<PAGE> 1
VANGUARD INTERNATIONAL
EQUITY INDEX FUND
- ----------------------------------
VANGUARD TOTAL
INTERNATIONAL PORTFOLIO
Semiannual Report - June 30, 1998
[PHOTO]
[THE VANGUARD GROUP LOGO]
<PAGE> 2
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 7,000 highly motivated
men and women--who form the cornerstone of our operations. We could not survive
long--let alone prosper--without them. That's why we chose this fiscal year's
fund reports 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
Senior Chairman Chairman & CEO
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
A MESSAGE TO OUR SHAREHOLDERS ................................ 1
THE MARKETS IN PERSPECTIVE ................................... 6
PERFORMANCE SUMMARIES ........................................ 8
PORTFOLIO PROFILES ........................................... 10
FINANCIAL STATEMENTS ......................................... 15
</TABLE>
All comparative mutual fund data are from Lipper Analytical Services, Inc., or
Morningstar unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
World financial markets diverged sharply during the six months ended June 30,
1998, the first half of the fiscal year for the three portfolios of Vanguard
International Equity Index Fund and for Vanguard Total International Portfolio.
European bourses forged ahead of even the rambunctious U.S. stock market, but
Asian exchanges generally lost ground.
As a result, the returns on our international index funds ranged from a
stunning advance of +27.1% for the European Portfolio to a steep decline of
- -16.3% for the Emerging Markets Portfolio. Europe's gains more than made up for
Asia's shortfalls in producing a +12.3% gain for the Total International
Portfolio. The table at right presents the total return (capital change plus
reinvested dividends) of each portfolio, along with those of its comparative
fund group and its target index.
The net asset values of the portfolios at the beginning and end of the
period, along with any distributions of net realized capital gains, are
presented in the table that follows this letter. The portfolios pay income
dividends annually, so none were distributed during the period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JUNE 30, 1998
- ---------------------------------------------------------------
<S> <C>
VANGUARD EUROPEAN PORTFOLIO +27.1%
Average European Fund +27.8
MSCI Europe Index +26.5
- ---------------------------------------------------------------
VANGUARD PACIFIC PORTFOLIO - 6.2%
Average Pacific Fund - 7.8
MSCI Pacific Free Index - 6.0
- ---------------------------------------------------------------
VANGUARD EMERGING MARKETS PORTFOLIO -16.3%
Average Emerging Markets Fund -15.6
MSCI Select Emerging Markets Free Index -16.3
- ---------------------------------------------------------------
VANGUARD TOTAL INTERNATIONAL PORTFOLIO +12.3%
Average International Fund +16.1
Total International Composite Index* +12.6
- ---------------------------------------------------------------
</TABLE>
*Consists of the MSCI EAFE Index plus the MSCI Select Emerging Markets Free
Index.
THE PERIOD IN REVIEW
Europe's stock markets were the global leaders during the first half of 1998,
buoyed by corporate merger activity, restructurings, and the impending launch of
a common currency by 11 European nations. By contrast, stock prices in most
Asian and emerging markets slumped in response to continuing currency
instability and economic weakness.
The U.S. dollar's gains versus most European currencies detracted slightly
from the positive returns earned in local currencies there, but its strength in
Pacific markets (or, more accurately, the weakness of the local currencies)
substantially worsened the losses in that region. Such currency
fluctuations--which can diminish or augment returns earned abroad--are a risk
that international stock investors assume in addition to the wide price swings
that are part and parcel of holding common stocks. The table at the top of page
2 presents returns on market indexes in both local currencies and U.S. dollars,
as well as the "currency effect" that bears on performance.
Taken together, international stocks provided an excellent half-year return
of +16.1%, as measured by the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index, which is weighted to reflect the market
capitalization of the world's established markets. But this result disguises the
wide geographical variations in market performances. European stocks as a group
were up a truly remarkable +26.5% in U.S.-dollar terms during the first half of
1998. This advance was buoyed by strengthening economic
1
<PAGE> 4
activity, along with investors' hope that cost-efficiencies and other benefits
will come with next year's inauguration of the European Economic and Monetary
Union--and the birth of the "euro" as a common currency.
In the Pacific, Japan's recession and its renewed bout of currency weakness
hurt stock prices, reverberating in the smaller markets where both local market
returns and currency weakness were even worse. While Japan's stocks were off
- -2.5% in U.S.-dollar terms, declines exceeded -25% in Hong Kong, Malaysia,
Thailand, and Singapore, markets already depressed from tumbles taken in 1997.
The economic downturn in Japan, the region's dominant economy, dampened hopes
that it would lead a recovery in the smaller economies. Emerging markets were
generally weak in Latin America as well as in Asia.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED JUNE 30, 1998
--------------------------------
LOCAL
CURRENCY CURRENCY U.S. DOLLAR
INDEX RETURN EFFECT RETURN
- -------------------------------------------------------------------
<S> <C> <C> <C>
United States (S&P 500 Index) +17.7% -- +17.7%
- -------------------------------------------------------------------
MSCI Europe Index +27.1% -0.6% +26.5%
MSCI Pacific Free Index - 0.4 -5.6 - 6.0
MSCI Select Emerging
Markets Index - 7.8 -8.5 -16.3
- -------------------------------------------------------------------
Total International
Composite Index +17.5% -4.9% +12.6%
- -------------------------------------------------------------------
</TABLE>
In the United States, the bull market in stocks continued during the
half-year, led by large-cap growth stocks. Stock prices wobbled at times--the
Standard & Poor's 500 Composite Stock Price Index dropped -1.9% on April 27
alone as concerns mounted about Asia's economic woes--but advanced in every
month except May. On balance, the S&P 500 Index earned +17.7%, an extraordinary
gain for a six-month period.
Amid the uncertainty in the world's markets, Vanguard's international index
portfolios provided returns that corresponded closely with their market
benchmarks. We salute members of our Core Management Group for their skill in
tracking the target indexes. Small divergences occur from time to time between
the returns of the portfolios and those of the benchmarks because our portfolios
do not precisely replicate the target indexes. Also, of course, our portfolios
bear "real world" operating expenses and transaction costs that are not incurred
by the indexes, which are theoretical constructs that exist only on paper.
The EUROPEAN PORTFOLIO's +27.1% return was 0.6 percentage point above that
of the MSCI Europe Index but 0.7 percentage point behind the return of the
average European fund. While the PACIFIC PORTFOLIO's return of -6.2% closely
tracked the -6.0% decline in the MSCI Pacific Free Index, it was better by 1.6
percentage points than the -7.8% decline posted by the average Pacific fund.
The EMERGING MARKETS PORTFOLIO's -16.3% decline exactly matched the return of
the MSCI Select Emerging Markets Free Index but was 0.7 percentage point worse
than the decline on the average emerging markets fund. The TOTAL INTERNATIONAL
PORTFOLIO, a "fund of funds" that invests in a market weighting of the
European, Pacific, and Emerging Markets Portfolios, fell a bit short of the
return of its target index (+12.3% versus +12.6%) but lagged the +16.1% return
of the average international fund by a wider margin, due to our higher stake in
Pacific stocks.
IN SUMMARY
Both the rewards and risks of international stocks were evident during the
first half of 1998. The risks of international stocks make them appropriate, we
believe, for only a portion of a U.S. investor's holdings. However, we also
believe that over the long term they offer the benefit of additional
diversification to investors who also hold domestic stock, bond, and money
market funds.
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<PAGE> 5
Once such diversified portfolios are constructed--in accordance with each
investor's particular time horizon, financial situation, and risk
tolerance--investors should be well positioned to "stay the course" toward their
long-term financial goals.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
July 22, 1998
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998
NET ASSET VALUE PER SHARE ------------------------------
--------------------------------------------- DISTRIBUTIONS FROM NET
PORTFOLIO DECEMBER 31, 1997 JUNE 30, 1998 REALIZED CAPITAL GAINS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
European $20.13 $25.53 $0.06
Pacific 7.72 7.24 --
Emerging Markets 9.98 8.35 --
Total International 9.87 11.08 --
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
Notice to Shareholders
At a special meeting on July 24, 1998, shareholders of Vanguard International
Equity Index Fund overwhelmingly approved three proposals. At a special meeting
on June 30, 1998, shareholders of Vanguard Total International Portfolio
overwhelmingly approved five proposals. The proposals and voting results were:
1. REORGANIZATION INTO A DELAWARE BUSINESS TRUST. This change will reduce the
amount of state taxes Vanguard International Equity Index Fund pays annually by
approximately $346,000. Vanguard Total International Portfolio will not realize
any tax savings or incur any additional taxes as a result of the change, but it
will benefit from the efficiency of being organized the same way as other
Vanguard funds. Approved as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN APPROVED BY
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity Index Fund 193,974,796 7,627,400 2,803,171 94.90%
- ------------------------------------------------------------------------------------------
Total International Portfolio 69,930,890 6,002,461 536,276 91.45%
- ------------------------------------------------------------------------------------------
</TABLE>
2a. INVESTMENT LIMITATION CHANGES--INTERFUND LENDING PROGRAM. This change
permits the portfolios of Vanguard International Equity Index Fund and the Total
International Portfolio to participate in Vanguard's interfund lending program,
which allows funds to loan money to each other if--and only if--it makes good
financial sense to do so on both sides of the transaction. The interfund lending
program won't be an integral part of your portfolio's investment program; it is
a contingency arrangement for managing unusual cash flows. Approved as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO FOR AGAINST ABSTAIN APPROVED BY
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European 83,322,031 2,194,178 1,953,109 95.26%
- ------------------------------------------------------------------------------------------
Pacific 74,313,668 2,234,302 1,413,261 95.32%
- ------------------------------------------------------------------------------------------
Emerging Markets 37,511,390 869,842 593,586 96.25%
- ------------------------------------------------------------------------------------------
Total International 74,768,006 738,268 963,353 97.77%
- ------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 7
2b. INVESTMENT LIMITATION CHANGES--BORROWING MONEY AND PLEDGING ASSETS. This
change sets standard limits of 15% of net assets on the amount of money Vanguard
funds can borrow from all sources and on the amount of assets that can be
pledged to secure any loans. Approved as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO FOR AGAINST ABSTAIN APPROVED BY
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European 82,417,234 2,810,875 2,241,209 94.22%
- ------------------------------------------------------------------------------------------
Pacific 73,252,750 3,118,687 1,589,794 93.96%
- ------------------------------------------------------------------------------------------
Emerging Markets 37,137,786 1,144,826 692,206 95.29%
- ------------------------------------------------------------------------------------------
Total International 74,532,960 852,541 1,084,127 97.47%
- ------------------------------------------------------------------------------------------
</TABLE>
2c. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN SECURITIES OWNED BY
AFFILIATES. This change eliminates the Total International Portfolio's policy of
avoiding investments in securities issued by companies whose securities are
owned in certain amounts by Trustees, officers, and key advisory personnel.
Vanguard International Equity Index Fund has no such policy. Approved by 97.20%
of the Total International Portfolio shares voted, as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total International Portfolio 74,324,849 1,080,881 1,063,898
- ----------------------------------------------------------------------------------------
</TABLE>
2d. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN UNSEASONED COMPANIES. This
change eliminates the Total International Portfolio's policy of not investing
more than 5% of net assets in securities issued by companies with fewer than
three years of operating history, taking into account any predecessors. Vanguard
International Equity Fund has no such policy. Approved by 97.06% of the Total
International Portfolio shares voted, as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total International Portfolio 74,220,407 1,184,671 1,064,550
- ----------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
THE MARKETS IN PERSPECTIVE
Six Months Ended June 30, 1998
Blue skies predominated for U.S. financial markets during the first six months
of 1998, and even the occasional clouds had silver linings. The bond market
provided solid returns during the half-year, while the stock market's
performance was extraordinarily strong.
After expanding at a 5.4% annual pace during the first quarter, the U.S.
economy kept steaming along through June, fueled by powerful increases in
household spending. Consumers had reason to be upbeat: plentiful jobs
(unemployment fell to 4.3% of the workforce in May); rising wages (personal
income in May was 5.9% higher than in May 1997); and tame inflation (consumer
prices in June were up only 1.7% from a year before).
The economic push provided by consumers more than compensated for the drag
caused by Asia's severe economic problems. Weakening currencies and business
slowdowns in Asia cut into U.S. exports and lowered the cost of Asian imports,
causing the U.S. trade deficit to hit record levels. Ominously, Asia's problems
appear to be more serious and enduring than many economists expected. Yet for
Americans this "Asian contagion" has a bright side: It serves as an escape valve
for the inflationary pressures that ordinarily would be expected to build up
with the U.S. economy humming along at high speed.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998
-----------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 17.7% 30.2% 23.1%
Russell 2000 Index 4.9 16.5 16.0
MSCI EAFE Index 16.1 6.4 10.3
- --------------------------------------------------------------------------------
FIXED-INCOME
Lehman Aggregate Bond Index 3.9% 10.5% 6.9%
Lehman 10-Year Municipal Bond Index 2.6 8.5 6.6
Salomon Brothers Three-Month
U.S. Treasury Bill Index 2.6 5.3 4.9
- --------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.1% 1.7% 2.5%
- --------------------------------------------------------------------------------
</TABLE>
*Annualized.
U.S. EQUITY MARKETS
The mixture of robust economic growth and anemic inflation was a tonic for the
U.S. stock market. Although prices generally rose, there were striking
disparities in returns between large-capitalization and small-cap stocks and
between growth and value stocks. The large-cap-dominated S&P 500 earned 17.7%
during the six months, nearly double the 9.4% return on the rest of the market
(as measured by the Wilshire 4500 Index) and more than triple the 4.9% return on
the small-cap Russell 2000 Index. Within the S&P 500 Index, growth stocks were
up 23.1%, while value stocks rose 12.1%.
A decline in interest rates contributed to the stock market's rise, as
falling rates on bonds tend to make equities more attractive and to boost the
price investors will pay for each dollar of a stock's earnings or dividends. Yet
growth in earnings and dividends--the long-term underpinning of stock
prices--was unimpressive during the first half of 1998.
Corporate earnings estimates were reduced in June, the tenth consecutive
month in which securities analysts have cut their earnings estimates, according
to I/B/E/S International, a financial research group. Earnings by the S&P 500
companies were expected to
6
<PAGE> 9
rise by only about 2% for the first half of 1998, I/B/E/S reported. With gains
in prices outstripping increases in earnings and dividends, stock valuations are
at or near all-time highs, an indication that investors expect ideal conditions
to continue.
Technology stocks were the best-performing sector during the first half of
1998, generating a 32.7% return. Three other sectors of the stock market--health
care, consumer discretionary stocks such as retailers, and auto &
transportation--each provided returns of about 25% for the six months. Companies
involved in energy, chemicals, or other commodity-based businesses were
generally laggards. Prices of many commodities have declined as Asia's economic
funk cuts demand for energy and other industrial materials in the face of
plentiful supplies.
U.S. FIXED-INCOME MARKETS
Investors in fixed-income securities enjoyed a moderate rise in the market value
of their holdings because of declining interest rates. This price appreciation,
added to coupon interest income, resulted in solid total returns. The 3.9% total
return of the Lehman Aggregate Bond Index during the half-year brought its
return for the 12 months ended June 30 to 10.5%, or a very generous 8.8% after
adjustment for inflation.
Yields on 10-year and 30-year U.S. Treasury bonds declined by 29 basis
points (0.29 percentage point) to 5.45% and 5.63%, respectively, during the
first half of 1998, with most of the drop occurring during the second quarter.
The yield on 3-month Treasury bills declined 36 basis points to 4.99%. Mild
inflation--consumer prices were up 1.1% for the half-year--enabled rates to
decline despite the economy's strong growth.
Yields on corporate and municipal bonds did not decline as far as those on
Treasury securities because of a large increase in the supply of new bonds
issued by companies and municipalities taking advantage of lower rates to
refinance old debt. Similarly, mortgage-backed securities did not match
Treasuries' performance because of expectations that large numbers of homeowners
would pay off old, higher-coupon mortgage loans and refinance with new,
lower-rate loans.
INTERNATIONAL EQUITY MARKETS
Stock markets in Europe soared while those in Asia and most emerging economies
suffered steep declines in U.S.-dollar terms. The 16.1% overall return from
international markets, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East Index, masked the divergence between Europe and
other regions.
Europe's markets were up 27.1% when measured in local currencies and 26.5%
in U.S. dollars, after adjusting for a slight overall rise in the dollar's
value. Stocks benefited from an upswing in most European economies, from signs
that corporate managers are increasingly focused on shareholder value, and from
optimism concerning next year's planned adoption of the euro as a single
European currency.
In the Pacific, which is dominated by Japan's stock market, stocks were
buffeted by several problems: slowing growth in economic activity; continued
instability in currencies; political upheavals; and widespread worries about
corporate and banking insolvencies. On balance, the region's stocks fell 6.0% in
U.S.-dollar terms. Japanese stocks were down 2.5%, but losses were more severe
in the region's smaller markets.
Emerging markets were, on balance, down sharply. Asian stock markets were
hurt by continued weakness in the currency values of several countries, by
Japan's recession, and by a growing conviction that the region's economic
troubles are far from transitory. Venezuela and Mexico, both key oil-producing
nations, were hard hit by falling oil prices.
7
<PAGE> 10
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the portfolios. Note, too, that
both share price and return can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
<CAPTION>
EUROPEAN PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-JUNE 30, 1998
- ------------------------------------------------------------
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
1998* 27.1 0.0 27.1 26.5
- ------------------------------------------------------------
</TABLE>
*Six months ended June 30, 1998.
See Financial Highlights table on page 42 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
PACIFIC PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-JUNE 30, 1998
- ------------------------------------------------------------
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
1998* -6.2 0.0 -6.2 -6.0
- ------------------------------------------------------------
</TABLE>
*Six months ended June 30, 1998.
See Financial Highlights table on page 43 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
European Portfolio* 6/18/1990 36.72% 23.05% 12.68% 2.33% 15.01%
Pacific Portfolio* 6/18/1990 -35.58 -6.08 -3.71 0.65 -3.06
- ---------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
8
<PAGE> 11
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the portfolios. Note, too, that
both share price and return can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
TOTAL INVESTMENT RETURNS: MAY 4, 1994-JUNE 30, 1998
- ---------------------------------------------------------
EMERGING MARKETS PORTFOLIO MSCI*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<C> <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
1998** -16.3 0.0 -16.3 -16.3
- ---------------------------------------------------------
</TABLE>
*MSCI Select Emerging Markets Free Index.
**Six months ended June 30, 1998.
See Financial Highlights table on page 43 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
TOTAL INTERNATIONAL PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 29, 1996-JUNE 30, 1998
- ---------------------------------------------------------
TOTAL INTERNATIONAL PORTFOLIO COMPOSITE*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<C> <C> <C> <C> <C>
1996 -1.0% 1.6% 0.6% 0.6%
1997 -2.5 1.7 -0.8 -0.8
1998** 12.3 0.0 12.3 12.6
- ---------------------------------------------------------
</TABLE>
*Consists of the MSCI EAFE Index plus the MSCI Select Emerging Markets Free
Index.
**Six months ended June 30, 1998.
See Financial Highlights table on page 44 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1998
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerging Markets Portfolio* 5/4/1994 -39.18% -4.62% 1.33% -3.29%
Total International Portfolio** 4/29/1996 -0.83 3.54 1.56 5.10
- -----------------------------------------------------------------------------------------------
</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.
**Performance figures are adjusted for the 0.5% transaction fee on purchases and
the $10 annual account maintenance fee.
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<PAGE> 12
PORTFOLIO PROFILE
European Portfolio
This Profile provides a snapshot of the portfolio's characteristics as of June
30, 1998, compared where appropriate to the unmanaged target index. Key elements
of this Profile are defined on page 11.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
EUROPEAN MSCI
PORTFOLIO EUROPE
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 598 593
Turnover Rate 4%* --
Expense Ratio 0.28%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- -------------------------------------------------------
<S> <C>
Royal Dutch Petroleum Co. 2.3%
Novartis AG 2.2
Glaxo Wellcome PLC 2.1
Roche Holdings AG 1.8
British Petroleum Co., PLC 1.6
Nestle SA (Registered) 1.6
Allianz AG 1.5
Union Bank of Switzerland 1.5
British Telecommunications PLC 1.5
Lloyds TSB Group PLC 1.4
- -------------------------------------------------------
Top Ten 17.5%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
EUROPEAN MSCI
PORTFOLIO EAFE
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.73 1.00
Beta 0.77 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1998
----------------------------------------------------------
EUROPEAN EUROPEAN MSCI
PORTFOLIO PORTFOLIO EUROPE
----------------------------------------------------------
<S> <C> <C> <C>
Austria 0.6% 0.5% 0.6%
Belgium 2.0 2.1 2.5
Denmark 1.6 1.3 1.3
Finland 1.3 1.4 1.4
France 11.8 13.2 13.0
Germany 14.9 15.5 15.4
Ireland 0.6 0.7 0.7
Italy 5.3 6.1 6.2
Netherlands 8.9 7.9 7.9
Norway 1.0 0.7 0.8
Portugal 0.0 0.9 0.8
Spain 4.2 4.5 4.5
Sweden 4.3 4.4 4.3
Switzerland 11.3 10.7 10.7
United Kingdom 32.2 30.1 29.9
- --------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
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 period. Portfolios
with high turnover rates incur higher transaction costs and are more likely to
distribute capital gains (which are taxable to investors).
11
<PAGE> 14
PORTFOLIO PROFILE
Pacific Portfolio
This Profile provides a snapshot of the portfolio's characteristics as of June
30, 1998, compared where appropriate to the unmanaged target index. Key elements
of this Profile are defined on page 11.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
MSCI
PACIFIC PACIFIC
PORTFOLIO FREE
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 500 514
Turnover Rate 2%* --
Expense Ratio 0.39%* --
Cash Reserves 0.3% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ----------------------------------------------------------
<S> <C>
Nippon Telegraph and Telephone Corp. 5.7%
Toyota Motor Corp. 5.3
The Bank of Tokyo-Mitsubishi Ltd. 2.7
Nomura Securities Co., Ltd. 2.0
Sony Corp. 1.9
Honda Motor Co., Ltd. 1.9
Matsushita Electric Industrial Co., Ltd. 1.8
Sumitomo Bank Ltd. 1.7
News Corp. Ltd. 1.6
Tokyo Electric Power Co. 1.4
- ----------------------------------------------------------
Top Ten 26.0%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
PACIFIC MSCI
PORTFOLIO EAFE
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.75 1.00
Beta 1.30 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- ----------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1998
--------------------------------------------------------
MSCI
PACIFIC PACIFIC PACIFIC
PORTFOLIO PORTFOLIO FREE
--------------------------------------------------------
<S> <C> <C> <C>
Australia 6.5% 9.1% 9.0%
Hong Kong 8.4 6.6 6.6
Japan 76.4 79.5 79.7
Malaysia 4.7 1.9 1.9
New Zealand 0.8 0.8 0.8
Singapore 3.2 2.1 2.0
- ----------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
PORTFOLIO PROFILE
Emerging Markets Portfolio
This Profile provides a snapshot of the portfolio's characteristics as of June
30, 1998, compared where appropriate to the unmanaged target index. Key elements
of this Profile are defined on page 11.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
EMERGING
MARKETS MSCI
PORTFOLIO SELECT*
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 611 600
Turnover Rate 9%** --
Expense Ratio 0.59%** --
Cash Reserves 4.9% --
</TABLE>
*MSCI Select Emerging Markets Free Index.
**Annualized.
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ----------------------------------------------------------
<S> <C>
Telecomunicacoes Brasileiras SA 4.9%
Telefonos de Mexico SA 3.2
Hong Kong Telecommunications Ltd. 2.8
Hutchison Whampoa Ltd. 2.5
Centrais Electricas Brasileiras SA 2.5
YPF SA Class D 1.7
Hellenic Telecommunication
Organization SA 1.7
Cheung Kong Holdings Ltd. 1.5
CLP Holdings Limited 1.4
Petroleo Brasileiro SA Pfd. 1.4
- ----------------------------------------------------------
Top Ten 23.6%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
EMERGING
MARKETS MSCI
PORTFOLIO EAFE
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.43 1.00
Beta 1.23 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- ---------------------------------------------------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1998
-------------------------------------------------------------
EMERGING MARKETS EMERGING MARKETS MSCI
PORTFOLIO PORTFOLIO SELECT
-------------------------------------------------------------
<S> <C> <C> <C>
Argentina 4.1% 5.5% 5.7%
Brazil 18.5 18.8 19.0
Czech Republic 0.0 1.5 1.5
Greece 1.6 5.8 5.7
Hong Kong 15.0 15.4 15.3
Hungary 0.0 1.9 1.8
Indonesia 6.5 1.0 1.0
Israel 2.4 4.1 4.1
Malaysia 13.8 5.8 5.7
Mexico 9.6 14.0 13.9
Philippines 3.1 1.9 1.9
Poland 0.0 0.8 0.8
Singapore 5.1 4.8 4.7
South Africa 12.1 13.2 13.5
Thailand 3.8 1.8 1.7
Turkey 2.0 3.7 3.7
Other 2.4 0.0 0.0
- ---------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
PORTFOLIO PROFILE
Total International Portfolio
This Profile provides a snapshot of the portfolio's characteristics as of June
30, 1998. Key elements of this Profile are defined on page 11.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
<S> <C>
Expense Ratio 0%
Average Weighted Expense Ratio 0.33%*
</TABLE>
*For underlying portfolios; annualized.
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION TO FUNDS
- ----------------------------------------------------------
<S> <C>
Vanguard International Equity Index Fund-
European Portfolio 67.6%
Pacific Portfolio 23.6
Emerging Markets Portfolio 8.8
- ----------------------------------------------------------
Total 100.0%
</TABLE>
14
<PAGE> 17
FINANCIAL STATEMENTS
June 30, 1998 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each portfolio's holdings, including
each security's market value on the last day of the reporting period. European,
Pacific, and Emerging 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 (99.7%)(1)
- ----------------------------------------------------------
<S> <C> <C>
AUSTRIA (0.5%)
Austria Mikro Systeme
International AG 3,700 $ 251
Austrian Airlines AG 22,940 755
BWT Best Water Technology AG 1,760 374
Bank Austria AG 45,222 3,677
Bank Austria AG (Ptg. Ctf.) 3,690 265
- - Bank Austria AG
Rights Exp. 7/9/1998 64,762 4
Bank Austria AG-Vorzug 19,540 1,587
Bau Holding AG 3,460 196
Bau Holding AG Pfd. 3,234 154
Boehler-Uddeholm AG 9,220 609
EA-Generali AG 5,461 1,604
EA-Generali AG Pfd. 1,114 221
Flughafen Wien AG 18,050 866
- - Lenzing AG 4,490 343
Mayr-Melnhof Karton AG 10,510 687
OMV AG 17,737 2,376
Oesterreichische Brau-
Beteiligungs AG 8,810 520
Oesterreichische
Elektrizitaetswirtschafts AG
Class A 21,675 2,594
RHI AG 12,947 627
Steyr-Daimler-Puch AG 14,174 388
Universale-Bau AG 7,730 240
VA Technologies AG 8,270 1,029
Wienerberger
Baustoffindustrie AG 6,790 1,643
---------
21,010
---------
BELGIUM (2.1%)
Barco NV 8,035 2,246
Bekaert SA 1,842 1,530
CBR Cimenteries SA 18,210 2,041
Colruyt NV 2,995 2,350
Compagnie Maritime Belge SA 8,087 611
D'Ieteren SA 4,463 2,084
Delhaize-Le Lion SA 39,268 2,744
Electrabel SA 40,532 11,492
Fortis AG 28,597 7,301
Generale De Banque SA 23,210 17,231
Glaverbel SA 5,879 841
Groupe Bruxelles Lambert SA 18,660 3,766
Petrofina SA 17,420 7,151
Solvay SA 61,350 4,864
Tractebel SA 58,050 8,502
UCB SA 1,126 5,842
Union Miniere SA 20,918 1,293
---------
81,889
---------
DENMARK (1.3%)
Aarhus Oliefabrik A/S A Shares 5,020 255
Aarhus Oliefabrik A/S B Shares 3,240 165
Bang & Olufsen Holding A/S
B Shares 11,900 857
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
Carlsberg A/S A Shares 25,075 $ 1,823
Carlsberg A/S B Shares 13,849 1,007
D/S 1912 B Shares 769 6,597
D/S Svendborg B Shares 559 6,828
Danisco A/S 46,335 3,113
Den Danske Bank A/S 40,830 4,898
- - East Asiatic Co. A/S 28,450 209
FLS Industries A/S B Shares 41,040 1,044
GN Store Nord A/S 29,950 915
ISS International Service
Systems A/S B Shares 24,319 1,415
J. Lauritzen Holding A/S B Shares 5,774 568
Korn Og Foderstof
Kompagniet A/S 12,510 295
NKT Holding A/S 7,870 612
Novo Nordisk A/S B Shares 49,482 6,821
Radiometer A/S B Shares 11,008 440
SAS Danmark A/S 39,680 796
Superfos A/S 27,600 742
Tele Danmark A/S B Shares 95,495 9,165
Unidanmark A/S A Shares 41,177 3,700
---------
52,265
---------
FINLAND (1.4%)
- - Amer Group Ltd. 19,220 371
Cultor Oyj-Series 1 40,650 659
Cultor Oyj-Series 2 30,510 489
Instrumentarium Group A Shares 4,600 290
Instrumentarium Group B Shares 5,240 334
Kemira Oy 52,830 546
Kesko Oy 68,770 1,084
Kone Oy B Shares 6,348 891
Merita Ltd. A Shares 641,467 4,232
Metra Oy A Shares 10,970 350
Metra Oy B Shares 33,626 1,103
Nokia Oyj A Shares 331,400 24,373
Nokia Oyj K Shares 108,700 8,004
Outokumpu Oy A Shares 100,750 1,285
Pohjola Insurance Co., Ltd.
A Shares 21,688 1,067
Pohjola Insurance Co., Ltd.
B Shares 9,400 468
Sampo Insurance Co., Ltd.
A Shares 35,424 1,679
Stockmann AB Oy A Shares 36,900 1,103
Stockmann AB Oy B Shares 28,730 670
UPM-Kymmene Oy 211,783 5,829
---------
54,827
---------
FRANCE (13.2%)
AXA-UAP SA 266,462 29,970
Accor SA 27,376 7,661
Alcatel Alsthom SA 122,559 24,954
Banque Nationale de Paris SA 165,070 13,487
Bongrain SA 1,858 933
Bouygues SA 20,093 3,649
Canal Plus SA 23,255 4,346
Cap Gemini SA 51,295 8,060
Carrefour SA 28,937 18,307
Chargeurs SA 7,116 588
- - Club Mediterranee SA 12,746 1,100
Coflexip SA 8,582 1,050
Compagnie Francaise d'Etudes
et de Construction SA 13,252 1,620
- - Compagnie Generale de
Geophysique SA 4,289 629
Compagnie Generale des
Establissements Michelin SCA
B Shares 104,570 6,036
Compagnie Parisienne de
Reescompte SA 22,468 1,810
Compagnie de Saint-Gobain SA 67,265 12,472
Compagnie des Gaz de Petrole
Primagaz SA 16,489 1,448
Compoirs Modernes SA 3,780 1,969
Dassault Systemes SA 83,879 3,954
Elf Aquitaine SA 206,076 28,972
Eridania Beghin-Say SA 19,713 4,353
Essilor International SA 7,781 3,291
Etablissements Economiques du
Casino Guichard-Perrachon SA 42,413 3,387
Etablissements Economiques du
Casino Guichard-Perrachon
SA Pfd. 16,517 918
France Telecom SA 603,690 41,637
Groupe GTM 10,921 1,134
Groupe Danone SA 54,746 15,094
Groupe SEB SA 9,894 1,371
Imetal SA 11,924 1,639
L'Air Liquide SA (Registered) 62,146 10,279
L'Oreal SA 50,771 28,241
LVMH Moet Hennessy Louis
Vuitton SA 66,005 13,210
Lafarge SA 78,220 8,086
Lagardere SCA 83,663 3,483
Legrand SA 21,373 5,656
Nord-Est SA 16,506 363
PSA Peugeot Citroen SA 36,669 7,884
- - Paribas 125,421 13,422
Pathe SA 6,229 1,221
Pechiney SA A 47,407 1,909
Pernod Ricard SA 43,680 3,027
Pinault-Printemps-Redoute SA 17,815 14,910
Promodes SA 14,604 8,092
Rhone-Poulenc SA Series A 273,853 15,445
Sagem SA 3,054 2,376
Sanofi SA 80,861 9,509
Schneider SA 115,075 9,176
Sidel SA 26,816 1,952
Simco SA 20,781 1,705
Skis Rossignol SA 15,906 282
Societe BIC SA 38,723 2,754
Societe Francaise
d'Investissements Immobiliers
et de Gestion SA 17,248 1,250
Societe Generale SA 75,891 15,778
Societe National d'Exploitation
Industrielle de Tabacs et
Allumettes SA 32,493 1,473
Sodexho Alliance SA 25,016 4,729
Sommer Allibert SA 17,700 920
Suez Lyonnaise des Eaux 95,553 15,725
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
Thomson-CSF SA 91,179 $ 3,469
Total SA B Shares 183,563 23,864
Union Immobiliere de France SA 9,650 761
Usinor Sacilor SA 149,633 2,312
Valeo SA 53,033 5,421
Vivendi 141,859 30,291
- - Zodiac SA 3,313 910
---------
515,724
---------
GERMANY (15.4%)
- - AGIV AG Fuer Industrie und
Verkehrswesen AG 32,820 909
Aachener & Muenchener
Beteiligungs AG (Bearer) 7,640 893
Aachener & Muenchener
Beteiligungs AG (Registered) 30,000 3,507
Adidas-Salomon AG 32,800 5,715
Allianz AG 176,530 58,826
- - Allianz AG-New Shares 4,292 1,418
Axa Colonia Konzern AG 19,980 2,479
BASF AG 467,975 22,232
Bayer AG 549,050 28,410
Bayerische Hypotheken und
Weschel Bank AG 201,165 12,750
Bayerische Vereinsbank AG 229,530 19,456
Beiersdorf AG 61,750 3,934
Bilfinger & Berger Bau AG 23,620 809
- - Brau und Brunnen AG 4,492 582
Buderus AG 2,110 1,052
CKAG Colonia Konzern AG Pfd. 4,410 446
Continental AG 80,150 2,518
DLW AG 1,890 353
Daimler-Benz AG 426,651 41,955
Degussa AG 68,070 4,356
Deutsche Bank AG 400,375 33,848
Deutsche Lufthansa AG-
New Shares 288,470 7,264
Deutsche Telekom AG 1,655,175 45,299
Douglas Holding AG 12,420 661
Dresdner Bank AG 387,985 20,957
Dyckerhoff AG Pfd. 2,578 1,007
Escada AG 1,420 234
Escada AG Pfd. 1,740 275
Fag Kugelfischer Georg
Schaefer AG 40,125 601
Friederich Grohe AG Pfd. 1,095 370
Heidelberger Zement AG 37,656 3,567
Herlitz AG 3,150 171
Herlitz AG Pfd. 4,415 236
Hochtief AG 53,900 2,586
Holsten-Brauerei AG 1,487 346
IWKA AG 1,450 340
Karstadt AG 4,000 1,945
- - Kloeckner-Humbolt-Deutz AG 41,700 493
Linde AG 6,554 4,502
Man AG 8,455 3,298
Man AG Pfd. 2,900 782
Mannesmann AG 293,440 30,156
Merck KGaA 121,500 5,446
Metro AG 170,772 10,312
Metro AG Pfd. 1 15,688 647
- - Metro AG Rights Exp. 7/2/1998 183,260 7
Muenchener
Rueckversicherungs-
Gesellschaft AG (Bearer) 2,700 963
Muenchener
Rueckversicherungs-
Gesellschaft AG (Registered) 59,475 29,523
Preussag AG 11,505 4,118
RWE AG 329,445 20,032
RWE AG Pfd. 91,495 3,397
Rheinmetall AG 16,500 548
Rheinmetall AG Pfd. 15,650 447
SAP AG 46,125 27,981
SAP AG Pfd. 32,650 22,158
SGL Carbon AG 11,200 1,304
Salamander AG 1,930 318
Schering AG 51,850 6,104
Siemens AG 431,120 26,309
- - Strabag Bau AG 1,893 164
- - Strabag Bau AG Pfd. 579 48
Thyssen AG 26,066 6,628
Veba AG 373,931 25,139
Viag AG 20,156 13,869
- - Volkswagen AG 23,300 22,499
- - Volkswagen AG Pfd. 7,350 5,066
---------
604,565
---------
IRELAND (0.7%)
Allied Irish Banks PLC 611,846 8,833
CRH PLC 291,843 4,140
Clondalkin Group PLC 43,008 360
DCC PLC 71,302 637
FYFFES PLC 272,730 662
Greencore Group PLC 165,500 900
Independent Newspapers PLC 211,515 1,136
Irish Continental Group PLC 25,311 406
Irish Life PLC 228,260 2,101
Irish Permanent PLC 75,302 888
James Crean PLC 77,080 168
Jefferson Smurfit Group PLC 847,100 2,517
Jurys Hotel Group PLC 43,488 364
Kerry Group PLC A Shares 41,060 567
- - Ryanair Holdings PLC 135,872 948
- - Tullow Oil PLC 217,985 395
Waterford Wedgewood PLC 584,480 758
---------
25,780
---------
ITALY (6.1%)
Assicurazioni Generali SpA 764,595 24,746
Banca Commerciale
Italiana SpA 2,581,300 15,453
Banca Intesa Non-Conv Risp. 1,001,820 2,953
Banco Intesa SpA 2,239,555 12,495
Banco Popolare Di Milano SpA 396,100 3,163
Benetton Group SpA 1,206,960 2,508
Bulgari SpA 229,800 1,244
Burgo (Cartiere) SpA 114,400 910
Cementir SpA 292,180 332
Danieli & Co. SpA 42,090 346
Danieli & Co. SpA Risp. 42,500 195
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
Edison SpA 487,400 $ 3,924
Ente Nazionale
Idrocarburi SpA 6,007,500 39,136
Falck, Acciaierie & Ferriere
Lombarde SpA 104,500 676
Fiat SpA 2,777,440 12,156
Fiat SpA Pfd. 782,200 1,947
Fiat SpA Risp. 621,820 1,539
- - Impregilo SpA 214,000 189
Istituto Bancairo San Paolo de
Torino SpA 1,172,600 17,113
Istituto Nazionale Delle
Assicurazioni SpA 460,000 1,307
Italcementi SpA 140,557 1,265
Italcementi SpA Risp. 101,235 436
Italgas SpA 553,250 2,253
La Rinascente SpA 165,362 1,616
La Rinascente SpA Pfd. 49,000 229
La Rinascente SpA Risp. 43,000 215
Magneti Marelli SpA 465,920 1,022
Marzotto & Figli SpA 11,900 179
Marzotto & Figli SpA Risp. 15,000 227
Mediaset SpA 863,700 5,477
Mondadori (Arnoldo)
Editore SpA 60,420 698
Montedison SpA 3,813,502 4,731
Montedison SpA Risp. 466,600 361
- - Olivetti SpA 1,984,556 2,953
Parmalat Finanziaria SpA 990,800 2,021
Pirelli SpA 1,373,400 4,288
Pirelli SpA Risp. 109,300 261
- - Reno De Medici SpA 118,790 407
Riunione Adriatica di
Sicurta SpA 321,954 4,211
Riunione Adriatica di
Sicurta SpA Risp. 59,900 539
SNIA BPD SpA 576,200 707
SNIA BPD SpA Risp. 103,780 99
Sirti SpA 160,000 861
Societa Assicuratrice
Industriale SpA 84,030 1,076
Societa Assicuratrice
Industriale SpA Risp. 60,500 398
Telecom Italia Mobile SpA 4,990,416 30,450
Telecom Italia Mobile SpA Risp. 1,201,244 4,055
- - Telecom Italia SpA 2,766,392 20,212
- - Telecom Italia SpA Risp. 643,571 3,131
---------
236,710
---------
NETHERLANDS (7.9%)
ABN-AMRO Holding NV 1,063,302 24,881
ASR Verzekerings Groep NV 28,097 2,384
- - Akzo Nobel NV 51,770 11,508
Elsevier NV 499,000 7,531
Getronics NV 65,441 3,394
- - Heineken NV 227,640 8,941
Hollandsche Beton Groep NV 28,940 603
IHC Caland NV 13,790 776
ING Groep NV 699,550 45,806
KLM Royal Dutch Airlines NV 54,117 2,197
Koninklijke Ahold NV 414,393 13,302
Koninklijke KNP BT NV 352,444 15,562
Koninklijke Nederlandsche
Hoogevens en
Staalfabireken NV 30,619 1,325
- - Koninklijke Pakhoed NV 26,828 870
Nedlloyd Groep NV 15,401 313
Oce NV 57,008 2,427
Philips Electronics NV 275,145 23,129
Royal Dutch Petroleum Co. 1,609,226 89,233
Stork NV 27,283 869
TNT Groep 352,444 9,008
Unilever NV 481,068 38,169
Wolters Kluwer NV 51,033 7,004
---------
309,232
---------
NORWAY (0.7%)
Aker ASA A Shares 32,423 509
Aker ASA B Shares 22,304 318
- - Ask ASA 45,607 354
Bergesen D.Y. ASA A Shares 43,736 832
Bergesen D.Y. ASA B Shares 20,896 391
Christiania Bank Og
Kreditkasse ASA 165,400 692
Den Norske Bank ASA 450,500 2,360
Dyno Industrier ASA 25,196 450
Elkem ASA 50,640 607
Hafslund ASA A Shares 47,831 259
Hafslund ASA B Shares 50,051 198
Helikopter Services Group ASA 25,650 261
Kvaerner ASA 28,220 956
Kvaerner ASA B Shares 10,690 330
Lief Hoegh & Co. ASA 24,470 357
Merkantildata ASA 72,760 920
- - NCL Holdings ASA 182,360 901
Norsk Hydro ASA 154,244 6,784
Norske Skogindustrier ASA
A Shares 25,200 778
Norske Skogindustrier ASA
B Shares 10,440 293
Orkla ASA A Shares 115,140 2,678
Orkla ASA B Shares 31,680 667
- - Petroleum Geo-Services ASA 64,740 2,016
SAS Norge ASA B Shares 41,200 703
Schibsted ASA 57,870 973
Smedvig ASA A Shares 22,401 271
Smedvig ASA B Shares 19,686 223
Storebrand ASA 182,760 1,620
Tomra Systems ASA 34,325 1,029
Unitor ASA 20,050 295
---------
29,025
---------
PORTUGAL (0.9%)
Banco Comercial Portugues
8% Cvt.Pfd. Series A 27,639 2,930
Banco Comercial Portugues
SA (Registered) 60,640 1,722
Banco Espirito Santo e Comercial
de Lisboa SA (Registered) 84,239 2,530
Banco Pinto & Sotto Mayor SA 88,768 1,657
Banco Totta e Acores SA
(Registered) 1,400 67
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
Brisa-Auto Estradas de
Portugal, SA 46,747 $ 1,999
Cimpor-Cimento de Portugal SA 65,516 2,302
Cin-Corporacao Industrial do
Norte SA 4,090 303
- - Colep-Companhia Portuguesa
de Embalagens 18,784 249
Companhia de Seguros
Tranquilidade 17,900 485
Corticeira Amorin SA 18,110 347
Efacec-Empresa Fabrilde
Maquinas Electricas SA 16,930 154
Electricidade de Portugal SA 271,222 6,305
Engil-SGPS 20,720 235
Inapa-Investimentos
Participacoes e Gestao SA 26,010 336
Jeronimo Martins & Filho
SGPS SA 54,170 2,602
Portucel Industrial-Empresa
Productora de Cellulosa SA 77,040 613
Portugal Telecom SA
(Registered) 127,156 6,739
- - Sociedade Construcoes Soares
da Costa SA 26,310 218
Somague-Sociedade Gestora de
Participacoes, SA 22,200 210
Sonae Investimentos-Sociedade
Gestora de Participacoes SA 30,920 1,689
Unicer-Uniao Cervejeira SA 19,550 432
---------
34,124
---------
SPAIN (4.5%)
- - Acerinox SA 9,206 1,227
- - Argentaria SA 346,970 7,797
Autopista Concesionaria
Espanola SA 185,457 2,877
- - Autopista Concesionaria
Espanola Rights
Exp. 7/10/1998 182,357 138
- - Azucarera Ebro Agricolas 47,694 1,421
- - Banco Bilbao Vizcaya SA
(Registered) 511,023 26,271
Banco Central
Hispanoamericano SA 278,343 8,764
- - Banco Santander SA 865,042 22,178
Corporacion Financiera Alba SA 11,815 1,258
Corporacion Mapfre SA 48,142 1,692
Dragados y Construcciones SA 46,546 1,493
- - El Aguila SA 38,608 361
Empresa Nacional Compania de
Celulosas SA 22,150 391
Endesa SA 780,756 17,110
- - Ercros SA 195,702 248
Fomento de Construcciones y
Contratas SA 47,132 2,435
Gas Natural SDG SA 106,308 7,694
Iberdrola SA 665,003 10,816
- - Inmobiliaria Urbis SA 39,880 557
- - Metrovacesa SA 39,632 1,168
- - Metrovacesa SA Bonus
Rights Exp. 7/24/1998 39,632 56
Portland Valderrivas SA 6,248 762
Prosegur Cia de Seguridad SA
(Registered) 54,600 651
Repsol SA 221,337 12,217
- - Sarrio SA 71,740 337
Sociedade General de Aguas de
Barcelona SA 4,550 254
Tabacalera SA 140,330 2,878
Telefonica de Espana SA 769,474 35,636
Union Electrica Fenosa SA 201,757 2,603
Uralita SA 47,564 679
Vallehermoso SA 34,458 1,269
Viscofan Industria Navarra de
Envolturas Celulosic SA 21,260 992
Zardoya Otis SA 42,430 1,264
- - Zardoya Otis SA
Rights Exp. 7/29/1998 42,430 205
---------
175,699
---------
SWEDEN (4.3%)
ABB AB A Shares 496,780 7,039
ABB AB B Shares 203,200 2,828
AGA AB A Shares 101,750 1,595
AGA AB B Shares 88,440 1,353
Astra AB A Shares 1,004,500 20,531
Astra AB B Shares 226,946 4,525
Atlas Copco AB A Shares 94,500 2,577
Atlas Copco AB B Shares 49,190 1,342
Diligentia AB 58,885 509
Electrolux AB Series B 275,950 4,741
Esselte AB A Shares 17,160 381
Esselte AB B Shares 16,290 378
Foreningssparbanken AB 269,000 8,095
Granges AB 33,646 616
Hennes & Mauritz AB B Shares 157,440 10,049
LM Ericsson Telephone AB
B Shares 1,460,300 42,665
- - Netcom Systems AB Series B 78,870 3,021
OM Gruppen AB 68,156 1,419
SKF AB A Shares 32,240 572
SKF AB B Shares 52,380 952
Sandvik AB A Shares 146,515 4,051
Sandvik AB B Shares 54,343 1,492
Securitas AB B Shares 54,480 2,668
- - Skandia Forsakrings AB 358,610 5,126
Skandinaviska Eeskilda Banken
AB B Shares 448,053 7,669
Skanska AB B Shares 88,358 3,966
Stora Kopparbergs Berglags AB
A Shares 125,005 1,967
Stora Kopparbergs Berglags AB
B Shares 17,650 279
Svenska Cellulosa AB B Shares 153,246 3,968
Svenska Handelsbanken AB
A Shares 165,680 7,687
Svenska Handelsbanken AB
B Shares 19,060 836
Svenskt Stal AB (SSAB)-
Series A 73,609 1,135
Svenskt Stal AB (SSAB)-
Series B 29,833 449
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- ------------------------------------------------------------
MARKET
VALUE*
EUROPEAN PORTFOLIO SHARES (000)
- ------------------------------------------------------------
<S> <C> <C>
Swedish Match AB 373,069 $ 1,240
Trelleborg AB B Shares 88,298 1,163
Volvo AB A Shares 88,250 2,567
Volvo AB B Shares 225,819 6,725
WM-Data AB B Shares 54,570 1,895
---------
170,071
---------
SWITZERLAND (10.7%)
ABB AG (Bearer) 6,135 9,060
ABB AG (Registered) 4,440 1,347
Adecco SA (Bearer) 12,327 5,559
- - Alusuisse-Lonza Group AG
(Registered) 4,726 5,995
Credit Suisse Group AG
(Registered) 199,835 44,465
- - Danzas Holding AG (Registered) 2,105 566
Forbo Holding AG (Registered) 1,310 667
Georg Fischer AG (Registered) 2,615 1,017
Grands Magasins Jelmoli SA
(Bearer) 500 635
Grands Magasins Jelmoli SA
(Registered) 1,550 389
Holderbank Financiere Glarus AG
(Bearer) 3,928 4,998
Holderbank Financiere Glarus AG
(Registered) 7,910 1,989
Kuoni Reisen Holding AG
(Registered) 260 1,291
Moevenpick Holding AG (Bearer) 1,090 541
Nestle SA (Registered) 29,549 63,235
Novartis AG (Bearer) 4,898 8,157
Novartis AG (Registered) 46,516 77,403
Roche Holding AG (Bearer) 1,218 18,047
Roche Holding AG
(Dividend-Right Certificates) 5,290 51,948
SGS Societe Generale de
Surveillance Holding SA (Bearer) 817 1,385
SGS Societe Generale de
Surveillance Holding SA
(Registered) 1,940 668
SMH AG (Registered) 11,150 1,860
SAirgroup AG 8,750 2,879
Schindler Holding AG (Ptg. Ctf.) 100 152
Schindler Holding AG (Registered) 190 294
Sika Finanz AG (Bearer) 1,940 769
Sulzer AG (Registered) 1,860 1,468
The Swatch Group AG 2,742 2,119
Swiss Reinsurance Co.
(Registered) 10,908 27,586
- - Union Bank of Switzerland 160,264 59,592
Valora Holding AG 2,531 667
Zurich Insurance Co. (Registered) 34,550 22,049
---------
418,797
---------
UNITED KINGDOM (30.0%)
Abbey National PLC 1,123,291 19,960
Amec PLC 177,862 507
Anglian Water PLC 201,972 2,831
Arjo Wiggins Appleton PLC 660,652 2,216
Associated British Foods PLC 682,473 6,439
B.A.T. (British American
Tobacco) Industries PLC 2,338,836 23,414
BAA PLC 803,885 8,678
BBA Group PLC 291,435 2,193
BG PLC 2,965,500 17,145
BICC PLC 299,963 641
BOC Group PLC 370,152 5,043
BPB PLC 393,069 2,381
BTR PLC 2,526,010 7,165
Barclays PLC 1,147,867 33,095
Barratt Developments PLC 185,750 818
- - Bass PLC 599,429 11,232
The Berkeley Group PLC 68,808 716
Blue Circle Industries PLC 591,565 3,341
Boots Co., PLC 692,224 11,469
Bowthorpe PLC 161,735 1,409
- - British Aerospace PLC 1,357,762 10,398
British Airways PLC 735,012 7,953
British Land Co., PLC 424,967 4,364
British Petroleum Co., PLC 4,364,391 63,645
British Sky Broadcasting
Group PLC 1,303,251 9,361
British Steel PLC 1,463,262 3,217
British Telecommunications
PLC 4,772,509 58,926
Bunzl PLC 248,407 1,165
Burmah Castrol PLC 166,257 2,968
CGU PLC 520,122 9,702
Cable and Wireless PLC 1,705,547 20,717
Cadbury Schweppes PLC 766,342 11,859
Caradon PLC 391,398 1,202
Carlton Communications PLC 460,920 4,114
- - Centrica PLC 3,416,346 5,757
Coats Viyella PLC 595,366 730
Cobham PLC 66,664 1,165
Compass Group PLC 509,604 5,858
Courtaulds PLC 315,920 2,343
Courtaulds Textiles PLC 88,294 421
De La Rue PLC 188,548 934
Delta PLC 143,760 521
Diageo PLC 2,673,136 31,667
EMI Group PLC 587,550 5,137
Electrocomponents PLC 329,390 2,583
Elementis 1998 PLC 285,530 724
English China Clays PLC 264,315 904
FKI PLC 469,426 1,355
GKN PLC 545,932 6,955
General Electric Co., PLC 2,041,393 17,592
George Wimpey PLC 251,450 485
Glaxo Wellcome PLC 2,681,536 80,490
Granada Group PLC 680,663 12,515
Great Universal Stores PLC 763,803 10,068
- - Guardian Royal Exchange PLC 673,429 3,944
HSBC Holdings PLC (Foreign) 1,359,596 32,938
HSBC Holdings PLC (Local) 658,545 16,713
Halifax PLC 2,009,062 26,080
Hammerson PLC 185,709 1,509
Hanson PLC 501,926 3,050
Hepworth PLC 62,675 224
Hyder PLC 116,646 1,828
IMI PLC 249,406 1,544
Imperial Chemical
Industries PLC 548,270 8,800
J. Sainsbury PLC 1,432,685 12,765
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
Jarvis PLC 64,000 $ 742
Johnson Matthey PLC 79,948 718
Kingfisher PLC 513,683 8,271
Ladbroke Group PLC 906,657 4,977
Laird Group PLC 109,650 518
Land Securities PLC 443,052 6,849
Lasmo PLC 756,622 3,030
Legal & General Group PLC 958,360 10,226
Lex Service PLC 90,688 749
Lloyds TSB Group PLC 4,048,967 56,647
- - Lonrho PLC 104,704 491
LucasVarity PLC 1,084,595 4,307
MEPC PLC 351,878 3,094
Marks & Spencer PLC 2,143,058 19,505
Marley PLC 126,040 227
Meyer International PLC 52,241 309
Misys PLC 71,448 4,059
- - National Grid Group PLC 1,115,037 7,516
National Power PLC 924,265 8,698
Next PLC 281,797 2,421
Ocean Group PLC 120,155 1,518
Pearson PLC 442,057 8,099
Peninsular & Oriental Steam
Navigation Co. 441,301 6,354
Pilkington PLC 671,275 1,238
Prudential Corp. PLC 1,446,295 19,052
RMC Group PLC 196,700 3,410
Racal Electronics PLC 244,449 1,383
Railtrack Group PLC 381,551 9,352
Rank Group PLC 327,166 1,796
Reed International PLC 869,273 7,861
Rentokil Initial PLC 2,165,005 15,569
Reuters Group PLC 1,104,597 12,625
Rexam PLC 396,156 1,727
Rio Tinto PLC 810,294 9,126
Rolls-Royce PLC 1,062,813 4,389
Royal & Sun Alliance
Insurance Group PLC 1,179,818 12,195
Royal Bank of Scotland
Group PLC 655,778 11,379
Rugby Group PLC 297,746 554
SIEBE PLC 375,850 7,506
Safeway PLC 838,760 5,493
Schroders PLC 240,910 6,214
Scottish & Newcastle PLC 472,845 6,690
Scottish Power PLC 909,880 7,970
Sears PLC 1,258,052 1,102
Sedgwick Group PLC 467,204 1,013
Slough Estates PLC 193,091 1,105
- - SmithKline Beecham PLC 4,164,726 50,831
Smiths Industries PLC 236,468 3,275
Southern Electric PLC 376,121 3,401
St. James's Place Capital PLC 341,916 1,846
Stagecoach Holdings PLC 185,931 3,955
TI Group PLC 370,362 2,812
Tarmac PLC 599,171 1,070
Tate & Lyle PLC 336,220 2,666
Taylor Woodrow PLC 300,599 1,003
Tesco PLC 1,661,079 16,213
Thames Water PLC 290,893 5,295
Thorn PLC 270,308 1,091
- - Transport Development
Group PLC 74,774 369
Unigate PLC 180,008 1,990
Unilever PLC 2,455,848 26,143
United Biscuits Holdings PLC 420,367 1,683
United Utilities PLC 417,839 6,076
Vickers PLC 234,229 860
Vodafone Group PLC 2,312,746 29,346
- - Williams PLC 600,788 3,859
Willis Corroon Group PLC 370,084 939
Wilson Connolly Holdings PLC 86,943 196
Wolseley PLC 434,416 2,551
Zeneca Group PLC 713,351 30,613
----------
1,174,040
----------
- ----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $2,478,977) 3,903,758
- ----------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ----------------------------------------------------------
NON-CONVERTIBLE BOND (0.2%)
- ----------------------------------------------------------
<S> <C> <C>
Republic of Italy
5.00%, 6/28/2001
(COST $7,311) $ 4,405 7,289
- ----------------------------------------------------------
TEMPORARY CASH INVESTMENTS (15.7%)
- ----------------------------------------------------------
U.S. Treasury Bill
(2)4.97%, 7/23/1998 1,000 997
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.67%, 7/1/1998 21,926 21,926
5.76%, 7/1/1998--Note G 592,842 592,842
- ----------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $615,765) 615,765
- ----------------------------------------------------------
TOTAL INVESTMENTS (115.6%)
(COST $3,102,053) 4,526,812
- ----------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-15.6%)
- ----------------------------------------------------------
Other Assets--Note B 38,341
Security Lending Collateral Payable
to Brokers--Note G (592,842)
Other Liabilities (54,899)
-----------
(609,400)
- ----------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------
Applicable to 153,450,903 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $3,917,412
==========================================================
NET ASSET VALUE PER SHARE $25.53
==========================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income-Producing Security.
(1)The combined market value of common stocks and index futures contracts
represents 99.9% of net assets. See Note E in Notes to Financial Statements.
(2)Security segregated as initial margin for open futures contracts.
(Ptg. Ctf.)--Participating Certificate.
21
<PAGE> 24
<TABLE>
<CAPTION>
- ----------------------------------------------------------
AMOUNT PER
EUROPEAN PORTFOLIO (000) SHARE
- ----------------------------------------------------------
AT JUNE 30, 1998, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------
<S> <C> <C>
Paid in Capital $2,426,838 $15.82
Undistributed Net Investment
Income--Note F 49,228 .32
Accumulated Net
Realized Gains--Note F 16,238 .11
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities 1,424,759 9.28
Futures Contracts 429 --
Foreign Currencies and
Forward Currency Contracts (80) --
- ----------------------------------------------------------
NET ASSETS $3,917,412 $25.53
==========================================================
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
COMMON STOCKS (98.6%)(1)
- ----------------------------------------------------------------------
AUSTRALIA (9.0%)
<S> <C> <C>
Aberfoyle Ltd. 78,000 $ 123
Amcor Ltd. 312,491 1,368
Ashton Mining Ltd. 231,114 122
Australia National Industries Ltd. 421,031 242
Australian Gas Light Co., Ltd. 150,000 938
Boral Ltd. 546,106 1,025
Brambles Industries Ltd. 108,711 2,133
Broken Hill Proprietary Ltd. 972,298 8,219
- - Burns Philp & Co., Ltd. 489,530 39
CSR Ltd. 475,700 1,373
Coca-Cola Amatil Ltd. 370,048 2,475
Coles Myer Ltd. 550,750 2,149
- - Crown Ltd. 581,395 175
David Jones Ltd. 214,132 245
Delta Gold NL 124,065 152
Email Ltd. 154,683 268
F.H. Faulding & Co., Ltd. 75,900 346
Foster's Brewing Group Ltd. 756,560 1,780
Futuris Corp., Ltd. 272,557 240
Gio Australia Holdings Ltd. 249,776 641
Goodman Fielder Ltd. 624,142 908
Great Central Mines Ltd. 153,430 146
Hardie (James) Industries Ltd. 207,004 578
Howard Smith Ltd. 97,200 572
Leighton Holdings Ltd. 137,200 480
Metal Manufactures Ltd. 123,800 149
Mount Isa Mines Holdings Ltd. 583,263 282
National Australia Bank Ltd. 688,380 9,080
- - Newcrest Mining Ltd. 95,845 118
News Corp. Ltd. 941,279 7,682
News Corp. Ltd. Pfd. 847,913 6,007
Normandy Mining Ltd. 838,983 686
North Ltd. 324,879 668
Orica Ltd. 134,048 793
Pacific Dunlop Ltd. 494,340 799
Pioneer International Ltd. 431,400 1,029
QBE Insurance Group Ltd. 187,593 662
QCT Resources Ltd. 329,597 218
Renison Goldfields
Consolidated Ltd. 145,141 144
- - Resolute Ltd. 105,895 64
Rio Tinto Ltd. 157,742 1,876
Rothmans Holdings Ltd. 63,400 390
Santos Ltd. 265,689 823
Sons of Gwalia Ltd. 92,544 229
Southcorp Ltd. 311,129 904
- - Star City Holdings Ltd. 305,800 178
Stockland Trust Group Ltd. 628,682 1,437
Tabcorp Holdings Ltd. 128,292 655
Telstra Corp. Ltd. 2,436,000 6,245
WMC Ltd. 491,168 1,478
Westfield Trust (Units) 2,052,603 3,940
Westpac Banking Corp., Ltd. 897,171 5,472
-----------
78,745
-----------
HONG KONG (6.5%)
Bank of East Asia Ltd. 661,933 718
CLP Holdings Ltd. 1,190,000 5,421
Cathay Pacific Airways Ltd. 1,565,000 1,101
Cheung Kong Holdings Ltd. 1,151,000 5,660
Dickson Concepts
International Ltd. 153,899 215
Elec & Eltek International
Holdings Ltd. 702,000 134
Giordano International Ltd. 586,000 119
Hang Lung Development Co., Ltd. 558,000 555
Hang Seng Bank Ltd. 909,900 5,143
Hong Kong & China Gas Co., Ltd. 1,920,192 2,181
Hong Kong & China Gas Co., Ltd.
Warrants Exp. 9/30/1999 84,599 6
Hong Kong Aircraft &
Engineering Co., Ltd. 126,400 196
Hong Kong
Telecommunications Ltd. 5,708,593 10,719
Hong Kong and Shanghai
Hotels Ltd. 426,000 213
Hopewell Holdings Ltd. 2,308,000 247
Hutchison Whampoa Ltd. 1,870,000 9,871
Hysan Development Co., Ltd. 503,000 415
Johnson Electric Holdings Ltd. 241,500 895
Kumagai Gumi Hong Kong Ltd. 260,000 108
Miramar Hotel & Investment Ltd. 336,000 295
New World Development
Co., Ltd. 872,797 1,690
Oriental Press Group Ltd. 1,183,000 110
- - Peregrine Investment
Holdings Ltd. 293,200 0
Regal Hotels International
Holdings Ltd. 2,224,800 267
Shangri-La Asia Ltd. 840,000 542
Shun Tak Holdings Ltd. 958,000 94
South China Morning Post Ltd. 887,000 426
Sun Hung Kai Properties Ltd. 1,180,400 5,012
Swire Pacific Ltd. A Shares 740,000 2,793
Tai Cheung Holdings Ltd. 556,500 135
Television Broadcasts Ltd. 237,000 627
Varitronix International Ltd. 151,000 302
Wharf Holdings Ltd. 1,027,000 1,014
Wing Lung Bank Ltd. 122,928 286
-----------
57,510
-----------
JAPAN (78.4%)
Advantest Corp. 47,500 2,553
Ajinomoto Co., Inc. 312,000 2,731
Alps Electric Co., Ltd. 90,000 1,070
Amada Co., Ltd. 138,000 671
Amano Corp. 49,000 430
- - Aoki Corp. 276,000 135
Aoyama Trading Co., Ltd. 36,600 902
Arabian Oil Co., Ltd. 30,400 441
Asahi Bank Ltd. 1,113,000 4,892
Asahi Breweries Ltd. 227,000 2,862
Asahi Chemical Industry Co., Ltd. 690,000 2,486
Asahi Glass Co., Ltd. 562,000 3,037
Ashikaga Bank Ltd. 345,000 430
Autobacs Seven Co., Ltd. 19,500 558
The Bank of Tokyo-
Mitsubishi Ltd. 2,215,000 23,445
Bank of Yokohama Ltd. 524,000 1,284
Bridgestone Corp. 391,000 9,241
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Brother Industries Ltd. 177,000 $ 661
CSK Corp. 30,100 599
Canon, Inc. 408,000 9,260
Casio Computer Co. 140,000 1,300
Chiba Bank Ltd. 352,000 1,217
Chichibu Onoda Cement Corp. 277,000 501
- - Chiyoda Corp. 109,000 134
Chugai Pharmaceutical Co., Ltd. 117,000 765
Citizen Watch Co., Ltd. 147,000 1,213
Cosmo Oil Co., Ltd. 306,000 551
Dai-Nippon Ink & Chemicals, Inc. 386,000 1,182
Dai-Nippon Printing Co., Ltd. 364,000 5,809
Dai-Nippon Screen
Manufacturing Co., Ltd. 82,000 336
Daicel Chemical Industries Ltd. 27,000 57
Daido Steel Co., Ltd. 242,000 434
Daiei, Inc. 330,000 773
Daifuku Co., Ltd. 62,000 231
Daiichi Pharmaceutical Co., Ltd. 135,000 1,780
Daikin Industries Ltd. 129,000 831
Daikyo, Inc. 128,000 147
Daimaru, Inc. 81,000 212
Daito Trust Construction Co., Ltd. 68,500 518
Daiwa House Industry Co., Ltd. 256,000 2,260
Daiwa Kosho Lease Co., Ltd. 80,000 336
Daiwa Securities Co., Ltd. 1,028,000 4,422
Denki Kagaku Kogyo K.K. 231,000 373
Denso Corp. 428,000 7,093
East Japan Railway Co. 1,899 8,921
Ebara Corp. 129,000 1,147
Eisai Co., Ltd. 138,000 1,879
Ezaki Glico Co. 81,000 459
Fanuc Co., Ltd. 113,300 3,919
Fuji Bank Ltd. 26,000 116
Fuji International Finance
Trust 0.25% Cvt. Pfd. 1,956,000,000 6,624
Fuji Photo Film Co., Ltd. 245,000 8,527
Fujikura Ltd. 159,000 708
Fujita Corp. 273,000 150
Fujita Kanko, Inc. 58,000 472
Fujitsu Ltd. 884,000 9,300
Furukawa Electric Co. 325,000 1,094
- - Gakken Co. 63,000 105
Gunma Bank Ltd. 246,000 1,664
Gunze Ltd. 134,000 306
Hankyu Corp. 423,000 1,734
Hankyu Department Stores, Inc. 59,000 307
- - Haseko Corp. 136,000 78
- - Hazama Corp. 176,000 101
Higo Bank Ltd. 97,000 437
Hirose Electric Co., Ltd. 18,300 893
Hitachi Ltd. 1,585,000 10,336
Hitachi Zosen Corp. 465,000 751
Hokuriku Bank Ltd. 382,000 495
Honda Motor Co., Ltd. 461,000 16,409
House Foods Industry Corp. 59,000 757
Hoya Corp. 56,000 1,586
INAX Corp. 113,000 388
Industrial Bank of Japan Ltd. 1,211,000 7,591
Isetan Co. 104,000 869
- - Ishihara Sangyo Kaisha Ltd. 136,000 188
Ito-Yokado Co., Ltd. 198,000 9,316
Itochu Corp. 645,000 1,394
Itoham Foods, Inc. 105,000 454
Iwatani International Corp. 135,000 237
JGC Corp. 105,000 256
- - Japan Air Lines Co., Ltd. 848,000 2,359
Japan Energy Corp. 508,000 538
- - Japan Metals & Chemicals Co. 60,000 85
- - Japan Steel Works Ltd. 198,000 244
Joyo Bank Ltd. 424,000 1,564
Jusco Co., Ltd. 155,000 2,842
Kajima Corp. 457,000 1,251
Kaken Pharmaceutical Co. 12,000 32
Kamigumi Co., Ltd. 56,000 234
Kandenko Co., Ltd. 101,000 625
- - Kanebo Ltd. 118,000 98
Kaneka Corp. 170,000 894
Kansai Electric Power Co., Inc. 464,900 8,073
Kansai Paint Co., Ltd. 137,000 316
Kao Corp. 295,000 4,549
Katokichi Co., Ltd. 27,000 321
Kawasaki Heavy Industries Ltd. 637,000 1,285
Kawasaki Kisen Kaisha Ltd. 302,000 522
Kawasaki Steel Corp. 1,544,000 2,781
Keihin Electric Express
Railway Co., Ltd. 246,000 713
Kikkoman Corp. 97,000 510
Kinden Corp. 136,000 1,646
Kinki Nippon Railway Co. 777,000 3,639
Kirin Brewery Co., Ltd. 502,000 4,738
Kissei Pharmaceutical Co. 27,000 399
Kokuyo Co., Ltd. 61,000 1,033
Komatsu Ltd. 440,000 2,137
Komori Corp. 36,000 684
Konami Co., Ltd. 18,400 396
Konica Corp. 128,000 576
Koyo Seiko Co., Ltd. 91,000 340
Kubota Corp. 642,000 1,480
- - Kumagai Gumi Co., Ltd. 251,000 181
Kurabo Industries Ltd. 77,000 100
Kuraray Co., Ltd. 179,000 1,521
Kureha Chemical Industry Co. 121,000 279
Kurita Water Industries Ltd. 63,000 744
Kyocera Corp. 91,000 4,446
Kyowa Hakko Kogyo Co. 209,000 828
Kyudenko Corp. 3,000 20
Lion Corp. 155,000 525
Maeda Road Construction
Co., Ltd. 21,000 112
Makino Milling Machine Co. 62,000 436
Makita Corp. 76,000 876
Marubeni Corp. 675,000 1,347
Maruha Corp. 14,000 14
Marui Co., Ltd. 176,000 2,625
Matsushita Electric Industrial
Co., Ltd. 1,001,000 16,084
Meiji Milk Products Co., Ltd. 60,000 160
Meiji Seika Kaisha Ltd. 196,000 596
Minebea Co., Ltd. 196,000 1,950
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Misawa Homes Co., Ltd. 49,000 $ 134
Mitsubishi Chemical Corp. 1,012,000 1,830
Mitsubishi Corp. 754,000 4,672
Mitsubishi Electric Corp. 1,008,000 2,317
Mitsubishi Estate Co., Ltd. 615,000 5,406
Mitsubishi Gas Chemical Co. 238,000 719
Mitsubishi Heavy
Industries Ltd. 1,580,000 5,965
Mitsubishi Logistics Corp. 79,000 704
Mitsubishi Materials Corp. 554,000 1,130
- - Mitsubishi Oil Co., Ltd. 224,000 315
Mitsubishi Paper Mills Ltd. 209,000 407
Mitsubishi Rayon Co., Ltd. 309,000 864
Mitsubishi Trust & Banking Corp. 619,000 5,259
Mitsui & Co., Ltd. 749,000 4,048
- - Mitsui Engineering &
Shipbuilding Co., Ltd. 438,000 331
Mitsui Fudosan Co., Ltd. 377,000 2,977
Mitsui Marine & Fire
Insurance Co. 381,000 1,913
Mitsui Mining & Smelting
Co., Ltd. 257,000 1,067
Mitsui Osk Lines Ltd. 507,000 862
Mitsui Soko Co., Ltd. 92,000 276
Mitsui Trust & Banking Co. 551,000 1,298
Mitsukoshi Ltd. 223,000 641
Mori Seiki Co. 49,000 600
Murata Manufacturing Co., Ltd. 115,000 3,729
Mycal Corp. 146,000 926
NEC Corp. 759,000 7,071
NGK Insulators Ltd. 176,000 1,528
NGK Spark Plug Co. 105,000 893
NKK Corp. 1,585,000 1,519
NOF Corp. 9,000 17
NSK Ltd. 271,000 1,103
NTN Corp. 155,000 487
Nagase & Co., Ltd. 6,000 22
Nagoya Railroad Co., Ltd. 397,000 1,201
Namco Ltd. 24,400 570
Nankai Electric Railway Co. 159,000 687
Nichido Fire & Marine
Insurance Co., Ltd. 210,000 1,097
Nichirei Corp. 74,000 152
Nihon Cement Co., Ltd. 120,000 240
- - Niigata Engineering Co., Ltd. 246,000 165
Nikon Corp. 173,000 1,244
Nippon Beet Sugar
Manufacturing Co. 11,000 15
Nippon Comsys Corp. 65,000 747
Nippon Express Co., Ltd. 513,000 2,750
Nippon Fire & Marine Insurance
Co., Ltd. 264,000 1,079
Nippon Light Metal Co. 308,000 355
Nippon Meat Packers, Inc. 110,000 1,347
Nippon Oil Co., Ltd. 566,000 1,827
Nippon Paper Industries Co. 430,000 1,791
Nippon Sharyo Ltd. 84,000 198
Nippon Sheet Glass Co., Ltd. 220,000 347
Nippon Shinpan Co. 281,000 466
Nippon Shokubai K.K. 94,000 505
Nippon Steel Corp. 3,279,000 5,765
- - Nippon Suisan Kaisha Ltd. 111,000 127
Nippon Telegraph and
Telephone Corp. 6,069 50,289
Nippon Yusen Kabushiki
Kaisha Co. 575,000 1,947
Nishimatsu Construction Co. 133,000 652
Nissan Motor Co., Ltd. 1,183,000 3,725
Nisshinbo Industries, Inc. 109,000 436
Nissin Food Products Co., Ltd. 63,000 1,128
Nitto Denko Corp. 19,000 285
Nomura Securities Co., Ltd. 1,472,000 17,129
Noritake Co., Ltd. 58,000 272
OJI Paper Co., Ltd. 485,000 2,111
Odakyu Electric Railway Co. 356,000 1,090
Ohbayashi Corp. 355,000 1,504
Okamoto Industries, Inc. 92,000 205
Okuma Corp. 67,000 305
Okumura Corp. 90,000 316
Olympus Optical Co., Ltd. 124,000 1,078
Omron Corp. 119,000 1,818
Onward Kashiyama Co., Ltd. 80,000 1,000
Osaka Gas Co., Ltd. 1,193,000 3,060
Oyo Corp. 11,000 148
Penta-Ocean Construction Co. 139,000 321
Pioneer Electronic Corp. 79,000 1,508
Q.P. Corp. 80,000 522
- - Renown, Inc. 90,000 67
Rohm Co., Ltd. 58,000 5,955
SMC Corp. 29,400 2,235
Sakura Bank Ltd. 1,767,681 4,585
Sanden Corp. 35,000 237
Sankyo Aluminum Industry Co. 8,000 8
Sankyo Co., Ltd. 218,000 4,964
- - Sanrio Co., Ltd. 40,000 477
Sanwa Shutter Corp. 109,000 479
Sanyo Electric Co., Ltd. 927,000 2,805
Sapparo Breweries Ltd. 162,000 620
Sato Kogyo Co. 95,000 78
Secom Co., Ltd. 55,000 3,174
Sega Enterprises Ltd. 49,900 861
Seino Transportation Co., Ltd. 60,000 333
Seiyu Ltd. 41,000 86
Sekisui Chemical Co. 265,000 1,356
Sekisui House Ltd. 344,000 2,665
77 Bank Ltd. 184,000 1,538
Sharp Corp. 535,000 4,333
Shimachu Co. 9,000 148
Shimano, Inc. 68,000 1,725
Shimizu Corp. 377,000 1,087
Shin-Etsu Chemical Co., Ltd. 188,000 3,251
Shionogi & Co., Ltd. 164,000 945
Shiseido Co., Ltd. 203,000 2,305
Shizuoka Bank Ltd. 383,000 4,112
Showa Denko K.K. 504,000 508
Skylark Co., Ltd. 49,000 484
Snow Brand Milk Products Co. 149,000 451
Sony Corp. 193,500 16,661
Sumitomo Bank Ltd. 1,493,000 14,523
Sumitomo Chemical Co. 788,000 2,430
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Sumitomo Corp. 499,000 $ 2,398
Sumitomo Electric Industries Ltd. 349,000 3,528
Sumitomo Forestry Co. 102,000 573
Sumitomo Heavy Industries Ltd. 273,000 624
Sumitomo Marine & Fire
Insurance Co. 321,000 1,795
Sumitomo Metal Industries Ltd. 1,402,000 2,253
Sumitomo Metal Mining Co. 276,000 1,120
Sumitomo Osaka Cement
Co., Ltd. 234,000 300
Taisei Corp. 477,000 1,031
Taisho Pharmaceutical Co. 166,000 3,098
Taiyo Yuden Co., Ltd. 8,000 85
Takara Shuzo Co. 127,000 527
Takara Standard Co. 46,000 267
Takashimaya Co. 145,000 1,093
Takeda Chemical Industries Ltd. 418,000 11,114
Takuma Co., Ltd. 42,000 302
Teijin Ltd. 462,000 1,398
Teikoku Oil Co., Ltd. 134,000 414
Toa Corp. 85,000 124
Tobu Railway Co., Ltd. 389,000 1,029
Toei Co. 77,000 242
Toho Co., Ltd. 9,300 978
Tohoku Electric Power Co. 241,100 3,553
Tokai Bank Ltd. 974,000 5,362
Tokio Marine & Fire
Insurance Co. 739,000 7,593
Tokyo Broadcasting System, Inc. 86,000 960
Tokyo Dome Corp. 79,000 427
Tokyo Electric Power Co. 643,000 12,602
Tokyo Electron Ltd. 83,630 2,561
Tokyo Gas Co., Ltd. 1,341,000 2,986
Tokyo Steel Manufacturing Co. 57,000 293
Tokyo Style Co. 48,000 470
Tokyo Tatemono Co., Ltd. 137,000 258
Tokyotokeiba Co. 142,000 210
Tokyu Corp. 537,000 1,629
Toppan Printing Co., Ltd. 334,000 3,571
Toray Industries, Inc. 674,000 3,497
Tosoh Corp. 298,000 517
Tostem Corp. 107,000 1,386
Toto Ltd. 181,000 1,099
Toyo Engineering Corp. 112,000 149
Toyo Exterior Co. 12,000 119
Toyo Seikan Kaisha Ltd. 103,000 1,262
Toyobo Ltd. 388,000 509
Toyoda Automatic Loom
Works Ltd. 127,000 2,242
Toyota Motor Corp. 1,805,000 46,691
Trans Cosmos, Inc. 11,900 286
Tsubakimoto Chain Co. 111,000 372
Ube Industries Ltd. 396,000 514
Uni-Charm Corp. 32,000 1,185
Uniden Corp. 11,000 120
- - Unitika Ltd. 233,000 175
Uny Co. 97,000 1,573
Wacoal Corp. 75,000 762
Yamaguchi Bank Ltd. 90,000 1,154
Yamaha Corp. 96,000 934
Yamanouchi Pharmaceuticals
Co., Ltd. 161,000 3,353
Yamato Transport Co., Ltd. 195,000 2,185
Yamazaki Baking Co., Ltd. 111,000 984
The Yasuda Trust and Banking
Co., Ltd. 531,000 497
Yokogawa Electric Corp. 122,000 651
-----------
688,903
-----------
MALAYSIA (1.9%)
AMMB Holdings Bhd. 212,600 112
- - Amsteel Corp., Bhd. 830,800 91
Antah Holdings Bhd. 475,000 57
- - Aokam Perdana Bhd. 337,000 0
Berjaya Group Bhd. 345,000 42
Berjaya Land Bhd. 199,000 109
Commerce Asset Holdings Bhd. 358,000 134
Edaran Otomobil Nasional Bhd. 128,000 123
- - Ekran Bhd. 525,000 57
Golden Hope Plantations Bhd. 505,000 463
Guinness Anchor Bhd. 149,000 158
Highlands & Lowlands Bhd. 157,000 111
Hong Leong Industries Bhd. 39,400 29
Hong Leong Properties Bhd. 705,000 100
Hume Industries Malaysia Bhd. 156,000 117
IGB Corp., Bhd. 662,000 159
IOI Corp., Bhd. 114,000 57
Jaya Tiasa Holdings Bhd. 93,000 115
Johan Holdings Bhd. 229,000 25
Kedah Cement Holdings Bhd. 325,000 90
- - Kelanamas Industries Bhd. 399,000 29
Kemayan Corp., Bhd. 484,000 54
Kian Joo Can Factory Bhd. 28,000 26
Kuala Lumpur Kepong Bhd. 352,500 569
Land & General Bhd. 204,500 23
- - Landmarks Bhd. 326,000 40
Leader Universal Holdings Bhd. 476,666 71
MBF Capital Bhd. 505,000 85
- - Magnum Corp., Bhd. 588,500 219
Malayan Banking Bhd. 1,107,000 1,116
Malayan Cement Bhd. 71,000 23
Malayan United Industries Bhd. 359,000 42
Malayawata Steel Bhd. 273,500 67
Malaysia International Shipping
Corp., Bhd. (Foreign) 371,333 542
Malaysia Mining Corp., Bhd. 104,400 33
Malaysian Airline System Bhd. 407,000 134
Malaysian Mosaics Bhd. 319,000 68
Malaysian Oxygen Bhd. 90,000 200
Malaysian Pacific
Industries Bhd. 112,000 132
- - Malaysian Resources
Corp., Bhd. 631,333 160
- - Mulpha International Bhd. 277,000 28
Mycom Bhd. 438,000 29
Nestle Malaysia Bhd. 125,000 567
New Straits Times Press Bhd. 131,000 49
Oriental Holdings Bhd. 203,200 338
Pan Malaysia Cement
Works Bhd. 107,000 22
Perlis Plantations Bhd. 186,500 162
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Perusahaan Otomobil
Nasional Bhd. 207,000 $ 132
Petaling Garden Bhd. 180,000 129
Pilecon Engineering Bhd. 239,000 45
- - Promet Bhd. 815,000 55
Public Bank Bhd. (Foreign) 420,599 127
RHB Capital Bhd. 820,000 334
RJ Reynolds Bhd. 197,000 273
Rashid Hussain Bhd. 224,000 110
Resorts World Bhd. 521,000 573
Rothmans of Pall Mall
Malaysia Bhd. 133,000 922
Selangor Properties Bhd. 315,000 129
Shell Refining Co.
Malaysia Bhd. 164,000 233
- - Silverstone Bhd. 29,078 0
Sime Darby Bhd. 1,047,600 722
Sungei Way Holdings Bhd. 337,200 52
TA Enterprise Bhd. 632,000 94
- - Tan Chong International Bhd. 1,251,000 0
Tan Chong Motor
Holdings Bhd. 417,000 187
Technology Resources
Industries Bhd. 452,000 311
Telekom Malaysia Bhd. 1,472,100 2,485
Tenaga Nasional Bhd. 1,480,000 1,784
Time Engineering Bhd. 280,000 39
UMW Holdings Malaysia Bhd. 197,733 89
United Engineers Malaysia Bhd. 339,000 138
YTL Corp., Bhd. 607,000 457
-----------
16,397
-----------
NEW ZEALAND (0.8%)
Brierley Investments Ltd. 1,372,800 684
Carter Holt Harvey Ltd. 828,459 722
Fisher & Paykel Industries Ltd. 39,300 100
Fletcher Challenge Ltd. Building 188,781 235
Fletcher Challenge Ltd. Energy 165,022 394
Fletcher Challenge Ltd. Forest 393,967 221
Fletcher Challenge Ltd. Paper 313,335 348
Lion Nathan Ltd. 274,900 611
Telecom Corp. of
New Zealand Ltd. 812,500 3,349
-----------
6,664
-----------
SINGAPORE (2.0%)
Chuan Hup Holdings Ltd. 246,000 52
City Developments Ltd. 522,000 1,458
Comfort Group Ltd. 542,000 122
- - Creative Technology Ltd. 45,450 551
Cycle & Carriage Ltd. 92,000 224
Development Bank of Singapore
Ltd. (Foreign) 272,712 1,509
First Capital Corp., Ltd. 136,000 46
Fraser & Neave Ltd. 157,000 422
Hai Sun Hup Group Ltd. 285,000 67
Haw Par Brothers
International Ltd. 120,400 126
Hotel Properties Ltd. 326,000 116
IPC Corp., Ltd. 981,000 41
Inchcape Bhd. 123,000 84
Keppel Corp., Ltd. 369,750 556
Lum Chang Holdings Ltd. 513,600 103
Metro Holdings Ltd. 75,000 45
Natsteel Ltd. 192,000 186
- - Neptune Orient Lines Ltd. 447,000 155
Oversea-Chinese Banking Corp.,
Ltd. (Foreign) 497,399 1,693
Overseas Union Enterprise Ltd. 73,000 108
Parkway Holdings Ltd. 124,000 215
Prima Ltd. 52,000 80
Robinson & Co., Ltd. 60,800 155
Sembawang Corp., Ltd. 125,000 147
Sembawang Marine & Logistics 94,000 50
Shangri-La Hotel Ltd. 121,300 150
Singapore Airlines Ltd. (Foreign) 514,000 2,403
Singapore Press Holdings Ltd. 159,616 1,068
Singapore Technologies
Industrial Corp. 437,000 323
Singapore
Telecommunications Ltd. 2,863,000 4,067
United Industrial Corp., Ltd. 917,000 263
United Overseas Bank Ltd.
(Foreign) 403,350 1,253
-----------
17,838
-----------
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,166,135) 866,057
- ----------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ----------------------------------------------------------------------
CONVERTIBLE BOND (0.1%)
- ----------------------------------------------------------------------
<S> <C> <C>
- - Nitto Denko Cvt.
3.90%, 3/30/2001
(COST $671) JPY 67,000 768
- ----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (27.7%)
- ----------------------------------------------------------------------
U.S. Treasury Bill
(2) 4.97%, 7/23/1998 $ 2,200 2,194
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.67%, 7/1/1998 6,991 6,991
5.76%, 7/1/1998--Note G 233,512 233,512
- ----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $242,697) 242,697
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (126.4%)
(COST $1,409,503) 1,109,522
- ----------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC PORTFOLIO (000)
- ----------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-26.4%)
- ----------------------------------------------------------------------
Other Assets--Note B $ 5,309
Security Lending Collateral Payable
to Brokers--Note G (233,512)
Other Liabilities (3,280)
---------
(231,483)
- ----------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------
Applicable to 121,246,126 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $878,039
======================================================================
NET ASSET VALUE PER SHARE $7.24
======================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income-Producing Security.
(1)The combined market value of common stocks and index futures contracts
represents 99.6% of net assets. See Note E in Notes to Financial Statements.
(2)Security segregated as initial margin for open futures contracts.
JPY--Japanese Yen.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
AT JUNE 30, 1998, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,227,012 $10.12
Undistributed Net Investment
Income--Note F 4,516 .04
Accumulated Net
Realized Losses--Note F (53,738) (.45)
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities (299,981) (2.47)
Futures Contracts 199 --
Foreign Currencies and
Forward Currency Contracts 31 --
- ----------------------------------------------------------------------
NET ASSETS $878,039 $7.24
======================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
COMMON STOCKS (95.1%)
- ----------------------------------------------------------------------
ARGENTINA (5.2%)
<S> <C> <C>
- - Acindar Industria Argentina de
Aceros SA 143,900 $ 240
- - Alpargatas S.A.I.C. 354,200 75
Astra Cia Argentina de
Petroleum SA 466,010 750
Bagley SA Class B 83,525 167
Banco Frances Del Rio de la
Plata SA 180,268 1,363
Banco Galicia y Buenos Aires
SA de CV 360,447 1,622
Central Puerto SA 94,665 222
- - Ciadea SA 221,848 442
Corp Cementera Argentina SA 45,100 272
- - Cresud SA 36,250 58
- - Disco SA 24,600 266
- - Indupa SA 296,438 239
Irsa Inversiones y
Representaciones SA 199,900 588
Ledesma SA 271,743 250
Molinos Rio de la Plata SA 107,100 235
Nobleza Piccardo SA 50,724 205
Perez Companc SA 806,650 4,050
- - Pirelli Cables SA 17,113 33
- - Polledo Sociedad Anonima,
Industrial, Constructora y
Financiera 67,900 107
Siderca SA Class A 976,608 1,660
Sociedad Comercial de Plata SA 252,433 278
Telefonica Argentina SA
Class B 2,259,800 7,323
Transportadora de Gas Sur SA 194,300 435
YPF SA Class D 336,024 10,032
----------
30,912
----------
BRAZIL (18.0%)
Aracruz Celulose SA Pfd.
B Shares 1,070,671 1,203
Banco Bamerindus do
Brasil SA 52,300 0
Banco Bradesco SA 483,338,308 3,903
Banco Bradesco SA Pfd. 466,991,197 3,876
Banco Itau SA Pfd. 12,445,112 7,102
Banco do Estado de Sao
Paulo SA Pfd. 36,756,000 1,713
Bardella SA Industrias
Mecanicas Pfd. 784 80
Bombril SA Pfd. 19,968,031 83
Brasmotor SA Pfd. 2,624,000 240
Caemi Mineracao e Metalurgia
SA Pfd. 1,920,501 111
Centrais Electricas
Brasileiras SA 433,176,010 12,547
Centrais Electricas
Brasileiras SA Pfd. B Shares 79,788,180 2,415
- - Centrais Geradoras
Brasil Pfd. 79,788,180 115
- - Centrais Geradoras do Sul 433,176,010 592
- - Ceval SA Pfd. 29,720,000 106
- - Cofap-Companhia
Fabricadora de Pecas Pfd. 11,370 99
Companhia Brasileira de
Petroleo Ipiranga Pfd. 55,190,000 504
Companhia Cervejaria Brahma 2,553,265 1,413
Companhia Cervejaria
Brahma Pfd. 4,577,150 2,849
Companhia Cimento Portland
Itau Pfd. 3,150,800 575
Companhia Energetica de
Minas Gerais Pfd. 153,006,329 4,829
- - Companhia Paulista de
Forca e Luz 18,547,400 1,924
Companhia Siderurgica
Belgo-Mineira 2,724,549 172
Companhia Siderurgica
Belgo-Mineira Pfd. 2,035,000 118
Companhia Siderurgica
Nacional 73,051,500 1,830
Companhia Vale do Rio
Doce Pfd. 372,192 7,563
Companhia Vidreas
Santa Marina 283,968 479
Companhia de Tecidos Norte
de Minas Pfd. 2,134,289 300
Confeccoes Guararapes SA 30,591 91
Copene-Petroquimica SA Pfd.
A Shares 1,476,194 327
Duratex SA Pfd. 7,119,367 277
Ericsson Telecomunicadoes
SA Pfd. 42,995,400 818
Fertilizantes Fosfatados
SA Pfd. 139,730,000 532
Industrias Klabin de Papel e
Celulose SA Pfd. 812,025 337
- - Iochpe-Maxion SA Pfd. 2,164,738 84
- - Lojas Americanas SA 24,182,000 165
- - Lojas Americanas SA Pfd. 48,304,033 269
- - Lojas Arapua SA Pfd. 40,268,700 25
Lojas Renner SA Pfd. 5,033,282 148
- - Mannesmann SA 53,181 6
Marcopolo SA Pfd. 43,900 76
Metal Leve SA Industria e
Comercio Pfd. 5,773,000 36
Metalurgica Gerdau SA Pfd. 7,675,400 245
- - Paranapanema SA Pfd. 31,162,000 181
Perdigao Agroindustrial SA 188,391,000 236
Petroleo Brasileiro SA Pfd. 43,260,100 8,005
Pirelli Cabos SA Pfd. 53,000 171
Pirelli Pneus SA Pfd. 140,400 303
Sadia Concordia SA Pfd. 121,000 75
- - San Paulo Alpargatas SA Pfd. 955,533 44
- - Santista Alimentos SA 171,820 98
Souza Cruz SA 298,600 2,324
Telecomunicacoes
Brasileiras SA 94,650,000 7,488
Telecomunicacoes
Brasileiras SA Pfd. 196,617,800 21,403
Unibanco-Uniao de Bancos
Brasileiros SA Pfd. 96,985,000 2,432
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Unipar-Uniao de Industrias
Petroquimicas SA Pfd.
B Shares 150,645 $ 33
Usiminas-Usinas Siderurgicas
de Minas Gerais SA Pfd. 225,069 1,142
Varig-Viacao Aerea Rio-
Grandense SA Pfd. 68,000 122
Votorantim Celulose e Papel
SA Pfd. 41,540,831 636
Weg SA Pfd. 403,508 262
White Martins SA 974,365 901
----------
106,033
----------
CZECH REPUBLIC (1.4%)
- - Ceska Sporitelna a.s. 78,880 648
Cokoladovny a.s. 2,970 512
- - The Czech Power Co. a.s. 52,700 1,465
Deza Valasske Mezirici a.s. 1,438 61
Elektrarny Opatovice, a.s. 430 55
Inzenyrske a Prumyslove
Stavby (IPS) a.s. 13,630 74
- - Komercni Banka a.s. 19,120 636
- - Leciva Praha 2,080 159
- - Nova Hut a.s. 12,132 115
- - Pivovar Radegast a.s. 750 46
- - Podnik Vypocetni Techniky a.s. 692 59
- - SPT Telecom a.s. 244,400 3,381
- - Sepap a.s. 140 3
Severoceske Doly a.s. 8,280 238
- - Skoda Plzen a.s. 8,990 90
- - Synthesia a.s. 6,120 32
Tabak a.s. 2,675 645
- - Vertex a.s. 1,304 82
Vodni Stavby Praha a.s. 1,760 22
----------
8,323
----------
GREECE (5.5%)
- - Aegek SA 22,470 95
Aktor SA 9,170 80
Alpha Credit Bank SA 38,566 3,192
Alte SA 5,190 53
Aluminum of Greece SA 5,370 318
Aluminum of Greece SA Pfd. 2,250 133
- - Aspis Pronoia SA 21,800 263
- - Athens Medical Center SA 20,250 399
Atti-Kat SA 4,400 19
Attica Enterprises SA 47,340 683
Commercial Bank of Greece SA 23,634 1,753
Delta Dairy SA 3,400 39
Delta Dairy SA Pfd. 8,370 100
El. D. Mouzakis SA 7,800 24
Elais SA 8,770 331
Epilectos SA 126,830 297
Ergo Bank SA 24,568 2,100
Fourlis Brothers SA 26,260 324
Hellas Can Packaging SA 11,800 190
Hellenic Bottling Co. SA (Bearer) 136,700 4,223
Hellenic Sugar Industry SA 40,584 398
Hellenic Technodomiki 5,390 47
Hellenic Telecommunication
Organization SA 384,111 9,846
Heracles General Cement SA 15,700 366
Inform P. Lykos SA 14,200 242
- - Intracom SA 36,906 1,250
- - Intracom SA Pfd 8,532 277
Klonatex ICST & TSA SA 10,100 87
Klonatex ICST & TSA SA Pfd. 15,600 76
Michaniki SA 34,800 183
National Bank of Greece SA 24,672 3,161
Papastratos Cigarettes SA 4,950 109
- - Parnassos Enterprises ABE SA 65,900 110
- - Petzetakis SA 11,900 63
- - Petzetakis SA
Rights Exp. 7/7/1998 11,900 1
Silver & Baryte Ores Mining 7,860 283
Titan Cement Co. SA 20,400 1,335
----------
32,450
----------
HONG KONG (14.7%)
Bank of East Asia Ltd. 871,781 945
CLP Holdings Limited 1,822,000 8,301
Cathay Pacific Airways Ltd. 2,464,000 1,733
Cheung Kong Holdings Ltd. 1,760,000 8,654
Dickson Concepts
International Ltd. 183,000 255
Elec & Eltek International
Holdings Ltd. 550,000 105
Giordano International Ltd. 611,000 124
Hang Lung Development
Co., Ltd. 855,000 850
Hang Seng Bank Ltd. 1,400,400 7,916
Hong Kong & China Gas Co.,
Ltd. 3,193,543 3,627
Hong Kong & China Gas Co.,
Ltd. Warrants Exp. 9/30/1999 115,615 8
Hong Kong Aircraft &
Engineering Co., Ltd. 144,800 224
Hong Kong and Shanghai
Hotels Ltd. 804,500 402
Hong Kong
Telecommunications Ltd. 8,706,758 16,349
Hopewell Holdings Ltd. 2,948,000 316
Hutchison Whampoa Ltd. 2,835,000 14,964
Hysan Development Co., Ltd. 686,000 567
Johnson Electric Holdings Ltd. 300,500 1,113
Kumagai Gumi Hong Kong Ltd. 334,000 139
Miramar Hotel &
Investment Ltd. 383,000 336
New World Development
Co., Ltd. 1,473,963 2,853
Oriental Press Group Ltd. 984,000 91
Peregrine Investment
Holdings Ltd. 459,000 0
Regal Hotels International
Holdings Ltd. 2,734,000 328
Shangri-La Asia Ltd. 752,000 485
Shun Tak Holdings Ltd. 402,000 39
South China Morning Post Ltd. 1,158,000 557
Sun Hung Kai Properties Ltd. 1,832,000 7,779
Swire Pacific Ltd. A Shares 1,079,000 4,073
Tai Cheung Holdings Ltd. 613,000 149
Television Broadcasts Ltd. 281,000 743
Varitronix International Ltd. 207,000 414
</TABLE>
30
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<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Wharf Holdings Ltd. 1,767,000 $ 1,745
Wing Lung Bank Ltd. 160,808 374
----------
86,558
----------
HUNGARY (1.8%)
- - Danubius Hotel and Spa Rt. 8,940 180
Fotex Rt. 58,730 47
- - Graboplast Rt. 4,790 121
MOL Magyar Olaj-es Gazipari Rt. 93,220 2,514
Magyar Tavkozlesi Rt. 759,400 4,408
- - OTB Bank Rt. 27,680 1,360
Pannonplast Rt. 4,590 170
Pick Szeged Rt. 3,100 181
Richter Gedeon Rt. 18,060 1,453
Zalakeramia Rt. 2,830 101
----------
10,535
----------
INDONESIA (1.0%)
PT Apac Centertex Corp. 1,065,500 14
- - PT Asahimas Flat Glass 292,000 10
PT Astra International 1,842,000 124
PT Bank Bali (Foreign) 317,950 18
PT Bank Dagang Nasional
Indonesia (Foreign) 2,906,374 15
PT Bank Internasional
Indonesia (Foreign) 3,458,715 70
- - PT Bank Negara Indonesia
(Foreign) 4,253,000 93
PT Barito Pacific Timber 1,081,000 18
PT Bimantara Citra 1,299,000 24
PT Budi Acid Jaya 646,875 48
PT Ciputra Development 367,000 4
PT Citra Marga Nusaphala
Persada 2,047,000 42
PT Darya Varia Laboratoria 78,000 1
PT Daya Guna Samudera 192,500 117
PT Dharmala Intiland 452,200 4
PT Duta Anggada Realty 1,392,664 16
PT Fisk Aragung Perkasa 945,100 21
PT Gadjah Tunggal 3,682,000 25
PT Great River International 647,000 16
PT Gudang Garam 769,500 452
PT Hero Supermarket 422,500 31
PT Indah Kiat Pulp &
Paper Corp. 4,465,622 852
PT Indofood Sukses Makmur 1,876,500 184
PT Indorama Synthetics 398,000 31
PT Jakarta International
Hotel & Development 1,406,500 40
PT Japfa Comfeed Indonesia 605,500 4
PT Kabel Indonesia 791,500 4
PT Kalbe Farma 501,500 14
- - PT Lippo Bank (Foreign) 1,055,250 53
PT London Sumatra Indonesia 499,100 39
PT Matahari Putra Prima 3,178,000 32
PT Mayora Indah 785,940 32
PT Medco Energi Corp. 60,500 9
- - PT Modern Photo Film Co. 175,000 10
PT Mulia Industrindo 1,867,520 32
PT Pakuwon Jati 1,286,500 4
- - PT Pan Indonesia Bank
(PANIN Bank)(Foreign) 500,000 12
- - PT Polysindo Eka Perkasa 3,459,000 216
PT Putra Surya Perkasa 976,000 5
- - PT Semen Cibinong Tbk 1,219,000 33
PT Semen Gresik TbK 630,000 358
PT Sierad Produca 322,500 1
- - PT Sinar Mas Argo 405,000 38
PT Tambang Timah 525,000 235
PT Telekomunikasi Indonesia 8,736,000 2,464
PT Trias Sentosa 1,097,000 8
----------
5,873
----------
ISRAEL (3.9%)
- - Ackerstein Industries Ltd. 49,709 66
- - Africa-Israel Investments Ltd. 2,570 146
- - Africa-Israel Investments
Ltd. (1985) 91 48
- - Agis Industries Ltd. 5,250 35
American Israeli Paper Mills Ltd. 3,562 144
Azorim Investment
Development &
Construction Ltd. 26,137 206
- - Bank Hapoalim Ltd. 1,191,109 3,602
Bezeq Israeli
Telecommunication Corp., Ltd. 703,315 2,247
CLAL Insurance Enterprise
Holdings Ltd. 33,988 346
Cvalim - The Electric Wire and
Cable Co. of Israel Ltd. 51,535 171
- - Dead Sea Periclase Ltd. 31,547 68
Delek Israel Fuel Corp., Ltd. 8,294 346
ECI Telecom Ltd. 73,300 2,776
Elco Holdings Ltd. 34,292 166
- - Electrochemical Industries
1952, Ltd. 24,100 21
- - Elite Industries Ltd. 7,055 231
First International Bank of Israel
Ltd.-ILS 1 Par 236,400 369
First International Bank of Israel
Ltd.-ILS 5 Par 64,200 502
Gilat Satellite Networks 10,509 351
- - I.I.S. Intelligent Information
Systems Ltd. 17,433 25
IDB Holding Corp., Ltd. 31,740 830
Industrial Buildings Corp. 300,193 503
Israel Chemicals Ltd. 1,132,568 1,447
- - The Israel Corp. Ltd.-ILS 1 Par 4,136 321
- - The Israel Corp. Ltd.-ILS 5 Par 80 3
- - The Israel Land Development
Co., Ltd. 41,800 260
Israel Petrochemical
Enterprises Ltd. 14,526 74
Jerusalem Economic Corp., Ltd. 51,929 269
- - Kitan Consolidated Ltd. 32,954 30
Koor Industries Ltd. 14,280 1,649
- - Makhteshim-Agan Industries Ltd. 75,605 241
- - Malibu Israel Ltd. 6,035 99
Maman Cargo Terminals &
Handling Ltd. 70,434 127
- - Mehadrin Ltd. 3,280 124
- - Meir Ezra & Son Co. 18,556 108
Mul-T-Lock Ltd. 25,386 57
</TABLE>
31
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- - New Dimension Software Ltd. 7,600 $ 255
Ormat Industries Ltd. 133,074 180
Osem Investment Ltd. 85,620 418
- - Packer Plada Ltd. 3,450 60
- - Polgat Ltd. 18,506 37
Property & Building Corp. 4,539 408
- - Scitex Corp., Ltd. 39,800 520
Super Sol Ltd. 218,055 718
Teledata Communications Ltd. 10,480 116
- - Tempo Beer Industries Ltd. 28,127 113
Teva Pharmaceutical
Industries Ltd. 57,254 2,056
----------
22,889
----------
MALAYSIA (5.5%)
AMMB Holdings Bhd. 468,600 246
- - Amsteel Corp., Bhd. 1,647,600 181
Antah Holdings Bhd. 244,000 29
- - Aokam Perdana Bhd. 241,000 0
Berjaya Group Bhd. 605,000 74
Berjaya Land Bhd. 471,000 259
Commerce Asset Holdings Bhd. 626,000 234
Edaran Otomobil Nasional Bhd. 234,000 226
- - Ekran Bhd. 155,000 17
Golden Hope Plantations Bhd. 962,000 881
Guinness Anchor Bhd. 153,000 162
Highlands & Lowlands Bhd. 328,000 232
Hong Leong Industries Bhd. 321,200 239
Hong Leong Properties Bhd. 999,000 142
Hume Industries Malaysia Bhd. 284,000 214
IGB Corp., Bhd. 661,000 159
IOI Corp., Bhd. 999,000 499
Jaya Tiasa Holdings Bhd. 101,000 125
Johan Holdings Bhd. 408,000 45
Kedah Cement Holdings Bhd. 544,000 151
- - Kelanamas Industries Bhd. 126,000 9
Kemayan Corp., Bhd. 222,000 25
Kian Joo Can Factory Bhd. 56,000 51
Kuala Lumpur Kepong Bhd. 683,000 1,103
Land & General Bhd. 652,500 74
- - Landmarks Bhd. 627,000 78
Leader Universal Holdings Bhd. 589,000 88
MBF Capital Bhd. 867,000 145
- - Magnum Corp., Bhd. 1,466,500 545
Malayan Banking Bhd. 2,222,000 2,239
Malayan Cement Bhd. 533,500 174
Malayan United Industries Bhd. 726,600 84
Malayawata Steel Bhd. 258,000 63
Malaysia International Shipping
Corp., Bhd. (Foreign) 914,000 1,333
Malaysia International Shipping
Corp., Bhd. (Local) 63,000 92
Malaysia Mining Corp., Bhd. 1,050,800 334
Malaysian Airline System Bhd. 712,000 235
Malaysian Mosaics Bhd. 82,000 17
Malaysian Oxygen Bhd. 134,000 297
Malaysian Pacific
Industries Bhd. 99,000 117
- - Malaysian Resources
Corp., Bhd. 1,038,666 263
- - Mulpha International Bhd. 415,000 43
Mycom Bhd. 549,000 36
Nestle Malaysia Bhd. 223,000 1,011
New Straits Times Press Bhd. 226,000 84
Oriental Holdings Bhd. 349,760 582
Pan Malaysia Cement
Works Bhd. 725,000 151
Perlis Plantations Bhd. 393,250 341
Perusahaan Otomobil
Nasional Bhd. 585,000 374
Petaling Garden Bhd. 336,000 240
Pilecon Engineering Bhd. 192,000 36
- - Promet Bhd. 386,000 26
Public Bank Bhd. (Foreign) 1,715,799 517
RHB Capital Bhd. 1,585,000 646
RJ Reynolds Bhd. 259,000 359
Rashid Hussain Bhd. 424,000 209
Resorts World Bhd. 1,052,000 1,157
Rothmans of Pall Mall
Malaysia Bhd. 274,000 1,899
Selangor Properties Bhd. 628,000 257
Shell Refining Co.
Malaysia Bhd. 345,000 491
- - Silverstone Bhd. 57,666 0
Sime Darby Bhd. 2,343,000 1,616
Sungei Way Holdings Bhd. 499,400 77
TA Enterprise Bhd. 861,000 129
Tan Chong International
Holdings Bhd. 1,836,000 0
Tan Chong Motor
Holdings Bhd. 612,000 274
Technology Resources
Industries Bhd. 862,000 592
Telekom Malaysia Bhd. 2,865,000 4,835
Tenaga Nasional Bhd. 2,973,000 3,584
Time Engineering Bhd. 856,000 118
UMW Holdings Malaysia Bhd. 253,000 113
United Engineers
Malaysia Bhd. 789,000 322
YTL Corp., Bhd. 1,163,250 875
----------
32,475
----------
MEXICO (13.3%)
Alfa SA de CV Series A 577,992 2,348
Apasco SA de CV 271,634 1,436
Cemex SA de CV (CPO) 277,452 1,042
Cemex SA de CV Series A 551,684 2,072
Cemex SA de CV Series B 422,425 1,866
Cifra SA de CV Series C 793,000 1,103
- - Cifra SA de CV Series V 3,858,259 5,761
- - Consorcio G Grupo Dina SA 341,000 224
Controladora Comercial
Mexicana SA de CV (Units) 194,000 160
- - Corporacion GEO, SA de CV 91,000 506
Cydsa SA Series A 138,000 228
Desc SA de CV Series B 296,907 1,505
- - Empaques Ponderosa SA
Series B 542,000 338
Empresas ICA Sociedad
Controladora SA de CV 576,600 912
- - Empresas la Moderna SA de CV
Series A 445,700 2,593
</TABLE>
32
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<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- - Fomento Economico
Mexica UBD 104,390 $ 3,257
Grupo Carso SA de CV Series A1 875,000 3,603
Grupo Continental SA 369,000 1,234
Grupo Elektra, SA de CV 1,194,000 1,189
- - Grupo Financiero Banamex
Accival SA de CV Series B 700,900 1,367
- - Grupo Financiero Banamex
Accival SA de CV Series L 216,810 350
Grupo Financiero Bancomer
SA de CV Series B 2,568,950 959
- - Grupo Financiero Banorte SA
de CV 251,000 280
- - Grupo Financiero Probursa SA
de CV Series B 3,791,946 482
Grupo Herdez SA Series B 424,000 203
Grupo Industrial Herdez Bimbo
SA de CV Series A 1,293,528 2,623
Grupo Industrial Maseca SA
de CV Series B 901,000 657
Grupo Mexico SA Series B 662,513 1,809
Grupo Modelo SA de CV
Series C 781,700 6,577
- - Grupo Televisa SA (CPO) 296,800 5,553
Industrias Penoles SA Series CP 310,599 986
Kimberly Clark de Mexico SA
de CV Series A 1,331,045 4,709
Telefonos de Mexico SA
Series A 1,810,000 4,336
Telefonos de Mexico SA
Series L 6,165,050 14,599
Tubos de Acero de Mexico SA 70,400 902
Vitro SA 356,640 765
----------
78,534
----------
PHILIPPINES (1.8%)
Alsons Cement Corp. 532,000 28
Ayala Land, Inc. 2,914,639 839
Bacnotan Consolidated
Industries 13,800 10
- - C&P Homes, Inc. 144,078 7
- - DMCI Holdings, Inc. 1,087,800 34
- - Filinvest Land, Inc. 4,005,000 169
Guoco Holdings
Philippines, Inc. 3,781,800 64
- - International Container
Terminal Services, Inc. 2,124,355 242
Ionics Circuit, Inc. 630,150 200
- - Kepphil Shipyard Inc. 50,371 1
Manila Electric Co. 279,608 738
- - Manila Mining Corp. Class B 833,936,629 115
- - Metro Pacific Corp. 4,445,126 101
Metropolitan Bank & Trust Co. 220,532 1,296
- - Mondragon International
Philippines, Inc. 1,753,680 29
- - Petron Corp. 9,476,654 1,000
- - Philex Mining Corp. Class B 2,136,450 38
Philippine Long Distance
Telephone Co. 101,619 2,315
- - Philippine National Bank Corp. 152,784 181
RFM CORP. 890,400 128
- - Republic Glass Holdings Corp. 670,000 10
- - Robinson's Land Co. Class B 410,200 19
SM Prime Holdings, Inc. 9,475,880 1,500
San Miguel Corp. Class B 499,587 659
- - Security Bank Corp. 305,335 141
- - Southeast Asia Cement
Holdings Inc. 12,965,000 109
- - Union Bank of the
Philippines Corp. 681,200 261
Universal Robina Corp. 1,878,400 191
----------
10,425
----------
POLAND (0.8%)
BIG Bank Gdanski SA 286,600 382
Bank Rozwoju Eksportu SA 18,100 490
- - Bank Rozwoju Eksportu SA
Rights Exp. 7/10/1998 18,100 5
Bank Slaski S.A. w Katowicach 8,800 591
- - Elektrim Spolka Akcyjna SA 63,900 779
- - Exbud SA 9,500 114
- - Fabryka Kotlow Rafako SA 16,600 46
- - Gorazdze SA 7,100 129
- - Huta Szkla Gospodarczego
Irena SA 18,300 31
KGHM Polska Miedz SA 190,900 766
Mostostal-Export SA 43,800 68
- - Optimus SA 6,200 124
Polifarb Cieszyn-Wroclaw SA 45,400 117
- - Przedsiebiorstwo
Farmaceutyczne JELFA SA 6,500 154
- - Stalexport SA 8,400 71
Stomil Olsztyn SA 26,000 177
Vistula SA 5,700 17
Wielkopolski Bank Kredytowy SA 65,700 509
Zaklady Piwowarskie w
Zywcu SA 193 23
----------
4,593
----------
SINGAPORE (4.5%)
Chuan Hup Holdings Ltd. 390,000 83
City Developments Ltd. 800,000 2,235
Comfort Group Ltd. 382,000 86
- - Creative Technology Ltd. 59,000 716
Cycle & Carriage Ltd. 149,000 363
Development Bank of Singapore
Ltd. (Foreign) 480,100 2,657
First Capital Corp., Ltd. 286,000 97
Fraser & Neave Ltd. 203,600 547
Hai Sun Hup Group Ltd. 421,000 98
Haw Par Brothers
International Ltd. 106,000 111
Hotel Properties Ltd. 448,000 159
IPC Corp., Ltd. 969,000 40
Inchcape Bhd. 106,000 73
Keppel Corp., Ltd. 504,000 758
Lum Chang Holdings Ltd. 616,400 124
Metro Holdings Ltd. 127,000 77
Natsteel Ltd. 224,000 217
- - Neptune Orient Lines Ltd. 438,000 152
Oversea-Chinese Banking Corp.,
Ltd. (Foreign) 761,800 2,593
Overseas Union Enterprise Ltd. 98,000 144
</TABLE>
33
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<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Parkway Holdings Ltd. 304,000 $ 527
Prima Ltd. 70,000 108
Robinson & Co., Ltd. 81,600 208
Sembawang Corp., Ltd. 151,000 178
Sembawang Marine & Logistics 79,000 42
Shangri-La Hotel Ltd. 139,300 172
Singapore Airlines Ltd. (Foreign) 800,000 3,741
Singapore Press Holdings Ltd. 280,390 1,875
Singapore Technologies
Industrial Corp. 52,000 38
Singapore
Telecommunications Ltd. 4,477,000 6,360
United Industrial Corp., Ltd. 1,000,000 287
United Overseas Bank Ltd.
(Foreign) 621,600 1,932
----------
26,798
----------
SOUTH AFRICA (12.5%)
African Oxygen Ltd. 224,483 381
Alpha Ltd. 32,800 245
Amalgamated Banks of South
Africa Group Ltd. 611,096 3,839
Anglo American Coal Corp. Ltd. 24,173 1,128
Anglo American Industrial
Corp., Ltd. 76,200 1,281
Anglo American Platinum Corp. 204,335 2,238
Anglogold Ltd. 41,015 1,664
Anglovaal Industries Ltd. 388,600 429
- - Avgold Ltd. 73,375 45
Barlow Ltd. 206,374 1,095
De Beers Centenary AG 365,000 6,457
- - Del Monte Royal Foods Ltd. 503,600 231
- - Dimension Data Holdings Ltd. 491,920 2,673
Driefontein Consolidated Ltd. 196,600 1,025
Engen Ltd. 171,900 479
Firstrand Ltd. 4,004,925 6,188
- - Foschini Ltd. 233,735 496
- - Gold Fields Ltd. 211,841 899
Impala Platinum Holdings Ltd. 55,401 475
- - Imperial Holdings Ltd. 174,974 1,723
Investec Bank Ltd. 69,100 2,698
JD Group Ltd. 107,193 726
Kersaf Investments Ltd. 57,781 265
Liberty Life Assn. of Africa Ltd. 256,447 5,033
M-Cell Ltd. 203,069 341
- - M-Web Holdings Ltd. 238,100 857
Metro Cash & Carry Ltd. 952,807 610
Metropolitan Life Ltd. 663,600 1,836
Murray & Roberts Holdings Ltd. 361,500 374
Nampak Ltd. 487,700 1,159
Nasionale Pers Beperk Ltd.
N Shares 114,600 759
Nedcor Ltd. 220,822 4,761
Palabora Mining Co., Ltd. 27,700 148
Pepkor Ltd. 210,700 785
- - Pick'n Pay Stores Ltd. 186,400 228
Pick'n Pay Stores Ltd. N Shares 290,300 311
- - Randfontein Estates Gold Mining
Co., Witwatersrand Ltd. 45,700 98
Rembrandt Group Ltd. 505,300 3,174
Reunert Ltd. 220,600 251
Safmarine & Rennies
Holdings Ltd. 538,000 411
Samancor Ltd. 193,300 820
- - Sappi Ltd. 206,447 780
Sasol Ltd. 589,560 3,438
South African Breweries Ltd. 335,400 6,947
- - South African Iron & Steel
Industrial Corp., Ltd. 2,515,831 478
Sun International South
Africa Ltd. 993,900 336
Tiger Oats Ltd. 146,400 1,297
Tongaat-Hulett Group Ltd. 98,693 741
Trencor Ltd. 156,505 518
- - Western Area Gold Mining
Co., Ltd. 100,100 323
Wooltru Ltd. 176,600 228
Wooltru Ltd. N Shares 244,504 315
----------
74,037
----------
THAILAND (1.7%)
- - ABN AMRO Asia Securities
Co. Ltd. 269,320 156
- - Advance Agro PLC (Foreign) 419,340 362
Ayudhya Insurance PLC
(Foreign) 59,200 216
Bangkok Bank PLC (Foreign) 627,400 771
Bangkok Bank PLC (Local) 96,400 99
- - Bangkok Expressway PLC
(Foreign) 883,200 355
- - Bangkok Land PLC (Foreign) 253,100 18
Bank of Ayudhya PLC (Foreign) 1,252,500 160
Banpu PLC (Foreign) 64,900 106
Berli Jucker PLC (Local) 31,000 27
- - Big C Supercenter PLC (Foreign) 551,100 93
- - CMIC Finance & Securities PLC
(Foreign) 366,000 0
- - Charoen Pokphand Feedmill PLC 18,000 15
- - Electricity Generating PLC
(Foreign) 440,300 682
- - Hana Microelectronics Co.
(Foreign) 119,800 306
ICC International PLC (Foreign) 39,200 44
- - International Broadcasting Corp.
PLC (Foreign) 369,476 245
- - Italian-Thai Development PLC
(Foreign) 347,000 176
- - K.R. Precision PLC (Foreign) 45,400 30
- - Land & House PLC (Foreign) 108,102 26
- - Loxley PLC (Foreign) 263,400 48
- - Nation Multimedia Group PLC
(Foreign) 172,700 57
- - National Petrochemical PLC
(Foreign) 349,700 97
- - PTT Exploration & Production
PLC (Foreign) 252,500 1,910
- - Padaeng Industry PLC (Foreign) 467,950 80
- - Phatra Thanakit PLC (Foreign) 497,700 45
Pizza PLC (Foreign) 104,000 307
Regional Container Lines PLC
(Foreign) 146,400 138
Saha-Union PLC (Foreign) 186,200 113
</TABLE>
34
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Saha-Union PLC (Local) 75,000 $ 43
- - Sahaviriya Steel Industries
(Foreign) 242,800 9
- - Sermsuk PLC (Foreign) 13,800 98
Shinawatra Computer &
Communications PLC (Foreign) 139,500 508
- - Siam Cement PLC (Foreign) 66,481 321
- - Siam Cement PLC (Local) 32,819 140
- - Siam City Cement PLC (Foreign) 213,094 151
Siam Commercial Bank PLC
(Foreign) 16,533 5
- - Tanayong PLC (Foreign) 674,845 19
- - TelecomAsia PLC (Foreign) 2,049,300 593
- - Thai Engine Manufacturing
PLC (Foreign) 7,600 3
Thai Farmers Bank PLC (Foreign) 542,700 478
- - Thai Petrochemical Industry
PLC (Foreign) 2,338,800 166
Thairung Union Car Plc
(Foreign) 140,300 44
- - Tipco Asphalt PLC (Foreign) 184,200 209
- - Tuntex (Thailand) PLC (Foreign) 277,700 120
- - United Communication Industry
PLC (Foreign) 276,300 131
- - Univest Land PLC (Foreign) 2,264,200 0
- - Wattachak PLC (Foreign) 1,339,600 143
----------
9,863
----------
TURKEY (3.5%)
Adana Cimento Sanayii
Turk AS 4,759,783 177
Adana Cimento Sanayii AS
C Shares 15,779,614 76
- - Akal Tekstil Sanayii AS 2,626,312 41
Akcansa Cimento SA 9,321,960 287
Aksa Akrilik Kimya Sanayii AS 4,866,083 152
Alarko Holdings 1,272,079 344
Altinyildiz Mensucat ve
Konfeksiyon Fabrikalari AS 1,472,000 155
Arcelik AS 17,407,948 817
Aygaz AS 2,708,419 407
Bagfas Bandirma Gubre
Fabrikalari AS 218,000 34
Bagfas Bandirma Gubre
Fabrikalari AS Rfd. 1,962,000 302
Brisa Bridgestone Sabanci
Lastik San. ve Tic AS 7,364,000 352
- - Cimentas Izmir Cimento
Fabrikasi T.A.S. 872,500 49
Cisma Cemento 2,063,748 105
Cukurova Elektrik AS 481,000 1,372
Doktas Dokumculuk Ticaret ve
Sanayi AS 519,000 21
EGE Seramik Sanayi ve
Ticaret AS 2,166,000 40
- - Eczacibasi Ilac Sanayi ve
Ticaret AS 3,826,600 198
Ege Biracilik ve Malt
Sanayii AS 4,192,314 496
- - Eregli Demir ve Celik
Fabrikalari AS 6,087,250 948
Ford Otomotiv Sanayi AS 1,332,500 713
Goodyear Lastikleri TAS 5,074,500 276
- - Ihlas Holding AS 3,198,115 438
Kartonsan Karton Sanayi ve
Ticaret AS 1,768,750 138
Kav Orman Sanayii AS 3,555,000 56
Konya Cimento Sanayii AS 2,160,000 39
Kordsa Kord Bezi Sanayi ve
Ticaret AS 1,668,802 266
Migros Turk AS 895,825 874
- - Netas-Northern Elektrik
Telekomunikasyon AS 1,360,000 362
- - Raks Elektronik Sanayi ve
Ticaret AS 467,000 172
- - Sabah Yayincilik AS 8,956,000 116
Sarkuysan Elektrolitik Bakir
Sanayi ve Ticaret AS 1,494,000 108
- - Sifas Sentetik Iplik
Fabrikalari AS 2,534,898 28
Tat Konserve 4,926,900 165
- - Tofas Turk Otomobil
Fabrikasi AS 12,145,075 513
Trakya Cam Sanayii AS 12,028,080 497
Turcas Petroculuk AS 2,211,774 110
Turk Demir Dokum
Fabrikalari SA 2,449,628 42
Turk Siemens Kablo ve Elektrik
Sanayii AS 617,367 37
- - Turk Tuborg Bira ve Malt
Sanayii AS 3,789,000 84
- - Turkiye Garanti Bankasi AS 38,988,065 1,793
Turkiye Is Bankasi AS
B Shares 64,000 178
Turkiye Is Bankasi AS
C Shares 125,395,960 5,060
Usas Ucak Servisi AS 51,500 122
- - Vestel Elektronik Sanayi ve
Ticaret AS 3,343,781 446
Yapi ve Kredi Bankasi AS 52,621,687 1,343
Yapi ve Kredi Bankasi AS
Receipt Shares 20,522,457 524
----------
20,873
----------
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $807,902) 561,171
- ----------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (29.9%)
- ----------------------------------------------------------------------
REPURCHASE AGREEMENTS
<S> <C> <C>
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.67%, 7/1/1998 $ 26,589 26,589
5.76%, 7/1/1998--Note G 150,071 150,071
- ----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $176,660) 176,660
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (125.0%)
(COST $984,562) 737,831
- ----------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EMERGING MARKETS PORTFOLIO (000)
- ----------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-25.0%)
- ----------------------------------------------------------------------
Other Assets--Note B $ 5,956
Security Lending Collateral Payable
to Brokers--Note G (150,071)
Other Liabilities (3,727)
----------
(147,842)
- ----------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------
Applicable to 70,624,884 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $589,989
======================================================================
NET ASSET VALUE PER SHARE $8.35
======================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ILS--Israeli Shekel.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
AT JUNE 30, 1998, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $858,432 $12.15
Undistributed Net Investment
Income--Note F 10,343 .15
Accumulated Net
Realized Losses--Note F (31,996) (.45)
Unrealized Depreciation--
Note E
Investment Securities (246,731) (3.50)
Foreign Currencies (59) --
- ----------------------------------------------------------------------
NET ASSETS $589,989 $8.35
======================================================================
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
TOTAL INTERNATIONAL PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES (100.0%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vanguard International Equity Index Fund-European Portfolio 31,663,254 $ 808,363
Vanguard International Equity Index Fund-Pacific Portfolio 38,950,680 282,003
Vanguard International Equity Index Fund-Emerging Markets Portfolio 12,671,939 105,811
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $1,124,497) 1,196,177
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.1%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a Pooled Cash Account
5.67%, 7/1/1998
(COST $1,619) $1,619 1,619
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(COST $1,126,116) 1,197,796
- ------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.1%)
- ------------------------------------------------------------------------------------------------------------------------
Other Assets 8,900
Liabilities (10,298)
----------
(1,398)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------------
Applicable to 107,951,757 shares of beneficial interest
(unlimited authorization--no par value) $1,196,398
========================================================================================================================
NET ASSET VALUE PER SHARE $11.08
========================================================================================================================
*See Note A in Notes to Financial Statements.
- ------------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 1998, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------
Paid in Capital $1,123,027 $10.40
Overdistributed Net Investment Income (54) --
Accumulated Net Realized Gains 1,745 .02
Unrealized Appreciation--Note E 71,680 .66
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,196,398 $11.08
========================================================================================================================
</TABLE>
37
<PAGE> 40
STATEMENT OF OPERATIONS
This Statement shows dividend and interest income earned by each portfolio
during the reporting period, and details the operating expenses charged to the
portfolio. These expenses directly reduce the amount of investment income
available to pay to shareholders as dividends. The Total International
Portfolio's Income Distributions Received from the other portfolios' net income
have been reduced by its share of the other portfolios' expenses.
This Statement also shows any Net Gain (Loss) realized on the sale of
investments, and the increase or decrease in the Unrealized Appreciation
(Depreciation) on investments during the period--these amounts include the
effect of foreign currency movements on the value of a portfolio's securities.
Currency gains (losses) on the translation of other assets and liabilities,
combined with the results of any investments in forward currency contracts
during the period, are shown separately. If a portfolio invested in futures
contracts during the period, the results of these investments are also shown
separately. The Total International Portfolio's Capital Gain Distributions
Received from the other portfolios' realized net gains are shown separately from
the Net Gain (Loss) realized on the sale of investments in the other portfolios.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
EMERGING
EUROPEAN PACIFIC MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998
------------------------------------------------
(000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends* $ 51,896 $ 6,866 $ 11,577
Interest 2,346 846 1,259
------------------------------------------------
Total Income 54,242 7,712 12,836
------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 17 17 17
Management and Administrative 2,789 1,259 936
Marketing and Distribution 388 169 129
Taxes (other than income taxes) 114 34 26
Custodian Fees 1,054 256 854
Auditing Fees 5 4 4
Shareholders' Reports 29 16 17
Annual Meeting and Proxy Costs 7 3 3
Directors' Fees and Expenses 3 1 1
------------------------------------------------
Total Expenses 4,406 1,759 1,987
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 49,836 5,953 10,849
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 13,247 (15,020) (6,323)
Futures Contracts 7,186 (34) --
Foreign Currencies and Forward Currency Contracts (1,435) (1,304) (155)
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 18,998 (16,358) (6,478)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 630,622 (50,556) (120,576)
Futures Contracts 89 303 --
Foreign Currencies and Forward Currency Contracts 571 64 (46)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 631,282 (50,189) (120,622)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $700,116 $(60,594) $(116,251)
========================================================================================================================
</TABLE>
*Dividends are net of foreign withholding taxes of $6,224,000, $780,000, and
$270,000, respectively.
38
<PAGE> 41
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL
PORTFOLIO
-------------------
SIX MONTHS ENDED
JUNE 30, 1998
-------------------
(000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Income Distributions Received --
Interest $ 95
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME--Note C 95
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN
Capital Gain Distributions Received 1,705
Investment Securities Sold --
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 1,705
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 113,202
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $115,002
========================================================================================================================
</TABLE>
39
<PAGE> 42
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
-------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1998 DEC. 31, 1997 JUN. 30, 1998 DEC. 31, 1997
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 49,836 $ 44,466 $ 5,953 $ 9,980
Realized Net Gain (Loss) 18,998 11,489 (16,358) (34,571)
Change in Unrealized Appreciation (Depreciation) 631,282 374,695 (50,189) (264,966)
---------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 700,116 430,650 (60,594) (289,557)
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (43,908) -- (9,619)
Realized Capital Gain (7,883) (9,048) -- --
---------------------------------------------------------------------
Total Distributions (7,883) (52,956) -- (9,619)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 935,274 798,288 186,427 469,885
Issued in Lieu of Cash Distributions 7,389 48,239 -- 8,612
Redeemed (149,910) (386,529) (75,034) (329,587)
---------------------------------------------------------------------
Net Increase from Capital Share Transactions 792,753 459,998 111,393 148,910
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,484,986 837,692 50,799 (150,266)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 2,432,426 1,594,734 827,240 977,506
---------------------------------------------------------------------
End of Period $3,917,412 $2,432,426 $878,039 $827,240
===============================================================================================================================
(1)Shares Issued (Redeemed)
Issued 38,718 43,854 23,934 48,273
Issued in Lieu of Cash Distributions 304 2,420 -- 1,142
Redeemed (6,414) (21,660) (9,894) (35,246)
---------------------------------------------------------------------
Net Increase in Shares Outstanding 32,608 24,614 14,040 14,169
===============================================================================================================================
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS TOTAL INTERNATIONAL
PORTFOLIO PORTFOLIO
-------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1998 DEC. 31, 1997 JUN. 30, 1998 DEC. 31, 1997
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,849 $ 15,391 $ 95 $ 15,276
Realized Net Gain (Loss) (6,478) (24,456) 1,705 1,845
Change in Unrealized Appreciation (Depreciation) (120,622) (152,608) 113,202 (40,129)
---------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (116,251) (161,673) 115,002 (23,008)
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (15,042) -- (15,269)
Realized Capital Gain -- -- -- (1,796)
---------------------------------------------------------------------
Total Distributions -- (15,042) -- (17,065)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 113,216 432,607 260,239 746,141
Issued in Lieu of Cash Distributions -- 13,894 -- 16,068
Redeemed (67,268) (246,615) (81,825) (99,512)
---------------------------------------------------------------------
Net Increase from Capital Share Transactions 45,948 199,886 178,414 662,697
- ------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (70,303) 23,171 293,416 622,624
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 660,292 637,121 902,982 280,358
---------------------------------------------------------------------
End of Period $589,989 $660,292 $1,196,398 $902,982
==============================================================================================================================
(1)Shares Issued (Redeemed)
Issued 11,567 33,794 23,991 71,840
Issued in Lieu of Cash Distributions -- 1,416 -- 1,641
Redeemed (7,091) (20,944) (7,559) (9,615)
---------------------------------------------------------------------
Net Increase in Shares Outstanding 4,476 14,266 16,432 63,866
==============================================================================================================================
</TABLE>
41
<PAGE> 44
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
EUROPEAN PORTFOLIO
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.13 $16.57 $14.02 $11.76 $11.88 $ 9.33
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .32 .38 .34 .32 .28 .17
Net Realized and Unrealized Gain (Loss)
on Investments 5.14 3.63 2.63 2.30 (.06) 2.55
------------------------------------------------------------------------
Total from Investment Operations 5.46 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 (.06) (.08) (.06) (.04) (.06) --
------------------------------------------------------------------------
Total Distributions (.06) (.45) (.42) (.36) (.34) (.17)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $25.53 $20.13 $16.57 $14.02 $11.76 $11.88
===============================================================================================================================
TOTAL RETURN* 27.14% 24.23% 21.26% 22.28% 1.88% 29.13%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $3,917 $2,432 $1,595 $1,017 $715 $601
Ratio of Total Expenses to
Average Net Assets 0.28%** 0.31% 0.35% 0.35% 0.32% 0.32%
Ratio of Net Investment Income to
Average Net Assets 3.15%** 2.19% 2.45% 2.66% 2.41% 2.05%
Portfolio Turnover Rate 4%** 3% 4% 2% 6% 4%
- -------------------------------------------------------------------------------------------------------------------------------
</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.
**Annualized.
42
<PAGE> 45
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PACIFIC PORTFOLIO
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $7.72 $10.51 $11.50 $11.31 $10.13 $ 7.56
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .05 .09 .10 .10 .08 .06
Net Realized and Unrealized Gain (Loss)
on Investments (.53) (2.79) (1.00) .21 1.24 2.62
------------------------------------------------------------------------
Total from Investment Operations (.48) (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 PERIOD $7.24 $ 7.72 $10.51 $11.50 $11.31 $10.13
================================================================================================================================
TOTAL RETURN* -6.22% -25.67% -7.82% 2.75% 13.04% 35.46%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $878 $827 $978 $831 $697 $493
Ratio of Total Expenses to
Average Net Assets 0.39%** 0.35% 0.35% 0.35% 0.32% 0.32%
Ratio of Net Investment Income to
Average Net Assets 1.33%** 1.03% 0.89% 0.97% 0.71% 0.75%
Portfolio Turnover Rate 2%** 8% 9% 1% 4% 7%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the transaction fee on purchases (0.5%
beginning 1/1/1997, 1.0% in 1993 through 1996) or the annual account
maintenance fee of $10.
**Annualized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------------- MAY 4* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUNE 30, 1998 1997 1996 1995 DEC. 31, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.98 $12.28 $10.75 $10.87 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .16 .24 .18 .15 .06
Net Realized and Unrealized Gain (Loss) on Investments (1.79) (2.31) 1.52 (.09) .92
------------------------------------------------------------------
Total from Investment Operations (1.63) (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 $8.35 $ 9.98 $12.28 $10.75 $10.87
==================================================================================================================================
TOTAL RETURN** -16.33% -16.82% 15.83% 0.56% 9.81%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $590 $660 $637 $234 $83
Ratio of Total Expenses to Average Net Assets 0.59%+ 0.57% 0.60% 0.60% 0.60%+
Ratio of Net Investment Income to Average Net Assets 3.23%+ 1.96% 1.69% 2.00% 1.32%+
Portfolio Turnover Rate 9%+ 19% 1% 3% 6%
- ----------------------------------------------------------------------------------------------------------------------------------
</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.
43
<PAGE> 46
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL PORTFOLIO
SIX MONTHS ENDED YEAR ENDED APR. 29* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUNE 30, 1998 DEC. 31, 1998 DEC. 31, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $10.14 $10.26
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income -- .18 .150
Capital Gain Distributions Received .02 .02 .015
Net Realized and Unrealized Gain (Loss) on Investments 1.19 (.28) (.110)
------------------------------------
Total from Investment Operations 1.21 (.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 $11.08 $ 9.87 $10.14
======================================================================================================================
TOTAL RETURN** 12.26% -0.77% 0.55%
======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,196 $903 $280
Ratio of Expenses to Average Net Assets--Note C 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets 0.02%+ 2.19% 1.51%+
Portfolio Turnover Rate 1%+ 0% 0%
- ----------------------------------------------------------------------------------------------------------------------
</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.
44
<PAGE> 47
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:
Equity securities are valued at the latest quoted sales prices as of the close
of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on
the valuation date; such securities not traded on the valuation date are valued
at the mean of the latest quoted bid and asked prices. Prices are taken from the
primary market in which each security trades. 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 independent pricing services. Other temporary cash investments are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued by methods deemed by the Board
of Directors to represent fair 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
exchange rates on the valuation date as employed by Morgan Stanley Capital
International in the calculation of its indexes.
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.
45
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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) 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 June 30,
1998, the portfolios had contributed capital aggregating $1,022,000 to Vanguard
(included in Other Assets), representing 1.5% of Vanguard's capitalization. The
portfolios' Directors and officers are also Directors and officers of Vanguard.
C. Under a special service agreement, The Vanguard Group furnishes corporate
management, administrative, marketing, and distribution services to the Total
International Portfolio. The special service agreement provides that Vanguard
will reimburse the portfolio's expenses to the extent of savings in
administrative and marketing costs realized by Vanguard in the operation of the
portfolio. Accordingly, all expenses incurred by the portfolio during the six
months ended June 30, 1998, were reimbursed by Vanguard. The portfolio's
Trustees and officers are also Directors and officers of Vanguard.
D. During the six months ended June 30, 1998, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(000)
--------------------------------------
PORTFOLIO PURCHASES SALES
- --------------------------------------------------------------------------------
<S> <C> <C>
European $944,024 $58,046
Pacific 115,916 10,026
Emerging Markets 85,763 27,131
Total International 183,514 4,396
- --------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 49
E. At June 30, 1998, 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 $1,448,688 $ (23,929) $1,424,759
Pacific 71,495 (371,476) (299,981)
Emerging Markets 73,648 (320,379) (246,731)
Total International 227,995 (156,315) 71,680
- -----------------------------------------------------------------------------------------------
</TABLE>
At June 30, 1998, the aggregate settlement value of open futures contracts
expiring in September 1998 and the related unrealized appreciation were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(000)
------------------------------------
AGGREGATE
NUMBER OF SETTLEMENT UNREALIZED
PORTFOLIO/FUTURES CONTRACTS LONG CONTRACTS VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
European/
Eurotop 38 $11,062 $429
Pacific/
Nikkei 300 471 8,241 199
- ----------------------------------------------------------------------------------------------
</TABLE>
At June 30, 1998, 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
-------------------------- UNREALIZED
PORTFOLIO/ FOREIGN U.S. MARKET VALUE IN APPRECIATION
CONTRACT SETTLEMENT DATE CURRENCY DOLLARS U.S. DOLLARS (DEPRECIATION)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European/
Receive:
9/23/1998 ECU 9,635 $10,632 $10,615 $(17)
Pacific/
Receive:
9/16/1998 JPY 929,121 6,768 6,768 --
9/17/1998 JPY 188,740 1,352 1,375 23
- ------------------------------------------------------------------------------------------------
</TABLE>
ECU--European Currency Unit.
JPY--Japanese Yen.
The European, Pacific, and Emerging Markets Portfolios had net unrealized
foreign currency gains (losses) of $(63,000), $8,000, and $(59,000),
respectively, resulting from the translation of other assets and liabilities at
June 30, 1998.
47
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
F. Distributions are determined on a tax basis and may differ from net
investment income and realized capital gains for financial reporting purposes.
During the six months ended June 30, 1998, the European, Pacific, and
Emerging Markets Portfolios realized net foreign currency losses of $297,000,
$321,000, and $155,000, 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.
For federal income tax purposes, at December 31, 1997, the Pacific and
Emerging Markets Portfolios had the following capital losses available to offset
future capital gains:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CAPITAL LOSS
------------------------------------
EXPIRATION
FISCAL
YEAR(S)
AMOUNT ENDING
PORTFOLIO (000) DECEMBER 31
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Pacific $(37,789) 2003-2006
Emerging Markets (25,667) 2003-2006
- ----------------------------------------------------------------------------------------------
</TABLE>
G. The market value of securities on loan to brokers/dealers at June 30, 1998,
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 $558,030 $592,842
Pacific 222,525 233,512
Emerging Markets 135,257 150,071
- ----------------------------------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements.
48
<PAGE> 51
DIRECTORS, TRUSTEES, AND OFFICERS
JOHN C. BOGLE
Senior 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
Chairman, Chief Executive Officer, and Director of The Vanguard Group, Inc., and
of each of the investment companies in The Vanguard Group.
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(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell
Company is he owner of trademarks and copyrights relating to the
Russell Indexes. "Wilshire 4500" and "Wilshire 5000" are
trademarks of Wilshire Associates.
49
<PAGE> 52
VANGUARD FAMILY OF FUNDS
STOCK FUNDS
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Equity Income Fund
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500 Portfolio
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Growth Portfolio
Mid Capitalization Stock
Portfolio
Small Capitalization Growth
Stock Portfolio
Small Capitalization Stock
Portfolio
Small Capitalization Value
Stock Portfolio
Total Stock Market Portfolio
Value Portfolio
Institutional Index Fund
International Equity Index Fund
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
International Growth Portfolio
International Value Portfolio
Morgan Growth Fund
PRIMECAP Fund
Selected Value Portfolio
Specialized Portfolios
Energy Portfolio
Gold & Precious Metals
Portfolio
Health Care Portfolio
REIT Index Portfolio
Utilities Income Portfolio
Tax-Managed Fund
Capital Appreciation
Portfolio
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Total International Portfolio
Trustees' Equity Fund
U.S. Portfolio
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MONEY MARKET FUNDS
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Portfolio
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(CA, NJ, NY, OH, PA)
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Treasury Portfolio
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Portfolio
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Portfolio
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Portfolio
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BALANCED FUNDS
Asset Allocation Fund
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Portfolio
LifeStrategy Portfolios
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Portfolio
Growth Portfolio
Income Portfolio
Moderate Growth Portfolio
STAR Portfolio
Tax-Managed Fund
Balanced Portfolio
Wellesley Income Fund
Wellington Fund
Q722-6/1998
(C) 1998 Vanguard Marketing
Corporation, Distributor.
All rights reserved.
[THE VANGUARD GROUP LOGO]
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Valley Forge, Pennsylvania 19482
FUND INFORMATION
1-800-662-7447
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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.
50
