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Last year was not a good year for xenophobic investors. Ratings' list for the top stock funds in 2006 was dominated by international investments, particularly those in China.

The top five stock funds, as well as eight of the top 10, were invested in China, led by the

(DPCAX) Dreyfus Premier Greater China Fund

, which returned an impressive 85.6% for the year.

Despite the high returns from the top 20 funds, only one,

(ESMAX) AIM European Small Company A

, garnered a rating of A or higher. The low grades for the top earners can be attributed to the volatility of the stocks held in these funds.

Because the international funds on the leader list tend to be more volatile than most stock funds, seven funds on the leader board earned a rating in the "C" range, which is the equivalent of a "hold" recommendation.

Additionally, five of the top funds lacked sufficient history to even be rated.

While the Chinese market was red-hot, things couldn't have been more different for those investing just across the East China Sea.

Three of the bottom 20 performers turned out to be Japan-focused funds, including the


Fidelity Japan Smaller Companies fund, which was down more than 21.5% in 2006.

The list excludes leveraged funds as well as their "inverse" cousins that move in the opposite direction of stock prices, frequently at an accelerated pace.

Such funds are virtually sure things to dominate top and bottom performance rosters, frequently with a leveraged version of a given fund near one end and an inverse version of the same at the opposite end.

Overall, 2006 was generally kind to stock fund investors. Of nearly 14,000 open-end stock funds tracked by Ratings, only 2.7% failed to have positive returns for the year.

Nearly 70% of the funds recorded double-digit gains, with almost 2,700 funds rewarding investors with returns exceeding 20%.

Richard Widows is a financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.