<PAGE> 1
semiannual
VANGUARD(R)
BOND INDEX FUNDS
June 30, 2000
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]
[THE VANGUARD GROUP LOGO]
<PAGE> 2
HAVE THE PRINCIPLES OF INVESTING CHANGED?
In a world of frenetic change in business, technology, and the financial
markets, it is natural to wonder whether the basic principles of investing have
changed.
We don't think so.
The most successful investors over the coming decade will be those who
began the new century with a fundamental understanding of risk and who had the
discipline to stick with long-term investment programs.
Certainly, investors today confront a challenging, even unprecedented,
environment. Valuations of market indexes are at or near historic highs. The
strength and duration of the bull market in U.S. stocks have inflated people's
expectations and diminished their recognition of the market's considerable
risks. And the incredible divergence in stock returns--many technology-related
stocks gained 100% or more in 1999, yet prices fell for more than half of all
stocks--has made some investors question the idea of diversification.
And then there is the Internet. Undeniably, it is a powerful medium for
communications and transacting business. For investors, the Internet is a vast
source of information about investments, and online trading has made it
inexpensive and convenient to trade stocks and invest in mutual funds.
However, new tools do not guarantee good workmanship. Information is not
the same as wisdom. Indeed, much of the information, opinion, and rumor that
swirl about financial markets each day amounts to "noise" of no lasting
significance. And the fact that rapid-fire trading is easy does not make it
beneficial. Frequent trading is almost always counterproductive because
costs--even at low commission rates--and taxes detract from the returns that the
markets provide. Sadly, many investors jump into a "hot" mutual fund just in
time to see it cool off. Meanwhile, long-term fund investors are hurt by
speculative trading activity because they bear part of the costs involved in
accommodating purchases and redemptions.
Vanguard believes that intelligent investors should resist short-term
thinking and focus instead on a few time-tested principles:
- Invest for the long term. Pursuing your long-term investment goals
is more like a marathon than a sprint.
- Diversify your investments with holdings in stocks, bonds, and
cash investments. Remember that, at any moment, some part of a diversified
portfolio will lag other parts, and be wary of taking on more risk by "piling
onto" the best-performing part of your holdings. Today's leader could well be
tomorrow's laggard.
- Step back from the daily frenzy of the markets; focus on your
overall asset allocation.
- Capture as much of the market's return as possible by minimizing
costs and taxes. Costs and taxes diminish long-term returns while doing nothing
to reduce the risks you incur as an investor.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
REPORT FROM THE CHAIRMAN ........... 1
THE MARKETS IN PERSPECTIVE ......... 5
PERFORMANCE SUMMARIES .............. 7
FUND PROFILES ...................... 10
FINANCIAL STATEMENTS ............... 15
</TABLE>
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted. "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 5000(R)" and "Wilshire 4500" are trademarks of
Wilshire Associates Incorporated.
<PAGE> 3
REPORT FROM THE CHAIRMAN
[PHOTO]
JOHN J. BRENNAN
Bonds provided a profitable haven during the first half of 2000, a
volatile period for global stock markets. Overall, bond prices edged higher
during the six months ended June 30 as yields fell on all but the shortest
maturity securities. Indeed, bonds' total returns topped those of the broad
stock market.
The four Vanguard Bond Index Funds performed well, posting returns higher
than those of their average peers and closely tracking their target indexes. Two
of our funds precisely matched the returns of their benchmark indexes, while the
other two lagged by just 0.1 percentage point.
The table at right presents the six-month total return (capital change
plus reinvested dividends) for each fund, its average mutual fund peer, and the
unmanaged bond index it tracks. Our funds' returns ranged from 3.0% for the
Short-Term Bond Index Fund to 6.4% for the Long-Term Bond Index Fund.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JUNE 30, 2000
---------------------------------------------------------------
<S> <C>
TOTAL BOND MARKET INDEX FUND 3.9%
Average Intermediate U.S.
Government Fund* 3.4
Lehman Aggregate Bond Index 4.0
---------------------------------------------------------------
SHORT-TERM BOND INDEX FUND 3.0%
Average 1-5 Year U.S. Government Fund* 2.8
Lehman 1-5 Year Government/Credit Index 3.0
---------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND 3.6%
Average Intermediate U.S.
Government Fund* 3.4
Lehman 5-10 Year Government/
Credit Index 3.6
---------------------------------------------------------------
LONG-TERM BOND INDEX FUND 6.4%
Average General U.S. Government Fund* 4.0
Lehman Long Government/Credit Index 6.5
---------------------------------------------------------------
*Derived from data provided by Lipper Inc.
INSTITUTIONAL SHARES
---------------------------------------------------------------
Total Bond Market Index Fund 4.0%
---------------------------------------------------------------
</TABLE>
On June 30, our annualized yields ranged from 6.93% for the Long-Term
Bond Index Fund to 7.29% for the Intermediate-Term Bond Index Fund. Detailed
figures for each fund, including net asset values, income dividends, yields,
credit quality, and average maturity data, are presented in the table following
this letter.
THE PERIOD IN REVIEW
The first half of 2000 was a tumultuous time in financial markets, which were
buffeted by a complex set of crosscurrents. The domestic economy continued to
grow at a strong pace--the production of goods and services during the second
quarter of 2000 was about 6% higher than in the same period last year, even
after adjusting for inflation. Unemployment remained low, hovering around 4% of
the workforce. Elsewhere in the world, growth was picking up from more subdued
levels.
Economic growth is generally good for corporate earnings and, thus, for
stocks. But investors and economic policymakers have worried that the
combination of rapid economic growth and low unemployment would trigger sharply
higher wages and inflation. The Federal Reserve Board, in an effort to slow the
economy's momentum and forestall an inflationary outburst, continued to raise
short-term interest rates during the half-year. The Fed boosted its target for
the federal funds rate three times by a total of 1.0 percentage point (100 basis
points). In all, the Fed has raised its target rate by 175 basis points in the
past 12 months.
1
<PAGE> 4
However, the market began to anticipate an end to the Fed's campaign of
rate hikes. The result was that longer-term interest rates eased even while the
Fed was boosting short-term rates. By midyear, statistical evidence suggested a
slowing of the economy's growth rate--just the result the Fed had been seeking.
On balance, the yield of 3-month U.S. Treasury bills climbed 52 basis
points (from 5.33% to 5.85%) during the half-year. For longer-term Treasuries,
yields rose but then began to fall after the Treasury announced that it would
use rising federal budget surpluses to buy back billions of dollars' worth of
long-term bonds. The shrinking supply caused long-term Treasuries' prices to
rise and their yields to fall. By June 30, the 30-year Treasury bond's yield
had fallen 58 basis points, from 6.48% to 5.90%. The yield of the 10-year
Treasury note fell 41 basis points, to 6.03%. Yields on high-quality corporate
bonds were flat to slightly higher. But for low-quality corporate OjunkO bonds,
prices fell and yields rose as investors worried about increased defaults.
Corporate bonds in general provided lower total returns than government
issues for the half-year. The Lehman Aggregate Bond Index, which represents the
overall U.S. taxable bond market, returned 4.0%, consisting of an average price
increase of 0.4% and an income return of 3.6%.
Meanwhile, the U.S. stock market, as measured by the Wilshire 5000 Total
Market Index, posted a -0.7% return for the six months. Despite the threat of
higher interest rates, growth stocks--mainly those in the technology sector
whose prices reflect high expectations for future profitability--continued to
boom for most of the first quarter of 2000. Thereafter, tech stocks fell sharply
before a bounceback in June. The switch in market sentiment may have been due to
worries that the ideal environment of rapid economic growth and low inflation
was coming to an end.
PERFORMANCE OVERVIEW
The Vanguard Bond Index Funds benefited from a steadying in the bond market
during the first half of 2000. Except for short-term and junk bonds,
fixed-income securities enjoyed modest price increases, which augmented the
interest income earned during the six months and resulted in solid total
returns. The Short-Term Bond Index Fund's six-month return of 3.0% consisted
entirely of its interest income. But each of the other funds enjoyed some price
appreciation during the half-year: 0.1% for the Intermediate-Term Bond Index
Fund, 0.5% for the Total Bond Index Fund, and 2.9% for the Long-Term Bond Index
Fund.
The LONG-TERM BOND INDEX FUND has a longer average duration than the
average competing fund, and its price is therefore more sensitive to changes in
interest rates. In periods of falling long-term interest rates, such as the past
six months, this works to our advantage. Thus, the fund's half-year return of
6.4% was the highest among our four funds and had the largest lead (2.4
percentage points) over the average return for peer funds. The TOTAL BOND MARKET
INDEX FUND earned a 3.9% return, which was 0.5 percentage point higher than that
of its peers. The 3.0% return of the SHORT-TERM BOND INDEX FUND and the 3.6%
return of the INTERMEDIATE-TERM BOND INDEX FUND were 0.2 percentage point higher
than the average return from peer funds.
The returns of the Short-Term and Intermediate-Term Bond Index Funds
equaled those of their relevant indexes. The Total and Long-Term Bond Index
Funds came in just 0.1 percentage point behind their index targets--a difference
reflecting the operating expenses that mutual funds incur. Indexes, of course,
exist only on paper and have no real-world expenses. So we salute the funds'
manager, Vanguard Fixed Income Group, for tracking the returns of the indexes so
closely. The group's task is made easier by the fact that our funds have some of
the lowest operating costs in the mutual fund industry.
2
<PAGE> 5
Operating costs directly reduce the income that bond funds can pass on to their
share-holders. Our funds' annualized expense ratio of about 0.20%, or $2 per
$1,000 in assets, is a small fraction of the expenses incurred by peers. For
our average competitors, expense ratios range from 1.00% (or $10 per $1,000 in
assets) for short-term U.S. government funds to 1.20% ($12 per $1,000 in
assets) for general government funds. In the world of bond funds, such a
sizable cost advantage is critical to providing superior long-term results.
Despite modest increases in 2000, bond prices at mid-year were still
below their levels in mid-1999. The adjacent table shows our funds' total
returns, broken down by interest income and price changes, for the 12 months
ended June 30. We present the 12-month figures because it's important to
consider a full year's interest income when evaluating a bond fund. And, as
always, we note that although bond prices can swing dramatically, over the long
run it is interest income that accounts for virtually all of a bond fund's
total return. At current yields, bonds can provide solid long-term returns,
particularly if inflation remains at relatively low levels.
<TABLE>
<CAPTION>
------------------------------------------------------------
COMPONENTS OF TOTAL RETURN
TWELVE MONTHS ENDED
JUNE 30, 2000
------------------------------------------------------------
INCOME CAPITAL TOTAL
BOND INDEX FUND RETURN RETURN RETURN
------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market 6.6% -2.0% 4.6%
------------------------------------------------------------
Short-Term Bond 5.9 -1.3 4.6
------------------------------------------------------------
Intermediate-Term Bond 6.7 -3.2 3.5
------------------------------------------------------------
Long-Term Bond 6.7 -2.3 4.4
------------------------------------------------------------
INSTITUTIONAL SHARES
------------------------------------------------------------
Total Bond Market 6.7% -2.0% 4.7%
------------------------------------------------------------
</TABLE>
IN SUMMARY
Paraphrasing Mark Twain, we would observe that reports on the death of
diversification are greatly exaggerated. The stock market has provided
extraordinary returns in recent years, making some investors wonder whether
diversification is an obsolete concept. We believe that the volatility in
stocks and the solid returns for bonds during the past half-year help to make
the case for balanced portfolios. Bond funds provide counterbalance to a
portfolio of stock funds, thus helping to reduce its risk. But bonds also
provide steady interest income that compounds over time, helping to build
wealth for long-term investors.
At Vanguard, we haven't altered our advice for navigating the stormy
seas of financial markets toward long-term investment objectives. First, create
an investment plan with a balance of stock funds, bond funds, and money market
funds suited to your time horizon, investment goals, and tolerance for market
fluctuations. Once you have such a diversified plan in place, stick with it.
Avoid the impulse to alter it based on short-term events--whether those be
unsettling turbulence or glittery returns from some particular corner of the
market. "Stay the course" is timeless investment wisdom.
/s/ JOHN J. BRENNAN
John J. Brennan
Chairman and Chief Executive Officer
July 24, 2000
3
<PAGE> 6
IN MEMORY
It is with great sadness that I report the death of John C. Sawhill, an
independent trustee of the funds and a member of The Vanguard Group's board of
directors since 1991. John, an economist who was president and chief executive
officer of The Nature Conservancy, died on May 18 at age 63. He was a senior
lecturer at the Harvard Business School and had formerly served as president of
New York University and as deputy secretary of the U.S. Department of Energy
under President Jimmy Carter. John was a remarkable man who was full of energy,
vigor, and life. His experience and wisdom added a great deal to Vanguard, and
his death is a blow to everyone who knew and loved him. Though John's work on
behalf of our funds was often carried on behind the scenes, he was a dedicated
advocate for the best interests of our shareholders. He will be
missed.
<TABLE>
<CAPTION>
FUND STATISTICS
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE SIX MONTHS ENDED
PER SHARE JUNE 30, 2000 SEC
------------------ ----------------- CURRENT
AVERAGE AVERAGE DEC. 31, JUN. 30, INCOME CAPITAL ANNUALIZED
BOND INDEX FUND MATURITY QUALITY 1999 2000 DIVIDENDS GAINS YIELD
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Bond Market 9.1 years Aa1 $9.56 $ 9.61 $0.320 -- 7.10%
Short-Term Bond 2.8 Aa1 9.73 9.73 0.292 -- 7.01
Intermediate-Term Bond 7.7 Aa2 9.51 9.52 0.324 -- 7.29
Long-Term Bond 22.3 Aa1 9.77 10.05 0.337 -- 6.93
-----------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
-----------------------------------------------------------------------------------------------------------
Total Bond Market 9.1 years Aa1 $9.56 $9.61 $0.325 -- 7.22%
-----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JUNE 30, 2000
The perpetual tug-of-war in the financial markets ended in a near
stalemate during the first half of 2000, despite lots of back-and-forth
movement. On average, neither stock nor bond prices ended the period far from
where they began it. However, bonds, thanks to their superior income, outpaced
stocks in total return.
Economic signals were conflicting. Growth continued at a rapid pace, and
corporate profits rose smartly. On the other hand, stock prices as the year
began already reflected high levels of optimism, and the market administered
severe punishment to companies that failed to live up to earnings expectations.
Also weighing on the market were concerns that the economy's vigor at a time of
low unemployment would inevitably push labor costs and other prices higher.
Indeed, higher costs for oil and natural gas pushed broad gauges of inflation
higher (the Consumer Price Index gained 2.4% for the six months and 3.7% for the
twelve months ended June 30). Yet core inflation, which excludes energy and food
items, registered a moderate 2.4% gain during the 12 months ended June 30.
The Federal Reserve Board raised short-term interest rates by 0.25
percentage point in February and again in March, before adding a half-point
boost in May. These steps, which followed three quarter- percentage-point
increases in 1999, took the Fed's target for short-term rates to 6.5%.
Thereafter, signs of a slowing in economic activity cropped up, although it was
not certain that the Fed was done trying to throttle down the economic engine.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JUNE 30, 2000
-------------------------------
6 MONTHS 1 YEAR 5 YEARS*
-------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index -0.4% 7.2% 23.8%
Russell 2000 Index 3.0 14.3 14.3
Wilshire 5000 Index -0.7 10.0 22.6
MSCI EAFE Index -4.0 17.4 11.6
-------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 4.0% 4.6% 6.3%
Lehman 10 Year Municipal Bond Index 4.0 4.5 6.0
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.8 5.3 5.2
-------------------------------------------------------------------------
OTHER
Consumer Price Index 2.4% 3.7% 2.5%
-------------------------------------------------------------------------
</TABLE>
*Annualized.
U.S. STOCK MARKETS
Stock prices were quite volatile during the half-year, and large day-to-day
price fluctuations in market averages were commonplace. There also were two
swift shifts in market leadership. The year began with a continuance in the
rapid rise for the OTMTO stocks (technology, media, telecommunications) that
were the market's darlings during 1999. Through mid-March, the surge in these
Onew economyO groups left Oold economyO stocks far behind. For example, the
Nasdaq Composite Index, which is dominated by tech-related stocks, gained 15.6%
and the Russell 1000 Value Index fell -10.4% during January and February. But in
mid-March, value stocks took charge and TMT stocks slumped. The Russell 1000
Value Index returned 12.1% while the Nasdaq plummeted to a -27.4% return in the
March-May period. But June brought another flip-flop: The value index declined
-4.6%, while the Nasdaq rebounded with a 14.5% return.
5
<PAGE> 8
When the half-year was over, most broad market indexes had modest
declines. The all-market Wilshire 5000 Index returned -0.7%, the
large-capitalization S&P 500 Index slipped -0.4%, and the Nasdaq fell -3.9%.
Small- and mid-cap stocks did better: The small-cap Russell 2000 Index gained
3.0% and the Wilshire 4500 Completion Index, comprising virtually all the U.S.
stocks outside of the S&P 500, eked out a 0.3% return.
U.S. BOND MARKETS
The Federal Reserve most directly influences interest rates of short-term
securities. The Fed pushed up its target federal funds rate (charged on
overnight loans between banks) by 1 percentage point to 6.5%. But yields of
3-month U.S. Treasury bills rose only half as far (0.52 percentage point, or 52
basis points to 5.85%). And yields actually declined on long-term Treasury
securities, whose prices rose. Big federal budget surpluses are causing a
shrinking supply of Treasury bonds. The 10-year Treasury note's yield fell 41
basis points to 6.03% as of June 30, and the yield of the 30-year Treasury
declined 58 basis points--from 6.48% to 5.90%--during the half-year.
The upshot was an unusual "inversion" in the yield curve. Instead of
sloping upward--with yields increasing along with the maturity of Treasury
securities--the curve descended. The 5.90% yield of 30-year Treasuries on June
30 was 49 basis points below the 6.39% yield on 3-year Treasury notes.
Corporate bonds did not perform as well as Treasuries for two main
reasons: a record level of new offerings and investors' concern that credit
quality might be declining. The rise in yields (and fall in prices) was slight
for higher-quality corporate bonds but more severe for high-yield "junk" bonds.
Investors grew wary of riskier bonds due to an increase in defaults. The Lehman
High Yield Bond Index saw a price decline of -5.7% during the first half of
2000, more than offsetting its six-month income of 4.5%. Tax-exempt municipal
bonds generally outperformed corporates but did not do as well as Treasury
securities. The overall taxable bond market, as measured by the Lehman Aggregate
Bond Index, returned 4.0%, as a price gain of 0.4% augmented a 3.6% income
return.
INTERNATIONAL STOCK MARKETS
International stock markets were generally unprofitable for U.S. investors due
to lack-luster local market performances and a stronger U.S. dollar during the
half-year. Although economic growth in most of Europe appeared to be
strengthening, stocks were hurt by continued economic weakness in Japan and
from expectations of higher interest rates. On the other hand, European stock
prices got some support from an increase in corporate takeovers.
In local currencies, European stocks posted a 1.7% return in the
aggregate and stocks from the Pacific region recorded a modest decline of -2.6%.
However, the dollar's strength diminished those results for U.S. investors, for
whom the Morgan Stanley Capital International (MSCI) Europe Index returned
-3.0% and the MSCI Pacific Free Index returned -5.9%. The MSCI Europe,
Australasia, Far East (EAFE) Index of developed foreign markets registered a
-4.0% return for U.S. investors.
The Select Emerging Markets Free Index fell -9.6% in U.S. dollars, having
declined -3.5% in local currencies. The index was hit by weakness in South
Africa (-15%) and several emerging Asian markets, including Indonesia (-44%),
Thailand (-36%), and the Philippines (-36%). The biggest gains among emerging
markets were in Israel (+27%) and Venezuela (+19%).
6
<PAGE> 9
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. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL BOND MARKET INDEX FUND
TOTAL INVESTMENT RETURNS: DECEMBER 11, 1986-JUNE 30, 2000
---------------------------------------------------------
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 -6.8 6.0 -0.8 -0.8
2000** 0.5 3.4 3.9 4.0
---------------------------------------------------------
</TABLE>
*Lehman Aggregate Bond Index.
**Six months ended June 30, 2000.
See Financial Highlights table on page 48 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, 2000
-----------------------------------------------------------
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 -6.8 6.1 -0.7 -0.8
2000** 0.5 3.5 4.0 4.0
-----------------------------------------------------------
</TABLE>
*Lehman Aggregate Bond Index.
**Six months ended June 30, 2000.
See Financial Highlights table on page 49 for dividend and capital gains
information since inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------------------------------
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 4.62% 6.19% 0.66% 7.03% 7.69%
Total Bond Market Index Fund
Institutional Shares 9/18/1995 4.74 -- -0.45** 6.65** 6.20**
--------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Since Inception.
7
<PAGE> 10
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. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
SHORT-TERM BOND INDEX FUND
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-JUNE 30, 2000
-------------------------------------------------------
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 -3.3 5.4 2.1 2.1
2000** 0.0 3.0 3.0 3.0
-------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Government/Credit Index.
**Six months ended June 30, 2000.
See Financial Highlights table on page 49 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, 2000
------------------------------------------------------
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 -9.0 6.0 -3.0 -2.9
2000** 0.1 3.5 3.6 3.6
------------------------------------------------------
</TABLE>
*Lehman 5-10 Year Government/Credit Index.
**Six months ended June 30, 2000.
See Financial Highlights table on page 50 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 2000
-------------------------------------------------------------------------------------------------------
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 4.59% 5.77% -0.27% 6.02% 5.75%
Intermediate-Term Bond Index Fund* 3/1/1994 3.48 5.82 -0.57 6.72 6.15
-------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
8
<PAGE> 11
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
LONG-TERM BOND INDEX FUND
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-JUNE 30, 2000
--------------------------------------------------
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 -13.5 5.6 -7.9 -7.7
2000** 2.9 3.5 6.4 6.5
--------------------------------------------------
</TABLE>
*Lehman Long Government/Credit Index.
**Six months ended June 30, 2000.
See Financial Highlights table on page 50 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------------------------------
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 4.43% 6.71% 0.22% 6.94% 7.16%
--------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
9
<PAGE> 12
FUND PROFILE
TOTAL BOND MARKET INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
2000, compared where appropriate to its unmanaged target index. Key elements of
this Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
-------------------------------------------------------
TOTAL BOND LEHMAN
MARKET INDEX INDEX*
-------------------------------------------------------
<S> <C> <C>
Number of Issues 755 5,632
Yield 7.1% 7.0%
Yield--Institutional Shares 7.2% 7.0%
Yield to Maturity 7.3% 7.3%
Average Coupon 7.3% 6.9%
Average Maturity 9.1 years 8.8 years
Average Quality Aa1 Aaa
Average Duration 4.9 years 4.9 years
Expense Ratio 0.22%** --
Expense Ratio--
Institutional Shares 0.10%** --
Cash Investments 1.3% --
</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 1.01 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
-------------------------------------------------
<S> <C>
Treasury/Agency* 59.5%
Aaa 5.5
Aa 6.1
A 13.8
Baa 14.5
Ba 0.2
B 0.0
Not Rated 0.0
-------------------------------------------------
Total 100.0%
</TABLE>
*Includes Government Mortgage-Backed.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
-------------------------------------------------
<S> <C>
Under 1 Year 1.7%
1-5 Years 32.8
5-10 Years 47.0
10-20 Years 6.0
20-30 Years 11.7
Over 30 Years 0.8
-------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
-------------------------------------------------
<S> <C>
Asset-Backed 4.3%
Commercial Mortgage-Backed 0.0
Finance 13.7
Foreign 5.7
Government Mortgage-Backed 34.8
Industrial 12.4
Treasury/Agency 25.1
Utilities 4.0
-------------------------------------------------
Total 100.0%
</TABLE>
10
<PAGE> 13
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average
duration of five years would decline by about 5%. If rates decrease by a
percentage point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most credit-worthy
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 INVESTMENTS. 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.
11
<PAGE> 14
FUND PROFILE
SHORT-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
--------------------------------------------------
SHORT-TERM LEHMAN
BOND INDEX INDEX*
--------------------------------------------------
<S> <C> <C>
Number of Issues 267 5,632
Yield 7.0% 7.0%
Yield to Maturity 7.1% 7.3%
Average Coupon 7.9% 6.9%
Average Maturity 2.8 years 8.8 years
Average Quality Aa1 Aaa
Average Duration 2.4 years 4.9 years
Expense Ratio 0.21%** --
Cash Investments 1.9% --
</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 0.53 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
-------------------------------------------------
<S> <C>
Treasury/Agency 56.5%
Aaa 4.2
Aa 8.8
A 14.6
Baa 15.9
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 2.3%
1-3 Years 50.7
3-5 Years 42.8
Over 5 Years 4.2
-------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
-------------------------------------------------
<S> <C>
Asset-Backed 3.7%
Commercial Mortgage-Backed 0.0
Finance 15.9
Foreign 6.7
Government Mortgage-Backed 0.0
Industrial 11.9
Treasury/Agency 56.5
Utilities 5.3
-------------------------------------------------
Total 100.0%
</TABLE>
12
<PAGE> 15
FUND PROFILE
INTERMEDIATE-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
--------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
BOND INDEX INDEX*
--------------------------------------------------------
<S> <C> <C>
Number of Issues 208 5,632
Yield 7.3% 7.0%
Yield to Maturity 7.3% 7.3%
Average Coupon 7.8% 6.9%
Average Maturity 7.7 years 8.8 years
Average Quality Aa2 Aaa
Average Duration 5.5 years 4.9 years
Expense Ratio 0.21%** --
Cash Investments 1.6% --
</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 0.96 1.00
Beta 1.34 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
--------------------------------------------------------
<S> <C>
Treasury/Agency 46.9%
Aaa 3.3
Aa 7.0
A 22.6
Baa 19.9
Ba 0.3
B 0.0
Not Rated 0.0
--------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
--------------------------------------------------------
<S> <C>
Under 1 Year 0.0%
1-5 Years 3.6
5-10 Years 94.0
10-20 Years 2.1
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 1.9%
Commercial Mortgage-Backed 0.0
Finance 16.7
Foreign 8.7
Government Mortgage-Backed 0.0
Industrial 19.9
Treasury/Agency 46.9
Utilities 5.9
--------------------------------------------------------
Total 100.0%
</TABLE>
13
<PAGE> 16
FUND PROFILE
LONG-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
--------------------------------------------------------
LONG-TERM LEHMAN
BOND INDEX INDEX*
--------------------------------------------------------
<S> <C> <C>
Number of Issues 198 5,632
Yield 6.9% 7.0%
Yield to Maturity 7.0% 7.3%
Average Coupon 8.2% 6.9%
Average Maturity 22.3 years 8.8 years
Average Quality Aa1 Aaa
Average Duration 10.0 years 4.9 years
Expense Ratio 0.21%** --
Cash Investments 1.9% --
</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 0.89 1.00
Beta 2.00 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
--------------------------------------------------------
<S> <C>
Treasury/Agency 64.2%
Aaa 0.5
Aa 5.1
A 13.9
Baa 16.3
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 0.0%
1-5 Years 0.6
5-10 Years 8.5
10-20 Years 24.4
20-30 Years 62.4
Over 30 Years 4.1
--------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
--------------------------------------------------------
<S> <C>
Asset-Backed 0.2%
Commercial Mortgage-Backed 0.0
Finance 5.5
Foreign 7.4
Government Mortgage-Backed 0.0
Industrial 18.1
Treasury/Agency 64.2
Utilities 4.6
--------------------------------------------------------
Total 100.0%
</TABLE>
14
<PAGE> 17
FINANCIAL STATEMENTS
JUNE 30, 2000 (unaudited)
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)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S GOVERNMENT AND AGENCY OBLIGATIONS (59.2%)
----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (20.0%)
U.S. Treasury Bond 6.625% 2/15/2027 $ 48,950 $ 51,890
U.S. Treasury Bond 6.75% 8/15/2026 190,575 204,759
U.S. Treasury Bond 7.125% 2/15/2023 12,615 13,997
U.S. Treasury Bond 7.50% 11/15/2024 36,525 42,469
U.S. Treasury Bond 7.625% 11/15/2022 194,875 227,569
U.S. Treasury Bond 7.875% 2/15/2021 8,210 9,752
U.S. Treasury Bond 8.00% 11/15/2021 77,400 93,385
U.S. Treasury Bond 8.125% 8/15/2019-8/15/2021 366,460 444,536
U.S. Treasury Bond 8.50% 2/15/2020 13,545 16,951
U.S. Treasury Bond 8.75% 5/15/2017-8/15/2020 157,540 201,219
U.S. Treasury Bond 8.875% 8/15/2017-2/15/2019 41,885 53,392
U.S. Treasury Bond 9.125% 5/15/2018 1,815 2,369
U.S. Treasury Bond 9.25% 2/15/2016 485 628
U.S. Treasury Bond 9.375% 2/15/2006 47,050 53,846
U.S. Treasury Bond 9.875% 11/15/2015 4,390 5,942
U.S. Treasury Bond 10.00% 5/15/2010 29,275 33,508
U.S. Treasury Bond 10.375% 11/15/2009-11/15/2012 566,620 671,367
U.S. Treasury Bond 10.625% 8/15/2015 26,175 37,203
U.S. Treasury Bond 10.75% 5/15/2003-8/15/2005 45,060 50,472
U.S. Treasury Bond 11.75% 11/15/2014 900 1,240
U.S. Treasury Bond 11.875% 11/15/2003 8,675 10,095
U.S. Treasury Bond 12.00% 8/15/2013 350 472
U.S. Treasury Bond 12.75% 11/15/2010 74,380 95,176
U.S. Treasury Bond 13.25% 5/15/2014 24,800 36,163
U.S. Treasury Bond 14.00% 11/15/2011 3,420 4,751
U.S. Treasury Note 5.75% 4/30/2003-8/15/2003 75,150 73,954
U.S. Treasury Note 5.875% 2/15/2004-11/15/2005 2,000 1,970
U.S. Treasury Note 6.25% 10/31/2001 2,000 1,994
U.S. Treasury Note 6.375% 9/30/2001 600 599
U.S. Treasury Note 6.50% 10/15/2006 300 304
U.S. Treasury Note 6.625% 4/30/2002-5/15/2007 158,250 158,805
</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>
U.S. Treasury Note 7.25% 5/15/2004 $ 28,500 $ 29,395
U.S. Treasury Note 7.50% 11/15/2001 44,000 44,574
U.S. Treasury Note 7.50% 5/15/2002 51,500 52,459
U.S. Treasury Note 7.875% 8/15/2001 1,500 1,522
----------
2,728,727
----------
AGENCY BONDS & NOTES (4.7%)
Federal Farm Credit Bank 4.80% 11/6/2003 34,120 31,935
Federal Farm Credit Bank 5.75% 9/1/2005 700 659
Federal Home Loan Bank 5.575% 9/2/2003 64,000 61,482
Federal Home Loan Bank 5.675% 8/18/2003 51,450 49,591
Federal Home Loan Bank 5.79% 4/27/2009 900 818
Federal Home Loan Bank 5.865% 9/2/2008 55,420 51,109
Federal Home Loan Bank 5.88% 11/25/2008 15,300 14,037
Federal Home Loan Bank 6.50% 8/15/2007 41,260 39,643
Federal Home Loan Bank 7.78% 10/19/2001 500 504
Federal Home Loan Mortgage Corp. 5.63% 1/10/2003 625 605
Federal Home Loan Mortgage Corp. 6.45% 4/29/2009 23,000 21,324
Federal Home Loan Mortgage Corp. 7.09% 6/1/2005 4,400 4,345
Federal National Mortgage Assn. 5.25% 1/15/2003 750 720
Federal National Mortgage Assn. 5.64% 12/10/2008 25,000 22,619
Federal National Mortgage Assn. 5.75% 4/15/2003-2/15/2008 34,270 33,042
Federal National Mortgage Assn. 5.90% 7/9/2003 41,345 40,136
Federal National Mortgage Assn. 5.91% 8/25/2003 18,450 17,917
Federal National Mortgage Assn. 5.96% 4/23/2003 7,900 7,693
Federal National Mortgage Assn. 5.97% 7/3/2003 26,390 25,667
Federal National Mortgage Assn. 6.09% 2/20/2009 51,730 47,676
Federal National Mortgage Assn. 6.18% 2/19/2009 11,000 10,203
Federal National Mortgage Assn. 6.375% 6/15/2009 1,700 1,613
Federal National Mortgage Assn. 6.40% 5/14/2009 67,300 62,370
Federal National Mortgage Assn. 6.50% 4/29/2009 1,000 930
Federal National Mortgage Assn. 6.56% 4/23/2008 55,000 52,342
Federal National Mortgage Assn. 6.59% 5/16/2002 1,500 1,489
Federal National Mortgage Assn. 7.50% 2/11/2002 2,500 2,518
Federal National Mortgage Assn. 7.55% 4/22/2002 3,000 3,027
Federal National Mortgage Assn. 8.25% 12/18/2000 100 101
Government Trust Certificate 9.625% 5/15/2002 103 105
Private Export Funding Corp. 8.40% 7/31/2001 225 228
Resolution Funding Corp. 8.125% 10/15/2019 550 633
Resolution Funding Corp. 8.625% 1/15/2030 110 140
Resolution Funding Corp. 8.875% 7/15/2020 280 346
Small Business Administration Variable Rate
Interest Only Custodial Receipts 2.719% 7/15/2017 6,704 269
Tennessee Valley Auth. 5.375% 11/13/2008 32,400 28,774
Tennessee Valley Auth. 6.235% 7/15/2045 800 796
----------
637,406
----------
MORTGAGE-BACKED SECURITIES (34.5%)
Federal Home Loan Mortgage Corp. 5.50% 9/1/2000-2/1/2028 (1) 48,045 44,587
Federal Home Loan Mortgage Corp. 6.00% 7/1/2000-12/1/2029 (1) 525,291 489,633
Federal Home Loan Mortgage Corp. 6.50% 8/1/2000-8/1/2029 (1) 915,541 869,157
Federal Home Loan Mortgage Corp. 7.00% 8/1/2001-2/1/2030 (1) 530,222 514,913
Federal Home Loan Mortgage Corp. 7.50% 8/1/2003-8/1/2029 (1) 229,958 228,130
Federal Home Loan Mortgage Corp. 8.00% 5/1/2002-11/1/2029 (1) 110,002 110,941
Federal Home Loan Mortgage Corp. 8.50% 9/1/2001-5/1/2030 (1) 27,048 27,663
Federal Home Loan Mortgage Corp. 9.00% 8/1/2001-5/1/2030 (1) 16,492 17,040
Federal Home Loan Mortgage Corp. 9.50% 4/1/2016-6/1/2025 (1) 3,948 4,106
Federal Home Loan Mortgage Corp. 10.00% 7/1/2000-4/1/2025 (1) 787 835
Federal Home Loan Mortgage Corp. 10.50% 9/1/2000-12/1/2015 (1) 88 95
Federal Home Loan Mortgage Corp. 11.25% 8/1/2014 (1) 9 10
Federal Housing Administration Project 7.43% 10/1/2020 (1) 456 458
Federal National Mortgage Assn. 5.50% 1/1/2001-2/1/2029 (1) 4,692 4,228
Federal National Mortgage Assn. 6.00% 10/1/2000-9/1/2029 (1) 228,715 211,832
Federal National Mortgage Assn. 6.50% 11/1/2000-5/1/2030 (1) 331,700 314,705
Federal National Mortgage Assn. 7.00% 9/1/2001-4/1/2030 (1) 320,299 310,442
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assn. 7.50% 7/1/2001-5/1/2030 (1) $ 248,391 $ 245,197
Federal National Mortgage Assn. 7.75% 10/1/2002 (1) 1 1
Federal National Mortgage Assn. 8.00% 5/1/2002-6/1/2030 (1) 80,634 81,116
Federal National Mortgage Assn. 8.50% 4/1/2006-6/1/2030 (1) 28,334 28,930
Federal National Mortgage Assn. 9.00% 9/1/2003-1/1/2027 (1) 4,839 5,016
Federal National Mortgage Assn. 9.50% 10/1/2001-11/1/2025 (1) 8,256 8,575
Federal National Mortgage Assn. 10.00% 8/1/2005-6/1/2022 (1) 1,031 1,080
Federal National Mortgage Assn. 10.50% 11/1/2000-8/1/2020 (1) 312 340
Government National Mortgage Assn. 5.50% 12/15/2028-1/15/2029 (1) 3,157 2,799
Government National Mortgage Assn. 6.00% 3/1/2009-7/15/2029 (1) 99,293 91,928
Government National Mortgage Assn. 6.50% 10/15/2007-8/15/2029 (1) 291,904 277,662
Government National Mortgage Assn. 7.00% 11/15/2007-10/15/2029 (1) 324,000 315,747
Government National Mortgage Assn. 7.50% 2/15/2007-4/15/2030 (1) 228,903 227,723
Government National Mortgage Assn. 8.00% 11/15/2001-6/15/2030 (1) 156,668 158,663
Government National Mortgage Assn. 8.50% 5/15/2010-6/15/2030 (1) 38,344 39,357
Government National Mortgage Assn. 9.00% 8/15/2001-6/15/2030 (1) 40,170 41,595
Government National Mortgage Assn. 9.50% 1/1/2004-9/15/2025 (1) 8,361 8,742
Government National Mortgage Assn. 10.00% 9/15/2003-8/15/2025 (1) 2,084 2,217
Government National Mortgage Assn. 10.50% 11/15/2010-1/15/2021 (1) 1,307 1,454
Government National Mortgage Assn. 11.50% 3/15/2010-11/15/2017 (1) 230 258
Resolution Trust Corp. Collateralized
Mortgage Obligations 10.35% 8/25/2021 (1) 444 443
----------
4,687,618
----------
--------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $8,199,721) 8,053,751
--------------------------------------------------------------------------------------------------------
CORPORATE BONDS (33.9%)
--------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (4.2%)
ARG Funding Corp. 5.88% 3/5/2002 (1) 37,900 37,223
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 32,000 31,445
American Express Credit Card Master Trust 6.40% 9/15/2002 (1) 17,000 16,786
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 25,854 25,864
American Express Credit Card Master Trust 7.60% 9/15/2001 (1) 2,000 2,015
CIT RV Trust 5.78% 7/15/2008 (1) 17,650 17,526
CIT RV Trust 5.96% 4/15/2011 (1) 15,525 15,306
California Infrastructure & Econ. Dev. Bank
Special Purpose Trust PG&E 6.42% 3/25/2005 (1) 11,325 10,974
Citibank Credit Card Master Trust 5.875% 3/10/2011 (1) 11,600 10,340
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1) 6,048 5,933
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 18,250 18,163
ComEd Transitional Funding Trust 5.63% 6/25/2006 (1) 510 469
Discover Card Master Trust 5.65% 11/15/2004 (1) 43,000 41,878
Discover Card Master Trust I 5.75% 4/16/2001 (1) 13,500 13,416
First Bank Corp. Card Master Trust 6.40% 2/15/2002 (1) 5,030 4,973
First USA Credit Card Master Trust 6.42% 7/17/2002 (1) 9,450 9,329
Ford Credit Auto Owner Trust 5.90% 6/15/2002 (1) 74,000 73,455
Honda Auto Lease Trust 6.45% 2/6/2001 (1) 23,000 22,844
Honda Auto Lease Trust 6.65% 7/15/2005 (1) 23,000 22,740
Mach One CDO 6.70% 3/15/2030 (1) 5,100 4,733
MBNA Master Credit Card Trust 6.60% 6/15/2002 (1) 15,065 14,946
MMCA Automobile Trust 6.80% 8/15/2003 (1) 29,900 29,750
PECO Energy Transition Trust 5.63% 6/29/2002 (1) 59,900 58,245
PECO Energy Transition Trust 6.05% 7/4/2006 (1) 14,675 13,601
PP&L Transition Bond Co. LLC 7.15% 6/25/2009 (1) 850 837
Providian Master Trust 6.60% 9/15/2002 (1) 20,000 19,790
Sears Credit Account Master Trust 6.05% 2/15/2004 (1) 19,500 19,026
Sears Credit Account Master Trust 6.35% 2/15/2007 (1) 30,000 29,609
Sears Credit Account Master Trust 7.00% 1/15/2004 (1) 250 250
Standard Credit Card Master Trust 6.55% 10/7/2005 (1) 2,850 2,780
Standard Credit Card Master Trust 8.25% 11/7/2003 (1) 1,020 1,036
----------
575,282
----------
</TABLE>
17
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE (13.5%)
Allstate Corp. 7.20% 12/1/2009 $ 10,700 $ 10,163
American General Capital II 8.50% 7/1/2030 12,400 12,415
American General Finance Corp. 6.20% 3/15/2003 3,100 2,991
American General Finance Corp. 6.375% 3/1/2003 900 872
American General Finance Corp. 7.45% 7/1/2002 1,575 1,572
Associates Corp. 5.75% 10/15/2003 700 661
Associates Corp. 6.00% 12/1/2002 200 193
Associates Corp. 6.20% 5/16/2005 1,000 935
Associates Corp. 6.44% 1/15/2004 1,625 1,566
Associates Corp. 6.50% 8/15/2002 3,000 2,941
Associates Corp. 6.50% 10/15/2002 11,975 11,723
Associates Corp. 6.625% 5/15/2001 3,300 3,282
Associates Corp. 7.50% 4/15/2002 5,800 5,795
Associates Corp. 7.875% 9/30/2001 1,105 1,112
Avalon Properties Inc. 6.875% 12/15/2007 9,550 8,932
Banc One Corp. 6.25% 10/1/2001 21,500 21,224
Bank America Corp. 6.625% 6/15/2004 5,350 5,184
Bank America Corp. 7.20% 9/15/2002 400 399
Bank America Corp. 7.50% 10/15/2002 6,150 6,165
Bank America Corp. 7.625% 6/15/2004 1,630 1,634
Bank America Corp. 7.75% 7/15/2002 3,000 3,021
Bank America Corp. 7.875% 12/1/2002 2,000 2,022
Bank America Corp. 8.07% 12/31/2026 8,000 7,158
Bank America Corp. 8.375% 3/15/2002 2,500 2,537
Bank America Corp. 8.50% 1/15/2007 5,000 5,164
Bank America Corp. 9.375% 9/15/2009 8,500 9,268
Bank America Corp. 10.00% 2/1/2003 4,900 5,167
Bank of New York 7.30% 12/1/2009 2,000 1,928
Bank of New York 7.875% 11/15/2002 1,500 1,509
Bank of New York Capital I 7.97% 12/31/2026 3,225 2,912
BankBoston NA 6.375% 3/25/2008 4,950 4,493
Bear, Stearns & Co., Inc. 6.625% 1/15/2004 3,500 3,359
Bear, Stearns & Co., Inc. 6.75% 12/15/2007 3,635 3,369
Bear, Stearns & Co., Inc. 7.625% 12/7/2009 4,000 3,831
Beneficial Corp. 6.35% 12/3/2001 1,500 1,473
BT Capital Trust B 7.90% 1/15/2027 1,100 947
Camden Property Trust 7.00% 11/15/2006 6,250 5,772
Case Credit Corp. 6.15% 3/1/2002 64,000 61,774
Centerpoint Properties 7.90% 1/15/2003 13,000 12,910
Chase Capital I 7.67% 12/1/2026 11,100 9,690
The Chase Manhattan Corp. 5.75% 4/15/2004 5,975 5,637
The Chase Manhattan Corp. 6.00% 11/1/2005 11,625 10,820
The Chase Manhattan Corp. 6.375% 4/1/2008 5,940 5,442
The Chase Manhattan Corp. 6.50% 8/1/2005 3,625 3,458
The Chase Manhattan Corp. 7.125% 2/1/2007 1,650 1,591
The Chase Manhattan Corp. 8.125% 6/15/2002 1,410 1,428
The Chase Manhattan Corp. 8.50% 2/15/2002 10,000 10,161
Chemical Banking Corp. 7.25% 9/15/2002 2,565 2,557
CIGNA Corp. 7.875% 5/15/2027 13,875 12,431
CIGNA Corp. 8.30% 1/15/2033 835 788
CIT Group Holdings, Inc. 7.125% 10/15/2004 30,000 29,187
CIT Group Holdings, Inc. 7.375% 3/15/2003 13,700 13,519
Citicorp 7.00% 7/1/2007 400 387
Citicorp 7.125% 3/15/2004 2,000 1,974
Citicorp 7.125% 6/1/2003 135 134
Citicorp 8.625% 12/1/2002 4,500 4,616
Citicorp 9.50% 2/1/2002 1,000 1,029
Citigroup Inc. 6.20% 3/15/2009 140 128
CNA Financial Corp. 6.50% 4/15/2005 25,175 22,670
Comdisco Inc. 6.00% 1/30/2002 4,000 3,836
Comdisco Inc. 7.25% 9/20/2001 25,500 25,059
Comerica, Inc. 7.125% 12/1/2013 5,000 4,542
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Credit Corp. 5.90% 9/1/2003 $ 550 $ 527
Commercial Credit Corp. 6.625% 11/15/2006 2,000 1,899
Commercial Credit Corp. 6.625% 6/1/2015 850 833
Conseco Inc. 9.00% 10/15/2006 26,625 17,911
CoreStates Capital Corp. 6.625% 3/15/2005 6,900 6,544
CoreStates Capital Corp. 9.375% 4/15/2003 1,750 1,812
Countrywide Funding Corp. 6.28% 1/15/2003 2,500 2,404
Countrywide Funding Corp. 8.25% 7/15/2002 9,872 9,914
Countrywide Home Loan 6.45% 2/27/2003 1,000 964
Countrywide Home Loan 7.26% 5/10/2004 2,000 1,945
Dean Witter, Discover & Co. 6.75% 10/15/2013 800 717
Dean Witter, Discover & Co. 6.875% 3/1/2003 2,300 2,270
Donaldson, Lufkin & Jenrette, Inc. 6.00% 12/1/2001 25,250 24,636
Donaldson, Lufkin & Jenrette, Inc. 6.875% 11/1/2005 2,095 1,994
Donaldson, Lufkin & Jenrette, Inc. 8.00% 3/1/2005 5,000 5,013
Equitable Companies Inc. 7.00% 4/1/2028 4,310 3,768
Equity Residential Properties 6.55% 11/15/2001 16,750 16,421
ERAC USA Finance Co. 7.95% 12/15/2009 14,200 13,764
Fidelity Investments 7.49% 6/15/2019 1,000 930
Fifth Third Bancorp 6.75% 7/15/2005 5,000 4,838
Finova Capital Corp. 5.875% 10/15/2001 22,500 20,250
Finova Capital Corp. 7.25% 11/8/2004 29,250 25,594
First Bank NA 7.55% 6/15/2004 10,000 9,970
First Bank System 7.625% 5/1/2005 5,000 4,971
First Chicago Corp. 6.375% 1/30/2009 5,000 4,484
First Chicago Corp. 6.875% 6/15/2003 5,000 4,887
First Chicago Corp. 7.625% 1/15/2003 2,400 2,391
First Chicago Corp. 8.25% 6/15/2002 5,000 5,058
First Chicago Corp. 9.25% 11/15/2001 1,225 1,255
First Chicago Corp. 10.25% 5/1/2001 2,750 2,813
First Union Corp. 6.625% 7/15/2005 390 368
First Union Corp. 8.00% 11/15/2002 100 101
First Union Corp. 8.125% 6/24/2002 2,900 2,922
Fleet Capital Trust II 7.92% 12/11/2026 3,790 3,335
Fleet Financial Group, Inc. 6.875% 3/1/2003 1,100 1,080
Fleet Financial Group, Inc. 7.125% 4/15/2006 5,700 5,491
Fleet/Norstar Group 8.125% 7/1/2004 4,600 4,658
Ford Motor Credit Co. 5.125% 10/15/2001 64,650 63,009
Ford Motor Credit Co. 5.80% 1/12/2009 15,000 13,093
Ford Motor Credit Co. 6.125% 1/9/2006 900 836
Ford Motor Credit Co. 6.375% 2/1/2029 16,750 13,711
Ford Motor Credit Co. 7.00% 9/25/2001 5,000 4,984
Ford Motor Credit Co. 7.375% 10/28/2009 12,700 12,283
Ford Motor Credit Co. 7.50% 1/15/2003 1,000 997
Ford Motor Credit Co. 7.75% 11/15/2002 1,650 1,659
Ford Motor Credit Co. 7.75% 3/15/2005 2,385 2,391
Ford Motor Credit Co. 9.00% 9/15/2001 5,000 5,087
General Electric Capital Corp. 5.77% 8/27/2001 9,700 9,563
General Electric Capital Corp. 5.89% 5/11/2001 10,000 9,905
General Electric Capital Corp. 6.90% 9/15/2015 9,000 8,515
General Electric Capital Corp. 7.375% 1/19/2010 19,500 19,656
General Electric Capital Corp. 8.30% 9/20/2009 275 292
General Motors Acceptance Corp. 5.50% 1/14/2002 14,000 13,612
General Motors Acceptance Corp. 6.60% 1/17/2001 100 100
General Motors Acceptance Corp. 6.625% 1/10/2002 22,100 21,842
General Motors Acceptance Corp. 6.625% 10/1/2002 5,150 5,069
General Motors Acceptance Corp. 6.625% 10/15/2005 900 860
General Motors Acceptance Corp. 6.875% 7/15/2001 1,500 1,497
General Motors Acceptance Corp. 7.125% 5/1/2001 10,975 10,976
General Motors Acceptance Corp. 7.125% 5/1/2003 1,300 1,287
General Motors Acceptance Corp. 7.75% 1/19/2010 54,600 54,211
General Motors Acceptance Corp. 8.50% 1/1/2003 6,200 6,333
General Motors Acceptance Corp. 9.00% 10/15/2002 10,650 11,000
</TABLE>
19
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Motors Acceptance Corp. 9.625% 12/15/2001 $ 5,895 $ 6,096
HRPT Properties Trust 6.75% 12/18/2002 16,250 15,414
John Hancock Global Funding II 7.90% 7/2/2010 20,000 20,113
Household Finance Corp. 5.875% 2/1/2009 360 312
Household Finance Corp. 6.40% 6/17/2008 5,715 5,164
Household Finance Corp. 6.45% 3/15/2001 700 695
Household Finance Corp. 6.45% 2/1/2009 2,430 2,190
Household Finance Corp. 6.70% 6/15/2002 1,500 1,475
Household Finance Corp. 7.25% 7/15/2003 1,000 986
Household Finance Corp. 7.65% 5/15/2007 3,250 3,213
International Lease Finance Corp. 6.375% 8/1/2001 7,500 7,433
International Lease Finance Corp. 6.50% 7/1/2001 2,050 2,035
JDN Realty Corp. 6.80% 8/1/2004 12,810 10,280
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 25,650 24,581
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 15,550 14,434
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 4,625 4,151
Lehman Brothers Holdings Inc. 7.25% 4/15/2003 11,000 10,796
Lehman Brothers Holdings Inc. 7.375% 1/15/2007 5,000 4,740
Lehman Brothers Holdings Inc. 7.625% 6/1/2006 5,000 4,820
Lehman Brothers Holdings Inc. 7.75% 1/15/2005 24,800 24,476
Liberty Financial Co. 6.75% 11/15/2008 11,000 9,727
Mack-Cali Realty 7.00% 3/15/2004 15,000 14,293
Mack-Cali Realty 7.25% 3/15/2009 2,175 1,973
Mellon Bank NA 6.50% 8/1/2005 5,300 5,042
Mellon Bank NA 6.75% 6/1/2003 2,775 2,725
Mellon Bank NA 7.375% 5/15/2007 3,500 3,417
Mellon Capital II 7.995% 1/15/2027 6,650 5,992
Mellon Financial Co. 5.75% 11/15/2003 4,400 4,166
Mellon Financial Co. 9.75% 6/15/2001 6,647 6,780
Merrill Lynch & Co., Inc. 5.71% 1/15/2002 12,000 11,711
Merrill Lynch & Co., Inc. 5.87% 11/15/2001 21,750 21,356
Merrill Lynch & Co., Inc. 5.88% 1/15/2004 7,100 6,764
Merrill Lynch & Co., Inc. 6.00% 2/17/2009 9,300 8,222
Merrill Lynch & Co., Inc. 6.07% 10/15/2001 44,700 44,034
Merrill Lynch & Co., Inc. 6.64% 9/19/2002 2,995 2,953
Merrill Lynch & Co., Inc. 6.875% 11/15/2018 3,750 3,299
Merrill Lynch & Co., Inc. 7.00% 3/15/2006 300 290
Merrill Lynch & Co., Inc. 8.00% 2/1/2002 2,600 2,623
Merrill Lynch & Co., Inc. 8.30% 11/1/2002 2,735 2,789
MONY Group Inc. 8.35% 3/15/2010 9,500 9,382
Morgan Stanley, Dean Witter Discover & Co. 5.625% 1/20/2004 4,000 3,750
Morgan Stanley, Dean Witter Discover & Co. 6.375% 8/1/2002 7,000 6,864
Morgan Stanley, Dean Witter Discover & Co. 6.875% 3/1/2007 7,300 6,962
Morgan Stanley, Dean Witter Discover & Co. 7.00% 10/1/2013 700 642
Morgan Stanley, Dean Witter Discover & Co. 7.125% 1/15/2003 82,200 81,615
NAC Re Corp. 7.15% 11/15/2005 1,500 1,447
National City Corp. 7.20% 5/15/2005 10,000 9,792
National Rural Utilities 6.42% 5/1/2008 11,300 10,464
Nationsbank Corp. 6.375% 2/15/2008 1,500 1,371
NationsBank Corp. 6.50% 3/15/2006 5,600 5,290
NationsBank Corp. 6.95% 3/20/2006 3,000 2,895
NationsBank Corp. 7.00% 9/15/2001 1,800 1,793
NationsBank Corp. 7.25% 10/15/2025 1,625 1,465
NationsBank Corp. 7.50% 9/15/2006 1,000 990
NationsBank Corp. 8.125% 6/15/2002 3,000 3,040
NB Capital Trust II 7.83% 12/15/2026 5,000 4,446
NB Capital Trust IV 8.25% 4/15/2027 3,400 3,102
NCNB Corp. 9.50% 6/1/2004 8,725 9,223
Norwest Corp. 5.75% 2/1/2003 4,000 3,841
Norwest Corp. 6.65% 10/15/2023 40 33
Norwest Corp. 6.80% 5/15/2002 5,000 4,949
Norwest Financial, Inc. 6.25% 11/1/2002 1,000 976
Norwest Financial, Inc. 7.875% 2/15/2002 1,000 1,006
</TABLE>
20
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PaineWebber Group, Inc. 6.375% 5/15/2004 $ 850 $ 801
PaineWebber Group, Inc. 6.50% 11/1/2005 500 465
PaineWebber Group, Inc. 7.625% 12/1/2009 22,800 21,486
PaineWebber Group, Inc. 7.875% 2/15/2003 2,250 2,232
Pitney Bowes Credit Corp. 9.25% 6/15/2008 2,000 2,222
Popular Inc 7.375% 9/15/2001 32,400 32,222
Private Export Funding Corp. 7.20% 11/15/2010 52,000 52,135
Progressive Corp. 6.625% 3/1/2029 5,000 3,933
Realty Income Corp. 7.75% 5/6/2007 3,000 2,797
Reckson Operating Partnership LP 7.75% 3/15/2009 16,400 15,293
Republic New York Corp. 7.75% 5/15/2002 3,000 3,004
Republic New York Corp. 7.75% 5/15/2009 4,300 4,188
Republic New York Corp. 9.70% 2/1/2009 5,000 5,465
Salomon, Inc. 6.65% 7/15/2001 7,050 7,007
Salomon, Inc. 7.20% 2/1/2004 6,000 5,928
Salomon Smith Barney Holdings Inc. 6.50% 10/15/2002 5,300 5,202
Salomon Smith Barney Holdings Inc. 7.375% 5/15/2007 2,000 1,965
Security Capital Pacific Trust 8.05% 4/1/2017 4,300 3,841
Shurgard Storage Centers, Inc. 7.50% 4/25/2004 6,000 5,809
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 10,000 9,371
Simon DeBartolo Group, Inc. 6.75% 6/15/2005 265 246
Spieker Properties Inc. 7.50% 10/1/2027 700 593
Summit Bancorp 8.625% 12/10/2002 5,000 5,096
Summit Properties Inc. 6.80% 8/15/2002 3,500 3,360
Summit Properties Inc. 6.95% 8/15/2004 17,500 16,298
Summit Properties Inc. 7.20% 8/15/2007 4,450 4,012
SunTrust Banks, Inc. 6.00% 2/15/2026 5,000 4,605
SunTrust Banks, Inc. 7.375% 7/1/2002 5,000 4,999
SunTrust Banks, Inc. 7.375% 7/1/2006 3,500 3,435
Suntrust Capital 7.90% 6/15/2027 2,085 1,868
Susa Partnership LP 7.00% 12/1/2007 1,050 948
Susa Partnership LP 7.50% 12/1/2027 5,025 4,112
Toyota Motor Credit Corp. 5.50% 9/17/2001 45,750 44,911
Toyota Motor Credit Corp. 5.625% 11/13/2003 3,750 3,590
Travelers/Aetna Property Casualty Corp. 7.75% 4/15/2026 1,000 946
US Bancorp 6.875% 12/1/2004 25,000 24,259
US Bancorp 8.27% 12/15/2026 3,250 2,973
US West Capital Funding, Inc. 6.875% 8/15/2001 31,250 31,034
Wachovia Corp. 5.625% 12/15/2008 4,650 4,000
Wachovia Corp. 6.25% 8/4/2008 2,600 2,343
Wachovia Corp. 6.375% 4/15/2003 110 107
Wachovia Corp. 6.625% 11/15/2006 750 711
Wachovia Corp. 6.80% 6/1/2005 10,000 9,693
Wells Fargo & Co. 6.125% 11/1/2003 5,000 4,796
Wells Fargo & Co. 6.25% 4/15/2008 915 833
Wells Fargo & Co. 6.50% 9/3/2002 40,200 39,507
Wells Fargo & Co. 6.875% 4/1/2006 6,400 6,162
Wells Fargo & Co. 8.75% 5/1/2002 8,370 8,559
Wells Fargo Capital I 7.96% 12/15/2026 3,600 3,248
----------
1,840,465
----------
INDUSTRIAL (12.3%)
American Airlines Inc. 6.855% 4/15/2009 12,538 12,152
American Airlines Inc. 7.024% 10/15/2009 6,400 5,985
Anadarko Petroleum Corp. 7.20% 3/15/2029 16,000 14,652
Anheuser-Busch Cos., Inc. 6.75% 12/15/2027 1,600 1,410
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 5,050 4,953
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 3,850 3,550
Anheuser-Busch Cos., Inc. 7.375% 7/1/2023 800 743
Apache Corp. 7.625% 7/1/2019 7,500 7,165
Applied Materials, Inc. 8.00% 9/1/2004 1,625 1,645
Archer-Daniels-Midland Co. 6.25% 5/15/2003 1,000 974
Archer-Daniels-Midland Co. 8.875% 4/15/2011 3,745 4,032
Auburn Hills 12.00% 5/1/2020 770 1,081
</TABLE>
21
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baker Hughes Inc. 6.25% 1/15/2009 $ 2,500 $ 2,281
Baker Hughes Inc. 6.875% 1/15/2029 17,150 15,067
C.R. Bard, Inc. 6.70% 12/1/2026 13,650 12,912
Bayer Corp. 6.65% 2/15/2028 1,300 1,132
Black & Decker Corp. 7.50% 4/1/2003 27,800 27,646
The Boeing Co. 6.625% 2/15/2038 11,000 9,276
The Boeing Co. 8.75% 8/15/2021 1,800 1,948
Borg-Warner Automotive 7.125% 2/15/2029 3,000 2,390
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 6,750 6,386
Burlington Northern Santa Fe Corp. 6.53% 7/15/2037 850 829
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 2,900 2,607
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 7,205 6,357
Burlington Northern Sante Fe Corp. 7.25% 8/1/2097 4,450 3,814
Burlington Northern Sante Fe Corp. 9.25% 10/1/2006 750 807
CSX Corp. 7.05% 5/1/2002 7,000 6,903
CSX Corp. 8.10% 9/15/2022 3,950 3,793
CSX Corp. 8.625% 5/15/2022 3,875 3,923
CSX Corp. 9.00% 8/15/2006 700 724
CVS Corp. 5.50% 2/15/2004 16,750 15,687
Caterpillar, Inc. 7.375% 3/1/2097 8,900 7,824
Caterpillar, Inc. 9.00% 4/15/2006 1,600 1,698
Chrysler Corp. 7.45% 2/1/2097 4,375 4,005
Clear Channel Communications 7.875% 6/15/2005 9,900 9,938
Comcast Cablevision 8.125% 5/1/2004 11,350 11,500
Comcast Cablevision 8.875% 5/1/2017 3,300 3,533
Conoco Inc. 6.95% 4/15/2029 5,500 5,008
Conrail Corp. 9.75% 6/15/2020 1,680 1,861
Continental Airlines, Inc.(Equipment Trust
Certificates) 6.648% 3/15/2019 10,496 9,517
Continental Airlines, Inc. Pass-Through Trust 6.331% 4/25/2001 2,619 2,547
Continental Airlines, Inc. Pass-Through Trust 6.41% 8/8/2004 797 742
Cyprus AMAX Minerals Co. 7.375% 5/15/2007 6,000 5,643
Daimler-Chrysler North America Holding Corp. 6.84% 10/15/2002 20,000 19,813
Daimler-Chrysler North America Holding Corp. 6.90% 9/1/2004 28,500 27,917
Daimler-Chrysler North America Holding Corp. 7.20% 9/1/2009 14,000 13,485
Daimler-Chrysler North America Holding Corp. 7.40% 1/20/2005 5,500 5,473
Dayton Hudson Corp. 6.65% 8/1/2028 5,600 4,744
Dayton Hudson Corp. 6.75% 1/1/2028 1,000 859
Dayton Hudson Corp. 9.75% 7/1/2002 1,000 1,047
Deere & Co. 8.50% 1/9/2022 985 1,020
Delta Air Lines, Inc. 7.70% 12/15/2005 5,000 4,817
Delta Air Lines, Inc. 7.90% 12/15/2009 1,400 1,309
Delta Air Lines, Inc. 8.30% 12/15/2029 5,800 5,090
Delta Air Lines, Inc. (Equipment Trust
Certificates) 8.54% 1/2/2007 3,352 3,370
Dillard's Inc. 5.79% 11/15/2001 26,000 24,807
Dillard's Inc. 6.625% 11/15/2008 7,000 5,672
Dillard's Inc. 7.75% 5/15/2027 1,000 758
Dillard's Inc. 7.85% 10/1/2012 2,700 2,259
The Walt Disney Co. 7.55% 7/15/2093 2,597 2,427
Dow Chemical Co. 7.375% 11/1/2029 7,000 6,800
Dow Chemical Co. 8.50% 6/8/2010 2,500 2,653
E.I. du Pont de Nemours & Co. 6.75% 10/15/2004 15,700 15,463
E.I. du Pont de Nemours & Co. 6.875% 10/15/2009 3,000 2,911
Eastman Chemical Co. 6.375% 1/15/2004 12,000 11,436
Eastman Chemical Co. 7.25% 1/15/2024 3,700 3,250
Eastman Chemical Co. 7.60% 2/1/2027 2,988 2,692
Enterprise Products 8.25% 3/15/2005 82,200 82,250
Federated Department Stores, Inc. 6.125% 9/1/2001 500 491
Federated Department Stores, Inc. 7.00% 2/15/2028 1,060 893
Federated Department Stores, Inc. 7.45% 7/15/2017 11,125 10,187
Federated Department Stores, Inc. 8.125% 10/15/2002 5,000 5,043
First Data Corp. 6.375% 12/15/2007 1,000 931
First Data Corp. 6.625% 4/1/2003 7,735 7,571
Ford Capital BV 9.50% 7/1/2001 1,925 1,958
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ford Capital BV 9.50% 6/1/2010 $ 825 $ 918
Ford Capital BV 9.875% 5/15/2002 2,250 2,334
Ford Motor Co. 8.00% 6/15/2002 2,850 2,876
Ford Motor Co. 9.98% 2/15/2047 835 1,012
Ford Motor Credit Co. 6.75% 12/10/2002 65,000 64,093
General Motors Corp. 7.00% 6/15/2003 2,500 2,471
General Motors Corp. 9.125% 7/15/2001 7,900 8,036
Georgia-Pacific Corp. 7.75% 11/15/2029 8,750 7,949
Harrahs Operating Co., Inc. 7.50% 1/15/2009 16,285 15,027
Illinois Central Railroad Co. 6.75% 5/15/2003 8,345 8,145
International Business Machines Corp. 6.45% 8/1/2007 1,000 959
International Business Machines Corp. 7.00% 10/30/2025 650 613
International Business Machines Corp. 7.125% 12/1/2096 11,325 10,360
International Paper Co. 6.875% 11/1/2023 5,000 4,230
International Paper Co. 7.875% 8/1/2006 2,265 2,240
Kroger Co. 7.625% 9/15/2006 15,250 14,862
Kroger Co. 7.65% 4/15/2007 7,550 7,364
Kroger Co. 8.00% 9/15/2029 4,700 4,472
Kroger Co. 8.05% 2/1/2010 5,300 5,262
Kroger Co. 8.15% 7/15/2006 2,700 2,699
Lafarge Corp. 6.375% 7/15/2005 2,000 1,853
Lockheed Martin Corp. 6.85% 5/15/2001 8,500 8,446
Lockheed Martin Corp. 7.65% 5/1/2016 5,000 4,687
May Department Stores Co. 9.75% 2/15/2021 1,680 1,890
May Department Stores Co. 9.875% 12/1/2002 1,775 1,867
McDonald's Corp. 6.75% 2/15/2003 945 937
MCI Communications Corp. 6.50% 4/15/2010 11,175 10,138
MCI Communications Corp. 7.50% 8/20/2004 4,050 4,034
MCI Communications Corp. 7.75% 3/23/2025 4,900 4,570
Mobil Corp. 7.625% 2/23/2033 920 875
Monsanto Co. 5.625% 12/1/2001 25,500 24,869
Monsanto Co. 6.00% 12/1/2005 17,390 16,127
Monsanto Co. 6.85% 12/1/2028 4,000 3,463
News America Holdings Inc. 7.75% 1/20/2024 2,000 1,819
News America Holdings Inc. 8.00% 10/17/2016 9,250 8,760
News America Holdings Inc. 8.50% 2/15/2005 2,600 2,661
News America Holdings Inc. 8.875% 4/26/2023 7,905 8,072
News America Holdings Inc. 9.25% 2/1/2013 3,341 3,565
Noble Drilling Corp. 6.95% 3/15/2009 6,000 5,690
Noble Drilling Corp. 7.50% 3/15/2019 11,000 10,430
Norfolk Southern Corp. 6.875% 5/1/2001 23,475 23,367
Norfolk Southern Corp. 7.70% 5/15/2017 3,500 3,357
Norfolk Southern Corp. 7.80% 5/15/2027 4,375 4,186
Norfolk Southern Corp. 7.90% 5/15/2097 1,750 1,609
Norfolk Southern Corp. 8.375% 2/15/2005 25,450 26,154
Norfolk Southern Corp. 8.625% 5/15/2010 6,950 7,253
Northrop Grumman Corp. 7.00% 3/1/2006 15,700 14,950
Occidental Petroleum Corp. 8.50% 11/9/2001 14,750 14,890
J.C. Penney & Co., Inc. 6.125% 11/15/2003 2,000 1,815
Philip Morris Cos., Inc. 6.00% 7/15/2001 110 108
Philip Morris Cos., Inc. 7.00% 7/15/2005 7,150 6,766
Philip Morris Cos., Inc. 7.20% 2/1/2007 1,450 1,344
Philip Morris Cos., Inc. 8.25% 10/15/2003 1,900 1,898
Phillips Petroleum Co. 8.49% 1/1/2023 2,100 2,049
Phillips Petroleum Co. 8.50% 5/25/2005 53,800 55,608
Phillips Petroleum Co. 8.75% 5/25/2010 12,850 13,546
Phillips Petroleum Co. 9.00% 6/1/2001 3,900 3,954
Praxair, Inc. 6.75% 3/1/2003 1,000 979
Praxair, Inc. 6.90% 11/1/2006 10,750 10,272
Raytheon Co. 6.45% 8/15/2002 19,500 19,030
Raytheon Co. 6.50% 7/15/2005 3,900 3,688
Raytheon Co. 6.75% 3/15/2018 1,600 1,373
Raytheon Co. 6.75% 8/15/2007 1,900 1,772
</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>
Raytheon Co. 7.00% 11/1/2028 $ 10,880 $ 9,304
Raytheon Co. 7.90% 3/1/2003 17,500 17,547
Republic Service Inc. 7.125% 5/15/2009 9,990 8,958
Rohm & Haas Co. 6.95% 7/15/2004 7,200 7,093
Rohm & Haas Co. 7.40% 7/15/2009 2,700 2,685
Rohm & Haas Co. 7.85% 7/15/2029 11,900 12,038
Rohm & Haas Co. 9.80% 4/15/2020 4,450 5,044
Safeway Inc. 5.875% 11/15/2001 10,450 10,239
Safeway Inc. 6.85% 9/15/2004 19,300 18,751
Safeway Inc. 7.00% 9/15/2007 2,150 2,053
Sears, Roebuck & Co. Acceptance Corp. 6.125% 1/15/2006 5,500 5,073
Sears, Roebuck & Co. Acceptance Corp. 6.25% 1/15/2004 2,700 2,574
Sears, Roebuck & Co. Acceptance Corp. 6.63% 7/9/2002 1,600 1,570
Sears, Roebuck & Co. Acceptance Corp. 7.19% 6/18/2001 800 796
Sears, Roebuck & Co. Acceptance Corp. 9.375% 11/1/2011 1,845 1,992
Sprint Capital Corp. 6.50% 11/15/2001 45,200 44,662
Sprint Capital Corp. 6.875% 11/15/2028 22,050 19,153
TCI Communications, Inc. 6.375% 5/1/2003 43,475 42,426
TCI Communications, Inc. 7.25% 8/1/2005 6,205 6,100
TCI Communications, Inc. 7.875% 8/1/2013 10,950 10,903
TCI Communications, Inc. 8.00% 8/1/2005 990 1,004
TCI Communications, Inc. 8.65% 9/15/2004 5,000 5,174
Tele-Communications, Inc. 9.875% 6/15/2022 500 593
Texaco Capital Corp. 5.70% 12/1/2008 2,425 2,195
Texaco Capital Corp. 7.50% 3/1/2043 850 789
Texaco Capital Corp. 8.25% 10/1/2006 2,300 2,396
Texaco Capital Corp. 8.875% 9/1/2021 705 803
Texas Instruments Inc. 6.125% 2/1/2006 6,300 5,897
Time Warner Entertainment 8.375% 3/15/2023 8,150 8,321
Time Warner Entertainment 9.625% 5/1/2002 3,900 4,034
Time Warner Inc. 7.57% 2/1/2024 1,500 1,401
Time Warner Inc. 7.75% 6/15/2005 9,600 9,674
Time Warner, Inc. 9.125% 1/15/2013 1,000 1,083
Tosco Corp. 7.80% 1/1/2027 1,650 1,591
Tosco Corp. 8.125% 2/15/2030 21,100 21,278
Tyco International Group SA 6.875% 9/5/2002 33,600 33,025
Tyco International Group SA 6.875% 1/15/2029 17,000 14,533
Union Carbide Corp. 6.70% 4/1/2009 2,000 1,887
Union Carbide Corp. 6.75% 4/1/2003 3,500 3,442
Union Carbide Corp. 7.75% 10/1/2096 7,350 6,972
Union Carbide Corp. 7.875% 4/1/2023 4,755 4,669
Union Oil of California 6.375% 2/1/2004 2,000 1,921
Union Oil of California 7.20% 5/15/2005 5,700 5,588
Union Pacific Corp. 6.125% 1/15/2004 1,000 939
Union Pacific Corp. 6.625% 2/1/2029 12,250 10,158
Union Pacific Corp. 7.00% 2/1/2016 1,450 1,307
Union Pacific Corp. 8.625% 5/15/2022 3,040 3,132
United Technologies Corp. 6.70% 8/1/2028 10,992 9,875
United Technologies Corp. 8.875% 11/15/2019 4,000 4,500
US Airways Pass-Through Trust 8.11% 2/20/2017 31,000 29,287
U S West Communications 7.625% 6/9/2003 23,400 23,354
Viacom Inc. 7.75% 6/1/2005 5,200 5,235
Wal-Mart Stores 7.55% 2/15/2030 25,500 26,082
Westvaco Corp. 8.20% 1/15/2030 20,200 19,614
WorldCom Inc. 6.125% 8/15/2001 42,360 41,824
WorldCom Inc. 6.25% 8/15/2003 12,000 11,581
WorldCom Inc. 6.40% 8/15/2005 180 170
WorldCom Inc. 6.95% 8/15/2028 1,500 1,323
WorldCom Inc. 7.875% 5/15/2003 32,250 32,502
WorldCom Inc. 8.00% 5/15/2006 11,550 11,712
Yosemite Security Trust 8.25% 11/15/2004 32,000 31,778
----------
1,668,283
----------
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES (3.9%)
AT&T Corp. 7.125% 1/15/2002 $ 1,100 $ 1,098
AT&T Corp. 8.35% 1/15/2025 2,350 2,338
Ameritech Capital Funding 7.50% 4/1/2005 4,950 4,944
Arizona Public Service Co. 5.875% 2/15/2004 6,500 6,153
Arizona Public Service Co. 7.25% 8/1/2023 2,150 1,920
Baltimore Gas & Electric Co. 8.375% 8/15/2001 5,570 5,622
Bell Atlantic Corp. 7.00% 6/15/2013 4,000 3,643
Bellsouth Capital Funding 6.04% 11/15/2026 1,350 1,323
Cincinnati Gas & Electric Co. 6.45% 2/15/2004 2,000 1,936
CMS Panhandle Holding Co. 6.125% 3/15/2004 4,300 4,042
CMS Panhandle Holding Co. 6.50% 7/15/2009 9,900 8,883
CMS Panhandle Holding Co. 7.00% 7/15/2029 5,825 5,125
Coastal Corp. 6.50% 5/15/2006 1,250 1,177
Coastal Corp. 6.50% 6/1/2008 8,400 7,751
Coastal Corp. 7.42% 2/15/2037 8,000 7,279
Coastal Corp. 7.75% 10/15/2035 6,600 6,259
Coastal Corp. 8.125% 9/15/2002 2,300 2,319
Coastal Corp. 9.625% 5/15/2012 4,700 5,267
Commonwealth Edison 7.375% 9/15/2002 7,500 7,519
Consolidated Edison Co. of New York, Inc. 6.375% 4/1/2003 5,000 4,890
Consolidated Edison Co. of New York, Inc. 6.625% 2/1/2002 1,000 990
Detroit Edison 7.50% 2/1/2005 4,000 3,980
Dominion Resources Inc. 8.125% 6/15/2010 16,000 16,139
Edison International 6.875% 9/15/2004 33,300 32,420
El Paso Energy Corp. 6.75% 5/15/2009 13,500 12,565
Enron Corp. 6.40% 7/15/2006 8,250 7,748
Enron Corp. 6.45% 11/15/2001 1,000 985
Enron Corp. 6.625% 11/15/2005 1,100 1,044
Enron Corp. 6.75% 8/1/2009 10,445 9,755
Enron Corp. 6.875% 10/15/2007 7,500 7,168
Enron Corp. 7.125% 5/15/2007 6,100 5,922
Enron Corp. 7.625% 9/10/2004 2,000 2,008
Enron Corp. 9.65% 5/15/2001 4,150 4,216
FPL Group Capital 7.625% 9/15/2006 5,000 5,010
GTE Corp. 6.36% 4/15/2006 1,045 987
GTE Corp. 7.83% 5/1/2023 4,000 3,751
GTE Corp. 8.75% 11/1/2021 3,935 4,234
GTE Corp. 9.10% 6/1/2003 225 234
GTE Florida, Inc. 6.31% 12/15/2002 5,000 4,889
GTE South Inc. 6.125% 6/15/2007 11,000 10,063
HNG Internorth 9.625% 3/15/2006 4,680 5,078
Illinois Power Co. 7.50% 7/15/2025 4,200 3,729
KN Energy, Inc. 6.45% 3/1/2003 9,200 8,912
Michigan Bell Telephone Co. 7.50% 2/15/2023 1,610 1,457
NRG Northeast Generating 9.292% 12/15/2024 22,500 22,077
National Rural Utility Co. 5.00% 10/1/2002 11,700 11,128
National Rural Utility Co. 6.20% 2/1/2008 18,000 16,474
National Rural Utility Co. 6.75% 9/1/2001 4,350 4,321
New England Telephone & Telegraph Co. 6.875% 10/1/2023 2,815 2,367
New England Telephone & Telegraph Co. 7.875% 11/15/2029 6,150 6,050
New England Telephone & Telegraph Co. 8.625% 8/1/2001 2,500 2,523
New England Telephone & Telegraph Co. 9.00% 8/1/2031 3,750 4,041
New Jersey Bell Telephone Co. 6.625% 4/1/2008 190 175
New York Telephone Co. 6.125% 1/15/2010 1,250 1,109
New York Telephone Co. 7.25% 2/15/2024 5,000 4,437
Northern States Power Co. 7.125% 7/1/2025 5,000 4,556
Pacific Bell Telephone Co. 7.25% 7/1/2002 250 251
Pacific Gas & Electric Co. 6.25% 8/1/2003 5,000 4,854
Pacific Gas & Electric Co. 6.75% 10/1/2023 150 128
Pacific Gas & Electric Co. 8.25% 11/1/2022 4,000 3,920
Pacific Gas & Electric Co. 8.375% 5/1/2025 5,000 4,886
Pennsylvania Power & Light Co. 6.50% 4/1/2005 135 127
</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>
PPL Capital Funding 7.75% 4/15/2005 $ 57,700 $ 56,838
Public Service Electric & Gas Co. 6.50% 5/1/2004 170 164
Reliant Energy Resources 8.125% 7/15/2005 33,000 32,953
Southern California Edison Co. 5.625% 10/1/2002 4,000 3,856
Southern California Edison Co. 6.375% 1/15/2006 2,350 2,204
Southern California Edison Co. 7.625% 1/15/2010 17,500 17,579
Southwestern Bell Telephone Co. 5.75% 9/1/2004 2,000 1,872
Southwestern Bell Telephone Co. 7.25% 7/15/2025 10,650 9,583
Southwestern Bell Telephone Co. 7.625% 3/1/2023 8,355 7,767
Texas Utilities Co. 7.17% 8/1/2007 650 619
Texas Utilities Co. 7.375% 8/1/2001 2,800 2,797
Texas Utilities Co. 7.875% 3/1/2023 2,075 1,914
Texas Utilities Co. 8.25% 4/1/2004 4,900 4,951
Texas Utilities Co. 8.75% 11/1/2023 180 176
US West Capital Funding, Inc. 6.125% 7/15/2002 3,000 2,922
US West Communications Group 6.875% 9/15/2033 165 137
US West Communications Group 7.20% 11/1/2004 20,600 20,255
US West Communications Group 7.25% 9/15/2025 18,000 16,366
Union Electric Power Co. 6.75% 5/1/2008 40 38
Virginia Electric & Power Co. 6.625% 4/1/2003 2,300 2,255
Virginia Electric & Power Co. 6.75% 10/1/2023 17,000 14,079
----------
535,521
----------
--------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $4,795,694) 4,619,551
--------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(5.6%)
--------------------------------------------------------------------------------------------------------
Abbey National PLC 7.95% 10/26/2029 25,300 24,877
Ahold Finance USA Inc. 6.25% 5/1/2009 10,000 8,891
Ahold Finance USA Inc. 6.875% 5/1/2029 2,300 1,921
Amoco Canada Petroleum Co. 6.75% 2/15/2005 145 143
Bank of Tokyo-Mitsubishi Ltd. 8.40% 4/15/2010 12,500 12,638
Bayerische Landesbank 7.375% 12/14/2002 145 146
British Aerospace 8.50% 6/10/2002 3,000 3,048
Canadian National Railway Co. 6.80% 7/15/2018 13,750 12,072
Canadian National Railway Co. 6.90% 7/15/2028 4,000 3,452
China Telecom 7.875% 11/2/2004 48,200 48,185
DBS Group Holdings LTD 7.875% 4/15/2010 6,000 5,938
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 12,375 12,254
Embotelladora Andina SA 7.875% 10/1/2097 10,200 7,649
Falconbridge Ltd. 7.35% 11/1/2006 1,000 933
Grand Metropolitan Investment Corp. 8.625% 8/15/2001 2,600 2,637
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 2,225 2,447
Hanson Overseas 7.375% 1/15/2003 7,100 7,026
Inter-American Development Bank 7.125% 3/15/2023 975 922
Inter-American Development Bank 8.50% 3/15/2011 2,705 2,964
Israel Electric Corp. 7.75% 3/1/2009 18,500 17,848
KFW International Finance, Inc. 7.20% 3/15/2014 3,550 3,529
KFW International Finance, Inc. 7.625% 2/15/2004 11,650 11,848
KFW International Finance, Inc. 9.125% 5/15/2001 2,400 2,439
Korea Electric Power 7.00% 2/1/2007 8,000 7,357
Korea Electric Power 7.75% 4/1/2013 18,100 16,431
Korean Development Bank 6.625% 11/21/2003 4,266 4,091
Korean Development Bank 7.125% 4/22/2004 50,000 48,311
Kowloon-Canton Railway 8.00% 3/15/2010 14,000 14,119
National Australia Bank 6.60% 12/10/2007 2,000 1,864
National Westminster Bancorp Inc. 9.375% 11/15/2003 3,950 4,197
Noranda Forest 7.50% 7/15/2003 7,825 7,643
Noranda, Inc. 7.00% 7/15/2005 1,045 986
Northern Telecom Ltd. 6.875% 9/1/2023 4,565 4,129
Pemex Finance Ltd. 6.125% 2/15/2002 14,700 14,303
Pemex Finance Ltd. 9.03% 9/29/2008 4,900 4,979
Pemex Finance Ltd. 9.14% 5/15/2003 18,400 18,656
Pemex Finance Ltd. 9.69% 3/31/2007 27,500 28,545
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Petro-Canada 7.875% 6/15/2026 $ 10,000 $ 9,769
Petro-Canada 9.25% 10/15/2021 22,700 25,451
Petro Geo-Services 6.25% 11/19/2003 2,500 2,370
Petro Geo-Services 6.625% 3/30/2008 7,675 6,962
Petro Geo-Services 7.125% 3/30/2028 9,370 7,793
Petro Geo-Services 7.50% 3/31/2007 12,510 12,045
Petro Geo-Services 8.15% 7/15/2029 3,500 3,280
Petroliam Nasional Bhd. 8.875% 8/1/2004 17,450 17,888
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 5,250 5,051
Province of British Columbia 7.00% 1/15/2003 2,550 2,525
Province of Manitoba 6.125% 1/19/2004 8,000 7,733
Province of Manitoba 6.875% 9/15/2002 13,369 13,277
Province of Manitoba 7.75% 2/1/2002 6,975 7,026
Province of Manitoba 8.75% 5/15/2001 6,200 6,274
Province of Manitoba 9.25% 4/1/2020 2,645 3,109
Province of Manitoba 9.625% 12/1/2018 3,500 4,236
Province of New Brunswick 6.75% 8/15/2013 210 197
Province of New Brunswick 8.75% 5/1/2022 5,100 5,791
Province of New Brunswick 9.75% 5/15/2020 8,500 10,479
Province of Newfoundland 7.32% 10/13/2023 8,050 7,613
Province of Newfoundland 9.00% 6/1/2019 1,400 1,575
Province of Ontario 7.375% 1/27/2003 915 919
Province of Ontario 7.75% 6/4/2002 1,175 1,188
Province of Quebec 7.125% 2/9/2024 1,000 937
Province of Saskatchewan 6.625% 7/15/2003 19,750 19,413
Province of Saskatchewan 7.125% 3/15/2008 1,200 1,185
Province of Saskatchewan 7.375% 7/15/2013 1,800 1,772
Province of Saskatchewan 8.00% 7/15/2004 15,950 16,417
Republic of Chile 6.875% 4/28/2009 20,700 19,150
Republic of Finland 7.875% 7/28/2004 10,300 10,639
Republic of Portugal 5.75% 10/8/2003 19,350 18,706
Republic of South Africa 9.125% 5/19/2009 4,625 4,528
The State of Qatar 9.50% 5/21/2009 17,850 18,355
The State of Qatar 9.75% 6/15/2030 20,500 20,114
Swiss Bank Corp. 7.00% 10/15/2015 750 694
Swiss Bank Corp. 7.375% 7/15/2015 2,000 1,917
Swiss Bank Corp.-New York 7.375% 6/15/2017 1,600 1,508
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 6,300 6,115
Telecomunicaciones de Puerto Rico 6.65% 5/15/2006 11,600 10,895
Telecomunicaciones de Puerto Rico 6.80% 5/15/2009 4,600 4,222
Telefonica de Argentina 11.875% 11/1/2004 1,135 1,192
TPSA Finance BV 7.75% 12/10/2008 8,350 7,893
United Mexican States 11.375% 9/15/2016 23,100 26,484
Vodafone Airtouch PLC 7.625% 2/15/2005 18,300 18,372
Vodafone Airtouch PLC 7.75% 2/15/2010 4,300 4,269
Vodafone Airtouch PLC 7.875% 2/15/2030 12,750 12,559
--------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $776,075) 759,305
--------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.1%)
--------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled Cash Account 6.71% 7/3/2000 116,516 116,516
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account--Note G 6.71%-6.73% 7/3/2000 162,635 162,635
--------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $279,151) 279,151
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%)
(COST $14,050,641) 13,711,758
--------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
MARKET
VALUE*
TOTAL BOND MARKET INDEX (000)
--------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-0.8%)
--------------------------------------------------------------------------------------------------------
Other Assets--Note B 298,633
Liabilities--Note G (404,660)
---------
(106,027)
--------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $13,605,731
========================================================================================================
</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.
CDO--Collateralized Debt Obligation.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
AMOUNT
(000)
--------------------------------------------------------------------------------------------------------
<S> <C>
AT JUNE 30, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------------------------------
Paid in Capital $14,036,896
Undistributed Net Investment Income --
Accumulated Net Realized Losses (92,282)
Unrealized Depreciation--Note F (338,883)
--------------------------------------------------------------------------------------------------------
NET ASSETS $13,605,731
========================================================================================================
Investor Shares--Net Assets applicable to 1,040,241,628 outstanding
$.001 par value shares of beneficial interest (unlimited authorization) $9,994,711
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $9.61
========================================================================================================
Institutional Shares--Net Assets applicable to 375,832,103 outstanding
$.001 par value shares of beneficial interest (unlimited authorization) $3,611,020
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $9.61
========================================================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S GOVERNMENT AND AGENCY OBLIGATIONS (55.3%)
--------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (43.9%)
U.S. Treasury Bond 9.375% 2/15/2006 $ 350 $ 401
U.S. Treasury Bond 10.75% 5/15/2003 6,200 6,893
U.S. Treasury Bond 10.75% 8/15/2005 29,225 34,853
U.S. Treasury Bond 11.125% 8/15/2003 25,500 28,861
U.S. Treasury Bond 11.625% 11/15/2002 32,725 36,383
U.S. Treasury Bond 11.875% 11/15/2003 44,650 51,957
U.S. Treasury Bond 12.00% 5/15/2005 4,100 5,058
U.S. Treasury Bond 12.375% 5/15/2004 8,850 10,651
U.S. Treasury Note 5.625% 2/28/2001 95 95
U.S. Treasury Note 5.75% 4/30/2003 14,360 14,132
U.S. Treasury Note 5.875% 10/31/2001 6,450 6,400
U.S. Treasury Note 6.25% 10/31/2001 1,000 997
U.S. Treasury Note 6.25% 2/28/2002 925 922
U.S. Treasury Note 6.625% 4/30/2002 77,185 77,444
U.S. Treasury Note 6.625% 5/15/2007 345 352
U.S. Treasury Note 7.25% 5/15/2004 31,245 32,226
U.S. Treasury Note 7.50% 11/15/2001 105,325 106,698
U.S. Treasury Note 7.50% 5/15/2002 34,400 35,041
U.S. Treasury Note 7.875% 8/15/2001 1,410 1,431
U.S. Treasury Note 13.75% 8/15/2004 43,575 55,106
----------
505,901
----------
AGENCY NOTES (11.4%)
Federal Farm Credit Bank 4.80% 11/6/2003 10,000 9,360
Federal Home Loan Bank 4.875% 1/22/2002 1,500 1,455
Federal Home Loan Bank 5.575% 9/2/2003 4,300 4,131
Federal Home Loan Bank 5.60% 9/2/2003 10,000 9,614
Federal Home Loan Bank 5.605% 3/3/2003 1,150 1,111
Federal Home Loan Bank 5.63% 9/2/2003 10,000 9,622
Federal Home Loan Bank 5.66% 1/13/2003 10,000 9,699
Federal Home Loan Bank 5.675% 8/18/2003 3,000 2,892
Federal Home Loan Bank 5.86% 4/28/2003 1,900 1,846
Federal Home Loan Bank 7.31% 6/16/2004 1,250 1,261
Federal Home Loan Mortgage Corp. 4.75% 12/14/2001 265 257
Federal Home Loan Mortgage Corp. 5.00% 1/15/2004 50,500 47,312
Federal Home Loan Mortgage Corp. 5.75% 6/15/2001 860 851
Federal Home Loan Mortgage Corp. 5.89% 7/17/2003 7,000 6,793
Federal Home Loan Mortgage Corp. 6.52% 1/2/2002 75 74
Federal National Mortgage Assn. 5.125% 2/13/2004 489 459
Federal National Mortgage Assn. 5.625% 5/14/2004 580 553
Federal National Mortgage Assn. 5.75% 4/15/2003 3,060 2,964
Federal National Mortgage Assn. 5.90% 7/9/2003 13,800 13,396
Federal National Mortgage Assn. 5.91% 8/25/2003 2,600 2,525
Federal National Mortgage Assn. 5.96% 4/23/2003 1,200 1,169
Federal National Mortgage Assn. 5.97% 7/3/2003 4,000 3,890
----------
131,234
----------
--------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $644,337) 637,135
--------------------------------------------------------------------------------------------------------
CORPORATE BONDS (36.2%)
--------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (3.7%)
ARG Funding Corp. 5.88% 3/5/2002 (1) 2,700 2,652
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 2,400 2,358
American Express Credit Card Master Trust 6.40% 9/15/2002 (1) 1,030 1,017
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 4,205 4,207
CIT RV Trust 5.78% 7/15/2008 (1) 1,350 1,341
CIT RV Trust 5.96% 4/15/2011 (1) 1,200 1,183
Citibank Credit Card Master Trust 5.30% 1/7/2004 (1) 400 376
Citibank Credit Card Master Trust 5.50% 2/15/2004 (1) 1,000 943
Discover Card Master Trust 5.30% 2/15/2002 (1) 260 253
Discover Card Master Trust 5.65% 11/15/2004 (1) 3,200 3,117
</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>
Discover Card Master Trust 5.90% 4/15/2002 (1) $ 600 $ 590
First Bank Corp. Card Master Trust 6.40% 2/15/2002 (1) 1,000 989
First USA Credit Card Master Trust 5.28% 1/20/2004 (1) 245 231
Ford Credit Auto Owner Trust 5.90% 6/15/2002 (1) 6,000 5,956
MBNA Master Credit Card Trust 5.80% 7/15/2003 (1) 300 290
MMCA Automobile Trust 6.80% 8/15/2003 (1) 2,700 2,686
PECO Energy Transition Trust 5.63% 6/29/2002 (1) 4,400 4,278
PECO Energy Transition Trust 5.80% 3/18/1999 (1) 220 206
Providian Master Trust 6.60% 9/15/2002 (1) 7,000 6,926
Sears Credit Account Master Trust 6.35% 2/15/2007 (1) 2,500 2,467
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 94 94
---------
42,160
---------
FINANCE (15.6%)
American General Finance Corp. 7.45% 7/1/2002 425 424
Aristar Inc. 6.30% 10/1/2002 1,000 963
Associates Corp. 6.50% 7/15/2002 2,000 1,963
Associates Corp. 6.50% 8/15/2002 1,150 1,127
Associates Corp. 6.50% 10/15/2002 1,250 1,224
Associates Corp. 7.50% 4/15/2002 1,400 1,399
Associates Corp. 7.75% 2/15/2005 4,300 4,280
Banc One Corp. 6.25% 10/1/2001 2,000 1,974
BankAmerica Corp. 6.625% 6/15/2004 800 775
BankAmerica Corp. 7.625% 6/15/2004 870 872
BankAmerica Corp. 7.75% 7/15/2002 250 252
BankAmerica Corp. 7.875% 12/1/2002 1,500 1,516
BankAmerica Corp. 8.125% 2/1/2002 3,900 3,940
BankAmerica Corp. 8.375% 3/15/2002 2,500 2,537
BankAmerica Corp. 10.00% 2/1/2003 700 738
Bear, Stearns & Co., Inc. 6.20% 3/30/2003 3,455 3,317
Bradley Operating LP 7.00% 11/15/2004 2,000 1,713
CIT Group Holdings, Inc. 7.125% 10/15/2004 5,000 4,865
CIT Group Holdings, Inc. 7.375% 3/15/2003 4,000 3,947
CIT Group Holdings, Inc. 6.50% 6/14/2002 165 161
Cabot Industrial Properties LP 7.125% 5/1/2004 430 411
Case Credit Corp. 6.15% 3/1/2002 4,500 4,344
Centerpoint Properties 7.90% 1/15/2003 2,500 2,483
The Chase Manhattan Corp. 7.625% 1/15/2003 2,000 2,007
The Chase Manhattan Corp. 8.50% 2/15/2002 3,000 3,048
The Chase Manhattan Corp. 8.625% 5/1/2002 1,000 1,019
Chemical Banking Corp. 7.25% 9/15/2002 1,500 1,496
Citicorp 7.125% 3/15/2004 3,000 2,962
Citigroup Inc. 5.80% 3/15/2004 340 323
Comdisco Inc. 7.25% 9/20/2001 2,250 2,211
Commercial Credit Corp. 7.875% 7/15/2004 2,000 2,017
Countrywide Funding Corp. 8.25% 7/15/2002 1,250 1,255
Countrywide Home Loan 7.45% 9/16/2003 4,500 4,429
Dean Witter, Discover & Co. 6.875% 3/1/2003 400 395
Donaldson, Lufkin & Jenrette, Inc. 6.00% 12/1/2001 5,000 4,878
Donaldson, Lufkin & Jenrette, Inc. 6.875% 11/1/2005 2,000 1,903
Donaldson, Lufkin & Jenrette, Inc. 8.00% 3/1/2005 2,500 2,506
Equity Residential Properties 6.55% 11/15/2001 1,350 1,323
Finova Capital Corp. 5.875% 10/15/2001 1,750 1,575
Finova Capital Corp. 7.25% 11/8/2004 5,000 4,375
First Chicago Corp. 7.625% 1/15/2003 600 598
First Chicago Corp. 8.25% 6/15/2002 1,345 1,361
First Chicago Corp. 9.875% 8/15/2000 150 150
First Chicago Corp. 10.25% 5/1/2001 250 256
First Union Corp. 8.00% 11/15/2002 2,000 2,013
First Union Corp. 8.125% 6/24/2002 1,600 1,612
Fleet/Norstar Group 8.125% 7/1/2004 900 911
Ford Motor Credit Co. 5.125% 10/15/2001 3,400 3,314
Ford Motor Credit Co. 6.625% 6/30/2003 1,500 1,462
Ford Motor Credit Co. 7.00% 9/25/2001 600 598
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ford Motor Credit Co. 7.50% 1/15/2003 $ 1,525 $ 1,521
Ford Motor Credit Co. 8.20% 2/15/2002 1,900 1,919
General Electric Capital Corp. 6.35% 9/15/2001 300 298
General Motors Acceptance Corp. 5.50% 12/15/2001 750 734
General Motors Acceptance Corp. 5.50% 1/14/2002 6,240 6,067
General Motors Acceptance Corp. 5.875% 1/22/2003 400 385
General Motors Acceptance Corp. 7.125% 5/1/2001 2,400 2,400
HRPT Properties Trust 6.75% 12/18/2002 1,250 1,186
Household Finance Corp. 7.625% 1/15/2003 3,000 2,986
Lehman Brothers Holdings Inc. 6.00% 2/26/2001 130 129
Lehman Brothers Holdings Inc. 7.25% 4/15/2003 4,000 3,926
Lehman Brothers Holdings Inc. 7.75% 1/15/2005 5,700 5,626
Mack-Cali Realty 7.00% 3/15/2004 2,000 1,906
Mellon Bank NA 6.75% 6/1/2003 225 221
Merrill Lynch & Co., Inc. 5.71% 1/15/2002 1,400 1,366
Merrill Lynch & Co., Inc. 5.87% 11/15/2001 1,600 1,571
Merrill Lynch & Co., Inc. 5.88% 1/15/2004 2,500 2,382
Merrill Lynch & Co., Inc. 6.07% 10/15/2001 2,300 2,266
Merrill Lynch & Co., Inc. 6.55% 8/1/2004 100 97
Merrill Lynch & Co., Inc. 8.00% 2/1/2002 400 404
Morgan Stanley, Dean Witter & Co. 5.625% 1/20/2004 1,265 1,186
Morgan Stanley, Dean Witter & Co. 7.125% 1/15/2003 7,800 7,744
NationsBank Corp. 7.00% 9/15/2001 1,500 1,494
NationsBank Corp. 8.125% 6/15/2002 1,000 1,013
Norwest Financial, Inc. 7.00% 1/15/2003 110 108
Norwest Financial, Inc. 7.875% 2/15/2002 2,000 2,013
PaineWebber Group, Inc. 6.375% 5/15/2004 2,500 2,355
PaineWebber Group, Inc. 7.875% 2/15/2003 250 248
Popular Inc. 7.375% 9/15/2001 3,425 3,406
Republic New York Corp. 7.75% 5/15/2002 700 701
Salomon Smith Barney Holdings Inc. 6.125% 1/15/2003 125 121
Salomon Smith Barney Holdings Inc. 6.50% 10/15/2002 5,000 4,907
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 4,000 3,748
Summit Properties Inc. 6.80% 8/15/2002 1,500 1,440
Toyota Motor Credit Corp. 5.50% 9/17/2001 2,500 2,454
US WEST Capital Funding, Inc. 6.875% 8/15/2001 5,000 4,966
Wells Fargo & Co. 6.50% 9/3/2002 5,200 5,110
Wells Fargo & Co. 6.875% 5/10/2001 2,750 2,740
Wells Fargo & Co. 8.75% 5/1/2002 1,000 1,023
----------
179,389
----------
INDUSTRIAL (11.7%)
Applied Materials, Inc. 8.00% 9/1/2004 150 152
Archer-Daniels-Midland Co. 6.25% 5/15/2003 250 244
Black & Decker Corp. 7.50% 4/1/2003 3,200 3,182
CSX Corp. 7.05% 5/1/2002 2,000 1,972
CVS Corp. 5.50% 2/15/2004 4,000 3,746
Clear Channel Communications 7.875% 6/15/2005 850 853
Conoco Inc. 5.90% 4/15/2004 3,500 3,329
Continental Airlines, Inc. Pass-Through Trust 6.331% 4/25/2001 1,092 1,063
Continental Airlines, Inc. Pass-Through Trust 6.41% 8/8/2004 1,594 1,484
Cyprus Minerals Co. 10.125% 4/1/2002 1,500 1,553
Daimler-Chrysler North America Holding Corp. 6.90% 9/1/2004 5,000 4,898
Daimler-Chrysler North America Holding Corp. 7.40% 1/20/2005 3,000 2,985
Delta Air Lines, Inc. 7.70% 12/15/2005 5,000 4,817
Dillard's Inc. 5.79% 11/15/2001 2,000 1,908
E.I. du Pont de Nemours & Co. 6.75% 10/15/2004 1,900 1,871
Enterprise Products 8.25% 3/15/2005 7,400 7,405
Federated Department Stores, Inc. 8.50% 6/15/2003 2,000 2,036
First Data Corp. 6.625% 4/1/2003 4,200 4,111
Ford Capital BV 9.50% 7/1/2001 675 687
Ford Capital BV 9.875% 5/15/2002 1,520 1,577
General Motors Acceptance Corp. 6.75% 12/10/2002 5,000 4,930
General Motors Corp. 9.125% 7/15/2001 1,000 1,017
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois Central Railroad Co. 6.75% 5/15/2003 $ 3,000 $ 2,928
Lucent Technologies 6.90% 7/15/2001 1,000 999
Lockheed Martin Corp. 6.50% 4/15/2003 1,000 966
McDonald's Corp. 6.75% 2/15/2003 450 446
MCI Communications Corp. 7.50% 8/20/2004 1,625 1,619
Monsanto Co. 5.625% 12/1/2001 5,500 5,364
News America Holdings Inc. 8.50% 2/15/2005 2,400 2,456
Norfolk Southern Corp. 6.875% 5/1/2001 3,150 3,136
Norfolk Southern Corp. 8.375% 2/15/2005 2,150 2,210
Occidental Petroleum Corp. 8.50% 11/9/2001 1,500 1,514
Phillips Petroleum Co. 8.50% 5/25/2005 7,450 7,700
Phillips Petroleum Co. 9.00% 6/1/2001 1,500 1,521
Praxair, Inc. 6.75% 3/1/2003 1,250 1,224
Raytheon Co. 5.70% 11/1/2003 4,375 4,124
Raytheon Co. 6.45% 8/15/2002 300 293
Raytheon Co. 7.90% 3/1/2003 4,000 4,011
Rohm & Haas Co. 6.95% 7/15/2004 4,000 3,941
Safeway Inc. 5.875% 11/15/2001 750 735
Safeway Inc. 6.85% 9/15/2004 3,500 3,400
Sprint Capital Corp. 6.50% 11/15/2001 6,500 6,423
TCI Communications, Inc. 6.375% 5/1/2003 2,300 2,245
Tele-Communications, Inc. 8.25% 1/15/2003 400 408
Time Warner Entertainment 9.625% 5/1/2002 2,054 2,125
Tyco International Group SA 6.125% 6/15/2001 400 394
Tyco International Group SA 6.875% 9/5/2002 2,900 2,850
Union Carbide Corp. 6.75% 4/1/2003 2,000 1,967
U S West Communications 7.20% 11/1/2004 1,000 983
U S West Communications 7.625% 6/9/2003 1,700 1,697
WorldCom Inc. 6.125% 8/15/2001 4,375 4,320
WorldCom Inc. 6.25% 8/15/2003 3,000 2,895
WorldCom Inc. 7.55% 4/1/2004 650 649
WorldCom Inc. 7.875% 5/15/2003 1,050 1,058
Yosemite Security Trust 8.25% 11/15/2004 3,225 3,203
----------
135,624
----------
UTILITIES (5.2%)
Arizona Public Service Co. 5.875% 2/15/2004 500 473
Baltimore Gas & Electric Co. 7.25% 7/1/2002 200 200
CMS Panhandle Holding Co. 6.125% 3/15/2004 2,800 2,632
Coastal Corp. 8.125% 9/15/2002 1,700 1,714
Commonwealth Edison 7.375% 9/15/2002 1,450 1,439
Commonwealth Edison 7.375% 9/15/2002 1,500 1,504
Consolidated Edison Co. of New York, Inc. 6.625% 2/1/2002 500 495
Edison International 6.875% 9/15/2004 2,900 2,823
El Paso Natural Gas 6.75% 11/15/2003 2,525 2,459
Enron Corp. 7.625% 9/10/2004 1,000 1,004
Enron Corp. 9.125% 4/1/2003 2,000 2,071
Florida Power & Light Co. 6.625% 2/1/2003 210 206
KN Energy, Inc. 6.45% 11/30/2001 1,000 984
KN Energy, Inc. 6.65% 3/1/2005 6,000 5,730
NRG Northeast Generating LLC 8.065% 5/5/2002 2,500 2,485
National Rural Utility Co. 5.00% 10/1/2002 800 761
National Rural Utility Co. 6.75% 9/1/2001 2,500 2,483
New England Telephone & Telegraph Co. 8.625% 8/1/2001 3,000 3,028
PPL Capital Funding 7.75% 4/15/2005 5,800 5,713
Pacific Bell Telephone Co. 7.00% 7/15/2004 3,175 3,126
Pacific Bell Telephone Co. 7.25% 7/1/2002 450 451
Pacific Gas & Electric Co. 6.25% 8/1/2003 1,000 971
Pacific Gas & Electric Co. 7.875% 3/1/2002 3,000 3,029
Reliant Energy Resources 8.125% 7/15/2005 2,750 2,746
Texas Utilities Co. 7.375% 8/1/2001 450 450
Texas Utilities Co. 8.125% 2/1/2002 600 604
Union Electric Power Co. 7.65% 7/15/2003 3,000 3,001
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US West Capital Funding, Inc. 6.125% 7/15/2002 $ 4,000 $ 3,896
Virginia Electric & Power Co. 6.625% 4/1/2003 3,000 2,941
----------
60,402
----------
--------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $425,569) 416,592
--------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(6.6%)
--------------------------------------------------------------------------------------------------------
Bank of Nova Scotia 6.875% 5/1/2003 750 732
China Telecom 7.875% 11/2/2004 4,900 4,899
Grand Metropolitan Investment Corp. 8.625% 8/15/2001 1,000 1,014
Hanson Overseas 7.375% 1/15/2003 1,250 1,237
KFW International Finance, Inc. 9.125% 5/15/2001 400 407
Korea Electric Power 6.375% 12/1/2003 310 293
Korea Electric Power 7.00% 2/1/2007 1,650 1,517
Korean Development Bank 6.625% 11/21/2003 3,775 3,621
Korean Development Bank 7.125% 4/22/2004 5,400 5,218
National Westminster Bancorp Inc. 9.45% 5/1/2001 250 254
Noranda, Inc. 8.125% 6/15/2004 1,000 995
Noranda, Inc. 8.625% 7/15/2002 500 503
Pemex Finance Ltd. 6.125% 2/15/2002 1,073 1,044
Pemex Finance Ltd. 9.14% 5/15/2003 5,000 5,070
Petro Geo-Services 6.25% 11/19/2003 3,000 2,843
Petroliam Nasional Bhd. 8.875% 8/1/2004 2,000 2,050
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 1,000 962
Province of Manitoba 6.875% 9/15/2002 3,500 3,476
Province of Manitoba 7.75% 2/1/2002 1,500 1,511
Province of Manitoba 8.75% 5/15/2001 1,000 1,012
Province of Ontario 7.625% 6/22/2004 5,000 5,066
Province of Ontario 7.75% 6/4/2002 550 556
Province of Ontario 8.00% 10/17/2001 5,360 5,411
Province of Saskatchewan 6.625% 7/15/2003 4,500 4,423
Province of Saskatchewan 8.00% 7/15/2004 3,900 4,014
Republic of Finland 7.875% 7/28/2004 3,500 3,615
Seagram Co.Ltd. 6.50% 4/1/2003 1,400 1,343
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 3,200 3,106
Telefonica de Argentina 11.875% 11/1/2004 4,000 4,200
United Mexican States 9.875% 1/15/2007 500 516
Vodafone Airtouch PLC 7.625% 2/15/2005 5,000 5,020
--------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $76,937) 75,928
--------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (4.9%)
--------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled Cash Account 6.71% 7/3/2000 4,315 4,315
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account--Note G 6.73% 7/3/2000 51,563 51,563
--------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $55,878) 55,878
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.0%)
(COST $1,202,721) 1,185,533
--------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--NET (-3.0%) (34,388)
--------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------------------------------
Applicable to 118,260,610 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $1,151,145
========================================================================================================
NET ASSET VALUE PER SHARE $9.73
========================================================================================================
</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.
33
<PAGE> 36
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
MARKET
VALUE*
SHORT-TERM BOND INDEX FUND (000)
--------------------------------------------------------------------------------------------------------
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------------
ASSETS
Investments in Securities, at Value $1,185,533
Receivables for Investment Securities Sold 40,535
Other Assets--Note B 30,966
----------
Total Assets 1,257,034
----------
LIABILITIES
Payables for Investment Securities Purchased 49,202
Security Lending Collaterial Payable to Brokers--Note G 51,563
Other Liabilities 5,124
----------
Total Liabilities 105,889
----------
--------------------------------------------------------------------------------------------------------
NET ASSETS $1,151,145
========================================================================================================
<CAPTION>
--------------------------------------------------------------------------------------------------------
AT JUNE 30, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,174,879 $9.94
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (6,546) (.06)
Unrealized Depreciation--Note F (17,188) (.15)
---------------------------------------------------------------------------------------------------------
NET ASSETS $1,151,145 $9.73
========================================================================================================
</TABLE>
34
<PAGE> 37
<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 (46.2%)
--------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (35.2%)
U.S. Treasury Bond 5.50% 5/15/2009 $101,365 $ 96,989
U.S. Treasury Bond 9.375% 2/15/2006 1,675 1,917
U.S. Treasury Bond 10.00% 5/15/2010 12,765 14,611
U.S. Treasury Bond 10.375% 11/15/2012 135,425 166,456
U.S. Treasury Bond 12.75% 11/15/2010 44,450 56,878
U.S. Treasury Bond 13.25% 5/15/2014 34,525 50,344
U.S. Treasury Note 6.50% 10/15/2006 6,785 6,870
U.S. Treasury Note 6.625% 5/15/2007 4,300 4,393
U.S. Treasury Note 7.00% 7/15/2006 114,025 118,203
----------
516,661
----------
AGENCY NOTES (11.0%)
Federal Home Loan Bank 5.79% 4/27/2009 10,000 9,089
Federal Home Loan Bank 5.865% 9/2/2008 10,000 9,222
Federal Home Loan Bank 5.88% 11/25/2008 5,000 4,587
Federal Home Loan Bank 5.925% 4/9/2008 4,000 3,718
Federal Home Loan Bank 6.50% 8/15/2007 27,800 26,711
Federal Home Loan Mortgage Corp. 6.13% 2/12/2009 7,000 6,466
Federal Home Loan Mortgage Corp. 6.45% 4/29/2009 25,000 23,178
Federal National Mortgage Assn. 5.64% 12/10/2008 10,380 9,391
Federal National Mortgage Assn. 6.09% 2/20/2009 10,000 9,216
Federal National Mortgage Assn. 6.18% 2/19/2009 3,000 2,783
Federal National Mortgage Assn. 6.19% 7/7/2008 4,325 4,046
Federal National Mortgage Assn. 6.40% 5/14/2009 20,000 18,535
Federal National Mortgage Assn. 6.52% 3/5/2008 19,075 18,134
Tennessee Valley Auth. 5.375% 11/13/2008 18,503 16,432
----------
161,508
----------
--------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $693,097) 678,169
--------------------------------------------------------------------------------------------------------
CORPORATE BONDS (43.6%)
--------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (1.9%)
California Infrastructure & Econ. Dev. Bank
Special Purpose Trust PG&E 6.38% 4/4/2005 (1) 5,500 5,304
California Infrastructure & Econ. Dev. Bank
Special Purpose Trust PG&E 6.42% 3/25/2005 (1) 2,400 2,326
Citibank Credit Card Master Trust 5.875% 3/10/2011 (1) 7,500 6,685
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1) 750 736
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 2,100 2,090
Mach One CDO 6.70% 3/15/2030 (1) 2,500 2,320
PECO Energy Transition Trust 6.05% 7/4/2006 (1) 9,000 8,341
----------
27,802
----------
FINANCE (16.4%)
ABN-AMRO Bank 7.125% 6/18/2007 5,000 4,892
Allstate Corp. 7.20% 12/1/2009 8,000 7,598
Bank of New York 7.30% 12/1/2009 8,000 7,712
BankAmerica Corp. 6.20% 2/15/2006 1,600 1,492
BankAmerica Corp. 7.125% 5/1/2006 1,750 1,702
BankAmerica Corp. 9.375% 9/15/2009 8,447 9,210
BankBoston NA 6.375% 3/25/2008 7,050 6,400
Bear Stearns & Co., Inc. 6.75% 12/15/2007 3,000 2,780
Bear Stearns & Co., Inc. 7.625% 12/7/2009 6,000 5,747
Chemical Bank Corp. 6.125% 11/1/2008 500 447
Citicorp 7.625% 5/1/2005 7,500 7,561
CNA Financial Corp. 6.50% 4/15/2005 2,000 1,801
Conseco Inc. 9.00% 10/15/2006 6,750 4,541
CoreStates Capital Corp. 6.625% 3/15/2005 2,400 2,276
Countrywide Home Loan 6.935% 7/16/2007 1,490 1,390
Equitable Cos. Inc. 6.50% 4/1/2008 2,000 1,833
ERAC USA Finance Co. 7.95% 12/15/2009 4,000 3,877
First Chicago Corp. 6.375% 1/30/2009 5,000 4,484
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM BOND INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fleet Financial Group, Inc. 7.125% 4/15/2006 $ 1,300 $ 1,252
Ford Motor Credit Co. 5.80% 1/12/2009 10,000 8,729
Ford Motor Credit Co. 7.375% 10/28/2009 6,000 5,803
Ford Motor Credit Co. 7.75% 3/15/2005 115 115
General Electric Capital Corp. 7.375% 1/19/2010 2,000 2,016
General Electric Capital Corp. 8.85% 3/1/2007 5,000 5,436
General Motors Acceptance Corp. 6.125% 1/22/2008 5,000 4,535
General Motors Acceptance Corp. 7.75% 1/19/2010 11,200 11,120
John Hancock Global Funding II 7.90% 7/2/2010 5,000 5,028
Household Finance Corp. 6.40% 6/17/2008 3,785 3,420
Household Finance Corp. 7.65% 5/15/2007 1,000 989
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 4,550 4,084
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 5,260 4,883
Lehman Brothers Holdings Inc. 7.375% 1/15/2007 5,000 4,740
Liberty Financial Co. 6.75% 11/15/2008 3,000 2,653
Mack-Cali Realty 7.25% 3/15/2009 2,000 1,814
Mellon Bank NA 6.50% 8/1/2005 3,000 2,854
Merrill Lynch & Co. 6.00% 2/17/2009 10,000 8,841
MONY Group Inc. 8.35% 3/15/2010 6,000 5,926
Morgan Stanley, Dean Witter Discover & Co. 6.875% 3/1/2007 3,000 2,861
NAC Re Corp. 7.15% 11/15/2005 2,500 2,411
National Rural Utilities 6.42% 5/1/2008 3,000 2,778
NationsBank Corp. 6.50% 3/15/2006 5,900 5,574
PaineWebber Group, Inc. 7.625% 12/1/2009 5,600 5,277
Private Export Funding Corp. 7.20% 11/15/2010 9,900 9,926
Prudential Insurance Co. of America 6.375% 7/23/2006 2,000 1,848
Realty Income Corp. 7.75% 5/6/2007 2,000 1,865
Reckson Operating Partnership LP 7.75% 3/15/2009 1,800 1,679
Republic New York Corp. 7.75% 5/15/2009 2,400 2,337
Salomon Smith Barney Holdings Inc. 6.875% 6/15/2005 3,300 3,195
SunTrust Bank Atlanta 7.25% 9/15/2006 1,000 969
SunTrust Banks, Inc. 6.25% 6/1/2008 2,000 1,813
SunTrust Banks, Inc. 7.375% 7/1/2006 2,400 2,355
Susa Partnership LP 7.00% 12/1/2007 3,000 2,709
Swiss Bank Corp. 7.25% 9/1/2006 4,000 3,920
The Chase Manhattan Corp. 6.00% 11/1/2005 3,800 3,537
The Chase Manhattan Corp. 6.375% 4/1/2008 8,500 7,788
The Chase Manhattan Corp. 6.50% 8/1/2005 1,200 1,145
The Chase Manhattan Corp. 7.125% 2/1/2007 1,650 1,591
US Bank Minnesota 5.70% 12/15/2008 2,000 1,718
US Bank Minnesota 6.50% 2/1/2008 5,000 4,573
Wachovia Corp. 5.625% 12/15/2008 1,350 1,161
Wachovia Corp. 6.25% 8/4/2008 5,400 4,867
Wachovia Corp. 6.625% 11/15/2006 250 237
Wells Fargo & Co. 6.875% 4/1/2006 3,000 2,888
----------
241,003
----------
INDUSTRIAL (19.5%)
Allied Signal Inc. 6.20% 2/1/2008 3,700 3,455
American Airlines Inc. 7.024% 10/15/2009 7,800 7,294
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 3,400 3,335
Ashland Inc. 6.86% 5/1/2009 7,500 6,852
Baker Hughes Inc. 6.25% 1/15/2009 7,500 6,844
C.R. Bard, Inc. 6.70% 12/1/2026 2,300 2,176
Borg-Warner Automotive 6.50% 2/15/2009 6,000 5,202
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 3,000 2,838
Burlington Northern Sante Fe Corp. 9.25% 10/1/2006 2,000 2,153
CSX Corp. 9.00% 8/15/2006 2,600 2,689
Caterpillar, Inc. 9.375% 8/15/2011 1,550 1,715
Caterpillar, Inc. 9.00% 4/15/2006 600 637
Comcast Cablevision 8.375% 5/1/2007 4,500 4,640
Conoco Inc. 6.35% 4/15/2009 10,000 9,301
Continental Airlines, Inc. (Equipment
Trust Certificates) 6.648% 3/15/2019 2,318 2,102
Daimler-Chrysler North America Holding Corp. 7.20% 9/1/2009 10,000 9,632
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delta Air Lines, Inc. 7.90% 12/15/2009 $ 8,600 $ 8,044
Delta Air Lines, Inc. (Equipment Trust
Certificates) 8.54% 1/2/2007 421 423
Dillard's Inc. 6.625% 11/15/2008 3,000 2,431
Dillard's Inc. 7.375% 6/1/2006 2,100 1,844
E.I. du Pont de Nemours & Co. 6.875% 10/15/2009 8,000 7,764
First Data Corp. 6.375% 12/15/2007 3,500 3,258
Fort James Corp. 6.875% 9/15/2007 5,000 4,707
Harrahs Operating Co., Inc. 7.50% 1/15/2009 5,000 4,614
Imperial Tobacco 7.125% 4/1/2009 3,775 3,363
International Business Machines Corp. 6.45% 8/1/2007 4,000 3,834
International Paper Co. 7.875% 8/1/2006 35 35
Kroger Co. 7.625% 9/15/2006 8,000 7,796
Kroger Co. 7.65% 4/15/2007 530 517
Kroger Co. 8.05% 2/1/2010 700 695
Kroger Co. 8.15% 7/15/2006 3,800 3,798
Lafarge Corp. 6.375% 7/15/2005 4,500 4,169
Lockheed Martin Corp. 7.70% 6/15/2008 3,800 3,723
MCI Communications Corp. 6.50% 4/15/2010 2,150 1,950
Monsanto Co. 6.00% 12/1/2005 6,000 5,564
Noble Drilling Corp. 6.95% 3/15/2009 4,000 3,793
Norfolk Southern Corp. 7.40% 9/15/2006 4,545 4,434
Northrop Grumman Corp. 7.00% 3/1/2006 3,500 3,333
Philip Morris Cos., Inc. 7.00% 7/15/2005 2,200 2,082
Philips Petroleum Co. 8.75% 5/25/2010 11,000 11,595
Praxair, Inc. 6.90% 11/1/2006 3,900 3,726
Raytheon Co. 6.75% 8/15/2007 8,100 7,555
Raytheon Co. 8.30% 3/1/2010 6,000 6,096
Republic Service Inc. 7.125% 5/15/2009 2,350 2,107
Rohm & Haas Co. 7.40% 7/15/2009 7,000 6,960
Safeway Inc. 7.00% 9/15/2007 2,700 2,579
Sears, Roebuck & Co. Acceptance Corp. 6.125% 1/15/2006 150 138
Sears, Roebuck & Co. Acceptance Corp. 6.75% 9/15/2005 3,000 2,857
TCI Communications, Inc. 7.25% 8/1/2005 5,685 5,589
Texaco Capital Inc. 5.70% 12/1/2008 5,000 4,525
Texas Instruments Inc. 6.125% 2/1/2006 3,100 2,902
Time Warner Inc. 7.48% 1/15/2008 2,050 2,012
Time Warner Inc. 7.75% 6/15/2005 6,500 6,550
Time Warner Inc. 8.18% 8/15/2007 2,250 2,302
Tosco Corp. 7.25% 1/1/2007 3,000 2,910
Union Carbide Corp. 6.70% 4/1/2009 7,000 6,603
Union Oil Co. of California 9.125% 2/15/2006 9,000 9,489
Union Pacific Corp. 6.40% 2/1/2006 10,965 10,247
Union Pacific Corp. 7.60% 5/1/2005 3,200 3,193
US Airways Pass-Through Trust 8.11% 2/20/2017 7,000 6,613
Worldcom Inc. 8.00% 5/15/2006 27,000 27,379
----------
286,963
----------
UTILITIES (5.8%)
Ameritech Capital Funding 6.15% 1/15/2008 6,000 5,464
CMS Panhandle Holding Co. 6.50% 7/15/2009 7,000 6,281
Coastal Corp. 6.375% 2/1/2009 5,000 4,532
Coastal Corp. 6.50% 5/15/2006 5,280 4,970
Coastal Corp. 6.50% 6/1/2008 500 461
Dominion Resources Inc. 8.125% 6/15/2010 1,500 1,513
El Paso Energy Corp. 6.75% 5/15/2009 9,000 8,377
Enron Corp. 6.75% 8/1/2009 4,500 4,203
Enron Corp. 6.875% 10/15/2007 1,500 1,434
Enron Corp. 7.125% 5/15/2007 2,546 2,472
FPL Group Capital 7.625% 9/15/2006 10,000 10,020
GTE Northwest Inc. 5.55% 10/15/2008 3,000 2,589
GTE South Inc. 6.125% 6/15/2007 2,000 1,830
HNG Internorth 9.625% 3/15/2006 2,000 2,170
National Rural Utility Co. 6.20% 2/1/2008 4,850 4,439
New York Telephone Co. 6.125% 1/15/2010 5,500 4,879
</TABLE>
37
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM BOND INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PP&L Resources Inc. 6.55% 3/1/2006 $ 1,325 $ 1,241
Southern California Edison Co. 6.375% 1/15/2006 3,000 2,814
Southern California Edison Co. 7.625% 1/15/2010 4,000 4,018
Southwestern Bell Telephone Co. 6.625% 7/15/2007 6,000 5,693
Texaco Capital Inc. 5.50% 1/15/2009 3,000 2,666
Texas Utility Co. 7.17% 8/1/2007 3,500 3,330
Union Electric Power Co. 6.75% 5/1/2008 120 113
----------
85,509
----------
--------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $675,879) 641,277
--------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(8.6%)
--------------------------------------------------------------------------------------------------------
Ahold Finance USA Inc. 6.25% 5/1/2009 8,000 7,113
Bank of Tokyo-Mitsubishi Ltd. 8.40% 4/15/2010 3,100 3,134
DBS Group Holdings LTD 7.875% 4/15/2010 1,000 990
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 4,000 3,961
Embotelladora Andina SA 7.875% 10/1/2097 1,000 750
Falconbridge Ltd. 7.35% 11/1/2006 1,500 1,400
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 3,000 3,300
Israel Electric Corp. 7.75% 3/1/2009 2,250 2,171
Korea Development Bank 6.75% 12/1/2005 2,000 1,871
Korea Electric Power 7.00% 2/1/2007 8,920 8,203
Korea Electric Power 7.75% 4/1/2013 1,500 1,362
Kowloon-Canton Railway 8.00% 3/15/2010 4,400 4,437
Malaysia 8.75% 6/1/2009 2,550 2,633
National Australia Bank 6.60% 12/10/2007 9,100 8,479
Noranda, Inc. 7.00% 7/15/2005 3,000 2,830
Pemex Finance Ltd. 9.69% 3/31/2007 4,200 4,360
Petro Geo-Services 6.625% 3/30/2008 5,325 4,830
Petro Geo-Services 7.50% 3/31/2007 4,830 4,650
Pohang Iron & Steel Co. 7.375% 5/15/2005 5,000 4,822
Province of British Columbia 5.375% 10/29/2008 7,000 6,172
Province of Quebec 5.75% 2/15/2009 10,000 8,935
Province of Saskatchewan 7.125% 3/15/2008 600 593
Republic of Chile 6.875% 4/28/2009 6,000 5,551
Republic of South Africa 9.125% 5/19/2009 2,600 2,545
The State of Qatar 9.50% 5/21/2009 2,100 2,159
Swiss Bank Corp. 6.75% 7/15/2005 2,000 1,940
Telecomunicaciones de Puerto Rico 6.65% 5/15/2006 2,400 2,254
Toronto-Dominion Bank 6.50% 8/15/2008 3,000 2,756
TPSA Finance BV 7.75% 12/10/2008 6,045 5,714
United Mexican States 9.875% 2/1/2010 10,000 10,435
Vodafone Airtouch PLC 7.75% 2/15/2010 5,700 5,659
--------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $131,688) 126,009
--------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (14.5%)
--------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 6.71% 7/3/2000 7,906 7,906
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 6.71%-6.73% 7/3/2000 205,087 205,087
--------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $212,993) 212,993
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (112.9%)
(COST $1,713,657) 1,658,448
--------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
MARKET
VALUE*
INTERMEDIATE-TERM BOND INDEX FUND (000)
--------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-12.9%)
--------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 50,130
Security Lending Collateral Payable to Brokers--Note G (205,087)
Other Liabilities (34,551)
-----------
(189,508)
--------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------------------------------
Applicable to 154,299,863 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $1,468,940
========================================================================================================
NET ASSET VALUE PER SHARE $9.52
========================================================================================================
</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.
CDO--Collateralized Debt Obligation.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
AT JUNE 30, 2000, NET ASSETS CONSISTED OF:
---------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,554,769 $10.08
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (30,620) (.20)
Unrealized Depreciation--Note F (55,209) (.36)
---------------------------------------------------------------------------------------------------------
NET ASSETS $1,468,940 $ 9.52
=========================================================================================================
</TABLE>
39
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<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 (63.1%)
--------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (58.5%)
U.S. Treasury Bond 6.625% 2/15/2027 $ 5,980 $ 6,339
U.S. Treasury Bond 6.75% 8/15/2026 20,045 21,537
U.S. Treasury Bond 7.50% 11/15/2024 3,835 4,459
U.S. Treasury Bond 7.625% 11/15/2022 46,045 53,770
U.S. Treasury Bond 8.00% 11/15/2021 13,710 16,541
U.S. Treasury Bond 8.125% 8/15/2019-8/15/2021 30,030 36,474
U.S. Treasury Bond 8.50% 2/15/2020 900 1,126
U.S. Treasury Bond 8.75% 5/15/2017-8/15/2020 6,100 7,810
U.S. Treasury Bond 8.875% 8/15/2017-2/15/2019 12,940 16,492
U.S. Treasury Bond 9.25% 2/15/2016 810 1,049
U.S. Treasury Bond 10.375% 11/15/2009-11/15/2012 12,550 15,337
U.S. Treasury Bond 10.625% 8/15/2015 6,180 8,784
U.S. Treasury Bond 11.25% 2/15/2015 6,540 9,626
U.S. Treasury Bond 12.75% 11/15/2010 1,900 2,431
U.S. Treasury Bond 13.25% 5/15/2014 2,585 3,769
----------
205,544
----------
AGENCY NOTES (4.6%)
Federal National Mortgage Assn. 6.25% 5/15/2029 500 447
Federal National Mortgage Assn. 7.125% 1/15/2030 9,667 9,708
Tennessee Valley Auth. 6.25% 12/15/2017 1,100 993
Tennessee Valley Auth. 6.75% 11/1/2025 2,500 2,393
Tennessee Valley Auth. 6.875% 12/15/2043 3,000 2,736
----------
16,277
----------
--------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $219,581) 221,821
--------------------------------------------------------------------------------------------------------
CORPORATE BONDS (27.8%)
--------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (0.2%)
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1) 150 147
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 450 448
----------
595
----------
FINANCE (5.4%)
ABN-AMRO Bank 7.125% 10/15/2093 1,000 848
American General Capital II 8.50% 7/1/2030 1,000 1,001
Bank of America Institute 8.07% 12/31/2026 1,500 1,342
Bank of New York Capital I 7.97% 12/31/2026 375 339
BT Capital Trust B 7.90% 1/15/2027 200 172
Chase Capital I 7.67% 12/1/2026 1,900 1,659
CIGNA Corp. 7.875% 5/15/2027 175 157
CIGNA Corp. 8.30% 1/15/2033 500 472
Citicorp Capital II 8.015% 2/15/2027 450 408
Dean Witter, Discover & Co. 6.75% 10/15/2013 200 179
Equitable Companies Inc. 7.00% 4/1/2028 200 175
Fleet Capital Trust II 7.92% 12/11/2026 400 352
Ford Motor Credit Co. 6.375% 2/1/2029 1,500 1,228
General Electric Capital Corp. 6.90% 9/15/2015 1,000 946
Household Finance Corp. 6.45% 2/1/2009 70 63
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 950 853
Liberty Financial Co. 6.75% 11/15/2008 1,000 884
Mellon Capital II 7.995% 1/15/2027 2,100 1,892
Merrill Lynch & Co. 6.875% 11/15/2018 1,250 1,100
NationsBank Corp. 7.25% 10/15/2025 375 338
NB Capital Trust IV 8.25% 4/15/2027 400 365
Norwest Corp. 6.65% 10/15/2023 60 50
Progressive Corp. 6.625% 3/1/2029 1,000 787
Security Capital Pacific Trust 8.05% 4/1/2017 200 179
Spieker Properties Inc. 7.50% 10/1/2027 300 254
Summit Properties Inc. 7.20% 8/15/2007 550 496
Suntrust Capital 7.90% 6/15/2027 750 672
Susa Partnership 7.50% 12/1/2027 400 327
</TABLE>
40
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Travelers/Aetna Property Casualty Corp. 7.75% 4/15/2026 $ 275 $ 260
U.S. Bancorp 8.27% 12/15/2026 750 686
Wells Fargo Capital I 7.96% 12/15/2026 400 361
----------
18,845
----------
INDUSTRIAL (17.7%)
Anadarko Petroleum Corp. 7.20% 3/15/2029 2,000 1,831
Anheuser-Busch Cos., Inc. 6.75% 12/15/2027 250 220
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 600 553
Apache Corp. 7.625% 7/1/2019 1,500 1,433
Archer-Daniels-Midland Co. 8.875% 4/15/2011 80 86
Auburn Hills 12.00% 5/1/2020 260 365
Baker Hughes Inc. 6.875% 1/15/2029 1,500 1,318
C.R. Bard, Inc. 6.70% 12/1/2026 500 473
Bayer Corp. 6.65% 2/15/2028 500 435
The Boeing Co. 6.625% 2/15/2038 700 590
Borg-Warner Automotive 7.125% 2/15/2029 2,000 1,593
Burlington Northern Santa Fe Corp. 6.75% 3/15/2029 1,000 849
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 300 270
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 800 706
Burlington Northern Sante Fe Corp. 7.25% 8/1/2097 250 214
CSX Corp. 8.10% 9/15/2022 600 576
CSX Corp. 8.625% 5/15/2022 1,025 1,038
Caterpillar Inc. 7.375% 3/1/2097 50 44
Caterpillar Inc. 9.375% 8/15/2011 450 498
Chrysler Corp. 7.45% 2/1/2097 225 206
Comcast Cablevision 8.875% 5/1/2017 500 535
Conoco Inc. 6.95% 4/15/2029 2,000 1,821
Continental Airlines, Inc. (Equipment Trust
Certificates) 6.648% 3/15/2019 452 410
Dayton Hudson Corp. 6.65% 8/1/2028 500 424
Dayton Hudson Corp. 6.75% 1/1/2028 750 644
Deere & Co. 8.50% 1/9/2022 115 119
Delta Air Lines Inc. 8.30% 12/15/2029 1,700 1,492
Dillard's Inc. 7.75% 5/15/2027 750 569
The Walt Disney Co. 7.55% 7/15/2093 975 911
Dow Chemical Co. 7.375% 11/1/2029 1,000 971
Eastman Chemical Co. 7.25% 1/15/2024 250 220
Eastman Chemical Co. 7.60% 2/1/2027 150 135
Federated Department Stores, Inc. 7.00% 2/15/2028 400 337
Federated Department Stores, Inc. 7.45% 7/15/2017 900 824
Ford Capital BV 9.50% 6/1/2010 180 200
Ford Motor Co. 8.90% 1/15/2032 1,000 1,086
Ford Motor Co. 9.98% 2/15/2047 100 121
Georgia-Pacific Corp. 7.75% 11/15/2029 1,500 1,363
International Business Machines Corp. 7.00% 10/30/2025 350 330
International Business Machines Corp. 7.125% 12/1/2096 500 457
Kroger Co. 8.00% 9/15/2029 1,750 1,665
Lucent Technologies, Inc. 6.50% 1/15/2028 500 444
May Department Stores Co. 6.70% 9/15/2028 1,375 1,157
May Department Stores Co. 9.75% 2/15/2021 40 45
MCI Communications Corp. 6.50% 4/15/2010 625 567
MCI Communications Corp. 7.75% 3/23/2025 250 233
Mobil Corp. 7.625% 2/23/2033 230 219
Monsanto Co. 6.85% 12/1/2028 1,000 866
News America Holdings Inc. 7.75% 1/20/2024 1,000 909
News America Holdings Inc. 8.00% 10/17/2016 750 710
News America Holdings Inc. 9.25% 2/1/2013 1,500 1,600
Noble Drilling Corp. 7.50% 3/15/2019 2,000 1,896
Norfolk Southern Corp. 7.70% 5/15/2017 400 384
Norfolk Southern Corp. 7.80% 5/15/2027 325 311
Norfolk Southern Corp. 7.90% 5/15/2097 100 92
Northrop Grumman Corp. 9.375% 10/15/2024 400 404
Phillips Petroleum Co. 8.49% 1/1/2023 900 878
Phillips Petroleum Co. 8.75% 5/25/2010 2,500 2,635
</TABLE>
41
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM BOND INDEX FUND COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Raytheon Co. 6.75% 3/15/2018 $ 800 $ 687
Raytheon Co. 7.00% 11/1/2028 400 342
Rohm & Haas Co. 7.85% 7/15/2029 1,750 1,770
Rohm & Haas Co. 9.80% 4/15/2020 550 623
Sears, Roebuck & Co. 9.375% 11/1/2011 395 426
Sprint Capital Corp. 6.875% 11/15/2028 1,250 1,086
TCI Communications, Inc. 7.875% 8/1/2013 1,000 996
Tele-Communications, Inc. 9.875% 6/15/2022 500 593
Texaco Capital Corp. 8.875% 9/1/2021 155 177
Time Warner Entertainment 8.375% 3/15/2023 1,650 1,685
Time Warner Inc. 7.57% 2/1/2024 500 467
Tosco Corp. 7.80% 1/1/2027 350 338
Tosco Corp. 8.125% 2/15/2030 1,500 1,513
Tyco International Group SA 6.875% 1/15/2029 1,500 1,282
Union Carbide Corp. 7.75% 10/1/2096 1,150 1,091
Union Carbide Corp. 7.875% 4/1/2023 220 216
Union Oil Co. of California 7.50% 2/15/2029 1,000 932
Union Pacific Corp. 6.625% 2/1/2029 1,250 1,037
Union Pacific Corp. 7.00% 2/1/2016 550 496
Union Pacific Corp. 8.625% 5/15/2022 35 36
United Technologies Corp. 6.70% 8/1/2028 500 449
United Technologies Corp. 8.875% 11/15/2019 545 613
Wal-Mart Stores 7.55% 2/15/2030 2,000 2,046
Westvaco Corp. 8.20% 1/15/2030 2,000 1,942
WorldCom Inc. 6.95% 8/15/2028 500 441
----------
62,566
----------
UTILITIES (4.5%)
AT&T Corp. 8.35% 1/15/2025 300 299
Arizona Public Service Co. 7.25% 8/1/2023 200 179
CMS Panhandle Holding Co. 7.00% 7/15/2029 1,500 1,320
Coastal Corp. 7.42% 2/15/2037 1,000 910
Coastal Corp. 7.75% 10/15/2035 400 379
Coastal Corp. 9.625% 5/15/2012 300 336
Commonwealth Edison 7.50% 7/1/2013 750 721
Dominion Resources Inc. 8.125% 6/15/2010 500 504
Enron Corp. 6.95% 7/15/2028 1,000 878
GTE Corp. 8.75% 11/1/2021 900 969
Illinois Power Co. 7.50% 7/15/2025 300 266
Michigan Bell Telephone Co. 7.50% 2/15/2023 1,040 941
NRG Northeast Generating 9.292% 12/15/2024 2,000 1,962
New England Telephone & Telegraph Co. 6.875% 10/1/2023 110 92
New England Telephone & Telegraph Co. 7.875% 11/15/2029 600 590
New England Telephone & Telegraph Co. 9.00% 8/1/2031 250 269
New York Telephone Co. 6.125% 1/15/2010 1,000 887
Pacific Gas & Electric Co. 8.25% 11/1/2022 1,000 980
Southwestern Bell Telephone Co. 7.25% 7/15/2025 450 405
Southwestern Bell Telephone Co. 7.625% 3/1/2023 45 42
Texas Utilities Co. 7.875% 3/1/2023 1,090 1,006
Texas Utilities Co. 8.75% 11/1/2023 50 49
U S West Communications Inc. 7.25% 9/15/2025 1,000 909
Virginia Electric & Power Co. 6.75% 10/1/2023 1,000 828
----------
15,721
----------
--------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $107,542) 97,727
--------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(7.2%)
--------------------------------------------------------------------------------------------------------
Abbey National PLC 7.95% 10/26/2029 1,800 1,770
Ahold Finance USA Inc. 6.875% 5/1/2029 1,500 1,253
Canadian National Railway Co. 6.80% 7/15/2018 725 637
Canadian National Railway Co. 6.90% 7/15/2028 400 345
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 800 792
Embotelladora Andina SA 7.875% 10/1/2097 300 225
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 75 83
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inter-American Development Bank 7.125% 3/15/2023 $ 25 $ 24
Inter-American Development Bank 8.50% 3/15/2011 110 121
KFW International Finance, Inc. 7.20% 3/15/2014 600 596
Korea Electric Power 7.00% 2/1/2007 175 161
Korea Electric Power 7.75% 4/1/2013 400 363
Korean Development Bank 7.125% 4/22/2004 800 773
Northern Telecom Ltd. 6.875% 9/1/2023 250 226
Pemex Finance Ltd. 9.03% 9/29/2008 525 534
Pemex Finance Ltd. 9.69% 3/31/2007 800 830
Petro-Canada 9.25% 10/15/2021 2,300 2,579
Petro Geo-Services 7.125% 3/30/2028 625 520
Petro Geo-Services 8.15% 7/15/2029 750 703
Province of Manitoba 9.25% 4/1/2020 485 570
Province of New Brunswick 8.75% 5/1/2022 800 908
Province of New Brunswick 9.75% 5/15/2020 500 616
Province of Newfoundland 9.00% 6/1/2019 300 338
Province of Newfoundland 10.00% 12/1/2020 750 915
Province of Quebec 7.125% 2/9/2024 2,000 1,874
Province of Saskatchewan 7.375% 7/15/2013 600 591
Republic of South Africa 9.125% 5/19/2009 225 220
The State of Qatar 9.75% 6/15/2030 2,200 2,159
Swiss Bank Corp.-New York 7.00% 10/15/2015 750 694
Swiss Bank Corp.-New York 7.375% 7/15/2015 750 719
Swiss Bank Corp.-New York 7.375% 6/15/2017 300 283
United Mexican States 11.375% 9/15/2016 1,700 1,949
Vodafone Airtouch PLC 7.875% 2/15/2030 1,000 985
---------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $26,694) 25,356
---------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (3.2%)
---------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 6.71% 7/3/2000 1,213 1,213
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 6.73% 7/3/2000 10,212 10,212
---------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $11,425) 11,425
---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.3%)
(COST $365,242) 356,329
---------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.3%)
---------------------------------------------------------------------------------------------------------
Other Assets--Note B 8,903
Liabilities--Note G (13,500)
------------
(4,597)
---------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
---------------------------------------------------------------------------------------------------------
Applicable to 34,983,576 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $351,732
=========================================================================================================
NET ASSET VALUE PER SHARE $10.05
=========================================================================================================
</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, 2000, NET ASSETS CONSISTED OF:
---------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $369,560 $10.56
Undistributed Net Investment Income -- ---
Accumulated Net Realized Losses (8,915) (.26)
Unrealized Depreciation--Note F (8,913) (.25)
---------------------------------------------------------------------------------------------------------
NET ASSETS $351,732 $10.05
=========================================================================================================
</TABLE>
43
<PAGE> 46
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 BOND INDEX
FUND FUND INDEX FUND FUND
-------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $450,839 $35,073 $50,815 $11,646
Security Lending 145 44 106 5
-------------------------------------------------------------
Total Income 450,984 35,117 50,921 11,651
-------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 782 69 88 20
Management and Administrative--Investor 8,834 984 1,265 278
Management and Administrative--Institutional* 1,173 -- -- --
Marketing and Distribution--Investor 900 107 131 29
Marketing and Distribution--Institutional* 302 -- -- --
Custodian Fees 158 15 16 13
Auditing Fees 7 4 4 4
Shareholders' Reports--Investor 153 12 20 8
Shareholders' Reports--Institutional* 9 -- -- --
Trustees' Fees and Expenses 8 1 1 --
-------------------------------------------------------------
Total Expenses 12,326 1,192 1,525 352
Expenses Paid Indirectly--Note D (15) -- -- --
-------------------------------------------------------------
Net Expenses 12,311 1,192 1,525 352
------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 438,673 33,925 49,396 11,299
------------------------------------------------------------------------------------------------------------------------
REALIZED NET LOSS ON INVESTMENT
SECURITIES SOLD (28,491) (5,102) (9,964) (2,476)
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENT SECURITIES 92,124 5,369 11,359 11,996
------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $502,306 $34,192 $50,791 $20,819
========================================================================================================================
</TABLE>
*Only the Total Bond Market Index Fund offers Institutional shares.
44
<PAGE> 47
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, 2000 DEC. 31, 1999
(000) (000)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 438,673 $ 728,322
Realized Net Gain (Loss) (28,491) (62,350)
Change in Unrealized Appreciation (Depreciation) 92,124 (739,761)
----------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 502,306 (73,789)
----------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (323,086) (545,745)
Institutional Shares (115,587) (182,577)
Realized Capital Gain
Investor Shares -- (12,419)
Institutional Shares -- (3,923)
----------------------------------
Total Distributions (438,673) (744,664)
----------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 1,429,879 3,990,946
Issued in Lieu of Cash Distributions 291,380 505,211
Redeemed (1,250,386) (2,168,015)
----------------------------------
Net Increase--Investor Shares 470,873 2,328,142
----------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued 618,251 1,292,134
Issued in Lieu of Cash Distributions 99,168 158,648
Redeemed (327,830) (536,860)
----------------------------------
Net Increase--Institutional Shares 389,589 913,922
--------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 924,095 2,423,611
--------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 12,681,636 10,258,025
----------------------------------
End of Period $ 13,605,731 $ 12,681,636
====================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 149,783 403,460
Issued in Lieu of Cash Distributions 30,529 51,368
Redeemed (131,048) (219,979)
----------------------------------
Net Increase in Shares Outstanding 49,264 234,849
====================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued 64,769 130,755
Issued in Lieu of Cash Distributions 10,390 16,133
Redeemed (34,392) (54,627)
----------------------------------
Net Increase in Shares Outstanding 40,767 92,261
====================================================================================================================
</TABLE>
45
<PAGE> 48
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INTERMEDIATE-TERM
BOND INDEX FUND BOND INDEX FUND
----------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 2000 DEC. 31, 1999 JUN. 30, 2000 DEC. 31, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 33,925 $ 51,918 $ 49,396 $ 84,273
Realized Net Gain (Loss) (5,102) (1,356) (9,964) (20,519)
Change in Unrealized Appreciation (Depreciation) 5,369 (29,597) 11,359 (102,634)
--------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 34,192 20,965 50,791 (38,880)
DISTRIBUTIONS
Net Investment Income (33,925) (51,918) (49,396) (84,273)
Realized Capital Gain -- (2,739) -- (4,238)
--------------------------------------------------------------
Total Distributions (33,925) (54,657) (49,396) (88,511)
CAPITAL SHARE TRANSACTIONS(1)
Issued 237,703 739,906 242,313 745,836
Issued in Lieu of Cash Distributions 29,172 47,342 40,464 73,493
Redeemed (271,563) (306,910) (264,181) (345,405)
--------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions (4,688) 480,338 18,596 473,924
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (4,421) 446,646 19,991 346,533
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,155,566 708,920 1,448,949 1,102,416
--------------------------------------------------------------
End of Period $1,151,145 $1,155,566 $1,468,940 $1,448,949
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 24,530 74,780 25,617 74,793
Issued in Lieu of Cash Distributions 3,011 4,800 4,282 7,443
Redeemed (28,011) (31,066) (27,881) (35,096)
----------------------------- ------------------------------
Net Increase (Decrease)
in Shares Outstanding (470) 48,514 2,018 47,140
========================================================================================================================
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
LONG-TERM
BOND INDEX FUND
-------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUN. 30, 2000 DEC. 31, 1999
(000) (000)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 11,299 $ 17,460
Realized Net Loss (2,476) (6,422)
Change in Unrealized Appreciation (Depreciation) 11,996 (32,879)
-------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 20,819 (21,841)
-------------------------------
DISTRIBUTIONS
Net Investment Income (11,299) (17,460)
Realized Capital Gain -- (451)
-------------------------------
Total Distributions (11,299) (17,911)
-------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 88,847 239,036
Issued in Lieu of Cash Distributions 9,481 15,448
Redeemed (69,269) (111,604)
-------------------------------
Net Increase (Decrease) from Capital Share Transactions 29,059 142,880
--------------------------------------------------------------------------------------------------------
Total Increase 38,579 103,128
--------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 313,153 210,025
-------------------------------
End of Period $351,732 $313,153
========================================================================================================
(1)Shares Issued (Redeemed)
Issued 8,963 22,752
Issued in Lieu of Cash Distributions 950 1,498
Redeemed (6,986) (10,740)
-------------------------------
Net Increase (Decrease) in Shares Outstanding 2,927 13,510
========================================================================================================
</TABLE>
47
<PAGE> 50
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, 2000 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.56 $10.27 $10.09 $ 9.84 $10.14 $ 9.17
=====================================================================================================================
INVESTMENT OPERATIONS
Net Investment Income .320 .617 .624 .645 .640 .650
Net Realized and Unrealized Gain (Loss)
on Investments .050 (.695) .218 .250 (.300) .970
-----------------------------------------------------------------
Total from Investment Operations .370 (.078) .842 .895 .340 1.620
-----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.320) (.617) (.624) (.645) (.640) (.650)
Distributions from Realized Capital Gains -- (.015) (.038) -- -- --
-----------------------------------------------------------------
Total Distributions (.320) (.632) (.662) (.645) (.640) (.650)
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.61 $ 9.56 $10.27 $10.09 $ 9.84 $10.14
=====================================================================================================================
TOTAL RETURN* 3.94% -0.76% 8.58% 9.44% 3.58% 18.18%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $9,995 $9,477 $7,765 $5,129 $2,962 $2,405
Ratio of Total Expenses to
Average Net Assets 0.22%** 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 6.72%** 6.26% 6.10% 6.54% 6.54% 6.66%
Portfolio Turnover Rate 41%** 55% 57% 39% 39% 36%
=====================================================================================================================
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Annualized.
48
<PAGE> 51
<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, 2000 1999 1998 1997 1996 DEC. 31, 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.56 $10.27 $10.09 $9.84 $10.14 $9.87
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .325 .627 .635 .655 .650 .174
Net Realized and Unrealized Gain (Loss)
on Investments .050 (.695) .218 .250 (.300) .270
----------------------------------------------------------------------------
Total from Investment Operations .375 (.068) .853 .905 .350 .444
----------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.325) (.627) (.635) (.655) (.650) (.174)
Distributions from Realized Capital Gains -- (.015) (.038) -- -- --
----------------------------------------------------------------------------
Total Distributions (.325) (.642) (.673) (.655) (.650) (.174)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.61 $9.56 $10.27 $10.09 $9.84 $10.14
===================================================================================================================================
TOTAL RETURN 4.00% -0.66% 8.69% 9.55% 3.68% 4.53%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $3,611 $3,204 $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% 0.10%**
Ratio of Net Investment Income to
Average Net Assets 6.84%** 6.36% 6.21% 6.64% 6.66% 6.48%**
Portfolio Turnover Rate 41%** 55% 57% 39% 39% 36%
===================================================================================================================================
</TABLE>
*Inception.
**Annualized.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.73 $10.10 $10.00 $ 9.92 $10.07 $ 9.50
------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .292 .539 .574 .597 .587 .623
Net Realized and Unrealized Gain (Loss)
on Investments -- (.336) .168 .080 (.146) .570
-----------------------------------------------------------------
Total from Investment Operations .292 .203 .742 .677 .441 1.193
-----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.292) (.539) (.574) (.597) (.587) (.623)
Distributions from Realized Capital Gains -- (.034) (.068) -- (.004) --
-----------------------------------------------------------------
Total Distributions (.292) (.573) (.642) (.597) (.591) (.623)
------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.73 $9.73 $10.10 $10.00 $ 9.92 $10.07
========================================================================================================================
TOTAL RETURN* 3.05% 2.08% 7.63% 7.04% 4.55% 12.88%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,151 $1,156 $709 $446 $328 $208
Ratio of Total Expenses to
Average Net Assets 0.21%** 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 6.03%** 5.48% 5.68% 6.03% 5.93% 6.28%
Portfolio Turnover Rate 117%** 108% 112% 88% 65% 65%
========================================================================================================================
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Annualized.
49
<PAGE> 52
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.51 $10.48 $10.20 $ 9.96 $10.37 $ 9.18
-------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .324 .628 .647 .661 .648 .661
Net Realized and Unrealized Gain (Loss)
on Investments .010 (.936) .353 .240 (.406) 1.217
-------------------------------------------------------------------
Total from Investment Operations .334 (.308) 1.000 .901 .242 1.878
-------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.324) (.628) (.647) (.661) (.648) (.661)
Distributions from Realized Capital Gains -- (.034) (.073) -- (.004) (.027)
-------------------------------------------------------------------
Total Distributions (.324) (.662) (.720) (.661) (.652) (.688)
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.52 $ 9.51 $10.48 $10.20 $ 9.96 $10.37
=========================================================================================================================
TOTAL RETURN* 3.58% -3.00% 10.09% 9.41% 2.55% 21.07%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,469 $1,449 $1,102 $687 $460 $346
Ratio of Total Expenses to
Average Net Assets 0.21%** 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 6.87%** 6.33% 6.23% 6.64% 6.54% 6.55%
Portfolio Turnover Rate 66%** 120% 77% 56% 80% 71%
=========================================================================================================================
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Annualized.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
LONG-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED --------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.77 $11.32 $10.78 $10.08 $10.82 $8.96
------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .337 .662 .666 .678 .674 .692
Net Realized and Unrealized Gain (Loss)
on Investments .280 (1.531) .588 .700 (.731) 1.884
--------------------------------------------------------------
Total from Investment Operations .617 (.869) 1.254 1.378 (.057) 2.576
--------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.337) (.662) (.666) (.678) (.674) (.692)
Distributions from Realized Capital Gains -- (.019) (.048) -- (.009) (.024)
--------------------------------------------------------------
Total Distributions (.337) (.681) (.714) (.678) (.683) (.716)
------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.05 $9.77 $11.32 $10.78 $10.08 $10.82
========================================================================================================================
TOTAL RETURN* 6.39% -7.85% 11.98% 14.30% -0.26% 29.72%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $352 $313 $210 $88 $44 $24
Ratio of Total Expenses to
Average Net Assets 0.21%** 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 6.80%** 6.39% 6.01% 6.66% 6.75% 6.90%
Portfolio Turnover Rate 43%** 61% 57% 58% 46% 45%
========================================================================================================================
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied to account balances under $10, 000.
**Annualized.
50
<PAGE> 53
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 fund, 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, 2000, 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 $1,911 0.02% 1.9%
Short-Term Bond 220 0.02 0.2
Intermediate-Term Bond 281 0.02 0.3
Long-Term Bond 66 0.02 0.1
-----------------------------------------------------------------------------------
</TABLE>
The funds' trustees and officers are also directors and officers of Vanguard.
51
<PAGE> 54
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 otherinvestors. Both classes of shares have equal rights as to
assets and earnings, except that each class bears certain class-specific
expenses related to maintenance of shareholder accounts (included in Management
and Administrative expense), marketing and distribution, and shareholder
reporting. For the six months ended June 30, 2000, class-specific expenses
represented an annual rate of 0.16% 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, 2000, custodian fee offset arrangements reduced
expenses of the Total Bond Market Index Fund by $15,000.
E. During the six months ended June 30, 2000, 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 $1,035,625 $598,963
Short-Term Bond 84,560 53,780
Intermediate-Term Bond 148,180 24,404
Long-Term Bond 20,262 2,619
---------------------------------------------------------------------------------
</TABLE>
Purchases and sales of U.S. government securities were:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
(000)
----------------------------------
INDEX FUND PURCHASES SALES
---------------------------------------------------------------------------------
<S> <C> <C>
Total Bond Market $2,693,680 $2,053,310
Short-Term Bond 579,913 599,417
Intermediate-Term Bond 348,205 447,561
Long-Term Bond 79,379 68,554
---------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, the funds had the following capital losses
available to offset future net gains:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
CAPITAL LOSS
---------------------------------------
EXPIRATION
AMOUNT FISCAL YEARS
INDEX FUND (000) ENDING DECEMBER 31,
--------------------------------------------------------------------------------------
<S> <C> <C>
Total Bond Market $62,658 2007-2008
Short-Term Bond 1,279 2007-2008
Intermediate-Term Bond 20,519 2007-2008
Long-Term Bond 6,422 2007-2008
--------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 55
F. At June 30, 2000, net 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 $84,876 $(423,759) $(338,883)
Short-Term Bond 2,054 (19,242) (17,188)
Intermediate-Term Bond 6,398 (61,607) (55,209)
Long-Term Bond 4,915 (13,828) (8,913)
-----------------------------------------------------------------------------------
</TABLE>
G. The market values of securities on loan to broker/dealers at June 30, 2000,
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 $519,962 $162,635 $367,053
Short-Term Bond 86,519 51,563 36,371
Intermediate-Term Bond 201,441 205,087 --
Long-Term Bond 9,960 10,212 --
------------------------------------------------------------------------------------
</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.
53
<PAGE> 56
THE VANGUARD(R) FAMILY OF FUNDS
STOCK FUNDS
--------------------------------------------------------------------------------
500 Index Fund
Calvert Social Index(TM) Fund*
Capital Opportunity Fund
Convertible Securities Fund
Developed Markets Index Fund
Emerging Markets Stock
Index Fund*
Energy Fund
Equity Income Fund
European Stock Index Fund*
Explorer(TM) Fund
Extended Market Index Fund*
Global Equity Fund
Gold and Precious Metals Fund
Growth and Income Fund
Growth Equity Fund
Growth Index Fund*
Health Care Fund
Institutional Developed Markets
Index Fund
Institutional Index Fund*
International Growth Fund
International Value Fund
Mid-Cap Index Fund*
Morgan(TM) Growth Fund
Pacific Stock Index Fund*
PRIMECAP Fund
REIT Index Fund
Selected Value Fund
Small-Cap Growth Index Fund*
Small-Cap Index Fund*
Small-Cap Value Index Fund*
Strategic Equity Fund
Tax-Managed Capital
Appreciation Fund*
Tax-Managed Growth and
Income Fund*
Tax-Managed International Fund*
Tax-Managed Small-Cap Fund*
Total International Stock
Index Fund
Total Stock Market Index Fund*
U.S. Growth Fund
U.S. Value Fund
Utilities Income Fund
Value Index Fund*
Windsor(TM) Fund
Windsor(TM) II Fund
BALANCED FUNDS
--------------------------------------------------------------------------------
Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy(R) Conservative
Growth Fund
LifeStrategy(R) Growth Fund
LifeStrategy(R) Income Fund
LifeStrategy(R) Moderate
Growth Fund
STAR(TM) Fund
Tax-Managed Balanced Fund
Wellesley(R) Income Fund
Wellington(TM) Fund
BOND FUNDS
--------------------------------------------------------------------------------
Admiral(TM) Intermediate-Term
Treasury Fund
Admiral(TM) Long-Term Treasury
Fund
Admiral(TM) Short-Term Treasury Fund
GNMA Fund
High-Yield Corporate Fund
High-Yield Tax-Exempt Fund
Inflation-Protected Securities Fund
Insured Long-Term Tax-Exempt
Fund
Intermediate-Term Bond
Index Fund
Intermediate-Term Corporate Fund
Intermediate-Term Tax-Exempt
Fund
Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund
Long-Term Bond Index Fund
Long-Term Corporate Fund
Long-Term Tax-Exempt Fund
Long-Term Treasury Fund
Preferred Stock Fund
Short-Term Bond Index Fund
Short-Term Corporate Fund*
Short-Term Federal Fund
Short-Term Tax-Exempt Fund
Short-Term Treasury Fund
State Tax-Exempt Bond Funds
(California, Florida,
Massachusetts, New Jersey,
New York, Ohio, Pennsylvania)
Total Bond Market Index Fund*
MONEY MARKET FUNDS
--------------------------------------------------------------------------------
Admiral(TM) Treasury Money
Market Fund
Federal Money Market Fund
Prime Money Market Fund*
State Tax-Exempt Money Market
Funds (California, New Jersey,
New York, Ohio, Pennsylvania)
Tax-Exempt Money Market Fund
Treasury Money Market Fund
VARIABLE ANNUITY PLAN
--------------------------------------------------------------------------------
Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High-Grade Bond Portfolio
High Yield Bond Portfolio
International Portfolio
Mid-Cap Index Portfolio
Money Market Portfolio
REIT Index Portfolio
Short-Term Corporate Portfolio
Small Company Growth Portfolio
*Offers Institutional Shares.
For information about Vanguard funds and our variable annuity plan, including
charges and expenses, obtain a prospectus from The Vanguard Group, P.O. Box
2600, Valley Forge, PA 19482-2600.
Read it carefully before you invest or send money.
54
<PAGE> 57
THE PEOPLE WHO GOVERN YOUR FUND
The trustees of your mutual fund are there to see that the fund is
operated and managed in your best interests since, as a shareholder, you are
part owner of the fund. Your fund trustees also serve on the board of directors
of the Vanguard Group, which is owned by the funds and exists solely to provide
services to them on an at-cost basis.
Six of Vanguard's seven board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.
Among board members' responsibilities are selecting investment advisers
for the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new trustees/directors; and electing
Vanguard officers.
The list below provides a brief description of each trustee's
professional affiliations. Noted in parentheses is the year in which the trustee
joined the Vanguard board.
TRUSTEES
JOHN J. BRENNAN - (1987) 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 - (1998) Vice President, Chief Information Officer, and a
member of the Executive Committee of Johnson & Johnson; Director of Johnson &
JohnsonoMerck Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.
BRUCE K. MACLAURY - (1990) President Emeritus of The Brookings Institution;
Director of American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.
BURTON G. MALKIEL - (1977) 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 Select Sector SPDR
Trust.
ALFRED M. RANKIN, JR. - (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.
JAMES O. WELCH, JR. - (1971) 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 - (1985) Retired Chairman of Rohm & Haas Co.; Director of
AmeriSource Health Corporation, 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.
VANGUARD MANAGING DIRECTORS
R. GREGORY BARTON - Legal Department.
ROBERT A. DISTEFANO - Information Technology.
JAMES H. GATELY - Individual Investor Group.
KATHLEEN C. GUBANICH - Human Resources.
IAN A. MacKINNON - Fixed Income Group.
F. WILLIAM McNABB, III - Institutional Investor Group.
MICHAEL S. MILLER - Planning and Development.
RALPH K. PACKARD - Chief Financial Officer.
GEORGE U. SAUTER - Quantitative Equity Group.
<PAGE> 58
ABOUT OUR COVER
Our cover art, depicting HMS Vanguard at sea, is a reproduction of Leading the
Way, a 1984 work created and copyrighted by noted naval artist Tom Freeman, of
Forest Hill, Maryland.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q842 082000
(C)2000 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing
Corporation, Distributor.
