<PAGE>
VANGUARD(R) FLORIDA
INSURED LONG-TERM
TAX-EXEMPT FUND
ANNUAL REPORT
NOVEMBER 30, 1999
[A MEMBER OF
THE VANGUARD GROUP LOGO]
<PAGE>
[PHOTO OF JOHN C. BOGLE]
DEAR SHAREHOLDERS:
Two roads diverged in a wood, and I--I took the one less traveled by, and that
has made all the difference.
I can think of no better words than those of Robert Frost to begin this special
letter to our shareholders, who have placed such extraordinary trust in me and
in Vanguard over the past quarter century. When the firm was founded 25 years
ago, we deliberately took a new road to managing a mutual fund enterprise.
Instead of having the funds controlled by an outside management company with its
own financial interests, the Vanguard funds--there were only 11 of them
then--would be controlled by their own shareholders and operate solely in their
financial interests. The outcome of our unprecedented decision was by no means
certain. We described it then as "The Vanguard Experiment."
Well, I guess it's fair to say it's an experiment no more. During the past
25 years, the assets we hold in stewardship for investors have grown from $1
billion to more than $500 billion, and I believe that our reputation for
integrity, fair-dealing, and sound investment principles is second to none in
this industry. Our staggering growth--which I never sought--has come in
important part as a result of the simple investment ideas and basic human values
that are the foundation of my personal philosophy. I have every confidence that
they will long endure at Vanguard, for they are the right ideas and right
values, unshakable and eternal.
While Emerson believed that "an institution is the lengthened shadow of one
man," Vanguard today is far greater than any individual. The Vanguard crew has
splendidly implemented and enthusiastically supported our founding ideas and
values, and deserves the credit for a vital role in forging our success over the
years. It is a dedicated crew of fine human beings, working together in an
organization that is well prepared to press on regardless long after I am gone.
Creating and leading this enterprise has been an exhilarating run. Through it
all, I've taken the kudos and the blows alike, enjoying every moment to the
fullest, and even getting a second chance at life with a heart transplant three
years ago. What more could a man ask?
While I shall no longer be serving on the Vanguard Board, I want to assure
you that I will remain vigorous and active in a newly created Vanguard unit,
researching the financial markets, writing, and speaking. I'll continue to focus
whatever intellectual power and ethical strength I possess on my mission to
assure that mutual fund investors everywhere receive a fair shake. In the spirit
of Robert Frost:
But I have promises to keep, and miles to go before I sleep, and miles to
go before I sleep.
You have given me your loyalty and friendship over these long years, and I
deeply appreciate your thousands of letters of support. For my part, I will
continue to keep an eagle eye on your interests, for you deserve no less. May
God bless you all, always.
/S/
JCB
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CONTENTS
Report From The Chairman .................1
The Markets In Perspective ...............5
Report From The Adviser ..................7
Performance Summary ......................9
Fund Profile ............................10
Financial Statements ....................12
Report Of Independent Accountants........21
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[PHOTO OF JOHN J. BRENNAN]
REPORT FROM THE CHAIRMAN
Concerns about higher inflation took hold of the bond market during the early
months of Vanguard Florida Insured Long-Term Tax-Exempt Fund's 1999 fiscal year
and never loosened their grip. The resulting decline in prices made the 12
months ended November 30 a difficult period for fixed-income investors. Our fund
registered a total return of -1.9%, which was two percentage points better than
that of its average peer, but a bit behind that of its unmanaged benchmark
index.
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TOTAL RETURNS
FISCAL YEAR ENDED
NOVEMBER 30, 1999
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Vanguard Florida Insured
Long-Term Tax-Exempt Fund -1.9%
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Average Florida Insured
Municipal Debt Fund* -3.9%
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*Derived from data provided by Lipper Inc.
The table at right presents the fund's 12-month return along with that of
our average mutual fund competitor. The total return (capital change plus
reinvested dividends) of our fund is based on a decrease in net asset value from
$11.54 per share on November 30, 1998, to $10.70 per share on November 30, 1999,
and is adjusted for dividends totaling $0.543 per share paid from net investment
income and a distribution of $0.091 per share paid from net realized capital
gains. At the end of the fiscal year, the fund's yield was 5.14%, up from 4.33%
a year earlier.
For Florida residents, income earned by our fund is exempt from federal
income tax and the Florida intangible personal property tax, but may be subject
to local taxes and to the alternative minimum tax.
FINANCIAL MARKETS IN REVIEW
The 12 months ended November 30 featured plenty of positive economic news, as
well as a good deal of apprehension over how long the good times can last
without touching off higher inflation. The U.S. economy expanded at an
inflation-adjusted rate of 4.3% from the third quarter of 1998 to the third
quarter of 1999, the nation's unemployment rate hovered near record-low levels,
and inflation barely stirred.
However, the nagging concern that inflation would soon accelerate resulted
in a steady rise in interest rates during the fiscal year. The rate increase
merely restrained the stock market, which managed an impressive advance, but
dealt a heavy blow to bond prices, which suffered their worst year since 1994.
The Federal Reserve Board went along with the uptrend in interest rates, hiking
its target for short-term interest rates by 25 basis points on three separate
occasions in an attempt to head off inflation it believes could result from
strong growth and tight labor markets.
Technology companies propelled the U.S. stock market higher, and the
Standard & Poor's 500 Index, which is dominated by large-capitalization stocks,
returned 20.9%--the index's fifth straight year of returns higher than 20%. The
broad market, as represented by the Wilshire 5000 Total Market Index, advanced
an even higher 22.4%, but a large portion of the gain was concentrated in a
relatively small number of stocks. Many value-oriented stocks were left far
behind.
The yield of the 30-year U.S. Treasury bond ended the fiscal year at 6.29%,
up 123 basis points (1.23 percentage points) from its starting point of 5.06% on
November 30, 1998. The yield of 3-month U.S. Treasury bills climbed to 5.30% on
balance, from 4.48%.
1
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Yields of high-quality, long-term municipal bonds climbed nearly a full
percentage point, from 4.89% when the period began to 5.87% on November 30,
1999.
The Lehman Brothers 10 Year Municipal Bond Index, a good measure of the
long-term municipal market, recorded a return of -0.4% during our fiscal year.
Long-term bonds suffer more when interest rates are rising, just as they benefit
more from a decline in interest rates.
Municipal bonds performed well early in the 1999 fiscal year as new
issuance dropped off from 1998's near-record levels and yields remained high
relative to Treasuries. But their relative performance faltered later in the
period because many investors were attracted to corporate bonds.
At the end of the fiscal year, the spread between yields of long-term
Treasuries and long-term munis stood at just 42 basis points (0.42 percentage
point). This is an extremely narrow gap, given that the income from Treasuries
is subject to federal income taxes, while income from a state-specific municipal
bond fund is fully exempt from federal taxes. On November 30, the yield of a
top-quality, long-term municipal bond was equal to about 93% of the yield of the
30-year U.S. Treasury bond. Historically, the ratio has been about 84%.
FISCAL 1999 PERFORMANCE OVERVIEW
The -1.9% return of Vanguard Florida Insured Long-Term Tax-Exempt Fund was a
full 2 percentage points better than the -3.9% return of the average Florida
municipal bond fund, which has lower average credit quality than our fund but a
similar average maturity. Our return, however, was 0.8 percentage point behind
the -1.1% return of the unmanaged Lehman Municipal Bond Index. Though our fund
earned an income return of 4.6%, a price decline of -6.5% engendered by the rise
in interest rates pulled our total return into negative territory for the year.
(The Performance Summary on page 9 presents a breakdown of the fund's returns
into their income and capital components dating to the fund's inception.) Our
performance advantage over our average peer was due in part to our lower costs.
The Lehman 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. The
index also has a slightly lower average duration than your fund, making it
slightly less sensitive to interest rate changes--an advantage during fiscal
1999.
Though the rise in interest rates during the past 12 months was to blame
for the poor bond returns, a slide in rates just one year ago provided a boost
to bond prices and returns. The simple lesson is that interest rates rise and
fall, sometimes gradually and sometimes sharply. All bond investors should know
that over long periods, the ups and downs in rates tend to offset each other,
leaving a bond fund's interest income as the chief source of return. And
considering that interest paid on munis today is considerably higher than a year
ago, it would seem that tax-exempt securities have become more attractive. At a
yield of about 5.1% compounded annually, money doubles in a little more than 14
years, or more than two years sooner than at 4.3%.
THE MUNICIPAL BOND TAX ADVANTAGE
For Florida residents, the income earned by our fund is exempt from federal
income tax, the Florida intangible personal property tax, and in most cases,
local taxes. At current yields, investors in long-term municipal bonds who are
taxed at the highest marginal tax rate (39.6%) can earn an astounding 55% more
after-tax income than they could in comparable long-term U.S. Treasury bonds.
For Florida taxpayers subject to the highest tax rates, a yield of 5.9% on a
tax-exempt long-term bond is the equivalent of a 9.8% taxable yield.
2
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This remarkable advantage is illustrated in the table below, which compares
the annual net income earned on U.S. Treasury and tax-exempt securities as of
November 30, 1999, assuming a $100,000 investment.
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ILLUSTRATION OF INCOME FROM A
HYPOTHETICAL $100,000 INVESTMENT
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Taxable gross income $6,300
Less taxes (39.6%) (2,500)
Net after-tax income 3,800
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Tax-exempt income $5,900
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Tax-exempt income advantage $2,100
Percentage advantage 55%
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This illustration assumes current yields (as of November 30, 1999) of 6.3% for
long-term U.S. Treasury bonds and 5.9% for long-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.
There is an important distinction between state-specific municipal bond
funds and U.S. Treasury bonds. Treasury securities are backed by the full faith
and credit of the U.S. government and therefore have unmatched credit quality.
Also, municipal bond funds that confine their investments to a single state lack
the diversification that comes from spreading investments among various states,
which may be subject to different economic conditions and different risks.
Private insurance on the bonds in the Florida Insured Long-Term Tax-Exempt Fund,
however, helps to reduce 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.
LONG-TERM PERFORMANCE OVERVIEW
An annual review of any mutual fund should be accompanied by an examination of
the fund's longer-term record. The table below compares the performance of our
fund since its September 1, 1992, inception with that of its average peer mutual
fund. It also presents the current value of a hypothetical $10,000 investment
made at our fund's inception. As you can see, the Florida Insured Long-Term
Tax-Exempt Fund has established a fine record versus its competition during a
life span of more than seven years. Our advantage over this period has amounted
to $1,177, or about 12% of the original investment.
<TABLE>
<CAPTION>
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TOTAL RETURNS
SEPTEMBER 1, 1992, TO NOVEMBER 30, 1999
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AVERAGE FINAL VALUE OF
ANNUAL A $10,000
RETURN INITIAL INVESTMENT*
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<S> <C> <C> <C> <C> <C>
AVERAGE AVERAGE
VANGUARD COMPETING VANGUARD COMPETING VANGUARD
FUND FUND FUND FUND ADVANTAGE
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Florida Insured Long-Term Tax-Exempt Fund 6.4% 5.3% $15,668 $14,491 $1,177
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</TABLE>
*Assuming reinvestment of all income dividends and capital gains distributions.
A large part of our performance edge versus competitors over the period can
be explained by the same factor that explained our outperformance during the
1999 fiscal year: cost. Our fund has an expense ratio (annual expenses as a
percentage of average net assets) of 0.18%, a fraction of the 1.03% charged by
the average long-term Florida municipal bond fund. Because fund operating costs
are deducted directly from the income earned by a bond fund, our fund has a
significant edge in its quest to provide
3
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IN SUMMARY
returns that are superior to those of similar funds. The combination of our cost
advantage and skillful management by Vanguard's Fixed Income Group has benefited
our shareholders since the fund's inception in 1992, and we expect it to
continue to do so in the future.
During a period when the stock market seems invulnerable, it's easy to overlook
the merits of bonds. However, bond funds must not be judged by how well their
returns stack up against those of stock funds in a particular period, but by
what they can add to a balanced investment program, namely, current income and
relative stability. Vanguard Florida Insured Long-Term Tax-Exempt Fund can
provide a high level of after-tax income, particularly for those in high income
tax brackets, and especially compared with the income available from the stock
market, whose average dividend yield is less than 1.5%. And because the
performance of bonds often differs from that of equities, a commitment to bonds
is a useful diversifier that can help smooth the sometimes-volatile returns of
stocks.
We advise investors to hold balanced portfolios of stock funds, bond funds,
and short-term reserves in proportions suitable to their own investment goals,
time horizon, and tolerance for risk. Once you have such a plan in place, we
advise you to stick with it through good times and bad.
/S/ John J. Brennan
John J. Brennan
Chairman and Chief Executive Officer
December 27, 1999
================================================================================
A NOTE OF THANKS TO OUR FOUNDER
================================================================================
As you may have read on the inside cover of our report, our founder, John C.
Bogle, is retiring December 31, 1999, as Senior Chairman of our Board after
nearly 25 years of devoted service to Vanguard and our shareholders. Vanguard
investors have Jack to thank for creating a truly mutual mutual fund company
that operates solely in the interest of its fund shareholders. And mutual fund
investors everywhere have benefited from his energetic efforts to improve this
industry. Finally, on a personal note, I am forever grateful to Jack for giving
me the opportunity to join this great company in 1982.
4
<PAGE>
THE MARKETS IN PERSPECTIVE
YEAR ENDED NOVEMBER 30, 1999
Strong economic expansion sent global stock markets charging higher but dealt a
blow to bond prices during the fiscal year ended November 30, 1999. The
powerhouse U.S. economy led the global growth parade, joined by Asian, European,
and Latin American economies that had slumped or stagnated in 1998.
Interest rates rose sharply as investors and monetary policymakers grew
increasingly worried that such strong economic growth would cause inflation to
surge. Although the rise in rates caused bond prices to fall, it only tempered
the stock market's advance.
U.S. STOCK MARKETS
Against the backdrop of a booming economy, U.S. companies reported solid
increases in earnings during the fiscal year. The nation's economic output
increased at an inflation-adjusted rate of 4.3%--a very rapid pace for such a
large, mature economy. Consumer spending, which accounts for roughly two-thirds
of economic activity, powered the expansion. Americans spent freely, encouraged
by rising wealth from a long bull market, a hot job market, and climbing
incomes.
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AVERAGE ANNUAL RETURNS
PERIODS ENDED NOVEMBER 30, 1999
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1 YEAR 3 YEARS 5 YEARS
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STOCKS
S&P 500 Index 20.9% 24.3% 27.5%
Russell 2000 Index 15.7 10.1 14.8
Wilshire 5000 Index 22.4 22.6 25.6
MSCI EAFE Index 21.4 12.3 11.4
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BONDS
Lehman Aggregate Bond Index 0.0% 5.6% 8.0%
Lehman 10 Year Municipal Bond Index -0.4 4.8 7.6
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 4.7 5.0 5.2
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OTHER
Consumer Price Index 2.6% 2.0% 2.4%
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The stock market, as measured by the Wilshire 5000 Index, gained 22.4%
overall. For a change, mid-capitalization and small-cap stocks outpaced their
large-cap brethren. The large-cap S&P 500 Index, which accounts for more than
75% of the U.S. stock market's total value, gained 20.9% during the year; the
rest of the market (as measured by the Wilshire 4500 Index) gained 29.0%.
Increasingly optimistic expectations for future corporate earnings more
than offset the negative effects of rising interest rates during fiscal 1999.
Higher rates often hurt stock prices because many investors use current rates to
discount the value of a stock's projected earnings and dividends. The higher the
interest rate, the more future earnings are discounted, and the less investors
will pay for the stock now.
Because of a remarkable surge in prices for technology stocks, growth
stocks again outperformed value stocks during the past year. Within the S&P 500
Index, growth stocks--characterized by high prices in relation to earnings, book
value, and dividends--recorded a 28.5% return, 16 percentage points above the
12.5% return for value stocks. The disparity was even greater in the small-cap
segment of the market; growth stocks within the small-cap Russell 2000 Index
gained 32.7%, while value stocks posted a -1.4% return.
Technology stocks within the S&P 500 Index gained 66%. QUALCOMM posted an
eye-popping 1,200% return, and a number of computer-related stocks doubled or
tripled in
5
<PAGE>
price, including Sun Microsystems (+257%), Apple Computer (+206%), Oracle
(+197%), Gateway (+172%), Texas Instruments (+152%), and Cisco Systems (+136%).
Big gains for wireless telecommunications and cable-TV stocks powered the
utilities category to an overall gain of nearly 28%. The producer-durables
group, which includes some technology-related manufacturers as well as aircraft
and equipment makers, gained 27%. Oil exploration and service firms in the
"other energy" category posted a 26% return, assisted by a jump in prices for
oil and natural gas.
The year's worst-performing sector was consumer staples (down nearly -12%).
This group suffered as severe price competition and a stronger dollar in Europe
crimped profits for many food and beverage makers, and the specter of litigation
costs caused tobacco stocks to slump. The auto & transportation group declined
- -2% overall, with airline stocks hurt by rising prices for jet fuel.
U.S. BOND MARKETS
Stock investors may cheer a fast-growing economy, but rapid growth tends to
worry bond investors. Early in the fiscal year, inflation seemed
dormant--plunging oil prices had taken commodity price indexes to the lowest
point in a quarter-century. But as the world economy began hitting on all
cylinders, the bond market feared that a minuscule U.S. unemployment rate,
rising commodity prices, and capacity constraints would cause inflation to
accelerate. Although oil prices were up nearly 150% during the fiscal year, the
overall price level, as measured by the Consumer Price Index, increased by a
moderate 2.6%.
The Federal Reserve Board, anticipating price pressures, abandoned its bias
toward easier monetary policy, and by mid-year was boosting interest rates to
try to throttle back the economic engines. The bond market was ahead of the
Fed--interest rates began rising sharply in February. By fiscal year-end, the
yield of 30-year U.S. Treasury bonds had risen 1.23 percentage points (123 basis
points) to 6.29%. The 10-year Treasury note's yield rose 148 basis points, from
4.71% to 6.19%. The rise in short-term rates was more restrained; 3-month
Treasury bill yields were up 82 basis points to 5.30% at fiscal year-end.
Bond prices fall when interest rates rise, and long-term bond prices are
most sensitive to changing rates. Long-term Treasury bond prices fell by more
than -13%, resulting in total returns of -8%. The Lehman Aggregate Bond Index, a
measure of the overall taxable bond market, which has an intermediate-term
structure on average, broke even on the year, as interest income of 6.2% was
offset by price declines. The damage to municipal bond prices was not as severe
as for Treasuries, and the intermediate-term Lehman 7 Year Municipal Bond Index
recorded a price decline of -3.7% and a total return of 0.5%.
INTERNATIONAL STOCK MARKETS
International markets had a strong year, with European stocks gaining 21.9% in
local-currency terms and Pacific-region stocks advancing 30.2%. However,
currency effects significantly altered the returns to U.S.-based investors. The
U.S. dollar rose in value against most European currencies but fell sharply
against the Japanese yen. As a result, returns from Europe plunged to 9.8% in
dollar terms while returns from the Pacific soared to 51.0%.
Overall, U.S. investors earned 21.4% in the major developed international
markets, as measured by the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index. The bull markets in most nations stemmed
from renewed optimism that economic growth would continue to accelerate. Japan
and the rest of Asia, which were hit hardest by currency and economic crises in
1997 and 1998, saw the biggest stock gains.
Emerging markets, as measured by the Select Emerging Markets Free Index,
gained 37.1% in U.S.-dollar terms, as investors regained an appetite for the
considerable risks of smaller markets.
6
<PAGE>
REPORT FROM THE ADVISER
Interest rates rose during the 12 months ended November 30, 1999, the fiscal
year for Vanguard Florida Insured Long-Term Tax-Exempt Fund. The rise was
principally due to investors' fears about the impact of the strong economy and
the low unemployment rate on inflation. In the past, these factors have caused
inflation to increase, and many investors expect that history will repeat itself
at some point. So far, employment costs and consumer price indexes have not
risen substantially, but each number is being closely watched for any upsurge. A
desire to head off inflation and concerns about the booming stock market led the
Federal Reserve Board to increase interest rates three times during the fiscal
year, raising the federal funds rate by a total of 0.75 percentage point.
As you might expect, yields of insured long-term municipal bonds rose along
with yields on U.S. Treasury bonds during fiscal 1999. During the first half of
the year, long-term insured municipals performed better than Treasury
securities; municipal yields increased by less than half as much as those for
long-term Treasuries. But the relative performance flip-flopped during the
second half, when yields on long-term municipals increased almost 11/2 times as
much as those on long Treasuries. Over the full fiscal year, the yield on the
benchmark 30-year U.S. Treasury bond rose by 1.23 percentage points (from 5.06%
to 6.29%), while the yield of a similar AAA-rated municipal bond rose by nearly
1 percentage point (from 4.89% to 5.87%).
Two factors account for the first-half outperformance of insured municipal
bonds and for their later underperformance. First, as the fiscal year began in
December 1998, insured municipal bonds were especially attractive to investors,
because the AAA-rated insured municipal's tax-exempt yield of 4.9% was equal to
97% of the yield of a 30-year Treasury. For an investor in the top marginal tax
bracket of 39.6%, that 4.9% yield was equivalent to an 8.1% yield on a taxable
bond. By May 31, the middle of our fiscal year, the long-term insured
municipal's yield was about 89% as high as the 30-year Treasury's yield, making
insured municipal bonds somewhat less alluring. The second factor was that in
the second half of the fiscal year, corporate bond yields had become quite
attractive, providing stiff competition for the bond investor's dollar. During
this period the corporate bond market encountered the same type of supply
imbalance that the municipal market had seen in fiscal 1998, as corporations
rushed bond issues to market to complete their financing before the end of the
century. The result was attractively high yields on corporate debt, which
enticed some large institutional buyers away from the municipal market. At
year-end, yields on long-term insured municipal bonds had risen in relation to
those on Treasuries, and 30-year munis offered yields equal to 94% of yields on
30-year Treasuries.
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INVESTMENT PHILOSOPHY
The fund reflects a belief that a high level of current income exempt from
federal income tax and Florida's intangible personal property tax can be
achieved by investing primarily in long-term insured bonds issued by state,
county, and municipal governments in Florida.
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The municipal market was aided by the fact that the supply of new issues
was lower during 1999 than in 1998. Through November, issuance of municipal
securities in 1999 amounted to $207 billion, down more than 20% from the same
period in 1998. The main reason for the decline was a 53% decrease in the
issuance of refunding bonds, whose proceeds are used to pay off older,
higher-coupon bonds. Because of the rise
7
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in interest rates, refunding issues generally did not make fiscal sense during
1999. As the economy continued to expand, the supply of bonds issued for new
projects was unchanged from 1998.
THE FUND'S FISCAL-YEAR PERFORMANCE
Long-term bonds typically are hurt most by rising interest rates. As a result,
the Florida Insured Long-Term Tax-Exempt Fund suffered a price decline of -6.5%
and posted a total return of -1.9%. Although negative returns are never good
news, this result actually was strong in comparison with competitors, whose
average return was -3.9%. Our edge over the average peer fund was due to the
combination of Vanguard's disciplined approach to risk and our low operating
expenses.
We scrutinize various bond maturities to find the best values for each
level of interest rate risk. Our focus on keeping expenses low is always helpful
and is critical in delivering above-average tax-exempt income, since expenses
are deducted directly from a bond fund's interest income. Our emphasis on
keeping the fund invested in high-quality securities benefits our shareholders
by reducing credit risk. The overall effect of combining low costs and high
quality is to provide to our shareholders both superior yields and low credit
risk, the ingredients of excellent risk-adjusted returns.
Ian A. MacKinnon, Managing Director
Christopher M. Ryon, Principal
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
Vanguard Fixed Income Group
December 13, 1999
8
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PERFORMANCE SUMMARY
FLORIDA 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. An investor's shares, when
redeemed, could be worth more or less than their original cost.
TOTAL INVESTMENT RETURNS: SEPTEMBER 1, 1992-NOVEMBER 30, 1999
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FLORIDA INSURED LONG-TERM
TAX-EXEMPT FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
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1992 1.6% 1.2% 2.8% 1.8%
1993 6.9 5.5 12.4 11.1
1994 -11.0 4.9 -6.1 -5.2
1995 13.8 6.3 20.1 18.9
1996 1.2% 5.3% 6.5% 5.9%
1997 1.3 5.2 6.5 7.2
1998 2.9 5.1 8.0 7.8
1999 -6.5 4.6 -1.9 -1.1
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*Lehman Municipal Bond Index.
See Financial Highlights table on page 18 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: SEPTEMBER 1, 1992-NOVEMBER 30, 1999
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199211 10284 10196 10179
199302 11020 10901 10778
199305 11087 10930 10833
199308 11489 11382 11257
199311 11558 11442 11307
199402 11621 11463 11375
199405 11403 11063 11100
199408 11500 11145 11277
199411 10855 10475 10716
199502 12057 11514 11593
199505 12475 12077 12115
199508 12465 12008 12278
199511 13031 12592 12742
199602 13230 12645 12874
199605 12950 12475 12669
199608 13241 12614 12921
199611 13872 13183 13492
199702 13921 13187 13584
199705 14066 13405 13718
199708 14440 13685 14116
199711 14779 14036 14459
199802 15158 14394 14825
199805 15359 14660 15004
199808 15724 14862 15337
199811 15966 15077 15581
199902 16167 15189 15737
199905 16036 15195 15705
199908 15687 14611 15414
199911 15668 14491 15414
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1999
-----------------------------------
<S> <C> C> <C> <C>
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
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Florida Insured Long-Term Tax-Exempt Fund -1.87% 7.62% 6.39% $15,668
Average Florida Insured Municipal Fund* -3.89 6.71 5.25 14,491
Lehman Municipal Bond Index -1.07 7.54 6.15 15,414
- -----------------------------------------------------------------------------------------------------------
*Derived from data provided by Lipper Inc.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1999*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION SINCE INCEPTION
---------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------------
Florida Insured Long-Term Tax-Exempt Fund 9/1/1992 -1.97% 6.74% 1.26% 5.26% 6.52%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
9
<PAGE>
FUND PROFILE
FLORIDA INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 11.
FINANCIAL ATTRIBUTES
- -----------------------------------------------------------------------
FLORIDA INSURED LEHMAN
LONG-TERM INDEX*
- -----------------------------------------------------------------------
Number of Issues 167 52,144
Yield 5.1% --
Yield to Maturity 5.3% --
Average Coupon 5.3% 5.5%
Average Maturity 12.7 years 13.0 years
Average Quality AAA AA+
Average Duration 8.4 years 7.5 years
Expense Ratio 0.18% --
Cash Reserves 1.1% --
*Lehman Municipal Bond Index.
INVESTMENT FOCUS
- ------------------------------
[GRID]
AVERAGE MATURITY LONG
CREDIT QUALITY HIGH
VOLATILITY MEASURES
- -----------------------------------------------------------------------
FLORIDA INSURED LEHMAN
LONG-TERM INDEX*
- -----------------------------------------------------------------------
R-Squared 0.98 1.00
Beta 1.16 1.00
*Lehman Municipal Bond Index.
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- --------------------------------------------------
AAA 95.1%
AA 4.9
A 0.0
BBB 0.0
BB 0.0
B 0.0
Total 100.0%
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
- --------------------------------------------------
Under 1 Year 4.8%
1-5 Years 9.0
5-10 Years 22.2
10-20 Years 51.8
20-30 Years 11.8
Over 30 Years 0.4
Total 100.0%
10
<PAGE>
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
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 and is annualized, or projected forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
11
<PAGE>
FINANCIAL STATEMENTS
NOVEMBER 30, 1999
STATEMENT OF NET ASSETS
This Statement provides a detailed list of the 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>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FACE MARKET
MATURITY AMOUNT VALUE*
FLORIDA INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.9%)
- ---------------------------------------------------------------------------------------------------------------
ISSUER INSURED (90.8%)
Alachua County FL Health Fac. Auth. (Shands Teaching Hosp.) 6.25% 12/1/2011 (1) $3,095 $3,340
Alachua County FL Health Fac. Auth. (Shands Teaching Hosp.) 6.25% 12/1/2016 (1) 8,695 9,247
Alachua County FL Health Fac. Auth. VRDO (
Shands Teaching Hosp.) 3.85% 12/8/1999 (1) 3,000 3,000
Boynton Beach FL Util. System Rev. 6.25% 11/1/2020 (3) 2,085 2,126
Boynton Beach FL Util. System Rev. 6.25% 11/1/2020 (3)(ETM) 415 441
Brevard County FL Health Fac. (Holmes Medical Center) 5.625% 10/1/2014 (1) 3,000 3,016
Broward County FL Airport System Rev. 5.125% 10/1/2018 (2) 5,000 4,573
Broward County FL Airport System Rev. 5.25% 10/1/2012 (1) 14,735 14,464
Broward County FL Solid Waste Rev. 5.75% 7/1/2013 (1) 4,130 4,205
Canaveral FL Port Auth. 6.00% 6/1/2006 (3) 1,000 1,045
Collier County FL COP 6.25% 2/15/2013 (4) 12,500 13,579
Coral Springs FL Improvement Dist. Water & Sewer GO 6.00% 6/1/2010 (1) 4,250 4,479
Dade County FL Health Fac. Auth. Rev. (Miami Baptist Hosp.) 5.25% 5/15/2013 (1) 5,500 5,391
Dade County FL School Board COP 5.60% 8/1/2006 (2)(Prere.) 22,420 23,595
Dade County FL School Board COP 5.70% 8/1/2006 (2)(Prere.) 4,300 4,550
Dade County FL School Dist. GO 5.00% 2/15/2017 (1) 19,000 17,357
Dade County FL School Dist. GO 6.875% 8/1/2002 (1) 5,000 5,312
Dade County FL Seaport GO 6.25% 10/1/2001 (2)(Prere.) 2,000 2,089
Dade County FL Seaport GO 6.50% 10/1/2001 (2)(Prere.) 4,090 4,290
Dade County FL Solid Waste System Rev. 6.00% 10/1/2007 (2) 8,700 9,292
Dade County FL Water & Sewer System Rev. 5.25% 10/1/2011 (3) 4,000 4,018
Dade County FL Water & Sewer System Rev. 5.25% 10/1/2012 (3) 6,000 5,977
Dade County FL Water & Sewer System Rev. 6.25% 10/1/2009 (3) 1,500 1,642
Dade County FL Water & Sewer System Rev. VRDO 3.60% 12/8/1999 (3) 5,480 5,480
Davie FL Water & Sewer Rev. 6.375% 10/1/2012 (2) 2,500 2,762
Dunedin FL Util. System. Rev. 6.75% 10/1/2008 (3) 1,115 1,251
Dunedin FL Util. System. Rev. 6.75% 10/1/2010 (3) 2,465 2,800
Florida Board of Educ. Lottery Rev. 5.00% 7/1/2016 (3) 16,800 15,430
Florida Board of Educ. Lottery Rev. 5.00% 7/1/2017 (3) 8,000 7,275
Florida Board of Educ. Rev. (Capital Outlay) 5.00% 6/1/2015 (3) 9,355 8,723
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------
Florida Board of Educ. Rev. (Capital Outlay) 5.00% 6/1/2017 (3) $10,380 $9,475
Florida Dept. of General Services Rev.
(Dept. of Environmental Protection Preservation-2000) 5.00% 7/1/2011 (2) 2,000 1,967
Florida Dept. of General Services Rev.
(Dept. of Environmental Protection Preservation-2000) 5.75% 7/1/2013 (2) 2,585 2,636
Florida Gas Util. Rev. (Gas Project) 5.00% 12/1/2008 (4) 7,500 7,522
Florida Muni. Power Agency 6.25% 10/1/2002 (2)(Prere.) 4,500 4,801
Florida Muni. Power Agency (Tri-City Project) 5.00% 10/1/2010 (2) 4,340 4,283
Florida Muni. Power Agency VRDO (Stanton Project) 3.90% 12/8/1999 (1) 3,405 3,405
Florida Turnpike Auth. Rev. 5.00% 7/1/2014 (1) 5,000 4,742
Florida Turnpike Auth. Rev. 5.00% 7/1/2015 (1) 7,435 6,945
Florida Turnpike Auth. Rev. 5.00% 7/1/2017 (1) 8,165 7,467
Florida Turnpike Auth. Rev. 5.00% 7/1/2023 (1) 10,000 8,826
Greater Orlando FL Aviation Auth. 5.25% 10/1/2012 (3) 18,245 17,910
Greater Orlando FL Aviation Auth. 6.10% 10/1/2006 (2) 2,500 2,642
Hillsborough County FL IDA (Univ. Community Hosp.) 6.50% 8/15/2019 (1) 17,850 19,459
Hillsborough County FL School Board COP 5.25% 7/1/2017 (1) 12,000 11,278
Hillsborough County FL School Board COP 5.625% 7/1/2005 (2)(Prere.) 6,500 6,892
Hillsborough County FL School Board COP 6.00% 7/1/2025 (1) 19,000 19,326
Indian River County FL Water & Sewer Rev. 5.25% 9/1/2018 (3) 6,415 6,021
Indian River County FL Water & Sewer Rev. 6.50% 9/1/2008 (3) 2,540 2,803
Jacksonville FL Entitlement Rev. 5.50% 10/1/2012 (2) 4,900 4,945
Lakeland FL Electric & Water Rev. 0.00% 10/1/2010 (1) 8,260 4,671
Lakeland FL Electric & Water Rev. 0.00% 10/1/2011 (1) 8,420 4,471
Lakeland FL Electric & Water Rev. 0.00% 10/1/2012 (1) 6,520 3,241
Lakeland FL Electric & Water Rev. 5.00% 10/1/2028 (1) 6,000 5,211
Lee County FL School Board COP 6.00% 8/1/2007 (4) 5,820 6,217
Lee County FL School Board COP 6.00% 8/1/2008 (4) 6,180 6,610
Marion County FL Hosp. Dist.
(Munroe Regional Medical Center) 6.20% 10/1/2007 (3) 1,000 1,065
Martin County FL Health Fac. Auth. Hosp. Rev.
(Martin Memorial Medical Center) 5.00% 11/15/2028 (2) 6,500 5,580
Melbourne FL Water & Sewer Rev. 6.375% 10/1/2012 (3) 1,000 1,060
Miami Beach FL Health Fac. Auth. (Mt. Sinai Medical Center) 6.125% 11/15/2014 (4) 1,250 1,308
Miami Beach FL Health Fac. Auth. (Mt. Sinai Medical Center) 6.25% 11/15/2008 (4) 2,000 2,125
Miami FL GO 5.90% 12/1/2008 (3) 1,000 1,070
Miami FL GO 6.00% 12/1/2009 (3) 1,380 1,488
Miami-Dade County FL Aviation Rev. 5.25% 10/1/2007 (3) 10,000 10,089
Miami-Dade County FL Public Fac. Rev. (Jackson Memorial Hosp.)5.25% 6/1/2010 (4) 2,815 2,822
Miami-Dade County FL Public Fac. Rev. (Jackson Memorial Hosp.)5.25% 6/1/2011 (4) 2,950 2,935
Miami-Dade County FL Public Fac. Rev. (Jackson Memorial Hosp.)5.25% 6/1/2012 (4) 3,120 3,075
Miami-Dade County FL Public Fac. Rev. (Jackson Memorial Hosp.)5.25% 6/1/2013 (4) 3,160 3,080
Miami-Dade County FL School Board COP 5.00% 8/1/2025 (4) 6,000 5,212
Miami-Dade County FL School Board COP 5.25% 8/1/2008 (2) 8,430 8,576
Miami-Dade County FL School Board COP 5.25% 8/1/2011 (2) 12,790 12,810
Miramar FL Wastewater Improvement Assessment Refunding 5.00% 10/1/2019 (1) 3,540 3,159
Miramar FL Wastewater Improvement Assessment Refunding 5.00% 10/1/2025 (1) 2,50 2,185
North Broward FL Hosp. Dist. Rev. 5.25% 1/15/2017 (1) 3,500 3,285
North Broward FL Hosp. Dist. Rev. 5.375% 1/15/2013 (1) 1,750 1,738
North Broward FL Hosp. Dist. Rev. 5.75% 1/15/2007 (1) 2,560 2,685
Ocala FL Water & Sewer Rev. 5.50% 10/1/2015 (2) 4,550 4,521
Ocala FL Water & Sewer Rev. 6.00% 10/1/2005 (2) 2,565 2,685
Ocala FL Water & Sewer Rev. 6.00% 10/1/2010 (2) 2,435 2,618
Orange County FL Health Fac. Auth.
(Adventist for Sunbelt Group) 5.50% 11/15/2015 (2) 1,250 1,224
Orange County FL Health Fac. Auth.
(Adventist for Sunbelt Group 6.25% 11/15/2008 (2) 4,570 4,910
Orange County FL Health Fac. Auth.
(Adventist for Sunbelt Group) 6.25% 11/15/2010 (2) 6,015 6,386
Orange County FL Health Fac. Auth.
(Orlando Regional Health 6.25% 10/1/2009 (1) 2,045 2,218
Orange County FL Health Fac. Auth.
(Orlando Regional Health) 6.25% 10/1/2009 (1)(ETM) 4,935 5,397
Orange County FL Health Fac. Auth.
(Orlando Regional Health) 6.25% 10/1/2010 (1) 2,175 2,364
Orange County FL Health Fac. Auth.
(Orlando Regional Health) 6.25% 10/1/2010 (1)(ETM) 5,260 5,754
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2011 (1) 1,145 1,245
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2011 (1)(ETM) 2,765 3,009
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2013 (1) 1,890 2,043
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2013 (1)(ETM) 3,160 3,422
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FACE MARKET
MATURITY AMOUNT VALUE*
FLORIDA INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2016 (1) $ 1,610 $ 1,723
Orange County FL Health Fac. Auth. (Orlando Regional Health 6.25% 10/1/2016 (1)(ETM) 3,890 4,172
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2018 (1) 4,770 5,070
Orange County FL Health Fac. Auth. (Orlando Regional Health) 6.25% 10/1/2021 (1) 6,500 6,892
Orange County FL Sales Tax Rev. 5.125% 1/1/2028 (3) 8,000 7,094
Orange County FL School Dist. COP 5.375% 8/1/2017 (1) 7,590 7,284
Orange County FL School Dist. COP 5.375% 8/1/2022 (1) 6,880 6,423
Orange County FL School Dist. COP 6.00% 8/1/2011 (1) 6,000 6,437
Orange County FL Solid Waste Rev. 6.375% 10/1/2017 (3) 3,500 3,658
Orange County FL Tourist Dev. Rev. 5.90% 10/1/2010 (1) 1,250 1,335
Orange County FL Tourist Dev. Rev. 6.50% 10/1/2002 (2)(Prere.) 4,000 4,291
Orlando & Orange County FL Expressway Auth. Rev. 5.375% 7/1/2011 (2) 5,000 5,044
Orlando & Orange County FL Expressway Auth. Rev. 6.50% 7/1/2010 (3) 2,000 2,234
Osceola County FL Gas Tax Rev. 5.90% 4/1/2008 (3) 1,805 1,884
Palm Beach County FL Criminal Justice Fac. Rev. 5.375% 6/1/2008 (3) 2,375 2,446
Palm Beach County FL Criminal Justice Fac. Rev. 7.20% 6/1/2015 (3) 3,000 3,510
Palm Beach County FL Solid Waste Auth. Rev. 6.00% 10/1/2007 (2) 10,000 10,695
Pinellas County FL Health Fac. Auth. (Morton Plant Hosp.) 5.25% 11/15/2012 (1) 2,705 2,680
Pinellas County FL Sewer Rev. 5.00% 10/1/2024 (3) 9,500 8,336
Sarasota County FL Util. System Rev. 5.75% 10/1/2012 (3) 4,325 4,412
Sarasota County FL Util. System Rev. 7.00% 10/1/2009 (3) 6,260 7,165
Seacoast FL Util. Auth. Water & Sewer Rev. 5.50% 3/1/2010 (3) 2,500 2,529
Seacoast FL Util. Auth. Water & Sewer Rev. 5.50% 3/1/2013 (3) 4,000 4,011
Seacoast FL Util. Auth. Water & Sewer Rev. 5.50% 3/1/2017 (3) 2,400 2,366
Seacoast FL Util. Auth. Water & Sewer Rev. 5.50% 3/1/2019 (3) 1,595 1,552
Seminole County FL School Board COP 6.125% 7/1/2004 (1)(Prere.) 3,500 3,774
Seminole County FL School Board COP 6.50% 7/1/2004 (1)(Prere.) 2,750 2,986
Seminole County FL Water & Sewer Rev. 6.00% 10/1/2009 (1) 1,800 1,935
Seminole County FL Water & Sewer Rev. 6.00% 10/1/2012 (1) 5,000 5,351
Seminole County FL Water & Sewer Rev. 6.00% 10/1/2019 (1) 2,350 2,442
Seminole County FL Water & Sewer Rev. 6.00% 10/1/2019 (1)(ETM) 5,150 5,307
South Miami FL Health Fac. Auth. Hosp. Rev.
(Baptist Health Systems Obligations Group) 5.00% 11/15/2028 (1) 10,000 8,585
St. Lucie County FL Util. System Rev. 5.50% 10/1/2015 (3)(ETM) 5,000 4,984
St. Lucie County FL Util. System Rev. 6.00% 10/1/2020 (3)(ETM) 3,165 3,214
St. Lucie County FL Util. System Rev. 6.50% 10/1/2008 (1)(ETM) 4,910 5,345
Sunrise FL Util. System Rev. 5.20% 10/1/2022 (2) 17,805 16,272
Sunrise FL Util. System Rev. 5.75% 10/1/2006 (2)(Prere.) 2,000 2,119
Tallahassee FL Energy System Rev. 5.00% 10/1/2028 (4) 6,000 5,211
Tallahassee FL Energy System Rev. 5.25% 10/1/2013 (4) 4,730 4,688
Tallahassee FL Energy System Rev. 5.25% 10/1/2014 (4) 3,980 3,895
Tallahassee FL Energy System Rev. 5.25% 10/1/2015 (4) 5,240 5,065
Tamarac FL Water & Sewer Util. Rev. 5.90% 10/1/2011 (3) 3,980 4,253
Tampa Bay FL Water Util. System Rev. 0.00% 10/1/2004 (3) 11,905 9,465
Tampa Bay FL Water Util. System Rev. 0.00% 10/1/2005 (3) 10,000 7,539
Tampa Bay FL Water Util. System Rev. 0.00% 10/1/2006 (3) 11,040 7,877
Tampa Bay FL Water Util. System Rev. 0.00% 10/1/2007 (3) 3,105 2,093
Tampa Bay FL Water Util. System Rev. 5.50% 10/1/2017 (3) 5,000 4,900
Tampa Bay FL Water Util. System Rev. 6.00% 10/1/2024 (3) 15,250 15,533
Tampa FL Health System Rev.
(Allegany Health System-St. Mary's Hosp.) 5.00% 12/1/2012 (1)(ETM) 7,380 7,181
Tampa FL Health System Rev. (Catholic Healthcare East) 5.25% 11/15/2011 (1) 4,575 4,575
Tampa FL Health System Rev. (Catholic Healthcare East) 5.25% 11/15/2012 (1) 3,385 3,354
Tampa FL Health System Rev. (Catholic Healthcare East) 5.25% 11/15/2013 (1) 4,365 4,276
Tampa FL Health System Rev. (Catholic Healthcare East) 5.50% 11/15/2004 (1) 1,000 1,038
Tampa FL Health System Rev. (Catholic Healthcare East) 5.50% 11/15/2012 (2) 6,000 6,089
Tampa FL Health System Rev. (Catholic Healthcare East) 5.50% 11/15/2013 (2) 2,800 2,824
Tampa FL Health System Rev. (Catholic Healthcare East) 5.50% 11/15/2014 (2) 1,000 999
Tampa FL Hillsborough County Expressway Auth. Rev. 6.00% 7/1/2004 (2) 4,980 5,274
Tampa FL Hillsborough County Expressway Auth. Rev. 6.50% 7/1/2002 (2) 4,130 4,346
Tampa FL Water & Sewer Rev. 6.25% 10/1/2012 (3) 5,805 6,093
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------
Titusville FL Water & Sewer Rev. 6.00% 10/1/2004 (1)(Prere.) 2,500 2,690
West Palm Beach FL Public Service Tax Rev. 6.125% 3/1/2002 (1)(Prere. 1,560 1,632
----------
794,105
----------
NONINSURED (8.1%)
Collier County FL Health Fac. Auth. Hosp. Rev. VRDO
(Cleveland Clinic Obligated Group) 3.70% 12/2/1999 5,500 5,500
Florida Board of Educ. Rev. 5.00% 6/1/2012 6,000 5,821
Florida Board of Educ. Rev. 6.75% 6/1/2001 (Prere.) 2,000 2,092
Florida Housing Finance Agency 6.25% 7/1/2011 1,415 1,444
Florida Housing Finance Agency 6.35% 7/1/2014 1,795 1,831
Gainesville FL Util. System Rev. 6.50% 10/1/2012 1,500 1,679
Hillsborough County FL IDA PCR VRDO
(Tampa Electric Co. Project) 3.80% 12/2/1999 2,550 2,550
Jacksonville FL Electric Auth. Rev. 5.00% 10/1/2023 14,940 13,074
Jacksonville FL Electric Auth. Rev. 5.10% 10/1/2032 4,445 3,841
Jacksonville FL PCR VRDO (Florida Power & Light Co. Project) 3.80% 12/2/1999 2,100 2,100
Lakeland FL Electric & Water Rev. 6.05% 10/1/2014 2,000 2,123
Lakeland FL Electric & Water Rev. 6.55% 10/1/2009 4,000 4,454
Orlando FL Util. Comm. Rev. 6.75% 10/1/2017 11,700 13,084
St. Lucie County FL PCR VRDO (Florida Power & Light Co.) 3.80% 12/2/1999 8,835 8,835
Tallahassee FL Consolidated Util. System Rev. 6.20% 10/1/2019 2,000 2,044
----------
70,472
----------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C>
TOTAL MUNICIPAL BONDS
(Cost $879,168) 864,577
- -----------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.1%)
- -----------------------------------------------------------------------------------------------------
Other Assets--Note B 12,665
Liabilities (2,632)
-------------------
10,033
- -----------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------
Applicable to 81,736,285 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $874,610
=====================================================================================================
NET ASSET VALUE PER SHARE $10.70
=====================================================================================================
*See Note A in Notes to Financial Statements.
For key to abbreviations and other references, see below.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------
Paid in Capital $891,994 $10.91
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (2,793) (.03)
Unrealized Depreciation--Note F (14,591) (.18)
- -----------------------------------------------------------------------------------------------------
NET ASSETS $874,610 $10.70
=====================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
COP--Certificate of Participation.
GO--General Obligation.
IDA--Industrial Development Authority Bond.
PCR--Pollution Control Revenue.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
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.
15
<PAGE>
STATEMENT OF OPERATIONS
This Statement shows interest earned by the 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.
- --------------------------------------------------------------------------------
FLORIDA INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30, 1999
(000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Interest $ 44,794
--------
Total Income 44,794
--------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 111
Management and Administrative 1,271
Marketing and Distribution 159
Custodian Fees 9
Auditing Fees 8
Shareholders' Reports 9
Trustees' Fees and Expenses 1
--------
Total Expenses 1,568
Expenses Paid Indirectly--Note C (9)
--------
Net Expenses 1,559
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 43,235
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (1,604)
Futures Contracts 3,424
- --------------------------------------------------------------------------------
REALIZED NET GAIN 1,820
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (63,175)
Futures Contracts 648
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (62,527)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(17,472)
================================================================================
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how the 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>
- ----------------------------------------------------------------------------------------------------------
FLORIDA INSURED LONG-TERM
TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
--------------------------
<S> <C> <C>
1999 1998
(000) (000)
- ----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 43,235 $ 34,425
Realized Net Gain 1,820 8,021
Change in Unrealized Appreciation (Depreciation) (62,527) 11,900
--------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (17,472) 54,346
DISTRIBUTIONS
Net Investment Income (43,235) (34,425)
Realized Capital Gain (6,916) --
--------------------------
Total Distributions (50,151) (34,425)
--------------------------
CAPITAL SHARE TRANSACTIONS1
Issued 362,954 351,784
Issued in Lieu of Cash Distributions 33,301 22,335
Redeemed (271,538) (193,595)
--------------------------
Net Increase from Capital Share Transactions 124,717 180,524
- ----------------------------------------------------------------------------------------------------------
Total Increase 57,094 200,445
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 817,516 617,071
--------------------------
End of Year $874,610 $817,516
==========================================================================================================
1Shares Issued (Redeemed)
Issued 32,294 30,858
Issued in Lieu of Cash Distributions 2,985 1,958
Redeemed (24,377) (17,015)
--------------------------
Net Increase in Shares Outstanding 10,902 15,801
==========================================================================================================
</TABLE>
17
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the 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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FLORIDA INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $11.54 $11.21 $11.07 $10.94 $ 9.61
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .543 .551 .561 .550 .560
Net Realized and Unrealized Gain (Loss) on Investments (.749) .330 .140 .130 1.330
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (.206) .881 .701 .680 1.890
DISTRIBUTIONS
Dividends from Net Investment Income (.543) (.551) (.561) (.550) (.560)
Distributions from Realized Capital Gains (.091) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (.634) (.551) (.561) (.550) (.560)
===================================================================================================================
NET ASSET VALUE, END OF YEAR $10.70 $11.54 $11.21 $11.07 $10.94
===================================================================================================================
TOTAL RETURN -1.87% 8.03% 6.54% 6.45% 20.05%
===================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $875 $818 $617 $515 $423
Ratio of Total Expenses to Average Net Assets 0.18% 0.20% 0.19% 0.19% 0.21%
Ratio of Net Investment Income to Average Net Assets 4.88% 4.83% 5.10% 5.09% 5.33%
Portfolio Turnover Rate 18% 21% 13% 19% 20%
===================================================================================================================
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Vanguard Florida Insured Long-Term Tax-Exempt Fund is registered under the
Investment Company Act of 1940 as an open-end investment company, or mutual
fund. The 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 Florida.
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: Bonds, and temporary cash investments acquired over
60 days to maturity, are valued using the latest bid prices or using valuations
based on a matrix system (which considers such factors as security prices,
yields, maturities, and ratings), both as furnished by independent pricing
services. Other temporary cash investments are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued by methods deemed by the Board of Trustees to
represent fair value.
2. Federal Income Taxes: The fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. Futures Contracts: The fund may use Municipal Bond Index, U.S. Treasury
Bond, and U.S. Treasury Note futures contracts, with the objectives of enhancing
returns, managing interest rate risk, maintaining liquidity, diversifying credit
risk, and minimizing transaction costs. The fund may purchase or sell futures
contracts instead of bonds to take advantage of pricing differentials between
the futures contracts and the underlying bonds. The fund may also seek to take
advantage of price differences among bond market sectors by simultaneously
buying futures (or bonds) of one market sector and selling futures (or bonds) of
another sector. Futures contracts may also be used to simulate a fully invested
position in the underlying bonds while maintaining a cash balance for liquidity.
The primary risks associated with the use of futures contracts are imperfect
correlation between changes in market values of bonds held by the fund and the
prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. The aggregate principal amounts of the contracts are not recorded in the
financial statements. Fluctuations in the value of the contracts are recorded in
the Statement of Net Assets as an asset (liability) and in the Statement of
Operations as unrealized appreciation (depreciation) until the contracts are
closed, when they are recorded as realized futures gains (losses).
4. Distributions: Distributions from net investment income are declared
daily and paid on the first business day of the following month. Annual
distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
5. Other: Security transactions are accounted for on the date securities
are bought or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Premiums and
original issue discounts are amortized and accreted, respectively, to interest
income over the lives of the respective securities.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the fund under methods approved by the board of
Trustees. The fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At November 30, 1999, the fund had
contributed capital of $178,000 to Vanguard (included in Other Assets),
representing 0.02% of the fund's net assets and 0.2% of Vanguard's
capitalization. The fund's Trustees and officers are also Directors and officers
of Vanguard.
C. The fund's custodian bank has agreed to reduce its fees when the fund
maintains cash on deposit in the non-interest-bearing custody account. For the
year ended November 30, 1999, custodian fee offset arrangements reduced expenses
by $9,000.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. During the year ended November 30, 1999, the fund purchased $262,744,000 of
investment securities and sold $154,187,000 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 fund had realized losses totaling
$2,620,000 through November 30, 1999, which are deferred for tax purposes and
increase the amount of net unrealized depreciation on investment securities for
tax purposes (see Note F). At November 30, 1999, the fund had available capital
losses of $173,000 to offset future net capital gains through November 30, 2007.
F. At November 30, 1999, net unrealized depreciation of investment securities
for federal income tax purposes was $17,211,000, consisting of unrealized gains
of $9,971,000 on securities that had risen in value since their purchase and
$27,182,000 in unrealized losses on securities that had fallen in value since
their purchase. (See Note E).
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Vanguard Florida Insured Long-Term Tax-Exempt Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard Florida Insured Long-Term Tax-Exempt Fund (the "Fund") at November 30,
1999, the results of its operations for the year then ended, the changes in its
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 Fund's 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, 1999 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, 2000
21
<PAGE>
================================================================================
SPECIAL 1999 TAX INFORMATION (UNAUDITED) FOR
VANGUARD FLORIDA INSURED LONG-TERM TAX-EXEMPT FUND
This information for the fiscal year ended November 30, 1999, is included
pursuant to provisions of the Internal Revenue Code.
The fund distributed $6,906,000 as capital gain dividends (from net
long-term capital gains) to shareholders in December 1998, all of which is
designated as a 20% rate gain distribution.
The fund designates 100% of its income dividends as exempt-interest
dividends.
================================================================================
22
<PAGE>
THE VANGUARD FAMILY OF FUNDS
STOCK FUNDS
- --------------------------------------------------
500 Index Fund
Aggressive Growth Fund
Capital Opportunity Fund
Convertible Securities Fund
Emerging Markets Stock Index Fund
Energy Fund Equity Income Fund
European Stock Index Fund
Explorer Fund
Extended Market Index Fund*
Global Equity Fund
Gold and Precious Metals Fund
Growth and Income Fund
Growth Index Fund*
Health Care Fund
Institutional Index Fund*
International Growth Fund
International Value Fund
Mid-Cap Index Fund*
Morgan Growth Fund
Pacific Stock Index Fund
PRIMECAP Fund
REIT Index Fund
Selected Value Fund
Small-Cap Growth Index Fund*
Small-Cap Index Fund*
Small-Cap Value Index Fund*
Tax-Managed Capital Appreciation Fund*
Tax-Managed Growth and Income Fund*
Tax-Managed International Fund*
Tax-Managed Small-Cap Fund*
Total International Stock Index Fund
Total Stock Market Index Fund*
U.S. Growth Fund
Utilities Income Fund
Value Index Fund*
Windsor Fund
Windsor II Fund
BALANCED FUNDS
- --------------------------------------------------
Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy Conservative Growth Fund
LifeStrategy Growth Fund
LifeStrategy Income Fund
LifeStrategy Moderate Growth Fund
STAR Fund
Tax-Managed Balanced Fund
Wellesley Income Fund
Wellington Fund
BOND FUNDS
- --------------------------------------------------
Admiral Intermediate-Term
Treasury Fund A
dmiral Long-Term Treasury Fund
Admiral Short-Term Treasury Fund
GNMA Fund
High-Yield Corporate Fund
High-Yield Tax-Exempt Fund
Insured Long-Term Tax-Exempt Fund
Intermediate-Term Bond Index Fund
Intermediate-Term Corporate Fund
Intermediate-Term Tax-Exempt Fund
Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund
Long-Term Bond Index Fund
Long-Term Corporate Fund
Long-Term Tax-Exempt Fund
Long-Term Treasury Fund
Preferred Stock Fund
Short-Term Bond Index Fund
Short-Term Corporate Fund*
Short-Term Federal Fund
Short-Term Tax-Exempt Fund
Short-Term Treasury Fund
State Tax-Exempt Bond Funds
(California, Florida, Massachusetts, New Jersey,
New York, Ohio, Pennsylvania)
Total Bond Market Index Fund*
MONEY MARKET FUNDS
- --------------------------------------------------
Admiral Treasury Money Market Fund
Federal Money Market Fund
Prime Money Market Fund*
State Tax-Exempt Money Market Funds
(California, New Jersey,
New York, Ohio, Pennsylvania)
Tax-Exempt Money Market Fund
Treasury Money Market Fund
VARIABLE ANNUITY PLAN
- --------------------------------------------------
Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High-Grade Bond Portfolio
High Yield Bond Portfolio
International Portfolio
Mid-Cap Index Portfolio
Money Market Portfolio
REIT Index Portfolio
Short-Term Corporate Portfolio
Small Company Growth Portfolio
*Offers Institutional Shares.
For information about Vanguard funds and our variable annuity plan, including
charges and expenses, obtain a prospectus from The Vanguard Group, P.O. Box
2600, Valley Forge, PA 19482-2600. Read it carefully before you invest or send
money.
23
<PAGE>
THE PEOPLE WHO GOVERN YOUR FUND
The Trustees of your mutual fund are there to see that the fund is operated and
managed in your best interests since, as a shareholder, you are part owner of
the fund. Your fund Trustees also serve on the Board of Directors of The
Vanguard Group, which is owned by the funds and exists solely to provide
services to them on an at-cost basis.
The majority of Vanguard's board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.
Among board members' responsibilities are selecting investment advisers for
the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new Trustees/Directors; and electing
Vanguard officers.
The list below provides a brief description of each Trustee's professional
affiliations. Noted in parentheses is the year in which the Trustee joined the
Vanguard Board.
TRUSTEES
JOHN C. BOGLE (1967) Founder, Senior Chairman of the Board, and Director/Trustee
of The Vanguard Group, Inc., and each of the investment companies in The
Vanguard Group.
JOHN J. BRENNAN (1987) Chairman of the Board, Chief Executive Officer, and
Director/Trustee of The Vanguard Group, Inc., and each of the investment
companies in The Vanguard Group.
JOANN HEFFERNAN HEISEN (1998) Vice President, Chief Information Officer, and a
member of the Executive Committee of Johnson & Johnson; Director of Johnson &
JohnsonoMerck Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.
BURTON G. MALKIEL (1977) Chemical Bank Chairman's Professor of Economics,
Princeton University; Director of Prudential Insurance Co. of America, Banco
Bilbao Gestinova, Baker Fentress & Co., The Jeffrey Co., and Select Sector SPDR
Trust.
ALFRED M. RANKIN, Jr. (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.
JOHN C. SAWHILL (1991) President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co. and
President of New York University; Director of Pacific Gas and Electric Co.,
Procter & Gamble Co., NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, Jr. (1971) Retired Chairman of Nabisco Brands, Inc.; retired
Vice Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc., and
Kmart Corp.
J. LAWRENCE WILSON (1985) Retired Chairman of Rohm & Haas Co.; Director of
Cummins Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY Secretary; Managing
Director and Secretary of The Vanguard Group,
Inc.; Secretary of each of the investment companies
in The Vanguard Group.
THOMAS J. HIGGINS Treasurer; Principal of The
Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
VANGUARD MANAGING DIRECTORS
R. GREGORY BARTON Legal Department.
ROBERT A. DISTEFANO Information Technology.
JAMES H. GATELY Individual Investor Group.
KATHLEEN C. GUBANICH Human Resources.
IAN A. MACKINNON Fixed Income Group.
F. WILLIAM MCNABB, III Institutional Investor Group.
MICHAEL S. MILLER Planning and Development.
RALPH K. PACKARD Chief Financial Officer.
GEORGE U. SAUTER Core Management Group.
<PAGE>
ABOUT OUR COVER
Our cover art, depicting HMS Vanguard at sea, is a
reproduction of Leading the Way, a 1984 work created
and copyrighted by noted naval artist Tom Freeman,
of Forest Hill, Maryland.
All comparative mutual fund data are from Lipper Inc. or Morningstar,
Inc., unless otherwise noted.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500,"
and "500" are trademarks of The McGraw-Hill Companies, Inc.
Frank Russell Company is the owner of trademarks and copyrights
relating to the Russell Indexes. "Wilshire 4500" and "Wilshire 5000"
are trademarks of Wilshire Associates.
[SHIP]
[THE VANGUARD GROUP LOG]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds'
shareholders. It may not be distributed
to prospective investors unless it
is preceded or accompanied by the
current fund prospectus.
Q180-01/25/2000
(C) 2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
