<PAGE> 1
VANGUARD BOND FUNDS
VANGUARD SHORT-TERM TREASURY FUND
VANGUARD SHORT-TERM FEDERAL FUND
VANGUARD SHORT-TERM CORPORATE FUND
VANGUARD INTERMEDIATE-TERM TREASURY FUND
VANGUARD INTERMEDIATE-TERM CORPORATE FUND
VANGUARD GNMA FUND
VANGUARD LONG-TERM TREASURY FUND
VANGUARD LONG-TERM CORPORATE FUND
VANGUARD HIGH-YIELD CORPORATE FUND
[PHOTO]
SEMIANNUAL REPORT
JULY 31, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 9,000 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.
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, 1998, 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, 1998.
- - The 70th anniversary, on December 28, 1998, 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.
[GRAPHIC]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
5
REPORTS FROM
THE ADVISERS
7
PERFORMANCE SUMMARIES
11
FUND PROFILES
16
FINANCIAL STATEMENTS
26
FOR AN UPDATE ON OUR YEAR 2000
PREPAREDNESS, SEE PAGE 47.
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & Ceo Senior Chairman
Bond prices slid during the first half of Vanguard Bond Funds' fiscal year amid
growing concerns that strong economic growth would touch off higher inflation.
In this difficult environment for fixed-income investments, seven of our nine
funds registered negative returns for the six months ended July 31, 1999. Our
returns ranged from +0.6% for our Short-Term Corporate Fund to -8.0% for our
Long-Term Treasury Fund.
The table below presents the six-month total return (capital change plus
reinvested dividends) for each fund compared with those of its average mutual
fund competitor. Details on each fund, including per-share net asset values,
income dividends, and any capital gains distributions, are presented in the
table that follows this letter. The table also lists the annualized yields of
each fund, which on July 31 ranged from 5.49% for our Short-Term Treasury Fund
to 8.93% for our High-Yield Corporate Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED JULY 31, 1999
------------------------------
VANGUARD PEER GROUP
FUND FUND AVERAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Treasury +0.1% +0.2%
Short-Term Federal -0.1 -0.2
Short-Term Corporate +0.6 +0.1
- --------------------------------------------------------------------------------
Intermediate-Term Treasury -4.3% -2.8%
Intermediate-Term Corporate -3.5 -2.5
GNMA -1.8 -1.7
- --------------------------------------------------------------------------------
Long-Term Treasury -8.0% -5.4%
Long-Term Corporate -7.3 -3.5
- --------------------------------------------------------------------------------
High-Yield Corporate -0.6% +2.0%
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Short-Term Corporate +0.6% +0.1%
- --------------------------------------------------------------------------------
</TABLE>
We believe that any semiannual review of bond fund returns should also
include a look at a full year's interest income. That's because semiannual
returns for bond funds account for only half of the year's interest income,
whereas price changes occur immediately in response to changes in interest
rates. Over the long run, however, the price effects of fluctuating interest
rates tend to be offsetting, so interest income accounts for virtually all of
the total return on a bond fund. The table on page 2 presents each fund's
return for the past twelve months, divided into its income and capital
components. The impact of the rise in interest rates over the past twelve
months--particularly on the Long-Term Corporate Fund and the Long-Term Treasury
Fund--is clearly illustrated. As you know, bond prices and bond yields move in
opposite directions. And prices of long-term bonds suffer most when interest
rates rise, just as they benefit most from a decline in rates. For further
information on capital and income returns for each fund, see the Performance
Summaries beginning on page 11.
1
<PAGE> 4
THE PERIOD IN REVIEW
The U.S. economy's impressive expansion, a strong showing in corporate profits,
and a general improvement in business conditions around the world pushed stock
prices higher during the six months ended July 31.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
COMPONENTS OF TOTAL RETURN
TWELVE MONTHS ENDED JULY 31, 1999
------------------------------------
INCOME CAPITAL TOTAL
RETURN RETURN RETURN
- ------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM FUNDS
Treasury +5.2% -0.9% +4.3%
Federal +5.6 -1.7 +3.9
Corporate +6.1 -2.0 +4.1
- ------------------------------------------------------------------------
INTERMEDIATE-TERM FUNDS
Treasury +5.7% -3.4% +2.3%
Corporate +6.1 -4.8 +1.3
GNMA +6.4 -4.4 +2.0
- ------------------------------------------------------------------------
LONG-TERM FUNDS
Treasury +5.5% -5.9% -0.4%
Corporate +5.9 -7.6 -1.7
- ------------------------------------------------------------------------
High-Yield Corporate Fund +8.0% -6.8% +1.2%
- ------------------------------------------------------------------------
Short-Term Corporate-
Institutional Shares +6.2% -2.0% +4.2%
- ------------------------------------------------------------------------
</TABLE>
But as is often the case, good news about economic growth was bad news
for the bond market. Throughout the period, bond investors grew increasingly
concerned that factors such as low unemployment (which puts pressure on
employers to raise wages) and a rebound in commodity prices (which can increase
the prices of finished goods) would push up overall inflation. Bond investors
are particularly attuned to hints of higher prices because inflation erodes the
purchasing power of future interest and principal payments.
Yields of fixed-income securities moved higher across the board during
the half-year. Early in the period, the Federal Reserve Board sent several
signals that it was prepared to act swiftly to head off higher inflation. Then
on June 30, it hiked its target for short-term interest rates by 25 basis
points (0.25 percentage point), an action that typically provokes rate
increases for other maturities as well. The yield of the benchmark 30-year U.S.
Treasury bond increased more than a full percentage point on balance during the
half-year, beginning the period at 5.09% and ending it at 6.10%. The rise in
the yield of the 10-year Treasury bond was even more significant. The 10-year
bond ended the period at 5.90%--fully 125 basis points higher than its starting
point. At the short end of the spectrum, the yield of the 3-month T-bill rose
on balance from 4.45% to 4.75%. Late in the period, the spread between yields
of higher-quality and lower-quality bonds widened considerably as investors
demanded additional compensation for the higher risk of more speculative debt.
The Lehman Aggregate Bond Index, an unmanaged measure of the entire U.S.
bond market, provided a return of -2.5% for the six months.
The U.S. stock market, meanwhile, advanced broadly. The Wilshire 5000
Total Market Index, which tracks the entire U.S. stock market, was up +4.4%
during the half-year. Small-capitalization stocks, which returned +4.9% (as
measured by the Russell 2000 Index), slightly outperformed large-caps, which
gained +4.5% (as measured by the S&P 500 Index). The market's gain was not
straight up, however. The Wilshire 5000 Index declined in three of the six
months, including a -3.1% slide in July.
2
<PAGE> 5
PERFORMANCE OVERVIEW
During the half-year ended July 31, not only were bond returns disappointing,
but the returns of most of the Vanguard Bond Funds fell short of the returns of
similar mutual funds. The highest return of our nine funds was recorded by the
SHORT-TERM CORPORATE FUND, which returned +0.6%. And of our nine funds, only
two--SHORT-TERM FEDERAL and SHORT-TERM CORPORATE--outpaced their average peers.
The negative returns posted by each of our intermediate-term and
long-term funds were deeper than the declines registered by their average peers.
The -8.0% return of the LONG-TERM TREASURY FUND trailed by 2.6 percentage points
the -5.4% return of the average long-term Treasury bond fund, and the -3.5%
return of the INTERMEDIATE-TERM CORPORATE FUND was a full percentage point lower
than that of its average competitor. The explanation for the shortfall is
straightforward: The average maturities of our funds are generally longer than
those of their average peers. For example, the average weighted maturity of our
Long-Term Treasury Fund is 20.1 years, while the average maturity of its
comparative group is just over 15 years. In addition, the 18.2-year maturity of
our Long-Term Corporate Fund is more than 8 years longer than the average
maturity of its comparative group. As noted earlier, longer maturities mean
higher yields and a more durable income stream, but also an increased
sensitivity to changes in interest rates.
It's important to understand that this significant difference between our
funds and their peers works both ways. When interest rates are declining--as
they have been for the better part of the past decade--our funds have an
advantage over their average peers. And for long-term investors who are not
concerned with interim price fluctuations, a rise in rates can be good news.
Overall, the yields of our funds as of July 31 were about a full percentage
point higher than six months ago.
Our GNMA FUND, which has an intermediate-term average maturity and
invests in mortgage-backed securities, provided a return of -1.8%, just a hair
off the -1.7% return of the average GNMA mutual fund. Mortgages fared better
than bonds with similar maturities during the period because one of the chief
risks of GNMA bonds--that the securities will be prepaid and replaced with
lower-interest securities--declines as interest rates rise. For further
information about the mortgage-backed bond market, see the Report From the
Adviser on page 9.
Finally, our HIGH-YIELD CORPORATE FUND returned -0.6% for the half-year,
well behind the relatively strong +2.0% return of the average high-yield bond
fund, which invests in riskier securities than those held by our fund. This
quality difference is a disadvantage for our fund during periods when
lower-quality issues outperform higher-quality debt.
Our funds generally fell in line with their unmanaged index benchmarks.
This accomplishment is notable because our funds incur expenses that the
indexes do not. However, we recognize that beating or matching an index is
small consolation in periods when our returns are negative or barely positive.
We believe that our policy of maintaining longer maturities will pay off
for shareholders because longer maturities normally provide higher yields, and
higher yields are the key to higher long-term returns. What is more, our funds
are aided in their quest to provide superior yields by their extremely low
expenses. Our funds have annualized expense ratios (expenses as a percentage of
average net assets) of 0.30% or lower, whereas the expense ratio of the average
fixed-income fund is 1.05%, giving us a remarkable 75 basis
3
<PAGE> 6
points (0.75 percentage point) advantage, holding quality and maturity
constant. To garner such an advantage in the bond fund field is, finally, the
key to our performance successes.
IN SUMMARY
During times when interest rates are rising, investors who take a short-term
view of the financial markets can find it difficult to justify a place for
bonds in their investment programs. But those who are investing for the long
haul understand that the benefits of low-cost bond funds--diversification and
compounded interest income--can be substantial. That's why we remain steadfast
in our belief that creating and maintaining a balanced investment program of
stock funds, bond funds, and short-term reserves tailored to your goals, time
horizon, and tolerance for risk is the surest route to long-term investment
success.
We look forward to reporting to you on the full fiscal year in our 2000
annual report six months hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
August 18, 1999
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE SIX MONTHS TWELVE MONTHS SEC
--------------------- ------------------------ ------------------------ 30-DAY
JAN. 31, JUL. 31, INCOME CAPITAL INCOME CAPITAL ANNUALIZED
FUND 1999 1999 DIVIDENDS GAINS DIVIDENDS GAINS YIELD
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Treasury $10.37 $10.10 $0.259 $0.017 $0.528 $0.039 5.49%
Short-Term Federal 10.26 9.97 0.279 -- 0.567 -- 5.78
Short-Term Corporate 10.86 10.60 0.323 -- 0.652 -- 6.40
Short-Term Corporate-
Institutional Shares 10.86 10.60 0.329 -- 0.665 -- 6.52
- ---------------------------------------------------------------------------------------------------------------------------
Intermediate-Term
Treasury $11.16 $10.38 $0.309 -- $0.623 -- 5.98%
Intermediate-Term
Corporate 10.07 9.37 0.304 $0.046 0.616 $0.113 7.08
GNMA 10.47 9.95 0.332 -- 0.670 0.010 6.59
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Treasury $11.42 $10.09 $0.304 $0.120 $0.616 $0.120 6.12%
Long-Term Corporate 9.38 8.37 0.278 0.055 0.566 0.179 6.93
- ---------------------------------------------------------------------------------------------------------------------------
High-Yield Corporate $ 7.90 $ 7.54 $0.314 -- $0.642 $0.025 8.93%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JULY 31, 1999
[PHOTO]
An improving global economy was the backdrop for generally higher stock prices
but lower bond prices during the six months ended July 31.
A powerful expansion of the U.S. economy--which is by far the world's
largest--attracted record levels of imported products, helping foreign
economies to begin recovering from recessions. Confidence grew that global
economic activity was likely to be solid, if unspectacular, throughout 1999,
with further gains expected in 2000. This was a marked change in sentiment from
autumn 1998, when many analysts feared that economic troubles in Asia, Latin
America, and Russia would eventually weaken even the robust U.S. economy. The
turnabout was due, in part, to actions by the Federal Reserve Board and other
central banks to ease monetary policy to foster growth and restore confidence
to financial markets.
As economic engines revved up during 1999, market interest rates rose
steadily. The Fed tapped the brakes on June 30, when it acted to boost
short-term interest rates by 0.25 percentage point. The move clearly signaled
that the Fed was more concerned about the danger of inflation than any risk of
an economic slowdown.
U.S. STOCK MARKETS
Stock prices rose during the half-year, largely because investors' expectations
for improved corporate earnings outweighed their concerns about rising interest
rates. Companies reporting higher-than-expected earnings outnumbered those with
lower-than-expected earnings, and analysts raised estimates for overall
corporate profits in 1999 and 2000. The total market, as measured by the
Wilshire 5000 Index, rose 4.4% during the six months ended July 31, while the
S&P 500 Index, a yardstick for large-capitalization stocks, gained 4.5%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JULY 31, 1999
-----------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 4.5% 20.2% 26.2%
Russell 2000 Index 4.9 7.4 14.4
Wilshire 5000 Index 4.4 18.3 24.1
MSCI EAFE Index 7.5 10.0 8.9
- ----------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -2.5% 2.5% 7.3%
Lehman 10 Year Municipal Bond Index -2.6 2.8 6.6
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.3 4.7 5.2
- ----------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.5% 2.1% 2.4%
- ----------------------------------------------------------------------------------
</TABLE>
*Annualized.
Although stock returns seemed modest compared with the huge gains of
recent years, they were in line with historical norms and were impressive in
light of the rise in interest rates. Higher rates hurt stock prices because many
investors use current interest rates to discount the value of a stock's
projected earnings and dividends: the higher the rate used to discount them, the
lower the present value of future earnings and dividends.
Within the stock market, leadership changed during the period. Value
stocks-- characterized by below-average share prices in relation to earnings,
dividends, and book
5
<PAGE> 8
value--led the market's advance after having lagged growth stocks for most of
the past five years. Value stocks within the S&P 500 gained 8.3% for the six
months, while the index's growth stocks gained just 1.3%. Predominantly
value-stock industries such as energy, materials & processing, and machinery
were the big gainers during the half-year, buoyed by higher demand and prices
for oil and a number of other commodities. The worst-performing sectors were
health care (-7.6%) and consumer staples (-6.2%), both home to some
high-profile growth stocks that had infatuated investors until recently.
Small-cap stocks, as measured by the Russell 2000 Index, gained 4.9% for
the half-year, marginally better than the return on large stocks. Even that
small victory is noteworthy, given that the Russell 2000's cumulative return
over the past three years (46.6%) lags that of the S&P 500 Index (118.1%) by
more than 70 percentage points.
U.S. BOND MARKETS
The rapid economic expansion that boosted prospects for stock prices made bond
investors wary. Although inflation was well-behaved--consumer prices rose 1.5%
for the six months and 2.1% for the twelve months ended July 31--both investors
and the Fed's policymakers were looking ahead, not behind. The concern is that
the economy is becoming overheated; inflation-adjusted gross domestic product
during the second quarter was up 5.4% from a year earlier. Too-rapid expansion
might yet trigger significant increases in wages and overall prices, many fear.
Indeed, thanks to high employment and rising wages, total U.S. wage and salary
income in June 1999 was 6.5% higher than in June 1998. Unless productivity--the
amount workers produce per hour--continues to rise at very rapid rates, such
wage growth could cause companies to boost prices for products and services.
U.S. Treasury bond yields rose by roughly 1 percentage point--a hefty
boost for a six-month period. The yield of the 30-year Treasury bond rose 101
basis points, to 6.10% on July 31 from 5.09% on January 31. The yield of the
10-year Treasury--a benchmark especially for mortgage rates--rose 125 basis
points, to 5.90% from 4.65%. Money market rates didn't rise as far: Yields on
3-month T-bills increased on balance by 30 basis points, to 4.75% on July 31.
Bond prices, which move in the opposite direction from interest rates, fell.
The benchmark for the overall taxable bond market, the Lehman Aggregate Bond
Index, fell 2.5% on a total-return basis, as interest income of about 3.0% for
the six months was more than offset by a 5.5% average decline in bond prices.
INTERNATIONAL STOCK MARKETS
Stock prices in Japan and many emerging markets rebounded sharply from steep
losses in 1997 and 1998, as investors reckoned that these nations' economies
were finally on the mend. In Europe, stock prices were modestly higher in
local-currency terms but slightly negative for U.S. investors because of the
U.S. dollar's gains against European currencies. (Returns from abroad are
diminished when the dollar's value rises against other currencies, and
augmented when the dollar falls in value.)
Overall, the developed markets outside the United States gained 7.5% in
U.S.-dollar terms, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index. The Pacific region was up 27.8% in
local-currency terms and 29.5% for U.S. investors, because the Japanese yen
gained against the dollar. Europe, which accounts for the lion's share of EAFE's
market capitalization, was up 3.7% in local currencies. But in U.S. dollars, the
return from European stocks was -0.8% because of weakness in European
currencies. The MSCI Select Emerging Markets Free Index shot up 30.9%, led by
gains of more than 60% in Indonesia, Singapore, and Turkey.
6
<PAGE> 9
REPORT FROM VANGUARD
FIXED INCOME GROUP
[PHOTO]
SHORT-TERM TREASURY, FEDERAL, AND CORPORATE FUNDS;
INTERMEDIATE-TERM TREASURY AND CORPORATE FUNDS; AND
LONG-TERM TREASURY FUND
During the six months ended July 31, 1999, returns from the bond market were
generally negative. Interest rates rose by about 1 percentage point, causing
price declines that on average more than offset the interest paid during the
half-year. Short-term bonds roughly broke even, but returns for intermediate-
and long-term bonds, whose prices are more sensitive to changing interest
rates, ranged from about -3% to about -8%. The Vanguard Bond Funds produced
returns that correspond with their average maturities.
The forces behind the rise in interest rates during the half-year are
essentially the reverse of those that roiled global financial markets in the
latter part of 1998. At that time, the Federal Reserve Board lowered interest
rates to jump-start the capital markets after they had "seized up" in response
to Russia's default on its debts, hedge fund liquidations, and other crises.
However, in autumn 1998, fearful that poorly functioning markets would cut off
the flow of capital that sustains economic growth, the Fed engineered three
interest rate reductions that encouraged shell-shocked investors to buy. By the
start of our new fiscal year in February, it was becoming clear that the tonic
of lower rates had worked, and that the yield premiums required to induce
investors to assume credit, prepayment, and liquidity risks had contracted.
For the bond market, the old phrase "be careful what you wish for" was
about to prove its truthfulness. Propelled by wage and employment growth and
rapidly accumulating wealth from stock investments, consumer spending surged and
soon had the economy firing on all cylinders. The housing sector, a catalyst for
consumption, was especially strong. In February, Federal Reserve Chairman Alan
Greenspan testified that the reduced interest rates of 1998 might no longer be
appropriate in an environment of restored confidence and strong economic
expansion. With productivity growth running above 2% (a high rate by historical
standards, although productivity is notoriously hard to measure with any
precision), Chairman Greenspan had in recent years experimented with letting the
economy find the upper limits of noninflationary growth. However, he recently
indicated that he thought those limits might be at hand--that the shrinking
supply of available workers now threatened to push up wages and prices. In his
view, price stability is the key to sustained economic growth. The Fed therefore
acted to preempt inflation by raising short-term interest rates 0.25 percentage
point on June 30. The markets, implicitly forecasting future events, have
factored in one or possibly two more rate hikes in the next three months or so.
In May, risk premiums ceased to narrow for fixed-income securities other
than Treasuries, and the spreads between yields on these securities and on
Treasuries have since dramatically widened. In relation to Treasury yields, the
yields of corporate, government agency, asset-backed, and mortgage-backed
securities are now
7
<PAGE> 10
nearly as high as or, in some cases, higher than they were during the financial
markets' gridlock in autumn 1998. Last year, spreads widened because of
investors' fear of defaults on debts by emerging countries or overextended
hedge funds. Today's wide spreads, by contrast, stem from a large bulge in
supply. Many bond issuers have been trying to meet all their funding needs by
the third quarter, in case Y2K concerns make markets less liquid later in the
year. This is problematic, because investors had already bought plenty of these
bonds some months back when they offered attractively wide yields relative to
Treasuries in the wake of the 1998 crisis.
While the current wide spreads are very attractive by historical
standards, many investors have acquired all the non-Treasury bonds they care to
hold and are concerned with maintaining some degree of liquidity themselves.
Further aggravating this situation is the increasing reluctance of securities
dealers to commit their capital to market-making activities. With dealers
unwilling to hold large inventories of securities, newly issued bonds have to
be priced cheap--offering high yields--to attract the marginal buyer.
In the face of recent volatility and uncertainty, we have applied some
consistent themes in managing the Vanguard Bond Funds. Anticipating rising
rates, we have been shading the interest-rate sensitivity of most of the funds
toward the lower end of our neutral duration policies. While the funds' average
maturities remain true to their names, this slight shortening of maturities
marginally cushions the negative impact of rising rates on share prices.
We find today's wide credit-risk premiums for corporate bonds to be very
attractive. It is our view that the economy will continue to grow at a healthy
pace, which should bolster the creditworthiness of corporate bond issuers.
Despite the recent volatility in yield spreads versus Treasuries, we are keeping
our corporate bond funds fully invested in corporate issues. In the same vein,
we are investing a portion of our Treasury funds' assets in U.S. government
agency bonds (as permitted by the prospectus) to capture the added income
offered by the wide spreads between their yields and those on Treasury bonds.
The wide variety of risk/return combinations available from the Vanguard
Bond Funds enables investors to match their own needs fairly closely. However,
it is important to bear in mind that risk and return relationships change, and
investors should periodically reevaluate their holdings. At present, for
example, an investor willing to accept a bit more credit risk can get
significantly higher income from high-quality corporate bonds than from
Treasury bonds.
What will not change about the Vanguard Bond Funds is our commitment to
disciplined portfolio management at the lowest possible cost.
Ian A. MacKinnon, Managing Director
Robert F. Auwaerter, Principal
John W. Hollyer, Principal
August 12, 1999
INVESTMENT PHILOSOPHY
The funds reflect a belief that no one bond portfolio is right for all
investors. The funds offer an array of portfolios with specific maturity and
quality characteristics so investors can select the portfolio or combination of
portfolios appropriate to their needs.
8
<PAGE> 11
REPORT FROM WELLINGTON
MANAGEMENT COMPANY, LLP
GNMA FUND; LONG-TERM CORPORATE FUND; AND HIGH-YIELD CORPORATE FUND
In any given period, changes in the level and direction of interest rates are
the most important determinants of absolute performance for the GNMA, Long-Term
Corporate, and High-Yield Corporate Funds. However, changes in rates affect
each fund differently.
During the last six months, yields on intermediate-term Treasury
securities rose about 125 basis points (1.25 percentage points), causing the
prices of existing fixed-income securities to fall. The average rate on home
mortgage loans rose past 8%, pushing up borrowing costs for homeowners, which
will have some mild slowing effects on the economy. Interest rates were rising
throughout the half-year, well before the Federal Reserve Board acted on June
30 to increase short-term rates. While risk premiums on corporate bonds are
generally lower than they were last autumn during the crises in global markets
stemming from Russia's defaults on its debt, they are still high by normal
standards. The wider spreads between yields on corporate bonds and those on
Treasuries exist even though corporate profits are strong and the domestic
economy is healthy--conditions that ordinarily would keep risk premiums
relatively narrow.
Currently, the flow of new investment-grade corporate bonds is strong
while the issuance of high-yield, or below-investment-grade, securities is
modest. Mortgage-backed securities offer very enticing yields, given that the
risk of refinancing and prepayments by homeowners is low because of the rise in
rates. If rates do not drop sharply, prepayments of principal on mortgages
won't be significant, and today's yield premium on GNMA issues will turn out to
be overly generous. If rates stay relatively stable over the next six months,
current yields on high-yield bonds and long-term corporate bonds offer
reasonable value.
GNMA FUND
Your GNMA Fund's share price declined during the half-year because interest
rates rose, but the decline was modest compared with those experienced by
longer-term bond funds. The yields of GNMA securities rose further than those of
comparable Treasury securities during the past six months. This was unusual.
Typically, rising interest rates mean a slowdown in mortgage refinancing, which
benefits the GNMA Fund and causes its yield to rise less rapidly than yields of
comparable Treasuries. But this time there has been no such effect, even though
refinancing rates have been falling. The upshot is that, although the recent
period has been a trying one for shareholders, we believe the current yield of
your GNMA Fund offers not only attractive current income but also the prospect
of good total return should interest rates stabilize.
LONG-TERM CORPORATE FUND
The average maturity of the Long-Term Corporate Fund's investments is about 18
years, in keeping with its charter. The fund's average duration--slightly under
nine years--is also long, making the share price extremely sensitive to changes
in long-term interest rates. It's important for shareholders to understand this
sensitivity. For example, if market interest rates move up or down by 100 basis
points (1 percentage point), the fund's net asset value would be expected to
fall or rise by 9%. Because rates rose by about 1 percentage point during the
semiannual period, the fund's return was negative. The fund has excellent call
protection, which means that most of our holdings cannot be redeemed by their
9
<PAGE> 12
issuers if rates decline. The fund's income stream therefore has some
protection from falling interest rates.
The major risk for this fund is the possibility of an extended rise in
long-term interest rates, which would cause its share price to keep falling.
More than half of our assets are invested (and are intended always to be so) in
corporate bonds with an average maturity longer than 15 years.
A second risk always present in this fund is that deterioration of the
creditworthiness of corporate bond issuers could hurt the value of our holdings.
To mitigate this risk, the fund is well diversified by issuer and industry. We
have recently seen a healthy trend in which upgrades of credit ratings have been
outpacing downgrades in the investment-grade market. More than 80% of the fund's
assets are invested in issues rated A or better. The fund does not own
below-investment-grade corporate bonds, emerging-market debt, or foreign bonds
denominated in non-U.S. currencies. We generally purchase bonds of
well-established, large companies with stable operating histories.
HIGH-YIELD CORPORATE FUND
The below-investment-grade bond market continues to act like a hybrid. Under
some market conditions, high-yield bonds follow the direction of the stock
market; at other times, they behave like the rest of the bond market. And
sometimes they act like neither. For example, during the second quarter of 1999,
downgrades of credit ratings outpaced upgrades in the high-yield market--the
reverse of the trend among investment-grade bonds. Energy and health-care
companies were most affected by the downgrades. This deterioration in ratings of
speculative-grade bonds caused a widening in the yield spread versus Treasury
securities, which hurt your fund's performance. During this period, the domestic
economy and the stock market remained vibrant, which would have supported the
high-yield market had rating downgrades been less numerous.
With the Federal Reserve raising interest rates and, thus, implicitly
restricting credit, the high-yield market probably will be kept slightly off
balance. When credit is tighter, the marginal, or lower-rated, borrower must pay
relatively steep yields to obtain credit. We have begun to see this phenomenon.
Investors' tolerance for risk will decrease if economic growth begins to slow,
as the Fed seems to prefer.
We remain very selective with respect to credit quality. We are avoiding
bonds of smaller, start-up companies and continuing to emphasize the
higher-quality end of the below-investment-grade market.
As always, we conduct in-depth research on a company-by-company basis and
emphasize diversification. The fund's holdings remain focused on cash-paying
issues rated B or better. We maintain a modest reserve of Treasury securities in
case we need liquidity.
Paul D. Kaplan, Senior Vice President and Portfolio Manager
Earl E. McEvoy, Senior Vice President and Portfolio Manager
August 12, 1999
10
<PAGE> 13
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note, too, that
both share price and return can fluctuate. An investor's shares, when redeemed,
could be worth more or less than their original cost.
SHORT-TERM TREASURY FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: OCTOBER 28, 1991-JULY 31, 1999
- ---------------------------------------------------------
SHORT-TERM TREASURY FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1992 1.2% 1.4% 2.6% 3.0%
1993 3.3 5.4 8.7 9.0
1994 0.8 4.7 5.5 6.1
1995 -4.8 5.2 0.4 -0.1
1996 4.8 6.6 11.4 12.0
1997 -1.9 5.8 3.9 4.1
1998 1.1 6.0 7.1 7.9
1999 1.2 5.5 6.7 7.0
2000** -2.4 2.5 0.1 0.3
- ---------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Treasury Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 36 for dividend and capital gains
information for the past five years.
SHORT-TERM FEDERAL FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: DECEMBER 31, 1987-JULY 31, 1999
- ----------------------------------------------------------
SHORT-TERM FEDERAL FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1988 0.5% 0.5% 1.0% 1.9%
1989 -2.7 8.4 5.7 5.0
1990 1.1 9.0 10.1 10.5
1991 1.9 8.6 10.5 11.1
1992 3.1 7.5 10.6 11.3
1993 2.3 6.2 8.5 8.9
1994 1.1 5.1 6.2 6.1
1995 -5.6 5.4 -0.2 -0.1
1996 5.0 6.4 11.4 12.0
1997 -1.7 6.2 4.5 4.1
1998 0.8 6.3 7.1 7.9
1999 0.7 5.9 6.6 6.9
2000** -2.8 2.7 -0.1 0.3
- ----------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Government Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 37 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- ---------------------------------------------------------------------------------------------------------------------------
10 Years
INCEPTION -------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Treasury Fund 10/28/1991 4.54% 6.21% 0.40%** 5.58%** 5.98%**
Short-Term Federal Fund 12/31/1987 4.39 6.26 0.40 6.47 6.87
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Since inception.
11
<PAGE> 14
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note, too, that
both share price and return can fluctuate. An investor's shares, when redeemed,
could be worth more or less than their original cost.
SHORT-TERM CORPORATE FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: OCTOBER 29, 1982-JULY 31, 1999
- ---------------------------------------------------------
SHORT-TERM CORPORATE FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1983 0.5% 2.7% 3.2% 4.6%
1984 -1.1 10.6 9.5 10.9
1985 2.3 11.7 14.0 14.1
1986 3.7 10.5 14.2 14.6
1987 2.9 8.7 11.6 11.9
1988 -2.2 7.4 5.2 6.8
1989 -1.9 8.2 6.3 6.5
1990 1.1 9.1 10.2 10.7
1991 1.5 9.0 10.5 9.8
1992 3.6 8.1 11.7 13.4
1993 2.6 6.7 9.3 9.5
1994 0.4 5.7 6.1 7.9
1995 -4.9 5.5 0.6 0.3
1996 5.2 6.8 12.0 13.8
1997 -1.7 6.2 4.5 4.6
1998 1.1 6.4 7.5 8.0
1999 -0.1 6.3 6.2 7.1
2000** -2.4 3.0 0.6 0.1
- ---------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Investment Grade Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 37 for dividend information for the past
five years.
SHORT-TERM CORPORATE FUND INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 30, 1997-JULY 31, 1999
- -----------------------------------------------------------
SHORT-TERM CORPORATE FUND
INSTITUTIONAL SHARES LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1998 0.6% 2.2% 2.8% 3.6%
1999 -0.1 6.4 6.3 7.1
2000** -2.4 3.0 0.6 0.1
- -----------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Investment Grade Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 38 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- ---------------------------------------------------------------------------------------------------------------------------
10 Years
INCEPTION -------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Corporate Fund 10/29/1982 4.54% 6.57% 0.47% 6.81% 7.28%
Short-Term Corporate Fund
Institutional Shares 9/30/1997 4.66 -- -0.80** 6.34** 5.54**
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Since inception.
12
<PAGE> 15
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
INTERMEDIATE-TERM TREASURY FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: OCTOBER 28, 1991-July 31, 1999
- ------------------------------------------------------------
INTERMEDIATE-TERM TREASURY FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 1.9% 1.7% 3.6% 4.0%
1993 6.1 7.0 13.1 13.2
1994 4.1 6.0 10.1 10.6
1995 -9.6 5.7 -3.9 -4.5
1996 11.7 7.3 19.0 19.6
1997 -4.9 6.2 1.3 1.3
1998 4.1 6.7 10.8 11.7
1999 3.3 6.1 9.4 10.0
2000** -7.0 2.7 -4.3 -4.3
- ------------------------------------------------------------
</TABLE>
*Lehman 5-10 Year Treasury Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 38 for dividend and capital gains
information for the past five years.
INTERMEDIATE-TERM CORPORATE FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: NOVEMBER 1, 1993-July 31, 1999
- ----------------------------------------------------------
INTERMEDIATE-TERM CORPORATE FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 0.4% 1.3% 1.7% 2.4%
1995 -9.7 6.0 -3.7 -4.0
1996 12.1 7.8 19.9 21.1
1997 -4.2 6.5 2.3 2.7
1998 3.3 6.9 10.2 10.4
1999 1.2 6.5 7.7 8.4
2000** -6.5 3.0 -3.5 -3.9
- ----------------------------------------------------------
</TABLE>
*Lehman 5-10 Year Investment Grade Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 39 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- ---------------------------------------------------------------------------------------------------------------------------
Since Inception
INCEPTION -------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Intermediate-Term Treasury Fund 10/28/1991 3.01% 7.52% 1.17% 6.34% 7.51%
Intermediate-Term Corporate Fund 11/1/1993 1.91 7.63 -0.70 6.57 5.87
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
13
<PAGE> 16
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
GNMA FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 27, 1980-JULY 31, 1999
- ------------------------------------------------------------
GNMA FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1981 -12.5% 6.2% -6.3% -8.8%
1982 -9.5 13.5 4.0 1.7
1983 16.3 15.8 32.1 39.6
1984 -0.1 12.3 12.2 12.0
1985 0.5 13.0 13.5 15.4
1986 7.2 12.4 19.6 22.6
1987 1.9 10.3 12.2 13.6
1988 -4.1 9.4 5.3 6.8
1989 -3.6 9.4 5.8 6.6
1990 2.1 9.9 12.0 12.9
1991 3.2 9.7 12.9 13.2
1992 4.1 8.9 13.0 12.9
1993 2.4 8.0 10.4 10.1
1994 -1.0 6.2 5.2 6.1
1995 -6.5 6.9 0.4 -0.3
1996 7.6 8.0 15.6 15.5
1997 -2.1 7.3 5.2 5.6
1998 2.5 7.4 9.9 9.8
1999 0.0 6.8 6.8 6.7
2000** -5.0 3.2 -1.8 -0.8
- ------------------------------------------------------------
</TABLE>
*Lehman GNMA Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 39 for dividend and capital gains
information for the past five years.
LONG-TERM TREASURY FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MAY 19, 1986-JULY 31, 1999
- -----------------------------------------------------------
LONG-TERM TREASURY FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1987 3.1% 5.5% 8.6% 11.9%
1988 -7.7 8.0 0.3 1.5
1989 -2.2 8.6 6.4 5.1
1990 2.7 8.6 11.3 12.3
1991 2.2 8.8 11.0 11.6
1992 4.1 8.3 12.4 13.4
1993 6.1 8.0 14.1 14.6
1994 8.9 7.2 16.1 16.7
1995 -13.0 6.3 -6.7 -7.5
1996 18.7 8.0 26.7 27.4
1997 -8.2 6.4 -1.8 -1.6
1998 9.7 7.1 16.8 18.3
1999 5.8 6.2 12.0 12.3
2000** -10.6 2.6 -8.0 -7.9
- -----------------------------------------------------------
</TABLE>
*Lehman Long Treasury Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 40 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- --------------------------------------------------------------------------------------------------------------------------
10 Years
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GNMA Fund 6/27/1980 3.18% 7.90% 0.46% 7.67% 8.13%
Long-Term Treasury Fund 5/19/1986 -0.36 9.33 1.56 7.25 8.81
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
14
<PAGE> 17
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
LONG-TERM CORPORATE FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JANUARY 31, 1979-JULY 31, 1999
- -----------------------------------------------------------
LONG-TERM CORPORATE FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1980 -13.8% 8.8% -5.0% -12.0%
1981 -3.5 11.7 8.2 3.0
1982 -4.7 13.2 8.5 -0.8
1983 13.3 15.0 28.3 43.4
1984 -2.0 12.3 10.3 9.9
1985 0.0 13.4 13.4 17.4
1986 7.4 12.9 20.3 25.1
1987 5.6 10.9 16.5 21.1
1988 -7.5 9.3 1.8 3.0
1989 -2.5 9.6 7.1 6.6
1990 1.1 9.6 10.7 11.2
1991 0.3 9.5 9.8 11.2
1992 7.6 9.5 17.1 15.5
1993 6.6 8.5 15.1 13.8
1994 6.5 7.3 13.8 12.6
1995 -11.9 6.8 -5.1 -5.3
1996 15.3 8.3 23.6 23.9
1997 -6.0 6.9 0.9 0.7
1998 7.9 7.6 15.5 15.3
1999 2.9 6.6 9.5 10.3
2000** -10.2 2.9 -7.3 -7.9
- -----------------------------------------------------------
</TABLE>
*Lehman Long Corporate AA or Better Bond Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 40 for dividend and capital gains
information for the past five years.
HIGH-YIELD CORPORATE FUND
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JANUARY 31, 1979-JULY 31, 1999
- ----------------------------------------------------------
HIGH-YIELD CORPORATE FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1980 -10.4% 11.9% 1.5% -8.7%
1981 -8.2 13.0 4.8 4.6
1982 -7.3 15.3 8.0 3.3
1983 13.7 18.6 32.3 39.7
1984 0.1 14.1 14.2 11.8
1985 -5.0 14.4 9.4 10.0
1986 3.8 14.6 18.4 22.6
1987 6.9 13.2 20.1 20.7
1988 -8.6 11.1 2.5 4.2
1989 -1.1 12.5 11.4 10.8
1990 -13.4 11.6 -1.8 -3.0
1991 -15.3 12.1 -3.2 -5.1
1992 17.4 13.9 31.3 47.3
1993 4.0 10.7 14.7 15.1
1994 7.7 9.8 17.5 16.3
1995 -11.1 8.6 -2.5 -1.8
1996 9.0 10.0 19.0 19.7
1997 -0.3 9.3 9.0 10.5
1998 3.8 9.3 13.1 13.7
1999 -3.0 8.3 5.3 1.6
2000** -4.6 4.0 -0.6 1.1
- ----------------------------------------------------------
</TABLE>
*Lehman Mutual Fund BBB Rated or Better Bond Index through January 1984;
Lehman High Yield Index thereafter.
**Six months ended July 31, 1999.
See Financial Highlights table on page 41 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- --------------------------------------------------------------------------------------------------------------------------
10 Years
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-Term Corporate Fund 7/9/1973 -1.47% 8.81% 1.33% 7.81% 9.14%
High-Yield Corporate Fund** 12/27/1978 1.93 9.76 -0.82 10.15 9.33
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Total returns do not reflect the 1% fee assessed on redemptions of shares
held for less than one year.
15
<PAGE> 18
FUND PROFILE
SHORT-TERM TREASURY FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
SHORT-TERM LEHMAN
TREASURY INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 42 5,381
Yield 5.5% 6.7%
Yield to Maturity 5.9% 6.8%
Average Coupon 5.9% 6.8%
Average Maturity 3.2 years 9.0 years
Average Quality Treasury Aaa
Average Duration 2.2 years 5.0 years
Expense Ratio 0.27%** --
Cash Reserves 2.3% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------------------------
SHORT-TERM LEHMAN
TREASURY INDEX*
- -----------------------------------------------------------
<S> <C> <C>
R-Squared 0.50 1.00
Beta 0.42 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 1 Year 2.0%
1-3 Years 70.1
3-5 Years 20.1
Over 5 Years 7.8
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ---------------------------------------------------------
<S> <C>
AVERAGE MATURITY SHORT
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury 86.1%
Agency 13.9
- -------------------------------------------------------
Total 100.0%
</TABLE>
16
<PAGE> 19
AVERAGE COUPON. The average interest rate paid on the securities held by a
fund. It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average
duration of five years would decline by about 5%. If rates decrease by a
percentage point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes
in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities. U.S. Treasury securities are considered to
have the highest credit quality.
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 bond
investment.
DISTRIBUTION BY COUPON. A breakdown of the securities in a fund according to
coupon rate--the interest rate that an issuer promises to pay, expressed as an
annual percentage of face value. Securities with unusually high coupon rates
may be subject to call risk, the possibility that they will be redeemed (or
"called") early by the issuer.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY ISSUER. A breakdown of a fund's holdings by type of issuer or
type of instrument.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
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.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit
quality (Treasury/agency, investment-grade corporate, or below
investment-grade).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
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.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days and is annualized, or projected forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
17
<PAGE> 20
FUND PROFILE
SHORT-TERM FEDERAL FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ------------------------------------------------------------
SHORT-TERM LEHMAN
FEDERAL INDEX*
- ------------------------------------------------------------
<S> <C> <C>
Number of Issues 62 5,381
Yield 5.8% 6.7%
Yield to Maturity 6.3% 6.8%
Average Coupon 5.8% 6.8%
Average Maturity 3.4 years 9.0 years
Average Quality Agency Aaa
Average Duration 2.2 years 5.0 years
Expense Ratio 0.27%** --
Cash Reserves 5.2% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------------
SHORT-TERM LEHMAN
FEDERAL INDEX*
- ------------------------------------------------------------
<S> <C> <C>
R-Squared 0.56 1.00
Beta 0.42 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 1 Year 15.3%
1-3 Years 27.1
3-5 Years 46.5
Over 5 Years 11.1
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- -------------------------------------------------
<S> <C>
AVERAGE MATURITY SHORT
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury 13.9%
Agency 86.1
- --------------------------------------------------------
Total 100.0%
</TABLE>
18
<PAGE> 21
FUND PROFILE
SHORT-TERM CORPORATE FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
SHORT-TERM LEHMAN
CORPORATE INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 339 5,381
Yield 6.4% 6.7%
Yield--Institutional Shares 6.5% 6.7%
Yield to Maturity 6.8% 6.8%
Average Coupon 6.7% 6.8%
Average Maturity 2.7 years 9.0 years
Average Quality A1 Aaa
Average Duration 2.3 years 5.0 years
Expense Ratio 0.26%** --
Expense Ratio--
Institutional Shares 0.14%** --
Cash Reserves 1.8% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------------
SHORT-TERM LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
R-Squared 0.59 1.00
Beta 0.43 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 1 Year 18.2%
1-3 Years 43.2
3-5 Years 24.1
Over 5 Years 14.5
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ------------------------------------------------------------
<S> <C>
AVERAGE MATURITY SHORT
CREDIT QUALITY INVESTMENT-GRADE CORPORATE
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ---------------------------------------------------------
<S> <C>
Treasury/Agency 1.1%
Aaa 21.9
Aa 13.2
A 34.5
Baa 29.0
Ba 0.0
B 0.0
Not Rated 0.3
- ---------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- ---------------------------------------------------------
<S> <C>
Asset-Backed 21.5%
Finance 39.4
Foreign 11.3
Industrial 14.6
Mortgage 0.8
Treasury/Agency 1.1
Utilities 10.9
Other 0.4
- ---------------------------------------------------------
Total 100.0%
</TABLE>
19
<PAGE> 22
FUND PROFILE
INTERMEDIATE-TERM TREASURY FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
TREASURY INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 37 5,381
Yield 6.0% 6.7%
Yield to Maturity 6.3% 6.8%
Average Coupon 7.2% 6.8%
Average Maturity 7.5 years 9.0 years
Average Quality Treasury Aaa
Average Duration 5.3 years 5.0 years
Expense Ratio 0.27%** --
Cash Reserves 2.0% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
TREASURY INDEX*
- -----------------------------------------------------------
<S> <C> <C>
R-Squared 0.60 1.00
Beta 1.19 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ---------------------------------------------------------
<S> <C>
Under 1 Year 0.4%
1-5 Years 9.4
5-10 Years 86.8
10-20 Years 3.4
20-30 Years 0.0
Over 30 Years 0.0
- ---------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ---------------------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ---------------------------------------------------------
<S> <C>
Treasury 86.0%
Agency 14.0
- ---------------------------------------------------------
Total 100.0%
</TABLE>
20
<PAGE> 23
FUND PROFILE
INTERMEDIATE-TERM CORPORATE FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ------------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
Number of Issues 199 5,381
Yield 7.1% 6.7%
Yield to Maturity 7.5% 6.8%
Average Coupon 7.0% 6.8%
Average Maturity 7.1 years 9.0 years
Average Quality A2 Aaa
Average Duration 5.3 years 5.0 years
Expense Ratio 0.26%** --
Cash Reserves 1.9% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
R-Squared 0.64 1.00
Beta 1.11 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 1 Year 1.1%
1-5 Years 22.1
5-10 Years 72.0
10-20 Years 4.8
20-30 Years 0.0
Over 30 Years 0.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- --------------------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY INVESTMENT-GRADE CORPORATE
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury/Agency 3.4%
Aaa 8.4
Aa 9.6
A 49.0
Baa 29.6
Ba 0.0
B 0.0
Not Rated 0.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Asset-Backed 7.0%
Finance 39.7
Foreign 16.2
Industrial 23.2
Mortgage 0.0
Treasury/Agency 3.4
Utilities 10.5
- --------------------------------------------------------
Total 100.0%
</TABLE>
21
<PAGE> 24
FUND PROFILE
GNMA FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
LEHMAN
GNMA INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 26 5,381
Yield 6.6% 6.7%
Yield to Maturity 7.4% 6.8%
Average Coupon 6.9% 6.8%
Average Maturity 8.2 years 9.0 years
Average Quality Treasury Aaa
Average Duration 5.0 years 5.0 years
Expense Ratio 0.28%** --
Cash Reserves 1.7% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------------------------
LEHMAN
GNMA INDEX*
- -----------------------------------------------------------
<S> <C> <C>
R-Squared 0.68 1.00
Beta 0.74 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ----------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY COUPON (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 6% 0.6%
6%-7% 41.6
7%-8% 48.0
8%-9% 7.6
9%-10% 2.1
10% and Over 0.1
- --------------------------------------------------------
Total 100.0%
</TABLE>
22
<PAGE> 25
FUND PROFILE
LONG-TERM TREASURY FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- --------------------------------------------------------------
LONG-TERM LEHMAN
TREASURY INDEX*
- --------------------------------------------------------------
<S> <C> <C>
Number of Issues 20 5,381
Yield 6.1% 6.7%
Yield to Maturity 6.4% 6.8%
Average Coupon 7.4% 6.8%
Average Maturity 20.1 years 9.0 years
Average Quality Treasury Aaa
Average Duration 9.9 years 5.0 years
Expense Ratio 0.28%** --
Cash Reserves 3.4% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- --------------------------------------------------------------
LONG-TERM LEHMAN
TREASURY INDEX*
- --------------------------------------------------------------
<S> <C> <C>
R-Squared 0.68 1.00
Beta 2.02 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 1 Year 1.0%
1-5 Years 0.0
5-10 Years 13.0
10-20 Years 34.7
20-30 Years 51.3
Over 30 Years 0.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- --------------------------------------------------------
<S> <C>
AVERAGE MATURITY LONG
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury 88.0%
Agency 12.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
23
<PAGE> 26
FUND PROFILE
LONG-TERM CORPORATE FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ------------------------------------------------------------
LONG-TERM LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
Number of Issues 148 5,381
Yield 6.9% 6.7%
Yield to Maturity 7.2% 6.8%
Average Coupon 7.0% 6.8%
Average Maturity 18.2 years 9.0 years
Average Quality Aa3 Aaa
Average Duration 8.6 years 5.0 years
Expense Ratio 0.30%** --
Cash Reserves 7.1% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------------
LONG-TERM LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
R-Squared 0.68 1.00
Beta 1.80 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ---------------------------------------------------------
<S> <C>
Under 1 Year 0.0%
1-5 Years 2.4
5-10 Years 23.0
10-20 Years 21.9
20-30 Years 50.7
Over 30 Years 2.0
- ---------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- --------------------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY INVESTMENT-GRADE CORPORATE
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury/Agency 5.3%
Aaa 13.6
Aa 20.3
A 44.7
Baa 16.1
Ba 0.0
B 0.0
Not Rated 0.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Asset-Backed 0.0%
Finance 23.2
Foreign 1.4
Industrial 48.3
Mortgage 9.9
Treasury/Agency 5.3
Utilities 11.9
- --------------------------------------------------------
Total 100.0%
</TABLE>
24
<PAGE> 27
FUND PROFILE
HIGH-YIELD CORPORATE FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ------------------------------------------------------------
HIGH-YIELD LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
Number of Issues 239 5,381
Yield 8.9% 6.7%
Yield to Maturity 9.2% 6.8%
Average Coupon 8.7% 6.8%
Average Maturity 7.4 years 9.0 years
Average Quality Ba2 Aaa
Average Duration 4.9 years 5.0 years
Expense Ratio 0.29%** --
Cash Reserves 2.9% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------------
HIGH-YIELD LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------------
<S> <C> <C>
R-Squared 0.19 1.00
Beta 0.69 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ---------------------------------------------------------
<S> <C>
Under 1 Year 3.7%
1-5 Years 10.1
5-10 Years 79.2
10-20 Years 6.7
20-30 Years 0.3
Over 30 Years 0.0
- ---------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- --------------------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY INVESTMENT-GRADE CORPORATE
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury/Agency 5.5%
Aaa 0.0
Aa 0.0
A 0.0
Baa 6.5
Ba 40.7
B 46.7
Caa 0.6
Not Rated 0.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Asset-Backed 0.0%
Finance 3.4
Foreign 0.0
Industrial 83.1
Mortgage 0.0
Treasury/Agency 5.5
Utilities 8.0
- --------------------------------------------------------
Total 100.0%
</TABLE>
25
<PAGE> 28
FINANCIAL STATEMENTS
JULY 31, 1999 (UNAUDITED)
[PHOTO]
The Statements of Net Assets, integral parts of the Financial Statements for
each of the Vanguard Bond Funds, are included as an insert to this report
(except for the GNMA Fund, whose Statement of Net Assets is provided below).
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. Securities are
grouped and subtotaled by bond type (U.S. government and agency issues,
corporate bonds, foreign bonds, etc.); corporate bonds are further classified
by industry sector. 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 of each fund, you will find a
table displaying the composition of the fund's net assets. Undistributed Net
Investment Income is usually zero because the fund distributes its net income
to shareholders as a dividend each day. Any realized gains must be distributed
annually, so the bulk of net assets consists of Paid in Capital (money invested
by shareholders). The balance shown for Accumulated Net Realized Gains usually
approximates the amount available to distribute to shareholders as 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 realized gains, will appear as negative balances.
Unrealized Appreciation (Depreciation) is the difference between the 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>
- ---------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
GNMA FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OBLIGATIONS (98.3%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Assn. 5.50% 3/15/2013-2/15/2014 (1) $ 73,277 $ 68,608
Government National Mortgage Assn. 6.00% 10/15/2023-4/15/2029 (1) 1,602,498 1,479,598
Government National Mortgage Assn. 6.50% 7/15/2008-6/15/2029 (1) 3,759,071 3,575,613
Government National Mortgage Assn. 7.00% 4/15/2007-7/15/2029 (1) 3,946,160 3,854,596
Government National Mortgage Assn. 7.25% 12/15/2026-2/15/2027 (1) 3,365 3,326
Government National Mortgage Assn. 7.50% 12/15/2001-8/1/2029 (1) 1,966,137 1,969,855
Government National Mortgage Assn. 7.75% 2/15/2027 (1) 8,302 8,395
Government National Mortgage Assn. 8.00% 5/15/2001-9/15/2028 (1) 691,396 710,547
Government National Mortgage Assn. 8.25% 8/15/2004-7/15/2008 (1) 3,213 3,332
Government National Mortgage Assn. 8.50% 1/20/2005-12/15/2024 (1) 205,158 214,868
Government National Mortgage Assn. 9.00% 9/15/2001-2/15/2023 (1) 163,769 174,277
Government National Mortgage Assn. 9.25% 5/15/2016-6/15/2018 (1) 1,249 1,337
Government National Mortgage Assn. 9.50% 12/15/2000-12/15/2022 (1) 78,522 84,659
Government National Mortgage Assn. 10.00% 7/20/2014-8/20/2018 (1) 1,597 1,748
Government National Mortgage Assn. 11.00% 7/15/2010-2/20/2016 (1) 496 555
Government National Mortgage Assn. 11.25% 7/15/2013-2/20/2016 (1) 434 485
Government National Mortgage Assn. 11.50% 1/15/2013-11/20/2015 (1) 555 629
Government National Mortgage Assn. 12.00% 10/15/2010-1/20/2016 (1) 992 1,143
Government National Mortgage Assn. 12.50% 12/20/2013-7/20/2015 (1) 570 662
Government National Mortgage Assn. 12.75% 12/15/2014 (1) 28 32
Government National Mortgage Assn. 13.00% 1/15/2011-1/20/2015 (1) 433 506
Government National Mortgage Assn. 13.25% 8/15/2014-10/15/2014 (1) 125 147
Government National Mortgage Assn. 13.50% 5/15/2010-12/15/2014 (1) 129 151
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Assn. 13.75% 9/20/2014 (1) $ 4 $ 4
Government National Mortgage Assn. 14.00% 6/15/2011-9/15/2012 (1) 130 153
Government National Mortgage Assn. 15.00% 9/15/2011-5/15/2012 (1) 88 103
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OBLIGATIONS
(COST $12,475,473) 12,155,329
- ---------------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (1.8%)
- ---------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $215,566) 5.07% 8/2/1999 215,566 215,566
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(COST $12,691,039) 12,370,895
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.1%)
- ---------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 84,515
Liabilities (91,246)
---------
(6,731)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------------
Applicable to 1,243,153,020 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $12,364,164
=================================================================================================================================
NET ASSET VALUE PER SHARE $9.95
=================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $12,685,927 $10.21
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (1,619) --
Unrealized Depreciation--Note H (320,144) (.26)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $12,364,164 $9.95
=================================================================================================================================
</TABLE>
27
<PAGE> 30
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to each class of its shares. These
expenses directly reduce the amount of investment income available to pay to
shareholders as income dividends. 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. If a
fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SHORT-TERM SHORT-TERM INTERMEDIATE-TERM
TREASURY FEDERAL CORPORATE TREASURY
FUND FUND FUND FUND
-------------------------------------------------------------------------
SIX MONTHS ENDED JULY 31, 1999
-------------------------------------------------------------------------
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $ 32,265 $ 48,180 $ 192,129 $ 55,507
Security Lending 86 48 24 6
-------------------------------------------------------------------------
Total Income 32,351 48,228 192,153 55,513
-------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B 74 102 371 114
The Vanguard Group--Note C
Management and Administrative 611 901 2,321 947
Shareholder Account Maintenance(1) 805 1,037 4,230 1,189
Marketing and Distribution(1) 107 151 604 181
Custodian Fees 8 16 75 6
Auditing Fees 4 4 5 4
Shareholders' Reports(1) 13 18 44 17
Trustees' Fees and Expenses 1 1 4 1
-------------------------------------------------------------------------
Total Expenses 1,623 2,230 7,654 2,459
Expenses Paid Indirectly--Note D -- -- (40) --
-------------------------------------------------------------------------
Net Expenses 1,623 2,230 7,614 2,459
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 30,728 45,998 184,539 53,054
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (4,031) (1,171) 182 (13,227)
Futures Contracts -- -- 2,079 (191)
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (4,031) (1,171) 2,261 (13,418)
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities (26,293) (46,688) (149,808) (119,051)
Futures Contracts -- -- 110 (21)
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) (26,293) (46,688) (149,698) (119,072)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 404 $ (1,861) $ 37,102 $ (79,436)
=========================================================================================================================
</TABLE>
(1) Expenses of the Short-Term Corporate Fund by class of shares are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(000)
----------------------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class-Specific Expenses:
Shareholder Account Maintenance $4,135 $ 95 $4,230
Marketing and Distribution 604 -- 604
Shareholders' Reports 37 7 44
---------------------------------------------
Total Class-Specific Expenses 4,776 102 4,878
All Other Fund Expenses 2,570 206 2,776
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses $7,346 $ 308 $7,654
=========================================================================================================================
</TABLE>
See Note E in Notes to Financial Statements.
28
<PAGE> 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM LONG-TERM LONG-TERM
CORPORATE GNMA TREASURY CORPORATE
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JULY 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $ 43,144 $ 406,645 $ 41,589 $ 134,062
Security Lending 134 -- 60 37
---------------------------------------------------------------------------
Total Income 43,278 406,645 41,649 134,099
---------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B 78 697 86 527
The Vanguard Group--Note C
Management and Administrative 1,037 7,745 640 2,468
Shareholder Account Maintenance 485 6,473 988 2,664
Marketing and Distribution 115 977 136 304
Custodian Fees 11 551 14 28
Auditing Fees 3 7 4 5
Shareholders' Reports 6 107 14 52
Trustees' Fees and Expenses 1 8 1 3
---------------------------------------------------------------------------
Total Expenses 1,736 16,565 1,883 6,051
Expenses Paid Indirectly--Note D (2) (132) -- (3)
---------------------------------------------------------------------------
Net Expenses 1,734 16,433 1,883 6,048
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 41,544 390,212 39,766 128,051
- --------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (8,517) (1,816) (126) (1,154)
Futures Contracts 11 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (8,506) (1,816) (126) (1,154)
- --------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities (80,592) (617,362) (155,896) (437,169)
Futures Contracts -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) (80,592) (617,362) (155,896) (437,169)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(47,554) $(228,966) $(116,256) $(310,272)
==========================================================================================================================
</TABLE>
29
<PAGE> 32
STATEMENT OF OPERATIONS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD CORPORATE FUND
SIX MONTHS ENDED JULY 31, 1999
(000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Interest $ 241,394
Security Lending 247
-----------
Total Income 241,641
-----------
EXPENSES
Investment Advisory Fees--Note B 999
The Vanguard Group--Note C
Management and Administrative 4,075
Shareholder Account Maintenance 2,745
Marketing and Distribution 441
Custodian Fees 18
Auditing Fees 5
Shareholders' Reports 43
Trustees' Fees and Expenses 4
-----------
Total Expenses 8,330
Expenses Paid Indirectly--Note D (21)
-----------
Net Expenses 8,309
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 233,332
- --------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (19,139)
Futures Contracts --
- --------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (19,139)
- --------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (251,487)
Futures Contracts --
- --------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (251,487)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (37,294)
==========================================================================================================================
</TABLE>
30
<PAGE> 33
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. Because the fund distributes its
income to shareholders each day, the amounts of Distributions--Net Investment
Income generally equal the net income earned as shown under the Operations
section. The amounts of Distributions--Realized Capital Gain may not match the
capital gains 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 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, and the amounts redeemed.
The corresponding numbers of Shares Issued and Redeemed are shown at the end of
the Statement. Distributions, Capital Share Transactions, and Shares Issued and
Redeemed are shown separately for each class of shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SHORT-TERM
TREASURY FUND FEDERAL FUND
----------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999 JUL. 31, 1999 JAN. 31, 1999
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 30,728 $ 56,928 $ 45,998 $ 87,409
Realized Net Gain (Loss) (4,031) 8,818 (1,171) 5,876
Change in Unrealized Appreciation (Depreciation) (26,293) 3,074 (46,688) 5,094
------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 404 68,820 (1,861) 98,379
------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (30,728) (56,928) (45,998) (87,409)
Realized Capital Gain (2,005) (2,497) -- --
------------------------------------------------------------------------
Total Distributions (32,733) (59,425) (45,998) (87,409)
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 263,855 500,362 287,868 521,686
Issued in Lieu of Cash Distributions 28,961 52,411 39,589 75,064
Redeemed (239,061) (373,916) (256,114) (423,745)
------------------------------------------------------------------------
Net Increase from Capital Share Transactions 53,755 178,857 71,343 173,005
- --------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 21,426 188,252 23,484 183,975
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,197,495 1,009,243 1,644,411 1,460,436
------------------------------------------------------------------------
End of Period $1,218,921 $1,197,495 $1,667,895 $1,644,411
================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 25,835 48,432 28,455 51,089
Issued in Lieu of Cash Distributions 2,842 5,078 3,926 7,351
Redeemed (23,427) (36,272) (25,359) (41,519)
------------------------------------------------------------------------
Net Increase in Shares Outstanding 5,250 17,238 7,022 16,921
================================================================================================================================
</TABLE>
31
<PAGE> 34
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
CORPORATE FUND
------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999
(000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 184,539 $ 331,873
Realized Net Gain (Loss) 2,261 9,363
Change in Unrealized Appreciation (Depreciation) (149,698) (10,705)
------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 37,102 330,531
------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (170,566) (311,139)
Institutional Shares (13,973) (20,734)
Realized Capital Gain
Investor Shares -- --
Institutional Shares -- --
------------------------------------
Total Distributions (184,539) (331,873)
------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 1,305,056 2,238,424
Issued in Lieu of Cash Distributions 146,103 269,772
Redeemed (988,868) (1,686,245)
------------------------------------
Net Increase--Investor Shares 462,291 821,951
------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued 113,648 190,015
Issued in Lieu of Cash Distributions 11,113 17,350
Redeemed (48,789) (49,229)
------------------------------------
Net Increase--Institutional Shares 75,972 158,136
- -------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 390,826 978,745
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 5,949,922 4,971,177
------------------------------------
End of Period $6,340,748 $5,949,922
=========================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 121,642 206,458
Issued in Lieu of Cash Distributions 13,648 24,868
Redeemed (92,173) (155,492)
------------------------------------
Net Increase in Shares Outstanding 43,117 75,834
=========================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued 10,583 17,520
Issued in Lieu of Cash Distributions 1,038 1,599
Redeemed (4,571) (4,541)
------------------------------------
Net Increase in Shares Outstanding 7,050 14,578
=========================================================================================================================
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM INTERMEDIATE-TERM
TREASURY FUND CORPORATE FUND
----------------------------- ----------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999 JUL. 31, 1999 JAN. 31, 1999
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 53,054 $ 99,566 $ 41,544 $ 66,190
Realized Net Gain (Loss) (13,418) 27,463 (8,506) 14,151
Change in Unrealized Appreciation (Depreciation) (119,072) 28,552 (80,592) 389
----------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (79,436) 155,581 (47,554) 80,730
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (53,054) (99,566) (41,544) (66,190)
Realized Capital Gain -- -- (6,098) (9,243)
----------------------------------------------------------------------
Total Distributions (53,054) (99,566) (47,642) (75,433)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 354,335 764,715 357,243 521,754
Issued in Lieu of Cash Distributions 41,383 74,832 38,780 62,630
Redeemed (352,208) (614,490) (159,615) (254,477)
----------------------------------------------------------------------
Net Increase from Capital
Share Transactions 43,510 225,057 236,408 329,907
- ----------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (88,980) 281,072 141,212 335,204
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,875,904 1,594,832 1,234,092 898,888
----------------------------------------------------------------------
End of Period $1,786,924 $1,875,904 $1,375,304 $1,234,092
============================================================================================================================
(1)Shares Issued (Redeemed)
Issued 33,062 69,777 36,842 52,041
Issued in Lieu of Cash Distributions 3,898 6,831 4,032 6,244
Redeemed (32,981) (56,110) (16,553) (25,384)
----------------------------------------------------------------------
Net Increase in Shares Outstanding 3,979 20,498 24,321 32,901
============================================================================================================================
</TABLE>
33
<PAGE> 36
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LONG-TERM
GNMA FUND TREASURY FUND
-------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999 JUL. 31, 1999 JAN. 31, 1999
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 390,212 $ 655,641 $ 39,766 $ 69,082
Realized Net Gain (Loss) (1,816) 10,764 (126) 20,507
Change in Unrealized Appreciation (Depreciation) (617,362) (7,860) (155,896) 48,185
---------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (228,966) 658,545 (116,256) 137,774
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (390,212) (655,641) (39,766) (69,082)
Realized Capital Gain -- (12,237) (15,831) --
---------------------------------------------------------------------
Total Distributions (390,212) (667,878) (55,597) (69,082)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 2,638,408 3,904,241 301,240 747,238
Issued in Lieu of Cash Distributions 296,248 508,264 46,137 54,527
Redeemed (1,305,288) (1,943,264) (319,233) (481,620)
---------------------------------------------------------------------
Net Increase from Capital
Share Transactions 1,629,368 2,469,241 28,144 320,145
- --------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,010,190 2,459,908 (143,709) 388,837
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 11,353,974 8,894,066 1,450,259 1,061,422
---------------------------------------------------------------------
End of Period $12,364,164 $11,353,974 $1,306,550 $1,450,259
================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 256,970 373,652 28,351 67,200
Issued in Lieu of Cash Distributions 29,043 48,627 4,398 4,914
Redeemed (127,746) (185,917) (30,279) (43,491)
-------------------------------- -------------------------------
Net Increase in Shares Outstanding 158,267 236,362 2,470 28,623
================================================================================================================================
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM HIGH-YIELD
CORPORATE FUND CORPORATE FUND
-------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999 JUL. 31, 1999 JAN. 31, 1999
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 128,051 $ 247,170 $ 233,332 $ 419,467
Realized Net Gain (Loss) (1,154) 79,798 (19,139) (2,445)
Change in Unrealized Appreciation (Depreciation) (437,169) 37,951 (251,487) (153,489)
---------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (310,272) 364,919 (37,294) 263,533
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (128,051) (247,170) (233,332) (419,467)
Realized Capital Gain (25,062) (88,379) -- (17,026)
---------------------------------------------------------------------
Total Distributions (153,113) (335,549) (233,332) (436,493)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 426,957 1,013,958 902,117 1,704,032
Issued in Lieu of Cash Distributions 128,561 283,759 159,361 306,214
Redeemed* (418,420) (815,663) (529,811) (1,035,394)
---------------------------------------------------------------------
Net Increase from Capital
Share Transactions 137,098 482,054 531,667 974,852
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (326,287) 511,424 261,041 801,892
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 4,231,702 3,720,278 5,548,843 4,746,951
---------------------------------------------------------------------
End of Period $3,905,415 $4,231,702 $5,809,884 $ 5,548,843
=================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 48,470 109,341 116,255 214,452
Issued in Lieu of Cash Distributions 14,722 30,569 20,677 38,479
Redeemed (47,687) (87,606) (68,537) (131,086)
---------------------------------------------------------------------
Net Increase in Shares Outstanding 15,505 52,304 68,395 121,845
=================================================================================================================================
</TABLE>
*The High-Yield Corporate Fund is net of redemption fees of $743,000 and
$1,580,000.
35
<PAGE> 38
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis for each class of shares. It also presents
the 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>
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TREASURY FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.37 $ 10.27 $ 10.16 $ 10.36 $ 9.89 $ 10.41
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .259 .545 .590 .586 .625 .532
Net Realized and Unrealized Gain (Loss)
on Investments (.253) .122 .110 (.200) .470 (.500)
-----------------------------------------------------------------------
Total from Investment Operations .006 .667 .700 .386 1.095 .032
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.259) (.545) (.590) (.586) (.625) (.532)
Distributions from Realized Capital Gains (.017) (.022) -- -- -- (.020)
-----------------------------------------------------------------------
Total Distributions (.276) (.567) (.590) (.586) (.625) (.552)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 10.37 $ 10.27 $ 10.16 $ 10.36 $ 9.89
================================================================================================================================
TOTAL RETURN 0.06% 6.66% 7.11% 3.89% 11.37% 0.40%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 1,219 $ 1,197 $ 1,009 $ 970 $ 919 $ 754
Ratio of Total Expenses to
Average Net Assets 0.27%* 0.27% 0.27% 0.25% 0.27% 0.28%
Ratio of Net Investment Income to
Average Net Assets 5.11%* 5.27% 5.80% 5.77% 6.14% 5.33%
Portfolio Turnover Rate 101%* 132% 83% 86% 93% 126%
================================================================================================================================
</TABLE>
*Annualized.
36
<PAGE> 39
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM FEDERAL FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 10.19 $ 10.11 $ 10.28 $ 9.79 $ 10.38
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .279 .581 .611 .615 .601 .550
Net Realized and Unrealized Gain (Loss)
on Investments (.290) .070 .080 (.170) .490 (.580)
-----------------------------------------------------------------------
Total from Investment Operations (.011) .651 .691 .445 1.091 (.030)
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.279) (.581) (.611) (.615) (.601) (.550)
Distributions from Realized Capital Gains -- -- -- -- -- (.010)
-----------------------------------------------------------------------
Total Distributions (.279) (.581) (.611) (.615) (.601) (.560)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.97 $ 10.26 $ 10.19 $ 10.11 $ 10.28 $ 9.79
================================================================================================================================
TOTAL RETURN -0.10% 6.57% 7.06% 4.51% 11.43% -0.21%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 1,668 $ 1,644 $ 1,460 $ 1,348 $ 1,402 $ 1,474
Ratio of Total Expenses to
Average Net Assets 0.27%* 0.27% 0.27% 0.25% 0.27% 0.28%
Ratio of Net Investment Income to
Average Net Assets 5.57%* 5.68% 6.04% 6.09% 5.93% 5.53%
Portfolio Turnover Rate 87%* 107% 94% 57% 74% 57%
================================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.86 $ 10.87 $ 10.75 $ 10.94 $ 10.40 $ 10.94
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .323 .660 .664 .663 .671 .596
Net Realized and Unrealized Gain (Loss)
on Investments (.260) (.010) .120 (.190) .540 (.540)
-----------------------------------------------------------------------
Total from Investment Operations .063 .650 .784 .473 1.211 .056
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.323) (.660) (.664) (.663) (.671) (.596)
Distributions from Realized Capital Gains -- -- -- -- -- --
-----------------------------------------------------------------------
Total Distributions (.323) (.660) (.664) (.663) (.671) (.596)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.60 $ 10.86 $ 10.87 $ 10.75 $ 10.94 $ 10.40
================================================================================================================================
TOTAL RETURN 0.58% 6.16% 7.53% 4.52% 11.95% 0.60%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 5,855 $ 5,529 $ 4,709 $ 4,531 $ 3,873 $ 2,924
Ratio of Total Expenses to
Average Net Assets 0.26%* 0.27% 0.28% 0.25% 0.27% 0.28%
Ratio of Net Investment Income to
Average Net Assets 6.06%* 6.08% 6.17% 6.18% 6.23% 5.66%
Portfolio Turnover Rate 63%* 46% 45% 45% 62% 69%
================================================================================================================================
</TABLE>
*Annualized.
37
<PAGE> 40
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE FUND INSTITUTIONAL SHARES
SIX MONTHS ENDED YEAR ENDED SEP. 30, 1997* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JULY 31, 1999 JAN. 31, 1999 JAN. 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.86 $10.87 $10.80
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .329 .673 .229
Net Realized and Unrealized Gain (Loss)on Investments (.260) (.010) .070
-----------------------------------------------
Total from Investment Operations .069 .663 .299
-----------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.329) (.673) (.229)
Distributions from Realized Capital Gains -- -- --
-----------------------------------------------
Total Distributions (.329) (.673) (.229)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.60 $10.86 $10.87
==============================================================================================================================
TOTAL RETURN 0.65% 6.28% 2.79%
==============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $486 $421 $263
Ratio of Total Expenses to Average Net Assets 0.14%** 0.15% 0.15%**
Ratio of Net Investment Income to Average Net Assets 6.18%** 6.19% 6.28%**
Portfolio Turnover Rate 63%** 46% 45%
==============================================================================================================================
</TABLE>
*Inception.
**Annualized.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM TREASURY FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.16 $ 10.80 $ 10.37 $ 10.90 $ 9.76 $ 10.82
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .309 .630 .647 .649 .662 .603
Net Realized and Unrealized Gain (Loss)
on Investments (.780) .360 .430 (.530) 1.140 (1.033)
-----------------------------------------------------------------------
Total from Investment Operations (.471) .990 1.077 .119 1.802 (.430)
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.309) (.630) (.647) (.649) (.662) (.603)
Distributions from Realized Capital Gains -- -- -- -- -- (.027)
-----------------------------------------------------------------------
Total Distributions (.309) (.630) (.647) (.649) (.662) (.630)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.38 $ 11.16 $ 10.80 $ 10.37 $ 10.90 $ 9.76
================================================================================================================================
TOTAL RETURN -4.25% 9.44% 10.78% 1.28% 18.96% -3.90%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 1,787 $ 1,876 $ 1,595 $ 1,279 $ 1,226 $ 848
Ratio of Total Expenses to
Average Net Assets 0.27%* 0.27% 0.27% 0.25% 0.28% 0.28%
Ratio of Net Investment Income to
Average Net Assets 5.83%* 5.76% 6.19% 6.26% 6.34% 6.05%
Portfolio Turnover Rate 41%* 63% 30% 42% 56% 128%
================================================================================================================================
</TABLE>
*Annualized.
38
<PAGE> 41
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM CORPORATE FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.07 $ 10.03 $ 9.72 $ 10.17 $ 9.07 $ 10.04
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .304 .627 .638 .639 .658 .587
Net Realized and Unrealized Gain (Loss)
on Investments (.654) .122 .321 (.430) 1.100 (.970)
-----------------------------------------------------------------------
Total from Investment Operations (.350) .749 .959 .209 1.758 (.383)
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.304) (.627) (.638) (.639) (.658) (.587)
Distributions from Realized Capital Gains (.046) (.082) (.011) (.020) -- --
-----------------------------------------------------------------------
Total Distributions (.350) (.709) (.649) (.659) (.658) (.587)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.37 $ 10.07 $ 10.03 $ 9.72 $ 10.17 $ 9.07
================================================================================================================================
TOTAL RETURN -3.52% 7.73% 10.24% 2.29% 19.94% -3.73%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 1,375 $ 1,234 $ 899 $ 592 $ 424 $ 163
Ratio of Total Expenses to
Average Net Assets 0.26%* 0.27% 0.26% 0.25% 0.28% 0.28%
Ratio of Net Investment Income to
Average Net Assets 6.34%* 6.25% 6.51% 6.61% 6.70% 6.46%
Portfolio Turnover Rate 73%* 71% 69% 85% 78% 97%
================================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GNMA FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 10.48 $ 10.23 $ 10.45 $ 9.71 $ 10.39
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .332 .687 .718 .727 .734 .693
Net Realized and Unrealized Gain (Loss)
on Investments (.520) .002 .253 (.220) .740 (.673)
-----------------------------------------------------------------------
Total from Investment Operations (.188) .689 .971 .507 1.474 .020
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.332) (.687) (.718) (.727) (.734) (.693)
Distributions from Realized Capital Gains -- (.012) (.003) -- -- (.007)
-----------------------------------------------------------------------
Total Distributions (.332) (.699) (.721) (.727) (.734) (.700)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.95 $ 10.47 $ 10.48 $ 10.23 $ 10.45 $ 9.71
================================================================================================================================
TOTAL RETURN -1.84% 6.79% 9.86% 5.15% 15.64% 0.36%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $12,364 $11,354 $ 8,894 $ 7,400 $ 6,998 $ 5,851
Ratio of Total Expenses to
Average Net Assets 0.28%* 0.30% 0.31% 0.27% 0.29% 0.30%
Ratio of Net Investment Income to
Average Net Assets 6.52%* 6.56% 6.97% 7.16% 7.22% 7.04%
Portfolio Turnover Rate 4%* 7% 3% 12% 7% 35%
================================================================================================================================
</TABLE>
*Annualized.
39
<PAGE> 42
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LONG-TERM TREASURY FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.42 $ 10.79 $ 9.84 $ 10.73 $ 9.23 $ 10.75
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .304 .629 .643 .655 .669 .665
Net Realized and Unrealized Gain (Loss)
on Investments (1.210) .630 .950 (.877) 1.725 (1.401)
-----------------------------------------------------------------------
Total from Investment Operations (.906) 1.259 1.593 (.222) 2.394 (.736)
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.304) (.629) (.643) (.655) (.669) (.665)
Distributions from Realized Capital Gains (.120) -- -- (.013) (.225) (.119)
-----------------------------------------------------------------------
Total Distributions (.424) (.629) (.643) (.668) (.894) (.784)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 11.42 $ 10.79 $ 9.84 $ 10.73 $ 9.23
================================================================================================================================
TOTAL RETURN -8.02% 12.02% 16.85% -1.85% 26.72% -6.68%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 1,307 $ 1,450 $ 1,061 $ 898 $ 916 $ 671
Ratio of Total Expenses to
Average Net Assets 0.28%* 0.27% 0.27% 0.25% 0.27% 0.28%
Ratio of Net Investment Income to
Average Net Assets 5.81%* 5.69% 6.38% 6.66% 6.57% 7.02%
Portfolio Turnover Rate 20%* 22% 18% 31% 105% 85%
================================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CORPORATE FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.38 $ 9.32 $ 8.71 $ 9.43 $ 8.18 $ 9.36
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .278 .582 .613 .619 .627 .617
Net Realized and Unrealized Gain (Loss)
on Investments (.955) .266 .685 (.566) 1.250 (1.108)
-----------------------------------------------------------------------
Total from Investment Operations (.677) .848 1.298 .053 1.877 (.491)
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.278) (.582) (.613) (.619) (.627) (.617)
Distributions from Realized Capital Gains (.055) (.206) (.075) (.154) -- (.072)
-----------------------------------------------------------------------
Total Distributions (.333) (.788) (.688) (.773) (.627) (.689)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.37 $ 9.38 $ 9.32 $ 8.71 $ 9.43 $ 8.18
================================================================================================================================
TOTAL RETURN -7.31% 9.52% 15.52% 0.86% 23.64% -5.12%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 3,905 $ 4,232 $3,720 $3,324 $3,376 $2,607
Ratio of Total Expenses to
Average Net Assets 0.30%* 0.30% 0.32% 0.28% 0.31% 0.32%
Ratio of Net Investment Income to
Average Net Assets 6.38%* 6.26% 6.87% 7.06% 7.03% 7.37%
Portfolio Turnover Rate 11%* 43% 33% 30% 49% 43%
================================================================================================================================
</TABLE>
*Annualized.
40
<PAGE> 43
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD CORPORATE FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUL. 31, 1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.90 $ 8.17 $ 7.87 $ 7.89 $ 7.24 $ 8.14
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .314 .659 .688 .688 .678 .679
Net Realized and Unrealized Gain (Loss)
on Investments (.360) (.245) .300 (.020) .650 (.900)
-----------------------------------------------------------------------
Total from Investment Operations (.046) .414 .988 .668 1.328 (.221)
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.314) (.659) (.688) (.688) (.678) (.679)
Distributions from Realized Capital Gains -- (.025) -- -- -- --
-----------------------------------------------------------------------
Total Distributions (.314) (.684) (.688) (.688) (.678) (.679)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.54 $ 7.90 $ 8.17 $ 7.87 $ 7.89 $ 7.24
================================================================================================================================
TOTAL RETURN* -0.60% 5.34% 13.14% 9.01% 19.01% -2.52%
================================================================================================================================
Ratios/Supplemental Data
Net Assets, End of Period (Millions) $ 5,810 $ 5,549 $ 4,747 $ 3,674 $ 3,007 $ 2,162
Ratio of Total Expenses to
Average Net Assets 0.29%** 0.29% 0.28% 0.29% 0.34% 0.34%
Ratio of Net Investment Income to
Average Net Assets 8.19%** 8.26% 8.63% 8.92% 8.85% 9.13%
Portfolio Turnover Rate 18%** 31% 45% 23% 38% 33%
================================================================================================================================
</TABLE>
*Total returns do not reflect the 1% fee assessed on redemptions of shares held
for less than one year.
**Annualized.
41
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS
Vanguard Bond Funds comprise the Vanguard Short-Term Treasury, Short-Term
Federal, Short-Term Corporate, Intermediate-Term Treasury, Intermediate-Term
Corporate, GNMA, Long-Term Treasury, Long-Term Corporate, and High-Yield
Corporate Funds, each of which is registered under the Investment Company Act
of 1940 as a diversified open-end investment company, or mutual fund. Certain
of the funds' investments are in corporate debt instruments; the issuers'
abilities to meet these obligations may be affected by economic developments in
their respective industries.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The fund consistently follows such
policies in preparing its financial statements.
1. SECURITY VALUATION: 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.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: Each fund, along with other members of The
Vanguard Group, transfers uninvested cash balances to a Pooled Cash Account,
the daily aggregate of 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.
4. FUTURES CONTRACTS: Each fund may use Municipal Bond Index, U.S.
Treasury Bond, and U.S. Treasury Note futures contracts, with the objectives of
enhancing returns, managing interest-rate risk, maintaining liquidity,
diversifying credit risk, and minimizing transaction costs. The funds may
purchase or sell futures contracts instead of bonds to take advantage of
pricing differentials between the futures contracts and the underlying bonds.
The funds may also seek to take advantage of price differences among bond
market sectors by simultaneously buying futures (or bonds) of one market sector
and selling futures (or bonds) of another sector. Futures contracts may also be
used to simulate a fully invested position in the underlying bonds while
maintaining a cash balance for liquidity. The primary risks associated with the
use of futures contracts are imperfect correlation between changes in market
values of bonds held by the funds and the prices of futures contracts, and the
possibility of an illiquid market.
Futures contracts are valued based upon 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 futures gains (losses).
5. DISTRIBUTIONS: Distributions from net investment income are declared
daily and paid on the first business day of the following month. Annual
distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
6. OTHER: 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. Premiums and
discounts on debt securities purchased are amortized and accreted, respectively,
to interest income over the lives of the respective securities. Fees assessed on
redemptions of Vanguard High-Yield Corporate Fund capital shares are credited to
paid in capital.
42
<PAGE> 45
B. The Vanguard Group furnishes investment advisory services to the Vanguard
Short-Term Treasury, Short-Term Federal, Short-Term Corporate,
Intermediate-Term Treasury, Intermediate-Term Corporate, and Long-Term Treasury
Funds on an at-cost basis.
Wellington Management Company, LLP provides investment advisory services
to the Vanguard GNMA, Long-Term Corporate, and High-Yield Corporate Funds for
fees calculated at an annual percentage rate of average net assets. For the six
months ended July 31, 1999, the investment advisory fees of the Vanguard GNMA,
Long-Term Corporate, and High-Yield Corporate Funds represented effective
annual rates of 0.01%, 0.03%, and 0.04%, respectively, of average net assets.
C. The Vanguard Group furnishes at cost corporate management, administrative,
shareholder account maintenance, marketing, and distribution services. The
costs of such services are allocated to each fund 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 July 31, 1999, the funds had
contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CAPITAL
CONTRIBUTION PERCENTAGE OF PERCENTAGE OF
TO VANGUARD FUND NET VANGUARD'S
FUND (000) ASSETS CAPITALIZATION
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Treasury $ 260 0.02% 0.3%
Short-Term Federal 350 0.02 0.4
Short-Term Corporate 1,220 0.02 1.2
Intermediate-Term Treasury 380 0.02 0.4
Intermediate-Term Corporate 290 0.02 0.3
GNMA 2,620 0.02 2.6
Long-Term Treasury 290 0.02 0.3
Long-Term Corporate 840 0.02 0.8
High-Yield Corporate 1,230 0.02 1.2
------------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
D. The funds' investment advisers may direct new issue purchases, subject to
obtaining the best price and execution, to underwriters who have agreed to
rebate or credit to the funds part of the underwriting fees generated. Such
rebates or credits are used solely to reduce the funds' management and
administrative expenses. The funds' custodian banks have also agreed to reduce
their fees when the funds maintain cash on deposit in their
non-interest-bearing custody accounts. For the six months ended July 31, 1999,
these arrangements reduced expenses by:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
EXPENSE REDUCTION
(000)
-----------------------------------
MANAGEMENT AND CUSTODIAN
FUND ADMINISTRATIVE FEES
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Corporate $ 1 $ 39
Intermediate-Term Corporate -- 2
GNMA -- 132
Long-Term Corporate -- 3
High-Yield Corporate 11 10
--------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS (continued)
E. The Short-Term Corporate Fund offers two classes of shares, Investor Shares
and Institutional Shares. Institutional Shares are designed primarily for
institutional investors that meet certain administrative and servicing criteria
and have a minimum investment of $50 million. Investor Shares are offered to
all other investors. Both classes of shares have equal rights to assets and
earnings, except that each class bears certain class-specific expenses related
to its shareholder activity. Class-specific expenses for the six months ended
July 31, 1999, represented the following percentages of average net assets:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
FUND INVESTOR SHARES INSTITUTIONAL SHARES
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Corporate 0.17%* 0.05%*
--------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
Income, expenses not attributable to a specific class, and realized and
unrealized gains and losses on investments are allocated to each class of
shares based on its relative net assets.
F. During the six months ended July 31, 1999, purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(000)
------------------------------------
FUND PURCHASES SALES
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Corporate $2,314,691 $1,657,107
Intermediate-Term Corporate 616,110 370,656
Long-Term Corporate 276,397 199,896
High-Yield Corporate 1,046,059 495,851
-----------------------------------------------------------------------------------------------
</TABLE>
Purchases and sales of U.S. government securities were:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
(000)
---------------------------------
FUND PURCHASES SALES
----------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Treasury $ 645,724 $602,429
Short-Term Federal 770,706 700,363
Short-Term Corporate 275,652 243,614
Intermediate-Term Treasury 484,492 363,869
Intermediate-Term Corporate 96,641 96,658
GNMA 2,845,415 260,491
Long-Term Treasury 144,109 132,194
Long-Term Corporate 47,098 --
High-Yield Corporate 62,580 15,371
----------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 47
G. Capital gain distributions are determined on a tax basis and may differ from
realized capital gains for financial reporting purposes due to differences in
the timing of realization of gains. The following funds had realized losses
through January 31, 1999, which are deferred for tax purposes and reduce the
amount of unrealized appreciation on investment securities for tax purposes
(see Note H).
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
DEFERRED LOSSES
FUND (000)
--------------------------------------------------------------------------------------------------
<S> <C>
Short-Term Corporate $3,027
Intermediate-Term Corporate 992
Long-Term Treasury 3,471
--------------------------------------------------------------------------------------------------
</TABLE>
At January 31, 1999, the funds had the following capital losses available
to offset future net capital gains:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
CAPITAL LOSS
-----------------------------
EXPIRATION
AMOUNT FISCAL YEAR(S)
FUND (000) ENDING JANUARY 31,
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Federal $19,495 2003-2004
Short-Term Corporate 17,122 2003-2004
Intermediate-Term Treasury 8,356 2003-2006
High-Yield Corporate 45,500 2008
--------------------------------------------------------------------------------------------------
</TABLE>
H. At July 31, 1999, net unrealized appreciation (depreciation) of investment
securities for federal income tax purposes was:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(000)
---------------------------------------------------------
NET UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION
FUND SECURITIES SECURITIES (DEPRECIATION)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Treasury $ 232 $ (14,231) $ (13,999)
Short-Term Federal 551 (28,832) (28,281)
Short-Term Corporate* 8,605 (107,694) (99,089)
Intermediate-Term Treasury 19,106 (38,514) (19,408)
Intermediate-Term Corporate* 324 (55,626) (55,302)
GNMA 84,088 (404,232) (320,144)
Long-Term Treasury* 52,182 (40,685) 11,497
Long-Term Corporate 46,484 (178,164) (131,680)
High-Yield Corporate 41,919 (253,354) (211,435)
-----------------------------------------------------------------------------------------------
</TABLE>
*See Note G.
45
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS (continued)
At July 31, 1999, the aggregate settlement value of open futures
contracts expiring in September 1999 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(000)
----------------------------------
NUMBER OF AGGREGATE UNREALIZED
SHORT SETTLEMENT APPRECIATION
BOND FUND/FUTURES CONTRACTS CONTRACTS VALUE (DEPRECIATION)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Corporate/
5-Year Treasury Note 257 $27,852 $ (13)
U.S. Treasury Note 850 93,766 123
-----------------------------------------------------------------------------------------------
</TABLE>
I. The market values of securities on loan to broker/dealers at July 31, 1999,
and collateral received with respect to such loans, were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(000)
---------------------------------------------------------
COLLATERAL RECEIVED
----------------------------------
MARKET VALUE U.S.
OF LOANED TREASURY
FUND SECURITIES CASH SECURITIES
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Treasury $ 89,070 $52,234 $ 38,483
Short-Term Federal 9,827 10,213 --
Short-Term Corporate 13,970 14,374 --
Intermediate-Term
Treasury 103,072 -- 105,632
Intermediate-Term
Corporate 19,349 19,976 --
Long-Term Treasury 166,208 18,045 154,603
Long-Term Corporate 120,531 9,191 115,216
High-Yield Corporate 35,319 37,200 --
-----------------------------------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements. Security loans
are required to be secured at all times by collateral at least equal to the
market value of securities loaned; 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.
46
<PAGE> 49
NOTICE TO SHAREHOLDERS ABOUT Y2K
As is well known by now, the approaching calendar change to 2000 has posed a
challenge to many computer systems worldwide. Computers that are not modified
could interpret "00" as 1900 rather than 2000 and produce errors in
date-dependent calculations, including bond interest payments, stock trade
settlements, retirement benefits, and other financial transactions.
OUR APPROACH
Vanguard has taken this challenge seriously. We have had a Year 2000 Project
under way since 1996 to fulfill our responsibility to safeguard our business
relationships and the security of our investors' accounts.
Our internal systems are Year 2000-compliant. They have been renovated and
thoroughly tested and are ready for the date change. As for the external systems
that connect with ours, we have been working for many months with clients,
business partners, and providers of products and services to assess their
compliance. We have analyzed the external services we require and have developed
contingency plans-- including provision for alternative providers where
appropriate.
On New Year's Day, our telephone centers will be staffed and ready for
shareholder calls. However, we expect the volume of inquiries over the New
Year's weekend to be high, and we encourage shareholders to check their accounts
via our website or automated telephone systems, which offer much greater service
capacity and efficiency. This will also help our live representatives to provide
a higher level of service to those with specific transaction or other
service-related needs.
WHAT YOU CAN DO
We assure you we will protect our shareholders' records, so account records
will not be lost. Nevertheless, keeping copies of current records is always
advisable. You should keep at least your third-quarter statement and any
confirmations you receive from us between October 1, 1999, and year-end.
If you are a registered user of Access Vanguard(TM) (www.vanguard.com), you
can retrieve this information through the secure "Your Accounts" section and
print copies for your files. If you are not registered for Access Vanguard and
wish to have this flexibility, you should register as soon as possible so that
you can receive your password and become familiar with this service before the
New Year's weekend. Likewise, you may need personal identification numbers to
use our automated telephone services: Vanguard Tele-Account(R) for individual
investors (1-800-662-6273) and The VOICE(TM) Network for participants in
employer-sponsored retirement plans (1-800-523-1188).
Our Year 2000 Project's primary goal from the start has been to prepare our
systems for business as usual on behalf of our shareholders into 2000 and
beyond. We remain confident we will meet that goal, and we look forward to
serving you in the years to come.
47
<PAGE> 50
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.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson - Merck Consumer
Pharmaceuticals Co., 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 Select Sector SPDR Trust.
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.
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> 51
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 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q282-09/21/1999
(C) 1999 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
<PAGE> 52
VANGUARD BOND FUNDS
FINANCIAL STATEMENTS
JULY 31, 1999 (UNAUDITED)
[THE VANGUARD GROUP PHOTO]
The Statement of Net Assets should be read in conjunction with the Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes
to Financial Statements, all of which appear in the accompanying report. The
Statement of Net Assets for the GNMA Fund begins on page 26 of that report.
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. Securities are
grouped and subtotaled by bond type (U.S. government and agency issues,
corporate bonds, foreign bonds, etc.); corporate bonds are further classified by
industry sector. 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 of each fund, you will find a
table displaying the composition of the fund's net assets. Undistributed Net
Investment Income is usually zero because the fund distributes its net income to
shareholders as a dividend each day. Any realized gains must be distributed
annually, so the bulk of net assets consists of Paid in Capital (money invested
by shareholders). The balance shown for Accumulated Net Realized Gains usually
approximates the amount available to distribute to shareholders as 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 realized gains, will appear as negative balances.
Unrealized Appreciation (Depreciation) is the difference between the 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>
CONTENTS
<S> <C>
Short-Term Treasury Fund 1
Short-Term Federal Fund 4
Short-Term Corporate Fund 6
Intermediate-Term Treasury Fund 14
Intermediate-Term Corporate Fund 16
Long-Term Treasury Fund 21
Long-Term Corporate Fund 22
High-Yield Corporate Fund 26
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM TREASURY FUND COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (97.7%)
- ----------------------------------------------------------------------------------------------------------
U.S. GOVERMENT SECURITIES (83.9%)
<S> <C> <C> <C> <C>
U.S. Treasury Inflation-Indexed Note 3.375% 1/15/2007 $ 11,539 $ 11,052
U.S. Treasury Inflation-Indexed Note 3.875% 1/15/2009 34,456 34,004
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 14,154 13,831
U.S. Treasury Note 4.00% 10/31/2000 53,000 52,070
U.S. Treasury Note 5.00% 2/28/2001 115,000 114,041
U.S. Treasury Note 5.125% 8/31/2000 40,000 39,880
U.S. Treasury Note 5.875% 11/30/2001 47,900 48,081
U.S. Treasury Note 6.00% 7/31/2002 4,000 4,024
U.S. Treasury Note 6.125% 12/31/2001 51,700 52,167
U.S. Treasury Note 6.25% 4/30/2001 4,000 4,042
U.S. Treasury Note 6.25% 10/31/2001 37,000 37,427
U.S. Treasury Note 6.25% 1/31/2002 83,000 84,009
U.S. Treasury Note 6.50% 5/31/2001 13,200 13,396
U.S. Treasury Note 6.50% 8/31/2001 47,600 48,363
</TABLE>
1
<PAGE> 53
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM TREASURY FUND COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Note 6.50% 5/31/2002 $ 13,000 $ 13,249
U.S. Treasury Note 6.625% 7/31/2001 87,000 88,570
U.S. Treasury Note 6.625% 4/30/2002 100,100 102,287
U.S. Treasury Note 7.50% 11/15/2001 38,700 40,165
U.S. Treasury Note 7.875% 8/15/2001 20,500 21,354
Bariven, SA Eximbank Guaranteed Export Financing
(U.S. Government Guaranteed) 6.277% 4/15/2001 (1)(3) 6,800 6,798
Banco Nacional de Comercio Exterior
(U.S. Government Guaranteed) 6.475% 5/15/2000 (1) 2,600 2,611
Banco Nacional de Comercio Exterior
(U.S. Government Guaranteed) 8.038% 1/15/2000 (1) 1,500 1,515
EximBank Guaranteed Export
(U.S. Government Guaranteed) 5.73% 1/15/2003 (1)(2) 37,800 37,448
Government Export Trust
(U.S. Government Guaranteed) 7.75% 1/1/2000 (1)(2) 1,333 1,347
Guaranteed Export Trust
(U.S. Government Guaranteed) 7.46% 12/15/2005 (1) 6,783 6,996
Guaranteed Trade Trust
(U.S. Government Guaranteed) 6.104% 7/15/2003 (1) 22,333 22,320
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 5.10% 6/30/2007 (1) 19,200 18,007
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 5.696% 2/1/2005 (1) 8,000 7,808
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 5.735% 1/15/2002 (1) 6,583 6,580
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 5.926% 6/15/2005 (1) 13,814 13,534
Private Export Funding Corp.
(U.S. Government Guaranteed) 5.65% 3/15/2003 (1) 4,253 4,222
Private Export Funding Corp.
(U.S. Government Guaranteed) 5.73% 1/15/2004 58,385 56,645
Private Export Funding Corp.
(U.S. Government Guaranteed) 6.31% 9/30/2004 10,000 9,912
Private Export Funding Corp.
(U.S. Government Guaranteed) 8.40% 7/31/2001 5,000 5,221
----------
1,022,976
----------
AGENCY BONDS & NOTES (8.8%)
Federal Farm Credit Bank 4.80% 11/6/2003 9,000 8,450
Federal Farm Credit Bank 5.70% 6/18/2003 5,000 4,871
Federal Home Loan Bank 5.575% 9/2/2003 30,000 29,057
Federal Home Loan Bank 5.675% 8/18/2003 21,800 21,198
Federal Home Loan Mortgage Corp. 6.30% 6/1/2004 45,000 44,079
----------
107,655
----------
MORTGAGED-BACKED SECURITIES (5.0%)
Federal National Mortgage Assn. 6.00% 4/1/2006 (1) 17,798 17,246
Federal Home Loan Mortgage Corp. 6.00% 8/1/2006 (1) 45,000 43,605
----------
60,851
----------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $1,205,481) 1,191,482
- ------------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (5.3%)
- ------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 12,169 12,169
Collateralized By U.S. Government Obligations in a
Pooled Cash Account--Note I 5.10% 8/2/1999 52,234 52,234
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $64,403) 64,403
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.0%)
(COST $1,269,884) 1,255,885
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 54
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- ---------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-3.0%)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Other Assets--Note C $ 20,026
Security Lending Collateral Payable to Brokers--Note I (52,234)
Other Liabilities (4,756)
-----------
(36,964)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------
Applicable to 120,728,072 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,218,921
=====================================================================================================================
NET ASSET VALUE PER SHARE $10.10
=====================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration
normally to qualified institutional buyers. At July 31, 1999, the aggregate
value of these securities was $38,795,000, representing 3.2% of net assets.
(3) Restricted security representing 0.6% of net assets at July 31, 1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AT JULY 31,1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,237,056 $10.25
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (4,136) (.03)
Unrealized Depreciation--Note H (13,999) (.12)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,218,921 $10.10
=====================================================================================================================
</TABLE>
3
<PAGE> 55
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM FEDERAL FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (94.8%)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (9.5%)
<S> <C> <C> <C> <C>
U.S. Treasury Inflation-Indexed Note 3.375% 1/15/2007 $ 16,784 $ 16,076
U.S. Treasury Inflation-Indexed Note 3.875% 1/15/2009 48,644 48,005
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 17,187 16,795
Banco Nacional de Comercio Exterior
(U.S. Government Guaranteed) 8.038% 10/16/1999 (1) 1,500 1,515
Government Export Trust
(U.S. Government Guaranteed) 6.61% 9/15/1999 (1) 974 978
Guaranteed Export Certificates
(U.S. Government Guaranteed) 7.50% 8/15/2000 (1) 4,111 4,129
Guaranteed Export Trust
(U.S. Government Guaranteed) 5.23% 4/1/2002 (1) 13,787 13,452
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 7.815% 8/15/2000 (1) 3,125 3,192
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 8.75% 8/15/2000 (1) 4,688 4,832
Private Export Funding Corp.
(U.S. Government Guaranteed) 6.31% 9/30/2004 10,000 9,912
Private Export Funding Corp.
(U.S. Government Guaranteed) 7.03% 10/31/2003 5,000 5,103
Private Export Funding Corp.
(U.S. Government Guaranteed) 9.45% 12/31/1999 33,580 34,153
---------
158,142
---------
AGENCY BONDS & NOTES (61.1%)
Federal Farm Credit Bank 6.10% 11/4/2004 5,000 4,900
Federal Home Loan Bank 4.675% 10/15/2002 22,000 21,022
Federal Home Loan Bank 4.967% 8/25/1999 25,000 24,903
Federal Home Loan Bank 5.37% 1/16/2003 23,750 22,979
Federal Home Loan Bank 5.375% 3/2/2001 57,000 56,496
Federal Home Loan Bank 5.40% 1/15/2003 29,575 28,643
Federal Home Loan Bank 5.40% 2/2/2004 103,000 97,683
Federal Home Loan Bank 5.42% 1/22/2003 30,000 29,069
Federal Home Loan Bank 5.50% 1/21/2003 30,000 29,143
Federal Home Loan Bank 5.60% 9/2/2003 8,000 7,756
Federal Home Loan Bank 5.625% 3/19/2001 20,000 19,894
Federal Home Loan Bank 5.735% 7/22/2003 8,180 7,975
Federal Home Loan Bank 5.97% 12/12/2000 7,000 7,010
Federal Home Loan Mortgage Corp. 5.00% 2/15/2001 50,000 49,330
Federal Home Loan Mortgage Corp. 6.52% 1/2/2002 23,000 23,149
Federal National Mortgage Assn. 5.10% 9/25/2000 15,000 14,920
Federal National Mortgage Assn. 5.72% 1/9/2001 10,000 9,968
Federal National Mortgage Assn. 5.72% 3/13/2001 9,000 8,962
Federal National Mortgage Assn. 5.75% 4/15/2003 78,000 76,391
Federal National Mortgage Assn. 5.83% 10/16/2000 15,000 14,994
Federal National Mortgage Assn. 5.86% 8/20/2003 71,835 70,087
Federal National Mortgage Assn. 5.875% 4/23/2004 10,000 9,665
Federal National Mortgage Assn. 5.90% 4/12/2004 30,565 29,593
Federal National Mortgage Assn. 5.94% 3/29/2004 12,052 11,687
Federal National Mortgage Assn. 5.96% 4/23/2003 86,000 84,365
Federal National Mortgage Assn. 5.97% 10/2/2000 11,000 11,013
Federal National Mortgage Assn. 6.00% 4/23/2003 30,000 29,465
Federal National Mortgage Assn. 6.01% 7/17/2000 39,010 38,285
Federal National Mortgage Assn. 6.06% 5/7/2003 31,000 30,472
Federal National Mortgage Assn. 6.10% 5/21/2003 20,000 19,680
Federal National Mortgage Assn. 6.17% 1/31/2004 (1) 18,769 18,340
Federal National Mortgage Assn. 6.18% 12/10/2001 10,000 9,951
Federal National Mortgage Assn. 6.23% 3/1/2002 13,250 13,251
Federal National Mortgage Assn. 6.375% 1/16/2002 14,000 14,059
Federal National Mortgage Assn. 6.44% 11/15/2001 28,635 28,584
Federal National Mortgage Assn. 6.45% 2/14/2002 10,000 9,981
Federal National Mortgage Assn. 6.70% 5/6/2002 12,750 12,900
Federal National Mortgage Assn. 6.80% 1/10/2003 21,600 21,854
----------
1,018,419
----------
MORTGAGE-BACKED SECURITIES (24.2%)
Federal Home Loan Mortgage Corp. 5.50% 11/1/2000 (1) 6,588 6,491
Federal Home Loan Mortgage Corp. 5.50% 1/1/2001 (1) 17,994 17,669
</TABLE>
4
<PAGE> 56
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp. 5.81% 1/25/2001 (1) $ 20,000 $ 19,675
Federal Home Loan Mortgage Corp. 6.00% 7/1/2005 (1) 11,817 11,451
Federal Home Loan Mortgage Corp 6.00% 8/1/2005 (1) 36,353 35,225
Federal Home Loan Mortgage Corp. 6.00% 7/1/2006 (1) 41,802 40,505
Federal Home Loan Mortgage Corp. 6.11% 9/7/2001 (1) 45,000 44,550
Federal Home Loan Mortgage Corp. 6.35% 3/18/2001 (1) 10,000 9,948
Federal Home Loan Mortgage Corp. 6.43% 12/19/2000 (1) 41,999 41,907
Federal Home Loan Mortgage Corp. 6.53% 11/25/2010 (1) 26,733 26,716
Federal Home Loan Mortgage Corp. 6.59% 8/31/2000 (1) 22,009 21,971
Federal Home Loan Mortgage Corp. 6.92% 9/25/2000 (1) 9,638 9,632
Federal National Mortgage Assn. 6.00% 10/1/2005 (1) 15,988 15,492
Federal National Mortgage Assn. 6.00% 11/1/2005 (1) 13,770 13,343
Federal National Mortgage Assn. 6.00% 6/29/2006 (1) 49,782 48,238
Vendee Mortgage Trust (U.S. Government Guaranteed) 6.50% 8/26/2001 (1) 16,628 16,611
Vendee Mortgage Trust (U.S. Government Guaranteed) 6.50% 12/14/2001 (1) 24,641 24,633
----------
404,057
----------
- ------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $1,608,899) 1,580,618
- ------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (4.9%)
- ------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 71,572 71,572
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note I 5.10% 8/2/1999 10,213 10,213
- ------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $81,785) 81,785
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%)
(COST $1,690,684) 1,662,403
- ------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- ------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 21,010
Liabilities--Note I (15,518)
----------
5,492
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------
Applicable to 167,286,209 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,667,895
==================================================================================================================
NET ASSET VALUE PER SHARE $9.97
==================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,716,967 $10.26
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (20,791) (.12)
Unrealized Depreciation--Note H (28,281) (.17)
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS $1,667,895 $ 9.97
=================================================================================================================
</TABLE>
5
<PAGE> 57
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (84.8%)
- -----------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (21.1%)
<S> <C> <C> <C> <C>
ARG Funding Corp. 5.88% 3/6/2002 (1)(3) $ 45,000 $ 44,326
Advanta Mortgage Loan Trust 5.98% 3/1/2014 (1) 28,750 28,600
Advanta Mortgage Loan Trust 6.25% 2/25/2020 (1) 39,000 38,912
American Express Credit Account Master Trust 5.85% 11/15/2006 (1) 24,800 23,810
American Express Credit Account Master Trust 6.40% 4/15/2005 (1) 49,500 49,480
Banc One Financial Services Home Equity Loan Trust 6.69% 8/25/2013 (1) 23,000 23,035
CIT Home Equity Loan Trust 6.08% 12/15/2007 (1) 25,000 25,008
CIT Home Equity Loan Trust 6.37% 3/15/2012 (1) 6,549 6,552
California Infrastructure & Economic Development Bank
SP Trust PG&E-1 6.15% 6/25/2002 (1) 8,417 8,450
California Infrastructure & Economic Development Bank
SP Trust PG&E-1 6.42% 9/25/2008 (1) 10,000 9,863
California Infrastructure & Economic Development Bank SCE-1 6.14% 10/12/1999 (1) 8,909 8,941
California Infrastructure SP SCE-1 6.28% 9/25/2005 (1) 20,000 19,836
Chase Manhattan Auto Trust 6.65% 9/15/2003 (1) 17,576 17,575
Chemical Master Credit Card Trust I 6.38% 6/15/2003 (1) 10,000 10,079
Citibank Credit Card Master Trust 5.55% 1/9/2006 (1) 15,187 14,400
Citibank Credit Card Master Trust 5.75% 1/15/2003 (1) 10,400 10,379
Citibank Credit Card Master Trust 5.95% 2/7/2005 (1) 10,400 10,114
Citibank Credit Card Master Trust 6.35% 8/15/2000 (1) 28,000 28,131
Citibank Credit Card Master Trust 6.70% 2/15/2004 (1) 13,000 13,010
ComEd Transitional Funding Trust Series 5.34% 3/25/2004 (1) 35,000 34,176
ComEd Transitional Funding Trust Series 5.39% 6/25/2005 (1) 50,000 48,300
Countrywide ABS Certificate 6.24% 9/25/2018 (1) 25,522 25,158
Countrywide ABS Certificate 6.675% 2/25/2012 (1) 3,165 3,166
Credit Card Merchant Voucher Receivables Master Trust 6.23% 8/1/2002 (1)(3) 16,322 16,227
Dayton Hudson Credit Card Master Trust 6.25% 8/25/2005 (1) 15,000 14,883
Discover Card Master Trust I Series 5.75% 4/15/2001 (1) 77,290 76,684
Discover Card Master Trust I Series 6.55% 2/18/2003 (1) 15,700 15,812
EQCC Home Equity Loan Trust Class A 6.223% 11/25/2001 (1) 19,650 19,394
Ford Credit Auto Owner Trust 6.15% 12/15/2001 (1) 25,000 24,852
Ford Credit Auto Loan Master Trust 6.50% 8/15/2002 (1) 35,000 35,264
General Electric Capital Mortgage Services 6.26% 12/15/2012 (1) 14,700 14,691
Honda Auto Lease Trust 6.45% 9/15/2002 (1) 24,600 24,546
Household Credit Card Master Trust 5.90% 5/15/2002 (1) 20,000 19,929
Illinois Power Special Purpose 5.26% 6/25/2003 (1) 10,000 9,902
MBNA Master Credit Card Trust 6.45% 2/15/2008 (1) 5,000 4,956
MBNA Master Credit Card Trust 6.60% 1/15/2003 (1) 10,000 10,089
Mellon Bank Home Equity Installment Loan Trust Series 6.21% 8/25/2009 (1) 11,500 11,454
NationsBank Credit Card Master Trust 6.45% 4/15/2003 (1) 17,000 17,151
Navistar Financial 5.95% 4/15/2003 (1) 39,650 39,420
Navistar Financial 6.22% 10/17/2005 (1) 4,000 3,949
Neiman Marcus Credit Card Master Trust 7.60% 6/15/2003 (1) 5,000 5,075
Option One Mortgage Loan Trust 5.92% 5/25/2029 23,250 22,790
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 49,750 47,596
PNC Mortgage Securities Corp. 6.49% 10/25/2026 (1) 17,310 17,331
PP&L Transition Bonds Series 6.96% 12/26/2007 (1) 53,000 52,841
Premier Auto Trust 6.55% 9/6/2003 (1) 5,000 4,979
Providian Master Trust Series 6.25% 6/15/2007 (1) 40,000 39,680
Providian Master Trust Series 6.45% 1/15/2003 (1) 10,000 9,886
Residential Asset Securities Corp. Series 6.00% 5/25/2020 (1) 73,650 72,596
Residential Asset Securities Corp. Series 6.285% 9/25/2020 (1) 26,423 26,343
Toyota Auto Lease Trust 6.20% 9/25/1999 (1) 70,000 70,085
UAC Securitization Corp. 5.57% 9/8/2003 (1) 24,650 24,416
UAC Securitization Corp. 6.31% 12/8/2006 (1) 16,836 16,523
WFS Financial 6.32% 10/20/2003 (1) 25,000 24,834
World Financial Network Credit Card Master Trust 6.70% 2/15/2004 (1) 41,000 41,317
----------
1,336,796
----------
</TABLE>
6
<PAGE> 58
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
FINANCE (38.6%)
AUTO (2.7%)
<S> <C> <C> <C> <C>
Ford Motor Credit Co. 5.375% 10/15/2002 $ 22,000 $ 21,156
Ford Motor Credit Co. 6.125% 4/28/2003 (5) 29,000 28,258
Ford Motor Credit Co. 6.55% 9/10/2002 28,000 27,863
Ford Motor Credit Co. 6.85% 8/15/2000 5,000 5,044
General Motors Acceptance Corp. 6.21% 9/19/2000 35,000 35,030
General Motors Acceptance Corp. 6.65% 5/24/2000 30,000 30,173
General Motors Acceptance Corp. 8.40% 10/15/1999 5,000 5,027
Toyota Motor Credit Corp. 5.50% 9/17/2001 20,000 19,631
BANKS (11.6%)
Banc One Corp. 6.40% 8/1/2002 10,000 9,911
Banc One Corp. 6.875% 8/1/2006 7,000 6,880
Bankers Trust NY Corp. 9.50% 6/14/2000 11,930 12,248
Capital One Bank 6.40% 5/8/2003 15,000 14,576
Capital One Bank 6.58% 4/17/2001 15,750 15,680
Capital One Bank 6.60% 8/20/2001 10,200 10,138
Compass Bank 6.45% 5/1/2009 8,000 7,421
CoreStates Capital Corp. 6.186% 10/2/2000 35,000 34,968
Dime Bancorp Inc. 7.00% 7/25/2001 15,000 14,942
First Fidelity Bancorp 9.625% 8/15/1999 23,540 23,566
First National Bank of Commerce 6.50% 1/14/2000 25,000 25,070
First Union Corp. 8.125% 6/24/2002 5,000 5,182
Firstar Corp. 6.35% 7/13/2001 25,000 24,861
Firstar Corp. 6.50% 7/15/2002 20,000 19,828
HSBC Americas Inc. 6.625% 3/1/2009 10,000 9,371
Long Island Savings Bank 6.20% 4/2/2001 12,000 11,876
Long Island Savings Bank 7.00% 6/13/2002 13,500 13,443
Mellon Financial Co. 5.75% 11/15/2003 5,000 4,777
Mellon Bank Corp. 7.00% 3/15/2006 6,250 6,131
Mercantile Bancorp 6.80% 6/15/2001 11,512 11,548
Meridian Bancorp 6.625% 6/15/2000 26,550 26,662
The Money Store Inc. 8.05% 4/15/2002 10,277 10,588
National City Bank Cleveland 6.35% 3/15/2001 36,860 36,830
NationsBank Corp 5.80% 1/31/2001 14,675 14,550
NationsBank Corp. 6.375% 5/15/2005 25,000 24,142
NationsBank Corp. 8.125% 6/15/2002 9,898 10,268
Norwest Corp. 6.125% 10/15/2000 6,225 6,218
Norwest Corp. 7.75% 3/1/2002 5,000 5,122
Wells Fargo Co. 6.20% 12/1/2005 5,000 4,743
PNC Funding Corp. 6.125% 9/1/2003 7,660 7,403
PNC Funding Corp. 9.875% 3/1/2001 5,565 5,825
Popular Inc. 6.20% 4/30/2001 37,200 36,782
Provident Bank of Ohio 6.125% 12/15/2000 12,700 12,640
Providian National Bank 6.70% 3/15/2003 32,380 31,372
Providian National Bank 6.75% 3/15/2002 30,000 29,473
Security Pacific Corp. 11.00% 3/1/2001 20,907 22,308
Shawmut National Corp. 7.20% 4/15/2003 7,000 7,064
Southern National Corp. 7.05% 5/23/2003 28,469 28,400
Summit Bancorp 8.625% 12/10/2002 26,725 27,899
U.S. Bancorp 5.213% 8/15/1999 (2)(3) 55,700 55,700
US Bank NA Minnesota 5.25% 6/4/2003 20,000 18,907
US Bank NA Minnesota 6.50% 2/1/2008 4,750 4,524
Wachovia Corp. 6.70% 6/21/2004 20,550 20,380
Wells Fargo & Co. 6.125% 11/1/2003 5,000 4,847
CONSUMERS (1.8%)
Aristar Inc. 6.125% 12/1/2000 48,000 47,777
Household Finance Corp. 7.00% 8/1/2003 12,000 11,950
</TABLE>
7
<PAGE> 59
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Norwest Financial Corp. 7.95% 5/15/2002 $ 4,200 $ 4,336
Sears Roebuck Acceptance Corp. 6.22% 11/8/2000 48,000 47,958
Sears Roebuck Acceptance Corp. 6.69% 4/30/2001 400 402
DIVERSIFIED (2.5%)
AT&T Capital Corp. 6.59% 8/4/2000 5,000 4,987
AT&T Capital Corp. 6.70% 2/15/2001 50,000 49,626
AT&T Capital Corp. 6.875% 1/16/2001 5,000 4,978
Associates Corp. of North America 5.75% 11/1/2003 38,000 36,388
Associates Corp. of North America 8.37% 12/21/1999 19,000 19,185
Associates Corp. of North America 8.40% 11/29/1999 10,000 10,083
Finova Capital Corp. 6.05% 9/15/1999 25,000 25,009
Finova Capital Corp. 6.625% 9/15/2001 10,250 10,226
INSURANCE (3.7%)
Conseco Inc. 6.40% 2/10/2003 30,000 28,644
Conseco Inc. 7.875% 12/15/2000 15,000 15,120
Liberty Financial Co. 6.75% 11/15/2008 17,650 16,707
Orion Capital Corp. 9.125% 9/1/2002 15,225 15,975
Progressive Corp. 7.30% 6/1/2006 12,290 12,381
Progressive Corp. 10.00% 12/15/2000 7,000 7,306
Prudential Insurance Co. of America 6.375% 7/23/2006 (3) 30,000 28,726
SunAmerica Inc. 6.20% 10/31/1999 26,000 26,032
SunAmerica Inc. 6.58% 1/15/2002 5,000 5,018
Travelers Property Casualty Corp. 6.25% 10/1/1999 50,000 50,051
Travelers Property Casualty Corp. 6.75% 9/1/1999 30,000 30,026
OTHER (16.3%)
Associated Estates Realty Corp. 6.88% 12/9/2004 5,000 4,229
Associated Estates Realty Corp. 8.375% 4/15/2000 15,680 15,621
Bay Apartment Communities 6.50% 1/15/2005 8,300 7,848
Bear, Stearns & Co., Inc. 7.625% 9/15/1999 10,000 10,022
Bear, Stearns & Co., Inc. 7.625% 4/15/2000 26,900 27,189
Bradley Operating LP 7.00% 11/15/2004 10,000 9,604
Chelsea GCA Realty 7.75% 1/26/2001 18,930 18,918
Colonial Realty LP 6.96% 7/26/2004 25,000 23,919
Comdisco Inc. 5.75% 2/15/2001 15,000 14,801
Dean Witter Discover & Co. 6.30% 1/15/2006 8,000 7,624
Donaldson Lufkin & Jenrette, Inc. 6.00% 12/1/2001 25,000 24,644
Donaldson Lufkin & Jenrette, Inc. 6.25% 8/1/2001 29,650 29,446
Donaldson Lufkin & Jenrette, Inc. 6.70% 6/30/2000 15,000 15,077
ERAC USA Finance Co. 6.35% 1/15/2001 (3) 7,330 7,284
ERAC USA Finance Co. 6.625% 5/15/2006 (3) 35,000 33,006
ERAC USA Finance Co. 7.00% 6/15/2000 (3) 9,880 9,920
Equity Residential Properties Trust Operating LP 7.95% 4/15/2002 7,000 7,134
First Industrial LP 7.00% 12/1/2006 17,000 15,751
First Industrial LP 7.15% 5/15/2027 8,150 7,939
First Industrial LP 7.375% 5/15/2004 (3) 12,000 11,651
Gables Realty LP 6.80% 3/15/2005 10,000 9,334
Goldman Sachs Group LP 6.20% 12/15/2000 (3) 32,725 32,706
Goldman Sachs Group LP 6.875% 9/15/1999 (3) 16,175 16,195
HRPT Properties Trust 6.70% 2/23/2005 25,000 23,046
JDN Realty Corp. 6.80% 8/1/2004 26,300 24,837
Lehman Brothers Holdings Inc. 5.37% 10/18/1999 (2) 10,000 9,997
Lehman Brothers Holdings Inc. 6.20% 1/15/2002 35,000 34,287
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 47,000 45,390
Lehman Brothers Holdings Inc. 6.375% 10/23/2000 33,000 32,951
Lehman Brothers Holdings Inc. 7.00% 5/15/2003 14,800 14,636
Lehman Brothers Holdings Inc. 7.375% 5/15/2004 9,930 9,930
Mack-Cali Realty 7.25% 3/15/2009 9,500 8,961
</TABLE>
8
<PAGE> 60
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrill Lynch & Co., Inc. 5.72% 4/15/2002 $ 50,000 $ 48,867
Merrill Lynch & Co., Inc. 6.05% 3/6/2001 14,500 14,425
Morgan Stanley, Dean Witter & Co. 5.625% 1/20/2004 12,000 11,360
Morgan Stanley, Dean Witter, Discover & Co. 5.75% 2/15/2001 10,500 10,401
Morgan Stanley, Dean Witter, Discover & Co. 5.875% 2/28/2001 55,000 54,574
Newcourt Credit Group 6.875% 2/16/2005 (3) 14,700 13,943
Oasis Residential Inc. 6.75% 11/15/2001 22,600 22,342
PaineWebber Group Inc. 6.32% 3/18/2003 25,000 24,309
PaineWebber Group Inc. 6.375% 5/15/2004 27,060 26,113
PaineWebber Group Inc. 6.45% 12/1/2003 25,900 25,169
PaineWebber Group Inc. 7.625% 10/15/2008 5,000 5,037
Post Apartment Homes LP 5.277% 9/3/1999 (2) 30,000 29,907
Post Apartment Homes LP 7.02% 4/2/2001 20,000 20,004
Reckson Operating Partnership LP 7.40% 3/15/2004 10,000 9,746
Reckson Operating Partnership LP 7.75% 3/15/2009 21,000 19,965
Regency Centers LP 7.40% 4/1/2004 6,900 6,646
Salomon Smith Barney Holdings Inc. 7.30% 5/15/2002 25,400 25,679
Salomon Smith Barney Holdings Inc. 7.50% 5/1/2002 11,500 11,681
Salomon Smith Barney Holdings Inc. 7.98% 3/1/2000 17,500 17,691
Summit Properties Inc. 6.625% 12/15/2003 16,000 15,191
Summit Properties Inc. 6.80% 8/15/2002 20,000 19,412
Summit Properties Inc. 6.95% 8/15/2004 12,500 11,901
Summit Properties Inc. 7.20% 8/15/2007 5,000 4,638
Topaz Ltd. (Morgan Stanley) 6.92% 8/7/2003 (3) 13,607 13,502
Trinet Corp. Realty Trust 7.30% 5/15/2001 5,500 5,352
Wellsford Residential Property Trust 9.375% 2/1/2002 5,175 5,422
----------
2,453,311
----------
INDUSTRIAL (14.4%)
CBI Industries 7.53% 8/26/1999 15,000 15,016
CSC Enterprises 6.50% 11/15/2001 (3) 28,500 28,465
Cabot Industrial Properties, LP 7.125% 5/1/2004 16,670 16,260
Champion Enterprises Inc. 7.625% 5/15/2009 (3) 8,000 7,459
Coastal Corp. 6.50% 5/15/2006 10,000 9,568
Comdisco Inc. 6.00% 1/30/2002 28,800 28,235
Continental Airlines Pass-Through Trust 6.331% 4/15/2003 14,949 14,852
Continental Airlines Pass-Through Trust 6.465% 10/15/2004 10,510 10,322
Continental Airlines Pass-Through Trust 6.541% 3/15/2008 13,765 13,155
Continental Airlines Pass-Through Trust 6.80% 7/2/2007 10,620 10,261
Continental Airlines Pass-Through Trust 7.434% 9/15/2004 6,700 6,677
Cox Communications, Inc. 6.375% 6/15/2000 37,000 37,095
Delta Air Lines 6.65% 3/15/2004 33,400 32,536
Delta Air Lines 10.375% 2/1/2011 5,750 6,880
Dillard's Inc. 5.79% 11/15/2001 25,000 24,552
Dillard's Inc. 6.625% 11/15/2008 15,000 14,094
R.R. Donnelley & Sons Co. 7.96% 11/8/1999 15,000 15,080
Dresser Industries, Inc. 8.00% 4/15/2003 20,067 21,032
Electronic Data Systems Corp. 6.85% 5/15/2000 (3) 18,000 18,145
Federal Express Corp. 9.875% 4/1/2002 8,195 8,736
Finova Capital Corp 6.11% 2/18/2003 35,600 34,528
Food Lion, Inc. 8.41% 9/26/2001 5,000 5,174
Harrahs Operating Co., Inc. 7.50% 1/15/2009 22,400 21,553
Hertz Corp. 6.50% 4/1/2000 5,000 5,015
Hertz Corp. 7.375% 6/15/2001 8,275 8,364
International Paper Co. 6.125% 11/1/2003 5,500 5,351
International Paper Co. 9.50% 3/15/2002 5,100 5,437
Knight-Ridder, Inc. 8.50% 9/1/2001 12,771 13,124
Kroger Co. 6.34% 6/1/2001 (3) 9,575 9,521
Lafarge Corp 6.375% 7/15/2005 14,860 14,291
Lockheed Martin Corp. 6.85% 5/15/2001 7,000 7,026
</TABLE>
9
<PAGE> 61
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
McDonald's Corp. 8.375% 10/29/1999 $ 8,550 $ 8,608
Minnesota Mining & Manufacturing ESOP Trust 5.62% 7/15/2009 (3) 46,645 43,722
Mobil Corp. ESOP 9.17% 2/29/2000 16,887 17,228
Monsanto Co. 5.625% 12/1/2001 (3) 15,000 14,648
Occidental Petroleum Corp. 6.75% 9/16/1999 6,000 6,006
Occidental Petroleum Corp. 8.50% 11/9/2001 10,000 10,338
PanAmSat Corp. 6.00% 1/15/2003 7,500 7,177
PanAmSat Corp. 6.125% 1/15/2005 30,000 27,874
Parker Retirement Savings Plan Trust 6.34% 7/15/2008 (3) 23,174 22,296
Pepsi Bottling Holdings Inc. 5.375% 2/17/2004 (3) 25,000 23,706
Philip Morris Cos., Inc. 7.00% 7/15/2005 5,000 4,911
Philip Morris Cos., Inc. 7.25% 1/15/2003 9,200 9,245
Philip Morris Cos., Inc. 8.25% 10/15/2003 7,500 7,801
Praxair, Inc. 6.70% 4/15/2001 52,000 52,116
Rockwell International Corp. 8.875% 9/15/1999 33,860 33,992
Sara Lee Corp. 6.50% 5/16/2000 15,000 15,083
Security Capital Group 7.75% 11/15/2003 20,000 19,735
TCI Communications, Inc. 6.375% 9/15/1999 25,000 25,029
TRW Inc. 6.50% 6/1/2002 (3) 20,000 19,768
Telecommunications, Inc. 8.25% 1/15/2003 10,000 10,490
USA Waste Services 6.50% 12/15/2002 22,000 21,530
Union Carbide Corp. 7.00% 8/1/1999 12,315 12,309
Union Pacific Corp. 7.00% 6/15/2000 10,000 10,073
Union Pacific Railroad Co. (Equipment Trust Certificate) 6.99% 7/23/1999 231 232
VF Corp. 7.60% 4/1/2004 18,635 18,699
---------
910,420
---------
UTILITIES (10.7%)
AEP Resources Inc. 6.50% 12/1/2003 (3) 50,000 48,775
Arizona Public Service 5.75% 9/15/2000 11,950 11,901
Baltimore Gas & Electric Co. 6.68% 10/11/2001 16,000 16,044
Boston Edison Co. 6.05% 8/15/2000 25,500 25,495
Boston Edison Co. 6.80% 2/1/2000 10,000 10,046
Boston Edison Co. 6.80% 3/15/2003 14,000 13,889
Cinergy Corp. 6.125% 4/15/2004 (3) 8,850 8,543
Cinergy Global Resources 6.20% 11/3/2008 (3) 5,000 4,648
Coastal Corp. 6.375% 2/1/2009 15,300 14,088
Connectiv Inc. 6.73% 6/1/2006 63,000 61,949
Consolidated Edison 6.50% 2/1/2001 5,000 5,012
Duquesne Light Co. 6.10% 5/10/2000 2,100 2,102
East Coast Power 6.737% 3/31/2008 (3) 8,487 8,005
Edison Mission Energy Funding Corp. 6.77% 8/24/2001 (3) 21,294 21,115
Florida Gas Transmission 8.14% 11/1/1999 (3) 10,000 10,051
GTE Corp. 6.36% 4/15/2006 7,950 7,669
GTE Corp. 6.39% 9/11/2000 10,000 10,045
GTE Northwest Inc. 7.375% 5/1/2001 10,000 10,179
GTE Southwest Inc. 5.82% 12/1/1999 18,650 18,658
Indiana Michigan Power Co. 6.40% 3/1/2000 20,000 20,055
KN Energy Inc. 6.45% 11/30/2001 24,850 24,483
KN Energy Inc. 6.65% 3/1/2005 5,000 4,767
Kansas City Power & Light Co. 6.50% 11/14/2001 5,000 4,994
Kern River Funding Corp. 6.42% 4/22/2000 (3) 8,196 8,206
LG&E Capital Corp. 6.205% 5/1/2004 (3) 21,700 20,969
MCN Investment Corp. 6.03% 2/1/2001 4,000 3,957
Mid American Energy Co. 7.23% 9/15/2005 12,500 12,352
Midamerican Funding LLC 5.85% 3/1/2001 (3) 20,000 19,808
Nevada Power Co. 6.20% 4/15/2004 6,850 6,593
Nevada Power Co. 7.06% 5/1/2000 12,000 12,080
Nipsco Capital Markets 7.39% 4/1/2004 5,000 5,007
NYNEX Credit Co. 6.50% 9/15/2000 (3) 30,000 30,044
</TABLE>
10
<PAGE> 62
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NYNEX Corp. Capital Funding 8.10% 11/1/1999 $ 5,070 $ 5,098
NYNEX Corp. Capital Funding 8.11% 11/1/1999 15,000 15,083
PSE&G Capital Corp. 6.25% 5/15/2003 (3) 25,000 24,290
PSE&G Capital Corp. 6.74% 10/23/2001 (3) 26,000 25,921
Progress Capital Holdings 5.47% 10/23/2000 (3) 25,000 24,659
Progress Capital Holdings 6.88% 8/1/2001 (3) 20,000 19,985
Texas Utilities Co. 8.25% 4/1/2004 6,000 6,301
Texas Utilities Co. 9.50% 8/1/1999 8,500 8,500
US West Capital Funding, Inc. 6.125% 7/15/2002 32,000 31,327
US West Capital Funding, Inc. 6.25% 7/15/2005 15,000 14,199
Virginia Electric Power 6.30% 6/21/2001 19,750 19,684
---------
676,576
---------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $5,461,655) 5,377,103
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (1.8%)
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (0.3%)
U.S. Treasury Bond 5.50% 5/15/2009 1,430 1,387
U.S. Treasury Note 5.625% 5/15/2001 15,000 15,001
U.S. Treasury Note 6.50% 5/15/2005 6,000 6,142
---------
22,530
---------
AGENCY BONDS & NOTES (0.7%)
Federal Home Loan Mortgage Corp. 6.11% 9/7/2001 (1) 23,000 22,770
Federal Home Loan Mortgage Corp. 6.43% 12/19/2000 (1) 13,125 13,096
Federal Home Loan Mortgage Corp. 6.92% 9/25/2000 (1) 8,109 8,104
Government Export Trust (U.S. Government Guaranteed) 6.61% 9/15/1999 (1) 375 376
---------
44,346
---------
MORTGAGE-BACKED SECURITIES (0.8%)
Federal Home Loan Mortgage Corp. 5.50% 10/1/2000 (1) 11,108 10,931
Federal Home Loan Mortgage Corp. 6.00% 12/1/1999 (1) 5,139 5,129
Federal Home Loan Mortgage Corp. 6.00% 1/1/2001 (1) 9,386 9,270
Federal Home Loan Mortgage Corp. 6.50% 10/1/1999 (1) 4,312 4,310
Federal Home Loan Mortgage Corp. 7.00% 3/1/2000 (1) 8,584 8,584
Federal Home Loan Mortgage Corp. 7.00% 5/1/2000 (1) 3,378 3,379
Federal National Mortgage Assn. 6.00% 1/1/2001 (1) 6,715 6,622
---------
48,225
---------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $115,978) 115,101
- -----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLAR-DENOMINATED)(11.0%)
- -----------------------------------------------------------------------------------------------------------------------
Australian Gas Light Co. 6.40% 4/15/2008 (3) 10,000 9,390
Banco Latinoamericano de Exportaciones 6.35% 4/10/2000 (3) 25,000 24,980
Bank of Nova Scotia 9.00% 10/1/1999 12,394 12,459
CIBC Capital Funding LP 6.25% 12/17/2002 (3) 25,000 24,573
Canadian Imperial Bank of Commerce (NY) 6.20% 8/1/2000 70,525 70,701
Corporacion Nacional del Cobre de Chile 7.375% 5/1/2009 (3) 30,985 28,681
Israel Electric Corp. 7.25% 12/15/2006 (3) 13,000 12,775
Kimberly-Clark de Mexico 8.875% 8/1/2009 7,860 7,822
Korea Electric Power 7.00% 10/1/2002 6,000 5,802
Korea Electric Power 10.00% 4/1/2001 (3) 11,980 12,360
Korea Development Bank 7.125% 9/17/2001 52,820 52,195
Korea Development Bank 7.125% 4/22/2004 17,350 16,595
Korea Development Bank 7.375% 9/17/2004 5,000 4,809
Malaysia 8.75% 6/1/2009 15,670 15,356
National Westminster Bancorp Inc. 9.45% 5/1/2001 8,881 9,315
Noranda, Inc. 8.00% 6/1/2003 20,000 20,223
Noranda, Inc. 8.625% 7/15/2002 15,000 15,416
Oil Enterprises Ltd. 6.239% 6/30/2008 (1)(3) 38,607 37,024
</TABLE>
11
<PAGE> 63
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PacifiCorp Australia LLC 6.15% 1/15/2008 (3)(4) $ 20,900 $ 19,391
Pemex Finance Ltd. 6.125% 11/15/2003 (3) 5,850 5,784
Pemex Finance Ltd. 9.14% 8/15/2004 (3) 44,350 44,035
Pemex Finance Ltd. 9.69% 8/15/2009 (3) 31,000 30,752
Petroliam Nasional Berhad 7.125% 10/18/2006 (3) 26,450 23,461
Placer Dome Inc. 6.14% 1/29/2002 15,000 14,457
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 13,015 12,339
Pohang Iron & Steel Co. Ltd. 7.50% 8/1/2002 11,320 11,097
Province of Ontario 5.50% 10/1/2008 5,000 4,527
Province of Ontario 7.375% 1/27/2003 10,000 10,245
Province of Saskatchewan 6.625% 7/15/2003 11,100 11,096
Qantas Airways 7.75% 6/15/2009 24,750 24,833
TPSA Finance BV 7.75% 12/10/2008 (3) 27,000 25,526
Telecom Argentina 9.75% 7/12/2001 4,800 4,752
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 (3) 5,000 4,898
Telefonica de Argentina 9.125% 5/7/2008 10,000 8,625
Telefonica de Argentina 9.875% 7/1/2002 10,000 9,838
The State of Qatar 9.50% 5/21/2009 (3) 17,500 17,596
Trans Canada Pipelines 7.15% 6/15/2006 11,750 11,624
Westpac Banking 9.125% 8/15/2001 24,966 26,160
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(COST $712,112) 701,512
- -----------------------------------------------------------------------------------------------------------------------
TAXABLE MUNICIPAL BOND (0.6%)
- -----------------------------------------------------------------------------------------------------------------------
Power Authority of the State of NY
(COST $35,000) 6.05% 2/15/2015 35,000 34,967
- -----------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (3.0%)
- -----------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 174,172 174,172
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note I 5.10% 8/2/1999 14,374 14,374
- -----------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $188,546) 188,546
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(COST $6,513,291) 6,417,229
- -----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.2%)
- -----------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 141,312
Liabilities--Note I (217,793)
---------
(76,481)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $6,340,748
=======================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Adjustable Rate Security.
(3) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31, 1999,
the aggregate value of these securities was $1,067,161,000, representing
16.8% of net assets.
(4) Scheduled principal and interest payments are guaranteed by Ambac Assurance
Corporation.
(5) Securities with a value of $4,872,000 have been segregated as initial
margin for open futures contracts.
12
<PAGE> 64
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $6,454,589
Undistributed Net Investment Income --
Accumulated Net Realized Losses (17,889)
Unrealized Depreciation--Note H
Investment Securities (96,062)
Futures Contracts 110
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $6,340,748
=========================================================================================================
Investor Shares--Net Assets applicable to 552,124,359 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $5,855,218
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $10.60
=========================================================================================================
Institutional Shares--Net Assets applicable to 45,783,127 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $485,530
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $10.60
=========================================================================================================
</TABLE>
13
<PAGE> 65
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM TREASURY FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (98.0%)
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (84.2%)
<S> <C> <C> <C> <C>
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 $ 28,545 $ 27,894
U.S. Treasury Bond 7.50% 11/15/2016 28,720 32,041
U.S. Treasury Bond 10.375% 11/15/2012 250,200 315,277
U.S. Treasury Note 6.125% 8/15/2007 176,100 176,503
U.S. Treasury Note 6.50% 5/15/2005 2,550 2,610
U.S. Treasury Note 6.50% 8/15/2005 5,000 5,119
U.S. Treasury Note 6.50% 10/15/2006 13,100 13,407
U.S. Treasury Note 6.875% 5/15/2006 40,450 42,242
U.S. Treasury Note 7.00% 7/15/2006 47,800 50,237
U.S. Treasury Note 7.50% 2/15/2005 262,300 280,682
U.S. Treasury Note 7.875% 11/15/2004 201,100 218,139
Export Funding Trust (U.S. Government Guaranteed) 8.21% 12/29/2006 (1) 23,281 24,697
Government Export Trust (U.S. Government Guaranteed) 6.00% 3/15/2005 (1) 11,979 11,892
Guaranteed Trade Trust (U.S. Government Guaranteed) 6.69% 1/15/2009 (1)(2) 26,476 26,630
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.02% 9/1/2004 (1) 9,740 9,917
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.39% 6/26/2006 (1) 3,582 3,689
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.46% 12/15/2005 (1) 21,761 22,445
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.80% 8/15/2006 (1) 6,726 7,009
Guaranteed Trade Trust (U.S. Government Guaranteed) 8.17% 1/15/2007 (1) 5,625 5,956
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 5.94% 6/20/2006 (1) 14,737 14,559
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 6.08% 8/15/2004 (1) 18,591 18,492
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 6.726% 9/15/2010 (1) 17,000 17,027
Overseas Private Investment Corp.
(U.S. Government Guaranteed) 6.75% 12/15/2008 (1) 10,529 10,631
Private Export Funding Corp.
(U.S. Government Guaranteed) 5.25% 5/15/2005 40,900 38,311
Private Export Funding Corp. (U.S. Government Guaranteed) 5.73% 1/15/2004 39,000 37,837
Private Export Funding Corp. (U.S. Government Guaranteed) 5.87% 7/31/2008 73,300 68,573
Private Export Funding Corp. (U.S. Government Guaranteed) 6.49% 7/15/2007 8,500 8,386
Private Export Funding Corp. (U.S. Government Guaranteed) 7.11% 4/15/2007 13,100 13,410
----------
1,503,612
----------
AGENCY BONDS & NOTES (13.8%)
Federal Home Loan Bank 4.925% 10/14/2008 31,800 27,809
Federal Home Loan Bank 5.315% 12/23/2008 53,450 48,075
Federal Home Loan Bank 5.80% 9/2/2008 3,000 2,817
Federal Home Loan Bank 5.945% 7/28/2008 48,500 45,654
Federal Home Loan Bank 6.525% 6/17/2009 14,500 14,185
Federal Home Loan Bank 6.795% 6/30/2009 38,800 38,703
Federal Home Loan Mortgage Corp. 5.75% 3/15/2009 16,500 15,346
Federal National Mortgage Assn. 6.375% 6/15/2009 2,800 2,728
Federal National Mortgage Assn. 6.40% 5/14/2009 54,800 52,086
----------
247,403
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $1,770,423) 1,751,015
- -----------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.5%)
- -----------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $9,637) 5.07% 8/2/1999 9,637 9,637
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%)
(COST $1,780,060) 1,760,652
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 66
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- ----------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.5%)
- ----------------------------------------------------------------------------------------------------------
Other Assets--Note C $ 34,725
Liabilities (8,453)
----------
26,272
- ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------------------------------------------
Applicable to 172,127,941 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,786,924
==========================================================================================================
NET ASSET VALUE PER SHARE $ 10.38
==========================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 1999, the value of
this security was $26,630,000, representing 1.5% of net assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,828,135 $10.62
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (21,803) (.13)
Unrealized Depreciation--Note H (19,408) (.11)
- -------------------------------------------------------------------------------------------------------
NET ASSETS $1,786,924 $10.38
=======================================================================================================
</TABLE>
15
<PAGE> 67
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (78.9%)
- -----------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (6.9%)
<S> <C> <C> <C> <C>
American Express Credit Account Master Trust 5.85% 11/15/2006 (1) $ 5,000 $ 4,800
California Infrastructure & Economic Development Bank
SP Trust PG&E-1 6.31% 9/25/2020 (1) 4,409 4,318
California Infrastructure & Economic Development Bank
SP Trust PG&E-1 6.32% 9/25/2005 (1) 1,650 1,640
California Infrastructure & Economic Development Bank
SP Trust PG&E-1 6.38% 9/25/2008 (1) 15,000 14,762
California Infrastructure & Economic Development Bank
SP Trust PG&E-1 6.42% 9/25/2008 (1) 1,800 1,775
Citibank Credit Card Master Trust 6.30% 5/15/2008 (1) 10,000 9,619
Citibank Credit Card Master Trust 6.70% 2/15/2004 (1) 5,000 5,004
ComEd Transitional Funding Trust 5.63% 6/25/2009 (1) 15,000 14,051
Illinois Power Special Purpose 5.54% 6/25/2009 (1) 7,000 6,522
MBNA Master Credit Card Trust 6.45% 2/15/2008 (1) 5,000 4,956
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 15,000 14,351
Providian Master Trust 6.25% 11/15/2002 (1) 10,000 9,920
Standard Credit Master Trust 7.25% 4/7/2008 (1) 3,200 3,277
---------
94,995
---------
FINANCE (39.0%)
AUTOMOBILE (1.3%)
Ford Motor Credit Co. 5.80% 1/12/2009 20,000 18,004
BANKS (15.5%)
BB&T Corp. 7.25% 6/15/2007 5,000 4,922
The Bank of New York Co., Inc. 6.625% 6/15/2003 6,000 5,953
The Bank of New York Co., Inc. 8.50% 12/15/2004 10,000 10,572
Bank One Corp. 10.00% 8/15/2010 8,312 9,972
BankAmerica Corp. 7.20% 4/15/2006 10,000 9,911
Citicorp 6.75% 8/15/2005 5,000 4,922
Compass Bank 6.45% 5/1/2009 10,000 9,276
CoreStates Capital Corp. 6.75% 11/15/2006 10,000 9,742
First Bank NA 6.00% 10/15/2003 4,200 4,063
First Bank System, Inc. 6.875% 9/15/2007 10,000 9,796
First Maryland Bancorp 6.875% 6/1/2009 13,000 12,476
First Security Corp. 6.875% 11/15/2006 10,917 10,562
First Tennessee Bank 5.75% 12/1/2008 5,000 4,433
HSBC Americas Inc. 6.625% 3/1/2009 10,000 9,371
HSBC Americas Inc. 7.00% 11/1/2006 2,000 1,954
Mellon Bank Corp. 7.00% 3/15/2006 10,500 10,300
Mellon Bank Corp. 7.625% 9/15/2007 5,000 5,110
Meridian Bancorp, Inc. 6.625% 3/15/2003 3,000 2,975
National City Bank of Kentucky 6.30% 2/15/2011 10,000 9,150
National City Corp. 5.75% 2/1/2009 10,000 8,946
National City Corp. 6.625% 3/1/2004 6,700 6,602
PNC Bank NA 7.875% 4/15/2005 5,000 5,118
PNC Funding Corp. 9.875% 3/1/2001 5,000 5,233
Southern National Corp. 7.05% 5/23/2003 13,000 12,969
Summit Bancorp 8.625% 12/10/2002 5,775 6,029
Summit Bank 6.75% 6/15/2003 8,335 8,222
US Bank NA Minnesota 5.25% 6/4/2003 5,000 4,727
Wells Fargo & Co. 6.25% 4/15/2008 10,000 9,356
CONSUMERS (1.9%)
Household Finance Corp. 5.875% 2/1/2009 7,000 6,277
Norwest Financial, Inc. 7.20% 5/1/2007 5,000 4,997
Norwest Financial, Inc. 7.50% 4/15/2005 5,000 5,079
Sears Roebuck Acceptance Corp. 6.69% 4/30/2001 5,000 5,019
Sears Roebuck Acceptance Corp. 6.80% 10/9/2002 5,000 5,010
</TABLE>
16
<PAGE> 68
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIVERSIFIED (0.9%)
Associates Corp. of North America 6.25% 11/1/2008 $ 5,000 $ 4,680
Associates Corp. of North America 7.54% 4/14/2004 3,000 3,063
Finova Capital Corp. 6.75% 11/15/2004 5,000 4,886
INSURANCE (5.6%)
Conseco Inc. 6.40% 2/10/2003 10,000 9,548
Harleysville Group 6.75% 11/15/2003 7,500 7,199
Horace Mann Educators Corp. 6.625% 1/15/2006 8,250 7,836
Liberty Financial Co. 6.75% 11/15/2008 17,000 16,092
NAC Re Corp. 7.15% 11/15/2005 6,500 6,396
Orion Capital Corp. 9.125% 9/1/2002 10,000 10,492
Prudential Insurance Co. of America 6.375% 7/23/2006 (2) 10,000 9,575
Reinsurance Group of America Inc. 7.25% 4/1/2006 (2) 10,000 9,854
OTHER (13.8%)
Amvescap PLC 6.60% 5/15/2005 5,825 5,620
BRE Properties, Inc. 7.20% 6/15/2007 2,000 1,901
Bradley Operating LP 7.20% 1/15/2008 4,000 3,746
Camden Property Trust 7.172% 6/21/2004 3,000 2,927
Colonial Realty LP 6.96% 7/26/2004 5,000 4,784
Commercial Net Lease Realty Inc. 7.125% 3/15/2008 5,000 4,555
Donaldson Lufkin & Jenrette, Inc. 6.50% 4/1/2008 5,000 4,682
Donaldson Lufkin & Jenrette, Inc. 6.50% 6/1/2008 10,000 9,356
ERAC USA Finance Co. 6.625% 5/15/2006 (2) 15,000 14,146
Evans Withycombe Residential, Inc. 7.50% 4/15/2004 3,000 2,998
First Industrial LP 7.00% 12/1/2006 1,500 1,390
First Industrial LP 7.60% 5/15/2007 3,000 2,879
Gables Realty LP 6.80% 3/15/2005 5,000 4,667
Goldman Sachs Group 6.65% 5/15/2009 10,000 9,524
Highwoods Realty LP 8.125% 1/15/2009 5,000 4,877
Irvine Apartment Communities Inc. 7.00% 10/1/2007 5,000 4,467
JDN Realty Corp. 6.80% 8/1/2004 3,500 3,305
JDN Realty Corp. 6.95% 8/1/2007 3,075 2,809
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 13,000 12,344
Mack-Cali Realty 7.25% 3/15/2009 8,000 7,546
Merry Land & Investment Co., Inc. 6.875% 11/1/2004 2,000 1,931
Merry Land & Investment Co., Inc. 6.90% 8/1/2007 5,000 4,734
Morgan Stanley, Dean Witter, Discover & Co. 8.10% 6/24/2002 5,500 5,682
Oasis Residential Inc. 6.75% 11/15/2001 2,500 2,471
PNC Funding Corp. 6.125% 2/15/2009 5,000 4,582
PaineWebber Group Inc. 6.45% 12/1/2003 5,000 4,859
PaineWebber Group Inc. 7.625% 10/15/2008 10,000 10,075
Realty Income Corp. 7.75% 5/6/2007 3,000 2,848
Reckson Operating Partnership LP 7.40% 3/15/2004 5,000 4,873
Regency Centers LP 7.40% 4/1/2004 3,000 2,890
Salomon Inc. 6.74% 12/15/2003 5,000 4,943
Salomon Inc. 6.75% 2/15/2003 5,000 4,962
Salomon Smith Barney Holdings Inc. 6.875% 6/15/2005 5,000 4,906
Security Capital Group 7.15% 6/15/2007 2,000 1,830
Security Capital Pacific Trust 7.375% 10/15/2006 3,000 2,819
Shurgard Storage Centers, Inc. 7.50% 4/25/2004 3,000 2,945
Susa Partnership LP 7.00% 12/1/2007 4,000 3,689
Topaz Ltd. (Morgan Stanley) 6.92% 3/10/2007 (1)(2) 9,950 9,874
--------
536,105
--------
INDUSTRIAL (22.7%)
Allied Signal Inc. 6.20% 2/1/2008 13,300 12,563
Anheuser-Busch Cos., Inc. 6.75% 6/1/2005 2,000 1,969
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 10,000 10,041
Applied Materials Inc. 6.75% 10/15/2007 5,500 5,289
</TABLE>
17
<PAGE> 69
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applied Materials, Inc. 8.00% 9/1/2004 $ 5,000 $ 5,171
Burlington Northern Railroad Co. Equipment Trust 7.33% 6/23/2010 (1) 4,326 4,370
Cabot Industrial Properties, LP 7.125% 5/1/2004 8,000 7,803
Cardinal Health, Inc. 6.00% 1/15/2006 8,845 8,338
Cardinal Health, Inc. 6.50% 2/15/2004 3,500 3,457
Champion Enterprises Inc. 7.625% 5/15/2009 (2) 4,000 3,730
Coastal Corp. 6.50% 5/15/2006 5,000 4,784
Continental Airlines Pass-Through Trust 6.41% 10/15/2008 (1) 3,344 3,223
Continental Airlines Pass-Through Trust 6.748% 3/15/2017 (1) 9,527 8,852
Continental Airlines Pass-Through Trust 7.434% 3/15/2006 (1) 5,000 4,982
Cox Communications, Inc. 6.50% 11/15/2002 3,000 2,954
Cox Communications, Inc. 6.69% 9/20/2004 8,430 8,203
Delta Airlines, Inc. 10.375% 2/1/2011 10,000 11,966
Delta Airlines, Inc. Pass-Through Trust 7.541% 10/11/2011 (1) 4,429 4,336
Delta Airlines, Inc. Pass-Through Trust 8.54% 1/2/2007 (1) 2,636 2,725
Dial Corp. 6.50% 9/15/2008 5,000 4,686
Dillard's Inc. 6.625% 11/15/2008 5,000 4,698
Dillard's Inc. 6.69% 8/1/2007 5,000 4,766
Electronic Data Systems Corp. 6.85% 5/15/2000 (2) 5,000 5,040
First Data Corp. 6.375% 12/15/2007 12,000 11,342
Fred Meyer Inc. 7.45% 3/1/2008 2,075 2,074
Harrahs Operating Co., Inc. 7.50% 1/15/2009 12,600 12,123
IBP, Inc. 6.125% 2/1/2006 4,000 3,723
International Paper Co. 6.50% 11/15/2007 6,000 5,734
International Paper Co. 7.625% 1/15/2007 11,750 12,020
Kroger Co. 6.375% 3/1/2008 2,140 1,995
Lafarge Corp 6.375% 7/15/2005 4,750 4,568
Lexmark International, Inc. 6.75% 5/15/2008 5,000 4,722
Lucent Technologies, Inc. 7.25% 7/15/2006 10,000 10,240
Minnesota Mining & Manufacturing ESOP Trust 5.62% 7/15/2009 (1)(2) 9,329 8,744
News America Inc. 6.75% 1/9/2010 10,000 9,354
Northwest Airlines Corp. Pass-Through Trust 8.07% 1/2/2015 (1) 11,072 11,192
PanAmSat Corp. 6.375% 1/15/2008 5,000 4,548
Parker Retirement Savings Plan Trust 6.34% 7/15/2008 (1)(2) 4,701 4,522
Pepsi Bottling Holdings Inc. 5.625% 2/17/2009 (2) 10,000 8,997
Philip Morris Cos. Inc. 6.375% 2/1/2006 5,000 4,734
Praxair, Inc. 6.70% 4/15/2001 5,000 5,011
Sealed Air Corp. 6.95% 5/15/2009 (2) 10,000 9,609
Smith International Inc. 7.00% 9/15/2007 7,500 7,284
TCI Communications, Inc. 6.875% 2/15/2006 7,000 6,910
TCI Communications, Inc. 7.25% 8/1/2005 7,000 7,110
Tektronix 7.50% 8/1/2003 2,000 1,985
Tektronix 7.625% 8/15/2002 5,310 5,313
Tyco International Group 6.125% 1/15/2009 5,000 4,614
Union Pacific Railroad Co. Equipment Trust 6.12% 2/1/2004 2,000 1,922
The Upjohn Co. ESOP Trust 9.79% 2/1/2004 (1) 5,700 6,151
Western Atlas, Inc. 7.875% 6/15/2004 2,000 2,081
---------
312,568
---------
UTILITIES (10.3%)
Baltimore Gas & Electric Co. 6.25% 12/8/2005 5,000 4,805
Baltimore Gas & Electric Co. 6.70% 12/1/2006 9,000 8,842
Cinergy Global Resources 6.20% 11/3/2008 (2)(3) 10,000 9,297
Coastal Corp. 9.625% 5/15/2012 10,000 11,672
Consolidated Edison Inc. 6.25% 2/1/2008 7,750 7,378
East Coast Power 6.737% 3/31/2008 (2) 2,877 2,714
El Paso Energy Corp. 6.75% 5/15/2009 10,000 9,479
GTE Corp. 6.36% 4/15/2006 5,000 4,823
GTE Northwest Inc. 5.55% 10/15/2008 15,000 13,486
GTE South Inc. 6.00% 2/15/2008 7,000 6,518
</TABLE>
18
<PAGE> 70
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kansas City Power & Light Co. 6.50% 11/14/2001 $ 5,000 $ 4,994
LG&E Capital Corp. 6.46% 1/15/2008 (2) 5,000 4,721
Midamerican Energy Holdings Co. 6.375% 6/15/2006 5,000 4,803
Nipsco Capital Markets 7.39% 4/1/2004 9,000 9,013
PSE&G Capital Corp. 6.25% 5/15/2003 (2) 10,000 9,716
Progress Capital Holdings 7.45% 9/1/2003 (2) 10,000 10,076
Southwestern Bell Telephone 6.59% 9/29/2008 5,650 5,499
U S WEST Capital Funding, Inc. 6.375% 7/15/2008 14,350 13,391
----------
141,227
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $1,131,732) 1,084,895
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (3.3%)
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (1.9%)
U.S. Treasury Bond 5.50% 5/15/2009 21,700 21,046
U.S. Treasury Note 6.50% 5/15/2005 5,000 5,119
----------
26,165
----------
AGENCY BONDS & NOTES (1.4%)
Federal Home Loan Bank Notes 5.29% 12/15/2008 3,000 2,694
Federal National Mortgage Assn. 6.40% 5/14/2009 18,000 17,109
----------
19,803
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST $47,022) 45,968
- -----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLAR-DENOMINATED)(15.9%)
- -----------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (Chicago Branch) 6.625% 10/31/2001 7,705 7,724
Australian Gas Light Co. 6.40% 4/15/2008 (2) 10,000 9,390
Banco Latinoamericano de Exportaciones 6.35% 4/10/2000 (2) 5,000 4,996
Bayer Corp. 6.50% 10/1/2002 (2) 6,000 5,999
Corporacion Nacional del Cobre de Chile 7.375% 5/1/2009 (2) 14,765 13,667
Embotelladora Andina SA 7.00% 10/1/2007 5,000 4,441
Gruma SA De CV 7.625% 10/15/2007 2,550 2,280
Israel Electric Corp. 7.75% 3/1/2009 (2) 12,500 12,450
Kimberly-Clark de Mexico 8.875% 8/1/2009 4,090 4,070
Korea Development Bank 7.125% 9/17/2001 4,830 4,773
Korea Development Bank 7.375% 9/17/2004 5,000 4,809
Malaysia 8.75% 6/1/2009 12,000 11,760
Oil Enterprises Ltd. 6.239% 6/30/2008 (1)(2) 7,354 7,052
PacifiCorp Australia LLC 6.15% 1/15/2008 (2)(4) 14,000 12,989
Pemex Finance Ltd. 6.55% 2/15/2008 (1)(2) 5,000 4,838
Pemex Finance Ltd. 9.69% 8/15/2009 (2) 25,000 24,800
Petro Geo-Services 6.625% 3/30/2008 5,000 4,677
Petroliam Nasional Berhad 7.125% 10/18/2006 (2) 8,500 7,539
Placer Dome, Inc. 7.125% 5/15/2003 5,000 4,864
Pohang Iron & Steel Co. Ltd. 6.625% 7/1/2003 5,400 5,097
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 2,200 2,086
Pohang Iron & Steel Co. Ltd. 7.125% 11/1/2006 5,445 5,043
Qantas Airways 7.75% 6/15/2009 10,000 10,033
The State of Qatar 9.50% 5/21/2009 (2) 9,400 9,452
Swiss Bank Corp. 6.75% 7/15/2005 5,000 4,875
TPSA Finance BV 7.75% 12/10/2008 (2) 8,000 7,563
Telefonica de Argentina 9.125% 5/7/2008 5,000 4,312
Telefonica de Argentina 11.875% 11/1/2004 5,000 5,150
TransCanada Pipelines 9.125% 4/20/2006 6,000 6,565
Union Bank of Switzerland (NY Branch) 7.25% 7/15/2006 5,000 5,038
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(COST $224,751) 218,332
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 71
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM CORPORATE FUND COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.3%)
- ------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
<S> <C> <C> <C> <C>
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 $ 11,890 $ 11,890
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note I 5.10% 8/2/1999 19,976 19,976
- ------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $31,866) 31,866
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(COST $1,435,371) 1,381,061
- ------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
- ------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 31,299
Liabilities--Note I (37,056)
-----------
(5,757)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------------
Applicable to 146,847,036 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,375,304
========================================================================================================================
NET ASSET VALUE PER SHARE $9.37
========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principle payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 1999, the aggregate
value of these securities was $241,350,000, representing 17.5% of net
assets.
(3) Scheduled principal and interest payments are guaranteed by Municipal Bond
Insurance Association.
(4) Scheduled principal and interest payments are guaranteed by Ambac Assurance
Corporation.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 1,439,228 $ 9.81
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (9,614) (.07)
Unrealized Depreciation--Note H (54,310) (.37)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,375,304 $ 9.37
========================================================================================================================
</TABLE>
20
<PAGE> 72
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM TREASURY FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (96.6%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (84.8%)
U.S. Treasury Inflation-Indexed Note 3.875% 1/15/2009 $ 13,661 $ 13,481
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 17,187 21,008
U.S. Treasury Bond 6.00% 2/15/2026 650 625
U.S. Treasury Bond 6.125% 11/15/2027 3,900 3,819
U.S. Treasury Bond 6.375% 8/15/2027 45,750 46,212
U.S. Treasury Bond 6.50% 11/15/2026 71,075 72,868
U.S. Treasury Bond 6.625% 2/15/2027 57,650 60,082
U.S. Treasury Bond 6.75% 8/15/2026 102,600 108,412
U.S. Treasury Bond 6.875% 8/15/2025 6,850 7,328
U.S. Treasury Bond 7.125% 2/15/2023 4,450 4,867
U.S. Treasury Bond 7.50% 11/15/2016 32,100 35,812
U.S. Treasury Bond 7.875% 2/15/2021 183,552 215,204
U.S. Treasury Bond 8.125% 8/15/2019 93,865 112,051
U.S. Treasury Bond 8.125% 8/15/2021 800 963
U.S. Treasury Bond 8.875% 8/15/2017 187,650 236,942
U.S. Treasury Bond 8.875% 2/15/2019 132,260 168,487
----------
1,108,161
----------
AGENCY BONDS & NOTES (11.8%)
Federal Home Loan Bank 5.29% 12/15/2008 30,000 26,936
Federal Home Loan Bank 5.80% 9/2/2008 118,600 111,346
Federal Home Loan Bank 5.865% 9/2/2008 5,050 4,740
Federal Home Loan Bank 6.045% 5/13/2008 11,300 10,721
----------
153,743
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $1,246,936) 1,261,904
- -----------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.4%)
- -----------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 13,618 13,618
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note I 5.10% 8/2/1999 18,045 18,045
- -----------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $31,663) 31,663
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.0%)
(COST $1,278,599) 1,293,567
- -----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
- -----------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 40,889
Liabilities--Note I (27,906)
--------
12,983
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------
Applicable to 129,463,058 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,306,550
=======================================================================================================================
NET ASSET VALUE PER SHARE $10.09
=======================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,295,235 $10.00
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gain (3,653) (.03)
Unrealized Appreciation--Note H 14,968 .12
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,306,550 $10.09
=======================================================================================================================
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (77.5%)
- -----------------------------------------------------------------------------------------------------------------------
FINANCE (21.5%)
<S> <C> <C> <C> <C>
Allstate Corp. 6.75% 5/15/2018 $ 20,000 $ 18,445
Allstate Corp. 7.50% 6/15/2013 10,000 10,094
Ambac, Inc. 7.50% 5/1/2023 20,000 19,673
American Re Corp. 7.45% 12/15/2026 18,267 17,953
Associates Corp. of North America 6.25% 11/1/2008 25,000 23,399
Banc One Corp. 7.75% 7/15/2025 25,000 24,946
Bank of America Corp. 8.50% 1/15/2007 15,000 16,056
BankBoston Corp. 6.625% 12/1/2005 30,000 28,950
CIGNA Corp. 7.875% 5/15/2027 25,000 24,985
Cincinnati Financial Corp. 6.90% 5/15/2028 20,000 18,548
Citicorp 7.125% 9/1/2005 15,000 14,943
Citigroup, Inc. 6.625% 1/15/2028 25,000 22,048
Equitable Companies Inc. 7.00% 4/1/2028 25,000 22,854
Exxon Capital Corp. 6.00% 7/1/2005 10,000 9,722
Farmers Exchange Capital 7.05% 7/15/2028 (2) 30,000 26,501
Fifth Third Bancorp 6.75% 7/15/2005 20,000 19,501
First Chicago Corp. 6.375% 1/30/2009 15,000 14,063
First Union Corp. 6.00% 10/30/2008 10,000 9,130
Fleet Financial Group 6.875% 1/15/2028 25,000 22,373
General Electric Capital Corp. 8.125% 5/15/2012 42,000 45,354
General Electric Capital Services 7.50% 8/21/2035 10,960 11,029
General Electric Global Insurance Holdings Corp. 7.00% 2/15/2026 50,000 47,144
General Re Corp. 9.00% 9/12/2009 15,000 17,194
John Hancock Mutual Life Insurance Co. 7.375% 2/15/2024 (2) 50,000 48,762
Liberty Mutual Insurance Co. 8.50% 5/15/2025 (2) 35,000 36,309
Lumbermens Mutual Casualty Co. 9.15% 7/1/2026 (2) 15,110 15,415
MBIA Inc. 7.00% 12/15/2025 7,550 7,078
Massachusetts Mutual Life 7.50% 3/1/2024 (2) 8,710 8,710
Massachusetts Mutual Life 7.625% 11/15/2023 (2) 15,970 16,191
Metropolitan Life Insurance Co. 7.80% 11/1/2025 (2) 35,000 35,589
National City Bank Pennsylvania 7.25% 10/21/2011 10,000 9,872
National City Corp. 7.20% 5/15/2005 10,000 9,949
NationsBank Corp. 7.75% 8/15/2004 15,000 15,387
NationsBank Corp. 7.75% 8/15/2015 10,000 10,092
Republic New York Corp. 9.70% 2/1/2009 10,000 11,557
SunTrust Banks 6.00% 2/15/2026 20,000 18,763
Transamerica Corp. 9.375% 3/1/2008 10,000 11,367
Transamerica Financial Corp. 6.125% 11/1/2001 15,000 14,838
Travelers Property Casualty Corp. 7.75% 4/15/2026 25,000 25,140
UNUM Corp. 6.75% 12/15/2028 25,000 22,251
Wachovia Corp. 6.605% 10/1/2025 30,000 29,453
Wachovia Corp. 6.80% 6/1/2005 10,000 9,879
---------
841,507
---------
INDUSTRIAL (45.0%)
AEROSPACE & DEFENSE (1.5%)
Lockheed Martin Corp. 7.65% 5/1/2016 35,000 34,512
Raytheon Co. 7.20% 8/15/2027 25,000 23,574
AUTOMOTIVE (4.0%)
Chrysler Corp. 7.45% 3/1/2027 25,000 24,828
Eaton Corp. 6.50% 6/1/2025 10,000 9,637
Eaton Corp. 7.625% 4/1/2024 15,000 14,958
Ford Motor Co. 8.90% 1/15/2032 40,000 45,647
General Motors Corp. 7.40% 9/1/2025 30,000 28,996
General Motors Corp. 7.70% 4/15/2016 10,000 10,112
General Motors Corp. 9.40% 7/15/2021 20,000 23,576
BASIC INDUSTRIES (4.7%)
Caterpillar Inc. 6.625% 7/15/2028 25,000 22,138
Hubbell Inc. 6.625% 10/1/2005 10,000 9,911
</TABLE>
22
<PAGE> 74
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois Tool Works, Inc. 5.75% 3/1/2009 $ 25,000 $ 23,158
Minnesota Mining & Manufacturing Corp. 6.375% 2/15/2028 35,000 31,604
Morton International, Inc. 9.25% 6/1/2020 10,000 11,554
PPG Industries, Inc. 6.875% 2/15/2012 10,200 9,897
PPG Industries, Inc. 9.00% 5/1/2021 9,750 11,365
Parker-Hannifin Corp. 7.30% 5/15/2011 20,000 19,983
USA Waste Services Inc. 7.00% 7/15/2028 25,000 21,823
Vulcan Materials Co. 6.00% 4/1/2009 25,000 23,399
BUILDING MATERIALS (0.6%)
Georgia-Pacific Group 7.25% 6/1/2028 25,000 23,377
CABLE (0.6%)
Comcast Cable Communications 6.20% 11/15/2008 25,000 23,120
CHEMICALS (3.2%)
E.I. du Pont de Nemours & Co. 6.50% 1/15/2028 25,000 22,482
E.I. du Pont de Nemours & Co. 6.75% 9/1/2007 25,000 24,755
Ferro Corp. 7.125% 4/1/2028 10,000 8,741
Monsanto Co. 6.75% 12/15/2027 25,000 22,122
Monsanto Co. 8.875% 12/15/2009 20,000 22,276
Rohm & Haas Co. 7.85% 7/15/2029 (2) 25,000 25,173
CONSUMER GOODS & SERVICES (5.8%)
Bestfoods 6.625% 4/15/2028 30,000 27,248
CPC International, Inc. 7.25% 12/15/2026 30,000 29,476
Coca Cola Enterprises 5.75% 11/1/2008 25,000 22,803
The Walt Disney Co. 6.75% 3/30/2006 25,000 24,985
Kimberly-Clark Corp. 6.25% 7/15/2018 25,000 22,710
Procter & Gamble Co. 6.45% 1/15/2026 27,000 24,831
Procter & Gamble Co. 8.50% 8/10/2009 10,000 11,291
Procter & Gamble Co. ESOP 9.36% 1/1/2021 35,000 42,087
Whirlpool Corp. 9.10% 2/1/2008 20,000 22,050
ENERGY & RELATED GOODS & SERVICES (4.2%)
Conoco Inc. 6.35% 4/15/2009 25,000 23,767
Mobil Corp. 8.625% 8/15/2021 22,000 25,440
Texaco Capital, Inc. 8.625% 11/15/2031 13,000 14,769
Texaco Capital, Inc. 9.75% 3/15/2020 17,000 21,045
USX Corp. 6.85% 3/1/2008 45,000 43,064
Ultramar Diamond Shamrock 7.20% 10/15/2017 20,000 18,660
United Technologies Corp. 8.875% 11/15/2019 15,000 17,269
FOOD & LODGING (1.0%)
Joseph Seagram & Sons, Inc. 7.50% 12/15/2018 20,000 19,156
Sysco Corp. 6.50% 8/1/2028 22,000 19,845
HEALTH CARE (3.5%)
Baxter International, Inc. 7.65% 2/1/2027 25,000 25,003
Bristol-Myers Squibb Co. 6.80% 11/15/2026 35,000 33,701
Eli Lilly & Co. 7.125% 6/1/2025 50,000 49,275
Merck & Co. 6.30% 1/1/2026 30,000 26,960
HOME BUILDING & REAL ESTATE (0.5%)
Masco Corp. 6.625% 4/15/2018 20,000 17,797
MEDIA & ENTERTAINMENT (4.3%)
New York Times Co. 8.25% 3/15/2025 30,000 31,522
News America Holdings Inc. 8.00% 10/17/2016 30,000 29,585
E.W. Scripps Co. 6.625% 10/15/2007 20,000 19,464
Time Warner Inc. 6.625% 5/15/2029 25,000 21,644
</TABLE>
23
<PAGE> 75
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tribune Co. 6.875% 11/1/2006 $ 20,000 $ 19,858
Washington Post Co. 5.50% 2/15/2009 50,000 45,628
METAL (1.1%)
Aluminum Co. of America 6.75% 1/15/2028 35,000 31,745
Phelps Dodge Corp. 7.125% 11/1/2027 12,500 10,993
PAPER (3.4%)
Champion International Corp. 7.35% 11/1/2025 30,000 28,437
International Paper Co. 6.875% 11/1/2023 10,000 9,171
Mead Corp. 7.35% 3/1/2017 10,350 10,102
Tenneco Inc. 7.625% 6/15/2017 20,000 19,020
Tenneco Inc. 7.875% 4/15/2027 15,000 14,390
Westvaco Corp. 9.75% 6/15/2020 15,000 18,096
Weyerhaeuser Co. 8.50% 1/15/2025 30,000 32,950
TECHNOLOGY & RELATED (3.0%)
International Business Machines Corp. 7.00% 10/30/2025 50,000 48,371
Lucent Technologies, Inc. 6.45% 3/15/2029 25,000 22,494
Motorola, Inc. 7.50% 5/15/2025 45,000 44,594
TELECOMMUNICATIONS (0.6%)
AirTouch Communications, Inc. 6.35% 6/1/2005 25,000 24,030
TRANSPORTATION (3.0%)
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 12,500 12,088
Burlington Northern Santa Fe Corp. 6.875% 12/1/2027 25,000 22,716
CSX Corp. 7.95% 5/1/2027 35,000 35,591
Norfolk Southern Corp. 7.80% 5/15/2027 35,000 35,478
Union Tank Car Co. 7.125% 2/1/2007 10,000 9,828
----------
1,753,745
----------
UTILITIES (11.0%)
AT&T Corp. 6.50% 3/15/2029 50,000 44,411
BellSouth Telecommunications 7.00% 10/1/2025 10,000 9,585
Cincinnati Bell, Inc. 6.30% 12/1/2028 25,000 21,645
Coastal Corp. 9.625% 5/15/2012 15,000 17,508
Duke Energy Corp. 6.00% 12/1/2028 25,000 20,628
El Paso Natural Gas Co. 7.50% 11/15/2026 25,000 24,432
Florida Power Corp. 6.75% 2/1/2028 22,375 20,660
GTE California Inc. 6.70% 9/1/2009 25,000 24,447
GTE Southwest, Inc. 6.00% 1/15/2006 10,000 9,533
Indiana Bell Telephone Co., Inc. 7.30% 8/15/2026 35,000 34,597
Michigan Bell Telephone Co. 7.85% 1/15/2022 25,000 26,225
New Jersey Bell Telephone Co. 8.00% 6/1/2022 25,000 26,640
Northern States Power Co. 7.125% 7/1/2025 30,000 29,395
Oklahoma Gas & Electric Co. 6.50% 4/15/2028 12,770 11,549
Pacific Bell 7.125% 3/15/2026 15,000 14,524
PacifiCorp 6.625% 6/1/2007 10,000 9,800
Sprint Capital Corp. 6.875% 11/15/2028 35,000 31,254
Tennessee Gas Pipeline Co. 7.50% 4/1/2017 25,000 24,878
Wisconsin Electric Power Co. 6.50% 6/1/2028 25,000 22,470
Wisconsin Power & Light 5.70% 10/15/2008 7,500 6,899
----------
431,080
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $3,119,962) 3,026,332
- -----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLAR-DENOMINATED)(1.3%)
- -----------------------------------------------------------------------------------------------------------------------
Province of Manitoba 8.875% 9/15/2021 10,000 11,890
Province of Ontario 6.00% 2/21/2006 15,000 14,382
</TABLE>
24
<PAGE> 76
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Province of Saskatchewan 8.50% 7/15/2022 $ 10,000 $ 11,315
Talisman Energy, Inc. 7.125% 6/1/2007 15,000 14,439
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(COST $53,102) 52,026
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (14.1%)
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (0.6%)
U.S. Treasury Bond 5.50% 8/15/2028 25,000 22,531
----------
AGENCY BONDS & NOTES (4.3%)
Federal Home Loan Bank 5.125% 9/15/2003 50,000 47,718
Federal Home Loan Mortgage Corp. 5.75% 7/15/2003 25,000 24,438
Federal National Mortgage Assn. 5.75% 6/15/2005 100,000 96,611
----------
168,767
----------
MORTGAGE-BACKED SECURITIES (9.2%)
Federal National Mortgage Assn. 5.735% 1/1/2009 (1) 14,916 14,151
Federal National Mortgage Assn. 15.50% 10/1/2012 (1) 5 5
Government National Mortgage Assn. 6.00% 5/15/2028-3/15/2029 (1) 296,585 273,468
Government National Mortgage Assn. 6.50% 5/15/2026-1/15/2029 (1) 73,842 70,153
----------
357,777
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $586,049) 549,075
- -----------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (6.5%)
- -----------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 246,032 246,032
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note I 5.10% 8/2/1999 9,191 9,191
- -----------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $255,223) 255,223
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.4%)
(COST $4,014,336) 3,882,656
- -----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
- -----------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 63,387
Liabilities--Note I (40,628)
---------
22,759
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------
Applicable to 466,857,055 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $3,905,415
=======================================================================================================================
NET ASSET VALUE PER SHARE $8.37
=======================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31, 1999,
the aggregate value of these securities was $212,650,000, representing 5.4%
of net assets.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 4,038,281 $ 8.65
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (1,186) --
Unrealized Depreciation--Note H (131,680) (.28)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,905,415 $ 8.37
======================================================================================================================
</TABLE>
25
<PAGE> 77
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (91.8%)
- -----------------------------------------------------------------------------------------------------------------------
FINANCE (3.3%)
<S> <C> <C> <C> <C>
Bank United Corp. 8.00% 3/15/2009 $ 15,000 $ 14,268
Bank United Corp. 8.875% 5/1/2007 30,000 29,366
Chevy Chase Savings Bank 9.25% 12/1/2008 15,000 15,262
FirstFed Financial Corp. 11.75% 10/1/2004 5,000 5,100
Imperial Credit Industries, Inc. 9.875% 1/15/2007 20,000 15,600
Navistar Financial Corp. 9.00% 6/1/2002 15,000 15,300
Olympic Financial Ltd. 11.50% 3/15/2007 22,160 19,279
SCG Holding Corp. 12.00% 8/1/2009 (1) 44,975 45,537
Western Financial Savings Bank 8.50% 7/1/2003 17,000 15,640
Western Financial Savings Bank 8.875% 8/1/2007 20,000 17,200
---------
192,552
---------
INDUSTRIAL (80.8%)
AEROSPACE & DEFENSE (2.3%)
Argo-Tech Corp. 8.625% 10/1/2007 16,000 14,480
Crown Castle International Corp. 9.50% 8/1/2011 (1) 18,750 17,812
K & F Industries, Inc. 9.25% 10/15/2007 27,000 26,595
L-3 Communications Corp. 8.50% 5/15/2008 8,425 8,299
L-3 Communications Corp. 10.375% 5/1/2007 20,000 21,000
Newport News Shipbuilding Inc. 8.625% 12/1/2006 25,000 25,625
Newport News Shipbuilding Inc. 9.25% 12/1/2006 20,000 20,700
AUTOMOTIVE (4.5%)
Accuride Corp. 9.25% 2/1/2008 20,000 19,500
Delco Remy International Inc. 10.625% 8/1/2006 10,000 10,400
Dura Operating Corp. 9.00% 5/1/2009 (1) 10,000 9,575
Federal-Mogul Corp. 7.75% 7/1/2006 54,810 52,091
Federal-Mogul Corp. 8.80% 4/15/2007 18,750 18,944
Hayes Wheels International, Inc. 9.125% 7/15/2007 30,000 29,700
Hayes Wheels International, Inc. 11.00% 7/15/2006 15,000 16,050
Johnstown America Industries, Inc. 11.75% 8/15/2005 27,000 27,945
LDM Technologies Inc. 10.75% 1/15/2007 8,000 7,920
Lear Corp. 7.96% 5/15/2005 (1) 25,000 24,272
Lear Corp. 9.50% 7/15/2006 20,000 20,700
Navistar International Corp. 8.00% 2/1/2008 25,000 24,750
BUILDING MATERIALS (2.3%)
American Standard Cos. Inc. 7.375% 2/1/2008 50,000 46,562
American Standard Cos. Inc. 7.625% 2/15/2010 41,250 38,569
Falcon Building Products, Inc. 9.50% 6/15/2007 21,750 20,663
Nortek, Inc. 8.875% 8/1/2008 (1) 8,000 7,860
Nortek, Inc. 9.25% 3/15/2007 17,500 17,456
CABLE (10.1%)
Adelphia Communications Corp. 7.75% 1/15/2009 27,000 24,570
Adelphia Communications Corp. 8.375% 2/1/2008 22,500 21,262
Bresnan Communications Group 8.00% 2/1/2009 (1) 23,000 22,885
CSC Holdings, Inc. 7.875% 12/15/2007 30,000 29,309
CSC Holdings, Inc. 8.125% 7/15/2009 (1) 25,000 24,740
CSC Holdings, Inc. 8.125% 8/15/2009 25,000 24,500
CSC Holdings, Inc. 9.25% 11/1/2005 30,000 30,750
CSC Holdings, Inc. 9.875% 2/15/2013 15,000 15,825
Century Communications Inc. 8.875% 1/15/2007 14,970 14,783
Charter Communications Holdings LLC 8.625% 4/1/2009 (1) 50,000 47,875
Classic Cable Inc. 9.375% 8/1/2009 (1) 15,000 14,850
Classic Cable Inc. 9.875% 8/1/2008 (1) 12,425 12,611
Comcast Corp. 9.125% 10/15/2006 25,000 26,313
Comcast Corp. 9.375% 5/15/2005 24,000 25,560
Comcast Corp. 10.625% 7/15/2012 25,000 30,938
</TABLE>
26
<PAGE> 78
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Falcon Holdings Group LP 8.375% 4/15/2010 $ 20,000 $ 19,600
Jones Intercable Inc. 7.625% 4/15/2008 20,000 20,054
Lenfest Communications, Inc. 8.375% 11/1/2005 73,500 76,348
Rifkin Acquisition Partners LLP 11.125% 1/15/2006 15,000 16,444
Rogers Cablesystem Ltd. 9.625% 8/1/2002 13,780 14,297
USA Networks Inc. 6.75% 11/15/2005 75,000 71,345
CHEMICALS (3.0%)
ARCO Chemical Co. 9.80% 2/1/2020 20,000 19,571
Acetex Corp. 9.75% 10/1/2003 20,000 18,000
Buckeye Cellulose Corp. 8.50% 12/15/2005 15,000 15,037
Huntsman Corp. 9.50% 7/1/2007 (1) 17,000 16,065
Lilly Industries, Inc. 7.75% 12/1/2007 15,000 14,379
Lyondell Chemical Co. 9.625% 5/1/2007 (1) 50,000 51,250
PCI Chemical Canada, Inc. 9.25% 10/15/2007 22,500 17,325
Pioneer Americas Acquisition Corp. 9.25% 6/15/2007 20,000 15,800
Sovereign Specialty Chemicals, Inc. 9.50% 8/1/2007 8,000 7,980
CONSUMER GOODS & SERVICES (0.9%)
Revlon Consumer Products 8.625% 2/1/2008 12,000 10,080
Scotts Co. 8.625% 1/15/2009 (1) 20,000 19,700
Sealy Mattress, Inc. 9.875% 12/15/2007 11,770 11,564
True Temper Sports, Inc. 10.875% 12/1/2008 (1) 15,000 13,500
CONTAINERS (1.8%)
BWAY Corp. 10.25% 4/15/2007 15,000 15,450
Owens-Illinois, Inc. 7.85% 5/15/2004 15,000 14,841
Owens-Illinois, Inc. 8.10% 5/15/2007 35,000 34,482
Silgan Holding Inc. 9.00% 6/1/2009 41,000 39,975
ENERGY & RELATED GOODS & SERVICES (5.1%)
AmeriGas Partners, LP Series B 10.125% 4/15/2007 10,000 10,250
Clark Refining & Marketing, Inc. 8.375% 11/15/2007 15,000 13,500
Cross Timbers Oil Co. 8.75% 11/1/2009 25,000 23,625
Cross Timbers Oil Co. 9.25% 4/1/2007 16,500 16,129
Energy Corp. of America 9.50% 5/15/2007 30,000 27,300
Newfield Exploration Co. 7.45% 10/15/2007 15,000 13,948
Newpark Resources, Inc. 8.625% 12/15/2007 15,000 14,325
Oryx Energy Co. 8.00% 10/15/2003 10,000 10,314
Oryx Energy Co. 8.125% 10/15/2005 22,500 23,294
P & L Coal Holdings Corp. 8.875% 5/15/2008 40,000 39,400
Plains Resources, Inc. 10.25% 3/15/2006 17,000 17,425
Pride Petroleum Services, Inc. 9.375% 5/1/2007 32,000 32,080
RBF Finance Co. 11.00% 3/15/2006 30,000 31,125
Tesoro Petroleum Corp. 9.00% 7/1/2008 10,000 9,850
Tuboscope Inc. 7.50% 2/15/2008 15,000 13,028
FOOD & LODGING (1.5%)
Aurora Foods Inc. 8.75% 7/1/2008 6,895 6,757
B & G Foods, Inc. 9.625% 8/1/2007 10,000 9,450
Nash Finch Co. 8.50% 5/1/2008 18,000 16,110
New World Pasta Co. 9.25% 2/15/2009 (1) 16,000 15,520
Purina Mills Inc. 9.00% 3/15/2010 25,000 12,500
Tricon Global Restaurants, Inc. 7.65% 5/15/2008 25,000 24,361
GENERAL INDUSTRIAL (4.6%)
Allied Waste North America Inc. 7.625% 1/1/2006 25,000 23,250
Anchor Glass Container Corp. 11.25% 4/1/2005 8,000 8,080
Cincinnati Milacron, Inc. 8.375% 3/15/2004 11,500 11,320
Consumers International 10.25% 4/1/2005 19,305 20,270
</TABLE>
27
<PAGE> 79
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Grove Worldwide LLC 9.25% 5/1/2008 $ 30,000 $ 19,650
Henry Co. 10.00% 4/15/2008 10,000 8,350
Idex Corp. 6.875% 2/15/2008 22,500 20,313
International Wire Group 11.75% 6/1/2005 15,000 15,600
Mastec, Inc. 7.75% 2/1/2008 30,000 28,800
Neenah Corp. 11.125% 5/1/2007 25,170 24,671
Numatics Inc. 9.625% 4/1/2008 16,500 14,190
Park-Ohio Industries, Inc. 9.25% 12/1/2007 22,500 21,713
Roller Bearing Co. of America Inc. 9.625% 6/15/2007 10,000 9,500
Royster-Clark Inc. 10.25% 4/1/2009 (1) 15,000 14,738
Scotsman Group Inc. 8.625% 12/15/2007 8,260 9,045
Terex Corp. 8.875% 4/1/2008 17,500 16,625
HEALTH CARE (4.8%)
Beverly Enterprises Inc. 9.00% 2/15/2006 18,000 17,370
Columbia/HCA Healthcare Corp. 6.91% 6/15/2005 25,000 22,630
Columbia/HCA Healthcare Corp. 7.00% 7/1/2007 30,000 26,717
Columbia/HCA Healthcare Corp. 7.25% 5/20/2008 30,000 26,919
Integrated Health Services, Inc. 9.50% 9/15/2007 30,000 19,050
Kinetic Concepts, Inc. 9.625% 11/1/2007 9,615 8,269
Leiner Health Products, Inc. 9.625% 7/1/2007 11,125 10,513
Lifepoint Hospitals Holdings Corp. 10.75% 5/15/2009 (1) 6,400 6,480
Owens & Minor, Inc. 10.875% 6/1/2006 14,075 14,779
Tenet Healthcare Corp. 8.125% 12/1/2008 70,000 65,450
Tenet Healthcare Corp. 8.625% 1/15/2007 40,000 39,200
Triad Hospitals Holdings, Inc. 11.00% 5/15/2009 (1) 20,785 20,941
HOME BUILDING & REAL ESTATE (1.7%)
CapStar Hotel Co. 8.75% 8/15/2007 20,000 18,750
Kaufman & Broad Home Corp. 7.75% 10/15/2004 26,250 25,200
Standard Pacific Corp. 8.00% 2/15/2008 15,000 13,875
Standard Pacific Corp. 8.50% 6/15/2007 15,000 14,550
Toll Corp. 7.75% 9/15/2007 15,000 13,950
Del E. Webb Corp. 10.25% 2/15/2010 15,000 14,756
MEDIA & ENTERTAINMENT (11.5%)
AMC Entertainment Inc. 9.50% 2/1/2011 20,000 18,375
American Media Operation Inc. 10.25% 5/1/2009 (1) 5,065 5,065
Big Flower Press Holdings 8.625% 12/1/2008 13,235 12,639
Big Flower Press Holdings 8.875% 7/1/2007 15,000 14,625
CBS Corp. 7.15% 5/20/2005 75,000 74,027
Chancellor Media Corp. 8.125% 12/15/2007 20,000 19,400
Chancellor Media Corp. 9.375% 10/1/2004 15,000 15,150
Citadel Broadcasting Co. 9.25% 11/15/2008 12,250 12,342
EchoStar DBS Corp. 9.375% 2/1/2009 (1) 100,000 100,000
Emmis Communications Corp. 8.125% 3/15/2009 30,000 28,350
Fox/Liberty Networks LLC 8.875% 8/15/2007 70,000 72,625
JCAC, Inc. 10.125% 6/15/2006 8,350 9,122
Lin Television Corp. 8.375% 3/1/2008 33,000 31,845
Loews Cineplex Entertainment 8.875% 8/1/2008 40,000 37,000
Mail-Well Corp. 8.75% 12/15/2008 19,125 18,456
Outdoor Systems Inc. 9.375% 10/15/2006 10,000 10,575
PRIMEDIA, Inc. 7.625% 4/1/2008 20,000 18,900
RCN Corp. 10.00% 10/15/2007 30,000 29,100
TV Guide Inc. 8.125% 3/1/2009 (1) 55,000 51,975
Von Hoffman Press Inc. 10.375% 5/15/2007 (1) 12,095 12,004
World Color Press, Inc. 7.75% 2/15/2009 20,000 19,950
World Color Press, Inc. 8.375% 11/15/2008 45,000 45,450
Young Broadcasting Inc. 9.00% 1/15/2006 10,000 9,750
</TABLE>
28
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
METAL (3.5%)
<S> <C> <C> <C> <C>
AK Steel Corp. 7.875% 2/15/2009 (1) $ 25,000 $ 24,375
AK Steel Corp. 9.125% 12/15/2006 55,000 56,925
AmeriSteel Corp. 8.75% 4/15/2008 10,000 9,900
Armco, Inc. 9.00% 9/15/2007 20,000 20,450
Bethlehem Steel Corp. 10.375% 9/1/2003 10,500 10,815
LTV Corp. 8.20% 9/15/2007 37,000 35,335
National Steel Corp. 9.875% 3/1/2009 13,000 13,260
Ryerson Tull, Inc. 9.125% 7/15/2006 11,960 12,498
Weirton Steel Corp. 10.75% 6/1/2005 12,500 12,000
Wells Aluminum Corp. 10.125% 6/1/2005 10,500 10,238
PAPER & PACKAGING (5.7%)
Ball Corp. 7.75% 8/1/2006 35,000 34,562
Ball Corp. 8.25% 8/1/2008 15,000 14,850
Boise Cascade Co. 9.45% 11/1/2009 15,000 16,269
Buckeye Technologies, Inc. 8.00% 10/15/2010 12,460 11,962
Container Corp. of America 9.75% 4/1/2003 50,000 52,000
Doman Industries, Ltd. 8.75% 3/15/2004 30,000 20,400
Domtar Inc. 8.75% 8/1/2006 15,000 15,300
Domtar Inc. 9.50% 8/1/2016 18,750 19,688
Fonda Group Inc. 9.50% 3/1/2007 15,000 12,900
NoramPac Inc. 9.50% 2/1/2008 10,000 10,150
Owens-Illinois Inc. 7.35% 5/15/2008 35,000 32,765
Packaging Corp. of America 9.625% 4/1/2009 (1) 20,000 20,350
Paperboard Industries International Inc. 8.375% 9/15/2007 18,750 17,438
Repap New Brunswick, Inc. 9.00% 6/1/2004 11,860 11,386
Tembec Finance Corp. 9.875% 9/30/2005 8,325 8,616
Tembec Industries Inc. 8.625% 6/30/2009 4,610 4,529
U.S. Timberlands LLC 9.625% 11/15/2007 30,000 30,000
RETAIL (0.2%)
Boise Cascade Office Products Corp. 7.05% 5/15/2005 14,490 13,760
TECHNOLOGY & RELATED (6.6%)
Advanced Micro Devices, Inc. 11.00% 8/1/2003 22,520 21,844
Amphenol Corp. 9.875% 5/15/2007 15,000 15,150
Beckman Instruments, Inc. 7.45% 3/4/2008 30,000 28,228
Fairchild Semiconductor Corp. 10.125% 3/15/2007 22,275 21,607
Fisher Scientific International Inc. 9.00% 2/1/2008 60,000 57,000
Iron Mountain, Inc. 8.25% 7/1/2011 (1) 15,000 14,100
Iron Mountain, Inc. 8.75% 9/30/2009 37,500 36,375
Iron Mountain, Inc. 10.125% 10/1/2006 16,500 17,408
Pierce Leahy Corp. 9.125% 7/15/2007 15,000 14,850
PSINet Inc. 10.00% 2/15/2005 80,000 77,400
Telecommunication Techniques Co. 9.75% 5/15/2008 24,000 23,160
Unisys Corp. 7.875% 4/1/2008 30,000 30,225
Wesco Distribution Inc. 9.125% 6/1/2008 25,000 24,250
TELECOMMUNICATIONS (9.6%)
Crown Castle International Corp. 9.00% 5/15/2011 25,000 24,000
Flag Limited Inc. 8.25% 1/30/2008 45,000 41,288
GCI, Inc. 9.75% 8/1/2007 20,000 19,500
ITC DeltaCom, Inc. 8.875% 3/1/2008 22,000 21,890
ITC DeltaCom, Inc. 9.75% 11/15/2008 10,405 10,769
ITC DeltaCom, Inc. 11.00% 6/1/2007 8,781 9,352
Intermedia Communications Inc. 8.50% 1/15/2008 45,000 40,950
Intermedia Communications Inc. 8.875% 11/1/2007 15,000 13,913
Level 3 Communications, Inc. 9.125% 5/1/2008 75,000 71,250
MJD Communications Inc. 9.50% 5/1/2008 12,000 11,880
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD CORPORATE FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
McLeodUSA Inc. 8.125% 2/15/2009 $ 7,250 $ 6,529
McLeodUSA Inc. 8.375% 3/15/2008 15,000 13,950
McLeodUSA Inc. 9.25% 7/15/2007 15,000 14,475
Nextel Communications Inc. 12.00% 11/1/2008 35,000 39,375
NEXTLINK Communications, Inc. 10.75% 11/15/2008 25,000 25,250
NEXTLINK Communications, Inc. 10.75% 6/1/2009 21,000 21,210
Paging Network, Inc. 8.875% 2/1/2006 12,000 9,360
Paging Network, Inc. 10.125% 8/1/2007 35,000 27,650
Qwest Communications International Inc. 7.50% 11/1/2008 93,000 91,140
Rogers Cantel, Inc. 8.30% 10/1/2007 27,500 27,431
Verio Inc. 11.25% 12/1/2008 15,125 15,446
TEXTILES & RELATED (0.7%)
Westpoint Stevens Inc. 7.875% 6/15/2005 40,000 39,100
TRANSPORTATION (0.4%)
Budget Group Inc. 9.125% 4/1/2006 25,000 22,500
---------
4,692,382
UTILITIES (7.7%) ---------
AES Corp. 8.375% 8/15/2007 30,000 28,275
AES Corp. 8.50% 11/1/2007 24,000 22,680
AES Corp. 9.50% 6/1/2009 25,000 25,687
CMS Energy Corp. 7.50% 1/15/2009 26,000 23,923
CMS Energy Corp. 7.625% 11/15/2004 18,000 17,502
CMS Energy Corp. 8.125% 5/15/2002 30,000 30,368
Caithness Coso Fund Corp. 9.05% 12/15/2009 (1) 15,000 14,850
CalEnergy Co., Inc. 7.52% 9/15/2008 17,000 16,845
Calpine Corp. 7.625% 4/15/2006 25,000 23,812
Calpine Corp. 7.875% 4/1/2008 36,380 34,743
Cleveland Electric Illuminating Co. 7.43% 11/1/2009 17,500 17,338
El Paso Electric Co. 8.25% 2/1/2003 15,000 15,457
El Paso Electric Co. 8.90% 2/1/2006 23,000 24,559
El Paso Electric Co. 9.40% 5/1/2011 28,000 30,643
Midland Funding II 11.75% 7/23/2005 25,000 28,647
Niagara Mohawk Power Corp. 7.75% 10/1/2008 60,000 60,817
Public Service Co. of New Mexico 7.50% 8/1/2018 20,000 18,757
Texas-New Mexico Power Co. 10.75% 9/15/2003 14,000 14,578
---------
449,481
---------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $5,539,541) 5,334,415
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (5.3%)
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note 5.75% 8/15/2003 85,000 84,593
U.S. Treasury Note 6.50% 5/31/2001 35,000 35,519
U.S. Treasury Note 6.50% 5/31/2002 85,000 86,627
U.S. Treasury Note 6.50% 8/15/2005 100,000 102,379
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $315,427) 309,118
- -----------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.5%)
- -----------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 5.07% 8/2/1999 105,863 105,863
Collateralized by U.S. Government Obligations in a
Pooled Cash Account --Note I 5.10% 8/2/1999 37,200 37,200
- -----------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $143,063) 143,063
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%)
(COST $5,998,031) 5,786,596
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 82
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
<S> <C>
Other Assets--Note C 149,466
----------
Liabilities--Note I (126,178)
----------
23,288
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------
Applicable to 771,040,137 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $5,809,884
=======================================================================================================================
NET ASSET VALUE PER SHARE $7.54
=======================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1)Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 1999, the aggregate
value of these securities was $628,930,000, representing 10.8% of net
assets.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $6,089,504 $ 7.90
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (68,185) (.09)
Unrealized Depreciation--Note H (211,435) (.27)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS $5,809,884 $ 7.54
======================================================================================================================
</TABLE>
31
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F282-09/21/1999
