<PAGE> 1
VANGUARD INTERNATIONAL
STOCK INDEX FUNDS
VANGUARD EUROPEAN STOCK INDEX FUND
VANGUARD PACIFIC STOCK INDEX FUND
VANGUARD EMERGING MARKETS STOCK INDEX FUND
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND
[PHOTO]
ANNUAL
REPORT
DECEMBER 31, 1998
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE
THAT TRADITION MATTERS
Our 8,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
This year, our report cover pays homage to three anniversaries, each of great
significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on
August 1, 1798. HMS Vanguard, the victorious British flagship at the
Nile, is our namesake. And its motto--"Leading the way"--serves as a
guiding principle for our company.
- - The 100th birthday, on July 23, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group.
Mr. Morgan was friend and mentor to Vanguard founder John C. Bogle, and
helped to shape the standards and business principles that Mr. Bogle
laid down for Vanguard at its beginning nearly 25 years ago: a stress
on balanced, diversified investments; insistence on fair dealing and
candor with clients; and a focus on long-term investing. To our great
regret, Mr. Morgan died on September 2.
- - The 70th anniversary, on December 28, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and
one of only a handful of funds created in the 1920s that are still in
operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
6
PERFORMANCE SUMMARIES
8
FUND PROFILES
12
FINANCIAL STATEMENTS
17
REPORT OF
INDEPENDENT ACCOUNTANTS
50
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
[PHOTO]
JOHN J. BRENNAN
Chairman & CEO
JOHN C. BOGLE
Senior Chairman
Risks were evident in the international markets during 1998, but rewards were
available too, particularly for investors who steered clear of Asia and most
emerging markets. Overall, it was a tumultuous year for international
exchanges. Most markets in Europe enjoyed remarkable gains, while stocks in
other countries were generally beset by economic and currency troubles.
Accordingly, the returns of Vanguard's international index funds varied
widely, from the outstanding +28.9% gain of the European Stock Index Fund to
the -18.1% decline of the Emerging Markets Stock Index Fund. Though on an
absolute basis our performance was decidedly mixed, all four of our funds
distinguished themselves not only by outpacing their average mutual fund
competitors but by closely tracking their comparative benchmarks.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
TOTAL RETURNS
YEAR ENDED
DECEMBER 31, 1998
- -----------------------------------------------------------
<S> <C>
VANGUARD EUROPEAN STOCK INDEX FUND +28.9%
Average European Fund +22.6
MSCI Europe Index +28.7
- -----------------------------------------------------------
VANGUARD PACIFIC STOCK INDEX FUND + 2.4%
Average Pacific Fund - 0.1
MSCI Pacific Free Index + 2.6
- -----------------------------------------------------------
VANGUARD EMERGING MARKETS
STOCK INDEX FUND -18.1%
Average Emerging Markets Fund -26.8
MSCI Select Emerging Markets Free Index -18.4
- -----------------------------------------------------------
VANGUARD TOTAL INTERNATIONAL
STOCK INDEX FUND +15.6%
Average International Fund +13.0
Total International Composite Index* +15.9
- -----------------------------------------------------------
</TABLE>
*Consists of the Morgan Stanley Capital International Europe, Australasia, Far
East Index, plus the MSCI Select Emerging Markets Free Index.
The table at right presents the twelve-month total return (capital change
plus reinvested dividends) of each fund, the average mutual fund in its
category, and an unmanaged target index. Per-share figures for each fund,
including its net asset value, the dividends paid from net investment income,
and any distributions of net realized capital gains, are presented in the table
that follows this letter.
FINANCIAL MARKETS IN REVIEW
European stocks gained about 23% in local-currency terms during 1998, although
the ascent was not without interruption. Pacific-region stocks, which are
dominated by Japan, declined -7% in local-currency terms. However, for U.S.
investors, local returns from Europe and the Pacific region were boosted by a
fall in the value of the U.S. dollar versus the Japanese yen and most European
currencies. The result was a dollar gain of +28.7% for the European component
of the MSCI EAFE Index and a gain of +2.6% for the Pacific component.
U.S. investors in emerging-market stocks were hit with a double whammy:
Declines of about -6% in local currencies were worsened by a general
strengthening of the dollar in these markets, resulting in a decline of -18.4%
for U.S. investors.
As the events of 1998 showed, fluctuations in currency values can either
add to or detract from the returns that U.S. investors receive on
international investments. These currency fluctuations are an added risk that
U.S. investors incur--along with the substantial risk of stock-price
fluctuations--when they own international stocks.
1
<PAGE> 4
The table below presents the impact of currency shifts on stock returns during
1998. It shows the total returns earned on various international stock indexes
in local currencies, the effect of the relative value of the dollar, and the
net total return for dollar-based investors. The return of the Wilshire 5000
Equity Index, which for U.S. investors is not affected by currency
fluctuations, is also shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURNS
YEAR ENDED
DECEMBER 31, 1998
------------------------------------
LOCAL
CURRENCY CURRENCY U.S. DOLLAR
INDEX RETURN IMPACT RETURN
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States
(Wilshire 5000 Equity Index) +23.4% -- +23.4%
- --------------------------------------------------------------------------------
MSCI Europe Index +22.8% +5.9% +28.7%
MSCI Pacific Free Index -7.2 +9.8 +2.6
MSCI Select Emerging
Markets Free Index -6.1 -12.3 -18.4
- --------------------------------------------------------------------------------
Total International Composite Index +13.2% +2.7% +15.9%
- --------------------------------------------------------------------------------
</TABLE>
European stocks benefited from a number of developments during 1998. First
was a general expansion in economic activity in the region. Europe's central
banks cut short-term interest rates to encourage continued growth. Another
influence was optimism about the long-term effects of the euro, the common
currency adopted by eleven European nations beginning in 1999. Investors also
were encouraged by increased merger-and-acquisition activity and by continuing
signs that European corporations are focusing more intently on boosting share
prices.
Most Asian markets--including Tokyo--continued to be weighed down by severe
economic troubles. Japan's economy shrank throughout the year, which was bad
news for the rest of the region because of Japan's key role as a market and
source of financing for many of its Asian neighbors. On the other hand, there
were signs even in Japan that some companies are moving toward a U.S.-style
corporate emphasis on providing value for shareholders, and are focusing less
on building market share or protecting corporate allies.
Except for South Korea and the Philippines, Asia's developing markets
declined on balance during 1998, although most of the damage occurred during
the first half of the year. Latin America's emerging markets suffered from the
same lack of confidence that afflicted Asia. Austerity measures such as
increased interest rates, taken to protect local currencies, slowed economic
activity throughout the region.
1998 PERFORMANCE OVERVIEW
During 1998, our European and Emerging Markets Stock Index Funds managed to eke
out slight advantages over their target indexes while our Pacific and Total
International Stock Index Funds came up just short. Of course, our funds--along
with all other mutual funds--incur operating expenses and transaction costs
that indexes do not. We attempt to offset transaction costs by levying modest
fees on purchases of shares in our international index funds. These fees are
paid directly to the funds so that existing shareholders don't bear the costs
of trading activity resulting from new purchases or redemptions.
Overall, our lower expenses and transaction costs gave us a leg up on
similar mutual funds. In fact, our funds have expense ratios (expenses as a
percentage of average net assets) that are about 1.5 percentage points lower
than those of comparable mutual funds. For example, the expense ratio of our
Pacific Stock Index Fund is 0.40%, compared with 2.01% for its average peer.
In addition, the costs of buying and selling securities are clearly lower among
our funds--a significant edge, if a less quantifiable cost saving. Our
portfolio turnover rate is 7% for our European fund, 4% for our Pacific fund,
2% for our Total International fund, and 22% for our Emerging Markets fund. In
contrast, comparable mutual funds
2
<PAGE> 5
have turnover rates in the range of 65% to 85%. When it comes to long-term
performance, this powerful combination of cost advantages can be difficult for
our competitors to overcome.
VANGUARD EUROPEAN STOCK INDEX FUND had an excellent year, both on an
absolute basis and relative to similar mutual funds. Its +28.9% total return
far outpaced the +22.6% return of the average European mutual fund and even
slightly exceeded the +28.7% return of its target benchmark index. Our success
versus our peers came from our emphasis on large, blue-chip companies, which
were strong performers during the year. Also, both our fund and its target
index have higher stakes than our peers in the largest international economies
(Germany, the United Kingdom, Switzerland, and the Netherlands), each of which
earned total returns of more than +17% in dollars during the year.
VANGUARD PACIFIC STOCK INDEX FUND ended 1998 with a total return of +2.4%,
well ahead of the -0.1% decline of the average Pacific mutual fund but slightly
behind the +2.6% return of the MSCI Pacific Free Index. Our fund's relative
results were helped by its big stake in Japan, simply because some other Asian
markets fared much worse than Japan, which remains mired in a severe slump. The
Japanese market, which accounts for about 78% of the Pacific Stock Index Fund's
equity assets, had a negative return in yen of -8.7% in 1998, but a weaker U.S.
dollar relative to the yen turned that performance into a +5.3% return for U.S.
investors. It's important to remember that currency fluctuations work the other
way too. For example, the strength of the U.S. dollar deepened already-severe
declines in Malaysia and nearly cut by half the solid return from Australia.
VANGUARD EMERGING MARKETS STOCK INDEX FUND posted a negative total return
of -18.1%, which--though disappointing--was considerably better than the -26.8%
decline of the average emerging markets fund and was even a bit better than the
- -18.4% return of the MSCI Select Emerging Markets Free Index. Though our fund
generally has higher weightings than its peers in Brazil and Southeast Asia,
which struggled in 1998, it avoids smaller, illiquid markets that many other
emerging-markets funds don't--notably Russia, which registered a disastrous
decline of more than -80% during the year. For the most part, returns from
emerging markets ranged from bad to awful. A few bright spots (Greece rose +78%
and the Philippines, +13%) were overwhelmed by the sharp drops in other
markets, such as Brazil (-40%), Mexico (-34%), South Africa (-28%), Malaysia
(-31%), and Argentina (-24%).
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND earned +15.6%, outperforming
the +13.0% return of the average international fund, but falling just short of
its unmanaged composite index, which returned +15.9% during 1998. This "fund of
funds" invests in our European, Pacific, and Emerging Markets Stock Index Funds
in proportion to the weightings of their target indexes within the Total
International Composite Index. At year-end, the fund had about 67% of its
assets in the European fund, 25% in the Pacific fund, and almost 8% in the
Emerging Markets fund. In 1998, the strong gain from the European Stock Index
Fund and the modest advance in the Pacific Stock Index Fund more than offset
the decline in our much smaller position in the Emerging Markets fund. The
Total International Stock Index Fund has no direct operating expenses, but it
bears its share of the costs of the underlying funds. This resulted in an
expense ratio of about 0.34%, a small fraction of the 1.67% charged by the
average international fund.
Vanguard Core Management Group deserves considerable credit for keeping our
funds in line with their target indexes. We expect small divergences from time
to time because our funds do not precisely replicate the indexes, but, rather,
hold representative samples of their stocks. And, of course, the indexes, as
theoretical constructs, have the built-in advantage of incurring no operating
expenses or transaction costs.
3
<PAGE> 6
LIFETIME PERFORMANCE OVERVIEW
The table below presents the lifetime records for our international index
funds, the average fund in each category, and the appropriate target index.
Along with annualized returns, the table shows the results of hypothetical
$10,000 initial investments in each fund and its peer, assuming dividends and
capital gains distributions were reinvested. As you can see, our funds have
done an excellent job tracking their target indexes. The European and Emerging
Markets funds have established performance edges over their average peers,
while the Pacific and Total International funds have come up short against
comparable mutual funds. We acknowledge that our margin over the average
emerging-markets fund may be small consolation because we have "won" by not
losing quite as much as our competitors.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS
FROM INCEPTION* THROUGH DECEMBER 31, 1998
----------------------------------------------------------------------------------------
AVERAGE FINAL VALUE OF A
ANNUAL RATE $10,000 INITIAL INVESTMENT
-------------------------------------------------- ---------------------------
AVERAGE AVERAGE
VANGUARD COMPETING TARGET VANGUARD COMPETING
STOCK INDEX FUND FUND FUND INDEX FUND FUND
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European +14.4% +10.3% +14.7% $31,478 $23,005
Pacific - 1.8 + 1.0 - 1.8 8,595 10,864
Emerging Markets - 2.9 - 3.9 - 4.3 8,710 8,291
Total International + 5.5 + 8.1 + 5.6 11,534 12,312
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* For European and Pacific funds: June 18, 1990; for Emerging Markets fund:
May 4, 1994; for Total International fund: April 29, 1996.
Of our four funds, the EUROPEAN STOCK INDEX FUND has enjoyed the greatest
relative success over its life span. During its lifetime of more than eight
years, the fund's annual performance margin of 4.1 percentage points over our
average peer has resulted in an edge of $8,473 on an initial $10,000
investment--nearly 85% of the original investment.
THE PACIFIC STOCK INDEX FUND--largely because of the heavy 78% commitment
of its target index to Japan--fell short of its average peer by 2.8 percentage
points a year, recording an annualized decline of -1.8% since its June 1990
inception.
Our EMERGING MARKETS STOCK INDEX FUND has posted an average annual decline
of -2.9% since its inception in May 1994. While disappointing, that result is 1
percentage point per year better than the return of the average emerging
markets fund.
The TOTAL INTERNATIONAL STOCK INDEX FUND, which will reach its third
anniversary in April, has underperformed its average peer by 2.6 percentage
points over its lifetime, resulting in a $778 shortfall on an initial $10,000
investment. This deficit was created largely by the significant stake in Japan
held by our fund and its target index during a period when the Japanese market
performed poorly. Of course, such a brief period is no basis for judging any
mutual fund, but we remain confident that our approach is sound and that, over
time, we will provide returns that are fully competitive with those of similar
mutual funds.
It's important for those who invest overseas to remember that volatility is
more the rule than the exception when it comes to international equities and
currencies. Investors who are seeking to diversify their portfolios of domestic
stocks and bonds should be well aware that the leveling effect caused by the
fact that international stocks fluctuate in different ways and at different
times has two sides: Yes, international markets can rise when the U.S. market
declines. But when the U.S. market rises, international markets can decline.
And, as we have observed in the past, sometimes both can rise or fall at once.
4
<PAGE> 7
IN SUMMARY
Returns on international stocks have paled in recent years beside the gaudy
gains achieved by U.S. stocks. But while we believe that international stocks
still can bring helpful diversification to a balanced portfolio with core
holdings of U.S. stock funds, bond funds, and money market funds, the market,
currency, and economic risks of international stocks remain substantial. So we
repeat our longstanding view that foreign stocks should probably be limited to
10% or 20% of investors' equity portfolios.
The key is for investors to construct investment programs suited to their
own time horizon, financial situation, and tolerance for market fluctuations,
and then to stick with their plans. In the same vein, Vanguard's International
Stock Index Funds will "stay the course" in providing low-cost exposure to
international stock markets.
<TABLE>
<S> <C>
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
</TABLE>
January 22, 1999
NOTE: You'll observe that we've made minor changes to the names of the Vanguard
International Stock Index Funds. We added the words "stock index" and replaced
the word "portfolio" with "fund" as part of a broader effort to simplify the
names in our fund lineup.
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1998
NET ASSET VALUE PER SHARE -----------------------------------------------
DECEMBER 31, DISTRIBUTIONS PER SHARE DIVIDENDS PER SHARE
-------------------------- FROM NET REALIZED FROM NET
STOCK INDEX FUND 1997 1998 CAPITAL GAINS INVESTMENT INCOME
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European $20.13 $25.28 $0.14 $0.520
Pacific 7.72 7.84 -- 0.065
Emerging Markets 9.98 7.91 -- 0.260
Total International 9.87 11.19 0.01 0.210
- --------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
THE MARKETS IN PERSPECTIVE
YEAR ENDED DECEMBER 31, 1998
[PHOTO]
Financial markets continued to produce solid overall gains during 1998. After
overcoming a sharp, six-week setback in July and August, the S&P 500 index
gained 28.6% For the year, marking the first time the index had produced
returns of 20% or more in four consecutive years. Bond prices rose as interest
rates generally declined over the year. Returns from overseas stock markets
varied widely, with big gains in Europe, small gains in the pacific, and losses
in most emerging markets.
U.S. STOCK MARKETS
Large-capitalization stocks--especially those of large growth companies--were
the best performers during 1998. The 50 largest stocks within the S&P 500 Index
earned more than 40%, while the return of the other 450 stocks was less than
17%. The stock market as a whole, as measured by the Wilshire 5000 Equity
Index, earned 23.4%. Small-cap stocks, represented by the Russell 2000 Index,
declined 2.5% for the year.
The huge gap between returns of large and small stocks was not the only
oddity during the year. Among large stocks there also was a large disparity in
performance between growth and value stocks. Within the S&P 500 Index, growth
stocks rose 42.2%, while value stocks were up 14.7%. The gap of 27.5 percentage
points is the largest in the 23 years that the growth and value components have
been tracked.
Stocks rose strongly during the first half of the year. But after hitting a
then-record high on July 17, the S&P 500 Index fell by 19.2% during the
following six weeks. Declines were steeper for most smaller stocks. The Russell
2000 Index fell nearly 40% from its peak in April before climbing back during
the fourth quarter.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED DECEMBER 31, 1998
------------------------------------
1 YEAR 3 YEARS 5 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 28.6% 28.2% 24.1%
Russell 2000 Index -2.5 11.6 11.9
MSCI EAFE Index 20.3 9.3 9.5
- --------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 8.7% 7.3% 7.3%
Lehman 10 Year Municipal Bond Index 6.8 6.8 6.4
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 5.1 5.2 5.1
- --------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.6% 2.2% 2.4%
- --------------------------------------------------------------------------------
</TABLE>
The summer slump in stock prices reflected several factors that raised
anxiety among investors and prompted a reconsideration of risk that extended
past stocks to bonds. Among these factors were deteriorating corporate
earnings; Russia's default on its debts; sharp swings in currency exchange
rates; and lingering economic weakness in Asia.
Although these sources of uncertainty remained as the year went on, many
investors reacted not by abandoning stocks, but by selecting large, well-known
stocks they perceived as reliable vehicles for long-term growth. The strong
rebound in prices during the fourth quarter was due in large part to the
calming influence on jittery markets of the Federal Reserve Board's decision to
cut short-term interest rates by 0.75 percentage point.
6
<PAGE> 9
Technology stocks led the market's advance during 1998, rising 83%.
Investors were attracted by rapid revenue growth and a belief that consumers
and businesses will keep spending freely on computers, software, and computer
services. Speculation also played a role in the surge. Burgeoning activity on
the Internet sent many stocks, even those with no hint of profitability,
skyrocketing. The bulge in Internet stock prices prompted comparisons with such
historic asset "bubbles" as Japan's stock market in the late 1980s and the
tulip-bulb mania in Holland in the 1630s.
Health care and utilities, especially telecommunications providers, also
soared, achieving returns of more than 43%. Both sectors benefited from rising
demand for their products and a perception that they are somewhat protected
from foreign economic troubles and foreign competition. Consumer-related stocks
such as retailers also did well, reflecting strength in consumer spending.
Americans spent almost every after-tax dollar they earned during 1998. Jobs
were abundant; unemployment fell to 4.3% by year-end.
The worst-performing groups were two directly harmed by falling commodity
prices: oil drilling and services firms in the "other energy" category (-36%)
and materials & processing firms (-1%), such as paper, steel, and chemical
makers. Producer-durables companies, such as machinery and aircraft makers,
eked out a 2% return as companies saw falling sales abroad and rising
competition at home from foreign firms.
U.S. BOND MARKETS
The fall in interest rates during 1998 was steepest for U.S. Treasury
securities, which benefited from heightened aversion to risk among investors
and from a slight decrease in supply, thanks to a $70 billion federal budget
surplus. The low inflation rate--consumer prices were up just 1.6%--gave the
Federal Reserve the flexibility to cut short-term rates even though economic
growth was strong.
Yields on long-term Treasury issues fell by roughly 1 percentage point, and
the 30-year Treasury bond's yield was 5.09% on December 31. Lower rates mean
higher bond prices, and the Lehman Brothers Long U.S. Treasury Index earned a
total return of 13.5%, an astounding margin of nearly 12 percentage points over
the inflation rate.
Bonds lacking the unquestioned credit quality of Treasuries did not fare as
well, reflecting a repricing of risk and a "flight to quality" by investors who
began to feel they had been underestimating risk. One result was price declines
that nearly offset the interest earned on high-yield "junk" bonds. However,
high-quality corporate bonds and mortgage-backed securities generally held up
well. The Lehman Aggregate Bond Index, which encompasses Treasury, mortgage,
and high-quality corporate securities and has an intermediate-term average
maturity, earned a solid 8.7%.
Yields on long-term municipal bonds declined only slightly during the year,
and by December 31 were only a tad lower than yields on long-term Treasuries.
This was striking because the interest on municipals is exempt from federal
income tax.
INTERNATIONAL STOCK MARKETS
Europe's stock markets beat even the S&P 500 Index's gaudy return, gaining
28.7% in U.S.-dollar terms, with about 5% of the gain due to a fall in the
dollar versus most European currencies. Pacific-region stocks rose 2.6%,
although it took a fall in the dollar's value versus the Japanese yen to
overcome losses in local-currency terms. Overall, developed international
markets, as measured by the MSCI EAFE Index, earned 20.3%.
Investors' confidence in emerging markets continued to evaporate in 1998,
and stocks in these markets fell about 25% as a group. The few bright spots
included South Korea (+141%) and the Philippines (+13%), which had suffered big
declines in 1997.
7
<PAGE> 10
PERFORMANCE SUMMARY
EUROPEAN STOCK INDEX FUND
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely, so an investment in the fund
could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-DECEMBER 31, 1998
- -----------------------------------------------------------------
EUROPEAN STOCK INDEX FUND 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 26.3 2.6 28.9 28.7
- -----------------------------------------------------------------
</TABLE>
See Financial Highlights table on page 42 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: JUNE 18, 1990-December 31, 1998
- --------------------------------------------------------------------------------------------------
European Stock Index Fund Average European Fund MSCI Europe Index
<S> <C> <C> <C>
Jun 18, 90 9950 10000 10000
1990 06 10271 10323 10335
1990 09 8523 8666 8620
1990 12 9225 9049 9357
1991 03 9517 9173 9761
1991 06 8965 8569 9122
1991 09 10092 9414 10308
1991 12 10357 9552 10679
1992 03 10031 9285 10315
1992 06 11115 9855 11338
1992 09 10538 9092 10798
1992 12 10005 8786 10260
1993 03 10604 9165 10883
1993 06 10848 9323 11088
1993 09 11822 10241 12123
1993 12 12911 11066 13261
1994 03 12636 11122 13053
1994 06 12569 10785 12921
1994 09 13069 11231 13541
1994 12 13145 11201 13635
1995 03 13848 11395 14478
1995 06 14975 12234 15420
1995 09 15588 12824 16066
1995 12 16067 13088 16628
1996 03 16661 13879 17264
1996 06 17187 14283 17735
1996 09 17828 14560 18417
1996 12 19474 16213 20190
1997 03 20426 16823 21175
1997 06 22378 17557 23072
1997 09 24237 18707 24937
1997 12 24187 18772 24985
1998 03 29111 22553 30035
1998 06 30747 23351 31614
1998 09 26313 19337 27126
1998 12 31179 23005 32150
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1998
---------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European Stock Index Fund* 28.22% 19.20% 14.31% $31,321
Average European Fund 22.55 15.76 10.25 23,005
MSCI Europe Index 28.68 19.40 14.66 32,150
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases.
The figures do not reflect the $10 annual account maintenance fee applied on
balances under $10,000.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
European Stock Index Fund* 6/18/1990 28.22% 19.20% 11.80% 2.51% 14.31%
- --------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases.
The figures do not reflect the $10 annual account maintenance fee applied on
balances under $10,000.
8
<PAGE> 11
PERFORMANCE SUMMARY
PACIFIC STOCK INDEX FUND
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely, so an investment in the fund
could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-DECEMBER 31, 1998
- -------------------------------------------------------------
PACIFIC STOCK INDEX FUND 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
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 1.6 0.8 2.4 2.6
- -------------------------------------------------------------
</TABLE>
See Financial Highlights table on page 43 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: JUNE 18, 1990-DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------
Pacific Stock Index Fund Average Pacific Fund MSCI Pacific Free Index
<S> <C> <C> <C>
Jun 18, 90 9950 10000 10000
1990 06 9900 9950 9965
1990 09 7586 8080 7540
1990 12 8550 8505 8503
1991 03 9247 9418 9312
1991 06 8895 9420 8894
1991 09 9422 9593 9435
1991 12 9451 9701 9482
1992 03 7674 8870 7669
1992 06 7291 9809 7276
1992 09 7952 9612 7943
1992 12 7728 9740 7726
1993 03 9045 10096 9076
1993 06 10607 11598 10650
1993 09 11168 13096 11185
1993 12 10462 15955 10520
1994 03 11277 13436 11360
1994 06 12473 14457 12522
1994 09 12120 15863 12174
1994 12 11820 14029 11868
1995 03 11537 12841 11701
1995 06 11138 13980 11216
1995 09 11597 14665 11673
1995 12 12139 14177 12211
1996 03 12401 14313 12505
1996 06 12537 15895 12562
1996 09 12029 15350 12051
1996 12 11184 13947 11206
1997 03 10087 13032 10112
1997 06 12033 16054 12001
1997 09 10479 14207 10474
1997 12 8310 10877 8322
1998 03 8556 10826 8599
1998 06 7792 10575 7813
1998 09 6725 9453 6764
1998 12 8510 10864 8542
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1998
-------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Stock Index Fund* 1.90% -4.11% -1.82% $ 8,552
Average Pacific Fund -0.12 -7.40 0.98 10,864
MSCI Pacific Free Index 2.64 -4.08 -1.83 8,542
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Performance figures are adjusted for the 0.5% transaction fee on
purchases. The figures do not reflect the $10 annual account maintenance
fee applied on balances under $10,000.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pacific Stock Index Fund* 6/18/1990 1.90% -4.11% -2.59% 0.77% -1.82%
- ------------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases.
The figures do not reflect the $10 annual account maintenance fee applied on
balances under $10,000.
9
<PAGE> 12
PERFORMANCE SUMMARY
EMERGING MARKETS STOCK INDEX FUND
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely, so an investment in the fund
could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MAY 4, 1994-DECEMBER 31, 1998
- ------------------------------------------------------------
EMERGING MARKETS STOCK INDEX FUND MSCI*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 9.1% 0.7% 9.8% 3.8%
1995 -1.1 1.7 0.6 0.0
1996 14.2 1.6 15.8 15.2
1997 -18.7 1.9 -16.8 -16.4
1998 -20.7 2.6 -18.1 -18.4
- ------------------------------------------------------------
</TABLE>
*MSCI Select Emerging Markets Free Index.
See Financial Highlights table on page 43 for dividend and capital gains
information since the fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MAY 4, 1994-DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------------
Emerging Mkts Stock Index Average Emerging Markets Fund MSCI Select Emerging Markets Index
<S> <C> <C> <C>
May 4, 94 9900 10000 10000
1994 06 10464 10572 10190
1994 09 12739 12560 12256
1994 12 10867 10939 10380
1995 03 9645 9712 9252
1995 06 10862 10162 10432
1995 09 10920 10449 10420
1995 12 10918 10437 10381
1996 03 12023 11282 11395
1996 06 12529 11375 11800
1996 09 12324 11247 11635
1996 12 12639 11607 11958
1997 03 13255 12780 12534
1997 06 14159 13430 13403
1997 09 12840 13386 12168
1997 12 10507 11331 10001
1998 03 11201 11979 10655
1998 06 8789 9150 8367
1998 09 7230 7167 6864
1998 12 8512 8291 8161
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1998
------------------------------- FINAL VALUE OF A
1 YEAR SINCE INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Markets Stock Index Fund* -19.75% -3.34% $8,537
Average Emerging Markets Fund -26.83 -3.94 8,291
MSCI Select Emerging Markets Free Index -18.39 -4.27 8,161
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 1% transaction fee on purchases and
redemptions. The figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets Stock Index Fund* 5/4/1994 -19.75% -5.24% 1.90% -3.34%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 1% transaction fee on purchases and
redemptions. The figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
10
<PAGE> 13
PERFORMANCE SUMMARY
TOTAL INTERNATIONAL STOCK INDEX FUND
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely, so an investment in the fund
could lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: APRIL 29, 1996-DECEMBER 31, 1998
- -----------------------------------------------------------------
TOTAL INTERNATIONAL STOCK INDEX FUND COMPOSITE*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 -1.0% 1.6% 0.6% 0.6%
1997 -2.5 1.7 -0.8 -0.8
1998 13.5 2.1 15.6 15.9
</TABLE>
*Total International Composite Index consists of the MSCI EAFE Index plus the
MSCI Select Emerging Markets Free Index. See Financial Highlights table on
page 44 for dividend and capital gains information since the fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: APRIL 29, 1996-DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
Total Int'l Stock Index Average International Fund Total International Composite Index
<S> <C> <C> <C>
Apr 29, 96 9950 10000 10000
1996 06 9892 10031 9925
1996 09 9861 9966 9897
1996 12 10002 10367 10055
1997 03 9932 10510 9979
1997 06 11174 11671 11220
1997 09 10947 11803 11003
1997 12 9922 10893 9978
1998 03 11278 12518 11356
1998 06 11137 12651 11233
1998 09 9518 10575 9605
1998 12 11468 12312 11563
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1998
------------------------------- FINAL VALUE OF A
1 YEAR SINCE INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total International Stock Index Fund* 15.02% 5.29% $11,477
Average International Fund 13.02 8.09 12,312
Total International Composite Index** 15.88 5.58 11,563
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases.
The figures do not reflect the $10 annual account maintenance fee applied on
balances under $10,000.
**Consists of the MSCI EAFE Index plus the MSCI Select Emerging Markets Free
Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Total International Stock Index Fund* 4/29/1996 15.02% 3.28% 2.01% 5.29%
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Performance figures are adjusted for the 0.5% transaction fee on purchases.
The figures do not reflect the $10 annual account maintenance fee applied on
balances under $10,000.
11
<PAGE> 14
FUND PROFILE
EUROPEAN STOCK INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1998, compared where appropriate to its unmanaged target index. Key
elements of this Profile are defined on page 13.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- -----------------------------------------
EUROPEAN MSCI
STOCK INDEX EUROPE
- -----------------------------------------
<S> <C> <C>
Number of Stocks 591 599
Turnover Rate 7% --
Expense Ratio 0.29% --
Cash Reserves 1.1% --
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------
<S> <C>
Novartis AG 2.4%
Glaxo Wellcome PLC 2.2
Roche Holdings AG 2.1
Royal Dutch Petroleum Co. 1.9
British Telecommunications PLC 1.7
Allianz AG 1.6
Nestle SA (Registered) 1.6
BP Amoco PLC 1.5
Lloyds TSB Group PLC 1.4
SmithKline Beecham PLC 1.4
- -----------------------------------------
Top Ten 17.8%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
EUROPEAN MSCI
STOCK INDEX EAFE
- -----------------------------------------
<S> <C> <C>
R-Squared 0.83 1.00
Beta 0.87 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1998
-----------------------------------------------
EUROPEAN EUROPEAN MSCI
STOCK INDEX STOCK INDEX EUROPE
-----------------------------------------------
<S> <C> <C> <C>
Austria 0.6% 0.5% 0.5%
Belgium 1.9 2.6 2.6
Denmark 1.7 1.2 1.2
Finland 1.1 2.1 2.1
France 11.7 12.9 12.8
Germany 14.7 14.1 14.5
Ireland 0.6 0.7 0.7
Italy 6.0 7.0 7.1
Netherlands 8.4 8.8 8.9
Norway 0.8 0.6 0.5
Portugal 0.9 0.9 0.9
Spain 3.9 4.6 4.6
Sweden 3.8 3.7 3.6
Switzerland 11.7 11.2 11.0
United Kingdom 32.2 28.4 29.0
United States 0.0 0.7 0.0
- --------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
ALLOCATION TO UNDERLYING VANGUARD FUNDS. This table shows the distribution of a
fund's assets in underlying Vanguard funds.
AVERAGE WEIGHTED EXPENSE RATIO. Funds that invest in other Vanguard funds incur
no direct expenses, but do bear proportionate shares 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 fund invested in each underlying fund.
BETA. A measure of the magnitude of a fund'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 fund 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 fund'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 fund's common stocks invested in
securities of various countries.
EXPENSE RATIO. The percentage of a fund'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 fund
holds, the more diversified it is and the more likely to perform in line with
the overall stock market.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund'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 fund has invested in
its ten largest holdings. (The average for stock mutual funds is about 30%.) As
this percentage rises, a fund's returns are likely to be more volatile because
they are more dependent on the fortunes of a few companies.
TURNOVER RATE. An indication of trading activity during the past year. Funds
with high turnover rates incur higher transaction costs and are more likely to
distribute capital gains (which are taxable to investors).
13
<PAGE> 16
FUND PROFILE
PACIFIC STOCK INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1998, compared where appropriate to its unmanaged target index. Key
elements of this Profile are defined on page 13.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- -----------------------------------------
MSCI
PACIFIC PACIFIC
STOCK INDEX FREE
- -----------------------------------------
<S> <C> <C>
Number of Stocks 423 433
Turnover Rate 4% --
Expense Ratio 0.40% --
Cash Reserves 0.5% --
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ---------------------------------------------------
<S> <C>
Toyota Motor Corp. 5.0%
Nippon Telegraph and Telephone Corp. 4.9
The Bank of Tokyo-Mitsubishi Ltd. 2.4
Matsushita Electric Industrial Co., Ltd. 1.8
Takeda Chemical Industries Ltd. 1.7
Tokyo Electric Power Co. 1.7
Sumitomo Bank Ltd. 1.6
Honda Motor Co., Ltd. 1.6
Sony Corp. 1.5
Ito-Yokado Co., Ltd. 1.4
- ---------------------------------------------------
Top Ten 23.6%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
PACIFIC MSCI
STOCK INDEX EAFE
- -----------------------------------------
<S> <C> <C>
R-Squared 0.76 1.00
Beta 1.20 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1998
-----------------------------------------------
PACIFIC PACIFIC MSCI
STOCK INDEX STOCK INDEX PACIFIC FREE
-----------------------------------------------
<S> <C> <C> <C>
Australia 8.4% 10.1% 9.7%
Hong Kong 8.7 7.9 7.8
Japan 76.8 78.2 79.0
Malaysia 2.5 0.0 0.0
New Zealand 0.9 0.8 0.7
Singapore 2.7 3.0 2.8
- --------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
FUND PROFILE
EMERGING MARKETS STOCK INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1998, compared where appropriate to its unmanaged target index. Key
elements of this Profile are defined on page 13.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- -----------------------------------------
EMERGING MARKETS MSCI
STOCK INDEX SELECT*
- -----------------------------------------
<S> <C> <C>
Number of Stocks 592 533
Turnover Rate 22% --
Expense Ratio 0.61% --
Cash Reserves 6.5% --
</TABLE>
*MSCI Select Emerging Markets Free Index.
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------
<S> <C>
Telefonos de Mexico SA 3.5%
Hutchison Whampoa Ltd. 2.9
Hong Kong Telecommunications Ltd. 2.0
Hellenic Telecommunication
Organization SA 2.0
YPF SA Class D 1.8
Hang Seng Bank Ltd. 1.7
Centrais Electricas Brasileiras SA 1.5
Sun Hung Kai Properties Ltd. 1.4
Cheung Kong Holdings Ltd. 1.4
National Bank of Greece SA 1.4
- --------------------------------------------
Top Ten 19.6%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
EMERGING MARKETS MSCI
STOCK INDEX EAFE
- -----------------------------------------
<S> <C> <C>
R-Squared 0.56 1.00
Beta 1.50 1.00
</TABLE>
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- -----------------------------------------------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1998
--------------------------------------------------
EMERGING MARKETS EMERGING MARKETS MSCI
STOCK INDEX STOCK INDEX SELECT*
--------------------------------------------------
<S> <C> <C> <C>
Argentina 5.5% 5.7% 5.5%
Brazil 20.0 14.6 14.3
Czech Republic 1.2 1.4 1.4
Greece 3.3 8.2 8.7
Hong Kong 14.9 16.0 14.5
Hungary 1.0 1.7 1.9
Indonesia 2.1 2.2 2.1
Israel 3.1 4.0 4.0
Malaysia 7.1 3.8 6.5
Mexico 15.9 13.3 13.5
Philippines 1.8 2.6 2.6
Poland 0.7 1.2 1.7
Singapore 4.8 6.5 5.3
South Africa 12.8 13.0 12.3
Thailand 1.9 3.3 3.3
Turkey 3.9 2.5 2.4
- -----------------------------------------------------------------------------------------
</TABLE>
*MSCI Select Emerging Markets Free Index.
15
<PAGE> 18
FUND PROFILE
TOTAL INTERNATIONAL STOCK INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1998. Key elements of this Profile are defined on page 13.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ---------------------------------------------
<S> <C>
Expense Ratio 0%
Average Weighted Expense Ratio* 0.34%
</TABLE>
*For underlying funds.
<TABLE>
<CAPTION>
ALLOCATION TO UNDERLYING VANGUARD FUNDS
- ----------------------------------------------
<S> <C>
European Stock Index Fund 67.4%
Pacific Stock Index Fund 25.0
Emerging Markets Stock Index Fund 7.6
- ----------------------------------------------
Total 100.0%
</TABLE>
16
<PAGE> 19
FINANCIAL STATEMENTS
DECEMBER 31, 1998
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings, including each
security's market value on the last day of the reporting period. Vanguard
European, Pacific, and Emerging Markets Stock Index Fund securities are grouped
and subtotaled by asset type (common stocks, bonds, etc.) and by country; the
Total International Stock Index Fund lists investments in shares of each
Vanguard International Stock Index Fund. Other assets are added to, and
liabilities are subtracted from, the value of Total Investments to calculate
the fund's Net Assets. Finally, Net Assets are divided by the outstanding
shares of the fund 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 fund'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 fund 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 fund's investments and their cost, and reflects the gains
(losses) that would be realized if the fund were to sell all of its investments
at their statement-date values.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN STOCK INDEX FUND SHARES (000)
- ------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------
COMMON STOCKS (98.0%)(1)
AUSTRIA (0.5%)
Austria Mikro Systeme
International AG 3,631 $ 137
Austria Tabak AG 10,556 810
Austrian Airlines AG 22,940 822
BWT Best Water
Technology AG 1,760 390
Bank Austria AG 92,950 4,729
Bank Austria AG (Ptg. Ctf.) 7,416 316
Bau Holding AG 5,860 273
Bau Holding AG Pfd. 3,234 121
Boehler-Uddeholm AG 10,541 491
EA-Generali AG 5,761 1,416
Flughafen Wien AG 19,150 940
Generali Vienna AG-Vorz 1,114 173
- - Lenzing AG 4,490 280
Mayr-Melnhof Karton AG 10,510 491
OMV AG 20,037 1,889
Oesterreichische
Brau-Beteiligungs AG 9,710 555
Oesterreichische
Elektrizitaetswirtschafts AG
Class A 25,827 3,950
RHI AG 12,947 338
Universale-Bau AG 7,730 277
VA Technologies AG 12,170 1,055
Wienerberger
Baustoffindustrie AG 7,090 1,411
--------
20,864
--------
BELGIUM (2.5%)
Barco NV 13,385 3,779
Bekaert SA 3,307 1,646
- - CBR Cimenteries SA 26,685 2,641
Colruyt NV 2,995 2,511
Compagnie Maritime
Belge SA (CMB) 9,287 415
D'Ieteren SA 5,713 3,151
Delhaize-Le Lion SA 58,618 5,187
Electrabel SA 44,232 19,443
- - Fortis AG 72,399 26,239
Glaverbel SA 6,579 871
Groupe Bruxelles
Lambert SA 25,200 5,135
Petrofina SA 20,270 9,293
Solvay SA 97,950 7,385
Tractebel SA 74,670 14,498
- - UCB SA 1,471 9,078
Union Miniere SA 21,818 831
--------
112,103
--------
DENMARK (1.2%)
Aarhus Oliefabrik A/S A Shares 5,020 146
Aarhus Oliefabrik A/S B Shares 3,240 97
Bang & Olufsen Holding A/S
B Shares 12,600 768
Carlsberg A/S A Shares 30,475 1,772
Carlsberg A/S B Shares 13,849 801
D/S 1912 B Shares 790 5,524
D/S Svendborg B Shares 613 6,213
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Danisco A/S 50,487 $ 2,737
Den Danske Bank A/S 45,780 6,150
- - East Asiatic Co. A/S 33,950 235
FLS Industries A/S B Shares 41,040 838
GN Store Nord A/S 33,147 1,172
ISS International Service
Systems A/S B Shares 26,119 1,699
J. Lauritzen Holding A/S
B Shares 3,524 243
Korn Og Foderstof
Kompagniet A/S 14,710 276
NKT Holding A/S 7,870 495
Novo Nordisk A/S B Shares 55,382 7,310
Radiometer A/S B Shares 11,008 579
SAS Danmark A/S 39,680 449
Superfos A/S 27,600 408
Tele Danmark A/S B Shares 89,495 12,079
Unidanmark A/S A Shares 44,477 4,018
--------
54,009
--------
FINLAND (2.0%)
- - Amer Group Ltd. 19,220 200
Cultor Oyj-Series 1 43,750 449
Cultor Oyj-Series 2 26,810 275
Finnlines OY 12,280 529
Hartwall Oyj Abp 48,358 788
Instrumentarium Group A Shares 4,811 198
Instrumentarium Group B Shares 6,040 249
Kemira Oy 74,630 538
Kesko Oy 73,528 1,104
Kone Oy B Shares 6,348 740
Merita PLC 694,667 4,418
Metra Oy A Shares 12,470 221
Metra Oy B Shares 36,726 638
Nokia Oy A Shares 377,569 46,233
Nokia Oy K Shares 111,950 13,708
Outokumpu Oy A Shares 114,550 1,059
Pohjola Group Insurance
A Shares 19,588 1,064
Pohjola Group Insurance
B Shares 19,700 1,082
Raisio Group PLC 130,016 1,438
Rautaruuki Oy 21,272 138
Sampo Insurance Co., Ltd.
A Shares 52,224 1,996
- Sonera Group Oyj 302,682 5,380
Stockmann AB Oy A Shares 24,500 605
Stockmann AB Oy B Shares 26,530 501
Tieto Corp. B Shares 35,419 1,588
UPM-Kymmene Oy 230,283 6,458
Valmet Oy 45 1
--------
91,598
--------
FRANCE (12.6%)
AXA-UAP SA 281,527 40,823
Accor SA 29,703 6,434
Alcatel 162,136 19,853
Banque Nationale de Paris SA 192,004 15,818
Bongrain SA 1,625 727
Bouygues SA 21,749 4,485
Canal Plus SA 25,521 6,967
Cap Gemini SA 56,595 9,088
Carrefour SA 31,609 23,874
Chargeurs SA 7,789 431
- - Club Mediterranee SA 13,800 1,240
Coflexip SA 12,382 840
Compagnie Francaise d'Etudes
et de Construction SA 14,271 1,344
- - Compagnie Generale de
Geophysique SA 4,289 250
Compagnie Generale des
Etablissements Michelin SCA
B Shares 110,724 4,430
Compagnie Parisienne de
Reescompte SA 16,933 782
Compagnie de Saint-Gobain SA 73,559 10,390
Compagnie des Gaz de
Petrole Primagaz SA 15,224 1,444
Dassault Systemes SA 94,079 4,424
Elf Aquitaine SA 223,646 25,864
Eridania Beghin-Say SA 20,324 3,518
Essilor International SA 8,019 3,158
Etablissements Economiques
du Casino Guichard-
Perrachon SA 53,259 5,549
Etablissements Economiques
du Casino Guichard-
Perrachon SA Pfd. 16,517 1,062
France Telecom SA 647,331 51,453
Groupe Danone SA 59,528 17,051
Groupe GTM 13,312 1,382
Groupe SEB SA 10,294 857
Imetal SA 12,299 1,233
L'Air Liquide SA (Registered) 68,099 12,496
L'Oreal SA 53,650 38,802
LVMH Moet Hennessy
Louis Vuitton SA 71,426 14,142
Lafarge SA 84,900 8,071
Lagardere SCA 92,928 3,951
Legrand SA 23,222 6,157
Nord-Est SA 16,506 443
PSA Peugeot Citroen SA 41,151 6,372
- - Paribas 133,721 11,627
Pathe SA 6,792 1,897
Pechiney SA A Shares 66,398 2,169
Pernod Ricard SA 45,780 2,975
- - Pinault-Printemps-Redoute SA 96,636 18,476
Promodes SA 15,721 11,438
Rhone-Poulenc SA Series A 300,314 15,462
Sagem SA 3,296 2,183
Sanofi SA 88,015 14,496
Schneider SA 126,296 7,665
Sidel SA 27,222 2,310
Simco SA 20,422 1,854
Skis Rossignol SA 4,263 62
Societe BIC SA 39,923 2,216
Societe Francaise
d'Investissements Immobiliers
et de Gestion SA 14,155 1,001
Societe Generale SA 86,874 14,075
Societe National d'Exploitation
Industrielle de Tabacs et
Allumettes SA 35,122 2,201
Sodexho Alliance SA 27,865 6,235
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Sommer Allibert SA 17,700 $ 479
Suez Lyonnaise des Eaux 124,635 25,614
Thomson-CSF SA 140,176 6,023
Total SA B Shares 197,733 20,035
Usinor Sacilor SA 149,633 1,662
Valeo SA 62,484 4,926
Vivendi 129,988 33,742
Zodiac SA 4,413 946
--------
566,974
--------
GERMANY (13.8%)
AGIV AG 31,449 812
Aachener & Muenchener
Beteiligungs AG (Bearer) 3,549 418
Aachener & Muenchener
Beteiligungs AG (Registered) 33,550 4,935
Adidas-Salomon AG 36,644 3,982
Allianz AG 199,983 73,364
Axa Colonia Konzern AG 22,280 2,528
BASF AG 508,391 19,413
Bayer AG 594,189 24,812
Bayerische Vereinsbank AG 349,658 27,397
Beiersdorf AG 70,150 4,844
Bilfinger & Berger Bau AG 24,878 635
- - Brau und Brunnen AG 4,492 402
Buderus AG 1,584 577
CKAG Colonia Konzern AG Pfd. 5,097 520
Continental AG 97,800 2,701
- - DaimlerChrysler AG 470,922 46,512
Degussa AG 76,420 4,201
Deutsche Bank AG 454,543 26,759
Deutsche Lufthansa AG 315,127 6,963
Deutsche Telekom AG 1,782,183 58,638
Douglas Holding AG 23,356 1,416
- - Douglas Holding AG 1,242 67
Dresdner Bank AG 435,777 18,315
Dyckerhoff AG Pfd. 2,578 715
Escada AG 859 139
Escada AG Pfd. 924 153
Fag Kugelfischer Georg
Schaefer AG 37,593 319
Friederich Grohe AG Pfd. 1,245 329
Heidelberger Zement AG 38,699 3,021
- - Herlitz AG Pfd. 415 11
Hochtief AG 58,800 2,295
Karstadt AG 7,050 3,683
- - Kloeckner-Humbolt-Deutz AG 41,700 388
Linde AG 6,600 4,062
Man AG 8,955 2,635
Man AG Pfd. 2,900 587
Mannesmann AG 318,767 36,556
Merck KGaA 136,302 6,138
Metro AG 219,571 17,534
Metro AG Pfd. 15,688 756
Muenchener
Rueckversicherungs-
Gesellschaft AG (Bearer) 2,850 938
Muenchener
Rueckversicherungs-
Gesellschaft AG (Registered) 68,217 33,053
Preussag AG 12,755 5,767
RWE AG 384,845 21,085
RWE AG Pfd. 63,360 2,313
Rheinmetall AG 16,500 427
Rheinmetall AG Pfd. 15,650 294
SAP AG 50,034 21,630
SAP AG Pfd. 35,558 16,977
SGL Carbon AG 17,860 1,072
Salamander AG 2,137 385
Schering AG 56,600 7,111
Siemens AG 469,367 30,295
- - Strabag Bau AG 2,990 185
Thyssen AG 28,316 5,255
Veba AG 398,883 23,878
Viag AG 21,756 12,762
Volkswagen AG 252,650 20,175
Volkswagen AG Pfd. 81,450 4,059
--------
617,193
--------
IRELAND (0.7%)
Allied Irish Banks PLC 711,019 12,753
CRH PLC 295,643 5,113
Clondalkin Group PLC 49,108 351
DCC PLC 84,602 719
FYFFES PLC 313,459 701
Greencore Group PLC 169,016 781
Independent Newspapers PLC 146,015 588
Irish Continental Group PLC 28,511 338
Irish Life PLC 261,495 2,464
Irish Permanent PLC 88,402 1,331
James Crean PLC 46,973 61
Jefferson Smurfit Group PLC 876,735 1,582
Jurys Hotel Group PLC 48,988 373
Kerry Group PLC A Shares 47,720 651
- - Ryanair Holdings PLC 145,972 1,045
- - Tullow Oil PLC 245,585 201
Waterford Wedgewood PLC 625,680 532
--------
29,584
--------
ITALY (6.9%)
- - Alitalia SpA 1,236,568 4,575
Assicurazioni Generali SpA 839,345 35,123
Banca Commerciale
Italiana SpA 2,207,424 15,262
Banca Intesa Non-Conv Risp. 1,115,820 3,411
Banco Intesa SpA 1,816,538 10,923
Banco Popolare Di Milano SpA 412,100 3,749
Benetton Group SpA 1,407,960 2,843
Bulgari SpA 253,800 1,516
Burgo (Cartiere) SpA 114,400 738
Cementir SpA 292,180 337
Danieli & Co. SpA 42,090 306
Danieli & Co. SpA Risp. 52,500 210
Edison SpA 535,900 6,326
Ente Nazionale
Idrocarburi SpA 6,430,500 42,119
Fiat SpA 2,937,440 10,226
Fiat SpA Pfd. 820,200 1,584
Fiat SpA Risp. 625,820 1,252
- - Impregilo SpA 576,000 522
Istituto Nazionale Delle
Assicurazioni SpA 3,294,722 8,722
Italcementi SpA 195,217 2,155
Italcementi SpA Risp. 166,635 849
Italgas SpA 610,250 3,311
</TABLE>
19
<PAGE> 22
]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
La Rinascente SpA 182,862 $ 1,885
La Rinascente SpA Pfd. 69,500 373
La Rinascente SpA Risp. 66,000 394
Magneti Marelli SpA 503,420 873
Marzotto & Figli SpA 29,150 322
Marzotto & Figli SpA Risp. 15,000 171
Mediaset SpA 975,700 7,929
Mondadori (Arnoldo)
Editore SpA 66,420 880
Montedison SpA 4,177,502 5,561
Montedison SpA Risp. 466,600 467
- - Olivetti SpA 2,565,556 8,947
Parmalat Finanziaria SpA 1,239,300 2,375
Pirelli SpA 1,662,400 5,338
Pirelli SpA Risp. 109,300 270
- - Reno De Medici SpA 118,790 375
Riunione Adriatica di
Sicurta SpA 365,454 5,308
Riunione Adriatica di Sicurta
SpA Risp. 159,900 1,605
SNIA BPD SpA 616,200 972
SNIA BPD SpA Risp. 103,780 115
- - San Paolo-IMI SpA 1,266,100 22,421
Sirti SpA 191,500 1,158
Societa Assicuratrice
Industriale SpA 110,530 1,334
Societa Assicuratrice
Industriale SpA Risp. 297,000 1,981
- - Telecom Italia SpA 3,156,392 26,991
- - Telecom Italia SpA Risp. 883,571 5,573
Telecom Italia Mobile SpA 5,432,916 40,198
Telecom Italia Mobile SpA Risp. 1,413,744 6,670
- - Unione Immobiliare SpA 3,294,722 1,722
--------
308,267
--------
NETHERLANDS (8.7%)
ABN-AMRO Holding NV 1,171,122 24,650
Aegon NV 449,230 55,200
Akzo Nobel NV 234,038 10,663
Buhrmann NV 70,170 1,256
Elsevier NV 550,000 7,708
Getronics NV 70,441 3,491
Hagemeyer NV 44,300 1,619
- - Heineken NV 258,110 15,542
Hollandsche Beton Groep NV 28,940 358
IHC Caland NV 17,190 714
ING Groep NV 765,089 46,680
KLM Royal Dutch Airlines NV 56,617 1,714
Koninklijke Ahold NV 458,017 16,938
Koninklijke KPN NV 389,404 19,505
Koninklijke Nederlandsche
Hoogevens en
Staalfabireken NV 33,019 915
Koninklijke Pakhoed NV 29,928 756
Nedlloyd Groep NV 25,001 340
Oce NV 67,021 2,411
Philips Electronics NV 297,511 19,975
Royal Dutch Petroleum Co. 1,751,456 87,262
Stork NV 28,883 660
TNT Post Group NV 365,476 11,782
Unilever NV 523,625 44,782
Vedior NV 52,930 1,044
Wolters Kluwer NV 56,561 12,110
--------
388,075
--------
NORWAY (0.5%)
Aker ASA A Shares 10,500 110
- - Ask ASA 45,607 281
Bergesen D.Y. ASA A Shares 49,836 595
Bergesen D.Y. ASA B Shares 27,096 313
Christiania Bank Og
Kreditkasse ASA 465,400 1,613
Den Norske Bank ASA 518,900 1,791
Dyno Industrier ASA 28,096 417
Elkem ASA 50,640 605
Hafslund ASA A Shares 74,831 471
Hafslund ASA B Shares 67,251 286
Helikopter Services Group ASA 25,650 121
Kvaerner ASA 28,220 556
Kvaerner ASA B Shares 10,690 175
Lief Hoegh & Co. ASA 24,470 286
Merkantildata ASA 72,760 716
- - NCL Holdings ASA 199,208 471
Norsk Hydro ASA 189,428 6,390
Norske Skogindustrier ASA
A Shares 26,900 784
Norske Skogindustrier ASA
B Shares 12,240 307
Orkla ASA A Shares 135,340 2,016
Orkla ASA B Shares 37,380 488
- - Petro Geo-Services ASA 67,940 865
SAS Norge ASA B Shares 41,200 346
Schibsted ASA 63,870 805
Smedvig ASA A Shares 22,401 188
Smedvig ASA B Shares 19,686 150
Storebrand ASA 229,160 1,729
Tomra Systems ASA 37,525 1,231
Unitor ASA 20,050 195
--------
24,301
--------
PORTUGAL (0.9%)
Banco Comercial Portugues SA
8% Cvt. Pfd. Series A 27,639 3,151
Banco Comercial Portugues
SA (Registered) 106,228 3,266
Banco Espirito Santo e
Comercial de Lisboa SA
(Registered) 126,539 3,928
Brisa-Auto Estradas de
Portugal, SA 51,547 3,034
Cimpor-Cimento de Portugal SA 71,416 2,280
Cin-Corporacao Industrial do
Norte SA 4,790 191
- - Colep-Companhia Portuguesa
de Embalagens 18,784 140
Companhia de Seguros
Tranquilidade 20,100 641
Corticeira Amorin SA 18,110 260
Efacec-Empresa Fabrilde
Maquinas Electricas SA 22,530 232
Electricidade de Portugal SA 396,030 8,720
Engil-SGPS 13,011 88
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Inapa-Investimentos
Participacoes e Gestao SA 17,340 $ 183
Inapa-Investimentos
Participacoes e Gestao SA 26,010 274
Jeronimo Martins & Filho,
SGPS, SA 58,770 3,215
Portucel Industrial-Empresa
Productora de Cellulosa SA 89,340 586
Portugal Telecom SA
(Registered) 156,619 7,181
- - Sociedade Construcoes
Soares da Costa SA 15,745 53
Somague-Sociedade
Gestora de Participacoes, SA 27,200 159
Sonae Investimentos-Sociedade
Gestora de Participacoes SA 33,920 1,649
Unicer-Uniao Cervejeira SA 21,850 521
--------
39,752
--------
SPAIN (4.5%)
ACS, Actividades de
Construccion y Servicios, SA 19,350 765
Acerinox SA 52,530 1,225
- - Argentaria SA 388,970 10,089
- - Asturiana de Zinc, SA 20,100 175
Autopista Concesionaria
Espanola SA 212,257 3,535
Azucarera Ebro Agricolas 54,094 1,195
- - Banco Bilbao Vizcaya SA 1,669,369 26,214
Banco Central
Hispanoamericano SA 892,829 10,618
- - Banco Santander SA 957,342 19,053
Corporacion Financiera Alba SA 12,315 2,060
Corporacion Mapfre SA 54,642 1,485
Cortefiel, SA 14,800 391
Dragados y Construcciones SA 46,546 1,718
- - El Aguila SA 38,608 373
Empresa Nacional Compania de
Celulosas SA 25,050 421
Endesa SA 779,956 20,697
- - Ercros SA 233,502 315
Fabrica Espanola de Productos
Quimicos y Farmaceuticos, SA 12,800 208
Fomento de Construcciones y
Contratas SA 51,132 3,807
Gas Natural SDG SA 123,295 13,444
Iberdrola SA 738,203 13,832
- - Inmobiliaria Urbis SA 43,680 680
Metrovacesa SA 45,343 1,363
Portland Valderrivas SA 21,444 878
Prosegur Cia de Seguridad SA
(Registered) 54,600 638
- - Puleva SA 337,500 226
Reno de Medici SpA
(Spanish Shares) 100,436 287
Repsol SA 246,117 13,149
Sociedade General de Aguas de
Barcelona SA 17,985 1,206
Sol Melia, SA 21,900 765
Tabacalera SA-A 151,417 3,826
- - TelePizza, SA 184,950 1,762
- - Telefonica SA Bonus
Rights Exp. 1/30/1999 834,061 742
Telefonica de Espana SA 834,061 37,144
Union Electrica Fenosa SA 259,757 4,501
Uralita SA 47,564 530
Vallehermoso SA 116,541 1,670
Viscofan Industria Navarra
de Envolturas Celulosic SA 21,260 689
Zardoya Otis SA 44,130 1,380
--------
203,056
--------
SWEDEN (3.6%)
ABB AB A Shares 551,780 5,888
ABB AB B Shares 210,400 2,232
AGA AB A Shares 110,439 1,465
AGA AB B Shares 88,440 1,162
Astra AB A Shares 1,091,300 22,282
Astra AB B Shares 253,246 5,155
Atlas Copco AB A Shares 102,200 2,244
Atlas Copco AB B Shares 49,190 1,068
Diligentia AB 64,385 453
- - Drott AB B Shares 94,358 867
Electrolux AB Series B 303,450 5,222
Esselte AB A Shares 17,160 275
Esselte AB B Shares 16,290 267
ForeningsSparbanken AB 290,500 7,526
Granges AB 36,646 529
Hennes & Mauritz AB B Shares 169,527 13,846
LM Ericsson Telephone AB
B Shares 1,587,000 37,788
- - NetCom AB Shares 86,698 3,530
OM Gruppen AB 70,756 890
SKF AB A Shares 41,840 475
SKF AB B Shares 59,388 692
Sandvik AB A Shares 159,615 2,777
Sandvik AB B Shares 54,343 939
Securitas AB B shares 227,920 3,543
Skandia Forsakrings AB 409,910 6,271
Skandinaviska Eeskilda Banken
AB B Shares 476,953 5,031
Skanska AB B Shares 94,358 2,619
Stora Kopparbergs Berglags
AB A Shares 151,105 1,659
Stora Kopparbergs Berglags
AB B Shares 17,650 196
Svenska Cellulosa AB B Shares 165,226 3,608
Svenska Handelsbanken AB
A Shares 177,780 7,501
Svenska Handelsbanken AB
B Shares 20,260 777
Svenskt Stal AB (SSAB) 29,833 285
Svenskt Stal AB (SSAB)-
Series A 75,609 723
Swedish Match AB 382,202 1,391
Trelleborg AB B Shares 105,198 857
Volvo AB A Shares 104,850 2,348
Volvo AB B Shares 250,065 5,738
WM-Data AB B Shares 54,570 2,329
--------
162,448
--------
SWITZERLAND (11.0%)
ABB AG (Bearer) 6,708 7,863
ABB AG (Registered) 4,087 958
Adecco SA (Bearer) 14,027 6,403
- - Alusuisse-Lonza Group AG
(Registered) 5,195 6,052
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
EUROPEAN STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Credit Suisse Group AG
(Registered) 219,817 $ 34,409
- - Danzas Holding AG (Registered) 2,105 889
Forbo Holding AG (Registered) 1,410 616
Georg Fischer AG (Registered) 3,015 1,020
Grands Magasins Jelmoli SA
(Bearer) 500 561
Grands Magasins Jelmoli SA
(Registered) 1,652 361
Holderbank Financiere Glarus AG
(Bearer) 4,328 5,124
Holderbank Financiere Glarus AG
(Registered) 8,710 2,181
Kuoni Reisen Holding AG
(Registered) 287 1,139
Moevenpick Holding AG (Bearer) 1,090 609
Nestle SA (Registered) 32,049 69,769
Novartis AG (Bearer) 5,268 10,356
Novartis AG (Registered) 50,535 99,342
Roche Holding AG (Bearer) 1,275 23,091
Roche Holding AG
(Dividend-Right Certificates) 5,724 69,847
SGS Societe Generale de
Surveillance Holding SA (Bearer) 799 782
SGS Societe Generale de
Surveillance Holding SA
(Registered) 1,371 323
SMH AG (Registered) 12,356 1,851
- - SAirGroup 8,750 2,172
Schindler Holding AG (Ptg. Ctf.) 158 253
Schindler Holding AG (Registered) 630 1,073
Sika Finanz AG (Bearer) 2,240 672
- - Sulzer AG (Registered) 2,951 1,796
Swiss Reinsurance Co.
(Registered) 11,756 30,651
- - Swisscom AG 59,293 24,823
The Swatch Group AG 3,039 1,881
- - UBS AG 176,621 54,266
Valora Holding AG 3,731 1,009
- - Zurich Allied AG 38,755 28,696
--------
490,838
--------
UNITED KINGDOM (27.9%)
Abbey National PLC 1,222,418 26,176
- - Allied Zurich PLC 1,264,068 18,855
Amec PLC 167,451 495
Anglian Water PLC 210,067 2,901
Arjo Wiggins Appleton PLC 541,772 1,019
Associated British Foods PLC 723,173 6,840
BAA PLC 835,512 9,752
BBA Group PLC 339,535 2,107
BG PLC 3,116,264 19,664
BICC PLC 182,682 213
BOC Group PLC 392,852 5,618
BP Amoco PLC 4,594,875 68,613
BPB PLC 421,869 1,595
BTR PLC 2,511,957 5,182
Barclays PLC 1,244,967 26,845
Barratt Developments PLC 151,206 581
Bass PLC 652,084 9,493
The Berkeley Group PLC 68,808 505
Blue Circle Industries PLC 626,165 3,230
Boots Co., PLC 732,150 12,468
Bowthorpe PLC 168,935 975
British Aerospace PLC 1,395,554 11,830
British Airways PLC 835,212 5,631
British American Tobacco PLC 1,254,861 11,034
British Land Co., PLC 408,801 3,040
British Sky Broadcasting
Group PLC 1,334,420 10,135
British Steel PLC 1,395,161 2,066
British Telecommunications
PLC 5,095,038 76,760
Bunzl PLC 251,053 982
Burmah Castrol PLC 91,567 1,310
CGU PLC 1,076,122 16,848
Cable and Wireless PLC 1,858,505 22,851
Cadbury Schweppes PLC 822,692 14,030
Caradon PLC 446,322 765
Carlton Communications PLC 483,420 4,448
- - Centrica PLC 3,431,700 6,909
Cobham PLC 78,564 911
Compass Group PLC 541,746 6,206
Courtaulds Textiles PLC 59,594 161
De La Rue PLC 63,991 216
Delta PLC 50,813 94
Diageo PLC 2,819,007 32,081
EMI Group PLC 639,444 4,277
Electrocomponents PLC 363,533 2,438
Elementis 1998 PLC 387,918 529
English China Clays PLC 264,315 717
FKI PLC 486,626 1,085
GKN PLC 590,915 7,841
General Electric Co., PLC 2,215,093 19,994
George Wimpey PLC 251,450 457
Glaxo Wellcome PLC 2,827,441 97,285
Granada Group PLC 743,098 13,136
Great Universal Stores PLC 769,899 8,115
Guardian Royal Exchange PLC 743,740 4,164
HSBC Holdings PLC (Foreign) 1,459,283 36,905
HSBC Holdings PLC (Local) 714,545 19,378
Halifax PLC 2,165,011 30,726
Hammerson PLC 212,609 1,210
Hanson PLC 530,849 4,215
Hepworth PLC 62,675 165
Hyder PLC 119,846 1,505
IMI PLC 305,206 1,198
Imperial Chemical
Industries PLC 545,398 4,728
J. Sainsbury PLC 1,465,277 11,745
Jarvis PLC 81,619 907
Johnson Matthey PLC 122,548 828
Kingfisher PLC 1,067,729 11,556
Ladbroke Group PLC 973,357 3,911
Land Securities PLC 437,642 5,636
Lasmo PLC 572,075 952
Legal & General Group PLC 1,046,551 13,590
Lex Service PLC 97,984 628
Lloyds TSB Group PLC 4,351,904 61,908
- - Lonrho PLC 62,829 344
LucasVarity PLC 1,118,800 3,732
MEPC PLC 295,307 1,965
Marks & Spencer PLC 2,180,206 14,954
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -----------------------------------------------------------------------
<S> <C>
- - Marley PLC 108,034 $ 219
Meyer International PLC 52,241 298
- - Misys PLC 453,830 3,305
National Grid Group PLC 1,199,100 9,571
National Power PLC 957,208 8,250
Next PLC 260,407 2,140
Ocean Group PLC 118,669 1,493
Pearson PLC 467,257 9,275
Peninsular & Oriental Steam
Navigation Co. 517,001 6,112
Pilkington PLC 731,768 730
Prudential Corp. PLC 1,581,895 23,885
RMC Group PLC 213,300 2,921
Racal Electronics PLC 244,449 1,415
Railtrack Group PLC 399,700 10,447
Rank Group PLC 434,633 1,674
Reed International PLC 870,218 6,805
Rentokil Initial PLC 2,282,951 17,207
Reuters Group PLC 1,127,398 11,836
Rexam PLC 332,465 924
Rio Tinto PLC 797,771 9,278
Rolls-Royce PLC 1,170,713 4,850
Royal & Sun Alliance
Insurance Group PLC 1,296,418 10,585
Royal Bank of Scotland
Group PLC 712,478 11,380
Rugby Group PLC 482,846 747
SIEBE PLC 1,640,395 6,468
Safeway PLC 787,820 3,959
Schroders PLC 248,910 4,543
Scottish & Newcastle PLC 508,245 5,902
Scottish Power PLC 905,285 9,301
Slough Estates PLC 193,091 874
- - SmithKline Beecham PLC 4,380,020 61,215
Smiths Industries PLC 234,752 3,349
Southern Electric PLC 382,467 4,308
St. James's Place Capital PLC 360,516 1,734
- - Stagecoach Holdings PLC 1,002,060 3,989
TI Group PLC 396,088 2,134
Tarmac PLC 805,471 1,508
Tate & Lyle PLC 312,320 1,720
Taylor Woodrow PLC 342,809 850
Tesco PLC 5,228,184 14,896
- - Thames Water PLC 264,641 5,064
Unigate PLC 100,228 723
Unilever PLC 2,591,667 29,063
United Biscuits Holdings PLC 359,886 1,416
- - United Biscuits Holdings PLC
B Shares 25,100 10
United Utilities PLC 444,139 6,156
Vickers PLC 121,329 361
Vodafone Group PLC 2,479,699 40,267
Williams PLC 563,231 3,198
Wilson Connolly Holdings PLC 86,943 158
Wolseley PLC 464,916 2,939
Zeneca Group PLC 744,817 32,431
----------
1,248,042
----------
UNITED STATES (0.7%)
- - DaimlerChrysler AG (US Shares) 327,336 31,445
----------
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $2,926,316) 4,388,549
- ----------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (8.7%)(1)
- ----------------------------------------------------------------------
U.S. TREASURY BILL
(2) 3.887%-5.582%, 1/21/1999 $ 2,500 $ 2,495
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.76%, 1/4/1999 100,219 100,219
4.77%, 1/4/1999--Note G 289,105 289,105
- ----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $391,818) 391,819
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (106.7%)
(COST $3,318,134) 4,780,368
- ----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-6.7%)
- ----------------------------------------------------------------------
Other Assets--Note B 22,834
Security Lending Collateral Payable
to Brokers--Note G (289,105)
Other Liabilities (34,791)
----------
(301,062)
- -----------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------
Applicable to 177,164,707 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $4,479,306
======================================================================
NET ASSET VALUE PER SHARE $25.28
======================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income-Producing Security.
(1)The fund invests a portion of its cash reserves in equity markets through
the use of index futures contracts. After giving effect to futures investments,
the fund's effective common stock and temporary cash investment positions
represent 98.9% and 7.8%, respectively, 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
AT DECEMBER 31, 1998, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $3,037,316 $17.15
Overdistributed Net
Investment Income--Note F (18,920) (.11)
Accumulated Net
Realized Losses--Note F (3,139) (.02)
Unrealized Appreciation--Note E
Investment Securities 1,462,234 8.25
Futures Contracts 1,498 .01
Foreign Currencies and
Forward Currency Contracts 317 --
- ----------------------------------------------------------------------
NET ASSETS $4,479,306 $25.28
======================================================================
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------
COMMON STOCKS (97.1%)(1)
- ----------------------------------------------------------------------
AUSTRALIA (9.8%)
- - AMP Ltd. 596,151 $ 7,560
Amcor Ltd. 330,291 1,413
Ashton Mining Ltd. 191,905 97
Australia National Industries Ltd. 421,031 297
Australian Gas Light Co., Ltd. 182,102 1,313
Boral Ltd. 566,206 806
Brambles Industries Ltd. 115,011 2,804
Broken Hill Proprietary Ltd. 1,074,369 7,920
CSR Ltd. 526,000 1,287
Coca-Cola Amatil Ltd. 515,652 1,923
Coles Myer Ltd. 602,076 3,157
- - Crown Ltd. 581,395 218
David Jones Ltd. 252,932 279
Delta Gold NL 165,500 252
Email Ltd. 183,583 262
F.H. Faulding & Co., Ltd. 78,900 373
Foster's Brewing Group Ltd. 877,060 2,378
Futuris Corp., Ltd. 293,129 333
Gio Australia Holdings Ltd. 382,970 1,259
Goodman Fielder Ltd. 658,621 667
Great Central Mines Ltd. 135,700 97
Hardie (James) Industries Ltd. 221,404 453
Howard Smith Ltd. 97,200 644
Leighton Holdings Ltd. 159,000 683
Metal Manufactures Ltd. 141,300 199
Mount Isa Mines Holdings Ltd. 913,763 404
National Australia Bank Ltd. 778,173 11,742
- - Newcrest Mining Ltd. 121,382 168
News Corp. Ltd. 1,061,680 7,020
News Corp. Ltd. Pfd. 947,532 5,771
Normandy Mining Ltd. 849,983 787
North Ltd. 334,926 546
Orica Ltd. 145,594 758
Pacific Dunlop Ltd. 571,440 925
Pioneer International Ltd. 476,300 1,008
QBE Insurance Group Ltd. 235,789 976
QCT Resources Ltd. 404,334 243
- - RGC Gold Unsecured Notes 145,141 36
Resolute Ltd. 111,700 79
Rio Tinto Ltd. 169,042 2,007
Rothmans Holdings Ltd. 83,140 597
Santos Ltd. 280,889 755
Sons of Gwalia Ltd. 70,044 199
Southcorp Ltd. 337,429 1,077
- - Star City Holdings Ltd. 305,800 271
Stockland Trust Group Ltd. 665,682 1,658
Tabcorp Holdings Ltd. 165,783 1,017
Telstra Corp. Ltd. 2,701,700 12,644
WMC Ltd. 585,468 1,767
Westfield Trust (Units) 2,217,203 4,896
Westpac Banking Corp., Ltd. 1,035,720 6,937
Westralian Sands Ltd. 95,158 195
-------
101,157
HONG KONG (7.7%) -------
Bank of East Asia Ltd. 691,933 1,206
CLP Holdings Limited 1,261,000 6,283
Cathay Pacific Airways Ltd. 1,718,000 1,708
Cheung Kong Holdings Ltd. 1,230,000 8,851
Dickson Concepts
International Ltd. 213,899 166
Elec & Eltek International
Holdings Ltd. 717,000 137
Giordano International Ltd. 306,000 57
Hang Lung Development
Co., Ltd. 662,000 709
Hang Seng Bank Ltd. 981,000 8,769
Hong Kong & China Gas
Co., Ltd. 2,130,192 2,708
- - Hong Kong & China Warrants 84,599 6
Hong Kong Aircraft &
Engineering Co., Ltd. 76,800 105
Hong Kong
Telecommunications Ltd. 6,185,793 10,819
Hong Kong and Shanghai
Hotels Ltd. 589,000 418
- - Hopewell Holdings-New 536,400 293
Hutchison Whampoa Ltd. 1,973,000 13,944
Hysan Development Co., Ltd. 611,000 911
Johnson Electric Holdings Ltd. 524,000 1,346
Kumagai Gumi Hong Kong Ltd. 277,000 118
- - Kumagai Gumi
Warrants Exp. 12/31/1999 52,000 4
Miramar Hotel &
Investment Ltd. 336,000 345
New World Development
Co., Ltd. 941,797 2,371
Oriental Press Group Ltd. 1,238,000 120
- - Peregrine Investment
Holdings Ltd. 293,200 0
Regal Hotels International
Holdings Ltd. 2,224,800 241
Shangri-La Asia Ltd. 960,000 818
Shun Tak Holdings Ltd. 1,046,000 197
South China Morning Post Ltd. 1,079,000 554
Sun Hung Kai Properties Ltd. 1,281,400 9,345
Swire Pacific Ltd. A Shares 776,000 3,476
Tai Cheung Holdings Ltd. 235,000 58
Television Broadcasts Ltd. 237,000 612
Varitronix International Ltd. 184,000 344
- - Wharf Holding
Warrants Exp. 12/31/1999 51,350 4
Wharf Holdings Ltd. 1,081,000 1,577
Wing Lung Bank Ltd. 144,528 502
----------
79,122
----------
JAPAN (75.9%)
- - AB International Cayman
.50% Cvt. Pfd. 264,000,000 1,937
Advantest Corp. 51,500 3,269
Ajinomoto Co., Inc. 331,000 3,521
Alps Electric Co., Ltd. 94,000 1,729
Amada Co., Ltd. 138,000 669
Amano Corp. 49,000 464
- - Aoki Corp. 216,000 103
Aoyama Trading Co., Ltd. 38,200 1,070
Arabian Oil Co., Ltd. 30,400 391
Asahi Bank Ltd. 651,000 2,389
Asahi Breweries Ltd. 244,000 3,602
Asahi Chemical Industry
Co., Ltd. 740,000 3,536
Asahi Glass Co., Ltd. 586,000 3,642
Ashikaga Bank Ltd. 345,000 618
Autobacs Seven Co., Ltd. 19,500 657
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
The Bank of Tokyo-
Mitsubishi Ltd. 2,352,000 $ 24,396
Bank of Yokohama Ltd. 566,000 1,360
Bridgestone Corp. 417,000 9,483
Brother Industries Ltd. 143,000 446
CSK Corp. 31,500 726
Canon, Inc. 433,000 9,271
Casio Computer Co. 145,000 1,072
Chiba Bank Ltd. 405,000 1,612
- - Chiyoda Corp. 66,000 126
Chugai Pharmaceutical
Co., Ltd. 119,000 1,192
Citizen Watch Co., Ltd. 164,000 989
Cosmo Oil Co., Ltd. 306,000 464
Dai-Nippon Ink & Chemicals, Inc. 417,000 1,142
Dai-Nippon Printing Co., Ltd. 384,000 6,135
Dai-Nippon Screen
Manufacturing Co., Ltd. 82,000 205
Daicel Chemical Industries Ltd. 166,000 494
Daido Steel Co., Ltd. 242,000 320
Daiei, Inc. 376,000 1,023
Daifuku Co., Ltd. 62,000 332
Daiichi Pharmaceutical Co., Ltd. 143,000 2,420
Daikin Industries Ltd. 129,000 1,281
- - Daikyo, Inc. 117,000 141
Daimaru, Inc. 102,000 307
Daito Trust Construction
Co., Ltd. 73,800 641
Daiwa House Industry Co., Ltd. 268,000 2,858
Daiwa Kosho Lease Co., Ltd. 110,000 453
Daiwa Securities Co., Ltd. 869,000 2,974
Denki Kagaku Kogyo K.K. 271,000 442
Denso Corp. 453,000 8,394
East Japan Railway Co. 2,043 11,429
Ebara Corp. 129,000 1,113
Eisai Co., Ltd. 152,000 2,965
Ezaki Glico Co. 81,000 465
Fanuc Co., Ltd. 121,000 4,151
Fuji Bank Ltd. 26,000 96
Fuji International Finance
Trust 0.25% Cvt. Pfd. 1,956,000,000 5,723
Fuji Photo Film Co., Ltd. 260,000 9,681
Fujikura Ltd. 196,000 1,053
Fujita Corp. 273,000 152
Fujita Kanko, Inc. 58,000 516
Fujitsu Ltd. 938,000 12,515
Furukawa Electric Co. 346,000 1,181
Gunma Bank Ltd. 278,000 2,211
Gunze Ltd. 134,000 323
Hankyu Corp. 445,000 1,957
Hankyu Department
Stores, Inc. 72,000 473
- - Haseko Corp. 198,000 100
- - Hazama Corp. 147,000 96
Higo Bank Ltd. 146,000 669
Hirose Electric Co., Ltd. 20,200 1,417
Hitachi Ltd. 1,676,000 10,401
Hitachi Zosen Corp. 465,000 643
Hokuriku Bank Ltd. 382,000 687
Honda Motor Co., Ltd. 491,000 16,150
House Foods Industry Corp. 59,000 999
Hoya Corp. 60,000 2,926
INAX Corp. 113,000 731
Industrial Bank of Japan Ltd. 1,289,000 5,954
Isetan Co. 115,000 1,236
- - Ishihara Sangyo Kaisha Ltd. 174,000 285
Ito-Yokado Co., Ltd. 209,000 14,638
Itochu Corp. 719,000 1,390
Itoham Foods, Inc. 126,000 537
Iwatani International Corp. 135,000 275
JGC Corp. 105,000 247
- - Japan Air Lines Co., Ltd. 896,000 2,367
Japan Energy Corp. 508,000 482
- - Japan Metals & Chemicals Co. 65,000 107
- - Japan Steel Works Ltd. 198,000 246
Joyo Bank Ltd. 454,000 1,779
Jusco Co., Ltd. 166,000 3,363
Kajima Corp. 487,000 1,274
Kaken Pharmaceutical Co. 32,000 114
Kamigumi Co., Ltd. 110,000 535
Kandenko Co., Ltd. 108,000 731
- - Kanebo Ltd. 184,000 183
Kaneka Corp. 186,000 1,397
Kansai Electric Power Co., Inc. 505,500 11,091
Kansai Paint Co., Ltd. 157,000 457
Kao Corp. 313,000 7,076
Katokichi Co., Ltd. 27,000 414
Kawasaki Heavy Industries Ltd. 674,000 1,583
Kawasaki Kisen Kaisha Ltd. 302,000 407
Kawasaki Steel Corp. 1,643,000 2,462
Keihin Electric Express
Railway Co., Ltd. 275,000 866
Kikkoman Corp. 105,000 668
Kinden Corp. 141,000 2,148
Kinki Nippon Railway Co. 876,000 4,699
Kirin Brewery Co., Ltd. 532,000 6,792
Kissei Pharmaceutical Co. 28,000 495
Kokuyo Co., Ltd. 67,000 903
Komatsu Ltd. 499,000 2,623
Komori Corp. 36,000 760
Konami Co., Ltd. 18,400 533
Konica Corp. 128,000 584
Koyo Seiko Co., Ltd. 91,000 505
Kubota Corp. 681,000 2,035
- - Kumagai Gumi Co., Ltd. 342,000 264
Kurabo Industries Ltd. 77,000 79
Kuraray Co., Ltd. 184,000 2,034
Kureha Chemical Industry Co. 121,000 316
Kurita Water Industries Ltd. 63,000 926
Kyocera Corp. 96,500 5,107
Kyowa Hakko Kogyo Co. 209,000 1,034
Kyudenko Corp. 38,000 257
Lion Corp. 155,000 647
Maeda Road Construction
Co., Ltd. 51,000 343
Makino Milling Machine Co. 52,000 298
Makita Corp. 76,000 848
Marubeni Corp. 753,000 1,295
Maruha Corp. 14,000 15
Marui Co., Ltd. 185,000 3,567
Matsushita Electric
Industrial Co., Ltd. 1,060,000 18,785
Meiji Milk Products Co., Ltd. 79,000 238
Meiji Seika Kaisha Ltd. 203,000 810
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Minebea Co., Ltd. 204,000 $ 2,340
Misawa Homes Co., Ltd. 64,000 199
Mitsubishi Chemical Corp. 1,056,000 2,228
Mitsubishi Corp. 791,000 4,558
- - Mitsubishi Electric Corp. 1,093,000 3,440
Mitsubishi Estate Co., Ltd. 681,000 6,116
Mitsubishi Gas Chemical Co. 254,000 705
Mitsubishi Heavy
Industries Ltd. 1,696,000 6,616
Mitsubishi Logistics Corp. 90,000 1,053
Mitsubishi Materials Corp. 574,000 967
- - Mitsubishi Oil Co., Ltd. 224,000 395
Mitsubishi Paper Mills Ltd. 177,000 362
Mitsubishi Rayon Co., Ltd. 324,000 888
Mitsubishi Trust &
Banking Corp. 658,000 4,241
Mitsui & Co., Ltd. 804,000 4,498
- - Mitsui Engineering &
Shipbuilding Co., Ltd. 438,000 435
Mitsui Fudosan Co., Ltd. 435,000 3,297
Mitsui Marine & Fire
Insurance Co. 409,000 2,157
Mitsui Mining & Smelting
Co., Ltd. 257,000 1,269
Mitsui Osk Lines Ltd. 542,000 875
Mitsui Soko Co., Ltd. 92,000 312
Mitsui Trust & Banking Co. 55,000 63
Mitsukoshi Ltd. 257,000 684
Mori Seiki Co. 49,000 556
Murata Manufacturing
Co., Ltd. 122,000 5,073
Mycal Corp. 164,000 980
NEC Corp. 804,000 7,413
NGK Insulators Ltd. 186,000 2,403
NGK Spark Plug Co. 114,000 1,163
NKK Corp. 1,701,000 1,161
NOF Corp. 60,000 120
NSK Ltd. 295,000 1,104
NTN Corp. 209,000 674
Nagase & Co., Ltd. 42,000 144
Nagoya Railroad Co., Ltd. 426,000 1,548
Namco Ltd. 26,800 539
Nankai Electric Railway Co. 267,000 1,347
Nichido Fire & Marine
Insurance Co., Ltd. 232,000 1,142
Nichirei Corp. 92,000 219
- - Niigata Engineering Co., Ltd. 246,000 198
Nikon Corp. 187,000 1,824
Nippon Beet Sugar
Manufacturing Co. 19,000 30
Nippon Comsys Corp. 69,000 941
Nippon Express Co., Ltd. 546,000 3,079
Nippon Fire & Marine
Insurance Co., Ltd. 296,000 1,092
Nippon Light Metal Co. 308,000 322
Nippon Meat Packers, Inc. 118,000 1,904
Nippon Oil Co., Ltd. 608,000 2,124
Nippon Paper Industries Co. 446,000 2,032
Nippon Sharyo Ltd. 84,000 273
Nippon Sheet Glass Co., Ltd. 220,000 620
Nippon Shinpan Co. 281,000 553
Nippon Shokubai K.K. 102,000 550
Nippon Steel Corp. 3,483,000 6,330
- - Nippon Suisan Kaisha Ltd. 111,000 128
Nippon Telegraph and
Telephone Corp. 6,511 50,335
Nippon Yusen Kabushiki
Kaisha Co. 589,000 1,864
Nishimatsu Construction Co. 142,000 831
Nissan Motor Co., Ltd. 1,253,000 3,844
Nisshinbo Industries, Inc. 109,000 381
Nissin Food Products Co., Ltd. 69,000 1,740
Nitto Denko Corp. 21,000 350
Nomura Securities Co., Ltd. 1,155,000 10,086
Noritake Co., Ltd. 58,000 300
OJI Paper Co., Ltd. 525,000 2,732
Odakyu Electric Railway Co. 369,000 1,292
Ohbayashi Corp. 376,000 1,807
Okamoto Industries, Inc. 92,000 207
Okuma Corp. 67,000 349
Okumura Corp. 136,000 604
Olympus Optical Co., Ltd. 136,000 1,566
Omron Corp. 129,000 1,770
Onward Kashiyama Co., Ltd. 90,000 1,211
Osaka Gas Co., Ltd. 1,299,000 4,480
Oyo Corp. 11,000 178
Penta-Ocean Construction Co. 190,000 381
Pioneer Electronic Corp. 89,000 1,495
- - Q.P. Corp. 87,000 717
- - Renown, Inc. 115,000 71
Rohm Co., Ltd. 61,000 5,565
SMC Corp. 34,000 2,719
Sakura Bank Ltd. 1,889,681 4,339
Sanden Corp. 65,000 493
- - Sankyo Aluminum Industry Co. 22,000 19
Sankyo Co., Ltd. 231,000 5,058
- - Sanrio Co., Ltd. 40,000 517
Sanwa Shutter Corp. 129,000 565
Sanyo Electric Co., Ltd. 979,000 3,038
Sapparo Breweries Ltd. 186,000 808
Sato Kogyo Co. 127,000 97
Secom Co., Ltd. 59,000 4,896
Sega Enterprises Ltd. 49,900 1,108
Seino Transportation Co., Ltd. 70,000 401
Seiyu Ltd. 103,000 303
Sekisui Chemical Co. 281,000 1,893
Sekisui House Ltd. 365,000 3,867
77 Bank Ltd. 201,000 2,014
Sharp Corp. 569,000 5,140
Shimachu Co. 22,000 439
Shimano, Inc. 70,000 1,809
Shimizu Corp. 407,000 1,368
Shin-Etsu Chemical Co., Ltd. 200,000 4,823
Shionogi & Co., Ltd. 164,000 1,202
Shiseido Co., Ltd. 216,000 2,780
Shizuoka Bank Ltd. 419,000 5,182
Showa Denko K.K. 562,000 493
Skylark Co., Ltd. 49,000 730
Snow Brand Milk Products Co. 178,000 814
Sony Corp. 207,000 15,103
Sumitomo Bank Ltd. 1,580,000 16,249
Sumitomo Chemical Co. 830,000 3,238
Sumitomo Corp. 538,000 2,623
Sumitomo Electric Industries Ltd. 367,000 4,135
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Sumitomo Forestry Co. 94,000 $ 675
Sumitomo Heavy Industries Ltd. 273,000 571
Sumitomo Marine & Fire
Insurance Co. 345,000 2,190
Sumitomo Metal Industries Ltd. 1,749,000 2,000
Sumitomo Metal Mining Co. 299,000 973
Sumitomo Osaka
Cement Co., Ltd. 234,000 438
Taiheiyo Cement Corp 439,000 1,101
Taisei Corp. 496,000 954
Taisho Pharmaceutical Co. 175,000 4,825
Taiyo Yuden Co., Ltd. 58,000 688
Takara Shuzo Co. 114,000 680
Takara Standard Co. 75,000 632
Takashimaya Co. 154,000 1,298
Takeda Chemical Industries Ltd. 449,000 17,316
Takuma Co., Ltd. 42,000 269
Teijin Ltd. 476,000 1,755
Teikoku Oil Co., Ltd. 134,000 398
Toa Corp. 102,000 188
Tobu Railway Co., Ltd. 451,000 1,319
Toei Co. 77,000 228
Toho Co., Ltd. 9,300 1,276
Tohoku Electric Power Co. 257,000 4,557
Tokai Bank Ltd. 1,024,000 4,848
Tokio Marine & Fire
Insurance Co. 787,000 9,419
Tokyo Broadcasting
System, Inc. 93,000 1,041
Tokyo Dome Corp. 79,000 422
Tokyo Electric Power Co. 689,500 17,055
Tokyo Electron Ltd. 88,630 3,371
Tokyo Gas Co., Ltd. 1,419,000 3,736
Tokyo Steel Manufacturing Co. 74,000 371
Tokyo Style Co. 48,000 487
Tokyo Tatemono Co., Ltd. 158,000 270
Tokyotokeiba Co. 142,000 208
Tokyu Corp. 562,000 1,480
Toppan Printing Co., Ltd. 353,000 4,319
Toray Industries, Inc. 716,000 3,745
Tosoh Corp. 320,000 460
Tostem Corp. 112,000 2,224
Toto Ltd. 196,000 1,576
Toyo Engineering Corp. 62,000 66
Toyo Exterior Co. 14,000 137
Toyo Seikan Kaisha Ltd. 112,000 1,904
Toyobo Ltd. 388,000 502
Toyoda Automatic Loom
Works Ltd. 147,000 2,605
Toyota Motor Corp. 1,913,000 52,066
Trans Cosmos, Inc. 11,900 335
Tsubakimoto Chain Co. 111,000 237
Ube Industries Ltd. 396,000 600
Uni-Charm Corp. 38,000 1,786
Uniden Corp. 16,000 135
- - Unitika Ltd. 233,000 161
Uny Co., Ltd. 97,000 1,776
Wacoal Corp. 81,000 1,043
Yamaguchi Bank Ltd. 97,000 917
Yamaha Corp. 105,000 1,089
Yamanouchi Pharmaceuticals
Co., Ltd. 172,000 5,551
Yamato Transport Co., Ltd. 214,000 2,998
Yamazaki Baking Co., Ltd. 116,000 1,515
- - The Yasuda Trust and
Banking Co., Ltd. 799,000 616
Yokogawa Electric Corp. 122,000 606
----------
783,934
----------
MALAYSIA**
- - Amsteel Corp., Bhd. 1,225,800 146
- - Aokam Perdana Bhd. 337,000 0
- - Promet Bhd. 765,000 0
----------
146
----------
NEW ZEALAND (0.8%)
Brierley Investments Ltd. 1,874,500 426
Carter Holt Harvey Ltd. 1,206,559 1,084
Fisher & Paykel Industries Ltd. 134,905 488
Fletcher Challenge Ltd.
Building 188,781 292
Fletcher Challenge Ltd. Energy 177,722 338
Fletcher Challenge Ltd. Forest 465,367 155
Fletcher Challenge Ltd. Paper 313,335 210
Lion Nathan Ltd. 316,700 808
Telecom Corp. of
New Zealand Ltd. 988,383 4,308
----------
8,109
----------
SINGAPORE (2.9%)
City Developments Ltd. 581,000 2,518
Comfort Group Ltd. 212,000 76
- - Creative Technology Ltd. 48,750 688
Cycle & Carriage Ltd. 152,000 521
Development Bank of
Singapore Ltd. (Foreign) 312,712 2,824
First Capital Corp., Ltd. 108,000 72
Fraser & Neave Ltd. 183,000 535
Hotel Properties Ltd. 112,000 48
Inchcape Bhd. 172,000 199
Keppel Corp., Ltd. 390,750 1,047
Natsteel Ltd. 192,000 211
- - Neptune Orient Lines Ltd. 136,000 44
Oversea-Chinese Banking
Corp., Ltd. (Foreign) 532,527 3,615
Overseas Union Enterprise Ltd. 86,000 171
Parkway Holdings Ltd. 210,000 374
Robinson & Co., Ltd. 11,000 25
- - Sembcorp Industries Ltd. 1,049,203 1,195
Singapore Airlines Ltd.
(Foreign) 557,000 4,085
Singapore Press Holdings Ltd. 182,855 1,995
Singapore Technologies
Engineering Ltd. 1,388,000 1,295
Singapore
Telecommunications Ltd. 3,126,000 4,774
United Industrial Corp., Ltd. 1,093,000 437
United Overseas Bank Ltd.
(Foreign) 417,350 2,681
Venture Manufacturing
(Singapore) Ltd. 121,000 462
----------
29,892
----------
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,155,621) 1,002,360
- ----------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
PACIFIC STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------
CONVERTIBLE BONDS (0.1%)
- ----------------------------------------------------------------------
MTI Capital Cvt .
0.50%, 10/1/2007 JPY 182,000 $ 629
Nitto Denko Cvt.
3.90%, 3/30/2001 JPY 67,000 861
- ----------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(COST $1,329) 1,490
- ----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (18.0%)(1)
- ----------------------------------------------------------------------
TIME DEPOSITS**
Hong Kong Malaysia Berhad
5.20%, 1/21/1999 MYR 27,441 5,777
5.50%, 1/21/1999 MYR 5,000 1,053
U.S. TREASURY BILL
(2) 3.887%-4.538%, 1/21/1999 $ 3,000 2,994
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.76%, 1/4/1999 28,095 28,095
4.77%, 1/4/1999--Note G 148,120 148,120
- ----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $186,039) 186,039
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (115.2%)
(COST $1,342,989) 1,189,889
- ----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-15.2%)
- ----------------------------------------------------------------------
Other Assets--Note B 5,295
Security Lending Collateral Payable
to Brokers--Note G (148,120)
Other Liabilities (14,232)
(157,057)
- ----------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------
Applicable to 131,801,716 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $1,032,832
======================================================================
NET ASSET VALUE PER SHARE $7.84
======================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
**See Note A.2. in Notes to Financial Statements.
-Non-Income-Producing Security.
(1)The fund invests a portion of its cash reserves in equity markets through
the use of index futures contracts. After giving effect to futures
investments, the fund's effective common stock and temporary cash
investment positions represent 99.4% and 15.7%, respectively, of net
assets. See Note E in Notes to Financial Statements.
(2)Security segregated as initial margin for open futures contracts.
JPY--Japanese Yen.
MYR--Malaysian Ringgit.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------
AT DECEMBER 31, 1998, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,304,762 $9.90
Overdistributed Net
Investment Income--Note F (239) --
Accumulated Net
Realized Losses--Note F (118,205) (.90)
Unrealized Appreciation
(Depreciation)--Note E
Investment Securities (153,100) (1.16)
Futures Contracts (1,446) (.01)
Foreign Currencies and
Forward Currency Contracts 1,060 .01
- --------------------------------------------------------------------------
NET ASSETS $1,032,832 $7.84
==========================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
EMERGING MARKETS VALUE*
STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------
COMMON STOCKS (93.5%)
- ----------------------------------------------------------------------
ARGENTINA (5.3%)
Acindar Industria Argentina
de Aceros SA 254,800 $ 305
- - Alpargatas S.A.I.C. 354,200 45
Astra Cia Argentina de
Petroleum SA 608,010 718
Bagley SA Class B 91,008 158
Banco Frances Del Rio de la
Plata SA 185,168 1,316
Banco Galicia y Buenos Aires
SA de CV 440,085 1,938
Central Puerto SA 154,783 361
- - Ciadea SA 221,849 280
Corp Cementera Argentina SA 45,100 255
Cresud SA 139,825 168
- - Indupa SA 296,438 193
Irsa Inversiones y
Representaciones SA 203,460 558
Ledesma SA 271,743 171
Molinos Rio de la Plata SA 127,200 299
Nobleza Piccardo SA 50,724 173
Perez Companc SA 871,150 3,688
- - Polledo SA 67,900 78
Siderca SA Class A 976,608 1,114
Sociedad Comercial de
Plata SA 369,433 261
Telefonica Argentina SA
Class B 2,498,100 7,126
Transportadora de Gas
Sur SA 612,500 1,214
YPF SA Class D 364,624 10,201
--------
30,620
--------
BRAZIL (13.7%)
Aracruz Celulose SA Pfd.
B Shares 1,132,671 844
- - Banco Bamerindus do
Brasil SA 52,300 0
Banco Bradesco SA 531,029,308 2,778
Banco Bradesco SA Pfd. 548,849,107 3,044
- - Banco Bradesco SA Pfd.
Rights Exp. 2/10/1999 22,749,323 13
- - Banco Bradesco SA
Rights Exp. 2/10/1999 22,010,708 6
Banco Itau SA Pfd. 13,565,242 6,624
Banco do Estado de
Sao Paulo SA Pfd. 40,897,800 1,693
Bardella SA Industrias
Mecanicas Pfd. 4,774 190
Bombril SA Pfd. 19,968,031 65
Brasmotor SA Pfd. 2,624,000 261
Caemi Mineracao e
Metalurgia SA Pfd. 1,920,501 39
Centrais Electricas
Brasileiras SA 488,407,340 8,408
Centrais Electricas
Brasileiras SA Pfd. B Shares 93,539,580 1,796
- - Centrais Geradoras do
Sul do Brasil SA 532,835,377 697
- - Centrais Geradoras do
Sul do Brasil SA Pfd. 144,644,711 180
- - Ceval SA Pfd. 59,370,000 172
Cia Vale Do Rio Pfd. A 409,092 5,248
Companhia Brasileira de
Petroleo Ipiranga Pfd. 60,420,000 335
Companhia Cervejaria
Brahma 2,835,265 1,244
Companhia Cervejaria
Brahma Pfd. 4,779,150 2,089
Companhia Cimento Portland
Itau Pfd. 3,150,800 359
Companhia Energetica de
Minas Gerais Pfd. 164,384,329 3,129
Companhia Paulista de
Forca e Luz 19,545,400 1,407
Companhia Siderurgica
Belgo-Mineira 2,724,549 176
Companhia Siderurgica
Belgo-Mineira Pfd. 2,035,000 62
Companhia Siderurgica
Nacional 80,732,500 1,804
Companhia Vidreas
Santa Marina 201,768 352
Companhia de Tecidos
Norte de Minas Pfd. 2,134,289 230
Confeccoes Guararapes SA 30,591 63
Copene-Petroquimica SA Pfd.
A Shares 1,730,194 198
Duratex SA Pfd. 10,698,367 292
- - Embratel Participacoes SA 121,211,560 1,053
- - Embratel Participacoes
SA Pfd. 213,881,150 2,921
Fertilizantes Fosfatados
SA Pfd. 139,730,000 359
Industrias Klabin de Papel e
Celulose SA Pfd. 969,025 184
- - Iochpe-Maxion SA Pfd. 8,889,738 74
Lojas Americanas SA 24,182,000 121
Lojas Americanas SA Pfd. 48,304,033 234
Lojas Renner SA Pfd. 5,033,282 104
- - Mannesmann SA 53,181 3
Marcopolo SA Pfd. 43,900 40
Metal Leve SA Industria e
Comercio Pfd. 5,773,000 30
Metalurgica Gerdau SA Pfd. 7,675,400 127
- - Paranapanema SA Pfd. 31,162,000 85
Perdigao Agroindustrial SA 240,428,000 295
Petroleo Brasileiro SA Pfd. 57,493,990 6,519
Pirelli Cabos SA Pfd. 120,000 328
Pirelli Pneus SA Pfd. 140,400 245
- - Renner Participacoes SA-Pfd. 5,033,282 4
San Paulo Alpargatas SA Pfd. 955,533 42
- - Santista Alimentos SA 226,346 164
Serrana SA-Common 10,661 4
Serrana SA-Preferred 12,712 5
Souza Cruz SA 317,600 2,050
- - Tele Centro Sul
Participacoes SA 121,211,560 803
- - Tele Centro Sul
Participacoes SA Pfd. 213,881,150 1,857
- - Tele Norte Leste
Participacoes SA 121,211,560 993
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
EMERGING MARKETS VALUE*
STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- - Tele Norte Leste
Participacoes SA Pfd. 213,881,150 $ 2,673
- - Tele Sudeste Celular
Participacoes SA 121,211,560 341
- - Tele Sudeste Celular
Participacoes SA Pfd. 213,881,150 903
- - Telesp Celular
Participacoes SA 121,211,560 522
- - Telesp Celular
Participacoes SA Pfd. 213,881,150 1,576
- - Telesp Participacoes SA 121,211,560 1,555
- - Telesp Participacoes SA Pfd. 219,337,550 4,992
Unibanco-Uniao de
Bancos Brasileiros SA Pfd. 99,468,900 2,017
Unipar-Uniao de Industrias
Petroquimicas SA Pfd.
B Shares 323,645 67
Usiminas-Usinas Siderurgicas
de Minas Gerais SA Pfd. 235,069 519
Varig-Viacao Aerea Rio-
Grandense SA Pfd. 76,000 47
Votorantim Celulose e Papel
SA Pfd. 41,540,831 447
Weg SA Pfd. 550,508 273
White Martins SA 1,048,365 503
--------
78,877
--------
CZECH REPUBLIC (1.3%)
- - Ceska Sporitelna a.s. 78,880 303
The Czech Power Co. a.s. 58,800 1,322
Deza Valasske Mezirici a.s. 3,138 56
Inzenyrske a Prumyslove
Stavby (IPS) a.s. 22,030 68
- - Komercni Banka a.s. 19,120 230
- - Nova Hut a.s. 12,132 56
- - Pivovar Radegast a.s. 807 41
- - Podnik Vypocetni Techniky a.s. 692 75
- - SPT Telecom a.s. 274,000 4,186
Severoceske Doly a.s. 8,280 207
- - Skoda Plzen a.s. 35,490 207
- - Synthesia a.s. 14,820 42
Tabak a.s. 2,675 747
- - Vertex a.s. 1,304 134
- - Vodni Stavby Praha a.s. 5,355 25
--------
7,699
--------
GREECE (7.6%)
Aegek SA 31,770 185
Aktor SA 9,170 93
Alpha Credit Bank SA 42,851 4,471
Alte SA 9,090 104
Aluminum of Greece SA 6,970 406
Aluminum of Greece SA Pfd. 2,250 125
- - Aspis Pronoia SA 25,100 355
Athens Medical Center SA 20,250 397
Atti-Kat SA 21,010 149
Attica Enterprises SA 94,680 849
Commercial Bank of Greece SA 28,360 2,789
Delta Dairy SA 3,400 39
Delta Dairy SA Pfd. 8,370 119
El. D. Mouzakis SA 9,360 27
Elais SA 17,540 370
Epilectos SA 37,230 102
Ergo Bank SA 24,568 2,842
Fourlis Brothers SA 21,168 311
Hellas Can Packaging SA 7,200 156
Hellenic Bottling Co. SA
(Bearer) 148,000 4,569
Hellenic Sugar Industry SA 33,584 296
Hellenic Technodomiki SA 15,080 114
Hellenic Telecommunication
Organization SA 427,311 11,368
Heracles General Cement SA 30,100 817
Inform P. Lykos SA 14,200 299
Intracom SA 36,906 1,680
Intracom SA Pfd. 7,332 301
Klonatex ICST & TSA SA 10,100 73
Klonatex ICST & TSA SA Pfd. 15,600 94
Michaniki SA 34,800 199
National Bank of Greece SA 35,572 8,003
Papastratos Cigarettes SA 27,328 413
- - Parnassos Enterprises ABE SA 120,800 189
- - Petzetakis SA 11,900 83
Titan Cement Co. SA 20,900 1,605
--------
43,992
--------
HONG KONG (14.8%)
Bank of East Asia Ltd. 1,184,381 2,064
CLP Holdings Limited 1,351,500 6,734
Cathay Pacific Airways Ltd. 1,809,000 1,798
Cheung Kong Holdings Ltd. 1,114,000 8,017
Dickson Concepts
International Ltd. 232,500 180
Elec & Eltek International
Holdings Ltd. 850,000 162
Hang Lung Development
Co., Ltd. 1,048,000 1,123
Hang Seng Bank Ltd. 1,071,800 9,581
Hong Kong & China Gas
Co., Ltd. 2,560,543 3,256
Hong Kong Aircraft &
Engineering Co., Ltd. 150,800 206
Hong Kong
Telecommunications Ltd. 6,729,158 11,770
Hong Kong and Shanghai
Hotels Ltd. 864,500 614
- - Hopewell Holdings-New 762,400 416
Hutchison Whampoa Ltd. 2,330,000 16,467
Hysan Development Co., Ltd. 730,000 1,088
Johnson Electric Holdings Ltd. 609,500 1,566
Kumagai Gumi Hong Kong Ltd. 414,000 176
Miramar Hotel &
Investment Ltd. 383,000 393
New World Development
Co., Ltd. 661,963 1,666
Oriental Press Group Ltd. 1,038,000 100
- - Peregrine Investment
Holdings Ltd. 459,000 0
Regal Hotels International
Holdings Ltd. 3,080,000 334
Shangri-La Asia Ltd. 1,306,000 1,113
South China Morning Post Ltd. 1,578,000 810
Sun Hung Kai Properties Ltd. 1,108,000 8,081
Swire Pacific Ltd. A Shares 959,000 4,295
Television Broadcasts Ltd. 356,000 919
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Varitronix International Ltd. 86,000 $ 161
Wharf Holdings Ltd. 971,000 1,416
Wing Lung Bank Ltd. 194,208 674
--------
85,180
--------
HUNGARY (1.6%)
- - Danubius Hotel and Spa Rt. 7,840 164
Fotex Rt. 145,830 77
Graboplast Rt. 6,490 50
MOL Magyar Olaj-es
Gazipari Rt. 95,362 2,616
Magyar Tavkozlesi Rt 697,893 3,990
OTB Bank Rt. 26,572 1,332
Pannonplast Rt. 4,590 130
Pick Szeged Rt. 3,100 132
Richter Gedeon Rt. 19,260 821
Zalakeramia Rt. 5,730 69
--------
9,381
--------
INDONESIA (2.1%)
- - PT Apac Centertex Corp. 1,065,500 27
- - PT Argha Karya Prima Industry 32,000 1
- - PT Asahimas Flat Glass 292,000 19
- - PT Astra International 1,842,000 232
PT Bank Bali (Foreign) 422,873 20
- - PT Bank Dagang Nasional
Indonesia (Foreign) 2,906,374 0
- - PT Bank Internasional
Indonesia (Foreign) 3,458,715 98
- - PT Bank Negra Indonesia
(Foreign) 4,253,000 161
- - PT Barito Pacific Timber 2,710,500 119
PT Bimantara Citra 3,290,500 217
- - PT Budi Acid Jaya 646,875 138
- - PT Charoen Pokphand
Indonesia Tbk 100,500 2
- - PT Ciputra Development 367,000 6
PT Citra Marga Nusaphala
Persada 3,425,500 119
- - PT Darya Varia Laboratoria 1,218,000 42
PT Daya Guna Samudera 200,200 130
PT Dharmala Intiland 2,154,200 27
- - PT Duta Anggada Realty 1,392,664 22
- - PT Fisk Aragung Perkasa 945,100 27
- - PT Gadjah Tunggal 3,682,000 104
- - PT Great River International 1,657,000 57
PT Gudang Garam 769,500 1,128
- - PT Hero Supermarket 422,500 53
- - PT Indah Kiat Pulp &
Paper Corp. 4,628,622 1,266
- - PT Indofood Sukses Makmur 1,876,500 956
- - PT Indorama Synthetics 398,000 71
- - PT Jakarta International
Hotel & Development 1,406,500 40
- - PT Japfa Comfeed Indonesia 605,500 8
- - PT Kabel Indonesia 791,500 10
- - PT Kalbe Farma 501,500 25
- - PT Lippo Bank (Foreign) 22,160,250 1,115
PT London Sumatra
Indonesia 499,100 82
- - PT Matahari Putra Prima 3,178,000 80
PT Mayora Indah 785,940 42
- - PT Medco Energi Corp. 810,000 150
- - PT Modern Photo Film Co. 175,000 11
PT Mulia Industrindo 1,867,520 88
- - PT Pakuwon Jati 1,286,500 12
PT Pan Indonesia Bank
(PANIN Bank) (Foreign) 500,000 25
- - PT Polysindo Eka Perkasa 4,244,000 400
- - PT Putra Surya Perkasa 976,000 9
- - PT Semen Cibinong TbK 1,219,000 46
PT Semen Gresik TbK 630,000 658
- - PT Sierad Produca 322,500 3
- - PT Sinar Mas Argo 405,000 87
PT Telekomunikasi Indonesia 10,707,000 3,636
PT Timah TbK 611,500 413
- - PT Trias Sentosa 1,097,000 19
--------
12,001
--------
ISRAEL (3.8%)
- - Ackerstein Industries Ltd. 49,710 57
- - Africa-Israel Investments
(1985) Ltd. 255 108
- - Africa-Israel Investments Ltd. 2,570 111
- - Agis Industries Ltd. 5,250 28
- American Israeli Paper Mills Ltd. 3,562 131
- - Azorim Investment
Development &
Construction Ltd. 26,137 207
Bank Hapoalim Ltd. 1,275,057 2,308
- - Bezeq Israeli
Telecommunication Corp., Ltd. 760,803 2,376
CLAL Insurance Enterprise
Holdings Ltd. 33,988 306
Cvalim-The Electric Wire and
Cable Co. of Israel Ltd. 51,535 141
- - Dead Sea Periclase Ltd. 31,547 74
Delek Israel Fuel Corp., Ltd. 8,294 224
ECI Telecom Ltd. 79,100 2,818
Elco Holdings Ltd. 34,292 173
- - Electrochemical Industries
1952, Ltd. 24,100 17
- - Elite Industries Ltd.-ILS 1 Par 7,300 43
- - Elite Industries Ltd.-ILS 5 Par 7,055 215
First International Bank of
Israel Ltd.-ILS 1 Par 236,400 244
First International Bank of
Israel Ltd.-ILS 5 Par 64,220 318
Gilat Satellite Networks 10,509 579
- - I.I.S. Intelligent Information
Systems Ltd. 17,433 5
IDB Holding Corp., Ltd. 31,740 655
Industrial Buildings Corp. 300,193 363
Israel Chemicals Ltd. 1,164,140 1,150
- - Israel Cold Storage & Supply
Co. Ltd. 8,300 36
- - The Israel Corp. Ltd.-ILS 1 Par 4,136 344
- - The Israel Corp. Ltd.-ILS 5 Par 314 11
The Israel Land Development
Co., Ltd. 41,800 172
Israel Petrochemical
Enterprises Ltd. 14,526 71
Jerusalem Economic Corp., Ltd. 51,249 182
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
EMERGING MARKETS VALUE*
STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- - Kitan Consolidated Ltd. 32,954 $ 34
Koor Industries Ltd. 17,650 1,540
- - Makhteshim-Agan Industries Ltd. 270,953 586
Maman Cargo Terminals &
Handling Ltd. 70,434 95
- - Mehadrin Ltd. 3,280 108
- - Meir Ezra & Son Co. 18,556 72
- - Mul-T-Lock Ltd. 25,386 37
- - New Dimension Software Ltd. 20,900 1,006
- - Ormat Industries Ltd. 133,074 140
Osem Investment Ltd. 85,620 351
- - Packer Plada Ltd. 3,450 46
- - Polgat Ltd. 18,506 62
Property & Building Corp. 4,351 327
- - Scitex Corp., Ltd. 55,800 656
Super Sol Ltd. 218,055 541
- - Tempo Beer Industries Ltd. 28,127 115
Teva Pharmaceutical
Industries Ltd. 64,453 2,634
--------
21,817
--------
MALAYSIA (3.6%)**
AMMB Holdings Bhd. 287,750 271
- - Amsteel Corp., Bhd. 1,411,600 168
- - Antah Holdings Bhd. 193,000 32
- - Aokam Perdana Bhd. 241,000 0
Berjaya Group Bhd. 454,000 77
Berjaya Land Bhd. 445,000 171
Commerce Asset Holdings Bhd. 496,000 307
Edaran Otomobil Nasional Bhd. 169,000 213
Golden Hope Plantations Bhd. 741,000 640
Guinness Anchor Bhd. 120,000 97
Highlands & Lowlands Bhd. 253,000 133
Hong Leong Industries Bhd. 228,200 115
Hong Leong Properties Bhd. 799,000 133
Hume Industries Malaysia Bhd. 184,000 128
IGB Corp., Bhd. 570,000 167
IOI Corp., Bhd. 554,000 254
Jaya Tiasa Holdings Bhd. 76,000 81
Johan Holdings Bhd. 305,000 46
Kedah Cement Holdings Bhd. 448,000 213
Kemayan Corp., Bhd. 167,000 16
Kuala Lumpur Kepong Bhd. 543,000 743
- - Land & General Bhd. 106,500 20
Landmarks Bhd. 481,000 102
- - Leader Universal Holdings
Bhd. 439,000 97
- - MBF Capital Bhd. 489,334 88
Magnum Corp., Bhd. 975,500 335
Malayan Banking Bhd. 1,610,034 2,610
Malayan Cement Bhd. 435,500 126
Malayan United
Industries Bhd. 467,600 81
Malayawata Steel Bhd. 232,000 48
Malaysia International
Shipping Corp., Bhd. (Foreign) 704,000 741
Malaysia Mining Corp., Bhd. 751,800 345
Malaysian Airline System Bhd. 569,000 249
Malaysian Mosaics Bhd. 169,000 46
Malaysian Oxygen Bhd. 101,000 153
Malaysian Pacific
Industries Bhd. 75,000 82
Malaysian Resources
Corp., Bhd. 854,666 248
Mulpha International Bhd. 171,000 22
Mycom Bhd. 412,000 46
Nestle Malaysia Bhd. 223,000 714
New Straits Times Press Bhd. 110,620 62
Oriental Holdings Bhd. 317,760 391
Pan Malaysia Cement
Works Bhd. 607,000 144
Perlis Plantations Bhd. 346,250 284
Perusahaan Otomobil
Nasional Bhd. 328,425 398
Petaling Garden Bhd. 269,000 163
Pilecon Engineering Bhd. 144,000 35
- - Promet Bhd. 386,000 0
Public Bank Bhd. (Foreign) 1,324,799 516
RHB Capital Bhd. 1,245,000 556
RJ Reynolds Bhd. 144,000 130
- - Rashid Hussain Bhd. 249,000 142
Resorts World Bhd. 581,628 536
Rothmans of Pall Mall
Malaysia Bhd. 171,000 806
Shell Refining Co.
Malaysia Bhd. 330,000 278
Sime Darby Bhd. 1,059,000 972
- - Sungei Way Holdings Bhd. 459,400 120
TA Enterprise Bhd. 661,000 171
Tan Chong Motor
Holdings Bhd. 462,000 120
Technology Resources
Industries Bhd. 362,000 151
Telekom Malaysia Bhd. 1,352,780 2,848
Tenaga Nasional Bhd. 580,100 953
- - Time Engineering Bhd. 616,000 115
UMW Holdings Malaysia Bhd. 178,000 150
- - United Engineers Malaysia Bhd. 599,000 349
YTL Corp., Bhd. 95,138 99
--------
20,647
--------
MEXICO (12.4%)
Alfa SA de CV Series A 587,992 1,613
Apasco SA de CV 303,634 1,078
Cemex SA de CV (CPO) 298,452 640
Cemex SA de CV Series A 593,684 1,299
Cemex SA de CV Series B 453,425 1,123
- - Cifra SA de CV Series C 830,000 1,014
- - Cifra SA de CV Series V 4,158,259 5,055
- - Consorcio G Grupo Dina SA 925,000 347
Controladora Comercial
Mexicana SA de CV (Units) 637,000 445
- - Corporacion GEO, SA de CV 139,000 387
Cydsa SA Series A 138,000 126
Desc SA de CV Series B 1,608,535 1,369
- - Empaques Ponderosa SA
Series B 621,000 320
Empresas ICA Sociedad
Controladora SA de CV 665,600 499
- - Empresas la Moderna SA de
CV Series A 471,100 2,782
Fomento Economico
Mexica UBD 1,123,900 3,029
Groupo Elektra, SA de CV 1,247,000 629
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
Grupo Carso SA de CV
Series A1 908,000 $ 3,091
Grupo Continental SA 392,000 951
Grupo Financiero Banamex
Accival SA de CV Series B 813,400 1,070
Grupo Financiero Banamex
Accival SA de CV Series L 260,010 300
Grupo Financiero Bancomer
SA de CV Series B 4,142,450 890
- - Grupo Financiero Banorte
SA de CV 331,000 285
- - Grupo Financiero Probursa
SA de CV Series B 4,243,946 482
Grupo Herdez SA Series B 424,000 116
Grupo Industrial Herdez Bimbo
SA de CV Series A 1,417,528 2,585
Grupo Industrial Maseca SA de
CV Series B 999,000 810
Grupo Mexico SA Series B 717,513 1,817
Grupo Modelo SA de CV
Series C 3,361,000 7,082
- - Grupo Televisa SA (CPO) 299,800 3,748
Industrias Penoles SA
Series CP 334,599 1,003
Kimberly Clark de Mexico SA
de CV Series A 1,429,045 4,546
Telefonos de Mexico SA
Series A 1,908,100 4,707
Telefonos de Mexico SA
Series L 6,460,450 15,708
Tubos de Acero de
Mexico SA 70,400 456
Vitro SA 348,440 512
--------
71,914
--------
PHILIPPINES (2.5%)
Alsons Cement Corp. 532,000 40
Ayala Land, Inc. 2,914,639 824
Bacnotan Consolidated
Industries 69,000 71
- - C&P Homes, Inc. 144,078 2
- - DMCI Holdings, Inc. 3,118,800 131
- - EEI Corp. 5,388,400 169
- - Filinvest Land, Inc. 4,005,000 227
- - Guoco Holdings
Philippines, Inc. 3,781,800 89
International Container
Terminal Services, Inc. 3,186,532 266
Ionics Circuit, Inc. 630,150 154
Keppel Philippines
Marine Inc. 4,127,371 85
Manila Electric Co. 372,208 1,196
- - Manila Mining Corp.
Class B 883,936,629 136
- - Metro Pacific Corp. 4,445,126 162
Metropolitan Bank &
Trust Co. 264,638 1,905
- - Mondragon International
Philippines, Inc. 3,683,680 30
- - Petron Corp. 12,853,654 1,404
- - Philex Mining Corp. Class B 5,930,750 47
Philippine Long Distance
Telephone Co. 126,519 3,253
- - Philippine National Bank Corp. 152,784 236
RFM CORP. 1,145,400 177
- - Republic Glass Holdings Corp. 770,000 18
- - Robinson's Land Co. Class B 410,200 22
SM Prime Holdings, Inc. 9,774,480 1,859
San Miguel Corp. Class B 530,287 1,022
Security Bank Corp. 347,318 123
- - Southeast Asia Cement
Holdings Inc. 13,742,900 170
Union Bank of the
Philippines Corp. 681,200 247
Universal Robina Corp. 1,878,400 210
--------
14,275
--------
POLAND (1.1%)
- - Agros Holding SA 13,600 49
BIG Bank Gdanski SA 333,200 299
Bank Handlowy W Warszawie 61,000 753
Bank Rozwoju Eksportu SA 24,000 554
Bank Slaski SA w Katowicach 10,300 534
- - Budimex SA 25,600 113
Elektrim Spolka Akcyjna SA 93,700 1,014
- - Exbud SA 31,400 271
- - Fabryka Kotlow Rafako SA 135,439 266
Gorazdze SA 9,600 161
KGHM Polska Miedz SA 226,400 806
Mostostal Zabrze-Holding SA 22,454 83
Mostostal-Export SA 136,318 144
- - Okocimskie Zaklady
Piwowarskie SA 24,600 144
- - Optimus SA 6,200 60
- - Orbis SA 6,500 51
Polifarb Cieszyn-Wroclaw SA 63,200 150
Prokom Software SA 5,400 208
Przedsiebiorstwo
Farmaceutyczne JELFA SA 8,600 71
- - Stalexport SA 15,800 87
Stomil Olsztyn SA 26,000 133
Swieciu SA 46,562 114
Wielkopolski Bank Kredytowy SA 72,800 458
--------
6,523
--------
SINGAPORE (6.1%)
City Developments Ltd. 660,000 2,860
Comfort Group Ltd. 700,000 252
- - Creative Technology Ltd. 54,300 767
Cycle & Carriage Ltd. 149,000 510
Development Bank of
Singapore Ltd. (Foreign) 408,100 3,685
Fraser & Neave Ltd. 248,600 726
Haw Par Brothers
International Ltd. 106,000 119
Inchcape Bhd. 106,000 123
Keppel Corp., Ltd. 629,000 1,685
Natsteel Ltd. 304,000 333
Oversea-Chinese Banking
Corp., Ltd. (Foreign) 745,342 5,059
Overseas Union Enterprise Ltd. 98,000 195
Parkway Holdings Ltd. 358,000 638
Robinson & Co., Ltd. 81,600 183
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
EMERGING MARKETS VALUE*
STOCK INDEX FUND SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- - Sembcorp Industries Ltd. 859,006 $ 979
Shangri-La Hotel Ltd. 173,300 281
Singapore Airlines Ltd.
(Foreign) 581,000 4,261
Singapore Press Holdings Ltd. 269,451 2,940
Singapore
Telecommunications Ltd. 3,466,000 5,294
United Industrial Corp., Ltd. 1,492,000 597
United Overseas Bank Ltd.
(Foreign) 592,600 3,807
--------
35,294
--------
SOUTH AFRICA (12.2%)
African Oxygen Ltd. 281,083 334
Amalgamated Banks of
South Africa Group Ltd. 646,896 3,068
Anglo American Corp. of
South Africa Ltd. 50,703 1,429
Anglo American Industrial
Corp., Ltd. 84,700 1,289
Anglo American Platinum Corp. 237,135 3,253
Anglogold Ltd. 111,115 4,329
Anglovaal Industries Ltd. 529,000 670
- - Avgold Ltd. 1,100,675 601
Barlow Ltd. 227,925 876
De Beers Centenary AG 393,100 5,012
- - Del Monte Royal Foods Ltd. 526,600 145
Dimension Data Holdings Ltd. 591,093 2,512
Driefontein Consolidated Ltd. 277,500 1,109
Firstrand Ltd. 5,677,125 6,196
Foschini Ltd. 236,072 303
- - Gold Fields Ltd. 311,741 1,722
Impala Platinum Holdings Ltd. 81,401 1,107
Imperial Holdings Ltd. 178,061 1,090
Investec Bank Ltd. 70,100 2,383
JD Group Ltd. 162,693 719
Liberty Life Assn. of Africa Ltd. 274,513 3,780
M-Cell Ltd. 688,469 907
- - M-Web Holdings Ltd. 260,500 459
Metro Cash & Carry Ltd. 952,807 632
Metropolitan Life Ltd. 707,100 896
Murray & Roberts Holdings Ltd. 611,800 322
Nampak Ltd. 499,200 760
Naspers Ltd. 114,600 448
Nedcor Ltd. 238,629 4,065
Palabora Mining Co., Ltd. 35,682 197
Pepkor Ltd. 221,100 921
Pick'n Pay Stores Ltd. 186,400 181
Pick'n Pay Stores Ltd.
N Shares 335,000 302
- - Randfontein Estates Ltd. 128,600 284
Rembrandt Group Ltd. 540,900 3,310
Reunert Ltd. 220,600 308
Safmarine & Rennies
Holdings Ltd. 538,000 466
Sappi Ltd. 219,347 848
Sasol Ltd. 626,760 2,371
South African Breweries Ltd. 360,813 6,078
South African Iron & Steel
Industrial Corp., Ltd. 2,690,031 485
Sun International
South Africa Ltd. 1,646,101 271
Tiger Oats Ltd. 157,400 1,552
Tongaat-Hulett Group Ltd. 107,637 704
Trencor Ltd. 211,705 389
Western Areas Ltd. 165,200 538
Wooltru Ltd. 215,719 273
Wooltru Ltd. N Shares 253,633 310
--------
70,204
--------
THAILAND (3.1%)
- - ABN AMRO Asia Securities
Co. Ltd. (Foreign) 269,320 430
- - Advance Agro PLC (Foreign) 463,540 255
Ayudhya Insurance PLC
(Foreign) 59,200 212
- - Bangkok Bank PLC (Foreign) 839,600 1,733
- - Bangkok Bank PLC (Local) 96,400 138
- - Bangkok Expressway PLC
(Foreign) 883,200 875
- - Bangkok Land PLC (Foreign) 253,100 37
Bank of Ayudhya PLC (Foreign) 1,252,500 371
- - Banpu PLC (Foreign) 187,200 381
Berli Jucker PLC (Foreign) 31,000 55
- - Big C Supercenter PLC
(Foreign) 551,100 112
- - CMIC Finance & Securities
PLC (Foreign) 366,000 0
- - Charoen Pokphand Feedmill
PLC (Foreign) 18,000 22
- - Electricity Generating PLC
(Foreign) 527,300 1,429
- - Hana Microelectronics Co.
(Foreign) 119,800 290
ICC International PLC (Foreign) 39,200 78
- - Italian-Thai Development PLC
(Foreign) 347,000 697
- - K.R. Precision PLC (Foreign) 90,800 44
- - Land & House PLC (Foreign) 178,602 120
- - Loxley PLC (Foreign) 263,400 100
- - Nation Multimedia Group PLC
(Foreign) 172,700 69
- - National Finance & Securities
PLC (Foreign) 942,400 298
- - National Petrochemical PLC
(Foreign) 349,700 161
- - PTT Exploration & Production
PLC (Foreign) 276,400 1,947
- - Padaeng Industry PLC
(Foreign) 467,950 103
Pizza PLC (Foreign) 97,100 326
Regional Container Lines PLC
(Foreign) 146,400 73
Saha-Union PLC (Foreign) 186,200 78
Saha-Union PLC (Local) 75,000 30
- - Sahaviriya Steel Industries
(Foreign) 742,800 53
- - Sermsuk PLC (Foreign) 13,800 77
- - Shinawatra Computer &
Communications PLC (Foreign) 139,500 480
- - Siam Cement PLC (Foreign) 66,481 1,508
- - Siam Cement PLC (Local) 32,819 506
- - Siam City Cement PLC (Foreign) 213,094 462
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
- - Siam Commercial Bank PLC
(Foreign) 150,533 $ 90
- - Tanayong PLC (Foreign) 674,845 113
- - TelecomAsia PLC (Foreign) 2,496,500 1,082
- - Thai Engine Manufacturing
PLC (Foreign) 768,000 192
- - Thai Farmers Bank PLC
(Foreign) 797,800 1,405
- - Thai Petrochemical Industry
PLC (Foreign) 2,338,800 386
Thairung Union Car PLC
(Foreign) 140,300 113
- - Tipco Asphalt PLC (Foreign) 184,200 286
- - Tuntex (Thailand) PLC (Foreign) 277,700 101
- - United Broadcasting Corp. PLC
(Foreign) 464,476 221
- - United Communication Industry
PLC (Foreign) 540,500 290
- - Univest Land PLC (Foreign) 2,264,200 0
- - Wattachak PLC (Foreign) 1,339,600 0
--------
17,829
--------
TURKEY (2.3%)
Adana Cimento Sanayii AS
C Shares 15,779,614 53
Adana Cimento Sanayii Turk
Anonim Sirketi 7,929,783 146
Akal Tekstil Sanayii AS 2,989,312 22
Akcansa Cimento AS 22,437,960 377
Aksa Akrilik Kimya Sanayii
AS 10,841,083 131
Alarko Holdings 1,272,079 171
Altinyildiz Mensucat ve
Konfeksiyon Fabrikalari AS 5,888,000 74
Arcelik AS 19,647,948 567
Aygaz AS 8,399,438 559
Bagfas Bandirma Gubre
Fabrikalari AS 2,709,000 107
Brisa Bridgestone Sabanci
Lastik San. ve Tic AS 8,215,000 185
- - Cimentas Izmir Cimento
Fabrikasi T.A.S. 872,500 33
Cisma Cemento 4,343,748 103
Cukurova Elektrik AS 576,100 621
Doktas Dokumculuk Ticaret ve
Sanayi AS 519,000 9
EGE Seramik Sanayi ve
Ticaret AS 4,721,880 13
- - Eczacibasi Ilac Sanayi ve
Ticaret AS 3,826,600 167
Ege Biracilik ve Malt
Sanayii AS 4,686,314 364
- - Eregli Demir ve Celik
Fabrikalari AS 7,192,250 296
Ford Otomotiv Sanayi AS 1,332,500 266
Goodyear Lastikleri TAS 5,074,500 111
- - Ihlas Holding AS 3,198,115 162
Kartonsan Karton Sanayi ve
Ticaret AS 2,579,650 90
Kav Orman Sanayii AS 9,776,250 37
Konya Cimento Sanayii AS 2,160,000 33
Kordsa Kord Bezi Sanayi ve
Ticaret AS 5,604,604 158
Migros Turk AS 895,825 895
- - Netas-Northern Elektrik
Telekomunikasyon AS 1,360,000 25
- - Raks Elektronik Sanayi ve
Ticaret AS 429,267 54
- - Sabah Yayincilik AS 8,956,000 52
Sarkuysan Elektrolitik Bakir
Sanayi ve Ticaret AS 1,494,000 60
Sifas Sentetik Iplik
Fabrikalari AS 2,534,898 7
Tat Konserve 4,926,900 176
- - Tofas Turk Otomobil
Fabrikasi AS 17,003,105 154
Trakya Cam Sanayii AS 10,817,280 134
Turcas Petroculuk AS 3,205,774 49
Turk Demir Dokum
Fabrikalari SA 2,449,628 27
Turk Siemens Kablo Ve Elektrik
Sanayii AS 617,367 23
- - Turk Tuborg Bira ve Malt
Sanayii AS 4,736,250 34
- - Turkiye Garanti Bankasi AS 48,735,081 1,205
Turkiye Is Bankasi AS
C Shares 135,121,260 3,513
Turkiye Is Bankasi AS 59,900 76
Usas Ucak Servisi AS 51,500 73
- - Vestel Elektronik Sanayi ve
Ticaret AS 4,210,281 347
Yapi Kredi Receipt Shares 22,710,755 263
Yapi ve Kredi Bankasi AS 107,266,544 1,241
--------
13,263
--------
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $745,225) 539,516
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (16.1%)
- ----------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.76%, 1/4/1999 $31,642 31,642
4.77%, 1/4/1999--Note G 61,354 61,354
- ----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $92,996) 92,996
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (109.6%)
(COST $838,221) 632,512
- ----------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARKET
EMERGING MARKETS VALUE*
STOCK INDEX FUND (000)
<S> <C>
- ----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-9.6%)
- ----------------------------------------------------------------------
Other Assets--Note B $ 11,747
Security Lending Collateral Payable
to Brokers--Note G (61,354)
Other Liabilities (5,917)
--------
(55,524)
- ----------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------
Applicable to 72,934,609 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $576,988
======================================================================
NET ASSET VALUE PER SHARE $7.91
======================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
**See Note A.2 in Notes to Financial Statements.
-Non-Income-Producing Security.
ILS--Israeli Shekel.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------
AT DECEMBER 31, 1998, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $878,553 $12.05
Overdistributed Net
Investment Income--Note F (504) (.01)
Accumulated Net
Realized Losses--Note F (95,283) (1.31)
Unrealized Depreciation--Note E
Investment Securities (205,709) (2.82)
Foreign Currencies (69) --
- --------------------------------------------------------------------------
NET ASSETS $576,988 $ 7.91
==========================================================================
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
MARKET
VALUE*
TOTAL INTERNATIONAL STOCK INDEX FUND SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES (99.9%)
Vanguard European Stock Index Fund 36,626,630 $ 925,921
Vanguard Pacific Stock Index Fund 43,887,507 344,078
Vanguard Emerging Markets Stock Index Fund 13,215,622 104,536
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $1,281,724) 1,374,535
- ---------------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.3%)
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a Pooled Cash Account
4.76%, 1/4/1999
(COST $3,602) $3,602 3,602
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(Cost $1,285,326) 1,378,137
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- ---------------------------------------------------------------------------------------------------
Other Assets 4,471
Liabilities (7,126)
-----------
(2,655)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------
Applicable to 122,949,751 outstanding $.001 par value shares of
beneficial interest (unlimited authorization) $ 1,375,482
===================================================================================================
NET ASSET VALUE PER SHARE $11.19
===================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1998, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,282,238 $10.43
Overdistributed Net Investment Income (440) --
Accumulated Net Realized Gains 873 .01
Unrealized Appreciation--Note E 92,811 .75
- ------------------------------------------------------------------------------------------------
NET ASSETS $1,375,482 $11.19
================================================================================================
</TABLE>
37
<PAGE> 40
STATEMENT OF OPERATIONS
This Statement shows dividend and interest income earned by each fund during
the reporting period, and details the operating expenses charged to the fund.
These expenses directly reduce the amount of investment income available to pay
to shareholders as dividends. The Total International Stock Index Fund's Income
Distributions Received from the other funds' net income have been reduced by
its share of the other funds' 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 fund'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 fund invested in futures
contracts during the period, the results of these investments are also shown
separately. The Total International Stock Index Fund's Capital Gain
Distributions Received from the other funds' realized net gains are shown
separately from the Net Gain (Loss) realized on the sale of investments in the
other funds.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
EMERGING
EUROPEAN PACIFIC MARKETS
STOCK INDEX STOCK INDEX STOCK INDEX
FUND FUND FUND
---------------------------------------
YEAR ENDED DECEMBER 31, 1998
---------------------------------------
(000) (000) (000)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends* $ 76,798 $12,145 $ 19,206
Interest 1,808 625 1,716
Security Lending 2,129 1,340 1,303
---------------------------------------
Total Income 80,735 14,110 22,225
---------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 47 47 47
Management and Administrative 7,089 2,639 1,822
Marketing and Distribution 817 293 214
Taxes (other than income taxes) 149 39 105
Custodian Fees 2,248 505 1,517
Auditing Fees 9 8 8
Shareholders' Reports 53 31 34
Annual Meeting and Proxy Costs 9 4 4
Trustees' Fees and Expenses 6 2 1
---------------------------------------
Total Expenses 10,427 3,568 3,752
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 70,308 10,542 18,473
- -----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 6,908 (82,110) (69,609)
Futures Contracts 7,792 856 --
Foreign Currencies and Forward Currency Contracts (1,254) (565) (195)
- -----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 13,446 (81,819) (69,804)
- -----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 668,097 96,325 (79,554)
Futures Contracts 1,158 (1,342) --
Foreign Currencies and Forward Currency Contracts 968 1,093 (56)
- -----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 670,223 96,076 (79,610)
- -----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 753,977 $24,799 $ (130,941)
===========================================================================================================
</TABLE>
*Dividends are net of foreign withholding taxes of $14,135,000, $1,440,000, and
$1,357,000, respectively.
38
<PAGE> 41
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
TOTAL INTERNATIONAL STOCK INDEX FUND
YEAR ENDED DECEMBER 31, 1998
(000)
- -------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Income Distributions Received $ 24,758
Interest 184
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME--Note C 24,942
- -------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Capital Gain Distributions Received 4,560
Investment Securities Sold (2,525)
- -------------------------------------------------------------------------------------
REALIZED NET GAIN 2,035
- -------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 134,333
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $161,310
=====================================================================================
</TABLE>
39
<PAGE> 42
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund'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 fund'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 fund, 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 STOCK PACIFIC STOCK
INDEX FUND INDEX FUND
------------------------ --------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1998 1997
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 70,308 $ 44,466 $ 10,542 $ 9,980
Realized Net Gain (Loss) 13,446 11,489 (81,819) (34,571)
Change in Unrealized Appreciation (Depreciation) 670,223 374,695 96,076 (264,966)
----------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 753,977 430,650 24,799 (289,557)
----------------------------------------------------
DISTRIBUTIONS
Net Investment Income (88,786) (43,908) (8,350) (9,619)
Realized Capital Gain (21,542) (9,048) -- --
----------------------------------------------------
Total Distributions (110,328) (52,956) (8,350) (9,619)
----------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 1,842,080 798,288 355,601 469,885
Issued in Lieu of Cash Distributions 101,520 48,239 7,588 8,612
Redeemed (540,369) (386,529) (174,046) (329,587)
----------------------------------------------------
Net Increase from Capital Share Transactions 1,403,231 459,998 189,143 148,910
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 2,046,880 837,692 205,592 (150,266)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 2,432,426 1,594,734 827,240 977,506
----------------------------------------------------
End of Year $4,479,306 $2,432,426 $1,032,832 $ 827,240
======================================================================================================================
(1)Shares Issued (Redeemed)
Issued 75,396 43,854 47,512 48,273
Issued in Lieu of Cash Distributions 4,001 2,420 982 1,142
Redeemed (23,075) (21,660) (23,899) (35,246)
----------------------------------------------------
Net Increase in Shares Outstanding 56,322 24,614 24,595 14,169
======================================================================================================================
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS TOTAL INTERNATIONAL
STOCK INDEX FUND STOCK INDEX FUND
-------------------- ---------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1998 1997
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 18,473 $ 15,391 $ 24,942 $ 15,276
Realized Net Gain (Loss) (69,804) (24,456) 2,035 1,845
Change in Unrealized Appreciation (Depreciation) (79,610) (152,608) 134,333 (40,129)
---------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (130,941) (161,673) 161,310 (23,008)
---------------------------------------------------
DISTRIBUTIONS
Net Investment Income (18,432) (15,042) (25,233) (15,269)
Realized Capital Gain -- -- (1,202) (1,796)
---------------------------------------------------
Total Distributions (18,432) (15,042) (26,435) (17,065)
---------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 210,263 432,607 478,309 746,141
Issued in Lieu of Cash Distributions 17,230 13,894 24,857 16,068
Redeemed* (161,424) (246,615) (165,541) (99,512)
---------------------------------------------------
Net Increase from Capital Share Transactions 66,069 199,886 337,625 662,697
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (83,304) 23,171 472,500 622,624
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 660,292 637,121 902,982 280,358
---------------------------------------------------
End of Year $ 576,988 $ 660,292 $1,375,482 $902,982
======================================================================================================================
(1)Shares Issued (Redeemed)
Issued 24,196 33,794 44,998 71,840
Issued in Lieu of Cash Distributions 2,190 1,416 2,221 1,641
Redeemed (19,600) (20,944) (15,789) (9,615)
---------------------------------------------------
Net Increase in Shares Outstanding 6,786 14,266 31,430 63,866
======================================================================================================================
</TABLE>
*Emerging Markets Stock Index Fund amounts are net of redemption fees of
$1,517,000 and $1,809,000, respectively.
41
<PAGE> 44
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis; investment results for the Total
International Stock Index Fund include both income and capital gain
distributions received from the other funds. The table also presents the
fund'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
fund's net income and total returns from year to year; the relative
contributions of net income and capital gains to the fund's total return; how
much it costs to operate the fund; and the extent to which the fund 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 fund for one year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EUROPEAN STOCK INDEX FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $20.13 $16.57 $14.02 $11.76 $11.88
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .41 .38 .34 .32 .28
Net Realized and Unrealized Gain (Loss) on Investments 5.40 3.63 2.63 2.30 (.06)
-----------------------------------------------------------
Total from Investment Operations 5.81 4.01 2.97 2.62 .22
DISTRIBUTIONS -----------------------------------------------------------
Dividends from Net Investment Income (.52) (.37) (.36) (.32) (.28)
Distributions from Realized Capital Gains (.14) (.08) (.06) (.04) (.06)
Total Distributions (.66) (.45) (.42) (.36) (.34)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $25.28 $20.13 $16.57 $14.02 $11.76
==========================================================================================================================
TOTAL RETURN* 28.86% 24.23% 21.26% 22.28% 1.88%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $4,479 $2,432 $1,595 $1,017 $715
Ratio of Total Expenses to Average Net Assets 0.29% 0.31% 0.35% 0.35% 0.32%
Ratio of Net Investment Income to Average Net Assets 1.97% 2.19% 2.45% 2.66% 2.41%
Portfolio Turnover Rate 7% 3% 4% 2% 6%
==========================================================================================================================
</TABLE>
*Total return figures do not reflect the transaction fee on purchases (0.5%
beginning 11/3/1997, 1% from 1994 through 11/2/1997) or the annual account
maintenance fee of $10.
42
<PAGE> 45
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PACIFIC STOCK INDEX FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $7.72 $10.51 $11.50 $11.31 $10.13
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .085 .09 .10 .10 .08
Net Realized and Unrealized Gain (Loss) on Investments .100 (2.79) (1.00) .21 1.24
----------------------------------------------------------
Total from Investment Operations .185 (2.70) (.90) .31 1.32
DISTRIBUTIONS ----------------------------------------------------------
Dividends from Net Investment Income (.065) (.09) (.09) (.12) (.08)
Distributions from Realized Capital Gains -- -- -- -- (.06)
----------------------------------------------------------
Total Distributions (.065) (.09) (.09) (.12) (.14)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $7.84 $ 7.72 $10.51 $11.50 $11.31
==========================================================================================================================
TOTAL RETURN* 2.41% -25.67% -7.82% 2.75% 13.04%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,033 $827 $978 $831 $697
Ratio of Total Expenses to Average Net Assets 0.40% 0.35% 0.35% 0.35% 0.32%
Ratio of Net Investment Income to Average Net Assets 1.17% 1.03% 0.89% 0.97% 0.71%
Portfolio Turnover Rate 4% 8% 9% 1% 4%
==========================================================================================================================
</TABLE>
*Total return figures do not reflect the transaction fee on purchases (0.5%
beginning 1/1/1997, 1.0% in 1994 through 1996) or the annual account
maintenance fee of $10.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS STOCK INDEX FUND
YEAR ENDED DECEMBER 31,
-------------------------------- MAY 4* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 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 .27 .24 .18 .15 .06
Net Realized and Unrealized Gain (Loss) on Investments (2.08) (2.31) 1.52 (.09) .92
----------------------------------------------------------
Total from Investment Operations (1.81) (2.07) 1.70 .06 .98
DISTRIBUTIONS ----------------------------------------------------------
Dividends from Net Investment Income (.26) (.23) (.17) (.18) (.07)
Distributions from Realized Capital Gains -- -- -- -- (.04)
----------------------------------------------------------
Total Distributions (.26) (.23) (.17) (.18) (.11)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $7.91 $ 9.98 $12.28 $10.75 $10.87
==========================================================================================================================
TOTAL RETURN** -18.12% -16.82% 15.83% 0.56% 9.81%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $577 $660 $637 $234 $83
Ratio of Total Expenses to Average Net Assets 0.61% 0.57% 0.60% 0.60% 0.60%+
Ratio of Net Investment Income to Average Net Assets 2.99% 1.96% 1.69% 2.00% 1.32%+
Portfolio Turnover Rate 22% 19% 1% 3% 6%
==========================================================================================================================
</TABLE>
*Inception.
**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
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL STOCK INDEX FUND
YEAR ENDED DECEMBER 31,
----------------------------- APR. 29* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1998 1997 DEC. 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 10.14 $ 10.26
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .21 .18 .150
Capital Gain Distributions Received .02 .02 .015
Net Realized and Unrealized Gain (Loss) on Investments 1.31 (.28) (.110)
-----------------------------------------------
Total from Investment Operations 1.54 (.08) .055
DISTRIBUTIONS -----------------------------------------------
Dividends from Net Investment Income (.21) (.17) (.160)
Distributions from Realized Capital Gains (.01) (.02) (.015)
-----------------------------------------------
Total Distributions (.22) (.19) (.175)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.19 $ 9.87 $ 10.14
============================================================================================================================
TOTAL RETURN** 15.60% -0.77% 0.55%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,375 $ 903 $ 280
Ratio of Expenses to Average Net Assets--Note C 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets 2.18% 2.19% 1.51%+
Portfolio Turnover Rate 2% 0% 0%
============================================================================================================================
</TABLE>
*Inception.
**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 Stock Index Funds comprise the European, Pacific,
Emerging Markets, and Total International Stock Index Funds, each of which is
registered under the Investment Company Act of 1940 as an open-end investment
company, or mutual fund. The European, Pacific, and Emerging Markets Stock
Index Funds each seek to match the performance of a distinct international
market index by investing in common stocks. The Total International Stock Index
Fund seeks to match the performance of its target index by investing in the
European, Pacific, and Emerging Markets Stock Index Funds. The funds' 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 funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: European, Pacific, and Emerging Markets Stock Index
Funds: 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 Trustees to represent fair value. Total
International Stock Index Fund: Investments are valued at the net asset value
of each Vanguard fund 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, except as follows for the
Malaysian ringgit. Effective September 1998, the Malaysian government fixed the
ringgit exchange rate at 3.8 per U.S. dollar and suspended investors' ability
to convert proceeds from the sale of Malaysian securities from ringgits into
other currencies until the later of September 1, 1999, or one year from initial
purchase. Accordingly, the fund considered its Malaysian security holdings
illiquid and established a fair value of 4.75 ringgits per U.S. dollar for the
translation of its Malaysian holdings as of December 31, 1998.
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 Stock Index Fund
uses FTSE 100 and Eurotop index futures contracts, and the Pacific Stock Index
Fund uses Nikkei 300 Index futures contracts, to a limited extent, with the
objectives of maintaining full exposure to the stock market, enhancing returns,
maintaining liquidity, and minimizing transaction costs. The funds 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 funds 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 funds and the prices of futures contracts,
and the possibility of an illiquid market.
45
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS (continued)
The European and Pacific Stock Index Funds enter into forward currency
contracts to maintain the same currency exposure as their respective indexes.
The funds' risks in using these contracts include movement in the values of the
foreign currencies relative to the U.S. dollar and the ability of the
counterparties to fulfill their obligations under the contracts.
Futures and forward currency contracts are valued at their quoted daily
settlement prices. The aggregate principal amounts of the contracts are not
recorded in the financial statements. Fluctuations in the value of the
contracts are recorded in the Statement of Net Assets as an asset (liability)
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 fund 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 fund, 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
Stock Index Funds at cost investment advisory, corporate management,
administrative, marketing, and distribution services. The costs of such
services are allocated to the funds under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At December 31, 1998, the funds had
contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
STOCK INDEX FUND (000) NET ASSETS CAPITALIZATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
European $749 0.02% 1.1%
Pacific 175 0.02 0.2
Emerging Markets 112 0.02 0.2
- -------------------------------------------------------------------------------
</TABLE>
The funds' Trustees 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 Stock Index Fund. The special service agreement provides that
Vanguard will reimburse the fund's expenses to the extent of savings in
administrative and marketing costs realized by Vanguard in the operation of the
fund. Accordingly, all expenses incurred by the fund during the year ended
December 31, 1998, were reimbursed by Vanguard.
46
<PAGE> 49
D. During the year ended December 31, 1998, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(000)
---------------------------
STOCK INDEX FUND PURCHASES SALES
- ---------------------------------------------------------------------------
<S> <C> <C>
European $1,583,879 $233,987
Pacific 199,873 36,749
Emerging Markets 187,160 126,513
Total International 363,358 24,488
- ---------------------------------------------------------------------------
</TABLE>
E. At December 31, 1998, net unrealized appreciation (depreciation) of
investment securities for federal income tax purposes was:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(000)
----------------------------------------------
NET UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION
STOCK INDEX FUND SECURITIES SECURITIES (DEPRECIATION)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
European* $1,521,170 $ (77,029) $1,444,141
Pacific 123,833 (276,933) (153,100)
Emerging Markets 56,924 (262,633) (205,709)
Total International 224,528 (131,717) 92,811
- ------------------------------------------------------------------------------
</TABLE>
*See Note F.
At December 31, 1998, the aggregate settlement value of open futures
contracts expiring in March 1999 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(000)
-------------------------------
AGGREGATE UNREALIZED
STOCK INDEX FUND/ NUMBER OF SETTLEMENT APPRECIATION
FUTURES CONTRACTS LONG CONTRACTS VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
European/
FTSE 100 447 $43,542 $ 1,498
Pacific/
Nikkei 300 1,278 24,185 (1,446)
- ------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 1998, the European and Pacific Stock Index Funds had open
forward currency contracts to receive foreign currency in exchange for U.S.
dollars as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(000)
------------------------------------------------------------
CONTRACT AMOUNT
---------------------
STOCK INDEX FUND/ FOREIGN U.S. MARKET VALUE IN UNREALIZED
CONTRACT SETTLEMENT DATE CURRENCY DOLLARS U.S. DOLLARS APPRECIATION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European/
Receive:
3/26/1999 GBP 25,330 $41,950 $42,046 $ 96
Pacific/
Receive:
3/17/1999 JPY 2,917,496 25,055 26,113 1,058
- ------------------------------------------------------------------------------------------------
</TABLE>
GBP--Great Britain Pound.
JPY--Japanese Yen.
Unrealized appreciation on open forward currency contracts is treated as
realized gain for tax purposes.
The European, Pacific, and Emerging Markets Stock Index Funds had net
unrealized foreign currency gains (losses) of $221,000, $2,000, and $(69,000),
respectively, resulting from the translation of other assets and liabilities at
December 31, 1998.
F. Distributions are determined on a tax basis and may differ from net
investment income and realized capital gains for financial reporting purposes.
During the year ended December 31, 1998, the European, Pacific, and
Emerging Markets Stock Index Funds realized net foreign currency losses of
$131,000, $1,315,000, and $195,000, respectively, which decreased distributable
net income for tax purposes; accordingly such losses have been reclassified
from accumulated net realized losses to overdistributed net investment income.
During the year ended December 31, 1998, the European Stock Index Fund
received securities with a value of $18,093,000 in a corporate spinoff that
increased taxable income and the tax basis cost of investments, but had no
effect on net investment income or the cost of investments for financial
statement purposes. The required distribution of this taxable income is
reflected in the balance of overdistributed net investment income, and the
difference between the securities' cost for financial statement and tax
purposes is reflected in unrealized appreciation, at December 31, 1998.
For federal tax purposes, capital gains required to be distributed in
December 1998 included net gains realized through October 31, 1998.
Subsequently, the European Stock Index Fund realized capital losses of
$2,283,000 which are available to offset future net capital gains.
For federal income tax purposes, at December 31, 1998, the Pacific and
Emerging Markets Stock Index Funds had the following capital losses available
to offset future capital gains:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
CAPITAL LOSS
----------------------------
EXPIRATION
FISCAL
YEAR(s)
AMOUNT ENDING
STOCK INDEX FUND (000) DECEMBER 31
- ----------------------------------------------------------------------------
<S> <C> <C>
Pacific $117,334 2003-2006
Emerging Markets 95,277 2003-2007
- ----------------------------------------------------------------------------
</TABLE>
48
<PAGE> 51
G. The market value of securities on loan to broker/dealers at December 31,
1998, and collateral received with respect to such loans were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(000)
-----------------------------
MARKET VALUE CASH
OF LOANED COLLATERAL
STOCK INDEX FUND SECURITIES RECEIVED
- ----------------------------------------------------------------------------
<S> <C> <C>
European $275,820 $289,105
Pacific 141,841 148,120
Emerging Markets 55,616 61,354
- ----------------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements.
49
<PAGE> 52
REPORT OF INDEPENDENT
ACCOUNTANTS
[PHOTO]
To the Shareholders and Trustees of
Vanguard European Stock Index Fund,
Vanguard Pacific Stock Index Fund,
Vanguard Emerging Markets Stock Index Fund and
Vanguard Total International Stock Index Funds
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard European Stock Index Fund, Vanguard Pacific Stock Index Fund, Vanguard
Emerging Markets Stock Index Fund, and Vanguard Total International Stock Index
Fund (hereafter referred to as the "Funds") at December 31, 1998, the results
of each of their operations for the year then ended, the changes in each of
their net assets for each of the two years in the period then ended and the
financial highlights for each of periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
February 2, 1999
50
<PAGE> 53
SPECIAL 1998 TAX INFORMATION (UNAUDITED) FOR THE VANGUARD INTERNATIONAL STOCK
INDEX FUNDS
This information for the fiscal year ended December 31, 1998, is included
pursuant to provisions of the Internal Revenue Code.
The European Stock Index Fund distributed $18,914,000 as capital gain
dividends (from net long-term capital gains) to shareholders during the
fiscal year ended December 31, 1998, all of which is designated as a 20% rate
gain distribution.
The Vanguard European Stock Index, Pacific Stock Index and Emerging
Markets Stock Index Funds have elected to pass through the credit for taxes
paid in foreign countries. Shareholders receive detailed information on
foreign income and foreign tax per share by country along with their 1998
Form 1099-DIV.
51
<PAGE> 54
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/ Trustee of The
Vanguard Group, Inc., and 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.
JOANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & JohnsonoMerck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
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, Banco Bilbao Gestinova, 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.,
NACCO Industries, and Newfield Exploration Co.
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.
THOMAS J. HIGGINS
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 the owner of trademarks and copyrights relating to the Russell Indexes.
"Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire Associates.
<PAGE> 55
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
www.vanguard.com
[email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
Q720-02/25/1999
(C) 1999 Vanguard Marketing
Corporation, Distributor.
All rights reserved.
