<PAGE> 1
VANGUARD CALIFORNIA
TAX-EXEMPT FUNDS
VANGUARD CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
VANGUARD CALIFORNIA INSURED
INTERMEDIATE-TERM TAX-EXEMPT FUND
VANGUARD CALIFORNIA INSURED
LONG-TERM TAX-EXEMPT FUND
[PHOTO]
SEMIANNUAL
REPORT
MAY 31, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 9,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
Our report cover pays homage to three anniversaries, each of great significance
to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto--"Leading the way"--serves as a guiding principle for
our company.
- - The 100th birthday, on July 23, 1998, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group. Mr.
Morgan was friend and mentor to Vanguard founder John C. Bogle, and helped to
shape the standards and business principles that Mr. Bogle laid down for
Vanguard at its beginning nearly 25 years ago: a stress on balanced,
diversified investments; insistence on fair dealing and candor with clients;
and a focus on long-term investing. To our great regret, Mr. Morgan died on
September 2, 1998.
- - The 70th anniversary, on December 28, 1998, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[GRAPHIC]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
4
REPORT FROM
THE ADVISER
6
PERFORMANCE SUMMARIES
8
FUND PROFILES
10
FINANCIAL STATEMENTS
14
FOR AN UPDATE ON OUR YEAR 2000 PREPAREDNESS, SEE PAGE 38.
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
DEAR SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
During the first half of the Vanguard California Tax-Exempt Funds' 1999 fiscal
year, municipal bond prices dipped in the face of rising interest rates. These
lower prices offset most of the interest income earned by tax-exempt securities
during the six months ended May 31, 1999, and resulted in relatively modest
total returns on municipal bonds for the period.
<TABLE>
<CAPTION>
- ----------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
MAY 31, 1999
- ----------------------------------------------------
<S> <C>
VANGUARD CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND +1.4%
(SEC 7-Day Annualized Yield: 2.91%)
Average California Tax-Exempt
Money Market Fund +1.2
- ----------------------------------------------------
VANGUARD CALIFORNIA INSURED
INTERMEDIATE-TERM TAX-EXEMPT FUND +0.7%
Average California Intermediate-Term
Tax-Exempt Fund +0.4
- ----------------------------------------------------
VANGUARD CALIFORNIA INSURED LONG-TERM
TAX-EXEMPT FUND +0.6%
Average California Long-Term
Tax-Exempt Fund -0.1
- ----------------------------------------------------
</TABLE>
In this environment, our Insured Long-Term Tax-Exempt Fund earned a
six-month total return (capital change plus reinvested dividends) of +0.6%, our
Insured Intermediate-Term Tax-Exempt Fund earned +0.7%, and our Tax-Exempt
Money Market Fund earned +1.4%. The adjacent table presents the half-year
returns for our funds, along with those of their average peers. As you can see,
the returns of each outpaced those of similar mutual funds.
The total return of the Insured Long-Term Tax-Exempt Fund is based on a
decrease in net asset value from $11.73 per share on November 30, 1998, to
$11.41 per share on May 31, 1999, and is adjusted for dividends totaling $0.281
per share paid from net investment income and a distribution of $0.110 per
share paid from net realized capital gains. The total return of the Insured
Intermediate-Term Tax-Exempt Fund is based on a decrease in net asset value
from $10.95 per share on November 30, 1998, to $10.79 per share on May 31,
1999, and is adjusted for dividends totaling $0.239 per share paid from net
investment income. The Tax-Exempt Money Market Fund's net asset value remained
at $1.00 per share, as was expected but not guaranteed. On May 31, the Insured
Long-Term Fund's yield stood at 4.56%, the Insured Intermediate-Term Fund's
yield at 4.10%, and the Money Market Fund's yield at 2.91%.
For California residents, income earned by our funds is exempt from
federal and California State income taxes, but may be subject to local taxes
and the Alternative Minimum Tax.
THE PERIOD IN REVIEW
The U.S. economy steamed ahead during the half-year as consumers continued
spending at a breakneck pace and the manufacturing sector showed signs of
recovering from last fall's woes. Economic growth expanded at an annual rate of
4.3% during the first three months of 1999, while both unemployment and
inflation remained low. The Wilshire 5000 Equity Index, which tracks the entire
U.S. stock market, gained +13.2% for the six months.
1
<PAGE> 4
While the strong growth pace was regarded enthusiastically by the stock
market, it was hardly welcome news in the bond market, where investors feared
that higher inflation would result from an overheated economy. These concerns
drove interest rates higher and bond prices lower. The yield of the benchmark
30-year U.S. Treasury bond climbed from its starting point of 5.06% on November
30, 1998, to 5.83% on May 31--a significant increase of 77 basis points. At the
shorter end of the bond spectrum, the yield of 3-month Treasury bills rose by
15 basis points to close the period at 4.63%.
Though yields of municipal bonds also rose, the climb was not as steep
as for Treasuries. Yields on high-grade long-term municipal bonds ended the
half-year at 5.16%, up from 4.89% when the period began. Yields on top-grade
(MIG-1) 3-month notes rose on balance to 3.15% from 2.95% six months earlier.
Municipal bonds continue to offer excellent value relative to U.S.
Treasuries, although they are not quite as attractive as they were six months
ago. On May 31, the yield of a high-grade, long-term municipal bond was equal
to about 89% of the yield of the 30-year U.S. Treasury, whose interest is
subject to federal income tax. This proportion has historically been about 84%.
Early in the period, however, it was about 97%, largely because Treasury yields
had been driven lower by heavy buying from investors who fled riskier
securities.
PERFORMANCE OVERVIEW
Our Tax-Exempt Money Market Fund's six-month return of +1.4% topped the +1.2%
return of the average California tax-exempt money market fund. Our margin over
our average peer can be explained by our much lower expenses.
The +0.7% total return achieved by the Insured Intermediate-Term
Tax-Exempt Fund consisted of a +2.2% income return and a price decline of
- -1.5%. The fund's performance topped the +0.4% return of the average California
intermediate-term municipal bond fund but was slightly behind the +0.8% return
of the Lehman 7 Year Municipal Bond Index. This national index, which exists
outside the "real world" of operating expenses and transaction costs, is a
tough standard for all state tax-exempt funds.
The +0.6% total return achieved by the Insured Long-Term Tax-Exempt Fund
consisted of a +2.4% income return and a price decline of -1.8%, which
reflected the rise in interest rates. The fund's performance was better than
the -0.1% return of the average California long-term municipal bond fund but
fell behind the +0.8% return of the overall Lehman Municipal Bond Index.
Of course, interest rate fluctuations--up and down--are to be expected.
In our letter to you six months ago, we explained that declining interest rates
gave a boost to bond prices, resulting in an excellent fiscal 1998 total return
of +8.3% for the Insured Long-Term Fund. Over time, however, the effects of
rate variations tend to be offsetting, leaving the rate of interest income as
the chief source of long-term bond returns.
A six-month period is too short to provide a complete picture of a bond
fund's return. This is because only half of the year's interest income is
accounted for, while the price changes engendered by shifts in interest rates
are fully reflected. Consequently, investors should consider a full year's
interest income as part of a semiannual review. During the twelve months ended
May 31, 1999, our Insured Long-Term Tax-Exempt Fund earned a total return of
+5.0%, consisting entirely of interest income. The +4.9% total return of our
Intermediate-Term Tax-Exempt Fund consisted of a +4.5% income return and a
+0.4% capital return.
2
<PAGE> 5
Our low costs play a critical role in our success. Our funds have
annualized expense ratios (expenses as a percentage of average net assets) of
about 0.20%, compared with 1.19% charged by the average long-term California
tax-exempt fund, 0.78% for the average intermediate-term California tax-exempt
fund, and 0.63% for the average California tax-exempt money market fund. Costs
matter because they are deducted from the income earned by the fund. Therefore,
lower operating expenses mean that a higher percentage of the gross interest
income is passed along to shareholders.
Also instrumental in our long-term success is the skillful management of
Vanguard Fixed Income Group, which selects the securities for our funds. Our
Insured Long-Term and Insured Intermediate-Term Funds invest predominantly in
bonds that carry private insurance guaranteeing the payment of principal and
interest in the event that a bond issuer defaults on its debt obligations.
Though these securities offer slightly lower gross yields than noninsured bonds,
our low costs historically have made up the difference--and then some. This cost
advantage has allowed our fund to provide net returns that are fully competitive
with those of uninsured--and thus, lower-quality--municipal bond portfolios.
IN SUMMARY
The swift rise in interest rates over the past several months is not an
aberration but rather a normal, if unpleasant, part of the cyclicality of the
financial markets. The variable nature of both bond and stock markets is the
reason we continuously counsel shareholders to hold balanced portfolios
suitable to their goals, time horizon for investing, and tolerance for risk.
Building such a program and then sticking with it through good times and bad is
a prudent, and ultimately rewarding, method of confronting the ever-present
volatility of the financial markets.
We look forward to reporting to you on the full 1999 fiscal year six
months hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
June 14, 1999
3
<PAGE> 6
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MAY 31, 1999
[PHOTO]
Sentiment shifted on the world's financial markets during the six months ended
May 31, 1999. The period began amid lingering anxiety over the state of the
world economy. Japan was in recession, economic growth was only sluggish in
Europe, and many developing nations were crisis-ridden. The United States was
just about the sole bright spot.
However, as the period progressed and reports showed rapid growth in U.S.
business activity, there was an evident reduction in anxiety. Midway through
the period, leadership in the U.S. stock market shifted away from a relatively
narrow group of large growth stocks regarded as relatively recession-proof and
toward cyclical stocks that had been depressed by fears of recession and by
falling demand from overseas markets. As confidence in global economic growth
grew, interest rates rose and bond prices declined in the United States due to
expectations that the Federal Reserve Board would raise interest rates to ward
off a potential surge in inflation. Internationally, however, a growing
conviction that the worst was over led to solid gains for stock markets in
Japan and several emerging markets.
U.S. STOCK MARKETS
Stock prices climbed during the half-year, reflecting the healthy domestic
economy and investors' confidence in future growth of corporate profits. The
overall market, as measured by the Wilshire 5000 Index, rose 13.2% during the
period, while the S&P 500 Index, a barometer for large-capitalization stocks,
gained 12.6%.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED MAY 31, 1999
-------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 12.6% 21.0% 25.9%
Russell 2000 Index 11.0 -2.7 13.6
Wilshire 5000 Index 13.2 17.7 23.8
MSCI EAFE Index 4.2 4.7 8.0
- ---------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -0.8% 4.4% 7.8%
Lehman 10 Year Municipal Bond Index 0.4 4.6 7.2
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.2 4.8 5.2
- ---------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.3% 2.1% 2.4%
- ---------------------------------------------------------------------------------
</TABLE>
*Annualized.
During the early part of the semiannual period, stock investors favored
large-cap growth stocks--a group perceived as less subject to harm during an
economic downturn. In the United States, the Federal Reserve had already cut
short-term rates by a total of 0.75 percentage point in the autumn. Foreign
central banks continued cutting rates into the new year to combat sluggish
economic conditions in Europe, Asia, and Latin America. Late in the semiannual
period, U.S. investors were rewarded for their earlier optimism with a series
of surprisingly strong gains in corporate earnings--a record percentage of
companies in the S&P 500 reported earnings that beat analysts' estimates.
4
<PAGE> 7
Throughout the period, U.S. consumers provided support for the global
economy: Spending by consumers continued to set records, and American
households on average spent nearly every dollar of income they earned. The
upbeat mood stemmed from a bright employment picture (unemployment hovered near
30-year lows) and rising incomes.
Improved prospects for global economic growth propelled several formerly
lackluster areas of the stock market, particularly commodity-related companies
and "cyclical" companies such as machinery, chemical, and paper manufacturers.
Higher oil prices, boosted by firmer demand and by agreement among oil-producing
nations to limit production, revived the "other energy" and integrated-oils
sectors, which gained about 36% and 16%, respectively. Technology stocks, up 26%
for the six months, were the market's leaders, but most of the sector's gains
came during the first three months of the period. Consumer-staples companies,
beset by tough price competition and hurt by the stronger U.S. dollar in Europe,
were the worst-performing group in the half-year, down about 7%.
U.S. BOND MARKETS
For bond investors, the powerful economic expansion evident during the
half-year was too much of a good thing. Although the inflation rate did not get
out of hand--consumer prices rose 1.3% during the six months and were up 2.1%
for the twelve months ended May 31--investors were worried that low
unemployment (4.2% of the labor force in May) would trigger an acceleration in
wages and push up prices.
Yields on U.S. Treasury bonds, which had fallen during the summer and
early fall of 1998 as investors flocked to what they regarded as a haven from
instability in other markets, rose by three-quarters of a percentage point or
more. The yield of the 30-year Treasury bond rose 77 basis points, to 5.83% on
May 31 from 5.06% on November 30, 1998. The yield of the 10-year Treasury rose
91 basis points, to 5.62% from 4.71%. Short-term rates didn't rise as far:
Yields on 3-month T-bills were up on balance by only 15 basis points, to 4.63%
on May 31. Bond prices, which move in the opposite direction from interest
rates, fell. The Lehman Aggregate Bond Index, a benchmark for investment-grade
taxable bonds, declined 0.8% on a total-return basis, as bond prices declined
an average of 3.8%, outweighing the 3.0% in interest income for the period.
Municipal bonds suffered only modest price declines and outperformed
Treasury securities during the period--a switch from the previous six months,
when Treasuries were the strongest segment of the bond market.
INTERNATIONAL STOCK MARKETS
Most overseas stock markets generated positive returns during the six months,
despite lingering economic weakness in Asia and sluggish growth in most of
Europe's developed economies. However, the strong rise in the value of the U.S.
dollar against European currencies negated most of the advances in that region
for U.S. investors. Emerging markets generally rebounded strongly, having
suffered steep losses in 1997 and 1998.
Overall, the developed markets outside the United States gained 4.2% in
U.S.-dollar terms, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index. The biggest increases were in the
Pacific region and in emerging markets, where investors saw hopeful signs of
economic recovery. The MSCI Pacific Index rose 14.2% in U.S.-dollar terms,
despite a continuing recession in Japan. The MSCI Select Emerging Markets Free
Index climbed 19.0%. European stocks were up a scant 0.3% in dollar terms, as
gains of about 8% in local currencies were diminished by the dollar's rise
against the euro--a common currency adopted by 11 nations--and other regional
currencies.
5
<PAGE> 8
REPORT FROM THE ADVISER
[PHOTO]
During the fiscal half-year ended May 31, 1999, interest rates rose as
investors became worried that the strong growth of the U.S. economy might lead
to an acceleration in the inflation rate. As the period progressed, the U.S.
economy's growth rate slowed, but remained strong.
On the inflation front, investors' fears seemed misplaced until May, when
the Consumer Price Index came in above expectations. Soon after, the Federal
Reserve Board announced that it had adopted a bias toward a tighter monetary
policy, meaning that it was more likely to raise interest rates in the coming
months than to lower them. A decision to raise short-term interest rates would,
if taken, be aimed at slowing growth and heading off increases in inflation.
The Fed's announcement marked the first time the agency had told the public
immediately about its adoption of a policy bias, rather than releasing the
information at a later date. As we reached the midpoint of our fiscal year,
interest rates were hovering around their highest levels of the period, and
market participants were waiting to see whether inflation and growth statistics
would prompt the Fed to act on its tightening bias.
Municipal bonds outperformed U.S. Treasury bonds with equivalent
maturities during the half-year. The benchmark 30-year U.S. Treasury bond's
yield increased by 77 basis points, from 5.06% on November 30, 1998, to 5.83% on
May 31, 1999. The yield of a 30-year AAA-rated general obligation municipal bond
increased 27 basis points, from 4.89% to 5.16%, over the same period. The
municipal bond market's strong relative performance can be explained by two
factors. First, municipal bond yields at the start of the 1999 fiscal year were
very attractive compared with Treasury yields. The global forces that had
compelled investors to seek the safety of Treasuries during summer 1998 did not
carry over to the municipal market, which consequently underperformed Treasuries
last fiscal year. This set the stage for municipals' superior performance in the
ensuing six months. Second, there was a 24% decline in the issuance of municipal
bonds during the first five months of calendar year 1999 compared with the same
period a year earlier.
THE INSURED INTERMEDIATE-TERM AND INSURED LONG-TERM TAX-EXEMPT FUNDS
The supply of newly issued municipals varied widely by state. In California,
new bond issuance declined by 26% compared with 1998. The supply of new bonds
declined for two reasons, both related to higher interest rates. First, as
rates rose, many issuers were no longer able to refinance older, higher-coupon
bonds by issuing new bonds at lower rates. Second, higher interest rates made
borrowing less attractive to bond issuers.
All in all, municipal bonds had a strong quarter compared with other types
of bonds. Even so, high-quality, long-term municipals continue to be attractive
investments, with yields as of May 31, 1999, equivalent to a relatively high 89%
of the yield on long-term
6
<PAGE> 9
U.S. Treasury bonds. Given that interest on municipal bonds is generally exempt
from federal income tax, while interest on Treasuries and corporate bonds is
not, municipals provide a better after-tax yield than any taxable bond of
similar credit quality.
Going forward, new municipal bond issuance is expected to remain low
through year-end. Also, as the outlook for growth and inflation becomes clearer,
the Fed should give more direction to the market. At the least, this should
reduce uncertainty and bring some comfort to the bond markets.
The Vanguard California Tax-Exempt Funds' low operating costs and high
credit quality should stand our shareholders in good stead during this year's
turbulent bond markets.
THE TAX-EXEMPT MONEY MARKET FUND
The economy's strength and the resulting threat of inflation were foremost on
investors' minds throughout the first half of the fiscal year. Consequently, the
yield on 1-year U.S. Treasury bills increased 47 basis points to finish the
half-year at 4.97%. Municipal securities with similar maturities experienced a
19-basis-point increase in yields, to 3.18% as of May 31, 1999. We believe the
strength of the U.S. economy is tempered by continued economic uncertainty
abroad, so our fund remains in a neutral position in terms of its average
maturity. In addition to fundamental economic forces, cash flows had a
significant impact on short-term municipal securities.
During the second quarter of the period, the annual onset of redemptions
by shareholders paying income tax liabilities contributed to the increase in
yields on short-term tax-exempt securities. In all, holders of state-specific
money market portfolios redeemed a net total of some $2.6 billion, or 4.4% of
assets, during the tax season, according to IBC Financial Data. As mutual funds
sold securities to meet these redemptions, the temporary oversupply of
short-term securities, coupled with a general rise in short-term interest rates
during late April and May, caused rates to rise significantly. Your management
used this opportunity to position the fund to benefit from the recent economic
trends, to further diversify its holdings, and to enhance its overall credit
quality.
Ian A. MacKinnon, Managing Director
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
John M. Carbone, Principal
Danine A. Mueller, Principal
Christopher M. Ryon, Principal
Kathryn Allen, Principal
Vanguard Fixed Income Group
June 11, 1999
INVESTMENT PHILOSOPHY
The adviser believes that each fund, while operating within stated maturity and
stringent quality targets, can achieve a high level of current income that is
exempt from federal and California income taxes by investing in insured and
high-quality uninsured securities issued by California state, county, and
municipal governments.
7
<PAGE> 10
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note that income
returns can fluctuate widely, as can the share price of the California Insured
Intermediate-Term Tax-Exempt Fund. An investment in a money market fund is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund.
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
TOTAL INVESTMENT RETURNS: JUNE 1, 1987-MAY 31, 1999
- -------------------------------------------------------
CALIFORNIA TAX-EXEMPT AVERAGE
MONEY MARKET FUND FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------
<S> <C> <C> <C> <C>
1987 0.0% 2.2% 2.2% 2.1%
1988 0.0 5.1 5.1 4.8
1989 0.0 6.2 6.2 5.8
1990 0.0 5.6 5.6 5.3
1991 0.0 4.4 4.4 4.2
1992 0.0 3.0 3.0 2.7
1993 0.0 2.4 2.4 2.0
1994 0.0 2.6 2.6 2.3
1995 0.0 3.7 3.7 3.3
1996 0.0 3.3 3.3 2.9
1997 0.0 3.4 3.4 3.0
1998 0.0 3.1 3.1 2.8
1999** 0.0 1.4 1.4 1.2
- -------------------------------------------------------
</TABLE>
*Average California Tax-Exempt Money Market Fund.
**Six months ended May 31, 1999.
SEC 7-Day Annualized Yield (5/31/1999): 2.91%
See Financial Highlights table on page 33 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CALIFORNIA INSURED INTERMEDIATE-TERM TAX-EXEMPT FUND
TOTAL INVESTMENT RETURNS: MARCH 4, 1994-MAY 31, 1999
- ------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE-
TERM TAX-EXEMPT FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -3.6% 3.4% -0.2% -1.1%
1995 8.3 5.6 13.9 15.2
1996 1.3 5.1 6.4 5.2
1997 1.0 4.9 5.9 6.0
1998 2.7 4.8 7.5 7.3
1999** -1.5 2.2 0.7 0.8
- ------------------------------------------------------
</TABLE>
*Lehman 7 Year Municipal Bond Index.
**Six months ended May 31, 1999.
See Financial Highlights table on page 34 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999*
- ---------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION ----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
California Tax-Exempt Money Market Fund 6/1/1987 2.91% 3.25% 0.00% 3.65% 3.65%
California Insured Intermediate-Term
Tax-Exempt Fund 3/4/1994 6.31 6.99 1.79** 4.96** 6.75**
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
**Since inception.
8
<PAGE> 11
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely, so an investment in the fund
could lose money.
<TABLE>
<CAPTION>
CALIFORNIA INSURED LONG-TERM TAX-EXEMPT FUND
TOTAL INVESTMENT RETURNS: APRIL 7, 1986-MAY 31, 1999
- ------------------------------------------------------
CALIFORNIA INSURED LONG-TERM
TAX-EXEMPT FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1986 4.8% 4.6% 9.4% 9.4%
1987 -11.6 6.3 -5.3 -0.2
1988 4.9 7.3 12.2 10.6
1989 4.9 7.3 12.2 11.0
1990 0.3 6.8 7.1 7.7
1991 2.1 6.5 8.6 10.3
1992 4.4 6.4 10.8 10.0
1993 5.7 5.8 11.5 11.1
1994 -11.0 5.1 -5.9 -5.2
1995 13.6 6.5 20.1 18.9
1996 1.3 5.6 6.9 5.9
1997 1.1 5.4 6.5 7.2
1998 3.1 5.2 8.3 7.8
1999** -1.8 2.4 0.6 0.8
- ------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
**Six months ended May 31, 1999.
See Financial Highlights table on page 34 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999*
- ----------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION -------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
California Insured Long-Term
Tax-Exempt Fund 4/7/1986 6.67% 7.92% 2.25% 5.99% 8.24%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
9
<PAGE> 12
FUND PROFILE
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
1999. Key elements of this Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- --------------------------------------
<S> <C>
Yield 2.9%
Average Maturity 27 days
Average Quality MIG-1
Expense Ratio 0.21%*
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ------------------------------------------------
<S> <C>
MIG-1/SP-1+ 73.9%
A-1/P-1 26.1
AAA/AA 0.0
A 0.0
- ------------------------------------------------
Total 100.0%
</TABLE>
10
<PAGE> 13
AVERAGE COUPON. The average interest rate paid on the securities held by a
fund. It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average
duration of five years would decline by about 5%. If rates decrease by a
percentage point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes
in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit
quality (high, medium, or low).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days (7 days for money market funds) and is annualized, or projected
forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
11
<PAGE> 14
FUND PROFILE
CALIFORNIA INSURED INTERMEDIATE-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------------------------
CALIFORNIA INSURED LEHMAN
INTERMEDIATE-TERM INDEX*
- ---------------------------------------------------
<S> <C> <C>
Number of Issues 335 49,905
Yield 4.1% --
Yield to Maturity 4.3% --
Average Coupon 5.2% 5.5%
Average Maturity 7.1 years 13.2 years
Average Quality AAA AA+
Average Duration 5.6 years 7.2 years
Expense Ratio 0.17%** --
Cash Reserves 0.5% --
</TABLE>
*Lehman Municipal Bond Index.
**Annualized.
INVESTMENT FOCUS
- -----------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ---------------------------------------------------
CALIFORNIA INSURED LEHMAN
INTERMEDIATE-TERM INDEX*
- ---------------------------------------------------
<S> <C> <C>
R-Squared 0.92 1.00
Beta 0.85 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------
<S> <C>
AAA 98.4%
AA 1.6
A 0.0
BBB 0.0
BB 0.0
B 0.0
- -------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -------------------------------------------------
<S> <C>
Under 1 Year 7.4%
1-5 Years 21.4
5-10 Years 41.3
10-20 Years 29.9
20-30 Years 0.0
Over 30 Years 0.0
- -------------------------------------------------
Total 100.0%
</TABLE>
12
<PAGE> 15
FUND PROFILE
CALIFORNIA INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------
CALIFORNIA INSURED LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------
<S> <C> <C>
Number of Issues 241 49,905
Yield 4.6% --
Yield to Maturity 4.7% --
Average Coupon 5.3% 5.5%
Average Maturity 10.9 years 13.2 years
Average Quality AAA AA+
Average Duration 7.6 years 7.2 years
Expense Ratio 0.19%** --
Cash Reserves 0.3% --
</TABLE>
*Lehman Municipal Bond Index.
**Annualized.
INVESTMENT FOCUS
- ---------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------
CALIFORNIA INSURED LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------
<S> <C> <C>
R-Squared 0.96 1.00
Beta 1.23 1.00
- ----------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
AAA 96.0%
AA 4.0
A 0.0
BBB 0.0
BB 0.0
B 0.0
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------
<S> <C>
Under 1 Year 6.3%
1-5 Years 11.6
5-10 Years 28.0
10-20 Years 39.1
0-30 Years 15.0
Over 30 Years 0.0
- --------------------------------------------
Total 100.0%
</TABLE>
13
<PAGE> 16
FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED)
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's municipal bond holdings,
including each security's market value on the last day of the reporting period
and information on credit enhancements (insurance or letters of credit). Other
assets are added to, and liabilities are subtracted from, the value of Total
Municipal Bonds to calculate the fund's Net Assets. Finally, Net Assets are
divided by the outstanding shares of the fund to arrive at its share price, or
Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the fund's net assets on both a dollar and
per-share basis. Undistributed Net Investment Income is usually zero because
the fund distributes its net income to shareholders as a dividend each day. Any
realized gains must be distributed annually, so the bulk of net assets consists
of Paid in Capital (money invested by shareholders). The balance shown for
Accumulated Net Realized Gains usually approximates the amount available to
distribute to shareholders as 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 fund's investments and their cost,
and reflects the gains (losses) that would be realized if the fund were to sell
all of its investments at their statement-date values.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.5%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alameda-Contra Costa CA School Financing Auth. COP VRDO
(Capital Improvement Financing Pooled Project) 2.95% 6/3/1999 LOC $ 20,160 $ 20,160
Anaheim CA Public Improvement Corp. Lease COP VRDO
(Refunding Project) 2.95% 6/2/1999 (2) 29,705 29,705
California Communities Dev. Auth. COP VRDO
(Memorial Health Services) 3.00% 6/2/1999 22,000 22,000
California Educ. Fac. Auth. Rev. VRDO
(California Institute of Technology) 2.90% 6/3/1999 9,200 9,200
California Educ. Fac. Auth. Rev. VRDO (Pepperdine Univ.) 3.00% 6/3/1999 6,000 6,000
California Educ. Fac. Auth. Rev. VRDO (Stanford Univ.) 3.00% 6/2/1999 5,000 5,000
California Finance Auth. PCR VRDO 3.45% 6/2/1999 4,500 4,500
California GO TOB VRDO 3.20% 6/3/1999 (3) 2,750 2,750
California Health Fac. Finance Auth. Rev. TOB VRDO
(Catholic Health Care West) 3.20% 6/3/1999 (1) 3,580 3,580
California Health Fac. Finance Auth. Rev. VRDO
(Adventist Health System West Sutter Health) 2.95% 6/3/1999 LOC 20,100 20,100
California Health Fac. Finance Auth. Rev. VRDO
(Catholic Health Care West) 2.90% 6/2/1999 (1) 52,200 52,200
California Health Fac. Finance Auth. Rev. VRDO
(Memorial Health Services) 3.05% 6/2/1999 12,600 12,600
California Health Fac. Finance Auth. Rev. VRDO
(St. Francis Medical Center) 2.90% 6/2/1999 (1) 27,900 27,900
California Health Fac. Finance Auth. Rev. VRDO
(St. Francis Medical Center) 3.05% 6/2/1999 (1) 6,900 6,900
California Health Fac. Finance Auth. Rev. VRDO
(St. Joseph Health) 3.25% 6/2/1999 4,000 4,000
California Housing Finance Agency PUT
(Single Family Mortgage Program) 3.00% 2/1/2000 6,865 6,865
California PCR Finance Auth. VRDO (Exxon Project) 3.20% 6/2/1999 400 400
California PCR Finance Auth. VRDO (Pacific Gas & Electric Co.) 3.00% 6/2/1999 LOC 98,700 98,700
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California PCR Finance Auth. VRDO (Pacific Gas & Electric Co.) 3.30% 6/2/1999 LOC $ 9,800 $ 9,800
California PCR Finance Auth. VRDO (Pacific Gas & Electric Co.) 3.35% 6/2/1999 LOC 29,900 29,900
California PCR Finance Auth. VRDO (Pacific Gas & Electric Co.) 3.40% 6/2/1999 LOC 32,870 32,870
California Pollution Control Financing Auth. Solid Waste Disposal
Rev. VRDO (Shell Oil Co.-Martinez) 3.30% 6/2/1999 104,700 104,700
California RAN 4.00% 6/30/1999 162,500 162,609
California School Fac. Financing Corp. COP VRDO 2.95% 6/2/1999 LOC 13,095 13,095
California GO CP 3.10% 7/21/1999 10,000 10,000
California GO CP 3.15% 6/8/1999 13,500 13,500
California Statewide Communities Dev. Auth. COP VRDO
(St. Joseph Health System Group) 3.25% 6/2/1999 15,175 15,175
Foothill CA Eastern Transp. Corridor Agency Toll Road Rev. VRDO 2.90% 6/3/1999 LOC 25,000 25,000
Fresno CA TRAN 4.00% 6/30/1999 10,000 10,003
Irvine CA Assessment Dist. Improvement Boards VRDO
(Orange County-Irvine County) 3.00% 6/2/1999 LOC 49,711 49,711
Irvine CA Assessment Dist. Improvement Boards VRDO 3.25% 6/2/1999 LOC 5,400 5,400
Irvine CA Ranch Water Dist. VRDO 3.20% 6/2/1999 LOC 500 500
Irvine CA Ranch Water Dist. VRDO
(Consolidated Bonds Refunding) 3.25% 6/2/1999 LOC 800 800
Kern County CA TRAN 4.25% 10/1/1999 5,000 5,020
Kern County CA VRDO (Public Fac. Project) 2.90% 6/2/1999 LOC 35,900 35,900
Los Angeles CA Community College Dist. TRAN 4.25% 7/29/1999 8,000 8,008
Los Angeles CA TRAN 4.00% 6/30/1999 60,000 60,023
Los Angeles CA TRAN 4.25% 6/30/1999 25,000 25,020
Los Angeles CA Unified School Dist. COP VRDO
(Belmont Learning Complex) 3.00% 6/2/1999 LOC 9,700 9,700
Los Angeles CA Waste Water System Rev. CP 2.95% 9/9/1999 LOC 3,875 3,875
Los Angeles County CA Dept. of Water
& Power Electric Plant CP 2.75% 6/9/1999 LOC 12,000 12,000
Los Angeles County CA Dept. of Water
& Power Electric Plant CP 2.80% 7/23/1999 LOC 12,000 12,000
Los Angeles County CA Dept. of Water
& Power Electric Plant CP 2.90% 8/12/1999 LOC 17,500 17,500
Los Angeles County CA Dept. of Water
& Power Electric Plant CP 3.20% 6/10/1999 LOC 10,200 10,200
Los Angeles County CA Metro. Transp. Auth. CP 2.90% 8/12/1999 LOC 13,315 13,315
Los Angeles County CA Metro. Transp. Auth. CP 3.00% 6/9/1999 LOC 12,082 12,082
Los Angeles County CA Metro. Transp. Auth. CP 3.15% 6/7/1999 LOC 8,200 8,200
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 8.00% 7/1/1999 (2) 5,445 5,464
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. VRDO 2.90% 6/3/1999 (1) 38,700 38,700
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. VRDO 2.95% 6/2/1999 (3) 8,000 8,000
Los Angeles County CA Pension Obligations VRDO 2.95% 6/2/1999 (2) 78,100 78,100
Los Angeles County CA TRAN 4.50% 6/30/1999 35,700 35,734
Los Angeles County CA Capital Asset Lease Rev. CP 3.10% 7/20/1999 LOC 9,940 9,940
Los Angeles County CA Capital Asset Lease Rev. CP 3.15% 6/7/1999 LOC 5,000 5,000
MSR California Public Power Agency VRDO (San Juan Project) 3.25% 6/2/1999 (1) 19,800 19,800
Marin County CA TRAN 4.50% 6/30/1999 19,500 19,518
Metro. Water Dist. of Southern California VRDO 2.90% 6/3/1999 13,500 13,500
Metro. Water Dist. of Southern California VRDO 3.00% 6/3/1999 15,000 15,000
Mission Viejo CA Community Dev. Financing Auth. VRDO
(Mission Viejo Mall Improvement Project) 3.05% 6/3/1999 16,100 16,100
Oakland CA Joint Powers Financing Auth. Lease Rev. VRDO 3.00% 6/3/1999 (4) 25,000 25,000
Orange County CA Sanitation Dist. VRDO 2.90% 6/3/1999 (2) LOC 26,800 26,800
Orange County CA Sanitation Dist. VRDO 3.25% 6/2/1999 (2) LOC 3,600 3,600
Otay CA Water Dist. COP VRDO (Capital Project) 3.00% 6/2/1999 LOC 8,800 8,800
Rancho Mirage CA Joint Powers Financing Auth. COP VRDO
(Eisenhower Medical Center) 3.00% 6/2/1999 (1) 25,100 25,100
Riverside County CA Public Fac. Project VRDO 3.00% 6/8/1999 LOC 19,520 19,520
Riverside County CA TRAN 4.50% 9/30/1999 9,400 9,440
Sacramento County CA Board of Educ. TOB VRDO 3.20% 6/2/1999 50,000 50,000
San Bernardino County CA COP VRDO
(County Center Refinancing Project) 3.00% 6/2/1999 LOC 8,800 8,800
San Bernardino County CA TRAN 4.50% 9/30/1999 12,825 12,879
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Diego CA TAN 4.50% 9/30/1999 $ 12,500 $ 12,553
San Diego CA Unified School Dist. TRAN 4.50% 10/1/1999 49,750 49,980
San Diego County CA TRAN 4.50% 9/30/1999 20,000 20,084
San Francisco CA Airport CP 2.90% 8/25/1999 LOC 7,690 7,690
San Francisco CA Airport CP 3.25% 6/7/1999 LOC 1,740 1,740
San Francisco CA Airport CP 3.30% 6/7/1999 LOC 3,870 3,870
San Francisco CA City & County Unified School Dist. TRAN 4.50% 9/22/1999 11,000 11,037
San Jose CA Redev. Agency Rev. VRDO
(Merged Area Redev. Project) 3.00% 6/2/1999 LOC 14,900 14,900
San Jose CA Unified School Dist. TRAN 3.50% 10/19/1999 22,000 22,044
San Jose/Santa Clara CA Clean Water
& Sewer Finance Auth. VRDO 2.95% 6/2/1999 (3) 3,700 3,700
Santa Barbara County CA TRAN 4.50% 10/1/1999 10,500 10,543
Santa Clara CA El Camino Hosp. Dist. Fac. Auth. Rev. Lease
VRDO (Valley Medical Center Project) 3.05% 6/8/1999 LOC 26,800 26,800
Santa Rosa County CA School Dist. TRAN 4.50% 10/1/1999 12,500 12,551
Sonoma County CA TRAN 3.50% 2/1/2000 11,400 11,435
Southern California Metro. Water Dist. CP 2.75% 6/7/1999 8,000 8,000
Southern California Public Power Auth. VRDO
(Southern Transmission Project) 2.90% 6/2/1999 (4) 30,265 30,265
Southern California Public Power Auth. VRDO
(Southern Transmission Project) 2.95% 6/2/1999 (2) LOC 111,500 111,500
Torrance CA Little Co. of Mary Hosp. VRDO
(Torrance Memorial Medical Center) 3.10% 6/3/1999 LOC 3,000 3,000
Tulare County CA TRAN 4.25% 6/30/1999 17,000 17,009
Turlock CA Irrigation Dist. COP VRDO (Transmission Project) 3.00% 6/2/1999 LOC 6,890 6,890
University of California Regents CP 2.95% 8/20/1999 14,000 14,000
University of California Regents CP 2.95% 9/8/1999 5,479 5,479
University of California Regents CP 2.95% 9/9/1999 12,000 12,000
University of California Regents CP 3.10% 6/8/1999 4,100 4,100
University of California Regents CP 3.15% 6/8/1999 7,400 7,400
University of California Regents CP 3.15% 6/10/1999 15,000 15,000
Ventura CA CP 2.95% 6/10/1999 LOC 12,000 12,000
Watereuse Financial Auth. of California VRDO 3.05% 6/2/1999 (4) 75,000 75,000
West Basin CA Muni. Water Dist. Rev. COP VRDO
(Phase II Recycled Water Project) 2.90% 6/2/1999 LOC 16,400 16,400
West Basin CA Muni. Water Dist. Rev. COP VRDO
(Phase II Recycled Water Project) 3.00% 6/3/1999 LOC 10,000 10,000
West Basin CA Muni. Water Dist. Rev. COP VRDO
(Phase III Recycled Water Project) 2.90% 6/3/1999 LOC 16,945 16,945
OUTSIDE CALIFORNIA:
Puerto Rico TRAN 3.50% 7/30/1999 18,000 18,019
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $2,095,195) 2,095,195
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.5%)
- ---------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 40,955
Liabilities (9,602)
-------
31,353
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------------
Applicable to 2,126,453,192 outstanding $.001 par value shares of beneficial
interest (unlimited authorization) $2,126,548
=================================================================================================================================
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 29.
16
<PAGE> 19
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------------------------------
AT MAY 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $2,126,593 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (45) --
Unrealized Appreciation --
- ----------------------------------------------------------------------------------------
NET ASSETS $2,126,548 $1.00
========================================================================================
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
CALIFORNIA INSURED MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.5%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (94.3%)
Alameda CA Corridor Transp. Auth. Rev. 5.125% 10/1/2016 (1) $ 5,000 $ 5,029
Alameda CA Corridor Transp. Auth. Rev. 5.125% 10/1/2017 (1) 6,565 6,579
Alameda CA Corridor Transp. Auth. Rev. 5.125% 10/1/2018 (1) 5,575 5,571
Alameda County CA COP 5.00% 6/1/2006 (2) 3,010 3,140
Alameda County CA COP (Medical Center Project) 5.25% 6/1/2008 (1) 1,965 2,076
Alameda County CA COP (Medical Center Project) 5.25% 6/1/2009 (1) 2,910 3,065
Alameda County CA COP (Medical Center Project) 5.25% 6/1/2010 (1) 3,065 3,208
Alameda County CA COP (Medical Center Project) 5.25% 6/1/2011 (1) 1,615 1,672
Alameda County CA COP (Medical Center Project) 5.25% 6/1/2012 (1) 1,595 1,642
Alameda County CA COP (Medical Center Project) 5.25% 6/1/2013 (1) 1,785 1,827
Alameda County CA COP (Medical Center Project) 5.375% 6/1/2014 (1) 1,880 1,938
Alameda County CA COP (Medical Center Project) 5.375% 6/1/2015 (1) 3,960 4,058
Anaheim CA Convention Center Finance COP 0.00% 8/1/2004 (1) 3,120 2,528
Anaheim CA Public Finance Auth. Rev. 6.00% 9/1/2008 (4) 2,000 2,238
Antioch CA Public Financing Auth. Reassessment Rev. 5.00% 9/2/2013 (2) 12,550 12,623
California GO 5.75% 12/1/2009 (2) 13,265 14,688
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.50% 7/1/2008 (1) 3,290 3,559
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.50% 7/1/2009 (1) 3,580 3,874
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.50% 7/1/2010 (1) 3,060 3,280
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.50% 7/1/2011 (1) 3,950 4,195
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.50% 7/1/2012 (1) 3,635 3,839
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.75% 7/1/2010 (1) 7,000 7,553
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.875% 7/1/2009 (2) 5,000 5,416
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 7.00% 7/1/2005 (2) 3,410 3,910
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 7.00% 7/1/2006 (2) 3,395 3,939
California Health Fac. Finance Auth. Rev. (Children's Hosp.) 6.00% 7/1/2001 (1) 1,600 1,674
California Health Fac. Finance Auth. Rev. (Children's Hosp.) 6.00% 7/1/2002 (1) 1,280 1,362
California Health Fac. Finance Auth. Rev. (Children's Hosp.) 6.00% 7/1/2004 (1) 1,645 1,795
California Health Fac. Finance Auth. Rev. (Children's Hosp.) 6.00% 7/1/2006 (1) 1,000 1,107
California Health Fac. Finance Auth. Rev. (Kaiser Permanente) 5.25% 6/1/2009 (4) 6,290 6,625
California Health Fac. Finance Auth. Rev. (Kaiser Permanente) 5.25% 12/1/2009 (2) 10,525 11,100
California Health Fac. Finance Auth. Rev. (Kaiser Permanente) 5.25% 6/1/2010 (4) 5,310 5,559
California Health Fac. Finance Auth. Rev. (Kaiser Permanente) 5.25% 6/1/2011 (4) 7,250 7,508
California Health Fac. Finance Auth. Rev. (Mills Peninsula Health) 6.00% 1/15/2000 (6) 1,080 1,098
California Health Fac. Finance Auth. Rev. (Pomona Valley Hosp.) 5.50% 7/1/2002 (1) 2,500 2,618
California Health Fac. Finance Auth. Rev. (Pomona Valley Hosp.) 5.50% 7/1/2003 (1) 3,010 3,181
California Health Fac. Finance Auth. Rev. (Pomona Valley Hosp.) 5.50% 7/1/2004 (1) 2,750 2,928
California Health Fac. Finance Auth. Rev. (Pomona Valley Hosp.) 5.50% 7/1/2010 (1) 3,570 3,788
California Health Fac. Finance Auth. Rev. (Pomona Valley Hosp.) 5.75% 7/1/2005 (1) 3,335 3,612
California Health Fac. Finance Auth. Rev. (Pomona Valley Hosp.) 5.75% 7/1/2006 (1) 3,415 3,715
California Health Fac. Finance Auth. Rev. (Presbyterian Hosp.) 5.25% 5/1/2001 (1) 1,500 1,546
California Health Fac. Finance Auth. Rev. (Presbyterian Hosp.) 5.25% 5/1/2002 (1) 1,000 1,041
California Health Fac. Finance Auth. Rev. (Presbyterian Hosp.) 5.25% 5/1/2003 (1) 1,000 1,050
California Health Fac. Finance Auth. Rev. (Presbyterian Hosp.) 5.50% 5/1/2004 (1) 1,855 1,982
California Health Fac. Finance Auth. Rev. (Presbyterian Hosp.) 5.50% 5/1/2005 (1) 1,500 1,612
California Health Fac. Finance Auth. Rev. (Scripps Memorial Hosp.) 6.25% 10/1/2013 (1) 3,000 3,208
California Health Fac. Finance Auth. Rev. (Sisters of Providence) 6.00% 10/1/2009 (2) 4,490 5,042
California Health Fac. Finance Auth. Rev. (Summit Medical Center) 5.25% 5/1/2009 (4) 3,500 3,696
California Health Fac. Finance Auth. Rev. (Summit Medical Center) 5.25% 5/1/2011 (4) 1,700 1,762
California Health Fac. Finance Auth. Rev. (Sutter Health) 5.50% 8/15/2012 (4) 3,000 3,170
California Health Fac. Finance Auth. Rev.
(UCSF-Stanford Health Care) 5.00% 11/15/2009 (2) 2,500 2,586
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Health Fac. Finance Auth. Rev.
(UCSF-Stanford Health Care) 5.00% 11/15/2010 (2) $ 1,000 $ 1,025
California Health Fac. Finance Auth. Rev.
(UCSF-Stanford Health Care) 5.00% 11/15/2011 (2) 2,000 2,030
California Public Works Board 6.50% 12/1/2008 (2) 5,000 5,800
California Public Works Board (Dept. of Corrections) 5.50% 1/1/2010 (2) 10,000 10,603
California Public Works Board (Dept. of Corrections) 5.50% 1/1/2014 (2) 5,975 6,232
California Public Works Board (Dept. of Corrections) 6.40% 11/1/2004 (1)(Prere.) 5,000 5,682
California Public Works Board (Dept. of Corrections) 6.60% 12/1/2002 (2)(Prere.) 3,500 3,890
California Public Works Board (Univ. of California) 5.50% 9/1/2008 (2) 5,185 5,619
California Public Works Board (Univ. of California) 5.50% 9/1/2009 (2) 4,015 4,352
California Public Works Board (Univ. of California) 6.25% 12/1/2002 (2)(Prere.) 1,000 1,100
California Statewide Communities Dev. Auth. COP
(Children's Hosp. of Los Angeles) 6.00% 6/1/2009 (1) 3,615 4,017
Capistrano CA Unified Public Schools 6.00% 9/1/2004 (2) 2,160 2,367
Capistrano CA Unified Public Schools 6.00% 9/1/2005 (2) 2,395 2,647
Central Coast CA Water Auth. Rev. 6.05% 10/1/2002 (2)(Prere.) 1,800 1,960
Central Coast CA Water Auth. Rev. 6.25% 10/1/2002 (2)(Prere.) 2,000 2,190
Chino CA Basin Finance Auth. Muni. Water Dist. 6.50% 8/1/2010 (2) 3,095 3,619
Clovis CA Unified School Dist. 0.00% 8/1/2004 (3)(ETM) 5,000 4,051
Clovis CA Unified School Dist. 0.00% 8/1/2005 (3) 16,000 12,363
Clovis CA Unified School Dist. 0.00% 8/1/2006 (3) 17,000 12,501
Contra Costa CA (Merrithew Memorial Hosp.) 5.25% 11/1/2001 (1) 3,000 3,110
Contra Costa CA (Merrithew Memorial Hosp.) 5.25% 11/1/2003 (1) 3,230 3,406
Contra Costa CA (Merrithew Memorial Hosp.) 6.00% 11/1/2006 (1) 2,000 2,223
Contra Costa CA (Merrithew Memorial Hosp.) 6.00% 11/1/2007 (1) 2,000 2,226
Corona CA Community Fac. Dist. 4.35% 9/1/2001 (1) 1,755 1,785
Corona CA Community Fac. Dist. 4.45% 9/1/2002 (1) 1,830 1,874
Corona CA Redev. Project 7.50% 9/1/2004 (3) 970 1,128
Corona CA Redev. Project 7.50% 9/1/2005 (3) 1,040 1,220
Culver City CA Redev. Finance Auth. 6.75% 11/1/1999 (2)(Prere.) 2,500 2,587
East Bay CA Muni. Util. Dist. Waste Water Treatment System Rev. 5.00% 6/1/2014 (3) 3,850 3,895
East Bay CA Muni. Util. Dist. Waste Water Treatment System Rev. 6.375% 12/1/2001 (2)(Prere.) 4,000 4,341
East Whittier CA City School Dist. 5.75% 8/1/2017 (3) 1,670 1,808
El Dorado County CA Public Agency Finance Auth. Rev. 5.50% 2/15/2021 (3) 2,420 2,503
El Dorado County CA Public Agency Finance Auth. Rev 5.60% 2/15/2012 (3) 3,900 4,145
Elsinore Valley CA Muni Water Dist. COP 5.90% 7/1/2006 (3) 1,685 1,863
Fresno CA COP (City Hall Project) 6.375% 8/1/2010 (2) 10,500 11,046
Glendale CA School Dist. 5.75% 9/1/2017 (3) 3,790 4,041
Imperial Irrigation Dist. CA COP (Electric System Project) 5.20% 11/1/2009 (2) 7,900 8,383
Irvine CA Public Fac. 4.30% 9/2/2010 (2) 3,500 3,438
Irvine CA Public Fac. 4.40% 9/2/2011 (2) 2,595 2,536
Irvine CA Public Fac. 4.50% 9/2/2012 (2) 1,700 1,660
Irvine CA Public Fac. 4.70% 9/2/2014 (2) 3,000 2,944
La Quinta CA Redev. Agency (Tax Allocation Project) 7.30% 9/1/2007 (1) 1,240 1,479
La Quinta CA Redev. Agency (Tax Allocation Project) 8.00% 9/1/2003 (1) 1,325 1,528
Long Beach CA Financing Auth. Rev. 6.00% 11/1/2007 (2) 3,070 3,429
Long Beach CA Financing Auth. Rev. 6.00% 11/1/2009 (2) 3,735 4,204
Long Beach CA Financing Auth. Rev. 6.00% 11/1/2010 (2) 3,860 4,354
Los Angeles CA Dept. of Water & Power Waterworks Rev. 5.00% 10/15/2015 (1) 10,000 10,007
Los Angeles CA Dept. of Water & Power Waterworks Rev. 5.125% 10/15/2013 (1) 3,500 3,580
Los Angeles CA Dev. Auth. COP (Children's Hosp.) 6.00% 6/1/2011 (1) 2,365 2,640
Los Angeles CA Transp. Comm. Sales Tax Rev. 6.25% 7/1/2002 (1) 1,500 1,637
Los Angeles CA Unified School Dist. COP 5.00% 11/1/2012 (4) 3,510 3,568
Los Angeles CA Unified School Dist. GO 5.375% 7/1/2014 (3) 7,000 7,294
Los Angeles CA Unified School Dist. GO 5.375% 7/1/2015 (3) 3,000 3,108
Los Angeles CA Unified School Dist. GO 5.375% 7/1/2016 (3) 4,000 4,119
Los Angeles CA Waste Water 5.75% 6/1/2011 (1) 7,960 8,573
Los Angeles CA Waste Water 6.50% 6/1/2004 (1)(Prere.) 1,695 1,920
Los Angeles CA Waste Water 8.70% 11/1/2002 (3) 2,535 2,929
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.00% 7/1/2013 (4) 5,000 5,072
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.25% 7/1/2008 (4) 6,155 6,558
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.25% 7/1/2010 (4) 7,070 7,484
</TABLE>
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FACE MARKET
CALIFORNIA INSURED MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.40% 7/1/2009 (2) $ 1,725 $ 1,809
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.50% 7/1/2017 (2) 1,500 1,546
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.75% 7/1/2008 (4) 2,445 2,692
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 6.00% 7/1/2006 (4) 1,630 1,810
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 6.00% 7/1/2007 (4) 2,450 2,727
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 9.00% 7/1/2005 (1) 4,015 5,053
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 9.00% 7/1/2006 (1) 4,380 5,639
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 9.00% 7/1/2007 (1) 4,770 6,254
Los Angeles County CA Public Works Finance Auth. Rev. 4.10% 3/1/2000 (4) 5,000 5,037
Los Angeles County CA Public Works Finance Auth. Rev. 5.125% 9/1/2008 (1) 4,605 4,867
Los Angeles County CA Public Works Finance Auth. Rev. 5.25% 9/1/2012 (1) 6,345 6,556
MSR California Public Power Agency (San Juan Project) 5.375% 7/1/2013 (1) 2,500 2,609
MSR California Public Power Agency (San Juan Project) 5.375% 7/1/2014 (1) 3,000 3,117
MSR California Public Power Agency (San Juan Project) 5.50% 7/1/2001 (1) 6,500 6,748
MSR California Public Power Agency (San Juan Project) 5.85% 7/1/2006 (2) 1,500 1,620
MSR California Public Power Agency VRDO (San Juan Project) 3.25% 6/2/1999 (1) 6,400 6,400
Modesto CA Irrigation Dist. Finance Auth. Rev. 4.25% 9/1/1999 (2) 550 551
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.00% 9/1/2004 (2) 1,255 1,317
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.00% 9/1/2009 (2) 1,130 1,180
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.00% 9/1/2010 (2) 2,000 2,073
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.00% 9/1/2011 (2) 1,790 1,836
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.00% 9/1/2012 (2) 1,630 1,661
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.125% 9/1/2015 (2) 4,365 4,415
Modesto CA Irrigation Dist. Finance Auth. Rev. 5.25% 9/1/2005 (2) 1,000 1,065
Mountain View CA Capital Improvement Finance Auth. 6.25% 8/1/2012 (1) 5,000 5,341
North City West CA Community Dist. 5.75% 9/1/2015 (4) 2,000 2,137
North City West CA Community Dist. 6.00% 9/1/2005 (4) 1,510 1,669
North City West CA Community Dist. 6.00% 9/1/2006 (4) 1,600 1,780
North City West CA Community Dist. 6.00% 9/1/2007 (4) 1,695 1,888
Northern California Power Agency Capital Fac. Rev. 5.25% 8/1/2015 (2) 2,000 2,042
Northern California Power Agency Capital Fac. Rev. 5.25% 8/1/2016 (2) 3,000 3,044
Northern California Power Agency Project 4.25% 8/15/2001 (2) 2,445 2,476
Northern California Power Agency Project 4.25% 8/15/2005 (2) 1,250 1,266
Northern California Power Agency Project 4.25% 8/15/2006 (2) 1,215 1,225
Northern California Power Agency Project 5.00% 8/15/2007 (2) 3,160 3,305
Northern California Power Agency Project 5.00% 8/15/2008 (2) 3,685 3,848
Northern California Power Agency Project 5.00% 8/15/2009 (2) 2,870 2,982
Northern California Power Agency Project 5.00% 8/15/2010 (2) 3,410 3,506
Oakland CA Building Auth. Lease Rev. (Harris Building) 5.25% 4/1/2009 (2) 5,235 5,557
Oakland CA Redev. Agency (Centeral Dist. Project) 6.00% 2/1/2006 (2) 5,125 5,663
Oakland CA Redev. Agency (Centeral Dist. Project) 6.00% 2/1/2007 (2) 3,360 3,723
Oakland CA Redev. Agency (Centeral Dist. Project) 6.00% 2/1/2008 (2) 5,585 6,215
Orange County CA Airport Rev. Refunding Bond 5.50% 7/1/2004 (1) 3,555 3,800
Orange County CA Airport Rev. Refunding Bond 6.00% 7/1/2001 (1) 7,245 7,582
Orange County CA Airport Rev. Refunding Bond 6.00% 7/1/2005 (1) 4,020 4,423
Orange County CA Airport Rev. Refunding Bond 6.00% 7/1/2006 (1) 4,565 5,055
Orange County CA Local Transp. Auth. Sales Tax Rev. 5.25% 2/15/2004 (1) 10,590 11,172
Orange County CA Local Transp. Auth. Sales Tax Rev. 5.25% 2/15/2005 (1) 10,260 10,871
Orange County CA Local Transp. Auth. Sales Tax Rev. 5.80% 2/15/2005 (3) 6,000 6,527
Orange County CA Local Transp. Auth. Sales Tax Rev. 5.90% 2/15/2006 (3) 8,000 8,801
Orange County CA Local Transp. Auth. Sales Tax Rev. 9.50% 2/15/2003 (3) 5,765 6,858
Orange County CA Sanitation Dist. COP 6.00% 8/1/2001 (3)(Prere.)+ 1,500 1,604
Orange County CA Sanitation Dist. COP 6.40% 8/1/2007 (3) 1,415 1,519
Orange County CA Sanitation Dist. VRDO 3.25% 6/2/1999 (2) LOC 2,500 2,500
Pittsburg CA Redev. Agency Rev. 5.50% 8/1/2007 (3) 5,750 6,055
Poway CA Redev. Agency 7.25% 12/15/2011 (3) 7,500 7,935
Poway CA Unified School Dist. Fac. 5.00% 10/1/2003 (1) 2,670 2,790
Poway CA Unified School Dist. Fac. 5.00% 10/1/2004 (1) 2,925 3,070
Poway CA Unified School Dist. Fac. 5.00% 10/1/2005 (1) 3,190 3,354
Poway CA Unified School Dist. Fac. 5.00% 10/1/2006 (1) 1,775 1,866
Poway CA Unified School Dist. Fac. 5.00% 10/1/2007 (1) 3,775 3,961
Poway CA Unified School Dist. Fac. 5.00% 10/1/2008 (1) 4,045 4,239
Poway CA Unified School Dist. Fac. 5.00% 10/1/2009 (1) 2,435 2,541
</TABLE>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rancho CA Water Dist. Finance Auth. Rev. 5.875% 11/1/2010 (3) $ 3,000 $ 3,266
Rancho CA Water Dist. Finance Auth. Rev. 6.25% 8/1/2012 (3) 1,950 2,083
Rancho CA Water Dist. Finance Auth. Rev. 6.50% 11/1/2001 (3) 1,590 1,696
Rancho Cucamonga CA Redev. Auth. 5.00% 9/1/2011 (1) 3,165 3,235
Riverside CA Electric Refunding Rev. 5.00% 10/1/2005 (2) 3,500 3,682
Riverside CA Electric Refunding Rev. 5.375% 10/1/2009 (2) 4,115 4,424
Riverside County CA Public Finance 5.25% 9/1/2003 (1) 2,210 2,330
Sacramento CA Cogeneration Project Refunding Rev. 5.25% 7/1/2011 (1) 4,730 4,919
Sacramento CA Muni. Util. Dist. Rev. 5.00% 7/1/2000 (2) 8,500 8,665
Sacramento CA Muni. Util. Dist. Rev. 5.75% 1/1/2010 (1) 5,000 5,396
Sacramento CA Muni. Util. Dist. Rev. 6.20% 8/15/2005 (1) 2,000 2,174
Sacramento CA Muni. Util. Dist. Rev. 6.25% 8/15/2007 (1) 8,000 8,706
Sacramento CA Redev. Agency (Merged Downtown Project) 5.25% 11/1/2010 (4) 3,895 4,121
Sacramento CA Redev. Agency (Merged Downtown Project) 6.75% 11/1/2005 (1) 1,000 1,065
Sacramento CA Redev. Agency (Tax Allocation Project) 6.50% 11/1/2000 (1)(Prere.) 1,775 1,888
Sacramento CA Redev. Agency (Tax Allocation Project) 6.50% 11/1/2013 (1) 225 238
Sacramento County CA Public Fac. Finance Corp. COP
(Main Detention Fac. Project) 5.50% 6/1/2010 (1) 5,500 5,949
San Bernardino County CA COP (Medical Center Financing Project) 4.30% 8/1/2000 (1) 6,000 6,067
San Bernardino County CA COP (Medical Center Financing Project) 4.40% 8/1/2001 (1) 9,500 9,638
San Bernardino County CA COP (Medical Center Financing Project) 4.50% 8/1/2002 (1) 8,000 8,170
San Bernardino County CA COP (Medical Center Financing Project) 5.00% 8/1/2003 (1) 2,500 2,599
San Bernardino County CA COP (Medical Center Financing Project) 5.50% 8/1/2006 (1) 8,500 9,140
San Bernardino County CA COP (Medical Center Financing Project) 5.50% 8/1/2007 (1) 6,000 6,449
San Diego CA Financing Auth. Lease Rev.
(Convention Center Expansion) 5.25% 4/1/2011 (2) 5,150 5,383
San Diego CA Financing Auth. Lease Rev.
(Convention Center Expansion) 5.25% 4/1/2012 (2) 3,000 3,117
San Diego CA Public Fac. Financing Auth. Sewer Rev. 5.00% 5/15/2008 (3) 1,000 1,047
San Diego CA Public Fac. Financing Auth. Sewer Rev. 5.00% 5/15/2009 (3) 1,240 1,293
San Diego CA Public Fac. Financing Auth. Sewer Rev. 5.00% 5/15/2015 (3) 3,500 3,503
San Diego CA Public Fac. Financing Auth. Sewer Rev. 5.00% 5/15/2016 (3) 3,250 3,228
San Diego CA Public Fac. Financing Auth. Sewer Rev. 5.10% 5/15/2010 (3) 2,770 2,884
San Diego CA Public Fac. Financing Auth. Sewer Rev. 5.125% 5/15/2012 (3) 6,370 6,569
San Diego CA Unified School Dist. COP 5.375% 7/1/2002 (1) 10,835 11,354
San Diego CA Unified School Dist. COP 5.375% 7/1/2003 (1) 10,435 11,040
San Diego CA Unified School Dist. GO 0.00% 7/1/2009 (3) 6,270 3,935
San Diego CA Unified School Dist. GO 0.00% 7/1/2014 (3) 3,400 1,592
San Diego CA Water Util. Rev. 5.25% 8/1/2009 (3) 2,000 2,128
San Diego CA Water Util. Rev. 5.375% 8/1/2010 (3) 6,000 6,398
San Diego CA Water Util. Rev. 5.375% 8/1/2012 (3) 2,000 2,103
San Diego County CA COP 5.25% 5/1/2011 (2) 3,395 3,492
San Diego County CA Regional Transp. Comm. 6.00% 4/1/2004 (2) 3,000 3,268
San Diego County CA Regional Transp. Comm. 6.00% 4/1/2007 (2) 3,000 3,330
San Diego County CA Regional Transp. Comm. 6.25% 4/1/2002 (3) 5,000 5,336
San Francisco CA Bay Area Rapid Transit Rev. 5.55% 7/1/2009 (3) 4,920 5,241
San Francisco CA City & County Airport Rev. 5.25% 5/1/2010 (1) 3,110 3,254
San Francisco CA City & County Airport Rev. 5.25% 5/1/2011 (3) 4,150 4,306
San Francisco CA City & County Airport Rev. 5.25% 5/1/2012 (3) 4,380 4,517
San Francisco CA City & County Airport Rev. 5.25% 5/1/2012 (4) 2,250 2,341
San Francisco CA City & County Airport Rev. 5.50% 5/1/2009 (1) 2,945 3,159
San Francisco CA City & County Airport Rev. 5.50% 5/1/2009 (4) 5,025 5,409
San Francisco CA City & County Airport Rev. 5.50% 5/1/2010 (3) 2,880 3,056
San Francisco CA City & County Airport Rev. 5.50% 5/1/2010 (4) 5,300 5,661
San Francisco CA City & County Airport Rev. 5.50% 5/1/2011 (3) 3,080 3,245
San Francisco CA City & County Airport Rev. 5.50% 5/1/2011 (4) 2,135 2,276
San Francisco CA City & County Airport Rev. 6.00% 5/1/2007 (1) 2,645 2,918
San Francisco CA City & County Airport Rev. 6.20% 5/1/2002 (2)(Prere.) 645 701
San Francisco CA City & County Airport Rev. 6.20% 5/1/2007 (2) 970 1,049
San Francisco CA City & County Airport Rev. 6.25% 5/1/2008 (1) 2,190 2,464
San Francisco CA City & County Airport Rev. 6.30% 5/1/2002 (2)(Prere.) 435 474
San Francisco CA City & County Airport Rev. 6.30% 5/1/2011 (2) 650 703
San Francisco CA City & County Airport Rev. 6.40% 5/1/2003 (1)(Prere.) 470 522
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FACE MARKET
CALIFORNIA INSURED MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Francisco CA City & County Airport Rev. 6.40% 5/1/2005 (1) $ 2,330 $ 2,570
San Francisco CA City & County Airport Rev. 6.50% 5/1/2002 (2)(Prere.) 865 947
San Francisco CA City & County Airport Rev. 6.50% 5/1/2013 (2) 1,295 1,408
San Francisco CA City & County Airport Rev. 6.60% 5/1/2003 (1)(Prere.) 170 190
San Francisco CA City & County Airport Rev. 6.60% 5/1/2007 (1) 830 922
San Francisco CA City & County GO 4.00% 6/15/2000 (3) 7,970 8,038
San Francisco CA City & County Sewer Rev. 6.00% 10/1/2011 (2) 2,000 2,156
San Joaquin Hills CA Transp. Corridor Agency Toll Road Rev. 0.00% 1/15/2003 (1) 6,000 5,193
San Joaquin Hills CA Transp. Corridor Agency Toll Road Rev. 0.00% 1/15/2006 (1) 14,745 11,092
San Joaquin Hills CA Transp. Corridor Agency Toll Road Rev. 0.00% 1/15/2011 (1) 2,140 1,219
San Jose CA Redev. Agency (Merged Area Redev. Project) 5.375% 8/1/1999 (1) 1,945 1,952
San Jose CA Redev. Agency (Merged Area Redev. Project) 5.375% 8/1/2000 (1) 2,045 2,096
San Jose CA Redev. Agency (Merged Area Redev. Project) 5.375% 8/1/2001 (1) 2,165 2,246
San Jose CA Redev. Agency (Merged Area Redev. Project) 5.375% 8/1/2002 (1) 2,270 2,381
San Jose CA Redev. Agency (Tax Allocation Project) 6.00% 8/1/2006 (1) 1,000 1,112
San Ramon Valley CA Unified School Dist. GO 0.00% 7/1/2006 (3) 3,750 2,767
San Ramon Valley CA Unified School Dist. GO 0.00% 7/1/2007 (3) 4,950 3,464
San Ramon Valley CA Unified School Dist. GO 0.00% 7/1/2008 (3) 6,050 4,015
Santa Anna CA Finance Auth. Rev. 5.375% 9/1/2009 (1) 3,040 3,254
Santa Anna CA Finance Auth. Rev. 5.375% 9/1/2010 (1) 1,600 1,704
Santa Barbara CA Redev. Agency
(Tax Allocation Central City Project) 5.50% 3/1/2000 (2) 2,075 2,112
Santa Barbara CA Redev. Agency
(Tax Allocation Central City Project) 5.50% 3/1/2001 (2) 2,215 2,287
Santa Clara County CA Financing Auth. Lease Rev. 5.50% 5/15/2011 (2) ++ 4,535 4,767
Santa Clara County CA Financing Auth. Lease Rev. 5.50% 5/15/2012 (2) ++ 4,785 5,007
Santa Margarita/Dana Point CA Auth. Rev. 5.50% 8/1/2008 (2) 3,345 3,623
Santa Margarita/Dana Point CA Auth. Rev. 5.50% 8/1/2009 (2) 3,860 4,182
Santa Margarita/Dana Point CA Auth. Rev. 5.50% 8/1/2010 (2) 2,245 2,409
Santa Margarita/Dana Point CA Auth. Rev. 7.25% 8/1/2006 (1) 3,315 3,926
Santa Margarita/Dana Point CA Auth. Rev. 7.25% 8/1/2010 (1) 2,180 2,686
Santa Margarita/Dana Point CA Auth. Rev. 7.25% 8/1/2011 (1) 1,640 2,029
Santa Rosa CA Waste Water Service Fac. Dist. 6.20% 7/2/2009 (2) 2,450 2,650
South Orange County CA Public Finance Auth. 5.25% 8/15/2013 (2) 2,290 2,368
South Orange County CA Public Finance Auth. 6.25% 8/15/1999 (3) 2,000 2,013
South Orange County CA Public Finance Auth. 7.00% 9/1/2005 (1) 3,440 3,979
South Orange County CA Public Finance Auth. 7.00% 9/1/2007 (1) 1,000 1,181
South Orange County CA Public Finance Auth. 7.00% 9/1/2008 (1) 2,875 3,429
South Orange County CA Public Finance Auth. 7.00% 9/1/2009 (1) 5,000 6,018
South Orange County CA Public Finance Auth. 7.00% 9/1/2010 (1) 3,300 3,999
South Orange County CA Public Finance Auth. 9.50% 8/15/2004 (1) 4,395 5,510
Southern California Public Power Auth. (Palo Verde Project) 7.00% 7/1/1999 (2)(Prere.) 435 436
Southern California Public Power Auth. (Palo Verde Project) 7.00% 7/1/2007 (2) 865 868
Southern California Rapid Transit Dist. 5.80% 9/1/2006 (2) 4,000 4,407
Southern California Rapid Transit Dist. 5.90% 9/1/2007 (2) 3,155 3,501
Southern California Rapid Transit Dist. 6.00% 9/1/2008 (2) 2,650 2,866
Sweetwater CA Water Rev. 7.00% 4/1/2010 (2) 1,950 1,995
Tri-City CA Hosp. Dist. 5.50% 2/15/2008 (1) 3,805 4,103
Tri-City CA Hosp. Dist. 5.50% 2/15/2009 (1) 2,665 2,859
Tri-City CA Hosp. Dist. 5.625% 2/15/2011 (1) 2,970 3,145
Tri-City CA Hosp. Dist. 5.625% 2/15/2012 (1) 1,880 1,985
Tulare County CA COP 5.00% 8/15/2009 (1) 3,880 4,031
Tulare County CA COP 5.70% 11/15/2003 (1) 1,000 1,076
Tulare County CA COP 5.80% 11/15/2004 (1) 1,000 1,091
Turlock Irrigation Dist. Refunding Rev. 5.00% 1/1/2015 (1) 2,555 2,557
Tustin CA Unified School Dist. Special Tax 5.00% 9/1/2011 (4) 2,070 2,115
Tustin CA Unified School Dist. Special Tax 5.00% 9/1/2013 (4) 2,540 2,566
Tustin CA Unified School Dist. Special Tax 5.00% 9/1/2015 (4) 3,080 3,073
Univ. of California Research Fac. Rev. 5.00% 9/1/2008 (4) 4,290 4,490
Univ. of California Research Fac. Rev. 5.00% 9/1/2009 (4) 4,510 4,692
Univ. of California Research Fac. Rev. 5.00% 9/1/2010 (4) 4,730 4,878
Univ. of California Rev. (Medical Center) 5.625% 7/1/2010 (2) 6,660 7,121
Univ. of California Rev. (Multiple Purpose Project) 6.00% 9/1/2002 (1)(Prere.) 1,500 1,631
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<CAPTION>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Univ. of California Rev. (Multiple Purpose Project) 10.00% 9/1/2002 (1) $ 2,950 $ 3,502
Univ. of California Rev. (Multiple Purpose Project) 10.00% 9/1/2002 (2) 1,000 1,187
Univ. of California Rev. (Multiple Purpose Project) 10.00% 9/1/2003 (2) 2,000 2,470
Univ. of California Rev. (Multiple Purpose Project) 12.00% 9/1/2003 (2) 2,000 2,622
Visalia CA Waste Water System Rev. 6.00% 12/1/2007 (1) 1,000 1,118
West Basin CA Water Dist. 6.80% 8/1/2000 (2)(Prere.) 2,000 2,121
Whittier CA Insured Health Fac. Rev. (Presbyterian Hosp.) 6.00% 6/1/2000 (1) 1,895 1,947
Whittier CA Insured Health Fac. Rev. (Presbyterian Hosp.) 6.00% 6/1/2003 (1) 3,380 3,645
Whittier CA Insured Health Fac. Rev. (Presbyterian Hosp.) 6.00% 6/1/2004 (1) 3,580 3,907
Whittier CA Insured Health Fac. Rev. (Presbyterian Hosp.) 6.00% 6/1/2005 (1) 3,675 4,046
OUTSIDE CALIFORNIA:
Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 4.75% 11/1/2000 (2) 2,020 2,058
Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.00% 11/1/2001 (2) 2,410 2,485
Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.25% 11/1/2003 (2) 1,635 1,724
Puerto Rico Electric Power Auth. Rev. 6.00% 7/1/2012 (1) 6,680 7,501
----------
1,153,193
----------
SECONDARY MARKET INSURED (0.3%)
California GO 6.50% 9/1/2006 (2) 3,000 3,432
----------
NONINSURED (4.9%)
California Dept. of Water Resources (Central Valley Project) 5.125% 12/1/2013 2,000 2,046
California Dept. of Water Resources (Central Valley Project) 5.125% 12/1/2015 1,410 1,425
California Dept. of Water Resources (Central Valley Project) 5.125% 12/1/2016 1,000 1,005
California Educ. Fac. Auth. Rev.
(Univ. of Southern California Project) 5.60% 10/1/2009 2,680 2,928
California Health Fac. Finance Auth. Rev. VRDO
(St. Joseph Health) 3.25% 6/2/1999 900 900
California PCR Finance Auth. VRDO (Exxon Project) 3.20% 6/2/1999 3,205 3,205
California PCR Finance Auth. VRDO (Pacific Gas & Electric Co.) 3.30% 6/2/1999 2,300 2,300
California PCR Finance Auth. VRDO (Pacific Gas & Electric Co.) 3.35% 6/2/1999 100 100
City of Chula Vista CA Industrial Rev. VRDO 3.20% 6/2/1999 600 600
Irvine CA Assessment Dist. Improvement Boards VRDO 3.25% 6/2/1999 LOC 400 400
Irvine CA Ranch Water Dist. VRDO 3.20% 6/2/1999 LOC 5,300 5,300
Los Angeles County CA TRAN 4.50% 6/30/1999 9,000 9,008
Orange County CA Sanitation Dist. VRDO 3.25% 6/2/1999 LOC 2,600 2,600
San Diego CA Unified School Dist. COP 5.25% 7/1/2001 11,265 11,638
Santa Monica CA Malibu Unified School Dist. Rev. 5.25% 8/1/2011 3,695 3,899
Southern California Metro. Water Dist. 2.95% 6/7/1999 5,000 4,996
West Basin CA Muni. Water Dist. COP VRDO
(Phase III Recycled Water Project) 2.90% 6/3/1999 2,100 2,100
OUTSIDE CALIFORNIA:
Puerto Rico TRAN 3.50% 7/30/1999 5,000 5,002
----------
59,452
----------
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,193,834) 1,216,077
- --------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- --------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 22,021
Liabilities (15,820)
----------
6,201
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------------
Applicable to 113,311,029 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,222,278
================================================================================================================================
NET ASSET VALUE PER SHARE $10.79
================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with a value of $1,069,000 have been segregated as initial margin
for open futures contracts.
++Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of May 31, 1999.
For key to abbreviations and other references, see page 29.
23
<PAGE> 26
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------
AT MAY 31, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,200,679 $10.60
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (1,111) (.01)
Unrealized Appreciation--Notes E and F
Investment Securities 22,243 .20
Futures Contracts 467 --
- --------------------------------------------------------------------------------------------------------
NET ASSETS $1,222,278 $10.79
========================================================================================================
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
CALIFORNIA INSURED MATURITY AMOUNT VALUE*
LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.7%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (87.5%)
Anaheim CA Convention Center Finance COP 0.00% 8/1/2005 (1) $ 1,250 $ 966
Anaheim CA Convention Center Finance COP 0.00% 8/1/2006 (1) 3,125 2,298
Anaheim CA Convention Center Finance COP 5.50% 8/1/2014 (1) 5,750 6,021
Anaheim CA Public Improvement Corp. Lease COP VRDO 2.95% 6/2/1999 (2) 3,475 3,475
Barstow CA Redev. Agency 6.25% 9/1/2022 (1) 2,225 2,454
California Dept. of Veteran Affairs 5.45% 12/1/2019 (2) 19,505 20,012
California Educ. Fac. Auth. (Point Loma Nazarene Univ.) 5.00% 12/1/2021 (1) 11,000 10,682
California Educ. Fac. Auth. (Santa Clara Univ.) 5.25% 9/1/2015 (2) 1,325 1,372
California Educ. Fac. Auth. (Santa Clara Univ.) 5.25% 9/1/2016 (2) 1,000 1,032
California Educ. Fac. Auth. (Santa Clara Univ.) 5.25% 9/1/2017 (2) 1,000 1,027
California GO 5.25% 10/1/2014 (3) 15,610 16,015
California GO 6.00% 8/1/2019 (3) 210 225
California GO 7.00% 11/1/2004 (3)(Prere.) 1,935 2,255
California GO 7.00% 11/1/2013 (3) 65 75
California Health Fac. Finance Auth. Rev. (Adventist Health System) 6.75% 3/1/2011 (1) 5,000 5,328
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 5.75% 7/1/2015 (2) 4,080 4,304
California Health Fac. Finance Auth. Rev.
(Catholic Health Care West) 6.00% 7/1/2017 (1) 27,900 30,219
California Health Fac. Finance Auth. Rev. (Kaiser Permanente) 5.25% 12/1/2010 (2) 9,785 10,251
California Health Fac. Finance Auth. Rev. (Little Company of Mary) 5.00% 10/1/2020 (2) 15,6551 5,136
California Health Fac. Finance Auth. Rev. (San Diego Hosp.) 6.20% 8/1/2020 (1) 3,820 4,119
California Health Fac. Finance Auth. Rev. (Scripps Health) 5.00% 10/1/2018 (1) 7,355 7,141
California Health Fac. Finance Auth. Rev. (Scripps Health) 5.00% 10/1/2022 (1) 5,760 5,567
California Health Fac. Finance Auth. Rev. (Sutter Health) 5.35% 8/15/2028 (1) 7,365 7,457
California Health Fac. Finance Auth. Rev.
(UCSF Stanford Health Care) 5.00% 11/15/2018 (2) 10,000 9,709
California Health Fac. Finance Auth. Rev. VRDO
(Catholic Health Care West) 2.90% 6/2/1999 (1) 5,100 5,100
California Housing Finance Agency Multifamily Housing Rev. 8.625% 8/1/2015 (1) 145 150
California Public Works Board Rev. (Dept. of Corrections) 5.50% 12/1/2012 (1) 2,000 2,108
California Public Works Board Rev. (Dept. of Corrections) 5.50% 1/1/2017 (2) 22,285 23,007
California Public Works Board Rev. (Dept. of Corrections) 5.625% 11/1/2016 (1) 9,200 9,677
California Public Works Board Rev. (Univ. of California) 5.375% 10/1/2017 (2) 8,250 8,441
Calleguas-Las Virgenes CA Public Finance Auth. Rev. 5.00% 11/1/2017 (4) 3,435 3,398
Calleguas-Las Virgenes CA Public Finance Auth. Rev. 5.00% 11/1/2023 (4) 13,500 13,092
Capistrano CA Unified Public Schools 5.70% 9/1/2016 (2) 10,000 10,566
Central Coast CA Water Auth. Rev. 5.00% 10/1/2022 (2) 7,500 7,278
Chino CA Basin Finance Auth. Muni. Water Dist. 6.00% 8/1/2016 (2) 5,500 5,887
Clovis CA Unified School Dist. 0.00% 8/1/2007 (3) 15,000 10,459
Clovis CA Unified School Dist. 0.00% 8/1/2008 (3) 14,265 9,432
Clovis CA Unified School Dist. 0.00% 8/1/2009 (3) 19,725 12,397
Clovis CA Unified School Dist. 0.00% 8/1/2010 (3) 21,485 12,770
Clovis CA Unified School Dist. 0.00% 8/1/2011 (3) 1,625 912
Contra Costa CA COP 5.50% 6/1/2012 (2) 6,850 7,206
Contra Costa CA Water Dist. Rev. 5.50% 10/1/2019 (1) 5,000 5,152
Culver City CA Redev. Finance Auth. 6.75% 11/1/1999 (2)(Prere.) 955 987
East Bay CA Muni. Util. Dist. Waste Water Treatment System Rev. 6.50% 6/1/2004 (2)(Prere.) 2,000 2,265
Eastern CA Muni. Water. Dist. Water & Sewer Rev. 6.75% 7/1/2012 (3) 8,500 10,180
El Dorado County CA Public Agency Finance Auth. Rev. 5.50% 2/15/2016 (3) 9,000 9,314
Elsinore Valley CA Muni. Water Dist. COP 6.00% 7/1/2012 (3) 2,210 2,486
Encina CA Power Auth. Waste Water Rev. 6.875% 8/1/1999 (3)(Prere.) 3,650 3,746
Escondido CA Union High School Dist. 0.00% 11/1/2020 (1) 3,000 976
Fresno CA Water System Rev. 5.00% 6/1/2024 (3) 3,000 2,908
Glendale CA Hosp. Rev. (Adventist Health System) 6.00% 3/1/2014 (1) 3,000 3,162
Imperial Irrigation Dist. of California Electric Rev. 5.00% 11/1/2018 (1) 6,900 6,790
Kern CA High School Dist. 6.25% 8/1/2011 (1) 1,065 1,226
Kern CA High School Dist. 6.40% 8/1/2014 (1) 1,490 1,746
Kern CA High School Dist. 6.40% 8/1/2015 (1) 1,645 1,926
Kern CA High School Dist. 6.40% 8/1/2016 (1) 1,815 2,126
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
CALIFORNIA INSURED MATURITY AMOUNT VALUE*
LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
King County CA Joint Unified High School Dist. 5.00% 8/1/2020 (1) $ 2,695 $ 2,629
La Quinta CA Redev. Agency (Tax Allocation Project) 7.30% 9/1/2010 (1) 1,145 1,413
Long Beach CA Finance Auth. Rev. 5.50% 10/1/2018 (1) 5,030 5,223
Long Beach CA Finance Auth. Rev. 6.00% 11/1/2017 (2) 2,000 2,234
Los Angeles CA Department of Water & Power Rev. 5.00% 10/15/2017 (1) 11,600 11,476
Los Angeles CA Department of Water & Power Rev. 5.00% 10/15/2018 (1) 11,600 11,443
Los Angeles CA Unified School Dist. 5.00% 7/1/2021 (3) 12,000 11,656
Los Angeles CA Unified School Dist. 5.00% 7/1/2023 (3) 10,000 9,700
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.00% 7/1/2012 (4) 8,090 8,252
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.00% 7/1/2023 (2) 21,100 20,467
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.25% 7/1/2011 (4) 9,570 10,049
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.25% 7/1/2023 (2) 13,025 13,065
Los Angeles County CA Metro. Transp. Auth. Sales Tax Rev. 5.25% 7/1/2027 (1) 8,210 8,233
MSR California Public Power Agency (San Juan Project) 6.125% 7/1/2013 (2) 8,000 9,111
MSR California Public Power Agency (San Juan Project) 6.75% 7/1/2020 (1)(ETM) 38,785 45,928
MSR California Public Power Agency VRDO (San Juan Project) 3.25% 6/2/1999 (1) 2,100 2,100
Metro. Water Dist. of Southern California Rev. 5.50% 7/1/2025 (1) 20,000 20,577
Modesto CA Irrigation Dist. Finance Auth. Rev.
(Domestic Water Project) 5.75% 9/1/2005 (2)(Prere.) 3,750 4,162
Modesto CA Irrigation Dist. Finance Auth. Rev. (Woodland Project) 6.50% 10/1/2011 (2) 8,125 9,453
Modesto CA Irrigation Dist. Finance Auth. Rev. (Woodland Project) 6.50% 10/1/2022 (2) 9,750 11,462
North City West CA School Fac. Finance Auth. 6.00% 9/1/2019 (4) 2,000 2,148
Northern California Power Agency 5.00% 8/1/2025 (2) 15,000 14,469
Northern California Power Agency (Hydro Electric Project) 6.00% 7/1/2009 (1) 7,530 8,444
Northern California Power Agency (Hydro Electric Project) 6.30% 7/1/2018 (1) 10,000 11,493
Northern California Power Agency (Hydro Electric Project) 7.50% 7/1/2021 (2)(Prere.) 1,810 2,341
Oakland CA Building Auth. Lease Rev. (Harris Building) 5.00% 4/1/2023 (2) 4,000 3,880
Oakland CA Building Auth. Lease Rev. (Harris Building) 5.25% 4/1/2010 (2) 5,495 5,793
Oakland CA Redev. Agency (Central Dist. Project) 5.50% 2/1/2014 (2) 5,500 5,884
Pasadena CA Unified School Dist. 5.00% 5/1/2023 (3) 5,155 5,001
Pomona CA Unified School Dist. GO 5.60% 8/1/2014 (1) 1,585 1,722
Pomona CA Unified School Dist. GO 5.60% 8/1/2015 (1) 2,000 2,164
Pomona CA Unified School Dist. GO 5.60% 8/1/2016 (1) 1,000 1,079
Pomona CA Unified School Dist. GO 7.50% 8/1/2017 (1) 2,540 3,289
Port of Oakland CA Rev. 5.40% 11/1/2017 (1) 16,705 17,168
Port of Oakland CA Rev. 5.60% 11/1/2019 (1) 22,280 23,429
Rancho CA Water Dist. Finance Auth. Rev. 5.875% 11/1/2010 (3) 3,585 3,903
Rancho CA Water Dist. Finance Auth. Rev. 6.25% 8/1/2012 (3) 3,000 3,205
Redding CA Joint Power Finance Auth. Waste Water Rev. 5.50% 12/1/2018 (3) 5,400 5,508
Riverside CA Electric Rev. 5.375% 10/1/2013 (2) 5,895 6,176
Riverside County CA Transp. Comm. Rev. 5.75% 6/1/2009 (2) 3,800 4,192
Sacramento CA Finance Auth. Rev. 5.25% 5/1/2016 (2) 9,700 9,841
Sacramento CA Finance Auth. Rev. 5.25% 5/1/2019 (2) 21,950 22,118
Sacramento CA Finance Auth. Rev. 5.375% 11/1/2014 (2) 9,000 9,489
Sacramento CA Finance Auth. Rev. 5.40% 11/1/2020 (2) 9,785 10,177
Sacramento CA Muni. Util. Dist. Rev. 6.25% 8/15/2010 (1) 33,800 38,673
Sacramento CA Muni. Util. Dist. Rev. 6.30% 8/15/2018 (1) 14,000 15,165
Sacramento CA Redev. Agency (Tax Allocation Project) 6.50% 11/1/2000 (1)(Prere.) 4,850 5,159
Sacramento CA Redev. Agency (Tax Allocation Project) 6.50% 11/1/2013 (1) 650 688
Sacramento CA Rev. (Cogeneration Project) 5.00% 7/1/2017 (1) 4,760 4,665
Sacramento County CA Airport System Rev. 5.00% 7/1/2026 (3) 3,250 3,133
Sacramento County CA Public Fac. Finance Corp. COP
(Main Detention Fac. Project) 5.50% 6/1/2010 (1) 5,760 6,230
San Bernardino County CA COP (Medical Center Financing Project) 5.50% 8/1/2005 (1)(Prere.) 12,790 13,971
San Bernardino County CA COP (Medical Center Financing Project) 6.50% 8/1/2017 (1) 17,915 20,979
San Diego CA Certificates of Undivided Interest in
Water Util. Fund Rev. 5.00% 8/1/2018 (3) 2,000 1,973
San Diego CA Financing Auth. Lease Rev.
(Convention Center Expansion) 5.25% 4/1/2014 (2) 5,680 5,836
San Diego CA Public Fac. Finance Auth. Sewer Rev. 5.25% 5/15/2027 (3) 6,450 6,470
San Diego CA Unified School Dist. COP 5.00% 8/1/2009 (1) 4,875 5,053
San Diego CA Unified School Dist. GO 0.00% 7/1/2015 (3) 5,370 2,366
San Diego CA Unified School Dist. GO 0.00% 7/1/2016 (3) 4,565 1,889
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Diego CA Unified School Dist. GO 0.00% 7/1/2018 (3) $ 4,500 $ 1,661
San Diego CA Water Auth. Rev. COP 5.25% 5/1/2015 (3) 14,290 14,589
San Diego CA Water Util. Rev. 5.00% 8/1/2021 (3) 4,975 4,832
San Francisco CA Bay Area Rapid Transit Rev. 6.75% 7/1/2010 (2) 6,370 7,580
San Francisco CA Bay Area Rapid Transit Rev. 6.75% 7/1/2011 (2) 7,455 8,890
San Francisco CA Building Auth. Rev. (Civic Center Complex) 5.25% 12/1/2016 (2) 22,575 22,913
San Francisco CA Building Auth. Rev. (Civic Center Complex) 5.25% 12/1/2021 (2) 15,000 15,067
San Francisco CA City & County Airport Rev. 5.00% 5/1/2023 (3) 8,500 8,145
San Francisco CA City & County Airport Rev. 5.65% 5/1/2006 (3)(Prere.) 6,200 6,813
San Francisco CA City & County Airport Rev. 6.00% 5/1/2003 (1)(Prere.) 1,915 2,096
San Francisco CA City & County Airport Rev. 6.00% 5/1/2010 (1) 1,640 1,773
San Francisco CA City & County Airport Rev. 6.00% 5/1/2011 (1) 1,720 1,859
San Francisco CA City & County Airport Rev. 6.00% 5/1/2020 (1) 5,325 5,671
San Francisco CA City & County Airport Rev. 6.20% 5/1/2002 (2)(Prere.) 2,410 2,618
San Francisco CA City & County Airport Rev. 6.20% 5/1/2006 (2) 2,995 3,238
San Francisco CA City & County Airport Rev. 6.20% 5/1/2008 (2) 595 643
San Francisco CA City & County Airport Rev. 6.30% 5/1/2002 (2)(Prere.) 2,005 2,183
San Francisco CA City & County Airport Rev. 6.30% 5/1/2011 (2) 2,995 3,237
San Francisco CA City & County Airport Rev. 6.50% 5/1/2003 (1)(Prere.) 545 607
San Francisco CA City & County Airport Rev. 6.50% 5/1/2006 (1) 2,735 3,027
San Francisco CA City & County Airport Rev. 6.60% 5/1/2003 (1)(Prere.) 410 458
San Francisco CA City & County Airport Rev. 6.60% 5/1/2007 (1) 2,080 2,309
San Francisco CA City & County Airport Rev. 6.625% 5/1/2003 (1)(Prere.) 620 693
San Francisco CA City & County Airport Rev. 6.625% 5/1/2008 (1) 3,100 3,445
San Francisco CA City & County Airport Rev. 6.70% 5/1/2003 (1)(Prere.) 665 745
San Francisco CA City & County Airport Rev. 6.70% 5/1/2009 (1) 3,305 3,681
San Francisco CA City & County GO 5.00% 6/15/2016 (3) 10,000 9,932
San Joaquin Hills CA Transp. Corridor Agency Toll Road Rev. 0.00% 1/15/2021 (1) 12,385 3,945
San Joaquin Hills CA Transp. Corridor Agency Toll Road Rev. 5.375% 1/15/2029 (1) 34,290 34,816
San Jose CA Redev. Agency (Merged Area Redev. Project) 5.00% 8/1/2020 (1) 3,500 3,393
San Jose CA Redev. Agency (Merged Area Redev. Project) 6.00% 8/1/2011 (1) 8,845 9,945
San Mateo County CA Finance Auth. Rev. 6.50% 7/1/2013 (1) 14,560 16,885
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2009 (3) 4,895 3,075
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2010 (3) 7,050 4,179
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2011 (3) 7,355 4,111
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2012 (3) 6,645 3,503
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2013 (3) 7,430 3,705
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2014 (3) 8,290 3,900
San Ramon Valley Unified School Dist. GO 0.00% 7/1/2015 (3) 5,605 2,481
Santa Ana CA Finance Auth. Rev. 6.25% 7/1/2016 (1) 5,345 6,126
Santa Ana CA Finance Auth. Rev. 6.25% 7/1/2017 (1) 2,000 2,290
Santa Clara CA Redev. Agency (Bayshore North Project) 7.00% 7/1/2010 (2) 7,000 8,309
Santa Clara CA Valley Water Dist. COP 6.00% 2/1/2024 (3) 20,000 21,322
Santa Clara County CA Finance Auth. Rev. 5.00% 11/15/2017 (2) 5,500 5,441
Santa Clara County CA Finance Auth. Rev.
(Multiple Fac. Project-2000) 5.50% 5/15/2013 (2) ++ 5,050 5,251
Santa Clara County CA Finance Auth. Rev.
(Multiple Fac. Project-2000) 5.50% 5/15/2014 (2) ++ 5,325 5,497
Santa Clara County CA Finance Auth. Rev.
(Multiple Fac. Project-2000) 5.50% 5/15/2015 (2) ++ 5,620 5,745
Santa Rosa CA Waste Water Rev. 6.00% 9/1/2015 (3) 5,580 6,255
Santa Rosa CA Waste Water Rev. 6.25% 9/1/2002 (3)(Prere.) 7,075 7,713
Santa Rosa CA Waste Water Service Fac. Dist. 6.00% 7/2/2015 (2) 7,000 7,842
Sante Fe Springs CA Redev. Agency 6.00% 9/1/2014 (1) 5,350 5,762
South Coast CA Air Quality Management Dist. Rev. 5.50% 8/1/2014 (1) 8,000 8,358
South Coast CA Air Quality Management Dist. Rev. 6.00% 8/1/2011 (2) + 3,200 3,598
South County CA Regional Waste Water Auth. (Gilroy) 5.50% 8/1/2022 (3) 8,625 9,080
South Orange County CA Public Finance Auth. Rev. 7.00% 9/1/2011 (1) 3,000 3,647
South Orange County CA Public Finance Auth. Rev. 9.50% 8/15/2004 (1) 3,000 3,761
Southern California Public Power Auth. (Palo Verde Project) 7.00% 7/1/1999 (2)(Prere.) 1,395 1,400
Southern California Public Power Auth. (Palo Verde Project) 7.00% 7/1/2007 (2) 1,070 1,074
Southern California Public Power Auth. (Palo Verdo Project) 7.00% 7/1/2010 (2) 1,635 1,641
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
CALIFORNIA INSURED MATURITY AMOUNT VALUE*
LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Southern California Public Power Auth. (Transmission Project) 5.75% 7/1/2021 (1) $ 3,000 $ 3,151
Three Valley CA Muni. Water Dist. COP 5.25% 11/1/2010 (3) 4,220 4,347
Tulare County CA COP 5.00% 8/15/2014 (1) 5,065 5,135
Tulare County CA COP 5.00% 8/15/2015 (1) 6,460 6,495
Ukiah CA Electric Rev. 6.00% 6/1/2008 (1) 4,565 5,096
Ukiah CA Electric Rev. 6.25% 6/1/2018 (1) 6,000 6,881
Univ. of California Rev. (Medical Center) 5.75% 7/1/2012 (2) 10,395 11,115
Univ. of California Rev. (Medical Center) 5.75% 7/1/2014 (2) 12,160 12,956
Univ. of California Rev. (Medical Center) 5.75% 7/1/2024 (2) 10,000 10,483
Univ. of California Rev. (Medical Center) 6.00% 7/1/2026 (2) 11,000 11,802
Univ. of California Rev. (Multiple Purpose Project) 5.125% 9/1/2020 (1) 18,000 17,849
Univ. of California Rev. (Multiple Purpose Project) 6.25% 9/1/2002 (1)(Prere.) 10,000 10,946
Walnut CA Public Finance Auth. 6.00% 9/1/2015 (1) 5,000 5,270
Walnut Valley CA Unified School Dist. 6.00% 8/1/2012 (2) 1,790 2,020
Walnut Valley CA Unified School Dist. 6.00% 8/1/2013 (2) 1,980 2,235
Walnut Valley CA Unified School Dist. 6.00% 8/1/2014 (2) 2,205 2,490
Walnut Valley CA Unified School Dist. 6.00% 8/1/2015 (2) 2,470 2,783
Walnut Valley CA Unified School Dist. 6.00% 8/1/2016 (2) 2,690 3,034
Walnut Valley CA Unified School Dist. 6.20% 8/1/2009 (2) 1,270 1,457
West Sacramento CA Finance Auth. Rev.
(Water System Improvement Project) 5.25% 8/1/2008 (3) 2,160 2,247
West Sacramento CA Tax Allocation (Redev. Project) 6.25% 9/1/2001 (1)(Prere.) 8,250 8,879
Whittier CA Insured Health Fac. Rev. (Presbyterian Hosp.) 6.25% 6/1/2007 (1) 4,260 4,805
Whittier CA Insured Health Fac. Rev. (Presbyterian Hosp.) 6.25% 6/1/2008 (1) 3,530 3,975
OUTSIDE CALIFORNIA:
Puerto Rico Govt. Dev. Bank VRDO 3.00% 6/2/1999 (1) LOC 8,500 8,500
---------
1,404,512
---------
SECONDARY MARKET INSURED (3.1%)
California GO 5.00% 10/1/2016 (3) 4,380 4,350
California GO 6.25% 9/1/2012 (3) 9,000 10,355
California Public Works Board Rev. (Dept. of Corrections) 6.50% 9/1/2017 (2) 30,000 35,264
---------
49,969
---------
NONINSURED (9.1%)
Beverly Hills CA Public Finance Auth. Rev.
(Capital Improvement Project) 5.25% 6/1/2028 10,000 10,025
California Department of Water (Central Valley Project) 6.40% 6/1/2002 (Prere.) 20,400 22,216
California Educ. Fac. Auth. Rev.
(Univ. of Southern California Project) 5.80% 10/1/2015 6,550 6,979
California Health Fac. Finance Auth. Rev. VRDO
(Adventist Health System West Sutter Health) 2.95% 6/3/1999 LOC 800 800
California Health Fac. Finance Auth. Rev. VRDO
(St. Joseph Health) 3.25% 6/2/1999 10,500 10,500
California PCR Financing Auth. VRDO (Exxon Project) 3.20% 6/2/1999 2,895 2,895
California PCR Financing Auth. VRDO (Pacific Gas & Electric Co.) 3.00% 6/2/1999 LOC 6,000 6,000
California PCR Financing Auth. VRDO (Pacific Gas & Electric Co.) 3.30% 6/2/1999 LOC 2,200 2,200
California PCR Financing Auth. VRDO (Pacific Gas & Electric Co.) 3.35% 6/2/1999 3,300 3,300
California PCR Financing Auth. VRDO (Pacific Gas & Electric Co.) 3.40% 6/2/1999 LOC 2,005 2,005
California GO PUT 3.20% 6/1/2000 8,500 8,498
East Bay CA Muni. Util. Dist. Water System Rev. 5.25% 6/1/2018 4,000 4,057
East Bay CA Muni. Util. Dist. Water System Rev. 5.25% 6/1/2019 4,445 4,501
Irvine CA Assessment Dist. Improvement Boards VRDO 3.25% 6/2/1999 5,400 5,400
Irvine CA Assessment Dist. Improvement Boards VRDO
(Northwest Irvine) 3.25% 6/2/1999 LOC 3,700 3,700
Irvine CA Assessment Dist. Improvement Boards VRDO
(Oak Creek) 3.25% 6/2/1999 LOC 1,900 1,900
Irvine CA Ranch Water Dist. VRDO 3.20% 6/2/1999 LOC 3,600 3,600
Irvine CA Ranch Water Dist. VRDO 3.25% 6/2/1999 LOC 6,900 6,900
Los Angeles CA Dept. of Water & Power Electric Plant Rev. 6.50% 4/1/2010 3,950 4,284
Los Angeles County CA Public Works Rev. 5.50% 10/1/2012 6,750 7,126
Metro. Water Dist. of Southern California 8.00% 7/1/2008 2,000 2,531
Orange County CA Sanitation Dist. VRDO 3.25% 6/2/1999 LOC 3,700 3,700
Riverside County CA Public Fac. Project VRDO 3.00% 6/8/1999 LOC 2,000 2,000
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Diego Water Auth. Rev. COP 5.00% 5/1/2017 $ 2,300 $ 2,268
West Basin CA Muni. Water Dist. COP VRDO
(Phase III Recycled Water Project) 2.90% 6/3/1999 9,000 9,000
OUTSIDE CALIFORNIA:
Puerto Rico Highway & Transp. Auth. VRDO 3.00% 6/2/1999 LOC 200 200
Puerto Rico TRAN 3.50% 7/30/1999 10,000 10,004
-------
146,589
-------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,524,561) 1,601,070
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 25,500
Liabilities (20,113)
--------
5,387
--------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 140,838,075 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,606,457
=========================================================================================================================
NET ASSET VALUE PER SHARE $11.41
=========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities segregated as initial margin for open futures contracts.
++Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of May 31, 1999.
For key to abbreviations and other references, see below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AT MAY 31, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,530,311 $10.87
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (1,339) (.01)
Unrealized Appreciation--Notes E and F
Investment Securities 76,509 .54
Futures Contracts 976 .01
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $1,606,457 $11.41
=========================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
COP--Certificate of Participation.
CP--Commercial Paper.
GO--General Obligation 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.
(Prere.)--Prerefunded.
(ETM)--Escrowed To Maturity.
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (Ambac Assurance Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
(5) BIGI (Bond Investors Guaranty Insurance).
(6) Connie Lee Inc.
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.
29
<PAGE> 32
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to the fund. 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 Gain (Loss)
realized on the sale of investments, and the increase or decrease in the
Unrealized Appreciation (Depreciation) on investments during the period. If a
fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CALIFORNIA CALIFORNIA
CALIFORNIA INSURED INSURED
TAX-EXEMPT INTERMEDIATE-TERM LONG-TERM
MONEY MARKET TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
---------------------------------------------
SIX MONTHS ENDED MAY 31, 1999
---------------------------------------------
(000) (000) (000)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $29,510 $25,523 $39,204
---------------------------------------------
Total Income 29,510 25,523 39,204
---------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 121 64 92
Management and Administrative 1,681 761 1,222
Marketing and Distribution 271 137 145
Custodian Fees 11 5 7
Auditing Fees 4 4 4
Shareholders' Reports 12 5 10
Trustees' Fees and Expenses 1 1 1
---------------------------------------------
Total Expenses 2,101 977 1,481
Expenses Paid Indirectly--Note C (11) (9) (7)
---------------------------------------------
Net Expenses 2,090 968 1,474
- --------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 27,420 24,555 37,730
- --------------------------------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold 13 283 482
Futures Contracts -- 1,107 5,291
- --------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 13 1,390 5,773
- --------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- (19,869) (37,261)
Futures Contracts -- 672 1,858
- --------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- (19,197) (35,403)
- --------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $27,433 $ 6,748 $ 8,100
========================================================================================================
</TABLE>
30
<PAGE> 33
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the fund distributes its
income to shareholders each day, the amounts of Distributions--Net Investment
Income generally equal the net income earned as shown under the Operations
section. The amounts of Distributions--Realized Capital Gain may not match the
capital gains shown in the Operations section, because distributions are
determined on a tax basis and may be made in a period different from the one in
which the gains were realized on the financial statements. The Capital Share
Transactions section shows the amount shareholders invested in the fund, either
by purchasing shares or by reinvesting distributions, and the amounts redeemed.
The corresponding numbers of Shares Issued and Redeemed are shown at the end of
the Statement.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
CALIFORNIA CALIFORNIA INSURED
TAX-EXEMPT INTERMEDIATE-TERM
MONEY MARKET FUND TAX-EXEMPT FUND
------------------------------ -----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1999 NOV. 30, 1998 MAY 31, 1999 NOV. 30, 1998
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 27,420 $ 58,937 $ 24,555 $ 35,732
Realized Net Gain (Loss) 13 1 1,390 (1,042)
Change in Unrealized Appreciation (Depreciation) -- -- (19,197) 21,816
-------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 27,433 58,938 6,748 56,506
-------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (27,420) (58,937) (24,555) (35,732)
Realized Capital Gain -- -- -- --
-------------------------------------------------------------
Total Distributions (27,420) (58,937) (24,555) (35,732)
-------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 1,328,785 2,145,061 382,796 561,031
Issued in Lieu of Cash Distributions 25,331 54,801 19,430 27,849
Redeemed (1,197,807) (2,029,569) (168,234) (199,993)
-------------------------------------------------------------
Net Increase from Capital Share Transactions 156,309 170,293 233,992 388,887
- ------------------------------------------------------------------------------------------------------------------------
Total Increase 156,322 170,294 216,185 409,661
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,970,226 1,799,932 1,006,093 596,432
-------------------------------------------------------------
End of Period $2,126,548 $1,970,226 $1,222,278 $1,006,093
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 1,328,785 2,145,061 35,055 51,907
Issued in Lieu of Cash Distributions 25,331 54,801 1,781 2,573
Redeemed (1,197,807) (2,029,569) (15,416) (18,538)
-------------------------------------------------------------
Net Increase in Shares Outstanding 156,309 170,293 21,420 35,942
========================================================================================================================
</TABLE>
31
<PAGE> 34
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CALIFORNIA
INSURED LONG-TERM
TAX-EXEMPT FUND
--------------------------------
SIX MONTHS YEAR
ENDED ENDED
MAY 31, 1999 NOV. 30, 1998
(000) (000)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 37,730 $ 66,239
Realized Net Gain (Loss) 5,773 13,608
Change in Unrealized Appreciation (Depreciation) (35,403) 26,524
-------------------------------
Net Increase in Net Assets Resulting from Operations 8,100 106,371
-------------------------------
DISTRIBUTIONS
Net Investment Income (37,730) (66,239)
Realized Capital Gain (14,028) (7,325)
-------------------------------
Total Distributions (51,758) (73,564)
-------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 270,221 398,698
Issued in Lieu of Cash Distributions 36,692 50,100
Redeemed (145,354) (199,574)
-------------------------------
Net Increase from Capital Share Transactions 161,559 249,224
- ---------------------------------------------------------------------------------------------------------
Total Increase 117,901 282,031
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,488,556 1,206,525
-------------------------------
End of Period $1,606,457 $1,488,556
=========================================================================================================
(1)Shares Issued (Redeemed)
Issued 23,312 34,419
Issued in Lieu of Cash Distributions 3,171 4,327
Redeemed (12,547) (17,261)
-------------------------------
Net Increase in Shares Outstanding 13,936 21,485
=========================================================================================================
</TABLE>
32
<PAGE> 35
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis. It also presents the fund'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 fund's net income and
total returns from year to year; the relative contributions of net income and
capital gains to the fund's total return; how much it costs to operate the
fund; and the extent to which the fund tends to distribute capital gains. The
table also shows the Portfolio Turnover Rate, a measure of trading activity. A
turnover rate of 100% means that the average security is held in the fund for
one year. Money market funds are not required to report a Portfolio Turnover
Rate.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
FOR A SHARE OUTSTANDING YEAR ENDED NOVEMBER 30,
SIX MONTHS ENDED ---------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1999 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .013 .031 .034 .033 .036 .026
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
----------------------------------------------------------------
Total from Investment Operations .013 .031 .034 .033 .036 .026
----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.013) (.031) (.034) (.033) (.036) (.026)
Distributions from Realized Capital Gains -- -- -- -- -- --
----------------------------------------------------------------
Total Distributions (.013) (.031) (.034) (.033) (.036) (.026)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================================================================================
TOTAL RETURN 1.35% 3.10% 3.41% 3.32% 3.69% 2.59%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $2,127 $1,970 $1,800 $1,443 $1,202 $1,159
Ratio of Total Expenses to
Average Net Assets 0.21%* 0.20% 0.18% 0.19% 0.20% 0.19%
Ratio of Net Investment Income to
Average Net Assets 2.69%* 3.05% 3.35% 3.27% 3.61% 2.57%
=============================================================================================================================
</TABLE>
*Annualized.
33
<PAGE> 36
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------------- MAR. 4* TO
THROUGHOUT EACH PERIOD MAY 31, 1999 1998 1997 1996 1995 NOV. 30, 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.66 $10.58 $10.44 $ 9.64 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .239 .489 .505 .508 .511 .346
Net Realized and Unrealized Gain (Loss)
on Investments (.160) .290 .102 .140 .800 (.360)
-------------------------------------------------------------------
Total from Investment Operations .079 .779 .607 .648 1.311 (.014)
-------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.239) (.489) (.505) (.508) (.511) (.346)
Distributions from Realized Capital Gains -- -- (.022) -- -- --
-------------------------------------------------------------------
Total Distributions (.239) (.489) (.527) (.508) (.511) (.346)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.79 $10.95 $10.66 $10.58 $10.44 $ 9.64
=============================================================================================================================
TOTAL RETURN 0.72% 7.47% 5.91% 6.41% 13.88% -0.19%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,222 $1,006 $596 $343 $206 $100
Ratio of Total Expenses to
Average Net Assets 0.17%** 0.19% 0.18% 0.19% 0.21% 0.19%**
Ratio of Net Investment Income to
Average Net Assets 4.39%** 4.52% 4.78% 4.90% 5.05% 4.97%**
Portfolio Turnover Rate 4%** 2% 10% 21% 11% 6%
=============================================================================================================================
</TABLE>
*Inception.
**Annualized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ----------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1999 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.73 $11.45 $11.42 $11.27 $ 9.92 $11.30
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .281 .577 .592 .598 .602 .604
Net Realized and Unrealized Gain (Loss)
on Investments (.210) .349 .121 .150 1.350 (1.228)
------------------------------------------------------------------
Total from Investment Operations .071 .926 .713 .748 1.952 (.624)
------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.281) (.577) (.592) (.598) (.602) (.604)
Distributions from Realized Capital Gains (.110) (.069) (.091 -- -- (.152)
------------------------------------------------------------------
Total Distributions (.391) (.646) (.683) (.598) (.602) (.756)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.41 $11.73 $11.45 $11.42 $11.27 $ 9.92
============================================================================================================================
TOTAL RETURN 0.60% 8.31% 6.52% 6.91% 20.11% -5.88%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,606 $1,489 $1,207 $1,066 $975 $834
Ratio of Total Expenses to
Average Net Assets 0.19%* 0.19% 0.16% 0.19% 0.20% 0.19%
Ratio of Net Investment Income to
Average Net Assets 4.86%* 4.98% 5.26% 5.38% 5.59% 5.60%
Portfolio Turnover Rate 6%* 15% 21% 23% 23% 28%
============================================================================================================================
</TABLE>
*Annualized.
34
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
Vanguard California Tax-Exempt Funds comprises the California Tax-Exempt Money
Market Fund, California Insured Intermediate-Term Tax-Exempt Fund, and
California Insured Long-Term Tax-Exempt Fund, each of which is registered under
the Investment Company Act of 1940 as an open-end investment company, or mutual
fund. Each fund invests in debt instruments of municipal issuers whose ability
to meet their obligations may be affected by economic and political developments
in the state of California.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Tax-Exempt Money Market Fund: Investment securities
are valued at amortized cost, which approximates market value. Other funds:
Bonds, and temporary cash investments acquired over 60 days to maturity, are
valued using the latest bid prices or using valuations based on a matrix system
(which considers such factors as security prices, yields, maturities, and
ratings), both as furnished by independent pricing services. Other temporary
cash investments are valued at amortized cost, which approximates market value.
Securities for which market quotations are not available are valued by methods
deemed by the Board of Trustees to represent fair value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. FUTURES CONTRACTS: The Insured Intermediate-Term and Insured Long-Term
Tax-Exempt Funds may use Municipal Bond Index, U.S. Treasury Bond, and U.S.
Treasury Note futures contracts, with the objectives of enhancing returns,
managing interest-rate risk, maintaining liquidity, diversifying credit risk,
and minimizing transaction costs. The funds may purchase or sell futures
contracts instead of bonds to take advantage of pricing differentials between
the futures contracts and the underlying bonds. The funds may also seek to take
advantage of price differences among bond market sectors by simultaneously
buying futures (or bonds) of one market sector and selling futures (or bonds) of
another sector. Futures contracts may also be used to simulate a fully invested
position in the underlying bonds while maintaining a cash balance for liquidity.
The primary risks associated with the use of futures contracts are imperfect
correlation between changes in market values of bonds held by the funds and the
prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. The aggregate principal amounts of the contracts are not recorded in the
financial statements. Fluctuations in the value of the contracts are recorded in
the Statement of Net Assets as an asset (liability) and in the Statement of
Operations as unrealized appreciation (depreciation) until the contracts are
closed, when they are recorded as realized futures gains (losses).
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 funds under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At May 31, 1999, the funds had contributed
capital to Vanguard (included in Other Assets) of:
35
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
CALIFORNIA TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $315 0.02% 0.4%
Insured Intermediate-Term 189 0.02 0.3
Insured Long-Term 245 0.02 0.3
- ----------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The funds' 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 funds part of the underwriting fees generated. Such
rebates or credits are used solely to reduce the funds' management and
administrative expenses. The funds' custodian bank has also agreed to reduce its
fees when the funds maintain cash on deposit in their non-interest-bearing
custody accounts. For the six months ended May 31, 1999, these arrangements
reduced expenses by:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
EXPENSE
REDUCTION
(000)
--------------------------------
MANAGEMENT AND CUSTODIAN
CALIFORNIA TAX-EXEMPT FUND ADMINISTRATIVE FEES
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market -- $11
Insured Intermediate-Term $4 5
Insured Long-Term -- 7
- --------------------------------------------------------------------------------------------
</TABLE>
D. During the six months ended May 31, 1999, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(000)
----------------------------
CALIFORNIA TAX-EXEMPT FUND PURCHASES SALES
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Insured Intermediate-Term $208,063 $21,303
Insured Long-Term 134,807 47,834
- ------------------------------------------------------------------------------------------
</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. The Insured Intermediate-Term Tax-Exempt
Fund and the Insured Long-Term Tax-Exempt Fund had realized losses totaling
$1,950,000 and $7,986,000, respectively, through November 30, 1998, which are
deferred for tax purposes and reduce the amount of unrealized appreciation on
investment securities for tax purposes (see Note F). For federal income tax
purposes at November 30, 1998, the funds had the following capital losses
available to offset future capital gains:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CAPITAL LOSS
--------------------------------------
EXPIRATION
FISCAL YEAR(S)
AMOUNT ENDING
CALIFORNIA TAX-EXEMPT FUND (000) NOVEMBER 30
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market $ (65) 2000-2006
Insured Intermediate-Term (756) 2005-2006
- ----------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 39
F. At May 31, 1999, net unrealized appreciation of investment securities for
federal income tax purposes was:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(000)
----------------------------------------------------
APPRECIATED DEPRECIATED NET UNREALIZED
CALIFORNIA TAX-EXEMPT FUND SECURITIES SECURITIES APPRECIATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Intermediate-Term $24,894 $(4,601) $20,293
Insured Long-Term 77,144 (8,621) 68,523
- ----------------------------------------------------------------------------------------------
</TABLE>
At May 31, 1999, the aggregate settlement value of open futures contracts
expiring through September 1999 and the related unrealized appreciation were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(000)
---------------------------------
CALIFORNIA AGGREGATE
TAX-EXEMPT FUND/ NUMBER OF SETTLEMENT UNREALIZED
FUTURES CONTRACTS SHORT CONTRACTS VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Intermediate-Term/
U.S. Treasury Note 107 $12,004 $467
Insured Long-Term/
U.S. Treasury Bond 520 61,198 976
- ----------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 40
NOTICE TO SHAREHOLDERS ABOUT Y2K
As is well known by now, the approaching calendar change to 2000 has posed a
challenge to many computer systems worldwide. Computers that are not modified
could interpret "00" as 1900 rather than 2000 and produce errors in
date-dependent calculations, including bond interest payments, stock trade
settlements, retirement benefits, and other financial transactions.
OUR APPROACH
Vanguard has taken this challenge seriously. We have had a Year 2000 Project
under way since 1996 to fulfill our responsibility to safeguard our business
relationships and the security of our investors' accounts.
Our internal systems are Year 2000-compliant. They have been renovated and
thoroughly tested and are ready for the date change. As for the external
systems that connect with ours, we have been working for many months with
clients, business partners, and providers of products and services to assess
their compliance. We have analyzed the external services we require and have
developed contingency plans--including provision for alternative providers
where appropriate.
On New Year's Day, our telephone centers will be staffed and ready for
shareholder calls. However, we expect the volume of inquiries over the New
Year's weekend to be high, and we encourage shareholders to check their
accounts via our website or automated telephone systems, which offer much
greater service capacity and efficiency. This will also help our live
representatives to provide a higher level of service to those with specific
transaction or other service-related needs.
WHAT YOU CAN DO
We assure you we will protect our shareholders' records, so account records
will not be lost. Nevertheless, keeping copies of current records is always
advisable. You should keep at least your third-quarter statement and any
confirmations you receive from us between October 1, 1999, and year-end.
If you are a registered user of Access Vanguard(TM) (www.vanguard.com),
you can retrieve this information through the secure "Your Accounts" section
and print copies for your files. If you are not registered for Access
Vanguard and wish to have this flexibility, you should register as soon as
possible so that you can receive your password and become familiar with this
service before the New Year's weekend. Likewise, you may need personal
identification numbers to use our automated telephone services: Vanguard
Tele-Account(R) for individual investors (1-800-662-6273) and The VOICE(TM)
Network for participants in employer-sponsored retirement plans
(1-800-523-1188).
Our Year 2000 Project's primary goal from the start has been to prepare
our systems for business as usual on behalf of our shareholders into 2000 and
beyond. We remain confident we will meet that goal, and we look forward to
serving you in the years to come.
38
<PAGE> 41
THE VANGUARD FAMILY OF FUNDS
STOCK FUNDS
- ---------------------------------------------------
500 Index Fund
Aggressive Growth Fund
Capital Opportunity Fund
Convertible Securities Fund
Emerging Markets Stock
Index Fund
Energy Fund
Equity Income Fund
European Stock Index Fund
Explorer Fund
Extended Market Index Fund*
Global Equity Fund
Gold and Precious Metals Fund
Growth and Income Fund
Growth Index Fund*
Health Care Fund
Institutional Index Fund*
International Growth Fund
International Value Fund
Mid-Cap Index Fund*
Morgan Growth Fund
Pacific Stock Index Fund
PRIMECAP Fund
REIT Index Fund
Selected Value Fund
Small-Cap Growth Index Fund*
Small-Cap Index Fund*
Small-Cap Value Index Fund*
Tax-Managed Capital
Appreciation Fund*
Tax-Managed Growth and
Income Fund*
Tax-Managed Small-Cap Fund*
Total International Stock
Index Fund
Total Stock Market Index Fund*
U.S. Growth Fund
Utilities Income Fund
Value Index Fund*
Windsor Fund
Windsor II Fund
BALANCED FUNDS
- ---------------------------------------------------
Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy Conservative
Growth Fund
LifeStrategy Growth Fund
LifeStrategy Income Fund
LifeStrategy Moderate
Growth Fund
STAR Fund
Tax-Managed Balanced Fund
Wellesley Income Fund
Wellington Fund
BOND FUNDS
- ---------------------------------------------------
Admiral Intermediate-Term
Treasury Fund
Admiral Long-Term Treasury Fund
Admiral Short-Term Treasury Fund
GNMA Fund
High-Yield Corporate Fund
High-Yield Tax-Exempt Fund
Insured Long-Term Tax-Exempt Fund
Intermediate-Term Bond
Index Fund
Intermediate-Term Corporate Fund
Intermediate-Term Tax-Exempt Fund
Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund
Long-Term Bond Index Fund
Long-Term Corporate Fund
Long-Term Tax-Exempt Fund
Long-Term Treasury Fund
Preferred Stock Fund
Short-Term Bond Index Fund
Short-Term Corporate Fund*
Short-Term Federal Fund
Short-Term Tax-Exempt Fund
Short-Term Treasury Fund
State Tax-Exempt Bond Funds
(California, Florida,
Massachusetts, New Jersey,
New York, Ohio, Pennsylvania)
Total Bond Market Index Fund*
MONEY MARKET FUNDS
- ---------------------------------------------------
Admiral Treasury Money
Market Fund
Federal Money Market Fund
Prime Money Market Fund*
State Tax-Exempt Money Market
Funds (California, New Jersey,
New York, Ohio, Pennsylvania)
Tax-Exempt Money Market Fund
Treasury Money Market Fund
VARIABLE ANNUITY PLAN
- ---------------------------------------------------
Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High-Grade Bond Portfolio
High Yield Bond Portfolio
International Portfolio
Mid-Cap Index Portfolio
Money Market Portfolio
REIT Index Portfolio
Short-Term Corporate Portfolio
Small Company Growth Portfolio
*Offers Institutional Shares.
39
<PAGE> 42
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson-Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress
& Co., The Jeffrey Co., and Southern New England Telecommunications 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.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; Retired Vice Chairman and Director af
RJR Nabisco; Director of Teco Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DiSTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MacKINNON
Managing Director, Fixed Income Group.
F. WILLIAM McNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell Company is
the owner of trademarks and copyrights relating to the Russell Indexes.
"Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire Associates.
<PAGE> 43
VANGUARD
MILESTONES
[PHOTO]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[PHOTO]
Walter L. Morgan, founder of
Wellington Fund, the nation's
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[PHOTO]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q752-07/21/1999
(C) 1999 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
