<PAGE> 1
VANGUARD
MUNICIPAL
BOND FUND
Annual Report
August 31, 1996
THE VANGUARD GROUP:
LINKING TRADITION
AND INNOVATION
At Vanguard, we treasure our rich nautical heritage--even as we steer our
course toward the twenty-first century. Our Report cover reflects that blending
of tradition and innovation, of past, present, and future. The montage includes
a bronze medallion with a likeness of our namesake, HMS Vanguard (Lord Nelson's
flagship at The Battle of the Nile); a clock built circa 1816 in Scotland,
featuring a portrait of Nelson (who is also shown, accepting a surrender, in a
detail from a nineteenth-century engraving); and several views of our recently
completed campus, which is steeped in nautical imagery--from our buildings
named after Nelson's warships (Victory, Majestic, and Goliath are three shown),
to our artwork and ornamental compass rose.
[PHOTO]
<PAGE> 2
[PHOTO]
VANGUARD HAS ALWAYS STRIVED TO BE THE STANDARD-BEARER for mutual fund
disclosure, going well beyond the "letter of the law" in
our shareholder communications. During the past year, we
raised the standard once again by rewriting and
reformatting our Fund prospectuses. They are designed to
ensure that prospective investors fully understand,
before they make an investment, each Fund's investment
strategies, risks, and costs. Our Annual Reports to
shareholders, in turn, provide a comprehensive discussion
and analysis of the year's results in the context of each
Fund's investment objectives and policies. Since Vanguard
has long been recognized for the quality and content of
these Fund Reports, our overriding objective was to
maintain the spirit and character of the previous
Reports, while adding information to assist shareholders
in understanding the investment characteristics of their
Fund.
THE NEW FUND REPORTS INCLUDE A MESSAGE TO SHAREHOLDERS from Chairman John C.
Bogle and President John J. Brennan. This Message
continues to provide a candid assessment of the Fund's
performance relative to an appropriate unmanaged market
benchmark and a peer group of mutual funds with similar
investment policies. It also reviews the principal
factors contributing to--and detracting from--the returns
earned by the Fund. To help you evaluate your Fund's
current-year performance, the Message includes a
discussion of the Fund's long-term investment results, as
well as a look ahead to the prospects for the coming
year. A recap of the financial markets, which had been
included as part of the Chairman's letter, now appears in
The Markets In Perspective. This overview covers the
world's financial markets, putting the results of the
Fund's strategy in a global perspective.
THE PORTFOLIO PROFILE REPRESENTS AN ADDITION TO OUR FUND REPORTS. In this day
and age, many investors use detailed statistical
information to evaluate their mutual fund holdings, and
our new Portfolio Profile furnishes shareholders with
comprehensive data on key characteristics--sector
diversification, volatility, top-ten holdings, among
others--that ultimately define how a Fund is likely to
perform in various market environments. For this
information to be used effectively, we include a brief
description of the profiled characteristics. The Report
From The Adviser (for our traditionally managed Funds)
now covers specific topics that we have defined as being
the important ones for the adviser to address--and we do
our best to ensure that this Report is written in the
same simple and candid manner that characterizes all
Vanguard communications. Finally, each Adviser's Report
will include an inset reminder of the adviser's basic
investment philosophy.
WE TRUST THAT THIS REDESIGNED FUND REPORT will continue to meet your need for a
fair, candid, and clear presentation of your Fund's
investment results and a thorough portfolio review. We
welcome any comments that you might have at any time
regarding these Reports.
CONTENTS
A Message To
Our Shareholders
1
The Markets
In Perspective
4
Report From
The Adviser
6
Performance
Summaries
9
Portfolio
Profiles
16
Financial
Statements
24
Directors and
Officers
INSIDE BACK COVER
<PAGE> 3
FELLOW SHAREHOLDER,
Our 1996 fiscal year, which ended August 31, was an eventful period
for the municipal bond market. During the first half of our fiscal year,
interest rates declined due to widespread belief that the U.S. economy was
slowing. During the second half, it became apparent that, while economic
activity remained strong, inflation remained subdued, and interest rates
reversed course. Indeed, by the end of August, rates had moved back near their
level at the start of the period.
[PHOTO] [PHOTO]
JOHN C. BOGLE JOHN J. BRENNAN
Chairman of the Board President
In this environment, the net asset values of our Portfolios closed the
year almost precisely where they began (the Money Market Portfolio remained
exactly stable at $1.00 per share). As a result, the volatility we expect from
capital returns was conspicuous by its absence, and the total return for each
Portfolio was made up almost entirely of dividends from tax-exempt interest.
The table below presents the twelve-month total return of each Portfolio, as
well as the two components of this return: income return and capital return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
INVESTMENT RETURNS
FISCAL YEAR ENDED AUGUST 31, 1996
----------------------------------------------
PORTFOLIO INCOME CAPITAL TOTAL
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market* +3.5% 0.0% +3.5%
Short-Term +3.9 -0.3 +3.6
Limited-Term +4.5 -0.8 +3.7
Intermediate-Term +5.2 -0.7 +4.5
Insured Long-Term +5.6 +0.2 +5.8
Long-Term +5.6 +0.5 +6.1
High-Yield +5.8 -0.4 +5.4
- --------------------------------------------------------------------------
</TABLE>
* Money market funds do not assure a stable value of $1.00 per share, 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 on page 3.
THE FISCAL YEAR IN REVIEW
Interest rates in general rose modestly during our fiscal year, with the yield
on short-term U.S. Treasury bills rising from 5.6% to 5.9%, and the yield on
the benchmark 30-year U.S. Treasury bond rising from 6.7% to 7.1%. The
municipal bond market, however, was disrupted during the fiscal year by
political posturing over income-tax reforms, particularly the prospect of a
"flat tax." Under the proposed reforms, all earned income would be taxed at the
same flat rate; at the same time, all interest income would be tax-exempt,
obviating the special tax status of municipal bonds. As support for the flat
tax waxed and waned, municipal bond yields--and prices--fluctuated accordingly.
Eventually, it became apparent that no radical tax reforms were imminent, and
yields stabilized with little point-to-point change during the year.
When all was said and done, then, municipal bonds gave a better
account of themselves than taxable bonds. Indeed, despite a -5% drop in the
price of the long-term U.S. Treasury bond over the twelve months, the price of
the average long-term municipal bond was virtually unchanged. A year ago, when
the yield on 20-year tax-exempt bonds was equal to 93% of the yield on 20-year
taxable bonds, we told you that yields on tax-exempt bonds were "remarkably
high" in relation to yields on taxable bonds. By the end of fiscal 1996, that
relationship had moved to a more normal level. The tax-exempt yield was equal
to 84% of the taxable bond's yield compared to the average of 88% for the
1
<PAGE> 4
period since the marginal Federal tax rate of 40% has been in place. So,
municipal bonds remain extremely attractive to high-tax-bracket investors.
It is worth noting that the relative stability in our capital returns
in fiscal 1996 was quite a change from the two previous years. In fiscal 1995,
long-term interest rates fell and the prices of municipals rose accordingly,
adding to our bond Portfolios' returns. In fiscal 1994, the scenario was
reversed: sharply rising interest rates drove municipal bond prices lower,
resulting in negative capital returns for our longer-term Portfolios. We
recount this brief history to emphasize that, while the share prices of bond
funds can be volatile in the short run, these fluctuations often cancel each
other out over longer periods.
FISCAL 1996 PERFORMANCE OVERVIEW
The table below shows the total return of each of the Fund's Portfolios in
relation to its average competitor with comparable quality and maturity
policies.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
TOTAL RETURNS
FISCAL YEAR ENDED AUGUST 31, 1996
---------------------------------------
AVERAGE
VANGUARD COMPETITIVE VANGUARD
PORTFOLIO FUND FUND ADVANTAGE
- -------------------------------------------------------------
<S> <C> <C> <C>
Money Market +3.5% +3.1% +0.4%
Short-Term +3.6 +3.5* +0.1
Limited-Term +3.7 +3.5 +0.2
Intermediate-Term +4.5 +3.9 +0.6
Insured Long-Term +5.8 +4.9 +0.9
Long-Term +6.1 +4.7 +1.4
High-Yield +5.4 +5.4 0.0
- -------------------------------------------------------------
</TABLE>
* Adjusted for maturity differences.
We are pleased--as we hope you are--that each of our seven Portfolios
matched or exceeded their respective competitive fund groups during the fiscal
year. This is the eighth Annual Report in which we have compared returns of the
seven Portfolios of Vanguard Municipal Bond Fund with returns of their peer
fund groups. Out of these 56 side-by-side comparisons, Vanguard prevailed in
51, with two "ties" and only three "losses."
A great deal of credit for this extraordinary consistency must be
given to our Fixed Income Group, which maintains tightly defined investment
policies that govern the maturity ranges and quality standards for our
Portfolios, and employs stringent credit analysis to uphold our high-quality
standards. In candor, however, part of our success can be traced to our
expense-ratio advantage--we call it "the Vanguard Advantage"--over our typical
competitor. While each of our Portfolios maintains an expense ratio (expenses
as a percentage of average net assets) in the area of 0.20%, the expense ratio
of the average municipal bond fund is 0.91%, or more than four times higher,
according to data from Lipper Analytical Services.
LONG-TERM PERFORMANCE OVERVIEW
Of course, any one year is far too short a period in which to judge the
performance of our Portfolios relative to their competitors. Interestingly,
over longer time periods, the records of our Portfolios, when compared to
competitive standards, are even more impressive. The table at the top of page 3
illustrates this point, showing total returns for the ten years ended August
31, 1996, for each Portfolio and its peer group of mutual funds.
The relative performance of our Portfolios over the past decade
underscores the Vanguard Advantage. While the performance differentials may
seem inconsequential, we assure you they are not. Even small differences in
average annual returns become impressive when compounded over long periods. For
example, a $10,000 investment in our Long-Term Portfolio at the start of the
ten-year period ended August 31, 1996, would
2
<PAGE> 5
have grown to $21,691. The same $10,000 investment in the average long-term
municipal bond fund would have grown to $19,642. The difference of $2,049 is
more than 20% of the initial investment and is available to the investor with
no increase in risk. Similar comparisons for each Portfolio appear in the
Performance Summaries on pages 9 through 15.
We should caution that, while we expect that our expense-ratio
advantage will continue to give us an edge over the competition, investors
cannot assume that the excellent absolute returns--especially on a tax-exempt
basis--of the past decade will be repeated in the future. In fact, with
interest rates considerably lower today than they were ten years ago, it seems
likely that returns in the ensuing decade will be somewhat more modest.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
10 YEARS ENDED AUGUST 31, 1996
-----------------------------------------
AVERAGE
VANGUARD COMPETITIVE VANGUARD
PORTFOLIO FUND FUND ADVANTAGE
- -------------------------------------------------------------
<S> <C> <C> <C>
Money Market +4.2% +3.8% +0.4%
Short-Term +5.1 +4.7* +0.4
Limited-Term** +6.3 +5.6 +0.7
Intermediate-Term +7.6 +6.4 +1.2
Insured Long-Term +8.0 +6.8 +1.2
Long-Term +8.1 +7.0 +1.1
High-Yield +8.1 +7.1 +1.0
- -------------------------------------------------------------
</TABLE>
* Adjusted for maturity differences.
** Period begins August 31, 1987.
IN SUMMARY
Our message to Vanguard Municipal Bond Fund shareholders has consistently
stressed the importance of "staying the course" with a balanced investment
portfolio--made up of stock funds, bond funds, and money market funds--that
will meet your long-term financial objectives. Within the bond-fund portion of
your mix, you should hold the Portfolio--or combination of Portfolios--that
best balances your desire for current income with your personal tolerance risk.
The performance of our Portfolios in fiscal 1996 reinforces the
sensibility of this approach. Despite the interim turbulence of the municipal
bond market, investors who took a long-term view ended the fiscal year in
positive territory.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
September 18, 1996
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE 12 MONTHS SEC
------------------------ -------------------------------- CURRENT
AVERAGE AVERAGE AUGUST 31, AUGUST 31, INCOME CAPITAL TOTAL ANNUALIZED
PORTFOLIO MATURITY QUALITY 1995 1996 DIVIDENDS GAINS RETURN YIELD*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 66 days MIG-1 $ 1.00 $ 1.00 $.034 -- +3.5% 3.36%
Short-Term 459 days Aaa 15.59 15.54 .609 -- +3.6 3.73
Limited-Term 3.3 years Aa1 10.71 10.62 .483 -- +3.7 4.10
Intermediate-Term 7.7 years Aa2 13.14 13.04 .671 $.009 +4.5 4.63
Insured Long-Term 13.2 years Aaa 12.12 12.14 .670 -- +5.8 5.14
Long-Term 14.0 years Aa2 10.68 10.73 .591 -- +6.1 5.17
High-Yield 13.2 years A1 10.43 10.39 .594 -- +5.4 5.48
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The yield for the Money Market Portfolio is a 7-day yield. All others are
30-day yields.
3
<PAGE> 6
THE MARKETS IN PERSPECTIVE
[PHOTO]
U.S. EQUITY AND BOND MARKETS
During the past twelve months, expectations about economic growth, inflation,
and Federal Reserve policy shifted markedly, generating some pronounced changes
in the U.S. equity and bond markets. In September 1995, for example, the U.S.
economy was widely considered to be slowing after exhibiting fairly robust
growth earlier in the year. Reflecting this view, investors were attracted to
long-term U.S. Treasury bonds (the yield on the 30-year maturity fell from 6.7%
to just below 6.0%) and high-quality, large-capitalization stocks (the
S&P/BARRA Growth Index advanced 10.8%) during the last four months of 1995. By
contrast, shares of more economically sensitive companies, such as technology
firms, dropped sharply during this period, falling -5.7%.
The view that slow but steady economic growth and minimal inflation would
continue was widely held. Even the Open Market Committee of the Federal Reserve
accepted this outlook, as evidenced by its decision last January to cut both
the discount and Fed funds rates by 0.25% in an effort to stimulate the
economy.
By mid-February, however, reports indicated increases in the demand for
technology goods, the number of new jobs, and consumer spending. As a result,
the outlook among investors changed. Common-stock investors began to look for
opportunities offered by a rapidly expanding economy (e.g., rapid earnings
growth among technology and cyclical firms), while bond investors saw the more
rapid growth as an indication of future inflation. The result was a 1.2% rise
in the 30-year U.S. Treasury yield and sharp jumps in the prices of
economically sensitive stocks during the next three months.
This outlook proved to be short-lived, too, with signs of a slowdown
appearing by late spring. As a result, blue-chip growth stocks again became the
preferred segment of the stock market, while smaller-company issues,
particularly technology stocks, declined--often sharply. Bond investors
benefited from the revised outlook, as long-term yields fell -0.3% between
mid-June and mid-August. The tide seemed to turn again in late August, however,
pushing the long-term Treasury yield back up to 7.1%.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED AUGUST 31, 1996
-------------------------------------
1 YEAR 3 YEARS 5 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity
S&P 500 Index 18.7% 15.0% 13.6%
Russell 2000 Index 10.8 12.3 15.1
MSCI-EAFE Index 8.2 6.6 9.1
- -----------------------------------------------------------------------------------
Fixed-Income
Lehman Aggregate Bond Index 4.1% 4.5% 7.5%
Lehman 10-Year Municipal
Bond Index 4.4 4.9 7.7
Lipper Money Market 4.9 4.4 3.9
- -----------------------------------------------------------------------------------
Other
Consumer Price Index 2.9% 2.8% 2.9%
- -----------------------------------------------------------------------------------
</TABLE>
The past year's volatility was a result of wide swings in the expectations
for the economy. Bond investors, in aggregate, suffered as the Lehman Brothers
Aggregate Bond Index posted a total return of 4.1% for the fiscal year, with
income of 6.9% and a -2.8% decline in capital.
4
<PAGE> 7
Equity investors, on the other hand, saw the Standard & Poor's 500
Composite Stock Price Index generate a return of 18.7%, largely due to
continued earnings growth; the S&P 500's performance was only 2.7% below the
strong 21.4% gain generated during the twelve months ended August 1995. The
best performers among the S&P 500's holdings were often the large "traditional"
growth stocks in the health-care (32.1% over the last twelve months) and
consumer-staples (28.7%) sectors. Such issues have historically performed
especially well during periods of economic uncertainty thanks to the
dependability of their earnings. The utilities (6.2%), technology (7.4%), and
basic-materials (10.2%) sectors, by contrast, lagged in this environment of
uncertain growth and rising interest rates.
A number of the worst--and most volatile--performers among domestic common
stocks could be found among small-capitalization technology issues. While
small-company stocks (as measured by the Russell 2000 Small Stock Index) gained
10.8% in aggregate, stocks of small technology companies fell -0.8% for the
year, dropping -18.8% in the last three months alone. The most likely cause was
a number of earnings disappointments within the group.
For bond investors, issues of shorter maturity and lower quality generally
performed better than other segments of the bond market. Mortgage-backed
securities also generated attractive relative returns as rising interest rates
reduced prepayment activity. Municipals, however, were particularly strong
compared to their taxable siblings as concern over a "flat-tax" system eased.
INTERNATIONAL EQUITY MARKETS
Returns for international equity investors were solid, as reflected in the 8.2%
return of the Morgan Stanley Capital International-Europe, Australasia, Far
East (EAFE) Index. Performance in the European and Pacific Rim markets differed
widely, however, with returns of 15.7% and 1.1% (measured in U.S. dollars),
respectively. One reason for the disparity was the strength of the U.S. dollar
versus the Japanese yen. The dollar gained 9.8% against the yen, a move that
reduced the Japanese market's 8.6% increase in local terms to a -2.0% drop for
dollar-based investors. The dollar was essentially unchanged against the major
European currencies.
The strength of the European markets stemmed primarily from two sources:
(1) a decline in inflation expectations consistent with a drop in expected
economic growth; and (2) a new focus among corporate management on "building
shareholder value." As in the U.S. market, reduced growth expectations boosted
the relative performance of "traditional" quality growth stocks, since their
earnings are less dependent on economic cycles. At the same time, corporate
restructuring appears to be gaining favor among the managers of many European
firms in their efforts to enhance returns to shareholders. This shift boosted
the performance of a number of more cyclical stocks. Performance in the United
Kingdom was also aided by a marked increase in merger activity in advance of
the upcoming national election--an election that is widely expected to result
in a change in government.
In Asian markets, Hong Kong (22.2%) and Malaysia (13.4%) stood out for
their gains. A number of the smaller markets (e.g., Singapore, Thailand)
suffered from slower growth and reduced competitiveness as a result of the
weakened Japanese yen. The Japanese market, despite the 8.6% gain in local
currency, proved disappointing to many investors due to slow sustained growth
despite government efforts to spur the economy.
5
<PAGE> 8
REPORT FROM THE ADVISER
[PHOTO]
The 1996 fiscal year ended with tax-exempt interest rates virtually
identical to those of twelve months earlier. This apparent stability masked a
market environment that included at first euphoric optimism and, subsequently,
pervasive unease.
All in all, it proved to be a "year of the coupon," in which nearly all of
the total return for each of the Vanguard Municipal Bond Fund Portfolios came
from interest income. Total return, as you know, consists of capital
appreciation (or depreciation) plus interest income. Fiscal 1996 witnessed an
initial surge in capital appreciation followed by an offsetting period of
falling bond prices that left net asset values, point to point, about the same.
Given the volatility of our markets, a year of the coupon occurs about as often
as the proverbial blue moon.
That said, most conscientious observers of the bond markets know that,
over long stretches of time, every year is on average a year of the coupon
because interest rates tend to fluctuate within fairly narrow ranges. Hence,
big gains in bond prices one year are wiped out by a rise in interest rates the
next year, and vice versa. Over many years of these offsetting ups and downs,
interest income turns out to be the dominant source of total return. Thus, what
happened in fiscal 1996 was unusual short-term behavior, but was fully
consistent with the longer-term "big picture." Details of each Portfolio's
total return and its two constituent contributors are provided on earlier pages
of this Report. Suffice it to say that, once again, the markets have
underscored the wisdom of "sticking to one's guns."
CROSSCURRENTS
Although interest rates ended the fiscal year very near where they began it,
there was a great deal of turbulence along the way. Many forces were pushing
and pulling the municipal bond market. The most important of these
market-movers was the state of the domestic economy. During the waning months
of 1995 and early in 1996, the economy appeared to be struggling, with October
through December 1995 particularly anemic.
Many investors believed that the Federal Reserve Board would attempt to
stimulate the economy by adding bank reserves to the banking system, thereby
engineering a drop in short-term interest rates. Exacerbating the situation
were the contentious (and, all said, silly) wrangling over the Federal debt
ceiling, which furloughed thousands of government workers, and severe winter
weather in the Northeast, which forced consumers in that region to temporarily
substitute snow shovels for charge cards.
The peculiar dynamics of the bond markets guarantee that economic weakness
begets strength, at least in the prices of bonds. Sure enough, from August
1995 through January 1996, the bond markets enjoyed a rally
INVESTMENT PHILOSOPHY
Each Portfolio holds a diversified group of municipal bonds designed to produce
a high level of current, tax-exempt income consistent with each Portfolio's
maturity and quality mandates. In managing the Fund, Vanguard Fixed Income
Group follows a disciplined investment policy, meeting well-defined standards
for credit quality and keeping each Portfolio within its stated maturity range,
while seeking to exceed, with reasonable consistency over the long term,
average returns achieved by comparable funds.
6
<PAGE> 9
that sent the yield on a garden-variety long-term Treasury bond from 6.7% to
6.0%. In the meantime, a similar generic municipal general obligation bond
rated Aa by Moody's dropped in yield from 6.2% to 5.6%.
Unfortunately for bond investors, the chill on the economy lasted only
about as long as the snowdrifts. By March, it became apparent that the economy
was anything but moribund. Employment statistics were among the first
indicators to show a thaw in economic activity. Before long, most market
participants began to believe that the Fed would have to tighten rather than
ease monetary policy. The high-water mark in bond prices occurred in
mid-February, when the generic Aa municipal general obligation bond yielded
about 5.5%. Within a few weeks its yield had bounced back over 6%, where it
continues to trade as of this writing.
A second force pushing and pulling municipal bond prices was politics. The
issue of tax reform, in various flavors and guises, was floated by candidates
in the presidential primaries. The most radical proposals for tax reform would
have eliminated the unique tax exemption of municipal bonds by making all
interest and dividends tax-exempt. Thus, municipal bonds would be treated the
same as their higher-yielding (and formerly taxable) corporate and Treasury
bond brethren.
Needless to say, enactment of such proposals would have profoundly
negative effects on the municipal bond market. As the fortunes of the tax
reform candidates waxed and waned, so did the performance of municipal bonds
relative to taxable bonds. Ultimately, when the principal tax reform
"tub-thumper" dropped out of the race, the municipal market began to stage a
comeback of sorts. The revival was abetted by a third factor: supply.
The saying "many are called but few are chosen" can certainly be applied
to the municipal bond market in the 1990s, and in 1996 in particular. This year
marks the final year (for a while) in which more bonds will have been redeemed
than are issued. The recent outright shrinkage of the municipal bond market is
a peculiar byproduct of the "excesses of the 1980s." In 1984, 1985, and 1986,
the municipal bond market was in turmoil, as tax reform threatened to curtail
municipal bond issuance. A flood of new issues came to market so as to beat the
effective date of the new legislation. At that time, interest rates on
tax-exempt bonds were between 9% and 10%. Almost invariably, these bonds were
issued with ten years of call protection; that is, the issuers were
contractually prevented from redeeming the bonds before a full ten years had
elapsed. However, the issuers were permitted to issue new bonds whose proceeds
would eventually be used to redeem these high-coupon bonds once their
call-protection period expired.
The ten years that followed were replete with such "advance refundings."
Obviously, issuers wasted no time retiring the high-coupon securities once they
were able, in 1995 and 1996, to do so. Indeed, refundings have been so
voluminous that they've outpaced new bond issuance in the last two calendar
years. In late 1996, in particular, the paucity of new issues has provided
firmer-than-expected support for bond prices.
YOUR VANGUARD MUNICIPAL BOND FUND PORTFOLIOS
The seven Portfolios of Vanguard Municipal Bond Fund performed exactly as one
would expect given the respective positions of their average maturities along
the yield curve and the generally placid point-to-point rate environment. Such
tranquillity is unlikely to persist. The economy is always in disequilibrium,
and the financial markets always react to economic change by getting either
better or worse.
7
<PAGE> 10
Currently, there is widespread concern over the extent to which low
unemployment (alternatively, a "fully utilized workforce") will push up labor
costs. This suggests that interest rates probably will move higher. If so,
investors can look forward to increased bond price volatility in fiscal 1997.
Regardless of how the bond market performs, the Vanguard Municipal Bond Fund
Portfolios will continue to be very cost-effective and to provide
"well-modulated" combinations of expected return (yield) and risk.
Ian A. MacKinnon, Senior Vice President
Jerome J. Jacobs, Principal
Pamela E. Tynan, Principal
Christopher M. Ryon, Principal
Reid O. Smith, Principal
Vanguard Fixed Income Group
September 16, 1996
8
<PAGE> 11
PERFORMANCE SUMMARY: MONEY MARKET PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. Government, and there is no
assurance that the fund will be able to maintain a stable net asset value of
$1.00 per share.
TOTAL INVESTMENT RETURNS: 6/10/80-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
AVERAGE
MONEY MARKET PORTFOLIO FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1980 0.0% 0.7% 0.7% -0.6%
1981 0.0 5.8 5.8 5.4
1982 0.0 7.5 7.5 8.2
1983 0.0 5.2 5.2 5.0
1984 0.0 5.6 5.6 5.3
1985 0.0 5.6 5.6 5.3
1986 0.0 5.0 5.0 4.7
1987 0.0 4.3 4.3 3.9
1988 0.0 4.9 4.9 4.5
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
AVERAGE
MONEY MARKET PORTFOLIO FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1989 0.0% 6.2% 6.2% 5.8%
1990 0.0 5.9 5.9 5.5
1991 0.0 5.1 5.1 4.7
1992 0.0 3.5 3.5 3.1
1993 0.0 2.5 2.5 2.1
1994 0.0 2.4 2.4 2.0
1995 0.0 3.6 3.6 3.2
1996 0.0 3.5 3.5 3.1
- --------------------------------------------------------
</TABLE>
*Average Tax-Exempt Money Market Fund.
See Financial Highlights table on page 30 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/86-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO 3.48% 3.12% 4.19% $15,072
AVERAGE TAX-EXEMPT
MONEY MARKET FUND 3.05 2.68 3.78 14,486
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio 6/10/80 3.53% 3.15% 0.00% 4.21% 4.21%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter as well as for the Portfolio's fiscal year
end.
9
<PAGE> 12
PERFORMANCE SUMMARY: SHORT-TERM PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate so that an investment in the
Portfolio could lose money.
TOTAL INVESTMENT RETURNS: 9/1/77-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHORT-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1978 -0.9% 3.4% 2.5% N/A
1979 -0.2 4.2 4.0 N/A
1980 0.1 5.3 5.4 N/A
1981 -0.4 6.3 5.9 N/A
1982 2.6 8.2 10.8 N/A
1983 -0.2 6.4 6.2 N/A
1984 -0.5 6.3 5.8 N/A
1985 1.1 6.7 7.8 N/A
1986 1.0 6.1 7.1 10.3%
1987 -0.1 5.2 5.1 5.4
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHORT-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1988 -0.4% 5.3% 4.9% 4.2%
1989 0.6 6.0 6.6 6.7
1990 0.3 6.1 6.4 6.6
1991 1.2 5.8 7.0 9.2
1992 1.1 4.8 5.9 9.0
1993 0.2 4.0 4.2 6.4
1994 -1.0 3.5 2.5 2.5
1995 0.8 4.0 4.8 6.7
1996 -0.3 3.9 3.6 3.9
- --------------------------------------------------------
</TABLE>
*Lehman 3-Year Municipal Bond Index.
See Financial Highlights table on page 30 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/86-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM PORTFOLIO 3.64% 4.20% 5.08% $16,416
AVERAGE SHORT-TERM
MUNICIPAL FUND* 3.51 4.09 4.71 15,850
LEHMAN 3-YEAR
MUNICIPAL BOND INDEX 3.94 5.68 6.03 17,964
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Adjusted for maturity differences.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Portfolio 9/1/77 3.80% 4.30% 0.25% 4.87% 5.12%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter as well as for the Portfolio's
fiscal year end.
10
<PAGE> 13
PERFORMANCE SUMMARY: LIMITED-TERM PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate so that an investment in the
Portfolio could lose money.
TOTAL INVESTMENT RETURNS: 8/31/87-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
LIMITED-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1988 1.0% 6.1% 7.1% 4.2%
1989 0.5 6.5 7.0 6.7
1990 0.4 6.5 6.9 6.6
1991 2.6 6.3 8.9 9.2
1992 2.6 5.4 8.0 9.0
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
LIMITED-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1993 2.0% 4.7% 6.7% 6.4%
1994 -1.9 4.2 2.3 2.5
1995 1.3 4.7 6.0 6.7
1996 -0.8 4.5 3.7 3.9
- --------------------------------------------------------
</TABLE>
*Lehman 3-Year Municipal Bond Index.
See Financial Highlights table on page 31 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/87-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS SINCE INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIMITED-TERM PORTFOLIO 3.73% 5.33% 6.28% $17,294
AVERAGE LIMITED-TERM
MUNICIPAL FUND 3.48 4.94 5.60 16,323
LEHMAN 3-YEAR
MUNICIPAL BOND INDEX 3.94 5.68 6.11 17,051
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Limited-Term Portfolio 8/31/87 4.05% 5.53% 0.85% 5.46% 6.31%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter as well as for the Portfolio's
fiscal year end.
11
<PAGE> 14
PERFORMANCE SUMMARY: INTERMEDIATE-TERM PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolio could lose money.
TOTAL INVESTMENT RETURNS: 9/1/77-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
INTERMEDIATE-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1978 -6.3% 4.2% -2.1% N/A
1979 -1.5 5.1 3.6 N/A
1980 -16.0 5.4 -10.6 N/A
1981 -22.2 6.7 -15.5 N/A
1982 12.0 11.3 23.3 N/A
1983 3.9 8.8 12.7 N/A
1984 -0.9 8.8 7.9 N/A
1985 5.2 9.3 14.5 N/A
1986 10.8 8.9 19.7 20.2%
1987 -3.0 6.9 3.9 6.4
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
INTERMEDIATE-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1988 0.1% 7.1% 7.2% 4.5%
1989 3.2 7.4 10.6 8.1
1990 -0.9 7.0 6.1 6.5
1991 5.1 7.0 12.1 10.9
1992 4.2 6.3 10.5 10.4
1993 5.7 5.8 11.5 10.6
1994 -2.7 5.2 2.5 1.4
1995 2.2 5.6 7.8 8.8
1996 -0.7 5.2 4.5 3.9
- --------------------------------------------------------
</TABLE>
*Lehman 7-Year Municipal Bond Index.
See Financial Highlights table on page 31 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/86-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTERMEDIATE-TERM PORTFOLIO 4.47% 7.31% 7.64% $20,871
AVERAGE INTERMEDIATE-TERM
MUNICIPAL FUND 3.89 6.33 6.44 18,658
LEHMAN 7-YEAR
MUNICIPAL BOND INDEX 3.90 6.96 7.11 19,878
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Intermediate-Term Portfolio 9/1/77 5.61% 7.64% 1.61% 6.43% 8.04%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter as well as for the Portfolio's
fiscal year end.
12
<PAGE> 15
PERFORMANCE SUMMARY: INSURED LONG-TERM PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolio could lose money.
TOTAL INVESTMENT RETURNS: 9/30/84-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
INSURED LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1985 5.0% 8.8% 13.8% 17.4%
1986 13.3 9.4 22.7 23.1
1987 -4.2 7.3 3.1 4.6
1988 0.0 7.8 7.8 6.9
1989 4.8 7.8 12.6 11.0
1990 -2.3 7.0 4.7 6.4
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
INSURED LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1991 5.5% 7.3% 12.8% 11.8%
1992 5.3 6.9 12.2 11.2
1993 6.7 6.4 13.1 12.2
1994 -5.8 5.5 -0.3 0.2
1995 2.7 6.2 8.9 8.9
1996 0.2 5.6 5.8 5.2
- --------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 32 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/86-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED LONG-TERM PORTFOLIO 5.77% 7.81% 7.96% $21,517
AVERAGE INSURED LONG-TERM
MUNICIPAL FUND 4.90 6.66 6.80 19,301
LEHMAN MUNICIPAL BOND INDEX 5.24 7.44 7.77 21,137
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Insured Long-Term Portfolio 9/30/84 6.83% 8.17% 1.54% 6.82% 8.36%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter as well as for the Portfolio's
fiscal year end.
13
<PAGE> 16
PERFORMANCE SUMMARY: LONG-TERM PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolio could lose money.
TOTAL INVESTMENT RETURNS: 9/1/77-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1978 -8.1% 5.2% -2.9% N/A
1979 -1.0 6.1 5.1 N/A
1980 -23.9 5.9 -18.0 N/A
1981 -25.5 7.5 -18.0 -16.0%
1982 14.6 13.4 28.0 31.5
1983 6.2 9.8 16.0 7.5
1984 -1.6 9.6 8.0 8.7
1985 6.8 10.2 17.0 16.6
1986 14.0 9.5 23.5 23.1
1987 -5.4 7.2 1.8 4.6
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1988 -0.1% 7.7% 7.6% 6.9%
1989 4.9 7.9 12.8 11.0
1990 -2.3 7.2 4.9 6.4
1991 6.2 7.7 13.9 11.8
1992 5.4 7.2 12.6 11.2
1993 6.7 6.4 13.1 12.2
1994 -5.3 5.4 0.1 0.2
1995 2.5 6.2 8.7 8.9
1996 0.5 5.6 6.1 5.2
- --------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 32 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/86-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM PORTFOLIO 6.08% 8.01% 8.05% $21,691
AVERAGE GENERAL MUNICIPAL FUND 4.68 6.74 6.98 19,642
LEHMAN MUNICIPAL BOND INDEX 5.24 7.44 7.77 21,137
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-Term Portfolio 9/1/77 7.43% 8.49% 1.62% 6.91% 8.53%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter as well as for the Portfolio's
fiscal year end.
14
<PAGE> 17
PERFORMANCE SUMMARY: HIGH-YIELD PORTFOLIO
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolio could lose money.
TOTAL INVESTMENT RETURNS: 12/27/78-8/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------
HIGH-YIELD PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1979 2.7% 4.4% 7.1% N/A
1980 -20.9 6.3 -14.6 N/A
1981 -22.5 8.1 -14.4 -16.0%
1982 11.8 13.8 25.6 31.5
1983 7.0 10.4 17.4 7.5
1984 -1.0 10.1 9.1 8.7
1985 6.9 10.6 17.5 16.6
1986 14.4 9.8 24.2 23.1
1987 -5.8 7.4 1.6 4.6
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
HIGH-YIELD PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1988 0.0% 8.0% 8.0% 6.9%
1989 5.6 8.0 13.6 11.0
1990 -2.6 7.4 4.8 6.4
1991 5.7 8.0 13.7 11.8
1992 5.3 7.5 12.8 11.2
1993 6.3 6.8 13.1 12.2
1994 -5.2 5.7 0.5 0.2
1995 2.2 6.5 8.7 8.9
1996 -0.4 5.8 5.4 5.2
- --------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 33 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: 8/31/86-8/31/96
[FIGURE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996
---------------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HIGH-YIELD PORTFOLIO 5.39% 7.99% 8.11% $21,817
AVERAGE HIGH-YIELD
MUNICIPAL FUND 5.43 6.91 7.12 19,886
LEHMAN MUNICIPAL BOND INDEX 5.24 7.44 7.77 21,137
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED 6/30/96*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High-Yield Portfolio 12/27/78 6.98% 8.56% 1.48% 7.16% 8.64%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter as well as for the Portfolio's
fiscal year end.
15
<PAGE> 18
PORTFOLIO PROFILE: MONEY MARKET PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics. Key
elements of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 300
7-Day Yield 3.4%
Average Maturity 66 days
Average Quality MIG-1
Expense Ratio 0.20%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 17.8%
Aa 68.4
A 13.8
Baa --
Ba --
B --
Not Rated --
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ---------------------------------------------
<S> <C>
Texas 13.8%
California 12.4
Florida 7.3
Illinois 4.9
Michigan 4.4
Georgia 4.0
New York 4.0
Alaska 3.5
Missouri 3.4
North Carolina 3.3
- ---------------------------------------------
Top Ten 61.0%
</TABLE>
16
<PAGE> 19
[PHOTO]
FINANCIAL ATTRIBUTES
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
portfolio holds, the less susceptible it is to a price decline stemming from
the problems of a particular bond issuer.
YIELD. A snapshot of a portfolio's interest income. The yield, expressed as a
percentage of the portfolio's net asset value, is based on income earned by the
portfolio over the past 30 days, 7 days for money market portfolios, and is
annualized, or projected forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by the portfolio were held to their maturity dates.
AVERAGE COUPON. The average interest rate, expressed as a percentage of face
value, paid on the bonds held by the portfolio.
AVERAGE MATURITY. The average length of time until bonds held by the portfolio
reach maturity and are repaid. In general, the longer the average maturity, the
more a portfolio's share price will fluctuate in response to changes in market
interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
credit ratings assigned to the portfolio's securities holdings by bond-rating
agencies. Agencies assign credit ratings after an appraisal of a bond issuer's
ability to meet its obligations. Quality is graded on a scale, with Aaa
indicating the most creditworthy bond issuers and MIG-1 indicating the most
creditworthy issues of municipal money market securities.
AVERAGE DURATION. A measure of how much a portfolio's share price will
fluctuate in response to a change in interest rates. To estimate the price
sensitivity of a portfolio, multiply its duration by the change in rates. If
interest rates rise by one percentage point, the share price of a portfolio
with an average duration of five years will decline by about 5%. If rates
decrease by a percentage point, the portfolio's share price would rise by 5%.
EXPENSE RATIO. The percentage of a portfolio's average net assets used to pay
its annual administrative and advisory expenses. These expenses directly reduce
returns to investors. Average expense ratios in 1995 for municipal bond mutual
funds ranged from 0.68% for money market funds to 1.21% for high-yield funds.
INVESTMENT FOCUS
This grid indicates a bond portfolio's characteristics in terms of two
attributes--average maturity (short, medium, or long) and average credit
quality (high, medium, or low).
VOLATILITY MEASURES
R-SQUARED. A measure of how much of a portfolio's past returns can be explained
by the returns from the overall market (or its benchmark index). If a
portfolio's total return were precisely synchronized with the overall market's
return, its R-squared would be 1.00. If a portfolio's returns bore no
relationship to the market's returns, its R-squared would be 0.
BETA. A measure of the magnitude of a portfolio's past share-price fluctuations
in relation to the fluctuations in the overall market (or appropriate market
index). The market, or index, has a beta of 1.00. Therefore, the share price of
a portfolio with a beta of 1.20 would rise or fall by 12% if the overall market
rose or fell by 10%.
DISTRIBUTION BY CREDIT QUALITY
An indicator of the risk of default or other credit problems on bonds held by
the portfolio.
DISTRIBUTION BY MATURITY
An indicator of interest-rate risk. In general, the higher the concentration of
longer-maturity issues, the more a portfolio's share price will fluctuate in
response to changes in interest rates.
17
<PAGE> 20
PORTFOLIO PROFILE: SHORT-TERM PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics. Key
elements of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 189
30-Day Yield 3.7%
Yield to Maturity* 3.9%
Average Coupon 5.3%
Average Maturity 459 days
Average Quality Aaa
Average Duration 1.1 years
Expense Ratio 0.20%
</TABLE>
*After expenses.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 57.5%
1-5 Years 42.5
5-10 Years --
10-20 Years --
20-30 Years --
Over 30 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[FIGURE]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 85.4%
Aa 9.2
A 4.5
Baa 0.9
Ba --
B --
Not Rated --
- ----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ----------------------------------------------
<S> <C>
New York 9.4%
California 8.9
Texas 8.4
Florida 7.1
Massachusetts 6.5
Washington 6.3
Pennsylvania 5.5
Illinois 5.3
Tennessee 4.0
Georgia 3.6
- ---------------------------------------------
Top Ten 65.0%
</TABLE>
18
<PAGE> 21
PORTFOLIO PROFILE: LIMITED-TERM PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics, where
appropriate, compared to an unmanaged index. Key elements for this Profile are
defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 256
30-Day Yield 4.1%
Yield to Maturity* 4.3%
Average Coupon 5.7%
Average Maturity 3.3 years
Average Quality Aa1
Average Duration 2.4 years
Expense Ratio 0.21%
</TABLE>
*After expenses.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
LIMITED-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.84 1.00
Beta 0.30 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 34.0%
1-5 Years 44.3
5-10 Years 21.7
10-20 Years --
20-30 Years --
Over 30 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[FIGURE]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 60.7%
Aa 20.4
A 13.5
Baa 5.4
Ba --
B --
Not Rated --
- ----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ---------------------------------------------
<S> <C>
California 12.2%
New York 11.7
Texas 10.7
Florida 7.8
Pennsylvania 7.4
Michigan 6.3
Massachusetts 4.8
Connecticut 3.6
Washington 3.4
New Jersey 3.1
- ---------------------------------------------
Top Ten 71.0%
</TABLE>
19
<PAGE> 22
PORTFOLIO PROFILE: INTERMEDIATE-TERM PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics, where
appropriate, compared to an unmanaged index. Key elements for this Profile are
defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 635
30-Day Yield 4.6%
Yield to Maturity* 4.8%
Average Coupon 5.7%
Average Maturity 7.7 years
Average Quality Aa2
Average Duration 5.1 years
Expense Ratio 0.20%
</TABLE>
*After expenses.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
INTERMEDIATE-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.96 1.00
Beta 0.72 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 19.2%
1-5 Years 23.7
5-10 Years 46.0
10-20 Years 10.4
20-30 Years 0.7
Over 30 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[FIGURE]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 57.3%
Aa 22.8
A 15.1
Baa 4.6
Ba --
B --
Not Rated 0.2
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ---------------------------------------------
<S> <C>
Texas 10.8%
California 10.7
New York 9.9
Pennsylvania 8.0
Illinois 6.8
Massachusetts 5.7
Georgia 4.8
New Jersey 4.6
Florida 3.5
Washington 3.3
- ---------------------------------------------
Top Ten 68.1%
</TABLE>
20
<PAGE> 23
PORTFOLIO PROFILE: INSURED LONG-TERM PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics, where
appropriate, compared to an unmanaged index. Key elements for this Profile are
defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 243
30-Day Yield 5.1%
Yield to Maturity* 5.3%
Average Coupon 5.8%
Average Maturity 13.2 years
Average Quality Aaa
Average Duration 8.1 years
Expense Ratio 0.20%
</TABLE>
*After expenses.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
INSURED LONG-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.16 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 12.5%
1-5 Years 10.8
5-10 Years 11.8
10-20 Years 39.7
20-30 Years 24.1
Over 30 Years 1.1
- -----------------------------------------
Total 100.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[FIGURE]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 97.3%
Aa 2.1
A 0.6
Baa --
Ba --
B --
Not Rated --
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ---------------------------------------------
<S> <C>
California 15.0%
Pennsylvania 9.1
Texas 9.1
Massachusetts 7.7
Florida 7.6
New Jersey 5.1
Illinois 4.9
South Carolina 4.1
Michigan 3.4
Ohio 3.2
- --------------------------------------------
Top Ten 69.2%
</TABLE>
21
<PAGE> 24
PORTFOLIO PROFILE: LONG-TERM PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics, where
appropriate, compared to an unmanaged index. Key elements for this Profile are
defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 123
30-Day Yield 5.2%
Yield to Maturity* 5.3%
Average Coupon 5.9%
Average Maturity 14.0 years
Average Quality Aa2
Average Duration 7.6 years
Expense Ratio 0.20%
</TABLE>
*After expenses.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
LONG-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.14 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 16.4%
1-5 Years 3.1
5-10 Years 25.9
10-20 Years 31.4
20-30 Years 22.2
Over 30 Years 1.0
- -----------------------------------------
Total 100.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[FIGURE]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 48.9%
Aa 20.9
A 25.6
Baa 3.6
Ba --
B --
Not Rated 1.0
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ---------------------------------------------
<S> <C>
Texas 13.8%
California 12.7
New York 9.4
Massachusetts 7.5
Pennsylvania 7.5
New Jersey 6.4
Illinois 4.9
Ohio 4.2
Wisconsin 3.4
Louisiana 3.2
- ---------------------------------------------
Top Ten 73.0%
</TABLE>
22
<PAGE> 25
PORTFOLIO PROFILE: HIGH-YIELD PORTFOLIO
AUGUST 31, 1996
This Profile provides a snapshot of the Portfolio's characteristics, where
appropriate, compared to an unmanaged index. Key elements for this Profile are
defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 198
30-Day Yield 5.5%
Yield to Maturity* 5.7%
Average Coupon 5.9%
Average Maturity 13.2 years
Average Quality A1
Average Duration 7.5 years
Expense Ratio 0.20%
</TABLE>
*After expenses.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
HIGH-YIELD LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.09 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 18.4%
1-5 Years 4.7
5-10 Years 21.8
10-20 Years 27.1
20-30 Years 25.9
Over 30 Years 2.1
- -----------------------------------------
Total 100.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[FIGURE]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Aaa 45.5%
Aa 10.6
A 18.9
Baa 13.2
Ba 2.5
B --
Not Rated 9.3
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF PORTFOLIO)
- ---------------------------------------------
<S> <C>
Texas 12.8%
California 12.3
New York 11.6
Pennsylvania 10.2
Massachusetts 9.1
Michigan 6.0
Illinois 5.4
Indiana 3.3
Washington 2.8
District of Columbia 2.5
- ---------------------------------------------
Top Ten 76.0%
</TABLE>
23
<PAGE> 26
[PHOTO]
FINANCIAL STATEMENTS
AUGUST 31, 1996
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.
STATEMENT OF OPERATIONS
This Statement shows interest earned by each Portfolio during the reporting
period, and details the operating expenses charged to the Portfolio. These
expenses directly reduce the amount of investment income available to pay to
shareholders as tax-exempt income dividends. This Statement also shows any Net
Gains (Losses) realized on the sale of investments, and the increase or
decrease in the Unrealized Appreciation (Depreciation) on investments during
the period. If the Portfolio invested in futures contracts during the period,
the results of these investments are shown separately.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1996
-------------------------------------------------------------------------
MONEY MARKET SHORT-TERM LIMITED-TERM INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $155,650 $58,365 $80,719 $305,081
--------------------------------------------------------------------------
Total Income 155,650 58,365 80,719 305,081
--------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 528 179 213 710
Management and Administrative 6,158 2,014 2,605 8,900
Marketing and Distribution 1,233 415 467 1,241
Taxes (other than income taxes) 302 98 122 409
Custodian Fees 123 37 41 128
Auditing Fees 10 8 8 11
Shareholders' Reports 87 37 48 154
Annual Meeting and Proxy Costs 21 9 14 45
Directors' Fees and Expenses 12 4 5 17
Total Expenses 8,474 2,801 3,523 11,615
--------------------------------------------------------------------------
Expenses Paid Indirectly--Note C (123) (40) (199) (412)
--------------------------------------------------------------------------
Net Expenses 8,351 2,761 3,324 11,203
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 147,299 55,604 77,395 293,878
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (75) 544 (706) 3,827
Futures Contracts -- -- 1,504 9,379
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (75) 544 798 13,206
- -----------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities -- (5,277) (13,781) (50,837)
Futures Contracts -- -- (2,466) (11,705)
- -----------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) -- (5,277) (16,247) (62,542)
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $147,224 $50,871 $61,946 $244,542
=============================================================================================================================
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1996
----------------------------------------------------
INSURED LONG-TERM LONG-TERM HIGH-YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $111,001 $61,799 $114,305
----------------------------------------------------------
Total Income 111,001 61,799 114,305
----------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 246 136 242
Management and Administrative 3,001 1,658 2,978
Marketing and Distribution 354 209 389
Taxes (other than income taxes) 136 73 134
Custodian Fees 46 27 45
Auditing Fees 8 7 8
Shareholders' Reports 53 30 56
Annual Meeting and Proxy Costs 13 6 14
Directors' Fees and Expenses 6 3 6
----------------------------------------------------------
Total Expenses 3,863 2,149 3,872
Expenses Paid Indirectly--Note C (56) (27) (82)
----------------------------------------------------------
Net Expenses 3,807 2,122 3,790
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 107,194 59,677 110,515
- -------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 11,032 10,688 16,441
Futures Contracts (2,397) (3,340) (7,610)
- -------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 8,635 7,348 8,831
- -------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (8,581) (2,132) (17,461)
Futures Contracts 2,444 (1,469) (1,410)
- -------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (6,137) (3,601) (18,871)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $109,692 $63,424 $100,475
=============================================================================================================
</TABLE>
25
<PAGE> 28
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information that is detailed in the Statement of Operations. Because the
Portfolio distributes its income to shareholders each day, the amounts of
Distributions--Net Investment Income generally equal the Net Investment Income
earned as shown under the Operations section. The amounts of
Distributions--Realized Capital Gain may not match the capital gains shown in
the Operations section, because distributions are determined on a tax basis and
may be made in a period different from the one in which the gains were
realized. The Capital Share Transactions section shows the amount shareholders
invested in the Portfolio, either by purchasing shares or by reinvesting
distributions, as well as the amounts redeemed. The corresponding numbers of
Shares Issued and Redeemed are shown at the end of the Statement.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET SHORT-TERM
PORTFOLIO PORTFOLIO
----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
1996 1995 1996 1995
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 147,299 $ 149,391 $ 55,604 $ 57,328
Realized Net Gain (Loss) (75) (150) 544 (212)
Change in Unrealized Appreciation
(Depreciation) -- -- (5,277) 11,658
----------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 147,224 149,241 50,871 68,774
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (147,299) (149,391) (55,604) (57,328)
Realized Capital Gain -- -- -- (97)
----------------------------------------------------------------------
Total Distributions (147,299) (149,391) (55,604) (57,425)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 5,021,926 5,115,579 693,673 752,491
Issued in Lieu of Cash Distributions 136,322 137,361 46,966 47,474
Redeemed (4,699,545) (5,250,720) (721,263) (929,866)
----------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 458,703 2,220 19,376 (129,901)
- --------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 458,628 2,070 14,643 (118,552)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 4,165,695 4,163,625 1,442,009 1,560,561
----------------------------------------------------------------------
End of Year $ 4,624,323 $ 4,165,695 $1,456,652 $1,442,009
==========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 5,021,926 5,115,579 44,518 48,700
Issued in Lieu of Cash Distributions 136,322 137,361 3,015 3,070
Redeemed (4,699,545) (5,250,720) (46,293) (60,206)
----------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 458,703 2,220 1,240 (8,436)
==========================================================================================================================
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
LIMITED-TERM INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------
1996 1995 1996 1995
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 77,395 $ 75,985 $ 293,878 $ 268,611
Realized Net Gain (Loss) 798 (3,378) 13,206 3,748
Change in Unrealized Appreciation
(Depreciation) (16,247) 21,146 (62,542) 104,438
----------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 61,946 93,753 244,542 376,797
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (77,395) (75,985) (293,878) (268,611)
Realized Capital Gain -- -- (3,701) (57,697)
----------------------------------------------------------------------
Total Distributions (77,395) (75,985) (297,579) (326,308)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 638,324 659,126 1,405,307 1,538,151
Issued in Lieu of Cash Distributions 61,604 59,862 221,318 247,714
Redeemed (592,463) (882,517) (1,095,077) (1,455,705)
----------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 107,465 (163,529) 531,548 330,160
- --------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 92,016 (145,761) 478,511 380,649
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,668,559 1,814,320 5,448,261 5,067,612
----------------------------------------------------------------------
End of Year $1,760,575 $1,668,559 $5,926,772 $5,448,261
==========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 59,690 62,583 106,500 120,215
Issued in Lieu of Cash Distributions 5,763 5,677 16,790 19,472
Redeemed (55,453) (84,035) (83,215) (114,445)
----------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 10,000 (15,775) 40,075 25,242
==========================================================================================================================
</TABLE>
27
<PAGE> 30
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM LONG-TERM
PORTFOLIO PORTFOLIO
----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
1996 1995 1996 1995
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 107,194 $ 108,265 $ 59,677 $ 58,321
Realized Net Gain (Loss) 8,635 (442) 7,348 792
Change in Unrealized Appreciation
(Depreciation) (6,137) 46,692 (3,601) 25,220
----------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 109,692 154,515 63,424 84,333
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (107,194) (108,265) (59,677) (58,321)
Realized Capital Gain -- (26,395) -- (14,264)
----------------------------------------------------------------------
Total Distributions (107,194) (134,660) (59,677) (72,585)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 246,307 314,308 211,755 293,714
Issued in Lieu of Cash Distributions 67,724 89,251 40,407 51,136
Redeemed (315,459) (426,123) (199,825) (303,416)
----------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions (1,428) (22,564) 52,337 41,434
- --------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 1,070 (2,709) 56,084 53,182
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,935,308 1,938,017 1,054,120 1,000,938
----------------------------------------------------------------------
End of Year $1,936,378 $1,935,308 $1,110,204 $1,054,120
==========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 20,072 26,844 19,545 28,855
Issued in Lieu of Cash Distributions 5,518 7,678 3,730 4,999
Redeemed (25,747) (36,608) (18,472) (29,758)
----------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding (157) (2,086) 4,803 4,096
==========================================================================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
HIGH-YIELD
PORTFOLIO
-----------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------
1996 1995
(000) (000)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 110,515 $ 106,379
Realized Net Gain (Loss) 8,831 (13,776)
Change in Unrealized Appreciation (Depreciation) (18,871) 46,507
----------------------------------
Net Increase in Net Assets Resulting from Operations 100,475 139,110
----------------------------------
DISTRIBUTIONS
Net Investment Income (110,515) (106,379)
Realized Capital Gain -- (27,681)
----------------------------------
Total Distributions (110,515) (134,060)
----------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 472,524 541,343
Issued in Lieu of Cash Distributions 74,934 95,23
Redeemed (417,820) (557,590)
----------------------------------
Net Increase (Decrease) from Capital Share Transactions 129,638 78,986
- ---------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 119,598 84,036
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,865,165 1,781,129
----------------------------------
End of Year $1,984,763 $1,865,165
===============================================================================================================
(1)Shares Issued (Redeemed)
Issued 44,918 53,728
Issued in Lieu of Cash Distributions 7,127 9,523
Redeemed (39,852) (55,774)
----------------------------------
Net Increase (Decrease) in Shares Outstanding 12,193 7,477
===============================================================================================================
</TABLE>
29
<PAGE> 32
FINANCIAL HIGHLIGHTS
This table summarizes each Portfolio's investment results and distributions to
shareholders on a per-share basis. It also presents the Portfolio's Total
Return and shows net investment income and expenses as percentages of average
net assets. These data will help you assess: the variability of the Portfolio's
net income and total returns from year to year; the relative contributions of
net income and capital gains to the Portfolio's total return; how much it costs
to operate the Portfolio; and the extent to which the Portfolio tends to
distribute capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in
the Portfolio for one year. Money market portfolios do not show a turnover rate
because securities with less than one year to maturity are excluded from the
calculation of turnover rates.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<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 .034 .036 .024 .025 .035
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
--------------------------------------------------------------
Total from Investment Operations .034 .036 .024 .025 .035
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.034) (.036) (.024) (.025) (.035)
Distributions from Realized Capital Gains -- -- -- -- --
--------------------------------------------------------------
Total Distributions (.034) (.036) (.024) (.025) (.035)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================================================================================
TOTAL RETURN 3.48% 3.63% 2.43% 2.51% 3.54%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $4,624 $4,166 $4,164 $3,538 $3,165
Ratio of Total Expenses to Average Net Assets 0.20% 0.22% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 3.42% 3.56% 2.41% 2.48% 3.45%
Portfolio Turnover Rate N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
---------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $15.59 $15.46 $15.63 $15.64 $15.53
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .609 .600 .534 .609 .720
Net Realized and Unrealized Gain (Loss) on Investments (.050) .131 (.150) .033 .171
--------------------------------------------------------------
Total from Investment Operations .559 .731 .384 .642 .891
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.609) (.600) (.534) (.609) (.720)
Distributions from Realized Capital Gains -- (.001) (.020) (.043) (.061)
--------------------------------------------------------------
Total Distributions (.609) (.601) (.554) (.652) (.781)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.54 $15.59 $15.46 $15.63 $15.64
==================================================================================================================================
TOTAL RETURN 3.64% 4.83% 2.49% 4.18% 5.87%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,457 $1,442 $1,561 $1,329 $1,061
Ratio of Total Expenses to Average Net Assets 0.20% 0.22% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 3.90% 3.88% 3.42% 3.88% 4.58%
Portfolio Turnover Rate 33% 32% 27% 46% 60%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
LIMITED-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.71 $10.57 $10.80 $10.64 $10.43
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .483 .476 .454 .485 .541
Net Realized and Unrealized Gain (Loss) on Investments (.090) .140 (.208) .209 .271
--------------------------------------------------------------
Total from Investment Operations .393 .616 .246 .694 .812
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.483) (.476) (.454) (.485) (.541)
Distributions from Realized Capital Gains -- -- (.022) (.049) (.061)
--------------------------------------------------------------
Total Distributions (.483) (.476) (.476) (.534) (.602)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.62 $10.71 $10.57 $10.80 $10.64
==================================================================================================================================
TOTAL RETURN 3.73% 5.99% 2.31% 6.68% 8.01%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,761 $1,669 $1,814 $1,625 $873
Ratio of Total Expenses to Average Net Assets 0.21% 0.22% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 4.51% 4.51% 4.24% 4.50% 5.08%
Portfolio Turnover Rate 27% 35% 21% 20% 37%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $13.14 $13.02 $13.45 $12.85 $12.41
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .671 .686 .683 .710 .747
Net Realized and Unrealized Gain (Loss) on Investments (.091) .278 (.354) .721 .516
--------------------------------------------------------------
Total from Investment Operations .580 .964 .329 1.431 1.263
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.671) (.686) (.683) (.710) (.747)
Distributions from Realized Capital Gains (.009) (.158) (.076) (.121) (.076)
--------------------------------------------------------------
Total Distributions (.680) (.844) (.759) (.831) (.823)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.04 $13.14 $13.02 $13.45 $12.85
==================================================================================================================================
TOTAL RETURN 4.47% 7.82% 2.49% 11.54% 10.52%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $5,927 $5,448 $5,068 $4,945 $3,102
Ratio of Total Expenses to Average Net Assets 0.20% 0.22% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 5.09% 5.35% 5.15% 5.41% 5.91%
Portfolio Turnover Rate 14% 12% 18% 15% 32%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 34
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $12.12 $11.98 $12.89 $12.28 $11.74
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .670 .684 .699 .718 .768
Net Realized and Unrealized Gain (Loss) on Investments .020 .313 (.734) .813 .616
--------------------------------------------------------------
Total from Investment Operations .690 .997 (.035) 1.531 1.384
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.670) (.684) (.699) (.718) (.768)
Distributions from Realized Capital Gains -- (.173) (.176) (.203) (.076)
--------------------------------------------------------------
Total Distributions (.670) (.857) (.875) (.921) (.844)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.14 $12.12 $11.98 $12.89 $12.28
==================================================================================================================================
TOTAL RETURN 5.77% 8.88% -0.32% 13.06% 12.22%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,936 $1,935 $1,938 $2,194 $1,947
Ratio of Total Expenses to Average Net Assets 0.20% 0.22% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 5.46% 5.82% 5.62% 5.77% 6.34%
Portfolio Turnover Rate 18% 7% 16% 30% 42%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.68 $10.58 $11.38 $10.95 $10.58
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .591 .608 .609 .640 .711
Net Realized and Unrealized Gain (Loss) on Investments .050 .256 (.595) .715 .561
--------------------------------------------------------------
Total from Investment Operations .641 .864 .014 1.355 1.272
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.591) (.608) (.609) (.640) (.711)
Distributions from Realized Capital Gains -- (.156) (.205) (.285) (.191)
--------------------------------------------------------------
Total Distributions (.591) (.764) (.814) (.925) (.902)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.73 $10.68 $10.58 $11.38 $10.95
==================================================================================================================================
TOTAL RETURN 6.08% 8.74% 0.08% 13.09% 12.60%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,110 $1,054 $1,001 $1,131 $962
Ratio of Total Expenses to Average Net Assets 0.20% 0.23% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 5.45% 5.87% 5.56% 5.81% 6.52%
Portfolio Turnover Rate 26% 35% 45% 36% 63%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD PORTFOLIO
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.43 $10.39 $11.17 $10.76 $10.32
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .594 .625 .626 .669 .723
Net Realized and Unrealized Gain (Loss) on Investments (.040) .213 (.566) .664 .546
--------------------------------------------------------------
Total from Investment Operations .554 .838 .060 1.333 1.269
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.594) (.625) (.626) (.669) (.723)
Distributions from Realized Capital Gains -- (.173) (.214) (.254) (.106)
--------------------------------------------------------------
Total Distributions (.594) (.798) (.840) (.923) (.829)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.39 $10.43 $10.39 $11.17 $10.76
==================================================================================================================================
TOTAL RETURN 5.39% 8.69% 0.52% 13.08% 12.81%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,985 $1,865 $1,781 $1,931 $1,505
Ratio of Total Expenses to Average Net Assets 0.20% 0.22% 0.20% 0.20% 0.23%
Ratio of Net Investment Income to Average Net Assets 5.66% 6.15% 5.83% 6.15% 6.83%
Portfolio Turnover Rate 19% 33% 50% 34% 64%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL 1996 TAX INFORMATION (UNAUDITED)
VANGUARD MUNICIPAL BOND FUND
This information for the fiscal year ended August 31, 1996, is included pursuant
to provisions of the Internal Revenue Code.
The Short-Term, Insured Long-Term, and Long-Term Portfolios designate
$332,000, $11,313,000, and $2,406,000, respectively, as capital gain dividends
(from net long-term capital gains) which, along with any additional gains
realized through October 31, 1996, will be distributed in December 1996. The
Intermediate-Term Portfolio designates $1,458,000 as capital gain dividends, of
which $41,000 was distributed to shareholders in December 1995. The balance of
$1,417,000, along with any additional gains realized through October 31, 1996,
will be distributed in December 1996.
Each Portfolio designates 100% of its income dividends as
exempt-interest dividends.
33
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
Vanguard Municipal Bond Fund is registered under the Investment Company Act of
1940 as a diversified open-end investment company, or mutual fund, and
comprises 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 many municipal issuers; 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 conform to generally
accepted accounting principles for mutual funds. The Fund consistently follows
such policies in preparing its 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 using primarily the latest bid prices or, if bid
prices are not available, using 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 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, except the Money Market Portfolio,
may use 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 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 the contracts are closed, at
which time realized gains (losses) are recognized.
4. DISTRIBUTIONS: Distributions from net investment income are declared
daily and paid on the first business day of the following month. Annual
distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
5. OTHER: Security transactions are accounted for on the date securities
are bought or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Premiums
and original issue discounts are amortized and accreted, respectively, to
interest income over the lives of the respective securities.
B. The Vanguard Group 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, 1996, the Fund had contributed capital aggregating
$1,896,000 to Vanguard (included in Other Assets), representing 9.5% of
Vanguard's capitalization. The Fund's directors and officers are also directors
and officers 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 part of the underwriting fees generated.
Such rebates or credits are used solely to reduce the Fund's
34
<PAGE> 37
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, 1996, directed brokerage and
custodian fee offset arrangements reduced expenses by:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
EXPENSE REDUCTION
(000) TOTAL EXPENSE
----------------------------- REDUCTION AS A
DIRECTED CUSTODIAN PERCENT OF AVERAGE
PORTFOLIO BROKERAGE FEES NET ASSETS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $123 --
Short-Term $ 3 37 --
Limited-Term 158 41 0.01%
Intermediate-Term 284 128 0.01
Insured Long-Term 10 46 --
Long-Term -- 27 --
High-Yield 37 45 --
- ---------------------------------------------------------------------------------
</TABLE>
D. During the year ended August 31, 1996, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(000)
------------------------------
PORTFOLIO PURCHASES SALES
- ----------------------------------------------------------------------------
<S> <C> <C>
Short-Term $ 301,063 $561,180
Limited-Term 439,405 593,619
Intermediate-Term 1,254,021 710,496
Insured Long-Term 317,016 342,184
Long-Term 251,786 293,232
High-Yield 317,477 377,379
- ----------------------------------------------------------------------------
</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
Portfolios had the following capital gains available for distribution at August
31, 1996, or capital losses available to offset future capital gains:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CAPITAL LOSS
---------------------------------
EXPIRATION
CAPITAL GAINS FISCAL
AVAILABLE FOR YEAR(S)
DISTRIBUTION AMOUNT ENDING
PORTFOLIO (000) (000) AUGUST 31
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $ (769) 2001-2005
Short-Term $ 332 -- --
Limited-Term -- (7,004) 2003-2005
Intermediate-Term 1,417 -- --
Insured Long-Term 11,313 -- --
Long-Term 2,406 -- --
High-Yield -- (8,112) 2003
- ---------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
The Short-Term, Insured Long-Term, and Long-Term Portfolios used capital loss
carryforwards of $212,000, $1,482,000, and $2,484,000, respectively, to offset
taxable capital gains realized during the year ended August 31, 1996, reducing
the amount of capital gains that would otherwise be available to distribute to
shareholders.
F. At August 31, 1996, 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 $ 4,595 $ (1,365) $ 3,230
Limited-Term 13,157 (3,808) 9,349
Intermediate-Term 215,787 (8,978) 206,809
Insured Long-Term 119,040 (2,107) 116,933
Long-Term 60,487 (416) 60,071
High-Yield 82,974 (24,298) 58,676
- ---------------------------------------------------------------------------------
</TABLE>
At August 31, 1996, the aggregate settlement value of open futures
contracts expiring in December 1996, and the related unrealized depreciation
were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(000)
---------------------------------
AGGREGATE
NUMBER OF SETTLEMENT UNREALIZED
PORTFOLIO/FUTURES CONTRACTS LONG CONTRACTS VALUE DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited-Term
5-Year U.S. Treasury Note 1,470 $153,339 $(2,466)
Intermediate-Term
5-Year U.S. Treasury Note 1,550 161,684 (2,641)
U.S. Treasury Note 2,590 273,326 (6,214)
Long-Term
U.S. Treasury Bond 415 44,314 (1,490)
High-Yield
U.S. Treasury Bond 467 49,867 (1,662)
- -------------------------------------------------------------------------------
</TABLE>
The market values of securities deposited as initial margin for open futures
contracts by the Limited-Term, Intermediate-Term, Long-Term, and High-Yield
Portfolios were $2,520,000, $6,760,000, $2,367,000, and $4,927,000,
respectively.
36
<PAGE> 39
DIRECTORS AND OFFICERS
JOHN C. BOGLE, Chairman of the Board and Director of The Vanguard Group, Inc.
and of each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN, President, Chief Executive Officer, and Director of The
Vanguard Group, Inc. and of each of the investment companies in
The Vanguard Group.
ROBERT E. CAWTHORN, Chairman Emeritus of Rhone-Poulenc Rorer Inc.; Director of
Sun Company, Inc. and Westinghouse Electric Corp.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea Co.,
Alco Standard Corp., Raytheon Co., Knight-Ridder, Inc., and
Massa-chusetts 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; Principal of The Vanguard Group, Inc.; Treasurer
of each of the investment companies in The Vanguard Group.
KAREN E. WEST, CONTROLLER; Principal of The Vanguard Group, Inc.; Controller of
each of the investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
ROBERT A. DISTEFANO, Senior Vice President,
Information Technology.
JAMES H. GATELY, Senior Vice President,
Individual Investor Group.
IAN A. MACKINNON, Senior Vice President,
Fixed Income Group.
F. WILLIAM MCNABB III, Senior Vice President,
Institutional.
RALPH K. PACKARD, Senior Vice President and
Chief Financial Officer.
[THE VANGUARD GROUP LOGO]
Please send your comments to us at:
Post Office Box 2600, Valley Forge, Pennsylvania 19482
Fund Information: 1-800-662-7447
Individual Account Services: 1-800-662-2739
Institutional Investor Services: 1-800-523-1036
[email protected] HTTP://WWW.VANGUARD.COM
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.
<PAGE> 40
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 Selected Value Portfolio
Vanguard/Trustees' Equity-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 Portfolios
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
INTERNATIONAL FUNDS
Vanguard International Growth Portfolio
Vanguard/Trustees' Equity-International
Portfolio
INDEX FUNDS
Vanguard Index Trust
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
Vanguard Bond Index Fund
Vanguard International Equity Index Fund
Vanguard Total International Portfolio
FIXED-INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
Vanguard Admiral Funds
INCOME FUNDS
Vanguard Fixed Income Securities Fund
Vanguard Admiral Funds
Vanguard Preferred Stock Fund
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax Free Funds
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, FL, NJ, NY, OH, PA)
Q950-8/96
[PHOTO]
<PAGE> 41
[PHOTO]
VANGUARD MUNICIPAL BOND FUND
FINANCIAL STATEMENTS
AUGUST 31, 1996
The Statement of Net Assets should be read in conjunction with the accompanying
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights, and Notes to Financial Statements.
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio's municipal bond
holdings, including each security's market value on the last day of the
reporting period and information on credit enhancements such as insurance or
letters of credit. Other assets are added to, and liabilities are subtracted
from, the value of Total Municipal Bonds to calculate the Portfolio's Net
Assets. Finally, Net Assets are divided by the outstanding shares of the
Portfolio to arrive at its share price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets of each Portfolio, you will
find a table displaying the composition of the Portfolio's net assets on both a
dollar and per-share basis. Undistributed Net Investment Income is usually zero
because the Portfolio distributes its net income to shareholders as a dividend
each day. Any realized gains must be distributed annually, so the bulk of net
assets consists of Paid in Capital (money invested by shareholders). The
balance shown for Accumulated Net Realized Gains usually approximates the
amount available to distribute to shareholders as taxable capital gains as of
the statement date, but may differ because certain investments or transactions
may be treated differently for financial statement and tax purposes. Any
Accumulated Net Realized Losses, and any cumulative excess of distributions
over net realized gains, will appear as negative balances. Unrealized
Appreciation (Depreciation) is the difference between the value of the
Portfolio's investments and their cost, and reflects the gains (losses) that
would be realized if the Portfolio were to sell all of its investments at their
statement-date values.
CONTENTS
<TABLE>
<S> <C>
Money Market Portfolio . . . . . . . . . . . . . 1
Short-Term Portfolio . . . . . . . . . . . . . . 9
Limited-Term Portfolio . . . . . . . . . . . . . 14
Intermediate-Term Portfolio . . . . . . . . . . 21
Insured Long-Term Portfolio . . . . . . . . . . 33
Long-Term Portfolio . . . . . . . . . . . . . . 40
High-Yield Portfolio . . . . . . . . . . . . . . 44
Key to Abbreviations . . . . . . . . . . . . . . 50
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (99.7%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALABAMA (2.5%)
Alabama Special Care Fac. Finance Auth. of the City of
Montgomery Hosp. Rev. VRDO 3.50% 9/4/96 (3) $ 19,700 $ 19,700
Birmingham AL GO VRDO 3.40% 9/5/96 LOC 8,200 8,200
Birmingham AL GO VRDO 3.45% 9/4/96 LOC 6,600 6,600
Columbia AL Industrial Dev. Board PCR VRDO (AL Power Co. Project) 3.85% 9/4/96 7,000 7,000
Huntsville AL Health Care Auth. VRDO 3.35% 9/5/96 (1) 12,100 12,100
Huntsville AL Health Care Auth. VRDO 3.40% 9/5/96 (1) 30,300 30,300
McIntosh AL IDA PCR VRDO (Ciba-Geigy) 3.40% 9/4/96 LOC 22,400 22,400
Montgomery AL IDA Pollution Control & Solid Waste CP
(General Electric Co. Project) 3.60% 9/11/96 11,175 11,175
---------
117,475
---------
ALASKA (3.5%)
Alaska Housing Finance Corp. VRDO 3.45% 9/4/96 11,500 11,500
Alaska Housing Finance Corp. VRDO 3.55% 9/4/96 70,600 70,600
Valdez AK Marine Terminal VRDO (Exxon Pipeline Project) 3.75% 9/4/96 53,100 53,100
Valdez AK Marine Terminal VRDO (Mobile Pipeline) 3.50% 9/4/96 28,350 28,350
---------
163,550
---------
</TABLE>
1
<PAGE> 42
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARIZONA (1.6%)
Arizona Health Fac. Auth. VRDO (Samaritan Health Services) 3.50% 9/5/96 (3) $ 32,160 $ 32,160
Maricopa County AZ PCR VRDO (Arizona Public Service Palo Verde) 3.75% 9/4/96 LOC 13,900 13,900
Salt River AZ Project Agricultural
Improvement & Power Dist. TOB VRDO 3.55% 9/4/96 26,370 26,370
---------
72,430
---------
CALIFORNIA (12.4%)
Alameda County CA TRAN 4.50% 6/30/97 10,500 10,546
California Higher Educ. Loan Auth. Student Loan Rev. PUT 3.70% 5/1/97 LOC 25,000 25,000
California Higher Educ. Loan Auth. Student Loan Rev. PUT 3.95% 7/1/97 LOC 25,000 25,000
California Higher Educ. Loan Auth. Student Loan Rev. PUT 4.00% 8/1/97 LOC 9,000 9,000
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.40% 9/4/96 LOC 74,375 74,375
California PCR VRDO (Pacific Gas & Electric) 3.85% 9/4/96 LOC 5,000 5,000
California Pollution Control Finance Auth.
PCR CP (Pacific Gas & Electric) 3.60% 10/16/96 LOC 12,500 12,500
California RAN 4.50% 6/30/97 50,000 50,211
California RAN VRDO 3.25% 9/4/96 20,000 20,000
California RAN VRDO 3.40% 9/4/96 6,000 6,000
California RAN VRDO 3.45% 9/4/96 34,800 34,800
Irvine CA Ranch Water Dist. VRDO 3.70% 9/4/96 LOC 10,200 10,200
Los Angeles City CA TRAN 4.50% 6/19/97 38,000 38,152
Los Angeles County CA TRAN 4.50% 6/30/97 LOC 15,000 15,078
Orange County CA Sanitation Dist. VRDO 3.75% 9/4/96 LOC 600 600
Sacramento City CA TRAN 4.75% 12/27/96 5,200 5,216
Sacramento County CA TRAN 4.75% 10/4/96 56,700 56,757
San Bernardino County CA TRAN 4.50% 6/30/97 LOC 45,000 45,225
San Diego CA Area Local Govt. Pooled TRAN 4.75% 10/18/96 LOC 18,500 18,521
San Diego CA Unified School Dist. TRAN 4.75% 10/10/96 LOC 7,500 7,507
San Diego County CA TRAN 4.50% 9/30/96 29,000 29,018
San Francisco City & County CA TRAN 4.75% 9/19/96 25,000 25,013
San Mateo County CA TRAN 4.50% 7/1/97 17,000 17,075
Santa Clara County CA TRAN 4.50% 8/1/97 32,800 32,973
---------
573,767
---------
COLORADO (1.9%)
Colorado Health Fac. Auth. Rev. VRDO (Kaiser Permanente) 3.40% 9/4/96 12,000 12,000
Colorado Health Fac. Auth. Rev. VRDO (Sisters of Charity) 3.40% 9/5/96 5,400 5,400
Colorado Springs CO Utility Refunding 5.90% 11/15/96 1,600 1,607
Colorado TRAN 4.50% 6/27/97 64,000 64,321
Moffat County CO PCR VRDO (PacifiCorp Project) 3.85% 9/4/96 (2) LOC 6,300 6,300
---------
89,628
---------
CONNECTICUT (0.6%)
Connecticut Dev. Auth. PCR VRDO (Connecticut Light & Power) 3.40% 9/4/96 LOC 25,000 25,000
Connecticut State 2nd Lien Special Tax Obligation Transp.
Infrastructure Purpose VRDO 3.35% 9/4/96 LOC 3,900 3,900
---------
28,900
---------
DISTRICT OF COLUMBIA (0.7%)
District of Columbia VRDO (George Washington Univ.) 3.55% 9/4/96 LOC 33,400 33,400
---------
FLORIDA (7.3%)
Dade County FL Water & Sewer System Rev. TOB VRDO (Eagle Trust) 3.56% 9/5/96 (3) 24,000 24,000
Dade County FL Water & Sewer System Rev. VRDO 3.35% 9/4/96 (3) 50,565 50,565
Gainesville FL Utilities System CP 3.50% 10/22/96 10,913 10,913
Gainesville FL Utilities System CP 3.60% 10/21/96 6,525 6,525
Gulf Breeze FL Local Govt. Loan Program VRDO 3.40% 9/5/96 (3) 16,500 16,500
Hillsborough County FL IDA PCR VRDO (Tampa Electric Co. Project) 3.85% 9/4/96 9,100 9,100
Jacksonville FL Electric Auth. CP 3.50% 10/11/96 3,000 3,000
Jacksonville FL Electric Auth. CP 3.60% 9/9/96 10,000 10,000
Jacksonville FL Electric Auth. CP 3.60% 9/11/96 5,000 5,000
Jacksonville FL Electric Auth. CP 3.60% 10/15/96 4,000 4,000
Jacksonville FL Electric Auth. CP 3.65% 10/15/96 7,500 7,500
Jacksonville FL Electric Auth. CP 3.65% 10/18/96 7,600 7,600
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.65% 10/23/96 3,000 3,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.70% 10/21/96 21,500 21,500
</TABLE>
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<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.70% 10/22/96 $ 7,000 $ 7,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.75% 12/17/96 7,000 7,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.80% 10/15/96 26,000 26,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.80% 10/24/96 25,500 25,500
Orange County FL Health Fac. Auth. VRDO
(Adventist Health System/Sunbelt) 3.45% 9/5/96 LOC 20,500 20,500
Orlando FL Utilities Comm. Water & Electric Rev. BAN VRDO 3.35% 9/5/96 10,850 10,850
Palm Beach County FL School Dist. TAN 4.50% 9/27/96 20,000 20,009
St. Lucie County FL PCR CP (Florida Power & Light Co. Project) 3.65% 10/15/96 5,000 5,000
Sunshine State Govt. Finance Committee of FL CP 3.50% 10/11/96 LOC 28,800 28,800
Sunshine State Govt. Finance Committee of FL CP 3.60% 9/11/96 LOC 3,000 3,000
West Orange FL Memorial Hosp. Tax Dist. Rev. CP 3.65% 10/10/96 LOC 6,100 6,100
---------
338,962
---------
GEORGIA (4.0%)
Burke County GA Dev. Auth. PCR CP (Oglethorpe Power) 3.65% 10/22/96 LOC 8,000 8,000
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power) 3.35% 9/4/96 (3) 51,100 51,100
DeKalb County GA TAN 3.75% 12/31/96 43,000 43,073
Fulco GA Hosp. Auth. CP (St. Joseph's Hosp.-Atlanta) 3.65% 9/10/96 7,300 7,300
Municipal Electric Auth. of GA CP (General Resolution Project) 3.60% 10/23/96 LOC 19,150 19,150
Municipal Electric Auth. of GA CP (General Resolution Project) 3.65% 9/26/96 LOC 10,445 10,445
Municipal Electric Auth. of GA CP (Project One) 3.55% 10/7/96 LOC 19,600 19,600
Municipal Electric Auth. of GA CP (Project One) 3.60% 10/24/96 LOC 17,600 17,600
Municipal Gas Auth. of GA CP (Southern Portfolio Project) 3.50% 10/21/96 LOC 6,595 6,595
---------
182,863
---------
HAWAII (0.8%)
Hawaii GO 5.00% 11/1/96 5,260 5,272
Hawaii GO TOB VRDO 3.55% 9/4/96 9,600 9,600
Honolulu HI City & County CP 3.45% 9/12/96 14,900 14,900
Honolulu HI City & County CP 3.50% 10/16/96 4,950 4,950
Honolulu HI City & County CP 3.65% 9/24/96 3,500 3,500
---------
38,222
---------
IDAHO (0.8%)
Idaho TAN 4.50% 6/30/97 36,000 36,172
---------
ILLINOIS (4.9%)
Chicago IL GO VRDO PUT 3.10% 2/4/97 LOC 21,300 21,300
Illinois Dev. Finance Auth. PCR CP (Illinois Power Co. Project) 3.40% 9/24/96 LOC 8,000 8,000
Illinois Dev. Finance Auth. PCR VRDO (Illinois Power Co. Project) 3.50% 9/4/96 LOC 13,200 13,200
Illinois Educ. Fac. VRDO (DePaul Univ.) 3.50% 9/4/96 LOC 33,600 33,600
Illinois Health Fac. Auth. PUT (Evanston Hosp. Corp.) 3.15% 1/31/97 10,000 10,000
Illinois Health Fac. Auth. VRDO (Franciscan Sisters) 3.40% 9/4/96 LOC 27,000 27,000
Illinois Health Fac. Auth. VRDO (Hosp. Sisters Service) 3.50% 9/4/96 (1) 23,900 23,900
Illinois Health Fac. Auth. VRDO (Pooled Finance) 3.45% 9/4/96 LOC 6,000 6,000
Illinois Health Fac. Auth. VRDO (Swedish Covenant Hosp.) 3.50% 9/4/96 (2) 35,000 35,000
Illinois Health Fac. Auth. VRDO (Univ. of Chicago Hosp.) 3.40% 9/4/96 (1) 21,000 21,000
Illinois Toll Highway Auth. VRDO 3.35% 9/4/96 (1) LOC 13,400 13,400
Joliet IL Regional Port Dist. Marine Terminal VRDO (Exxon Project) 3.75% 9/4/96 1,900 1,900
Schaumburg IL VRDO 3.50% 9/4/96 10,800 10,800
---------
225,100
---------
INDIANA (1.4%)
Hammond City IN PCR VRDO (Amoco Oil Co. Project) 3.75% 9/4/96 11,720 11,720
Indiana Educ. Fac. Auth. VRDO (Univ. of Notre Dame) 3.50% 9/5/96 1,400 1,400
Jasper County IN PCR VRDO CP
(Northern Indiana Public Service Project) 3.70% 9/10/96 LOC 8,000 8,000
Mt. Vernon IN PCR PUT (Southern Indiana Gas & Electric) 4.00% 5/1/97 12,000 12,028
Mt. Vernon IN PCR & Solid Waste Disposal CP (General Electric Project) 3.60% 9/11/96 11,340 11,340
Petersburg IN PCR CP (Indianapolis Power & Light Co.) 3.60% 10/15/96 6,775 6,775
Petersburg IN PCR CP (Indianapolis Power & Light Co.) 3.70% 9/16/96 5,000 5,000
Rockport City IN PCR Refunding VRDO (AEP Generating Co.) 3.80% 9/4/96 (2) 5,300 5,300
Rockport City IN PCR Refunding VRDO (AEP Generating Co.) 3.85% 9/4/96 (2) 5,300 5,300
---------
66,863
---------
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IOWA (0.2%)
Des Moines IA GO 5.00% 6/1/97 $ 4,425 $ 4,464
Iowa School Corp. (Iowa School Cash Anticipation Project) 4.25% 1/30/97 (4) 6,300 6,321
---------
10,785
---------
KANSAS (0.1%)
Burlington KS PCR CP (Kansas City Power & Light) 3.60% 9/16/96 LOC 5,600 5,600
---------
KENTUCKY (0.5%)
Jefferson County KY PCR CP (Louisville Gas & Electric Project) 3.60% 9/10/96 4,500 4,500
Jefferson County KY PCR CP (Louisville Gas & Electric Project) 3.65% 10/22/96 6,000 6,000
Trimble County KY PCR CP (Louisville Gas & Electric Project) 3.60% 9/10/96 12,685 12,685
---------
23,185
---------
LOUISIANA (2.8%)
East Baton Rouge Parish LA VRDO (Exxon Project) 3.75% 9/4/96 15,900 15,900
Louisiana Public Fac. Auth. CP
(Lady of Lakes Regional Medical Center) 3.55% 10/17/96 (4) 61,560 61,560
Louisiana Public Finance Auth. SCH Health Care System CP
(Sisters of Charity) 3.55% 10/23/96 3,600 3,600
Louisiana Public Finance Auth. SCH Health Care System CP
(Sisters of Charity) 3.55% 10/24/96 5,200 5,200
Louisiana Public Finance Auth. SCH Health Care System CP
(Sisters of Charity) 3.60% 10/16/96 17,500 17,500
Louisiana Public Finance Auth. SCH Health Care System CP
(Sisters of Charity) 3.65% 9/10/96 9,500 9,500
Louisiana Recovery Dist. Sales Tax VRDO 3.85% 9/4/96 (3) 5,900 5,900
Louisiana Recovery Dist. Sales Tax VRDO 3.85% 9/4/96 (1) 10,200 10,200
---------
129,360
---------
MAINE (1.1%)
Maine GO 5.00% 5/15/97 5,340 5,388
Maine Health & Higher Educ. Fac. Auth. VRDO (Bowdoin College) 3.50% 9/4/96 LOC 6,500 6,500
Maine Highway GO 5.00% 5/15/97 2,500 2,522
Maine TAN 4.50% 6/27/97 34,000 34,168
---------
48,578
---------
MARYLAND (0.6%)
Howard County MD Consolidated Public Improvement CP 3.55% 10/18/96 26,000 26,000
---------
Massachusetts (2.7%)
Massachusetts Bay Transp. Auth. CP 3.50% 10/8/96 LOC 10,000 10,000
Massachusetts GO 4.25% 6/10/97 25,000 25,067
Massachusetts Health & Educ. Fac. Auth. Rev. CP (Harvard Univ.) 3.65% 10/18/96 3,700 3,700
Massachusetts Health & Educ. Fac. Auth. Rev. VRDO
(Harvard Univ.) 3.25% 9/5/96 57,100 57,100
Massachusetts Water Resource Auth. BAN 4.30% 10/15/96 7,000 7,004
Massachusetts Water Resource Auth. CP 3.65% 10/18/96 LOC 20,300 20,300
---------
123,171
---------
MICHIGAN (4.4%)
Michigan GO Notes 4.00% 9/30/96 119,000 119,079
Michigan Hosp. Finance Auth. VRDO
(Daughters of Charity-Providence Hosp.) 3.45% 9/4/96 22,800 22,800
Regents of Univ. of Michigan Hosp. Rev. VRDO 3.85% 9/4/96 38,600 38,600
Royal Oak MI Hosp. Finance Auth. VRDO (William Beaumont Hosp.) 3.75% 9/4/96 20,000 20,000
Univ. of Michigan Rev. VRDO (Medical Service Plan) 3.85% 9/4/96 4,200 4,200
---------
204,679
---------
MINNESOTA (0.2%)
Minnesota Housing Finance Agency PUT (Single Family Mortgage) 3.50% 12/12/96 4,650 4,650
Regents of Univ. of Minnesota CP VRDO 3.60% 10/15/96 5,000 5,000
---------
9,650
---------
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MISSISSIPPI (0.9%)
Jackson County MS PCR VRDO (Chevron USA Project) 3.80% 9/4/96 $ 10,700 $ 10,700
Jackson County MS Port Fac. VRDO (Chevron USA Project) 3.75% 9/4/96 30,150 30,150
---------
40,850
---------
MISSOURI (3.4%)
Missouri Health & Educ. Fac. Auth. CP 3.50% 10/11/96 LOC 14,200 14,200
Missouri Health & Educ. Fac. Auth. School Dist. Advance Funding
Program Notes (Rockwood R-VI School Dist.) 4.50% 9/8/97 5,000 5,029
Missouri Health & Educ. Fac. Auth. VRDO (SSM Health Care Project) 3.45% 9/4/96 (1) 10,000 10,000
Missouri Health & Educ. Fac. Auth. VRDO (SSM Health Care Project) 3.60% 9/10/96 LOC 7,800 7,800
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health Care System) 3.45% 9/4/96 30,300 30,300
Missouri Health & Educ. Fac. Auth. VRDO (Washington Univ.) 3.80% 9/4/96 7,000 7,000
Missouri Health & Educ. Finance Auth. VRDO
(St. Anthony's Medical Center) 3.45% 9/4/96 23,500 23,500
St. Louis MO VRDO (Sisters of Mercy Health Care System) 3.45% 9/5/96 31,500 31,500
Univ. of Missouri Capital Project Notes 4.75% 6/30/97 26,000 26,176
---------
155,505
---------
NEBRASKA (0.3%)
Omaha NE Public Power Dist. CP 3.40% 9/24/96 10,000 10,000
Omaha NE Public Power Dist. CP 3.60% 10/15/96 5,500 5,500
---------
15,500
---------
NEVADA (1.6%)
Clark County NV Airport Improvement Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 LOC 13,440 13,440
Clark County NV Airport System Refunding Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 (1) 43,630 43,630
Nevada GO 9.70% 5/1/97 6,275 6,517
Nevada GO TOB VRDO 3.55% 9/5/96 9,225 9,225
---------
72,812
---------
NEW HAMPSHIRE (0.2%)
New Hampshire Educ. & Health Fac. Auth. VRDO (St. Paul's School) 3.40% 9/5/96 LOC 7,000 7,000
---------
NEW JERSEY (0.2%)
Ocean County NJ BAN 4.25% 6/20/97 10,000 10,029
---------
NEW MEXICO (0.5%)
Hurley NM PCR VRDO (Kennecott Sante Fe Corp. Project) 3.85% 9/4/96 24,200 24,200
---------
NEW YORK (4.0%)
Erie County NY GO 10.00% 2/1/97 (3) 4,325 4,435
Erie County NY RAN 4.50% 9/20/96 LOC 10,000 10,003
New York City NY GO CP 3.50% 9/17/96 LOC 57,700 57,700
New York City NY GO CP 3.60% 10/11/96 (2) 7,400 7,400
New York City NY TAN 4.50% 2/12/97 65,000 65,242
New York City NY GO VRDO 3.75% 9/4/96 (1) 9,000 9,000
New York City NY Municipal Water Finance Auth. Water &
Sewer System VRDO 3.80% 9/4/96 (3) 1,400 1,400
Suffolk County NY TAN 4.50% 9/12/96 LOC 4,000 4,001
Westchester County NY TAN 3.75% 12/11/96 25,000 25,044
---------
184,225
---------
NORTH CAROLINA (3.3%)
Charlotte NC Airport Refunding Rev. VRDO 3.35% 9/4/96 (1) 8,380 8,380
Mecklenburg County NC VRDO 3.45% 9/5/96 12,000 12,000
North Carolina Educ. Fac. Auth. VRDO (Duke Univ.) 3.45% 9/5/96 31,600 31,600
North Carolina Medical Care Hosp. Rev. VRDO (Duke Univ. Hosp.) 3.45% 9/5/96 22,600 22,600
North Carolina Medical Care Hosp. Rev. VRDO (Moses Cone Hosp.) 3.40% 9/5/96 19,500 19,500
North Carolina Medical Care Hosp. Rev. VRDO
(North Carolina Baptist Hosp.) 3.40% 9/5/96 41,000 41,000
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Wake County NC Pollution Control Finance Auth. VRDO
(Carolina Power & Light) 3.40% 9/4/96 LOC $ 11,500 $ 11,500
Winston-Salem NC COP VRDO 3.50% 9/5/96 4,250 4,250
---------
150,830
---------
NORTH DAKOTA (0.2%)
Oliver County ND PCR VRDO (Square Butte Electric Coop Project) 3.45% 9/4/96 (2) 9,950 9,950
---------
OHIO (1.1%)
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic Foundation) 3.40% 9/4/96 LOC 22,500 22,500
Cuyahoga County OH Hosp. Rev. VRDO (St. Luke's Hosp.) 3.50% 9/4/96 LOC 1,300 1,300
Greene County OH GO BAN 4.50% 6/4/97 4,540 4,557
Hamilton County OH Hosp. Fac. Rev. VRDO (Bethesda Hosp.) 3.45% 9/5/96 LOC 11,900 11,900
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas & Electric Co. Project) 3.75% 9/4/96 LOC 5,700 5,700
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas & Electric Co. Project) 4.00% 9/4/96 LOC 3,200 3,200
---------
49,157
---------
OKLAHOMA (0.9%)
Garfield County OK IDA PCR VRDO
(Oklahoma Gas & Electric Co. Project) 3.50% 9/4/96 19,200 19,200
Oklahoma City OK Industrial & Cultural Fac. Trust VRDO
(St. Anthony Hosp.) 3.60% 9/10/96 LOC 23,300 23,300
---------
42,500
---------
OREGON (0.4%)
Multnomah County OR TRAN 4.75% 6/30/97 11,000 11,075
Oregon Veterans Welfare Program VRDO 3.45% 9/4/96 LOC 5,900 5,900
---------
16,975
---------
PENNSYLVANIA (0.2%)
Pennsylvania Higher Educ. Fac. Auth. VRDO (Carnegie Mellon) 3.75% 9/4/96 10,900 10,900
---------
SOUTH CAROLINA (0.2%)
South Carolina GO 7.25% 5/1/97 3,915 4,005
York County SC PCR CP (Duke Power Co. Project) 3.50% 10/23/96 6,950 6,950
---------
10,955
---------
SOUTH DAKOTA (0.2%)
South Dakota School Dist. COP (Cash Flow Finance Project) 4.75% 7/28/97 8,370 8,428
---------
TENNESSEE (1.6%)
Metropolitan Govt. of Nashville & Davidson County TN Health &
Educ. CP (Baptist Hosp.) 3.60% 9/9/96 6,000 6,000
Metropolitan Govt. of Nashville & Davidson County TN Health &
Educ. CP (Baptist Hosp.) 3.70% 9/3/96 3,500 3,500
Metropolitan Govt. of Nashville & Davidson County TN Health &
Educ. CP (Vanderbilt Univ.) 3.50% 10/22/96 6,640 6,640
Metropolitan Govt. of Nashville & Davidson County TN Health &
Educ. CP (Vanderbilt Univ.) 3.60% 10/15/96 10,000 10,000
Metropolitan Govt. of Nashville TN Airport Auth. Improvement
Refunding VRDO 3.50% 9/4/96 (3)LOC 20,000 20,000
Tennessee BAN VRDO 3.30% 9/4/96 27,500 27,500
---------
73,640
---------
TEXAS (13.8%)
Austin TX Combined Utility System CP
(Travis & Williamson Counties) 3.45% 9/19/96 LOC 16,969 16,969
Dallas TX GO 4.25% 2/15/97 3,405 3,415
Dallas TX GO 6.00% 2/15/97 2,750 2,779
Dallas TX Waterworks & Sewer 6.90% 4/1/97 2,000 2,035
Dallas TX Waterworks & Sewer TOB VRDO
(Dallas, Denton & Collin Counties) 3.55% 9/4/96 30,000 30,000
Gulf Coast Waste Disposal Auth. of TX PCR VRDO
(Amoco Oil Project) 3.75% 9/4/96 45,075 45,075
Gulf Coast Waste Disposal Auth. of TX PCR VRDO
(Exxon Project) 3.75% 9/4/96 26,800 26,800
Harris County TX Health Fac. Dev. Corp. VRDO
(Children's Hosp.) 3.45% 9/4/96 21,000 21,000
Harris County TX Health Fac. Dev. Corp. VRDO
(Methodist Hosp.) 3.75% 9/4/96 89,200 89,200
Harris County TX Health Fac. Dev. Corp. VRDO
(St. Luke's Episcopal Hosp.) 3.75% 9/4/96 14,800 14,800
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Harris County TX PCR VRDO (Exxon Project) 3.75% 9/4/96 $ 9,400 $ 9,400
Harris County TX SCH Health Care System CP
(Sisters of Charity) 3.50% 10/8/96 13,700 13,700
Harris County TX SCH Health Care System CP
(Sisters of Charity) 3.50% 10/25/96 20,000 20,000
Harris County TX SCH Health Care System CP
(Sisters of Charity) 3.55% 10/21/96 10,000 10,000
Harris County TX SCH Health Care System CP
(Sisters of Charity) 3.55% 10/24/96 6,700 6,700
Harris County TX SCH Health Care System CP
(Sisters of Charity) 3.65% 9/9/96 20,000 20,000
Harris County TX Toll Road VRDO 3.40% 9/4/96 51,100 51,100
Harris County TX Toll Road VRDO 3.45% 9/4/96 31,700 31,700
Houston TX CP 3.60% 10/11/96 21,000 21,000
Houston TX Independent School Dist. TRAN 4.50% 8/27/97 15,900 15,997
Houston TX Public Improvement GO 4.25% 3/1/97 7,000 7,032
Houston TX Public Improvement GO 6.00% 4/1/97 1,500 1,520
Houston TX TRAN 4.50% 6/30/97 75,000 75,359
Houston TX Water & Sewer System Rev. 6.40% 12/1/96 (Prere.) 2,000 2,054
North Central TX Health Fac. Dev. Corp. VRDO
(Presbyterian Medical Center) 3.70% 9/4/96 (1) 10,400 10,400
Plano TX Health Fac. Dev. Corp. Hosp. Rev. CP
(Children's & Presbyterian Health Care Center) 3.65% 9/10/96 5,000 5,000
Richardson TX Independent School Dist. TRAN 4.50% 8/29/97 15,000 15,093
Texas Municipal Power Agency Rev. 5.00% 9/1/96 8,585 8,585
Texas Research Laboratory GO TOB VRDO 3.50% 9/5/96 (Prere.) 9,350 9,350
Texas TRAN 4.75% 8/29/97 49,000 49,386
Univ. of TX System Board of Regents Rev. Finance System CP 3.60% 9/9/96 4,313 4,313
---------
639,762
---------
UTAH (3.2%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.50% 9/4/96 LOC 35,500 35,500
Emery County UT PCR VRDO (PacifiCorp Project) 3.80% 9/4/96 (2) 39,800 39,800
Intermountain Power Agency of UT PUT 3.35% 9/15/96 LOC 27,000 27,000
Intermountain Power Agency of UT TOB VRDO (Eagle Trust) 3.56% 9/5/96 (1) 37,600 37,600
Salt Lake City UT Rev. CP (Pooled Hosp. Finance Program) 3.70% 9/16/96 5,700 5,700
---------
145,600
---------
VERMONT (0.8%)
Vermont Educ. & Health Buildings Finance Agency PUT
(Middlebury College Project) 3.70% 5/1/97 6,650 6,650
Vermont Educ. & Health Buildings Finance Agency VRDO
(Norwich Univ.) 3.40% 9/5/96 LOC 10,000 10,000
Vermont GO CP 3.60% 12/17/96 20,000 20,000
---------
36,650
---------
VIRGINIA (1.1%)
Fairfax County VA IDA Hosp. Rev. CP
(Inova Health System Hosp. Project) 3.50% 10/8/96 5,000 5,000
Fairfax County VA IDA Hosp. Rev. CP
(Inova Health System Hosp. Project) 3.65% 9/10/96 3,800 3,800
Fairfax County VA IDA Hosp. Rev. CP
(Inova Health System Hosp. Project) 3.65% 9/17/96 10,000 10,000
Fairfax County VA IDA Hosp. Rev. CP
(Inova Health System Hosp. Project) 3.65% 10/16/96 7,900 7,900
Fairfax County VA IDA Hosp. Rev. CP
(Inova Health System Hosp. Project) 3.70% 9/6/96 7,300 7,300
Fairfax County VA IDA Rev. Refunding Fairfax Hosp. Rev.
(Inova Health Systems) 3.55% 9/4/96 18,500 18,500
---------
52,500
---------
WASHINGTON (2.9%)
Port of Seattle WA GO VRDO 3.50% 9/4/96 2,500 2,500
Seattle WA Municipal Light & Power VRDO 3.50% 9/4/96 30,700 30,700
Seattle WA Water System Rev. VRDO 3.50% 9/4/96 LOC 19,800 19,800
Washington GO 3.80% 10/1/96 6,000 6,001
Washington GO 8.00% 9/1/96 (Prere.) 9,200 9,200
Washington GO VRDO 3.45% 9/4/96 39,300 39,300
Washington GO VRDO 3.50% 9/4/96 24,500 24,500
---------
132,001
---------
WISCONSIN (2.9%)
Milwaukee WI Industrial Dev. VRDO
(Wisconsin Electric Power Co. Project) 3.45% 9/5/96 10,000 10,000
Milwaukee WI School Order Notes RAN 4.25% 8/21/97 25,000 25,095
Milwaukee WI Short Term Promissory Notes RAN 3.50% 2/27/97 16,300 16,315
</TABLE>
7
<PAGE> 48
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oak Creek WI VRDO (Wisconsin Electric Power Co. Project) 3.55% 9/5/96 $ 33,800 $ 33,800
Village of Pleasant Prairie WI PCR VRDO
(Wisconsin Electric Power Co. Project) 3.45% 9/5/96 9,000 9,000
Village of Pleasant Prairie WI PCR VRDO
(Wisconsin Electric Power Co. Project) 4.00% 9/5/96 9,500 9,500
Wisconsin GO 5.00% 5/1/97 5,450 5,493
Wisconsin GO TOB VRDO 3.55% 9/4/96 25,570 25,570
----------
134,773
----------
WYOMING (0.8%)
Lincoln County WY PCR VRDO (Exxon Project) 3.75% 9/4/96 5,200 5,200
Lincoln County WY PCR VRDO (Exxon Project) 3.80% 9/4/96 15,200 15,200
Sublette County WY VRDO (Exxon Project) 3.75% 9/4/96 15,500 15,500
----------
35,900
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $4,608,982) 4,608,982
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 44,430
Liabilities (29,089)
----------
15,341
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 4,625,077,065 outstanding $.001 par value shares
(authorized 5,500,000,000 shares) $4,624,323
===================================================================================================================================
NET ASSET VALUE PER SHARE $1.00
===================================================================================================================================
*See Note A in Notes to Financial Statements.
For key to abbreviations and other references, see page 50.
- -----------------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in Capital $4,625,092 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (769) --
Unrealized Appreciation -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $4,624,323 $1.00
===================================================================================================================================
</TABLE>
8
<PAGE> 49
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
SHORT-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (99.0%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALABAMA (1.0%)
Birmingham AL GO VRDO 3.40% 9/5/96 LOC $ 6,800 $ 6,800
Huntsville AL Health Care Auth. VRDO 3.40% 9/5/96 (1) 7,700 7,700
---------
14,500
---------
ALASKA (3.1%)
Alaska Housing Finance Corp. VRDO 3.45% 9/4/96 4,300 4,300
Alaska Housing Finance Corp. VRDO 3.55% 9/4/96 16,600 16,600
North Slope Borough AK GO 7.125% 7/1/98 (1) 7,710 8,087
North Slope Borough AK GO 7.15% 7/1/99 (1) 5,670 6,064
Valdez AK Marine Terminal CP (Atlantic Richfield Co.) 3.60% 9/6/96 4,300 4,300
Valdez AK Marine Terminal VRDO (Exxon Pipeline Co. Project) 3.75% 9/4/96 6,200 6,200
---------
45,551
---------
ARIZONA (0.5%)
Arizona Transp. Board Excise Tax 5.50% 7/1/98 (2) 7,315 7,484
---------
CALIFORNIA (8.9%)
Alameda County CA Public Fac. Corp. COP PUT 6.15% 9/1/96 LOC 5,000 5,000
Anaheim CA Public Improvement Corp. Lease COP VRDO 3.20% 9/4/96 (2) LOC 65 65
California Dept. of Water (Central Valley Project) 8.75% 12/1/00 4,540 5,271
California GO 10.00% 4/1/97 (2) 10,000 10,353
California Health Fac. Financing Auth. VRDO
(Catholic Health Care West) 3.25% 9/4/96 (1) 600 600
California Health Fac. Auth. VRDO
(Adventist Health System West Sutter Health) 3.25% 9/5/96 LOC 1,300 1,300
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.40% 9/4/96 LOC 28,400 28,400
California PCR VRDO (Pacific Gas & Electric) 3.85% 9/4/96 LOC 1,200 1,200
Foothill CA Eastern Transp. Corridor Agency Toll Rev. VRDO 3.20% 9/5/96 LOC 17,900 17,900
Los Angeles CA COP 5.50% 12/1/96 3,400 3,412
Los Angeles CA Dept. of Water & Power Rev. 9.00% 11/15/97 5,855 6,192
Los Angeles County CA Pension Obligation VRDO 3.20% 9/4/96 (2) 4,400 4,400
Los Angeles County CA TRAN 4.50% 6/30/97 LOC 15,000 15,078
Orange County CA Sanitation Dist. VRDO 3.20% 9/5/96 (2) LOC 2,916 2,916
Orange County CA Water Dist. VRDO 3.60% 9/4/96 LOC 1,500 1,500
Riverside County CA VRDO (Public Fac. Project) 3.25% 9/10/96 LOC 2,900 2,900
Riverside County CA VRDO (Public Fac. Project) 3.50% 9/10/96 LOC 1,520 1,520
Sacramento CA Utility Rev. 7.875% 8/15/98 (Prere.) 4,000 4,355
San Diego CA Area Local Govt. COP Pooled TRAN 4.75% 10/1/97 (4) 5,500 5,539
San Diego County CA Unified School Dist. TRAN 4.75% 10/1/97 10,000 10,075
Santa Clara County CA Finance Auth. Lease Rev. VRDO
(VMC Fac. Replacement Project) 3.15% 9/4/96 1,600 1,600
---------
129,576
---------
COLORADO (0.3%)
Colorado Health Fac. Auth. Rev. VRDO (Kaiser Permanente) 3.40% 9/4/96 5,200 5,200
---------
CONNECTICUT (1.6%)
Connecticut Dev. Auth. PCR VRDO (Connecticut Light & Power Co.) 3.40% 9/4/96 LOC 20,930 20,930
Connecticut GO 5.65% 11/15/98 2,500 2,576
---------
23,506
---------
DISTRICT OF COLUMBIA (1.0%)
District of Columbia GO 0.00% 6/1/00 (1) 6,900 5,724
District of Columbia GO 6.00% 6/1/01 (1) 8,115 8,457
---------
14,181
---------
FLORIDA (7.1%)
Dade County FL School Dist. 7.00% 8/1/98 (3) 7,510 7,888
Dade County FL Water & Sewer System Rev. VRDO 3.35% 9/4/96 (3) 21,810 21,810
Gulf Breeze FL Local Govt. Loan Program VRDO 3.40% 9/5/96 (3) 16,640 16,640
Jacksonville FL Hosp. Rev. 10.50% 10/1/97 (Prere.) 8,000 8,691
Jacksonville FL Transp. Auth. 9.00% 1/1/98 (Prere.) 3,780 4,091
Orlando FL Utilities Comm. Water & Electric Rev. BAN 4.40% 10/1/96 3,255 3,257
Orlando FL Utilities Comm. Water & Electric Rev. BAN VRDO 3.35% 9/5/96 17,150 17,150
</TABLE>
9
<PAGE> 50
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
SHORT-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
St. Lucie County FL PCR Rev. VRDO (FL Power & Light Co.) 3.75% 9/4/96 $15,200 $ 15,200
Tampa FL Utilities Auth. 8.00% 10/1/97 (Prere.) 7,700 8,175
---------
102,902
---------
GEORGIA (3.6%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.75% 9/4/96 10,700 10,700
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power) 3.35% 9/4/96 19,800 19,800
Georgia GO 6.80% 8/1/97 4,815 4,939
Georgia GO 6.80% 8/1/98 6,155 6,450
Georgia GO 7.40% 8/1/00 5,000 5,508
Georgia GO 7.70% 4/1/99 5,000 5,403
---------
52,800
---------
HAWAII (2.4%)
Hawaii GO 5.00% 11/1/96 12,870 12,896
Hawaii GO 5.00% 11/1/97 1,250 1,263
Hawaii GO 5.00% 11/1/98 16,000 16,249
Honolulu HI City & County GO 6.60% 8/1/01 (Prere.) 4,000 4,362
---------
34,770
---------
ILLINOIS (5.3%)
Chicago IL GO 7.50% 1/1/99 (Prere.) 5,000 5,430
Chicago IL Metropolitan Sanitation Dist. 7.85% 1/1/98 (Prere.) 5,600 5,970
Chicago IL Metropolitan Water Reclamation Dist. 6.40% 1/1/00 5,000 5,280
Chicago IL Metropolitan Water Reclamation Dist. 6.80% 1/1/00 (Prere.) 5,200 5,637
Chicago IL Metropolitan Water Reclamation Dist. 7.25% 1/1/99 (Prere.) 3,490 3,708
Chicago IL Public Building Comm. 4.50% 12/1/98 (1) 8,000 8,025
Chicago IL Public Building Comm. 7.75% 1/1/99 (3)(Prere.) 5,000 5,458
Chicago IL School Finance Auth. GO 4.40% 6/1/98 (1) 6,755 6,753
Illinois GO 5.50% 8/1/98 7,700 7,858
Illinois Housing Dev. Auth. VRDO (Illinois Center Apartments) 3.70% 9/4/96 14,900 14,900
Illinois Toll Highway Auth. Rev. VRDO 3.35% 9/4/96 (1) LOC 7,600 7,600
---------
76,619
---------
INDIANA (0.6%)
Merriville IN 7.50% 7/15/00 (Prere.) 4,000 4,473
Rockport IN PCR Refunding VRDO (AEP Generating Co. Project) 3.85% 9/4/96 (2) 4,200 4,200
---------
8,673
---------
LOUISIANA (1.3%)
Louisiana GO 8.00% 5/1/97 (2) 6,030 6,189
Louisiana Recovery Dist. Sales Tax 5.50% 7/1/97 10,000 10,115
Louisiana Recovery Dist. Sales Tax VRDO 3.85% 9/4/96 (3) 2,000 2,000
---------
18,304
---------
MAINE (0.7%)
Maine Municipal Bond Bank 3.875% 11/1/96 10,000 10,001
---------
MARYLAND (0.3%)
Maryland Health & Higher Educ. Fac. (Francis Scott Key) 7.00% 7/1/00 (Prere.) 4,000 4,402
---------
MASSACHUSETTS (6.5%)
Massachusetts Bay Transp. Auth. 7.00% 3/1/01 (Prere.) 6,000 6,661
Massachusetts Bay Transp. Auth. 7.10% 3/1/99 (3)(Prere.) 7,800 8,445
Massachusetts Consolidated Loan 7.00% 6/1/99 (Prere.) 10,000 10,846
Massachusetts Consolidated Loan 7.50% 2/1/99 (3)(Prere.) 6,400 6,917
Massachusetts GO 5.50% 7/1/99 10,000 10,268
Massachusetts GO 7.25% 7/1/98 (Prere.) 5,000 5,335
Massachusetts GO 9.25% 7/1/00 10,000 11,586
Massachusetts Municipal Wholesale Electric 6.00% 7/1/97 2,355 2,391
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 7,000 7,111
Massachusetts Water Resources Auth. 7.00% 4/1/00 (Prere.) 4,500 4,935
Massachusetts Water Resources Auth. 7.625% 4/1/00 (Prere.) 17,645 19,710
---------
94,205
---------
</TABLE>
10
<PAGE> 51
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MICHIGAN (2.6%)
Greater Detroit MI Resource Recovery Auth. 5.00% 12/13/99 (2) $12,000 $ 12,151
Michigan Trunk Line 5.50% 11/15/98 13,720 14,057
Regents of Univ. of MI Hosp. Rev. VRDO 3.85% 9/4/96 11,300 11,300
---------
37,508
---------
MINNESOTA (0.4%)
Minnesota GO 6.00% 8/1/99 5,730 5,985
---------
MISSISSIPPI (0.5%)
Jackson County MS Port Fac. Rev. VRDO (Chevron USA Project) 3.75% 9/4/96 6,900 6,900
---------
MISSOURI (1.8%)
Missouri Health & Educ. Fac. Auth. VRDO
(St. Anthony's Medical Center) 3.45% 9/4/96 21,400 21,400
St. Louis MO VRDO (Sisters of Mercy Health System) 3.45% 9/5/96 4,600 4,600
---------
26,000
---------
NEVADA (2.3%)
Clark County NV Airport Improvement Rev.
(McCarran International Airport) 13.25% 7/1/97 (Prere.) 3,015 3,242
Clark County NV Airport System Refunding Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 (1) 30,405 30,405
---------
33,647
---------
NEW JERSEY (0.1%)
New Jersey Turnpike Auth. Rev. VRDO 3.00% 9/4/96 (3) LOC 1,600 1,600
---------
NEW MEXICO (0.3%)
Albuquerque NM Water & Sewer 5.90% 7/1/98 (ETM) 4,105 4,225
---------
NEW YORK (9.4%)
Nassau County NY General Improvement 5.125% 11/1/99 (3) 7,525 7,673
New York City NY GO 6.80% 2/1/97 9,985 10,100
New York City NY GO 6.80% 2/1/97 (Prere.) 2,990 3,027
New York City NY GO VRDO 3.30% 9/4/96 LOC 9,500 9,500
New York City NY GO VRDO 3.40% 9/4/96 LOC 3,200 3,200
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. 7.75% 6/15/01 (Prere.) 6,000 6,854
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. VRDO 3.80% 9/4/96 (3) 11,400 11,400
New York Medical Care Fac. (St. Luke's) 7.45% 2/15/00 (1)(Prere.) 5,000 5,553
New York Medical Care Fac. Finance Agency Rev. 7.80% 2/15/99 (Prere.) 5,000 5,495
New York Medical Care Fac. Finance Agency Rev. 8.00% 8/15/97 (7)(Prere.) 8,700 9,195
New York Medical Care Fac. Finance Agency Rev. 8.875% 8/15/97 (Prere.) 12,100 12,894
New York State Dormitory Auth. (City Univ.) 5.25% 7/1/97 2,780 2,809
New York State Dormitory Auth. (City Univ.) 7.625% 7/1/00 (Prere.) 21,600 24,300
New York State Dormitory Auth. (State Univ.) 7.25% 5/15/00 (Prere.) 2,070 2,296
New York State Local Govt. Assistance Corp. 7.50% 4/1/01 (Prere.) 4,800 5,451
New York State Thruway Auth. (Highway & Bridge Trust Fund) 5.00% 4/1/98 8,750 8,821
New York Urban Dev. Corp. 7.50% 4/1/01 (Prere.) 3,000 3,407
New York Urban Dev. Corp. 7.75% 1/1/00 (Prere.) 3,900 4,359
---------
136,334
---------
NORTH CAROLINA (1.4%)
Charlotte NC Airport Refunding Rev. VRDO 3.35% 9/4/96 (1) 1,700 1,700
North Carolina Eastern Municipal Power Agency 7.25% 1/1/99 (Prere.) 3,000 3,249
North Carolina Medical Care VRDO (Duke Univ. Hosp.) 3.45% 9/5/96 9,200 9,200
North Carolina Municipal Power Agency 7.875% 1/1/98 (Prere.) 6,000 6,407
---------
20,556
---------
OHIO (3.3%)
Cincinnati OH School Dist. TAN 5.50% 12/1/00 (2) 4,300 4,448
Columbus OH GO VRDO 3.30% 9/5/96 5,200 5,200
Columbus OH Refunding Limited Tax 3.90% 7/1/97 4,850 4,851
</TABLE>
11
<PAGE> 52
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
SHORT-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cuyahoga County OH Hosp. Improvement Rev. VRDO
(St. Luke's Hosp.) 3.50% 9/4/96 LOC $ 400 $ 400
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas and Electric Project) 3.75% 9/4/96 LOC 1,800 1,800
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas and Electric Project) 3.85% 9/4/96 LOC 18,700 18,700
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas and Electric Project) 4.00% 9/4/96 LOC 2,500 2,500
Student Loan Funding Corp. Cincinnati OH
Student Loan Rev. VRDO 3.50% 9/4/96 LOC 10,800 10,800
---------
48,699
---------
OKLAHOMA (1.7%)
Grand River Dam OK Auth. 4.90% 6/1/98 10,000 10,106
Oklahoma Industries Auth. Health System Rev. VRDO 3.55% 9/4/96 14,625 14,625
---------
24,731
---------
OREGON (1.9%)
Oregon Veterans Welfare Program VRDO 3.45% 9/4/96 27,200 27,200
---------
PENNSYLVANIA (5.5%)
Berks County PA GO 7.25% 11/15/20 (3)(Prere.) 6,700 7,493
Geisinger Health Systems Rev. VRDO (Montour County PA) 3.75% 9/4/96 100 100
Pennsylvania GO 5.25% 11/15/00 (3) 7,500 7,701
Pennsylvania GO 10.00% 4/15/98 16,000 17,399
Pennsylvania Higher Educ. Fac. Auth. Health Services
(Allegheny/Delaware Valley) 4.80% 11/15/00 (1) 4,245 4,261
Philadelphia PA GO 5.25% 11/15/96 (3) 4,150 4,162
Philadelphia PA GO 5.75% 11/15/98 (3) 6,655 6,849
Philadelphia PA GO 6.00% 11/15/99 (3) 10,000 10,431
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Childrens Hosp. Project) 3.75% 9/4/96 LOC 3,000 3,000
Philadelphia PA School Dist. 6.60% 7/1/98 (1) 4,815 5,014
Philadelphia PA School Dist. 6.70% 7/1/99 (1) 5,145 5,457
Philadelphia PA Water & Sewer 6.90% 10/1/99 (Prere.) 5,000 5,441
Sayre PA Health Care Fac. Auth. Hosp. Rev. VRDO
(VHA of PA, Pooled Capital Asset Financing Program) 3.35% 9/4/96 (2) 2,400 2,400
---------
79,708
---------
SOUTH CAROLINA (0.2%)
Berkeley County SC PCR VRDO (Amoco Chemical Co. Project) 3.75% 9/4/96 3,550 3,550
---------
TENNESSEE (4.0%)
Metropolitan Govt. of Nashville & Davidson County TN 10.50% 12/1/97 (Prere.) 5,750 6,195
Metropolitan Govt. of Nashville TN Airport Improvement
Refunding VRDO 3.50% 9/4/96 (3) 27,500 27,500
Tennessee BAN VRDO 3.30% 9/4/96 14,000 14,000
Tennessee GO 5.00% 5/1/99 10,070 10,248
---------
57,943
---------
TEXAS (8.4%)
Austin TX Combined Utility System Rev. 7.60% 11/15/99 (1) 5,000 5,459
Austin TX Combined Utility System Rev. 11.125% 11/15/99 (Prere.) 4,000 4,776
Austin TX Combined Utility System Rev. 14.25% 5/15/97 (Prere.) 7,090 7,596
Fort Worth TX Water & Sewer Rev. 5.60% 2/15/98 3,500 3,567
Harris County TX Health Fac. Dev. Corp. VRDO (Methodist Hosp.) 3.75% 9/4/96 15,000 15,000
Harris County TX Toll Road VRDO 3.40% 9/4/96 24,700 24,700
Houston TX Hotel Occupancy Rev. 6.00% 7/1/99 (4) 4,000 4,149
Houston TX Water & Sewer System 8.10% 12/1/96 (Prere.) 10,000 10,305
Northside TX Independent School Dist. 4.90% 2/1/00 5,000 5,053
Texas Municipal Power Agency Rev. 5.00% 9/1/96 5,000 5,000
Texas Municipal Power Agency Rev. 14.25% 3/1/97 (Prere.) 5,250 5,519
Texas National Research GO 7.125% 4/1/00 (Prere.) 11,805 12,990
Texas Public Finance Auth. 8.00% 10/1/98 3,000 3,220
Texas TRAN 4.75% 8/29/97 15,000 15,120
---------
122,454
---------
</TABLE>
12
<PAGE> 53
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTAH (1.4%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.80% 9/4/96 (2) $ 7,400 $ 7,400
Intermountain Power Agency UT 7.00% 7/1/99 (Prere.) 5,100 5,537
Intermountain Power Agency UT CP 3.60% 9/23/96 LOC 8,000 8,001
----------
20,938
----------
VIRGINIA (0.2%)
Virginia Public School Auth. 7.30% 1/1/97 (Prere.) 3,345 3,450
----------
WASHINGTON (6.3%)
King County WA GO 6.70% 1/1/99 9,000 9,448
Snohomish County WA Public Utility Dist. Rev. 5.00% 1/1/00 (3) 3,000 3,030
Snohomish County WA Public Utility Dist. Rev. 9.75% 1/1/99 (3) 5,315 5,925
Washington GO 6.75% 6/1/01 (Prere.) 10,000 10,841
Washington GO 7.00% 10/1/96 6,405 6,422
Washington GO 7.60% 9/1/96 (Prere.) 4,325 4,325
Washington GO 7.75% 12/1/98 (Prere.) 2,500 2,682
Washington GO 8.00% 9/1/96 (Prere.) 21,695 21,697
Washington GO 8.60% 10/1/97 (Prere.) 5,000 5,240
Washington Health Care Auth. (Empire Health Spokane) 8.00% 11/1/97 (1)(Prere.) 9,200 9,785
Washington Motor Vehicle Fuel Tax 8.00% 9/1/96 (Prere.) 12,750 12,751
----------
92,146
----------
WEST VIRGINIA (0.9%)
West Virginia School Building Auth. 6.00% 7/1/98 7,000 7,217
West Virginia Water Dev. Auth. 7.70% 11/1/00 (Prere.) 4,960 5,623
----------
12,840
----------
WISCONSIN (0.2%)
Wisconsin GO 7.00% 5/1/98 (Prere.) 3,185 3,356
----------
WYOMING (2.0%)
Lincoln County WY PCR VRDO (Exxon Project) 3.75% 9/4/96 13,700 13,700
Lincoln County WY PCR VRDO (Exxon Project) 3.80% 9/4/96 7,400 7,400
Sublette County WY VRDO (Exxon Project) 3.75% 9/4/96 8,300 8,300
----------
29,400
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $1,438,614) 1,441,844
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 19,604
Liabilities (4,796)
----------
14,808
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 93,728,404 outstanding $.001 par value shares
(authorized 250,000,000 shares) $1,456,652
===================================================================================================================================
NET ASSET VALUE PER SHARE $15.54
===================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
For key to abbreviations and other references, see page 50.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 1,453,090 $15.50
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains--Note E 332 --
Unrealized Appreciation--Note F 3,230 .04
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,456,652 $15.54
===================================================================================================================================
</TABLE>
13
<PAGE> 54
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
LIMITED-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (100.2%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALABAMA (0.2%)
Columbia AL IDA PCR VRDO (Alabama Power Co. Project) 3.70% 9/4/96 $ 1,600 $ 1,600
Huntsville AL Health Care Auth. VRDO 3.35% 9/5/96 (1) 1,700 1,700
---------
3,300
---------
ALASKA (2.3%)
Alaska Housing Finance Corp. VRDO 3.45% 9/4/96 13,000 13,000
Anchorage AK GO 4.70% 8/1/01 (1) 5,000 5,000
North Slope Borough AK GO 0.00% 6/30/97 (1) 1,000 966
North Slope Borough AK GO 7.25% 6/30/00 (4) 20,000 21,805
Valdez AK Marine Terminal VRDO (Exxon Pipeline Project) 3.75% 9/4/96 400 400
---------
41,171
---------
ARIZONA (1.5%)
Arizona Transp. Board Excise Tax 6.00% 7/1/02 (2) 15,185 16,166
Maricopa County AZ School Dist. GO 6.00% 7/1/97 (2) 10,000 10,167
---------
26,333
---------
CALIFORNIA (12.2%)
Alameda County CA Public Fac. Corp. COP PUT 6.15% 9/1/96 LOC 10,000 10,000
California GO 7.50% 11/1/03 (3) 6,000 6,960
California GO 8.90% 3/1/97 3,000 3,075
California GO 10.00% 4/1/98 19,600 21,294
California GO 10.50% 10/1/00 3,000 3,647
California Dept. of Water (Central Valley Project) 8.25% 12/1/01 4,790 5,587
California Dept. of Water (Central Valley Project) 8.25% 12/1/02 5,060 6,011
California Dept. of Water (Central Valley Project) 8.25% 12/1/05 5,685 7,021
California Public Works Board (Univ. of CA Project) 6.60% 12/1/02 (Prere.) 10,000 11,207
California RAN VRDO 3.45% 9/4/96 23,000 23,000
Contra Costa CA Transp. Auth. Sales Tax Rev. 6.00% 3/1/97 2,580 2,609
East Bay CA Municipal Utility Dist. Water System Rev. 6.00% 6/1/00 (3) 3,000 3,155
Irvine CA Ranch Water Dist. VRDO 3.60% 9/4/96 LOC 1,800 1,800
Los Angeles CA COP 5.50% 12/1/96 5,000 5,018
Los Angeles CA Dept. of Water & Power Waterworks Rev. 9.00% 5/15/02 9,135 11,040
Los Angeles CA Dept. of Water & Power Waterworks Rev. 9.00% 5/15/03 5,355 6,604
Los Angeles CA Unified School Dist. TRAN 4.50% 9/30/97 6,300 6,331
Los Angeles County CA TRAN 4.50% 6/30/97 LOC 10,000 10,052
Los Angeles County CA Transp. Commission Sales Tax 6.75% 7/1/01 (3)(Prere.) 5,000 5,546
Orange County CA Sanitation Dist. VRDO 3.20% 9/5/96 (2) LOC 11,055 11,055
Orange County CA Sanitation Dist. VRDO 3.65% 9/4/96 (3) 3,800 3,800
San Bernardino County CA Transp. Auth. Sales Tax Rev. 3.75% 3/1/97 (1) 4,280 4,278
San Diego CA Area Local Govt. COP Pooled TRAN 4.75% 10/1/97 (4) 5,000 5,035
San Diego CA Unified School Dist. TRAN 4.75% 10/1/97 10,000 10,075
San Diego County CA TRAN 4.375% 9/30/97 LOC 10,300 10,345
Santa Clara County CA El Camino Hosp. (Valley Medical Center) 3.30% 9/10/96 LOC 12,200 12,200
Santa Clara County CA Finance Auth. Lease Rev. VRDO
(VMC Fac. Replacement Project) 3.15% 9/4/96 1,300 1,300
Univ. of California Rev. (Multipurpose Dist. Project) 10.00% 9/1/01 (2) 5,500 6,775
---------
214,820
---------
CONNECTICUT (3.6%)
Connecticut GO 9.875% 3/1/01 6,750 8,151
Connecticut Special Assessment Unemployment Compensation 4.00% 11/15/96 20,295 20,301
Connecticut Special Assessment Unemployment Compensation 5.50% 5/15/01 (2) 13,455 13,916
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 4.00% 10/1/99 11,000 10,833
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 4.80% 9/1/97 6,350 6,400
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 6.25% 10/1/02 (3) 4,000 4,309
---------
63,910
---------
DISTRICT OF COLUMBIA (0.2%)
District of Columbia GO 6.00% 6/1/97 (1) 3,250 3,296
---------
</TABLE>
14
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FLORIDA (7.8%)
Dade County FL Aviation Rev. 4.30% 10/1/96 $ 2,500 $ 2,501
Dade County FL School Dist. 7.375% 7/1/99 (Prere.) 19,600 21,500
Dade County FL Water & Sewer System VRDO 3.35% 9/4/96 (3) 27,215 27,215
Florida Board of Educ. (Capital Outlay Rev.) 6.50% 6/1/04 5,565 6,118
Florida Dept. of General Services 6.10% 7/1/97 (2) 6,900 7,024
Florida Municipal Power Agency (St. Lucie Project) 4.20% 10/1/96 (3) 2,055 2,056
Florida Municipal Power Agency (St. Lucie Project) 4.40% 10/1/97 (3) 2,230 2,237
Florida Turnpike Auth. Rev. 9.50% 7/1/99 (2) 4,000 4,533
Gulf Breeze FL Local Govt. Loan Program VRDO 3.40% 9/5/96 (3) 10,945 10,945
Hillsborough County FL Aviation Auth. (Tampa Airport) 3.90% 10/1/96 (3) 7,155 7,155
City of Homestead FL Special Insurance Assessment Rev. 4.20% 9/1/96 (1) 6,025 6,025
City of Homestead FL Special Insurance Assessment Rev. 4.20% 9/1/96 (1)(Prere.) 165 165
City of Homestead FL Special Insurance Assessment Rev. 4.40% 3/1/97 (1) 7,010 7,029
City of Homestead FL Special Insurance Assessment Rev. 4.40% 3/1/97 (1)(Prere.) 190 191
City of Lakeland FL Electric & Water Rev. 6.25% 10/1/02 (3) 5,000 5,398
Lee County FL School Board 6.00% 8/1/02 (4) 2,750 2,912
Orlando FL Utility Comm. Water & Electric BAN VRDO 3.35% 9/5/96 10,400 10,400
Palm Beach County FL Solid Waste Auth. Rev. 8.00% 7/1/98 4,000 4,239
Port Everglade FL Port Fac. Rev. 7.00% 9/1/97 (4) 2,600 2,675
St. Lucie County FL PCR VRDO (Florida Power & Light Co.) 3.75% 9/4/96 3,900 3,900
City of Sunrise FL Public Service 8.00% 10/1/97 (2) 2,035 2,099
---------
136,317
---------
GEORGIA (3.0%)
Burke County GA PCR VRDO (Georgia Power Co.) 3.70% 9/4/96 1,600 1,600
Burke County GA PCR VRDO (Georgia Power Co.) 3.75% 9/5/96 8,070 8,070
Georgia GO 5.75% 3/1/02 5,600 5,893
Georgia GO 7.25% 7/1/02 5,620 6,341
Georgia GO 7.25% 9/1/02 8,160 9,233
Georgia GO 7.40% 8/1/02 12,360 14,039
Metropolitan Atlanta GA Rapid Transp. Auth. 6.35% 7/1/04 3,560 3,839
Monroe County GA Dev. Auth. (Oglethorpe Power) 5.10% 1/1/97 3,880 3,895
---------
52,910
---------
HAWAII (1.3%)
Hawaii Airport System Rev. 5.10% 7/1/97 (1) 1,855 1,872
Hawaii GO 4.50% 1/1/98 5,000 5,020
Hawaii GO 4.60% 1/1/97 5,500 5,515
Hawaii GO 5.00% 11/1/97 4,000 4,043
Honolulu HI City & County GO 4.60% 10/1/99 6,500 6,533
---------
22,983
---------
ILLINOIS (2.9%)
Chicago IL GO 6.25% 10/31/02 (1) 4,250 4,561
Chicago IL Metropolitan Water Reclamation Dist. 4.70% 12/1/99 7,710 7,758
Chicago IL Metropolitan Water Reclamation Dist. 6.80% 1/1/97 3,400 3,434
Chicago IL Water Rev. 4.70% 11/1/97 (2) 3,250 3,270
Cook County IL GO 4.75% 11/15/97 (3) 5,000 5,037
Dupage County IL Rev. (Storm Water Project) 6.55% 1/1/02 (Prere.) 10,000 10,987
Illinois GO 6.40% 8/1/01 5,365 5,686
Illinois Sales Tax Rev. 6.90% 6/15/97 2,000 2,045
Illinois Sales Tax Rev. 7.20% 6/15/99 (Prere.) 7,600 8,285
---------
51,063
---------
INDIANA (0.8%)
Rockport IN PCR VRDO (AEP Generating Co. Project) 3.85% 9/4/96 (2) 14,000 14,000
---------
KENTUCKY (1.1%)
Kentucky Dev. Finance Auth. Hosp. Rev. 6.10% 11/1/96 (3) 3,105 3,117
Kentucky Property & Building Comm. 6.00% 11/1/02 2,000 2,123
Kentucky Property & Building Comm. 6.75% 11/1/99 9,500 10,118
Kentucky Turnpike Auth. 4.30% 7/1/97 (2) 3,150 3,161
---------
18,519
---------
</TABLE>
15
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
LIMITED-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOUISIANA (1.3%)
East Baton Rouge Parish of LA VRDO (Exxon Project) 3.75% 9/4/96 $ 5,400 $ 5,400
Louisiana Recovery Dist. Sales Tax 5.50% 7/1/97 6,000 6,069
New Orleans LA GO 6.50% 10/1/01 (2) 10,655 11,508
---------
22,977
---------
MAINE (0.9%)
Maine Health & Higher Educ. (Sebasticook Hosp.) 10.10% 7/1/01 (Prere.) 4,400 5,472
Maine Municipal Bond Bank 4.125% 11/1/97 10,000 9,999
---------
15,471
---------
MARYLAND (0.3%)
Maryland Dept. of Transp. 6.70% 8/15/99 (Prere.) 5,000 5,393
---------
Massachusetts (4.8%)
Massachusetts GO 5.80% 8/1/97 7,000 7,112
Massachusetts GO 6.25% 7/1/02 12,500 13,386
Massachusetts GO 6.875% 7/1/01 (Prere.) 17,400 19,297
Massachusetts GO 7.00% 7/1/98 LOC 5,000 5,232
Massachusetts GO 9.25% 7/1/00 10,000 11,586
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 4,000 4,063
Massachusetts Water Resources Auth. 5.80% 7/15/97 7,145 7,252
Massachusetts Water Resources Auth. 6.875% 12/1/01 (Prere.) 9,945 11,096
Massachusetts Water Resources Auth. 7.30% 4/1/00 (Prere.) 5,000 5,532
---------
84,556
---------
MICHIGAN (6.3%)
Detroit MI GO 5.60% 5/1/00 (2) 7,040 7,263
Detroit MI GO 5.70% 5/1/01 (2) 5,000 5,197
Greater Detroit MI Resource Recovery Auth. 5.00% 12/13/00 (2) 6,290 6,362
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/01 (2) 5,000 5,161
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/03 (2) 17,995 18,537
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/04 (2) 12,990 13,336
Michigan GO (Environmental Protection Program) 6.00% 11/1/02 4,845 5,168
Michigan GO (Recreation Program) 6.00% 11/1/00 11,910 12,563
Michigan GO (Recreation Program) 6.00% 11/1/01 5,910 6,275
Michigan GO Notes 4.00% 9/30/96 14,000 14,004
Michigan State Building Auth. 6.30% 10/1/03 (4) 7,800 8,386
Univ. of Michigan VRDO (Medical Service Plan) 3.85% 9/4/96 8,200 8,200
---------
110,452
---------
MINNESOTA (0.3%)
Minnesota GO 6.00% 8/1/04 5,000 5,357
---------
MISSISSIPPI (1.0%)
Jackson County MS Port Fac. VRDO (Chevron USA Project) 3.75% 9/4/96 17,500 17,500
---------
MISSOURI (1.1%)
Kansas City MO School Dist. Building Corp. 10.50% 2/1/99 (3) 7,545 8,560
Missouri Higher Educ. Loan Auth. 5.15% 2/15/98 11,365 11,468
---------
20,028
---------
NEBRASKA (0.1%)
Omaha NE Public Power Dist. 4.35% 2/1/98 2,400 2,404
---------
NEVADA (0.7%)
Clark County NV School Dist. GO 9.75% 6/1/01 (1) 10,000 12,098
---------
NEW JERSEY (3.1%)
Camden County NJ GO 4.65% 6/1/97 (1) 3,565 3,585
New Jersey Health Care Fac. Finance Auth. Rev.
(Union Hosp./Mega Care) 5.75% 7/1/97 2,670 2,696
</TABLE>
16
<PAGE> 57
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Jersey Transp. Trust Fund 4.10% 6/15/97 $11,300 $ 11,315
New Jersey Transp. Trust Fund 4.40% 6/15/99 10,000 10,002
New Jersey Turnpike Auth. 5.20% 1/1/98 15,000 15,138
New Jersey Turnpike Auth. 6.00% 1/1/98 8,000 8,153
Passaic Valley NJ Sewer System Rev. 5.70% 12/1/03 (2) 3,980 4,179
---------
55,068
---------
NEW YORK (11.7%)
Battery Park City NY Auth. 7.70% 5/1/99 (Prere.) 5,000 5,505
Erie County NY Water Auth. Waterworks System Rev. VRDO 3.05% 9/4/96 (2) 2,200 2,200
Municipal Assistance Corp. for New York City NY 6.00% 7/1/00 (2) 10,000 10,494
Municipal Assistance Corp. for New York City NY 6.00% 7/1/05 (2) 10,370 11,026
New York City NY GO 5.50% 8/1/98 15,000 15,242
New York City NY GO 5.60% 8/15/97 19,170 19,426
New York City NY GO VRDO 3.40% 9/4/96 LOC 600 600
New York City NY GO VRDO 3.75% 9/4/96 LOC 1,600 1,600
New York City NY IDA (USTA National Tennis Center Project) 7.75% 11/15/00 3,125 3,487
New York City NY IDA (USTA National Tennis Center Project) 7.75% 11/15/01 4,380 4,973
New York City NY IDA (USTA National Tennis Center Project) 7.75% 11/15/02 3,100 3,571
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. VRDO 3.80% 9/4/96 (3) 400 400
New York State COP 4.50% 2/1/98 4,985 4,980
New York State COP 4.70% 2/1/99 4,580 4,569
New York State Dormitory Auth. (City Univ.) 5.50% 7/1/98 6,300 6,408
New York State Dormitory Auth. (City Univ.) 9.00% 7/1/00 (3) 15,515 17,984
New York State Dormitory Auth. (State Univ.) 7.70% 5/15/00 (Prere.) 6,500 7,308
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.00% 6/15/01 1,750 1,691
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.10% 6/15/02 3,000 2,883
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.20% 2/15/03 3,840 3,680
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.20% 6/15/03 6,120 5,853
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.30% 6/15/04 6,025 5,722
New York State Hosp. Finance Agency 7.80% 3/15/01 (Prere.) 15,000 17,186
New York State Local Govt. Assistance Corp. 7.00% 4/1/01 (Prere.) 11,550 12,881
New York State Medical Care Fac. Finance Agency Rev. 7.875% 8/15/00 (Prere.) 8,000 9,087
New York State Power Auth. 7.10% 1/1/99 6,400 6,741
New York State Thruway Auth. (Highway & Bridge Trust Fund) 6.00% 4/1/02 (1) 11,965 12,685
New York State Urban Dev. Corp. (Correctional Fac.) 7.50% 1/1/01 (Prere.) 7,100 8,020
---------
206,202
---------
NORTH CAROLINA (0.3%)
North Carolina Medical Care Hosp. Rev. VRDO (Duke Univ. Hosp.) 3.45% 9/5/96 300 300
North Carolina Municipal Power Agency (Catawba Electric) 5.10% 1/1/98 3,980 4,010
---------
4,310
---------
OHIO (2.2%)
Hamilton County OH Hosp. Fac. VRDO (Bethesda Hosp.) 3.45% 9/5/96 LOC 3,000 3,000
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric) 3.75% 9/4/96 LOC 9,700 9,700
Ohio Building Auth. (Correctional Fac.) 7.00% 9/1/00 4,000 4,090
Ohio Public Fac. Comm. (Higher Educ.) 4.40% 12/1/96 7,000 7,009
Ohio Public Fac. Comm. (Higher Educ.) 6.50% 12/1/97 2,950 3,034
Ohio Water Dev. Auth. 4.60% 12/1/96 5,000 5,009
Ohio Water Dev. Auth. 4.90% 6/1/97 4,085 4,113
Ohio Water Dev. Auth. 4.90% 12/1/97 3,455 3,485
---------
39,440
---------
OKLAHOMA (1.2%)
Grand River Dam Auth. OK 4.90% 6/1/98 17,500 17,686
Grand River Dam Auth. OK 6.30% 6/1/97 3,450 3,510
---------
21,196
---------
OREGON (0.3%)
Oregon Veterans Welfare Program VRDO 3.45% 9/4/96 LOC 5,100 5,100
---------
</TABLE>
17
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
LIMITED-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PENNSYLVANIA (7.4%)
Allegheny County PA Hosp. Dev. Auth. VRDO (Allegheny Hosp.) 3.40% 9/4/96 $ 4,800 $ 4,800
Northumberland County PA Auth. Commonwealth Lease Rev. 6.00% 10/15/96 (1) 4,960 4,973
Pennsylvania Convention Center Auth. Rev. 5.75% 9/1/99 16,450 16,617
Pennsylvania GO 5.00% 7/1/97 3,930 3,963
Pennsylvania GO 5.00% 5/1/00 6,210 6,293
Pennsylvania GO 5.40% 7/1/00 4,000 4,111
Pennsylvania GO 6.00% 9/15/97 5,885 5,997
Pennsylvania Higher Educ. Fac. Health Services
(Allegheny/Delaware Valley) 5.00% 11/15/02 (1) 7,990 8,032
Pennsylvania Intergovernmental Cooperation Auth. 5.40% 6/15/97 (3) 4,000 4,046
Philadelphia PA GO 6.00% 11/15/99 (3) 8,505 8,871
Philadelphia PA GO 6.00% 11/15/00 (3) 13,000 13,658
Philadelphia PA Municipal Lease 5.25% 7/15/98 3,215 3,239
Philadelphia PA School Dist. GO 4.70% 7/1/99 (1) 14,000 14,069
Philadelphia PA School Dist. GO 6.60% 7/1/98 (2) 3,000 3,121
Philadelphia PA Water & Sewer 6.90% 10/1/99 (Prere.) 15,000 16,324
Philadelphia PA Water & Wastewater Rev. 6.25% 8/1/02 (1) 5,450 5,835
Sayre PA Health Care Fac. Auth. VRDO 3.35% 9/4/96 (2) 7,050 7,050
---------
130,999
---------
PUERTO RICO (0.3%)
Puerto Rico Electric Power Auth. Rev. 6.00% 7/1/03 (1) 5,000 5,358
Rhode Island (1.5%)
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 5/15/97 4,215 4,274
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/03 (1) 9,665 10,276
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/04 (1) 11,345 12,071
---------
26,621
---------
SOUTH CAROLINA (0.2%)
Piedmont SC Municipal Power Agency 4.90% 1/1/97 3,350 3,360
---------
TEXAS (10.7%)
Anderson County TX (Coffield Prison Farm Project) 8.00% 3/15/97 (2) 4,135 4,226
Austin TX Combined Utilities System Rev. 4.00% 11/15/96 7,820 7,822
Austin TX Combined Utilities System Rev. 9.75% 5/15/97 (1) 2,835 2,948
Austin TX Combined Utilities System Rev. 9.75% 5/15/97 (1)(Prere.) 1,165 1,212
Austin TX Combined Utilities System Rev. 10.00% 5/15/00 (Prere.) 5,000 5,897
Austin TX Combined Utilities System Rev. 11.00% 11/15/96 970 984
Austin TX Combined Utilities System Rev. 11.00% 11/15/96 (ETM) 200 203
Corpus Christi TX Utilities System Rev. 6.30% 7/15/97 (3) 2,460 2,509
Dallas-Fort Worth TX Regional Airport 3.75% 11/1/96 (1) 4,000 3,999
Dallas-Fort Worth TX Regional Airport 4.00% 11/1/97 (1) 9,000 8,979
Dallas TX Waterworks & Sewer System 5.90% 10/1/97 7,265 7,402
Gulf Coast Waste Disposal Auth. PCR VRDO (Amoco Oil Project) 3.75% 9/4/96 14,700 14,700
Harris County TX Flood Control Dist. GO 5.50% 10/1/00 3,000 3,103
Harris County TX Health Fac. Dev. Corp. VRDO (Methodist Hosp.) 3.75% 9/4/96 1,600 1,600
Harris County TX Toll Road Refunding GO 5.50% 10/1/00 2,645 2,736
Harris County TX Toll Road Refunding GO 5.60% 10/1/97 10,000 10,160
Harris County TX Toll Road VRDO 3.40% 9/4/96 4,400 4,400
Houston TX Hotel Occupancy Tax Rev. 6.00% 7/1/00 (4) 4,250 4,439
Houston TX Hotel Occupancy Tax Rev. 6.00% 7/1/01 (4) 4,000 4,201
Houston TX Hotel Occupancy Tax Rev. 6.00% 7/1/02 (4) 2,250 2,372
Houston TX Independent School Dist. 6.40% 8/15/01 (Prere.) 4,095 4,401
Houston TX Public Improvement 5.25% 3/1/98 5,000 5,074
Houston TX Water & Sewer System 4.65% 12/1/96 11,315 11,336
Houston TX Water & Sewer System 4.90% 12/1/97 5,000 5,044
Houston TX Water & Sewer System 5.40% 12/1/00 8,000 8,213
Houston TX Water & Sewer System 5.70% 12/1/97 (2) 7,000 7,137
</TABLE>
18
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
San Antonio TX Electric & Gas Rev. 6.75% 2/1/97 $ 2,000 $ 2,024
San Antonio TX GO 5.40% 8/1/04 7,495 7,666
Texas A&M Univ. Rev. 6.90% 8/15/97 5,425 5,570
Texas GO 4.625% 10/1/97 2,700 2,716
Texas Municipal Power Agency Rev. 5.80% 9/1/03 (1) 6,750 7,097
Texas Municipal Power Agency Rev. 6.40% 9/1/98 (3) 3,000 3,118
Texas TRAN 4.75% 8/29/97 25,000 25,199
----------
188,487
----------
UTAH (0.1%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.80% 9/4/96 (2) 1,000 1,000
----------
VIRGINIA (0.4%)
Virginia Public School Auth. 4.00% 1/1/97 2,500 2,501
Virginia Public School Auth. 4.25% 1/1/98 5,250 5,252
----------
7,753
----------
WASHINGTON (3.4%)
Renton WA School Dist. GO (King County) 5.50% 12/1/96 6,000 6,024
Washington GO 5.30% 9/1/99 5,000 5,118
Washington GO 6.10% 9/1/00 5,000 5,271
Washington GO 6.30% 9/1/02 4,700 5,047
Washington GO 6.75% 6/1/01 (Prere.) 20,000 21,682
Washington GO 7.00% 10/1/99 7,555 8,089
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/00 (2) 3,030 3,173
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/01 (2) 4,735 4,984
----------
59,388
----------
WEST VIRGINIA (0.1%)
Cabell WV Board of Educ. 8.00% 5/1/97 (1) 2,120 2,177
----------
WISCONSIN (2.8%)
Wisconsin GO 4.125% 11/1/98 33,625 33,544
Wisconsin GO 6.00% 5/1/03 14,055 14,966
----------
48,510
----------
WYOMING (0.8%)
Kemmerer WY PCR VRDO (Exxon Project) 3.75% 9/4/96 2,800 2,800
Lincoln County WY PCR VRDO (Exxon Project) 3.75% 9/4/96 2,100 2,100
Platte County WY PCR 4.20% 1/1/99 3,370 3,331
Platte County WY PCR 4.40% 1/1/00 3,945 3,894
Sublette County WY VRDO (Exxon Project) 3.75% 9/4/96 2,200 2,200
----------
14,325
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $1,754,803) 1,764,152
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 26,779
Liabilities (30,356)
----------
(3,577)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 165,809,949 outstanding $.001 par value shares
(authorized 250,000,000 shares) $1,760,575
===================================================================================================================================
NET ASSET VALUE PER SHARE $10.62
===================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
For key to abbreviations and other references, see page 50.
19
<PAGE> 60
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
LIMITED-TERM PORTFOLIO (000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in Capital $1,758,803 $10.61
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (5,111) (.03)
Unrealized Appreciation (Depreciation)--Note F:
Investment Securities 9,349 .06
Futures Contracts (2,466) (.02)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,760,575 $10.62
===================================================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (99.1%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALABAMA (0.1%)
Columbia AL IDA PCR VRDO (Alabama Power Co. Project) 3.85% 9/4/96 $ 3,400 $ 3,400
Univ. of Southern Alabama Hosp. 7.00% 5/15/04 (2) 3,250 3,507
---------
6,907
---------
ALASKA (0.7%)
Alaska Housing Finance Corp. VRDO 3.45% 9/4/96 35,400 35,400
Anchorage AK Electric Rev. 8.00% 12/1/11 (1) 5,395 6,717
Valdez AK Marine Terminal VRDO (Exxon Pipeline Project) 3.75% 9/4/96 1,500 1,500
---------
43,617
---------
ARIZONA (2.1%)
Arizona Transp. Board Highway Rev. 8.75% 7/1/03 10,000 12,252
Arizona Transp. Board-Maricopa County Regional Area 6.00% 7/1/05 (2) 18,885 20,191
Maricopa County AZ COP 6.00% 6/1/04 5,275 5,382
Maricopa County AZ (Samaritan Health Service) 7.15% 12/1/04 (1) 9,900 11,331
Maricopa County AZ (Samaritan Health Service) 7.15% 12/1/05 (1) 6,080 6,909
Maricopa County AZ PCR VRDO (Arizona Public Service) 3.75% 9/4/96 LOC 10,500 10,500
Mesa AZ GO 5.70% 7/1/08 (1) 5,600 5,705
Phoenix AZ Highway Rev. 9.25% 7/1/07 4,000 5,333
Salt River AZ Project Agricultural Improvement & Power Dist. 6.00% 1/1/07 3,515 3,726
Salt River AZ Project Agricultural Improvement & Power Dist. CP 3.60% 9/9/96 10,415 10,415
Tucson AZ Unified School Dist. 7.50% 7/1/06 (3) 8,840 10,509
Tucson AZ Unified School Dist. 7.50% 7/1/07 (3) 9,125 10,880
Tucson AZ Unified School Dist. 7.50% 7/1/08 (3) 8,060 9,639
---------
122,772
---------
CALIFORNIA (10.7%)
California Dept. of Water (Central Valley Project) 8.25% 12/1/03 5,290 6,382
California Dept. of Water (Central Valley Project) 8.25% 12/1/04 5,545 6,776
California GO 5.70% 8/1/07 17,500 18,007
California GO 5.75% 8/1/08 (3) 15,000 15,387
California GO 6.40% 2/1/06 (1) 4,500 4,933
California GO 7.00% 10/1/05 (1) 5,000 5,711
California GO 11.00% 3/1/06 13,185 18,874
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/04 (1) 4,515 4,889
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/05 (1) 5,875 6,350
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/06 (1) 5,395 5,822
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/07 (1) 5,290 5,677
California Health Fac. Finance Auth. (Sisters of Providence) 6.00% 10/1/02 3,865 4,087
California Health Fac. Finance Auth. (Sisters of Providence) 6.00% 10/1/03 4,095 4,337
California Health Fac. Finance Auth. (Sisters of Providence) 6.00% 10/1/04 4,340 4,596
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.40% 9/4/96 LOC 1,500 1,500
California Public Works Board (Dept. of Corrections) 6.00% 1/1/06 (2) 7,325 7,815
California Public Works Board (Dept. of Corrections) 6.00% 1/1/08 (2) 14,865 15,703
California Public Works Board (Dept. of Corrections) 7.00% 9/1/00 (Prere.) 7,400 8,201
California Public Works Board (Univ. of California) 6.10% 12/1/05 (2) 6,515 6,991
California Public Works Board (Univ. of California) 6.20% 12/1/06 (2) 3,320 3,576
California RAN 4.50% 6/30/97 20,000 20,110
Clovis CA Unified School Dist. GO 0.00% 8/1/00 7,000 5,835
Clovis CA Unified School Dist. GO 0.00% 8/1/01 11,180 8,814
East Bay CA Municipal Utility Dist. Rev. 6.00% 6/1/03 (3) 2,950 3,154
Foothill CA Eastern Transp. Corridor Agency Toll Rev. VRDO 3.20% 9/5/96 LOC 900 900
Fresno CA Sewer Rev. 6.25% 9/1/14 (2) 12,000 12,863
Kern County CA Public Fac. Project VRDO 3.25% 9/4/96 LOC 450 450
Kern County CA TRAN 4.50% 10/2/97 8,000 8,040
Long Beach CA Financing Auth. Rev. 6.00% 11/1/07 (2) 3,070 3,284
Long Beach CA Harbor Rev. 7.10% 5/15/99 2,900 3,093
Long Beach CA Harbor Rev. 7.15% 5/15/00 10,000 10,859
Long Beach CA Harbor Rev. 7.20% 5/15/01 2,000 2,209
Los Angeles CA COP 7.50% 6/1/98 (Prere.) 3,950 4,240
</TABLE>
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<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Los Angeles CA COP 7.60% 6/1/98 (Prere.) $ 3,995 $ 4,295
Los Angeles CA Unified School Dist. TRAN 4.50% 9/30/97 11,000 11,055
Los Angeles County CA TRAN 4.50% 6/30/97 LOC 18,000 18,093
Los Angeles County CA Transp. Auth. Sales Tax Rev. 8.00% 7/1/01 (2) 6,365 7,267
Los Angeles County CA Transp. Auth. Sales Tax Rev. 8.00% 7/1/02 (2) 3,915 4,548
Los Angeles County CA Transp. Comm. Sales Tax Rev. 6.50% 7/1/10 51,070 56,229
Metropolitan Water Dist. of Southern California 7.75% 7/1/01 (Prere.) 18,085 20,793
Northern California Power Agency (Hydroelectric Project) 6.10% 7/1/05 (1) 5,575 6,008
Northern California Power Agency (Hydroelectric Project) 6.20% 7/1/06 (1) 5,940 6,464
Northern California Power Agency (Hydroelectric Project) 6.25% 7/1/07 (1) 6,685 7,278
Oakland CA Redev. Agency (Central Dist. Project) 5.75% 2/1/04 (2) 1,535 1,616
Oakland CA Redev. Agency (Central Dist. Project) 5.90% 2/1/05 (2) 4,870 5,169
Oakland CA Redev. Agency (Central Dist. Project) 6.00% 2/1/07 (2) 3,360 3,582
Orange County CA Sanitation Dist. VRDO 3.75% 9/4/96 LOC 2,000 2,000
Poway CA Redev. Agency (Paguay Project) 7.125% 12/15/04 (3) 4,840 5,552
Sacramento CA Municipal Utility Dist. Electric Rev. 6.60% 2/1/97 4,000 4,044
Sacramento County CA TRAN 4.50% 9/30/97 23,715 23,855
San Bernardino CA COP 5.75% 8/1/06 (1) 3,300 3,434
San Bernardino CA COP 5.75% 8/1/07 (1) 3,420 3,540
San Bernardino CA COP 6.75% 8/1/10 (Prere.) 11,385 12,644
San Bernardino CA COP 7.00% 8/1/08 (1) 9,045 10,313
San Bernardino CA COP 7.00% 8/1/09 (1) 9,705 11,028
San Bernardino CA COP 7.00% 8/1/10 (1) 10,525 11,947
San Diego CA Area Local Govt. COP Pooled TRAN 4.75% 10/1/97 (4) 14,000 14,098
San Diego CA Unified School Dist. TRAN 4.75% 10/1/97 47,600 47,956
San Diego County CA Regional Transp. Auth. Sales Tax Rev. 5.00% 4/1/07 (3) 12,730 12,504
San Diego County CA Regional Transp. Auth. Sales Tax Rev. 7.00% 4/1/01 (Prere.) 3,220 3,597
San Diego County CA Regional Transp. Auth. Sales Tax Rev. 7.00% 4/1/06 1,780 1,885
San Diego County CA TRAN 4.375% 9/30/97 LOC 34,700 34,850
San Diego County CA Water Rev. COP 5.40% 5/1/03 5,000 5,172
San Diego County CA Water Rev. COP 5.50% 5/1/04 5,000 5,193
San Diego County CA Water Rev. COP 5.50% 5/1/05 4,245 4,395
Southern California Public Power Auth. 6.75% 7/1/99 6,190 6,545
Southern California Rapid Transit Dist. Rev. 5.70% 9/1/04 (2) 14,040 14,786
Univ. of California Rev. 10.00% 9/1/03 (2) 3,790 4,914
---------
636,114
---------
COLORADO (0.5%)
Colorado Health Fac. Auth. (Sisters of Charity Health System Inc.) 8.50% 5/15/04 (1) 17,500 21,389
Denver CO City & County School Dist. 6.95% 12/15/00 (3) 9,250 10,014
---------
31,403
---------
CONNECTICUT (2.7%)
Connecticut Dev. Auth. PCR VRDO (Connecticut Power and Light) 3.40% 9/4/96 LOC 5,350 5,350
Connecticut GO 5.30% 11/15/06 16,940 17,000
Connecticut GO 5.40% 11/15/07 24,010 24,181
Connecticut GO 6.00% 10/1/04 5,660 6,048
Connecticut Resource Recovery Auth. (Bridgeport Resco) 8.40% 1/1/99 4,950 5,065
Connecticut Special Tax Obligation Rev. 4.80% 10/1/05 (3) 9,085 8,914
Connecticut Special Tax Obligation Rev. 5.125% 9/1/05 11,575 11,604
Connecticut Special Tax Obligation Rev. 5.25% 9/1/06 42,550 42,823
Connecticut Special Tax Obligation Rev. 7.125% 6/1/10 12,000 13,888
Connecticut Special Tax Obligation Rev. 7.75% 6/1/00 11,300 12,505
Connecticut State 2nd Lien Special Tax Obligation Transp.
Infrastructure Purpose VRDO 3.35% 9/4/96 LOC 10,400 10,400
South Central CT Regional Water Auth. Water System Rev. 5.75% 8/1/06 3,900 4,051
---------
161,829
---------
DELAWARE (0.3%)
Delaware Transp. Auth. Rev. 5.625% 7/1/06 (1) 11,420 11,728
Delaware Transp. Auth. Rev. 5.80% 7/1/08 7,545 7,719
---------
19,447
---------
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (1.1%)
District of Columbia GO 5.50% 6/1/06 (4) $ 6,205 $ 6,204
District of Columbia GO 6.10% 6/1/11 (1) 7,000 7,086
District of Columbia GO 6.30% 6/1/08 (1) 15,000 15,547
District of Columbia GO 7.50% 6/1/99 (2)(Prere.) 17,875 19,612
District of Columbia GO 7.75% 6/1/97 (5)(Prere.) 5,000 5,215
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/07 (1) 2,985 3,112
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/08 (1) 3,160 3,275
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/10 (1) 2,555 2,613
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/12 (1) 2,995 3,038
---------
65,702
---------
FLORIDA (3.5%)
Broward County FL School Dist. GO 5.30% 2/15/04 3,295 3,366
Broward County FL School Dist. GO 5.40% 2/15/05 5,000 5,119
Broward County FL School Dist. GO 5.50% 2/15/06 10,080 10,319
Dade County FL Solid Waste System 7.00% 10/1/01 6,240 6,379
Dade County FL Water & Sewer Rev. VRDO 3.35% 9/4/96 (3) 15,595 15,595
Florida Board of Educ. (Capital Outlay Rev.) 4.70% 6/1/07 3,580 3,383
Florida Board of Educ. (Capital Outlay Rev.) 4.90% 6/1/08 6,905 6,601
Florida Board of Educ. (Capital Outlay Rev.) 5.00% 6/1/09 3,620 3,452
Florida Board of Educ. (Capital Outlay Rev.) 6.50% 6/1/05 5,940 6,547
Florida Dept. of General Services 6.25% 7/1/06 5,600 5,957
Florida School Board Assn. (Orange County) 6.90% 7/1/99 (2) 12,450 13,163
Florida School Board Assn. (Orange County) 7.00% 7/1/00 (2) 13,820 14,913
Gulf Breeze FL Local Govt. Loan Program VRDO 3.40% 9/5/96 (3) 15,000 15,000
Hillsborough County FL IDA PCR VRDO (Tampa Electric Co.) 3.75% 9/4/96 8,550 8,550
Hillsborough County FL School Dist. GO 7.10% 8/15/03 23,665 26,215
City of Lakeland FL Electric & Water Rev. 6.25% 10/1/03 (3) 6,465 7,010
City of Lakeland FL Electric & Water Rev. 6.50% 10/1/06 (3) 5,300 5,870
Lee County FL School Board 6.00% 8/1/05 (4) 4,975 5,278
Orlando FL Utilities Comm. Water & Electric Rev. BAN VRDO 3.35% 9/5/96 31,595 31,595
Palm Beach County FL School Board 6.00% 8/1/05 (2) 6,115 6,537
Palm Beach County FL School Board 6.00% 8/1/06 (2) 6,480 6,919
---------
207,768
---------
GEORGIA (4.8%)
Burke County GA PCR (Oglethorpe Power Corp.) 4.50% 1/1/02 (2) 7,375 7,272
Burke County GA PCR (Oglethorpe Power Corp.) 4.60% 1/1/03 (2) 9,955 9,793
Burke County GA PCR (Oglethorpe Power Corp.) 4.70% 1/1/04 (2) 13,160 12,908
Burke County GA PCR VRDO (Oglethorpe Power Corp.) 3.35% 9/4/96 (3) 8,300 8,300
Burke County GA PCR VRDO (Georgia Power Co.) 3.70% 9/4/96 18,550 18,550
Burke County GA PCR VRDO (Georgia Power Co.) 3.75% 9/5/96 11,300 11,300
Burke County GA PCR VRDO (Georgia Power Co.) 3.85% 9/5/96 23,000 23,000
Fulton County GA School Dist. 6.375% 5/1/10 15,000 16,415
Georgia GO 6.00% 7/1/04 5,000 5,364
Georgia GO 6.25% 9/1/08 6,490 7,087
Georgia GO 6.30% 3/1/07 15,000 16,411
Georgia GO 6.50% 8/1/01 3,230 3,502
Georgia GO 6.75% 9/1/10 8,000 9,068
Georgia GO 6.80% 8/1/02 8,000 8,865
Georgia GO 7.00% 11/1/05 15,670 17,939
Georgia GO 7.00% 11/1/06 16,780 19,341
Georgia GO 7.00% 11/1/07 17,960 20,787
Georgia GO 7.10% 9/1/09 3,400 3,965
Georgia GO 7.25% 9/1/06 5,860 6,858
Georgia GO 7.40% 8/1/07 11,200 13,266
Georgia GO 7.50% 4/1/01 5,500 6,150
Monroe County GA Dev. Auth. (Oglethorpe Power Corp.) 6.65% 1/1/08 9,220 10,121
Municipal Electric Power Auth. of Georgia 6.30% 1/1/05 12,775 13,697
Municipal Electric Power Auth. of Georgia 8.00% 1/1/98 (Prere.) 9,505 10,164
Municipal Electric Power Auth. of Georgia 8.10% 1/1/03 2,320 2,484
---------
282,607
---------
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HAWAII (2.8%)
Hawaii Airport System Rev. 5.40% 7/1/02 (1) $ 7,855 $ 8,072
Hawaii Airport System Rev. 5.85% 7/1/02 (1) 7,830 8,242
Hawaii Airport System Rev. 5.95% 7/1/03 (1) 2,590 2,745
Hawaii Airport System Rev. 6.05% 7/1/04 (1) 3,145 3,355
Hawaii Airport System Rev. 6.15% 7/1/05 (1) 10,735 11,520
Hawaii Airport System Rev. 6.25% 7/1/06 5,000 5,453
Hawaii GO 5.00% 11/1/97 4,000 4,043
Hawaii GO 5.00% 11/1/99 20,000 20,338
Hawaii GO 5.00% 2/1/04 10,000 10,024
Hawaii GO 5.00% 2/1/05 6,650 6,623
Hawaii GO 5.125% 2/1/06 11,605 11,574
Hawaii GO 5.50% 7/1/01 6,500 6,739
Hawaii GO 6.40% 3/1/07 5,555 6,118
Honolulu HI City & County GO 5.75% 1/1/06 8,825 9,200
Honolulu HI City & County GO 6.00% 1/1/08 5,000 5,313
Honolulu HI City & County GO 6.30% 3/1/10 4,830 5,062
Honolulu HI City & County GO 8.00% 10/1/09 30,560 37,978
---------
162,399
---------
ILLINOIS (6.8%)
Chicago IL Metropolitan Sanitation Dist. 8.75% 1/1/00 (Prere.) 2,980 3,355
Chicago IL Metropolitan Water Reclamation Dist. 5.85% 12/1/03 6,355 6,714
Chicago IL Metropolitan Water Reclamation Dist. 5.90% 12/1/06 4,450 4,695
Chicago IL Metropolitan Water Reclamation Dist. 5.95% 12/1/07 7,200 7,633
Chicago IL Metropolitan Water Reclamation Dist. 6.00% 12/1/08 9,900 10,509
Chicago IL Metropolitan Water Reclamation Dist. 6.05% 12/1/09 3,000 3,177
Chicago IL Metropolitan Water Reclamation Dist. 6.10% 12/1/06 5,300 5,638
Chicago IL Metropolitan Water Reclamation Dist. 6.25% 12/1/08 15,000 15,929
Chicago IL Metropolitan Water Reclamation Dist. 6.50% 12/1/07 10,000 10,971
Chicago IL Public Building Comm. Rev. 7.50% 1/1/02 (1) 2,500 2,723
Chicago IL Public Building Comm. Rev. 7.60% 1/1/03 (1) 2,500 2,715
Chicago IL Public Building Comm. Rev. 7.70% 1/1/08 (1)(ETM) 4,000 4,187
Chicago IL School Finance Auth. 4.40% 6/1/98 (1) 5,000 4,999
Chicago IL School Finance Auth. 4.90% 6/1/02 (3) 10,000 9,970
Chicago IL School Finance Auth. 5.00% 6/1/03 (3) 25,190 25,103
Chicago IL School Finance Auth. 5.10% 6/1/04 (3) 26,155 26,054
Chicago IL School Finance Auth. 5.20% 6/1/05 (3) 3,000 2,986
Chicago IL School Finance Auth. 5.375% 6/1/08 (3) 9,500 9,305
Chicago IL School Finance Auth. 6.00% 6/1/01 (3) 8,305 8,698
Chicago IL School Finance Auth. 6.10% 6/1/02 (3) 11,945 12,606
Chicago IL Water Rev. 5.50% 11/1/03 (2) 5,000 5,149
Cook County IL GO 4.60% 11/15/00 (1) 5,360 5,360
Cook County IL GO 5.75% 11/15/03 (3) 5,000 5,255
Cook County IL GO 5.80% 11/15/04 10,000 10,531
Cook County IL GO 6.60% 11/1/03 (2) 4,785 5,269
Cook County IL GO 6.75% 11/1/01 (2) 3,000 3,317
Illinois GO 5.125% 12/1/97 (3) 20,000 20,244
Illinois GO 5.125% 12/1/02 (3) 5,025 5,112
Illinois GO 6.25% 10/1/05 6,000 6,403
Illinois Health Fac. Auth. (Lutheran General Health Systems) 7.25% 4/1/99 (Prere.) 1,675 1,773
Illinois Health Fac. Auth. (Lutheran General Health Systems) 7.25% 4/1/00 7,470 7,962
Illinois Health Fac. Auth. (Univ. of Chicago Hosp.) VRDO 3.40% 9/4/96 (1) 700 700
Illinois Housing Dev. Auth. VRDO (Illinois Center Apartments) 3.70% 9/4/96 LOC 33,755 33,755
Illinois Regional Transp. Auth. 9.00% 6/1/05 (2) 5,220 6,621
Illinois Regional Transp. Auth. 9.00% 6/1/08 (2) 6,840 8,968
Illinois Regional Transp. Auth. 9.00% 6/1/09 (2) 4,255 5,611
Illinois Sales Tax Rev. 6.50% 6/15/13 5,000 5,422
Illinois Toll Highway Auth. VRDO 3.35% 9/4/96 (1) LOC 32,800 32,800
Metropolitan Pier & Exposition Auth. IL 6.50% 6/1/06 11,885 12,781
Metropolitan Pier & Exposition Auth. IL 6.75% 6/1/10 25,000 27,502
Metropolitan Pier & Exposition Auth. IL 7.25% 6/15/05 15,000 16,904
---------
405,406
---------
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDIANA (1.4%)
East Allen IN County Schools TAW 4.00% 12/31/96 $ 6,900 $ 6,903
East Chicago IN School Building Corp. 11.75% 2/1/99 (Prere.) 5,000 5,772
Indiana Educ. Fac. Auth. VRDO (Univ. of Notre Dame) 3.50% 9/5/96 16,600 16,600
Indiana Municipal Power Agency 5.875% 1/1/10 (1) 4,500 4,649
Indiana State Office Building Comm. Rev. 6.65% 7/1/01 4,500 4,771
Indiana State Office Building Comm. Rev. 6.70% 7/1/02 5,290 5,634
Indiana Univ. Student Fee Bonds 6.80% 8/1/04 25,000 27,366
Indiana Univ. Student Fee Bonds 7.00% 8/1/06 5,845 6,418
Rockport IN PCR VRDO (AEP Generating Co. Project) 3.80% 9/4/96 (2) 2,100 2,100
---------
80,213
---------
KENTUCKY (1.3%)
Kentucky Dev. Finance Auth. (St. Elizabeth Medical Center) 6.625% 11/1/04 (3) 20,025 21,689
Kentucky Dev. Finance Auth. (Sisters of Charity) 6.60% 11/1/06 5,000 5,291
Kentucky Property & Buildings Rev. 5.25% 11/1/08 2,500 2,451
Kentucky Property & Buildings Rev. 5.50% 9/1/03 8,000 8,272
Kentucky Property & Buildings Rev. 5.60% 9/1/04 3,000 3,114
Kentucky Property & Buildings Rev. 5.70% 9/1/05 7,350 7,627
Kentucky Property & Buildings Rev. 6.875% 8/1/06 10,400 11,524
Kentucky Turnpike Auth. Resource Recovery Road Rev. 8.00% 7/1/03 14,750 15,482
Kentucky Turnpike Auth. Resource Recovery Road Rev. 13.125% 7/1/97 (Prere.) 820 881
Kentucky Turnpike Auth. Resource Recovery Road Rev. 13.125% 1/1/98 (Prere.) 30 33
---------
76,364
---------
LOUISIANA (1.5%)
Jefferson Parish LA Sales Tax Rev. 6.75% 12/1/06 (3) 11,000 12,090
Louisiana Gas & Fuel Tax Rev. 7.20% 11/15/99 9,500 10,183
Louisiana Gas & Fuel Tax Rev. 7.25% 11/15/00 5,250 5,724
Louisiana Gas & Fuel Tax Rev. 7.25% 11/15/04 11,000 11,994
Louisiana GO 7.00% 9/1/00 (Prere.) 11,540 12,730
Louisiana GO 8.75% 9/1/00 (4) 8,830 10,121
Louisiana GO 8.75% 9/1/01 (4) 9,445 10,957
Louisiana Recovery Dist. Sales Tax Rev. VRDO 3.85% 9/4/96 (3) 7,300 7,300
New Orleans LA Public Improvement GO 7.70% 10/1/99 (5)(Prere.) 2,395 2,579
New Orleans LA Public Improvement GO 7.75% 10/1/00 (5)(Prere.) 5,510 5,938
---------
89,616
---------
MAINE (0.2%)
Maine Municipal Bond Bank 4.90% 11/1/02 13,000 13,054
---------
MASSACHUSETTS (5.7%)
Boston MA Water & Sewer Comm. 5.75% 11/1/13 6,325 6,285
Commonwealth of MA Dedicated Income Tax VRDO 3.65% 9/4/96 LOC 6,200 6,200
Massachusetts Bay Transit Auth. 5.30% 3/1/04 32,380 32,921
Massachusetts Bay Transit Auth. 7.25% 3/1/03 (3) 16,000 17,674
Massachusetts GO 5.10% 2/1/05 25,000 24,948
Massachusetts GO 5.50% 2/1/11 10,000 9,776
Massachusetts GO 6.25% 7/1/02 10,000 10,709
Massachusetts GO 6.50% 8/1/02 (Prere.) 3,840 4,245
Massachusetts GO 6.90% 6/1/00 (2) 2,500 2,703
Massachusetts GO 7.00% 6/1/99 (Prere.) 3,000 3,254
Massachusetts GO 7.00% 6/1/02 (2) 5,000 5,384
Massachusetts GO 7.50% 12/1/00 (Prere.) 10,000 11,272
Massachusetts GO 7.50% 6/1/04 3,975 4,585
Massachusetts Industrial Finance Agency (Refusetech Inc. Project) 6.15% 7/1/02 5,040 5,135
Massachusetts Industrial Finance Agency (Refusetech Inc. Project) 6.30% 7/1/05 21,500 22,166
Massachusetts Industrial Finance Auth. Rev. (BioMed Research Corp.) 0.00% 8/1/04 10,000 6,512
Massachusetts Industrial Finance Auth. Rev. (BioMed Research Corp.) 7.10% 8/1/99 17,075 18,101
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 11,000 11,174
Massachusetts Turnpike Auth. Rev. 4.70% 1/1/03 5,000 4,940
Massachusetts Turnpike Auth. Rev. 4.75% 1/1/04 2,500 2,459
Massachusetts Water Resources Auth. 5.25% 3/1/07 5,000 4,917
Massachusetts Water Resources Auth. 5.25% 3/1/09 7,175 6,926
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Massachusetts Water Resources Auth. 5.50% 11/1/07 $32,860 $ 32,921
Massachusetts Water Resources Auth. 6.50% 7/15/10 30,220 32,817
Massachusetts Water Resources Auth. 6.50% 7/15/19 37,515 40,367
Massachusetts Water Resources Auth. 7.25% 4/1/01 9,800 10,730
---------
339,121
---------
MICHIGAN (2.9%)
Detroit MI GO 5.80% 5/1/02 (2) 8,970 9,386
Detroit MI GO 5.90% 5/1/03 (2) 9,490 9,993
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/04 (2) 7,505 7,705
Greater Detroit MI Resource Recovery Auth. 6.25% 12/13/05 (2) 12,905 13,872
Greater Detroit MI Resource Recovery Auth. 6.25% 12/13/06 (2) 17,475 18,776
Greater Detroit MI Resource Recovery Auth. 6.25% 12/13/07 (2) 11,070 11,866
Michigan GO 4.00% 9/30/96 3,300 3,301
Michigan Municipal Bond Auth. Local Govt. Loan Auth. 0.00% 12/1/99 (3) LOC 6,000 5,168
Michigan Municipal Bond Auth. Local Govt. Loan Auth. 0.00% 12/1/00 (3) LOC 5,590 4,580
Michigan Municipal Bond Auth. Local Govt. Loan Auth. 0.00% 12/1/01 (3) LOC 9,630 7,453
Michigan Public Power Agency 5.30% 1/1/05 13,075 13,223
Michigan Public Power Agency 5.375% 1/1/06 13,790 13,923
Michigan Public Power Agency 5.50% 1/1/07 14,545 14,660
Michigan Public Power Agency 5.50% 1/1/08 9,360 9,365
Michigan State Building Auth. 5.50% 10/1/07 (2) 7,500 7,593
Michigan State Building Auth. 6.00% 10/1/09 (2) 8,735 8,938
Michigan State Building Auth. 6.50% 10/1/03 (2) 3,000 3,259
Regents of Univ. of Michigan Hosp. Rev. VRDO 3.85% 9/4/96 5,500 5,500
---------
168,561
---------
MINNESOTA (0.3%)
Minnesota GO 4.70% 8/1/97 16,315 16,427
---------
MISSISSIPPI (0.3%)
Mississippi GO 5.25% 5/1/08 5,805 5,765
Mississippi GO 6.50% 5/1/03 4,285 4,696
Mississippi GO 7.00% 5/1/05 4,840 5,499
---------
15,960
---------
MISSOURI (0.2%)
St. Louis County MO Rockwood School Dist. GO 8.50% 2/1/01 8,000 9,193
---------
NEBRASKA (0.5%)
Consumers Public Power Dist. NE Electric Rev. 5.10% 1/1/03 13,035 13,048
Nebraska Public Power Dist. 5.60% 7/1/03 13,175 13,681
---------
26,729
---------
NEVADA (2.3%)
Clark County NV Airport System Refunding Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 (1) 38,360 38,360
Clark County NV GO 7.50% 6/1/06 (2) 3,575 4,206
Clark County NV GO 7.50% 6/1/07 (2) 9,550 11,306
Clark County NV GO 7.50% 6/1/09 (2) 6,825 8,109
Clark County NV GO 8.00% 6/1/08 (2) 9,875 12,117
Clark County NV School Dist. GO 5.375% 5/1/06 (3) 3,740 3,759
Clark County NV School Dist. GO 5.375% 5/1/07 (3) 9,195 9,143
Clark County NV School Dist. GO 5.375% 5/1/08 (3) 9,170 9,044
Clark County NV School Dist. GO 5.60% 6/15/09 (3) 9,640 9,622
Clark County NV School Dist. GO 7.25% 6/15/02 (1) 3,995 4,474
Clark County NV School Dist. GO 7.40% 3/1/00 10,000 10,640
Clark County NV School Dist. GO 9.75% 6/1/00 (1) 4,580 5,373
Nevada GO 6.00% 5/1/05 10,450 10,914
---------
137,067
---------
NEW JERSEY (4.6%)
Camden County NJ Municipal Utilities Auth. 0.00% 9/1/99 (3) 12,545 10,963
Camden County NJ Municipal Utilities Auth. 0.00% 9/1/00 (3) 18,500 15,349
Camden County NJ Municipal Utilities Auth. 0.00% 9/1/02 (3) 18,545 13,860
Camden County NJ Municipal Utilities Auth. 0.00% 9/1/03 (3) 18,545 13,132
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Essex County NJ Solid Waste Util. Auth. 5.50% 4/1/11 (4) $ 3,000 $ 2,953
New Jersey Economic Dev. Auth. 5.80% 7/1/07 (1) 17,800 18,383
New Jersey Economic Dev. Auth. 5.80% 7/1/08 (1) 4,000 4,098
New Jersey Economic Dev. Auth. 7.00% 7/1/03 (1) 26,195 29,323
New Jersey Health Care Rev. (Union Hosp./Mega Care) 6.00% 7/1/98 2,820 2,862
New Jersey Health Care Rev. (Union Hosp./Mega Care) 6.20% 7/1/99 3,080 3,146
New Jersey Health Care Rev. (Union Hosp./Mega Care) 6.40% 7/1/00 3,295 3,383
New Jersey Sports & Exposition Auth. 6.50% 3/1/06 4,725 5,085
New Jersey Sports & Exposition Auth. 6.50% 3/1/07 3,500 3,758
New Jersey Transp. Trust Fund Auth. 5.30% 12/15/01 5,000 5,136
New Jersey Transp. Trust Fund Auth. 6.00% 12/15/04 (1) 4,000 4,288
New Jersey Transp. Trust Fund Auth. 6.00% 12/15/05 (1) 7,510 8,045
New Jersey Transp. Turnpike Auth. 4.75% 1/1/06 (ETM) 18,955 18,484
New Jersey Transp. Turnpike Auth. 5.90% 1/1/03 4,700 4,859
New Jersey Transp. Turnpike Auth. 5.90% 1/1/04 19,030 19,643
New Jersey Transp. Turnpike Auth. 6.00% 1/1/05 22,220 23,044
New Jersey Transp. Turnpike Auth. 6.50% 1/1/09 (2) 50,000 54,950
Port Auth. NY & NJ VRDO 3.65% 9/4/96 5,000 5,000
Rutgers State Univ. NJ Rev. 6.40% 5/1/13 4,675 5,071
---------
274,815
---------
NEW MEXICO (0.1%)
Hurley NM PCR VRDO (Kennecott Santa Fe Corp. Project) 3.85% 9/4/96 7,900 7,900
---------
NEW YORK (9.9%)
Metropolitan Transp. Auth. NY 5.40% 7/1/03 10,560 10,560
Metropolitan Transp. Auth. NY 5.625% 7/1/05 11,485 11,456
Metropolitan Transp. Auth. NY 5.75% 7/1/06 12,320 12,309
Metropolitan Transp. Auth. NY 6.10% 7/1/07 (1) 3,625 3,892
Metropolitan Transp. Auth. NY 6.10% 7/1/08 (1) 7,200 7,708
New York City NY GO 6.00% 8/15/99 13,070 13,475
New York City NY GO 6.10% 8/1/02 4,000 4,120
New York City NY GO 6.15% 8/15/00 14,670 15,221
New York City NY GO 7.00% 8/1/97 (Prere.) 820 855
New York City NY GO 7.00% 8/15/99 (3) 5,550 5,929
New York City NY GO 7.00% 8/15/99 (3)(ETM) 9,450 10,130
New York City NY GO 7.00% 8/1/00 4,830 4,969
New York City NY GO 7.00% 2/1/05 5,000 5,333
New York City NY GO 8.00% 11/1/97 (2)(Prere.) 2,245 2,379
New York City NY GO 8.00% 8/1/99 4,560 4,939
New York City NY GO 8.00% 8/1/99 (ETM) 615 673
New York City NY GO 8.00% 11/1/00 (2) 2,175 2,274
New York City NY GO 8.00% 4/1/06 (2) 5,955 7,141
New York City NY GO 8.125% 11/1/04 (3) 11,155 11,839
New York City NY GO VRDO 3.75% 9/4/96 (1) 4,300 4,300
New York City NY GO VRDO 3.80% 9/4/96 LOC 200 200
New York City NY IDA (USTA National Tennis Center Project) 6.375% 11/15/07 (4) 6,200 6,732
New York City NY IDA (USTA National Tennis Center Project) 6.40% 11/15/08 (4) 4,105 4,437
New York City NY IDA (USTA National Tennis Center Project) 6.50% 11/15/09 (4) 6,745 7,260
New York City NY IDA (USTA National Tennis Center Project) 6.50% 11/15/10 (4) 3,500 3,767
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. 5.30% 6/15/06 27,665 27,579
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. 6.00% 6/15/10 4,000 4,136
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. VRDO 3.80% 9/4/96 (3) 2,000 2,000
New York City NY TAN 4.50% 2/12/97 40,000 40,141
New York State Dormitory Auth. (City Univ.) 6.25% 7/1/03 4,250 4,456
New York State Dormitory Auth. (City Univ.) 6.35% 7/1/04 2,500 2,627
New York State Dormitory Auth. (City Univ.) 6.45% 7/1/05 1,500 1,583
New York State Dormitory Auth. (City Univ.) 7.00% 7/1/01 10,000 10,975
New York State Dormitory Auth. (New York Univ.) 6.375% 7/1/07 (3) 27,000 28,868
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INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New York State Dormitory Auth. (State Univ.) 5.80% 5/15/05 $ 5,400 $ 5,451
New York State Dormitory Auth. (State Univ.) 5.90% 5/15/06 2,000 2,020
New York State Dormitory Auth. (State Univ.) 6.00% 7/1/03 (2) 4,000 4,257
New York State Dormitory Auth. (State Univ.) 6.00% 7/1/04 (2) 4,000 4,262
New York State Dormitory Auth. (State Univ.) 6.10% 5/15/08 2,000 2,022
New York State Dormitory Auth. (State Univ.) 7.00% 5/15/99 (Prere.) 14,105 15,281
New York State Dormitory Auth. (State Univ.) 7.00% 5/15/01 4,180 4,439
New York State Dormitory Auth. (State Univ.) 7.10% 5/15/00 6,050 6,469
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.30% 2/15/04 3,875 3,687
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.30% 12/15/04 2,605 2,467
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.40% 6/15/05 5,130 4,850
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.50% 2/15/06 4,025 3,799
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.65% 6/15/07 3,000 2,826
New York State GO 6.00% 10/1/03 4,800 5,110
New York State GO 6.00% 10/1/04 9,195 9,794
New York State GO 7.80% 11/15/99 5,000 5,483
New York State Local Govt. Assistance Corp. 4.00% 7/1/97 7,540 7,544
New York State Local Govt. Assistance Corp. 5.125% 7/1/07 8,000 7,878
New York State Local Govt. Assistance Corp. 5.20% 7/1/07 (2) 4,500 4,453
New York State Local Govt. Assistance Corp. 5.50% 7/1/07 5,000 5,065
New York State Local Govt. Assistance Corp. 6.00% 7/1/06 7,000 7,454
New York State Medical Care Fac. Finance Agency Rev. 7.875% 8/15/00 (Prere.) 6,815 7,741
New York State Medical Care Fac. Finance Agency Rev. 8.875% 8/15/97 (Prere.) 20,000 21,313
New York State Thruway Auth. (Highway & Bridge Trust Fund) 5.30% 4/1/08 (1) 7,740 7,660
New York State Thruway Auth. (Highway & Bridge Trust Fund) 5.40% 4/1/07 (1) 9,215 9,274
New York State Thruway Auth. (Highway & Bridge Trust Fund) 6.25% 4/1/06 (3) 10,000 10,863
New York State Urban Dev. Corp. 6.40% 1/1/04 9,685 10,104
Onondaga County NY PCR (Anheuser Busch) 6.625% 8/1/06 10,000 10,811
Suffolk County NY Water Auth. 6.80% 6/1/12 (ETM) 10,660 11,723
Triborough Bridge & Tunnel NY Auth. Rev. 0.00% 1/1/03 19,185 13,612
Triborough Bridge & Tunnel NY Auth. Rev. 5.80% 1/1/06 6,000 6,299
Triborough Bridge & Tunnel NY Auth. Rev. 6.00% 1/1/12 12,000 12,552
Triborough Bridge & Tunnel NY Auth. Rev. 6.60% 1/1/10 59,325 65,548
---------
586,374
---------
NORTH CAROLINA (1.2%)
Charlotte NC Airport Refunding Rev. VRDO 3.35% 9/4/96 (1) 2,300 2,300
North Carolina Educ. Fac. Auth. VRDO (Duke Univ.) 3.45% 9/5/96 4,100 4,100
North Carolina Municipal Power Agency (Catawba Electric) 6.00% 1/1/04 7,000 7,234
North Carolina Municipal Power Agency (Catawba Electric) 6.00% 1/1/05 28,750 29,602
North Carolina Municipal Power Agency (Catawba Electric) 7.00% 1/1/00 (Prere.) 6,040 6,587
North Carolina Municipal Power Agency (Catawba Electric) 7.25% 1/1/07 10,410 12,015
Wake County NC Industrial Fac. & Pollution Control Finance Auth.
(Carolina Power & Light) VRDO 3.40% 9/4/96 LOC 9,000 9,000
---------
70,838
---------
OHIO (2.8%)
Cleveland OH School Dist. 8.125% 12/1/98 (ETM) 2,205 2,352
Cleveland OH School Dist. 9.00% 12/1/98 (Prere.) 4,000 4,472
Cleveland OH Water Works 6.00% 1/1/02 (1) 3,690 3,894
Cleveland OH Water Works 6.00% 1/1/03 (1) 2,105 2,228
Cleveland OH Water Works 6.00% 1/1/04 (1) 6,855 7,267
Cleveland OH Water Works 6.00% 1/1/05 (1) 4,545 4,816
Cleveland OH Water Works 6.00% 1/1/06 (1) 2,100 2,223
Cleveland OH Water Works 6.25% 1/1/02 (2)(Prere.) 4,245 4,606
Cleveland OH Water Works 6.25% 1/1/05 (2) 4,910 5,303
Columbus OH Sewer Rev. VRDO 3.40% 9/5/96 11,400 11,400
Cuyahoga County OH Hosp. Improvement Rev. VRDO (St. Luke's Hosp.) 3.50% 9/4/96 LOC 2,500 2,500
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric Co.) 3.85% 9/4/96 LOC 7,800 7,800
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric Co.) 4.00% 9/4/96 LOC 4,300 4,300
Ohio Building Auth. (State Correctional Fac.) 5.70% 10/1/03 3,305 3,460
Ohio Building Auth. (State Correctional Fac.) 5.70% 10/1/04 2,725 2,849
Ohio Building Auth. (State Correctional Fac.) 5.80% 10/1/06 4,360 4,556
Ohio Building Auth. (State Correctional Fac.) 5.90% 10/1/07 2,500 2,618
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FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/02 $ 3,790 $ 4,133
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/02 (1) 5,350 5,819
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/03 5,500 5,988
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/03 (1) 5,710 6,244
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/04 2,500 2,711
Ohio Building Auth. (State Correctional Fac.) 7.20% 8/1/00 10,000 10,903
Ohio Building Auth. (State Correctional Fac.) 7.25% 8/1/01 7,500 8,188
Ohio Building Auth. (State Correctional Fac.) 7.30% 8/1/02 10,000 10,930
Ohio Building Auth. (State Correctional Fac.) 7.35% 8/1/03 4,945 5,412
Ohio Building Auth. (State Data Center) 5.70% 10/1/04 2,895 3,026
Ohio Building Auth. (State Data Center) 5.75% 10/1/05 3,070 3,211
Ohio GO 3.70% 8/1/97 3,725 3,718
Ohio Higher Educ. Fac. 5.90% 12/1/05 8,175 8,559
Ohio Public Fac. Comm. 5.50% 12/1/06 5,465 5,561
Ohio State Univ. VRDO 3.40% 9/5/96 400 400
Ohio Water Dev. Auth. 6.00% 12/1/08 (2) 6,000 6,249
---------
167,696
---------
OKLAHOMA (2.0%)
Grand River Dam Auth. OK 5.50% 6/1/13 (2) 8,100 8,003
Grand River Dam Auth. OK 5.70% 6/1/05 20,000 20,837
Grand River Dam Auth. OK 5.75% 6/1/06 19,350 20,154
Grand River Dam Auth. OK 5.875% 6/1/07 14,500 15,157
Grand River Dam Auth. OK 6.25% 6/1/11 (2) 7,600 8,234
Grand River Dam Auth. OK 8.00% 6/1/02 21,000 24,284
Oklahoma Industrial Auth. (St. Anthony's Hosp.) 7.50% 10/1/03 (1) 5,470 5,569
Tulsa County OK Industrial Auth. PUT (St. Francis Hosp.) 5.15% 12/15/03 8,715 8,712
Tulsa OK Metropolitan Utility Auth. 7.00% 2/1/03 8,465 9,365
---------
120,315
---------
OREGON (0.1%)
Oregon Veterans Welfare Program VRDO 3.45% 9/4/96 6,445 6,445
---------
PENNSYLVANIA (8.0%)
Allegheny County PA GO 7.45% 2/15/98 2,000 2,088
Allegheny County PA GO 7.60% 11/1/98 (Prere.) 2,000 2,134
Allegheny County PA Higher Educ. Building Auth. VRDO
(Univ. of Pittsburgh) 3.30% 9/5/96 LOC 8,200 8,200
Allegheny County PA Hosp. Dev. Auth. VRDO (South Hills Health System) 3.40% 9/4/96 LOC 8,400 8,400
Berks County PA GO 7.25% 11/15/00 (3)(Prere.) 10,000 11,184
Delaware County PA Hosp. Rev. VRDO (Crozer-Chester Medical Center) 3.57% 9/4/96 LOC 2,900 2,900
Delaware County PA IDA PCR VRDO (British Petroleum Exploration & Oil) 3.75% 9/4/96 4,700 4,700
Erie County PA Prison Auth. Commonwealth Lease Rev. 6.75% 11/1/01 (1)(Prere.) 5,295 5,798
Northumberland County PA Commonwealth Lease Rev. 6.70% 10/15/01 (1)(Prere.) 7,005 7,669
Northumberland County PA Commonwealth Lease Rev. 7.75% 10/15/01 (1)(Prere.) 6,000 6,824
Pennsylvania Convention Center Auth. 6.25% 9/1/04 15,200 15,721
Pennsylvania Convention Center Auth. 6.70% 9/1/14 (1) 4,500 4,895
Pennsylvania COP 4.80% 7/1/01 (2) 20,000 20,042
Pennsylvania COP 4.90% 7/1/02 (2) 13,665 13,698
Pennsylvania COP 5.00% 7/1/03 (2) 6,555 6,573
Pennsylvania GO 5.00% 4/15/05 24,290 24,121
Pennsylvania GO 5.00% 4/15/07 7,950 7,739
Pennsylvania GO 5.00% 4/15/08 9,250 8,894
Pennsylvania GO 6.20% 11/15/04 12,480 13,297
Pennsylvania GO 6.50% 11/1/06 4,260 4,549
Pennsylvania GO 7.10% 11/1/08 6,700 7,312
Pennsylvania GO 10.00% 4/15/02 (2) 10,160 12,697
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/03 (1) 7,380 7,379
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/04 (1) 9,295 9,233
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/05 (1) 7,690 7,561
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/06 (1) 3,250 3,166
Pennsylvania Higher Educ. Fac. Auth.
VRDO (Univ. of PA Health Services) 3.45% 9/4/96 200 200
Pennsylvania IDA VRDO 3.55% 9/5/96 6,750 6,750
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INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pennsylvania IDA 6.50% 7/1/98 $ 9,850 $ 10,224
Pennsylvania IDA 6.60% 1/1/99 5,065 5,307
Pennsylvania IDA 6.60% 7/1/99 10,355 10,930
Pennsylvania IDA 6.70% 1/1/00 7,420 7,897
Pennsylvania IDA 6.70% 7/1/00 9,080 9,728
Pennsylvania IDA 6.80% 1/1/01 5,000 5,403
Pennsylvania IDA 6.80% 7/1/01 5,480 5,960
Pennsylvania Intergovernmental Cooperation Auth. 5.45% 6/15/08 (3) 14,595 14,476
Pennsylvania Intergovernmental Cooperation Auth. 5.75% 6/15/99 (3) 17,000 17,605
Pennsylvania Intergovernmental Cooperation Auth. 6.00% 6/15/02 (3) 28,500 30,121
Philadelphia PA GO 4.60% 5/15/99 (3) 4,345 4,360
Philadelphia PA GO 6.00% 11/15/00 (3) 11,995 12,602
Philadelphia PA Municipal Lease Rev. 6.00% 7/15/03 5,065 5,104
Philadelphia PA School Dist. GO 0.00% 7/1/00 (2) 15,500 12,975
Philadelphia PA School Dist. GO 5.375% 7/1/05 (1) 7,500 7,618
Philadelphia PA School Dist. GO 6.25% 9/1/05 (2) 5,870 6,361
Philadelphia PA School Dist. GO 6.25% 9/1/06 (2) 2,000 2,167
Philadelphia PA School Dist. GO 6.25% 9/1/08 (2) 4,000 4,320
Philadelphia PA School Dist. GO 6.25% 9/1/09 (2) 2,080 2,236
Philadelphia PA School Dist. GO 6.70% 7/1/99 (2) 9,000 9,526
Philadelphia PA Water & Wastewater Rev. 4.75% 6/15/98 11,540 11,571
Philadelphia PA Water & Wastewater Rev. 6.25% 8/1/07 (1) 5,000 5,424
Philadelphia PA Water & Wastewater Rev. 6.25% 8/1/08 (1) 5,000 5,411
Philadelphia PA Water & Wastewater Rev. 6.25% 8/1/09 (1) 3,400 3,663
Philadelphia PA Water & Wastewater Rev. 6.25% 8/1/10 (1) 2,730 2,933
Philadelphia PA Water & Wastewater Rev. 6.875% 10/1/06 (1) 15,455 16,571
Sayre Health Care Fac. Auth. Hosp. Rev. VRDO
(VHA of PA, Pooled Capital Asset Financing Program) 3.35% 9/4/96 (2) 3,700 3,700
Schuylkill PA Redev. Auth. 6.95% 6/1/01 (3)(Prere.) 3,995 4,376
-----------
472,293
-----------
PUERTO RICO (0.5%)
Puerto Rico Electric Power Auth. Rev. 6.50% 7/1/05 (1) 20,525 22,840
Puerto Rico Telephone Auth. Rev. 5.40% 1/1/08 9,550 9,481
-----------
32,321
-----------
RHODE ISLAND (0.7%)
Rhode Island Depositors Economic Protection Corp. 6.55% 8/1/10 (1) 26,850 29,621
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/05 (1) 4,000 4,252
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/06 (1) 5,000 5,307
-----------
39,180
-----------
SOUTH CAROLINA (0.2%)
Piedmont SC Municipal Power Agency Rev. 5.40% 1/1/07 (1) 3,200 3,227
South Carolina Public Service Auth. CP 3.60% 9/9/96 11,000 11,000
-----------
14,227
-----------
SOUTH DAKOTA (0.1%)
South Dakota Health & Educ. Auth. Rev. (McKennan Hosp.) 7.50% 7/1/04 (1) 5,845 6,352
-----------
TENNESSEE (0.1%)
Shelby County TN (Methodist Health Systems) 6.25% 8/1/06 4,915 5,291
-----------
TEXAS (10.8%)
Anderson County TX Rev. (Coffield Prison Farm Project) 5.50% 3/15/04 (2) 5,715 5,882
Anderson County TX Rev. (Coffield Prison Farm Project) 5.50% 3/15/05 (2) 5,590 5,722
Anderson County TX Rev. (Coffield Prison Farm Project) 5.50% 3/15/06 (2) 6,985 7,108
Austin TX Combined Utilities System Rev. 5.125% 11/15/02 9,500 9,612
Austin TX Combined Utilities System Rev. 5.20% 11/15/03 3,360 3,400
Austin TX Combined Utilities System Rev. 5.30% 5/15/04 5,770 5,842
Austin TX Combined Utilities System Rev. 5.80% 11/15/06 5,255 5,460
Austin TX Combined Utilities System Rev. 6.00% 11/15/06 (1) 23,265 24,837
Austin TX Combined Utilities System Rev. 7.25% 11/15/03 6,000 6,465
Bell County TX Health Fac. Dev. Corp. (Scott & White Hosp.) 7.625% 9/1/03 8,340 8,860
Corpus Christi TX GO 7.50% 11/1/97 (2)(Prere.) 1,155 1,200
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- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corpus Christi TX GO 7.50% 11/1/98 (2) $ 1,865 $ 1,933
Dallas-Fort Worth TX Regional Airport 8.75% 11/1/03 4,890 5,135
Dallas TX Independent School Dist. 5.30% 8/15/08 7,510 7,417
Dallas TX Independent School Dist. 5.40% 8/15/09 20,440 20,181
Dallas TX Independent School Dist. 5.50% 8/15/10 24,210 23,908
Dallas TX Independent School Dist. 5.60% 8/15/03 (Prere.) 2,220 2,311
Dallas TX Independent School Dist. 5.60% 8/15/04 5,780 5,992
Dallas TX Independent School Dist. 5.70% 8/15/03 (Prere.) 1,230 1,287
Dallas TX Independent School Dist. 5.70% 8/15/06 3,520 3,626
Gulf Coast TX Waste Disposal Auth. PCR VRDO (Exxon Project) 3.75% 9/4/96 3,500 3,500
Harris County TX Health Fac. Dev. Corp. VRDO (Methodist Hosp.) 3.75% 9/4/96 43,100 43,100
Harris County TX Toll Road 6.30% 8/15/02 (3)(Prere.) 4,470 4,891
Harris County TX Toll Road 6.30% 8/15/04 (3) 840 910
Harris County TX Toll Road VRDO 3.40% 9/4/96 32,600 32,600
Houston TX GO 5.00% 3/1/04 6,265 6,275
Houston TX GO 5.10% 3/1/06 12,200 12,123
Houston TX GO 5.80% 3/1/02 5,080 5,330
Houston TX GO 7.00% 3/1/08 48,405 55,111
Houston TX GO 7.30% 3/1/98 (3)(Prere.) 3,000 3,135
Houston TX Hotel Occupancy Tax Rev. 5.25% 7/1/07 (4) 6,585 6,483
Houston TX Housing Finance Corp. TOB VRDO 3.60% 9/5/96 (4) 3,700 3,700
Houston TX Water & Sewer System Rev. 7.00% 12/1/01 (2) 3,220 3,558
Houston TX Water & Sewer System Rev. 7.00% 12/1/02 (2) 4,125 4,605
Houston TX Water & Sewer System Rev. 7.00% 12/1/03 (2) 3,100 3,489
Houston TX Water & Sewer System Rev. 7.60% 12/1/97 (5)(Prere.) 4,010 4,218
North Central TX Health Fac. Dev. Corp.
(Presbyterian Medical Center) VRDO 3.70% 9/4/96 (1) 7,800 7,800
San Antonio TX Electric & Gas 5.50% 2/1/04 4,545 4,676
San Antonio TX Electric & Gas 5.80% 2/1/06 8,000 8,366
Tarrant County TX Water Control & Improvement Dist. 4.50% 3/1/11 (3) 5,000 4,355
Texas GO 6.00% 10/1/06 6,000 6,402
Texas GO 6.00% 10/1/08 5,000 5,328
Texas GO 8.00% 10/1/07 50,000 61,824
Texas Municipal Power Agency 6.10% 9/1/07 (1) 12,500 13,412
Texas Municipal Power Agency 6.10% 9/1/08 (1) 27,840 29,672
Texas Municipal Power Agency 6.10% 9/1/09 (1) 5,000 5,300
Texas Public Fin. Auth. Building Rev. 5.75% 10/1/09 5,000 5,084
Texas Public Fin. Auth. Building Rev. 6.60% 2/1/00 (1) 5,000 5,315
Texas Public Fin. Auth. Building Rev. 6.75% 2/1/02 (1) 5,000 5,386
Texas Public Fin. Auth. Building Rev. 6.80% 2/1/03 (1) 5,000 5,374
Texas TRAN 4.75% 8/29/97 80,000 80,638
Texas Water Resource Finance Auth. 7.50% 8/15/01 3,910 4,194
Univ. of Texas Permanent Univ. Fund 6.00% 7/1/05 3,740 3,990
Univ. of Texas Permanent Univ. Fund 6.00% 7/1/06 3,000 3,197
Univ. of Texas Permanent Univ. Fund 6.40% 7/1/02 5,000 5,446
Univ. of Texas Rev. 7.00% 8/15/01 (Prere.) 6,700 7,478
Univ. of Texas Rev. 7.00% 8/15/07 14,050 15,542
---------
637,985
---------
UTAH (0.2%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.80% 9/4/96 (2) 10,300 10,300
Salt Lake County UT PCR VRDO (British Petroleum) 3.75% 9/4/96 3,500 3,500
---------
13,800
---------
VIRGINIA (0.3%)
Chesapeake Bay Bridge & Tunnel VA 5.40% 7/1/05 (3) 6,090 6,218
Fairfax County VA GO 7.25% 6/1/00 5,805 6,350
Fairfax County VA IDA Hosp. Rev. VRDO
(Inova Health System Hosp. Project) 3.65% 9/4/96 LOC 3,000 3,000
---------
15,568
---------
WASHINGTON (3.3%)
King County WA GO 6.00% 12/1/04 5,000 5,302
King County WA GO 6.10% 12/1/05 5,000 5,301
Seattle WA Water System 4.90% 12/1/02 5,890 5,908
</TABLE>
31
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Seattle WA Water System 5.00% 12/1/03 $ 2,000 $ 2,007
Seattle WA Water System 5.10% 12/1/04 4,000 4,016
Seattle WA Water System 5.20% 12/1/05 2,320 2,330
Tacoma WA Electric System Rev. 5.70% 1/1/03 (2) 6,845 7,140
Washington GO 5.60% 9/1/04 5,000 5,199
Washington GO 5.625% 5/1/08 7,535 7,611
Washington GO 5.75% 9/1/07 19,950 20,708
Washington GO 5.75% 9/1/08 4,000 4,122
Washington GO 6.10% 6/1/06 9,495 10,164
Washington GO 6.125% 6/1/07 10,110 10,855
Washington GO 6.20% 6/1/08 10,765 11,584
Washington GO 6.25% 6/1/09 11,465 12,332
Washington GO 6.25% 9/1/09 21,550 22,449
Washington GO 6.25% 6/1/10 7,450 7,991
Washington GO 6.25% 2/1/11 6,680 7,146
Washington GO 7.00% 10/1/98 3,900 4,104
Washington GO 7.10% 9/1/99 7,500 7,881
Washington GO 7.20% 9/1/98 (Prere.) 2,365 2,496
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/02 (2) 5,105 5,392
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/03 (2) 5,270 5,574
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/04 (2) 5,515 5,833
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/05 (2) 4,830 5,099
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/06 (2) 6,055 6,382
----------
194,926
----------
WISCONSIN (1.4%)
Wisconsin GO 4.25% 11/1/99 4,000 3,980
Wisconsin GO 5.00% 5/1/00 7,335 7,447
Wisconsin GO 6.20% 5/1/06 20,990 22,667
Wisconsin GO 6.25% 5/1/07 22,970 24,885
Wisconsin GO 6.25% 5/1/08 24,365 26,336
----------
85,315
----------
WYOMING (0.1%)
Platte County WY PCR 4.50% 1/1/01 2,250 2,209
Platte County WY PCR 4.60% 1/1/02 2,430 2,371
----------
4,580
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $5,667,688) 5,874,497
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.9%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 90,296
Liabilities (38,021)
----------
52,275
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 454,626,460 outstanding $.001 par value shares
(authorized 550,000,000 shares) $5,926,772
===================================================================================================================================
NET ASSET VALUE PER SHARE $13.04
===================================================================================================================================
</TABLE>
*See Note A in Notes To Financial Statements.
For key to abbreviations and other references, see page 50.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 5,746,796 $ 12.64
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (17,978) (.04)
Unrealized Appreciation (Depreciation)--Note F:
Investment Securities 206,809 .46
Futures Contracts (8,855) (.02)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $5,926,772 $13.04
===================================================================================================================================
</TABLE>
32
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (101.5%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALABAMA (1.9%)
Birmingham AL Medical Center (Special Care Medical Center) 7.25% 7/1/15 (1) $ 6,715 $ 6,867
Columbia AL Industrial Dev. Board PCR VRDO (Alabama Power Co.) 3.85% 9/4/96 1,400 1,400
Huntsville AL Health Care Auth. VRDO 3.35% 9/5/96 (1) 4,500 4,500
McIntosh AL IDA PCR VRDO (Ciba-Geigy) 3.40% 9/4/96 LOC 2,600 2,600
Medical Clinic Board of Bessemer AL (Bessemer-Carraway Hosp.) 7.25% 4/1/15 (1) 5,000 5,428
Medical Clinic Board of Montgomery AL (Jackson Hosp.) 6.00% 3/1/26 (2) 12,000 11,951
Mobile AL Water & Sewer Comm. 5.50% 1/1/10 (3) 4,000 3,951
---------
36,697
---------
ALASKA (1.5%)
Anchorage AK Electric Rev. 8.00% 12/1/09 (1) 2,565 3,171
Anchorage AK Electric Rev. 8.00% 12/1/10 (1) 2,960 3,671
Anchorage AK Water GO 7.20% 6/1/17 (2) 11,000 11,792
North Slope Borough AK GO 9.85% 6/30/97 (2)(ETM) 3,000 3,141
Valdez AK Marine Terminal Rev. VRDO (Exxon Pipeline Co. Project) 3.75% 9/4/96 6,500 6,500
---------
28,275
---------
ARIZONA (0.5%)
Maricopa County AZ (Samaritan Health Service) 7.00% 12/1/16 (1) 8,650 10,036
---------
ARKANSAS (0.5%)
North Little Rock AR Electric System 6.50% 7/1/10 (1) 3,500 3,843
North Little Rock AR Electric System 6.50% 7/1/15 (1) 4,500 4,923
---------
8,766
---------
CALIFORNIA (15.0%)
California Dept. of Water Resources (Central Valley Project) 5.25% 12/1/28 (3) 23,000 20,975
California Health Fac. Finance Auth. (Adventist Health System) 6.75% 3/1/11 (1) 12,000 13,075
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.40% 9/4/96 LOC 2,150 2,150
California Housing Finance Agency 8.625% 8/1/15 (1) 2,550 2,670
East Bay CA Municipal Utility Dist. Water System 5.00% 6/1/26 (3) 26,775 23,548
Fresno CA COP (City Hall Refinancing Project) 6.375% 8/1/10 (2) 10,500 11,008
Irvine Coast CA Assessment Dist. VRDO (Orange County) 3.65% 9/4/96 LOC 8,282 8,282
Los Angeles CA Unified School Dist. TRAN 4.50% 9/30/97 7,000 7,035
Los Angeles County CA TRAN 4.50% 6/30/97 LOC 20,000 20,104
Modesto CA Irrigation Dist. Finance Auth. (Woodland Project) 6.50% 10/1/22 (2) 20,225 22,290
MSR California Public Power Agency (San Juan Project) 6.125% 7/1/13 (2) 7,000 7,373
MSR California Public Power Agency (San Juan Project) 6.75% 7/1/20 (1) 13,000 14,692
Northern California Power Agency (Combustion Turbine Project) 6.00% 8/15/10 (1) 3,500 3,545
Northern California Power Agency (Hydroelectric Project) 5.50% 7/1/23 (1) 23,200 21,631
Oakland CA Redev. Agency (Central Dist. Project) 5.50% 2/1/14 (2) 6,300 6,162
Oakland CA Redev. Agency (Central Dist. Project) 6.00% 2/1/08 (2) 5,585 5,926
Pittsburg CA Redev. Agency 5.50% 8/1/07 (3) 3,000 3,044
Sacramento CA Municipal Utility Dist. 5.75% 8/15/13 (1) 12,360 12,228
Sacramento CA Municipal Utility Dist. 6.50% 9/1/13 (1) 8,895 9,735
San Diego CA Area Local Govt. COP Pooled TRAN 4.75% 10/1/97 (4) 7,000 7,049
San Diego County CA TRAN 4.375% 9/30/97 LOC 11,500 11,550
San Jose CA Tax Redev. 6.00% 8/1/10 (1) 8,105 8,552
Santa Clara CA Redev. Agency (Bayshore North Project) 7.00% 7/1/10 (2) 3,000 3,444
Santa Clara CA Valley Water Dist. 6.00% 2/1/24 (3) 5,000 4,980
Santa Rosa CA Waste Water Rev. 6.00% 9/1/15 (3) 5,000 5,155
South County CA Waste Water Auth. (Gilroy) 5.50% 8/1/22 (3) 8,000 7,467
South County CA Waste Water Auth. (Morgan Hill) 5.50% 8/1/22 (3) 7,000 6,534
Southern California Public Power Auth. (Palo Verde) 5.00% 7/1/15 (2) 2,605 2,332
Southern California Rapid Transit Dist. 5.80% 9/1/06 (2) 4,000 4,233
Southern California Rapid Transit Dist. 5.90% 9/1/07 (2) 3,155 3,339
Transmission Agency of Northern California 5.25% 5/1/08 (1) 4,000 3,962
Ukiah CA Electric Rev. 6.25% 6/1/18 (1) 6,330 6,736
---------
290,806
---------
</TABLE>
33
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COLORADO (1.5%)
Colorado Health Fac. Auth. (Sisters of Charity Health System Inc.) 6.00% 5/15/13 (1) $ 4,525 $ 4,584
Denver CO Health Fac. (St. Anthony's Hosp.) 7.70% 5/1/07 (1) 2,800 3,052
Northern Colorado Water Conservation Dist. Rev. 6.50% 12/1/12 (2)+ 20,575 22,180
---------
29,816
---------
CONNECTICUT (0.3%)
Connecticut Special Obligation Transp. Infrastructure Rev. 5.625% 10/1/14 (3) 3,000 2,953
South Central Connecticut Regional Water Auth. 5.75% 8/1/12 (3) 3,100 3,108
---------
6,061
---------
DELAWARE (1.1%)
Delaware Economic Dev. Auth. (Delmarva Power & Light) 7.30% 9/1/15 (3) 4,000 4,389
Delaware Health Fac. Auth. (Delaware Medical Center) 7.00% 10/1/15 (1) 6,000 6,463
Dover DE Electric Rev. 5.75% 7/1/15 (3) 5,225 5,136
Dover DE Electric Rev. 6.10% 7/1/11 (3) 2,000 2,066
Sussex County DE Waste Water Rev. 6.60% 6/15/25 (1) 2,500 2,778
---------
20,832
---------
FLORIDA (7.6%)
Coral Springs FL Improvement Dist. Water & Sewer GO 6.00% 6/1/10 (1) 3,000 3,170
Dade County FL Water & Sewer System Rev. VRDO 3.35% 9/4/96 (3) 3,885 3,885
Davie FL Water & Sewer Rev. 6.375% 10/1/12 (2) 2,620 2,860
Florida Municipal Power Agency (Stanton Project) 5.00% 10/1/19 (1) 8,100 7,131
Jacksonville FL Guaranteed Entitlement Rev. 5.50% 10/1/12 (2) 4,900 4,787
Lee County FL Gas Tax Rev. 5.50% 10/1/09 (1) 2,000 1,978
Orlando FL Utility Comm. Water & Electric Rev. BAN VRDO 3.35% 9/5/96 12,700 12,700
Orange and Orlando County FL Expressway Auth. 8.25% 7/1/13 (3) 9,695 12,484
Orange and Orlando County FL Expressway Auth. 8.25% 7/1/15 (3) 8,360 10,813
Orange and Orlando County FL Expressway Auth. 8.25% 7/1/16 (3) 12,295 16,007
Orange County FL Health Auth. Hosp. (Adventist for Sunbelt Group) 6.25% 11/15/10 (2) 4,000 4,231
Palm Beach FL Criminal Justice 7.20% 6/1/14 (3) 16,300 19,237
Palm Beach FL Criminal Justice 7.20% 6/1/15 (3) 4,000 4,695
St. Lucie County FL Utilities System Rev. 6.00% 10/1/20 (3)(ETM) 2,350 2,408
Seacoast FL Utility Auth. Water & Sewer Rev. 5.00% 3/1/19 (3) 2,000 1,764
Seacoast FL Utility Auth. Water & Sewer Rev. 5.50% 3/1/13 (3) 4,000 3,903
Seacoast FL Utility Auth. Water & Sewer Rev. 5.50% 3/1/19 (3) 2,000 1,932
Tampa FL Utilities Rev. 6.75% 10/1/10 (2) 9,330 10,551
Tampa FL Utilities Rev. 6.75% 10/1/11 (2) 9,965 11,274
Tampa FL Utilities Rev. 6.75% 10/1/12 (2) 10,635 12,029
---------
147,839
---------
GEORGIA (2.1%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.75% 9/5/96 14,630 14,630
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power) 3.35% 9/4/96 16,800 16,800
Henry County GA School Dist. GO 6.45% 8/1/11 (1) 4,000 4,400
Private Colleges & Universities Auth. of GA (Mercer Univ. Project) 6.50% 11/1/15 (1) 5,000 5,475
---------
41,305
---------
HAWAII (1.3%)
Hawaii Airport System Rev. 6.35% 7/1/07 (1) 8,000 8,757
Hawaii County GO 5.50% 5/1/08 (3) 2,000 2,033
Hawaii County GO 5.55% 5/1/09 (3) 1,000 1,013
Honolulu HI City & County GO 8.00% 10/1/10 11,000 13,683
---------
25,486
---------
ILLINOIS (4.9%)
Chicago IL Board of Educ. GO 6.25% 1/1/11 (1) 7,000 7,444
Chicago IL Public Building Comm. Board of Educ. 7.00% 1/1/20 (1)(ETM) 21,500 24,578
Chicago IL Waste Water Transmission Rev. 6.50% 1/1/08 (3) 1,315 1,440
Cook County IL GO 7.25% 11/1/07 (1) 6,000 6,990
Illinois Dev. Finance Auth. PCR (Illinois Power Co. Project) 7.40% 12/1/24 (1) 14,000 16,115
Illinois Regional Transit Auth. GO (Cook, DuPage and Kane Counties) 7.20% 11/1/20 (2) 24,000 28,092
Illinois Toll Highway Auth. Rev. VRDO 3.35% 9/4/96 (1) LOC 6,700 6,700
Will County IL Community Unit School Dist. (Romeoville) 7.10% 12/1/09 (2) 1,750 2,017
Will County IL Community Unit School Dist. (Romeoville) 7.10% 12/1/10 (2) 1,615 1,862
---------
95,238
---------
</TABLE>
34
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDIANA (1.0%)
Indiana Municipal Power Agency 6.125% 1/1/13 (1) $13,250 $ 13,944
Merrillville IN School Building Corp. 6.65% 7/1/06 (1) 5,500 6,085
---------
20,029
---------
KANSAS (0.1%)
Kansas Highway Refunding Rev. 9.00% 7/1/97 (1)(ETM) 1,200 1,250
---------
KENTUCKY (1.5%)
Kentucky Dev. Finance Auth. Hosp. Fac. Rev.
(St. Elizabeth's Medical Center) 6.00% 11/1/10 (3) 23,885 24,317
Kentucky Housing Corp. 8.875% 7/1/19 (5) 150 153
Kentucky Turnpike Economic Dev. 5.50% 7/1/09 (2) 3,630 3,660
---------
28,130
---------
LOUISIANA (2.6%)
Jefferson Parish LA Sales Tax 6.75% 12/1/06 (3) 8,500 9,342
New Orleans LA Capital Appreciation 0.00% 9/1/13 (2) 9,000 3,272
New Orleans LA GO 0.00% 9/1/10 (2) 8,500 3,796
New Orleans LA GO 0.00% 9/1/11 (2) 10,475 4,385
New Orleans LA GO 6.00% 9/1/21 (2) 22,250 22,345
Ouachita Parish LA Hosp. Service (Glenwood Medical Center) 5.70% 5/15/16 (4) 4,900 4,770
Ouachita Parish LA Hosp. Service (Glenwood Medical Center) 5.75% 5/15/21 (4) 3,200 3,105
---------
51,015
---------
MAINE (0.8%)
Maine Health & Higher Educ. Fac. Auth.
(Eastern Maine Medical Center) 6.375% 10/1/21 (3) 8,000 8,301
Maine Turnpike Rev. 6.00% 7/1/18 (1) 7,000 7,077
---------
15,378
---------
MARYLAND (0.7%)
Maryland Health & Educ. Fac. Auth.
(Univ. of Maryland Medical System) 7.00% 7/1/22 (3) 12,025 13,908
---------
MASSACHUSETTS (7.7%)
Boston MA GO 6.50% 7/1/12 (2) 4,750 5,097
Boston MA Water & Sewer Comm. 7.25% 11/1/06 (5) 2,500 2,641
Lawrence MA GO 4.75% 2/15/14 (2) 1,500 1,321
Massachusetts Consolidated Loan GO 7.00% 7/1/09 (3) 32,250 37,045
Massachusetts Consolidated Loan GO TOB VRDO 3.55% 9/4/96 700 700
Massachusetts Health & Educ. Fac. Auth. (Boston College) 6.75% 7/1/11 (3) 6,595 7,216
Massachusetts Health & Educ. Fac. Auth. (Falmouth Hosp.) 5.50% 7/1/08 (1) 1,425 1,431
Massachusetts Health & Educ. Fac. Auth. (Lahey Clinic) 5.25% 7/1/10 (1) 14,120 13,555
Massachusetts Health & Educ. Fac. Auth. (Lahey Clinic) 7.85% 7/1/03 (1) 3,360 3,911
Massachusetts Health & Educ. Fac. Auth. (MA General Hosp.) 6.25% 7/1/12 (2) 19,650 20,978
Massachusetts Housing Finance Agency Rev. 5.55% 10/1/05 (2) 5,230 5,298
Massachusetts Housing Finance Agency Rev. 5.95% 10/1/08 (2) 27,485 28,057
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 11,000 11,174
Massachusetts Water Auth. 4.75% 12/1/21 (1) 10,160 8,588
Southeastern Massachusetts Univ. Building Auth. Rev. 5.75% 5/1/16 (2) 2,000 1,972
---------
148,984
---------
MICHIGAN (3.4%)
Detroit MI Sewer System Rev. 5.45% 7/1/07 (3) 6,850 6,897
Michigan Strategic Fund (Detroit Edison) 7.00% 7/15/08 (1) 18,375 21,100
Monroe County MI Economic Dev. Corp. (Detroit Edison) 6.95% 9/1/22 (3) 25,000 28,985
St. Clair MI Economic Dev. Corp. PCR (Detroit Edison) 6.40% 8/1/24 (2) 8,000 8,454
---------
65,436
---------
MINNESOTA (0.5%)
Southern Minnesota Municipal Power Agency Supply System Rev. 5.50% 1/1/15 (2) 6,120 5,867
Southern Minnesota Municipal Power Agency Supply System Rev. 5.50% 1/1/15 (2)(Prere.) 3,880 3,762
---------
9,629
---------
</TABLE>
35
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MISSISSIPPI (0.7%)
Jackson County MS Port Fac. Rev. VRDO (Chevron USA Project) 3.75% 9/4/96 $12,510 $ 12,510
Jackson MS Water & Sewer System 4.50% 9/1/10 (1) 1,500 1,317
---------
13,827
---------
MISSOURI (0.2%)
Missouri Health & Educ. Fac. Auth. (Lester Cox Medical Center) 5.25% 6/1/15 (1) 5,000 4,715
---------
MONTANA (0.1%)
Forsyth MT PCR (Montana Power Co.) 6.125% 5/1/23 (2) 1,500 1,510
---------
NEVADA (0.6%)
Clark County NV Airport System Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 (1) 3,720 3,720
Clark County NV Airport System Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 LOC 2,700 2,700
Clark County NV GO 6.50% 6/1/17 (2) 5,000 5,463
---------
11,883
---------
NEW HAMPSHIRE (0.4%)
New Hampshire Higher Educ. (Hitchcock Clinic) 6.00% 7/1/15 (1) 7,560 7,442
---------
NEW JERSEY (5.1%)
Atlantic County NJ Public Fac. COP 7.40% 3/1/12 (3) 4,335 5,151
Camden County NJ Municipal Utility Auth. 5.30% 7/15/13 (3) 5,000 4,771
Camden County NJ Municipal Utility Auth. 5.30% 7/15/14 (3) 5,000 4,736
Hoboken-Union City-Weehawken NJ Sewage Auth. 6.25% 8/1/14 (1) 10,185 10,856
Hoboken-Union City-Weehawken NJ Sewage Auth. 6.25% 8/1/15 (1) 10,820 11,529
New Jersey Health Care Fac. Finance Auth.
(St. Clares-Riverside Medical Center) 5.75% 7/1/14 (1) 3,000 2,899
New Jersey Sports & Exposition Auth. 6.50% 3/1/13 (1) 18,795 20,687
New Jersey Turnpike Auth. 6.50% 1/1/13 (1) 30,000 32,998
New Jersey Turnpike Auth. 6.50% 1/1/16 (1) 5,000 5,446
---------
99,073
---------
NEW MEXICO (0.7%)
Albuquerque NM Hosp. System (Presbyterian Health) 6.375% 8/1/07 (1) 4,000 4,304
Farmington NM Utility Systems Rev. 5.75% 5/15/13 (3) 3,000 2,990
Santa Fe NM Rev. 6.30% 6/1/24 (2) 5,000 5,457
---------
12,751
---------
NEW YORK (3.1%)
New York City NY GO VRDO 3.75% 9/4/96 (1) 1,800 1,800
New York City NY Municipal Water & Sewer System Rev. 7.00% 6/15/01 (2)(Prere.) 1,905 2,107
New York City NY Municipal Water & Sewer System Rev. 7.00% 6/15/09 (2) 1,845 2,015
New York City NY TAN 4.50% 2/12/97 19,000 19,067
New York State Local Govt. Assistance Corp. VRDO 3.35% 9/4/96 LOC 11,900 11,900
New York State Medical Care Fac. Finance Agency
(Mental Health Improvement) 6.00% 8/15/15 (1) 5,000 5,000
Suffolk County NY Water Auth. 5.75% 6/1/13 (2) 7,345 7,358
Triborough Bridge & Tunnel Auth. of NY Rev. 5.00% 1/1/17 (1) 6,000 5,339
Triborough Bridge & Tunnel Auth. of NY Rev. 6.00% 1/1/14 4,500 4,520
Triborough Bridge & Tunnel Auth. of NY Rev. 6.00% 1/1/15 (2) 1,275 1,286
---------
60,392
---------
NORTH CAROLINA (0.2%)
North Carolina Municipal Power Agency (Catawba Electric) 6.00% 1/1/10 (1) 4,000 4,195
---------
NORTH DAKOTA (1.1%)
Bismarck ND Medical Center 7.50% 5/1/13 (5) 10,000 10,831
Mercer County ND PCR (Basin Electric Power) 6.05% 1/1/19 (2) 10,000 10,014
---------
20,845
---------
</TABLE>
36
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OHIO (3.2%)
Cleveland OH Airport System Rev. 0.00% 1/1/06 (1) $ 3,475 $ 2,105
Cleveland OH GO 5.30% 9/1/07 (2) 3,500 3,497
Cleveland OH Public Power System Rev. 7.00% 11/15/16 (1) 5,000 5,607
Cleveland OH School Dist. Board of Educ. GO 5.875% 12/1/11 (3) 4,720 4,756
Cleveland OH Water Works Rev. 6.25% 1/1/15 (2) 2,500 2,610
Columbus OH Electric System Rev. VRDO 3.40% 10/1/96 LOC 900 900
Cuyahoga County OH Hosp. Refunding and Improvement (Univ. Hosp.) 5.625% 1/15/21 (1) 11,480 11,045
Franklin County OH Convention Center Rev. 0.00% 12/1/06 (1) 4,355 2,555
Hamilton County OH Hosp. Fac. Rev. VRDO (Bethesda Hosp.) 3.45% 9/5/96 LOC 800 800
Northeast Ohio Regional Sewer Dist. Waste Water Improvement 6.50% 11/15/16 (2) 5,750 6,260
Ohio Air Quality Dev. Auth. PCR (Ohio Edison Project) 7.10% 6/1/18 (3) 6,500 7,058
Ohio Air Quality Dev. Auth. PCR (Ohio Edison Project) 7.45% 3/1/16 (3) 9,500 10,402
Ohio GO 7.625% 8/1/09 4,345 5,268
---------
62,863
---------
OKLAHOMA (0.3%)
Grand River Dam Auth. OK 5.75% 6/1/06 (4) 5,800 6,160
---------
OREGON (0.7%)
Oregon Health, Housing, Educ. & Cultural Fac.
(Lewis & Clark College) 6.00% 10/1/13 (1) 2,250 2,313
Oregon Health Sciences Univ. Rev. 5.25% 7/1/25 (1) 12,000 10,986
---------
13,299
---------
PENNSYLVANIA (9.1%)
Allegheny County PA Hosp. Auth. (Presbyterian Hosp.) 7.125% 7/1/99 (1)(Prere.) 12,500 13,605
Allegheny County PA Sanitary Auth. 5.50% 12/1/16 (3) 10,000 9,451
Armstrong County PA Hosp. Auth. Rev. 6.25% 6/1/13 (2) 18,400 19,154
Lehigh County PA General Purpose Auth. (Lehigh Valley Hosp.) 6.50% 7/1/10 (1) 6,655 7,114
Pennsylvania Convention Center Auth. Rev. 6.00% 9/1/19 (3) 10,000 10,370
Pennsylvania Convention Center Auth. Rev. 6.70% 9/1/16 (3) 9,970 10,991
Pennsylvania Higher Educ. Fac. (Allegheny-Delaware Valley) 5.875% 11/15/16 (1) 10,000 9,970
Pennsylvania Turnpike Comm. Rev. 5.50% 12/1/12 (2) 7,000 6,867
Pennsylvania Turnpike Comm. Rev. 5.50% 12/1/17 (3) 10,470 9,881
Pennsylvania Turnpike Comm. Rev. 5.50% 12/1/19 (3) 25,000 23,411
Pennsylvania Turnpike Comm. Rev. 6.00% 6/1/15 (1) 1,000 1,008
Philadelphia PA Gas Works Rev. 6.00% 5/15/12 (2) 3,000 3,040
Philadelphia PA GO 5.00% 5/15/20 (1) 10,000 8,916
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/10 (3) 15,000 17,185
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/11 (3) 16,500 18,927
Pittsburgh PA Water & Sewer System Rev. 7.25% 9/1/14 (3)(ETM) 5,000 5,756
Sayre PA Health Care Fac. Auth. Hosp. Rev. VRDO
(VHA of PA, Pooled Capital Asset Financing Program) 3.35% 9/4/96 (2) 1,100 1,100
---------
176,746
---------
PUERTO RICO (0.8%)
Puerto Rico Highway and Transp. Rev. 6.00% 7/1/18 (4) 10,850 11,184
Puerto Rico Public Building Auth. 0.00% 7/1/01 (3) 4,150 3,312
---------
14,496
---------
RHODE ISLAND (0.3%)
Rhode Island Depositors Economic Project 5.80% 8/1/12 (1) 2,000 2,022
Rhode Island Public Building Auth. 6.00% 2/1/11 (2) 3,805 3,864
---------
5,886
---------
SOUTH CAROLINA (4.1%)
North Charleston SC Sewer Dist. Rev. 6.375% 7/1/12 (1) 2,750 2,981
Piedmont SC Municipal Power Agency Rev. 5.00% 1/1/18 (3) 27,500 24,213
Piedmont SC Municipal Power Agency Rev. 6.75% 1/1/19 (3) 10,600 11,908
Piedmont SC Municipal Power Agency Rev. 6.75% 1/1/20 (3) 23,515 26,480
Public Service Auth. Rev. of SC 6.25% 1/1/22 (2) 13,000 13,425
---------
79,007
---------
SOUTH DAKOTA (0.7%)
South Dakota Health & Educ. Fac. Auth. Rev. (McKennan Hosp.) 7.625% 7/1/14 (1) 11,500 12,542
---------
</TABLE>
37
<PAGE> 78
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TENNESSEE (0.7%)
Health, Educ. & Housing Fac. of TN (Methodist Health System) 5.50% 8/1/12 (1) $ 5,000 $ 4,870
Knox County TN Health, Educ. & Housing Fac. (Fort Sanders Hosp.) 8.00% 1/1/08 (1) 3,000 3,186
Nashville and Davidson County TN Health and Educ. Fac.
(Meharry Medical College) 5.00% 12/1/24 (2) 3,000 2,619
Tennessee Housing Dev. Agency 7.125% 7/1/17 (1) 2,665 2,808
---------
13,483
---------
TEXAS (9.1%)
Austin TX Combined Utilities System Rev. 5.75% 11/15/16 (2) 10,000 9,823
Colorado River Municipal Water Dist. of TX Rev. 6.00% 1/1/16 (2) 6,000 6,034
Corpus Christi TX Utilities System Rev. 7.00% 7/15/10 (3) 7,500 8,176
Gulf Coast Waste Disposal Auth. of TX PCR VRDO (Exxon Project) 3.75% 9/4/96 5,400 5,400
Harris County TX Health Fac. Dev. Corp. VRDO (Methodist Hosp.) 3.75% 9/4/96 7,100 7,100
Harris County TX Toll Road VRDO 3.40% 9/4/96 23,200 23,200
Houston TX Public Improvement 7.00% 3/1/08 16,000 18,217
Houston TX Water & Sewer Rev. 7.00% 12/1/20 (1) 12,280 13,448
Houston TX Water Conveyance System 6.25% 12/15/12 (2) 8,340 8,932
Houston TX Water Conveyance System 6.80% 12/15/10 (2) 5,490 6,201
Houston TX Water Conveyance System 6.80% 12/15/11 (2) 8,910 10,067
Houston TX Water Conveyance System 7.50% 12/15/12 (2) 1,000 1,202
Houston TX Water Conveyance System 7.50% 12/15/13 (2) 1,100 1,323
Lower Colorado River Auth. of TX Rev. 5.625% 1/1/15 (4)(Prere.) 3,055 3,005
North Central TX Health Fac. Dev. Corp. VRDO
(Presbyterian Medical Center) 3.70% 9/4/96 (1) 5,100 5,100
San Antonio TX Electric & Gas System Rev. 0.00% 2/1/06 (3) 18,000 10,807
San Antonio TX Electric & Gas System Rev. 0.00% 2/1/07 (3) 15,000 8,445
Texas TRAN 4.75% 8/29/97 25,000 25,199
Texas Turnpike Auth. of Dallas North Toll (Addison Project) 6.60% 1/1/23 (3) 4,500 4,856
---------
176,535
---------
VERMONT (0.3%)
Vermont GO BAN CP 3.60% 9/9/96 5,000 5,000
---------
VIRGINIA (0.7%)
Henry County VA Public Service Auth. 6.25% 11/15/19 (3) 1,500 1,536
Norfolk VA Water Dev. 5.90% 11/1/25 (1) 12,150 12,015
---------
13,551
---------
WASHINGTON (1.3%)
Snohomish County WA Mukilteo School Dist. 5.60% 12/1/08 (3) 6,960 7,077
Snohomish County WA Mukilteo School Dist. 5.65% 12/1/09 (3) 9,160 9,279
Snohomish County WA Mukilteo School Dist. 5.65% 12/1/10 (3) 3,950 3,976
Snohomish County WA Mukilteo School Dist. 5.70% 12/1/11 (3) 5,000 5,035
---------
25,367
---------
WEST VIRGINIA (1.3%)
West Virginia Hosp. Finance Auth. (Charleston Medical Center) 5.75% 9/1/13 (1) 8,000 8,026
West Virginia State Building Comm. Rev. (Jail & Correction Fac.) 7.00% 7/1/11 (1) 7,325 8,404
West Virginia State Building Comm. Rev. (Jail & Correction Fac.) 7.00% 7/1/12 (1) 7,840 9,000
---------
25,430
---------
WISCONSIN (0.2%)
Wisconsin Health & Educ. (St. Luke's Medical Center) 7.10% 8/15/11 (1) 4,000 4,390
---------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $1,849,371) 1,966,304
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 79
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-1.5%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 27,068
Liabilities (56,994)
----------
(29,926)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 159,540,072 outstanding $.001 par value shares
(authorized 250,000,000 shares) $1,936,378
===================================================================================================================================
NET ASSET VALUE PER SHARE $12.14
===================================================================================================================================
</TABLE>
*See Note A in Notes To Financial Statements.
For key to abbreviations and other references, see page 50.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 1,827,232 $ 11.46
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (7,787) (.05)
Unrealized Appreciation--Note F 116,933 .73
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,936,378 $12.14
===================================================================================================================================
</TABLE>
39
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
LONG-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (99.6%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALASKA (1.3%)
Alaska Housing Finance Corp. VRDO 3.45% 9/4/96 $14,200 $ 14,200
----------
ARIZONA (0.8%)
Scottsdale AZ IDA (Memorial Hosp.) 6.00% 9/1/12 (2)+ 4,000 3,957
Scottsdale AZ IDA (Memorial Hosp.) 6.125% 9/1/17 (2)+ 4,700 4,611
----------
8,568
----------
CALIFORNIA (12.7%)
California GO 6.25% 9/1/12 5,000 5,335
California Health Fac. VRDO (Catholic Health Care West) 3.25% 9/4/96 (1) 7,100 7,100
California Public Works Rev. (Community College Project) 7.00% 3/1/19 5,800 6,365
California Public Works Rev. (Dept. of Corrections) 5.25% 1/1/21 (2) 6,000 5,535
California RAN VRDO 3.45% 9/4/96 2,400 2,400
California State Dept. of Water (Central Valley Project) 4.75% 12/1/25 3,120 2,592
California State Dept. of Water (Central Valley Project) 5.25% 12/1/28 (3) 12,395 11,304
Culver City CA Redev. Finance Auth. 4.60% 11/1/20 (2) 10,240 8,411
Fresno CA Sewer Rev. 6.25% 9/1/10 (2) 6,395 6,885
Los Angeles CA Unified School Dist. TRAN 4.50% 9/30/97 4,000 4,020
Los Angeles County CA COP (Capital Fac. Project) 6.50% 3/1/10 21,815 22,228
Orange County CA Sanitation Dist. VRDO 3.75% 9/4/96 LOC 2,400 2,400
Sacramento County CA Administration Center & Courthouse VRDO 3.25% 9/5/96 LOC 1,100 1,100
San Bernardino CA COP (Capital Fac. Project) 6.875% 8/1/24 (ETM) 18,000 20,825
San Bernardino CA COP (Medical Center Project) 5.50% 8/1/19 11,400 10,238
San Bernardino CA COP (Medical Center Project) 5.50% 8/1/24 14,295 12,817
San Diego CA Unified School Dist. TRAN 4.75% 10/1/97 5,300 5,340
San Diego County CA TRAN 4.375% 9/30/97 LOC 6,500 6,528
----------
141,423
----------
COLORADO (0.2%)
Moffat County CO PCR VRDO (PacifiCorp Project) 3.85% 9/4/96 (2) 2,700 2,700
----------
CONNECTICUT (0.7%)
Connecticut Dev. Auth. PCR VRDO (Connecticut Light & Power) 3.40% 9/4/96 LOC 7,950 7,950
----------
DISTRICT OF COLUMBIA (0.6%)
District of Columbia GO 6.75% 6/1/05 (2) 6,140 6,516
----------
FLORIDA (1.8%)
Dade County FL Water & Sewer System Rev. VRDO 3.35% 9/4/96 (3) 13,180 13,180
Gulf Breeze FL Local Govt. Loan Program VRDO 3.40% 9/5/96 (3) 6,895 6,895
----------
20,075
----------
GEORGIA (2.3%)
College Park GA IDA GO (Civic Center) 7.00% 9/1/10 11,500 13,012
Metropolitan Atlanta GA Rapid Transit Auth. Rev. 6.25% 7/1/18 12,170 12,780
----------
25,792
----------
ILLINOIS (4.9%)
Chicago IL Metropolitan Water Capital Improvement Rev. 7.00% 1/1/11 20,000 22,882
Chicago IL Public Building Comm. 7.00% 1/1/20 (1)(ETM) 6,000 6,859
Chicago IL Skyway Toll Bridge Rev. 6.50% 1/1/10 7,750 7,912
Illinois Dev. Finance Auth. PCR (Illinois Power Co. Project) 7.40% 12/1/24 (1) 8,150 9,381
Illinois Dev. Finance Auth. PCR VRDO (Illinois Power Co. Project) 3.50% 9/4/96 LOC 700 700
Illinois Metropolitan Pier & Exposition Auth. Rev. 6.75% 6/1/10 (1) 6,000 6,729
----------
54,463
----------
INDIANA (2.5%)
Indiana Health Fac. Finance Auth. Rev. (Ancilla System, Inc.) 5.75% 7/1/15 (1) 4,470 4,286
Indiana State Office Building Comm. Rev. 6.90% 7/1/11 16,875 19,064
Rockport IN PCR VRDO (AEP Generating Co. Project) 3.85% 9/4/96 (2) 4,000 4,000
----------
27,350
----------
</TABLE>
40
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOUISIANA (3.2%)
De Soto Parish LA PCR (Southwestern Electric Power Co.) 7.60% 1/1/19 $24,300 $ 27,126
East Baton Rouge LA VRDO (Exxon Project) 3.75% 9/4/96 6,900 6,900
Louisiana Recovery Dist. Sales Tax VRDO 3.85% 9/4/96 (3) 1,900 1,900
----------
35,926
----------
MASSACHUSETTS (7.5%)
Massachusetts Bay Transp. Auth. Rev. 7.00% 3/1/21 15,000 17,252
Massachusetts GO 5.75% 5/1/12 7,500 7,446
Massachusetts GO 6.00% 6/1/11 3,500 3,552
Massachusetts GO 6.50% 8/1/11 5,460 5,745
Massachusetts Housing Finance Agency 6.125% 11/15/08 3,500 3,571
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 7,000 7,111
Massachusetts Water Resources Auth. Rev. 5.50% 7/15/22 5,000 4,648
Massachusetts Water Resources Auth. Rev. 6.50% 7/15/19 32,000 34,433
----------
83,758
----------
MICHIGAN (3.0%)
Detroit MI GO 6.375% 4/1/07 10,500 10,669
Detroit MI Sewer Disposal 5.00% 7/1/25 (1) 5,820 5,098
Grand Rapids MI Tax Increment Rev. (Downtown Project) 6.875% 6/1/24 (1) 7,500 8,236
Michigan GO Notes 4.00% 9/30/96 1,300 1,300
Michigan Hosp. Finance Auth. Rev.
(Detroit Medical Center Obligated Group) 6.25% 8/15/13 3,000 3,037
Michigan Hosp. Finance Auth. Rev.
(Detroit Medical Center Obligated Group) 6.50% 8/15/18 5,000 5,129
----------
33,469
----------
MISSISSIPPI (1.0%)
Claiborne County MS PCR (Middle South Energy) 9.875% 12/1/14 10,000 11,182
----------
NEVADA (1.0%)
Humbolt County NV PCR (Idaho Power Co.) 8.30% 12/1/14 9,100 10,553
----------
NEW JERSEY (6.4%)
New Jersey Economic Dev. Auth. Market Transition Fac. 5.75% 7/1/06 (1) 34,165 35,675
New Jersey Health Care Fac. Auth. Rev. (Atlantic City Medical Center) 6.80% 7/1/05 3,500 3,762
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/13 10,000 10,927
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/19 20,000 21,003
----------
71,367
----------
NEW YORK (9.4%)
Babylon NY Waste Water Fac. GO 9.00% 8/1/08 (3) 4,900 6,461
Babylon NY Waste Water Fac. GO 9.00% 8/1/09 (3) 2,800 3,713
Babylon NY Waste Water Fac. GO 9.00% 8/1/10 (3) 4,900 6,576
Metropolitan NY Transit Auth. Rev. 6.375% 7/1/18 (1) 7,500 7,848
New York City NY GO 6.375% 8/1/04 5,000 5,155
New York City NY GO 7.10% 2/1/10 (1) 7,500 8,318
New York City NY GO VRDO 3.75% 9/4/96 (1) 3,000 3,000
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. 7.00% 6/15/01 (Prere.) 2,520 2,783
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. 7.00% 6/15/09 2,480 2,705
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. VRDO 3.80% 9/4/96 (3) 1,000 1,000
New York Local Govt. Assistance Corp. Rev. 6.50% 4/1/20 10,000 10,563
New York Local Govt. Assistance Corp. Rev. 6.875% 4/1/19 8,000 8,762
New York Medical Care Fac. Auth. Rev. 6.875% 2/15/32 (7) 5,000 5,326
New York State Dormitory Auth. Rev. (State Univ.) 7.50% 5/15/11 18,900 21,722
Triborough Bridge & Tunnel Auth. NY General Purpose Rev. 6.125% 1/1/21 10,000 10,447
----------
104,379
----------
</TABLE>
41
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
LONG-TERM PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NORTH CAROLINA (2.0%)
Charlotte NC Airport Rev. VRDO 3.35% 9/4/96 (1) $11,100 $ 11,100
North Carolina Eastern Municipal Power Agency Rev. 6.50% 1/1/18 (ETM) 4,625 5,096
North Carolina Eastern Municipal Power Agency Rev. 7.50% 1/1/09 (Prere.) 4,935 5,847
----------
22,043
----------
OHIO (4.2%)
Franklin County OH Hosp. Rev. (Children's Hosp.) 5.75% 11/1/20 2,945 2,862
Franklin County OH Hosp. Rev. VRDO (Holy Cross Health System) 3.45% 9/5/96 7,400 7,400
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric) 4.00% 9/4/96 LOC 2,700 2,700
Ohio State Univ. VRDO 3.40% 9/5/96 3,800 3,800
Ohio Turnpike Comm. 5.50% 2/15/26 (1) 26,650 25,275
Ohio Water Dev. Auth. VRDO (Mead Corp.) 3.65% 9/4/96 LOC 4,200 4,200
----------
46,237
----------
OREGON (1.1%)
Oregon Veterans Welfare Program GO VRDO 3.40% 9/4/96 LOC 12,000 12,000
----------
PENNSYLVANIA (7.5%)
Allegheny County PA VRDO (Children's Hosp. Pittsburgh) 3.35% 9/5/96 (1) 900 900
Pennsylvania GO 6.375% 9/15/09 11,000 11,614
Pennsylvania GO 6.375% 9/15/10 8,820 9,312
Pennsylvania GO 6.375% 9/15/11 5,975 6,309
Pennsylvania GO 6.375% 9/15/12 13,500 14,254
Pennsylvania Higher Educ. Fac. Auth. Rev. (Drexel Univ.) 7.70% 5/1/12 (1) 2,660 2,721
Pennsylvania Housing Finance Agency Residential Dev. Rev. 7.50% 7/1/06 3,890 4,169
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/10 (3) 20,000 22,913
Pittsburgh PA Water & Sewer Auth. Rev. 6.50% 9/1/13 (3) 10,000 11,002
Radnor Township PA School Auth. 9.875% 9/15/00 (ETM) 465 507
----------
83,701
----------
PUERTO RICO (0.9%)
Puerto Rico Highway and Transp. Rev. 5.00% 7/1/16 (4) 10,605 9,670
----------
SOUTH CAROLINA (2.1%)
Piedmont SC Municipal Power Agency Rev. 6.15% 1/1/07 (1) 4,040 4,337
Piedmont SC Municipal Power Agency Rev. 6.20% 1/1/08 (1) 3,000 3,225
Piedmont SC Municipal Power Agency Rev. 6.50% 1/1/15 (3) 14,245 15,512
----------
23,074
----------
TEXAS (13.8%)
Harris County TX Toll Road VRDO 3.40% 9/4/96 12,700 12,700
Houston TX Hotel Occupancy Rev. 5.50% 7/1/11 (4) 21,760 21,263
Houston TX Public Improvement 7.00% 3/1/08 5,000 5,693
Houston TX Water & Sewer System Rev. 6.375% 12/1/17 (2) 6,000 6,295
North East TX Independent School Dist. 5.00% 2/1/16 6,425 5,768
San Antonio TX Electric & Gas Rev. 5.00% 2/1/17 14,135 12,544
Southwest TX Higher Educ. Auth. VRDO (Southern Methodist Univ.) 3.75% 9/4/96 LOC 7,800 7,800
Texas City TX IDR (Arco Pipeline Project) 7.375% 10/1/20 17,000 19,805
Texas GO 5.50% 4/1/20 15,000 14,023
Texas TRAN 4.75% 8/29/97 15,000 15,120
Texas Water Dev. Board Rev. 5.25% 7/15/17 7,000 6,521
Texas Water Dev. Board Rev. 6.50% 7/15/10 17,425 18,993
Texas Water Dev. Board Rev. 7.05% 8/1/25 5,655 6,219
----------
152,744
----------
UTAH (0.1%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.80% 9/4/96 (2) 800 800
----------
VIRGINIA (1.2%)
Richmond VA Metropolitan Expressway Auth. Rev. 6.25% 7/15/22 (3) 7,750 7,972
Richmond VA Metropolitan Expressway Auth. Rev. 6.375% 7/15/16 (3) 5,400 5,649
----------
13,621
----------
</TABLE>
42
<PAGE> 83
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WASHINGTON (3.0%)
Washington Dept. of Ecology COP (State Office Building Project) 5.00% 4/1/16 $27,820 $ 25,325
Washington GO 5.50% 5/1/18 4,000 3,838
Washington GO 6.75% 2/1/15 3,450 3,843
----------
33,006
----------
WEST VIRGINIA (0.9%)
West Virginia State Building Comm. Rev. 7.00% 7/1/14 (1) 8,975 10,292
----------
WISCONSIN (3.4%)
Oak Creek WI VRDO (Wisconsin Electric Power Co. Project) 3.55% 9/5/96 4,000 4,000
Wisconsin Clean Water Rev. 6.875% 6/1/11 20,500 23,254
Wisconsin GO 6.25% 5/1/09 10,000 10,820
----------
38,074
----------
WYOMING (0.1%)
Sublette County WY VRDO (Exxon Project) 3.75% 9/4/96 900 900
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $1,045,762) 1,105,833
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 31,658
Liabilities (27,287)
----------
4,371
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 103,493,936 outstanding $.001 par value shares
(authorized 250,000,000 shares) $1,110,204
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.73
===================================================================================================================================
</TABLE>
*See Note A in Notes To Financial Statements.
For key to abbreviations and other references, see page 50.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 1,059,003 $ 10.23
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (7,380) (.07)
Unrealized Appreciation (Depreciation)--Note F:
Investment Securities 60,071 .58
Futures Contracts (1,490) (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,110,204 $10.73
===================================================================================================================================
</TABLE>
43
<PAGE> 84
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (100.4%)
- -----------------------------------------------------------------------------------------------------------------------------------
ALASKA (2.3%)
Alaska Housing Finance Corp. Rev. VRDO 3.55% 9/4/96 $15,400 $ 15,400
North Slope Borough AK GO 7.50% 6/30/01 (4) 2,000 2,235
Valdez AK PCR Rev. VRDO (Exxon Pipeline Project) 3.75% 9/4/96 28,700 28,700
----------
46,335
----------
ARIZONA (1.7%)
Board of Regents Rev. (Univ. of Arizona) 6.20% 6/1/16 26,660 28,356
Pima County AZ IDA Rev. (La Cholla Project) 8.50% 7/1/20 6,650 5,802
----------
34,158
----------
ARKANSAS (0.2%)
North Little Rock AR Electric System Rev. 6.50% 7/1/15 (1) 3,450 3,774
----------
CALIFORNIA (12.3%)
California Dept. of Water Resources 4.75% 12/1/29 (1) 15,000 12,348
California GO 4.75% 9/1/23 (3) 10,000 8,362
California Public Works Rev. (Community College Project) 7.00% 3/1/14 14,275 15,665
California Public Works Rev. (Community College Project) 7.00% 3/1/19 18,000 19,753
California Public Works Rev. (Univ. Project) 6.40% 12/1/16 (2) 8,450 8,948
Irvine CA Assessment Dist. VRDO 3.65% 9/4/96 LOC 600 600
Irvine CA Ranch Water Dist. VRDO 3.60% 9/4/96 LOC 11,000 11,000
Irvine CA Ranch Water Dist. VRDO 3.70% 9/4/96 LOC 1,000 1,000
Los Angeles CA Dept. of Water & Power 4.75% 11/15/19 (1) 5,000 4,222
Los Angeles CA Unified School Dist. TRAN 4.50% 9/30/97 7,100 7,136
Metropolitan Water Dist. of Southern California Rev. 6.625% 7/1/12 3,000 3,306
Orange County CA Sanitation Dist. VRDO 3.75% 9/4/96 (2) LOC 780 780
Sacramento CA Finance Auth Lease Rev. 5.40% 11/1/20 12,565 11,946
Sacramento County CA TRAN 4.50% 9/30/97 10,000 10,059
Sacramento County CA VRDO
(Administration Center & Courthouse Project) 3.25% 9/5/96 LOC 375 375
San Diego CA Area Local Govt. COP TRAN 4.75% 10/1/97 (4) 7,000 7,049
San Bernardino County CA COP (Capital Fac. Project) 6.875% 8/1/24 (ETM) 25,220 29,178
San Bernardino County CA COP (Medical Center Funding) 4.75% 8/1/28 10,425 8,143
San Bernardino County CA COP (Medical Center Funding) 5.00% 8/1/26 15,045 12,390
San Bernardino County CA COP (Medical Center Funding) 7.00% 8/1/20 12,180 13,386
San Diego CA IDR (San Diego Gas & Electric) 8.75% 3/1/23 4,450 4,696
San Diego County CA TRAN 4.375% 9/30/97 LOC 11,600 11,650
San Joaquin Hills CA Transp. Agency Rev. 0.00% 1/1/01 7,340 5,728
San Joaquin Hills CA Transp. Agency Rev. 0.00% 1/1/02 14,000 10,186
Santa Clara CA El Camino Valley Hosp. Dist. VRDO 3.30% 9/10/96 LOC 4,100 4,100
Southern California Public Power Auth. Rev. 5.50% 7/1/20 7,700 7,159
Southern California Public Power Auth. Rev. 6.00% 7/1/18 3,985 3,904
Univ. of CA Hosp. (Medical Center) 6.00% 7/1/26 (2) 10,260 10,217
----------
243,286
----------
CONNECTICUT (0.4%)
Connecticut Dev. Auth. PCR VRDO (Connecticut Light & Power) 3.40% 9/4/96 LOC 8,695 8,695
----------
District of Columbia (2.5%)
District of Columbia GO VRDO 3.95% 9/4/96 LOC 7,100 7,100
Metropolitan Washington D.C. Airport Auth. Rev. 5.50% 10/1/24 (1) 23,825 21,974
Metropolitan Washington D.C. Airport Auth. Rev. 5.70% 10/1/07 (1) 12,900 12,935
Metropolitan Washington D.C. Airport Auth. Rev. 5.875% 10/1/15 (1) 8,400 8,225
----------
50,234
----------
FLORIDA (1.4%)
Citrus County FL PCR (Florida Power Corp.) 6.35% 2/1/22 6,500 6,683
Dade County FL Water & Sewer System Rev. VRDO 3.35% 9/4/96 (3) 13,585 13,585
Orlando FL Utilities Comm. Rev. 6.75% 10/1/17 2,200 2,481
Tarpon Springs FL Health Fac. Auth. Rev. (Tarpon Springs Hosp.) 8.75% 5/1/12 4,000 4,231
----------
26,980
----------
</TABLE>
44
<PAGE> 85
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GEORGIA (2.4%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.75% 9/4/96 $ 300 $ 300
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Co.) 3.35% 9/4/96 (3) 22,840 22,840
Cartersville GA Water & Waste Water Fac. (Anheuser-Busch) 7.40% 11/1/10 5,000 5,825
Municipal Electric Auth. of Georgia Rev. 6.60% 1/1/18 5,000 5,358
Savannah GA Hosp. Auth. Rev. (Candler Hosp.) 7.00% 1/1/23 13,000 13,280
----------
47,603
----------
ILLINOIS (5.4%)
Chicago IL Public Building Comm. 7.00% 1/1/15 (1) (ETM) 10,000 11,120
Chicago IL Public Building Comm. 7.00% 1/1/20 (1) (ETM) 10,000 11,432
Chicago IL Skyway Toll Bridge Rev. 6.75% 1/1/14 10,000 10,256
Chicago IL Skyway Toll Bridge Rev. 6.75% 1/1/17 18,185 18,523
Cook County IL GO 6.60% 11/15/22 (1) 12,000 12,837
Illinois Dev. Finance Auth. Rev. (Regency Park Project) 10.25% 4/15/19 # 6,500 4,875
Illinois Dev. Finance Auth. Rev. (Regency Park Project) 10.625% 4/15/20 # 6,000 4,500
Illinois Dev. Finance Auth. Rev. PCR (Illinois Power Co. Project) 7.40% 12/1/24 (1) 20,000 23,021
Illinois Health Fac. Auth. Certificate of Beneficial Interest
(Adventist Living Centers) -- -- # 770 62
Illinois Health Fac. Auth. Rev. (United Medical Center) 8.125% 7/1/03 (Prere.) 2,750 3,057
Illinois Toll Highway Auth. Rev. 6.30% 1/1/11 5,000 5,296
Loves Park IL First Mortgage Rev. (Hoosier Care) 9.75% 8/1/19 1,545 1,643
----------
106,622
----------
INDIANA (3.3%)
Indiana Health Fac. Finance Auth. Rev. (Ancilla System, Inc.) 7.375% 7/1/23 19,400 20,950
Indiana State Office Building Comm. Rev. 6.90% 7/1/11 15,660 17,692
Indianapolis IN Local Public Improvement Bond Bank 6.75% 2/1/14 21,500 23,669
Indianapolis IN Local Public Improvement Bond Bank 6.75% 2/1/20 2,500 2,665
----------
64,976
----------
IOWA (0.5%)
Des Moines IA Rev. (Des Moines General Hosp.) 8.25% 11/15/11 9,620 9,692
----------
KENTUCKY (0.2%)
Kentucky Property & Buildings Comm. Rev. 5.80% 9/1/06 3,100 3,216
----------
LOUISIANA (0.4%)
Louisiana Recovery Dist. Sales Tax VRDO 3.85% 9/4/96 (1) 3,000 3,000
West Feliciana Parish LA PCR (Gulf States Utilities) 9.00% 5/1/15 4,000 4,454
----------
7,454
----------
MARYLAND (0.7%)
Hagerstown MD Energy Finance Administration Recycling Rev.
(Hagerstown Fiber Project) 9.00% 10/15/16 17,500 14,248
----------
MASSACHUSETTS (9.1%)
Massachusetts Bay Transit Auth. 6.25% 3/1/05 2,000 2,151
Massachusetts Consolidated Loan 5.75% 5/1/12 (2) 5,000 5,018
Massachusetts GO 5.25% 2/1/08 35,575 34,886
Massachusetts GO 6.00% 6/1/11 14,750 14,967
Massachusetts Industrial Finance Agency
(Massachusetts Recycling Assoc.) 9.00% 8/1/16 17,000 9,172
Massachusetts Industrial Finance Agency (Refusetech Inc. Project) 6.30% 7/1/05 34,500 35,568
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 11,000 11,174
Massachusetts Water Resources Auth. Rev. 5.50% 7/15/22 22,420 20,844
Massachusetts Water Resources Auth. Rev. 6.50% 7/15/19 43,700 47,023
----------
180,803
----------
MICHIGAN (6.0%)
Detroit MI GO 6.25% 4/1/05 13,000 13,223
Detroit MI GO 6.375% 4/1/06 8,635 8,824
Dickinson County MI Memorial Hosp. System Rev. 7.625% 11/1/05 1,150 1,174
Dickinson County MI Memorial Hosp. System Rev. 8.00% 11/1/14 5,700 6,024
Michigan GO 4.00% 9/30/96 9,500 9,502
Michigan Hosp. Finance Auth. Rev. (Genesys Health System) 7.50% 10/1/27 6,620 6,884
</TABLE>
45
<PAGE> 86
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michigan Hosp. Finance Auth. Rev. (Genesys Health System) 8.10% 10/1/13 $ 5,000 $ 5,489
Michigan Hosp. Finance Auth. Rev. (Genesys Health System) 8.125% 10/1/21 15,000 16,386
Michigan Housing Dev. Auth. Rev. 6.30% 4/1/04 6,500 6,778
Michigan Public Power Agency Rev. (Belle River Project) 5.50% 1/1/13 46,595 44,748
----------
119,032
----------
MINNESOTA (0.3%)
Washington County MN Housing & Redev. Auth. Rev.
(Woodland Park Project) 0.00% 5/1/20 35,070 1,800
Washington County MN Housing & Redev. Auth. Rev.
(Woodland Park Project) 9.75% 5/1/20 5,000 4,750
----------
6,550
----------
MISSISSIPPI (1.4%)
Claiborne County MS PCR (Middle South Energy) 9.875% 12/1/14 21,000 23,483
Jackson County MS PCR VRDO (Chevron USA Project) 3.80% 9/4/96 2,300 2,300
Jackson County MS Port Fac. Rev. VRDO (Chevron USA Project) 3.75% 9/4/96 1,700 1,700
----------
27,483
----------
MISSOURI (0.3%)
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health Care System) 3.45% 9/4/96 4,000 4,000
Missouri Health & Educ. Fac. Auth. VRDO (Washington Univ.) 3.80% 9/4/96 2,800 2,800
----------
6,800
----------
NEVADA (0.8%)
Clark County NV Airport System Refunding Rev. VRDO
(McCarran International Airport) 3.35% 9/4/96 (1) 16,395 16,395
----------
NEW HAMPSHIRE (0.3%)
New Hampshire Health & Higher Educ. Rev. (Catholic Medical Center) 6.00% 7/1/17 6,580 6,078
----------
NEW JERSEY (1.2%)
New Jersey Economic Dev. Auth. Market Transition Fac. 5.875% 7/1/11 (1) 8,000 8,110
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/13 15,000 16,391
----------
24,501
----------
NEW YORK (11.6%)
Glencove NY IDA Rev. (Regency at Glencove Project) 9.50% 7/1/12 10,000 10,000
Metropolitan NY Transit Auth. Rev. 6.375% 7/1/20 (1) 25,690 26,783
Metropolitan NY Transit Auth. Rev. 7.375% 7/1/08 22,870 25,677
New York City NY GO VRDO 3.40% 9/4/96 LOC 4,500 4,500
New York City NY GO VRDO 3.60% 9/4/96 LOC 7,800 7,800
New York City NY GO VRDO 3.75% 9/4/96 LOC 300 300
New York City NY GO VRDO 3.75% 9/4/96 (1) 5,000 5,000
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. 5.50% 6/15/20 25,000 22,864
New York City NY Municipal Water Finance Auth. Water &
Sewer System Rev. VRDO 3.80% 9/4/96 (3) 11,800 11,800
New York State Dormitory Auth. Rev. (City Univ.) 6.375% 7/1/08 3,150 3,231
New York State Dormitory Auth. Rev. (City Univ.) 7.50% 7/1/10 5,500 6,301
New York State Dormitory Auth. Rev. (State Univ.) 5.375% 5/15/07 (2) 2,100 2,128
New York State Dormitory Auth. Rev. (State Univ.) 7.50% 5/15/13 11,500 13,410
New York State Housing Finance Agency Rev. 5.625% 3/15/09 4,685 4,476
New York State Local Govt. Assistance Corp. Rev. 6.00% 4/1/16 6,400 6,363
New York State Local Govt. Assistance Corp. Rev. 6.50% 4/1/20 16,110 17,016
New York State Local Govt. Assistance Corp. Rev. 7.00% 4/1/10 6,320 6,935
New York State Power Auth. Rev. 6.50% 1/1/19 26,250 27,734
Triborough Bridge & Tunnel Auth. NY Rev. (Convention Center Project) 7.25% 1/1/10 13,500 14,914
Triborough Bridge & Tunnel Auth. NY Rev. (General Purpose Rev.) 5.00% 1/1/17 3,000 2,669
Triborough Bridge & Tunnel Auth. NY Rev. (General Purpose Rev.) 5.50% 1/1/17 10,000 9,702
----------
229,603
----------
NORTH CAROLINA (1.3%)
Charlotte NC Airport Rev. VRDO 3.35% 9/4/96 (1) 8,700 8,700
North Carolina Eastern Municipal Power Agency Rev. 5.00% 1/1/20 (ETM) 10,385 9,333
North Carolina Eastern Municipal Power Agency Rev. 6.50% 1/1/18 (ETM) 6,665 7,344
----------
25,377
----------
</TABLE>
46
<PAGE> 87
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OHIO (0.8%)
Columbus OH GO VRDO 3.30% 9/5/96 $ 5,200 $ 5,200
Lucas County OH Hosp. Fac. Rev. (Flower Memorial Hosp.) 8.125% 12/1/11 8,900 10,388
----------
15,588
----------
OKLAHOMA (0.4%)
Jackson County OK Memorial Hosp. Auth. Rev. (Jackson Memorial) 6.75% 8/1/04 4,700 4,594
Jackson County OK Memorial Hosp. Auth. Rev. (Jackson Memorial) 7.30% 8/1/15 4,000 3,841
----------
8,435
----------
OREGON (0.6%)
Oregon Veterans Welfare Program VRDO 3.40% 9/4/96 LOC 1,500 1,500
Oregon Veterans Welfare Program VRDO 3.45% 9/4/96 LOC 10,100 10,100
----------
11,600
----------
PENNSYLVANIA (10.2%)
Langhorne PA Higher Educ. & Health Auth. Rev. (Lower Bucks Hosp.) 7.30% 7/1/12 4,500 4,255
Langhorne PA Higher Educ. & Health Auth. Rev. (Lower Bucks Hosp.) 7.35% 7/1/22 13,200 12,325
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Brittany Point Project) 8.50% 1/1/22 5,000 5,315
Pennsylvania Convention Center Auth. Rev. 6.60% 9/1/09 2,500 2,623
Pennsylvania Convention Center Auth. Rev. 6.70% 9/1/14 2,500 2,646
Pennsylvania Convention Center Auth. Rev. 6.75% 9/1/19 6,600 7,004
Pennsylvania COP 5.40% 7/1/08 (2) 15,000 14,862
Pennsylvania COP 5.40% 7/1/09 (2) 25,000 24,527
Pennsylvania Economic Dev. Auth. Rev. (Colver Project) 7.05% 12/1/10 2,500 2,614
Pennsylvania Economic Dev. Auth. Rev. (Colver Project) 7.125% 12/1/15 14,000 14,715
Pennsylvania Housing Finance Agency Rev. 7.60% 7/1/13 10,000 10,644
Pennsylvania Higher Educ. Fac. Auth. Rev. VRDO (Temple Univ.) 3.75% 9/4/96 LOC 400 400
Pennsylvania Higher Educ. Fac. Auth. Rev. VRDO (Carnegie Mellon) 3.75% 9/4/96 2,200 2,200
Pennsylvania Turnpike Comm. Rev. 5.50% 12/1/17 17,735 16,901
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Seashore Hosp.) 7.00% 8/15/12 3,540 3,711
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Seashore Hosp.) 7.00% 8/15/17 1,000 1,033
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Seashore Hosp.) 7.00% 8/15/22 500 516
Philadelphia PA Hosp. & Higher Educ. Fac.
Auth. Rev. (Methodist Hosp.) 7.75% 7/1/23 12,290 12,337
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Roxborough Memorial Hosp.) 7.25% 3/1/24 9,900 9,311
Philadelphia PA Municipal Auth. Rev. 6.125% 7/15/08 4,000 4,016
Philadelphia PA Municipal Auth. Rev. 6.25% 7/15/13 5,785 5,743
Philadelphia PA Municipal Auth. Rev. 6.30% 7/15/17 1,750 1,736
Philadelphia PA Municipal Auth. Rev. 8.625% 11/15/16 1,600 1,671
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/11 (3) 21,500 24,662
Sayre PA Health Care Fac. Auth. Hosp. Rev. VRDO
(VHA of PA, Pooled Capital Asset Financing Program) 3.35% 9/4/96 (2) 400 400
Scranton-Lackawanna PA Health & Welfare (Moses Taylor Hosp.) 8.50% 7/1/20 14,375 15,294
----------
201,461
----------
RHODE ISLAND (0.5%)
Rhode Island Convention Center Auth. Rev. 5.75% 5/15/20 (2) 5,000 4,836
Rhode Island Public Building Auth. 5.25% 2/1/10 (2) 5,000 4,791
----------
9,627
----------
SOUTH CAROLINA (0.4%)
Piedmont SC Municipal Power Agency Rev. 6.25% 1/1/21 (3) 6,640 7,062
----------
TEXAS (12.8%)
Austin TX Airport System Rev. 6.125% 11/15/25 (1) 38,000 37,766
Austin TX Airport System Rev. 6.45% 11/15/20 17,040 17,756
Austin TX Water, Sewer & Electric Rev. 14.00% 11/15/01 200 261
Dallas TX Independent School Dist. 5.70% 8/15/12 18,645 18,606
Gulf Coast Waste Disposal Auth. TX PCR VRDO (Amoco Oil Project) 3.75% 9/4/96 13,900 13,900
Harris County TX Health Fac. Dev. Corp. VRDO (Methodist Hosp.) 3.75% 9/4/96 16,400 16,400
</TABLE>
47
<PAGE> 88
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
INTEREST MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO RATE DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Harris County TX Hosp. Dist. Rev. 7.40% 2/15/10 (2) $17,500 $ 20,332
Harris County TX Toll Road 6.25% 8/15/15 (1) 5,000 5,187
Harris County TX Toll Road VRDO 3.40% 9/4/96 11,600 11,600
Hidalgo County TX Health Mission Hosp. 6.875% 8/15/26 7,880 7,740
Houston TX Hotel Occupancy Rev. 5.50% 7/1/15 (4) 6,000 5,775
Houston TX Water & Sewer System Rev. 6.375% 12/1/17 (2) 4,820 5,057
North Central TX Health Fac. Dev. Corp. VRDO
(Presbyterian Medical Center) 3.70% 9/4/96 (1) 9,600 9,600
Odessa TX Junior College Dist. Rev. 8.125% 12/1/18 10,000 10,577
San Antonio TX Electric & Gas Rev. 5.00% 2/1/17 3,500 3,106
Southwest TX Higher Educ. Auth. VRDO (Southern Methodist Univ.) 3.75% 9/4/96 LOC 4,300 4,300
Texas GO 5.50% 4/1/20 40,050 37,442
Texas TRAN 4.75% 8/29/97 15,000 15,120
Texas Turnpike Auth. Rev. 5.50% 1/1/15 (3)+ 14,605 13,630
----------
254,155
----------
UTAH (2.1%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.80% 9/4/96 (2) 17,200 17,200
Salt Lake City & County UT Airport Rev. VRDO 3.55% 9/5/96 LOC 24,700 24,700
----------
41,900
----------
VIRGINIA (2.5%)
Alexandria VA Redev. & Housing Auth. Rev. (Portals West Project) 9.50% 7/15/20 ## 9,680 6,098
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 0.00% 7/1/17 2,600 52
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 0.00% 7/1/18 2,600 52
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 0.00% 7/1/19 2,600 52
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 0.00% 7/1/20 2,600 52
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 0.00% 7/1/21 2,600 52
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 10.25% 7/1/15 ## 8,000 5,760
Chesterfield County VA Mortgage Rev. (Brandermill Woods Project) 10.625% 7/1/16 ## 10,400 7,488
Upper Occoquan VA Sewer Auth. Rev. 4.75% 7/1/29 (1) 23,935 20,080
Virginia GO 5.375% 6/1/07 4,325 4,395
Virginia GO 5.375% 6/1/08 5,440 5,487
----------
49,568
----------
WASHINGTON (2.8%)
Port of Seattle WA GO 5.75% 5/1/14 15,600 15,128
Snohomish County WA Public Utility Dist. Rev. 5.50% 1/1/20 (3) 43,710 40,928
----------
56,056
----------
WEST VIRGINIA (0.5%)
West Virginia State Building Comm. Rev. 7.00% 7/1/13 (1) 8,390 9,629
----------
WYOMING (0.8%)
Kemmerer County WY PCR VRDO (Exxon Project) 3.75% 9/4/96 7,000 7,000
Lincoln County WY PCR VRDO (Exxon Project) 3.75% 9/4/96 10,000 10,000
----------
17,000
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $1,933,300) 1,991,976
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 29,671
Liabilities (36,884)
----------
(7,213)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 191,104,685 outstanding $.001 par value shares
(authorized 250,000,000 shares) $1,984,763
===================================================================================================================================
NET ASSET VALUE PER SHARE $10.39
===================================================================================================================================
</TABLE>
*See Note A in Notes To Financial Statements.
For key to abbreviations and other references, see page 50.
48
<PAGE> 89
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in Capital $ 1,943,207 $ 10.17
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (15,458) (.08)
Unrealized Appreciation (Depreciation)--Note F:
Investment Securities 58,676 .31
Futures Contracts (1,662) (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,984,763 $10.39
===================================================================================================================================
</TABLE>
49
<PAGE> 90
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
COP--Certificate of Participation.
CP--Commercial Paper.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
IDR--Industrial Development Revenue Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
RAN--Revenue Anticipation Note.
RAW--Revenue Anticipation Warrant.
Rev.--Revenue Bond.
TAN--Tax Anticipation Note.
TAW--Tax Anticipation Warrant.
TOB--Tender Option Bond.
TRAN--Tax Revenue Anticipation Note.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
# 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, 1996.
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) BIGI (Bond Investors Guaranty Insurance).
(6) Connie Lee Inc.
(7) 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.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Vanguard Municipal Bond Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights appearing in the Vanguard Municipal Bond Fund 1996 Annual Report
present fairly, in all material respects, the financial position of Money
Market Portfolio, Short-Term Portfolio, Limited-Term Portfolio,
Intermediate-Term Portfolio, Insured Long-Term Portfolio, Long-Term Portfolio
and High-Yield Portfolio (constituting Vanguard Municipal Bond Fund, hereafter
referred to as the "Fund") at August 31, 1996, and the results of each of their
operations, the changes in each of their net assets and the financial
highlights for each of the 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, 1996 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
September 30, 1996
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F950-8/96
