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VANGUARD INTERNATIONAL
EQUITY INDEX FUND
- ----------------------
VANGUARD TOTAL
INTERNATIONAL PORTFOLIO
Annual Report - December 31, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
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OUR CREW MAKES THE DIFFERENCE
Throughout our history, The Vanguard Group has received considerable attention
as the low-cost provider of mutual funds. While such accolades are gratifying,
we are most proud, not of our low operating expenses or the billions of dollars
we manage, but of our sterling reputation created by the Vanguard crew.
We recognize that it is our crew members--more than 6,000 highly
motivated men and women--who form the cornerstone of our operations. As with
any cornerstone, we could not survive long--let alone prosper--without it.
That's why we chose this fiscal year's annual report to celebrate the spirit,
enthusiasm, and achievements of our crew. (We call those who work at Vanguard
crew members, not employees, because they operate as a team to accomplish our
mission of serving you, our clients.)
But while we prize the collective contributions of our crew, we also
take time to recognize the importance of the individual. Each calendar quarter,
we present our Award For Excellence to a handful of crew members who have
demonstrated particular excellence in the performance of their jobs and who
embody "The Vanguard Spirit." Our report cover shows only a few of the more
than 300 crew members who have received this distinction since 1984.
They, along with the rest of our valiant crew, look forward to serving
you in the years ahead.
[PHOTO] [PHOTO]
John C. Bogle John J. Brennan
Chairman of the Board President
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CONTENTS
<S> <C>
A MESSAGE TO OUR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . 1
THE MARKETS IN PERSPECTIVE . . . . . . . . . . . . . . . . . . . . 7
PERFORMANCE SUMMARIES . . . . . . . . . . . . . . . . . . . . . . . 9
PORTFOLIO PROFILES . . . . . . . . . . . . . . . . . . . . . . . . 13
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 18
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . 51
</TABLE>
All comparative mutual fund data are from Lipper Analytical Services, Inc., or
Morningstar unless otherwise noted.
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FELLOW SHAREHOLDER,
International stock markets seemed worlds apart during 1997. European
stocks generally surged, while Asia's markets took a nasty tumble--especially
in U.S. dollar terms--as investors lost confidence in the region's currencies
and economies. This hemispheric split also was evident in emerging markets, as
Asian nations suffered severe declines that more than offset big gains in Latin
America. Taken together, the gains and losses from non-U.S. markets virtually
offset one another, and Morgan Stanley Capital International's Total
International Index produced a negative return of -0.8% for U.S. investors.
Naturally, these market conditions were reflected in the returns of
Vanguard Total International Portfolio and the three Portfolios of Vanguard
International Equity Index Fund, as each closely tracked its target index in
1997. The table at right presents the twelve-month total return (capital change
plus reinvested dividends) of each Portfolio, the average mutual fund in its
category, and the unmanaged target index.
Per-share figures for each Portfolio, including its net asset value, the
dividends paid from net investment income, and any distributions of net
realized capital gains, are presented in the table that follows this letter.
<TABLE>
<CAPTION>
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TOTAL RETURNS
YEAR ENDED
DECEMBER 31, 1997
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<S> <C>
VANGUARD EUROPEAN PORTFOLIO +24.2%
Average European Fund +15.8
MSCI Europe Index +23.7
- ----------------------------------------------------------
VANGUARD PACIFIC PORTFOLIO -25.7%
Average Pacific Fund -27.6
MSCI Pacific Free Index -25.7
- ----------------------------------------------------------
VANGUARD EMERGING MARKETS PORTFOLIO -16.8%
Average Emerging Markets Fund - 2.4
MSCI Select Emerging Markets
Free Index -16.4
- ----------------------------------------------------------
VANGUARD TOTAL INTERNATIONAL PORTFOLIO - 0.8%
Average International Fund + 5.1
MSCI Total International Index - 0.8
- ----------------------------------------------------------
</TABLE>
THE FINANCIAL MARKETS IN 1997
The U.S. and European stock markets continued their powerful advances during
1997, and stocks rose sharply in nearly every Latin American market. In stark
contrast, nearly every Asian stock market was rocked by the actual and
anticipated impacts of a currency crisis that first hit in Southeast Asia and
spread to South Korea. The dollar's rise in value against other currencies
reduced returns to U.S. investors pretty much across the board, and the overall
impact was huge: It converted a +21.2% overall gain on non-U.S. stock markets
in local-currency terms to a decline of -0.8% for U.S. investors. A strong
dollar is not an unmixed blessing!
The table on page 2 depicts the strong dollar's impact. It presents the
total returns (weighted by market capitalization) earned on various
international stock indexes in local currencies, the reduction in returns due
to the dollar's rise, and the net total return received by U.S. investors.
As the table shows, the average return earned in local currencies was a
strong +21.2%. Yet those gains were, on the whole, erased by the dollar's
gains. Europe's powerful advance of +38.4% in local currencies was cut by more
than one-third. And the dollar's gains versus Asian currencies turned a bad
year into a horrendous one for U.S. investors in Pacific region stocks, which
are dominated by Japan. Emerging markets as a group posted a nifty
1
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<TABLE>
<CAPTION>
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TOTAL RETURNS
YEAR ENDED
DECEMBER 31, 1997
--------------------------------------
LOCAL
CURRENCY CURRENCY U.S. DOLLAR
INDEX RETURN IMPACT RETURN
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
United States (S&P 500 Index) +33.4% -- +33.4%
- ------------------------------------------------------------------------------
MSCI Europe Index +38.4% -14.7% +23.7%
MSCI Pacific Free Index -15.6 -10.1 -25.7
MSCI Select Emerging Markets Index +24.8 -41.2 -16.4
- ------------------------------------------------------------------------------
MSCI Total International Index +21.2% -22.0% - 0.8%
- ------------------------------------------------------------------------------
</TABLE>
+24.8% return in local currencies, but these gains were illusory for U.S.
investors, as currency declines resulted in a net loss in dollar terms. Some
Asian markets experienced both sharply falling stock prices and severe currency
devaluations, with catastrophic results. In the second half of 1997, for
example, Indonesian stocks lost 75% of their value in U.S.-dollar terms, and
net declines in Malaysia, South Korea, Thailand, and the Philippines exceeded
60%.
In short, U.S. investors got a stern lesson in the risks of international
investing--particularly in less-seasoned emerging markets. Chief among these is
currency risk: the danger that the dollar's value will rise versus other
currencies. A stronger dollar means that securities worth a given sum in a
foreign currency will convert into fewer dollars.
The dollar's strength in 1997 was due in part to the powerful U.S.
economy, where consumer confidence strengthened amid low inflation and
continued solid growth in employment, business activity, and corporate
earnings. U.S. stock prices, despite some sharp interim declines, surged for
the third consecutive year, bringing cumulative returns since the end of 1994
to some +125%. These conditions drew in capital from overseas, boosting the
demand for dollars and the dollar's price in relation to other currencies.
However, there were other reasons that foreign currencies declined. In
Europe, economic growth was spotty and there was anxiety about the coming of
the European Monetary Union--the replacement of national currencies with a
single currency, the euro. In Asia, both economic and psychological forces
depressed local currencies. Japan, still the region's dominant player,
continued to suffer from economic weakness and fear that the government lacked
the will and skill to revive the economy. The yen's value in dollars fell to
levels not seen in more than five years.
In Asia's developing markets, whatever could go wrong did go wrong. Often,
these economies had unwisely invested the huge inflows of capital too easily
borrowed from foreign banks or invested by corporations or individual
investors. After midyear, the dollar's strength fanned doubts about whether the
region's companies could generate the cash flow needed to repay their debts,
many of which were denominated in dollars. As doubts grew, local currencies
fell against the dollar. Businesses and investors sold local currencies to get
dollars to pay debts or to safeguard their savings. Each decline in local
currencies reduced the likelihood that companies could repay their debts, so
stock prices fell. Falling stock prices further weakened currencies, which
prompted further declines in stocks. In this vicious cycle, doubt turned into
fear, which turned into panic.
1997 PERFORMANCE OVERVIEW
Amid the extraordinary volatility in currency and stock prices during 1997,
Vanguard's international index Portfolios tracked their market indexes with
admirable accuracy. Indeed, the European Portfolio beat its benchmark's return,
while the Pacific and Total International Portfolios precisely matched their
target indexes. Our Emerging Markets Portfolio trailed its bogey by 0.4
percentage point, mainly due to the Portfolio's modest
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operating costs. Actual mutual funds, of course, incur operating and
transaction costs that do not burden indexes, which exist only on paper.
To offset transaction costs, we levy modest transaction fees on new
purchases of shares in our international index Portfolios. These fees are paid
directly to the portfolios so that existing shareholders don't bear the costs
of trading activity resulting from new purchases or redemptions. As our
Portfolios grew and the impact of net purchase activity lessened, we were able
to reduce, effective November 3, the purchase fees for three Portfolios:
European (from 1.0% to 0.5%); Emerging Markets (from 1.5% to 1.0%); and Total
International (from 0.75% to 0.50%).
We remind you that our returns sometimes diverge from those of the indexes
because of "tracking error," since each Portfolio owns only a sampling (albeit
a large and carefully chosen one) of the stocks in its target index. Although
we tracked our indexes closely in 1997, only two of our four Portfolios
outperformed their peer mutual funds.
Our EUROPEAN PORTFOLIO earned +24.2%, outpacing the +15.8% return for the
average European equity fund by 8.4 percentage points, more than recovering our
1996 shortfall. Two factors were largely responsible for our strong 1997
showing. First, it was a good year for large-capitalization stocks, which
dominate our benchmark index and, therefore, the Portfolio. Second, the
Portfolio and our target index are more heavily weighted than our peers in
several large economies (the United Kingdom, Germany, and Switzerland) that
were powerful performers during 1997. The Portfolio also had no holdings in
Poland or the Czech Republic, both of which had sharp losses, and we held
lighter stakes than many actively managed competitors in some so-so performers
(Austria and Norway). For the record, our Portfolio now invests in Portugal,
which was shifted from the MSCI Select Emerging Markets Index to the MSCI
Europe Index on November 28, 1997.
As always, the European Portfolio benefited from our low operating costs.
Our annual expenses as a percentage of average net assets were a rock-bottom
0.31% in 1997, compared with the 1.85% expense ratio of the average European
fund. The difference of 1.5 percentage points represents a substantial head
start, year after year, over our peers.
While there is no way to put a negative return of -25.7% in a positive
light, our PACIFIC PORTFOLIO did a bit better than the average Pacific region
fund's -27.6% loss. Japanese stocks represent some 75% of the Portfolio and
its target index, and therefore dominate our returns. As bad as the year was
for Japanese stocks (down some -23%), it was even worse for most other Asian
markets. The weakest markets represented a smaller portion of the Pacific
Portfolio than of the average Pacific-region fund. Our low costs also helped:
Our expense ratio, at 0.35%, was roughly one-sixth the 2.06% paid by investors
in the average Pacific fund.
Our EMERGING MARKETS PORTFOLIO posted a negative return of -16.8%, much
worse than the -2.4% return of the average emerging markets fund. The reason
for our poor performance is simple: Southeast Asian stocks accounted for more
than half our assets (and our target index) when 1997 began, roughly twice the
region's weighting in the average emerging markets fund. This was a huge
disadvantage given the tremendous declines in Thailand (-77% for the year),
Indonesia (-74%), Malaysia (-68%), and the Philippines (-63%), along with
lesser declines in Hong Kong (-23%) and Singapore (-30%). We were more heavily
concentrated than our peers in Southeast Asia, largely because our target index
does not include a number of emerging markets that have not developed
sufficient liquidity or legal and regulatory safeguards. Some of these
markets--India, Russia, and Pakistan, for example--enjoyed nice gains in 1997.
That said, our
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benchmark, the MSCI Select Emerging Markets Index, is not static. On November
28, 1997, when the Index and our Portfolio dropped Portugal, both added Poland,
Hungary, and the Czech Republic.
We concede that the impact of our cost advantage--an expense ratio of
0.57% versus 2.09% for our average competitor--paled in 1997 next to the
effects of the "Asian contagion." However, we expect our cost advantage to
endure, while market trends are subject to sudden and dramatic changes.
Our TOTAL INTERNATIONAL PORTFOLIO provided a -0.8% return, precisely
matching our target index, but well short of the +5.1% gain posted by the
average international fund. As you know, the Portfolio is a "fund of funds"
that invests in our European, Pacific, and Emerging Markets Portfolios in
proportion to the weightings of the underlying indexes within the MSCI Total
International Index. The strong gains from our European Portfolio and the Latin
American portion of our Emerging Markets Portfolio were offset by the big
declines in the Asian portion of Emerging Markets and in our Pacific Portfolio.
In all, the Total International Portfolio began the year with some 45% of its
assets in Asian stocks versus a weighting of roughly 30% for the typical
international fund, a disparity that accounts for our substantial performance
shortfall.
Our Total International Portfolio has no direct operating expenses, but
bears its share of the costs of the underlying funds. The average expense
ratio of the underlying Portfolios, weighted according to their proportion of
Total International's assets, was 0.35% in 1997, a fraction of the 1.70%
charged by the average diversified international stock fund.
LIFETIME PERFORMANCE OVERVIEW
The lifetime records of each Portfolio, the average fund in its category, and
the appropriate target index are displayed in the table below. Besides the
average annual returns for these periods, the table presents the results of
hypothetical $10,000 investments in each Portfolio and its peer, assuming
dividends and capital gains distributions were reinvested.
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TOTAL RETURNS
FROM INCEPTION* THROUGH DECEMBER 31, 1997
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AVERAGE FINAL VALUE OF A
ANNUAL RATE $10,000 INITIAL INVESTMENT
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AVERAGE AVERAGE
VANGUARD COMPETING TARGET VANGUARD COMPETING
PORTFOLIO PORTFOLIO FUND INDEX PORTFOLIO FUND
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European +12.6% +8.7% +12.9% $24,428 $18,772
Pacific - 2.3 +0.4 - 2.4 8,393 10,307
Emerging Markets + 1.7 +3.5 0.0 10,638 11,331
Total International - 0.1 +5.2 - 0.1 9,978 10,893
- -----------------------------------------------------------------------------------
</TABLE>
*For European and Pacific Portfolios: June 18, 1990; for Emerging Markets
Portfolio: May 4, 1994; for Total International Portfolio: April 29, 1996.
Although we have done an excellent job of tracking our unmanaged
benchmarks, our record so far against our real-world competitors is mixed. Our
EUROPEAN PORTFOLIO has built a big lead over its competitors during its
seven-plus years of operation. The average margin of nearly 4 percentage points
amounted to an edge of $5,656, or more than half an initial $10,000 investment.
Alas, for our three other Portfolios, the negative 1997 results reduced average
returns of each and left each lagging its peer group.
Our PACIFIC PORTFOLIO, whose biggest component, the Japanese stock market,
has fallen sharply since 1990, has trailed its average peer by an average of
2.7 percentage points a year. While Japanese stocks make up about 25% of the
non-U.S. equity market,
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<PAGE> 7
most of our competitors have maintained stakes in Japan that are far below
Japan's overall share of the foreign stock market. In terms of the hypothetical
$10,000 investments, the shortfall versus competitors amounts to $1,914 over
the Portfolio's lifetime.
During a much shorter time frame, our EMERGING MARKETS PORTFOLIO, which
had outperformed its competitors until 1997, gave up its lead--and then
some--during the year. Its average annual return now trails its peers by 1.8
percentage points, amounting to a difference of $693 on identical $10,000
investments made at the Portfolio's inception (May 4, 1994).
The TOTAL INTERNATIONAL PORTFOLIO, in a still shorter and therefore even
less meaningful period of but 20 months, has trailed the competition by an
annual rate of 5.3 percentage points. On $10,000 investments made at the
Portfolio's inception, the shortfall versus competitors is $915.
We emphasize that future returns may bear little relation to the past
returns reflected in the table on page 4. Indeed, unpredictable and sometimes
dramatic volatility has been the norm in international equity and currency
markets, so future returns may be higher or lower than those earned so far in
the 1990s.
IN SUMMARY
Some commentators, citing the losses suffered during the past year in Asian and
emerging stock markets, have concluded that international investing is a big
mistake for U.S. investors. We disagree. While hindsight enables anyone to
conclude that 1997 was a horrible year for these markets, it does not
necessarily follow that they will perpetually underperform the U.S. stock
market.
It may be instructive to note that only a few years ago international
stock markets appeared to be the better-performing asset, and some commentators
were urging U.S. investors to invest 30% or more of their equity portfolios in
international stocks. We were not so enthusiastic about international stocks
then--indeed, we did not believe that they should be considered an essential
segment of a portfolio, and recommended that they be limited to 10% or 20% of
investors' equity portfolios. This recommendation may have seemed stodgy to
some, and the outlook for international stocks, after the dark days of 1997,
may be much improved. Still--though we are far from pessimistic about
international stocks--we hold to our earlier limits, given the self-evident
economic, financial, and currency risks of investing abroad.
We believe that for investors who understand the special risks of
international stocks--currency fluctuations and, occasionally, political
instability--these assets still make sense for the diversification and
potential for competitive long-term returns that they bring to balanced
portfolios built on a core of U.S. stock funds, bond funds, and money market
funds. Investors who craft such diversified, balanced portfolios--in accordance
with their time horizon, financial situation, and tolerance for market
volatility--should be well prepared to "stay the course" toward long-term
financial goals.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
January 22, 1998
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<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
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YEAR ENDED DECEMBER 31, 1997
NET ASSET VALUE PER SHARE --------------------------------------------------
DECEMBER 31, PER-SHARE PER-SHARE
------------------------- DISTRIBUTIONS FROM NET DIVIDENDS FROM NET
PORTFOLIO 1996 1997 REALIZED CAPITAL GAINS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European $16.57 $20.13 $0.08 $0.37
Pacific 10.51 7.72 0.00 0.09
Emerging Markets 12.28 9.98 0.00 0.23
Total International 10.14 9.87 0.02 0.17
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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THE MARKETS IN PERSPECTIVE
Year Ended December 31, 1997
U.S. EQUITY MARKETS
Despite some year-end rockiness, 1997 again provided U.S. equity investors with
exceptional returns, as illustrated by the 33.4% advance of the S&P 500 Index.
Investors' mettle was tested several times, however, and most severely by the
upheavals that devastated a number of Asian markets in the fourth quarter.
Beginning in late October, the U.S. market grew increasingly volatile, a direct
result of investors' struggle to understand the nature and implications of
Asia's economic turmoil. By the end of the year, it appeared that a new
consensus was emerging, grounded in two basic beliefs: (1) that the collapse of
currencies in the Far East would help keep inflation tame in the United States
and (2) that slower growth in Asia would most likely lead to weaker corporate
profits over the next several years.
As the dust continued to settle, many investors sought havens traditional
in periods of high uncertainty: large-capitalization issues and particularly
the "defensive" sectors of the stock market, such as utilities, consumer
staples, and health care. The closing weeks of 1997 saw a broad advance in
these "safe" sectors, with utilities gaining 20.1% and consumer staples 10.4%
in the last quarter. By contrast, more economically sensitive sectors were
thrashed in the wake of the Asian crisis, with technology issues falling 12.3%
and producer durables down 9.0% over the three months. After posting strong
results in the third quarter, small-company stocks also suffered in the fourth,
falling 3.3%.
<TABLE>
<CAPTION>
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AVERAGE ANNUALIZED RETURNS
PERIODS ENDED DECEMBER 31, 1997
--------------------------------
1 YEAR 3 YEARS 5 YEARS
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 33.4% 31.2% 20.3%
Russell 2000 Index 22.4 22.3 16.4
MSCI EAFE Index 2.1 6.6 11.7
- ---------------------------------------------------------------------------
FIXED INCOME
Lehman Aggregate Bond Index 9.7% 10.4% 7.5%
Lehman 10-Year Municipal Bond Index 9.2 10.2 7.6
Salomon Brothers Three-Month
U.S. Treasury Bill Index 5.3 5.4 4.7
- ---------------------------------------------------------------------------
OTHER
Consumer Price Index 1.7% 2.5% 2.6%
- ---------------------------------------------------------------------------
</TABLE>
The year-end excitement did not detract from 1997's overall record as a
stellar year for U.S. stock investors. The best-performing sector was financial
services, which rose 46.9%. This sector benefited from a number of factors,
including the strength of the economy, the vibrant financial markets, and
merger activity. By contrast, the commodity-oriented materials & processing
sector posted a gain of "only" 12.3%--in itself more than a percentage point
above the long-term average return from common stocks. Small-cap stocks also
fared well overall, as illustrated by the 22.4% increase of the Russell 2000
Index. Small-company technology issues were the most glaring exception,
mustering a gain in 1997 of just 1.1%.
U.S. FIXED-INCOME MARKETS
In a year characterized by exceptionally low inflation, interest rates fell,
providing investors with very attractive total returns. The Lehman Aggregate
Bond Index, for example,
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posted a total return of 9.7% for 1997, comprising 7.2% in income return and
2.5% in capital appreciation. The decline in rates can be attributed largely to
better-than-expected reports about the inflation rate. Early in the year,
economists were projecting a 2.9% increase in the Consumer Price Index (CPI)
during 1997. In March, the Federal Reserve grew sufficiently concerned to boost
interest rates by 0.25% in an effort to temper economic growth and thereby ward
off inflation. By year-end, however, the worries seemed to have been
unnecessary, as the actual CPI increase was a mere 1.7%--its smallest increase
since 1986.
The bond market gradually gathered strength during the year as investors
grew more confident that four seemingly strange bedfellows--strong economic
growth, reasonable inflation, low unemployment, and stable wage growth--would
continue to coexist peacefully. In the fourth quarter, the market also was
bolstered by the "flight to quality" among investors concerned about Asia's
problems. Overall, the longest-maturity issues benefited most from the decline
in interest rates. The yield on the 30-year U.S. Treasury bond closed the year
at 5.92%, compared with 6.64% on December 31, 1996. Falling rates flattened the
yield curve considerably: Only 0.57% separated the yield on Treasury bills from
that on the 30-year issue, down from a spread of 1.47% at the end of 1996.
The best-performing sector in 1997 was long-term Treasuries, as
illustrated by the 15.1% return of the Lehman Long U.S. Treasury Index.
Investors in lower-quality securities also fared well, with the Lehman High
Yield Bond Index generating a 12.8% gain. The strength of the economy, together
with the lack of inflationary pressure, created an ideal environment for junk
bonds.
INTERNATIONAL EQUITY MARKETS
Arguably, investors' greatest disappointments were in international
markets--and, of course, Asian markets in particular. During the year, the
Morgan Stanley Capital International (MSCI) Pacific Index declined by 25.7% in
U.S. dollar terms; the Index fell 20.7% in the fourth quarter alone. Among
individual markets, the fiscal year saw sharp declines (in U.S. dollar terms)
in Japan, down 23.6% (including a 19.7% drop in the fourth quarter); Thailand,
down 76.8%; and Malaysia, down 68.1%. The general slump in Asian markets began
in midsummer with currency devaluations by a number of countries.
By contrast, the European markets continued to provide U.S. investors with
solid returns, although they, too, stumbled in late October and subsequently
recovered. The MSCI Europe Index posted a gain of 23.7% for the 12 months. The
robust character of the European markets reflected strong corporate earnings
and optimism that the European Monetary Union would provide a solid framework
for future fiscal responsibility and economic growth.
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PERFORMANCE SUMMARY
European Portfolio
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely, so an investment in the
Portfolio could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-DECEMBER 31, 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 22.0 2.2 24.2 23.7
- --------------------------------------------------------------
</TABLE>
See Financial Highlights table on page 44 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: JUNE 18, 1990-DECEMBER 31, 1997
- ---------------------------------------------------------------------------------
EUROPEAN AVERAGE MSCI
PORTFOLIO EUROPEAN FUND EUROPE INDEX
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
6/18/90 9950 10000 10000
1990 06 10271 10323 10323
1990 09 8523 8666 8609
1990 12 9225 9049 9346
1991 03 9517 9173 9749
1991 06 8965 8569 9111
1991 09 10092 9414 10296
1991 12 10357 9552 10666
1992 03 10031 9285 10302
1992 06 11115 9855 11324
1992 09 10538 9092 10785
1992 12 10005 8786 10247
1993 03 10604 9165 10870
1993 06 10848 9323 11074
1993 09 11822 10241 12108
1993 12 12911 11066 13245
1994 03 12636 11122 13037
1994 06 12569 10785 12905
1994 09 13069 11231 13524
1994 12 13145 11201 13619
1995 03 13848 11395 14461
1995 06 14975 12234 15401
1995 09 15588 12824 16047
1995 12 16067 13088 16608
1996 03 16661 13879 17243
1996 06 17187 14283 17713
1996 09 17828 14560 18394
1996 12 19474 16213 20165
1997 03 20426 16823 21149
1997 06 22378 17557 23043
1997 09 24237 18707 24906
1997 12 24201 18772 24985
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</TABLE>
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997
--------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European Portfolio* 23.59% 19.20% 12.44% $24,201
Average European Fund 15.78 16.40 8.71 18,772
MSCI Europe Index 23.75 19.51 12.92 24,985
- ----------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
European Portfolio* 6/18/1990 23.59% 19.20% 10.00% 2.44% 12.44%
- ---------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
9
<PAGE> 12
PERFORMANCE SUMMARY
Pacific Portfolio
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely, so an investment in the
Portfolio could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-DECEMBER 31, 1997
- ----------------------------------------------------------
PACIFIC PORTFOLIO MSCI PACIFIC
FREE
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 -26.5 0.8 -25.7 -25.7
- ----------------------------------------------------------
</TABLE>
See Financial Highlights table on page 45 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: JUNE 18, 1990-DECEMBER 31, 1997
- -------------------------------------------------------------
PACIFIC AVERAGE MSCI PACIFIC
PORTFOLIO PACIFIC FUND FREE INDEX
- -------------------------------------------------------------
<S> <C> <C> <C>
6/18/90 9950 10000 10000
1990 06 9900 9950 9950
1990 09 7586 8080 7528
1990 12 8550 8505 8490
1991 03 9247 9418 9298
1991 06 8895 9420 8881
1991 09 9422 9593 9421
1991 12 9451 9701 9468
1992 03 7674 8870 7658
1992 06 7291 9809 7265
1992 09 7952 9612 7932
1992 12 7728 9740 7715
1993 03 9045 10096 9063
1993 06 10607 11598 10634
1993 09 11168 13096 11168
1993 12 10462 15955 10504
1994 03 11277 13436 11343
1994 06 12473 14457 12504
1994 09 12120 15863 12157
1994 12 11820 14029 11851
1995 03 11537 12841 11684
1995 06 11138 13980 11200
1995 09 11597 14665 11656
1995 12 12139 14177 12193
1996 03 12401 14313 12487
1996 06 12537 15895 12543
1996 09 12029 15350 12033
1996 12 11184 13947 11190
1997 03 10087 13032 10097
1997 06 12033 16054 11983
1997 09 10479 14431 10459
1997 12 8313 10094 8322
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997
--------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Portfolio* -26.08% 1.36% -2.42% $ 8,313
Average Pacific Fund -27.63 2.08 0.40 10,307
MSCI Pacific Free Index -25.74 1.50 -2.41 8,322
- -------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pacific Portfolio* 6/18/1990 -26.08% 1.36% -3.13% 0.71% -2.42%
- ------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
10
<PAGE> 13
PERFORMANCE SUMMARY
Emerging Markets Portfolio
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely, so an investment in the
Portfolio could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MAY 4, 1994-DECEMBER 31, 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 -18.7 1.9 -16.8 -16.4
- -------------------------------------------------------
</TABLE>
*MSCI Select Emerging Markets Free Index.
See Financial Highlights table on page 45 for dividend and capital gains
information since the Portfolio's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MAY 4, 1994-DECEMBER 31, 1997
- ---------------------------------------------------------------------------------
EMERGING MARKETS AVERAGE EMERGING MSCI SELECT EMERGING
PORTFOLIO MARKETS FUND MARKETS FREE INDEX
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
5/4/94 9900 10000 10000
1994 06 10464 10572 10591
1994 09 12739 12560 12738
1994 12 10867 10939 10789
1995 03 9645 9712 9617
1995 06 10862 10162 10843
1995 09 10920 10449 10831
1995 12 10918 10437 10790
1996 03 12023 11282 11844
1996 06 12529 11375 12265
1996 09 12324 11247 12093
1996 12 12639 11607 12429
1997 03 13255 12780 13027
1997 06 14159 13430 13931
1997 09 12840 13386 12647
1997 12 10403 11331 10001
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997
------------------------------- FINAL VALUE OF A
1 YEAR SINCE INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Markets Portfolio* -18.52% 1.08% $10,403
Average Emerging Markets Fund -2.38 3.47 11,331
MSCI Select Emerging Markets Free Index -16.37 0.00 10,001
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 1% transaction fee on purchases, the
1% transaction fee on redemptions, and the $10 annual account maintenance fee.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerging Markets Portfolio* 5/4/1994 -18.52% -0.50% 1.58% 1.08%
- -------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 1% transaction fee on purchases, the
1% transaction fee on redemptions, and the $10 annual account maintenance fee.
11
<PAGE> 14
PERFORMANCE SUMMARY
Total International Portfolio
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely, so an investment in the
Portfolio could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: APRIL 29, 1996-DECEMBER 31, 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 -2.5% 1.7% -0.8% -0.8%
- ----------------------------------------------------------
</TABLE>
*MSCI Total International Index.
See Financial Highlights table on page 46 for dividend and capital gains
information since the Portfolio's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: APRIL 29, 1996-DECEMBER 31, 1997
- --------------------------------------------------------------------------------------
TOTAL INTERNATIONAL AVERAGE INTERNATIONAL MSCI TOTAL
PORTFOLIO FUND INTERNATIONAL INDEX
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
4/29/96 9950 10000 10000
1996 06 9892 10031 9925
1996 09 9861 9966 9897
1996 12 10002 10367 10055
1997 03 9932 10510 9979
1997 06 11174 11671 11220
1997 09 10947 11803 11003
1997 12 9923 10893 9978
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1997
------------------------------- FINAL VALUE OF A
1 YEAR SINCE INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total International Portfolio* -1.30% -0.46% $ 9,923
Average International Fund 5.08 5.24 10,893
MSCI Total International Index -0.77 -0.13 9,978
- --------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total International Portfolio* 4/29/1996 -1.30% -2.38% 1.92% -0.46%
- -----------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
12
<PAGE> 15
PORTFOLIO PROFILE
European Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
December 31, 1997, compared where appropriate to the unmanaged target index.
Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ------------------------------------------------------
EUROPEAN MSCI
PORTFOLIO EUROPE
- ------------------------------------------------------
<S> <C> <C>
Number of Stocks 561 566
Turnover Rate 3% --
Expense Ratio 0.31% --
Cash Reserves 0.3% --
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ------------------------------------------------------
<S> <C>
Royal Dutch Petroleum Co. 2.9%
Novartis AG 2.8
Roche Holdings AG 2.3
Glaxo Wellcome PLC 2.1
British Petroleum Co., PLC 1.8
Lloyds TSB Group PLC 1.7
HSBC Holdings PLC 1.7
Allianz AG 1.5
Nestle SA (Registered) 1.5
SmithKline Beecham PLC 1.4
- ------------------------------------------------------
Top Ten 19.7%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------
EUROPEAN MSCI
PORTFOLIO EAFE
- ------------------------------------------------------
<S> <C> <C>
R-Squared 0.71 1.00
Beta 0.69 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCK)
- ------------------------------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------------------------------
EUROPEAN EUROPEAN MSCI
PORTFOLIO PORTFOLIO EUROPE
-------------------------------------------
<S> <C> <C> <C>
Austria . . . . . . . . . . . . . . 0.8% 0.6% 0.6%
Belgium . . . . . . . . . . . . . . 2.0 1.9 1.9
Denmark . . . . . . . . . . . . . . 1.7 1.7 1.7
Finland . . . . . . . . . . . . . . 1.3 1.1 1.1
France . . . . . . . . . . . . . . 12.0 11.7 11.9
Germany . . . . . . . . . . . . . . 14.2 14.7 14.6
Hong Kong . . . . . . . . . . . . . 0.3 0.0 0.0
Ireland . . . . . . . . . . . . . . 0.6 0.6 0.6
Italy . . . . . . . . . . . . . . . 5.3 6.0 6.0
Netherlands . . . . . . . . . . . . 8.2 8.4 8.5
Norway . . . . . . . . . . . . . . 1.0 0.8 0.8
Portugal . . . . . . . . . . . . 0.0 0.9 0.8
Spain . . . . . . . . . . . . . . . 3.7 3.9 4.0
Sweden . . . . . . . . . . . . . . 4.1 3.8 3.9
Switzerland . . . . . . . . . . . . 10.0 11.7 11.7
United Kingdom . . . . . . . . . . 34.8 32.2 31.9
- ------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
AVERAGE WEIGHTED EXPENSE RATIO. Portfolios that invest in other Vanguard funds
incur no direct expenses, but do bear their share of the operating,
administrative, and advisory expenses of the underlying funds. The average
weighted expense ratio is the average of these expense ratios, weighted in
proportion to the amount of the portfolio represented by each underlying fund.
BETA. A measure of the magnitude of a portfolio's past share-price fluctuations
in relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a portfolio with a
beta of 1.20 would have seen its share price rise or fall by 12% when the
overall market rose or fell by 10%.
CASH RESERVES. The percentage of a portfolio's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate stock
investment.
COUNTRY DIVERSIFICATION. The percentages of a portfolio's common stock invested
in securities of various countries.
EXPENSE RATIO. The percentage of a portfolio's average net assets used to pay
its annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
NUMBER OF STOCKS. An indicator of diversification. The more stocks a portfolio
holds, the more diversified it is and the more likely to perform in line with
the overall stock market.
PORTFOLIO ALLOCATION TO FUNDS. This table shows the distribution of a
portfolio's investments in underlying Vanguard funds.
R-SQUARED. A measure of how much of a portfolio's past returns can be explained
by the returns from the overall market (or its benchmark index). If a
portfolio's total return were precisely synchronized with the overall market's
return, its R-squared would be 1.00. If a portfolio's returns bore no
relationship to the market's returns, its R-squared would be 0.
TEN LARGEST HOLDINGS. The percentage of net assets that a portfolio has
invested in its ten largest holdings. (The average for stock mutual funds is
about 30%.) As this percentage rises, a portfolio's returns are likely to be
more volatile because they are more dependent on the fortunes of a few
companies.
TURNOVER RATE. An indication of trading activity during the past year.
Portfolios with high turnover rates incur higher transaction costs and are more
likely to distribute capital gains (which are taxable to investors).
14
<PAGE> 17
PORTFOLIO PROFILE
Pacific Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
December 31, 1997, compared where appropriate to the unmanaged target index.
Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ------------------------------------------------------
MSCI
PACIFIC PACIFIC
PORTFOLIO FREE
- ------------------------------------------------------
<S> <C> <C>
Number of Stocks 508 522
Turnover Rate 8% --
Expense Ratio 0.35% --
Cash Reserves 0% --
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ------------------------------------------------------
<S> <C>
Nippon Telegraph and Telephone Corp. 5.7%
Toyota Motor Corp. 5.7
The Bank of Tokyo-Mitsubishi Ltd. 3.3
Nomura Securities Co., Ltd. 2.1
Sumitomo Bank Ltd. 1.9
Honda Motor Co., Ltd. 1.9
Sony Corp. 1.8
Matsushita Electric Industrial Co., Ltd. 1.6
Hong Kong Telecommunications Ltd. 1.3
Takeda Chemical Industries Ltd. 1.3
- ------------------------------------------------------
Top Ten 26.6%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------
PACIFIC MSCI
PORTFOLIO EAFE
- ------------------------------------------------------
<S> <C> <C>
R-Squared 0.85 1.00
Beta 1.38 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCK)
- ------------------------------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1997
---------------------------------------------
MSCI
PACIFIC PACIFIC PACIFIC
PORTFOLIO PORTFOLIO FREE
---------------------------------------------
<S> <C> <C> <C>
Australia . . . . . . . . . . . . . . 6.9% 8.4% 8.4%
Hong Kong . . . . . . . . . . . . . . 8.8 8.7 8.6
Japan . . . . . . . . . . . . . . . 73.1 76.8 76.9
Malaysia . . . . . . . . . . . . . . 6.1 2.5 2.5
New Zealand . . . . . . . . . . . . . 0.9 0.9 0.9
Singapore . . . . . . . . . . . . . . 4.2 2.7 2.7
- ------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
PORTFOLIO PROFILE
Emerging Markets Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
December 31, 1997, compared where appropriate to the unmanaged target index.
Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ------------------------------------------------------
EMERGING
MARKETS MSCI
PORTFOLIO SELECT*
- ------------------------------------------------------
<S> <C> <C>
Number of Stocks 635 612
Turnover Rate 19% --
Expense Ratio 0.57% --
Cash Reserves 4.5% --
</TABLE>
*MSCI Select Emerging Markets Free Index.
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ------------------------------------------------------
<S> <C>
Telecomunicacoes Brasileiras SA 5.0%
Centrais Electricas Brasileiras SA 3.8
Telefonos de Mexico SA 3.3
Hong Kong Telecommunications Ltd. 2.1
Hutchison Whampoa Ltd. 2.0
YPF SA Class D 1.7
Cifra SA de CV 1.6
Hang Seng Bank Ltd. 1.6
Petroleo Brasileiro SA Pfd. 1.5
Sun Hung Kai Properties Ltd. 1.5
- ------------------------------------------------------
Top Ten 24.1%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------
EMERGING
MARKETS MSCI
PORTFOLIO EAFE
- ------------------------------------------------------
<S> <C> <C>
R-Squared 0.49 1.00
Beta 1.16 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCK)
- ------------------------------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------------------------------------
EMERGING MARKETS EMERGING MARKETS MSCI
PORTFOLIO PORTFOLIO SELECT
----------------------------------------------
<S> <C> <C> <C>
Argentina . . . . . . . . . . . . . 3.8% 5.5% 5.5%
Brazil . . . . . . . . . . . . . . 13.7 20.0 19.6
Czech Republic . . . . . . . . . . 0.0 1.2 1.2
Greece . . . . . . . . . . . . . . 1.3 3.3 3.2
Hong Kong . . . . . . . . . . . . . 14.1 14.9 15.2
Hungary . . . . . . . . . . . . . 0.0 1.0 1.6
Indonesia . . . . . . . . . . . . . 6.1 2.1 2.1
Israel . . . . . . . . . . . . . . 2.3 3.1 3.2
Malaysia . . . . . . . . . . . . . 18.7 7.1 7.1
Mexico . . . . . . . . . . . . . . 9.1 15.9 15.6
Philippines . . . . . . . . . . . . 3.7 1.8 1.7
Poland . . . . . . . . . . . . . . 0.0 0.7 0.6
Portugal . . . . . . . . . . . . . 2.2 0.0 0.0
Singapore . . . . . . . . . . . . . 6.6 4.8 4.8
South Africa . . . . . . . . . . . 11.6 12.8 12.9
Thailand . . . . . . . . . . . . . 5.3 1.9 1.9
Turkey . . . . . . . . . . . . . . 1.5 3.9 3.8
- ------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
PORTFOLIO PROFILE
Total International Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
December 31, 1997. Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ---------------------------------------------------
<S> <C>
Expense Ratio 0%
Average Weighted Expense Ratio* 0.35%
</TABLE>
*For underlying portfolios.
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION TO FUNDS
- ---------------------------------------------------
<S> <C>
Vanguard International Equity Index Fund-
European Portfolio 59.1%
Pacific Portfolio 28.9
Emerging Markets Portfolio 12.0
- ---------------------------------------------------
Total 100.0%
</TABLE>
17
<PAGE> 20
FINANCIAL STATEMENTS
December 31, 1997
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 Markets 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 (98.2%)(1)
- -----------------------------------------------------------------------------------
<S> <C> <C>
AUSTRIA (0.6%)
Austria Mikro Systeme
International AG 500 $ 25
- - Austrian Airlines AG 31,130 662
BWT Best Water Technology AG 2,860 443
Bank Austria AG 42,922 2,171
Bank Austria AG (Ptg. Ctf.) 3,690 99
Bank Austria AG-Vorzug 19,540 927
Bau Holding AG 905 56
Bau Holding AG Pfd. 1,044 47
Boehler-Uddeholm AG 6,520 382
EA-Generali AG 4,501 1,181
EA-Generali AG Pfd. 1,114 125
Flughafen Wien AG 7,750 308
- - Lenzing AG 4,490 266
Mayr-Melnhof Karton AG 5,930 319
OMV AG 11,767 1,628
Oesterreichische
Brau-Beteiligungs AG 10,810 539
Oesterreichische
Elektrizitaetswirtschafts AG
Class A 21,175 2,243
Radex-Heraklith
Industriebeteiligungs AG 10,647 366
Steyr-Daimler-Puch AG 14,174 380
Universale-Bau AG 5,540 195
VA Technologies AG 3,270 496
Wienerberger Baustoffindustrie AG 6,090 1,167
-----------
14,025
-----------
BELGIUM (1.9%)
Barco NV 4,735 869
Bekaert SA 1,942 1,156
CBR Cimenteries SA 18,210 1,637
Delhaize-Le Lion SA 34,868 1,769
Electrabel SA 29,972 6,933
Fortis AG 23,997 5,007
Generale De Banque SA 18,900 8,226
Glaverbel SA 6,979 1,092
Groupe Bruxelles Lambert SA 15,210 2,200
Petrofina SA 13,320 4,916
Royale Belge SA 11,350 3,232
Solvay SA 49,450 3,110
Tractebel SA 47,050 4,102
- - Union Miniere SA 17,718 1,229
-----------
45,478
-----------
DENMARK (1.7%)
Aarhus Oliefabrik A/S A Shares 2,220 99
Aarhus Oliefabrik A/S B Shares 2,240 100
Bang & Olufsen Holding A/S
B Shares 7,200 429
Carlsberg A/S A Shares 12,775 691
Carlsberg A/S B Shares 8,549 459
D/S 1912 B Shares 124 5,723
D/S Svendborg B Shares 91 5,981
Danisco A/S 39,535 2,194
Den Danske Bank A/S 30,430 4,057
- - East Asiatic Co. A/S 7,250 66
FLS Industries A/S B Shares 41,040 979
GN Store Nord A/S 5,750 97
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
- - ISS International Service Systems
A/S B Shares 31,519 $ 1,160
- - J. Lauritzen Holding A/S B Shares 5,965 501
Korn Og Foderstof Kompagniet A/S 10,510 292
NKT Holding A/S 5,270 420
Novo Nordisk A/S B Shares 43,882 6,281
Radiometer A/S B Shares 6,508 264
SAS Danmark A/S 28,080 410
Sophus Berendsen A/S A Shares 3,883 641
Sophus Berendsen A/S B Shares 12,560 2,073
Superfos A/S 34,000 860
Tele Danmark A/S B Shares 78,695 4,884
Unidanmark A/S A Shares 25,877 1,901
-----------
40,562
-----------
FINLAND (1.1%)
- - Amer Group Ltd. 12,120 233
Cultor Oy-Series 1 2,750 149
Cultor Oy-Series 2 12,120 657
Instrumentarium Group A Shares 1,000 35
Instrumentarium Group B Shares 3,140 110
Kemira Oy 24,730 234
Kesko Oy 53,570 848
Kone Oy B Shares 7,468 905
Merita Ltd. A Shares 523,767 2,866
Metra Oy A Shares 3,170 75
Metra Oy B Shares 31,626 743
Nokia AB Oy A Shares 132,600 9,424
Nokia AB Oy K Shares 51,700 3,703
Outokumpu Oy A Shares 53,350 652
Pohjola Insurance Co., Ltd.
A Shares 21,688 820
Pohjola Insurance Co., Ltd.
B Shares 6,300 234
Sampo Insurance Co., Ltd.
A Shares 30,524 992
Stockmann AB Oy A Shares 12,300 802
Stockmann AB Oy B Shares 3,610 225
UPM-Kymmene Oy 167,183 3,346
-----------
27,053
-----------
FRANCE (11.5%)
AXA-UAP SA 196,071 15,178
Accor SA 22,052 4,102
Alcatel Alsthom SA 96,495 12,271
Banque Nationale de Paris SA 131,123 6,973
Bongrain SA 160 68
Bouygues SA 9,592 1,087
Canal Plus SA 20,403 3,795
Carrefour SA 22,822 11,912
Chargeurs SA 4,031 241
- - Club Mediterranee SA 7,610 538
Compagnie Bancaire SA 30,174 4,890
Compagnie Financiere de
Paribas SA 55,678 4,840
Compagnie Francaise d'Etudes
et de Construction SA 10,454 1,103
- - Compagnie Generale de
Geophysique SA 5,402 691
- - Compagnie Generale des Eaux SA 80,086 11,182
Compagnie Generale des
Establissements Michelin SCA
B Shares 84,759 4,269
Compagnie Parisienne de
Reescompte SA 10,792 879
Compagnie de Saint-Gobain SA 52,939 7,524
Compagnie des Gaz de Petrole
Primagaz SA 12,984 1,086
Compoirs Modernes SA 3,263 1,671
- - Dollfus-Mieg & Compagnie SA 5,900 105
Elf Aquitaine SA 160,502 18,676
Eridania Beghin-Say SA 16,777 2,624
Essilor International SA 6,100 1,825
Etablissements Economiques du
Casino Guichard-Perrachon SA 27,360 1,524
Etablissements Economiques du
Casino Guichard-Perrachon
SA Pfd. 6,050 265
Europe 1 Communication SA 1,577 346
- - France Telecom SA 484,250 17,572
Groupe Danone SA 40,805 7,292
Groupe GTM 3,850 259
Havas SA 56,124 4,040
Imetal SA 8,554 1,064
L'Air Liquide SA (Registered) 43,311 6,782
L'Oreal SA 39,825 15,590
LVMH Moet Hennessy Louis
Vuitton SA 51,599 8,569
Lafarge SA 58,142 3,817
Lagardere SCA 36,851 1,219
Legrand SA 9,405 1,874
- - Moulinex SA 16,361 404
Nord-Est SA 23,610 471
PSA Peugeot Citroen SA 30,911 3,900
Pathe SA 5,213 1,012
Pernod Ricard SA 35,352 2,080
Pinault-Printemps-Redoute SA 13,717 7,322
Promodes SA 12,394 5,144
Rhone-Poulenc SA Series A 199,675 8,948
Sagem SA 2,040 909
Salomon SA 10,328 889
Sanofi SA 60,795 6,771
Schneider SA 90,151 4,897
Sidel SA 15,048 998
Simco SA 14,071 947
Skis Rossignol SA 8,306 148
Societe BIC SA 34,323 2,506
Societe Francaise
d'Investissements Immobiliers
et de Gestion SA 20,399 1,017
Societe Generale SA 58,746 8,007
Societe National d'Exploitation
Industrielle de Tabacs et
Allumettes SA 18,920 679
Sodexho Alliance SA 3,986 2,136
Sommer Allibert SA 23,150 804
Suez Lyonnaise des Eaux 77,371 8,566
Thomson-CSF SA 80,801 2,548
Total SA B Shares 144,447 15,727
Union Immobiliere de France SA 5,563 404
Usinor Sacilor SA 109,465 1,581
Valeo SA 42,246 2,867
-----------
279,425
-----------
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
GERMANY (14.4%)
- - AGIV AG Fuer Industrie und
Verkehrswesen AG 21,020 $ 397
Aachener & Muenchener
Beteiligungs AG (Bearer) 5,490 595
- - Aachener & Muenchener
Beteiligungs AG (Registered) 25,100 2,743
Adidas AG 21,550 2,836
Allianz AG 136,880 35,475
Axa Colonia Konzern AG 17,530 1,677
BASF AG 369,700 13,108
Bayer AG 433,450 16,200
Bayerische Hypotheken-Und
Weschel-Bank AG 150,190 7,334
Bayerische Vereinsbank AG 186,130 12,184
Beiersdorf AG 61,750 2,679
Bilfinger & Berger Bau AG 9,220 286
- - Brau und Brunnen AG 4,042 405
Buderus AG 110 49
CKAG Colonia Konzern AG Pfd. 8,310 795
Continental AG 25,900 572
- - DLW AG 340 39
Daimler-Benz AG 308,440 21,649
Degussa AG 65,370 3,236
Deutsche Bank AG 318,100 22,468
- - Deutsche Lufthansa AG New 236,070 4,530
Deutsche Telekom AG 1,342,950 25,282
Douglas Holding AG 9,720 294
Dresdner Bank AG 300,260 13,860
Dyckerhoff AG Pfd. 2,978 787
Escada AG 720 98
Escada AG Pfd. 1,740 196
Fag Kugelfischer Georg
Schaefer AG 35,150 464
Friederich Grohe AG Pfd. 195 47
Heidelberger Zement AG 31,906 2,271
Herlitz AG 2,450 155
Herlitz AG Pfd. 6,215 349
Hochtief AG 50,950 2,012
Holsten-Brauerei AG 987 200
IWKA AG 1,450 341
Karstadt AG 3,200 1,093
- - Kloeckner-Humbolt-Deutz AG 22,800 167
Linde AG 5,204 3,178
Man AG 6,955 2,015
Man AG Pfd. 2,300 518
Mannesmann AG 22,029 11,137
Merck KGaA 97,650 3,177
Metro AG 138,222 4,958
Metro AG Pfd. 1 14,138 395
Muenchener Rueckversicherungs-
Gesellschaft AG (Bearer) 2,200 508
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered) 49,000 18,477
PWA Papierwerke Waldhof-
Aschaffanburg AG 7,000 1,197
Preussag AG 8,930 2,727
RWE AG 202,450 10,865
RWE AG Pfd. 135,290 5,718
Rheinmetall AG 24,500 478
Rheinmetall AG Pfd. 13,050 203
SAP AG 37,550 11,413
SAP AG Pfd. 26,225 8,583
SGL Carbon AG 950 123
- - Salamander AG 430 68
Schering AG 44,900 4,333
Siemens AG 335,920 19,897
- - Strabag Bau AG 1,893 132
Strabag Bau AG Pfd. 143 10
Thyssen AG 18,516 3,965
Veba AG 295,131 20,107
Viag AG 16,406 8,842
Volkswagen AG 16,650 9,371
Volkswagen AG Pfd. 5,500 2,361
-----------
351,629
-----------
IRELAND (0.6%)
Allied Irish Banks PLC 548,469 5,316
CRH PLC 247,599 2,901
FYFFES PLC 57,630 86
Greencore Group PLC 108,800 512
Independent Newspapers PLC 211,515 1,161
Irish Life PLC 166,260 955
James Crean PLC 27,780 56
Jefferson Smurfit Group PLC 727,400 2,053
Kerry Group PLC A Shares 21,260 227
Waterford Wedgewood PLC 552,980 749
-----------
14,016
-----------
ITALY (5.9%)
Assicurazioni Generali SPA 524,545 12,915
Banca Commerciale
Italiana SPA 2,016,300 7,014
Banco Ambrosiano Veneto
SPA Risp. 362,420 707
Banco Intesa SPA 1,080,055 4,150
Banco Popolare Di Milano SPA 311,100 1,950
Benetton Group SPA 86,196 1,400
Bulgari SPA 212,800 1,083
Burgo (Cartiere) SPA 114,400 682
Cementir SPA 482,180 458
Danieli & Co. SPA 53,090 365
Danieli & Co. SPA Risp. 21,000 75
Edison SPA 429,500 2,599
Ente Nazionale Idrocarburi SPA 4,722,000 26,981
Falck, Acciaierie & Ferriere
Lombarde SPA 129,500 593
Fiat SPA 2,100,440 6,112
Fiat SPA Pfd. 763,200 1,165
Fiat SPA Risp. 479,820 794
- - Impregilo SPA 214,000 163
Istituto Bancairo San Paolo de
Torino SPA 908,000 8,726
Istituto Nazionale Delle
Assicurazion SPA 2,580,000 5,232
Italcementi SPA 135,557 948
Italcementi SPA Risp. 145,735 437
Italgas SPA 491,250 2,028
La Previdente SPA 8,500 67
La Rinascente SPA 154,362 1,152
La Rinascente SPA Pfd. 15,000 46
La Rinascente SPA Risp. 6,000 22
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Magneti Marelli SPA 265,300 $ 454
Marzotto & Figli SPA 11,900 149
Marzotto & Figli SPA Risp. 5,000 61
Mediaset SPA 614,700 3,021
Mondadori (Arnoldo)
Editore SPA 7,420 58
Montedison SPA 3,253,502 2,924
Montedison SPA Risp. 466,600 306
- - Olivetti SPA 1,820,156 1,101
Parmalat Finanziaria SPA 532,800 762
Pirelli SPA 1,054,400 2,821
Pirelli SPA Risp. 46,300 84
- - Reno de Medici SPA 21,790 58
Riunione Adriatica di Sicurta SPA 227,954 2,232
Riunione Adriatica di Sicurta
SPA Risp. 39,900 269
SNIA BPD SPA 721,200 742
SNIA BPD SPA Risp. 63,780 51
Societa Assicuratrice
Industriale SPA 84,030 929
Societa Assicuratrice
Industriale SPA Risp. 104,000 459
Telecom Italia Mobile SPA 4,045,666 18,684
Telecom Italia Mobile SPA Risp. 952,744 2,711
- - Telecom Italia SPA 2,235,092 14,306
- - Telecom Italia SPA Risp. 614,571 2,711
-----------
142,757
-----------
NETHERLANDS (8.2%)
ABN-AMRO Holding NV 846,512 16,494
ASR Verzekerings Groep NV 28,097 1,529
Akzo Nobel NV 43,300 7,467
Elsevier NV 403,630 6,531
Getronics NV 62,962 2,006
Heineken NV 30,096 5,241
Hollandsche Beton Groep NV 23,900 444
IHC Caland NV 6,290 326
ING Groep NV 477,850 20,130
KLM Royal Dutch Airlines NV 38,637 1,429
Koninklijke Ahold NV 317,671 8,290
Koninklijke KNP BT NV 54,244 1,250
Koninklijke Nederlandsche
Hoogevens en
Staalfabireken NV 26,019 1,067
Koninklijke PTT Nederland NV 284,187 11,860
- - Koninklijke Pakhoed NV 21,778 628
Nedlloyd Groep NV 15,401 349
Oce-Van Der Grinten NV 10,657 1,162
Philips Electronics NV 211,895 12,710
Royal Dutch Petroleum Co. 1,285,336 70,568
Stork NV 21,683 749
Unilever NV 389,248 24,001
- - Wolters Kluwer NV 42,343 5,470
-----------
199,701
-----------
NORWAY (0.8%)
Aker ASA A Shares 26,623 480
Aker ASA B Shares 18,704 304
Bergesen D.Y. ASA A Shares 31,536 744
Bergesen D.Y. ASA B Shares 18,496 432
Christiania Bank Og
Kreditkasse ASA 82,900 335
Dyno Industrier ASA 21,996 424
Elkem ASA 50,640 673
Hafslund ASA A Shares 38,131 233
Hafslund ASA B Shares 16,651 79
Helikopter Services Group ASA 25,650 313
Kvaerner ASA 26,820 1,368
Kvaerner ASA B Shares 14,790 688
Lief Hoegh & Co. ASA 18,370 374
- - NCL Holdings ASA 216,460 775
- - NCL Holdings ASA Rights
Exp. 1/5/1998 216,460 1
Norsk Hydro ASA 132,744 6,473
Norske Skogindustrier ASA
A Shares 23,500 682
Norske Skogindustrier ASA
B Shares 3,140 85
Orkla ASA A Shares 26,060 2,245
Orkla ASA B Shares 7,920 617
- - Petroleum Geo-Services ASA 1,170 74
- - Storebrand ASA 160,260 1,130
Unitor ASA 44,650 545
-----------
19,074
-----------
PORTUGAL (0.9%)
Banco Comercial Portugues 8%
Cvt. Pfd. Series A 27,639 2,039
Banco Comercial Portugues SA
(Registered) 18,840 386
Banco Espirito Santo e Comercial
de Lisboa SA (Registered) 70,080 2,088
Banco Totta e Acores SA
(Registered) 50,980 1,002
Cimpor-Cimento de Portugal SA 53,316 1,399
Cin-Corporacao Industrial do
Norte SA 2,690 170
- - Colep-Companhia Portuguesa de
Embalagens SA 11,284 160
- - Companhia de Seguros
Tranquilidade SA 9,200 221
Corticeira Amorin SA 18,110 217
Efacec-Empresa Fabrilde Maquinas
Electricas SA 16,930 131
- - Electricidade de Portugal SA 221,822 4,205
Engil-SGPS SA 16,320 159
Inapa-Investimentos Participacoes
e Gestao SA 43,710 511
Jeronimo Martins & Filho,
SGPS, SA 26,870 853
- - Jeronimo Martins SGPS SA
PTE1000 Rights Exp. 1/1/1998 33,500 1,558
Portucel Industrial-Empresa
Productora de Cellulosa SA 42,240 258
Portugal Telecom SA (Registered) 95,456 4,434
- - Sociedade Construcoes Soares
da Costa SA 19,310 134
- - Somague-Sociedade Gestora de
Participacoes, SA 14,000 147
Sonae Investimentos-Sociedade
Gestora de Participacoes SA 28,820 1,167
Unicer-Uniao Cervejeira SA 15,950 226
-----------
21,465
-----------
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
SPAIN (3.8%)
Acerinox SA 8,746 $ 1,291
Argentaria SA 72,900 4,434
Autopista Concesionaria
Espanola SA 110,007 1,476
Banco Bilbao Vizcaya SA
(Registered) 412,073 13,329
Banco Central
Hispanoamericano SA 215,772 5,252
- - Banco Santander SA 273,746 9,142
Corporacion Financiera Alba SA 9,715 1,023
- - Corporacion Mapfre SA 40,842 1,082
Dragados y Construcciones SA 34,946 744
ENDESA-Empresa Nacional de
Electricidad SA 616,456 10,941
Ebro Agricolas Compania de
Alimentacion SA 33,394 587
- - El Aguila SA 33,608 132
Empresa Nacional Compania
de Celulosas SA 18,550 252
- - Ercros SA 80,602 78
Fomento de Construcciones y
Contratas SA 38,032 1,447
Gas Natural SDG SA 92,208 4,779
Iberdrola SA 535,603 7,046
Inmobiliaria Metropolitana
Vasca Central SA 16,966 765
- - Inmobiliaria Urbis SA 60,980 576
Portland Valderrivas SA 4,748 427
Prosegur Cia de Seguridad SA
(Registered) 74,800 751
Repsol SA 169,037 7,209
Sarrio SA 61,040 221
Sociedade General de Aguas de
Barcelona SA 1,350 56
Tabacalera SA 23,506 1,905
Telefonica de Espana SA 554,468 15,825
Union Electrica Fenosa SA 86,007 824
Uralita SA 35,964 410
Vallehermoso SA 28,158 863
Viscofan Industria Navarra de
Envolturas Celulosic SA 21,260 534
Zardoya Otis SA 2,426 282
-----------
93,683
-----------
SWEDEN (3.7%)
ABB AB A Shares 410,480 4,863
ABB AB B Shares 189,800 2,237
AGA AB A Shares 101,750 1,404
AGA AB B Shares 88,440 1,170
Astra AB A Shares 790,500 13,699
Astra AB B Shares 178,346 3,001
Atlas Copco AB A Shares 76,300 2,279
Atlas Copco AB B Shares 38,590 1,150
Electrolux AB B Shares 49,650 3,448
Esselte AB A Shares 17,160 324
Esselte AB B Shares 12,090 245
Hennes & Mauritz AB B Shares 127,940 5,644
LM Ericsson Telephone AB
B Shares 568,400 21,384
SKF AB A Shares 27,240 546
SKF AB B Shares 5,680 121
Scanem AB A Shares 34,830 1,427
Securitas AB B Shares 46,080 1,394
Skandia Forsakrings AB 43,622 2,059
Skandinaviska Eeskilda Banken
AB B Shares 345,753 4,379
Skanska AB B Shares 71,758 2,944
Stora Kopparbergs Berglags
AB A Shares 82,805 1,044
Stora Kopparbergs Berglags
AB B Shares 3,550 44
Svenska Cellulosa AB B Shares 125,946 2,833
Svenska Handelsbanken AB
A Shares 135,680 4,694
Svenska Handelsbanken AB
B Shares 25,060 807
Swedish Match AB 323,369 1,080
Trelleborg AB B Shares 76,898 969
Volvo AB A Shares 41,300 1,104
Volvo AB B Shares 182,969 4,912
-----------
91,205
-----------
SWITZERLAND (11.5%)
- - ABB AG (Bearer) 4,795 6,033
- - ABB AG (Registered) 3,560 901
Adecco SA (Bearer) 10,627 3,086
Alusuisse-Lonza Holding AG
(Bearer) 1,316 1,257
Alusuisse-Lonza Holding AG
(Registered) 2,550 2,453
Credit Suisse Group AG
(Registered) 155,175 24,044
- - Danzas Holding AG (Registered) 1,845 363
Forbo Holding AG (Registered) 780 319
Georg Fischer AG (Bearer) 310 425
Georg Fischer AG (Registered) 215 57
Grands Magasins Jelmoli SA
(Bearer) 290 250
Grands Magasins Jelmoli SA
(Registered) 650 109
Holderbank Financiere Glarus AG
(Bearer) 3,328 2,720
Holderbank Financiere Glarus AG
(Registered) 6,710 1,095
Kuoni Reisen Holding AG
(Registered) 260 976
Moevenpick Holding AG (Bearer) 1,810 733
Nestle SA (Registered) 23,619 35,447
Novartis AG (Bearer) 3,718 6,054
Novartis AG (Registered) 37,766 61,366
Roche Holding AG (Bearer) 968 14,933
Roche Holdings AG
(Dividend-Right Certificates) 4,208 41,848
SGS Societe Generale de
Surveillance Holding SA (Bearer) 817 1,568
SGS Societe Generale de
Surveillance Holding SA
(Registered) 1,740 638
SMH AG (Bearer) 2,352 1,300
SMH AG (Registered) 9,650 1,303
- - Sairgroup AG 1,260 1,728
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Schindler Holding AG (Ptg. Ctf.) 60 $ 63
Schindler Holding AG (Registered) 190 204
Sika Finanz AG (Bearer) 890 283
Sulzer AG (Registered) 360 229
- - Swiss Bank Corp. (Registered) 45,365 14,121
Swiss Reinsurance Co. (Registered) 8,818 16,517
Union Bank of Switzerland AG
(Bearer) 12,691 18,377
Union Bank of Switzerland AG
(Registered) 15,000 4,330
Valora Holding AG 1,981 418
Zurich Insurance Co. (Registered) 28,290 13,500
-----------
279,048
-----------
UNITED KINGDOM (31.6%)
Abbey National PLC 901,437 16,182
Amec PLC 338,062 651
Anglian Water PLC 201,972 2,758
Argos PLC 210,262 1,901
Arjo Wiggins Appleton PLC 660,652 1,761
Associated British Foods PLC 545,159 4,754
B.A.T. (British American Tobacco)
Industries PLC 1,851,602 16,878
BBA Group PLC 261,227 1,745
BG PLC 2,401,041 10,825
BICC PLC 278,099 796
BOC Group PLC 277,847 4,576
BPB PLC 362,769 2,029
BTR PLC 2,444,952 7,402
Barclays PLC 912,063 24,282
Barratt Developments PLC 185,750 709
Bass PLC 520,501 8,089
Blue Circle Industries PLC 531,665 2,987
Boots Co., PLC 546,975 7,888
Bowthorpe PLC 174,335 1,076
British Aerospace PLC 251,942 7,192
British Airways PLC 591,986 5,455
British Land Co., PLC 346,567 3,883
British Petroleum Co., PLC 3,404,712 44,817
British Sky Broadcasting
Group PLC 1,057,991 7,938
British Steel PLC 1,374,762 2,952
British Telecommunications PLC 3,782,268 29,779
Burmah Castrol PLC 155,957 2,720
Cable and Wireless PLC 1,353,724 11,917
Cadbury Schweppes PLC 616,349 6,222
Caradon PLC 391,398 1,140
Carlton Communications PLC 362,600 2,804
- - Centrica PLC 2,992,804 4,407
Coats Viyella PLC 525,766 787
Cobham PLC 50,964 700
Commercial Union PLC 422,923 5,908
Courtaulds PLC 271,720 1,328
Courtaulds Textiles PLC 72,694 427
De La Rue PLC 188,548 1,228
Delta PLC 143,760 624
Diageo PLC 2,439,128 22,455
EMI Group PLC 451,852 3,777
Electrocomponents PLC 323,990 2,415
English China Clays PLC 264,315 1,166
FKI PLC 469,426 1,475
GKN PLC 235,559 4,833
General Electric Co., PLC 1,670,662 10,844
George Wimpey PLC 251,450 443
Glaxo Wellcome PLC 2,116,250 50,142
Granada Group PLC 528,686 8,090
Great Universal Stores PLC 618,344 7,804
Guardian Royal Exchange PLC 364,846 1,986
HSBC Holdings PLC (Foreign) 1,071,258 26,475
HSBC Holdings PLC (Local) 537,845 13,806
Hammerson PLC 64,316 497
Hanson PLC 407,135 1,820
Harrison & Crosfield PLC 227,073 527
Hepworth PLC 51,075 187
Hyder PLC 116,646 1,858
IMI PLC 192,006 1,278
Imperial Chemical Industries PLC 434,454 6,798
J. Sainsbury PLC 1,136,437 9,518
Johnson Matthey PLC 44,748 401
Kingfisher PLC 412,263 5,752
Ladbroke Group PLC 741,857 3,222
Laird Group PLC 59,550 436
Land Securities PLC 319,406 5,098
Lasmo PLC 610,943 2,774
Legal & General Group PLC 770,995 6,749
Lex Service PLC 53,026 406
Lloyds TSB Group PLC 3,203,269 41,480
Lonrho PLC 244,458 378
LucasVarity PLC 885,898 3,134
MEPC PLC 318,878 2,665
Marks & Spencer PLC 1,699,102 16,746
Marley PLC 43,540 67
Mercury Asset Management
Group PLC 134,430 3,760
Meyer International PLC 52,241 328
National Grid Group PLC 1,112,452 5,290
National Power PLC 730,402 7,211
Next PLC 253,197 2,883
Ocean Group PLC 141,155 1,384
Pearson PLC 367,917 4,788
Peninsular & Oriental Steam
Navigation Co. 346,101 3,944
Pilkington PLC 482,475 1,012
Prudential Corp. PLC 1,151,564 13,908
RMC Group PLC 43,728 612
Racal Electronics PLC 244,449 1,074
Railtrack Group PLC 67,030 1,067
Rank Group PLC 204,921 1,143
Redland PLC 135,687 764
Reed International PLC 662,222 6,647
Reuters Holdings PLC 1,011,699 11,070
Rexam PLC 317,046 1,560
Rio Tinto PLC 624,205 7,693
Rolls-Royce PLC 792,113 3,063
Royal & Sun Alliance Insurance
Group PLC 939,877 9,480
Royal Bank of Scotland
Group PLC 520,013 6,614
Rugby Group PLC 297,746 666
Safeway PLC 723,560 4,084
Schroders PLC 137,029 4,313
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Scottish & Newcastle PLC 379,675 $ 4,657
Scottish Power PLC 729,154 6,455
Sears PLC 707,165 617
Sedgwick Group PLC 107,950 252
Slough Estates PLC 83,589 472
SmithKline Beecham PLC 3,297,878 33,806
Smiths Industries PLC 190,363 2,656
Southern Electric PLC 128,685 1,071
St. James's Place Capital PLC 290,314 822
T & N PLC 164,627 691
TI Group PLC 346,962 2,649
Tarmac PLC 541,871 1,016
Tate & Lyle PLC 272,595 2,247
Taylor Woodrow PLC 257,799 755
Tesco PLC 1,305,079 10,630
Thames Water PLC 234,749 3,501
Thorn PLC 151,429 394
Transport Development
Group PLC 211,921 708
Unigate PLC 151,020 1,493
Unilever PLC 1,995,124 17,103
United Biscuits Holdings PLC 420,367 1,556
United Utilities PLC 331,199 4,251
Vickers PLC 219,029 851
Viglen Technology PLC
Unsecured Exchangeable Loan
Stock Due 9/1/2000 199,005 327
Vodafone Group PLC 1,832,923 13,240
Williams PLC 470,789 2,618
Willis Corroon Group PLC 98,419 238
Wilson Connolly Holdings PLC 86,943 226
Wolseley PLC 359,736 2,859
Zeneca Group PLC 564,904 19,863
-----------
769,401
-----------
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,594,386) 2,388,522
- -----------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -----------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (17.8%)
- -----------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILL
(2)5.02%, 1/22/1998 $ 1,900 1,895
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.54%, 1/2/1998 33,553 33,553
6.50%, 1/2/1998--Note G 396,606 396,606
- -----------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $432,053) 432,054
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS (116.0%)
(COST $2,026,439) 2,820,576
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -----------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-16.0%)
- -----------------------------------------------------------------------------------
<S> <C>
Other Assets--Note B $ 23,212
Security Lending Collateral Payable
to Brokers--Note G (396,606)
Other Liabilities (14,756)
-----------
(388,150)
- -----------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------
Applicable to 120,843,178 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $2,432,426
===================================================================================
NET ASSET VALUE PER SHARE $20.13
===================================================================================
</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 99.7% of net assets.
(2)Security segregated as initial margin for open futures contracts.
(Ptg. Ctf.)--Participating Certificate.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
AT DECEMBER 31, 1997, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,634,085 $13.52
Overdistributed Net Investment
Income--Note F (311) --
Accumulated Net Realized
Gains--Note F 4,826 .04
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities 794,137 6.57
Futures Contracts 340 --
Foreign Currencies and Forward
Currency Contracts (651) --
- -----------------------------------------------------------------------------------
NET ASSETS $2,432,426 $20.13
===================================================================================
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
COMMON STOCKS (99.8%)(1)
- -----------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (8.4%)
Aberfoyle Ltd. 53,000 $ 86
Amcor Ltd. 280,691 1,235
Ashton Mining Ltd. 231,114 203
Australia National Industries Ltd. 363,531 334
Australian Gas Light Co., Ltd. 142,800 996
Boral Ltd. 504,000 1,274
Brambles Industries Ltd. 97,711 1,939
Broken Hill Proprietary Ltd. 856,460 7,952
Burns Philp & Co., Ltd. 234,530 37
CSR Ltd. 439,600 1,489
Coca-Cola Amatil Ltd. 345,968 2,585
Coles Myer Ltd. 480,641 2,308
- - Crown Ltd. 317,495 141
- - Crown Ltd. Rights Exp. 1/19/1998 115,452 10
David Jones Ltd. 178,132 201
Delta Gold NL 124,065 131
Email Ltd. 137,683 325
F.H. Faulding & Co., Ltd. 68,300 342
Foster's Brewing Group Ltd. 701,260 1,334
Futuris Corp., Ltd. 232,120 254
Gio Australia Holdings Ltd. 217,500 556
Goodman Fielder Ltd. 548,833 873
Great Central Mines Ltd. 123,430 133
Hardie (James) Industries Ltd. 179,904 524
Howard Smith Ltd. 97,200 807
ICI Australia Ltd. 134,048 939
Leighton Holdings Ltd. 127,100 444
Metal Manufactures Ltd. 123,800 186
Mount Isa Mines Holdings Ltd. 510,599 313
National Australia Bank Ltd. 625,680 8,736
- - Newcrest Mining Ltd. 64,445 70
News Corp. Ltd. 840,379 4,638
News Corp. Ltd. Pfd. 623,413 3,085
Normandy Mining Ltd. 824,264 800
North Ltd. 320,778 845
Pacific Dunlop Ltd. 415,740 880
Pioneer International Ltd. 431,400 1,178
Plutonic Resources Ltd. 72,650 203
QBE Insurance Group Ltd. 175,443 790
QCT Resources Ltd. 225,200 182
Renison Goldfields
Consolidated Ltd. 65,441 100
Resolute Ltd. 105,895 77
Rio Tinto Ltd. 150,942 1,761
Rothmans Holdings Ltd. 56,800 300
Southcorp. Ltd. 306,605 1,015
Santos Ltd. 265,689 1,094
Sons of Gwalia Ltd. 92,544 211
Stockland Trust Group Ltd. 285,800 662
- - Sydney Harbour Casino
Holdings Ltd. 265,200 251
Tabcorp Holdings Ltd. 58,692 275
- - Telstra Corp. Ltd. 2,214,000 4,674
WMC Ltd. 474,187 1,653
Westfield Trust (Units) 1,786,100 3,410
Westpac Banking Corp., Ltd. 752,571 4,813
-----------
69,654
-----------
HONG KONG (8.7%)
Bank of East Asia Ltd. 567,933 1,330
Cathay Pacific Airways Ltd. 1,433,000 1,165
Cheung Kong Holdings Ltd. 1,016,000 6,655
China Light and Power Co., Ltd. 1,067,000 5,922
Dickson Concepts
International Ltd. 69,399 101
Elec & Eltek International
Holdings Ltd. 292,000 72
Giordano International Ltd. 586,000 202
Hang Lung Development Co., Ltd. 500,000 703
Hang Seng Bank Ltd. 828,900 7,997
Hong Kong & China Gas Co., Ltd. 1,599,993 3,098
Hong Kong Aircraft &
Engineering Co., Ltd. 126,400 318
Hong Kong and Shanghai
Hotels Ltd. 328,000 271
Hong Kong
Telecommunications Ltd. 5,248,593 10,804
Hopewell Holdings Ltd. 2,308,000 575
Hutchison Whampoa Ltd. 1,630,000 10,224
Hysan Development Co., Ltd. 478,000 953
Johnson Electric Holdings Ltd. 206,500 594
Kumagai Gumi Hong Kong Ltd. 138,000 105
Miramar Hotel & Investment Ltd. 336,000 568
New World Development
Co., Ltd. 834,000 2,885
Oriental Press Group Ltd. 1,183,000 359
Peregrine Investment
Holdings Ltd. 293,200 208
Regal Hotels International
Holdings Ltd. 1,756,800 333
Shangri-La Asia Ltd. 306,000 259
Shun Tak Holdings Ltd. 958,000 257
South China Morning Post Ltd. 775,000 545
Sun Hung Kai Properties Ltd. 1,057,400 7,369
Swire Pacific Ltd. A Shares 665,500 3,650
Tai Cheung Holdings Ltd. 556,500 221
Television Broadcasts Ltd. 237,000 676
Varitronix International Ltd. 144,000 247
Wharf Holdings Ltd. 1,027,000 2,253
Wing Lung Bank Ltd. 113,528 544
-----------
71,463
-----------
JAPAN (76.6%)
Advantest Corp. 37,400 2,129
Ajinomoto Co., Inc. 282,000 2,754
Alps Electric Co., Ltd. 90,000 851
Amada Co., Ltd. 129,000 481
Amano Corp. 44,000 338
- - Aoki Corp. 276,000 89
Aoyama Trading Co., Ltd. 36,600 656
Arabian Oil Co., Ltd. 30,400 463
Asahi Bank Ltd. 1,015,000 4,137
Asahi Breweries Ltd. 198,000 2,893
Asahi Chemical Industry Co., Ltd. 635,000 2,159
Asahi Glass Co., Ltd. 500,000 2,384
Ashikaga Bank Ltd. 345,000 557
Autobacs Seven Co., Ltd. 19,500 562
The Bank of Tokyo-
Mitsubishi Ltd. 1,999,000 27,674
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Bank of Yokohama Ltd. 511,000 $ 1,352
Bridgestone Corp. 356,000 7,749
Brother Industries Ltd. 177,000 406
CSK Corp. 28,400 730
Canon, Inc. 375,000 8,768
Casio Computer Co. 123,000 885
Chiba Bank Ltd. 339,000 1,056
Chichibu Onoda Cement Corp. 255,000 471
Chiyoda Corp. 86,000 93
Chugai Pharmaceutical Co., Ltd. 109,000 562
Citizen Watch Co., Ltd. 144,000 969
Cosmo Oil Co., Ltd. 250,000 381
Dai-Nippon Ink & Chemicals, Inc. 346,000 878
Dai-Nippon Printing Co., Ltd. 331,000 6,237
Dai-Nippon Screen
Manufacturing Co., Ltd. 68,000 314
Daicel Chemical Industries Ltd. 27,000 35
Daido Steel Co., Ltd. 242,000 305
Daiei, Inc. 330,000 1,371
Daifuku Co., Ltd. 32,000 156
Daiichi Pharmaceutical Co., Ltd. 117,000 1,323
Daikin Industries Ltd. 58,000 219
Daikyo, Inc. 99,000 76
Daimaru, Inc. 81,000 192
Daito Trust Construction Co., Ltd. 58,800 360
Daiwa House Industry Co., Ltd. 230,000 1,221
Daiwa Kosho Lease Co., Ltd. 70,000 285
Daiwa Securities Co., Ltd. 815,000 2,821
Denki Kagaku Kogyo K.K. 209,000 317
Denso Corp. 385,000 6,958
East Japan Railway Co. 1,735 7,860
Ebara Corp. 116,000 1,231
Eisai Co., Ltd. 127,000 1,944
Ezaki Glico Co. 81,600 529
Fanuc Co., Ltd. 104,600 3,974
Fuji Bank Ltd. 1,258,000 5,109
Fuji Photo Film Co., Ltd. 223,000 8,576
Fujikura Ltd. 152,000 1,010
Fujita Corp. 273,000 99
Fujita Kanko, Inc. 58,000 625
Fujitsu Ltd. 803,000 8,646
Furukawa Electric Co. 286,000 1,230
Gakken Co. 6,000 8
Gunma Bank Ltd. 224,000 1,464
Gunze Ltd. 52,000 86
Hankyu Corp. 352,000 1,654
Hankyu Department Stores, Inc. 45,000 251
- - Haseko Corp. 136,000 70
Hazama Corp. 176,000 87
Higo Bank Ltd. 68,000 345
Hirose Electric Co., Ltd. 16,300 836
Hitachi Ltd. 1,428,000 10,214
Hitachi Zosen Corp. 440,000 707
Hokuriku Bank Ltd. 382,000 499
Honda Motor Co., Ltd. 418,000 15,399
House Foods Industry Corp. 59,000 771
Hoya Corp. 53,000 1,671
INAX Corp. 102,000 297
Industrial Bank of Japan Ltd. 1,100,000 7,868
Isetan Co. 80,000 335
- - Ishihara Sangyo Kaisha Ltd. 109,000 122
Ito-Yokado Co., Ltd. 180,000 9,206
Itochu Corp. 580,000 914
Itoham Foods, Inc. 67,000 318
Iwatani International Corp. 135,000 240
JGC Corp. 47,000 99
- - Japan Air Lines Co., Ltd. 779,000 2,127
Japan Energy Corp. 391,000 370
- - Japan Metals & Chemicals Co. 60,000 50
- - Japan Steel Works Ltd. 100,000 76
Joyo Bank Ltd. 390,000 1,380
Jusco Co., Ltd. 141,000 1,995
Kajima Corp. 433,000 1,096
Kaken Pharmaceutical Co. 12,000 24
Kamigumi Co., Ltd. 45,000 134
Kandenko Co., Ltd. 56,000 287
- - Kanebo Ltd. 118,000 86
Kaneka Corp. 79,000 358
Kansai Electric Power Co., Inc. 422,600 7,183
Kansai Paint Co., Ltd. 116,000 281
Kao Corp. 265,000 3,832
Katokichi Co., Ltd. 27,000 334
Kawasaki Heavy Industries Ltd. 559,000 868
- - Kawasaki Kisen Kaisha Ltd. 230,000 279
Kawasaki Steel Corp. 1,322,000 1,810
Keihin Electric Express
Railway Co., Ltd. 158,000 553
Kikkoman Corp. 58,000 295
Kinden Corp. 117,000 1,251
Kinki Nippon Railway Co. 709,000 3,801
Kirin Brewery Co., Ltd. 449,000 3,281
Kissei Pharmaceutical Co. 27,000 390
Kokuyo Co., Ltd. 58,000 1,004
Komatsu Ltd. 440,000 2,217
Komori Corp. 22,000 328
Konami Co., Ltd. 11,000 272
Konica Corp. 80,000 369
Koyo Seiko Co., Ltd. 71,000 285
Kubota Corp. 628,000 1,662
Kumagai Gumi Co., Ltd. 251,000 137
Kurabo Industries Ltd. 77,000 83
Kuraray Co., Ltd. 163,000 1,354
Kureha Chemical Industry Co. 89,000 183
Kurita Water Industries Ltd. 59,000 604
Kyocera Corp. 83,000 3,779
Kyowa Hakko Kogyo Co. 199,000 865
Kyudenko Corp. 3,000 15
Lion Corp. 155,000 460
Maeda Road Construction Co., Ltd. 21,000 84
Makino Milling Machine Co. 62,000 393
Makita Corp. 68,000 654
Marubeni Corp. 594,000 1,046
Maruha Corp. 14,000 13
Marui Co., Ltd. 161,000 2,514
Matsushita Electric Industrial
Co., Ltd. 906,000 13,309
Meiji Milk Products Co., Ltd. 60,000 156
Meiji Seika Kaisha Ltd. 92,000 307
Minebea Co., Ltd. 174,000 1,874
Misawa Homes Co., Ltd. 49,000 136
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Mitsubishi Chemical Corp. 957,000 $ 1,376
Mitsubishi Corp. 679,000 5,379
Mitsubishi Electric Corp. 878,000 2,255
Mitsubishi Estate Co., Ltd. 564,000 6,160
Mitsubishi Gas Chemical Co. 113,000 298
Mitsubishi Heavy Industries Ltd. 1,466,000 6,134
Mitsubishi Logistics Corp. 58,000 607
Mitsubishi Materials Corp. 533,000 861
Mitsubishi Oil Co., Ltd. 100,000 148
Mitsubishi Paper Mills Ltd. 209,000 294
Mitsubishi Rayon Co., Ltd. 278,000 684
Mitsubishi Trust & Banking Corp. 558,000 5,622
Mitsui & Co., Ltd. 687,000 4,079
- - Mitsui Engineering &
Shipbuilding Co., Ltd. 186,000 119
Mitsui Fudosan Co., Ltd. 331,000 3,208
Mitsui Marine & Fire
Insurance Co. 294,000 1,506
Mitsui Mining & Smelting Co., Ltd. 154,000 621
- - Mitsui Osk Lines Ltd. 495,000 689
Mitsui Soko Co., Ltd. 92,000 231
Mitsui Trust & Banking Co. 530,000 1,031
Mitsukoshi Ltd. 124,000 331
Mori Seiki Co. 24,000 249
Murata Manufacturing Co., Ltd. 104,000 2,624
Mycal Corp. 141,000 1,182
NEC Corp. 687,000 7,344
NGK Insulators Ltd. 166,000 1,481
NGK Spark Plug Co. 51,000 290
NKK Corp. 1,454,000 1,163
NOF Corp. 9,000 15
NSK Ltd. 225,000 562
NTN Corp. 87,000 202
Nagase & Co., Ltd. 6,000 18
Nagoya Railroad Co., Ltd. 358,000 1,234
Namco Ltd. 20,000 583
Nankai Electric Railway Co. 121,000 530
Nichido Fire & Marine
Insurance Co., Ltd. 196,000 1,025
Nichirei Corp. 74,000 159
Nihon Cement Co., Ltd. 63,000 130
- - Niigata Engineering Co., Ltd. 246,000 108
Nikon Corp. 153,000 1,518
Nippon Beet Sugar
Manufacturing Co. 11,000 15
Nippon Comsys Corp. 65,000 805
Nippon Express Co., Ltd. 470,000 2,350
Nippon Fire & Marine
Insurance Co., Ltd. 254,000 955
Nippon Light Metal Co. 308,000 450
Nippon Meat Packers, Inc. 100,000 1,369
Nippon Oil Co., Ltd. 534,000 1,384
Nippon Paper Industries Co. 410,000 1,615
Nippon Sharyo Ltd. 43,000 120
Nippon Sheet Glass Co., Ltd. 199,000 279
Nippon Shinpan Co. 281,000 318
Nippon Shokubai K.K. 84,000 342
Nippon Steel Corp. 2,971,000 4,410
- - Nippon Suisan Kaisha Ltd. 111,000 141
Nippon Telegraph and
Telephone Corp. 5,449 46,938
Nippon Yusen Kabushiki
Kaisha Co. 550,000 1,514
Nishimatsu Construction Co. 124,000 391
Nissan Motor Co., Ltd. 1,068,000 4,436
Nisshinbo Industries, Inc. 99,000 419
Nissin Food Products Co., Ltd. 53,000 966
Nitto Denko Corp. 16,000 277
Nomura Securities Co., Ltd. 1,297,000 17,357
Noritake Co., Ltd. 58,000 277
OJI Paper Co., Ltd. 423,000 1,688
Odakyu Electric Railway Co. 344,000 1,492
Ohbayashi Corp. 308,000 1,052
Okamoto Industries, Inc. 75,000 133
Okuma Corp. 67,000 239
Okumura Corp. 79,000 188
Olympus Optical Co., Ltd. 63,000 437
Omron Corp. 108,000 1,694
Onward Kashiyama Co., Ltd. 77,000 894
Osaka Gas Co., Ltd. 1,037,000 2,377
Oyo Corp. 11,000 159
Penta-Ocean Construction Co. 139,000 196
Pioneer Electronic Corp. 73,000 1,129
Q.P. Corp. 74,000 452
- - Renown, Inc. 90,000 38
Rohm Co., Ltd. 51,000 5,217
SMC Corp. 28,400 2,512
Sakura Bank Ltd. 1,485,681 4,262
Sanden Corp. 35,000 151
Sankyo Aluminum Industry Co. 8,000 7
Sankyo Co., Ltd. 199,000 4,515
- - Sanrio Co., Ltd. 40,000 211
Sanwa Shutter Corp. 101,000 510
Sanyo Electric Co., Ltd. 793,000 2,074
Sapparo Breweries Ltd. 69,000 218
Sato Kogyo Co. 95,000 59
Secom Co., Ltd. 49,000 3,143
Sega Enterprises Ltd. 49,900 906
Seino Transportation Co., Ltd. 52,000 260
Seiyu Ltd. 41,000 130
Sekisui Chemical Co. 250,000 1,275
Sekisui House Ltd. 316,000 2,039
77 Bank Ltd. 71,000 508
Sharp Corp. 466,000 3,218
Shimachu Co. 9,000 142
Shimano, Inc. 34,000 628
Shimizu Corp. 345,000 801
Shin-Etsu Chemical Co., Ltd. 166,000 3,179
Shionogi & Co., Ltd. 155,000 713
Shiseido Co., Ltd. 184,000 2,519
Shizuoka Bank Ltd. 354,000 3,812
Showa Denko K.K. 458,000 402
Skylark Co., Ltd. 45,000 433
Snow Brand Milk Products Co. 67,000 181
Sony Corp. 171,500 15,301
Sumitomo Bank Ltd. 1,346,000 15,425
Sumitomo Chemical Co. 723,000 1,668
Sumitomo Corp. 462,000 2,594
Sumitomo Electric Industries Ltd. 316,000 4,326
Sumitomo Forestry Co. 72,000 352
Sumitomo Heavy Industries Ltd. 213,000 654
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Sumitomo Marine & Fire
Insurance Co. 272,000 $ 1,443
Sumitomo Metal Industries Ltd. 1,291,000 1,658
Sumitomo Metal Mining Co. 252,000 833
Sumitomo Osaka Cement
Co., Ltd. 234,000 295
Taisei Corp. 419,000 690
Taisho Pharmaceutical Co. 150,000 3,842
Taiyo Yuden Co., Ltd. 8,000 56
Takara Shuzo Co. 127,000 474
Takara Standard Co. 46,000 226
Takashimaya Co. 145,000 881
Takeda Chemical Industries Ltd. 376,000 10,758
Takuma Co., Ltd. 20,000 138
Teijin Ltd. 428,000 899
Teikoku Oil Co., Ltd. 121,000 316
Toa Corp. 85,000 112
Tobu Railway Co., Ltd. 376,000 1,180
Toei Co. 67,000 245
Toho Co., Ltd. 9,330 997
Tohoku Electric Power Co. 219,100 3,337
Tokai Bank Ltd. 886,000 4,143
Tokio Marine & Fire Insurance Co. 675,000 7,683
Tokyo Broadcasting System, Inc. 69,000 876
Tokyo Dome Corp. 73,000 487
Tokyo Electric Power Co. 578,600 10,591
Tokyo Electron Ltd. 74,630 2,399
Tokyo Gas Co., Ltd. 1,142,000 2,600
Tokyo Steel Manufacturing Co. 57,000 193
Tokyo Style Co. 31,000 281
Tokyo Tatemono Co., Ltd. 106,000 139
Tokyotokeiba Co. 142,000 183
Tokyu Corp. 442,000 1,713
Toppan Printing Co., Ltd. 304,000 3,975
Toray Industries, Inc. 614,000 2,763
- - Tosoh Corp. 247,000 416
Tostem Corp. 89,000 958
Toto Ltd. 162,000 1,039
Toyo Engineering Corp. 112,000 81
Toyo Exterior Co. 12,000 79
Toyo Seikan Kaisha Ltd. 103,000 1,473
Toyobo Ltd. 388,000 471
Toyoda Automatic Loom
Works Ltd. 124,000 2,289
Toyota Motor Corp. 1,627,000 46,800
Trans Cosmos, Inc. 8,000 141
Tsubakimoto Chain Co. 111,000 401
Ube Industries Ltd. 370,000 472
Uni-Charm Corp. 4,000 142
Uniden Corp. 11,000 89
- - Unitika Ltd. 183,000 99
Uny Co. 84,000 1,156
Wacoal Corp. 70,000 700
Yamaguchi Bank Ltd. 86,000 1,058
Yamaha Corp. 92,000 1,047
Yamanouchi Pharmaceuticals
Co., Ltd. 133,000 2,864
Yamato Transport Co., Ltd. 164,000 2,207
Yamazaki Baking Co., Ltd. 97,000 947
The Yasuda Trust and Banking
Co., Ltd. 531,000 531
Yokogawa Electric Corp. 115,000 713
-----------
633,425
-----------
MALAYSIA (2.5%)
AMMB Holdings Bhd. 212,600 139
Aluminum Co. of Malaysia Bhd. 264,000 60
Amsteel Corp., Bhd. 830,800 153
Antah Holdings Bhd. 475,000 145
- - Aokam Perdana Bhd. 337,000 37
Berjaya Group Bhd. 345,000 70
Berjaya Land Bhd. 160,000 98
Commerce Asset Holdings Bhd. 358,000 171
Edaran Otomobil Nasional Bhd. 128,000 261
- - Ekran Bhd. 56,000 40
Golden Hope Plantations Bhd. 505,000 584
Golden Plus Holdings Bhd. 41,000 9
Guinness Anchor Bhd. 123,000 152
Highlands & Lowlands Bhd. 157,000 161
Hong Leong Industries Bhd. 39,400 40
Hong Leong Properties Bhd. 705,000 129
Hume Industries Malaysia Bhd. 65,000 68
IGB Corp., Bhd. 662,000 154
IOI Corp., Bhd. 114,000 37
Jaya Tiasa Holdings Bhd. 26,000 48
Johan Holdings Bhd. 229,000 63
Kedah Cement Holdings Bhd. 72,000 13
- - Kelanamas Industries Bhd. 19,000 2
- - Kemayan Corp., Bhd. 114,000 15
Kian Joo Can Factory Bhd. 28,000 25
Kuala Lumpur Kepong Bhd. 261,500 561
Land & General Bhd. 204,500 38
Landmarks Bhd. 209,000 31
Leader Universal Holdings Bhd. 279,666 86
MBF Capital Bhd. 505,000 117
Magnum Corp., Bhd. 416,500 250
Malayan Banking Bhd. 515,500 1,497
Malayan Cement Bhd. 71,000 48
Malayan United Industries Bhd. 175,000 31
Malayawata Steel Bhd. 82,500 20
Malaysia International Shipping
Corp., Bhd. (Foreign) 251,333 368
Malaysia Mining Corp., Bhd. 104,400 41
Malaysian Airline System Bhd. 407,000 326
Malaysian Mosaics Bhd. 319,000 115
Malaysian Oxygen Bhd. 90,000 201
Malaysian Pacific Industries Bhd. 98,000 235
Malaysian Resources Corp., Bhd. 631,333 146
Mulpha International Bhd. 277,000 32
- - Mycom Bhd. 295,000 74
Nestle Malaysia Bhd. 116,000 536
New Straits Times Press Bhd. 98,000 121
Oriental Holdings Bhd. 203,200 249
Palmco Holdings Bhd. 61,000 10
Pan Malaysia Cement Works Bhd. 107,000 41
Perlis Plantations Bhd. 157,500 223
Perusahaan Otomobil
Nasional Bhd. 152,000 148
Petaling Garden Bhd. 121,000 93
Pilecon Engineering Bhd. 239,000 57
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
- - Promet Bhd. 382,000 $ 35
Public Bank Bhd. (Foreign) 353,599 122
- - Public Bank Bhd. Rights for
Foreign Shares Exp. 1/1/1998 58,933 1
RHB Capital Bhd. 737,000 356
RJ Reynolds Bhd. 197,000 321
Rashid Hussain Bhd. 224,000 174
Resorts World Bhd. 434,000 730
Rothmans of Pall Mall
Malaysia Bhd. 133,000 1,034
Selangor Properties Bhd. 315,000 96
Shell Refining Co. Malaysia Bhd. 164,000 257
Sime Darby Bhd. 1,008,600 969
Sungei Way Holdings Bhd. 58,200 19
TA Enterprise Bhd. 632,000 128
Tan Chong Motor Holdings Bhd. 417,000 182
Technology Resources
Industries Bhd. 452,000 267
Telekom Malaysia Bhd. 1,315,100 3,886
Tenaga Nasional Bhd. 1,371,000 2,923
Time Engineering Bhd. 280,000 72
UMW Holdings Malaysia Bhd. 144,733 110
United Engineers Malaysia Bhd. 339,000 282
YTL Corp., Bhd. 330,000 445
- - YTL Corp., Bhd. Warrants
Exp. 9/30/2002 22,000 9
-----------
20,787
-----------
NEW ZEALAND (0.9%)
Brierley Investments Ltd. 1,176,200 840
Carter Holt Harvey Ltd. 718,359 1,110
Fisher & Paykel Industries Ltd. 300 1
Fletcher Challenge Ltd. Building 184,167 376
Fletcher Challenge Ltd. Energy 162,067 568
Fletcher Challenge Ltd. Forest 341,292 283
Fletcher Challenge Ltd. Paper 226,035 295
Lion Nathan Ltd. 258,700 580
Telecom Corp. of New
Zealand Ltd. 750,800 3,640
-----------
7,693
-----------
SINGAPORE (2.7%)
Chuan Hup Holdings Ltd. 246,000 74
City Developments Ltd. 471,000 2,180
Comfort Group Ltd. 542,000 235
- - Creative Technology Ltd. 39,500 802
Cycle & Carriage Ltd. 75,000 309
Development Bank of Singapore
Ltd. (Foreign) 193,625 1,655
First Capital Corp., Ltd. 93,000 86
Fraser & Neave Ltd. 157,000 680
Goldtron Ltd. 378,000 75
Hai Sun Hup Group Ltd. 186,000 75
Haw Par Brothers
International Ltd. 96,400 125
Hotel Properties Ltd. 326,000 213
IPC Corp., Ltd. 411,000 35
Inchcape Bhd. 123,000 189
Keppel Corp., Ltd. 309,750 890
Lum Chang Holdings Ltd. 513,600 169
Metro Holdings Ltd. 42,000 52
Natsteel Ltd. 106,000 143
Neptune Orient Lines Ltd. 346,000 137
Oversea-Chinese Banking Corp.,
Ltd. (Foreign) 355,399 2,067
Overseas Union Enterprise Ltd. 56,000 134
Parkway Holdings Ltd. 124,000 280
Prima Ltd. 52,000 96
Robinson & Co., Ltd. 60,800 217
Sembawang Corp., Ltd. 65,000 139
Sembawang Marine & Logistics 34,000 50
Shangri-La Hotel Ltd. 121,300 222
Singapore Airlines Ltd. (Foreign) 383,000 2,500
Singapore Press Holdings Ltd.
(Foreign) 92,960 1,164
Singapore Technologies
Industrial Corp. 437,000 418
Singapore Telecommunications
Ltd. 2,591,000 4,829
United Industrial Corp., Ltd. 917,000 359
United Overseas Bank Ltd.
(Foreign) 356,350 1,977
Van Der Horst Ltd. 106,000 41
-----------
22,617
-----------
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,075,274) 825,639
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- -----------------------------------------------------------------------------------
CONVERTIBLE BOND (0.1%)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Nitto Denko Cvt.
3.90%, 3/30/2001
(COST $671) JPY 67,000 881
- -----------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (25.4%)
- -----------------------------------------------------------------------------------
U.S. TREASURY BILL
(2)5.02%, 1/22/1998 $ 3,000 2,992
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.54%, 1/2/1998 2,837 2,837
6.50%, 1/2/1998--Note G 204,273 204,273
- -----------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $210,102) 210,102
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS (125.3%)
(COST $1,286,047) 1,036,622
- -----------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-25.3%)
- -----------------------------------------------------------------------------------
Other Assets--Note B 4,808
Security Lending Collateral
Payable to Brokers--Note G (204,273)
Other Liabilities (9,917)
-----------
(209,382)
-----------
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO (000)
- -----------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
- -----------------------------------------------------------------------
Applicable to 107,206,360 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $827,240
=======================================================================
NET ASSET VALUE PER SHARE $7.72
=======================================================================
</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 Index futures contracts represents 100.4% of net assets.
(2)Security segregated as initial margin for open futures contracts.
JPY--Japanese Yen.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------
AT DECEMBER 31, 1997, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,115,619 $10.41
Overdistributed Net Investment
Income--Note F (1,116) (.01)
Accumulated Net Realized
Losses--Note F (37,701) (.35)
Unrealized Depreciation--Note E
Investment Securities (249,425) (2.33)
Futures Contracts (104) --
Foreign Currencies and Forward
Currency Contracts (33) --
- -----------------------------------------------------------------------------------
NET ASSETS $827,240 $7.72
===================================================================================
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
COMMON STOCKS (95.5%)
- -----------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA (5.3%)
- - Acindar Industria Argentina
de Aceros SA 78,600 $ 187
- - Alpargatas S.A.I.C. 354,200 149
Astra Cia Argentina de
Petroleum SA 466,010 816
Bagley SA Class B 62,225 118
Banco Frances Del Rio
de la Plata SA 152,968 1,420
Banco Galicia y Buenos Aires
SA de CV 306,763 1,964
- - Celulosa Argentina SA 623,850 187
Central Puerto SA 94,665 265
Ciadea SA 221,848 311
Corp Cementera Argentina SA 26,500 128
- - Indupa SA 296,438 356
Irsa Inversiones y
Representaciones SA 142,600 531
Ledesma SA 129,743 135
Molinos Rio de la Plata SA 33,600 81
Nobleza Piccardo SA 41,924 189
Perez Companc SA 786,550 5,617
- - Pirelli Cables SA 14,596 26
Siderca SA Class A 873,308 2,428
Sociedad Comercial de Plata SA 380,133 601
Telefonica Argentina SA Class B 2,221,000 8,330
YPF SA Class D 326,224 10,996
-----------
34,835
-----------
BRAZIL (19.2%)
Aracruz Celulose SA Pfd.
B Shares 1,070,671 1,477
Banco Banerindus de
Brasil SA 52,300 0
Banco Bradesco SA 451,548,308 4,491
Banco Bradesco SA Pfd. 439,916,197 4,336
Banco Itau SA Pfd. 12,125,112 6,519
- - Banco do Estado de Sao
Paulo SA Pfd. 36,756,000 1,499
Bardella SA Industrias
Mecanicas Pfd. 784 84
Bombril SA Pfd. 19,968,031 107
Brasmotor SA Pfd. 2,624,000 259
- - Caemi Mineracao e
Metalurgia SA Pfd. 1,920,501 69
Centrais Electricas
Brasileiras SA 417,899,010 20,783
Centrais Electricas
Brasileiras SA Pfd. B Shares 78,744,180 4,022
Ceval SA Pfd. 29,720,000 229
Cofap-Companhia Fabricadora
de Pecas Pfd. 11,370 33
Companhia Brasileira de
Petroleo Ipiranga Pfd. 55,190,000 841
Companhia Cervejaria Brahma 2,269,265 1,413
Companhia Cervejaria
Brahma Pfd. 4,469,150 3,003
Companhia Cimento Portland
Itau Pfd. 3,150,800 607
Companhia de Tecidos Norte de
Minas Pfd. 1,611,315 578
Companhia Energetica de Minas
Gerais Pfd. 121,409,665 5,275
Companhia Paulista de
Forca e Luz 18,547,400 2,443
Companhia Siderurgica
Belgo-Mineira 2,724,549 144
Companhia Siderurgica
Belgo-Mineira Pfd. 2,035,000 97
Companhia Siderurgica
Nacional 73,051,500 2,029
Companhia Vale do Rio
Doce Pfd. 363,192 7,306
Companhia Vidreas
Santa Marina 283,968 539
Confeccoes Guararapes SA 30,591 107
Copene-Petroquimica SA
Pfd. A Shares 981,194 299
Duratex SA Pfd. 4,562,367 180
Ericsson Telecomunicadoes
SA Pfd. 42,995,400 1,379
Fertilizantes Fosfatados
SA Pfd. 139,730,000 587
Industrias Klabin de Papel e
Celulose SA Pfd. 543,025 248
- - Iochpe-Maxion SA Pfd. 3,540,738 219
- - Lojas Americanas SA 17,700,000 109
- - Lojas Americanas SA Pfd. 48,304,033 225
Lojas Arapua SA Pfd. 29,167,700 98
Lojas Renner SA Pfd. 5,033,282 158
- - Mannesmann SA 53,181 7
Marcopolo SA Pfd. 439,000 52
- - Metal Leve SA Industria e
Comercio Pfd. 5,773,000 30
Metalurgica Gerdau SA Pfd. 7,675,400 230
- - Paranapanema SA Pfd. 31,162,000 223
Perdigao Agroindustrial SA 172,760,000 226
Petroleo Brasileiro SA Pfd. 41,774,100 9,770
Pirelli Cabos SA Pfd. 21,000 88
Pirelli Pneus SA Pfd. 140,400 356
Sadia Concordia SA Pfd. 121,000 79
San Paulo Alpargatas SA Pfd. 955,533 32
Santista Alimentos SA 373,587 519
Souza Cruz SA 293,600 2,368
Telecomunicacoes
Brasileiras SA 66,930,000 6,807
Telecomunicacoes
Brasileiras SA Pfd. 229,300,500 26,156
Unibanco-Uniao de Bancos
Brasileiros SA Pfd. 95,823,000 3,950
- - Unipar-Uniao de Industrias
Petroquimicas SA Pfd.
B Shares 150,645 31
Usiminas-Usinas Siderurgicas
de Minas Gerais SA Pfd. 225,069 1,331
- - Varig-Viacao Aerea
Rio-Grandense SA Pfd. 68,000 167
Votorantim Celulose e Papel
SA Pfd. 41,540,831 800
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Weg SA Pfd. 403,508 $ 249
White Martins SA 974,365 1,423
-----------
126,686
-----------
CZECH REPUBLIC (1.1%)
Ceska Sporitelna a.s. 72,080 476
Cokoladovny a.s. 2,970 411
- - The Czech Power Co. a.s. 51,200 1,676
Deza Valasske Mezirici a.s. 1,438 100
Elektrarny Opat vice, a.s. 430 50
Inzenyrske a Prumyslove
Stavby (IPS) a.s. 13,630 76
Komercni Banka a.s. 18,020 678
- - Leciva Praha a.s. 2,080 126
- - Nova Hut a.s. 7,066 94
Pivovar Radegast a.s. 750 95
- - Podnik Vypocetni Techniky a.s. 692 44
- - SPT Telecom a.s. 24,440 2,608
- - Sepap a.s. 140 5
Severoceske Doly a.s. 8,280 216
- - Skoda Plzen a.s. 8,990 159
- - Synthesia a.s. 5,420 20
Tabak a.s. 2,600 592
Vertex a.s. 1,304 121
Vodni Stavby Praha a.s 1,760 26
-----------
7,573
-----------
GREECE (3.1%)
Aegek SA 22,470 106
Aktor SA 9,170 78
- - Aktor SA Rights Exp. 1/30/1998 9,170 1
Alpha Credit Bank SA 38,566 2,253
Alte Technical Co. SA 5,190 35
Aluminum of Greece SA 5,370 297
Aluminum of Greece SA Pfd. 2,250 119
- - Aspis Pronoia SA 21,800 218
Athens Medical Center SA 20,250 239
Atti-Kat SA 4,400 23
Attica Enterprises SA 39,450 441
Commercial Bank of Greece SA 23,634 912
Delta Dairy SA 8,370 95
Delta Dairy SA Pfd. 3,400 31
El. D. Mouzakis SA 7,800 20
Elais SA 8,770 262
Epilectos SA 92,240 182
Ergo Bank SA 21,968 1,137
Fourlis Brothers SA 26,260 171
Hellas Can Packaging SA 11,800 171
Hellenic Bottling Co. SA (Bearer) 90,200 2,095
Hellenic Sugar Industry SA 33,820 194
Hellenic Technodomiki SA 5,390 46
Hellenic Telecommunication
Oranization SA 342,000 7,016
Heracles General Cement SA 9,600 200
Inform P. Lykos SA 14,200 167
Intracom SA 13,840 639
Intracom SA Pfd. 3,200 133
Klonatex ICST & TSA SA 10,100 64
Klonatex ICST & TSA SA Pfd. 15,600 70
Michaniki SA 34,800 178
- - National Bank of Greece SA 20,560 1,811
Papastratos Cigarettes SA 2,550 49
Parnassos Enterprises ABE SA 65,900 146
- - Petzetakis SA 11,900 64
Silver & Baryte Ores Mining SA 4,360 79
Titan Cement Co. SA 16,900 771
-----------
20,513
-----------
HONG KONG (14.2%)
Bank of East Asia Ltd. 755,181 1,769
Cathay Pacific Airways Ltd. 1,983,000 1,612
Cheung Kong Holdings Ltd. 1,347,000 8,823
China Light and Power Co., Ltd. 1,387,500 7,700
Dickson Concepts
International Ltd. 183,000 267
Elec & Eltek International
Holdings Ltd. 550,000 136
Giordano International Ltd. 611,000 211
Hang Lung Development Co., Ltd. 855,000 1,203
Hang Seng Bank Ltd. 1,063,300 10,258
Hong Kong & China Gas
Co., Ltd. 2,245,312 4,347
Hong Kong Aircraft &
Engineering Co., Ltd. 124,000 312
Hong Kong and Shanghai
Hotels Ltd. 750,500 620
Hong Kong
Telecommunications Ltd. 6,793,958 13,986
Hopewell Holdings Ltd. 2,767,000 689
Hutchison Whampoa Ltd. 2,152,000 13,498
Hysan Development Co., Ltd. 642,000 1,280
Johnson Electric Holdings Ltd. 300,500 865
Kumagai Gumi Hong Kong Ltd. 271,000 206
Miramar Hotel & Investment Ltd. 383,000 648
- - New World Development
Co., Ltd. 1,160,000 4,012
Oriental Press Group Ltd. 984,000 298
Peregrine Investment
Holdings Ltd. 459,000 326
Regal Hotels International
Holdings Ltd. 2,734,000 519
Shangri-La Asia Ltd. 138,000 117
Shun Tak Holdings Ltd. 402,000 108
South China Morning Post Ltd. 796,000 560
Sun Hung Kai Properties Ltd. 1,401,000 9,764
Swire Pacific Ltd. A Shares 876,500 4,808
Tai Cheung Holdings Ltd. 613,000 243
Television Broadcasts Ltd. 281,000 801
Varitronix International Ltd. 207,000 355
Wharf Holdings Ltd. 1,381,000 3,030
Wing Lung Bank Ltd. 131,708 631
-----------
94,002
-----------
HUNGARY (1.0%)
- - Danubius Hotel and Spa Rt. 7,540 229
- - Fotex Rt. 58,730 66
Graboplast Rt. 3,990 211
MOL Magyar Olaj-es Gazipari Rt. 91,620 2,221
OTB Bank Rt. 27,680 1,049
Pannonplast Rt. 3,790 200
Pick Szeged Rt. 2,500 200
Richter Gedeon Rt. 18,060 2,051
Zalakeramia Rt. 2,830 131
-----------
6,358
-----------
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA (2.0%)
PT Apac Centertex Corp. 336,000 $ 12
PT Asahimas Flat Glass 292,000 17
PT Astra International 1,842,000 478
PT Bank Bali (Local) 117,450 16
PT Bank Dagang Nasional
Indonesia (Foreign) 2,617,874 167
PT Bank Dagang Nasional
Indonesia (Local) 288,500 18
- - PT Bank Dagang Nasional
Warrants Exp. 2/4/2000 503,624 5
PT Bank Internasional
Indonesia (Local) 3,458,715 205
PT Bank Negara Indonesia
(Foreign) 4,253,000 406
PT Barito Pacific Timber 1,081,000 310
PT Bimantara Citra 790,500 151
PT Budi Acid Jaya 646,875 100
PT Ciputra Development 367,000 17
PT Citra Marga Nusaphala
Persada 2,047,000 224
PT Darya Varia Laboratoria 78,000 6
PT Daya Guna Samudera 192,500 146
PT Dharmala Intiland 119,000 28
PT Duta Anggada Realty 1,392,664 51
PT Fisk Aragung Perkasa 945,100 129
PT Gadjah Tunggal 3,682,000 352
PT Great River International 647,000 53
PT Gudang Garam 718,000 1,094
PT Hero Supermarket 259,500 64
PT Indah Kiat Pulp &
Paper Corp. 4,465,622 792
- - PT Indah Kiat Pulp & Paper
Free Warrants Exp. 7/11/2002 259,635 7
PT Indofood Sukses Makmur 1,876,500 615
PT Indorama Synthetics 320,000 143
PT Jakarta International
Hotel & Development 798,000 156
PT Japfa Comfeed Indonesia 605,500 44
PT Kabel Indonesia 334,000 26
PT Kalbe Farma 501,500 89
PT Lippo Bank (Local) 1,055,250 115
PT London Sumatra Indonesia 499,100 284
PT Mayora Indah 1,580,440 137
PT Matahari Putra Prima 2,689,500 220
PT Medco Energi Corp. 60,500 74
PT Modern Photo Film Co. 175,000 51
PT Mulia Industrindo 1,867,520 212
PT Pakuwon Jati 1,286,500 105
PT Pan Indonesia Bank
(PANIN Bank) (Foreign) 500,000 61
PT Polysindo Eka Perkasa 2,454,000 435
PT Putra Surya Perkasa 976,000 75
PT Semen Cibinong 560,000 25
PT Semen Gresik 385,500 226
PT Sierad Produca 322,500 9
PT Sinar Mas Argo 405,000 35
PT Supreme Cable
Manufacturing Corp. 436,500 22
PT Tambang Timah 525,000 564
PT Telekomunikasi Indonesia 8,472,000 4,510
PT Trias Sentosa 1,097,000 50
-----------
13,131
-----------
ISRAEL (3.0%)
- - Ackerstein Industries Ltd. 49,709 55
- - Africa-Israel Investments
(1985) Ltd. 91 53
- - Africa-Israel Investments Ltd. 2,570 162
Agan Chemical Manufacturers Ltd. 7,378 220
Agis Industries Ltd. 5,250 43
American Israeli Paper Mills Ltd. 3,562 147
Azorim Investment Development &
Construction Ltd. 18,151 204
Bank Hapoalim Ltd. 1,139,201 2,734
Bezeq Israeli
Telecommunication Corp., Ltd. 669,821 1,850
CLAL Insurance Enterprise
Holdings Ltd. 12,843 117
- - CLAL Trading Ltd. 25,102 101
Cvalim-The Electric Wire and
Cable Co. of Israel Ltd. 51,535 188
Dead Sea Periclase Ltd. 31,547 113
Delek Israel Fuel Corp., Ltd. 8,294 297
ECI Telecom Ltd. 71,900 1,833
Elco Holdings Ltd. 34,292 281
- - Electrochemical Industries
1952, Ltd. 24,100 27
Elite Industries Ltd. 3,142 93
First International Bank of
Israel Ltd.-ILS 1 Par 2,074 281
First International Bank of
Israel Ltd.-ILS 5 Par 642 471
- - Gilat Satellite Networks 5,309 150
- - I.I.S. Intelligent Information
Systems Ltd. 52,300 65
IDB Holding Corp., Ltd. 26,190 628
Industrial Buildings Corp. 276,262 470
Israel Chemicals Ltd. 789,236 1,069
- - The Israel Corp., Ltd.-ILS 5 Par 80 3
- - The Israel Corp., Ltd.-ILS 1 Par 4,136 312
- - The Israel Land Development
Co., Ltd. 41,800 220
Israel Petrochemical
Enterprises Ltd. 14,526 93
Jerusalem Economic Corp., Ltd. 43,956 213
- - Kitan Consolidated Ltd. 32,954 35
Koor Industries Ltd. 13,751 1,524
- - Malibu Israel Ltd. 6,035 79
- - Maman Cargo Terminals &
Handling Ltd. 70,434 141
- - Mehadrin Ltd. 1,629 41
- - Meir Ezra & Son Co. 18,556 164
Mul-T-Lock Ltd. 25,386 61
- - New Dimension Software Ltd. 5,500 106
Ormat Industrites Ltd. 133,074 175
Osem Investment Ltd. 76,658 371
- - Packer Plada Ltd. 1,227 26
- - Polgat Ltd. 18,506 50
Property & Building Corp. 4,006 324
- - Scitex Corp., Ltd. 33,000 394
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Super Sol Ltd. 200,949 $ 570
- - Teledata Communications Ltd. 5,880 106
- - Tempo Beer Industries Ltd. 28,127 135
Teva Pharmaceutical
Industries Ltd. 57,254 2,716
-----------
19,511
-----------
MALAYSIA (6.8%)
AMMB Holdings Bhd. 433,600 284
Aluminum Co. of Malaysia Bhd. 181,000 41
Amsteel Corp., Bhd. 1,647,600 303
Antah Holdings Bhd. 244,000 75
- - Aokam Perdana Bhd. 241,000 26
Berjaya Group Bhd. 605,000 123
Berjaya Land Bhd. 340,000 208
Commerce Asset Holdings Bhd. 626,000 299
Edaran Otomobil Nasional Bhd. 234,000 478
- - Ekran Bhd. 155,000 109
Golden Hope Plantations Bhd. 962,000 1,112
Golden Plus Holdings Bhd. 112,000 25
Guinness Anchor Bhd. 153,000 189
Highlands & Lowlands Bhd. 328,000 335
Hong Leong Industries Bhd. 321,200 327
Hong Leong Properties Bhd. 999,000 182
Hume Industries Malaysia Bhd. 284,000 298
IGB Corp., Bhd. 661,000 154
IOI Corp., Bhd. 999,000 323
Jaya Tiasa Holdings Bhd. 101,000 186
Johan Holdings Bhd. 186,000 51
- - Kedah Cement Holdings Bhd. 544,000 100
- - Kelanamas Industries Bhd. 126,000 16
- - Kemayan Corp., Bhd. 222,000 30
Kian Joo Can Factory Bhd. 56,000 50
Kuala Lumpur Kepong Bhd. 554,000 1,188
Land & General Bhd. 652,500 121
Landmarks Bhd. 627,000 92
Leader Universal Holdings Bhd. 589,000 182
MBF Capital Bhd. 773,000 180
Magnum Corp., Bhd. 1,404,500 844
Malayan Banking Bhd. 1,111,000 3,225
Malayan Cement Bhd. 533,500 363
Malayan United Industries Bhd. 726,600 127
Malayawata Steel Bhd. 258,000 63
Malaysia International Shipping
Corp., Bhd. (Foreign) 914,000 1,338
Malaysia International Shipping
Corp., Bhd. (Local) 63,000 81
Malaysia Mining Corp., Bhd. 1,050,800 413
Malaysian Airline System Bhd. 712,000 571
Malaysian Mosaics Bhd. 82,000 29
Malaysian Oxygen Bhd. 188,000 420
Malaysian Pacific Industries Bhd. 99,000 238
Malaysian Resources Corp., Bhd. 818,666 189
Mulpha International Bhd. 415,000 49
- - Mycom Bhd. 549,000 137
Nestle Malaysia Bhd. 223,000 1,031
New Straits Times Press Bhd. 226,000 280
Oriental Holdings Bhd. 349,760 428
Palmco Holdings Bhd. 297,000 50
Pan Malaysia Cement Works Bhd. 162,000 62
Perlis Plantations Bhd. 393,250 556
Perusahaan Otomobil
Nasional Bhd. 585,000 571
Petaling Garden Bhd. 336,000 259
Pilecon Engineering Bhd. 192,000 46
- - Promet Bhd. 386,000 36
Public Bank Bhd. (Foreign) 1,346,799 464
- - Public Bank Bhd. Rights for
Foreign Shares Exp. 1/1/1998 224,466 4
RHB Capital Bhd. 1,508,000 728
RJ Reynolds Bhd. 259,000 423
Rashid Hussain Bhd. 424,000 329
Resorts World Bhd. 954,000 1,605
Rothmans of Pall Mall
Malaysia Bhd. 274,000 2,129
Selangor Properties Bhd. 628,000 192
Shell Refining Co. Malaysia Bhd. 345,000 541
Sime Darby Bhd. 2,294,000 2,204
Sungei Way Holdings Bhd. 499,400 162
TA Enterprise Bhd. 861,000 175
Tan Chong Motor Holdings Bhd. 612,000 267
Technology Resources
Industries Bhd. 862,000 509
Telekom Malaysia Bhd. 2,717,000 8,027
Tenaga Nasional Bhd. 2,789,000 5,947
Time Engineering Bhd. 856,000 220
UMW Holdings Malaysia Bhd. 253,000 192
United Engineers Malaysia Bhd. 789,000 657
YTL Corp., Bhd. 1,133,250 1,529
- - YTL Corp., Bhd. Warrants
Exp. 9/30/2002 60,950 25
-----------
44,822
-----------
MEXICO (15.2%)
Alfa SA de CV Series A 569,992 3,847
Apasco SA de CV 264,634 1,825
- - Cemex SA de CV (CPO) 231,000 1,048
- - Cemex SA de CV Series A 540,684 2,466
- - Cemex SA de CV Series B 413,425 2,209
Cifra SA de CV Series C 744,000 1,674
- - Cifra SA de CV Series V 3,661,600 9,056
- - Consorcio G Grupo Dina SA 341,000 470
Controladora Comercial
Mexicana SA de CV (Units) 134,000 175
Cydsa SA Series A 86,000 240
Desc SA de CV Series B 284,907 2,705
El Puerto de Liverpool SA de
CV Series 1 1,090,950 1,871
El Puerto de Liverpool SA de
CV Series C1 132,697 223
- - Empaques Ponderosa SA
Series B 390,000 337
Empresas ICA Sociedad
Controladora SA de CV 576,600 1,559
- - Empresas la Moderna SA de
CV Series A 428,700 2,296
Fomento Economico Mexicano
SA de CV Series B 517,950 4,171
Grupo Carso SA de CV Series A1 823,000 5,513
Grupo Continental SA 332,000 1,184
- - Grupo Financiero Banamex
Accival SA de CV Series B 684,900 2,056
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
- - Grupo Financiero Banamex
Accival SA de CV Series L 216,810 $ 560
- - Grupo Financiero Bancomer
SA de CV Series B 2,499,950 1,628
- - Grupo Financiero Probursa
SA de CV Series B 3,406,959 881
- - Grupo Financiero Serfin SA
de CV Series B 953,000 232
- - Grupo Financiero Serfin SA
de CV Series L 501,000 473
Grupo Herdez SA Series B 424,000 358
Grupo Industrial Herdez Bimbo
SA de CV Series A 318,882 3,091
Grupo Industrial Maseca SA de
CV Series B 901,000 932
Grupo Mexico SA Series B 650,513 2,345
Grupo Modelo SA de CV
Series C 734,700 6,173
- - Grupo Simec SA de CV Series B 977,000 277
- - Grupo Situr SA de CV Series B 5,203,000 162
- - Grupo Televisa SA (CPO) 292,800 5,688
Industrias Penoles SA Series CP 247,599 1,123
Kimberly Clark de Mexico SA de
CV Series A 1,303,045 6,178
Telefonos de Mexico SA
Series A 1,807,000 5,098
Telefonos de Mexico SA
Series L 5,960,050 16,815
- - Transportacion Maritima
Mexicana SA de CV Series L 42,000 324
- - Tubos de Acero de Mexico SA 67,400 1,449
Vitro SA 356,640 1,578
-----------
100,290
-----------
PHILIPPINES (1.7%)
Alsons Cement Corp. 532,000 27
Ayala Land, Inc. Class B 2,428,866 974
Bacnotan Consolidated
Industries 13,800 5
C&P Homes, Inc. 144,078 9
- - DMCI Holdings, Inc. 1,087,800 33
- - Filinvest Land, Inc. 4,005,000 161
Guoco Holdings Philippines, Inc. 3,781,800 73
- - International Container
Terminal Services, Inc. 2,124,355 266
Ionics Circuit, Inc. 630,150 261
- - Kepphil Shipyard Inc. 44,000 1
- - Manila Mining Corp. Class B 676,705,940 220
Meralco Class B 267,308 898
Metro Pacific Corp. 4,445,126 125
Metropolitan Bank & Trust Co. 215,732 1,473
- - Mondragon International
Philippines, Inc. 1,753,680 31
Petron Corp. 9,476,654 796
- - Philex Mining Corp. Class B 2,136,450 54
Philippine Long Distance
Telephone Co. 93,220 2,056
Philippine Long Distance
Telephone Co. GDR 5.75%
Cvt. Pfd. 13,880 360
- - Philippine National Bank Corp. 152,784 341
RFM CORP. 485,000 80
Republic Glass Holdings Corp. 470,000 13
- - Robinson's Land Co. Class B 410,200 14
SM Prime Holdings, Inc. 9,475,880 1,425
San Miguel Corp. Class B 451,187 560
- - Security Bank Corp. 305,335 130
- - Southeast Asia Cement
Holdings Inc. 12,965,000 172
- - Union Bank of the
Philippines Corp. 681,200 299
Universal Robina Corp. 2,370,400 294
-----------
11,151
-----------
POLAND (0.7%)
BIG Bank Gdanski SA 286,600 281
Bank Rozwoju Eksportu SA 18,100 375
- - Bank Slaski SA w Katowicach 8,800 487
E. Wedel SA 5,700 293
Elektrim Spolka Akcyjna SA 63,900 618
- - Exbud SA 9,500 89
- - Fabryka Kotlow Rafako SA 16,600 44
Gorazdze SA 7,100 175
- - Huta Szkla Gospodarczego
Irena SA 6,100 26
- - KGHM Polska Miedz SA 190,900 704
Mostostal-Export SA 43,800 111
- - Optimus SA 6,200 164
- - Polifarb Cieszyn-Wroclaw SA 45,400 215
- - Przedsiebiorstwo Farmaceutyczne
JELFA SA 6,500 144
- - Stalexport SA 8,400 57
Stomil Olsztyn SA 26,000 199
Vistula SA 5,700 14
Wielkopolski Bank Kredytowy SA 65,700 330
Zaklady Piwowarskie w Zywcu SA 2,900 244
-----------
4,570
-----------
SINGAPORE (4.5%)
Chuan Hup Holdings Ltd. 390,000 118
City Developments Ltd. 639,000 2,958
Comfort Group Ltd. 382,000 166
- - Creative Technology Ltd. 53,150 1,079
Cycle & Carriage Ltd. 149,000 615
Development Bank of Singapore
Ltd. (Foreign) 280,000 2,393
First Capital Corp., Ltd. 242,000 224
Fraser & Neave Ltd. 193,600 839
Goldtron Ltd. 117,000 23
Hai Sun Hup Group Ltd. 421,000 170
Haw Par Brothers
International Ltd. 106,000 137
Hotel Properties Ltd. 448,000 292
IPC Corp., Ltd. 969,000 83
Inchcape Bhd. 106,000 163
Keppel Corp., Ltd. 466,000 1,339
Lum Chang Holdings Ltd. 616,400 203
Metro Holdings Ltd. 81,000 100
Natsteel Ltd. 224,000 303
Neptune Orient Lines Ltd. 438,000 173
Oversea-Chinese Banking Corp.,
Ltd. (Foreign) 524,800 3,052
Overseas Union Enterprise Ltd. 34,000 82
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Parkway Holdings Ltd. 286,000 $ 645
Prima Ltd. 70,000 129
Robinson & Co., Ltd. 81,600 291
Sembawang Corp., Ltd. 133,000 284
Sembawang Marine & Logistics 27,000 40
Shangri-La Hotel Ltd. 114,300 209
Singapore Airlines Ltd. (Foreign) 514,000 3,356
Singapore Press Holdings Ltd.
(Foreign) 122,400 1,533
Singapore Technologies
Industrial Corp. 17,000 16
Singapore Telecommunications
Ltd. 3,402,000 6,340
United Industrial Corp., Ltd. 46,000 18
United Overseas Bank Ltd.
(Foreign) 483,600 2,684
Van Der Horst Ltd. 11,000 4
-----------
30,061
-----------
SOUTH AFRICA (12.2%)
African Oxygen Ltd. 204,200 550
Alpha Ltd. 29,100 323
Amalgamated Banks of South
Africa Group Ltd. 599,796 3,451
Anglo American Coal Corp. Ltd. 8,200 383
Anglo American Industrial
Corp., Ltd. 74,400 1,798
Anglo American Platinum Corp 194,635 2,600
Anglovaal Industries Ltd. 388,600 719
- - Avgold Ltd. 73,375 57
Barlow Ltd. 196,938 1,671
Beatrix Mines Ltd. 37,900 130
De Beers Centenary AG 350,400 7,128
Del Monte Royal Foods Ltd. 557,000 364
- - Dimension Data Holdings Ltd. 439,320 1,896
Driefontein Consolidated Ltd. 196,600 1,333
Engen Ltd. 171,900 874
Evander Gold Mines Ltd. 25,800 49
First National Bank Holdings Ltd. 408,700 3,632
- - Foschini Ltd. 226,928 699
Free State Consolidated Gold
Mines Ltd. 15,700 71
Impala Platinum Holdings Ltd. 30,501 291
Imperial Holdings Ltd. 173,500 2,014
Investec Bank Ltd. 69,800 2,685
JD Group Ltd. 61,293 375
Kloof Gold Mining Co., Ltd. 159,000 533
Liberty Life Assn. of Africa Ltd. 244,023 6,268
M-Cell Ltd. 158,069 205
- - MIH Holdings Ltd. 227,500 654
Metropolitan Life Ltd. 648,600 1,833
Murray & Roberts Holdings Ltd. 335,600 507
Nampak Ltd. 487,700 1,463
Nasionale Pers Beperk Ltd.
N Shares 28,000 230
Nedcor Ltd. 214,622 4,763
Palabora Mining Co., Ltd. 27,700 283
Pepkor Ltd. 210,700 1,082
Pick'n Pay Stores Ltd. 186,400 272
Pick'n Pay Stores Ltd. N Shares 239,600 325
Premier Group Ltd. 975,300 1,062
- - Randfontein Estates Gold
Mining Co., Witwatersrand Ltd. 45,700 69
Rembrandt Group Ltd. 477,600 3,484
Reunert Ltd. 199,900 325
Safmarine & Rennies
Holdings Ltd. 538,000 984
Samancor Ltd. 205,300 933
Sappi Ltd. 169,647 854
Sasol Ltd. 556,560 5,821
South African Breweries Ltd. 322,700 7,957
- - South African Iron & Steel
Industrial Corp., Ltd. 2,332,631 690
Sun International South
Africa Ltd. 993,900 408
Tiger Oats Ltd. 143,700 1,984
Tongaat-Hulett Group Ltd. 60,500 771
Trencor Ltd. 147,305 605
Vaal Reefs Exploration &
Mining Co., Ltd. 16,850 675
- - Western Area Gold Mining
Co., Ltd. 110,600 609
Western Deep Levels Ltd. 27,500 509
Wooltru Ltd. 176,600 617
Wooltru Ltd. N Shares 232,704 732
-----------
80,600
-----------
THAILAND (1.8%)
- - Advance Agro PLC (Foreign) 203,940 170
Alphatec Electronics (Foreign) 247,000 0
Asia Securities Trading PLC
(Foreign) 269,320 64
Ayudhya Insurance PLC
(Foreign) 59,200 246
- - Bangkok Bank PLC (Foreign) 587,800 1,465
Bangkok Bank PLC (Local) 96,400 172
- - Bangkok Expressway PLC
(Foreign) 883,200 491
Bangkok Land PLC (Foreign) 253,100 17
Bank of Ayudhya PLC (Foreign) 626,250 254
Banpu PLC (Foreign) 64,900 260
Berli Jucker PLC (Local) 31,000 36
Big C Supercenter PLC (Foreign) 151,500 24
CMIC Finance & Securities PLC
(Foreign) 366,000 0
Charoen Pokphand Feedmill PLC 11,000 13
Electricity Generating PLC
(Foreign) 336,500 629
Hana Microelectronics Co.
(Foreign) 119,800 274
ICC International PLC (Foreign) 39,200 33
- - International Broadcasting Corp.
PLC (Foreign) 285,200 60
Italian-Thai Development PLC
(Foreign) 206,800 64
K.R. Precision PLC (Foreign) 45,400 172
Land & House PLC (Foreign) 40,902 8
Loxley PLC (Foreign) 263,400 33
Nation Multimedia Group PLC
(Foreign) 172,700 46
National Petrochemical PLC
(Foreign) 240,400 127
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------------------
<S> <C> <C>
National Petrochemical PLC
(Local) 33,700 $ 18
PTT Exploration & Production
PLC (Foreign) 252,500 2,905
- - Padaeng Industry PLC (Foreign) 224,150 37
Phatra Thanakit PLC (Foreign) 195,100 108
Pizza PLC (Foreign) 104,000 184
Regional Container Lines PLC
(Foreign) 146,400 113
Saha Patana Inter-Holding PLC
(Foreign) 203,400 127
Saha-Union PLC (Foreign) 186,200 104
Saha-Union PLC (Local) 75,000 43
- - Sahaviriya Steel Industries
(Foreign) 242,800 5
Sanyo Universal Electric PLC
(Foreign) 38,900 8
Sermsuk PLC (Foreign) 12,700 87
Shinawatra Computer &
Communications PLC (Foreign) 158,600 527
Siam Cement PLC (Foreign) 66,481 525
Siam Cement PLC (Local) 32,819 164
Siam City Cement PLC (Foreign) 213,094 221
Siam Commercial Bank PLC
(Foreign) 16,533 19
- - Sun Tech Group PLC (Foreign) 214,500 28
- - Tanayong PLC (Foreign) 674,845 73
- - TelecomAsia PLC (Foreign) 2,430,300 464
Thai Engine Manufacturing PLC
(Foreign) 7,600 13
Thai Farmers Bank PLC (Foreign) 358,700 652
Thai Petrochemical Industry PLC
(Foreign) 2,338,800 223
Thairung Union Car PLC (Foreign) 140,300 39
Tipco Asphalt PLC (Foreign) 184,200 142
- - Tuntex (Thailand) PLC (Foreign) 199,700 103
Unicord PLC (Foreign) 105,600 0
United Communication Industry
PLC (Foreign) 276,300 112
Univest Land PLC (Foreign) 2,264,200 0
- - Wattachak PLC (Foreign) 1,339,600 125
-----------
11,827
-----------
TURKEY (3.7%)
Adana Cimento Sanayii AS
C Shares 9,227,845 80
Adana Cimento Sanayii Turk
Anonim Sirketi A Shares 3,586,499 303
Akal Tekstil Sanayii AS 1,750,875 67
Akcansa Cimento SA 1,864,392 261
Aksa Akrilik Kimya Sanayii AS 2,780,619 205
Alarko Holdings AS 1,035,079 222
Altinyildiz Mensucat Ve
Konfeksiyon Fabrikalari AS 1,472,000 162
Arcelik AS 8,703,974 819
Aygaz SA 2,708,419 503
Bagfas Bandirma Gubre
Fabrikalari AS 218,000 142
Brisa Bridgestone Sabanci
Lastik San. Ve Tic AS 7,364,000 516
Cimentas Izmir Cimento
Fabrikasi AS 349,000 38
Cisma Cemento 2,063,748 112
Cukurova Elektrik AS 481,000 1,324
Doktas Dokumculuk Ticaret ve
Sanayi AS 519,000 20
EGE Seramik Sanayi ve
Ticaret AS 2,166,000 47
- - Eczacibasi Ilac Sanayi Ve
Ticaret AS 3,826,600 174
Ege Biracilik Ve Malt
Sanayii AS 3,585,314 325
Eregli Demir Ve Celik
Fabrikalari AS 5,715,250 883
Ford Otomotiv Sanayi AS 1,332,500 1,110
Goodyear Lastikleri TAS 502,000 225
- - Ihlas Holding AS 3,198,115 463
Kartonsan Karton Sanayi Ve
Ticaret AS 1,768,750 109
Kav Orman Sanayii AS 3,555,000 83
Konya Cimento Sanayii 2,160,000 39
Kordsa Kord Bezi Sanayi ve
Ticaret AS 1,041,802 91
Migros Turk AS 895,825 811
- - Netas-Northern Elektrik
Telekomunikasyon AS 1,360,000 492
Raks Elektronik Sanayi Ve
Ticaret AS 467,000 120
Sabah Yayincilik AS 5,877,000 77
Sarkuysan Elektrolitik Bakir
Sanayi Ve Ticaret AS 1,494,000 133
- - Sifas Sentetik Iplik
Fabrikalari AS 1,521,000 36
Tat Konserve 4,479,000 212
Tofas Turk Otomobil
Fabrikasi AS 12,145,075 689
Trakya Cam Sanayii AS 12,028,080 697
Turcas Petroculuk AS 2,211,774 54
Turk Demir Dokum
Fabrikalari SA 1,224,814 68
Turk Siemens Kablo Ve
Elektrik Sanayii AS 617,367 46
- - Turk Tuborg Bira ve Malt
Sanayii AS 764,000 17
Turkiye Garanti Bankasi AS 34,699,065 1,717
Turkiye Is Bankasi AS
C Shares 47,745,040 8,645
Turkiye Is Bankasi AS 64,000 247
Usas Ucak Servisi AS 98,500 238
Vestel Elektronik Sanayi Ve
Ticaret AS 3,343,781 274
Yapi ve Kredi Bankasi AS 46,607,687 1,778
-----------
24,674
-----------
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $756,759) 630,604
- -----------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
EMERGING MARKETS PORTFOLIO (000) (000)
- -----------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (4.2%)
- -----------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.54%, 1/2/1998
(COST $27,384) $27,384 $ 27,384
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%)
(COST $784,143) 657,988
- -----------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- -----------------------------------------------------------------------------------
Other Assets--Note B 11,981
Liabilities (9,677)
----------
2,304
- -----------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------
Applicable to 66,148,895 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $660,292
===================================================================================
NET ASSET VALUE PER SHARE $9.98
===================================================================================
</TABLE>
*See A in Notes to Financial Statements.
- -Non-Income-Producing Security.
GDR--Global Depositary Receipt.
ILS--Israeli Shekel.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------
AT DECEMBER 31, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $812,484 $12.28
Overdistributed Net Investment
Income--Note F (351) (.01)
Accumulated Net Realized
Losses--Note F (25,673) (.39)
Unrealized Depreciation--Note E
Investment Securities (126,155) (1.90)
Foreign Currencies (13) --
- ------------------------------------------------------------------------------------
NET ASSETS $660,292 $9.98
====================================================================================
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
TOTAL INTERNATIONAL PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES (100.1%)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vanguard International Equity Index Fund-European Portfolio 26,541,173 $534,274
Vanguard International Equity Index Fund-Pacific Portfolio 33,845,057 261,284
Vanguard International Equity Index Fund-Emerging Markets Portfolio 10,851,674 108,299
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $945,379) 903,857
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a Pooled Cash Account
6.54%, 1/2/1998
(COST $177) $177 177
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(COST $945,556) 904,034
- ------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.1%)
- ------------------------------------------------------------------------------------------------------------
Other Assets 7,389
Liabilities (8,441)
----------
(1,052)
- ------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------
Applicable to 91,519,235 shares of beneficial interest
(unlimited authorization--no par value) $902,982
===========================================================================================================
NET ASSET VALUE PER SHARE $9.87
===========================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $944,613 $10.32
Overdistributed Net Investment Income (149) --
Accumulated Net Realized Gains 40 --
Unrealized Depreciation--Note E (41,522) (.45)
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $902,982 $9.87
============================================================================================================
</TABLE>
39
<PAGE> 42
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
------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------
(000) (000) (000)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends* $ 47,409 $ 11,949 $ 17,633
Interest 3,257 1,461 2,234
------------------------------------------------
Total Income 50,666 13,410 19,867
------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 23 23 23
Management and Administrative 4,486 2,417 2,165
Marketing and Distribution 493 320 245
Taxes (other than income taxes) 150 74 135
Custodian Fees 964 533 1,854
Auditing Fees 9 9 8
Shareholders' Reports 51 39 34
Annual Meeting and Proxy Costs 19 12 10
Directors' Fees and Expenses 5 3 2
------------------------------------------------
Total Expenses 6,200 3,430 4,476
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 44,466 9,980 15,391
- ----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 5,678 (29,944) (24,067)
Futures Contracts 8,520 (2,154) --
Foreign Currencies and Forward Currency Contracts (2,709) (2,473) (389)
- ----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 11,489 (34,571) (24,456)
- ----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 375,676 (265,402) (152,595)
Futures Contracts (226) 226 --
Foreign Currencies and Forward Currency Contracts (755) 210 (13)
- ----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 374,695 (264,966) (152,608)
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $430,650 $(289,557) $(161,673)
==========================================================================================================
</TABLE>
*Dividends are net of foreign withholding taxes of $6,651,000, $1,463,000, and
$1,495,000, respectively.
40
<PAGE> 43
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
TOTAL INTERNATIONAL
PORTFOLIO
--------------------
YEAR ENDED
DECEMBER 31, 1997
--------------------
(000)
- -------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Income Distributions Received $ 15,068
Interest 208
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME--Note C 15,276
- -------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Capital Gain Distributions Received 1,846
Investment Securities Sold (1)
- -------------------------------------------------------------------------------------
REALIZED NET GAIN 1,845
- -------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES (40,129)
- -------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(23,008)
=====================================================================================
</TABLE>
41
<PAGE> 44
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 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
------------------------------ --------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1997 1996
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 44,466 $ 31,390 $ 9,980 $ 8,602
Realized Net Gain (Loss) 11,489 9,085 (34,571) (1,625)
Change in Unrealized Appreciation (Depreciation) 374,695 213,795 (264,966) (94,228)
----------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 430,650 254,270 (289,557) (87,251)
----------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (43,908) (33,504) (9,619) (8,273)
Realized Capital Gain (9,048) (5,470) -- --
----------------------------------------------------------
Total Distributions (52,956) (38,974) (9,619) (8,273)
----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 798,288 511,774 469,885 474,705
Issued in Lieu of Cash Distributions 48,239 34,983 8,612 7,164
Redeemed (386,529) (184,595) (329,587) (239,553)
----------------------------------------------------------
Net Increase from Capital Share Transactions 459,998 362,162 148,910 242,316
- ----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 837,692 577,458 (150,266) 146,792
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,594,734 1,017,276 977,506 830,714
----------------------------------------------------------
End of Year $2,432,426 $1,594,734 $827,240 $977,506
==================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 43,854 33,822 48,273 41,039
Issued in Lieu of Cash Distributions 2,420 2,156 1,142 684
Redeemed (21,660) (12,290) (35,246) (20,943)
----------------------------------------------------------
Net Increase in Shares Outstanding 24,614 23,688 14,169 20,780
==================================================================================================================================
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS TOTAL INTERNATIONAL
PORTFOLIO PORTFOLIO
----------------------------- -------------------------------
YEAR ENDED DECEMBER 31,
----------------------------- YEAR ENDED APR. 29* TO
1997 1996 DEC. 31, 1997 DEC. 31, 1996
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 15,391 $ 8,064 $ 15,276 $ 4,158
Realized Ne Gain (Loss) (24,456) 349 1,845 396
Change in Unrealized Appreciation (Depreciation) (152,608) 35,034 (40,129) (1,393)
----------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (161,673) 43,447 (23,008) 3,161
----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (15,042) (8,487) (15,269) (4,314)
Realized Capital Gain -- -- (1,796) (405)
----------------------------------------------------------------
Total Distributions (15,042) (8,487) (17,065) (4,719)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 432,607 406,671 746,141 293,013
Issued in Lieu of Cash Distributions 13,894 7,541 16,068 4,311
Redeemed (246,615) (46,342) (99,512) (15,515)
----------------------------------------------------------------
Net Increase from Capital Share Transactions 199,886 367,870 662,697 281,809
- ------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 23,171 402,830 622,624 280,251
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period--Note C 637,121 234,291 280,358 107
----------------------------------------------------------------
End of Period $660,292 $637,121 $902,982 $280,358
==============================================================================================================================
(1)Shares Issued (Redeemed)
Issued 33,794 33,380 71,840 28,748
Issued in Lieu of Cash Distributions 1,416 619 1,641 429
Redeemed (20,944) (3,916) (9,615) (1,534)
----------------------------------------------------------------
Net ancrease in Shares Outstanding 14,266 30,083 63,866 27,643
==============================================================================================================================
</TABLE>
*Commencement of operations.
43
<PAGE> 46
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 Securities and Exchange
Commission 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 THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $16.57 $14.02 $11.76 $11.88 $ 9.33
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .38 .34 .32 .28 .17
Net Realized and Unrealized Gain (Loss) on Investments 3.63 2.63 2.30 (.06) 2.55
------------------------------------------------------------
Total from Investment Operations 4.01 2.97 2.62 .22 2.72
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.37) (.36) (.32) (.28) (.17)
Distributions from Realized Capital Gains (.08) (.06) (.04) (.06) --
------------------------------------------------------------
Total Distributions (.45) (.42) (.36) (.34) (.17)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $20.13 $16.57 $14.02 $11.76 $11.88
=============================================================================================================================
TOTAL RETURN* 24.23% 21.26% 22.28% 1.88% 29.13%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $2,432 $1,595 $1,017 $715 $601
Ratio of Total Expenses to Average Net Assets 0.31% 0.35% 0.35% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 2.19% 2.45% 2.66% 2.41% 2.05%
Portfolio Turnover Rate 3% 4% 2% 6% 4%
Average Commission Rate Paid $.0396 $.0395 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the transaction fee on purchases (0.5%
beginning 11/3/1997, 1% from 1993 through 11/2/1997) or the annual account
maintenance fee of $10.
44
<PAGE> 47
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PACIFIC PORTFOLIO
YEAR ENDED DECEMBER 31,
----------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.51 $11.50 $11.31 $10.13 $ 7.56
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .09 .10 .10 .08 .06
Net Realized and Unrealized Gain (Loss) on Investments (2.79) (1.00) .21 1.24 2.62
----------------------------------------------------
Total from Investment Operations (2.70) (.90) .31 1.32 2.68
----------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.09) (.09) (.12) (.08) (.06)
Distributions from Realized Capital Gains -- -- -- (.06) (.05)
----------------------------------------------------
Total Distributions (.09) (.09) (.12) (.14) (.11)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 7.72 $10.51 $11.50 $11.31 $10.13
===================================================================================================================
TOTAL RETURN* -25.67% -7.82% 2.75% 13.04% 35.46%
===================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $827 $978 $831 $697 $493
Ratio of Total Expenses to Average Net Assets 0.35% 0.35% 0.35% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 1.03% 0.89% 0.97% 0.71% 0.75%
Portfolio Turnover Rate 8% 9% 1% 4% 7%
Average Commission Rate Paid $.0120 $.0156 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 1993 through 1996) or the annual account maintenance fee of $10.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
YEAR ENDED DECEMBER 31,
--------------------------------- MAY 4* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 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 .24 .18 .15 .06
Net Realized and Unrealized Gain (Loss) on Investments (2.31) 1.52 (.09) .92
---------------------------------------------------
Total from Investment Operations (2.07) 1.70 .06 .98
---------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.23) (.17) (.18) (.07)
Distributions from Realized Capital Gains -- -- -- (.04)
---------------------------------------------------
Total Distributions (.23) (.17) (.18) (.11)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.98 $12.28 $10.75 $10.87
========================================================================================================================
TOTAL RETURN** -16.82% 15.83% 0.56% 9.81%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $660 $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 1.96% 1.69% 2.00% 1.32%+
Portfolio Turnover Rate 19% 1% 3% 6%
Average Commission Rate Paid $.0006 $.0004 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
**Total return figures do not reflect the transaction fee on purchases (1.0%
beginning 11/3/1997, 1.5% from 1/1/1997 to 11/2/1997, 2.0% in 1994 through
1996), the 1% transaction fee on redemptions, or the annual account
maintenance fee of $10.
+ Annualized.
45
<PAGE> 48
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL PORTFOLIO
YEAR ENDED APR. 29* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD DEC. 31, 1997 DEC. 31, 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.14 $10.26
- ------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .18 .150
Capital Gain Distributions Received .02 .015
Net Realized and Unrealized Gain (Loss) on Investments (.28) (.110)
--------------------------
Total from Investment Operations (.08) .055
--------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.17) (.160)
Distributions from Realized Capital Gains (.02) (.015)
--------------------------
Total Distributions (.19) (.175)
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $10.14
======================================================================================================
TOTAL RETURN** -0.77% 0.55%
======================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $903 $280
Ratio of Expenses to Average Net Assets--Note C 0% 0%
Ratio of Net Investment Income to Average Net Assets 2.19% 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 (0.5%
beginning 11/3/1997, 0.75% from 1/1/1997 to 11/2/1997, 1.0% in 1996) or the
annual account maintenance fee of $10.
+Annualized.
46
<PAGE> 49
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 amortized 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)
47
<PAGE> 50
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 other 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. Fees assessed on capital share
transactions are credited to paid in capital.
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 December
31, 1997, the Portfolios had contributed capital aggregating $260,000 to
Vanguard (included in Other Assets), representing 1.3% 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 year
ended December 31, 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 year ended December 31, 1997, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
------------------------------------------------------------------
(000)
---------------------------
PORTFOLIO PURCHASES SALES
------------------------------------------------------------------
<S> <C> <C>
European $504,090 $ 65,653
Pacific 235,209 79,018
Emerging Markets 347,125 141,008
Total International 664,312 746
------------------------------------------------------------------
</TABLE>
48
<PAGE> 51
E. At December 31, 1997, net unrealized appreciation (depreciation) of
investment securities for federal income tax purposes was:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
(000)
----------------------------------------------
NET UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION
PORTFOLIO SECURITIES SECURITIES (DEPRECIATION)
-----------------------------------------------------------------------
<S> <C> <C> <C>
European $821,378 $ (27,241) $ 794,137
Pacific 90,965 (340,390) (249,425)
Emerging Markets 112,369 (238,577) (126,208)
Total International 75,931 (117,453) (41,522)
-----------------------------------------------------------------------
</TABLE>
At December 31, 1997, the aggregate settlement value of open futures
contracts expiring in March 1998 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
(000)
----------------------------------
AGGREGATE UNREALIZED
NUMBER OF SETTLEMENT APPRECIATION
PORTFOLIO/FUTURES CONTRACTS LONG CONTRACTS VALUE (DEPRECIATION)
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
European/
Eurotop 162 $37,722 $340
Pacific/
Nikkei 300 226 4,125 (104)
-----------------------------------------------------------------------------------
</TABLE>
At December 31, 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:
3/25/1998 ECU 33,448 $37,382 $36,936 $(446)
Pacific/
Receive:
3/18/1998 JPY 549,757 4,293 4,274 (19)
------------------------------------------------------------------------------------------------
</TABLE>
ECU--European Currency Unit.
JPY--Japanese Yen.
The European, Pacific, and Emerging Markets Portfolios had net unrealized
foreign currency losses of $205,000, $14,000, and $13,000, respectively,
resulting from the translation of other assets and liabilities at December 31,
1997.
49
<PAGE> 52
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 year ended December 31, 1997, the European, Pacific, and
Emerging Markets Portfolios realized net foreign currency losses of $152,000,
$1,083,000, and $389,000, 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 $1,046,000 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. Distributions to
shareholders from passive foreign investment company income during the year
ended December 31, 1997, were $92,000; the cumulative total of these
distributions related to passive foreign investment company holdings at
December 31, 1997, was $53,000. During the year ended December 31, 1997, the
Portfolio realized gains on the sale of passive foreign investment companies of
$838,000, 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, the European, Pacific, and Emerging
Markets Portfolios had the following capital gains available for distribution
at December 31, 1997, or capital losses available to offset future capital
gains:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
CAPITAL LOSS
-----------------------------
EXPIRATION
CAPITAL GAINS FISCAL
AVAILABLE FOR YEAR(S)
DISTRIBUTION AMOUNT ENDING
PORTFOLIO (000) (000) DECEMBER 31
--------------------------------------------------------------------
<S> <C> <C> <C>
European $6,198 -- --
Pacific -- $(37,789) 2003-2006
Emerging Markets -- (25,667) 2003-2006
--------------------------------------------------------------------
</TABLE>
G. The market value of securities on loan to brokers/dealers at December 31,
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 $373,604 $396,606
Pacific 189,040 204,273
--------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements.
50
<PAGE> 53
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors and Trustees of
Vanguard International Equity Index Fund and
Vanguard STAR Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
European Portfolio, Pacific Portfolio and Emerging Markets Portfolio,
constituting Vanguard International Equity Index Fund, and Total International
Portfolio, a separate portfolio of Vanguard STAR Fund, (together, "the
Portfolios") at December 31, 1997, the results of each of their operations for
the year then ended, and the changes in each of their net assets and the
financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities purchased had not been settled, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
February 6, 1998
51
<PAGE> 54
SPECIAL 1997 TAX INFORMATION (UNAUDITED) VANGUARD INTERNATIONAL EQUITY INDEX
FUND AND VANGUARD STAR FUND-TOTAL INTERNATIONAL PORTFOLIO
This information for the fiscal year ended December 31, 1997, is included
pursuant to provisions of the Internal Revenue Code.
The European Portfolio designates $8,070,000 as capital gain dividends
(from net long-term capital gains), of which $3,306,000 was distributed to
shareholders in December 1997 and $4,764,000 will be distributed in March 1998.
Of the $8,070,000 capital gain dividends, the Portfolio designates $4,583,000
as a 20% rate gain distribution.
The Total International Portfolio designates $1,013,000 as capital gain
dividends (from net long-term capital gains), which were distributed in
December 1997. Of the $1,013,000 capital gain dividends, the Portfolio
designates $333,000 as a 20% rate gain distribution.
The Fund has elected to pass through the credit for taxes paid in foreign
countries. Shareholders receive detailed information on foreign income and
foreign tax per share by country along with their 1997 Form 1099-DIV.
52
<PAGE> 55
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 Office Solutions,
Inc., Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance
Co., and Ladies Professional Golf Association; 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 Telecommunications 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. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director 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
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DISTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MACKINNON
Managing Director, Fixed Income Group.
F. WILLIAM MCNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's 500," "S&P 500(R)," "Standard & Poor's(R)," "S&P(R)," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell
Company is the owner of trademarks and copyrights relating to the Russell
Indexes. "Wilshire 4500" and "Wilshire 5000" are trademarks of
Wilshire Associates.
<PAGE> 56
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(CA, NJ, NY, OH, PA)
Q720-12/1997
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[THE VANGUARD GROUP LOGO]
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INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
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 you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
