<PAGE> 1
CHAIRMAN'S LETTER
FELLOW SHAREHOLDER:
Few newly-formed mutual funds begin their first full year with as favorable a
performance as did Vanguard Tax-Managed Fund. During the six months ended
June 30, the first half of our 1995 fiscal year, a strong bull market and
outstanding portfolio administration combined to get the Fund "off on the right
foot" as it begins what I believe will be a long, healthy life.
The stock market leadership was provided by the large blue-chip
stocks, the backbone of the major stock indexes. As a result, given the market
index approach that is essential to our low portfolio turnover, tax-managed
strategy, both of our all-equity portfolios--Growth and Income and Capital
Appreciation--provided total returns of about +20% (as did the stock portion of
our Balanced Portfolio), well in excess of the return of +16.6% for the average
equity mutual fund.
And, if more good news is possible, each Portfolio successfully tracked
its target index, coming within 0.6% of its standard, despite bearing
transaction costs and operating expenses. The total returns (capital change
plus income) achieved by our Tax-Managed Portfolios and by their benchmarks are
shown in this table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Total Return
-----------------------------------
Six Months Ended
June 30, 1995
- ---------------------------------------------------------------------------
Target
Portfolio Vanguard Index*
- ---------------------------------------------------------------------------
<S> <C> <C>
GROWTH AND INCOME +20.2% +20.2%
CAPITAL APPRECIATION +20.1 +19.8
BALANCED +14.1 +14.7
- ---------------------------------------------------------------------------
</TABLE>
* The respective indexes are: the Standard & Poor's 500 Index, the Russell 1000
Index, and a 50/50 combination of the Russell 1000 Index and the Lehman
Intermediate-Term Municipal Bond Index. "Standard & Poor's," "S&P 500," and
"500" are registered trademarks of Standard & Poor's Corporation; "Russell
1000" is a registered trademark of the Frank Russell Company.
Detailed per share figures for each Portfolio, including net asset values and
income dividends, are presented in a table that follows this letter.
THE PERIOD IN REVIEW
After a moderately disappointing 1994, the stock market sprung to life as 1995
began. During the past six months, the market moved upward, week after week, in
virtually straight-line fashion, delighting the bulls and astonishing the
bears. On balance, the Dow Jones Industrial Average rose from 3834 as the year
began to 4556 on June 30.
As usual, there were many opinions as to the source of the market's
surprising strength. In my view, it resulted from a combination of: (1) the
sharp decline in interest rates (the yield on the long-term U.S. Treasury bond
fell from 7.8% to 6.6% during the period, a dip of 120 basis points); (2) the
diminishing threat of additional increases in short-term interest rates by the
Federal Reserve Board; (3) a slight softening in U.S. economic growth,
resulting in continued optimism about the outlook for inflation; (4)
record-breaking corporate profits; and (5) a hint of speculative fever in the
marketplace. Whatever the cause, the Standard & Poor's 500 Index provided a
return of +20.2% for the six months.
Particularly dramatic was the dominance of the Standard & Poor's 500
Index (and our Tax-Managed Portfolios) over the results achieved by the average
general equity mutual fund. The Index outpaced fully 83% of all professionally
managed equity mutual funds during the past six months--the best ranking that I
can recall. This success follows an equally good 1994, when the Index outpaced
78% of the equity funds. That said, I would strongly caution you that 1995
still has another six months to go. I would also caution that these two
excellent periods follow relatively low rankings in 1991-1993, during which the
Index outpaced "only" about 44% of all general equity funds.
Much of this improvement in the relative return of the S&P 500 Index
over the past eighteen months is accounted for by a gradual trend away from
more speculative mutual funds, which provided the market leadership during
those three earlier years. During the past year and one-half, however, the
market leadership has been provided by blue-chip stocks with large market
capitalizations, which, of course, dominate the Standard & Poor's 500 Index.
(continued)
1
<PAGE> 2
A few words about our target indexes:
- - Our Growth and Income Portfolio aims to provide returns which match,
before expenses, those of the Standard & Poor's 500 Index, the measurement
standard against which mutual fund returns are most frequently compared.
- - Our Capital Appreciation Portfolio aims to provide returns comparable to
those of the Russell 1000 Index. This Index includes most of the stocks in
the Standard & Poor's 500 Index, plus 500 "medium cap" issues. However,
our policy is to emphasize the low-yielding stocks in the Russell 1000
Index, so as to reduce (taxable) dividend income and commensurately
enhance capital returns. Hence, variations between our Portfolio and the
Index should be expected.
- - Our Balanced Portfolio simply combines our Capital Appreciation Portfolio
strategy for 50% of our assets, with the remaining 50% accounted for by a
diversified group of tax-exempt, intermediate-term bonds selected by the
Vanguard Fixed Income Group.
In terms of income, the Growth and Income Portfolio presently provides
a dividend yield of 2.4%, or 1.4% after tax for an investor in the highest
marginal tax bracket. Our low-yield-biased version of the Russell 1000 Index
provides a pretax yield of 0.9%, or 0.6% for the top-tax-bracket investor, and
our Balanced Portfolio provides a pretax yield of 2.9%, or roughly 2.7% on an
after-tax basis.
SUMMING UP
Led by Vanguard, the concept and acceptance of market-index funds now can be
fairly said to have come of age. It is, I confess, a personal delight for me to
see such headlines as in Jane Bryant Quinn's Newsweek column, "INDEXING: FOR
WINNERS ONLY." The secret, as it were, of indexing is simply broad
diversification at low cost. So, measured against comparable mutual funds with
far higher (and in some cases, grossly excessive) costs, it is as certain as
anything in the uncertain world of investing can be that, over an extended
period of time, a market index fund should provide a significant enhancement in
return over managed equity funds as a group. Our Tax-Managed Portfolios should
increase this advantage when measured in after-tax dollars.
Our prospects relative to other equity funds are only part of the
game; the more important part is the future absolute returns provided by
stocks. I emphasize that the 1995 bull market has been so strong and so swift
that caution should be the order of the day. What this means is that long-term
investors should continue to balance stock holdings with holdings of bonds and
reserves, and not attempt to outguess the market by making major, precipitate
reallocations among these three basic classes of financial assets. In our 1994
Annual Report six months ago, we urged you to "stay the course." It proved fine
advice then; we reiterate it now.
Sincerely,
/s/ JOHN C. BOGLE
- -----------------
John C. Bogle
Chairman of the Board
July 23, 1995
Note: Mutual fund data from Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
-------------------------------------- DIVIDENDS PER SHARE FROM
TAX-MANAGED PORTFOLIO DECEMBER 31, 1994 JUNE 30, 1995 NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH AND INCOME . . . . . . . . . . . . . . . . . $9.77 $11.63 $0.11
CAPITAL APPRECIATION . . . . . . . . . . . . . . . 9.95 11.95 --
BALANCED . . . . . . . . . . . . . . . . . . . . . 9.79 11.03 0.14
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
AVERAGE ANNUAL TOTAL RETURNS
THE CURRENT YIELDS QUOTED IN THE CHAIRMAN'S LETTER ARE CALCULATED IN ACCORDANCE
WITH SEC GUIDELINES. THE AVERAGE ANNUAL TOTAL RETURNS FOR THE PORTFOLIOS
(PERIODS ENDED JUNE 30, 1995) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
SINCE INCEPTION
---------------------------------------
INCEPTION TOTAL CAPITAL INCOME
TAX-MANAGED PORTFOLIOS DATE RETURN RETURN RETURN
- --------------------------- --------- ------ ------- ------
<S> <C> <C> <C> <C>
GROWTH AND INCOME PORTFOLIO 9/6/94 +18.18% +15.95% +2.23%
CAPITAL APPRECIATION PORTFOLIO 9/6/94 +19.50 +19.02 +0.48
BALANCED PORTFOLIO 9/6/94 +12.55 +10.08 +2.47
</TABLE>
ALL OF THESE DATA REPRESENT PAST PERFORMANCE. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT INVESTORS' SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
3
<PAGE> 4
REPORT FROM VANGUARD CORE MANAGEMENT GROUP
EQUITY MARKET REVIEW
To the surprise of most market analysts, U.S. stocks surged +20.2% during the
first half of 1995, as measured by the Standard & Poor's 500 Index. Indeed, in
January, the general consensus of professional market strategists and
economists was that the stock market would be weak in the beginning of the year
and would strengthen in the second half.
It is said that a bull market "climbs a wall of worry," which
perfectly describes the market environment in the first half of the year. As
each month passed, and stock prices continued upward, the prevalent advice was
to exercise caution. This skepticism was accompanied by favorable fundamental
factors, most notably the increasing chance of a "soft landing," a slowing
economy that maintains enough momentum to avoid a recession, while not
increasing pressure on inflation. As fears of inflation subsided, the bond
market rallied, producing a very favorable environment for stocks.
Increases in corporate earnings accelerated as the economic growth and
years of corporate restructuring found their way to the bottom line. Finally,
the weak dollar relative to most major currencies made U.S. goods and services
more attractive abroad and domestically, further increasing corporate
profitability.
PORTFOLIO PERFORMANCE
Each of the three equity Portfolios of the Vanguard Tax-Managed Fund provided
returns in accordance with its objective. The Growth and Income Portfolio has
reached sufficient size to accurately track the Standard & Poor's 500 Index.
During the first half of 1995, its total return matched the +20.2% total return
of the Index.
The Capital Appreciation Portfolio and the equity portion of the
Balanced Portfolio are designed to provide the return of the more broadly
diversified Russell 1000 Index, which consists of the 1000 largest stocks in
the market. Both Portfolios also attempt to minimize the dividend yield, but
preserve the same total return of the Index over the long run. Consequently,
both Portfolios are overweighted in low-yielding stocks, which typically
consist of smaller stocks or high growth stocks. While smaller stocks tended to
underperform the +19.8% return of the Russell 1000 during the period, growth
stocks outperformed. The presence of these growth stocks boosted the
performance of the Capital Appreciation Portfolio (+20.1%) and the equity
portion of the Balanced Portfolio (+21.2%).
MINIMIZING REALIZED CAPITAL GAINS
All three Portfolios have successfully minimized the realization of capital
gains. Through June 30, 1995, the Growth and Income Portfolio realized gains of
$0.01 per share, while the Capital Appreciation Portfolio and the Balanced
Portfolio each realized gains of $0.03 per share. The low realization of gains
is due to: (1) the design of the Fund, which has successfully discouraged
redemptions; and (2) the nature of an index strategy, which inherently has low
turnover, and therefore, lower realization of gains. All of the gains realized
to date were because of corporate takeovers. We are pursuing a strategy of
realizing losses as they accrue, and we anticipate that there will be no
distributable capital gains for the year.
MARKET OUTLOOK
The tremendous returns of the past six months do not alter our long-term
expectation of more moderate returns over the next five to ten years, perhaps
in line with--or even lower than--the market's long-term return of +10%
annually. Nonetheless, for investors with a long time horizon, the stock market
is still a prudent and relatively attractive investment.
Respectfully,
George U. Sauter
Vice President
Vanguard Core Management Group
August 8, 1995
4
<PAGE> 5
REPORT FROM VANGUARD FIXED INCOME GROUP
A SEMI-ANNUAL REVIEW
The past six months was one of those unusual and enjoyable periods when
financial assets of all types produced returns well above historical norms. The
Tax-Managed Fund-Balanced Portfolio certainly shared in the good times with a
+14.1% return. This return compares favorably to most balanced portfolios
(although it lagged most equity portfolios), and is particularly impressive
given the tax-exempt income stream provided by the municipal bond component and
the avoidance of capital gains taxes (which will significantly reduce the
after-tax returns of most comparable balanced funds).
BOND MARKET EUPHORIA
Economic growth slowed markedly during the past six months. The bond markets
typically react favorably when economic growth declines (slow growth implies
low inflation), and this market reaction was even more euphoric than normal.
For example, a long-term Treasury bond appreciated more than +10% in price
during the month of May alone! The last time such a feat was achieved was
during October 1987, as the stock market crash precipitated a massive infusion
of reserves by the Federal Reserve Board and interest rates plummeted.
The tax-exempt bond market only partially participated in the rally
that invigorated the Treasury market. Fears of the enactment of a "flat tax"
and debate over other potentially damaging tax reform legislation tempered the
municipal bond market rally. We believe that the fears are overblown. Even if a
flat tax or some other detrimental tax legislation is enacted (a relatively low
probability in our judgment), it would not likely occur until 1997 or beyond,
and it would probably include a lengthy phase-in period.
An additional worry was the Orange County bankruptcy filing, and the
prospects for broader-based erosion of credit quality and liquidity. We believe
that most rational investors are already concluding that the bankruptcy is an
isolated occurrence and, therefore, will not have pervasive or lasting effects
for the municipal market.
The result of the flat tax debate and the Orange County concerns is
that municipal bonds are trading as "inexpensively" relative to Treasury bonds
as they have in nearly ten years (particularly in the intermediate and longer
maturities) and, as such, represent a terrific bargain. In any case, investors
in the Balanced Portfolio will benefit in future periods from a higher
tax-exempt compounding rate than would otherwise be the case.
STRATEGY SUMMARY
Our traditional "value rotation" style was severely limited over the period due
to a bond market which rallied in an almost uninterrupted fashion. Every bond
position in the Portfolio is currently priced at a gain to "book cost." We do
not intend to sell positions at a gain unless offsetting book losses are
available in the Portfolio. We have established this posture to meet the stated
objective of the Fund which is to maximize after-tax returns.
Even though opportunities were limited due to tax considerations, we
were able to enhance shareholder returns somewhat with careful bond selection.
The Portfolio continues to experience solidly positive cash flow, which gives
us an opportunity to aggregate cash flow and be selective with new purchases.
The other significant strategies of the municipal bond component of
the Portfolio are similar to our last report and are listed below.
FOCUS ON QUALITY
We continue to maintain an extremely high average quality (AA1). The "spread"
between bonds of higher and lower quality remains much too tight to be tempted
into the lower investment-grade securities. We are prepared to wait until
economic activity slows enough (typically a recession) to lower the Portfolio's
average quality. At such time, we will reduce quality selectively when we are
more than adequately compensated for additional credit risk exposure.
(continued)
5
<PAGE> 6
FOCUS ON CALL PROTECTION
Call protection remains an enduring strategy of the Tax-Managed Balanced
Portfolio. This strategy allows the Portfolio to participate much more fully in
a rally than competitors who sacrifice call protection for a slight pickup in
yield. More importantly, it allows the Portfolio to have a more durable
tax-exempt dividend and, therefore, reduce exposure to unacceptable
reinvestment risks.
LADDERED MATURITY PROFILE
We continue to "ladder" the maturity structure of the Portfolio between six and
twelve years to average maturity. Such a maturity structure produces the
maximum amount of income for the maturity risk assumed. It also produces the
maximum total return potential in most market environments, as the shorter
maturities are recycled to purchase longer maturities. In technical bond
nomenclature, this is known as having attractive "rolldown" or "aging."
LOWER THAN NORMAL PRICE SENSITIVITY
The maturity of the Portfolio is currently 7.5 years, which is somewhat shorter
than normal due to our opinion that the market has reacted a bit too
enthusiastically to signs of a slowdown in economic growth. We expect economic
growth to resume a more normal rate in the second half of the year, and
interest rates to go up moderately as a result. The somewhat shorter maturity
profile sacrificed some principal appreciation during the past fiscal six
months, as the markets performed better than we had anticipated. However, we
were able to adjust during the second quarter to keep the performance sacrifice
to a minimum, which allowed the Portfolio to continue to perform well versus
its competitors and market indexes.
SUMMARY
We hope that you have been pleased with the performance of the Balanced
Portfolio, and look forward to a long and productive investment record. As
always, we will continue to manage the Portfolio to produce the maximum
after-tax returns given moderate levels of interest rate risk.
Respectfully,
Ian A. MacKinnon
Senior Vice President
Jerome J. Jacobs
Vice President
Vanguard Fixed Income Group
July 28, 1995
6
<PAGE> 7
FINANCIAL STATEMENTS
(unaudited)
June 30, 1995
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
Market
Value
GROWTH AND INCOME PORTFOLIO Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
- -------------------------------------------------------------------------------
General Electric Co. 23,636 $ 1,332
Exxon Corp. 17,437 1,231
AT&T Corp. 22,131 1,176
The Coca-Cola Co. 17,713 1,129
Royal Dutch Petroleum Co. ADR 7,529 918
Philip Morris Cos., Inc. 11,793 877
Wal-Mart Stores, Inc. 32,343 865
Merck & Co., Inc. 17,179 842
International Business Machines Corp. 8,084 776
* Microsoft Corp. 8,223 743
Intel Corp. 11,592 733
Procter & Gamble Co. 9,634 692
Johnson & Johnson 9,094 615
Motorola, Inc. 8,301 557
Hewlett-Packard Co. 7,226 538
E.I. du Pont de Nemours & Co. 7,816 537
Mobil Corp. 5,559 534
American International Group, Inc. 4,384 500
PepsiCo, Inc. 10,926 498
General Motors Corp. 10,341 485
Bristol-Myers Squibb Co. 7,044 480
GTE Corp. 13,464 459
Amoco Corp. 6,894 459
Abbott Laboratories, Inc. 11,197 453
BellSouth Corp. 6,893 438
Ford Motor Co. 14,318 426
Chevron Corp. 9,124 425
The Walt Disney Co. 7,332 408
Pfizer, Inc. 4,395 406
SBC Communications Inc. 8,448 403
McDonald's Corp. 9,615 376
Federal National Mortgage Assn. 3,833 362
Ameritech Corp. 7,765 342
Bell Atlantic Corp. 6,088 341
Minnesota Mining &
Manufacturing Co. 5,945 340
American Home Products Corp. 4,259 330
Citicorp 5,619 325
Sears, Roebuck & Co. 5,399 323
Eli Lilly & Co. 4,099 322
The Boeing Co. 4,762 298
Unilever NV ADR 2,246 292
Eastman Kodak Co. 4,728 287
BankAmerica Corp. 5,257 277
Dow Chemical Co. 3,840 276
Gillette Co. 6,108 273
U.S. West Inc. 6,546 272
Columbia/HCA Healthcare Corp. 6,124 265
Home Depot, Inc. 6,229 253
Chrysler Corp. 5,208 249
Atlantic Richfield Co. 2,246 246
American Express Co. 6,888 242
Texaco, Inc. 3,584 235
* Oracle Corp. 6,102 235
NYNEX Corp. 5,816 234
Emerson Electric Co. 3,266 233
Capital Cities/ABC, Inc. 2,123 229
Schering-Plough Corp. 5,118 226
* Viacom International Class B 4,824 224
Kellogg Co. 3,068 219
Time Warner, Inc. 5,291 218
* Tele-Communications Inc. Class A 8,929 209
Schlumberger Ltd. 3,333 207
Southern Co. 9,212 206
MCI Communications Corp. 9,412 206
NationsBank, Inc. 3,820 205
Anheuser-Busch Co., Inc. 3,507 199
* AirTouch Communications, Inc. 6,981 199
Lockheed Martin Corp. 3,088 195
WMX Technologies Inc. 6,850 194
Travelers Group Inc. 4,405 193
Sara Lee Corp. 6,632 189
Caterpillar, Inc. 2,895 186
* Cisco Systems, Inc. 3,655 185
The Seagram Co. Ltd. 5,272 183
J.P. Morgan & Co., Inc. 2,560 180
Banc One Corp. 5,487 177
ITT Corp. 1,501 176
Texas Instruments, Inc. 1,313 176
Federal Home Loan Mortgage Corp. 2,515 173
Pacific Gas & Electric Co. 5,958 173
Allied-Signal, Inc. 3,871 172
Xerox Corp. 1,455 171
Campbell Soup Co. 3,456 169
* COMPAQ Computer Corp. 3,660 166
Sprint Corp. 4,872 164
Union Pacific Corp. 2,900 161
Warner-Lambert Co. 1,856 160
General Re Corp. 1,187 159
Pacific Telesis Group 5,938 159
J.C. Penney Co., Inc. 3,306 159
Chemical Banking Corp. 3,261 154
Micron Technology Inc. 2,800 154
Computer Associates
International, Inc. 2,261 153
H.J. Heinz Co. 3,359 149
* Amgen, Inc. 1,844 148
International Paper Co. 1,723 148
Colgate-Palmolive Co. 2,003 146
Monsanto Co. 1,605 145
May Department Stores Co. 3,447 143
Baxter International, Inc. 3,844 140
Merrill Lynch & Co., Inc. 2,596 136
Archer-Daniels-Midland Co. 7,308 136
</TABLE>
7
<PAGE> 8
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
United Technologies Corp. 1,733 $ 135
Rockwell International Corp. 2,953 135
Northern Telecom Ltd. 3,657 133
Weyerhaeuser Co. 2,801 132
Norwest Corp. 4,587 132
Automatic Data Processing, Inc. 2,084 131
CPC International, Inc. 2,111 130
Raytheon Co. 1,661 129
Kimberly-Clark Corp. 2,150 129
Norfolk Southern Corp. 1,873 126
PPG Industries, Inc. 2,925 126
The Dun & Bradstreet Corp. 2,380 125
Wells Fargo & Co. 688 124
ConAgra, Inc. 3,546 124
Phillips Petroleum Co. 3,692 123
McDonnell Douglas Corp. 1,602 123
Medtronic, Inc. 1,592 123
Barrick Gold Corp. 4,779 121
Aluminum Co. of America 2,404 120
Duke Power Co. 2,899 120
AMP, Inc. 2,816 119
The Chase Manhattan Corp. 2,530 119
Enron Corp. 3,350 118
Tenneco, Inc. 2,477 114
* Toys R Us, Inc. 3,891 114
Dean Witter Discover & Co. 2,382 112
American Brands, Inc. 2,788 111
General Mills, Inc. 2,141 110
CSX Corp. 1,457 109
The Bank of New York Co., Inc. 2,700 109
Texas Utilities Co. 3,171 109
SCEcorp 6,228 107
Albertson's, Inc. 3,565 106
Georgia-Pacific Corp. 1,208 105
The Limited, Inc. 4,739 104
Scott Paper Co. 2,106 104
* Novell, Inc. 5,230 104
* Applied Materials, Inc. 1,200 104
Browning-Ferris Industries, Inc. 2,858 103
First Union Corp. 2,281 103
Gannett Co., Inc. 1,902 103
Deere & Co. 1,193 102
Corning, Inc. 3,113 102
KeyCorp 3,224 101
Aetna Life & Casualty Co. 1,583 100
Occidental Petroleum Corp. 4,345 99
Public Service Enterprise Group Inc. 3,535 98
United Healthcare Corp. 2,364 98
Loews Corp. 800 97
The Chubb Corp. 1,199 96
American Electric Power Co., Inc. 2,730 96
FPL Group, Inc. 2,449 95
Unocal Corp. 3,423 95
SunTrust Banks, Inc. 1,618 94
Alcan Aluminium Ltd. 3,065 93
American General Corp. 2,731 92
Kmart Corp. 6,294 92
Placer Dome Group, Inc. 3,512 92
* Silicon Graphics, Inc. 2,300 92
Consolidated Edison Co. of
New York, Inc. 3,100 91
First Data Corp. 1,600 91
Upjohn Co. 2,390 91
Air Products & Chemicals, Inc. 1,590 89
Illinois Tool Works, Inc. 1,586 87
PECO Energy Corp. 3,156 87
W.R. Grace & Co. 1,420 87
First Interstate Bancorp. 1,083 87
Dominion Resources, Inc. 2,374 87
Walgreen Co. 1,720 86
Wachovia Corp. 2,385 85
USX-Marathon Group 4,278 84
* Digital Equipment Corp. 2,071 84
The Goodyear Tire & Rubber Co. 2,016 83
Mellon Bank Corp. 1,989 83
Burlington Northern, Inc. 1,304 83
UST, Inc. 2,699 80
Nike, Inc. Class B 953 80
Honeywell, Inc. 1,846 80
PNC Bank Corp. 3,001 79
* AMR Corp. 1,059 79
First Chicago Corp. 1,316 79
International Flavors &
Fragrances, Inc. 1,582 79
Apple Computer, Inc. 1,691 78
Pitney Bowes, Inc. 2,040 78
PacifiCorp 4,162 78
Unicom Corp. 2,929 78
* DSC Communications Corp. 1,674 78
Houston Industries, Inc. 1,846 78
Marsh & McLennan Cos., Inc. 952 77
Mattel, Inc. 2,936 76
NBD Bancorp, Inc. 2,348 75
Central & South West Corp. 2,845 75
Sysco Corp. 2,529 75
Wm. Wrigley, Jr. Co. 1,597 74
Hercules, Inc. 1,517 74
TRW, Inc. 920 73
R.R. Donnelley & Sons Co. 2,041 73
CIGNA Corp. 946 73
Barnett Banks, Inc. 1,432 73
Fleet Financial Group, Inc. 1,968 73
Entergy Corp. 2,986 72
Hershey Foods Corp. 1,299 72
U.S. Healthcare, Inc. 2,340 72
ALLTEL Corp. 2,800 71
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Westinghouse Electric Corp. 4,806 $ 70
Lowes Cos., Inc. 2,335 70
The Gap, Inc. 1,996 70
CoreStates Financial Corp. 1,991 69
Nucor Corp. 1,297 69
* Sun Microsystems, Inc. 1,412 68
Ralston-Purina Group 1,342 68
Burlington Resources, Inc. 1,843 68
MBNA Corp. 2,007 68
Dayton-Hudson Corp. 944 68
Union Carbide Corp. 2,015 67
* CUC International, Inc. 1,600 67
Bankers Trust New York Corp. 1,072 66
Household International, Inc. 1,322 65
* Crown Cork & Seal Co., Inc. 1,303 65
* Boston Scientific Corp. 2,041 65
Carolina Power & Light Co. 2,148 65
Eastman Chemical 1,082 64
Amerada Hess Corp. 1,317 64
Textron, Inc. 1,102 64
Champion International Corp. 1,217 63
Avon Products, Inc. 946 63
First Fidelity Bancorp. 1,073 63
Cooper Industries, Inc. 1,595 63
Comcast Corp. Class A Special 3,396 63
Alco Standard Corp. 783 63
Rubbermaid, Inc. 2,247 62
Eaton Corp. 1,059 62
Genuine Parts Co. 1,625 62
Phelps Dodge Corp. 1,041 61
Quaker Oats Co. 1,856 61
Winn Dixie Stores, Inc. 1,054 61
Transamerica Corp. 1,041 61
Union Camp Corp. 1,038 60
Ingersoll-Rand Co. 1,560 60
Conrail, Inc. 1,072 60
Salomon, Inc. 1,477 59
Detroit Edison Co. 2,002 59
American Stores Co. 2,086 59
Marriott International 1,634 59
Morton International, Inc. 2,000 58
Whirlpool Corp. 1,053 58
Boatmen's Bancshares, Inc. 1,648 58
Dover Corp. 795 58
Lincoln National Corp. 1,321 58
Union Electric Corp. 1,548 58
Masco Corp. 2,134 58
Shawmut National Corp. 1,802 57
Newell Co. 2,338 57
Tyco International Ltd. 1,058 57
Engelhard Corp. 1,327 57
Halliburton Co. 1,590 57
Rohm & Haas Co. 1,031 57
* Promus Co., Inc. 1,449 57
Fluor Corp. 1,080 56
Loral Corp. 1,083 56
H & R Block, Inc. 1,362 56
National City Corp. 1,900 56
Dresser Industries, Inc. 2,498 56
CINergy Corp. 2,106 55
Bank of Boston Corp. 1,460 55
CBS, Inc. 805 54
Panhandle Eastern Corp. 2,209 54
St. Paul Cos., Inc. 1,089 54
Melville Corp. 1,559 53
Tandy Corp. 1,016 53
Baltimore Gas & Electric Co. 2,098 52
Clorox Co. 785 51
Tribune Co. 829 51
Great Lakes Chemical Corp. 843 51
The McGraw-Hill Cos. 669 51
Santa Fe Pacific Corp. 1,988 51
Pioneer Hi-Bred International 1,198 50
Newmont Mining Corp. 1,191 50
Delta Air Lines, Inc. 672 50
Becton, Dickinson & Co. 848 49
Nordstrom, Inc. 1,174 48
* Federal Express Corp. 790 48
* Cabletron Systems, Inc. 900 48
* Advanced Micro Devices, Inc. 1,317 48
The Mead Corp. 802 48
General Public Utilities Corp. 1,600 48
* Price/Costco Inc. 2,926 48
Southwest Airlines Co. 1,987 47
* National Semiconductor Corp. 1,709 47
Hilton Hotels Corp. 664 47
Dillard Department Stores Class A 1,586 47
Safeco Corp. 810 46
Consolidated Natural Gas Co. 1,217 46
Ohio Edison Co. 2,021 46
Dow Jones & Co., Inc. 1,240 46
W.W. Grainger, Inc. 773 45
Harcourt General, Inc. 1,066 45
Circuit City Stores, Inc. 1,428 45
Providian Corp. 1,243 45
UNUM Corp. 959 45
Knight-Ridder, Inc. 785 45
Coastal Corp. 1,457 44
VF Corp. 821 44
Sigma Aldrich Corp. 900 44
Praxair, Inc. 1,760 44
Dana Corp. 1,537 44
* Computer Sciences Corp. 772 44
Williams Cos., Inc. 1,254 44
Interpublic Group of Cos., Inc. 1,157 43
* St. Jude Medical, Inc. 855 43
</TABLE>
9
<PAGE> 10
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Sherwin-Williams Co. 1,197 $ 43
Premark International, Inc. 817 42
Great Western Financial Corp. 2,053 42
Inco Ltd. 1,497 42
* The Kroger Co. 1,569 42
Jefferson-Pilot Corp. 769 42
Reynolds Metals Co. 806 42
Parker Hannifin Corp. 1,149 42
Kerr-McGee Corp. 776 42
* Lotus Development Corp. 652 42
Laidlaw Inc. Class B 4,300 41
Hasbro, Inc. 1,300 41
Mallinckrodt Group, Inc. 1,162 41
Service Corp. International 1,290 41
Baker Hughes, Inc. 1,979 41
Cyprus Amax Minerals Co. 1,415 40
Reebok International Ltd. 1,182 40
Northrop Grumman Corp. 768 40
Deluxe Corp. 1,182 39
Times Mirror Co. Class A 1,634 39
Louisiana-Pacific Corp. 1,476 39
Golden West Financial Corp. 818 39
* Tellabs, Inc. 800 38
Northern States Power Co.
of Minnesota 828 38
Temple-Inland Inc. 789 38
Sun Co., Inc. 1,365 37
* Tenet Healthcare Corp. 2,566 37
U.S. Bancorp 1,534 37
Westvaco Corp. 829 37
Sonat, Inc. 1,197 37
USX-U.S. Steel Group 1,057 36
General Dynamics Corp. 816 36
* Andrew Corp. 627 36
Torchmark Corp. 949 36
Homestake Mining Co. 2,168 36
* FMC Corp. 523 35
* Western Atlas Inc. 760 34
Black & Decker Corp. 1,086 34
Bausch & Lomb, Inc. 802 33
Pall Corp. 1,495 33
H.F. Ahmanson & Co. 1,499 33
James River Corp. 1,179 33
Autodesk, Inc. 760 32
New York Times Co. Class A 1,365 32
Moore Corp. Ltd. 1,440 32
Avery Dennison Corp. 792 32
Polaroid Corp. 760 31
SuperValu, Inc. 1,046 30
Johnson Controls, Inc. 538 30
Nalco Chemical Co. 835 30
General Signal Corp. 762 30
The Dial Corp. 1,214 30
* Stone Container Corp. 1,408 30
* ALZA Corp. 1,279 30
Beneficial Corp. 678 30
Wendy's International, Inc. 1,651 30
Niagara Mohawk Power Corp. 1,987 29
Pacific Enterprises 1,187 29
Raychem Corp. 746 29
* Varity Corp. 650 29
The Stanley Works 753 29
Ashland Inc. 806 28
Whitman Corp. 1,460 28
Rite Aid Corp. 1,101 28
* Unisys Corp. 2,581 28
Brown-Forman Corp. Class B 835 28
Echlin, Inc. 801 28
American Greetings Corp. Class A 947 28
Harris Corp. 536 28
Scientific-Atlanta, Inc. 1,256 28
Allergan, Inc. 1,018 28
* Owens-Corning Fiberglas Corp. 747 28
Ecolab, Inc. 1,115 27
Manor Care Inc. 913 27
Cooper Tire & Rubber Co. 1,085 26
Armstrong World Industries Inc. 527 26
Pennzoil Co. 557 26
USF&G Corp. 1,591 26
Santa Fe Pacific Gold Corp. 2,119 26
Giant Food, Inc. Class A 904 26
Ryder System, Inc. 1,064 25
Maytag Corp. 1,564 25
* Woolworth Corp. 1,650 25
Thomas & Betts Corp. 364 25
Liz Claiborne, Inc. 1,169 25
Roadway Services, Inc. 530 25
Paccar, Inc. 530 25
Worthington Industries, Inc. 1,202 24
Mercantile Stores Co., Inc. 526 24
Louisiana Land & Exploration Co. 613 24
* Tandem Computers, Inc. 1,489 24
* Oryx Energy Co. 1,731 24
* Bethlehem Steel Corp. 1,463 24
Cummins Engine Co., Inc. 541 24
* Darden Restaurants Inc. 2,141 23
ENSERCH Corp. 1,327 23
Inland Steel Industries, Inc. 741 23
Brunswick Corp. 1,326 23
Pep Boys (Manny, Moe & Jack) 808 22
Boise Cascade Corp. 530 21
* Fruit of the Loom, Inc. 1,000 21
* Ceridian Corp. 551 20
Millipore Corp. 297 20
Tektronix, Inc. 403 20
* Biomet, Inc. 1,285 20
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Teledyne Inc. 789 $ 19
Federal Paper Board Co., Inc. 544 19
The Timkin Co. 405 19
Crane Co. 502 18
* Columbia Gas Systems, Inc. 573 18
C.R. Bard, Inc. 577 17
* King World Productions, Inc. 427 17
Snap-On Inc. 445 17
Fleetwood Enterprises, Inc. 856 17
Harnischfeger Industries Inc. 487 17
Potlatch Corp. 400 17
Great Atlantic & Pacific Tea Co., Inc. 630 17
National Service Industries, Inc. 569 16
Perkin-Elmer Corp. 450 16
First Mississippi Corp. 468 16
Bruno's Inc. 1,361 16
NICOR, Inc. 580 16
* Amdahl Corp. 1,393 15
Alexander & Alexander Services, Inc. 649 15
The BF Goodrich Co. 287 15
USLIFE Corp. 378 15
Meredith Corp. 598 15
* USAir Group, Inc. 1,302 15
Shared Medical Systems Corp. 376 15
Bemis Co., Inc. 575 15
Alberto-Culver Co. Class B 493 15
EG & G, Inc. 890 15
Foster Wheeler Corp. 422 15
Safety-Kleen Corp. 897 14
* Navistar International Corp. 956 14
United States Surgical Corp. 692 14
Centex Corp. 508 14
Helmerich & Payne, Inc. 484 14
Ogden Corp. 648 14
Eastern Enterprises 472 14
McDermott International, Inc. 582 14
Ball Corp. 401 14
Fleming Cos., Inc. 526 14
Jostens Inc. 655 14
Longs Drug Stores, Inc. 371 14
Cincinnati Milacron, Inc. 515 14
Trinova Corp. 397 14
Pulte Corp. 494 14
NACCO Industries, Inc. Class A 231 14
NorAm Energy Corp. 2,118 14
Briggs & Stratton Corp. 398 14
* Rowan Cos., Inc. 1,686 14
ASARCO, Inc. 442 13
Peoples Energy Corp. 519 13
Springs Industries Inc. Class A 360 13
* Santa Fe Energy Resources Inc. 1,407 13
* Bally Entertainment Corp. 1,060 13
Pittston Services Group 541 13
Russell Corp. 441 13
Giddings & Lewis, Inc. 714 13
ONEOK, Inc. 591 13
* Armco, Inc. 1,855 13
* Beverly Enterprises Inc. 983 12
* Cray Research, Inc. 489 12
Adolph Coors Co. Class B 728 12
Consolidated Freightways, Inc. 522 12
John H. Harland Co. 504 12
Republic New York Corp. 200 11
Yellow Corp. 594 11
* Community Psychiatric Centers 948 11
Echo Bay Mines Ltd. 1,182 11
* Intergraph Corp. 951 11
Charming Shoppes, Inc. 1,943 10
Stride Rite Corp. 971 10
TJX Cos., Inc. 651 9
* Cox Communications Class A 305 6
* Viacom International Class A 100 5
Luby's Cafeterias, Inc. 88 2
* Shoney's Inc. 140 2
Kaufman & Broad Home Corp. 111 2
* Ryan's Family Steak Houses, Inc. 178 1
Brown Group, Inc. 60 1
Outboard Marine Corp. 68 1
Bassett Furniture Industries, Inc. 48 1
* Data General Corp. 121 1
Handleman Co. 114 1
* M/A-Com, Inc. 87 1
* Zenith Electronics Corp. 136 1
Zurn Industries, Inc. 42 1
* Morrison-Knudsen Co., Inc. 108 1
Skyline Corp. 38 1
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (100.0%)
(Cost $48,835) 55,848
- -------------------------------------------------------------------------------
<CAPTION>
TEMPORARY CASH INVESTMENT (.7%)
- -------------------------------------------------------------------------------
Face
Amount
(000)
----------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account 6.13%, 7/3/95
(Cost $409) $409 409
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.7%)
(Cost $49,244) 56,257
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-.7%)
- -------------------------------------------------------------------------------
Other Assets--Note B $ 229
Liabilities (614)
---------
(385)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------
Applicable to 4,806,087 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $55,872
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $11.63
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AT JUNE 30, 1995, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------
Amount Per
(000) Share
-------- --------
<S> <C> <C>
Paid in Capital $48,776 $10.15
Undistributed Net
Investment Income 56 .01
Accumulated Net
Realized Gains 27 .01
Unrealized Appreciation of
Investments--Note D 7,013 1.46
- -------------------------------------------------------------------------------
NET ASSETS $55,872 $11.63
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
CAPITAL APPRECIATION PORTFOLIO Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
- -------------------------------------------------------------------------------
* ADC Telecommunications, Inc. 6,900 $ 246
AFLAC, Inc. 7,400 324
* ALC Communications 5,700 257
* AMR Corp. 4,900 366
AT&T Corp. 62,700 3,331
Abbott Laboratories, Inc. 34,000 1,377
* Adaptec, Inc. 7,400 273
Adobe Systems, Inc. 5,300 309
* Advanced Micro Devices, Inc. 9,000 327
Advanta Corp. Class A 6,000 250
Airborne Freight Corp. 4,400 89
* Airgas, Inc. 8,100 218
* AirTouch Communications, Inc. 25,000 713
Albemarle Corp. 14,400 225
Albertson's, Inc. 12,800 381
Alco Standard Corp. 4,000 320
Alexander & Alexander Services, Inc. 9,100 217
* Alleghany Corp. 1,116 178
Allied-Signal, Inc. 13,500 601
Allmerica Property & Casualty Cos. 10,300 228
* Alumax, Inc. 6,500 202
Aluminum Co. of America 10,200 511
* ALZA Corp. 10,600 248
AMBAC, Inc. 5,400 217
Amerada Hess Corp. 5,800 283
* Amdahl Corp. 16,700 186
American International Group, Inc. 11,500 1,311
* American Media Class A 3,000 21
* American Power Conversion Corp. 12,500 287
American Re Corp. 6,300 235
* Amgen, Inc. 7,500 603
Amoco Corp. 19,900 1,326
* Amphenol Corp. 6,800 198
Anadarko Petroleum Corp. 5,700 246
* Analog Devices, Inc. 8,800 299
* Andrew Corp. 4,150 240
* AnnTaylor Stores Corp. 7,800 181
Apache Corp. 7,200 197
Apple Computer, Inc. 8,700 405
* Applied Materials, Inc. 5,200 450
Archer-Daniels-Midland Co. 28,800 536
* Arrow Electronics, Inc. 5,200 259
ASARCO, Inc. 7,200 220
* Associated Group, Inc. 6,149 111
* Associated Group, Inc. Class B 875 16
Atlantic Southeast Airlines Inc. 4,600 139
* Atmel Corp. 4,900 272
Autodesk, Inc. 6,400 274
Automatic Data Processing, Inc. 7,900 497
* AutoZone, Inc. 12,300 309
* BHC Communications, Inc. Class A 2,200 177
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
* BMC Software, Inc. 3,600 $ 277
Bandag, Inc. 3,700 231
BankAmerica Corp. 300 16
* Barnes & Noble Inc. 6,300 214
Battle Mountain Gold Co. Class A 16,500 159
* Bay Networks 8,862 366
Beckman Instruments 4,000 111
Becton, Dickinson & Co. 5,000 291
* Bed Bath and Beyond 8,100 197
A. H. Belo Corp. Class A 5,600 171
* Best Buy, Inc. 7,000 186
* Bethlehem Steel Corp. 14,300 232
* Beverly Enterprises Inc. 15,700 194
* Biogen, Inc. 5,500 245
* Biomet, Inc. 16,900 261
Bob Evans Farms, Inc. 900 18
The Boeing Co. 15,300 958
* Boston Scientific Corp. 8,600 274
* Boyd Gaming Corp. 13,400 223
Breed Technological Inc. 8,500 204
* Brinker International, Inc. 12,500 216
* Burlington Coat Factory
Warehouse Corp. 17,600 183
* Burlington Industries 17,100 197
Burlington Resources, Inc. 7,900 291
CBS, Inc. 4,100 275
CML Group, Inc. 10,100 79
* CNA Financial Corp. 2,200 190
* CUC International, Inc. 8,800 370
* Cablevision Systems Corp. Class B 3,100 198
* Cabletron Systems, Inc. 5,300 282
Callaway Golf Co. 6,800 102
Capital Cities/ABC, Inc. 6,600 713
Capital One Financial Corp. 10,800 211
Cardinal Health, Inc. 4,700 222
Caremark International, Inc. 10,300 206
Caterpillar, Inc. 9,900 636
Centex Corp. 6,400 181
* Century Communications Corp.
Class A 19,400 184
Century Telephone Enterprises, Inc. 6,800 193
* Ceridian Corp. 7,000 258
Champion International Corp. 6,300 328
Charming Shoppes, Inc. 3,600 19
* Cheyenne Software, Inc. 13,500 250
* Chiron Corp. 3,935 255
* Chris-Craft Industries, Inc. 5,696 199
Chrysler Corp. 8,700 416
CINergy Corp. 5,700 150
Circuit City Stores, Inc. 8,600 272
* Cirrus Logic 4,800 301
* Cisco Systems, Inc. 13,200 667
Cintas Corp. 5,700 204
* Circus Circus Enterprises Inc. 8,700 307
Citicorp 18,200 1,053
* Citizens Utilities Co. Class B 17,035 202
Clayton Homes Inc. 12,475 204
Coastal Corp. 8,200 249
The Coca-Cola Co. 50,000 3,187
Coca-Cola Enterprises, Inc. 10,200 223
* Coleman Inc. 5,100 181
* Coltec Inc. 12,000 207
* Columbia Gas Systems, Inc. 7,600 241
Columbia/HCA Healthcare Corp. 16,015 693
Comcast Corp. Class A Special 18,000 334
* COMPAQ Computer Corp. 13,500 613
Computer Associates
International, Inc. 7,300 495
* Computer Sciences Corp. 5,100 290
* Compuware Corp. 8,200 253
* Conner Peripherals, Inc. 17,500 217
Conseco, Inc. 3,800 172
Consolidated Freightways, Inc. 4,200 93
Cooper Tire & Rubber Co. 9,100 222
* Cordis Corp. 3,200 214
Cracker Barrel Old Country
Stores, Inc. 9,900 205
* Crown Cork & Seal Co., Inc. 6,100 306
Cummins Engine Co., Inc. 1,000 44
* DSC Communications Corp. 8,200 382
Danaher Corp. 7,000 212
* Darden Restaurants Inc. 22,200 241
Dean Witter Discover & Co. 9,300 437
* Dell Computer 3,700 223
Delta Air Lines, Inc. 4,500 332
Dentsply International 4,500 162
* Department 56 Inc. 5,400 206
* Digital Equipment Corp. 9,700 395
Dillard Department Stores Class A 9,700 285
The Walt Disney Co. 18,400 1,023
Dole Food Co. 7,200 210
Dollar General Corp. 8,850 280
E.I. du Pont de Nemours & Co. 22,800 1,567
Duracell International, Inc. 1,400 61
* EMC Corp. 14,900 361
* Ensco International, Inc. 12,200 194
* Electronic Arts 7,900 215
Emerson Electric Co. 10,400 744
Enron Oil & Gas Co. 7,700 167
ENSERCH Corp. 11,800 202
The Equitable Cos. 9,800 204
Equitable of Iowa Co. 5,100 168
Exxon Corp. 48,900 3,453
* FHP International Corp. 9,900 229
* FMC Corp. 3,700 249
* Federal Express Corp. 5,000 304
</TABLE>
13
<PAGE> 14
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corp. 8,900 $ 612
Federal National Mortgage Assn. 11,200 1,057
* Federated Department Stores 12,900 332
Fingerhut Co. 14,300 223
First Brands Corp. 4,600 197
First Data Corp. 6,400 364
First Empire State Corp. 1,100 189
First Financial Management 4,600 393
First USA Inc. 5,800 257
* FIserv, Inc. 6,700 187
FlightSafety International, Inc. 3,500 171
Fluor Corp. 6,300 328
Ford Motor Co. 20,200 601
* Forest Laboratories, Inc. 5,200 231
* Foundation Health Co. 7,000 189
* Franklin Quest Co. 6,000 144
Franklin Resources Corp. 6,100 271
* Freeport McMoRan, Inc. 15,800 278
Freeport McMoRan Copper &
Gold Inc. Class A 139 3
* Fruit of the Loom, Inc. 9,200 194
The Gap, Inc. 9,600 335
* Gateway 2000 Inc. 8,600 196
Gaylord Entertainment Class A 9,070 229
General Electric Co. 66,400 3,743
* General Instrument 9,700 372
General Motors Corp. 31,600 1,481
General Motors Corp. Class E 14,200 618
* General Nutrition Cos., Inc. 7,800 272
General Re Corp. 4,000 535
* Genzyme Corp. 5,700 229
* Genzyme Corp. Tissue Repair 391 2
Georgia Gulf Corp. 6,700 218
Giddings & Lewis, Inc. 10,700 191
Gillette Co. 18,600 830
* Glenayre Technologies, Inc. 4,950 254
Golden West Financial Corp. 5,700 269
W.W. Grainger, Inc. 4,100 241
Great Atlantic & Pacific Tea Co., Inc. 2,200 58
Great Lakes Chemical Corp. 5,400 325
Green Tree Financial Corp. 6,300 279
* Gtech Holdings Corp. 7,600 222
HBO and Co. 4,200 229
Harley-Davidson, Inc. 8,900 217
Hasbro, Inc. 7,500 238
* Healthcare & Retirement Corp. 7,100 208
* HealthCare Compare Corp. 7,100 213
* Health Management Associates
Class A 7,200 211
* Health Systems International 5,800 168
* HEALTHSOUTH Corp. 13,300 231
* Healthsource, Inc. 6,700 234
Heilig-Meyers Co. 8,900 227
Hewlett-Packard Co. 17,000 1,267
Home Depot, Inc. 20,600 837
* Home Shopping Network, Inc. 23,000 195
Homestake Mining Co. 14,400 238
Horace Mann Educators Corp. 5,200 120
* Hospitality Franchise Systems, Inc. 7,800 270
* Host Marriott 20,600 219
* Humana, Inc. 14,200 250
J.B. Hunt Transport Services, Inc. 10,100 184
IBP, Inc. 5,800 252
IMC Global Inc. 4,400 238
ITT Corp. 5,200 611
Illinois Tool Works, Inc. 6,100 335
* Infinity Broadcasting Corp. 7,050 235
* Informix Corp. 11,400 289
Inland Steel Industries, Inc. 7,900 241
* Integrated Device Technology Inc. 5,000 231
Intel Corp. 34,000 2,153
International Business
Machines Corp. 23,400 2,246
International Game Technology 16,600 255
International Paper Co. 6,300 540
* International Specialty Products, Inc. 18,700 159
* Itel Corp. 5,700 222
IVAX Corp. 10,300 254
John Alden Financial Group 3,400 58
Johnson & Johnson 26,800 1,812
* Jones Apparel Group, Inc. 6,200 185
* KLA Instruments Corp. 3,600 279
Kansas City Southern Industries, Inc. 5,500 205
Kellogg Co. 6,500 464
Kemper Corp. 700 33
* King World Productions, Inc. 5,400 219
* Kohls Corp. 4,200 192
* The Kroger Co. 9,700 261
* LDDS Communications, Inc. 11,178 301
* LSI Logic Corp. 8,600 336
* LTV Corp. 14,500 212
La Quinta Inns Inc. 6,800 184
* Laboratory Corp. of America 6,480 86
* Laboratory Corp. of America Warrants
Exp. 4/28/00 1,468 2
* LAM Research Corp. 4,000 256
Lancaster Colony Corp. 800 28
* Lands' End, Inc. 9,100 148
* Lear Seating Corp. 8,600 197
* Legent Corp. 6,600 289
Lehman Brothers Holdings, Inc. 11,700 256
Leucadia National Corp. 4,300 217
The Limited, Inc. 16,800 370
* Lin Broadcasting Corp. 2,200 278
* Lin Television 5,100 171
Linear Technology Corp. 4,300 283
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
* Litton Industries, Inc. 5,100 $ 188
Lockheed Martin Corp. 8,800 555
Loews Corp. 2,900 351
Loral Corp. 6,000 310
* Lotus Development Corp. 6,000 383
Louisiana-Pacific Corp. 4,300 113
Lowes Cos., Inc. 10,300 308
MBIA, Inc. 700 46
MCI Communications Corp. 33,300 731
* MFS Communications Co., Inc. 5,900 189
MGIC Investment Corp. 5,900 276
* MGM Grand Inc. 7,000 192
* Magma Copper Co. Class B 13,200 214
Mallinckrodt Group, Inc. 1,400 50
Manor Care Inc. 7,000 204
Manpower Inc. 9,600 245
* Manville Corp. 12,300 169
Mapco Inc. 700 41
Mark IV Industries, Inc. 9,130 196
* Marquette Electronics Class A 9,900 160
Marriott International 7,600 273
Martin Marietta Materials, Inc. 4,500 90
* Marvel Entertainment Group 11,600 180
MascoTech Inc. 16,000 198
Mattel, Inc. 14,850 386
* Maxim Integrated Products, Inc. 4,500 230
McDonald's Corp. 30,900 1,209
McDonnell Douglas Corp. 4,200 322
McKesson Corp. 1,500 70
Medtronic, Inc. 6,400 494
Merck & Co., Inc. 50,100 2,455
Merrill Lynch & Co., Inc. 9,800 514
* Fred Meyer, Inc. 6,500 176
* Michaels Stores, Inc. 6,700 143
* Microsoft Corp. 14,200 1,284
* Micro Warehouse Inc. 5,000 231
Micron Technology Inc. 8,000 439
* Mid Atlantic Medical Services 10,200 189
Millipore Corp. 3,100 209
Minnesota Mining &
Manufacturing Co. 17,500 1,002
* Mirage Resorts, Inc. 8,900 272
Mobil Corp. 15,900 1,526
Molex, Inc. 6,725 260
Morgan Stanley Group, Inc. 3,900 316
Morton International, Inc. 10,900 319
Motorola, Inc. 24,500 1,645
* Multimedia, Inc. 5,000 194
Mylan Laboratories, Inc. 7,500 231
* National Gaming Corp. 340 3
* National Gypsum Co. 3,500 183
* National Semiconductor Corp. 10,700 297
* Navistar International Corp. 12,500 189
Newell Co. 11,500 282
Newmont Gold Co. 4,000 161
Newmont Mining Corp. 7,100 297
* Nextel Communications 12,400 174
Nike, Inc. Class B 2,700 227
* Nine West Group, Inc. 5,600 204
Noble Affiliates, Inc. 7,600 194
Nordson Corp. 2,900 160
Nordstrom, Inc. 5,500 227
* Northwest Airlines Corp. Class A 7,600 268
* NovaCare, Inc. 25,000 203
* Novell, Inc. 20,900 417
Nucor Corp. 6,600 353
* Office Depot, Inc. 10,700 301
Olsten Corp. 6,000 197
* Oracle Corp. 17,000 656
* OrNda Healthcorp 10,200 175
* Oryx Energy Co. 15,200 209
* Outback Steakhouse 8,300 241
* Owens-Corning Fiberglas Corp. 6,300 232
* Owens-Illinois, Inc. 15,700 204
* Oxford Health Plan 4,800 226
* Pacificare Health Systems Inc. Class A 3,100 156
* Paging Network Inc. 7,200 245
* Parametric Technology Corp. 5,400 268
Parker & Parsley Petroleum Co. 10,000 196
Paul Revere Corp. 1,500 25
Paychex, Inc. 5,700 208
Pep Boys (Manny, Moe & Jack) 8,900 238
PepsiCo, Inc. 32,700 1,492
* Perrigo Co. 14,900 164
Petrie Stores Corp. 4,700 32
* Petsmart, Inc. 8,550 247
Pfizer, Inc. 13,600 1,256
Philip Morris Cos., Inc. 32,600 2,425
Phillips-Van Heusen Corp. 11,800 183
* Physician Corp. of America 9,200 125
Pittston Services Group 7,700 185
Pogo Producing Co. 8,600 197
* Policy Management Systems Corp. 3,600 166
Praxair, Inc. 11,200 280
* Price/Costco Inc. 18,500 302
* Price Enterprises, Inc. 13,100 182
* Primadonna Resorts, Inc. 8,400 203
Procter & Gamble Co. 28,300 2,034
Progressive Corp. of Ohio 6,400 246
* Promus Co., Inc. 7,500 292
* Qualcomm, Inc. 8,300 287
* Quantum Corp. 10,200 235
RJR Nabisco Holdings Corp. 8,720 243
Raychem Corp. 5,900 226
Raytheon Co. 6,300 489
Reebok International Ltd. 6,700 228
</TABLE>
15
<PAGE> 16
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
* Revco Drug Stores, Inc. 9,800 $ 235
Reynolds & Reynolds Class A 1,400 41
Reynolds Metals Co. 900 46
Riverwood International Corp. 6,400 149
Rubbermaid, Inc. 6,800 189
Russell Corp. 3,100 89
* Rust International, Inc. 9,500 155
* SPS Transaction Services 6,100 211
* Safeway, Inc. 9,000 336
St. Joe Paper Co. 3,100 197
* St. Jude Medical, Inc. 5,600 280
Salomon, Inc. 8,100 325
* Santa Fe Energy Resources Inc. 20,700 197
Santa Fe Pacific Corp. 11,744 299
Santa Fe Pacific Gold Corp. 17,240 209
* R. P. Scherer Corp. 4,600 194
A. Schulman Inc. 6,700 193
Charles Schwab Corp. 6,150 267
Scientific-Atlanta, Inc. 11,700 257
Scott Paper Co. 9,800 485
E.W. Scripps Co. 6,235 201
* Seagate Technology 7,200 283
* Seagull Energy Corp. 9,200 152
Sensormatic Electronics Corp. 7,800 277
* Service Merchandise Co., Inc. 40,400 212
Shaw Industries, Inc. 9,300 158
* Shoney's Inc. 17,800 209
Sigma Aldrich Corp. 5,100 250
* Silicon Graphics, Inc. 9,900 395
* Sithe Energies, Inc. 21,300 208
* Solectron Corp. 6,500 222
* Southern Pacific Rail Corp. 11,900 187
* Southland Corp. 42,400 147
Southwest Airlines Co. 12,900 308
SBC Communications, Inc. 7,260 346
Sprint Corp. 2,000 67
* Staples, Inc. 8,500 246
* Starbucks Corp. 7,400 263
State Street Boston Corp. 2,200 81
Stewart & Stevenson Services, Inc. 5,200 187
* Stone Container Corp. 10,500 223
* Stop & Shop Cos. Inc. 8,600 220
* Storage Technology Corp. 8,800 217
* Stratus Computer, Inc. 5,800 180
Stryker Corp. 5,300 203
* Sun Microsystems, Inc. 6,400 311
SunAmerica Inc. 3,900 199
Sunbeam Corp. 12,100 168
Superior Industries International, Inc. 7,300 227
* Sybase, Inc. 9,000 262
* Sybron Corp. 4,700 187
Sysco Corp. 12,000 354
TIG Holdings, Inc. 8,200 189
Talbots Inc. 6,000 238
* Tandem Computers, Inc. 14,600 235
Tandy Corp. 5,500 285
* Tele-Communications Inc. Class A 30,600 717
Teledyne Inc. 7,100 174
Telephone & Data Systems, Inc. 5,600 204
* Tellabs, Inc. 7,000 336
* Tenet Healthcare Corp. 17,742 255
* Teradyne, Inc. 4,300 281
Texas Instruments, Inc. 4,900 656
* Thermo Electron Corp. 7,500 302
* Thermo Instrument Systems, Inc. 7,350 180
* 3 Com Corp. 5,100 342
Time Warner, Inc. 18,800 773
Total System Services, Inc. 10,600 155
* Toys R Us, Inc. 15,350 449
Transatlantic Holdings 3,200 208
* TransTexas Gas Corp. 12,300 184
Travelers Group Inc. 15,400 674
Trimas Corp. 6,800 156
* Triton Energy Corp. 4,800 223
Turner Broadcasting Class B 11,700 240
* 20th Century Industries of CA 16,100 201
Tyco International Ltd. 6,094 329
Tyson Foods, Inc. 9,300 215
* UAL Corp. 1,900 266
UNUM Corp. 1,200 56
* USG Corp. 9,000 214
Union Texas Petroleum Holdings Inc. 8,000 169
* Unisys Corp. 22,900 249
United Healthcare Corp. 10,100 418
* United States Cellular 5,900 178
U.S. Healthcare, Inc. 6,100 188
United States Surgical Corp. 10,800 225
* Value Health, Inc. 6,000 194
* Vanguard Cellular Systems, Inc.
Class A 7,000 169
Varian Associates, Inc. 4,300 238
* Varity Corp. 5,000 220
* Viacom International Class A 13,744 639
* Viacom International Class B 2,606 121
* Viking Office Products 7,100 260
* Vishay Intertechnology, Inc. 6,220 225
* Vons Cos., Inc. 9,500 191
WMX Technologies Inc. 22,900 650
Wal-Mart Stores, Inc. 57,200 1,530
Walgreen Co. 7,800 391
Warnaco Group 9,300 186
Watts Industries Class A 7,000 177
Wausau Paper Mills Co. 6,780 157
Wellman, Inc. 6,300 172
* Wellpoint Health Networks, Inc. Class A 6,100 172
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Werner Enterprises, Inc. 8,500 $ 168
Wesco Financial Corp. 1,300 164
* Western Atlas Inc. 5,300 235
Western Gas Resources, Inc. 7,400 128
Western National Corp. 8,500 105
Westinghouse Electric Corp. 23,500 344
Wheelabrator Technologies 14,500 223
Wm. Wrigley, Jr. Co. 1,900 88
* Xilinx, Inc. 2,800 263
Xtra Corp. 3,500 162
York International Corp. 4,800 216
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (100.0%)
(Cost $144,413) 163,501
- -------------------------------------------------------------------------------
<CAPTION>
TEMPORARY CASH INVESTMENT (.4%)
- -------------------------------------------------------------------------------
Face
Amount
(000)+
----------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account 6.13%, 7/3/95
(Cost $607) $607 607
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $145,020) 164,108
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.4%)
- -------------------------------------------------------------------------------
Other Assets--Notes B and E 1,579
Liabilities--Note E (2,259)
---------
(680)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------
Applicable to 13,681,214 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $163,428
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $11.95
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AT JUNE 30, 1995, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------
Amount Per
(000) Share
--------- ---------
<S> <C> <C>
Paid in Capital $143,338 $10.48
Undistributed Net
Investment Income 577 .04
Accumulated Net
Realized Gains 425 .03
Unrealized Appreciation of
Investments--Note D 19,088 1.40
- -------------------------------------------------------------------------------
NET ASSETS $163,428 $11.95
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
BALANCED PORTFOLIO Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (48.4%)
- -------------------------------------------------------------------------------
* ADC Telecommunications, Inc. 400 $ 14
* ALC Communications 800 36
* AMR Corp. 600 45
AT&T Corp. 5,400 287
Abbott Laboratories, Inc. 2,900 117
* Adaptec, Inc. 900 33
Adobe Systems, Inc. 600 35
* Advanced Micro Devices, Inc. 1,100 40
Advanta Corp. Class A 200 8
* Airgas, Inc. 1,000 27
* AirTouch Communications, Inc. 2,300 66
Alexander & Alexander Services, Inc. 400 10
* Alleghany Corp. 102 16
Allied-Signal, Inc. 500 22
* Alumax, Inc. 700 22
Aluminum Co. of America 800 40
* ALZA Corp. 1,100 26
Amerada Hess Corp. 200 10
* Amdahl Corp. 2,300 26
American International Group, Inc. 1,000 114
American Media Class A 400 3
* American Power Conversion Corp. 400 9
American Re Corp. 800 30
* Amgen, Inc. 600 48
Amoco Corp. 1,200 80
* Amphenol Corp. 400 12
Anadarko Petroleum Corp. 600 26
* Analog Devices, Inc. 1,000 34
* Andrew Corp. 600 35
* AnnTaylor Stores Corp. 1,400 33
* Applied Materials, Inc. 600 52
Archer-Daniels-Midland Co. 2,600 48
* Arrow Electronics, Inc. 700 35
* Associated Group, Inc. 50 1
* Associated Group, Inc. Class B 50 1
* Atmel Corp. 600 33
Automatic Data Processing, Inc. 800 50
* AutoZone, Inc. 1,100 28
* BHC Communications, Inc. Class A 300 24
* BMC Software, Inc. 500 38
* Barnes & Noble Inc. 700 24
Battle Mountain Gold Co. Class A 600 6
* Bay Networks 690 28
* Bed Bath and Beyond 200 5
* Best Buy, Inc. 800 21
* Bethlehem Steel Corp. 1,300 21
* Beverly Enterprises Inc. 1,600 20
* Biogen, Inc. 600 27
* Biomet, Inc. 1,600 25
The Boeing Co. 1,300 81
* Boston Scientific Corp. 1,100 35
</TABLE>
17
<PAGE> 18
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
* Boyd Gaming Corp. 600 $ 10
Breed Technological Inc. 200 5
* Brinker International, Inc. 1,200 21
* Burlington Coat Factory
Warehouse Corp. 2,500 26
* Burlington Industries 2,100 24
Burlington Resources, Inc. 300 11
CBS, Inc. 500 34
* CNA Financial Corp. 400 35
* CUC International, Inc. 800 34
* Cablevision Systems Corp. Class B 400 25
* Cabletron Systems, Inc. 650 35
Capital Cities/ABC, Inc. 600 65
Capital One Financial Corp. 900 18
Cardinal Health, Inc. 600 28
Caremark International, Inc. 1,200 24
Caterpillar, Inc. 800 51
Centex Corp. 200 6
* Century Communications Corp.
Class A 2,800 26
* Ceridian Corp. 800 30
Champion International Corp. 900 47
* Cheyenne Software, Inc. 600 11
* Chiron Corp. 485 31
* Chris-Craft Industries, Inc. 721 25
Chrysler Corp. 1,300 62
CINergy Corp. 700 18
Circuit City Stores, Inc. 1,000 32
* Cirrus Logic 800 50
* Cisco Systems, Inc. 1,200 61
Cintas Corp. 200 7
* Circus Circus Enterprises Inc. 1,200 42
Citicorp 1,800 104
* Citizens Utilities Co. Class B 1,462 17
Clayton Homes Inc. 1,625 27
The Coca-Cola Co. 4,300 274
Coca-Cola Enterprises, Inc. 1,300 28
* Coleman Inc. 700 25
* Coltec Inc. 1,100 19
* Columbia Gas Systems, Inc. 600 19
Columbia/HCA Healthcare Corp. 1,868 81
Comcast Corp. Class A Special 1,600 30
* COMPAQ Computer Corp. 1,600 73
Computer Associates International, Inc. 700 47
* Computer Sciences Corp. 600 34
* Compuware Corp. 800 25
* Conner Peripherals, Inc. 1,800 22
Conseco, Inc. 200 9
Consolidated Freightways, Inc. 900 20
* Cordis Corp. 400 27
Cracker Barrel Old Country
Stores, Inc. 1,100 23
* Crown Cork & Seal Co., Inc. 900 45
* DSC Communications Corp. 900 42
Danaher Corp. 1,000 30
Dean Witter Discover & Co. 900 42
* Dell Computer 600 36
Delta Air Lines, Inc. 500 37
Dentsply International 700 25
* Department 56 Inc. 700 27
* Digital Equipment Corp. 1,100 45
Dillard Department Stores Class A 1,000 29
The Walt Disney Co. 1,700 95
E.I. du Pont de Nemours & Co. 1,900 131
* EMC Corp. 2,000 49
* Ensco International, Inc. 1,000 16
* Electronic Arts 1,200 33
Enron Oil & Gas Co. 1,000 22
The Equitable Cos. 400 8
Exxon Corp. 4,200 297
* FHP International Corp. 800 18
* FMC Corp. 400 27
* Federal Express Corp. 500 30
Federal Home Loan Mortgage Corp. 300 21
Federal National Mortgage Assn. 400 38
* Federated Department Stores 1,800 46
Fingerhut Co. 400 6
First Data Corp. 600 34
First Financial Management 500 43
First USA Inc. 700 31
* FIserv, Inc. 1,000 28
Fluor Corp. 200 10
Ford Motor Co. 1,300 39
* Forest Laboratories, Inc. 600 27
* Foundation Health Co. 700 19
* Franklin Quest Co. 700 17
Franklin Resources Corp. 200 9
* Freeport McMoRan, Inc. 1,800 32
* Fruit of the Loom, Inc. 900 19
The Gap, Inc. 200 7
* Gateway 2000 Inc. 1,100 25
General Electric Co. 5,600 316
* General Instrument 900 34
General Motors Corp. 2,800 131
General Motors Corp. Class E 1,200 52
* General Nutrition Cos., Inc. 1,000 35
General Re Corp. 400 54
* Genzyme Corp. 800 32
* Genzyme Corp. Tissue Repair 108 1
Georgia Gulf Corp. 600 19
Giddings & Lewis, Inc. 200 3
Gillette Co. 1,800 80
* Glenayre Technologies, Inc. 900 46
Golden West Financial Corp. 600 28
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Great Lakes Chemical Corp. 500 $ 30
Green Tree Financial Corp. 200 9
* Gtech Holdings Corp. 1,200 35
HBO and Co. 600 33
Harley-Davidson, Inc. 400 10
Hasbro, Inc. 900 29
* Healthcare & Retirement Corp. 800 23
* HealthCare Compare Corp. 800 24
* Health Management Associates Class A 1,000 29
* Healthsource, Inc. 600 21
* HEALTHSOUTH Corp. 1,200 21
* Health Systems International 800 23
Hewlett-Packard Co. 1,400 104
Home Depot, Inc. 2,100 85
* Home Shopping Network, Inc. 2,600 22
Homestake Mining Co. 400 7
* Hospitality Franchise Systems, Inc. 900 31
* Host Marriott 2,100 22
* Humana, Inc. 2,000 35
IBP, Inc. 700 30
IMC Global Inc. 600 32
ITT Corp. 600 71
Illinois Tool Works, Inc. 800 44
* Infinity Broadcasting Corp. 1,050 35
* Informix Corp. 1,800 45
Inland Steel Industries, Inc. 600 18
* Integrated Device Technology Inc. 800 37
* Intel Corp. 3,000 190
International Business Machines Corp. 2,000 192
International Game Technology 400 6
International Specialty Products, Inc. 2,900 25
* Itel Corp. 700 27
IVAX Corp. 1,200 30
Johnson & Johnson 2,500 169
* Jones Apparel Group, Inc. 900 27
* KLA Instruments Corp. 500 39
Kansas City Southern Industries, Inc. 200 7
* King World Productions, Inc. 700 28
* Kohls Corp. 600 27
* The Kroger Co. 900 24
* LDDS Communications, Inc. 1,382 37
* LSI Logic Corp. 1,200 47
* LTV Corp. 2,000 29
La Quinta Inns Inc. 300 8
* Laboratory Corp. of America 1,152 15
* LAM Research Corp. 700 45
* Lands' End, Inc. 400 6
* Lear Seating Corp. 1,100 25
* Legent Corp. 800 35
Lehman Brothers Holdings, Inc. 400 9
Leucadia National Corp. 600 30
* Lin Broadcasting Corp. 300 38
* Lin Television 750 25
* Litton Industries, Inc. 700 26
Lockheed Martin Corp. 800 50
Loews Corp. 300 36
* Lotus Development Corp. 700 45
Lowes Cos., Inc. 1,400 42
MCI Communications Corp. 2,900 63
* MFS Communications Co., Inc. 600 19
MGIC Investment Corp. 700 33
* MGM Grand Inc. 800 22
* Magma Copper Co. Class B 1,200 19
Manor Care Inc. 800 23
Manpower Inc. 900 23
* Manville Corp. 2,500 34
Mark IV Industries, Inc. 420 9
* Marquette Electronics Class A 1,100 17
Martin Marietta Materials, Inc. 400 8
* Marvel Entertainment Group 1,400 22
Mattel, Inc. 1,250 33
* Maxim Integrated Products, Inc. 200 10
McDonald's Corp. 2,600 102
McDonnell Douglas Corp. 900 69
Medtronic, Inc. 800 62
Merck & Co., Inc. 4,400 216
* Fred Meyer, Inc. 700 19
* Michaels Stores, Inc. 700 15
* Microsoft Corp. 1,400 127
* Micro Warehouse Inc. 700 32
Micron Technology Inc. 1,200 66
* Mid Atlantic Medical Services 1,000 19
* Mirage Resorts, Inc. 1,000 31
Mobil Corp. 1,500 144
Molex, Inc. 750 29
Motorola, Inc. 2,100 141
* Multimedia, Inc. 700 27
* National Gypsum Co. 600 31
* National Semiconductor Corp. 1,300 36
* Navistar International Corp. 1,400 21
Newmont Gold Co. 200 8
Newmont Mining Corp. 200 8
* Nextel Communications 1,700 24
* Nine West Group, Inc. 800 29
Noble Affiliates, Inc. 200 5
Nordstrom, Inc. 200 8
* Northwest Airlines Corp. Class A 1,200 42
* NovaCare, Inc. 2,000 16
* Novell, Inc. 1,800 36
Nucor Corp. 900 48
* Office Depot, Inc. 1,000 28
Olsten Corp. 200 7
* Oracle Corp. 1,800 69
* OrNda Healthcorp 1,300 22
* Oryx Energy Co. 2,500 34
* Outback Steakhouse 200 6
</TABLE>
19
<PAGE> 20
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
* Owens-Corning Fiberglas Corp. 700 $ 26
* Owens-Illinois, Inc. 2,000 26
* Oxford Health Plan 800 37
* Pacificare Health Systems Inc. Class A 400 20
* Paging Network Inc. 800 27
* Parametric Technology Corp. 800 40
Parker & Parsley Petroleum Co. 200 4
Pep Boys (Manny, Moe & Jack) 200 5
PepsiCo, Inc. 3,000 137
* Perrigo Co. 1,700 18
* Petsmart, Inc. 900 26
Pfizer, Inc. 1,200 111
Philip Morris Cos., Inc. 2,900 216
Phillips-Van Heusen Corp. 200 3
* Physician Corp. of America 1,200 16
Pittston Services Group 800 19
Pogo Producing Co. 1,200 27
* Policy Management Systems Corp. 600 28
* Price/Costco Inc. 2,400 39
Price Enterprises, Inc. 1,400 19
* Primadonna Resorts, Inc. 900 22
Procter & Gamble Co. 2,600 187
Progressive Corp. of Ohio 600 23
* Promus Co., Inc. 800 31
Qualcomm, Inc. 1,000 35
* Quantum Corp. 1,400 32
RJR Nabisco Holdings Corp. 1,140 32
Raychem Corp. 200 8
Raytheon Co. 300 23
Reebok International Ltd. 200 7
* Revco Drug Stores, Inc. 1,100 26
* Rust International, Inc. 1,500 24
SPS Transaction Services 700 24
* Safeway, Inc. 700 26
St. Joe Paper Co. 400 25
St. Jude Medical, Inc. 800 40
Salomon, Inc. 300 12
* Santa Fe Energy Resources Inc. 1,600 15
Santa Fe Pacific Corp. 1,571 40
Santa Fe Pacific Gold Corp. 1,640 20
* R. P. Scherer Corp. 600 25
Charles Schwab Corp. 1,000 43
Scientific-Atlanta, Inc. 400 9
Scott Paper Co. 800 40
* Seagate Technology 1,000 39
* Seagull Energy Corp. 1,600 26
Sensormatic Electronics Corp. 200 7
* Service Merchandise Co., Inc. 3,800 20
* Shoney's Inc. 2,500 29
* Silicon Graphics, Inc. 1,000 40
* Sithe Energies, Inc. 400 4
* Solectron Corp. 800 27
* Southern Pacific Rail Corp. 1,100 17
* Southland Corp. 6,800 23
Southwest Airlines Co. 1,600 38
SBC Communications, Inc. 72 3
* Staples, Inc. 1,000 29
* Starbucks Corp. 200 7
Stewart & Stevenson Services, Inc. 700 25
* Stone Container Corp. 900 19
* Stop & Shop Cos. Inc. 800 21
* Storage Technology Corp. 800 20
* Stratus Computer, Inc. 800 25
Stryker Corp. 600 23
SunAmerica Inc. 200 10
Sunbeam Corp. 900 12
* Sun Microsystems, Inc. 900 44
* Superior Industries International, Inc. 200 6
* Sybase, Inc. 1,300 38
* Sybron Corp. 700 28
Talbots Inc. 200 8
* Tandem Computers, Inc. 1,300 21
* Tele-Communications Inc. Class A 2,700 63
Teledyne Inc. 300 7
Telephone & Data Systems, Inc. 200 7
* Tellabs, Inc. 1,200 58
* Tenet Healthcare Corp. 2,562 37
* Teradyne, Inc. 700 46
Texas Instruments, Inc. 400 54
* Thermo Electron Corp. 900 36
* Thermo Instrument Systems, Inc. 1,050 26
* 3 Com Corp. 600 40
Time Warner, Inc. 2,000 82
Total System Services, Inc. 400 6
* Toys R Us, Inc. 1,800 53
Transatlantic Holdings 400 26
* TransTexas Gas Corp. 2,000 30
Travelers Group Inc. 1,300 57
Trimas Corp. 200 5
* Triton Energy Corp. 700 32
Turner Broadcasting Class B 1,000 21
* 20th Century Industries of CA 1,900 24
Tyco International Ltd. 717 39
Tyson Foods, Inc. 1,000 23
* UAL Corp. 300 42
* USG Corp. 1,100 26
* Unisys Corp. 1,700 18
United Healthcare Corp. 1,000 41
* United States Cellular 700 21
United States Surgical Corp. 300 6
* Value Health, Inc. 600 19
* Vanguard Cellular Systems, Inc. Class A 800 19
Varian Associates, Inc. 200 11
* Varity Corp. 700 31
* Viacom International Class A 1,148 53
* Viacom International Class B 363 17
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
* Viking Office Products 700 $ 26
* Vishay Intertechnology, Inc. 1,260 46
* Vons Cos., Inc. 1,100 22
Wal-Mart Stores, Inc. 5,000 134
Warnaco Group 1,300 26
Wellman, Inc. 200 5
* Wellpoint Health Networks, Inc.
Class A 800 23
Werner Enterprises, Inc. 1,000 20
* Western Atlas Inc. 600 27
Wheelabrator Technologies 1,500 23
* Xilinx, Inc. 400 38
York International Corp. 600 27
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $11,851) 13,942
- -------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL BONDS (53.9%)
- -------------------------------------------------------------------------------
Face
Amount
(000)
----------
<S> <C> <C>
ALASKA (1.9%)
North Slope Borough GO
7.50%, 6/30/01 (3) $ 500 566
---------
- -------------------------------------------------------------------------------
CALIFORNIA (9.5%)
California GO
10.00%, 4/1/98 400 456
Los Angeles Waste Water System
5.75%, 6/1/10 (1) 400 396
Orange County Sanitation Dist. VRDO
4.20%, 7/5/95 (LOC) 160 160
San Diego County TRAN
4.50%, 9/30/96 1,000 1,004
University of California Regents Rev.
12.00%, 9/1/03 (2) 500 729
---------
STATE TOTAL 2,745
---------
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (2.5%)
District of Columbia GO
VRDO 4.40%, 7/5/95 200 200
6.75%, 6/1/05 (2) 500 532
---------
STATE TOTAL 732
---------
- -------------------------------------------------------------------------------
FLORIDA (3.6%)
Dade County School Dist.
7.375%, 7/1/08 (Prere.) 400 450
Dade County Water & Sewer
Rev. VRDO
4.20%, 7/5/95 (3) 440 440
Hillsborough County Industrial
Development Auth. PCR VRDO
(Tampa Electric Co.)
4.30%, 7/5/95 145 145
---------
STATE TOTAL 1,035
---------
- -------------------------------------------------------------------------------
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
ILLINOIS (1.5%)
Illinois Sales Tax Rev.
7.20%, 6/1/99 (Prere.) $ 400 $ 446
---------
- -------------------------------------------------------------------------------
KENTUCKY (1.4%)
Kentucky Property & Buildings Rev.
5.80%, 9/1/06 400 407
---------
- -------------------------------------------------------------------------------
MARYLAND (1.4%)
Maryland Dept. of Transportation
5.20%, 9/15/04 400 404
---------
- -------------------------------------------------------------------------------
MASSACHUSETTS (6.9%)
Massachusetts GO
7.25%, 7/1/98 (Prere.) 500 549
Massachusetts Bay Transportation
Auth. TRAN
6.25%, 3/1/05 500 537
Massachusetts Industrial Finance Agency
(Refusetech Inc. Project)
6.30%, 7/1/05 600 605
Massachusetts Water Resources Auth.
5.75%, 8/1/10 (1) 300 300
---------
STATE TOTAL 1,991
---------
- -------------------------------------------------------------------------------
MICHIGAN (3.9%)
Dickinson County Memorial Hosp. Rev.
7.625%, 11/1/05 500 495
Michigan Housing Development Auth.
6.30%, 4/1/04 600 616
---------
STATE TOTAL 1,111
---------
- -------------------------------------------------------------------------------
NEVADA (2.5%)
Clark County Airport VRDO
4.20%, 7/5/95 (1) 720 720
---------
- -------------------------------------------------------------------------------
NEW JERSEY (3.3%)
New Jersey Economic
Development Auth.
5.70%, 7/1/05 (1) 400 412
New Jersey Health Care Facilities Auth.
(Atlantic City Medical Center)
6.80%, 7/1/05 500 529
---------
STATE TOTAL 941
---------
- -------------------------------------------------------------------------------
NEW YORK (4.7%)
New York Environmental Facilities
Corp. PCR
6.35%, 6/15/06 520 558
New York State Dormitory Auth.
(State University)
5.375%, 5/15/07 (2) 400 400
New York State Thruway Auth.
5.40%, 4/1/05 (1) 400 404
---------
STATE TOTAL 1,362
---------
- -------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OHIO (3.4%)
Ohio Public Facilities Comm.
5.50%, 12/1/06 (1) $ 400 $ 407
Ohio Water Development Auth.
5.75%, 12/1/05 (1) 540 559
---------
STATE TOTAL 966
---------
- -------------------------------------------------------------------------------
PENNSYLVANIA (2.0%)
Pennsylvania Turnpike Comm.
7.625%, 12/1/99 (Prere.) 500 571
---------
- -------------------------------------------------------------------------------
TEXAS (3.6%)
Houston Hotel Occupancy
5.25%, 7/1/07 (4) 500 490
San Antonio Water Rev.
6.50%, 5/15/10 (1) 500 531
---------
STATE TOTAL 1,021
---------
- -------------------------------------------------------------------------------
WEST VIRGINIA (1.8%)
West Virginia School Building Auth.
5.625%, 7/1/02 500 520
---------
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $15,173) 15,538
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.3%)
(Cost $27,024) 29,480
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.3%)
- -------------------------------------------------------------------------------
Other Assets--Note B 367
Liabilities (1,023)
---------
(656)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------
Applicable to 2,613,953 outstanding
$.001 par value shares
(authorized 250,000,000 shares) $28,824
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $11.03
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AT JUNE 30, 1995, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------
Amount Per
(000) Share
---------- ---------
<S> <C> <C>
Paid in Capital $26,263 $10.05
Undistributed Net
Investment Income 25 .01
Accumulated Net
Realized Gains 80 .03
Unrealized Appreciation of
Investments--Note D 2,456 .94
- -------------------------------------------------------------------------------
NET ASSETS $28,824 $11.03
- -------------------------------------------------------------------------------
</TABLE>
GO=General Obligation
PCR=Pollution Control Revenue
TRAN=Tax Revenue Anticipation Note
VRDO=Variable Rate Demand Obligation
(Prere.)=Prerefunded
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association)
(2) AMBAC (AMBAC Indemnity Corporation)
(3) FGIC (Financial Guaranty Insurance Company)
(4) FSA (Financial Security Assurance)
The insurance does not guarantee the market value of the municipal bonds.
(LOC)=Scheduled principal and interest payments are guaranteed by bank letter
of credit.
22
<PAGE> 23
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH AND CAPITAL
INCOME APPRECIATION BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended Six Months Ended
June 30, 1995 June 30, 1995 June 30, 1995
(000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends . . . . . . . . . . . . . . . . . . . $ 585 $ 644 $ 57
Interest . . . . . . . . . . . . . . . . . . . 16 76 339
- ------------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . 601 720 396
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . . . $11 $23 $7
Management and Administrative . . . . . . . 11 44 6
Marketing and Distribution . . . . . . . . 4 26 10 77 2 15
--- --- --
Taxes (other than income taxes) . . . . . . . 2 4 --
Custodians' Fees . . . . . . . . . . . . . . . 9 16 4
Auditing Fees . . . . . . . . . . . . . . . 3 3 1
Shareholders' Reports . . . . . . . . . . . . 3 8 1
- ------------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . 43 108 21
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . 558 612 375
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN ON INVESTMENT
SECURITIES SOLD . . . . . . . . . . . . . . . 25 393 78
- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES . . . . . . . . . . . . 7,438 19,452 2,680
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations . . . $8,021 $20,457 $3,133
==============================================================================================================================
</TABLE>
23
<PAGE> 24
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH AND CAPITAL
INCOME APPRECIATION
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS July 25 to SIX MONTHS July 25 to
ENDED Dec. 31, ENDED Dec. 31,
JUNE 30, 1995 1994 JUNE 30, 1995 1994
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . $ 558 $ 225 $ 612 $ 238
Realized Net Gain . . . . . . . . . . . . . . . . . . . 25 2 393 32
Change in Unrealized Appreciation (Depreciation) . . . 7,438 (425) 19,452 (364)
- --------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from Operations . . . . . 8,021 (198) 20,457 (94)
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . (486) (241) -- (273)
Realized Net Gain . . . . . . . . . . . . . . . . . . . -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . . . . (486) (241) -- (273)
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . . . . . 10,732 12,242 57,763 42,711
--In Lieu of Cash Distributions . . . . . . 326 164 -- 250
--Exchange . . . . . . . . . . . . . . . . . 6,067 19,462 15,915 27,039
Redeemed --Regular . . . . . . . . . . . . . . . . . (22) (10) (192) (73)
--Exchange . . . . . . . . . . . . . . . . . (175) (10) (165) (10)
- --------------------------------------------------------------------------------------------------------------------
Net Increase from Capital
Share Transactions . . . . . . . . . . . . . . 16,928 31,848 73,321 69,917
- --------------------------------------------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . . . . . 24,463 31,409 93,778 69,550
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period--Note F . . . . . . . . . . . . . . 31,409 -- 69,650 100
- --------------------------------------------------------------------------------------------------------------------
End of Period (3) . . . . . . . . . . . . . . . . . . . $ 55,872 $ 31,409 $ 163,428 $ 69,650
====================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . . . . . . $.11 $.09 -- $.04
Realized Net Gain . . . . . . . . . . . . . . . . -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . . . 1,580 3,200 6,712 6,976
Issued in Lieu of
Cash Distributions . . . . . . . . . . . . . . 29 17 -- 25
Redeemed . . . . . . . . . . . . . . . . . . . . (18) (2) (33) (9)
- --------------------------------------------------------------------------------------------------------------------
1,591 3,215 6,679 6,992
- --------------------------------------------------------------------------------------------------------------------
(3) Undistributed (Overdistributed)
Net Investment Income . . . . . . . . . . . . $ 56 $ (16) $ 577 $ (35)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
BALANCED
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS July 25 to
ENDED Dec. 31,
JUNE 30, 1995 1994
(000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375 $ 143
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 2
Change in Unrealized Appreciation (Depreciation) . . . . . . . . . . . . . . . 2,680 (224)
- --------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from Operations . . . . . . . . . . . . . . . . . 3,133 (79)
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (343) (150)
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
- --------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (343) (150)
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,136 10,016
--In Lieu of Cash Distributions . . . . . . . . . . . . . . . . . . 304 134
--Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,232 7,634
Redeemed --Regular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43) (42)
--Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87) (21)
- --------------------------------------------------------------------------------------------------------------------
Net Increase from Capital
Share Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 8,542 17,721
- --------------------------------------------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,332 17,492
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period--Note F . . . . . . . . . . . . . . . . . . . . . . . . . . 17,492 --
- --------------------------------------------------------------------------------------------------------------------
End of Period (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,824 $17,492
====================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . $.14 $.09
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
- --------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812 1,779
Issued in Lieu of
Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 28 14
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (7)
- --------------------------------------------------------------------------------------------------------------------
828 1,786
- --------------------------------------------------------------------------------------------------------------------
(3) Undistributed (Overdistributed)
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . $ 25 $ (7)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH AND
INCOME
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED July 25+ to
For a Share Outstanding Throughout Each Period JUNE 30, 1995 Dec. 31, 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 9.77 $10.00
------- ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 .09
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.85 (.23)
------- ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . . . . . . . . . . . . . . 1.97 (.14)
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . (.11) (.09)
Distributions from
Realized Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
------- ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . (.11) (.09)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . $11.63 $9.77
====================================================================================================================
TOTAL RETURN** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +20.22% -1.70%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (Millions) . . . . . . . . . . . . . . . . . . . . . . . $56 $31
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . . . . . . . .20%* .20%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.56%* 2.82%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2%* 0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total returns do not reflect the 2% redemption fee on shares held less than
one year.
+ Subscription period for each Portfolio was July 25, 1994, to September 5,
1994, during which time all assets were held in money market instruments.
Performance measurement begins September 6, 1994.
26
<PAGE> 27
<TABLE>
<CAPTION>
CAPITAL
APPRECIATION
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED July 25+ to
For a Share Outstanding Throughout Each Period JUNE 30, 1995 Dec. 31, 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 9.95 $10.00
------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .04 .04
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.96 (.05)
------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . . . . . . . . . . . . . . 2.00 (.01)
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.04)
Distributions from
Realized Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.04)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . $11.95 $9.95
====================================================================================================================
TOTAL RETURN** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +20.10% -0.50%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (Millions) . . . . . . . . . . . . . . . . . . . . . . . $163 $70
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . . . . . . . .20%* .20%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.12%* 1.26%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%* 1%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total returns do not reflect the 2% redemption fee on shares held less than
one year.
+ Subscription period for each Portfolio was July 25, 1994, to September 5,
1994, during which time all assets were held in money market instruments.
Performance measurement begins September 6, 1994.
27
<PAGE> 28
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
BALANCED
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED July 25+ to
For a Share Outstanding Throughout Each Period JUNE 30, 1995 Dec. 31, 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 9.79 $10.00
------- ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 .09
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.23 (.21)
------- ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . . . . . . . . . . . . . . 1.38 (.12)
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . (.14) (.09)
Distributions from
Realized Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
------- ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . (.14) (.09)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . $11.03 $9.79
====================================================================================================================
TOTAL RETURN** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +14.14% -1.40%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (Millions) . . . . . . . . . . . . . . . . . . . . . . . $29 $17
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . . . . . . . .20%* 0%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13%* 2.88%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%* 0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total returns do not reflect the 2% redemption fee on shares held less than
one year.
+ Subscription period for each Portfolio was July 25, 1994, to September 5,
1994, during which time all assets were held in money market instruments.
Performance measurement begins September 6, 1994.
28
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
Vanguard Tax-Managed Fund is registered under the Investment Company Act of
1940 as a diversified open-end investment company and consists of the Growth
and Income, Capital Appreciation, and Balanced Portfolios.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of financial
statements.
1. SECURITY VALUATION: Securities listed on an exchange are valued at the
latest quoted sales prices as of the close of the New York Stock Exchange
(generally 4:00 PM) on the valuation date; such securities not traded are
valued at the mean of the latest quoted bid and asked prices. Unlisted
securities held by the Growth and Income Portfolio are valued at the latest
quoted bid prices; such securities held by the Capital Appreciation
Portfolio and the equity portion of the Balanced Portfolio are valued at
the mean of the latest quoted bid and asked prices. Municipal bonds are
valued utilizing primarily the latest bid prices or, if bid prices are not
available, on the basis of valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and
ratings), both as furnished by an independent pricing service. Temporary
cash investments are valued at amortized cost which approximates market
value.
2. FEDERAL INCOME TAXES: Each Portfolio of the Fund intends to continue to
qualify as a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for Federal income taxes is required in
the financial statements.
3. REPURCHASE AGREEMENTS: The Growth and Income and Capital Appreciation
Portfolios, along with other members of The Vanguard Group of Investment
Companies, transfer uninvested cash balances into a Pooled Cash Account,
the daily aggregate of which is invested in repurchase agreements secured
by U.S. Government obligations. Securities pledged as collateral for
repurchase agreements are held by the Fund's custodian bank until maturity
of each repurchase agreement. Provisions of the agreement require that the
market value of this collateral is sufficient in the event of default;
however, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings.
4. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Premiums and original issue discounts on municipal bonds
are amortized and accreted, respectively, to interest income over the lives
of the respective securities.
B. The Vanguard Group, Inc. furnishes at cost investment advisory, corporate
management, administrative, marketing and distribution services. The costs of
such services are allocated to the Fund under methods approved by the Board of
Directors. At June 30, 1995, the Fund had contributed capital of $31,000 to
Vanguard (included in Other Assets), representing .2% of Vanguard's
capitalization. The Fund's directors and officers are also directors and
officers of Vanguard.
C. During the six months ended June 30, 1995, purchases and sales of
investment securities, other than U.S. Government securities and temporary cash
investments, were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(000)
------------------------------
Portfolio Purchases Sales
- --------------------------------------------------------------------
<S> <C> <C>
GROWTH AND INCOME $17,942 $ 374
CAPITAL APPRECIATION 75,996 1,892
BALANCED 8,600 387
- --------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (continued)
D. At June 30, 1995, unrealized appreciation of investment securities for
financial reporting and Federal income tax purposes was:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
(000)
----------------------------------------
Appreciated Depreciated Net Unrealized
Portfolio Securities Securities Appreciation
- -----------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH AND INCOME $ 7,289 $ (276) $ 7,013
CAPITAL APPRECIATION 21,503 (2,415) 19,088
BALANCED 2,754 (298) 2,456
- -----------------------------------------------------------------------
</TABLE>
E. The market value of Capital Appreciation Portfolio securities on loan to
broker/dealers at June 30, 1995, was $813,000, for which the Portfolio had
received cash collateral of $850,000.
F. The Fund was organized on July 1, 1994, and its operations up to July 25,
1994, were limited to the sale and issuance of 10,000 shares of common stock of
the Capital Appreciation Portfolio to a director and officer of the Fund.
30
<PAGE> 31
DIRECTORS AND OFFICERS
JOHN C. BOGLE, Chairman and Chief Executive Officer
Chairman and Director of The Vanguard Group, Inc.,
and of each of the investment companies in The
Vanguard Group.
JOHN J. BRENNAN, President
President and Director of The Vanguard Group, Inc.,
and of each of the investment companies in The
Vanguard Group.
ROBERT E. CAWTHORN, Chairman of Rhone-Poulenc
Rorer, Inc.; Director of Sun Company, Inc.
BARBARA BARNES HAUPTFUHRER, Director of The Great
Atlantic and Pacific Tea Company, Alco Standard Corp.,
Raytheon Company, Knight-Ridder, Inc., and
Massachusetts Mutual Life Insurance Co.
BRUCE K. MACLAURY, President of The Brookings
Institution; Director of American Express Bank Ltd.,
The St. Paul Companies, Inc., and Scott Paper Company.
BURTON G. MALKIEL, Chemical Bank Chairman's
Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Amdahl
Corporation, Baker Fentress & Co., The Jeffrey Co.,
and Southern New England Communications Company.
ALFRED M. RANKIN, JR., Chairman, President, and
Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich
Company, and The Standard Products Company.
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 Company and NACCO Industries.
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 Corporation.
J. LAWRENCE WILSON, Chairman and Chief Executive
Officer of Rohm & Haas Company; Director of
Cummins Engine Company; Trustee of Vanderbilt
University and the Culver Educational Foundation.
OTHER FUND OFFICERS
RICHARD F. HYLAND, Treasurer; Treasurer of The
Vanguard Group, Inc., and of each of the investment
companies in The Vanguard Group.
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President
and Secretary of The Vanguard Group, Inc.; Secretary of
each of the investment companies in The Vanguard Group.
KAREN E. WEST, Controller; Vice President of The
Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD GROUP OFFICERS
ROBERT A. DISTEFANO IAN A. MACKINNON
Senior Vice President Senior Vice President
Information Technology Fixed Income Group
JEREMY G. DUFFIELD F. WILLIAM MCNABB III
Senior Vice President Senior Vice President
Planning & Development Institutional
JAMES H. GATELY RALPH K. PACKARD
Senior Vice President Senior Vice President
Individual Investor Group Chief Financial Officer
31
<PAGE> 32
THE VANGUARD FAMILY OF FUNDS
FIXED INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Admiral Funds
U.S. Treasury Money
Market Portfolio
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Money Market Portfolio
Vanguard State Tax-Free Funds
Money Market Portfolios
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
Insured Longer-Term Portfolios
(CA, FL, NJ, NY, OH, PA)
INCOME FUNDS
Vanguard Admiral Funds
Vanguard Fixed Income
Securities Fund
Vanguard Preferred Stock Fund
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible
Securities Fund
Vanguard Equity Income Fund
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund
U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Funds
Income Portfolio
Conservative Growth Portfolio
Moderate Growth Portfolio
Growth Portfolio
Vanguard STAR Portfolio
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International
Growth Portfolio
Vanguard/Trustees' Equity Fund
International Portfolio
INDEX FUNDS
Vanguard Index Trust
Total Stock Market Portfolio
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Value Portfolio
Small Capitalization Stock Portfolio
Vanguard International Equity
Index Fund
European Portfolio
Pacific Portfolio
Emerging Markets Portfolio
Vanguard Bond Index Fund
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
[THE VANGUARD GROUP LOGO]
Vanguard Financial Center Valley Forge, Pennsylvania 19482
New Account Information: Shareholder Account Services:
1-(800) 662-7447 1-(800) 662-2739
This Report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus. All Funds in
the Vanguard Family are offered by prospectus only.
Q872-6/95
[VANGUARD TAX-MANAGED FUND LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1995
