<PAGE> 1
VANGUARD
BOND INDEX
FUNDS
VANGUARD TOTAL BOND MARKET INDEX FUND
VANGUARD SHORT-TERM BOND INDEX FUND
VANGUARD INTERMEDIATE-TERM BOND INDEX FUND
VANGUARD LONG-TERM BOND INDEX FUND
[PHOTO]
SEMIANNUAL
REPORT
JUNE 30, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 9,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
Our report cover pays homage to three anniversaries, each of great significance
to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto-- "Leading the way"--serves as a guiding principle for
our company.
- - The 100th birthday, on July 23, 1998, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group. Mr.
Morgan was friend and mentor to Vanguard founder John C. Bogle, and helped to
shape the standards and business principles that Mr. Bogle laid down for
Vanguard at its beginning nearly 25 years ago: a stress on balanced,
diversified investments; insistence on fair dealing and candor with clients;
and a focus on long-term investing. To our great regret, Mr. Morgan died on
September 2, 1998.
- - The 70th anniversary, on December 28, 1998, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
4
FUND PROFILES
6
PERFORMANCE SUMMARIES
11
FINANCIAL STATEMENTS
14
FOR AN UPDATE ON OUR YEAR 2000
PREPAREDNESS, SEE PAGE 52.
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 moved higher and bond prices fell during the first six months of
1999. These price declines more than offset interest income for three of the
four Vanguard Bond Index Funds, resulting in negative returns for the half-year.
The Total Bond Market Index Fund posted a -1.4% decline, a result that was
in line with its index benchmark and slightly ahead of the return of its average
peer. Our Intermediate-Term and Long-Term Bond Index Funds also had negative
returns, while our Short-Term Bond Index Fund managed a modest gain.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JUNE 30, 1999
- -------------------------------------------------------------------------
<S> <C>
TOTAL BOND MARKET INDEX FUND -1.4%
Average Intermediate-Term
U.S. Government Fund -1.8
Lehman Aggregate Bond Index -1.4
- -------------------------------------------------------------------------
SHORT-TERM BOND INDEX FUND +0.6%
Average Short-Term U.S.
Government Fund +0.2
Lehman 1-5 Year Government/
Corporate Index +0.6
- -------------------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND -2.9%
Average Intermediate-Term
U.S. Government Fund -1.8
Lehman 5-10 Year Government/
Corporate Index -2.9
- -------------------------------------------------------------------------
LONG-TERM BOND INDEX FUND -6.1%
Average General U.S.
Government Fund -2.7
Lehman Long Government/
Corporate Index -6.0
- -------------------------------------------------------------------------
INSTITUTIONAL SHARES
- -------------------------------------------------------------------------
Total Bond Market Index Fund -1.4%
- -------------------------------------------------------------------------
</TABLE>
The table at right presents the six-month total return (capital change plus
reinvested dividends) for each fund along with those of its comparative
standards. Detailed per-share figures for each fund, including net asset values,
yields, income dividends, and capital gains, are presented in the table that
follows this letter. The annualized yields of our funds as of June 30 ranged
from 5.95% for our Short-Term Bond Index Fund to 6.66% for
our Long-Term Bond Index Fund.
It's important to note that semiannual returns for bond funds account for
only half of the year's interest income, while price changes occur immediately
in response to changes in interest rates. For this reason, we think it's also
useful to take into consideration a fund's interest income for a full year. The
table on page 2 presents each bond index fund's return for the past twelve
months, divided into its income and capital components.
THE PERIOD IN REVIEW
The key influences on financial markets during the first half of 1999 were the
surprising strength of the U.S. economy's long-running expansion, promising
corporate earnings, and the increasing signs that a number of shaky foreign
economies were on firmer footing. These factors were responsible for both
broad-based gains in U.S. stocks and increases in interest rates, which sent
bond prices lower.
The overall U.S. stock market, as measured by the Wilshire 5000 Equity
Index, gained +11.8%--equivalent to more than a full year's return based on
historical norms. But the surprising strength of the U.S. economy and an
improved outlook for global
1
<PAGE> 4
economic growth pushed up interest rates along with the prices of oil and many
industrial commodities. In the stock market, these factors contributed to a
notable revival in cyclical stocks--those of commodity-related companies,
machinery makers, and other firms whose profit prospects are most closely tied
to the economy's ups and downs.
For bondholders, a surging economy has a dark side: the possibility that
accelerating growth will push up inflation, which diminishes the buying power of
future bond interest and principal payments. Interest rates held steady in
January, but rose throughout the rest of the half-year. By June 30, yields on
U.S. Treasury notes and bonds were higher by roughly 1 percentage point from
their year-end 1998 levels. The benchmark 30-year Treasury bond's yield
increased 86 basis points (0.86 percentage point), from 5.10% to 5.96%. The rate
rise was less pronounced for short-term securities, with the 3-month Treasury
bill's yield rising 33 basis points, from 4.45% on December 31, 1998, to 4.78%
on June 30.
The Lehman Brothers Aggregate Bond Index, which has an intermediate-term
average maturity and is a benchmark for the taxable bond market, returned -1.4%,
as a -4.4% price decline more than offset +3.0% in interest income. The price
declines were larger for longer-term bonds, whose prices are more sensitive to
interest rate fluctuations.
PERFORMANCE OVERVIEW
All of our bond index funds saw the market value of their holdings fall during
the six months, although the decline was muted for our Short-Term fund.
While fluctuations in bond prices can noticeably detract from or enhance
returns in the short run, over long periods it is interest income that accounts
for the vast majority of a bond fund's total return. Even a period as short as
one year provides a somewhat better perspective on bond returns. The adjacent
table shows that the price declines associated with rising interest rates over
the past twelve months were more than offset by the income generated for the
three shorter-term funds and very nearly offset in the Long-Term fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
COMPONENTS OF TOTAL RETURN
TWELVE MONTHS ENDED
JUNE 30, 1999
- ------------------------------------------------------------------------
INCOME CAPITAL TOTAL
BOND INDEX FUND RETURN RETURN RETURN
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market +6.0% -3.0% +3.0%
Short-Term Bond +5.5 -0.6 +4.9
Intermediate-Term Bond +6.2 -3.5 +2.7
Long-Term Bond +5.8 -6.5 -0.7
- ------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
Total Bond Market +6.1% -3.0% +3.1%
- ------------------------------------------------------------------------
</TABLE>
For long-term investors who hold bond funds for their interest income,
the rise in interest rates is certainly not bad news. Higher yields result in
more attractive reinvestment rates, enhancing returns markedly over the years.
The current annualized SEC yields for our four funds were noticeably higher on
June 30 than on last December 31, when the semiannual period began. For our
Total Bond Market fund, the current yield of 6.44% is 81 basis points higher
than six months ago, while the current yields for our Short-Term,
Intermediate-Term, and Long-Term funds are higher by 94 basis points, 121 basis
points, and 101 basis points, respectively.
As noted, our Total Bond Market fund outperformed its average mutual fund
peer, as did our Short-Term fund. The returns of the Intermediate-Term and
Long-Term funds trailed the average returns for funds in their peer groups. Our
Long-Term Bond Index Fund maintains a longer average maturity than the average
competitor tracked by
2
<PAGE> 5
Lipper Inc. The comparisons between our funds and their peer groups for the
half-year and previous years are presented in the Performance Summaries on pages
11-13.
It is worth noting that the skilled managers in Vanguard Fixed Income Group
have precisely matched the respective indexes for three of our four funds--a
significant feat given that indexes are not encumbered by the expenses or
transaction costs that any mutual fund must bear. Only the Long-Term Bond Index
Fund fell short of its index, and that by a slim 0.1 percentage point.
IN SUMMARY
Bonds have been overshadowed in recent years by the amazing runup in stock
prices. But we believe it is a mistake to overlook the merits of bond funds,
which include high current income in relation to stocks and the diversification
they add to a stock-oriented portfolio. Indeed, the relatively low correlation
between these two asset classes is precisely why it is important to hold a
diversified mix of assets--including stock funds, bond funds, and money market
funds--in proportions suited to your time horizon, investment goals, and risk
tolerance. Such a balanced portfolio is a time-tested means to gain exposure to
the rewards of investing while moderating the risks. Once you've developed such
a plan for yourself, we suggest that you "stay the course" toward your financial
goals.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
July 21, 1999
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,1999 SEC
NET ASSET VALUE PER SHARE -------------------------- CURRENT
------------------------------------- INCOME CAPITAL ANNUALIZED
BOND INDEX FUND DECEMBER 31, 1998 JUNE 30, 1999 DIVIDENDS GAINS YIELD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Bond Market $10.27 $ 9.81 $0.304 $0.015 6.44%
Short-Term Bond 10.10 9.86 0.263 0.034 5.95
Intermediate-Term Bond 10.48 9.83 0.317 0.034 6.52
Long-Term Bond 11.32 10.29 0.328 0.019 6.66
- ----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------------------------
Total Bond Market $10.27 $ 9.81 $0.308 $0.015 6.54%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JUNE 30, 1999
[PHOTO]
A markedly improved global economic outlook during the first half of 1999 led to
mostly positive stock market returns and lower bond prices.
As the year began, many observers expected that severe economic crises in
Asia, Russia, and some Latin American nations would restrain business activity
worldwide, even in the United States, which has been the world's economic
locomotive. By spring, however, a consensus emerged that global economic
activity was likely to be solid, if not robust. This change in sentiment stemmed
from several factors, including further vigorous growth in the U.S. economy, a
belief that Asia's slump had bottomed out, and moves in Europe to ease monetary
policy to encourage growth.
Interest rates rose as investors stopped wondering whether the Federal
Reserve Board would lower interest rates--as it had three times in autumn
1998--and began to wonder when the Fed would increase rates to slow growth and
thereby forestall inflation. Indeed, on the final day of the period, the Fed
boosted short-term rates by 0.25 percentage point. In the stock market, the
brighter economic outlook led to a change in leadership from glamorous
large-capitalization growth stocks to value stocks and small-cap stocks, both of
which had been among Wall Street's wallflowers in recent years.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JUNE 30, 1999
--------------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 12.4% 22.8% 27.9%
Russell 2000 Index 9.3 1.5 15.4
Wilshire 5000 Index 11.8 19.5 25.7
MSCI EAFE Index 4.1 7.9 8.5
- --------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -1.4% 3.2% 7.8%
Lehman 10 Year Municipal Bond Index -1.7 2.3 6.8
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.2 4.7 5.2
- --------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.4% 2.0% 2.3%
- --------------------------------------------------------------------------------
</TABLE>
*Annualized.
U.S. STOCK MARKETS
The rise in stock prices reflected the healthy domestic economy and improving
prospects for corporate earnings. The overall market, as measured by the
Wilshire 5000 Index, rose 11.8% during the period, while the S&P 500 Index, a
yardstick for large-cap stocks, gained 12.4%.
Large-cap growth stocks, which are generally perceived as less vulnerable
than other stocks to economic slowdowns, continued to lead the market's climb
during the first quarter of the year. During the second quarter, however, value
stocks--especially producers of commodity products such as oil, aluminum, and
chemicals--moved to the front of the pack. Providing support were generally
upbeat corporate profit reports. Indeed, earnings gains were sufficient to send
prices higher despite rising interest rates, which often depress stock prices as
well as bond prices. For the six months, the S&P 500 Index's value stocks posted
a 14.0% return while its growth stocks gained 11.0% as a group.
4
<PAGE> 7
Small-cap stocks, as measured by the Russell 2000 Index, gained 9.3%,
although that fact masks a remarkable turnaround: Small-caps declined 5.4%
during the first quarter of 1999, then advanced 15.6% during the second quarter.
Even so, the cumulative return of the Russell 2000 over the past three years
lags the S&P 500 Index by nearly 80 percentage points (+37.6% for the Russell
2000 versus +115.2% for the S&P 500).
Four of the top-performing sectors within the S&P 500 Index during the
half-year were solidly in the value camp--the "other energy" group (+40%);
producer durables (+26%); materials & processing (+25%); and integrated-oils
(+17%). The strongest growth-oriented sector was the irrepressible technology
group (+24%). The poor performance of the consumer staples sector (-8%) was due
in part to the gains of the U.S. dollar against most foreign currencies, which
reduced the value of earnings from overseas operations.
U.S. BOND MARKETS
The powerful economic expansion that buoyed corporate profits and stock prices
was too much of a good thing for the bond market. Inflation was well
behaved--consumer prices rose 1.4% for the six months and 2.0% for the twelve
months ended June 30--but investors and Fed policymakers clearly were concerned
that an overheated economy might yet trigger significant increases in wages and
overall prices. Certainly, there was no evidence of the "natural slowing" that
many analysts expected for the economy, which is in the longest peacetime
expansion ever.
Yields on U.S. Treasury bonds rose by approximately 1 percentage point--a
significant rise for a six-month period. The yield of the 30-year Treasury bond
rose 86 basis points, to 5.96% on June 30 from 5.10% on December 31, 1998. The
yield of the 10-year Treasury rose 113 basis points, to 5.78% from 4.65%. Money
market rates didn't rise as far: Yields on 3-month T-bills increased on balance
by only 33 basis points, to 4.78% on June 30. Bond prices, which move in the
opposite direction from interest rates, fell. The Lehman Aggregate Bond Index, a
benchmark for investment-grade taxable bonds, declined 1.4% on a total-return
basis, as bond prices declined an average of 4.4%, outweighing the 3.0% in
interest income for the period.
INTERNATIONAL STOCK MARKETS
Led by sharp recoveries in stock prices in Japan and many emerging markets,
international stock prices generated positive returns in local currencies during
the six months. However, a pervasive rise in the value of the U.S. dollar
against other currencies reduced returns for U.S. investors (returns from abroad
are augmented when the dollar falls in value against other currencies).
Overall, the developed markets outside the United States gained 4.1% in
U.S.-dollar terms, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index. The biggest increases were in the
Pacific region--up 27.3% in local-currency terms and 21.1% when measured in U.S.
dollars. Europe, which accounts for the lion's share of EAFE's market
capitalization, was up 8.2% in local currencies. But in U.S. dollars, the return
from European stocks was a negative 2.3%, as weakness in European
currencies--notably in the euro, the new 11-nation common currency--lopped more
than 10 percentage points from the local-currency returns. The MSCI Select
Emerging Markets Free Index shot up 31.5% in dollar terms, led by Asian markets
that rebounded from severe losses suffered in 1997 and 1998.
5
<PAGE> 8
FUND PROFILE
TOTAL BOND MARKET INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to its unmanaged target index. Key elements of
this Profile are defined on page 7.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
TOTAL BOND LEHMAN
MARKET INDEX INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 738 7,520
Yield 6.4% 6.7%
Yield--Institutional Shares 6.5% 6.7%
Yield to Maturity 6.5% 6.6%
Average Coupon 7.3% 6.8%
Average Maturity 9.1 years 9.0 years
Average Quality Aa1 Aaa
Average Duration 4.9 years 4.9 years
Expense Ratio 0.20%** --
Expense Ratio--
Institutional Shares 0.10%** --
Cash Reserves 1.1% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ----------------------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
TOTAL BOND LEHMAN
MARKET INDEX INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.99 1.00
Beta 0.99 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury/Agency 27.1%
Aaa 42.1
Aa 6.4
A 13.0
Baa 11.4
Ba 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 2.2%
1-5 Years 29.6
5-10 Years 48.0
10-20 Years 5.0
20-30 Years 14.3
Over 30 Years 0.9
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Asset-Backed 7.0%
Finance 14.5
Foreign 4.6
Industrial 8.8
Mortgage 34.2
Treasury/Agency 27.1
Utilities 3.8
- --------------------------------------------------------
Total 100.0%
</TABLE>
6
<PAGE> 9
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities. U.S. Treasury securities are considered to
have the highest credit quality.
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 ISSUER. A breakdown of a fund's holdings by type of issuer or
type of instrument.
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
(Treasury/agency, investment-grade corporate, or below investment-grade).
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 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.
7
<PAGE> 10
FUND PROFILE
SHORT-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 7.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -------------------------------------------
SHORT-TERM LEHMAN
BOND INDEX INDEX*
- -------------------------------------------
<S> <C> <C>
Number of Issues 235 7,520
Yield 6.0% 6.7%
Yield to Maturity 6.1% 6.6%
Average Coupon 7.4% 6.8%
Average Maturity 2.8 years 9.0 years
Average Quality Aa1 Aaa
Average Duration 2.4 years 4.9 years
Expense Ratio 0.20%** --
Cash Reserves 1.5% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- -------------------------------------------
<S> <C>
AVERAGE MATURITY SHORT
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -------------------------------------------
SHORT-TERM LEHMAN
BOND INDEX INDEX*
- -------------------------------------------
<S> <C> <C>
R-Squared 0.89 1.00
Beta 0.52 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Treasury/Agency 60.7%
Aaa 6.8
Aa 7.9
A 14.3
Baa 10.3
Ba 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 2.0%
1-3 Years 56.5
3-5 Years 40.7
Over 5 Years 0.8
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Asset-Backed 6.1%
Finance 14.8
Foreign 4.3
Industrial 9.0
Mortgage 0.0
Treasury/Agency 60.7
Utilities 5.1
- -----------------------------------------
Total 100.0%
</TABLE>
8
<PAGE> 11
FUND PROFILE
INTERMEDIATE-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 7.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- --------------------------------------------
INTERMEDIATE-TERM LEHMAN
BOND INDEX INDEX*
- --------------------------------------------
<S> <C> <C>
Number of Issues 186 7,520
Yield 6.5% 6.7%
Yield to Maturity 6.6% 6.6%
Average Coupon 7.3% 6.8%
Average Maturity 7.6 years 9.0 years
Average Quality Aa1 Aaa
Average Duration 5.6 years 4.9 years
Expense Ratio 0.20%** --
Cash Reserves 1.9% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- --------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- --------------------------------------------
INTERMEDIATE-TERM LEHMAN
BOND INDEX INDEX*
- --------------------------------------------
<S> <C> <C>
R-Squared 0.98 1.00
Beta 1.31 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Treasury/Agency 60.5%
Aaa 2.8
Aa 5.4
A 15.6
Baa 15.7
Ba 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 0.1%
1-5 Years 0.7
5-10 Years 96.5
10 -20 Years 2.4
20-30 Years 0.2
Over 30 Years 0.1
- --------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- --------------------------------------------
<S> <C>
Asset-Backed 1.8%
Finance 11.1
Foreign 7.3
Industrial 13.6
Mortgage 0.0
Treasury/Agency 60.5
Utilities 5.7
- --------------------------------------------
Total 100.0%
</TABLE>
9
<PAGE> 12
FUND PROFILE
LONG-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 7.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -------------------------------------------
LONG-TERM LEHMAN
BOND INDEX INDEX*
- -------------------------------------------
<S> <C> <C>
Number of Issues 171 7,520
Yield 6.7% 6.7%
Yield to Maturity 6.7% 6.6%
Average Coupon 8.0% 6.8%
Average Maturity 21.8 years 9.0 years
Average Quality Aa1 Aaa
Average Duration 10.0 years 4.9 years
Expense Ratio 0.20%** --
Cash Reserves 1.7% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- --------------------------------------------
<S> <C>
AVERAGE MATURITY LONG
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -------------------------------------------
LONG-TERM LEHMAN
BOND INDEX INDEX*
- -------------------------------------------
<S> <C> <C>
R-Squared 0.95 1.00
Beta 2.07 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Treasury/Agency 65.3%
Aaa 1.3
Aa 3.7
A 16.5
Baa 13.2
Ba 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 0.7%
1-5 Years 1.4
5-10 Years 8.3
10 -20 Years 15.2
20-30 Years 69.6
Over 30 Years 4.8
- -----------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- -----------------------------------------
<S> <C>
Asset-Backed 0.1%
Finance 6.2
Foreign 5.2
Industrial 17.3
Mortgage 0.0
Treasury/Agency 65.3
Utilities 5.9
- -----------------------------------------
Total 100.0%
</TABLE>
10
<PAGE> 13
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TOTAL BOND MARKET INDEX FUND
TOTAL INVESTMENT RETURNS: DECEMBER 11, 1986-JUNE 30, 1999
- --------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
1986 -0.6% 0.4% -0.2% -0.2%
1987 -7.4 8.5 1.1 2.8
1988 -1.6 9.0 7.4 7.9
1989 4.3 9.3 13.6 14.5
1990 -0.3 8.9 8.6 9.0
1991 6.4 8.8 15.2 16.0
1992 -0.2 7.3 7.1 7.4
1993 3.0 6.7 9.7 9.8
1994 -8.8 6.1 -2.7 -2.9
1995 10.6 7.6 18.2 18.5
1996 -3.0 6.6 3.6 3.6
1997 2.5 6.9 9.4 9.7
1998 2.2 6.4 8.6 8.7
1999** -4.3 2.9 -1.4 -1.4
- --------------------------------------------------------------------
</TABLE>
*Lehman Aggregate Bond Index.
**Six months ended June 30, 1999.
See Financial Highlights table on page 46 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
TOTAL BOND MARKET INDEX FUND INSTITUTIONAL SHARES
TOTAL INVESTMENT RETURNS: SEPTEMBER 18, 1995-JUNE 30, 1999
- ---------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND
INSTITUTIONAL SHARES LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 2.7% 1.8% 4.5% 4.4%
1996 -3.0 6.7 3.7 3.6
1997 2.5 7.1 9.6 9.7
1998 2.2 6.5 8.7 8.7
1999** -4.3 2.9 -1.4 -1.4
- ---------------------------------------------------------------------
</TABLE>
*Lehman Aggregate Bond Index.
**Six months ended June 30, 1999.
See Financial Highlights table on page 47 for dividend and capital gains
information since the fund's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- -------------------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION ------------------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Bond Market Index Fund* 12/11/1986 2.99% 7.71% 0.72% 7.24% 7.96%
Total Bond Market Index Fund
Institutional Shares 9/18/1995 3.09 -- -0.02** 6.61** 6.59**
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Since inception.
11
<PAGE> 14
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the funds. Note, too, that both
share price and return can fluctuate widely, so an investment in the funds could
lose money.
<TABLE>
<CAPTION>
SHORT-TERM BOND INDEX FUND
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-JUNE 30, 1999
- ---------------------------------------------------------------------
SHORT-TERM BOND INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -5.0% 4.6% -0.4% -0.2%
1995 6.0 6.9 12.9 12.9
1996 -1.5 6.0 4.5 4.7
1997 0.8 6.2 7.0 7.1
1998 1.7 5.9 7.6 7.6
1999** -2.0 2.6 0.6 0.6
- ---------------------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Government/Corporate Index.
**Six months ended June 30, 1999.
See Financial Highlights table on page 47 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND INDEX FUND
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-JUNE 30, 1999
- ---------------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -8.2% 5.3% -2.9% -2.9%
1995 13.3 7.8 21.1 21.4
1996 -3.9 6.5 2.6 2.7
1997 2.4 7.0 9.4 9.4
1998 3.5 6.6 10.1 10.1
1999** -5.9 3.0 -2.9 -2.9
- ---------------------------------------------------------------------
</TABLE>
*Lehman 5-10 Year Government/Corporate Index.
**Six months ended June 30, 1999.
See Financial Highlights table on page 48 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- ------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Bond Index Fund* 3/1/1994 4.90% 6.58% -0.07% 6.04% 5.97%
Intermediate-Term Bond Index Fund* 3/1/1994 2.72 7.86 -0.07 6.73 6.66
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
12
<PAGE> 15
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>
LONG-TERM BOND INDEX FUND
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-JUNE 30, 1999
- ---------------------------------------------------------------------
LONG-TERM BOND INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -10.4% 5.9% -4.5% -4.6%
1995 21.0 8.7 29.7 30.0
1996 -6.8 6.5 -0.3 0.1
1997 6.9 7.4 14.3 14.5
1998 5.5 6.5 12.0 11.8
1999** -8.9 2.8 -6.1 -6.0
- ---------------------------------------------------------------------
</TABLE>
*Lehman Long Government/Corporate Index.
**Six months ended June 30, 1999.
See Financial Highlights table on page 48 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- -----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-Term Bond Index Fund* 3/1/1994 -0.70% 9.48% 0.71% 6.98% 7.69%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
13
<PAGE> 16
FINANCIAL STATEMENTS
JUNE 30, 1999 (UNAUDITED)
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings, including each
security's market value on the last day of the reporting period. Securities are
grouped and subtotaled by bond type (U.S. government and agency issues,
corporate bonds, foreign bonds, etc.); corporate bonds are further classified by
industry sector. Other assets are added to, and liabilities are subtracted from,
the value of Total Investments 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 of each fund, you will find a
table displaying the composition of the fund's net assets. 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 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*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (60.6%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (20.6%)
U.S. Treasury Bond 7.125% 2/15/2023 $92,575 $ 102,416
U.S. Treasury Bond 7.50% 11/15/2016 3,235 3,648
U.S. Treasury Bond 7.625% 11/15/2022 39,025 45,460
U.S. Treasury Bond 7.875% 2/15/2021 21,810 25,834
U.S. Treasury Bond 8.00% 11/15/2021 94,075 113,255
U.S. Treasury Bond 8.125% 8/15/2019-8/15/2021 568,585 689,129
U.S. Treasury Bond 8.50% 2/15/2020 52,820 66,107
U.S. Treasury Bond 8.75% 5/15/2017-8/15/2020 168,200 214,250
U.S. Treasury Bond 8.875% 8/15/2017-2/15/2019 45,385 58,098
U.S. Treasury Bond 9.125% 5/15/2018 15,840 20,746
U.S. Treasury Bond 9.25% 2/15/2016 835 1,088
U.S. Treasury Bond 9.875% 11/15/2015 4,390 5,997
U.S. Treasury Bond 10.00% 5/15/2010 29,275 34,923
U.S. Treasury Bond 10.375% 11/15/2009-11/15/2012 574,220 705,122
U.S. Treasury Bond 10.75% 5/15/2003 40,410 47,253
U.S. Treasury Bond 11.625% 11/15/2002 50,150 59,044
U.S. Treasury Bond 11.75% 11/15/2014 900 1,282
U.S. Treasury Bond 11.875% 11/15/2003 20,675 25,417
U.S. Treasury Bond 12.00% 8/15/2013 350 492
U.S. Treasury Bond 12.75% 11/15/2010 74,380 100,416
U.S. Treasury Bond 13.25% 5/15/2014 24,800 37,650
U.S. Treasury Bond 14.00% 11/15/2011 3,420 5,010
U.S. Treasury Note 5.50% 5/31/2003 1,700 1,686
U.S. Treasury Note 5.75% 4/30/2003 13,325 13,339
U.S. Treasury Note 7.00% 7/15/2006 27,950 29,640
U.S. Treasury Note 7.875% 8/15/2001 8,800 9,198
-----------
2,416,500
-----------
AGENCY BONDS & NOTES (6.2%)
Federal Farm Credit Bank 4.80% 11/6/2003 34,120 32,353
Federal Home Loan Bank 5.575% 9/2/2003 64,000 62,602
Federal Home Loan Bank 5.675% 8/18/2003 51,450 50,521
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank 5.80% 9/2/2008 $ 74,700 $ 70,963
Federal Home Loan Bank 5.865% 9/2/2008 55,420 52,783
Federal Home Loan Bank 5.88% 11/25/2008 15,300 14,477
Federal Home Loan Bank 5.90% 6/9/2000 1,000 1,004
Federal Home Loan Bank 7.78% 10/19/2001 500 520
Federal Home Loan Bank 8.60% 1/25/2000 110 112
Federal Home Loan Mortgage Corp. 5.63% 1/10/2003 625 614
Federal Home Loan Mortgage Corp. 6.155% 9/15/2000 1,000 1,007
Federal Home Loan Mortgage Corp. 6.45% 4/29/2009 23,000 22,169
Federal Home Loan Mortgage Corp. 7.09% 6/1/2005 4,400 4,430
Federal National Mortgage Assn. 5.25% 1/15/2003 750 731
Federal National Mortgage Assn. 5.64% 12/10/2008 25,000 23,305
Federal National Mortgage Assn. 5.75% 4/15/2003-2/15/2008 33,170 32,726
Federal National Mortgage Assn. 5.90% 7/6/2000-7/9/2003 44,345 43,728
Federal National Mortgage Assn. 5.91% 8/25/2003 18,450 18,202
Federal National Mortgage Assn. 5.96% 4/23/2003 7,900 7,800
Federal National Mortgage Assn. 5.97% 7/3/2003 26,390 26,043
Federal National Mortgage Assn. 6.09% 2/20/2009 51,730 48,936
Federal National Mortgage Assn. 6.16% 3/29/2001 1,300 1,308
Federal National Mortgage Assn. 6.18% 2/19/2009 11,000 10,464
Federal National Mortgage Assn. 6.35% 8/10/1999 100 100
Federal National Mortgage Assn. 6.40% 5/14/2009 67,300 65,136
Federal National Mortgage Assn. 6.56% 4/23/2008 55,000 53,813
Federal National Mortgage Assn. 6.57% 8/22/2007 36,250 36,490
Federal National Mortgage Assn. 6.58% 8/20/2007 36,900 37,168
Federal National Mortgage Assn. 6.59% 5/16/2002 1,500 1,523
Federal National Mortgage Assn. 7.50% 2/11/2002 2,500 2,589
Federal National Mortgage Assn. 7.55% 4/22/2002 3,000 3,118
Federal National Mortgage Assn. 8.25% 12/18/2000 100 104
Federal National Mortgage Assn. 8.35% 11/10/1999 270 273
Federal National Mortgage Assn. 8.45% 7/12/1999 110 110
Government Trust Certificate 9.625% 5/15/2002 223 232
Private Export Funding Corp. 8.40% 7/31/2001 225 236
Resolution Funding Corp. 8.125% 10/15/2019 550 647
Resolution Funding Corp. 8.625% 1/15/2030 110 140
Resolution Funding Corp. 8.875% 7/15/2020 280 354
Small Business Administration Variable Rate
Interest Only Custodial Receipts 2.719% 6/25/2000 10,106 379
Tennessee Valley Authority 8.375% 10/1/1999 610 614
----------
729,824
----------
MORTGAGE-BACKED SECURITIES (33.8%)
Federal Home Loan Mortgage Corp. 5.50% 9/1/2000-12/1/2028 (1) 52,489 49,669
Federal Home Loan Mortgage Corp. 6.00% 7/1/2000-12/1/2029 (1) 515,112 491,287
Federal Home Loan Mortgage Corp. 6.50% 3/1/2000-7/1/2029 (1) 816,868 793,684
Federal Home Loan Mortgage Corp. 7.00% 7/1/1999-5/1/2029 (1) 489,883 487,024
Federal Home Loan Mortgage Corp. 7.50% 8/1/1999-12/1/2028 (1) 260,425 263,867
Federal Home Loan Mortgage Corp. 8.00% 5/1/2002-3/1/2028 (1) 130,939 134,549
Federal Home Loan Mortgage Corp. 8.50% 9/1/2001-1/1/2028 (1) 29,035 30,347
Federal Home Loan Mortgage Corp. 9.00% 8/1/2001-7/1/2027 (1) 8,297 8,815
Federal Home Loan Mortgage Corp. 9.50% 4/1/2016-6/1/2025 (1) 5,602 5,967
Federal Home Loan Mortgage Corp. 10.00% 7/1/2000-4/1/2025 (1) 1,016 1,100
Federal Home Loan Mortgage Corp. 10.50% 9/1/2000-12/1/2015 (1) 203 210
Federal Home Loan Mortgage Corp. 11.25% 8/1/2014 (1) 16 17
Federal Housing Administration Project 7.43% 10/1/2020 (1) 496 503
Federal National Mortgage Assn. 5.50% 1/1/2001-6/1/2009 (1) 1,511 1,449
Federal National Mortgage Assn. 6.00% 10/1/2000-1/1/2029 (1) 194,698 184,575
Federal National Mortgage Assn. 6.50% 2/1/2000-10/1/2028 (1) 233,732 226,672
Federal National Mortgage Assn. 7.00% 9/1/1999-9/1/2028 (1) 170,482 169,142
Federal National Mortgage Assn. 7.50% 7/1/2001-8/1/2027 (1) 64,180 64,974
Federal National Mortgage Assn. 7.55% 10/1/2002 (1) 115 115
Federal National Mortgage Assn. 8.00% 8/1/1999-9/1/2027 (1) 37,398 38,428
Federal National Mortgage Assn. 8.50% 7/1/2006-7/1/2027 (1) 13,949 14,580
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assn. 9.00% 9/1/2003-1/1/2027 (1) $ 6,523 $ 6,915
Federal National Mortgage Assn. 9.50% 10/1/2001-2/1/2025 (1) 3,638 3,879
Federal National Mortgage Assn. 10.00% 8/1/2005-6/1/2022 (1) 1,413 1,522
Federal National Mortgage Assn. 10.50% 11/1/2000-8/1/2020 (1) 447 486
Government National Mortgage Assn. 6.00% 3/1/2009-6/15/2029 (1) 93,172 87,647
Government National Mortgage Assn. 6.50% 10/15/2007-6/15/2029 (1) 248,712 239,984
Government National Mortgage Assn. 7.00% 11/15/2007-6/15/2029 (1) 274,459 271,671
Government National Mortgage Assn. 7.50% 2/15/2007-12/15/2028 (1) 166,395 168,500
Government National Mortgage Assn. 8.00% 11/15/2001-9/15/2029 (1) 151,778 156,284
Government National Mortgage Assn. 8.50% 5/15/2010-1/15/2028 (1) 28,873 30,273
Government National Mortgage Assn. 9.00% 8/15/2001-6/15/2027 (1) 19,234 20,483
Government National Mortgage Assn. 9.50% 1/1/2004-9/15/2025 (1) 11,347 12,276
Government National Mortgage Assn. 10.00% 3/15/2000-8/15/2025 (1) 2,799 3,068
Government National Mortgage Assn. 10.50% 11/15/2010-1/15/2021 (1) 1,751 1,943
Government National Mortgage Assn. 11.50% 3/15/2010-11/15/2017 (1) 280 318
Resolution Trust Corp. Collateralized Mortgage Obligations 10.35% 8/25/2021 (1) 596 596
------------
3,972,819
------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $7,212,770) 7,119,143
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (33.7%)
- ------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (6.9%)
ARG Funding Corp. 5.88% 5/20/2003 (1) 37,900 37,371
AT&T Universal Card Master Trust 5.95% 10/17/2002 (1) 14,120 14,176
Advanta Credit Card Master Trust 6.05% 8/1/2003 (1) 8,750 8,784
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 32,000 31,482
American Express Credit Card Master Trust 6.40% 4/15/2005 (1) 17,000 17,115
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 25,854 26,217
American Express Credit Card Master Trust 7.60% 8/15/2002 (1) 2,000 2,058
American Express Credit Europe 5.375% 7/15/2001 (1) 16,250 16,198
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.16% 6/25/2003 (1) 7,875 7,906
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.42% 9/25/2008 (1) 11,325 11,316
Chase Manhattan Credit Card Master Trust 6.30% 4/15/2003 (1) 31,500 31,762
Chemical Master Credit Card Trust I 5.55% 9/15/2003 (1) 5,450 5,418
CIT RV Trust 5.78% 7/15/2008 (1) 17,650 17,606
CIT RV Trust 5.96% 4/15/2011 (1) 15,525 15,444
Citibank Credit Card Master Trust 5.875% 3/10/2011 (1) 11,600 10,944
Discover Card Master Trust 5.65% 11/15/2004 (1) 43,000 42,437
Discover Card Master Trust I 5.75% 4/15/2001 (1) 13,500 13,435
First Bank Corp. Card Master Trust 6.40% 2/15/2003 (1) 5,030 5,055
First USA Credit Card Master Trust 6.42% 3/17/2005 (1) 9,450 9,556
Ford Credit Auto Loan Master Trust 6.50% 8/15/2002 (1) 20,750 20,920
Ford Credit Auto Owner Trust 5.90% 6/15/2002 (1) 74,000 73,905
Household Affinity Credit Card Master Trust I 5.60% 5/15/2002 (1) 3,195 3,200
MBNA Master Credit Card Trust 6.05% 11/15/2002 (1) 21,375 21,492
MBNA Master Credit Card Trust 6.60% 1/15/2003 (1) 8,500 8,614
MBNA Master Credit Card Trust 6.60% 11/15/2004 (1) 16,065 16,312
MMCA Automobile Trust 5.50% 7/15/2005 (1) 39,600 39,393
NationsBank Credit Card Master Trust 6.45% 4/15/2003 (1) 6,678 6,739
PECO Energy Transition Trust 5.63% 6/26/2006 (1) 59,900 58,661
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 14,675 14,043
Premier Auto Trust 5.69% 6/8/2002 (1) 41,400 41,368
Sears Credit Account Master Trust 5.80% 8/15/2005 (1) 42,500 42,498
Sears Credit Account Master Trust 6.05% 1/16/2008 (1) 19,500 19,434
Sears Credit Account Master Trust 7.00% 1/15/2004 (1) 1,750 1,765
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 1,860 1,897
Standard Credit Card Master Trust 6.55% 10/7/2007 (1) 2,850 2,863
Standard Credit Card Master Trust 7.85% 2/7/2002 (1) 43,261 43,856
Standard Credit Card Master Trust 8.25% 11/7/2003 (1) 1,020 1,067
Toyota Auto Lease Trust 5.35% 7/25/2002 (1) 60,575 59,999
Toyota Auto Lease Trust 6.35% 4/26/2004 (1) 7,950 7,977
------------
810,283
------------
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE (14.3%)
American Express Credit Corp. 6.50% 8/1/2000 $ 2,200 $ 2,215
American General Finance Corp. 5.84% 1/29/2001 1,500 1,493
American General Finance Corp. 5.875% 7/1/2000 3,770 3,766
American General Finance Corp. 6.20% 3/15/2003 3,100 3,058
American General Finance Corp. 7.45% 7/1/2002 1,575 1,618
Associates Corp. 5.85% 1/15/2001 1,550 1,544
Associates Corp. 6.00% 6/15/2000 6,500 6,508
Associates Corp. 6.375% 8/15/2000 43,500 43,668
Associates Corp. 6.44% 1/15/2004 1,625 1,611
Associates Corp. 6.50% 8/15/2002 3,000 3,008
Associates Corp. 6.50% 10/15/2002 11,975 12,013
Associates Corp. 6.625% 5/15/2001 3,300 3,325
Associates Corp. 6.625% 6/15/2005 1,000 990
Associates Corp. 7.50% 4/15/2002 5,800 5,964
Associates Corp. 7.875% 9/30/2001 1,105 1,142
Avalon Properties Inc. 6.875% 12/15/2007 9,550 9,088
Banc One Corp. 6.25% 9/1/2000 16,000 16,047
Banc One Corp. 6.25% 10/1/2001 21,500 21,500
Bank of America Corp. 8.50% 1/15/2007 5,000 5,429
Bank of New York 7.875% 11/15/2002 1,500 1,563
Bank of New York Capital I 7.97% 12/31/2026 3,225 3,243
BankAmerica Corp. 7.50% 10/15/2002 4,150 4,277
BankAmerica Corp. 7.625% 6/15/2004 1,050 1,087
BankAmerica Corp. 7.75% 7/15/2002 3,000 3,109
BankAmerica Corp. 7.875% 12/1/2002 2,000 2,085
BankAmerica Corp. 9.625% 2/13/2001 1,100 1,158
BankAmerica Corp. 10.00% 2/1/2003 4,900 5,428
Bear, Stearns & Co., Inc. 6.50% 6/15/2000 4,225 4,247
Bear, Stearns & Co., Inc. 6.625% 1/15/2004 3,500 3,457
Bear, Stearns & Co., Inc. 6.75% 8/15/2000 3,200 3,221
Bear, Stearns & Co., Inc. 6.75% 12/15/2007 3,635 3,519
Beneficial Corp. 6.35% 12/3/2001 1,500 1,503
BT Capital Trust B 7.90% 1/15/2027 1,100 1,071
CIGNA Corp. 7.875% 5/15/2027 13,875 14,121
CIGNA Corp. 8.30% 1/15/2033 835 880
CIT Group Inc. 5.35% 12/15/2000 25,000 24,738
CNA Financial Corp. 6.50% 4/15/2005 25,175 24,369
Camden Property Trust 7.00% 11/15/2006 6,250 6,003
Case Credit Corp. 6.15% 3/1/2002 64,000 64,033
Chase Capital I 7.67% 12/1/2026 3,100 3,009
The Chase Manhattan Corp. 6.00% 11/1/2005 11,625 11,118
The Chase Manhattan Corp. 6.375% 4/1/2008 3,500 3,342
The Chase Manhattan Corp. 6.50% 8/1/2005 3,625 3,562
The Chase Manhattan Corp. 7.125% 2/1/2007 1,650 1,659
The Chase Manhattan Corp. 8.125% 6/15/2002 1,410 1,472
The Chase Manhattan Corp. 8.50% 2/15/2002 10,000 10,488
Chemical Bank Corp. 7.25% 9/15/2002 2,565 2,622
Chrysler Financial Co. LLC 5.25% 10/19/2000 69,000 68,426
Chrysler Financial Co. LLC 5.875% 2/7/2001 3,500 3,491
Chrysler Financial Co. LLC 6.625% 8/15/2000 3,050 3,073
Citicorp 7.125% 6/1/2003 135 137
Citicorp 7.125% 3/15/2004 2,000 2,044
Citicorp 8.625% 12/1/2002 4,500 4,789
Citicorp 9.50% 2/1/2002 1,000 1,072
Comdisco Inc. 6.00% 1/30/2002 4,000 3,937
Comdisco Inc. 6.32% 11/27/2000 21,500 21,493
Comerica, Inc. 7.125% 12/1/2013 5,000 4,799
Commercial Credit Corp. 5.90% 9/1/2003 550 534
Commercial Credit Corp. 6.625% 11/15/2006 2,000 1,973
CoreStates Capital Corp. 6.625% 3/15/2005 6,900 6,800
CoreStates Capital Corp. 9.375% 4/15/2003 1,750 1,906
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Countrywide Funding 8.25% 7/15/2002 $ 3,750 $ 3,913
Countrywide Home Loan 6.45% 2/27/2003 1,000 989
Dean Witter, Discover & Co. 6.25% 3/15/2000 3,000 3,009
Dean Witter, Discover & Co. 6.75% 8/15/2000 4,000 4,032
Dean Witter, Discover & Co. 6.75% 10/15/2013 800 767
Dean Witter, Discover & Co. 6.875% 3/1/2003 2,300 2,323
Donaldson Lufkin & Jenrette, Inc. 6.00% 12/1/2001 25,250 25,018
Equitable Companies Inc. 7.00% 4/1/2028 4,310 4,087
Equity Residential Properties 6.55% 11/15/2001 16,750 16,641
Fidelity Investments 7.49% 6/15/2019 1,000 998
Fifth Third Bancorp 6.75% 7/15/2005 5,000 4,992
Finova Capital Corp 5.875% 10/15/2001 22,500 22,207
First Bank NA 7.55% 6/15/2004 10,000 10,329
First Bank System 7.625% 5/1/2005 5,000 5,187
First Chicago Corp. 6.25% 7/21/2000 6,500 6,523
First Chicago Corp. 6.375% 1/30/2009 5,000 4,760
First Chicago Corp. 6.875% 6/15/2003 5,000 5,050
First Chicago Corp. 7.625% 1/15/2003 2,400 2,480
First Chicago Corp. 8.25% 6/15/2002 5,000 5,244
First Chicago Corp. 9.25% 11/15/2001 1,225 1,304
First Chicago Corp. 10.25% 5/1/2001 2,750 2,939
First Fidelity Bancorp 9.625% 8/15/1999 700 703
First Interstate Bancorp 10.875% 4/15/2001 2,750 2,964
First Union Corp. 8.00% 11/15/2002 100 104
First Union Corp. 8.125% 6/24/2002 2,900 3,025
Fleet Capital Trust II 7.92% 12/11/2026 3,790 3,741
Fleet Credit Card 6.82% 4/9/2001 5,000 5,045
Fleet Financial Group, Inc. 7.25% 9/1/1999 1,000 1,003
Fleet Financial Group, Inc. 6.875% 3/1/2003 1,100 1,109
Fleet Financial Group, Inc. 7.125% 4/15/2006 5,700 5,685
Fleet/Norstar Group 8.125% 7/1/2004 4,600 4,843
Fleet Mortgage Group 6.50% 6/15/2000 16,045 16,120
Ford Motor Credit Co. 5.125% 10/15/2001 64,650 63,148
Ford Motor Credit Co. 5.80% 1/12/2009 15,000 13,704
Ford Motor Credit Co. 6.375% 2/1/2029 16,750 14,560
Ford Motor Credit Co. 6.85% 8/15/2000 17,105 17,268
Ford Motor Credit Co. 7.00% 9/25/2001 5,000 5,067
Ford Motor Credit Co. 7.50% 1/15/2003 1,000 1,030
Ford Motor Credit Co. 7.75% 11/15/2002 1,650 1,713
Ford Motor Credit Co. 7.75% 3/15/2005 2,385 2,486
Ford Motor Credit Co. 8.00% 6/15/2002 2,850 2,965
Ford Motor Credit Co. 8.375% 1/15/2000 2,655 2,692
Ford Motor Credit Co. 9.00% 9/15/2001 5,000 5,268
General Electric Capital Corp. 5.77% 8/27/2001 9,700 9,647
General Electric Capital Corp. 5.89% 5/11/2001 10,000 9,980
General Electric Capital Corp. 6.90% 9/15/2015 9,000 9,027
General Electric Capital Corp. 8.30% 9/20/2009 275 305
General Motors Acceptance Corp. 6.60% 1/17/2001 100 101
General Motors Acceptance Corp. 5.50% 1/14/2002 14,000 13,719
General Motors Acceptance Corp. 6.625% 1/10/2002 22,100 22,227
General Motors Acceptance Corp. 6.625% 10/1/2002 5,150 5,180
General Motors Acceptance Corp. 6.875% 7/15/2001 1,500 1,517
General Motors Acceptance Corp. 7.00% 3/1/2000 3,300 3,325
General Motors Acceptance Corp. 7.125% 5/1/2001 10,975 11,139
General Motors Acceptance Corp. 7.125% 5/1/2003 1,300 1,319
General Motors Acceptance Corp. 8.00% 10/1/1999 3,000 3,018
General Motors Acceptance Corp. 8.40% 10/15/1999 4,190 4,222
General Motors Acceptance Corp. 8.50% 1/1/2003 6,200 6,551
General Motors Acceptance Corp. 9.00% 10/15/2002 10,650 11,450
General Motors Acceptance Corp. 9.375% 4/1/2000 3,515 3,602
General Motors Acceptance Corp. 9.625% 12/15/2001 5,895 6,330
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Great Western Finance 6.375% 7/1/2000 $ 16,100 $ 16,150
HRPT Properties Trust 6.75% 12/18/2002 16,250 15,640
Household Finance Corp. 6.40% 6/17/2008 4,715 4,465
Household Finance Corp. 6.45% 3/15/2001 700 701
Household Finance Corp. 6.45% 2/1/2009 2,430 2,299
Household Finance Corp. 6.70% 6/15/2002 1,500 1,507
Household Finance Corp. 7.25% 7/15/2003 1,000 1,019
Household Finance Corp. 7.65% 5/15/2007 3,250 3,344
International Lease Finance Corp. 6.375% 8/1/2001 7,500 7,517
International Lease Finance Corp. 6.50% 7/1/2001 2,050 2,059
International Lease Finance Corp. 6.625% 6/1/2000 10,000 10,069
JDN Realty Corp. 6.80% 8/1/2004 12,810 12,202
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 25,650 24,887
Lehman Brothers Holdings Inc. 6.375% 10/23/2000 18,500 18,466
Lehman Brothers Holdings Inc. 6.625% 11/15/2000 7,861 7,868
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 6,500 6,200
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 2,850 2,671
Lehman Brothers Holdings Inc. 6.90% 1/29/2001 10,800 10,836
Lehman Brothers Holdings Inc. 7.00% 5/15/2003 11,000 10,934
Lehman Brothers Holdings Inc. 7.20% 8/15/2009 1,415 1,374
Lehman Brothers Holdings Inc. 7.375% 1/15/2007 5,000 4,933
Lehman Brothers Holdings Inc. 7.625% 6/1/2006 6,310 6,398
Liberty Financial Co. 6.75% 11/15/2008 11,000 10,585
Mack-Cali Realty 7.00% 3/15/2004 15,000 14,658
Mack-Cali Realty 7.25% 3/15/2009 2,000 1,898
Mellon Bank NA 6.50% 8/1/2005 5,300 5,234
Mellon Bank NA 6.75% 6/1/2003 2,775 2,796
Mellon Bank NA 7.375% 5/15/2007 3,500 3,575
Mellon Capital II 7.995% 1/15/2027 6,650 6,692
Mellon Financial Corp. 5.75% 11/15/2003 4,400 4,257
Mellon Financial Corp. 7.625% 11/15/1999 850 856
Mellon Financial Corp. 9.75% 6/15/2001 6,647 7,059
Merrill Lynch & Co., Inc. 5.71% 1/15/2002 12,000 11,830
Merrill Lynch & Co., Inc. 5.87% 11/15/2001 21,750 21,594
Merrill Lynch & Co., Inc. 5.88% 1/15/2004 7,100 6,897
Merrill Lynch & Co., Inc. 6.00% 1/15/2001 1,000 999
Merrill Lynch & Co., Inc. 6.00% 2/17/2009 9,300 8,575
Merrill Lynch & Co., Inc. 6.07% 10/15/2001 44,700 44,579
Merrill Lynch & Co., Inc. 6.38% 7/18/2000 1,000 1,005
Merrill Lynch & Co., Inc. 6.50% 4/1/2001 18,500 18,614
Merrill Lynch & Co., Inc. 6.64% 9/19/2002 2,995 3,018
Merrill Lynch & Co., Inc. 6.875% 11/15/2018 3,750 3,502
Merrill Lynch & Co., Inc. 7.00% 3/15/2006 300 301
Merrill Lynch & Co., Inc. 8.00% 2/1/2002 2,600 2,701
Merrill Lynch & Co., Inc. 8.30% 11/1/2002 2,735 2,888
Morgan Stanley, Dean Witter Discover & Co. 5.625% 1/20/2004 4,000 3,838
Morgan Stanley, Dean Witter Discover & Co. 6.375% 8/1/2002 7,000 6,990
Morgan Stanley, Dean Witter Discover & Co. 6.875% 3/1/2007 7,300 7,262
Morgan Stanley, Dean Witter Discover & Co. 7.00% 10/1/2013 700 687
NAC Re Corp. 7.15% 11/15/2005 1,500 1,491
NB Capital Trust II 7.83% 12/15/2026 5,000 4,912
NB Capital Trust IV 8.25% 4/15/2027 3,400 3,479
NCNB Corp. 9.50% 6/1/2004 3,725 4,170
National City Corp. 7.20% 5/15/2005 10,000 10,197
National Rural Utilities 6.42% 5/1/2008 11,200 10,920
NationsBank Corp. 5.75% 3/15/2001 500 497
NationsBank Corp. 6.375% 2/15/2008 1,500 1,438
NationsBank Corp. 6.50% 3/15/2006 5,600 5,431
NationsBank Corp. 6.875% 2/15/2005 580 582
NationsBank Corp. 6.95% 3/20/2006 3,000 2,980
NationsBank Corp. 7.00% 9/15/2001 1,800 1,827
NationsBank Corp. 7.25% 10/15/2025 1,625 1,570
NationsBank Corp. 7.50% 9/15/2006 1,000 1,030
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NationsBank Corp. 7.75% 8/15/2004 $ 5,000 $ 5,210
NationsBank Texas 6.75% 8/15/2000 9,800 9,888
Norwest Corp. 5.75% 2/1/2003 4,000 3,912
Norwest Corp. 6.125% 10/15/2000 2,000 2,003
Norwest Corp. 6.65% 10/15/2023 40 36
Norwest Corp. 6.80% 5/15/2002 5,000 5,064
Norwest Corp. 7.125% 4/1/2000 500 505
Norwest Financial, Inc. 6.25% 11/1/2002 1,000 994
Norwest Financial, Inc. 7.875% 2/15/2002 1,000 1,035
Orion Capital Corp. 7.25% 7/15/2005 9,200 8,938
Orion Capital Corp. 9.125% 9/1/2002 5,421 5,669
PaineWebber Group, Inc. 6.375% 5/15/2004 850 826
PaineWebber Group, Inc. 6.50% 11/1/2005 500 480
PaineWebber Group, Inc. 7.00% 3/1/2000 5,350 5,378
PaineWebber Group, Inc. 7.875% 2/15/2003 2,250 2,318
Pitney Bowes Credit Corp. 9.25% 6/15/2008 2,000 2,315
Popular Inc. 6.20% 4/30/2001 32,000 31,697
Progressive Corp. 6.625% 3/1/2029 5,000 4,543
Realty Income Corp. 7.75% 5/6/2007 3,000 2,871
Reckson Operating Partnership LP 7.75% 3/15/2009 16,400 15,792
Republic New York Corp. 7.75% 5/15/2002 3,000 3,096
Republic New York Corp. 7.75% 5/15/2009 4,300 4,476
Republic New York Corp. 9.70% 2/1/2009 5,000 5,868
Salomon Smith Barney Holdings Inc. 5.875% 2/1/2001 13,200 13,129
Salomon Smith Barney Holdings Inc. 6.50% 10/15/2002 300 300
Salomon Smith Barney Holdings Inc. 6.625% 6/1/2000 10,000 10,073
Salomon Smith Barney Holdings Inc. 6.65% 7/15/2001 7,050 7,095
Salomon Smith Barney Holdings Inc. 6.70% 7/5/2000 2,000 2,013
Salomon Smith Barney Holdings Inc. 7.00% 5/15/2000 6,000 6,060
Salomon Smith Barney Holdings Inc. 7.20% 2/1/2004 6,000 6,100
Salomon Smith Barney Holdings Inc. 7.375% 5/15/2007 2,000 2,021
Security Capital Pacific Trust 8.05% 4/1/2017 4,300 3,998
Shurgard Storage Centers, Inc. 7.50% 4/25/2004 6,000 5,944
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 10,000 9,669
Spieker Properties Inc. 7.50% 10/1/2027 700 640
Summit Bancorp 8.625% 12/10/2002 5,000 5,284
Summit Properties Inc. 6.80% 8/15/2002 3,500 3,412
Summit Properties Inc. 6.95% 8/15/2004 17,500 16,737
Summit Properties Inc. 7.20% 8/15/2007 4,450 4,174
SunTrust Banks, Inc. 6.00% 2/15/2026 5,000 4,758
SunTrust Banks, Inc. 7.375% 7/1/2002 5,000 5,126
SunTrust Banks, Inc. 7.375% 7/1/2006 3,500 3,579
Suntrust Capital 7.90% 6/15/2027 2,085 2,076
Susa Partnership LP 7.00% 12/1/2007 1,050 977
Susa Partnership LP 7.50% 12/1/2027 5,025 4,399
Toyota Motor Credit Corp. 5.50% 9/17/2001 45,750 45,153
Toyota Motor Credit Corp. 5.625% 11/13/2003 3,750 3,650
Travelers/Aetna Property Casualty Corp. 6.75% 4/15/2001 14,000 14,134
Travelers/Aetna Property Casualty Corp. 7.75% 4/15/2026 1,000 1,030
U.S. Bancorp 8.27% 12/15/2026 3,250 3,344
U.S. Leasing International 6.625% 5/15/2003 195 195
Wachovia Corp. 5.625% 12/15/2008 5,400 4,903
Wachovia Corp. 6.25% 8/4/2008 2,600 2,475
Wachovia Corp. 6.375% 4/15/2003 110 109
Wachovia Corp. 6.80% 6/1/2005 10,000 10,013
Wachovia Corp. 7.00% 12/15/1999 600 604
Wells Fargo & Co. 6.125% 11/1/2003 5,000 4,926
Wells Fargo & Co. 6.25% 4/15/2008 915 870
Wells Fargo & Co. 6.875% 4/1/2006 6,400 6,350
Wells Fargo & Co. 8.75% 5/1/2002 3,370 3,557
Wells Fargo Capital I 7.96% 12/15/2026 3,600 3,609
------------
1,678,892
------------
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL (8.7%)
Anadarko Petroleum Corp. 7.20% 3/15/2029 $16,000 $ 14,983
Anheuser-Busch Cos., Inc. 6.75% 12/15/2027 1,600 1,517
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 5,050 5,107
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 3,850 3,773
Anheuser-Busch Cos., Inc. 7.375% 7/1/2023 800 790
Applied Materials, Inc. 8.00% 9/1/2004 1,625 1,690
Archer-Daniels-Midland Co. 6.25% 5/15/2003 1,000 994
Archer-Daniels-Midland Co. 8.875% 4/15/2011 3,745 4,320
Auburn Hills 12.00% 5/1/2020 770 1,178
BP America, Inc. 9.375% 11/1/2000 1,500 1,566
Baker Hughes Inc. 6.25% 1/15/2009 2,500 2,369
Baker Hughes Inc. 6.875% 1/15/2029 17,150 15,906
C.R. Bard, Inc. 6.70% 12/1/2026 13,650 13,337
Baxter International, Inc. 9.25% 12/15/1999 100 102
Bayer Corp. 6.65% 2/15/2028 1,300 1,208
Black & Decker Corp. 6.625% 11/15/2000 12,000 12,065
Black & Decker Corp. 7.50% 4/1/2003 27,800 28,554
The Boeing Co. 6.625% 2/15/2038 11,000 9,843
The Boeing Co. 8.75% 8/15/2021 1,800 2,076
Borg-Warner Automotive 7.125% 2/15/2029 3,000 2,781
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 6,750 6,576
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 2,900 2,759
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 7,205 6,810
Burlington Northern Santa Fe Corp. 7.25% 8/1/2097 4,450 4,246
Burlington Northern Santa Fe Corp. 9.25% 10/1/2006 750 842
CSX Corp 7.05% 5/1/2002 7,000 7,050
CSX Corp. 8.10% 9/15/2022 3,950 4,142
CSX Corp. 8.625% 5/15/2022 3,875 4,280
CSX Corp. 9.00% 8/15/2006 700 765
CVS Corp. 5.50% 2/15/2004 16,750 16,136
Caterpillar, Inc. 7.375% 3/1/2097 8,900 8,537
Caterpillar, Inc. 9.00% 4/15/2006 1,600 1,779
Champion Enterprises Inc. 7.625% 5/15/2009 4,000 3,796
Chrysler Corp. 7.45% 2/1/2097 4,375 4,312
Comcast Cablevision 8.125% 5/1/2004 11,350 11,895
Comcast Cablevision 8.875% 5/1/2017 3,300 3,707
Conoco Inc. 6.95% 4/15/2029 5,500 5,131
Conrail Corp. 9.75% 6/15/2020 1,680 2,048
Continental Airlines P/T Trust 6.331% 10/15/2004 (1) 4,061 4,038
Continental Airlines P/T Trust 6.41% 10/15/2008 (1) 836 808
Continental Airlines P/T Trust 6.648% 3/15/2019 10,798 10,231
Cyprus AMAX Minerals Co. 7.375% 5/15/2007 6,000 5,598
Dayton Hudson Corp. 6.65% 8/1/2028 5,600 5,127
Dayton Hudson Corp. 6.75% 1/1/2028 1,000 928
Dayton Hudson Corp. 9.75% 7/1/2002 1,000 1,090
Deere & Co. 8.50% 1/9/2022 985 1,098
Delta Airlines, Inc. (Equipment Trust Certificates) 8.54% 1/2/2007 3,574 3,722
Dillard's Inc. 5.79% 11/15/2001 26,000 25,573
Dillard's Inc. 6.625% 11/15/2008 7,000 6,632
Dillard's Inc. 7.75% 5/15/2027 1,000 988
Dillard's Inc. 7.85% 10/1/2012 2,700 2,759
The Walt Disney Co. 7.55% 7/15/2093 2,597 2,618
Dow Chemical Co. 8.50% 6/8/2010 2,500 2,701
Eastman Chemical Co. 6.375% 1/15/2004 12,000 11,727
Eastman Chemical Co. 7.25% 1/15/2024 3,700 3,476
Eastman Chemical Co. 7.60% 2/1/2027 2,988 2,924
Federated Department Stores, Inc. 7.00% 2/15/2028 1,060 989
Federated Department Stores, Inc. 7.45% 7/15/2017 11,125 11,083
Federated Department Stores, Inc. 8.125% 10/15/2002 5,000 5,233
First Data Corp. 6.375% 12/15/2007 1,000 963
First Data Corp. 6.625% 4/1/2003 7,735 7,761
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ford Capital BV 9.50% 7/1/2001 $ 1,925 $ 2,039
Ford Capital BV 9.50% 6/1/2010 825 962
Ford Capital BV 9.875% 5/15/2002 2,250 2,445
Ford Motor Co. 7.50% 11/15/1999 2,000 2,014
Ford Motor Co. 9.98% 2/15/2047 835 1,091
Fortune Brands 7.875% 1/15/2023 1,900 2,016
Gannett Co. 5.85% 5/1/2000 1,000 1,001
General Motors Corp. 7.00% 6/15/2003 2,500 2,536
General Motors Corp. 9.125% 7/15/2001 7,900 8,317
Harrahs Operating Co., Inc. 7.50% 1/15/2009 16,285 15,820
H.J. Heinz Co. 6.875% 1/15/2003 100 102
Hertz Corp. 6.00% 2/1/2001 15,000 14,925
Illinois Central Railroad Co. 6.75% 5/15/2003 8,345 8,342
International Business Machines Corp. 6.375% 6/15/2000 500 504
International Business Machines Corp. 6.45% 8/1/2007 1,000 994
International Business Machines Corp. 6.50% 1/15/2028 650 602
International Business Machines Corp. 7.125% 12/1/2096 11,325 10,906
International Paper Co. 6.875% 11/1/2023 5,000 4,659
International Paper Co. 6.875% 4/15/2029 2,000 1,837
International Paper Co. 7.875% 8/1/2006 2,265 2,357
Kroger Co. 7.65% 4/15/2007 7,550 7,761
Kroger Co. 8.15% 7/15/2006 2,700 2,839
Lafarge Corp. 6.375% 7/15/2005 2,000 1,949
Lockheed Martin Corp. 6.85% 5/15/2001 8,500 8,532
Lockheed Martin Corp. 7.65% 5/1/2016 5,000 4,958
May Department Stores Co. 9.75% 2/15/2021 1,680 2,054
May Department Stores Co. 9.875% 12/1/2002 1,775 1,960
McDonald's Corp. 6.75% 2/15/2003 945 950
Mobil Corp. 7.625% 2/23/2033 920 914
Monsanto Co. 5.375% 12/1/2001 25,500 24,993
Monsanto Co. 5.75% 12/1/2005 17,000 16,059
Monsanto Co. 6.60% 12/1/2028 4,000 3,554
News America Holdings Inc. 8.00% 10/17/2016 9,250 9,276
News America Holdings Inc. 8.50% 2/15/2005 2,600 2,744
News America Holdings Inc. 8.875% 4/26/2023 7,905 8,645
News America Holdings Inc. 9.25% 2/1/2013 3,341 3,753
Norfolk Southern Corp. 6.875% 5/1/2001 23,475 23,683
Norfolk Southern Corp. 7.70% 5/15/2017 3,450 3,538
Norfolk Southern Corp. 7.80% 5/15/2027 4,375 4,523
Norfolk Southern Corp. 7.90% 5/15/2097 1,750 1,775
Northrop Grumman Corp. 7.00% 3/1/2006 15,700 15,196
Occidental Petroleum Corp. 8.50% 11/9/2001 14,750 15,219
Occidental Petroleum Corp. 8.50% 9/15/2004 2,500 2,512
Occidental Petroleum Corp. 10.125% 11/15/2001 7,000 7,468
J.C. Penney & Co., Inc. 6.125% 11/15/2003 2,000 1,955
J.C. Penney & Co., Inc. 9.05% 3/1/2001 625 650
PepsiCo, Inc. 6.25% 9/1/1999 650 651
Philip Morris Cos., Inc. 6.00% 7/15/2001 110 109
Philip Morris Cos., Inc. 7.00% 7/15/2005 7,150 7,139
Philip Morris Cos., Inc. 7.20% 2/1/2007 1,450 1,453
Philip Morris Cos., Inc. 8.25% 10/15/2003 1,900 2,000
Phillips Petroleum Co. 8.49% 1/1/2023 2,100 2,202
Phillips Petroleum Co. 9.00% 6/1/2001 3,900 4,082
Praxair, Inc. 6.70% 4/15/2001 12,225 12,271
Praxair, Inc. 6.75% 3/1/2003 1,000 996
Praxair, Inc. 6.90% 11/1/2006 10,750 10,590
Raytheon Co. 6.45% 8/15/2002 19,500 19,496
Raytheon Co. 6.50% 7/15/2005 3,900 3,842
Raytheon Co. 6.75% 8/15/2007 1,900 1,871
Raytheon Co. 6.75% 3/15/2018 1,600 1,502
Raytheon Co. 7.00% 11/1/2028 10,880 10,338
Rockwell International Corp. 8.875% 9/15/1999 110 111
Rohm & Haas Co. 6.95% 7/15/2004 7,200 7,187
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rohm & Haas Co. 7.40% 7/15/2009 $ 2,700 $ 2,700
Rohm & Haas Co. 7.85% 7/15/2029 11,900 11,891
Rohm & Haas Co. 9.80% 4/15/2020 4,450 5,260
Safeway Inc. 5.75% 11/15/2000 23,950 23,811
Safeway Inc. 5.875% 11/15/2001 10,450 10,303
Safeway Inc. 6.85% 9/15/2004 19,300 19,359
Safeway Inc. 7.00% 9/15/2007 2,150 2,147
Sears, Roebuck & Co. Acceptance Corp. 6.125% 1/15/2006 5,500 5,231
Sears, Roebuck & Co. Acceptance Corp. 6.25% 1/15/2004 2,700 2,621
Sears, Roebuck & Co. Acceptance Corp. 6.50% 6/15/2000 18,185 18,278
Sears, Roebuck & Co. Acceptance Corp. 6.63% 7/9/2002 1,600 1,610
Sears, Roebuck & Co. Acceptance Corp. 7.19% 6/18/2001 800 814
Sears, Roebuck & Co. Acceptance Corp. 9.375% 11/1/2011 1,845 2,134
TCI Communications, Inc. 7.25% 8/1/2005 5,480 5,578
TCI Communications, Inc. 7.875% 8/1/2013 10,950 11,594
TCI Communications, Inc. 8.00% 8/1/2005 990 1,047
TCI Communications, Inc. 8.65% 9/15/2004 5,000 5,449
Tele-Communications, Inc. 6.375% 5/1/2003 43,475 43,263
Tele-Communications, Inc. 9.875% 6/15/2022 500 643
Tenneco, Inc. 8.20% 11/15/1999 12,500 12,593
Tenneco, Inc. 10.075% 2/1/2001 5,150 5,399
Texaco Capital Corp. 5.70% 12/1/2008 2,425 2,256
Texaco Capital Corp. 7.50% 3/1/2043 850 840
Texaco Capital Corp. 8.25% 10/1/2006 2,300 2,502
Texaco Capital Corp. 8.875% 9/1/2021 705 831
Texaco Capital Corp. 9.00% 12/15/1999 300 305
Texas Instruments Inc. 6.125% 2/1/2006 6,300 6,085
Time Warner Entertainment 8.375% 3/15/2023 8,150 8,868
Time Warner Entertainment 9.625% 5/1/2002 3,900 4,209
Time Warner Inc. 7.57% 2/1/2024 1,500 1,490
Time Warner Inc. 7.75% 6/15/2005 9,000 9,300
Time Warner Inc. 9.125% 1/15/2013 1,000 1,140
Tosco Corp. 7.00% 7/15/2000 16,000 16,102
Tosco Corp. 7.80% 1/1/2027 1,650 1,658
Tyco International Group SA 6.875% 1/15/2029 17,000 15,487
USA Waste Services Inc. 7.00% 7/15/2028 2,700 2,515
USA Waste Services Inc. 7.125% 12/15/2017 1,505 1,451
Union Carbide Corp. 6.70% 4/1/2009 2,000 1,918
Union Carbide Corp. 6.75% 4/1/2003 3,500 3,475
Union Carbide Corp. 7.75% 10/1/2096 4,350 4,193
Union Carbide Corp. 7.875% 4/1/2023 4,755 4,824
Union Oil of California 6.375% 2/1/2004 2,000 1,956
Union Oil of California 7.20% 5/15/2005 5,000 5,020
Union Pacific Corp. 6.125% 1/15/2004 1,000 971
Union Pacific Corp. 6.625% 2/1/2029 12,250 10,750
Union Pacific Corp. 7.00% 6/15/2000 5,000 5,044
Union Pacific Corp. 7.00% 2/1/2016 1,450 1,372
Union Pacific Corp. 8.625% 5/15/2022 2,865 3,027
United Technologies Corp. 6.70% 8/1/2028 10,442 9,763
United Technologies Corp. 8.875% 11/15/2019 4,000 4,691
United Telecom 9.75% 4/1/2000 1,000 1,026
WMX Technologies Inc. 6.25% 10/15/2000 3,315 3,314
WMX Technologies Inc. 7.65% 3/15/2011 4,400 4,490
Whirlpool Corp. 9.00% 3/1/2003 2,250 2,395
Whirlpool Corp. 9.10% 2/1/2008 940 1,044
------------
1,019,843
------------
UTILITIES (3.8%)
AT&T Corp. 7.125% 1/15/2002 1,100 1,122
AT&T Corp. 8.35% 1/15/2025 2,350 2,455
Alabama Power Co. 6.00% 3/1/2000 1,950 1,951
Ameritech Capital Funding 7.50% 4/1/2005 4,950 5,170
Arizona Public Service Co. 5.875% 2/15/2004 6,500 6,273
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Public Service Co. 7.25% 8/1/2023 $ 2,150 $ 2,047
Baltimore Gas & Electric Co. 8.375% 8/15/2001 5,570 5,806
Bell Atlantic Corp. 7.00% 6/15/2013 4,000 4,049
Bellsouth Capital Funding 6.04% 11/15/2026 1,350 1,345
CMS Panhandle Holding Co. 6.125% 3/15/2004 4,300 4,182
CMS Panhandle Holding Co. 6.50% 7/15/2009 9,900 9,342
CMS Panhandle Holding Co. 7.00% 7/15/2029 5,825 5,326
Carolina Power & Light Co. 6.875% 8/15/2023 2,550 2,398
Carolina Power & Light Co. 8.20% 7/1/2022 110 111
Cincinnati Gas & Electric Co. 6.45% 2/15/2004 2,000 1,991
Coastal Corp. 7.42% 2/15/2037 5,800 5,644
Coastal Corp. 7.75% 10/15/2035 6,600 6,608
Coastal Corp. 8.125% 9/15/2002 2,300 2,395
Coastal Corp. 9.625% 5/15/2012 4,700 5,631
Commonwealth Edison 7.375% 9/15/2002 7,500 7,774
Consolidated Edison Co. of New York, Inc. 6.375% 4/1/2003 5,000 4,984
Consolidated Edison Co. of New York, Inc. 6.625% 2/1/2002 1,000 1,007
El Paso Energy Corp. 6.75% 5/15/2009 3,000 2,872
Enron Corp. 6.40% 7/15/2006 8,250 7,907
Enron Corp. 6.45% 11/15/2001 1,000 997
Enron Corp. 6.625% 11/15/2005 1,100 1,076
Enron Corp. 6.875% 10/15/2007 7,500 7,389
Enron Corp. 7.125% 5/15/2007 6,100 6,068
Enron Corp. 7.625% 9/10/2004 2,000 2,060
Enron Corp. 9.65% 5/15/2001 4,150 4,380
GTE Corp. 7.83% 5/1/2023 4,000 4,017
GTE Corp. 8.75% 11/1/2021 3,435 4,005
GTE Corp. 9.10% 6/1/2003 225 245
GTE Florida, Inc. 6.31% 12/15/2002 5,000 4,985
GTE South Inc. 6.125% 6/15/2007 11,000 10,509
HNG Internorth 9.625% 3/15/2006 4,680 5,255
Houston Lighting & Power Co. 8.75% 3/1/2022 1,050 1,110
Illinois Power Co. 7.50% 7/15/2025 4,200 3,977
KN Energy, Inc. 6.45% 3/1/2003 9,200 8,991
MCI Communications Corp. 6.50% 4/15/2010 11,175 10,721
MCI Communications Corp. 7.50% 8/20/2004 4,050 4,170
MCI Communications Corp. 7.75% 3/23/2025 4,650 4,554
Michigan Bell Telephone Co. 7.50% 2/15/2023 1,610 1,569
Midamerican Funding LLC 5.85% 3/1/2001 33,200 32,959
National Rural Utility Co. 5.00% 10/1/2002 11,700 11,288
National Rural Utility Co. 6.20% 2/1/2008 18,000 17,304
National Rural Utility Co. 6.75% 9/1/2001 4,350 4,402
New England Telephone & Telegraph Co. 6.875% 10/1/2023 2,815 2,608
New England Telephone & Telegraph Co. 7.875% 11/15/2029 6,150 6,564
New England Telephone & Telegraph Co. 8.625% 8/1/2001 2,500 2,627
New England Telephone & Telegraph Co. 9.00% 8/1/2031 3,750 4,120
New Jersey Bell Telephone Co. 6.625% 4/1/2008 190 187
New York Telephone Co. 6.125% 1/15/2010 1,250 1,181
New York Telephone Co. 7.25% 2/15/2024 5,000 4,850
Northern States Power Co. 7.125% 7/1/2025 5,000 4,963
Pacific Bell Telephone Co. 7.25% 7/1/2002 250 257
Pacific Gas & Electric Co. 6.25% 8/1/2003 5,000 4,965
Pacific Gas & Electric Co. 6.75% 10/1/2023 150 136
Pacific Gas & Electric Co. 8.25% 11/1/2022 4,000 4,131
Pacific Gas & Electric Co. 8.375% 5/1/2025 5,000 5,266
Pacific Gas & Electric Co. 8.75% 1/1/2001 2,000 2,073
PP&L Resources Inc. 6.50% 4/1/2005 135 135
Public Service Electric & Gas Co. 6.50% 5/1/2004 170 166
South Carolina Electric & Gas 9.00% 7/15/2006 145 161
Southern California Edison Co. 5.625% 10/1/2002 4,000 3,928
Southern California Edison Co. 6.375% 1/15/2006 2,350 2,315
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Southern California Gas 7.375% 3/1/2023 $ 120 $ 114
Southwestern Bell Telephone Co. 5.75% 9/1/2004 2,000 1,913
Southwestern Bell Telephone Co. 7.25% 7/15/2025 10,650 10,244
Southwestern Bell Telephone Co. 7.625% 3/1/2023 8,355 8,297
Sprint Capital Corp. 6.875% 11/15/2028 22,050 20,112
Texas Utilities Co. 7.17% 8/1/2007 650 660
Texas Utilities Co. 7.375% 8/1/2001 2,800 2,855
Texas Utilities Co. 7.875% 3/1/2023 2,075 2,083
Texas Utilities Co. 8.25% 4/1/2004 4,900 5,176
Texas Utilities Co. 8.75% 11/1/2023 180 193
Union Electric Power Co. 6.75% 5/1/2008 40 40
US West Capital Funding, Inc. 6.125% 7/15/2002 3,000 2,956
U S WEST Communications Group 6.875% 9/15/2033 165 146
U S WEST Communications Group 7.25% 9/15/2025 18,000 17,409
Virginia Electric & Power Co. 6.625% 4/1/2003 2,300 2,308
Virginia Electric & Power Co. 6.75% 10/1/2023 17,000 15,639
Wisconsin Electric Power Co. 7.70% 12/15/2027 65 63
Worldcom Inc. 6.125% 8/15/2001 42,360 42,144
Worldcom Inc. 6.25% 8/15/2003 12,000 11,826
Worldcom Inc. 6.40% 8/15/2005 180 177
Worldcom Inc. 6.95% 8/15/2028 1,500 1,422
----------
446,831
----------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $4,019,905) 3,955,849
- -----------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(4.6%)
- -----------------------------------------------------------------------------------------------------------------------
Ahold Finance USA Inc. 6.25% 5/1/2009 10,000 9,430
Ahold Finance USA Inc. 6.875% 5/1/2029 2,300 2,145
Province of Alberta 9.25% 4/1/2000 5,075 5,200
Amoco Canada Petroleum Co. 6.75% 2/15/2005 145 146
Asian Development Bank 9.125% 6/1/2000 740 763
Bayerische Landesbank 5.875% 4/7/2000 21,500 21,528
Bayerische Landesbank 7.375% 12/14/2002 145 150
British Aerospace 8.50% 6/10/2002 3,000 3,138
Province of British Columbia 7.00% 1/15/2003 2,550 2,604
Canadian Imperial Bank of Commerce (NY) 6.20% 8/1/2000 55,200 55,451
Canadian National Railway Co. 6.80% 7/15/2018 13,750 12,931
Canadian National Railway Co. 6.90% 7/15/2028 4,000 3,723
Republic of Chile 6.875% 4/28/2009 15,700 14,752
Embotelladora Andina SA 7.875% 10/1/2097 10,200 7,656
European Investment Bank 10.125% 10/1/2000 125 131
Falconbridge Ltd. 7.35% 11/1/2006 1,000 945
Republic of Finland 7.875% 7/28/2004 10,300 11,019
Grand Metropolitan Investment Corp. 8.625% 8/15/2001 2,600 2,716
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 2,225 2,592
Hanson Overseas 7.375% 1/15/2003 7,100 7,270
Inter-American Development Bank 7.125% 3/15/2023 975 960
Inter-American Development Bank 8.50% 3/15/2011 2,705 3,147
International Bank for Reconstruction & Development 9.25% 7/15/2017 1,615 2,079
Israel Electric Corp. 7.75% 3/1/2009 18,500 18,358
KFW International Finance, Inc. 7.20% 3/15/2014 3,550 3,710
KFW International Finance, Inc. 7.625% 2/15/2004 11,650 12,221
KFW International Finance, Inc. 9.125% 5/15/2001 2,400 2,528
Korean Development Bank 7.125% 4/22/2004 43,000 42,074
Korea Electric Power 7.00% 2/1/2007 8,000 7,355
Korea Electric Power 7.75% 4/1/2013 18,100 16,853
Province of Manitoba 6.125% 1/19/2004 8,000 7,896
Province of Manitoba 6.875% 9/15/2002 13,369 13,592
Province of Manitoba 7.75% 2/1/2002 6,975 7,212
Province of Manitoba 8.75% 5/15/2001 6,200 6,477
Province of Manitoba 9.25% 4/1/2020 2,645 3,301
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Province of Manitoba 9.50% 10/1/2000 $ 1,560 $ 1,624
Province of Manitoba 9.625% 12/1/2018 3,500 4,481
National Australia Bank 6.60% 12/10/2007 2,000 1,936
National Westminster Bancorp Inc. 9.375% 11/15/2003 3,950 4,365
Province of New Brunswick 6.75% 8/15/2013 210 210
Province of New Brunswick 8.75% 5/1/2022 5,100 6,150
Province of New Brunswick 9.75% 5/15/2020 8,500 11,056
New Zealand Government 8.75% 12/15/2006 1,175 1,313
New Zealand Government 10.625% 11/15/2005 400 481
Province of Newfoundland 7.32% 10/13/2023 8,050 8,032
Province of Newfoundland 9.00% 6/1/2019 1,400 1,641
Noranda Forest 7.50% 7/15/2003 7,825 7,852
Noranda, Inc. 7.00% 7/15/2005 1,045 1,000
Northern Telecom Ltd. 6.875% 9/1/2023 4,565 4,427
Province of Ontario 7.375% 1/27/2003 915 945
Province of Ontario 7.75% 6/4/2002 1,175 1,225
Pemex Finance Ltd. 6.125% 11/15/2003 15,750 15,652
Petro-Canada 7.875% 6/15/2026 10,000 10,154
Petro-Canada 9.25% 10/15/2021 700 811
Petro Geo-Services 6.25% 11/19/2003 2,500 2,427
Petro Geo-Services 6.625% 3/30/2008 7,675 7,245
Petro Geo-Services 7.125% 3/30/2028 9,370 8,464
Petro Geo-Services 7.50% 3/31/2007 6,510 6,508
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 5,250 5,000
Republic of Portugal 5.75% 10/8/2003 19,350 19,008
The State of Qatar 9.50% 5/21/2009 17,850 18,057
Province of Quebec 7.125% 2/9/2024 1,000 980
Province of Saskatchewan 6.625% 7/15/2003 19,750 19,872
Province of Saskatchewan 7.125% 3/15/2008 1,200 1,232
Province of Saskatchewan 7.375% 7/15/2013 1,800 1,881
Province of Saskatchewan 8.00% 7/15/2004 15,950 16,986
Sweden Global Bond 6.50% 3/4/2003 145 147
Swiss Bank Corp. 7.00% 10/15/2015 750 711
Swiss Bank Corp. 7.375% 7/15/2015 2,000 1,961
Swiss Bank Corp.-New York 7.375% 6/15/2017 1,600 1,564
TPSA Finance BV 7.75% 12/10/2008 8,350 8,099
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 6,300 6,205
Telecomunicaciones de Puerto Rico 6.65% 5/15/2006 11,600 11,118
Telecomunicaciones de Puerto Rico 6.80% 5/15/2009 4,600 4,411
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $542,982) 537,284
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.4%)
- -------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 4.87% 7/1/1999 143,822 143,822
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note F 4.96%-4.98% 7/1/1999 19,375 19,375
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $163,197) 163,197
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $11,938,854) 11,775,473
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--NET (-0.3%) (35,417)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $11,740,056
=========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
26
<PAGE> 29
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- --------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in Securities, at Value $11,775,473
Receivables for Investment Securities Sold 461,075
Other Assets--Note B 188,745
------------
Total Assets 12,425,293
------------
LIABILITIES
Payables for Investment Securities Purchased (625,466)
Other Liabilities--Note F (59,771)
------------
Total Liabilities (685,237)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $11,740,056
==========================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AMOUNT
(000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $11,920,489
Undistributed Net Investment Income --
Accumulated Net Realized Losses (17,052)
Unrealized Depreciation--Note E (163,381)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $11,740,056
==========================================================================================================================
Investor Shares--Net Assets applicable to 895,527,430 outstanding
$.001 par value shares of beneficial interest** $8,786,781
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $9.81
==========================================================================================================================
Institutional Shares--Net Assets applicable to 300,990,694 outstanding
$.001 par value shares of beneficial interest** $2,953,275
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $9.81
==========================================================================================================================
</TABLE>
**Unlimited Authorization.
27
<PAGE> 30
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (59.8%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (48.8%)
U.S. Treasury Bond 10.75% 5/15/2003 $ 6,200 $ 7,250
U.S. Treasury Bond 11.625% 11/15/2002 36,425 42,885
U.S. Treasury Bond 11.875% 11/15/2003 44,650 54,891
U.S. Treasury Bond 12.375% 5/15/2004 19,500 24,804
U.S. Treasury Note 5.50% 12/31/2000 600 600
U.S. Treasury Note 5.50% 5/31/2003 26,550 26,338
U.S. Treasury Note 5.625% 11/30/2000 5,400 5,413
U.S. Treasury Note 5.75% 10/31/2000 30,600 30,722
U.S. Treasury Note 5.75% 11/15/2000 13,800 13,854
U.S. Treasury Note 5.875% 9/30/2002 2,800 2,817
U.S. Treasury Note 6.00% 8/15/2000 13,000 13,087
U.S. Treasury Note 6.125% 7/31/2000 26,200 26,410
U.S. Treasury Note 6.375% 8/15/2002 4,250 4,334
U.S. Treasury Note 6.625% 4/30/2002 14,435 14,799
U.S. Treasury Note 7.50% 11/15/2001 66,875 69,511
U.S. Treasury Note 7.50% 5/15/2002 22,150 23,207
U.S. Treasury Note 7.75% 2/15/2001 30,600 31,659
U.S. Treasury Note 7.875% 8/15/2001 28,250 29,529
U.S. Treasury Note 8.00% 5/15/2001 6,100 6,363
U.S. Treasury Note 8.50% 11/15/2000 25,425 26,441
U.S. Treasury Note 8.75% 8/15/2000 1,200 1,243
U.S. Treasury Note 13.75% 8/15/2004 800 1,075
---------
457,232
---------
AGENCY BONDS & NOTES (11.0%)
Federal Farm Credit Bank 4.80% 11/6/2003 10,000 9,482
Federal Home Loan Bank 5.575% 9/2/2003 4,300 4,206
Federal Home Loan Bank 5.60% 9/2/2003 10,000 9,791
Federal Home Loan Bank 5.605% 3/3/2003 1,150 1,127
Federal Home Loan Bank 5.63% 9/2/2003 10,000 9,802
Federal Home Loan Bank 5.66% 1/13/2003 10,000 9,839
Federal Home Loan Bank 5.675% 8/18/2003 3,000 2,946
Federal Home Loan Bank 5.86% 4/28/2003 1,900 1,880
Federal Home Loan Mortgage Corp. 5.00% 1/15/2004 25,000 23,843
Federal Home Loan Mortgage Corp. 5.89% 7/17/2003 7,000 6,891
Federal National Mortgage Assn. 5.75% 4/15/2003 1,500 1,483
Federal National Mortgage Assn. 5.90% 7/9/2003 13,800 13,590
Federal National Mortgage Assn. 5.91% 8/25/2003 2,600 2,565
Federal National Mortgage Assn. 5.96% 4/23/2003 1,200 1,185
Federal National Mortgage Assn. 5.97% 7/3/2003 4,000 3,947
---------
102,577
---------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $567,033) 559,809
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (34.4%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (6.0%)
ARG Funding Corp. 5.88% 5/20/2003 (1) 2,700 2,662
AT&T Universal Card Master Trust 5.95% 10/17/2002 (1) 2,250 2,259
Advanta Credit Card Master Trust 6.05% 8/1/2003 (1) 2,500 2,510
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 2,400 2,361
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 4,000 4,056
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.16% 6/25/2003 (1) 1,250 1,255
Chase Manhattan Credit Card Master Trust 6.30% 4/15/2003 (1) 2,500 2,521
CIT RV Trust 5.78% 7/15/2008 (1) 1,350 1,347
CIT RV Trust 5.96% 4/15/2011 (1) 1,200 1,194
Discover Card Master Trust 5.65% 11/15/2004 (1) 3,200 3,158
First Bank Corp. Card Master Trust 6.40% 2/15/2003 (1) 1,000 1,005
Ford Credit Auto Loan Master Trust 6.50% 8/15/2002 (1) 2,250 2,268
Ford Credit Auto Owner Trust 5.90% 6/15/2002 (1) 6,000 5,992
MMCA Automobile Trust 5.50% 7/15/2005 (1) 6,000 5,969
PECO Energy Transition Trust 5.63% 6/26/2006 (1) 4,400 4,309
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premier Auto Trust 5.69% 6/8/2002 (1) $ 3,500 $ 3,497
Sears Credit Account Master Trust 5.80% 8/15/2005 (1) 3,000 3,000
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 1,979 2,018
Toyota Auto Lease Trust 5.35% 7/25/2002 (1) 4,075 4,036
Toyota Auto Lease Trust 6.35% 4/26/2004 (1) 550 552
---------
55,969
---------
FINANCE (14.6%)
American General Finance Corp. 5.875% 7/1/2000 450 449
American General Finance Corp. 7.45% 7/1/2002 425 437
Associates Corp. 6.50% 7/15/2002 2,000 2,008
Associates Corp. 6.50% 8/15/2002 1,150 1,153
Associates Corp. 6.50% 10/15/2002 1,250 1,254
Associates Corp. 7.50% 4/15/2002 1,400 1,440
Banc One Corp. 6.25% 10/1/2001 2,000 2,000
BankAmerica Corp. 7.75% 7/15/2002 250 259
BankAmerica Corp. 7.875% 12/1/2002 1,500 1,563
BankAmerica Corp. 8.125% 2/1/2002 2,500 2,600
BankAmerica Corp. 9.625% 2/13/2001 400 421
BankAmerica Corp. 10.00% 2/1/2003 700 775
Bear, Stearns & Co., Inc. 6.20% 3/30/2003 3,455 3,386
Bear, Stearns & Co., Inc. 7.625% 4/15/2000 750 760
CIT Group Inc. 5.35% 12/15/2000 5,000 4,948
Case Credit Corp. 6.15% 3/1/2002 4,500 4,502
The Chase Manhattan Corp. 7.75% 11/1/1999 135 136
The Chase Manhattan Corp. 8.50% 2/15/2002 2,000 2,098
The Chase Manhattan Corp. 8.625% 5/1/2002 1,000 1,055
Chemical Bank Corp. 7.25% 9/15/2002 1,500 1,533
Chrysler Financial Co. LLC 5.25% 10/19/2000 5,000 4,958
Chrysler Financial Co. LLC 6.625% 8/15/2000 450 453
Citicorp 7.125% 3/15/2004 2,000 2,044
Citicorp 9.75% 8/1/1999 1,000 1,003
Comdisco Inc. 6.32% 11/27/2000 1,600 1,599
Countrywide Funding 8.25% 7/15/2002 250 261
Dean Witter, Discover & Co. 6.25% 3/15/2000 210 211
Dean Witter, Discover & Co. 6.875% 3/1/2003 400 404
Donaldson Lufkin & Jenrette, Inc. 6.00% 12/1/2001 5,000 4,954
Equity Residential Properties 6.55% 11/15/2001 1,350 1,341
Finova Capital Corp 5.875% 10/15/2001 1,750 1,727
First Chicago Corp. 7.625% 1/15/2003 600 620
First Chicago Corp. 8.25% 6/15/2002 1,345 1,411
First Chicago Corp. 9.875% 8/15/2000 150 156
First Chicago Corp. 10.25% 5/1/2001 250 267
First Fidelity Bancorp 9.625% 8/15/1999 800 804
First Interstate Bancorp 10.875% 4/15/2001 250 269
First Union Corp. 8.00% 11/15/2002 2,000 2,086
First Union Corp. 8.125% 6/24/2002 1,600 1,669
Fleet Credit Card 6.82% 4/9/2001 2,700 2,724
Ford Motor Credit Co. 5.125% 10/15/2001 3,400 3,321
Ford Motor Credit Co. 6.625% 6/30/2003 1,500 1,501
Ford Motor Credit Co. 7.00% 9/25/2001 600 608
Ford Motor Credit Co. 7.50% 1/15/2003 1,525 1,571
Ford Motor Credit Co. 8.20% 2/15/2002 1,900 1,980
General Motors Acceptance Corp. 5.50% 12/15/2001 750 731
General Motors Acceptance Corp. 5.50% 1/14/2002 6,000 5,880
General Motors Acceptance Corp. 7.125% 5/1/2001 2,400 2,436
Great Western Finance 6.375% 7/1/2000 2,000 2,006
HRPT Properties Trust 6.75% 12/18/2002 1,250 1,203
Household Finance Corp. 7.625% 1/15/2003 2,000 2,060
International Lease Finance Corp. 6.31% 9/1/2000 1,020 1,024
Lehman Brothers Holdings Inc. 6.375% 10/23/2000 4,835 4,826
Lehman Brothers Holdings Inc. 6.90% 1/29/2001 2,000 2,007
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lehman Brothers Holdings Inc. 7.00% 5/15/2003 $ 4,000 $ 3,976
Mack-Cali Realty 7.00% 3/15/2004 2,000 1,954
Mellon Bank NA 6.75% 6/1/2003 225 227
Mellon Financial Corp. 7.625% 11/15/1999 600 605
Merrill Lynch & Co., Inc. 5.71% 1/15/2002 1,400 1,380
Merrill Lynch & Co., Inc. 5.87% 11/15/2001 1,600 1,589
Merrill Lynch & Co., Inc. 5.88% 1/15/2004 1,500 1,457
Merrill Lynch & Co., Inc. 6.00% 1/15/2001 2,000 1,998
Merrill Lynch & Co., Inc. 6.07% 10/15/2001 2,300 2,294
Merrill Lynch & Co., Inc. 6.38% 7/18/2000 1,000 1,005
Merrill Lynch & Co., Inc. 6.50% 4/1/2001 1,500 1,509
Merrill Lynch & Co., Inc. 8.00% 2/1/2002 400 416
NationsBank Corp. 7.00% 9/15/2001 1,500 1,523
NationsBank Corp. 8.125% 6/15/2002 1,000 1,045
Norwest Financial, Inc. 7.00% 1/15/2003 110 112
Norwest Financial, Inc. 7.875% 2/15/2002 2,000 2,070
Orion Capital Corp. 9.125% 9/1/2002 1,500 1,569
PaineWebber Group, Inc. 6.375% 5/15/2004 1,500 1,458
PaineWebber Group, Inc. 7.00% 3/1/2000 2,450 2,463
PaineWebber Group, Inc. 7.875% 2/15/2003 250 258
Popular Inc. 6.20% 4/30/2001 2,500 2,476
Republic New York Corp. 7.75% 5/15/2002 700 722
Salomon Smith Barney Holdings Inc. 5.875% 2/1/2001 700 696
Summit Properties Inc. 6.80% 8/15/2002 1,500 1,462
Toyota Motor Credit Corp. 5.50% 9/17/2001 2,500 2,467
Travelers/Aetna Property Casualty Corp. 6.75% 4/15/2001 4,000 4,038
Wells Fargo & Co. 6.875% 5/10/2001 2,750 2,782
---------
136,443
---------
INDUSTRIAL (8.8%)
Air Products & Chemicals, Inc. 6.25% 6/15/2003 125 123
Archer-Daniels-Midland Co. 6.25% 5/15/2003 250 248
BP America, Inc. 9.375% 11/1/2000 1,004 1,048
Black & Decker Corp. 7.50% 4/1/2003 3,200 3,287
CSX Corp 7.05% 5/1/2002 1,000 1,007
CVS Corp. 5.50% 2/15/2004 4,000 3,853
Conoco Inc. 5.90% 4/15/2004 3,500 3,410
Continental Airlines P/T Trust 6.331% 4/15/2004 (1) 1,694 1,685
Cyprus AMAX Minerals Co. 10.125% 4/1/2002 1,500 1,585
Dayton Hudson Corp. 10.00% 12/1/2000 1,200 1,263
Dillard's Inc. 5.79% 11/15/2001 2,000 1,967
The Walt Disney Co. 6.375% 3/30/2001 1,000 1,006
Federated Department Stores, Inc. 8.50% 6/15/2003 2,000 2,130
First Data Corp. 6.625% 4/1/2003 4,200 4,214
Ford Capital BV 9.50% 7/1/2001 675 715
Ford Capital BV 9.875% 5/15/2002 1,520 1,651
General Motors Corp. 9.125% 7/15/2001 1,000 1,053
Illinois Central Railroad Co. 6.75% 5/15/2003 3,000 2,999
Johnson & Johnson 7.375% 6/29/2002 200 207
Kimberly-Clark 8.625% 5/1/2001 100 105
Lucent Technologies, Inc. 6.90% 7/15/2001 1,000 1,017
Lockheed Martin Corp. 6.50% 4/15/2003 1,000 985
McDonald's Corp. 6.75% 2/15/2003 450 452
Mobil Corp. 8.375% 2/12/2001 2,238 2,319
Monsanto Co. 5.375% 12/1/2001 5,000 4,901
Norfolk Southern Corp. 6.875% 5/1/2001 3,150 3,178
Occidental Petroleum Corp. 8.50% 11/9/2001 1,500 1,548
J.C. Penney & Co., Inc. 9.05% 3/1/2001 375 390
Phillips Petroleum Co. 9.00% 6/1/2001 1,500 1,570
Praxair, Inc. 6.25% 6/30/2000 1,250 1,253
Praxair, Inc. 6.70% 4/15/2001 4,000 4,015
Praxair, Inc. 6.75% 3/1/2003 1,250 1,245
Raytheon Co. 5.70% 11/1/2003 3,000 2,903
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Raytheon Co. 5.95% 3/15/2001 $ 1,500 $ 1,493
Raytheon Co. 6.30% 8/15/2000 1,750 1,755
Rohm & Haas Co. 6.95% 7/15/2004 4,000 3,993
Safeway Inc. 5.75% 11/15/2000 1,700 1,690
Safeway Inc. 5.875% 11/15/2001 750 739
Sears, Roebuck & Co. Acceptance Corp. 6.50% 6/15/2000 1,500 1,508
Tele-Communications, Inc. 6.375% 5/1/2003 2,300 2,289
Tenneco, Inc. 8.20% 11/15/1999 350 353
Texaco Capital Corp. 9.00% 12/15/1999 700 711
Union Carbide Corp. 6.75% 4/1/2003 2,000 1,986
Union Pacific Corp. 9.87% 11/14/2000 1,000 1,047
WMX Technologies Inc. 6.25% 10/15/2000 3,000 2,999
Waste Management Inc. 7.70% 10/1/2002 2,225 2,295
Whirlpool Corp. 9.00% 3/1/2003 400 426
Xerox Corp. 8.125% 4/15/2002 150 157
---------
82,773
---------
UTILITIES (5.0%)
Alabama Power Co. 6.00% 3/1/2000 1,050 1,051
Arizona Public Service Co. 5.875% 2/15/2004 500 483
Baltimore Gas & Electric Co. 7.25% 7/1/2002 200 206
CMS Panhandle Holding Co. 6.125% 3/15/2004 2,800 2,723
Coastal Corp. 8.125% 9/15/2002 1,700 1,770
Commonwealth Edison 7.375% 9/15/2002 2,950 3,043
Consolidated Edison Co. of New York, Inc. 6.625% 2/1/2002 500 504
Enron Corp. 9.125% 4/1/2003 2,000 2,146
Florida Power & Light Co. 6.625% 2/1/2003 210 210
KN Energy, Inc. 6.45% 11/30/2001 1,000 980
Midamerican Funding LLC 5.85% 3/1/2001 1,900 1,886
National Rural Utility Co. 5.00% 10/1/2002 800 772
National Rural Utility Co. 6.75% 9/1/2001 2,500 2,530
New England Telephone & Telegraph Co. 8.625% 8/1/2001 3,000 3,152
Pacific Bell Telephone Co. 7.25% 7/1/2002 450 462
Pacific Gas & Electric Co. 6.25% 8/1/2003 1,000 993
Pacific Gas & Electric Co. 7.875% 3/1/2002 3,000 3,110
PP&L Resources Inc. 6.00% 6/1/2000 1,000 1,001
PP&L Resources Inc. 7.75% 5/1/2002 1,000 1,031
Public Service of Colorado 6.00% 1/1/2001 1,000 995
Texas Utilities Co. 7.375% 8/1/2001 450 459
Texas Utilities Co. 8.125% 2/1/2002 600 624
Union Electric Power Co. 7.65% 7/15/2003 3,000 3,115
US West Capital Funding, Inc. 6.125% 7/15/2002 4,000 3,942
Virginia Electric & Power Co. 6.625% 4/1/2003 3,000 3,010
Worldcom Inc. 6.125% 8/15/2001 4,250 4,228
Worldcom Inc. 6.25% 8/15/2003 3,000 2,957
---------
47,383
---------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $325,452) 322,568
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(4.3%)
- --------------------------------------------------------------------------------------------------------------------------
Asian Development Bank 9.125% 6/1/2000 700 721
Bank of Nova Scotia 6.875% 5/1/2003 750 756
Bayerische Landesbank 5.875% 4/7/2000 1,600 1,602
Canadian Imperial Bank of Commerce (NY) 6.20% 8/1/2000 3,600 3,616
Grand Metropolitan Investment Corp. 8.625% 8/15/2001 1,000 1,045
Hanson Overseas 7.375% 1/15/2003 1,250 1,280
KFW International Finance, Inc. 9.125% 5/15/2001 400 421
Korean Development Bank 7.125% 4/22/2004 3,900 3,816
Korea Electric Power 7.00% 2/1/2007 1,650 1,517
Province of Manitoba 6.875% 9/15/2002 2,500 2,542
Province of Manitoba 7.75% 2/1/2002 1,500 1,551
Province of Manitoba 8.75% 5/15/2001 1,000 1,045
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Province of Manitoba 9.50% 10/1/2000 $ 450 $ 469
National Westminster Bancorp Inc. 9.45% 5/1/2001 250 263
Noranda, Inc. 8.625% 7/15/2002 500 515
Province of Ontario 7.75% 6/4/2002 550 573
Province of Ontario 8.00% 10/17/2001 5,360 5,573
Pemex Finance Ltd. 6.125% 11/15/2003 1,150 1,143
Petro Geo-Services 6.25% 11/19/2003 3,000 2,912
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 1,000 952
Province of Saskatchewan 6.625% 7/15/2003 4,500 4,528
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 3,200 3,152
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $40,421) 39,992
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $14,284) 4.87% 7/1/1999 14,284 14,284
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(COST $947,190) 936,653
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 46,029
Payables for Investment Securities Purchased (42,971)
Other Liabilities (3,022)
---------
36
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------
Applicable to 95,020,123 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $936,689
==========================================================================================================================
NET ASSET VALUE PER SHARE $9.86
==========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $946,481 $9.96
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 745 .01
Unrealized Depreciation--Note E (10,537) (.11)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $936,689 $9.86
==========================================================================================================================
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (59.4%)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (45.8%)
U.S. Treasury Bond 10.00% 5/15/2010 $ 12,765 $ 15,228
U.S. Treasury Bond 10.375% 11/15/2012 22,865 29,151
U.S. Treasury Bond 10.75% 8/15/2005 22,490 28,007
U.S. Treasury Bond 12.75% 11/15/2010 44,450 60,009
U.S. Treasury Note 6.125% 8/15/2007 101,475 102,663
U.S. Treasury Note 6.50% 8/15/2005 26,400 27,268
U.S. Treasury Note 7.00% 7/15/2006 175,300 185,899
U.S. Treasury Note 7.50% 2/15/2005 1,800 1,942
U.S. Treasury Note 7.875% 11/15/2004 151,800 165,960
-----------
616,127
-----------
AGENCY BONDS & NOTES (13.6%)
Federal Home Loan Bank 5.79% 4/27/2009 10,000 9,405
Federal Home Loan Bank 5.80% 9/2/2008 16,700 15,865
Federal Home Loan Bank 5.865% 9/2/2008 10,000 9,524
Federal Home Loan Bank 5.88% 11/25/2008 5,000 4,731
Federal Home Loan Bank 5.925% 4/9/2008 4,000 3,832
Federal Home Loan Mortgage Corp. 6.13% 2/12/2009 7,000 6,637
Federal Home Loan Mortgage Corp. 6.45% 4/29/2009 25,000 24,096
Federal National Mortgage Assn. 5.64% 12/10/2008 10,380 9,676
Federal National Mortgage Assn. 6.09% 2/20/2009 10,000 9,460
Federal National Mortgage Assn. 6.18% 2/19/2009 3,000 2,854
Federal National Mortgage Assn. 6.19% 7/7/2008 4,325 4,175
Federal National Mortgage Assn. 6.40% 5/14/2009 20,000 19,357
Federal National Mortgage Assn. 6.52% 3/5/2008 19,075 18,646
Federal National Mortgage Assn. 6.57% 8/22/2007 10,000 10,066
Federal National Mortgage Assn. 6.58% 8/20/2007 28,000 28,203
Federal National Mortgage Assn. 6.59% 9/17/2007 7,000 7,055
-----------
183,582
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $809,061) 799,709
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (31.6%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (1.8%)
California Infrastructure & Econ. Dev. Bank
SP Trust PG&E 6.38% 9/25/2008 (1) 5,500 5,484
California Infrastructure & Econ. Dev. Bank
SP Trust PG&E-1 6.42% 9/25/2008 (1) 2,400 2,398
Citibank Credit Card Master Trust 5.875% 3/10/2011 (1) 7,500 7,076
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 9,000 8,613
-----------
23,571
-----------
FINANCE (10.9%)
Associates Corp. 7.75% 2/15/2005 4,300 4,522
BankAmerica Corp. 6.20% 2/15/2006 1,600 1,531
BankAmerica Corp. 7.125% 5/1/2006 1,750 1,755
BankAmerica Corp. 7.625% 6/15/2004 450 466
Bear, Stearns & Co., Inc. 6.75% 12/15/2007 3,000 2,904
Bradley Operating LP 7.00% 11/15/2004 2,000 1,933
CNA Financial Corp. 6.50% 4/15/2005 2,000 1,936
The Chase Manhattan Corp. 6.00% 11/1/2005 3,800 3,634
The Chase Manhattan Corp. 6.375% 4/1/2008 3,500 3,342
The Chase Manhattan Corp. 6.50% 8/1/2005 1,200 1,179
The Chase Manhattan Corp. 7.125% 2/1/2007 1,650 1,659
Chemical Bank Corp. 6.125% 11/1/2008 500 468
Commercial Credit Corp. 7.875% 7/15/2004 2,000 2,090
CoreStates Capital Corp. 6.625% 3/15/2005 2,400 2,365
Equitable Companies Inc. 6.50% 4/1/2008 2,000 1,934
First Chicago Corp. 6.375% 1/30/2009 5,000 4,760
Fleet Financial Group, Inc. 7.125% 4/15/2006 1,300 1,297
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fleet/Norstar Group 8.125% 7/1/2004 $ 900 $ 948
Ford Motor Credit Co. 5.80% 1/12/2009 10,000 9,136
Ford Motor Credit Co. 7.75% 3/15/2005 115 120
General Electric Capital Corp. 8.85% 3/1/2007 5,000 5,631
General Motors Acceptance Corp. 6.125% 1/22/2008 5,000 4,727
Household Finance Corp. 6.40% 6/17/2008 3,785 3,585
Household Finance Corp. 7.65% 5/15/2007 1,000 1,029
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 1,325 1,264
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 2,850 2,671
Lehman Brothers Holdings Inc. 7.20% 8/15/2009 1,500 1,457
Lehman Brothers Holdings Inc. 7.375% 1/15/2007 5,000 4,933
Lehman Brothers Holdings Inc. 7.625% 6/1/2006 1,100 1,115
Liberty Financial Co. 6.75% 11/15/2008 3,000 2,887
Mack-Cali Realty 7.25% 3/15/2009 2,000 1,898
Mellon Bank NA 6.50% 8/1/2005 3,000 2,963
Merrill Lynch & Co., Inc. 6.00% 2/17/2009 10,000 9,221
Merrill Lynch & Co., Inc. 6.55% 8/1/2004 100 99
Morgan Stanley, Dean Witter Discover & Co. 6.875% 3/1/2007 3,000 2,984
NAC Re Corp. 7.15% 11/15/2005 2,500 2,486
National Rural Utilities 6.42% 5/1/2008 3,000 2,925
NationsBank Corp. 6.50% 3/15/2006 5,900 5,722
NationsBank Corp. 6.875% 2/15/2005 420 421
NationsBank Corp. 7.75% 8/15/2004 500 521
Orion Capital Corp. 7.25% 7/15/2005 800 777
Prudential Insurance Co. of America 6.375% 7/23/2006 2,000 1,930
Realty Income Corp. 7.75% 5/6/2007 2,000 1,914
Reckson Operating Partnership LP 7.75% 3/15/2009 1,800 1,733
Republic New York Corp. 7.75% 5/15/2009 2,400 2,498
Salomon Smith Barney Holdings Inc. 6.875% 6/15/2005 3,300 3,288
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 4,000 3,868
SunTrust Banks, Inc. 6.25% 6/1/2008 3,000 2,854
SunTrust Banks, Inc. 7.375% 7/1/2006 2,400 2,454
Susa Partnership LP 7.00% 12/1/2007 3,000 2,791
U.S. Bank NA 5.70% 12/15/2008 2,000 1,816
U.S. Bank NA 6.30% 7/15/2008 5,000 4,752
Wachovia Corp. 5.625% 12/15/2008 1,600 1,453
Wachovia Corp. 6.25% 8/4/2008 5,400 5,141
Wells Fargo & Co. 6.875% 4/1/2006 3,000 2,976
-----------
146,763
-----------
INDUSTRIAL (13.3%)
Allied Signal Inc. 6.20% 2/1/2008 3,700 3,520
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 3,400 3,438
Applied Materials, Inc. 8.00% 9/1/2004 150 156
Baker Hughes Inc. 6.25% 1/15/2009 7,500 7,107
C.R. Bard, Inc. 6.70% 12/1/2026 2,300 2,247
Borg-Warner Automotive 6.50% 2/15/2009 6,000 5,679
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 3,000 2,923
Burlington Northern Santa Fe Corp. 9.25% 10/1/2006 1,000 1,122
CSX Corp. 9.00% 8/15/2006 2,600 2,841
Caterpillar, Inc. 9.00% 4/15/2006 600 667
Caterpillar, Inc. 9.375% 8/15/2011 1,550 1,824
Champion Enterprises Inc. 7.625% 5/15/2009 2,500 2,372
Comcast Cablevision 8.375% 5/1/2007 4,500 4,802
Conoco Inc. 6.35% 4/15/2009 10,000 9,547
Continental Airlines P/T Trust 6.41% 10/15/2008 (1) 1,672 1,617
Continental Airlines P/T Trust 6.648% 3/15/2019 2,385 2,259
Delta Airlines, Inc. (Equipment Trust Certificates) 8.54% 1/2/2007 (1) 449 467
Dillard's Inc. 6.625% 11/15/2008 3,000 2,842
Dillard's Inc. 7.375% 6/1/2006 2,100 2,092
First Data Corp. 6.375% 12/15/2007 3,500 3,370
Harrahs Operating Co., Inc. 7.50% 1/15/2009 5,000 4,857
International Business Machines Corp. 6.45% 8/1/2007 4,000 3,977
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Paper Co. 7.875% 8/1/2006 $ 35 $ 36
Kroger Co. 7.65% 4/15/2007 530 545
Kroger Co. 8.15% 7/15/2006 3,800 3,995
Lafarge Corp. 6.375% 7/15/2005 4,500 4,384
Lockheed Martin Corp. 7.70% 6/15/2008 3,800 3,895
Monsanto Co. 5.75% 12/1/2005 6,000 5,668
Philip Morris Cos., Inc. 7.00% 7/15/2005 2,200 2,196
News America Holdings Inc. 8.50% 2/15/2005 2,400 2,533
Norfolk Southern Corp. 7.40% 9/15/2006 4,545 4,624
Northrop Grumman Corp. 7.00% 3/1/2006 3,500 3,388
Occidental Petroleum Corp. 8.50% 9/15/2004 3,000 3,015
Praxair, Inc. 6.90% 11/1/2006 3,900 3,842
Raytheon Co. 6.75% 8/15/2007 8,100 7,974
Rohm & Haas Co. 7.40% 7/15/2009 7,000 6,998
Safeway Inc. 6.85% 9/15/2004 3,500 3,511
Safeway Inc. 7.00% 9/15/2007 2,700 2,696
Sears, Roebuck & Co. Acceptance Corp. 6.125% 1/15/2006 150 143
Sears, Roebuck & Co. Acceptance Corp. 6.75% 9/15/2005 3,000 2,961
TCI Communications, Inc. 7.25% 8/1/2005 5,685 5,787
Texaco Capital Corp. 5.70% 12/1/2008 5,000 4,651
Texas Instruments Inc. 6.125% 2/1/2006 3,100 2,994
Time Warner Inc. 7.48% 1/15/2008 2,050 2,084
Time Warner Inc. 7.75% 6/15/2005 6,500 6,717
Time Warner Inc. 8.18% 8/15/2007 2,250 2,382
Tosco Corp. 7.25% 1/1/2007 3,000 2,996
USA Waste Services Inc. 7.125% 10/1/2007 5,500 5,520
Union Carbide Corp. 6.70% 4/1/2009 7,000 6,714
Union Pacific Corp. 6.40% 2/1/2006 2,465 2,356
Union Pacific Corp. 7.60% 5/1/2005 3,200 3,274
WMX Technologies Inc. 7.00% 10/15/2006 2,000 2,004
Whirlpool Corp. 9.10% 2/1/2008 60 67
-----------
179,676
-----------
UTILITIES (5.6%)
Ameritech Capital Funding 6.15% 1/15/2008 6,000 5,735
CMS Panhandle Holding Co. 6.50% 7/15/2009 7,000 6,606
Coastal Corp. 6.375% 2/1/2009 5,000 4,697
El Paso Energy Corp. 6.75% 5/15/2009 6,000 5,745
Enron Corp. 6.875% 10/15/2007 1,500 1,478
Enron Corp. 7.125% 5/15/2007 2,546 2,532
Enron Corp. 7.625% 9/10/2004 1,000 1,030
GTE Northwest Inc. 5.55% 10/15/2008 3,000 2,725
GTE South Inc. 6.125% 6/15/2007 2,000 1,911
HNG Internorth 9.625% 3/15/2006 2,000 2,246
KN Energy Inc. 6.65% 3/1/2005 6,000 5,679
MCI Communications Corp. 6.50% 4/15/2010 2,150 2,063
MCI Communications Corp. 7.50% 8/20/2004 3,250 3,346
National Rural Utility Co. 6.20% 2/1/2008 4,850 4,662
New York Telephone Co. 6.125% 1/15/2010 5,500 5,195
Pacific Bell Telephone Co. 7.00% 7/15/2004 3,175 3,244
PP&L Resources Inc. 6.55% 3/1/2006 1,325 1,306
Southern California Edison Co. 6.375% 1/15/2006 3,000 2,955
Southwestern Bell Telephone Co. 6.625% 7/15/2007 6,000 5,942
Texaco Capital Inc. 5.50% 1/15/2009 3,000 2,739
Texas Utility Co. 7.17% 8/1/2007 3,500 3,555
Union Electric Power Co. 6.75% 5/1/2008 120 119
-----------
75,510
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $440,829) 425,520
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(7.1%)
- --------------------------------------------------------------------------------------------------------------------------
Ahold Finance USA Inc. 6.25% 5/1/2009 $ 8,000 $ 7,544
Province of British Columbia 5.375% 10/29/2008 7,000 6,368
Republic of Chile 6.875% 4/28/2009 5,000 4,698
Embotelladora Andina SA 7.875% 10/1/2097 1,000 751
Falconbridge Ltd. 7.35% 11/1/2006 1,500 1,417
Republic of Finland 7.875% 7/28/2004 3,500 3,744
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 3,000 3,494
Israel Electric Corp. 7.75% 3/1/2009 2,250 2,233
Korea Development Bank 6.75% 12/1/2005 2,000 1,885
Korea Electric Power 7.00% 2/1/2007 8,920 8,201
Korea Electric Power 7.75% 4/1/2013 1,500 1,397
National Australia Bank 6.60% 12/10/2007 4,100 3,968
New Zealand Government 8.75% 12/15/2006 325 363
New Zealand Government 10.625% 11/15/2005 600 722
Noranda, Inc. 7.00% 7/15/2005 3,000 2,872
Noranda, Inc. 8.125% 6/15/2004 1,000 1,021
Province of Ontario 7.625% 6/22/2004 5,000 5,230
Petro Geo-Services 6.625% 3/30/2008 5,325 5,027
Petro Geo-Services 7.50% 3/31/2007 1,500 1,500
Pohang Iron & Steel Co. Ltd. 7.375% 5/15/2005 5,000 4,780
The State of Qatar 9.50% 5/21/2009 2,100 2,124
Province of Quebec 5.75% 2/15/2009 10,000 9,193
Province of Saskatchewan 7.125% 3/15/2008 600 616
Province of Saskatchewan 8.00% 7/15/2004 3,900 4,153
Swiss Bank Corp. 6.75% 7/15/2005 2,000 1,966
TPSA Finance BV 7.75% 12/10/2008 6,045 5,863
Telecomunicaciones de Puerto Rico 6.65% 5/15/2006 2,400 2,300
Toronto-Dominion Bank 6.50% 8/15/2008 3,000 2,931
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $99,957) 96,361
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 4.87% 7/1/1999 21,605 21,605
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note F 4.96%-4.98% 7/1/1999 34,612 34,612
- --------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $56,217) 56,217
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.3%)
(COST $1,406,064) 1,377,807
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-2.3%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 54,943
Payables for Investment Securities Purchased (47,831)
Other Liabilities--Note F (38,359)
-----------
(31,247)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------
Applicable to 137,009,336 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $1,346,560
==========================================================================================================================
NET ASSET VALUE PER SHARE $9.83
==========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,388,052 $10.13
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (13,235) (.10)
Unrealized Depreciation--Note E (28,257) (.20)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,346,560 $9.83
==========================================================================================================================
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (64.1%)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (61.3%)
U.S. Treasury Bond 7.125% 2/15/2023 $ 9,875 $ 10,925
U.S. Treasury Bond 7.625% 11/15/2022 9,450 11,008
U.S. Treasury Bond 8.00% 11/15/2021 19,045 22,928
U.S. Treasury Bond 8.125% 8/15/2019-8/15/2021 56,400 68,359
U.S. Treasury Bond 8.50% 2/15/2020 8,895 11,133
U.S. Treasury Bond 8.75% 5/15/2017-8/15/2020 5,540 7,110
U.S. Treasury Bond 8.875% 8/15/2017-2/15/2019 14,725 18,810
U.S. Treasury Bond 10.375% 11/15/2009-11/15/2012 11,565 14,531
U.S. Treasury Bond 12.75% 11/15/2010 1,900 2,565
U.S. Treasury Bond 13.25% 5/15/2014 975 1,480
-----------
168,849
-----------
AGENCY BONDS & NOTES (2.8%)
Federal National Mortgage Assn. 5.83% 11/26/2027 1,000 888
Federal National Mortgage Assn. 6.08% 9/1/2028 3,000 2,757
Tennessee Valley Authority 6.25% 12/15/2017 1,100 1,063
Tennessee Valley Authority 6.875% 12/15/2043 3,000 2,854
-----------
7,562
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $180,577) 176,411
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (29.1%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITY (0.2%)
Premier Auto Trust 5.69% 6/8/2002 (1) 400 400
-----------
FINANCE (6.1%)
Bank of New York Capital I 7.97% 12/31/2026 375 377
BT Capital Trust B 7.90% 1/15/2027 200 195
CIGNA Corp. 7.875% 5/15/2027 175 178
CIGNA Corp. 8.30% 1/15/2033 500 527
Chase Capital I 7.67% 12/1/2026 400 388
Citicorp Capital II 8.015% 2/15/2027 450 449
Dean Witter, Discover & Co. 6.75% 10/15/2013 200 192
Equitable Companies Inc. 7.00% 4/1/2028 200 190
First Chicago Corp. 9.875% 7/1/1999 600 600
Fleet Capital Trust II 7.92% 12/11/2026 400 395
Ford Motor Credit Co. 6.375% 2/1/2029 1,500 1,304
General Electric Capital Corp. 6.90% 9/15/2015 1,000 1,003
Household Finance Corp. 6.45% 2/1/2009 70 66
International Lease Finance Corp. 6.30% 11/1/1999 600 602
Lehman Brothers Holdings Inc. 7.20% 8/15/2009 835 811
Liberty Financial Co. 6.75% 11/15/2008 1,000 962
Mellon Capital II 7.995% 1/15/2027 2,100 2,113
Merrill Lynch & Co., Inc. 6.875% 11/15/2018 1,250 1,167
NB Capital Trust IV 8.25% 4/15/2027 400 409
NationsBank Corp. 7.25% 10/15/2025 375 362
Norwest Corp. 6.65% 10/15/2023 60 55
Progressive Corp. 6.625% 3/1/2029 1,000 909
Security Capital Pacific Trust 8.05% 4/1/2017 200 186
Spieker Properties Inc. 7.50% 10/1/2027 300 274
Summit Properties Inc. 7.20% 8/15/2007 550 516
Suntrust Capital 7.90% 6/15/2027 750 747
Susa Partnership LP 7.50% 12/1/2027 400 350
Travelers/Aetna Property Casualty Corp. 7.75% 4/15/2026 275 283
U.S. Bancorp 8.27% 12/15/2026 750 772
Wells Fargo Capital I 7.96% 12/15/2026 400 401
-----------
16,783
-----------
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL (17.0%)
Anadarko Petroleum Corp. 7.20% 3/15/2029 $ 2,000 $ 1,873
Anheuser-Busch Cos., Inc. 6.75% 12/15/2027 250 237
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 600 588
Archer-Daniels-Midland Co. 8.875% 4/15/2011 80 92
Auburn Hills 12.00% 5/1/2020 260 398
Baker Hughes Inc. 6.875% 1/15/2029 1,500 1,391
C.R. Bard, Inc. 6.70% 12/1/2026 500 488
Bayer Corp. 6.65% 2/15/2028 500 465
The Boeing Co. 6.625% 2/15/2038 700 626
Borg-Warner Automotive 7.125% 2/15/2029 2,000 1,854
Burlington Northern Santa Fe Corp. 6.75% 3/15/2029 1,000 913
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 300 285
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 800 756
Burlington Northern Santa Fe Corp. 7.25% 8/1/2097 250 239
CSX Corp. 8.10% 9/15/2022 600 629
CSX Corp. 8.625% 5/15/2022 1,025 1,132
Caterpillar, Inc. 7.375% 3/1/2097 50 48
Caterpillar, Inc. 9.375% 8/15/2011 450 530
Champion Enterprises Inc. 7.625% 5/15/2009 500 475
Chrysler Corp. 7.45% 2/1/2097 225 222
Comcast Cablevision 8.875% 5/1/2017 500 562
Conoco Inc. 6.95% 4/15/2029 2,000 1,866
Continental Airlines P/T Trust 6.648% 3/15/2019 465 441
Dayton Hudson Corp. 6.65% 8/1/2028 500 458
Dayton Hudson Corp. 6.75% 1/1/2028 750 696
Deere & Co. 8.50% 1/9/2022 115 128
Dillard's Inc. 7.75% 5/15/2027 750 741
The Walt Disney Co. 7.55% 7/15/2093 975 983
Eastman Chemical Co. 7.25% 1/15/2024 250 235
Eastman Chemical Co. 7.60% 2/1/2027 150 147
Federated Department Stores, Inc. 7.00% 2/15/2028 400 373
Federated Department Stores, Inc. 7.45% 7/15/2017 900 897
Ford Capital BV 9.50% 6/1/2010 180 210
Ford Motor Co. 8.90% 1/15/2032 1,000 1,164
Ford Motor Co. 9.98% 2/15/2047 100 131
International Business Machines Corp. 6.50% 1/15/2028 350 324
International Business Machines Corp. 7.125% 12/1/2096 500 481
International Paper Co. 6.875% 4/15/2029 2,000 1,837
Lucent Technologies, Inc. 6.50% 1/15/2028 500 463
May Department Stores Co. 6.70% 9/15/2028 1,375 1,284
May Department Stores Co. 9.75% 2/15/2021 40 49
Mobil Corp. 7.625% 2/23/2033 230 228
Monsanto Co. 6.60% 12/1/2028 1,000 888
News America Holdings Inc. 8.00% 10/17/2016 750 752
News America Holdings Inc. 9.25% 2/1/2013 1,500 1,685
Norfolk Southern Corp. 7.70% 5/15/2017 400 410
Norfolk Southern Corp. 7.80% 5/15/2027 325 336
Norfolk Southern Corp. 7.90% 5/15/2097 100 101
Northrop Grumman Corp. 9.375% 10/15/2024 400 437
Phillips Petroleum Co. 8.49% 1/1/2023 900 944
Raytheon Co. 6.75% 3/15/2018 800 751
Raytheon Co. 7.00% 11/1/2028 400 380
Rohm & Haas Co. 7.85% 7/15/2009 1,750 1,749
Rohm & Haas Co. 9.80% 4/15/2020 (1) 550 650
Sears, Roebuck & Co. 9.375% 11/1/2011 395 457
Tele-Communications, Inc. 9.875% 6/15/2022 500 643
TCI Communications, Inc. 7.875% 8/1/2013 1,000 1,059
Texaco Capital Corp. 8.875% 9/1/2021 155 183
Time Warner Entertainment 8.375% 3/15/2023 1,650 1,795
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Time Warner Inc. 7.57% 2/1/2024 $ 500 $ 497
Tosco Corp. 7.80% 1/1/2027 350 352
Tyco International Group SA 6.875% 1/15/2029 1,500 1,366
USA Waste Services Inc. 7.00% 7/15/2028 300 279
USA Waste Services Inc. 7.125% 12/15/2017 1,150 1,109
Union Carbide Corp. 7.75% 10/1/2096 150 145
Union Carbide Corp. 7.875% 4/1/2023 220 223
Union Pacific Corp. 6.625% 2/1/2029 1,250 1,097
Union Pacific Corp. 7.00% 2/1/2016 550 520
Union Pacific Corp. 8.625% 5/15/2022 35 37
United Technologies Corp. 6.70% 8/1/2028 500 468
United Technologies Corp. 8.875% 11/15/2019 545 639
-----------
46,891
-----------
UTILITIES (5.8%)
AT&T Corp. 8.35% 1/15/2025 300 313
Arizona Public Service Co. 7.25% 8/1/2023 200 190
CMS Panhandle Holding Co. 7.00% 7/15/2029 1,500 1,372
Coastal Corp. 7.42% 2/15/2037 700 681
Coastal Corp. 7.75% 10/15/2035 400 400
Coastal Corp. 9.625% 5/15/2012 300 359
Commonwealth Edison 7.50% 7/1/2013 750 786
GTE Corp. 8.75% 11/1/2021 900 1,049
Illinois Power Co. 7.50% 7/15/2025 300 284
MCI Communications Corp. 6.50% 4/15/2010 625 600
MCI Communications Corp. 7.75% 3/23/2025 250 245
Michigan Bell Telephone Co. 7.50% 2/15/2023 1,040 1,013
New England Telephone & Telegraph Co. 6.875% 10/1/2023 110 102
New England Telephone & Telegraph Co. 7.875% 11/15/2029 600 640
New England Telephone & Telegraph Co. 9.00% 8/1/2031 250 275
New York Telephone Co. 6.125% 1/15/2010 1,000 945
Pacific Gas & Electric Co. 8.25% 11/1/2022 1,000 1,033
Southern California Edison Co. 6.75% 1/15/2000 500 502
Southwestern Bell Telephone Co. 7.25% 7/15/2025 450 433
Southwestern Bell Telephone Co. 7.625% 3/1/2023 45 45
Sprint Capital Corp. 6.875% 11/15/2028 1,250 1,140
Texas Utilities Co. 7.875% 3/1/2023 1,090 1,094
Texas Utilities Co. 8.75% 11/1/2023 50 53
U S WEST Communications Group 7.25% 9/15/2025 1,000 967
Virginia Electric & Power Co. 6.75% 10/1/2023 1,000 920
Wisconsin Electric Power Co. 7.70% 12/15/2027 75 73
Worldcom Inc. 6.95% 8/15/2028 500 474
-----------
15,988
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $84,514) 80,062
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(5.1%)
- --------------------------------------------------------------------------------------------------------------------------
Ahold Finance USA Inc. 6.875% 5/1/2029 1,500 1,399
Canadian National Railway Co. 6.80% 7/15/2018 725 682
Canadian National Railway Co. 6.90% 7/15/2028 400 372
Embotelladora Andina SA 7.875% 10/1/2097 300 225
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 75 87
Inter-American Development Bank 7.125% 3/15/2023 25 25
Inter-American Development Bank 8.50% 3/15/2011 110 128
International Bank for Reconstruction & Development 9.25% 7/15/2017 135 174
KFW International Finance, Inc. 7.20% 3/15/2014 600 627
Korean Development Bank 7.125% 4/22/2004 800 783
Korea Electric Power 7.00% 2/1/2007 175 161
Korea Electric Power 7.75% 4/1/2013 400 372
Province of Manitoba 9.25% 4/1/2020 485 605
Province of New Brunswick 8.75% 5/1/2022 800 965
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Province of New Brunswick 9.75% 5/15/2020 $ 500 $ 650
Province of Newfoundland 9.00% 6/1/2019 300 352
Province of Newfoundland 10.00% 12/1/2020 750 964
Northern Telecom Ltd. 6.875% 9/1/2023 250 242
Petro-Canada 9.25% 10/15/2021 300 348
Petro Geo-Services 7.125% 3/30/2028 625 565
Province of Quebec 7.125% 2/9/2024 2,000 1,961
Province of Saskatchewan 7.375% 7/15/2013 600 627
Swiss Bank Corp. 7.00% 10/15/2015 750 711
Swiss Bank Corp. 7.375% 7/15/2015 750 735
Swiss Bank Corp.-New York 7.375% 6/15/2017 300 293
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $14,680) 14,053
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $646) 4.87% 7/1/1999 646 646
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%)
(COST $280,417) 271,172
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--NET (1.5%) 4,129
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------
Applicable to 26,743,032 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $275,301
==========================================================================================================================
NET ASSET VALUE PER SHARE $10.29
==========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in Securities, at Value $271,172
Other Assets--Note B 14,447
-----------
Total Assets 285,619
-----------
LIABILITIES
Payables for Investment Securities Purchased (8,741)
Other Liabilities (1,577)
-----------
Total Liabilities (10,318)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $275,301
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $286,857 $10.73
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (2,311) (.09)
Unrealized Depreciation--Note E (9,245) (.35)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $275,301 $10.29
==========================================================================================================================
</TABLE>
41
<PAGE> 44
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to each class of its shares. These
expenses directly reduce the amount of investment income available to pay to
shareholders as income dividends. This Statement also shows any Net Gain (Loss)
realized on the sale of investments, and any Unrealized Appreciation
(Depreciation) on investments during the period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TOTAL BOND SHORT-TERM INTERMEDIATE- LONG-TERM
MARKET INDEX BOND INDEX TERM BOND INDEX BOND INDEX
FUND FUND FUND FUND
---------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
---------------------------------------------------------------------
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $342,354 $22,323 $40,255 $ 7,896
Security Lending 95 29 18 --
---------------------------------------------------------------------
Total Income 342,449 22,352 40,273 7,896
---------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 635 46 71 14
Management and Administrative 2,501 324 501 1
Shareholder Account Maintenance(1) 4,799 313 498 188
Marketing and Distribution(1) 1,209 88 124 24
Custodian Fees 120 17 18 10
Auditing Fees 7 4 4 4
Shareholders' Reports(1) 287 15 25 9
Trustees' Fees and Expenses 8 1 1 --
---------------------------------------------------------------------
Total Expenses 9,566 808 1,242 250
Expenses Paid Indirectly--Note D (1) -- (4) (2)
---------------------------------------------------------------------
Net Expenses 9,565 808 1,238 248
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 332,884 21,544 39,035 7,648
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT
SECURITIES SOLD (15,610) 834 (13,097) (2,294)
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENT SECURITIES (472,135) (17,577) (64,323) (21,215)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(154,861) $4,801 $(38,385) $(15,861)
=========================================================================================================================
</TABLE>
(1)Expenses of the Total Bond Market Index Fund by class of shares are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(000)
------------------------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class-Specific Expenses:
Shareholder Account Maintenance $4,577 $ 222 $4,799
Marketing and Distribution 921 288 1,209
Shareholders' Reports 265 22 287
------------------------------------------------
Total Class-Specific Expenses 5,763 532 6,295
All Other Fund Expenses 2,471 800 3,271
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses $8,234 $1,332 $9,566
=========================================================================================================================
See Note C in Notes to Financial Statements.
</TABLE>
42
<PAGE> 45
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.
Distributions, Capital Share Transactions, and Shares Issued and Redeemed are
shown separately for each class of shares.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND
----------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUN. 30, 1999 DEC. 31, 1998
(000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 332,884 $ 502,763
Realized Net Gain (Loss) (15,610) 65,401
Change in Unrealized Appreciation (Depreciation) (472,135) 101,026
----------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (154,861) 669,190
----------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (250,491) (385,446)
Institutional Shares (82,393) (117,317)
Realized Capital Gain
Investor Shares (12,420) (28,406)
Institutional Shares (3,923) (8,371)
----------------------------------
Total Distributions (349,227) (539,540)
----------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 2,177,389 3,417,802
Issued in Lieu of Cash Distributions 238,127 373,724
Redeemed (1,012,758) (1,255,551)
----------------------------------
Net Increase--Investor Shares 1,402,758 2,535,975
----------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued 710,176 1,101,619
Issued in Lieu of Cash Distributions 74,419 105,038
Redeemed (201,234) (371,701)
----------------------------------
Net Increase--Institutional Shares 583,361 834,956
- -------------------------------------------------------------------------------------------------------------------------
Total Increase 1,482,031 3,500,581
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 10,258,025 6,757,444
----------------------------------
End of Period $11,740,056 $10,258,025
=========================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 216,386 334,291
Issued in Lieu of Cash Distributions 23,751 36,562
Redeemed (100,738) (122,914)
----------------------------------
Net Increase in Shares Outstanding 139,399 247,939
=========================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued 70,765 107,590
Issued in Lieu of Cash Distributions 7,424 10,275
Redeemed (20,002) (36,368)
----------------------------------
Net Increase in Shares Outstanding 58,187 81,497
=========================================================================================================================
</TABLE>
43
<PAGE> 46
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (continued)
- -------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INTERMEDIATE-TERM
BOND INDEX FUND BOND INDEX FUND
-------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1999 DEC. 31, 1998 JUN. 30, 1999 DEC. 31, 1998
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 21,544 $ 32,590 $ 39,035 $ 55,640
Realized Net Gain (Loss) 834 6,344 (13,097) 15,703
Change in Unrealized Appreciation (Depreciation) (17,577) 2,874 (64,323) 14,878
-------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,801 41,808 (38,385) 86,221
-------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (21,544) (32,590) (39,035) (55,640)
Realized Capital Gain (2,740) (4,414) (4,239) (7,583)
-------------------------------------------------------------------
Total Distributions (24,284) (37,004) (43,274) (63,223)
-------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 367,164 374,881 438,083 527,923
Issued in Lieu of Cash Distributions 21,042 31,908 36,356 52,764
Redeemed (140,954) (148,942) (148,636) (187,851)
-------------------------------------------------------------------
Net Increase from Capital
Share Transactions 247,252 257,847 325,803 392,836
- -------------------------------------------------------------------------------------------------------------------------
Total Increase 227,769 262,651 244,144 415,834
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 708,920 446,269 1,102,416 686,582
-------------------------------------------------------------------
End of Period $936,689 $708,920 $1,346,560 $1,102,416
=========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 36,814 37,200 43,030 50,863
Issued in Lieu of Cash Distributions 2,114 3,165 3,597 5,067
Redeemed (14,125) (14,760) (14,761) (18,083)
-------------------------------------------------------------------
Net Increase in Shares Outstanding 24,803 25,605 31,866 37,847
=========================================================================================================================
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LONG-TERM
BOND INDEX FUND
----------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUN. 30, 1999 DEC. 31, 1998
(000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 7,648 $ 8,682
Realized Net Gain (Loss) (2,294) 1,152
Change in Unrealized Appreciation (Depreciation) (21,215) 6,379
----------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (15,861) 16,213
----------------------------------
DISTRIBUTIONS
Net Investment Income (7,648) (8,682)
Realized Capital Gain (451) (810)
----------------------------------
Total Distributions (8,099) (9,492)
----------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 136,802 175,576
Issued in Lieu of Cash Distributions 7,038 8,099
Redeemed (54,604) (68,323)
----------------------------------
Net Increase from Capital Share Transactions 89,236 115,352
- -------------------------------------------------------------------------------------------------------------------------
Total Increase 65,276 122,073
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 210,025 87,952
----------------------------------
End of Period $275,301 $210,025
=========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 12,610 15,843
Issued in Lieu of Cash Distributions 657 727
Redeemed (5,071) (6,180)
----------------------------------
Net Increase in Shares Outstanding 8,196 10,390
=========================================================================================================================
</TABLE>
45
<PAGE> 48
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis for each class of shares. It also presents the
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND INVESTOR SHARES
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.27 $10.09 $ 9.84 $10.14 $ 9.17 $10.06
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .304 .624 .645 .640 .650 .622
Net Realized and Unrealized Gain (Loss)
on Investments (.445) .218 .250 (.300) .970 (.888)
------------------------------------------------------------------------
Total from Investment Operations (.141) .842 .895 .340 1.620 (.266)
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.304) (.624) (.645) (.640) (.650) (.622)
Distributions from Realized Capital Gains (.015) (.038) -- -- -- (.002)
------------------------------------------------------------------------
Total Distributions (.319) (.662) (.645) (.640) (.650) (.624)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $10.27 $10.09 $ 9.84 $10.14 $ 9.17
==========================================================================================================================
TOTAL RETURN* -1.41% 8.58% 9.44% 3.58% 18.18% -2.66%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $8,787 $7,765 $5,129 $2,962 $2,405 $1,731
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.20% 0.20% 0.20% 0.20% 0.18%
Ratio of Net Investment Income to
Average Net Assets 6.08%+ 6.10% 6.54% 6.54% 6.66% 6.57%
Portfolio Turnover Rate 61%+ 57%** 39% 39% 36% 33%
==========================================================================================================================
</TABLE>
*Total return figures do not reflect the annual account maintenance fee of $10.
**Portfolio turnover rate excluding in-kind redemptions was 56%.
+Annualized.
46
<PAGE> 49
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND INSTITUTIONAL SHARES
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------- SEP. 18* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 DEC. 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.27 $10.09 $ 9.84 $10.14 $ 9.87
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .308 .635 .655 .650 .174
Net Realized and Unrealized Gain (Loss) on Investments (.445) .218 .250 (.300) .270
--------------------------------------------------------------
Total from Investment Operations (.137) .853 .905 .350 .444
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.308) (.635) (.655) (.650) (.174)
Distributions from Realized Capital Gains (.015) (.038) -- -- --
--------------------------------------------------------------
Total Distributions (.323) (.673) (.655) (.650) (.174)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $10.27 $10.09 $ 9.84 $10.14
===========================================================================================================================
TOTAL RETURN -1.36% 8.69% 9.55% 3.68% 4.53%
===========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $2,953 $2,493 $1,628 $1,024 $413
Ratio of Total Expenses to Average Net Assets 0.10%** 0.10% 0.10% 0.10% 0.10%**
Ratio of Net Investment Income to Average Net Assets 6.18%** 6.21% 6.64% 6.66% 6.48%**
Portfolio Turnover Rate 61%** 57%+ 39% 39% 36%
===========================================================================================================================
</TABLE>
*Inception.
**Annualized.
+Portfolio turnover rate excluding in-kind redemptions was 56%.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------------------- MAR. 1* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 DEC. 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $10.00 $ 9.92 $10.07 $ 9.50 $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .263 .574 .597 .587 .623 .463
Net Realized and Unrealized Gain (Loss)
on Investments (.206) .168 .080 (.146) .570 (.500)
--------------------------------------------------------------------------
Total from Investment Operations .057 .742 .677 .441 1.193 (.037)
--------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.263) (.574) (.597) (.587) (.623) (.463)
Distributions from Realized Capital Gains (.034) (.068) -- (.004) -- --
--------------------------------------------------------------------------
Total Distributions (.297) (.642) (.597) (.591) (.623) (.463)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.86 $10.10 $10.00 $ 9.92 $10.07 $ 9.50
=========================================================================================================================
TOTAL RETURN** 0.57% 7.63% 7.04% 4.55% 12.88% -0.37%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $937 $709 $446 $328 $208 $77
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.20% 0.20% 0.20% 0.20% 0.18%+
Ratio of Net Investment Income to
Average Net Assets 5.33%+ 5.68% 6.03% 5.93% 6.28% 5.77%+
Portfolio Turnover Rate 122%+ 112% 88% 65% 65% 53%
=========================================================================================================================
</TABLE>
*Subscription period for the fund was from January 18, 1994, through February
28, 1994, during which time all assets were held in money market instruments.
**Total return figures do not reflect the annual account maintenance fee of $10.
+Annualized.
47
<PAGE> 50
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED --------------------------------------------- MAR. 1* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 DEC. 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.48 $10.20 $ 9.96 $10.37 $ 9.18 $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .317 .647 .661 .648 .661 .533
Net Realized and Unrealized Gain (Loss)
on Investments (.616) .353 .240 (.406) 1.217 (.820)
--------------------------------------------------------------------------
Total from Investment Operations (.299) 1.000 .901 .242 1.878 (.287)
--------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.317) (.647) (.661) (.648) (.661) (.533)
Distributions from Realized Capital Gains (.034) (.073) -- (.004) (.027) --
--------------------------------------------------------------------------
Total Distributions (.351) (.720) (.661) (.652) (.688) (.533)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.83 $10.48 $10.20 $ 9.96 $10.37 $ 9.18
========================================================================================================================
TOTAL RETURN** -2.90% 10.09% 9.41% 2.55% 21.07% -2.88%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,347 $1,102 $687 $460 $346 $71
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.20% 0.20% 0.20% 0.20% 0.18%+
Ratio of Net Investment Income to
Average Net Assets 6.30%+ 6.23% 6.64% 6.54% 6.55% 6.88%+
Portfolio Turnover Rate 155%+ 77% 56% 80% 71% 63%
=========================================================================================================================
</TABLE>
*Subscription period for the fund was from January 18, 1994, through February
28, 1994, during which time all assets were held in money market instruments.
**Total return figures do not reflect the annual account maintenance fee of $10.
+Annualized.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
LONG-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED --------------------------------------------- MAR. 1* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 DEC. 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.32 $10.78 $10.08 $10.82 $ 8.96 $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .328 .666 .678 .674 .692 .586
Net Realized and Unrealized Gain (Loss)
on Investments (1.011) .588 .700 (.731) 1.884 (1.040)
--------------------------------------------------------------------------
Total from Investment Operations (.683) 1.254 1.378 (.057) 2.576 (.454)
--------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.328) (.666) (.678) (.674) (.692) (.586)
Distributions from Realized Capital Gains (.019) (.048) -- (.009) (.024) --
--------------------------------------------------------------------------
Total Distributions (.347) (.714) (.678) (.683) (.716) (.586)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.29 $11.32 $10.78 $10.08 $10.82 $ 8.96
========================================================================================================================
TOTAL RETURN** -6.12% 11.98% 14.30% -0.26% 29.72% -4.53%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $275 $210 $88 $44 $24 $9
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.20% 0.20% 0.20% 0.20% 0.18%+
Ratio of Net Investment Income to
Average Net Assets 6.15%+ 6.01% 6.66% 6.75% 6.90% 7.70%+
Portfolio Turnover Rate 67%+ 57% 58% 46% 45% 70%
========================================================================================================================
</TABLE>
*Subscription period for the fund was from January 18, 1994, through February
28, 1994, during which time all assets were held in money market instruments.
**Total return figures do not reflect the annual account maintenance fee of $10.
+Annualized.
48
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS
Vanguard Bond Index Funds comprise the Total Bond Market Index Fund, Short-Term
Bond Index Fund, Intermediate-Term Bond Index Fund, and Long-Term Bond Index
Fund, each of which is registered under the Investment Company Act of 1940 as a
diversified open-end investment company, or mutual fund. Certain of the funds'
investments are in corporate debt instruments; the issuers' abilities to meet
their obligations may be affected by economic developments in their respective
industries.
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: Bonds, and temporary cash investments acquired over
60 days to maturity, are valued using the latest bid prices or using valuations
based on a matrix system (which considers such factors as security prices,
yields, maturities, and ratings), both as furnished by independent pricing
services. Other temporary cash investments are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
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. REPURCHASE AGREEMENTS: Each of the Vanguard Bond Index Funds, along with
other members of The Vanguard Group, transfers uninvested cash balances into a
Pooled Cash Account, which is invested in repurchase agreements secured by U.S.
government securities. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
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
discounts on debt securities purchased 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 June 30, 1999, the funds had contributed
capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
INDEX FUND (000) NET ASSETS CAPITALIZATION
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market $1,771 0.02% 2.5%
Short-Term Bond 140 0.02 0.2
Intermediate-Term Bond 203 0.02 0.3
Long-Term Bond 42 0.02 0.1
-------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
49
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (continued)
C. The Total Bond Market Index Fund offers two classes of shares, the
Investor Shares and the Institutional Shares. Institutional shares are designed
primarily for institutional investors that meet certain administrative and
servicing criteria and have a minimum investment of $10 million. Investor shares
are offered to all other investors. Both classes of shares have equal rights as
to assets and earnings, except that each class bears certain class-specific
expenses related to its shareholder activity. For the six months ended June 30,
1999, class-specific expenses represented an annual rate of 0.14% and 0.04% of
average net assets of the Investor Shares and Institutional Shares,
respectively. Income, expenses not attributable to a specific class, and
realized and unrealized gains and losses on investments are allocated to each
class of shares based on its relative net assets.
D. The funds' custodian bank has agreed to reduce its fees when the funds
maintain cash on deposit in their non-interest-bearing custody accounts. For the
six months ended June 30, 1999, custodian fee offset arrangements reduced
expenses of the Total Bond Market Index Fund, Intermediate-Term Bond Index Fund
and Long-Term Bond Index Fund by $1,000, $4,000, and $2,000, respectively.
E. During the six months ended June 30, 1999, purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments were:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
(000)
--------------------------------
INDEX FUND PURCHASES SALES
---------------------------------------------------------------------------------------------
<S> <C> <C>
Total Bond Market $1,273,182 $549,582
Short-Term Bond 122,884 50,487
Intermediate-Term Bond 234,589 174,135
Long-Term Bond 57,816 13,910
---------------------------------------------------------------------------------------------
</TABLE>
Purchases and sales of U.S. government securities were:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
(000)
---------------------------------
INDEX FUND PURCHASES SALES
----------------------------------------------------------------------------------------------
<S> <C> <C>
Total Bond Market $4,481,944 $2,758,059
Short-Term Bond 625,658 438,182
Intermediate-Term Bond 1,028,569 778,340
Long-Term Bond 112,527 68,394
----------------------------------------------------------------------------------------------
</TABLE>
At June 30, 1999, unrealized depreciation of investment securities for financial
reporting and federal income tax purposes was:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(000)
----------------------------------------------------------
APPRECIATED DEPRECIATED NET UNREALIZED
INDEX FUND SECURITIES SECURITIES DEPRECIATION
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market $56,865 $(220,246) $(163,381)
Short-Term Bond 701 (11,238) (10,537)
Intermediate-Term Bond 4,840 (33,097) (28,257)
Long-Term Bond 474 (9,719) (9,245)
------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 53
F. The market values of securities on loan to broker/dealers at June 30, 1999,
and collateral received with respect to such loans, were:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(000)
------------------------------------------------------------
COLLATERAL RECEIVED
----------------------------------
MARKET VALUE MARKET VALUE
OF LOANED OF U.S. TREASURY
INDEX FUND SECURITIES CASH SECURITIES
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market $58,573 $19,375 $40,536
Short-Term Bond 46,393 -- 47,429
Intermediate-Term Bond 58,517 34,612 25,095
-------------------------------------------------------------------------------------------------
</TABLE>
Security loans are required to be secured at all times by collateral at
least equal to the market value of securities loaned; however, in the event of
default or bankruptcy by the other party to the agreement, retention of the
collateral may be subject to legal proceedings. Cash collateral received is
invested in repurchase agreements.
51
<PAGE> 54
NOTICE TO SHAREHOLDERS ABOUT Y2K
As is well known by now, the approaching calendar change to 2000 has posed a
challenge to many computer systems worldwide. Computers that are not modified
could interpret "00" as 1900 rather than 2000 and produce errors in
date-dependent calculations, including bond interest payments, stock trade
settlements, retirement benefits, and other financial transactions.
OUR APPROACH
Vanguard has taken this challenge seriously. We have had a Year 2000 Project
under way since 1996 to fulfill our responsibility to safeguard our business
relationships and the security of our investors' accounts.
Our internal systems are Year 2000-compliant. They have been renovated and
thoroughly tested and are ready for the date change. As for the external systems
that connect with ours, we have been working for many months with clients,
business partners, and providers of products and services to assess their
compliance. We have analyzed the external services we require and have developed
contingency plans--including provision for alternative providers where
appropriate.
On New Year's Day, our telephone centers will be staffed and ready for
shareholder calls. However, we expect the volume of inquiries over the New
Year's weekend to be high, and we encourage shareholders to check their accounts
via our website or automated telephone systems, which offer much greater service
capacity and efficiency. This will also help our live representatives to provide
a higher level of service to those with specific transaction or other
service-related needs.
WHAT YOU CAN DO
We assure you we will protect our shareholders' records, so account records
will not be lost. Nevertheless, keeping copies of current records is always
advisable. You should keep at least your third-quarter statement and any
confirmations you receive from us between October 1, 1999, and year-end.
If you are a registered user of Access Vanguard(TM) (www.vanguard.com), you
can retrieve this information through the secure "Your Accounts" section and
print copies for your files. If you are not registered for Access Vanguard and
wish to have this flexibility, you should register as soon as possible so that
you can receive your password and become familiar with this service before the
New Year's weekend. Likewise, you may need personal identification numbers to
use our automated telephone services: Vanguard Tele-Account(R) for individual
investors (1-800-662-6273) and The VOICE(TM) Network for participants in
employer-sponsored retirement plans (1-800-523-1188).
Our Year 2000 Project's primary goal from the start has been to prepare our
systems for business as usual on behalf of our shareholders into 2000 and
beyond. We remain confident we will meet that goal, and we look forward to
serving you in the years to come.
52
<PAGE> 55
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & 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.
BRUCE K. MacLAURY
President Emeritus of The Brookings Institution; Director of American Express
Bank Ltd., The St. Paul Companies, Inc., and National Steel Corp.
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.
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> 56
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
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[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.
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Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
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1-800-662-2739
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1-800-523-1036
This report is intended for the fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q842-8/24/1999
(C) 1999 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
