackluster for many
international bourses, but the final two months of the period more than made up
for the slow start. During May and June alone, the MSCI Pacific Free Index
climbed +16.6%, the MSCI Europe Index rose +9.5%, and the MSCI Select Emerging
Markets Free Index advanced +8.6%.
Measured in terms of local currency rather than U.S. dollars, these
returns were even higher. The strength of the dollar versus most foreign
currencies diminished the returns of foreign mutual funds for U.S. investors
during the period. The exception was Japan, where the U.S. dollar declined
slightly against the yen, providing a small boost in returns to U.S. investors.
1
<PAGE> 4
As the dollar strengthens, foreign investments denominated in other
currencies are worth fewer dollars, and returns to U.S. investors are
diminished. When the dollar weakens, returns to U.S. investors are enhanced.
The risk of currency fluctuations is part and parcel of investing in
international mutual funds. The table at left presents returns on market
indexes in both local currencies and U.S. dollars, as well as the currency
impact that accounts for the differences.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------
LOCAL
CURRENCY CURRENCY U.S. DOLLAR
INDEX RETURN IMPACT RETURN
- -------------------------------------------------------------------------
<S> <C> <C> <C>
United States +20.6% -- +20.6%
Europe +24.8% -10.4% +14.4%
Pacific + 6.6 + 0.4 + 7.0
Select Emerging Markets +21.6 - 9.5 +12.1
Total International +17.6 - 6.0 +11.6
- -------------------------------------------------------------------------
</TABLE>
European bourses posted stellar returns nearly across the board during the
half-year, as economic conditions improved and the benefits of wide-ranging
corporate restructurings began to take hold. On a local currency basis,
Switzerland was up +42.9% during the six months, Germany rose +32.3%, and
France climbed +23.5%. The +14.9% return of the EUROPEAN PORTFOLIO outpaced the
+14.4% return of the MSCI Europe Index, as well as the +11.4% return of the
average European mutual fund.
The MSCI Pacific Free Index, which is dominated by Japan, provided a
return of +7.0% for the half-year. The relative strength of the yen versus the
dollar slightly boosted the Index's +6.6% return in local currency. While the
+7.6% return of our PACIFIC PORTFOLIO topped that of the Index, it fell short
of the +9.2% return of the average Pacific region mutual fund, which typically
holds a much smaller stake in Japan.
OUR EMERGING MARKETS PORTFOLIO'S +12.1% return matched that of its
benchmark index but fell far short of the +21.0% return of the average emerging
markets mutual fund. Our shortfall against our competitors is owed in part to
our relatively heavy stake in Malaysia (about 13% of the Portfolio's assets),
whose stock market had a negative return of -11.7% for the six months, as well
as our lack of exposure to several lesser-developed or restricted markets
(among them Chile, Taiwan, and Russia) that have recently posted very large
gains.
OUR TOTAL INTERNATIONAL PORTFOLIO, which invests in a market weighting of
our European, Pacific, and Emerging Markets Portfolios, provided a return that
narrowly outpaced its target index (+11.7% versus +11.6%) but was shy of the
+12.4% return of the average international mutual fund.
IN SUMMARY
Returns on international mutual funds will not always lag the returns on U.S.
stocks, as they have over the past couple of years. The performance of foreign
equity markets often differs from that of domestic markets, sometimes to the
benefit of U.S. investors, sometimes not.
It is just this lack of correlation with U.S. stocks that can make
international mutual funds so useful in adding diversification to an investment
program that includes U.S. stock funds, bond funds, and money market funds. Our
Portfolios combine the benefits
2
<PAGE> 5
of diversification with the advantages of a low-cost, indexed investment
approach. We believe that over the long term this is a powerful combination for
our shareholders.
We look forward to reporting to you in our 1997 Annual Report six months
hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
July 22, 1997
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- -----------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1997
--------------------
NET ASSET VALUE PER SHARE DISTRIBUTIONS FROM
- --------------------------------------------------------------------- NET REALIZED
PORTFOLIO DECEMBER 31, 1996 JUNE 30, 1997 CAPITAL GAINS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
European $16.57 $19.01 $0.03
Pacific 10.51 11.31 --
Emerging Markets 12.28 13.76 --
Total International 10.14 11.33 --
- -----------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
[PHOTO]
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JUNE 30, 1997
U.S. EQUITY MARKETS
As the economy continued to grow while the rate of inflation did not, a robust
market provided solid gains to investors in U.S. common stocks during the
first half of 1997. The best performers were primarily larger-capitalization
issues, although the small-company indexes exhibited some strength in the final
two months of the period. Over the half-year, the Standard & Poor's 500
Composite Stock Price Index gained 20.6%, fueled by a 10.8% boost since the end
of April. Reflecting the gains among smaller companies, the Russell 2000 Index
posted a 10.2% increase for the six-month period, driven by an 11.1% jump in
May and a 4.3% rise in June. It was particularly noteworthy that the recent
small-cap gains were led by small growth stocks, the worst segment of the U.S.
market during the past 12 months. This group has surged 17.6% since the end of
March, although at the half-year's end it still lagged the S&P 500 Index by a
sizable margin (5.2% versus 20.6%).
Stocks benefited from the continued strength of corporate earnings, which
rose some 15% during the past year, and from a widespread confidence reflected
in increased price/earnings ratios. The strength in earnings, the expectation
that income will continue to increase at an attractive pace, and the further
conviction that inflation is not a problem helped stocks to continue to produce
solid gains in the fiscal period. What's more, earnings have shown not only
good strength but remarkable consistency in beating the consensus forecasts of
Wall Street analysts.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997
---------------------------
6 MONTHS 1 YEAR 5 YEARS*
- -----------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 20.6% 34.7% 19.8%
Russell 2000 Index 10.2 16.3 17.9
MSCI EAFE Index 11.4 13.2 13.2
- -----------------------------------------------------------
FIXED-INCOME
Lehman Aggregate Bond Index 3.1% 8.2% 7.1%
Lehman 10-Year Municipal
Bond Index 3.3 8.3 7.4
Salomon Brothers Three-Month
U.S. Treasury Bill Index 2.6 5.3 4.5
- -----------------------------------------------------------
OTHER
Consumer Price Index 1.1% 2.3% 2.7%
- -----------------------------------------------------------
</TABLE>
*Average annual.
The strongest gains in the S&P 500 Index during the past six months came
from the health-care sector (up 31.4%) and the consumer-staples sector (up
23.9%). By contrast, numerous uncertainties for utilities caused the issues in
that sector to lag the broad market, although, on an absolute basis, their 8.2%
return over six months is quite good.
U.S. FIXED-INCOME MARKETS
The modest rise in interest rates during the past six months reflects the
economy's underlying momentum. The 10-year U.S. Treasury's yield increased from
6.42% at the end of December to 6.97% by the middle of April. In the following
weeks, economic reports indicated a slowing in economic growth and further
reduced fears of an increase in inflation. This news helped interest rates fall
to 6.50% by the end of June.
4
<PAGE> 7
Fueled by robust consumer spending, the U.S. economy expanded at a
remarkable 5.8% rate in the first three months of 1997. Reflecting the vibrant
economy, the nation's unemployment rate stood at 5.0% in June. Strong economic
growth and tight labor markets have often led to rising inflation because of
increased demand for goods and services. With this in mind, the Federal Reserve
raised its federal funds interest rate target by 0.25% on March 25 in a
"preemptive" strike against mounting inflationary pressures. Observed price
increases have been subdued in recent months, however. Wholesale prices have
fallen in each of the first six months of 1997, and so far this year consumer
prices have risen at a slower pace than last year.
With interest rates very close to year-end levels, bond investors have
fared reasonably well during the past six months, as illustrated by the 3.1%
return of the Lehman Brothers Aggregate Bond Index. Investors who favored
shorter-maturity and lower-quality issues achieved somewhat better returns.
Mortgage-backed securities continued to perform well because refinancing
activity has been reduced to historically low levels as interest rates have
risen. Municipal issues also tended to perform better than their taxable
counterparts.
INTERNATIONAL EQUITY MARKETS
International investors received fairly good returns over the past six months.
As measured by the broad Morgan Stanley Capital International Europe,
Australasia, Far East Index, foreign markets gained 11.4%.
The period saw two major developments. First, the Japanese stock market
moved sharply higher in the spring, returning 11.1% in May and 7.5% in June to
U.S. investors. Better tone in the economy, plus strong earnings reported by
export-oriented companies benefiting from the weak yen, gave Japan a
long-awaited boost. For the six months, the Japanese market is up 9.2%. The
competitive benefits of a weak currency relative to the dollar extended to
Germany, where the export-driven capital goods and chemical manufacturers
gained; overall, the German market rose 17.0% during the six-month period.
Arguably the biggest news came from the French elections at the end of
May. The new government is considered to be less friendly toward the austerity
measures needed to meet the eligibility requirements for the European Monetary
Union (EMU) in 1999. The French elections also had a broad impact across the
continent. Although most investors appear to agree that the elections won't
jeopardize the continent's move toward the EMU, the timing and intensity of the
fiscal measures are now less certain. For the six months, Europe gained 24.8%
in local currencies, which a strong dollar trimmed to 14.4% for U.S. investors.
5
<PAGE> 8
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolios could lose money.
<TABLE>
<CAPTION>
EUROPEAN PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-JUNE 30, 1997
- -------------------------------------------
EUROPEAN PORTFOLIO MSCI EUROPE
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------
<S> <C> <C> <C> <C>
1990 -8.7% 1.5% -7.2% -6.4%
1991 9.5 2.9 12.4 14.1
1992 -5.9 2.6 -3.3 -3.9
1993 27.3 1.8 29.1 29.3
1994 -0.5 2.4 1.9 2.8
1995 19.6 2.7 22.3 22.1
1996 18.6 2.7 21.3 21.4
1997* 14.9 0.0 14.9 14.4
- -------------------------------------------
</TABLE>
*Six months ended June 30, 1997.
See Financial Highlights table on page 34 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
PACIFIC PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-JUNE 30, 1997
- -------------------------------------------
PACIFIC PORTFOLIO MSCI PACIFIC
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------
<S> <C> <C> <C> <C>
1990 -14.3% 0.3% -14.0% -15.0%
1991 10.0 0.7 10.7 11.5
1992 -18.7 0.5 -18.2 -18.5
1993 34.7 0.8 35.5 36.1
1994 12.2 0.8 13.0 12.8
1995 1.7 1.0 2.7 2.9
1996 -8.6 0.8 -7.8 -8.2
1997* 7.6 0.0 7.6 7.0
- -------------------------------------------
</TABLE>
*Six months ended June 30, 1997.
See Financial Highlights table on page 35 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
European Portfolio* 6/18/90 28.91% 14.80% 9.74% 2.32% 12.06%
Pacific Portfolio** 6/18/90 -4.50 10.44 2.05 0.62 2.67
- --------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 1% transaction fee on purchases and
the $10 annual account maintenance fee.
**Performance figures are adjusted for the 0.5% transaction fee on purchases
and the $10 annual account maintenance fee.
6
<PAGE> 9
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolios could lose money.
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
TOTAL INVESTMENT RETURNS: MAY 4, 1994-JUNE 30, 1997
- -----------------------------------------
EMERGING MARKETS PORTFOLIO MSCI*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------
<S> <C> <C> <C> <C>
1994 9.1% 0.7% 9.8% 3.8%
1995 -1.1 1.7 0.6 0.0
1996 14.2 1.6 15.8 15.2
1997** 12.1 0.0 12.1 12.1
- -----------------------------------------
</TABLE>
*MSCI Select Emerging Markets Index.
**Six months ended June 30, 1997.
See Financial Highlights table on page 35 for dividend and capital gains
information since the Portfolio's inception.
<TABLE>
<CAPTION>
TOTAL INTERNATIONAL PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 29, 1996-JUNE 30, 1997
- -----------------------------------------
TOTAL INTERNATIONAL PORTFOLIO MSCI*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------
<S> <C> <C> <C> <C>
1996 -1.0% 1.6% 0.6% 0.6%
1997** 11.7 0.0 11.7 11.6
- -----------------------------------------
</TABLE>
*MSCI Total International Index.
**Six months ended June 30, 1997.
See Financial Highlights table on page 36 for dividend and capital gains
information since the Portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerging Markets Portfolio* 5/4/94 10.21% 9.89% 1.23% 11.12%
Total International Portfolio** 4/29/96 12.13 8.30 1.44 9.74
- --------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 1.5% transaction fee on purchases,
the 1% transaction fee on redemptions, and the $10 annual account
maintenance fee.
**Performance figures are adjusted for the 0.75% transaction fee on purchases
and the $10 annual account maintenance fee.
7
<PAGE> 10
[PHOTO]
FINANCIAL STATEMENTS
JUNE 30, 1997 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio's holdings, including
each security's market value on the last day of the reporting period. European,
Pacific and Emerging Market Portfolio securities are grouped and subtotaled by
asset type (common stocks, bonds, etc.) and by country; the Total International
Portfolio lists investments in shares of each Vanguard International Equity
Index Portfolio. Other assets are added to, and liabilities are subtracted
from, the value of Total Investments to calculate the Portfolio's Net Assets.
Finally, Net Assets are divided by the outstanding shares of the Portfolio to
arrive at its share price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table displaying
the composition of the Portfolio's net assets on both a dollar and per-share
basis. Because all income and any realized gains must be distributed to
shareholders each year, the bulk of net assets consists of Paid in Capital
(money invested by shareholders). The amounts shown for Undistributed Net
Investment Income and Accumulated Net Realized Gains usually approximate the
sums the Portfolio had available to distribute to shareholders as income
dividends or capital gains as of the statement date, but may differ because
certain investments or transactions may be treated differently for financial
statement and tax purposes. Any Accumulated Net Realized Losses, and any
cumulative excess of distributions over net income or net realized gains, will
appear as negative balances. Unrealized Appreciation (Depreciation) is the
difference between the market value of the Portfolio's investments and their
cost, and reflects the gains (losses) that would be realized if the Portfolio
were to sell all of its investments at their statement-date values.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
COMMON STOCKS (98.4%)(1)
- ------------------------------------------------------------------------
<S> <C> <C>
AUSTRIA (0.6%)
Austria Mikro Systeme
International AG 500 $ 42
- - Austrian Airlines AG 3,113 503
BWT Best Water Technology AG 2,860 443
Bank Austria AG 40,022 2,220
Bank Austria AG Pfd. 7,440 239
Bank Austria AG (Ptg. Ctf.) 1,690 45
Bau Holding AG 905 65
Bau Holding AG Pfd. 1,044 57
Boehler-Uddeholm AG 720 56
Creditanstalt-Bankverein AG 24,810 1,449
Creditanstalt-Bankverein AG Pfd. 14,908 599
EA-Generali AG 3,601 947
EA-Generali AG Pfd. 214 21
Flughafen Wien AG 3,450 146
- - Lenzing AG 4,490 263
Mayr-Melnhof Karton AG 1,030 53
OMV AG 11,767 1,508
Oesterreichische
Brau-Beteiligungs AG 10,810 639
Oesterreichische
Elektrizitaetswirtschafts AG
Class A 21,175 1,492
Radex-Heraklith
Industriebeteiligungs AG 10,647 451
Steyr-Daimler-Puch AG 14,174 303
Universale-Bau AG 2,640 97
VA Technologies AG 370 68
Wienerberger
Baustoffindustrie AG 6,090 1,251
-----------------
12,957
-----------------
BELGIUM (2.0%)
Barco NV 3,035 615
Bekaert SA 1,942 1,317
CBR Cimenteries SA 17,710 1,626
Delhaize-Le Lion SA 34,868 1,833
Electrabel SA 29,172 6,256
Fortis AG 23,997 4,960
Generale De Banque SA 10,300 3,968
Gevaert NV 16,960 1,595
Glaverbel SA 5,479 805
Groupe Bruxelles Lambert SA 16,310 2,736
Petrofina SA 12,120 4,593
Royale Belge SA 10,850 3,154
Solvay SA 4,945 2,916
Tractebel SA 9,110 3,801
- - Union Miniere SA 17,718 1,661
-----------------
41,836
-----------------
DENMARK (1.6%)
Aarhus Oliefabrik A/S A Shares 2,220 110
Aarhus Oliefabrik A/S B Shares 2,240 113
Bang & Olufsen Holding A/S
B Shares 7,200 445
Carlsberg A/S A Shares 12,775 703
Carlsberg A/S B Shares 8,549 472
D/S 1912 B Shares 120 4,298
D/S Svendborg B Shares 90 4,656
Danisco A/S 39,535 2,421
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Den Danske Bank A/S 23,400 $ 2,280
- - East Asiatic Co. A/S 7,250 172
FLS Industries A/S B Shares 41,040 1,393
GN Store Nord A/S 1,150 122
- - ISS International Service Systems
A/S B Shares 31,519 1,131
- - J. Lauritzen Holding A/S B Shares 5,965 598
Korn OG Foderstof Kompagniet A/S 5,210 167
NKT Holding A/S 10,970 744
Novo Nordisk A/S B Shares 42,482 4,638
Radiometer A/S B Shares 6,508 336
SAS Danmark A/S 28,080 328
Sophus Berendsen A/S A Shares 3,883 559
Sophus Berendsen A/S B Shares 10,560 1,529
Superfos A/S 34,000 836
Tele Danmark A/S B Shares 71,995 3,746
Unidanmark A/S A Shares 25,877 1,456
-----------------
33,253
-----------------
FINLAND (1.2%)
- - Amer Group Ltd. 12,120 218
Cultor Oy-Series 1 2,750 146
Cultor Oy-Series 2 12,120 637
Instrumentarium Group A Shares 1,000 37
Instrumentarium Group B Shares 3,140 117
Kemira Oy 21,730 205
Kesko Oy 26,570 374
Kone Oy B Shares 7,468 891
Merita Ltd. A Shares 476,667 1,588
Metra Oy A Shares 3,170 98
Metra Oy B Shares 31,626 953
Nokia AB Oy A Shares 113,800 8,499
Nokia AB Oy K Shares 63,900 4,761
Outokumpu Oy A Shares 53,350 1,058
Pohjola Insurance Co., Ltd.
A Shares 21,688 647
Pohjola Insurance Co., Ltd.
B Shares 6,300 187
Sampo Insurance Co., Ltd.
A Shares 7,631 742
Stockmann AB Oy A Shares 12,300 739
Stockmann AB Oy B Shares 1,410 75
UPM-Kymmene Oy 164,583 3,802
-----------------
25,774
-----------------
FRANCE (11.6%)
AXA-UAP SA 178,806 11,132
Accor SA 20,945 3,139
Alcatel Alsthom SA 89,128 11,173
Banque Nationale de Paris SA 118,009 4,868
Bongrain SA 160 63
Bouygues SA 9,592 790
- - Canal Plus SA 19,744 3,847
Carrefour SA 20,951 15,231
Chargeurs SA 4,031 232
- - Club Mediterranee SA 7,610 540
Compagnie Bancaire SA 20,429 2,610
Compagnie Financiere de
Paribas SA 71,322 4,932
Compagnie Francaise d'Etudes
et de Construction SA 9,650 1,121
- - Compagnie Generale de
Geophysique SA 8,702 848
Compagnie Generale des
Eaux SA 71,176 9,129
- - Compagnie Generale des
Eaux SA Warrants Exp. 5/2/01 64,550 39
Compagnie Generale des
Establissements Michelin SCA
B Shares 71,463 4,296
Compagnie Parisienne de
Reescompte SA 12,202 886
Compagnie de Saint-Gobain SA 47,513 6,936
Compagnie de Suez SA 1,873,820 4,612
Compagnie des Gaz de
Petrole Primagaz SA 15,241 1,350
Compoirs Modernes SA 2,692 1,421
- - Dollfus-Mieg & Compagnie SA 5,900 101
Elf Aquitaine SA 149,205 16,113
Eridania Beghin-Say SA 12,885 1,931
Essilor International SA 6,584 1,778
Etablissements Economiques du
Casino Guichard-Perrachon SA 27,360 1,356
Etablissements Economiques du
Casino Guichard-Perrachon
SA Pfd. 6,050 244
Europe 1 Communication SA 1,577 324
Finextel SA 21,650 366
GTM Entrepose SA 3,850 193
Groupe Danone SA 40,009 6,617
Havas SA 53,002 3,823
Imetal SA 7,682 1,019
L'Air Liquide SA (Registered) 41,606 6,612
L'Oreal SA 37,586 15,851
LVMH Moet Hennessy
Louis Vuitton SA 47,943 12,903
Lafarge SA 59,978 3,734
Lagardere SCA 36,851 1,071
Legrand SA 9,063 1,598
Lyonnaise des Eaux SA 38,885 3,921
- - Moulinex SA 16,361 449
Nord-Est SA 23,610 521
PSA Peugeot Citroen SA 32,424 3,137
Pathe SA 5,213 1,035
Pernod Ricard SA 42,639 2,201
Pinault-Printemps-Redoute SA 12,663 6,091
Promodes SA 12,394 4,832
Rhone-Poulenc SA Series A 191,381 7,824
Sagem SA 2,040 1,037
Salomon SA 9,800 748
Sanofi SA 59,472 5,835
Schneider SA 76,439 4,073
Sidel SA 15,048 1,166
Simco SA 11,559 917
Skis Rossignol SA 8,306 175
Societe BIC SA 19,085 3,124
Societe Francaise
d'Investissments Immobiliers
et de Gestion SA 14,393 919
Societe Generale SA 50,791 5,675
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Societe National d'Exploitation
Industrielle de Tabacs et
Allumettes SA 18,920 $ 599
Sodexho Alliance SA 1,678 860
Sommer Allibert SA 23,150 812
Thomson-CSF SA 80,801 2,084
Total SA B Shares 134,952 13,654
Union Immobiliere de France SA 5,563 384
Usinor Sacilor SA 109,465 1,976
Valeo SA 36,230 2,252
Worms et Compagnie 7,296 432
-----------------
241,562
-----------------
GERMANY (14.7%)
- - AGIV AG Fuer Industrie und
Verkehrswesen AG 21,020 480
Aachener & Muenchener
Beteiligungs AG (Bearer) 549 482
Aachener & Muenchener
Beteiligungs AG (Registered) 2,810 2,483
Adidas AG 17,400 1,927
Allianz AG 125,930 26,378
BASF AG 341,650 12,636
Bayer AG 406,750 15,644
Bayerische Hypotheken-Und
Weschel-Bank AG 145,190 4,345
Bayerische Vereinsbank AG 150,180 6,145
Beiersdorf AG 56,750 2,931
Bilfinger & Berger Bau AG 9,220 376
- - Brau und Brunnen AG 4,042 320
Buderus AG 110 61
CKAG Colonia Konzern AG 13,830 1,278
CKAG Colonia Konzern AG Pfd. 8,310 701
Continental AG 22,200 552
- - DLW AG 340 43
Daimler-Benz AG 286,240 23,244
Degussa AG 62,370 3,300
Deutsche Bank AG 278,400 16,280
Deutsche Lufthansa AG 236,070 4,532
Deutsche Telekom AG 1,245,850 30,028
Didier-Werke AG 2,610 232
Douglas Holding AG 9,720 388
Dresdner Bank AG 262,660 9,089
Dyckerhoff AG 991 359
Dyckerhoff AG Pfd. 2,178 787
Escada AG 720 118
Escada AG Pfd. 1,740 278
Fag Kugelfischer Georg
Schaefer AG 35,150 654
Friederich Grohe AG Pfd. 195 60
Heidelberger Zement AG 29,460 2,789
- - Herlitz AG 2,450 254
- - Herlitz AG Pfd. 6,215 596
Hochtief AG 52,150 2,334
Holsten-Brauerei AG 987 198
IWKA AG 1,450 422
Karstadt AG 3,200 1,140
- - Kloeckner-Humbolt-Deutz AG 22,800 217
Linde AG 5,554 4,255
Man AG 5,155 1,589
Man AG Pfd. 2,300 583
Mannesmann AG 20,329 9,065
Merck KGaA 97,650 4,312
- - Metro AG 52,730 5,783
- - Metro AG Pfd. 1 5,000 403
- - Metro AG Pfd. 2 891 71
Muenchener
Rueckversicherungs-Gesellschaft
AG (Bearer) 220 429
Muenchener
Rueckversicherungs-Gesellschaft
AG (Registered) 4,510 12,656
PWA Papierwerke
Waldhof-Aschaffanburg AG 5,900 1,009
Preussag AG 7,480 2,191
RWE AG 185,700 7,993
RWE AG Pfd. 120,540 4,199
Rheinmetall AG 2,450 560
Rheinmetall AG Pfd. 750 149
SAP AG 34,600 6,950
SAP AG Pfd. 23,875 4,960
SGL Carbon AG 400 55
- - Salamander AG 430 62
Schering AG 43,650 4,668
Siemens AG 313,070 18,604
- - Strabag Bau AG 1,893 175
- - Strabag Bau AG Pfd. 143 12
Thyssen AG 15,466 3,665
Veba AG 274,931 15,462
Viag AG 14,856 6,761
Volkswagen AG 15,300 11,739
Volkswagen AG Pfd. 4,450 2,503
-----------------
304,944
-----------------
HONG KONG (0.3%)
HSBC Holdings PLC 222,877 6,703
IRELAND (0.6%)
Allied Irish Banks PLC 421,500 3,226
CRH PLC 246,440 2,573
FYFFES PLC 57,630 83
Greencore Group PLC 108,800 533
Independent Newspapers PLC 211,515 1,245
Irish Life PLC 162,000 831
James Crean PLC 27,780 83
Jefferson Smurfit Group PLC 675,000 1,955
Kerry Group PLC A Shares 21,260 205
Waterford Wedgewood PLC 522,580 682
-----------------
11,416
-----------------
ITALY (5.2%)
Assicurazioni Generali SPA 487,295 8,838
Banca Commerciale Italiana
SPA 1,264,300 2,616
Banco Ambrosiano Veneto SPA 490,355 1,412
Banco Ambrosiano Veneto
SPA Risp. 464,420 677
Banco Popolare Di Milano SPA 228,100 1,368
Benetton Group SPA 76,696 1,230
Bulgari SPA 240,800 1,371
Burgo (Cartiere) SPA 135,400 750
Cementir SPA 482,180 301
Danieli & Co. SPA 83,090 550
Danieli & Co. SPA Risp. 9,000 31
Edison SPA 461,500 2,293
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Ente Nazionale Idrocarburi SPA 4,432,000 $ 25,071
Falck, Acciaierie & Ferriere
Lombarde SPA 129,500 488
Fiat SPA 1,900,400 6,835
Fiat SPA Pfd. 802,000 1,480
Fiat SPA Risp. 436,200 819
- - Impregilo SPA 214,000 141
Istituto Bancairo San Paolo
de Torino SPA 543,500 3,918
Istituto Nazionale Delle
Assicurazioni SPA 2,637,000 4,014
_ Italcementi SPA 152,557 944
- - Italcementi SPA Risp. 204,735 499
Italgas SPA 470,250 1,520
La Previdente SPA 8,500 45
La Rinascente SPA 154,362 857
La Rinascente SPA Pfd. 15,000 30
- - La Rinascente SPA Rights for
Bonds Exp. 7/23/97 175,362 8
- - La Rinascente SPA Rights for
Stock Exp. 7/15/97 175,362 29
La Rinascente SPA Risp. 6,000 15
Magneti Marelli SPA 265,300 447
Marzotto & Figli SPA 11,900 100
Marzotto & Figli SPA Risp. 5,000 40
Mediaset SPA 586,700 2,488
Mondadori (Arnoldo) Editore
SPA 7,420 43
- - Montedison SPA 3,241,502 2,138
- - Montedison SPA Risp. 466,600 302
- - Olivetti SPA 1,629,150 461
Parmalat Finanziaria SPA 532,800 753
Pirelli SPA 809,400 2,003
Pirelli SPA Risp. 46,300 66
Riunione Adriatica di Sicurta
SPA 214,204 1,702
Riunione Adriatica di Sicurta
SPA Risp. 39,900 201
SNIA BPD SPA 721,200 651
SNIA BPD SPA Risp. 63,780 42
- - Saffa SPA 21,790 36
Sasib SPA 77,160 262
Sasib SPA Risp. 24,000 47
Sirti SPA 130,190 752
Societa Assicuratrice
Industriale SPA 84,030 651
Societa Assicuratrice
Industriale SPA Risp. 161,000 496
Telecom Italia Mobile SPA 3,770,666 12,188
Telecom Italia Mobile SPA Risp. 580,244 1,037
Telecom Italia SPA 3,663,166 11,744
Telecom Italia SPA Risp. 1,124,144 2,223
-----------------
109,023
-----------------
NETHERLANDS (8.7%)
ABN-AMRO Holding NV 764,232 14,276
Akzo Nobel NV 39,790 5,463
Assurantieconcern Stad
Rotterdam NV 28,097 1,286
Elsevier NV 383,130 6,414
Getronics NV 62,616 2,026
Heineken NV 28,696 4,906
Hollandsche Beton Groep NV 2,390 546
IHC Caland NV 4,730 259
ING Groep NV 438,750 20,266
KLM Royal Dutch Airlines NV 36,747 1,135
Koninklijke Ahold NV 95,896 8,105
Koninklijke KNP BT NV 52,914 1,207
Koninklijke Nederlandsche
Hoogevens en
Staalfabireken NV 26,019 1,453
Koninklijke PTT Nederland NV 261,307 10,269
Koninklijke Pakhoed NV 20,578 727
Nedlloyd Groep NV 15,401 446
Oce-Van Der Grinten NV 10,657 1,377
Philips Electronics NV 199,895 14,344
Royal Dutch Petroleum Co. 1,197,736 62,415
Stork NV 21,683 885
Unilever NV 89,637 18,904
Wolters Kluwer NV 38,543 4,702
-----------------
181,411
-----------------
NORWAY (1.0%)
Aker ASA A Shares 26,623 524
Aker ASA B Shares 18,704 330
Bergesen D.Y. ASA A Shares 31,536 747
Bergesen D.Y. ASA B Shares 18,496 437
Christiania Bank Og Kreditkasse
ASA 82,900 282
Dyno Industrier ASA 21,996 571
Elkem ASA 50,640 993
Hafslund ASA A Shares 38,131 229
Hafslund ASA B Shares 16,651 91
Helikopter Services Group ASA 25,650 331
Kvaerner ASA 26,820 1,625
Kvaerner ASA B Shares 14,790 828
Lief Hoegh & Co. ASA 18,370 394
- - NCL Holdings ASA 216,460 683
Norsk Hydro ASA 129,544 7,060
Norske Skogindustrier ASA
A Shares 23,500 810
Norske Skogindustrier ASA
B Shares 3,140 104
Nycomed ASA A Shares 18,841 278
Nycomed ASA B Shares 16,671 239
Orkla ASA A Shares 26,060 1,926
Orkla ASA B Shares 7,920 538
- - Petroleum Geo-Services ASA 1,170 56
Storebrand ASA 160,260 957
Unitor ASA 44,650 640
-----------------
20,673
-----------------
SPAIN (4.1%)
Acerinox SA 8,746 1,642
Argentaria SA 72,900 4,089
Autopista Concesionaria
Espanola SA 98,127 1,334
Banco Bilbao Vizcaya SA
(Registered) 127,821 10,403
Banco Central
Hispanoamericano SA 103,386 3,789
Banco Santander SA 261,081 8,059
Corporacion Financiera Alba SA 7,315 930
Corporacion Mapfre SA 16,621 886
Dragados y Construcciones SA 34,946 727
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Ebro Agricolas Compania de
Alimentacion SA 33,394 $ 653
- - El Aguila SA 33,608 161
Empresa Nacional Compania
de Celulosas SA 18,550 328
Empresa Nacional de
Electricidad SA 141,779 11,925
- - Ercros SA 80,602 82
Fomento de Construcciones y
Contratas SA 7,258 927
Gas Natural SDG SA 21,852 4,783
Iberdrola SA 492,363 6,227
Inmobiliaria Metropolitana
Vasca Central SA 16,159 616
- - Inmobiliaria Urbis SA 60,980 587
Portland Valderrivas SA 4,748 389
Prosegur Cia de Seguridad SA
(Registered) 74,800 916
Repsol SA ADR 165,237 7,000
Sarrio SA 49,540 196
Sociedade General de Aguas
de Barcelona SA 1,350 55
Tabacalera SA 20,306 1,092
Telefonica de Espana SA 515,268 14,925
Union Electrica Fenosa SA 28,737 262
Uralita SA 78,564 879
Vallehermoso SA 43,558 1,177
Viscofan Industria Navarra
de Envolturas Celulosic SA 21,260 498
Zardoya Otis SA 2,426 320
-----------------
85,857
-----------------
SWEDEN (4.3%)
ABB AB A Shares 386,380 5,422
ABB AB B Shares 189,800 2,651
AGA AB A Shares 101,750 1,382
AGA AB B Shares 88,440 1,178
Astra AB A Shares 732,900 13,649
Astra AB B Shares 135,246 2,405
Atlas Copco AB A Shares 79,400 2,074
Atlas Copco AB B Shares 32,090 832
- - Autoliv, Inc. 20,600 806
Electrolux AB B Shares 47,550 3,431
Esselte AB A Shares 15,260 359
Esselte AB B Shares 12,090 285
- - Granges AB 22,725 306
Hennes & Mauritz AB B Shares 126,940 4,547
LM Ericsson Telephone AB
B Shares 528,000 20,793
SKF AB A Shares 11,140 275
SKF AB B Shares 5,680 147
Scanem AB A Shares 34,830 1,396
Securitas AB B Shares 61,280 1,728
Skandia Forsakrings AB 40,122 1,479
Skandinaviska Eeskilda Banken
AB B Shares 339,053 3,661
Skanska AB B Shares 83,658 3,700
Stora Kopparbergs Berglags
AB A Shares 80,705 1,305
Stora Kopparbergs Berglags
AB B Shares 3,550 58
Svenska Cellulosa AB B Shares 96,146 2,045
Svenska Handelsbanken AB
A Shares 141,080 4,516
Svenska Handelsbanken AB
B Shares 30,960 913
Swedish Match AB 281,969 948
Trelleborg AB B Shares 71,198 1,169
Volvo AB A Shares 41,300 1,111
Volvo AB B Shares 182,969 4,898
-----------------
89,469
-----------------
SWITZERLAND (11.2%)
ABB AG (Bearer) 4,415 6,693
ABB AG (Registered) 2,960 873
Adecco SA (Bearer) 8,827 3,391
Alusuisse-Lonza Holding AG
(Bearer) 1,316 1,349
Alusuisse-Lonza Holding AG
(Registered) 2,850 2,956
Credit Suisse Group AG
(Registered) 107,975 13,887
Danzas Holding AG (Registered) 1,845 361
Forbo Holding AG (Registered) 380 164
Georg Fischer AG (Bearer) 310 432
Georg Fischer AG (Registered) 215 59
Grands Magasins Jelmoli SA
(Bearer) 290 181
Grands Magasins Jelmoli SA
(Registered) 650 85
Holderbank Financiere Glarus AG
(Bearer) 2,530 2,393
Holderbank Financiere Glarus AG
(Registered) 6,710 1,266
Kuoni Reisen Holding AG
(Registered) 330 1,132
Moevenpick Holding AG (Bearer) 1,910 577
Nestle SA (Registered) 21,959 29,010
Novartis AG (Bearer) 3,197 5,114
Novartis AG (Registered) 35,456 56,765
Roche Holding AG (Bearer) 908 12,488
Roche Holding AG
(Dividend-Right Certificates) 3,933 35,625
SGS Societe Generale de
Surveillance Holding SA (Bearer) 817 1,748
SGS Societe Generale de
Surveillance Holding SA
(Registered) 1,140 450
SMH AG (Bearer) 1,852 1,059
SMH AG (Registered) 8,350 1,133
- - Sairgroup AG 1,160 1,302
Schindler Holding AG (Ptg. Ctf.) 60 75
Schindler Holding AG (Registered) 190 244
Sika Finanz AG (Bearer) 890 280
Sulzer AG (Registered) 360 309
- - Swiss Bank Corp. (Registered) 43,165 11,562
Swiss Reinsurance Co.
(Registered) 8,148 11,541
Union Bank of Switzerland AG
(Bearer) 11,831 13,553
Union Bank of Switzerland AG
(Registered) 15,200 3,482
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
- - Valora Holding AG 1,481 $ 315
Zurich Insurance Co. (Registered) 25,090 9,999
-----------------
231,853
-----------------
UNITED KINGDOM (31.3%)
Abbey National PLC 787,537 10,748
Amec PLC 287,102 717
Amstrad PLC 122,089 577
Anglian Water PLC 195,272 2,129
Argos PLC 191,362 1,736
Arjo Wiggins Appleton PLC 620,152 1,806
Associated British Foods PLC 522,059 4,492
B.A.T. (British American
Tobacco) Industries PLC 1,720,002 15,387
BBA Group PLC 298,927 1,761
BG PLC 2,454,764 8,988
BICC PLC 278,099 819
BOC Group PLC 271,547 4,716
BPB PLC 362,769 1,961
BTR PLC 2,273,352 7,775
Barclays PLC 839,153 16,648
Barratt Developments PLC 161,950 663
Bass PLC 497,781 6,073
Blue Circle Industries PLC 483,665 3,453
Boots Co., PLC 537,715 6,305
Bowthorpe PLC 174,335 937
British Aerospace PLC 245,692 5,465
British Airways PLC 584,486 6,659
British Land Co., PLC 338,367 3,193
British Petroleum Co., PLC 3,166,362 39,365
British Sky Broadcasting
Group PLC 962,591 7,017
British Steel PLC 1,322,262 3,290
British Telecommunications
PLC 3,494,218 25,937
Burmah Castrol PLC 131,957 2,231
Cable and Wireless PLC 1,236,324 11,317
Cadbury Schweppes PLC 571,749 5,100
Caradon PLC 391,398 1,309
- - Caradon PLC Class B 110,461 184
Carlton Communications PLC 362,600 3,069
- - Centrica PLC 2,992,804 3,636
Chubb Security PLC 314,463 2,342
Coats Viyella PLC 385,166 808
Cobham PLC 50,964 613
Commercial Union PLC 412,723 4,338
Courtaulds PLC 271,720 1,533
Courtaulds Textiles PLC 148,194 757
De La Rue PLC 188,548 1,170
Delta PLC 143,760 658
EMI Group PLC 239,607 4,307
Electrocomponents PLC 312,290 2,323
English China Clays PLC 300,215 1,019
FKI PLC 469,426 1,328
GKN PLC 229,759 3,946
General Electric Co., PLC 1,529,822 9,140
George Wimpey PLC 149,750 339
Glaxo Wellcome PLC 1,975,820 40,858
Granada Group PLC 476,486 6,265
Grand Metropolitan PLC 1,180,330 11,354
Great Universal Stores PLC 565,744 5,739
Guardian Royal Exchange PLC 251,716 1,137
Guinness PLC 1,069,928 10,470
HSBC Holdings PLC (Foreign) 775,481 22,970
HSBC Holdings PLC (Local) 499,825 15,377
Hammerson PLC 64,316 499
Hanson PLC 363,535 1,803
Harrison & Crosfield PLC 227,073 416
Hepworth PLC 51,075 201
Hyder PLC 116,646 1,572
IMI PLC 192,006 1,099
Imperial Chemical
Industries PLC 393,254 5,459
Johnson Matthey PLC 44,748 429
Kingfisher PLC 404,763 4,594
Ladbroke Group PLC 741,857 2,914
Laird Group PLC 59,550 348
Land Securities PLC 296,346 4,192
Lasmo PLC 430,043 1,875
Legal & General Group PLC 704,895 4,775
Lex Service PLC 53,026 333
Lloyds TSB Group PLC 2,974,439 30,544
Lonrho PLC 244,458 517
LucasVarity PLC 963,337 3,335
MEPC PLC 288,778 2,363
Marks & Spencer PLC 1,576,642 13,068
Marley PLC 43,540 90
Mercury Asset Management
Group PLC 124,130 2,551
Meyer International PLC 52,241 365
National Grid Group PLC 1,101,652 3,979
National Power PLC 644,102 5,596
Next PLC 253,197 2,865
Ocean Group PLC 141,155 1,233
Pearson PLC 350,657 4,050
Peninsular & Oriental Steam
Navigation Co. 346,101 3,445
Pilkington PLC 482,475 1,108
Prudential Corp. PLC 1,067,304 10,426
RMC Group PLC 43,728 708
Racal Electronics PLC 244,449 976
Railtrack Group PLC 8,230 85
Rank Group PLC 204,921 1,298
Redland PLC 135,687 768
Reed International PLC 639,042 6,169
Reuters Holdings PLC 934,479 9,845
Rexam PLC 388,146 1,638
Rio Tinto PLC 595,205 10,367
Rolls-Royce PLC 701,873 2,675
Royal & Sun Alliance
Insurance Group PLC 877,877 6,487
Royal Bank of Scotland
Group PLC 451,213 4,220
Rugby Group PLC 297,746 594
Safeway PLC 656,480 3,797
J. Sainsbury PLC 1,092,207 6,617
Schroders PLC 128,629 3,530
Scottish & Newcastle PLC 348,955 3,752
Scottish Power PLC 658,354 4,273
Sears PLC 617,365 699
Sedgwick Group PLC 107,950 221
Slough Estates PLC 83,589 417
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
SmithKline Beecham PLC 1,532,839 $ 28,203
Smiths Industries PLC 212,223 2,713
Southern Electric PLC 128,686 947
St. James's Place Capital PLC 386,650 836
T & N PLC 164,627 392
TI Group PLC 321,562 2,802
Tarmac PLC 541,871 1,118
Tate & Lyle PLC 315,735 2,346
Taylor Woodrow PLC 197,099 577
Tesco PLC 1,212,869 7,489
Thames Water PLC 256,899 2,950
Thorn PLC 176,668 500
Transport Development Group
PLC 211,921 607
Unigate PLC 196,420 1,579
Unilever PLC 452,906 12,957
United Biscuits Holdings PLC 420,367 1,431
United Utilities PLC 343,399 3,761
Vickers PLC 130,029 441
Vodafone Group PLC 1,704,243 8,311
Williams PLC 122,547 663
Willis Corroon Group PLC 98,419 210
Wilson Connolly Holdings PLC 86,943 231
Wolseley PLC 359,736 2,805
Zeneca Group PLC 523,164 17,292
-----------------
650,595
-----------------
- ------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,403,891) 2,047,326
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------
BOND
- ------------------------------------------------------------------------
SWITZERLAND
<S> <C> <C>
(U.S. Dollar-Denominated)
Hofi International Finance Ltd. Cvt.
4.50%, 8/11/08
(COST $613) $ 445 $ 759
- ------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.5%)
- ------------------------------------------------------------------------
U.S. TREASURY BILL
(2) 5.21%, 7/24/97 1,900 1,894
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.93%, 7/1/97 29,268 29,268
- ------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $31,162) 31,162
- ------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(COST $1,435,666) $2,079,247
- ------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- ------------------------------------------------------------------------
Other Assets--Notes B and G $ 456,343
Liabilities --Note G (453,791)
-----------------
2,552
- ------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------
Applicable to 109,503,878 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $2,081,799
========================================================================
NET ASSET VALUE PER SHARE $19.01
========================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income Producing Security.
(1)The combined market value of common stocks and Eurotop futures contracts
represents 99.9% of net assets.
(2)Security segregated as initial margin for open futurescontracts.
(Ptg. Ctf.)--Participating Certificate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,405,702 $12.83
Undistributed Net
Investment Income--Note F 26,723 .24
Accumulated Net
Realized Gains--Note F 5,310 .05
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities 643,581 5.88
Futures Contracts 729 .01
Foreign Currencies and
Forward Currency Contracts (246) --
- ------------------------------------------------------------------------
NET ASSETS $2,081,799 $19.01
========================================================================
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
COMMON STOCKS (99.0%)(1)
- ------------------------------------------------------------------------
AUSTRALIA (6.4%)
<S> <C> <C>
Aberfoyle Ltd. 142,000 $ 394
Amcor Ltd. 298,391 1,967
Ashton Mining Ltd. 113,400 155
Australia National Industries Ltd. 575,031 698
Australian Gas Light Co., Ltd. 118,300 691
Boral Ltd. 568,500 1,776
Brambles Industries Ltd. 107,111 2,102
- - Broken Hill Proprietary Ltd. 815,196 11,898
Burns Philp & Co., Ltd. 234,530 432
CSR Ltd. 479,200 1,842
Coca-Cola Amatil Ltd. 178,668 2,302
Coles Myer Ltd. 507,014 2,617
- - Crown Ltd. 317,495 507
David Jones Ltd. 178,132 247
Delta Gold NL 124,065 205
Email Ltd. 208,183 739
F.H. Faulding & Co., Ltd. 54,100 308
Foster's Brewing Group Ltd. 469,860 866
Futuris Corp., Ltd. 207,120 331
Gio Australia Holdings Ltd. 217,500 668
Goodman Fielder Ltd. 522,405 763
Great Central Mines Ltd. 123,430 233
Hardie (James) Industries Ltd. 225,047 717
Howard Smith Ltd. 109,200 1,031
ICI Australia Ltd. 149,548 1,462
Leighton Holdings Ltd. 176,150 851
Metal Manufactures Ltd. 123,800 306
Mount Isa Mines Holdings Ltd. 397,344 583
National Australia Bank Ltd. 615,146 8,742
Newcrest Mining Ltd. 64,445 177
News Corp. Ltd. 870,979 4,143
News Corp. Ltd. Pfd. 439,413 1,718
Normandy Mining Ltd. 454,127 507
North Ltd. 327,413 1,239
Pacific Dunlop Ltd. 415,740 1,221
Pioneer International Ltd. 382,800 1,468
Plutonic Resources Ltd. 72,650 225
QBE Insurance Group Ltd. 123,251 739
QCT Resources Ltd. 225,200 275
Renison Goldfields
Consolidated Ltd. 65,441 238
Resolute Ltd. 105,895 187
Rio Tinto Ltd. 150,942 2,553
Rothmans Holdings Ltd. 91,700 565
Santos Ltd. 291,789 1,218
Sons of Gwalia Ltd. 92,544 342
Southcorp Holdings Ltd. 335,354 1,246
- - Sydney Harbour Casino
Holdings Ltd. 265,200 413
Tabcorp Holdings Ltd. 58,692 317
WMC Ltd. 436,587 2,731
Westpac Banking Corp., Ltd. 752,571 4,493
-----------------
71,448
-----------------
HONG KONG (8.3%)
Bank of East Asia Ltd. 567,933 2,368
Cathay Pacific Airways Ltd. 1,241,000 2,571
Cheung Kong Holdings Ltd. 861,000 8,502
China Light and Power Co., Ltd. 789,000 4,471
Dickson Concepts
International Ltd. 69,399 253
Elec & Eltek International
Holdings Ltd. 2,000 1
Giordano International Ltd. 586,000 401
Hang Seng Bank Ltd. 760,200 10,843
Hong Kong & China
Gas Co., Ltd. 1,599,993 3,201
Hong Kong Aircraft &
Engineering Co., Ltd. 117,400 427
Hong Kong
Telecommunications Ltd. 4,565,400 10,902
Hong Kong and Shanghai
Hotels Ltd. 328,000 523
Hopewell Holdings Ltd. 2,308,000 1,460
Hutchison Whampoa Ltd. 1,549,000 13,396
Hysan Development Co., Ltd. 506,000 1,492
Johnson Electric Holdings Ltd. 265,000 790
Kumagai Gumi Hong Kong Ltd. 101,000 105
Miramar Hotel & Investment Ltd. 406,000 747
New World
Development Co., Ltd. 812,000 4,842
Oriental Press Group Ltd. 1,183,000 485
Peregrine Investment
Holdings Ltd. 412,900 850
Regal Hotels International
Holdings Ltd. 1,756,800 476
Shangri-La Asia Ltd. 306,000 367
Shun Tak Holdings Ltd. 762,000 467
South China Morning Post Ltd. 1,019,000 1,000
Sun Hung Kai Properties Ltd. 912,400 10,982
Swire Pacific Ltd. A Shares 450,500 4,056
Tai Cheung Holdings Ltd. 566,500 450
Television Broadcasts Ltd. 237,000 1,065
Varitronix International Ltd. 120,000 204
Wharf Holdings Ltd. 990,000 4,294
Wing Lung Bank Ltd. 94,528 603
-----------------
92,594
-----------------
JAPAN (75.6%)
77 Bank Ltd. 71,000 689
Advantest Corp. 30,250 2,326
Ajinomoto Co., Inc. 291,000 3,128
Alps Electric Co., Ltd. 94,000 1,314
Amada Co., Ltd. 158,000 1,395
Amano Corp. 63,000 716
- - Aoki Corp. 276,000 326
Aoyama Trading Co., Ltd. 40,800 1,312
Arabian Oil Co., Ltd. 30,400 1,025
Asahi Bank Ltd. 948,000 8,077
Asahi Breweries Ltd. 198,000 2,959
Asahi Chemical Industry Co., Ltd. 626,000 3,747
Asahi Glass Co., Ltd. 500,000 4,981
Ashikaga Bank Ltd. 297,000 1,090
Autobacs Seven Co., Ltd. 15,000 1,190
The Bank of Tokyo-
Mitsubishi Ltd. 1,805,000 36,280
Bank of Yokohama Ltd. 542,000 3,055
Bridgestone Corp. 331,000 7,694
Brother Industries Ltd. 177,000 764
CSK Corp. 29,000 1,100
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Canon, Inc. 351,000 $ 9,570
Casio Computer Co. 124,000 1,080
Chiba Bank Ltd. 349,000 2,080
Chichibu Onoda Cement Corp. 253,000 993
Chiyoda Corp. 86,000 414
Chugai Pharmaceutical Co., Ltd. 122,000 1,098
Citizen Watch Co., Ltd. 154,000 1,190
Cosmo Oil Co., Ltd. 232,000 1,111
Dai-Nippon Ink & Chemicals, Inc. 310,000 1,338
Dai-Nippon Printing Co., Ltd. 314,000 7,107
Dai-Nippon Screen
Manufacturing Co., Ltd. 68,000 642
Daicel Chemical Industries Ltd. 27,000 105
Daido Steel Co., Ltd. 242,000 782
Daiei, Inc. 330,000 2,120
Daifuku Co., Ltd. 32,000 422
Daiichi Pharmaceutical Co., Ltd. 106,000 1,871
Daikin Industries Ltd. 58,000 527
Daikyo, Inc. 161,000 630
Daimaru, Inc. 81,000 466
Daito Trust Construction Co., Ltd. 52,000 613
Daiwa House Industry Co., Ltd. 237,000 2,900
Daiwa Kosho Lease Co., Ltd. 99,000 767
Daiwa Securities Co., Ltd. 575,000 4,543
Denki Kagaku Kogyo K.K. 209,000 577
Denso Corp. 363,000 8,692
East Japan Railway Co. 1,643 8,443
Ebara Corp. 68,000 1,022
Eisai Co., Ltd. 127,000 2,408
Ezaki Glico Co. 96,600 870
Fanuc Co., Ltd. 104,600 4,022
Fuji Bank Ltd. 1,171,000 17,601
Fuji Photo Film Co., Ltd. 211,000 8,500
Fujikura Ltd. 172,000 1,608
Fujita Corp. 273,000 477
Fujita Kanko, Inc. 67,000 843
Fujitsu Ltd. 759,000 10,546
Furukawa Electric Co. 289,000 1,841
Gakken Co. 6,000 32
Gunma Bank Ltd. 218,000 1,962
Gunze Ltd. 52,000 237
Hankyu Corp. 312,000 1,726
Hankyu Department Stores, Inc. 45,000 476
- - Haseko Corp. 136,000 218
Hazama Corp. 176,000 363
Higo Bank Ltd. 68,000 448
Hirose Electric Co., Ltd. 11,500 790
Hitachi Ltd. 1,350,000 15,101
Hitachi Zosen Corp. 446,000 1,777
Hokuriku Bank Ltd. 254,000 872
Honda Motor Co., Ltd. 395,000 11,909
House Foods Industry Corp. 67,000 1,189
Hoya Corp. 53,000 2,362
INAX Corp. 102,000 765
Industrial Bank of Japan Ltd. 1,028,000 15,991
Isetan Co. 80,000 993
- - Ishihara Sangyo Kaisha Ltd. 109,000 323
Ito-Yokado Co., Ltd. 170,000 9,879
Itochu Corp. 549,000 2,960
Itoham Foods, Inc. 67,000 370
Iwatani International Corp. 99,000 398
JGC Corp. 47,000 324
- - Japan Air Lines Co., Ltd. 779,000 3,547
Japan Energy Corp. 391,000 1,025
- - Japan Metals & Chemicals Co. 60,000 147
- - Japan Steel Works Ltd. 100,000 195
Joyo Bank Ltd. 419,000 2,318
Jusco Co., Ltd. 135,000 4,566
Kajima Corp. 433,000 2,539
Kaken Pharmaceutical Co. 12,000 62
Kamigumi Co., Ltd. 45,000 254
Kandenko Co., Ltd. 56,000 529
- - Kanebo Ltd. 118,000 217
Kaneka Corp. 79,000 496
Kansai Electric Power Co., Inc. 404,000 7,803
Kansai Paint Co., Ltd. 116,000 481
Kao Corp. 262,000 3,640
Katokichi Co., Ltd. 27,000 481
Kawasaki Heavy Industries Ltd. 633,000 2,948
- - Kawasaki Kisen Kaisha Ltd. 230,000 464
Kawasaki Steel Corp. 1,120,000 3,651
Keihin Electric Express
Railway Co., Ltd. 148,000 696
Kikkoman Corp. 58,000 383
Kinden Corp. 94,000 1,331
Kinki Nippon Railway Co. 701,000 4,288
Kirin Brewery Co., Ltd. 449,000 4,669
Kissei Pharmaceutical Co. 33,000 727
Kokuyo Co., Ltd. 60,000 1,625
Komatsu Ltd. 440,000 3,576
Komori Corp. 22,000 523
Konami Co., Ltd. 11,000 411
Konica Corp. 80,000 511
Koyo Seiko Co., Ltd. 71,000 568
Kubota Corp. 628,000 3,079
Kumagai Gumi Co., Ltd. 251,000 419
Kurabo Industries Ltd. 77,000 208
Kuraray Co., Ltd. 150,000 1,494
Kureha Chemical Industry Co. 89,000 385
Kurita Water Industries Ltd. 41,000 1,093
Kyocera Corp. 67,000 5,328
Kyowa Hakko Kogyo Co. 203,000 1,522
Kyudenko Corp. 3,000 25
Lion Corp. 107,000 490
Maeda Road
Construction Co., Ltd. 21,000 181
Makino Milling Machine Co. 78,000 667
Makita Corp. 44,000 646
Marubeni Corp. 438,000 1,990
Maruha Corp. 14,000 37
Marui Co., Ltd. 136,000 2,532
Matsushita Electric
Industrial Co., Ltd. 830,000 16,755
Meiji Milk Products Co., Ltd. 60,000 274
Meiji Seika Kaisha Ltd. 92,000 507
Minebea Co., Ltd. 190,000 2,026
Misawa Homes Co., Ltd. 49,000 300
Mitsubishi Corp. 648,000 8,098
Mitsubishi Chemical Corp. 888,000 2,902
Mitsubishi Electric Corp. 778,000 4,358
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Mitsubishi Estate Co., Ltd. 474,000 $ 6,876
Mitsubishi Gas Chemical Co. 113,000 462
Mitsubishi Heavy Industries Ltd. 1,379,000 10,593
Mitsubishi Logistics Corp. 35,000 502
Mitsubishi Materials Corp. 533,000 2,133
Mitsubishi Oil Co., Ltd. 100,000 446
Mitsubishi Paper Mills Ltd. 159,000 622
Mitsubishi Rayon Co., Ltd. 257,000 1,060
Mitsubishi Trust & Banking Corp. 532,000 8,415
Mitsui & Co., Ltd. 669,000 6,431
- - Mitsui Engineering &
Shipbuilding Co., Ltd. 186,000 406
Mitsui Fudosan Co., Ltd. 285,000 3,935
Mitsui Marine & Fire
Insurance Co. 294,000 2,127
Mitsui Mining &
Smelting Co., Ltd. 136,000 605
- - Mitsui Osk Lines Ltd. 406,000 837
Mitsui Soko Co., Ltd. 92,000 642
Mitsui Toatsu Chemicals, Inc. 339,000 933
Mitsui Trust & Banking Co. 508,000 3,840
Mitsukoshi Ltd. 124,000 883
Mori Seiki Co. 24,000 386
Murata Manufacturing Co., Ltd. 84,000 3,347
Mycal Corp. 129,000 1,860
NEC Corp. 640,000 8,949
NGK Insulators Ltd. 156,000 1,718
NGK Spark Plug Co. 51,000 557
NKK Corp. 1,289,000 2,771
NOF Corp. 9,000 39
NSK Ltd. 118,000 760
NTN Corp. 87,000 487
Nagase & Co., Ltd. 6,000 48
Nagoya Railroad Co., Ltd. 302,000 1,246
Namco Ltd. 20,000 773
Nankai Electric Railway Co. 121,000 618
Nichido Fire & Marine
Insurance Co., Ltd. 223,000 1,629
Nichirei Corp. 74,000 369
Nihon Cement Co., Ltd. 63,000 302
- - Niigata Engineering Co., Ltd. 246,000 451
Nikon Corp. 131,000 2,209
Nippon Beet Sugar
Manufacturing Co. 11,000 40
Nippon Comsys Corp. 73,000 1,085
Nippon Express Co., Ltd. 470,000 3,758
Nippon Fire & Marine
Insurance Co., Ltd. 230,000 1,242
Nippon Light Metal Co. 225,000 820
Nippon Meat Packers, Inc. 99,000 1,280
Nippon Oil Co., Ltd. 334,000 1,830
Nippon Paper Industries Co. 410,000 2,376
Nippon Sharyo Ltd. 43,000 278
Nippon Sheet Glass Co., Ltd. 274,000 1,010
Nippon Shinpan Co. 196,000 709
Nippon Shokubai K.K. 84,000 668
Nippon Steel Corp. 2,786,000 8,911
- - Nippon Suisan Kaisha Ltd. 111,000 377
Nippon Telephone and
Telegraph 4,998 48,045
Nippon Yusen Kabushiki
Kaisha Co. 550,000 2,139
Nishimatsu Construction Co. 89,000 622
Nissan Motor Co., Ltd. 972,000 7,551
Nisshinbo Industries, Inc. 72,000 654
Nissin Food Products Co., Ltd. 34,000 885
Nitto Denko Corp. 33,000 643
Nomura Securities Co., Ltd. 799,000 11,032
Noritake Co., Ltd. 58,000 522
OJI Paper Co., Ltd. 423,000 2,621
Odakyu Electric Railway Co. 320,000 1,902
Ohbayashi Corp. 266,000 1,783
Okamoto Industries, Inc. 133,000 592
Okuma Corp. 67,000 591
Okumura Corp. 79,000 419
Olympus Optical Co., Ltd. 63,000 567
Omron Corp. 108,000 2,293
Onward Kashiyama Co., Ltd. 96,000 1,594
Osaka Gas Co., Ltd. 869,000 2,498
Oyo Corp. 11,000 428
Penta-Ocean Construction Co. 139,000 449
Pioneer Electronic Corp. 49,000 1,190
Q.P. Corp. 107,000 954
- - Renown, Inc. 90,000 224
Rohm Co., Ltd. 47,000 4,847
SMC Corp. 21,000 1,776
Sakura Bank Ltd. 1,396,000 10,711
Sanden Corp. 35,000 294
Sankyo Aluminum Industry Co. 8,000 26
Sankyo Co., Ltd. 166,000 5,585
- - Sanrio Co., Ltd. 40,000 330
Sanwa Shutter Corp. 101,000 918
Sanyo Electric Co., Ltd. 650,000 2,920
Sapparo Breweries Ltd. 69,000 574
Sato Kogyo Co. 95,000 199
Secom Co., Ltd. 46,000 3,381
Sega Enterprises Ltd. 41,100 1,365
Seino Transportation Co., Ltd. 52,000 563
Seiyu Ltd. 41,000 329
Sekisui Chemical Co. 250,000 2,534
Sekisui House Ltd. 316,000 3,203
Sharp Corp. 466,000 6,434
Shimachu Co. 9,000 271
Shimano, Inc. 34,000 713
Shimizu Corp. 345,000 2,071
Shin-Etsu Chemical Co., Ltd. 138,000 3,666
Shionogi & Co., Ltd. 165,000 1,280
Shiseido Co., Ltd. 184,000 3,039
Shizuoka Bank Ltd. 330,000 3,778
- - Showa Denko K.K. 467,000 1,224
Skylark Co., Ltd. 55,000 841
Snow Brand Milk Products Co. 67,000 345
Sony Corp. 155,500 13,576
Sumitomo Bank Ltd. 1,245,000 20,454
Sumitomo Chemical Co. 723,000 3,279
Sumitomo Corp. 462,000 4,401
Sumitomo Electric
Industries Ltd. 308,000 5,168
Sumitomo Forestry Co. 72,000 793
Sumitomo Heavy
Industries Ltd. 213,000 862
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Sumitomo Marine &
Fire Insurance Co. 315,000 $ 2,588
Sumitomo Metal Industries Ltd. 1,291,000 3,678
Sumitomo Metal Mining Co. 276,000 1,954
Sumitomo Osaka
Cement Co., Ltd. 234,000 736
Taisei Corp. 322,000 1,494
Taisho Pharmaceutical Co. 146,000 3,943
Taiyo Yuden Co., Ltd. 8,000 132
Takara Shuzo Co. 120,000 867
Takara Standard Co. 17,000 149
Takashimaya Co. 135,000 1,840
Takeda Chemical Industries Ltd. 361,000 10,158
Takuma Co., Ltd. 20,000 273
Teijin Ltd. 477,000 2,251
Teikoku Oil Co., Ltd. 165,000 740
Toa Corp. 85,000 383
Tobu Railway Co., Ltd. 376,000 1,738
Toei Co. 67,000 460
Toho Co., Ltd. 8,700 1,437
Tohoku Electric Power Co. 216,600 3,861
Tokai Bank Ltd. 827,000 8,528
Tokio Marine & Fire
Insurance Co. 641,000 8,403
Tokyo Broadcasting System, Inc. 51,000 1,047
Tokyo Dome Corp. 87,000 1,171
Tokyo Electric Power Co. 549,700 11,577
Tokyo Electron Ltd. 51,700 2,476
Tokyo Gas Co., Ltd. 925,000 2,571
Tokyo Steel Manufacturing Co. 57,000 638
Tokyo Style Co. 31,000 431
Tokyo Tatemono Co., Ltd. 175,000 925
Tokyotokeiba Co. 142,000 410
Tokyu Corp. 498,000 3,094
Toppan Printing Co., Ltd. 297,000 4,672
Toray Industries, Inc. 611,000 4,362
- - Tosoh Corp. 247,000 838
Tostem Corp. 101,000 2,798
Toto Ltd. 174,800 2,154
Toyo Engineering Corp. 112,000 505
Toyo Exterior Co. 12,000 165
Toyo Seikan Kaisha Ltd. 103,300 2,293
Toyobo Ltd. 388,000 1,027
Toyoda Automatic Loom
Works Ltd. 113,000 2,568
Toyota Motor Corp. 1,502,000 44,366
Trans Cosmos, Inc. 8,000 293
Tsubakimoto Chain Co. 133,000 814
Ube Industries Ltd. 361,000 1,051
Uni-Charm Corp. 4,000 143
Uniden Corp. 11,000 162
- - Unitika Ltd. 183,000 368
Uny Co. 72,000 1,409
Wacoal Corp. 77,000 956
Yamaguchi Bank Ltd. 51,000 767
Yamaha Corp. 95,000 1,743
Yamaichi Securities Co. 579,000 1,725
Yamanouchi
Pharmaceuticals Co., Ltd. 145,000 3,903
Yamato Transport Co., Ltd. 164,000 2,049
Yamazaki Baking Co., Ltd. 88,000 1,553
The Yasuda Trust and
Banking Co., Ltd. 482,000 1,845
Yokogawa Electric Corp. 103,000 896
-----------------
846,416
-----------------
MALAYSIA (4.7%)
AMMB Holdings Bhd. 193,000 1,201
Aluminum Co. of Malaysia Bhd. 264,000 354
Amsteel Corp., Bhd. 830,800 635
Antah Holdings Bhd. 261,000 335
- - Aokam Perdana Bhd. 216,000 240
Berjaya Group Bhd. 345,000 424
Berjaya Land Bhd. 160,000 418
Commerce Asset Holdings Bhd. 304,000 801
- - Commerce Asset Holdings Bhd.
Rights Exp. 7/23/97 60,800 4
Edaran Otomobil Nasional Bhd. 93,000 792
Ekran Bhd. 56,000 110
- - Ekran Bhd. Rights for Warrants
Exp. 7/1/97 14,000 1
Golden Hope Plantations Bhd. 481,000 827
Golden Plus Holdings Bhd. 41,000 74
Guinness Anchor Bhd. 123,000 273
Highlands & Lowlands Bhd. 157,000 240
Hong Leong Industries Bhd. 39,400 125
Hong Leong Properties Bhd. 471,000 536
Hume Industries Malaysia Bhd. 65,000 299
IGB Corp., Bhd. 476,000 475
IOI Corp., Bhd. 114,000 130
Jaya Tiasa Holdings Bhd. 1,000 5
Johan Holdings Bhd. 124,000 101
Kedah Cement Holdings Bhd. 72,000 112
Kelanamas Industries Bhd. 19,000 32
Kemayan Corp., Bhd. 114,000 133
Kian Joo Can Factory Bhd. 28,000 121
Kuala Lumpur Kepong Bhd. 261,500 648
Land & General Bhd. 204,500 235
Landmarks Bhd. 209,000 245
Leader Universal Holdings Bhd. 279,666 503
MBF Capital Bhd. 456,000 838
Magnum Corp., Bhd. 416,500 627
Malayan Banking Bhd. 474,000 4,977
Malayan Cement Bhd. 71,000 119
Malayan United Industries Bhd. 125,000 91
Malayawata Steel Bhd. 55,000 85
Malaysia International
Shipping Corp., Bhd. (Foreign) 251,333 652
Malaysia Mining Corp., Bhd. 104,400 114
Malaysian Airline System Bhd. 228,000 569
Malaysian Mosaics Bhd. 133,000 180
Malaysian Oxygen Bhd. 90,000 456
Malaysian Pacific Industries Bhd. 155,000 676
Malaysian Resources Corp., Bhd. 307,000 845
Mulpha International Bhd. 277,000 223
- - Mulpha International Bhd.
Rights Exp. 7/18/97 69,250 12
Nestle Malaysia Bhd. 135,000 1,011
New Straits Times Press Bhd. 73,000 428
Oriental Holdings Bhd. 115,000 866
Pan Malaysia Cement Works Bhd. 107,000 127
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Perlis Plantations Bhd. 64,500 $ 189
Perusahaan Otomobil
Nasional Bhd. 108,000 505
Petaling Garden Bhd. 134,000 199
Pilecon Engineering Bhd. 239,000 347
- - Promet Bhd. 314,000 264
Public Bank Bhd. (Foreign) 294,666 460
RHB Capital Bhd. 404,000 1,281
RJ Reynolds Bhd. 211,000 527
Rashid Hussain Bhd. 177,000 1,122
Resorts World Bhd. 434,000 1,307
Rothmans of Pall Mall
Malaysia Bhd. 117,000 1,150
Shell Refining Co. Malaysia Bhd. 164,000 520
Sime Darby Bhd. 1,008,600 3,357
Sungei Way Holdings Bhd. 58,200 110
TA Enterprise Bhd. 476,000 507
Tan Chong Motor Holdings Bhd. 417,000 786
- - Technology Resources
Industries Bhd. 276,000 475
Telekom Malaysia Bhd. 1,254,100 5,863
Tenaga Nasional Bhd. 1,286,000 6,267
Time Engineering Bhd. 280,000 424
UMW Holdings Malaysia Bhd. 82,733 390
United Engineers Malaysia Bhd. 339,000 2,444
YTL Corp., Bhd. 220,000 680
-----------------
52,499
-----------------
NEW ZEALAND (0.8%)
Brierley Investments Ltd. 1,385,200 1,352
Carter Holt Harvey Ltd. 718,359 1,855
Fisher & Paykel Industries Ltd. 300 1
Fletcher Challenge Ltd. Building 184,167 553
Fletcher Challenge Ltd. Energy 162,067 489
Fletcher Challenge Ltd. Forest 313,793 455
Fletcher Challenge Ltd. Paper 226,035 547
Lion Nathan Ltd. 258,700 654
Telecom Corp. of
New Zealand Ltd. 678,800 3,450
-----------------
9,356
-----------------
SINGAPORE (3.2%)
Amcol Holdings Ltd. 366,000 481
Chuan Hup Holdings Ltd. 246,000 177
City Developments Ltd. 351,000 3,437
Comfort Group Ltd. 542,000 428
- - Creative Technology Ltd. 57,850 995
Cycle & Carriage Ltd. 75,000 776
Development Bank of
Singapore Ltd. (Foreign) 193,625 2,438
Fraser & Neave Ltd. 157,000 1,120
Goldtron Ltd. 378,000 214
Hai Sun Hup Group Ltd. 186,000 134
Haw Par Brothers
International Ltd. 211,400 476
Hotel Properties Ltd. 326,000 554
- - IPC Corp., Ltd. 411,000 134
Inchcape Bhd. 123,000 443
Jurong Shipyard Ltd. 68,000 295
- - Keppel Corp. Ltd. 248,000 1,101
- - Keppel Corp. Ltd. Class A 61,750 268
Lum Chang Holdings Ltd. 428,000 341
Metro Holdings Ltd. 42,000 137
Natsteel Ltd. 106,000 270
Neptune Orient Lines Ltd. 604,000 541
Oversea-Chinese
Banking Corp., Ltd. (Foreign) 355,399 3,679
Overseas Union Enterprise Ltd. 56,000 259
Prima Ltd. 108,000 367
Robinson & Co., Ltd. 99,000 516
Shangri-La Hotel Ltd. 154,300 462
Singapore Airlines Ltd. (Foreign) 383,000 3,429
Singapore Press Holdings Ltd.
(Foreign) 92,960 1,872
Singapore Technologies
Industrial Corp. 437,000 1,125
Singapore
Telecommunications Ltd. 2,591,000 4,784
United Industrial Corp., Ltd. 917,000 693
United Overseas Bank Ltd.
(Foreign) 306,350 3,150
Van Der Horst Ltd. 106,000 195
-----------------
35,291
-----------------
- ------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,012,703) 1,107,604
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------
CONVERTIBLE BONDS (0.1%)
- ------------------------------------------------------------------------
<S> <C> <C>
The Bank of Tokyo-Mitsubishi
Cayman Finance Ltd. Cvt.
4.25%, 3/29/49 JPY 40,000 468
Nitto Denko Cvt.
3.90%, 3/30/01 JPY 67,000 992
- ------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(COST $1,222) 1,460
- ------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.9%)
- ------------------------------------------------------------------------
U.S. TREASURY BILL
(2) 5.21%, 7/24/97 $3,000 2,990
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.93%, 7/1/97 7,375 7,375
- ------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $10,365) 10,365
- ------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(COST $1,024,290) 1,119,429
- ------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO (000)
- ------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
- ------------------------------------------------------------------------
<S> <C>
Other Assets--Notes B and G $ 266,608
Liabilities--Note G (266,451)
-----------------
157
- ------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------
Applicable to 98,955,543 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $1,119,586
========================================================================
NET ASSET VALUE PER SHARE $11.31
========================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income Producing Security.
(1)The combined market value of common stocks, convertible bonds, and Nikkei
300 futures contracts represents 99.9% of net assets.
(2)Security segregated as initial margin for open futures contracts.
JPY--Japanese Yen.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,028,075 $10.39
Undistributed Net
Investment Income--Note F 4,110 .04
Accumulated Net Realized
Losses--Note F (7,810) (.08)
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities 95,139 .96
Futures Contracts 218 --
Foreign Currencies and
Forward Currency Contracts (146) --
- ------------------------------------------------------------------------
NET ASSETS $1,119,586 $11.31
========================================================================
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
EMERGING VALUE*
MARKETS PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
COMMON STOCKS (94.8%)
- ------------------------------------------------------------------------
ARGENTINA (3.9%)
<S> <C> <C>
- - Acindar Industria Argentina
de Aceros SA 78,600 $ 201
- - Alpargatas S.A.I.C. 158,600 155
Astra Cia Argentina de
Petroleum SA 366,740 778
Banco Frances Del Rio
de la Plata SA 173,968 1,884
Banco Galicia y Buenos Aires
SA de CV 297,963 1,982
- - Celulosa Argentina SA 623,850 437
Ciadea SA 184,874 795
- - Corp Cementera Argentina SA 26,500 168
Irsa Inversiones y
Representaciones SA 202,600 881
Ledesma SA 129,743 153
Molinos Rio de la Plata SA 33,600 131
Nobleza Piccardo SA 41,924 277
Perez Companc SA 838,249 6,724
- - Pirelli Cables SA 14,596 35
Siderca SA Class A 319,100 827
- - Sociedad Comercial de Plata SA 285,100 930
Telefonica Argentina SA
Class B 2,278,100 7,861
YPF SA Class D 342,824 10,560
-----------------
34,779
-----------------
BRAZIL (17.4%)
Aracruz Celulose SA Pfd.
B Shares 1,207,671 2,446
Banco Bamerindus do
Brasil SA 52,300 583
Banco Bradesco SA 481,139,308 4,604
Banco Bradesco SA Pfd. 465,819,197 4,695
Banco Itau SA Pfd. 12,580,112 7,047
- - Banco do Estado de
Sao Paulo SA Pfd. 144,675,000 3,563
Brasmotor SA Pfd. 1,930,000 430
Centrais Electricas
Brasileiras SA 43,062,201 24,083
Centrais Electricas
Brasileiras SA Pfd.
B Shares 8,261,118 4,927
Ceval SA Pfd. 29,720,000 348
Companhia Brasileira de
Petroleo Ipiranga Pfd. 57,606,000 937
Companhia Cervejaria
Brahma 2,269,265 1,733
Companhia Cervejaria
Brahma Pfd. 4,750,150 3,619
Companhia Cimento
Portland Itau Pfd. 1,895,800 652
Companhia de Tecidos
Norte de Minas Pfd. 1,083,300 423
Companhia Energetica
de Minas Gerais Pfd. 130,987,665 6,754
Companhia Paulista de
Forca e Luz 16,513,100 2,777
Companhia Siderurgica
Belgo-Mineira Pfd. 1,102,000 79
Companhia Siderurgica
Nacional 66,532,400 2,194
Companhia Vale do
Rio Doce Pfd. 381,192 8,432
Companhia Vidreas
Santa Marina 283,968 784
Copene-Petroquimica SA Pfd.
A Shares 981,194 364
Ericsson Telecomunicadoes
SA Pfd. 46,856,400 2,786
Fertilizantes Fosfatados
SA Pfd. 66,300,000 373
Industrias Klabin de
Papel e Celulose SA Pfd. 533,025 520
- - Iochpe-Maxion SA Pfd. 3,540,738 421
- - Lojas Americanas SA 17,700,000 252
- - Lojas Americanas SA Pfd. 48,304,033 655
- - Lojas Arapua SA Pfd. 2,165,000 35
Marcopolo SA Pfd. 439,000 79
- - Metal Leve SA Industria e
Comercio Pfd. 5,773,000 57
Metalurgica Gerdau SA Pfd. 7,675,400 371
- - Paranapanema SA Pfd. 17,416,000 129
Perdigao SA Pfd. 172,760,000 409
Petroleo Brasileiro SA Pfd. 43,859,500 12,184
Pirelli Cabos SA Pfd. 21,000 152
Pirelli Pneus SA Pfd. 130,000 371
Refrigeracao Parana SA Pfd. 88,033,000 140
Sadia Concordia SA Pfd. 121,000 126
Santista Alimentos SA 373,587 798
Souza Cruz SA 321,600 3,391
Telecomunicacoes
Brasileiras SA 35,813,200 4,858
Telecomunicacoes
Brasileiras SA Pfd. 234,477,600 35,572
Unibanco-Uniao de Bancos
Brasileiros SA Pfd. 94,705,000 3,474
Unipar-Uniao de Industrias
Petroquimicas SA Pfd.
B Shares 150,645 71
Usiminas-Usinas Siderurgicas
de Minas Gerais SA Pfd. 246,069 2,741
- - Varig-Viacao Aerea
Rio-Grandense SA Pfd. 151,000 401
Votorantim Celulose e Papel
SA Pfd. 46,180,324 1,394
- - Votorantim Celulose e Papel
SA Pfd. (Ranked for
Dividend Shares) 4,721,507 119
Weg SA Pfd. 86,000 59
White Martins SA 1,302,965 3,813
-----------------
157,225
-----------------
GREECE (1.5%)
Alpha Credit Bank SA 34,666 2,360
- - Aspis Pronoia SA 21,800 180
Athens Medical Center SA 38,550 310
Attica Enterprises SA 39,450 380
Commercial Bank of Greece SA 23,634 979
Elais SA 8,770 255
Epilectos SA 225,110 509
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
EMERGING VALUE*
MARKETS PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Ergo Bank SA 13,123 $ 789
Ergo Bank SA (Ranked for
Dividend Shares) 4,445 267
Fourlis Brothers SA 49,110 501
Hellas Can Packaging SA 8,900 165
Hellenic Bottling Co. SA (Bearer) 45,100 1,669
Hellenic Sugar Industry SA 52,090 326
Heracles General Cement SA 9,600 178
Inform P. Lykos SA 14,200 104
- - Intracom SA 24,640 1,123
Klonatex ICST & TSA SA 1,900 37
Klonatex ICST & TSA SA Pfd. 7,800 91
Michaniki SA 29,000 220
- - National Bank of Greece SA 17,160 2,101
Papastratos Cigarettes SA 2,550 48
Parnassos Enterprises ABE SA 65,900 146
- - Petzetakis SA 64,450 328
Titan Cement Co. SA 16,900 834
-----------------
13,900
-----------------
HONG KONG (14.2%)
Bank of East Asia Ltd. 786,781 3,280
Cathay Pacific Airways Ltd. 1,483,000 3,072
Cheung Kong Holdings Ltd. 1,279,000 12,629
China Light and Power Co., Ltd. 1,437,000 8,143
Chinese Estates Holdings 72,000 68
Dickson Concepts
International Ltd. 252,000 917
Elec & Eltek International
Holdings Ltd. 960,000 282
Giordano International Ltd. 958,000 655
Hang Lung Development
Co., Ltd. 716,000 1,312
Hang Seng Bank Ltd. 1,081,600 15,427
Hong Kong & China Gas
Co., Ltd. 1,494,312 2,990
Hong Kong Aircraft &
Engineering Co., Ltd. 92,400 336
Hong Kong
Telecommunications Ltd. 6,549,400 15,640
Hong Kong and
Shanghai Hotels Ltd. 895,500 1,428
Hopewell Holdings Ltd. 2,767,000 1,750
Hutchison Whampoa Ltd. 2,143,000 18,533
Hysan Development Co., Ltd. 642,000 1,894
Johnson Electric Holdings Ltd. 97,500 291
Kumagai Gumi Hong Kong Ltd. 199,000 207
Miramar Hotel &
Investment Ltd. 230,000 423
New World Development
Co., Ltd. 1,086,000 6,476
Oriental Press Group Ltd. 640,000 262
Peregrine Investment
Holdings Ltd. 167,000 344
South China Morning Post Ltd. 50,000 49
Sun Hung Kai Properties Ltd. 1,321,000 15,900
Swire Pacific Ltd. A Shares 909,500 8,188
Tai Cheung Holdings Ltd. 100,000 79
Television Broadcasts Ltd. 229,000 1,029
Varitronix International Ltd. 52,000 88
Wharf Holdings Ltd. 1,333,000 5,781
Wing Lung Bank Ltd. 173,208 1,105
-----------------
128,578
-----------------
INDONESIA (6.2%)
PT Apac Centertex Corp.
(Foreign) 336,000 111
PT Asahimas Flat Glass
(Foreign) 292,000 159
- - PT Astra International (Foreign) 296,500 1,219
PT Bank Bali (Foreign) 58,725 157
PT Bank Dagang Nasional
Indonesia (Foreign) 4,522,374 3,208
- - PT Bank Dagang Nasional
Indonesia Warrants
Exp. 2/4/00 251,812 161
PT Bank Internasional
Indonesia
(Foreign) 3,405,715 2,906
PT Bank Internasional
Indonesia
(Local) 53,000 46
PT Bank Negara Indonesia
(Foreign) 3,406,000 2,171
PT Barito Pacific Timber
(Foreign) 1,018,500 869
PT Bimantara Citra (Foreign) 790,500 1,382
PT Budi Acid Jaya (Foreign) 517,500 633
PT Citra Marga Nusaphala
Persada (Foreign) 1,336,500 783
- - PT Citra Marga Nusaphala
Persada Rights Exp. 8/6/97 677,500 258
PT Darya Varia Laboratoria
(Foreign) 78,000 94
- - PT Daya Guna Samudera
(Foreign) 192,500 346
PT Duta Anggada Realty
(Foreign) 650,832 629
PT Duta Anggada Realty (Local) 45,500 44
- - PT Fisk Aragung Perkasa
(Foreign) 727,000 1,174
PT Gadjah Tunggal (Foreign) 2,313,500 1,142
- - PT Great River International
(Foreign) 647,000 406
PT Gudang Garam (Foreign) 788,000 3,306
PT Gudang Garam (Local) 9,500 40
PT Indah Kiat Pulp & Paper
Corp. (Foreign) 1,568,192 919
PT Indah Kiat Pulp & Paper
Corp. (Local) 54,500 32
- - PT Indah Kiat Pulp & Paper
Corp. Rights Exp. 8/8/97 1,411,372 247
PT Indofood Sukses Makmur
(Foreign) 1,271,500 2,928
PT Indofood Sukses Makmur
(Local) 605,000 1,393
- - PT Jakarta Internasional Hotels
& Development (Foreign) 1,353,000 1,544
- - PT Japfa Comfeed Indonesia
(Foreign) 605,500 405
PT Kabelmetal Indonesia
(Foreign) 167,000 77
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
PT Kalbe Farma (Foreign) 501,500 $ 670
PT Lippo Bank (Foreign) 1,055,250 1,085
- - PT London Sumatra Indonesia
(Foreign) 109,000 309
PT Matahari Putra Prima
(Foreign) 711,000 1,433
PT Mayora Indah (Foreign) 1,580,440 894
PT Medco Energi Corp. (Local) 60,500 111
PT Modern Photo Film Co.
(Foreign) 87,500 310
PT Mulia Industrindo (Foreign) 1,867,520 979
PT Pakuwon Jati (Foreign) 847,500 444
PT Pakuwon Jati (Local) 439,000 230
PT Polysindo Eka Perkasa
(Foreign) 3,559,000 1,976
PT Semen Gresik (Foreign) 385,500 864
- - PT Sierad Produca (Foreign) 322,500 106
PT Sinar Mas Agro Resources
Agricultural Production and
Technology Corp. (Foreign) 405,000 367
PT Supreme Cable
Manufacturing Corp. (Foreign) 145,500 201
PT Tambang Timah (Foreign) 310,500 482
PT Telekomunikasi Indonesia
(Foreign) 8,811,000 14,404
- - PT Telekomunikasi Indonesia
(Local) 68,000 111
PT Trias Sentosa (Foreign) 1,097,000 553
PT Unilever Indonesia (Foreign) 95,000 1,680
-----------------
55,998
-----------------
ISRAEL (2.3%)
Ackerstein Industries Ltd. 224,957 288
- - Africa-Israel Investments Ltd. 2,570 196
Agis Industries Ltd. 5,250 55
American Israeli Paper Mills Ltd. 3,562 156
Azorim Investment Development
& Construction Ltd. 18,151 205
Bank Hapoalim Ltd. 1,403,954 2,922
Bezeq Israeli
Telecommunication Corp., Ltd. 200,649 507
CLAL Insurance Enterprise
Holdings Ltd. 9,365 91
Cvalim-The Electric Wire and
Cable Co. of Israel Ltd. 73,099 302
Dead Sea Periclase Ltd. 31,547 143
Delek Israel Fuel Corp., Ltd. 8,294 258
ECI Telecom Ltd. 80,400 2,392
Elco Holdings Ltd. 1,411 13
First International Bank of
Israel Ltd. - ILS 1 Par 6,003 869
First International Bank of
Israel Ltd. - ILS 5 Par 1,387 1,069
- - IIS Intelligent Information
Systems Ltd. 52,300 75
IDB Holding Corp., Ltd. 26,190 576
Industrial Buildings Corp. 717,693 1,266
- - The Israel Corp., Ltd. 4,136 234
- - The Israel Land
Development Co., Ltd. 41,800 187
Jerusalem Economic Corp., Ltd. 123,500 608
Koor Industries Ltd. 11,751 1,040
- - Malibu Israel Ltd. 15,376 288
Maman Cargo Terminals &
Handling Ltd. 70,434 142
- - Meir Ezra & Son Co. 18,556 119
Mul-T-Lock Ltd. 25,386 73
- - Ormat Industries Ltd. 133,074 197
Osem Investment Ltd. 137,705 730
- - Packer Plada Ltd. 1,227 31
- - Polgat Ltd. 17,247 47
Property & Building Corp. Ltd. 12,614 1,021
Scitex Corp., Ltd. 71,100 618
Super Sol Ltd. 265,768 853
- - Tempo Beer Industries Ltd. 28,127 129
Teva Pharmaceutical
Industries Ltd. 45,209 2,917
-----------------
20,617
-----------------
MALAYSIA (13.1%)
AMMB Holdings Bhd. 433,600 2,697
Aluminum Co. of Malaysia Bhd. 153,000 205
Amsteel Corp., Bhd. 1,647,600 1,260
Antah Holdings Bhd. 244,000 313
Aokam Perdana Bhd. 241,000 268
Berjaya Group Bhd. 605,000 743
Commerce Asset Holdings Bhd. 626,000 1,649
- - Commerce Asset Holdings Bhd.
Rights Exp. 7/23/97 125,200 7
Edaran Otomobil Nasional Bhd. 234,000 1,993
Ekran Bhd. 155,000 303
- - Ekran Bhd. Rights for Warrants
Exp. 7/1/97 38,750 3
Golden Hope Plantations Bhd. 1,150,000 1,977
Golden Plus Holdings Bhd. 112,000 203
Guinness Anchor Bhd. 153,000 339
Highlands & Lowlands Bhd. 328,000 502
Hong Leong Industries Bhd. 321,200 1,018
Hong Leong Properties Bhd. 999,000 1,136
Hume Industries Malaysia Bhd. 203,000 933
IOI Corp., Bhd. 819,000 935
- - Idris Hydraulic Malaysia Bhd. 214,000 238
Jaya Tiasa Holdings Bhd. 81,000 408
Johan Holdings Bhd. 186,000 152
Kedah Cement Holdings Bhd. 245,000 382
Kelanamas Industries Bhd. 126,000 211
Kemayan Corp., Bhd. 222,000 259
Kuala Lumpur Kepong Bhd. 375,000 929
Land & General Bhd. 652,500 750
Landmarks Bhd. 627,000 735
Leader Universal Holdings Bhd. 589,000 1,059
MBF Capital Bhd. 214,000 393
Magnum Corp., Bhd. 1,634,500 2,461
Malayan Banking Bhd. 1,075,000 11,287
Malayan Cement Bhd. 292,500 489
Malayawata Steel Bhd. 172,000 266
Malaysia International Shipping
Corp., Bhd. (Foreign) 914,000 2,372
Malaysia International Shipping
Corp., Bhd. (Local) 63,000 170
Malaysia Mining Corp., Bhd. 1,050,800 1,149
Malaysian Airline System Bhd. 712,000 1,777
Malaysian Mosaics Bhd. 82,000 111
Malaysian Pacific
Industries Bhd. 99,000 431
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
EMERGING VALUE*
MARKETS PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Malaysian Resources
Corp., Bhd. 614,000 $ 1,691
Metroplex Bhd. 1,037,000 1,076
Mulpha International Bhd. 415,000 334
- - Mulpha International Bhd.
Rights Exp. 7/18/97 103,750 18
Multi-Purpose Holdings Bhd. 451,000 633
Nestle Malaysia Bhd. 281,000 2,104
New Straits Times Press Bhd. 143,000 839
Oriental Holdings Bhd. 218,600 1,646
Palmco Holdings Bhd. 297,000 353
Pan Malaysia Cement Works Bhd. 77,000 92
Perlis Plantations Bhd. 216,250 634
Perusahaan Otomobil Nasional
Bhd. 585,000 2,735
Petaling Garden Bhd. 426,000 631
Pilecon Engineering Bhd. 192,000 278
- - Promet Bhd. 386,000 324
Public Bank Bhd. (Foreign) 321,333 502
RHB Capital Bhd. 839,000 2,659
RJ Reynolds Bhd. 388,000 968
Rashid Hussain Bhd. 394,000 2,498
Resorts World Bhd. 1,144,000 3,445
Rothmans of Pall Mall
Malaysia Bhd. 303,000 2,977
Selangor Properties Bhd. 628,000 602
Shell Refining Co. Malaysia Bhd. 377,000 1,195
Sime Darby Bhd. 2,294,000 7,635
Sungei Way Holdings Bhd. 499,400 942
TA Enterprise Bhd. 583,000 621
Tan Chong Motor Holdings Bhd. 612,000 1,154
- - Technology Resources
Industries Bhd. 862,000 1,482
Telekom Malaysia Bhd. 2,460,000 11,501
Tenaga Nasional Bhd. 2,970,000 14,473
Time Engineering Bhd. 554,000 839
UMW Holdings Malaysia Bhd. 253,000 1,193
United Engineers Malaysia Bhd. 789,000 5,689
YTL Corp., Bhd. 609,500 1,884
-----------------
118,160
-----------------
MEXICO (9.1%)
Alfa SA de CV Series A 615,992 4,208
Apasco SA de CV 295,634 2,120
Cemex SA de CV (CPO) 268,000 1,165
Cemex SA de CV Series A 642,684 2,778
Cemex SA de CV Series B 452,425 2,207
Cifra SA de CV Series B 2,445,600 4,561
Cifra SA de CV Series C 928,000 1,485
- - Consorcio G Grupo Dina SA 481,000 372
Controladora Comercial
Mexicana SA de CV (Units) 134,000 125
Cydsa SA Series A 86,000 231
Desc SA de CV Series B 330,907 2,419
Desc SA de CV Series C 3,309 24
El Puerto de Liverpool SA de
CV Series 1 1,243,950 1,586
El Puerto de Liverpool SA de
CV Series C1 132,697 154
- - Empaques Ponderosa SA
Series B 390,000 319
Empresas ICA Sociedad
Controladora SA de CV 96,100 1,538
- - Empresas la Moderna SA de
CV Series A 495,700 2,639
Fomento Economico Mexicano
SA de CV Series B 250,950 1,494
Grupo Carso SA de CV Series A1 32,000 223
Grupo Continental SA Series CP 332,000 912
- - Grupo Financiero Banamex
Accival SA de CV Series B 829,900 2,134
- - Grupo Financiero Banamex
Accival SA de CV Series L 382,810 907
- - Grupo Financiero Bancomer SA
de CV Series B 3,515,950 1,693
- - Grupo Financiero Probursa SA
de CV Series B 2,212,045 560
- - Grupo Financiero Serfin SA
de CV Series B 1,427,000 457
- - Grupo Financiero Serfin SA
de CV Series L 516,000 523
Grupo Herdez SA Series B 424,000 219
Grupo Industrial Herdez Bimbo
SA de CV Series A 344,882 2,473
Grupo Industrial Maseca SA
de CV Series B 901,000 986
- - Grupo Mexicano Desarrollo SA
Series L 22,000 38
Grupo Mexico SA Series B 650,513 2,451
Grupo Modelo SA de CV
Series C 804,700 5,588
- - Grupo Simec SA de CV
Series B 977,000 177
- - Grupo Situr SA de CV Series B 5,203,000 236
- - Grupo Televisa SA (CPO) 302,800 4,614
Industrias Penoles SA
Series CP 247,599 1,183
Kimberly Clark de Mexico SA
de CV Series A 1,395,045 5,626
Telefonos de Mexico SA
Series A 1,694,000 4,056
Telefonos de Mexico SA
Series L 6,191,050 14,809
Transportacion Maritima
Mexicana SA de CV Series L 42,000 258
- - Tubos de Acero de Mexico SA 86,400 1,588
- - Vitro SA 356,640 1,326
-----------------
82,462
-----------------
PHILIPPINES (2.9%)
Ayala Land, Inc. Class B 2,887,166 2,654
C&P Homes, Inc. 144,078 54
- - DMCI Holdings, Inc. 1,087,800 359
- - Filinvest Land, Inc. 4,005,000 1,002
Guoco Holdings
Philippines, Inc. 3,781,800 445
- - International Container
Terminal Services, Inc. 1,416,237 725
Ionics Circuit, Inc. 968,150 532
- - Kepphil Shipyard Inc. 44,000 2
Manila Electric Co. Class B 267,308 1,318
- - Manila Mining Corp. Class B 693,205,940 342
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Metro Pacific Corp. 3,342,200 $ 722
Metropolitan Bank & Trust Co. 179,777 3,817
- - Mondragon International
Philippines, Inc. 1,461,400 515
Petron Corp. 9,476,654 2,407
- - Philex Mining Corp. Class B 2,136,450 178
Philippine Long Distance
Telephone Co. 92,220 2,989
Philippine Long Distance
Telephone Co. GDR 5.75%
Cvt. Pfd. 13,880 512
- - Philippine National Bank Corp. 152,785 1,037
- - Robinson's Land Co. Class B 410,200 53
SM Prime Holdings, Inc. 10,852,880 3,209
San Miguel Corp. Class B 451,187 1,189
- - Security Bank Corp. 305,335 365
- - Southeast Asia Cement
Holdings Inc. 12,965,000 629
- - Union Bank of the Philippines
Corp. 681,200 639
Universal Robina Corp. 2,370,400 863
-----------------
26,557
-----------------
PORTUGAL (2.3%)
BPI-SGPS SA (Registered) 30,800 600
Banco Comercial Portugues SA
(Registered) 67,200 1,271
Banco Comercial Portugues SA
8.00% Cvt. Pfd. Series A 9,200 630
Banco Espirito Santo e
Comercial de Lisboa SA
(Registered) 96,200 2,183
Banco Totta e Acores SA
(Registered) 45,900 768
Caima-Companhia de Celulose
do Caima SA 11,500 212
Cimpor-Cimento de Portugal SA 97,128 2,266
Cin-Corporacao Industrial do
Norte SA 4,000 220
Corticeira Amorin SA 32,800 325
Efacec-Empresa Fabrilde
Maquinas Electricas SA 38,500 328
Electricidade de Portugal SA 10,000 184
Estabelecimentos Jeronimo
Martins & Fiho Sociedade
Gestora de Participacoes
Sociais SA 5,700 399
Inapa-Investimentos
Participacoes e Gestao SA 7,700 252
- - Lusotur-Sociedade Financeira
de Turismo SA 20,500 329
Mundicenter-Sociedade
Imobiliaria SA 10,800 123
- - Mundicenter-Sociedade
Imobiliaria SA (Ranked for
Dividend Shares) 565 6
Portucel Industrial-Empresa
Productora de Cellulosa SA 106,400 790
Portugal Telecom SA
(Registered) 181,847 7,344
- - Sociedade Construcoes Soares
da Costa SA 66,280 622
Sonae Investimentos-Sociedade
Gestora de Participacoes SA 39,700 1,662
- - Tertir Terminais de Portugal SA 33,800 157
Unicer-Uniao Cervejeira SA 4,700 79
-----------------
20,750
-----------------
SINGAPORE (4.9%)
Chuan Hup Holdings Ltd. 782,000 563
City Developments Ltd. 470,000 4,602
Comfort Group Ltd. 206,000 163
- - Creative Technology Ltd. 13,800 238
Cycle & Carriage Ltd. 149,000 1,542
Development Bank of
Singapore Ltd. (Foreign) 357,000 4,494
First Capital Corp., Ltd. 17,000 44
Fraser & Neave Ltd. 93,600 668
Goldtron Ltd. 117,000 66
Hai Sun Hup Group Ltd. 421,000 303
Hotel Properties Ltd. 448,000 762
IPC Corp., Ltd. 305,000 99
Jurong Shipyard Ltd. 101,000 438
- - Keppel Corp. Ltd. 296,000 1,315
- - Keppel Corp. Ltd. Class A 74,000 321
Lum Chang Holdings Ltd. 592,000 472
Metro Holdings Ltd. 12,000 39
Natsteel Ltd. 140,000 357
Neptune Orient Lines Ltd. 743,000 665
Oversea-Chinese Banking
Corp., Ltd. (Foreign) 387,800 4,014
Parkway Holdings Ltd. 286,000 1,280
Prima Ltd. 160,000 544
Robinson & Co., Ltd. 68,000 354
Shangri-La Hotel Ltd. 80,300 240
Singapore Airlines Ltd. (Foreign) 500,000 4,476
Singapore Press Holdings Ltd.
(Foreign) 122,400 2,466
Singapore Technologies
Industrial Corp. 17,000 44
Singapore
Telecommunications Ltd. 3,464,000 6,396
Straits Trading Co., Ltd. 320,000 698
United Industrial Corp., Ltd. 46,000 35
United Overseas Bank Ltd.
(Foreign) 554,600 5,702
United Overseas Land Ltd. 465,000 631
Van Der Horst Ltd. 11,000 20
-----------------
44,051
-----------------
SOUTH AFRICA (11.5%)
African Oxygen Ltd. 43,300 142
Alpha Ltd. 20,200 348
Amalgamated Banks of
South Africa Ltd. 628,900 4,513
Anglo American Industrial
Corp., Ltd. 83,000 3,642
Anglovaal Industries Ltd. 388,600 1,422
- - Avgold Ltd. 73,375 72
Barlow Ltd. 231,300 2,517
Beatrix Mines Ltd. 19,100 87
De Beers Centenary AG 366,300 13,528
Del Monte Royal Foods Ltd. 557,000 289
Driefontein Consolidated Ltd. 231,200 1,555
Engen Ltd. 184,100 919
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
EMERGING VALUE*
MARKETS PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Evander Gold Mines Ltd. 25,800 $ 111
First National Bank Holdings Ltd. 462,200 3,974
- - Foschini Ltd. 294,545 950
Free State Consolidated
Gold Mines Ltd. 15,700 79
Imperial Holdings Ltd. 191,500 2,723
Investec Bank Ltd. 69,800 2,793
Kloof Gold Mining Co., Ltd. 159,000 950
Liberty Life Assn. of Africa Ltd. 250,023 6,780
- - MIH Holdings Ltd. 288,400 1,081
Metropolitan Life Ltd. 688,700 1,333
Murray & Roberts Holdings Ltd. 448,400 1,053
Nampak Ltd. 577,000 2,506
Nasionale Pers Beperk Ltd.
N Shares 28,000 321
Nedcor Ltd. 224,100 4,966
Palabora Mining Co., Ltd. 25,100 465
Pepkor Ltd. 143,300 837
Pick'n Pay Stores Ltd. 186,400 279
Pick'n Pay Stores Ltd. N Shares 239,600 343
Premier Group Ltd. 462,000 672
Randfontein Estates Gold Mining
Co., Witwatersrand Ltd. 45,700 96
Rembrandt Group Ltd. 512,700 5,471
Reunert Ltd. 64,400 221
Rustenburg Platinum
Holdings Ltd. 148,535 2,718
Safmarine & Rennies
Holdings Ltd. 653,800 1,600
Samancor Ltd. 205,300 2,060
Sappi Ltd. 193,337 1,748
Sasol Ltd. 597,300 7,836
South African Breweries Ltd. 301,300 9,251
South African Iron & Steel
Industrial Corp., Ltd. 2,786,012 1,843
Sun International
South Africa Ltd. 1,339,500 756
Tiger Oats Ltd. 158,200 2,790
Trencor Ltd. 197,405 827
Vaal Reefs Exploration &
Mining Co., Ltd. 23,850 1,152
Western Area Gold Mining Co.,
Ltd. 110,600 744
Western Deep Levels Ltd. 19,500 470
Wooltru Ltd. 176,600 1,005
Wooltru Ltd. N Shares 270,100 1,465
-----------------
103,303
-----------------
THAILAND (3.6%)
- - Advance Agro PLC (Foreign) 173,400 388
- - Advance Agro PLC (Local) 12,000 27
- - Alphatec Electronics PLC (Foreign) 27,000 17
- - Alphatec Electronics PLC (Local) 220,000 138
Asia Credit PLC (Foreign) 53,800 137
Asia Securities Trading PLC
(Foreign) 389,200 473
Asia Securities Trading PLC
(Local) 35,800 44
Ayudhya Insurance PLC (Foreign) 59,200 446
Bangkok Bank PLC (Foreign) 19,800 136
Bangkok Bank PLC (Local) 96,400 480
- - Bangkok Expressway PLC
(Foreign) 407,800 433
- - Bangkok Expressway PLC (Local) 713,400 757
Bangkok Insurance PLC (Foreign) 3,900 63
Bangkok Land PLC (Foreign) 253,100 215
Bank of Ayudhya PLC (Foreign) 626,250 979
Banpu PLC (Foreign) 64,900 947
Berli Jucker PLC (Local) 31,000 96
Big C Supercenter PLC (Local) 151,500 48
CMIC Finance & Securities PLC
(Foreign) 366,000 92
- - Castle Peak Holdings PLC
(Foreign) 130,400 644
Dhana Siam Finance & Securities
PLC (Foreign) 130,100 69
Dusit Thani PLC (Foreign) 15,000 13
Electricity Generating PLC
(Foreign) 336,500 825
First City Investment PLC
(Foreign) 230,600 68
Hana Microelectronics Co.
(Foreign) 59,900 280
ICC International PLC (Foreign) 39,200 132
Industrial Finance Corp. of
Thailand PLC (Foreign) 399,946 509
Industrial Finance Corp. of
Thailand PLC (Local) 5,254 6
- - International Broadcasting
Corp. PLC (Foreign) 521,200 241
International Engineering PLC
(Foreign) 199,200 146
International Engineering PLC
(Local) 325,600 239
Italian-Thai Development PLC
(Foreign) 114,200 258
Italian-Thai Development PLC
(Local) 92,600 209
K.R. Precision PLC (Foreign) 8,000 57
K.R. Precision PLC (Local) 76,400 549
- - Krisda Mahanakorn PLC
(Foreign) 748,100 118
- - Krisda Mahanakorn PLC (Local) 564,600 89
Land & House PLC (Foreign) 39,600 83
Land & House PLC (Local) 2,600 4
Loxley PLC (Foreign) 23,600 42
Loxley PLC (Local) 239,800 426
- - Malee Sampran Factory PLC
(Foreign) 286,200 74
- - NTS Steel Group PLC (Foreign) 1,855,900 179
Nation Multimedia Group PLC
(Foreign) 172,700 367
National Finance & Securities
PLC (Foreign) 256,600 161
National Petrochemical PLC
(Foreign) 240,400 246
Nava Finance & Securities PLC
(Foreign) 296,300 114
PTT Exploration & Production
PLC (Foreign) 319,100 4,632
- - Padaeng Industry PLC (Foreign) 1,451,150 414
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
Phatra Thanakit PLC (Foreign) 195,100 $ 241
Pizza PLC (Foreign) 95,000 488
Pizza PLC (Local) 9,000 46
Premier Enterprise PLC (Foreign) 423,900 213
Regional Container Lines PLC
(Foreign) 48,800 290
Robinson Department Store PLC
(Foreign) 229,800 82
Robinson Department Store PLC
(Local) 75,000 27
Saha Patana Inter-Holding PLC
(Foreign) 203,400 495
Saha-Union PLC (Foreign) 686,600 504
Saha-Union PLC (Local) 75,000 47
- - Sahaviriya Steel Industries PLC
(Foreign) 163,300 28
- - Sahaviriya Steel Industries PLC
(Local) 79,500 14
Sanyo Universal Electric PLC
(Foreign) 38,900 34
Shinawatra Computer &
Communications PLC (Foreign) 178,300 1,232
Shinawatra Computer &
Communications PLC (Local) 37,400 258
Siam Cement PLC (Foreign) 96,281 1,665
Siam Cement PLC (Local) 34,819 519
Siam City Cement PLC (Foreign) 182,480 740
Siam City Cement PLC (Local) 39,800 161
Siam Commercial Bank PLC
(Foreign) 12,400 51
Srithai Superware PLC (Foreign) 49,600 112
- - Sun Tech Group PLC (Foreign) 549,900 160
Tanayong PLC (Foreign) 674,845 286
- - TelecomAsia PLC (Foreign) 1,718,700 2,073
- - TelecomAsia PLC (Local) 711,600 858
- - Thai Engine Manufacturing
PLC (Local) 7,600 49
Thai Farmers Bank PLC (Foreign) 10,900 46
Thai Petrochemical Industry
PLC (Foreign) 1,016,800 618
Thai Petrochemical Industry
PLC (Local) 1,322,000 804
Thairung Union Car PLC
(Foreign) 13,200 48
Thairung Union Car PLC (Local) 127,100 459
Tipco Asphalt PLC (Foreign) 184,200 960
- - Tuntex (Thailand) PLC (Foreign) 62,700 45
- - Tuntex (Thailand) PLC (Local) 137,000 98
- - Unicord PLC (Foreign) 105,600 2
Union Asia Finance PLC
(Foreign) 92,800 41
United Communication Industry
PLC (Foreign) 276,300 1,141
- - Univest Land PLC (Foreign) 2,264,200 131
Wattachak PLC (Foreign) 1,339,600 217
-----------------
32,393
-----------------
TURKEY (1.9%)
Adana Cimento Sanayii AS
A Shares 3,183,834 295
Adana Cimento Sanayii AS
C Shares 6,938,230 74
Akal Tekstil Sanayii AS 1,750,875 88
Altinyildiz Mensucat Ve
Konfeksiyon Fabrikalari AS 1,472,000 181
Arcelik AS 6,070,974 818
Bagfas Bandirma Gubre
Fabrikalari AS 2,161,000 517
Brisa Bridgestone Sabanci
Lastik Sanayi Ve Ticaretas 1,052,000 354
Cukurova Elektrik AS 481,000 858
Doktas Dokumculuk Sanayi Ve
Ticaret AS 911,600 117
- - Eczacibasi Ilac Sanayi Ve
Ticaret AS 3,826,600 204
Ege Biracilik Ve Malt
Sanayii AS 1,792,657 417
Ege Seramik Sanayi de
Ticaret AS 2,166,000 66
Eregli Demir Ve Celik
Fabrikalari AS 5,715,250 953
Goodyear Lastikleri TAS 502,000 183
- - Ihlas Holding AS 3,198,115 307
Kartonsan Karton Sanayi Ve
Ticaret AS 1,768,750 128
Kav Orman Sanayii AS 3,555,000 115
Konya Cimento Sanayii AS 720,000 45
- - Konya Cimento Sanayii AS
Rights Exp. 7/1/97 720,000 18
Migros Turk AS 895,825 634
- - Netas-Northern Elektrik
Telekomunikasyon AS 1,226,000 338
Otosan Otomobil Sanayii AS 2,086,500 1,110
Raks Elektronik Sanayi Ve
Ticaret AS 467,000 93
Sabah Yayincilik AS 20,607,000 184
Sarkuysan Elektrolitik Bakir
Sanayi De Vicaret AS 1,494,000 166
- - Sifas Sentetik Iplik
Fabrikalari AS 1,014,000 22
- - Sifas Sentetik Iplik Fabrikalari AS
Rights Exp. 7/1/97 1,014,000 8
Tat Konserve 7,386,000 547
Tofas-Turk Otomobil Fabrikasi
AS 23,883,075 1,158
Trakya Cam Sanayii AS 12,943,036 567
Turcas Petroculuk AS 2,211,774 56
Turkiye Garanti Bankasi AS 18,585,065 701
Turkiye Is Bankasi AS B Shares 64,000 271
Turkiye Is Bankasi AS C Shares 9,768,900 3,817
Usas Ucak Servisi AS 200,500 473
Vestel Elektronik Sanayi Ve
Ticaret AS 3,343,781 187
Yapi ve Kredi Bankasi AS 26,940,860 617
- - Yapi ve Kredi Bankasi AS
Receipt New Shares 19,666,827 450
-----------------
17,137
-----------------
- ------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $742,299) 855,910
- ------------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
EMERGING VALUE*
MARKETS PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (5.2%)
- ------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.93%, 7/1/97
(COST $46,489) $46,489 $ 46,489
- ------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(COST $788,788) 902,399
- ------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
- ------------------------------------------------------------------------
Other Assets--Note B 11,356
Liabilities (11,044)
-----------------
312
- ------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------
Applicable to 65,581,546 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $902,711
========================================================================
NET ASSET VALUE PER SHARE $13.76
========================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income Producing Security.
ILS--Israeli Shekel.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $794,480 $12.11
Undistributed Net
Investment Income--Note F 7,658 .12
Accumulated Net
Realized Losses--Note F (13,021) (.20)
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities 113,611 1.73
Foreign Currencies (17) --
- ------------------------------------------------------------------------
NET ASSETS $902,711 $13.76
========================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MARKET
VALUE*
TOTAL INTERNATIONAL PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES (100.0%)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vanguard International Equity Index Fund-European Portfolio 20,031,901 $380,807
Vanguard International Equity Index Fund-Pacific Portfolio 24,658,304 278,885
Vanguard International Equity Index Fund-Emerging Markets Portfolio 7,785,411 107,127
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $687,667) 766,819
- ------------------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.2%)
- ------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a Pooled Cash Account
5.93%, 7/1/97
(COST $1,614) $1,614 1,614
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(COST $689,281) 768,433
- ------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- ------------------------------------------------------------------------------------------------------
Other Assets 3,846
Liabilities (5,279)
------------
(1,433)
- ------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------
Applicable to 67,674,226 shares of beneficial interest
(unlimited authorization--no par value) $767,000
======================================================================================================
NET ASSET VALUE PER SHARE $11.33
======================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $687,423 $10.15
Overdistributed Net Investment Income (112) --
Accumulated Net Realized Gains 537 .01
Unrealized Appreciation--Note E 79,152 1.17
- ------------------------------------------------------------------------------------------------------
NET ASSETS $767,000 $11.33
======================================================================================================
</TABLE>
29
<PAGE> 32
STATEMENT OF OPERATIONS
This Statement shows dividend and interest income earned by each Portfolio
during the reporting period, and details the operating expenses charged to the
Portfolio. These expenses directly reduce the amount of investment income
available to pay to shareholders as dividends. The Total International
Portfolio's Income Distributions Received from the other Portfolios' net income
have been reduced by its share of the other Portfolios' expenses.
This Statement also shows any Net Gain (Loss) realized on the sale of
investments, and the increase or decrease in the Unrealized Appreciation
(Depreciation) on investments during the period-- these amounts include the
effect of foreign currency movements on the value of a Portfolio's securities.
Currency gains (losses) on the translation of other assets and liabilities,
combined with the results of any investments in forward currency contracts
during the period, are shown separately. If a Portfolio invested in futures
contracts during the period, the results of these investments are also shown
separately. The Total International Portfolio's Capital Gain Distributions
Received from the other Portfolios' realized net gains are shown separately
from the Net Gain (Loss) realized on the sale of investments in the other
Portfolios.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
EMERGING
EUROPEAN PACIFIC MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------
SIX MONTHS ENDED JUNE 30, 1997
----------------------------------------
(000) (000) (000)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends* $ 28,791 $ 6,324 $ 9,975
Interest 1,470 649 1,122
----------------------------------------
Total Income 30,261 6,973 11,097
----------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 12 12 12
Management and Administrative 2,003 1,180 1,063
Marketing and Distribution 226 161 116
Taxes (other than income taxes) 66 36 64
Custodian Fees 404 254 966
Auditing Fees 5 4 4
Shareholders' Reports 25 20 16
Annual Meeting and Proxy Costs 1 1 1
Directors' Fees and Expenses 2 1 1
----------------------------------------
Total Expenses 2,744 1,669 2,243
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 27,517 5,304 8,854
- ----------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 1,865 (4,437) (12,222)
Futures Contracts 6,298 218 --
Foreign Currencies and Forward Currency Contracts (2,049) (178) (78)
REALIZED NET GAIN (LOSS) 6,114 (4,397) (12,300)
- ----------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 225,120 79,162 87,171
Futures Contracts 163 548 --
Foreign Currencies and Forward Currency Contracts (350) 97 (17)
- ----------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 224,933 79,807 87,154
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $258,564 $80,714 $83,708
====================================================================================================
</TABLE>
*Dividends are net of foreign withholding taxes of $4,092,000, $784,000, and
$982,000, respectively.
30
<PAGE> 33
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
TOTAL INTERNATIONAL
PORTFOLIO
--------------------
SIX MONTHS ENDED
JUNE 30, 1997
--------------------
(000)
- --------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Income Distributions Received --
Interest $ 44
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME--Note C 44
- --------------------------------------------------------------------------------------
REALIZED NET GAIN
Capital Gain Distributions Received 546
Investment Securities Sold --
- --------------------------------------------------------------------------------------
REALIZED NET GAIN 546
- --------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT SECURITIES 80,545
- --------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $81,135
======================================================================================
</TABLE>
31
<PAGE> 34
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information that is detailed in the Statement of Operations. The amounts shown
as Distributions to shareholders from the Portfolio's net income and capital
gains may not match the amounts shown in the Operations section, because
distributions are determined on a tax basis and may be made in a period
different from the one in which the income was earned or the gains were
realized on the financial statements. The Capital Share Transactions section
shows the amount shareholders invested in the Portfolio, either by purchasing
shares or by reinvesting distributions, as well as the amounts redeemed. The
corresponding numbers of Shares Issued and Redeemed are shown at the end of the
Statement.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
EUROPEAN PACIFIC
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1997 DEC. 31, 1996 JUN. 30, 1997 DEC. 31, 1996
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 27,517 $ 31,390 $ 5,304 $ 8,602
Realized Net Gain (Loss) 6,114 9,085 (4,397) (1,625)
Change in Unrealized Appreciation (Depreciation) 224,933 213,795 79,807 (94,228)
----------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 258,564 254,270 80,714 (87,251)
----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (33,504) -- (8,273)
Realized Capital Gain (3,114) (5,470) -- --
----------------------------------------------------------------
Total Distributions (3,114) (38,974) -- (8,273)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 482,304 511,774 262,262 474,705
Issued in Lieu of Cash Distributions 2,922 34,983 -- 7,164
Redeemed (253,611) (184,595) (200,896) (239,553)
----------------------------------------------------------------
Net Increase from Capital
Share Transactions 231,615 362,162 61,366 242,316
- ----------------------------------------------------------------------------------------------------------------------
Total Increase 487,065 577,458 142,080 146,792
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,594,734 1,017,276 977,506 830,714
----------------------------------------------------------------
End of Period $2,081,799 $1,594,734 $1,119,586 $977,506
=======================================================================================================================
(1)Shares Issued (Redeemed)
Issued 28,050 33,822 26,498 41,039
Issued in Lieu of Cash Distributions 173 2,156 -- 684
Redeemed (14,949) (12,290) (20,580) (20,943)
----------------------------------------------------------------
Net Increase in Shares Outstanding 13,274 23,688 5,918 20,780
=======================================================================================================================
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS TOTAL INTERNATIONAL
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED APR. 29* TO
JUN. 30, 1997 DEC. 31, 1996 JUN. 30, 1997 DEC. 31, 1996
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 8,854 $ 8,064 $ 44 $ 4,158
Realized Net Gain (Loss) (12,300) 349 546 396
Change in Unrealized Appreciation (Depreciation) 87,154 35,034 80,545 (1,393)
----------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 83,708 43,447 81,135 3,161
DISTRIBUTIONS
Net Investment Income -- (8,487) -- (4,314)
Realized Capital Gain -- -- -- (405)
----------------------------------------------------------------
Total Distributions -- (8,487) -- (4,719)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 279,611 406,671 445,290 293,013
Issued in Lieu of Cash Distributions -- 7,541 -- 4,311
Redeemed (97,729) (46,342) (39,783) (15,515)
----------------------------------------------------------------
Net Increase from Capital
Share Transactions 181,882 367,870 405,507 281,809
- ----------------------------------------------------------------------------------------------------------------------
Total Increase 265,590 402,830 486,642 280,251
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period--Note C 637,121 234,291 280,358 107
----------------------------------------------------------------
End of Period $902,711 $637,121 $767,000 $280,358
=======================================================================================================================
(1)Shares Issued (Redeemed)
Issued 21,173 33,380 43,915 28,748
Issued in Lieu of Cash Distributions -- 619 -- 429
Redeemed (7,475) (3,916) (3,894) (1,534)
----------------------------------------------------------------
Net Increase in Shares Outstanding 13,698 30,083 40,021 27,643
=======================================================================================================================
</TABLE>
*Commencement of operations.
33
<PAGE> 36
FINANCIAL HIGHLIGHTS
This table summarizes each Portfolio's investment results and distributions to
shareholders on a per-share basis; investment results for the Total
International Portfolio include both income and capital gain distributions
received from the other Portfolios. The table also presents the Portfolio's
Total Return and shows net investment income and expenses as percentages of
average net assets. These data will help you assess: the variability of the
Portfolio's net income and total returns from year to year; the relative
contributions of net income and capital gains to the Portfolio's total return;
how much it costs to operate the Portfolio; and the extent to which the
Portfolio tends to distribute capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in
the Portfolio for one year. Finally, the table lists the Portfolio's Average
Commission Rate Paid, a disclosure required by the SEC beginning in 1996. This
rate is calculated by dividing total commissions paid on portfolio securities
by the total number of shares purchased and sold on which commissions were
charged. The Total International Portfolio does not report an Average
Commission Rate Paid because it pays no commissions on transactions in shares
of the other Portfolios.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.57 $14.02 $11.76 $11.88 $ 9.33 $9.92
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .25 .34 .32 .28 .17 .25
Net Realized and Unrealized Gain (Loss)
on Investments 2.22 2.63 2.30 (.06) 2.55 (.58)
-------------------------------------------------------------------------
Total from Investment Operations 2.47 2.97 2.62 .22 2.72 (.33)
-------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.36) (.32) (.28) (.17) (.26)
Distributions from Realized Capital Gains (.03) (.06) (.04) (.06) -- --
-------------------------------------------------------------------------
Total Distributions (.03) (.42) (.36) (.34) (.17) (.26)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.01 $16.57 $14.02 $11.76 $11.88 $9.33
=========================================================================================================================
TOTAL RETURN* 14.93% 21.26% 22.28% 1.88% 29.13% -3.32%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $2,082 $1,595 $1,017 $715 $601 $256
Ratio of Total Expenses to
Average Net Assets 0.30%** 0.35% 0.35% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to
Average Net Assets 3.05%** 2.45% 2.66% 2.41% 2.05% 3.05%
Portfolio Turnover Rate 2%** 4% 2% 6% 4% 1%
Average Commission Rate Paid $.0410 $.0395 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the 1% transaction fee on purchases or
the annual account maintenance fee of $10.
**Annualized.
34
<PAGE> 37
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PACIFIC PORTFOLIO
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.51 $11.50 $11.31 $10.13 $ 7.56 $9.42
INVESTMENT OPERATIONS
Net Investment Income .05 .10 .10 .08 .06 .05
Net Realized and Unrealized Gain (Loss)
on Investments .75 (1.00) .21 1.24 2.62 (1.76)
-------------------------------------------------------------------------
Total from Investment Operations .80 (.90) .31 1.32 2.68 (1.71)
-------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.09) (.12) (.08) (.06) (.05)
Distributions from Realized Capital Gains -- -- -- (.06) (.05) (.10)
-------------------------------------------------------------------------
Total Distributions -- (.09) (.12) (.14) (.11) (.15)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.31 $10.51 $11.50 $11.31 $10.13 $7.56
=========================================================================================================================
TOTAL RETURN* 7.61% -7.82% 2.75% 13.04% 35.46% -18.17%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,120 $978 $831 $697 $493 $207
Ratio of Total Expenses to
Average Net Assets 0.34%** 0.35% 0.35% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to
Average Net Assets 1.09%** 0.89% 0.97% 0.71% 0.75% 0.92%
Portfolio Turnover Rate 9%** 9% 1% 4% 7% 3%
Average Commission Rate Paid $.0133 $.0156 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the transaction fee on purchases (0.5%
in 1997, 1.0% in 1992 through 1996) or the annual account maintenance fee of
$10.
**Annualized.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
YEAR ENDED
DECEMBER 31, MAY 4* TO
SIX MONTHS ENDED ---------------------------------------
FOR A SHARE OUTSTANDINGTHROUGHOUT EACH PERIOD JUNE 30, 1997 1996 1995 DEC. 31, 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.28 $10.75 $10.87 $10.00
INVESTMENT OPERATIONS
Net Investment Income .14 .18 .15 .06
Net Realized and Unrealized Gain (Loss) on Investments 1.34 1.52 (.09) .92
-------------------------------------------------------
Total from Investment Operations 1.48 1.70 .06 .98
-------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.17) (.18) (.07)
Distributions from Realized Capital Gains -- -- -- (.04)
-------------------------------------------------------
Total Distributions -- (.17) (.18) (.11)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.76 $12.28 $10.75 $10.87
=========================================================================================================================
TOTAL RETURN** 12.05% 15.83% 0.56% 9.81%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $903 $637 $234 $83
Ratio of Total Expenses to Average Net Assets 0.57%+ 0.60% 0.60% 0.60%+
Ratio of Net Investment Income to Average Net Assets 2.23%+ 1.69% 2.00% 1.32%+
Portfolio Turnover Rate 8%+ 1% 3% 6%
Average Commission Rate Paid $.0004 $.0004 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
**Total return figures do not reflect the transaction fee on purchases (1.5%
in 1997, 2.0% in 1994 through 1996), the 1% transaction fee on redemptions,
or the annual account maintenance fee of $10.
+ Annualized.
35
<PAGE> 38
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL PORTFOLIO
SIX MONTHS
ENDED APR. 29* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUN. 30, 1997 DEC. 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.14 $10.26
- ----------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Income Distributions Received -- .150
Capital Gain Distributions Received .01 .015
-----------------------------
Total Distributions Received .01 .165
Net Realized and Unrealized Gain (Loss) on Investments 1.18 (.110)
-----------------------------
Total from Investment Operations 1.19 .055
-----------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.160)
Distributions from Realized Capital Gains -- (.015)
-----------------------------
Total Distributions -- (.175)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.33 $10.14
==============================================================================================
TOTAL RETURN** 11.74% 0.55%
==============================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $767 $280
Ratio of Expenses to Average Net Assets--Note C 0% 0%
Ratio of Net Investment Income to Average Net Assets 0.02%+ 1.51%+
Portfolio Turnover Rate 0%+ 0%
Average Commission Rate Paid N/A N/A
- ----------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
**Total return figures do not reflect the transaction fee on purchases
(0.75% in 1997, 1.0% in 1996) or the annual account maintenance fee of $10.
+Annualized.
36
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS
Vanguard International Equity Index Fund and Vanguard Total International
Portfolio are registered under the Investment Company Act of 1940 as open-end
investment companies, or mutual funds. Vanguard International Equity Index Fund
consists of the European, Pacific, and Emerging Markets Portfolios, each of
which seeks to match the performance of a distinct international market index
by investing in common stocks. The Total International Portfolio, one of six
independent Portfolios of Vanguard STAR Fund, seeks to match the performance of
its target index by investing in the European, Pacific, and Emerging Markets
Portfolios. The Portfolios' direct and indirect investments in foreign
securities involve investment risks not normally associated with investing in
securities of United States corporations.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The Portfolios consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: European, Pacific, and Emerging Markets Portfolios:
Foreign securities listed on an exchange are valued at the latest quoted sales
prices on the appropriate exchange as of the close of trading on the New York
Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date.
Securities not listed on an exchange are valued at the latest quoted bid
prices. Bonds, and temporary cash investments acquired over 60 days to
maturity, are valued using the latest bid prices or using valuations based on a
matrix system (which considers such factors as security prices, yields,
maturities, and ratings), both as furnished by an independent pricing service.
Other temporary cash investments are valued at cost, which approximates market
value.
Total International Portfolio: Investments are valued at the net asset
value of each Vanguard Portfolio determined as of the close of the New York
Stock Exchange on the valuation date. Temporary cash investments are valued at
cost, which approximates market value.
2. FOREIGN CURRENCY: Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the bid
prices of those currencies against U.S. dollars last quoted by major banks as
of 5:00 p.m. Geneva time on the valuation date.
Realized gains (losses) and unrealized appreciation (depreciation) on
investment securities include the effects of changes in exchange rates since
the securities were purchased, combined with the effects of changes in security
prices. Fluctuations in the value of other assets and liabilities resulting
from changes in exchange rates are recorded as unrealized foreign currency
gains (losses) until the asset or liability is settled in cash, when they are
recorded as realized foreign currency gains (losses).
3. FUTURES AND FORWARD CURRENCY CONTRACTS: The European and Pacific
Portfolios use Eurotop and Nikkei 300 Index futures contracts, respectively, to
a limited extent, with the objectives of maintaining full exposure to the stock
market, enhancing returns, maintaining liquidity, and minimizing transaction
costs. The Portfolios may purchase futures contracts to immediately invest
incoming cash in the market, or sell futures in response to cash outflows,
thereby simulating a fully invested position in the underlying index while
maintaining a cash balance for liquidity. The Portfolios may seek to enhance
returns by using futures contracts instead of the underlying securities when
futures are believed to be priced more attractively than the underlying
securities. The primary risks associated with the use of futures contracts are
imperfect correlation between changes in market values of stocks held by the
Portfolios and the prices of futures contracts, and the possibility of an
illiquid market.
The European and Pacific Portfolios enter into forward currency contracts
to maintain the same currency exposure as their respective indexes. The
Portfolios' risks in using these contracts include movement in the values of
the foreign currencies relative to the U.S. dollar and the ability of the
counterparties to fulfill their obligations under the contracts.
Futures and forward currency contracts are valued at their quoted daily
settlement prices. The aggregate principal amounts of the contracts are not
recorded in the financial statements. Fluctuations in the value of the
contracts are recorded in the Statement of Net Assets as an asset (liability)
37
<PAGE> 40
and in the Statement of Operations as unrealized appreciation (depreciation)
until the contracts are closed, when they are recorded as realized gains
(losses) on futures or forward currency contracts.
4. FEDERAL INCOME TAXES: Each Portfolio intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
5. REPURCHASE AGREEMENTS: Each Portfolio, along with members of The
Vanguard Group, transfers uninvested cash balances to a Pooled Cash Account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
6. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date.
7. OTHER: Dividend income is recorded on the ex-dividend date. Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold.
B. The Vanguard Group furnishes to the European, Pacific, and Emerging Markets
Portfolios at cost investment advisory, corporate management, administrative,
marketing, and distribution services. The costs of such services are allocated
to the Portfolios under methods approved by the board of directors. At June 30,
1997, the Portfolios had contributed capital aggregating $297,000 to Vanguard
(included in Other Assets), representing 1.5% of Vanguard's capitalization. The
Portfolios' directors and officers are also directors and officers of Vanguard.
C. Under a special service agreement, The Vanguard Group furnishes corporate
management, administrative, marketing, and distribution services to the Total
International Portfolio. The special service agreement provides that Vanguard
will reimburse the Portfolio's expenses to the extent of savings in
administrative and marketing costs realized by Vanguard in the operation of the
Portfolio. Accordingly, all expenses incurred by the Portfolio during the six
months ended June 30, 1997, were reimbursed by Vanguard. The Portfolio's
trustees and officers are also directors and officers of Vanguard.
The Total International Portfolio's operations prior to April 29, 1996,
were limited to the issuance of 10,443 shares to a private account of a trustee
and officer of the Portfolio in exchange for shares of the European, Pacific,
and Emerging Markets Portfolios.
D. During the six months ended June 30, 1997, purchases and sales of
investment securities other than temporary cash investments were:
<TABLE>
<CAPTION>
------------------------------------------------------------------
(000)
------------------------
PORTFOLIO PURCHASES SALES
------------------------------------------------------------------
<S> <C> <C>
European $272,522 $19,437
Pacific 113,025 44,373
Emerging Markets 206,820 29,022
Total International 406,302 449
------------------------------------------------------------------
</TABLE>
38
<PAGE> 41
E. At June 30, 1997, net unrealized appreciation of investment securities for
federal income tax purposes was:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
(000)
---------------------------------------------
APPRECIATED DEPRECIATED NET UNREALIZED
PORTFOLIO SECURITIES SECURITIES APPRECIATION
-----------------------------------------------------------------------
<S> <C> <C> <C>
European $670,758 $ (27,177) $643,581
Pacific 201,407 (106,268) 95,139
Emerging Markets 180,811 (68,061) 112,750
Total International 79,152 -- 79,152
-----------------------------------------------------------------------
</TABLE>
At June 30, 1997, the aggregate settlement value of open futures contracts
expiring in September 1997 and the related unrealized appreciation were:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
(000)
--------------------------------------------
AGGREGATE
NUMBER OF SETTLEMENT UNREALIZED
PORTFOLIO/FUTURES CONTRACTS LONG CONTRACTS VALUE APPRECIATION
--------------------------------------------------------------------------
<S> <C> <C> <C>
European/
Eurotop 153 $32,352 $729
Pacific/
Nikkei 300 377 9,923 218
--------------------------------------------------------------------------
</TABLE>
At June 30, 1997, the European and Pacific Portfolios had open forward
currency contracts to receive foreign currency in exchange for U.S. dollars as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(000)
-------------------------------------------------------------
CONTRACT AMOUNT
----------------------
PORTFOLIO/ FOREIGN U.S. MARKET VALUE IN UNREALIZED
CONTRACT SETTLEMENT DATE CURRENCY DOLLARS U.S. DOLLARS DEPRECIATION
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European/
Receive:
9/24/97 ECU 27,828 $31,623 $31,493 $(130)
Pacific/
Receive:
9/18/97 JPY 1,105,912 9,915 9,773 (142)
- ----------------------------------------------------------------------------------------
</TABLE>
ECU--European Currency Unit.
JPY--Japanese Yen.
The European, Pacific, and Emerging Markets Portfolios had net unrealized
foreign currency losses of $116,000, $4,000, and $17,000, respectively,
resulting from the translation of other assets and liabilities at June 30,
1997.
39
<PAGE> 42
F. Distributions are determined on a tax basis and may differ from net
investment income and realized capital gains for financial reporting purposes.
During the six months ended June 30, 1997, the European, Pacific, and
Emerging Markets Portfolios realized net foreign currency losses of $77,000,
$800,000, and $78,000, respectively, which decreased distributable net income
for tax purposes; accordingly such losses have been reclassified from
accumulated net realized gains (losses) to undistributed net investment income.
The amount reclassified by the Pacific Portfolio includes $982,000 of realized
losses on the sale of foreign bonds which are treated as foreign currency
losses for tax purposes.
Certain of the Emerging Markets Portfolio's investments are in securities
considered to be "passive foreign investment companies," for which any
unrealized appreciation and/or realized gains are required to be included in
distributable net investment income for tax purposes. The cumulative total of
Emerging Markets Portfolio distributions related to passive foreign investment
company holdings at June 30, 1997, was $861,000. During the six months ended
June 30, 1997, the Portfolio realized gains on the sale of passive foreign
investment companies of $31,000, which were included in prior years'
distributable net income for tax purposes; accordingly such gains have been
reclassified from accumulated net realized losses to undistributed net
investment income.
For federal income tax purposes at December 31, 1996, the Pacific and
Emerging Markets Portfolios had the following capital losses available to
offset future capital gains:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
CAPITAL LOSS
-------------------------
EXPIRATION
FISCAL
YEAR(S)
AMOUNT ENDING
PORTFOLIO (000) DECEMBER 31
-------------------------------------------------------------------
<S> <C> <C>
Pacific $4,520 2003-2005
Emerging Markets 762 2003-2004
-------------------------------------------------------------------
</TABLE>
G. The market value of securities on loan to broker/dealers at June 30, 1997,
and collateral received with respect to such loans were:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
(000)
---------------------------
MARKET VALUE CASH
OF LOANED COLLATERAL
PORTFOLIO SECURITIES RECEIVED
-------------------------------------------------------------------
<S> <C> <C>
European $410,814 $442,034
Pacific 246,891 261,933
-------------------------------------------------------------------
</TABLE>
40
<PAGE> 43
DIRECTORS, TRUSTEES, AND OFFICERS
JOHN C. BOGLE, Chairman of the Board and Director of The Vanguard Group, Inc.
and of each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN, President, Chief Executive Officer, and Director of The
Vanguard Group, Inc. and of each of the investment companies in The
Vanguard Group.
ROBERT E. CAWTHORN, Chairman Emeritus and Director of Rhone-Poulenc Rorer,
Inc.; Managing Director of Global Health Care Partners/DLJ Merchant
Banking Partners; Director of Sun Company, Inc. and Westinghouse
Electric Corp.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea Co.,
Ikon Business Solutions, Inc., Raytheon Co., Knight-Ridder, Inc., and
Massa-chusetts Mutual Life Insurance Co.; Trustee Emerita of Wellesley
College.
BRUCE K. MACLAURY, President Emeritus of The Brookings Institution; Director of
American Express Bank Ltd., The St. Paul Companies, Inc., and National
Steel Corp.
BURTON G. MALKIEL, Chemical Bank Chairman's Professor of Economics, Princeton
University; Director of Prudential Insurance Co. of America, Amdahl
Corp., Baker Fentress & Co., The Jeffrey Co., and Southern New England
Communications Co.
ALFRED M. RANKIN, JR., Chairman, President, and Chief Executive Officer of
NACCO Industries, Inc.; Director of NACCO Industries, The BFGoodrich
Co., and The Standard Products Co.
JOHN C. SAWHILL, President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co.
and President of New York University; Director of Pacific Gas and
Electric Co., Procter & Gamble Co., and NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco Brands, Inc.; retired Vice
Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc.
and Kmart Corp.
J. LAWRENCE WILSON, Chairman and Chief Executive Officer of Rohm & Haas Co.;
Director of Cummins Engine Co.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment companies
in The Vanguard Group.
RICHARD F. HYLAND, Treasurer; Principal of The Vanguard Group, Inc.; Treasurer
of each of the investment companies in The Vanguard Group.
KAREN E. WEST, Controller; Principal of The Vanguard Group, Inc.; Controller of
each of the investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
ROBERT A. DISTEFANO, Senior Vice President, Information Technology.
JAMES H. GATELY, Senior Vice President,
Individual Investor Group.
IAN A. MACKINNON, Senior Vice President,
Fixed Income Group.
F. WILLIAM MCNABB III, Senior Vice President, Institutional Investor Group.
RALPH K. PACKARD, Senior Vice President and
Chief Financial Officer.
[THE VANGUARD GROUP LOGO]
Please send your comments to us at:
Post Office Box 2600, Valley Forge, Pennsylvania 19482
Fund Information: 1-800-662-7447
Individual Account Services: 1-800-662-2739
Institutional Investor Services: 1-800-523-1036
http://www.vanguard.com [email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before investing or sending money. Prospectuses
may be obtained directly from The Vanguard Group.
(C) 1997 Vanguard Marketing Corporation, Distributor
<PAGE> 44
[PHOTO]
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard/Windsor Fund
Vanguard/Windsor II
Vanguard Equity Income Fund
Vanguard Growth and Income Portfolio
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BALANCED FUNDS
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GROWTH FUNDS
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INTERNATIONAL FUNDS
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INDEX FUNDS
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FIXED-INCOME FUNDS
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(CA, FL, NJ, NY, OH, PA)
Q722-6/97
