<PAGE> 1
VANGUARD PENNSYLVANIA
TAX-EXEMPT FUNDS
VANGUARD PENNSYLVANIA TAX-EXEMPT
MONEY MARKET FUND
VANGUARD PENNSYLVANIA INSURED
LONG-TERM TAX-EXEMPT FUND
[PHOTO]
Annual
Report
November 30, 1998
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 8,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
This year, our report cover pays homage to three anniversaries, each of great
significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on
August 1, 1798. HMS Vanguard, the victorious British flagship at the Nile,
is our namesake. And its motto-- "Leading the way"--serves as a guiding
principle for our company.
- - The 100th birthday, on July 23, of Walter L. Morgan, founder of Wellington
Fund, the oldest member of what became The Vanguard Group. Mr. Morgan was
friend and mentor to Vanguard founder John C. Bogle, and helped to shape the
standards and business principles that Mr. Bogle laid down for Vanguard at
its beginning nearly 25 years ago: a stress on balanced, diversified
investments; insistence on fair dealing and candor with clients; and a focus
on long-term investing. To our great regret, Mr. Morgan died on September 2.
- - The 70th anniversary, on December 28, of the incorporation of Vanguard
Wellington Fund. It was the nation's first balanced mutual fund, and is one
of only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
7
REPORT FROM
THE ADVISER
9
PERFORMANCE SUMMARIES
11
FUND PROFILES
13
FINANCIAL STATEMENTS
16
REPORT OF
INDEPENDENT ACCOUNTANTS
32
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
Interest rates declined on balance during the twelve months ended November 30,
1998--the fiscal year for the Vanguard Pennsylvania Tax-Exempt Funds--providing
a significant boost to prices of tax-exempt municipal bonds. In this
bond-friendly environment of lower rates and tame inflation, our Pennsylvania
Insured Long-Term Tax-Exempt Fund provided an excellent total return of +7.6%
that surpassed the return of its average peer by a full percentage point. Our
Pennsylvania Tax-Exempt Money Market Fund's return of +3.3% also outdistanced
that of its competitors.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
COMPONENTS OF TOTAL RETURNS
FISCAL YEAR ENDED
NOVEMBER 30, 1998
---------------------------
PENNSYLVANIA TAX-EXEMPT FUND INCOME CAPITAL TOTAL
- -----------------------------------------------------------------
<S> <C> <C> <C>
Money Market +3.3% 0.0% +3.3%
(SEC 7-Day Annualized Yield: 3.04%)
Insured Long-Term +5.5 +2.1 +7.6
- -----------------------------------------------------------------
</TABLE>
The table at right presents each fund's twelve-month return along
with its income and capital components. The total return (capital change plus
reinvested dividends) of the Insured Long-Term Tax-Exempt Fund is based on a
change in net asset value from $11.27 per share on November 30, 1997, to $11.51
per share on November 30, 1998, adjusted for dividends totaling $0.597 per share
paid from net investment income. The Money Market Fund's net asset value
remained at $1 per share, as was expected but not guaranteed. At the end of the
fiscal year, the Insured Long-Term Fund's yield stood at 4.31%, the Money Market
Fund's yield at 3.04%.
FINANCIAL MARKETS IN REVIEW
During the twelve months ended November 30, investors fretted over a variety of
developments both here and abroad, from the debt problems of foreign governments
to a huge hedge-fund bailout to growing concern about corporate profits.
Overall, the uncertainty made for a tumultuous, but ultimately rewarding, period
in the equity markets and a fine fiscal year for bonds.
The yield of the benchmark 30-year U.S. Treasury bond fell about 100
basis points on balance, ending the period at 5.06% after bottoming out at 4.72%
in early October. During the autumn, the Federal Reserve Board trimmed
short-term rates three times in seven weeks by a total of 0.75 percentage point,
citing the strain of international woes on the U.S. economy. The economy
continued to exhibit steady growth (about 3% during the period) and inflation
remained low. Consumer prices were up just 1.5% for the fiscal year.
Of course, as interest rates drop, bond prices rise. That meant
outstanding returns for bonds during the fiscal year, particularly for
longer-maturity issues, which benefit most from interest-rate declines. The
Lehman Brothers Long U.S. Treasury Bond Index earned a total return of +15.7%,
with its +7.2% income return augmented by an +8.5% capital return.
Yields on high-grade long-term municipal bonds did not fall as far as
those for Treasury securities. Top-rated long-term municipal bonds ended the
fiscal year with a yield of 4.89%, down from 5.25% at the end of November 1997.
Yields on top-grade (MIG-1) 3-month notes, which are more sensitive than
longer-term issues to changes in short-term interest rates, declined on balance
to 2.95% from 3.80% a year earlier. For the twelve
1
<PAGE> 4
months, the Lehman 10 Year Municipal Bond Index, a good measure of the long-term
municipal market, returned +8.1%--an outstanding return considering the tax
advantages of municipal bonds and the extremely low inflation rate.
The U.S. stock market, meanwhile, weathered a severe summer storm that
drove the broad market down nearly -20% and clipped more than 40% from the value
of many smaller stocks. A swift recovery ensued during the final three months of
the fiscal year, and for the twelve months, the Standard & Poor's 500 Composite
Stock Price Index was up +23.7%.
The 1998 fiscal year will likely be remembered as a period of
extraordinary relative value in the municipal bond market. On November 30,
yields on long-term U.S. Treasuries and long-term municipal bonds were nearly
identical--a truly remarkable occurrence, given that income from state-specific
municipal bond funds is exempt from federal, state, and local taxes for state
residents. The yield convergence has been the result of several factors.
Treasury bonds benefited from both an easing of inflation fears and a "flight to
quality" by foreign investors--particularly from Asia--who bought Treasury
securities to protect themselves from declines in their currencies versus the
U.S. dollar. Meanwhile, new Treasury issuance dropped--thanks to the federal
budget surplus--and issuance of new municipal bonds soared, dampening prices a
bit and keeping yields high in relation to Treasuries.
Throughout the summer and into the fall, yields of long-term municipal
bonds were equal to about 98% of the yield on comparable Treasuries, and on
several occasions muni yields matched or even slightly exceeded Treasury yields.
To be sure, this phenomenon is temporary, but it made municipal bonds as
valuable in relation to Treasuries as they've ever been. Historically, municipal
bonds have offered a yield equal to about 84% of the yield on Treasury bonds.
It's always important to view the performance of bonds in the proper
perspective, especially after a year when declining interest rates pushed
returns higher. As you may recall, during the past two fiscal years bond prices
received only a small capital boost. Just four years ago, in 1994, interest
rates rose sharply and bond prices plunged, providing a painful lesson about the
volatility of bond-fund returns. It is also important for investors to
understand that the ever-present fluctuations in the bond market tend to offset
each other over longer periods, leaving the rate of interest income as the
dominant long-term source of bond returns.
FISCAL 1998 PERFORMANCE OVERVIEW
The +7.6% return of the Vanguard Pennsylvania Insured Long-Term Tax-Exempt Fund
topped the +6.5% return of the average Pennsylvania municipal bond fund and fell
a bit short of the +7.8% return of the unmanaged Lehman Municipal Bond Index.
This index, which includes municipal bonds from across the country, is a
notoriously tough competitor because it does not incur the "real world"
operating expenses and transaction costs that all mutual funds must bear. Though
the majority of our total return came from interest income, the fund earned a
capital return of +2.1% that reflected the interest-rate decline. The Tax-Exempt
Money Market Fund provided a total return of +3.3%, outpacing the +3.0% return
of its average peer.
THE MUNICIPAL BOND TAX ADVANTAGE
For Pennsylvania residents, the income earned by our funds is exempt from state,
local, and federal income taxes. At current yields, that means that investors in
long-term tax-
2
<PAGE> 5
exempt bonds who are taxed at the highest marginal tax rate can earn an
astounding 65% more after-tax income than they could in a comparable long-term
U.S. Treasury bond fund. Our Money Market Fund also offers Pennsylvania
residents a distinct advantage over U.S. Treasury securities with similar
maturities. On November 30, the yield of MIG-1 notes was 11% higher than the
after-tax yield of 90-day U.S. Treasury bills. To look at this another way, a
yield of 5.1% on a tax-exempt long-term bond would be the equivalent of an 8.4%
taxable yield for Pennsylvania taxpayers subject to the highest tax rates. For a
tax-exempt short-term yield of 3.0%, the taxable equivalent would be 5.0%.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ILLUSTRATION OF INCOME ON
A HYPOTHETICAL $100,000 INVESTMENT
----------------------------------
SHORT-TERM LONG-TERM
- -------------------------------------------------------------------
<S> <C> <C>
Taxable gross income $ 4,500 $ 5,100
Less taxes (39.6%) (1,800) (2,000)
Net after-tax income 2,700 3,100
- -------------------------------------------------------------------
Tax-exempt income $ 3,000 $ 5,100
- -------------------------------------------------------------------
Tax-exempt income advantage $ 300 $ 2,000
- -------------------------------------------------------------------
Percentage advantage 11% 65%
- -------------------------------------------------------------------
</TABLE>
This illustration assumes current yields (as of November 30, 1998) of 5.1% for
long-term U.S. Treasury bonds, 4.5% for U.S. Treasury bills, 5.1% for long-term
municipals, and 3.0% for short-term municipals. The tax adjustment assumes a
typical itemized tax return based on a federal tax rate of 39.6%. Income from
U.S. Treasury securities is not subject to state taxes; local taxes are not
considered. The illustration is not intended to represent future results.
These remarkable advantages are illustrated in the table at right, which
compares the annual net income earned on U.S. Treasury and tax-exempt securities
as of November 30, 1998, assuming a $100,000 investment.
Of course, in terms of credit quality, state-specific municipal bond
funds, by definition, don't match up to U.S. Treasury bond funds, whose
securities are backed by the full faith and credit of the U.S. government. Also,
single-state municipal bond funds lack geographic diversification. Private
insurance on the bonds in our Long-Term Tax-Exempt Fund, however, substantially
mitigates these additional credit risks. Though the insurance does not provide
protection against fluctuations in the fund's value, it guarantees full payment
of interest and principal for our bond holdings.
Portfolio insurance generally is not available for short-term securities,
so our investment adviser, Vanguard Fixed Income Group, is responsible for
preserving the principal of the Tax-Exempt Money Market Fund--a responsibility
the group fulfilled admirably. We remind you that money market investments are
not guaranteed by the Federal Deposit Insurance Corporation, which insures bank
accounts and certificates of deposit.
LONG-TERM PERFORMANCE OVERVIEW
The adjacent table compares the longer-term performance of our funds with those
of their average peer mutual funds. It also illustrates our performance edge
over our competitors, based on hypothetical investments of $10,000.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
TOTAL RETURNS
TEN YEARS ENDED NOVEMBER 30, 1998
------------------------------------------------------
FINAL VALUE OF
AVERAGE A $10,000
ANNUAL RATE INITIAL INVESTMENT*
-------------------- --------------------------------
AVERAGE AVERAGE
PENNSYLVANIA VANGUARD COMPETING VANGUARD COMPETING VANGUARD
TAX-EXEMPT FUND FUND FUND FUND FUND ADVANTAGE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market +3.9% +3.7% $14,599 $14,384 $ 215
Insured Long-Term +8.4 +7.8 22,327 21,096 1,231
- ----------------------------------------------------------------------------
</TABLE>
*Assuming reinvestment of all income dividends and capital gains distributions.
Our advantage is explained, in part, by our much lower expenses, a factor
that
3
<PAGE> 6
helps us toward our goal of providing returns that exceed those of competitive
norms. Our funds had expense ratios (annual expenses as a percentage of average
net assets) of 0.20% in fiscal 1998, far below both the 1.03% charged by the
average long-term state tax-exempt fund and the 0.53% charged by the average
state tax-exempt money market fund. We believe this powerful advantage is
sustainable. Another reason for our success is the skillful management of
Vanguard Fixed Income Group, which has helped guide our funds to their superior
record while maintaining the highest investment quality in the industry.
We emphasize that the longer-term returns shown above are higher than
investors should expect with interest rates at current levels. Our Insured
Long-Term Fund's returns have been boosted by capital appreciation due to
generally declining interest rates since 1990. But interest rates cannot decline
forever. Investors looking for a realistic forecast of future returns on
long-term bonds should not regard past returns as a guide. The best indicator of
the average future return on long-term bonds--and it is not a perfect
predictor--is the current yield on those bonds.
IN SUMMARY
The excellent returns earned by bonds over the past twelve months--as well as
over the past decade--should not lull investors into a false sense of security
about the safety of bonds or the reliability of returns. Bond returns will
inevitably revert to their historical (lower) averages, possibly with little or
no warning.
We believe that the specific risks of bonds, and the general risks of
investing, can be managed by a balanced investment program that includes stock
funds, bond funds, and money market funds suited to an individual's objectives,
time horizon, tolerance for risk, and financial situation. Once you have such a
program, you should be prepared to stick with it through good times and bad.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
December 18, 1998
NOTE: You'll observe that we have made minor changes in the names of the
Vanguard Pennsylvania Tax-Exempt Funds. We replaced the word "Tax-Free" with
"Tax-Exempt" and replaced "Portfolio" with "Fund" as part of a broader effort to
clarify the names in our fund lineup.
4
<PAGE> 7
NOTICE TO SHAREHOLDERS
At a special meeting on July 24, 1998, shareholders of Vanguard Pennsylvania
Tax-Exempt Funds overwhelmingly approved six proposals. The proposals and voting
results were:
1. REORGANIZATION INTO A DELAWARE BUSINESS TRUST. Based on the funds' assets at
the time of the vote, this change will reduce the amount of state taxes paid
each year by some Vanguard funds. The Vanguard Pennsylvania Tax-Exempt Funds
will not realize any tax savings as a result of the change, but the funds will
benefit from the efficiency of being organized the same way as all other
Vanguard Funds. Approved by 96.21% of the shares voted, as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
FOR AGAINST ABSTAIN
----------------------------------------------------------------------
<S> <C> <C>
999,470,751 19,660,867 19,761,530
----------------------------------------------------------------------
</TABLE>
2a. INVESTMENT LIMITATION CHANGES--INTERFUND LENDING PROGRAM. This change
permits the Pennsylvania Tax-Exempt Funds to participate in Vanguard's interfund
lending program, which allows funds to loan money to each other if--and only
if--it makes good financial sense to do so on both sides of the transaction. The
interfund lending programs won't be an integral part of the funds' investment
programs; it is a contingency arrangement for managing unusual cash flows.
Approved as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 853,185,250 64,721,884 24,521,152 90.53%
- --------------------------------------------------------------------------------
Insured Long-Term 89,298,945 3,711,299 3,454,618 92.57%
- --------------------------------------------------------------------------------
</TABLE>
2b. INVESTMENT LIMITATION CHANGES--BORROWING MONEY AND PLEDGING ASSETS. This
change sets standard limits of 15% of net assets on the amount of money Vanguard
funds can borrow from all sources and on the amount of assets that can be
pledged to secure any loans. Approved as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 826,079,633 90,285,112 26,063,541 87.65%
- --------------------------------------------------------------------------------
Insured Long-Term 87,886,934 5,138,573 3,439,354 91.11%
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
2c. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN SECURITIES OWNED BY
AFFILIATES. This change eliminates the funds' policy of avoiding investments in
securities that are owned in certain amounts by Trustees, officers, and key
advisory personnel. This policy was well-intentioned but wrongly focused and
unnecessary in light of the funds' Code of Ethics and other regulatory
protections against conflicts of interest on the part of fund management.
Approved as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 845,284,967 72,938,143 24,205,176 89.69%
- --------------------------------------------------------------------------------
Insured Long-Term 88,795,555 4,471,553 3,197,754 92.05%
- --------------------------------------------------------------------------------
</TABLE>
2d. INVESTMENT LIMITATION CHANGES--BONDS SECURED BY INTERESTS IN OIL, GAS, OR
MINERAL PROGRAMS. This change amends a policy prohibiting investments in
interests in oil, gas, or other mineral exploration or development programs.
While the funds still cannot invest directly in oil, gas, or mineral programs,
the change clarifies that the funds can invest in bonds and money market
instruments secured by interests in these programs. Approved as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 841,931,877 74,530,774 25,965,636 89.34%
- --------------------------------------------------------------------------------
Insured Long-Term 88,450,209 4,712,445 3,302,209 91.69%
- --------------------------------------------------------------------------------
</TABLE>
2g. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN INDUSTRIAL REVENUE BONDS. This
change eliminates a policy imposing special restrictions on investments in
industrial revenue and development bonds. The change allows the funds to invest
in industrial revenue and development bonds without limit, subject to their
usual stringent quality and maturity guidelines. Approved as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 858,288,281 56,424,879 27,715,126 91.07%
- --------------------------------------------------------------------------------
Insured Long-Term 89,171,517 4,148,872 3,144,473 92.44%
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
[PHOTO]
THE MARKETS IN PERSPECTIVE
YEAR ENDED NOVEMBER 30, 1998
U.S. financial markets produced solid overall gains during the fiscal year ended
November 30. The S&P 500 Index gained 23.7% for the 12-month period, overcoming
a sharp summer setback. Bond prices rose as interest rates declined. Returns
from overseas stock markets varied widely, with big gains in Europe and losses
in most other markets.
U.S. STOCK MARKETS
The stock market's gains during the fiscal year were concentrated in
large-capitalization growth stocks. Within the S&P 500 Index, the growth stocks
rose 33.7%, while the value stocks were up 13.2%. The market's overall bias
toward large-caps showed starkly in the contrast between the S&P 500 and other
indexes. While the S&P 500 was rising 23.7%, the rest of the market returned a
paltry 2.6%, as measured by the Wilshire 4500 Equity Index. Small-cap stocks, as
represented by the Russell 2000 Index, did even worse--a negative return of
6.6%.
The market's ascent was not without incident, even for large-cap stocks.
After rising strongly to a record high on July 17, the S&P 500 fell by 19.2%
during the following six weeks, just shy of the 20% mark generally considered
the boundary distinguishing a bear market from a mere "correction." Declines
were certifiably bearish for smaller stocks, however.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------------
1 YEAR 3 YEARS 5 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 23.7% 26.7% 23.0%
Russell 2000 Index -6.6 10.3 11.3
MSCI EAFE Index 16.8 9.3 10.2
- --------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 9.5% 7.7% 7.3%
Lehman 10 Year Municipal Bond Index 8.1 6.9 6.8
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 5.1 5.2 5.1
- --------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.5% 2.2% 2.4%
- --------------------------------------------------------------------------------
</TABLE>
The July-August tumble in stock prices reflected a number of factors that
collectively raised the anxiety level for many investors. Among these were
deteriorating corporate earnings reports and forecasts, Russia's default on its
debts, and a continuance of economic weakness in Asia. The persistence of Asia's
economic troubles--which first surfaced in mid-1997--began to slow the economic
expansions in the United States and Europe.
The rebound in stocks late in the fiscal year occurred even though
several sources of uncertainty remained, including doubts about global economic
growth and reductions in securities analysts' forecasts of future corporate
earnings. Stock prices got considerable help from the decline in interest rates.
(Low inflation and low interest rates help stock prices by raising the estimated
value of future dividends and earnings.)
Three forces clearly shaped the performance of industry sectors. They
could be summarized as faith (the buoyant confidence of consumers), fear
(related to the effects of economic troubles abroad), and fortresses (companies
somewhat protected from competition).
7
<PAGE> 10
In contrast to the cautious stance of investors during fiscal 1998, U.S.
consumers threw caution to the wind. Feeling flush because of plentiful jobs
(the nation's unemployment rate was 4.4% at fiscal year-end) and rising wages,
consumers spent a record proportion of their income. Not surprisingly, then, two
big gainers among sectors of the S&P 500 Index were consumer discretionary
firms, such as retailers (+26%) and consumer staples (+22%).
Fear was a factor in the lagging returns in industry groups considered to
be vulnerable to slowing global growth, falling commodity prices, and tougher
price competition from foreign suppliers. Among these--all traditional value
sectors--were firms in the "other energy" category (-37%); chemical and other
materials & processing firms (essentially a zero return); and makers of producer
durables such as airplanes and machinery (+2%). Conversely, utilities did well
(+35%) in part because they are seen as relatively insulated from foreign
competition or economic woes. Fortresses are companies perceived as relatively
safe from competitors because of patented products or brands. Such companies led
the year's best-performing sectors: technology (+49%) and health care (+43%).
U.S. BOND MARKETS
Interest rates declined during the fiscal year, especially for U.S. Treasury
securities, which benefited from heightened aversion to risk among investors and
from a slight decrease in supply, thanks to a $70 billion federal budget
surplus. The Federal Reserve Board had the flexibility to cut short-term rates
in three quarter-point steps in the autumn because inflation was remarkably
tame--consumer prices rose just 1.5% for our fiscal year.
In this bond-friendly environment, yields on long-term Treasury issues
fell by roughly 100 basis points (1 percentage point), with the 30-year Treasury
bond ending the fiscal year at 5.06%. Lower rates mean higher prices for bonds,
and the Lehman Brothers Long U.S. Treasury Bond Index earned a total return of
15.7%, an astounding margin of some 14 percentage points over the inflation
rate.
Reflecting investors' flight to quality and worries about slowing
economic growth, prices fell for high-yield "junk" bonds. Even high-quality
corporate bonds and mortgage-backed securities did not rise in price as far as
Treasury securities. Mortgage bonds tend to lag Treasuries during periods when
falling rates lead to greater refinancing activity by homeowners, resulting in
unwanted prepayments of principal. The Lehman Aggregate Bond Index, which
comprises high-quality corporate and mortgage-backed bonds as well as
Treasuries, and has an intermediate-term average maturity, earned 9.5%.
Yields on long-term municipal bonds declined only modestly during the
fiscal year, and by November 30 were only slightly lower than yields on
comparable Treasury securities. This was striking because the interest on
municipals is exempt from federal income tax.
INTERNATIONAL STOCK MARKETS
Europe's stock markets outdistanced even the S&P 500 Index, but Asian and Latin
American markets were generally down during the fiscal year. As a group,
European stocks earned 27.8% in U.S.-dollar terms. Europe's bull market was
fueled by continuing economic growth, lower interest rates, increased corporate
merger activity, and optimism about the effects of the euro, a common currency
due to be adopted in 1999 by 11 nations.
Japan's stock market continued to suffer from the effects of a severe
recession and a shaky banking system. Stocks in Tokyo fell 4.5% in U.S.-dollar
terms. Elsewhere in Asia, returns were mixed, ranging from a rebound of 21% in
South Korea, through Australia's 11% gain, to big losses in Indonesia (-52%),
Malaysia (-42%), New Zealand (-25%), and Singapore (-18%). Losses were steep
throughout Latin America, including Mexico (-32%), Venezuela (-59%), Brazil
(-20%), and Chile (-22%).
8
<PAGE> 11
[PHOTO]
REPORT FROM THE ADVISER
During the fiscal year ended November 30, nervous global investors flocked to
the safety of U.S. Treasury securities. The "flight to quality" began with the
collapse of Asian markets early in the year, then spread throughout the emerging
economies of the world. With each round of negative world events, U.S. Treasury
yields fell as investors bid up bond prices. In contrast to the volatility in
world financial markets, sailing was smooth for the U.S. economy, which produced
stable growth and low inflation. The Federal Reserve Board initially was
reluctant to lower short-term interest rates in the face of the fundamental
strength of the domestic economy; however, signs of international economic
calamity loomed ever larger, threatening future U.S. growth. By the second half
of our fiscal year, it was clear that domestic export-sensitive sectors were
slowing, and stock market volatility increased. The Fed then cut short-term
interest rates by a total of three-quarters of a percentage point. To date, the
Fed's action has helped calm the fears of a worldwide credit crunch and stemmed
investors' flight from risk. We will have to wait and see whether the worst is
over for global markets.
As one would expect, municipal bond yields fell in sympathy with the
decline in Treasury yields. However, a large supply of new tax-exempt bonds
muted the price increases. Consequently, municipal bonds underperformed their
Treasury bond counterparts. During the fiscal year, the benchmark 30-year U.S.
Treasury bond yield declined nearly a full percentage point (from 6.05% to
5.06%). In contrast, the yield on an AAA-rated tax-exempt bond of similar
maturity declined only three-tenths of 1 percent (from roughly 5.2% to 4.9%),
and produced commensurately less price appreciation.
As noted, the supply of new tax-exempt bonds grew dramatically during our
fiscal year. Two factors led to this increase in municipal debt. First, as
interest rates declined, municipalities rushed to issue new bonds that would
refinance their older, higher-coupon debt. Second, the financial strength of
many states and localities improved as robust economic performance boosted tax
revenues. This increased financial sustenance allowed many issuers to fund new
capital projects with tax-exempt debt. In all, tax-exempt issuance for the year
was up 27% to $278 billion in new bonds.
This abundance of new bonds offers unique value to investors in
longer-term municipal issues. As of our fiscal year-end, the yield on a
high-quality, long-maturity municipal bond was equal to an unusually high 96.8%
of the yield on a comparable U.S. Treasury security. At certain points during
the fiscal period, AAA-rated insured municipal bonds actually offered yields
higher than Treasury bonds, a situation not seen since 1986. For investors in
the maximum federal tax bracket (39.6%), high-grade municipal bonds offer about
3 percentage points in additional taxable-equivalent yield over comparable U.S.
Treasuries. Our state tax-exempt funds further boost after-tax returns by
providing income exempt from state tax. In the past, municipal bond yields have
not stayed
9
<PAGE> 12
high relative to Treasury bonds for long. However, because of the persistence of
global uncertainty and its beneficial effect on prices of Treasury bonds, it's
hard to predict when municipal yields will return to more-normal levels. In the
meantime, longer-term municipal bonds are a steal.
The high credit quality of the Vanguard Pennsylvania Tax-Exempt Funds
played an important role in our strong performance relative to peers. Early in
our fiscal year, demand was quite strong for the higher yields of uninsured
bonds and those of speculative-grade credit quality. Market participants
disregarded the added credit risk they were assuming. Demand for lower-quality
securities was so high that investors accepted ever-smaller yield premiums for
assuming the extra credit risk, and yield spreads between bonds of different
quality tightened. But the bankruptcy of a major Pennsylvania hospital group in
summer 1998 caused many bondholders to reconsider the relationship between yield
and credit quality.
Investors in Vanguard's insured single-state tax-exempt funds receive
additional credit protection. Although this municipal bond insurance does not
protect against changes in market value, it does guarantee the timely payment of
principal and interest. Our single-state tax-exempt funds are able to offer the
dual benefits of high credit quality and attractive yields year after year
because of our low expenses. Our emphasis on high credit quality should allow
our shareholders to sleep comfortably.
Over time, the simple combination of a disciplined risk approach with low
expenses has proven to be a powerful force for maximizing total return for
shareholders. Our continued focus on these basics produced the desired results
in fiscal 1998.
Yields on 1-year tax-exempt money market instruments fell 76 basis points
(0.76 percentage point) during the second half of our fiscal year, even though
summer is traditionally a season for heavy municipal borrowing. Over the full 12
months, the decline was 82 basis points, leaving the yield on the benchmark
1-year MIG-1 note at 2.99% on November 30. By comparison, the yield on 1-year
U.S. Treasury bills fell 92 basis points during the second half and 99 basis
points for the full year, closing with a yield of 4.50%. The plunge in
short-term yields was fueled by the global "flight to quality" and by the Fed's
75-basis-point cut in the federal funds rate. At fiscal year-end, the yield on
1-year MIG-1 notes therefore was equal to 66.4% of the yield on comparable
Treasury bills. Though this ratio is less favorable than that for yields of
long-term municipal bonds in relation to those of Treasury bonds, municipal
money markets still offer value for investors in the highest tax brackets.
As the new year begins, the Pennsylvania Tax-Exempt Money Market Fund is
positioned to take advantage of its dual strengths of conservative,
quality-oriented management and low expenses. We believe these attributes will,
over time, generate superior risk-adjusted returns.
Ian A. MacKinnon, Managing Director
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
John M. Carbone, Principal
Danine A. Mueller, Principal
Christopher M. Ryon, Principal
Kathryn Allen, Principal
Vanguard Fixed Income Group
December 10, 1998
INVESTMENT PHILOSOPHY
The adviser believes that each fund, 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.
10
<PAGE> 13
PERFORMANCE SUMMARY
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that 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>
TOTAL INVESTMENT RETURNS: JUNE 13, 1988-NOVEMBER 30, 1998
- ---------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT AVERAGE
MONEY MARKET FUND 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 3.3 3.3 3.0
- ---------------------------------------------------------
</TABLE>
*Average Pennsylvania Tax-Exempt Money Market Fund.
SEC 7-Day Annualized Yield (11/30/1998): 3.04%
See Financial Highlights table on page 28 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1988-NOVEMBER 30, 1998
- ----------------------------------------------------------------
Pennsylvania Tax-Exempt Average Pennsylvania Tax-Exempt
Money Market Fund Money Market Fund
<S> <C> <C>
1988-11 10000 10000
1989-02 10149 10152
1989-05 10320 10309
1989-08 10481 10468
1989-11 10639 10636
1990-02 10792 10776
1990-05 10951 10937
1990-08 11104 11093
1990-11 11262 11261
1991-02 11408 11396
1991-05 11539 11528
1991-08 11659 11645
1991-11 11780 11778
1992-02 11880 11860
1992-05 11974 11958
1992-08 12050 12031
1992-11 12129 12119
1993-02 12203 12170
1993-05 12276 12240
1993-08 12346 12301
1993-11 12419 12382
1994-02 12486 12428
1994-05 12560 12500
1994-08 12640 12576
1994-11 12738 12679
1995-02 12850 12767
1995-05 12975 12888
1995-08 13090 12998
1995-11 13208 13119
1996-02 13321 13206
1996-05 13433 13310
1996-08 13540 13413
1996-11 13652 13527
1997-02 13763 13611
1997-05 13883 13720
1997-08 14004 13835
1997-11 14128 13960
1998-02 14244 14048
1998-05 14368 14158
1998-08 14485 14270
1998-11 14599 14384
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania Tax-Exempt Money Market Fund 3.33% 3.29% 3.86% $14,599
Average Pennsylvania Tax-Exempt
Money Market Fund 3.04 3.04 3.70 14,384
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- -------------------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania Tax-Exempt
Money Market Fund 6/13/1988 3.42% 3.26% 0.00% 3.90% 3.90%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
11
<PAGE> 14
PERFORMANCE SUMMARY
PENNSYLVANIA INSURED LONG-TERM TAX-EXEMPT FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: APRIL 7, 1986-NOVEMBER 30, 1998
- ---------------------------------------------------------
PENNSYLVANIA INSURED LONG-TERM
TAX-EXEMPT FUND 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 2.1 5.5 7.6 7.8
- ---------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 29 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1988-NOVEMBER 30, 1998
- ---------------------------------------------------------------------------------
Pennsylvania Insured Long-Term Average Pennsylvania Lehman Municipal
Tax-Exempt Fund Tax-Exempt Fund Bond Index
<S> <C> <C> <C>
1988-11 10000 10000 10000
1989-02 10249 10228 10194
1989-05 10768 10634 10627
1989-08 10888 10799 10811
1989-11 11216 11096 11101
1990-02 11295 11170 11239
1990-05 11499 11283 11404
1990-08 11426 11326 11505
1990-11 12032 11805 11956
1991-02 12284 12045 12275
1991-05 12616 12320 12554
1991-08 12911 12636 12861
1991-11 13193 12981 13182
1992-02 13556 13303 13500
1992-05 13874 13543 13786
1992-08 14480 14101 14296
1992-11 14731 14314 14504
1993-02 15661 15188 15358
1993-05 15783 15207 15435
1993-08 16391 15869 16041
1993-11 16485 15996 16111
1994-02 16557 16053 16208
1994-05 16301 15492 15817
1994-08 16525 15712 16069
1994-11 15588 14847 15270
1995-02 17059 16159 16519
1995-05 17650 16781 17263
1995-08 17766 16879 17495
1995-11 18468 17667 18157
1996-02 18681 17791 18345
1996-05 18401 17431 18052
1996-08 18761 17723 18412
1996-11 19533 18559 19224
1997-02 19646 18624 19355
1997-05 19810 18743 19547
1997-08 20312 19251 20115
1997-11 20747 19808 20603
1998-02 21298 20269 21125
1998-05 21546 20413 21380
1998-08 22023 20755 21855
1998-11 22327 21096 22202
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
-------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania Insured Long-Term Tax-Exempt Fund 7.60% 6.25% 8.36% $22,327
Average Pennsylvania Tax-Exempt Fund 6.50 5.69 7.75 21,096
Lehman Municipal Bond Index 7.76 6.62 8.30 22,202
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- -------------------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania Insured Long-Term
Tax-Exempt Fund 4/7/1986 8.57% 6.08% 2.19% 6.27% 8.46%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
12
<PAGE> 15
FUND PROFILE
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998. Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
<S> <C>
Yield 3.0%
Average Maturity 34 days
Average Quality MIG-1
Expense Ratio 0.20%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ----------------------------------------------------------
<S> <C>
MIG-1/SP-1+ 68.1%
A-1/P-1 31.1
AAA/AA 0.6
A 0.2
- ----------------------------------------------------------
Total 100.0%
</TABLE>
13
<PAGE> 16
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by 1 percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit quality
(high, medium, or low).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days (7 days for money market funds) and is annualized, or projected
forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
14
<PAGE> 17
FUND PROFILE
PENNSYLVANIA INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 14.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
PENNSYLVANIA INSURED LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 255 47,383
Yield 4.3% 4.4%
Yield to Maturity 4.4% --
Average Coupon 5.5% 5.5%
Average Maturity 9.1 years 13.5 years
Average Quality AAA AA+
Average Duration 6.4 years 7.2 years
Expense Ratio 0.20% --
Cash Reserves 0.8% --
</TABLE>
*Lehman Municipal Bond Index.
INVESTMENT FOCUS
- ------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
PENNSYLVANIA INSURED LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.98 1.00
Beta 0.99 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
AAA 98.5%
AA 1.5
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 6.3%
1-5 Years 26.5
5-10 Years 31.3
10-20 Years 23.6
20-30 Years 10.5
Over 30 Years 1.8
- -------------------------------------------------------
Total 100.0%
</TABLE>
15
<PAGE> 18
[PHOTO]
FINANCIAL STATEMENTS
NOVEMBER 30, 1998
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's municipal bond holdings,
including each security's market value on the last day of the reporting period
and information on credit enhancements (insurance or letters of credit).
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 fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the fund's net assets on both a dollar and
per-share basis. Undistributed Net Investment Income is usually zero because the
fund distributes its net income to shareholders as a dividend each day. Any
realized gains must be distributed annually, so the bulk of net assets consists
of Paid in Capital (money invested by shareholders). The balance shown for
Accumulated Net Realized Gains usually approximates the amount available to
distribute to shareholders as taxable capital gains as of the statement date,
but may differ because certain investments or transactions may be treated
differently for financial statement and tax purposes. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net realized
gains, will appear as negative balances. Unrealized Appreciation (Depreciation)
is the difference between the value of the fund's investments and their cost,
and reflects the gains (losses) that would be realized if the fund were to sell
all of its investments at their statement-date values.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (101.3%)
- ------------------------------------------------------------------------------------------------------------------------------------
Allegheny County PA Higher Educ. Auth. VRDO (Univ. of Pittsburgh) 3.00% 12/3/1998 LOC $ 30,120 $ 30,120
Allegheny County PA Higher Educ. Auth. VRDO (Univ. of Pittsburgh) 3.30% 12/3/1998 LOC 5,510 5,510
Allegheny County PA Hosp. Dev. Auth. VRDO
(Children's Hosp.-Pittsburgh) 3.00% 12/3/1998 (1) 26,950 26,950
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health System) 3.30% 12/3/1998 (1) 25,750 25,750
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health System) 3.30% 12/3/1998 LOC 9,205 9,205
Allegheny County PA Hosp. Dev. Auth. VRDO
(Saint Francis Health System) 3.10% 12/3/1998 LOC 11,000 11,000
Allegheny County PA Hosp. Dev. Auth. VRDO
(South Hills Health System) 3.10% 12/2/1998 LOC 8,400 8,400
Allegheny County PA PCR CP PUT (Duquesne Light Co.) 3.60% 1/27/1999 LOC 11,500 11,500
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.00% 1/28/1999 LOC 2,500 2,500
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.05% 1/29/1999 LOC 6,000 6,000
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.10% 1/22/1999 LOC 3,900 3,900
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.10% 1/29/1999 LOC 17,950 17,950
Beaver County PA IDA PCR CP (Duquesne Light Co.) 3.50% 12/7/1998 LOC 14,500 14,500
Beaver County PA IDA PCR VRDO (Duquesne Light Co.) 3.10% 12/2/1998 LOC 10,600 10,600
Chester County PA IDA VRDO (Archdiocese of Philadelphia) 3.30% 12/2/1998 LOC 24,800 24,800
Cumberland County PA Muni. Auth. PUT (Dickinson College) 2.95% 11/1/1999 LOC 11,385 11,385
Dallastown Area School Dist. GO VRDO 3.29% 12/3/1998 (3) 20,450 20,450
Dauphin County PA General Auth. Hosp. Rev. VRDO
(Reading Hosp. & Medical Center) 3.10% 12/2/1998 12,320 12,320
Delaware County PA IDA Airport Fac. Rev. VRDO
(United Parcel Service) 3.15% 12/2/1998 60,975 60,975
Delaware County PA IDA PCR CP (PECO) 3.00% 3/1/1999 (3) 11,300 11,300
Delaware County PA IDA PCR CP (PECO) 3.00% 3/12/1999 (3) 21,400 21,400
Delaware County PA IDA PCR CP (PECO) 3.05% 3/9/1999 (3) 9,500 9,500
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware County PA IDA PCR CP (PECO) 3.35% 2/18/1999 (3) $ 13,700 $ 13,700
Delaware County PA IDA PCR VRDO (BP Exploration & Oil) 3.30% 12/2/1998 8,000 8,000
Delaware County PA IDA PCR VRDO (PECO) 3.30% 12/2/1998 LOC 3,525 3,525
Delaware County PA IDA Rev. VRDO (General Electric Capital Corp.) 3.15% 12/2/1998 30,100 30,100
Delaware County PA IDA Solid Waste Rev. VRDO
(Scott Paper Co. Project) 3.15% 12/2/1998 76,305 76,305
Downington PA School Dist. TRAN 4.04% 6/30/1999 1,000 1,001
Emmaus PA General Auth. Local Govt. Rev. VRDO 3.25% 12/2/1998 95,000 95,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Altoona Area School Dist.) 3.15% 12/9/1998 LOC 15,000 15,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Avon Grove School Dist.) 3.15% 12/2/1998 LOC 19,800 19,800
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Big Spring School Dist.) 3.15% 12/2/1998 LOC 15,000 15,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Colonial School Dist.) 3.15% 12/2/1998 LOC 8,200 8,200
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Council Rock School Dist.) 3.15% 12/2/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(East Penn School Dist.) 3.15% 12/2/1998 LOC 8,700 8,700
Emmaus PA General Auth. Local Govt. Rev. VRDO
(East Pennsboro Area School Dist.) 3.15% 12/2/1998 LOC 5,600 5,600
Emmaus PA General Auth. Local Govt. Rev. VRDO
(East Stroudsburg Area School Dist.) 3.15% 12/2/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Kennett Consolidated School Dist.) 3.15% 12/2/1998 LOC 20,000 20,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Lower Merion School Dist.) 3.15% 12/2/1998 LOC 15,000 15,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Methacton School Dist.) 3.15% 12/2/1998 LOC 13,000 13,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Nazareth PA Area School Dist.) 3.15% 12/2/1998 LOC 18,700 18,700
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Northern York County School Dist.) 3.15% 12/2/1998 LOC 7,200 7,200
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Oxford Area School Dist.) 3.15% 12/2/1998 LOC 7,900 7,900
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Pennridge School Dist.) 3.15% 12/2/1998 LOC 9,600 9,600
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Pottsgrove School Dist.) 3.15% 12/2/1998 LOC 5,400 5,400
Emmaus PA General Auth. Local Govt. Rev. VRDO
(South York School Dist.) 3.15% 12/2/1998 LOC 9,800 9,800
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Upper Dublin School Dist.) 3.25% 12/2/1998 LOC 9,300 9,300
Emmaus PA General Auth. Local Govt. Rev. VRDO
(Upper Merion School Dist.) 3.15% 12/2/1998 LOC 10,000 10,000
Emmaus PA General Auth. Local Govt. Rev. VRDO (West Allegheny) 3.15% 12/2/1998 LOC 15,000 15,000
Emmaus PA General Auth. Local Govt. Rev. VRDO
(West Chester Area School Dist.) 3.15% 12/2/1998 LOC 10,000 10,000
Geisinger Health System Auth. of Pennsylvania VRDO
(Penn State Geisinger Health) 3.25% 12/2/1998 5,650 5,650
Lehigh County PA Auth. Rev. VRDO (Lehigh Valley Hosp.) 3.15% 12/2/1998 (2) 11,000 11,000
Lehigh County PA IDA PCR TOB VRDO (Pennsylvania Power & Light) 3.25% 12/3/1998 (1) 6,350 6,350
Lower Merion PA School Dist. GO TOB BAN 3.25% 12/3/1998 6,070 6,070
Mercerburg Borough PA Auth. VRDO (Mercerburg College) 3.20% 12/2/1998 LOC 7,500 7,500
Montgomery County PA Higher Educ. & Health Auth. 7.50% 11/1/1999 (Prere.) 3,465 3,603
Montgomery County PA IDA PCR CP (PECO) 3.00% 2/16/1999 LOC 11,640 11,640
Montgomery County PA IDA PCR CP (PECO) 3.00% 3/17/1999 LOC 8,000 8,000
Montgomery County PA IDA PCR CP (PECO) 3.35% 2/18/1999 LOC 7,400 7,400
Montgomery County PA VRDO 3.15% 12/2/1998 900 900
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Northeastern PA Hosp. & Educ. Auth. VRDO
(Wyoming Valley Health Care Obligated Group) 3.10% 12/2/1998 (2) $ 49,100 $ 49,100
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.05% 2/12/1999 (1) 14,800 14,800
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.10% 3/9/1999 (1) 10,300 10,300
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.40% 12/16/1998 (1) 4,000 4,000
Northeastern PA Hosp. Auth. Pooled CP (Hosp. Central Services) 3.55% 12/11/1998 (1) 4,900 4,900
Pennsylvania CP 3.35% 1/14/1999 11,000 11,000
Pennsylvania GO 4.25% 8/1/1999 15,375 15,446
Pennsylvania GO 4.50% 3/1/1999 8,600 8,618
Pennsylvania GO 4.75% 6/15/1999 (1) 2,500 2,519
Pennsylvania GO 5.25% 11/15/1999 (3) 3,500 3,579
Pennsylvania Higher Educ. Assistance Agency
Student Loan Rev. VRDO 3.20% 12/2/1998 LOC 123,600 123,600
Pennsylvania Higher Educ. Assistance Agency
Student Loan Rev. VRDO 3.35% 12/2/1998 LOC 20,000 20,000
Pennsylvania Higher Educ. Fac. Auth. Rev. 4.50% 6/15/1999 (1) 1,120 1,124
Pennsylvania Higher Educ. Fac. Auth. VRDO (Carnegie Mellon Univ.) 3.25% 12/2/1998 41,300 41,300
Pennsylvania Higher Educ. Fac. Auth. VRDO (St. Joseph's Univ.) 4.00% 11/1/1999 LOC 12,000 12,102
Pennsylvania Higher Educ. Fac. Auth. VRDO (Temple Univ.) 3.30% 12/2/1998 LOC 38,900 38,900
Pennsylvania Higher Educ. Fac. Auth. VRDO (Univ. of Pennsylvania ) 3.25% 12/2/1998 115,700 115,700
Pennsylvania Intergovernmental Cooperative Auth. Rev. 5.75% 6/15/1999 (3) 8,930 9,057
Pennsylvania State Univ. BAN 4.50% 3/30/1999 17,800 17,851
Pennsylvania Turnpike Comm. Rev. 7.625% 12/1/1999 (Prere.) 1,425 1,517
Pennsylvania Turnpike Comm. Rev. VRDO 3.30% 12/2/1998 13,500 13,500
Pennsylvania Turnpike Comm. Oil Franchise Tax Rev. TOB VRDO 3.25% 12/3/1998 (2) 4,130 4,130
Philadelphia PA GO 4.60% 5/15/1999 (3) 4,345 4,375
Philadelphia PA Hosp. & Higher Educ. Fac. Auth.
(Albert Einstein Medical Center) 7.625% 4/1/1999 (Prere.) 4,500 4,657
Philadelphia PA Hosp. & Higher Educ. Fac. Auth.
(Jefferson Health System) 4.25% 5/15/1999 (1) 2,860 2,868
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. of Philadelphia) 3.25% 12/2/1998 42,560 42,560
Philadelphia PA IDA VRDO (Cancer Research) 3.25% 12/2/1998 LOC 4,000 4,000
Philadelphia PA School Dist. GO 6.70% 7/1/1999 (2) 9,000 9,187
Philadelphia PA School Dist. TRAN 4.25% 6/30/1999 44,000 44,153
Philadelphia PA Water & Sewer Rev. 6.90% 10/1/1999 (1)(Prere.) 5,300 5,568
Philadelphia PA Water & Waste Water Rev. VRDO 3.05% 12/2/1998 (2) 60,900 60,900
St. Mary's Hosp. PA VRDO (Catholic Health Initiatives) 3.05% 12/2/1998 23,100 23,100
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financial Program) 3.20% 12/2/1998 (2) 123,405 123,405
Scranton-Lackawanna PA Health & Welfare Auth. VRDO
(Mercy Health System) 3.10% 12/2/1998 6,500 6,500
South Fork PA Muni. Auth. Hosp. Rev. VRDO
(Conemaugh Health Systems) 3.15% 12/2/1998 (1) 45,800 45,800
Temple Univ. PA Higher Educ. GO 4.50% 5/14/1999 13,500 13,544
Univ. of Pittsburgh PA Higher Educ. VRDO 3.00% 12/3/1998 LOC 37,000 37,000
Washington County PA Higher Educ. VRDO
(Pooled Equipment Lease Program) 3.25% 12/2/1998 LOC 17,200 17,200
York County PA IDA PCR VRDO (PECO) 3.30% 12/2/1998 LOC 6,340 6,340
York County PA IDA PCR VRDO (Public Service Electric & Gas) 3.10% 12/2/1998 (1) 5,200 5,200
OUTSIDE PENNSYLVANIA:
Puerto Rico TRAN 3.50% 7/30/1999 ++ 18,000 18,076
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,892,435) $1,892,435
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-1.3%)
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 40,327
Payables for Investment Securities Purchased (58,437)
Other Liabilities (5,700)
------------
(23,810)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------------------------
Applicable to 1,868,661,880 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,868,625
====================================================================================================================================
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 25.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,868,661 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (36) --
Unrealized Appreciation -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,868,625 $1.00
====================================================================================================================================
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PENNSYLVANIA INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (99.2%)
===================================================================================================================================
ISSUER INSURED (95.3%)
Allegheny County PA Airport Rev. (Pittsburgh International Airport) 5.00% 1/1/2017 (1) $ 12,205 $ 12,243
Allegheny County PA Airport Rev. (Pittsburgh International Airport) 5.00% 1/1/2019 (1) 15,750 15,729
Allegheny County PA GO 0.00% 5/1/2003 (2) 8,815 7,387
Allegheny County PA GO 6.00% 5/1/2010 (2) 3,030 3,272
Allegheny County PA GO 6.00% 5/1/2012 (2) 3,000 3,242
Allegheny County PA Hosp. Dev. Auth. Rev. (Catholic Health East) 5.25% 11/15/2013 (2) 1,000 1,041
Allegheny County PA Hosp. Dev. Auth. Rev. (Magee Women's Hosp.) 6.00% 10/1/2010 (3) 4,235 4,867
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health) 3.30% 12/3/1998 (1) 6,000 6,000
Allegheny County PA Hosp. Dev. Auth. Rev.
(Presbyterian Univ. Health System) 6.00% 11/1/2002 (1)(Prere.) 3,000 3,244
Allegheny County PA Hosp. Dev. Auth. Rev.
(Presbyterian Univ. Health System) 7.125% 7/1/1999 (1)(Prere.) 6,835 7,129
Allegheny County PA Hosp. Dev. Auth. Rev. (Univ. of Pittsburgh) 5.125% 7/1/2022 (1) 5,960 5,883
Allegheny County PA Hosp. Dev. Auth. Rev. (Univ. of Pittsburgh) 5.60% 4/1/2017 (1) 2,000 2,127
Allegheny County PA Hosp. Dev. Auth. VRDO
(Children's Hosp. Pittsburgh) 3.35% 12/3/1998 (1) 2,050 2,050
Allegheny County PA Hosp. Dev. Auth. VRDO
(Presbyterian Univ. Health System) 3.30% 12/3/1998 (1) 2,700 2,700
Allegheny County PA Sanitation Auth. Sewer Rev. 5.50% 12/1/2013 (3) 19,000 20,083
Allegheny County PA Sanitation Auth. Sewer Rev. 5.50% 12/1/2016 (3) 23,665 24,545
Allegheny County PA Sanitation Auth. Sewer Rev. 6.00% 12/1/2019 (1) 20,000 22,350
Allegheny County PA Sanitation Auth. Sewer Rev. 6.25% 12/1/2014 (1) 9,660 10,852
Allegheny County PA Sanitation Auth. Sewer Rev. 6.50% 12/1/2011 (3) 8,000 8,596
Altoona PA Water Rev. Auth. 6.50% 11/1/2004 (3)(Prere.) 19,790 22,778
Altoona PA Water Rev. Auth. 6.50% 11/1/2019 (3) 210 238
Beaver County PA IDA PCR (Ohio Edison) 7.00% 6/1/2021 (3) 22,715 24,666
Beaver County PA IDA PCR (Ohio Edison) 7.10% 6/1/2018 (3) 5,000 5,327
Berks County PA GO 0.00% 11/15/2013 (3)(ETM) 7,250 3,514
Berks County PA GO 0.00% 11/15/2014 (3)(ETM) 8,615 3,948
Berks County PA GO 0.00% 11/15/2015 (3)(ETM) 6,250 2,705
Berks County PA GO 5.75% 11/15/2012 (3) 7,750 8,256
Berks County PA Hosp. Rev. (Reading Hosp.) 5.70% 10/1/2014 (1) 4,500 4,993
Berks County PA Hosp. Rev. (Reading Hosp.) 6.10% 10/1/2023 (1) 16,500 18,269
Blair County PA Hosp. Auth. Rev. (Altoona Hosp.) 5.00% 7/1/2022 (2) 5,815 5,720
Blair County PA Hosp. Auth. Rev. (Altoona Hosp.) 5.50% 7/1/2016 (2) 4,480 4,811
Blair County PA Hosp. Auth. Rev. (Altoona Hosp.) 6.50% 7/1/2002 (2)(Prere.) 8,500 9,426
Boyertown PA Area School Dist. GO 6.10% 9/1/2002 (2)(Prere.) 6,000 6,493
Butler County PA GO 6.00% 7/15/2012 (3) 5,185 5,540
Center City Philadelphia PA Business Improvement 5.50% 12/1/2015 (2) 6,955 7,370
Center Township PA Sewer Auth. Rev. 5.50% 4/15/2011 (1) 2,375 2,522
Central Dauphin PA School Dist. GO 0.00% 6/1/2004 (2) 4,800 3,831
Chester County PA Health & Educ. Fac. Auth. Rev.
(Chester County Hosp.) 5.875% 7/1/2016 (1) 7,870 8,494
Chester County PA Health & Educ. Fac. Auth. Rev.
(Jefferson Health System) 5.125% 5/15/2018 (2) 12,445 12,536
Chester County PA Health & Educ. Fac. Auth. Rev.
(Jefferson Health System) 5.25% 5/15/2022 (2) 35,555 35,920
Coatesville PA School Dist. GO 5.75% 4/1/2015 (4) 10,080 10,925
Cornwall Lebanon PA Suburban Joint School Dist. GO 5.875% 3/1/2004 (3)(Prere.) 5,635 6,075
Cornwall Lebanon PA Suburban Joint School Dist. GO 5.90% 3/1/2004 (3)(Prere.) 3,270 3,537
Corry PA Area School Dist. GO 5.50% 12/15/2010 (1) 4,000 4,225
Dauphin County PA General Auth. Rev. (West Pennsylvania Hosp.) 5.50% 7/1/2013 (1) 5,000 5,279
Delaware County PA Auth. College Rev. (Haverford College) 5.40% 11/15/2013 (1) 1,750 1,844
Delaware County PA Auth. Rev. (Catholic Health East) 5.25% 11/15/2012 (2) 3,435 3,603
Delaware County PA Auth. Rev. (Catholic Health East) 5.25% 11/15/2013 (2) 4,665 4,859
Delaware County PA Auth. Rev. (Villanova Univ.) 5.00% 12/1/2028 (1) 26,885 26,637
Delaware County PA Hosp. Auth. Rev.
(Delaware County Memorial Hosp.) 5.50% 8/15/2013 (1) 12,000 12,714
</TABLE>
20
<PAGE> 23
<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.) 7.125% 8/15/1999 (1)(Prere.) $ 5,160 $ 5,406
Delaware County PA Hosp. Auth. Rev.
(Delaware County Memorial Hosp.) 7.20% 8/15/1999 (1)(Prere.) 8,000 8,385
Delaware River Joint Toll Bridge Comm. Pennsylvania &
New Jersey Rev. 6.00% 7/1/2018 (3) 3,040 3,231
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026 (3) 21,450 22,448
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 6.50% 1/1/2009 (2) 4,500 4,513
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 7.375% 1/1/2007 (2) 13,500 13,818
Delaware Valley PA Regional Finance Auth. Local Govt. Rev. 5.50% 8/1/2028 (2) 36,750 40,361
Dover Township PA Sewer Auth. Rev. 5.50% 11/1/2017 (1) 2,235 2,347
Dover Township PA Sewer Auth. Rev. 5.55% 11/1/2022 (1) 4,000 4,194
Erie County PA Hosp. Auth. Rev. (St. Vincent Health Care) 6.125% 7/1/2013 (1) 3,900 4,228
Erie PA School Dist. GO 0.00% 9/1/2010 (4) 5,665 3,331
Erie PA School Dist. GO 0.00% 9/1/2011 (4) 5,780 3,216
Erie PA School Dist. GO 0.00% 9/1/2013 (4) 2,780 1,371
Erie PA School Dist. GO 0.00% 9/1/2016 (4) 5,785 2,403
Fort LeBoeuf PA School Dist. GO 5.80% 1/1/2003 (1)(Prere.) 5,500 5,908
Garnet Valley PA School Dist. GO 5.70% 4/1/2011 (2) 3,000 3,162
Greensburg Salem PA School Dist. GO 6.45% 9/15/2018 (1) 7,500 8,140
Hazleton PA Area School Dist. GO 5.50% 3/1/2011 (3) 3,740 4,067
Hazleton PA Area School Dist. GO 5.75% 3/1/2012 (3) 3,945 4,379
Hazleton PA Area School Dist. GO 6.00% 3/1/2016 (3) 18,245 20,723
Lancaster PA Higher Educ. Auth. Rev. (Franklin & Marshall College) 6.60% 4/15/2010 (1) 4,940 5,337
Lancaster PA Higher Educ. Auth. Rev. (Franklin & Marshall College) 6.70% 4/15/2012 (1) 4,000 4,344
Lancaster PA School Dist. GO 5.375% 2/15/2017 (3) 5,590 5,783
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Health Network) 5.00% 7/1/2028 (1) 15,905 15,615
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Health Network) 5.625% 7/1/2005 (1)(Prere.) 800 886
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Health Network) 5.625% 7/1/2025 (1) 9,200 9,722
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Health Network) 5.70% 7/1/2010 (1) 3,905 4,234
Lehigh County PA General Purpose Hosp. Auth. Rev.
(Lehigh Valley Health Network) 7.00% 7/1/2016 (1) 4,415 5,517
Lehigh County PA GO 6.00% 10/15/1999 (2)(Prere.) 1,000 1,025
Lewisburg PA Area School Dist. GO 6.20% 6/1/2002 (1)(Prere.) 3,500 3,782
Lewisburg PA Area School Dist. GO 6.25% 6/1/2002 (1)(Prere.) 3,685 3,988
Ligonier Valley PA School Dist. GO 6.00% 3/1/2004 (1)(Prere.) 6,000 6,587
Manheim PA Central School Dist. GO 6.85% 3/1/2008 (3) 2,705 2,881
McKeesport PA Area School Dist. GO 0.00% 10/1/2004 (1) 1,040 819
McKeesport PA Area School Dist. GO 0.00% 10/1/2005 (1) 1,050 789
McKeesport PA Area School Dist. GO 0.00% 10/1/2006 (1) 2,015 1,447
McKeesport PA Area School Dist. GO 0.00% 10/1/2007 (1) 2,080 1,425
McKeesport PA Area School Dist. GO 0.00% 10/1/2008 (1) 2,270 1,477
McKeesport PA Area School Dist. GO 0.00% 10/1/2009 (1) 2,020 1,245
McKeesport PA Area School Dist. GO 0.00% 10/1/2010 (1) 1,840 1,072
McKeesport PA Area School Dist. GO 0.00% 10/1/2011 (1) 1,835 1,011
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Abington Memorial Hosp.) 5.00% 6/1/2028 (2) 8,660 8,503
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Abington Memorial Hosp.) 6.00% 6/1/2003 (2)(Prere.) 8,140 8,998
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Abington Memorial Hosp.) 6.00% 6/1/2022 (2) 2,020 2,201
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Abington Memorial Hosp.) 6.10% 6/1/2012 (2) 5,000 5,491
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Pottstown Healthcare) 5.00% 1/1/2027 (4) 6,250 6,139
Montgomery County PA Higher Educ. & Health Auth. Rev.
(Pottstown Healthcare) 5.375% 1/1/2012 (4) 5,085 5,398
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PENNSYLVANIA INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Montgomery County PA IDA PCR (PECO) 6.70% 12/1/2021 (1) $ 12,000 $ 13,051
Mount Lebanon PA Hosp. Dev. Auth. Rev. (St. Clair Memorial Hosp.) 6.25% 7/1/2006 (3) 9,250 10,503
Nazareth PA School Dist. GO 5.50% 11/15/2015 (2) 1,500 1,587
Neshaminy PA School Dist. GO 5.70% 2/15/2014 (3) 8,795 9,535
Neshaminy PA School Dist. GO 6.30% 8/15/2002 (3)(Prere.) 10,000 10,882
North Hills PA School Dist. GO 5.25% 11/15/2017 (3) 7,440 8,064
North Penn PA Water Auth. Rev. 6.125% 11/1/2010 (3) 5,140 5,571
North Wales PA Water Auth. Rev. 5.25% 11/1/2019 (3) 12,350 12,557
North Wales PA Water Auth. Rev. 6.125% 11/1/2002 (3)(Prere.) 11,300 12,137
Northampton County PA Higher Educ. Auth. Rev. (Lehigh Univ.) 7.10% 11/15/1999 (1)(Prere.) 6,000 6,341
Northampton County PA Higher Educ. Auth. Rev. (Lehigh Univ.) 7.10% 11/15/2009 (1) 1,035 1,092
Northampton County PA Hosp. Auth. Rev. (Easton Hosp.) 6.25% 1/1/2019 (1) 10,000 10,900
Northampton County PA Hosp. Auth. Rev. (Easton Hosp.) 7.875% 1/1/2019 (5) 285 292
Northampton County PA IDA PCR (Central Metro. Edison) 6.10% 7/15/2021 (1) 4,410 4,917
Northeastern PA Hosp. & Educ. Health Rev. (Wyoming Valley Health) 5.25% 1/1/2016 (2) 6,560 6,714
Northeastern PA Hosp. & Educ. Health Rev. (Wyoming Valley Health) 5.25% 1/1/2026 (2) 5,350 5,400
Northumberland County PA Commonwealth Lease Rev. 6.25% 10/15/2001 (1)(Prere.) 13,600 14,565
Owen J. Roberts School Dist. PA GO 5.375% 5/15/2018 (1) 4,565 4,726
Penn Hills PA GO 5.80% 12/1/2002 (2)(Prere.) 11,735 12,630
Penn Trafford PA School Dist. GO 5.85% 5/1/2004 (1)(Prere.) 2,435 2,662
Pennsylvania Convention Center Auth. Rev. 0.00% 9/1/2004 (3)(ETM) 5,000 3,966
Pennsylvania Convention Center Auth. Rev. 6.00% 9/1/2019 (3)(ETM) 12,600 14,447
Pennsylvania Convention Center Auth. Rev. 6.70% 9/1/2016 (3)(ETM) 19,150 23,275
Pennsylvania GO 5.125% 3/15/2017 (2) 7,990 8,159
Pennsylvania GO 5.375% 5/15/2010 (3) 13,800 14,833
Pennsylvania GO 5.375% 5/15/2012 (3) 16,570 17,625
Pennsylvania GO 5.375% 5/15/2014 (3) 14,000 14,746
Pennsylvania GO 5.375% 5/15/2016 (3) 5,000 5,229
Pennsylvania Higher Educ. Auth. Rev.
(Allegheny/Delaware Valley Obligated Group) 5.50% 11/15/2008 (1) 2,000 2,022
Pennsylvania Higher Educ. Auth. Rev.
(Allegheny/Delaware Valley Obligated Group) 5.875% 11/15/2016 (1) 20,000 20,244
Pennsylvania Higher Educ. Auth. Rev.
(Allegheny/Delaware Valley Obligated Group) 5.875% 11/15/2021 (1) 9,545 9,661
Pennsylvania Higher Educ. Auth. Rev. (Bryn Mawr College) 5.625% 12/1/2014 (1) 2,200 2,395
Pennsylvania Higher Educ. Auth. Rev. (Hahnemann Univ.) 7.20% 7/1/1999 (1)(Prere.) 1,400 1,461
Pennsylvania Higher Educ. Auth. Rev. (College and Univ.) 7.20% 1/1/2004 (2) 2,120 2,127
Pennsylvania Higher Educ. Auth. Rev. (Temple Univ.) 5.00% 4/1/2029 (1) 8,700 8,606
Pennsylvania Higher Educ. Auth. Rev. (Temple Univ.) 5.25% 4/1/2011 (1) 3,545 3,772
Pennsylvania Higher Educ. Auth. Rev. (Temple Univ.) 5.25% 4/1/2012 (1) 1,040 1,099
Pennsylvania Higher Educ. Auth. Rev. (Temple Univ.) 5.25% 4/1/2016 (1) 4,000 4,152
Pennsylvania Intergovernmental Cooperative Auth. Rev. 5.625% 6/15/2013 (3) 2,605 2,807
Pennsylvania Intergovernmental Cooperative Auth. Rev. 7.00% 6/15/2005 (3)(Prere.) 2,250 2,635
Pennsylvania Turnpike Comm. Rev. 5.50% 12/1/2017 (3) + 16,000 16,570
Pennsylvania Turnpike Comm. Rev. 5.75% 12/1/2012 (2) 10,000 10,793
Pennsylvania Turnpike Comm. Rev. 6.00% 6/1/2015 (1) 28,800 30,752
Pennsylvania Turnpike Comm. Rev. 6.25% 6/1/2011 (2) 14,390 15,450
Pennsylvania Turnpike Comm. Oil Franchise Tax Rev. 5.00% 12/1/2023 (2) 24,325 24,139
Pennsylvania Turnpike Comm. Oil Franchise Tax Rev. 5.125% 12/1/2016 (2) 4,735 4,857
Pennsylvania Turnpike Comm. Oil Franchise Tax Rev. 6.00% 12/1/2004 (2)(Prere.) 7,450 8,377
Philadelphia PA Airport Rev. 5.00% 7/1/2023 (3) 8,950 8,715
Philadelphia PA Airport Rev. 5.125% 7/1/2028 (3) 12,650 12,507
Philadelphia PA Airport Rev. 5.750% 6/15/2010 (3) 4,440 4,914
Philadelphia PA Gas Works Rev. 5.00% 7/1/2028 (4) 5,000 4,946
Philadelphia PA Gas Works Rev. 5.25% 7/1/2011 (4) 3,965 4,163
Philadelphia PA Gas Works Rev. 5.375% 7/1/2012 (4) 4,000 4,222
Philadelphia PA Gas Works Rev. 5.375% 7/1/2014 (4) 4,810 5,024
Philadelphia PA Gas Works Rev. 6.00% 5/15/2000 (2)(Prere.) 14,250 15,041
Philadelphia PA Gas Works Rev. 6.75% 1/1/2015 (2) 13,930 14,248
Philadelphia PA Gas Works Rev. 7.25% 1/1/2010 (2) 10,085 10,319
Philadelphia PA GO 5.00% 5/15/2020 (1) 12,650 12,567
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philadelphia PA GO 5.00% 3/15/2028 (4) ++ $ 10,000 $ 9,833
Philadelphia PA GO 5.25% 3/15/2014 (4) ++ 2,000 2,077
Philadelphia PA GO 5.25% 3/15/2015 (4) ++ 2,600 2,690
Philadelphia PA GO 6.00% 11/15/2010 (3) 2,810 3,101
Philadelphia PA GO 6.00% 11/15/2011 (3) 3,025 3,340
Philadelphia PA GO 6.00% 11/15/2012 (3) 3,355 3,704
Philadelphia PA GO 6.00% 11/15/2013 (3) 1,885 2,076
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Jefferson Health System) 5.125% 5/15/2018 (2) 5,700 5,742
Philadelphia PA Parking Auth. Rev. 5.40% 9/1/2011 (2) 4,520 4,822
Philadelphia PA Parking Auth. Rev. 5.40% 9/1/2012 (2) 5,990 6,355
Philadelphia PA Parking Auth. Rev. 5.40% 9/1/2015 (2) 6,350 6,648
Philadelphia PA Parking Auth. Rev. 5.50% 9/1/2018 (2) 4,250 4,460
Philadelphia PA School Dist. GO 0.00% 7/1/2001 (2) 11,750 10,649
Philadelphia PA School Dist. GO 5.25% 4/1/2017 (2) 5,470 5,577
Philadelphia PA School Dist. GO 5.50% 9/1/2015 (2) 5,000 5,255
Philadelphia PA School Dist. GO 5.50% 9/1/2018 (2) 4,000 4,167
Philadelphia PA School Dist. GO 5.50% 9/1/2025 (2) 15,000 15,654
Philadelphia PA Water & Waste Water Rev. 5.50% 8/1/2014 (1) 12,900 13,599
Philadelphia PA Water & Waste Water Rev. 5.60% 8/1/2018 (1) 5,920 6,234
Philadelphia PA Water & Waste Water Rev. 6.25% 8/1/2011 (1) 3,750 4,355
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/2010 (3) 33,865 41,593
Philadelphia PA Water & Waste Water Rev. 7.00% 6/15/2011 (3) 35,685 44,125
Pine Richland School Dist. PA GO 5.50% 9/1/2019 (4) 3,430 3,579
Pittsburgh PA GO 5.125% 9/1/2014 (3) 10,435 10,737
Pittsburgh PA GO 5.125% 9/1/2015 (3) 7,795 7,978
Pittsburgh PA GO 5.25% 9/1/2017 (3) 4,980 5,117
Pittsburgh PA GO 5.25% 9/1/2018 (2) 5,500 5,623
Pittsburgh PA GO 5.50% 9/1/2014 (2) 10,500 11,439
Pittsburgh PA GO 6.25% 9/1/2001 (1)(Prere.) 11,030 11,982
Pittsburgh PA Public Parking Auth. Rev. 5.875% 12/1/2012 (3) 8,200 8,903
Pittsburgh PA School Dist. 0.00% 8/1/2009 (2) 4,000 2,483
Pittsburgh PA Water & Sewer System Rev. 5.00% 9/1/2019 (4) 5,170 5,181
Pittsburgh PA Water & Sewer System Rev. 7.25% 9/1/2014 (3)(ETM) 25,210 31,249
Pittsburgh PA Water & Sewer System Rev. 7.625% 9/1/2004 (3)(ETM) 5,370 6,200
Pocono Mountain PA School Dist. GO 5.75% 10/1/2009 (2) 6,000 6,328
Reading PA GO 5.875% 11/15/2002 (2)(Prere.) 4,175 4,498
Reading PA GO 5.875% 11/15/2012 (2) 13,825 14,765
St. Mary's Hosp. Auth. Langhorne PA Rev.
(Franciscan Health System) 7.00% 7/1/2009 (5) 1,000 1,040
St. Mary's Hosp. Auth. Langhorne PA Rev.
(Franciscan Health System) 7.00% 7/1/2013 (5) 5,050 5,253
St. Mary's Hosp. Auth. Langhorne PA Rev.
(Franciscan Health System) 7.00% 6/15/2015 (5) 1,770 1,838
Sayre PA Health Care Fac. Auth. Rev. (Guthrie Health Care System) 7.00% 3/1/2011 (2) 2,000 2,164
Sayre PA Health Care Fac. Auth. VRDO
(VHA of Pennsylvania, Pooled Capital Asset Financial Program) 3.20% 12/2/1998 (2) 10,100 10,100
Scranton-Lackawanna PA Health & Welfare Auth. Rev.
(Mercy Health System) 5.625% 1/1/2016 (1) 5,490 5,862
Scranton-Lackawanna PA Health & Welfare Auth. Rev.
(Mercy Health System) 5.70% 1/1/2023 (1) 9,205 9,793
Seneca Valley PA School Dist. GO 5.50% 7/1/2002 (3)(Prere.) 9,965 10,552
Seneca Valley PA School Dist. GO 5.75% 7/1/2002 (3)(Prere.) 4,000 4,269
South Fork PA Hosp. Auth. Rev. (Conemaugh Valley Hosp.) 5.625% 7/1/2010 (6) + 2,300 2,542
South Fork PA Hosp. Auth. Rev. (Conemaugh Valley Hosp.) 5.75% 7/1/2018 (6) 7,000 7,669
Southeastern PA Transp. Auth. Rev. 5.375% 3/1/2017 (3) 2,500 2,607
Southeastern PA Transp. Auth. Rev. 5.375% 3/1/2022 (3) 15,825 16,398
Southeastern PA Transp. Auth. Rev. 5.45% 3/1/2011 (3) 3,730 4,030
Southwestern PA School Dist. GO 6.40% 6/15/2002 (3)(Prere.) 3,825 4,228
Univ. of Pittsburgh PA 5.00% 6/1/2021 (1) 6,000 5,952
Univ. of Pittsburgh PA 5.25% 6/1/2017 (3) 6,995 7,223
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PENNSYLVANIA INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Univ. of Pittsburgh PA 5.50% 6/1/2010 (1) $ 5,285 $ 5,779
Univ. of Pittsburgh PA 5.50% 6/1/2014 (1) 12,620 13,525
Univ. of Pittsburgh PA 6.125% 6/1/2002 (1)(Prere.) 25,025 27,418
Univ. of Pittsburgh PA 6.125% 6/1/2021 (1) 13,545 14,713
Univ. of Pittsburgh PA 6.25% 6/1/2002 (1)(Prere.) 2,760 3,035
Univ. of Pittsburgh PA 6.25% 6/1/2012 (1) 1,490 1,625
Washington County PA Hosp. Auth. Rev. (Shadyside Hosp.) 5.875% 12/15/2009 (2) 22,000 23,874
Washington County PA Hosp. Auth. Rev. (Washington Hosp.) 6.75% 7/1/2012 (2) 10,000 10,621
West Allegheny PA School Dist. GO 6.25% 8/1/2002 (2)(Prere.) 6,155 6,623
West Jefferson Hills PA School Dist. GO 5.90% 8/1/2010 (3) 3,160 3,359
West Jefferson Hills PA School Dist. GO 5.95% 8/1/2014 (3) 7,180 7,653
West Mifflin PA School Dist. GO 5.35% 2/15/2009 (3) 1,555 1,654
West Mifflin PA School Dist. GO 5.625% 2/15/2015 (3) 7,000 7,473
Westmoreland County PA Auth. Rev. 6.125% 7/1/2017 (1)(ETM) 8,205 9,438
York County PA Hosp. Auth. Rev. (York Hosp.) 5.25% 7/1/2017 (2) 3,500 3,574
York County PA Hosp. Auth. Rev. (York Hosp.) 5.25% 7/1/2023 (2) 8,675 8,759
York County PA Solid Waste & Refuse Auth. Rev. 5.50% 12/1/2013 (3) 6,750 7,365
York County PA Solid Waste & Refuse Auth. Rev. 5.50% 12/1/2014 (3) 4,050 4,407
York PA City Sewer Auth. Rev. 0.00% 12/1/2012 (1) 3,235 1,665
OUTSIDE PENNSYLVANIA:
Puerto Rico Govt. Dev. Bank VRDO 2.90% 12/2/1998 (1) 200 200
----------
1,853,131
----------
NONINSURED (3.9%)
Delaware County PA Hosp. Auth. VRDO
(Crozier-Chester Medical Center) 3.53% 12/2/1998 LOC 4,900 4,900
Delaware County PA IDA PCR VRDO (BP Exploration & Oil) 3.30% 12/2/1998 700 700
Emmaus PA General Auth. Local Govt. Rev. VRDO 3.25% 12/2/1998 400 400
Lower Merion Township PA School Dist. GO 5.00% 5/15/2023 11,600 11,407
Montgomery County PA GO 5.375% 10/15/2025 7,930 8,132
Pennsylvania Higher Educ. Fac. Auth. Rev.
(Univ. of Pennsylvania Health System Obligated Group) 5.75% 1/1/2012 6,000 6,415
Pennsylvania Higher Educ. Fac. Auth. Rev.
(Univ. of Pennsylvania Health System Obligated Group) 5.75% 1/1/2022 12,415 13,082
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.) 3.25% 12/2/1998 2,350 2,350
Pennsylvania Higher Educ. Fac. Auth. VRDO (Univ. of Pennsylvania) 3.25% 12/2/1998 300 300
Pennsylvania Housing Single Family Mortgage Finance Agency Rev. 6.90% 4/1/2017 5,225 5,562
Pennsylvania Housing Single Family Mortgage Finance Agency Rev. 7.55% 4/1/2016 2,875 3,010
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. VRDO
(Children's Hosp. of Philadelphia) 3.25% 12/2/1998 LOC 300 300
St. Mary's Hosp. Auth. Bucks County PA Rev.
(Catholic Health System) 5.375% 12/1/2011 2,525 2,693
St. Mary's Hosp. Auth. Bucks County PA Rev.
(Catholic Health System) 5.375% 12/1/2013 2,340 2,467
OUTSIDE PENNSYLVANIA:
Puerto Rico Highway & Transp. Auth. Rev. VRDO 2.90% 12/2/1998 LOC 1,900 1,900
Puerto Rico TRAN 3.50% 7/30/1999 10,000 10,045
----------
75,584
----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,793,685) 1,928,715
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (0.8%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 51,195
Liabilities (36,137)
----------
15,058
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 168,876,786 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,943,773
===================================================================================================================================
NET ASSET VALUE PER SHARE $11.51
===================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with an aggregate value of $4,230,000 have been segregated as
initial margin for open futures contracts. For key to abbreviations and other
references, see below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,800,090 $10.66
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains--Note E 9,072 .05
Unrealized Appreciation (Depreciation)--Notes E and F
Investment Securities 135,030 .80
Futures Contracts (419) --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,943,773 $11.51
===================================================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
CP--Commercial Paper.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
TOB--Tender Option Bond.
TRAN--Tax Revenue Anticipation Note.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
++Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of November 30, 1998.
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.
25
<PAGE> 28
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to the fund. These expenses directly
reduce the amount of investment income available to pay to shareholders as
tax-exempt income dividends. This Statement also shows any Net Gain (Loss)
realized on the sale of investments, and the increase or decrease in the
Unrealized Appreciation (Depreciation) on investments during the period. If a
fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
PENNSYLVANIA
PENNSYLVANIA INSURED
TAX-EXEMPT LONG-TERM
MONEY MARKET TAX-EXEMPT
FUND FUND
-----------------------------------------
YEAR ENDED NOVEMBER 30, 1998
-----------------------------------------
(000) (000)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $59,410 $100,290
-----------------------------------------
Total Income 59,410 100,290
-----------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 216 236
Management and Administrative 2,679 3,050
Marketing and Distribution 542 397
Custodian Fees 23 23
Auditing Fees 9 9
Shareholders' Reports 20 27
Annual Meeting and Proxy Costs 3 4
Trustees' Fees and Expenses 3 3
-----------------------------------------
Total Expenses 3,495 3,749
Expenses Paid Indirectly--Note C (23) (110)
-----------------------------------------
Net Expenses 3,472 3,639
- --------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 55,938 96,651
- --------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 51 16,795
Futures Contracts -- (2,343)
- --------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 51 14,452
- --------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- 23,763
Futures Contracts -- (328)
- --------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 23,435
- --------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $55,989 $134,538
========================================================================================================
</TABLE>
26
<PAGE> 29
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the fund distributes its income
to shareholders each day, the amounts of Distributions--Net Investment Income
generally equal the net income earned as shown under the Operations section. The
amounts of Distributions--Realized Capital Gain may not match the capital gains
shown in the Operations section, because distributions are determined on a tax
basis and may be made in a period different from the one in which the gains were
realized on the financial statements. The Capital Share Transactions section
shows the amount shareholders invested in the fund, either by purchasing shares
or by reinvesting distributions, and the amounts redeemed. The corresponding
numbers of Shares Issued and Redeemed are shown at the end of the Statement.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT PENNSYLVANIA INSURED LONG-TERM
MONEY MARKET FUND TAX-EXEMPT FUND
-------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 55,938 $ 50,219 $ 96,651 $ 90,336
Realized Net Gain (Loss) 51 (44) 14,452 (2,333)
Change in Unrealized Appreciation (Depreciation) -- -- 23,435 14,002
-------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 55,989 50,175 134,538 102,005
-------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (55,938) (50,219) (96,651) (90,336)
Realized Capital Gain -- -- -- (9,435
-------------------------------------------------------------------
Total Distributions (55,938) (50,219) (96,651) (99,771)
-------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 2,017,947 1,721,948 379,935 307,829
Issued in Lieu of Cash Distributions 51,617 45,994 66,823 69,664
Redeemed (1,798,948) (1,541,322) (287,190) (284,646)
-------------------------------------------------------------------
Net Increase from Capital Share Transactions 270,616 226,620 159,568 92,847
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase 270,667 226,576 197,455 95,081
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,597,958 1,371,382 1,746,318 1,651,237
-------------------------------------------------------------------
End of Year $1,868,625 $1,597,958 $1,943,773 $1,746,318
=================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 2,017,947 1,721,948 33,258 27,683
Issued in Lieu of Cash Distributions 51,617 45,994 5,846 6,259
Redeemed (1,798,948) (1,541,322) (25,162) (25,593)
-------------------------------------------------------------------
Net Increase in Shares Outstanding 270,616 226,620 13,942 8,349
=================================================================================================================================
</TABLE>
27
<PAGE> 30
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis. It also presents the fund's Total Return and
shows net investment income and expenses as percentages of average net assets.
These data will help you assess: the variability of the fund's net income and
total returns from year to year; the relative contributions of net income and
capital gains to the fund's total return; how much it costs to operate the fund;
and the extent to which the fund tends to distribute capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in the
fund for one year. Money market funds are not required to report a Portfolio
Turnover Rate.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .033 .034 .033 .036 .025
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
-----------------------------------------------------------------
Total from Investment Operations .033 .034 .033 .036 .025
-----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.033) (.034) (.033) (.036) (.025)
Distributions from Realized Capital Gains -- -- -- -- --
-----------------------------------------------------------------
Total Distributions (.033) (.034) (.033) (.036) (.025)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================================
TOTAL RETURN 3.33% 3.49% 3.36% 3.69% 2.57%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,869 $1,598 $1,371 $1,200 $1,105
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.19% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 3.27% 3.42% 3.30% 3.62% 2.55%
=================================================================================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.27 $11.26 $11.28 $10.07 $11.36
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .597 .598 .606 .612 .625
Net Realized and Unrealized Gain (Loss) on Investments .240 .074 .017 1.210 (1.211)
-----------------------------------------------------------------
Total from Investment Operations .837 .672 .623 1.822 (.586)
-----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.597) (.598) (.606) (.612) (.625)
Distributions from Realized Capital Gain -- (.064) (.037) -- (.079)
-----------------------------------------------------------------
Total Distributions (.597) (.662) (.643) (.612) (.704)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.51 $11.27 $11.26 $11.28 $10.07
=================================================================================================================================
TOTAL RETURN 7.60% 6.21% 5.77% 18.48% -5.44%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,944 $1,746 $1,651 $1,569 $1,299
Ratio of Total Expenses to Average Net Assets 0.20% 0.18% 0.19% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.23% 5.37% 5.47% 5.63% 5.76%
Portfolio Turnover Rate 19% 9% 13% 12% 16%
================================================================================================================================
</TABLE>
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
Vanguard Pennsylvania Tax-Exempt Funds comprises the Pennsylvania Tax-Exempt
Money Market and Pennsylvania Insured Long-Term Tax-Exempt Funds, each of which
is registered under the Investment Company Act of 1940 as an open-end investment
company, or mutual fund. Each fund invests in debt instruments of municipal
issuers whose ability to meet their obligations may be affected by economic and
political developments in the Commonwealth of Pennsylvania.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Tax-Exempt Money Market Fund: Investment
securities are valued at amortized cost, which approximates market value.
Insured Long-Term Tax-Exempt Fund: 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 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 fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. FUTURES CONTRACTS: The Insured Long-Term Tax-Exempt Fund 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 fund may purchase or sell futures contracts instead of
bonds to take advantage of pricing differentials between the futures contracts
and the underlying bonds. The fund may also seek to take advantage of price
differences among bond market sectors by simultaneously buying futures (or
bonds) of one market sector and selling futures (or bonds) of another sector.
Futures contracts may also be used to simulate a fully invested position in the
underlying bonds while maintaining a cash balance for liquidity. The primary
risks associated with the use of futures contracts are imperfect correlation
between changes in market values of bonds held by the fund and the prices of
futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. The aggregate principal amounts of the contracts are not recorded in the
financial statements. Fluctuations in the value of the contracts are recorded in
the Statement of Net Assets as an asset (liability) and in the Statement of
Operations as unrealized appreciation (depreciation) until the contracts are
closed, when they are recorded as realized futures gains (losses).
4. DISTRIBUTIONS: Distributions from net investment income are
declared daily and paid on the first business day of the following month.
Annual distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
5. OTHER: Security transactions are accounted for on the date
securities are bought or sold. Costs used to determine realized gains (losses)
on the sale of investment securities are those of the specific securities sold.
Premiums and original issue discounts are amortized and accreted, respectively,
to interest income over the lives of the respective securities.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the funds under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At November 30, 1998, the funds had
contributed capital to Vanguard (included in Other Assets) of:
30
<PAGE> 33
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
PENNSYLVANIA TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $343 0.02% 0.5%
Insured Long-Term 364 0.02 0.5
-----------------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The funds' investment adviser may direct new issue purchases, subject to
obtaining the best price and execution, to underwriters who have agreed to
rebate or credit to the funds part of the underwriting fees generated. Such
rebates or credits are used solely to reduce the funds' administrative expenses.
The funds' custodian bank has also agreed to reduce its fees when the funds
maintain cash on deposit in the noninterest-bearing custody account. For the
year ended November 30, 1998, directed brokerage and custodian fee offset
arrangements reduced expenses by:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
EXPENSE REDUCTION
(000) TOTAL EXPENSE
-------------------------------------------- REDUCTION AS A
DIRECTED CUSTODIAN PERCENTAGE OF
PENNSYLVANIA TAX-EXEMPT FUND BROKERAGE FEES AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $23 --
Insured Long-Term $87 23 0.01%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
D. During the year ended November 30, 1998, the Insured Long-Term Tax-Exempt
Fund purchased $452,328,000 of investment securities and sold $344,570,000 of
investment securities, other than temporary cash investments.
E. Capital gains distributions are determined on a tax basis and may differ
from realized capital gains for financial reporting purposes due to differences
in the timing of realization of gains. The Insured Long-Term Tax-Exempt Fund had
realized losses totaling $6,980,000 through November 30, 1998, which are
deferred for tax purposes and reduce the amount of unrealized appreciation on
investment securities for tax purposes (see Note F.) At November 30, 1998, the
Insured Long-Term Tax-Exempt Fund had capital gains of $15,633,000 available for
distribution. The Insured Long-Term Tax-Exempt Fund used a capital loss
carryforward of $532,000 to offset taxable capital gains realized during the
year ended November 30, 1998, reducing the amount of capital gains that would
otherwise be available to distribute to shareholders.
F. At November 30, 1998, net unrealized appreciation of Insured Long-Term
Tax-Exempt Fund investment securities for federal income tax purposes was
$128,050,000, consisting of unrealized gains of $128,934,000 on securities that
had risen in value since their purchase and $884,000 in unrealized losses on
securities that had fallen in value since their purchase.
At November 30, 1998, the aggregate settlement value of open futures
contracts expiring through March 1999 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
(000)
-----------------------------------------------
PENNSYLVANIA AGGREGATE UNREALIZED
TAX-EXEMPT FUND/ NUMBER OF LONG SETTLEMENT APPRECIATION
FUTURES CONTRACTS (SHORT) CONTRACTS VALUE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Long-Term/
Municipal Bond Index 60 $ 7,588 $ 88
U.S. Treasury Bond (516) 66,965 (615)
U.S. Treasury Note (186) 22,154 108
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Net unrealized depreciation on open futures contracts is treated as realized
loss for tax purposes.
31
<PAGE> 34
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Shareholders and Trustees of
Vanguard Pennsylvania Tax-Exempt Funds [PHOTO]
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard Pennsylvania Tax-Exempt Money Market Fund and Vanguard Pennsylvania
Insured Long-Term Tax-Exempt Fund (constituting Vanguard Pennsylvania Tax-Exempt
Funds, hereafter referred to as the "Funds") at November 30, 1998, the results
of each of their operations for the year then ended, the changes in each of
their net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 1999
SPECIAL 1998 TAX INFORMATION (UNAUDITED) FOR VANGUARD PENNSYLVANIA TAX-EXEMPT
FUNDS
This information for the fiscal year ended November 30, 1998, is included
pursuant to provisions of the Internal Revenue Code.
Each fund designates 100% of its income dividends as exempt-interest
dividends.
32
<PAGE> 35
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
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.
JOANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & JohnsonoMerck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co., The Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director 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.
THOMAS J. HIGGINS
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> 36
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
first balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
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.
Q770-01/25/1999
(C) 1999 Vanguard Marketing Corporation, Distributor.
All rights reserved.
[GRAPHIC]
