<PAGE> 1
[VANGUARD MUNICIPAL BOND FUND LOGO]
ANNUAL REPORT 1995
<PAGE> 2
In this Annual Report, I am delighted to formally introduce you to John J.
Brennan, who, on January 31, 1996, will assume my responsibilities as Chief
Executive Officer of Vanguard Municipal Bond Fund and the other Funds in The
Vanguard Group. Mr. Brennan will continue to serve as President of the Funds,
and I will continue to serve as Chairman of the Board.
As a shareholder of the Fund since its inception and as Chairman of all
the Vanguard Funds, I want to tell you that I am enthusiastic and confident
that Jack Brennan is exactly the right person to succeed me as Chief Executive
Officer. To use yet another Vanguard nautical metaphor, he will be the new
captain. He has the qualities of leadership, integrity, intelligence, and
vision that must continue to be Vanguard's hallmark as we move toward, and then
into, the 21st century.
I know that he has these qualities, because Jack Brennan and I have been
working closely together since he joined Vanguard in 1982. He is a graduate of
Dartmouth College and Harvard Business School. He started as Assistant to the
Chairman and, rising like a rocket, became President in 1989. While, at age 41,
he may seem young, he is in fact older than I was when I became Chief Executive
Officer of Vanguard's predecessor organization in 1967, at the age of 38. Most
important of all, Jack is completely dedicated to the Vanguard character, and
believes in our basic mission: serving solely the shareholder, free of any
conflict of interest. He believes in holding our costs of operation to a
minimum, and in retaining our position as the lowest-cost provider of financial
services in the world. He is a true competitor, who shares Vanguard's
dedication to providing highly competitive returns to our investors relative to
the returns provided by other mutual funds with comparable objectives. He also
believes in reporting our results to shareholders with complete candor. He has
the full support of the Board of Directors and our crew, and is committed to
staying the course we have set for Vanguard. You need have no doubt that the
essential elements that drew you to Vanguard in the first place will remain
intact.
[FIGURE 1]
As for me, I expect to fill a useful, if less demanding, role as Chairman
of the Board. I shall keep a watchful eye over the interests of our
shareholders, our crew, and our investment policies. I shall also speak out on
industry affairs, reminding all who will listen of the primacy of the interests
of mutual fund shareholders. I will be readily available to provide Jack
Brennan with whatever wisdom I may have acquired during my lifetime of
experience in this wonderful industry and in my service as captain of Vanguard
since I founded this unique organization more than two decades ago.
In short, I'll still be around. Thank you for all your confidence in me
in the past and, in advance, for your continued confidence in Vanguard under
Jack Brennan's leadership.
/s/ JOHN C. BOGLE
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:
Happily, our 1995 fiscal year, which ended on August 31, presented a sharp
contrast to fiscal 1994. During the prior fiscal year, rates rose sharply, with
a commensurate drop in bond prices; during our most recent fiscal year,
long-term interest rates fell, driving bond prices upward. The net result of
this sea change was greatly enhanced returns to the shareholders of Vanguard
Municipal Bond Fund. In short, this Annual Report brings good news to our
investors.
The table below presents the twelve-month total return of each Portfolio,
and also shows the two components of this return: capital return and income
return. Income return, as I emphasized in my letter to you a year ago, is
always a positive component and is reasonably predictable from one year to the
next. During fiscal 1995, given the earlier rise in rates, each Portfolio
enjoyed an increase in its income return.
Capital return, on the other hand, can be fairly volatile and
unpredictable from year to year. Normally, volatility increases with the length
of a portfolio's maturity. As you will note, our longer-term Portfolios'
capital returns were in the +2.5% range, while our Money Market Portfolio
maintained a stable net asset value of $1.00 per share throughout the year.(1)
During fiscal 1995, in contrast with 1994, capital returns enhanced our income
returns, as shown in this table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
INVESTMENT RETURNS
---------------------------------------------
Twelve Months Ended August 31, 1995
---------------------------------------------
Portfolio Income Capital Total
- -----------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET +3.6% -- +3.6%
SHORT-TERM +4.0 +0.8% +4.8
LIMITED-TERM +4.7 +1.3 +6.0
- -----------------------------------------------------------------------
INTERMEDIATE-TERM +5.6% +2.2% +7.8%
INSURED LONG-TERM +6.2 +2.7 +8.9
LONG-TERM +6.2 +2.5 +8.7
HIGH-YIELD +6.5 +2.2 +8.7
- -----------------------------------------------------------------------
</TABLE>
- -----------------------
(1) Money market funds do not assure a stable value, and, unlike bank
certificates of deposit, are not insured by the Federal Deposit Insurance
Corporation.
The customary detailed statement of net asset values, income dividends, any
distributions from net realized capital gains, and current yields is presented
on page 7.
THE YEAR IN REVIEW
Above all, fiscal 1995 can be viewed as a year of recovery in the bond market.
However, the major market moves did not conveniently coincide with the dates on
which our 1995 fiscal year began and ended, nor did conditions in the
tax-exempt bond market precisely parallel those in the more closely monitored
(and headlined) U.S. Treasury market.
In reviewing the cycle, the starkest contrast takes us from the low yield
level of the long-term U.S. Treasury bond in October 1993, to the high in
November 1994, to the close of our fiscal year on August 31, 1995. During this
exceptionally volatile period for bonds, the yield on the long-term U.S.
Treasury bond soared from 5.9% to 8.2%, only to retreat and close at 6.7%. The
90-day U.S. Treasury bill yield traced a similar pattern, from a low of 3.0% in
August 1993, to a high of 6.0% in February 1995, and returning finally to 5.5%.
During this interest rate cycle, the municipal bond market's volatility,
while extreme, was more subdued. In the long-maturity sector, for example,
yields on high-grade municipals rose from 5.2% in October 1993 to a high of
7.1%, before retreating to close the fiscal year at 6.0%. Yields on top-grade
tax-exempt notes moved from a low of 3.3% to a high of 5.5% in January 1995,
and then closed the fiscal period at 4.2%.
The initial rise in long-term rates was engendered largely by investors'
fears about a resurgence of inflation. While the Consumer Price Index had been
relatively tame, there were worrisome rises in commodity prices and producer
prices, leading to concerns about an overheating economy. These same signs were
observed by the Federal Reserve Board, which responded by raising the Federal
funds rate (the rate at which banks borrow from one another) an unprecedented
seven times in 13 months (from 3.0% in February 1994 to 6.0% in February 1995).
The Fed's medicine seemed to work: the pace of U.S. economic growth slowed
1
<PAGE> 4
[FIGURE 2]
and inflation concerns dissipated. Reflecting renewed optimism, long rates
turned sharply lower and the Fed felt free to relax its stern monetary policy,
reducing the Federal funds rate by 1/4 of 1% (to 5 3/4%) as the summer of 1995
began.
The chart above should place the events of the past two fiscal years into
a somewhat longer-run perspective. You will note that the first three years
witnessed a steady downtrend in rates, followed by the abrupt two-year cycle
described earlier. Yet, when all is said and done, yields on long-term
municipal bonds remain generally below the levels maintained during fiscal
1991-1992, meaning that the prices of bonds today, despite the "slings and
arrows" of the recent volatile period, are higher than during the early years
of the period.
I should reemphasize that interest rate volatility is translated directly
into bond price volatility as maturity lengthens. During the interest rate
decline that began in fiscal 1991, the prices of long-term tax-exempt bonds
rose +32%, as suggested in the chart above. In the ensuing rate rise, prices
fell by -24%, only to rise by +16% in the rate decline from November 1994,
through August 1995. On the other hand, short-term tax-exempt notes rose +8%,
fell -6%, and then rose +4% at the major inflection points during the period.
The fluctuations of limited- and intermediate-term bonds were laddered between
these two extremes.
THE VANGUARD PORTFOLIOS IN FISCAL 1995
While mutual funds investing in municipal bonds tend to manifest similar
patterns of performance depending upon the average maturity of the bonds in
their portfolios, we aim to give you what we might describe as "higher returns
per year of maturity." That is, our goal is to provide better performance than
that provided by our competitors holding municipal bonds of comparable
maturities. I am pleased to report that we again met this standard during the
past fiscal year, as shown in this table:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
TOTAL RETURN
-----------------------------------------------------
Twelve Months Ended August 31, 1995
-----------------------------------------------------
Average
Vanguard Competitive Vanguard
Portfolio Fund Fund Advantage
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET +3.6% +3.2% +0.4%
SHORT-TERM +4.8 +4.3* +0.5
LIMITED-TERM +6.0 +5.3* +0.7
- ----------------------------------------------------------------------------
INTERMEDIATE-TERM +7.8% +7.1% +0.7%
INSURED LONG-TERM +8.9 +7.5 +1.4
LONG-TERM +8.7 +7.3 +1.4
HIGH-YIELD +8.7 +7.4 +1.3
- ----------------------------------------------------------------------------
</TABLE>
* Adjusted for maturity differences.
As you can see, we garnered an across-the-board advantage--ranging from +0.4%
to +1.4%--for the Vanguard Portfolios during the past favorable year for
municipal bonds. What makes this accomplishment even more interesting is that
we also accomplished a clean sweep (one of very similar dimensions) during the
prior unfavorable year. To say that such consistency is rare in the municipal
bond mutual fund field would be to understate the case considerably. I believe
that our consistent advantage arises from four essential factors. (You may
recall their being cited in my earlier letters to you.)
(1) COST ADVANTAGE. In 1995, we operated Vanguard Municipal Bond Fund at
a net expense ratio (expenses as a percentage of average net assets)
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<PAGE> 5
of 0.21%. Competitive funds are burdened by far higher expense ratios,
averaging 0.97% for their long-term portfolios and 0.68% for their money market
portfolios. We can therefore deliver--other factors held equal--a yield
advantage of from 0.47% to 0.76% (raising a net yield of, say, 5.6% to 6.4%).
(2) UNCOMPROMISING QUALITY. Given our "natural" yield advantage, there is
no temptation to compromise our quality standards by "reaching out on a limb"
for extra yield in riskier bonds. Bonds rated Aaa and Aa generally comprise
about 75% or more of the value of our Portfolios; for the average municipal
bond fund, the figure is 65%. Our caution paid off in fiscal 1995. We had no
direct exposure to bonds of Orange County, California, which--in the year's
most notable event in the municipal bond market--declared bankruptcy after
absorbing a $3 billion loss on a bond portfolio that was laden with exotic and
highly risky derivative securities.
(3) DISCIPLINED INVESTMENT POLICIES. We clearly specify the maturity
ranges and quality standards to which each of the Vanguard Municipal Bond Fund
Portfolios must adhere. "What you see is what you get," and we do not attempt
to enhance returns by making substantial "bets" based on predicting the future
direction and level of interest rates. In the highly efficient markets that
prevail in our fallible world, to do so is simply gambling--and against
unfavorable odds. We have no intention of gambling with the hard-earned dollars
you have entrusted to us.
(4) PROFESSIONAL ADVISORY STAFF. I'd like to express my special pride in
our excellent money managers, analysts, statisticians, and support staff. They
are directly responsible for maintaining our quality standards, positioning
Portfolios within their maturity guidelines, managing sector and market
exposure as well as selecting specific bonds. Ever since the Vanguard Fixed
Income Group assumed responsibility for providing advisory services to Vanguard
Municipal Bond Fund in 1981, it has been a cohesive unit with a high sense of
investment integrity. Our Fixed Income Group now numbers 55 men and women,
comprising one of the largest fixed-income management entities in the entire
municipal bond industry. I call your special attention to our Adviser's review
of the year, which begins on page 9 of this Report.
A TEN-YEAR PERSPECTIVE
These four factors--low cost, high quality, firm discipline, and professional
competence--are "constants" we endeavor to provide to the shareholders of
Vanguard Municipal Bond Fund. That they have led to excellent relative
performance is reflected in our long-term record, as shown in the table below.
It covers the decade ended August 31, 1995, and reflects the results of each
Portfolio relative to its competitive peer group:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------------
Ten Years Ended August 31, 1995
-----------------------------------------------
Vanguard Average Vanguard
Portfolio Fund Competitor Advantage
- ------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET +4.3% +3.9% +0.4%
SHORT-TERM +5.4 +4.8* +0.6
LIMITED-TERM** +6.6 +6.0* +0.6
- ------------------------------------------------------------------------
INTERMEDIATE-TERM +9.1% +7.2% +1.9%
INSURED LONG-TERM +9.6 +8.4 +1.2
LONG-TERM +9.7 +8.7 +1.0
HIGH-YIELD +9.9 +8.5 +1.4
- ------------------------------------------------------------------------
</TABLE>
* Adjusted for maturity differences.
** Period begins August 31, 1987.
You can see that the same "clean sweep" of the competition manifested in fiscal
1994 and fiscal 1995 was again in evidence over the full decade. As you will
note from the ten-year charts presented for each Portfolio on pages 12 to 15,
this was a fine period for municipal bonds of all maturities, with returns
rising as maturities lengthened. These past returns should not be regarded as
an indication of future returns. Indeed, given the lower interest rates that
prevail today as compared to a decade ago, it would be unlikely for future
returns to match these historical results.
I call your particular attention to the ten-year charts because they
highlight the long-run importance of seemingly small enhancements in annual
rates of return. For example, the Vanguard Insured Long-Term Portfolio provided
a return averaging +9.6% annually, compared to +8.4%
3
<PAGE> 6
for other insured municipal bond funds. While this spread may not appear
especially significant, I assure you it is critical in a dollars-and-cents
sense. The value of the assumed initial $10,000 investment in the Vanguard
Portfolio rose to $24,967; for the peer group, the final value was $22,386.
(Both figures assume that all income dividends and capital gains distributions
were reinvested in additional shares.) This difference of $2,581 in Vanguard's
favor is equivalent to more than 25%(!) of the initial investment. Call it
"little things mean a lot," or "the magic of compounding," or what you will, it
is a huge margin. Our margin is even more remarkable given that the return of
our peer group is seriously overstated by the omission of sales "loads" payable
on the purchase or redemption of shares for roughly 65% of all municipal bond
funds. The Vanguard Funds are, of course, no-load funds, available without
commissions.
The charts, I should also note, include the results of each Portfolio's
comparable Lehman Municipal Bond Index. These indexes, of course, exist only in
theory and on paper, and incur no operating expenses or transaction costs. Few
municipal bond mutual funds outpace this tough bogey; we were successful in
doing so in four of the six Portfolios for which a Lehman Index is available.
[FIGURE 3]
A WORD ABOUT TAXES
Talk of change in the Federal income tax structure is in the air. Seemingly
with each passing day, new tax proposals and new tax concepts find their way
into the headlines, and many of them could, if passed by the Congress and
signed by the President, significantly impact the municipal bond market.
I want to be clear that interest rates on tax-exempt bonds are, to state
the obvious, affected by two principal factors: (1) the prevailing level of
interest rates on (taxable) U.S. Treasury and corporate bonds; and (2) the
value accorded to the tax-exemption. A convenient way to consider this latter
factor is to observe the relationship between tax-exempt and taxable bonds of
like maturities, presented for 20-year bonds in the chart to the left. Note
that, a year ago, the tax-exempt rate was equivalent to 83% of the taxable
rate; currently the ratio has risen to 93%. This ratio seems remarkably high,
given that the maximum marginal Federal tax rate is 40%. (The average spread
since the 40% maximum marginal tax rate has been in place is 88%.)
Doubtless, one reason for the lower spread is a concern that the value of
tax-exempt income could be eroded by potential changes in the Federal tax
structure, perhaps with the elimination of income taxes altogether through the
passage of a national sales tax (i.e., a "value added" tax) or a "flat" tax
from which all interest income would be exempt. Either of these scenarios would
place tax-exempt interest income in the same category as taxable income.
(Whether today's spread would be reconciled by an increase in interest rates on
municipal bonds or a reduction in taxable rates is impossible to say.) Of
course, such changes as these would have a very modest effect on short-term
bonds, but a much more significant effect on bonds with longer maturities.
These comments are in the nature of full disclosure on our part. I
personally doubt that
4
<PAGE> 7
such mind-boggling changes in the American tax philosophy--effectively
increasing taxes on lower income earners and reducing taxes on those with high
incomes, with the expectation that capital investment and savings will grow to
the benefit of all--will take place in the foreseeable future. Indeed, there is
an old axiom that says, "never underestimate the ability of the political
system to end up doing nothing." Whatever the case may be, given the narrowing
of the taxable/tax-exempt spread that has already occurred, I would recommend
that our shareholders maintain their present investments in the Fund's
Portfolios. If, however, you believe that the risks are significant, you should
move to a shorter-maturity Portfolio, accepting the reduction in yield that
such a move would entail.
SUMMING UP
When I wrote to you in my Annual Report a year ago, near the low point in the
tax-exempt market, I was optimistic enough to predict that "during fiscal 1995,
the probabilities favor greater stability in long-term tax-exempt rates and
somewhat higher short-term rates," noting that reversals in trend lie in the
very nature of the financial markets.
The ensuing recovery--reflecting the traditional view that the dawn
inevitably follows the darkness--provided a substantive enhancement to the
value of your Vanguard investment, and a clear statement about the value of
"staying the course." Simply put, markets fluctuate, and the best investment
returns are apt to come to those who do not try "market timing," or even
shifting among the differing maturity choices available through the seven
Portfolios of Vanguard Municipal Bond Fund. A year ago, I urged you to stay the
course, and it proved to be a winning strategy. I reiterate that same advice
today.
Sincerely,
/s/ JOHN C. BOGLE
- ----------------------
John C. Bogle
Chairman of the Board
September 11, 1995
Note: Mutual fund data from Lipper Analytical Services, Inc.
5
<PAGE> 8
DIVIDEND POLICY REVIEW
INCOME DIVIDENDS
We want to remind you of the policy we implemented last year to use the actual
number of days in a month (as opposed to using 30 days every month) to
calculate the net income from tax-exempt interest. The only significant
difference arising from this policy is that a lower income dividend will
generally be paid in February, as was the case this past year. Interest
payments for the full year remain identical under both methodologies.
CAPITAL GAINS DISTRIBUTIONS
As you know, it is our policy to limit, to the extent possible, the
distribution of realized capital gains in the Vanguard Municipal Bond Fund
Portfolios. In recent past years, however, through the normal course of
portfolio management activity as well as the calling away of higher coupon
bonds, we realized capital gains, mostly in the range of $.10 to $.22 per
share, which were then distributed to our shareholders. This year, given the
relatively higher interest rates that prevailed during much of the period, very
few gains have been realized thus far. At this time, we anticipate that the
only distribution will be a gain of $.01 per share in the Intermediate-Term
Portfolio. Of course, circumstances may change before the distribution date in
December, and we will keep you informed.
6
<PAGE> 9
PORTFOLIO STATISTICS
<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 1994 1995 Dividends Distributions Return Yield*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORTER-TERM
MONEY MARKET 66 DAYS MIG 1 $ 1.00 $ 1.00 $.036 -- +3.6% 3.54%
SHORT-TERM 454 DAYS Aa1 15.46 15.59 .600 $.001 +4.8 3.83
LIMITED-TERM 3.0 YEARS Aa2 10.57 10.71 .476 -- +6.0 4.21
- ------------------------------------------------------------------------------------------------------------------------------------
LONGER-TERM
INTERMEDIATE-TERM 7.6 YEARS Aa2 $13.02 $13.14 $.686 $.158 +7.8% 4.79%
INSURED LONG-TERM 13.5 YEARS Aaa 11.98 12.12 .684 .173 +8.9 5.33
LONG-TERM 13.7 YEARS Aa2 10.58 10.68 .608 .156 +8.7 5.50
HIGH-YIELD 14.3 YEARS A1 10.39 10.43 .625 .173 +8.7 5.84
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield for Money Market Portfolio is a 7-day yield. All others are 30-day
yields.
7
<PAGE> 10
AVERAGE ANNUAL TOTAL RETURNS
THE AVERAGE ANNUAL TOTAL RETURNS FOR THE PORTFOLIOS (PERIODS ENDED JUNE 30,
1995) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
10 YEARS
---------------------------------------
INCEPTION TOTAL INCOME CAPITAL
PORTFOLIO DATE 1 YEAR 5 YEARS RETURN RETURN RETURN
- --------- ---- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET 6/10/80 +3.47% +3.51% +4.36% +4.36% 0.00%
SHORT-TERM 9/1/77 +4.61 +4.88 +5.39 +5.08 +0.31
LIMITED-TERM 8/31/87 +5.82 +6.31 +6.60* +5.57* +1.03*
INTERMEDIATE-TERM 9/1/77 +7.34 +8.38 +8.83 +6.75 +2.08
INSURED LONG-TERM 9/30/84 +8.85 +8.48 +9.35 +7.15 +2.20
LONG-TERM 9/1/77 +8.88 +8.84 +9.43 +7.23 +2.20
HIGH-YIELD 12/27/78 +8.72 +9.00 +9.70 +7.51 +2.19
</TABLE>
*PERFORMANCE FIGURES SINCE INCEPTION.
ALL OF 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
REPORT FROM THE INVESTMENT ADVISER
REVERSAL OF FORTUNE
What a difference a year makes! The letter we wrote to you last year covered
the twelve months ended August 31, 1994, which, as history would have it,
turned out to comprise the lion's share of a major bear market in bonds. At
that time, we reiterated our advice that shareholders stick to their long-term
investment plans and try to weather the prevailing and painful short-term price
volatility that is an unavoidable part of our capital markets.
Investors who remained true to their long-term objectives were rewarded
with a bull market that all but negated the poor absolute results obtained
during that malodorous fiscal 1994. Interest rates rarely move continuously in
one direction for protracted periods of time. Thus, it should not come as a
great surprise to see the sharp reversal of investor sentiment that, late last
year and into 1995, produced a giddying drop in interest rates and concomitant
rise in bond prices.
ANATOMY OF A BULL MARKET
The first perceptible change in what had for months seemed to be unrelenting
gloom occurred in November 1994. By that time, the Federal Reserve policymakers
had acted on six separate occasions to tighten monetary policy through
"open-market operations" (the purchase or sale of government securities to
institutional investors), which acted to drain monetary reserves from the
banking system and force short-term interest rates higher. The bellwether
Federal funds rate (the rate charged by one bank to lend to another) rose by
+2.5 percentage points, from 3.0% to 5.5%.
The Fed was concerned that 1994's robust economic growth would eventually
lead to price pressures that would threaten the newly found stability in
inflation. Their preemptive activities during 1994 were designed to avert
(rather than remedy) worsening inflation. By November 1994, market participants
had surveyed the extent of the Fed tightening, the reaction of other closely
related interest rates, and the then-available economic growth statistics, and
began to conclude that the tight monetary policy was actually working. It
remains to be seen whether we have witnessed the all-time highs in interest
rates for this particular cycle, but the odds suggest that we have and that
they occurred last November. The following table shows the beginning, high, and
ending level of representative yields for the past fiscal year:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Representative Aaa General Obligation Yields
- -------------------------------------------------------------------------
Maturity Fiscal Fiscal Fiscal
in Years Beginning High Ending
- -------------------------------------------------------------------------
<S> <C> <C> <C>
1 3.7% 4.4% 3.7%
3 4.4 5.2 4.0
5 4.7 5.6 4.3
10 5.3 6.1 4.9
25 6.0 6.9 5.9
- -------------------------------------------------------------------------
</TABLE>
Source: Bloomberg LP.
While the nascent signs of a slowdown were beginning to appear in late 1994,
the Fed continued to maintain close surveillance on economic activity. Indeed,
they tightened the Federal funds rate in February 1995, to ensure that the
appropriate magnitude of slower growth was achieved. As the year progressed, it
became increasingly apparent that the desired slowing was happening. The
so-called interest sensitive sectors (housing, durable goods, etc.) were
uniformly weaker and were dragging down overall economic vitality. Statistics
on employment began to provide corroboration that a slower but sustainable
noninflationary "soft landing" was not only possible, but happening.
During April and May, the taxable bond markets staged one of their
strongest ralliesin recent memory. In just eight weeks, the yield on the
30-year U.S. Treasury obligation dropped -0.8 percentage points raising its
price by more than +10%. And what of municipal notes and bonds? They got "left
in the dust."
ALL IS NOT WELL . . .
It would be impossible for a Treasury bond rally as powerful as this past
spring's to fail to drag other related markets along with it, and municipal
bond and note prices did rise along with every other debt obligation. But the
April-May price appreciation among municipal bonds was at best lackluster. This
market managed only about 30% of the price gains
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<PAGE> 12
enjoyed by its taxable brethren. It's difficult to pin the blame on any
specific incident or incidents, but it is probably no coincidence that
Congressional discussion of tax reform was making front-page news. Various
proposals, notably a flat tax, which would exempt all dividends and interest
income from taxation were viewed as a potential threat to municipal bonds. Such
discussions caused an understandable degree of uncertainty among existing and
prospective holders of municipal bonds. Simply put, investors probably wondered
whether their tax-exempt municipal interest income would remain unique. Until
the proverbial tax reform "dust" settled, many otherwise traditional municipal
bond investors chose (and are choosing) to remain on the sideline.
The remaining months of fiscal 1995 generally have seen little if any
fluctuation in price and yield. Indeed, interest rates are now within one or
two tenths of a percent of the levels of late May. We happen to believe the
failure of municipal bonds to fully participate in the springtime rally creates
an unusual buying opportunity. It is now possible to buy garden-variety
long-term Aaa-rated municipal bonds at yields fully 90% of Treasury bond
yields. Such occurrences are rare and reflect the marketplace's expectation
that tax reform has a material likelihood of passage. If you share our opinion
that tax reform sufficiently radical to threaten municipal bonds is a low
likelihood, you are now enjoying unjustifiably attractive yields. Regardless,
only time will tell, and, as is the case with so many economic "experiments,"
the actions of the observers and participants in the "trial" will have a great
affect on the outcome.
YOUR PORTFOLIOS
The seven Portfolios that comprise the Vanguard Municipal Bond Fund produced
attractive total returns over the past twelve months. To differing degrees,
they all enjoyed the market's "rising tide" that lifts all ships. Both the
Money Market Portfolio and the Short-Term Portfolio benefited from the Fed's
aggressive tightening of monetary policy. The resultant upward pressure on
short-term interest rates translated directly into higher dividends.
In the case of the other five Portfolios, the apparent success of the
tighter monetary policy produced moderate but noteworthy price appreciation to
complement generous dividend yields. If the astute investor feels a bit
shortchanged by the underwhelming response of municipal prices per share, he or
she can seek answers in Washington D.C., where tax reform discussions
metaphorically blighted the springtime landscape. Details of each individual
Portfolio's total returns are given in the Chairman's letter.
We also take some satisfaction in providing good relative returns versus
our competitors. Obviously, our expense ratio advantage has provided a powerful
tailwind, but we also have been fortunate in pursuing relative value and
duration management strategies that have been rewarded in the marketplace. Also
noteworthy are the efforts of our analytical staff which often go unsung.
Working behind and between the lines, they have helped us avoid the "colossal
blunder" that appears--if infrequently--with glaring visibility in some of our
competitors' funds. May it be ever so.
ENDURING THEMES
We began managing the Vanguard Municipal Bond Fund Portfolios fourteen years
ago (or, for the newer Portfolios, since their inception). During this time, we
have observed a few value relationships that year-after-year seem to provide us
with decent, if not good, investment opportunities. In most instances, these
relationships cut across particular markets, so it avails us to exploit them in
all of the Portfolios we manage (subject to specific Portfolio suitability). Of
course, we have discussed these enduring themes in previous letters.
Nevertheless, as long as we still rely on them, it remains appropriate to
reiterate them:
QUALITY. Maintaining the high credit quality of our Portfolios is our primary
focus. Secondarily, since the bond market collectively requires differing
amounts of yield compensation at different times to assume credit risk (the
risk that a security might default or be downgraded), we may modify our
standards. During recessions, the market requires a lot of compensation to hold
a less-than gilt-edged bond, expressed as a much higher yield than
equivalent-maturity Aaa-rated bonds. During
10
<PAGE> 13
economic expansions, the market requires little extra yield. Within the quality
universe composed of "investment-grade" bonds (Aaa, Aa, A, and Baa), we have
found it fruitful to apply value analyses to use the ebbs and flows of credit
fears to earn some extra return at the margin. Similarly, our analysts are
looking for those situations when the market ought to be concerned, but is not.
Therein lie ideal sale candidates. We believe that, portfolio to portfolio, our
quality is peerless, and a summary of the ratings of our Portfolios is
presented on page 7.
CALL PROTECTION. For reasons not entirely clear to us, the market is
persistent in its failure to appropriately value call protection. Even after
one of the most dramatic and epochal periods of early bond redemptions
(1992-1995), it is still possible to find and buy bonds that cannot be called
away prematurely at prices that reflect negligible sacrifices in yield compared
to their callable counterparts. We'll forget trying to explain this anomaly,
and just go right on along building as much call protection as we can.
SECTORS. The municipal bond market is "balkanized" into thousands if not
millions of separate issues and maturities, but the number of issuing sectors
can be enumerated on our fingers and toes. Each sector is, in a technical
sense, subservient to the forces of new-issue supply and demand. Simply put,
sectors become rich (or cheap) when there exists in the marketplace a temporary
scarcity (or surfeit) of bonds issued from within the relevant sector.
Portfolio managers move quickly to capture the restoration of these value
relationships, once the supply/demand distortions are removed.
CONSERVATISM. We hold to the fundamental belief that shareholders have a right
to expect us to manage our Portfolios consistent with the underlying
risk/return profile disclosed most particularly in the fund prospectus. This
means that, regardless of what strategies we employ or whether they are
successful, shareholders who invest, for example, in a short-term portfolio
will get performance results consistent with what that segment of the market
produced. We believe one of the worst disservices that a manager can inflict on
shareholders is to undertake investments that could produce returns materially
different from what one would expect, given the relevant market segment.
Consequently, each Vanguard Portfolio adheres to well-defined maturity
guidelines and avoids exotic securities or leverage.
Over time, the combination of the above factors, in addition to the
advantage of low cost, have helped to establish Vanguard as a consistently
successful provider of tax-exempt portfolios to our shareholders. We hope to
extend that streak over the coming years.
Sincerely,
Ian A. MacKinnon, Senior Vice President
Jerome J. Jacobs, Vice President
Pamela E. Tynan, Vice President
David E. Hamlin, Assistant Vice President
Christopher M. Ryon, Assistant Vice President
Vanguard Fixed Income Group
September 14, 1995
11
<PAGE> 14
CUMULATIVE PERFORMANCE
[FIGURE 4]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- -----------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO +3.63% +3.44% +4.34%
AVERAGE TAX-EXEMPT
MONEY MARKET FUND +3.19 +3.01 +3.94
</TABLE>
Note: Past performance is not predictive of future performance.
[FIGURE 5]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- -----------------------------------------------------------
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM PORTFOLIO +4.83% +4.86% +5.43%
AVERAGE SHORT-TERM
MUNICIPAL FUND* +4.31 +4.79 +4.83
LEHMAN INDEX +6.66 +6.73 +6.67
</TABLE>
*Adjusted for maturity differences.
Note: Past performance is not predictive of future performance.
12
<PAGE> 15
[FIGURE 6]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- --------------------------------------------------------------------------
1 Year 5 Years Since Inception*
- --------------------------------------------------------------------------
<S> <C> <C> <C>
LIMITED-TERM PORTFOLIO +5.99% +6.35% +6.60%
AVERAGE LIMITED-TERM
MUNICIPAL FUND +5.33 +6.02 +6.01
LEHMAN INDEX +6.66 +6.73 +6.38
</TABLE>
*Inception: August 31, 1987.
Note: Past performance is not predictive of future performance.
[FIGURE 7]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- ----------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------
<S> <C> <C> <C>
INTERMEDIATE-TERM PORTFOLIO +7.82% +8.85% +9.11%
AVERAGE INTERMEDIATE-TERM
MUNICIPAL FUND +7.09 +7.51 +7.24
LEHMAN INDEX +9.60 +9.17 +9.58
</TABLE>
Note: Past performance is not predictive of future performance.
13
<PAGE> 16
CUMULATIVE PERFORMANCE (continued)
[FIGURE 8]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- -------------------------------------------------------------------
1 Year 5 Years 10 Years
- -------------------------------------------------------------------
<S> <C> <C> <C>
INSURED LONG-TERM PORTFOLIO +8.88% +9.20% +9.58%
AVERAGE INSURED LONG-TERM
MUNICIPAL FUND +7.48 +7.98 +8.39
LEHMAN INDEX +8.87 +8.75 +9.47
</TABLE>
Note: Past performance is not predictive of future performance.
[FIGURE 9]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- ----------------------------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM PORTFOLIO +8.74% +9.55% +9.70%
AVERAGE GENERAL
MUNICIPAL FUND +7.34 +8.13 +8.67
LEHMAN INDEX +8.87 +8.75 +9.47
</TABLE>
Note: Past performance is not predictive of future performance.
14
<PAGE> 17
[FIGURE 10]
<TABLE>
<CAPTION>
Average Annual Total Returns--Periods Ended August 31, 1995
- ------------------------------------------------------------------
1 Year 5 Years 10 Years
- ------------------------------------------------------------------
<S> <C> <C> <C>
HIGH-YIELD PORTFOLIO +8.69% +9.64% +9.90%
AVERAGE HIGH-YIELD
MUNICIPAL FUND +7.41 +7.85 +8.54
LEHMAN INDEX +8.87 +8.75 +9.47
</TABLE>
Note: Past performance is not predictive of future performance.
15
<PAGE> 18
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MONEY MARKET SHORT-TERM LIMITED-TERM
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
August 31, 1995 August 31, 1995 August 31, 1995
(000) (000) (000)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . $158,291 $60,460 $79,551
- ----------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . 158,291 60,460 79,551
- ----------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . 553 195 223
Management and Administrative . . . . 6,628 2,319 2,703
Marketing and Distribution . . . . . . 1,236 441 494
Taxes (other than income taxes) . . . . . 342 124 136
Custodian's Fees . . . . . . . . . . . . 133 42 48
Auditing Fees . . . . . . . . . . . . . . 10 7 8
Shareholders' Reports . . . . . . . . . . 108 53 69
Annual Meeting and Proxy Costs . . . . . 9 6 12
Directors' Fees and Expenses . . . . . . 14 5 6
- ----------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . 9,033 3,192 3,699
Expenses Paid Indirectly--Note C . (133) (60) (133)
- ----------------------------------------------------------------------------------------------
Net Expenses . . . . . . . . . . . 8,900 3,132 3,566
- ----------------------------------------------------------------------------------------------
Net Investment Income . . . . . 149,391 57,328 75,985
- ----------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . (150) (212) (6,380)
Futures Contracts . . . . . . . . . . . . -- -- 3,002
- ----------------------------------------------------------------------------------------------
Realized Net Gain (Loss) . . . . (150) (212) (3,378)
- ----------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)
Investment Securities . . . . . . . . . . -- 11,658 21,571
Futures Contracts . . . . . . . . . . . . -- -- (425)
- ----------------------------------------------------------------------------------------------
Change in Unrealized . . . . .
Appreciation (Depreciation) . -- 11,658 21,146
- ----------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations . . $149,241 $68,774 $93,753
==============================================================================================
</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.
16
<PAGE> 19
\
<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, 1995 August 31, 1995 August 31, 1995 August 31, 1995
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . $279,268 $112,250 $60,434 $110,054
- ---------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . 279,268 112,250 60,434 110,054
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . 646 242 128 223
Management and Administrative . . . . 8,438 3,226 1,772 2,926
Marketing and Distribution . . . . . . 1,144 348 192 359
Taxes (other than income taxes) . . . . . 408 151 84 145
Custodian's Fees . . . . . . . . . . . . 130 53 29 49
Auditing Fees . . . . . . . . . . . . . . 11 8 7 8
Shareholders' Reports . . . . . . . . . . 202 74 34 77
Annual Meeting and Proxy Costs . . . . . 31 6 2 7
Directors' Fees and Expenses . . . . . . 17 6 4 6
- --------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . 11,027 4,114 2,252 3,800
Expenses Paid Indirectly--Note C . (370) (129) (139) (125)
- ---------------------------------------------------------------------------------------------------------------
Net Expenses . . . . . . . . . . . 10,657 3,985 2,113 3,675
- --------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . 268,611 108,265 58,321 106,379
- --------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . . 2,171 (2,470) 839 (7,802)
Futures Contracts . . . . . . . . . . . . 1,577 2,028 (47) (5,974)
- ---------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) . . . . 3,748 (442) 792 (13,776)
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)
Investment Securities . . . . . . . . . . 100,814 49,962 25,241 47,410
Futures Contracts . . . . . . . . . . . . 3,624 (3,270) (21) (903)
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized
Appreciation (Depreciation) . 104,438 46,692 25,220 46,507
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations . . $376,797 $154,515 $84,333 $139,110
===============================================================================================================
</TABLE>
17
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET SHORT-TERM
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended YEAR ENDED Year Ended
AUGUST 31, 1995 August 31, 1994 AUGUST 31, 1995 August 31, 1994
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . $ 149,391 $ 98,343 $ 57,328 $ 50,920
Realized Net Gain (Loss) . . . . . . . . . . (150) (378) (212) 153
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . . . -- -- 11,658 (14,693)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . 149,241 97,965 68,774 36,380
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . (149,391) (98,343) (57,328) (50,920)
Realized Net Gain . . . . . . . . . . . . . -- -- (97) (1,836)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . (149,391) (98,343) (57,425) (52,756)
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . 3,857,068 4,182,559 511,853 796,836
--In Lieu of Cash Distributions . . 137,361 89,767 47,474 43,222
--Exchange . . . . . . . . . . . . 1,258,511 1,748,976 240,638 413,024
Redeemed --Regular . . . . . . . . . . . . . (3,841,577) (4,044,714) (551,088) (628,207)
--Exchange . . . . . . . . . . . . (1,409,143) (1,350,414) (378,778) (376,843)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions . . . . . . . . 2,220 626,174 (129,901) 248,032
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . . . 2,070 625,796 (118,552) 231,656
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year . . . . . . . . . . . . . 4,163,625 3,537,829 1,560,561 1,328,905
- ----------------------------------------------------------------------------------------------------------------------
End of Year . . . . . . . . . . . . . . . . $ 4,165,695 $ 4,163,625 $1,442,009 $1,560,561
======================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . $.036 $.024 $.600 $.534
Realized Net Gain . . . . . . . . . . . -- -- $.001 $.020
-------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . 5,115,579 5,931,535 48,700 77,761
Issued in Lieu of Cash Distributions . . 137,361 89,767 3,070 2,781
Redeemed . . . . . . . . . . . . . . . (5,250,720) (5,395,128) (60,206) (64,634)
- ----------------------------------------------------------------------------------------------------------------------
2,220 626,174 (8,436) 15,908
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
LIMITED-TERM INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended YEAR ENDED Year Ended
AUGUST 31, 1995 August 31, 1994 AUGUST 31, 1995 August 31, 1994
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . $ 75,985 $ 76,087 $ 268,611 $ 262,995
Realized Net Gain (Loss) . . . . . . . . . . (3,378) (1,555) 3,748 51,878
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . . . 21,146 (35,516) 104,438 (200,274)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . 93,753 39,016 376,797 114,599
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . (75,985) (76,087) (268,611) (262,995)
Realized Net Gain . . . . . . . . . . . . . -- (3,611) (57,697) (29,272)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . (75,985) (79,698) (326,308) (292,267)
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . 407,939 705,088 905,510 1,111,290
--In Lieu of Cash Distributions . . 59,862 63,053 247,714 223,421
--Exchange . . . . . . . . . . . . 251,187 403,840 632,641 661,185
Redeemed --Regular . . . . . . . . . . . . . (407,423) (466,315) (674,489) (753,226)
--Exchange . . . . . . . . . . . . (475,094) (475,703) (781,216) (942,767)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions . . . . . . . . . (163,529) 229,963 330,160 299,903
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . . . . (145,761) 189,281 380,649 122,235
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year . . . . . . . . . . . . . 1,814,320 1,625,039 5,067,612 4,945,377
- ----------------------------------------------------------------------------------------------------------------------
End of Year . . . . . . . . . . . . . . . . $1,668,559 $1,814,320 $5,448,261 $5,067,612
======================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . $.476 $.454 $.686 $.683
Realized Net Gain . . . . . . . . . . -- $.022 $.158 $.076
- ----------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . 62,583 103,446 120,215 133,187
Issued in Lieu of Cash Distributions . 5,677 5,898 19,472 16,855
Redeemed . . . . . . . . . . . . . . . (84,035) (88,203) (114,445) (128,504)
- ----------------------------------------------------------------------------------------------------------------------
(15,775) 21,141 25,242 21,538
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
STATEMENT OF CHANGES IN NET ASSETS (continued)
<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,
1995 1994 1995 1994 1995 1994
(000) (000) (000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . $ 108,265 $ 115,496 $ 58,321 $ 58,507 $ 106,379 $ 107,526
Realized Net Gain (Loss) . . . . . . (442) 30,179 792 19,366 (13,776) 39,887
Change in Unrealized
Appreciation (Depreciation) . . . 46,692 (153,870) 25,220 (76,503) 46,507 (139,457)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations . . . . . . 154,515 (8,195) 84,333 1,370 139,110 7,956
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . (108,265) (115,496) (58,321) (58,507) (106,379) (107,526)
Realized Net Gain . . . . . . . . . (26,395) (29,332) (14,264) (19,678) (27,681) (36,102)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . (134,660) (144,828) (72,585) (78,185) (134,060) (143,628)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . 161,563 213,973 130,852 123,617 243,271 288,307
--In Lieu of Cash
Distributions . . . . . 89,251 98,489 51,136 56,630 95,233 104,549
--Exchange . . . . . . . . 152,745 135,738 162,862 129,162 298,072 257,090
Redeemed --Regular . . . . . . . . . (196,195) (223,877) (111,827) (130,205) (226,298) (263,156)
--Exchange . . . . . . . . (229,928) (327,530) (191,589) (232,028) (331,292) (400,749)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions . . . . . . . (22,564) (103,207) 41,434 (52,824) 78,986 (13,959)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . (2,709) (256,230) 53,182 (129,639) 84,036 (149,631)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year . . . . . . . . . 1,938,017 2,194,247 1,000,938 1,130,577 1,781,129 1,930,760
- ------------------------------------------------------------------------------------------------------------------------------------
End of Year . . . . . . . . . . . . $1,935,308 $1,938,017 $1,054,120 $1,000,938 $1,865,165 $1,781,129
====================================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . $.684 $.699 $.608 $.609 $.625 $.626
Realized Net Gain . . . . . . $.173 $.176 $.156 $.205 $.173 $.214
- ------------------------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . 26,844 28,101 28,855 23,106 53,728 50,641
Issued in Lieu of Cash
Distributions . . . . . . . 7,678 7,892 4,999 5,128 9,523 9,687
Redeemed . . . . . . . . . . . (36,608) (44,443) (29,758) (33,017) (55,774) (61,773)
- ------------------------------------------------------------------------------------------------------------------------------------
(2,086) (8,450) 4,096 (4,783) 7,477 (1,445)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<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 . . . . . . . . . . . . .036 .024 .025 .035 .050
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . -- -- -- -- --
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . . .036 .024 .025 .035 .050
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.036) (.024) (.025) (.035) (.050)
Distributions from Realized Capital Gains . . . -- -- -- -- --
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.036) (.024) (.025) (.035) (.050)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +3.63% +2.43% +2.51% +3.54% +5.08%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $4,166 $4,164 $3,538 $3,165 $2,709
Ratio of Expenses to Average Net Assets . . . . . 22%+ .20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 3.56% 2.41% 2.48% 3.45% 4.94%
Portfolio Turnover Rate . . . . . . . . . . . . . N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT-TERM PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . $15.46 $15.63 $15.64 $15.53 $15.35
------- ------- ------- ------- -------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .600 .534 .609 .720 .861
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . .131 (.150) .033 .171 .180
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . .731 .384 .642 .891 1.041
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.600) (.534) (.609) (.720) (.861)
Distributions from Realized Capital Gains . . . (.001) (.020) (.043) (.061) --
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.601) (.554) (.652) (.781) (.861)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $15.59 $15.46 $15.63 $15.64 $15.53
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +4.83% +2.49% +4.18% +5.87% +6.96%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $1,442 $1,561 $1,329 $1,061 $841
Ratio of Expenses to Average Net Assets . . . . . .22%+ +.20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 3.88% 3.42% 3.88% 4.58% 5.55%
Portfolio Turnover Rate . . . . . . . . . . . . . 32% 27% 46% 60% 104%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Effective in fiscal 1995, does not include reductions from directed brokerage
and custodian fee offset arrangements. The 1995 Ratio of Expenses to Average
Net Assets is .21% after including these reductions. See Note C.
21
<PAGE> 24
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
LIMITED-TERM PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . $10.57 $10.80 $10.64 $10.43 $10.17
------- ------- ------- ------- -------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .476 .454 .485 .541 .614
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . .140 (.208) .209 .271 .265
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . .616 .246 .694 .812 .879
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.476) (.454) (.485) (.541) (.614)
Distributions from Realized Capital Gains . . . -- (.022) (.049) (.061) (.005)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.476) (.476) (.534) (.602) (.619)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $10.71 $10.57 $10.80 $10.64 $10.43
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +5.99% +2.31% +6.68% +8.01% +8.88%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $1,669 $1,814 $1,625 $873 $420
Ratio of Expenses to Average Net Assets . . . . . .22%+ .20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 4.51% 4.24% 4.50% 5.08% 5.91%
Portfolio Turnover Rate . . . . . . . . . . . . 35% 21% 20% 37% 57%
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE-TERM PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . $13.02 $13.45 $12.85 $12.41 $11.90
------- ------- ------- ------- -------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .686 .683 .710 .747 .791
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . .278 (.354) .721 .516 .605
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . .964 .329 1.431 1.263 1.396
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.686) (.683) (.710) (.747) (.791)
Distributions from Realized Capital Gains . . . (.158) (.076) (.121) (.076) (.095)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.844) (.759) (.831) (.823) (.886)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $13.14 $13.02 $13.45 $12.85 $12.41
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +7.82% +2.49% +11.54% +10.52% +12.15%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $5,448 $5,068 $4,945 $3,102 $2,006
Ratio of Expenses to Average Net Assets . . . . . .22%+ .20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 5.35% 5.15% 5.41% 5.91% 6.49%
Portfolio Turnover Rate . . . . . . . . . . . . . 12% 18% 15% 32% 27%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Effective in fiscal 1995, does not include reductions from directed brokerage
and custodian fee offset arrangements. The 1995 Ratio of Expenses to Average
Net Assets is .21% after including these reductions. See Note C.
22
<PAGE> 25
<TABLE>
<CAPTION>
INSURED LONG-TERM PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.98 $12.89 $12.28 $11.74 $11.25
------- ------- ------- ------- -------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .684 .699 .718 .768 .775
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . .313 (.734) .813 .616 .615
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . . .997 (.035) 1.531 1.384 1.390
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.684) (.699) (.718) (.768) (.775)
Distributions from Realized Capital Gains . . . (.173) (.176) (.203) (.076) (.125)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . . (.857) (.875) (.921) (.844) (.900)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $12.12 $11.98 $12.89 $12.28 $11.74
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +8.88% -0.32% +13.06% +12.22% +12.79%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $1,935 $1,938 $2,194 $1,947 $1,551
Ratio of Expenses to Average Net Assets . . . . . .22%+ .20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 5.82% 5.62% 5.77% 6.34% 6.77%
Portfolio Turnover Rate . . . . . . . . . . . . . 7% 16% 30% 42% 33%
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LONG-TERM PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . $10.58 $11.38 $10.95 $10.58 $10.13
------- ------- ------- ------- -------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .608 .609 .640 .711 .722
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . .256 (.595) .715 .561 .626
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . . .864 .014 1.355 1.272 1.348
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.608) (.609) (.640) (.711) (.722)
Distributions from Realized Capital Gains . . . (.156) (.205) (.285) (.191) (.176)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . . (.764) (.814) (.925) (.902) (.898)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $10.68 $10.58 $11.38 $10.95 $10.58
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +8.74% +0.08% +13.09% +12.60% +13.86%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $1,054 $1,001 $1,131 $962 $798
Ratio of Expenses to Average Net Assets . . . . . .23%+ .20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 5.87% 5.56% 5.81% 6.52% 7.09%
Portfolio Turnover Rate . . . . . . . . . . . . . 35% 45% 36% 63% 62%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Effective in fiscal 1995, does not include reductions from directed brokerage
and custodian fee offset arrangements. The 1995 Ratio of Expenses to Average
Net Assets is .21% after including these reductions. See Note C.
23
<PAGE> 26
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------------
For a Share Outstanding Throughout Each Year 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . $10.39 $11.17 $10.76 $10.32 $9.90
------- ------- ------- ------- -------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .625 .626 .669 .723 .732
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . .213 (.566) .664 .546 .560
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . . .838 .060 1.333 1.269 1.292
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.625) (.626) (.669) (.723) (.732)
Distributions from Realized Capital Gains . . . (.173) (.214) (.254) (.106) (.140)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . . (.798) (.840) (.923) (.829) (.872)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $10.43 $10.39 $11.17 $10.76 $10.32
================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +8.69% +0.52% +13.08% +12.81% +13.66%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (Millions) . . . . . . . $1,865 $1,781 $1,931 $1,505 $1,215
Ratio of Expenses to Average Net Assets . . . . . .22%+ +.20% .20% .23% .25%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 6.15% 5.83% 6.15% 6.83% 7.34%
Portfolio Turnover Rate . . . . . . . . . . . . . 33% 50% 34% 64% 58%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Effective in fiscal 1995, does not include reductions from directed brokerage
and custodian fee offset arrangements. The 1995 Ratio of Expenses to Average
Net Assets is .21% after including these reductions. See Note C.
24
<PAGE> 27
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, utilizes Municipal Bond Index, U.S. Treasury Bond, and U.S.
Treasury Note futures contracts to a limited extent, with the objectives
of enhancing returns, managing interest rate risk, maintaining liquidity,
diversifying credit risk and minimizing transaction costs. The Portfolios
may purchase futures contracts instead of municipal bonds when futures
contracts are believed to be priced more attractively than municipal
bonds. The Portfolios may also seek to take advantage of price
differences among bond market sectors by simultaneously buying futures
(or bonds) of one market sector and selling futures (or bonds) of another
sector. Futures contracts may also be used to simulate a fully invested
position in the underlying bonds while maintaining a cash balance for
liquidity.
The primary risks associated with the use of futures contracts are
imperfect correlation between changes in market values of bonds held by
the Portfolios 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 values of futures
contracts are recorded as unrealized appreciation (depreciation) until
contract termination, 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.
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, 1995, the Fund had contributed capital
aggregating $2,231,000 to Vanguard (included in
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (continued)
Other Assets), representing 11.1% of Vanguard's capitalization. The Fund's
officers and directors are also officers and directors of Vanguard.
C. The Fund's investment adviser may direct new issue portfolio purchases,
subject to obtaining the best price and execution, to underwriters who have
agreed to rebate or credit to the Fund a portion of the underwriting fees
generated. Such rebates or credits are used solely to reduce the Fund's
administrative expenses. The Fund's custodian bank has also agreed to reduce
its fees when the Fund maintains cash on deposit in the non-interest bearing
custody account. For the year ended August 31, 1995, directed brokerage and
custodian fee offset arrangements reduced expenses by:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
EXPENSE REDUCTION
(000) Total Expense
----------------------- Reduction as a
Directed Custodian's Percent of Average
Portfolio Brokerage Fees Net Assets
- ------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET -- $133 .01%
SHORT-TERM $ 18 42 .01
LIMITED-TERM 85 48 .01
INTERMEDIATE-TERM 240 130 .01
INSURED LONG-TERM 76 53 .01
LONG-TERM 110 29 .02
HIGH-YIELD 76 49 .01
- ------------------------------------------------------------------------
</TABLE>
D. During the year ended August 31, 1995, purchases and sales of
investment securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- --------------------------------------------------
(000)
---------------------------
PORTFOLIO PURCHASES SALES
- --------------------------------------------------
<S> <C> <C>
SHORT-TERM $375,848 $539,701
LIMITED-TERM 559,413 547,339
INTERMEDIATE-TERM 610,596 535,950
INSURED LONG-TERM 119,317 244,384
LONG-TERM 319,471 331,787
HIGH-YIELD 519,486 544,290
- --------------------------------------------------
</TABLE>
E. 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. For Federal income tax
purposes, the Intermediate-Term Portfolio had capital gains of $3,673,000
available for distribution at August 31, 1995. The aggregate capital losses
available to offset future capital gains were:
<TABLE>
<CAPTION>
- ---------------------------------------------------
Expiration
Fiscal Year(s) Amount
Portfolio Ending August 31, (000)
- ---------------------------------------------------
<S> <C> <C>
MONEY MARKET 2001-2004 $ 694
SHORT-TERM 2003-2004 212
LIMITED-TERM 2003-2004 5,251
INSURED LONG-TERM 2003 1,482
LONG-TERM 2003 2,484
HIGH-YIELD 2003 13,411
- --------------------------------------------------
</TABLE>
26
<PAGE> 29
F. At August 31, 1995, net unrealized appreciation of investment
securities for financial reporting and Federal income tax purposes was:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(000)
------------------------------------------
Net
Appreciated Depreciated Unrealized
Portfolio Securities Securities Appreciation
- -----------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM $ 8,925 $ (418) $ 8,507
LIMITED-TERM 23,918 (788) 23,130
INTERMEDIATE-TERM 260,611 (2,965) 257,646
INSURED LONG-TERM 126,938 (1,424) 125,514
LONG-TERM 62,376 (173) 62,203
HIGH-YIELD 89,910 (13,773) 76,137
- -----------------------------------------------------------------
</TABLE>
At August 31, 1995, the aggregate settlement value of open futures contracts
expiring in September 1995, and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(000)
----------------------------
Aggregate Unrealized
Settlement Appreciation
Portfolio/Futures Contracts Value (Depreciation)
- ------------------------------------------------------------------
<S> <C> <C>
INTERMEDIATE-TERM
LONG MUNICIPAL BOND INDEX $275,222 $ 610
SHORT U.S. TREASURY BOND 272,141 2,240
INSURED LONG-TERM
LONG MUNICIPAL BOND INDEX 21,171 264
SHORT U.S. TREASURY BOND 95,278 (2,708)
LONG-TERM
LONG MUNICIPAL BOND INDEX 18,997 89
SHORT U.S. TREASURY BOND 73,552 (110)
HIGH-YIELD
LONG MUNICIPAL BOND INDEX 27,694 (115)
SHORT U.S. TREASURY BOND 131,261 (137)
- -----------------------------------------------------------------
</TABLE>
The market values of securities deposited as initial margin for open futures
contracts by the Intermediate-Term, Insured Long-Term, Long-Term, and
High-Yield Portfolios were $7,245,000, $6,506,000, $2,362,000, and $5,303,000,
respectively.
27
<PAGE> 30
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 of Rhone-Poulenc Rorer Inc.; Director of Sun
Company, Inc.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea Co.,
Alco Standard Corp., Raytheon Co., 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 Corp.,
Baker Fentress & Co., The Jeffrey Co., and Southern New England Communications
Co.
ALFRED M. RANKIN, JR., Chairman, President, and Chief Executive Officer of
NACCO Industries, Inc.; Director of NACCO Industries, The BFGoodrich Co., and
The Standard Products Co.
JOHN C. SAWHILL, President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co. and
President of New York University; Director of Pacific Gas and Electric Co. and
NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco Brands, Inc.; retired Vice
Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc. and Kmart
Corp.
J. LAWRENCE WILSON, Chairman and Chief Executive Officer of Rohm & Haas Co.;
Director of Cummins Engine Co.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
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.
RICHARD F. HYLAND, Treasurer; Treasurer of The Vanguard Group, Inc., and 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
ROBERT A. DISTEFANO IAN A. MACKINNON
Senior Vice President Senior Vice President
Information Technology Fixed Income Group
JEREMY G. DUFFIELD F. WILLIAM MCNABB III
Senior Vice President Senior Vice President
Planning & Development Institutional
JAMES H. GATELY RALPH K. PACKARD
Senior Vice President Senior Vice President
Individual Investor Group Chief Financial Officer
28
<PAGE> 31
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard/Windsor Fund
Vanguard/Windsor II
Vanguard Equity Income Fund
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund
U.S. Portfolio
Vanguard Convertible
Securities Fund
BALANCED FUNDS
Vanguard/Wellington Fund
Vanguard/Wellesley Income Fund
Vanguard STAR Portfolio
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Funds
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
Vanguard Horizon Fund
Global Equity Portfolio
Global Asset Allocation Portfolio
Capital Opportunity Portfolio
Aggressive Growth Portfolio
INTERNATIONAL FUNDS
Vanguard International
Growth Portfolio
Vanguard/Trustees' Equity Fund
International Portfolio
INDEX FUNDS
Vanguard Index Trust
500 Portfolio
Total Stock Market Portfolio
Extended Market Portfolio
Growth Portfolio
Value Portfolio
Small Capitalization Stock Portfolio
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
Vanguard Bond Index Fund
Total Bond Market Portfolio
Short-Term Bond Portfolio
Intermediate-Term Bond Portfolio
Long-Term Bond Portfolio
Vanguard International Equity
Index Fund
European Portfolio
Pacific Portfolio
Emerging Markets Portfolio
FIXED INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
Vanguard Admiral Fund
U.S. Treasury Money Market Portfolio
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)
INCOME FUNDS
Vanguard Fixed Income
Securities Fund
Vanguard Admiral Fund
Vanguard Preferred Stock Fund
[THE VANGUARD GROUP LOGO]
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.
Vanguard Financial Center
Valley Forge, Pennsylvania 19482
New Account Information:
1 (800) 662-7447
Shareholder Account Services:
1 (800) 662-2739
Q950-8/95
ON OUR COVER: On the evening of August 1, 1798, Lord Horatio Nelson sailed his
flagship, HMS Vanguard, into Egypt's Aboukir Bay. In a night encounter, the
British fleet decimated Napoleon Bonaparte's ships of the line in what is still
considered to be the most complete victory ever recorded in naval history. Our
Report's cover illustration is Thomas Luny's 1830 painting, The Battle Of The
Nile, in which the French flagship, L'Orient, is shown as it exploded at 10:00
p.m. under a gibbous moon.
<PAGE> 32
STATEMENT OF NET ASSETS
VANGUARD MUNICIPAL FINANCIAL STATEMENTS
BOND FUND August 31, 1995
<TABLE>
<CAPTION>
Face Market
Amount Value
MONEY MARKET PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL MONEY MARKET INSTRUMENTS
(100.3%)
- ---------------------------------------------------------------------------------
ALABAMA (2.5%)
Alabama GO
5.25%, 9/1/95 $ 5,835 $ 5,835
Alabama Special Care Facilities
VRDO 3.50%, 9/6/95 (3) 20,000 20,000
Birmingham GO VRDO
3.60%-3.625%,
9/6/95-9/7/95 (LOC) 6,900 6,900
Huntsville Health Care Auth. VRDO
3.40%-3.45%, 9/7/95 (1) 45,400 45,400
Macintosh Industrial Development
Auth. VRDO
(Ciba-Geigy)
3.60%, 9/6/95 (LOC) 24,400 24,400
----------
STATE TOTAL 102,535
----------
- ---------------------------------------------------------------------------------
ALASKA (3.8%)
Alaska Housing Finance Corp. VRDO
3.55%, 9/7/95 (LOC) 64,800 64,800
3.70%, 9/6/95 50,400 50,400
Valdez Marine Terminal VRDO
(Exxon Pipe Project)
3.35%-3.50%, 9/5/95 12,575 12,575
(Mobile Pipeline)
3.50%, 9/6/95 28,350 28,350
----------
STATE TOTAL 156,125
----------
- ---------------------------------------------------------------------------------
ARIZONA (4.0%)
Arizona Health Facilities Auth. VRDO
3.60%, 9/7/95 (3) 32,160 32,160
Maricopa County PCR VRDO
(Arizona Public Service)
3.50%, 9/5/95 (LOC) 2,800 2,800
Phoenix VRDO
3.55%, 9/5/95 2,800 2,800
Salt River Project Agricultural
Improvement & Power Dist.
CP 3.40%-3.85%,
10/11/95-12/12/95 101,471 101,471
TOB VRDO 3.70%, 9/6/95 26,370 26,370
----------
STATE TOTAL 165,601
----------
- ---------------------------------------------------------------------------------
CALIFORNIA (8.7%)
California Higher Education Loan
Auth. Student Loan Rev. VRDO
3.55%, 9/6/95 (LOC) 69,700 69,700
California School Cash Reserve
Program Notes
4.75%, 7/3/96 (1) (LOC) 15,000 15,121
California Statewide Communities
Development Auth. TRAN
4.75%, 7/5/96 (5) 10,000 10,057
Fresno County TRAN
4.50%, 7/2/96 16,500 16,593
Kern County TRAN
4.50%, 7/2/96 10,000 10,047
Los Angeles County TRAN
4.50%, 7/1/96 (LOC) 124,200 124,927
Riverside County TRAN
4.75%, 7/1/96 15,000 15,095
Riverside County VRDO
(Public Facilities Project)
3.50%, 9/5/95 (LOC) 1,900 1,900
Santa Clara County TRAN
4.50%, 8/2/96 50,000 50,299
Sonoma County TRAN
4.75%, 10/10/95 25,000 25,016
Ventura County TRAN
4.50%, 7/2/96 25,000 25,141
----------
STATE TOTAL 363,896
----------
- ---------------------------------------------------------------------------------
COLORADO (1.6%)
Colorado TRAN
4.50%, 6/27/96 65,000 65,451
----------
- ---------------------------------------------------------------------------------
CONNECTICUT (1.3%)
Connecticut Development Auth.
PCR VRDO
(Connecticut Light & Power)
3.55%, 9/6/95 (LOC) 30,000 30,000
Connecticut Economic
Recovery Notes
VRDO 3.55%, 9/6/95 11,500 11,500
Connecticut Special Obligation
VRDO 3.65%, 9/6/95 (LOC) 14,300 14,300
----------
STATE TOTAL 55,800
----------
- ---------------------------------------------------------------------------------
</TABLE>
THE PORTFOLIO LISTINGS BEGIN ON THE FOLLOWING PAGES:
<TABLE>
<S> <C>
MONEY MARKET PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . 1
SHORT-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . 7
LIMITED-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . 12
INTERMEDIATE-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . 18
INSURED LONG-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . 29
LONG-TERM PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . 36
HIGH-YIELD PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
1
<PAGE> 33
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
DISTRICT OF COLUMBIA (.9%)
District of Columbia VRDO
3.75%, 9/6/95 $ 13,500 $ 13,500
(George Washington Univ.)
3.75%, 9/6/95 23,100 23,100
----------
STATE TOTAL 36,600
----------
- ---------------------------------------------------------------------------------
FLORIDA (9.0%)
Dade County Solid Waste System
10.00%, 10/1/95 (Prere.) 5,000 5,123
Dade County Water & Sewer System
Rev. VRDO
3.45%, 9/6/95 (3) 90,810 90,810
TOB 3.67%, 9/7/95 24,000 24,000
Florida Dept. of Transportation
TOB VRDO
3.65%, 9/7/95 (3) 11,020 11,020
Florida Municipal Loan Council CP
3.75%-4.00%,
9/11/95-12/1/95 (LOC) 17,700 17,700
Gainesville Utilities System CP
3.75%, 11/14/95 6,525 6,525
Gulf Breeze Local Govt. Loan
Program VRDO
3.55%, 9/7/95 (3) 13,225 13,225
Jacksonville Electric Auth. CP
3.40%-3.90%, 10/11/95-12/13/95 30,200 30,200
Lee County Hosp. Board CP
(Lee Memorial Hosp. Project)
3.40%-4.00%, 10/6/95-11/14/95 61,500 61,500
Orlando Utilities Comm. Water &
Electric Rev. BAN VRDO
3.55%, 9/7/95 47,650 47,650
Sunshine State Govt. Finance
Committee CP
3.70%-3.95%,
9/25/95-12/5/95 (LOC) 68,015 68,015
----------
STATE TOTAL 375,768
----------
- ---------------------------------------------------------------------------------
GEORGIA (4.2%)
Burke County Development Auth. PCR
(Oglethorpe Power)
VRDO 3.45%, 9/6/95 96,900 96,900
CP 3.50%, 10/16/95 (LOC) 10,200 10,200
CP 3.70%, 10/24/95 4,500 4,500
Burke County PCR VRDO
(Georgia Power)
3.50%, 9/5/95 11,300 11,300
Cobb County TAN
5.00%, 12/29/95 15,000 15,039
Municipal Gas Auth. CP
(Southern Project)
3.90%-3.95%,
9/12/95-11/20/95 (LOC) 36,000 36,000
----------
STATE TOTAL 173,939
----------
- ---------------------------------------------------------------------------------
HAWAII (.7%)
Hawaii GO TOB VRDO
3.751%, 9/6/95 9,600 9,600
Honolulu City & County CP
3.70%-3.90%, 10/10/95-11/13/95 19,000 19,000
----------
STATE TOTAL 28,600
----------
- ---------------------------------------------------------------------------------
IDAHO (.4%)
Idaho TAN
4.50%, 6/27/96 15,000 15,083
----------
- ---------------------------------------------------------------------------------
ILLINOIS (9.1%)
Chicago GO
VRDO 3.65%, 9/7/95 (LOC) 36,100 36,100
4.60%, 10/31/95* (LOC) 22,050 22,050
Illinois Development Finance
Auth. PCR
(Illinois Power)
CP 3.40%, 10/11/95 (LOC) 10,000 10,000
VRDO 3.50%, 9/6/95 (LOC) 11,600 11,600
Illinois Education Facilities VRDO
(DePaul Univ.)
3.65%, 9/6/95 (LOC) 30,800 30,800
Illinois GO
5.25%, 7/1/96 (3) 9,740 9,854
Illinois Health Facilities Auth.
VRDO 3.55%, 9/6/95 (LOC) 6,000 6,000
(Evanston Hosp.)
CP 4.00%, 5/15/96 15,000 15,000
(Franciscan Sisters)
VRDO 3.65%, 9/6/95 (LOC) 15,100 15,100
(Hosp. Sisters Service)
VRDO 3.50%, 9/6/95 (1) 21,400 21,400
(Northwest Community Hosp.)
3.599%, 9/7/95 (LOC) 34,570 34,570
(Univ. of Chicago Hosp.)
VRDO 3.60%, 9/6/95 (1) 21,000 21,000
Illinois Housing
Development Auth. VRDO
(Center Apartments)
3.60%, 9/6/95 (LOC) 49,155 49,155
Illinois RAN
4.50%, 4/12/96 32,600 32,756
Illinois Toll Highway Auth. VRDO
3.40%, 9/6/95 (1) 64,300 64,300
----------
STATE TOTAL 379,685
----------
- ---------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 34
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
INDIANA (1.9%)
Indiana Educational Facilities Auth.
VRDO (Univ. of Notre Dame)
3.55%, 9/7/95 $ 18,000 $ 18,000
Indianapolis Local Public
Improvement Notes
4.25%, 1/11/96 14,950 14,990
Jasper County PCR CP
(Northern Indiana Public Service)
3.70%-3.90%,
9/8/95-10/30/95 (LOC) 9,400 9,400
Mt. Vernon PCR
(General Electric Project)
CP 3.50%, 10/20/95 15,250 15,250
(Southern Indiana Gas & Electric)
4.50%, 5/1/96* 12,000 12,029
Petersburg PCR CP
(Indianapolis Power & Light)
3.70%, 10/20/95-10/23/95 11,000 11,000
----------
STATE TOTAL 80,669
----------
- ---------------------------------------------------------------------------------
KANSAS (.2%)
Burlington PCR
(Kansas City Power & Light)
3.75%, 10/10/95 (LOC) 9,600 9,600
----------
- ---------------------------------------------------------------------------------
LOUISIANA (4.0%)
Louisiana GO TOB VRDO
3.751%, 9/6/95 (1) 23,645 23,645
Louisiana Public Facilities Auth.
(Lady of Lakes Regional
Medical Center)
CP 3.70%-4.25%,
9/7/95-12/8/95 (4) 76,590 76,590
(Sisters of Charity)
CP 3.50%-3.75%,
10/13/95-10/19/95 31,700 31,700
Louisiana Recovery Dist. Sales Tax
VRDO 3.50%, 9/5/95 (3) 5,100 5,100
Orleans Levee Dist. VRDO
3.95%, 9/6/95 (LOC) 28,905 28,905
----------
STATE TOTAL 165,940
----------
- ---------------------------------------------------------------------------------
MAINE (.4%)
Maine Health & Higher Education
Facilities Auth. VRDO
(Bowdoin College)
3.50%, 9/6/95 (LOC) 6,500 6,500
Maine TAN
4.50%, 6/28/96 10,000 10,052
----------
STATE TOTAL 16,552
----------
- ---------------------------------------------------------------------------------
MARYLAND (.4%)
Baltimore County
Metropolitan Dist.
BAN CP 3.75%, 11/9/95 8,000 8,000
Howard County
Public Improvement
CP 3.75%, 10/31/95 9,400 9,400
----------
STATE TOTAL 17,400
----------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (2.1%)
Commonwealth of Massachusetts GO
TOB VRDO 3.532%, 9/6/95 (1) 19,400 19,400
Massachusetts Bay Transit Auth.
CP 3.75%-3.80%, 10/13/95 (LOC) 16,500 16,500
Notes 5.00%, 9/8/95 49,900 49,908
----------
STATE TOTAL 85,808
----------
- ---------------------------------------------------------------------------------
MICHIGAN (2.3%)
Michigan Municipal Bond Auth.
Rev. Notes
4.50%, 7/3/96 17,000 17,096
Michigan State Hosp. Finance Auth.
VRDO (Daughters of Charity)
3.50%, 9/6/95 23,100 23,100
Michigan State Housing Development
Auth. VRDO
3.70%, 9/6/95 (LOC) 40,015 40,015
Michigan State Notes GO
5.00%, 9/29/95 15,000 15,013
----------
STATE TOTAL 95,224
----------
- ---------------------------------------------------------------------------------
MINNESOTA (1.0%)
Anoka-Hennepin Independent School
Dist. TAN
5.50%, 3/6/96 19,930 19,992
Minneapolis GO VRDO
(Arena Acquisition Project)
3.65%, 9/7/95 16,000 16,000
Regents of Univ. of Minnesota
CP 3.70%, 10/24/95 5,000 5,000
----------
STATE TOTAL 40,992
----------
- ---------------------------------------------------------------------------------
MISSISSIPPI (.1%)
Jackson County VRDO
(Chevron)
3.50%, 9/5/95 5,500 5,500
----------
- ---------------------------------------------------------------------------------
MISSOURI (1.0%)
Missouri Health & Education
Facilities Auth. VRDO
(SSM Health Care Project)
3.55%, 9/6/95 (1) 10,000 10,000
</TABLE>
3
<PAGE> 35
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Missouri Health & Education
Finance Auth. VRDO
(St. Anthony's Medical Center)
3.55%, 9/5/95 $ 24,000 $ 24,000
Sisters of Mercy Health
Care System
VRDO 3.50%, 9/7/95 9,200 9,200
----------
STATE TOTAL 43,200
----------
- ---------------------------------------------------------------------------------
NEBRASKA (.5%)
Lincoln Electric System Rev. CP
3.75%, 9/11/95 15,000 15,000
Omaha Public Power Dist. CP
3.70%, 10/24/95 5,500 5,500
----------
STATE TOTAL 20,500
----------
- ---------------------------------------------------------------------------------
NEVADA (2.9%)
Clark County Airport VRDO
3.45%, 9/6/95 (1) 113,385 113,385
Nevada GO TOB VRDO
3.751%, 9/7/95 9,225 9,225
----------
STATE TOTAL 122,610
----------
- ---------------------------------------------------------------------------------
NEW HAMPSHIRE (.4%)
Hillsborough County TAN
3.78%, 12/28/95 16,000 16,002
----------
- ---------------------------------------------------------------------------------
NEW JERSEY (.8%)
New Jersey Transportation Trust
Fund Auth. Notes
3.67%, 12/27/95 33,000 33,000
----------
- ---------------------------------------------------------------------------------
NEW MEXICO (.1%)
Hurley PCR VRDO
(Kennecott Sante Fe Corp. Project)
3.55%, 9/5/95 5,900 5,900
----------
- ---------------------------------------------------------------------------------
NEW YORK (3.8%)
New York City GO
CP 3.90%, 10/30/95 (4) 24,600 24,600
TAN 4.50%, 2/15/96 65,000 65,226
New York City Municipal Water
Finance Auth. CP
3.70%-3.80%,
9/13/95-11/17/95 (LOC) 64,100 64,100
Port Washington Unified
School Dist. TAN
4.25%, 6/27/96 4,500 4,520
----------
STATE TOTAL 158,446
----------
- ---------------------------------------------------------------------------------
NORTH CAROLINA (3.6%)
Charlotte Airport Refunding Rev.
VRDO 3.45%, 9/6/95 (1) 32,500 32,500
North Carolina Education Facilities
Auth. VRDO
(Duke Univ.)
3.751%, 9/7/95 21,700 21,700
North Carolina Medical Care
Hosp. Rev. VRDO
(Duke Univ. Hosp.)
3.751%, 9/7/95 20,400 20,400
(Moses Cone Hosp.)
3.80%, 9/7/95 19,500 19,500
North Carolina Public Power Agency
TOB VRDO 3.70%, 9/6/95 (2) 45,000 45,000
Wake County Pollution Control
Finance Auth. VRDO
(Carolina Power & Light)
3.50%, 9/6/95 (LOC) 11,500 11,500
----------
STATE TOTAL 150,600
----------
- ---------------------------------------------------------------------------------
OHIO (1.0%)
Butler County GO BAN
4.80%, 11/3/95 1,700 1,701
Columbus Electric VRDO
3.70%, 10/2/95 (LOC) 8,500 8,500
Columbus GO VRDO
3.30%, 9/7/95 8,000 8,000
Ohio Student Loan Rev. VRDO
3.50%, 9/6/95 (LOC) 24,850 24,850
----------
STATE TOTAL 43,051
----------
- ---------------------------------------------------------------------------------
OKLAHOMA (.3%)
Oklahoma City Industrial & Cultural
Facilities Trust VRDO
3.90%, 9/5/95 (LOC) 12,800 12,800
----------
- ---------------------------------------------------------------------------------
OREGON (1.3%)
Oregon Veterans Welfare VRDO
3.60%, 9/6/95 (LOC) 55,400 55,400
----------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (.4%)
Delaware County PCR CP
(PECO Energy Co.)
3.70%, 10/10/95 (3) 5,500 5,500
Emmaus General Auth. VRDO
3.65%, 9/6/95 2,500 2,500
Geisinger Auth. Health System VRDO
(Montour County)
3.25%, 9/5/95 800 800
Northeast Pennsylvania Hosp. Auth. CP
(Hosp. Central Services)
3.70%, 10/23/95 (1) 2,000 2,000
Sayre Health Care Facility Auth.
VRDO 3.50%, 9/6/95 (2) 3,900 3,900
----------
STATE TOTAL 14,700
----------
- ---------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 36
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
SOUTH CAROLINA (.8%)
Greenville Hosp. System VRDO
3.55%, 9/7/95 $ 24,500 $ 24,500
South Carolina Public Service
Auth. CP
3.70%-3.80%,
9/8/95-9/11/95 7,200 7,200
----------
STATE TOTAL 31,700
----------
- ---------------------------------------------------------------------------------
SOUTH DAKOTA (.1%)
South Dakota School Dist. Certificates
4.75%, 7/30/96 2,795 2,815
----------
- ---------------------------------------------------------------------------------
TENNESSEE (1.2%)
Metropolitan Govt. of Nashville
Airport Auth. VRDO
3.50%, 9/6/95 (3) 10,000 10,000
Metropolitan Govt. of Nashville
& Davidson County
Health Education CP
(Baptist Hosp.)
3.70%-3.80%, 9/8/95-10/26/95 26,100 26,100
(Vanderbilt Univ.)
3.70%, 10/24/95 10,000 10,000
Tennessee VRDO
3.60%, 9/6/95 5,000 5,000
----------
STATE TOTAL 51,100
----------
- ---------------------------------------------------------------------------------
TEXAS (14.3%)
Austin Utility System CP
3.75%, 9/14/95 (LOC) 9,500 9,500
Bexar County VRDO
(Incarnate Word Health Service)
3.55%, 9/6/95 (4) 74,200 74,200
Dallas Counties Waterworks & Sewer
TOB VRDO 3.751%, 9/6/95 30,000 30,000
Dallas/Fort Worth International
Airport CP
3.80%, 11/1/95 (LOC) 11,500 11,500
Dallas Water Utility Dept. CP
3.50%-3.75%, 10/17/95-11/14/95 19,709 19,709
Gulf Coast Waste Disposal Auth. PCR
(Amoco Oil Project)
VRDO 3.35%, 9/5/95 3,450 3,450
(Exxon Project)
CP 3.80%, 11/16/95 3,000 3,000
Harris County Health Facility
Development Corp. VRDO
(Children's Hosp.)
3.55%, 9/6/95 21,000 21,000
(St. Luke's Episcopal Hosp.)
3.40%, 9/5/95 2,300 2,300
Harris County School Health
System CP (Sisters of Charity)
3.40%-3.75%,
10/10/95-10/24/95 27,600 27,600
Harris County Toll Road VRDO
3.50%, 9/6/95 56,700 56,700
Houston TRAN
4.50%, 6/27/96 10,000 10,063
Houston VRDO
3.55%, 9/6/95 22,100 22,100
3.55%, 9/6/95 (LOC) 42,000 42,000
Houston Independent School Dist.
TRAN 4.50%, 8/29/96 15,000 15,086
North-Central Texas Health Facilities
Development Corp. CP
(Methodist Hosp.-Dallas)
3.40%-3.75%,
9/25/95-11/28/95 (1) 39,100 39,100
Richardson Independent School Dist.
TRAN 4.50%, 8/30/96 9,000 9,041
San Antonio Electric & Gas CP
3.50%, 10/16/95 5,000 5,000
San Antonio GO TOB VRDO
3.65%, 9/7/95 6,000 6,000
Southwest Higher Education Auth.
(Southern Methodist Univ.)
VRDO 3.50%, 9/5/95 (LOC) 4,500 4,500
Tarrant County Health Facility
Development Corp. VRDO
(Harris Methodist Health)
3.80%, 9/7/95 (LOC) 9,900 9,900
Texas Municipal Power Agency
BAN CP
3.55%-3.80%, 9/8/95-10/20/95 20,850 20,850
Texas Municipal Power Agency Rev.
9.50%, 9/1/95 (Prere.) 4,050 4,131
Texas Public Finance Auth. GO CP
3.80%-4.20%, 10/5/95-12/7/95 72,200 72,200
Texas Public Finance Auth. Rev. CP
3.70%, 10/24/95 13,300 13,300
Texas GO TOB VRDO
3.903%, 9/7/95 (Prere.) 9,350 9,350
Texas TRAN
4.75%, 8/30/96 25,000 25,163
Univ. of Texas Board of Regents
CP 3.40%-3.55%,
10/11/95-10/16/95 19,955 19,955
TOB VRDO 3.65%, 9/7/95 10,170 10,170
----------
STATE TOTAL 596,868
----------
- ---------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 37
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
UTAH (1.7%)
Emery County PCR VRDO
(Pacific Corp.)
3.55%, 9/5/95 (2) $ 3,000 $ 3,000
Intermountain Power Agency
CP 3.80%-3.85%,
12/12/95-12/14/95 (LOC) 28,600 28,600
CP 3.55%-3.90%,
9/11/95-10/16/95 28,325 28,325
3.75%, 9/15/95* 10,000 10,000
Salt Lake City PCR
(Amoco Project)
4.40%, 10/1/95* 1,000 1,000
----------
STATE TOTAL 70,925
----------
- ---------------------------------------------------------------------------------
VIRGINIA (2.1%)
Fairfax County Industrial
Development Auth.
(Fairfax Hosp.)
VRDO 3.65%, 9/6/95 (LOC) 46,500 46,500
(Inova Health System Project)
CP 3.60%-3.85%,
10/13/95-10/23/95 18,800 18,800
Louisa Industrial Development Auth.
CP 3.80%, 10/10/95 4,100 4,100
Virginia Housing Commonwealth
Mortgage Bond
4.12%, 9/12/95* 10,000 10,001
4.25%, 9/12/95* 10,000 10,000
----------
STATE TOTAL 89,401
----------
- ---------------------------------------------------------------------------------
WASHINGTON (1.4%)
Chelan County Development Corp.
PCR VRDO
(Alcoa Project)
3.75%, 9/5/95 (LOC) 8,300 8,300
Port of Seattle GO VRDO
3.50%, 9/6/95 2,800 2,800
Seattle Municipal Light & Power
VRDO 3.50%, 9/6/95 30,700 30,700
CP 3.90%, 12/6/95 6,000 6,000
9.70%, 9/1/95 (Prere.) 4,865 4,962
Washington Motor Vehicle
9.50%, 9/1/95 (Prere.) 4,700 4,700
----------
STATE TOTAL 57,462
----------
- ---------------------------------------------------------------------------------
WEST VIRGINIA (.5%)
Kanawah Building Comm. Hosp.
(Charleston Medical Inc.)
VRDO 3.85%, 9/6/95 (LOC) 18,435 18,435
----------
- ---------------------------------------------------------------------------------
WISCONSIN (3.1%)
Milwaukee School Order Notes
4.50%, 8/22/96 20,000 20,093
Milwaukee Short Term
Promissory Notes
5.50%, 2/22/96 15,000 15,052
Oak Creek City VRDO
(Wisconsin Electric Power Co.)
3.55%, 9/7/95 33,800 33,800
Wisconsin GO TOB VRDO
3.751%, 9/6/95 25,570 25,570
Wisconsin Operating Notes
4.50%, 6/17/96 35,000 35,217
----------
STATE TOTAL 129,732
----------
- ---------------------------------------------------------------------------------
WYOMING (.4%)
Lincoln County PCR
(Amoco)
4.40%, 10/1/95* 2,000 2,000
(Exxon)
VRDO 3.35%, 9/5/95 500 500
Sweetwater County PCR
(Chevron)
4.30%, 12/15/95* 6,800 6,833
Uinta County PCR
(Chevron)
4.30%, 12/15/95* 6,150 6,180
----------
STATE TOTAL 15,513
----------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL MONEY MARKET
INSTRUMENTS
(Cost $4,176,928) 4,176,928
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.3%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 40,737
Liabilities (51,970)
----------
(11,233)
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 4,166,374,427 outstanding
$.001 par value shares
(authorized 5,500,000,000 shares) $4,165,695
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
=================================================================================
</TABLE>
+See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 45.
6
<PAGE> 38
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- -----
<S> <C> <C>
Paid in Capital $4,166,389 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Losses--Note E (694) --
Unrealized Appreciation
of Investments -- --
- ---------------------------------------------------------------------------------
NET ASSETS $4,165,695 $1.00
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
SHORT-TERM PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (100.1%)
- ---------------------------------------------------------------------------------
ALABAMA (1.5%)
Birmingham GO VRDO
3.60%, 9/7/95 (LOC) $ 9,700 $ 9,700
Birmingham North Medical Clinic
(Carraway Hosp.)
9.00%, 10/1/95 (Prere.) 8,500 8,706
Huntsville Health Care Auth. VRDO
3.45%, 9/7/95 (1) 2,600 2,600
----------
STATE TOTAL 21,006
----------
- ---------------------------------------------------------------------------------
ALASKA (2.9%)
Alaska Housing Finance Corp. VRDO
3.60%, 9/6/95 10,700 10,700
3.70%, 9/6/95 4,700 4,700
Anchorage Electric Rev.
9.75%, 9/1/95 (Prere.) 3,700 3,774
North Slope Borough GO
7.125%, 7/1/98 (1) 7,710 8,278
7.15%, 7/1/99 (1) 5,670 6,197
Valdez Marine Terminal Rev. VRDO
(Exxon Pipeline Project)
3.50%, 9/5/95 8,000 8,000
----------
STATE TOTAL 41,649
----------
- ---------------------------------------------------------------------------------
ARIZONA (.5%)
Maricopa County PCR VRDO
3.50%, 9/5/95 (LOC) 7,000 7,000
----------
- ---------------------------------------------------------------------------------
CALIFORNIA (10.7%)
Alameda County Public Facilities Corp.
COP 6.15%, 9/1/96* (LOC) 5,000 5,053
Los Angeles COP
5.50%, 12/1/96 3,400 3,459
Los Angeles Dept. of Water &
Power Rev.
9.00%, 11/15/97 5,855 6,443
Orange County Sanitation Dist. VRDO
3.40%, 9/5/95 (LOC) 6,700 6,700
3.90%, 9/7/95 (2) (LOC) 21,431 21,431
Riverside County TRAN
4.75%, 7/1/96 20,000 20,114
Sacramento County TRAN
4.50%, 9/29/95 25,000 25,000
4.75%, 10/4/96 20,000 20,137
Sacramento Utility Rev.
7.875%, 8/15/98 (Prere.) 4,000 4,497
San Diego County TRAN
4.50%, 9/29/95 15,000 15,000
4.50%, 9/30/96 15,000 15,070
San Diego Unified School Dist. TRAN
4.75%, 10/10/96 (LOC) 10,000 10,102
</TABLE>
7
<PAGE> 39
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Santa Clara County Finance Auth.
Rev. VRDO
3.45%, 9/6/95 $ 1,500 $ 1,500
-----------
STATE TOTAL 154,506
-----------
- ---------------------------------------------------------------------------------
COLORADO (.7%)
Jefferson County School Dist.
8.50%, 12/15/95 (Prere.) 5,000 5,069
Municipal Subdist. of
Northern Colorado
9.00%, 12/1/95 (Prere.) 3,000 3,069
9.25%, 12/1/95 (Prere.) 2,420 2,477
-----------
STATE TOTAL 10,615
-----------
- ---------------------------------------------------------------------------------
CONNECTICUT (1.6%)
Connecticut Development Auth.
PCR VRDO
(Connecticut Light & Power Co.)
3.55%, 9/6/95 (LOC) 10,300 10,300
Connecticut Economic
Recovery Notes
VRDO 3.55%, 9/6/95 800 800
Connecticut GO
5.65%, 11/15/98 2,500 2,617
Connecticut Special Tax
Obligation Rev.
4.25%, 9/1/95 5,630 5,630
8.60%, 10/15/95 (Prere.) 3,075 3,154
-----------
STATE TOTAL 22,501
-----------
- ---------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (.7%)
District of Columbia GO
0.00%, 6/1/00 (1) 6,900 5,505
5.60%, 6/1/96 (3) 5,000 5,054
-----------
STATE TOTAL 10,559
-----------
- ---------------------------------------------------------------------------------
FLORIDA (7.8%)
Dade County School Dist.
7.00%, 8/1/98 (3) 7,510 8,077
Dade County Water & Sewer System
Rev. VRDO
3.45%, 9/6/95 (3) 19,535 19,535
Gulf Breeze Local Govt. Loan Program
VRDO 3.55%, 9/7/95 (3) 5,840 5,840
Hillsborough County Aviation Auth.
(Tampa Airport)
3.50%, 10/1/95 (3) 4,980 4,979
Jacksonville Electric Auth. Rev.
7.50%, 10/1/95 (Prere.) 9,090 9,255
(St. John's River Project)
10.25%, 10/1/95 (Prere.) 5,000 5,127
Jacksonville Hosp. Rev.
10.50%, 10/1/97 (Prere.) 8,000 9,197
Jacksonville Transportation Auth.
9.00%, 1/1/98 (Prere.) 3,780 4,263
Orlando Utilities Comm. Water &
Electric Rev.
BAN VRDO 3.55%, 9/7/95 19,850 19,850
4.40%, 10/1/96 3,255 3,278
8.50%, 10/1/95 (Prere.) 13,980 14,315
Tampa Utilities Auth.
8.00%, 10/1/97 (Prere.) 7,700 8,476
-----------
STATE TOTAL 112,192
-----------
- ---------------------------------------------------------------------------------
GEORGIA (2.4%)
Burke County Development
Auth. PCR VRDO
(Oglethorpe Power)
3.45%, 9/6/95 2,000 2,000
Burke County PCR VRDO
(Georgia Power)
3.50%, 9/5/95 5,500 5,500
3.60%, 9/5/95 3,400 3,400
Georgia GO
6.80%, 8/1/98 6,155 6,623
7.00%, 11/1/95 4,725 4,752
7.70%, 4/1/99 5,000 5,582
Gwinnett County Water & Sewer Auth.
8.75%, 8/1/96 (Prere.) 6,000 6,389
-----------
STATE TOTAL 34,246
-----------
- ---------------------------------------------------------------------------------
HAWAII (3.9%)
Hawaii GO
5.00%, 11/1/96 12,870 13,051
5.00%, 11/1/97 10,000 10,209
5.00%, 11/1/98 16,000 16,413
Honolulu City & County GO
3.60%, 10/1/95 14,000 13,999
9.00%, 3/1/96 3,000 3,076
-----------
STATE TOTAL 56,748
-----------
- ---------------------------------------------------------------------------------
ILLINOIS (4.5%)
Chicago GO
7.50%, 1/1/99 (Prere.) 5,000 5,580
VRDO 3.65%, 9/7/95 (LOC) 14,000 14,000
Chicago Metropolitan Sanitation Dist.
7.85%, 1/1/98 (Prere.) 5,600 6,163
Chicago Metropolitan Water
7.25%, 1/1/99 (Prere.) 3,490 3,807
Chicago Metropolitan Water
Capital Improvement
6.40%, 1/1/00 5,000 5,370
</TABLE>
8
<PAGE> 40
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Chicago Public Building Comm.
4.50%, 12/1/98 (1) $ 8,000 $ 8,055
7.75%, 1/1/99 (3) (Prere.) 5,000 5,618
Chicago School Finance Auth. GO
4.40%, 6/1/98 (1) 6,755 6,796
Illinois GO
5.50%, 8/1/98 7,700 7,953
Illinois Toll Highway Auth. VRDO
3.40%, 9/6/95 (1) 800 800
-----------
STATE TOTAL 64,142
-----------
- ---------------------------------------------------------------------------------
KENTUCKY (.8%)
Ashland City PCR VRDO
(Ashland Oil)
3.35%, 9/7/95 5,700 5,700
Kentucky Property & Buildings
4.00%, 9/1/95 6,420 6,420
-----------
STATE TOTAL 12,120
-----------
- ---------------------------------------------------------------------------------
LOUISIANA (1.5%)
Jefferson Parish Sales Tax Rev.
5.90%, 12/1/95 (3) 4,175 4,197
Louisiana Recovery Dist. Sales Tax
5.50%, 7/1/97 10,000 10,196
Plaquemines Port Harbor &
Terminal CP
(Electro Coal)
4.00%, 9/12/95 7,000 7,000
-----------
STATE TOTAL 21,393
-----------
- ---------------------------------------------------------------------------------
MAINE (.7%)
Maine Municipal Bond Bank
3.875%, 11/1/96 10,000 10,007
-----------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (6.6%)
Massachusetts Bay
Transportation Auth.
7.10%, 3/1/99 (3) (Prere.) 7,800 8,640
Massachusetts Consolidated Loan
7.00%, 6/1/99 (Prere.) 10,000 11,099
7.50%, 2/1/99 (3) (Prere.) 6,400 7,143
Massachusetts GO
4.05%, 9/1/95 12,000 12,000
5.50%, 7/1/99 10,000 10,405
5.70%, 8/1/96 8,000 8,133
7.25%, 7/1/98 (Prere.) 5,000 5,482
Massachusetts Municipal
Wholesale Electric
6.00%, 7/1/97 2,355 2,424
Massachusetts Water Resources Auth.
BAN 4.125%, 10/15/95 10,000 10,003
7.625%, 4/1/00 (Prere.) 17,645 20,216
-----------
STATE TOTAL 95,545
-----------
- ---------------------------------------------------------------------------------
MICHIGAN (1.0%)
Michigan Trunk Line
5.50%, 11/15/98 13,720 14,240
-----------
- ---------------------------------------------------------------------------------
MISSISSIPPI (.4%)
Jackson County VRDO
(Chevron)
3.50%, 9/5/95 5,800 5,800
-----------
- ---------------------------------------------------------------------------------
MISSOURI (.5%)
Missouri Health & Educational
Facilities Auth. VRDO
3.55%, 9/5/95 7,200 7,200
-----------
- ---------------------------------------------------------------------------------
NEBRASKA (.1%)
Nebraska Public Power Dist. Electric
System Rev.
4.80%, 1/1/96 2,000 2,007
-----------
- ---------------------------------------------------------------------------------
NEVADA (.5%)
Clark County Airport
VRDO 3.45%, 9/6/95 (1) 3,150 3,150
13.25%, 7/1/97 (Prere.) 3,015 3,505
-----------
STATE TOTAL 6,655
-----------
- ---------------------------------------------------------------------------------
NEW JERSEY (.7%)
New Jersey Turnpike Auth.
VRDO 3.05%, 9/6/95 (3) (LOC) 3,700 3,700
4.80%, 1/1/96 7,000 7,024
-----------
STATE TOTAL 10,724
-----------
- ---------------------------------------------------------------------------------
NEW MEXICO (.3%)
Albuquerque Water & Sewer
5.90%, 7/1/98 (ETM) 4,105 4,304
-----------
- ---------------------------------------------------------------------------------
NEW YORK (5.0%)
New York City GO
VRDO 3.50%, 9/6/95 (LOC) 10,400 10,400
6.80%, 2/1/97 9,985 10,274
6.80%, 2/1/97 (ETM) 2,990 3,106
New York City Metropolitan
Transportation Auth. RAN
5.50%, 12/14/95 10,000 10,048
New York State Dormitory Auth.
(City Univ.)
4.90%, 7/1/96 5,205 5,244
5.25%, 7/1/97 2,780 2,825
New York State Medical Care Facility
7.80%, 2/15/99 (Prere.) 5,000 5,660
(Mt. Sinai Hosp.)
8.875%, 1/15/96 (Prere.) 7,000 7,274
(Mental Health Service)
7.90%, 8/15/96 8,145 8,432
</TABLE>
9
<PAGE> 41
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
New York State Urban
Development Corp.
6.75%, 1/1/96 $ 3,135 $ 3,163
Triborough Bridge & Tunnel Rev.
7.875%, 1/1/98 (Prere.) 5,000 5,493
-----------
STATE TOTAL 71,919
-----------
- ---------------------------------------------------------------------------------
NORTH CAROLINA (3.8%)
Charlotte Airport VRDO
3.45%, 9/6/95 (1) 800 800
North Carolina Eastern Municipal
Power Agency
7.25%, 1/1/99 (Prere.) 3,000 3,334
North Carolina Medical Care VRDO
(Duke Univ. Hosp.)
3.751%, 9/7/95 9,200 9,200
North Carolina Municipal
Power Agency
7.875%, 1/1/98 (Prere.) 12,000 13,238
(Catawba Electric)
CP 3.75%, 9/25/95 14,000 14,000
4.50%, 1/1/96 2,000 2,003
7.625%, 1/1/98 (2) (Prere.) 5,000 5,488
9.00%, 1/1/96 (Prere.) 5,845 6,064
-----------
STATE TOTAL 54,127
-----------
- ---------------------------------------------------------------------------------
OHIO (3.7%)
Columbus Refunding Limited Tax
3.90%, 7/1/97 4,850 4,852
Columbus Sewer Rev. VRDO
3.45%, 9/7/95 1,500 1,500
Ohio Public Facilities Comm.
4.10%, 12/1/95 9,830 9,841
4.25%, 6/1/96 12,660 12,703
5.30%, 12/1/95 6,000 6,024
5.30%, 12/1/96 5,000 5,077
Ohio Student Loan Rev. VRDO
3.50%, 9/6/95 (LOC) 1,400 1,400
Ohio Water Development Auth.
4.40%, 12/1/95 5,000 5,008
4.60%, 6/1/96 6,800 6,835
-----------
STATE TOTAL 53,240
-----------
- ---------------------------------------------------------------------------------
OKLAHOMA (.7%)
Grand River Dam Auth.
4.90%, 6/1/98 10,000 10,190
-----------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (5.5%)
Northumberland County Auth.
Commonwealth Lease Rev.
5.75%, 10/15/95 (1) 3,480 3,489
Pennsylvania GO
10.00%, 4/15/98 16,000 18,255
Pennsylvania Turnpike Comm. Rev.
7.875%, 12/1/96 (Prere.) 7,640 8,166
Philadelphia GO
CP 3.85%, 10/23/95 (LOC) 11,500 11,502
5.25%, 11/15/96 (3) 4,150 4,215
5.75%, 11/15/98 (3) 6,655 6,943
6.00%, 11/15/99 (3) 10,000 10,588
Philadelphia School Dist.
6.60%, 7/1/98 (1) 4,815 5,106
6.70%, 7/1/99 (1) 5,145 5,566
Philadelphia Water & Sewer
6.90%, 10/1/99 (Prere.) 5,000 5,570
-----------
STATE TOTAL 79,400
-----------
- ---------------------------------------------------------------------------------
RHODE ISLAND (.4%)
Rhode Island Student Loan Auth. Rev.
5.40%, 12/1/95 6,000 6,018
-----------
- ---------------------------------------------------------------------------------
SOUTH CAROLINA (1.7%)
Greenville Hosp. System Facility Rev.
VRDO 3.55%, 9/7/95 6,700 6,700
Piedmont Municipal Power Agency
7.75%, 1/1/96 (Prere.) 3,700 3,804
8.00%, 1/1/96 (Prere.) 9,430 9,704
9.70%, 1/1/96 (Prere.) 4,500 4,722
-----------
STATE TOTAL 24,930
-----------
- ---------------------------------------------------------------------------------
TENNESSEE (.8%)
Metropolitan Govt. of Nashville &
Davidson County
8.75%, 1/1/96 (Prere.) 5,000 5,182
10.50%, 12/1/97 (Prere.) 5,750 6,551
-----------
STATE TOTAL 11,733
-----------
- ---------------------------------------------------------------------------------
TEXAS (17.1%)
Austin Combined Utility System Rev.
5.00%, 11/15/95 (2) 3,840 3,850
7.60%, 11/15/99 (1) 5,000 5,612
10.25%, 11/15/95 (Prere.) 24,395 25,203
11.125%, 11/15/99 (Prere.) 4,000 5,036
14.25%, 5/15/97 (Prere.) 7,090 8,281
Dallas-Fort Worth Regional Airport
3.40%, 11/1/95 (1) 15,555 15,545
El Paso Health Facilities VRDO
(Providence Memorial Hosp.)
3.55%, 9/5/95 (LOC) 1,700 1,700
Fort Worth Water & Sewer
5.60%, 2/15/98 3,500 3,614
</TABLE>
10
<PAGE> 42
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Harris County Toll Road VRDO
3.50%, 9/6/95 $ 24,000 $ 24,000
Houston Hotel Occupancy Rev.
6.00%, 7/1/99 (4) 4,000 4,230
Houston VRDO
3.55%, 9/6/95 (LOC) 3,200 3,200
Houston Water & Sewer System
8.10%, 12/1/96 (Prere.) 10,000 10,715
9.375%, 12/1/95 (3) (Prere.) 9,320 9,635
Jefferson PCR VRDO
(Texaco Inc.)
3.55%, 9/5/95 6,200 6,200
Northside Independent School Dist.
4.90%, 2/1/00 5,000 5,105
Sam Rayburn Municipal
Power Agency
9.25%, 9/1/95 (Prere.) 37,000 37,740
Texas Municipal Power Agency Rev.
5.00%, 9/1/96 5,000 5,048
14.25%, 3/1/97 (Prere.) 5,250 6,029
Texas National Research GO
7.125%, 4/1/00 (Prere.) 11,805 13,283
Texas Public Finance Auth. GO CP
3.75%, 10/12/95 27,400 27,400
Texas TRAN
4.75%, 8/30/96++ 25,000 25,202
-----------
STATE TOTAL 246,628
-----------
- ---------------------------------------------------------------------------------
UTAH (.6%)
Intermountain Power Agency
7.00%, 7/1/99 (Prere.) 5,100 5,670
7.75%, 7/1/96 (Prere.) 2,500 2,631
-----------
STATE TOTAL 8,301
-----------
- ---------------------------------------------------------------------------------
VIRGINIA (1.5%)
Chesterfield County Industrial
Development Auth.
3.75%, 9/11/95 14,000 14,000
Fairfax County GO
7.30%, 10/1/95 (Prere.) 4,495 4,598
Virginia Public School Auth.
7.30%, 1/1/97 (Prere.) 3,345 3,553
-----------
STATE TOTAL 22,151
-----------
- ---------------------------------------------------------------------------------
WASHINGTON (7.5%)
King County GO
6.70%, 1/1/99 9,000 9,652
Renton School Dist. GO
5.50%, 12/1/95 5,600 5,623
Seattle Metropolitan Municipality
7.875%, 1/1/96 (Prere.) 3,700 3,824
Snohomish County Public
Utility Dist.
5.00%, 1/1/00 (3) 3,000 3,062
9.75%, 1/1/99 (3) 5,315 6,185
Washington GO
3.35%, 10/1/95 2,000 1,999
7.00%, 10/1/96 6,405 6,619
7.60%, 9/1/96 (Prere.) 4,325 4,491
7.75%, 12/1/98 (Prere.) 2,500 2,774
8.00%, 9/1/96 (Prere.) 21,695 22,611
8.10%, 9/1/95 5,000 5,000
8.60%, 10/1/97 (Prere.) 5,000 5,462
9.20%, 5/1/96 (Prere.) 2,300 2,383
9.30%, 5/1/96 (Prere.) 5,000 5,184
Washington Health Care Auth.
(Empire Health Spokane)
8.00%, 11/1/97 (1)(Prere.) 9,200 10,139
Washington Motor Vehicle Fuel Tax
8.00%, 9/1/96 (Prere.) 12,750 13,288
-----------
STATE TOTAL 108,296
-----------
- ---------------------------------------------------------------------------------
WEST VIRGINIA (.5%)
West Virginia School Building Auth.
6.00%, 7/1/98 7,000 7,314
-----------
- ---------------------------------------------------------------------------------
WISCONSIN (.8%)
City of Milwaukee GO
5.00%, 6/1/96 7,710 7,781
Wisconsin GO
7.00%, 5/1/98 (Prere.) 3,185 3,444
-----------
STATE TOTAL 11,225
-----------
- ---------------------------------------------------------------------------------
WYOMING (.2%)
Platte County PCR
3.60%, 1/1/96 3,000 2,999
-----------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,435,123) 1,443,630
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.1%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 27,246
Liabilities (28,867)
-----------
(1,621)
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 92,488,704 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $ 1,442,009
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 15.59
=================================================================================
</TABLE>
+See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 45.
11
<PAGE> 43
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,433,714 $15.50
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Losses--Note E (212) --
Unrealized Appreciation of
Investments--Note F 8,507 .09
- ---------------------------------------------------------------------------------
NET ASSETS $1,442,009 $15.59
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
LIMITED-TERM PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (100.8%)
- ---------------------------------------------------------------------------------
ALABAMA (.2%)
Huntsville Health Care Auth.
VRDO 3.45%, 9/7/95 (1) $ 3,300 $ 3,300
-------------
- ---------------------------------------------------------------------------------
ALASKA (1.6%)
Alaska Housing Finance Corp. VRDO
3.55%, 9/7/95 (LOC) 1,200 1,200
3.60%, 9/6/95 1,800 1,800
North Slope Borough GO
0.00%, 6/30/97 (1) 1,000 928
7.25%, 6/30/00 (5) 20,000 22,244
-------------
STATE TOTAL 26,172
-------------
- ---------------------------------------------------------------------------------
ARIZONA (1.0%)
Maricopa County School Dist. #4
6.00%, 7/1/97 (2) 10,000 10,341
City of Mesa Utility System Rev.
6.10%, 7/1/96 (3) 4,000 4,077
Salt River Project Agricultural
Improvement & Power Dist.
5.80%, 1/1/96 2,000 2,014
-------------
STATE TOTAL 16,432
-------------
- ---------------------------------------------------------------------------------
CALIFORNIA (11.6%)
Alameda County Public Facilities
Corp. COP
6.15%, 9/1/96* (LOC) 10,000 10,106
California GO
7.50%, 11/1/03 (3) 6,000 7,070
8.90%, 3/1/97 3,000 3,207
10.00%, 4/1/98 19,600 22,313
10.50%, 10/1/00 3,000 3,794
Clovis Unified School Dist.
4.50%, 8/1/96 11,250 11,327
Contra Costa Transportation Auth.
Sales Tax Rev.
6.00%, 3/1/96 4,165 4,213
6.00%, 3/1/97 2,580 2,658
Irvine Assessment Dist. VRDO
3.35%, 9/5/95 (LOC) 490 490
Irvine Ranch Water Dist. VRDO
3.35%, 9/5/95 (LOC) 3,100 3,100
3.45%, 9/5/95 (LOC) 2,400 2,400
Los Angeles COP
5.25%, 12/1/95 7,775 7,799
5.50%, 12/1/96 5,000 5,086
6.00%, 5/1/96 3,000 3,033
</TABLE>
12
<PAGE> 44
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Los Angeles Dept. of Water & Power
Waterworks Rev.
9.00%, 5/15/02 $ 9,135 $ 11,223
9.00%, 5/15/03 5,355 6,691
Orange County Sanitation Dist.
VRDO 3.90%, 9/7/95 (2) (LOC) 50 50
Sacramento County TRAN
4.50%, 9/29/95 28,000 28,000
4.75%, 10/4/96 20,000 20,137
San Bernardino County
Transportation Auth.
3.75%, 3/1/97 (1) 4,280 4,257
San Diego County TRAN
4.50%, 9/29/95 10,000 10,000
4.50%, 9/30/96 8,000 8,037
San Diego Area Local Govt. TRAN
4.75%, 10/18/96 7,000 7,042
San Diego Unified School Dist. TRAN
4.75%, 10/10/96 (LOC) 10,000 10,102
Southern California Public Power
Auth. VRDO
3.15%, 9/6/95 (2) 1,400 1,400
-------------
STATE TOTAL 193,535
-------------
- ---------------------------------------------------------------------------------
COLORADO (.8%)
Colorado Health Facility Auth.
(Rocky Mountain Hosp.)
5.50%, 2/1/96 4,000 3,998
(Sisters of Charity Health
System Inc.)
5.75%, 5/15/96 2,400 2,432
Municipal Subdist. of Northern
Colorado
9.25%, 12/1/95 (Prere.) 6,025 6,167
-------------
STATE TOTAL 12,597
-------------
- ---------------------------------------------------------------------------------
CONNECTICUT (2.9%)
Connecticut Special Assessment
Unemployment Compensation
4.00%, 5/15/96 10,175 10,182
4.00%, 11/15/96 20,295 20,322
Connecticut Special Tax
Obligation Rev.
4.00%, 10/1/99 11,000 10,881
4.80%, 9/1/97 6,350 6,445
-------------
STATE TOTAL 47,830
-------------
- ---------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (.2%)
District of Columbia GO
6.00%, 6/1/97 (1) 3,250 3,337
-------------
- ---------------------------------------------------------------------------------
FLORIDA (6.2%)
Dade County Aviation Rev.
4.30%, 10/1/96 2,500 2,511
Dade County School Dist.
6.80%, 7/1/96 3,150 3,226
7.375%, 7/1/08 (Prere.) 19,600 22,115
Florida Dept. of General Services
6.10%, 7/1/97 (2) 6,900 7,159
Florida Municipal Power Agency
(St. Lucie Project)
3.90%, 10/1/95 (3) 1,595 1,595
4.20%, 10/1/96 (3) 2,055 2,064
4.40%, 10/1/97 (3) 2,230 2,247
Florida Turnpike Auth. Rev.
9.50%, 7/1/99 (2) 4,000 4,724
Hillsborough County Aviation Auth.
(Tampa Airport)
3.90%, 10/1/96 (3) 7,155 7,162
City of Homestead Special Insurance
Assessment Rev.
4.20%, 9/1/96 (1) 6,025 6,044
4.20%, 9/1/96 (1) (Prere.) 165 166
4.40%, 3/1/97 (1) 7,010 7,048
4.40%, 3/1/97 (1) (Prere.) 190 192
Jacksonville Electric Auth. Rev.
7.50%, 10/1/95 (Prere.) 15,500 15,781
City of Lakeland Electric &
Water Rev.
6.25%, 10/1/02 (3)++ 5,000 5,352
Orlando Utility Comm. Water &
Electric Rev.
BAN VRDO 3.55%, 9/7/95 1,000 1,000
4.00%, 10/1/95 4,750 4,752
Palm Beach Solid Waste Auth. Rev.
8.00%, 7/1/98 4,000 4,356
Port Everglade Port Facilities Rev.
7.00%, 9/1/97 (4) 2,600 2,746
City of Sunrise Public Service
8.00%, 10/1/97 (2) 2,940 3,116
-------------
STATE TOTAL 103,356
-------------
- ---------------------------------------------------------------------------------
GEORGIA (2.4%)
Georgia GO
5.75%, 3/1/02 5,600 6,013
7.25%, 7/1/02 5,620 6,513
7.25%, 9/1/02++ 8,160 9,484
7.40%, 8/1/02 12,360 14,454
</TABLE>
13
<PAGE> 45
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Monroe County Development Auth.
(Oglethorpe Power)
5.10%, 1/1/97 $ 3,880 $ 3,905
-------------
STATE TOTAL 40,369
-------------
- ---------------------------------------------------------------------------------
HAWAII (3.2%)
Hawaii Airport System Rev.
4.85%, 7/1/96 (1) 1,765 1,780
5.10%, 7/1/97 (1) 1,855 1,889
7.50%, 7/1/97 3,890 4,095
Hawaii GO
3.85%, 2/1/96 16,500 16,519
4.50%, 1/1/98 5,000 5,043
4.60%, 1/1/97 5,500 5,544
5.00%, 11/1/97 11,130 11,363
Honolulu City & County GO
4.60%, 10/1/99 6,500 6,584
-------------
STATE TOTAL 52,817
-------------
- ---------------------------------------------------------------------------------
ILLINOIS (4.7%)
Chicago GO
6.25%, 10/31/02 (1) 4,250 4,620
Chicago Park Dist. GO
9.70%, 1/1/96 3,000 3,057
Chicago School Finance Auth. GO
4.50%, 6/1/99 (3) 10,000 10,071
Chicago Waste Water Transmission
3.85%, 1/1/96 (3) 5,000 5,003
Chicago Water Capital Improvement
4.70%, 12/1/99 7,710 7,831
4.90%, 12/1/01 9,290 9,470
Chicago Water Rev.
4.70%, 11/1/97 (2) 3,250 3,295
Cook County GO
4.75%, 11/15/97 (3) 5,000 5,075
Dupage County Rev.
(Storm Water Project)
6.55%, 1/1/02 (Prere.) 10,000 11,192
Illinois Sales Tax Rev.
6.90%, 6/15/97 2,000 2,093
7.20%, 6/1/99 (Prere.) 7,600 8,494
Metropolitan Water Recovery Dist.
of Chicago
6.80%, 1/1/97 3,400 3,526
7.25%, 1/1/96 5,200 5,261
-------------
STATE TOTAL 78,988
-------------
- ---------------------------------------------------------------------------------
KANSAS (.2%)
Kansas City Utility System Rev.
5.80%, 3/1/96 (2) 3,155 3,188
-------------
- ---------------------------------------------------------------------------------
KENTUCKY (.4%)
Kentucky Development Finance
Auth. Hosp. Rev.
6.10%, 11/1/96 (3) 3,105 3,185
Kentucky Turnpike Auth.
4.30%, 7/1/97 (2) 3,150 3,171
-------------
STATE TOTAL 6,356
-------------
- ---------------------------------------------------------------------------------
LOUISIANA (1.2%)
Louisiana Recovery Dist. Sales Tax
5.50%, 7/1/97 6,000 6,118
7.625%, 7/1/96 2,250 2,302
New Orleans GO
6.50%, 10/1/01 (2)++ 10,655 11,653
-------------
STATE TOTAL 20,073
-------------
- ---------------------------------------------------------------------------------
MAINE (.9%)
Maine Health & Higher Education
(Sebasticook Hosp.)
10.10%, 7/1/01 (Prere.) 4,450 5,779
Maine Municipal Bond Bank
4.125%, 11/1/97 10,000 10,023
-------------
STATE TOTAL 15,802
-------------
- ---------------------------------------------------------------------------------
MARYLAND (.3%)
Maryland Dept. of Transportation
6.70%, 8/15/99 (Prere.) 5,000 5,512
-------------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (7.5%)
Massachusetts GO
5.80%, 8/1/97 7,000 7,221
6.25%, 7/1/02 12,500 13,605
6.875%, 7/1/01 (Prere.) 17,400 19,718
7.00%, 7/1/98 (LOC) 10,000 10,704
7.25%, 7/1/98 (Prere.) 14,500 15,899
9.25%, 7/1/00 10,000 12,013
Massachusetts Water Resources Auth.
BAN 4.125%, 10/15/95 14,000 14,004
BAN 4.30%, 10/15/96 7,000 7,019
5.80%, 7/15/97 7,145 7,348
6.875%, 12/1/01 (Prere.) 9,945 11,340
7.30%, 4/1/00 (Prere.) 5,000 5,662
-------------
STATE TOTAL 124,533
-------------
- ---------------------------------------------------------------------------------
MICHIGAN (2.2%)
Detroit GO
5.60%, 5/1/00 (2) 7,040 7,341
5.70%, 5/1/01 (2) 5,000 5,254
</TABLE>
14
<PAGE> 46
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Michigan GO
(Environmental Protection
Program)
6.00%, 11/1/02 $ 4,845 $ 5,255
(Recreation Program)
6.00%, 11/1/00 11,910 12,781
6.00%, 11/1/01 5,910 6,382
Michigan State Housing Development
Auth. VRDO
3.70%, 9/6/95 (LOC) 495 495
-------------
STATE TOTAL 37,508
-------------
- ---------------------------------------------------------------------------------
MINNESOTA (.2%)
Minnesota GO
4.50%, 8/1/96 2,500 2,519
-------------
- ---------------------------------------------------------------------------------
MISSOURI (1.2%)
Kansas City School Dist.
10.50%, 2/1/99 (3) 7,545 8,968
Missouri Higher Education
Loan Auth.
5.15%, 2/15/98 11,365 11,498
-------------
STATE TOTAL 20,466
-------------
- ---------------------------------------------------------------------------------
NEBRASKA (.4%)
Nebraska Public Power Dist. Rev.
4.30%, 1/1/96 5,000 5,010
Omaha Public Power Dist.
4.35%, 2/1/98 2,400 2,413
-------------
STATE TOTAL 7,423
-------------
- ---------------------------------------------------------------------------------
NEVADA (1.2%)
Clark County School Dist. GO
9.75%, 6/1/01 (1) 10,000 12,534
Nevada GO
9.70%, 5/1/97 6,275 6,836
-------------
STATE TOTAL 19,370
-------------
- ---------------------------------------------------------------------------------
NEW JERSEY (4.8%)
Camden County GO
4.65%, 6/1/97 (1) 3,565 3,602
New Jersey Health Care
Facility Finance Auth. Rev.
(Union Hosp./Mega Care)
5.40%, 7/1/96 2,170 2,185
5.75%, 7/1/97 2,670 2,710
New Jersey Transportation
Trust Fund
3.80%, 6/15/96 17,695 17,708
4.10%, 6/15/97 15,000 15,057
4.40%, 6/15/99 10,000 10,079
New Jersey Turnpike Auth.
5.20%, 1/1/98 15,000 15,306
6.00%, 1/1/98 8,000 8,298
Port Auth. of New York &
New Jersey
VRDO 3.25%, 9/5/95 5,500 5,500
-------------
STATE TOTAL 80,445
-------------
- ---------------------------------------------------------------------------------
NEW YORK (9.8%)
Battery Park City Auth.
7.70%, 5/1/99 (Prere.) 5,000 5,674
Erie County GO
10.00%, 2/1/96 (3) 4,530 4,647
10.00%, 2/1/97 (3) 4,325 4,672
Municipal Assistance Corp. for
New York City
6.80%, 7/1/96 6,000 6,147
New York City GO
VRDO 3.40%, 9/5/95 (LOC) 1,400 1,400
5.50%, 8/1/98 15,000 15,257
5.60%, 8/15/97 19,170 19,510
New York City Industrial
Development Agency
(USTA National Tennis
Center Project)
7.75%, 11/15/00 3,125 3,577
7.75%, 11/15/01 4,380 5,094
7.75%, 11/15/02 3,100 3,653
New York State Medical Care Facilities
7.875%, 8/15/00 (Prere.) 8,000 9,364
(Mental Health Service)
5.00%, 2/15/01 2,445 2,422
5.00%, 8/15/01 6,760 6,691
New York State COP
4.50%, 2/1/98 4,985 4,965
4.70%, 2/1/99 4,580 4,554
New York State Dormitory Auth.
(City Univ.)
5.50%, 7/1/98 6,300 6,459
9.00%, 7/1/00 (3) 15,515 18,628
New York State Housing
Finance Agency
8.875%, 11/1/95 (Prere.) 12,500 12,857
New York State Local Govt.
Assistance Corp.
4.50%, 4/1/96 2,000 2,007
7.00%, 4/1/01 (Prere.) 11,550 13,166
New York State Power Auth.
7.10%, 1/1/99 6,400 6,899
New York State Thruway Auth.
(Highway & Bridge Trust Fund)
4.80%, 4/1/02 (3) 5,000 5,033
-------------
STATE TOTAL 162,676
-------------
- ---------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 47
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA (.2%)
North Carolina Municipal Power
Agency (Catawba Electric)
5.10%, 1/1/98 $ 3,980 $ 4,008
-------------
- ---------------------------------------------------------------------------------
OHIO (2.5%)
Columbus Library Rev.
4.60%, 10/1/96 2,500 2,524
Columbus Sewer Improvement
9.00%, 9/15/96 5,065 5,337
Ohio Building Auth.
7.00%, 9/1/00 4,000 4,193
Ohio Higher Education Facilities Rev.
5.875%, 12/1/96 6,650 6,807
Ohio Public Facilities Comm.
4.40%, 12/1/96 7,000 7,043
6.50%, 12/1/97 2,950 3,103
Ohio Water Development Auth.
4.60%, 12/1/96 5,000 5,043
4.90%, 6/1/97 4,085 4,137
4.90%, 12/1/97 3,455 3,511
-------------
STATE TOTAL 41,698
-------------
- ---------------------------------------------------------------------------------
OKLAHOMA (1.4%)
Grand River Dam Auth.
4.90%, 6/1/98 17,500 17,832
6.30%, 6/1/97 3,450 3,580
Oklahoma City GO
10.00%, 8/1/96 2,465 2,601
-------------
STATE TOTAL 24,013
-------------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (9.3%)
Erie County Prison Auth. Lease Rev.
5.65%, 11/1/95 (1) (ETM) 3,125 3,135
Northumberland County Auth.
Commonwealth Lease Rev.
6.00%, 10/15/96 (1) 4,960 5,078
Pennsylvania Convention
Center Auth. Rev.
5.75%, 9/1/99 16,450 16,608
Pennsylvania GO
5.00%, 7/1/97 3,930 3,996
5.00%, 5/1/00 6,210 6,357
5.40%, 7/1/00 4,000 4,163
6.00%, 9/15/96 4,550 4,650
6.00%, 11/1/96 (1) 5,000 5,123
6.00%, 9/15/97 5,885 6,107
8.30%, 4/15/97 3,800 3,897
Pennsylvania Housing
Finance Agency
6.60%, 7/1/96 1,145 1,163
Pennsylvania Intergovernmental
Cooperation Auth.
5.20%, 6/15/96 (3) 5,650 5,706
5.40%, 6/15/97 (3) 4,000 4,086
Philadelphia GO
6.00%, 11/15/99 (3) 8,505 9,005
6.00%, 11/15/00 (3) 13,000 13,833
Philadelphia Hosp. & Higher
Education Facilities Auth. VRDO
(Pennsylvania Hosp.)
3.55%, 9/6/95 (3) 2,800 2,800
Philadelphia Municipal Lease
5.25%, 7/15/98 4,705 4,757
Philadelphia School Dist.
4.70%, 7/1/99 (1) 14,000 14,151
6.60%, 7/1/98 (2) 3,000 3,189
Philadelphia Water & Sewer
6.90%, 10/1/99 (Prere.) 15,000 16,710
Philadelphia Water &
Wastewater Rev.
4.25%, 6/15/96 15,000 15,042
6.25%, 8/1/02 (1) 5,450 5,910
-------------
STATE TOTAL 155,466
-------------
- ---------------------------------------------------------------------------------
PUERTO RICO (.8%)
Puerto Rico Electric Power Auth. Rev.
6.00%, 7/1/03 (1) 12,290 13,326
-------------
- ---------------------------------------------------------------------------------
RHODE ISLAND (.9%)
Rhode Island GO
6.00%, 5/15/97 4,215 4,347
Rhode Island Student Loan Auth. Rev.
5.40%, 12/1/95 10,000 10,031
-------------
STATE TOTAL 14,378
-------------
- ---------------------------------------------------------------------------------
SOUTH CAROLINA (.2%)
Piedmont Municipal Power Agency
4.90%, 1/1/97 3,350 3,363
-------------
- ---------------------------------------------------------------------------------
TENNESSEE (1.0%)
Metropolitan Govt. of Nashville &
Davidson County GO
4.75%, 5/15/01 16,125 16,365
-------------
- ---------------------------------------------------------------------------------
TEXAS (10.6%)
Anderson County
(Coffield Prison Farm Project)
8.00%, 3/15/97 (2) 4,135 4,376
</TABLE>
16
<PAGE> 48
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Austin Combined Utilities System Rev.
4.00%, 11/15/96 $ 7,820 $ 7,840
5.50%, 5/15/02 3,500 3,667
6.80%, 11/15/95 1,380 1,388
6.80%, 11/15/95 (Prere.) 1,620 1,630
9.75%, 5/15/97 (1) 2,835 3,092
9.75%, 5/15/97 (1) (Prere.) 1,165 1,275
10.00%, 5/15/00 (Prere.) 5,000 6,154
11.00%, 11/15/96 2,915 3,108
11.00%, 11/15/96 (ETM) 50 54
Corpus Christi Utilities System Rev.
6.20%, 7/15/96 (3) 2,965 3,025
6.30%, 7/15/97 (3) 2,460 2,559
Dallas-Fort Worth Regional Airport
3.75%, 11/1/96 (1) 4,000 3,989
4.00%, 11/1/97 (1) 9,000 8,966
Dallas Waterworks & Sewer System
5.90%, 10/1/97 7,265 7,535
6.75%, 4/1/96 11,250 11,440
6.90%, 4/1/97 2,000 2,087
Fort Worth Water & Sewer
5.20%, 2/15/96 3,000 3,021
Harris County Flood
Control Dist. GO
5.50%, 10/1/00 3,000 3,145
Harris County Road Refunding GO
5.50%, 10/1/00 2,645 2,780
5.60%, 10/1/97 10,000 10,329
8.60%, 10/1/95 2,000 2,008
Houston GO
3.90%, 3/1/96 2,415 2,417
Houston Hotel Occupancy
6.00%, 7/1/00 (4) 4,250 4,524
6.00%, 7/1/01 (4) 4,000 4,283
6.00%, 7/1/02 (4) 2,250 2,419
Houston Public Improvement
5.25%, 3/1/98 5,000 5,132
Houston Water & Sewer System
4.65%, 12/1/96 11,315 11,409
4.90%, 12/1/97 5,000 5,079
5.70%, 12/1/97 (2) 7,000 7,253
San Antonio Electric & Gas Rev.
6.75%, 2/1/97 2,000 2,073
Texas A&M Univ. Rev.
6.90%, 8/15/97 5,425 5,711
Texas GO
4.625%, 10/1/97 2,700 2,738
Texas Municipal Power Agency Rev.
5.00%, 9/1/96 8,585 8,667
5.80%, 9/1/03 (1) 6,750 7,157
6.40%, 9/1/98 (3) 3,000 3,174
Texas Public Finance Auth.
6.20%, 2/1/96 (1) 6,000 6,062
9.00%, 10/1/95 4,675 4,695
-------------
STATE TOTAL 176,261
-------------
- ---------------------------------------------------------------------------------
UTAH (.4%)
Intermountain Power Agency
3.90%, 7/1/96 7,000 6,999
-------------
- ---------------------------------------------------------------------------------
VIRGINIA (.5%)
Virginia Public School Auth.
4.00%, 1/1/97 2,500 2,502
4.25%, 1/1/98 5,250 5,271
-------------
STATE TOTAL 7,773
-------------
- ---------------------------------------------------------------------------------
WASHINGTON (5.1%)
Renton School Dist. GO
5.50%, 12/1/96 6,000 6,113
Washington GO
3.80%, 10/1/96 6,000 5,998
4.50%, 9/1/95 8,000 8,000
4.875%, 10/1/01 7,500 7,632
5.30%, 9/1/99 5,000 5,180
6.10%, 9/1/00 5,000 5,354
6.30%, 9/1/02 4,700 5,125
6.75%, 6/1/01 (Prere.) 30,000 33,255
7.00%, 10/1/99 7,555 8,290
-------------
STATE TOTAL 84,947
-------------
- ---------------------------------------------------------------------------------
WEST VIRGINIA (.1%)
Cabell Board of Education
8.00%, 5/1/97 (1) 2,120 2,253
-------------
- ---------------------------------------------------------------------------------
WISCONSIN (2.3%)
Wisconsin GO
4.125%, 11/1/98 33,625 33,638
6.60%, 5/1/98 (Prere.) 4,725 5,063
-------------
STATE TOTAL 38,701
-------------
- ---------------------------------------------------------------------------------
WYOMING (.4%)
Platte County PCR
4.20%, 1/1/99 3,370 3,285
4.40%, 1/2/00 3,945 3,828
-------------
STATE TOTAL 7,113
-------------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,658,138) 1,681,268
- ---------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 49
<TABLE>
<CAPTION>
Market
Value
(000)+
- ---------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-.8%)
- ---------------------------------------------------------------------------------
Other Assets--Note B $ 34,561
Liabilities (47,270)
----------
(12,709)
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 155,810,389 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,668,559
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.71
=================================================================================
</TABLE>
+See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 45.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,651,348 $10.60
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Losses--Note E (5,919) (.04)
Unrealized Appreciation of
Investments--Note F 23,130 .15
- ---------------------------------------------------------------------------------
NET ASSETS $1,668,559 $10.71
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
INTERMEDIATE-TERM Amount Value
PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (100.3%)
- ---------------------------------------------------------------------------------
ALABAMA (.1%)
Univ. of Southern Alabama Hosp.
7.00%, 5/15/04 (2) $ 3,250 $ 3,595
-------------
- ---------------------------------------------------------------------------------
ALASKA (.8%)
Alaska Housing Finance Corp. VRDO
3.60%, 9/6/95 5,900 5,900
3.70%, 9/6/95 23,300 23,300
Anchorage Electric Rev.
8.00%, 12/1/11 (1) 5,395 6,744
North Slope Borough GO
0.00%, 6/30/96 (1) 4,500 4,353
Valdez Marine Terminal VRDO
(Exxon Pipeline Project)
3.50%, 9/5/95 2,300 2,300
-------------
STATE TOTAL 42,597
-------------
- ---------------------------------------------------------------------------------
ARIZONA (1.7%)
Arizona Transportation Board
8.75%, 7/1/03 10,000 12,575
Maricopa County
(Samaritan Health Service)
7.15%, 12/1/04 (1) 9,900 11,564
7.15%, 12/1/05 (1) 6,080 7,002
Maricopa County COP
6.00%, 6/1/04 5,275 5,459
Maricopa County PCR VRDO
(Arizona Public Service)
3.40%, 9/5/95 (LOC) 3,000 3,000
3.55%, 9/5/95 8,500 8,500
Phoenix Highway Rev. GO
9.25%, 7/1/07 4,000 5,474
Salt River Project Agricultural
Improvement & Power Dist.
5.75%, 1/1/07 5,700 5,965
6.00%, 1/1/07 3,515 3,741
Tucson Unified School Dist.
7.50%, 7/1/06 (3) 8,840 10,712
7.50%, 7/1/07 (3) 9,125 11,088
7.50%, 7/1/08 (3) 8,060 9,805
-------------
STATE TOTAL 94,885
-------------
- ---------------------------------------------------------------------------------
CALIFORNIA (12.6%)
California GO
5.70%, 8/1/07 17,500 17,957
5.75%, 8/1/08 (3) 15,000 15,465
6.40%, 2/1/06 (1) 4,500 4,983
7.00%, 10/1/05 (1) 5,000 5,771
11.00%, 3/1/06 13,185 19,178
</TABLE>
18
<PAGE> 50
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
California Public Works Board
(State Prison)
5.25%, 12/1/04 (1) $20,000 $ 20,589
7.00%, 9/1/00 (Prere.) 7,400 8,383
(Univ. of California)
6.10%, 12/1/05 (2) 6,515 7,037
6.20%, 12/1/06 (2) 3,320 3,610
Clovis Unified School Dist. GO
0.00%, 8/1/00 7,000 5,528
0.00%, 8/1/01 11,180 8,362
Fresno Sewer Rev.
6.25%, 9/1/14 (2) 12,000 12,702
Irvine Ranch Water Dist. VRDO
3.60%, 9/5/95 (LOC) 4,500 4,500
Long Beach Financing Auth. Rev.
6.00%, 11/1/07 (2) 3,070 3,286
Long Beach Harbor Rev.
7.10%, 5/15/99 2,900 3,174
7.15%, 5/15/00 10,000 11,125
7.20%, 5/15/01 2,000 2,251
Los Angeles COP
7.50%, 6/1/98 (Prere.) 3,950 4,356
7.60%, 6/1/98 (Prere.) 3,995 4,416
Los Angeles County Sanitation
Dist. Finance Auth.
5.00%, 10/1/02 3,460 3,518
5.10%, 10/1/04 8,100 8,199
Los Angeles County Transportation
Auth. Sales Tax Rev.
VRDO 3.35%, 9/7/95 (1) 5,400 5,400
8.00%, 7/1/01 (2) 6,365 7,450
8.00%, 7/1/02 (2) 3,915 4,655
Los Angeles County Transportation
Commission Sales Tax Rev.
6.50%, 7/1/10 51,070 54,170
Metropolitan Water Dist. of
Southern California
7.75%, 7/1/01 (Prere.) 18,085 21,287
Northern California Power Agency
(Geothermal Project)
6.75%, 7/1/01 19,530 20,251
(Hydroelectric Project)
6.10%, 7/1/05 (1) 5,575 6,046
6.20%, 7/1/06 (1) 5,940 6,499
6.25%, 7/1/07 (1) 6,685 7,293
Oakland Redevelopment Agency
(Central Dist. Project)
5.75%, 2/1/04 (2) 1,535 1,627
5.90%, 2/1/05 (2) 4,870 5,200
6.00%, 2/1/07 (2) 3,360 3,601
Orange County Sanitation
Dist. VRDO
3.35%, 9/5/95 (3) 13,000 13,000
3.90%, 9/7/95 (2) (LOC) 66,245 66,245
Orange County VRDO
(Irvine Coast Assessment)
3.90%, 9/5/95 (LOC) 5,968 5,968
Poway Redevelopment Agency
(Paguay Project)
7.125%, 12/15/04 (3) 4,840 5,624
Riverside County Public
Facilities Project VRDO
3.50%, 9/5/95 (LOC) 5,700 5,700
Sacramento County TRAN
4.50%, 9/29/95 30,000 30,000
4.75%, 10/4/96 39,000 39,266
Sacramento Municipal Utility Dist.
Electric Rev.
6.60%, 2/1/97 4,000 4,129
San Bernardino COP
5.75%, 8/1/06 (1) 3,300 3,475
5.75%, 8/1/07 (1) 3,420 3,573
6.75%, 8/1/10 (Prere.) 11,385 12,915
7.00%, 8/1/08 (1) 9,045 10,405
7.00%, 8/1/09 (1) 9,705 11,118
7.00%, 8/1/10 (1) 10,525 11,990
San Diego County Regional
Transportation Auth. Sales Tax Rev.
7.00%, 4/1/01 (Prere.) 3,220 3,670
7.00%, 4/1/06 1,780 1,928
San Diego County TRAN
4.50%, 9/29/95 10,500 10,500
4.50%, 9/30/96 15,000 15,070
San Diego County Water Rev. COP
5.40%, 5/1/03 5,000 5,203
5.50%, 5/1/04 5,000 5,220
5.50%, 5/1/05 4,245 4,412
San Diego Local Govt. COP TRAN
4.75%, 10/18/96 (LOC) 15,000 15,089
San Diego Transportation Sales
Tax Rev.
5.00%, 4/1/07 (3) 12,730 12,456
San Diego Unified School Dist.
TRAN 4.75%, 10/10/96 (LOC) 25,000 25,254
Santa Clara County Finance Auth.
VRDO 3.45%, 9/6/95 8,800 8,800
Santa Clara VRDO
(El Camino Hosp.-Valley Medical)
3.40%, 9/5/95 (LOC) 9,400 9,400
</TABLE>
19
<PAGE> 51
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Southern California Public
Power Auth.
VRDO 3.15%, 9/6/95 (2) $ 3,300 $ 3,300
6.75%, 7/1/99 6,190 6,641
Southern California Rapid Transit
Dist. Rev.
5.70%, 9/1/04 (2) 14,040 14,881
Univ. of California Rev.
10.00%, 9/1/03 (2) 3,790 5,069
-------------
STATE TOTAL 688,170
-------------
- ---------------------------------------------------------------------------------
COLORADO (.6%)
Colorado Health Facilities Auth.
(Sisters of Charity Health
System Inc.)
8.50%, 5/15/04 (1) 17,500 21,990
Denver City & County School Dist.
6.95%, 12/15/00 (3) 9,250 10,193
-------------
STATE TOTAL 32,183
-------------
- ---------------------------------------------------------------------------------
CONNECTICUT (2.4%)
Connecticut Economic Recovery Notes
VRDO 3.55%, 9/6/95 8,800 8,800
Connecticut GO
5.30%, 11/15/06 10,875 11,132
5.40%, 11/15/07 24,010 24,480
Connecticut Resource Recovery Auth.
(Bridgeport Resco)
8.40%, 1/1/99 4,950 5,122
Connecticut Special Tax
Obligation Rev.
5.125%, 9/1/05 11,575 11,733
5.25%, 9/1/06 42,550 43,144
7.125%, 6/1/10 12,000 13,951
7.75%, 6/1/00 11,300 12,838
-------------
STATE TOTAL 131,200
-------------
- ---------------------------------------------------------------------------------
DELAWARE (.4%)
Delaware Transportation Auth. Rev.
5.625%, 7/1/06 (1) 11,420 11,833
5.80%, 7/1/08 7,545 7,717
-------------
STATE TOTAL 19,550
-------------
- ---------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (1.2%)
District of Columbia GO
6.10%, 6/1/11 (1) 7,000 7,060
6.30%, 6/1/08 (1) 15,000 15,570
7.50%, 6/1/99 (2) (Prere.) 17,875 20,146
7.75%, 6/1/97 (6) (Prere.) 5,000 5,389
8.00%, 6/1/96 (Prere.) 18,420 19,344
-------------
STATE TOTAL 67,509
-------------
- ---------------------------------------------------------------------------------
FLORIDA (3.8%)
Broward County School Dist. GO
5.30%, 2/15/04 3,295 3,406
5.40%, 2/15/05 5,000 5,176
5.50%, 2/15/06 10,080 10,410
Dade County Solid Waste System
7.00%, 10/1/01 6,240 6,483
Dade County Water & Sewer Rev.
VRDO 3.45%, 9/6/95 (3) 41,905 41,905
Florida Dept. of General Services
6.25%, 7/1/06 5,600 6,034
Florida School Board Assn.
(Orange County)
6.90%, 7/1/99 (2) 12,450 13,341
7.00%, 7/1/00 (2) 13,820 14,955
Gulf Breeze Local Govt.
Loan Program VRDO
3.55%, 9/7/95 (3) 37,700 37,700
Hillsborough County School Dist.
GO 7.10%, 8/15/03 23,665 26,783
City of Lakeland Electric &
Water Rev.
6.25%, 10/1/03 (3)++ 6,465 6,927
6.50%, 10/1/06 (3)++ 5,300 5,761
Palm Beach County School Board
6.00%, 8/1/05 (2) 6,115 6,638
6.00%, 8/1/06 (2) 6,480 7,008
Port Everglades Port Facilities Rev.
6.90%, 9/1/98 (3) 2,000 2,156
Putnam County Development Auth.
PCR 3.336%, 12/15/95* 10,000 9,988
-------------
STATE TOTAL 204,671
-------------
- ---------------------------------------------------------------------------------
GEORGIA (4.5%)
Burke County PCR
(Georgia Power Co.)
VRDO 3.60%, 9/5/95 3,700 3,700
(Oglethorpe Power Corp.)
VRDO 3.40%, 9/6/95 (3) 4,900 4,900
4.35%, 1/1/01 6,080 5,877
4.50%, 1/1/02 7,375 7,114
4.60%, 1/1/03 9,955 9,565
4.70%, 1/1/04 13,160 12,590
Fulton County School Dist.
6.375%, 5/1/10 15,000 16,467
Georgia GO
6.00%, 7/1/04 5,000 5,465
6.25%, 9/1/08++ 6,490 7,167
6.30%, 3/1/07 15,000 16,718
6.50%, 8/1/01 3,230 3,587
</TABLE>
20
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
6.75%, 9/1/10++ $ 8,000 $ 9,109
6.80%, 8/1/02 8,000 9,078
7.00%, 11/1/05 15,670 18,430
7.00%, 11/1/06 16,780 19,781
7.00%, 11/1/07 17,960 21,185
7.10%, 9/1/09++ 3,400 4,007
7.25%, 9/1/06++ 5,860 6,993
7.40%, 8/1/96 7,930 8,197
7.40%, 8/1/07 11,200 13,523
7.50%, 4/1/01 5,500 6,330
Monroe County Development Auth.
(Oglethorpe Power Corp.)
6.65%, 1/1/08 9,220 9,979
Municipal Electric Power Auth.
of Georgia
6.30%, 1/1/05 12,775 13,881
8.00%, 1/1/02 9,505 10,492
8.10%, 1/1/03 2,320 2,566
-------------
STATE TOTAL 246,701
-------------
- ---------------------------------------------------------------------------------
HAWAII (3.0%)
Hawaii Airport System Rev.
5.40%, 7/1/02 (1) 7,855 8,149
5.85%, 7/1/02 (1) 7,830 8,360
5.95%, 7/1/03 (1) 2,590 2,784
6.05%, 7/1/04 (1) 3,145 3,402
6.15%, 7/1/05 (1) 10,735 11,672
Hawaii GO
5.00%, 11/1/99 20,000 20,558
5.00%, 2/1/04 10,000 10,137
5.00%, 2/1/05 6,650 6,694
5.125%, 2/1/06 11,605 11,660
5.50%, 7/1/01 6,500 6,820
6.30%, 3/1/06 5,555 6,163
6.40%, 3/1/07 5,555 6,178
Honolulu City & County GO
5.75%, 1/1/06 8,825 9,331
6.00%, 1/1/08 5,000 5,314
6.30%, 3/1/10 4,830 5,080
8.00%, 10/1/09 30,560 38,603
-------------
STATE TOTAL 160,905
-------------
- ---------------------------------------------------------------------------------
ILLINOIS (6.2%)
Chicago Metropolitan Sanitation Dist.
8.75%, 1/1/00 (Prere.) 2,980 3,477
Chicago Metropolitan Water
Reclamation Dist.
5.50%, 12/1/08 5,300 5,354
5.85%, 12/1/03 6,355 6,814
5.90%, 12/1/06 4,450 4,708
5.95%, 12/1/07 7,200 7,590
6.00%, 12/1/08 9,900 10,399
6.05%, 12/1/09 3,000 3,137
6.25%, 12/1/08 15,000 16,041
6.50%, 12/1/07 10,000 11,089
Chicago Public Building Comm. Rev.
7.50%, 1/1/02 (1) 2,500 2,782
7.60%, 1/1/03 (1) 2,500 2,770
7.70%, 1/1/08 (1) (ETM) 4,000 4,381
9.00%, 1/1/96 1,150 1,169
Chicago School Finance Auth.
4.40%, 6/1/98 (1) 10,000 10,061
4.90%, 6/1/02 (3) 10,000 10,137
5.00%, 6/1/03 (3) 25,190 25,609
5.10%, 6/1/04 (3) 26,155 26,208
6.00%, 6/1/01 (3) 8,305 8,886
6.10%, 6/1/02 (3) 11,945 12,902
Chicago Water Rev.
5.50%, 11/1/03 (2) 5,000 5,206
Cook County GO
4.375%, 11/15/99 (1) 6,565 6,585
4.60%, 11/15/00 (1) 5,360 5,402
5.75%, 11/15/03 (3) 5,000 5,329
5.80%, 11/15/04 10,000 10,675
6.60%, 11/1/03 (2) 4,785 5,308
6.75%, 11/1/01 (2) 3,000 3,398
Decatur Water Rev. CP
(New South Water Treatment)
3.85%, 9/19/95 4,000 4,000
Illinois GO
6.25%, 10/1/05 6,000 6,482
Illinois Health Facility Auth.
(Lutheran General Health Systems)
7.25%, 4/1/99 (Prere.) 1,675 1,828
7.25%, 4/1/00 9,025 9,679
(Univ. of Chicago Hosp.)
VRDO 3.60%, 9/6/95 (1) 700 700
Illinois Regional Transportation Auth.
9.00%, 6/1/05 (2) 5,220 6,787
9.00%, 6/1/08 (2) 6,840 9,080
9.00%, 6/1/09 (2) 4,255 5,668
Illinois Sales Tax Rev.
6.50%, 6/15/13 5,000 5,437
Illinois Toll Highway Auth. VRDO
3.40%, 9/6/95 (1) 5,400 5,400
Joliet Port Dist. Marine Terminal
VRDO (Exxon Project)
3.35%, 9/5/95 8,200 8,200
</TABLE>
21
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Metropolitan Pier &
Exposition Auth.
6.50%, 6/1/06 $11,885 $ 13,051
6.75%, 6/1/10 25,000 27,460
7.25%, 6/15/05 15,000 17,284
-------------
STATE TOTAL 336,473
-------------
- ---------------------------------------------------------------------------------
INDIANA (1.1%)
East Chicago School Building Corp.
11.75%, 2/1/99 (Prere.) 5,000 6,139
Indiana Municipal Power Agency
5.875%, 1/1/10 (1) 4,500 4,656
Indiana State Office Building
Comm. Rev.
6.65%, 7/1/01 4,500 4,881
6.70%, 7/1/02 5,290 5,731
Indiana Univ. Student Fee Bonds
6.80%, 8/1/04 25,000 27,450
7.00%, 8/1/06 5,845 6,352
Marion County Hosp. Auth.
(Daughters of Charity)
9.75%, 11/1/00 4,600 4,741
-------------
STATE TOTAL 59,950
-------------
- ---------------------------------------------------------------------------------
KENTUCKY (1.4%)
Kentucky Development
Finance Auth.
(St. Elizabeth Medical Center)
6.625%, 11/1/04 (3) 20,025 21,942
(Sisters of Charity)
6.60%, 11/1/06 5,000 5,194
Kentucky Property & Buildings
5.50%, 9/1/03 8,000 8,330
5.60%, 9/1/04 3,000 3,136
5.70%, 9/1/05 7,350 7,676
6.875%, 8/1/06 10,400 11,801
Kentucky Turnpike Auth. Resource
Recovery Road Rev.
8.00%, 7/1/03 14,750 16,026
13.125%, 7/1/97 (Prere.) 820 951
13.125%, 1/1/98 (Prere.) 30 36
-------------
STATE TOTAL 75,092
-------------
- ---------------------------------------------------------------------------------
LOUISIANA (1.9%)
Jefferson Parish Sales Tax Rev.
6.75%, 12/1/06 (3) 11,000 12,087
Louisiana Gas & Fuel Tax Rev.
7.20%, 11/15/99 9,500 10,369
7.25%, 11/15/00 5,250 5,751
7.25%, 11/15/04 11,000 12,057
Louisiana GO
7.00%, 9/1/00 (Prere.) 11,540 13,020
8.75%, 9/1/00 (4) 8,830 10,472
8.75%, 9/1/01 (4) 9,445 11,258
Louisiana Public Facilities Auth. CP
(Sisters of Charity)
3.80%, 9/1/95 2,000 2,000
Louisiana Recovery Dist.
Sales Tax Rev.
7.375%, 7/1/96 (2) 4,000 4,089
New Orleans Public
Improvement GO
7.70%, 10/1/99 (6) (Prere.) 2,395 2,663
7.75%, 10/1/00 (6) (Prere.) 5,510 6,134
Plaquemines Port Harbor & Terminal
CP (Electro-Coal)
4.00%, 9/28/95 15,775 15,775
-------------
STATE TOTAL 105,675
-------------
- ---------------------------------------------------------------------------------
MAINE (.2%)
Maine Municipal Bond Bank
4.90%, 11/1/02 13,000 13,187
-------------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (6.1%)
Boston Water & Sewer Comm.
5.75%, 11/1/13 6,325 6,275
Massachusetts Bay Transit Auth.
5.30%, 3/1/04 32,380 33,317
7.25%, 3/1/03 (3) 16,000 17,897
Massachusetts GO
5.10%, 2/1/05 25,000 25,222
6.25%, 7/1/02 10,000 10,884
6.50%, 5/1/04 (3) 4,000 4,172
6.50%, 8/1/04 3,840 4,317
6.50%, 8/1/08 9,400 10,389
6.90%, 6/1/00 (2) 2,500 2,745
7.00%, 6/1/99 (Prere.) 3,000 3,330
7.00%, 6/1/02 (2) 5,000 5,469
7.50%, 12/1/00 (Prere.) 10,000 11,561
7.50%, 6/1/04 3,975 4,687
Massachusetts Industrial Finance
Agency (Refusetech Inc. Project)
6.15%, 7/1/02 5,040 5,138
6.30%, 7/1/05 21,500 22,262
Massachusetts Industrial Finance
Auth. Rev.
(BioMed Research Corp.)
0.00%, 8/1/04 10,000 5,847
7.10%, 8/1/99 21,435 23,270
</TABLE>
22
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Massachusetts Turnpike Auth.
4.70%, 1/1/03 $ 5,000 $ 4,933
4.75%, 1/1/04 2,500 2,453
Massachusetts Water Resources Auth.
5.25%, 3/1/07 5,000 4,928
5.25%, 3/1/09 7,175 6,979
5.50%, 11/1/07 32,860 33,045
6.50%, 7/15/10 30,220 32,588
6.50%, 7/15/19 37,515 40,274
7.25%, 4/1/01 9,800 10,947
-------------
STATE TOTAL 332,929
-------------
- ---------------------------------------------------------------------------------
MICHIGAN (1.8%)
Detroit GO
5.80%, 5/1/02 (2) 8,970 9,486
5.90%, 5/1/03 (2) 9,490 10,096
Michigan Municipal Bond Auth.
Local Govt. Loan Auth.
0.00%, 12/1/99 (3) (LOC) 6,000 4,962
0.00%, 12/1/00 (3) (LOC) 5,590 4,376
0.00%, 12/1/01 (3) (LOC) 9,630 7,146
Michigan Public Power Agency
5.30%, 1/1/05 13,075 13,335
5.375%, 1/1/06 13,790 13,996
5.50%, 1/1/07 14,545 14,745
5.50%, 1/1/08 9,360 9,393
Michigan State Building Auth.
6.50%, 10/1/03 (2) 3,000 3,309
University of Michigan Hosp. Rev.
VRDO 3.45%, 9/5/95 5,500 5,500
-------------
STATE TOTAL 96,344
-------------
- ---------------------------------------------------------------------------------
MINNESOTA (.3%)
Minnesota GO
4.70%, 8/1/97 16,315 16,553
-------------
- ---------------------------------------------------------------------------------
MISSISSIPPI (.3%)
Mississippi GO
5.25%, 5/1/08 5,805 5,783
6.50%, 5/1/03 4,285 4,776
7.00%, 5/1/05 4,840 5,611
-------------
STATE TOTAL 16,170
-------------
- ---------------------------------------------------------------------------------
MISSOURI (.4%)
Missouri Health & Education
Facilities Auth. CP
3.80%, 11/9/95 (LOC) 10,000 10,000
Missouri Housing
Development Comm.
9.80%, 8/1/97 15 15
St. Louis County Rockwood School
Dist. GO
8.50%, 2/1/01 8,000 9,476
-------------
STATE TOTAL 19,491
-------------
- ---------------------------------------------------------------------------------
MONTANA (.3%)
Forsyth PCR CP
(Pacific Project)
3.75%, 9/11/95 (LOC) 18,000 18,000
-------------
- ---------------------------------------------------------------------------------
NEBRASKA (.5%)
Consumers Public Power Dist.
Electric Rev.
5.10%, 1/1/03 14,500 14,529
Nebraska Public Power Dist.
5.60%, 7/1/03 13,175 13,829
-------------
STATE TOTAL 28,358
-------------
- ---------------------------------------------------------------------------------
NEVADA (2.4%)
Clark County Airport VRDO
3.45%, 9/6/95 (1) 32,300 32,300
Clark County GO
4.80%, 7/1/01 (1) 7,440 7,500
7.50%, 6/1/06 (2) 3,575 4,294
7.50%, 6/1/07 (2) 9,550 11,491
7.50%, 6/1/09 (2) 6,825 8,195
8.00%, 6/1/08 (2) 9,875 12,283
Clark County School Dist. GO
5.375%, 5/1/06 (3) 3,740 3,797
5.375%, 5/1/07 (3) 9,195 9,239
5.375%, 5/1/08 (3) 9,170 9,107
7.25%, 6/15/02 (1) 3,995 4,573
7.40%, 3/1/00 10,000 10,945
9.75%, 6/1/00 (1) 4,580 5,580
Nevada GO
6.00%, 5/1/05 10,450 11,038
-------------
STATE TOTAL 130,342
-------------
- ---------------------------------------------------------------------------------
NEW JERSEY (5.3%)
Camden County Municipal
Utilities Auth.
0.00%, 9/1/99 (3) 12,545 10,569
0.00%, 9/1/00 (3) 18,500 14,795
0.00%, 9/1/02 (3) 18,545 13,406
0.00%, 9/1/03 (3) 18,545 12,719
New Jersey Economic
Development Auth.
5.80%, 7/1/07 (1) 4,800 5,003
5.80%, 7/1/08 (1) 4,000 4,126
7.00%, 7/1/03 (1) 26,195 30,011
</TABLE>
23
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
New Jersey GO TOB VRDO
3.599%, 9/6/95* $19,600 $ 19,600
New Jersey Health Care Rev.
(Union Hosp./Mega Care)
6.00%, 7/1/98 2,820 2,882
6.20%, 7/1/99 3,080 3,165
6.40%, 7/1/00 3,295 3,401
New Jersey Sports & Exposition Auth.
VRDO 3.35%, 9/7/95 (1) 4,500 4,500
6.50%, 3/1/06 4,725 5,150
6.50%, 3/1/07 3,500 3,790
New Jersey Transportation
Trust Fund Auth.
VRDO 3.67%, 9/7/95 11,000 11,000
5.30%, 12/15/01 5,000 5,239
New Jersey Turnpike Auth.
VRDO 3.05%, 9/6/95 (3) (LOC) 5,800 5,800
4.75%, 1/1/06 (ETM) 25,970 25,905
5.90%, 1/1/03 4,700 4,989
5.90%, 1/1/04 19,030 20,197
6.00%, 1/1/05 22,220 23,547
6.50%, 1/1/09 50,000 54,626
Rutgers State Univ. Rev.
6.40%, 5/1/13 4,675 5,020
-------------
STATE TOTAL 289,440
-------------
- ---------------------------------------------------------------------------------
NEW YORK (9.6%)
Metropolitan Transportation Auth.
5.40%, 7/1/03 16,040 16,059
RAN 5.50%, 12/14/95 10,000 10,048
5.625%, 7/1/05 11,485 11,445
5.75%, 7/1/06 12,320 12,338
6.10%, 7/1/07 (1) 3,625 3,931
6.10%, 7/1/08 (1) 7,200 7,759
New York City GO
VRDO 3.35%, 9/5/95 (LOC) 4,400 4,400
VRDO 3.40%, 9/5/95 (LOC) 4,200 4,200
VRDO 3.50%, 9/6/95 (LOC) 1,100 1,100
TAN 4.50%, 2/15/96 15,000 15,043
6.00%, 8/15/99 13,070 13,463
6.10%, 8/1/02 4,000 4,109
6.15%, 8/15/00 14,670 15,149
6.25%, 8/1/03 14,000 14,323
6.375%, 8/1/04 20,000 20,720
7.00%, 8/1/97 (Prere.) 600 642
7.00%, 8/15/99 (3) 5,550 6,075
7.00%, 8/15/99 (3) (ETM) 9,450 10,405
7.00%, 8/1/00 5,050 5,265
7.00%, 8/1/03 6,000 6,475
7.00%, 2/1/05 5,000 5,408
8.00%, 8/1/99 4,560 5,017
8.00%, 8/1/99 (ETM) 615 695
8.00%, 11/1/00 (2) 4,420 4,839
8.125%, 11/1/04 (3) 11,155 12,290
New York City Industrial
Development Agency
(USTA National Tennis
Center Project)
6.375%, 11/15/07 (4) 6,200 6,785
6.40%, 11/15/08 (4) 4,105 4,457
6.50%, 11/15/09 (4) 6,745 7,309
6.50%, 11/15/10 (4) 3,500 3,756
New York City Municipal Finance
Auth. Water and Sewer System Rev.
VRDO 3.35%, 9/5/95 9,400 9,400
VRDO 3.35%, 9/5/95 (3) 1,500 1,500
6.00%, 6/15/10 4,000 4,110
New York City Transit Auth. RAN
5.50%, 12/14/95 7,000 7,029
New York State Dormitory Auth.
(City Univ.)
6.25%, 7/1/03 4,250 4,525
6.35%, 7/1/04 2,500 2,670
6.45%, 7/1/05 1,500 1,606
7.00%, 7/1/01 10,000 11,199
(New York Univ.)
6.375%, 7/1/07 (3) 27,000 28,892
(State Univ.)
5.80%, 5/15/05 5,400 5,435
5.90%, 5/15/06 2,000 2,020
6.10%, 5/15/08 2,000 2,028
7.00%, 5/15/01 18,285 19,643
7.10%, 5/15/00 6,050 6,540
New York State GO
7.80%, 11/15/99 5,000 5,632
New York State Local Govt.
Assistance Corp.
VRDO 3.45%, 9/6/95 (LOC) 25,000 25,000
4.25%, 4/1/00 2,500 2,475
4.375%, 4/1/01 3,000 2,957
New York State Medical Care Facility
7.875%, 8/15/00 (Prere.) 6,815 7,977
New York State Thruway Auth.
6.25%, 4/1/06 (3) 10,000 11,000
New York State Urban
Development Corp.
6.40%, 1/1/04 9,685 10,188
</TABLE>
24
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<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Onondaga County PCR
(Anheuser Busch)
6.625%, 8/1/06 $10,000 $ 10,718
Suffolk County Water Auth.
6.80%, 8/17/10 (ETM) 10,660 11,695
Triborough Bridge & Tunnel
Auth. Rev.
0.00%, 1/1/03 19,185 12,454
5.80%, 1/1/06 6,000 6,339
6.00%, 1/1/12 12,000 12,378
6.60%, 1/1/10 59,325 65,421
-------------
STATE TOTAL 524,336
-------------
- ---------------------------------------------------------------------------------
NORTH CAROLINA (1.6%)
Charlotte Airport VRDO
3.45%, 9/6/95 (1) 5,100 5,100
North Carolina Educational
Facilities Auth. VRDO
(Duke Univ.)
3.751%, 9/7/95 4,100 4,100
North Carolina Municipal
Power Agency
(Catawba Electric)
CP 3.50%, 10/12/95 12,000 11,998
6.00%, 1/1/04 7,000 7,193
6.00%, 1/1/05 28,750 29,428
7.00%, 1/1/00 (Prere.) 6,040 6,759
7.25%, 1/1/07 10,410 11,581
Wake County Industrial Facilities &
Pollution Control Finance Auth.
(Carolina Power & Light)
VRDO 3.50%, 9/6/95 9,000 9,000
-------------
STATE TOTAL 85,159
-------------
- ---------------------------------------------------------------------------------
OHIO (2.4%)
Cleveland School Dist.
8.125%, 12/1/98 (ETM) 2,815 3,119
9.00%, 12/1/98 (Prere.) 4,000 4,657
Cleveland Water Works
6.25%, 1/1/05 (2) 9,155 9,892
Columbus Electric VRDO
3.70%, 10/2/95 (LOC) 8,200 8,200
Columbus Sewer Rev. VRDO
3.45%, 9/7/95 900 900
Cuyahoga County Hosp. Improvement
VRDO (St. Luke's Hosp.)
3.70%, 9/6/95 (LOC) 5,110 5,110
Ohio Air Quality Development Auth.
VRDO (Mead Corp.)
3.40%, 9/5/95 (LOC) 3,400 3,400
Ohio Building Auth.
(State Correctional Facilities)
5.70%, 10/1/03 3,305 3,507
5.70%, 10/1/04 2,725 2,887
5.80%, 10/1/06 4,360 4,612
5.90%, 10/1/07 2,500 2,646
6.50%, 10/1/02 3,790 4,197
6.50%, 10/1/02 (1) 5,350 5,924
6.50%, 10/1/03 5,500 6,070
6.50%, 10/1/03 (1) 5,710 6,354
6.50%, 10/1/04 2,500 2,745
7.20%, 8/1/00 10,000 11,175
7.25%, 8/1/01 7,500 8,395
7.30%, 8/1/02 10,000 11,211
7.35%, 8/1/03 4,945 5,553
(State Data Center)
5.70%, 10/1/04 2,895 3,067
5.75%, 10/1/05 3,070 3,256
Ohio Higher Education Facilities
5.90%, 12/1/05 8,175 8,637
Ohio Public Facilities Comm.
5.50%, 12/1/06 5,465 5,613
Ohio Student Loan VRDO
3.50%, 9/6/95 1,800 1,800
-------------
STATE TOTAL 132,927
-------------
- ---------------------------------------------------------------------------------
OKLAHOMA (3.0%)
Grand River Dam Auth. Electric Rev.
5.50%, 6/1/13 (2) 8,100 7,991
5.70%, 6/1/05 20,000 21,100
5.75%, 6/1/06 19,350 20,363
5.875%, 6/1/07 14,500 15,299
6.25%, 6/1/11 (2) 7,600 8,245
8.00%, 6/1/02 21,000 24,926
Oklahoma Industrial Auth.
(Baptist Medical Center)
CP 3.50%, 10/12/95 12,700 12,700
CP 4.00%, 9/13/95 7,900 7,900
CP 4.00%, 10/27/95 20,000 20,000
(St. Anthony's Hosp.)
7.50%, 10/1/03 (1) 5,470 5,594
Tulsa County Industrial Auth.
(St. Francis Hosp.)
5.15%, 12/15/03* 8,715 8,714
Tulsa Metropolitan Utility Auth.
7.00%, 2/1/03 8,465 9,414
-------------
STATE TOTAL 162,246
-------------
- ---------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 57
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
OREGON (.6%)
Oregon Veterans Welfare
Program GO
VRDO 3.70%, 9/6/95 $32,745 $ 32,745
-------------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (7.0%)
Allegheny County GO
7.45%, 2/15/98 2,000 2,149
7.60%, 11/1/98 (Prere.) 2,000 2,203
Berks County GO
7.25%, 11/15/00 (3) (Prere.) 10,000 11,436
Erie County Prison Auth.
Commonwealth Lease Rev.
6.75%, 11/1/01 (1) (Prere.) 5,295 5,918
Northumberland County
Commonwealth Lease Rev.
6.70%, 10/15/03 (1) 7,005 7,684
7.75%, 10/15/04 (1) 6,000 6,915
Pennsylvania Convention
Center Auth.
6.25%, 9/1/04 15,200 15,761
Pennsylvania COP
4.80%, 7/1/01 (2) 20,000 20,120
4.90%, 7/1/02 (2) 13,665 13,759
5.00%, 7/1/03 (2) 6,555 6,614
Pennsylvania GO
5.00%, 4/15/05 24,290 24,362
5.00%, 4/15/07 7,950 7,771
5.00%, 4/15/08 9,250 8,898
5.25%, 5/1/06 (3) 8,660 8,794
5.30%, 5/1/07 (3) 2,500 2,521
6.20%, 11/15/04 12,480 13,477
6.50%, 11/1/06 4,260 4,612
7.10%, 11/1/08 6,700 7,495
10.00%, 4/15/02 (2) 10,160 13,139
Pennsylvania Industrial
Development Auth.
6.50%, 7/1/98 9,850 10,440
6.60%, 1/1/99 5,065 5,407
6.60%, 7/1/99 10,355 11,150
6.70%, 1/2/00 7,420 8,031
6.70%, 7/1/00 9,080 9,905
6.80%, 1/1/01 5,000 5,495
6.80%, 7/1/01 5,480 6,067
Pennsylvania Intergovernmental
Cooperation Auth.
4.70%, 6/15/01 (3) 3,410 3,432
4.80%, 6/15/02 (3) 6,275 6,278
5.75%, 6/15/99 (3) 17,000 17,773
Philadelphia GO
CP 3.85%, 10/23/95 (LOC) 14,800 14,803
4.60%, 5/15/99 (3) 4,345 4,390
6.00%, 11/15/00 (3) 11,995 12,763
Philadelphia Municipal Lease Rev.
6.00%, 7/15/03 5,065 5,137
Philadelphia School Dist. GO
0.00%, 7/1/00 (2) 15,500 12,418
6.70%, 7/1/99 (2) 9,000 9,735
Philadelphia Water & Sewer Rev.
6.875%, 10/1/06 (1) 15,455 16,879
Philadelphia Water & Wastewater Rev.
4.75%, 6/15/98 11,540 11,638
6.25%, 8/1/07 (1) 5,000 5,471
6.25%, 8/1/08 (1) 5,000 5,440
6.25%, 8/1/09 (1) 3,400 3,673
6.25%, 8/1/10 (1) 2,730 2,922
Sayre Health Care Facility Auth.
VRDO 3.50%, 9/6/95 (2) 3,300 3,300
Schuylkill Redevelopment Auth.
6.95%, 6/1/04 (3) 3,995 4,436
-------------
STATE TOTAL 380,611
-------------
- ---------------------------------------------------------------------------------
PUERTO RICO (.6%)
Puerto Rico Electric Power Auth. Rev.
6.50%, 7/1/05 (1) 20,525 23,027
Puerto Rico Govt.
Development Bank VRDO
3.20%, 9/6/95 (LOC) 200 200
Puerto Rico Telephone Auth. Rev.
5.40%, 1/1/08 9,550 9,577
-------------
STATE TOTAL 32,804
-------------
- ---------------------------------------------------------------------------------
RHODE ISLAND (.5%)
Rhode Island Depositors Economic
Protection Corp.
6.55%, 8/1/10 (1) 26,850 29,206
-------------
- ---------------------------------------------------------------------------------
SOUTH CAROLINA (.2%)
Charleston Water Works & Sewer
9.625%, 1/1/96 (Prere.) 4,000 4,157
Piedmont Municipal Power
Agency Rev.
5.40%, 1/1/07 (1) 3,200 3,268
South Carolina Capital Improvement
GO 6.50%, 2/1/96 3,000 3,037
-------------
STATE TOTAL 10,462
-------------
- ---------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 58
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
SOUTH DAKOTA (.1%)
South Dakota Health & Education
Auth. Rev.
(McKennan Hosp.)
7.50%, 7/1/04 (1) $ 5,845 $ 6,504
-------------
- ---------------------------------------------------------------------------------
TEXAS (10.0%)
Anderson County Rev.
(Coffield Prison Farm Project)
5.50%, 3/15/04 (2) 5,715 5,940
5.50%, 3/15/05 (2) 5,590 5,771
5.50%, 3/15/06 (2) 6,985 7,153
Austin Combined Utilities System Rev.
5.125%, 11/15/02 9,500 9,779
5.20%, 11/15/03 3,360 3,462
5.30%, 5/15/04 5,770 5,948
5.30%, 11/15/04 5,735 5,920
5.50%, 5/15/06 (1) 5,000 5,147
5.80%, 11/15/06 5,255 5,561
6.00%, 11/15/06 (1) 23,265 25,199
7.25%, 11/15/03 6,000 6,600
Bell County Health Facilities
Development Corp.
(Scott & White Hosp.)
7.625%, 9/1/03 8,340 9,121
Bexar County VRDO
(Incarnate Word Health Service)
3.55%, 9/6/95 (4) 6,800 6,800
Corpus Christi GO
7.50%, 11/1/97 (2) (Prere.) 1,155 1,240
7.50%, 11/1/98 (2) 1,865 1,986
Corpus Christi Port Auth. CP
(Union Pacific Project)
4.25%, 10/31/95 4,000 4,000
Dallas-Fort Worth Regional Airport
8.75%, 11/1/03 4,890 5,356
Dallas Independent School Dist.
5.60%, 8/15/04 8,000 8,381
5.70%, 8/15/06 4,750 4,931
Harris County Flood Control Dist.
GO 5.60%, 10/1/01 8,900 9,401
Harris County School Health System
(Sisters of Charity)
CP 3.80%, 9/1/95 6,650 6,650
Harris County Toll Road
VRDO 3.50%, 9/6/95 62,100 62,100
6.30%, 8/15/02 (3) (Prere.) 4,470 4,976
6.30%, 8/15/04 (3) 840 921
Houston GO
VRDO 3.55%, 9/6/95 (LOC) 3,000 3,000
5.00%, 3/1/04 6,265 6,343
5.10%, 3/1/06 12,200 12,230
5.80%, 3/1/02 5,080 5,407
7.00%, 3/1/08 48,405 56,001
7.30%, 3/1/98 (3) (Prere.) 3,000 3,225
Houston Hotel Occupancy
5.25%, 7/1/07 (4) 6,585 6,590
Houston Housing Finance Corp.
TOB VRDO 3.70%, 9/7/95 (4) 4,075 4,075
Houston Water & Sewer System Rev.
7.00%, 12/1/01 (2) 3,220 3,639
7.00%, 12/1/02 (2) 4,125 4,707
7.00%, 12/1/03 (2) 3,100 3,567
7.60%, 12/1/02 (6) 4,010 4,316
San Antonio Electric & Gas
5.50%, 2/1/04 4,545 4,721
5.80%, 2/1/06 8,000 8,402
Tarrant County Water Control
& Improvement Dist.
4.50%, 3/1/11 (3) 5,000 4,273
Texas GO
TRAN 4.75%, 8/30/96++ 25,000 25,202
6.00%, 10/1/06 6,000 6,495
8.00%, 10/1/07 50,000 62,827
6.00%, 10/1/08 5,000 5,351
Texas Municipal Power Agency
6.10%, 9/1/07 (1) 12,500 13,565
6.10%, 9/1/08 (1) 27,840 30,158
6.10%, 9/1/09 (1) 5,000 5,387
Texas Public Finance Auth.
Building Rev.
5.45%, 10/1/06 3,260 3,370
6.60%, 2/1/00 (1) 5,000 5,414
6.75%, 2/1/02 (1) 5,000 5,480
6.80%, 2/1/03 (1) 5,000 5,467
Texas Water Resource Finance Auth.
7.50%, 8/15/01 3,945 4,302
Univ. of Texas Permanent Univ. Fund
6.40%, 7/1/02 5,000 5,488
Univ. of Texas Rev.
7.00%, 8/15/07 20,750 22,902
-------------
STATE TOTAL 544,247
-------------
- ---------------------------------------------------------------------------------
UTAH (.4%)
Salt Lake County PCR VRDO
(British Petroleum)
3.40%, 9/5/95 3,500 3,500
</TABLE>
27
<PAGE> 59
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Utah GO
6.00%, 7/1/96 $ 5,000 $ 5,095
Utah Housing Finance Auth. VRDO
3.60%, 9/6/95 11,700 11,700
-------------
STATE TOTAL 20,295
-------------
- ---------------------------------------------------------------------------------
VIRGINIA (.2%)
Chesapeake Bay Bridge & Tunnel
5.40%, 7/1/05 (3) 6,090 6,291
Fairfax County GO
7.25%, 6/1/00 5,805 6,512
-------------
STATE TOTAL 12,803
-------------
- ---------------------------------------------------------------------------------
WASHINGTON (2.7%)
King County GO
6.00%, 12/1/04 5,000 5,367
6.10%, 12/1/05 5,000 5,366
Seattle Water System
4.90%, 12/1/02 5,890 5,968
5.00%, 12/1/03 2,000 2,032
5.10%, 12/1/04 4,000 4,068
5.20%, 12/1/05 2,320 2,359
Tacoma Electric System Rev.
5.70%, 1/1/03 (2) 6,845 7,234
Washington GO
5.60%, 9/1/04 5,000 5,263
5.625%, 5/1/08 7,535 7,666
5.75%, 9/1/07 19,950 20,957
5.75%, 9/1/08 4,000 4,164
6.10%, 6/1/06 9,495 10,305
6.125%, 6/1/07 10,110 10,942
6.20%, 6/1/08 10,765 11,654
6.25%, 6/1/09 11,465 12,378
6.25%, 6/1/10 7,450 7,970
6.25%, 2/1/11 6,680 7,117
7.00%, 10/1/98 3,900 4,210
7.10%, 9/1/99 7,500 8,070
7.20%, 9/1/98 (Prere.) 2,365 2,566
-------------
STATE TOTAL 145,656
-------------
- ---------------------------------------------------------------------------------
WISCONSIN (1.4%)
Wisconsin GO
4.25%, 11/1/99 4,000 4,000
6.20%, 5/1/06 20,990 22,906
6.25%, 5/1/07 22,970 25,058
6.25%, 5/1/08 24,365 26,432
-------------
STATE TOTAL 78,396
-------------
- ---------------------------------------------------------------------------------
WYOMING (.7%)
Lincoln PCR VRDO
(Exxon)
3.50%, 9/5/95 8,000 8,000
Platte County PCR
4.50%, 1/1/01 2,250 2,170
4.60%, 1/1/02 2,430 2,331
Sublette County VRDO
(Exxon)
3.50%, 9/5/95 24,900 24,900
-------------
STATE TOTAL 37,401
-------------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $5,208,122) 5,465,768
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.3%)
Other Assets--Note B 96,845
Liabilities (114,352)
-------------
(17,507)
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 414,551,001 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $5,448,261
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $13.14
=================================================================================
</TABLE>
+See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 45.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $5,215,236 $12.58
Undistributed Net
Investment Income -- --
Overdistributed Net
Realized Gains--Note E (27,471) (.07)
Unrealized Appreciation of
Investments--Note F 260,496 .63
- ---------------------------------------------------------------------------------
NET ASSETS $5,448,261 $13.14
- ---------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 60
<TABLE>
<CAPTION>
Face Market
INSURED LONG-TERM Amount Value
PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (100.0%)
- ---------------------------------------------------------------------------------
ALABAMA (.7%)
Birmingham Medical Center
(Special Care Medical Center)
7.25%, 7/1/15 (1) $ 6,715 $ 7,028
Macintosh Industrial
Development Auth. VRDO
(Ciba-Geigy)
3.60%, 9/6/95 (LOC) 600 600
Medical Clinic Board of Bessemer
(Bessemer-Carraway Hosp.)
7.25%, 4/1/15 (1) 5,000 5,518
-------------
STATE TOTAL 13,146
-------------
- ---------------------------------------------------------------------------------
ALASKA (2.1%)
Alaska Housing Finance Corp. VRDO
3.60%, 9/6/95 15,100 15,100
Anchorage Electric Rev.
8.00%, 12/1/09 (1) 2,565 3,207
8.00%, 12/1/10 (1) 2,960 3,692
Municipality of Anchorage GO
7.20%, 6/1/17 (2) 11,000 11,971
7.625%, 8/1/96 (3) (Prere.) 3,000 3,164
North Slope Borough GO
9.85%, 6/30/97 (2) (ETM) 3,000 3,310
10.00%, 6/30/04 (2) (ETM) 850 1,159
-------------
STATE TOTAL 41,603
-------------
- ---------------------------------------------------------------------------------
ARIZONA (.6%)
Maricopa County
(Samaritan Health Service)
7.00%, 12/1/16 (1) 8,650 10,113
Tucson GO
5.50%, 7/1/12 (3) 1,500 1,471
-------------
STATE TOTAL 11,584
-------------
- ---------------------------------------------------------------------------------
ARKANSAS (.5%)
North Little Rock Electric System
6.50%, 7/1/10 (1) 3,500 3,893
6.50%, 7/1/15 (1) 4,500 4,958
-------------
STATE TOTAL 8,851
-------------
- ---------------------------------------------------------------------------------
CALIFORNIA (19.7%)
Anaheim Public Improvement Corp.
COP VRDO
3.25%, 9/6/95 (2) (LOC) 5,500 5,500
California Health Facilities Finance
Auth. (Adventist Health System)
6.75%, 3/1/11 (1) 12,000 12,858
California Housing Finance Agency
8.625%, 8/1/15 (1) 2,550 2,701
Contra Costa Transportation Auth.
Sales Tax
VRDO
3.40%, 9/6/95 (3) 900 900
Contra Costa Water Dist. Rev.
5.00%, 10/1/24 (1) 23,000 19,908
Culver City Redevelopment Auth.
7.10%, 11/1/99 (2) (Prere.) 390 428
Fresno COP (City Hall Project)
6.375%, 8/1/10 (2) 10,500 10,968
Long Beach Financing Auth. Rev.
6.00%, 11/1/09 (2) 3,735 3,951
Modesto Irrigation Dist.
Finance Auth.
(Woodland Project)
6.50%, 10/1/22 (2) 20,225 21,999
Modesto San Juan Public
Power Agency
6.125%, 7/1/13 (2) 7,000 7,378
6.75%, 7/1/20 (1) 13,000 14,557
Northern California Power Agency
(Combustion Turbine Project)
6.00%, 8/15/10 (1) 3,500 3,536
(Hydroelectric Project)
5.50%, 7/1/23 (1) 23,200 21,726
Oakland Redevelopment Agency
(Central Dist. Project)
5.50%, 2/1/14 (2) 6,300 6,094
6.00%, 2/1/08 (2) 5,585 5,932
Orange County Sanitation
Dist. VRDO
3.40%, 9/5/95 (2) 18,416 18,416
3.40%, 9/5/95 (LOC) 2,700 2,700
3.90%, 9/7/95 (2) (LOC) 17,145 17,145
Pasadena Electric Works Rev.
5.375%, 8/1/12 9,000 8,461
Pittsburg Redevelopment Agency
5.50%, 8/1/07 (3) 3,000 3,053
5.50%, 8/1/15 (3) 5,000 4,756
Riverside County
Transportation Comm.
5.75%, 6/1/07 (2) 3,495 3,649
5.75%, 6/1/08 (2) 1,750 1,811
Sacramento County TRAN
4.50%, 9/29/95 30,000 30,000
4.75%, 10/4/96 7,500 7,551
Sacramento Municipal Utility Dist.
5.75%, 8/15/13 (1) 12,360 12,264
6.50%, 9/1/13 (1) 8,895 9,769
</TABLE>
29
<PAGE> 61
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
San Diego County TRAN
4.50%, 9/29/95 $15,000 $ 15,000
4.50%, 9/30/96 15,000 15,070
San Diego Area Local Govt. TRAN
4.75%, 10/18/96 9,000 9,054
San Jose Merged Area
Redevelopment Project Rev.
7.50%, 8/1/96 (1) (Prere.) 2,700 2,847
7.50%, 8/1/96 (3) (Prere.) 1,440 1,518
San Jose Tax Redevelopment
6.00%, 8/1/10 (1) 8,105 8,539
Santa Clara County Finance Auth.
Lease Rev. VRDO
3.45%, 9/6/95 15,400 15,400
Santa Clara Redevelopment Agency
(Bayshore North Project)
7.00%, 7/1/10 (2) 3,000 3,468
Santa Clara Valley Water Dist.
6.00%, 2/1/24 (3) 5,000 5,000
Santa Margarita/Dana Point
Improvement Dist.
5.75%, 8/1/20 (1) 8,500 8,248
Santa Rosa Waste Water Recovery
6.00%, 9/1/15 (3) 5,000 5,129
South County Waste Water Auth.
(Gilroy)
5.50%, 8/1/22 (3) 8,000 7,458
(Morgan Hill)
5.50%, 8/1/22 (3) 7,000 6,526
Southern California Public Power Auth.
(Palo Verde)
5.00%, 7/1/15 (2) 2,605 2,338
Southern California Rapid Transit Dist.
5.80%, 9/1/06 (2) 4,000 4,244
5.90%, 9/1/07 (2) 3,155 3,368
Transmission Agency of Northern
California
5.25%, 5/1/08 (1) 4,000 3,970
Ukiah Electric Rev.
6.25%, 6/1/18 (1) 6,330 6,711
-------------
STATE TOTAL 381,899
-------------
- ---------------------------------------------------------------------------------
COLORADO (.8%)
Colorado Health Facilities Auth.
(Sisters of Charity Health
System Inc.)
6.00%, 5/15/13 (1) 12,500 12,583
Denver County Health Facilities
(St. Anthony's Hosp.)
7.70%, 5/1/07 (1) 2,800 3,087
-------------
STATE TOTAL 15,670
-------------
- ---------------------------------------------------------------------------------
CONNECTICUT (.2%)
Connecticut Development Auth.
(Connecticut Light & Power)
PCR VRDO 3.55%, 9/6/95 (LOC) 300 300
South Central Connecticut Regional
Water Auth.
5.75%, 8/1/12 (3) 3,100 3,123
-------------
STATE TOTAL 3,423
-------------
- ---------------------------------------------------------------------------------
DELAWARE (1.1%)
Delaware Economic
Development Auth.
(Delmarva Power and Light)
7.30%, 9/1/15 (3) 4,000 4,409
Delaware Health Facilities Auth.
(Delaware Medical Center)
7.00%, 10/1/15 (1) 6,000 6,503
Dover Electric Rev.
5.75%, 7/1/15 (3) 5,225 5,164
6.10%, 7/1/11 (3) 2,000 2,063
Sussex County Waste Water Rev.
6.60%, 6/15/25 (1) 2,500 2,633
-------------
STATE TOTAL 20,772
-------------
- ---------------------------------------------------------------------------------
DISTRICT OF COLUMBIA
District of Columbia Housing
Finance Agency
10.25%, 11/1/09 (3) 875 897
-------------
- ---------------------------------------------------------------------------------
FLORIDA (8.3%)
Coral Springs Improvement Dist. GO
Water & Sewer
6.00%, 6/1/10 (1) 3,000 3,175
Dade County Water &
Sewer System Rev. VRDO
3.45%, 9/6/95 (3) 10,815 10,815
Davie Water & Sewer Rev.
6.375%, 10/1/12 (2) 2,620 2,856
Florida Housing Finance Agency
9.125%, 12/15/16 (3) 10 10
Florida Municipal Power Agency
(Stanton Project)
5.00%, 10/1/19 (1) 8,100 7,150
Gulf Breeze Local Govt.
Loan Program VRDO
3.55%, 9/7/95 (3) 17,525 17,525
City of Jacksonville Guaranteed
Entitlement Rev.
5.50%, 10/1/12 (2) 4,900 4,804
Lee County Gas Tax
5.50%, 10/1/09 (1) 2,000 2,006
</TABLE>
30
<PAGE> 62
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Orange and Orlando County
Expressway Auth.
8.25%, 7/1/13 (3) $ 9,695 $ 12,555
8.25%, 7/1/15 (3) 8,360 10,813
8.25%, 7/1/16 (3) 12,295 15,998
Orange County Health Auth. Hosp.
(Adventist for Sunbelt Group)
6.25%, 11/15/10 (2) 4,000 4,224
Palm Beach Criminal Justice
7.20%, 6/1/14 (3) 16,300 19,249
7.20%, 6/1/15 (3) 4,000 4,745
Palm Beach Solid Waste Auth.
7.40%, 12/1/05 (6) 750 841
St. Lucie County Utilities
System Rev.
6.00%, 10/1/20 (3) (ETM) 2,350 2,434
Seacoast Utility Auth. Water & Sewer
5.00%, 3/1/19 (3) 2,000 1,768
5.50%, 3/1/13 (3) 4,000 3,891
5.50%, 3/1/19 (3) 2,000 1,919
Tampa Utilities Rev.
6.75%, 10/1/10 (2) 9,330 10,587
6.75%, 10/1/11 (2) 9,965 11,294
6.75%, 10/1/12 (2) 10,635 12,019
-------------
STATE TOTAL 160,678
-------------
- ---------------------------------------------------------------------------------
GEORGIA (.8%)
Burke County Development Auth. PCR
VRDO (Oglethorpe Power)
3.45%, 9/6/95 5,100 5,100
Henry County School Dist. GO
6.45%, 8/1/11 (1) 4,000 4,381
Private Colleges & Universities Auth.
(Mercer Univ.)
6.50%, 11/1/15 (1) 5,000 5,463
-------------
STATE TOTAL 14,944
-------------
- ---------------------------------------------------------------------------------
HAWAII (1.4%)
Hawaii Airport System Rev.
6.35%, 7/1/07 (1) 8,000 8,692
Hawaii GO
5.50%, 5/1/08 (3) 2,000 2,042
5.55%, 5/1/09 (3) 1,000 1,015
5.55%, 5/1/10 (3) 2,500 2,507
Honolulu City & County GO
8.00%, 10/1/10 11,000 13,898
-------------
STATE TOTAL 28,154
-------------
- ---------------------------------------------------------------------------------
ILLINOIS (5.2%)
Chicago Board of Education GO
6.25%, 1/1/11 (1) 7,000 7,426
Chicago Public Building Comm.
7.00%, 1/1/20 (1) (ETM) 21,500 24,777
Chicago Waste Water Transmission
6.50%, 1/1/08 (3) 1,315 1,448
Cook County GO
7.25%, 11/1/07 (1) 6,000 7,092
Illinois Development
Finance Auth.
PCR (Illinois Power Co.)
7.40%, 12/1/24 (1) 14,000 16,032
Illinois Regional Transit
Auth. Cook, DuPage and
Kane Counties GO
7.20%, 11/1/20 (2) 24,000 28,061
O'Hare International Airport Rev.
6.375%, 1/1/15 (1) 11,500 11,821
Will County Community Unit
School Dist.
(Romeoville)
7.10%, 12/1/09 (2) 1,750 2,026
7.10%, 12/1/10 (2) 1,615 1,859
-------------
STATE TOTAL 100,542
-------------
- ---------------------------------------------------------------------------------
INDIANA (1.1%)
Indiana Municipal Power Agency
6.125%, 1/1/13 (1) 13,250 13,879
Marion County Hosp. Auth.
(Community Hosp.)
9.00%, 5/1/08 (1) 730 745
Merrillville School Building Corp.
6.65%, 7/1/06 (1) 5,500 6,139
-------------
STATE TOTAL 20,763
-------------
- ---------------------------------------------------------------------------------
KANSAS (.1%)
Kansas Highway Refunding Rev.
9.00%, 7/1/97 (1) (ETM) 1,200 1,306
-------------
- ---------------------------------------------------------------------------------
KENTUCKY (1.6%)
Boone County PCR
(Cincinnati Gas & Electric)
5.50%, 1/1/24 (1) 2,000 1,888
Kentucky Development Finance
Auth. Hosp. Facilities Rev.
(St. Elizabeth's Medical Center)
6.00%, 11/1/10 (3) 23,885 24,338
Kentucky Housing Corp.
8.875%, 7/1/19 (6) 465 482
Kentucky Turnpike Economic
Development
5.50%, 7/1/09 (2) 3,630 3,658
-------------
STATE TOTAL 30,366
-------------
- ---------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 63
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
LOUISIANA (2.7%)
Jefferson Parish Sales Tax Rev.
6.75%, 12/1/06 (3) $ 8,500 $ 9,340
New Orleans Capital Appreciation
0.00%, 9/1/13 (2) 9,000 3,083
New Orleans GO
0.00%, 9/1/10 (2) 8,500 3,543
0.00%, 9/1/11 (2) 10,475 4,125
6.00%, 9/1/21 (2) 22,250 22,192
Plaquemines Harbor & Terminal CP
(Electro-Coal)
4.00%, 9/12/95 10,200 10,200
-------------
STATE TOTAL 52,483
-------------
- ---------------------------------------------------------------------------------
MAINE (.8%)
Maine Health & Higher Education
Facilities Auth.
(Eastern Maine Medical Center)
6.375%, 10/1/21 (3) 8,000 8,154
Maine Turnpike Rev.
6.00%, 7/1/18 (1) 7,000 6,999
-------------
STATE TOTAL 15,153
-------------
- ---------------------------------------------------------------------------------
MARYLAND (.7%)
Maryland Health & Education
Facilities Auth.
(Univ. of Maryland
Medical System)
7.00%, 7/1/22 (3) 12,025 13,884
-------------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (7.1%)
Boston GO
6.50%, 7/1/12 (2) 4,750 5,036
Boston Water & Sewer Comm.
5.25%, 11/1/11 (3) 5,000 4,739
7.25%, 11/1/06 (6) 2,500 2,714
Lawrence GO
4.75%, 2/15/14 (2) 1,500 1,274
Massachusetts GO
TOB VRDO 3.60%, 9/6/95 (1) 700 700
7.00%, 7/1/09 (3) 32,250 37,264
Massachusetts Health and Education
Facilities Auth.
(Boston College)
6.75%, 7/1/11 (3) 6,595 7,087
(Falmouth Hosp.)
5.50%, 7/1/08 (1) 1,425 1,437
(Lahey Clinic)
5.25%, 7/1/10 (1) 14,120 13,367
7.85%, 7/1/03 (1) 3,360 3,991
(Massachusetts General Hosp.)
6.25%, 7/1/12 (2) 19,650 20,786
Massachusetts Housing Finance
Agency Rev.
5.55%, 10/1/05 (2) 5,230 5,368
5.95%, 10/1/08 (2) 27,485 28,138
Massachusetts Municipal Wholesale
Electric Power Supply System Rev.
5.10%, 7/1/07 (2) 3,280 3,228
Southeastern Massachusetts Univ.
Building Auth. Rev.
5.75%, 5/1/16 (2) 2,000 1,957
-------------
STATE TOTAL 137,086
-------------
- ---------------------------------------------------------------------------------
MICHIGAN (3.8%)
Detroit Sewer System Rev.
5.45%, 7/1/07 (3) 6,850 6,954
Michigan Strategic Fund
(Detroit Edison)
7.00%, 7/15/08 (1) 18,375 21,205
Monroe County Economic
Development Corp.
(Detroit Edison)
6.95%, 9/1/22 (3) 25,000 28,822
Regents of Univ. of Michigan Hosp.
Rev. VRDO
3.45%, 9/5/95 8,800 8,800
St. Clair Economic Development
Corp. PCR
(Detroit Edison)
6.40%, 8/1/24 (2) 8,000 8,352
-------------
STATE TOTAL 74,133
-------------
- ---------------------------------------------------------------------------------
MINNESOTA (.6%)
Dakota County Housing &
Redevelopment Auth.
9.375%, 5/1/18 (3) 55 59
Southern Minnesota Municipal Power
Agency Supply System Rev.
5.50%, 1/1/15 (2) (ETM) 3,880 3,763
5.50%, 1/1/15 (2) 6,120 5,921
Western Minnesota Municipal
Power Agency
9.75%, 1/1/16 (1) (ETM) 845 1,280
-------------
STATE TOTAL 11,023
-------------
- ---------------------------------------------------------------------------------
MISSISSIPPI (.2%)
Jackson Water & Sewer System
4.50%, 9/1/10 (1) 1,500 1,285
5.20%, 9/1/07 (1) 2,000 1,991
-------------
STATE TOTAL 3,276
-------------
- ---------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 64
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MISSOURI (.3%)
Missouri Health & Education
Facilities Auth.
(Lester Cox Medical Center)
5.25%, 6/1/15 (1) $ 5,000 $ 4,637
St. Louis County Single Family
Mortgage Rev.
9.25%, 10/1/16 (2) 890 958
-------------
STATE TOTAL 5,595
-------------
- ---------------------------------------------------------------------------------
MONTANA (.1%)
Forsyth PCR
(Montana Power Co.)
6.125%, 5/1/23 (2) 1,500 1,515
-------------
- ---------------------------------------------------------------------------------
NEBRASKA (.1%)
Nebraska Investment Finance Auth.
9.10%, 11/15/06 (3) 988 1,021
-------------
- ---------------------------------------------------------------------------------
NEVADA (.5%)
Clark County GO
6.50%, 6/1/17 (2) 5,000 5,396
Clark County Airport VRDO
3.45%, 9/6/95 (1) 3,555 3,555
-------------
STATE TOTAL 8,951
-------------
- ---------------------------------------------------------------------------------
NEW HAMPSHIRE (.4%)
New Hampshire Higher Education
(Hitchcock Clinic)
6.00%, 7/1/15 (1) 7,560 7,577
-------------
- ---------------------------------------------------------------------------------
NEW JERSEY (5.2%)
Atlantic County COP
7.40%, 3/1/12 (3) 4,335 5,153
Hoboken-Union City-Weehawken
Sewage Auth.
6.25%, 8/1/14 (1) 10,185 10,920
6.25%, 8/1/15 (1) 10,820 11,623
New Brunswick Housing & Urban
Development
5.75%, 7/1/24 (1) 5,000 4,913
New Jersey Health Care Facility
Finance Auth.
(St. Clares-Riverside Medical Center)
5.75%, 7/1/14 (1) 3,000 2,956
New Jersey Sports & Exposition Auth.
VRDO 3.35%, 9/7/95 (1) 1,177 1,177
6.50%, 3/1/13 (1) 18,795 20,666
New Jersey Transportation Trust
Fund Auth. Notes
3.67%, 12/27/95 2,200 2,200
New Jersey Turnpike Auth.
VRDO 3.05%, 9/6/95 (3) (LOC) 3,400 3,400
6.50%, 1/1/13 (1) 30,000 32,827
6.50%, 1/1/16 (1) 5,000 5,446
-------------
STATE TOTAL 101,281
-------------
- ---------------------------------------------------------------------------------
NEW MEXICO (.6%)
Albuquerque Hosp. System
(Presbyterian Health)
6.375%, 8/1/07 (1) 4,000 4,299
Farmington Utility Systems Rev.
5.75%, 5/15/13 (3) 3,000 2,977
Santa Fe Rev.
6.30%, 6/1/24 (2) 5,000 5,128
-------------
STATE TOTAL 12,404
-------------
- ---------------------------------------------------------------------------------
NEW YORK (1.8%)
New York City GO
VRDO 3.50%, 9/6/95 (LOC) 5,000 5,000
6.625%, 8/1/15 (2) 50 53
New York City Trust for Cultural
Resources VRDO (Carnegie Hall)
3.45%, 9/6/95 (LOC) 1,400 1,400
New York City Municipal Water and
Sewer System Rev.
7.00%, 6/15/09 (2) 3,750 4,151
New York State Medical Care
Facilities Finance Agency Mental
Health Improvement
6.00%, 8/15/15 (1) 5,000 5,029
New York State Thruway Auth.
5.80%, 4/1/11 (2) 8,635 8,709
Triborough Bridge & Tunnel
Auth. Rev.
5.00%, 1/1/17 (1) 6,000 5,396
6.00%, 1/1/14 4,500 4,521
6.00%, 1/1/15 (2) 1,275 1,285
-------------
STATE TOTAL 35,544
-------------
- ---------------------------------------------------------------------------------
NORTH CAROLINA (.2%)
North Carolina Municipal Power
Agency (Catawba Electric)
6.00%, 1/1/10 (1) 4,000 4,168
-------------
- ---------------------------------------------------------------------------------
NORTH DAKOTA (.6%)
Bismarck Medical Center
7.50%, 5/1/13 (6) 10,000 11,101
-------------
- ---------------------------------------------------------------------------------
OHIO (4.1%)
Akron Bath Copley Joint Township
Hosp. Dist.
(Akron General)
6.00%, 1/1/22 (2) 3,100 3,111
</TABLE>
33
<PAGE> 65
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cleveland Airport System Rev.
0.00%, 1/1/05 (1) $ 3,975 $ 2,457
0.00%, 1/1/06 (1) 3,475 2,016
7.25%, 1/1/20 (1) 50 55
Cleveland GO
5.30%, 9/1/07 (2) 3,500 3,553
Cleveland Public Power System Rev.
7.00%, 11/15/16 (1) 5,000 5,643
Cleveland Water Works Rev.
5.50%, 1/1/21 (1) 1,000 964
6.25%, 1/1/15 (2) 2,500 2,573
Columbus Electric Rev. VRDO
3.70%, 10/2/95 (LOC) 600 600
Columbus Sewer Rev. VRDO
3.45%, 9/7/95 10,300 10,300
Franklin Convention Center Rev.
0.00%, 12/1/06 (1) 4,355 2,458
Franklin Hosp. Facility Auth.
(Riverside Hosp.)
7.25%, 5/15/20 (1) 2,050 2,280
Lucas County GO
6.95%, 12/1/11 (1) 900 992
Northeast Ohio Regional Sewer Dist.
6.50%, 11/15/16 (2) 5,750 6,006
Ohio Air Quality Development
Auth. PCR
(Ohio Edison)
7.10%, 6/1/18 (3) 6,500 7,187
7.45%, 3/1/16 (3) 9,500 10,482
Ohio Building Auth.
(Transportation Facilities)
7.00%, 9/1/07 (1) 1,420 1,576
Ohio GO
7.625%, 8/1/09 4,345 5,340
Ohio Higher Education Facilities Auth.
(Univ. of Dayton)
6.60%, 12/1/17 (3) 1,200 1,277
Ohio Student Loan VRDO
3.50%, 9/6/95 2,500 2,500
Ohio Water Development Auth.
7.00%, 12/1/09 (2) (ETM) 1,500 1,703
Reynoldsburg School Dist. GO
6.55%, 12/1/17 (3) 2,000 2,110
Summit Limited Tax GO
6.90%, 8/1/12 (2) 2,750 2,979
Univ. of Toledo
5.75%, 12/1/12 (3) 1,000 1,000
-------------
STATE TOTAL 79,162
-------------
- ---------------------------------------------------------------------------------
OKLAHOMA (.3%)
Grand River Dam Auth. Rev.
5.75%, 6/1/06 (4) 5,800 6,208
-------------
- ---------------------------------------------------------------------------------
OREGON (.1%)
Oregon Health, Housing,
Educational & Cultural Facilities
(Lewis & Clark College)
6.00%, 10/1/13 (1) 2,250 2,297
-------------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (8.8%)
Allegheny County Hosp. Auth.
(Presbyterian Hosp.)
7.125%, 7/1/99 (1) (Prere.) 12,500 13,952
Allegheny County Sanitary Auth.
5.50%, 12/1/16 (3) 10,000 9,588
Armstrong County Hosp. Auth. Rev.
6.25%, 6/1/13 (2) 18,400 18,820
Delaware River Joint Toll
Bridge Comm.
6.00%, 7/1/18 (3) 10,500 10,551
Lehigh County General Purpose Auth.
(Lehigh Valley Hosp.)
6.50%, 7/1/10 (1) 6,655 7,139
Pennsylvania Convention Center
Auth. Rev.
6.00%, 9/1/19 (3) 10,000 10,376
6.70%, 9/1/16 (3) 9,970 11,182
Pennsylvania Turnpike Comm. Rev.
5.50%, 12/1/12 (2) 7,000 6,780
5.50%, 12/1/17 (3) 10,470 9,966
5.50%, 12/1/19 (3) 25,000 23,624
6.00%, 6/1/15 (1) 1,000 1,002
Philadelphia Gas Works Rev.
6.00%, 5/15/12 (2) 3,000 3,029
Philadelphia Water &
Wastewater Rev.
7.00%, 6/15/10 (3) 15,000 17,173
7.00%, 6/15/11 (3) 16,500 18,879
Pittsburgh Water & Sewer
System Rev.
7.25%, 9/1/14 (3) (ETM) 5,000 5,835
Sayre Health Care Facility Auth.
VRDO 3.50%, 9/6/95 (2) 2,500 2,500
-------------
STATE TOTAL 170,396
-------------
- ---------------------------------------------------------------------------------
PUERTO RICO (.2%)
Puerto Rico Public Building Auth.
0.00%, 7/1/01 (3) 4,150 3,183
-------------
- ---------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 66
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
RHODE ISLAND (.5%)
Rhode Island Public Building Auth.
6.00%, 2/1/11 (2) $ 3,805 $ 3,829
Rhode Island Convention Auth.
5.25%, 5/15/15 (1) 3,000 2,783
Rhode Island Depositors
Economic Project
5.80%, 8/1/11 (1) 1,250 1,256
5.80%, 8/1/12 (1) 2,000 1,998
-------------
STATE TOTAL 9,866
-------------
- ---------------------------------------------------------------------------------
SOUTH CAROLINA (4.4%)
North Charleston Sewer Dist. Rev.
6.375%, 7/1/12 (1) 2,750 2,977
Piedmont Municipal Power
Agency Rev.
5.00%, 1/1/18 (3) 27,500 24,354
5.00%, 1/1/22 (3) 8,000 6,995
6.75%, 1/1/19 (3) 10,600 11,769
6.75%, 1/1/20 (3) 23,515 26,159
Public Service Auth. Rev.
6.25%, 1/1/22 (2)++ 13,000 12,924
-------------
STATE TOTAL 85,178
-------------
- ---------------------------------------------------------------------------------
SOUTH DAKOTA (1.0%)
Heartland Consumer Power Dist.
7.625%, 1/1/97 (1) (Prere.) 7,000 7,465
South Dakota Health &
Educational Facilities Auth. Rev.
(McKennan Hosp.)
7.625%, 7/1/14 (1) 11,500 12,799
-------------
STATE TOTAL 20,264
-------------
- ---------------------------------------------------------------------------------
TENNESSEE (.3%)
Knox County Health, Education &
Housing Facility
(Fort Sanders Hosp.)
8.00%, 1/1/08 (1) 3,000 3,309
Tennessee Housing
Development Agency
7.125%, 7/1/17 (1) 2,815 2,982
-------------
STATE TOTAL 6,291
-------------
- ---------------------------------------------------------------------------------
TEXAS (6.9%)
Austin Combined Utilities
System Rev.
5.75%, 11/15/16 (2) 25,000 24,577
Colorado River Municipal Water
Dist. Rev.
6.00%, 1/1/16 (2) 6,000 6,010
Corpus Christi Utilities System Rev.
7.00%, 7/15/10 (3) 7,500 8,300
Denton County Housing
Finance Corp.
10.00%, 9/1/05 (1) 30 31
Harris County Toll Road VRDO
3.50%, 9/6/95 5,000 5,000
Houston Public Improvement
7.00%, 3/1/08 16,000 18,511
Houston VRDO
3.55%, 9/6/95 (LOC) 1,000 1,000
Houston Water & Sewer Rev.
7.00%, 12/1/20 (1) 12,280 13,626
Houston Water Conveyance System
6.125%, 12/15/09 (2) 2,000 2,126
6.25%, 12/15/12 (2) 8,340 8,811
6.80%, 12/15/10 (2) 5,490 6,154
6.80%, 12/15/11 (2) 8,910 9,970
7.50%, 12/15/12 (2) 1,000 1,192
7.50%, 12/15/13 (2) 1,100 1,310
Lower Colorado River Auth. Rev.
5.625%, 1/1/15 (4) (Prere.) 3,055 3,014
San Antonio Electric & Gas
System Rev.
0.00%, 2/1/06 (3) 18,000 10,312
0.00%, 2/1/07 (3) 15,000 8,038
Texas Turnpike Auth. Dallas
North Toll
(Addison Project)
6.60%, 1/1/23 (3) 4,500 4,772
-------------
STATE TOTAL 132,754
-------------
- ---------------------------------------------------------------------------------
VIRGINIA (1.1%)
Chesapeake Hosp. Auth.
(Chesapeake General Hosp.)
5.30%, 7/1/08 (1) 2,250 2,209
5.50%, 7/1/12 (1) 2,000 1,917
Henry County Public Service Auth.
6.25%, 11/15/19 (3) 1,500 1,525
Norfolk Water Development
5.90%, 11/1/25 (1)++ 12,150 12,064
Prince William County Service
Auth. Rev.
6.00%, 7/1/29 (3) 4,500 4,493
-------------
STATE TOTAL 22,208
-------------
- ---------------------------------------------------------------------------------
WASHINGTON (1.3%)
Snohomish County Mukilteo
School Dist.
5.60%, 12/1/08 (3) 6,960 7,103
5.65%, 12/1/09 (3) 9,160 9,294
5.65%, 12/1/10 (3) 3,950 3,954
5.70%, 12/1/11 (3) 5,000 4,999
-------------
STATE TOTAL 25,350
-------------
- ---------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 67
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
WEST VIRGINIA (.9%)
Berkeley Brooke Fayette Counties
Single Family Mortgage
9.10%, 8/1/11 (3) $ 500 $ 528
West Virginia State Building
Comm. Rev.
7.00%, 7/1/11 (1) 7,325 8,333
7.00%, 7/1/12 (1) 7,840 8,905
-------------
STATE TOTAL 17,766
-------------
- ---------------------------------------------------------------------------------
WISCONSIN (.2%)
Wisconsin Health & Education
(St. Luke's Medical Center)
7.10%, 8/15/11 (1) 4,000 4,368
-------------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,810,570) 1,936,084
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------
Other Assets--Note B 29,655
Liabilities (30,431)
-------------
(776)
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 159,696,672 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,935,308
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $12.12
=================================================================================
</TABLE>
+See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 45.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,828,655 $11.45
Undistributed Net
Investment Income -- --
Overdistributed Net
Realized Gains--Note E (16,417) (.10)
Unrealized Appreciation of
Investments--Note F 123,070 .77
- ---------------------------------------------------------------------------------
NET ASSETS $1,935,308 $12.12
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
LONG-TERM PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.6%)
- ---------------------------------------------------------------------------------
ALASKA (1.3%)
Alaska Housing Finance
Corp. VRDO
3.55%, 9/7/95 (LOC) $10,800 $ 10,800
3.60%, 9/6/95 3,100 3,100
-------------
STATE TOTAL 13,900
-------------
- ---------------------------------------------------------------------------------
CALIFORNIA (14.7%)
Anaheim Public Improvement Corp.
COP VRDO 3.25%, 9/6/95 (2) (LOC) 2,300 2,300
California GO
6.25%, 9/1/12 5,000 5,241
California Public Works Rev.
(Community College Project)
7.00%, 3/1/19 5,800 6,189
Contra Costa Water Dist. Rev.
5.00%, 10/1/24 (1) 23,000 19,909
Foothill/Eastern Transport Corridor
Agency Rev.
6.00%, 1/1/34 3,725 3,395
0.00%, 1/1/21 25,000 4,206
0.00%, 1/1/22 25,000 3,920
Fresno Sewer Rev.
6.25%, 9/1/10 (2) 6,395 6,860
Irvine Ranch Water Dist. VRDO
3.35%, 9/5/95 (LOC) 3,900 3,900
Los Angeles County COP
6.50%, 3/1/10 21,8152 1,998
Sacramento County TRAN
4.50%, 9/29/95 14,870 14,870
San Bernardino COP
(Capital Facility Project)
6.875%, 8/1/24 (ETM) 18,000 20,950
(Medical Center Project)
5.50%, 8/1/19 11,400 10,000
5.50%, 8/1/24 14,295 12,325
San Diego County TRAN
4.50%, 9/30/96 10,000 10,047
San Diego Local Govt.
4.75%, 10/18/96 9,000 9,054
-------------
STATE TOTAL 155,164
-------------
- ---------------------------------------------------------------------------------
CONNECTICUT (.3%)
Connecticut Development Auth.
(Connecticut Light & Power)
PCR VRDO 3.55%, 9/6/95 (LOC) 3,600 3,600
-------------
- ---------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 68
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
DISTRICT OF COLUMBIA (1.9%)
District of Columbia GO
6.75%, 6/1/05 (2) $ 7,040 $ 7,514
7.75%, 6/1/96 (Prere.) 11,970 12,549
-------------
STATE TOTAL 20,063
-------------
- ---------------------------------------------------------------------------------
FLORIDA (.9%)
Dade County Water & Sewer System
Rev. VRDO
3.45%, 9/6/95 (3) 7,525 7,525
Gulf Breeze Local Govt.
Loan Program VRDO
3.55%, 9/7/95 (3) 2,000 2,000
-------------
STATE TOTAL 9,525
-------------
- ---------------------------------------------------------------------------------
GEORGIA (4.8%)
College Park GO
(Civic Center)
7.00%, 9/1/10 11,500 12,748
Metropolitan Atlanta Rapid
Transit Auth. Rev.
6.25%, 7/1/18 12,170 12,762
6.25%, 7/1/20 (2) 23,275 24,705
-------------
STATE TOTAL 50,215
-------------
- ---------------------------------------------------------------------------------
ILLINOIS (5.3%)
Chicago Metropolitan Water
Capital Improvement Rev.
7.00%, 1/1/11 20,000 22,699
Chicago Public Building Comm.
7.00%, 1/1/20 (1) (ETM) 6,000 6,915
Chicago Skyway Toll Bridge Rev.
6.50%, 1/1/10 7,750 7,836
Illinois Development Finance
Auth. PCR
(Illinois Power Co.)
VRDO 3.50%, 9/6/95 (LOC) 2,300 2,300
7.40%, 12/1/24 (1) 8,150 9,333
Metropolitan Pier & Exposition
Auth. Rev.
6.75%, 6/1/10 (1) 6,000 6,641
-------------
STATE TOTAL 55,724
-------------
- ---------------------------------------------------------------------------------
INDIANA (2.2%)
Indiana Health Facilities Finance
Auth. Rev.
(Ancilla System, Inc.)
5.75%, 7/1/15 (1) 4,470 4,331
Indiana State Office Building
Comm. Rev.
6.90%, 7/1/11 16,875 18,723
-------------
STATE TOTAL 23,054
-------------
- ---------------------------------------------------------------------------------
LOUISIANA (2.6%)
De Soto Parish PCR
(Southwestern Electric Power)
7.60%, 1/1/19 24,300 27,199
Jefferson Parish Single Family
Mortgage Rev.
9.375%, 11/1/07 (3) 390 413
-------------
STATE TOTAL 27,612
-------------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (7.4%)
Massachusetts Bay
Transportation Auth. Rev.
7.00%, 3/1/21 15,000 17,162
Massachusetts GO
5.75%, 5/1/12 7,500 7,428
6.50%, 8/1/11 5,460 5,817
Massachusetts Housing
Finance Agency Rev.
6.125%, 11/15/08 3,500 3,603
9.125%, 12/1/20 4,390 4,538
Massachusetts Water Resources
Auth. Rev.
5.50%, 7/15/22 5,000 4,624
6.50%, 7/15/19 32,000 34,353
-------------
STATE TOTAL 77,525
-------------
- ---------------------------------------------------------------------------------
MICHIGAN (3.1%)
Detroit GO
6.375%, 4/1/07 10,500 10,710
Grand Rapids Tax Increment Rev.
(Downtown Project)
6.875%, 6/1/24 (1) 7,500 8,164
Michigan Environmental Program GO
6.25%, 11/1/02 (Prere.) 5,000 5,597
Michigan Hosp. Finance Auth. Rev.
(Detroit Medical Center)
6.25%, 8/15/13 3,000 2,978
6.50%, 8/15/18 5,000 5,022
-------------
STATE TOTAL 32,471
-------------
- ---------------------------------------------------------------------------------
MISSISSIPPI (1.1%)
Claiborne County PCR
(Middle South Energy)
9.875%, 12/1/14 10,000 11,730
-------------
- ---------------------------------------------------------------------------------
NEVADA (1.0%)
Humbolt County PCR
(Idaho Power Co.)
8.30%, 12/1/14 9,100 10,691
-------------
- ---------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 69
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
NEW JERSEY (8.5%)
New Jersey Economic Development
Auth. Market Transition Rev.
5.75%, 7/1/06 (1) $34,165 $ 35,848
New Jersey Health Care
Facilities Auth. Rev.
(Atlantic City Medical Center)
6.80%, 7/1/05 4,000 4,262
New Jersey Sports & Exposition
Auth. Rev.
6.50%, 3/1/13 10,000 10,821
6.50%, 3/1/19 20,000 20,861
New Jersey Turnpike Auth. Rev.
VRDO 3.05%, 9/6/95 (3) (LOC) 800 800
6.50%, 1/1/16 16,195 17,456
-------------
STATE TOTAL 90,048
-------------
- ---------------------------------------------------------------------------------
NEW YORK (13.8%)
Babylon Waste Water GO
9.00%, 8/1/08 (3) 4,900 6,541
9.00%, 8/1/09 (3) 2,800 3,751
9.00%, 8/1/10 (3) 4,900 6,611
Metropolitan Transportation
Auth. Rev.
6.375%, 7/1/18 (1) 7,500 7,794
New York City GO
VRDO 3.50%, 9/6/95 (LOC) 2,800 2,800
6.375%, 8/1/04 5,000 5,180
6.375%, 8/15/09 16,500 16,616
7.10%, 2/1/10 (1) 7,500 8,371
New York City Municipal Finance
Auth. Water and Sewer System Rev.
3.35%, 9/5/95 2,100 2,100
7.00%, 6/15/09 5,000 5,440
New York Medical Care
Facilities Auth. Rev.
6.875%, 2/15/32 (8) 5,000 5,293
New York State Dormitory Auth. Rev.
(City Univ.)
5.75%, 7/1/09 7,930 7,781
(State Univ.)
7.50%, 5/15/11 18,900 21,797
New York State Local Govt.
Assistance Corp. Rev.
6.50%, 4/1/20 10,000 10,343
6.875%, 4/1/19 8,000 8,680
Port Auth. of New York &
New Jersey Rev.
5.125%, 10/1/21 18,000 16,044
Triborough Bridge & Tunnel Auth.
General Purpose Rev.
6.125%, 1/1/21 10,000 10,360
-------------
STATE TOTAL 145,502
-------------
- ---------------------------------------------------------------------------------
NORTH CAROLINA (1.0%)
North Carolina Eastern Municipal
Power Agency Rev.
6.50%, 1/1/18 (ETM) 4,625 5,101
7.50%, 1/1/09 (Prere.) 4,935 5,904
-------------
STATE TOTAL 11,005
-------------
- ---------------------------------------------------------------------------------
OHIO (.2%)
Franklin County Hosp. Rev. VRDO
(Holy Cross Health System)
3.50%, 9/7/95 1,600 1,600
-------------
- ---------------------------------------------------------------------------------
Oklahoma (1.6%)
Oklahoma Industries Auth. Health
System Rev. CP
(Baptist Medical Center)
4.00%, 10/27/95 16,875 16,875
-------------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (7.0%)
Pennsylvania GO
6.375%, 9/15/09 11,000 11,744
6.375%, 9/15/10 8,820 9,302
6.375%, 9/15/11 5,975 6,335
Pennsylvania Higher Education
Facilities Auth. Rev.
(Drexel Univ.)
7.70%, 11/1/95 (1) (Prere.) 3,340 3,428
7.70%, 5/1/12 (1) 2,660 2,727
Pennsylvania Housing Finance Agency
Residential Development Rev.
7.50%, 7/1/06 3,890 4,223
Philadelphia Water & Wastewater Rev.
7.00%, 6/15/10 (3) 20,000 22,897
Pittsburgh Water & Sewer Auth. Rev.
6.50%, 9/1/13 (3) 10,000 10,881
Radnor Township School Auth. GO
9.875%, 9/15/00 (ETM) 465 553
Sayre Health Care Facility Auth.
VRDO 3.50%, 9/6/95 (2) 1,300 1,300
-------------
STATE TOTAL 73,390
-------------
- ---------------------------------------------------------------------------------
SOUTH CAROLINA (2.2%)
Piedmont Municipal Power
Agency Rev.
6.15%, 1/1/07 (1) 4,040 4,387
6.20%, 1/1/08 (1) 3,000 3,253
6.50%, 1/1/15 (3) 14,245 15,428
-------------
STATE TOTAL 23,068
-------------
- ---------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 70
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
TEXAS (10.9%)
Houston GO
7.00%, 3/1/08 $ 5,000 $ 5,785
Houston Hotel Occupancy Rev.
5.50%, 7/1/11 (4) 21,760 21,264
Houston Water & Sewer System Rev.
6.375%, 12/1/17 (2) 6,000 6,171
San Antonio Electric & Gas Rev.
5.00%, 2/1/17 14,135 12,427
Southwest Higher Education Auth.
VRDO (Southern Methodist Univ.)
3.50%, 9/5/95 (LOC) 8,700 8,700
Texas City IDR
(Arco)
7.375%, 10/1/20 17,000 20,801
Texas GO
5.50%, 4/1/20 15,000 14,005
Texas Water Development
Board Rev.
6.50%, 7/15/10 17,425 19,140
7.05%, 8/1/25 5,655 6,253
-------------
STATE TOTAL 114,546
-------------
- ---------------------------------------------------------------------------------
VIRGINIA (.5%)
Richmond Metropolitan Auth. Rev.
6.375%, 7/15/16 (3) 5,400 5,582
-------------
- ---------------------------------------------------------------------------------
WASHINGTON (3.0%)
Washington Dept. of Ecology COP
5.00%, 4/1/16 27,820 24,465
Washington GO
5.50%, 5/1/18 4,000 3,758
6.75%, 2/1/15 3,450 3,790
-------------
STATE TOTAL 32,013
-------------
- ---------------------------------------------------------------------------------
WEST VIRGINIA (1.0%)
West Virginia State Building
Comm. Lease Rev.
7.00%, 7/1/14 (1) 8,975 10,143
-------------
- ---------------------------------------------------------------------------------
WISCONSIN (3.2%)
Wisconsin Clean Water Rev.
6.875%, 6/1/11 20,500 22,888
Wisconsin GO
6.25%, 5/1/09 10,000 10,874
-------------
STATE TOTAL 33,762
-------------
- ---------------------------------------------------------------------------------
WYOMING (.1%)
Sublette County
(Exxon Project)
3.50%, 9/5/95 700 700
-------------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $987,305) 1,049,508
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (.4%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 18,043
Liabilities (13,431)
-------------
4,612
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 98,691,426 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,054,120
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.68
=================================================================================
</TABLE>
+See Note A to Financial Statements.
For explanations of abbreviations and other references, see page 45.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,006,692 $10.20
Undistributed Net
Investment Income -- --
Overdistributed Net
Realized Gains--Note E (14,754) (.15)
Unrealized Appreciation of
Investments--Note F 62,182 .63
- ---------------------------------------------------------------------------------
NET ASSETS $1,054,120 $10.68
=================================================================================
</TABLE>
39
<PAGE> 71
<TABLE>
<CAPTION>
Face Market
Amount Value
HIGH-YIELD PORTFOLIO (000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (102.4%)
- ---------------------------------------------------------------------------------
ALABAMA (.2%)
Huntsville Health Care Auth. Rev.
VRDO 3.45%, 9/7/95 (1) $ 4,400 $ 4,400
-------------
- ---------------------------------------------------------------------------------
ALASKA (.8%)
Alaska Housing Finance Corp. Rev.
3.60%, 9/6/95 13,000 13,000
North Slope Borough GO
7.50%, 6/30/01 (5) 2,500 2,849
-------------
STATE TOTAL 15,849
-------------
- ---------------------------------------------------------------------------------
ARIZONA (1.9%)
Board of Regents Rev.
(Univ. of Arizona)
6.20%, 6/1/16 26,660 28,133
Pima County Industrial
Development Auth. Rev.
(La Cholla Project)
8.50%, 7/1/20 6,650 6,402
-------------
STATE TOTAL 34,535
-------------
- ---------------------------------------------------------------------------------
ARKANSAS (.2%)
North Little Rock Electric System Rev.
6.50%, 7/1/15 (1) 3,450 3,801
-------------
- ---------------------------------------------------------------------------------
CALIFORNIA (15.4%)
California GO
5.50%, 3/1/20 (4) 12,875 11,945
6.00%, 8/1/19 (3) 17,125 17,219
California Health Facilities
Auth. VRDO
(Catholic Health Care West)
3.40%, 9/6/95 (1) 800 800
(Kaiser Permanante)
3.35%, 9/6/95 200 200
California Public Works Rev.
(Community College Project)
7.00%, 3/1/14 14,275 15,295
7.00%, 3/1/19 18,000 19,207
(Univ. Project)
6.40%, 12/1/16 (2) 8,450 8,747
Contra Costa Transportation Auth.
Sales Tax VRDO
3.40%, 9/6/95 (3) 5,400 5,400
Foothill/Eastern Transport Corridor
Agency Rev.
0.00%, 1/1/18 10,000 2,091
0.00%, 1/1/20 20,000 3,618
5.00%, 1/1/35 8,810 6,879
Irvine Water Dist. VRDO
3.60%, 9/5/95 (LOC) 7,200 7,200
Los Angeles County Metropolitan
Transport Auth. Sales Tax
Rev. VRDO
3.35%, 9/7/95 (1) 11,000 11,000
Metropolitan Water Dist. of
Southern California Rev.
5.00%, 7/1/20 6,400 5,578
6.625%, 7/1/12 3,000 3,187
Orange County Sanitation Dist.
VRDO 3.40%, 9/5/95 (LOC) 900 900
Sacramento County TRAN
4.75%, 10/4/96 10,000 10,068
San Bernardino County COP
4.75%, 8/1/28 10,425 7,880
5.00%, 8/1/26 15,045 11,936
6.875%, 8/1/24 (ETM) 25,220 29,353
7.00%, 8/1/20 12,180 13,083
San Diego County TRAN
4.50%, 9/30/96 24,000 24,113
San Diego IDR
(San Diego Gas & Electric)
8.75%, 3/1/2 34,450 4,916
San Diego Unified School Dist. TRAN
4.75%, 10/10/96 (LOC) 10,000 10,102
San Joaquin Hills
Transportation Agency Rev.
0.00%, 1/1/01 7,340 5,157
0.00%, 1/1/02 14,000 9,195
San Mateo County TRAN
4.50%, 7/1/96 20,000 20,072
Santa Clara County Finance
Auth. Lease Rev.
VRDO 3.45%, 9/6/95 8,700 8,700
Santa Clara Dist. Valley Medical
VRDO (El Camino Hosp.)
3.40%, 9/5/95 (LOC) 3,100 3,100
Southern California Public Power
Auth. Rev.
5.50%, 7/1/20 7,700 7,003
6.00%, 7/1/18 3,985 3,869
-------------
STATE TOTAL 287,813
-------------
- ---------------------------------------------------------------------------------
COLORADO (.7%)
Colorado Health Facilities Auth.
(PSL Health System Project)
8.50%, 2/15/21 10,950 12,738
-------------
- ---------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 72
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
CONNECTICUT (.1%)
Connecticut Development Auth.
(Connecticut Light & Power)
PCR VRDO 3.55%, 9/6/95 (LOC) $ 2,400 $ 2,400
-------------
- ---------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (2.1%)
Metropolitan Washington Airport
Auth. Rev.
5.50%, 10/1/24 (1) 23,825 22,010
5.875%, 10/1/15 (1) 17,600 17,304
-------------
STATE TOTAL 39,314
-------------
- ---------------------------------------------------------------------------------
FLORIDA (2.9%)
Cape Coral Health Facilities Auth. Rev.
(Cape Coral Medical Center)
7.50%, 11/15/21 22,000 20,900
Citrus County PCR
(Florida Power Corp.)
6.35%, 2/1/22 7,000 7,128
Dade County Water & Sewer
System Rev.
VRDO 3.45%, 9/6/95 (3) 9,070 9,070
Gulf Breeze Local Govt. Loan Program
VRDO 3.55%, 9/7/95 (3) 9,375 9,375
Orlando Utilities Comm. Rev.
6.75%, 10/1/17 2,200 2,482
Tarpon Springs Health Facility
Auth. Rev.
(Tarpon Springs Hosp.)
8.75%, 5/1/12 4,000 4,315
-------------
STATE TOTAL 53,270
-------------
- ---------------------------------------------------------------------------------
GEORGIA (1.6%)
Burke County PCR VRDO
(Georgia Power Co.)
3.30%, 9/5/95 3,000 3,000
3.40%, 9/5/95 2,500 2,500
Cartersville Water & Wastewater
Facilities (Anheuser-Busch)
7.40%, 11/1/10 5,000 5,816
Municipal Electric Auth. of
Georgia Rev.
6.60%, 1/1/18 5,000 5,277
Savannah Hosp. Auth. Rev.
(Candler Hosp.)
7.00%, 1/1/23 13,000 13,033
-------------
STATE TOTAL 29,626
-------------
- ---------------------------------------------------------------------------------
ILLINOIS (6.4%)
Chicago Public Building Comm.
7.00%, 1/1/15 (1) (ETM) 9,000 10,222
7.00%, 1/1/20 (1) (ETM) 10,000 11,524
Chicago Skyway Toll Bridge Rev.
6.75%, 1/1/14 10,000 10,170
6.75%, 1/1/17 6,760 6,875
Cook County GO
6.60%, 11/15/22 (1) 12,000 12,494
Illinois Development Finance
Auth. Rev.
PCR (Illinois Power Co.)
7.40%, 12/1/24 (1) 20,000 22,903
Illinois Development Finance
Auth. Rev.
(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. Rev.
(United Medical Center)
8.125%, 7/1/01 (Prere.) 2,925 3,457
Illinois Health Facilities Auth.
Certificate of Beneficial Interest
(Adventist Living Centers)** 770 185
Illinois Housing Development Auth.
VRDO (Center Apartments)
3.60%, 9/6/95 (LOC) 4,545 4,545
Illinois Toll Highway Auth. Rev.
6.30%, 1/1/11 5,000 5,256
Loves Park First Mortgage Rev.
(Hoosier Care)
9.75%, 8/1/19 1,565 1,704
Robbins Resources Recovery
Project Rev.
9.25%, 10/15/14 15,000 16,470
9.25%, 10/15/16 3,000 3,294
-------------
STATE TOTAL 118,474
-------------
- ---------------------------------------------------------------------------------
INDIANA (3.5%)
Indiana Health Facilities Finance
Auth. Rev. (Ancilla System Inc.)
7.375%, 7/1/23 19,400 20,782
Indiana State Office Building
Comm. Rev.
6.90%, 7/1/11 15,660 17,375
Indianapolis Local Public
Improvement Bond Bank
6.75%, 2/1/14 21,500 23,662
6.75%, 2/1/20 2,500 2,633
-------------
STATE TOTAL 64,452
-------------
- ---------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 73
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
KENTUCKY (.3%)
Ashland PCR VRDO
(Ashland Oil Project)
3.35%, 9/7/95 (LOC) $ 2,900 $ 2,900
Kentucky Property &
Buildings Comm. Rev.
5.80%, 9/1/06 3,100 3,230
-------------
STATE TOTAL 6,130
-------------
- ---------------------------------------------------------------------------------
LOUISIANA (.3%)
West Feliciana Parish PCR
(Gulf States Utilities)
9.00%, 5/1/15 4,000 4,569
-------------
- ---------------------------------------------------------------------------------
MARYLAND (1.0%)
Hagerstown Energy Finance
Administration Recycling Rev.
(Hagerstown Fiber Project)
9.00%, 10/15/16 17,500 17,891
-------------
- ---------------------------------------------------------------------------------
MASSACHUSETTS (8.1%)
Massachusetts Bay Transit Auth.
6.25%, 3/1/05 2,500 2,734
Massachusetts GO
5.25%, 2/1/08 35,575 35,032
6.00%, 6/1/11 14,750 14,912
Massachusetts Industrial
Finance Agency
(Massachusetts Recycling Assoc.)
9.00%, 8/1/16 17,000 17,961
(Refusetech Inc. Project)
6.30%, 7/1/05 11,900 12,322
Massachusetts Water Resources Auth.
5.50%, 7/15/22 22,420 20,735
6.50%, 7/15/19 43,700 46,914
-------------
STATE TOTAL 150,610
-------------
- ---------------------------------------------------------------------------------
MICHIGAN (6.2%)
Detroit GO
6.25%, 4/1/05 13,000 13,262
Dickinson County Memorial Hosp.
System Rev.
7.625%, 11/1/05 1,150 1,161
8.00%, 11/1/14 5,700 5,779
Michigan Hosp. Finance Auth. Rev.
(Genesys Health System)
7.50%, 10/1/27 5,620 5,743
8.10%, 10/1/13 5,000 5,363
8.125%, 10/1/21 15,000 16,118
Michigan Housing
Development Auth. Rev.
6.30%, 4/1/04 6,900 7,244
Michigan Public Power Agency Rev.
(Belle River Project)
5.50%, 1/1/13 46,595 44,488
Michigan Trunk Line Rev.
5.50%, 10/1/21 18,500 17,081
-------------
STATE TOTAL 116,239
-------------
- ---------------------------------------------------------------------------------
MINNESOTA (.3%)
Washington County Housing &
Redevelopment Auth. Rev.
(Woodland Park Project)
0.00%, 5/1/20 35,070 1,622
9.75%, 5/1/20 5,000 4,750
-------------
STATE TOTAL 6,372
-------------
- ---------------------------------------------------------------------------------
MISSISSIPPI (1.6%)
Claiborne County PCR
(Middle South Energy)
9.50%, 4/1/16 5,000 5,308
9.875%, 12/1/14 21,000 24,632
-------------
STATE TOTAL 29,940
-------------
- ---------------------------------------------------------------------------------
NEVADA (.3%)
Clark County Airport VRDO
3.45%, 9/6/95 (1) 6,445 6,445
-------------
- ---------------------------------------------------------------------------------
NEW HAMPSHIRE (.3%)
New Hampshire Health & Higher
Education Rev.
(Catholic Medical Center)
6.00%, 7/1/17 6,580 5,971
-------------
- ---------------------------------------------------------------------------------
NEW JERSEY (3.7%)
New Jersey Sports & Exposition
Auth. Rev.
6.50%, 3/1/13 15,000 16,231
New Jersey Turnpike Auth. Rev.
VRDO 3.05%, 9/6/95 (3) (LOC) 4,100 4,100
6.50%, 1/1/16 44,340 47,792
-------------
STATE TOTAL 68,123
-------------
- ---------------------------------------------------------------------------------
NEW YORK (15.8%)
Glencove Industrial Development
Auth. Rev.
(Regency at Glencove Project)
9.50%, 7/1/12 10,000 10,000
Metropolitan Transit Auth. Rev.
5.75%, 7/1/15 8,545 8,071
6.375%, 7/1/20 (1) 25,690 26,674
7.375%, 7/1/08 22,870 25,929
</TABLE>
42
<PAGE> 74
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
New York City GO
VRDO 3.50%, 9/6/95 (LOC) $ 3,600 $ 3,600
5.75%, 8/15/08 10,000 9,663
6.375%, 8/15/092 8,000 28,197
New York City Municipal Water
Finance Auth. Water & Sewer
System Rev.
VRDO 3.35%, 9/5/95 (3) 7,500 7,500
5.50%, 6/15/20 25,000 22,944
New York City Transit Auth. RAN
5.50%, 12/14/95 25,000 25,105
New York State Dormitory
Auth. Rev.
(City Univ.)
6.375%, 7/1/08 3,150 3,203
7.50%, 7/1/10 5,500 6,332
(State Univ.)
5.375%, 5/15/07 (2) 2,100 2,143
7.50%, 5/15/13 10,250 11,911
New York State Housing
Finance Agency Rev.
5.625%, 3/15/09 4,685 4,519
New York State Local Govt.
Assistance Corp. Rev.
6.50%, 4/1/20 16,110 16,663
7.00%, 4/1/10 4,320 4,764
New York State Power Auth. Rev.
6.50%, 1/1/19 26,250 27,290
Triborough Bridge & Tunnel
Auth. Rev.
(Convention Center Project)
7.25%, 1/1/10 13,500 15,050
(General Purpose Rev.)
5.00%, 1/1/17 3,000 2,661
5.50%, 1/1/17 10,000 9,517
5.00%, 1/1/24 26,380 22,933
-------------
STATE TOTAL 294,669
-------------
- ---------------------------------------------------------------------------------
NORTH CAROLINA (.9%)
North Carolina Eastern Municipal
Power Agency Rev.
5.00%, 1/1/20 (ETM) 10,385 9,326
6.50%, 1/1/18 6,665 7,351
-------------
STATE TOTAL 16,677
-------------
- ---------------------------------------------------------------------------------
OHIO (.5%)
Lucas County Hosp. Facility Rev.
(Flower Memorial Hosp.)
8.125%, 12/1/11 8,900 9,561
-------------
- ---------------------------------------------------------------------------------
OKLAHOMA (1.1%)
Jackson County Memorial Hosp.
Auth. Rev.
(Jackson Memorial)
6.75%, 8/1/04 4,700 4,620
7.30%, 8/1/15 4,000 3,942
Oklahoma Industrial Auth. Health
System Rev. CP
(Baptist Medical Center)
3.50%, 10/12/95 12,300 12,300
-------------
STATE TOTAL 20,862
-------------
- ---------------------------------------------------------------------------------
OREGON (.1%)
Oregon Veterans Welfare
Program VRDO
3.60%, 9/6/95 (LOC) 1,500 1,500
3.70%, 9/6/95 900 900
-------------
STATE TOTAL 2,400
-------------
- ---------------------------------------------------------------------------------
PENNSYLVANIA (12.5%)
Allegheny County Pittsburgh
Children's Hosp. Rev.
3.599%, 9/7/95 (1) 12,900 12,900
Langhorne Higher Education &
Health Auth. Rev.
(Lower Bucks Hosp.)
7.30%, 7/1/12 4,500 4,460
7.35%, 7/1/22 2,500 2,382
Montgomery County Higher
Education & Health Auth. Rev.
(Brittany Point Project)
8.50%, 1/1/22 5,000 5,317
Pennsylvania COP
5.40%, 7/1/08 (2) 15,000 15,010
5.40%, 7/1/09 (2) 25,000 24,686
Pennsylvania Convention
Center Auth. Rev.
6.60%, 9/1/09 2,500 2,561
6.70%, 9/1/14 2,500 2,563
6.75%, 9/1/19 6,600 6,786
Pennsylvania Economic
Development Auth. Rev.
(Colver Project)
7.05%, 12/1/10 2,500 2,586
7.125%, 12/1/15 14,000 14,385
Pennsylvania Housing
Finance Agency Rev.
7.60%, 7/1/13 10,000 10,777
</TABLE>
43
<PAGE> 75
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania Turnpike Comm. Rev.
5.50%, 12/1/17 $17,735 $ 16,913
Philadelphia Hosp. & Higher
Education Facilities Auth. Rev.
(Childrens Seashore Hosp.)
7.00%, 8/15/12 3,540 3,725
7.00%, 8/15/17 1,000 1,052
7.00%, 8/15/22 500 526
(Graduate Health System)
7.25%, 7/1/10 15,000 15,572
(Methodist Hosp.)
7.75%, 7/1/23 12,290 12,218
(Roxborough Memorial Hosp.)
7.25%, 3/1/24 10,000 9,225
Philadelphia Municipal Auth. Rev.
6.125%, 7/15/08 4,000 4,063
6.25%, 7/15/13 2,785 2,758
6.30%, 7/15/17 1,750 1,697
8.625%, 11/15/16 1,600 1,752
Philadelphia Water & Sewer Rev.
9.10%, 10/1/95 (Prere.) 6,250 6,402
9.10%, 12/1/95 (Prere.) 5,750 5,941
Philadelphia Water &
Wastewater Rev.
5.50%, 6/15/14 (5) 5,650 5,352
7.00%, 6/15/11 (3) 21,500 24,600
Sayre Health Care Facility Auth.
VRDO 3.50%, 9/6/95 (2) 1,700 1,700
Scranton-Lackawanna Health &
Welfare (Moses Taylor Hosp.)
8.50%, 7/1/20 14,375 15,186
-------------
STATE TOTAL 233,095
-------------
- ---------------------------------------------------------------------------------
RHODE ISLAND (.3%)
Convention Center Auth. Rev.
5.75%, 5/15/20 (2) 5,000 4,802
-------------
- ---------------------------------------------------------------------------------
SOUTH CAROLINA (.4%)
Piedmont Municipal Power
Agency Rev.
6.25%, 1/1/21 (3) 6,640 6,965
-------------
- ---------------------------------------------------------------------------------
TEXAS (8.4%)
Austin Airport System Rev.
6.125%, 11/15/25 (1)++ 38,000 37,814
6.45%, 11/15/20++ 17,040 17,509
Austin Water, Sewer & Electric Rev.
14.00%, 11/15/01 200 276
Harris County Health Facility
Development Corp. VRDO
(Methodist Hosp.)
3.40%, 9/5/95 10,500 10,500
Harris County Hosp. Dist. Rev.
7.40%, 2/15/10 (2) 17,500 20,478
Harris County Toll Road
VRDO 3.50%, 9/6/95 4,000 4,000
6.25%, 8/15/15 (1) 5,000 5,103
Houston Hotel Occupancy
5.50%, 7/1/15 (4) 6,000 5,728
Houston Water & Sewer System Rev.
6.375%, 12/1/17 (2) 4,820 4,958
Odessa Junior College Dist. Rev.
8.125%, 12/1/18 10,000 10,107
San Antonio Electric & Gas Rev.
5.00%, 2/1/17 3,500 3,077
Texas GO
5.50%, 4/1/20 40,050 37,393
-------------
STATE TOTAL 156,943
-------------
- ---------------------------------------------------------------------------------
VIRGINIA (1.0%)
Alexandria Redevelopment &
Housing Auth. Rev.
(Portals West Project)
9.50%, 7/15/20*** 9,680 6,098
Chesterfield County Mortgage Rev.
(Brandermill Woods Project)
0.00%, 7/1/17 2,600 52
0.00%, 7/1/18 2,600 52
0.00%, 7/1/19 2,600 52
0.00%, 7/1/20 2,600 52
0.00%, 7/1/21 2,600 52
10.25%, 7/1/15*** 8,000 5,600
10.625%, 7/1/16*** 10,400 7,280
-------------
STATE TOTAL 19,238
-------------
- ---------------------------------------------------------------------------------
WASHINGTON (3.0%)
Port of Seattle GO
5.75%, 5/1/14 15,600 14,944
Snohomish County Public Utility
Dist. Rev.
5.50%, 1/1/20 (3) 43,710 40,403
-------------
STATE TOTAL 55,347
-------------
- ---------------------------------------------------------------------------------
WEST VIRGINIA (.5%)
West Virginia State Building
Comm. Rev.
7.00%, 7/1/13 (1) 8,390 9,509
-------------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,832,893) 1,909,030
- ---------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 76
<TABLE>
<CAPTION>
Market
Value
(000)+
- ---------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-2.4%)
- ---------------------------------------------------------------------------------
Other Assets--Note B $ 29,156
Liabilities (73,021)
------------
(43,865)
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------
Applicable to 178,912,024 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $1,865,165
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.43
=================================================================================
</TABLE>
+See Note A to Financial Statements.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT AUGUST 31, 1995,
NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ------
<S> <C> <C>
Paid in Capital $1,813,639 $10.14
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Losses--Note E (24,359) (.14)
Unrealized Appreciation
of Investments--Note F 75,885 .43
- ---------------------------------------------------------------------------------
NET ASSETS $1,865,165 $10.43
- ---------------------------------------------------------------------------------
</TABLE>
BAN = Bond Anticipation Note
COP = Certificate of Participation
CP = Commercial Paper
GO = General Obligation Bond
IDR = Industrial Development Revenue Bond
PCR = Pollution Control Revenue Bond
RAN = Revenue Anticipation Note
RAW = Revenue Anticipation Warrant
Rev. = Revenue Bond
TAN = Tax Anticipation Note
TOB = Tender Option Bond
TRAN = Tax Revenue Anticipation Note
VRDO = Variable Rate Demand Obligation
(ETM) = Escrowed to Maturity
(Prere.) = Prerefunded
* Put Option Obligation.
** Non-Income Producing Security.
*** Only partial interest was paid on the last interest payment date.
++ Security purchased on a when-issued or delayed delivery basis for which the
Fund has not taken delivery as of August 31, 1995.
Scheduled principal and interest payments are guaranteed by:
(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.
(8) FHA (Federal Housing Authority)
The insurance does not guarantee the market value of the municipal bonds.
(LOC) = Scheduled principal and interest payments are guaranteed by bank letter
of credit.
45
<PAGE> 77
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 1995 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, 1995, and 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, 1995, 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 LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
October 13, 1995
F950-8/95
46
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Vanguard Municipal Bond Fund
Intermediate-Term Portfolio
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 (the "Fund") 1995
Annual Report (the "Annual Report") present fairly, in all material respects,
the financial position of the Intermediate-Term Portfolio (one of the
portfolios constituting the Fund) at August 31, 1995, and the results of its
operations, the changes in its 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, 1995, 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.
We have also audited the financial statements of the other portfolios included
in the Fund at August 31, 1995, and we have issued an unqualified opinion
thereon. An insert to the Annual Report containing our report on the financial
statements of the other portfolios is available from the Fund.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
October 13, 1995
F420-8/95
47
