<PAGE> 1
VANGUARD
ADMIRAL FUNDS
VANGUARD ADMIRAL TREASURY
MONEY MARKET FUND
VANGUARD ADMIRAL SHORT-TERM
TREASURY FUND
VANGUARD ADMIRAL INTERMEDIATE-TERM
TREASURY FUND
VANGUARD ADMIRAL LONG-TERM
TREASURY FUND
[PHOTO]
SEMIANNUAL
REPORT
JULY 31, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 9,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients. Our report cover pays homage to three anniversaries, each
of great significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto-- "Leading the way"--serves as a guiding principle
for our company.
- - The 100th birthday, on July 23, 1998, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group. Mr.
Morgan was friend and mentor to Vanguard founder John C. Bogle, and helped to
shape the standards and business principles that Mr. Bogle laid down for
Vanguard at its beginning nearly 25 years ago: a stress on balanced,
diversified investments; insistence on fair dealing and candor with clients;
and a focus on long-term investing. To our great regret, Mr. Morgan died on
September 2, 1998.
- - The 70th anniversary, on December 28, 1998, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[GRAPHIC]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
5
REPORT FROM
THE ADVISER
7
PERFORMANCE SUMMARIES
9
FUND PROFILES
11
FINANCIAL STATEMENTS
16
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
Bond prices slid during the first half of Vanguard Admiral Funds' fiscal year
amid growing concerns that strong economic growth would touch off higher
inflation. In this difficult environment for fixed-income investments, two of
our four funds registered negative returns for the six months ended July 31,
1999. Our returns ranged from +2.3% for our Treasury Money Market Fund to -7.9%
for our Long-Term Treasury Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JULY 31, 1999
- ------------------------------------------------------
<S> <C>
ADMIRAL TREASURY MONEY MARKET FUND +2.3%
(SEC 7-Day Annualized Yield: 4.56%)
Average Treasury Money Market Fund +2.0
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index +2.3
- ------------------------------------------------------
ADMIRAL SHORT-TERM TREASURY FUND +0.1%
Average Short-Term Treasury Fund +0.2
Lehman Brothers 1-5 Year
U.S. Treasury Bond Index +0.3
- ------------------------------------------------------
ADMIRAL INTERMEDIATE-TERM
TREASURY FUND -4.1%
Average Intermediate-Term
Treasury Fund -2.8
Lehman Brothers 5-10 Year
U.S. Treasury Bond Index -4.3
- ------------------------------------------------------
ADMIRAL LONG-TERM TREASURY FUND -7.9%
Average Long-Term Treasury Fund -5.4
Lehman Brothers Long
U.S. Treasury Bond Index -7.9
- ------------------------------------------------------
</TABLE>
The table at right presents the six-month total return (capital change
plus reinvested dividends) for each fund compared with those of its average
mutual fund competitor and an unmanaged bond market index.
Details on each fund, including per-share net asset values, income
dividends, and any capital gains distributions, are presented in the table that
follows this letter. The table also lists the annualized yields of each fund,
which on July 31 ranged from 4.56% for our Money Market Fund to 6.27% for our
Long-Term Fund.
We believe that any semiannual review of bond fund returns should also
include a look at a full year's interest income. That's because semiannual
returns for bond funds account for only half of the year's interest income,
whereas price changes occur immediately in response to changes in interest
rates. Over long periods, however, the price effects of fluctuating interest
rates tend to be offsetting, so interest income accounts for virtually all of
the total return on a bond fund. The table on page 2 presents each fund's return
for the past twelve months, divided into its income and capital components.
The impact of the rise in interest rates over the past twelve
months--particularly on the Long-Term Treasury Fund--is clearly illustrated. As
you know, bond prices and bond yields move in opposite directions. And prices of
long-term bonds suffer most when interest rates rise, just as they benefit most
from a decline in rates. Our Treasury Money Market Fund maintained its share
price of $1, as is expected but not guaranteed. For further information on
capital and income returns for each fund, see the Performance Summaries
beginning on page 9.
1
<PAGE> 4
THE PERIOD IN REVIEW
The U.S. economy's impressive expansion, a strong showing in corporate profits,
and a general improvement in business conditions around the world pushed stock
prices higher during the six months ended July 31.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
COMPONENTS OF TOTAL RETURNS
TWELVE MONTHS ENDED
JULY 31, 1999
-------------------------------
INCOME CAPITAL TOTAL
ADMIRAL TREASURY FUND RETURN RETURN RETURN
- ------------------------------------------------------------
<S> <C> <C> <C>
Money Market +4.8% 0.0% +4.8%
Short-Term +5.3 -1.0 +4.3
Intermediate-Term +5.6 -3.2 +2.4
Long-Term +5.5 -5.8 -0.3
- ------------------------------------------------------------
</TABLE>
But as is often the case, good news about economic growth was bad news
for the bond market. Throughout the period, bond investors grew increasingly
concerned that factors such as low unemployment (which puts pressure on
employers to raise wages) and a rebound in commodity prices (which can increase
the prices of finished goods) would push up overall inflation. Bond investors
are particularly attuned to hints of higher prices because inflation eats away
at the purchasing power of future interest and principal payments.
Yields of fixed-income securities moved higher across the board during
the half-year. Early in the period, the Federal Reserve Board sent several
signals that it was prepared to act swiftly to head off higher inflation. Then
on June 30, it hiked its target for short-term interest rates by 25 basis points
(0.25 percentage point), an action that typically provokes rate increases for
other maturities as well. The yield of the benchmark 30-year U.S. Treasury bond
increased more than a full percentage point on balance during the half-year,
beginning the period at 5.09% and ending it at 6.10%. The rise in the yield of
the 10-year Treasury bond was even more significant. The 10-year bond ended the
period at 5.90%--fully 125 basis points higher than its starting point. At the
short end of the spectrum, the yield of the 3-month T-bill rose on balance from
4.45% to 4.75%.
The Lehman Aggregate Bond Index, an unmanaged measure of the entire U.S.
bond market, provided a return of -2.5% for the six months.
The U.S. stock market, meanwhile, advanced broadly. The Wilshire 5000
Total Market Index, which tracks the entire U.S. stock market, was up +4.4%
during the half-year. Small-capitalization stocks, which returned +4.9% (as
measured by the Russell 2000 Index), slightly outperformed large-caps, which
gained +4.5% (as measured by the Standard & Poor's 500 Index). The market's gain
was not straight up, however. The Wilshire 5000 Index declined in three of the
six months, including a -3.1% slide in July.
PERFORMANCE OVERVIEW
During the half-year ended July 31, not only were bond returns disappointing
overall but the returns of three of the four Vanguard Admiral Funds fell short
of the average returns of similar mutual funds. Our TREASURY MONEY MARKET FUND
earned the highest return of the four--gaining +2.3% for the period--and was the
only one to outperform its peers, beating the +2.0% earned by the average
Treasury money market fund.
Our SHORT-TERM TREASURY FUND landed barely in positive territory with a
six-month total return of +0.1%, a hair behind the +0.2% return of the average
short-term Treasury fund. The two other Admiral funds, which registered negative
returns for the period, trailed their peers by wider margins. The
INTERMEDIATE-TERM TREASURY FUND returned -4.1%, versus a -2.8% return for the
average competing Treasury fund. Our LONG-TERM TREASURY FUND had a six-month
total return of -7.9%, well behind the -5.4% average return of comparable funds.
2
<PAGE> 5
The explanation for the shortfall of our Intermediate-Term and Long-Term
Funds is straightforward: Their average maturities are significantly longer than
those of their average peers. For example, the average weighted maturity of our
Long-Term Fund is 20 years, while the average maturity of its comparative group
is just over 15 years. As noted earlier, longer maturities mean higher yields,
but also an increased sensitivity to changes in interest rates.
It's important to understand that this distinction works both ways. When
interest rates are declining--as they have been for the better part of the past
decade--our funds have an advantage over their average peers. And for long-term
investors who are not concerned with interim price fluctuations, a rise in rates
can be good news. Overall, the yields of our funds as of July 31 were about a
full percentage point higher than six months ago.
Our funds fared well versus their unmanaged indexes during the six
months, with one fund outpacing its index, two matching their benchmarks, and
one falling short. This accomplishment is notable because our funds incur
expenses that the indexes do not. However, we recognize that beating or matching
an index is small consolation in periods when our returns are negative or barely
positive.
We believe that our policy of maintaining longer maturities will pay off
for shareholders because longer maturities normally provide higher yields, and
higher yields are the key to higher long-term returns. What is more, our funds
are aided in their quest to provide superior yields by their extremely low
expenses. Each of our funds has an annualized expense ratio (expenses as a
percentage of average net assets) of 0.15%. The average expense ratios of our
comparative groups run from 0.59% for short-term Treasury funds to 0.96% for
long-term Treasury funds. This difference gives us a remarkable cost advantage
of as much as 81 basis points (0.81 percentage point), holding quality and
maturity constant. To garner such an advantage in the bond fund field is,
finally, the key to our performance successes.
IN SUMMARY
During times when interest rates are rising, investors who take a short-term
view of the financial markets can find it difficult to justify a place for bonds
in their investment programs. But those who are investing for the long haul
understand that the benefits of bonds--diversification and compounded interest
income--can be substantial. That's why we remain steadfast in our belief that
creating and maintaining a balanced investment program of stock funds, bond
funds, and short-term reserves tailored to your goals, time horizon, and
tolerance for risk is the surest route to long-term investment success.
We look forward to reporting to you on the full fiscal year in our 2000
annual report six months hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
August 17, 1999
3
<PAGE> 6
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PERIODS ENDED JULY 31, 1999
PER SHARE SIX MONTHS TWELVE MONTHS SEC
--------------------- ---------------------- ---------------------- 30-DAY
JAN. 31, JULY 31, INCOME CAPITAL INCOME CAPITAL ANNUALIZED
ADMIRAL TREASURY FUND 1999 1999 DIVIDENDS GAINS DIVIDENDS GAINS YIELD
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market $ 1.00 $ 1.00 $0.022 -- $0.047 -- 4.56%*
Short-Term 10.22 9.96 0.258 $0.017 0.527 $0.055 5.61
Intermediate-Term 10.94 10.15 0.301 0.042 0.611 0.050 6.08
Long-Term 11.72 10.38 0.316 0.103 0.640 0.150 6.27
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*7-day yield.
4
<PAGE> 7
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JULY 31, 1999
[PHOTO]
An improving global economy was the backdrop for generally higher stock prices
but lower bond prices during the six months ended July 31.
A powerful expansion of the U.S. economy--which is by far the world's
largest--attracted record levels of imported products, helping foreign economies
to begin recovering from recessions. Confidence grew that global economic
activity was likely to be solid, if unspectacular, throughout 1999, with further
gains expected in 2000. This was a marked change in sentiment from autumn 1998,
when many analysts feared that economic troubles in Asia, Latin America, and
Russia would eventually weaken even the robust U.S. economy. The turnabout was
due, in part, to actions by the Federal Reserve Board and other central banks to
ease monetary policy to foster growth and restore confidence to financial
markets.
As economic engines revved up during 1999, market interest rates rose
steadily. The Fed tapped the brakes on June 30, when it acted to boost
short-term interest rates by 0.25 percentage point. The move clearly signaled
that the Fed was more concerned about the danger of inflation than any risk of
an economic slowdown.
U.S. STOCK MARKETS
Stock prices rose during the half-year, largely because investors' expectations
for improved corporate earnings outweighed their concerns about rising interest
rates. Companies reporting higher-than-expected earnings outnumbered those with
lower-than-expected earnings, and analysts raised estimates for overall
corporate profits in 1999 and 2000. The total market, as measured by the
Wilshire 5000 Index, rose 4.4% during the six months ended July 31, while the
S&P 500 Index, a yardstick for large-capitalization stocks, gained 4.5%.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JULY 31, 1999
-----------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 4.5% 20.2% 26.2%
Russell 2000 Index 4.9 7.4 14.4
Wilshire 5000 Index 4.4 18.3 24.1
MSCI EAFE Index 7.5 10.0 8.9
- --------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -2.5% 2.5% 7.3%
Lehman 10 Year Municipal Bond Index -2.6 2.8 6.6
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.3 4.7 5.2
- --------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.5% 2.1% 2.4%
- --------------------------------------------------------------------------------
</TABLE>
*Annualized.
Although stock returns seemed modest compared with the huge gains of
recent years, they were in line with historical norms and were impressive in
light of the rise in interest rates. Higher rates hurt stock prices because many
investors use current interest rates to discount the value of a stock's
projected earnings and dividends: the higher the rate used to discount them, the
lower the present value of future earnings and dividends.
Within the stock market, leadership changed during the period. Value
stocks-- characterized by below-average share prices in relation to earnings,
dividends, and book
5
<PAGE> 8
value--led the market's advance after having lagged growth stocks for most of
the past five years. Value stocks within the S&P 500 gained 8.3% for the six
months, while the index's growth stocks gained just 1.3%. Predominantly
value-stock industries such as energy, materials & processing, and machinery
were the big gainers during the half-year, buoyed by higher demand and prices
for oil and a number of other commodities. The worst-performing sectors were
health care (-7.6%) and consumer staples (-6.2%), both home to some high-profile
growth stocks that had infatuated investors until recently.
Small-cap stocks, as measured by the Russell 2000 Index, gained 4.9% for
the half-year, marginally better than the return on large stocks. Even that
small victory is noteworthy, given that the Russell 2000's cumulative return
over the past three years (46.6%) lags that of the S&P 500 Index (118.1%) by
more than 70 percentage points.
U.S. BOND MARKETS
The rapid economic expansion that boosted prospects for stock prices made bond
investors wary. Although inflation was well-behaved--consumer prices rose 1.5%
for the six months and 2.1% for the twelve months ended July 31--both investors
and the Fed's policymakers were looking ahead, not behind. The concern is that
the economy is becoming overheated; inflation-adjusted gross domestic product
during the second quarter was up 5.4% from a year earlier. Too-rapid expansion
might yet trigger significant increases in wages and overall prices, many fear.
Indeed, thanks to high employment and rising wages, total U.S. wage and salary
income in June 1999 was 6.5% higher than in June 1998. Unless productivity--the
amount workers produce per hour--continues to rise at very rapid rates, such
wage growth could cause companies to boost prices for products and services.
U.S. Treasury bond yields rose by roughly 1 percentage point--a hefty
boost for a six-month period. The yield of the 30-year Treasury bond rose 101
basis points, to 6.10% on July 31 from 5.09% on January 31. The yield of the
10-year Treasury--a benchmark especially for mortgage rates--rose 125 basis
points, to 5.90% from 4.65%. Money market rates didn't rise as far: Yields on
3-month T-bills increased on balance by 30 basis points, to 4.75% on July 31.
Bond prices, which move in the opposite direction from interest rates, fell. The
benchmark for the overall taxable bond market, the Lehman Aggregate Bond Index,
fell 2.5% on a total-return basis, as interest income of about 3.0% for the six
months was more than offset by a 5.5% average decline in bond prices.
INTERNATIONAL STOCK MARKETS
Stock prices in Japan and many emerging markets rebounded sharply from steep
losses in 1997 and 1998, as investors reckoned that these nations' economies
were finally on the mend. In Europe, stock prices were modestly higher in
local-currency terms but slightly negative for U.S. investors because of the
U.S. dollar's gains against European currencies. (Returns from abroad are
diminished when the dollar's value rises against other currencies, and augmented
when the dollar falls in value.)
Overall, the developed markets outside the United States gained 7.5% in
U.S.-dollar terms, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index. The Pacific region was up 27.8% in
local-currency terms and 29.5% for U.S. investors, because the Japanese yen
gained against the dollar. Europe, which accounts for the lion's share of EAFE's
market capitalization, was up 3.7% in local currencies. But in U.S. dollars, the
return from European stocks was -0.8% because of weakness in European
currencies. The MSCI Select Emerging Markets Free Index shot up 30.9%, led by
gains of more than 60% in Indonesia, Singapore, and Turkey.
6
<PAGE> 9
REPORT FROM THE ADVISER
[PHOTO]
Bond returns were generally negative during the six months ended July 31, the
first half of the fiscal year for Vanguard Admiral Funds. Interest rates rose by
about 1 percentage point during the half-year, and the resulting fall in bond
prices more than offset interest earned. Short-term bonds roughly broke even,
but returns for intermediate- and long-term bonds, whose prices are more
sensitive to changing interest rates, ranged from about -3% to about -8%. Our
three Admiral bond funds produced returns that reflected their average
maturities, and the Admiral Treasury Money Market Fund produced a return of
2.3%.
The forces behind the rise in interest rates during the half-year are
essentially the reverse of those that roiled global financial markets in the
latter part of 1998. At that time, the Federal Reserve Board lowered interest
rates to jump-start the capital markets after they had "seized up" in response
to Russia's default on its debts, hedge fund liquidations, and other crises.
Fearful that poorly functioning markets would cut off the flow of capital that
sustains economic growth, the Fed engineered three interest rate reductions that
encouraged shell-shocked investors to buy. By the start of our new fiscal year
in February, it was becoming clear that the tonic of lower rates had worked and
that the yield premiums required to induce investors to assume credit,
prepayment, and liquidity risks had contracted.
For the bond market, the old phrase "be careful what you wish for" was
about to prove its truthfulness. Propelled by strong wage and employment growth
and rapidly accumulating wealth from stock investments, consumer spending surged
and soon had the economy firing on all cylinders. The housing sector, a catalyst
for consumption, was especially strong. In February, Federal Reserve Chairman
Alan Greenspan testified that the reduced interest rates of 1998 might no longer
be appropriate in an environment of restored confidence and strong economic
expansion. With productivity growth running above 2% (a high rate by historical
standards, although productivity is notoriously hard to measure with any
precision), Chairman Greenspan had in recent years experimented with letting the
economy find the upper limits of noninflationary growth. However, he recently
indicated that he thought those limits might be at hand--that the shrinking
supply of available workers now threatened to push up wages and prices. In his
view, price stability is the key to sustained economic growth. The Fed therefore
acted to preempt inflation by raising short-term interest rates 0.25 percentage
point on June 30. The markets, implicitly forecasting future events, have
factored in one or possibly two more rate hikes in the next three months or so.
In May, risk premiums ceased to narrow for fixed-income securities other
than Treasuries, and the spreads between yields on these securities and on
Treasuries have since dramatically widened. In relation to Treasury yields, the
yields of corporate, government agency, asset-backed, and mortgage-backed
securities are now nearly as high as or, in some cases, higher than they were
during the financial markets gridlock in autumn 1998. Last year, spreads widened
because of investors' fear of defaults on debts of emerging-
7
<PAGE> 10
market countries or overextended hedge funds. Today's wide spreads, by contrast,
stem from a large bulge in supply. Many bond issuers have been trying to meet
all their funding needs by the third quarter, in case Y2K concerns make markets
less liquid later in the year. This is problematic, because investors had
already bought plenty of these bonds when they offered attractively wide yields
relative to Treasuries in the wake of the 1998 crisis.
While the current wide spreads are very attractive by historic standards,
many investors have acquired all the non-Treasury bonds they care to hold and
are concerned with maintaining some degree of liquidity themselves. Further
aggravating this situation is the increasing reluctance of securities dealers to
commit their capital to market-making activities. With dealers unwilling to hold
large inventories of securities, newly issued bonds have to be priced
cheap--offering high yields--to attract the marginal buyer.
In the face of recent volatility and uncertainty, we have applied some
consistent themes in managing the Vanguard Admiral Funds. Anticipating rising
rates, we have been shading the interest-rate sensitivity of the Admiral
Short-Term, Intermediate-Term, and Long-Term Treasury Funds toward the lower end
of our neutral duration policies. While the funds' maturities remain true to
their names, this slight shortening of maturities marginally cushions the
negative impact of rising rates on share prices. We also are investing a larger
portion of the three bond funds' assets in U.S. government agency securities (as
permitted by the prospectus) to capture the added income offered by the wide
spreads between yields on agency and Treasury bonds. (The Admiral Treasury Money
Market Fund remains fully invested in Treasury securities.)
While rising rates have diminished bond returns, Treasury securities have
held their value better than most other types of bonds. The various dislocations
of the fixed-income market in the past 12 months have given many investors a
renewed appreciation for the safety and liquidity of Treasuries. We will
endeavor to enhance these qualities with our commitment to disciplined portfolio
management at the lowest possible cost.
Ian A. MacKinnon, Managing Director
Robert F. Auwaerter, Principal
John W. Hollyer, Principal
David R. Glocke, Principal
Vanguard Fixed Income Group
August 12, 1999
INVESTMENT PHILOSOPHY
The funds reflect a belief that investors who want the unparalleled credit
quality of U.S. Treasury securities should be able to select portfolios with
maturities appropriate to their needs.
8
<PAGE> 11
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the funds. An investment in a
money market fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the fund seeks to preserve
the value of your investment at $1 per share, it is possible to lose money by
investing in the fund. Note that income returns can fluctuate, as can the share
price of the Admiral Short-Term Treasury Fund. An investor's shares in this
fund, when redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
ADMIRAL TREASURY MONEY MARKET FUND
TOTAL INVESTMENT RETURNS: DECEMBER 14, 1992-JULY 31, 1999
- -----------------------------------------------------------
ADMIRAL TREASURY AVERAGE
MONEY MARKET FUND FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1993 0.0% 0.4% 0.4% 0.4%
1994 0.0 3.0 3.0 2.6
1995 0.0 4.2 4.2 3.8
1996 0.0 5.7 5.7 5.3
1997 0.0 5.2 5.2 4.7
1998 0.0 5.3 5.3 4.8
1999 0.0 5.1 5.1 4.6
2000** 0.0 2.3 2.3 2.0
- -----------------------------------------------------------
</TABLE>
*Average Treasury Money Market Fund.
**Six months ended July 31, 1999.
See Financial Highlights table on page 27 for dividend information for
the past five years.
SEC 7-Day Annualized Yield (7/31/1999): 4.56%
<TABLE>
<CAPTION>
ADMIRAL SHORT-TERM TREASURY FUND
TOTAL INVESTMENT RETURNS: DECEMBER 14, 1992-JULY 31, 1999
- -----------------------------------------------------------
ADMIRAL SHORT-TERM TREASURY FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1993 1.7% 0.7% 2.4% 2.3%
1994 1.0 4.5 5.5 6.1
1995 -4.6 5.2 0.6 -0.1
1996 4.7 6.7 11.4 12.0
1997 -1.9 6.0 4.1 4.1
1998 1.1 6.1 7.2 7.9
1999 1.1 5.6 6.7 7.0
2000** -2.4 2.5 0.1 0.3
- -----------------------------------------------------------
</TABLE>
*Lehman 1-5 Year Treasury Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 28 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- --------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Admiral Treasury Money Market Fund 12/14/1992 4.82% 5.20% 0.00% 4.71% 4.71%
Admiral Short-Term Treasury Fund 12/14/1992 4.66 6.32 0.13 5.61 5.74
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
9
<PAGE> 12
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
ADMIRAL INTERMEDIATE-TERM TREASURY FUND
TOTAL INVESTMENT RETURNS: DECEMBER 14, 1992-JULY 31, 1999
- -----------------------------------------------------------
ADMIRAL INTERMEDIATE-TERM
TREASURY FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1993 2.9% 0.9% 3.8% 3.8%
1994 4.1 5.8 9.9 10.6
1995 -9.4 5.7 -3.7 -4.5
1996 11.7 7.5 19.2 19.6
1997 -5.0 6.3 1.3 1.3
1998 4.2 6.8 11.0 11.7
1999 3.3 6.1 9.4 10.0
2000** -6.9 2.8 -4.1 -4.3
- -----------------------------------------------------------
</TABLE>
*Lehman 5-10 Year Treasury Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 28 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
ADMIRAL LONG-TERM TREASURY FUND
TOTAL INVESTMENT RETURNS: DECEMBER 14, 1992-JULY 31, 1999
- ----------------------------------------------------------
ADMIRAL LONG-TERM TREASURY FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1993 3.0% 1.0% 4.0% 3.8%
1994 8.6 7.3 15.9 16.7
1995 -12.9 6.3 -6.6 -7.5
1996 18.6 8.1 26.7 27.4
1997 -8.1 6.4 -1.7 -1.6
1998 9.8 7.3 17.1 18.3
1999 5.9 6.2 12.1 12.3
2000** -10.6 2.7 -7.9 -7.9
- ----------------------------------------------------------
</TABLE>
*Lehman Long Treasury Index.
**Six months ended July 31, 1999.
See Financial Highlights table on page 29 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999*
- --------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Admiral Intermediate-Term Treasury Fund 12/14/1992 3.05% 7.62% 0.63% 6.30% 6.93%
Admiral Long-Term Treasury Fund 12/14/1992 -0.26 9.44 1.67 6.80 8.47
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
10
<PAGE> 13
FUND PROFILE
ADMIRAL TREASURY MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999. Key elements of this Profile are defined on page 12.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
<S> <C>
Yield 4.6%
Average Maturity 51 days
Average Quality Treasury
Expense Ratio 0.15%*
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ------------------------------------------------------
<S> <C>
Treasury 100.0%
</TABLE>
11
<PAGE> 14
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. U.S. Treasury securities are considered to have the highest credit
quality, with U.S. agency bonds almost equally high.
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 instruments. 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
(Treasury/agency, investment-grade corporate, or below investment-grade).
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.
12
<PAGE> 15
FUND PROFILE
ADMIRAL SHORT-TERM TREASURY FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 12.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
ADMIRAL LEHMAN
SHORT-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 43 5,381
Yield 5.6% 6.7%
Yield to Maturity 5.9% 6.8%
Average Coupon 5.8% 6.8%
Average Maturity 3.2 years 9.0 years
Average Quality Treasury Aaa
Average Duration 2.2 years 5.0 years
Expense Ratio 0.15%** --
Cash Reserves 1.9% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
ADMIRAL LEHMAN
SHORT-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.51 1.00
Beta 0.41 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Under 1 Year 0.8%
1-3 Years 69.3
3-5 Years 22.4
Over 5 Years 7.5
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- -------------------------------------------------------
<S> <C>
AVERAGE MATURITY SHORT
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury 85.4%
Agency 14.6
- -------------------------------------------------------
Total 100.0%
</TABLE>
13
<PAGE> 16
FUND PROFILE
ADMIRAL INTERMEDIATE-TERM TREASURY FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 12.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
ADMIRAL LEHMAN
INTERMEDIATE-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 37 5,381
Yield 6.1% 6.7%
Yield to Maturity 6.3% 6.8%
Average Coupon 7.2% 6.8%
Average Maturity 7.5 years 9.0 years
Average Quality Treasury Aaa
Average Duration 5.3 years 5.0 years
Expense Ratio 0.15%** --
Cash Reserves 2.6% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
ADMIRAL LEHMAN
INTERMEDIATE-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.61 1.00
Beta 1.20 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Under 1 Year 1.0%
1-5 Years 8.0
5-10 Years 87.6
10-20 Years 3.4
20-30 Years 0.0
Over 30 Years 0.0
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- -------------------------------------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury 86.3%
Agency 13.7
- -------------------------------------------------------
Total 100.0%
</TABLE>
14
<PAGE> 17
FUND PROFILE
ADMIRAL LONG-TERM TREASURY FUND
This Profile provides a snapshot of the fund's characteristics as of July 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 12.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
ADMIRAL LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 21 5,381
Yield 6.3% 6.7%
Yield to Maturity 6.4% 6.8%
Average Coupon 7.4% 6.8%
Average Maturity 20.0 years 9.0 years
Average Quality Treasury Aaa
Average Duration 9.9 years 5.0 years
Expense Ratio 0.15%** --
Cash Reserves 3.3% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
- ----------------------------------------------------------
<S> <C>
AVERAGE MATURITY LONG
CREDIT QUALITY TREASURY/AGENCY
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
ADMIRAL LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.68 1.00
Beta 2.01 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ----------------------------------------------------------
<S> <C>
Treasury 87.9%
Agency 12.1
- ----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ----------------------------------------------------------
<S> <C>
Under 1 Year 1.1%
1-5 Years 0.0
5-10 Years 13.1
10-20 Years 34.6
20-30 Years 51.2
Over 30 Years 0.0
- ----------------------------------------------------------
Total 100.0%
</TABLE>
15
<PAGE> 18
FINANCIAL STATEMENTS
JULY 31, 1999 (UNAUDITED)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings including each
security's market value on the last day of the reporting period. Other assets
are added to, and liabilities are subtracted from, the value of Total
Investments to calculate the fund's Net Assets. Finally, Net Assets are divided
by the outstanding shares of the fund to arrive at its share price, or Net Asset
Value (NAV) Per Share.
At the end of the Statement of Net Assets of each fund, you will find a
table displaying the composition of the fund's net assets 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 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*
ADMIRAL TREASURY MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (98.0%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bill 4.669%-4.777% 10/14/1999 $ 100,000 $ 99,042
U.S. Treasury Bill 4.504%-4.564% 8/12/1999 36,625 36,565
U.S. Treasury Bill 4.582% 9/9/1999 113,650 113,092
U.S. Treasury Bill 4.510%-4.595% 9/2/1999 554,720 552,489
U.S. Treasury Bill 4.489%-4.548% 8/19/1999 37,079 36,996
U.S. Treasury Bill 4.701%-4.725% 1/6/2000 165,000 161,667
U.S. Treasury Bill 4.716% 1/13/2000 55,000 53,837
U.S. Treasury Bond 5.625% 11/30/1999 226,305 226,788
U.S. Treasury Note 5.625% 10/31/1999 165,000 165,261
U.S. Treasury Note 5.75% 9/30/1999 122,223 122,403
U.S. Treasury Note 5.875% 8/31/1999 372,489 372,823
U.S. Treasury Note 5.875% 11/15/1999 364,608 365,438
U.S. Treasury Note 6.00% 8/15/1999 1,245,798 1,246,416
U.S. Treasury Note 6.375% 1/15/2000 50,000 50,322
U.S. Treasury Note 6.875% 8/31/1999 587,258 588,236
U.S. Treasury Note 6.875% 3/31/2000 55,000 55,724
U.S. Treasury Note 7.125% 9/30/1999 253,331 254,281
U.S. Treasury Note 7.50% 10/31/1999 754,705 759,305
U.S. Treasury Note 7.75% 11/30/1999 140,000 141,285
U.S. Treasury Note 7.875% 11/15/1999 80,000 80,637
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $5,482,607) 5,482,607
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES--NET (2.0%) $ 112,417
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 5,594,573,727 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $5,595,024
=========================================================================================================================
NET ASSET VALUE PER SHARE $1.00
=========================================================================================================================
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
- -------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in Securities at Value $5,482,607
Receivables for Investment Securities Sold 911,195
Other Assets--Note B 154,332
-----------
Total Assets 6,548,134
-----------
LIABILITIES
Payables for Investment Securities Purchased (920,612)
Other Liabilities (32,498)
-----------
Total Liabilities (953,110)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $5,595,024
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $5,594,574 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 450 --
Unrealized Appreciation -- --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $5,595,024 $1.00
=========================================================================================================================
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
ADMIRAL SHORT-TERM TREASURY FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (98.1%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (83.7%)
U.S. Treasury Inflation-Indexed Note 3.375% 1/15/2007 $ 11,539 $ 11,052
U.S. Treasury Inflation-Indexed Note 3.875% 1/15/2009 34,456 34,004
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 15,165 14,819
U.S. Treasury Note 4.00% 10/31/2000 95,000 93,333
U.S. Treasury Note 5.00% 2/28/2001 122,000 120,983
U.S. Treasury Note 5.125% 8/31/2000 46,000 45,862
U.S. Treasury Note 5.75% 8/15/2003 6,000 5,971
U.S. Treasury Note 5.875% 11/30/2001 42,000 42,159
U.S. Treasury Note 6.125% 12/31/2001 36,600 36,931
U.S. Treasury Note 6.25% 10/31/2001 30,000 30,346
U.S. Treasury Note 6.25% 1/31/2002 99,000 100,204
U.S. Treasury Note 6.50% 8/31/2001 56,200 57,100
U.S. Treasury Note 6.50% 5/31/2002 14,000 14,268
U.S. Treasury Note 6.625% 7/31/2001 127,000 129,291
U.S. Treasury Note 6.625% 4/30/2002 54,000 55,180
U.S. Treasury Note 7.50% 11/15/2001 39,800 41,307
U.S. Treasury Note 7.875% 8/15/2001 20,000 20,833
Banco Nacional de Comercio Exterior
(U.S. Government Guaranteed) 6.475% 5/15/2000 (1) 1,178 1,183
Banco Nacional de Comercio Exterior
(U.S. Government Guaranteed) 8.038% 1/15/2000 (1) 699 706
Bariven, SA Eximbank Guaranteed Export Financing
(U.S. Government Guaranteed) 6.277% 4/15/2001 (1)(3) 3,200 3,199
Eximbank Guaranteed Export Financing
(U.S. Government Guaranteed) 5.73% 1/15/2003 (1)(2) 29,997 29,718
Government Export Trust (U.S. Government Guaranteed) 6.61% 9/15/1999 (1) 300 301
Government Export Trust (U.S. Government Guaranteed) 7.75% 1/1/2000 (1)(2) 600 606
Guaranteed Export Trust (U.S. Government Guaranteed) 7.46% 12/15/2005 (1) 6,783 6,996
Guaranteed Trade Trust (U.S. Government Guaranteed) 6.104% 7/15/2003 (1) 26,667 26,651
Overseas Private Investment Corp. (U.S. Government Guaranteed) 5.10% 6/30/2007 (1) 17,371 16,292
Overseas Private Investment Corp. (U.S. Government Guaranteed) 5.696% 2/1/2005 (1) 6,000 5,856
Overseas Private Investment Corp. (U.S. Government Guaranteed) 5.735% 1/15/2002 (1) 5,417 5,414
Overseas Private Investment Corp. (U.S. Government Guaranteed) 5.76% 6/15/2006 (1) 20,000 19,581
Overseas Private Investment Corp. (U.S. Government Guaranteed) 5.926% 6/15/2005 (1) 11,223 10,997
Private Export Funding Corp. (U.S. Government Guaranteed) 5.73% 1/15/2004 65,950 63,984
Private Export Funding Corp. (U.S. Government Guaranteed) 6.31% 9/30/2004 10,000 9,912
Private Export Funding Corp. (U.S. Government Guaranteed) 8.40% 7/31/2001 6,000 6,265
-----------
1,061,304
-----------
AGENCY BONDS & NOTES (9.4%)
Federal Farm Credit Bank 4.80% 11/6/2003 8,000 7,511
Federal Farm Credit Bank 5.70% 6/18/2003 8,000 7,793
Federal Farm Credit Bank 5.73% 7/28/2003 14,361 13,997
Federal Home Loan Bank 5.575% 9/2/2003 30,000 29,057
Federal Home Loan Bank 5.627% 9/2/2003 13,000 12,615
Federal Home Loan Bank 5.13% 9/15/2003 5,000 4,772
Federal Home Loan Mortgage Corp. 6.30% 6/1/2004 45,000 44,079
-----------
119,824
-----------
MORTGAGE-BACKED SECURITIES (5.0%)
Federal Home Loan Mortgage Corp. 6.00% 8/1/2006 (1) 40,000 38,760
Federal National Mortgage Association 6.00% 8/26/2006 (1) 25,000 24,234
-----------
62,994
-----------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $1,259,982) 1,244,122
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (8.9%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 5.07% 8/2/1999 $ 53,832 $ 53,832
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 5.10% 8/2/1999 59,809 59,809
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $113,641) 113,641
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (107.0%)
(COST $1,373,623) 1,357,763
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-7.0%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 29,222
Payables for Investment Securities Purchased (53,925)
Security Lending Collateral Payable to Brokers--Note G (59,809)
Other Liabilities (4,520)
-----------
(89,032)
=========================================================================================================================
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 127,397,842 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,268,731
=========================================================================================================================
NET ASSET VALUE PER SHARE $9.96
=========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 1999, the aggregate
value of these securities was $30,324,000 representing 2.4% of net assets.
(3) Restricted security representing 0.3% of net assets at July 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,289,533 $10.12
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (4,942) (.04)
Unrealized Depreciation--Note F (15,860) (.12)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,268,731 $9.96
=========================================================================================================================
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
ADMIRAL INTERMEDIATE-TERM TREASURY FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (97.4%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (83.8%)
U.S. Treasury Bond 7.50% 11/15/2016 $ 20,965 $ 23,389
U.S. Treasury Bond 10.375% 11/15/2012 180,850 227,889
U.S. Treasury Bond 11.625% 11/15/2004 15,300 19,126
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 21,044 20,564
U.S. Treasury Note 6.125% 8/15/2007 144,400 144,731
U.S. Treasury Note 6.50% 10/15/2006 12,400 12,691
U.S. Treasury Note 6.50% 5/15/2005 8,600 8,804
U.S. Treasury Note 6.50% 8/15/2005 8,500 8,702
U.S. Treasury Note 6.875% 5/15/2006 33,100 34,566
U.S. Treasury Note 7.00% 7/15/2006 38,100 40,042
U.S. Treasury Note 7.50% 2/15/2005 190,100 203,422
U.S. Treasury Note 7.875% 11/15/2004 139,200 150,994
Export Funding Trust (U.S. Government Guaranteed) 8.21% 12/29/2006 (1) 7,275 7,718
Government Export Trust (U.S. Government Guaranteed) 6.00% 3/15/2005 (1) 7,177 7,125
Guaranteed Trade Trust (U.S. Government Guaranteed) 6.69% 1/15/2009 (1)(2) 16,850 16,948
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.39% 6/26/2006 (1) 1,668 1,718
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.46% 12/15/2005 (1) 9,043 9,328
Guaranteed Trade Trust (U.S. Government Guaranteed) 7.80% 8/15/2006 (1) 6,250 6,512
Guaranteed Trade Trust (U.S. Government Guaranteed) 8.17% 1/15/2007 (1) 2,500 2,647
Overseas Private Investment Corp. (U.S. Government Guaranteed) 5.94% 6/20/2006 (1) 3,684 3,640
Overseas Private Investment Corp. (U.S. Government Guaranteed) 6.08% 8/15/2004 (1) 18,591 18,492
Overseas Private Investment Corp. (U.S. Government Guaranteed) 6.726% 9/15/2010 (1) 9,000 9,014
Overseas Private Investment Corp. (U.S. Government Guaranteed) 6.75% 12/15/2008 (1) 12,667 12,789
Private Export Funding Corp. (U.S. Government Guaranteed) 5.25% 5/15/2005 28,100 26,321
Private Export Funding Corp. (U.S. Government Guaranteed) 5.73% 1/15/2004 36,665 35,572
Private Export Funding Corp. (U.S. Government Guaranteed) 5.87% 7/31/2008 49,800 46,588
Private Export Funding Corp. (U.S. Government Guaranteed) 6.49% 7/15/2007 5,500 5,426
Private Export Funding Corp. (U.S. Government Guaranteed) 7.11% 4/15/2007 13,235 13,548
-----------
1,118,306
-----------
AGENCY BONDS & NOTES (13.6%)
Federal Home Loan Bank 4.925% 10/14/2008 48,580 42,484
Federal Home Loan Bank 5.315% 12/23/2008 24,385 21,933
Federal Home Loan Bank 5.80% 9/2/2008 5,600 5,258
Federal Home Loan Bank 5.945% 7/28/2008 31,500 29,652
Federal Home Loan Bank 6.525% 6/17/2009 10,500 10,272
Federal Home Loan Bank 6.795% 6/30/2009 18,875 18,828
Federal Home Loan Mortgage Corp. 5.75% 3/15/2009 11,900 11,068
Federal National Mortgage Association 6.375% 6/15/2009 2,800 2,728
Federal National Mortgage Association 6.40% 5/14/2009 40,200 38,209
-----------
180,432
-----------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $1,330,927) 1,298,738
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (6.0%)
- -------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 5.07% 8/2/1999 15,449 15,449
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 5.10% 8/2/1999 64,279 64,279
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $79,728) 79,728
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.4%)
(COST $1,410,655) 1,378,466
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-3.4%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENTS
Other Assets--Note B $ 25,501
Security Lending Collateral Payable to Brokers--Note G (64,279)
Other Liabilities (5,838)
----------
(44,616)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 131,422,279 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,333,850
=========================================================================================================================
NET ASSET VALUE PER SHARE $10.15
=========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 1999, the value of
these securities was $16,948,000, representing 1.3% of net assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,374,796 $10.46
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (8,757) (.07)
Unrealized Depreciation--Note F (32,189) (.24)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,333,850 $10.15
=========================================================================================================================
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
ADMIRAL LONG-TERM TREASURY FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (96.7%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (84.8%)
U.S. Treasury Bond 6.00% 2/15/2026 $ 100 $ 96
U.S. Treasury Bond 6.125% 11/15/2027 1,225 1,199
U.S. Treasury Bond 6.375% 8/15/2027 17,215 17,389
U.S. Treasury Bond 6.50% 11/15/2026 25,990 26,646
U.S. Treasury Bond 6.625% 2/15/2027 21,125 22,016
U.S. Treasury Bond 6.75% 8/15/2026 38,010 40,163
U.S. Treasury Bond 6.875% 8/15/2025 2,350 2,514
U.S. Treasury Bond 7.125% 2/15/2023 1,570 1,717
U.S. Treasury Bond 7.50% 11/15/2016 11,405 12,724
U.S. Treasury Bond 7.875% 2/15/2021 67,854 79,555
U.S. Treasury Bond 8.125% 8/15/2019 34,808 41,552
U.S. Treasury Bond 8.125% 8/15/2021 650 783
U.S. Treasury Bond 8.875% 8/15/2017 68,970 87,087
U.S. Treasury Bond 8.875% 2/15/2019 49,278 62,776
U.S. Treasury Inflation-Indexed Note 3.875% 1/15/2009 4,722 4,660
U.S. Treasury Inflation-Indexed Note 3.875% 4/15/2029 7,315 7,148
-----------
408,025
-----------
AGENCY BONDS & NOTES (11.9%)
Federal Home Loan Bank 5.29% 12/15/2008 10,000 8,979
Federal Home Loan Bank 5.80% 9/2/2008 41,300 38,774
Federal Home Loan Bank 5.865% 9/2/2008 1,950 1,830
Federal Home Loan Bank 6.045% 5/13/2008 3,190 3,026
Federal Home Loan Bank 6.795% 6/30/2009 4,845 4,833
-----------
57,442
-----------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $472,448) 465,467
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (9.7%)
- -------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 5.07% 8/2/1999 5,501 5,501
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 5.10% 8/2/1999 41,103 41,103
- -------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $46,604) 46,604
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (106.4%)
(COST $519,052) 512,071
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-6.4%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 13,446
Security Lending Collateral Payable to Brokers--Note G (41,103)
Other Liabilities (3,182)
-----------
(30,839)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 46,350,644 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $481,232
=========================================================================================================================
NET ASSET VALUE PER SHARE $10.38
=========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
22
<PAGE> 25
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
AT JULY 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $488,910 $10.55
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (697) (.02)
Unrealized Depreciation--Note F (6,981) (.15)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $481,232 $10.38
=========================================================================================================================
</TABLE>
23
<PAGE> 26
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
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>
- -------------------------------------------------------------------------------------------------------------------------
ADMIRAL ADMIRAL ADMIRAL ADMIRAL
TREASURY SHORT-TERM INTERMEDIATE-TERM LONG-TERM
MONEY MARKET TREASURY TREASURY TREASURY
FUND FUND FUND FUND
---------------------------------------------------------------------
SIX MONTHS ENDED JULY 31, 1999
---------------------------------------------------------------------
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $124,636 $32,817 $39,949 $14,084
Security Lending -- 93 11 21
--------------------------------------------------------------------
Total Income 124,636 32,910 39,960 14,105
--------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 325 76 83 29
Management and Administrative 3,042 692 752 256
Marketing and Distribution 583 136 142 47
Custodian Fees 20 8 7 6
Auditing Fees 5 4 4 4
Shareholders' Reports 50 13 17 9
Trustees' Fees and Expenses 3 1 1 --
--------------------------------------------------------------------
Total Expenses 4,028 930 1,006 351
Expenses Paid Indirectly--Note C (13) -- -- --
--------------------------------------------------------------------
Net Expenses 4,015 930 1,006 351
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 120,621 31,980 38,954 13,754
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
Investment Securities Sold 460 (4,829) (8,531) 312
Futures Contracts -- -- (138) --
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 460 (4,829) (8,669) 312
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities -- (26,027) (87,528) (53,231)
Futures Contracts -- -- (15) --
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) -- (26,027) (87,543) (53,231)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $121,081 $ 1,124 $(57,258) $(39,165)
========================================================================================================================
</TABLE>
24
<PAGE> 27
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>
- ------------------------------------------------------------------------------------------------------------------------
ADMIRAL TREASURY ADMIRAL SHORT-TERM
MONEY MARKET FUND TREASURY FUND
--------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999 JUL. 31, 1999 JAN. 31, 1999
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 120,621 $ 221,665 $ 31,980 $ 51,308
Realized Net Gain (Loss) 460 (284) (4,829) 6,290
Change in Unrealized Appreciation
(Depreciation) -- -- (26,027) 4,134
----------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 121,081 221,381 1,124 61,732
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (120,621) (221,665) (31,980) (51,308)
Realized Capital Gain -- -- (2,088) (4,773)
----------------------------------------------------------------------
Total Distributions (120,621) (221,665) (34,068) (56,081)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 2,629,929 5,189,503 357,936 889,960
Issued in Lieu of Cash Distributions 113,405 206,536 26,951 44,624
Redeemed (2,205,726) (4,219,201) (340,542) (463,865)
----------------------------------------------------------------------
Net Increase from Capital
Share Transactions 537,608 1,176,838 44,345 470,719
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 538,068 1,176,554 11,401 476,370
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 5,056,956 3,880,402 1,257,330 780,960
----------------------------------------------------------------------
End of Period $5,595,024 $5,056,956 $1,268,731 $1,257,330
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 2,629,929 5,189,503 35,540 87,237
Issued in Lieu of Cash Distributions 113,405 206,536 2,682 4,376
Redeemed (2,205,726) (4,219,201) (33,801) (45,568)
----------------------------------------------------------------------
Net Increase in Shares Outstanding 537,608 1,176,838 4,421 46,045
========================================================================================================================
</TABLE>
25
<PAGE> 28
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ADMIRAL INTERMEDIATE-TERM ADMIRAL LONG-TERM
TREASURY FUND TREASURY FUND
--------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUL. 31, 1999 JAN. 31, 1999 JUL. 31, 1999 JAN. 31, 1999
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 38,954 $ 64,893 $ 13,754 $ 23,642
Realized Net Gain (Loss) (8,669) 20,371 312 6,371
Change in Unrealized Appreciation
(Depreciation) (87,543) 17,871 (53,231) 17,628
----------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (57,258) 103,135 (39,165) 47,641
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (38,954) (64,893) (13,754) (23,642)
Realized Capital Gain (5,431) (969) (4,442) (2,175)
----------------------------------------------------------------------
Total Distributions (44,385) (65,862) (18,196) (25,817)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 335,730 752,778 184,084 388,444
Issued in Lieu of Cash Distributions 34,763 51,403 14,177 19,302
Redeemed (294,932) (386,931) (158,399) (257,933)
----------------------------------------------------------------------
Net Increase from Capital
Share Transactions 75,561 417,250 39,862 149,813
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (26,082) 454,523 (17,499) 171,637
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,359,932 905,409 498,731 327,094
----------------------------------------------------------------------
End of Period $1,333,850 $1,359,932 $481,232 $498,731
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 31,998 69,909 17,012 33,961
Issued in Lieu of Cash Distributions 3,343 4,776 1,315 1,685
Redeemed (28,201) (35,851) (14,519) (22,520)
----------------------------------------------------------------------
Net Increase in Shares Outstanding 7,140 38,834 3,808 13,126
========================================================================================================================
</TABLE>
26
<PAGE> 29
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>
- -------------------------------------------------------------------------------------------------------------------------
ADMIRAL TREASURY MONEY MARKET FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------------
THROUGHOUT EACH PERIOD JULY 31, 1999 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .022 .050 .052 .051 .055 .041
Net Realized and Unrealized Gain
(Loss) on Investments -- -- -- -- -- --
-----------------------------------------------------------------------
Total from Investment
Operations .022 .050 .052 .051 .055 .041
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.022) (.050) (.052) (.051) (.055) (.041)
Distributions from Realized
Capital Gains -- -- -- -- -- --
-----------------------------------------------------------------------
Total Distributions (.022) (.050) (.052) (.051) (.055) (.041)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
TOTAL RETURN 2.25% 5.12% 5.31% 5.24% 5.66% 4.19%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(Millions) $5,595 $5,057 $3,880 $3,247 $1,778 $1,371
Ratio of Total Expenses to
Average Net Assets 0.15%* 0.15% 0.15% 0.15% 0.15% 0.15%
Ratio of Net Investment Income to
Average Net Assets 4.50%* 4.97% 5.20% 5.12% 5.50% 4.21%
=========================================================================================================================
</TABLE>
*Annualized.
27
<PAGE> 30
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ADMIRAL SHORT-TERM TREASURY FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD JULY 31, 1999 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.22 $10.15 $10.04 $10.23 $ 9.77 $10.26
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .258 .548 .592 .587 .626 .518
Net Realized and Unrealized Gain
(Loss) on Investments (.243) .114 .110 (.190) .460 (.468)
------------------------------------------------------------------------
Total from Investment
Operations .015 .662 .702 .397 1.086 .050
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.258) (.548) (.592) (.587) (.626) (.518)
Distributions from Realized
Capital Gains (.017) (.044) -- -- -- (.022)
------------------------------------------------------------------------
Total Distributions (.275) (.592) (.592) (.587) (.626) (.540)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD 9.96 $10.22 $10.15 $10.04 $10.23 $ 9.77
========================================================================================================================
TOTAL RETURN 0.15% 6.70% 7.21% 4.05% 11.41% 0.57%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(Millions) $1,269 $1,257 $781 $553 $426 $333
Ratio of Total Expenses to
Average Net Assets 0.15%* 0.15% 0.15% 0.15% 0.15% 0.15%
Ratio of Net Investment Income to
Average Net Assets 5.16%* 5.35% 5.89% 5.85% 6.22% 5.30%
Portfolio Turnover Rate 109%* 130% 81% 80% 95% 129%
========================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ADMIRAL INTERMEDIATE-TERM TREASURY FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD JULY 31, 1999 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.94 $10.60 $10.17 $10.70 $ 9.58 $10.58
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .301 .624 .645 .648 .665 .598
Net Realized and Unrealized Gain
(Loss) on Investments (.748) .348 .430 (.530) 1.120 (.995)
------------------------------------------------------------------------
Total from Investment
Operations (.447) .972 1.075 .118 1.785 (.397)
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.301) (.624) (.645) (.648) (.665) (.598)
Distributions from Realized
Capital Gains (.042) (.008) -- -- -- (.005)
------------------------------------------------------------------------
Total Distributions (.343) (.632) (.645) (.648) (.665) (.603)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.15 $10.94 $10.60 $10.17 $10.70 $ 9.58
========================================================================================================================
TOTAL RETURN -4.12% 9.45% 10.98% 1.30% 19.16% -3.67%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(Millions) $1,334 $1,360 $905 $659 $585 $357
Ratio of Total Expenses to
Average Net Assets 0.15%* 0.15% 0.15% 0.15% 0.15% 0.15%
Ratio of Net Investment Income to
Average Net Assets 5.81%* 5.80% 6.28% 6.37% 6.49% 6.15%
Portfolio Turnover Rate 46%* 63% 34% 52% 64% 134%
========================================================================================================================
</TABLE>
*Annualized.
28
<PAGE> 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ADMIRAL LONG-TERM TREASURY FUND
YEAR ENDED JANUARY 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD JULY 31, 1999 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.72 $11.12 $10.13 $11.06 $ 9.40 $10.90
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .316 .654 .669 .681 .691 .670
Net Realized and Unrealized Gain
(Loss) on Investments (1.237) .653 .990 (.900) 1.749 (1.405)
------------------------------------------------------------------------
Total from Investment
Operations (.921) 1.307 1.659 (.219) 2.440 (.735)
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.316) (.654) (.669) (.681) (.691) (.670)
Distributions from Realized
Capital Gains (.103) (.053) -- (.030) (.089) (.095)
------------------------------------------------------------------------
Total Distributions (.419) (.707) (.669) (.711) (.780) (.765)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.38 $11.72 $11.12 $10.13 $11.06 $ 9.40
========================================================================================================================
TOTAL RETURN -7.94% 12.11% 17.05% -1.75% 26.74% -6.60%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(Millions) $481 $499 $327 $192 $186 $136
Ratio of Total Expenses to
Average Net Assets 0.15%* 0.15% 0.15% 0.15% 0.15% 0.15%
Ratio of Net Investment Income to
Average Net Assets 5.88%* 5.72% 6.41% 6.72% 6.66% 7.06%
Portfolio Turnover Rate 24%* 32% 13% 42% 125% 44%
========================================================================================================================
</TABLE>
*Annualized.
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
Vanguard Admiral Funds comprise the Admiral Treasury Money Market Fund, Admiral
Short-Term Treasury Fund, Admiral Intermediate-Term Treasury Fund, and Admiral
Long-Term Treasury Fund, each of which is registered under the Investment
Company Act of 1940 as a diversified open-end investment company, or mutual
fund.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Admiral Treasury Money Market Fund: Investment
securities are valued at amortized cost, which approximates market value. Other
funds: Bonds, and temporary cash investments acquired over 60 days to maturity,
are valued using the latest bid prices or using valuations based on a matrix
system (which considers such factors as security prices, yields, maturities, and
ratings), both as furnished by independent pricing services. Other temporary
cash investments are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued by
methods deemed by the Board of Trustees to represent fair value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. REPURCHASE AGREEMENTS: The Admiral Short-Term Treasury,
Intermediate-Term Treasury, and Long-Term Treasury Funds, along with other
members of The Vanguard Group, transfer uninvested cash balances into a Pooled
Cash Account, which is invested in repurchase agreements secured by U.S.
government securities. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
4. FUTURES CONTRACTS: Each Admiral fund, except the Treasury Money Market
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 funds may purchase or sell futures contracts
instead of bonds to take advantage of pricing differentials between the futures
contracts and the underlying bonds. The funds 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 funds 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).
5. 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.
6. OTHER: Security transactions are accounted for on the date securities
are bought or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Premiums and
discounts on debt securities purchased are amortized and accreted, respectively,
to interest income over the lives of the respective securities.
30
<PAGE> 33
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the funds under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At July 31, 1999, the funds had contributed
capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
ADMIRAL FUND (000) NET ASSETS CAPITALIZATION
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Money Market $1,170 0.02% 1.2%
Short-Term Treasury 270 0.02 0.3
Intermediate-Term Treasury 280 0.02 0.3
Long-Term Treasury 100 0.02 0.1
- -------------------------------------------------------------------------------------------------
</TABLE>
The fund's Trustees and officers are also Directors and officers of Vanguard.
C. The funds' custodian banks have agreed to reduce their fees when the funds
maintain cash on deposit in their non-interest-bearing custody accounts. For the
six months ended July 31, 1999, custodian fee offset arrangements reduced
expenses of the Admiral Treasury Money Market Fund by $13,000.
D. During the six months ended July 31, 1999, purchases and sales of U.S.
government securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(000)
-------------------------------------
ADMIRAL FUND PURCHASES SALES
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Treasury $717,798 $674,567
Intermediate-Term Treasury 424,703 298,219
Long-Term Treasury 89,816 54,288
- -------------------------------------------------------------------------------------------------
</TABLE>
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 Admiral Long-Term Treasury Fund had realized losses totaling $960,000
through January 31, 1999, which are deferred for tax purposes and reduce the
amount of unrealized appreciation on investment securities for tax purposes (see
Note F).
F. At July 31, 1999, net unrealized depreciation of investment securities for
federal income tax purposes was:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(000)
-------------------------------------------------------------
NET
APPRECIATED DEPRECIATED UNREALIZED
ADMIRAL FUND SECURITIES SECURITIES DEPRECIATION
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Treasury 73 $(15,933) $(15,860)
Intermediate-Term Treasury 1,311 (33,500) (32,189)
Long-Term Treasury* 5,488 (13,429) (7,941)
- -------------------------------------------------------------------------------------------------
</TABLE>
*See Note E.
31
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (continued)
G. The market values of securities on loan to broker/dealers at July 31, 1999,
and collateral received with respect to such loans, were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(000)
-------------------------------------------------------------
COLLATERAL RECEIVED
------------------------------------
MARKET VALUE MARKET VALUE
OF LOANED OF U.S. TREASURY
ADMIRAL FUND SECURITIES CASH SECURITIES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Treasury 62,430 $59,809 3,996
Intermediate-Term Treasury 115,955 64,279 54,264
Long-Term Treasury 62,015 41,103 23,111
- -------------------------------------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements. Security loans
are required to be secured at all times by collateral at least equal to the
market value of securities loaned; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
32
<PAGE> 35
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & JohnsonoMerck Consumer
Pharmaceuticals Co., The Medical Center at Princeton, and Women's Research and
Education Institute.
BRUCE K. MacLAURY
President Emeritus of The Brookings Institution; Director of American Express
Bank Ltd., The St. Paul Companies, Inc., and National Steel Corp.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co., The Jeffrey Co., and Select Sector SPDR Trust.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DiSTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MacKINNON
Managing Director, Fixed Income Group.
F. WILLIAM McNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell Company is
the owner of trademarks and copyrights relating to the Russell Indexes.
"Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire Associates.
<PAGE> 36
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago,
on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q122-09/20/1999
(C) 1999 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
