<PAGE> 1
VANGUARD(R)
BOND INDEX
FUNDS
VANGUARD TOTAL BOND
MARKET INDEX FUND
VANGUARD SHORT-TERM
BOND INDEX FUND
VANGUARD INTERMEDIATE-
TERM BOND INDEX FUND
VANGUARD LONG-TERM
BOND INDEX FUND
[PHOTO]
Annual Report
December 31, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
FELLOW SHAREHOLDERS:
Two roads diverged in a wood, and I--I took the one less traveled by, and that
has made all the difference.
[PHOTO]
John C. Bogle
I can think of no better words than those of Robert Frost to begin this special
letter to our shareholders, who have placed such extraordinary trust in me and
in Vanguard over the past quarter century. When the firm was founded 25 years
ago, we deliberately took a new road to managing a mutual fund enterprise.
Instead of having the funds controlled by an outside management company with its
own financial interests, the Vanguard funds--there were only 11 of them
then--would be controlled by their own shareholders and operate solely in their
financial interests. The outcome of our unprecedented decision was by no means
certain. We described it then as "The Vanguard Experiment."
Well, I guess it's fair to say it's an experiment no more. During the
past 25 years, the assets we hold in stewardship for investors have grown from
$1 billion to more than $500 billion, and I believe that our reputation for
integrity, fair-dealing, and sound investment principles is second to none in
this industry. Our staggering growth--which I never sought--has come in
important part as a result of the simple investment ideas and basic human values
that are the foundation of my personal philosophy. I have every confidence that
they will long endure at Vanguard, for they are the right ideas and right
values, unshakable and eternal.
While Emerson believed that "an institution is the lengthened shadow of
one man," Vanguard today is far greater than any individual. The Vanguard crew
has splendidly implemented and enthusiastically supported our founding ideas and
values, and deserves the credit for a vital role in forging our success over the
years. It is a dedicated crew of fine human beings, working together in an
organization that is well prepared to press on regardless long after I am gone.
Creating and leading this enterprise has been an exhilarating run. Through it
all, I've taken the kudos and the blows alike, enjoying every moment to the
fullest, and even getting a second chance at life with a heart transplant nearly
four years ago. What more could a man ask?
While I shall no longer be serving on the Vanguard Board, I want to
assure you that I will remain vigorous and active in a newly created Vanguard
unit, researching the financial markets, writing, and speaking. I'll continue to
focus whatever intellectual power and ethical strength I possess on my mission
to assure that mutual fund investors everywhere receive a fair shake. In the
spirit of Robert Frost:
But I have promises to keep, and miles to go before I sleep, and miles to
go before I sleep.
You have given me your loyalty and friendship over these long years, and
I deeply appreciate your thousands of letters of support. For my part, I will
continue to keep an eagle eye on your interests, for you deserve no less. May
God bless you all, always.
/S/ JOHN C. BOGLE
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
REPORT FROM THE CHAIRMAN 1
THE MARKETS IN PERSPECTIVE 6
FUND PROFILES 8
PERFORMANCE SUMMARIES 13
FINANCIAL STATEMENTS 18
REPORT OF INDEPENDENT ACCOUNTANTS 57
</TABLE>
<PAGE> 3
REPORT FROM THE CHAIRMAN
[PHOTO]
John J. Brennan
Rising interest rates prompted by a surprisingly durable and powerful economic
expansion caused bond prices to fall during 1999. For the overall U.S. bond
market, the result was the worst returns in five years. Returns for the Vanguard
Bond Index Funds ranged from a modest gain for our Short-Term Bond Index Fund to
a -7.9% return for our Long-Term Bond Index Fund.
Our flagship Vanguard Total Bond Market Index Fund posted a -0.8% return,
as falling prices for its bond holdings more than offset its interest income.
This result matched the return for our target index and was better--by nearly a
full percentage point--than the return of the fund's average peer, the average
intermediate-term U.S. government bond fund. While a negative return is never
good news, we note that this was the 12th consecutive year in which the Total
Bond Market Index Fund has outpaced its average peer fund--an indication that
low-cost index funds are a sound investment strategy for fixed-income investors
as well as for stock investors.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
TOTAL RETURNS
YEAR ENDED
DECEMBER 31, 1999
- -----------------------------------------------------------------------------------
<S> <C>
TOTAL BOND MARKET INDEX FUND -0.8%
Average Intermediate U.S.
Government Fund* -1.7
Lehman Aggregate Bond Index -0.8
- -----------------------------------------------------------------------------------
SHORT-TERM BOND INDEX FUND 2.1%
Average 1-5 Year U.S. Government Fund* 1.5
Lehman 1-5 Year Government/
Corporate Index 2.1
- -----------------------------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND -3.0%
Average Intermediate U.S.
Government Fund* -1.7
Lehman 5-10 Year Government/
Corporate Index -2.9
- -----------------------------------------------------------------------------------
LONG-TERM BOND INDEX FUND -7.9%
Average General U.S. Government Fund* -3.0
Lehman Long Government/
Corporate Index -7.7
- -----------------------------------------------------------------------------------
*Derived from data provided by Lipper Inc.
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------
Total Bond Market Index Fund -0.7%
- -----------------------------------------------------------------------------------
</TABLE>
The adjacent table presents the 1999 total return (capital change plus
reinvested dividends) for each of our funds, its average mutual fund peer, and
the unmanaged bond index it tracks. Our Short-Term Bond Index Fund outpaced its
average peer, while both the Intermediate-Term and Long-Term Bond Index Funds
trailed their peers. Detailed per-share figures for each fund, including net
asset values, yields, income dividends paid during 1999, and credit quality and
average maturity data, are presented in the table following this letter.
FINANCIAL MARKETS IN REVIEW
During the past year, the U.S. economy continued--with remarkable vigor--the
expansion that began back in 1991. If, as expected, growth continues into
February 2000, the expansion will be the longest in U.S. history. Economic
output in 1999 grew at a rapid inflation-adjusted pace of approximately 4%, even
though there was little slack in the economy. The unemployment rate, for
example, closed the year at a 30-year low of 4.1%.
Stock investors reveled in this environment. The Wilshire 5000 Total
Market Index, consisting of virtually all U.S. stocks, posted a 23.8% advance.
But bond investors--along with Federal Reserve Board policymakers--were clearly
worried that growth was too strong for inflation to remain dormant. Indeed, the
pace of inflation, as measured by the
1
<PAGE> 4
Consumer Price Index, did rise to 2.7% from 1.6% in 1998. Most of the increase,
however, was due to higher oil and food prices, which many observers believe
will not keep climbing so fast.
Market interest rates began rising in earnest in February, and the
Federal Reserve joined in with three 0.25% increases in short-term rates. Rates
moved substantially higher across all maturities. The yield of the 30-year U.S.
Treasury bond stood at 6.48% on December 31, 138 basis points above its 5.10%
yield when the year began. Long-term bonds were hardest hit by the rise in
rates, as always, and their prices fell almost -15% during the year. The
all-market Lehman Brothers Aggregate Bond Index suffered a price decline of
- -7.0%, offsetting its 6.2% income return and making for a total return of -0.8%.
Rates also rose on short-term money market instruments, though not as much as
for long-term securities. The yield of 90-day Treasury bills increased 88 basis
points during 1999 to 5.33% at year-end.
Corporate and mortgage-backed securities fared slightly better than
Treasury bonds during 1999. The spread between yields on corporate and Treasury
bonds narrowed as investors lost some of their concern about credit downgrades
and defaults. Spreads also narrowed for mortgage-backed bonds as rising interest
rates decreased the risk that homeowners would prepay mortgages through
refinancing.
1999 PERFORMANCE OVERVIEW
Total return for a bond fund has two components--the interest income earned by
the fund and the price change of the securities the fund owns. As interest rates
change, bond prices also change, in the opposite direction. During 1999, as
interest rates rose, the prices of existing bonds fell.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
TOTAL RETURNS
YIELDS AT YEAR ENDED
YEAR-END DECEMBER 31, 1999
--------------------------------------------
INDEX FUND 1998 1999 INCOME CAPITAL TOTAL
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Bond Market 5.63% 6.85% 6.0% -6.8% -0.8%
Short-Term Bond 5.01 6.53 5.4 -3.3 2.1
Intermediate-Term Bond 5.31 7.04 6.0 -9.0 -3.0
Long-Term Bond 5.65 7.15 5.6 -13.5 -7.9
- -----------------------------------------------------------------------
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------
Total Bond Market 5.73% 6.95% 6.1% -6.8% -0.7%
- -----------------------------------------------------------------------
</TABLE>
The extent of the price fluctuations due to changing interest rates
increases along with the average maturity or average duration of a fund. This
difference in interest rate sensitivity is apparent in the capital returns
listed in the adjacent table, which ranged from -3.3% for our Short-Term Bond
Index Fund to -13.5% for our Long-Term Bond Index Fund. Each fund's yield--the
current rate of interest income the fund is producing--rose substantially during
1999, which means that each dollar invested today earns more income than a
dollar invested a year ago. This fact is important because over long periods
fluctuations in interest rates and in prices tend to largely cancel each other
out, leaving interest income as the main element of total return for any
investment in bonds.
The Fund Profiles starting on page 8 list each fund's average duration,
which you can use to estimate how much your fund's share price will fluctuate in
response to a change in market interest rates. For example, the average duration
of the Total Bond Market Index Fund is 5 years, which means that if interest
rates fall or rise by 1%, the fund's share price can be expected to rise or fall
by about 5%. Knowing your fund's duration can help you determine whether you can
be comfortable with potential fluctuations in the fund's net asset value.
2
<PAGE> 5
As noted on page 1, the total returns for our Total Bond Market and
Short-Term Bond Index Funds exceeded returns earned by the average funds in
their peer groups. Our Long-Term Bond Index Fund trailed its peer-group average
because its average maturity is much longer than its competitors', meaning that
rising interest rates took a greater toll on its net asset value. When interest
rates decline--as in 1997 and 1998--the longer maturity of the fund pays off
with greater share-price gains.
In comparison with average funds in their peer groups, our funds hold
more corporate issues. This was helpful in 1999 because corporate bonds
generally outperformed Treasury securities of similar maturities. Also, our
funds were aided--as they are year after year--by having much lower operating
costs then their competitors. In 1999, each of our funds had an expense ratio of
0.20%, or $2.00 per $1,000 invested. The average expense ratios charged by funds
in the peer groups was five to six times higher, ranging from a low of 1.04%, or
$10.40 per $1,000 in assets, for the average short-term government bond fund to
1.21%, or $12.10 per $1,000, for the average general government bond fund. Such
high expense ratios confiscate a very large portion of the gross income earned
by these competing funds. High expenses also make it very difficult for a bond
fund to keep up with a low-cost index fund over the long term--a truth
illustrated by the longer-term comparisons of our funds with their peers.
LONG-TERM PERFORMANCE OVERVIEW
Vanguard Total Bond Market Index Fund--the nation's first bond index fund for
individual investors--has amassed an enviable long-term record. As the table
below shows, the fund's 7.5% average annual return outpaced the 6.4% average
return for intermediate-term government bond funds by 1.1 percentage points
during the decade of the 1990s. Hypothetical investments of $10,000 made a
decade ago in our fund and its average peer would have grown, with dividends and
capital gains reinvested, to $20,678 and $18,652, respectively. The $2,000
"Vanguard advantage" is equal to 20% of the original investment.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
TOTAL RETURNS
TEN YEARS ENDED DECEMBER 31, 1999
---------------------------------
AVERAGE FINAL VALUE OF
ANNUAL A $10,000
RETURN INITIAL INVESTMENT
- -------------------------------------------------------------------------
<S> <C> <C>
Total Bond Market Index Fund 7.5% $20,678
- -------------------------------------------------------------------------
Average Intermediate
Government Fund 6.4% $18,652
- -------------------------------------------------------------------------
Lehman Aggregate Bond Index 7.7% $20,988
- -------------------------------------------------------------------------
</TABLE>
Although our lower costs explain the bulk of our lead over competitors,
another factor is the skilled hand of Vanguard's Fixed Income Group, which has
managed the bond index funds from the start. Our Total Bond Market Index Fund
has tracked its benchmark, the Lehman Aggregate Bond Index, closely over the
years. And this is not an easy feat, since the index exists only on paper and
incurs no costs. Also, the index comprises more than 5,500 separate
securities--far more than a mutual fund could realistically own--so our fund
must use sampling techniques to shadow the index while holding about 720
securities.
Our other funds haven't been around a decade, but the same advantage for
the low-cost indexing approach to bond-fund investing is apparent. Each of our
other bond index funds has outperformed its average competitor by 1.0 to 2.1
percentage points annually since they began operations on March 1, 1994.
3
<PAGE> 6
We also present returns for the Institutional Shares of our Total Bond
Market Index Fund. These shares were created in September 1995 and are available
for a minimum investment of $10 million.
All our funds have closely tracked their target indexes, even though the
operating and transaction costs that we incur put us at a disadvantage versus
the theoretical indexes. Our adviser is able to make up part of the cost
disadvantage by substituting corporate issues for some government securities.
This enables the funds to earn slightly higher yields while maintaining very
high credit-quality standards.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
TOTAL RETURNS FROM INCEPTION*
THROUGH DECEMBER 31, 1999
----------------------------------
AVERAGE FINAL VALUE OF
ANNUAL A $10,000
RETURN INITIAL INVESTMENT
- -------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM BOND INDEX FUND 5.7% $13,827
Average 1-5 Year
Government Fund 4.7 13,101
Lehman 1-5 Year Government/
Corporate Index 5.8 13,878
- -------------------------------------------------------------------------
INTERMEDIATE-TERM BOND
INDEX FUND 6.0% $14,089
Average Intermediate
Government Fund 4.8 13,163
Lehman 5-10 Year Government/
Corporate Index 6.2 14,169
- -------------------------------------------------------------------------
LONG-TERM BOND INDEX FUND 6.7% $14,568
- -------------------------------------------------------------------------
Average General
Government Fund 4.6 13,016
Lehman Long Government/
Corporate Index 6.8 14,667
- -------------------------------------------------------------------------
FINAL VALUE OF
A $10,000,000
INSTITUTIONAL SHARES INITIAL INVESTMENT
- -------------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND** 6.0% $12,820,542
Average Intermediate
Government Fund 4.8 12,211,758
Lehman Aggregate Bond Index 5.9 12,784,096
- -------------------------------------------------------------------------
</TABLE>
*March 1, 1994, for the Short-Term, Intermediate-Term, and Long-Term Bond Index
Funds; September 18, 1995, for the Institutional Shares of the Total Bond
Market Index Fund.
**Minimum initial investment is $10 million.
IN SUMMARY
After a year like 1999, when stock market averages soared while bond prices
fell, the importance of diversification could easily be overlooked. That would
be a mistake, in our judgment. The important attributes of bonds--regular
interest income and greater price stability than stocks--become, if anything,
more important as the stock market reaches unprecedented valuations.
Vanguard has long believed that an investment program should begin with
an assessment of your investment time horizon, goals, financial situation, and
tolerance for risk. And we continue to advocate a diversified portfolio of bond
funds, stock funds, and short-term reserves as a proven way to participate in
the long-term rewards of investing while being prepared for the ever-present
risks. The Vanguard Bond Index Funds are a highly diversified and highly
efficient way to fill the bond component of any investor's investment plan.
/s/ JOHN J. BRENNAN
John J. Brennan
Chairman and Chief Executive Officer
January 18, 2000
4
<PAGE> 7
- --------------------------------------------------------------------------------
A NOTE OF THANKS TO OUR FOUNDER
- --------------------------------------------------------------------------------
As you may have read on the inside cover of our report, our founder, John C.
Bogle, retired on December 31, 1999, as Senior Chairman of our Board after
nearly 25 years of devoted service to Vanguard and our shareholders. Vanguard
investors have Jack to thank for creating a truly mutual mutual fund company
that operates solely in the interest of its fund shareholders. And mutual fund
investors everywhere have benefited from his energetic efforts to improve this
industry. Finally, on a personal note, I am forever grateful to Jack for giving
me the opportunity to join this great company in 1982.
<TABLE>
<CAPTION>
FUND STATISTICS
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE 12 MONTH SEC
--------------------- --------------------- CURRENT
AVERAGE AVERAGE DEC. 31, DEC. 31, INCOME TOTAL ANNUALIZED
INDEX FUND MATURITY QUALITY 1998 1999 DIVIDENDS RETURN YIELD
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Bond Market 9.0 years Aa1 $10.27 $9.56 $0.617 -0.8% 6.85%
Short-Term Bond 2.8 years Aa1 10.10 9.73 0.539 2.1 6.53
Intermediate-Term Bond 7.7 years Aa2 10.48 9.51 0.628 -3.0 7.04
Long-Term Bond 22.3 years Aa1 11.32 9.77 0.662 -7.9 7.15
- -------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- -------------------------------------------------------------------------------------------------------------------------
Total Bond Market 9.0 years Aa1 $10.27 $9.56 $0.627 -0.7% 6.95%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
THE MARKETS IN PERSPECTIVE
YEAR ENDED DECEMBER 31, 1999
A global expansion in economic activity bolstered stocks at home and abroad
during 1999. The muscular U.S. economy provided a good bit of the oomph, but it
got an assist from solid growth in Asian, European, and Latin American economies
that had slumped in 1997 and 1998.
Interest rates increased significantly--causing bond prices to fall--as
both investors and monetary policymakers grew concerned that economic growth was
so vigorous that it would cause inflation to accelerate.
U.S. STOCK MARKETS
The booming economy and growing corporate profits provided plenty of fuel for
stock prices during 1999. However, higher interest rates restrained the rise,
especially for financial-services and electric utility stocks regarded as
interest rate sensitive.
U.S. economic output increased at an inflation- adjusted rate of about
4%--a very rapid pace for such a large, mature economy. Analysts estimated that
corporate profits would grow by 14% in 1999 and again in 2000. Consumer
spending, which accounts for roughly two-thirds of economic activity, was
strong. People felt prosperous, thanks to the long bull market, plentiful jobs,
and rising incomes. (After-tax personal income grew by more than 5% in 1999, and
unemployment at year-end was at a three-decade low of 4.1% of the workforce.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
--------------------------------------
1 YEAR 3 YEARS 5 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 21.0% 27.6% 28.6%
Russell 2000 Index 21.3 13.1 16.7
Wilshire 5000 Index 23.8 26.1 27.1
MSCI EAFE Index 27.3 16.1 13.2
- --------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -0.8% 5.7% 7.7%
Lehman 10 Year Municipal Bond Index -1.3 4.8 7.1
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 4.7 5.0 5.2
- --------------------------------------------------------------------------------
OTHER
Consumer Price Index 2.7% 2.0% 2.4%
- --------------------------------------------------------------------------------
</TABLE>
The stock market, as measured by the Wilshire 5000 Index, gained 23.8%,
with more than three-quarters of the gain coming in the final quarter of 1999.
For the first time in several years, smaller stocks outpaced
large-capitalization issues. The S&P 500 Index, which is dominated by large-cap
stocks and accounts for more than three-quarters of the U.S. stock market's
total value, gained 21.0% during the year; the rest of the market gained 35.4%.
Hidden in the market averages was an amazing divergence in stock
performance. Prices soared for most technology-related stocks, but performance
was pedestrian, at best, for most other issues. Indeed, three-fifths of stocks
on the New York Stock Exchange fell in 1999. The technology sector of the S&P
500 Index gained 74%, and the producer-durables sector, driven by huge gains for
some makers of telecommunications and technology gear, was up 49%. These results
were in stark contrast to the declines suffered by food and beverage companies
in the consumer-staples sector (-16%) and by many companies in the health-care
group (-10%).
6
<PAGE> 9
Investors seemed bedazzled by the prospects for growth in revenue and
profits among tech stocks, but less interested in the actual profits for nontech
companies. Remarkably, the average S&P 500 stock without earnings gained 36.5%
in 1999, while the average stock with earnings rose 11.5%. There is general
agreement that growth in Internet commerce, computers, software, wireless
communications, and other key tech sectors will be stupendous. However, there is
much disagreement about whether profits will grow so impressively, given
the intense competition. During 1999, optimists clearly ruled.
U.S. BOND MARKETS
The pickup in worldwide economic activity buoyed stock prices but depressed bond
prices. Interest rates, which move in the opposite direction from bond prices,
rose sharply. The rate increase stemmed from increased borrowing by corporations
and individuals and from investors' fears that a sizzling economy was bound to
send inflation soaring.
The inflation evidence was ambiguous. Price increases were greater in
1999 than in 1998 at both the wholesale and consumer levels. Wholesale prices
rose 3.0%, the biggest gain since 1990. And the Consumer Price Index advanced
2.7% in 1999 after a gain of just 1.6% in 1998. However, energy prices, which
plunged in 1998 and shot up in 1999, skewed the figures in both periods. At the
consumer level, the "core rate" of inflation, which excludes food and energy
prices, was up just 1.9% in 1999, the smallest increase in 35 years.
At midyear, the Federal Reserve Board, aiming to cool the economy a bit
to head off price pressures, began raising short-term interest rates. In all,
the Fed pushed up rates by 0.75 percentage point in three quarter-point steps.
The bond market anticipated the Fed--interest rates began rising sharply in
February--and at year-end the yield of 30-year U.S. Treasury bonds was up 1.38
percentage points (138 basis points) to 6.48%. The 10-year Treasury note--a
benchmark for mortgage lenders--rose 179 basis points, from 4.65% to 6.44%.
Short-term rates didn't rise as far; 3-month Treasury bill yields were up 88
basis points to 5.33% at year-end.
Price declines, as usual, were greatest for long-term bonds and least for
short-term bonds. The overall market, as measured by the Lehman Aggregate Bond
Index, which has an intermediate-term average maturity, posted a -0.8% total
return in 1999. Short-term bonds generally provided returns of 2% to 3%.
Long-term bonds suffered significant price declines, and the Lehman Long
Government/Corporate Index recorded a -7.7% total return.
INTERNATIONAL STOCK MARKETS
Bullishness among stock investors was an international phenomenon in 1999. The
biggestgains came in Pacific-region and emerging markets that had suffered most
from economic slumps and currency crises during 1997 and 1998.
Overall, the Morgan Stanley Capital International Europe, Australasia,
Far East (EAFE) Index of major developed markets produced a 27.3% return for
U.S. dollar-based investors. The MSCI Pacific Free Index gained an astounding
56.4% for U.S. investors, as a strong rise in the Japanese yen against the U.S.
dollar tacked on about 12.5 percentage points to a 43.9% return in local
currencies. In Europe, currency fluctuations had the opposite effect: European
currencies, including the new 11-nation common currency, the euro, mostly fell
against the dollar, and the 30.3% return in local currencies was nearly halved
to 15.8% in U.S. dollars.
Emerging markets managed a stunning turnaround, as the Select Emerging
Markets Free Index rose 60.9% in U.S.-dollar terms after having plummeted -18.4%
in 1998 and -16.4% in 1997.
7
<PAGE> 10
FUND PROFILE
TOTAL BOND MARKET INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to its unmanaged target index. Key elements
of this Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
TOTAL BOND LEHMAN
MARKET INDEX INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 721 5,545
Yield 6.9% 6.9%
Yield--Institutional Shares 7.0% 6.9%
Yield to Maturity 7.1% 7.2%
Average Coupon 7.2% 6.8%
Average Maturity 9.0 years 8.9 years
Average Quality Aa1 Aaa
Average Duration 5.0 years 4.9 years
Expense Ratio 0.20% --
Expense Ratio--
Institutional Shares 0.10% --
Cash Reserves 1.2% --
</TABLE>
*Lehman Aggregate Bond Index.
<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 1.00 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury/Agency 25.7%
Aaa 42.7
Aa 6.1
A 13.6
Baa 11.9
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 2.1%
1-5 Years 32.4
5-10 Years 45.6
10-20 Years 8.2
20-30 Years 11.1
Over 30 Years 0.6
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Asset-Backed 7.1%
Finance 14.1
Foreign 4.8
Industrial 9.1
Mortgage 35.1
Treasury/Agency 25.7
Utilities 4.1
- -------------------------------------------------------
Total 100.0%
</TABLE>
8
<PAGE> 11
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities. U.S. Treasury securities are considered to
have the highest credit quality.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY ISSUER. A breakdown of a fund's holdings by type of issuer or
type of instrument.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit quality
(Treasury/agency, investment-grade corporate, or below investment-grade).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days and is annualized, or projected forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
9
<PAGE> 12
FUND PROFILE
SHORT-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
SHORT-TERM LEHMAN
BOND INDEX INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 270 5,545
Yield 6.5% 6.9%
Yield to Maturity 6.8% 7.2%
Average Coupon 7.7% 6.8%
Average Maturity 2.8 years 8.9 years
Average Quality Aa1 Aaa
Average Duration 2.4 years 4.9 years
Expense Ratio 0.20% --
Cash Reserves 2.6% --
</TABLE>
*Lehman Aggregate Bond Index.
<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 0.88 1.00
Beta 0.52 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury/Agency 58.7%
Aaa 8.5
Aa 7.2
A 14.1
Baa 11.5
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 3.2%
1-3 Years 52.7
3-5 Years 43.5
Over 5 Years 0.6
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Asset-Backed 5.9%
Finance 16.1
Foreign 5.5
Industrial 8.9
Mortgage 0.0
Treasury/Agency 58.7
Utilities 4.9
- -------------------------------------------------------
Total 100.0%
</TABLE>
10
<PAGE> 13
FUND PROFILE
INTERMEDIATE-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
BOND INDEX INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 192 5,545
Yield 7.0% 6.9%
Yield to Maturity 7.2% 7.2%
Average Coupon 7.5% 6.8%
Average Maturity 7.7 years 8.9 years
Average Quality Aa2 Aaa
Average Duration 5.6 years 4.9 years
Expense Ratio 0.20% --
Cash Reserves 1.8% --
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ---------------------------------------------------------
<S> <C>
AVERAGE MATURITY Medium
CREDITY QUALITY Treasury/Agency
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------------------------
INTERMEDIATE-TERM LEHMAN
BOND INDEX INDEX*
- -----------------------------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.31 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury/Agency 54.3%
Aaa 2.0
Aa 6.8
A 19.5
Baa 17.4
Ba 0.0
B 0.0
Not Rated 0.0
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Under 1 Year 0.0%
1-5 Years 0.1
5-10 Years 97.9
10-20 Years 1.6
20-30 Years 0.3
Over 30 Years 0.1
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Asset-Backed 1.8%
Finance 14.7
Foreign 7.0
Industrial 16.3
Mortgage 0.0
Treasury/Agency 54.3
Utilities 5.9
- --------------------------------------------------------
Total 100.0%
</TABLE>
11
<PAGE> 14
FUND PROFILE
LONG-TERM BOND INDEX FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------
LONG-TERM LEHMAN
BOND INDEX INDEX*
- -----------------------------------------------------------
<S> <C> <C>
Number of Issues 190 5,545
Yield 7.2% 6.9%
Yield to Maturity 7.2% 7.2%
Average Coupon 8.1% 6.8%
Average Maturity 22.3 years 8.9 years
Average Quality Aa1 Aaa
Average Duration 9.9 years 4.9 years
Expense Ratio 0.20% --
Cash Reserves 1.8% --
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ---------------------------------------------------------
<S> <C>
AVERAGE MATURITY Long
CREDITY QUALITY Treasury/Agency
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------------------------
LONG-TERM LEHMAN
BOND INDEX INDEX*
- -----------------------------------------------------------
<S> <C> <C>
R-Squared 0.93 1.00
Beta 2.04 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Treasury/Agency 65.2%
Aaa 0.8
Aa 4.8
A 15.1
Baa 14.1
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 0.4%
1-5 Years 1.3
5-10 Years 8.4
10-20 Years 21.6
20-30 Years 64.7
Over 30 Years 3.6
- --------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Asset-Backed 0.3%
Finance 6.0
Foreign 6.0
Industrial 17.2
Mortgage 0.0
Treasury/Agency 65.2
Utilities 5.3
- --------------------------------------------------------
Total 100.0%
</TABLE>
12
<PAGE> 15
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: DECEMBER 11, 1986-DECEMBER 31, 1999
- -----------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
1986 -0.6% 0.4% -0.2% -0.2%
1987 -7.4 8.5 1.1 2.8
1988 -1.6 9.0 7.4 7.9
1989 4.3 9.3 13.6 14.5
1990 -0.3 8.9 8.6 9.0
1991 6.4 8.8 15.2 16.0
1992 -0.2 7.3 7.1 7.4
1993 3.0 6.7 9.7 9.8
1994 -8.8 6.1 -2.7 -2.9
1995 10.6 7.6 18.2 18.5
1996 -3.0 6.6 3.6 3.6
1997 2.5 6.9 9.4 9.7
1998 2.2 6.4 8.6 8.7
1999 -6.8 6.0 -0.8 -0.8
- -----------------------------------------------------------------
</TABLE>
*Lehman Aggregate Bond Index.
See Financial Highlights table on page 51 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: DECEMBER 31, 1989-DECEMBER 31, 1999
- ----------------------------------------------------------------------------------
Total Bond Average Intermediate Lehman Aggregate
Market Index Fund Government Fund Bond Index
<S> <C> <C> <C>
1989 12 10000 10000 10000
1990 03 9891 9937 9921
1990 06 10242 10242 10283
1990 09 10319 10373 10371
1990 12 10861 10851 10896
1991 03 11143 11017 11201
1991 06 11322 11209 11382
1991 09 11940 11790 12026
1991 12 12513 12412 12639
1992 03 12353 12119 12478
1992 06 12835 12642 12980
1992 09 13374 13199 13535
1992 12 13402 13166 13575
1993 03 13959 13578 14136
1993 06 14335 13921 14509
1993 09 14724 14256 14886
1993 12 14695 14253 14898
1994 03 14297 13806 14471
1994 06 14151 13660 14320
1994 09 14223 13721 14407
1994 12 14301 13723 14463
1995 03 14988 14253 15193
1995 06 15887 15024 16118
1995 09 16184 15277 16433
1995 12 16896 15875 17135
1996 03 16572 15511 16831
1996 06 16671 15588 16927
1996 09 16967 15853 17238
1996 12 17495 16300 17757
1997 03 17385 16111 17657
1997 06 18004 16661 18306
1997 09 18615 17149 18912
1997 12 19141 17617 19470
1998 03 19438 17761 19775
1998 06 19894 18169 20236
1998 09 20715 18954 21088
1998 12 20778 18971 21162
1999 03 20687 18727 21058
1999 06 20484 18587 20873
1999 09 20643 18678 21010
1999 12 20678 18652 20988
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
---------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Bond Market Index Fund* -0.76% 7.62% 7.54% $20,678
Average Intermediate Government Fund** -1.68 6.33 6.43 18,652
Lehman Aggregate Bond Index -0.82 7.73 7.70 20,988
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION ---------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Bond Market Index Fund* 12/11/1986 -0.76% 7.62% 0.42% 7.12% 7.54%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
13
<PAGE> 16
PERFORMANCE SUMMARY
TOTAL BOND MARKET INDEX FUND INSTITUTIONAL SHARES
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 INVESTMENT RETURNS: SEPTEMBER 18, 1995-DECEMBER 31, 1999
- ---------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND
INSTITUTIONAL SHARES LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 2.7% 1.8% 4.5% 4.4%
1996 -3.0 6.7 3.7 3.6
1997 2.5 7.1 9.6 9.7
1998 2.2 6.5 8.7 8.7
1999 -6.8 6.1 -0.7 -0.8
- ---------------------------------------------------------------
</TABLE>
*Lehman Aggregate Bond Index.
See Financial Highlights table on page 52 for dividend and capital gains
information since the fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: SEPTEMBER 18, 1995-DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------
Total Bond Market Index Average Intermediate Lehman Aggregate
Fund Institutional Shares Government Fund Bond Index
<S> <C> <C> <C>
9/18/95 10000000 10000000 10000000
1995 09 10009145 10009145 10009145
1995 12 10452849 10383487 10435534
1996 03 10256352 10205324 10250365
1996 06 10320662 10238831 10310151
1996 09 10507702 10386490 10499593
1996 12 10837942 10672248 10815527
1997 03 10773716 10616721 10755184
1997 06 11160477 10943263 11150428
1997 09 11542845 11235066 11519103
1997 12 11873019 11534566 11859226
1998 03 12061236 11703873 12044730
1998 06 12348362 11933628 12325683
1998 09 12861741 12418118 12844952
1998 12 12905361 12420421 12889792
1999 03 12852732 12340564 12826433
1999 06 12730171 12208101 12713942
1999 09 12833502 12236814 12797426
1999 12 12820542 12199761 12784096
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999 FINAL VALUE OF
--------------------------------- A $10,000,000
1 YEAR SINCE INCEPTION INVESTMENT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market Index Fund Institutional Shares -0.66% 5.97% $12,820,542
Average Intermediate Government Fund* -1.68 4.77 12,211,758
Lehman Aggregate Bond Index -0.82 5.90 12,784,096
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Bond Market Index Fund Institutional Shares 9/18/1995 -0.66% -0.62% 6.59% 5.97%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
PERFORMANCE SUMMARY
SHORT-TERM BOND INDEX FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-DECEMBER 31, 1999
- -------------------------------------------------------------
SHORT-TERM BOND INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -5.0% 4.6% -0.4% -0.2%
1995 6.0 6.9 12.9 12.9
1996 -1.5 6.0 4.5 4.7
1997 0.8 6.2 7.0 7.1
1998 1.7 5.9 7.6 7.6
1999 -3.3 5.4 2.1 2.1
- -------------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Government/Corporate Index.
See Financial Highlights table on page 52 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MARCH 1, 1994-DECEMBER 31, 1999
- ----------------------------------------------------------------------
Lehman 1-5 Year
Short-Term Bond Average1-5 Year Government/Corporate
Index Fund Government Fund Index
<S> <C> <C> <C>
3/1/94 10000 10000 10000
1994 03 9933 9933 9935
1994 06 9904 9846 9905
1994 09 9985 9916 9995
1994 12 9962 9887 9979
1995 03 10356 10221 10365
1995 06 10761 10564 10780
1995 09 10932 10720 10945
1995 12 11244 11000 11264
1996 03 11231 10987 11254
1996 06 11328 11040 11352
1996 09 11510 11210 11549
1996 12 11754 11423 11790
1997 03 11797 11487 11829
1997 06 12086 11726 12127
1997 09 12356 11957 12405
1997 12 12580 12148 12630
1998 03 12768 12329 12820
1998 06 12980 12494 13035
1998 09 13456 12869 13523
1998 12 13537 12909 13594
1999 03 13584 12980 13647
1999 06 13614 12955 13677
1999 09 13760 13059 13830
1999 12 13827 13101 13878
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
-------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Bond Index Fund* 2.08% 6.77% 5.71% $13,827
Average 1-5 Year Government Fund** 1.49 5.79 4.74 13,101
Lehman 1-5 Year Government/Corporate Index 2.09 6.82 5.78 13,878
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Bond Index Fund* 3/1/1994 2.08% 6.77% -0.29% 6.00% 5.71%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
15
<PAGE> 18
PERFORMANCE SUMMARY
INTERMEDIATE-TERM BOND INDEX FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-DECEMBER 31, 1999
- -----------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -8.2% 5.3% -2.9% -2.9%
1995 13.3 7.8 21.1 21.4
1996 -3.9 6.5 2.6 2.7
1997 2.4 7.0 9.4 9.4
1998 3.5 6.6 10.1 10.1
1999 -9.0 6.0 -3.0 -2.9
- -----------------------------------------------------------
</TABLE>
*Lehman 5-10 Year Government/Corporate Index.
See Financial Highlights table on page 53 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MARCH 1, 1994-DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Lehman 5-10 Year
Intermediate-Term Average Intermediate Government/Corporate
Bond Index Fund Government Fund Index
<S> <C> <C> <C>
3/1/94 10000 10000 10000
1994 03 9790 9790 9771
1994 06 9662 9665 9648
1994 09 9703 9701 9704
1994 12 9711 9685 9707
1995 03 10239 10107 10256
1995 06 10993 10625 11022
1995 09 11195 10799 11239
1995 12 11754 11204 11787
1996 03 11457 10998 11494
1996 06 11468 11024 11509
1996 09 11674 11206 11727
1996 12 12052 11504 12104
1997 03 11921 11424 11970
1997 06 12374 11783 12437
1997 09 12820 12122 12886
1997 12 13183 12433 13246
1998 03 13402 12594 13465
1998 06 13719 12849 13780
1998 09 14556 13398 14622
1998 12 14511 13388 14589
1999 03 14320 13279 14396
1999 06 14089 13145 14171
1999 09 14152 13202 14249
1999 12 14089 13163 14169
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
----------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate-Term Bond Index Fund* -3.00% 7.72% 6.05% $14,089
Average Intermediate Government Fund** -1.68 6.33 4.82 13,163
Lehman 5-10 Year Government/Corporate Index -2.88 7.86 6.15 14,169
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTERMEDIATE-TERM BOND INDEX FUND* 3/1/1994 -3.00% 7.72% -0.63% 6.68% 6.05%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
16
<PAGE> 19
PERFORMANCE SUMMARY
LONG-TERM BOND INDEX FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MARCH 1, 1994-DECEMBER 31, 1999
- ------------------------------------------------------------
LONG-TERM BOND INDEX FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -10.4% 5.9% -4.5% -4.6%
1995 21.0 8.7 29.7 30.0
1996 -6.8 6.5 -0.3 0.1
1997 6.9 7.4 14.3 14.5
1998 5.5 6.5 12.0 11.8
1999 -13.5 5.6 -7.9 -7.7
- ------------------------------------------------------------
</TABLE>
*Lehman Long Government/Corporate Index.
See Financial Highlights table on page 53 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MARCH 1, 1994-DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Lehman Long
Long-Term Bond Average General Government/Corporate
Index Fund Government Fund Index
<S> <C> <C> <C>
3/1/94 10000 10000 10000
1994 03 9706 9706 9683
1994 06 9437 9532 9411
1994 09 9388 9535 9377
1994 12 9543 9560 9535
1995 03 10155 9992 10164
1995 06 11196 10569 11225
1995 09 11477 10755 11514
1995 12 12374 11217 12391
1996 03 11608 10920 11641
1996 06 11595 10937 11649
1996 09 11784 11104 11848
1996 12 12334 11410 12408
1997 03 11984 11300 12061
1997 06 12621 11704 12720
1997 09 13331 12071 13427
1997 12 14090 12419 14210
1998 03 14277 12595 14415
1998 06 14913 12894 15025
1998 09 15819 13476 15917
1998 12 15771 13421 15882
1999 03 15239 13261 15349
1999 06 14802 13085 14937
1999 09 14752 13117 14889
1999 12 14568 13016 14667
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
---------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Bond Index Fund* -7.85% 8.82% 6.66% $14,568
Average General Government Fund** -3.02 6.37 4.62 13,016
Lehman Long Government/Corporate Index -7.65 8.99 6.78 14,667
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-Term Bond Index Fund* 3/1/1994 -7.85% 8.82% -0.24% 6.90% 6.66%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
17
<PAGE> 20
FINANCIAL STATEMENTS
DECEMBER 31, 1999
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings, including each
security's market value on the last day of the reporting period. Securities are
grouped and subtotaled by bond type (U.S. government and agency issues,
corporate bonds, foreign bonds, etc.); corporate bonds are further classified by
industry sector. Other assets are added to, and liabilities are subtracted from,
the value of Total Investments to calculate the fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets of each fund, you will find a
table displaying the composition of the fund's net assets. Undistributed Net
Investment Income is usually zero because the fund distributes its net income to
shareholders as a dividend each day. Any realized gains must be distributed
annually, so the bulk of net assets consists of Paid in Capital (money invested
by shareholders). The balance shown for Accumulated Net Realized Gains usually
approximates the amount available to distribute to shareholders as capital gains
as of the statement date, but may differ because certain investments or
transactions may be treated differently for financial statement and tax
purposes. Any Accumulated Net Realized Losses, and any cumulative excess of
distributions over net realized gains, will appear as negative balances.
Unrealized Appreciation (Depreciation) is the difference between the value of
the fund's investments and their cost, and reflects the gains (losses) that
would be realized if the fund were to sell all of its investments at their
statement-date values.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (60.0%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (19.1%)
U.S. Treasury Bond 7.125% 2/15/2023 $ 65,915 $ 68,609
U.S. Treasury Bond 7.50% 11/15/2024 56,600 61,744
U.S. Treasury Bond 7.625% 11/15/2022 194,875 213,626
U.S. Treasury Bond 7.875% 2/15/2021 17,310 19,333
U.S. Treasury Bond 8.00% 11/15/2021 94,075 106,676
U.S. Treasury Bond 8.125% 8/15/2019-8/15/2021 392,360 448,153
U.S. Treasury Bond 8.50% 2/15/2020 47,945 56,613
U.S. Treasury Bond 8.75% 5/15/2017-8/15/2020 149,025 179,074
U.S. Treasury Bond 8.875% 8/15/2017-2/15/2019 57,385 69,427
U.S. Treasury Bond 9.125% 5/15/2018 15,840 19,605
U.S. Treasury Bond 9.25% 2/15/2016 29,435 36,317
U.S. Treasury Bond 9.875% 11/15/2015 4,390 5,672
U.S. Treasury Bond 10.00% 5/15/2010 29,275 33,537
U.S. Treasury Bond 10.375% 11/15/2009-11/15/2012 566,620 668,961
U.S. Treasury Bond 10.625% 8/15/2015 16,400 22,304
U.S. Treasury Bond 10.75% 5/15/2003 40,410 45,586
U.S. Treasury Bond 11.75% 11/15/2014 900 1,216
U.S. Treasury Bond 11.875% 11/15/2003 8,675 10,241
U.S. Treasury Bond 12.00% 8/15/2013 350 467
U.S. Treasury Bond 12.75% 11/15/2010 74,380 95,850
U.S. Treasury Bond 13.25% 5/15/2014 24,800 35,700
U.S. Treasury Bond 14.00% 11/15/2011 3,420 4,768
U.S. Treasury Note 5.75% 8/15/2003 20,000 19,590
U.S. Treasury Note 6.50% 8/15/2005-10/15/2006 189,000 188,622
U.S. Treasury Note 8.00% 5/15/2001 8,725 8,927
-----------
2,420,618
-----------
AGENCY BONDS & NOTES (6.3%)
Federal Farm Credit Bank 4.80% 11/6/2003 34,120 31,803
Federal Farm Credit Bank 5.75% 9/1/2005 700 662
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank 5.575% 9/2/2003 $ 64,000 $ 61,413
Federal Home Loan Bank 5.675% 8/18/2003 51,450 49,554
Federal Home Loan Bank 5.79% 4/27/2009 900 820
Federal Home Loan Bank 5.80% 9/2/2008 74,700 68,581
Federal Home Loan Bank 5.865% 9/2/2008 55,420 50,774
Federal Home Loan Bank 5.88% 11/25/2008 15,300 13,807
Federal Home Loan Bank 6.50% 8/15/2007 41,260 40,065
Federal Home Loan Bank 7.78% 10/19/2001 500 511
Federal Home Loan Bank 8.60% 1/25/2000 110 110
Federal Home Loan Mortgage Corp. 5.63% 1/10/2003 625 604
Federal Home Loan Mortgage Corp. 5.75% 3/15/2009 112,800 102,737
Federal Home Loan Mortgage Corp. 6.45% 4/29/2009 23,000 21,450
Federal Home Loan Mortgage Corp. 7.09% 6/1/2005 4,400 4,330
Federal National Mortgage Assn. 5.25% 1/15/2003 750 721
Federal National Mortgage Assn. 5.64% 12/10/2008 25,000 22,204
Federal National Mortgage Assn. 5.75% 4/15/2003-2/15/2008 33,170 32,111
Federal National Mortgage Assn. 5.90% 7/9/2003 41,345 39,908
Federal National Mortgage Assn. 5.91% 8/25/2003 18,450 17,805
Federal National Mortgage Assn. 5.96% 4/23/2003 7,900 7,656
Federal National Mortgage Assn. 5.97% 7/3/2003 26,390 25,514
Federal National Mortgage Assn. 6.09% 2/20/2009 51,730 47,075
Federal National Mortgage Assn. 6.16% 3/29/2001 1,300 1,295
Federal National Mortgage Assn. 6.18% 2/19/2009 11,000 10,066
Federal National Mortgage Assn. 6.40% 5/14/2009 67,300 62,870
Federal National Mortgage Assn. 6.56% 4/23/2008 55,000 51,817
Federal National Mortgage Assn. 6.59% 5/16/2002 1,500 1,498
Federal National Mortgage Assn. 7.12% 7/3/2006 669 673
Federal National Mortgage Assn. 7.50% 2/11/2002 2,500 2,542
Federal National Mortgage Assn. 7.55% 4/22/2002 3,000 3,058
Federal National Mortgage Assn. 8.25% 12/18/2000 100 102
Government Trust Certificate 9.625% 5/15/2002 163 167
Private Export Funding Corp. 8.40% 7/31/2001 225 231
Resolution Funding Corp. 8.125% 10/15/2019 550 613
Resolution Funding Corp. 8.625% 1/15/2030 110 132
Resolution Funding Corp. 8.875% 7/15/2020 280 335
Small Business Administration Variable Rate
Interest Only Custodial Receipts 2.719% 6/25/2000 8,243 309
Tennessee Valley Auth. 5.375% 11/13/2008 32,400 28,427
-----------
804,350
-----------
MORTGAGE-BACKED SECURITIES (34.6%)
Federal Home Loan Mortgage Corp. 5.50% 9/1/2000-12/1/2028 (1) 50,219 46,786
Federal Home Loan Mortgage Corp. 6.00% 7/1/2000-12/1/2029 (1) 542,724 507,225
Federal Home Loan Mortgage Corp. 6.50% 3/1/2000-8/1/2029 (1) 967,918 920,666
Federal Home Loan Mortgage Corp. 7.00% 2/1/2000-10/1/2029 (1) 528,404 514,202
Federal Home Loan Mortgage Corp. 7.50% 3/1/2000-8/1/2029 (1) 234,101 232,817
Federal Home Loan Mortgage Corp. 8.00% 5/1/2002-11/1/2029 (1) 123,838 125,312
Federal Home Loan Mortgage Corp. 8.50% 9/1/2001-1/1/2028 (1) 29,107 29,505
Federal Home Loan Mortgage Corp. 9.00% 8/1/2001-7/1/2027 (1) 6,653 6,936
Federal Home Loan Mortgage Corp. 9.50% 4/1/2016-6/1/2025 (1) 4,705 4,979
Federal Home Loan Mortgage Corp. 10.00% 7/1/2000-4/1/2025 (1) 880 946
Federal Home Loan Mortgage Corp. 10.50% 9/1/2000-12/1/2015 (1) 136 139
Federal Home Loan Mortgage Corp. 11.25% 8/1/2014 (1) 10 10
Federal Housing Administration Project 7.43% 10/1/2020 (1) 468 460
Federal National Mortgage Assn. 5.50% 1/1/2001-6/1/2009 (1) 1,367 1,298
Federal National Mortgage Assn. 6.00% 10/1/2000-7/1/2029 (1) 203,109 188,731
Federal National Mortgage Assn. 6.50% 2/1/2000-11/1/2029 (1) 280,531 266,218
Federal National Mortgage Assn. 7.00% 5/1/2000-1/1/2030 (1) 274,414 266,511
Federal National Mortgage Assn. 7.50% 1/1/2000-1/1/2030 (1) 142,768 141,509
Federal National Mortgage Assn. 7.75% 10/1/2002 (1) 9 9
Federal National Mortgage Assn. 8.00% 2/1/2000-6/1/2029 (1) 33,689 34,067
Federal National Mortgage Assn. 8.50% 4/1/2006-7/1/2027 (1) 12,703 13,058
Federal National Mortgage Assn. 9.00% 9/1/2003-1/1/2027 (1) 5,378 5,603
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assn. 9.50% 10/1/2001-2/1/2025 (1) $ 2,941 $ 3,109
Federal National Mortgage Assn. 10.00% 8/1/2005-6/1/2022 (1) 1,126 1,205
Federal National Mortgage Assn. 10.50% 11/1/2000-8/1/2020 (1) 352 378
Government National Mortgage Assn. 6.00% 3/1/2009-7/15/2029 (1) 99,951 91,678
Government National Mortgage Assn. 6.50% 10/15/2007-8/15/2029 (1) 285,863 269,538
Government National Mortgage Assn. 7.00% 11/15/2007-10/15/2029 (1) 312,692 303,077
Government National Mortgage Assn. 7.50% 2/15/2007-12/15/2029 (1) 212,331 210,550
Government National Mortgage Assn. 8.00% 11/15/2001-12/15/2029 (1) 132,999 134,641
Government National Mortgage Assn. 8.50% 5/15/2010-11/15/2029 (1) 30,789 31,725
Government National Mortgage Assn. 9.00% 8/15/2001-6/15/2027 (1) 15,863 16,650
Government National Mortgage Assn. 9.50% 1/1/2004-9/15/2025 (1) 9,641 10,321
Government National Mortgage Assn. 10.00% 3/15/2000-8/15/2025 (1) 2,362 2,573
Government National Mortgage Assn. 10.50% 11/15/2010-1/15/2021 (1) 1,512 1,652
Government National Mortgage Assn. 11.50% 3/15/2010-11/15/2017 (1) 260 289
Resolution Trust Corp. Collateralized Mortgage Obligations 10.35% 8/25/2021 (1) 507 505
-----------
4,384,878
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $7,877,427) 7,609,846
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (34.0%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (7.0%)
ARG Funding Corp. 5.88% 3/6/2002 (1) 37,900 37,012
AT&T Universal Card Master Trust 5.95% 10/17/2002 (1) 14,120 14,072
Advanta Credit Card Master Trust 6.05% 8/1/2003 (1) 8,750 8,718
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 32,000 31,332
American Express Credit Card Master Trust 6.40% 9/15/2002 (1) 17,000 16,782
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 25,854 25,878
American Express Credit Card Master Trust 7.60% 9/15/2001 (1) 2,000 2,024
American Express Credit Europe 5.375% 9/15/2000 (1) 16,250 16,160
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.16% 12/14/2000 (1) 7,875 7,849
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.42% 3/25/2005 (1) 11,325 10,992
Chemical Master Credit Card Trust I 5.55% 1/15/2001 (1) 5,450 5,399
CIT RV Trust 5.78% 7/15/2008 (1) 17,650 17,486
CIT RV Trust 5.96% 4/15/2011 (1) 15,525 15,260
Citibank Credit Card Master Trust 5.875% 3/10/2011 (1) 11,600 10,444
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1) 6,325 6,285
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 18,250 18,218
ComEd Transitional Funding Trust 5.63% 6/25/2006 (1) 510 468
Discover Card Master Trust 5.65% 11/15/2004 (1) 43,000 41,742
Discover Card Master Trust I 5.75% 4/15/2001 (1) 13,500 13,326
First Bank Corp. Card Master Trust 6.40% 2/15/2002 (1) 5,030 4,982
First USA Credit Card Master Trust 6.42% 7/17/2002 (1) 9,450 9,364
Ford Credit Auto Owner Trust 5.90% 6/15/2002 (1) 74,000 73,280
Honda Auto Lease Trust 6.45% 1/29/2001 (1) 23,000 22,836
Honda Auto Lease Trust 6.65% 7/15/2005 (1) 23,000 22,874
Household Affinity Credit Card Master Trust I 5.60% 5/15/2002 (1) 2,929 2,922
MBNA Master Credit Card Trust 6.05% 11/15/2002 (1) 21,375 21,388
MBNA Master Credit Card Trust 6.60% 8/15/2000 (1) 8,500 8,526
MBNA Master Credit Card Trust 6.60% 6/15/2002 (1) 16,065 15,969
MMCA Automobile Trust 5.50% 7/15/2005 (1) 39,600 39,239
MMCA Automobile Trust 6.80% 8/15/2003 (1) 29,900 29,816
PECO Energy Transition Trust 5.63% 3/1/2005 (1) 59,900 58,025
PECO Energy Transition Trust 6.05% 7/5/2006 (1) 14,675 13,849
Premier Auto Trust 5.69% 6/8/2002 (1) 41,400 41,088
Providian Master Trust 6.60% 9/15/2002 (1) 20,000 19,808
Sears Credit Account Master Trust 5.80% 8/15/2001 (1) 42,500 42,136
Sears Credit Account Master Trust 6.05% 2/15/2004 (1) 19,500 19,090
Sears Credit Account Master Trust 6.35% 2/15/2007 (1) 30,000 29,579
Sears Credit Account Master Trust 7.00% 1/15/2004 (1) 1,000 1,004
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 1,273 1,285
Standard Credit Card Master Trust 6.55% 10/7/2005 (1) 2,850 2,773
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Standard Credit Card Master Trust 7.85% 2/7/2002 (1) $ 43,261 $ 43,331
Standard Credit Card Master Trust 8.25% 11/7/2003 (1) 1,020 1,044
Toyota Auto Lease Trust 5.35% 7/25/2002 (1) 60,575 59,969
Toyota Auto Lease Trust 6.35% 4/26/2004 (1) 7,950 7,926
-----------
891,550
-----------
FINANCE (13.9%)
Allstate Corp. 7.20% 12/1/2009 10,700 10,386
American General Finance Corp. 5.84% 1/29/2001 1,500 1,485
American General Finance Corp. 6.20% 3/15/2003 3,100 3,008
American General Finance Corp. 7.45% 7/1/2002 1,575 1,587
Associates Corp. 5.85% 1/15/2001 1,550 1,536
Associates Corp. 6.20% 5/16/2005 1,000 947
Associates Corp. 6.44% 1/15/2004 1,625 1,580
Associates Corp. 6.50% 8/15/2002 3,000 2,961
Associates Corp. 6.50% 10/15/2002 11,975 11,816
Associates Corp. 6.625% 5/15/2001 3,300 3,290
Associates Corp. 7.50% 4/15/2002 5,800 5,858
Associates Corp. 7.875% 9/30/2001 1,105 1,122
Avalon Properties Inc. 6.875% 12/15/2007 9,550 8,850
Banc One Corp. 6.25% 10/1/2001 21,500 21,244
Bank of America Corp. 7.50% 10/15/2002 6,150 6,214
Bank of America Corp. 7.625% 6/15/2004 1,630 1,653
Bank of America Corp. 7.75% 7/15/2002 3,000 3,047
Bank of America Corp. 7.875% 12/1/2002 2,000 2,041
Bank of America Corp. 8.07% 12/31/2026 8,000 7,523
Bank of America Corp. 8.375% 3/15/2002 2,500 2,566
Bank of America Corp. 8.50% 1/15/2007 5,000 5,257
Bank of America Corp. 9.375% 9/15/2009 8,500 9,524
Bank of America Corp. 9.625% 2/13/2001 1,100 1,132
Bank of America Corp. 10.00% 2/1/2003 4,900 5,275
Bank of New York 7.30% 12/1/2009 2,000 1,959
Bank of New York 7.875% 11/15/2002 1,500 1,521
Bank of New York Capital I 7.97% 12/31/2026 3,225 3,015
Bear, Stearns & Co., Inc. 6.625% 1/15/2004 3,500 3,396
Bear, Stearns & Co., Inc. 6.75% 12/15/2007 3,635 3,405
Bear, Stearns & Co., Inc. 7.625% 12/7/2009 4,000 3,924
Beneficial Corp. 6.35% 12/3/2001 1,500 1,476
BT Capital Trust B 7.90% 1/15/2027 1,100 1,001
CIGNA Corp. 7.875% 5/15/2027 13,875 12,924
CIGNA Corp. 8.30% 1/15/2033 835 808
CIT Group Holdings, Inc. 7.125% 10/15/2004 30,000 29,689
CNA Financial Corp 6.50% 4/15/2005 25,175 23,453
Camden Property Trust 7.00% 11/15/2006 6,250 5,786
Case Credit Corp. 6.15% 3/1/2002 64,000 63,428
Chase Capital I 7.67% 12/1/2026 11,100 10,104
The Chase Manhattan Corp. 5.75% 4/15/2004 5,975 5,649
The Chase Manhattan Corp. 6.00% 11/1/2005 11,625 10,873
The Chase Manhattan Corp. 6.375% 4/1/2008 5,940 5,515
The Chase Manhattan Corp. 6.50% 8/1/2005 3,625 3,477
The Chase Manhattan Corp. 7.125% 2/1/2007 1,650 1,612
The Chase Manhattan Corp. 8.125% 6/15/2002 1,410 1,444
The Chase Manhattan Corp. 8.50% 2/15/2002 10,000 10,288
Chemical Bank Corp. 7.25% 9/15/2002 2,565 2,578
Chrysler Financial Corp. LLC 5.875% 2/7/2001 3,500 3,465
Citicorp 7.00% 7/1/2007 400 388
Citicorp 7.125% 6/1/2003 135 135
Citicorp 7.125% 3/15/2004 2,000 1,994
Citicorp 8.625% 12/1/2002 4,500 4,681
Citicorp 9.50% 2/1/2002 1,000 1,047
Citigroup Inc. 6.20% 3/15/2009 140 128
Comdisco Inc. 6.00% 1/30/2002 4,000 3,864
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comdisco Inc. 7.25% 9/20/2001 $ 25,500 $ 25,307
Comerica, Inc. 7.125% 12/1/2013 5,000 4,639
Commercial Credit Corp. 5.90% 9/1/2003 550 527
Commercial Credit Corp. 6.625% 11/15/2006 2,000 1,908
Conseco Inc. 9.00% 10/15/2006 7,900 8,111
CoreStates Capital Corp. 6.625% 3/15/2005 6,900 6,636
CoreStates Capital Corp. 9.375% 4/15/2003 1,750 1,850
Countrywide Funding Corp. 6.28% 1/15/2003 2,500 2,430
Countrywide Funding Corp. 7.26% 5/10/2004 2,000 1,983
Countrywide Funding Corp. 8.25% 7/15/2002 9,872 10,101
Countrywide Home Loan 6.45% 2/27/2003 1,000 975
Dean Witter, Discover & Co. 6.75% 10/15/2013 800 719
Dean Witter, Discover & Co. 6.875% 3/1/2003 2,300 2,277
Donaldson, Lufkin & Jenrette, Inc. 6.00% 12/1/2001 25,250 24,697
ERAC USA Finance Co. 7.95% 12/15/2009 14,200 14,060
Equitable Cos. Inc. 7.00% 4/1/2028 4,310 3,854
Equity Residential Properties 6.55% 11/15/2001 16,750 16,467
Fidelity Investments 7.49% 6/15/2019 1,000 970
Fifth Third Bancorp 6.75% 7/15/2005 5,000 4,853
Finova Capital Corp 5.875% 10/15/2001 22,500 21,996
Finova Capital Corp 7.25% 11/8/2004 29,250 28,893
First Bank NA 7.55% 6/15/2004 10,000 10,090
First Bank System 7.625% 5/1/2005 5,000 5,010
First Chicago Corp. 10.25% 5/1/2001 2,750 2,863
First Chicago Corp. 6.375% 1/30/2009 5,000 4,553
First Chicago Corp. 6.875% 6/15/2003 5,000 4,929
First Chicago Corp. 7.625% 1/15/2003 2,400 2,419
First Chicago Corp. 8.25% 6/15/2002 5,000 5,124
First Chicago Corp. 9.25% 11/15/2001 1,225 1,274
First Interstate Bancorp 10.875% 4/15/2001 2,750 2,883
First Union Corp. 6.625% 7/15/2005 390 374
First Union Corp. 8.00% 11/15/2002 100 102
First Union Corp. 8.125% 6/24/2002 2,900 2,955
Fleet Capital Trust II 7.92% 12/11/2026 3,790 3,457
Fleet Credit Card 6.82% 4/9/2001 5,000 4,994
Fleet Financial Group, Inc. 6.875% 3/1/2003 1,100 1,085
Fleet Financial Group, Inc. 7.125% 4/15/2006 5,700 5,531
Fleet Financial Group, Inc. 8.125% 7/1/2004 4,600 4,703
FleetBoston Financial Corp. 7.375% 12/1/2009 4,000 3,915
Ford Motor Credit Co. 6.375% 2/1/2029 16,750 14,079
Ford Motor Credit Co. 9.00% 9/15/2001 5,000 5,149
Ford Motor Credit Co. 5.125% 10/15/2001 64,650 62,823
Ford Motor Credit Co. 5.80% 1/12/2009 15,000 13,292
Ford Motor Credit Co. 7.00% 9/25/2001 5,000 5,008
Ford Motor Credit Co. 7.375% 10/28/2009 12,700 12,534
Ford Motor Credit Co. 7.50% 1/15/2003 1,000 1,008
Ford Motor Credit Co. 7.75% 11/15/2002 1,650 1,678
Ford Motor Credit Co. 7.75% 3/15/2005 2,385 2,421
General Electric Capital Corp. 5.77% 8/27/2001 9,700 9,534
General Electric Capital Corp. 5.89% 5/11/2001 10,000 9,879
General Electric Capital Corp. 6.90% 9/15/2015 9,000 8,431
General Electric Capital Corp. 8.30% 9/20/2009 275 291
General Motors Acceptance Corp. 5.50% 1/14/2002 14,000 13,596
General Motors Acceptance Corp. 6.60% 1/17/2001 100 100
General Motors Acceptance Corp. 6.625% 10/1/2002 5,150 5,082
General Motors Acceptance Corp. 6.625% 1/10/2002 22,100 21,893
General Motors Acceptance Corp. 6.75% 12/10/2002 65,000 64,264
General Motors Acceptance Corp. 6.875% 7/15/2001 1,500 1,498
General Motors Acceptance Corp. 7.125% 5/1/2003 1,300 1,294
General Motors Acceptance Corp. 7.125% 5/1/2001 10,975 10,999
General Motors Acceptance Corp. 8.50% 1/1/2003 6,200 6,407
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Motors Acceptance Corp. 9.00% 10/15/2002 $ 10,650 $ 11,134
General Motors Acceptance Corp. 9.625% 12/15/2001 5,895 6,172
HRPT Properties Trust 6.75% 12/18/2002 16,250 15,234
Household Finance Corp. 5.875% 2/1/2009 360 318
Household Finance Corp. 6.40% 6/17/2008 4,715 4,346
Household Finance Corp. 6.45% 3/15/2001 700 695
Household Finance Corp. 6.45% 2/1/2009 2,430 2,235
Household Finance Corp. 6.70% 6/15/2002 1,500 1,484
Household Finance Corp. 7.25% 7/15/2003 1,000 996
Household Finance Corp. 7.65% 5/15/2007 3,250 3,251
International Lease Finance Corp. 6.375% 8/1/2001 7,500 7,435
International Lease Finance Corp. 6.50% 7/1/2001 2,050 2,037
JDN Realty Corp. 6.80% 8/1/2004 12,810 11,926
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 25,650 24,733
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 6,500 6,135
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 4,625 4,252
Lehman Brothers Holdings Inc. 6.90% 1/29/2001 10,800 10,762
Lehman Brothers Holdings Inc. 7.25% 4/15/2003 11,000 10,870
Lehman Brothers Holdings Inc. 7.375% 1/15/2007 5,000 4,849
Lehman Brothers Holdings Inc. 7.50% 9/1/2006 6,750 6,588
Lehman Brothers Holdings Inc. 7.625% 6/1/2006 6,510 6,388
Liberty Financial Co. 6.75% 11/15/2008 11,000 10,044
Mack-Cali Realty 7.00% 3/15/2004 15,000 14,397
Mack-Cali Realty 7.25% 3/15/2009 2,175 2,004
Mellon Bank NA 6.50% 8/1/2005 5,300 5,091
Mellon Bank NA 6.75% 6/1/2003 2,775 2,742
Mellon Bank NA 7.375% 5/15/2007 3,500 3,470
Mellon Capital II 7.995% 1/15/2027 6,650 6,267
Mellon Financial Co. 5.75% 11/15/2003 4,400 4,182
Mellon Financial Co. 9.75% 6/15/2001 6,647 6,887
Merrill Lynch & Co., Inc. 5.71% 1/15/2002 12,000 11,707
Merrill Lynch & Co., Inc. 5.87% 11/15/2001 21,750 21,340
Merrill Lynch & Co., Inc. 5.88% 1/15/2004 7,100 6,763
Merrill Lynch & Co., Inc. 6.00% 1/15/2001 1,000 992
Merrill Lynch & Co., Inc. 6.00% 2/17/2009 9,300 8,314
Merrill Lynch & Co., Inc. 6.07% 10/15/2001 44,700 44,038
Merrill Lynch & Co., Inc. 6.50% 4/1/2001 18,500 18,412
Merrill Lynch & Co., Inc. 6.64% 9/19/2002 2,995 2,964
Merrill Lynch & Co., Inc. 6.875% 11/15/2018 3,750 3,395
Merrill Lynch & Co., Inc. 7.00% 3/15/2006 300 292
Merrill Lynch & Co., Inc. 8.00% 2/1/2002 2,600 2,648
Merrill Lynch & Co., Inc. 8.30% 11/1/2002 2,735 2,818
Morgan Stanley, Dean Witter Discover & Co. 5.625% 1/20/2004 4,000 3,777
Morgan Stanley, Dean Witter Discover & Co. 6.375% 8/1/2002 7,000 6,867
Morgan Stanley, Dean Witter Discover & Co. 6.875% 3/1/2007 7,300 7,033
Morgan Stanley, Dean Witter Discover & Co. 7.00% 10/1/2013 700 644
Morgan Stanley, Dean Witter Discover & Co. 7.125% 1/15/2003 82,200 81,892
NAC Re Corp. 7.15% 11/15/2005 1,500 1,449
NB Capital Trust II 7.83% 12/15/2026 5,000 4,626
NB Capital Trust IV 8.25% 4/15/2027 3,400 3,270
NCNB Corp. 9.50% 6/1/2004 8,725 9,371
National City Corp. 7.20% 5/15/2005 10,000 9,892
National Rural Utilities 6.42% 5/1/2008 11,300 10,625
NationsBank Corp. 5.75% 3/15/2001 500 494
NationsBank Corp. 6.375% 2/15/2008 1,500 1,395
NationsBank Corp. 6.50% 3/15/2006 5,600 5,329
NationsBank Corp. 6.95% 3/20/2006 3,000 2,911
NationsBank Corp. 7.00% 9/15/2001 1,800 1,801
NationsBank Corp. 7.25% 10/15/2025 1,625 1,502
NationsBank Corp. 7.50% 9/15/2006 1,000 1,002
NationsBank Corp. 7.75% 8/15/2004 5,000 5,104
</TABLE>
23
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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>
NationsBank Corp. 8.125% 6/15/2002 $ 3,000 $ 3,066
Norwest Corp. 5.75% 2/1/2003 4,000 3,856
Norwest Corp. 6.65% 10/15/2023 40 35
Norwest Corp. 6.80% 5/15/2002 5,000 4,982
Norwest Corp. 7.125% 4/1/2000 500 501
Norwest Financial, Inc. 6.25% 11/1/2002 1,000 979
Norwest Financial, Inc. 7.875% 2/15/2002 1,000 1,017
PaineWebber Group, Inc. 6.375% 5/15/2004 850 808
PaineWebber Group, Inc. 6.50% 11/1/2005 500 467
PaineWebber Group, Inc. 7.875% 2/15/2003 2,250 2,264
Pitney Bowes Credit Corp. 9.25% 6/15/2008 2,000 2,237
Popular Inc. 6.20% 4/30/2001 32,000 31,536
Popular Inc. 7.375% 9/15/2001 32,400 32,333
Progressive Corp. 6.625% 3/1/2029 5,000 4,206
Realty Income Corp. 7.75% 5/6/2007 3,000 2,757
Reckson Operating Partnership LP 7.75% 3/15/2009 16,400 15,090
Republic New York Corp. 7.75% 5/15/2002 3,000 3,020
Republic New York Corp. 7.75% 5/15/2009 4,300 4,203
Republic New York Corp. 9.70% 2/1/2009 5,000 5,508
Salomon, Inc. 6.65% 7/15/2001 7,050 7,011
Salomon, Inc. 7.20% 2/1/2004 6,000 5,981
Salomon Smith Barney Holdings Inc. 5.875% 2/1/2001 13,200 13,053
Salomon Smith Barney Holdings Inc. 6.50% 10/15/2002 5,300 5,217
Salomon Smith Barney Holdings Inc. 7.375% 5/15/2007 2,000 1,975
Security Capital Pacific Trust 8.05% 4/1/2017 4,300 3,877
Shurgard Storage Centers, Inc. 7.50% 4/25/2004 6,000 5,759
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 10,000 9,368
Simon DeBartolo Group, Inc. 6.75% 6/15/2005 265 244
Spieker Properties Inc. 7.50% 10/1/2027 700 606
Summit Bancorp 8.625% 12/10/2002 5,000 5,150
Summit Properties Inc. 6.80% 8/15/2002 3,500 3,367
Summit Properties Inc. 6.95% 8/15/2004 17,500 16,318
Summit Properties Inc. 7.20% 8/15/2007 4,450 4,027
SunTrust Banks, Inc. 6.00% 2/15/2026 5,000 4,626
SunTrust Banks, Inc. 7.375% 7/1/2002 5,000 5,031
SunTrust Banks, Inc. 7.375% 7/1/2006 3,500 3,509
Suntrust Capital 7.90% 6/15/2027 2,085 1,943
Susa Partnership LP 7.00% 12/1/2007 1,050 928
Susa Partnership LP 7.50% 12/1/2027 5,025 4,110
Toyota Motor Credit Corp. 5.50% 9/17/2001 45,750 44,701
Toyota Motor Credit Corp. 5.625% 11/13/2003 3,750 3,563
Travelers/Aetna Property Casualty Corp. 6.75% 4/15/2001 14,000 13,987
Travelers/Aetna Property Casualty Corp. 7.75% 4/15/2026 1,000 970
U.S. Bancorp 6.875% 12/1/2004 25,000 24,478
U.S. Bancorp 8.27% 12/15/2026 3,250 3,091
U S WEST Capital Funding, Inc. 6.875% 8/15/2001 31,250 31,120
Wachovia Corp. 5.625% 12/15/2008 4,650 4,082
Wachovia Corp. 6.25% 8/4/2008 2,600 2,393
Wachovia Corp. 6.375% 4/15/2003 110 108
Wachovia Corp. 6.625% 11/15/2006 750 717
Wachovia Corp. 6.80% 6/1/2005 10,000 9,755
Wells Fargo & Co. 6.125% 11/1/2003 5,000 4,824
Wells Fargo & Co. 6.25% 4/15/2008 915 842
Wells Fargo & Co. 6.50% 9/3/2002 40,200 39,724
Wells Fargo & Co. 6.875% 4/1/2006 6,400 6,219
Wells Fargo & Co. 8.75% 5/1/2002 8,370 8,667
Wells Fargo Capital I 7.96% 12/15/2026 3,600 3,390
-----------
1,766,890
-----------
INDUSTRIAL (9.0%)
American Airlines Inc. 6.855% 4/15/2009 13,400 13,163
American Airlines Inc. 7.024% 10/15/2009 6,400 6,300
</TABLE>
24
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Anadarko Petroleum Corp. 7.20% 3/15/2029 $ 16,000 $ 14,470
Anheuser-Busch Cos., Inc. 6.75% 12/15/2027 1,600 1,431
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 5,050 4,952
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 3,850 3,606
Anheuser-Busch Cos., Inc. 7.375% 7/1/2023 800 748
Apache Corp. 7.625% 7/1/2019 7,500 7,243
Applied Materials, Inc. 8.00% 9/1/2004 1,625 1,653
Archer-Daniels-Midland Co. 6.25% 5/15/2003 1,000 972
Archer-Daniels-Midland Co. 8.875% 4/15/2011 3,745 4,091
Auburn Hills 12.00% 5/1/2020 770 1,113
Baker Hughes Inc. 6.25% 1/15/2009 2,500 2,267
Baker Hughes Inc. 6.875% 1/15/2029 17,150 14,995
C.R. Bard, Inc. 6.70% 12/1/2026 13,650 12,925
Bayer Corp. 6.65% 2/15/2028 1,300 1,142
Black & Decker Corp. 7.50% 4/1/2003 27,800 27,871
The Boeing Co. 6.625% 2/15/2038 11,000 9,323
The Boeing Co. 8.75% 8/15/2021 1,800 1,978
Borg-Warner Automotive 7.125% 2/15/2029 3,000 2,573
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 6,750 6,376
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 2,900 2,645
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 7,205 6,476
Burlington Northern Santa Fe Corp. 7.25% 8/1/2097 4,450 3,866
Burlington Northern Santa Fe Corp. 9.25% 10/1/2006 750 812
CSX Corp. 7.05% 5/1/2002 7,000 6,953
CSX Corp. 8.10% 9/15/2022 3,950 3,943
CSX Corp. 8.625% 5/15/2022 3,875 4,077
CSX Corp. 9.00% 8/15/2006 700 739
CVS Corp. 5.50% 2/15/2004 16,750 15,655
Caterpillar, Inc. 7.375% 3/1/2097 8,900 7,990
Caterpillar, Inc. 9.00% 4/15/2006 1,600 1,710
Chrysler Corp. 7.45% 2/1/2097 4,375 4,062
Coastal Corp. 6.50% 5/15/2006 1,250 1,179
Comcast Cablevision 8.125% 5/1/2004 11,350 11,626
Comcast Cablevision 8.875% 5/1/2017 3,300 3,609
Conoco Inc. 6.95% 4/15/2029 5,500 4,955
Conrail Corp. 9.75% 6/15/2020 1,680 1,913
Continental Airlines, Inc. (Equipment Trust Certificates) 6.648% 3/15/2019 10,675 9,580
Continental Airlines, Inc. Pass-Through Trust 6.331% 12/29/2000 3,206 3,146
Continental Airlines, Inc. Pass-Through Trust 6.41% 8/8/2004 826 782
Cyprus AMAX Minerals Co. 7.375% 5/15/2007 6,000 5,653
Daimler-Chrysler North America Holding Corp. 6.84% 10/15/2002 20,000 19,907
Daimler-Chrysler North America Holding Corp. 6.90% 9/1/2004 28,500 28,128
Daimler-Chrysler North America Holding Corp. 7.20% 9/1/2009 14,000 13,746
Dayton Hudson Corp. 6.65% 8/1/2028 5,600 4,853
Dayton Hudson Corp. 6.75% 1/1/2028 1,000 879
Dayton Hudson Corp. 9.75% 7/1/2002 1,000 1,059
Deere & Co. 8.50% 1/9/2022 985 1,042
Delta Air Lines Inc. 7.70% 12/15/2005 5,000 4,921
Delta Air Lines Inc. 7.90% 12/15/2009 1,400 1,369
Delta Air Lines Inc. 8.30% 12/15/2029 5,800 5,617
Delta Air Lines, Inc. (Equipment Trust Certificates) 8.54% 1/2/2007 3,574 3,612
Dillard's Inc. 5.79% 11/15/2001 26,000 25,137
Dillard's Inc. 6.625% 11/15/2008 7,000 6,236
Dillard's Inc. 7.75% 5/15/2027 1,000 907
Dillard's Inc. 7.85% 10/1/2012 2,700 2,546
The Walt Disney Co. 7.55% 7/15/2093 2,597 2,393
Dow Chemical Co. 7.375% 11/1/2029 7,000 6,692
Dow Chemical Co. 8.50% 6/8/2010 2,500 2,624
E.I. duPont de Nemours & Co. 6.75% 10/15/2004 15,700 15,480
E.I. duPont de Nemours & Co. 6.875% 10/15/2009 3,000 2,903
Eastman Chemical Co. 6.375% 1/15/2004 12,000 11,434
Eastman Chemical Co. 7.25% 1/15/2024 3,700 3,265
</TABLE>
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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>
Eastman Chemical Co. 7.60% 2/1/2027 $ 2,988 $ 2,736
Federated Department Stores, Inc. 6.125% 9/1/2001 500 491
Federated Department Stores, Inc. 7.00% 2/15/2028 1,060 939
Federated Department Stores, Inc. 7.45% 7/15/2017 11,125 10,579
Federated Department Stores, Inc. 8.125% 10/15/2002 5,000 5,098
First Data Corp. 6.375% 12/15/2007 1,000 931
First Data Corp. 6.625% 4/1/2003 7,735 7,584
Ford Capital BV 9.50% 6/1/2010 825 927
Ford Capital BV 9.50% 7/1/2001 1,925 1,992
Ford Capital BV 9.875% 5/15/2002 2,250 2,380
Ford Motor Co. 9.98% 2/15/2047 835 1,040
Ford Motor Co. 8.00% 6/15/2002 2,850 2,910
General Motors Corp. 7.00% 6/15/2003 2,500 2,487
General Motors Corp. 9.125% 7/15/2001 7,900 8,144
Georgia-Pacific Corp. 7.75% 11/15/2029 8,750 8,336
Harrahs Operating Co., Inc. 7.50% 1/15/2009 16,285 15,278
Hertz Corp. 6.00% 2/1/2001 15,000 14,855
Illinois Central Railroad Co. 6.75% 5/15/2003 8,345 8,131
International Business Machines Corp. 6.375% 6/15/2000 500 500
International Business Machines Corp. 6.45% 8/1/2007 1,000 957
International Business Machines Corp. 7.00% 10/30/2025 650 610
International Business Machines Corp. 7.125% 12/1/2096 11,325 10,273
International Paper Co. 6.875% 11/1/2023 5,000 4,346
International Paper Co. 6.875% 4/15/2029 2,000 1,734
International Paper Co. 7.875% 8/1/2006 2,265 2,273
Kroger Co. 7.625% 9/15/2006 15,250 15,041
Kroger Co. 7.625% 9/15/2029 4,700 4,603
Kroger Co. 7.65% 4/15/2007 7,550 7,456
Kroger Co. 8.15% 7/15/2006 2,700 2,737
Lafarge Corp 6.375% 7/15/2005 2,000 1,882
Lockheed Martin Corp. 6.85% 5/15/2001 8,500 8,420
Lockheed Martin Corp. 7.65% 5/1/2016 5,000 4,638
May Department Stores Co. 9.75% 2/15/2021 1,680 1,959
May Department Stores Co. 9.875% 12/1/2002 1,775 1,899
McDonald's Corp. 6.75% 2/15/2003 945 934
Mobil Corp. 7.625% 2/23/2033 920 859
Monsanto Co. 5.625% 12/1/2001 25,500 24,757
Monsanto Co. 6.00% 12/1/2005 17,390 15,970
Monsanto Co. 6.85% 12/1/2028 4,000 3,382
News America Holdings Inc. 7.75% 1/20/2024 2,000 1,891
News America Holdings Inc. 8.00% 10/17/2016 9,250 9,045
News America Holdings Inc. 8.50% 2/15/2005 2,600 2,675
News America Holdings Inc. 8.875% 4/26/2023 7,905 8,391
News America Holdings Inc. 9.25% 2/1/2013 3,341 3,629
Norfolk Southern Corp. 6.875% 5/1/2001 23,475 23,393
Norfolk Southern Corp. 7.70% 5/15/2017 3,500 3,420
Norfolk Southern Corp. 7.80% 5/15/2027 4,375 4,276
Norfolk Southern Corp. 7.90% 5/15/2097 1,750 1,657
Northrop Grumman Corp. 7.00% 3/1/2006 15,700 14,753
Occidental Petroleum Corp. 8.50% 11/9/2001 14,750 15,035
J.C. Penney & Co., Inc. 6.125% 11/15/2003 2,000 1,847
J.C. Penney & Co., Inc. 9.05% 3/1/2001 625 631
Philip Morris Cos., Inc. 6.00% 7/15/2001 110 107
Philip Morris Cos., Inc. 7.00% 7/15/2005 7,150 6,727
Philip Morris Cos., Inc. 7.20% 2/1/2007 1,450 1,355
Philip Morris Cos., Inc. 8.25% 10/15/2003 1,900 1,907
Phillips Petroleum Co. 8.49% 1/1/2023 2,100 2,099
Phillips Petroleum Co. 9.00% 6/1/2001 3,900 4,000
Praxair, Inc. 6.70% 4/15/2001 12,225 12,148
Praxair, Inc. 6.75% 3/1/2003 1,000 978
Praxair, Inc. 6.90% 11/1/2006 10,750 10,220
</TABLE>
26
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Raytheon Co. 6.45% 8/15/2002 $ 19,500 $ 18,998
Raytheon Co. 6.50% 7/15/2005 3,900 3,663
Raytheon Co. 6.75% 8/15/2007 1,900 1,772
Raytheon Co. 6.75% 3/15/2018 1,600 1,390
Raytheon Co. 7.00% 11/1/2028 10,880 9,449
Rohm & Haas Co. 6.95% 7/15/2004 7,200 7,101
Rohm & Haas Co. 7.40% 7/15/2009 2,700 2,672
Rohm & Haas Co. 7.85% 7/15/2029 11,900 11,921
Rohm & Haas Co. 9.80% 4/15/2020 4,450 5,065
Safeway Inc. 5.875% 11/15/2001 10,450 10,224
Safeway Inc. 6.85% 9/15/2004 19,300 18,728
Safeway Inc. 7.00% 9/15/2007 2,150 2,068
Sears, Roebuck & Co. Acceptance Corp. 6.125% 1/15/2006 5,500 5,002
Sears, Roebuck & Co. Acceptance Corp. 6.25% 1/15/2004 2,700 2,567
Sears, Roebuck & Co. Acceptance Corp. 6.63% 7/9/2002 1,600 1,567
Sears, Roebuck & Co. Acceptance Corp. 7.19% 6/18/2001 800 797
Sears, Roebuck & Co. Acceptance Corp. 9.375% 11/1/2011 1,845 2,000
Sprint Capital Corp. 6.50% 11/15/2001 45,200 44,768
TCI Communications, Inc. 7.25% 8/1/2005 6,205 6,180
TCI Communications, Inc. 7.875% 8/1/2013 10,950 11,114
TCI Communications, Inc. 8.00% 8/1/2005 990 1,019
TCI Communications, Inc. 8.65% 9/15/2004 5,000 5,260
Tele-Communications, Inc. 6.375% 5/1/2003 43,475 42,464
Tele-Communications, Inc. 9.875% 6/15/2022 500 607
Texaco Capital Corp. 5.70% 12/1/2008 2,425 2,143
Texaco Capital Corp. 7.50% 3/1/2043 850 780
Texaco Capital Corp. 8.25% 10/1/2006 2,300 2,411
Texaco Capital Corp. 8.875% 9/1/2021 705 788
Texas Instruments Inc. 6.125% 2/1/2006 6,300 5,791
Time Warner Inc. 7.57% 2/1/2024 1,500 1,428
Time Warner Inc. 7.75% 6/15/2005 9,600 9,681
Time Warner Inc. 9.125% 1/15/2013 1,000 1,095
Time Warner Entertainment 8.375% 3/15/2023 8,150 8,482
Time Warner Entertainment 9.625% 5/1/2002 3,900 4,099
Tosco Corp. 7.80% 1/1/2027 1,650 1,549
Tyco International Group SA 6.875% 9/5/2002 33,600 32,992
Tyco International Group SA 6.875% 1/15/2029 17,000 14,479
Union Carbide Corp. 6.70% 4/1/2009 2,000 1,876
Union Carbide Corp. 6.75% 4/1/2003 3,500 3,430
Union Carbide Corp. 7.75% 10/1/2096 7,350 6,705
Union Carbide Corp. 7.875% 4/1/2023 4,755 4,636
Union Oil of California 6.375% 2/1/2004 2,000 1,919
Union Oil of California 7.20% 5/15/2005 5,700 5,560
Union Pacific Corp. 6.125% 1/15/2004 1,000 941
Union Pacific Corp. 6.625% 2/1/2029 12,250 10,342
Union Pacific Corp. 7.00% 2/1/2016 1,450 1,328
Union Pacific Corp. 8.625% 5/15/2022 3,040 3,136
United Technologies Corp. 6.70% 8/1/2028 10,992 9,712
United Technologies Corp. 8.875% 11/15/2019 4,000 4,454
Viacom Inc. 7.75% 6/1/2005 5,200 5,234
Yosemite Security Trust I 8.25% 11/15/2004 32,000 31,548
-----------
1,138,500
-----------
UTILITIES (4.1%)
AT&T Corp. 7.125% 1/15/2002 1,100 1,105
AT&T Corp. 8.35% 1/15/2025 2,350 2,320
Ameritech Capital Funding 7.50% 4/1/2005 4,950 4,961
Arizona Public Service Co. 5.875% 2/15/2004 6,500 6,156
Arizona Public Service Co. 7.25% 8/1/2023 2,150 1,929
Baltimore Gas & Electric Co. 8.375% 8/15/2001 5,570 5,685
Bell Atlantic Corp. 7.00% 6/15/2013 4,000 3,802
Bellsouth Capital Funding 6.04% 11/15/2026 1,350 1,329
</TABLE>
27
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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>
CMS Panhandle Holding Co. 6.125% 3/15/2004 $ 4,300 $ 4,081
CMS Panhandle Holding Co. 6.50% 7/15/2009 9,900 9,018
CMS Panhandle Holding Co. 7.00% 7/15/2029 5,825 5,113
Cincinnati Gas & Electric Co. 6.45% 2/15/2004 2,000 1,923
Coastal Corp. 6.50% 6/1/2008 8,400 7,743
Coastal Corp. 7.42% 2/15/2037 8,000 7,282
Coastal Corp. 7.75% 10/15/2035 6,600 6,261
Coastal Corp. 8.125% 9/15/2002 2,300 2,337
Coastal Corp. 9.625% 5/15/2012 4,700 5,235
Commonwealth Edison 7.375% 9/15/2002 7,500 7,527
Consolidated Edison Co. of New York, Inc. 6.375% 4/1/2003 5,000 4,895
Consolidated Edison Co. of New York, Inc. 6.625% 2/1/2002 1,000 992
Edison International 6.875% 9/15/2004 33,300 32,681
El Paso Energy Corp. 6.75% 5/15/2009 13,500 12,582
Enron Corp. 6.40% 7/15/2006 8,250 7,734
Enron Corp. 6.45% 11/15/2001 1,000 987
Enron Corp. 6.625% 11/15/2005 1,100 1,047
Enron Corp. 6.75% 8/1/2009 10,445 9,738
Enron Corp. 6.875% 10/15/2007 7,500 7,102
Enron Corp. 7.125% 5/15/2007 6,100 5,884
Enron Corp. 7.625% 9/10/2004 2,000 2,006
Enron Corp. 9.65% 5/15/2001 4,150 4,285
FPL Group Capital Inc. 7.625% 9/15/2006 5,000 5,017
GTE Corp. 6.36% 4/15/2006 1,045 990
GTE Corp. 7.83% 5/1/2023 4,000 3,789
GTE Corp. 8.75% 11/1/2021 3,935 4,339
GTE Corp. 9.10% 6/1/2003 225 237
GTE Florida, Inc. 6.31% 12/15/2002 5,000 4,888
GTE South Inc. 6.125% 6/15/2007 11,000 10,169
HNG Internorth 9.625% 3/15/2006 4,680 5,124
Illinois Power Co. 7.50% 7/15/2025 4,200 3,787
KN Energy, Inc. 6.45% 3/1/2003 9,200 8,923
MCI Communications Corp. 6.50% 4/15/2010 11,175 10,409
MCI Communications Corp. 7.50% 8/20/2004 4,050 4,100
MCI Communications Corp. 7.75% 3/23/2025 4,900 4,619
MCI Worldcom Inc. 6.25% 8/15/2003 12,000 11,670
Michigan Bell Telephone Co. 7.50% 2/15/2023 1,610 1,514
Midamerican Funding LLC 5.85% 3/1/2001 33,200 32,712
National Rural Utility Co. 5.00% 10/1/2002 11,700 11,109
National Rural Utility Co. 6.20% 2/1/2008 18,000 16,709
National Rural Utility Co. 6.75% 9/1/2001 4,350 4,336
New England Telephone & Telegraph Co. 6.875% 10/1/2023 2,815 2,468
New England Telephone & Telegraph Co. 7.875% 11/15/2029 6,150 6,206
New England Telephone & Telegraph Co. 8.625% 8/1/2001 2,500 2,563
New England Telephone & Telegraph Co. 9.00% 8/1/2031 3,750 3,914
New Jersey Bell Telephone Co. 6.625% 4/1/2008 190 179
New York Telephone Co. 6.125% 1/15/2010 1,250 1,127
New York Telephone Co. 7.25% 2/15/2024 5,000 4,459
Northern States Power Co. 7.125% 7/1/2025 5,000 4,647
Pacific Bell Telephone Co. 7.25% 7/1/2002 250 251
Pacific Gas & Electric Co. 6.25% 8/1/2003 5,000 4,859
Pacific Gas & Electric Co. 6.75% 10/1/2023 150 129
Pacific Gas & Electric Co. 8.25% 11/1/2022 4,000 3,863
Pacific Gas & Electric Co. 8.375% 5/1/2025 5,000 4,887
Pacific Gas & Electric Co. 8.75% 1/1/2001 2,000 2,036
Pennsylvania Power & Light Co. 6.50% 4/1/2005 135 129
Public Service Electric & Gas Co. 6.50% 5/1/2004 170 163
Southern California Edison Co. 5.625% 10/1/2002 4,000 3,862
Southern California Edison Co. 6.375% 1/15/2006 2,350 2,230
Southwestern Bell Telephone Co. 5.75% 9/1/2004 2,000 1,875
Southwestern Bell Telephone Co. 7.25% 7/15/2025 10,650 9,529
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Southwestern Bell Telephone Co. 7.625% 3/1/2023 $ 8,355 $ 7,905
Sprint Capital Corp. 6.875% 11/15/2028 22,050 19,619
Texas Utilities Co. 7.17% 8/1/2007 650 630
Texas Utilities Co. 7.375% 8/1/2001 2,800 2,813
Texas Utilities Co. 7.875% 3/1/2023 2,075 1,975
Texas Utilities Co. 8.25% 4/1/2004 4,900 5,049
Texas Utilities Co. 8.75% 11/1/2023 180 184
Union Electric Power Co. 6.75% 5/1/2008 40 38
U S WEST Capital Funding, Inc. 6.125% 7/15/2002 3,000 2,925
U S WEST Communications Group 6.875% 9/15/2033 165 136
U S WEST Communications Group 7.20% 11/1/2004 20,600 20,475
U S WEST Communications Group 7.25% 9/15/2025 18,000 16,618
Virginia Electric & Power Co. 6.625% 4/1/2003 2,300 2,255
Virginia Electric & Power Co. 6.75% 10/1/2023 17,000 14,446
Worldcom Inc. 6.125% 8/15/2001 42,360 41,848
Worldcom Inc. 6.40% 8/15/2005 180 172
Worldcom Inc. 6.95% 8/15/2028 1,500 1,365
-----------
516,010
-----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $4,465,420) 4,312,950
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(4.8%)
- --------------------------------------------------------------------------------------------------------------------------
Abbey National PLC 7.95% 10/26/2029 25,300 25,255
Ahold Finance USA Inc. 6.25% 5/1/2009 10,000 9,100
Ahold Finance USA Inc. 6.875% 5/1/2029 2,300 2,022
Amoco Canada Petroleum Co. 6.75% 2/15/2005 145 142
Bayerische Landesbank 7.375% 12/14/2002 145 147
British Aerospace 8.50% 6/10/2002 3,000 3,077
Canadian National Railway Co. 6.80% 7/15/2018 13,750 12,421
Canadian National Railway Co. 6.90% 7/15/2028 4,000 3,551
China Telecom 7.875% 11/2/2004 48,200 47,876
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 9,375 9,331
Embotelladora Andina SA 7.875% 10/1/2097 10,200 7,763
Falconbridge Ltd. 7.35% 11/1/2006 1,000 951
Grand Metropolitan Investment Corp. 8.625% 8/15/2001 2,600 2,668
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 2,225 2,454
Hanson Overseas 7.375% 1/15/2003 7,100 7,081
Inter-American Development Bank 7.125% 3/15/2023 975 897
Inter-American Development Bank 8.50% 3/15/2011 2,705 2,951
Israel Electric Corp. 7.75% 3/1/2009 18,500 17,860
KFW International Finance, Inc. 7.20% 3/15/2014 3,550 3,489
KFW International Finance, Inc. 7.625% 2/15/2004 11,650 11,903
KFW International Finance, Inc. 9.125% 5/15/2001 2,400 2,474
Korea Electric Power 7.00% 2/1/2007 8,000 7,354
Korea Electric Power 7.75% 4/1/2013 18,100 16,942
Korean Development Bank 7.125% 4/22/2004 43,000 41,893
National Australia Bank 6.60% 12/10/2007 2,000 1,849
National Westminster Bancorp Inc. 9.375% 11/15/2003 3,950 4,218
Noranda Forest 7.00% 7/15/2005 1,045 988
Noranda Inc. 7.50% 7/15/2003 7,825 7,697
Northern Telecom Ltd. 6.875% 9/1/2023 4,565 4,092
Pemex Finance Ltd. 6.125% 2/15/2002 15,750 15,484
Pemex Finance Ltd. 9.14% 7/6/2003 18,400 18,627
Pemex Finance Ltd. 9.69% 4/1/2007 27,500 28,198
Petro-Canada 7.875% 6/15/2026 10,000 9,615
Petro-Canada 9.25% 10/15/2021 700 771
Petro Geo-Services 6.25% 11/19/2003 2,500 2,397
Petro Geo-Services 6.625% 3/30/2008 7,675 7,094
Petro Geo-Services 7.125% 3/30/2028 9,370 8,201
Petro Geo-Services 7.50% 3/31/2007 12,510 12,244
Petro-Geo Services 8.15% 7/15/2029 3,500 3,452
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TOTAL BOND MARKET INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Petroliam Nasional Bhd. 8.875% 8/1/2004 $ 25,200 $ 26,263
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 5,250 5,038
Province of British Columbia 7.00% 1/15/2003 2,550 2,551
Province of Manitoba 6.125% 1/19/2004 8,000 7,764
Province of Manitoba 6.875% 9/15/2002 13,369 13,349
Province of Manitoba 7.75% 2/1/2002 6,975 7,086
Province of Manitoba 8.75% 5/15/2001 6,200 6,351
Province of Manitoba 9.25% 4/1/2020 2,645 3,100
Province of Manitoba 9.625% 12/1/2018 3,500 4,215
Province of New Brunswick 6.75% 8/15/2013 210 196
Province of New Brunswick 8.75% 5/1/2022 5,100 5,675
Province of New Brunswick 9.75% 5/15/2020 8,500 10,291
Province of Newfoundland 7.32% 10/13/2023 8,050 7,556
Province of Newfoundland 9.00% 6/1/2019 1,400 1,567
Province of Ontario 7.375% 1/27/2003 915 924
Province of Ontario 7.75% 6/4/2002 1,175 1,195
Province of Quebec 7.125% 2/9/2024 1,000 930
Province of Saskatchewan 6.625% 7/15/2003 19,750 19,449
Province of Saskatchewan 7.125% 3/15/2008 1,200 1,185
Province of Saskatchewan 7.375% 7/15/2013 1,800 1,786
Province of Saskatchewan 8.00% 7/15/2004 15,950 16,480
Republic of Chile 6.875% 4/28/2009 15,700 14,559
Republic of Finland 7.875% 7/28/2004 10,300 10,663
Republic of Portugal 5.75% 10/8/2003 19,350 18,619
The State of Qatar 9.50% 5/21/2009 17,850 18,756
Swiss Bank Corp. 7.00% 10/15/2015 750 690
Swiss Bank Corp. 7.375% 7/15/2015 2,000 1,908
Swiss Bank Corp.-New York 7.375% 6/15/2017 1,600 1,522
TPSA Finance BV 7.75% 12/10/2008 8,350 7,793
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 6,300 6,109
Telecomunicaciones de Puerto Rico 6.65% 5/15/2006 11,600 10,981
Telecomunicaciones de Puerto Rico 6.80% 5/15/2009 4,600 4,214
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $614,250) 603,294
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 3.25% 1/3/2000 196,071 196,071
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note G 3.40%-3.47% 1/3/2000 31,286 31,286
- --------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $227,357) 227,357
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(COST $13,184,454) 12,753,447
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.6%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 190,290
Liabilities--Note G (262,101)
------------
(71,811)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $12,681,636
==========================================================================================================================
</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.
30
<PAGE> 33
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT
(000)
- --------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $13,176,434
Undistributed Net Investment Income --
Accumulated Net Realized Losses--Note E (63,791)
Unrealized Depreciation--Note F (431,007)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $12,681,636
==========================================================================================================================
Investor Shares--Net Assets applicable to 990,977,730 outstanding
$.001 par value shares of beneficial interest $9,477,237
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $9.56
==========================================================================================================================
Institutional Shares--Net Assets applicable to 335,064,741 outstanding
$.001 par value shares of beneficial interest $3,204,399
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $9.56
==========================================================================================================================
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (57.2%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (42.9%)
U.S. Treasury Bond 10.75% 5/15/2003 $ 6,200 $ 6,994
U.S. Treasury Bond 11.125% 8/15/2003 25,500 29,240
U.S. Treasury Bond 11.625% 11/15/2002 33,825 38,401
U.S. Treasury Bond 11.875% 11/15/2003 44,650 52,710
U.S. Treasury Bond 12.375% 5/15/2004 8,850 10,784
U.S. Treasury Note 4.625% 11/30/2000 4,031 3,980
U.S. Treasury Note 5.25% 5/31/2001 1,400 1,383
U.S. Treasury Note 5.625% 11/30/2000 5,400 5,378
U.S. Treasury Note 5.625% 2/28/2001 95 94
U.S. Treasury Note 5.875% 10/31/2001 9,400 9,342
U.S. Treasury Note 6.25% 2/28/2002 925 925
U.S. Treasury Note 6.25% 2/15/2003 16,425 16,377
U.S. Treasury Note 6.375% 3/31/2001 8,725 8,743
U.S. Treasury Note 6.625% 4/30/2002 6,210 6,257
U.S. Treasury Note 7.50% 11/15/2001 55,925 57,132
U.S. Treasury Note 7.50% 5/15/2002 80,875 83,021
U.S. Treasury Note 7.75% 2/15/2001 56,550 57,512
U.S. Treasury Note 7.875% 8/15/2001 23,150 23,719
U.S. Treasury Note 8.00% 5/15/2001 47,725 48,829
U.S. Treasury Note 8.50% 11/15/2000 5,225 5,332
U.S. Treasury Note 13.75% 8/15/2004 23,175 29,737
---------
495,890
---------
AGENCY BONDS & NOTES (14.3%)
Federal Farm Credit Bank 4.80% 11/6/2003 10,000 9,321
Federal Home Loan Bank 4.875% 1/22/2002 1,500 1,452
Federal Home Loan Bank 5.575% 9/2/2003 4,300 4,126
Federal Home Loan Bank 5.60% 9/2/2003 10,000 9,604
Federal Home Loan Bank 5.605% 3/3/2003 1,150 1,109
Federal Home Loan Bank 5.63% 9/2/2003 10,000 9,613
Federal Home Loan Bank 5.66% 1/13/2003 10,000 9,683
Federal Home Loan Bank 5.675% 8/18/2003 3,000 2,889
Federal Home Loan Bank 5.86% 4/28/2003 1,900 1,845
Federal Home Loan Bank 6.25% 8/13/2004 22,500 21,947
Federal Home Loan Bank 7.31% 6/16/2004 1,250 1,270
Federal Home Loan Mortgage Corp. 4.75% 12/14/2001 (1) 265 257
Federal Home Loan Mortgage Corp. 5.00% 1/15/2004 26,000 24,314
Federal Home Loan Mortgage Corp. 5.75% 6/15/2001 860 852
Federal Home Loan Mortgage Corp. 5.89% 7/17/2003 7,000 6,753
Federal Home Loan Mortgage Corp. 6.52% 1/2/2002 75 75
Federal National Mortgage Assn. 5.125% 2/13/2004 (1) 489 459
Federal National Mortgage Assn. 5.625% 5/14/2004 (1) 580 553
Federal National Mortgage Assn. 5.75% 4/15/2003 3,060 2,971
Federal National Mortgage Assn. 5.90% 7/9/2003 13,800 13,320
Federal National Mortgage Assn. 5.91% 8/25/2003 2,600 2,509
Federal National Mortgage Assn. 5.96% 4/23/2003 1,200 1,163
Federal National Mortgage Assn. 5.97% 7/3/2003 4,000 3,867
Federal National Mortgage Assn. 7.10% 10/18/2004 35,000 34,650
---------
164,602
--------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $674,580) 660,492
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (34.9%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (5.7%)
ARG Funding Corp. 5.88% 5/20/2003 (1) 2,700 2,637
AT&T Universal Card Master Trust 5.95% 10/17/2002 (1) 2,250 2,242
Advanta Credit Card Master Trust 6.05% 8/1/2003 (1) 2,500 2,491
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 2,400 2,350
American Express Credit Card Master Trust 6.40% 4/15/2005 (1) 1,030 1,017
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 4,205 4,209
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.16% 12/14/2000 (1) $ 1,250 $ 1,246
CIT RV Trust 5.78% 7/15/2008 (1) 1,350 1,337
CIT RV Trust 5.96% 4/15/2011 (1) 1,200 1,180
Citibank Credit Card Master Trust 5.30% 1/9/2006 (1) 400 376
Citibank Credit Card Master Trust 5.50% 2/15/2006 (1) 1,000 939
Discover Card Master Trust 5.30% 8/15/2004 (1) 260 251
Discover Card Master Trust 5.65% 11/15/2004 (1) 3,200 3,106
Discover Card Master Trust 5.90% 10/15/2004 (1) 600 592
First Bank Corp. Card Master Trust 6.40% 2/15/2002 (1) 1,000 990
First USA Credit Card Master Trust 5.28% 9/18/2006 (1) 245 230
Ford Credit Auto Owner Trust 5.90% 6/15/2002 (1) 6,000 5,942
MBNA Master Credit Card Trust 5.80% 12/15/2005 (1) 300 288
MMCA Automobile Trust 5.50% 7/15/2005 (1) 6,000 5,945
MMCA Automobile Trust 6.80% 8/15/2003 (1) 2,700 2,692
PECO Energy Transition Trust 5.63% 3/1/2005 (1) 4,400 4,262
PECO Energy Transition Trust 5.80% 3/1/2007 (1) 220 208
Premier Auto Trust 5.69% 6/8/2002 (1) 3,500 3,474
Providian Master Trust 6.60% 4/15/2007 (1) 7,000 6,933
Sears Credit Account Master Trust 5.80% 8/15/2005 (1) 3,000 2,974
Sears Credit Account Master Trust 6.35% 2/15/2007 (1) 2,500 2,465
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 1,354 1,367
Toyota Auto Lease Trust 5.35% 7/25/2002 (1) 4,075 4,034
Toyota Auto Lease Trust 6.35% 4/26/2004 (1) 550 548
---------
66,325
---------
FINANCE (15.7%)
American General Finance Corp. 7.45% 7/1/2002 425 428
Aristar Inc. 6.30% 10/1/2002 1,000 975
Associates Corp. 6.50% 7/15/2002 2,000 1,977
Associates Corp. 6.50% 8/15/2002 1,150 1,135
Associates Corp. 6.50% 10/15/2002 1,250 1,233
Associates Corp. 7.50% 4/15/2002 1,400 1,414
Banc One Corp. 6.25% 10/1/2001 2,000 1,976
Bank of America Corp. 6.625% 6/15/2004 275 269
Bank of America Corp. 7.625% 6/15/2004 870 882
Bank of America Corp. 7.75% 7/15/2002 250 254
Bank of America Corp. 7.875% 12/1/2002 1,500 1,531
Bank of America Corp 8.125% 2/1/2002 3,900 3,979
Bank of America Corp. 8.375% 3/15/2002 2,500 2,566
Bank of America Corp. 9.625% 2/13/2001 400 412
Bank of America Corp. 10.00% 2/1/2003 700 754
Bear, Stearns & Co., Inc. 6.20% 3/30/2003 3,455 3,332
Bradley Operating LP 7.00% 11/15/2004 2,000 1,868
CIT Group Holdings, Inc. 7.125% 10/15/2004 5,000 4,948
CIT Group Holdings, Inc. 6.50% 6/14/2002 165 163
Cabot Industrial Properties LP 7.125% 5/1/2004 430 414
Case Credit Corp. 6.15% 3/1/2002 4,500 4,460
The Chase Manhattan Corp. 7.625% 1/15/2003 2,000 2,028
The Chase Manhattan Corp. 8.50% 2/15/2002 3,000 3,086
The Chase Manhattan Corp. 8.625% 5/1/2002 1,000 1,034
Chemical Banking Corp. 7.25% 9/15/2002 1,500 1,507
Citicorp 7.125% 3/15/2004 3,000 2,992
Citigroup Inc. 5.80% 3/15/2004 340 323
Comdisco Inc. 7.25% 9/20/2001 2,250 2,233
Commercial Credit Corp. 7.875% 7/15/2004 2,000 2,039
Countrywide Funding 8.25% 7/15/2002 1,250 1,279
Countrywide Home Loan 7.45% 9/16/2003 4,500 4,508
Dean Witter, Discover & Co. 6.875% 3/1/2003 400 396
Donaldson Lufkin & Jenrette, Inc. 6.00% 12/1/2001 5,000 4,890
Equity Residential Properties 6.55% 11/15/2001 1,350 1,327
Finova Capital Corp. 5.875% 10/15/2001 1,750 1,711
Finova Capital Corp. 7.25% 11/8/2004 5,000 4,939
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Chicago Corp. 7.625% 1/15/2003 $ 600 $ 605
First Chicago Corp. 8.25% 6/15/2002 1,345 1,378
First Chicago Corp. 9.875% 8/15/2000 150 153
First Chicago Corp. 10.25% 5/1/2001 250 260
First Interstate Bancorp 10.875% 4/15/2001 250 262
First Union Corp. 8.00% 11/15/2002 2,000 2,034
First Union Corp. 8.125% 6/24/2002 1,600 1,630
Fleet/Norstar Group 8.125% 7/1/2004 900 920
Fleet Credit Card 6.82% 4/9/2001 2,700 2,697
Ford Motor Credit Co. 5.125% 10/15/2001 3,400 3,304
Ford Motor Credit Co. 6.625% 6/30/2003 1,500 1,473
Ford Motor Credit Co. 7.00% 9/25/2001 600 601
Ford Motor Credit Co. 7.50% 1/15/2003 1,525 1,537
Ford Motor Credit Co. 8.20% 2/15/2002 1,900 1,943
General Electric Capital Corp. 6.35% 9/15/2001 300 297
General Motors Acceptance Corp. 5.50% 12/15/2001 750 730
General Motors Acceptance Corp. 5.50% 1/14/2002 6,240 6,060
General Motors Acceptance Corp. 5.875% 1/22/2003 400 385
General Motors Acceptance Corp. 6.75% 12/10/2002 5,000 4,943
General Motors Acceptance Corp. 7.125% 5/1/2001 2,400 2,405
HRPT Properties Trust 6.75% 12/18/2002 1,250 1,172
Household Finance Corp. 7.625% 1/15/2003 3,000 3,024
Lehman Brothers Holdings Inc. 7.25% 4/15/2003 4,000 3,953
Lehman Brothers Holdings Inc. 6.00% 2/26/2001 130 128
Lehman Brothers Holdings Inc. 6.90% 1/29/2001 2,000 1,993
Mack-Cali Realty 7.00% 3/15/2004 2,000 1,920
Mellon Bank 6.75% 6/1/2003 225 222
Merrill Lynch & Co., Inc. 5.71% 1/15/2002 1,400 1,366
Merrill Lynch & Co., Inc. 5.87% 11/15/2001 1,600 1,570
Merrill Lynch & Co., Inc. 5.88% 1/15/2004 2,500 2,381
Merrill Lynch & Co., Inc. 6.00% 1/15/2001 2,000 1,984
Merrill Lynch & Co., Inc. 6.07% 10/15/2001 2,300 2,266
Merrill Lynch & Co., Inc. 6.50% 4/1/2001 1,500 1,493
Merrill Lynch & Co., Inc. 6.55% 8/1/2004 100 97
Merrill Lynch & Co., Inc. 8.00% 2/1/2002 400 407
Morgan Stanley, Dean Witter & Co. 5.625% 1/20/2004 1,265 1,194
Morgan Stanley, Dean Witter & Co. 7.125% 1/15/2003 7,800 7,771
NationsBank Corp. 7.00% 9/15/2001 1,500 1,501
NationsBank Corp. 7.75% 8/15/2004 500 510
NationsBank Corp. 8.125% 6/15/2002 1,000 1,022
Norwest Financial, Inc. 7.00% 1/15/2003 110 110
Norwest Financial, Inc. 7.875% 2/15/2002 2,000 2,034
PaineWebber Group, Inc. 6.375% 5/15/2004 2,500 2,376
PaineWebber Group, Inc. 7.875% 2/15/2003 250 252
Popular Inc. 6.20% 4/30/2001 2,500 2,464
Popular Inc. 7.375% 9/15/2001 3,425 3,418
Republic New York Corp. 7.75% 5/15/2002 700 705
Salomon Smith Barney Holdings Inc. 5.875% 2/1/2001 700 692
Salomon Smith Barney Holdings Inc. 6.125% 1/15/2003 125 121
Salomon Smith Barney Holdings Inc. 6.50% 10/15/2002 5,000 4,921
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 4,000 3,747
Summit Properties Inc. 6.80% 8/15/2002 1,500 1,443
Toyota Motor Credit Corp. 5.50% 9/17/2001 2,500 2,443
Travelers/Aetna Property Casualty Corp. 6.75% 4/15/2001 4,000 3,996
U S WEST Capital Funding, Inc. 6.875% 8/15/2001 5,000 4,979
Wells Fargo & Co. 6.50% 9/3/2002 5,200 5,138
Wells Fargo & Co. 6.875% 5/10/2001 2,750 2,752
Wells Fargo & Co. 8.75% 5/1/2002 1,000 1,035
---------
181,479
---------
INDUSTRIAL (8.7%)
Applied Materials, Inc. 8.00% 9/1/2004 150 153
Archer-Daniels-Midland Co. 6.25% 5/15/2003 250 243
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Black & Decker Corp. 7.50% 4/1/2003 $ 3,200 $ 3,208
CSX Corp. 7.05% 5/1/2002 2,000 1,987
CVS Corp. 5.50% 2/15/2004 4,000 3,739
Conoco Inc. 5.90% 4/15/2004 3,500 3,333
Continental Airlines, Inc. Pass-Through Trust 6.331% 4/15/2003 (1) 1,338 1,312
Continental Airlines. Inc. Pass-Through Trust 6.41% 4/15/2007 (1) 1,652 1,564
Cyprus Minerals Co. 10.125% 4/1/2002 1,500 1,566
Daimler-Chrysler North America Holding Corp. 6.90% 9/1/2004 5,000 4,935
Delta Air Lines Inc. 7.70% 12/15/2005 5,000 4,921
Dillard's Inc. 5.79% 11/15/2001 2,000 1,934
The Walt Disney Co. 6.375% 3/30/2001 1,000 995
E.I. duPont de Nemours & Co. 6.75% 10/15/2004 1,900 1,873
Federated Department Stores, Inc. 8.50% 6/15/2003 2,000 2,063
First Data Corp. 6.625% 4/1/2003 4,200 4,118
Ford Capital BV 9.50% 7/1/2001 675 698
Ford Capital BV 9.875% 5/15/2002 1,520 1,608
General Motors Corp. 9.125% 7/15/2001 1,000 1,031
Illinois Central Railroad Co. 6.75% 5/15/2003 3,000 2,923
Lockheed Martin Corp. 6.50% 4/15/2003 1,000 958
Lucent Technologies, Inc. 6.90% 7/15/2001 1,000 1,001
McDonald's Corp. 6.75% 2/15/2003 450 445
Mobil Corp. 8.375% 2/12/2001 2,238 2,276
Monsanto Co. 5.625% 12/1/2001 5,500 5,340
Norfolk Southern Corp. 6.875% 5/1/2001 3,150 3,139
Occidental Petroleum Corp. 8.50% 11/9/2001 1,500 1,529
J.C. Penney & Co., Inc. 9.05% 3/1/2001 375 379
Phillips Petroleum Co. 9.00% 6/1/2001 1,500 1,538
Praxair, Inc. 6.70% 4/15/2001 4,000 3,975
Praxair, Inc. 6.75% 3/1/2003 1,250 1,222
Raytheon Co. 5.70% 11/1/2003 4,375 4,098
Raytheon Co. 5.95% 3/15/2001 2,500 2,459
Raytheon Co. 6.45% 8/15/2002 300 292
Rohm & Haas Co. 6.95% 7/15/2004 4,000 3,945
Safeway Inc. 5.875% 11/15/2001 750 734
Safeway Inc. 6.85% 9/15/2004 3,500 3,396
Sprint Capital Corp. 6.50% 11/15/2001 6,500 6,438
Tele-Communications, Inc. 6.375% 5/1/2003 2,300 2,246
Tele-Communications, Inc. 8.25% 1/15/2003 400 413
Time Warner Entertainment 9.625% 5/1/2002 2,054 2,159
Tyco International Group SA 6.125% 6/15/2001 400 393
Tyco International Group SA 6.875% 9/5/2002 2,900 2,848
Union Carbide Corp. 6.75% 4/1/2003 2,000 1,960
Yosemite Security Trust I 8.25% 11/15/2004 3,225 3,179
---------
100,566
---------
UTILITIES (4.8%)
Arizona Public Service Co. 5.875% 2/15/2004 500 474
Baltimore Gas & Electric Co. 7.25% 7/1/2002 200 201
CMS Panhandle Holding Co. 6.125% 3/15/2004 2,800 2,658
Coastal Corp. 8.125% 9/15/2002 1,700 1,728
Commonwealth Edison 7.375% 9/15/2002 1,450 1,455
Commonwealth Edison 7.375% 9/15/2002 1,500 1,505
Consolidated Edison Co. of New York, Inc. 6.625% 2/1/2002 500 496
Edison International 6.875% 9/15/2004 2,900 2,846
El Paso Natural Gas 6.75% 11/15/2003 2,525 2,466
Enron Corp. 7.625% 9/10/2004 1,000 1,003
Enron Corp. 9.125% 4/1/2003 2,000 2,091
Florida Power & Light Co. 6.625% 2/1/2003 210 208
KN Energy Inc. 6.45% 11/30/2001 1,000 985
MCI Communications Corp. 7.50% 8/20/2004 1,625 1,645
MCI Worldcom Inc. 6.25% 8/15/2003 3,000 2,917
Midamerican Funding LLC 5.85% 3/1/2001 1,900 1,872
National Rural Utility Co. 5.00% 10/1/2002 800 760
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National Rural Utility Co. 6.75% 9/1/2001 $ 2,500 $ 2,492
New England Telephone & Telegraph Co. 8.625% 8/1/2001 3,000 3,075
Pacific Bell Telephone Co. 7.00% 7/15/2004 3,175 3,138
Pacific Bell Telephone Co. 7.25% 7/1/2002 450 453
Pacific Gas & Electric Co. 6.25% 8/1/2003 1,000 972
Pacific Gas & Electric Co. 7.875% 3/1/2002 3,000 3,042
Texas Utilities Co. 7.375% 8/1/2001 450 452
Texas Utilities Co. 8.125% 2/1/2002 600 611
Union Electric Power Co. 7.65% 7/15/2003 3,000 3,042
US WEST Capital Funding, Inc. 6.125% 7/15/2002 4,000 3,900
U S WEST Communications Inc. 7.20% 11/1/2004 1,000 994
Virginia Electric & Power Co. 6.625% 4/1/2003 3,000 2,941
Worldcom Inc. 6.125% 8/15/2001 4,375 4,322
Worldcom Inc. 7.55% 4/1/2004 650 659
---------
55,403
--------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $411,308) 403,773
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(5.3%)
- --------------------------------------------------------------------------------------------------------------------------
Bank of Nova Scotia 6.875% 5/1/2003 750 734
China Telecom 7.875% 11/2/2004 4,900 4,867
Grand Metropolitan Investment Corp. 8.625% 8/15/2001 1,000 1,026
Hanson Overseas 7.375% 1/15/2003 1,250 1,247
KFW International Finance, Inc. 9.125% 5/15/2001 400 412
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 7.125% 4/22/2004 3,900 3,800
National Westminster Bancorp Inc. 9.45% 5/1/2001 250 258
Noranda, Inc. 8.125% 6/15/2004 1,000 1,001
Noranda, Inc. 8.625% 7/15/2002 500 507
Pemex Finance Ltd. 9.14% 7/6/2003 5,000 5,062
Pemex Finance Ltd. 6.125% 2/15/2002 1,150 1,131
Petro Geo-Services 6.25% 11/19/2003 3,000 2,877
Petroliam Nasional Bhd. 8.875% 8/1/2004 2,000 2,084
Pohang Iron & Steel Co. Ltd. 7.125% 7/15/2004 1,000 960
Province of Manitoba 6.875% 9/15/2002 3,500 3,495
Province of Manitoba 7.75% 2/1/2002 1,500 1,524
Province of Manitoba 8.75% 5/15/2001 1,000 1,024
Province of Ontario 7.625% 6/22/2004 5,000 5,088
Province of Ontario 7.75% 6/4/2002 550 560
Province of Ontario 8.00% 10/17/2001 5,360 5,455
Province of Saskatchewan 6.625% 7/15/2003 4,500 4,431
Province of Saskatchewan 8.00% 7/15/2004 3,900 4,030
Republic of Finland 7.875% 7/28/2004 3,500 3,623
Seagram Co. Ltd. 6.50% 4/1/2003 1,400 1,356
Telecomunicaciones de Puerto Rico 6.15% 5/15/2002 3,200 3,103
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $62,399) 61,465
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 3.25% 1/3/2000 26,529 26,529
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note G 3.40% 1/3/2000 16,798 16,798
- --------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $43,327) 43,327
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(COST $1,191,614) 1,169,057
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-1.2%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 7,231
Liabilities--Note G (20,722)
----------
(13,491)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
==========================================================================================================================
Applicable to 118,730,649 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $1,155,566
==========================================================================================================================
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,179,567 $ 9.93
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (1,444) (.01)
Unrealized Depreciation--Note F (22,557) (.19)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,155,566 $ 9.73
==========================================================================================================================
</TABLE>
37
<PAGE> 40
<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 (53.3%)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (39.1%)
U.S. Treasury Bond 10.00% 5/15/2010 $ 12,765 $ 14,624
U.S. Treasury Bond 10.375% 11/15/2012 119,480 145,150
U.S. Treasury Bond 10.75% 8/15/2005 22,490 26,814
U.S. Treasury Bond 12.75% 11/15/2010 44,450 57,281
U.S. Treasury Note 6.125% 8/15/2007 48,025 46,802
U.S. Treasury Note 6.50% 8/15/2005 52,550 52,530
U.S. Treasury Note 6.50% 10/15/2006 25,950 25,849
U.S. Treasury Note 7.00% 7/15/2006 183,300 187,584
U.S. Treasury Note 7.875% 11/15/2004 9,675 10,226
---------
566,860
---------
AGENCY BONDS & NOTES (14.2%)
Federal Home Loan Bank 5.79% 4/27/2009 10,000 9,111
Federal Home Loan Bank 5.80% 9/2/2008 16,700 15,332
Federal Home Loan Bank 5.865% 9/2/2008 10,000 9,162
Federal Home Loan Bank 5.88% 11/25/2008 5,000 4,512
Federal Home Loan Bank 5.925% 4/9/2008 4,000 3,691
Federal Home Loan Bank 6.50% 8/15/2007 27,800 26,995
Federal Home Loan Mortgage Corp. 5.75% 3/15/2009 32,000 29,145
Federal Home Loan Mortgage Corp. 6.13% 2/12/2009 7,000 6,387
Federal Home Loan Mortgage Corp. 6.45% 4/29/2009 25,000 23,315
Federal National Mortgage Assn. 5.64% 12/10/2008 10,380 9,219
Federal National Mortgage Assn. 6.09% 2/20/2009 10,000 9,100
Federal National Mortgage Assn. 6.18% 2/19/2009 3,000 2,745
Federal National Mortgage Assn. 6.19% 7/7/2008 4,325 3,991
Federal National Mortgage Assn. 6.40% 5/14/2009 20,000 18,684
Federal National Mortgage Assn. 6.52% 3/5/2008 19,075 17,956
Tennessee Valley Auth. 5.375% 11/13/2008 18,503 16,234
---------
205,579
--------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $803,889) 772,439
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (38.0%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (1.8%)
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.38% 9/25/2008 (1) 5,500 5,325
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.42% 9/25/2008 (1) 2,400 2,329
Citibank Credit Card Master Trust 5.875% 3/10/2011 (1) 7,500 6,753
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1) 750 745
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 2,100 2,096
PECO Energy Transition Trust 6.05% 7/5/2006 (1) 9,000 8,493
---------
25,741
---------
FINANCE (14.4%)
ABN-AMRO Bank 7.125% 6/18/2007 5,000 4,871
Allstate Corp. 7.20% 12/1/2009 8,000 7,765
Associates Corp. 7.75% 2/15/2005 4,300 4,360
Bank of America Corp. 6.20% 2/15/2006 1,600 1,499
Bank of America Corp. 7.125% 5/1/2006 1,750 1,712
Bank of America Corp. 9.375% 9/15/2009 8,447 9,464
Bank of New York 7.30% 12/1/2009 8,000 7,838
Bear Stearns & Co., Inc. 6.75% 12/15/2007 3,000 2,810
Bear Stearns & Co., Inc. 7.625% 12/7/2009 6,000 5,886
CNA Financial Corp. 6.50% 4/15/2005 2,000 1,863
The Chase Manhattan Corp. 6.00% 11/1/2005 3,800 3,554
The Chase Manhattan Corp. 6.375% 4/1/2008 8,500 7,892
The Chase Manhattan Corp. 6.50% 8/1/2005 1,200 1,151
The Chase Manhattan Corp. 7.125% 2/1/2007 1,650 1,612
Chemical Bank Corp. 6.125% 11/1/2008 500 455
Citicorp 7.625% 5/1/2005 7,500 7,577
Conseco Inc. 9.00% 10/15/2006 5,000 5,134
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CoreStates Capital Corp. 6.625% 3/15/2005 $ 2,400 $ 2,308
Countrywide Home Loan 6.935% 7/16/2007 1,490 1,420
ERAC USA Finance Co. 7.95% 12/15/2009 4,000 3,961
Equitable Cos. Inc. 6.50% 4/1/2008 2,000 1,862
First Chicago Corp. 6.375% 1/30/2009 5,000 4,553
Fleet Financial Group, Inc. 7.125% 4/15/2006 1,300 1,261
FleetBoston Financial Corp. 7.375% 12/1/2009 6,000 5,873
Ford Motor Credit Co. 5.80% 1/12/2009 10,000 8,861
Ford Motor Credit Co. 7.375% 10/28/2009 6,000 5,921
Ford Motor Credit Co. 7.75% 3/15/2005 115 117
General Electric Capital Corp. 8.85% 3/1/2007 5,000 5,392
General Motors Acceptance Corp. 6.125% 1/22/2008 5,000 4,572
Household Finance Corp. 6.40% 6/17/2008 3,785 3,489
Household Finance Corp. 7.65% 5/15/2007 1,000 1,000
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 1,325 1,251
Lehman Brothers Holdings Inc. 6.625% 2/15/2008 4,550 4,183
Lehman Brothers Holdings Inc. 7.375% 1/15/2007 5,000 4,849
Lehman Brothers Holdings Inc. 7.625% 6/1/2006 1,100 1,079
Lehman Brothers Holdings Inc. 7.50% 9/1/2006 2,500 2,440
Liberty Financial Co. 6.75% 11/15/2008 3,000 2,739
Mack-Cali Realty 7.25% 3/15/2009 2,000 1,843
Mellon Bank NA 6.50% 8/1/2005 3,000 2,881
Merrill Lynch & Co. 6.00% 2/17/2009 10,000 8,939
Morgan Stanley, Dean Witter Discover & Co. 6.875% 3/1/2007 3,000 2,890
NAC Re Corp. 7.15% 11/15/2005 2,500 2,415
National Rural Utilities 6.42% 5/1/2008 3,000 2,821
NationsBank Corp. 6.50% 3/15/2006 5,900 5,615
Prudential Insurance Co. of America 6.375% 7/23/2006 2,000 1,871
Realty Income Corp. 7.75% 5/6/2007 2,000 1,838
Reckson Operating Partnership LP 7.75% 3/15/2009 1,800 1,656
Republic New York Corp. 7.75% 5/15/2009 2,400 2,346
Salomon Smith Barney Holdings Inc. 6.875% 6/15/2005 3,300 3,208
SunTrust Bank Atlanta 7.25% 9/15/2006 1,000 982
SunTrust Banks, Inc. 6.25% 6/1/2008 2,000 1,836
SunTrust Banks, Inc. 7.375% 7/1/2006 2,400 2,406
Susa Partnership LP 7.00% 12/1/2007 3,000 2,651
Swiss Bank Corp. 7.25% 9/1/2006 4,000 3,929
US Bank NA Minnesota 5.70% 12/15/2008 2,000 1,752
US Bank NA Minnesota 6.50% 2/1/2008 5,000 4,663
Wachovia Corp. 5.625% 12/15/2008 1,350 1,185
Wachovia Corp. 6.25% 8/4/2008 5,400 4,970
Wachovia Corp. 6.625% 11/15/2006 250 239
Wells Fargo & Co. 6.875% 4/1/2006 3,000 2,915
---------
208,425
---------
INDUSTRIAL (16.0%)
Allied Signal Inc. 6.20% 2/1/2008 3,700 3,424
American Airlines Inc. 7.024% 10/15/2009 7,800 7,678
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 3,400 3,334
Ashland Inc. 6.86% 5/1/2009 7,500 6,947
Baker Hughes Inc. 6.25% 1/15/2009 7,500 6,800
C.R. Bard, Inc. 6.70% 12/1/2026 2,300 2,178
Borg-Warner Automotive 6.50% 2/15/2009 6,000 5,431
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 3,000 2,834
Burlington Northern Santa Fe Corp. 9.25% 10/1/2006 2,000 2,166
CSX Corp. 9.00% 8/15/2006 2,600 2,746
Caterpillar, Inc. 9.00% 4/15/2006 600 641
Caterpillar, Inc. 9.375% 8/15/2011 1,550 1,741
Coastal Corp. 6.50% 5/15/2006 5,280 4,979
Comcast Cablevision 8.375% 5/1/2007 4,500 4,663
Conoco Inc. 6.35% 4/15/2009 10,000 9,249
Continental Airlines, Inc. (Equipment Trust Certificates) 6.648% 3/15/2019 2,358 2,116
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INTERMEDIATE-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daimler-Chrysler North America Holding Corp. 7.20% 9/1/2009 $ 10,000 $ 9,819
Delta Air Lines, Inc. 7.90% 12/15/2009 8,600 8,412
Delta Air Lines, Inc. (Equipment Trust Certificates) 8.54% 1/2/2007 (1) 449 454
Dillard's Inc. 6.625% 11/15/2008 3,000 2,672
Dillard's Inc. 7.375% 6/1/2006 2,100 1,995
E.I. duPont de Nemours & Co. 6.875% 10/15/2009 8,000 7,740
First Data Corp. 6.375% 12/15/2007 3,500 3,259
Fort James Corp. 6.875% 9/15/2007 5,000 4,729
Harrahs Operating Co., Inc. 7.50% 1/15/2009 5,000 4,691
International Business Machines Corp. 6.45% 8/1/2007 4,000 3,828
International Paper Co. 7.875% 8/1/2006 35 35
Kroger Co. 7.625% 9/15/2006 8,000 7,890
Kroger Co. 7.65% 4/15/2007 530 523
Kroger Co. 8.15% 7/15/2006 3,800 3,853
Lafarge Corp. 6.375% 7/15/2005 4,500 4,234
Lockheed Martin Corp. 7.70% 6/15/2008 3,800 3,667
Monsanto Co. 6.00% 12/1/2005 6,000 5,510
News America Holdings Inc. 8.50% 2/15/2005 2,400 2,469
Norfolk Southern Corp. 7.40% 9/15/2006 4,545 4,439
Northrop Grumman Corp. 7.00% 3/1/2006 3,500 3,289
Philip Morris Cos., Inc. 7.00% 7/15/2005 2,200 2,070
Praxair, Inc. 6.90% 11/1/2006 3,900 3,708
Raytheon Co. 6.75% 8/15/2007 8,100 7,554
Rohm & Haas Co. 7.40% 7/15/2009 7,000 6,927
Safeway Inc. 7.00% 9/15/2007 2,700 2,597
Sears, Roebuck & Co. Acceptance Corp. 6.125% 1/15/2006 150 136
Sears, Roebuck & Co. Acceptance Corp. 6.75% 9/15/2005 3,000 2,833
TCI Communications, Inc. 7.25% 8/1/2005 5,685 5,662
Texaco Capital Inc. 5.70% 12/1/2008 5,000 4,418
Texas Instruments Inc. 6.125% 2/1/2006 3,100 2,850
Time Warner Inc. 7.48% 1/15/2008 2,050 2,017
Time Warner Inc. 7.75% 6/15/2005 6,500 6,555
Time Warner Inc. 8.18% 8/15/2007 2,250 2,309
Tosco Corp. 7.25% 1/1/2007 3,000 2,868
Union Carbide Corp. 6.70% 4/1/2009 7,000 6,567
Union Oil Co. of California 9.125% 2/15/2006 9,000 9,561
Union Pacific Corp. 6.40% 2/1/2006 10,965 10,268
Union Pacific Corp. 7.60% 5/1/2005 3,200 3,186
---------
232,521
---------
UTILITIES (5.8%)
Ameritech Capital Funding 6.15% 1/15/2008 6,000 5,557
CMS Panhandle Holding Co. 6.50% 7/15/2009 7,000 6,376
Coastal Corp. 6.375% 2/1/2009 5,000 4,553
Coastal Corp. 6.50% 6/1/2008 500 461
El Paso Energy Corp. 6.75% 5/15/2009 9,000 8,388
Enron Corp. 6.75% 8/1/2009 4,500 4,195
Enron Corp. 6.875% 10/15/2007 1,500 1,420
Enron Corp. 7.125% 5/15/2007 2,546 2,456
FPL Group Capital Inc. 7.625% 9/15/2006 10,000 10,035
GTE Northwest Inc. 5.55% 10/15/2008 3,000 2,636
GTE South Inc. 6.125% 6/15/2007 2,000 1,849
HNG Internorth 9.625% 3/15/2006 2,000 2,190
KN Energy Inc. 6.65% 3/1/2005 6,000 5,747
MCI Communications Corp. 6.50% 4/15/2010 2,150 2,003
National Rural Utility Co. 6.20% 2/1/2008 4,850 4,502
New York Telephone Co. 6.125% 1/15/2010 5,500 4,957
PP&L Resources Inc. 6.55% 3/1/2006 1,325 1,261
Southern California Edison Co. 6.375% 1/15/2006 3,000 2,846
Southwestern Bell Telephone Co. 6.625% 7/15/2007 6,000 5,811
Texaco Capital Inc. 5.50% 1/15/2009 3,000 2,630
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas Utility Co. 7.17% 8/1/2007 $ 3,500 $ 3,394
Union Electric Power Co. 6.75% 5/1/2008 120 115
----------
83,382
---------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $579,708) 550,069
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(6.9%)
- --------------------------------------------------------------------------------------------------------------------------
Ahold Finance USA Inc. 6.25% 5/1/2009 8,000 7,280
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 3,000 2,986
Embotelladora Andina SA 7.875% 10/1/2097 1,000 761
Falconbridge Ltd. 7.35% 11/1/2006 1,500 1,427
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 3,000 3,309
Israel Electric Corp. 7.75% 3/1/2009 2,250 2,172
Korea Development Bank 6.75% 12/1/2005 2,000 1,884
Korea Electric Power 7.00% 2/1/2007 8,920 8,199
Korea Electric Power 7.75% 4/1/2013 1,500 1,404
Malaysia 8.75% 6/1/2009 5,000 5,239
National Australia Bank 6.60% 12/10/2007 9,100 8,415
Noranda Inc. 7.00% 7/15/2005 3,000 2,835
Pemex Finance Ltd. 9.69% 4/1/2007 4,200 4,307
Petro Geo-Services 6.625% 3/30/2008 5,325 4,922
Petro Geo-Services 7.50% 3/31/2007 4,830 4,727
Pohang Iron & Steel Co. 7.375% 5/15/2005 5,000 4,783
Province of British Columbia 5.375% 10/29/2008 7,000 6,162
Province of Quebec 5.75% 2/15/2009 10,000 8,887
Province of Saskatchewan 7.125% 3/15/2008 600 592
Republic of Chile 6.875% 4/28/2009 5,000 4,637
The State of Qatar 9.50% 5/21/2009 2,100 2,207
Swiss Bank Corp. 6.75% 7/15/2005 2,000 1,930
Telecomunicaciones de Puerto Rico 6.65% 5/15/2006 2,400 2,272
Toronto-Dominion Bank 6.50% 8/15/2008 3,000 2,759
TPSA Finance BV 7.75% 12/10/2008 6,045 5,642
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $105,217) 99,738
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations in a
Pooled Cash Account 3.25% 1/3/2000 13,291 13,291
Collateralized by U.S. Government Obligations in a
Pooled Cash Account--Note G 3.40% 1/3/2000 18,558 18,558
- --------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $31,849) 31,849
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(COST $1,520,663) 1,454,095
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 30,232
Liabilities--Note G (35,378)
----------
(5,146)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
==========================================================================================================================
Applicable to 152,282,410 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $1,448,949
==========================================================================================================================
NET ASSET VALUE PER SHARE $9.51
==========================================================================================================================
</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.
41
<PAGE> 44
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
INTERMEDIATE-TERM BOND INDEX FUND (000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,536,173 $ 10.09
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (20,656) (.14)
Unrealized Depreciation--Note F (66,568) (.44)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,448,949 $ 9.51
==========================================================================================================================
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (64.0%)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (58.4%)
U.S. Treasury Bond 7.50% 11/15/2024 $ 4,475 $ 4,882
U.S. Treasury Bond 7.625% 11/15/2022 46,245 50,695
U.S. Treasury Bond 8.00% 11/15/2021 18,445 20,916
U.S. Treasury Bond 8.125% 8/15/2019-8/15/2021 36,730 41,981
U.S. Treasury Bond 8.50% 2/15/2020 6,740 7,958
U.S. Treasury Bond 8.75% 5/15/2017-8/15/2020 1,765 2,131
U.S. Treasury Bond 8.875% 8/15/2017-2/15/2019 18,350 22,172
U.S. Treasury Bond 9.25% 2/15/2016 2,125 2,622
U.S. Treasury Bond 10.375% 11/15/2009-11/15/2012 16,640 20,037
U.S. Treasury Bond 10.625% 8/15/2015 2,700 3,672
U.S. Treasury Bond 12.75% 11/15/2010 1,900 2,448
U.S. Treasury Bond 13.25% 5/15/2014 975 1,404
U.S. Treasury Note 6.25% 2/15/2003 525 523
U.S. Treasury Note 6.50% 8/15/2005-10/15/2006 1,600 1,595
----------
183,036
----------
AGENCY BONDS & NOTES (5.6%)
Federal National Mortgage Assn. 5.83% 11/26/2027 1,000 838
Federal National Mortgage Assn. 6.08% 9/1/2028 3,000 2,601
Federal National Mortgage Assn. 6.09% 9/27/2027 2,000 1,739
Federal National Mortgage Assn. 6.16% 8/7/2028 5,000 4,340
Federal National Mortgage Assn. 6.25% 5/15/2029 2,000 1,778
Tennessee Valley Authority 6.25% 12/15/2017 1,100 970
Tennessee Valley Authority 6.75% 11/1/2025 2,500 2,360
Tennessee Valley Authority 6.875% 12/15/2043 3,000 2,768
----------
17,394
----------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $211,545) 200,430
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (28.3%)
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (0.3%)
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1) 150 149
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 450 449
Premier Auto Trust 5.69% 6/8/2002 (1) 400 397
----------
995
----------
FINANCE (5.9%)
ABN-AMRO Bank 7.125% 10/15/2093 1,000 864
Bank of America Institute 8.07% 12/31/2026 1,500 1,410
Bank of New York Capital I 7.97% 12/31/2026 375 351
BT Capital Trust B 7.90% 1/15/2027 200 182
Chase Capital I 7.67% 12/1/2026 1,900 1,730
CIGNA Corp. 7.875% 5/15/2027 175 163
CIGNA Corp. 8.30% 1/15/2033 500 484
Citicorp Capital II 8.015% 2/15/2027 450 423
Dean Witter, Discover & Co. 6.75% 10/15/2013 200 180
Equitable Companies Inc. 7.00% 4/1/2028 200 179
Fleet Capital Trust II 7.92% 12/11/2026 400 365
Ford Motor Credit Co. 6.375% 2/1/2029 1,500 1,261
General Electric Capital Corp. 6.90% 9/15/2015 1,000 937
Household Finance Corp. 6.45% 2/1/2009 70 64
Lehman Brothers Holdings, Inc. 6.625% 2/15/2008 950 873
Liberty Financial Co. 6.75% 11/15/2008 1,000 913
Mellon Capital II 7.995% 1/15/2027 2,100 1,979
Merrill Lynch & Co. 6.875% 11/15/2018 1,250 1,132
NB Capital Trust IV 8.25% 4/15/2027 400 385
NationsBank Corp. 7.25% 10/15/2025 375 347
Norwest Corp. 6.65% 10/15/2023 60 52
Progressive Corp. 6.625% 3/1/2029 1,000 841
Security Capital Pacific Trust 8.05% 4/1/2017 200 180
</TABLE>
43
<PAGE> 46
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Spieker Properties Inc. 7.50% 10/1/2027 $ 300 $ 260
Summit Properties Inc. 7.20% 8/15/2007 550 498
Suntrust Capital 7.90% 6/15/2027 750 699
Susa Partnership 7.50% 12/1/2027 400 327
Travelers/Aetna Property Casualty Corp. 7.75% 4/15/2026 275 267
U.S. Bancorp 8.27% 12/15/2026 750 713
Wells Fargo Capital I 7.96% 12/15/2026 400 377
----------
18,436
----------
INDUSTRIAL (16.9%)
Anadarko Petroleum Corp. 7.20% 3/15/2029 2,000 1,809
Anheuser-Busch Cos., Inc. 6.75% 12/15/2027 250 224
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 600 562
Apache Corp. 7.625% 7/1/2019 1,500 1,449
Archer-Daniels-Midland Co. 8.875% 4/15/2011 80 87
Auburn Hills 12.00% 5/1/2020 260 376
Baker Hughes Inc. 6.875% 1/15/2029 1,500 1,312
C.R. Bard, Inc. 6.70% 12/1/2026 500 473
Bayer Corp. 6.65% 2/15/2028 500 439
The Boeing Co. 6.625% 2/15/2038 700 593
Borg-Warner Automotive 7.125% 2/15/2029 2,000 1,715
Burlington Northern Santa Fe Corp. 6.75% 3/15/2029 1,000 869
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 300 274
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 800 719
Burlington Northern Santa Fe Corp. 7.25% 8/1/2097 250 217
CSX Corp. 8.10% 9/15/2022 600 599
CSX Corp. 8.625% 5/15/2022 1,025 1,078
Caterpillar Inc. 9.375% 8/15/2011 450 505
Caterpillar Co. 7.375% 3/1/2097 50 45
Chrysler Corp. 7.45% 2/1/2097 225 209
Comcast Cablevision 8.875% 5/1/2017 500 547
Conoco Inc. 6.95% 4/15/2029 2,000 1,802
Continental Airlines, Inc. (Equipment Trust Certificates) 6.648% 3/15/2019 460 413
Dayton Hudson Corp. 6.65% 8/1/2028 500 433
Dayton Hudson Corp. 6.75% 1/1/2028 750 659
Deere & Co. 8.50% 1/9/2022 115 122
Delta Air Lines Inc. 8.30% 12/15/2029 1,700 1,646
Dillard's Inc. 7.75% 5/15/2027 750 680
The Walt Disney Co. 7.55% 7/15/2093 975 898
Dow Chemical Co. 7.375% 11/1/2029 1,000 956
Eastman Chemical Co. 7.25% 1/15/2024 250 221
Eastman Chemical Co. 7.60% 2/1/2027 150 137
Federated Department Stores, Inc. 7.00% 2/15/2028 400 354
Federated Department Stores, Inc. 7.45% 7/15/2017 900 856
Ford Capital BV 9.50% 6/1/2010 180 202
Ford Motor Co. 8.90% 1/15/2032 1,000 1,114
Ford Motor Co. 9.98% 2/15/2047 100 125
Georgia-Pacific Corp. 7.75% 11/15/2029 1,500 1,429
International Business Machines Corp. 7.00% 10/30/2025 350 328
International Business Machines Corp. 7.125% 12/1/2096 500 454
International Paper Co. 6.875% 4/15/2029 2,000 1,734
Kroger Co. 7.625% 9/15/2029 1,750 1,714
Lucent Technologies, Inc. 6.50% 1/15/2028 500 439
May Department Stores Co. 6.70% 9/15/2028 1,375 1,202
May Department Stores Co. 9.75% 2/15/2021 40 47
Mobil Corp. 7.625% 2/23/2033 230 215
Monsanto Co. 6.85% 12/1/2028 1,000 846
News America Holdings Inc. 7.75% 1/20/2024 1,000 946
News America Holdings Inc. 8.00% 10/17/2016 750 733
News America Holdings Inc. 9.25% 2/1/2013 1,500 1,629
Norfolk Southern Corp. 7.70% 5/15/2017 400 391
Norfolk Southern Corp. 7.80% 5/15/2027 325 318
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Norfolk Southern Corp. 7.90% 5/15/2097 100 95
Northrop Grumman Corp. 9.375% 10/15/2024 $ 400 $ 419
Phillips Petroleum Co. 8.49% 1/1/2023 900 900
Raytheon Co. 6.75% 3/15/2018 800 695
Raytheon Co. 7.00% 11/1/2028 400 347
Rohm & Haas Co. 7.85% 7/15/2029 1,750 1,753
Rohm & Haas Co. 9.80% 4/15/2020 550 626
Sears, Roebuck & Co. 9.375% 11/1/2011 395 428
TCI Communications, Inc. 7.875% 8/1/2013 1,000 1,015
Tele-Communications, Inc. 9.875% 6/15/2022 500 607
Texaco Capital Corp. 8.875% 9/1/2021 155 173
Time Warner Entertainment 8.375% 3/15/2023 1,650 1,717
Time Warner Inc. 7.57% 2/1/2024 500 476
Tosco Corp. 7.80% 1/1/2027 350 329
Tyco International Group SA 6.875% 1/15/2029 1,500 1,278
Union Carbide Corp. 7.75% 10/1/2096 1,150 1,049
Union Carbide Corp. 7.875% 4/1/2023 220 214
Union Oil Co. of California 7.50% 2/15/2029 1,000 934
Union Pacific Corp. 6.625% 2/1/2029 1,250 1,055
Union Pacific Corp. 7.00% 2/1/2016 550 504
Union Pacific Corp. 8.625% 5/15/2022 35 36
United Technologies Corp. 6.70% 8/1/2028 500 442
United Technologies Corp. 8.875% 11/15/2019 545 607
----------
52,843
----------
UTILITIES (5.2%)
AT&T Corp. 8.35% 1/15/2025 300 296
Arizona Public Service Co. 7.25% 8/1/2023 200 179
CMS Panhandle Holding Co. 7.00% 7/15/2029 1,500 1,317
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 300 334
Commonwealth Edison 7.50% 7/1/2013 750 730
Enron Corp. 6.95% 7/15/2028 1,000 873
GTE Corp. 8.75% 11/1/2021 900 992
Illinois Power Co. 7.50% 7/15/2025 300 271
MCI Communications Corp. 6.50% 4/15/2010 625 582
MCI Communications Corp. 7.75% 3/23/2025 250 236
Michigan Bell Telephone Co. 7.50% 2/15/2023 1,040 978
New England Telephone & Telegraph Co. 6.875% 10/1/2023 110 96
New England Telephone & Telegraph Co. 7.875% 11/15/2029 600 606
New England Telephone & Telegraph Co. 9.00% 8/1/2031 250 261
New York Telephone Co. 6.125% 1/15/2010 1,000 901
Pacific Gas & Electric Co. 8.25% 11/1/2022 1,000 966
Southern California Edison Co. 6.75% 1/15/2000 500 500
Southwestern Bell Telephone Co. 7.25% 7/15/2025 450 403
Southwestern Bell Telephone Co. 7.625% 3/1/2023 45 43
Sprint Capital Corp. 6.875% 11/15/2028 1,250 1,112
Texas Utilities Co. 7.875% 3/1/2023 1,090 1,038
Texas Utilities Co. 8.75% 11/1/2023 50 51
U S WEST Communications Inc. 7.25% 9/15/2025 1,000 923
Virginia Electric & Power Co. 6.75% 10/1/2023 1,000 850
Worldcom Inc. 6.95% 8/15/2028 500 455
----------
16,282
---------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $96,117) 88,556
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(5.9%)
- --------------------------------------------------------------------------------------------------------------------------
Abbey National PLC 7.95% 10/26/2029 1,800 1,797
Ahold Finance USA Inc. 6.875% 5/1/2029 1,500 1,318
Canadian National Railway Co. 6.80% 7/15/2018 725 655
Canadian National Railway Co. 6.90% 7/15/2028 400 355
</TABLE>
45
<PAGE> 48
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
LONG-TERM BOND INDEX FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 $ 800 $ 796
Embotelladora Andina SA 7.875% 10/1/2097 300 228
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 75 83
Inter-American Development Bank 7.125% 3/15/2023 25 23
Inter-American Development Bank 8.50% 3/15/2011 110 120
KFW International Finance, Inc. 7.20% 3/15/2014 600 590
Korea Electric Power 7.00% 2/1/2007 175 161
Korea Electric Power 7.75% 4/1/2013 400 374
Korean Development Bank 7.125% 4/22/2004 800 779
Newfoundland 10.00% 12/1/2020 750 910
Northern Telecom Ltd. 6.875% 9/1/2023 250 224
Pemex Finance Ltd. 9.69% 4/1/2007 800 820
Petro-Canada 9.25% 10/15/2021 1,300 1,432
Petro Geo-Services 7.125% 3/30/2028 625 547
Petro-Geo Services 8.15% 7/15/2029 750 740
Province of Manitoba 9.25% 4/1/2020 485 568
Province of New Brunswick 8.75% 5/1/2022 800 890
Province of New Brunswick 9.75% 5/15/2020 500 605
Province of Newfoundland 9.00% 6/1/2019 300 336
Province of Quebec 7.125% 2/9/2024 2,000 1,859
Province of Saskatchewan 7.375% 7/15/2013 600 595
Swiss Bank Corp.-New York 7.00% 10/15/2015 750 690
Swiss Bank Corp.-New York 7.375% 7/15/2015 750 715
Swiss Bank Corp.-New York 7.375% 6/15/2017 300 285
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $20,728) 18,495
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $1,070) 3.25% 1/3/2000 1,070 1,070
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%)
(COST $329,460) 308,551
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 6,952
Liabilities (2,350)
----------
4,602
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
==========================================================================================================================
Applicable to 32,056,493 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $313,153
==========================================================================================================================
NET ASSET VALUE PER SHARE $9.77
==========================================================================================================================
</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 DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $340,501 $ 10.62
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (6,439) (.20)
Unrealized Depreciation--Note F (20,909) (.65)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $313,153 $ 9.77
==========================================================================================================================
</TABLE>
46
<PAGE> 49
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to each class of its shares. These
expenses directly reduce the amount of investment income available to pay to
shareholders as income dividends. This Statement also shows any Net Gain (Loss)
realized on the sale of investments, and any Unrealized Appreciation
(Depreciation) on investments during the period.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TOTAL BOND SHORT-TERM INTERMEDIATE- LONG-TERM
MARKET INDEX BOND INDEX TERM BOND INDEX BOND INDEX
FUND FUND FUND FUND
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $ 748,611 $ 53,761 $ 86,812 $ 18,006
Security Lending 244 50 121 --
--------------------------------------------------------------------
Total Income 748,855 53,811 86,933 18,006
--------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 1,430 113 163 33
Management and Administrative 5,255 890 1,167 8
Shareholder Account Maintenance(1) 10,751 640 997 411
Marketing and Distribution(1) 2,305 178 244 50
Custodian Fees 236 30 32 22
Auditing Fees 14 8 9 8
Shareholders' Reports(1) 527 33 52 18
Trustees' Fees and Expenses 15 1 2 --
--------------------------------------------------------------------
Total Expenses 20,533 1,893 2,666 550
Expenses Paid Indirectly--Note D -- -- (6) (4)
--------------------------------------------------------------------
Net Expenses 20,533 1,893 2,660 546
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 728,322 51,918 84,273 17,460
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT
SECURITIES SOLD (62,350) (1,356) (20,519) (6,422)
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENT SECURITIES (739,761) (29,597) (102,634) (32,879)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (73,789) $ 20,965 $ (38,880) $(21,841)
=========================================================================================================================
</TABLE>
(1)Expenses of the Total Bond Market Index Fund by class of shares
are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(000)
----------------------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class-Specific Expenses:
Shareholder Account Maintenance $10,213 $ 538 $10,751
Marketing and Distribution 1,750 555 2,305
Shareholders' Reports 473 54 527
----------------------------------------------
Total Class-Specific Expenses 12,436 1,147 13,583
All Other Fund Expenses 5,231 1,719 6,950
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses $17,667 $2,866 $20,533
=========================================================================================================================
</TABLE>
See Note C in Notes to Financial Statements.
47
<PAGE> 50
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
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998
(000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 728,322 $ 502,763
Realized Net Gain (Loss) (62,350) 65,401
Change in Unrealized Appreciation (Depreciation) (739,761) 101,026
---------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (73,789) 669,190
---------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (545,745) (385,446)
Institutional Shares (182,577) (117,317)
Realized Capital Gain
Investor Shares (12,419) (28,406)
Institutional Shares (3,923) (8,371)
---------------------------------------
Total Distributions (744,664) (539,540)
---------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 3,990,946 3,417,802
Issued in Lieu of Cash Distributions 505,211 373,724
Redeemed (2,168,015) (1,255,551)
---------------------------------------
Net Increase--Investor Shares 2,328,142 2,535,975
---------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued 1,292,134 1,101,619
Issued in Lieu of Cash Distributions 158,648 105,038
Redeemed (536,860) (371,701)
---------------------------------------
Net Increase--Institutional Shares 913,922 834,956
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase 2,423,611 3,500,581
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 10,258,025 6,757,444
---------------------------------------
End of Year $12,681,636 $10,258,025
===============================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 403,460 334,291
Issued in Lieu of Cash Distributions 51,368 36,562
Redeemed (219,979) (122,914)
---------------------------------------
Net Increase in Shares Outstanding 234,849 247,939
===============================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued 130,755 107,590
Issued in Lieu of Cash Distributions 16,133 10,275
Redeemed (54,627) (36,368)
---------------------------------------
Net Increase in Shares Outstanding 92,261 81,497
===============================================================================================================================
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INTERMEDIATE-TERM
BOND INDEX FUND BOND INDEX FUND
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1999 1998 1999 1998
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 51,918 $ 32,590 $ 84,273 $ 55,640
Realized Net Gain (Loss) (1,356) 6,344 (20,519) 15,703
Change in Unrealized Appreciation (Depreciation) (29,597) 2,874 (102,634) 14,878
-----------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 20,965 41,808 (38,880) 86,221
-----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (51,918) (32,590) (84,273) (55,640)
Realized Capital Gain (2,739) (4,414) (4,238) (7,583)
-----------------------------------------------------------------------
Total Distributions (54,657) (37,004) (88,511) (63,223)
-----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 739,906 374,881 745,836 527,923
Issued in Lieu of Cash Distributions 47,342 31,908 73,493 52,764
Redeemed (306,910) (148,942) (345,405) (187,851)
-----------------------------------------------------------------------
Net Increase from Capital
Share Transactions 480,338 257,847 473,924 392,836
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase 446,646 262,651 346,533 415,834
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 708,920 446,269 1,102,416 686,582
-----------------------------------------------------------------------
End of Year $1,155,566 $ 708,920 $1,448,949 $1,102,416
===================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 74,780 37,200 74,793 50,863
Issued in Lieu of Cash Distributions 4,800 3,165 7,443 5,067
Redeemed (31,066) (14,760) (35,096) (18,083)
-----------------------------------------------------------------------
Net Increase in Shares Outstanding 48,514 25,605 47,140 37,847
===================================================================================================================================
</TABLE>
49
<PAGE> 52
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
LONG-TERM
BOND INDEX FUND
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998
(000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 17,460 $ 8,682
Realized Net Gain (Loss) (6,422) 1,152
Change in Unrealized Appreciation (Depreciation) (32,879) 6,379
---------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (21,841) 16,213
---------------------------------------
DISTRIBUTIONS
Net Investment Income (17,460) (8,682)
Realized Capital Gain (451) (810)
---------------------------------------
Total Distributions (17,911) (9,492)
---------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 239,036 175,576
Issued in Lieu of Cash Distributions 15,448 8,099
Redeemed (111,604) (68,323)
---------------------------------------
Net Increase from Capital Share Transactions 142,880 115,352
- --------------------------------------------------------------------------------------------------------------------------
Total Increase 103,128 122,073
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 210,025 87,952
---------------------------------------
End of Year $ 313,153 $ 210,025
==========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 22,752 15,843
Issued in Lieu of Cash Distributions 1,498 727
Redeemed (10,740) (6,180)
---------------------------------------
Net Increase in Shares Outstanding 13,510 10,390
==========================================================================================================================
</TABLE>
50
<PAGE> 53
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 THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.27 $ 10.09 $ 9.84 $ 10.14 $ 9.17
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .617 .624 .645 .640 .650
Net Realized and Unrealized Gain (Loss) on Investments (.695) .218 .250 (.300) .970
------------------------------------------------------------
Total from Investment Operations (.078) .842 .895 .340 1.620
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.617) (.624) (.645) (.640) (.650)
Distributions from Realized Capital Gains (.015) (.038) -- -- --
------------------------------------------------------------
Total Distributions (.632) (.662) (.645) (.640) (.650)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 9.56 $ 10.27 $ 10.09 $ 9.84 $ 10.14
=============================================================================================================================
TOTAL RETURN* -0.76% 8.58% 9.44% 3.58% 18.18%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 9,477 $ 7,765 $ 5,129 $ 2,962 $ 2,405
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 6.26% 6.10% 6.54% 6.54% 6.66%
Portfolio Turnover Rate 55% 57%** 39% 39% 36%
=============================================================================================================================
</TABLE>
*Total return figures do not reflect the annual account maintenance fee of
$10.
**Portfolio turnover rate excluding in-kind redemptions was 56%.
51
<PAGE> 54
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL BOND MARKET INDEX FUND INSTITUTIONAL SHARES
YEAR ENDED DECEMBER 31,
------------------------------------------- SEP. 18* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1999 1998 1997 1996 DEC. 31, 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.27 $ 10.09 $ 9.84 $ 10.14 $ 9.87
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .627 .635 .655 .650 .174
Net Realized and Unrealized Gain (Loss) on Investments (.695) .218 .250 (.300) .270
---------------------------------------------------------------
Total from Investment Operations (.068) .853 .905 .350 .444
---------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.627) (.635) (.655) (.650) (.174)
Distributions from Realized Capital Gains (.015) (.038) -- -- --
---------------------------------------------------------------
Total Distributions (.642) (.673) (.655) (.650) (.174)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.56 $ 10.27 $ 10.09 $ 9.84 $ 10.14
===============================================================================================================================
TOTAL RETURN -0.66% 8.69% 9.55% 3.68% 4.53%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 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%**
Ratio of Net Investment Income to Average Net Assets 6.36% 6.21% 6.64% 6.66% 6.48%**
Portfolio Turnover Rate 55% 57%+ 39% 39% 36%
===============================================================================================================================
</TABLE>
*Inception.
**Annualized.
+Portfolio turnover rate excluding in-kind redemptions was 56%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.10 $ 10.00 $ 9.92 $ 10.07 $ 9.50
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .539 .574 .597 .587 .623
Net Realized and Unrealized Gain (Loss) on Investments (.336) .168 .080 (.146) .570
-----------------------------------------------------------
Total from Investment Operations .203 .742 .677 .441 1.193
DISTRIBUTIONS
Dividends from Net Investment Income (.539) (.574) (.597) (.587) (.623)
Distributions from Realized Capital Gains (.034) (.068) -- (.004) --
-----------------------------------------------------------
Total Distributions (.573) (.642) (.597) (.591) (.623)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 9.73 $ 10.10 $ 10.00 $ 9.92 $ 10.07
============================================================================================================================
TOTAL RETURN* 2.08% 7.63% 7.04% 4.55% 12.88%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 1,156 $ 709 $ 446 $ 328 $ 208
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.48% 5.68% 6.03% 5.93% 6.28%
Portfolio Turnover Rate 108% 112% 88% 65% 65%
============================================================================================================================
</TABLE>
*Total return figures do not reflect the annual account maintenance fee of $10.
52
<PAGE> 55
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.48 $ 10.20 $ 9.96 $ 10.37 $ 9.18
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .628 .647 .661 .648 .661
Net Realized and Unrealized Gain (Loss) on Investments (.936) .353 .240 (.406) 1.217
----------------------------------------------------------
Total from Investment Operations (.308) 1.000 .901 .242 1.878
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.628) (.647) (.661) (.648) (.661)
Distributions from Realized Capital Gains (.034) (.073) -- (.004) (.027)
----------------------------------------------------------
Total Distributions (.662) (.720) (.661) (.652) (.688)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 9.51 $ 10.48 $ 10.20 $ 9.96 $ 10.37
============================================================================================================================
TOTAL RETURN* -3.00% 10.09% 9.41% 2.55% 21.07%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 1,449 $ 1,102 $ 687 $ 460 $ 346
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 6.33% 6.23% 6.64% 6.54% 6.55%
Portfolio Turnover Rate 120% 77% 56% 80% 71%
============================================================================================================================
</TABLE>
*Total return figures do not reflect the annual account maintenance fee of $10.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
LONG-TERM BOND INDEX FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 11.32 $ 10.78 $ 10.08 $ 10.82 $ 8.96
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .662 .666 .678 .674 .692
Net Realized and Unrealized Gain (Loss) on Investments (1.531) .588 .700 (.731) 1.884
----------------------------------------------------------
Total from Investment Operations (.869) 1.254 1.378 (.057) 2.576
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.662) (.666) (.678) (.674) (.692)
Distributions from Realized Capital Gains (.019) (.048) -- (.009) (.024)
----------------------------------------------------------
Total Distributions (.681) (.714) (.678) (.683) (.716)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 9.77 $ 11.32 $ 10.78 $ 10.08 $ 10.82
=============================================================================================================================
TOTAL RETURN* -7.85% 11.98% 14.30% -0.26% 29.72%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 313 $ 210 $ 88 $ 44 $ 24
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 6.39% 6.01% 6.66% 6.75% 6.90%
Portfolio Turnover Rate 61% 57% 58% 46% 45%
=============================================================================================================================
</TABLE>
*Total return figures do not reflect the annual account maintenance fee of $10.
53
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS
Vanguard Bond Index Funds comprise the Total Bond Market Index Fund, Short-Term
Bond Index Fund, Intermediate-Term Bond Index Fund, and Long-Term Bond Index
Fund, each of which is registered under the Investment Company Act of 1940 as a
diversified open-end investment company, or mutual fund. Certain of the funds'
investments are in corporate debt instruments; the issuers' abilities to meet
their obligations may be affected by economic developments in their respective
industries.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Bonds, and temporary cash investments acquired over
60 days to maturity, are valued using the latest bid prices or using valuations
based on a matrix system (which considers such factors as security prices,
yields, maturities, and ratings), both as furnished by independent pricing
services. Other temporary cash investments are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued by methods deemed by the Board of Trustees to
represent fair value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: Each of the Vanguard Bond Index Funds, along
with other members of The Vanguard Group, transfers uninvested cash balances
into a Pooled Cash Account, which is invested in repurchase agreements secured
by U.S. government securities. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
4. DISTRIBUTIONS: Distributions from net investment income are declared
daily and paid on the first business day of the following month. Annual
distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
5. OTHER: Security transactions are accounted for on the date securities
are bought or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Premiums and
discounts on debt securities purchased are amortized and accreted, respectively,
to interest income over the lives of the respective securities.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the funds under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At December 31, 1999, the funds had
contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
INDEX FUND (000) NET ASSETS CAPITALIZATION
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market $2,582 0.02% 2.6%
Short-Term Bond 236 0.02 0.2
Intermediate-Term Bond 299 0.02 0.3
Long-Term Bond 63 0.02 0.1
-------------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
54
<PAGE> 57
C. The Total Bond Market Index Fund offers two classes of shares, the Investor
Shares and the Institutional Shares. Institutional shares are designed
primarily for institutional investors that meet certain administrative and
servicing criteria and have a minimum investment of $10 million. Investor
shares are offered to all other investors. Both classes of shares have equal
rights as to assets and earnings, except that each class bears certain
class-specific expenses related to its shareholder activity. For the year ended
December 31, 1999, class-specific expenses represented an annual rate of 0.14%
and 0.04% of average net assets of the Investor Shares and Institutional
Shares, respectively. Income, expenses not attributable to a specific class,
and realized and unrealized gains and losses on investments are allocated to
each class of shares based on its relative net assets.
D. The funds' custodian bank has agreed to reduce its fees when the funds
maintain cash on deposit in their non-interest-bearing custody accounts. For
the year ended December 31, 1999, custodian fee offset arrangements reduced
expenses of the Intermediate-Term Bond Index Fund and Long-Term Bond Index Fund
by $6,000, and $4,000, respectively.
E. During the year ended December 31, 1999, purchases and sales of investment
securities other than U.S. government securities and temporary cash investments
were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
(000)
------------------------------------
INDEX FUND PURCHASES SALES
-----------------------------------------------------------------
<S> <C> <C>
Total Bond Market $2,418,025 $1,216,831
Short-Term Bond 293,518 110,759
Intermediate-Term Bond 449,885 242,283
Long-Term Bond 81,844 17,980
-----------------------------------------------------------------
</TABLE>
Purchases and sales of U.S. government securities were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
(000)
------------------------------------
INDEX FUND PURCHASES SALES
-----------------------------------------------------------------
<S> <C> <C>
Total Bond Market $7,879,395 $5,124,808
Short-Term Bond 1,197,071 890,762
Intermediate-Term Bond 1,576,980 1,324,784
Long-Term Bond 223,281 144,088
-----------------------------------------------------------------
</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>
55
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS (continued)
F. At December 31, 1999, unrealized depreciation of investment securities for
financial reporting and federal income tax purposes was:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
(000)
-------------------------------------------------------------
APPRECIATED DEPRECIATED NET UNREALIZED
INDEX FUND SECURITIES SECURITIES DEPRECIATION
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market $17,700 $(448,707) $(431,007)
Short-Term Bond 154 (22,711) (22,557)
Intermediate-Term Bond 574 (67,142) (66,568)
Long-Term Bond 147 (21,056) (20,909)
----------------------------------------------------------------------------------------
</TABLE>
G. The market values of securities on loan to broker/dealers at December 31,
1999, and collateral received with respect to such loans, were:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
(000)
---------------------------------------------------------
COLLATERAL RECEIVED
-------------------------------------
MARKET VALUE MARKET VALUE
OF LOANED OF U.S. TREASURY
INDEX FUND SECURITIES CASH SECURITIES
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Bond Market $117,763 $31,286 $ 90,487
Short-Term Bond 21,824 16,798 5,468
Intermediate-Term Bond 191,936 18,558 175,750
----------------------------------------------------------------------------------------
</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.
56
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Vanguard Bond Index Funds
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard Total Bond Market Index Fund, Vanguard Short-Term Bond Index Fund,
Vanguard Intermediate-Term Bond Index Fund, and Vanguard Long-Term Bond Index
Fund (constituting Vanguard Bond Index Funds, hereafter referred to as the
"Funds") at December 31, 1999, the results of each of their operations for the
year then ended, the changes in each of their net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
February 2, 2000
57
<PAGE> 60
- -------------------------------------------------------------------------------
SPECIAL 1999 TAX INFORMATION (UNAUDITED) FOR
VANGUARD BOND INDEX FUNDS
This information for the fiscal year ended December 31, 1999, is included
pursuant to provisions of the Internal Revenue Code.
The Total Bond Market Index Fund, Short-Term Bond Index Fund,
Intermediate-Term Bond Index Fund, and Long-Term Bond Index Fund distributed
$10,895,000, $403,000, $3,864,000, and $451,000, respectively, as capital gain
dividends (from net long-term capital gains) to shareholders during the fiscal
year ended December 31, 1999, all of which is designated as a 20% rate gain
distribution.
- -------------------------------------------------------------------------------
58
<PAGE> 61
THE VANGUARD FAMILY OF FUNDS
<TABLE>
<CAPTION>
STOCK FUNDS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
500 Index Fund Growth Index Fund* Tax-Managed Capital
Aggressive Growth Fund Health Care Fund Appreciation Fund*
Capital Opportunity Fund Institutional Index Fund* Tax-Managed Growth and
Convertible Securities Fund International Growth Fund Income Fund*
Emerging Markets Stock International Value Fund Tax-Managed International Fund*
Index Fund Mid-Cap Index Fund* Tax-Managed Small-Cap Fund*
Energy Fund Morgan Growth Fund Total International Stock
Equity Income Fund Pacific Stock Index Fund Index Fund
European Stock Index Fund PRIMECAP Fund Total Stock Market Index Fund*
Explorer Fund REIT Index Fund U.S. Growth Fund
Extended Market Index Fund* Selected Value Fund Utilities Income Fund
Global Equity Fund Small-Cap Growth Index Fund* Value Index Fund*
Gold and Precious Metals Fund Small-Cap Index Fund* Windsor Fund
Growth and Income Fund Small-Cap Value Index Fund* Windsor II Fund
BALANCED FUNDS
- -------------------------------------------------------------------------------------------------------------
Asset Allocation Fund LifeStrategy Growth Fund STAR Fund
Balanced Index Fund LifeStrategy Income Fund Tax-Managed Balanced Fund
Global Asset Allocation Fund LifeStrategy Moderate Wellesley Income Fund
LifeStrategy Conservative Growth Fund Wellington Fund
Growth Fund
BOND FUNDS
- -------------------------------------------------------------------------------------------------------------
Admiral Intermediate-Term Intermediate-Term Corporate Fund Short-Term Corporate Fund*
Treasury Fund Intermediate-Term Tax-Exempt Short-Term Federal Fund
Admiral Long-Term Treasury Fund Fund Short-Term Tax-Exempt Fund
Admiral Short-Term Treasury Fund Intermediate-Term Treasury Fund Short-Term Treasury Fund
GNMA Fund Limited-Term Tax-Exempt Fund State Tax-Exempt Bond Funds
High-Yield Corporate Fund Long-Term Bond Index Fund (California, Florida,
High-Yield Tax-Exempt Fund Long-Term Corporate Fund Massachusetts, New Jersey,
Insured Long-Term Tax-Exempt Fund Long-Term Tax-Exempt Fund New York, Ohio, Pennsylvania)
Intermediate-Term Bond Long-Term Treasury Fund Total Bond Market Index Fund*
Index Fund Preferred Stock Fund
Short-Term Bond Index Fund
MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------
Admiral Treasury Money State Tax-Exempt Money Market Tax-Exempt Money Market Fund
Market Fund Funds (California, New Jersey, Treasury Money Market Fund
Federal Money Market Fund New York, Ohio, Pennsylvania)
Prime Money Market Fund*
VARIABLE ANNUITY PLAN
- -------------------------------------------------------------------------------------------------------------
Balanced Portfolio High-Grade Bond Portfolio Money Market Portfolio
Diversified Value Portfolio High Yield Bond Portfolio REIT Index Portfolio
Equity Income Portfolio International Portfolio Short-Term Corporate Portfolio
Equity Index Portfolio Mid-Cap Index Portfolio Small Company Growth Portfolio
Growth Portfolio
</TABLE>
*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.
59
<PAGE> 62
- -------------------------------------------------------------------------------
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.
Seven of Vanguard's nine 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 C. BOGLE - (1967) Founder, Senior Chairman of the Board, and
Director/Trustee of The Vanguard Group, Inc., and each of the investment
companies in The Vanguard Group.
JOHN J. BRENNAN - (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.
JOHN C. SAWHILL - (1991) President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co. and
President of New York University; Director of Pacific Gas and Electric Co.,
Procter & Gamble Co., NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR. - (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
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 - Core Management Group.
<PAGE> 63
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.
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 4500" and "Wilshire 5000" are trademarks of Wilshire
Associates.
[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.
Q840-02/24/2000
(C) 2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
