<PAGE> 1
VANGUARD OHIO
TAX-EXEMPT FUNDS
VANGUARD OHIO TAX-EXEMPT
MONEY MARKET FUND
VANGUARD OHIO INSURED LONG-TERM
TAX-EXEMPT FUND
[PHOTO]
Annual
Report
November 30, 1998
[PHOTO]
[THE VANGUARD GROUP LOGO]
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AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 8,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
This year, our report cover pays homage to three anniversaries, each of great
significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August
1, 1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto--"Leading the way"--serves as a guiding principle
for our company.
- - The 100th birthday, on July 23, of Walter L. Morgan, founder of Wellington
Fund, the oldest member of what became The Vanguard Group. Mr. Morgan was
friend and mentor to Vanguard founder John C. Bogle, and helped to shape the
standards and business principles that Mr. Bogle laid down for Vanguard at its
beginning nearly 25 years ago: a stress on balanced, diversified investments;
insistence on fair dealing and candor with clients; and a focus on long-term
investing. To our great regret, Mr. Morgan died on September 2.
- - The 70th anniversary, on December 28, of the incorporation of Vanguard
Wellington Fund. It was the nation's first balanced mutual fund, and is one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
7
REPORT FROM
THE ADVISER
9
PERFORMANCE SUMMARIES
11
FUND PROFILES
13
FINANCIAL STATEMENTS
16
REPORT OF
INDEPENDENT ACCOUNTANTS
28
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
DEAR SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
Interest rates declined on balance during the twelve months ended November 30,
1998--the fiscal year for the Vanguard Ohio Tax-Exempt Funds--providing a
significant boost to prices of tax-exempt municipal bonds. In this bond-friendly
environment of lower rates and tame inflation, our Ohio Insured Long-Term
Tax-Exempt Fund provided an excellent total return of +7.8% that surpassed the
return of its average peer by a full percentage point. Our Ohio Tax-Exempt Money
Market Fund's return of +3.4% also outdistanced that of its competitors.
<TABLE>
<CAPTION>
- --------------------------------------------------------
COMPONENTS OF TOTAL RETURNS
FISCAL YEAR ENDED NOVEMBER 30, 1998
-----------------------------------
OHIO TAX-EXEMPT FUND INCOME CAPITAL TOTAL
- --------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET +3.4% 0.0% +3.4%
(SEC 7-Day Annualized
Yield: 3.05%)
INSURED LONG-TERM +5.2 +2.6 +7.8
- --------------------------------------------------------
</TABLE>
The table at right presents each fund's twelve-month return along with its
income and capital components. The total return (capital change plus reinvested
dividends) of the Insured Long-Term Tax-Exempt Fund is based on a change in net
asset value from $11.72 per share on November 30, 1997, to $12.02 per share on
November 30, 1998, adjusted for dividends totaling $0.592 per share paid from
net investment income. The Money Market Fund's net asset value remained at $1
per share, as was expected but not guaranteed. At the end of the fiscal year,
the Insured Long-Term Fund's yield stood at 4.28%, the Money Market Fund's yield
at 3.05%.
FINANCIAL MARKETS IN REVIEW
During the twelve months ended November 30, investors fretted over a variety of
developments both here and abroad, from the debt problems of foreign governments
to a huge hedge-fund bailout to growing concern about corporate profits.
Overall, the uncertainty made for a tumultuous, but ultimately rewarding, period
in the equity markets and a fine fiscal year for bonds.
The yield of the benchmark 30-year U.S. Treasury bond fell about 100 basis
points on balance, ending the period at 5.06% after bottoming out at 4.72% in
early October. During the autumn, the Federal Reserve Board trimmed short-term
rates three times in seven weeks by a total of 0.75 percentage point, citing the
strain of international woes on the U.S. economy. The economy continued to
exhibit steady growth (about 3% during the period) and inflation remained low.
Consumer prices were up just 1.5% for the fiscal year.
Of course, as interest rates drop, bond prices rise. That meant
outstanding returns for bonds during the fiscal year, particularly for
longer-maturity issues, which benefit most from interest-rate declines. The
Lehman Brothers Long U.S. Treasury Bond Index earned a total return of +15.7%,
with its +7.2% income return augmented by an +8.5% capital return.
Yields on high-grade long-term municipal bonds did not fall as far as
those for Treasury securities. Top-rated long-term municipal bonds ended the
fiscal year with a yield of 4.89%, down from 5.25% at the end of November 1997.
Yields on top-grade (MIG-1) 3-month notes, which are more sensitive than
longer-term issues to changes
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in short-term interest rates, declined on balance to 2.95% from 3.80% a year
earlier. For the twelve months, the Lehman 10 Year Municipal Bond Index, a good
measure of the long-term municipal market, returned +8.1%--an outstanding return
considering the tax advantages of municipal bonds and the extremely low
inflation rate.
The U.S. stock market, meanwhile, weathered a severe summer storm that
drove the broad market down nearly 20% and clipped more than 40% from the value
of many smaller stocks. A swift recovery ensued during the final three months of
the fiscal year, and for the twelve months, the Standard & Poor's 500 Composite
Stock Price Index was up +23.7%.
The 1998 fiscal year will likely be remembered as a period of
extraordinary relative value in the municipal bond market. On November 30,
yields on long-term U.S. Treasuries and long-term municipal bonds were nearly
identical--a truly remarkable occurrence, given that income from state-specific
municipal bond funds is exempt from federal, state, and local taxes for state
residents. The yield convergence has been the result of several factors.
Treasury bonds benefited from both an easing of inflation fears and a "flight to
quality" by foreign investors--particularly from Asia--who bought Treasury
securities to protect themselves from declines in their currencies versus the
U.S. dollar. Meanwhile, new Treasury issuance dropped--thanks to the federal
budget surplus--and issuance of new municipal bonds soared, dampening prices a
bit and keeping yields high in relation to Treasuries.
Throughout the summer and into the fall, yields of long-term municipal
bonds were equal to about 98% of the yield on comparable Treasuries, and on
several occasions muni yields matched or even slightly exceeded Treasury yields.
To be sure, this phenomenon is temporary, but it made municipal bonds as
valuable in relation to Treasuries as they've ever been. Historically, municipal
bonds have offered a yield equal to about 84% of the yield on Treasury bonds.
It's always important to view the performance of bonds in the proper
perspective, especially after a year when declining interest rates pushed
returns higher. As you may recall, during the past two fiscal years bond prices
received only a small capital boost. Just four years ago, in 1994, interest
rates rose sharply and bond prices plunged, providing a painful lesson about the
volatility of bond-fund returns. It is also important for investors to
understand that the ever-present fluctuations in the bond market tend to offset
each other over longer periods, leaving the rate of interest income as the
dominant long-term source of bond returns.
FISCAL 1998 PERFORMANCE OVERVIEW
The +7.8% return of the Vanguard Ohio Insured Long-Term Tax-Exempt Fund topped
the +6.8% return of the average Ohio municipal bond fund and exactly matched the
return of the unmanaged Lehman Municipal Bond Index. This index, which includes
municipal bonds from across the country, is a notoriously tough competitor
because it does not incur the "real world" operating expenses and transaction
costs that all mutual funds must bear. Though the majority of our total return
came from interest income, the fund earned a capital return of +2.6% that
reflected the interest-rate decline. The Ohio Tax-Exempt Money Market Fund
provided a total return of +3.4%, outpacing the +3.1% return of its average
peer.
THE MUNICIPAL BOND TAX ADVANTAGE
For Ohio residents, the income earned by our funds is exempt from state, local,
and federal income taxes. At current yields, that means that investors in the
Ohio Insured
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Long-Term Tax-Exempt Fund who are taxed at the highest marginal tax rate can
earn an astounding 65% more after-tax income than they could in a comparable
long-term U.S. Treasury bond fund. Our Tax-Exempt Money Market Fund also offers
Ohio residents a distinct advantage over Treasuries with similar maturities. On
November 30, the yield of MIG-1 notes was 11% higher than the after-tax yield of
90-day U.S. Treasury bills. To look at this another way, a yield of 5.1% on a
tax-exempt long-term bond would be the equivalent of an 8.4% taxable yield for
Ohio taxpayers subject to the highest tax rates. For a tax-exempt short-term
yield of 3.0%, the taxable equivalent would be 5.0%.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
ILLUSTRATION OF INCOME FROM
A HYPOTHETICAL $100,000 INVESTMENT
------------------------------------
SHORT-TERM LONG-TERM
- -----------------------------------------------------------------
<S> <C> <C>
Taxable gross income $4,500 $5,100
Less taxes (39.6%) (1,800) (2,000)
Net after-tax income 2,700 3,100
- -----------------------------------------------------------------
Tax-exempt income $3,000 $5,100
- -----------------------------------------------------------------
Tax-exempt income advantage $ 300 $2,000
- -----------------------------------------------------------------
Percentage advantage 11% 65%
- -----------------------------------------------------------------
</TABLE>
This illustration assumes current yields (as of November 30, 1998) of 5.1% for
long-term U.S. Treasury bonds, 4.5% for U.S. Treasury bills, 5.1% for long-term
municipals, and 3.0% for short-term municipals. The tax adjustment assumes a
typical itemized tax return based on a federal tax rate of 39.6%. Income from
U.S. Treasuries is not subject to state taxes; local taxes are not considered.
The illustration is not intended to represent future results.
These remarkable advantages are illustrated in the table above, which
compares the annual net income earned on U.S. Treasury and tax-exempt securities
as of November 30, 1998, assuming a $100,000 investment.
Of course, in terms of credit quality, state-specific municipal bond
funds, by definition, don't match up to U.S. Treasury bond funds, whose
securities are backed by the full faith and credit of the U.S. government. Also,
single-state municipal bond funds lack geographic diversification. Private
insurance on the bonds in our Ohio Long-Term Tax-Exempt Fund, however,
substantially mitigates these additional credit risks. Though the insurance does
not provide protection against fluctuations in the fund's value, it guarantees
full payment of interest and principal for our bond holdings.
Portfolio insurance generally is not available for short-term securities,
so our investment adviser, Vanguard Fixed Income Group, is responsible for
preserving the principal of the Tax-Exempt Money Market Fund--a responsibility
the group fulfilled admirably. We remind you that money market investments are
not guaranteed by the Federal Deposit Insurance Corporation, which insures bank
accounts and certificates of deposit.
LONG-TERM PERFORMANCE OVERVIEW
The Vanguard Ohio Tax-Exempt Funds were launched more than eight years ago to
provide Ohio investors with a high level of tax-exempt income. While the true
test of these funds will come over a longer period, it is heartening to see that
they have established fine competitive records over their life spans.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURNS
JUNE 18, 1990, TO NOVEMBER 30, 1998
----------------------------------------------------------
AVERAGE FINAL VALUE OF A
ANNUAL RATE $10,000 INITIAL INVESTMENT*
----------------------------------------------------------
AVERAGE AVERAGE
OHIO TAX-EXEMPT VANGUARD COMPETING VANGUARD COMPETING VANGUARD
FUND FUND FUND FUND FUND ADVANTAGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market +3.5% +3.2% $13,337 $13,080 $ 257
Insured Long-Term +8.2 +7.5 19,529 18,377 1,152
- --------------------------------------------------------------------------------
</TABLE>
*Assuming reinvestment of all income dividends and capital gains distributions.
The table at right compares the performance of our funds since their June
18, 1990, inception with those of their average peer mutual funds. It also
presents
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the current value of a hypothetical $10,000 investment made at our funds'
inception. Our edge over competitors during this period has amounted, in the
case of the Insured Long-Term Fund, to $1,152, or more than 11% of the original
investment.
Our advantage is explained, in part, by our much lower expenses, a factor
that helps us toward our goal of providing returns that exceed those of
competitive norms. Our funds maintain expense ratios (annual expenses as a
percentage of average net assets) of 0.20%, far below both the 1.03% charged by
the average long-term state tax-exempt fund and the 0.53% charged by the average
state tax-exempt money market fund. We believe this powerful advantage is
sustainable. Another reason for our success is the skillful management of
Vanguard Fixed Income Group, which has helped guide our funds to their superior
record while maintaining the highest investment quality in the industry.
We emphasize that the longer-term returns shown above are higher than
investors should expect with interest rates at current levels. Our Insured
Long-Term Fund's returns have been boosted by capital appreciation due to
generally declining interest rates since 1990. But interest rates cannot decline
forever. Investors looking for a realistic forecast of future returns on
long-term bonds should not regard past returns as a guide. The best indicator of
the average future return on long-term bonds--and it is not a perfect
predictor--is the current yield on those bonds.
IN SUMMARY
The excellent returns earned by bonds over the past twelve months--as well as
over the past decade--should not lull investors into a false sense of security
about the safety of bonds or the reliability of returns. Bond returns will
inevitably revert to their historical (lower) averages, possibly with little or
no warning.
We believe that the specific risks of bonds, and the general risks of
investing, can be managed by a balanced investment program that includes stock
funds, bond funds, and money market funds suited to an individual's objectives,
time horizon, tolerance for risk, and financial situation. Once you have such a
program, you should be prepared to stick with it through good times and bad.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
December 18, 1998
NOTE: You'll observe that we have made minor changes in the names of the
Vanguard Ohio Tax-Exempt Funds. We replaced the word "Tax-Free" with
"Tax-Exempt" and replaced "Portfolio" with "Fund" as part of a broader effort to
clarify the names in our fund lineup.
4
<PAGE> 7
NOTICE TO SHAREHOLDERS
At a special meeting on July 24, 1998, shareholders of Vanguard Ohio Tax-Exempt
Funds overwhelmingly approved six proposals. The proposals and voting results
were:
1. REORGANIZATION INTO A DELAWARE BUSINESS TRUST. Based on the funds' assets at
the time of the vote, this change will reduce the amount of state taxes paid
each year by some Vanguard funds. The Vanguard Ohio Tax-Exempt Funds will not
realize any tax savings as a result of the change, but the funds will benefit
from the efficiency of being organized the same way as all other Vanguard Funds.
Approved by 93.89% of the shares voted, as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------
FOR AGAINST ABSTAIN
-------------------------------------------------------------
<S> <C> <C>
178,301,222 6,543,383 5,060,722
-------------------------------------------------------------
</TABLE>
2a. INVESTMENT LIMITATION CHANGES--INTERFUND LENDING PROGRAM. This change
permits the Vanguard Ohio Tax-Exempt Funds to participate in Vanguard's
interfund lending program, which allows funds to loan money to each other
if--and only if--it makes good financial sense to do so on both sides of the
transaction. The interfund lending program won't be an integral part of the
funds' investment programs; it is a contingency arrangement for managing unusual
cash flows. Approved as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
OHIO TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 147,006,577 19,079,487 7,811,058 84.54%
- -----------------------------------------------------------------------------------
Insured Long-Term 14,447,976 697,342 862,887 90.25%
- -----------------------------------------------------------------------------------
</TABLE>
2b. INVESTMENT LIMITATION CHANGES--BORROWING MONEY AND PLEDGING ASSETS. This
change sets standard limits of 15% of net assets on the amount of money Vanguard
funds can borrow from all sources and on the amount of assets that can be
pledged to secure any loans. Approved as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
OHIO TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 143,009,110 22,089,848 8,798,165 82.24%
- -----------------------------------------------------------------------------------
Insured Long-Term 14,239,839 927,798 840,568 88.95%
- -----------------------------------------------------------------------------------
</TABLE>
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<PAGE> 8
2c. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN SECURITIES OWNED BY
AFFILIATES. This change eliminates the funds' policy of avoiding investments in
securities that are owned in certain amounts by Trustees, officers, and key
advisory personnel. This policy was well-intentioned but wrongly focused and
unnecessary in light of the funds' Code of Ethics and other regulatory
protections against conflicts of interest on the part of fund management.
Approved as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
OHIO TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 143,383,303 21,685,914 8,827,905 82.45%
- ---------------------------------------------------------------------------------
Insured Long-Term 14,393,133 852,485 762,586 89.91%
- ---------------------------------------------------------------------------------
</TABLE>
2d. INVESTMENT LIMITATION CHANGES--BONDS SECURED BY INTERESTS IN OIL, GAS, OR
MINERAL PROGRAMS. This change amends a policy prohibiting investments in
interests in oil, gas, or other mineral exploration or development programs.
While the funds still cannot invest directly in oil, gas, or mineral programs,
the change clarifies that the funds can invest in bonds and money market
instruments secured by interests in these programs. Approved as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
OHIO TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 148,249,905 17,555,755 8,091,463 85.25%
- ---------------------------------------------------------------------------------
Insured Long-Term 14,484,604 684,352 839,249 90.48%
- ---------------------------------------------------------------------------------
</TABLE>
2g. INVESTMENT IN INDUSTRIAL REVENUE BONDS. This change eliminates a policy
imposing special restrictions on investments in industrial revenue and
development bonds. The change allows the funds to invest in industrial revenue
and development bonds without limit, subject to their usual stringent quality
and maturity guidelines. Approved as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
OHIO TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 154,613,063 11,796,709 7,487,351 88.91%
- ---------------------------------------------------------------------------------
Insured Long-Term 14,485,165 680,314 842,726 90.49%
- ---------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
THE MARKETS IN PERSPECTIVE
YEAR ENDED NOVEMBER 30, 1998
[PHOTO]
U.S. financial markets produced solid overall gains during the fiscal year ended
November 30. The S&P 500 Index gained 23.7% for the 12-month period, overcoming
a sharp summer setback. Bond prices rose as interest rates declined. Returns
from overseas stock markets varied widely, with big gains in Europe and losses
in most other markets.
U.S. STOCK MARKETS
The stock market's gains during the fiscal year were concentrated in
large-capitalization growth stocks. Within the S&P 500 Index, the growth stocks
rose 33.7%, while the value stocks were up 13.2%. The market's overall bias
toward large-caps showed starkly in the contrast between the S&P 500 and other
indexes. While the S&P 500 was rising 23.7%, the rest of the market returned a
paltry 2.6%, as measured by the Wilshire 4500 Equity Index. Small-cap stocks, as
represented by the Russell 2000 Index, did even worse--a negative return of
6.6%.
The market's ascent was not without incident, even for large-cap stocks.
After rising strongly to a record high on July 17, the S&P 500 fell by 19.2%
during the following six weeks, just shy of the 20% mark generally considered
the boundary distinguishing a bear market from a mere "correction." Declines
were certifiably bearish for smaller stocks, however.
The July-August tumble in stock prices reflected a number of factors that
collectively raised the anxiety level for many investors. Among these were
deteriorating corporate earnings reports and forecasts, Russia's default on its
debts, and a continuance of economic weakness in Asia. The persistence of Asia's
economic troubles--which first surfaced in mid-1997--began to slow the economic
expansions in the United States and Europe.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED NOVEMBER 30, 1998
-------------------------------
1 YEAR 3 YEARS 5 YEARS
- ----------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 23.7% 26.7% 23.0%
Russell 2000 Index -6.6 10.3 11.3
MSCI EAFE Index 16.8 9.3 10.2
- ----------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 9.5% 7.7% 7.3%
Lehman 10 Year Municipal Bond Index 8.1 6.9 6.8
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 5.1 5.2 5.1
- ----------------------------------------------------------------------
OTHER
Consumer Price Index 1.5% 2.2% 2.4%
- ----------------------------------------------------------------------
</TABLE>
The rebound in stocks late in the fiscal year occurred even though several
sources of uncertainty remained, including doubts about global economic growth
and reductions in securities analysts' forecasts of future corporate earnings.
Stock prices got considerable help from the decline in interest rates. (Low
inflation and low interest rates help stock prices by raising the estimated
value of future dividends and earnings.)
Three forces clearly shaped the performance of industry sectors. They
could be summarized as faith (the buoyant confidence of consumers), fear
(related to the effects of economic troubles abroad), and fortresses (companies
somewhat protected from competition).
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<PAGE> 10
In contrast to the cautious stance of investors during fiscal 1998, U.S.
consumers threw caution to the wind. Feeling flush because of plentiful jobs
(the nation's unemployment rate was 4.4% at fiscal year-end) and rising wages,
consumers spent a record proportion of their income. Not surprisingly, then, two
big gainers among sectors of the S&P 500 Index were consumer discretionary
firms, such as retailers (+26%) and consumer staples (+22%).
Fear was a factor in the lagging returns in industry groups considered to
be vulnerable to slowing global growth, falling commodity prices, and tougher
price competition from foreign suppliers. Among these--all traditional value
sectors--were firms in the "other energy" category (-37%); chemical and other
materials & processing firms (essentially a zero return); and makers of producer
durables such as airplanes and machinery (+2%). Conversely, utilities did well
(+35%) in part because they are seen as relatively insulated from foreign
competition or economic woes. Fortresses are companies perceived as relatively
safe from competitors because of patented products or brands. Such companies led
the year's best-performing sectors: technology (+49%) and health care (+43%).
U.S. BOND MARKETS
Interest rates declined during the fiscal year, especially for U.S. Treasury
securities, which benefited from heightened aversion to risk among investors and
from a slight decrease in supply, thanks to a $70 billion federal budget
surplus. The Federal Reserve Board had the flexibility to cut short-term rates
in three quarter-point steps in the autumn because inflation was remarkably
tame--consumer prices rose just 1.5% for our fiscal year.
In this bond-friendly environment, yields on long-term Treasury issues
fell by roughly 100 basis points (1 percentage point), with the 30-year Treasury
bond ending the fiscal year at 5.06%. Lower rates mean higher prices for bonds,
and the Lehman Brothers Long U.S. Treasury Bond Index earned a total return of
15.7%, an astounding margin of some 14 percentage points over the inflation
rate.
Reflecting investors' flight to quality and worries about slowing economic
growth, prices fell for high-yield "junk" bonds. Even high-quality corporate
bonds and mortgage-backed securities did not rise in price as far as Treasury
securities. Mortgage bonds tend to lag Treasuries during periods when falling
rates lead to greater refinancing activity by homeowners, resulting in unwanted
prepayments of principal. The Lehman Aggregate Bond Index, which comprises
high-quality corporate and mortgage-backed bonds as well as Treasuries, and has
an intermediate-term average maturity, earned 9.5%.
Yields on long-term municipal bonds declined only modestly during the
fiscal year, and by November 30 were only slightly lower than yields on
comparable Treasury securities. This was striking because the interest on
municipals is exempt from federal income tax.
INTERNATIONAL STOCK MARKETS
Europe's stock markets outdistanced even the S&P 500 Index, but Asian and Latin
American markets were generally down during the fiscal year. As a group,
European stocks earned 27.8% in U.S.-dollar terms. Europe's bull market was
fueled by continuing economic growth, lower interest rates, increased corporate
merger activity, and optimism about the effects of the euro, a common currency
due to be adopted in 1999 by 11 nations.
Japan's stock market continued to suffer from the effects of a severe
recession and a shaky banking system. Stocks in Tokyo fell 4.5% in U.S.-dollar
terms. Elsewhere in Asia, returns were mixed, ranging from a rebound of 21% in
South Korea, through Australia's 11% gain, to big losses in Indonesia (-52%),
Malaysia (-42%), New Zealand (-25%), and Singapore (-18%). Losses were steep
throughout Latin America, including Mexico (-32%), Venezuela (-59%), Brazil
(-20%), and Chile (-22%).
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<PAGE> 11
REPORT FROM THE ADVISER
During the fiscal year ended November 30, nervous global investors flocked to
the safety of U.S. Treasury securities. The "flight to quality" began with the
collapse of Asian markets early in the year, then spread throughout the emerging
economies of the world. With each round of negative world events, U.S. Treasury
yields fell as investors bid up bond prices. In contrast to the volatility on
world financial markets, sailing was smooth for the U.S. economy, which produced
stable growth and low inflation. The Federal Reserve Board initially was
reluctant to lower short-term interest rates in the face of the fundamental
strength of the domestic economy; however, signs of international economic
calamity loomed ever larger, threatening future U.S. growth. By the second half
of our fiscal year, it was clear that domestic export-sensitive sectors were
slowing, and stock market volatility increased. The Fed then cut short-term
interest rates by a total of three-quarters of a percentage point. To date, the
Fed's action has helped calm the fears of a worldwide credit crunch and stemmed
investors' flight from risk. We will have to wait and see whether the worst is
over for global markets.
As one would expect, municipal bond yields fell in sympathy with the
decline in Treasury yields. However, a large supply of new tax-exempt bonds
muted the price increases. Consequently, municipal bonds underperformed their
Treasury bond counterparts. During the fiscal year, the benchmark 30-year U.S.
Treasury bond yield declined nearly 1 percentage point (from 6.05% to 5.06%). In
contrast, the yield on an AAA-rated tax-exempt bond of similar maturity declined
only three-tenths of 1 percent (from roughly 5.2% to 4.9%), and produced
commensurately less price appreciation.
As noted, the supply of new tax-exempt bonds grew dramatically during our
fiscal year. Two factors led to this increase in municipal debt. First, as
interest rates declined, municipalities rushed to issue new bonds that would
refinance their older, higher-coupon debt. Second, the financial strength of
many states and localities improved as robust economic performance boosted tax
revenues. This increased financial sustenance allowed many issuers to fund new
capital projects with tax-exempt debt. In all, tax-exempt issuance for the year
was up 27% to $278 billion in new bonds.
This abundance of new bonds offers unique value to investors in
longer-term municipal issues. As of our fiscal year-end, the yield on a
high-quality, long-maturity municipal bond was equal to an unusually high 96.8%
of the yield on a comparable U.S. Treasury security. At certain points during
the fiscal period, AAA-rated insured municipal bonds actually offered yields
higher than Treasury bonds, a situation not seen since 1986. For investors in
the maximum federal tax bracket (39.6%), high-grade municipal bonds offer about
3 percentage points in additional taxable-equivalent yield over comparable U.S.
Treasuries. Our state tax-exempt funds further boost after-tax returns by
providing income exempt from state tax. In the past, municipal bond yields have
not stayed high relative to Treasury
9
<PAGE> 12
bonds for long. However, because of the persistence of global uncertainty and
its beneficial effect on prices of Treasury bonds, it's hard to predict when
municipal yields will return to more-normal levels. In the meantime, longer-term
municipal bonds are a steal.
The high credit quality of the Vanguard Ohio Tax-Exempt Funds played an
important role in our strong performance relative to peers. Early in our fiscal
year, demand was quite strong for the higher yields of uninsured bonds and those
of speculative-grade credit quality. Market participants disregarded the added
credit risk they were assuming. Demand for lower-quality securities was so high
that investors accepted ever-smaller yield premiums for assuming the extra
credit risk, and yield spreads between bonds of different quality tightened. But
the bankruptcy of a major hospital group in Pennsylvania in summer 1998 caused
many bondholders to reconsider the relationship between yield and credit
quality.
Investors in Vanguard's insured single-state tax-exempt funds receive
additional credit protection. Although this municipal bond insurance does not
protect against changes in market value, it does guarantee the timely payment of
principal and interest. Our single-state tax-exempt funds are able to offer the
dual benefits of high credit quality and attractive yields year after year
because of our low expenses. Our emphasis on high credit quality should allow
our shareholders to sleep comfortably.
Over time, the simple combination of a disciplined risk approach with low
expenses has proven to be a powerful force for maximizing total return for
shareholders. Our continued focus on these basics produced the desired results
in fiscal 1998.
Yields on 1-year tax-exempt money market instruments fell 76 basis points
(0.76 percentage point) during the second half of our fiscal year, even though
summer is traditionally a season for heavy municipal borrowing. Over the full 12
months, the decline was 82 basis points, leaving the yield on the benchmark
1-year MIG-1 note at 2.99% on November 30. By comparison, the yield on 1-year
U.S. Treasury bills fell 92 basis points during the second half and 99 basis
points for the full year, closing with a yield of 4.50%. The plunge in
short-term yields was fueled by the global "flight to quality" and by the Fed's
75-basis-point cut in the fed funds rate. At fiscal year-end, the yield on
1-year MIG-1 notes therefore was equal to 66.4% of the yield on comparable
Treasury bills. Though this ratio is less favorable than that for yields of
long-term municipal bonds in relation to those of Treasury bonds, municipal
money markets still offer value for investors in the highest tax brackets.
As the new year begins, the Ohio Tax-Exempt Money Market Fund is
positioned to take advantage of its dual strengths of conservative,
quality-oriented management and low expenses. We believe these attributes will,
over time, generate superior risk-adjusted returns.
Ian A. MacKinnon, Managing Director
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
John M. Carbone, Principal
Danine A. Mueller, Principal
Christopher M. Ryon, Principal
Vanguard Fixed Income Group
December 10, 1998
INVESTMENT PHILOSOPHY
The adviser believes that each fund, while operating within stated maturity and
stringent quality targets, can achieve a high level of current income that is
exempt from federal and Ohio income taxes by investing in insured and
high-quality uninsured securities issued by Ohio state, county, and municipal
governments.
10
<PAGE> 13
PERFORMANCE SUMMARY
OHIO TAX-EXEMPT MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that returns
can fluctuate widely. An investment in a money market fund is neither insured
nor guaranteed by the U.S. government, and there is no assurance that the fund
will be able to maintain a stable net asset value of $1 per share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-NOVEMBER 30, 1998
- ---------------------------------------------------------
OHIO TAX-EXEMPT AVERAGE
MONEY MARKET FUND FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1990 0.0% 2.6% 2.6% 2.5%
1991 0.0 4.7 4.7 4.5
1992 0.0 3.0 3.0 2.9
1993 0.0 2.4 2.4 2.2
1994 0.0 2.6 2.6 2.4
1995 0.0 3.8 3.8 3.5
1996 0.0 3.4 3.4 3.1
1997 0.0 3.5 3.5 3.2
1998 0.0 3.4 3.4 3.1
- --------------------------------------------------------
</TABLE>
* Average Ohio Tax-Exempt Money Market Fund.
See Financial Highlights table on page 24 for dividend information for the
past five years.
SEC 7-Day Annualized Yield (11/30/1998): 3.05%
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: JUNE 18, 1990-NOVEMBER 30, 1998
- -------------------------------------------------------
<S> <C> <C>
6/18/90 10000 10000
199008 10115 10107
199011 10259 10246
199102 10394 10375
199105 10515 10489
199108 10626 10604
199111 10736 10709
199202 10831 10798
199205 10920 10885
199208 10990 10952
199211 11061 11017
199302 11129 11078
199305 11194 11139
199308 11257 11198
199311 11324 11254
199402 11386 11308
199405 11454 11371
199408 11526 11443
199411 11616 11520
199502 11721 11613
199505 11839 11722
199508 11946 11826
199511 12056 11921
199602 12162 12015
199605 12265 12109
199608 12365 12207
199611 12468 12294
199702 12570 12383
199705 12680 12486
199708 12791 12594
199711 12903 12690
199802 13011 12785
199805 13124 12889
199808 13232 12993
199811 13337 13080
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
-------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio Tax-Exempt Money Market Fund 3.37% 3.33% 3.47% $13,337
Average Ohio Tax-Exempt Money Market Fund 3.08 3.05 3.23 13,080
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- ----------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ohio Tax-Exempt Money Market Fund 6/18/1990 3.44% 3.30% 0.00% 3.47% 3.47%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
11
<PAGE> 14
PERFORMANCE SUMMARY
OHIO INSURED LONG-TERM TAX-EXEMPT FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JUNE 18, 1990-NOVEMBER 30, 1998
- ---------------------------------------------------------
OHIO INSURED LONG-TERM
TAX-EXEMPT FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1990 3.0% 3.0% 6.0% 4.9%
1991 2.9 6.6 9.5 10.3
1992 4.5 6.2 10.7 10.0
1993 6.3 5.7 12.0 11.1
1994 -11.2 4.9 -6.3 -5.2
1995 13.1 6.4 19.5 18.9
1996 0.3 5.4 5.7 5.9
1997 0.9 5.4 6.3 7.2
1998 2.6 5.2 7.8 7.8
- --------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 25 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: JUNE 18, 1990-NOVEMBER 30, 1998
- -------------------------------------------------------
<S> <C> <C> <C>
6/18/90 10000 10000 10000
199008 10079 10055 10091
199011 10604 10449 10487
199102 10836 10677 10767
199105 11132 10941 11011
199108 11341 11153 11281
199111 11611 11404 11563
199202 11902 11683 11842
199205 12182 11927 12092
199208 12662 12335 12540
199211 12853 12485 12722
199302 13727 13244 13471
199305 13814 13329 13539
199308 14327 13804 14070
199311 14400 13933 14132
199402 14456 13987 14216
199405 14142 13601 13873
199408 14334 13711 14095
199411 13495 13026 13394
199502 14872 14142 14490
199505 15427 14712 15142
199508 15499 14715 15345
199511 16119 15444 15926
199602 16314 15486 16091
199605 16007 15203 15834
199608 16352 15423 16149
199611 17045 16199 16862
199702 17133 16209 16977
199705 17272 16347 17145
199708 17725 16688 17643
199711 18119 17210 18072
199802 18610 17535 18529
199805 18815 17747 18753
199808 19261 17993 19169
199811 19529 18377 19474
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
-------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio Insured Long-Term Tax-Exempt Fund 7.78% 6.28% 8.24% $19,529
Average Ohio Tax-Exempt Fund 6.78 5.69 7.47 18,377
Lehman Municipal Bond Index 7.76 6.62 8.20 19,474
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- --------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ohio Insured Long-Term Tax-Exempt Fund 6/18/1990 8.62% 6.02% 2.59% 5.80% 8.39%
- --------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
12
<PAGE> 15
FUND PROFILE
OHIO TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998. Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -------------------------------
<S> <C>
Yield 3.1%
Average Maturity 70 days
Average Quality MIG-1
Expense Ratio 0.20%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ------------------------------------------------
<S> <C>
MIG-1/SP-1+ 77.1%
A-1/P-1 17.0
AAA/AA 5.9
A 0.0
- ------------------------------------------------
Total 100.0%
</TABLE>
13
<PAGE> 16
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by 1 percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit quality
(high, medium, or low).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days (7 days for money market funds) and is annualized, or projected
forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
14
<PAGE> 17
FUND PROFILE
OHIO INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 14.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------------------------------
OHIO INSURED LEHMAN
LONG-TERM INDEX*
- ---------------------------------------------------------
<S> <C> <C>
Number of Issues 145 47,383
Yield 4.3% 4.4%
Yield to Maturity 4.4% --
Average Coupon 5.3% 5.5%
Average Maturity 8.5 years 13.5 years
Average Quality AAA AA+
Average Duration 6.4 years 7.2 years
Expense Ratio 0.20% --
Cash Reserves 1.2% --
</TABLE>
*Lehman Municipal Bond Index.
INVESTMENT FOCUS
- ------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------------------------------
OHIO INSURED LEHMAN
LONG-TERM INDEX*
- ------------------------------------------------------------------------
<S> <C> <C>
R-Squared 0.98 1.00
Beta 1.07 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ------------------------------------------------
<S> <C>
AAA 97.8%
AA 2.2
A 0.0
BBB 0.0
BB 0.0
B 0.0
- ------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ------------------------------------------------
<S> <C>
Under 1 Year 5.8%
1-5 Years 19.1
5-10 Years 39.5
10-20 Years 27.7
20-30 Years 7.9
Over 30 Years 0.0
- ------------------------------------------------
Total 100.0%
</TABLE>
15
<PAGE> 18
FINANCIAL STATEMENTS
NOVEMBER 30, 1998
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's municipal bond holdings,
including each security's market value on the last day of the reporting period
and information on credit enhancements (insurance or letters of credit).
Securities are grouped and subtotaled according to their insured or noninsured
status. Other assets are added to, and liabilities are subtracted from, the
value of Total Municipal Bonds to calculate the fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table displaying
the composition of the fund's net assets on both a dollar and per-share basis.
Undistributed Net Investment Income is usually zero because the fund distributes
its net income to shareholders as a dividend each day. Any realized gains must
be distributed annually, so the bulk of net assets consists of Paid in Capital
(money invested by shareholders). The balance shown for Accumulated Net Realized
Gains usually approximates the amount available to distribute to shareholders as
taxable capital gains as of the statement date, but may differ because certain
investments or transactions may be treated differently for financial statement
and tax purposes. Any Accumulated Net Realized Losses, and any cumulative excess
of distributions over net realized gains, will appear as negative balances.
Unrealized Appreciation (Depreciation) is the difference between the value of
the fund's investments and their cost, and reflects the gains (losses) that
would be realized if the fund were to sell all of its investments at their
statement-date values.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
OHIO TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.9%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Akron-Summit County OH 4.00% 12/1/1998 (3) $ 2,000 $ 2,000
Akron-Summit County OH Public Library 4.00% 12/1/1999 (3) 2,320 2,343
American Muni. Power OH BAN (Bowling Green Project) 4.10% 12/4/1998 3,185 3,185
Butler County OH BAN 3.50% 3/19/1999 3,600 3,604
Butler County OH BAN 3.55% 10/21/1999 6,400 6,422
Cincinnati OH GO 4.75% 12/1/1998 5,700 5,700
Cincinnati OH School Dist. TAN 5.00% 12/1/1998 (2) 1,880 1,880
Cincinnati OH Student Loan Funding Corp. VRDO 3.25% 12/2/1998 LOC 23,900 23,900
Cleveland OH GO 6.75% 7/1/1999 (Prere.) 2,525 2,630
Columbus OH Electric System Rev. VRDO 3.10% 1/1/1999 LOC 15,245 15,245
Columbus OH GO 5.50% 6/15/1999 4,980 5,030
Columbus OH Sewer Rev. VRDO 3.05% 12/3/1998 3,100 3,100
Columbus OH VRDO 3.00% 12/3/1998 1,000 1,000
Cuyahoga County OH Hosp. Rev. Improvement VRDO
(Cleveland Clinic Foundation) 3.15% 12/2/1998 LOC 13,100 13,100
Cuyahoga OH Econ. Dev. Rev. VRDO (Cleveland Orchestra) 3.25% 12/2/1998 12,000 12,000
Fairfield County OH Sanitary Sewer System Improvement BAN 4.46% 7/27/1999 1,155 1,161
Franklin County OH Hosp. Rev. VRDO (U.S. Health Corp.) 3.15% 12/3/1998 LOC 13,335 13,335
Hamilton County OH Hosp. Fac. Rev. (Children's Hosp.Medical Center) 4.00% 5/15/1999 (1) 1,135 1,137
Hamilton County OH Hosp. Fac. Rev. VRDO (Bethesda Hosp.) 3.00% 12/3/1998 LOC 19,900 19,900
Hamilton County OH Hosp. Fac. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.10% 12/2/1998 (1) 6,400 6,400
Hamilton County OH Hosp. Fac. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.35% 12/2/1998 (1) 300 300
Hancock County OH BAN 3.42% 12/1/1999 ++ 3,115 3,126
Lorain County OH Hosp. Rev. CP (Catholic Healthcare Partners) 2.95% 4/9/1999 14,300 14,300
Lorain County OH Hosp. Rev. CP (Catholic Healthcare Partners) 3.25% 2/18/1999 5,000 5,000
Lorain County OH Hosp. Rev. CP (Catholic Healthcare Partners) 3.35% 12/8/1998 11,600 11,600
Mason City OH School Dist. GO 4.02% 2/18/1999 5,500 5,505
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Middleburg Heights OH GO BAN 4.05% 1/15/1999 $ 1,700 $ 1,701
Montgomery County OH Rev. VRDO (Catholic Health Initiatives) 3.15% 12/2/1998 10,000 10,000
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric Co.) 3.25% 12/2/1998 LOC 5,880 5,880
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric Co.) 3.75% 12/2/1998 LOC 3,400 3,400
Ohio Air Quality Dev. Auth. VRDO (Mead Corp.) 3.15% 12/2/1998 LOC 5,400 5,400
Ohio Building Auth. 7.35% 8/1/1999 (Prere.) 5,725 5,986
Ohio Building Auth. 7.35% 10/1/1999 (Prere.) 1,250 1,331
Ohio Building Auth. (Correctional Fac.) 7.15% 8/1/1999 (Prere.) 1,000 1,026
Ohio Elementary & Secondary Educ. Capital Fac. 4.50% 12/1/1998 3,000 3,000
Ohio GO (Infrastructure Improvement) 4.25% 2/1/1999 3,695 3,699
Ohio Higher Educ. Fac. Rev. VRDO (Mount Union College Project) 3.20% 12/3/1998 1,610 1,610
Ohio Highway GO 4.40% 5/15/1999 6,080 6,109
Ohio PCR VRDO (British Petroleum) 3.30% 12/2/1998 8,500 8,500
Ohio Public Fac. Comm. (Higher Educ.) 4.375% 11/1/1999 (1) 1,500 1,518
Ohio Public Fac. Comm. (Higher Educ.) 5.50% 12/1/1998 (4) 1,600 1,600
Ohio Public Fac. Comm. (Mental Health) 4.50% 6/29/1999 (4) 4,700 4,722
Ohio Public Fac. Comm. (Mental Health) 4.625% 12/1/1999 1,570 1,596
Ohio School Dist. COP TAN 4.05% 6/30/1999 7,801 7,821
Ohio Solid Waste Rev. VRDO (BP Exploration & Oil Project) 3.45% 12/2/1998 10,300 10,300
Ohio State Univ. CP 3.20% 2/9/1999 5,000 5,000
Ohio State Univ. CP 3.50% 12/7/1998 6,500 6,500
Ohio State Univ. VRDO 3.05% 12/3/1998 5,100 5,100
Ohio Water Dev. Auth. VRDO (Timken Co. Project) 3.20% 12/2/1998 LOC 5,000 5,000
Ohio Water Dev. Auth. VRDO (Mead Corp.) 3.15% 12/2/1998 LOC 7,820 7,820
Ross County OH Hosp. Rev. VRDO (Medical Center Hosp. Project) 3.20% 12/3/1998 LOC 4,160 4,160
Summit County OH GO BAN 3.625% 11/18/1999 9,740 9,803
Summit County OH GO BAN 4.50% 6/3/1999 5,000 5,018
Toledo OH Special Services Assessment VRDO 3.15% 12/3/1998 LOC 14,420 14,420
Univ. of Cincinnati OH GO BAN 3.80% 3/1/1999 6,000 6,003
Wooster OH School Dist. 3.80% 12/1/1998 (3) 1,090 1,090
OUTSIDE OHIO:
Puerto Rico TRAN 3.50% 7/30/1999 ++ 3,000 3,013
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $341,029) 341,029
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.1%)
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 13,206
Liabilities (9,571)
---------
3,635
---------
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------------------------------------------------------
Applicable to 344,665,214 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $344,664
===========================================================================================================================
NET ASSET VALUE PER SHARE $ 1.00
===========================================================================================================================
*See Note A in Notes to Financial Statements.
For explanations of abbreviations and other references, see page 21.
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $344,668 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (4) --
Unrealized Appreciation -- --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $344,664 $1.00
===========================================================================================================================
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
OHIO INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.8%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (93.7%)
Adams County OH School Dist. GO 5.55% 12/1/2009 (1) $ 1,000 $ 1,091
Akron Bath & Copley OH Joint Township Hosp. Dist. Rev.
(Akron Medical Center Project) 5.375% 1/1/2017 (2) 3,000 3,100
Akron Bath & Copley OH Joint Township Hosp. Dist. Rev.
(Akron Medical Center Project) 5.375% 1/1/2022 (2) 4,000 4,102
Akron Bath & Copley OH Joint Township Hosp. Dist. Rev.
(Akron Medical Center Project) 5.50% 1/1/2008 (2) 1,000 1,063
Aurora County OH School Dist. GO 5.80% 12/1/2016 (3) 3,000 3,256
Barberton OH School Dist. GO 5.125% 11/1/2022 (3) 3,000 3,009
Bedford Heights OH GO 5.65% 12/1/2014 (2) 500 563
Butler County OH Sewer System Rev. 5.00% 12/1/2023 (2) 2,245 2,239
Butler County OH Sewer System Rev. 6.25% 12/1/2002 (2)(Prere.) 2,925 3,224
Butler County OH Transp. Improvement Dist. Rev. 6.00% 4/1/2011 (4) 4,000 4,545
Butler County OH Transp. Improvement Dist. Rev. 6.00% 4/1/2012 (4) 2,320 2,627
Butler County OH Water Works Rev. 5.125% 12/1/2021 (2) 500 502
Canal Winchester OH Local School Dist. GO 6.00% 12/1/2013 (3) 1,680 1,920
Canton OH GO 5.375% 12/1/2007 (2) 1,000 1,072
Canton OH GO (Water Works System) 5.75% 12/1/2010 (2) 1,000 1,104
Canton OH GO (Water Works System) 5.85% 12/1/2015 (2) 1,000 1,094
Clermont County OH Hosp. Fac. Rev. (Mercy Health System) 5.50% 9/1/2006 (2) 2,500 2,691
Cleveland-Cuyahoga County OH Port Auth. Rev.
(Rock & Roll Hall of Fame) 5.40% 12/1/2015 (2) 2,000 2,104
Cleveland OH Airport System Rev. 0.00% 1/1/2005 (1) 3,975 3,099
Cleveland OH Airport System Rev. 7.25% 1/1/2000 (1)(Prere.) 800 849
Cleveland OH GO 5.375% 9/1/2010 (2) 1,000 1,090
Cleveland OH GO 5.375% 9/1/2012 (2) 1,000 1,087
Cleveland OH GO 5.50% 8/1/2009 (1) 4,500 4,946
Cleveland OH GO 6.25% 10/1/2001 (1)(Prere.) 2,500 2,721
Cleveland OH Public Power System Rev. 5.00% 11/15/2020 (1) 3,125 3,125
Cleveland OH Public Power System Rev. 5.00% 11/15/2024 (1) 3,000 2,983
Cleveland OH Public Power System Rev. 5.25% 11/15/2016 (1) 10,200 10,560
Cleveland OH Public Power System Rev. 7.00% 11/15/2004 (1)(Prere.) 2,750 3,241
Cleveland OH School Dist. GO 0.00% 12/1/2005 (3) 700 526
Cleveland OH School Dist. GO 0.00% 12/1/2006 (3) 700 503
Cleveland OH School Dist. GO 0.00% 12/1/2007 (3) 500 343
Cleveland OH School Dist. GO 0.00% 12/1/2008 (3) 400 261
Cleveland OH School Dist. GO 5.875% 12/1/2011 (3) 1,500 1,629
Cleveland OH Water Works Rev. 5.00% 1/1/2023 (4) 3,000 2,983
Cleveland OH Water Works Rev. 5.00% 1/1/2028 (4) 2,000 1,994
Cleveland OH Water Works Rev. 5.50% 1/1/2013 (1) 3,125 3,414
Cleveland OH Water Works Rev. 5.50% 1/1/2021 (1)+ 6,500 7,078
Cleveland OH Water Works Rev. 6.25% 1/1/2002 (2)(Prere.) 4,305 4,700
Cleveland OH Water Works Rev. 6.25% 1/1/2015 (2) 195 210
Columbus OH Muni. Airport Auth. Rev. (Port of Columbus) 5.00% 1/1/2028 (2) 3,000 2,973
Columbus OH School Dist. GO 7.00% 12/1/2000 (3)(Prere.) 1,750 1,902
Cuyahoga County OH Hosp. Rev. (Univ. Hosp. Health System) 5.50% 1/15/2019 (1) 7,545 7,846
Cuyahoga County OH Hosp. Rev. (Univ. Hosp. Health System) 6.875% 1/15/1999 (5)(Prere.) 1,825 1,870
Cuyahoga County OH Hosp. Rev.
(Walker Center Cleveland Clinic Foundation) 5.00% 1/1/2023 (2) 3,000 2,967
Dayton OH Water System Rev. 6.75% 12/1/2010 (1) 1,000 1,013
Defiance OH Waterworks System GO 5.65% 12/1/2018 (2) 1,130 1,227
Dublin OH School Dist. GO 0.00% 12/1/2005 (3) 1,220 916
Dublin OH School Dist. GO 0.00% 12/1/2006 (3) 1,220 876
Fairfield County OH Hosp. Rev. (Lancaster-Fairfield Hosp.) 5.375% 6/15/2015 (1) 3,000 3,224
Forest Hills OH School Dist. GO 6.00% 12/1/2007 (1) 750 855
Franklin County OH Convention Center Rev. 0.00% 12/1/2007 (1) 4,355 2,985
Franklin County OH Convention Center Rev. 7.00% 12/1/2000 (1)(Prere.) 675 734
Franklin County OH Hosp. Fac. Rev. (Riverside United Methodist) 7.25% 5/15/2000 (1)(Prere.) 2,800 3,003
Gallia County OH Hosp. Rev. (Holzer Medical Center Project) 5.125% 10/1/2013 (2) 3,000 3,084
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater Cleveland OH Regional Transp. Auth. GO 5.375% 12/1/2010 (3) $ 1,665 $ 1,808
Greater Cleveland OH Regional Transp. Auth. GO 5.375% 12/1/2012 (3) 1,850 1,979
Greater Cleveland OH Regional Transp. Auth. GO 5.375% 12/1/2013 (3) 1,850 1,966
Greater Cleveland OH Regional Transp. Auth. GO 5.60% 12/1/2011 (3) 5,505 5,993
Greater Cleveland OH Regional Transp. Auth. GO 5.65% 12/1/2016 (3) 1,000 1,071
Greene County OH Sewer System Rev. 5.125% 12/1/2020 (1) 2,000 2,032
Hamilton County OH Hosp. Fac. Rev. (Children's Hosp.) 5.20% 5/15/2009 (1) 2,000 2,149
Hamilton County OH Hosp. Fac. Rev. (Children's Hosp.) 5.375% 5/15/2013 (1) 2,235 2,361
Hamilton County OH Hosp. Fac. Rev. VRDO
(Health Alliance of Greater Cincinnati) 3.10% 12/2/1998 (1) 4,700 4,700
Hamilton County OH Sales Tax Rev. (Hamilton County Football Project) 5.00% 12/1/2018 (1) 3,000 3,007
Hamilton County OH Sales Tax Rev. (Hamilton County Football Project) 5.00% 12/1/2027 (1) 2,000 1,988
Hamilton County OH Sewer System Rev. 5.45% 12/1/2009 (3) 3,250 3,572
Hamilton OH Water System Rev. 6.30% 10/15/2021 (1) 2,000 2,168
Hilliard County OH School Dist. GO 5.75% 12/1/2019 (3) 2,000 2,161
Hilliard County OH School Dist. GO 6.55% 12/1/2005 (3) 500 575
Lake County OH Hosp. Fac. Rev. (Lake Hosp. System Inc.) 5.375% 8/15/2015 (2) 2,900 3,032
Lakota OH Local School Dist. 5.05% 12/1/2013 (3) 1,925 1,990
Lisbon OH School Dist. GO 6.25% 12/1/2017 (2) 1,000 1,101
Lorain County OH Hosp. Rev. (Catholic Healthcare Partners) 5.50% 9/1/2027 (1) 2,215 2,321
Lorain County OH Hosp. Rev. (Catholic Healthcare Partners) 5.625% 9/1/2014 (1) 3,290 3,553
Lorain County OH Hosp. Rev. (Catholic Healthcare Partners) 6.00% 9/1/2006 (1) 1,500 1,680
Lorain County OH Hosp. Rev. (Catholic Healthcare Partners) 6.00% 9/1/2008 (1) 1,250 1,416
Lucas County OH GO 6.95% 12/1/2000 (1)(Prere.) 2,700 2,933
Lucas County OH Hosp. Rev. (Promedica Health Care) 5.75% 11/15/2009 (1) 3,000 3,320
Lucas County OH Hosp. Rev. (Promedica Health Care) 5.75% 11/15/2014 (1) 6,000 6,535
Marietta City OH School Dist. GO 5.75% 12/1/2007 (2) 1,500 1,616
Marysville OH Water System Rev. 7.05% 12/1/2001 (1)(Prere.) 1,250 1,382
Medina OH School Dist. GO 6.20% 12/1/2002 (3)(Prere.) 2,100 2,329
Mount Vernon OH Sewer System Rev. 6.00% 12/1/2012 (2) 750 813
New Philadelphia OH School Dist. GO 6.25% 12/1/2017 (2) 2,300 2,514
North Canton OH GO 5.90% 12/1/2004 (2)(Prere.) 2,000 2,244
Northeast OH Regional Sewer Dist. Rev. 5.60% 11/15/2013 (2) 1,880 2,016
Northeast OH Regional Sewer Dist. Rev. 5.60% 11/15/2014 (2) 1,500 1,599
Northeast OH Regional Sewer Dist. Rev. 6.50% 11/15/2001 (2)(Prere.) 2,500 2,723
Oak Hills OH Local School Dist. GO 7.20% 12/1/2009 (1) 1,625 2,028
Ohio Air Quality Dev. Auth. PCR (Ohio Edison) 7.10% 6/1/2018 (3) 1,000 1,066
Ohio Air Quality Dev. Auth. PCR (Ohio Edison) 7.45% 3/1/2016 (3) 500 531
Ohio Building Auth. Rev. (Adult Correctional Fac.) 5.50% 4/1/2016 (2) 4,965 5,228
Ohio Building Auth. Rev. (Adult Correctional Fac.) 5.95% 10/1/2013 (1) 3,000 3,296
Ohio Higher Educ. Fac. Rev. (Univ. of Dayton) 0.00% 12/1/2006 (3) 1,000 718
Ohio Higher Educ. Fac. Rev. (Univ. of Dayton) 6.60% 12/1/2017 (3) 2,200 2,482
Ohio Higher Educ. Fac. Rev. (Univ. of Dayton) 6.75% 12/1/2015 (3) 1,000 1,118
Ohio Higher Educ. Fac. Rev. (Xavier Univ.) 5.375% 5/15/2022 (1) 4,000 4,157
Ohio Higher Educ. Fac. Rev. (Xavier Univ.) 6.00% 5/15/2011 (1) 2,000 2,249
Ohio Turnpike Comm. Rev. 5.25% 2/15/2013 (3) 1,780 1,873
Ohio Turnpike Comm. Rev. 5.70% 2/15/2006 (1)(Prere.) 1,000 1,118
Ohio Water Dev. Auth. Rev. 5.25% 12/1/2012 (4) 2,990 3,167
Ohio Water Dev. Auth. Rev. 5.50% 12/1/2011 (2) 1,000 1,070
Ohio Water Dev. Auth. Rev. 5.50% 12/1/2014 (1) 1,595 1,684
Ohio Water Dev. Auth. Rev. 5.90% 12/1/2015 (2) 3,250 3,547
Ohio Water Dev. Auth. Rev. 7.00% 12/1/2009 (2)(ETM) 1,500 1,780
Ohio Water Dev. Auth. Rev. PCR 5.125% 6/1/2019 (1) 2,750 2,795
Ohio Water Dev. Auth. Rev. PCR 5.50% 6/1/2011 (1) 2,300 2,502
Olmsted Falls City OH School Dist. GO 5.85% 12/15/2017 (3) 2,000 2,158
Olmsted Falls City OH School Dist. GO 6.85% 12/15/2004 (3)(Prere.) 565 663
Ottowa County OH GO 7.00% 9/1/2001 (2)(Prere.) 500 553
Pickerington OH Local School Dist. GO 5.80% 12/1/2009 (3) 500 565
Revere OH School Dist. GO 6.00% 12/1/2016 (2) 3,850 4,241
Reynoldsburg OH School Dist. GO 0.00% 12/1/2009 (3) 1,465 905
Reynoldsburg OH School Dist. GO 0.00% 12/1/2010 (3) 1,465 858
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
OHIO INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reynoldsburg OH School Dist. GO 6.55% 12/1/2002 (3)(Prere.) $ 3,600 $ 4,039
Richland County OH GO 5.40% 12/1/2015 (2) 1,120 1,176
Richland County OH GO 6.95% 12/1/2011 (2) 450 529
Springboro Community OH School Dist. GO 5.25% 12/1/2016 (2) 4,000 4,130
Summit County OH GO 6.90% 8/1/2001 (2)(Prere.) 2,650 2,898
Summit County OH GO 6.90% 8/1/2002 (2)(Prere.) 175 194
Summit County OH GO 6.90% 8/1/2003 (2)(Prere.) 2,425 2,743
Trumbull County OH Hosp. Rev. (Trumbull Memorial Hosp.) 6.25% 11/15/2003 (3)(Prere.) 2,000 2,169
Wood County OH Justice Center GO 5.95% 12/1/2007 (2) 1,750 1,913
Woodridge OH School Dist. GO 6.00% 12/1/2019 (2) 1,000 1,108
Woodridge OH School Dist. GO 6.80% 12/1/2014 (2) 2,000 2,481
Wooster OH School Dist. GO 0.00% 12/1/2009 (4) 2,195 1,355
Wooster OH School Dist. GO 0.00% 12/1/2010 (4) 2,265 1,326
Wooster OH School Dist. GO 0.00% 12/1/2011 (4) 2,315 1,280
Wooster OH School Dist. GO 6.50% 12/1/2002 (2)(Prere.) 2,500 2,800
Wyoming OH School Dist. 5.15% 12/1/2027 (3) 1,750 1,756
OUTSIDE OHIO:
Puerto Rico Govt. Dev. Bank VRDO 2.90% 12/2/1998 (1) 800 800
Puerto Rico Public Building Auth. Rev. 0.00% 7/1/2001 (3) 850 774
Puerto Rico Public Building Auth. Rev. 5.00% 7/1/2027 (2) 3,000 3,005
---------
303,598
---------
SECONDARY MARKET INSURED (0.7%)
Franklin OH Hosp. Rev.
(Mount Carmel Health-Holy Cross Health System) 6.75% 6/1/2002 (1)(Prere.) 2,000 2,232
---------
NONINSURED (4.4%)
Cincinnati OH Student Loan Funding Corp. VRDO 3.25% 12/2/1998 LOC 200 200
Columbus OH Electric VRDO 3.10% 1/1/1999 LOC 175 175
Columbus OH GO 5.25% 5/15/2009 1,000 1,085
Cuyahoga County OH Hosp. VRDO (Cleveland Clinic Foundation) 3.15% 12/2/1998 LOC 1,300 1,300
Franklin OH Hosp. Rev. VRDO (U.S. Health Corp.) 3.15% 12/3/1998 LOC 1,400 1,400
Hamilton County OH Hosp. Fac. Rev. VRDO (Bethesda Hosp.) 3.00% 12/3/1998 LOC 400 400
Ohio Air Quality Dev. Auth. VRDO (Cincinnati Gas & Electric Co.) 3.25% 12/2/1998 LOC 2,360 2,360
Ohio GO 7.625% 8/1/2010 3,510 4,559
Ohio Higher Educ. Fac. Auth. Rev. (Case Western Reserve Univ.) 6.50% 10/1/2020 250 301
Rocky River OH City School Dist. GO 5.375% 12/1/2017 2,200 2,359
---------
14,139
---------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $300,332) 319,969
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 6,408
Liabilities (2,594)
---------
3,814
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------------------
Applicable to 26,946,864 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $323,783
==========================================================================================================================
NET ASSET VALUE PER SHARE $12.02
==========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with a value of $544,000 have been segregated as initial margin for
open futures contracts. For explanations of abbreviations and other references,
see page 21.
20
<PAGE> 23
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $304,325 $11.29
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (132) --
Unrealized Appreciation (Depreciation)--Note F
Investment Securities 19,637 .73
Futures Contracts (47) --
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $323,783 $12.02
===============================================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
CP--Commercial Paper.
GO--General Obligation Bond.
PCR--Pollution Control Revenue Bond.
RAN--Revenue Anticipation Note.
TAN--Tax Anticipation Note.
TRAN--Tax Revenue Anticipation Note.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
++ Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of November 30, 1998.
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (Ambac Assurance Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
The insurance does not guarantee the market value of the municipal bonds.
LOC--Scheduled principal and interest payments are guaranteed by bank letter of
credit.
21
<PAGE> 24
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to the fund. These expenses directly
reduce the amount of investment income available to pay to shareholders as
tax-exempt income dividends. This Statement also shows any Net Gain (Loss)
realized on the sale of investments, and the increase or decrease in the
Unrealized Appreciation (Depreciation) on investments during the period. If a
fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
OHIO INSURED
OHIO TAX-EXEMPT LONG-TERM
MONEY MARKET TAX-EXEMPT
FUND FUND
---------------------------------
YEAR ENDED NOVEMBER 30, 1998
---------------------------------
(000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $ 10,877 $14,806
---------------------------------
Total Income 10,877 14,806
---------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 39 36
Management and Administrative 463 446
Marketing and Distribution 99 66
Custodian Fees 8 5
Auditing Fees 8 7
Shareholders' Reports 14 10
Annual Meeting and Proxy Costs 1 1
Trustees' Fees and Expenses 1 1
---------------------------------
Total Expenses 633 572
Expenses Paid Indirectly--Note C (8) (5)
---------------------------------
Net Expenses 625 567
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,252 14,239
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold -- 914
Futures Contracts -- (394)
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN -- 520
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- 6,428
Futures Contracts -- (41)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 6,387
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,252 $21,146
========================================================================================================================
</TABLE>
22
<PAGE> 25
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the fund distributes its
income to shareholders each day, the amounts of Distributions-- Net Investment
Income generally equal the net income earned as shown under the Operations
section. The amounts of Distributions--Realized Capital Gain may not match the
capital gains shown in the Operations section, because distributions are
determined on a tax basis and may be made in a period different from the one in
which the gains were realized on the financial statements. The Capital Share
Transactions section shows the amount shareholders invested in the fund, either
by purchasing shares or by reinvesting distributions, and the amounts redeemed.
The corresponding numbers of Shares Issued and Redeemed are shown at the end of
the Statement.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
OHIO TAX-EXEMPT OHIO INSURED LONG-TERM
MONEY MARKET FUND TAX-EXEMPT FUND
---------------------------- ---------------------------
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------
1998 1997 1998 1997
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,252 $ 9,923 $ 14,239 $ 11,833
Realized Net Gain (Loss) -- 4 520 (235)
Change in Unrealized Appreciation
(Depreciation) -- -- 6,387 2,567
-----------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 10,252 9,927 21,146 14,165
-----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (10,252) (9,923) (14,239) (11,833)
Realized Capital Gain -- -- -- (1,114)
-----------------------------------------------------------------
Total Distributions (10,252) (9,923) (14,239) (12,947)
-----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 330,928 307,260 93,813 60,331
Issued in Lieu of Cash Distributions 9,257 8,528 10,084 9,339
Redeemed (293,952) (271,321) (40,024) (34,336)
-----------------------------------------------------------------
Net Increase from
Capital Share Transactions 46,233 44,467 63,873 35,334
- ------------------------------------------------------------------------------------------------------------------------
Total Increase 46,233 44,471 70,780 36,552
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 298,431 253,960 253,003 216,451
-----------------------------------------------------------------
End of Year $344,664 $298,431 $323,783 $253,003
========================================================================================================================
(1)Shares Issued (Redeemed) 330,928 307,260 7,874 5,219
Issued 9,257 8,528 846 808
Redeemed (293,952) (271,321) (3,365) (2,978)
-----------------------------------------------------------------
Net Increase in Shares Outstanding 46,233 44,467 5,355 3,049
========================================================================================================================
</TABLE>
23
<PAGE> 26
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis. It also presents the fund's Total Return and
shows net investment income and expenses as percentages of average net assets.
These data will help you assess: the variability of the fund's net income and
total returns from year to year; the relative contributions of net income and
capital gains to the fund's total return; how much it costs to operate the
fund; and the extent to which the fund tends to distribute capital gains. The
table also shows the Portfolio Turnover Rate, a measure of trading activity. A
turnover rate of 100% means that the average security is held in the fund for
one year. Money market funds are not required to report a Portfolio Turnover
Rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
OHIO TAX-EXEMPT MONEY MARKET FUND
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .033 .034 .034 .037 .026
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
-------------------------------------------------------------
Total from Investment Operations .033 .034 .034 .037 .026
-------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.033) (.034) (.034) (.037) (.026)
Distributions from Realized Capital Gains -- -- -- -- --
-------------------------------------------------------------
Total Distributions (.033) (.034) (.034) (.037) (.026)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
==============================================================================================================================
TOTAL RETURN 3.37% 3.49% 3.42% 3.78% 2.58%
==============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $345 $298 $254 $178 $147
Ratio of Total Expenses to Average Net Assets 0.20% 0.19% 0.20% 0.21% 0.23%
Ratio of Net Investment Income to Average Net Assets 3.30% 3.43% 3.36% 3.71% 2.56%
==============================================================================================================================
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OHIO INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.72 $11.67 $11.63 $10.28 $11.61
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .592 .598 .603 .610 .599
Net Realized and Unrealized Gain (Loss) on Investments .300 .110 .040 1.350 (1.298)
-------------------------------------------------------------
Total from Investment Operations .892 .708 .643 1.960 (.699)
-------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.592) (.598) (.603) (.610) (.599)
Distributions from Realized Capital Gains -- (.060) -- -- (.032)
-------------------------------------------------------------
Total Distributions (.592) (.658) (.603) (.610) (.631)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.02 $11.72 $11.67 $11.63 $10.28
===============================================================================================================================
TOTAL RETURN 7.78% 6.30% 5.75% 19.45% -6.29%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $324 $253 $216 $197 $149
Ratio of Total Expenses to Average Net Assets 0.20% 0.17% 0.20% 0.21% 0.23%
Ratio of Net Investment Income to Average Net Assets 4.98% 5.17% 5.26% 5.45% 5.38%
Portfolio Turnover Rate 8% 14% 17% 7% 16%
===============================================================================================================================
</TABLE>
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
Vanguard Ohio Tax-Exempt Funds comprises the Ohio Tax-Exempt Money Market Fund
and Ohio Insured Long-Term Tax-Exempt Fund, each of which is registered under
the Investment Company Act of 1940 as a diversified open-end investment
company, or mutual fund. Each fund invests in debt instruments of municipal
issuers whose ability to meet their obligations may be affected by economic and
political developments in the state of Ohio.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The fund consistently follows such
policies in preparing its financial statements.
1. SECURITY VALUATION: Tax-Exempt Money Market Fund: Investment
securities are valued at amortized cost, which approximates market value.
Insured Long-Term Tax-Exempt Fund: Bonds, and temporary cash investments
acquired more than 60 days to maturity, are valued using the latest bid prices
or using valuations based on a matrix system (which considers such factors as
security prices, yields, maturities, and ratings), both as furnished by
independent pricing services. Other temporary cash investments are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not 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.
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (continued)
3. FUTURES CONTRACTS: The Insured Long-Term Tax-Exempt Fund may use
Municipal Bond Index, U.S. Treasury Bond, and U.S. Treasury Note futures
contracts, with the objectives of enhancing returns, managing interest rate
risk, maintaining liquidity, diversifying credit risk, and minimizing
transaction costs. The fund may purchase or sell futures contracts instead of
bonds to take advantage of pricing differentials between the futures contracts
and the underlying bonds. The fund may also seek to take advantage of price
differences among bond market sectors by simultaneously buying futures (or
bonds) of one market sector and selling futures (or bonds) of another sector.
Futures contracts may also be used to simulate a fully invested position in the
underlying bonds while maintaining a cash balance for liquidity. The primary
risks associated with the use of futures contracts are imperfect correlation
between changes in market values of bonds held by the fund and the prices of
futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. The aggregate principal amounts of the contracts are not recorded in
the financial statements. Fluctuations in the value of the contracts are
recorded in the Statement of Net Assets as an asset (liability) and in the
Statement of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized futures gains
(losses).
4. DISTRIBUTIONS: Distributions from net investment income are declared
daily and paid on the first business day of the following month. Annual
distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
5. OTHER: Security transactions are accounted for on the date securities
are bought or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Premiums
and original issue discounts are amortized and accreted, respectively, to
interest income over the lives of the respective securities.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to each fund under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At November 30, 1998, the funds had
contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
OHIO TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $63 0.02% 0.09%
Insured Long-Term 56 0.02 0.08
- --------------------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The funds' custodian bank has agreed to reduce its fees when a fund
maintains cash on deposit in the non-interest-bearing custody account. For the
year ended November 30, 1998, custodian fee offset arrangements reduced
expenses of the Tax-Exempt Money Market Fund and Insured Long-Term Tax-Exempt
Fund by $8,000 and $5,000, respectively.
D. During the year ended November 30, 1998, the Insured Long-Term Tax-Exempt
Fund purchased $81,737,000 of investment securities and sold $22,928,000 of
investment securities, other than temporary cash investments.
E. Capital gain distributions are determined on a tax basis and may differ from
realized capital gains for financial reporting purposes due to differences in
the timing of realization of gains. The Insured Long-Term Tax-Exempt Fund had
realized losses totaling $790,000 through
26
<PAGE> 30
November 30, 1998, which are deferred for tax purposes and reduce the amount of
unrealized appreciation on investment securities for tax purposes (see Note F).
For federal income tax purposes, the funds had the following capital gains
available at November 30, 1998, or capital losses available to offset future
capital gains:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CAPITAL LOSS
CAPITAL GAINS -------------------------------------
AVAILABLE FOR EXPIRATION
DISTRIBUTION AMOUNT FISCAL YEAR(S) ENDING
OHIO TAX-EXEMPT FUND (000) (000) NOVEMBER 30,
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $(4) 2002-2004
Insured Long-Term $611 -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
The Insured Long-Term Fund used a capital loss carryforward of $157,000 to
offset capital gains realized during the year ended November 30, 1998, reducing
the amount of capital gains that would otherwise be available to distribute to
shareholders.
F. At November 30, 1998, net unrealized appreciation of Insured Long-Term
Tax-Exempt Fund investment securities for federal income tax purposes was
$18,847,000, consisting of unrealized gains of $18,866,000 on securities that
had risen in value since their purchase and $19,000 in unrealized losses on
securities that had fallen in value since their purchase.
At November 30, 1998, the aggregate settlement value of open futures
contracts expiring through March 1999 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
(000)
-----------------------------------
NUMBER OF AGGREGATE UNREALIZED
OHIO TAX-EXEMPT FUND/ LONG (SHORT) SETTLEMENT APPRECIATION
FUTURES CONTRACTS CONTRACTS VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Long-Term/
Municipal Bond Index 14 $ 1,771 $ 20
U.S. Treasury Bond 89 11,550 (105)
U.S. Treasury Note 33 3,930 38
- -----------------------------------------------------------------------------------------------
</TABLE>
Net unrealized depreciation on open futures contracts is required to be treated
as realized loss for tax purposes.
27
<PAGE> 31
REPORT OF INDEPENDENT [LOGO]
ACCOUNTANTS
To the Shareholders and Trustees of
Vanguard Ohio Tax-Exempt 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
Ohio Tax-Exempt Money Market Fund and Ohio Insured Long-Term Tax-Exempt Fund
(constituting Vanguard Ohio Tax-Exempt Funds, hereafter referred to as the
"Funds") at November 30, 1998, the results of each of their operations for the
year then ended, the changes in each of their net assets for each of the two
years in the period then ended and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at November 30, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 1999
SPECIAL 1998 TAX INFORMATION (UNAUDITED) FOR VANGUARD OHIO TAX-EXEMPT FUNDS
This information for the fiscal year ended November 30, 1998, is included
pursuant to provisions of the Internal Revenue Code.
Each fund designates 100% of its income dividends as exempt-interest
dividends.
28
<PAGE> 32
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
BARBARA BARNES HAUPTFUHRER
Director of The Great Atlantic and Pacific Tea Co., IKON Office Solutions,
Inc., Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance
Co., and Ladies Professional Golf Association; Trustee Emerita of Wellesley
College.
JOANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson=Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress
& Co., The Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of the Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
KAREN E. WEST
Controller; Principal of The Vanguard Group, Inc.; Controller of each of the
investment companies in the The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DISTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MACKINNON
Managing Director, Fixed Income Group.
F. WILLIAM MCNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"STANDARD & POOR'S(R)," "S&P(R)," "S&P 500(R)," "STANDARD & POOR'S 500," AND
"500" ARE TRADEMARKS OF THE MCGRAW-HILL COMPANIES, INC. FRANK RUSSELL
COMPANY IS THE OWNER OF TRADEMARKS AND COPYRIGHTS RELATING TO THE
RUSSELL INDEXES. "WILSHIRE 4500" AND "WILSHIRE 5000" ARE
TRADEMARKS OF WILSHIRE ASSOCIATES.
<PAGE> 33
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
first balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
www.vanguard.com
[email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
Q960-01/18/1999
(C) 1999 Vanguard Marketing Corporation, Distributor. All rights reserved.
at vanguard, we believe that tradition matters
