<PAGE> 1
VANGUARD
MUNICIPAL
BOND FUND
ANNUAL REPORT 1994
[PHOTO -- SEE EDGAR APPENDIX]
THE VANGUARD VOYAGE . . . STAYING THE COURSE
<PAGE> 2
THE VANGUARD VOYAGE . . . STAYING THE COURSE
WE ARE PRESENTLY OBSERVING TWO MILESTONES IN OUR HISTORY: (1) THE 20TH
ANNIVERSARY OF THE VANGUARD GROUP; AND (2) THE 65TH ANNIVERSARY YEAR OF
WELLINGTON FUND, THE OLDEST MUTUAL FUND ASSOCIATED WITH VANGUARD. WE CELEBRATE
THESE TWO EVENTS SINCE THEY HAVE INDELIBLY ALTERED THE MUTUAL FUND INDUSTRY--IN
OUR VIEW, FOR THE BETTER.
Wellington Fund--a pioneer in the mutual fund industry--began operations on
June 30, 1929. Its first fifteen years were a struggle for survival in an
industry that was shaken to its roots by the Great Crash of 1929-1933. From an
initial base of $100,000, Wellington's assets had grown to but $27 million by
the end of World War II. The Vanguard Group was founded on September 24, 1974.
Soon thereafter, we assumed responsibility for the management of Wellington
Fund and ten associated funds, with assets aggregating $1.4 billion.
The years that followed the founding of The Vanguard Group were marked by
exceptional growth. Today, Wellington Fund, with assets of nearly $9 billion,
remains one of the largest mutual funds in the nation. And Vanguard, now
managing 85 mutual fund portfolios, is entrusted with assets of $134 billion,
and ranks as the second largest fund complex in the world.
Our durability in an era of change--and our longevity in an era of
challenge--didn't "just happen." What brought us to where we are today is what
we were when we began. Put another way, we set our original investment course
based on sound principles, and our corporate course based on a single focus:
serving solely the interests of our Fund shareholders.
FOUNDING INVESTMENT PRINCIPLES
The founding investment principles of Wellington Fund were, above all,
conservative. The Fund provided a broadly diversified portfolio at a time when
holding individual securities was the conventional strategy. It incurred no
debt in an era of high leverage that would soon come back to haunt less
cautious investors. And it was a "balanced" fund--in fact, Wellington is
America's oldest balanced fund--with holdings from each of the three basic
financial asset classes: cash reserves, bonds, and common stocks. In short,
Wellington Fund was a staid investment in an era of stock speculation that
was to become, almost within moments, an era of conservatism.
For Vanguard, these investment principles endure. "Balance" is still our
watchword, because the three basic financial asset classes have different--and
usually countervailing--investment characteristics. When it began, Wellington
Fund provided a balanced program in a single investment; in 1994, such a
balance is often achieved by a combination of Vanguard money market, bond, and
stock funds.
"Conservatism," too, remains our standard. Over the years, we have tried
to maintain the discipline to eschew offering funds that lack sound financial
principles, often based on marketplace fads that could not--and did
not--endure. Our conservatism applies not only to the funds we offer, but to
the instruments in which they invest. For example, we have steered clear of
exotic derivative securities with unpredictable investment characteristics. Too
many fund managers have been taken in by these highly risky instruments, and
their shareholders have paid a heavy price--except in cases where the manager
has "made the fund whole," when to do otherwise would have shocked investors
and impaired their confidence in the fund complex.
Speculation, it seems, comes and goes, albeit in different guises. But the
investment principles to which we have adhered since Wellington Fund began in
1929 remain firm:
* We offer Funds with sound and durable investment objectives, designed for
long-term investors.
(please turn to inside back cover)
- ------------------------------------------------------------------------------
VANGUARD MUNICIPAL BOND FUND SEEKS TO PROVIDE THE HIGHEST LEVEL OF INCOME THAT
IS EXEMPT FROM FEDERAL INCOME TAXES, AND THAT IS CONSISTENT WITH BOTH
CONSERVATION OF CAPITAL AND THE INVESTMENT POLICIES OF EACH OF ITS PORTFOLIOS:
MONEY MARKET * SHORT-TERM * LIMITED-TERM * INTERMEDIATE-TERM * INSURED
LONG-TERM * LONG-TERM * HIGH-YIELD.
<PAGE> 3
CHAIRMAN'S LETTER
FELLOW SHAREHOLDER:
Our 1994 fiscal year, which ended on August 31, was, all things considered, a
pretty good year for Vanguard Municipal Bond Fund. Our shorter-term Portfolios
provided total returns in the area of +2.5%; our longer-term Portfolios,
despite a sharp decline in the bond market, generally held in neutral territory
(returns ranging from +2.5% down to -0.3%). In this tough environment for
fixed-income securities, I am pleased to report that each one of our seven
Portfolios outpaced competitive norms.
This table presents the total return for each of our Portfolios, and
also shows the two components of return: income return and capital return.
Income returns are always a positive component, and are reasonably predictable
from one year to the next; however, capital returns, especially volatile in our
longer-term Portfolios, may be positive (as they had been for most of the prior
six years) or negative (as in fiscal 1994).
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Investment Returns
------------------------------------
Twelve Months Ended August 31, 1994
------------------------------------
Portfolio Income Capital Total
- ------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET +2.4% -- +2.4%
SHORT-TERM +3.5 -1.0% +2.5
LIMITED-TERM +4.2 -1.9 +2.3
- ------------------------------------------------------------
INTERMEDIATE-TERM +5.1% -2.6% +2.5%
INSURED LONG-TERM +5.5 -5.8 -0.3
LONG-TERM +5.4 -5.3 +0.1
HIGH-YIELD +5.7 -5.2 +0.5
- ------------------------------------------------------------
</TABLE>
The customary detailed statement of net asset values, income dividends, any
capital gains distributions, and current yields is presented on page 5.
THE YEAR IN REVIEW
The declining interest rate environment that had persisted with striking
consistency since October 1987 came to an end in October 1993. The yield on the
long-term U.S. Treasury bond, which had fallen from 7.5% when 1993 began to a
low of 5.9% in mid-October, then began to rise sharply, returning to the 7.5%
level on August 31, 1994. The earlier rate decline had engendered a +22%
increase in the price of the long Treasury bond, the rate rise a commensurate
- -19% drop in price. Over the same periods, the yield on the 90-day U.S.
Treasury bill fell from 3.2% to 3.1%, then rose to 4.7% by the fiscal year's
end. (Because of the bill's short maturity, its price remained virtually flat
during the entire period.)
A primary cause of the interest rate rise was investor fears about a
resurgence of inflation. So far, at least, there is little evidence of it. The
U.S. Consumer Price Index has risen just 2.9% over the past twelve months,
although more sensitive indicators--such as commodity prices and producer
prices--have been rising at a higher rate.
In an effort to quell inflationary fears, the Federal Reserve has
acted to "tighten" the money supply and slow economic growth and potential
future inflation. Five rate increases--in February, March, April, May, and
again in August--combined to raise the Federal funds rate (at which banks
borrow from one another) from 3.00% to 4.75%. Theory suggests that increases in
short-term rates should be regarded by market participants as a restraint on
potential inflation, and thus cause long-term rates to fall.
(continued)
[PHOTO OF JOHN C. BOGLE -- SEE EDGAR APPENDIX]
1
<PAGE> 4
[TAX-FREE YIELDS - 1990-1994 LINE GRAPH -- SEE EDGAR APPENDIX]
However, this theory seldom holds true in practice, and, at least so far in
1994, theory has again been rebutted by practice.
Happily, the prices of long-term municipals resisted the overall
decline in the bond market fairly well. This resistance was based, simply put,
on the fact that tax-exempt bonds began the fiscal year with yields that were
extremely attractive relative to their taxable cousins. Indeed, as I mentioned
a year ago in our Annual Report for fiscal year 1993, "relative values in
tax-exempt bonds are as great as they have been in two decades." The result was
that municipal bonds pretty much held their own through January and then
declined slightly less than long Treasuries in the ensuing months. From the
October low through fiscal year end, the yield on high-grade, 30-year
tax-exempt bonds rose from 5.2% to 6.2%, reflected in a price decline of about
- -14%, or three-quarters of the drop in the 30-year Treasury.
The chart above shows the changing pattern of long-term and short-term
tax-exempt yields during our past five fiscal years. It provides some
perspective on the recent increase in yields, which, on the long-term side,
have nonetheless come down from 7.0% to 6.2% on balance over the period.
Short-term rates declined even more--from 5.9% to 3.3%--but, like
short-maturity Treasury bills, prices were stable throughout the entire period.
THE VANGUARD PORTFOLIOS IN FISCAL 1994
The trends in the municipal bond market were, of course, fully manifested in
the returns of our seven Portfolios, each of which has very tightly structured
investment policies with respect to quality and maturity. Given these
guidelines, it i hardly surprising that we provide good absolute returns in
good markets and just the reverse when markets decline. As I noted at the
outset, we had just enjoyed six years of the former conditions. That 1994 is in
the latter category is hardly surprising, since such reversals lie in the very
nature of the financial markets.
That said, we believe that it is our responsibility to provide
relative returns that, to the extent possible, are superior to those of other
municipal bond funds with objectives similar to those of our Portfolios. Each
year we evaluate our returns compared to those of our peers, and we have met
this relative performance standard over the years with a remarkable degree of
consistency. The past fiscal year was no exception, as each of our Portfolios
nicely outpaced competitive norms. This table tells the story:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Total Return
-----------------------------------------
Twelve Months Ended August 31, 1994
-----------------------------------------
Vanguard Average Vanguard
Portfolio Fund Competitive Fund Advantage
- -----------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET +2.4% +2.0% +0.4%
SHORT-TERM +2.5 +2.3* +0.2
LIMITED-TERM +2.3 +1.9* +0.4
- -----------------------------------------------------------------
INTERMEDIATE-TERM +2.5% +1.0% +1.5%
INSURED LONG-TERM -0.3 -1.4 +1.1
LONG-TERM +0.1 -1.1 +1.2
HIGH-YIELD +0.5 +0.1 +0.4
- -----------------------------------------------------------------
</TABLE>
* Adjusted for average maturity.
It would be disingenuous indeed if I did not tell you how proud I am of this
"clean sweep" in fiscal 1994. As in the past, our aggregate advantage comes
from a combination of: (1) our skilled professional
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<PAGE> 5
management team; (2) our consistent maturity policies (we do not make major
interest rate "bets"); (3) our high quality standards (unlike many competitors,
we elect not to "play games" with exotic derivative securities, the hazards of
which have received so much attention this year); and (4) our exceptionally low
expense structure (which gives us a tangible yield advantage and obviates the
temptation to "go out on a limb" reaching for higher yields).
Since Vanguard Municipal Bond Fund began operations in 1977, our
expense ratios (expenses as a percentage of average net assets) have been the
lowest in the field. Last year, our expense ratios were but 0.20%, compared to
an average of about 0.80% for our competitors. This advantage means that, on
average, we can provide an extra 0.60% of yield to you, raising, say, a 5.0%
net yield to 5.6%. Put another way, our annualized expenses would consume just
4% of an assumed gross yield of 5.0% for a tax-exempt bond portfolio; our
average competitor's costs would consume fully 16%.
In addition to this truly substantial expense advantage, of course,
investors purchase shares of Vanguard Municipal Bond Fund on a "no-load" basis,
without sales commissions of any kind. Some 1,100 (of 1,800) competitive
municipal bond funds require the payment of a sales commission, usually in the
4% range. Compared with such funds, then, Vanguard offers not only a huge
expense advantage year after year, but a huge initial savings in purchase
price. At Vanguard, your first year's dividend (say, 4%) would be "free"; a
sales charge fund would confiscate such a dividend in its entirety.
TAX-EXEMPT VERSUS TAXABLE YIELDS
One of the (too often) unsung advantages of tax-exempt income is the sharp
increase in spendable income compared to the income that would be garnered,
after taxes, on a taxable bond. In the lower rate environment of a year ago, as
I mentioned earlier in this letter, this advantage--for investors in the
highest marginal Federal tax bracket (now 39.6%)--was well above historical
norms, with tax-exempt bonds providing net spendable income nearly 40% higher
than that available on taxable U.S. Treasury bonds. While this "spread" is
"only" about +25% today, it is still substantial. This table presents a
comparison of the yields on tax-exempt and taxable 10-year bonds as of August
31, 1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Ten-Year Maturity
-----------------------------
Income Income on $10,000
Yields Investment
- --------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BOND
GROSS YIELD 7.2% $720
TAX (39.6%) 2.9 290
---- ----
NET YIELD 4.3% $430
- --------------------------------------------------------------------
HIGH-GRADE MUNICIPAL BOND
NET YIELD 5.3% $530
- --------------------------------------------------------------------
MUNICIPAL BOND ADVANTAGE +1.0% $100
- --------------------------------------------------------------------
</TABLE>
As you can see, an investor in the top tax bracket today can gain a yield
improvement of about 25% by investing in municipal bonds rather than U.S.
Treasury bonds. To be sure, the "full faith and credit" of the U.S. Treasury
remains peerless; on the other hand, the tax-exempt yield shown above is
available on AAA municipal bonds for which the payment of income and principal
(at maturity) is insured by a high-quality private insurance company. (This
insurance, of course, does not protect against price volatility.) Such a bond
represents a slight decline in credit quality, but nothing resembling a 25%
diminution. So, the insured municipal bond appears to provide a remarkable
trade-off of higher after-tax return without a marked increase in credit risk.
A LONGER-TERM PERSPECTIVE
Fiscal 1994 goes into the record, then, as one in which interest rates
increased rather sharply. This trend reduced the prices of long-term bonds
significantly, although municipal bonds withstood the decline better than
taxable bonds. This same rate increase, of course, raised the level of income
earned by holders of short-term bonds. Municipal bond money market funds
provided stable net asset values of $1.00 per share, and short-term bond funds
held their principal declines to modest levels, in both cases, just as would be
expected.
Taken alone, 1994 could easily be regarded as a disappointing year.
But the reality is that bond prices fluctuate. And the longer the maturity, the
greater the price volatility. We should consider ourselves fortunate
3
<PAGE> 6
that the long-term performance of municipal bond funds remains excellent, with
annual returns over the past decade (including 1994) averaging from the +10%
range for our longer-term Portfolios to the +5% range for our shorter-term
Portfolios. The detailed comparisons over the past decade for each Portfolio
are presented on pages 9-12 of this Annual Report.
These charts also show the ongoing performance superiority of each of
our Portfolios over competitive funds throughout the past decade. The four keys
to this advantage enumerated earlier in this letter explain, as well as words
can, the reasons for our success. We have no reason to doubt the sustainability
of our advantage. A similar conclusion has been reached by many mutual fund
evaluation services. In its 1994 Mutual Fund Review, for example, Forbes
magazine listed all seven of our Portfolios as "Best Buys" in their respective
maturity groups, a record of consistency that none of our competitors
approached. We shall do our best to measure up to these independent accolades.
LOOKING AHEAD
A year ago in my 1993 letter to shareholders, I cautioned that "with interest
rates having come down so far and so fast, there is always the risk of a sharp
rebound." That risk "came home to roost" during fiscal 1994, but our Portfolios
withstood the test of a falling bond market with flying colors.
I also mentioned in that 1993 letter that, in such a market,
short-term ("market timing") investors in municipal bond funds could be
expected to quickly redeem their shares, and urged any who were invested in
Vanguard Municipal Bond Fund "to move their assets to one of our many competent
competitors," for we seek to serve long-term investors. I cannot say that my
warning had the desired effect, but I can say that our short- to long-term
Portfolios in the aggregate enjoyed a modest positive cash inflow, while
virtually all of our major competitors suffered cash outflows. During the worst
of the decline, we not only met the liquidity needs of our shareholders, but
did so without impacting the liquidity reserve of 8% of net assets that we
maintain as a matter of policy. While this "safety valve" was not needed, it
was a comfort to know that it was available. We will continue to adhere to this
reserve policy in the coming year.
I believe that, during fiscal 1995, the probabilities favor greater
stability in long-term tax-exempt rates and somewhat higher short-term rates.
While recent signals of higher inflation are not encouraging, it would not be
unusual if the financial market's expectations are already, at least in part,
manifested in higher yields. Whatever the case, we again urge you to own the
Portfolio (or combination of Portfolios) that best matches the risk-reward
pattern that suits your own needs and circumstances. Always remember that the
longer the maturity, the higher the income yield you receive, but the greater
the principal volatility you must accept.
In sum, we intend to "stay the course" with the consistent objectives
and policies we have established for the various Portfolios of Vanguard
Municipal Bond Fund. Alone or in combination, these Portfolios enable you to
establish the investment course you wish to follow. Whatever plan you set, we
urge you, again, to "stay the course" as well.
Sincerely,
/s/ JOHN C. BOGLE
- -----------------
John C. Bogle
Chairman of the Board
September 13, 1994
Note: Mutual fund data from Lipper Analytical Services, Inc.
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A WORD ABOUT CAPITAL GAINS DISTRIBUTIONS
You may recall that, during the rising bond markets of each of the past four
years, our longer-term Portfolios realized capital gains mostly in the range of
$.10 to $.20 per share. These amounts must, under Federal tax regulations, be
distributed to shareholders of our Portfolios as taxable capital gains.
I want to emphasize that it is not our objective to realize capital
gains. Rather, capital gains are a by-product of a number of factors,
including, most importantly, sharply rising municipal bond prices in earlier
years. When bonds are subsequently called or refunded, or when even limited
portfolio strategy shifts capitalize on the relative valuations of different
market sectors, realized gains are the result.
While we will not know until October 31 the exact amount of gains
distributions for 1994, it will hardly surprise you to know that we have again
realized gains. At the moment, the gains total about $.15 to $.18 per share for
the Intermediate-Term, Insured Long-Term, Long-Term, and High-Yield Portfolios.
The numbers could rise a bit; they are unlikely to get smaller. Shareholders
of record on December 29, 1994, will receive these distributions. Our telephone
Communications Associates receive regular updates on the gains figures, and
they are happy to provide them to you at any time.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share Twelve Months SEC
------------------------- ----------------------------------- Current
Average Average August 31, August 31, Income Capital Gains Total Annualized
Portfolio Maturity Quality 1993 1994 Dividends Distributions Return Yield*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORTER-TERM
MONEY MARKET 51 Days MIG 1 $ 1.00 $ 1.00 $.024 -- +2.4% 3.01%
SHORT-TERM 420 Days Aa1 15.63 15.46 .534 $.020 +2.5 3.84
LIMITED-TERM 2.6 Years Aa 10.80 10.57 .454 .022 +2.3 4.18
- ---------------------------------------------------------------------------------------------------------------------------------
LONGER-TERM
INTERMEDIATE-TERM 8.0 Years Aa $13.45 $13.02 $.683 $.076 +2.5% 5.07%
INSURED LONG-TERM 14.8 Years Aaa 12.89 11.98 .699 .176 -0.3 5.66
LONG-TERM 17.4 Years Aa3 11.38 10.58 .609 .205 +0.1 5.73
HIGH-YIELD 17.3 Years A2 11.17 10.39 .626 .214 +0.5 6.08
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield for Money Market Portfolio is a 7-day yield. All others are 30-day
yields.
5
<PAGE> 8
REPORT FROM THE INVESTMENT ADVISER
IT WAS A BUMPY RIDE
The fiscal year ended August 31, 1994, was a difficult period to be a
bondholder. Interest rates climbed relentlessly from a starting point that
represented the lowest levels in some twenty years. A garden variety 30-year
municipal bond lost about 8% of its market value during the twelve months, more
than consuming its 5.4% tax-exempt yield earned during the period. Shorter
maturity bonds were not insulated very much from the difficult markets, as very
low initial yield levels provided little income cushion. Additionally, yields
rose more rapidly for short and intermediate maturities, causing sharp losses
in their values. A one-year tax-exempt note had the best total return over the
twelve-month holding period. In all, it was a bumpy ride, particularly in
comparison to the prior three consecutive fiscal years of bountiful returns.
Shareholders of each of our bond Portfolios received returns
consistent with the "market profiles" that each Portfolio maintains. As meager
as the returns may seem, they look attractive compared to the returns of
comparable individual securities:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Total Return
-----------------------------
Twelve Months Ended
August 31, 1994
- --------------------------------------------------------------------
Comparable
Vanguard Municipal
Vanguard Portfolio Return Bond Return
- --------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM +2.5% +2.05%
LIMITED-TERM +2.3 +1.82
INTERMEDIATE-TERM +2.5 +0.88
INSURED LONG-TERM -0.3 -2.26
LONG-TERM +0.1 -2.26
HIGH-YIELD +0.5 -1.35
- --------------------------------------------------------------------
</TABLE>
All of the Portfolios enjoyed relative returns that, in each case,
were above those of funds with similar investment objectives. Three primary
factors contributed to our relative success: (1) rock-bottom expense ratios;
(2) more cautious than normal maturity profiles; and (3) several strategies
which "at the margin" improved shareholder value. Details of the year in review
and comments on key investment strategies follow.
THE YEAR IN REVIEW
At the beginning of the fiscal year, the consensus of economists and portfolio
managers alike could not have been more optimistic for fixed-income
investments. Inflation was running at less than three percentage points above
year earlier levels. Economic growth was tepid (at best) and the cliche of the
"jobless recovery" dominated the financial press. Additionally, unacceptably
low returns on shorter-term investments were causing a torrent of cash flow
into all categories of bond funds. Such euphoria often precedes a downturn in
the market, and this year was no exception.
Bond prices continued to escalate up to the market highs of October
14, 1993. At that point, the yield on one-, ten-, and 30-year U.S. Treasury
securities reached 3.3%, 5.2%, and 5.9%, respectively. All of these yield
levels require an investor to go back to the early 1970s to find meaningful
comparisons.
Late October and November witnessed the first signs of the bear market
in bonds that was to follow. Growth figures for the U.S. economy began to
accelerate, and improving sales of homes and automobiles as well as an
improving consumer confidence confirmed the rebound. Also, rising commodity
prices foreshadowed the end of heretofore "easy" Federal Reserve monetary
policy.
On February 4, 1994, the Fed issued a statement acknowledging that,
for the first time in more than five years, short-term interest rates charged
to banks ("Fed funds") had been raised. This "adding slightly to the degree of
restraint" was the first of five such rate hikes. Coupled with now undeniable
evidence of a more rapid pace of economic activity, the bond market went into a
tailspin. Long Treasury bonds went from a yield of 6.3% in early February to
7.6% in early May, before finally leveling off. Short and intermediate
maturities rose even more rapidly in yield. This reaction is normal, as the
shorter maturity markets try to anticipate the speed and magnitude of the next
tightening moves by the Fed.
The municipal market followed the lead of the Treasury market with
several notable exceptions. Following a five-month period of good relative
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<PAGE> 9
performance, the municipal market was hit even harder than the Treasury market
from early February to early April. Shareholder redemptions forced many
tax-exempt bond funds to sell some of their holdings. This forced selling had a
disproportionately large negative effect on the less liquid tax-exempt market
compared to most other bond markets. The low reserve levels of most tax-exempt
bond funds clearly contributed to the market's problems. Needless to say, the
Vanguard Portfolios had more-than-adequate liquid reserves to accommodate
shareholders.
Following this difficult period, the municipal market again
outperformed the Treasury market by a wide margin, and tax-exempt bond fund
redemptions subsided. The higher marginal income tax rates imposed during 1993
were finally "discounted" by the better relative performance of tax-exempts. A
30-year AAA tax-exempt bond now yields about 80% of the yield of a comparable
Treasury. This is down appreciably from the 88% ratio of Treasury yields a year
ago. We now consider tax exempts to be "fairly priced" compared to the relative
bargain prices of a year ago.
STRATEGY RECAP
Last year in our annual letter, we identified several strategies that were
designed to provide shareholders with incremental performance over the generic
risk/return profiles that their Portfolios embodied. These activities entail
over- or underweighting specific risk characteristics. On balance, 1994 was a
successful year in this regard. The following represents how these strategies
have fared and where we stand today.
* EMPHASIS ON LOWER PRICE SENSITIVITY
In last year's letter we noted that we had adjusted our average
maturities down somewhat in the spring of 1993. In hindsight, that
initial move turned out to be a bit too early. Nevertheless, in late
1993 and early 1994, we further shifted our maturity profile downward.
That adjustment saved shareholders some of the pain of the bear
market. In our opinion, the bulk of the rise in interest rates is
behind us. Consequently, we have begun to shift back to our normal
average maturity profile for each Portfolio. If interest rates were to
move much higher, we would consider adjusting our price sensitivities
somewhat higher to take advantage of some bargains, not to mention
higher yields.
* EMPHASIS ON ADDED QUALITY
We continue to manage the Portfolios with a somewhat higher average
credit quality than that of competitors. The differences in yield
among higher- and lower-quality bonds remain quite small, much like
they were a year ago. This strategy neither added nor subtracted much
to the return potential of each Portfolio. While we are finding a few
opportunities in the lower-quality arena (High-Yield Portfolio), we'll
wait for more generous compensation for credit risk before lowering
our average portfolio quality. Moreover, Vanguard's substantial
expense ratio advantage over our competitors continues to make this
yield sacrifice all but invisible.
* EMPHASIS ON CALL PROTECTION
All of the Portfolios contain much better call protection than that of
competitors. We continue to strive, as we have for many years, to
improve our call structure. This strategy helped us avoid some of the
pitfalls of a difficult bond market. We were not faced with the
pressure of reinvesting the untimely proceeds of calls in 1993.
Consequently, we avoided being forced to purchase many of the new
issue bonds that proceeded to perform the worst. Of course, the main
advantage of this added call protection will be evidenced (we hope)
with outsized appreciation during the next bull market. Moreover,
enhanced call protection is the best way to assure a high and stable
level of tax-exempt dividend income.
* MUNICIPAL/TREASURY ARBITRAGE
We noted last year that municipal bonds were extraordinarily cheap
compared to Treasury bonds. We also noted that the strategy to exploit
that cheapness was not successful in fiscal 1993. The past fiscal year
rewarded that strategy and helped boost returns somewhat above
competitor norms. Much
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<PAGE> 10
of the previously noted reductions in average maturities were
accomplished through "hedging" with Treasury futures contracts.
Treasury bond prices fell much more over the past year than municipal
bond prices. Also, it enabled us to maintain high dividend levels
while protecting shareholder value.
* MAINTENANCE OF ADEQUATE RESERVE LEVELS
While not listed as a major strategy a year ago, the Vanguard
Portfolios always maintain cash reserve positions that we consider
adequate to handle contingencies. In good times, this precaution
sacrifices a small amount of yield potential. In difficult markets,
our added reserves protect shareholder value. We were not at any time
during the distressed markets of March and April forced to liquidate
bond positions. Forced liquidations can be an expensive activity for
the vast majority of shareholders who invest in the Portfolios for the
long haul.
Collectively, we hope that these strategies will continue to provide
relative returns toward the top of each Portfolio's risk category. Our huge
cost advantage gives us a big (and certain) head start toward meeting that
objective. As always, your Portfolios will be managed to provide the best
returns with a high degree of relative predictability.
Sincerely,
I. A. MacKinnon, Senior Vice President
J. J. Jacobs, Vice President
P. E. Wisehaupt, Vice President
D. E. Hamlin, Assistant Vice President
C. M. Ryon, Assistant Vice President
Vanguard Fixed Income Group
September 14, 1994
AVERAGE ANNUAL TOTAL RETURNS--THE AVERAGE ANNUAL TOTAL RETURNS FOR THE
PORTFOLIOS (PERIODS ENDED JUNE 30, 1994) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
10 YEARS
---------------------------------
INCEPTION TOTAL CAPITAL INCOME
PORTFOLIO DATE 1 YEAR 5 YEARS RETURN RETURN RETURN
- ------------------------ ---------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET 6/10/80 +2.39% +4.01% + 4.60% 0.00% +4.60%
SHORT-TERM 9/1/77 +2.38 +5.27 + 5.80 +0.42 +5.38
LIMITED-TERM 8/31/87 +2.32 +6.56 + 6.72* +1.00* +5.72*
INTERMEDIATE-TERM 9/1/77 +2.54 +8.26 +10.19 +3.02 +7.17
INSURED LONG-TERM 9/30/84 -0.26 +7.84 +10.11* +2.64* +7.47*
LONG-TERM 9/1/77 -0.24 +8.20 +10.97 +3.29 +7.68
HIGH-YIELD 12/27/78 +0.33 +8.29 +11.27 +3.30 +7.97
</TABLE>
* PERFORMANCE FIGURES SINCE INCEPTION.
THESE DATA REPRESENT PAST PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT INVESTORS' SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT IN THE MONEY
MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND
THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
8
<PAGE> 11
CUMULATIVE PERFORMANCE
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -----------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO +2.43% +3.89% +4.54%
AVERAGE TAX-EXEMPT
MONEY MARKET FUND +2.01 +3.47 +4.14
</TABLE>
[MONEY MARKET PORTFOLIO LINE GRAPH - AUGUST 31, 1984, TO AUGUST 31, 1994 --
SEE EDGAR APPENDIX]
Note: Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -----------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
Short-Term Portfolio +2.49% +5.17% +5.73%
Average Short-Term
Municipal Fund +1.84 +5.99 +6.47
</TABLE>
[SHORT-TERM PORTFOLIO LINE GRAPH - AUGUST 31, 1984, TO AUGUST 31, 1994 --
SEE EDGAR APPENDIX]
Note: Past performance is not predictive of future performance.
9
<PAGE> 12
CUMULATIVE PERFORMANCE (continued)
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -----------------------------------------------------------------
1 Year 5 Years Since Inception*
- -----------------------------------------------------------------
<S> <C> <C> <C>
LIMITED-TERM PORTFOLIO +2.31% +6.54% +6.68%
AVERAGE SHORT-TERM
MUNICIPAL FUND +1.84 +5.99 +5.94
LEHMAN INDEX +2.52 +6.44 +6.15
</TABLE>
[LIMITED-TERM PORTFOLIO LINE GRAPH - AUGUST 31, 1987, TO AUGUST 31, 1994 --
SEE EDGAR APPENDIX]
*Inception: August 31, 1987.
Note: Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -------------------------------------------------------------
1 Year 5 Years 10 Years
- -------------------------------------------------------------
<S> <C> <C> <C>
INTERMEDIATE-TERM PORTFOLIO +2.49% +8.49% + 9.76%
AVERAGE INTERMEDIATE-TERM
MUNICIPAL FUND +0.95 +7.22 + 7.58
LEHMAN INDEX +0.92 +8.47 +10.11
</TABLE>
[INTERMEDIATE-TERM PORTFOLIO LINE GRAPH - AUGUST 31, 1984, TO AUGUST 31, 1994 --
SEE EDGAR APPENDIX]
Note: Past performance is not predictive of future performance.
10
<PAGE> 13
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -------------------------------------------------------------------
1 Year 5 Years Since Inception*
- -------------------------------------------------------------------
<S> <C> <C> <C>
INSURED LONG-TERM PORTFOLIO -0.32% +8.36% +10.16%
AVERAGE INSURED LONG-TERM
MUNICIPAL FUND -1.37 +7.42 + 9.34
LEHMAN INDEX +0.18 +8.25 +10.39
</TABLE>
[INSURED LONG-TERM PORTFOLIO LINE GRAPH - SEPTEMBER 30, 1984, TO AUGUST 31,
1994 -- SEE EDGAR APPENDIX]
*Inception: September 30, 1994.
Note: Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -----------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM PORTFOLIO +0.08% +8.76% +10.51%
AVERAGE GENERAL
MUNICIPAL FUND -1.10 +7.59 + 9.63
LEHMAN INDEX +0.18 +8.25 +10.23
</TABLE>
[LONG-TERM PORTFOLIO LINE GRAPH - AUGUST 31, 1984, TO AUGUST 31, 1994 --
SEE EDGAR APPENDIX]
Note: Past performance is not predictive of future performance.
11
<PAGE> 14
CUMULATIVE PERFORMANCE (continued)
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1994
- -----------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
HIGH-YIELD PORTFOLIO +0.52% +8.85% +10.76%
AVERAGE HIGH-YIELD
MUNICIPAL FUND +0.08 +7.33 + 9.45
LEHMAN INDEX +0.18 +8.25 +10.23
</TABLE>
[HIGH-YIELD PORTFOLIO LINE GRAPH - AUGUST 31, 1984, TO AUGUST 31, 1994 --
SEE EDGAR APPENDIX]
Note: Past performance is not predictive of future performance.
12
<PAGE> 15
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MONEY MARKET SHORT-TERM LIMITED-TERM
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
August 31, 1994 August 31, 1994 August 31, 1994
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . . . . $106,727 $ 53,949 $ 79,755
- -------------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . 106,727 53,949 79,755
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . . . . . . . 425 154 187
Management and Administrative . . . . . . . . . . 6,406 2,242 2,736
Marketing and Distribution . . . . . . . . . . . . 1,085 396 448
Taxes (other than income taxes)--Note A . . . . . . . 321 118 141
Auditing Fees . . . . . . . . . . . . . . . . . . . 11 8 8
Shareholders' Reports . . . . . . . . . . . . . . . . 108 98 127
Annual Meeting and Proxy Costs . . . . . . . . . . . 9 6 12
Directors' Fees and Expenses . . . . . . . . . . . . 19 7 9
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . 8,384 3,029 3,668
- -------------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . 98,343 50,920 76,087
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . (378) 153 (3,049)
Futures Contracts . . . . . . . . . . . . . . . . . . -- -- 1,494
- -------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) . . . . . . . . . (378) 153 (1,555)
- -------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . . -- (14,693) (35,941)
Futures Contracts . . . . . . . . . . . . . . . . . . -- -- 425
- -------------------------------------------------------------------------------------------------------------------------------
Change in Unrealized
Appreciation (Depreciation) . . . . . . -- (14,693) (35,516)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
in Net Assets Resulting
from Operations . . . . . . . . . . . . $ 97,965 $ 36,380 $ 39,016
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Statements of Net Assets, integral parts of the financial statements for
each of the Vanguard Municipal Bond Fund Portfolios, and the Report of
Independent Accountants are included as an insert to this Report.
13
<PAGE> 16
STATEMENT OF OPERATIONS (continued)
<TABLE>
<CAPTION>
INSURED
INTERMEDIATE-TERM LONG-TERM LONG-TERM HIGH-YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
August 31, 1994 August 31, 1994 August 31, 1994 August 31, 1994
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . . . . $ 273,408 $ 119,677 $ 60,649 $ 111,279
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . 273,408 119,677 60,649 111,279
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . . . . . . . 541 224 115 198
Management and Administrative . . . . . . . . . . 7,937 3,221 1,650 2,858
Marketing and Distribution . . . . . . . . . . . . 1,098 398 198 370
Taxes (other than income
taxes)--Note A . . . . . . . . . . . . . . . . . . 404 164 85 147
Auditing Fees . . . . . . . . . . . . . . . . . . . 12 9 8 9
Shareholders' Reports . . . . . . . . . . . . . . . 367 147 79 154
Annual Meeting and Proxy Costs . . . . . . . . . . . 29 7 2 8
Directors' Fees and Expenses . . . . . . . . . . . . 25 11 5 9
- -----------------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . 10,413 4,181 2,142 3,753
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . 262,995 115,496 58,507 107,526
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . 1,263 15,226 9,023 19,905
Futures Contracts . . . . . . . . . . . . . . . . . . 50,615 14,953 10,343 19,982
- -----------------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) . . . . . . . . . 51,878 30,179 19,366 39,887
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . . (220,661) (166,429) (83,480) (150,903)
Futures Contracts . . . . . . . . . . . . . . . . . . 20,387 12,559 6,977 11,446
- -----------------------------------------------------------------------------------------------------------------------------------
Change in Unrealized
Appreciation (Depreciation) . . . . . . (200,274) (153,870) (76,503) (139,457)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
in Net Assets Resulting
from Operations . . . . . . . . . . . . $ 114,599 $ (8,195) $ 1,370 $ 7,956
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET SHORT-TERM
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended YEAR ENDED Year Ended
AUGUST 31, 1994 August 31, 1993 AUGUST 31, 1994 August 31, 1993
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . $ 98,343 $ 82,052 $ 50,920 $ 45,282
Realized Net Gain (Loss) . . . . . . . . . . . . . . . . (378) (46) 153 2,134
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . . . . . . . . . -- -- (14,693) 444
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . . . . 97,965 82,006 36,380 47,860
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . (98,343) (82,052) (50,920) (45,282)
Realized Net Gain . . . . . . . . . . . . . . . . . . . -- -- (1,836) (3,073)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . (98,343) (82,052) (52,756) (48,355)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . . . . 4,182,559 3,675,705 796,836 717,818
--In Lieu of Cash Distributions . . . . . 89,767 74,650 43,222 39,773
--Exchange . . . . . . . . . . . . . . . . 1,748,976 1,295,556 413,024 285,873
Redeemed --Regular . . . . . . . . . . . . . . . . (4,044,714) (3,305,334) (628,207) (460,866)
--Exchange . . . . . . . . . . . . . . . . (1,350,414) (1,367,784) (376,843) (314,312)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions . . . . . . . . . . . . 626,174 372,793 248,032 268,286
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . . . . . . 625,796 372,747 231,656 267,791
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year . . . . . . . . . . . . . . . . . . . 3,537,829 3,165,082 1,328,905 1,061,114
- -----------------------------------------------------------------------------------------------------------------------------------
End of Year . . . . . . . . . . . . . . . . . . . $ 4,163,625 $ 3,537,829 $1,560,561 $1,328,905
===================================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . . . . . . $ .024 $ .025 $ .534 $ .609
Realized Net Gain . . . . . . . . . . . . . . . . -- -- $ .020 $ .043
- -----------------------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . 5,931,535 4,971,261 77,761 64,169
Issued in Lieu of Cash Distributions . . . . . . . 89,767 74,650 2,781 2,543
Redeemed . . . . . . . . . . . . . . . . . . . (5,395,128) (4,673,118) (64,634) (49,559)
- -----------------------------------------------------------------------------------------------------------------------------------
626,174 372,793 15,908 17,153
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
LIMITED-TERM INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended YEAR ENDED Year Ended
AUGUST 31, 1994 August 31, 1993 AUGUST 31, 1994 August 31, 1993
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . $ 76,087 $ 55,575 $ 262,995 $ 213,123
Realized Net Gain (Loss) . . . . . . . . . . . . . . . . (1,555) 3,804 51,878 13,461
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . . . . . . . . . (35,516) 20,118 (200,274) 205,764
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . . . . 39,016 79,497 114,599 432,348
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . (76,087) (55,575) (262,995) (213,123)
Realized Net Gain . . . . . . . . . . . . . . . . . . . (3,611) (4,543) (29,272) (30,946)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . (79,698) (60,118) (292,267) (244,069)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . . . . 705,088 778,572 1,111,290 1,602,893
--In Lieu of Cash Distributions . . . . . 63,053 48,253 223,421 191,081
--Exchange . . . . . . . . . . . . . . . . 403,840 513,897 661,185 951,810
Redeemed --Regular . . . . . . . . . . . . . . . . (466,315) (289,711) (753,226) (529,240)
--Exchange . . . . . . . . . . . . . . . . (475,703) (318,003) (942,767) (561,729)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions . . . . . . . . . . . . 229,963 733,008 299,903 1,654,815
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . . . . . . 189,281 752,387 122,235 1,843,094
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year . . . . . . . . . . . . . . . . . . . 1,625,039 872,652 4,945,377 3,102,283
- -----------------------------------------------------------------------------------------------------------------------------------
End of Year . . . . . . . . . . . . . . . . . . . $1,814,320 $1,625,039 $5,067,612 $4,945,377
===================================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . . . . . . $ .454 $ .485 $ .683 $ .710
Realized Net Gain . . . . . . . . . . . . . . . . $ .022 $ .049 $ .076 $ .121
- -----------------------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . 103,446 120,587 133,187 195,262
Issued in Lieu of Cash Distributions . . . . . . . 5,898 4,504 16,855 14,645
Redeemed . . . . . . . . . . . . . . . . . . . (88,203) (56,687) (128,504) (83,536)
- -----------------------------------------------------------------------------------------------------------------------------------
21,141 68,404 21,538 126,371
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
INSURED LONG-TERM LONG-TERM HIGH-YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended YEAR ENDED Year Ended YEAR ENDED Year Ended
AUGUST 31, August 31, AUGUST 31, August 31, AUGUST 31, August 31,
1994 1993 1994 1993 1994 1993
(000) (000) (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . $ 115,496 $ 118,583 $ 58,507 $ 60,501 $ 107,526 $ 104,869
Realized Net Gain (Loss) . . . . . . . 30,179 24,073 19,366 11,304 39,887 23,484
Change in Unrealized
Appreciation (Depreciation) . . . . (153,870) 112,357 (76,503) 57,729 (139,457) 84,289
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations . . . . (8,195) 255,013 1,370 129,534 7,956 212,642
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . (115,496) (118,583) (58,507) (60,501) (107,526) (104,869)
Realized Net Gain . . . . . . . . . . (29,332) (32,418) (19,678) (25,424) (36,102) (36,892)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . (144,828) (151,001) (78,185) (85,925) (143,628) (141,761)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . 213,973 385,337 123,617 203,654 288,307 446,238
--In Lieu of Cash
Distributions . . . 98,489 106,732 56,630 64,397 104,549 106,880
--Exchange . . . . . . . 135,738 202,107 129,162 192,302 257,090 363,804
Redeemed --Regular . . . . . . . (223,877) (224,040) (130,205) (117,709) (263,156) (213,810)
--Exchange . . . . . . . (327,530) (327,085) (232,028) (217,918) (400,749) (348,358)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions . . . . . . (103,207) 143,051 (52,824) 124,726 (13,959) 354,754
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . (256,230) 247,063 (129,639) 168,335 (149,631) 425,635
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year . . . . . . . . . . 2,194,247 1,947,184 1,130,577 962,242 1,930,760 1,505,125
- ---------------------------------------------------------------------------------------------------------------------------------
End of Year . . . . . . . . . . $1,938,017 $2,194,247 $1,000,938 $1,130,577 $1,781,129 $1,930,760
=================================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . $ .699 $ .718 $ .609 $ .640 $ .626 $ .669
Realized Net Gain . . . . . . . $ .176 $ .203 $ .205 $ .285 $ .214 $ .254
- ---------------------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . 28,101 47,371 23,106 36,086 50,641 75,005
Issued in Lieu of Cash
Distributions . . . . . . 7,892 8,660 5,128 5,925 9,687 9,977
Redeemed . . . . . . . . . . (44,443) (44,426) (33,017) (30,510) (61,773) (52,029)
- ---------------------------------------------------------------------------------------------------------------------------------
(8,450) 11,605 (4,783) 11,501 (1,445) 32,953
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .024 .025 .035 .050 .057
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . -- -- -- -- --
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS . . . . . .024 .025 .035 .050 .057
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.024) (.025) (.035) (.050) (.057)
Distributions from Realized Capital Gains . . . . -- -- -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.024) (.025) (.035) (.050) (.057)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . +2.43% +2.51% +3.54% +5.08% +5.90%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $4,164 $3,538 $3,165 $2,709 $2,488
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 2.41% 2.48% 3.45% 4.94% 5.72%
Portfolio Turnover Rate . . . . . . . . . . . . . . . N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $15.63 $15.64 $15.53 $15.35 $15.30
------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .534 .609 .720 .861 .906
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . (.150) .033 .171 .180 .050
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . .384 .642 .891 1.041 .956
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.534) (.609) (.720) (.861) (.906)
Distributions from Realized Capital Gains . . . . (.020) (.043) (.061) -- --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.554) (.652) (.781) (.861) (.906)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $15.46 $15.63 $15.64 $15.53 $15.35
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . +2.49% +4.18% +5.87% +6.96% +6.42%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $1,561 $1,329 $1,061 $841 $751
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 3.42% 3.88% 4.58% 5.55% 5.90%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 27% 46% 60% 104% 78%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
LIMITED-TERM PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $10.80 $10.64 $10.43 $10.17 $10.14
------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .454 .485 .541 .614 .643
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . (.208) .209 .271 .265 .041
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . .246 .694 .812 .879 .684
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.454) (.485) (.541) (.614) (.643)
Distributions from Realized Capital Gains . . . . (.022) (.049) (.061) (.005) (.011)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.476) (.534) (.602) (.619) (.654)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $10.57 $10.80 $10.64 $10.43 $10.17
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . +2.31% +6.68% +8.01% +8.88% +6.93%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $1,814 $1,625 $873 $420 $245
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 4.24% 4.50% 5.08% 5.91% 6.31%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 21% 20% 37% 57% 55%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $13.45 $12.85 $12.41 $11.90 $12.08
------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .683 .710 .747 .791 .822
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . (.354) .721 .516 .605 (.114)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . .329 1.431 1.263 1.396 .708
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.683) (.710) (.74) (.791) (.822)
Distributions from Realized Capital Gains . . . . (.076) (.121) (.076) (.095) (.066)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.759) (.831) (.823) (.886) (.888)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $13.02 $13.45 $12.85 $12.41 $11.90
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . +2.49% +11.54% +10.52% +12.15% +6.05%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $5,068 $4,945 $3,102 $2,006 $1,259
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 5.15% 5.41% 5.91% 6.49% 6.83%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 18% 15% 32% 27% 54%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
INSURED LONG-TERM PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $12.89 $12.28 $11.74 $11.25 $11.67
------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .699 .718 .768 .775 .805
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . (.734) .813 .616 .615 (.267)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . (.035) 1.531 1.384 1.390 .538
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.699) (.718) (.768) (.775) (.805)
Distributions from Realized Capital Gains . . . . (.176) (.203) (.076) (.125) (.153)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.875) (.921) (.844) (.900) (.958)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $11.98 $12.89 $12.28 $11.74 $11.25
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . -0.32% +13.06% +12.22% +12.79% +4.74%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $1,938 $2,194 $1,947 $1,551 $1,122
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 5.62% 5.77% 6.34% 6.77% 6.99%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 16% 30% 42% 33% 47%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $11.38 $10.95 $10.58 $10.13 $10.53
------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .609 .640 .711 .722 .732
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . (.595) .715 .561 .626 (.233)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . .014 1.355 1.272 1.348 .499
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.609) (.640) (.711) (.722) (.732)
Distributions from Realized Capital Gains . . . . (.205) (.285) (.191) (.176) (.167)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.814) (.925) (.902) (.898) (.899)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $10.58 $11.38 $10.95 $10.58 $10.13
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . +0.08% +13.09% +12.60% +13.86% +4.88%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $1,001 $1,131 $962 $798 $683
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 5.56% 5.81% 6.52% 7.09% 7.04%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 45% 36% 63% 62% 110%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $11.17 $10.76 $10.32 $ 9.90 $10.27
------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .626 .669 .723 .732 .739
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . . (.566) .664 .546 .560 (.259)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . .060 1.333 1.269 1.292 .480
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.626) (.669) (.723) (.732) (.739)
Distributions from Realized Capital Gains . . . . (.214) (.254) (.106) (.140) (.111)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.840) (.923) (.829) (.872) (.850)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $10.39 $11.17 $10.76 $10.32 $9.90
=================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . +0.52% +13.08% +12.81% +13.66% +4.82%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . . . $1,781 $1,931 $1,505 $1,215 $962
Ratio of Expenses to Average Net Assets . . . . . . . .20% .20% .23% .25% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 5.83% 6.15% 6.83% 7.34% 7.30%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 50% 34% 64% 58% 82%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
VANGUARD MUNICIPAL FINANCIAL STATEMENTS
BOND FUND August 31, 1994
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
Face Market
Amount Value
MONEY MARKET PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL MONEY MARKET INSTRUMENTS
(100.4%)
- -------------------------------------------------------------------------------------------
ALABAMA (1.8%)
Alabama Special Care Facilities
VRDO 3.00%, 9/7/94 (3) $ 4,100 $ 4,100
Birmingham GO VRDO
3.20%, 9/8/94 10,000 10,000
Huntsville Health Care Auth. VRDO
3.15%, 9/8/94 (1) 23,600 23,600
Macintosh IDR VRDO
(Ciba-Geigy)
3.10%, 9/7/94 21,800 21,800
Montgomery Industrial Development
Board Solid Waste PCR CP
(General Electric)
3.10%-3.20%,
10/11/94-10/18/94 16,830 16,830
------------
STATE TOTAL 76,330
------------
- -------------------------------------------------------------------------------------------
ALASKA (2.2%)
Valdez Marine Terminal
(ARCO Transport Project)
CP 2.90%-3.30%,
10/7/94-11/1/94 64,575 64,579
(Mobile Pipeline)
VRDO 3.00%, 9/7/94 28,350 28,350
------------
STATE TOTAL 92,929
------------
- -------------------------------------------------------------------------------------------
ARIZONA (3.6%)
Arizona Health Facilities Auth. VRDO
3.30%, 9/8/94 (3) 16,500 16,500
Maricopa County PCR VRDO
(Public Service Co.)
3.00%-3.15%, 9/2/94 48,900 48,900
Salt River Project Agricultural
Improvement & Power Dist. CP
2.90%-3.20%, 10/4/94-11/8/94 56,853 56,853
TOB 3.20%, 9/7/94 26,370 26,370
------------
STATE TOTAL 148,623
------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (6.4%)
California GO
5.00%, 8/1/95 (2) 15,600 15,710
California Higher Education Loan
Auth. Student Loan Rev. VRDO
3.15%, 9/7/94 36,100 36,100
California RAN
5.00%, 6/28/95 45,000 45,291
California RAW
3.75%, 12/21/94 14,300 14,312
Los Angeles County TRAN
4.50%, 6/30/95 73,100 73,446
Los Angeles County Unified School
Dist. TRAN
4.50%, 7/10/95 23,000 23,171
Orange County Irvine Coast
Assessment Dist. VRDO
2.90%, 9/2/94 600 600
Orange County Sanitation Dist. VRDO
2.80%, 9/2/94 300 300
2.80%, 9/2/94 (3) 900 900
Riverside County VRDO
3.05%, 9/6/94 6,000 6,000
Sacramento County Administration
Center & Courthouse VRDO
3.05%, 9/8/94 900 900
San Bernadino County TRAN
4.50%, 7/31/95 10,000 10,035
San Francisco Unified School
Dist. TRAN
4.75%, 8/24/95 17,000 17,091
Ventura County TRAN
4.50%, 8/1/95 23,950 24,087
------------
STATE TOTAL 267,943
------------
- -------------------------------------------------------------------------------------------
CONNECTICUT (.6%)
Connecticut Development Auth. PCR
VRDO (Connecticut Light & Power)
3.05%, 9/7/94 1,300 1,300
Connecticut Economic Recovery
VRDO 3.05%, 9/7/94 10,800 10,800
Connecticut Special Obligation VRDO
3.20%, 9/7/94 14,700 14,700
------------
STATE TOTAL 26,800
------------
- -------------------------------------------------------------------------------------------
DELAWARE (5.0%)
Delaware Economic Development
Auth. VRDO
(Hosp. Bill & Collection Service)
3.15%, 9/7/94 201,550 201,550
Delaware Transportation Auth.
10.30%, 7/1/95 (Prere.) 2,975 3,191
</TABLE>
THE PORTFOLIO LISTINGS BEGIN ON THE FOLLOWING PAGES:
<TABLE>
<S> <C>
MONEY MARKET PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SHORT-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
LIMITED-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
INTERMEDIATE-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INSURED LONG-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
LONG-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
HIGH-YIELD PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
1
<PAGE> 25
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Franciscan Health System VRDO
(City of Wilmington)
2.90%, 9/2/94 $ 3,400 $ 3,400
------------
STATE TOTAL 208,141
------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (2.8%)
District of Columbia TRAN
3.50%, 9/30/94 36,500 36,509
District of Columbia VRDO
GO 3.10%, 9/2/94 41,300 41,300
3.20%, 9/7/94 15,400 15,400
(George Washington Univ.)
3.20%, 9/7/94 24,200 24,200
------------
STATE TOTAL 117,409
------------
- -------------------------------------------------------------------------------------------
FLORIDA (8.8%)
Dade County Water & Sewer VRDO
3.10%, 9/7/94 (3) 108,555 108,555
Florida Board of Education TOB
VRDO 3.10%, 9/8/94 20,800 20,800
Florida Dept. of Transportation TOB
VRDO 3.30%, 9/8/94 (3) 14,980 14,980
Gainesville Utility System Service CP
3.10%, 10/13/94 10,000 10,000
Gulf Breeze Local Govt. Loan
Program VRDO
3.15%, 9/8/94 (3) 90,975 90,975
Hillsborough County Industrial
Development Auth. PCR VRDO
(Tampa Electric Co.)
3.20%, 9/2/94 5,600 5,600
Hillsborough County School Dist.
GO TOB VRDO
3.40%, 9/8/94 (1) 15,165 15,165
Orlando Utilities Comm. Water &
Electric Rev. BAN VRDO
3.10%, 9/8/94 87,850 87,850
Sunshine State Govt. Finance
Committee CP
3.20%, 10/12/94 8,500 8,500
Volusia County Tourist Development
TOB VRDO 3.30%, 9/8/94 3,320 3,320
------------
STATE TOTAL 365,745
------------
- -------------------------------------------------------------------------------------------
GEORGIA (3.7%)
Burke County PCR VRDO
(Georgia Power)
2.95%-3.10%, 9/2/94 11,400 11,400
(Oglethorpe Power)
3.10%, 9/7/94 86,200 86,200
TOB 3.35%, 9/8/94 (1) 11,260 11,260
Fulton County Hosp. Auth. CP
(St. Joseph Hosp.)
3.00%, 10/17/94 10,000 10,000
Georgia GO TOB
VRDO 3.25%, 9/8/94 19,580 19,580
7.00%, 11/1/94 8,470 8,525
Municipal Electric Auth. of Georgia
10.25%-10.50%, 1/1/95 (Prere.) 5,790 6,049
------------
STATE TOTAL 153,014
------------
- -------------------------------------------------------------------------------------------
HAWAII (.4%)
Hawaii GO TOB VRDO
3.20%, 9/7/94 9,600 9,600
Honolulu County & City CP
3.10%, 10/27/94 5,500 5,500
------------
STATE TOTAL 15,100
------------
- -------------------------------------------------------------------------------------------
ILLINOIS (8.3%)
Chicago GO
VRDO 3.15%, 9/8/94 51,600 51,600
CP 3.15%, 10/31/94 12,000 12,000
Cook County GO
4.50%, 11/15/94 (1) 4,185 4,199
Illinois Development Facilities Auth.
PCR (Illinois Power)
VRDO 3.00%, 9/7/94 13,600 13,600
CP 3.10%, 10/13/94 5,000 5,000
Illinois Education Facilities
Auth. VRDO (DePaul Univ.)
3.15%, 9/7/94 23,900 23,900
Illinois Health Facilities Auth.
VRDO 3.05%, 9/7/94 6,000 6,000
(Evanston Hosp.)
CP 3.40%, 3/31/95 15,000 15,000
(Franciscan Sisters)
VRDO 3.00%, 9/7/94 (1) 17,100 17,100
VRDO 3.10%, 9/7/94 15,100 15,100
(Northwest Community Hosp.)
VRDO 3.194%, 9/8/94 34,515 34,515
(St. Luke's Medical Center)
CP 2.90%, 10/17/94 14,040 14,040
(Univ. of Chicago Hosp.)
VRDO 3.15%, 9/7/94 (1) 6,500 6,500
Illinois Housing Development Auth.
(Center Apartments)
VRDO 3.05%, 9/7/94 48,400 48,400
Illinois State Certificates GO
4.75%, 5/15/95 25,000 25,133
Illinois Toll Highway Auth. VRDO
3.10%, 9/7/94 (1) 55,900 55,900
------------
STATE TOTAL 347,987
------------
- -------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 26
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
KENTUCKY (.4%)
Clark County National Rural
Utility Finance Corp.
(East Kentucky Power)
2.80%, 10/15/94* $ 10,150 $ 10,150
Trimble PCR CP
(Louisville Gas & Electric)
3.10%, 10/13/94 5,300 5,300
------------
STATE TOTAL 15,450
------------
- -------------------------------------------------------------------------------------------
LOUISIANA (3.2%)
Louisiana GO
CP 3.20%, 10/11/94 11,000 11,000
TOB VRDO 3.20%, 9/7/94 (1) 16,645 16,645
Louisiana Public Facilities Auth.
Hosp. Rev. CP
(Lady of Lakes Regional
Medical Center)
2.90%-3.25%,
9/6/94-10/12/94 (4) 49,160 49,160
Louisiana Recovery Dist. VRDO
2.90%, 9/2/94 (3) 9,000 9,000
Orleans Levee Dist. VRDO
3.95%, 9/7/94 29,525 29,525
Plaquemines Port Dist.
(Chevron)
3.07%, 9/1/94* 9,080 9,080
Sisters of Charity Health Care
System CP
3.15%, 10/19/94 8,200 8,200
------------
STATE TOTAL 132,610
------------
- -------------------------------------------------------------------------------------------
MARYLAND (.3%)
Maryland Health & Higher Education
Auth. CP
(Johns Hopkins Hosp.)
2.90%-3.10%,
10/14/94-10/17/94 13,770 13,770
------------
- -------------------------------------------------------------------------------------------
MASSACHUSETTS (.9%)
Commonwealth of Massachusetts
VRDO 2.90%, 9/2/94 18,700 18,700
Massachusetts Bay Transit Auth.
8.60%-8.70%, 3/1/95 (Prere.) 9,500 10,065
Massachusetts Health & Higher
Education Facility Auth. Rev. CP
(Harvard Univ.)
3.15%, 9/12/94 6,500 6,500
Massachusetts Municipal Electric
Power Supply System Rev.
13.00%, 1/1/95 (Prere.) 2,925 3,074
------------
STATE TOTAL 38,339
------------
- -------------------------------------------------------------------------------------------
MICHIGAN (1.7%)
Michigan Hosp. Finance Auth. VRDO
(Daughters of Charity)
3.15%, 9/7/94 23,300 23,300
Michigan State Housing
Development Auth. VRDO
3.15%, 9/7/94 46,995 46,995
------------
STATE TOTAL 70,295
------------
- -------------------------------------------------------------------------------------------
MINNESOTA (.9%)
Minnesota Housing Finance Agency
2.50%, 1/12/95* 30,035 30,035
Univ. of Minnesota CP
3.10%, 10/14/94 7,300 7,300
------------
STATE TOTAL 37,335
------------
- -------------------------------------------------------------------------------------------
MISSISSIPPI (1.4%)
Harrison County Waste Water Dist.
10.20%, 2/1/95 (Prere.) 7,455 7,808
Jackson County PCR VRDO
(Chevron)
3.00%, 9/2/94 49,450 49,450
------------
STATE TOTAL 57,258
------------
- -------------------------------------------------------------------------------------------
MISSOURI (.8%)
Missouri Health & Education Finance
Auth. VRDO
(St. Anthony's Medical Center)
3.20%, 9/6/94 24,300 24,300
Sisters of Mercy Health Care System
VRDO 3.15%, 9/8/94 9,000 9,000
------------
STATE TOTAL 33,300
------------
- -------------------------------------------------------------------------------------------
NEVADA (2.9%)
Clark County Airport VRDO
3.10%, 9/7/94 (1) 111,900 111,900
Nevada GO TOB VRDO
3.346%, 9/8/94 9,225 9,225
------------
STATE TOTAL 121,125
------------
- -------------------------------------------------------------------------------------------
NEW JERSEY (.3%)
New Jersey GO TOB
3.75%, 2/15/95* 12,200 12,200
------------
- -------------------------------------------------------------------------------------------
NEW YORK (5.3%)
Battery Park City Auth.
7.25%, 11/1/94 (1)(Prere.) 2,000 2,073
Erie County BAN
4.75%, 8/15/95 9,865 9,924
Erie County Water Auth. VRDO
2.90%, 9/7/94 (2) 1,100 1,100
Monroe County GO BAN
3.75%, 10/7/94 15,500 15,512
</TABLE>
3
<PAGE> 27
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Nassau County BAN
3.50%, 11/15/94 $ 25,000 $ 25,008
New York City GO VRDO
3.15%, 9/2/94 (1) 23,800 23,800
3.15%, 9/2/94 (2) 11,600 11,600
New York City Municipal Water &
Sewer Rev. VRDO
3.10%, 9/2/94 (3) 9,400 9,400
New York City RAN
4.50%-4.75%, 4/12/95-6/30/95 80,000 80,314
New York City Water Finance Auth.
VRDO 3.15%, 9/2/94 (3) 23,000 23,000
New York Energy Auth. CP
(Electric & Gas)
2.95%, 12/7/94 13,000 13,000
Triborough Bridge & Tunnel Auth.
6.00%, 1/1/95 (Prere.) 6,725 6,782
------------
STATE TOTAL 221,513
------------
- -------------------------------------------------------------------------------------------
NORTH CAROLINA (4.4%)
Charlotte Airport VRDO
3.10%, 9/7/94 (1) 16,500 16,500
Fayetteville GO TOB VRDO
3.30%, 9/8/94 7,260 7,260
North Carolina Eastern Municipal
Power Agency
CP 3.00%, 10/27/94 6,876 6,876
9.40%-10.25%, 1/1/95 (Prere.) 30,260 31,782
North Carolina Educational
Facilities Auth. VRDO
(Duke Univ.)
2.788%, 9/8/94 10,400 10,400
North Carolina Medical Care
Hosp. Rev. VRDO
(Duke Univ.)
2.788%, 9/8/94 25,000 25,000
(Moses Cone Hosp.)
VRDO 3.00%, 9/8/94 19,500 19,500
North Carolina Public Power Agency
TOB 3.20%, 9/7/94 (2) 45,000 45,000
Wake County
(Carolina Power & Light)
PCR CP 3.00%, 10/17/94 6,000 6,000
VRDO 3.00%, 9/7/94 14,500 14,500
------------
STATE TOTAL 182,818
------------
- -------------------------------------------------------------------------------------------
OHIO (1.2%)
Cleveland Water Works TOB VRDO
3.25%, 9/8/94 (1) 5,560 5,560
Ohio Air Quality Development
Auth. PCR CP
(Cincinnati Gas & Electric)
3.10%, 10/20/94 11,700 11,700
Ohio GO TOB VRDO
3.25%, 9/8/94 3,000 3,000
Ohio Student Loan VRDO
3.10%, 9/7/94 18,150 18,150
Univ. of Cincinnati BAN
3.02%, 9/1/94 8,400 8,400
4.75%, 8/30/95 5,000 5,034
------------
STATE TOTAL 51,844
------------
- -------------------------------------------------------------------------------------------
OKLAHOMA (.6%)
Grand River Dam Auth. TOB VRDO
3.30%, 9/8/94 (4) 10,000 10,000
Oklahoma City Industrial & Cultural
Facilities Trust VRDO
3.20%, 9/6/94 13,600 13,600
------------
STATE TOTAL 23,600
------------
- -------------------------------------------------------------------------------------------
OREGON (2.6%)
Klamath Falls
(Salt Caves Hydro Project)
3.75%, 5/2/95* 10,000 10,000
Oregon Veterans Welfare Program
VRDO 3.05%-3.25%, 9/7/94 96,500 96,500
------------
STATE TOTAL 106,500
------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (.8%)
Delaware County Industrial
Development Auth. VRDO
(United Parcel Service)
2.90%, 9/2/94 2,300 2,300
Pennsylvania System of Higher
Education (Univ. of Pittsburgh)
3.092%, 9/8/94 9,800 9,800
Sayre Health Care Facility Auth.
VRDO 3.15%, 9/7/94 (2) 20,300 20,300
------------
STATE TOTAL 32,400
------------
- -------------------------------------------------------------------------------------------
RHODE ISLAND (.5%)
Rhode Island Housing Finance Corp.
VRDO 3.10%, 9/7/94 (3) 22,500 22,500
------------
- -------------------------------------------------------------------------------------------
SOUTH CAROLINA (2.3%)
Charleston Water Works & Sewer Rev.
10.375%, 1/1/95 (Prere.) 5,000 5,277
Greenville Hosp. System VRDO
2.95%, 9/8/94 9,200 9,200
Piedmont Municipal Power Agency
9.375%-11.00%, 1/1/95 (Prere.) 72,385 76,170
</TABLE>
4
<PAGE> 28
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
York County PCR CP
2.60%, 10/18/94 $ 6,000 $ 6,000
------------
STATE TOTAL 96,647
------------
- -------------------------------------------------------------------------------------------
TENNESSEE (1.3%)
Metropolitan Govt. of Nashville and
Davidson County
9.375%, 1/1/95 (Prere.) 4,000 4,165
Metropolitan Govt. of Nashville and
Davidson County Health &
Educational Facilities CP
(Baptist Hosp.)
3.10%-3.35%, 10/12/94-10/13/94 16,400 16,400
Metropolitan Govt. of Nashville and
Davidson County Water & Sewer
Rev. TOB VRDO
3.00%, 9/8/94 (Prere.) 14,892 14,892
Tennessee GO TOB VRDO
3.25%, 9/8/94 11,700 11,700
Tennessee Local Development
Auth. BAN
4.50%, 6/1/95 5,900 5,924
------------
STATE TOTAL 53,081
------------
- -------------------------------------------------------------------------------------------
TEXAS (16.8%)
Abilene Health Facility Development
Corp. VRDO
(Hendrick Medical Center)
3.30%, 9/7/94 10,650 10,650
Bexar County VRDO
(Incarnate Word Health Service)
3.15%, 9/7/94 (4) 71,100 71,100
Dallas Waterworks & Sewer TOB
VRDO 3.20%, 9/7/94 30,000 30,000
El Paso Health Facility Rev. VRDO
(Providence Memorial Hosp.)
3.25%, 9/2/94 30,700 30,700
Gulf Coast Industrial
Development Auth. (Amoco)
3.20%, 12/1/94* 12,065 12,065
Harris County Health Facility
Development Corp. VRDO
(Children's Hosp.)
3.10%, 9/7/94 21,000 21,000
(Methodist Hosp.)
3.15%, 9/2/94 10,800 10,800
(St. Luke's Episcopal Hosp.)
3.15%, 9/2/94 8,000 8,000
Harris County School Health
System CP
(Sisters of Charity)
3.15%-3.25%,10/5/94-10/24/94 22,100 22,100
Harris County Toll Roads VRDO
3.194%, 9/8/94 97,390 97,390
Houston City VRDO
3.10%, 9/7/94 71,700 71,700
North Central Health Facility
Hosp. CP
(Methodist Hosp. of Dallas)
2.90%-3.35%,
10/3/94-10/26/94 (1) 52,100 52,100
Plano Health Facility
Development Corp. CP
(Children's Presbyterian Health
Care Center)
3.15%, 10/19/94 (1) 13,200 13,200
Richardson Independent School
Dist. TRAN
5.00%, 8/31/95 12,000 12,092
San Antonio Electric & Gas
CP 3.25%, 10/19/94 18,700 18,700
10.75%, 2/1/95 (Prere.) 5,000 5,249
San Antonio GO TOB VRDO
3.10%, 9/8/94 6,000 6,000
Southwest Higher Education Auth.
VRDO (Southern Methodist Univ.)
3.05%, 9/2/94 15,000 15,000
Tarrant County Health Facility
Development Corp. VRDO
3.25%, 9/8/94 10,800 10,800
Texas A&M Board of Regents CP
2.90%-3.25%, 9/8/94-11/14/94 54,000 54,000
Texas GO
7.375%, 10/1/94 4,150 4,165
Texas Municipal Power Agency
BAN CP
3.10%-3.20%,
10/11/94-10/25/94 44,150 44,150
Texas Public Finance Auth. GO CP
2.50%-3.05%, 10/4/94-11/7/94 55,000 55,000
Univ. of Texas Board of Regents
CP 3.10%, 10/11/94 15,000 15,000
TOB VRDO 3.10%, 9/8/94 10,170 10,170
------------
STATE TOTAL 701,131
------------
- -------------------------------------------------------------------------------------------
UTAH (1.4%)
Intermountain Power Agency CP
2.90%-3.00%,
10/17/94-10/20/94 28,500 28,500
Utah Housing Finance Agency VRDO
3.10%, 9/7/94 29,400 29,400
------------
STATE TOTAL 57,900
------------
- -------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 29
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
VIRGINIA (2.4%)
Fairfax County Industrial
Development Auth.
(Fairfax Hosp.) VRDO
3.00%, 9/7/94 $ 8,000 $ 8,000
(Inova Health System Project) CP
3.10%-3.25%,
10/3/94-10/24/94 10,000 10,000
Peninsula Port Auth. VRDO
(Shell Oil)
3.10%, 9/2/94 11,600 11,600
Virginia Housing Development Auth.
2.50%, 12/15/94* 50,000 50,000
Virginia Public Facilities TOB VRDO
3.30%, 9/8/94 6,020 6,020
York County Industrial Development
Auth. PCR CP
(Virginia Electric Power)
3.20%, 10/3/94 12,600 12,600
------------
STATE TOTAL 98,220
------------
- -------------------------------------------------------------------------------------------
WASHINGTON (1.0%)
Chelan County Development Corp.
VRDO (Alcoa Project)
3.15%, 9/6/94 8,300 8,300
Port of Seattle GO VRDO
3.00%, 9/7/94 3,000 3,000
Seattle Municipal Light & Power
VRDO 3.00%, 9/7/94 5,700 5,700
Washington GO TOB VRDO
3.10%, 9/8/94 23,500 23,500
------------
STATE TOTAL 40,500
------------
- -------------------------------------------------------------------------------------------
WEST VIRGINIA (.5%)
Kanawha Building Comm. Hosp. VRDO
(Charleston Medical Inc.)
3.35%, 9/7/94 19,040 19,040
------------
- -------------------------------------------------------------------------------------------
WISCONSIN (2.9%)
Oak Creek City VRDO
(Wisconsin Electric Power Co.)
3.10%, 9/8/94 33,800 33,800
Wisconsin GO TOB VRDO
3.10%-3.20%, 9/7/94-9/8/94 41,270 41,270
Wisconsin Health Education Facility
Auth. CP
3.00%, 10/17/94 5,000 5,000
Wisconsin Operating Notes
4.50%, 6/15/95 40,500 40,703
------------
STATE TOTAL 120,773
------------
- -------------------------------------------------------------------------------------------
WYOMING
Uinta County PCR VRDO
(Chevron)
3.05%, 9/2/94 1,900 1,900
------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL MONEY MARKET
INSTRUMENTS
(Cost $4,182,070) 4,182,070
- -------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.4%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B 33,310
Liabilities (51,755)
------------
(18,445)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 4,164,154,003 outstanding
$.001 par value shares
(authorized 5,500,000,000 shares) $4,163,625
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 46.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
---------- -----
<S> <C> <C>
Paid in Capital $4,164,179 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (554) --
Unrealized Appreciation of Investments -- --
- -------------------------------------------------------------------------------------------
NET ASSETS $4,163,625 $1.00
- -------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 30
<TABLE>
<CAPTION>
Face Market
Amount Value
SHORT-TERM PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.2%)
- -------------------------------------------------------------------------------------------
ALABAMA (.9%)
Alabama State Public School &
College Auth. Rev.
3.70%, 11/1/94 $ 4,700 $ 4,704
Birmingham North Medical Clinic
(Carraway Hosp.)
9.00%, 10/1/95 (Prere.) 8,500 9,095
------------
STATE TOTAL 13,799
------------
- -------------------------------------------------------------------------------------------
ALASKA (.3%)
Anchorage Electric Rev.
9.75%, 9/1/95 (Prere.) 3,700 3,972
------------
- -------------------------------------------------------------------------------------------
ARIZONA (.3%)
City of Phoenix GO
6.50%, 7/1/95 5,000 5,101
------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (10.6%)
Alameda County Public
Facilities Corp. COP VRDO
6.15%, 9/1/96* 5,000 5,075
Anaheim Public Improvement
COP VRDO
3.00%, 2/1/95 (2) 1,500 1,500
California GO
11.00%, 9/1/94 5,350 5,350
California Health Facility Auth. VRDO
2.85%, 9/1/94 6,900 6,900
California RAN
5.00%, 6/28/95 10,000 10,077
Clovis Unified School Dist.
4.20%, 8/1/95 5,800 5,810
Contra Costa Transportation Auth.
Sales Tax Rev.
5.80%, 3/1/95 3,730 3,765
Los Angeles COP
5.10%, 12/1/94 5,315 5,335
5.50%, 12/1/96 3,400 3,467
Los Angeles Water & Power
9.00%, 11/15/97 5,855 6,588
Modesto Santa Clara Redding
Public Power Agency
9.25%, 7/1/95 (Prere.) 7,660 8,167
Northern California Power Agency
9.75%, 7/1/95 (Prere.) 9,000 9,590
Oakland Redevelopment Agency COP
9.25%, 8/1/95 (Prere.) 3,695 3,937
Orange County Sanitation Dist. VRDO
2.80%, 9/1/94 (3) 6,400 6,400
Riverside VRDO
3.05%, 9/1/94 650 650
Sacramento County TRAN
4.50%, 9/29/95 25,000 25,150
San Bernadino County TRAN
4.50%, 7/31/95 17,970 17,957
San Diego County TRAN
4.50%, 9/29/95 15,000 14,985
Santa Barbara County TRAN
4.25%, 7/31/95 15,000 14,956
Southern California
Public Power Auth.
(Palo Verde Project)
9.25%, 7/1/95 (2) (Prere.) 9,405 10,029
------------
STATE TOTAL 165,688
------------
- -------------------------------------------------------------------------------------------
COLORADO (.9%)
Colorado Health Auth.
(Sisters of Charity Health System)
5.70%, 5/15/95 2,300 2,330
Jefferson County School Dist.
8.50%, 12/15/95 (Prere.) 5,000 5,271
Municipal Subdist. of Northern
Colorado
9.00%, 12/1/95 (Prere.) 3,000 3,204
9.25%, 12/1/95 (Prere.) 2,420 2,592
------------
STATE TOTAL 13,397
------------
- -------------------------------------------------------------------------------------------
CONNECTICUT (2.7%)
Connecticut Development Auth. PCR
3.05%, 9/1/94 20,000 20,000
Connecticut Economic Recovery
Notes
VRDO 3.05%, 9/1/94 7,800 7,800
GO 5.40%, 6/15/95 5,455 5,511
Connecticut Special Tax Obligation
4.25%, 9/1/95 5,630 5,650
8.60%, 10/15/95 (Prere.) 3,075 3,283
------------
STATE TOTAL 42,244
------------
- -------------------------------------------------------------------------------------------
DELAWARE (2.3%)
Delaware Economic Development
Auth. VRDO
(Hosp. Bill & Collection Service)
3.15%, 9/1/94 33,100 33,100
New Castle County GO
7.50%, 10/15/94 2,500 2,513
------------
STATE TOTAL 35,613
------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (.6%)
District of Columbia GO
5.50%, 6/1/95 (3) 4,705 4,742
5.60%, 6/1/96 (3) 5,000 5,074
------------
STATE TOTAL 9,816
------------
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 31
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA (5.6%)
Dade County School Dist.
7.00%, 8/1/98 (3) $ 7,510 $ 8,101
Dade County Water & Sewer
VRDO 3.10%, 10/5/94 (3) 1,185 1,185
4.50%, 10/1/98 (3) 4,000 3,970
Hillsborough County Aviation Auth.
(Tampa Airport)
3.50%, 10/1/95 (3) 4,980 4,961
City of Homestead Special Insurance
Assessment Rev.
3.30%, 9/1/94 (1) 7,685 7,685
Jacksonville Electric Auth. Rev.
7.50%, 10/1/95 (Prere.) 9,090 9,540
(St. John's River Project)
10.00%, 10/1/94 (Prere.) 3,000 3,076
10.25%, 10/1/95 (Prere.) 5,000 5,415
Orlando Utility Comm. Water
& Electric Rev.
4.40%, 10/1/96 3,255 3,266
8.50%, 10/1/95 (Prere.) 13,980 14,887
10.50%, 10/1/94 (Prere.) 14,410 14,925
Pinellas County Capital Improvement
5.00%, 10/1/94 9,960 9,973
------------
STATE TOTAL 86,984
------------
- -------------------------------------------------------------------------------------------
GEORGIA (4.9%)
Burke County Development
Auth. VRDO (Oglethorpe Power)
3.10%, 9/7/94 (3) 7,300 7,300
Burke County PCR VRDO
(Georgia Power)
3.10%, 9/1/94 18,000 18,000
3.30%, 9/1/94 13,500 13,500
Fulton County Building Auth.
9.00%, 1/1/95 (Prere.) 3,925 4,075
Georgia GO
6.80%, 8/1/98 6,155 6,635
7.00%, 7/1/95 3,000 3,160
7.00%, 11/1/95 4,725 4,887
7.70%, 4/1/95 4,000 4,091
7.70%, 4/1/99 5,000 5,586
Gwinnett County Water & Sewer Auth.
8.75%, 8/1/96 (Prere.) 6,000 6,585
Metropolitan Atlanta Rapid
Transit Auth.
8.50%, 7/1/95 (Prere.) 3,000 3,165
------------
STATE TOTAL 76,984
------------
- -------------------------------------------------------------------------------------------
HAWAII (2.9%)
Hawaii GO
5.00%, 11/1/96 12,870 13,051
5.00%, 11/1/97 10,000 10,145
7.00%, 11/1/94 4,325 4,351
Honolulu City & County GO
3.60%, 10/1/95 14,000 13,892
9.00%, 3/1/96 3,000 3,197
------------
STATE TOTAL 44,636
------------
- -------------------------------------------------------------------------------------------
ILLINOIS (4.0%)
Chicago Public Building Comm.
4.50%, 12/1/98 (1) 8,000 7,884
7.75%, 1/1/06 (3) 5,000 5,637
Chicago Sanitation Dist.
7.85%, 1/1/98 (Prere.) 5,600 6,223
Chicago School Finance Auth. GO
4.40%, 6/1/98 (1) 6,755 6,636
Illinois GO
5.50%, 8/1/98 7,700 7,890
Illinois Metropolitan Fair &
Exposition Auth.
10.375%, 6/1/95 (Prere.) 17,105 18,385
Illinois Sales Tax Rev.
9.375%, 6/15/95 (Prere.) 4,325 4,605
Illinois Toll Highway Auth. VRDO
3.10%, 1/1/95 (1) 5,600 5,600
------------
STATE TOTAL 62,860
------------
- -------------------------------------------------------------------------------------------
INDIANA (.5%)
Indiana State Univ. Student
Fee Bonds
9.40%, 8/1/95 (Prere.) 3,500 3,699
Indiana Toll Road Auth.
9.00%, 7/1/95 (Prere.) 4,000 4,236
------------
STATE TOTAL 7,935
------------
- -------------------------------------------------------------------------------------------
IOWA (.1%)
Iowa School Corp. Certificates
3.60%, 12/30/94 (3) 1,800 1,801
------------
- -------------------------------------------------------------------------------------------
KANSAS (.2%)
Kansas City Utility System
4.45%, 9/1/94 (2) 2,500 2,500
------------
- -------------------------------------------------------------------------------------------
KENTUCKY (1.7%)
Ashland City PCR VRDO
(Ashland Oil)
2.80%, 9/1/94 5,700 5,700
</TABLE>
8
<PAGE> 32
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Kentucky Property & Buildings
3.70%, 9/1/94 $ 8,370 $ 8,370
4.00%, 9/1/95 6,420 6,414
Kentucky Turnpike Auth.
9.20%, 7/1/95 (Prere.) 4,850 5,191
------------
STATE TOTAL 25,675
------------
- -------------------------------------------------------------------------------------------
LOUISIANA (1.7%)
Jefferson Parish Sales Tax Rev.
5.90%, 12/1/95 (3) 4,175 4,262
Louisiana GO TOB
3.20%, 2/1/95 (1) 7,000 7,000
Louisiana Recovery Dist. Sales Tax
VRDO 2.90%, 9/1/94 (1)* 4,600 4,600
5.50%, 7/1/97 10,000 10,185
------------
STATE TOTAL 26,047
------------
- -------------------------------------------------------------------------------------------
MAINE (.6%)
Maine Municipal Bond Bank
3.875%, 11/1/96 10,000 9,870
------------
- -------------------------------------------------------------------------------------------
MARYLAND (1.6%)
Maryland State Transportation Auth.
3.625%, 6/15/95 11,185 11,194
9.00%, 7/1/95 (Prere.) 13,450 14,247
------------
STATE TOTAL 25,441
------------
- -------------------------------------------------------------------------------------------
MASSACHUSETTS (6.4%)
Massachusetts Bay Transportation Auth.
7.10%, 3/1/99 (3) (Prere.) 7,800 8,621
Massachusetts Consolidated Loan
GO VRDO 3.15%, 11/1/94 (1) 19,400 19,400
7.00%, 6/1/99 (Prere.) 10,000 11,043
Massachusetts GO
2.90%, 9/1/94 7,000 7,000
3.55%, 9/1/94 12,300 12,300
4.05%, 9/1/95 12,000 11,978
5.70%, 8/1/96 8,000 8,183
Massachusetts Health & Educational
Facilities Auth.
9.375%, 7/1/95 (Prere.) 8,900 9,539
Massachusetts Municipal Wholesale
Electric
6.00%, 7/1/97 2,355 2,428
Massachusetts Water Resources
Auth. BAN
4.125%, 10/15/95 10,000 10,002
------------
STATE TOTAL 100,494
------------
- -------------------------------------------------------------------------------------------
MICHIGAN (.9%)
Michigan Trunk Line
5.50%, 11/15/98 13,720 14,081
------------
- -------------------------------------------------------------------------------------------
MINNESOTA (.4%)
Southern Minnesota Municipal
Power Agency
4.70%, 1/1/97 (2) 6,640 6,651
------------
- -------------------------------------------------------------------------------------------
MISSISSIPPI (.1%)
Jackson County VRDO
(Chevron)
3.00%, 9/1/94 1,900 1,900
------------
- -------------------------------------------------------------------------------------------
MISSOURI
Sisters of Mercy
Health System VRDO
3.15%, 9/1/94 200 200
------------
- -------------------------------------------------------------------------------------------
NEBRASKA (.1%)
Nebraska Public Power Dist.
Electric System Rev.
4.80%, 1/1/96 2,000 2,011
------------
- -------------------------------------------------------------------------------------------
NEVADA (.6%)
Clark County Airport
VRDO 3.10%, 1/1/95 (1) 1,400 1,400
13.25%, 7/1/97 (Prere.) 3,015 3,693
Clark County School Dist.
3.30%, 7/1/95 (2) 4,600 4,570
------------
STATE TOTAL 9,663
------------
- -------------------------------------------------------------------------------------------
NEW JERSEY (.9%)
New Jersey Health Care Facility Auth.
5.125%, 7/1/95 1,805 1,814
New Jersey Transportation Trust Fund
3.50%, 6/15/95 5,000 4,973
New Jersey Turnpike Auth.
4.80%, 1/1/96 7,000 7,033
------------
STATE TOTAL 13,820
------------
- -------------------------------------------------------------------------------------------
NEW YORK (8.2%)
Erie County Water Auth. VRDO
2.90%, 12/1/94 (2) 2,300 2,300
Nassau County GO TOB VRDO
3.00%, 1/1/95 (1) 1,300 1,300
3.00%, 1/15/95 (1) 3,760 3,760
New York City GO
4.90%, 8/15/95 23,170 23,329
6.70%, 2/1/95 11,240 11,388
6.80%, 2/1/97 9,985 10,411
6.80%, 2/1/97 (Prere.) 2,990 3,139
New York City Water
Finance Auth. VRDO
3.15%, 9/1/94 (3) 10,700 10,700
</TABLE>
9
<PAGE> 33
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
New York State Dormitory Auth.
(City Univ.)
4.90%, 7/1/96 $ 5,205 $ 5,241
5.25%, 7/1/97 2,780 2,818
New York State Energy Research &
Development Auth. PCR
2.80%, 12/1/94 4,500 4,493
New York State CP
2.80%, 9/7/94 18,800 18,799
New York State GO
6.625%, 8/1/95 5,000 5,110
New York State Medical Care Facility
(Mt. Sinai Hosp.)
8.875%, 1/15/96 (Prere.) 7,000 7,575
(Mental Health Service)
7.90%, 8/15/96 8,145 8,612
New York State Urban Development
6.75%, 1/1/96 3,135 3,226
Triborough Bridge & Tunnel Auth.
5.50%, 1/1/97 5,000 5,120
------------
STATE TOTAL 127,321
------------
- -------------------------------------------------------------------------------------------
NORTH CAROLINA (3.7%)
Charlotte Airport VRDO
3.10%, 1/1/95 (1) 5,500 5,500
North Carolina Eastern Power
Agency
7.25%, 1/1/99 (Prere.) 3,000 3,322
10.00%, 1/1/95 (Prere.) 6,350 6,627
10.20%, 1/1/95 (Prere.) 5,000 5,261
10.625%, 1/1/95 (Prere.) 3,735 3,935
North Carolina Medical Care VRDO
(Duke Univ. Hosp.)
2.75%, 9/1/94 6,200 6,200
North Carolina Municipal Power
Agency
7.875%, 1/1/98 (Prere.) 12,000 13,344
(Catawba Electric)
4.50%, 1/1/96 2,000 1,998
7.625%, 1/1/98 (2) (Prere.) 5,000 5,522
9.00%, 1/1/96 (Prere.) 5,845 6,310
------------
STATE TOTAL 58,019
------------
- -------------------------------------------------------------------------------------------
OHIO (3.1%)
Columbus Refunding Limited Tax
3.90%, 7/1/97 4,850 4,791
Cuyahoga County Hosp.
Improvement VRDO
(St. Luke's Hosp.)
3.15%, 9/1/94 1,800 1,800
Ohio Higher Education Facility VRDO
3.25%, 11/1/94 (2) 4,100 4,100
Ohio Public Facilities Comm.
5.30%, 12/1/95 6,000 6,071
5.30%, 12/1/96 5,000 5,077
(Lease Fee)
4.10%, 12/1/95 9,830 9,822
Ohio Student Loan VRDO
3.10%, 10/1/94 5,100 5,100
Ohio Water Development Auth.
4.40%, 12/1/95 5,000 5,024
4.60%, 6/1/96 6,800 6,828
------------
STATE TOTAL 48,613
------------
- -------------------------------------------------------------------------------------------
OKLAHOMA (.7%)
Grand River Dam Auth.
4.90%, 6/1/98 10,000 10,033
------------
- -------------------------------------------------------------------------------------------
OREGON (.3%)
Oregon Veterans Welfare
Program VRDO
3.05%, 9/1/94 3,800 3,800
------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (3.2%)
Northumberland County
Commonwealth Lease Rev.
5.75%, 10/15/95 (1) 3,480 3,546
Pennsylvania Turnpike Comm.
7.875%, 12/1/96 (Prere.) 7,640 8,334
Philadelphia GO
5.25%, 11/15/96 (3) 4,150 4,219
5.75%, 11/15/98 (3) 6,655 6,893
Philadelphia Hosp. & Higher
Education Facility Auth.
(Albert Einstein Medical Center)
9.75%, 4/1/95 (Prere.) 3,460 3,648
Philadelphia School Dist.
6.60%, 7/1/98 (1) 4,815 5,110
6.70%, 7/1/99 (1) 5,145 5,516
Philadelphia Water &
Wastewater Rev.
4.00%, 6/15/95 11,700 11,674
Sayre Health Care Facility Auth.
VRDO 3.15%, 9/1/94 (2) 1,400 1,400
------------
STATE TOTAL 50,340
------------
- -------------------------------------------------------------------------------------------
PUERTO RICO (.1%)
Puerto Rico Govt. Development
Bank VRDO
2.90%, 9/1/94 1,700 1,700
------------
- -------------------------------------------------------------------------------------------
RHODE ISLAND (.4%)
Rhode Island Student Loan Auth.
5.40%, 12/1/95 6,000 6,081
------------
- -------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 34
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
SOUTH CAROLINA (4.3%)
Charleston Water & Sewer
10.375%, 1/1/95 (Prere.) $ 5,000 $ 5,264
Greenville Hosp. System Facility
Rev. VRDO
2.95%, 9/1/94 16,800 16,800
Piedmont Municipal Power Agency
TOB 3.00%, 1/1/95 (Prere.) 10,902 10,903
7.75%, 1/1/96 (Prere.) 3,700 3,918
8.00%, 1/1/96 (Prere.) 9,430 10,014
9.70%, 1/1/96 (Prere.) 4,500 4,939
10.25%, 1/1/95 (Prere.) 4,405 4,635
10.50%, 1/1/95 (Prere.) 4,000 4,212
South Carolina Public Service Auth.
(Santee Cooper)
9.50%, 7/1/95 (Prere.) 6,500 6,973
------------
STATE TOTAL 67,658
------------
- -------------------------------------------------------------------------------------------
TENNESSEE (.6%)
Metropolitan Govt. of Nashville
& Davidson County
8.75%, 1/1/96 (Prere.) 5,000 5,381
9.375%, 1/1/95 (Prere.) 4,580 4,761
------------
STATE TOTAL 10,142
------------
- -------------------------------------------------------------------------------------------
TEXAS (11.0%)
Austin Combined Utility
System Rev.
5.00%, 11/15/95 (2) 3,840 3,875
10.25%, 11/15/95 (Prere.) 24,395 26,588
Dallas-Fort Worth Regional Airport
3.40%, 11/1/95 (1) 15,555 15,437
Dallas Waterworks & Sewer
6.50%, 4/1/95 5,000 5,075
El Paso Health Facilities VRDO
(Providence Memorial Hosp.)
3.25%, 9/1/94 2,200 2,200
Harris County Toll Road Rev.
9.25%, 2/1/95 (Prere.) 16,130 16,998
9.875%, 2/1/95 (Prere.) 6,100 6,444
Houston GO
7.50%, 3/1/95 3,185 3,247
Houston VRDO
3.10%, 10/3/94 2,700 2,700
Houston Water & Sewer System
5.25%, 12/1/94 (3) 4,525 4,547
8.10%, 12/1/96 (Prere.) 10,000 10,953
9.375%, 12/1/95 (3) (Prere.) 9,320 10,084
Port Arthur PCR
(Texaco)
3.10%, 9/1/94 9,400 9,400
Sam Rayburn Municipal
Power Agency
9.25%, 9/1/95 (Prere.) 37,000 39,544
San Antonio GO
8.875%, 8/1/95 (Prere.) 2,500 2,607
Texas GO
9.00%, 12/1/94 3,065 3,106
9.00%, 12/1/94 (ETM) 3,785 3,837
Texas Municipal Power Agency
5.00%, 9/1/96 5,000 5,036
------------
STATE TOTAL 171,678
------------
- -------------------------------------------------------------------------------------------
UTAH (3.0%)
Intermountain Power Agency
7.00%, 7/1/95 (Prere.) 5,000 5,121
7.75%, 7/1/96 (Prere.) 2,500 2,693
8.90%, 7/1/95 (Prere.) 4,000 4,233
9.00%, 7/1/95 6,000 6,229
9.20%, 7/1/95 (Prere.) 9,375 9,898
9.50%, 7/1/95 (Prere.) 5,000 5,316
9.625%, 7/1/95 (Prere.) 5,650 6,064
10.25%, 7/1/95 (Prere.) 6,225 6,655
------------
STATE TOTAL 46,209
------------
- -------------------------------------------------------------------------------------------
VIRGINIA (1.4%)
Fairfax County GO
7.30%, 10/1/95 (Prere.) 4,495 4,733
Southeast Public Service Auth.
10.50%, 7/1/95 (Prere.) 8,000 8,570
Virginia Public School Auth.
3.25%, 1/1/95 5,000 4,998
7.30%, 1/1/97 (Prere.) 3,345 3,602
------------
STATE TOTAL 21,903
------------
- -------------------------------------------------------------------------------------------
WASHINGTON (5.7%)
Renton School Dist. GO
5.50%, 12/1/95 5,600 5,683
Seattle Metropolitan Municipality
7.875%, 1/1/96 (Prere.) 3,700 3,940
Seattle Municipal Sewer
9.75%, 7/1/95 (Prere.) 4,000 4,261
Washington GO
3.35%, 10/1/95 2,000 1,989
7.00%, 10/1/96 6,405 6,733
7.60%, 9/1/96 (Prere.) 4,325 4,591
8.00%, 9/1/96 (Prere.) 21,695 23,180
8.10%, 9/1/95 5,000 5,192
9.20%, 5/1/96 (Prere.) 2,300 2,479
9.30%, 5/1/96 (Prere.) 5,000 5,397
</TABLE>
11
<PAGE> 35
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Washington Health Care Auth.
(Empire Health Spokane)
8.00%, 11/1/97 (1)(Prere.) $ 9,200 $ 10,265
Washington Motor Vehicle Fuel
3.25%, 9/1/94 2,000 2,000
8.00%, 9/1/96 (Prere.) 12,750 13,626
------------
STATE TOTAL 89,336
------------
- -------------------------------------------------------------------------------------------
WISCONSIN (.5%)
City of Milwaukee GO
5.00%, 6/1/96 7,710 7,784
------------
- -------------------------------------------------------------------------------------------
WYOMING (1.2%)
Platte County PCR
3.60%, 1/1/96 3,000 2,944
Uinta County PCR VRDO
3.05%, 9/1/94 15,500 15,500
------------
STATE TOTAL 18,444
------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,551,395) 1,548,244
- -------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (.8%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B 25,765
Liabilities (13,448)
------------
12,317
- -------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 100,925,139 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,560,561
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $15.46
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 46.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,563,615 $15.49
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains 97 --
Unrealized Depreciation of
Investments--Note D (3,151) (.03)
- -------------------------------------------------------------------------------------------
NET ASSETS $1,560,561 $15.46
- -------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 36
<TABLE>
<CAPTION>
Face Market
Amount Value
LIMITED-TERM PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (98.7%)
- -------------------------------------------------------------------------------------------
ALABAMA (.2%)
Alabama GO
5.35%, 9/1/96 $ 3,480 $ 3,548
------------
- -------------------------------------------------------------------------------------------
ALASKA (.3%)
North Slope Borough GO
0.0%, 6/30/95 (1) 5,000 4,822
0.0%, 6/30/97 (1) 1,000 874
------------
STATE TOTAL 5,696
------------
- -------------------------------------------------------------------------------------------
ARIZONA (2.1%)
Maricopa County GO
6.00%, 7/1/97 (2) 10,000 10,359
Maricopa County PCR VRDO
3.15%, 9/1/94 15,180 15,180
City of Mesa Utility System
6.10%, 7/1/96 (3) 4,000 4,122
Phoenix GO
5.20%, 7/1/96 6,830 6,943
Salt River Project Agricultural
Improvement & Power Dist.
5.80%, 1/1/96 2,000 2,037
------------
STATE TOTAL 38,641
------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (7.0%)
Alameda County Public Facilities
Corp. COP VRDO
6.15%, 9/1/96* 10,000 10,150
Anaheim Public Improvement Corp.
COP VRDO
3.00%, 2/1/95 (2)* 3,100 3,100
California GO
8.90%, 3/1/97 3,000 3,288
10.00%, 4/1/98 10,000 11,639
California Health Facilities Finance
Auth. VRDO
2.85%, 9/1/94 400 400
(Catholic Health Care West)
2.85%, 9/1/94 (1) 3,100 3,100
Clovis Unified School Dist.
4.50%, 8/1/96 11,250 11,270
Contra Costa Transportation
Auth. Sales Tax Rev.
6.00%, 3/1/96 4,165 4,261
6.00%, 3/1/97 2,580 2,665
Irvine Assessment Dist. VRDO
2.80%, 9/1/94 5,400 5,400
Los Angeles City COP
5.25%, 12/1/95 7,775 7,877
5.50%, 12/1/96 5,000 5,099
6.00%, 5/1/96 3,000 3,057
Orange County Sanitation Dist.
COP VRDO
2.80%, 9/1/94 3,100 3,100
Sacramento County TRAN
4.50%, 9/29/95 28,000 28,169
San Bernardino County
Transportation Auth.
3.75%, 3/1/97 (1) 4,280 4,199
San Diego County TRAN
4.50%, 9/29/95 10,000 9,990
Santa Barbara County TRAN
4.25%, 7/31/95 10,000 9,971
------------
STATE TOTAL 126,735
------------
- -------------------------------------------------------------------------------------------
COLORADO (1.2%)
Colorado Health Auth.
(Rocky Mountain Hosp.)
5.50%, 2/1/96 4,000 3,964
(Sisters of Charity Health System)
5.75%, 5/15/96 2,400 2,455
Colorado Springs Utilities
10.50%, 11/15/97 (Prere.) 3,000 3,515
Municipal Subdist. of
Northern Colorado
9.25%, 12/1/95 (Prere.) 6,025 6,453
Platte River Power Auth.
3.50%, 6/1/95 4,990 4,981
------------
STATE TOTAL 21,368
------------
- -------------------------------------------------------------------------------------------
CONNECTICUT (3.0%)
Connecticut Development
Auth. PCR VRDO
(Connecticut Light & Power)
3.05%, 9/1/94 7,900 7,900
Connecticut Special Assessment
Unemployment Compensation
4.00%, 5/15/96 10,175 10,118
4.00%, 11/15/96 20,295 20,150
Connecticut Special Tax Obligation
4.00%, 10/1/99 11,000 10,530
4.80%, 9/1/97 6,350 6,405
------------
STATE TOTAL 55,103
------------
- -------------------------------------------------------------------------------------------
DELAWARE (1.5%)
Delaware Economic Development
Auth. VRDO
3.15%, 9/1/94 27,200 27,200
------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (.4%)
District of Columbia GO
6.00%, 6/1/97 (1) 3,250 3,347
9.25%, 6/1/95 (Prere.) 4,000 4,228
------------
STATE TOTAL 7,575
------------
- -------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 37
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA (7.1%)
Broward County
7.875%, 7/1/96 (Prere.) $10,200 $ 11,009
Dade County Aviation Rev.
4.30%, 10/1/96 2,500 2,505
Dade County School Dist.
6.80%, 7/1/96 3,150 3,275
Dade County Solid Waste System
8.80%, 10/1/94 3,000 3,013
Florida Board of Education GO
8.40%, 6/1/95 (Prere.) 17,000 17,865
Florida COP
5.75%, 5/15/95 2,500 2,528
Florida Dept. of General Services
6.10%, 7/1/97 (2) 6,900 7,211
Florida Municipal Power Agency
3.90%, 10/1/95 (3) 1,595 1,596
4.20%, 10/1/96 (3) 2,055 2,055
4.40%, 10/1/97 (3) 2,230 2,225
Florida Turnpike Auth. Rev.
9.50%, 7/1/99 (2) 4,000 4,785
Gulf Breeze Local Govt. Loan
3.15%, 9/1/94 (3) 30 30
Hillsborough County Aviation Auth.
(Tampa Airport)
3.90%, 10/1/96 (3) 7,155 7,114
City of Homestead Special
Insurance Assessment Rev.
4.20%, 9/1/96 (1) 6,190 6,183
4.40%, 3/1/97 (1) 7,200 7,180
Jacksonville Electric Auth. Rev.
6.60%, 10/1/96 4,600 4,808
7.50%, 10/1/95 (Prere.) 15,500 16,268
Jacksonville Transportation Auth.
9.00%, 1/1/98 (Prere.) 3,780 4,328
Orlando Utility Comm. Water &
Electric Rev.
BAN VRDO 3.10%, 9/1/94 100 100
4.00%, 10/1/95 4,750 4,759
Palm Beach Solid Waste Auth.
8.00%, 7/1/98 4,000 4,488
Port Everglade Port Facilities Rev.
7.00%, 9/1/97 (4) 2,600 2,774
City of Sunrise Public Service
8.00%, 5/5/96 (2) 3,780 4,060
Tampa Utilities
8.00%, 10/1/97 (Prere.) 7,700 8,576
------------
STATE TOTAL 128,735
------------
- -------------------------------------------------------------------------------------------
GEORGIA (3.0%)
Atlanta Water & Sewer Rev.
6.00%, 1/1/96 4,390 4,483
6.00%, 1/1/97 4,655 4,805
6.00%, 1/1/98 4,935 5,129
Burke County PCR VRDO
(Georgia Power)
3.10%, 9/1/94 10,200 10,200
Georgia GO
7.00%, 11/1/97 5,000 5,375
7.40%, 8/1/97 4,265 4,608
Gwinnett County Water & Sewer Auth.
8.75%, 8/1/96 (Prere.) 14,250 15,639
Monroe County Development Auth.
(Oglethorpe Power)
5.10%, 1/1/97 3,880 3,908
------------
STATE TOTAL 54,147
------------
- -------------------------------------------------------------------------------------------
HAWAII (3.9%)
Hawaii Airport System Rev.
4.50%, 7/1/95 (1) 1,690 1,697
4.85%, 7/1/96 (1) 1,765 1,781
5.10%, 7/1/97 (1) 1,855 1,883
7.50%, 7/1/97 3,890 4,198
Hawaii GO
3.85%, 2/1/96 16,500 16,423
4.50%, 1/1/98 5,000 4,969
4.60%, 1/1/97 5,500 5,514
5.00%, 11/1/97 11,130 11,292
5.50%, 2/1/97 10,000 10,228
6.10%, 11/1/94 (Prere.) 5,345 5,451
Honolulu City & County GO
4.60%, 10/1/99 6,500 6,419
------------
STATE TOTAL 69,855
------------
- -------------------------------------------------------------------------------------------
ILLINOIS (3.8%)
Chicago Park Dist. GO
9.70%, 1/1/96 3,000 3,192
Chicago School Finance Auth.
4.50%, 6/1/99 (3) 10,000 9,815
5.20%, 6/1/96 (3) 3,450 3,483
Chicago Waste Water Transmission
3.85%, 1/1/96 (3) 5,000 4,973
Chicago Water Capital Improvement
4.70%, 12/1/99 7,710 7,607
4.90%, 12/1/01 9,290 9,244
Chicago Water Rev.
4.70%, 11/1/97 (2) 3,250 3,252
Cook County GO
4.75%, 11/15/97 (3) 5,000 5,011
</TABLE>
14
<PAGE> 38
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Illinois Sales Tax Rev.
6.90%, 6/15/97 $ 2,000 $ 2,115
7.60%, 6/15/97 (Prere.) 3,200 3,504
7.70%, 6/15/97 (Prere.) 3,200 3,512
7.80%, 6/15/97 (Prere.) 3,200 3,520
Metropolitan Water Recovery Dist.
of Chicago
6.80%, 1/1/97 3,400 3,566
7.25%, 1/1/96 5,200 5,400
------------
STATE TOTAL 68,194
------------
- -------------------------------------------------------------------------------------------
INDIANA (1.1%)
Indiana Toll Finance Auth.
9.00%, 7/1/95 (Prere.) 8,210 8,695
City of Rockport PCR
(Indiana & Michigan Electric Co.)
6.75%, 8/1/95* 11,500 11,751
------------
STATE TOTAL 20,446
------------
- -------------------------------------------------------------------------------------------
KANSAS (.2%)
Kansas City Utility System
5.80%, 3/1/96 (2) 3,155 3,210
------------
- -------------------------------------------------------------------------------------------
KENTUCKY (1.2%)
City of Ashland PCR VRDO
(Ashland Oil)
2.80%, 9/1/94 2,900 2,900
Kentucky Development Finance
Auth. Hosp. Rev.
6.10%, 11/1/96 (3) 3,105 3,217
Kentucky Turnpike Auth.
4.30%, 7/1/97 (2) 3,150 3,128
9.20%, 7/1/95 (Prere.) 7,050 7,546
Louisville Univ.
7.25%, 11/1/96 (Prere.) 4,000 4,339
------------
STATE TOTAL 21,130
------------
- -------------------------------------------------------------------------------------------
LOUISIANA (.6%)
Louisiana GO
9.30%, 5/1/95 (Prere.) 3,000 3,160
Louisiana Recovery Dist. Sales Tax
5.50%, 7/1/97 6,000 6,111
7.625%, 7/1/96 2,250 2,358
------------
STATE TOTAL 11,629
------------
- -------------------------------------------------------------------------------------------
MAINE (.9%)
Maine Health & Higher Education
(Cook Hosp.)
10.10%, 7/1/01 (Prere.) 4,500 5,854
Maine Municipal Bond Bank
4.125%, 11/1/97 10,000 9,820
------------
STATE TOTAL 15,674
------------
- -------------------------------------------------------------------------------------------
MARYLAND (1.3%)
Maryland Dept. of Transportation
6.70%, 8/15/99 (Prere.) 5,000 5,465
Maryland GO
9.00%, 9/1/98 10,000 11,571
Washington Suburban Sanitation Dist.
5.00%, 6/1/98 3,000 3,034
7.10%, 12/1/97 (Prere.) 2,405 2,627
------------
STATE TOTAL 22,697
------------
- -------------------------------------------------------------------------------------------
MASSACHUSETTS (4.8%)
Massachusetts GO
4.40%, 9/1/96 7,300 7,303
5.10%, 9/1/99 7,000 7,055
5.80%, 8/1/97 7,000 7,223
6.00%, 8/1/98 3,000 3,126
7.00%, 3/1/98 5,695 6,100
7.00%, 7/1/98 10,000 10,721
7.25%, 6/1/96 10,850 11,396
Massachusetts Water Resources Auth.
BAN 4.125%, 10/15/95 14,000 14,003
BAN 4.30%, 10/15/96 7,000 6,995
5.80%, 7/15/97 7,145 7,346
7.30%, 4/1/00 (Prere.) 5,000 5,630
------------
STATE TOTAL 86,898
------------
- -------------------------------------------------------------------------------------------
MICHIGAN (.7%)
Detroit GO
5.60%, 5/1/00 (2) 7,040 7,242
5.70%, 5/1/01 (2) 5,000 5,159
Michigan State Housing
Development Auth. VRDO
3.15%, 9/1/94 695 695
------------
STATE TOTAL 13,096
------------
- -------------------------------------------------------------------------------------------
MINNESOTA (.8%)
Minnesota GO
4.50%, 8/1/96 2,500 2,515
Southern Minnesota Municipal
Power Agency
9.50%, 1/1/96 (Prere.) 11,725 12,729
------------
STATE TOTAL 15,244
------------
- -------------------------------------------------------------------------------------------
MISSISSIPPI (.3%)
Jackson County PCR VRDO
(Chevron)
3.00%, 9/1/94 5,500 5,500
------------
- -------------------------------------------------------------------------------------------
MISSOURI (.6%)
Missouri Higher Education
Loan Auth.
5.15%, 2/15/98 11,365 11,357
------------
- -------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 39
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
NEBRASKA (.4%)
Nebraska Public Power Dist.
4.30%, 1/1/96 $ 5,000 $ 5,000
Omaha Public Power Dist.
4.35%, 2/1/98 2,400 2,369
------------
STATE TOTAL 7,369
------------
- -------------------------------------------------------------------------------------------
NEVADA (.5%)
Clark County Airport VRDO
3.10%, 1/1/95 (1) 2,700 2,700
Nevada GO
9.70%, 5/1/97 6,275 7,052
------------
STATE TOTAL 9,752
------------
- -------------------------------------------------------------------------------------------
NEW JERSEY (4.4%)
Camden County GO
4.65%, 6/1/97 (1) 3,565 3,577
New Jersey Health Care Facility Auth.
5.40%, 7/1/96 2,170 2,189
5.75%, 7/1/97 2,670 2,712
New Jersey Transportation
Trust Fund
3.80%, 6/15/96 17,695 17,549
4.10%, 6/15/97 15,000 14,797
4.40%, 6/15/99 10,000 9,722
New Jersey Turnpike Auth.
5.20%, 1/1/98 15,000 15,186
6.00%, 1/1/98 8,000 8,289
Rutgers State Univ.
8.125%, 5/1/97 (Prere.) 4,750 5,252
------------
STATE TOTAL 79,273
------------
- -------------------------------------------------------------------------------------------
NEW YORK (7.4%)
Battery Park Auth.
7.70%, 5/1/99 (Prere.) 5,000 5,664
Erie County GO
10.00%, 2/1/96 (3) 4,530 4,872
10.00%, 2/1/97 (3) 4,325 4,851
Municipal Assistance Corp. for
New York City
6.80%, 7/1/96 6,000 6,261
9.00%, 7/1/95 (Prere.) 6,000 6,358
New York City GO
VRDO 3.15%, 9/1/94 (1) 4,400 4,400
5.50%, 8/1/98 15,000 15,274
5.60%, 8/15/97 19,170 19,577
New York City Water Finance
Auth. VRDO
3.15%, 9/1/94 (3) 3,600 3,600
New York Medical Care Facilities
5.00%, 2/15/01 2,445 2,373
5.00%, 8/15/01 6,760 6,548
7.875%, 8/15/00 (Prere.) 5,000 5,810
New York State COP
4.50%, 2/1/98 4,985 4,860
4.70%, 2/1/99 4,580 4,433
New York State Dormitory Auth.
(City Univ.)
5.50%, 7/1/98 6,300 6,412
New York State Housing
Finance Agency
8.875%, 11/1/95 (Prere.) 12,500 13,413
New York State Local Govt.
Assistance Corp.
VRDO 2.85%, 9/1/94 1,200 1,200
4.10%, 4/1/95 2,400 2,400
4.50%, 4/1/96 2,000 2,000
New York State Power Auth.
7.10%, 1/1/99 6,400 6,928
Triborough Bridge & Tunnel
7.875%, 1/1/98 (Prere.) 6,000 6,670
------------
STATE TOTAL 133,904
------------
- -------------------------------------------------------------------------------------------
NORTH CAROLINA (.2%)
North Carolina Municipal Power
Agency (Catawba Electric)
5.10%, 1/1/98 3,980 4,004
------------
- -------------------------------------------------------------------------------------------
OHIO (3.1%)
Cleveland Water Works
7.75%, 1/1/97 (Prere.) 5,000 5,433
Columbus Library Rev.
4.60%, 10/1/96 2,500 2,521
Columbus Sewer Improvement
9.00%, 9/15/96 5,065 5,522
County of Cuyahoga Hosp.
Improvement VRDO
3.15%, 9/1/94 750 750
Ohio Building Auth.
7.00%, 9/1/00 4,000 4,265
9.75%, 3/1/95 (Prere.) 5,000 5,309
Ohio Higher Education Facilities
5.875%, 12/1/96 6,650 6,852
Ohio Public Facilities Comm.
4.40%, 12/1/96 7,000 6,974
6.50%, 12/1/97 2,950 3,102
Ohio Water Development Auth.
VRDO 2.90%, 9/1/94 3,300 3,300
4.60%, 12/1/96 5,000 5,026
4.90%, 6/1/97 4,085 4,120
4.90%, 12/1/97 3,455 3,490
------------
STATE TOTAL 56,664
------------
- -------------------------------------------------------------------------------------------
OKLAHOMA (1.3%)
Grand River Dam Auth.
4.90%, 6/1/98 17,500 17,558
6.30%, 6/1/97 3,450 3,596
</TABLE>
16
<PAGE> 40
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Oklahoma City GO
10.00%, 8/1/96 $ 2,465 $ 2,713
------------
STATE TOTAL 23,867
------------
- -------------------------------------------------------------------------------------------
OREGON (.5%)
Oregon GO VRDO
3.05%, 9/1/94 7,700 7,700
3.25%, 9/1/94 1,000 1,000
------------
STATE TOTAL 8,700
------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (8.7%)
Delaware County Industrial Development
Auth. VRDO
2.90%, 9/1/94 900 900
Erie County Prison Auth.
5.65%, 11/1/95 (1) 3,125 3,184
Northumberland County Auth.
Commonwealth Lease Rev.
6.00%, 10/15/96 (1) 4,960 5,120
Pennsylvania Convention Center Auth.
5.75%, 9/1/99 20,000 20,000
Pennsylvania GO
5.00%, 7/1/97 3,930 3,978
5.40%, 11/15/97 4,000 4,092
5.40%, 7/1/00 4,000 4,074
6.00%, 9/15/96 4,550 4,696
6.00%, 11/1/96 (1) 5,000 5,179
6.00%, 9/15/97 5,885 6,128
8.30%, 4/15/97 3,800 4,019
Pennsylvania Housing Finance Agency
6.60%, 7/1/96 2,220 2,266
Pennsylvania Intergovernmental
Cooperation Auth.
5.20%, 6/15/96 (3) 5,650 5,722
5.40%, 6/15/97 (3) 4,000 4,080
Pennvest VRDO
3.05%, 9/1/94 4,800 4,800
Philadelphia GO
TOB VRDO 3.00%, 11/15/94 (3) 12,100 12,100
6.00%, 11/15/99 (3) 18,505 19,308
6.00%, 11/15/00 (3) 13,000 13,593
Philadelphia Municipal Lease
5.25%, 7/15/98 6,135 6,050
Philadelphia School Dist. GO
4.70%, 7/1/99 (1) 14,000 13,826
Philadelphia Water & Wastewater Rev.
4.25%, 6/15/96 15,000 14,895
Sayre Health Care Facility
Auth. VRDO
3.15%, 9/1/94 (2) 700 700
------------
STATE TOTAL 158,710
------------
- -------------------------------------------------------------------------------------------
RHODE ISLAND (1.1%)
Rhode Island GO
6.00%, 5/15/97 9,215 9,551
Rhode Island Student Loan Auth.
5.40%, 12/1/95 10,000 10,135
------------
STATE TOTAL 19,686
------------
- -------------------------------------------------------------------------------------------
SOUTH CAROLINA (1.8%)
Charleston Water Works & Sewer
7.50%, 1/1/96 (Prere.) 12,700 13,470
Piedmont Municipal Power Agency
4.90%, 1/1/97 3,350 3,363
9.70%, 1/1/96 (Prere.) 7,875 8,644
South Carolina Public Service Auth.
(Santee Cooper)
9.20%, 7/1/95 (Prere.) 7,180 7,685
------------
STATE TOTAL 33,162
------------
- -------------------------------------------------------------------------------------------
TENNESSEE (.4%)
Metropolitan Govt. of Nashville
& Davidson County
10.50%, 12/1/97 (Prere.) 5,750 6,749
------------
- -------------------------------------------------------------------------------------------
TEXAS (13.9%)
Anderson County
(Coffield Prison Farm Project)
8.00%, 3/15/97 (2) 4,135 4,466
Austin Combined Utility System
4.00%, 11/15/96 7,820 7,735
6.80%, 11/15/95 3,000 3,088
9.75%, 5/15/97(1) 4,000 4,514
11.00%, 11/15/96 3,830 4,328
11.125%, 11/15/99 (Prere.) 4,000 5,116
14.25%, 5/15/97 (Prere.) 7,090 8,786
Corpus Christi Utility System
6.20%, 7/15/96 (3) 2,965 3,057
6.30%, 7/15/97 (3) 2,460 2,568
Dallas-Fort Worth
Regional Airport
3.75%, 11/1/96 (1) 4,000 3,942
4.00%, 11/1/97 (1) 9,000 8,803
Dallas Waterworks & Sewer System
5.90%, 10/1/97 7,265 7,550
6.75%, 4/1/96 11,250 11,651
6.90%, 4/1/97 2,000 2,112
Fort Worth Water & Sewer
5.20%, 2/15/96 3,000 3,038
5.40%, 2/15/97 4,000 4,071
Harris County Flood Control Dist. GO
5.50%, 10/1/00 3,000 3,073
5.60%, 10/1/97 5,000 5,139
</TABLE>
17
<PAGE> 41
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Harris County Health Facility
Development Corp. VRDO
(Methodist Hosp.)
3.15%, 9/1/94 $20,000 $ 20,000
Harris County Road Refunding GO
5.50%, 10/1/00 2,645 2,723
5.60%, 10/1/97 10,000 10,307
8.60%, 10/1/95 2,000 2,093
Houston GO
3.40%, 3/1/95 5,000 4,990
3.90%, 3/1/96 2,415 2,400
Houston Public Improvement
5.25%, 3/1/98 5,000 5,080
Houston Water and Sewer System
4.65%, 12/1/96 11,315 11,319
4.90%, 12/1/97 5,000 5,017
5.70%, 12/1/97 (2) 7,000 7,225
8.20%, 12/1/96 (Prere.) 6,000 6,585
San Antonio Electric & Gas Rev.
6.75%, 2/1/97 2,000 2,096
San Antonio GO
8.875%, 8/1/95 (Prere.) 4,000 4,171
Texas A&M Univ. Rev.
6.90%, 8/15/97 5,425 5,766
Texas GO
4.625%, 10/1/97 2,700 2,713
6.75%, 8/1/95 (ETM) 7,895 8,088
7.50%, 10/1/96 5,300 5,624
7.50%, 10/1/97 3,300 3,574
7.50%, 10/1/98 11,700 12,881
Texas Municipal Power Agency
5.00%, 9/1/96 8,585 8,647
6.40%, 9/1/98 (3) 3,000 3,169
14.25%, 3/1/97 (Prere.) 5,250 6,422
14.625%, 3/1/97 (Prere.) 5,115 6,302
Texas Public Finance Auth.
6.20%, 2/1/96 (1) 6,000 6,142
9.00%, 10/1/95 4,675 4,913
------------
STATE TOTAL 251,284
------------
- -------------------------------------------------------------------------------------------
UTAH (1.9%)
Intermountain Power Agency
3.90%, 7/1/96 7,000 6,936
4.60%, 7/1/95 5,000 5,026
8.75%, 7/1/95 (Prere.) 3,885 4,107
8.875%, 7/1/95 (Prere.) 10,000 10,533
Utah GO
4.90%, 7/1/97 7,300 7,402
------------
STATE TOTAL 34,004
------------
- -------------------------------------------------------------------------------------------
VIRGINIA (1.5%)
Peninsula Port PCR VRDO
(Shell Oil)
3.10%, 9/1/94 6,000 6,000
Southeast Public Service Auth.
10.50%, 7/1/95 (Prere.) 12,890 13,809
Virginia Public School Auth.
4.00%, 1/1/97 2,500 2,476
4.25%, 1/1/98 5,250 5,179
------------
STATE TOTAL 27,464
------------
- -------------------------------------------------------------------------------------------
WASHINGTON (2.5%)
King County GO
5.50%, 12/1/96 6,000 6,119
Washington GO
3.80%, 10/1/96 6,000 5,952
4.50%, 9/1/95 8,000 8,045
5.30%, 9/1/99 5,000 5,101
7.00%, 10/1/97 5,720 6,112
7.00%, 10/1/99 7,555 8,240
8.00%, 9/1/96 (Prere.) 5,105 5,454
------------
STATE TOTAL 45,023
------------
- -------------------------------------------------------------------------------------------
WEST VIRGINIA (.1%)
Cabell Board of Education
8.00%, 5/1/97 (1) 2,120 2,292
------------
- -------------------------------------------------------------------------------------------
WISCONSIN (2.6%)
Wisconsin GO
4.125%, 11/1/98 33,625 32,999
7.00%, 8/1/95 10,130 10,388
7.20%, 5/1/98 (Prere.) 4,000 4,326
------------
STATE TOTAL 47,713
------------
- -------------------------------------------------------------------------------------------
WYOMING (.4%)
Platte County PCR
4.20%, 1/1/99 3,370 3,171
4.40%, 1/1/00 3,945 3,691
------------
STATE TOTAL 6,862
------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,788,601) 1,790,160
- -------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 42
<TABLE>
<CAPTION>
Market
Value
(000)+
- -------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.3%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B $ 29,533
Liabilities (5,373)
------------
24,160
- -------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 171,585,574 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,814,320
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.57
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 46.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994,
NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,814,877 $10.58
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Losses (2,541) (.02)
Unrealized Appreciation of
Investments--Note D 1,984 .01
- -------------------------------------------------------------------------------------------
NET ASSETS $1,814,320 $10.57
- -------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 43
<TABLE>
<CAPTION>
Face Market
Amount Value
INTERMEDIATE-TERM PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (98.4%)
- -------------------------------------------------------------------------------------------
ALABAMA (.3%)
Columbia Industrial Development
Power Co.
10.875%, 11/1/14 $ 9,000 $ 9,288
Macintosh IDR VRDO
(Ciba-Geigy)
3.10%, 9/1/94 1,300 1,300
Univ. of Southern Alabama Hosp.
7.00%, 5/15/04 (2) 3,250 3,571
-------------
STATE TOTAL 14,159
-------------
- -------------------------------------------------------------------------------------------
ALASKA (.7%)
Anchorage Electric Rev.
8.00%, 12/1/11 (1) 5,395 6,524
North Slope Borough GO
0.00%, 6/30/96 (1) 4,500 4,137
7.125%, 7/1/98 (1) 7,710 8,316
7.15%, 7/1/99 (1) 5,670 6,182
Valdez CP
3.05%, 9/20/94 10,000 10,000
-------------
STATE TOTAL 35,159
-------------
- -------------------------------------------------------------------------------------------
ARIZONA (2.0%)
Arizona Transportation Board
6.35%, 7/1/05 10,660 11,552
6.45%, 7/1/06 2,250 2,451
6.60%, 7/1/08 8,250 9,053
8.75%, 7/1/03 10,000 12,328
Maricopa County COP
6.00%, 6/1/04 5,275 5,305
Maricopa County
(Samaritan Health Service)
7.15%, 12/1/04 (1) 9,900 11,257
7.15%, 12/1/05 (1) 6,080 6,869
Maricopa VRDO
3.05%, 9/1/94 4,200 4,200
Phoenix Highway Rev.
9.25%, 7/1/07 4,000 5,293
Salt River Project Agricultural
Improvement & Power Dist.
6.00%, 1/1/07 3,515 3,642
Tucson Unified School Dist.
7.50%, 7/1/06 (3) 8,840 10,270
7.50%, 7/1/07 (3) 9,125 10,595
7.50%, 7/1/08 (3) 8,060 9,359
-------------
STATE TOTAL 102,174
-------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (9.1%)
Anaheim Public Improvement Corp.
COP VRDO
3.00%, 2/1/95 (2) 8,800 8,800
California GO
5.70%, 8/1/07 17,500 17,310
5.75%, 8/1/08 (3) 15,000 14,971
California Higher Education Loan
Auth. VRDO
3.15%, 9/1/94 5,000 5,000
California Public Works Board
(State Prison)
5.25%, 12/1/04 (1) 25,000 24,822
7.00%, 9/1/00 (Prere.) 7,400 8,318
(Univ. of California)
6.10%, 12/1/05 (2) 6,515 6,854
6.20%, 12/1/06 (2) 3,320 3,471
Clovis Unified School Dist. GO
0.00%, 8/1/00 7,000 5,147
0.00%, 8/1/01 11,180 7,753
Corona COP
10.00%, 11/1/02 (Prere.) 6,000 7,908
Irvine GO VRDO
2.85%, 9/1/94 600 600
Kern County Public Facility
2.95%, 9/1/94 4,900 4,900
Long Beach Financing Auth.
6.00%, 11/1/07 (2) 3,070 3,160
Long Beach Harbor Rev.
7.10%, 5/15/99 2,900 3,158
7.15%, 5/15/00 10,000 11,039
7.20%, 5/15/01 2,000 2,233
Los Angeles COP
7.50%, 6/1/98 (Prere.) 3,950 4,401
7.60%, 6/1/98 (Prere.) 3,995 4,460
Los Angeles County Sanitation Dist.
Finance Auth.
5.00%, 10/1/02 3,460 3,417
5.10%, 10/1/04 8,100 7,913
Los Angeles County Transportation
Auth. Sales Tax
8.00%, 7/1/01 (2) 6,365 7,398
8.00%, 7/1/02 (2) 3,915 4,604
Los Angeles County Transportation
Comm. Sales Tax
6.50%, 7/1/01 (Prere.) 6,700 7,379
6.50%, 7/1/10 51,070 53,278
6.70%, 7/1/01 (Prere.) 5,500 6,120
Metropolitan Water Dist. of
Southern California
7.75%, 7/1/01 (Prere.) 18,085 21,213
Northern California Power Agency
(Geothermal Project)
6.75%, 7/1/01 $19,530 $ 20,535
</TABLE>
20
<PAGE> 44
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
(Hydroelectric Project)
6.10%, 7/1/05 (1) 5,575 5,877
6.20%, 7/1/06 (1) 5,940 6,276
6.25%, 7/1/07 (1) 6,685 7,041
Oakland Redevelopment Agency
5.75%, 2/1/04 (2) 1,535 1,582
5.90%, 2/1/05 (2) 4,870 5,050
6.00%, 2/1/07 (2) 3,360 3,458
Orange County Apartment
Development Rev. CP
3.20%, 9/13/94 42,220 42,220
Poway Redevelopment Agency
(Paguay Project)
7.125%, 12/15/04 (3) 4,840 5,463
Sacramento County TRAN
4.50%, 9/29/95 30,000 30,181
Sacramento Municipal Utility Dist.
Electric Rev.
6.60%, 2/1/97 4,000 4,170
San Bernardino COP
6.75%, 8/1/10 11,385 12,657
San Diego County Regional
Transportation Auth. Sales Tax
7.00%, 4/1/01 (Prere.) 3,220 3,628
7.00%, 4/1/06 1,780 1,968
San Diego County TRAN
4.50%, 9/29/95 15,000 14,985
San Diego County Water Rev. COP
5.40%, 5/1/03 5,000 5,058
5.50%, 5/1/04 5,000 5,063
5.50%, 5/1/05 4,245 4,262
Southern California Public
Power Auth. 6.75%, 7/1/99 6,190 6,622
Southern California Rapid
Transit Dist.
5.70%, 9/1/04 (2) 14,040 14,428
Univ. of California Rev.
10.00%, 9/1/03 (2) 3,790 5,026
-------------
STATE TOTAL 461,177
-------------
- -------------------------------------------------------------------------------------------
COLORADO (.6%)
Colorado Health Auth.
(Sisters of Charity Health System)
8.50%, 5/15/04 (1) 17,500 21,659
Denver City & County School Dist.
6.95%, 12/15/00 (3) 9,250 10,127
-------------
STATE TOTAL 31,786
-------------
- -------------------------------------------------------------------------------------------
CONNECTICUT (3.5%)
Connecticut Economic Recovery Notes
5.25%, 12/15/94 3,090 3,107
Connecticut GO
5.30%, 11/15/06 10,875 10,635
5.40%, 11/15/07 24,010 23,410
5.95%, 11/15/00 5,000 5,278
Connecticut Power & Light
PCR VRDO
3.05%, 9/1/94 44,600 44,600
Connecticut Resource
Recovery Auth.
(Bridgeport Resco)
8.40%, 1/1/99 4,950 5,251
Connecticut Special Tax Obligation
5.125%, 9/1/05 11,575 11,220
5.25%, 9/1/06 42,550 41,171
7.125%, 6/1/01 (Prere.) 5,365 6,020
7.125%, 6/1/10 12,000 13,519
7.75%, 6/1/00 11,300 12,799
-------------
STATE TOTAL 177,010
-------------
- -------------------------------------------------------------------------------------------
DELAWARE (1.0%)
Delaware Economic Development
Auth. VRDO
(Hosp. Bill & Collection Service)
3.15%, 9/1/94 27,500 27,500
Delaware Transportation Auth.
5.625%, 7/1/06 (1) 11,420 11,466
5.80%, 7/1/08 7,545 7,480
7.30%, 7/1/00 (Prere.) 5,000 5,653
-------------
STATE TOTAL 52,099
-------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (1.7%)
District of Columbia GO
VRDO 3.10%, 9/1/94 26,100 26,100
6.30%, 6/1/08 (1) 15,000 15,188
7.50%, 6/1/99 (2) (Prere.) 17,875 20,130
7.75%, 6/1/97 (6) (Prere.) 5,000 5,467
8.00%, 6/1/05 18,420 19,887
-------------
STATE TOTAL 86,772
-------------
- -------------------------------------------------------------------------------------------
FLORIDA (2.8%)
Broward County School Dist. GO
5.30%, 2/15/04 3,295 3,285
5.40%, 2/15/05 9,000 8,957
5.50%, 2/15/06 10,080 10,021
Dade County Solid Waste System
7.00%, 10/1/01 6,240 6,549
Dade County Water & Sewer
Rev. VRDO
3.10%, 10/5/94 (3) 24,880 24,880
</TABLE>
21
<PAGE> 45
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Florida Dept. of General Services
6.25%, 7/1/06 $ 5,600 $ 5,894
Florida Municipal Power Agency
5.50%, 10/1/06 (3) 6,055 6,028
Florida School Board Assn.
6.90%, 7/1/99 (2) 12,450 13,343
7.00%, 7/1/00 (2) 13,820 14,970
Hillsborough County
School Dist. GO
7.10%, 8/15/03 23,665 26,523
City of Homestead Special Insurance
Assessment Rev.
5.125%, 3/1/02 (1) 14,000 13,996
5.125%, 9/1/02 (1) 5,910 5,908
Port Everglades Port Facilities Rev.
6.90%, 9/1/98 (3) 2,000 2,154
-------------
STATE TOTAL 142,508
-------------
- -------------------------------------------------------------------------------------------
GEORGIA (4.3%)
Burke County PCR
(Georgia Power Co.)
VRDO 3.10%, 9/1/94 4,400 4,400
(Oglethorpe Power Corp.)
4.35%, 1/1/01 6,080 5,594
4.50%, 1/1/02 7,375 6,746
4.60%, 1/1/03 9,955 9,032
4.70%, 1/1/04 13,160 11,854
Fulton County School Dist.
6.375%, 5/1/10 15,000 15,847
Georgia GO
6.30%, 3/1/07 15,000 16,088
6.50%, 12/1/99 11,670 12,631
6.50%, 8/1/01 3,230 3,514
6.80%, 8/1/02 8,000 8,865
7.00%, 11/1/05 15,670 17,680
7.00%, 11/1/06 16,780 18,910
7.00%, 11/1/07 17,960 20,188
7.40%, 8/1/96 7,930 8,386
7.40%, 8/1/07 11,200 13,002
7.50%, 4/1/01 5,500 6,250
Monroe County Development Auth.
(Oglethorpe Power Corp.)
6.65%, 1/1/08 9,220 9,686
Municipal Electric Power Auth.
of Georgia
6.30%, 1/1/05 12,775 13,509
8.00%, 1/1/02 9,505 10,602
8.10%, 1/1/03 2,320 2,595
-------------
STATE TOTAL 215,379
-------------
- -------------------------------------------------------------------------------------------
HAWAII (3.4%)
Hawaii Airport System Rev.
5.85%, 7/1/02 (1) 7,830 8,184
5.95%, 7/1/03 (1) 2,590 2,720
6.05%, 7/1/04 (1) 3,145 3,319
6.15%, 7/1/05 (1) 10,735 11,361
Hawaii GO
5.00%, 11/1/98 21,000 21,250
5.00%, 11/1/99 20,000 20,143
5.00%, 2/1/04 10,000 9,714
5.00%, 2/1/05 11,650 11,304
5.125%, 2/1/06 11,605 11,268
5.50%, 7/1/01 6,500 6,671
6.30%, 3/1/06 5,555 5,833
6.40%, 3/1/07 5,555 5,874
Honolulu City & County GO
5.75%, 1/1/06 8,825 9,038
6.00%, 1/1/08 5,000 5,167
6.30%, 3/1/10 4,830 4,997
8.00%, 10/1/09 30,560 36,568
-------------
STATE TOTAL 173,411
-------------
- -------------------------------------------------------------------------------------------
ILLINOIS (6.0%)
Chicago Metropolitan
Sanitation Dist.
8.75%, 1/1/00 (Prere.) 2,980 3,494
Chicago Public Building
Comm. Rev.
7.50%, 1/1/02 (1) 2,500 2,755
7.60%, 1/1/03 (1) 2,500 2,757
7.70%, 1/1/08 (1) 4,000 4,431
9.00%, 1/1/96 1,150 1,212
Chicago School Finance Auth.
4.40%, 6/1/98 (1) 10,000 9,823
GO 4.90%, 6/1/02 (3) 10,000 9,816
GO 5.00%, 6/1/03 (3) 25,190 24,441
GO 5.10%, 6/1/04 (3) 26,155 25,295
6.00%, 6/1/01 (3) 8,305 8,714
6.10%, 6/1/02 (3) 11,945 12,607
Chicago Water Reclamation Dist.
5.50%, 12/1/08 5,300 5,092
5.90%, 12/1/06 4,450 4,551
5.95%, 12/1/07 7,200 7,331
6.00%, 12/1/08 9,900 10,031
6.05%, 12/1/09 3,000 3,020
Chicago Water Rev.
5.50%, 11/1/03 (2) 5,000 5,068
</TABLE>
22
<PAGE> 46
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cook County GO
4.375%, 11/15/99 (1) $ 6,565 $ 6,361
4.60%, 11/15/00 (1) 5,360 5,205
5.75%, 11/15/03 (3) 5,000 5,151
5.80%, 11/15/04 10,000 10,294
6.60%, 11/1/03 (2) 4,785 5,193
6.75%, 11/1/05 (2) 3,000 3,330
Illinois GO
5.60%, 6/1/99 5,000 5,138
6.25%, 10/1/05 6,000 6,325
(Univ. of Chicago Hosp.)
VRDO 3.15%, 9/1/94 (1) 5,500 5,500
Illinois Health Facility Auth.
(Lutheran General Health Systems)
7.25%, 4/1/99 (Prere.) 1,945 2,127
7.25%, 4/1/00 10,490 11,200
Illinois Regional Transportation Auth.
9.00%, 6/1/05 (2) 5,220 6,648
9.00%, 6/1/08 (2) 6,840 8,832
9.00%, 6/1/09 (2) 4,255 5,527
Illinois Sales Tax Rev.
6.50%, 6/15/13 5,000 5,273
Illinois Toll Highway Auth. VRDO
3.10%, 1/1/95 (1) 5,000 5,000
Joliet Gas Supply Rev.
3.00%, 10/1/94* 9,750 9,745
Metropolitan Pier & Exposition Auth.
6.50%, 6/1/06 11,885 12,596
6.75%, 6/1/10 25,000 26,393
7.25%, 6/15/05 15,000 16,712
-------------
STATE TOTAL 302,988
-------------
- -------------------------------------------------------------------------------------------
INDIANA (1.3%)
East Chicago School Building Corp.
11.75%, 2/1/99 (Prere.) 5,000 6,315
Indiana Municipal Power Agency
5.875%, 1/1/10 (1) 4,500 4,466
Indiana State Office Building
6.65%, 7/1/01 4,500 4,863
6.70%, 7/1/02 5,290 5,724
Indiana Univ. Student Fee Bonds
6.80%, 8/1/04 25,000 26,399
7.00%, 8/1/06 5,845 6,216
Marion County Hosp. Auth.
(Daughters of Charity)
9.75%, 11/1/00 4,700 5,036
Petersburg PCR
(Indianapolis Power & Light
Co. Project)
10.625%, 12/1/14 5,300 5,498
-------------
STATE TOTAL 64,517
-------------
- -------------------------------------------------------------------------------------------
KENTUCKY (1.5%)
Kentucky Development
Finance Auth.
(St. Elizabeth Medical Center)
6.625%, 11/1/04 (3) 20,025 21,583
(Sisters of Charity) 6.60%, 11/1/06 5,000 5,110
Kentucky Property &
Buildings Rev.
5.50%, 9/1/03 8,000 8,085
5.60%, 9/1/04 3,000 3,034
5.70%, 9/1/05 7,350 7,417
6.875%, 8/1/06 10,400 11,546
Kentucky Turnpike Auth. Resource
Recovery Road Rev.
8.00%, 7/1/03 14,750 16,263
13.125%, 7/1/97 (Prere.) 820 1,002
13.125%, 1/1/98 (Prere.) 30 38
-------------
STATE TOTAL 74,078
-------------
- -------------------------------------------------------------------------------------------
LOUISIANA (2.3%)
Jefferson Parish Sales Tax
6.75%, 12/1/06 (3) 11,000 11,750
Louisiana Gas & Fuel Tax Rev.
7.20%, 11/15/99 9,500 10,324
7.25%, 11/15/00 5,250 5,765
7.25%, 11/15/04 11,000 12,000
Louisiana GO 6.30%, 5/1/04 (1) 4,750 5,050
7.00%, 9/1/00 (Prere.) 11,540 12,914
8.75%, 9/1/00 (4) 8,830 10,448
8.75%, 9/1/01 (4) 9,445 11,255
Louisiana Public Facilities Auth.
(Unemployment Compensation
Funding)
7.40%, 9/1/97 10,000 10,200
7.60%, 9/1/94 (Prere.) 2,310 2,356
Louisiana Recovery Dist.
Sales Tax
VRDO 2.90%, 9/1/94 (1)* 5,200 5,200
VRDO 2.90%, 9/1/94 (3) 7,700 7,700
7.375%, 7/1/96 (2) 4,000 4,181
New Orleans Public Improvement GO
7.70%, 10/1/99 (6) 2,395 2,649
7.75%, 10/1/00 (6) 5,510 6,104
-------------
STATE TOTAL 117,896
-------------
- -------------------------------------------------------------------------------------------
MAINE (.3%)
Maine Municipal Bond Bank
4.90%, 11/1/02 13,000 12,633
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
23
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MASSACHUSETTS (6.6%)
Boston Water & Sewer Comm.
5.75%, 11/1/13 $ 6,325 $ 5,980
Massachusetts Bay Transit Auth.
5.30%, 3/1/04 32,380 32,094
7.25%, 3/1/03 (3) 16,000 17,801
Massachusetts Consolidated Loan
7.00%, 6/1/99 (Prere.) 3,000 3,313
Massachusetts Dedicated Income
Tax VRDO
2.90%, 9/1/94 3,000 3,000
Massachusetts GO
5.10%, 2/1/05 25,000 24,060
6.50%, 5/1/04 (3) 4,000 4,163
6.50%, 8/1/05 3,840 4,183
6.50%, 8/1/08 9,400 10,050
6.90%, 6/1/00 (2) 2,500 2,732
7.00%, 6/1/02 (2) 5,000 5,450
7.50%, 12/1/00 (Prere.) 10,000 11,491
7.50%, 6/1/04 3,975 4,634
Massachusetts Industrial Finance
Agency (Refusetech Inc. Project)
6.15%, 7/1/02 5,040 5,102
6.30%, 7/1/05 21,500 21,464
Massachusetts Industrial Finance
Auth. Rev.
(BioMed Research Corp.)
7.10%, 8/1/99 25,395 27,785
Massachusetts Turnpike Auth.
4.70%, 1/1/03 5,000 4,732
4.75%, 1/1/04 2,500 2,347
Massachusetts Water Resources Auth.
5.25%, 3/1/07 5,000 4,711
5.25%, 3/1/09 7,175 6,606
5.25%, 3/1/13 20,000 17,705
5.50%, 11/1/07 32,860 31,694
6.50%, 7/15/02 10,000 10,977
6.50%, 7/15/10 30,220 31,186
6.50%, 7/15/19 37,515 39,419
-------------
STATE TOTAL 332,679
-------------
- -------------------------------------------------------------------------------------------
MICHIGAN (1.7%)
Detroit GO
5.80%, 5/1/02 (2) 8,970 9,294
5.90%, 5/1/03 (2) 9,490 9,874
Michigan Municipal Bond Auth.
0.00%, 12/1/99 (3) 6,000 4,604
0.00%, 12/1/00 (3) 5,590 4,056
0.00%, 12/1/01 (3) 9,630 6,590
Michigan Public Power Agency
5.30%, 1/1/05 13,075 12,890
5.375%, 1/1/06 13,790 13,531
5.50%, 1/1/07 14,545 14,276
5.50%, 1/1/08 9,360 9,075
Michigan State Building Auth.
(Univ. of Michigan Adult
General Hosp.)
6.50%, 10/1/03 (2) 3,000 3,239
Michigan State Housing
Development Auth. VRDO
3.15%, 9/1/94 300 300
-------------
STATE TOTAL 87,729
-------------
- -------------------------------------------------------------------------------------------
MINNESOTA (.3%)
Minnesota GO
4.70%, 8/1/97 16,315 16,447
-------------
- -------------------------------------------------------------------------------------------
MISSOURI (.8%)
Missouri Housing
Development Comm.
9.80%, 8/1/97 240 249
New Madrid Electric Rev.
5.75%, 6/1/03 31,090 31,085
St. Louis County Rockwood School
Dist. GO
8.50%, 2/1/01 8,000 9,453
-------------
STATE TOTAL 40,787
-------------
- -------------------------------------------------------------------------------------------
NEBRASKA (.6%)
Consumers Public Power Dist.
Electric Rev.
5.10%, 1/1/03 16,445 16,444
Nebraska Public Power Dist.
5.60%, 7/1/03 13,175 13,506
-------------
STATE TOTAL 29,950
-------------
- -------------------------------------------------------------------------------------------
NEVADA (2.0%)
Clark County Airport VRDO
3.10%, 1/1/95 (1) 8,200 8,200
Clark County GO
4.80%, 7/1/01 (1) 7,440 7,274
7.50%, 6/1/06 (2) 3,575 4,133
7.50%, 6/1/07 (2) 9,550 11,035
7.50%, 6/1/09 (2) 6,825 7,875
8.00%, 6/1/08 (2) 9,875 11,850
Clark County School Dist. GO
5.375%, 5/1/06 (3) 3,740 3,674
5.375%, 5/1/07 (3) 9,195 8,863
5.375%, 5/1/08 (3) 9,170 8,755
7.40%, 3/1/00 10,000 10,883
9.75%, 6/1/00 (1) 4,580 5,632
Nevada GO
6.00%, 5/1/05 10,450 10,852
Reno Hosp. Rev. CP
(St. Mary's Hosp.)
9.40%, 7/1/99 (1) (ETM) 2,505 2,660
-------------
STATE TOTAL 101,686
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
24
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
NEW JERSEY (5.4%)
Camden County Municipal
Utilities Auth.
0.00%, 9/1/99 (3) $12,545 $ 9,805
0.00%, 9/1/00 (3) 18,500 13,699
0.00%, 9/1/02 (3) 18,545 12,261
0.00%, 9/1/03 (3) 18,545 11,551
New Jersey Economic
Development Auth.
7.00%, 7/1/03 (1) 26,195 29,086
New Jersey Health Care Rev.
6.00%, 7/1/98 2,820 2,878
6.20%, 7/1/99 3,080 3,148
6.40%, 7/1/00 3,295 3,393
New Jersey Sports & Exposition Auth.
VRDO 2.90%, 9/1/94 (1) 2,100 2,100
6.50%, 3/1/06 4,725 5,039
6.50%, 3/1/07 3,500 3,703
New Jersey Transportation
Trust Fund
3.50%, 6/15/95 12,000 11,935
5.30%, 12/15/01 7,500 7,576
New Jersey Turnpike Auth.
VRDO 2.95%, 1/1/95 (3) 17,000 17,000
4.75%, 1/1/06 (ETM) 32,065 31,979
5.90%, 1/1/03 4,700 4,878
5.90%, 1/1/04 19,030 19,733
6.00%, 1/1/05 22,220 22,872
6.50%, 1/1/09 50,000 53,269
Rutgers State Univ. Rev.
6.40%, 5/1/13 4,675 4,872
-------------
STATE TOTAL 270,777
-------------
- -------------------------------------------------------------------------------------------
NEW YORK (9.9%)
Erie County Water Auth. VRDO
2.90%, 12/1/94 (2) 2,600 2,600
Metropolitan Transportation Auth.
5.40%, 7/1/03 16,040 15,611
5.625%, 7/1/05 11,485 11,171
5.75%, 7/1/06 12,320 12,020
6.10%, 7/1/02 (Prere.) 4,300 4,638
6.10%, 7/1/07 (1) 3,625 3,759
6.10%, 7/1/08 (1) 7,200 7,410
6.25%, 7/1/02 (3) (Prere.) 5,000 5,404
New York City Finance Auth.
Water and Sewer Rev.
VRDO 3.15%, 9/1/94 (3) 400 400
6.00%, 6/15/10 4,000 4,020
New York City GO
6.00%, 8/15/99 13,070 13,429
6.10%, 8/1/02 4,000 4,103
6.15%, 8/15/00 14,670 15,171
6.25%, 8/1/03 14,000 14,413
6.30%, 8/15/01 10,000 10,404
6.375%, 8/1/04 20,000 20,689
7.00%, 8/1/97 (Prere.) 600 647
7.00%, 8/15/99 (3) 15,000 16,410
7.00%, 8/1/00 5,050 5,309
7.00%, 8/1/03 6,000 6,482
7.00%, 2/1/05 5,000 5,313
8.00%, 8/1/99 4,560 5,053
8.00%, 8/1/99 (ETM) 615 697
8.00%, 11/1/00 (2) 4,420 4,916
8.125%, 11/1/04 (3) 11,155 12,438
New York Medical Care Facilities
6.00%, 8/15/02 13,140 13,397
6.00%, 8/15/03 18,340 18,593
7.875%, 8/15/00 (Prere.) 6,815 7,919
New York State COP
4.50%, 8/1/98 4,490 4,363
4.70%, 8/1/99 2,490 2,402
New York State Dormitory Auth.
(City Univ.) 6.25%, 7/1/03 4,250 4,404
6.35%, 7/1/04 2,500 2,594
6.45%, 7/1/05 1,500 1,563
7.00%, 7/1/01 10,000 11,072
(New York Univ.)
6.375%, 7/1/07 (3) 27,000 28,210
(State Univ.) 5.80%, 5/15/05 5,400 5,353
5.90%, 5/15/06 2,000 1,985
6.10%, 5/15/08 2,000 1,992
7.00%, 5/15/01 18,285 19,579
7.10%, 5/15/00 6,050 6,505
7.25%, 5/15/00 (Prere.) 2,000 2,264
New York State GO
7.80%, 11/15/99 5,000 5,637
New York State Local Govt.
Assistance Corp.
4.25%, 4/1/00 2,500 2,377
4.375%, 4/1/01 3,000 2,831
New York State Urban
Development Corp.
6.30%, 1/1/03 14,340 14,961
6.40%, 1/1/04 24,930 26,792
Onondaga County PCR
(Anheuser Busch)
6.625%, 8/1/06 10,000 10,474
Suffolk County Water Auth.
6.80%, 8/17/10 10,660 12,053
</TABLE>
25
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Triborough Bridge & Tunnel Auth.
0.00%, 1/1/03 $19,185 $ 11,722
5.80%, 1/1/06 6,000 6,155
6.00%, 1/1/12 12,000 11,986
6.60%, 1/1/10 59,325 63,471
-------------
STATE TOTAL 503,161
-------------
- -------------------------------------------------------------------------------------------
NORTH CAROLINA (1.4%)
North Carolina Medical Care
(Duke Univ. Hosp.)
2.75%, 9/1/94 9,100 9,100
North Carolina Municipal
Power Agency
CP 3.10%, 10/26/94 8,300 8,299
(Catawba Electric)
6.00%, 1/1/04 7,000 7,160
6.00%, 1/1/05 28,750 29,571
7.00%, 1/1/00 (Prere.) 6,040 6,686
7.25%, 1/1/07 10,410 11,628
-------------
STATE TOTAL 72,444
-------------
- -------------------------------------------------------------------------------------------
OHIO (2.8%)
Cleveland School Dist.
8.125%, 12/1/98 (ETM) 3,385 3,792
9.00%, 12/1/98 (Prere.) 4,000 4,704
Cleveland Water Works
6.25%, 1/1/05 (2) 4,455 4,703
Columbus Electric VRDO
3.00%, 9/1/94 8,900 8,900
Columbus Sewer VRDO
3.15%, 9/1/94 13,000 13,000
Cuyahoga County Hosp.
Improvement VRDO
(St. Luke's Hosp.)
3.15%, 9/1/94 1,600 1,600
Hamilton County BAN
3.25%, 4/14/95 9,880 9,841
Ohio Building Auth.
(State Correctional Facilities)
5.70%, 10/1/03 3,305 3,390
5.70%, 10/1/04 2,725 2,779
5.80%, 10/1/06 4,360 4,413
5.90%, 10/1/07 2,500 2,522
6.50%, 10/1/02 3,790 4,091
6.50%, 10/1/02 (1) 5,350 5,811
6.50%, 10/1/03 5,500 5,937
6.50%, 10/1/03 (1) 5,710 6,211
6.50%, 10/1/04 2,500 2,684
7.20%, 8/1/00 10,000 11,151
7.25%, 8/1/01 7,500 8,380
7.30%, 8/1/02 10,000 11,194
7.35%, 8/1/03 4,945 5,546
(State Data Center)
5.70%, 10/1/04 2,895 2,953
5.75%, 10/1/05 3,070 3,123
Ohio Higher Education Facilities
5.90%, 12/1/05 8,175 8,400
Ohio Public Facilities Comm.
5.50%, 12/1/06 5,465 5,341
Ohio Student Loan VRDO
3.10%, 10/1/94 700 700
-------------
STATE TOTAL 141,166
-------------
- -------------------------------------------------------------------------------------------
OKLAHOMA (2.0%)
Grand River Dam Auth.
Electric Rev.
5.70%, 6/1/05 20,000 20,238
5.75%, 6/1/06 19,350 19,662
5.875%, 6/1/07 14,500 14,779
8.00%, 6/1/02 21,000 24,519
Oklahoma Industries Auth.
(St. Anthony's Hosp.)
7.50%, 10/1/03 (1) 5,470 5,757
Tulsa County Industrial Auth.
(St. Francis Hosp.)
5.15%, 12/15/03* 8,715 8,492
Tulsa Metropolitan Utilities Auth.
Water & Sewer Rev.
7.00%, 2/1/03 8,465 9,377
-------------
STATE TOTAL 102,824
-------------
- -------------------------------------------------------------------------------------------
OREGON (.5%)
Oregon Veterans Welfare
Program GO VRDO
3.05%, 9/1/94 1,000 1,000
3.25%, 9/1/94 25,000 25,000
-------------
STATE TOTAL 26,000
-------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (7.1%)
Allegheny County GO
7.45%, 2/15/98 2,000 2,166
7.60%, 11/1/98 (Prere.) 2,000 2,212
Berks County GO
7.25%, 11/15/00 (3)(Prere.) 10,000 11,340
Delaware County Industrial
Development Auth. VRDO
2.90%, 9/1/94 2,400 2,400
Erie County Prison Auth.
Commonwealth Lease Rev.
6.75%, 11/1/01 (1) (Prere.) 5,295 5,803
Northumberland County
Commonwealth Lease Rev.
6.70%, 10/15/01 (1) (Prere.) 7,005 7,676
7.75%, 10/15/01 (1) (Prere.) 6,000 6,943
</TABLE>
26
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania Convention
Center Auth.
6.25%, 9/1/04 $15,200 $ 15,312
Pennsylvania COP
4.80%, 7/1/01 (2) 20,000 19,543
4.90%, 7/1/02 (2) 13,665 13,253
5.00%, 7/1/03 (2) 6,555 6,404
Pennsylvania GO
5.00%, 4/15/05 24,290 23,133
5.00%, 4/15/07 7,950 7,386
5.00%, 4/15/08 14,250 13,022
6.20%, 11/15/04 12,480 13,215
6.50%, 11/1/06 4,260 4,519
6.50%, 11/1/07 14,900 15,705
7.10%, 11/1/08 6,700 7,446
Pennsylvania Industrial
Development Auth. 6.50%, 7/1/98 9,850 10,422
6.60%, 1/1/99 5,065 5,399
6.60%, 7/1/99 10,355 11,108
6.70%, 1/1/00 7,420 8,000
6.70%, 7/1/00 9,080 9,847
6.80%, 1/1/01 5,000 5,449
6.80%, 7/1/01 5,480 6,005
Pennsylvania Intergovernmental
Cooperation Auth.
4.70%, 6/15/01 (3) 3,410 3,285
4.80%, 6/15/02 (3) 6,275 6,030
5.75%, 6/15/99 (3) 17,000 17,565
Pennsylvania Public School
Building Auth.
10.375%, 11/1/94 (Prere.) 1,320 1,340
Pennsylvania Turnpike Comm.
7.625%, 12/1/99 (Prere.) 5,000 5,708
Philadelphia GO
CP 3.10%, 10/13/94 4,000 4,000
4.60%, 5/15/99 (3) 4,345 4,271
6.00%, 11/15/00 (3) 11,995 12,543
Philadelphia Municipal Lease Rev.
6.00%, 7/15/03 5,065 5,064
Philadelphia School Dist. GO
0.00%, 7/1/00 (2) 15,500 11,535
6.70%, 7/1/99 (2) 9,000 9,649
Philadelphia Water & Sewer Rev.
6.875%, 10/1/06 (1) 15,455 16,549
8.90%, 10/1/95 (Prere.) 10,000 10,674
Philadelphia Water & Wastewater Rev.
4.75%, 6/15/98 11,540 11,448
Schuylkill Redevelopment Auth.
6.95%, 6/1/01 (3) (Prere.) 3,995 4,474
-------------
STATE TOTAL 357,843
-------------
- -------------------------------------------------------------------------------------------
PUERTO RICO (.2%)
Puerto Rico Telephone Auth.
5.40%, 1/1/08 9,550 9,275
-------------
- -------------------------------------------------------------------------------------------
RHODE ISLAND (.6%)
Rhode Island Depositors Economic
Protection Corp.
6.55%, 8/1/10 (1) 26,850 28,321
-------------
- -------------------------------------------------------------------------------------------
SOUTH CAROLINA (.7%)
Charleston Water Works & Sewer
9.625%, 1/1/96 (Prere.) 4,000 4,349
Greenville Hosp. Board of Trustees
VRDO 2.95%, 9/1/94 5,200 5,200
Piedmont Municipal Power Agency
TOB 3.00%, 1/1/95(Prere.) 12,185 12,185
5.40%, 1/1/07 (1) 3,200 3,116
10.25%, 1/1/95 (Prere.) 5,000 5,261
South Carolina GO
6.50%, 2/1/96 3,000 3,094
South Carolina Public Service
Auth. Rev.
7.10%, 7/1/01 (2)(Prere.) 3,000 3,390
Sumter County (Tuomey Hosp.)
9.375%, 10/1/94 790 790
-------------
STATE TOTAL 37,385
-------------
- -------------------------------------------------------------------------------------------
SOUTH DAKOTA (.1%)
South Dakota Health & Education
Auth. Rev.
7.50%, 7/1/04 (1) 5,845 6,524
-------------
- -------------------------------------------------------------------------------------------
TENNESSEE (.5%)
Tennessee GO BAN VRDO
3.10%, 9/1/94 24,000 24,000
-------------
- -------------------------------------------------------------------------------------------
TEXAS (9.6%)
Anderson County Rev.
(Coffield Prison Farm Project)
5.50%, 3/15/04 (2) 5,715 5,750
5.50%, 3/15/05 (2) 5,590 5,577
5.50%, 3/15/06 (2) 6,985 6,897
Austin Combined Utility System
5.125%, 11/15/02 9,500 9,390
5.20%, 11/15/03 3,360 3,311
5.30%, 5/15/04 5,770 5,679
5.30%, 11/15/04 5,735 5,641
5.80%, 11/15/06 5,255 5,282
6.00%, 11/15/04 (1) 11,000 11,582
6.00%, 11/15/05 (1) 10,000 10,441
6.00%, 11/15/06 (1) 23,265 24,056
7.25%, 11/15/03 6,000 6,610
7.60%, 11/15/99 (1) 5,000 5,574
</TABLE>
27
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Bell County Health Facilities
Development Corp.
(Scott & White Hosp.) 7.625%, 9/1/03 $ 8,340 $ 9,090
Corpus Christi GO
7.50%, 11/1/97 (2) (Prere.) 1,155 1,253
7.50%, 11/1/98 (2) 1,865 2,002
Dallas-Fort Worth Regional Airport
8.75%, 11/1/03 4,890 5,500
El Paso Health Facility Rev. VRDO
(Provident Memorial Hosp.)
3.25%, 9/1/94 5,000 5,000
Gulf Coast Waste Disposal Auth.
PCR VRDO (Amoco)
3.05%, 9/1/94 23,115 23,115
Harris County Flood Control
5.60%, 10/1/01 8,900 9,145
Harris County Health Facility
Development Corp. VRDO
(Methodist Hosp.)
3.15%, 9/1/94 14,700 14,700
Harris County Toll Road
6.30%, 8/15/02 (3)(Prere.) 4,470 4,855
6.30%, 8/15/04 (3) 840 901
Houston GO 5.00%, 3/1/04 6,265 6,067
5.10%, 3/1/06 12,200 11,618
7.00%, 3/1/08 37,405 41,382
7.30%, 3/1/98 (3) (Prere.) 3,000 3,243
Houston Housing Finance
Corp. TOB
3.40%, 12/1/94 (4) 4,425 4,425
Houston Water & Sewer
System Rev.
5.80%, 12/1/04 (1) 8,160 8,394
7.00%, 12/1/01 (2) 3,220 3,562
7.00%, 12/1/02 (2) 4,125 4,585
7.00%, 12/1/03 (2) 8,120 9,055
7.60%, 12/1/02 (6) 4,010 4,347
San Antonio Electric & Gas
5.50%, 2/1/04 4,545 4,578
5.80%, 2/1/06 8,000 8,053
San Antonio Water Rev.
6.30%, 5/15/04 (3) 3,955 4,236
6.40%, 5/15/05 (3) 5,250 5,613
Texas GO
VRDO 3.25%, 10/1/94 (Prere.) 9,350 9,350
6.00%, 10/1/06 6,000 6,273
8.00%, 10/1/07 50,000 60,864
Texas Municipal Power Agency
6.00%, 9/1/02 (1) (Prere.) 9,270 9,867
6.10%, 9/1/07 (1) 12,500 12,885
6.10%, 9/1/08 (1) 27,840 28,714
6.10%, 9/1/09 (1) 5,000 5,124
Texas Public Finance Auth.
Building Rev. 6.60%, 2/1/00 (1) 5,000 5,348
6.75%, 2/1/02 (1) 5,000 5,393
6.80%, 2/1/03 (1) 5,000 5,378
Texas Water Resource Finance Auth.
7.50%, 8/15/01 3,960 4,328
Univ. of Texas Permanent
Univ. Fund
5.90%, 7/1/02 5,000 5,242
6.40%, 7/1/02 5,000 5,388
Univ. of Texas Rev.
7.00%, 8/15/07 20,750 22,511
-------------
STATE TOTAL 487,174
-------------
- -------------------------------------------------------------------------------------------
UTAH (.1%)
Utah GO
6.00%, 7/1/96 5,000 5,158
-------------
- -------------------------------------------------------------------------------------------
WASHINGTON (2.8%)
King County GO
6.00%, 12/1/04 5,000 5,222
6.10%, 12/1/05 5,000 5,218
Seattle Water System
4.90%, 12/1/02 5,890 5,776
5.00%, 12/1/03 2,000 1,962
5.10%, 12/1/04 4,000 3,918
5.20%, 12/1/05 2,320 2,268
Tacoma Electric System Rev.
5.70%, 1/1/03 (2) 6,845 6,999
Washington GO
5.60%, 9/1/04 5,000 5,092
5.75%, 9/1/07 19,950 20,023
5.75%, 9/1/08 4,000 3,970
6.10%, 6/1/06 9,495 9,991
6.125%, 6/1/07 10,110 10,494
6.20%, 6/1/08 10,765 11,147
6.25%, 6/1/09 11,465 11,798
6.25%, 6/1/10 7,450 7,660
6.25%, 2/1/11 6,680 6,888
7.00%, 10/1/98 3,900 4,219
7.10%, 9/1/99 7,500 8,076
7.20%, 9/1/98 (Prere.) 2,365 2,574
Washington State
Health Care Auth. VRDO
(Sisters of Province)
3.35%, 9/1/94 9,200 9,200
-------------
STATE TOTAL 142,495
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
28
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
WISCONSIN (1.6%)
Wisconsin GO
4.25%, 11/1/99 $ 4,000 $ 3,897
5.90%, 5/1/02 5,000 5,231
6.20%, 5/1/06 20,990 22,259
6.25%, 5/1/07 22,970 24,352
6.25%, 5/1/08 24,365 25,670
-------------
STATE TOTAL 81,409
-------------
- -------------------------------------------------------------------------------------------
WYOMING (.3%)
Platte County PCR
4.50%, 1/1/01 2,250 2,084
4.60%, 1/1/02 2,430 2,232
Uinta County PCR VRDO
(Chevron) 11,200 11,200
3.05%, 9/1/94 -------------
STATE TOTAL 15,516
-------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $4,827,664) 4,984,496
- -------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.6%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B 136,873
Liabilities (53,757)
------------
83,116
- -------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 389,308,619 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $5,067,612
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $13.02
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 46.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994,
NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
----------- ----------
<S> <C> <C>
Paid in Capital $4,885,076 $12.55
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains--Note A 26,478 .07
Unrealized Appreciation of
Investments--Note D 156,058 .40
- -------------------------------------------------------------------------------------------
NET ASSETS $5,067,612 $13.02
- -------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 53
<TABLE>
<CAPTION>
Face Market
Amount Value
INSURED LONG-TERM PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.8%)
- -------------------------------------------------------------------------------------------
ALABAMA (1.2%)
Birmingham Medical Center
(Special Care Medical Center)
7.25%, 7/1/15 (1) $ 6,715 $ 7,147
Macintosh VRDO
(Ciba-Geigy)
3.10%, 9/1/94 1,900 1,900
Medical Clinic Board of Bessemer
(Bessemer-Carraway Hosp.)
7.25%, 4/1/15 (1) 5,000 5,411
Tuscaloosa City GO
6.75%, 7/1/20 (2) 1,900 1,986
Wilsonville PCR
(S.E. Electric Generating)
6.75%, 2/1/15 (1) 5,900 6,145
-------------
STATE TOTAL 22,589
-------------
- -------------------------------------------------------------------------------------------
ALASKA (1.4%)
Anchorage Electric Rev.
8.00%, 12/1/09 (1) 2,565 3,090
8.00%, 12/1/10 (1) 2,960 3,565
Municipality of Anchorage GO
7.20%, 6/1/17 (2) 11,000 11,827
7.625%, 8/1/96 (3) (Prere.) 3,000 3,234
North Slope Borough GO
9.85%, 6/30/97 (2) (ETM) 3,000 3,409
10.00%, 6/30/04 (2) (ETM) 850 1,131
-------------
STATE TOTAL 26,256
-------------
- -------------------------------------------------------------------------------------------
ARIZONA (.8%)
Maricopa County
(Samaritan Health Service)
7.00%, 12/1/16 (1) 8,650 9,635
Salt River Agricultural
Improvement & Power Dist.
6.00%, 1/1/09 4,750 4,832
-------------
STATE TOTAL 14,467
-------------
- -------------------------------------------------------------------------------------------
ARKANSAS (.4%)
North Little Rock Electric System
6.50%, 7/1/10 (1) 3,500 3,710
6.50%, 7/1/15 (1) 4,500 4,782
-------------
STATE TOTAL 8,492
-------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (16.9%)
Anaheim Public Improvement
Corp. VRDO
3.00%, 2/1/95 (2) 600 600
California Finance Auth. PCR VRDO
(Southern California Edison)
3.25%, 9/1/94 700 700
California GO
6.00%, 8/1/19 (3) 8,300 8,080
6.00%, 8/1/24 (1) 25,000 24,288
California Health Facilities Finance
Auth. (Adventist Health System)
6.75%, 3/1/11 (1) 12,000 12,519
California Housing Finance Agency
8.625%, 8/1/15 (1) 3,045 3,099
Contra Costa Water Dist. Rev.
5.00%, 10/1/24 (1) 23,000 19,229
Culver City Redevelopment Auth.
7.10%, 11/1/10 (2) (Prere.) 390 423
Fresno COP (City Hall Project)
6.375%, 8/1/10 (2) 10,500 10,953
Long Beach Finance Auth.
6.00%, 11/1/09 (2) 3,735 3,787
Modesto Irrigation Dist.
Finance Auth.
(Woodland Project)
6.50%, 10/1/22 (2) 20,225 21,276
Modesto Santa Clara Redding Public
Power Agency
6.125%, 7/1/13 (2) 7,000 7,066
6.75%, 7/1/20 (1) 13,000 14,072
Northern California Power Agency
(Combustion Turbine Project)
6.00%, 8/15/10 (1) 3,500 3,506
(Hydroelectric Project)
5.50%, 7/1/23 (1) 23,200 20,943
Oakland Redevelopment Agency
(Central Dist. Project)
5.50%, 2/1/14 (2) 6,300 5,826
6.00%, 2/1/08 (2) 5,585 5,693
Orange County Improvement VRDO
2.90%, 9/1/94 4,000 4,000
Orange County Sanitation Dist. COP
VRDO 2.80%, 9/1/94 4,000 4,000
Palmdale Single Family
Mortgage Rev.
9.875%, 4/1/08 (3) 79 105
Pasadena Electric Works Rev.
5.375%, 8/1/12 9,000 8,267
Pittsburg Redevelopment Agency
5.50%, 8/1/07 (3) 3,000 2,959
5.50%, 8/1/15 (3) 5,000 4,598
Riverside County
Transportation Comm.
5.75%, 6/1/07 (2) 3,495 3,529
5.75%, 6/1/08 (2) 1,750 1,756
Sacramento County TRAN
4.50%, 9/29/95 30,000 30,181
Sacramento Municipal Utility Dist.
5.75%, 8/15/13 (1) 12,360 11,877
</TABLE>
30
<PAGE> 54
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
San Diego County TRAN
4.50%, 9/29/95 $15,000 $ 14,985
San Jose Merged Area
Redevelopment Project Rev.
7.50%, 8/1/96 (1) (Prere.) 2,700 2,905
7.50%, 8/1/96 (3) (Prere.) 1,440 1,553
San Jose Tax Redevelopment
6.00%, 8/1/10 (1) 8,105 8,171
Santa Clara Redevelopment Agency
(Bayshore North) 7.00%, 7/1/10 (2) 3,000 3,336
Santa Clara Valley Water Dist.
6.00%, 2/1/24 (3) 5,000 4,859
Santa Margarita/Dana Point
Improvement Dist.
5.75%, 8/1/20 (1) 8,500 8,009
Santa Rosa Waste Water Recovery
6.00%, 9/1/15 (3) 5,000 4,924
South County Waste Water Auth.
(Gilroy)
5.50%, 8/1/22 (3) 8,000 7,231
(Morgan Hill)
5.50%, 8/1/22 (3) 7,000 6,327
Southern California Public
Power Auth.
5.00%, 7/1/15 (2) 2,605 2,201
Southern California Rapid
Transit Dist.
5.75%, 9/1/05 (2) 9,250 9,485
5.80%, 9/1/06 (2) 6,975 7,096
5.90%, 9/1/07 (2) 3,155 3,212
Transmission Agency of Northern
California
5.25%, 5/1/08 (1) 4,000 3,754
Ukiah Electric Rev.
6.25%, 6/1/18 (1) 6,330 6,447
-------------
STATE TOTAL 327,827
-------------
- -------------------------------------------------------------------------------------------
COLORADO (1.1%)
Colorado Health Auth.
(Boulder Community Hosp.)
7.30%, 10/1/99 (1) (Prere.) 5,000 5,619
(Sisters of Charity Health System)
6.00%, 5/15/13 (1) 12,500 12,485
Denver County Health Facilities
(St. Anthony's Hosp.)
7.70%, 5/1/07 (1) 2,800 3,102
-------------
STATE TOTAL 21,206
-------------
- -------------------------------------------------------------------------------------------
CONNECTICUT (.1%)
South Central Connecticut Regional
Water Auth. 5.75%, 8/1/12 (3) 3,100 3,035
-------------
- -------------------------------------------------------------------------------------------
DELAWARE (1.7%)
Delaware Economic
Development Auth.
(Delmarva Power and Light)
7.30%, 9/1/15 (3) 4,000 4,428
(Hosp. Bill & Collection Service)
VRDO 3.15%, 9/1/94 4,800 4,800
Delaware Health Facilities Auth.
(Delaware Medical Center)
7.00%, 10/1/15 (1) 6,000 6,424
Dover Electric Rev.
5.75%, 7/1/15 (3) 5,225 5,016
6.10%, 7/1/11 (3) 2,000 2,023
Sussex County Waste Water Rev.
6.60%, 6/15/25 (1) 2,500 2,576
Wilmington GO
5.00%, 7/1/22 (3) 8,700 7,313
-------------
STATE TOTAL 32,580
-------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (.8%)
District of Columbia GO VRDO
3.10%, 9/1/94 11,200 11,200
District of Columbia Housing
Finance Agency 1,410 1,473
10.25%, 11/1/09 (3)
Washington Metropolitan
Transportation
5.25%, 7/1/14 (3) 1,000 887
6.00%, 7/1/10 (3) 1,000 1,012
-------------
STATE TOTAL 14,572
-------------
- -------------------------------------------------------------------------------------------
FLORIDA (7.9%)
Coral Springs Improvement Dist. GO
6.00%, 6/1/10 (1) 3,000 3,038
Davie Water & Sewer Rev.
6.375%, 10/1/12 (2) 2,620 2,745
Daytona Beach Water & Sewer Rev.
5.75%, 11/15/10 (2) 2,790 2,732
Florida Housing Finance Agency
9.125%, 12/15/16 (3) 10 11
Florida Municipal Power Agency
(St. Lucie Project)
5.50%, 10/1/12 (3) 4,070 3,830
(Stanton Project)
5.00%, 10/1/19 (1) 8,100 6,826
City of Homestead
5.25%, 3/1/03 (1) 2,000 2,003
Indian River County Water & Sewer
5.25%, 9/1/18 (3) 3,200 2,808
City of Jacksonville Guaranteed
Entitlement Rev.
5.50%, 10/1/12 (2) 4,900 4,580
</TABLE>
31
<PAGE> 55
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Lee County Gas Tax
5.50%, 10/1/09 (1) $ 2,000 $ 1,907
Orange and Orlando County
Expressway Auth.
8.25%, 7/1/13 (3) 9,695 12,135
8.25%, 7/1/15 (3) 8,360 10,521
8.25%, 7/1/16 (3) 12,295 15,547
Orange County Tourist Development
6.25%, 10/1/13 (2) 8,000 8,149
Palm Beach Criminal Justice
5.375%, 6/1/06 (3) 3,925 3,879
7.20%, 6/1/14 (3) 16,300 18,502
7.20%, 6/1/15 (3) 4,000 4,544
Palm Beach Solid Waste Auth.
7.40%, 12/1/05 (6) 750 832
St. Lucie County Utilities System
6.00%, 10/1/20 (3) 2,350 2,319
Seacoast Utility Auth.
5.00%, 3/1/19 (3) 9,450 7,978
5.50%, 3/1/13 (3) 4,000 3,753
5.50%, 3/1/19 (3) 2,000 1,837
Tampa Utilities Rev.
6.75%, 10/1/10 (2) 9,330 10,126
6.75%, 10/1/11 (2) 9,965 10,801
6.75%, 10/1/12 (2) 10,635 11,581
-------------
STATE TOTAL 152,984
-------------
- -------------------------------------------------------------------------------------------
GEORGIA (2.4%)
Georgia Municipal Electric Auth.
CP 2.90%, 10/14/94 10,150 10,146
CP 2.95%, 10/14/94 10,450 10,446
3.00%, 10/14/94 14,200 14,196
10.50%, 1/1/95 (Prere.) 3,000 3,130
Henry County School Dist. GO
6.45%, 8/1/11 (1) 4,000 4,224
Private Colleges & Universities
Auth. (Mercer Univ.)
6.50%, 11/1/15 (1) 5,000 5,266
-------------
STATE TOTAL 47,408
-------------
- -------------------------------------------------------------------------------------------
HAWAII (1.4%)
Hawaii Airport System Rev.
6.35%, 7/1/07 (1) 8,000 8,376
Hawaii GO
5.50%, 5/1/08 (3) 2,000 1,953
5.55%, 5/1/09 (3) 1,000 973
5.55%, 5/1/10 (3) 2,500 2,421
Honolulu City & County GO
8.00%, 10/1/10 11,000 13,223
Univ. of Hawaii
5.65%, 10/1/12 (2) 1,000 954
-------------
STATE TOTAL 27,900
-------------
- -------------------------------------------------------------------------------------------
IDAHO
Idaho Health Facilities Auth.
(St. Joseph Regional
Medical Center)
5.25%, 7/1/16 (1) 1,000 881
-------------
- -------------------------------------------------------------------------------------------
ILLINOIS (4.6%)
Chicago Board of Education GO
6.25%, 1/1/11 (1) 7,000 7,129
Chicago Public Building Comm.
7.00%, 1/1/20 (1) (ETM) 21,500 23,977
Chicago Waste Water Transmission
6.50%, 1/1/08 (3) 1,315 1,388
Cook County GO
7.25%, 11/1/07 (1) 6,000 6,810
Cook County Single Family
Mortgage 9.30%, 12/1/05 (1) 80 86
Illinois Development Finance Auth.
PCR (Illinois Power Co.)
7.40%, 12/1/24 (1) 14,000 15,401
Illinois Regional Transit Auth.
Cook, DuPage and Kane Counties
7.20%, 11/1/20 (2) 24,000 27,119
Southern Illinois Univ.
10.25%, 4/1/95 (Prere.) 3,000 3,172
Will County Community Unit
School Dist. (Romeoville)
7.10%, 12/1/09 (2) 1,750 1,953
7.10%, 12/1/10 (2) 1,615 1,799
-------------
STATE TOTAL 88,834
-------------
- -------------------------------------------------------------------------------------------
INDIANA (1.4%)
Indiana Municipal Bond Bank
9.75%, 8/1/09 (2) (ETM) 5,500 5,949
Indiana Municipal Power Agency
6.125%, 1/1/13 (1) 13,250 13,270
Marion County Hosp. Auth.
(Community Hosp.)
9.00%, 5/1/08 (1) 1,500 1,578
Merrillville School Building Corp.
6.65%, 7/1/06 (1) 5,500 5,920
-------------
STATE TOTAL 26,717
-------------
- -------------------------------------------------------------------------------------------
KANSAS (.3%)
Kansas Highway Refunding Rev.
9.00%, 7/1/97 (1) (ETM) 1,200 1,338
Kansas Utility System Rev.
6.375%, 9/1/23 (3) 5,000 5,105
-------------
STATE TOTAL 6,443
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 56
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
KENTUCKY (1.5%)
Boone County PCR
(Cincinnati Gas & Electric)
5.50%, 1/1/24 (1) $ 2,000 $ 1,799
Kentucky Development Finance
Auth. Hosp. Facilities
(St. Elizabeth's Medical Center)
6.00%, 11/1/10 (3) 23,885 23,858
Kentucky Housing Corp.
8.875%, 7/1/19 (6) 705 730
Kentucky Turnpike Economic
Development
5.50%, 7/1/09 (2) 3,630 3,519
-------------
STATE TOTAL 29,906
-------------
- -------------------------------------------------------------------------------------------
LOUISIANA (2.1%)
Jefferson Parish Sales Tax Rev.
6.75%, 12/1/06 (3) 8,500 9,080
New Orleans GO
0.00%, 9/1/10 (2) 8,500 3,200
0.00%, 9/1/11 (2) 10,475 3,691
0.00%, 9/1/13 (2) 9,000 2,780
6.00%, 9/1/21 (2) 22,250 21,556
-------------
STATE TOTAL 40,307
-------------
- -------------------------------------------------------------------------------------------
MAINE (.8%)
Maine Health & Higher Education
Facilities Auth.
(Eastern Maine Medical Center)
6.375%, 10/1/21 (3) 8,000 8,000
Maine Turnpike Rev.
6.00%, 7/1/18 (1) 7,000 6,860
-------------
STATE TOTAL 14,860
-------------
- -------------------------------------------------------------------------------------------
MARYLAND (.7%)
Maryland Health & Education
Facilities Auth.
(Univ. of Maryland Medical System)
7.00%, 7/1/22 (3) 12,025 13,535
-------------
- -------------------------------------------------------------------------------------------
MASSACHUSETTS (8.2%)
Boston GO
6.50%, 7/1/12 (2) 4,750 4,985
Boston Water & Sewer Comm.
5.25%, 11/1/11 (3) 5,000 4,539
6.00%, 11/1/08 (6) 5,030 5,066
7.25%, 11/1/06 (6) 2,500 2,703
Lawrence GO
4.75%, 2/15/14 (2) 1,500 1,249
Massachusetts GO
VRDO 2.90%, 9/1/94 8,100 8,100
TOB 3.15%, 11/1/94 (1) 700 700
7.00%, 7/1/09 (3) 32,250 35,754
Massachusetts Health and
Education Facilities Auth.
(Boston College)
6.75%, 7/1/11 (3) 6,595 6,948
(Cape Cod Health System)
5.25%, 11/15/21 (7) 2,500 2,126
(Falmouth Hosp.)
5.50%, 7/1/08 (1) 1,425 1,386
(Lahey Clinic)
5.25%, 7/1/10 (1) 14,120 12,992
7.85%, 7/1/03 (1) 3,360 3,929
(Massachusetts General Hosp.)
6.25%, 7/1/12 (2) 19,650 20,030
Massachusetts Housing
Finance Agency
5.55%, 10/1/05 (2) 5,230 5,217
5.95%, 10/1/08 (2) 27,485 27,276
8.875%, 7/1/18 (1) 7,935 8,385
Massachusetts Municipal Wholesale
Electric Power
5.10%, 7/1/07 (2) 4,000 3,735
13.625%, 1/1/95 (Prere.) 3,595 3,830
-------------
STATE TOTAL 158,950
-------------
- -------------------------------------------------------------------------------------------
MICHIGAN (3.6%)
Detroit Sewer System Rev.
5.45%, 7/1/07 (3) 6,850 6,707
5.55%, 7/1/08 (3) 7,100 6,919
Michigan Strategic Fund
(Detroit Edison)
7.00%, 7/15/08 (1) 18,375 20,316
Monroe County Economic
Development Corp.
(Detroit Edison)
6.95%, 9/1/22 (3) 25,000 27,691
St. Clair Economic Development
Corp. PCR (Detroit Edison)
6.40%, 8/1/24 (2) 8,000 8,168
-------------
STATE TOTAL 69,801
-------------
- -------------------------------------------------------------------------------------------
MINNESOTA (.7%)
Dakota County Housing &
Redevelopment Auth.
9.375%, 5/1/18 (3) 55 57
Southern Minnesota Municipal
Power Agency
5.50%, 1/1/15 (2) 10,000 9,372
11.00%, 1/1/95 (Prere.) 2,000 2,110
Western Minnesota Municipal
Power Agency
9.75%, 1/1/16 (1) (ETM) 845 1,227
-------------
STATE TOTAL 12,766
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 57
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MISSISSIPPI (.2%)
Jackson Water & Sewer System
4.50%, 9/1/10 (1) $ 1,500 $ 1,252
5.20%, 9/1/07 (1) 2,000 1,888
-------------
STATE TOTAL 3,140
-------------
- -------------------------------------------------------------------------------------------
MISSOURI (.5%)
Greene County Single Family
Mortgage Rev.
9.375%, 12/1/06 (2) 30 32
Missouri Health & Education
Facilities Auth.
(Cox Medical Center)
5.25%, 6/1/15 (1) 10,000 8,909
St. Louis County Single Family
Mortgage Rev.
9.25%, 10/1/16 (2) 1,050 1,089
-------------
STATE TOTAL 10,030
-------------
- -------------------------------------------------------------------------------------------
MONTANA (.1%)
Forsyth PCR (Montana Power Co.)
6.125%, 5/1/23 (2) 1,500 1,479
-------------
- -------------------------------------------------------------------------------------------
NEBRASKA (.1%)
Nebraska Investment Finance Auth.
9.10%, 11/15/06 (3) 1,933 2,040
-------------
- -------------------------------------------------------------------------------------------
NEVADA (1.6%)
Clark County GO
6.50%, 6/1/17 (2) 5,000 5,219
Clark County School Dist. GO
7.00%, 6/1/11 (1) 20,750 22,828
Reno Hosp. Rev. (St. Mary's Hosp.)
9.875%, 7/1/12 (1) 3,000 3,197
-------------
STATE TOTAL 31,244
-------------
- -------------------------------------------------------------------------------------------
NEW HAMPSHIRE (.4%)
New Hampshire Higher Education
6.00%, 7/1/15 (1) 7,560 7,427
-------------
- -------------------------------------------------------------------------------------------
NEW JERSEY (4.7%)
Atlantic County COP
7.40%, 3/1/12 (3) 4,335 5,039
Hoboken-Union City-Weehawken
Sewage Auth.
6.25%, 8/1/14 (1) 10,185 10,550
6.25%, 8/1/15 (1) 10,820 11,324
New Brunswick Housing & Urban
Development
5.75%, 7/1/24 (1) 5,000 4,767
New Jersey Health Care
Facility Finance Auth.
5.75%, 7/1/14 (1) 3,000 2,867
New Jersey Sports & Exposition Auth.
6.50%, 3/1/13 (1) 18,795 20,032
New Jersey Turnpike Auth.
6.50%, 1/1/13 (1) 30,000 31,997
6.50%, 1/1/16 (1) 5,000 5,279
-------------
STATE TOTAL 91,855
-------------
- -------------------------------------------------------------------------------------------
NEW MEXICO (.6%)
Albuquerque Hosp. System
(Presbyterian Health)
6.375%, 8/1/07 (1) 4,000 4,217
Farmington Utility Systems Rev.
5.75%, 5/15/13 (3) 3,000 2,887
Santa Fe Rev.
6.30%, 6/1/24 (2) 5,000 5,025
-------------
STATE TOTAL 12,129
-------------
- -------------------------------------------------------------------------------------------
NEW YORK (2.4%)
New York City GO
VRDO 3.15%, 9/1/94 (1) 10,100 10,100
6.625%, 8/1/02 (2) (Prere.) 4,950 5,459
6.625%, 8/1/15 (2) 50 52
New York City Trust for Cultural
Resources VRDO (Carnegie Hall)
3.15%, 9/1/94 1,400 1,400
New York City Water Finance Auth.
VRDO 3.15%, 9/1/94 (3) 6,800 6,800
7.00%, 6/15/09 (2) 3,750 4,046
New York State Thruway Auth.
5.80%, 4/1/11 (2) 8,635 8,472
Triborough Bridge & Tunnel Auth.
5.00%, 1/1/17 6,000 5,078
6.00%, 1/1/14 4,500 4,444
6.00%, 1/1/15 (2) 1,275 1,265
-------------
STATE TOTAL 47,116
-------------
- -------------------------------------------------------------------------------------------
NORTH CAROLINA (.2%)
Concord Utility System Rev.
6.00%, 12/1/10 (1) 500 503
North Carolina Municipal Power
Agency (Catawba Electric)
6.00%, 1/1/10 (1) 4,000 4,031
-------------
STATE TOTAL 4,534
-------------
- -------------------------------------------------------------------------------------------
NORTH DAKOTA (.6%)
Bismark Medical Center
7.50%, 5/1/13 (6) 10,000 11,085
-------------
- -------------------------------------------------------------------------------------------
OHIO (3.4%)
Akron Bath Copley Joint Township
Hosp. Dist. (Akron General)
6.00%, 1/1/22 (2) 3,100 3,043
Cleveland Airport System Rev.
0.00%, 1/1/05 (1) 3,975 2,269
0.00%, 1/1/06 (1) 3,475 1,862
7.25%, 1/1/20 (1) 50 54
</TABLE>
34
<PAGE> 58
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cleveland City GO
5.30%, 9/1/07 (2) $ 3,500 $ 3,388
Cleveland Water Works Rev.
5.50%, 1/1/21 (1) 1,000 926
6.25%, 1/1/15 (2) 2,500 2,535
Columbus Sewer Rev. VRDO
3.15%, 9/1/94 400 400
Franklin Convention Center Rev.
0.00%, 12/1/06 (1) 4,355 2,219
Franklin Hosp. Facility Auth.
(Riverside Hosp.)
7.25%, 5/15/20 (1) 2,050 2,238
Hamilton County (Children's Hosp.)
5.20%, 5/15/09 (1) 2,500 2,327
Lucas County GO
6.95%, 12/1/11 (1) 900 966
Northeast Ohio Regional
Sewer Dist.
6.50%, 11/15/16 (2) 5,750 5,950
Ohio Air Quality PCR
(Ohio Edison)
7.10%, 6/1/18 (3) 6,500 7,101
7.45%, 3/1/16 (3) 9,500 10,548
Ohio Building Auth.
(Transportation Facilities)
7.00%, 9/1/07 (1) 1,420 1,541
Ohio GO
7.625%, 8/1/09 4,345 5,100
Ohio Higher Education
Facilities Auth.
(Case Western Reserve)
6.50%, 10/1/20 500 519
(Univ. of Dayton)
6.60%, 12/1/17 (3) 1,200 1,258
Ohio Water Development Auth.
VRDO 3.00%, 9/1/94 100 100
7.00%, 12/1/09 (2) (ETM) 1,500 1,672
Olentangy School Dist. GO
6.35%, 12/1/17 (1) 500 511
Reynoldsburg School Dist. GO
6.55%, 12/1/17 (3) 2,000 2,083
Summit Limited Tax GO
6.90%, 8/1/12 (2) 2,750 2,946
Trumbull County Hosp.
Improvement
(Trumbull Memorial Hosp.)
6.25%, 11/15/12 (3) 2,500 2,535
Univ. of Toledo
5.75%, 12/1/12 (3) 1,000 977
Wilmington School Dist. GO
6.30%, 12/1/14 (3) 1,500 1,530
-------------
STATE TOTAL 66,598
-------------
- -------------------------------------------------------------------------------------------
OKLAHOMA (.3%)
Grand River Dam Auth.
5.75%, 6/1/06 (4) 5,800 5,858
Oklahoma Housing Finance Agency
10.40%, 9/1/94 (1) (Prere.) 135 138
-------------
STATE TOTAL 5,996
-------------
- -------------------------------------------------------------------------------------------
OREGON (.1%)
Oregon Health
(Lewis & Clark Housing)
6.00%, 10/1/13 (1) 2,250 2,265
-------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (9.0%)
Allegheny County Hosp. Auth.
(Presbyterian Hosp.)
7.125%, 7/1/99 (1) (Prere.) 12,500 13,892
Allegheny County Sanitary Auth.
5.50%, 12/1/16 (3) 10,000 9,194
Armstrong County Hosp. Auth.
6.25%, 6/1/13 (2) 18,400 18,504
Delaware County Industrial
Development Auth. CP (PECO)
3.15%, 9/22/94 (3) 3,500 3,500
Delaware River Joint Toll
Bridge Comm.
6.00%, 7/1/18 (3) 10,500 10,433
Lehigh County General
Purpose Auth.
6.50%, 7/1/10 (1) 6,655 7,035
Pennsylvania Convention
Center Auth.
6.00%, 9/1/19 (3) 10,000 9,987
6.70%, 9/1/16 (3) 9,970 10,829
Pennsylvania Turnpike Comm.
5.50%, 12/1/12 (2) 7,000 6,555
5.50%, 12/1/17 (3) 10,470 9,585
5.50%, 12/1/19 (3) 25,000 22,808
6.00%, 6/1/15 (1) 1,000 987
Philadelphia Gas Works
6.00%, 5/15/12 (2) 3,000 2,990
Philadelphia GO CP
3.35%, 10/26/94 7,790 7,790
Philadelphia Water & Wastewater Rev.
7.00%, 6/15/10 (3) 15,000 16,695
7.00%, 6/15/11 (3) 16,500 18,322
Pittsburgh Water & Sewer System Rev.
7.25%, 9/1/14 (3) (ETM) 5,000 5,722
-------------
STATE TOTAL 174,828
-------------
- -------------------------------------------------------------------------------------------
PUERTO RICO (.2%)
Puerto Rico Public Building Auth.
0.00%, 7/1/01 (3) 4,150 2,940
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 59
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
RHODE ISLAND (.5%)
Rhode Island Building Auth.
6.00%, 2/1/11 (2) $ 3,805 $ 3,797
Rhode Island Convention Auth.
5.25%, 5/15/15 (1) 3,000 2,651
Rhode Island Depositors
Economic Project
5.80%, 8/1/11 (1) 1,250 1,222
5.80%, 8/1/12 (1) 2,000 1,939
-------------
STATE TOTAL 9,609
-------------
- -------------------------------------------------------------------------------------------
SOUTH CAROLINA (3.4%)
North Charleston Sewer Dist.
6.375%, 7/1/12 (1) 2,750 2,868
Piedmont Municipal Power Agency
5.00%, 1/1/18 (3) 23,500 19,639
5.00%, 1/1/22 (3) 8,000 6,597
6.75%, 1/1/19 (3) 10,600 11,396
6.75%, 1/1/20 (3) 23,515 25,312
-------------
STATE TOTAL 65,812
-------------
- -------------------------------------------------------------------------------------------
SOUTH DAKOTA (1.1%)
Heartland Consumer Power Dist.
7.625%, 1/1/97 (1) (Prere.) 7,000 7,618
South Dakota Health &
Educational Facilities Auth.
(McKennan Hosp.)
7.625%, 7/1/14 (1) 11,500 12,783
-------------
STATE TOTAL 20,401
-------------
- -------------------------------------------------------------------------------------------
TENNESSEE (.3%)
Knox County Health, Education
& Housing Facility
(Fort Sanders Hosp.)
8.00%, 1/1/08 (1) 3,000 3,338
Tennessee Housing
Development Agency
7.125%, 7/1/17 (1) 3,000 3,086
-------------
STATE TOTAL 6,424
-------------
- -------------------------------------------------------------------------------------------
TEXAS (7.0%)
Austin Combined Utilities
System Rev.
5.75%, 11/15/16 (2) 25,000 23,679
Colorado River Municipal
Water Dist. 6.00%, 1/1/16 (2) 6,000 5,879
Corpus Christi Utilities
System Rev. 7.00%, 7/15/10 (3) 7,500 8,041
Denton County Housing
Finance Corp. 10.00%, 9/1/05 (1) 180 189
Houston Public Improvement
7.00%, 3/1/08 16,000 17,701
Houston Water & Sewer Rev.
7.00%, 12/1/20 (1) 12,280 13,101
Houston Water Conveyance System
6.125%, 12/15/09 (2) 2,000 2,030
6.25%, 12/15/12 (2) 8,340 8,569
6.80%, 12/15/10 (2) 5,490 5,954
6.80%, 12/15/11 (2) 5,455 5,907
7.50%, 12/15/12 (2) 1,000 1,165
7.50%, 12/15/13 (2) 1,100 1,280
Lower Colorado River Auth.
5.625%, 1/1/15 (4) (Prere.) 3,055 2,925
San Antonio Electric & Gas System
0.00%, 2/1/06 (3) 18,000 9,392
0.00%, 2/1/07 (3) 15,000 7,278
San Antonio Sewer Rev.
8.00%, 5/1/95 (Prere.) 4,000 4,180
Southeast Texas Housing Finance Corp.
9.20%, 12/1/10 (3) 45 48
Texas Municipal Power Agency
6.10%, 9/1/09 (1) 18,000 18,445
-------------
STATE TOTAL 135,763
-------------
- -------------------------------------------------------------------------------------------
VIRGINIA (.5%)
Chesapeake Hosp. Auth.
(Chesapeake General Hosp.)
5.30%, 7/1/08 (1) 2,250 2,142
5.50%, 7/1/12 (1) 2,000 1,868
Henry County Public Service Auth.
6.25%, 11/15/19 (3) 1,500 1,503
Prince William County Service Auth.
6.00%, 7/1/29 (3) 4,500 4,384
-------------
STATE TOTAL 9,897
-------------
- -------------------------------------------------------------------------------------------
WASHINGTON (1.4%)
Snohomish County Mukilteo
School Dist.
5.60%, 12/1/08 (3) 6,960 6,812
5.65%, 12/1/09 (3) 9,160 8,949
5.65%, 12/1/10 (3) 3,950 3,827
5.70%, 12/1/11 (3) 5,000 4,819
Washington Health Care Facilities
Auth. (General Hosp. of Everett)
9.00%, 1/1/11 (3) 1,700 1,799
-------------
STATE TOTAL 26,206
-------------
- -------------------------------------------------------------------------------------------
WEST VIRGINIA (.9%)
Berkeley Brooke Fayette Counties
Single Family Mortgage
9.10%, 8/1/11 (3) 615 647
</TABLE>
36
<PAGE> 60
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
West Virginia State Building Comm.
7.00%, 7/1/11 (1) $ 7,325 $ 8,085
7.00%, 7/1/12 (1) 7,840 8,645
-------------
STATE TOTAL 17,377
-------------
- -------------------------------------------------------------------------------------------
WISCONSIN (.3%)
Wisconsin Health Facilities Auth.
(Columbia Hosp.)
9.50%, 6/1/95 (6) (Prere.) 2,000 2,118
(St. Luke's Medical Center)
7.10%, 8/15/11 (1) 4,000 4,275
-------------
STATE TOTAL 6,393
-------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,859,352) 1,934,904
- -------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (.2%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B 74,462
Liabilities (71,349)
-------------
3,113
- -------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 161,782,273 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,938,017
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $11.98
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 46.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994,
NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
------------------------------
<S> <C> <C>
Paid in Capital $1,851,083 $11.44
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains--Note A 10,556 .07
Unrealized Appreciation of
Investments--Note D 76,378 .47
- -------------------------------------------------------------------------------------------
NET ASSETS $1,938,017 $11.98
- -------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 61
<TABLE>
<CAPTION>
Face Market
Amount Value
LONG-TERM PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (101.3%)
- -------------------------------------------------------------------------------------------
ARIZONA (2.6%)
Board of Regents
(Univ. of Arizona)
5.90%, 6/1/07 $ 2,500 $ 2,527
5.90%, 6/1/08 4,490 4,523
6.00%, 6/1/09 4,770 4,816
6.00%, 6/1/10 5,075 5,116
6.00%, 6/1/11 5,400 5,428
Salt River Project Agricultural
Improvement & Power Dist.
9.75%, 1/1/95 (Prere.) 3,790 3,944
-------------
STATE TOTAL 26,354
-------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (15.9%)
California GO
6.00%, 8/1/24 (1) 20,000 19,431
6.25%, 9/1/12 5,000 5,048
Contra Costa Transportation
Auth. VRDO
2.85%, 9/7/94 (3) 2,200 2,200
Contra Costa Water Dist.
5.00%, 10/1/24 (1) 23,000 19,229
Los Angeles County COP
6.50%, 3/1/10 21,815 22,086
Metropolitan Water Dist.
5.50%, 7/1/19 15,735 14,073
Sacramento County TRAN
4.50%, 9/29/95 18,870 18,984
San Bernardino COP
4.75%, 8/1/28 10,425 7,460
5.00%, 8/1/26 15,045 11,392
6.875%, 8/1/24 (ETM) 18,000 19,933
Santa Clara Valley Water Dist. COP
6.00%, 2/1/24 (3) 20,000 19,434
-------------
STATE TOTAL 159,270
-------------
- -------------------------------------------------------------------------------------------
DELAWARE (.8%)
Delaware Economic Development
Auth. IDR (Cargill)
10.35%, 12/1/99 1,350 1,413
Delaware Economic Development
Auth. VRDO
(Hosp. Bill & Collection Service)
3.15%, 9/1/94 6,250 6,250
-------------
STATE TOTAL 7,663
-------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (2.3%)
District of Columbia GO
VRDO 3.10%, 9/1/94 2,500 2,500
6.75%, 6/1/05 (2) 7,540 8,043
7.75%, 6/1/96 (Prere.) 11,970 12,878
-------------
STATE TOTAL 23,421
-------------
- -------------------------------------------------------------------------------------------
FLORIDA (2.6%)
Florida Board of Education
VRDO 3.10%, 12/1/94 2,500 2,500
Orlando Utilities Comm.
6.75%, 10/1/17 22,000 23,757
-------------
STATE TOTAL 26,257
-------------
- -------------------------------------------------------------------------------------------
GEORGIA (9.0%)
Burke County Development
Auth. VRDO (Oglethorpe Power)
3.10%, 9/7/94 (3) 4,900 4,900
College Park GO (Civic Center)
7.00%, 9/1/10 11,500 12,304
Gwinnett County School Dist. GO
6.40%, 2/1/06 10,450 11,148
6.40%, 2/1/07 11,345 12,044
6.40%, 2/1/08 12,310 13,050
Metropolitan Atlanta Rapid
Transit Auth.
6.25%, 7/1/18 12,170 12,305
6.25%, 7/1/20 (2) 23,275 23,723
Municipal Electric Auth. of Georgia
6.60%, 1/1/18 1,000 1,045
-------------
STATE TOTAL 90,519
-------------
- -------------------------------------------------------------------------------------------
HAWAII (1.2%)
Hawaii GO
6.40%, 3/1/09 5,555 5,913
6.40%, 3/1/10 5,555 5,910
-------------
STATE TOTAL 11,823
-------------
- -------------------------------------------------------------------------------------------
ILLINOIS (5.2%)
Chicago Metropolitan Water
Capital Improvement
7.00%, 1/1/11 20,000 21,648
Chicago Public Building Comm.
7.00%, 1/1/20 (1) (ETM) 6,000 6,691
Chicago Skyway Toll Bridge
6.50%, 1/1/10 7,750 7,690
Illinois Development Finance
Auth. PCR
(Illinois Power Co.)
VRDO 3.00%, 9/7/94 300 300
7.40%, 12/1/24 (1) 8,150 8,965
</TABLE>
38
<PAGE> 62
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Metropolitan Pier & Exposition Auth.
6.75%, 6/1/10 (1) $ 6,000 $ 6,428
-------------
STATE TOTAL 51,722
-------------
- -------------------------------------------------------------------------------------------
INDIANA (1.1%)
Indiana Health Facilities Finance Auth.
(Ancilla System, Inc.)
5.75%, 7/1/15 (1) 4,470 4,172
Indiana State Office Building Comm.
6.90%, 7/1/11 6,875 7,291
-------------
STATE TOTAL 11,463
-------------
- -------------------------------------------------------------------------------------------
KENTUCKY (.1%)
Jefferson County Capital Project Corp.
9.375%, 8/15/95 (Prere.) 1,000 1,077
-------------
- -------------------------------------------------------------------------------------------
LOUISIANA (2.8%)
De Soto Parish PCR
(Southwestern Electric Power)
7.60%, 1/1/19 24,300 27,030
Jefferson Parish Single Family
Mortgage Rev.
9.375%, 11/1/07 (3) 850 883
-------------
STATE TOTAL 27,913
-------------
- -------------------------------------------------------------------------------------------
MASSACHUSETTS (8.8%)
Massachusetts Bay
Transportation Auth.
7.00%, 3/1/21 15,000 16,805
Massachusetts GO
5.75%, 5/1/12 7,500 7,179
6.50%, 8/1/11 5,460 5,634
Massachusetts Housing Finance Agency
6.125%, 11/15/08 3,500 3,525
6.375%, 4/1/21 7,000 6,907
9.125%, 12/1/20 4,390 4,649
Massachusetts Income Tax VRDO
2.90%, 9/1/94 5,300 5,300
Massachusetts Water Resources Auth.
5.50%, 7/15/22 5,000 4,433
6.50%, 7/15/19 32,000 33,624
-------------
STATE TOTAL 88,056
-------------
- -------------------------------------------------------------------------------------------
MICHIGAN (2.3%)
Michigan Hosp. Finance Auth.
(Detroit Medical Center)
6.25%, 8/15/13 3,000 2,906
6.50%, 8/15/18 5,000 4,940
Michigan Trunk Line
5.50%, 10/1/21 17,000 15,162
-------------
STATE TOTAL 23,008
-------------
- -------------------------------------------------------------------------------------------
MISSISSIPPI (1.2%)
Claiborne County PCR
(Middle South Energy)
9.875%, 12/1/14 10,000 11,572
-------------
- -------------------------------------------------------------------------------------------
NEVADA
Clark County Airport VRDO
3.10%, 1/1/95 (1) 100 100
-------------
- -------------------------------------------------------------------------------------------
NEW JERSEY (6.8%)
New Jersey Economic
Development Auth.
5.75%, 7/1/06 (1) 34,165 34,278
New Jersey Health Care Facilities Auth.
(Atlantic City Medical Center)
6.80%, 7/1/05 4,500 4,802
New Jersey Sports & Exposition Auth.
VRDO 2.90%, 9/1/94 (1) 1,300 1,300
6.50%, 3/1/13 10,000 10,577
New Jersey Turnpike Auth.
6.50%, 1/1/16 16,195 17,000
-------------
STATE TOTAL 67,957
-------------
- -------------------------------------------------------------------------------------------
NEW YORK (12.7%)
Metropolitan Transportation Auth.
6.375%, 7/1/18 (1) 7,500 7,608
New York City GO
6.375%, 8/1/04 5,000 5,172
7.10%, 2/1/09 (1) 5,000 5,412
7.10%, 2/1/10 (1) 7,500 8,060
New York City Municipal Water
Finance Auth. VRDO
3.15%, 9/1/94 (3) 17,600 17,600
New York Medical Care Facilities
5.25%, 8/15/07 23,420 22,104
New York State Dormitory Auth.
(City Univ.)
5.75%, 7/1/09 12,930 12,461
(State Univ.)
5.25%, 5/15/21 7,875 6,660
7.50%, 5/15/11 18,900 21,453
New York State Local Govt.
Assistance Corp.
6.875%, 4/1/19 10,000 10,518
Triborough Bridge & Tunnel Auth.
General Purpose Rev.
6.125%, 1/1/21 10,000 9,928
-------------
STATE TOTAL 126,976
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 63
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA (1.8%)
North Carolina Eastern Municipal
Power Agency
6.50%, 1/1/18 (ETM) $ 4,625 $ 4,989
6.50%, 1/1/18 2,375 2,380
7.50%, 1/1/09 (Prere.) 4,935 5,670
7.50%, 1/1/10 4,580 5,086
-------------
STATE TOTAL 18,125
-------------
- -------------------------------------------------------------------------------------------
OHIO (.2%)
Columbus Sewer VRDO
3.15%, 9/1/94 1,000 1,000
Ohio Water Development
Auth. VRDO
(Mead Corp.)
2.90%, 9/1/94 1,400 1,400
-------------
STATE TOTAL 2,400
-------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (3.4%)
Delaware County Industrial
Development Auth. VRDO
(United Parcel Service)
2.90%, 9/1/94 300 300
Pennsylvania Higher Education
Facilities Auth.
(Drexel Univ.)
7.70%, 11/1/95 (1) (Prere.) 3,340 3,539
7.70%, 5/1/12 (1) 2,660 2,812
Pennsylvania Housing Finance Agency
7.50%, 7/1/06 3,890 4,106
Philadelphia Water & Wastewater
7.00%, 6/15/10 (3) 20,000 22,259
Radnor Township School Auth.
9.875%, 9/15/00 (ETM) 595 695
-------------
STATE TOTAL 33,711
-------------
- -------------------------------------------------------------------------------------------
PUERTO RICO (.3%)
Puerto Rico Govt. Development
Bank VRDO 2.90%, 9/1/94 1,200 1,200
Puerto Rico Telephone Auth.
5.50%, 1/1/13 1,000 931
5.50%, 1/1/22 1,460 1,330
-------------
STATE TOTAL 3,461
-------------
- -------------------------------------------------------------------------------------------
SOUTH CAROLINA (2.5%)
Piedmont Municipal Power Agency
6.15%, 1/1/07 (1) 4,040 4,192
6.20%, 1/1/08 (1) 3,000 3,101
6.25%, 1/1/09 (1) 3,000 3,108
6.50%, 1/1/15 (3) 14,245 14,902
-------------
STATE TOTAL 25,303
-------------
- -------------------------------------------------------------------------------------------
TEXAS (9.3%)
Austin Combined Utility System
6.00%, 11/15/13 14,505 13,852
Gulf Coast Waste Disposal
Auth. VRDO (Amoco Oil)
3.05%, 9/1/94 1,700 1,700
Houston Public Improvement
7.00%, 3/1/08 15,000 16,595
San Antonio Electric & Gas
5.00%, 2/1/17 11,000 9,341
Texas City IDR (Arco)
7.375%, 10/1/20 17,000 19,420
Texas GO
5.50%, 4/1/20 15,000 13,414
Texas Water Development Board
6.50%, 7/15/10 17,425 18,454
-------------
STATE TOTAL 92,776
-------------
- -------------------------------------------------------------------------------------------
WASHINGTON (3.1%)
Washington Dept. of Ecology COP
5.00%, 4/1/16 27,820 23,323
Washington GO
5.50%, 5/1/18 4,000 3,645
6.75%, 2/1/15 3,450 3,693
-------------
STATE TOTAL 30,661
-------------
- -------------------------------------------------------------------------------------------
WEST VIRGINIA (1.0%)
West Virginia State Building Comm.
7.00%, 7/1/14 (1) 8,975 9,896
-------------
- -------------------------------------------------------------------------------------------
WISCONSIN (4.3%)
Wisconsin Clean Water Rev.
6.875%, 6/1/11 20,500 22,060
Wisconsin GO
6.25%, 5/1/09 19,555 20,454
-------------
STATE TOTAL 42,514
-------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $977,036) 1,013,998
- -------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 64
<TABLE>
<CAPTION>
Market
Value
(000)+
- -------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-1.3%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B $ 36,835
Liabilities (49,895)
-------------
(13,060)
- --------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 94,595,434 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,000,938
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.58
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 46.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994,
NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
----------- ------
<S> <C> <C>
Paid in Capital $ 965,258 $10.20
Undistributed Net
Investment Income -- --
Overdistributed Net Realized
Gains--Note A (1,282) (.01)
Unrealized Appreciation of
Investments--Note D 36,962 .39
- -------------------------------------------------------------------------------------------
NET ASSETS $1,000,938 $10.58
- -------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 65
<TABLE>
<CAPTION>
Face Market
Amount Value
HIGH-YIELD PORTFOLIO (000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (101.5%)
- -------------------------------------------------------------------------------------------
ARIZONA (2.0%)
Board of Regents
(Univ. of Arizona)
6.20%, 6/1/16 $28,660 $ 29,560
Pima County Industrial
Development Auth.
(La Cholla Project)
8.50%, 7/1/20 6,650 6,318
-------------
STATE TOTAL 35,878
-------------
- -------------------------------------------------------------------------------------------
ARKANSAS (.2%)
North Little Rock Electric System
6.50%, 7/1/15 (1) 3,450 3,666
-------------
- -------------------------------------------------------------------------------------------
CALIFORNIA (12.0%)
California GO
6.00%, 8/1/19 (3) 35,000 34,072
California Statewide Community
Development Auth. TRAN
4.50%, 7/17/95 25,000 24,980
Irvine Ranch Water Dist. VRDO
2.85%, 9/1/94 3,500 3,500
Metropolitan Water Dist. of
Southern California
5.00%, 7/1/20 6,400 5,274
6.625%, 7/1/12 3,000 3,121
Riverside County VRDO
3.05%, 9/1/94 4,200 4,200
Sacramento County TRAN
4.50%, 9/29/95 28,000 28,169
San Bernardino County COP
5.50%, 8/1/19 11,400 9,632
5.50%, 8/1/24 14,295 11,868
6.875%, 8/1/24 (ETM) 25,220 27,929
7.00%, 8/1/20 12,180 13,065
San Bernardino County TRAN
4.50%, 7/31/95 7,500 7,494
San Diego County TRAN
4.50%, 9/29/95 10,000 9,990
San Joaquin Hills
Transportation Agency
0.00%, 1/1/01 7,340 4,805
0.00%, 1/1/02 14,000 8,542
Southern California Public
Power Auth.
5.375%, 1/1/10 (1) 6,000 5,564
5.50%, 7/1/20 7,700 6,838
6.00%, 7/1/18 3,985 3,796
-------------
STATE TOTAL 212,839
-------------
- -------------------------------------------------------------------------------------------
COLORADO (.7%)
Colorado Health Facilities Auth.
(St. Luke's Healthcare)
8.50%, 2/15/21 10,950 11,985
-------------
- -------------------------------------------------------------------------------------------
CONNECTICUT (.7%)
Connecticut Development Auth.
(AHF/Hartford Project)
10.00%, 1/1/22 11,500 12,582
-------------
- -------------------------------------------------------------------------------------------
DELAWARE (.1%)
Delaware Economic Development
Auth. VRDO
(Hosp. Bill & Collection Service)
3.15%, 9/1/94 1,100 1,100
-------------
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (2.1%)
Metropolitan Washington
Airport Auth.
5.50%, 10/1/24 (1) 23,825 20,948
5.875%, 10/1/15 (1) 17,600 16,693
-------------
STATE TOTAL 37,641
-------------
- -------------------------------------------------------------------------------------------
FLORIDA (3.9%)
Cape Coral Health Facilities Auth.
(Cape Coral Medical Center)
7.50%, 11/15/21 22,000 22,112
Dade County Water &
Sewer Rev. VRDO
3.10%, 10/5/94 (3) 20,335 20,335
Florida Board of Education GO
6.10%, 6/1/24 7,500 7,378
Orlando Utilities Comm.
6.75%, 10/1/17 6,200 6,695
Palm Beach Health Facilities
(Good Samaritan Hosp.)
6.30%, 10/1/22 5,000 4,897
Seminole County Water
& Sewer Rev.
6.00%, 10/1/19 (1) 4,500 4,448
Tarpon Springs Health Facility Auth.
(Tarpon Springs Hosp.)
8.75%, 5/1/12 4,000 4,359
-------------
STATE TOTAL 70,224
-------------
- -------------------------------------------------------------------------------------------
GEORGIA (1.8%)
Burke County PCR VRDO
(Georgia Power Co.)
2.95%, 9/1/94 7,700 7,700
Cartersville Water &
Wastewater Facilities
(Anheuser-Busch)
7.40%, 11/1/10 5,000 5,574
</TABLE>
42
<PAGE> 66
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Municipal Electric Auth. of Georgia
6.60%, 1/1/18 $ 5,000 $ 5,225
Savannah Hosp. Auth
(Candler Hosp.)
7.00%, 1/1/23 13,000 12,732
-------------
STATE TOTAL 31,231
-------------
- -------------------------------------------------------------------------------------------
ILLINOIS (5.7%)
Chicago Public Building Comm.
7.00%, 1/1/15 (1) (ETM) 9,000 10,059
7.00%, 1/1/20 (1) (ETM) 10,000 11,152
Chicago Skyway Toll Bridge
6.75%, 1/1/14 10,000 10,038
6.75%, 1/1/17 4,000 3,972
Illinois Development Finance Auth.
PCR (Illinois Power Co.)
7.40%, 12/1/24 (1) 10,000 11,001
Illinois Development Finance Auth.
(Regency Park Project)
10.25%, 4/15/19 6,500 4,875
10.625%, 4/15/20 6,000 4,500
Illinois Health Facilities Auth.
Certificate of Beneficial Interest
(Adventist Living Centers)** 770 169
Illinois Health Facilities Auth.
(Northwestern Memorial Hosp.)
6.00%, 8/15/24 30,000 27,882
(United Medical Center)
8.125%, 7/1/01 (Prere.) 3,085 3,616
Illinois Toll Highway Auth.
6.30%, 1/1/11 5,000 5,051
6.375%, 1/1/15 8,150 8,164
Loves Park First Mortgage
(Hoosier Care)
9.75%, 8/1/19 1,570 1,682
-------------
STATE TOTAL 102,161
-------------
- -------------------------------------------------------------------------------------------
INDIANA (4.0%)
Indiana Health Facilities Finance Auth.
(Ancilla System Inc.)
7.375%, 7/1/23 17,900 18,839
Indiana State Office Building Comm.
6.90%, 7/1/11 25,660 27,213
Indianapolis Local Public
Improvement Bond Bank
6.75%, 2/1/14 21,500 23,127
6.75%, 2/1/20 2,500 2,523
-------------
STATE TOTAL 71,702
-------------
- -------------------------------------------------------------------------------------------
KENTUCKY (1.4%)
Kentucky Property & Buildings Comm.
5.75%, 10/1/11 22,000 21,279
5.80%, 9/1/06 3,500 3,529
-------------
STATE TOTAL 24,808
-------------
- -------------------------------------------------------------------------------------------
LOUISIANA (.7%)
West Feliciana Parish PCR
(Gulf States Utilities)
9.00%, 5/1/15 4,000 4,575
10.625%, 5/1/14 3,740 3,936
12.00%, 5/1/14 4,500 4,756
-------------
STATE TOTAL 13,267
-------------
- -------------------------------------------------------------------------------------------
MASSACHUSETTS (9.4%)
Massachusetts GO
5.25%, 2/1/08 35,575 33,200
6.00%, 6/1/11 14,750 14,687
Massachusetts Housing
Finance Agency
6.25%, 11/15/14 12,395 12,219
6.375%, 4/1/21 12,000 11,840
Massachusetts Industrial
Finance Agency
(Massachusetts Recycling Assoc.)
9.00%, 7/1/16 17,000 17,057
(Refusetech Inc. Project)
6.30%, 7/1/05 12,500 12,479
Massachusetts Water Resources Auth.
5.50%, 7/15/22 22,420 19,876
6.50%, 7/15/19 43,700 45,918
-------------
STATE TOTAL 167,276
-------------
- -------------------------------------------------------------------------------------------
MICHIGAN (3.6%)
Michigan Housing Development Auth.
6.30%, 4/1/04 7,500 7,656
Michigan Public Power Agency
5.50%, 1/1/13 46,595 43,047
Michigan Trunk Line
5.50%, 10/1/21 14,500 12,932
-------------
STATE TOTAL 63,635
-------------
- -------------------------------------------------------------------------------------------
MINNESOTA (.3%)
Washington County Housing &
Redevelopment Auth.
(Woodland Park Project)
0.00%, 5/1/20 35,070 1,227
9.75%, 5/1/20 5,000 4,000
-------------
STATE TOTAL 5,227
-------------
- -------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 67
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
MISSISSIPPI (2.3%)
Claiborne County PCR
(Middle South Energy)
9.50%, 4/1/16 $ 5,000 $ 5,446
9.875%, 12/1/14 21,000 24,301
12.50%, 6/15/15 2,000 2,182
Jackson County Port Facilities VRDO
(Chevron)
3.00%, 9/1/94 9,150 9,150
-------------
STATE TOTAL 41,079
-------------
- -------------------------------------------------------------------------------------------
NEVADA (.6%)
Humbolt County PCR
(Idaho Power Co.)
8.30%, 12/1/14 9,100 10,812
-------------
- -------------------------------------------------------------------------------------------
NEW HAMPSHIRE (.3%)
New Hampshire Health &
Higher Education
(Catholic Medical Center)
6.00%, 7/1/17 6,580 5,814
-------------
- -------------------------------------------------------------------------------------------
NEW JERSEY (5.3%)
New Jersey Economic
Development Auth.
5.70%, 7/1/05 (1) 29,860 30,194
New Jersey Sports & Exposition Auth.
6.50%, 3/1/13 15,000 15,866
New Jersey Turnpike Auth.
6.50%, 1/1/16 44,340 46,545
VRDO 2.95%, 1/1/95 (3) 1,400 1,400
-------------
STATE TOTAL 94,005
-------------
- -------------------------------------------------------------------------------------------
NEW YORK (14.2%)
Glencove Industrial Development Auth.
(Regency at Glencove Project)
9.50%, 7/1/12 10,000 10,222
Metropolitan Transit Auth.
5.75%, 7/1/15 16,545 15,261
6.375%, 7/1/20 (1) 25,690 25,974
7.375%, 7/1/08 22,870 25,361
Nassau County GO TOB VRDO
3.00%, 12/15/94 (1) 2,700 2,700
New York City GO
5.75%, 8/15/08 10,000 9,574
6.375%, 8/1/05 18,500 19,039
6.375%, 8/1/06 4,000 4,081
New York City Municipal Water Auth.
5.50%, 6/15/20 25,000 22,203
6.00%, 6/15/09 10,000 10,087
New York Medical Care Facilities
5.25%, 2/15/07 8,700 8,213
5.25%, 2/15/08 11,875 11,060
New York State Dormitory Auth.
(City Univ.)
6.375%, 7/1/08 3,150 3,187
7.50%, 7/1/10 5,500 6,226
(State Univ.) 7.50%, 5/15/13 10,250 11,786
New York State Housing
Finance Agency
5.625%, 3/15/09 10,435 9,827
New York State Local Govt.
Assistance Corp.
6.875%, 4/1/19 13,215 13,900
7.00%, 4/1/10 8,550 9,178
Triborough Bridge & Tunnel Auth.
(Convention Center Project)
7.25%, 1/1/10 13,500 14,916
(General Purpose Rev.)
5.00%, 1/1/17 3,000 2,539
5.50%, 1/1/17 10,000 9,103
6.20%, 1/1/07 (3) 9,000 9,282
-------------
STATE TOTAL 253,719
-------------
- -------------------------------------------------------------------------------------------
NORTH CAROLINA (1.5%)
Haywood County PCR VRDO
(Champion International)
4.96%, 12/1/94* 7,600 7,600
North Carolina Eastern Municipal
Power Agency
5.00%, 1/1/20 (ETM) 10,385 8,920
6.50%, 1/1/18 3,335 3,343
6.50%, 1/1/18 (ETM) 6,665 7,190
-------------
STATE TOTAL 27,053
-------------
- -------------------------------------------------------------------------------------------
OHIO (.7%)
Lucas County Hosp. Facility
(Flower Memorial Hosp.)
8.125%, 12/1/11 8,900 9,755
Ohio Student Loan VRDO
3.10%, 10/1/94 2,200 2,200
-------------
STATE TOTAL 11,955
-------------
- -------------------------------------------------------------------------------------------
OKLAHOMA (.3%)
Jackson County Hospital Auth.
6.75%, 8/1/04 4,700 4,693
-------------
- -------------------------------------------------------------------------------------------
PENNSYLVANIA (14.2%)
Delaware County Industrial
Development Auth. VRDO
(United Parcel Service)
2.90%, 9/1/94 1,900 1,900
</TABLE>
44
<PAGE> 68
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Langhorne Higher Education
& Health Auth.
(Lower Bucks Hosp.)
7.30%, 7/1/12 $ 4,500 $ 4,652
7.35%, 7/1/22 2,500 2,575
Montgomery County Higher
Education & Health Auth.
(Brittany Point Project)
8.50%, 1/1/22 5,000 5,281
Pennsylvania Convention Center Auth.
6.60%, 9/1/09 2,500 2,506
6.70%, 9/1/14 2,500 2,465
6.75%, 9/1/19 6,600 6,498
Pennsylvania COP
5.40%, 7/1/08 (2) 15,000 14,282
5.40%, 7/1/09 (2) 25,000 23,632
Pennsylvania Economic
Development Auth.
(Colver Project)
7.05%, 12/1/10 2,500 2,516
7.125%, 12/1/15 16,000 16,043
Pennsylvania Housing
Finance Agency
7.60%, 7/1/13 10,000 10,580
Pennsylvania Turnpike Comm.
5.50%, 12/1/17 17,735 15,914
Philadelphia Gas Works Rev.
6.375%, 7/1/26 26,715 26,020
Philadelphia GO CP
3.15%, 10/5/94 5,900 5,900
Philadelphia Hosp. & Higher
Education Facilities
(Childrens Seashore Hosp.)
7.00%, 8/15/12 3,540 3,658
7.00%, 8/15/17 1,000 1,032
7.00%, 8/15/22 500 513
(Graduate Hosp.)
7.25%, 7/1/10 15,000 15,283
(Methodist Hosp.)
7.75%, 7/1/23 12,290 11,675
(Roxborough Memorial Hosp.)
7.25%, 3/1/24 10,000 9,478
Philadelphia Municipal Auth.
6.125%, 7/15/08 4,000 3,839
6.25%, 7/15/13 2,785 2,620
6.30%, 7/15/17 1,750 1,635
8.625%, 11/15/16 1,600 1,723
Philadelphia Water
& Sewer Rev.
9.10%, 10/1/95 (Prere.) 6,250 6,684
9.10%, 12/1/95 (Prere.) 9,650 10,391
Philadelphia Water &
Wastewater Rev.
5.50%, 6/15/14 (5) 5,650 5,190
7.00%, 6/15/11 (3) 21,500 23,873
Scranton--Lackawanna Health &
Welfare (Moses Taylor Hosp.)
8.50%, 7/1/20 14,375 14,785
-------------
STATE TOTAL 253,143
-------------
- -------------------------------------------------------------------------------------------
PUERTO RICO (1.3%)
Puerto Rico Government
Development Bank VRDO
2.90%, 9/1/94 13,500 13,500
Puerto Rico Telephone Auth.
5.40%, 1/1/08 9,550 9,275
-------------
STATE TOTAL 22,775
-------------
- -------------------------------------------------------------------------------------------
RHODE ISLAND (.3%)
Convention Center Auth.
5.75%, 5/15/20 (2) 5,000 4,652
-------------
- -------------------------------------------------------------------------------------------
SOUTH CAROLINA (.4%)
Piedmont Municipal Power
Agency Rev.
6.25%, 1/1/21 (3) 6,640 6,725
-------------
- -------------------------------------------------------------------------------------------
TEXAS (6.6%)
Austin Water, Sewer &
Electric Rev.
14.00%, 11/15/01 200 290
Brazos River Auth. PCR
(Texas Utilities)
9.875%, 10/1/17 (3) 20,000 23,127
El Paso Health Facilities Revenue
VRDO
(Providence Memorial Hosp.)
3.25%, 9/1/94 4,300 4,300
Harris County Hosp. Dist.
7.40%, 2/15/10 (2) 17,500 19,964
Harris County Toll Road
6.125%, 8/15/20 5,000 4,958
Houston Public Improvement
7.00%, 3/1/08 22,000 24,339
San Antonio Water Rev.
6.40%, 5/15/07 (3) 5,000 5,319
Texas GO
5.50%, 4/1/20 40,050 35,816
-------------
STATE TOTAL 118,113
-------------
- -------------------------------------------------------------------------------------------
VIRGINIA (.8%)
Alexandria Redevelopment &
Housing Auth.
(Portals West Project)
9.50%, 7/15/20 4,740 3,555
</TABLE>
45
<PAGE> 69
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Chesterfield County Mortgage Rev.
(Brandermill Woods Project)
0.00%, 7/1/17 $ 2,600 $ 86
0.00%, 7/1/18 2,600 78
0.00%, 7/1/19 2,600 70
0.00%, 7/1/20 2,600 63
0.00%, 7/1/21 2,600 56
10.25%, 7/1/15 8,000 4,800
10.625%, 7/1/16 10,400 6,240
-------------
STATE TOTAL 14,948
-------------
- -------------------------------------------------------------------------------------------
WASHINGTON (3.0%)
Port of Seattle GO
5.75%, 5/1/14 15,600 14,605
Snohomish County Public Utility Dist.
5.50%, 1/1/20 (3) 43,710 38,606
-------------
STATE TOTAL 53,211
-------------
- -------------------------------------------------------------------------------------------
WEST VIRGINIA (.5%)
West Virginia State Building Comm.
7.00%, 7/1/13 (1) 8,390 9,228
-------------
- -------------------------------------------------------------------------------------------
WISCONSIN (.6%)
Wisconsin GO
6.25%, 5/1/10 9,460 9,883
-------------
- -------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,778,303) 1,807,030
-------------
- -------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.5%)
- -------------------------------------------------------------------------------------------
Other Assets--Note B 66,183
Liabilities (92,084)
-------------
(25,901)
- --------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------
Applicable to 171,434,801 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,781,129
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.39
===========================================================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AT AUGUST 31, 1994,
NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------
Amount Per
(000) Share
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,734,653 $10.12
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains--Note A 17,098 .10
Unrealized Appreciation of
Investments--Note D 29,378 .17
- -------------------------------------------------------------------------------------------
NET ASSETS $1,781,129 $10.39
- -------------------------------------------------------------------------------------------
</TABLE>
BAN = Bond Anticipation Note
COP = Certificate of Participation
CP = Commercial Paper
GO = General Obligation
IDR = Industrial Development Revenue
PCR = Pollution Control Revenue
RAN = Revenue Anticipation Note
RAW = Revenue Anticipation Warrant
TAN = Tax Anticipation Note
TOB = Tender Option Bond
TRAN = Tax Revenue Anticipation Note
VRDO = Variable Rate Demand Obligation
(ETM) = Escrowed to Maturity
(Prere.) = Prerefunded
(1) MBIA (Municipal Bond Insurance Association)
(2) AMBAC (AMBAC Indemnity Corporation)
(3) FGIC (Financial Guaranty Insurance Company)
(4) FSA (Financial Security Assurance)
(5) CGI (Capital Guaranty Insurance)
(6) BIGI (Bond Investors Guaranty Insurance)
(7) Connie Lee Inc.
* Put Option Obligation.
** Non-Income Producing Security.
46
<PAGE> 70
NOTES TO FINANCIAL STATEMENTS
Vanguard Municipal Bond Fund is registered under the Investment Company Act of
1940 as a diversified open-end investment company and consists of the Money
Market, Short-Term, Limited-Term, Intermediate-Term, Insured Long-Term,
Long-Term, and High-Yield Portfolios. Each Portfolio invests in debt
instruments of municipal issuers; although each Portfolio maintains a
diversified schedule of investments, the issuers' abilities to meet their
obligations may be affected by economic and political developments in a
specific state or region.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of financial
statements.
1. SECURITY VALUATION: Money Market Portfolio: investment securities are
stated at amortized cost which approximates market value. Other
Portfolios: municipal bonds are valued utilizing primarily the latest
bid prices or, if bid prices are not available, on the basis of
valuations based on a matrix system (which considers such factors as
security prices, yields, maturities, and ratings), both as furnished
by an independent pricing service.
2. FEDERAL INCOME TAXES: Each Portfolio of the 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. FUTURES CONTRACTS: Each Portfolio of the Fund, except the Money Market
Portfolio, may utilize futures contracts to a limited extent. The
primary risks associated with the use of futures contracts are
imperfect correlation between the change in market value of the bonds
held by a Portfolio and the prices of futures contracts, and the
possibility of an illiquid market. Futures contracts are valued based
upon their quoted daily settlement prices. Fluctuations in the value
of futures contracts are recorded as unrealized appreciation
(depreciation) until terminated at which time realized gains (losses)
are recognized.
Unrealized appreciation (depreciation) related to open futures
contracts is required to be treated as realized gain (loss) for
Federal income tax purposes.
4. DISTRIBUTIONS: Distributions from net investment income are declared
on a daily basis payable on the first business day of the following
month. Annual distributions from realized gains, if any, are recorded
on the ex-dividend date. Capital gains 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.
5. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized
gains and losses on sales of investment securities are those of
specific securities sold. Premiums and original issue discounts are
amortized and accreted, respectively, to interest income over the
lives of the respective securities.
B. The Vanguard Group, Inc. furnishes at cost investment advisory,
corporate management, administrative, marketing and distribution services. The
costs of such services are allocated to the Fund under methods approved by the
Board of Directors. At August 31, 1994, the Fund had contributed capital
aggregating $2,701,000 to Vanguard (included in Other Assets), representing
13.5% of Vanguard's capitalization. The Fund's officers and directors are also
officers and directors of Vanguard.
The Fund's investment adviser may direct new issue portfolio trades, subject to
obtaining the best price and execution, to brokers who have agreed to rebate or
credit to the Fund a portion of the commissions
22
<PAGE> 71
generated. Such rebates or credits are used solely to reduce the Fund's
administrative expenses. For the year ended August 31, 1994, directed brokerage
arrangements reduced expenses of the Short-Term, Limited-Term,
Intermediate-Term, Insured Long-Term, Long-Term, and High-Yield Portfolios by
$72,000 (.01% of average net assets), $269,000 (.02% of average net assets),
$313,000 (.01% of average net assets), $147,000 (.01% of average net assets),
$188,000 (.02% of average net assets), and $188,000 (.01% of average net
assets), respectively.
C. During the year ended August 31, 1994, purchases and sales of
investment securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(000)
---------------------------
Portfolio Purchases Sales
- -------------------------------------------------------------
<S> <C> <C>
SHORT-TERM $ 593,556 $305,846
LIMITED-TERM 498,767 348,187
INTERMEDIATE-TERM 1,231,342 822,389
INSURED LONG-TERM 307,249 436,646
LONG-TERM 451,328 495,345
HIGH-YIELD 884,618 870,749
- -------------------------------------------------------------
</TABLE>
D. At August 31, 1994, unrealized appreciation (depreciation) of investment
securities for financial reporting and Federal income tax purposes was:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(000)
-------------------------------------------
Net
Unrealized
Appreciated Depreciated Appreciation
Portfolio Securities Securities (Depreciation)
- -----------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM $ 2,601 $ (5,752) $ (3,151)
LIMITED-TERM 10,774 (9,215) 1,559
INTERMEDIATE-TERM 186,313 (29,481) 156,832
INSURED LONG-TERM 87,351 (11,799) 75,552
LONG-TERM 42,367 (5,405) 36,962
HIGH-YIELD 59,266 (30,539) 28,727
- -----------------------------------------------------------------
</TABLE>
At August 31, 1994, the aggregate settlement value and unrealized appreciation
(depreciation) of long positions in Municipal Bond Index futures contracts
(High-Yield Portfolio) and 5-Year U.S. Treasury Note futures contracts
(Limited-Term Portfolio), and short positions in U.S. Treasury Note futures
contracts (Intermediate-Term Portfolio) and U.S. Treasury Bond futures
contracts (Insured Long-Term Portfolio), and the market value of securities
deposited as initial margin for those contracts were:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(000)
-------------------------------------------
Market Value
Aggregate Unrealized of Securities
Settlement Appreciation Deposited as
Portfolio Value (Depreciation) Initial Margin
- -----------------------------------------------------------------
<S> <C> <C> <C>
LIMITED-TERM $ 52,398 $ 425 $ 1,315
INTERMEDIATE-TERM 104,342 (774) 15,148
INSURED LONG-TERM 108,905 826 6,294
HIGH-YIELD 37,058 651 5,279
- -----------------------------------------------------------------
</TABLE>
23
<PAGE> 72
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Vanguard Municipal Bond Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights appearing in the Vanguard Municipal Bond Fund 1994 Annual Report
(the "Annual Report") present fairly, in all material respects, the financial
position of the Money Market, Short-Term, Limited-Term, Intermediate-Term,
Insured Long-Term, Long-Term, and High-Yield Portfolios (constituting the
Vanguard Municipal Bond Fund, hereafter referred to as the "Fund") at August
31, 1994, the results of each of their operations, the changes in each of their
net assets, and the financial highlights for each of the respective periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1994, by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE L.L.P.
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
October 13, 1994
47
<PAGE> 73
F950-8/94
<PAGE> 74
DIRECTORS AND OFFICERS
JOHN C. BOGLE, Chairman and Chief Executive Officer
Chairman and Director of The Vanguard Group, Inc.,
and of each of the investment companies in The
Vanguard Group.
JOHN J. BRENNAN, President
President and Director of The Vanguard Group, Inc., and of each of the
investment companies in The Vanguard Group.
ROBERT E. CAWTHORN, Chairman and Chief Executive Officer of Rhone-Poulenc Rorer
Inc.; Director of Sun Company, Inc.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea
Company, Alco Standard Corp., Raytheon Company, Knight-Ridder, Inc., and
Massachusetts Mutual Life Insurance Co.
BURTON G. MALKIEL, Chemical Bank Chairman's Professor of Economics, Princeton
University; Director of Prudential Insurance Co. of America, Amdahl
Corporation, Baker Fentress & Co., The Jeffrey Co., and Southern New England
Communications Company.
ALFRED M. RANKIN, JR., Chairman, President, and Chief Executive Officer of
NACCO Industries, Inc.; Director of NACCO Industries, The BFGoodrich Company,
Reliance Electric Company, and The Standard Products Company.
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 Company
and NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco Brands, Inc.; retired Vice
Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc.
J. LAWRENCE WILSON, Chairman and Chief Executive Officer of Rohm & Haas
Company; Director of Cummins Engine Company; Trustee of Vanderbilt University
and the Culver Educational Foundation.
OTHER FUND OFFICERS
RICHARD F. HYLAND, Treasurer; Treasurer of The Vanguard Group, Inc., and of
each of the investment companies in The Vanguard Group.
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment companies in The
Vanguard Group.
KAREN E. WEST, Controller; Vice President of The Vanguard Group, Inc.;
Controller of each of the investment companies in The Vanguard Group.
OTHER VANGUARD GROUP OFFICERS
JEREMY G. DUFFIELD VINCENT S. MCCORMACK
Senior Vice President Senior Vice President
Planning & Development Operations
JAMES H. GATELY RALPH K. PACKARD
Senior Vice President Senior Vice President
Institutional Chief Financial Officer
IAN A. MACKINNON
Senior Vice President
Fixed Income Group
24
<PAGE> 75
* We set specific standards for each Fund's investment policies and
principles.
* We adhere to the highest standards of investment quality, consistent with
each Fund's objectives.
* We offer candor in our Fund descriptions (including full disclosure of risk)
to prospective investors, and in our description to shareholders of each
Fund's success (or, sometimes, lack of the same).
These principles make at least as much sense today as they did in 1929, perhaps
even more. For we live in an era when many fund organizations have become
asset-gathering machines, capitalizing on past performance that is unrepeatable
and investment fads that today, as yesterday, will come and go. The new
marketing policy is too often "if investors want it, we'll sell it to them."
But our principle remains "if it makes sound investment sense, we'll offer it,
even if it takes years to attract substantial assets."
FOUNDING CORPORATE VALUES
With the founding of The Vanguard Group in 1974, a new concept of values was
brought to bear on mutual fund management. Unlike other fund organizations,
Vanguard alone is structured to serve only its Funds' shareholders. Vanguard's
corporate structure places not the fund management company, but the fund
shareholders, "at the top" of the organizational chart. Vanguard Fund
shareholders are literally the owners of the firm and are entitled to all of
the benefits that, at other fund firms, accrue to the owners of the management
company.
Because of this unique structure, Vaguard has become best known for its
low costs, which we believe are just as essential a consideration in investing
in mutual funds as risk potential and total return. We call this relationship
between risk, return, and cost the "eternal triangle" of mutual fund investing.
We take special pride in our position as (by far) the lowest-cost provider
of financial services in the world. Under our "no-load" offering structure,
shareholders begin their Vanguard investment program with $1,000 of assets
(not, say, $950) for each $1,000 investment. Then, under our "at-cost"
operating structure, each $1,000 is managed for only about $3 per year; our
competitors may charge three, four, or even five times that amount.
In all, Vanguard has distinguished itself by providing Funds with sound
and durable goals to investors with long-term time horizons, and doing so at
the fairest financial terms available. We believe that the unique Vanguard
structure "promotes a healthy and viable mutual fund complex within which each
Fund can better prosper; enables the Funds to realize substantial savings from
advisory fee reductions; promotes savings from economies of scale; and provides
the Funds with direct and conflict-free control over distribution functions."
We are not alone in this belief. Indeed, the quotation is taken verbatim from
the unanimous decision of the U.S. Securities and Exchange Commission when, in
1981, it approved our application for the structure under which we operate
today.
A CLOSING THOUGHT
We are proud of what Wellington Fund, the other Vanguard Funds, and The
Vanguard Group have come to represent, and we are grateful for the success and
growth with which we have been blessed. We are an industry leader, and, as a
competitor observed a few years ago, we are "the standard by which all fund
organizations are judged."
In battle terms, "the vanguard" is the first wave of troops or ships, and
Vanguard surely is in the first wave of the battle for investment survival. As
we look behind us, however, the "second wave" is not in sight. No fund
organization has followed our lead, leaving ours a lonely course. No matter. We
have an organization that places the interests of our Fund shareholders first.
We have Funds that shall endure the vicissitudes of the future. Come what may,
we intend to "stay the course," and we shall do our very best to continue to
deserve your confidence and loyalty. We hope that you will stay the course with
us.
[ETERNAL TRIANGLE OF MUTUAL FUND INVESTING -- SEE EDGAR APPENDIX]
<PAGE> 76
THE VANGUARD FAMILY OF FUNDS
FIXED INCOME FUNDS
TAXABLE MONEY MARKET FUNDS
Vanguard Admiral Funds
U.S. Treasury Money Market Portfolio
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Money Market Portfolio
Vanguard State Tax-Free Funds
Money Market Portfolios (CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
Insured Longer-Term Portfolios
(CA, FL, NJ, NY, OH, PA)
TAXABLE INCOME FUNDS
Vanguard Admiral Funds
Vanguard Fixed Income Securities Fund
Vanguard Preferred Stock Fund
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible Securities Fund
Vanguard Equity Income Fund
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund
U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard STAR Fund
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International Growth Portfolio
Vanguard/Trustees' Equity Fund
International Portfolio
INDEX FUNDS
Vanguard Index Trust
Total Stock Market Portfolio
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Value Portfolio
Small Capitalization Stock Portfolio
Vanguard International Equity Index Fund
European Portfolio
Pacific Portfolio
Emerging Markets Portfolio
Vanguard Bond Index Fund
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
[VANGUARD GROUP LOGO]
<TABLE>
<S> <C>
Vanguard Financial Center Valley Forge, Pennsylvania 19482
New Account Information: 1-(800) 662-7447 Shareholder Account Services: 1-(800)662-2739
</TABLE>
This Report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus. All Funds in
the Vanguard Family are offered by prospectus only.
Q950-8/94
[PHOTO -- SEE EDGAR APPENDIX]
<PAGE> 77
EDGAR APPENDIX
This appendix describes the components of the printed version of this
report that do not translate into a format acceptable to the EDGAR system.
The cover of the printed version of this report features the Vanguard
ship in the crashing sea.
A small picture of a rear view of the Vanguard ship crashing through
the sea appears at the top of the inside cover of the report.
A running head featuring a sextant appears on pages one through five.
A photograph of John C. Bogle appears at the lower-right of page one.
A line chart comparing short-term and long-term tax-free yields (30-
Year Prime Municipal Bonds and 90-Day MIG 1 Notes) for the fiscal years
1990 to 1994 appears at the upper-left of page two.
A running head featuring a map and telescope appears on pages six
through eight.
Cumulative performance line charts, including average annual total
returns, for the seven portfolios of Vanguard Municipal Bond Fund ("VMBF")
appear on pages nine through twelve. At the top of page nine, a comparison
is made between VMBF-Money Market Portfolio and the Average Tax-Exempt
Money Market Fund for the period August 31, 1984, to August 31, 1994. At
the bottom of page nine, a comparison is made between VMBF-Short-Term
Portfolio and the Average Short-Term Municipal Fund for the period August
31, 1984, to August 31, 1994. Appearing at the top of page ten is a
comparison of VMBF-Limited-Term Portfolio, the Average Short-Term Municipal
Fund and the Lehman 3-Year Municipal Index for the period August 31, 1987
(inception date of the Limited-Term Portfolio), to August 31, 1994. At the
bottom of page ten is the comparison of VMBF-Intermediate-Term Portfolio,
the Average Intermediate-Term Municipal Fund and the Lehman 10-Year
Municipal Index for the period August 31, 1984, to August 31, 1994. At the
top of page eleven, a comparison is made between VMBF-Insured Long-Term
Portfolio, the Average Insured Long-Term Municipal Fund, and the Lehman
Municipal Bond Index for the period September 30, 1984 (inception date of
the Insured Long-Term Portofio), to August 31, 1994. At the bottom of page
eleven, a comparison is made between VMBF-Long-Term Portfolio, the Average
General Municipal Fund and the Lehman Municipal Bond Index for the period
August 31, 1984, to August 31, 1994. Appearing at the top of page twelve
is a comparison of VMBF-High-Yield Portfolio, the Average High-Yield
Municipal Fund, and the Lehman Municipal Bond Index for the period August
31, 1984, to August 31, 1994.
A running head featuring a lantern appears on pages nine through
twelve.
A running head featuring a log book and pen appears on pages thirteen
through twenty-three of the printed report, as well as at the top of the
following pages of the insert to the report: one, seven, thirteen, twenty,
thirty, thirty-eight, forty-two, and forty-seven.
A running head featuring a compass appears on page twenty-four.
At the bottom of the back cover there appears a triangle with the
sides labeled "risk," "cost," and "return."
