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[PHOTO]
VANGUARD
MUNICIPAL BOND
FUND
Annual Report | August 31, 1997
[THE VANGUARD GROUP LOGO]
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[PHOTO]
OUR CREW MAKES THE DIFFERENCE
Throughout its history, The Vanguard Group has received considerable attention
as the low-cost provider of mutual funds. While such accolades are gratifying,
we are most proud, not of our low operating expenses or the billions of dollars
we manage, but of our sterling reputation created by the Vanguard crew.
We recognize that it is our crew members--some 6,000 highly motivated men
and women--who form the cornerstone of our operations. As with any cornerstone,
we could not survive long--let alone prosper--without it. That's why we chose
this fiscal year's annual report to celebrate the spirit, enthusiasm, and
achievements of our crew. (We call those who work at Vanguard crew members, not
employees, because they operate as a team to accomplish our mission of serving
you, our clients.)
But while we prize the collective contributions of our crew, we also take
time to recognize the importance of the individual. Each calendar quarter, we
present our Award For Excellence to a handful of crew members who have
demonstrated particular excellence in the performance of their jobs and who
embody "The Vanguard Spirit." Our report cover shows only a few of the more
than 300 crew members who have received this distinction since 1984.
They, along with the rest of our valiant crew, look forward to serving you
in the years ahead.
[PHOTO]
John J. Brennan
President
John C. Bogle
Chairman
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CONTENTS
<S> <C>
A MESSAGE TO OUR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE MARKETS IN PERSPECTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . 5
REPORT FROM THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PERFORMANCE SUMMARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PORTFOLIO PROFILES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
All comparative mutual fund data are from Lipper Analytical Services, Inc., or
Morningstar unless otherwise noted.
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FELLOW SHAREHOLDER,
The somewhat unlikely combination of robust economic growth and tame inflation
afforded a healthy climate for fixed-income investments during Vanguard
Municipal Bond Fund's 1997 fiscal year. Interest rates declined on balance for
all but municipal money market securities during the twelve months ended August
31, providing a boost for bonds, particularly those with the longest
maturities.
The Portfolios of Vanguard Municipal Bond Fund provided a strong showing
across the board. Returns ranged from +3.5% for our Money Market Portfolio to
+9.5% for our Long-Term and High-Yield Portfolios. These are solid returns for
fixed-income funds--particularly since 100% of the income return is free from
federal income taxes. The table at right presents the total return (capital
change plus reinvested dividends) for each Portfolio for the twelve months,
broken down into its capital and income components. It also shows each
Portfolio's yield as of August 31.
Per-share figures for each Portfolio, including net asset values, income
dividends, and any distributions from net realized capital gains, are presented
in the table following this letter.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
COMPONENTS OF TOTAL RETURNS
FISCAL YEAR ENDED AUGUST 31, 1997
--------------------------------------------------------
TOTAL INCOME CAPITAL CURRENT
PORTFOLIO RETURN RETURN RETURN YIELD*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market** +3.5% +3.5% 0.0% 3.30%
Short-Term +4.2 +4.0 +0.2 3.70
Limited-Term +5.4 +4.6 +0.8 4.13
Intermediate-Term +7.3 +5.3 +2.0 4.42
Insured Long-Term +8.9 +5.8 +3.1 4.92
Long-Term +9.5 +5.7 +3.8 4.89
High-Yield +9.5 +5.9 +3.6 5.04
- -----------------------------------------------------------------------------------
</TABLE>
*SEC 7-day annualized yield for Money Market Portfolio; SEC 30-day annualized
yield for other Portfolios.
**Money market funds do not assure a stable value of $1 per share and, unlike
bank certificates of deposit, are not insured by the Federal Deposit
Insurance Corporation.
FISCAL 1997 PERFORMANCE OVERVIEW
During the twelve months ended August 31, economic growth continued--taking the
nation's unemployment rate to its lowest point in more than two decades--and
inflation remained on its best behavior. This idyllic confluence pushed stocks
to new heights and provided a solid foundation for bonds.
Though market participants worried that the strong economy and low
unemployment would drive wages and inflation higher, no such increase in the
cost of goods and services materialized. (The Consumer Price Index rose just
2.2% during the fiscal year.) Interest rates reacted accordingly. On balance
during the year, the yield on the benchmark 30-year U.S. Treasury bond declined
by one-half percentage point, to 6.61%. In the municipal market, the yield on
high-grade, long-term municipal bonds dropped on balance to 5.55% from 6.02%.
Yields on high-quality, short-term municipal securities finished the year at
3.65%, exactly where they started.
At the end of the fiscal year, the 5.55% yield on 20-year tax-exempt bonds
was roughly equivalent to the level a year ago and equal to 83% of the yield on
20-year (taxable) U.S. Treasury bonds. For investors in the maximum marginal
tax bracket of 39.6%, the taxable equivalent yield is 9.19%, which continues to
make municipal bonds highly attractive.
The returns provided by the bond market, while quite strong in absolute
terms, were meager in comparison with those of the U.S. stock market. Stocks
surged again in
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the twelve months ended August 31, with the Standard & Poor's 500 Composite
Stock Price Index rocketing to a +40.6% gain. The rosy economic scenario
heightened the already-ebullient mood of investors, with the result that stock
prices rose even faster than the underlying earnings. By the close of the
fiscal year, the prices of the S&P 500 stocks were at or near historic highs in
relation to earnings, dividends, and book values.
Predictably, the decline in interest rates affected the net asset values
of our tightly constructed Portfolios in proportion to their maturities. Our
Long-Term Portfolio--the most sensitive to changes in interest
rates--experienced the largest share-price increase, while our
Intermediate-Term Portfolio--half as sensitive to interest rates--also
benefited from the interest rate decline. Our Short-Term and Limited-Term
Portfolios received only a slight nudge from share-price appreciation, leaving
dividends from tax-exempt interest as the chief source of their total returns.
Our Money Market Portfolio maintained its share price of $1.00, as is expected
though not guaranteed.
We expect to make year-end distributions of realized capital gains to
shareholders of four of our Portfolios. Based on estimates as of August 31, we
expect the distributions to total $0.05 per share for our Intermediate-Term
Portfolio; $0.08 per share for our Insured Long-Term Portfolio; $0.06 for our
Long-Term Portfolio; and $0.05 for our High-Yield Portfolio.
Compared with those of our peers, Vanguard Municipal Bond Fund's
performance was solid, as all but two of our Portfolios outpaced the average
competing funds over the twelve months. This fine accomplishment burnishes our
longer-term competitive record. This is the ninth annual report in which we
have compared returns of the seven Portfolios of Vanguard Municipal Bond Fund
with the returns of their peer fund groups. Out of these 63 side-by-side
comparisons, our Portfolios prevailed in 56, with 2 ties and only 5 "losses."
The past year's results are shown in the table.
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<CAPTION>
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TOTAL RETURNS
FISCAL YEAR ENDED AUGUST 31, 1997
--------------------------------------
AVERAGE
VANGUARD COMPETITIVE VANGUARD
PORTFOLIO FUND FUND ADVANTAGE
- --------------------------------------------------------------------
<S> <C> <C> <C>
Money Market +3.5% +3.0% +0.5%
Short-Term +4.2 +4.3* -0.1
Limited-Term +5.4 +5.0 +0.4
Intermediate-Term +7.3 +7.0 +0.3
Insured Long-Term +8.9 +8.2 +0.7
Long-Term +9.5 +8.8 +0.7
High-Yield +9.5 +9.7 -0.2
- --------------------------------------------------------------------
</TABLE>
*Adjusted for maturity differences.
The slight shortfall of our High-Yield Portfolio is explained in part by
the distress of industrial revenue bonds issued to finance so-called de-inking
plants that process recycled paper. We were hurt by holding two such bonds,
amounting to about 1.7% of the Portfolio. Though our High-Yield Portfolio
generally holds a bigger share of higher-quality issues than our peers--a
policy that has served our shareholders well over the long term--this episode
illustrates that we are not immune to the ever-present risks of investing in
higher-yielding, and thus riskier, bonds.
Over time, the bond market has demonstrated both the negative and positive
effects of interest rate changes. During Vanguard Municipal Bond Fund's past
four fiscal years, rising interest rates have twice hampered bond returns,
while falling interest rates have twice augmented them. This brief history
provides a valuable lesson: Though bond prices can be volatile over short
periods, these fluctuations often cancel each other out over longer periods. As
a result, the long-term returns on bonds are almost always determined by income
returns rather than capital returns. In short, yield matters.
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LONG-TERM PERFORMANCE OVERVIEW
Viewed through the wide-angle lens of our longer-term performance--a much more
useful measure than a twelve-month snapshot--our results are even more
impressive. The Performance Summaries on pages 9 through 15 present the
long-term results for each of our Portfolios, including yearly breakdowns of
the income and capital returns earned by each, as well as cumulative returns
for the period. The table below summarizes the long-term total returns of each
Portfolio relative to the average return of comparable fixed-income mutual
funds for the ten years ended August 31. It also shows how a $10,000 investment
in each fund would have grown over the decade.
As the table shows, each of our Portfolios has outperformed its peer group
during these longer periods. Over the years, our margin of superiority, which
we call the "Vanguard advantage," can add up to considerable sums. Our annual
average margins of superiority range from 0.2 percentage point to 1.3
percentage points, equating over a decade to amounts from $371 to $2,505 (about
4% to 25% of the initial investment) in extra return compared with our peers.
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TOTAL RETURNS
10 YEARS ENDED AUGUST 31, 1997
------------------------------------------------------------------------
FINAL VALUE OF
AVERAGE A $10,000
ANNUAL RATE INITIAL INVESTMENT*
------------------------------------------------------------------------
AVERAGE AVERAGE
VANGUARD COMPETITIVE VANGUARD COMPETITIVE VANGUARD
PORTFOLIO PORTFOLIO FUND PORTFOLIO FUND ADVANTAGE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market +4.1% +3.7% $14,958 $14,367 $ 591
Short-Term +5.0 +4.8** 16,285 15,914 371
Limited-Term +6.2 +5.5 18,234 17,099 1,135
Intermediate-Term +8.0 +6.7 21,545 19,090 2,455
Insured Long-Term +8.6 +7.5 22,741 20,683 2,058
Long-Term +8.8 +7.7 23,314 20,961 2,353
High-Yield +8.9 +7.7 23,509 21,004 2,505
- --------------------------------------------------------------------------------------------------
</TABLE>
*Assuming reinvestment of all income dividends and capital gains distributions.
**Adjusted for maturity differences.
Costs matter for all mutual funds, but particularly for bond funds, where
expenses account for a large share of the difference in the performance of
funds with similar quality and maturity. On that score, as we hope you are
aware, we are without peer. The expense ratios of Vanguard Municipal Bond
Fund's Portfolios averaged about 0.20% of net assets in fiscal 1997 versus the
0.95% expense ratio of the average municipal bond fund--a difference of about
0.75%, or about $7.50 for each $1,000 in assets. The cost advantage flows to
our shareholders, since expenses directly reduce the income passed through to
bond fund investors. Thus, just as yield matters, so cost matters.
Much of the credit for our long-term success also goes to Vanguard Fixed
Income Group, which manages our Portfolios with outstanding expertise and
professionalism within our clearly defined maturity and credit-quality
standards.
The Performance Summaries that follow compare the returns of our six
non-money market Portfolios with unmanaged index benchmarks. Over the past ten
years, all six Portfolios outpaced their competitors, and five of them (our
Short-Term Portfolio was the exception) also outpaced their respective indexes.
This is a noteworthy accomplishment, since the indexes exist only on paper and
are not burdened by the operating, advisory, and securities-transaction costs
that, in the real world, all mutual funds bear to one degree or another.
We caution that the absolute returns shown in the table should not be
considered a promise of what's to come in the municipal bond market. The past
decade has been a generous one for bonds, as interest rates have receded from
levels much higher than those
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prevailing today. Therefore, there is little chance that future returns will be
as high as those of the past decade.
We offer no such warning about our relative performance. We fully expect
that our Portfolios' returns will continue to more than measure up to those of
our peers, given our confidence that Vanguard's low costs and sound management
are enduring advantages.
IN SUMMARY
The rewards of the financial markets, particularly those of the U.S. stock
market, have been abundantly clear over the past three years. Though the
inherent risks of investing may not seem as obvious, we assure you that they
exist. We need look back only a few years for evidence of the wide and
unpredictable swings that are very much a part of bond investing. With bond
yields now near their lows for the past decade, we have taken a conservative
stance, with average maturities somewhat below our norms.
The prudent approach is to bear in mind both risk and reward in
constructing a balanced portfolio of stock funds, bond funds, and reserves in
proportions suitable to your investment goals, time horizon, and tolerance for
market downturns. Then, as we have advised many times in the past, stay the
course toward your investment objective.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
September 17, 1997
NOTE: Vanguard Municipal Bond Fund's fiscal year-end is being changed from
August 31 to October 31. The change will have no effect on the Fund's
investment objective or policies. It is designed to enable the Portfolio
managers to better match the realization of capital gains with the timing of
distributions to the Fund's tax-sensitive shareholders.
In December, shareholders will receive a report similar to this one, but
covering the period from August 31, 1997, through October 31, 1997. After
that, shareholders will receive a semiannual report each June, covering the
six months through April 30, and an annual report each December that covers
the twelve months through October 31.
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PORTFOLIO STATISTICS
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NET ASSET VALUE
PER SHARE 12 MONTHS
------------------------- ---------------------
AUGUST 31, AUGUST 31, INCOME CAPITAL CURRENT
PORTFOLIO 1996 1997 DIVIDENDS GAINS YIELD*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market $ 1.00 $ 1.00 $0.034 -- 3.30%
Short-Term 15.54 15.57 0.610 $0.004 3.70
Limited-Term 10.62 10.71 0.476 -- 4.13
Intermediate-Term 13.04 13.30 0.669 0.003 4.42
Insured Long-Term 12.14 12.45 0.674 0.072 4.92
Long-Term 10.73 11.11 0.588 0.023 4.89
High-Yield 10.39 10.76 0.589 -- 5.04
- -----------------------------------------------------------------------------------------
</TABLE>
*SEC 7-day annualized yield for Money Market Portfolio; SEC 30-day annualized
yield for other Portfolios.
4
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THE MARKETS IN PERSPECTIVE
Year Ended August 31, 1997
U.S. EQUITY MARKETS
To say that investors in financial assets fared well over the fiscal year ended
August 31, 1997, is to be guilty of understatement. Virtually across the
board, returns in the equity and bond markets ranged from quite strong to
exceptional, relative to historical averages. These results can be attributed
to three factors: continued solid economic growth; harnessed inflation,
remaining at levels not experienced since the 1960s; and growth in corporate
profits that was not only impressive but exceeded expectations. The most
surprising aspect of this remarkable period is that the rate of inflation
actually continued to decline despite robust growth and a very low level of
unemployment. According to traditional economic theory, inflation should have
accelerated rather than slowed at this point in the economic cycle. The most
widely accepted explanation for this paradox involves ongoing and substantial
productivity gains that are not apparent from the productivity measures in use
today. Reports indicate that even the Federal Reserve Board is otherwise at a
loss to explain the current "economic nirvana."
The performance of large-capitalization U.S. common stocks was nothing
short of spectacular during the past year, as illustrated by the 40.6% gain
generated by the Standard & Poor's 500 Composite Stock Price Index. This
advance ranks among the top 5% for all 12-month periods in the last 20 years.
The best-performing sectors were technology and financial services, with
increases of 80.5% and 51.9%, respectively. The surge in technology reflects
the exceptional strength in corporate spending on this industry's products,
particularly desktop computers, networking equipment, and software. By
contrast, utility stocks could be considered laggards despite their overall
return of 18.8%.
<TABLE>
<CAPTION>
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AVERAGE ANNUALIZED RETURNS
PERIODS ENDED AUGUST 31, 1997
---------------------------------
1 YEAR 3 YEARS 5 YEARS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 40.6% 26.6% 19.8%
Russell 2000 Index 29.0 20.0 19.4
MSCI EAFE Index 9.4 6.0 11.0
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FIXED-INCOME
Lehman Aggregate Bond Index 10.0% 8.4% 6.9%
Lehman 10-Year Municipal Bond Index 9.3 7.7 7.3
Salomon Brothers Three-Month
U.S. Treasury Bill Index 5.3 5.4 4.6
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OTHER
Consumer Price Index 2.2% 2.6% 2.7%
- -----------------------------------------------------------------------------
</TABLE>
The performance of small-company stocks, while it failed to match the
outsized advance of the S&P 500 Index, cannot be characterized as weak during
this period--the Russell 2000 Index gained 29.0%. The difference in return
between large and small companies can be attributed, at least in part, to the
superior earnings growth achieved by larger companies during the past 24
months. In addition, large companies generated better-than-expected earnings
60% of the time over the past year, compared to only 40% for small firms.
Within sectors, the most dramatic difference between large and small companies
appeared in technology issues. In the Russell 2000 Index, technology stocks
advanced "only" 32.9% in aggregate, nearly 50 percentage points less than their
large-company counterparts.
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U.S. FIXED-INCOME MARKETS
The fixed-income markets also rewarded investors over the past year, as rates
fell across the yield curve. For example, the rates on 1-, 5-, 10-, and 30-year
U.S. Treasury issues fell 0.33%, 0.51%, 0.60%, and 0.51%, respectively, from
August 31, 1996, to August 31, 1997. These declines reflect the continued good
news regarding inflation and the relative dormancy of the Federal Reserve. The
benefit of the drop in rates can be seen in the 10.0% return of the Lehman
Brothers Aggregate Bond Index, the broadest measure of investment-grade issues.
Investors in lower-quality securities fared even better, as illustrated by the
15.2% gain of the Lehman High Yield Bond Index. The strength of the economy
combined with the lack of inflationary pressure produced an ideal environment
for junk bonds.
INTERNATIONAL EQUITY MARKETS
Investments in non-U.S. common stocks did not match the gains in domestic
equities, with the Morgan Stanley Capital International Europe, Australasia,
Far East Index advancing 9.4% in dollars. This Index's relatively modest
performance masks the fact that the European markets were very strong during
the past year, gaining 42.2% in local currency terms and 26.2% in dollars,
while many of the Pacific Basin markets were weak, down 0.7% in local currency
and 9.8% in dollars. The Japanese market declined 11.4% in dollars and 1.9% in
yen terms, despite signs of a strengthening economy. Smaller Asian markets,
such as Malaysia (losing 28.9% in local terms and 39.2% in dollars), suffered
from a variety of challenges, including overvalued currencies, rising interest
rates, and poor earnings.
6
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REPORT FROM THE ADVISER
Interest rates were lower on August 31, the end of Vanguard Municipal Bond
Fund's fiscal year 1997, than at the start of the period. Intermediate- and
long-term rates declined by amounts ranging from about 0.20% to 0.45% (20 to 45
basis points) over the course of the year, with most of the reduction occurring
in the first six months of the period. However, the second half of the fiscal
year was hardly tranquil, as some very significant events moved the bond
markets. First, in March the Federal Reserve Board chose to strike
"preemptively" against inflation by raising short-term interest rates. Second,
Republicans and Democrats were able to reach a compromise on the federal
budget. Third, the economy continued to expand at a rate above 3%. Finally, the
stock market was able to sustain its historic run, reaching record highs in
August.
Total returns for the Vanguard Municipal Bond Fund Portfolios in fiscal
1997 proved to be more rewarding than in the previous year. Total return
consists, of course, of capital appreciation (or depreciation) plus interest
income. As in fiscal 1996, the lion's share of each Portfolio's total return in
fiscal 1997 came from interest income. In addition, the decline in interest
rates over the past 12 months provided some degree of capital appreciation for
most of our Portfolios. The increases in share price were highest for those
Portfolios embracing the greatest amount of market risk. Conversely, these
longer-term Portfolios would have experienced the greatest share-price declines
if interest rates had moved higher during the year. In general, then, each of
the Portfolios performed in accordance with its stated risk parameters.
"IT'S THE ECONOMY, . . ."
In March the Federal Reserve Board decided that the economy's robust growth
rate was worrisome and warranted a rise in short-term interest rates. On March
25, the Fed therefore increased the federal funds rate from 5.25% to 5.50%. At
the time, the move was widely viewed as likely to be the first in a series of
increases in short-term rates. However, five months later, as our fiscal year
came to a close, the March adjustment remained the Fed's only change.
Inflation, as measured by both the Producer Price Index and Consumer Price
Index, has been remarkably restrained. Many economists and Federal Reserve
Board governors do not understand why. Some ascribe the benign inflation trend
to increased productivity fostered by technological innovation. Workers are
able to produce more owing to increased use of advanced technology. Others
believe that U.S. workers have been so traumatized by the corporate
"downsizings" of recent years that they are willing to sacrifice higher wages
for increased job security.
The domestic economy enjoyed the best of all worlds in the second half of
fiscal 1997. It has maintained an annual growth rate above 3%, as measured by
changes in Gross Domestic Product, for the last three quarters. The
unemployment rate dropped by August
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to 4.9%, well below the level long believed to produce increases in labor
costs. The Consumer Confidence Index survey of consumer attitudes suggests that
the public is very optimistic about economic prospects. The question being
asked by many economists is: How long can these benign conditions last? Some
storm clouds may be faintly visible on the horizon. The recent United Parcel
Service strike could be a precursor of future labor unrest. The August
employment report noted that more people were voluntarily leaving their jobs,
presumably because of greater confidence in their ability to find better or
higher-paying jobs elsewhere.
The strength of the economy had some very positive effects for all
investors. For one thing, it enabled Republicans and Democrats to agree on the
federal budget. Last year, the federal government sustained a series of
shutdowns before Congress reached a budget agreement. This year, when budget
negotiators reached an impasse, new projections of higher tax revenues allowed
both sides to claim victory. It seems that government operates very smoothly
when its coffers are full. The new, rosier projections were based, in part, on
the economy's current health. Included in the budget agreement was a reduction
in the capital gains tax rate: Investors who have gains on the sale of assets
owned longer than 18 months will now be subject to a maximum capital gains tax
of 20% rather than 28%.
The stock market continued its protracted rise, reaching record highs in
early August. Investors poured cash into equity funds throughout the fiscal
year, adding fuel to the explosive growth in stock prices. The equity markets
relinquished some of their recent gains in the final three weeks of the fiscal
year. At the period's end on August 31, the Dow Jones Industrial Average and
the Standard & Poor's 500 Composite Stock Price Index were down 7.7% and 6.3%,
respectively, from records attained on August 6.
CONCLUSION
The seven Portfolios of Vanguard Municipal Bond Fund performed in line with
their investment objectives in fiscal 1997. Their performance was what one
would expect, given their clearly defined investment charters. Each Portfolio
provides a degree of share-price stability and income consistent with the
position of its average maturity on the yield curve.
Looking forward, the major question facing the market is how long the
economy can operate at such low levels of unemployment and such strong levels
of growth without showing signs of increases in the rate of inflation. If
inflation does begin to accelerate in fiscal 1998, share-price volatility can
also be expected to increase. Whatever the outcome, the Portfolios of Vanguard
Municipal Bond Fund will continue to provide total returns consistent with our
well-defined investment objectives in the most cost-efficient manner possible.
Ian A. MacKinnon, Managing Director
Christopher M. Ryon, Principal
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
Vanguard Fixed Income Group
September 17, 1997
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.
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 that
annual 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 value of $1 per
share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 10, 1980-AUGUST 31, 1997
- -----------------------------------------------------------
MONEY MARKET PORTFOLIO AVERAGE
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
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
1997 0.0 3.5 3.5 3.0
- -----------------------------------------------------------
</TABLE>
*Average Tax-Exempt Money Market Fund.
See Financial Highlights table on page 30 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
VMBF-Money
Market
<S> <C> <C>
198708 10000 10000
198711 10120 10107
198802 10243 10222
198805 10361 10329
198808 10491 10450
198811 10634 10578
198902 10791 10725
198905 10970 10902
198908 11140 11057
198911 11305 11208
199002 11467 11358
199005 11634 11520
199008 11797 11670
199011 11965 11825
199102 12123 11970
199105 12266 12105
199108 12397 12217
199111 12530 12336
199202 12644 12435
199205 12750 12533
199208 12837 12599
199211 12924 12669
199302 13005 12735
199305 13083 12804
199308 13160 12858
199311 13240 12918
199402 13314 12978
199405 13394 13050
199408 13480 13116
199411 13587 13202
199502 13709 13309
199505 13844 13433
199508 13970 13535
199511 14097 13640
199602 14219 13747
199605 14338 13855
199608 14456 13947
199611 14577 14044
199702 14698 14147
199705 14827 14262
199708 14958 14367
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio 3.47% 3.11% 4.11% $14,958
Average Tax-Exempt Money Market Fund 3.01 2.66 3.69 14,367
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION ------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio 6/10/80 3.44% 3.08% 0.00% 4.12% 4.12%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 1, 1977-AUGUST 31, 1997
- -----------------------------------------------------------
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
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
1997 0.2 4.0 4.2 5.7
- -----------------------------------------------------------
</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.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
VMBF-Short-Term Average Short-Term Lehman 3 Year Municipal
Portfolio Municipal Fund* Bond Index
<S> <C> <C> <C>
198708 10000 10000 10000
198711 10030 10107 10033
198802 10294 10222 10372
198805 10391 10329 10382
198808 10489 10450 10417
198811 10650 10578 10565
198902 10761 10725 10635
198905 10963 10589 10874
198908 11177 11057 11112
198911 11372 11208 11335
199002 11555 11358 11505
199005 11712 11190 11657
199008 11895 11670 11844
199011 12119 11825 12152
199102 12374 12135 12490
199105 12552 11976 12698
199108 12722 12491 12938
199111 12927 12618 13217
199202 13147 12917 13543
199205 13278 12700 13729
199208 13468 13238 14103
199211 13608 13348 14261
199302 13842 13661 14682
199305 13905 13366 14763
199308 14032 13814 15003
199311 14146 13891 15081
199402 14219 14064 15220
199405 14266 13693 15195
199408 14382 14135 15381
199411 14423 14101 15278
199502 14648 14428 15635
199505 14891 14291 16072
199508 15077 14744 16405
199511 15246 14949 16636
199602 15415 15220 16839
199605 15478 14840 16835
199608 15626 15261 17051
199611 15837 15530 17438
199702 15982 15788 17608
199705 16092 15460 17737
199708 16285 15914 18015
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Portfolio 4.22% 3.87% 5.00% $16,285
Average Short-Term Municipal Fund* 4.28 3.75 4.76 15,914
Lehman 3-Year Municipal Bond Index 5.65 5.02 6.06 18,015
- ------------------------------------------------------------------------------------------------------
</TABLE>
*Adjusted for maturity differences.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION -------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Portfolio 9/1/77 4.12% 3.89% 0.25% 4.74% 4.99%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: AUGUST 31, 1987-AUGUST 31, 1997
- -----------------------------------------------------------
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
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
1997 0.8 4.6 5.4 5.7
</TABLE>
*Lehman 3-Year Municipal Bond Index.
See Financial Highlights table on page 32 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
Average Limited-Term Lehman 3 Year Municipal
VMBF-Limited-Term Municipal Fund Bond Index
<S> <C> <C> <C>
198708 10000 10000 10000
198711 10179 10019 10033
198802 10525 10330 10372
198805 10615 10394 10382
198808 10711 10508 10417
198811 10865 10642 10565
198902 10986 10772 10635
198905 11251 10966 10874
198908 11459 11190 11112
198911 11713 11367 11335
199002 11910 11555 11505
199005 12052 11682 11657
199008 12254 11876 11844
199011 12576 12106 12152
199102 12917 12383 12490
199105 13118 12564 12698
199108 13342 12794 12938
199111 13594 12976 13217
199202 13916 13275 13543
199205 14079 13441 13729
199208 14411 13751 14103
199211 14624 13887 14261
199302 15084 14378 14682
199305 15124 14410 14763
199308 15374 14697 15003
199311 15510 14741 15081
199402 15588 14854 15220
199405 15594 14780 15195
199408 15730 14967 15381
199411 15618 14759 15278
199502 16005 15166 15635
199505 16420 15458 16072
199508 16672 15738 16405
199511 16925 15858 16636
199602 17130 16129 16839
199605 17085 16061 16835
199608 17294 16286 17051
199611 17682 16497 17438
199702 17845 16738 17608
199705 17932 16800 17737
199708 18234 17099 18015
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Limited-Term Portfolio 5.44% 4.82% 6.19% $18,234
Average Limited-Term Municipal Fund 4.99 4.45 5.51 17,099
Lehman 3-Year Municipal Bond Index 5.65 5.02 6.06 18,015
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Limited-Term Portfolio 8/31/87 5.25% 4.89% 0.83% 5.37% 6.20%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 1, 1977-AUGUST 31, 1997
- -----------------------------------------------------------
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
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 6.7
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
1997 2.0 5.3 7.3 7.8
</TABLE>
*Lehman 7-Year Municipal Bond Index.
See Financial Highlights table on page 32 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
VMBF-Intermediate-Term Intermediate-Term Lehman 7 Year Municipal
Average Municipal Fund Bond Index
<S> <C> <C> <C>
198708 10000 10000 10000
198711 9957 9944 9845
198802 10557 10361 10400
198805 10493 10364 10280
198808 10722 10496 10447
198811 11001 10678 10587
198902 11233 10784 10701
198905 11663 11116 11047
198908 11861 11313 11295
198911 12125 11528 11549
199002 12323 11653 11753
199005 12493 11824 11890
199008 12579 11955 12055
199011 13076 12328 12500
199102 13433 12596 12863
199105 13784 12877 13081
199108 14107 13123 13369
199111 14439 13405 13705
199202 14737 13682 14035
199205 15049 13947 14256
199208 15591 14403 14760
199211 15840 14586 15002
199302 16836 15310 15815
199305 16845 15374 15752
199308 17390 15880 16328
199311 17546 15975 16403
199402 17681 16038 16515
199405 17578 15826 16274
199408 17824 16031 16560
199411 17168 15444 16000
199502 18280 16303 16919
199505 18913 16926 17595
199508 19218 17168 18013
199511 19745 17574 18439
199602 20019 17765 18655
199605 19747 17579 18410
199608 20078 17836 18715
199611 20783 18402 19405
199702 20908 18501 19578
199705 21084 18674 19667
199708 21545 19090 20171
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate-Term Portfolio 7.31% 6.68% 7.98% $21,545
Average Intermediate-Term Municipal Fund 7.03 5.80 6.68 19,090
Lehman 7-Year Municipal Bond Index 7.78 6.45 7.27 20,171
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION -------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Intermediate-Term Portfolio 9/1/77 7.01% 6.81% 1.77% 6.23% 8.00%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 30, 1984-AUGUST 31, 1997
- -----------------------------------------------------------
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
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
1997 3.1 5.8 8.9 9.3
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 32 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
VMBF-Insured Average Insured Lehman Municipal
Long-Term Long-Term Municipal Fund Bond Index
<S> <C> <C> <C>
198708 10000 10000 10000
198711 9943 9899 9918
198802 10574 10575 10530
198805 10485 10441 10456
198808 10778 10656 10688
198811 11113 11027 10972
198902 11405 11273 11184
198905 12011 11809 11660
198908 12133 11856 11862
198911 12500 12201 12180
199002 12536 12270 12331
199005 12748 12488 12513
199008 12709 12414 12623
199011 13394 13007 13118
199102 13690 13318 13468
199105 14072 13687 13774
199108 14335 13844 14111
199111 14681 14233 14464
199202 15112 14572 14813
199205 15458 14938 15126
199208 16086 15360 15686
199211 16281 15637 15914
199302 17491 17271 16851
199305 17542 16705 16936
199308 18187 17190 17600
199311 18251 17338 17677
199402 18344 18142 17783
199405 17912 16910 17354
199408 18128 16954 17632
199411 17103 16102 16754
199502 18925 18334 18125
199505 19677 18393 18941
199508 19737 18222 19195
199511 20618 19246 19922
199602 20842 20144 20128
199605 20422 18964 19807
199608 20877 19115 20201
199611 21857 20159 21093
199702 21894 20937 21237
199705 22112 20323 21447
199708 22741 20683 22070
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured Long-Term Portfolio 8.93% 7.17% 8.56% $22,741
Average Insured Long-Term Municipal Fund 8.20 6.13 7.54 20,683
Lehman Municipal Bond Index 9.25 7.07 8.24 22,070
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
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 8.08% 7.18% 1.89% 6.64% 8.53%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 1, 1977-AUGUST 31, 1997
- -----------------------------------------------------------
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
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
1997 3.8 5.7 9.5 9.3
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 33 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
VMBF-Long-Term Average General Lehman Municipal
Portfolio Municipal Fund Bond Index
<S> <C> <C> <C>
198708 10000 10000 10000
198711 9918 9859 9918
198802 10616 10551 10530
198805 10435 10411 10456
198808 10757 10710 10688
198811 11106 10993 10972
198902 11410 11260 11184
198905 11992 11717 11660
198908 12133 11892 11862
198911 12538 12145 12180
199002 12566 12237 12331
199005 12777 12372 12513
199008 12726 12447 12623
199011 13419 12904 13118
199102 13754 13225 13468
199105 14139 13540 13774
199108 14489 13898 14111
199111 14847 14169 14464
199202 15286 14544 14813
199205 15686 14862 15126
199208 16315 15447 15686
199211 16518 15569 15914
199302 17756 16581 16851
199305 17827 16639 16936
199308 18450 17332 17600
199311 18523 17360 17677
199402 18655 17449 17783
199405 18234 16884 17354
199408 18464 17141 17632
199411 17336 16162 16754
199502 19116 17561 18125
199505 19909 18270 18941
199508 20077 18400 19195
199511 20966 19133 19922
199602 21247 19294 20128
199605 20856 18908 19807
199608 21299 19261 20201
199611 22305 20072 21093
199702 22366 20164 21237
199705 22656 20345 21447
199708 23314 20961 22070
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Portfolio 9.46% 7.40% 8.83% $23,314
Average General Municipal Fund 8.83 6.29 7.68 20,961
Lehman Municipal Bond Index 9.25 7.07 8.24 22,070
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION -------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-Term Portfolio 9/1/77 8.41% 7.41% 2.02% 6.71% 8.73%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: DECEMBER 27, 1978-AUGUST 31, 1997
- -----------------------------------------------------------
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
1988 0.0 8.0 8.0 6.9
1989 5.5 8.1 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
1997 3.6 5.9 9.5 9.3
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 33 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: AUGUST 31, 1987-AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------
VMBF-High-Yield Average High-Yield Lehman Municipal
Portfolio Municipal Fund Bond Index
<S> <C> <C> <C>
198708 10000 10000 10000
198711 9856 9846 9918
198802 10599 10407 10530
198805 10421 10371 10456
198808 10800 10677 10688
198811 11183 10980 10972
198902 11518 11229 11184
198905 12132 11667 11660
198908 12274 11874 11862
198911 12613 12105 12180
199002 12642 12195 12331
199005 12862 12333 12513
199008 12866 12450 12623
199011 13411 12772 13118
199102 13737 12965 13468
199105 14235 13334 13774
199108 14624 13708 14111
199111 15026 13983 14464
199202 15406 14300 14813
199205 15870 14656 15126
199208 16498 15168 15686
199211 16712 15313 15914
199302 17929 16136 16851
199305 18018 16274 16936
199308 18656 16898 17600
199311 18724 16997 17677
199402 18902 17129 17783
199405 18526 16640 17354
199408 18752 16911 17632
199411 17592 16083 16754
199502 19368 17310 18125
199505 20239 17983 18941
199508 20381 18164 19195
199511 21170 18841 19922
199602 21405 19072 20128
199605 21081 18779 19807
199608 21480 19151 20201
199611 22466 19834 21093
199702 22527 20077 21237
199705 22826 20321 21447
199708 23509 21004 22070
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1997
------------------------------------ FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High-Yield Portfolio 9.45% 7.34% 8.92% $23,509
Average High-Yield Municipal Fund 9.68 6.73 7.70 21,004
Lehman Municipal Bond Index 9.25 7.07 8.24 22,070
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997*
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION -------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High-Yield Portfolio 12/27/78 8.15% 7.38% 1.86% 6.97% 8.83%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
15
<PAGE> 18
PORTFOLIO PROFILE
Money Market Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997. Key elements of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------
<S> <C>
Yield 3.3%
Average Maturity 44 days
Average Quality MIG-1
Expense Ratio 0.19%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
MIG-1/SP-1 64.5%
A-1/P-1 30.0
AAA/AA 5.0
A 0.5
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------------
<S> <C>
Texas 14.5%
Florida 7.1
California 6.8
Michigan 4.8
Illinois 4.3
New York 4.3
Missouri 4.1
Georgia 4.0
Alabama 3.7
Alaska 3.5
- -----------------------------------------------
Top Ten 57.1%
</TABLE>
16
<PAGE> 19
AVERAGE COUPON. The average interest rate, expressed as a percentage of face
value, paid on the bonds held by the portfolio.
AVERAGE DURATION. An estimate of how much a bond portfolio's share price will
fluctuate in response to a change in interest rates. To see how the price
could shift, multiply the portfolio's 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 would decline by about 5%. If rates
decrease by a percentage point, the portfolio's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by the portfolio
reach maturity (or are called) 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
ratings assigned to a portfolio's securities holdings by credit-rating
agencies. The agencies make their judgment after appraising an issuer's ability
to meet its obligations. Quality is graded on a scale, with Aaa or AAA
indicating the most creditworthy bond issuers and SP-1 or MIG-1 indicating the
most creditworthy issuers of money market securities.
BETA. A measure of the magnitude of a portfolio's past share-price fluctuations
in relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a portfolio with a
beta of 1.20 would have seen its share price rise or fall by 12% when the
overall market rose or fell by 10%.
CASH RESERVES. The percentage of a portfolio's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing investments.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a portfolio's securities by
credit rating can help in gauging the risk that returns could be affected by
defaults or other credit problems.
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.
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.
INVESTMENT FOCUS. This grid indicates the focus of a portfolio in terms of two
attributes: average maturity (short, medium, or long) and average credit
quality (high, medium, or low).
LARGEST STATE CONCENTRATIONS. An indicator of diversification. The less
concentrated a portfolio's holdings of bonds, the less the portfolio will be
hurt by any financial problems in a single state or region.
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.
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.
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.
17
<PAGE> 20
PORTFOLIO PROFILE
Short-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997, compared where appropriate to an unmanaged index. Key elements
of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 190
Yield 3.7%
Yield to Maturity 3.8%
Average Coupon 5.2%
Average Maturity 437 days
Average Quality AA+
Average Duration 1.1 years
Expense Ratio 0.19%
Cash Reserves 1.0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
SHORT-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.68 1.00
Beta 0.12 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
AAA 68.6%
AA 24.8
A 4.0
BBB 1.1
BB 1.5
B --
Not Rated --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 43.5%
1-3 Years 51.4
3-5 Years 5.1
Over 5 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------
<S> <C>
California 17.1%
New York 7.5
Massachusetts 7.0
Texas 6.0
Illinois 5.7
Pennsylvania 5.0
Florida 4.6
Georgia 3.7
District of Columbia 3.4
Ohio 3.4
- -----------------------------------------
Top Ten 63.4%
</TABLE>
18
<PAGE> 21
PORTFOLIO PROFILE
Limited-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997, compared where appropriate to an unmanaged index. Key elements
of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 241
Yield 4.1%
Yield to Maturity 4.2%
Average Coupon 6.1%
Average Maturity 3.0 years
Average Quality AA+
Average Duration 2.6 years
Expense Ratio 0.19%
Cash Reserves 0.7%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
LIMITED-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.80 1.00
Beta 0.31 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
AAA 57.1%
AA 30.5
A 6.2
BBB 4.0
BB 2.2
B --
Not Rated --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 10.8%
1-3 Years 44.8
3-5 Years 34.2
5-7 Years 8.3
7-10 Years 1.9
Over 10 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------
<S> <C>
New York 16.4%
California 10.7
Pennsylvania 8.8
Texas 8.4
Massachusetts 5.6
Michigan 5.3
Florida 4.4
Wisconsin 4.1
Washington 3.8
Georgia 3.3
- -----------------------------------------
Top Ten 70.8%
</TABLE>
19
<PAGE> 22
PORTFOLIO PROFILE
Intermediate-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997, compared where appropriate to an unmanaged index. Key elements
of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 766
Yield 4.4%
Yield to Maturity 4.6%
Average Coupon 5.8%
Average Maturity 6.6 years
Average Quality AA+
Average Duration 5.1 years
Expense Ratio 0.19%
Cash Reserves 0.6%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
INTERMEDIATE-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 0.75 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
AAA 60.4%
AA 23.3
A 11.6
BBB 4.2
BB 0.3
B --
Not Rated 0.2
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 11.9%
1-3 Years 11.8
3-5 Years 18.7
5-7 Years 21.7
7-10 Years 19.0
Over 10 Years 16.9
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------
<S> <C>
New York 13.0%
California 10.0
Texas 8.2
Pennsylvania 8.0
New Jersey 5.7
Illinois 5.5
Massachusetts 4.9
Florida 4.1
Georgia 3.6
Washington 3.6
- -----------------------------------------
Top Ten 66.6%
</TABLE>
20
<PAGE> 23
PORTFOLIO PROFILE
Insured Long-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997, compared where appropriate to an unmanaged index. Key elements
of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 248
Yield 4.9%
Yield to Maturity 5.0%
Average Coupon 5.9%
Average Maturity 12.5 years
Average Quality AAA
Average Duration 8.1 years
Expense Ratio 0.19%
Cash Reserves 1.7%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
INSURED LONG-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.19 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
AAA 97.6%
AA 2.4
A --
BBB --
BB --
B --
Not Rated --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 5.7%
1-5 Years 13.4
5-10 Years 17.3
10-20 Years 44.5
20-30 Years 19.1
Over 30 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------
<S> <C>
California 11.0%
Florida 8.1
Pennsylvania 8.1
Texas 7.3
Massachusetts 7.1
New Jersey 4.6
Illinois 4.5
New York 4.2
Michigan 4.1
Ohio 3.9
- -----------------------------------------
Top Ten 62.9%
</TABLE>
21
<PAGE> 24
PORTFOLIO PROFILE
Long-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997, compared where appropriate to an unmanaged index. Key elements
of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 139
Yield 4.9%
Yield to Maturity 4.9%
Average Coupon 6.0%
Average Maturity 12.0 years
Average Quality AA+
Average Duration 7.6 years
Expense Ratio 0.19%
Cash Reserves 0.5%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
LONG-TERM LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.98 1.00
Beta 1.16 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
AAA 52.6%
AA 18.7
A 23.4
BBB 5.3
BB --
B --
Not Rated --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 11.0%
1-5 Years 15.0
5-10 Years 16.4
10-20 Years 38.6
20-30 Years 19.0
Over 30 Years --
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------
<S> <C>
New York 15.4%
California 13.0
Texas 11.2
Pennsylvania 9.4
Massachusetts 7.6
New Jersey 6.0
Illinois 4.7
Ohio 3.7
South Carolina 3.4
Wisconsin 2.9
- -----------------------------------------
Top Ten 77.3%
</TABLE>
22
<PAGE> 25
PORTFOLIO PROFILE
High-Yield Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
August 31, 1997, compared where appropriate to an unmanaged index. Key elements
of this Profile are defined on page 17.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------
<S> <C>
Number of Issues 250
Yield 5.0%
Yield to Maturity 5.4%
Average Coupon 5.9%
Average Maturity 11.6 years
Average Quality AA-
Average Duration 7.6 years
Expense Ratio 0.19%
Cash Reserves 0%
</TABLE>
INVESTMENT FOCUS
- -----------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------
HIGH-YIELD LEHMAN
PORTFOLIO INDEX*
- -----------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.13 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
AAA 54.6%
AA 8.3
A 14.6
BBB 11.6
BB 2.8
B --
Not Rated 8.1
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 7.3%
1-5 Years 10.9
5-10 Years 28.8
10-20 Years 36.2
20-30 Years 16.4
Over 30 Years 0.4
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF TOTAL NET ASSETS)
- -----------------------------------------
<S> <C>
New York 13.7%
California 10.7
Texas 9.3
Pennsylvania 9.0
Florida 8.4
Massachusetts 7.3
Illinois 5.1
Michigan 4.5
Indiana 3.2
District of Columbia 3.1
- -----------------------------------------
Top Ten 74.3%
</TABLE>
23
<PAGE> 26
FINANCIAL STATEMENTS
August 31, 1997
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 a Portfolio invested in futures contracts during the period, the
results of these investments are shown separately.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
MONEY MARKET SHORT-TERM LIMITED-TERM INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------
YEAR ENDED AUGUST 31, 1997
-----------------------------------------------------------
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $180,797 $59,725 $84,467 $329,518
-----------------------------------------------------------
Total Income 180,797 59,725 84,467 329,518
-----------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 735 217 269 925
Management and Administrative 6,664 1,913 2,509 9,031
Marketing and Distribution 1,567 470 497 1,441
Taxes (other than income taxes) 323 90 129 434
Custodian Fees 100 26 32 99
Auditing Fees 10 7 8 11
Shareholders' Reports 90 33 48 163
Annual Meeting and Proxy Costs 8 3 4 14
Directors' Fees and Expenses 11 3 4 15
-----------------------------------------------------------
Total Expenses 9,508 2,762 3,500 12,133
Expenses Paid Indirectly--Note C (100) (34) (96) (397)
-----------------------------------------------------------
Net Expenses 9,408 2,728 3,404 11,736
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 171,389 56,997 81,063 317,782
- ----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 132 592 970 9,488
Futures Contracts -- -- 1,411 (4,325)
- ----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 132 592 2,381 5,163
- ----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities -- 2,384 9,835 106,226
Futures Contracts -- -- 2,619 10,516
- ----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) -- 2,384 12,454 116,742
- ----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $171,521 $59,973 $95,898 $439,687
==========================================================================================================
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
INSURED LONG-TERM LONG-TERM HIGH-YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------
YEAR ENDED AUGUST 31, 1997
----------------------------------------------------
(000) (000) (000)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $111,546 $ 64,496 $119,410
----------------------------------------------------
Total Income 111,546 64,496 119,410
----------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 293 171 307
Management and Administrative 2,917 1724 3,021
Marketing and Distribution 381 236 448
Taxes (other than income taxes) 126 72 133
Custodian Fees 34 21 33
Auditing Fees 8 7 8
Shareholders' Reports 51 25 55
Annual Meeting and Proxy Costs 4 3 5
Directors' Fees and Expenses 4 3 5
----------------------------------------------------
Total Expenses 3,818 2,262 4,015
Expenses Paid Indirectly--Note C (130) (89) (127)
----------------------------------------------------
Net Expenses 3,688 2,173 3,888
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 107,858 62,323 115,522
- ----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 12,355 2,928 14,567
Futures Contracts (4,617) (54) (4,642)
- ----------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 7,738 2,874 9,925
- ----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 55,180 38,537 62,449
Futures Contracts (497) 1,240 934
- ----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 54,683 39,777 63,383
- ----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $170,279 $104,974 $188,830
==========================================================================================================
</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 income earned as
shown under the Operations section. The amounts of Distributions--Realized
Capital Gain may not match the capital gains shown in the Operations section,
because distributions are determined on a tax basis and may be made in a period
different from the one in which the gains were realized on the financial
statements. The Capital Share Transactions section shows the amount
shareholders invested in the Portfolio, either by purchasing shares or by
reinvesting distributions, and the amounts redeemed. The corresponding numbers
of Shares Issued and Redeemed are shown at the end of the Statement.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MONEY MARKET SHORT-TERM
PORTFOLIO PORTFOLIO
---------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------------------------------------
1997 1996 1997 1996
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 171,389 $ 147,299 $ 56,997 $ 55,604
Realized Net Gain (Loss) 132 (75) 592 544
Change in Unrealized Appreciation
(Depreciation) -- -- 2,384 (5,277)
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 171,521 147,224 59,973 50,871
---------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (171,389) (147,299) (56,997) (55,604)
Realized Capital Gain -- -- (392) --
---------------------------------------------------------
Total Distributions (171,389) (147,299) (57,389) (55,604)
---------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 5,660,032 5,021,926 732,007 693,673
Issued in Lieu of Cash Distributions 159,979 136,322 48,457 46,966
Redeemed (5,099,054) (4,699,545) (775,966) (721,263)
---------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 720,957 458,703 4,498 19,376
- ------------------------------------------------------------------------------------------------------
Total Increase 721,089 458,628 7,082 14,643
- ------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 4,624,323 4,165,695 1,456,652 1,442,009
---------------------------------------------------------
End of Year $5,345,412 $4,624,323 $1,463,734 $1,456,652
======================================================================================================
(1)Shares Issued (Redeemed)
Issued 5,660,032 5,021,926 47,037 44,518
Issued in Lieu of Cash Distributions 159,979 136,322 3,113 3,015
Redeemed (5,099,054) (4,699,545) (49,869) (46,293)
---------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 720,957 458,703 281 1,240
======================================================================================================
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
LIMITED-TERM INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
---------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------------------------------------
1997 1996 1997 1996
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 81,063 $ 77,395 $ 317,782 $ 293,878
Realized Net Gain (Loss) 2,381 798 5,163 13,206
Change in Unrealized Appreciation
(Depreciation) 12,454 (16,247) 116,742 (62,542)
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 95,898 61,946 439,687 244,542
---------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (81,063) (77,395) (317,782) (293,878)
Realized Capital Gain -- -- (1,435) (3,701)
---------------------------------------------------------
Total Distributions (81,063) (77,395) (319,217) (297,579)
---------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 672,438 638,324 1,549,834 1,405,307
Issued in Lieu of Cash Distributions 63,785 61,604 236,107 221,318
Redeemed (582,527) (592,463) (1,175,502) (1,095,077)
---------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 153,696 107,465 610,439 531,548
- ------------------------------------------------------------------------------------------------------
Total Increase 168,531 92,016 730,909 478,511
- ------------------------------------------------------------------------------------------------------
Net Assets
Beginning of Year 1,760,575 1,668,559 5,926,772 5,448,261
---------------------------------------------------------
End of Year $1,929,106 $1,760,575 $6,657,681 $5,926,772
======================================================================================================
(1)Shares Issued (Redeemed)
Issued 62,932 59,690 117,359 106,500
Issued in Lieu of Cash Distributions 5,970 5,763 17,869 16,790
Redeemed (54,564) (55,453) (89,141) (83,215)
---------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 14,338 10,000 46,087 40,075
======================================================================================================
</TABLE>
27
<PAGE> 30
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
INSURED LONG-TERM LONG-TERM
PORTFOLIO PORTFOLIO
---------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------------------------------------
1997 1996 1997 1996
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 107,858 $ 107,194 $ 62,323 $ 59,677
Realized Net Gain (Loss) 7,738 8,635 2,874 7,348
Change in Unrealized Appreciation
(Depreciation) 54,683 (6,137) 39,777 (3,601)
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 170,279 109,692 104,974 63,424
---------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (107,858) (107,194) (62,323) (59,677)
Realized Capital Gain (11,310) -- (2,409) --
---------------------------------------------------------
Total Distributions (119,168) (107,194) (64,732) (59,677)
---------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 265,675 246,307 221,419 211,755
Issued in Lieu of Cash Distributions 76,210 67,724 44,013 40,407
Redeemed (305,317) (315,459) (194,173) (199,825)
---------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 36,568 (1,428) 71,259 52,337
- ------------------------------------------------------------------------------------------------------
Total Increase 87,679 1,070 111,501 56,084
- ------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,936,378 1,935,308 1,110,204 1,054,120
---------------------------------------------------------
End of Year $2,024,057 $1,936,378 $1,221,705 $1,110,204
======================================================================================================
(1)Shares Issued (Redeemed)
Issued 21,609 20,072 20,226 19,545
Issued in Lieu of Cash Distributions 6,179 5,518 4,015 3,730
Redeemed (24,797) (25,747) (17,737) (18,472)
---------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 2,991 (157) 6,504 4,803
======================================================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
HIGH-YIELD
PORTFOLIO
-----------------------------
YEAR ENDED AUGUST 31,
-----------------------------
1997 1996
(000) (000)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 115,522 $ 110,515
Realized Net Gain (Loss) 9,925 8,831
Change in Unrealized Appreciation (Depreciation) 63,383 (18,871)
-----------------------------
Net Increase in Net Assets Resulting from Operations 188,830 100,475
-----------------------------
DISTRIBUTIONS
Net Investment Income (115,522) (110,515)
Realized Capital Gain -- --
-----------------------------
Total Distributions (115,522) (110,515)
-----------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 480,518 472,524
Issued in Lieu of Cash Distributions 77,020 74,934
Redeemed (422,965) (417,820)
-----------------------------
Net Increase (Decrease) from Capital Share Transactions 134,573 129,638
- ------------------------------------------------------------------------------------------------------
Total Increase 207,881 119,598
- ------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,984,763 1,865,165
-----------------------------
End of Year $2,192,644 $1,984,763
======================================================================================================
(1)Shares Issued (Redeemed)
Issued 45,326 44,918
Issued in Lieu of Cash Distributions 7,255 7,127
Redeemed (39,946) (39,852)
-----------------------------
Net Increase (Decrease) in Shares Outstanding 12,635 12,193
======================================================================================================
</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 are not required to report
a Portfolio Turnover Rate.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
YEAR ENDED AUGUST 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<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 .034 .036 .024 .025
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
----------------------------------------------------------
Total from Investment Operations .034 .034 .036 .024 .025
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.034) (.034) (.036) (.024) (.025)
Distributions from Realized Capital Gains -- -- -- -- --
----------------------------------------------------------
Total Distributions (.034) (.034) (.036) (.024) (.025)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN 3.47% 3.48% 3.63% 2.43% 2.51%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $5,345 $4,624 $4,166 $4,164 $3,538
Ratio of Total Expenses to Average Net Assets 0.19% 0.20% 0.22% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 3.41% 3.42% 3.56% 2.41% 2.48%
Portfolio Turnover Rate N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $15.54 $15.59 $15.46 $15.63 $15.64
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .610 .609 .600 .534 .609
Net Realized and Unrealized Gain (Loss) on Investments .034 (.050) .131 (.150) .033
----------------------------------------------------------
Total from Investment Operations .644 .559 .731 .384 .642
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.610) (.609) (.600) (.534) (.609)
Distributions from Realized Capital Gains (.004) -- (.001) (.020) (.043)
----------------------------------------------------------
Total Distributions (.614) (.609) (.601) (.554) (.652)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.57 $15.54 $15.59 $15.46 $15.63
============================================================================================================================
TOTAL RETURN 4.22% 3.64% 4.83% 2.49% 4.18%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,464 $1,457 $1,442 $1,561 $1,329
Ratio of Total Expenses to Average Net Assets 0.19% 0.20% 0.22% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 3.91% 3.90% 3.88% 3.42% 3.88%
Portfolio Turnover Rate 34% 33% 32% 27% 46%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
LIMITED-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.62 $10.71 $10.57 $10.80 $10.64
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .476 .483 .476 .454 .485
Net Realized and Unrealized Gain (Loss) on Investments .090 (.090) .140 (.208) .209
----------------------------------------------------------
Total from Investment Operations .566 .393 .616 .246 .694
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.476) (.483) (.476) (.454) (.485)
Distributions from Realized Capital Gains -- -- -- (.022) (.049)
----------------------------------------------------------
Total Distributions (.476) (.483) (.476) (.476) (.534)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.71 $10.62 $10.71 $10.57 $10.80
============================================================================================================================
TOTAL RETURN 5.44% 3.73% 5.99% 2.31% 6.68%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,929 $1,761 $1,669 $1,814 $1,625
Ratio of Total Expenses to Average Net Assets 0.19% 0.21% 0.22% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 4.46% 4.51% 4.51% 4.24% 4.50%
Portfolio Turnover Rate 28% 27% 35% 21% 20%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 34
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $13.04 $13.14 $13.02 $13.45 $12.85
INVESTMENT OPERATIONS
Net Investment Income .669 .671 .686 .683 .710
Net Realized and Unrealized Gain (Loss) on Investments .263 (.091) .278 (.354) .721
----------------------------------------------------------
Total from Investment Operations .932 .580 .964 .329 1.431
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.669) (.671) (.686) (.683) (.710)
Distributions from Realized Capital Gains (.003) (.009) (.158) (.076) (.121)
----------------------------------------------------------
Total Distributions (.672) (.680) (.844) (.759) (.831)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.30 $13.04 $13.14 $13.02 $13.45
============================================================================================================================
TOTAL RETURN 7.31% 4.47% 7.82% 2.49% 11.54%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $6,658 $5,927 $5,448 $5,068 $4,945
Ratio of Total Expenses to Average Net Assets 0.19% 0.20% 0.22% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.07% 5.09% 5.35% 5.15% 5.41%
Portfolio Turnover Rate 15% 14% 12% 18% 15%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
-------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR $12.14 $12.12 $11.98 $12.89 $12.28
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .674 .670 .684 .699 .718
Net Realized and Unrealized Gain (Loss) on Investments .382 .020 .313 (.734) .813
-------------------------------------------------------
Total from Investment Operations 1.056 .690 .997 (.035) 1.531
-------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.674) (.670) (.684) (.699) (.718)
Distributions from Realized Capital Gains (.072) -- (.173) (.176) (.203)
-------------------------------------------------------
Total Distributions (.746) (.670) (.857) (.875) (.921)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.45 $12.14 $12.12 $11.98 $12.89
=========================================================================================================================
TOTAL RETURN 8.93% 5.77% 8.88% -0.32% 13.06%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $2,024 $1,936 $1,935 $1,938 $2,194
Ratio of Total Expenses to Average Net Assets 0.19% 0.20% 0.22% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.47% 5.46% 5.82% 5.62% 5.77%
Portfolio Turnover Rate 18% 18% 7% 16% 30%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LONG-TERM PORTFOLIO
YEAR ENDED AUGUST 31,
-------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.73 $10.68 $10.58 $11.38 $10.95
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .588 .591 .608 .609 .640
Net Realized and Unrealized Gain (Loss) on Investments .403 .050 .256 (.595) .715
-------------------------------------------------------
Total from Investment Operations .991 .641 .864 .014 1.355
-------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.588) (.591) (.608) (.609) (.640)
Distributions from Realized Capital Gains (.023) -- (.156) (.205) (.285)
-------------------------------------------------------
Total Distributions (.611) (.591) (.764) (.814) (.925)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.11 $10.73 $10.68 $10.58 $11.38
=========================================================================================================================
TOTAL RETURN 9.46% 6.08% 8.74% 0.08% 13.09%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,222 $1,110 $1,054 $1,001 $1,131
Ratio of Total Expenses to Average Net Assets 0.19% 0.20% 0.23% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.37% 5.45% 5.87% 5.56% 5.81%
Portfolio Turnover Rate 9% 26% 35% 45% 36%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD PORTFOLIO
YEAR ENDED AUGUST 31,
-------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.39 $10.43 $10.39 $11.17 $10.76
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .589 .594 .625 .626 .669
Net Realized and Unrealized Gain (Loss) on Investments .370 (.040) .213 (.566) .664
-------------------------------------------------------
Total from Investment Operations .959 .554 .838 .060 1.333
-------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.589) (.594) (.625) (.626) (.669)
Distributions from Realized Capital Gains -- -- (.173) (.214) (.254)
-------------------------------------------------------
Total Distributions (.589) (.594) (.798) (.840) (.923)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.76 $10.39 $10.43 $10.39 $11.17
=========================================================================================================================
TOTAL RETURN 9.45% 5.39% 8.69% 0.52% 13.08%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $2,193 $1,985 $1,865 $1,781 $1,931
Ratio of Total Expenses to Average Net Assets 0.19% 0.20% 0.22% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.56% 5.66% 6.15% 5.83% 6.15%
Portfolio Turnover Rate 27% 19% 33% 50% 34%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
valued at amortized cost, which approximates market value. Other Portfolios:
Bonds, and temporary cash investments acquired over 60 days to maturity, are
valued using the latest bid prices or using valuations based on a matrix system
(which considers such factors as security prices, yields, maturities, and
ratings), both as furnished by independent pricing services. Other temporary
cash investments are valued at amortized cost, which approximates market value.
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 or
sell futures contracts instead of bonds to take advantage of pricing
differentials between the futures contracts and the underlying 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. The aggregate principal amounts of the contracts are not recorded in
the financial statements. Fluctuations in the values of futures contracts are
recorded in the Statement of Net Assets as an asset (liability) and in the
Statement of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized futures gains
(losses).
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, 1997, the Fund had contributed capital aggregating
$1,444,000 to Vanguard (included in Other Assets), representing 7.2% of
Vanguard's capitalization. The Fund's Directors and officers are also Directors
and officers of Vanguard.
34
<PAGE> 37
C. The Fund's investment adviser may direct new issue 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 administrative
expenses. The Fund's custodian bank has also agreed to reduce its fees when the
Fund maintains cash on deposit in the noninterest-bearing custody account. For
the year ended August 31, 1997, 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 -- $100 --
Short-Term $ 8 26 --
Limited-Term 64 32 0.01%
Intermediate-Term 298 99 0.01
Insured Long-Term 96 34 0.01
Long-Term 68 21 0.01
High-Yield 94 33 0.01
-----------------------------------------------------------------------
</TABLE>
D. During the year ended August 31, 1997, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
(000)
---------------------------------
PORTFOLIO PURCHASES SALES
-----------------------------------------------------------------------
<S> <C> <C>
Short-Term $ 495,483 $298,029
Limited-Term 864,560 470,377
Intermediate-Term 1,551,124 816,538
Insured Long-Term 468,530 341,487
Long-Term 233,266 91,340
High-Yield 859,937 506,276
-----------------------------------------------------------------------
</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, 1997, or capital losses available to offset future capital gains:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
CAPITAL LOSS
-------------------------------
CAPITAL GAINS EXPIRATION
AVAILABLE FOR FISCAL YEAR(S)
DISTRIBUTION AMOUNT ENDING
PORTFOLIO (000) (000) AUGUST 31
-----------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $ 634 2002-2004
Short-Term $ 532 -- --
Limited-Term -- 2,143 2004
Intermediate-Term 27,340 -- --
Insured Long-Term 13,299 -- --
Long-Term 6,521 -- --
High-Yield 10,842 -- --
-----------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
The High-Yield Portfolio used a capital loss carryforward of $8,112,000 to
offset taxable capital gains realized during the year ended August 31, 1997,
reducing the amount of capital gains that would otherwise be available to
distribute to shareholders.
F. At August 31, 1997, 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 $ 5,782 $ (168) $ 5,614
Limited-Term 20,049 (865) 19,184
Intermediate-Term 313,912 (877) 313,035
Insured Long-Term 173,278 (1,165) 172,113
Long-Term 99,127 (519) 98,608
High-Yield 153,013 (31,888) 121,125
-----------------------------------------------------------------------
</TABLE>
At August 31, 1997, the aggregate settlement value of open futures
contracts expiring through December 1997 and the related unrealized
appreciation (depreciation) were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(000)
--------------------------------
AGGREGATE UNREALIZED
NUMBER OF SETTLEMENT APPRECIATION
PORTFOLIO/FUTURES CONTRACTS SHORT CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited-Term/
5-Year U.S. Treasury Note 275 $ 29,270 $ 153
Intermediate-Term/
U.S. Treasury Note 6,298 685,596 1,661
Insured Long-Term/
U.S. Treasury Bond 2,047 231,183 (497)
Long-Term/
U.S. Treasury Note 623 70,360 (250)
High-Yield/
U.S. Treasury Bond 2,211 249,705 (728)
- --------------------------------------------------------------------------------
</TABLE>
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 and Director of Rhone-Poulenc Rorer, Inc.; Managing Director
of Global Health Care Partners/DLJ Merchant Banking Partners; Director of Sun
Company, Inc., and Westinghouse Electric Corp.
BARBARA BARNES HAUPTFUHRER
Director of The Great Atlantic and Pacific Tea Co., IKON Office Solutions,
Inc., Raytheon Co., Knight-Ridder, Inc., and Massachusetts Mutual Life
Insurance Co.; Trustee Emerita of Wellesley College.
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., Procter & Gamble 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; Managing Director 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
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DISTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MACKINNON
Managing Director, Fixed Income Group.
F. WILLIAM MCNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's 500," "S&P 500(R)," "Standard & Poor's(R)," "S&P(R)," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell Company
is the owner of trademarks and copyrights relating to the Russell Indexes.
"Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire Associates.
<PAGE> 40
[PHOTO]
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard/Windsor Fund
Vanguard/Windsor II
Vanguard Equity Income Fund
Vanguard Growth and Income Portfolio
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 International Value 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 Treasury Money Market Portfolio
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, NY, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds (CA, FL, NJ, NY, OH, PA)
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
http://www.vanguard.com
[email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
Q950-8/97 | (C) 1997 Vanguard Marketing Corporation, Distributor
<PAGE> 41
VANGUARD MUNICIPAL BOND FUND
FINANCIAL STATEMENTS
August 31, 1997
The Statement of Net Assets should be read in conjunction with the Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes
to Financial Statements, all of which appear in the accompanying report.
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio's municipal bond
holdings by state, 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 ..... 20
Insured Long-Term Portfolio ..... 34
Long-Term Portfolio ............. 41
High-Yield Portfolio ............ 45
Key to Abbreviations ............ 51
Report of Independent Accountants 52
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.8%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA (3.7%)
Alabama Special Care Fac. Finance Auth. of the
City of Montgomery Hosp. Rev. VRDO 3.30% 9/3/97 (3) $ 21,400 $ 21,400
Birmingham AL GO VRDO 3.30% 9/3/97 (2)LOC 31,800 31,800
Birmingham AL GO VRDO 3.35% 9/4/97 LOC 15,800 15,800
Birmingham AL GO VRDO 3.40% 9/3/97 LOC 28,900 28,900
Huntsville AL Health Care Auth.VRDO 3.30% 9/4/97 (1) 28,300 28,300
McIntosh AL IDR PCR VRDO (Ciba-Geigy Corp. Project) 3.30% 9/3/97 LOC 25,000 25,000
McIntosh AL IDR PCR VRDO (Ciba-Geigy Corp. Project) 3.75% 9/3/97 LOC 12,100 12,100
Mobile AL IDR VRDO (Kimberly-Clark Tissue Co. Project) 3.30% 9/3/97 33,550 33,550
-----------
196,850
-----------
ALASKA (3.5%)
Alaska Housing Finance Corp. VRDO 3.30% 9/3/97 94,000 94,000
Alaska Housing Finance Corp. VRDO 3.35% 9/3/97 23,900 23,900
Anchorage AK Electric Util. Rev. VRDO (Muni. Light & Power) 3.35% 9/3/97 LOC 18,000 18,000
Anchorage AK TAN 4.00% 12/17/97 12,000 12,016
</TABLE>
1
<PAGE> 42
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Valdez AK Marine Terminal VRDO (Exxon Pipeline Project) 3.75% 9/3/97 $ 10,000 $ 10,000
Valdez AK Marine Terminal VRDO (Mobile Pipeline Co. Project) 3.30% 9/3/97 28,350 28,350
-----------
186,266
-----------
ARIZONA (1.0%)
Arizona Health Fac. Auth. VRDO (Samaritan Health Services) 3.30% 9/4/97 (3) 26,760 26,760
Maricopa County AZ PCR VRDO (Arizona Public Service Palo Verde) 3.70% 9/3/97 LOC 11,900 11,900
Scottsdale AZ IDA Hosp. Rev. VRDO
(Scottsdale Memorial Health System) 3.25% 9/3/97 (2) 13,500 13,500
-----------
52,160
-----------
CALIFORNIA (6.8%)
Alameda-Contra Costa CA School Financing Auth. COP
(Capital Improvement Financing Pooled Project) 3.10% 9/4/97 LOC 14,590 14,590
California GO CP 3.80% 10/16/97 35,200 35,200
California Higher Educ. Loan Auth. Student Loan Rev. PUT 3.95% 5/1/98 LOC 49,300 49,300
California Higher Educ. Loan Auth. Student Loan Rev. PUT 4.00% 7/1/98 LOC 16,000 16,000
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.30% 9/3/97 LOC 9,650 9,650
Contra Costa County CA 4.50% 7/1/98 20,000 20,106
Los Angeles City CA TRAN 4.50% 6/30/98 24,000 24,119
Los Angeles CA Unified School Dist. TRAN 4.50% 9/30/97 20,800 20,813
Los Angeles County CA Capital Asset Lease CP 3.80% 9/12/97 LOC 25,000 25,000
Los Angeles County CA Metro Transp. Auth. CP 3.875% 9/4/97 LOC 31,720 31,720
Riverside County CA VRDO (Public County Fac. Project) 3.10% 9/9/97 LOC 4,900 4,900
Sacramento County CA TRAN 4.50% 9/30/97 27,115 27,132
San Diego CA Area Local Govt. COP Pooled TRAN 4.75% 10/1/97 13,000 13,010
San Diego CA Unified School Dist. TRAN 4.75% 10/1/97 14,400 14,413
San Diego County CA TRAN 4.375% 9/30/97 LOC 33,500 33,518
San Francisco City & County CA TRAN 4.50% 10/8/97 10,000 10,007
Stanislaus CA TRAN 4.50% 7/9/98 14,000 14,068
-----------
363,546
-----------
COLORADO (1.3%)
Colorado TRAN 4.50% 6/26/98 31,000 31,161
Colorado Health Fac. Auth. Rev. VRDO (Kaiser Permanente) 3.25% 9/3/97 6,600 6,600
Colorado Health Fac. Auth. Rev. VRDO (Kaiser Permanente) 3.30% 9/3/97 12,000 12,000
Colorado Health Fac. Auth. Rev. VRDO (Sisters of Charity) 3.35% 9/4/97 5,300 5,300
Moffat County CO PCR VRDO (PacifiCorp Project) 3.75% 9/3/97 (2) 13,805 13,805
-----------
68,866
-----------
CONNECTICUT (0.1%)
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 4.80% 9/1/97 6,350 6,350
-----------
DISTRICT OF COLUMBIA (0.6%)
District of Columbia VRDO (George Washington Univ.) 3.60% 9/3/97 LOC 31,500 31,500
-----------
FLORIDA (7.1%)
Dade County FL Water & Sewer System Rev. TOB VRDO (Eagle Trust) 3.41% 9/4/97 (3) 24,000 24,000
Dade County FL Water & Sewer System Rev. VRDO 3.25% 9/3/97 (3) 48,319 48,319
Florida Dept. of General Services Rev.
(Dept. of Environmental Protection Preservation-2000) 5.00% 7/1/98 7,015 7,080
Florida State Muni. Power Agency VRDO (Stanton Project) 3.35% 9/4/97 (1) 24,195 24,195
Gulf Breeze FL Local Govt. Loan Program VRDO 3.30% 9/4/97 (3) 39,365 39,365
Hillsborough County FL IDA PCR VRDO (Tampa Electric Co. Project) 3.65% 9/3/97 5,320 5,320
Hillsborough County FL IDA PCR VRDO (Tampa Electric Co. Project) 3.75% 9/3/97 9,400 9,400
Jacksonville FL Electric Auth. System 3.75% 9/10/97 9,000 9,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.70% 10/14/97 28,500 28,500
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.70% 11/10/97 20,500 20,500
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.80% 12/15/97 21,500 21,500
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.85% 9/17/97 7,000 7,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.85% 11/18/97 31,000 31,000
Lee County FL Hosp. Board CP (Lee Memorial Hosp. Project) 3.85% 12/18/97 30,505 30,505
Orange County FL Health Fac. Auth. VRDO
(Adventist Health System/Sunbelt) 3.30% 9/4/97 LOC 36,200 36,200
Pinellas County FL Water Rev. Refunding 4.50% 10/1/97 (2) 7,185 7,189
</TABLE>
2
<PAGE> 43
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
St. Lucie County FL PCR CP (Florida Power & Light Co.) 3.80% 9/18/97 $ 3,700 $ 3,700
Sunshine State FL Govt. Financing Comm. CP 3.70% 10/23/97 LOC 17,200 17,200
West Orange FL Memorial Hosp. Tax Dist. Rev. CP 3.75% 9/8/97 LOC 9,500 9,500
-----------
379,473
-----------
GEORGIA (4.0%)
Burke County GA Dev. Auth. PCR (Oglethorpe Power Corp.) 3.60% 12/1/97 (2) 20,000 20,000
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Corp.) 3.25% 9/3/97 (3) 53,820 53,820
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Corp.) 3.25% 9/3/97 (3) 34,900 34,900
Dekalb County GA TAN 4.00% 12/31/97 20,000 20,030
Macon-Bibb County GA Hosp. Auth. Rev. VRDO
(Medical Center of Central Georgia) 3.40% 9/3/97 LOC 5,000 5,000
Muni. Electric Auth. of Georgia CP (Subordinate Bonds Project) 3.75% 10/21/97 LOC 25,000 25,000
Muni. Electric Auth. of Georgia General Resolution CP 3.75% 10/21/97 LOC 7,385 7,385
Muni. Electric Auth. of Georgia VRDO (Sublien Bonds Project) 3.35% 9/3/97 LOC 4,600 4,600
Muni. Gas Auth. of Georgia VRDO (Agency Project) 3.30% 9/3/97 LOC 43,500 43,500
-----------
214,235
-----------
HAWAII (0.8%)
Hawaii GO 4.50% 1/1/98 5,000 5,009
Hawaii GO 5.00% 11/1/97 4,000 4,007
Honolulu HI City & County CP 3.55% 9/9/97 25,600 25,600
Honolulu HI City & County CP 3.80% 9/10/97 4,000 4,000
Honolulu HI City & County CP 3.90% 9/12/97 4,100 4,100
-----------
42,716
-----------
IDAHO (0.5%)
Idaho TAN 4.625% 6/30/98 25,000 25,149
-----------
ILLINOIS (4.3%)
Chicago IL Water Rev. 4.70% 11/1/97 (2) 3,250 3,254
Cook County IL 4.75% 11/15/97 (3) 5,000 5,009
Illinois Dev. Finance Auth. PCR VRDO (Illinois Power Co. Project) 3.30% 9/3/97 LOC 13,900 13,900
Illinois Educ. Fac. VRDO (Depaul Univ.) 3.35% 9/3/97 LOC 33,600 33,600
Illinois GO 5.125% 12/1/97 (3) 20,000 20,073
Illinois Health Fac. Auth. PUT (Evanston Hosp. Corp.) 3.75% 1/15/98 17,000 17,000
Illinois Heatlh Fac. Auth. VRDO (Franscican Sisters Health Care Corp.) 3.30% 9/3/97 LOC 27,000 27,000
Illinois Health Fac. Auth. VRDO (Hosp. Sisters Service) 3.30% 9/3/97 (1) 23,700 23,700
Illinois Health Fac. Auth. VRDO (Pooled Finance) 3.30% 9/3/97 LOC 6,000 6,000
Illinois Health Fac. Auth. VRDO (Swedish Covenant Hosp.) 3.30% 9/3/97 (2) 34,500 34,500
Illinois Health Fac. Auth. VRDO (Univ. of Chicago Hosp. Project) 3.30% 9/3/97 (1) 21,000 21,000
Illinois Toll Highway Auth. VRDO 3.25% 9/3/97 (1)LOC 12,580 12,580
Schaumburg IL VRDO 3.40% 9/3/97 10,800 10,800
-----------
228,416
-----------
INDIANA (1.6%)
Hammond City IN PCR VRDO (Amoco Oil Co. Project) 3.70% 9/3/97 9,390 9,390
Indiana Educ. Fac. Auth. VRDO (Univ. of Notre Dame Du Lac Project) 3.20% 9/4/97 15,400 15,400
Indiana Health Fac. Finance Auth. Hosp. Rev. VRDO
(Clarian Health Partners) 3.30% 9/3/97 31,400 31,400
Mt. Vernon IN PCR PUT (Southern Indiana Gas & Electric) 4.05% 5/1/98 12,000 12,027
Petersburg IN PCR CP (Indianapolis Power & Light Co.) 3.60% 9/11/97 11,000 11,000
Rockport City IN PCR VRDO (AEP Generating Co. Project) 3.75% 9/3/97 (2) 5,100 5,100
-----------
84,317
-----------
KANSAS (0.4%)
Burlington KS PCR CP (Kansas City Power & Light) 3.60% 9/9/97 LOC 12,000 12,000
Overland Park KS Muni. Temp Notes 4.25% 4/1/98 10,900 10,931
-----------
22,931
-----------
KENTUCKY (2.2%)
Kentucky Econ. Dev. Finance Auth. Hosp. Rev. VRDO
(Baptist Healthcare System Obligation Group) 3.30% 9/3/97 LOC 82,000 82,000
Kentucky Econ. Dev. Finance Auth. Hosp. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.30% 9/3/97 30,900 30,900
Trimble County KY PCR (Louisville Gas & Electric Project) 3.60% 9/8/97 2,500 2,500
-----------
115,400
-----------
</TABLE>
3
<PAGE> 44
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA (1.9%)
East Baton Rouge Parish LA PCR VRDO (Exxon Project) 3.70% 9/3/97 $ 2,800 $ 2,800
Louisiana Public Fac. Auth. Hosp. Rev. CP
(Our Lady of the Lake Regional Medical Center) 3.75% 10/24/97 (4) 15,500 15,500
Louisiana Public Fac. Auth. Hosp. Rev. CP
(Our Lady of the Lake Regional Medical Center) 3.80% 9/10/97 (4) 12,600 12,600
Louisiana Public Fac. Auth. Hosp. Rev. CP
(Our Lady of the Lake Regional Medical Center) 3.90% 9/12/97 (4) 11,400 11,400
Louisiana Public Fac. Auth. Hosp. Rev. CP
(Our Lady of the Lake Regional Medical Center) 3.90% 9/24/97 (4) 5,760 5,760
Louisiana Public Fac. Auth. Hosp. Rev. CP
(Our Lady of the Lake Regional Medical Center) 3.95% 9/24/97 (4) 20,000 20,000
Louisiana Public Fac. Auth. Rev. CP (Sisters of Charity) 3.80% 9/12/97 9,000 9,000
Louisiana Public Fac. Auth. Rev. VRDO (Sisters of Charity) 3.30% 9/3/97 24,600 24,600
-----------
101,660
-----------
MAINE (0.4%)
Maine Health & Higher Educ. Fac. Auth. VRDO (Bowdoin College) 3.30% 9/3/97 LOC 13,500 13,500
Maine Muni. Bond Bank 4.125% 11/1/97 10,000 10,004
-----------
23,504
-----------
MARYLAND (0.8%)
Montgomery MD Consolidated BAN CP 3.55% 9/9/97 15,000 15,000
Washington MD Suburban Sanitation Dist. BAN VRDO 3.35% 9/3/97 25,800 25,800
-----------
40,800
-----------
MASSACHUSETTS (0.7%)
Massachusetts GO VRDO 3.25% 9/4/97 39,500 39,500
-----------
MICHIGAN (4.8%)
Detroit MI City School Dist. State School Aid 4.50% 5/1/98 30,000 30,116
Michigan GO Notes 4.50% 9/30/97 91,700 91,773
Michigan Housing Dev. Auth. Rental Rev. VRDO 3.30% 9/3/97 LOC 37,700 37,700
Michigan State Hosp. Finance Auth. VRDO
(Daughters of Charity-Providence Hosp.) 3.30% 9/3/97 26,850 26,850
Oakland County MI Econ. Dev. Corp. VRDO (Cranbrook Educ. Comm.) 3.40% 9/4/97 4,500 4,500
Regents of Univ. of Michigan Hosp. Rev. VRDO 3.75% 9/3/97 35,200 35,200
Univ. of Michigan Hosp. Rev. VRDO 3.75% 9/3/97 10,300 10,300
Univ. of Michigan Rev. VRDO (Medical Service Plan) 3.75% 9/3/97 19,000 19,000
-----------
255,439
-----------
MINNESOTA (0.1%)
Canby MN Community Hosp. Dist. #1 Yellow Medicine County VRDO
(Sioux Valley Hospitals & Health Systems) 3.40% 9/5/97 3,870 3,870
-----------
MISSISSIPPI (0.2%)
Jackson County MS Port Fac. VRDO (Chevron USA Inc. Project) 3.70% 9/3/97 9,000 9,000
-----------
MISSOURI (4.1%)
Independence MO Water Util. Rev. CP 3.55% 9/9/97 LOC 6,850 6,850
Missouri Environmental Improvement & Energy
Resources Auth. PCR CP (Union Electric Co.) 3.90% 10/9/97 LOC 11,655 11,655
Missouri Health & Educ. Fac. Auth. VRDO (Cox Health System) 3.75% 9/3/97 12,900 12,900
Missouri Health & Educ. Fac. Auth. VRDO (SSM Health Care Project) 3.30% 9/3/97 (1) 5,200 5,200
Missouri Health & Educ. Fac. Auth. VRDO (SSM Health Care Project) 3.35% 9/3/97 (1) 10,000 10,000
Missouri Health & Educ. Fac. Auth. VRDO (SSM Health Care Project) 3.40% 9/9/97 LOC 7,200 7,200
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health Care System) 3.30% 9/3/97 55,000 55,000
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health Care System) 3.30% 9/4/97 44,300 44,300
Missouri Health & Educ. Fac. Auth. VRDO (Washington Univ.) 3.75% 9/3/97 5,900 5,900
Missouri Health & Educ. Fac. Auth. School Dist.
Advance Funding Program (Columbia School Dist.) 4.50% 9/14/98 6,000 6,035
Missouri Health & Educ. Fac. Auth. School Dist.
Advance Funding Program (Rockwood R-VI School Dist.) 4.50% 9/8/97 5,000 5,001
</TABLE>
4
<PAGE> 45
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Missouri Health & Educ. Fac. Auth. School Dist.
Advance Funding Program (Rockwood R-VI School Dist.) 4.50% 9/14/98 $ 4,500 $ 4,527
Missouri Health & Educ. Fac. Auth. School Dist.
Advance Funding Program (St. Louis County School Dist.) 4.50% 9/14/98 9,000 9,054
Missouri Health & Educ. Finance Auth. VRDO
(St. Anthony's Medical Center) 3.30% 9/3/97 23,500 23,500
Missouri Higher Educ. Loan Auth. Student Loan Rev. 5.15% 2/15/98 11,365 11,426
-----------
218,548
-----------
NEBRASKA (0.5%)
Lincoln City NE (Lincoln Electric System) 3.45% 9/23/97 12,400 12,400
Omaha NE Public Power Dist. CP 3.55% 9/15/97 13,715 13,715
-----------
26,115
-----------
NEVADA (1.3%)
Clark County NV Airport Improvement Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 LOC 13,375 13,375
Clark County NV Airport System Refunding Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 (1) 57,223 57,223
-----------
70,598
-----------
NEW HAMPSHIRE (0.5%)
New Hampshire Higher Educ. & Health Fac. Auth. VRDO
(St Paul's School) 3.35% 9/4/97 LOC 25,200 25,200
-----------
NEW MEXICO (2.6%)
Hurley NM PCR VRDO
(Kennecott Sante Fe Corp. Project British Petroleum) 3.75% 9/3/97 27,200 27,200
New Mexico Highway Comm. VRDO 3.30% 9/3/97 (4) 12,000 12,000
New Mexico TRAN 4.50% 6/30/98 100,050 100,539
-----------
139,739
-----------
NEW YORK (4.3%)
Great Neck NY Union Free School Dist. TAN 4.25% 6/30/98 10,000 10,040
Nassau County NY TAN 4.25% 9/25/97 34,000 34,015
New York City NY GO VRDO 3.25% 9/3/97 LOC 15,400 15,400
New York City NY GO VRDO 3.70% 9/3/97 LOC 17,220 17,220
New York City NY Muni. Finance Auth.
Water & Sewer System Rev. VRDO 3.70% 9/3/97 (3) 28,700 28,700
New York City NY Muni. Water Finance Auth. CP 3.45% 9/22/97 LOC 10,000 10,000
New York City NY Muni. Water Finance Auth. CP 3.65% 9/19/97 LOC 50,000 50,000
New York Local Govt. Assistance Corp. VRDO 3.20% 9/3/97 LOC 15,400 15,400
New York Medical Care Fac. Finance Agency Rev.
(Hosp. & Nursing Home) 8.10% 2/15/98 (Prere.) 20,000 20,790
Orange County NY BAN 4.50% 11/12/97 9,700 9,714
Roslyn NY Union Free School Dist. TAN 4.25% 6/29/98 4,500 4,516
Syosset NY Central School Dist. TAN 4.10% 6/29/98 9,000 9,021
Syosset NY Central School Dist. TAN 4.25% 6/29/98 3,000 3,011
-----------
227,827
-----------
NORTH CAROLINA (3.2%)
Charlotte NC Airport Refunding Rev. VRDO 3.25% 9/3/97 (1) 60 60
Mecklenburg County NC VRDO 3.30% 9/4/97 21,800 21,800
North Carolina Educ. Fac. Finance Auth. VRDO
(Bowman Gray School of Medicine Project) 3.30% 9/3/97 LOC 5,700 5,700
North Carolina Educ. Fac. Finance Auth. VRDO (Duke Univ.) 3.30% 9/4/97 27,100 27,100
North Carolina Educ. Fac. Finance Auth. VRDO (Duke Univ.) 3.33% 9/4/97 11,800 11,800
North Carolina Medical Care Comm. Hosp. Rev. VRDO
(Duke Univ. Hosp. Project) 3.30% 9/4/97 21,600 21,600
North Carolina Medical Care Comm. Hosp. Rev. VRDO
(Moses H. Cone Memorial Hosp. Project) 3.35% 9/4/97 19,500 19,500
North Carolina Medical Care Comm. Hosp. Rev. VRDO
(North Carolina Baptist Hosp. Project) 3.35% 9/4/97 41,000 41,000
Wake County NC Industrial Fac. & Polution Control
Finance Auth. VRDO (Carolina Power & Light) 3.30% 9/3/97 LOC 12,400 12,400
Winston-Salem NC COP VRDO 3.35% 9/4/97 8,850 8,850
-----------
169,810
-----------
</TABLE>
5
<PAGE> 46
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH DAKOTA (0.5%)
Oliver County ND PCR VRDO (Square Butte Electric Coop Project) 3.30% 9/3/97 (2) $ 26,750 $ 26,750
-----------
OHIO (2.4%)
Cincinnati OH Student Loan Funding Corp. Student Loan Rev. VRDO 3.15% 9/3/97 LOC 6,000 6,000
Clermont County OH Hosp. Rev. VRDO (Mercy Health System) 3.30% 9/3/97 22,200 22,200
Columbus OH GO VRDO 3.25% 9/4/97 5,100 5,100
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic Foundation) 3.25% 9/3/97 LOC 14,440 14,440
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic Foundation) 3.30% 9/3/97 7,200 7,200
Franklin County OH Hosp. Rev. VRDO (Holy Cross Health System) 3.35% 9/4/97 7,800 7,800
Franklin County OH Hosp. Rev. VRDO (U.S. Health Corp.) 3.35% 9/4/97 LOC 3,515 3,515
Hamilton County OH Hosp. Fac. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.25% 9/3/97 (1) 25,200 25,200
Hamilton County OH Hosp. Fac. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.40% 9/3/97 (1) 20,000 20,000
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric
Co. Project) 3.70% 9/3/97 LOC 2,900 2,900
Ohio Public Fac. Comm. Higher Educ. Fac. 4.50% 5/1/98 10,850 10,885
Ohio Public Fac. Comm. Higher Educ. Fac. 6.50% 12/1/97 2,950 2,969
-----------
128,209
-----------
OKLAHOMA (0.8%)
Garfield County OK IDA PCR VRDO (Oklahoma Gas & Elec Co. Project) 3.35% 9/3/97 19,200 19,200
Oklahoma City OK Ind. & Cultural Health Fac. Auth. VRDO
(St. Anthony Hosp. Project) 3.40% 9/9/97 LOC 21,500 21,500
Tulsa County OK Criminal Justice Auth. Sales Tax Rev. 4.50% 9/1/97 5,340 5,340
-----------
46,040
-----------
OREGON (2.6%)
Oregon Health Housing Educ. & Cultural Fac. Auth. (Peacehealth) 3.30% 9/4/97 LOC 14,055 14,055
Oregon Veterans Welfare Program VRDO 3.30% 9/3/97 LOC 115,795 115,795
Portland OR TAN 4.50% 6/29/98 10,325 10,379
-----------
140,229
-----------
PENNSYLVANIA (1.4%)
Delaware County PA IDA PCR Refunding VRDO (PECO) 3.50% 9/3/97 LOC 6,900 6,900
Pennsylvania Higher Educ. Fac. Auth. VRDO (Carnegie Mellon Univ.) 3.70% 9/3/97 12,500 12,500
Pennsylvania Higher Educ. Fac. Auth. VRDO
(Univ. of Pennsylvania Health Services) 3.20% 9/3/97 8,700 8,700
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. Project) 3.70% 9/3/97 31,550 31,550
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financial Program) 3.30% 9/3/97 (2) 14,900 14,900
-----------
74,550
-----------
SOUTH CAROLINA (0.1%)
Berkeley County SC PCR VRDO (Amoco Chemical Co. Project) 3.70% 9/3/97 3,550 3,550
-----------
SOUTH DAKOTA (0.3%)
South Dakota Health & Educ. Fac. Auth.
(Sioux Valley Hospitals & Health System) 3.40% 9/5/97 11,130 11,130
South Dakota School District COP (Cash Flow Finance Project) 4.50% 7/27/98 6,180 6,209
-----------
17,339
-----------
TENNESSEE (2.7%)
Metro. Govt. of Nashville & Davidson County
TN Health & Educ. CP (Baptist Hosp.) 3.80% 9/9/97 73,600 73,600
Metro. Govt. of Nashville & Davidson County
TN Health & Educ. PUT (Vanderbilt Univ.) 3.65% 1/15/98 5,500 5,500
Metro. Govt. of Nashville TN Airport Auth.
Improvement Refunding VRDO 3.35% 9/3/97 (3) 33,100 33,100
Metro. Govt. of Nashville TN Airport Auth.
Improvement Refunding VRDO 3.35% 9/3/97 (3) LOC 19,900 19,900
Tennessee BAN VRDO 3.25% 9/3/97 15,000 15,000
-----------
147,100
-----------
</TABLE>
6
<PAGE> 47
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (14.5%)
Austin TX Combined Util. System CP (Travis & Williamson Counties) 3.50% 9/22/97 LOC $ 8,050 $ 8,050
Dallas/Fort Worth TX Regional Airport Joint Rev. Refunding 4.00% 11/1/97 (1) 9,000 9,002
Dallas TX Water Works & Sewer System Rev. 5.90% 10/1/97 7,265 7,277
Gulf Coast Waste Disposal Auth. of TX PCR CP (Exxon Project) 3.80% 9/10/97 7,400 7,400
Gulf Coast Waste Disposal Auth. of TX PCR VRDO (Exxon Project) 3.70% 9/3/97 6,200 6,200
Harris County TX Health Fac. Dev. Corp. (Hermann Trust) 9.00% 10/1/97 (Prere.) 2,000 2,048
Harris County TX Health Fac. Dev. Corp. CP (Sisters of Charity) 3.80% 9/8/97 9,400 9,400
Harris County TX Health Fac. Dev. Corp. CP (Sisters of Charity) 3.80% 9/12/97 10,000 10,000
Harris County TX Health Fac. Dev. Corp. Medical Fac. VRDO
(Baylor College of Medicine) 3.35% 9/3/97 25,000 25,000
Harris County TX Health Fac. Dev. Corp. VRDO (Texas Children's Hosp.) 3.35% 9/3/97 32,400 32,400
Harris County TX Health Fac. Dev. Corp. Hosp. Rev. VRDO
(Methodist Hosp.) 3.70% 9/3/97 33,200 33,200
Harris County TX Health Fac. Dev. Corp. VRDO
(St. Lukes Episcopal Hosp.) 3.70% 9/3/97 49,200 49,200
Harris County TX Health Fac. Dev. Corp. VRDO
(St. Lukes Episcopal Hosp.) 3.75% 9/3/97 94,000 94,000
Harris County TX Health Fac. Dev. Corp. VRDO (Sisters of Charity) 3.30% 9/3/97 31,500 31,500
Harris County TX GO Refunding 5.60% 10/1/97 10,000 10,014
Harris County TX Toll Road VRDO 3.30% 9/3/97 39,100 39,100
Houston TX CP 3.65% 9/22/97 7,400 7,400
Houston TX Water & Sewer System Rev. 7.60% 12/1/97 (5)(Prere.) 4,010 4,128
Katy TX Independent School Dist. VRDO 3.35% 9/4/97 24,700 24,700
North Central TX Health Fac. Dev. Corp. CP (Methodist Hosp. Dallas) 3.40% 9/9/97 (1) 61,300 61,300
North Central TX Health Fac. Dev. Corp. VRDO
(Presbyterian Medical Center) 3.75% 9/3/97 (1) 8,700 8,700
Pasadena TX Independent School Dist. VRDO 3.35% 9/4/97 19,200 19,200
Red River TX Auth. PCR VRDO (Southwest Public Service) 3.40% 9/4/97 18,600 18,600
Red River TX Auth. PCR VRDO (Southwest Public Service) 3.40% 9/4/97 (2) 20,000 20,000
Richardson TX Independent School Dist. TRAN 4.50% 8/27/98 17,000 17,105
San Antonio TX Electric & Gas System Rev. CP 3.75% 11/13/97 7,500 7,500
Southwest Higher Educ. Auth. of TX VRDO (Southern Methodist Univ.) 3.75% 9/3/97 LOC 18,000 18,000
Texas GO 6.75% 12/1/97 5,000 5,000
Texas Muni. Power Agency Rev. (Self-Insurance & Risk Mgmt.) 4.25% 9/1/97 11,325 11,325
Texas TRAN 4.75% 8/31/98 110,000 110,953
Univ. of Texas System Board of Regents Rev. Finance System CP 3.60% 10/14/97 13,313 13,313
Univ. of Texas System Board of Regents Rev. Finance System CP 3.70% 10/22/97 9,815 9,815
Univ. of Texas System Board of Regents Rev. Finance System CP 3.80% 9/18/97 5,066 5,066
Univ. of Texas System Board of Regents Univ. Fund Permanent 3.80% 10/22/97 35,000 35,000
West Side Calhoun County TX Dev. VRDO
(Sohio Chemical Co. Project-British Petroleum) 3.70% 9/3/97 6,400 6,400
-----------
777,296
-----------
UTAH (3.2%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.35% 9/3/97 LOC 35,500 35,500
Emery County UT PCR VRDO (PacifiCorp. Project) 3.75% 9/3/97 (2) 8,000 8,000
Intermountain Power Agency of UT PUT 3.50% 9/15/97 LOC 45,500 45,500
Intermountain Power Agency of UT TOB VRDO (Eagle Trust) 3.41% 9/4/97 (1) 37,600 37,600
Salt Lake City UT Rev. (Pooled Hosp. Finance Program) 3.80% 9/18/97 2,500 2,500
Salt Lake City UT Rev. (Pooled Hosp. Finance Program) 3.80% 10/23/97 5,000 5,000
Salt Lake County UT PCR VRDO (British Petroleum) 3.70% 9/3/97 4,000 4,000
Univ. of Utah Rev. VRDO (Auxiliary & Campus Fac.) 3.30% 9/3/97 19,590 19,590
Utah Highway GO CP 3.80% 9/18/97 10,000 10,000
Utah Highway GO CP 3.80% 10/7/97 5,000 5,000
Utah Water Finance Agency Rev. (Pooled Loan Financing Project) 3.75% 10/1/97 (1) 1,000 1,000
-----------
173,690
-----------
VERMONT (0.7%)
Vermont Educ. & Health Buildings Finance Agency PUT
(Middlebury College Project) 3.95% 5/1/98 6,600 6,600
Vermont Educ. & Health Buildings Finance Agency VRDO
(Norwich Univ.) 3.30% 9/4/97 LOC 14,400 14,400
Vermont GO RAN 3.84% 10/30/97 20,000 20,000
-----------
41,000
-----------
</TABLE>
7
<PAGE> 48
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIRGINIA (1.1%)
Fairfax County VA IDA Hosp. Rev. CP (Inova Health System Hosp. Project) 3.80% 9/11/97 $ 5,000 $ 5,000
Fairfax County VA IDA Hosp. Rev. CP (Inova Health System Hosp. Project) 3.80% 10/15/97 10,400 10,400
Fairfax County VA IDA Rev. VRDO (Fairfax Hosp. System) 3.30% 9/3/97 25,750 25,750
Fairfax County VA IDA Rev. VRDO (Fairfax Hosp. System) 3.40% 9/3/97 18,300 18,300
-----------
59,450
-----------
WASHINGTON (2.7%)
Port of Seattle WA GO VRDO 3.30% 9/3/97 2,300 2,300
Seattle WA Muni. Light & Power VRDO 3.25% 9/3/97 5,000 5,000
Seattle WA Muni. Light & Power VRDO 3.30% 9/3/97 30,700 30,700
Seattle WA Water System Rev. VRDO 3.30% 9/3/97 LOC 19,800 19,800
Washington GO 4.125% 10/1/97 5,000 5,001
Washington GO VRDO 3.25% 9/3/97 22,600 22,600
Washington GO VRDO 3.30% 9/3/97 61,700 61,700
-----------
147,101
-----------
WISCONSIN (3.0%)
Milwaukee WI Ind. Dev. VRDO (Wisconsin Electric Power Co. Project) 3.40% 9/4/97 10,000 10,000
Oak Creek City WI VRDO (Wisconsin Electric Power Co. Project) 3.40% 9/4/97 37,800 37,800
Univ. of Wisconsin Hospitals & Clinics Auth. Rev. VRDO
(Univ. of Wisconsin Hosp.) 3.30% 9/3/97 (1) 3,000 3,000
Village of Pleasant Prairie WI PCR VRDO
(Wisconsin Electric Power Co. Project) 3.40% 9/4/97 23,500 23,500
Wisconsin CP 3.45% 9/23/97 10,107 10,107
Wisconsin GO 4.50% 6/15/98 25,000 25,123
Wisconsin Health & Educ. Fac. Auth. VRDO
(Wheaton Franciscan Services) 3.30% 9/4/97 LOC 48,700 48,700
-----------
158,230
-----------
WYOMING (0.5%)
Kemmerer WY VRDO (Exxon Project) 3.75% 9/3/97 8,000 8,000
Lincoln County WY PCR VRDO (Exxon Project) 3.70% 9/3/97 10,500 10,500
Sublette County WY (Exxon Project) 3.70% 9/3/97 8,200 8,200
-----------
26,700
-----------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $5,337,019) 5,337,019
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 142,125
Liabilities (133,732)
-----------
8,393
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 5,346,034,798 outstanding $.001 par value shares
(authorized 6,700,000,000 shares) $5,345,412
===========================================================================================================================
NET ASSET VALUE PER SHARE $1.00
===========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
For key to abbreviations and other references, see page 51.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $5,346,049 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (637) --
Unrealized Appreciation -- --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $5,345,412 $1.00
===========================================================================================================================
</TABLE>
8
<PAGE> 49
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.0%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA (0.6%)
Birmingham AL GO VRDO 3.35% 9/4/97 LOC $ 1,400 $ 1,400
Huntsville AL Health Care Auth. VRDO 3.30% 9/4/97 (1) 7,700 7,700
-----------
9,100
-----------
ALASKA (2.7%)
Alaska Housing Finance Corp. VRDO 3.30% 9/3/97 25,800 25,800
North Slope Borough AK GO 7.125% 7/1/98 (1) 7,710 7,918
North Slope Borough AK GO 7.15% 7/1/99 (1) 5,670 5,973
Valdez AK Marine Terminal VRDO (Exxon Pipeline Co. Project) 3.70% 9/3/97 100 100
-----------
39,791
-----------
ARIZONA (1.2%)
Arizona Transp. Board Excise Tax Rev. 5.50% 7/1/98 (2) 7,315 7,416
Maricopa County AZ PCR VRDO (Arizona Public Service Palo Verde) 3.70% 9/3/97 LOC 3,000 3,000
Maricopa County AZ School Dist. 0.00% 7/1/99 (3) 7,530 6,965
-----------
17,381
-----------
CALIFORNIA (17.1%)
California Community College Financing Auth. TRAN 4.50% 9/30/98 56,330 56,642
California Dept. of Water (Central Valley Project) 8.75% 12/1/00 4,540 5,174
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.30% 9/3/97 LOC 28,400 28,400
California PCR VRDO (Pacific Gas & Electric) 3.45% 9/3/97 LOC 4,700 4,700
California State GO CP 3.35% 9/2/97 10,000 10,000
Los Angeles CA Dept. of Water & Power Rev. 9.00% 11/15/97 5,855 5,918
Los Angeles County CA Local Educ. Agency Pooled TRAN 4.50% 9/30/98 40,000 40,213
Los Angeles County CA Public Works Finance Auth. 6.00% 9/1/99 (1) 11,080 11,507
Los Angeles County CA Unified School Dist. TRAN 4.50% 10/1/98 10,000 10,062
Sacramento CA Util. Rev. 7.875% 8/15/98 (Prere.) 4,000 4,230
San Diego CA Area Local Govt. COP Pooled TRAN 4.50% 10/1/98 25,000 25,152
San Diego City CA TRAN 4.50% 9/30/98 28,300 28,484
Santa Clara County CA TRAN 4.75% 10/1/98 20,000 20,182
Southern CA Public Power Auth. VRDO 2.95% 9/3/97 (2)LOC 100 100
-----------
250,764
-----------
COLORADO (0.4%)
Colorado Health Fac. Auth. Rev. VRDO (Kaiser Permanente) 3.25% 9/3/97 5,200 5,200
-----------
CONNECTICUT (2.1%)
Connecticut GO 5.00% 8/1/00 7,000 7,150
Connecticut GO 5.65% 11/15/98 2,500 2,550
Connecticut Special Assessment Unemployment Compensation 5.50% 5/15/00 (2) 17,500 18,072
Connecticut State 2nd Lien Special Tax Obligation Transp.
Infrastructure Purpose VRDO 3.10% 9/3/97 LOC 3,400 3,400
-----------
31,172
-----------
DISTRICT OF COLUMBIA (3.4%)
District of Columbia GO 0.00% 6/1/00 (1) 6,900 6,097
District of Columbia GO 5.50% 6/1/98 9,065 9,147
District of Columbia GO 5.50% 6/1/99 12,100 12,289
District of Columbia GO 5.90% 6/1/00 (1) 10,105 10,496
District of Columbia GO 6.00% 6/1/01 (1) 8,115 8,533
District of Columbia GO 7.10% 6/1/00 (4) 3,620 3,871
-----------
50,433
-----------
FLORIDA (4.6%)
Dade County FL School Dist. 7.00% 8/1/98 (3) 7,510 7,724
Dade County FL Water & Sewer System Rev. VRDO 3.25% 9/3/97 (3) 3,115 3,115
Florida State Department Transp. Rev. (Right-of-Way) 6.40% 7/1/99 2,765 2,881
Florida State Turnpike 7.50% 7/1/99 (Prere.) 9,750 10,522
Gulf Breeze FL Local Govt. Loan Program VRDO 3.30% 9/4/97 (3) 22,275 22,275
Hillsborough County FL IDA PCR VRDO (Tampa Electric Co. Project) 3.65% 9/3/97 400 400
Jacksonville FL Hosp. Rev. 10.50% 10/1/97 (Prere.) 8,000 8,206
Jacksonville FL Transp. Auth. 9.00% 1/1/98 (Prere.) 3,780 3,920
Tampa FL Util. Auth. Special Refunding 8.00% 10/1/97 (Prere.) 7,700 7,882
-----------
66,925
-----------
</TABLE>
9
<PAGE> 50
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA (3.7%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.80% 9/3/97 $ 1,200 $ 1,200
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power) 3.25% 9/3/97 (3) 14,300 14,300
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power) 3.25% 9/3/97 (3) 2,300 2,300
Georgia GO 6.80% 8/1/98 6,155 6,321
Georgia GO 7.00% 11/1/99 7,500 7,961
Georgia GO 7.40% 8/1/00 5,000 5,436
Georgia GO 7.50% 4/1/01 5,500 6,076
Georgia GO 7.70% 4/1/99 5,000 5,281
Municipal Gas Auth. of GA Rev. VRDO (Agency Project) 3.30% 9/3/97 LOC 5,000 5,000
-----------
53,875
-----------
HAWAII (2.6%)
Hawaii GO 5.00% 11/1/97 1,250 1,253
Hawaii GO 5.00% 11/1/98 16,000 16,186
Hawaii GO 5.00% 11/1/99 20,000 20,369
-----------
37,808
-----------
ILLINOIS (5.7%)
Chicago IL GO 7.50% 1/1/99 (Prere.) 5,000 5,322
Chicago IL Metro. Sanitation Dist. 7.85% 1/1/98 (Prere.) 5,600 5,787
Chicago IL Metro. Water Reclamation Dist. 6.40% 1/1/00 5,000 5,239
Chicago IL Metro. Water Reclamation Dist. 6.80% 1/1/00 (Prere.) 5,200 5,592
Chicago IL Metro. Water Reclamation Dist. 7.25% 1/1/99 (Prere.) 3,490 3,637
Chicago IL Public Building Comm. 4.50% 12/1/98 (1) 8,000 8,045
Chicago IL Public Building Comm. 7.75% 1/1/99 (3) 5,000 5,338
Chicago IL School Finance Auth. GO 4.40% 6/1/98 (1) 6,755 6,781
Illinois GO 5.50% 8/1/98 7,700 7,813
Illinois Housing Dev. Auth. VRDO (Illinois Center Apartments) 3.60% 9/3/97 14,800 14,800
Illinois Toll Highway Auth. Rev. VRDO 3.25% 9/3/97 (1)LOC 15,000 15,000
-----------
83,354
-----------
INDIANA (0.3%)
Merrillville IN Multi School Building Corp. 7.50% 7/15/00 (Prere.) 4,000 4,420
-----------
LOUISIANA (0.4%)
East Baton Rouge Parish LA PCR VRDO (Exxon Project) 3.70% 9/3/97 6,100 6,100
-----------
MARYLAND (0.4%)
Maryland GO 5.00% 10/15/97 1,000 1,002
Maryland Health & Higher Educ. Fac. (Francis Scott Key) 7.00% 7/1/00 (Prere.) 4,000 4,364
-----------
5,366
-----------
MASSACHUSETTS (7.0%)
Massachusetts Bay Transp. Auth. 7.00% 3/1/01 (Prere.) 6,000 6,625
Massachusetts Bay Transp. Auth. 7.10% 3/1/99 (Prere.) 7,800 8,296
Massachusetts Consolidated Loan 7.00% 6/1/99 (Prere.) 10,000 10,681
Massachusetts Consolidated Loan 7.50% 2/1/99 (Prere.) 6,400 6,767
Massachusetts GO 5.50% 7/1/99 10,000 10,245
Massachusetts GO 7.25% 7/1/98 (Prere.) 5,000 5,213
Massachusetts GO 7.25% 3/1/00 (Prere.) 3,910 4,261
Massachusetts GO 9.25% 7/1/00 10,000 11,297
Massachusetts State Health and Educ. Fac. Auth. Rev. PUT
(Fairview Extended Care) 4.55% 7/14/02 3,500 3,492
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 7,000 7,102
Massachusetts Water Resources Auth. Rev. 6.50% 12/1/01 (Prere.) 4,300 4,729
Massachusetts Water Resources Auth. Rev. 7.00% 4/1/00 (Prere.) 4,500 4,886
Massachusetts Water Resources Auth. Rev. 7.625% 4/1/00 (Prere.) 17,645 19,425
-----------
103,019
-----------
MICHIGAN (2.4%)
Greater Detroit MI Resource Recovery Auth. 5.00% 12/13/99 (2) 12,000 12,225
Michigan Building Auth. Rev. (Equipment Program) 5.00% 10/1/98 3,615 3,656
Michigan Building Auth. Rev. (Fac. Program) 5.00% 10/1/00 (2) 4,000 4,091
Michigan Trunk Line 5.50% 11/15/98 13,720 13,960
Regents of Univ. of MI Hosp. Rev. VRDO 3.75% 9/3/97 400 400
-----------
34,332
-----------
</TABLE>
10
<PAGE> 51
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MINNESOTA (0.9%)
Minnesota GO 6.00% 8/1/99 $ 5,730 $ 5,938
Minnesota GO 6.40% 8/1/00 6,700 7,103
-----------
13,041
-----------
MISSOURI (2.4%)
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health System) 3.30% 9/3/97 1,000 1,000
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health System) 3.30% 9/4/97 4,600 4,600
Missouri Health & Educ. Fac. Auth. VRDO
(St. Anthony Medical Center) 3.30% 9/3/97 21,000 21,000
St. Louis County MO Rockwood School Dist. GO Refunding 8.50% 2/1/01 8,000 9,035
-----------
35,635
-----------
NEVADA (2.3%)
Clark County NV Airport System Refunding Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 (1) 19,725 19,725
Clark County NV Airport System Refunding Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 LOC 2,685 2,685
Clark County NV Highway Improvement Motor Vehicle Fuel Tax 4.50% 7/1/98 (2) 5,160 5,188
Clark County NV School Dist. GO 7.50% 6/15/00 (3) 6,000 6,504
-----------
34,102
-----------
NEW JERSEY (0.3%)
New Jersey Econ. Dev. Auth. Transition Fac. 5.125% 7/1/00 (1) 2,710 2,768
New Jersey Turnpike Auth. VRDO 2.65% 9/3/97 (1)LOC 1,300 1,300
-----------
4,068
-----------
NEW MEXICO (0.3%)
Albuquerque NM Water & Sewer 5.90% 7/1/98 (ETM) 4,105 4,175
-----------
NEW YORK (7.5%)
Muni. Assistance Corp. of New York 4.50% 7/1/98 10,000 10,055
Nassau County NY General Improvement 4.50% 9/1/99 (3) 14,025 14,143
Nassau County NY General Improvement 5.125% 11/1/99 (3) 7,525 7,687
New York City NY GO 5.25% 8/1/99 9,875 10,042
New York City NY GO VRDO 3.25% 9/3/97 LOC 6,000 6,000
New York City NY GO VRDO 3.70% 9/3/97 LOC 1,200 1,200
New York City NY GO VRDO 3.75% 9/3/97 (1) 2,600 2,600
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.70% 9/3/97 (3) 2,600 2,600
New York Medical Care Fac. (St. Luke's) 7.45% 2/15/00 (Prere.) 5,000 5,470
New York Medical Care Fac. Finance Agency Rev. 7.80% 2/15/99 (Prere.) 5,000 5,364
New York State Dormitory Auth. Rev. (City Univ.) 7.625% 7/1/00 (Prere.) 21,600 23,949
New York State Dormitory Auth. Rev. (State Univ.) 7.25% 5/15/00 (Prere.) 2,070 2,268
New York State Thruway Auth. (Highway & Bridge Trust Fund) 5.00% 4/1/98 8,750 8,807
New York State Thruway Auth. Service Contract Rev. (Highway Bridge) 5.10% 4/1/99 5,085 5,152
New York Urban Dev. Corp. (Correction Fac.) 7.75% 1/1/00 (Prere.) 3,900 4,280
-----------
109,617
-----------
NORTH CAROLINA (2.2%)
Charlotte NC Airport Refunding Rev. VRDO 3.25% 9/3/97 (1) 15,700 15,700
North Carolina Eastern Muni. Power Agency 7.25% 1/1/99 (Prere.) 3,000 3,185
North Carolina Medical Care Comm. VRDO (Duke Univ. Hosp.) 3.30% 9/4/97 3,000 3,000
North Carolina Muni. Power Agency 7.875% 1/1/98 (Prere.) 6,000 6,201
Wake County NC Industrial Fac. & Pollution Control
Finance Auth. VRDO (Carolina Power & Light) 3.30% 9/3/97 LOC 4,200 4,200
-----------
32,286
-----------
OHIO (3.4%)
Cincinnati City OH School Dist. TAN 5.50% 12/1/00 (2) 4,300 4,466
Clermont County OH Hosp. Rev. VRDO (Mercy Health Systems) 3.30% 9/3/97 9,200 9,200
Columbus OH VRDO 3.25% 9/4/97 6,965 6,965
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic) 3.25% 9/3/97 LOC 800 800
Franklin County OH Hosp. Rev. VRDO (Holy Cross Health System) 3.35% 9/4/97 12,800 12,800
</TABLE>
11
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hamilton County OH Hosp. Fac. Rev. VDRO
(Health Alliance of Greater Cincinnati) 3.25% 9/3/97 (1) $ 10,000 $ 10,000
Hancock County OH BAN 4.50% 12/1/98 5,865 5,900
-----------
50,131
-----------
OKLAHOMA (3.1%)
Garfield County OK IDA PCR VRDO
(Oklahoma Gas & Electric Co. Project) 3.35% 9/3/97 10,000 10,000
Grand River Dam Auth. OK 4.90% 6/1/98 10,000 10,079
Oklahoma Ind. Auth. Health System Rev. VRDO (Baptist Center) 3.35% 9/3/97 24,625 24,625
-----------
44,704
-----------
OREGON (1.9%)
Oregon Veterans Welfare Program GO VRDO 3.30% 9/3/97 LOC 27,600 27,600
-----------
PENNSYLVANIA (5.0%)
Allegheny County PA Hosp. Dev. Auth. VRDO
(Allegheny General Hosp. Project) 3.25% 9/3/97 LOC 4,000 4,000
Allegheny County PA Hosp. Dev. Auth. VRDO (Presbyterian Univ. Health) 3.45% 9/4/97 (1) 14,000 14,000
Berks County PA GO 7.25% 11/15/00 (Prere.) 6,700 7,416
Pennsylvania GO 5.25% 11/15/00 (3) 7,500 7,732
Pennsylvania Higher Educ. Fac. Auth. Health Services
(Allegheny/Delaware Valley) 4.60% 11/15/99 (1) 4,830 4,871
Pennsylvania Higher Educ. Fac. Auth. Rev. VRDO
(University of Pennsylvania Health Services) 3.20% 9/3/97 3,400 3,400
Philadelphia PA GO 5.75% 11/15/98 (3) 6,655 6,790
Philadelphia PA GO 6.00% 11/15/99 (3) 10,000 10,393
Philadelphia PA School Dist. 6.70% 7/1/99 (1) 5,145 5,383
Philadelphia PA Water & Sewer Rev. 6.90% 10/1/99 (Prere.) 5,000 5,370
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financing Program) 3.30% 9/3/97 (2) 4,300 4,300
-----------
73,655
-----------
PUERTO RICO (0.7%)
Puerto Rico GO 5.50% 7/1/99 10,000 10,227
-----------
TENNESSEE (1.8%)
Metro. Govt. of Nashville & Davidson County TN 10.50% 12/1/97 (Prere.) 5,750 5,846
Metro. Govt. of Nashville TN Airport Auth. Improvement
Refunding VRDO 3.35% 9/3/97 (3) LOC 9,900 9,900
Tennessee GO 5.00% 5/1/99 10,070 10,234
-----------
25,980
-----------
TEXAS (6.0%)
Austin TX Combined Util. System Rev. 7.60% 11/15/99 (1) 2,300 2,467
Austin TX Combined Util. System Rev. 7.60% 11/15/99 (Prere.) 2,700 2,898
Austin TX Combined Util. System Rev. 11.125% 11/15/99 (Prere.) 4,000 4,583
Dallas TX GO 7.50% 2/15/99 3,050 3,201
Fort Worth TX Water & Sewer Rev. 5.60% 2/15/98 3,500 3,529
Harris County TX Health Fac. Dev. Corp. Hosp. Rev. VRDO
(Methodist Hosp.) 3.70% 9/3/97 1,100 1,100
Harris County TX Toll Road VRDO 3.30% 9/3/97 26,585 26,585
Houston TX Hotel Occupancy Rev. 6.00% 7/1/99 (4) 4,000 4,132
Lower Colorado River Auth. TX Rev. 5.00% 1/1/99 3,180 3,218
Pasadena TX Independent School Dist. VRDO 3.35% 9/4/97 400 400
Texas National Research Lab Comm. (Super Conductors) 7.125% 4/1/00 (Prere.) 15,930 17,344
Texas Public Finance Auth. 8.00% 10/1/98 3,000 3,130
Texas TRAN 4.75% 8/31/98 15,000 15,134
-----------
87,721
-----------
UTAH (0.4%)
Intermountain Power Agency UT 7.00% 7/1/99 (Prere.) 5,100 5,457
-----------
</TABLE>
12
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIRGINIA (0.8%)
Virginia Public School Auth. 5.00% 8/1/99 $ 6,215 $ 6,326
Virginia Public School Auth. 5.30% 8/1/00 2,370 2,440
Virginia Public School Auth. 5.50% 8/1/98 3,320 3,369
------------
12,135
------------
WASHINGTON (3.4%)
King County WA GO 6.70% 1/1/99 9,000 9,312
Snohomish County WA Public Util. Dist. Rev. 5.00% 1/1/00 (3) 3,000 3,049
Snohomish County WA Public Util. Dist. Rev. 9.75% 1/1/99 (3) 5,315 5,698
Washington GO 4.40% 10/1/98 4,500 4,523
Washington GO 7.75% 12/1/98 (Prere.) 2,500 2,615
Washington GO 8.60% 10/1/97 (Prere.) 5,000 5,021
Washington GO VRDO 3.25% 9/3/97 9,900 9,900
Washington Health Care Auth. (Empire Health Spokane) 8.00% 11/1/97 (Prere.) 9,200 9,448
------------
49,566
------------
WEST VIRGINIA (1.2%)
West Virginia Building Comm. Rev. 5.00% 7/1/98 (1) 5,190 5,239
West Virginia School Building Auth. Rev. 6.00% 7/1/98 (1) 7,000 7,126
West Virginia Water Dev. Auth. 7.70% 11/1/00 (Prere.) 4,960 5,551
------------
17,916
------------
WISCONSIN (0.8%)
Wisconsin Clean Water Rev. 6.30% 6/1/00 3,000 3,160
Wisconsin GO 5.00% 5/1/99 5,305 5,385
Wisconsin GO 7.00% 5/1/00 (Prere.) 3,185 3,283
------------
11,828
------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,443,270) 1,448,884
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 39,045
Liabilities (24,195)
------------
14,850
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 94,009,566 outstanding $.001 par value shares
(authorized 350,000,000 shares) $1,463,734
===========================================================================================================================
NET ASSET VALUE PER SHARE $15.57
===========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
For key to abbreviations and other references, see page 51.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 1,457,588 $15.50
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains--Note E 532 .01
Unrealized Appreciation--Note F 5,614 .06
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,463,734 $15.57
===========================================================================================================================
</TABLE>
13
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LIMITED-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.3%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA
Huntsville AL Health Care Auth. VRDO 3.25% 9/4/97 (1) $ 200 $ 200
Huntsville AL Health Care Auth. VRDO 3.30% 9/4/97 (1) 100 100
-----------
300
-----------
ALASKA (1.4%)
Anchorage AK GO 4.70% 8/1/01 (1) 5,000 5,061
North Slope Borough AK GO 7.25% 6/30/00 (3)+ 20,000 21,578
-----------
26,639
-----------
ARIZONA (1.5%)
Arizona Transp. Board Excise Tax 6.00% 7/1/02 (2) 15,185 16,246
Arizona Transp. Board Highway Rev. 6.00% 7/1/00 4,500 4,714
Maricopa County AZ School Dist. GO 0.00% 7/1/99 (3) 8,000 7,399
-----------
28,359
-----------
CALIFORNIA (10.7%)
California GO 7.50% 11/1/03 (3) 6,000 7,018
California GO 9.00% 6/1/00 5,000 5,628
California GO 10.50% 10/1/00 3,000 3,546
California Dept. of Water (Central Valley Project) 8.25% 12/1/01 4,790 5,536
California Dept. of Water (Central Valley Project) 8.25% 12/1/02 5,060 5,990
California Dept. of Water (Central Valley Project) 8.25% 12/1/05 5,685 7,107
California PCR VRDO (Pacific Gas & Electric Co.) 3.45% 9/3/97 LOC 600 600
Los Angeles CA Dept. of Water & Power Water Works Rev. 9.00% 5/15/02 + 9,135 10,896
Los Angeles CA Dept. of Water & Power Water Works Rev. 9.00% 5/15/03 5,355 6,550
Los Angeles County CA Local Educ. Agency TRAN 4.50% 9/30/98 43,000 43,229
Los Angeles County CA Public Works Auth. 6.00% 9/1/99 (1) 10,000 10,386
Los Angeles County CA Transp. Comm. Sales Tax 6.75% 7/1/01 (Prere.) 5,000 5,544
Los Angeles County CA Unified School Dist. TRAN 4.50% 10/1/98 25,000 25,155
Orange County CA Sanitation Dist. VRDO 3.40% 9/3/97 LOC 3,600 3,600
San Diego CA Area Local Govt. COP Pooled TRAN 4.50% 10/1/98 25,000 25,152
San Diego City CA 4.50% 9/30/98 25,000 25,163
Univ. of California Rev. (Multi Purpose Dist. Project) 10.00% 9/1/00 (2) 7,755 9,017
Univ. of California Rev. (Multi Purpose Dist. Project) 10.00% 9/1/01 (2) 5,500 6,647
-----------
206,764
-----------
COLORADO (0.3%)
Platte River Power Auth. CO 5.00% 6/1/00 (1) 5,000 5,098
-----------
CONNECTICUT (2.9%)
Connecticut GO 5.50% 11/1/01 13,630 14,232
Connecticut GO 9.875% 3/1/01 6,750 7,935
Connecticut Special Assessment Unemployment Compensation 5.00% 1/1/01 4,230 4,324
Connecticut Special Assessment Unemployment Compensation 5.50% 5/15/01 (2) 13,455 13,984
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 4.00% 10/1/99 11,000 10,984
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 6.25% 10/1/02 (3) 4,000 4,328
-----------
55,787
-----------
DELAWARE (0.3%)
Delaware GO 5.00% 1/1/02 5,085 5,208
-----------
DISTRICT OF COLUMBIA (2.1%)
District of Columbia GO 4.90% 6/1/00 20,000 20,050
District of Columbia GO 5.50% 6/1/98 9,000 9,082
District of Columbia GO 5.50% 6/1/99 12,105 12,294
-----------
41,426
-----------
FLORIDA (4.4%)
Dade County FL School Dist. 5.00% 2/15/01 (1) 4,525 4,629
Dade County FL School Dist. 7.375% 7/1/99 (Prere.) 19,600 21,110
Dade County FL Water & Sewer System VRDO 3.25% 9/3/97 (3) 800 800
Florida Board of Educ. (Capital Outlay Rev.) 6.50% 6/1/04 5,565 6,190
Florida Dept. of General Services Rev.
(Dept. of Environmental Protection Preservation-2000) 5.50% 7/1/99 6,765 6,940
Florida School Board Assoc. Rev. (Orange County) 7.00% 7/1/00 (2) 13,820 14,848
</TABLE>
14
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida State Dept. of Transp. Rev. (Right-of-Way) 6.40% 7/1/00 $ 3,080 $ 3,263
Florida Turnpike Auth. Rev. 9.50% 7/1/99 (2) 4,000 4,381
Hillsborough County FL School Dist. 6.95% 8/15/99 (1) 5,425 5,723
Lakeland FL Electric & Water Rev. 6.25% 10/1/02 (3) 5,000 5,422
Lee County FL School Board 6.00% 8/1/02 (4) 2,750 2,941
Orange County FL Health Fac. Auth. Rev. 6.00% 10/1/04 (1) 3,975 4,303
Port Everglade FL Port Fac. Rev. 7.00% 9/1/97 (4) 2,600 2,600
St. Lucie County FL PCR VRDO (Florida Power & Light Co. Project) 3.65% 9/3/97 1,500 1,500
Sunrise FL Public Service Rev. 8.00% 10/1/97 (2) 1,055 1,059
-----------
85,709
-----------
GEORGIA (3.3%)
Burke County GA PCR VRDO (Georgia Power Co.) 3.80% 9/3/97 300 300
Cobb County GA School Dist. 5.00% 2/1/00 8,040 8,190
Georgia GO 5.75% 3/1/02 5,600 5,911
Georgia GO 7.20% 3/1/99 9,650 10,100
Georgia GO 7.20% 3/1/02 3,000 3,341
Georgia GO 7.25% 7/1/99 3,000 3,171
Georgia GO 7.25% 7/1/02 5,620 6,313
Georgia GO 7.25% 9/1/02 8,160 9,197
Georgia GO 7.40% 8/1/02 12,360 13,973
Metro. Atlanta GA Rapid Transp. Auth. 6.35% 7/1/04 3,560 3,846
-----------
64,342
-----------
HAWAII (1.2%)
Hawaii GO 5.00% 9/1/99 5,000 5,086
Hawaii GO 7.75% 2/1/02 9,600 10,839
Honolulu HI City & County GO 4.60% 10/1/99 6,500 6,566
-----------
22,491
-----------
ILLINOIS (2.0%)
Chicago IL GO 6.25% 10/31/02 (1) 4,250 4,573
Chicago IL Metro. Water Reclamation Dist. 4.70% 12/1/99 7,710 7,805
Dupage County IL Rev. (Storm Water Project) 6.55% 1/1/02 (Prere.) 10,000 10,989
Illinois GO 6.40% 8/1/01 5,365 5,660
Illinois Sales Tax Rev. 7.20% 6/15/99 (Prere.) 7,600 8,151
Illinois Toll Highway Auth. VRDO 3.25% 9/3/97 (1) 1,040 1,040
-----------
38,218
-----------
INDIANA (0.1%)
Rockport IN PCR VRDO (AEP Generating Co. Project) 3.75% 9/3/97 (2) 2,000 2,000
-----------
KENTUCKY (0.6%)
Kentucky Property & Buildings Comm. Rev. 6.00% 11/1/02 2,000 2,138
Kentucky Property & Buildings Comm. Rev. 6.75% 11/1/99 9,500 10,009
-----------
12,147
-----------
LOUISIANA (1.9%)
Louisiana GO 6.00% 8/1/00 (3) 5,000 5,239
Louisiana GO 6.00% 8/1/01 (3) 19,325 20,456
New Orleans LA GO 6.50% 10/1/01 (2) 10,655 11,471
-----------
37,166
-----------
MAINE (0.3%)
Maine Health & Higher Educ. (Sebasticook Hosp.) 10.10% 7/1/01 (Prere.) 4,350 5,279
-----------
MARYLAND (0.3%)
Maryland Dept. of Transp. 6.70% 8/15/99 (Prere.) 5,000 5,328
-----------
MASSACHUSETTS (5.6%)
Massachusetts Bay Transit Auth. 7.625% 3/1/00 (Prere.) 5,550 6,097
Massachusetts GO 6.25% 7/1/02 12,500 13,446
Massachusetts GO 6.875% 7/1/01 (Prere.) 17,400 19,238
Massachusetts GO 7.00% 7/1/98 LOC 5,000 5,129
Massachusetts GO 7.50% 12/1/00 (Prere.) 14,750 16,454
Massachusetts GO 7.50% 12/1/07 (Prere.) 10,000 11,155
</TABLE>
15
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LIMITED-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts GO 9.25% 7/1/00 $ 10,000 $ 11,297
Massachusetts State Consolidated Loan 7.00% 12/1/00 (Prere.) 5,000 5,415
Massachusetts State Health and Educ. Fac. Auth. PUT
(Fairview Extended Care) 4.55% 7/14/02 3,500 3,492
Massachusetts Water Resources Auth. 6.875% 12/1/01 (Prere.) 9,945 11,080
Massachusetts Water Resources Auth. 7.30% 4/1/00 (Prere.) 5,000 5,465
-----------
108,268
-----------
MICHIGAN (5.3%)
Detroit MI GO 5.60% 5/1/00 (2) 7,040 7,257
Detroit MI GO 5.70% 5/1/01 (2) 5,000 5,208
Greater Detroit MI Resource Recovery Auth. 5.00% 12/13/00 (2) 6,290 6,429
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/01 (2) 5,000 5,216
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/03 (2) 17,995 18,889
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/04 (2) 12,990 13,649
Michigan GO (Environmental Protection Program) 6.00% 11/1/02 4,845 5,197
Michigan GO (Recreation Program) 6.00% 11/1/00 11,910 12,543
Michigan GO (Recreation Program) 6.00% 11/1/01 5,910 6,287
Michigan State Building Auth. 6.30% 10/1/03 (4) 7,800 8,424
Royal Oak MI Hosp. Fin. Auth. (West Beaumont Hosp.) 6.75% 1/1/01 (Prere.) 12,450 13,600
-----------
102,699
-----------
MINNESOTA (0.8%)
Minnesota GO 4.625% 8/1/00 10,385 10,508
Minnesota GO 6.00% 8/1/04 5,000 5,429
-----------
15,937
-----------
MISSOURI (0.4%)
Kansas City MO School Dist. Building Corp. 10.50% 2/1/99 (3) 7,545 8,202
-----------
NEVADA (1.9%)
Clark County NV Airport System Refunding Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 (1) 21,500 21,500
Clark County NV School Dist. GO 9.75% 6/1/01 (1) 10,000 11,805
Clark County NV School Dist. GO (Computer Equipment) 7.00% 6/15/99 (3) 4,000 4,199
-----------
37,504
-----------
NEW JERSEY (2.8%)
New Jersey Transp. Trust Fund Auth. 4.40% 6/15/99 5,000 5,034
New Jersey Transp. Trust Fund Auth. 6.00% 6/15/00 12,655 13,242
New Jersey Turnpike Auth. 5.20% 1/1/98 + 15,000 15,065
New Jersey Turnpike Auth. 5.60% 1/1/00 (2) 4,000 4,124
New Jersey Turnpike Auth. 6.00% 1/1/98 8,000 8,056
New Jersey Turnpike Auth. VRDO 2.65% 9/3/97 (3) LOC 3,900 3,900
Passaic Valley NJ Sewer System Rev. 5.70% 12/1/03 (2) 3,980 4,226
-----------
53,647
-----------
NEW MEXICO (0.6%)
New Mexico GO 5.50% 9/1/00 6,350 6,584
New Mexico GO 5.50% 9/1/01 4,475 4,671
-----------
11,255
-----------
NEW YORK (16.4%)
Battery Park City NY Auth. 7.70% 5/1/99 (Prere.) 5,000 5,390
Hempstead NY Industrial Dev. Agency (American Fuel Co.) 4.40% 12/1/01 (1) 6,810 6,807
Muni. Assistance Corp. for New York City NY 5.00% 7/1/00 4,330 4,422
Muni. Assistance Corp. for New York City NY 5.50% 7/1/00 42,940 44,417
Muni. Assistance Corp. for New York City NY 6.00% 7/1/00 (2) 10,000 10,479
Muni. Assistance Corp. for New York City NY 6.00% 7/1/05 10,370 11,252
Nassau County NY General Improvement 4.50% 9/1/98 21,430 21,568
New York City NY Cultural Resources Center (Museum of Modern Art) 5.00% 1/1/00 (2) 7,250 7,386
New York City NY GO 5.25% 8/1/99 9,875 10,042
New York City NY GO 5.50% 8/1/98 15,000 15,195
New York City NY IDA (USTA National Tennis Center Project) 7.75% 11/15/00 (4) 3,125 3,443
New York City NY IDA (USTA National Tennis Center Project) 7.75% 11/15/01 (4) 4,380 4,933
New York City NY IDA (USTA National Tennis Center Project) 7.75% 11/15/02 (4) 3,100 3,559
New York State COP 4.50% 2/1/98 4,985 4,994
</TABLE>
16
<PAGE> 57
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State COP 4.70% 2/1/99 $ 4,580 $ 4,609
New York State Dormitory Auth. (City Univ.) 5.50% 7/1/98 6,300 6,376
New York State Dormitory Auth. (City Univ.) 7.625% 7/1/00 (Prere.) 6,200 6,874
New York State Dormitory Auth. (City Univ.) 7.875% 7/1/00 (Prere.) 15,725 17,539
New York State Dormitory Auth. (City Univ.) 9.00% 7/1/00 (3) 15,515 17,474
New York State Dormitory Auth. (Dept. of Health) 7.70% 7/1/00 (Prere.) 6,790 7,542
New York State Dormitory Auth. (State Univ.) 7.70% 5/15/00 (Prere.) 6,500 7,195
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.00% 6/15/01 1,750 1,731
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.10% 6/15/02 3,000 2,957
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.20% 2/15/03 3,840 3,780
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.20% 6/15/03 6,120 6,020
New York State Environmental Fac. PCR (State Water Revolving Fund) 4.30% 6/15/04 6,025 5,915
New York State Hosp. Finance Agency 7.80% 3/15/01 (Prere.) 15,000 16,964
New York State Housing Finance Agency 8.00% 11/1/00 (Prere.) 4,140 4,674
New York State Local Govt. Assistance Corp. 7.00% 4/1/01 (Prere.) 14,550 16,114
New York State Medical Care Fac. Finance Agency Rev. 7.875% 8/15/00 (Prere.) 8,000 8,950
New York State Power Auth. 7.10% 1/1/99 6,400 6,592
New York State Thruway Auth. (Highway & Bridge Trust Fund) 6.00% 4/1/02 (1) 11,965 12,742
New York State Urban Dev. Corp. (Correctional Fac.) 7.50% 1/1/01 (Prere.) 7,100 7,936
-----------
315,871
-----------
NORTH CAROLINA (0.2%)
North Carolina Muni. Power Agency (Catawba Electric) 5.10% 1/1/98 3,980 3,994
-----------
OHIO (1.8%)
Cleveland OH Water Works Rev. 6.25% 1/1/02 (Prere.) 4,245 4,619
Columbus OH VRDO 3.25% 9/4/97 2,000 2,000
Franklin County OH PUT (U.S. Health Corp.) 4.50% 6/1/00 LOC 10,000 10,077
Ohio Public Fac. Comm. Higher Educ. Fac. 5.00% 11/1/99 6,370 6,493
Ohio Public Fac. Comm. Higher Educ. Fac. 5.50% 12/1/99 7,685 7,916
Ohio Water Dev. Auth. 4.90% 12/1/97 3,455 3,464
-----------
34,569
-----------
OKLAHOMA (1.7%)
Garfield County OK IDA PCR VRDO (Oklahoma Gas &
Electric Co. Project) 3.35% 9/3/97 1,600 1,600
Grand River Dam Auth. OK 4.90% 6/1/98 17,500 17,638
Tulsa County OK Criminal Justice Auth. 5.25% 3/1/01 (2) 6,525 6,712
Tulsa County OK Criminal Justice Auth. 5.25% 9/1/01 (2) 6,960 7,185
-----------
33,135
-----------
PENNSYLVANIA (8.8%)
Delaware County PA IDA Rev. (Resource Recovery Fac.) 5.50% 1/1/99 5,000 5,074
Pennsylvania Convention Center Auth. Rev. 5.75% 9/1/99 12,685 12,843
Pennsylvania GO 4.75% 6/15/99 (1) 10,500 10,625
Pennsylvania GO 5.00% 5/1/00 2,710 2,760
Pennsylvania GO 5.25% 11/15/01 (3) 10,000 10,346
Pennsylvania GO 5.40% 7/1/00 4,000 4,120
Pennsylvania Higher Educ. Fac. Health Services
(Allegheny/Delaware Valley) 5.00% 11/15/02 (1) 7,990 8,151
Pennsylvania Intergovernmental Cooperation Auth. 6.00% 6/15/01 10,000 10,567
Pennsylvania Turnpike Rev. 7.50% 12/1/99 (Prere.) 15,000 16,364
Philadelphia PA Airport Rev. 5.25% 6/15/01 (3) 4,590 4,730
Philadelphia PA Gas Works 7.00% 7/1/02 (8) 4,035 4,474
Philadelphia PA GO 6.00% 11/15/99 (3) 8,505 8,839
Philadelphia PA GO 6.00% 11/15/00 (3) 13,000 13,671
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. Project) 3.70% 9/3/97 LOC 700 700
Philadelphia PA Muni. Lease Rev. 5.25% 7/15/98 1,645 1,659
Philadelphia PA School Dist. GO 4.70% 7/1/99 (1) 14,000 14,139
Philadelphia PA School Dist. GO 6.60% 7/1/98 (2) 3,000 3,067
Philadelphia PA Water & Sewer 6.90% 10/1/99 (Prere.) 24,150 25,938
</TABLE>
17
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LIMITED-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philadelphia PA Water & Waste Water Rev. 6.25% 8/1/02 (1) $ 5,450 $ 5,874
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financing Program) 3.30% 9/3/97 (2) 5,000 5,000
-----------
168,941
-----------
PUERTO RICO (0.8%)
Puerto Rico Electric Power Auth. Rev. 6.00% 7/1/03 (1) 5,000 5,410
Puerto Rico GO 5.50% 7/1/99 10,000 10,227
-----------
15,637
-----------
RHODE ISLAND (1.2%)
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/03 (1) 9,665 10,385
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/04 (1) 11,345 12,249
-----------
22,634
-----------
TEXAS (8.4%)
Austin TX Combined Util. System Rev. 9.50% 5/15/00 (Prere.) 5,705 6,458
Austin TX Combined Util. System Rev. 10.00% 5/15/00 (Prere.) 5,000 5,721
Austin TX GO 6.00% 9/1/99 (Prere.) 6,200 6,429
Harris County TX Flood Control Dist. GO 5.50% 10/1/00 3,000 3,113
Harris County TX Health Fac. Dev. Corp. (Memorial Hosp.) 5.00% 6/1/00 (1) 3,025 3,071
Harris County TX Health Fac. Dev. Corp. (Memorial Hosp.) 5.00% 6/1/01 (1) 5,835 5,932
Harris County TX Health Fac. Dev. Corp. VRDO (Methodist Hosp.) 3.70% 9/3/97 5,000 5,000
Harris County TX 5.50% 10/1/00 2,645 2,744
Harris County TX Toll Road Refunding GO 6.50% 8/15/02 (Prere.) 5,220 5,778
Harris County TX Toll Road VRDO 3.30% 9/3/97 100 100
Houston TX GO 5.90% 3/1/03 3,475 3,669
Houston TX Hotel Occupancy Tax Rev. 6.00% 7/1/00 (4) 4,250 4,441
Houston TX Hotel Occupancy Tax Rev. 6.00% 7/1/01 (4) 4,000 4,224
Houston TX Hotel Occupancy Tax Rev. 6.00% 7/1/02 (4) 2,250 2,395
Houston TX Independent School Dist. 5.00% 7/15/99 6,700 6,817
Houston TX Independent School Dist. 6.40% 8/15/01 (Prere.) 4,095 4,399
Houston TX Water & Sewer System Rev. 0.00% 12/1/00 (2) 6,130 5,305
Houston TX Water & Sewer System Rev. 4.90% 12/1/97 5,000 5,013
Houston TX Water & Sewer System Rev. 5.40% 12/1/00 8,000 8,254
Lower Colorado River Auth. TX 5.50% 1/1/01 17,730 18,379
San Antonio TX Electric & Gas Rev. 7.00% 2/1/99 (Prere.) 3,105 3,276
San Antonio TX Electric & Gas Rev. 7.00% 2/1/00 1,695 1,784
San Antonio TX GO 5.40% 8/1/04 7,495 7,763
Texas GO 5.375% 10/1/00 5,000 5,171
Texas Muni. Power Agency Rev. 5.80% 9/1/03 (1) 6,750 7,189
Texas Muni. Power Agency Rev. 6.40% 9/1/98 (3) 3,000 3,066
Texas TRAN 4.75% 8/31/98 10,000 10,089
Univ. of Texas Board of Regents Rev. 7.00% 8/15/01 (Prere.) 6,700 7,455
Univ. of Texas Permanent Univ. Fund 6.50% 7/1/01 (Prere.) 4,285 4,681
Univ. of Texas Permanent Univ. Fund 9.50% 7/1/00 3,545 4,037
-----------
161,753
-----------
UTAH (0.3%)
Utah Water Finance Agency Rev. 4.70% 10/1/01 (1) 5,000 5,052
-----------
VIRGINIA (0.3%)
Virginia Public School Auth. 5.00% 8/1/00 6,345 6,486
-----------
WASHINGTON (3.8%)
King County WA School Dist. 6.30% 12/1/03 5,375 5,826
Washington GO 6.10% 9/1/00 5,000 5,266
Washington GO 6.30% 9/1/02 4,700 5,057
Washington GO 6.50% 7/1/02 5,035 5,482
Washington GO 6.75% 6/1/01 (Prere.) 20,000 21,652
Washington GO 7.00% 10/1/99 7,555 7,995
Washington GO 7.00% 8/1/02 4,000 4,448
Washington GO VRDO 3.25% 9/3/97 1,340 1,340
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/00 (2) 3,030 3,171
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/01 (2) 4,735 5,003
</TABLE>
18
<PAGE> 59
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington Health Care Fac. Auth. VRDO
(Virginia Mason Medical Center) 3.75% 9/4/97 $ 3,000 $ 3,000
Washington Motor Vehicle Fuel Tax 5.30% 9/1/99 5,000 5,119
------------
73,359
------------
WEST VIRGINIA (0.4%)
West Virginia State Building Comm. Rev. 5.50% 7/1/99 (1) 2,500 2,561
West Virginia State Building Comm. Rev. 5.50% 7/1/00 (1) 5,500 5,680
------------
8,241
------------
WISCONSIN (4.1%)
Wisconsin GO 4.125% 11/1/98 33,625 33,695
Wisconsin GO 5.80% 5/1/01 4,000 4,196
Wisconsin GO 6.00% 5/1/03 14,055 15,084
Wisconsin Public Power System Rev. 7.30% 7/1/00 (Prere.) 4,000 4,395
Wisconsin Public Power System Rev. 7.40% 7/1/00 (Prere.) 19,500 21,477
------------
78,847
------------
WYOMING (0.4%)
Platte County WY PCR 4.20% 1/1/99 3,370 3,372
Platte County WY PCR 4.40% 1/1/00 3,945 3,950
------------
7,322
-----------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,896,430) 1,915,614
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.7%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 28,238
Liabilities (14,746)
------------
13,492
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 180,147,492 outstanding $.001 par value shares
(authorized 350,000,000 shares) $1,929,106
===========================================================================================================================
NET ASSET VALUE PER SHARE $10.71
===========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with an aggregate value of $3,793,000 have been segregated as
initial margin for open futures contracts.
For key to abbreviations and other references, see page 51.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,912,499 $10.62
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (2,730) (.02)
Unrealized Appreciation--Note F
Investment Securities 19,184 .11
Futures Contracts 153 --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,929,106 $10.71
===========================================================================================================================
</TABLE>
19
<PAGE> 60
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.4%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA (0.5%)
Huntsville AL Health Care Auth. VRDO 3.25% 9/4/97 (1) $ 1,300 $ 1,300
Huntsville AL Health Care Auth. VRDO 3.30% 9/4/97 (1) 23,300 23,300
Montgomery AL Industrial Dev. Board Pollution Control and Solid Waste
Disposal Rev. CP (General Electric Co. Project) 3.65% 10/16/97 2,790 2,790
Univ. of Southern Alabama Hosp. 7.00% 5/15/04 (2) 3,250 3,476
-----------
30,866
-----------
ALASKA (0.5%)
Alaska Housing Finance Corp. VRDO 3.35% 9/3/97 23,800 23,800
Anchorage AK Electric Rev. 8.00% 12/1/11 (1) 5,395 7,004
Valdez AK Marine Terminal VRDO (Exxon Pipeline Project) 3.70% 9/3/97 3,000 3,000
-----------
33,804
-----------
ARIZONA (1.8%)
Arizona Transp. Board Highway Rev. 8.75% 7/1/03 10,000 12,146
Arizona Transp. Board-Maricopa County Regional Area 6.00% 7/1/05 (2) 18,885 20,568
Maricopa County AZ COP 6.00% 6/1/04 5,275 5,458
Maricopa County AZ GO 6.25% 7/1/02 (3) 5,100 5,511
Maricopa County AZ PCR VRDO (Arizona Public Service Palo Verde) 3.70% 9/3/97 LOC 6,400 6,400
Maricopa County AZ (Samaritan Health Service) 7.15% 12/1/04 (1) 9,900 11,382
Maricopa County AZ (Samaritan Health Service) 7.15% 12/1/05 (1) 6,080 6,958
Mesa AZ GO 5.70% 7/1/08 (1) 5,600 5,901
Phoenix AZ Civic Improvement Water System 5.95% 7/1/16 6,600 6,843
Phoenix AZ Highway Rev. 9.25% 7/1/07 4,000 5,397
Tucson AZ Unified School Dist. 7.50% 7/1/06 (3) 8,840 10,606
Tucson AZ Unified School Dist. 7.50% 7/1/07 (3) 9,125 11,062
Tucson AZ Unified School Dist. 7.50% 7/1/08 (3) 8,060 9,866
-----------
118,098
-----------
CALIFORNIA (10.0%)
Anaheim CA Public Finance Auth. Rev. 6.00% 9/1/08 (4) 2,000 2,209
Anaheim CA Public Finance Auth. Rev. 6.00% 9/1/09 (4) 2,000 2,211
California Dept. of Water (Central Valley Project) 8.25% 12/1/03 5,000 6,044
California Dept. of Water (Central Valley Project) 8.25% 12/1/04 5,545 6,825
California GO 5.70% 8/1/07 17,500 18,789
California GO 5.75% 8/1/08 (3) 15,000 16,091
California GO 6.40% 2/1/06 (1) 4,500 5,074
California GO 6.75% 6/1/04 13,165 14,914
California GO 7.00% 10/1/05 (1) 5,000 5,847
California GO 7.10% 6/1/05 12,495 14,569
California GO 11.00% 3/1/06 13,185 18,954
California GO CP 3.40% 9/11/97 17,000 17,000
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/04 (1) 4,515 4,970
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/05 (1) 5,875 6,507
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/06 (1) 5,000 5,574
California Health Fac. Finance Auth. (Catholic Healthcare West) 6.25% 7/1/07 (1) 5,290 5,916
California Health Fac. Finance Auth. (Sisters of Providence) 6.00% 10/1/02 3,865 4,150
California Health Fac. Finance Auth. (Sisters of Providence) 6.00% 10/1/03 4,095 4,426
California Health Fac. Finance Auth. (Sisters of Providence) 6.00% 10/1/04 4,340 4,715
California Health Fac. Finance Auth. VRDO (Catholic Healthcare West) 3.00% 9/3/97 (1) 5,200 5,200
California Higher Educ. Loan Auth. Student Loan Rev. VRDO 3.30% 9/3/97 LOC 1,500 1,500
California PCR Rev. VRDO (Pacific Gas & Electric Co.) 3.45% 9/3/97 LOC 18,100 18,100
California PCR Rev. VRDO (Pacific Gas & Electric Co.) 3.50% 9/3/97 2,000 2,000
California Public Works Board (Community College) 5.625% 3/1/16 (2) 20,000 20,325
California Public Works Board (Dept. of Corrections) 5.375% 11/1/11 6,500 6,551
California Public Works Board (Dept. of Corrections) 5.375% 11/1/12 7,990 8,013
California Public Works Board (Dept. of Corrections) 6.00% 1/1/06 (2) 7,325 8,039
California Public Works Board (Dept. of Corrections) 6.00% 1/1/08 (2) 14,865 16,332
California Public Works Board (State Archives) 5.375% 12/1/09 4,555 4,649
California Public Works Board (State Archives) 5.375% 12/1/10 6,635 6,727
California Public Works Board (State Archives) 5.375% 12/1/12 7,895 7,917
California Public Works Board (Univ. of California) 6.10% 12/1/05 (2) 6,515 7,088
California Public Works Board (Univ. of California) 6.20% 12/1/06 (2) 3,320 3,603
</TABLE>
20
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Clovis CA Unified School Dist. GO 0.00% 8/1/00 $ 7,000 $ 6,168
Clovis CA Unified School Dist. GO 0.00% 8/1/01 11,180 9,393
Contra Costa CA COP 5.50% 11/1/11 (1) 5,660 5,806
Fresno CA Sewer Rev. 6.25% 9/1/14 (2) 12,000 13,469
Irvine CA Unified School Dist. GO 5.50% 11/1/13 (2) 4,565 4,675
Long Beach CA Financing Auth. Rev. 6.00% 11/1/07 (2) 3,070 3,400
Long Beach CA Harbor Rev. 7.10% 5/15/99 2,900 3,048
Long Beach CA Harbor Rev. 7.15% 5/15/00 10,000 10,759
Long Beach CA Harbor Rev. 7.20% 5/15/01 2,000 2,199
Los Angeles CA COP 7.50% 6/1/98 (Prere.) 3,950 4,132
Los Angeles CA COP 7.60% 6/1/98 (Prere.) 3,995 4,182
Los Angeles County CA Pension Obligation Rev. VRDO 2.95% 9/3/97 (2) 4,000 4,000
Los Angeles County CA Transp. Auth. Sales Tax Rev. 8.00% 7/1/01 (2) 6,365 7,204
Los Angeles County CA Transp. Auth. Sales Tax Rev. 8.00% 7/1/02 (2) 3,915 4,536
Los Angeles County CA Transp. Comm. Sales Tax Rev. 6.50% 7/1/10 51,070 58,521
Los Angeles CA Unified School Dist. TRAN 4.50% 10/1/98 14,500 14,590
Metro. Water Dist. of Southern California 7.75% 7/1/01 (Prere.) 18,085 20,674
Northern California Power Agency (Hydroelectric Project) 6.10% 7/1/05 (1) 5,575 6,154
Northern California Power Agency (Hydroelectric Project) 6.20% 7/1/06 (1) 5,940 6,651
Northern California Power Agency (Hydroelectric Project) 6.25% 7/1/07 (1) 6,685 7,516
Oakland CA Redev. Agency (Central Dist. Project) 5.75% 2/1/04 (2) 1,535 1,647
Oakland CA Redev. Agency (Central Dist. Project) 5.90% 2/1/05 (2) 4,870 5,293
Oakland CA Redev. Agency (Central Dist. Project) 6.00% 2/1/07 (2) 3,360 3,700
Orange County CA Dist. VRDO 3.55% 9/3/97 LOC 1,000 1,000
Orange County CA Sanitation Dist. VRDO 3.40% 9/3/97 LOC 2,700 2,700
Poway CA Redev. Agency (Paguay Project) 7.125% 12/15/04 (3) 4,840 5,643
San Bernardino CA Medical Center COP 5.50% 8/1/04 (1)++ 7,150 7,541
San Bernardino CA Medical Center COP 5.50% 8/1/05 (1)++ 10,000 10,557
San Bernardino CA Medical Center COP 5.50% 8/1/06 (1)++ 8,500 8,984
San Bernardino CA Medical Center COP 5.75% 8/1/06 (1) 3,300 3,575
San Bernardino CA Medical Center COP 5.75% 8/1/07 (1) 3,420 3,713
San Bernardino CA Medical Center COP 6.75% 8/1/10 (Prere.) 11,385 12,644
San Bernardino CA Medical Center COP 7.00% 8/1/08 (1) 9,045 10,746
San Bernardino CA Medical Center COP 7.00% 8/1/09 (1) 9,705 11,596
San Bernardino CA Medical Center COP 7.00% 8/1/10 (1) 10,525 12,611
San Diego CA Local Govt. COP TRAN 4.50% 10/1/98 20,000 20,122
San Diego County CA Regional Transp. Auth. Sales Tax Rev. 5.00% 4/1/07 (3) 12,730 13,071
San Diego County CA Regional Transp. Auth. Sales Tax Rev. 7.00% 4/1/01 (Prere.) 3,220 3,582
San Diego County CA Regional Transp. Auth. Sales Tax Rev. 7.00% 4/1/06 1,780 1,993
San Diego County CA Water Rev. COP 5.40% 5/1/03 5,000 5,264
San Diego County CA Water Rev. COP 5.50% 5/1/04 5,000 5,306
San Diego County CA Water Rev. COP 5.50% 5/1/05 4,245 4,515
South Orange County CA Public Finance Auth. 7.00% 9/1/06 (1) 500 585
Southern California Public Power Auth. 6.75% 7/1/99 6,190 6,486
Southern California Public Power Auth. VRDO 3.00% 9/3/97 (4) 4,000 4,000
Southern California Rapid Transit Dist. Rev. 5.70% 9/1/04 (2) 14,040 15,104
Univ. of California Rev. (Multi Purpose Project) 10.00% 9/1/03 (2) 3,790 4,883
-----------
664,767
-----------
COLORADO (0.7%)
Colorado Health Fac. Auth. (Sisters of Charity Health System Inc.) 8.50% 5/15/04 (1) 17,500 21,344
Denver CO City & County School Dist. 6.95% 12/15/99 (3)(Prere.) 4,390 4,702
Denver CO City & County School Dist. 6.95% 12/15/00 (3) 4,860 5,194
E-470 Public Highway Auth. CO Rev. 4.80% 9/1/09 (1) 6,095 5,960
E-470 Public Highway Auth. CO Rev. 4.90% 9/1/10 (1) 5,000 4,879
E-470 Public Highway Auth. CO Rev. 5.00% 9/1/11 (1) 7,250 7,135
-----------
49,214
-----------
CONNECTICUT (2.4%)
Connecticut GO 5.30% 11/15/06 16,940 17,566
Connecticut GO 5.40% 11/15/07 24,010 24,976
Connecticut GO 6.00% 5/15/03 5,000 5,371
Connecticut GO 6.00% 10/1/04 5,660 6,134
Connecticut GO 6.00% 11/1/04 10,000 10,846
Connecticut GO 7.00% 3/15/03 5,000 5,605
</TABLE>
21
<PAGE> 62
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Connecticut Resource Recovery Auth. (Bridgeport Resco) 8.40% 1/1/99 $ 4,950 $ 5,041
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 5.125% 9/1/05 11,575 11,908
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 5.25% 9/1/06 42,550 43,982
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 7.125% 6/1/10 12,000 14,294
Connecticut Special Tax Obligation Rev. (Transp. Infrastructure) 7.75% 6/1/00 11,300 12,317
South Central CT Regional Water Auth. Water System Rev. 5.75% 8/1/06 3,000 3,194
-----------
161,234
-----------
DELAWARE (0.3%)
Delaware Transp. Auth. Rev. 5.625% 7/1/06 (1) 11,420 11,990
Delaware Transp. Auth. Rev. 5.80% 7/1/08 7,545 7,935
-----------
19,925
-----------
DISTRICT OF COLUMBIA (1.8%)
District of Columbia GO 5.50% 6/1/98 20,000 20,182
District of Columbia GO 5.50% 6/1/06 (4) 6,205 6,463
District of Columbia GO 5.75% 6/1/07 (2) 5,050 5,304
District of Columbia GO 5.80% 6/1/04 (3) 13,000 13,757
District of Columbia GO 6.00% 6/1/08 (1) 8,890 9,487
District of Columbia GO 6.10% 6/1/11 (1) 7,000 7,400
District of Columbia GO 6.30% 6/1/05 (1) 5,000 5,382
District of Columbia GO 6.30% 6/1/08 (1) 15,000 16,251
District of Columbia GO 7.50% 6/1/99 (2)(Prere.) 17,875 19,219
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/07 (1) 2,985 3,239
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/08 (1) 3,160 3,438
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/10 (1) 2,555 2,751
District of Columbia Hosp. Rev. (Medlantic Health Group) 6.00% 8/15/12 (1) 2,995 3,216
-----------
116,089
-----------
FLORIDA (4.1%)
Alachua County FL Health Fac. Auth. VRDO (Shands Teaching Hosp.) 3.30% 9/3/97 (1) 12,200 12,200
Broward County FL School Board COP 5.75% 7/1/03 (2) 9,000 9,571
Broward County FL School Board COP 5.75% 7/1/04 (2) 9,515 10,156
Broward County FL School Board COP 5.75% 7/1/05 (2) 5,445 5,827
Broward County FL School Dist. GO 5.30% 2/15/04 1,295 1,347
Broward County FL School Dist. GO 5.40% 2/15/05 5,000 5,234
Broward County FL School Dist. GO 5.50% 2/15/06 10,080 10,582
Dade County FL Sales Tax Rev. 6.00% 10/1/02 (2) 5,000 5,361
Dade County FL School Dist. GO 6.25% 2/15/04 (1) 5,520 6,040
Dade County FL School Dist. GO 7.00% 8/1/99 (3) 8,300 8,752
Dade County FL Water & Sewer Rev. VRDO 3.25% 9/3/97 (3) 6,323 6,323
Florida Board of Educ. (Capital Outlay Rev.) 0.00% 6/1/00 (Prere.) 15,000 4,654
Florida Board of Educ. (Capital Outlay Rev.) 4.90% 6/1/08 6,905 6,932
Florida Board of Educ. (Capital Outlay Rev.) 5.00% 6/1/09 3,620 3,632
Florida Board of Educ. (Capital Outlay Rev.) 5.25% 6/1/05 ++ 4,815 5,004
Florida Board of Educ. (Capital Outlay Rev.) 5.50% 6/1/04 ++ 5,095 5,370
Florida Board of Educ. (Capital Outlay Rev.) 6.50% 6/1/05 5,000 5,603
Florida Dept. of General Services 5.625% 7/1/08 (2) 5,000 5,272
Florida Dept. of General Services 6.00% 7/1/06 (2) 18,560 20,287
Florida School Board Assn. Rev. (Orange County) 6.90% 7/1/99 (2) 12,450 13,074
Gulf Breeze FL Local Govt. Loan Program VRDO 3.30% 9/4/97 (3) 14,825 14,825
Hillsborough County FL IDA PCR VRDO (Tampa Electric Co.) 3.65% 9/3/97 3,300 3,300
Hillsborough County FL School Dist. GO 7.10% 8/15/03 23,665 25,982
Jacksonville FL Electric Auth. CP 3.60% 9/9/97 13,500 13,500
Lakeland FL Electric & Water Rev. 6.25% 10/1/03 (3) 6,465 7,076
Lakeland FL Electric & Water Rev. 6.50% 10/1/06 (3) 5,300 6,007
Lee County FL School Board 6.00% 8/1/05 (4) 4,175 4,539
Palm Beach County FL School Board 6.00% 8/1/05 (2) 6,115 6,665
Palm Beach County FL School Board 6.00% 8/1/06 (2) 6,480 7,098
Palm Beach County FL Solid Waste Auth. Rev. 5.25% 10/1/03 (2) 9,000 9,365
Palm Beach County FL Solid Waste Auth. Rev. 5.50% 10/1/06 (2) 13,910 14,725
Reedy Creek FL Util. Rev. 5.50% 10/1/08 (2) 10,570 11,153
-----------
275,456
-----------
</TABLE>
22
<PAGE> 63
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA (3.6%)
Burke County GA Dev. Auth. PCR (Oglethorpe Power Corp.) 4.70% 1/1/04 (2) $ 8,510 $ 8,554
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.75% 9/3/97 7,500 7,500
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Corp.) 3.25% 9/3/97 (3) 5,400 5,400
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Corp.) 3.25% 9/3/97 (3) 4,100 4,100
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Corp.) 3.70% 9/3/97 8,860 8,860
DeKalb County GA GO 5.60% 1/1/05 3,040 3,205
Fulton County GA School Dist. GO 6.375% 5/1/10 15,000 16,978
Georgia GO 6.00% 7/1/04 5,000 5,431
Georgia GO 6.30% 4/1/02 3,820 4,122
Georgia GO 6.30% 3/1/07 15,000 16,823
Georgia GO 6.50% 8/1/01 3,230 3,485
Georgia GO 6.50% 12/1/03 5,000 5,563
Georgia GO 6.75% 9/1/10 8,000 9,394
Georgia GO 6.80% 8/1/02 8,000 8,849
Georgia GO 7.00% 11/1/04 5,000 5,752
Georgia GO 7.00% 11/1/05 15,670 18,207
Georgia GO 7.00% 11/1/06 16,780 19,696
Georgia GO 7.00% 11/1/07 17,960 21,268
Georgia GO 7.10% 9/1/09 3,400 4,097
Georgia GO 7.25% 9/1/05 3,630 4,265
Georgia GO 7.25% 9/1/06 5,860 6,963
Georgia GO 7.40% 8/1/07 11,200 13,552
Monroe County GA Dev. Auth. (Oglethorpe Power Corp.) 6.65% 1/1/08 9,220 10,452
Muni. Electric Auth. of Georgia 6.30% 1/1/05 12,775 14,047
Muni. Electric Auth. of Georgia 8.10% 1/1/03 2,320 2,399
Muni. Electric Auth. of Georgia VRDO (Sublien Bonds Project) 3.35% 9/3/97 LOC 11,950 11,950
-----------
240,912
-----------
HAWAII (2.2%)
Hawaii Airport System Rev. 5.40% 7/1/02 (1) 7,855 8,155
Hawaii Airport System Rev. 5.85% 7/1/02 (1) 7,830 8,292
Hawaii Airport System Rev. 5.95% 7/1/03 (1) 2,590 2,771
Hawaii Airport System Rev. 6.05% 7/1/04 (1) 3,145 3,398
Hawaii Airport System Rev. 6.15% 7/1/05 (1) 10,735 11,662
Hawaii Airport System Rev. 6.25% 7/1/06 5,000 5,468
Hawaii GO 5.00% 11/1/97 4,000 4,008
Hawaii GO 5.00% 2/1/04 10,000 10,203
Hawaii GO 5.00% 2/1/05 6,650 6,769
Hawaii GO 5.125% 2/1/06 11,605 11,867
Hawaii GO 5.50% 7/1/01 6,500 6,759
Hawaii GO 6.40% 3/1/07 5,555 6,213
Honolulu HI City & County GO 5.75% 1/1/06 8,825 9,420
Honolulu HI City & County GO 6.00% 1/1/08 5,000 5,459
Honolulu HI City & County GO 6.30% 3/1/10 4,830 5,190
Honolulu HI City & County GO 8.00% 10/1/09 30,560 38,705
-----------
144,339
-----------
ILLINOIS (5.5%)
Chicago IL Metro. Sanitation Dist. 8.75% 1/1/00 (Prere.) 2,980 3,277
Chicago IL Metro. Water Reclamation Dist. 5.85% 12/1/03 6,355 6,789
Chicago IL Metro. Water Reclamation Dist. 5.90% 12/1/06 4,450 4,812
Chicago IL Metro. Water Reclamation Dist. 5.95% 12/1/07 7,200 7,834
Chicago IL Metro. Water Reclamation Dist. 6.00% 12/1/08 9,900 10,860
Chicago IL Metro. Water Reclamation Dist. 6.05% 12/1/09 3,000 3,309
Chicago IL Metro. Water Reclamation Dist. 6.10% 12/1/06 5,300 5,765
Chicago IL Metro. Water Reclamation Dist. 6.25% 12/1/08 15,000 16,585
Chicago IL Public Building Comm. Rev. 7.50% 1/1/02 (1) 2,500 2,581
Chicago IL Public Building Comm. Rev. 7.60% 1/1/03 (1) 2,500 2,581
Chicago IL Public Building Comm. Rev. 7.70% 1/1/08 (1)(ETM) 4,000 4,132
Chicago IL School Finance Auth. 4.40% 6/1/98 (1) 5,000 5,019
Chicago IL School Finance Auth. 4.90% 6/1/02 (3) 10,000 10,135
Chicago IL School Finance Auth. 5.00% 6/1/03 (3) 25,190 25,591
Chicago IL School Finance Auth. 5.10% 6/1/04 (3) 26,155 26,647
</TABLE>
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<CAPTION>
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FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chicago IL School Finance Auth. 5.20% 6/1/05 (3) $ 3,000 $ 3,067
Chicago IL School Finance Auth. 5.375% 6/1/08 (3) 9,500 9,720
Chicago IL School Finance Auth. 6.00% 6/1/01 (3) 8,305 8,736
Chicago IL School Finance Auth. 6.10% 6/1/02 (3) 11,945 12,712
Chicago IL Water Rev. 5.50% 11/1/03 (2) 5,000 5,228
Cook County IL GO 5.75% 11/15/03 (3) 5,000 5,321
Cook County IL GO 5.80% 11/15/04 10,000 10,703
Cook County IL GO 6.60% 11/1/03 (2) 4,785 5,273
Cook County IL GO 6.75% 11/1/01 (2) 3,000 3,323
Illinois GO 6.25% 10/1/05 6,000 6,497
Illinois Health Fac. Auth. (Lutheran General Health Systems) 7.25% 4/1/99 (Prere.) 1,075 1,128
Illinois Health Fac. Auth. (Lutheran General Health Systems) 7.25% 4/1/00 5,790 6,110
Illinois Health Fac. Auth. VRDO (Univ. of Chicago Hosp. Project) 3.30% 9/3/97 (1) 700 700
Illinois Housing Dev. Auth. VRDO (Illinois Center Apartments) 3.60% 9/3/97 LOC 33,455 33,455
Illinois Metro. Pier & Exposition Auth. Rev. 6.50% 6/1/06 (2) 11,885 13,269
Illinois Metro. Pier & Exposition Auth. Rev. 6.75% 6/1/10 (2) 25,000 29,010
Illinois Metro. Pier & Exposition Auth. Rev. 7.25% 6/15/05 (2) 15,000 17,335
Illinois Regional Transp. Auth. 9.00% 6/1/05 (2) 5,220 6,625
Illinois Regional Transp. Auth. 9.00% 6/1/08 (2) 6,840 9,148
Illinois Regional Transp. Auth. 9.00% 6/1/09 (2) 4,255 5,767
Illinois Sales Tax Rev. 6.50% 6/15/13 5,000 5,682
Illinois Toll Highway Auth. VRDO 3.25% 9/3/97 (1)LOC 30,300 30,300
-----------
365,026
-----------
INDIANA (0.9%)
East Chicago IN School Building Corp. 11.75% 2/1/99 (Prere.) 4,825 5,296
Indiana Educ. Fac. Auth. VRDO (Univ. of Notre Dame Du Lac Project) 3.20% 9/4/97 5,100 5,100
Indiana Muni. Power Agency 5.875% 1/1/10 (1) 4,500 4,863
Indiana State Office Building Comm. Rev. 6.65% 7/1/01 4,500 4,780
Indiana State Office Building Comm. Rev. 6.70% 7/1/02 5,290 5,621
Indiana Univ. Student Fee Bonds 6.80% 8/1/04 25,000 27,437
Indiana Univ. Student Fee Bonds 7.00% 8/1/06 5,845 6,387
-----------
59,484
-----------
KENTUCKY (1.1%)
Kentucky Dev. Finance Auth. (St. Elizabeth Medical Center) 6.625% 11/1/04 (3) 20,025 21,851
Kentucky Dev. Finance Auth. (Sisters of Charity) 6.60% 11/1/06 5,000 5,401
Kentucky Econ. Dev. Finance Auth. Rev. VRDO
(Baptist Healthcare System Group) 3.30% 9/3/97 LOC 13,000 13,000
Kentucky Property & Buildings Comm. Rev. 5.25% 11/1/08 2,500 2,555
Kentucky Property & Buildings Comm. Rev. 5.50% 9/1/03 8,000 8,383
Kentucky Property & Buildings Comm. Rev. 5.60% 9/1/04 3,000 3,165
Kentucky Property & Buildings Comm. Rev. 5.70% 9/1/05 7,350 7,762
Kentucky Property & Buildings Comm. Rev. 6.875% 8/1/06 10,400 11,525
Kentucky Turnpike Auth. Resource Recovery Road Rev. 13.125% 1/1/98 (Prere.) 30 31
-----------
73,673
-----------
Louisiana (2.0%)
East Baton Rouge Parish LA PCR VRDO (Exxon Project) 3.70% 9/3/97 200 200
Jefferson Parish LA Sales Tax Rev. 6.75% 12/1/06 (3) 11,000 12,097
Louisiana Gas & Fuel Tax Rev. 7.20% 11/15/99 9,500 10,072
Louisiana Gas & Fuel Tax Rev. 7.25% 11/15/00 5,250 5,643
Louisiana Gas & Fuel Tax Rev. 7.25% 11/15/04 11,000 11,823
Louisiana GO 5.50% 4/15/03 (3) 4,445 4,652
Louisiana GO 6.00% 4/15/04 (3) 7,210 7,764
Louisiana GO 6.25% 4/15/05 (3) 6,455 7,081
Louisiana GO 6.75% 5/15/02 (1) 7,680 8,419
Louisiana GO 7.00% 9/1/00 (Prere.) 11,540 12,633
Louisiana GO 7.00% 8/1/04 (1) 5,810 6,614
Louisiana GO 7.75% 8/1/06 (1) 10,970 13,276
Louisiana GO 8.75% 9/1/00 (4) 8,830 9,925
Louisiana GO 8.75% 9/1/01 (4) 9,445 10,784
New Orleans LA Public Improvement GO 7.70% 10/1/99 (5)(Prere.) 2,395 2,515
New Orleans LA Public Improvement GO 7.75% 10/1/00 (5)(Prere.) 5,510 5,788
-----------
129,286
-----------
</TABLE>
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<CAPTION>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MAINE
Maine Muni. Bond Bank 4.90% 11/1/02 $ 2,500 $ 2,550
-----------
MARYLAND (0.4%)
Howard County MD Consolidated Public Improvement CP 3.60% 9/9/97 21,000 21,000
Maryland GO 5.00% 10/15/99 8,520 8,692
-----------
29,692
-----------
MASSACHUSETTS (4.9%)
Boston MA Water & Sewer Comm. 5.75% 11/1/13 6,325 6,645
Massachusetts Bay Transit Auth. 5.30% 3/1/04 32,380 33,513
Massachusetts Bay Transit Auth. 7.25% 3/1/03 (3) 16,000 17,366
Massachusetts GO 5.10% 2/1/05 25,000 25,541
Massachusetts GO 5.50% 2/1/11 10,000 10,127
Massachusetts GO 5.70% 2/1/08 (1) 6,805 7,195
Massachusetts GO 6.25% 7/1/02 10,000 10,757
Massachusetts GO 6.50% 8/1/02 (Prere.) 3,840 4,248
Massachusetts GO 6.90% 6/1/00 (2) 2,500 2,667
Massachusetts GO 7.00% 6/1/99 (Prere.) 3,000 3,204
Massachusetts GO 7.00% 6/1/02 (2) 5,000 5,340
Massachusetts GO 7.50% 6/1/04 3,975 4,614
Massachusetts Ind. Finance Agency (Refusetech Inc. Project) 6.15% 7/1/02 5,040 5,254
Massachusetts Ind. Finance Agency (Refusetech Inc. Project) 6.30% 7/1/05 21,500 22,998
Massachusetts Ind. Finance Auth. Rev. (BioMed Research Corp.) 0.00% 8/1/04 10,000 7,085
Massachusetts Ind. Finance Auth. Rev. (BioMed Research Corp.) 7.10% 8/1/99 12,420 13,033
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 6,000 6,087
Massachusetts Turnpike Auth. Rev. 4.70% 1/1/03 5,000 5,047
Massachusetts Turnpike Auth. Rev. 4.75% 1/1/04 2,500 2,522
Massachusetts Water Resources Auth. 5.25% 3/1/07 5,000 5,103
Massachusetts Water Resources Auth. 5.25% 3/1/09 7,175 7,219
Massachusetts Water Resources Auth. 5.50% 11/1/07 32,860 33,998
Massachusetts Water Resources Auth. 6.50% 7/15/10 30,220 34,237
Massachusetts Water Resources Auth. 6.50% 7/15/19 37,515 42,667
Massachusetts Water Resources Auth. 7.25% 4/1/01 9,800 10,571
-----------
327,038
-----------
MICHIGAN (2.5%)
Detroit MI GO 5.80% 5/1/02 (2) 8,970 9,433
Detroit MI GO 5.90% 5/1/03 (2) 9,490 10,065
Greater Detroit MI Resource Recovery Auth. 5.50% 12/13/04 (2) 7,505 7,886
Greater Detroit MI Resource Recovery Auth. 6.25% 12/13/05 (2) 12,905 14,217
Greater Detroit MI Resource Recovery Auth. 6.25% 12/13/06 (2) 17,475 19,327
Greater Detroit MI Resource Recovery Auth. 6.25% 12/13/07 (2) 11,070 12,294
Michigan Muni. Bond Auth. Local Govt. Loan Auth. 0.00% 12/1/99 (3) 6,000 5,452
Michigan Muni. Bond Auth. Local Govt. Loan Auth. 0.00% 12/1/00 (3) 5,590 4,845
Michigan Muni. Bond Auth. Local Govt. Loan Auth. 0.00% 12/1/01 (3) 9,630 7,955
Michigan Public Power Agency 5.30% 1/1/05 13,075 13,515
Michigan Public Power Agency 5.375% 1/1/06 13,790 14,257
Michigan Public Power Agency 5.50% 1/1/07 14,545 15,104
Michigan Public Power Agency 5.50% 1/1/08 9,360 9,655
Michigan State Building Auth. 5.50% 10/1/07 (2) 7,500 7,891
Michigan State Building Auth. 6.00% 10/1/09 (2) 8,735 9,051
Michigan State Building Auth. 6.50% 10/1/03 (2) 3,000 3,266
Regents of Univ. of Michigan Hosp. Rev. VRDO 3.75% 9/3/97 3,000 3,000
-----------
167,213
-----------
MINNESOTA (0.1%)
Minnesota GO 5.125% 11/1/09 8,275 8,374
-----------
MISSISSIPPI (0.3%)
Mississippi GO 5.25% 5/1/08 5,805 5,959
Mississippi GO 6.50% 5/1/03 4,285 4,725
Mississippi GO 7.00% 5/1/05 4,840 5,580
-----------
16,264
-----------
</TABLE>
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<CAPTION>
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FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSOURI (0.2%)
Missouri Health & Educ. Fac. Auth. VRDO (Washington Univ.) 3.75% 9/3/97 $ 4,400 $ 4,400
St. Louis County MO Rockwood School Dist. GO 8.50% 2/1/02 5,940 6,887
-----------
11,287
-----------
NEBRASKA (0.4%)
Consumers Public Power Dist. NE Electric Rev. 5.10% 1/1/03 11,510 11,511
Nebraska Public Power Dist. 5.60% 7/1/03 13,175 13,856
-----------
25,367
-----------
NEVADA (3.5%)
Clark County NV Airport System Refunding Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 (1) 27,900 27,900
Clark County NV GO 5.50% 6/1/12 (3) 6,365 6,489
Clark County NV GO 5.60% 6/1/13 (3) 7,175 7,346
Clark County NV GO 5.625% 6/1/14 (3) 7,450 7,615
Clark County NV GO 7.50% 6/1/06 (2) 3,575 4,258
Clark County NV GO 7.50% 6/1/07 (2) 9,550 11,481
Clark County NV GO 7.50% 6/1/09 (2) 6,825 8,382
Clark County NV GO 8.00% 6/1/08 (2) 9,875 12,447
Clark County NV School Dist. GO 5.375% 5/1/06 (3) 3,740 3,872
Clark County NV School Dist. GO 5.375% 5/1/07 (3) 9,195 9,489
Clark County NV School Dist. GO 5.375% 5/1/08 (3) 9,170 9,392
Clark County NV School Dist. GO 5.50% 6/15/10 (3) 16,325 16,792
Clark County NV School Dist. GO 5.60% 6/15/09 (3) 9,640 10,034
Clark County NV School Dist. GO 5.70% 6/15/09 (1) 10,825 11,320
Clark County NV School Dist. GO 5.875% 6/15/13 (1) 9,275 9,645
Clark County NV School Dist. GO 5.875% 6/15/14 (1) 14,485 15,012
Clark County NV School Dist. GO 5.90% 6/15/12 (3) 10,000 10,500
Clark County NV School Dist. GO 6.50% 6/15/06 (3) 13,865 15,560
Clark County NV School Dist. GO 7.25% 6/15/02 (1) 3,995 4,463
Clark County NV School Dist. GO 7.40% 3/1/00 10,000 10,376
Clark County NV School Dist. GO 9.75% 6/1/00 (1) 4,580 5,214
Nevada GO 6.00% 5/1/05 10,450 10,983
Washoe County NV Hosp. Medical Center 6.00% 6/1/09 (2) 6,310 6,697
-----------
235,267
-----------
NEW JERSEY (5.7%)
Camden County NJ Muni. Util. Auth. 0.00% 9/1/99 (3) 12,545 11,454
Camden County NJ Muni. Util. Auth. 0.00% 9/1/00 (3) 18,500 16,070
Camden County NJ Muni. Util. Auth. 0.00% 9/1/02 (3) 18,545 14,526
Camden County NJ Muni. Util. Auth. 0.00% 9/1/03 (3) 18,545 13,753
Essex County NJ Solid Waste Util. Auth. 5.50% 4/1/11 (4) 3,000 3,082
New Jersey Econ. Dev. Auth. 5.70% 7/1/05 (1) 6,330 6,707
New Jersey Econ. Dev. Auth. 5.80% 7/1/07 (1) 17,800 19,082
New Jersey Econ. Dev. Auth. 5.80% 7/1/08 (1) 4,000 4,261
New Jersey Econ. Dev. Auth. 5.875% 7/1/11 (1) 6,000 6,318
New Jersey Econ. Dev. Auth. 7.00% 7/1/03 (1) 26,195 29,366
New Jersey Health Care Rev. (Union Hosp./Mega Care) 6.00% 7/1/98 2,820 2,856
New Jersey Health Care Rev. (Union Hosp./Mega Care) 6.20% 7/1/99 3,080 3,155
New Jersey Health Care Rev. (Union Hosp./Mega Care) 6.40% 7/1/00 3,295 3,418
New Jersey Sports & Exposition Auth. 6.50% 3/1/06 4,725 5,160
New Jersey Sports & Exposition Auth. 6.50% 3/1/07 3,500 3,804
New Jersey Transp. Trust Fund Auth. 5.30% 12/15/01 5,000 5,199
New Jersey Transp. Trust Fund Auth. 5.50% 6/15/11 (1) 4,250 4,360
New Jersey Transp. Trust Fund Auth. 6.00% 12/15/04 (1) 4,000 4,343
New Jersey Transp. Trust Fund Auth. 6.00% 6/15/08 34,660 37,884
New Jersey Transp. Trust Fund Auth. 6.00% 6/15/09 37,000 40,367
New Jersey Turnpike Auth. 4.75% 1/1/06 (ETM) 18,955 18,951
New Jersey Turnpike Auth. 5.60% 1/1/00 (2) 5,000 5,155
New Jersey Turnpike Auth. 5.90% 1/1/03 (2) 4,700 4,997
New Jersey Turnpike Auth. 5.90% 1/1/04 19,030 20,273
New Jersey Turnpike Auth. 6.00% 1/1/05 22,220 23,685
New Jersey Turnpike Auth. 6.50% 1/1/09 (2) 50,000 56,986
New Jersey Turnpike Auth. Rev. VRDO 2.65% 9/3/97 (3) LOC 6,200 6,200
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Port Auth. of NY & NJ VRDO 3.65% 9/3/97 $ 100 $ 100
Rutgers State Univ. NJ Rev. 6.40% 5/1/13 4,675 5,303
-----------
376,815
-----------
NEW MEXICO (0.1%)
Hurley NM PCR VRDO
(Kennecott Santa Fe Corp. Project-British Petroleum) 3.75% 9/3/97 7,900 7,900
-----------
NEW YORK (13.0%)
Metro. NY Transp. Auth. 5.20% 7/1/05 (2) 5,760 5,939
Metro. NY Transp. Auth. 5.40% 7/1/03 10,560 10,922
Metro. NY Transp. Auth. 5.50% 4/1/15 (1) 4,500 4,554
Metro. NY Transp. Auth. 5.625% 7/1/05 11,485 11,983
Metro. NY Transp. Auth. 5.70% 7/1/17 (1) 9,000 9,273
Metro. NY Transp. Auth. 5.75% 7/1/06 12,320 12,964
Metro. NY Transp. Auth. 6.10% 7/1/07 (1) 3,625 3,985
Metro. NY Transp. Auth. 6.10% 7/1/08 (1) 7,200 7,926
Metro. NY Transp. Auth. 7.50% 7/1/00 (Prere.) 4,350 4,809
Monroe County NY GO 4.50% 3/1/98 1,435 1,441
New York City NY GO 5.60% 8/1/05 10,380 10,755
New York City NY GO 5.70% 8/1/06 6,110 6,370
New York City NY GO 5.70% 8/1/07 9,800 10,185
New York City NY GO 5.75% 2/15/07 8,950 9,323
New York City NY GO 5.875% 8/15/12 (3) 7,000 7,355
New York City NY GO 5.90% 8/1/10 4,750 4,925
New York City NY GO 6.00% 8/15/99 13,070 13,478
New York City NY GO 6.00% 8/1/11 5,600 5,827
New York City NY GO 6.00% 8/1/12 4,000 4,146
New York City NY GO 6.10% 8/1/02 4,000 4,242
New York City NY GO 6.15% 8/15/00 3,170 3,313
New York City NY GO 7.00% 8/15/99 (3) 5,550 5,847
New York City NY GO 7.00% 8/15/99 (3)(ETM) 9,450 9,978
New York City NY GO 7.00% 8/1/00 340 349
New York City NY GO 7.00% 2/1/02 (Prere.) 125 140
New York City NY GO 7.00% 8/1/04 5,000 5,597
New York City NY GO 7.00% 8/1/05 6,500 7,323
New York City NY GO 7.00% 2/1/05 4,875 5,312
New York City NY GO 7.10% 8/15/07 10,000 11,124
New York City NY GO 8.00% 11/1/97 (2)(Prere.) 2,245 2,295
New York City NY GO 8.00% 8/1/99 4,560 4,866
New York City NY GO 8.00% 8/1/99 (ETM) 615 660
New York City NY GO 8.00% 11/1/00 (2) 2,175 2,226
New York City NY GO 8.00% 8/1/01 (Prere.) 3,185 3,648
New York City NY GO 8.00% 8/15/01 (Prere.) 3,090 3,543
New York City NY GO 8.00% 4/1/06 (2) 5,955 7,232
New York City NY GO 8.125% 11/1/04 (3) 11,155 11,404
New York City NY GO VRDO 3.25% 9/3/97 LOC 7,100 7,100
New York City NY GO VRDO 3.70% 9/3/97 LOC 1,300 1,300
New York City NY Health & Hospital Corp. Rev. VRDO (Health System) 3.20% 9/3/97 LOC 1,200 1,200
New York City NY IDA (USTA National Tennis Center Project) 6.375% 11/15/07 (4) 6,200 6,881
New York City NY IDA (USTA National Tennis Center Project) 6.40% 11/15/08 (4) 4,105 4,546
New York City NY IDA (USTA National Tennis Center Project) 6.50% 11/15/09 (4) 6,745 7,537
New York City NY IDA (USTA National Tennis Center Project) 6.50% 11/15/10 (4) 3,500 3,897
New York City NY Muni. Water Finance Auth. CP 3.45% 9/24/97 15,000 15,000
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.30% 6/15/06 27,665 28,427
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 6.00% 6/15/10 4,000 4,319
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.70% 9/3/97 (3) 10,000 10,000
New York State Dormitory Auth. Rev. (City Univ.) 5.50% 7/1/16 16,000 16,051
New York State Dormitory Auth. Rev. (City Univ.) 6.25% 7/1/03 4,250 4,578
New York State Dormitory Auth. Rev. (City Univ.) 6.35% 7/1/04 2,500 2,716
New York State Dormitory Auth. Rev. (City Univ.) 6.45% 7/1/05 1,500 1,645
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Dormitory Auth. Rev. (City Univ.) 7.00% 7/1/01 $ 8,090 $ 8,849
New York State Dormitory Auth. Rev. (City Univ.) 7.00% 7/1/01 (ETM) 1,910 2,091
New York State Dormitory Auth. Rev. VRDO
(New York Foundling Charitable Corp.) 3.15% 9/3/97 15,000 15,000
New York State Dormitory Auth. Rev. (New York Univ.) 6.375% 7/1/07 (3) 27,000 29,091
New York State Dormitory Auth. Rev. (State Univ.) 5.80% 5/15/05 5,400 5,691
New York State Dormitory Auth. Rev. (State Univ.) 5.90% 5/15/06 2,000 2,124
New York State Dormitory Auth. Rev. (State Univ.) 6.00% 7/1/03 (2) 4,000 4,301
New York State Dormitory Auth. Rev. (State Univ.) 6.00% 7/1/04 (2) 4,000 4,323
New York State Dormitory Auth. Rev. (State Univ.) 6.10% 5/15/08 2,000 2,130
New York State Dormitory Auth. Rev. (State Univ.) 6.25% 7/1/04 6,570 7,183
New York State Dormitory Auth. Rev. (State Univ.) 7.00% 5/15/99 (Prere.) 14,105 15,036
New York State Dormitory Auth. Rev. (State Univ.) 7.00% 5/15/01 4,180 4,425
New York State Dormitory Auth. Rev. (State Univ.) 7.10% 5/15/00 6,050 6,458
New York State Dormitory Auth. Rev. (Univ. of Rochester) 5.75% 7/1/14 (1) 9,725 9,982
New York State GO 6.00% 10/1/03 4,800 5,153
New York State GO 6.00% 10/1/04 9,195 9,914
New York State GO 7.80% 11/15/99 5,000 5,382
New York State Local Govt. Assistance Corp. 5.00% 7/1/99 9,500 9,660
New York State Local Govt. Assistance Corp. 5.125% 7/1/07 8,000 8,195
New York State Local Govt. Assistance Corp. 5.125% 4/1/10 24,000 24,072
New York State Local Govt. Assistance Corp. 5.20% 7/1/07 (2) 4,500 4,625
New York State Local Govt. Assistance Corp. 5.50% 7/1/00 5,000 5,172
New York State Local Govt. Assistance Corp. 5.50% 7/1/01 4,500 4,682
New York State Local Govt. Assistance Corp. 5.50% 7/1/02 10,000 10,456
New York State Local Govt. Assistance Corp. 5.50% 7/1/03 11,945 12,539
New York State Local Govt. Assistance Corp. 5.50% 7/1/07 5,000 5,272
New York State Local Govt. Assistance Corp. 6.00% 7/1/04 4,200 4,539
New York State Local Govt. Assistance Corp. 6.00% 4/1/06 5,000 5,411
New York State Local Govt. Assistance Corp. 6.00% 7/1/06 23,500 25,616
New York State Local Govt. Assistance Corp. 6.00% 4/1/07 3,000 3,257
New York State Local Govt. Assistance Corp. 6.00% 7/1/07 10,000 10,932
New York State Local Govt. Assistance Corp. 6.00% 4/1/08 13,140 14,254
New York State Local Govt. Assistance Corp. 6.00% 7/1/08 10,000 10,933
New York State Local Govt. Assistance Corp. 6.25% 7/1/05 5,000 5,506
New York State Local Govt. Assistance Corp. VRDO 3.15% 9/3/97 LOC 5,400 5,400
New York State Local Govt. Assistance Corp. VRDO 3.20% 9/3/97 LOC 15,200 15,200
New York State Medical Care Fac. Finance Agency Rev. 5.375% 2/15/14 (4) 4,460 4,414
New York State Medical Care Fac. Finance Agency Rev. 6.00% 8/15/02 (1) 5,350 5,703
New York State Medical Care Fac. Finance Agency Rev. 7.875% 8/15/00 (Prere.) 6,815 7,624
New York State Thruway Auth. (Highway & Bridge Trust Fund) 5.30% 4/1/08 (1) 7,740 7,968
New York State Thruway Auth. (Highway & Bridge Trust Fund) 5.40% 4/1/07 (1) 9,215 9,643
New York State Thruway Auth. (Highway & Bridge Trust Fund) 6.25% 4/1/06 (3) 10,000 11,055
New York State Thruway Auth. (Service Contract) 5.75% 4/1/13 (1) 10,000 10,342
New York State Urban Dev. Corp. (Correctional Fac.) 6.40% 1/1/04 9,685 10,495
Onondaga County NY PCR (Anheuser-Busch Project) 6.625% 8/1/06 10,000 11,217
Suffolk County NY Water Auth. 6.80% 6/1/12 (ETM) 10,660 12,156
Triborough Bridge & Tunnel NY Auth. Rev. 0.00% 1/1/03 19,185 14,823
Triborough Bridge & Tunnel NY Auth. Rev. 5.80% 1/1/06 6,000 6,446
Triborough Bridge & Tunnel NY Auth. Rev. 6.00% 1/1/12 12,000 13,114
Triborough Bridge & Tunnel NY Auth. Rev. 6.60% 1/1/10 59,325 68,100
-----------
866,410
-----------
NORTH CAROLINA (1.2%)
Charlotte NC Airport Refunding Rev. VRDO 3.25% 9/3/97 (1) 5,945 5,945
North Carolina Educ. Fac. Finance Auth. VRDO
(Bowman Gray School of Medicine Project) 3.30% 9/3/97 5,300 5,300
North Carolina Educ. Fac. Finance Auth. VRDO (Duke Univ.) 3.30% 9/4/97 4,100 4,100
North Carolina Medical Care Hosp. Rev. VRDO (Duke Univ. Hosp.) 3.30% 9/4/97 1,300 1,300
North Carolina Muni. Power Agency (Catawba Electric) 6.00% 1/1/04 (2) 7,000 7,521
North Carolina Muni. Power Agency (Catawba Electric) 6.00% 1/1/05 (2) 28,750 30,830
North Carolina Muni. Power Agency (Catawba Electric) 7.00% 1/1/00 (Prere.) 6,040 6,533
North Carolina Muni. Power Agency (Catawba Electric) 7.25% 1/1/07 5,000 5,900
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Carolina Muni. Power Agency (Catawba Electric) 7.25% 1/1/07 (1) $ 5,410 $ 6,384
Wake County NC Industrial Fac. & Pollution Control Finance Auth. VRDO
(Carolina Power & Light) 3.30% 9/3/97 8,100 8,100
-----------
81,913
-----------
OHIO (3.4%)
Clermont County OH Hosp. Rev. VRDO (Mercy Health Systems) 3.30% 9/3/97 1,100 1,100
Cleveland OH GO 5.50% 8/1/08 (1) 6,295 6,606
Cleveland OH School Dist. 8.125% 12/1/98 (ETM) 1,515 1,579
Cleveland OH School Dist. 9.00% 12/1/98 (Prere.)+ 4,000 4,319
Cleveland OH Water Works 6.00% 1/1/02 (1) 11,190 11,876
Cleveland OH Water Works 6.00% 1/1/03 (1) 2,105 2,251
Cleveland OH Water Works 6.00% 1/1/04 (1) 6,855 7,373
Cleveland OH Water Works 6.00% 1/1/05 (1) 4,545 4,911
Cleveland OH Water Works 6.00% 1/1/06 (1) 2,100 2,280
Cleveland OH Water Works 6.25% 1/1/05 (2) 4,910 5,301
Columbus OH Sewer Rev. VRDO 3.25% 9/4/97 800 800
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic Foundation) 3.25% 9/3/97 LOC 16,500 16,500
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic Foundation) 3.30% 9/3/97 3,800 3,800
Franklin County OH Hosp. Rev. VRDO (U.S. Health Corp.) 3.35% 9/4/97 LOC 5,450 5,450
Hamilton County OH Hosp. Fac. Rev. VRDO (Bethesda Hosp.) 3.20% 9/4/97 LOC 1,500 1,500
Hamilton County OH Hosp. Fac. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.25% 9/3/97 (1) 5,500 5,500
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas &
Electric Co. Project) 3.75% 9/3/97 LOC 2,800 2,800
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas &
Electric Co. Project) 3.70% 9/3/97 LOC 2,700 2,700
Ohio Building Auth. (Adult Correctional Building) 5.75% 4/1/08 5,375 5,767
Ohio Building Auth. (Adult Correctional Building) 5.75% 4/1/09 (2) 5,485 5,851
Ohio Building Auth. (Adult Correctional Building) 6.00% 10/1/07 (2) 3,710 4,072
Ohio Building Auth. (Data Center) 5.70% 10/1/04 2,895 3,082
Ohio Building Auth. (Data Center) 5.75% 10/1/05 3,070 3,285
Ohio Building Auth. (Highway Safety Building) 5.375% 10/1/09 (2) 4,605 4,755
Ohio Building Auth. (Highway Safety Building) 5.75% 10/1/08 (2) 5,055 5,428
Ohio Building Auth. (Highway Safety Building) 6.00% 4/1/07 (2) 4,640 5,075
Ohio Building Auth. (State Correctional Fac.) 5.70% 10/1/03 3,305 3,509
Ohio Building Auth. (State Correctional Fac.) 5.70% 10/1/04 2,725 2,901
Ohio Building Auth. (State Correctional Fac.) 5.80% 10/1/06 4,360 4,695
Ohio Building Auth. (State Correctional Fac.) 5.90% 10/1/07 2,500 2,720
Ohio Building Auth. (State Correctional Fac.) 5.90% 10/1/09 (1) 4,435 4,740
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/02 3,790 4,126
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/02 (1) 5,350 5,852
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/03 5,500 5,992
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/03 (1) 5,710 6,315
Ohio Building Auth. (State Correctional Fac.) 6.50% 10/1/04 2,500 2,723
Ohio Building Auth. (State Correctional Fac.) 7.20% 8/1/00 10,000 10,760
Ohio Building Auth. (State Correctional Fac.) 7.25% 8/1/01 7,500 8,077
Ohio Building Auth. (State Correctional Fac.) 7.30% 8/1/02 10,000 10,778
Ohio Building Auth. (State Correctional Fac.) 7.35% 8/1/03 4,945 5,334
Ohio Higher Educ. Fac. 5.90% 12/1/05 8,175 8,676
Ohio Public Fac. Comm. Higher Educ. Fac. 5.50% 12/1/06 5,465 5,699
Ohio Turnpike Comm. Rev. 5.50% 2/15/10 (1) 4,435 4,581
Ohio Water Dev. Auth. 6.00% 12/1/08 (2) 6,000 6,401
-----------
227,840
-----------
OKLAHOMA (1.9%)
Garfield County OK IDA PCR VRDO
(Oklahoma Gas & Electric Co. Project) 3.35% 9/3/97 11,400 11,400
Grand River Dam Auth. OK 5.70% 6/1/05 20,000 21,366
Grand River Dam Auth. OK 5.75% 6/1/06 19,350 20,807
Grand River Dam Auth. OK 5.875% 6/1/07 (1) 14,500 15,772
Grand River Dam Auth. OK 6.25% 6/1/11 (2) 7,600 8,528
Grand River Dam Auth. OK 8.00% 6/1/02 21,000 24,094
Oklahoma Ind. Auth. (St. Anthony's Hosp.) 7.50% 10/1/03 (1) 5,470 5,487
Tulsa County OK Ind. Auth. PUT (St. Francis Hosp.) 5.15% 12/15/03 8,715 8,988
Tulsa OK Metro. Util. Auth. 7.00% 2/1/03 8,465 9,262
-----------
125,704
-----------
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OREGON (0.7%)
Oregon Veterans Welfare Program VRDO 3.30% 9/3/97 LOC $ 6,445 $ 6,445
Oregon Veterans Welfare Program VRDO 3.30% 9/3/97 LOC 8,400 8,400
Portland OR Sewer System Rev. 5.00% 6/1/10 18,890 18,890
Portland OR Sewer System Rev. 5.00% 6/1/12 (3) 13,580 13,384
-----------
47,119
-----------
PENNSYLVANIA (8.0%)
Allegheny County PA GO 7.45% 2/15/98 2,000 2,033
Allegheny County PA GO 7.60% 11/1/98 (Prere.) 2,000 2,083
Allegheny County PA Hosp. Dev. Auth. VRDO
(Allegheny General Hosp. Project) 3.40% 9/3/97 LOC 3,500 3,500
Allegheny County PA Hosp. Dev. Auth. VRDO
(Allegheny General Hosp. Project) 3.40% 9/3/97 LOC 300 300
Allegheny County PA Hosp. Dev. Auth. VRDO
(Children's Hosp. Pittsburgh) 3.30% 9/4/97 (1) 1,600 1,600
Berks County PA GO 7.25% 11/15/00 (3)(Prere.) 10,000 11,069
Delaware County PA Hosp. Rev. VRDO (Crozer-Chester Medical Center) 3.44% 9/3/97 LOC 2,900 2,900
Delaware County PA IDA PCR Refunding VRDO (PECO) 3.50% 9/3/97 LOC 8,000 8,000
Delaware County PA IDA Resource Recovery Rev. (Browning Ferris) 6.00% 1/1/09 5,355 5,606
Delaware County PA IDA Resource Recovery Rev. (Browning Ferris) 6.10% 1/1/07 7,955 8,454
Erie County PA Prison Auth. Commonwealth Lease Rev. 6.75% 11/1/01 (1)(Prere.) 5,295 5,777
Northumberland County PA Commonwealth Lease Rev. 6.70% 10/15/01 (1)(Prere.) 7,005 7,623
Northumberland County PA Commonwealth Lease Rev. 7.75% 10/15/01 (1)(Prere.) 6,000 6,765
Pennsylvania Convention Center Auth. 6.25% 9/1/04 15,200 16,063
Pennsylvania Convention Center Auth. 6.70% 9/1/14 (1) 4,000 4,485
Pennsylvania COP 4.80% 7/1/01 (2) 20,000 20,236
Pennsylvania COP 4.90% 7/1/02 (2) 13,665 13,864
Pennsylvania COP 5.00% 7/1/03 (2) 6,555 6,664
Pennsylvania GO 5.00% 4/15/05 24,290 24,689
Pennsylvania GO 5.00% 4/15/07 7,950 8,027
Pennsylvania GO 5.00% 4/15/08 9,250 9,269
Pennsylvania GO 5.125% 9/15/09 (2) 20,000 20,170
Pennsylvania GO 5.375% 5/15/13 (3) 3,515 3,540
Pennsylvania GO 5.90% 11/15/01 1,500 1,587
Pennsylvania GO 6.20% 11/15/04 12,480 13,510
Pennsylvania GO 6.50% 11/1/06 4,260 4,657
Pennsylvania GO 7.10% 11/1/08 6,700 7,207
Pennsylvania GO 10.00% 4/15/02 (2) 10,160 12,456
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/03 (1) 7,380 7,509
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/04 (1) 9,295 9,429
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/05 (1) 7,690 7,772
Pennsylvania Higher Educ. Fac. Auth. (Allegheny/Delaware Valley) 5.00% 11/15/06 (1) 3,250 3,274
Pennsylvania Higher Educ. Fac. Auth. VRDO (Univ. of Pennsylvania) 3.20% 9/3/97 1,400 1,400
Pennsylvania Higher Educ. Fac. Auth. VRDO
(Univ. of Pennsylvania Health Services) 3.20% 9/3/97 500 500
Pennsylvania IDA 6.50% 7/1/98 9,850 10,060
Pennsylvania IDA 6.60% 1/1/99 5,065 5,227
Pennsylvania IDA 6.60% 7/1/99 10,355 10,790
Pennsylvania IDA 6.70% 1/1/00 7,420 7,805
Pennsylvania IDA 6.70% 7/1/00 9,080 9,636
Pennsylvania IDA 6.80% 1/1/01 5,000 5,364
Pennsylvania IDA 6.80% 7/1/01 5,480 5,923
Pennsylvania Intergovernmental Cooperation Auth. 5.45% 6/15/08 (3) 14,595 14,955
Pennsylvania Intergovernmental Cooperation Auth. 5.75% 6/15/99 (3) 17,000 17,494
Pennsylvania Intergovernmental Cooperation Auth. 6.00% 6/15/02 (3) 28,500 30,374
Philadelphia PA Airport Rev. (Philadelphia Airport Systems) 5.75% 6/15/11 (3) 4,695 4,933
Philadelphia PA Airport Rev. (Philadelphia Airport Systems) 6.00% 6/15/03 (3) 5,530 5,928
Philadelphia PA GO 4.60% 5/15/99 (3) 4,345 4,380
Philadelphia PA GO 6.00% 11/15/00 (3) 11,995 12,614
Philadelphia PA IDA VRDO (Franklin Institute) 3.45% 9/4/97 6,650 6,650
Philadelphia PA Muni. Lease Rev. 6.00% 7/15/03 5,065 5,173
Philadelphia PA School Dist. GO 0.00% 7/1/00 (2) 15,500 13,683
Philadelphia PA School Dist. GO 5.375% 7/1/05 (1) 7,500 7,778
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philadelphia PA School Dist. GO 6.25% 9/1/05 (2) $ 5,000 $ 5,477
Philadelphia PA School Dist. GO 6.25% 9/1/06 (2) 2,000 2,202
Philadelphia PA School Dist. GO 6.25% 9/1/08 (2) 4,000 4,437
Philadelphia PA School Dist. GO 6.25% 9/1/09 (2) 2,080 2,335
Philadelphia PA School Dist. GO 6.70% 7/1/99 (2) 9,000 9,405
Philadelphia PA Water & Waste Water Rev. 4.75% 6/15/98 11,540 11,601
Philadelphia PA Water & Waste Water Rev. 5.50% 6/15/06 (1) 12,750 13,383
Philadelphia PA Water & Waste Water Rev. 6.25% 8/1/07 (1) 5,000 5,546
Philadelphia PA Water & Waste Water Rev. 6.875% 10/1/06 (1) 15,455 16,511
Pittsburgh PA GO 5.00% 3/1/03 (1) 5,000 5,104
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financing Program) 3.30% 9/3/97 (2) 14,000 14,000
Schuylkill PA Redev. Auth. 6.95% 6/1/01 (3)(Prere.) 3,995 4,378
-----------
535,164
-----------
PUERTO RICO (0.7%)
Puerto Rico Electric Power Auth. Rev. 6.50% 7/1/05 (1) 20,525 23,109
Puerto Rico GO 5.00% 7/1/98 15,000 15,130
Puerto Rico Telephone Auth. Rev. 5.40% 1/1/08 9,550 9,812
-----------
48,051
-----------
RHODE ISLAND (0.6%)
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/05 (1) 4,000 4,335
Rhode Island Consolidated Capital Dev. Loan GO 6.00% 8/1/06 (1) 5,000 5,442
Rhode Island Depositors Econ. Protection Corp. 6.55% 8/1/10 (1) 26,850 30,803
-----------
40,580
-----------
SOUTH CAROLINA (0.3%)
Piedmont SC Muni. Power Agency Rev. 5.40% 1/1/07 (1) 1,800 1,867
Piedmont SC Muni. Power Agency Rev. 5.40% 1/1/07 (1) 1,400 1,469
Piedmont SC Muni. Power Agency Rev. VRDO 3.30% 9/3/97 (1) 13,700 13,700
-----------
17,036
-----------
SOUTH DAKOTA (0.1%)
South Dakota Health & Educ. Fac. Auth. Rev. (McKennan Hosp.) 7.50% 7/1/04 (1) 5,845 6,268
-----------
TENNESSEE (0.2%)
Metro. Govt. of Nashville TN Airport Auth. Improvement
Refunding VRDO 3.35% 9/3/97 (3)LOC 6,800 6,800
Shelby County TN (Methodist Health Systems) 6.25% 8/1/06 4,915 5,446
-----------
12,246
-----------
TEXAS (8.2%)
Anderson County TX Rev. (Coffield Prison Farm Project) 5.50% 3/15/04 (2) 5,715 5,961
Anderson County TX Rev. (Coffield Prison Farm Project) 5.50% 3/15/05 (2) 5,590 5,809
Anderson County TX Rev. (Coffield Prison Farm Project) 5.50% 3/15/06 (2) 6,985 7,241
Austin TX Combined Util. System Rev. 5.20% 11/15/03 (1) 3,360 3,477
Austin TX Combined Util. System Rev. 5.30% 5/15/04 (1) 5,770 5,987
Austin TX Combined Util. System Rev. 5.80% 11/15/06 (1) 5,255 5,654
Austin TX Combined Util. System Rev. 6.00% 11/15/06 (1) 23,265 25,376
Austin TX Combined Util. System Rev. 7.25% 11/15/03 5,605 5,916
Austin TX Combined Util. System Rev. 7.25% 11/15/03 (ETM) 395 452
Austin TX Combined Util. System Rev. CP 3.20% 9/9/97 6,350 6,349
Austin TX Combined Util. System Rev. CP 3.45% 9/23/97 6,350 6,349
Bell County TX Health Fac. Dev. Corp. (Scott & White Hosp.) 7.625% 9/1/03 8,340 8,772
Birdville TX Independent School Dist. 5.75% 2/15/03 4,990 5,284
Corpus Christi TX GO 7.50% 11/1/97 (2)(Prere.) 1,155 1,162
Corpus Christi TX GO 7.50% 11/1/98 (2) 1,865 1,876
Dallas/Fort Worth TX Regional Airport Joint Rev. 8.75% 11/1/03 4,890 4,929
Dallas TX Independent School Dist. 5.30% 8/15/08 7,510 7,701
Dallas TX Independent School Dist. 5.40% 8/15/09 10,440 10,706
Dallas TX Independent School Dist. 5.50% 8/15/10 24,210 24,827
Dallas TX Independent School Dist. 5.60% 8/15/03 (Prere.) 2,220 2,345
Dallas TX Independent School Dist. 5.60% 8/15/04 5,780 6,075
Dallas TX Independent School Dist. 5.70% 8/15/03 (Prere.) 1,230 1,305
Dallas TX Independent School Dist. 5.70% 8/15/06 3,520 3,694
Gulf Coast TX Waste Disposal Auth. PCR VRDO (Amoco Project) 3.75% 9/3/97 2,500 2,500
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harris County TX Health Fac. Dev. Corp. (Memorial Hosp.) 6.00% 6/1/08 $ 6,080 $ 6,539
Harris County TX Health Fac. Dev. Corp. (Memorial Hosp.) 6.00% 6/1/10 (1) 1,500 1,637
Harris County TX Toll Road 6.30% 8/15/02 (3)(Prere.) 4,470 4,908
Harris County TX Toll Road 6.30% 8/15/04 (3) 840 917
Harris County TX Toll Road VRDO 3.30% 9/3/97 13,685 13,685
Houston TX GO 5.00% 3/1/04 6,265 6,373
Houston TX GO 5.10% 3/1/06 12,200 12,393
Houston TX GO 5.80% 3/1/02 5,080 5,361
Houston TX GO 7.00% 3/1/08 48,405 56,936
Houston TX GO 7.30% 3/1/98 (3)(Prere.) 3,000 3,053
Houston TX Hotel Occupancy Tax Rev. 5.25% 7/1/07 (4) 6,585 6,753
Houston TX Housing Finance Corp. TOB VRDO 3.40% 9/4/97 (4) 9,000 9,000
Houston TX Water & Sewer System Rev. 0.00% 12/1/00 (3) 6,130 5,305
Houston TX Water & Sewer System Rev. 7.00% 12/1/01 (2) 3,220 3,551
Houston TX Water & Sewer System Rev. 7.00% 12/1/02 (2) 4,125 4,617
Houston TX Water & Sewer System Rev. 7.00% 12/1/03 (2) 3,100 3,515
San Antonio TX Electric & Gas System Rev. 5.50% 2/1/02 1,845 1,938
San Antonio TX Electric & Gas System Rev. 5.50% 2/1/04 2,700 2,804
San Antonio TX Electric & Gas System Rev. 5.80% 2/1/06 8,000 8,527
Southwest Higher Educ. Auth. of TX VRDO (Southern Methodist Univ.) 3.75% 9/3/97 LOC 1,200 1,200
Tarrant County TX Water Control & Improvement Dist. 4.50% 3/1/11 (3) 5,000 4,618
Texas GO 6.00% 10/1/06 6,000 6,567
Texas GO 8.00% 10/1/07 50,000 62,903
Texas Muni. Power Agency Rev. 6.10% 9/1/07 (1) 12,500 13,790
Texas Muni. Power Agency Rev. 6.10% 9/1/08 (1) 27,840 30,856
Texas Muni. Power Agency Rev. 6.10% 9/1/09 (1) 5,000 5,530
Texas Public Fin. Auth. Building Rev. 5.75% 10/1/09 5,000 5,243
Texas Public Fin. Auth. Building Rev. 5.75% 10/1/10 8,625 8,991
Texas Public Fin. Auth. Building Rev. 6.60% 2/1/00 (1) 5,000 5,271
Texas Public Fin. Auth. Building Rev. 6.75% 2/1/02 (1) 5,000 5,364
Texas Public Fin. Auth. Building Rev. 6.80% 2/1/03 (1) 5,000 5,358
Texas TRAN 4.75% 8/31/98 50,000 50,445
Texas Water Resource Finance Auth. 7.50% 8/15/01 3,860 4,074
Univ. of Texas Permanent Univ. Fund 6.40% 7/1/02 5,000 5,445
Univ. of Texas Rev. 7.00% 8/15/07 14,050 15,477
-----------
548,691
-----------
UTAH (0.2%)
Emery County UT PCR VRDO (PacifiCorp Project) 3.75% 9/3/97 (2) 1,200 1,200
Jordan UT School Dist. 5.75% 6/15/05 4,235 4,551
Salt Lake County UT Building Rev. 5.90% 10/1/06 (1) 4,000 4,295
Salt Lake County UT PCR VRDO (British Petroleum) 3.70% 9/3/97 3,500 3,500
-----------
13,546
-----------
VIRGINIA (0.3%)
Chesapeake Bay Bridge & Tunnel VA 5.40% 7/1/05 (3) 6,090 6,374
Fairfax County VA GO 7.25% 6/1/00 5,805 6,265
Fairfax County VA IDA Hosp. Rev. VRDO
(Inova Health System Hosp. Project) 3.30% 9/3/97 400 400
Virginia Public School Auth. 5.40% 6/1/09 5,750 5,949
-----------
18,988
-----------
Washington (3.6%)
King County WA GO 6.00% 12/1/04 5,000 5,360
King County WA GO 6.10% 12/1/05 5,000 5,364
Seattle WA GO 5.60% 1/15/09 5,020 5,226
Seattle WA Power and Light 5.10% 5/1/05 10,575 10,810
Seattle WA Water System Rev. 5.00% 12/1/03 2,000 2,045
Seattle WA Water System Rev. 5.10% 12/1/04 4,000 4,105
Seattle WA Water System Rev. 5.20% 12/1/05 2,320 2,387
Tacoma WA Electric System Rev. 5.70% 1/1/03 (2) 6,845 7,214
Washington GO 5.50% 7/1/02 5,000 5,228
Washington GO 5.60% 9/1/04 5,000 5,294
Washington GO 5.625% 5/1/08 7,535 7,847
Washington GO 5.75% 9/1/07 19,950 21,590
Washington GO 5.75% 9/1/08 4,000 4,304
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington GO 5.75% 5/1/09 $ 5,000 $ 5,219
Washington GO 6.00% 7/1/03 5,200 5,591
Washington GO 6.00% 7/1/04 3,115 3,366
Washington GO 6.10% 6/1/06 9,495 10,411
Washington GO 6.125% 6/1/07 10,110 11,218
Washington GO 6.20% 6/1/08 10,765 11,971
Washington GO 6.25% 6/1/09 11,465 12,824
Washington GO 6.25% 9/1/09 21,550 22,684
Washington GO 6.25% 6/1/10 7,450 8,327
Washington GO 6.25% 2/1/11 6,680 7,461
Washington GO 7.00% 10/1/98 3,900 4,027
Washington GO 7.10% 9/1/99 7,500 7,727
Washington GO 7.20% 9/1/98 (Prere.) 2,365 2,441
Washington GO VRDO 3.25% 9/3/97 7,600 7,600
Washington GO VRDO 3.30% 9/3/97 5,400 5,400
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/02 (2) 5,105 5,433
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/03 (2) 5,270 5,640
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/04 (2) 5,515 5,926
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/05 (2) 4,830 5,204
Washington Health Care Fac. Auth. (Sisters of Providence) 6.00% 10/1/06 (2) 6,055 6,552
------------
241,796
------------
WISCONSIN (1.3%)
Wisconsin GO 4.25% 11/1/99 4,000 4,015
Wisconsin GO 6.20% 5/1/06 20,990 23,147
Wisconsin GO 6.25% 5/1/07 + 22,970 25,540
Wisconsin GO 6.25% 5/1/08 24,365 27,157
Wisconsin GO CP 3.65% 9/3/97 4,046 4,046
------------
83,905
------------
WYOMING (0.2%)
Kemmerer WY VRDO (Exxon Project) 3.75% 9/3/97 2,600 2,600
Lincoln County WY PCR VRDO (Exxon Project) 3.70% 9/3/97 3,600 3,600
Platte County WY PCR 4.50% 1/1/01 2,250 2,254
Platte County WY PCR 4.60% 1/1/02 2,430 2,434
------------
10,888
------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $6,303,050) 6,616,085
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 145,563
Liabilities (103,967)
------------
41,596
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 500,713,719 outstanding $.001 par value shares
(authorized 1,150,000,000 shares) $6,657,681
===========================================================================================================================
NET ASSET VALUE PER SHARE $13.30
===========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with an aggregate value of $9,879,000 have been segregated as
initial margin for open futures contracts.
For key to abbreviations and other references, see page 51.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $6,357,235 $12.70
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (14,250) (.03)
Unrealized Appreciation--Note F
Investment Securities 313,035 .63
Futures Contracts 1,661 --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $6,657,681 $13.30
===========================================================================================================================
</TABLE>
33
<PAGE> 74
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.3%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA (1.4%)
Birmingham AL Medical Center (Special Care Medical Center) 7.25% 7/1/15 (1) $ 6,715 $ 6,800
Medical Clinic Board of Bessemer AL (Bessemer Carraway Hosp.) 7.25% 4/1/15 (1) 5,000 5,419
Medical Clinic Board of Montgomery AL (Jackson Hosp.) 6.00% 3/1/26 (2) 12,000 12,523
Mobile AL Water & Sewer Comm. 5.50% 1/1/10 (3) 4,000 4,108
-----------
28,850
-----------
ALASKA (1.1%)
Alaska Housing Fin. Corp. Rev. VRDO 3.30% 9/3/97 1,980 1,980
Alaska Housing Fin. Corp. Rev. VRDO 3.35% 9/3/97 700 700
Anchorage AK Electric Rev. 8.00% 12/1/09 (1) 2,565 3,288
Anchorage AK Electric Rev. 8.00% 12/1/10 (1) 2,960 3,816
Anchorage AK Water GO 7.20% 6/1/17 (2) 11,000 11,627
-----------
21,411
-----------
ARIZONA (0.5%)
Maricopa County AZ (Samaritan Health Service) 7.00% 12/1/16 (1) 8,650 10,457
ARKANSAS (0.5%)
North Little Rock AR Electric System 6.50% 7/1/10 (1) 3,500 3,996
North Little Rock AR Electric System 6.50% 7/1/15 (1) 4,500 5,146
-----------
9,142
-----------
CALIFORNIA (11.0%)
California Health Fac. Finance Auth. (Adventist Health System) 6.75% 3/1/11 (1) 12,000 13,023
California Health Fac. Finance Auth. (Pomona Valley Hosp.) 5.75% 7/1/15 8,205 8,468
California Housing Finance Agency 8.625% 8/1/15 (1) 2,550 2,670
California PCR Rev. VRDO (Pacific Gas & Electric) 3.45% 9/3/97 LOC 1,000 1,000
Fresno CA COP (City Hall Refinancing Project) 6.375% 8/1/10 (2) 10,500 11,187
Fresno CA Sewer Rev. 4.75% 9/1/26 (1) 7,400 6,571
Irvine CA Ranch Water Dist. VRDO 3.35% 9/3/97 LOC 700 700
Los Angeles CA Unit School Dist. 5.375% 7/1/16 (3) 5,000 4,973
Los Angeles County CA Metro. Transp. Auth. VRDO 2.95% 9/3/97 (3) 900 900
Modesto CA Irrigation Dist. Finance Auth. (Woodland Project) 6.50% 10/1/22 (2) 20,225 23,415
MSR California Public Power Agency (San Juan Project) 6.125% 7/1/13 (2) 7,000 7,773
MSR California Public Power Agency (San Juan Project) 6.75% 7/1/20 (1) 13,000 15,324
Northern California Power Agency (Combustion Turbine Project) 6.00% 8/15/10 (1) 3,500 3,567
Oakland CA Redev. Agency (Central Dist. Project) 5.50% 2/1/14 (2) 6,300 6,535
Oakland CA Redev. Agency (Central Dist. Project) 6.00% 2/1/08 (2) 5,585 6,144
Orange County CA Water Dist. VRDO 3.50% 9/3/97 4000 4,000
Pittsburg CA Redev. Agency 5.50% 8/1/07 (3) 3,000 3,148
Port of Oakland CA Rev. 5.40% 11/1/17 (1) 25,575 25,417
Sacramento CA Muni. Util. Dist. 5.75% 8/15/13 (1) 12,360 12,659
Sacramento CA Muni. Util. Dist. 6.50% 9/1/13 (1) 8,895 10,246
San Jose CA Tax Redev. 6.00% 8/1/10 (1) 8,105 8,943
Santa Clara CA Redev. Agency (Bayshore North Project) 7.00% 7/1/10 (2) 3,000 3,592
Santa Clara CA Valley Water Dist. 6.00% 2/1/24 (3) 5,000 5,197
Santa Rosa CA Waste Water Rev. 6.00% 9/1/15 (3) 5,000 5,433
South County CA Waste Water Auth. (Gilroy) 5.50% 8/1/22 (3) 8,000 7,946
South County CA Waste Water Auth. (Morgan Hill) 5.50% 8/1/22 (3) 7,000 6,953
Southern California Public Power Auth. (Palo Verde) 5.00% 7/1/15 (2) 2,605 2,466
Southern California Rapid Transit Dist. 5.80% 9/1/06 (2) 4,000 4,369
Southern California Rapid Transit Dist. 5.90% 9/1/07 (2) 3,155 3,465
Ukiah CA Electric Rev. 6.25% 6/1/18 (1) 6,330 7,081
-----------
223,165
-----------
COLORADO (3.8%)
Colorado Health Fac. Auth. (Sisters of Charity Health System Inc.) 6.00% 5/15/13 (1) 4,525 4,639
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/04 (1) 13,750 9,822
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/05 (1) 17,200 11,665
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/07 (1) 12,250 7,466
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/08 (1) 14,355 8,238
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/09 16,500 8,898
</TABLE>
34
<PAGE> 75
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Denver CO Health Fac. (St. Anthony's Hosp.) 7.70% 5/1/07 (1) $ 2,800 $ 2,989
Northern Colorado Water Conservation Dist. Rev. 6.50% 12/1/12 (2) 20,575 23,098
-----------
76,815
-----------
CONNECTICUT (0.3%)
Connecticut Special Obligation Transp. Infrastructure Rev. 5.625% 10/1/14 (3) 3,000 3,067
South Central CT Regional Water Auth. Water System Rev. 5.75% 8/1/12 (3) 3,100 3,211
-----------
6,278
DELAWARE (1.0%)
Delaware Econ. Dev. Auth. (Delmarva Power & Light) 7.30% 9/1/15 (3) 4,000 4,325
Delaware Health Fac. Auth. (Delaware Medical Center) 7.00% 10/1/15 (1) 6,000 6,416
Dover DE Electric Rev. 5.75% 7/1/15 (3) 5,225 5,350
Dover DE Electric Rev. 6.10% 7/1/11 (3) 2,000 2,117
Sussex County DE Waste Water Rev. 6.60% 6/15/25 (1)(Prere.) 2,500 2,809
-----------
21,017
-----------
DISTRICT OF COLUMBIA (0.5%)
District of Columbia Rev. (Howard Univ.) 5.75% 10/1/17 (1) 10,030 10,244
-----------
FLORIDA (8.1%)
Coral Springs FL Improvement Dist. Water & Sewer GO 6.00% 6/1/10 (1) 3,000 3,292
Dade County FL Water & Sewer Rev. VRDO 3.25% 9/3/97 (3) 10,880 10,880
Davie FL Water & Sewer Rev. 6.375% 10/1/12 (2) 2,620 2,974
Florida Muni. Power Agency (Stanton Project) 5.00% 10/1/19 (1) 8,100 7,605
Hillsborough County FL IDA PCR Rev. VRDO (Tampa Electric Co.) 3.65% 9/3/97 LOC 100 100
Orange and Orlando County FL Expressway Auth. 8.25% 7/1/13 (3) 9,695 12,943
Orange and Orlando County FL Expressway Auth. 8.25% 7/1/15 (3) 8,360 11,261
Orange and Orlando County FL Expressway Auth. 8.25% 7/1/16 (3) + 12,295 16,631
Orange County FL Health Auth. Hosp. (Adventist for Sunbelt Group) 6.25% 11/15/10 (2) 4,000 4,378
Palm Beach FL Criminal Justice 7.20% 6/1/14 (3) 16,300 19,977
Palm Beach FL Criminal Justice 7.20% 6/1/15 (3) 4,000 4,909
St. Lucie County FL Util. System Rev. 6.00% 10/1/20 (3)(ETM) 2,350 2,495
Sarasota County FL Public Hosp. (Sarasota Memorial Hosp.) 5.75% 10/1/17 (1) 28,850 29,582
Seacoast FL Util. Auth. Water & Sewer Rev. 5.50% 3/1/19 (3) 2,000 2,046
Tampa FL Util. Rev. 6.75% 10/1/10 (2) 9,330 10,923
Tampa FL Util. Rev. 6.75% 10/1/11 (2) 9,965 11,702
Tampa FL Util. Rev. 6.75% 10/1/12 (2) 10,635 12,515
-----------
164,213
-----------
GEORGIA (0.6%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.70% 9/3/97 1,000 1,000
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.80% 9/3/97 130 130
Henry County GA School Dist. GO 6.45% 8/1/11 (1) 4,000 4,568
Private Colleges & Universities Auth. of GA (Mercer Univ. Project) 6.50% 11/1/15 (1) 5,000 5,739
-----------
11,437
-----------
HAWAII (1.4%)
Hawaii Airport System Rev. 6.35% 7/1/07 (1) 8,000 8,788
Hawaii Highway Rev. 5.25% 7/1/11 1,650 1,657
Hawaii Highway Rev. 5.25% 7/1/12 1,500 1,500
Hawaii Highway Rev. 5.25% 7/1/16 2,550 2,490
Honolulu HI City & County GO 8.00% 10/1/10 11,000 13,994
-----------
28,429
-----------
ILLINOIS (4.5%)
Chicago IL Board of Educ. GO 6.25% 1/1/11 (1) 7,000 7,786
Chicago IL Public Building Comm. 7.00% 1/1/20 (1)(ETM) 21,500 25,610
Chicago IL Waste Water Transmission Rev. 6.50% 1/1/08 (3) 1,315 1,493
Cook County IL GO 7.25% 11/1/07 (1) 6,000 7,150
Illinois Dev. Finance Auth. PCR (Illinois Power Co. Project) 7.40% 12/1/24 (1) 14,000 16,130
Illinois Regional Transit Auth. GO (Cook, DuPage, and Kane Counties) 7.20% 11/1/20 (2) 24,000 29,597
Will County IL Community Unit School Dist. (Romeoville) 7.10% 12/1/09 (2) 1,250 1,505
Will County IL Community Unit School Dist. (Romeoville) 7.10% 12/1/10 (2) 1,115 1,347
-----------
90,618
-----------
</TABLE>
35
<PAGE> 76
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDIANA (1.0%)
Indiana Muni. Power Agency 6.125% 1/1/13 (1) $13,250 $ 14,607
Merrillville IN School Building Corp. 6.65% 7/1/06 (1) 5,500 6,225
-----------
20,832
-----------
KANSAS (0.6%)
Kansas Health System Dev. Auth. (St. Luke Mission) 5.375% 11/15/16 (1) 6,300 6,207
Kansas Health System Dev. Auth. (St. Luke Mission) 5.375% 11/15/21 (1) 3,000 2,926
Kansas Health System Dev. Auth. (St. Luke Mission) 5.375% 11/15/16 (1) 3,000 2,956
-----------
12,089
-----------
KENTUCKY (1.8%)
Jefferson County KY Health System Rev. (Jewish Hosp.) 5.75% 1/1/26 (2) 11,000 11,229
Kentucky Dev. Finance Auth. Hosp. Fac. Rev.
(St. Elizabeth's Medical Center) 6.00% 11/1/10 (3) 23,885 25,115
-----------
36,344
-----------
LOUISIANA (2.8%)
East Baton Rouge Parish LA PCR VRDO (Exxon Project) 3.70% 9/3/97 1,980 1,980
Jefferson Parish LA Sales Tax Rev. 6.75% 12/1/06 (3) 8,500 9,348
New Orleans LA Capital Appreciation 0.00% 9/1/13 (2) 9,000 3,806
New Orleans LA GO 0.00% 9/1/10 (2) 8,500 4,310
New Orleans LA GO 0.00% 9/1/11 (2) 10,475 5,001
New Orleans LA GO 6.00% 9/1/21 (2) 22,250 22,894
Ouachita Parish LA Hosp. Service (Glenwood Medical Center) 5.70% 5/15/16 (4) 4,900 5,002
Ouachita Parish LA Hosp. Service (Glenwood Medical Center) 5.75% 5/15/21 (4) 3,200 3,269
-----------
55,610
-----------
MAINE (0.8%)
Maine Health & Higher Educ. Fac. Auth.
(Eastern Maine Medical Center) 6.375% 10/1/21 (3) 8,000 8,625
Maine Turnpike Rev. 6.00% 7/1/18 (1) 7,000 7,311
-----------
15,936
-----------
MARYLAND (0.7%)
Maryland Health & Educ. Fac. Auth.
(Univ. of Maryland Medical System) 7.00% 7/1/22 (3) 12,025 14,638
-----------
MASSACHUSETTS (7.1%)
Boston MA GO 6.50% 7/1/12 (2) 4,750 5,192
Boston MA Water & Sewer Comm. 7.25% 11/1/06 (5) 2,500 2,587
Lawrence MA GO 4.75% 2/15/14 (2) 1,500 1,382
Massachusetts Consolidated Loan GO 4.50% 11/1/15 (2) 15,000 13,289
Massachusetts Consolidated Loan GO 7.00% 7/1/09 (3) 32,250 38,244
Massachusetts Health & Educ. Fac. Auth. (Boston College) 6.75% 7/1/11 (3) 6,595 7,201
Massachusetts Health & Educ. Fac. Auth. (Falmouth Hosp.) 5.50% 7/1/08 (1) 1,425 1,468
Massachusetts Health & Educ. Fac. Auth. (Lahey Clinic) 7.85% 7/1/03 (1) 3,360 3,909
Massachusetts Health & Educ. Fac. Auth.
(Massachusetts General Hosp.) 6.25% 7/1/12 (2) 19,650 21,800
Massachusetts Housing Finance Agency Rev. 5.95% 10/1/08 (2) 27,485 28,745
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 11,000 11,160
Massachusetts Water Auth. 4.75% 12/1/21 (1) 9,660 8,695
-----------
143,672
-----------
MICHIGAN (4.1%)
Detroit MI Sewer System Rev. 5.45% 7/1/07 (3) 6,850 7,119
Michigan Hosp. Fin. Auth. Rev. (Mercy Health) 5.375% 8/15/26 (2) 5,000 4,875
Michigan Strategic Fund (Detroit Edison) 7.00% 7/15/08 (1) 18,375 21,683
Michigan Trunk Line Rev. 5.625% 11/1/26 (3) 10,000 10,086
Monroe County MI Econ. Dev. Corp. (Detroit Edison) 6.95% 9/1/22 (3) 25,000 30,401
St. Clair MI Econ. Dev. Corp. PCR (Detroit Edison) 6.40% 8/1/24 (2) 8,000 8,820
-----------
82,984
-----------
MINNESOTA (0.5%)
Southern Minnesota Muni. Power Agency Supply System Rev. 5.50% 1/1/15 (2) 6,120 6,149
Southern Minnesota Muni. Power Agency Supply System Rev. 5.50% 1/1/15 (2)(Prere.) 3,880 3,916
-----------
10,065
-----------
</TABLE>
36
<PAGE> 77
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSOURI (0.2%)
Missouri Health & Educ. Fac. Auth. (Lester Cox Medical Center) 5.25% 6/1/15 (1) 5,000 $ 4,988
-----------
NEVADA (0.3%)
Clark County NV Airport System Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 (1) 300 300
Clark County NV GO 6.50% 6/1/17 (2) 5,000 5,742
-----------
6,042
-----------
NEW HAMPSHIRE (0.4%)
New Hampshire Higher Educ. (Hitchcock Clinic) 6.00% 7/1/15 (1) 7,560 7,837
-----------
NEW JERSEY (4.6%)
Atlantic County NJ Public Fac. COP 7.40% 3/1/12 (3) 4,335 5,358
Hoboken-Union City-Weehawken NJ Sewage Auth. 6.25% 8/1/14 (1) 10,185 11,415
Hoboken-Union City-Weehawken NJ Sewage Auth. 6.25% 8/1/15 (1) 10,820 12,107
New Jersey Health Care Fac. Finance Auth.
(St. Clares-Riverside Medical Center) 5.75% 7/1/14 (1) 3,000 3,092
New Jersey Sports & Exposition Auth. 6.50% 3/1/13 (1) 18,795 21,548
New Jersey Turnpike Auth. 6.50% 1/1/13 (1) 30,000 34,360
New Jersey Turnpike Auth. 6.50% 1/1/16 (1) 5,000 5,730
New Jersey Turnpike Auth. VRDO 2.65% 9/3/97 (3) LOC 400 400
-----------
94,010
-----------
NEW MEXICO (0.9%)
Albuquerque NM Hosp. System (Presbyterian Health) 6.375% 8/1/07 (1) 4,000 4,357
Farmington NM Util. Systems Rev. 5.75% 5/15/13 (3) 3,000 3,084
Santa Fe NM Rev. 6.30% 6/1/24 (2) 5,000 5,485
Univ. of New Mexico Rev. 5.375% 6/1/26 (1) 5,000 4,903
-----------
17,829
-----------
NEW YORK (4.2%)
Metro. NY Transp. Auth. 6.00% 4/1/20 (1) 18,000 19,522
New York City NY GO VRDO 3.25% 9/3/97 LOC 9,000 9,000
New York City NY Muni. Assistance Corp. VRDO 3.15% 9/3/97 600 600
New York City NY Muni. Water & Sewer System Rev. 7.00% 6/15/09 (2) 1,845 2,014
New York City NY VRDO 3.15% 9/3/97 LOC 4,900 4,900
New York State Medical Care Fac. Finance Agency
(Mental Health Improvement) 6.00% 8/15/15 (1) 5,000 5,216
New York State Thruway Auth. (Highway & Bridge Trust Fund) 6.00% 4/1/06 (2) 11,815 12,855
New York State Thruway Auth. (Highway & Bridge Trust Fund) 6.00% 4/1/07 (2) 16,480 17,998
Suffolk County NY Water Auth. 5.75% 6/1/13 (2) 7,345 7,564
Triborough Bridge & Tunnel Auth. of NY Rev. 6.00% 1/1/14 4,500 4,663
Triborough Bridge & Tunnel Auth. of NY Rev. 6.00% 1/1/15 (2) 1,275 1,319
-----------
85,651
-----------
NORTH CAROLINA (1.1%)
North Carolina Higher Educ. VRDO (Duke Univ.) 3.33% 9/4/97 1,940 1,940
North Carolina Medical Care Rev. (Wake County Hosp.) 5.25% 10/1/17 (1) 14,250 13,853
North Carolina Muni. Power Agency (Catawba Electric) 6.00% 1/1/10 (1) 6,750 7,385
-----------
23,178
-----------
NORTH DAKOTA (1.1%)
Bismarck ND Medical Center 7.50% 5/1/13 (5) 10,000 10,678
Mercer County ND PCR (Basin Electric Power) 6.05% 1/1/19 (2) 10,000 10,546
-----------
21,224
-----------
OHIO (3.9%)
Cleveland OH Airport System Rev. 0.00% 1/1/06 (1) 3,475 2,323
Cleveland OH Public Power System Rev. 7.00% 11/15/16 (1) 5,000 5,673
Cleveland OH School Dist. Board of Educ. GO 5.875% 12/1/11 (3) 4,720 4,907
Cleveland OH Water Works Rev. 6.25% 1/1/15 (2) 2,500 2,679
Columbus OH Electric System Rev. VRDO 3.55% 10/1/97 LOC 100 100
Columbus OH VRDO 3.25% 9/4/97 400 400
Cuyahoga County OH Hosp. Refunding and Improvement (Univ. Hosp.) 5.625% 1/15/21 (1) 11,480 11,564
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic Foundation) 3.30% 9/3/97 LOC 400 400
Franklin County OH Convention Center Rev. 0.00% 12/1/06 (1) 4,355 2,785
</TABLE>
37
<PAGE> 78
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater Cleveland OH Regional Transp. Auth. GO 5.65% 12/1/16 (3) $ 5,000 $ 5,110
Northeast Ohio Regional Sewer Dist. Waste Water Improvement 6.50% 11/15/01 (2) 5,750 6,275
Ohio Air Quality Dev. Auth. PCR (Ohio Edison Project) 7.10% 6/1/18 (3) 6,500 7,033
Ohio Air Quality Dev. Auth. PCR (Ohio Edison Project) 7.45% 3/1/16 (3) 9,500 10,314
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric) 3.75% 9/3/97 LOC 900 900
Ohio GO 7.625% 8/1/09 4,345 5,418
Ohio Turnpike Comm. Rev. 5.50% 2/15/26 (1) 12,800 12,781
-----------
78,662
-----------
OKLAHOMA (0.3%)
Grand River Dam Auth. OK 5.75% 6/1/06 (4) 5,800 6,237
OREGON (1.3%)
Oregon Health, Housing, Educ. & Cultural Fac. (Lewis & Clark College) 6.00% 10/1/13 (1) 2,250 2,382
Oregon Health Sciences Univ. Rev. 5.25% 7/1/25 (1) 8,000 7,705
Portland OR GO Sewer Rev. 5.50% 6/1/17 (1) 15,000 15,154
-----------
25,241
-----------
PENNSYLVANIA (8.1%)
Allegheny County PA Hosp. Auth. (Presbyterian Hosp.) 7.125% 7/1/99 (1)(Prere.) 12,500 13,399
Allegheny County PA Sanitary Auth. 5.50% 12/1/16 (3) 10,000 10,005
Allegheny County PA Sanitary Auth. 6.00% 12/1/19 (1) 20,000 21,047
Armstrong County PA Hosp. Auth. Rev. 6.25% 6/1/13 (2) 18,400 19,507
Lehigh County PA General Purpose Auth. (Lehigh Valley Hosp.) 6.50% 7/1/10 (1) 6,655 7,268
Pennsylvania Convention Center Auth. Rev. 6.00% 9/1/19 (3)(ETM) 10,000 10,768
Pennsylvania Convention Center Auth. Rev. 6.70% 9/1/16 (3)(ETM) 9,970 11,436
Pennsylvania Higher Educ. Fac. Health Service Rev.
(Allegheny-Delaware Valley) 5.875% 11/15/16 (1) 20,000 20,670
Pennsylvania Higher Educ. Fac. VRDO (Univ. of Pennsylvania) 3.20% 9/3/97 500 500
Pennsylvania Turnpike Comm. Rev. 6.00% 6/1/15 (1) 1,000 1,030
Philadelphia PA Gas Works Rev. 6.00% 5/15/12 (2) 3,000 3,096
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/10 (3) 15,000 17,856
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/11 (3) 16,500 19,722
Pittsburgh PA Water & Sewer System Rev. 7.25% 9/1/14 (3)(ETM) 5,000 5,958
York County PA IDA PCR VRDO (Public Service Electric & Gas) 3.10% 9/3/97 (1) 2,400 2,400
-----------
164,662
-----------
PUERTO RICO (0.8%)
Puerto Rico Highway and Transp. Rev. 6.00% 7/1/18 (4) 10,850 11,873
Puerto Rico Public Building Auth. 0.00% 7/1/01 (3) 4,150 3,526
-----------
15,399
-----------
RHODE ISLAND (0.3%)
Rhode Island Depositors Econ. Protection Corp. 5.80% 8/1/12 (1) 2,000 2,147
Rhode Island Public Building Auth. 6.00% 2/1/11 (2) 3,805 3,904
SOUTH CAROLINA (3.8%)
Piedmont SC Muni. Power Agency Rev. 5.00% 1/1/18 (3) 23,585 22,178
Piedmont SC Muni. Power Agency Rev. 6.75% 1/1/19 (3) 10,600 12,474
Piedmont SC Muni. Power Agency Rev. 6.75% 1/1/20 (3) 23,515 27,774
Public Service Auth. Rev. of South Carolina 6.25% 1/1/22 (2) 13,000 13,908
-----------
76,334
-----------
SOUTH DAKOTA (0.7%)
South Dakota Health & Educ. Fac. Auth. Rev. (McKennan Hosp.) 7.625% 7/1/14 (1) 11,500 13,882
-----------
TENNESSEE (1.1%)
Health, Educ. & Housing Fac. of Tennessee (Methodist Health System) 5.50% 8/1/12 (1) 2,500 2,556
Knox County TN Health, Educ. & Housing Fac. (Fort Sanders Hosp.) 8.00% 1/1/08 (1) 3,000 3,097
Nashville and Davidson County TN Health and Educ. Fac.
(Meharry Medical College) 6.00% 12/1/12 (2) 3,405 3,742
Tennessee Housing Dev. Agency 7.125% 7/1/17 (1) 2,665 2,800
Tennessee School Board Auth. Higher Educ. Fac. 5.50% 5/1/22 (4) 9,500 9,487
-----------
21,682
-----------
</TABLE>
38
<PAGE> 79
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (7.3%)
Austin TX Combined Util. System Rev. 5.75% 11/15/16 (2) $ 10,000 $ 10,179
Colorado River Muni. Water Dist. of TX Rev. 6.00% 1/1/16 (2) 6,000 6,160
Corpus Christi TX Util. System Rev. 7.00% 7/15/10 (3) 7,500 8,145
Harris County TX Toll Road VRDO 3.30% 9/3/97 1,600 1,600
Houston TX Public Improvement 7.00% 3/1/08 16,000 18,820
Houston TX Water & Sewer System Rev. 7.00% 12/1/20 (1) 12,280 13,514
Houston TX Water Conveyance System 6.25% 12/15/12 (2) 8,340 9,368
Houston TX Water Conveyance System 6.80% 12/15/10 (2) 5,490 6,452
Houston TX Water Conveyance System 6.80% 12/15/11 (2) 8,910 10,503
Houston TX Water Conveyance System 7.50% 12/15/12 (2) 1,000 1,255
Houston TX Water Conveyance System 7.50% 12/15/13 (2) 1,100 1,384
Lower Colorado River Auth. of Texas Rev. 5.625% 1/1/15 (4)(Prere.) 3,055 3,181
Northeast Hosp. Auth. (Northeast Medical Center) 5.625% 5/15/17 (4) 7,425 7,485
Northeast Hosp. Auth. (Northeast Medical Center) 5.625% 5/15/22 (4) 7,110 7,105
Northeast Hosp. Auth. (Northeast Medical Center) 6.00% 5/15/09 (4) 2,000 2,164
Northeast Hosp. Auth. (Northeast Medical Center) 6.00% 5/15/10 (4) 2,000 2,155
Northeast Hosp. Auth. (Northeast Medical Center) 6.25% 5/15/11 (4) 1,400 1,543
Northeast Hosp. Auth. (Northeast Medical Center) 6.25% 5/15/12 (4) 1,000 1,102
San Antonio TX Electric & Gas System Rev. 0.00% 2/1/06 (3) 18,000 11,885
San Antonio TX Electric & Gas System Rev. 0.00% 2/1/07 (3) 15,000 9,384
Texas TRAN 4.75% 8/31/98 10,000 10,089
Texas Turnpike Auth. of Dallas North Toll (Addison Project) 6.60% 1/1/23 (3) 4,500 5,021
-----------
148,494
-----------
VIRGINIA (0.7%)
Henry County VA Public Service Auth. 6.25% 11/15/19 (3) 1,500 1,607
Norfolk VA Water Dev. 5.90% 11/1/25 (1) 12,150 12,552
-----------
14,159
-----------
WASHINGTON (1.5%)
Snohomish County WA Mukilteo School Dist. 5.60% 12/1/08 (3) 6,960 7,421
Snohomish County WA Mukilteo School Dist. 5.65% 12/1/09 (3) 9,160 9,795
Snohomish County WA Mukilteo School Dist. 5.65% 12/1/10 (3) 3,950 4,208
Snohomish County WA Mukilteo School Dist. 5.70% 12/1/11 (3) 5,000 5,343
Washington GO VRDO 3.30% 9/3/97 2,700 2,700
-----------
29,467
-----------
WEST VIRGINIA (1.3%)
West Virginia Hosp. Finance Auth. (Charleston Medical Center) 5.75% 9/1/13 (1) 8,000 8,296
West Virginia State Building Comm. Rev. (Jail & Correction Fac.) 7.00% 7/1/11 (1) 7,325 8,759
West Virginia State Building Comm. Rev. (Jail & Correction Fac.) 7.00% 7/1/12 (1) 7,840 9,404
-----------
26,459
-----------
WISCONSIN (0.2%)
Wisconsin Health & Educ. (St. Luke's Medical Center) 7.10% 8/15/11 (1) 4,000 4,422
-----------
WYOMING (0.1%)
Kemmerer WY VRDO (Exxon Project) 3.75% 9/3/97 2,100 2,100
Lincoln County WY PCR VRDO (Exxon Project) 3.70% 9/3/97 700 700
-----------
2,800
-----------
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,816,843) 1,988,956
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 80
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
INSURED LONG-TERM PORTFOLIO (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.7%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 55,894
Liabilities (20,793)
35,101
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 162,531,461 outstanding $.001 par value shares
(authorized 350,000,000 shares) $2,024,057
===========================================================================================================================
NET ASSET VALUE PER SHARE $12.45
===========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with a value of $6,763,000 have been segregated as initial margin
for open futures contracts.
For key to abbreviations and other references, see page 51.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,863,800 $11.46
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (11,359) (.07)
Unrealized Appreciation
(Depreciation)--Note F
Investment Securities 172,113 1.06
Futures Contracts (497) --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $2,024,057 $12.45
===========================================================================================================================
</TABLE>
40
<PAGE> 81
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.5%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARIZONA (0.8%)
Scottsdale AZ IDA (Memorial Hosp.) 6.00% 9/1/12 (2) $ 4,000 $ 4,254
Scottsdale AZ IDA (Memorial Hosp.) 6.125% 9/1/17 (2) 4,700 5,020
-----------
9,274
-----------
CALIFORNIA (13.0%)
Anaheim CA Public Finance Auth. 6.00% 9/1/13 (4) 7,000 7,683
Anaheim CA Public Finance Auth. 6.00% 9/1/14 (4) 2,500 2,736
California GO 6.25% 9/1/12 5,000 5,609
California GO CP 3.35% 9/2/97 17,600 17,600
California PCR VRDO (Pacific Gas & Electric) 3.45% 9/3/97 LOC 2,800 2,800
California Public Works Rev. (Community College Project) 5.625% 3/1/16 (2) 11,370 11,555
California Public Works Rev. (Dept. of Corrections) 5.625% 11/1/16 (1) 16,675 16,943
California State Dept. of Water (Central Valley Project) 4.75% 12/1/25 3,120 2,770
Culver City CA Redev. Finance Auth. 4.60% 11/1/20 (2) 10,240 8,955
Fresno CA Sewer Rev. 6.25% 9/1/10 (2) 6,395 7,211
Irvine CA Water Dist. VRDO 3.35% 9/3/97 LOC 100 100
Los Angeles County CA COP (Capital Fac. Project) 6.50% 3/1/10 21,815 22,728
San Bernardino CA COP (Capital Fac. Project) 6.875% 8/1/24 (ETM) 18,000 21,915
San Bernardino CA Medical Center COP 5.50% 8/1/19 (1) 11,400 11,271
San Bernardino CA Medical Center COP 5.50% 8/1/24 (1) 14,295 14,038
San Diego County CA TRAN 4.375% 9/30/97 LOC 4,800 4,802
-----------
158,716
-----------
COLORADO (0.9%)
E-470 Public Highway Auth. CO Rev. 5.00% 9/1/15 (1) 11,645 11,152
-----------
DISTRICT OF COLUMBIA (0.9%)
District of Columbia GO 5.40% 6/1/12 (2) 5,000 5,009
District of Columbia GO 6.75% 6/1/05 (2) 6,140 6,543
-----------
11,552
-----------
FLORIDA (0.1%)
Dade County FL Water & Sewer System Rev. VRDO 3.25% 9/3/97 (3) 700 700
-----------
GEORGIA (2.9%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.80% 9/3/97 8,300 8,300
College Park GA IDA GO (Civic Center) 7.00% 9/1/10 11,500 13,478
Metro. Atlanta GA Rapid Transit Auth. Rev. 6.25% 7/1/18 12,170 13,486
-----------
35,264
-----------
ILLINOIS (4.7%)
Chicago IL Metro. Water Capital Improvement Rev. 7.00% 1/1/11 20,000 23,793
Chicago IL Public Building Comm. 7.00% 1/1/20 (1)(ETM) 6,000 7,147
Chicago IL Skyway Toll Bridge Rev. 6.50% 1/1/10 7,750 8,617
Illinois Dev. Finance Auth. PCR (Illinois Power Co. Project) 7.40% 12/1/24 (1) 8,150 9,390
Illinois Metro. Pier & Exposition Auth. Rev. 6.75% 6/1/10 (1) 6,000 6,883
Illinois Toll Highway Auth. Rev. VRDO 3.25% 9/3/97 (1)LOC 1,005 1,005
-----------
56,835
-----------
INDIANA (2.0%)
Indiana Health Fac. Finance Auth. Rev. (Ancilla System, Inc.) 5.75% 7/1/15 (1) 4,470 4,540
Indiana State Office Building Comm. Rev. 6.90% 7/1/11 16,875 19,643
-----------
24,183
-----------
LOUISIANA (2.8%)
De Soto Parish LA PCR (Southwestern Electric Power Co.) 7.60% 1/1/19 24,300 27,615
East Baton Rouge LA PCR VRDO (Exxon Project) 3.70% 9/3/97 6,400 6,400
-----------
34,015
-----------
MASSACHUSETTS (7.6%)
Massachusetts Bay Transp. Auth. 7.00% 3/1/21 15,000 18,128
Massachusetts GO 5.75% 5/1/12 7,500 8,025
Massachusetts GO 6.00% 6/1/11 3,500 3,696
Massachusetts GO 6.50% 8/1/01 (Prere.) 3,115 3,408
Massachusetts GO 6.50% 8/1/11 2,345 2,543
Massachusetts Housing Finance Agency 6.125% 11/15/08 3,500 3,641
</TABLE>
41
<PAGE> 82
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 $ 7,000 $ 7,102
Massachusetts Water Resources Auth. Rev. 5.50% 11/1/16 (3) 5,000 5,033
Massachusetts Water Resources Auth. Rev. 5.50% 7/15/22 5,000 4,881
Massachusetts Water Resources Auth. Rev. 6.50% 7/15/19 + 32,000 36,395
-----------
92,852
-----------
MICHIGAN (1.6%)
Detroit MI GO 6.375% 4/1/07 10,500 11,357
Grand Rapids MI Tax Increment Rev. (Downtown Project) 6.875% 6/1/24 (1) 7,500 8,455
-----------
19,812
-----------
MISSISSIPPI (1.1%)
Claiborne County MS PCR (Middle South Energy) 9.875% 12/1/14 10,000 10,842
Jackson County MS Port Fac. Rev. VRDO (Chevron USA Inc. Project) 3.70% 9/3/97 2,500 2,500
-----------
13,342
-----------
NEVADA (1.4%)
Clark County NV Building Auth. 5.25% 6/15/16 (3) 7,000 6,836
Humbolt County NV PCR (Idaho Power Co.) 8.30% 12/1/14 9,100 10,810
-----------
17,646
-----------
NEW JERSEY (6.0%)
New Jersey Econ. Dev. Auth. Market Transition Fac. 5.75% 7/1/06 (1) 34,165 36,402
New Jersey Health Care Fac. Auth. Rev. (Atlantic City Medical Center) 6.80% 7/1/05 3,500 3,842
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/13 10,000 11,441
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/19 20,000 21,652
New Jersey Turnpike Auth. 2.65% 9/3/97 (3) LOC 200 200
-----------
73,537
-----------
NEW YORK (15.4%)
Babylon NY Waste Water Fac. GO 9.00% 8/1/08 (3) 4,900 6,588
Babylon NY Waste Water Fac. GO 9.00% 8/1/09 (3) 2,800 3,812
Babylon NY Waste Water Fac. GO 9.00% 8/1/10 (3) 4,900 6,732
Metro. NY Transit Auth. Dedicated Petroleum Tax 5.25% 4/1/26 (1) 4,675 4,507
Metro. NY Transit Auth. Dedicated Petroleum Tax 6.00% 4/1/20 (1) 13,665 14,821
Metro. NY Transit Auth. Rev. 5.70% 7/1/17 (1) 8,320 8,543
Metro. NY Transit Auth. Rev. 6.375% 7/1/18 (1) 7,500 8,369
New York City NY GO 5.70% 8/1/07 4,700 4,885
New York City NY GO 5.75% 2/15/07 5,000 5,209
New York City NY GO 5.80% 8/1/08 5,730 5,977
New York City NY GO 5.90% 8/1/09 6,125 6,391
New York City NY GO 6.375% 8/1/04 5,000 5,369
New York City NY GO 7.10% 2/1/10 (1) 5,140 5,690
New York City NY GO 7.10% 2/1/02 (1)(Prere.) 2,360 2,644
New York City NY GO VRDO 3.25% 9/3/97 LOC 1,100 1,100
New York City NY GO VRDO 3.75% 9/3/97 (1) 4,600 4,600
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 7.00% 6/15/01 (Prere.) 2,520 2,773
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 7.00% 6/15/09 2,480 2,724
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.70% 9/3/97 (3) 4,200 4,200
New York Local Govt. Assistance Corp. Rev. 5.375% 4/1/12 5,275 5,313
New York Local Govt. Assistance Corp. Rev. 5.40% 4/1/13 13,125 13,171
New York Local Govt. Assistance Corp. Rev. 5.40% 4/1/15 5,700 5,663
New York Local Govt. Assistance Corp. Rev. 6.50% 4/1/20 10,000 10,726
New York Local Govt. Assistance Corp. Rev. 6.875% 4/1/19 8,000 8,949
New York Medical Care Fac. Auth. Rev. 6.875% 2/15/32 (7) 5,000 5,418
New York State Dormitory Auth. Rev. (State Univ.) 7.50% 5/15/11 18,900 22,626
Triborough Bridge & Tunnel Auth. NY Rev. (General Purpose Rev.) 6.125% 1/1/21 10,000 10,997
-----------
187,797
-----------
NORTH CAROLINA (1.5%)
North Carolina Eastern Muni. Power Agency Rev. 6.50% 1/1/18 (ETM) 4,625 5,336
North Carolina Eastern Muni. Power Agency Rev. 7.50% 1/1/09 (Prere.) 4,935 6,045
North Carolina Medical Care Rev. (Wake County Hosp.) 5.25% 10/1/17 (1) 7,100 6,902
-----------
18,283
-----------
</TABLE>
42
<PAGE> 83
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO (3.7%)
Columbus OH Electric System Rev. VRDO 3.55% 10/1/97 LOC $ 4,900 $ 4,900
Franklin County OH Hosp. Rev. (Children's Hosp.) 5.75% 11/1/20 2,945 2,985
Franklin County OH Hosp. Rev. VRDO (Holy Cross Health System) 3.35% 9/4/97 1,100 1,100
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas & Electric Co. Project) 3.75% 9/3/97 LOC 4,200 4,200
Ohio GO 4.625% 5/1/98 5,000 5,028
Ohio Turnpike Comm. Rev. 5.50% 2/15/26 (1) 26,650 26,611
-----------
44,824
-----------
OREGON (0.8%)
Portland County OR Sewer System Rev. 5.50% 6/1/17 (1) 10,090 10,194
-----------
PENNSYLVANIA (9.4%)
Allegheny County PA Sanitary Auth. 6.00% 12/1/19 (1) 10,000 10,524
Allegheny County PA Hosp. Dev. Auth. VRDO
(Children's Hosp. Pittsburgh) 3.30% 9/4/97 (1) 350 350
Delaware County PA IDA PCR VRDO
(British Petroleum Exploration & Oil) 3.70% 9/3/97 800 800
Delaware County PA IDA Resource Recovery (Browning Ferris) 6.10% 7/1/13 10,000 10,545
Pennsylvania GO 6.375% 9/15/09 11,000 11,842
Pennsylvania GO 6.375% 9/15/10 8,820 9,495
Pennsylvania GO 6.375% 9/15/11 5,975 6,430
Pennsylvania GO 6.375% 9/15/12 13,500 14,522
Pennsylvania Higher Educ. Fac. Auth. Rev. VRDO
(Univ. of Pennsylvania Health Service) 3.20% 9/3/97 2,700 2,700
Pennsylvania Housing Finance Agency Residential Dev. Rev. 7.50% 7/1/06 3,890 4,176
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/10 (3) 20,000 23,808
Pittsburgh PA School Dist. 5.50% 9/1/14 (1) 4,715 4,758
Pittsburgh PA Water & Sewer Auth. Rev. 6.50% 9/1/13 (3) 10,000 11,460
Radnor Township PA School Auth. 9.875% 9/15/00 (ETM) 385 415
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financing Program) 3.30% 9/3/97 (2) 3,200 3,200
-----------
115,025
-----------
PUERTO RICO (1.2%)
Puerto Rico GO 5.00% 7/1/98 5,000 5,043
Puerto Rico Highway and Transp. Rev. 5.00% 7/1/16 (4) 10,605 10,179
-----------
15,222
-----------
SOUTH CAROLINA (3.4%)
Piedmont SC Muni. Power Agency Rev. 6.15% 1/1/07 (1) 4,040 4,456
Piedmont SC Muni. Power Agency Rev. 6.20% 1/1/08 (1) 3,000 3,331
Piedmont SC Muni. Power Agency Rev. 6.50% 1/1/15 (3) 12,210 13,963
Piedmont SC Muni. Power Agency Rev. 6.50% 1/1/15 (3)(ETM) 2,035 2,315
Piedmont SC Muni. Power Agency Rev. VRDO 3.30% 9/3/97 (1) 18,000 18,000
-----------
42,065
-----------
TEXAS (11.2%)
Harris County TX Toll Road VRDO 3.30% 9/3/97 1,000 1,000
Houston TX Hotel Occupancy Tax Rev. 5.50% 7/1/11 (4) 21,760 22,139
Houston TX Public Improvement 7.00% 3/1/08 5,000 5,881
Houston TX Water & Sewer System Rev. 6.375% 12/1/17 (2) 5,640 6,109
Houston TX Water & Sewer System Rev. 6.375% 12/1/01 (2) (Prere.) 360 394
North East TX Independent School Dist. 5.00% 2/1/16 6,425 6,134
San Antonio TX Electric & Gas System Rev. 5.00% 2/1/17 14,135 13,394
Southwest TX Higher Educ. Auth. VRDO (Southern Methodist Univ.) 3.75% 9/3/97 LOC 1,900 1,900
Texas City TX IDR (Arco Pipeline Project) 7.375% 10/1/20 17,000 21,360
Texas TRAN 4.75% 8/31/98 10,000 10,089
Texas GO 5.50% 4/1/20 4,655 4,655
Texas GO 5.50% 4/1/02 (Prere.) 10,345 10,964
Texas Water Dev. Board Rev. 5.25% 7/15/17 7,000 6,873
Texas Water Dev. Board Rev. 6.50% 7/15/10 17,425 19,741
Texas Water Dev. Board Rev. 7.05% 8/1/25 5,655 6,393
-----------
137,026
-----------
</TABLE>
43
<PAGE> 84
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIRGINIA (0.5%)
Richmond VA Metro. Expressway Auth. Rev. 6.375% 7/15/16 (3) $ 5,400 $ 5,866
-----------
WASHINGTON (2.8%)
Washington Dept. of Ecology COP (State Office Building Project) 5.00% 4/1/16 27,820 26,367
Washington GO 5.50% 5/1/18 4,000 4,110
Washington GO 6.75% 2/1/15 3,450 4,036
-----------
34,513
-----------
WEST VIRGINIA (0.9%)
West Virginia State Building Comm. Rev. 7.00% 7/1/14 (1) 8,975 10,795
WISCONSIN (2.9%)
Wisconsin Clean Water Rev. 6.875% 6/1/11 20,500 24,198
Wisconsin GO 6.25% 5/1/09 10,000 11,198
-----------
35,396
-----------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,117,278) 1,215,886
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 18,810
Liabilities (12,991)
-----------
5,819
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 109,998,283 outstanding $.001 par value shares
(authorized 350,000,000 shares) $1,221,705
===========================================================================================================================
NET ASSET VALUE PER SHARE $11.11
===========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
+ Securities with a value of $2,502,000 have been segregated as initial margin
for open futures contracts.
For key to abbreviations and other references, see page 51.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,130,262 $10.27
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (6,915) (.06)
Unrealized Appreciation (Depreciation)--Note F
Investment Securities 98,608 .90
Futures Contracts (250) --
===========================================================================================================================
NET ASSETS $1,221,705 $11.11
===========================================================================================================================
</TABLE>
44
<PAGE> 85
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (100.2%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA (0.3%)
Alaska Housing Finance Corp. VRDO 3.30% 9/3/97 $ 2,690 $ 2,690
North Slope Borough AK GO 7.50% 6/30/01 (3) 3,000 3,326
-----------
6,016
-----------
ARIZONA (1.7%)
Board of Regents Rev. (Univ. of Arizona) 6.20% 6/1/16 26,660 29,589
Pima County AZ IDA Rev. (La Cholla Project) 8.50% 7/1/20 + 6,650 6,251
Scottsdale AZ IDA Hosp. Rev. VRDO
(Scottsdale Memorial Health Systems) 3.25% 9/3/97 (2) 3,600 3,600
-----------
39,440
-----------
ARKANSAS (0.2%)
North Little Rock AR Electric System Rev. 6.50% 7/1/15 (1) 3,450 3,945
-----------
CALIFORNIA (10.7%)
California Educ. Fac. Auth. (Univ. of Southern California) 5.70% 10/1/15 6,000 6,207
California GO 4.75% 9/1/23 (3) 10,000 8,881
California Health Fac. Financing Auth. VRDO
(Catholic Health Care West) 3.00% 9/3/97 (1) 100 100
California Public Works Rev. (Community College Project) 5.375% 3/1/10 3,555 3,602
California Public Works Rev. (Community College Project) 5.375% 3/1/11 3,905 3,935
California Public Works Rev. (Community College Project) 5.375% 3/1/12 4,265 4,277
California Public Works Rev. (Community College Project) 7.00% 3/1/04 (Prere.) 14,275 16,561
California Public Works Rev. (Dept. of Corrections) 5.375% 11/1/13 7,820 7,782
California Public Works Rev. (Univ. Project) 6.40% 12/1/16 (2) 8,450 9,437
East Bay CA Muni. Util. Dist. Water System 4.75% 6/1/21 5,000 4,506
Orange County CA Airport Rev. 5.375% 7/1/08 (1) 5,745 5,918
Orange County CA Airport Rev. 5.50% 7/1/04 (1) 3,555 3,739
Orange County CA Airport Rev. 6.00% 7/1/01 (1) 7,245 7,668
Orange County CA Airport Rev. 6.00% 7/1/05 (1) 4,020 4,362
Orange County CA Airport Rev. 6.00% 7/1/06 (1) 4,565 4,976
Orange County CA Airport Rev. 6.00% 7/1/07 (1) 3,135 3,422
Orange County CA Sanitation Dist. VRDO 3.40% 9/3/97 (2) 1,100 1,100
Sacramento CA Finance Auth. Lease Rev. 5.40% 11/1/20 12,565 12,531
Sacramento County CA Sanitation Dist. Rev. 4.75% 12/1/23 9,000 8,067
San Bernardino County CA COP (Capital Fac. Project) 6.875% 8/1/24 (ETM) 25,220 30,705
San Bernardino County CA COP (Medical Center Funding) 4.75% 8/1/28 10,425 8,859
San Bernardino County CA COP (Medical Center Funding) 7.00% 8/1/20 12,180 14,579
San Diego CA IDR (San Diego Gas & Electric) 8.75% 3/1/23 4,450 4,554
San Joaquin Hills CA Transp. Agency Rev. 0.00% 1/1/01 7,340 6,275
San Joaquin Hills CA Transp. Agency Rev. 0.00% 1/1/02 14,000 11,343
Santa Clara County CA TRAN 4.75% 10/1/98 10,300 10,394
Southern California Public Power Auth. Rev. 6.00% 7/1/18 3,985 4,052
Southern California Public Power Auth. Rev. VRDO
(Transmission Project) 3.00% 9/3/97 (4) 2,400 2,400
Univ. of California Hosp. (Medical Center) 6.00% 7/1/26 (2) 10,260 10,737
Vallejo CA Sanitation & Flood Control COP 5.00% 7/1/19 (3) 15,000 14,290
-----------
235,259
-----------
COLORADO (2.9%)
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/03 (1) 8,200 6,182
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/06 (1) 22,000 14,151
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/07 (1) 12,500 7,619
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/08 (1) 14,000 8,034
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/09 (1) 16,195 8,734
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/10 (1) 7,185 3,634
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/12 (1) 21,795 9,769
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/13 (1) 5,000 2,108
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/14 (1) 5,000 1,981
E-470 Public Highway Auth. CO Rev. 0.00% 9/1/15 (1) 5,000 1,859
-----------
64,071
-----------
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FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (3.1%)
District of Columbia GO 5.50% 6/1/98 $ 20,000 $ 20,182
Metro. Washington D.C. Airport Auth. Rev. 5.50% 10/1/09 (3) 6,795 7,019
Metro. Washington D.C. Airport Auth. Rev. 5.50% 10/1/10 (3) 7,270 7,437
Metro. Washington D.C. Airport Auth. Rev. 5.50% 10/1/24 (1) 10,630 10,366
Metro. Washington D.C. Airport Auth. Rev. 5.70% 10/1/07 (1) 12,900 13,630
Metro. Washington D.C. Airport Auth. Rev. 5.875% 10/1/15 (1) 8,400 8,635
-----------
67,269
-----------
FLORIDA (8.4%)
Citrus County FL PCR (Florida Power Corp.) 6.35% 2/1/22 6,500 6,898
Dade County FL Aviation Rev. (Miami International Airport) 5.50% 10/1/02 (4) 4,270 4,434
Dade County FL Aviation Rev. (Miami International Airport) 5.75% 10/1/03 (4) 17,950 18,889
Dade County FL Aviation Rev. (Miami International Airport) 5.75% 10/1/04 (4) 11,850 12,490
Dade County FL Aviation Rev. (Miami International Airport) 5.75% 10/1/05 (4) 7,490 7,900
Dade County FL School Dist. GO 5.00% 2/15/17 (1) 21,240 20,372
Dade County FL Water & Sewer System Rev. VRDO 3.25% 9/3/97 (3) 5,050 5,050
Florida Dept. of General Services
(Dept. of Environmental Protection Preservation) 5.75% 7/1/08 (2) 18,590 19,986
Florida Dept. of General Services
(Dept. of Environmental Protection Preservation) 6.00% 7/1/03 (2) 15,980 17,215
Florida Dept. of General Services
(Dept. of Environmental Protection Preservation) 6.00% 7/1/04 (2) 10,815 11,714
Orange County FL School Master Lease COP 6.00% 8/1/08 (1) 11,580 12,662
Orange County FL School Master Lease COP 6.00% 8/1/09 (1) 12,255 13,308
Orange County FL School Master Lease COP 6.00% 8/1/10 (1) 12,825 13,815
Orlando FL Util. Comm. Rev. 6.75% 10/1/17 2,200 2,600
Palm Beach County FL Auth. Rev. 6.00% 10/1/07 (2) 10,850 11,917
Tarpon Springs FL Health Fac. Auth. Rev. (Tarpon Springs Hosp.) 8.75% 5/1/12 4,000 4,158
-----------
183,408
-----------
GEORGIA (2.0%)
Burke County GA Dev. Auth. PCR VRDO (Georgia Power Co.) 3.70% 9/3/97 300 300
Burke County GA Dev. Auth. PCR VRDO (Oglethorpe Power Co.) 3.25% 9/3/97 (3) 40 40
Cartersville GA Water & Waste Water Fac. (Anheuser-Busch Cos., Inc.) 7.40% 11/1/10 5,000 6,041
Dalton County GA Dev. Auth. (Hamilton Health Care System) 5.50% 8/15/17 (1) 5,000 5,116
Dalton County GA Dev. Auth. (Hamilton Health Care System) 5.50% 8/15/26 (1) 12,000 12,192
Muni. Electric Auth. of Georgia Rev. 6.60% 1/1/18 (1) 5,000 5,803
Savannah GA Hosp. Auth. Rev. (Candler Hosp.) 7.00% 1/1/23 13,000 13,623
-----------
43,115
-----------
HAWAII (1.1%)
Hawaii GO 6.25% 3/1/07 (3) 5,000 5,544
Hawaii Harbor Capital Improvement Rev. 5.50% 7/1/27 (1) 18,500 18,074
-----------
23,618
-----------
ILLINOIS (5.1%)
Chicago IL Public Building Comm. 7.00% 1/1/15 (1)(ETM) 10,000 11,424
Chicago IL Public Building Comm. 7.00% 1/1/20 (1)(ETM) 10,000 11,912
Chicago IL Skyway Toll Bridge Rev. 6.75% 1/1/04 (Prere.) 10,000 11,255
Chicago IL Skyway Toll Bridge Rev. 6.75% 1/1/04 (Prere.) 18,185 20,467
Cook County IL GO 6.60% 11/15/22 (1) 12,000 13,384
Illinois Dev. Finance Auth. Rev. (Regency Park Project) 10.25% 4/15/19 * 6,500 5,200
Illinois Dev. Finance Auth. Rev. (Regency Park Project) 10.625% 4/15/20 * 6,000 4,860
Illinois Dev. Finance Auth. Rev. PCR (Illinois Power Co. Project) 7.40% 12/1/24 (1) 20,000 23,043
Illinois Health Fac. Auth. Certificate of Beneficial Interest
(Adventist Living Centers) -- -- * 770 69
Illinois Health Fac. Auth. Rev. (United Medical Center) 8.125% 7/1/03 (Prere.) 2,565 2,855
Illinois Toll Highway Auth. Rev. 6.30% 1/1/11 5,000 5,514
Loves Park IL First Mortgage Rev. (Hoosier Care) 9.75% 8/1/19 1,520 1,626
-----------
111,609
-----------
INDIANA (3.2%)
Indiana Educ. Fac. Auth. VRDO (Univ. of Notre Dame Du Lac Project) 3.20% 9/4/97 2,300 2,300
Indiana Health Fac. Finance Auth. Rev. (Ancilla System, Inc.) 7.375% 7/1/23 19,400 22,767
Indiana State Office Building Comm. Rev. 6.90% 7/1/11 + 15,660 18,228
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indianapolis IN Local Public Improvement Bond Bank 6.75% 2/1/14 $21,500 $ 24,838
Indianapolis IN Local Public Improvement Bond Bank 6.75% 2/1/20 2,500 2,746
------------
70,879
------------
IOWA (0.5%)
Des Moines IA Rev. (Des Moines General Hosp.) 8.25% 11/15/11 9,620 10,263
------------
KENTUCKY (1.0%)
Jefferson County KY (Jewish Hosp. Health) 5.65% 1/1/17 (2) 8,000 8,100
Jefferson County KY (Jewish Hosp. Health) 5.70% 1/1/21 (2) 10,000 10,166
Kentucky Property & Buildings Comm. Rev. 5.80% 9/1/06 3,100 3,282
------------
21,548
LOUISIANA (1.2%)
East Baton Rouge Parish LA PCR VRDO (Exxon Project) 3.70% 9/3/97 2,100 2,100
Iberia Parish LA Hosp. Services Dist. 8.00% 5/26/16 6,250 6,515
Louisiana Health Educ. Auth. (Lambeth House Project) 8.75% 10/1/17 12,295 12,964
West Feliciana Parish LA PCR (Gulf States Utilities) 9.00% 5/1/15 4,000 4,440
------------
26,019
------------
MARYLAND (0.2%)
Hagerstown MD Energy Finance Administration Recycling Rev.
(Hagerstown Fiber Project) 9.00% 10/15/16 17,500 5,250
MASSACHUSETTS (7.3%)
Massachusetts Consolidated Loan 4.50% 11/1/15 (2) 14,620 12,952
Massachusetts Consolidated Loan 5.75% 5/1/12 (2) 5,000 5,355
Massachusetts GO 6.00% 6/1/11 14,750 15,579
Massachusetts Industrial Finance Agency
(Massachusetts Recycling Assoc.) 9.00% 8/1/16 * 17,000 6,503
Massachusetts Industrial Finance Agency (Refusetech Inc. Project) 6.30% 7/1/05 34,500 36,904
Massachusetts Turnpike Auth. BAN 5.00% 6/1/99 11,000 11,160
Massachusetts Water Resources Auth. Rev. 5.50% 7/15/22 22,420 21,884
Massachusetts Water Resources Auth. Rev. 6.50% 7/15/19 43,700 49,702
------------
160,039
------------
MICHIGAN (4.5%)
Detroit MI GO 6.25% 4/1/05 13,000 13,973
Detroit MI GO 6.375% 4/1/06 8,635 9,373
Dickinson County MI Memorial Hosp. System Rev. 7.625% 11/1/05 1,150 1,248
Dickinson County MI Memorial Hosp. System Rev. 8.00% 11/1/14 5,700 6,335
Michigan Hosp. Finance Auth. Rev. (Genesys Health System) 7.50% 10/1/27 6,620 7,370
Michigan Hosp. Finance Auth. Rev. (Genesys Health System) 8.10% 10/1/13 5,000 5,845
Michigan Hosp. Finance Auth. Rev. (Genesys Health System) 8.125% 10/1/21 15,000 17,435
Michigan Housing Dev. Auth. Rev. 6.30% 4/1/04 6,500 6,857
Michigan Public Power Agency Rev. (Belle River Project) 5.50% 1/1/13 27,000 26,970
Univ. of Michigan Hosp. Rev. VRDO 3.75% 9/3/97 3,200 3,200
------------
98,606
------------
MINNESOTA (0.3%)
Washington County MN Housing & Redev. Auth. Rev.
(Woodland Park Project) 0.00% 5/1/20 35,070 2,077
Washington County MN Housing & Redev. Auth. Rev.
(Woodland Park Project) 9.75% 5/1/20 5,000 4,750
------------
6,827
------------
MISSISSIPPI (1.0%)
Claiborne County MS PCR (Middle South Energy) 9.875% 12/1/14 21,000 22,768
------------
MISSOURI (0.7%)
Missouri Health & Educ. Fac. Auth. VRDO
(Sisters of Mercy Health Care System) 3.30% 9/3/97 4,300 4,300
Missouri Health & Educ. Fac. Auth. VRDO (Washington Univ.) 3.75% 9/3/97 3,300 3,300
St. Luke Mission Health System MO 5.375% 11/15/16 (1) 8,000 7,882
------------
15,482
------------
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FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEVADA
Clark County NV Airport System Refunding Rev. VRDO
(McCarren International Airport) 3.25% 9/3/97 (1) $ 300 $ 300
------------
NEW Hampshire (0.3%)
New Hampshire Health & Higher Educ. Rev. (Catholic Medical Center) 6.00% 7/1/17 6,580 6,586
------------
NEW JERSEY (1.8%)
New Jersey Econ. Dev. Auth. Market Transition Fac. 5.875% 7/1/11 (1) 8,000 8,424
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/13 15,000 17,162
New Jersey Transp. Trust 6.00% 6/15/11 (1) 10,000 10,771
New Jersey Turnpike Auth. VRDO 2.65% 9/3/97 (3) LOC 3,200 3,200
------------
39,557
------------
NEW YORK (13.7%)
Metro. NY Transit Auth. Rev. 6.00% 4/1/20 (1) 18,000 19,522
Metro. NY Transit Auth. Rev. 6.375% 7/1/04 (1)(Prere.) 25,690 28,668
Metro. NY Transit Auth. Rev. 7.375% 7/1/08 22,870 26,517
New York City NY GO 5.90% 8/1/09 5,150 5,374
New York City NY GO VRDO 3.25% 9/3/97 LOC 300 300
New York City NY GO VRDO 3.70% 9/3/97 LOC 1,500 1,500
New York City NY Muni. Water Finance Auth. CP 3.45% 9/23/97 LOC 10,000 10,000
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.50% 6/15/20 25,000 24,583
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.75% 6/15/26 (1) 22,300 22,733
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.70% 9/3/97 (3) 2,000 2,000
New York State Environmental Fac. Solid Waste Disposal Rev. CP
(General Electric Co. Project) 3.50% 9/2/97 1,600 1,600
New York State Dormitory Auth. Rev. (City Univ.) 6.375% 7/1/08 3,150 3,350
New York State Dormitory Auth. Rev. (City Univ.) 7.50% 7/1/10 5,500 6,588
New York State Dormitory Auth. Rev. (State Univ.) 5.375% 5/15/07 (2) 2,100 2,201
New York State Dormitory Auth. Rev. (State Univ.) 7.50% 5/15/13 11,500 14,090
New York State Local Govt. Assistance Corp. Rev. 6.00% 4/1/16 6,400 6,782
New York State Local Govt. Assistance Corp. Rev. 6.50% 4/1/20 16,110 17,279
New York State Local Govt. Assistance Corp. Rev. 7.00% 4/1/10 6,320 7,000
New York State Local Govt. Assistance Corp. Rev. VRDO 3.20% 9/3/97 LOC 18,300 18,300
New York State Power Auth. Rev. 6.50% 1/1/19 26,250 28,329
Port Auth. of New York & New Jersey Special Obligation Rev.
(JFK International Airport) 6.00% 12/1/05 (1) 7,500 8,091
Port Auth. of New York & New Jersey Special Obligation Rev.
(JFK International Airport) 6.00% 12/1/06 (1) 9,000 9,743
Port Auth. of New York & New Jersey Special Obligation Rev.
(JFK International Airport) 6.00% 12/1/07 (1) 5,000 5,426
Port Auth. of New York & New Jersey Special Obligation Rev.
(JFK International Airport) 6.25% 12/1/08 (1) 4,000 4,426
Triborough Bridge & Tunnel Auth. NY Rev. (Convention Center Project) 7.25% 1/1/10 13,500 15,650
Triborough Bridge & Tunnel Auth. NY Rev. (General Purpose Rev.) 5.50% 1/1/17 10,000 10,239
------------
300,291
------------
NORTH CAROLINA (1.5%)
Charlotte NC Airport Rev. VRDO 3.25% 9/3/97 (1) 1,395 1,395
New Hanover County NC Hosp. Rev. (Regional Medical Center) 5.75% 10/1/16 (2) 12,500 12,798
North Carolina Eastern Muni. Power Agency Rev. 5.00% 1/1/20 (ETM) 10,385 9,932
North Carolina Eastern Muni. Power Agency Rev. 6.50% 1/1/18 (ETM) 6,665 7,689
------------
31,814
------------
OHIO (1.7%)
Cuyahoga County OH Hosp. Rev. VRDO (Cleveland Clinic) 3.25% 9/3/97 LOC 1,450 1,450
Franklin County OH Hosp. Rev. VRDO (Holy Cross Health System) 3.35% 9/4/97 900 900
Hamilton County OH Hosp. Fac. Rev. VRDO (Bethesda Hosp.) 3.20% 9/4/97 LOC 1,000 1,000
Lucas County OH Hosp. Fac. Rev. (Flower Memorial Hosp.) 8.125% 12/1/11 8,900 10,312
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio GO (Highway Obligation) 4.50% 5/15/98 $11,400 $ 11,457
Scioto County OH Market Terminal Fac. VRDO (Norfolk Southern Corp.) 5.35% 9/3/97 12,000 12,000
------------
37,119
------------
OKLAHOMA (0.6%)
Jackson County OK Memorial Hosp. Auth. Rev. (Jackson Memorial) 6.75% 8/1/04 4,700 4,767
Jackson County OK Memorial Hosp. Auth. Rev. (Jackson Memorial) 7.30% 8/1/15 4,000 4,148
Norman OK Regional Hosp. Auth. 5.625% 9/1/16 (1) 4,510 4,545
------------
13,460
------------
OREGON (1.4%)
Oregon State Department Administrative Services 5.70% 5/1/16 (2) 4,290 4,397
Oregon Veterans Welfare Program VRDO 3.30% 9/3/97 LOC 2,300 2,300
Port Auth. of Portland OR Airport Rev. 5.625% 7/1/26 (3) 9,000 8,993
Portland County OR Sewer System Rev. 5.50% 6/1/17 (1) 15,000 15,154
------------
30,844
------------
PENNSYLVANIA (9.0%)
Allegheny County PA Airport Rev. (Pittsburgh International Airport) 5.75% 1/1/11 (1)++ 5,000 5,242
Allegheny County PA Sanitary Auth. 6.00% 12/1/19 (1) 14,630 15,396
Delaware County PA IDA (Browning Ferris) 6.10% 7/1/13 19,000 20,036
Delaware County PA IDA Resource Recovery Fac. VRDO
(General Electric Capital Corp.) 3.25% 9/3/97 2,500 2,500
Langhorne PA Higher Educ. & Health Auth. Rev. (Lower Bucks Hosp.) 7.30% 7/1/12 4,500 4,700
Langhorne PA Higher Educ. & Health Auth. Rev. (Lower Bucks Hosp.) 7.35% 7/1/22 13,200 13,786
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Brittany Point Project) 8.50% 1/1/03 (Prere.) 5,000 5,972
Pennsylvania Convention Center Auth. Rev. 6.60% 9/1/09 (4) 2,500 2,804
Pennsylvania Convention Center Auth. Rev. 6.70% 9/1/14 (4) 3,500 3,922
Pennsylvania Convention Center Auth. Rev. 6.75% 9/1/19 (4) 3,695 4,147
Pennsylvania Econ. Dev. Auth. Rev. (Colver Project) 7.050% 12/1/10 2,500 2,729
Pennsylvania Econ. Dev. Auth. Rev. (Colver Project) 7.125% 12/1/15 14,000 15,254
Pennsylvania Higher Educ. Fac. Auth. Rev. VRDO
(Univ. of Pennsylvania) 3.20% 9/3/97 3,500 3,500
Pennsylvania Housing Finance Agency Rev. 7.60% 7/1/13 10,000 10,670
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Seashore Hosp.) 7.00% 8/15/12 3,540 3,839
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Seashore Hosp.) 7.00% 8/15/17 1,000 1,085
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Seashore Hosp.) 7.00% 8/15/22 500 539
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev. (Methodist Hosp.) 7.75% 7/1/04 (Prere.) 12,290 14,504
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Roxborough Memorial Hosp.) 7.25% 3/1/24 9,800 9,977
Philadelphia PA Muni. Auth. Rev. 6.125% 7/15/08 4,000 4,184
Philadelphia PA Muni. Auth. Rev. 6.25% 7/15/13 5,785 5,999
Philadelphia PA Muni. Auth. Rev. 6.30% 7/15/17 1,750 1,815
Philadelphia PA Muni. Auth. Rev. 8.625% 11/15/16 1,385 1,548
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/11 (3) 21,500 25,699
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financing Program) 3.30% 9/3/97 (2) 700 700
Scranton-Lackawanna PA Health & Welfare (Moses Taylor Hosp.) 8.50% 7/1/01 (Prere.) 14,375 16,692
------------
197,239
------------
PUERTO RICO (0.5%)
Puerto Rico GO 5.00% 7/1/98 10,600 10,692
------------
RHODE ISLAND (0.5%)
Rhode Island Convention Center Auth. Rev. 5.75% 5/15/20 (2) 5,000 5,095
Rhode Island Public Building Auth. 5.25% 2/1/10 (2) 5,000 5,000
------------
10,095
------------
SOUTH CAROLINA (0.3%)
Piedmont SC Muni. Power Agency Rev. 6.25% 1/1/21 (3) 6,640 7,431
------------
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FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-YIELD PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (9.3%)
Austin TX Airport System Rev. 6.125% 11/15/25 (1) $38,000 $ 39,502
Austin TX Airport System Rev. 6.45% 11/15/20 17,040 18,442
Austin TX Water, Sewer & Electric Rev. 14.00% 11/15/01 200 246
Gulf Coast Waste Disposal Auth. TX PCR VRDO (Exxon Project) 3.70% 9/3/97 1,500 1,500
Harris County TX Hosp. Dist. Rev. 7.40% 2/15/10 (2) 17,500 20,870
Harris County TX IDA VRDO (Shell Oil Co. Project) 3.65% 9/3/97 3,600 3,600
Harris County TX Improvement GO 0.00% 10/1/13 (1) 9,630 4,023
Harris County TX Toll Road 6.25% 8/15/15 (1) 5,000 5,556
Harris County TX Toll Road VRDO 3.30% 9/3/97 9,700 9,700
Hidalgo County TX Health Mission Hosp. 6.875% 8/15/26 7,880 8,353
Houston TX Water & Sewer System Rev. 0.00% 12/1/11 (2) 24,810 11,608
Houston TX Water & Sewer System Rev. 6.375% 12/1/01 (2)(Prere.) 290 317
Houston TX Water & Sewer System Rev. 6.375% 12/1/17 (2) 4,530 4,906
North Central TX Health Fac. Dev. Corp. VRDO
(Presbyterian Medical Center) 3.75% 9/3/97 (1) 200 200
Odessa TX Junior College Dist. Rev. 8.125% 12/1/18 10,000 11,084
San Antonio TX Electric & Gas Rev. 5.00% 2/1/17 3,500 3,317
Texas GO 5.50% 4/1/02 (Prere.) 27,375 29,014
Texas GO 5.50% 4/1/20 12,675 12,674
Texas Muni. Power Agency Rev. 0.00% 9/1/06 6,205 3,981
Texas Turnpike Auth. Rev. 5.50% 1/1/15 (3)++ 14,605 14,774
------------
203,667
------------
UTAH (0.7%)
Intermountain Power Agency UT Power Supply Rev. 5.75% 7/1/19 (1) 8,000 8,165
Salt Lake City & County UT Airport Rev. VRDO 3.40% 9/4/97 LOC 7,000 7,000
------------
15,165
------------
VIRGINIA (0.9%)
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
------------
19,606
------------
WASHINGTON (2.0%)
Chelan County WA Public Util. Dist. (Rock Island Hydro Project) 0.00% 6/1/09 (1) 7,950 4,328
Chelan County WA Public Util. Dist. (Rock Island Hydro Project) 0.00% 6/1/10 (1) 19,550 9,982
Chelan County WA Public Util. Dist. (Rock Island Hydro Project) 0.00% 6/1/11 (1) 11,400 5,478
Chelan County WA Public Util. Dist. (Rock Island Hydro Project) 0.00% 6/1/12 (1) 19,650 8,888
Port Auth. of Seattle WA GO 5.75% 5/1/14 15,600 15,790
------------
44,466
------------
WEST VIRGINIA (0.5%)
West Virginia State Building Comm. Rev. 7.00% 7/1/13 (1) 8,390 10,076
WYOMING (0.1%)
Kemmerer WY PCR VRDO (Exxon Project) 3.75% 9/3/97 2,400 2,400
------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $2,075,114) 2,196,239
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 91
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-0.2%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 32,487
Liabilities $ (36,082)
--------------
(3,595)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 203,739,783 outstanding $.001 par value shares
(authorized 550,000,000 shares) $2,192,644
===========================================================================================================================
NET ASSET VALUE PER SHARE $10.76
===========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with an aggregate value of $5,282,000 have been segregated as
initial margin for open futures contracts.
For key to abbreviations and other references, see below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT AUGUST 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
Amount Per
(000) Share
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $2,077,780 $10.20
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (5,533) (.03)
Unrealized Appreciation (Depreciation)--Note F
Investment Securities 121,125 .59
Futures Contracts (728) --
===========================================================================================================================
NET ASSETS $2,192,644 $10.76
===========================================================================================================================
</TABLE>
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.
TAN--Tax Anticipation Note.
TOB--Tender Option Bond.
TRAN--Tax Revenue Anticipation Note.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
*Non-Income Producing Security--Interest Payments in Default.
**Only partial interest was paid on the last interest payment date.
++Security purchased on a when-issued or delayed delivery basis for which the
Portfolio has not taken delivery as of August 31, 1997.
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).
(8) CAP-MAC (Capital Markets Assurance Corporation).
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.
51
<PAGE> 92
================================================================================
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 Annual Report to Shareholders 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 (separate
portfolios of Vanguard Municipal Bond Fund, hereafter referred to as the "Fund")
at August 31, 1997, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, 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, 1997 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where securities purchased had not been settled,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
October 3, 1997
SPECIAL 1997 TAX INFORMATION (UNAUDITED)
VANGUARD MUNICIPAL BOND FUND
This information for the fiscal year ended August 31, 1997, is included
pursuant to provisions of the Internal Revenue Code.
The Short-Term, Intermediate-Term, Insured Long-Term, Long-Term, and
High-Yield Portfolios designate $198,000, $19,903,000, $8,371,000,
$4,800,000, and $10,842,000, respectively, as capital gain dividends (from
net long-term capital gains), which, along with any additional gains
realized through October 31, 1997, will be distributed in December 1997.
Each Portfolio designates 100% of its income dividends as
exempt-interest dividends.
