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VANGUARD
PENNSYLVANIA
TAX-FREE FUND
Semiannual Report - May 31, 1998
[PHOTO]
[THE VANGUARD GROUP LOGO]
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OUR CREW MAKES THE DIFFERENCE
Throughout our history, The Vanguard Group has received considerable attention
as the low-cost provider of mutual funds. While such accolades are gratifying,
we are most proud, not of our low operating expenses or the billions of dollars
we manage, but of our sterling reputation created by the Vanguard crew.
We recognize that it is our crew members--more than 7,000 highly
motivated men and women--who form the cornerstone of our operations. We could
not survive long--let alone prosper--without them. That's why we chose this
fiscal year's fund reports to celebrate the spirit, enthusiasm, and achievements
of our crew. (We call those who work at Vanguard crew members, not employees,
because they operate as a team to accomplish our mission of serving you, our
clients.)
But while we prize the collective contributions of our crew, we also
take time to recognize the importance of the individual. Each calendar quarter,
we present our Award For Excellence to a handful of crew members who have
demonstrated particular excellence in the performance of their jobs and who
embody "The Vanguard Spirit." Our report cover shows only a few of the more than
300 crew members who have received this distinction since 1984.
They, along with the rest of our valiant crew, look forward to
serving you in the years ahead.
[PHOTO] [PHOTO]
John C. Bogle John J. Brennan
Senior Chairman Chairman & CEO
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CONTENTS
<S> <C>
A MESSAGE TO OUR SHAREHOLDERS .......... 1
THE MARKETS IN PERSPECTIVE ............. 3
REPORT FROM THE ADVISER ................ 5
PERFORMANCE SUMMARIES .................. 7
PORTFOLIO PROFILES ..................... 8
FINANCIAL STATEMENTS ................... 11
</TABLE>
All comparative mutual fund data are from Lipper Analytical Services, Inc., or
Morningstar unless otherwise noted.
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FELLOW SHAREHOLDER,
Prices of municipal bonds nudged higher during the first half of
Vanguard Pennsylvania Tax-Free Fund's 1998 fiscal year, reflecting a slight
easing in long-term interest rates and docile inflation. These higher prices,
combined with six months of interest income, gave investors in tax-exempt
securities a solid return for the half-year ended May 31, 1998.
In this environment, the +1.7% earned by our Money Market Portfolio
and the +3.9% return of our Insured Long-Term Portfolio outpaced the returns of
their peers. The adjacent table presents each Portfolio's six-month return as
well as those of average competing mutual funds.
<TABLE>
<CAPTION>
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TOTAL RETURNS
SIX MONTHS ENDED
MAY 31, 1998
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<S> <C>
MONEY MARKET PORTFOLIO +1.7%
Average Pennsylvania Tax-Exempt
Money Market Fund +1.6
- ---------------------------------------------------------
INSURED LONG-TERM PORTFOLIO +3.9%
Average Pennsylvania
Municipal Bond Fund +3.5
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</TABLE>
The total return (capital change plus reinvested dividends) of the
Insured Long-Term Portfolio is based on an increase in net asset value from
$11.27 per share on November 30, 1997, to $11.40 per share on May 31, 1998,
adjusted for dividends totaling $0.301 per share paid from net investment
income. The Money Market Portfolio's net asset value remained at $1 per share,
as is expected but not guaranteed. On May 31, the Insured Long-Term Portfolio's
yield stood at 4.61%, and the Money Market Portfolio's yield at 3.57%.
THE PERIOD IN REVIEW
A storybook environment that featured solid economic growth, declining interest
rates, and well-behaved inflation showed no signs of fading during the
half-year. As a result, the six-month period was a good one for bonds and even
better for stocks.
The decline in interest rates was particularly helpful. Yields on
long-term U.S. Treasury bonds declined on balance during the half-year by
approximately 25 to 30 basis points (0.25 to 0.30 percentage point). The yield
on the 30-year Treasury bond ended the period at 5.80%, down from 6.05% on
November 30, 1997, while rates on 3-month T-bills declined by 19 basis points,
from 5.20% to 5.01%. The rate decline stemmed from remarkably good inflation
news--consumer prices were up just 0.8% during the period--and a conviction
among market participants that one consequence of Asia's continuing economic
crisis would be to keep a lid on inflation and interest rates in the United
States.
Yields on high-grade, long-term municipal bonds fell on balance to
5.22% on May 31, down from 5.36% on November 30, 1997. The yield on top-grade
(MIG-1) short-term municipal notes declined to 3.65%, from 3.80% six months
earlier.
Despite the good news for bonds, stocks continued to lead the party.
The Standard & Poor's 500 Composite Stock Price Index returned +15.1% for the
six months, a spectacular return for such a brief period.
Our low expenses explained the advantage achieved by our Money Market
Portfolio, which returned +1.7%, over the average Pennsylvania tax-exempt money
market mutual fund, which returned +1.6%.
The +3.9% total return achieved by the Insured Long-Term Portfolio
consisted of a +2.7% income return and a +1.2% capital return that reflected
slightly lower interest
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rates. The Portfolio's performance topped the +3.5% return of the average
Pennsylvania municipal bond fund and was a hair ahead of the +3.8% return of the
unmanaged Lehman Brothers 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.
In reviewing the results of the past six months, it's important to
remember that the interest rate environment is not always so friendly to bond
investors. During periods when interest rates are on the rise, existing bond
prices fall and thus diminish, rather than augment, a fund's total return.
Also, we urge you to keep in mind that our six-month performance
accounts for only half of the year's interest income, whereas bond prices react
immediately to interest rate changes. However, over time, unpredictable changes
in interest rates tend to even out, leaving the rate of interest income as the
chief source of long-term bond returns. That's why investors should consider a
full year's interest income as part of a semiannual review. Over the twelve
months ended May 31, 1998--a period when interest rates generally declined--our
Insured Long-Term Portfolio provided a total return of +8.8%, consisting of an
income return of +5.6% and a capital return of +3.2%.
For Vanguard Pennsylvania Tax-Free Fund, our excellent long-term
performance is largely a function of two elements: our low expenses and our
disciplined management approach. For our shareholders, these factors are
significant and durable advantages that we expect to continue. Our Portfolios
have annualized expense ratios (expenses as a percentage of average net assets)
of about 0.20%, compared with 1.03% charged by the average long-term state
tax-exempt fund and 0.53% for the average state tax-exempt money market fund.
Our cost advantage allows us to offer a portfolio of higher-quality
bonds without compromising the yields earned by our shareholders. Our Insured
Long-Term Portfolio invests in bonds that carry private insurance guaranteeing
the payment of principal and interest in the event of an issuer's default. This
insurance comes at the cost of slightly lower gross yields, but our lower costs
more than make up the difference, thus enabling our Portfolio to provide net
returns that are fully competitive with those of uninsured municipal bond
portfolios.
IN SUMMARY
While it's enjoyable to bask in the glow of the financial markets' recent
stellar performance, it's important to remember that the markets are still
subject to cycles. Interest rates cannot--and will not--march lower
indefinitely. Nor will stocks sustain their above-average performance forever.
Given that financial markets are not a one-way street, we reiterate
our belief that a balanced portfolio of stock funds, bond funds, and money
market funds can help investors "stay the course" toward their investment
objectives--no matter what the market environment.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
June 16, 1998
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THE MARKETS IN PERSPECTIVE
Six Months Ended May 31, 1998
The U.S. financial markets turned in another excellent performance during the
half- year ended May 31. The stock market's gains would have been good even for
a full year, and the bond market chalked up solid returns.
Consumer spending was the economy's locomotive. Americans spent
freely on houses, automobiles, and just about everything else. Their spirits
were buoyed by a very strong job market--the nation's unemployment rate was 4.3%
in May, tying a 28-year low--and by higher wages (average hourly earnings in May
were 4.3% higher than a year before). Growth in the consumer sector, which
accounts for two-thirds of all economic activity, was more than enough to offset
the negative effects of Asia's financial and economic crisis. A strong rise in
the value of the U.S. dollar since mid-1997 in relation to most Asian currencies
has cut into U.S. exports to Asia while lowering the cost of Asian goods for
American buyers. The upshot is intensifying competition for U.S. companies, some
of which have blamed the Asian crisis for reduced profits.
The silver lining in the Asian cloud is that, by offsetting some of the
strength elsewhere in the U.S. economy, it has reduced inflationary pressures.
Ordinarily, low unemployment, rising wages, and a rapidly growing economy might
be expected to push up consumer prices. But thanks in part to lower-priced Asian
imports, inflation has been remarkably well behaved--the Consumer Price Index
rose just 0.8% during the six months ended May 31. Benign inflation and a
conviction that the Asian situation will keep the Federal Reserve Board from
raising interest rates anytime soon allowed interest rates to decline.
<TABLE>
<CAPTION>
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TOTAL RETURNS
PERIODS ENDED MAY 31, 1998
-----------------------------------
6 MONTHS 1 YEAR 5 YEARS*
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<S> <C> <C> <C>
EQUITY
S&P 500 Index 15.1% 30.7% 22.2%
Russell 2000 Index 6.5 21.2 16.1
MSCI EAFE Index 16.2 11.4 9.8
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FIXED INCOME
Lehman Aggregate Bond Index 4.1% 10.9% 7.1%
Lehman 10-Year Municipal Bond Index 3.8 9.3 6.9
Salomon Brothers Three-Month
U.S. Treasury Bill Index 2.7 5.3 4.9
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OTHER
Consumer Price Index 0.8% 1.7% 2.5%
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</TABLE>
*Annualized.
U.S. EQUITY MARKETS
Stock prices rose in each of the first five months of the period before
declining in May. Gains were largest for large-capitalization stocks. The S&P
500 Index, which is dominated by large-cap stocks, earned a total return of
15.1%, while the rest of the stock market, as measured by the Wilshire 4500
Equity Index, returned 10.4%. The Russell 2000 Index, focusing on small-cap
stocks, gained 6.5%.
Stock prices were supported by declining interest rates and the
surprisingly low inflation rate, which led to an expansion of price/earnings
multiples investors were willing to pay for stocks. The news on corporate
earnings, another key fundamental in stock valuation, was not so positive.
Corporate earnings in the January-March quarter were up by less than 5% from the
previous year, and securities analysts steadily reduced their estimates
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of earnings for the full year. Concern about meager growth in profits--partly
because of increased competition from Asia--was a factor in the stock market's
decline from record highs set in late April.
The consumer spending boom was reflected in the stock market's
performance. The best-performing sector was auto & transportation stocks. This
segment of the S&P 500 Index earned 28.6% for the six months. The consumer
discretionary sector, which makes up 10% of the Index, was up 23.0% for the
half-year, and health-care stocks, which make up nearly 12% of the S&P 500,
gained 22.2%. Lower oil prices were to blame for the two weakest
sectors--integrated oil companies (up 8.2%) and the "other energy" group (down
6.3%).
U.S. FIXED-INCOME MARKETS
The decline in interest rates during the period meant that bond investors saw
modest price increases along with their interest income. The Lehman Brothers
Aggregate Bond Index, a yardstick for the overall taxable bond market, earned
4.1%, bringing its return over the past 12 months to 10.9%, a superb
inflation-adjusted return of 9.2%. Bonds benefited from both an easing of
inflation fears and, reportedly, from a "flight to quality" by Asian investors
who some analysts believe bought U.S. Treasury securities to protect themselves
from further declines in their currencies versus the U.S. dollar.
The rate decline was more pronounced for longer-term bonds. While
yields on 3-month Treasury bills declined 19 basis points (0.19 percentage
point) during the half-year, yields on 10- and 30-year Treasuries fell by 32 and
25 basis points, respectively, to 5.55% and 5.80%. The flattening of the yield
curve during the period signaled that market participants expect interest rates
to remain stable or to decline further. No one knows whether that expectation
will prove correct, but investors certainly are being paid very little to bear
the higher risk of price fluctuations that comes with longer-term bonds. As of
May 31, the yield on 10-year Treasuries was only 2 basis points higher than the
5.53% yield on 3-year Treasuries, even though the price of a 10-year note is
three times more sensitive to changes in interest rates than that of a 3-year
note.
INTERNATIONAL EQUITY MARKETS
Europe's stock markets made Wall Street's bull market look like a mere calf
during the first half of the fiscal year, while Asian markets slumped under the
weight of falling currencies and weakening economic activity. Overall, the
Morgan Stanley Capital International Europe, Australasia, Far East Index rose
16.2% in U.S. dollar terms. Its European component was up a remarkable 29.7% in
U.S. dollar terms and an even- stronger 32.7% in local currencies. A
strengthening in the dollar versus other currencies slightly cut returns for
American investors.
Several factors were credited for Europe's bull market, including a
recovery in economic activity across the continent and an increase in U.S.-style
efforts to boost shareholder value, including share repurchases, corporate
restructurings, and mergers. In addition, investors seemed pleased at the smooth
progress toward the January 1, 1999, adoption by 11 countries of a common
currency, the euro.
In the Pacific, stock markets were, on balance, down 2.7% in
local-currency terms. But a weakening of the Japanese yen and several other
currencies versus the U.S. dollar resulted in a decline of 9.9% in U.S. dollar
terms. Japan, the dominant Pacific Rim economy and stock market, officially
acknowledged that its economy had fallen into a recession. A number of
investors, analysts, and others criticized the Japanese government for being
slow to adopt economic reforms and other measures to spur business activity.
4
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REPORT FROM THE ADVISER
The uncertainty facing financial markets at the start of Vanguard Pennsylvania
Tax- Free Fund's 1998 fiscal year continued throughout the past six months. The
U.S. economy displayed surprising strength, which obliged the Federal Reserve
Board's Open Market Committee to reinstate a bias toward a tighter monetary
policy. Disruptive events in Asia boosted demand for U.S. Treasury securities.
The dichotomy between domestic and international forces caused interest rates to
trade within a narrow range. Against this backdrop, the prices of municipal
bonds remained relatively stable during the six months. The Insured Long-Term
Portfolio's total return was 3.9%, while the Money Market Portfolio earned 1.7%.
During the period, tight labor markets underscored the strength in
the domestic economy, which grew at a robust 5.4% annual pace during the
January-March quarter. Monthly increases in nonfarm payrolls averaged 277,000
during the first half of our fiscal year, and the nation's unemployment rate
dropped to a 28-year low of 4.3% in April and May. On the other hand, economic
and political unrest in Asia cast a bit of a shadow on the strong U.S. economy.
In Indonesia, riots and protests against the government and economic conditions
ultimately forced President Suharto to step down after a 32-year reign. In
Japan, economic lethargy persisted, and the yen fell to its lowest level against
the U.S. dollar in eight years. Asian investors bought U.S. Treasury securities
as a potential safe haven, helping interest rates to fall instead of to rise, as
they might otherwise have done in a strong domestic economy.
THE INSURED LONG-TERM PORTFOLIO
Over the fiscal half-year, the yield on the 30-year Treasury bond declined 0.25
percentage point to 5.80%. Rates didn't drop as far for municipal bonds, with
the yield on 30-year, AAA-rated bonds declining 0.13 percentage point to 5.05%.
Municipal bond yields didn't fall as much as yields on taxable bonds primarily
because of an increased supply of new municipals. Municipal issuance for the six
months was 50% higher than during the same period a year earlier, thanks partly
to a heavy volume of refundings (bonds issued to refinance debt at lower
interest rates). Another big factor was a $3.5 billion transaction for the Long
Island Power Authority, the largest single new issue in the history of municipal
finance.
Market conditions appear favorable for municipal bonds. Supply should
diminish as refunding volume subsides. Moreover, in June and July investors will
have an estimated $45 billion to $60 billion of coupon payments and bond
redemptions to reinvest, so demand for bonds should be strong in the summer.
In our last report to you, we discussed the narrowing spread between
yields on high- and lower-quality municipals. The decline stemmed both from the
overall reduction in bond yields and the growing use of municipal bond insurance
to enhance credit quality, which limited the supply of lower-quality,
higher-yielding bonds. This compression in quality spreads continued during the
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first half of fiscal 1998. Nearly half of all newly issued municipal bonds came
with insurance that enabled the bonds to secure a top AAA rating. As a result,
the yield spread between AAA-rated insured and BBB-rated (low-quality) bonds
narrowed to 15 basis points (0.15 percentage point). In short, investors were
taking substantially greater credit risk to earn a very modest incremental
yield. It is difficult to predict when this trend will reverse, but when it
does, prices of low-quality bonds will decline relative to prices of
high-quality insured bonds. Your Insured Long-Term Portfolio is positioned to
benefit from such a reversal. The Portfolio maintains top overall credit quality
through a combination of insured and AA-rated municipal bonds. Our low expense
ratio and the Portfolio's high credit quality offer shareholders an unbeatable
combination of minimal credit risk and consistent, above-average performance
relative to our competitors.
THE MONEY MARKET PORTFOLIO
The economic drama that unfolded throughout the first half of the fiscal year
triggered a 7-basis-point decline in yields on 1-year Treasury bills, which
finished the period with a 5.42% yield. Concurrently, yields on 1-year
municipals fell 6 basis points to conclude the period at 3.75%. With the
domestic economy's strength offset somewhat by ongoing economic uncertainties
abroad, the Money Market Portfolio is positioned neutrally in terms of its
average maturity. In addition to economic forces, two issues had a significant
impact on the short-term municipal securities market.
The first issue was the adoption by the Securities and Exchange
Commission of amendments to Rule 2a-7 under the Investment Company Act of 1940.
This regulation governs certain risk characteristics of money market portfolios.
The changes were designed to tighten regulation of money market funds and
improve the likelihood that the funds will retain a stable net asset value.
Because Vanguard's tax-exempt money market portfolios have been and will
continue to be managed conservatively with a focus on high quality, the impact
of these amendments should be minimal for our shareholders. However, some of our
competitors operate with lower quality standards, and may have to alter their
approach to fund management.
The second issue was the onset of heavy share redemptions during
April and May, a seasonal outflow as shareholders paid personal income taxes.
The sector of the mutual fund market that includes state-specific money market
portfolios lost $4.1 billion in assets, or 6.5% of the total, during tax season,
according to IBC Financial Data. As funds sold securities to provide cash for
share redemptions, an overabundance of supply in the short-term market was
created. This excess supply caused a spike in yields during late April and much
of May. We took advantage of this rise in yields to selectively purchase
securities with maturity dates other than early July, when a seasonal lack of
supply is expected to push yields lower. We also used this buying opportunity to
further diversify the Portfolio and 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
Vanguard Fixed Income Group
June 15, 1998
INVESTMENT PHILOSOPHY
The adviser believes that each Portfolio, while operating with stated maturity
and stringent quality targets, can achieve a high level of current income that
is exempt from federal and Pennsylvania income taxes by investing in insured
and high-quality uninsured securities issued by Pennsylvania state, county,
and municipal governments.
6
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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 Portfolios. Note, too, that
returns can fluctuate widely. An investment in a money market fund is neither
insured nor guaranteed by the U.S. government, and there is no assurance that
the fund will be able to maintain a stable net asset value of $1 per share.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 13, 1988-MAY 31, 1998
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MONEY MARKET PORTFOLIO AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1988 0.0% 2.5% 2.5% 2.5%
1989 0.0 6.4 6.4 6.4
1990 0.0 5.9 5.9 5.9
1991 0.0 4.6 4.6 4.6
1992 0.0 3.0 3.0 2.9
1993 0.0 2.4 2.4 2.2
1994 0.0 2.6 2.6 2.4
1995 0.0 3.7 3.7 3.5
1996 0.0 3.4 3.4 3.1
1997 0.0 3.5 3.5 3.2
1998** 0.0 1.7 1.7 1.6
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</TABLE>
* Average Pennsylvania Tax-Exempt Money Market Fund.
**Six months ended May 31, 1998.
See Financial Highlights table on page 22 for dividend information for the past
five years.
<TABLE>
<CAPTION>
INSURED LONG-TERM PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 7, 1986-MAY 31, 1998
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INSURED LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1986 3.0% 4.7% 7.7% 8.1%
1987 -9.9 6.6 -3.3 -0.2
1988 4.5 7.5 12.0 10.6
1989 4.7 7.5 12.2 11.0
1990 0.3 7.0 7.3 7.7
1991 2.8 6.9 9.7 10.3
1992 5.0 6.7 11.7 10.0
1993 5.8 6.1 11.9 11.1
1994 -10.7 5.3 -5.4 -5.2
1995 12.0 6.5 18.5 18.9
1996 0.2 5.6 5.8 5.9
1997 0.7 5.5 6.2 7.2
1998** 1.2 2.7 3.9 3.8
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</TABLE>
* Lehman Municipal Bond Index.
**Six months ended May 31, 1998.
See Financial Highlights table on page 23 for dividend and capital gains
information for the past five years.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1998*
<TABLE>
<CAPTION>
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10 YEARS
INCEPTION ----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio 6/13/1988 3.50% 3.16% 0.00%** 3.97%** 3.97%**
Insured Long-Term Portfolio 4/7/1986 9.90 6.59 2.16 6.36 8.52
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Since inception.
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PORTFOLIO PROFILE
Money Market Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of May
31, 1998. Key elements of this Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
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<S> <C>
Yield 3.6%
Average Maturity 25 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+ 56.3%
A-1/P-1 40.6
AAA/AA 3.1
A 0.0
- -----------------------------------------------
Total 100.0%
</TABLE>
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AVERAGE COUPON. The average interest rate paid on the securities held by a
portfolio. It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond portfolio's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the portfolio's duration by the change in rates. If interest
rates rise by 1 percentage point, the share price of a portfolio with an average
duration of five years would decline by about 5%. If rates decrease by a
percentage point, the portfolio's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a portfolio
reach maturity (or are called) and are repaid. In general, the longer the
average maturity, the more a portfolio's share price will fluctuate in response
to changes in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a portfolio's securities holdings by credit-rating agencies.
The agencies make their judgment after appraising an issuer's ability to meet
its obligations. Quality is graded on a scale, with Aaa or AAA indicating the
most creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a portfolio's past share-price fluctuations
in relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a portfolio with a
beta of 1.20 would have seen its share price rise or fall by 12% when the
overall market rose or fell by 10%.
CASH RESERVES. The percentage of a portfolio's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a portfolio's securities by
credit rating can help in gauging the risk that returns could be affected by
defaults or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a portfolio's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a portfolio's average net assets used to pay
its annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a portfolio in terms of two
attributes: average maturity (short, medium, or long) and average credit quality
(high, medium, or low).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
portfolio holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a portfolio's past returns can be explained
by the returns from the overall market (or its benchmark index). If a
portfolio's total return were precisely synchronized with the overall market's
return, its R-squared would be 1.00. If a portfolio's returns bore no
relationship to the market's returns, its R-squared would be 0.
YIELD. A snapshot of a portfolio's interest income. The yield, expressed as a
percentage of the portfolio's net asset value, is based on income earned over
the past 30 days (7 days for money market portfolios) and is annualized, or
projected forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a portfolio were held to their maturity dates.
9
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PORTFOLIO PROFILE
Insured Long-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of May
31, 1998, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------
<S> <C>
Number of Issues 245
Yield 4.6%
Yield to Maturity 4.6%
Average Coupon 5.7%
Average Maturity 9.0 years
Average Quality AAA
Average Duration 6.4 years
Expense Ratio 0.20%*
Cash Reserves 1.2%
</TABLE>
*Annualized.
INVESTMENT FOCUS
- -----------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------
INSURED LONG-TERM LEHMAN
PORTFOLIO INDEX*
- ------------------------------------------------------
<S> <C> <C>
R-Squared 0.98 1.00
Beta 1.01 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
AAA 98.3%
AA 1.7
A 0.0
BBB 0.0
BB 0.0
B 0.0
Not Rated 0.0
- -----------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Under 1 Year 6.6%
1-5 Years 28.5
5-10 Years 29.8
10-20 Years 26.8
20-30 Years 5.6
Over 30 Years 2.7
- -----------------------------------------
Total 100.0%
</TABLE>
10
<PAGE> 13
FINANCIAL STATEMENTS
May 31, 1998 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio's municipal bond
holdings, including each security's market value on the last day of the
reporting period and information on credit enhancements (insurance or letters of
credit). Securities are grouped and subtotaled according to their insured or
noninsured status. Other assets are added to, and liabilities are subtracted
from, the value of Total Municipal Bonds to calculate the Portfolio's Net
Assets. Finally, Net Assets are divided by the outstanding shares of the
Portfolio to arrive at its share price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the Portfolio's net assets on both a dollar and
per-share basis. Undistributed Net Investment Income is usually zero because the
Portfolio distributes its net income to shareholders as a dividend each day. Any
realized gains must be distributed annually, so the bulk of net assets consists
of Paid in Capital (money invested by shareholders). The balance shown for
Accumulated Net Realized Gains usually approximates the amount available to
distribute to shareholders as taxable capital gains as of the statement date,
but may differ because certain investments or transactions may be treated
differently for financial statement and tax purposes. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net realized
gains, will appear as negative balances. Unrealized Appreciation (Depreciation)
is the difference between the value of the Portfolio's investments and their
cost, and reflects the gains (losses) that would be realized if the Portfolio
were to sell all of its investments at their statement-date values. .
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.2%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allegheny County PA GO VRDO 3.80% 6/4/1998 $ 4,775 $ 4,775
Allegheny County PA Higher Educ. Auth. VRDO (Univ. of Pittsburgh) 3.60% 6/4/1998 LOC 30,430 30,430
Allegheny County PA Hosp. Dev. Auth. VRDO
(Allegheny General Hosp.) 3.80% 6/3/1998 LOC 27,700 27,700
Allegheny County PA Hosp. Dev. Auth. VRDO
(Allegheny Health Educ. & Research) 3.80% 6/3/1998 LOC 20,350 20,350
Allegheny County PA Hosp. Dev. Auth. VRDO
(Children's Hosp.-Pittsburgh) 3.65% 6/4/1998 (1) 24,050 24,050
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health System) 3.80% 6/4/1998 (1) 8,410 8,410
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health System) 3.80% 6/4/1998 LOC 3,025 3,025
Allegheny County PA Hosp. Dev. Auth. VRDO
(Saint Francis Health System) 3.90% 6/4/1998 LOC 11,000 11,000
Allegheny County PA Hosp. Dev. Auth. VRDO
(South Hills Health System) 3.85% 6/3/1998 LOC 8,400 8,400
Allegheny County PA PCR CP PUT (Duquesne Light Co.) 3.60% 1/27/1999 11,500 11,500
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.55% 7/8/1998 LOC 17,950 17,950
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.55% 7/14/1998 LOC 5,000 5,000
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.80% 6/1/1998 LOC 13,400 13,400
Beaver County PA IDA PCR VRDO (Duquesne Light Co.) 3.85% 6/3/1998 LOC 10,600 10,600
Berks County PA IDA CP (Citizens Utility Co.) 3.65% 7/16/1998 4,200 4,200
Chester County PA IDA VRDO (Archdiocese of Philadelphia) 4.00% 6/2/1998 LOC 24,800 24,800
Cumberland County PA Muni. Auth. PUT (Dickinson College) 3.75% 11/2/1998 LOC 13,310 13,310
Dallastown Area School Dist. GO VRDO 3.93% 6/4/1998 (3) 18,450 18,450
Dauphin County PA General Auth. Hosp. Rev. VRDO
(Reading Hosp. & Medical Center) 3.90% 6/3/1998 12,800 12,800
Delaware County PA IDA Airport Fac. Rev. VRDO
(United Parcel Service) 3.95% 6/2/1998 55,600 55,600
Delaware County PA IDA PCR CP (PECO) 3.55% 7/14/1998 (3) 6,300 6,300
Delaware County PA IDA PCR CP (PECO) 3.60% 9/11/1998 11,200 11,200
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware County PA IDA PCR CP (PECO) 3.65% 6/1/1998 (3) $ 9,300 $ 9,300
Delaware County PA IDA PCR VRDO (BP Exploration & Oil) 4.00% 6/2/1998 4,700 4,700
Delaware County PA IDA PCR VRDO (PECO) 3.95% 6/2/1998 LOC 1,025 1,025
Delaware County PA IDA Rev. VRDO (General Electric Capital Corp.) 3.80% 6/3/1998 22,500 22,500
Delaware County PA IDA Solid Waste Rev. VRDO
(Scott Paper Co. Project) 3.80% 6/3/1998 LOC 72,105 72,105
Emmaus PA General Auth. Local Govt. Rev. VRDO 3.95% 6/3/1998 110,000 110,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Avon Grove School Dist.) 3.90% 6/3/1998 LOC 19,800 19,800
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Colonial School Dist.) 3.90% 6/3/1998 LOC 8,200 8,200
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Council Rock School Dist.) 3.95% 6/3/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(East Penn School Dist.) 3.90% 6/3/1998 LOC 13,000 13,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(East Stroudsburg) 3.95% 6/1/1998 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Lower Merion School Dist.) 3.90% 6/3/1998 LOC 15,000 15,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Methacton School Dist.) 3.95% 6/3/1998 LOC 13,000 13,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Nazareth PA Area School Dist.) 3.95% 6/3/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Nazareth PA Area School Dist.) 4.00% 6/3/1998 LOC 8,700 8,700
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Oxford Area School Dist.) 3.90% 6/3/1998 LOC 7,900 7,900
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Pottsgrove School Dist.) 3.95% 6/3/1998 LOC 5,400 5,400
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Upper Merion School Dist.) 3.90% 6/3/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO (West Allegheny) 3.95% 6/3/1998 LOC 15,000 15,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(West Chester Area School Dist.) 3.95% 6/3/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Wissahickon School Dist.) 3.90% 6/3/1998 LOC 10,000 10,000
Geisinger Health System Auth. of Pennsylvania VRDO
(Geisinger Health System) 4.00% 6/2/1998 36,000 36,000
Lehigh County PA Auth. Rev. VRDO (Lehigh Valley Hosp.) 3.95% 6/2/1998 (2) 10,700 10,700
Lehigh County PA IDA PCR TOB VRDO (Pennsylvania Power & Light) 4.02% 6/4/1998 (1) 3,200 3,200
Mercerburg Borough PA Auth. VRDO (Mercerburg College) 3.85% 6/3/1998 7,500 7,500
Montgomery County PA Higher Educ. & Health Auth.
(Abington Memorial Hosp.) 4.25% 6/1/1998 (2) 2,905 2,905
Montgomery County PA IDA PCR CP (PECO) 3.45% 9/11/1998 LOC 7,000 7,000
Montgomery County PA IDA PCR CP (PECO) 3.50% 7/14/1998 LOC 4,350 4,350
Montgomery County PA IDA PCR CP (PECO) 3.50% 8/14/1998 LOC 8,000 8,000
Montgomery County PA VRDO 3.80% 6/3/1998 1,400 1,400
Northampton County PA IDA VRDO (Citizens Utility Co.) 3.95% 6/3/1998 8,375 8,375
Northeastern PA Hosp. & Educ. Auth. VRDO
(Wyoming Valley Health Care Obligated Group) 3.85% 6/3/1998 (2) 49,100 49,100
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.50% 6/24/1998 (1) 10,300 10,300
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.55% 7/13/1998 (1) 14,800 14,800
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.55% 7/14/1998 4,900 4,900
Pennsylvania GO 4.50% 3/1/1999 8,600 8,654
Pennsylvania GO 5.00% 10/15/1998 9,690 9,736
Pennsylvania GO CP 3.40% 6/1/1998 5,000 5,000
Pennsylvania Higher Educ. Assistance Agency
Student Loan Rev. VRDO 4.00% 6/3/1998 LOC 103,100 103,100
Pennsylvania Higher Educ. Assistance Agency
Student Loan Rev. VRDO 3.95% 6/4/1998 LOC 20,000 20,000
Pennsylvania Higher Educ. Fac. Auth. VRDO (Allegheny College) 3.95% 6/3/1998 LOC 3,000 3,000
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania Higher Educ. Fac. Auth. VRDO (Carnegie Mellon Univ.) 4.00% 6/2/1998 $ 11,350 $ 11,350
Pennsylvania Higher Educ. Fac. Auth. VRDO (Temple Univ.) 4.00% 6/2/1998 LOC 40,300 40,300
Pennsylvania Higher Educ. Fac. Auth. VRDO (Univ. of Pennsylvania ) 3.80% 6/3/1998 111,300 111,300
Pennsylvania Intergovernmental Cooperative Auth. 5.00% 6/15/1998 (3) 30,550 30,564
Pennsylvania Intergovernmental Cooperative Auth. 5.60% 6/15/1998 (3)(ETM) 1,000 1,001
Pennsylvania State Univ. Notes 4.50% 3/30/1999 14,800 14,907
Pennsylvania TAN 4.50% 6/30/1998 82,750 82,801
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. PUT
(Pennsylvania Hosp.) 3.95% 7/1/1998 (3) 24,200 24,200
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. of Philadelphia) 4.00% 6/2/1998 10,500 10,500
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. of Philadelphia) 4.00% 6/2/1998 2,500 2,500
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Pennsylvania Hosp.) 3.90% 6/3/1998 (3) 28,400 28,400
Philadelphia PA IDA VRDO 4.00% 6/2/1998 LOC 4,000 4,000
Philadelphia PA School Dist. 6.60% 7/1/1998 (ETM) 4,815 4,826
Philadelphia PA Water & Waste Water Rev. PUT 3.82% 8/5/1998 (1) 37,000 37,000
St. Mary's Hosp. PA VRDO (Catholic Health Initiatives) 3.90% 6/3/1998 23,100 23,100
Sayre PA Health Care Fac. Auth. VRDO 3.75% 6/3/1998 (2) 110,305 110,305
Scranton-Lackawanna PA Health & Welfare Auth. VRDO
(Mercy Health System) 3.85% 6/3/1998 6,500 6,500
Temple Univ. PA Higher Educ. 3.78% 5/14/1999 5,000 5,000
Temple Univ. PA Higher Educ. 4.50% 5/14/1999 13,500 13,593
Univ. of Pittsburgh PA Higher Educ. VRDO 3.60% 6/4/1998 LOC 37,000 37,000
Univ. of Pittsburgh PA Refunding Rev. 4.50% 6/1/1998 (1) 2,400 2,400
York County PA IDA PCR VRDO (PECO) 3.90% 6/2/1998 LOC 1,840 1,840
York County PA IDA PCR VRDO (Public Service Electric & Gas) 3.80% 6/3/1998 (1) 5,200 5,200
OUTSIDE PENNSYLVANIA:
Puerto Rico Govt. Dev. Bank VRDO 3.80% 6/3/1998 3,300 3,300
- --------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,658,787) 1,658,787
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 18,970
Liabilities (4,837)
-----------
14,133
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------
Applicable to 1,672,972,238 outstanding shares of beneficial interest
(unlimited authorization--no par value) $1,672,920
==========================================================================================================================
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 19.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT MAY 31, 1998, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,672,971 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (51) --
Unrealized Appreciation -- --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,672,920 $1.00
==========================================================================================================================
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.8%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (94.7%)
Allegheny County PA Airport Rev. (Pittsburgh International Airport) 5.00% 1/1/2017 (1) $12,205 $ 12,016
Allegheny County PA Airport Rev. (Pittsburgh International Airport) 5.00% 1/1/2019 (1) 13,250 12,999
Allegheny County PA GO 0.00% 5/1/2003 (2) 12,315 9,940
Allegheny County PA GO 5.00% 10/1/2008 (3) 5,955 6,151
Allegheny County PA GO 5.10% 10/1/2009 (3) 1,760 1,821
Allegheny County PA GO 5.15% 10/1/2010 (3) 6,570 6,782
Allegheny County PA GO 6.00% 5/1/2010 (2) 3,030 3,256
Allegheny County PA GO 6.00% 5/1/2012 (2) 3,000 3,219
Allegheny County PA Hosp. Dev. Auth. Rev. (Catholic Health East) 5.25% 11/15/2013 (2) 1,000 1,021
Allegheny County PA Hosp. Dev. Auth. Rev. (Magee Women's Hosp.) 6.00% 10/1/2010 (3) 4,235 4,810
Allegheny County PA Hosp. Dev. Auth. Rev. (Mercy Hosp.) 6.75% 4/1/2001 (2)(Prere.) 4,500 4,903
Allegheny County PA Hosp. Dev. Auth. Rev.
(Presbyterian Univ. Health System) 6.00% 11/1/2012 (1) 3,000 3,188
Allegheny County PA Hosp. Dev. Auth. Rev.
(Presbyterian Univ. Health System) 7.125% 7/1/1999 (1)(Prere.) 6,835 7,207
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health System) 3.80% 6/4/1998 (1) 1,700 1,700
Allegheny County PA Hosp. Dev. Auth. Rev. (Univ. of Pittsburgh) 5.60% 4/1/2017 (1) 2,000 2,092
Allegheny County PA Sanitation Auth. Sewer Rev. 5.50% 12/1/2013 (3) 19,000 19,526
Allegheny County PA Sanitation Auth. Sewer Rev. 5.50% 12/1/2016 (3) 23,665 24,236
Allegheny County PA Sanitation Auth. Sewer Rev. 6.00% 12/1/2019 (1) 20,000 21,825
Allegheny County PA Sanitation Auth. Sewer Rev. 6.25% 12/1/2014 (1) 9,660 10,737
Allegheny County PA Sanitation Auth. Sewer Rev. 6.50% 12/1/2011 (3) 8,000 8,575
Altoona PA Water Rev. Auth. 6.50% 11/1/2004 (3)(Prere.) 19,790 22,631
Altoona PA Water Rev. Auth. 6.50% 11/1/2019 (3) 210 236
Beaver County PA IDA PCR (Ohio Edison) 7.00% 6/1/2021 (3) 22,715 24,679
Beaver County PA IDA PCR (Ohio Edison) 7.10% 6/1/2018 (3) 5,000 5,356
Berks County PA GO 0.00% 11/15/2013 (3)(ETM) 7,250 3,338
Berks County PA GO 0.00% 11/15/2014 (3)(ETM) 8,615 3,742
Berks County PA GO 0.00% 11/15/2015 (3)(ETM) 6,250 2,559
Berks County PA GO 5.75% 11/15/2012 (3) 7,750 8,147
Berks County PA Hosp. Rev. (Reading Hosp.) 5.70% 10/1/2014 (1) 4,500 4,928
Berks County PA Hosp. Rev. (Reading Hosp.) 6.10% 10/1/2023 (1) 16,500 18,024
Bethlehem PA Area School Dist. GO 5.375% 9/1/2009 (3) 5,855 6,202
Blair County PA Hosp. Auth. Rev. (Altoona Hosp.) 6.50% 7/1/2022 (2) 8,500 9,263
Boyertown PA Area School Dist. GO 6.10% 3/1/2015 (2) 6,000 6,464
Butler County PA GO 6.00% 7/15/2012 (3) 5,185 5,501
Center City Philadelphia PA Business Improvement 5.50% 12/1/2015 (2) 6,955 7,226
Center Township PA Sewer Auth. Rev. 5.50% 4/15/2011 (1) 2,375 2,470
Central Dauphin PA School Dist. GO 0.00% 6/1/2004 (2) 4,800 3,685
Central Greene PA School Dist. 6.50% 8/15/2004 (1)(Prere.) 5,500 6,198
Chester County PA Health & Educ. Fac. Auth. Rev.
(Chester County Hosp.) 5.875% 7/1/2016 (1) 7,870 8,392
Chester County PA Health & Educ. Fac. Auth. Rev.
(Jefferson Health System) 5.125% 5/15/2018 (2) 12,445 12,254
Chester County PA Health & Educ. Fac. Auth. Rev.
(Jefferson Health System) 5.25% 5/15/2022 (2) 35,555 35,267
Coatesville PA School Dist. GO 5.75% 4/1/2015 (4) 10,080 10,755
Cornwall Lebanon PA Suburban Joint School Dist. GO 5.875% 3/1/2014 (3) 5,635 6,012
Cornwall Lebanon PA Suburban Joint School Dist. GO 5.90% 3/1/2011 (3) 3,270 3,494
Corry PA Area School Dist. GO 5.50% 12/15/2010 (1) 4,000 4,144
Dauphin County PA General Auth. Rev. (West Pennsylvania Hosp.) 5.50% 7/1/2013 (1) 5,000 5,144
Delaware County PA Auth. College Rev. (Haverford College) 5.40% 11/15/2013 (1) 1,750 1,801
Delaware County PA Auth. Rev. (Catholic Health East) 5.25% 11/15/2012 (2) 3,435 3,530
Delaware County PA Auth. Rev. (Catholic Health East) 5.25% 11/15/2013 (2) 4,665 4,763
Delaware County PA Auth. Rev. (Villanova Univ.) 5.00% 12/1/2028 (1) 26,885 26,147
Delaware County PA Hosp. Auth. Rev.
(Delaware County Memorial Hosp.) 5.50% 8/15/2013 (1) 12,000 12,528
Delaware County PA Hosp. Auth. Rev.
(Delaware County Memorial Hosp.) 7.125% 8/15/1999 (1)(Prere.) 5,160 5,459
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware County PA Hosp. Auth. Rev.
(Delaware County Memorial Hosp.) 7.20% 8/15/1999 (1)(Prere.) $ 8,000 $ 8,471
Delaware River Joint Toll Bridge Comm. Pennsylvania &
New Jersey Rev. 6.00% 7/1/2018 (3) 3,040 3,196
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026 (3) 21,450 22,110
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 6.50% 1/1/2009 (2) 4,500 4,570
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 7.375% 1/1/2007 (2) 13,500 14,039
Dover Township PA Sewer Auth. Rev. 5.50% 11/1/2017 (1) 2,235 2,306
Dover Township PA Sewer Auth. Rev. 5.55% 11/1/2022 (1) 4,000 4,128
Erie County PA Hosp. Auth. Rev. (St. Vincent Health Care) 6.125% 7/1/2013 (1) 3,900 4,196
Erie PA School Dist. GO 0.00% 9/1/2010 (4) 5,665 3,149
Erie PA School Dist. GO 0.00% 9/1/2011 (4) 5,780 3,023
Erie PA School Dist. GO 0.00% 9/1/2013 (4) 2,780 1,293
Erie PA School Dist. GO 0.00% 9/1/2016 (4) 5,785 2,258
Fort LeBoeuf PA School Dist. GO 5.80% 1/1/2013 (1) 5,500 5,875
Garnet Valley PA School Dist. GO 5.70% 4/1/2011 (2) 3,000 3,125
Greensburg Salem PA School Dist. GO 6.45% 9/15/2018 (1) 7,500 8,089
Hazleton PA Area School Dist. GO 5.50% 3/1/2011 (3) 3,740 4,017
Hazleton PA Area School Dist. GO 5.75% 3/1/2012 (3) 3,945 4,336
Hazleton PA Area School Dist. GO 5.75% 3/1/2003 (3)(Prere.) 11,875 12,784
Hazleton PA Area School Dist. GO 6.00% 3/1/2016 (3) 18,245 20,443
Lancaster PA Higher Educ. Auth. Rev. (Franklin & Marshall College) 6.60% 4/15/2010 (1) 4,940 5,327
Lancaster PA Higher Educ. Auth. Rev. (Franklin & Marshall College) 6.70% 4/15/2012 (1) 4,000 4,329
Lancaster PA School Dist. GO 5.375% 2/15/2017 (3) 5,590 5,685
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Health Network) 5.00% 7/1/2028 (1) 15,905 15,329
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Hosp.) 5.625% 7/1/2025 (1) 10,000 10,355
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Hosp.) 5.70% 7/1/2010 (1) 3,905 4,184
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Hosp.) 7.00% 7/1/2016 (1) 4,415 5,428
Lehigh County PA GO 6.00% 10/15/1999 (2)(Prere.) 1,000 1,030
Lewisburg PA Area School Dist. GO 6.20% 6/1/2002 (1)(Prere.) 3,500 3,769
Lewisburg PA Area School Dist. GO 6.25% 6/1/2002 (1)(Prere.) 3,685 3,975
Ligonier Valley PA School Dist. GO 6.00% 3/1/2019 (1) 6,000 6,547
Lycoming County PA College Auth. Rev.
(Pennsylvania College of Technology) 5.40% 11/1/2008 (2) 6,000 6,225
Manheim PA Central School Dist. GO 6.85% 3/1/2008 (3) 2,705 2,891
Mars PA Area School Dist. GO 6.25% 9/1/2004 (3)(Prere.) 4,000 4,447
McKeesport PA Area School Dist. GO 0.00% 10/1/2004 (1) 1,040 787
McKeesport PA Area School Dist. GO 0.00% 10/1/2005 (1) 1,050 755
McKeesport PA Area School Dist. GO 0.00% 10/1/2006 (1) 2,015 1,378
McKeesport PA Area School Dist. GO 0.00% 10/1/2007 (1) 2,080 1,353
McKeesport PA Area School Dist. GO 0.00% 10/1/2008 (1) 2,270 1,407
McKeesport PA Area School Dist. GO 0.00% 10/1/2009 (1) 2,020 1,186
McKeesport PA Area School Dist. GO 0.00% 10/1/2010 (1) 1,840 1,019
McKeesport PA Area School Dist. GO 0.00% 10/1/2011 (1) 1,835 956
Montgomery County PA Higher Educ. & Health Auth.
(Abington Memorial Hosp.) 5.00% 6/1/2008 (2) 1,250 1,288
Montgomery County PA Higher Educ. & Health Auth.
(Abington Memorial Hosp.) 5.00% 6/1/2028 (2) 8,660 8,347
Montgomery County PA Higher Educ. & Health Auth.
(Abington Memorial Hosp.) 6.00% 6/1/2022 (2) 10,160 10,866
Montgomery County PA Higher Educ. & Health Auth.
(Abington Memorial Hosp.) 6.10% 6/1/2012 (2) 5,000 5,442
Montgomery County PA IDA PCR (PECO) 6.70% 12/1/2021 (1) 12,000 13,065
Mount Lebanon PA Hosp. Dev. Auth. Rev. (St. Clair Memorial Hosp.) 6.25% 7/1/2006 (3) 9,250 10,390
Nazareth PA School Dist. GO 5.50% 11/15/2015 (2) 1,500 1,545
Neshaminy PA School Dist. GO 5.70% 2/15/2014 (3) 8,795 9,340
Neshaminy PA School Dist. GO 6.30% 8/15/2002 (3)(Prere.) 10,000 10,842
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Hills PA School Dist. GO 5.25% 11/15/2017 (3) $ 7,440 $ 7,512
North Penn PA Water Auth. Rev. 6.125% 11/1/2010 (3) 5,140 5,539
North Wales PA Water Auth. Rev. 5.25% 11/1/2019 (3) 12,350 12,387
North Wales PA Water Auth. Rev. 6.125% 11/1/2002 (3)(Prere.) 11,300 12,027
North Wales PA Water Auth. Rev. 6.25% 11/1/2004 (3)(Prere.) 2,300 2,520
Northampton County PA Higher Educ. Auth. Rev. (Lehigh Univ.) 7.10% 11/15/2009 (1) 7,035 7,484
Northampton County PA Hosp. Auth. Rev. (Easton Hosp.) 6.25% 1/1/2019 (1) 10,000 10,825
Northampton County PA Hosp. Auth. Rev. (Easton Hosp.) 7.875% 1/1/2019 (5) 285 297
Northampton County PA IDA PCR (Central Metro. Edison) 6.10% 7/15/2021 (1) 4,410 4,830
Northeastern PA Hosp. & Educ. Health Rev. (Wyoming Valley Health) 5.25% 1/1/2016 (2) 6,560 6,597
Northeastern PA Hosp. & Educ. Health Rev. (Wyoming Valley Health) 5.25% 1/1/2026 (2) 5,350 5,342
Northumberland County PA Commonwealth Lease Rev. 6.25% 10/15/2001 (1)(Prere.) 13,600 14,548
Owen J. Roberts School Dist. PA GO Rev. 5.375% 5/15/2018 (1) 4,565 4,644
Penn Hills PA GO 5.80% 12/1/2002 (2)(Prere.) 11,735 12,548
Penn Trafford PA School Dist. GO 5.85% 5/1/2014 (1) 2,435 2,644
Pennsylvania Convention Center Auth. Rev. 0.00% 9/1/2004 (3)(ETM) 5,000 3,808
Pennsylvania Convention Center Auth. Rev. 6.00% 9/1/2019 (3)(ETM) 12,600 14,039
Pennsylvania Convention Center Auth. Rev. 6.70% 9/1/2016 (3)(ETM) 19,150 22,706
Pennsylvania GO 5.125% 3/15/2017 (2) 7,990 8,013
Pennsylvania GO 5.375% 5/15/2010 (3) 13,800 14,622
Pennsylvania GO 5.375% 5/15/2012 (3) 16,570 17,318
Pennsylvania GO 5.375% 5/15/2014 (3) 14,000 14,504
Pennsylvania GO 5.375% 5/15/2016 (3) 5,000 5,135
Pennsylvania Higher Educ. Auth. Rev.
(Allegheny/Delaware Valley Obligated Group) 5.50% 11/15/2008 (1) 2,000 2,140
Pennsylvania Higher Educ. Auth. Rev.
(Allegheny/Delaware Valley Obligated Group) 5.875% 11/15/2016 (1) 20,000 21,462
Pennsylvania Higher Educ. Auth. Rev.
(Allegheny/Delaware Valley Obligated Group) 5.875% 11/15/2021 (1) 9,545 10,170
Pennsylvania Higher Educ. Auth. Rev. (Bryn Mawr College) 5.625% 12/1/2014 (1) 2,200 2,338
Pennsylvania Higher Educ. Auth. Rev. (Hahnemann Univ.) 7.200% 7/1/1999 (1)(Prere.) 1,400 1,478
Pennsylvania Higher Educ. Auth. Rev. (College and Univ.) 7.20% 1/1/2004 (2) 2,165 2,171
Pennsylvania Higher Educ. Auth. Rev. (Temple Univ.) 6.50% 4/1/2021 (1) 6,000 6,452
Pennsylvania Intergovernmental Cooperative Auth. Rev. 5.40% 6/15/2009 (3) 2,700 2,846
Pennsylvania Intergovernmental Cooperative Auth. Rev. 5.50% 6/15/2010 (3) 3,700 3,909
Pennsylvania Intergovernmental Cooperative Auth. Rev. 5.625% 6/15/2013 (3) 2,605 2,738
Pennsylvania Intergovernmental Cooperative Auth. Rev. 6.00% 6/15/2006 (3) 1,200 1,326
Pennsylvania Intergovernmental Cooperative Auth. Rev. 6.75% 6/15/2005 (3)(Prere.) 23,050 26,526
Pennsylvania Intergovernmental Cooperative Auth. Rev. 7.00% 6/15/2005 (3)(Prere.) 2,250 2,620
Pennsylvania Turnpike Comm. Rev. 5.50% 12/1/2017 (3)+ 16,000 16,368
Pennsylvania Turnpike Comm. Rev. 5.75% 12/1/2012 (2) 10,000 10,685
Pennsylvania Turnpike Comm. Rev. 6.00% 6/1/2015 (1) 28,800 30,657
Pennsylvania Turnpike Comm. Rev. 6.05% 6/1/1998 (1) 1,000 1,000
Pennsylvania Turnpike Comm. Rev. 6.25% 6/1/2011 (2) 14,390 15,418
Pennsylvania Turnpike Comm. Oil Franchise Tax Rev. 6.00% 12/1/2019 (2) 7,450 8,120
Philadelphia PA Airport Rev. 5.75% 6/15/2010 (3) 4,440 4,830
Philadelphia PA Gas Works Rev. 6.00% 5/15/2012 (2) 14,250 14,957
Philadelphia PA Gas Works Rev. 6.75% 1/1/2015 (2) 13,930 14,427
Philadelphia PA Gas Works Rev. 7.25% 1/1/2010 (2) 10,085 10,475
Philadelphia PA GO 5.00% 5/15/2020 (1) 12,650 12,353
Philadelphia PA GO 6.00% 11/15/2010 (3) 2,810 3,068
Philadelphia PA GO 6.00% 11/15/2011 (3) 3,025 3,297
Philadelphia PA GO 6.00% 11/15/2012 (3) 3,355 3,657
Philadelphia PA GO 6.00% 11/15/2013 (3) 1,885 2,049
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Jefferson Health System) 5.125% 5/15/2018 (2) 5,700 5,605
Philadelphia PA Muni. Auth. Lease Rev. 5.55% 11/15/2008 (3) 3,040 3,219
Philadelphia PA Muni. Auth. Lease Rev. 5.60% 11/15/2009 (3) 2,100 2,219
Philadelphia PA Muni. Auth. Justice Lease Rev. 7.10% 11/15/2005 (1) 3,000 3,336
Philadelphia PA Parking Auth. Rev. 5.40% 9/1/2011 (2) 4,520 4,734
Philadelphia PA Parking Auth. Rev. 5.40% 9/1/2012 (2) 5,990 6,223
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philadelphia PA Parking Auth. Rev. 5.40% 9/1/2015 (2) $ 6,350 $ 6,510
Philadelphia PA Parking Auth. Rev. 5.50% 9/1/2018 (2) 4,250 4,368
Philadelphia PA Parking Auth. Rev. 7.375% 9/1/1998 (2)(Prere.) 12,065 12,415
Philadelphia PA School Dist. GO 0.00% 7/1/2001 (2) 11,750 10,319
Philadelphia PA School Dist. GO 5.25% 4/1/2017 (2) 5,470 5,489
Philadelphia PA School Dist. GO 5.50% 9/1/2015 (2) 5,000 5,157
Philadelphia PA School Dist. GO 5.50% 9/1/2018 (2) 4,000 4,096
Philadelphia PA School Dist. GO 5.50% 9/1/2025 (2) 15,000 15,437
Philadelphia PA School Dist. GO 5.85% 7/1/2009 (1) 3,500 3,777
Philadelphia PA Water & Waste Water Rev. 5.25% 8/1/2010 (2) 5,660 5,903
Philadelphia PA Water & Waste Water Rev. 5.50% 8/1/2014 (1) 12,900 13,340
Philadelphia PA Water & Waste Water Rev. 5.60% 8/1/2018 (1) 5,920 6,118
Philadelphia PA Water & Waste Water Rev. 6.25% 8/1/2011 (1) 3,750 4,308
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/2010 (3) 33,865 41,210
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/2011 (3) 35,685 43,581
Pine Richland School Dist. PA GO 5.50% 9/1/2019 (4) 3,430 3,517
Pittsburgh PA GO 5.20% 9/1/2006 (2) 1,175 1,235
Pittsburgh PA GO 5.30% 9/1/2007 (2) 1,000 1,060
Pittsburgh PA GO 5.50% 9/1/2014 (2) 10,500 11,285
Pittsburgh PA GO 6.25% 9/1/2016 (1) 11,030 11,861
Pittsburgh PA Public Parking Auth. Rev. 5.875% 12/1/2012 (3) 8,200 8,814
Pittsburgh PA Water & Sewer System Rev. 5.60% 9/1/2005 (3)(Prere.) 5,000 5,417
Pittsburgh PA Water & Sewer System Rev. 7.25% 9/1/2014 (3)(ETM) 25,210 31,011
Pittsburgh PA Water & Sewer System Rev. 7.625% 9/1/2004 (3)(ETM) 5,370 6,148
Pocono Mountain PA School Dist. GO 5.75% 10/1/2009 (2) 6,000 6,298
Reading PA GO 5.875% 11/15/2012 (2) 18,000 19,087
St. Mary's Hosp. Auth. Langhorne PA Rev. (Franciscan Health System) 7.00% 7/1/2009 (5) 1,000 1,050
St. Mary's Hosp. Auth. Langhorne PA Rev. (Franciscan Health System) 7.00% 7/1/2013 (5) 5,050 5,294
St. Mary's Hosp. Auth. Langhorne PA Rev. (Franciscan Health System) 7.00% 6/15/2015 (5) 1,770 1,855
Sayre PA Health Care Fac. Auth. Rev. (Guthrie Health Care System) 7.00% 3/1/2011 (2) 2,000 2,165
Sayre PA Health Care Fac. Auth. VRDO 3.75% 6/3/1998 (2) 3,800 3,800
Scranton-Lackawanna PA Health & Welfare Auth. Rev.
(Mercy Health System) 5.625% 1/1/2016 (1) 5,490 5,765
Scranton-Lackawanna PA Health & Welfare Auth. Rev.
(Mercy Health System) 5.70% 1/1/2023 (1) 9,205 9,632
Seneca PA Valley School Dist. GO 5.50% 7/1/2014 (3) 9,965 10,485
Seneca PA Valley School Dist. GO 5.75% 7/1/2010 (3) 4,000 4,246
South Fork PA Hosp. Auth. Rev. (Conemaugh Valley Hosp.) 5.625% 7/1/2010 (6)+ 2,300 2,514
South Fork PA Hosp. Auth. Rev. (Conemaugh Valley Hosp.) 5.75% 7/1/2018 (6) 7,000 7,540
Southeastern PA Transp. Auth. Rev. 5.375% 3/1/2017 (3) 2,500 2,554
Southeastern PA Transp. Auth. Rev. 5.375% 3/1/2022 (3) 5,825 5,927
Southeastern PA Transp. Auth. Rev. 5.45% 3/1/2011 (3) 3,730 3,946
Southwestern PA School Dist. GO 6.40% 6/15/2002 (3)(Prere.) 3,825 4,215
Spring-Ford PA Area School Dist. GO 6.50% 2/1/2004 (2)(Prere.) 8,260 9,373
Univ. of Pittsburgh PA 5.25% 6/1/2017 (3) 6,995 7,071
Univ. of Pittsburgh PA 5.50% 6/1/2010 (1) 5,285 5,673
Univ. of Pittsburgh PA 5.50% 6/1/2014 (1) 12,620 13,236
Univ. of Pittsburgh PA 6.125% 6/1/2002 (1)(Prere.) 25,025 27,305
Univ. of Pittsburgh PA 6.125% 6/1/2021 (1) 13,545 14,612
Univ. of Pittsburgh PA 6.25% 6/1/2002 (1)(Prere.) 2,760 3,024
Univ. of Pittsburgh PA 6.25% 6/1/2012 (1) 1,490 1,614
Washington County PA Hosp. Auth. Rev. (Shadyside Hosp.) 5.875% 12/15/2009 (2) 22,000 23,698
Washington County PA Hosp. Auth. Rev. (Washington Hosp.) 6.75% 7/1/2012 (2) 10,000 10,652
West Allegheny PA School Dist. GO 6.25% 2/1/2014 (2) 6,155 6,579
West Jefferson Hills PA School Dist. GO 5.90% 8/1/2010 (3) 3,160 3,341
West Jefferson Hills PA School Dist. GO 5.95% 8/1/2014 (3) 7,180 7,602
West Mifflin PA School Dist. GO 5.35% 2/15/2009 (3) 1,555 1,628
West Mifflin PA School Dist. GO 5.625% 2/15/2015 (3) 7,000 7,292
Westmoreland County PA Auth. Rev. 6.125% 7/1/2017 (1)(ETM) 8,205 9,212
York County PA Hosp. Auth. Rev. (York Hosp.) 5.25% 7/1/2017 (2) 3,500 3,514
York County PA Hosp. Auth. Rev. (York Hosp.) 5.25% 7/1/2023 (2) 8,675 8,663
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
York County PA Solid Waste & Refuse Auth. Rev. 5.50% 12/1/2013 (3) $ 6,750 $ 7,270
York County PA Solid Waste & Refuse Auth. Rev. 5.50% 12/1/2014 (3) 4,050 4,347
York PA City Sewer Auth. Rev. 0.00% 12/1/2012 (1) 3,235 1,569
-----------
1,746,024
-----------
NONINSURED (4.1%)
Allegheny County PA Hosp. Dev. Auth. VRDO
(Allegheny General Hosp.) 3.80% 6/3/1998 LOC 1,300 1,300
Delaware County PA Hosp. Auth. VRDO
(Crozier-Chester Medical Center) 3.90% 6/3/1998 LOC 2,000 2,000
Delaware County PA IDA PCR VRDO (BP Exploration & Oil) 4.00% 6/2/1998 4,000 4,000
Lancaster PA Higher Educ. Fac. Auth. VRDO
(Franklin & Marshall College) 3.85% 6/3/1998 4,000 4,000
Lower Merion Township PA School Dist. GO 5.00% 5/15/2023 5,450 5,336
Montgomery County PA GO 5.375% 10/15/2025 7,930 8,017
Pennsylvania Higher Educ. Fac. Auth. Rev.
(Univ. of Pennsylvania Health System Obligated Group) 5.75% 1/1/2012 6,000 6,448
Pennsylvania Higher Educ. Fac. Auth. Rev.
(Univ. of Pennsylvania Health System Obligated Group) 5.75% 1/1/2022 12,415 13,058
Pennsylvania Higher Educ. Fac. Auth. Rev.
(Univ. of Pennsylvania Health System Obligated Group) 5.875% 1/1/2015 1,800 1,921
Pennsylvania Higher Educ. Fac. Auth. VRDO (Carnegie Mellon Univ.) 4.00% 6/2/1998 6,850 6,850
Pennsylvania Housing Single Family Mortgage
Finance Agency Rev. 6.90% 4/1/2017 5,640 5,999
Pennsylvania Housing Single Family Mortgage
Finance Agency Rev. 7.55% 4/1/2016 2,955 3,101
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. of Philadelphia) 4.00% 6/2/1998 LOC 5,300 5,300
St. Mary's Hosp. Auth. Bucks County PA Rev.
(Catholic Health System) 5.375% 12/1/2011 2,525 2,639
St. Mary's Hosp. Auth. Bucks County PA Rev.
(Catholic Health System) 5.375% 12/1/2013 2,340 2,415
Swarthmore Borough PA Auth. College Rev. 7.375% 9/15/2018 2,200 2,255
OUTSIDE PENNSYLVANIA:
Puerto Rico Govt. Dev. Bank VRDO 3.80% 6/3/1998 LOC 400 400
-----------
75,039
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,693,116) 1,821,063
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 32,123
Liabilities (10,463)
-----------
21,660
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------
Applicable to 161,653,095 outstanding shares of beneficial interest
(unlimited authorization--no par value) $1,842,723
==========================================================================================================================
NET ASSET VALUE PER SHARE $11.40
==========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with an aggregate value of $4,181,000 have been segregated as
initial margin for open futures contracts.
For key to abbreviations and other references, see page 19.
18
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
AT MAY 31, 1998, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,717,275 $10.62
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains (2,439) (.01)
Unrealized Appreciation (Depreciation)--Note E
Investment Securities 127,947 .79
Futures Contracts (60) --
==========================================================================================================================
NET ASSETS $1,842,723 $11.40
==========================================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
CP--Commercial Paper.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
TAN--Tax Anticipation Note.
TOB--Tender Option Bond.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
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.
19
<PAGE> 22
STATEMENT OF OPERATIONS
This Statement shows interest earned by each Portfolio during the reporting
period, and details the operating expenses charged to the Portfolio. These
expenses directly reduce the amount of investment income available to pay to
shareholders as tax-exempt income dividends. This Statement also shows any Net
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 Portfolio invested in futures contracts during the period, the results of
these investments are shown separately.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MONEY INSURED
MARKET LONG-TERM
PORTFOLIO PORTFOLIO
-------------------------------
SIX MONTHS ENDED MAY 31, 1998
-------------------------------
(000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $29,769 $49,419
-------------------------------
Total Income 29,769 49,419
-------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 108 118
Management and Administrative 1,288 1,351
Marketing and Distribution 295 216
Custodian Fees 11 11
Auditing Fees 5 4
Shareholders' Reports 14 19
Annual Meeting and Proxy Costs 2 3
Trustees' Fees and Expenses 2 2
-------------------------------
Total Expenses 1,725 1,724
Expenses Paid Indirectly--Note C (11) (11)
-------------------------------
Net Expenses 1,714 1,713
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 28,055 47,706
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 36 3,929
Futures Contracts -- (988)
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 36 2,941
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- 16,680
Futures Contracts -- 31
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 16,711
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $28,091 $67,358
=========================================================================================================================
</TABLE>
20
<PAGE> 23
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the Portfolio distributes its
income to shareholders each day, the amounts of Distributions--Net Investment
Income generally equal the net income earned as shown under the Operations
section. The amounts of Distributions--Realized Capital Gain may not match the
capital gains shown in the Operations section, because distributions are
determined on a tax basis and may be made in a period different from the one in
which the gains were realized on the financial statements. The Capital Share
Transactions section shows the amount shareholders invested in the Portfolio,
either by purchasing shares or by reinvesting distributions, and the amounts
redeemed. The corresponding numbers of Shares Issued and Redeemed are shown at
the end of the Statement.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSURED LONG-TERM
PORTFOLIO PORTFOLIO
------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1998 NOV. 30, 1997 MAY 31, 1998 NOV. 30, 1997
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 28,055 $ 50,219 $ 47,706 $ 90,336
Realized Net Gain (Loss) 36 (44) 2,941 (2,333)
Change in Unrealized Appreciation (Depreciation) -- -- 16,711 14,002
--------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 28,091 50,175 67,358 102,005
--------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (28,055) (50,219) (47,706) (90,336)
Realized Capital Gain -- -- -- (9,435)
--------------------------------------------------------------------
Total Distributions (28,055) (50,219) (47,706) (99,771)
--------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 1,024,488 1,721,948 195,272 307,829
Issued in Lieu of Cash Distributions 25,859 45,994 32,871 69,664
Redeemed (975,421) (1,541,322) (151,390) (284,646)
--------------------------------------------------------------------
Net Increase from Capital Share Transactions 74,926 226,620 76,753 92,847
- -------------------------------------------------------------------------------------------------------------------------
Total Increase 74,962 226,576 96,405 95,081
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,597,958 1,371,382 1,746,318 1,651,237
--------------------------------------------------------------------
End of Period $1,672,920 $1,597,958 $1,842,723 $1,746,318
=========================================================================================================================
Shares Issued (Redeemed)
Issued 1,024,488 1,721,948 17,134 27,683
Issued in Lieu of Cash Distributions 25,859 45,994 2,888 6,259
Redeemed (975,421) (1,541,322) (13,303) (25,593)
-------------------------------------------------------------------
Net Increase in Shares Outstanding 74,926 226,620 6,719 8,349
=========================================================================================================================
</TABLE>
21
<PAGE> 24
FINANCIAL HIGHLIGHTS
This table summarizes each Portfolio's investment results and distributions to
shareholders on a per-share basis. It also presents the Portfolio's Total Return
and shows net investment income and expenses as percentages of average net
assets. These data will help you assess: the variability of the Portfolio's net
income and total returns from year to year; the relative contributions of net
income and capital gains to the Portfolio's total return; how much it costs to
operate the Portfolio; and the extent to which the Portfolio tends to distribute
capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in the
Portfolio for one year. Money market portfolios are not required to report a
Portfolio Turnover Rate.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<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 .017 .034 .033 .036 .025 .024
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
-----------------------------------------------------------------------
Total from Investment Operations .017 .034 .033 .036 .025 .024
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.017) (.034) (.033) (.036) (.025) (.024)
Distributions from Realized Capital Gains -- -- -- -- -- --
------------------------------------------------------------------------
Total Distributions (.017) (.034) (.033) (.036) (.025) (.024)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 1.70% 3.49% 3.36% 3.69% 2.57% 2.38%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,673 $1,598 $1,371 $1,200 $1,105 $935
Ratio of Total Expenses to
Average Net Assets 0.21%* 0.20% 0.19% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 3.38%* 3.42% 3.30% 3.62% 2.55% 2.35%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
22
<PAGE> 25
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.27 $11.26 $11.28 $10.07 $11.36 $10.96
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .301 .598 .606 .612 .625 .631
Net Realized and Unrealized Gain (Loss)
on Investments .130 .074 .017 1.210 (1.211) .624
-----------------------------------------------------------------------
Total from Investment Operations .431 .672 .623 1.822 (.586) 1.255
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.301) (.598) (.606) (.612) (.625) (.631)
Distributions from Realized Capital Gains -- (.064) (.037) -- (.079) (.224)
-----------------------------------------------------------------------
Total Distributions (.301) (.662) (.643) (.612) (.704) (.855)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.40 $11.27 $11.26 $11.28 $10.07 $11.36
=========================================================================================================================
TOTAL RETURN 3.85% 6.21% 5.77% 18.48% -5.44% 11.90%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,843 $1,746 $1,651 $1,569 $1,299 $1,496
Ratio of Total Expenses to
Average Net Assets 0.20%* 0.18% 0.19% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 5.29%* 5.37% 5.47% 5.63% 5.76% 5.61%
Portfolio Turnover Rate 20%* 9% 13% 12% 16% 14%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
NOTES TO FINANCIAL STATEMENTS
Vanguard Pennsylvania Tax-Free Fund is registered under the Investment Company
Act of 1940 as an open-end investment company, or mutual fund, and comprises the
Money Market and Insured Long-Term Portfolios. Each Portfolio invests in debt
instruments of municipal issuers whose ability to meet their obligations may be
affected by economic and political developments in the Commonwealth of
Pennsylvania.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The Fund consistently follows such
policies in preparing its financial statements.
1. SECURITY VALUATION: Money Market Portfolio: Investment securities are
valued at amortized cost, which approximates market value. Insured Long-Term
Portfolio: Bonds, and temporary cash investments acquired more than 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 credit 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
readily available are valued by methods deemed by the Board of Trustees to
represent fair value.
2. FEDERAL INCOME TAXES: Each Portfolio intends to continue to qualify as
a regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. FUTURES CONTRACTS: The Insured Long-Term Portfolio 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
Portfolio may purchase or sell futures contracts instead of bonds to take
advantage of pricing differentials between the futures contracts and the
underlying bonds. The Portfolio may also seek to take advantage of price
differences among bond market sectors by simultaneously buying futures
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (continued)
(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 Portfolio and
the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. 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 Fund under methods approved by the Board of
Trustees. At May 31, 1998, the Fund had contributed capital aggregating $195,000
to Vanguard (included in Other Assets), representing 1.0% of Vanguard's
capitalization. The Fund's Trustees and officers are also Directors and officers
of Vanguard.
C. The Fund's custodian bank has agreed to reduce its fees when the Fund
maintains cash on deposit in the non-interest-bearing custody account. For the
six months ended May 31, 1998, custodian fee offset arrangements reduced
expenses of the Money Market and Insured Long-Term Portfolios by $11,000 and
$11,000, respectively.
D. During the six months ended May 31, 1998, the Insured Long-Term Portfolio
purchased $207,663,000 of investment securities and sold $173,610,000 of
investment securities, other than temporary cash investments.
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. At November 30, 1997, the Insured
Long-Term Portfolio had available a capital loss carryforward of $532,000 to
offset future net capital gains through November 30, 2005.
E. At May 31, 1998, net unrealized appreciation of Insured Long-Term Portfolio
investment securities for financial reporting and federal income tax purposes
was $127,947,000, consisting of unrealized gains of $128,205,000 on securities
that had risen in value since their purchase and $258,000 in unrealized losses
on securities that had fallen in value since their purchase.
At May 31, 1998, the aggregate settlement value of open futures contracts
expiring in September 1998 and the related unrealized depreciation were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(000)
------------------------------------
AGGREGATE
NUMBER OF SETTLEMENT UNREALIZED
PORTFOLIO/FUTURES CONTRACTS SHORT CONTRACTS VALUE DEPRECIATION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Long-Term/
U.S. Treasury Note 100 $11,313 $(60)
- ------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Senior Chairman of the Board and Director of The Vanguard Group, Inc., and of
each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman, Chief Executive Officer, and Director of The Vanguard Group, Inc., and
of each of the investment companies in The Vanguard Group.
ROBERT E. CAWTHORN
Chairman Emeritus and Director of Rhone-Poulenc Rorer, Inc.; Managing Director
of Global Health Care Partners/DLJ Merchant Banking Partners; Director of Sun
Company, Inc., and Westinghouse Electric Corp.
BARBARA BARNES HAUPTFUHRER
Director of The Great Atlantic and Pacific Tea Co., IKON Office Solutions, Inc.,
Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance Co., and
Ladies Professional Golf Association; Trustee Emerita of Wellesley College.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Amdahl Corp., Baker Fentress & Co., The
Jeffrey Co., and Southern New England 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., and
NACCO Industries.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. 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.
RICHARD F. HYLAND
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
KAREN E. WEST
Controller; Principal of The Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DISTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MACKINNON
Managing Director, Fixed Income Group.
F. WILLIAM MCNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's(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> 28
VANGUARD FAMILY OF FUNDS
STOCK FUNDS
Convertible Securities Fund
Equity Income Fund
Explorer Fund
Growth and Income Portfolio
Horizon Fund
Aggressive Growth Portfolio
Capital Opportunity Portfolio
Global Equity Portfolio
Index Trust
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Mid Capitalization Stock
Portfolio
Small Capitalization Growth
Stock Portfolio
Small Capitalization Stock
Portfolio
Small Capitalization Value
Stock Portfolio
Total Stock Market Portfolio
Value Portfolio
Institutional Index Fund
International Equity Index Fund
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
International Growth Portfolio
International Value Portfolio
Morgan Growth Fund
PRIMECAP Fund
Selected Value Portfolio
Specialized Portfolios
Energy Portfolio
Gold & Precious Metals
Portfolio
Health Care Portfolio
REIT Index Portfolio
Utilities Income Portfolio
Tax-Managed Fund
Capital Appreciation
Portfolio
Growth and Income Portfolio
Total International Portfolio
Trustees' Equity Fund
U.S. Portfolio
U.S. Growth Portfolio
Windsor Fund
Windsor II
MONEY MARKET FUNDS
Admiral Funds
U.S. Treasury Money Market
Portfolio
Money Market Reserves
Federal Portfolio
Prime Portfolio
Municipal Bond Fund
Money Market Portfolio
State Tax-Free Funds
(CA, NJ, NY, OH, PA)
Treasury Money Market Portfolio
BOND FUNDS
Admiral Funds
Intermediate-Term U.S.
Treasury Portfolio
Long-Term U.S. Treasury
Portfolio
Short-Term U.S. Treasury
Portfolio
Bond Index Fund
Intermediate-Term Bond
Portfolio
Long-Term Bond Portfolio
Short-Term Bond Portfolio
Total Bond Market Portfolio
Fixed Income Securities Fund
GNMA Portfolio
High Yield Corporate Portfolio
Intermediate-Term Corporate
Portfolio
Intermediate-Term U.S.
Treasury Portfolio
Long-Term Corporate
Portfolio
Long-Term U.S. Treasury
Portfolio
Short-Term Corporate
Portfolio
Short-Term Federal Portfolio
Short-Term U.S. Treasury
Portfolio
Municipal Bond Fund
High-Yield Portfolio
Insured Long-Term Portfolio
Intermediate-Term Portfolio
Limited-Term Portfolio
Long-Term Portfolio
Short-Term Portfolio
Preferred Stock Fund
State Tax-Free Funds
(CA, FL, NJ, NY, OH, PA)
BALANCED FUNDS
Asset Allocation Fund
Balanced Index Fund
Horizon Fund
Global Asset Allocation
Portfolio
LifeStrategy Portfolios
Conservative Growth
Portfolio
Growth Portfolio
Income Portfolio
Moderate Growth Portfolio
STAR Portfolio
Tax-Managed Fund
Balanced Portfolio
Wellesley Income Fund
Wellington Fund
Q772-5/1998
(C) 1998 Vanguard Marketing
Corporation, Distributor.
All rights reserved.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
www.vanguard.com
[email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
