<PAGE> 1
VANGUARD
TAX-MANAGED FUNDS
VANGUARD TAX-MANAGED BALANCED FUND
VANGUARD TAX-MANAGED GROWTH AND
INCOME FUND
VANGUARD TAX-MANAGED CAPITAL
APPRECIATION FUND
VANGUARD TAX-MANAGED SMALL-CAP FUND
[PHOTO]
SEMIANNUAL
REPORT
JUNE 30, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 9,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
Our report cover pays homage to three anniversaries, each of great significance
to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto--"Leading the way"--serves as a guiding principle for
our company.
- - The 100th birthday, on July 23, 1998, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group. Mr.
Morgan was friend and mentor to Vanguard founder John C. Bogle, and helped to
shape the standards and business principles that Mr. Bogle laid down for
Vanguard at its beginning nearly 25 years ago: a stress on balanced,
diversified investments; insistence on fair dealing and candor with clients;
and a focus on long-term investing. To our great regret, Mr. Morgan died on
September 2, 1998.
- - The 70th anniversary, on December 28, 1998, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
5
PERFORMANCE SUMMARIES
7
FUND PROFILES
11
FINANCIAL STATEMENTS
18
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
The U.S. stock market advanced along a broad front during the six months
ended June 30, 1999, helping the Vanguard Tax-Managed Funds to post strong
returns during the first half of their fiscal year. Each of our three equity
funds registered double-digit gains, including the new Tax-Managed Small-Cap
Fund, which was in operation for just over three months of the period. The rise
in stock prices came in the face of higher interest rates and lower bond prices,
which restrained returns for our Tax-Managed Balanced Fund.
As you know, the funds seek to minimize taxable gains and to keep portfolio
turnover low in an effort to provide superior after-tax returns for
shareholders. All four funds turned in solid performances in relation to their
mutual fund competitors and all but the Growth and Income Fund exceeded the
returns of their unmanaged index benchmarks.
The +12.3% return of our Growth and Income Fund came just short of the
+12.4% return of its benchmark, the Standard & Poor's 500 Index. Our Capital
Appreciation Fund earned +15.6% for the half-year, well above the gain for its
index benchmark. Despite a modest slump in the bond market, our Balanced Fund
achieved an excellent half-year return of +6.5%, outperforming both of its
comparative standards. In its brief 14 weeks of operation, our new Small-Cap
Fund returned +17.4%, an outsized return based in part on lucky timing--the fund
was launched when small-capitalization stock indexes were near their lows for
the half-year.
The table above compares the funds' total returns (capital change plus
rein-vested dividends) with their comparative standards. The performance of the
new Institutional Shares for our three equity funds, which are available for
minimum investments of $10 million, is presented in the second table. Net asset
values and
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JUNE 30, 1999
- ---------------------------------------------------------------
<S> <C>
TAX-MANAGED GROWTH AND INCOME FUND +12.3%
Average Growth and Income Fund +11.0
S&P 500 Index +12.4
- ---------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND +15.6%
Average Growth Fund +11.7
Russell 1000 Index +11.5
- ---------------------------------------------------------------
TAX-MANAGED BALANCED FUND + 6.5%
Average Balanced Fund* + 5.6
Balanced Composite Index** + 5.3
- ---------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND (FROM 3/25) +17.4%
Average Small-Cap Fund (from 3/25) +17.5
S&P SmallCap 600 Index (from 3/25) +16.7
- ---------------------------------------------------------------
</TABLE>
*Bond component not tax-exempt.
**50% Russell 1000 Index, 50% Lehman Brothers 7 Year
Municipal Bond Index.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
TOTAL RETURNS
SINCE INCEPTION*
INSTITUTIONAL SHARES THROUGH JUNE 30, 1999
- ---------------------------------------------------------------
<S> <C>
TAX-MANAGED GROWTH AND INCOME FUND +10.5%
Average Growth and Income Fund +12.3
S&P 500 Index +10.5
- ---------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND +12.9%
Average Growth Fund + 9.8
Russell 1000 Index + 9.8
- ---------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND + 9.5%
Average Small-Cap Fund +10.0
S&P SmallCap 600 Index + 9.2
- ---------------------------------------------------------------
</TABLE>
*For Tax-Managed Growth and Income Fund, March 4,
1999; for Tax-Managed Capital Appreciation Fund,
February 24, 1999; for Tax-Managed Small-Cap Fund,
April 21, 1999.
1
<PAGE> 4
income dividends for each fund are presented in tables that follow this letter.
By design, our funds did not realize any net capital gains during the
half-year--nor have they since we created the Tax-Managed Funds in 1994.
THE PERIOD IN REVIEW
The key influences on financial markets during the first half of 1999 were the
surprising strength of the U.S. economy's long-running expansion, promising
corporate earnings, and increasing signs that a number of shaky foreign
economies were on firmer footing. These factors were responsible for both
broad-based gains in U.S. stocks and increases in interest rates, which sent
bond prices lower.
The U.S. stock market, as measured by the Wilshire 5000 Equity Index,
gained +11.8%--equivalent to more than a full year's return based on historical
norms. But the half-year saw a sharp rotation in market leadership. As the
outlook for global economic growth kept improving, there was a notable revival
in cyclical stocks--commodity-related companies, machinery makers, and other
firms whose profit prospects are most closely tied to the economy's ups and
downs. This was a welcome change for cyclicals and other value stocks, which had
lagged the market not just in the first quarter but for much of the last five
years. During the first quarter, the growth stocks within the S&P 500 Index
outpaced the value stocks--those generally characterized by above-average
dividend yields and below-average price/earnings ratios. However, the situation
reversed during the second quarter, and for the half-year value stocks carried
the day with a gain of +14.0% while growth stocks were up +11.0%.
Also rebounding vigorously were small-company stocks, another market
segment that had trailed large-cap stocks in recent years. The Russell 2000
Index of small-caps gained +15.6% for the quarter, nicely outpacing the
large-cap-dominated S&P 500. Even so, the Russell 2000 trailed the S&P 500 for
the half-year (+9.3% versus +12.4%).
For bond investors, a surging economy has a dark side: the possibility that
wage pressures and capacity constraints will push up inflation, which diminishes
the buying power of future bond interest and principal payments. Interest rates
held steady in January, but rose thereafter. And on the final day of the period,
the Federal Reserve Board hiked its target for short-term interest rates by
0.25% amid concerns that higher inflation would be an inevitable by-product of
strong growth. By June 30, yields on U.S. Treasury notes and bonds were higher
by roughly 1 percentage point from their year-end 1998 levels. The yield of the
benchmark 30-year Treasury bond increased 86 basis points (0.86 percentage
point), from 5.10% to 5.96%. The rate rise was smaller for short-term
securities, with the 3-month Treasury bill's yield rising 33 basis points, from
4.45% on December 31 to 4.78% on June 30.
PERFORMANCE OVERVIEW
The +12.3% return of our TAX-MANAGED GROWTH AND INCOME FUND exceeded by 1.3
percentage points the +11.0% gain of the average growth-and-income mutual fund,
according to Lipper Inc., and was just a tad below the +12.4% return for the
unmanaged S&P 500 Index.
Our TAX-MANAGED CAPITAL APPRECIATION FUND, which tracks the Russell 1000
Index of the largest U.S. stocks, earned a remarkable half-year return of
+15.6%, far outpacing the +11.7% gain recorded by the average growth fund,
according to Lipper, and surpassing its benchmark index by 4.1 percentage
points. Although the fund tracks the
2
<PAGE> 5
Russell 1000, our returns diverge from those of the index from time to time
because of techniques used to minimize the fund's taxable income. For example,
to minimize taxable income the Capital Appreciation Fund emphasizes stocks in
the Russell 1000 Index with below-average dividend yields. This bias led to an
above-average weighting in technology-related stocks, which proved helpful
during the first half of 1999, when the tech sector was a big winner. Over the
long haul, we expect the returns from the fund and its benchmark index to be
quite close.
We also note that although our Capital Appreciation Fund outpaced the
Growth and Income Fund during the half-year, we believe that the long-term
pretax total returns of the two funds will be similar. However, we also expect
that, for taxable investors, Capital Appreciation's emphasis on lower-yielding
growth stocks will provide slightly superior after-tax returns over the long
run.
Our TAX-MANAGED BALANCED FUND, whose holdings are divided between Russell
1000 Index stocks and high-grade, intermediate-term, tax-exempt bonds, earned
+6.5% during the half-year, exceeding both the +5.6% return of the average
balanced fund and the +5.3% return of our balanced composite index. The
composite index is split evenly between the Russell 1000 Index and the Lehman 7
Year Municipal Bond Index. The fund's return was outstanding on an absolute
basis for a six-month period, but was well below gains posted by our all-equity
funds. This gap reflects the disparity in returns for U.S. stocks and
intermediate-term municipal bonds: The Russell 1000 Index gained +11.5%, while
the Lehman 7 Year Municipal Bond Index posted a return of -0.9%. Because the
Balanced Fund maintains its tax exemption for income only if municipal bonds
make up at least 50% of its assets, we slightly overweight our bond position to
ensure that we meet that requirement. The tax-exempt interest income earned by
the Balanced Fund represented an annualized yield of 2.5% (after expenses) as of
June 30, 1999.
The TAX-MANAGED SMALL-CAP FUND, which began operations on March 25, posted
a +17.4% gain through June 30. As mentioned earlier, the fund's inception
happened to come just before a surge in small-cap stocks. Our return for this
stub period was a whisker behind the +17.5% gain for the average small-cap fund
and slightly ahead of the +16.7% return for our benchmark, the S&P SmallCap 600
Index.
IN SUMMARY
The divergence between stock and bond returns during the first half of 1999
reinforced the benefits of a balanced investment approach. Diversifying your
investment program through holdings in stock funds, bond funds, and cash
reserves gives you exposure to the rewards of the financial markets while
spreading out the risks that go along with investing.
Another key to successful investing is to minimize the impact of costs and
taxes on your long-term returns. The Vanguard Tax-Managed Funds can help on
both counts. We keep portfolio turnover and transaction costs low by using an
index-based approach to investing. And our ongoing operating costs--an
annualized expense ratio of about 0.20% of assets--are lower by a full
percentage point or more than the expenses charged by peer mutual funds.
Finally, by using techniques to minimize currently taxable income, our
Tax-Managed Funds are designed to provide superior after-tax returns over the
long term.
Once you've developed a balanced investment program suited to your
investment time horizon, financial goals, and tolerance for risk, we recommend
that you stick with it. This can be difficult at times when one market segment
runs ahead of the others and
3
<PAGE> 6
seems to be "the only game in town." But in the long run, staying the course
with such a program can help you to ride out the inevitable downturns in
financial markets and stay focused on your long-term goals.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
July 22, 1999
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- ----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
NET ASSET VALUE PER SHARE ----------------------------------------
----------------------------- INCOME CAPITAL GAINS
TAX-MANAGED FUND DEC. 31, 1998 JUNE 30, 1999 DIVIDENDS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth and Income $26.55 $29.67 $0.14 $0.00
Capital Appreciation 25.69 29.70 0.00 0.00
Balanced 16.74 17.64 0.18 0.00
Small-Cap 10.03* 11.78 0.00 0.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Net asset value on inception date, March 25, 1999.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION* THROUGH JUNE 30, 1999
NET ASSET VALUE PER SHARE ---------------------------------------
TAX-MANAGED FUND ------------------------------ INCOME CAPITAL GAINS
INSTITUTIONAL SHARES INCEPTION DATE* JUNE 30, 1999 DIVIDENDS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth and Income $26.99 $29.67 $0.149 $0.00
Capital Appreciation 26.32 29.71 0.000 0.00
Small-Cap 10.76 11.78 0.000 0.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
*For Tax-Managed Growth and Income Fund, March 4, 1999; for Tax-Managed Capital
Appreciation Fund, February 24, 1999; for Tax-Managed Small-Cap Fund, April 21,
1999.
4
<PAGE> 7
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JUNE 30, 1999
[PHOTO]
A markedly improved global economic outlook during the first half of 1999 led to
mostly positive stock market returns and lower bond prices.
As the year began, many observers expected that severe economic crises in
Asia, Russia, and some Latin American nations would restrain business activity
worldwide, even in the United States, which has been the world's economic
locomotive. By spring, however, a consensus emerged that global economic
activity was likely to be solid, if not robust. This change in sentiment stemmed
from several factors, including further vigorous growth in the U.S. economy, a
belief that Asia's slump had bottomed out, and moves in Europe to ease monetary
policy to encourage growth.
Interest rates rose as investors stopped wondering whether the Federal
Reserve Board would lower interest rates--as it had three times in autumn
1998--and began to wonder when the Fed would increase rates to slow growth and
thereby forestall inflation. Indeed, on the final day of the period, the Fed
boosted short-term rates by 0.25 percentage point. In the stock market, the
brighter economic outlook led to a change in leadership from glamorous
large-capitalization growth stocks to value stocks and small-cap stocks, both of
which had been among Wall Street's wallflowers in recent years.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JUNE 30, 1999
--------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 12.4% 22.8% 27.9%
Russell 2000 Index 9.3 1.5 15.4
Wilshire 5000 Index 11.8 19.5 25.7
MSCI EAFE Index 4.1 7.9 8.5
- ----------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -1.4% 3.2% 7.8%
Lehman 10 Year Municipal Bond Index -1.7 2.3 6.8
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.2 4.7 5.2
- ----------------------------------------------------------------------------
OTHER
Consumer Price Index 1.4% 2.0% 2.3%
- ----------------------------------------------------------------------------
</TABLE>
*Annualized.
U.S. STOCK MARKETS
The rise in stock prices reflected the healthy domestic economy and improving
prospects for corporate earnings. The overall market, as measured by the
Wilshire 5000 Index, rose 11.8% during the period, while the S&P 500 Index, a
yardstick for large-cap stocks, gained 12.4%.
Large-cap growth stocks, which are generally perceived as less vulnerable
than other stocks to economic slowdowns, continued to lead the market's climb
during the first quarter of the year. During the second quarter, however, value
stocks--especially producers of commodity products such as oil, aluminum, and
chemicals--moved to the front of the pack. Providing support were generally
upbeat corporate profit reports. Indeed, earnings gains were sufficient to send
prices higher despite rising interest rates, which often depress stock prices as
well as bond prices. For the six months, the S&P 500 Index's value stocks posted
a 14.0% return while its growth stocks gained 11.0% as a group.
5
<PAGE> 8
Small-cap stocks, as measured by the Russell 2000 Index, gained 9.3%,
although that fact masks a remarkable turnaround: Small-caps declined 5.4%
during the first quarter of 1999, then advanced 15.6% during the second quarter.
Even so, the cumulative return of the Russell 2000 over the past three years
lags the S&P 500 Index by nearly 80 percentage points (+37.6% for the Russell
2000 versus +115.2% for the S&P 500).
Four of the top-performing sectors within the S&P 500 Index during the
half-year were solidly in the value camp--the "other energy" group (+40%);
producer durables (+26%); materials & processing (+25%); and integrated-oils
(+17%). The strongest growth-oriented sector was the irrepressible technology
group (+24%). The poor performance of the consumer staples sector (-8%) was due
in part to the gains of the U.S. dollar against most foreign currencies, which
reduced the value of earnings from overseas operations.
U.S. BOND MARKETS
The powerful economic expansion that buoyed corporate profits and stock prices
was too much of a good thing for the bond market. Inflation was well
behaved--consumer prices rose 1.4% for the six months and 2.0% for the twelve
months ended June 30--but investors and Fed policymakers clearly were concerned
that an overheated economy might yet trigger significant increases in wages and
overall prices. Certainly, there was no evidence of the "natural slowing" that
many analysts expected for the economy, which is in the longest peacetime
expansion ever.
Yields on U.S. Treasury bonds rose by approximately 1 percentage point--a
significant rise for a six-month period. The yield of the 30-year Treasury bond
rose 86 basis points, to 5.96% on June 30 from 5.10% on December 31, 1998. The
yield of the 10-year Treasury rose 113 basis points, to 5.78% from 4.65%. Money
market rates didn't rise as far: Yields on 3-month T-bills increased on balance
by only 33 basis points, to 4.78% on June 30. Bond prices, which move in the
opposite direction from interest rates, fell. The Lehman Aggregate Bond Index, a
benchmark for investment-grade taxable bonds, declined 1.4% on a total-return
basis, as bond prices declined an average of 4.4%, outweighing the 3.0% in
interest income for the period.
INTERNATIONAL STOCK MARKETS
Led by sharp recoveries in stock prices in Japan and many emerging markets,
international stock prices generated positive returns in local currencies during
the six months. However, a pervasive rise in the value of the U.S. dollar
against other currencies reduced returns for U.S. investors (returns from abroad
are augmented when the dollar falls in value against other currencies).
Overall, the developed markets outside the United States gained 4.1% in
U.S.-dollar terms, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index. The biggest increases were in the
Pacific region--up 27.3% in local-currency terms and 21.1% when measured in U.S.
dollars. Europe, which accounts for the lion's share of EAFE's market
capitalization, was up 8.2% in local currencies. But in U.S. dollars, the return
from European stocks was a negative 2.3%, as weakness in European
currencies--notably in the euro, the new 11-nation common currency--lopped more
than 10 percentage points from the local-currency returns. The MSCI Select
Emerging Markets Free Index shot up 31.5% in dollar terms, led by Asian markets
that rebounded from severe losses suffered in 1997 and 1998.
6
<PAGE> 9
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TAX-MANAGED BALANCED FUND
TOTAL INVESTMENT RETURNS: SEPTEMBER 6, 1994-JUNE 30, 1999
- ----------------------------------------------------------
TAX-MANAGED BALANCED FUND COMPOSITE*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -2.3% 0.9% -1.4% -1.8%
1995 21.0 3.5 24.5 25.5
1996 9.0 3.2 12.2 13.2
1997 13.5 3.1 16.6 19.9
1998 14.1 2.8 16.9 17.0
1999** 5.4 1.1 6.5 5.3
- ----------------------------------------------------------
</TABLE>
*50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
**Six months ended June 30, 1999.
See Financial Highlights table on page 46 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax-Managed Balanced Fund 9/6/1994 13.58% 12.47% 3.01% 15.48%
Fee-Adjusted Returns* 12.45 12.23 3.01 15.24
- --------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year and the 1% fee that is assessed on
redemptions of shares that are held in the fund for at least one year but less
than five years.
7
<PAGE> 10
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TAX-MANAGED GROWTH AND INCOME FUND
TOTAL INVESTMENT RETURNS: SEPTEMBER 6, 1994-JUNE 30, 1999
- -----------------------------------------------------------
TAX-MANAGED
GROWTH AND INCOME FUND S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -2.6% 0.9% -1.7% -1.8%
1995 34.7 2.8 37.5 37.6
1996 20.7 2.3 23.0 23.0
1997 31.4 1.9 33.3 33.4
1998 27.2 1.5 28.7 28.6
1999* 11.8 0.5 12.3 12.4
- -----------------------------------------------------------
</TABLE>
*Six months ended June 30, 1999.
See Financial Highlights table on page 47 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
TAX-MANAGED GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
TOTAL INVESTMENT RETURNS:
MARCH 4, 1999-JUNE 30, 1999
- -----------------------------------------------
TAX-MANAGED
GROWTH AND INCOME FUND
INSTITUTIONAL SHARES S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN RETURN
<S> <C> <C> <C> <C>
1999 9.9% 0.6% 10.5% 10.5%
- -----------------------------------------------
</TABLE>
See Financial Highlights table on page 47 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- ------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax-Managed Growth and Income Fund 9/6/1994 22.74% 25.27% 2.10% 27.37%
Fee-Adjusted Returns* 21.52 25.01 2.09 27.10
Tax-Managed Growth and Income Fund
Institutional Shares 3/4/1999 -- 9.93 0.58 10.51
Fee-Adjusted Returns* -- 7.73 0.57 8.30
- ------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year and the 1% fee that is assessed on
redemptions of shares that are held in the fund for at least one year but less
than five years.
8
<PAGE> 11
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TAX-MANAGED CAPITAL APPRECIATION FUND
TOTAL INVESTMENT RETURNS: SEPTEMBER 6, 1994-JUNE 30, 1999
- ------------------------------------------------------------------
TAX-MANAGED
CAPITAL APPRECIATION FUND RUSSELL 1000
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -0.9% 0.4% -0.5% -1.9%
1995 33.5 0.9 34.4 37.8
1996 20.1 0.8 20.9 22.4
1997 26.5 0.8 27.3 32.9
1998 27.3 0.7 28.0 27.0
1999* 15.6 0.0 15.6 11.5
- ------------------------------------------------------------------
</TABLE>
*Six months ended June 30, 1999.
See Financial Highlights table on page 48 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
TAX-MANAGED CAPITAL APPRECIATION FUND
INSTITUTIONAL SHARES
TOTAL INVESTMENT RETURNS:
FEBRUARY 24, 1999-JUNE 30, 1999
- ------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION RUSSELL
FUND INSTITUTIONAL SHARES 1000
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN RETURN
- ------------------------------------------------------------------
<C> <C> <C> <C> <C>
1999 12.9% 0.0% 12.9% 9.8%
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax-Managed Capital Appreciation Fund 9/6/1994 26.06% 25.27% 0.75% 26.02%
Fee-Adjusted Returns* 24.80 25.01 0.75 25.76
Tax-Managed Capital Appreciation Fund
Institutional Shares 2/24/1999 -- 12.88 0.00 12.88
Fee-Adjusted Returns* -- 10.62 0.00 10.62
- ---------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year and the 1% fee that is assessed on
redemptions of shares that are held in the fund for at least one year but less
than five years.
9
<PAGE> 12
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely, so an investment in the fund
could lose money.
<TABLE>
<CAPTION>
TAX-MANAGED SMALL-CAP FUND
TOTAL INVESTMENT RETURNS:
MARCH 25, 1999-JUNE 30, 1999
- ---------------------------------------------------------------
TAX-MANAGED S&P
SMALL-CAP FUND SMALLCAP 600
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN* RETURN
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 17.4% 0.0% 17.4% 16.7%
- ---------------------------------------------------------------
</TABLE>
*Subscription period for the fund was February 22, 1999, to March 24, 1999,
during which time all assets were held in money market instruments. Performance
measurement begins March 25, 1999.
<TABLE>
<CAPTION>
TAX-MANAGED SMALL-CAP FUND
INSTITUTIONAL SHARES
TOTAL INVESTMENT RETURNS:
APRIL 21, 1999-JUNE 30, 1999
- ---------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND S&P
INSTITUTIONAL SHARES SMALLCAP 600
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN* RETURN
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 9.5% 0.0% 9.5% 9.2%
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS: PERIODS ENDED JUNE 30, 1999
- -------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------------------------
DATE CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Small-Cap Fund* 3/25/1999 17.45% 0.00% 17.45%
Fee-Adjusted Returns** 13.95 0.00 13.95
Tax-Managed Small-Cap Fund Institutional Shares 4/21/1999 9.48 0.00 9.48
Fee-Adjusted Returns** 6.22 0.00 6.22
- -------------------------------------------------------------------------------------------------
</TABLE>
* Subscription period for the fund was February 22, 1999, to March 24, 1999,
during which time all assets were held in money market instruments.
Performance measurement begins March 25, 1999.
** Reflective of the 1% transaction fee on purchases and the 2% fee assessed on
redemptions of shares that are held in the fund for less than one year.
10
<PAGE> 13
FUND PROFILE
TAX-MANAGED BALANCED FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 13 and 14.
<TABLE>
<CAPTION>
TOTAL FUND CHARACTERISTICS
- --------------------------------------------------------------------------------
<S> <C>
Yield 2.5%
Turnover Rate 11%*
Expense Ratio 0.20%*
Cash Reserves 0.0%
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
FUND ASSET ALLOCATION
- --------------------------------------------------------------------------------
<S> <C>
BONDS 51%
STOCKS 49%
</TABLE>
<TABLE>
<CAPTION>
TOTAL FUND VOLATILITY MEASURES
- --------------------------------------------------------------------------------
BALANCED S&P 500
- --------------------------------------------------------------------------------
<S> <C> <C>
R-Squared 0.95 1.00
Beta 0.55 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST STOCKS (% OF EQUITIES)
- --------------------------------------------------------------------------------
<S> <C>
General Electric Co. 3.3%
Microsoft Corp. 2.9
International Business Machines Corp. 1.9
Cisco Systems, Inc. 1.9
Intel Corp. 1.8
Lucent Technologies, Inc. 1.7
AT&T Corp. 1.7
Merck & Co., Inc. 1.6
Citigroup, Inc. 1.5
MCI WorldCom, Inc. 1.5
- --------------------------------------------------------------------------------
Top Ten 19.8%
- --------------------------------------------------------------------------------
Top Ten as % of Total Net Assets 9.6%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1999
-----------------------------------------------
RUSSELL
BALANCED BALANCED 1000
-----------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 4.6% 3.3% 2.6%
Consumer Discretionary 16.4 17.2 13.5
Consumer Staples 7.3 5.2 7.1
Financial Services 10.9 11.5 18.1
Health Care 14.3 12.6 11.3
Integrated Oils 2.2 2.1 3.9
Other Energy 4.0 3.2 1.4
Materials & Processing 4.9 3.4 3.4
Producer Durables 3.1 4.0 3.3
Technology 20.2 23.2 18.8
Utilities 6.5 9.6 12.0
Other 5.6 4.7 4.6
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
BALANCED FUND PROFILE (continued)
<TABLE>
<CAPTION>
EQUITY CHARACTERISTICS
- --------------------------------------------------------------------------------
RUSSELL
BALANCED 1000
- --------------------------------------------------------------------------------
<S> <C> <C>
Number of Stocks 456 1,000
Median Market Cap $30.4B $55.5B
Price/Earnings Ratio 31.8x 28.5x
Price/Book Ratio 5.0x 5.0x
Dividend Yield 0.5% 1.2%
Return on Equity 20.9% 22.0%
Earnings Growth Rate 19.3% 15.4%
Foreign Holdings 0.6% 0.0%
</TABLE>
EQUITY INVESTMENT FOCUS
- ---------------------------
STYLE-BLEND
MARKET CAP-LARGE
<TABLE>
<CAPTION>
FIXED-INCOME CHARACTERISTICS
- --------------------------------------------------------------------------------
BALANCED LEHMAN*
- --------------------------------------------------------------------------------
<S> <C> <C>
Number of Bonds 138 50,269
Yield to Maturity 4.6% --
Average Coupon 5.2% 5.5%
Average Maturity 6.6 years 13.1 years
Average Quality AA+ AA+
Average Duration 5.2 years 7.2 years
</TABLE>
*Lehman Municipal Bond Index.
FIXED-INCOME INVESTMENT FOCUS
- ----------------------------------
AVERAGE MATURITY-MEDIUM
CREDIT QUALITY-HIGH
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF BONDS)
- ---------------------------------------------------------
<S> <C>
Under 1 Year 12.7%
1-5 Years 22.7
5-10 Years 38.8
10-20 Years 25.8
20-30 Years 0.0
Over 30 Years 0.0
- ---------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF BONDS)
- ----------------------------------------------------------
<S> <C>
AAA 72.7%
AA 22.8
A 2.6
BBB 1.6
BB 0.0
B 0.0
Not Rated 0.3
- ----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS (% OF BONDS)
- ----------------------------------------------------------
<S> <C>
Texas 13.9%
New York 12.9
Florida 8.6
California 7.1
Pennsylvania 6.5
Michigan 5.8
Ohio 5.2
Massachusetts 4.7
Colorado 3.0
Arizona 2.8
- ----------------------------------------------------------
Top Ten 70.5%
</TABLE>
12
<PAGE> 15
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes
in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate stock
and bond investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
DIVIDEND YIELD. The current, annualized rate of dividends paid on a share of
stock, divided by its current share price. For a fund, the weighted average
yield for stocks it holds.
EARNINGS GROWTH RATE. The average annual rate of growth in earnings over the
past five years for the stocks now in a fund.
EQUITY INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of
two attributes: market capitalization (large, medium, or small) and relative
valuation (growth, value, or a blend).
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
FIXED-INCOME INVESTMENT FOCUS. This grid indicates the focus of a fund in terms
of two attributes: average maturity (short, medium, or long) and average credit
quality (high, medium, or low).
FOREIGN HOLDINGS. The percentage of a fund's equity assets represented by
stocks or American Depositary Receipts of companies based outside the United
States.
FUND ASSET ALLOCATION. This chart shows the proportions of a fund's holdings
allocated to different types of assets.
LARGEST STATE CONCENTRATIONS. An indicator of diversification. The less
concentrated a fund's holdings of bonds, the less the fund will be hurt by any
financial problems in a single state or region.
13
<PAGE> 16
MEDIAN MARKET CAP. An indicator of the size of companies in which a fund
invests; the midpoint of market capitalization (market price x shares
outstanding) of a fund's stocks, weighted by the proportion of the fund's
assets invested in each stock. Stocks representing half of the fund's assets
have market capitalizations above the median, and the rest are below it.
NUMBER OF BONDS. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular bond issuer.
NUMBER OF STOCKS. An indicator of diversification. The more stocks a fund
holds, the more diversified it is and the more likely to perform in line with
the overall stock market.
PRICE/BOOK RATIO. The share price of a stock divided by its net worth, or book
value, per share. For a fund, the weighted average price/book ratio of the
stocks it holds.
PRICE/EARNINGS RATIO. The ratio of a stock's current price to its per-share
earnings over the past year. For a fund, the weighted average P/E of the stocks
it holds. P/E is an indicator of market expectations about corporate prospects;
the higher the P/E, the greater the expectations for a company's future growth.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
RETURN ON EQUITY. The annual average rate of return generated by a company
during the past five years for each dollar of shareholder's equity (net income
divided by shareholder's equity). For a fund, the weighted average return on
equity for the companies whose stocks it holds.
SECTOR DIVERSIFICATION. The percentages of a fund's common stocks that come
from each of the major industry groups that compose the stock market.
TEN LARGEST STOCKS/HOLDINGS. The percentage of equity assets that a fund has
invested in its ten largest stocks. As this percentage rises, a fund's returns
are likely to be more volatile because they are more dependent on the fortunes
of a few companies.
TURNOVER RATE. An indication of trading activity during the period. Funds with
high turnover rates incur higher transaction costs and are more likely to
distribute capital gains (which are taxable to investors).
YIELD. A snapshot of a fund's income from interest and dividends. The yield,
expressed as a percentage of the fund's net asset value, is based on income
earned over the past 30 days and is annualized, or projected forward for the
coming year. The index yield is based on the current annualized rate of
dividends paid on stocks in the index.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
14
<PAGE> 17
FUND PROFILE
TAX-MANAGED GROWTH AND INCOME FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 13 and 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- --------------------------------------------------------------------------------
GROWTH AND
INCOME S&P 500
- --------------------------------------------------------------------------------
<S> <C> <C>
Number of Stocks 513 500
Median Market Cap $70.1B $70.1B
Price/Earnings Ratio 29.6x 29.6x
Price/Book Ratio 5.2x 5.2x
Yield 1.1% 1.2%
Yield--Institutional Shares 1.2% 1.2%
Return on Equity 22.4% 22.4%
Earnings Growth Rate 14.9% 14.8%
Foreign Holdings 1.6% 1.6%
Turnover Rate 5%* --
Expense Ratio 0.20%* --
Expense Ratio--
Institutional Shares 0.10%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
EQUITY INVESTMENT FOCUS
- --------------------------
STYLE-BLEND
MARKET CAP-LARGE
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- --------------------------------------------------------------------------------
GROWTH AND
INCOME S&P 500
- --------------------------------------------------------------------------------
<S> <C> <C>
R-Squared 1.00 1.00
Beta 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ----------------------------------------------------------
<S> <C>
Microsoft Corp. 4.1%
General Electric Co. 3.3
International Business Machines Corp. 2.1
Wal-Mart Stores, Inc. 1.9
Cisco Systems, Inc. 1.8
Lucent Technologies, Inc. 1.8
Intel Corp. 1.8
Exxon Corp. 1.7
AT&T Corp. 1.6
Merck & Co., Inc. 1.5
- ----------------------------------------------------------
Top Ten 21.6%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1999
-------------------------------------------------
GROWTH AND GROWTH AND
INCOME INCOME S&P 500
-------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 3.4% 2.5% 2.5%
Consumer Discretionary 10.2 12.8 12.8
Consumer Staples 10.8 7.8 7.8
Financial Services 18.6 16.5 16.5
Health Care 12.1 11.0 11.1
Integrated Oils 6.5 5.4 5.1
Other Energy 1.0 1.1 1.4
Materials & Processing 5.1 3.7 3.5
Producer Durables 3.6 4.2 3.5
Technology 12.9 18.4 18.9
Utilities 10.3 11.3 11.3
Other 5.5 5.3 5.6
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
FUND PROFILE
TAX-MANAGED CAPITAL APPRECIATION FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 13 and 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- --------------------------------------------------------------------------------
CAPITAL RUSSELL
APPRECIATION 1000
- --------------------------------------------------------------------------------
<S> <C> <C>
Number of Stocks 483 1,000
Median Market Cap $29.6B $55.5B
Price/Earnings Ratio 31.9x 28.5x
Price/Book Ratio 4.9x 5.0x
Yield 0.4% 1.2%
Yield--Institutional Shares 0.5% 1.2%
Return on Equity 20.8% 22.0%
Earnings Growth Rate 18.7% 15.4%
Foreign Holdings 0.6% 0.0%
Turnover Rate 17%* --
Expense Ratio 0.20%* --
Expense Ratio--
Institutional Shares 0.10%* --
Cash Reserves 0.1% --
*Annualized.
</TABLE>
EQUITY INVESTMENT FOCUS
- --------------------------
STYLE-BLEND
MARKET CAP-LARGE
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------------------
CAPITAL
APPRECIATION S&P 500
- ----------------------------------------------------------------------
<S> <C> <C>
R-Squared 0.95 1.00
Beta 1.14 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- -----------------------------------------------------
<S> <C>
General Electric Co. 3.3%
Microsoft Corp. 2.9
International Business Machines Corp. 2.1
Lucent Technologies, Inc. 1.9
Cisco Systems, Inc. 1.8
Intel Corp. 1.8
AT&T Corp. 1.6
Merck & Co., Inc. 1.6
MCI WorldCom, Inc. 1.4
Citigroup, Inc. 1.4
- -----------------------------------------------------
Top Ten 19.8%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1999
--------------------------------------------
CAPITAL CAPITAL RUSSELL
APPRECIATION APPRECIATION 1000
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 3.3% 3.0% 2.6%
Consumer Discretionary 16.1 16.7 13.5
Consumer Staples 8.1 5.5 7.1
Financial Services 12.5 11.2 18.1
Health Care 14.0 12.1 11.3
Integrated Oils 1.8 1.8 3.9
Other Energy 2.9 3.3 1.4
Materials & Processing 5.6 3.9 3.4
Producer Durables 3.8 4.8 3.3
Technology 20.0 23.4 18.8
Utilities 6.2 9.3 12.0
Other 5.7 5.0 4.6
- --------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
FUND PROFILE
TAX-MANAGED SMALL-CAP FUND
This Profile provides a snapshot of the fund's characteristics as of June 30,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 13 and 14.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- --------------------------------------------------------------------------------
SMALL-CAP S&P*
- --------------------------------------------------------------------------------
<S> <C> <C>
Number of Stocks 600 600
Median Market Cap $0.8B $0.8B
Price/Earnings Ratio 20.1x 19.9x
Price/Book Ratio 2.6x 2.6x
Yield 0.7% 0.8%
Yield--Institutional Shares 0.7% 0.8%
Return on Equity 15.6% 16.0%
Earnings Growth Rate 17.4% 17.4%
Foreign Holdings 0.0% 0.4%
Turnover Rate 32%** --
Expense Ratio 0.19%** --
Expense Ratio--
Institutional Shares 0.10%** --
Cash Reserves 0.5% --
</TABLE>
*S&P SmallCap 600 Index.
**Annualized.
EQUITY INVESTMENT FOCUS
- ---------------------------
STYLE-BLEND
MARKET CAP-SMALL
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- -------------------------------------------------
<S> <C>
VISIX Inc. 0.9%
Novellus Systems, Inc. 0.7
FirstMerit Corp. 0.7
American Bankers Insurance Group 0.6
Express Scripts 0.6
Legg Mason Inc. 0.6
Valassis Communications, Inc. 0.6
Gentex Corp. 0.6
Acxiom Corp. 0.5
Williams Sonoma, Inc. 0.5
- -------------------------------------------------
Top Ten 6.3%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------
JUNE 30, 1999
---------------------------------------------
S&P
SMALL-CAP SMALLCAP 600
---------------------------------------------
<S> <C> <C>
Auto & Transportation 5.9% 5.5%
Consumer Discretionary 20.3 20.5
Consumer Staples 3.1 2.9
Financial Services 17.1 17.2
Health Care 11.1 10.6
Integrated Oils 0.3 0.0
Other Energy 3.2 3.3
Materials & Processing 10.2 10.6
Producer Durables 9.2 9.7
Technology 14.1 14.5
Utilities 4.8 4.8
Other 0.7 0.4
- --------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 20
FINANCIAL STATEMENTS
JUNE 30, 1999 (UNAUDITED)
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings, including each
security's market value on the last day of the reporting period. Securities are
grouped and subtotaled by asset type (common stocks, bonds, etc.), with common
stocks listed in descending market value order. The Tax-Managed Balanced Fund's
municipal bond holdings are grouped and subtotaled by state. Other assets are
added to, and liabilities are subtracted from, the value of Total Investments
to calculate the fund's Net Assets. Finally, Net Assets are divided by the
outstanding shares of the fund to arrive at its share price, or Net Asset Value
(NAV) Per Share.
At the end of the Statement of Net Assets of each fund, you will find a
table displaying the composition of the fund's net assets. Because all income
and any realized gains must be distributed to shareholders each year, the bulk
of net assets consists of Paid in Capital (money invested by shareholders). The
amounts shown for Undistributed Net Investment Income and Accumulated Net
Realized Gains usually approximate the sums the fund had available to
distribute to shareholders as income dividends or capital gains as of the
statement date. Any Accumulated Net Realized Losses, and any cumulative excess
of distributions over net income or net realized gains, will appear as negative
balances. Unrealized Appreciation (Depreciation) is the difference between the
market value of the fund's investments and their cost, and reflects the gains
(losses) that would be realized if the fund were to sell all of its investments
at their statement-date values.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------
COMMON STOCKS (48.8%)
- --------------------------------------------------------------------
<S> <C> <C>
General Electric Co. 38,403 $ 4,340
- - Microsoft Corp. 41,700 3,761
International Business
Machines Corp. 19,600 2,533
- - Cisco Systems, Inc. 38,700 2,489
Intel Corp. 39,700 2,362
Lucent Technologies, Inc. 32,641 2,201
AT&T Corp. 39,090 2,182
Merck & Co., Inc. 28,600 2,117
Citigroup, Inc. 41,096 1,952
- - MCI WorldCom, Inc. 22,510 1,937
American International
Group, Inc. 14,815 1,734
Pfizer, Inc. 15,800 1,734
The Coca-Cola Co. 27,700 1,731
Wal-Mart Stores, Inc. 34,200 1,650
Johnson & Johnson 16,602 1,627
- - America Online, Inc. 13,380 1,478
Procter & Gamble Co. 16,300 1,455
Exxon Corp. 17,800 1,373
Home Depot, Inc. 18,800 1,211
- - Dell Computer Corp. 28,200 1,043
Schering-Plough Corp. 19,400 1,028
Time Warner, Inc. 13,200 970
The Walt Disney Co. 27,300 841
Hewlett-Packard Co. 8,200 824
Morgan Stanley Dean Witter & Co. 7,680 787
Fannie Mae 11,500 786
Texas Instruments, Inc. 5,400 783
American Home Products Corp. 13,400 770
Vodafone AirTouch PLC ADR 3,850 758
- - Sun Microsystems, Inc. 11,000 758
Abbott Laboratories 16,600 755
Motorola, Inc. 7,900 749
Charles Schwab Corp. 6,750 742
- - EMC Corp. 13,200 726
- - Yahoo!, Inc. 4,000 689
- - Oracle Corp. 17,375 645
McDonald's Corp. 15,600 644
- - MediaOne Group, Inc. 8,600 640
- - AT&T Corp.-Liberty Media
Class A 17,080 628
Medtronic, Inc. 8,000 623
Gillette Co. 15,004 615
- - QUALCOMM, Inc. 4,200 603
BellSouth Corp. 12,000 562
- - AES Corp. 9,600 558
Freddie Mac 9,600 557
- - Applied Materials, Inc. 7,300 539
Sprint Corp. 10,200 539
The Gap, Inc. 10,125 510
- - The Kroger Co. 17,800 497
Associates First Capital Corp. 11,178 495
- - CBS Corp. 10,958 476
Waste Management, Inc. 8,834 475
- - Amgen, Inc. 7,800 475
- - Clear Channel
Communications, Inc. 6,730 464
Mobil Corp. 4,600 455
E.I. du Pont de Nemours & Co. 6,600 451
Comcast Corp. Class A Special 11,400 438
- - Tellabs, Inc. 6,400 432
Compaq Computer Corp. 18,181 431
- - Continental Airlines, Inc. Class B 11,000 414
- - Safeway, Inc. 8,334 413
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------
<S> <C> <C>
Walgreen Co. 14,000 $ 411
- - Solectron Corp. 6,000 400
Monsanto Co. 10,100 398
Automatic Data Processing, Inc. 9,000 396
- - Viacom Inc. Class B 8,726 384
Bank of America Corp. 5,205 382
- - Smurfit-Stone Container Corp. 18,288 376
First Data Corp. 7,684 376
- - Teradyne, Inc. 5,200 373
- - Analog Devices, Inc. 7,367 370
Linear Technology Corp. 5,400 363
- - Sprint PCS 6,350 363
- - Level 3 Communications, Inc. 6,000 360
The Boeing Co. 8,040 355
- - Xilinx, Inc. 6,200 355
PepsiCo, Inc. 9,000 348
- - FDX Corp. 6,400 347
- - Costco Cos., Inc. 4,300 344
- - Cendant Corp. 16,246 333
- - NEXTEL Communications, Inc. 6,500 326
- - At Home Corp. Series A 6,000 324
Alcoa Inc. 5,190 321
Illinois Tool Works, Inc. 3,900 320
- - BMC Software, Inc. 5,800 313
- - Novell, Inc. 11,800 313
CVS Corp. 6,128 311
- - Compuware Corp. 9,700 309
- - Watson Pharmaceuticals, Inc. 8,800 309
- - Office Depot, Inc. 13,650 301
Lowe's Cos., Inc. 5,300 300
Ford Motor Co. 5,300 299
- - Staples, Inc. 9,637 298
- - Best Buy Co., Inc. 4,400 297
Cardinal Health, Inc. 4,627 297
Guidant Corp. 5,700 293
- - Lexmark International Group, Inc.
Class A 4,400 291
- - Maxim Integrated Products, Inc. 4,300 286
Capital One Financial Corp. 5,100 284
- - Biogen, Inc. 4,400 283
State Street Corp. 3,300 282
Circuit City Stores, Inc. 3,000 279
Weatherford International, Inc. 7,615 279
General Motors Corp. 4,200 277
Computer Associates
International, Inc. 5,037 277
- - Amazon.com, Inc. 2,200 275
- - Federated Department Stores, Inc. 5,200 275
M & T Bank Corp. 500 275
- - Ocean Energy, Inc. 28,300 272
- - Computer Sciences Corp. 3,900 270
- - AMR Corp. 3,900 266
- - Altera Corp. 7,200 265
- - Kohl's Corp. 3,400 262
Kansas City Southern
Industries, Inc. 4,100 262
- - Comverse Technology, Inc. 3,450 260
- - Boston Scientific Corp. 5,900 259
Aetna Inc. 2,869 257
Wells Fargo Co. 6,000 256
Lehman Brothers Holdings, Inc. 4,100 255
- - Abercrombie & Fitch Co. 5,316 255
- - AutoNation, Inc. 14,300 255
- - Rowan Cos., Inc. 13,800 254
AFLAC, Inc. 5,300 254
Frontier Corp. 4,300 254
Philip Morris Cos., Inc. 6,300 253
- - Nabors Industries, Inc. 10,300 252
United Healthcare Corp. 4,000 250
- - BJ Services Co. 8,500 250
- - Siebel Systems, Inc. 3,700 246
Southwest Airlines Co. 7,875 245
Harley-Davidson, Inc. 4,500 245
- - Cox Communications Class A 6,600 243
- - HEALTHSOUTH Corp. 16,100 240
- - KLA-Tencor Corp. 3,700 240
- - Smith International, Inc. 5,400 235
Freeport-McMoRan Copper &
Gold Inc. Class B 13,000 233
ALLTEL Corp. 3,230 231
- - Immunex Corp. 1,800 229
- - Global Marine, Inc. 14,800 228
- - Kmart Corp. 13,800 227
- - Global TeleSystems Group, Inc. 2,800 227
- - Starbucks Corp. 6,000 225
- - Unisys Corp. 5,700 222
- - Chancellor Media Corp. 4,000 221
Coastal Corp. 5,500 220
Paychex, Inc. 6,900 220
Telephone & Data Systems, Inc. 3,000 219
Delta Air Lines, Inc. 3,800 219
Minnesota Mining &
Manufacturing Co. 2,500 217
- - Electronic Arts Inc. 4,000 217
- - Tricon Global Restaurants, Inc. 4,000 217
- - Wellpoint Health Networks Inc.
Class A 2,533 215
AlliedSignal Inc. 3,400 214
MGIC Investment Corp. 4,400 214
- - ALZA Corp. 4,200 214
- - Micron Technology, Inc. 5,300 214
Mattel, Inc. 8,067 213
- - Apple Computer, Inc. 4,600 213
- - Promus Hotel Corp. 6,865 213
- - Cablevision Systems Corp. Class B 3,000 210
Caterpillar, Inc. 3,500 210
- - Concord EFS, Inc. 4,950 209
Danaher Corp. 3,600 209
- - Veritas Software Corp. 2,200 209
SBC Communications Inc. 3,544 206
- - Foundation Health Systems
Class A 13,600 204
Franklin Resources Corp. 5,000 203
Progressive Corp. of Ohio 1,400 203
- - Atmel Corp. 7,700 202
- - Outdoor Systems, Inc. 5,500 201
- - Toys R Us, Inc. 9,700 201
IMS Health, Inc. 6,400 200
- - General Instrument Corp. 4,700 200
Dynegy, Inc. 9,800 200
- - LSI Logic Corp. 4,300 198
Wrigley, (Wm.) Jr. Co. 2,200 198
- - Noble Drilling Corp. 10,000 197
NIKE, Inc. Class B 3,100 196
- - R & B Falcon Corp. 20,904 196
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------
<S> <C> <C>
Starwood Hotels & Resorts
Worldwide, Inc. REIT 6,400 $ 196
- - National Semiconductor Corp. 7,700 195
- - Outback Steakhouse 4,950 195
Kerr-McGee Corp. 3,874 194
The Equitable Cos. 2,900 194
- - Lear Corp. 3,900 194
- - NCR Corp. 3,968 194
Merrill Lynch & Co., Inc. 2,400 192
- - Qwest Communications
International Inc. 5,794 192
- - General Motors Corp. Class H 3,400 191
- - Citizens Utilities Co. Class B 17,137 191
- - PeopleSoft, Inc. 11,000 190
- - Thermo Electron Corp. 9,450 190
- - Sealed Air Corp. 2,920 189
- - Intuit, Inc. 2,100 189
Adobe Systems, Inc. 2,300 189
- - Gateway, Inc. 3,200 189
- - Bed Bath & Beyond, Inc. 4,900 189
Cintas Corp. 2,800 188
- - American Standard Cos., Inc. 3,900 187
- - Adaptec, Inc. 5,300 187
- - ADC Telecommunications, Inc. 4,100 187
Champion International Corp. 3,900 187
Stryker Corp. 3,100 186
- - Owens-Illinois, Inc. 5,700 186
- - Navistar International Corp. 3,700 185
- - Dollar Tree Stores, Inc. 4,200 185
- - Genzyme Corp. 3,800 184
- - Blyth Industries, Inc. 5,350 184
- - Gulfstream Aerospace Corp. 2,700 182
- - Tenet Healthcare Corp. 9,827 182
- - Affiliated Computer Services, Inc.
Class A 3,600 182
The PMI Group Inc. 2,900 182
- - U.S. Cellular Corp. 3,400 182
- - Centocor, Inc. 3,900 182
Coca-Cola Enterprises, Inc. 6,100 181
Albertson's, Inc. 3,500 180
- - Allied Waste Industries, Inc. 9,100 180
- - SunGard Data Systems, Inc. 5,200 179
Amerada Hess Corp. 3,000 179
Zions Bancorp 2,800 178
Federal-Mogul Corp. 3,400 177
Anadarko Petroleum Corp. 4,800 177
- - Synopsys, Inc. 3,200 177
Golden West Financial Corp. 1,800 176
- - 3Com Corp. 6,600 176
- - McLeodUSA, Inc. Class A 3,200 176
- - SCI Systems, Inc. 3,700 176
ENSCO International, Inc. 8,800 175
Kimberly-Clark Corp. 3,072 175
- - Jones Apparel Group, Inc. 5,100 175
Mylan Laboratories, Inc. 6,600 175
- - Cadence Design Systems, Inc. 13,700 175
ServiceMaster Co. 9,300 174
- - St. Jude Medical, Inc. 4,892 174
- - VISIX Inc. 2,200 174
- - Litton Industries, Inc. 2,400 172
Becton, Dickinson & Co. 5,700 171
Molex, Inc. 4,613 171
- - Sepracor Inc. 2,100 171
- - Cooper Cameron Corp. 4,600 170
- - Saks Inc. 5,900 170
CenturyTel, Inc. 4,275 170
- - DST Systems, Inc. 2,700 170
- - PanAmSat Corp. 4,344 169
Raytheon Co. Class B 2,400 169
Newmont Mining Corp. 8,489 169
- - USA Networks, Inc. 4,200 169
- - Parametric Technology Corp. 12,100 168
- - Modis Professional Services Inc. 12,100 166
- - AutoZone Inc. 5,500 166
Conseco Inc. 5,440 166
- - US Airways Group, Inc. 3,800 166
- - Niagara Mohawk Holdings Inc. 10,300 165
Sigma-Aldrich Corp. 4,800 165
- - Univision Communications Inc. 2,500 165
- - Consolidated Stores, Inc. 6,087 164
- - Sterling Commerce, Inc. 4,500 164
UNUM Corp. 3,000 164
Allmerica Financial Corp. 2,700 164
- - Quantum Corp. 6,800 164
Apache Corp. 4,200 164
- - BISYS Group, Inc. 2,800 164
- - Quintiles Transnational Corp. 3,900 164
- - Convergys Corp. 8,500 164
Biomet, Inc. 4,100 163
Centex Corp. 4,300 162
IBP, Inc. 6,800 162
- - Waters Corp. 3,000 159
- - VoiceStream Wireless Corp. 5,600 159
- - MGM Grand, Inc. 3,240 159
Archer-Daniels-Midland Co. 10,238 158
- - Northeast Utilities 8,900 157
- - Forest Laboratories, Inc. 3,400 157
- - Sybron International Corp. 5,700 157
Great Lakes Chemical Corp. 3,400 157
Nucor Corp. 3,300 157
- - Golden State Bancorp Inc. 7,100 156
- - Harrah's Entertainment, Inc. 7,100 156
- - Seagate Technology Inc. 6,090 156
Provident Cos., Inc. 3,900 156
- - MedImmune Inc. 2,300 156
AMBAC Financial Group Inc. 2,700 154
- - Ceridian Corp. 4,700 154
- - Robert Half International, Inc. 5,900 153
- - Tech Data Corp. 4,000 153
- - Pacificare Health Systems, Inc. 2,124 153
Bank One Corp. 2,564 153
- - PRIMEDIA Inc. 9,000 152
Solutia, Inc. 7,100 151
USG Corp. 2,700 151
Emerson Electric Co. 2,400 151
- - SPX Corp. 1,800 150
- - FMC Corp. 2,200 150
International Game Technology 8,100 150
- - Payless ShoeSource, Inc. 2,800 150
Newell Rubbermaid, Inc. 3,218 150
- - Brinker International, Inc. 5,500 150
- - Uniphase Corp. 900 149
- - Humana, Inc. 11,500 149
- - Infinity Broadcasting Corp. 5,000 149
- - Northwest Airlines Corp. Class A 4,500 146
Tyson Foods, Inc. 6,500 146
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------
<S> <C> <C>
Enron Oil & Gas Co. 7,200 $ 146
The St. Joe Co. 5,400 146
- - Fiserv, Inc. 4,650 146
- - American Tower Corp. Class A 6,000 144
- - Associated Group, Inc. 2,200 143
- - Safeguard Scientifics, Inc. 2,300 143
Clayton Homes Inc. 12,422 142
Pharmacia & Upjohn, Inc. 2,500 142
- - MidAmerican Energy Holdings Co. 4,100 142
- - Chiron Corp. 6,840 142
- - Shaw Industries, Inc. 8,600 142
Darden Restaurants Inc. 6,500 142
Martin Marietta Materials, Inc. 2,400 142
- - CNA Financial Corp. 3,500 141
Noble Affiliates, Inc. 5,000 141
- - U.S. Foodservice 3,300 141
- - Andrx Corp. 1,800 139
- - Santa Fe Snyder Corp. 18,000 137
Raychem Corp. 3,700 137
- - American Power Conversion Corp. 6,800 137
Total System Services, Inc. 7,200 137
Eastman Kodak Co. 2,000 136
Transatlantic Holdings, Inc. 1,800 135
Owens Corning 3,900 134
- - Catellus Development Corp. 8,600 133
FirstEnergy Corp. 4,300 133
- - IVAX Corp. 9,300 131
Manpower Inc. 5,800 113
- - Health Management Associates
Class A 11,612 131
- - HCR Manor Care, Inc. 5,400 131
- - Mohawk Industries, Inc. 4,300 131
Baker Hughes, Inc. 3,890 130
- - Western Wireless Corp. Class A 4,800 130
Roslyn Bancorp, Inc. 7,500 129
Expeditors International of
Washington, Inc. 4,700 128
- - Mirage Resorts, Inc. 7,600 127
- - Winstar Communications, Inc. 2,600 127
CNF Transportation, Inc. 3,300 127
Loews Corp. 1,600 127
- - Advanced Micro Devices, Inc. 7,000 126
- - Global Industries Ltd. 9,800 126
Fort James Corp. 3,300 125
- - Keebler Foods Co. 4,100 125
Wesco Financial Corp. 400 124
- - UAL Corp. 1,900 124
- - Gentex Corp. 4,400 123
- - Barnes & Noble, Inc. 4,500 123
- - MiniMed, Inc. 1,600 123
- - ICOS Corp. 3,000 122
Columbia/HCA Healthcare Corp. 5,302 121
- - Calpine Corp. 2,200 119
- - Synetic, Inc. 1,700 117
The Hartford Financial Services
Group Inc. 2,000 117
Burlington Northern Santa Fe Corp. 3,738 116
Marriott International, Inc. Class A 3,100 116
- - King World Productions, Inc. 3,200 111
Investment Technology Group, Inc. 3,400 110
- - Sterling Software, Inc. 4,100 109
Dime Bancorp, Inc. 5,400 109
Electronic Data Systems Corp. 1,900 107
Fastenal Co. 2,000 105
- - Jabil Circuit, Inc. 2,300 104
- - Sodexho Marriott Services, Inc. 5,375 103
- - The Goldman Sachs Group, Inc. 1,400 101
- - United Rentals, Inc. 3,300 97
Lockheed Martin Corp. 2,600 97
- - ACNielson Corp. 3,200 97
International Paper Co. 1,900 96
Columbia Energy Group 1,500 94
Praxair, Inc. 1,900 93
- - Silicon Graphics, Inc. 5,500 90
Sysco Corp. 3,000 89
- - Storage Technology Corp. 3,800 86
Dole Food Co. 2,900 85
Alberto-Culver Co. Class B 3,100 83
- - Network Associates, Inc. 5,550 82
McKesson HBOC, Inc. 2,516 81
- - Chris-Craft Industries, Inc. 1,671 79
New Century Energies, Inc. 1,900 74
American General Corp. 975 73
Homestake Mining Co. 8,800 72
DENTSPLY International Inc. 2,400 69
- - Thermo Instrument Systems, Inc. 4,015 68
Travelers Property Casualty Corp. 1,700 67
- - Fox Entertainment Group, Inc.
Class A 2,400 65
W.W. Grainger, Inc. 1,200 65
BHC Communications, Inc. Class A 500 64
Autodesk, Inc. 2,100 62
J.C. Penney Co., Inc. 1,178 57
Dollar General Corp. 1,968 57
- - Polo Ralph Lauren Corp. 3,000 57
Diamond Offshore Drilling, Inc. 2,000 57
Hasbro, Inc. 2,025 57
Autoliv, Inc. 1,811 55
Delphi Automotive Systems Corp. 2,935 54
Cinergy Corp. 1,700 54
- - Safety-Kleen Corp. 3,000 54
- - Venator Group, Inc. 5,100 53
Reynolds Metals Co. 900 53
Browning-Ferris Industries, Inc. 1,200 52
The Limited, Inc. 1,069 49
- - Revlon, Inc. Class A 1,600 48
Burlington Resources, Inc. 1,100 48
- - Gartner Group, Inc. Class A 2,300 47
Stewart Enterprises, Inc. Class A 3,000 44
Texaco Inc. 688 43
York International Corp. 1,000 43
- - Arrow Electronics, Inc. 2,100 40
Sealed Air Corp. $2.00 Cvt. Pfd.
Series A 617 39
Transocean Offshore, Inc. 1,400 37
IKON Office Solutions, Inc. 2,400 36
The Goodyear Tire & Rubber Co. 600 35
Dillard's Inc. 1,000 35
The Warnaco Group, Inc. Class A 1,300 35
- - First Health Group Corp. 1,600 35
Nordstrom, Inc. 1,000 34
Johns Manville Corp. 2,500 33
Host Marriott Corp. REIT 2,674 32
Sears, Roebuck & Co. 700 31
- - Nielsen Media Research 1,066 31
Tenneco, Inc. 1,200 29
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Nabisco Group Holdings Corp. 1,460 $ 29
- - Cabletron Systems, Inc. 2,100 27
Kellogg Co. 800 26
IMC Global Inc. 1,470 26
Crown Cork & Seal Co., Inc. 900 26
Mallinckrodt, Inc. 700 25
20th Century Industries of CA 1,300 25
Rohm & Haas Co. 553 24
ITT Industries, Inc. 600 23
Cummins Engine Co., Inc. 400 23
First Union Corp. 468 22
Union Pacific Corp. 359 21
Tandy Corp. 400 20
Texas Utilities Co. 472 19
Raytheon Co. Class A 267 18
- - Centennial Cellular Corp. Class A 483 17
U.S. Industries, Inc. 1,000 17
- - Snyder Communications, Inc. 500 16
Pioneer Natural Resources Co. 1,400 15
- - R.J. Reynolds Tobacco
Holdings, Inc. 486 15
Louisiana-Pacific Corp. 600 14
Allegheny Teledyne Inc. 577 13
U S WEST, Inc. 207 12
El Paso Energy Corp. 222 8
- - J.D. Edwards & Co. 400 7
Scientific-Atlanta, Inc. 200 7
Union Pacific Resources Group, Inc. 304 5
- - LHS Group, Inc. 100 3
- - Genzyme Surgical Products 680 3
- ----------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $74,165) 131,094
- ----------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (52.8%)
- ----------------------------------------------------------------------------------------
ALABAMA (0.7%)
Huntsville AL Health Care
Auth. VRDO
3.30%, 7/7/1999 (1) $ 1,800 1,800
-----------
ALASKA (1.0%)
Matanuska-Susitna Borough AK GO
5.50%, 3/1/2012 (3) 1,695 1,746
North Slope Borough AK GO
7.50%, 6/30/2001 (3) 1,000 1,063
-----------
2,809
-----------
ARIZONA (1.5%)
Arizona Transp. Board Highway Rev.
6.50%, 7/1/2011 1,000 1,076
Arizona Transp. Excise Tax Rev.
6.50%, 7/1/2004 1,250 1,359
Maricopa AZ Unified School Dist.
7.125%, 7/1/1999 1,500 1,500
-----------
3,935
-----------
CALIFORNIA (3.8%)
California Dept. of Water Resource
Rev. (Central Valley Project)
8.25%, 12/1/2003 290 336
California GO
6.40%, 2/1/2006 (1) 500 554
California Health Fac. Finance Auth.
(Catholic Healthcare West)
6.25%, 7/1/2006 (1) 395 435
California PCR Finance Auth. VRDO
(Pacific Gas & Electric)
3.30%, 7/2/1999 LOC 175 175
California Pollution Control Financing
Auth. Solid Waste Disposal
Rev. VRDO
(Shell Oil Co.-Martinez Project)
3.00%, 7/2/1999 770 770
California Public Works Board Lease
Rev. (Dept. of Corrections)
5.00%, 9/1/2011 (2) 1,535 1,534
Central Coast CA Water Auth.
6.00%, 10/1/2008 (2) 1,000 1,092
Clovis CA Unified School Dist. GO
0.00%, 8/1/2005 (3) 2,000 1,522
Los Angeles CA Unified School
Dist. GO
6.00%, 7/1/2008 (3) 1,000 1,091
Los Angeles CA Wastewater
System Rev.
5.75%, 6/1/2010 (1) 400 425
San Bernardino CA Medical
Center COP
5.50%, 8/1/2005 (1) 500 529
South Orange County CA
Public Finance Auth.
7.00%, 9/1/2006 (1) 875 1,005
Univ. of California Rev.
(Multiple Purpose Project)
12.00%, 9/1/2003 (2) 500 646
-----------
10,114
-----------
COLORADO (1.6%)
Colorado Health Fac. Auth. Rev.
(Sisters of Charity Health
System Inc.)
5.25%, 12/1/2012 (1) 2,250 2,231
Denver CO City & County School
Dist. GO
5.25%, 12/1/2016 (3) 2,080 2,066
-----------
4,297
-----------
CONNECTICUT (0.7%)
Connecticut GO
6.00%, 5/15/2003 1,000 1,061
South Central Connecticut Regional
Water Auth. Water System Rev.
5.75%, 8/1/2006 (3) 900 951
-----------
2,012
-----------
DISTRICT OF COLUMBIA (0.7%)
District of Columbia GO
5.40%, 6/1/2012 (2) 455 457
6.75%, 6/1/2000 (2)(Prere.) 1,395 1,463
6.75%, 6/1/2005 (1) 5 5
-----------
1,925
-----------
FLORIDA (4.6%)
Broward County FL School Dist. GO
5.30%, 2/15/2004 1,295 1,342
Dade County FL School Dist.
7.375%, 7/1/1999 (Prere.) 400 408
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Dade County FL Water & Sewer
System Rev. VRDO
3.30%, 7/7/1999 (3) $ 100 $ 100
Florida Board of Educ.
(Capital Outlay Rev.)
0.00%, 6/1/2000 (Prere.) 15,000 5,075
Florida Dept. of General Services
6.00%, 7/1/2002 (2) (Prere.) 1,000 1,059
Florida Turnpike Auth. Rev.
5.25%, 7/1/2009 (3) 485 498
5.25%, 7/1/2010 (3) 825 842
Lee County FL School Board COP
6.00%, 8/1/2005 (4) 800 859
St. Lucie County FL PCR VRDO
(Florida Power & Light Co.)
3.70%, 7/2/1999 1,070 1,070
Tampa FL Health System Rev.
(Catholic Health)
5.00%, 11/15/2009 (2) 1,000 995
-----------
12,248
-----------
GEORGIA (0.4%)
Georgia GO
6.00%, 3/1/2004 1,000 1,067
-----------
ILLINOIS (1.4%)
Illinois Dev. Finance Auth. PCR PUT
(Commonwealth Edison)
4.40%, 12/1/2006 (2) 1,500 1,456
Illinois Health Fac. Auth. Rev.
(Hosp. Sisters Services Inc.)
5.00%, 6/1/2002 1,635 1,660
Illinois Toll Highway Auth. Rev. VRDO
3.30%, 7/7/1999 (1) LOC 580 580
-----------
3,696
-----------
KANSAS (0.7%)
Kansas Dev. Finance Auth.
Board of Regents
5.50%, 10/1/2003 (2) 1,800 1,877
-----------
KENTUCKY (0.2%)
Kentucky Property & Buildings
Comm. Rev.
5.80%, 9/1/2006 400 419
-----------
LOUISIANA (1.1%)
Louisiana GO
6.00%, 8/1/2001 (3) 1,000 1,036
Louisiana Public Fac. Auth. Hosp. Rev.
(Franciscan Missionaries)
5.00%, 7/1/2002 (4) 2,000 2,034
-----------
3,070
-----------
MARYLAND (1.3%)
Maryland Dept. of Transp.
5.20%, 9/15/2004 400 413
Maryland Health & Higher Educ.
(Johns Hopkins Univ.)
6.00%, 7/1/2005 2,740 2,948
-----------
3,361
-----------
MASSACHUSETTS (2.5%)
Chelsea MA GO
5.50%, 6/15/2011 (2) 740 761
5.50%, 6/15/2012 (2) 735 753
Massachusetts Bay Transp. Auth.
5.125%, 3/1/2013 1,695 1,678
6.25%, 3/1/2005 1,000 1,078
Massachusetts Health & Educ. Fac.
Auth. Rev. (Northeastern Univ.)
5.00%, 10/1/2017 (1) 1,000 957
Massachusetts Ind. Finance Agency
(Refusetech Inc. Project)
6.30%, 7/1/2005 1,000 1,054
Massachusetts Water
Resources Auth.
5.75%, 8/1/2004 (1)(Prere.) 300 321
-----------
6,602
-----------
MICHIGAN (3.0%)
Dickinson County MI Memorial
Hosp. System Rev.
7.625%, 11/1/2005 415 455
Greater Detroit MI Resource
Recovery Auth.
6.25%, 12/13/2006 (2) 1,200 1,304
Michigan Building Auth.
5.125%, 10/15/2011 3,015 2,997
5.30%, 10/1/2010 1,250 1,276
Michigan Environmental
Protection Program GO
6.25%, 11/1/2002 (Prere.) 1,000 1,078
Michigan Housing Dev. Auth. Rev.
6.30%, 4/1/2004 1,000 1,063
-----------
8,173
-----------
NEBRASKA (0.9%)
Nebraska Public Power Dist. Rev.
5.25%, 1/1/2005 (1) 2,000 2,060
5.25%, 1/1/2010 (1) 125 127
5.25%, 1/1/2011 (1) 225 227
-----------
2,414
-----------
NEVADA (1.4%)
Clark County NV Airport
Improvement Rev. VRDO
(McCarran International Airport)
3.30%, 7/7/1999 LOC 270 270
Clark County NV Airport Rev.
5.00%, 7/1/2005 (1) 1,705 1,735
Clark County NV Passenger Fac.
Charge Rev. (McCarran
International Airport)
6.00%, 7/1/2002 (Prere.) 1,000 1,067
Clark County NV School Dist. GO
5.90%, 6/15/2006 (3)(Prere.) 750 810
-----------
3,882
-----------
NEW JERSEY (1.2%)
New Jersey Econ. Dev. Auth.
Market Transition Fac.
5.70%, 7/1/2005 (1) 400 421
New Jersey Health Care Fac. Auth.
Rev. (Atlantic City Medical Center)
6.80%, 7/1/2005 1,000 1,076
New Jersey Transp. Trust Fund Auth.
5.00%, 6/15/2014 1,555 1,520
6.00%, 6/15/2008 250 270
-----------
3,287
-----------
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
NEW YORK (6.8%)
Erie County NY GO
6.125%, 1/15/2011 (3) $ 610 $ 665
Hempstead NY GO
5.625%, 2/1/2011 (3) 840 874
Huntington NY GO
6.70%, 2/1/2010 (3) 375 427
Long Island NY Power Auth. Electric
System Rev.
5.50%, 12/1/2009 (2) 2,000 2,074
Metro. NY Transp. Auth.
6.00%, 7/1/2006 (1) 1,000 1,073
Muni. Assistance Corp. for
New York City NY
5.00%, 7/1/1999 500 500
New York City NY IDA
(USTA National Tennis Center)
6.25%, 11/15/2006 (4) 2,000 2,182
New York City NY GO
6.375%, 8/15/2005 (Prere.) 135 149
6.375%, 8/15/2009 505 548
7.10%, 8/15/2004 (Prere.) 500 563
New York State Dormitory Auth. Rev.
(State Univ.)
5.375%, 5/15/2007 (2) 400 415
New York State Dormitory Auth. Rev.
(Vassar Brothers Hosp.)
5.10%, 7/1/2010 (4) 1,500 1,495
New York State Energy Research &
Dev. Auth. PCR VRDO (New York
State Electric & Gas)
3.80%, 7/2/1999 LOC 1,445 1,445
New York State Environmental Fac.
Corp. PCR (State Water
Recovery Fund)
6.35%, 6/15/2004 (Prere.) 295 323
6.35%, 6/15/2006 225 244
New York State GO
4.50%, 9/15/2000 1,600 1,617
New York State Thruway Auth.
(Service Contract)
5.40%, 4/1/2005 (1) 400 415
Suffolk County NY GO
5.00%, 4/1/2007 (3) 1,120 1,134
Triborough Bridge & Tunnel Auth.
Rev. NY
5.50%, 1/1/2006 (4) 2,000 2,086
-----------
18,229
-----------
OHIO (2.8%)
Lorain County OH Hosp. Rev.
(Catholic Healthcare Partners)
5.625%, 9/1/2013 (1) 1,775 1,824
6.00%, 9/1/2004 (1) 1,080 1,148
Ohio Air Quality Dev. Auth. VRDO
(Cincinnati Gas &
Electric Co. Project)
3.50%, 7/2/1999 LOC 700 700
Ohio Public Fac. Comm. Higher
Educ. Fac.
5.50%, 12/1/2006 (1) 400 415
Ohio Water Dev. Auth.
5.00%, 6/1/2015 (1) 2,000 1,944
5.75%, 12/1/2005 (1) 540 568
6.00%, 12/1/2008 (2) 750 799
-----------
7,398
-----------
OKLAHOMA (0.4%)
Oklahoma Dev. Finance Auth. Rev.
(Hillcrest Hosp.)
5.00%, 8/15/2009 1,185 1,142
-----------
PENNSYLVANIA (3.4%)
Pennsylvania Convention Center Auth.
6.70%, 9/1/2014 (1) 500 551
Pennsylvania GO
5.90%, 11/15/2001 1,000 1,040
Pennsylvania Higher Educ. Fac. Auth.
Rev. (Allegheny/Delaware Valley)
5.00%, 11/15/2006 (1) 1,125 1,125
Pennsylvania Higher Educ. Fac. Auth.
Rev. VRDO (Carnegie Mellon Univ.)
3.45%, 7/2/1999 820 820
Pennsylvania Turnpike Comm. Oil
Franchise Tax Rev.
5.25%, 12/1/2009 (2) 615 629
5.25%, 12/1/2011 (2) 455 460
Pennsylvania Turnpike Comm. Rev.
7.625%, 12/1/1999 (Prere.) 500 519
Philadelphia PA Airport Parking Auth.
5.75%, 9/1/2008 (2) 1,150 1,210
Philadelphia PA School Dist. GO
6.25%, 9/1/2005 (2) 870 940
Philadelphia PA Water &
Wastewater Rev.
6.25%, 8/1/2009 (1) 1,000 1,092
Pittsburgh PA GO
5.20%, 3/1/2010 (3) 580 583
Pittsburgh PA Water & Sewer
Auth. Rev.
5.60%, 9/1/2005 (3)(Prere.) 235 247
-----------
9,216
-----------
SOUTH DAKOTA (0.4%)
South Dakota Building Auth.
Lease Rev.
5.25%, 12/1/2010 (2) 1,000 1,007
-----------
TEXAS (7.3%)
Dallas TX Civic Center
Refunding & Improvement
4.60%, 8/15/2009 (1) 110 106
4.70%, 8/15/2010 (1) 815 782
Fort Worth TX Water & Sewer Rev.
5.25%, 2/15/2011 3,800 3,826
Grand Prairie TX GO
5.50%, 2/15/2003 (1) 3,065 3,171
Gulf Coast TX Waste Disposal Auth.
PCR VRDO (Exxon Project)
3.40%, 7/2/1999 1,460 1,460
Harris County TX Health Fac. Dev.
Corp. Hosp. Rev. VRDO
(St. Luke's Episcopal Hosp.)
3.85%, 7/2/1999 1,070 1,070
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Houston TX GO
5.70%, 3/1/2001 $ 500 $ 513
Houston TX Hotel Occupancy
Tax Rev.
5.25%, 7/1/2007 (4) 500 508
Lubbock TX Health Fac. Dev. Corp.
Rev. (St. Joseph Health System)
5.00%, 7/1/2001 1,000 1,014
5.00%, 7/1/2008 1,645 1,633
Northwest Texas Independant
School Dist.
0.00%, 8/15/2004 2,205 1,737
San Antonio TX Electric & Gas Rev.
5.125%, 2/1/2009 1,000 1,010
San Antonio TX Water Rev.
6.50%, 5/15/2002 (1)(Prere.) 145 156
6.50%, 5/15/2010 (1) 280 299
6.50%, 5/15/2010 (1)(ETM) 75 84
Texas Water Finance Assistance GO
5.00%, 8/1/2008 690 693
5.00%, 8/1/2009 1,050 1,052
Univ. of Texas Permanent Fund
6.60%, 7/1/2001 (Prere.) 500 534
-----------
19,648
-----------
UTAH (0.5%)
Intermountain Power Agency Utah
Power Supply Rev.
5.20%, 7/1/2006 1,150 1,171
Salt Lake County UT Building Auth.
Lease Rev.
5.90%, 10/1/2006 (1) 260 276
-----------
1,447
-----------
VIRGINIA (0.8%)
Henrico County VA Water &
Sewer Rev.
5.25%, 5/1/2011 1,485 1,502
Virginia Transp. Board
6.00%, 5/15/2007 500 533
-----------
2,035
-----------
WASHINGTON (0.9%)
King County WA Library System GO
6.05%, 12/1/2007 1,000 1,071
Seattle WA Muni. Light & Power Rev.
6.25%, 7/1/2004 (Prere.) 700 765
Tacoma WA Electric System Rev.
5.50%, 1/1/2012 (2) 500 504
-----------
2,340
-----------
WEST VIRGINIA (0.7%)
West Virginia Building Comm. Rev.
5.25%, 7/1/2008 (1) 1,150 1,173
West Virginia School Building Auth.
Capital Improvement Rev.
5.625%, 7/1/2002 655 681
-----------
1,854
-----------
WISCONSIN (0.1%)
Wisconsin GO
5.00%, 5/1/2000 335 340
-----------
- ----------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $142,276) 141,644
- ----------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT (0.1%)
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.96%, 7/1/1999--Note G
(COST $205) $ 205 $ 205
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.7%)
(COST $216,646) 272,943
- ----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.7%)
- ----------------------------------------------------------------------------------------
Other Assets--Note B 6,325
Payables for Investment
Securities Purchased (10,232)
Other Liabilities--Note G (557)
-----------
(4,464)
- ----------------------------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------------------------
Applicable to 15,222,929 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 268,479
========================================================================================
NET ASSET VALUE PER SHARE $17.64
========================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
COP--Certificate of Participation.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
REIT--Real Estate Investment Trust.
VRDO--Variable Rate Demand Obligation.
(Prere.)--Prerefunded.
(ETM)--Escrowed to Maturity.
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $213,307 $14.01
Undistributed Net
Investment Income 278 .02
Accumulated Net Realized Losses (1,403) (.09)
Unrealized Appreciation--
Note F 56,297 3.70
- ------------------------------------------------------------------------------------
NET ASSETS $268,479 $17.64
====================================================================================
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (100.1%)
- --------------------------------------------------------------------------------------
- - Microsoft Corp. 865,384 $ 78,047
General Electric Co. 554,772 62,689
International Business
Machines Corp. 307,736 39,775
Wal-Mart Stores, Inc. 754,786 36,418
- - Cisco Systems, Inc. 541,794 34,844
Lucent Technologies, Inc. 515,610 34,771
Intel Corp. 562,768 33,485
Exxon Corp. 411,774 31,758
AT&T Corp. 539,752 30,125
Merck & Co., Inc. 394,858 29,219
Citigroup, Inc. 573,207 27,227
- - MCI WorldCom, Inc. 315,570 27,159
The Coca-Cola Co. 418,626 26,164
American International
Group, Inc. 210,109 24,596
Pfizer, Inc. 219,580 24,099
Bristol-Myers Squibb Co. 336,876 23,729
Johnson & Johnson 228,188 22,362
Royal Dutch Petroleum Co. ADR 363,816 21,920
Bank of America Corp. 296,001 21,701
- - America Online, Inc. 184,350 20,371
Procter & Gamble Co. 225,368 20,114
SBC Communications Inc. 333,210 19,326
Hewlett-Packard Co. 172,252 17,311
Bell Atlantic Corp. 263,414 17,221
Philip Morris Cos., Inc. 409,479 16,456
Home Depot, Inc. 251,486 16,205
- - Dell Computer Corp. 430,400 15,925
BellSouth Corp. 316,772 14,849
Time Warner, Inc. 199,482 14,662
Ameritech Corp. 186,530 13,710
Eli Lilly & Co. 186,196 13,336
Tyco International Ltd. 139,280 13,197
Schering-Plough Corp. 248,972 13,195
Mobil Corp. 132,818 13,149
E.I. du Pont de Nemours & Co. 191,432 13,077
American Home Products Corp. 221,436 12,733
GTE Corp. 164,364 12,451
The Chase Manhattan Corp. 143,492 12,430
Wells Fargo Co. 279,504 11,949
Bank One Corp. 199,754 11,898
Fannie Mae 173,432 11,858
Abbott Laboratories 257,094 11,698
Ford Motor Co. 204,818 11,559
The Walt Disney Co. 348,296 10,732
Chevron Corp. 110,824 10,549
Warner-Lambert Co. 144,536 10,027
American Express Co. 76,488 9,953
Morgan Stanley Dean
Witter & Co. 96,689 9,911
Nortel Networks Corp. 112,274 9,747
Motorola, Inc. 102,401 9,702
PepsiCo, Inc. 249,852 9,666
Texas Instruments, Inc. 66,552 9,650
McDonald's Corp. 230,630 9,528
- - EMC Corp. 171,300 9,421
- - Sun Microsystems, Inc. 131,496 9,057
- - Oracle Corp. 243,518 9,041
Sprint Corp. 147,444 7,787
Medtronic, Inc. 99,268 7,730
Gillette Co. 187,716 7,696
- - MediaOne Group, Inc. 102,846 7,649
Charles Schwab Corp. 69,425 7,628
First Union Corp. 161,904 7,609
The Gap, Inc. 145,485 7,329
The Boeing Co. 164,883 7,286
General Motors Corp. 109,941 7,256
Compaq Computer Corp. 289,039 6,847
Freddie Mac 117,760 6,830
Unilever NV ADR 97,121 6,774
Xerox Corp. 112,430 6,640
Minnesota Mining &
Manufacturing Co. 68,445 5,950
Schlumberger Ltd. 93,010 5,924
United Technologies Corp. 82,589 5,921
AlliedSignal Inc. 93,242 5,874
Anheuser-Busch Cos., Inc. 80,414 5,704
Texaco Inc. 91,268 5,704
Waste Management, Inc. 103,551 5,566
Associates First Capital Corp. 123,916 5,491
- - Amgen, Inc. 87,076 5,301
- - CBS Corp. 121,106 5,261
Kimberly-Clark Corp. 90,644 5,167
- - Viacom Inc. Class B 115,748 5,093
Carnival Corp. 103,900 5,039
U S WEST, Inc. 85,660 5,033
Walgreen Co. 170,360 5,004
Computer Associates
International, Inc. 90,916 5,000
Merrill Lynch & Co., Inc. 62,392 4,987
Allstate Corp. 137,280 4,925
Enron Corp. 60,150 4,917
Dayton Hudson Corp. 75,364 4,899
Colgate-Palmolive Co. 49,506 4,889
Pharmacia & Upjohn, Inc. 85,870 4,878
The Bank of New York Co., Inc. 129,600 4,755
Dow Chemical Co. 37,240 4,725
Electronic Data Systems Corp. 83,400 4,717
- - Applied Materials, Inc. 63,500 4,691
Comcast Corp. Class A Special 121,892 4,685
Emerson Electric Co. 74,032 4,655
Automatic Data Processing, Inc. 105,336 4,635
Atlantic Richfield Co. 54,292 4,537
- - Tellabs, Inc. 66,700 4,506
Fleet Financial Group, Inc. 97,072 4,308
- - Sprint PCS 74,836 4,275
Monsanto Co. 107,525 4,240
J.P. Morgan & Co., Inc. 30,160 4,237
U.S. Bancorp 123,241 4,190
- - Safeway, Inc. 84,600 4,188
MBNA Corp. 136,495 4,180
- - The Kroger Co. 139,076 3,885
Household International, Inc. 81,411 3,857
Alcoa Inc. 62,242 3,851
- - Clear Channel
Communications, Inc. 55,857 3,851
SunTrust Banks, Inc. 54,552 3,788
Eastman Kodak Co. 54,828 3,715
First Data Corp. 74,738 3,657
Albertson's, Inc. 70,701 3,646
Raytheon Co. Class B 51,722 3,640
The Seagram Co. Ltd. 72,172 3,636
Caterpillar, Inc. 60,590 3,635
ALLTEL Corp. 50,036 3,578
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------------
<S> <C> <C>
National City Corp. 54,380 $ 3,562
Lowe's Cos., Inc. 62,506 3,543
Washington Mutual, Inc. 100,054 3,539
International Paper Co. 69,916 3,531
Illinois Tool Works, Inc. 42,272 3,466
Sara Lee Corp. 152,464 3,459
Campbell Soup Co. 74,012 3,432
Marsh & McLennan Cos., Inc. 44,856 3,387
CVS Corp. 66,324 3,366
Gannett Co., Inc. 47,104 3,362
Halliburton Co. 74,178 3,357
Duke Energy Corp. 61,303 3,333
Firstar Corp. 115,100 3,223
American General Corp. 42,676 3,217
Mellon Bank Corp. 88,256 3,210
Williams Cos., Inc. 73,661 3,135
Southern Co. 117,712 3,119
CIGNA Corp. 34,638 3,083
H.J. Heinz Co. 61,188 3,067
Fifth Third Bancorp 45,650 3,039
NIKE, Inc. Class B 47,812 3,027
PNC Bank Corp. 51,901 2,991
Baxter International, Inc. 49,144 2,979
- - Costco Cos., Inc. 36,926 2,956
Cardinal Health, Inc. 45,879 2,942
- - Boston Scientific Corp. 66,582 2,925
Wachovia Corp. 34,163 2,923
Corning, Inc. 41,513 2,911
Pitney Bowes, Inc. 45,280 2,909
- - Solectron Corp. 42,900 2,861
Sears, Roebuck & Co. 64,099 2,856
- - FDX Corp. 50,584 2,744
- - Cendant Corp. 130,137 2,668
Guidant Corp. 50,800 2,613
BankBoston Corp. 50,520 2,583
Lockheed Martin Corp. 67,376 2,510
- - NEXTEL Communications, Inc. 49,800 2,499
Honeywell, Inc. 21,546 2,497
Avon Products, Inc. 44,684 2,480
Union Pacific Corp. 42,100 2,455
Burlington Northern
Santa Fe Corp. 79,027 2,450
KeyCorp 76,148 2,446
- - Staples, Inc. 78,200 2,419
Omnicom Group Inc. 30,100 2,408
May Department Stores Co. 58,720 2,400
Bestfoods 47,422 2,347
Weyerhaeuser Co. 33,801 2,324
Columbia/HCA Healthcare Corp. 101,486 2,315
State Street Corp. 27,100 2,314
The Hartford Financial
Services Group Inc. 39,602 2,309
Kellogg Co. 69,236 2,285
Providian Financial Corp. 23,914 2,236
Newell Rubbermaid, Inc. 47,773 2,221
ConAgra, Inc. 83,092 2,212
J.C. Penney Co., Inc. 45,006 2,186
- - BMC Software, Inc. 40,385 2,181
Textron, Inc. 26,404 2,173
AFLAC, Inc. 45,000 2,154
Aetna Inc. 23,959 2,143
Phillips Petroleum Co. 42,392 2,133
The Clorox Co. 19,907 2,126
Coca-Cola Enterprises, Inc. 71,100 2,115
PG&E Corp. 64,958 2,111
- - Kohl's Corp. 27,300 2,107
General Mills, Inc. 25,741 2,069
Interpublic Group of Cos., Inc. 23,685 2,052
- - Best Buy Co., Inc. 29,800 2,012
- - Compuware Corp. 62,900 2,001
BB&T Corp. 53,816 1,974
Rockwell International Corp. 32,453 1,971
Norfolk Southern Corp. 65,019 1,959
United Healthcare Corp. 31,064 1,945
Texas Utilities Co. 46,944 1,936
- - AES Corp. 32,500 1,889
The Chubb Corp. 27,098 1,883
Capital One Financial Corp. 33,700 1,877
- - Federated Department
Stores, Inc. 35,100 1,858
Northern Trust Corp. 19,094 1,852
Mattel, Inc. 69,820 1,846
- - Computer Sciences Corp. 26,544 1,836
Ingersoll-Rand Co. 28,390 1,835
Baker Hughes, Inc. 54,691 1,832
Aon Corp. 43,750 1,805
TJX Cos., Inc. 53,904 1,796
The McGraw-Hill Cos., Inc. 33,276 1,795
Wrigley, (Wm.) Jr. Co. 19,897 1,791
Progressive Corp. of Ohio 12,300 1,783
PPG Industries, Inc. 30,025 1,773
Delphi Automotive Systems Corp. 95,073 1,765
- - Unisys Corp. 45,281 1,763
Consolidated Edison Inc. 38,800 1,756
- - AMR Corp. 25,718 1,755
Lincoln National Corp. 33,442 1,749
Frontier Corp. 29,600 1,746
Southwest Airlines Co. 56,070 1,745
Vodafone AirTouch PLC ADR 8,790 1,732
Tribune Co. 19,858 1,730
- - Micron Technology, Inc. 42,800 1,725
USX-Marathon Group 52,878 1,722
The Limited, Inc. 37,697 1,710
Franklin Resources Corp. 42,100 1,710
Sysco Corp. 56,658 1,689
Ralston-Ralston Purina Group 54,926 1,672
IMS Health, Inc. 53,160 1,661
Conseco Inc. 54,430 1,657
FPL Group, Inc. 30,149 1,647
CSX Corp. 36,314 1,645
Masco Corp. 56,468 1,630
Tandy Corp. 33,264 1,626
- - 3Com Corp. 60,850 1,624
Pioneer Hi-Bred
International, Inc. 41,100 1,600
Unocal Corp. 40,323 1,598
Comerica, Inc. 26,850 1,596
Edison International 59,228 1,584
Transamerica Corp. 20,982 1,574
Deere & Co. 39,679 1,572
Marriott International, Inc.
Class A 41,968 1,569
Circuit City Stores, Inc. 16,828 1,565
Archer-Daniels-Midland Co. 101,241 1,563
PECO Energy Corp. 37,156 1,556
Rohm & Haas Co. 36,257 1,554
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------------
<S> <C> <C>
- - Gateway, Inc. 26,100 $ 1,540
Air Products & Chemicals, Inc. 38,180 1,537
The Goodyear Tire & Rubber Co. 26,116 1,536
McKesson HBOC, Inc. 47,569 1,528
Public Service Enterprise
Group, Inc. 37,135 1,518
Loews Corp. 19,100 1,511
Mercantile Bancorp, Inc. 26,415 1,509
- - Novell, Inc. 56,300 1,492
The Quaker Oats Co. 22,456 1,491
Regions Financial Corp. 38,500 1,480
Coastal Corp. 36,614 1,465
General Dynamics Corp. 21,232 1,454
Fort James Corp. 37,879 1,435
- - Tricon Global Restaurants, Inc. 26,275 1,422
Dominion Resources, Inc. 32,774 1,420
Hershey Foods Corp. 23,798 1,413
Unicom Corp. 36,529 1,409
Georgia Pacific Group 29,400 1,393
Reliant Energy, Inc. 49,787 1,375
Delta Air Lines, Inc. 23,644 1,362
- - Kmart Corp. 82,350 1,354
Danaher Corp. 23,200 1,348
Paychex, Inc. 42,050 1,340
Burlington Resources, Inc. 30,517 1,320
Dover Corp. 37,280 1,305
Praxair, Inc. 26,360 1,290
Dana Corp. 27,893 1,285
Entergy Corp. 41,086 1,284
SLM Holding Corp. 28,000 1,283
UNUM Corp. 23,318 1,277
Lehman Brothers Holdings, Inc. 20,400 1,270
Barrick Gold Corp. 65,479 1,269
Becton, Dickinson & Co. 41,792 1,254
- - Apple Computer, Inc. 26,700 1,237
St. Paul Cos., Inc. 38,866 1,236
Allergan, Inc. 11,118 1,234
- - General Instrument Corp. 29,000 1,232
Huntington Bancshares Inc. 35,158 1,231
Alcan Aluminium Ltd. 38,465 1,228
Republic New York Corp. 18,000 1,227
Occidental Petroleum Corp. 57,645 1,218
Summit Bancorp 29,000 1,213
Kansas City Southern
Industries, Inc. 19,000 1,212
FirstEnergy Corp. 39,046 1,210
American Electric
Power Co., Inc. 32,130 1,207
Jefferson-Pilot Corp. 18,229 1,207
Browning-Ferris Industries, Inc. 27,858 1,198
- - Office Depot, Inc. 53,800 1,187
Avery Dennison Corp. 19,584 1,182
PaineWebber Group, Inc. 25,200 1,178
Fortune Brands, Inc. 28,088 1,162
New York Times Co. Class A 30,930 1,139
Eaton Corp. 12,059 1,109
- - LSI Logic Corp. 24,000 1,107
TRW, Inc. 20,140 1,105
Union Planters Corp. 24,600 1,099
Carolina Power & Light Co. 25,648 1,098
Union Carbide Corp. 22,415 1,093
Dollar General Corp. 37,550 1,089
MBIA, Inc. 16,700 1,081
Rite Aid Corp. 43,402 1,069
Nabisco Group Holdings Corp. 54,600 1,068
SouthTrust Corp. 27,700 1,063
- - HEALTHSOUTH Corp. 71,142 1,063
Genuine Parts Co. 30,137 1,055
Maytag Corp. 15,064 1,050
- - Seagate Technology Inc. 40,900 1,048
Cincinnati Financial Corp. 27,900 1,048
PE Corp.-PE Biosystems Group 8,850 1,016
SAFECO Corp. 22,820 1,007
Consolidated Natural Gas Co. 16,317 991
Johnson Controls, Inc. 14,276 989
Dun & Bradstreet Corp. 27,880 988
DTE Energy Co. 24,302 972
- - Tenet Healthcare Corp. 52,266 970
- - KLA-Tencor Corp. 14,800 960
Golden West Financial Corp. 9,718 952
- - Wellpoint Health Networks
Inc. Class A 11,200 951
Bear Stearns Co., Inc. 20,120 941
Black & Decker Corp. 14,886 940
Ecolab, Inc. 21,530 939
Whirlpool Corp. 12,653 936
CenturyTel, Inc. 23,400 930
Hasbro, Inc. 33,225 928
Winn-Dixie Stores, Inc. 25,008 924
PacifiCorp 50,062 920
Sempra Energy 40,517 917
UST, Inc. 31,199 913
Provident Cos., Inc. 22,800 912
- - Sealed Air Corp. 14,036 911
GPU, Inc. 21,300 899
MGIC Investment Corp. 18,400 895
Amerada Hess Corp. 15,017 894
Synovus Financial Corp. 44,800 890
Willamette Industries, Inc. 19,300 889
Columbia Energy Group 14,159 888
Ameren Corp. 23,105 887
Service Corp. International 45,980 885
Adobe Systems, Inc. 10,700 879
Equifax, Inc. 24,500 874
- - Toys R Us, Inc. 42,091 871
W.W. Grainger, Inc. 16,146 869
VF Corp. 20,142 861
Cinergy Corp. 26,906 861
- - Owens-Illinois, Inc. 26,300 860
- - ALZA Corp. 16,879 859
Cooper Industries, Inc. 16,495 858
Central & South West Corp. 36,345 850
R.R. Donnelley & Sons Co. 22,641 839
Dow Jones & Co., Inc. 15,640 830
PP&L Resources Inc. 26,480 814
Parker Hannifin Corp. 17,773 813
CMS Energy Corp. 19,300 808
Torchmark Corp. 23,598 805
Countrywide Credit
Industries, Inc. 18,800 804
Sherwin-Williams Co. 28,894 802
Nordstrom, Inc. 23,748 796
H & R Block, Inc. 15,900 795
International Flavors &
Fragrances, Inc. 17,782 789
- - Ceridian Corp. 23,802 778
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Anadarko Petroleum Corp. 21,100 $ 777
- - AutoZone Inc. 25,500 768
Northrop Grumman Corp. 11,568 767
Champion International Corp. 16,017 767
Bausch & Lomb, Inc. 9,902 757
Brown-Forman Corp. Class B 11,535 752
The Times Mirror Co. Class A 12,634 749
Biomet, Inc. 18,785 747
Allegheny Teledyne Inc. 32,646 739
Constellation Energy Group 24,898 738
New Century Energies, Inc. 19,000 737
- - National Semiconductor Corp. 28,551 723
Knight Ridder 13,070 718
Apache Corp. 18,400 718
Kerr-McGee Corp. 14,279 717
- - PeopleSoft, Inc. 41,000 707
The Mead Corp. 16,804 702
Nucor Corp. 14,697 697
Tenneco, Inc. 28,977 692
PACCAR, Inc. 12,860 686
Union Pacific Resources
Group, Inc. 41,791 682
AmSouth Bancorp 29,250 678
Eastman Chemical Co. 12,882 667
Hercules, Inc. 16,717 657
- - Parametric Technology Corp. 47,300 656
- - US Airways Group, Inc. 14,902 649
Harcourt General, Inc. 12,366 638
ITT Industries, Inc. 16,701 637
Placer Dome, Inc. 53,552 633
Temple-Inland Inc. 9,100 621
Reynolds Metals Co. 10,506 620
Hilton Hotels Corp. 43,616 619
Dillard's Inc. 17,386 611
Sonat, Inc. 18,297 606
Northern States Power Co. 24,956 604
Case Corp. 12,300 592
Phelps Dodge Corp. 9,441 585
- - Mirage Resorts, Inc. 34,800 583
Crown Cork & Seal Co., Inc. 20,403 581
Inco Ltd. 32,297 581
Sigma-Aldrich Corp. 16,600 572
Wendy's International, Inc. 20,151 571
Nalco Chemical Co. 10,935 567
- - Navistar International Corp. 11,156 558
- - Watson Pharmaceuticals, Inc. 15,800 554
Newmont Mining Corp. 27,109 539
- - Thermo Electron Corp. 26,600 534
Engelhard Corp. 23,090 522
The BFGoodrich Co. 12,154 517
Harris Corp. 13,172 516
SuperValu Inc. 19,992 514
Deluxe Corp. 13,082 509
Darden Restaurants Inc. 23,041 503
- - St. Jude Medical, Inc. 14,046 500
Ashland, Inc. 12,406 498
Fluor Corp. 12,180 493
- - Consolidated Stores, Inc. 18,252 493
- - Silicon Graphics, Inc. 30,000 491
- - Niagara Mohawk Holdings Inc. 30,493 490
Florida Progress Corp. 11,800 487
Westvaco Corp. 16,743 486
Freeport-McMoRan Copper &
Gold Inc. Class B 26,400 474
- - Harrah's Entertainment, Inc. 20,849 459
Raychem Corp. 12,392 459
Great Lakes Chemical Corp. 9,943 457
The Stanley Works 14,206 457
Sunoco, Inc. 15,145 457
Thomas & Betts Corp. 9,628 455
Pall Corp. 20,495 455
Scientific-Atlanta, Inc. 12,378 446
Brunswick Corp. 15,826 441
- - HCR Manor Care, Inc. 18,013 436
Mallinckrodt, Inc. 11,862 431
Louisiana-Pacific Corp. 18,000 428
- - Advanced Micro Devices, Inc. 23,508 425
- - King World Productions, Inc. 12,154 423
C.R. Bard, Inc. 8,677 415
Cummins Engine Co., Inc. 7,141 408
Snap-On Inc. 11,267 408
Boise Cascade Corp. 9,330 401
USX-U.S. Steel Group 14,500 391
- - Network Appliance, Inc. 7,000 391
Liz Claiborne, Inc. 10,669 389
Laidlaw, Inc. 52,700 389
Centex Corp. 10,216 384
Raytheon Co. Class A 5,497 379
Armstrong World Industries Inc. 6,527 377
- - FMC Corp. 5,523 377
Crane Co. 11,554 363
American Greetings Corp.
Class A 11,947 360
- - Cabletron Systems, Inc. 27,500 357
IKON Office Solutions, Inc. 23,566 353
- - Humana, Inc. 27,100 351
Bemis Co., Inc. 8,775 349
Homestake Mining Co. 41,868 343
NICOR, Inc. 8,280 315
Owens Corning 9,147 314
Ryder System, Inc. 11,964 311
Millipore Corp. 7,594 308
Shared Medical Systems Corp. 4,676 305
Meredith Corp. 8,796 305
Cooper Tire & Rubber Co. 12,685 300
EG&G, Inc. 8,290 295
Adolph Coors Co. Class B 5,928 293
- - Andrew Corp. 15,160 287
- - R.J. Reynolds Tobacco
Holdings, Inc. 9,000 283
Autodesk, Inc. 9,360 277
McDermott International, Inc. 9,441 267
Tupperware Corp. 10,317 263
Alberto-Culver Co. Class B 9,486 253
Cyprus Amax Minerals Co. 16,400 249
- - Rowan Cos., Inc. 13,386 247
Worthington Industries, Inc. 14,802 243
Potlatch Corp. 5,500 242
- - W.R. Grace & Co. 12,920 237
Briggs & Stratton Corp. 4,098 237
Ball Corp. 5,601 237
National Service Industries, Inc. 6,569 236
Peoples Energy Corp. 6,119 231
Longs Drug Stores, Inc. 6,642 230
Tektronix, Inc. 7,476 226
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Great Atlantic & Pacific Tea
Co., Inc. 6,630 $ 224
The Timken Co. 10,810 211
Vulcan Materials Co. 4,300 207
Kaufman & Broad Home Corp. 8,211 204
Polaroid Corp. 6,960 192
The Pep Boys
(Manny, Moe & Jack) 8,836 191
Helmerich & Payne, Inc. 7,868 187
- - Bethlehem Steel Corp. 23,331 179
Eastern Enterprises 4,472 178
ONEOK, Inc. 5,591 178
Pulte Corp. 7,488 173
- - Reebok International Ltd. 8,991 167
Fleetwood Enterprises, Inc. 6,056 160
Springs Industries Inc. Class A 3,560 155
Jostens Inc. 7,055 149
Comcast Corp. Class A 4,100 147
- - Data General Corp. 9,521 139
Milacron Inc. 7,215 133
Russell Corp. 6,820 133
ASARCO, Inc. 6,342 119
- - Fruit of the Loom Inc. Class A 11,500 112
NACCO Industries, Inc. Class A 1,331 98
Foster Wheeler Corp. 6,522 92
Battle Mountain Gold Co. Class A 36,700 89
- - Triad Hospitals, Inc. 5,566 75
- - LifePoint Hospitals, Inc. 5,567 75
Moore Corp. Ltd. 5,040 42
- - PE Corp.-Celera Genomics Group 2,275 37
- - Viacom Inc. Class A 200 9
- --------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,330,727) 1,905,344
- --------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT (0.3%)
- --------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.87%, 7/1/1999
(COST $5,262) $5,262 5,262
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(COST $1,335,989) 1,910,606
- --------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
- --------------------------------------------------------------------------------------
Other Assets--Note B 13,557
Liabilities (21,058)
-----------
(7,501)
- --------------------------------------------------------------------------------------
NET ASSETS (100%) $1,903,105
======================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------
AMOUNT
(000)
- ------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $1,338,797
Undistributed Net Investment Income 711
Accumulated Net Realized Losses (11,020)
Unrealized Appreciation--Note F 574,617
- ------------------------------------------------------------------------------------
NET ASSETS $1,903,105
====================================================================================
Investor Shares--Net Assets
Applicable to 62,063,260 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $1,841,624
- -----------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $29.67
===================================================================================
Institutional Shares--Net Assets
Applicable to 2,071,939 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $61,481
===================================================================================
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $29.67
===================================================================================
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.9%)
- ---------------------------------------------------------------------------------------
General Electric Co. 565,878 $ 63,944
- - Microsoft Corp. 623,300 56,214
International Business
Machines Corp. 312,200 40,352
Lucent Technologies, Inc. 543,154 36,629
- - Cisco Systems, Inc. 553,500 35,597
Intel Corp. 571,000 33,975
AT&T Corp. 562,114 31,373
Merck & Co., Inc. 411,300 30,436
- - MCI WorldCom, Inc. 323,732 27,861
Citigroup, Inc. 584,977 27,786
American International
Group, Inc. 218,488 25,577
Pfizer, Inc. 226,500 24,858
The Coca-Cola Co. 396,400 24,775
Wal-Mart Stores, Inc. 484,400 23,372
Johnson & Johnson 236,106 23,138
- - America Online, Inc. 191,861 21,201
Procter & Gamble Co. 232,900 20,786
Exxon Corp. 234,300 18,070
Home Depot, Inc. 270,200 17,411
Schering-Plough Corp. 270,600 14,342
- - Dell Computer Corp. 384,600 14,230
Hewlett-Packard Co. 139,100 13,980
Time Warner, Inc. 185,850 13,660
American Home Products Corp. 226,800 13,041
Fannie Mae 180,100 12,314
The Walt Disney Co. 393,409 12,122
Abbott Laboratories 264,400 12,030
Morgan Stanley Dean
Witter & Co. 109,900 11,265
Texas Instruments, Inc. 75,900 11,005
Vodafone AirTouch PLC ADR 55,450 10,924
- - Sun Microsystems, Inc. 155,800 10,731
- - EMC Corp. 189,200 10,406
Charles Schwab Corp. 93,900 10,317
PepsiCo, Inc. 263,600 10,198
E.I. du Pont de Nemours & Co. 140,600 9,605
- - Oracle Corp. 248,412 9,222
McDonald's Corp. 219,400 9,064
- - MediaOne Group, Inc. 121,300 9,022
Motorola, Inc. 95,100 9,011
- - AT&T Corp.-Liberty Media
Class A 239,590 8,805
Medtronic, Inc. 111,000 8,644
- - QUALCOMM, Inc. 59,200 8,495
Bank of America Corp. 115,875 8,495
Gillette Co. 206,916 8,484
Freddie Mac 133,800 7,760
Sprint Corp. 144,000 7,605
The Boeing Co. 165,470 7,312
The Gap, Inc. 142,687 7,188
Alcoa Inc. 115,446 7,143
AlliedSignal Inc. 112,500 7,087
Waste Management, Inc. 128,697 6,917
Associates First Capital Corp. 155,488 6,890
- - Applied Materials, Inc. 91,900 6,789
- - The Kroger Co. 241,800 6,755
- - Amgen, Inc. 110,700 6,739
- - CBS Corp. 152,906 6,642
Philip Morris Cos., Inc. 163,800 6,583
Compaq Computer Corp. 276,930 6,560
BellSouth Corp. 132,400 6,206
Comcast Corp. Class A Special 159,332 6,124
- - Clear Channel
Communications, Inc. 88,720 6,116
Walgreen Co. 201,600 5,922
- - Sprint PCS 103,000 5,884
- - Yahoo!, Inc. 34,000 5,856
- - Tellabs, Inc. 85,200 5,756
- - Solectron Corp. 84,000 5,602
- - Safeway, Inc. 112,184 5,553
First Data Corp. 111,262 5,445
Monsanto Co. 138,000 5,442
Merrill Lynch & Co., Inc. 68,000 5,436
- - Cablevision Systems Corp.
Class B 76,400 5,348
Mobil Corp. 53,000 5,247
- - Qwest Communications
International Inc. 157,476 5,207
- - Xilinx, Inc. 89,400 5,118
Kimberly-Clark Corp. 87,496 4,987
- - Teradyne, Inc. 68,100 4,886
- - Cendant Corp. 238,125 4,882
- - Smurfit-Stone Container Corp. 234,602 4,824
- - Compuware Corp. 151,200 4,810
- - BMC Software, Inc. 88,200 4,763
- - Viacom Inc. Class B 108,212 4,761
Raytheon Co. Class B 66,900 4,708
- - FDX Corp. 86,400 4,687
- - Level 3 Communications, Inc. 76,900 4,619
Cardinal Health, Inc. 70,875 4,545
- - Analog Devices, Inc. 90,133 4,524
CVS Corp. 88,528 4,493
Emerson Electric Co. 71,200 4,477
- - Biogen, Inc. 69,600 4,476
Electronic Data Systems Corp. 78,800 4,457
Illinois Tool Works, Inc. 54,000 4,428
- - Costco Cos., Inc. 54,800 4,387
- - Lexmark International Group, Inc.
Class A 66,200 4,373
Lowe's Cos., Inc. 76,200 4,320
Automatic Data Processing, Inc. 98,100 4,316
- - Novell, Inc. 159,800 4,235
- - Staples, Inc. 132,130 4,088
Linear Technology Corp. 59,400 3,995
- - Office Depot, Inc. 179,400 3,958
Circuit City Stores, Inc. 42,500 3,952
- - Best Buy Co., Inc. 58,300 3,935
Guidant Corp. 76,000 3,909
- - Siebel Systems, Inc. 58,500 3,883
- - Federated Department
Stores, Inc. 73,300 3,880
Adobe Systems, Inc. 47,100 3,870
- - Altera Corp. 105,000 3,865
- - AMR Corp. 56,100 3,829
Capital One Financial Corp. 68,400 3,809
State Street Corp. 44,400 3,791
- - NEXTEL Communications, Inc. 75,300 3,779
- - KLA-Tencor Corp. 57,600 3,737
- - Computer Sciences Corp. 53,900 3,729
ENSCO International, Inc. 184,700 3,682
- - At Home Corp. Series A 67,600 3,646
Weatherford International, Inc. 99,400 3,641
- - LSI Logic Corp. 78,400 3,616
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Nabors Industries, Inc. 147,600 $ 3,607
- - AES Corp. 62,000 3,604
- - Autonation Inc. 201,400 3,587
AFLAC, Inc. 74,900 3,586
- - Maxim Integrated Products, Inc. 53,600 3,564
Computer Associates
International, Inc. 64,662 3,556
- - Ocean Energy, Inc. 366,340 3,526
- - Boston Scientific Corp. 79,900 3,511
- - Kohl's Corp. 45,400 3,504
United Healthcare Corp. 55,600 3,482
- - HEALTHSOUTH Corp. 231,802 3,463
- - Amazon.com, Inc. 27,400 3,428
- - BJ Services Co. 116,200 3,421
Southwest Airlines Co. 109,350 3,404
General Motors Corp. 51,500 3,399
- - Immunex Corp. 26,600 3,390
- - Rowan Cos., Inc. 181,700 3,350
- - Starbucks Corp. 88,400 3,321
Mattel, Inc. 125,032 3,306
- - Unisys Corp. 84,500 3,290
- - Global Marine, Inc. 210,200 3,245
- - Apple Computer, Inc. 69,700 3,228
Tandy Corp. 65,600 3,206
Freeport-McMoRan Copper &
Gold Inc. Class B 178,687 3,205
- - ALZA Corp. 63,000 3,205
Frontier Corp. 54,200 3,198
- - General Instrument Corp. 75,100 3,192
Newell Rubbermaid, Inc. 68,510 3,186
Conseco Inc. 104,339 3,176
- - Abercrombie & Fitch Co. 65,316 3,135
Kansas City Southern
Industries, Inc. 49,100 3,133
- - Micron Technology, Inc. 77,200 3,112
- - Adaptec, Inc. 87,700 3,097
- - McLeodUSA, Inc. Class A 56,100 3,085
ALLTEL Corp. 42,953 3,071
- - Thermo Electron Corp. 152,400 3,058
Lehman Brothers Holdings, Inc. 49,100 3,056
- - Global TeleSystems Group, Inc. 37,400 3,029
- - Tricon Global Restaurants, Inc. 55,940 3,028
- - General Motors Corp. Class H 53,800 3,026
Delphi Automotive Systems Corp. 162,994 3,026
Albertson's, Inc. 58,400 3,011
- - Cox Communications Class A 81,700 3,008
- - Chancellor Media Corp. 54,400 2,999
Burlington Northern
Santa Fe Corp. 96,393 2,988
Dollar General Corp. 102,950 2,986
Harley-Davidson, Inc. 54,800 2,980
Coastal Corp. 74,100 2,964
Aetna Inc. 32,997 2,951
MGIC Investment Corp. 60,600 2,947
- - 3Com Corp. 109,975 2,935
- - Tech Data Corp. 76,600 2,930
- - Wellpoint Health Networks Inc.
Class A 34,403 2,920
- - Concord EFS, Inc. 68,900 2,915
Franklin Resources Corp. 71,700 2,913
UNUM Corp. 53,100 2,907
Archer-Daniels-Midland Co. 188,124 2,904
- - Smith International, Inc. 66,800 2,902
- - Kmart Corp. 176,400 2,900
- - Foundation Health Systems
Class A 193,270 2,899
- - Forest Laboratories, Inc. 62,400 2,886
- - Veritas Software Corp. 30,300 2,877
The Hartford Financial Services
Group Inc. 49,200 2,869
- - Intuit, Inc. 31,800 2,866
Delta Air Lines, Inc. 49,700 2,864
- - ADC Telecommunications, Inc. 62,300 2,839
- - St. Jude Medical, Inc. 78,910 2,811
- - American Standard Cos., Inc. 58,500 2,808
IMS Health, Inc. 89,400 2,794
- - Global Industries Ltd. 217,900 2,792
- - Noble Drilling Corp. 141,200 2,780
- - Bed Bath & Beyond, Inc. 72,100 2,776
Dynegy, Inc. 136,100 2,773
- - Uniphase Corp. 16,700 2,772
- - R & B Falcon Corp. 294,746 2,763
- - Owens-Illinois, Inc. 84,000 2,746
Telephone & Data Systems, Inc. 36,900 2,696
NIKE, Inc. Class B 42,500 2,691
Starwood Hotels & Resorts
Worldwide, Inc. REIT 88,024 2,690
Kerr-McGee Corp. 53,449 2,682
- - Genzyme Corp. 55,300 2,682
Progressive Corp. of Ohio 18,400 2,668
Paychex, Inc. 83,587 2,664
Sysco Corp. 89,200 2,659
- - NCR Corp. 54,337 2,652
Champion International Corp. 55,400 2,652
- - Jones Apparel Group, Inc. 77,100 2,645
- - Gulfstream Aerospace Corp. 39,100 2,642
- - PeopleSoft, Inc. 153,100 2,641
Caterpillar, Inc. 44,000 2,640
- - Sanmina Corp. 34,600 2,625
- - Toys R Us, Inc. 126,800 2,623
- - Citizens Utilities Co. Class B 235,002 2,614
The Equitable Cos. 39,000 2,613
- - Sterling Commerce, Inc. 71,300 2,602
Minnesota Mining &
Manufacturing Co. 29,900 2,599
Anadarko Petroleum Corp. 70,600 2,599
Praxair, Inc. 53,100 2,599
- - Allied Waste Industries, Inc. 131,100 2,589
- - Cooper Cameron Corp. 69,800 2,587
Stryker Corp. 43,000 2,585
- - Navistar International Corp. 51,200 2,560
- - Lear Corp. 51,400 2,557
Wrigley, (Wm.) Jr. Co. 28,400 2,556
- - Outdoor Systems, Inc. 70,000 2,555
- - Tenet Healthcare Corp. 137,037 2,544
Molex, Inc. 68,525 2,535
M & T Bank Corp. 4,600 2,530
- - Centocor, Inc. 53,900 2,513
Federal-Mogul Corp. 48,300 2,512
- - Atmel Corp. 95,800 2,509
- - SCI Systems, Inc. 52,800 2,508
Sigma-Aldrich Corp. 72,800 2,507
- - Sealed Air Corp. 38,336 2,487
- - Electronic Arts Inc. 45,600 2,474
Danaher Corp. 42,500 2,470
Coca-Cola Enterprises, Inc. 83,000 2,469
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Litton Industries, Inc. 34,300 $ 2,461
Columbia/HCA Healthcare Corp. 106,421 2,428
Lockheed Martin Corp. 65,000 2,421
SBC Communications Inc. 41,720 2,420
Becton, Dickinson & Co. 80,600 2,418
- - Blyth Industries, Inc. 70,300 2,417
Cintas Corp. 35,900 2,412
The PMI Group Inc. 38,400 2,412
- - FMC Corp. 35,300 2,411
CenturyTel, Inc. 60,300 2,397
- - USA Networks, Inc. 59,480 2,387
Allmerica Financial Corp. 38,844 2,362
- - National Semiconductor Corp. 93,200 2,359
- - Synopsys, Inc. 42,627 2,352
ServiceMaster Co. 125,100 2,346
- - Niagara Mohawk Holdings Inc. 146,000 2,345
- - Saks Inc. 81,200 2,345
- - Outback Steakhouse 59,550 2,341
- - AutoZone Inc. 77,600 2,338
Loews Corp. 29,100 2,303
Golden West Financial Corp. 23,400 2,293
- - Ceridian Corp. 69,900 2,285
- - SunGard Data Systems, Inc. 66,200 2,284
- - Sybron International Corp. 82,200 2,266
Provident Cos., Inc. 56,604 2,264
- - Infinity Broadcasting Corp. 76,000 2,261
- - Seagate Technology Inc. 88,170 2,259
Solutia, Inc. 105,800 2,255
- - Advanced Micro Devices, Inc. 124,500 2,249
- - The Goldman Sachs Group, Inc. 31,000 2,240
- - Parametric Technology Corp. 161,100 2,235
Biomet, Inc. 56,000 2,226
USG Corp. 39,700 2,223
Great Lakes Chemical Corp. 48,200 2,220
- - Quintiles Transnational Corp. 52,800 2,218
Tyson Foods, Inc. 98,550 2,217
Nucor Corp. 46,400 2,201
- - NTL Inc. 25,500 2,198
Zions Bancorp 34,600 2,197
Apache Corp. 56,300 2,196
- - Waters Corp. 41,200 2,189
Burlington Resources, Inc. 50,500 2,184
Newmont Mining Corp. 109,756 2,181
Darden Restaurants Inc. 99,900 2,179
- - MidAmerican Energy
Holdings Co. 62,200 2,154
Transocean Offshore, Inc. 82,000 2,152
- - U.S. Cellular Corp. 40,200 2,151
- - VISIX Inc. 27,000 2,138
- - King World Productions, Inc. 61,400 2,137
- - Northwest Airlines Corp.
Class A 65,400 2,126
- - Humana, Inc. 164,000 2,122
Martin Marietta Materials, Inc. 35,900 2,118
- - Payless ShoeSource, Inc. 39,500 2,113
Noble Affiliates, Inc. 74,900 2,111
- - Modis Professional Services Inc. 153,400 2,109
- - Fiserv, Inc. 67,200 2,104
- - Quantum Corp. 87,200 2,104
- - DST Systems, Inc. 33,300 2,094
- - Gateway, Inc. 35,200 2,077
- - Continental Airlines, Inc. Class B 54,900 2,066
Enron Oil & Gas Co. 101,100 2,047
- - Pacificare Health Systems, Inc. 28,328 2,038
The St. Joe Co. 75,200 2,030
Baker Hughes, Inc. 60,480 2,026
- - American Power
Conversion Corp. 100,400 2,021
- - Silicon Graphics, Inc. 123,300 2,019
- - US Airways Group, Inc. 46,200 2,013
Amerada Hess Corp. 33,800 2,011
AMBAC Financial Group Inc. 35,100 2,005
- - Robert Half International, Inc. 77,000 2,002
Mylan Laboratories, Inc. 75,250 1,994
- - Sepracor Inc. 24,500 1,991
McKesson HBOC, Inc. 61,324 1,970
- - Vitesse Semiconductor Corp. 29,200 1,969
- - Chiron Corp. 94,840 1,968
Bank One Corp. 32,959 1,963
- - HCR Manor Care, Inc. 80,300 1,942
Marriott International, Inc.
Class A 51,700 1,932
- - CNA Financial Corp. 47,900 1,931
- - VoiceStream Wireless Corp. 67,000 1,905
Columbia Energy Group 30,300 1,899
IBP, Inc. 79,900 1,898
IKON Office Solutions, Inc. 126,500 1,898
- - MedImmune Inc. 28,000 1,897
- - Watson Pharmaceuticals, Inc. 54,000 1,893
- - PanAmSat Corp. 48,100 1,873
Centex Corp. 49,700 1,867
Williams Cos., Inc. 43,789 1,864
Owens Corning 53,700 1,846
- - Health Management Associates
Class A 163,268 1,837
- - Catellus Development Corp. 118,400 1,835
- - Brinker International, Inc. 67,400 1,832
- - Fox Entertainment Group, Inc.
Class A 68,000 1,832
Union Pacific Corp. 31,253 1,822
- - Shaw Industries, Inc. 110,000 1,815
MBIA, Inc. 28,000 1,813
Alberto-Culver Co. Class B 68,000 1,810
- - Consolidated Stores, Inc. 66,706 1,801
International Paper Co. 35,600 1,798
- - Harrah's Entertainment, Inc. 81,600 1,795
- - PRIMEDIA Inc. 105,500 1,787
- - UAL Corp. 27,400 1,781
- - SPX Corp. 21,200 1,770
- - Golden State Bancorp Inc. 79,800 1,756
ITT Industries, Inc. 45,900 1,750
Fort James Corp. 46,087 1,746
International Game Technology 93,900 1,737
Hasbro, Inc. 62,100 1,735
FirstEnergy Corp. 55,900 1,733
- - Premier Parks Inc. 47,000 1,727
- - American Tower Corp. Class A 71,700 1,721
- - Northeast Utilities 96,600 1,709
Pioneer Natural Resources Co. 155,200 1,707
Total System Services, Inc. 89,450 1,700
Manpower Inc. 74,900 1,695
- - Promus Hotel Corp. 54,563 1,691
W.W. Grainger, Inc. 31,400 1,690
- - Adelphia Communications
Corp. Class A 26,400 1,680
Transatlantic Holdings, Inc. 22,200 1,664
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Mirage Resorts, Inc. 98,700 $ 1,653
- - Keebler Foods Co. 54,400 1,652
- - Republic Services, Inc. Class A 66,700 1,651
Autoliv, Inc. 53,947 1,632
- - Safeguard Scientifics, Inc. 26,300 1,631
Raychem Corp. 44,000 1,628
- - Network Associates, Inc. 110,550 1,624
- - Univision Communications Inc. 24,600 1,624
- - MGM Grand, Inc. 33,109 1,622
- - Barnes & Noble, Inc. 59,100 1,618
Clayton Homes Inc. 140,395 1,606
- - Cadence Design Systems, Inc. 125,600 1,601
Millipore Corp. 39,200 1,590
- - Affiliated Computer Services, Inc.
Class A 31,300 1,585
- - Sodexho Marriott Services, Inc. 82,250 1,578
AGCO Corp. 138,600 1,568
CNF Transportation, Inc. 40,800 1,566
- - Associated Group, Inc. 23,850 1,553
Homestake Mining Co. 187,200 1,533
Dime Bancorp, Inc. 75,400 1,517
- - RCN Corp. 36,200 1,507
Roslyn Bancorp, Inc. 87,400 1,502
- - Winstar Communications, Inc. 30,800 1,502
- - Western Wireless Corp. Class A 55,000 1,485
- - Gentex Corp. 52,600 1,473
- - Metromedia Fiber Network, Inc. 40,900 1,470
- - BISYS Group, Inc. 25,000 1,463
- - Convergys Corp. 75,900 1,461
- - U.S. Foodservice 34,200 1,458
- - International Specialty
Products, Inc. 142,700 1,454
- - DLJdirect 49,100 1,448
Kellogg Co. 43,700 1,442
Wesco Financial Corp. 4,600 1,426
- - Venator Group, Inc. 136,359 1,423
- - ICOS Corp. 34,800 1,420
- - Mohawk Industries, Inc. 46,700 1,419
Union Pacific Resources
Group, Inc. 86,842 1,417
Dole Food Co. 46,500 1,366
Fluor Corp. 33,600 1,361
- - IVAX Corp. 95,000 1,342
Fastenal Co. 25,500 1,337
- - Synetic, Inc. 19,200 1,320
Cooper Tire & Rubber Co. 55,500 1,311
York International Corp. 30,600 1,310
The Limited, Inc. 28,437 1,290
- - Gartner Group, Inc. Class A 61,700 1,265
Investment Technology
Group, Inc. 38,900 1,259
- - LHS Group, Inc. 37,600 1,246
- - Santa Fe Snyder Corp. 163,170 1,244
Arch Chemicals, Inc. 50,400 1,225
Nordstrom, Inc. 36,200 1,213
Beckman Coulter, Inc. 24,500 1,191
- - Snyder Communications, Inc. 36,300 1,189
- - Storage Technology Corp. 52,200 1,188
Autodesk, Inc. 39,900 1,180
- - Andrx Corp. 15,000 1,157
New Century Energies, Inc. 29,800 1,157
Ford Motor Co. 20,200 1,140
Johns Manville Corp. 87,000 1,131
- - Quorum Health Group, Inc. 89,500 1,124
- - Sterling Software, Inc. 41,700 1,113
Expeditors International of
Washington, Inc. 40,700 1,109
- - ACNielson Corp. 35,900 1,086
- - MiniMed, Inc. 14,000 1,077
- - United Rentals, Inc. 36,000 1,062
Lancaster Colony Corp. 30,050 1,037
- - Calpine Corp. 19,000 1,026
The Warnaco Group, Inc. Class A 38,100 1,019
Cummins Engine Co., Inc. 16,900 965
Diamond Offshore Drilling, Inc. 33,700 956
American General Corp. 12,461 939
- - Thermo Instrument Systems, Inc. 55,458 936
- - Chris-Craft Industries, Inc. 19,701 928
DENTSPLY International Inc. 31,400 907
20th Century Industries of CA 47,300 893
- - J.D. Edwards & Co. 48,200 892
IMC Global Inc. 49,206 867
Rohm & Haas Co. 19,950 855
Dillard's Inc. 24,200 850
- - Arrow Electronics, Inc. 43,300 823
Stewart Enterprises, Inc. Class A 55,800 813
BHC Communications, Inc.
Class A 6,200 797
- - Crestline Capital Corp. REIT 47,190 793
A. H. Belo Corp. Class A 38,400 756
E.W. Scripps Co. Class A 15,235 725
- - Dollar Tree Stores, Inc. 15,600 686
- - Polo Ralph Lauren Corp. 35,500 675
J.C. Penney Co., Inc. 13,654 663
Sealed Air Corp. $2.00 Cvt. Pfd. 10,117 632
Host Marriott Corp. REIT 52,069 618
- - Allegheny Teledyne Inc. 27,142 614
Mallinckrodt, Inc. 16,800 611
- - Viacom Inc. Class A 13,688 604
- - Reebok International Ltd. 30,050 560
Reynolds & Reynolds Class A 23,500 548
Lyondell Chemical Co. 25,000 516
- - Safety-Kleen Corp. 27,834 504
Crown Cork & Seal Co., Inc. 17,500 499
Texaco Inc. 7,960 497
The Pepsi Bottling Group, Inc. 20,000 461
Meditrust Corp. REIT 33,722 440
- - Nielsen Media Research 14,633 428
- - First Health Group Corp. 16,700 360
The Clorox Co. 3,210 343
- - Revlon, Inc. Class A 11,000 333
Texas Utilities Co. 7,965 329
Reynolds Metals Co. 5,300 313
- - Mandalay Resort Group 14,200 300
Young & Rubicam Inc. 6,500 295
- - Cabletron Systems, Inc. 21,700 282
Raytheon Co. Class A 3,284 226
- - Conexant Systems, Inc. 3,400 197
Chicago Title Corp. 5,124 183
Cinergy Corp. 5,700 182
U S WEST, Inc. 3,009 177
St. Paul Cos., Inc. 4,800 153
Baxter International, Inc. 2,000 121
- - Centennial Cellular Corp. Class A 3,000 107
- - Covad Communications Group, Inc. 2,000 107
Nabisco Group Holdings Corp. 4,360 85
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Beverly Enterprises, Inc. 10,400 $ 84
- - UCAR International, Inc. 2,900 73
- - Associated Group, Inc. Class B 750 49
- - R.J. Reynolds Tobacco
Holdings, Inc. 1,453 46
- - Genzyme Surgical Products 9,899 44
Louisiana-Pacific Corp. 1,050 25
Freeport-McMoRan Copper &
Gold, Inc. Class A 138 2
- ---------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,106,058) 1,927,843
- ---------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS (0.9%)
- ---------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.87%, 7/1/1999 $ 3,563 3,563
4.96%, 7/1/1999--Note G 14,094 14,094
- ---------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $17,657) 17,657
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%)
(COST $1,123,715) 1,945,500
- ---------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- ---------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-0.8%)
- ---------------------------------------------------------------------------------------
Other Assets--Note B 46,968
Liabilities--Note G (63,593)
---------
(16,625)
- ---------------------------------------------------------------------------------------
NET ASSETS (100%) $1,928,875
=======================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
REIT--Real Estate Investment Trust.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------
AMOUNT
(000)
- ---------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $1,123,924
Undistributed Net Investment Income 3,700
Accumulated Net Realized Losses (20,534)
Unrealized Appreciation--Note F 821,785
- ---------------------------------------------------------------------------------------
NET ASSETS $1,928,875
=======================================================================================
Investor Shares--Net Assets
Applicable to 60,552,460 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $1,798,577
- ---------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $29.70
=======================================================================================
Institutional Shares--Net Assets
Applicable to 4,385,284 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $130,298
=======================================================================================
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $29.71
=======================================================================================
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.5%)
- ---------------------------------------------------------------------------------------
- - VISIX Inc. 15,800 $ 1,251
- - Novellus Systems, Inc. 15,000 1,024
FirstMerit Corp. 35,200 988
American Bankers
Insurance Group 16,700 909
- - Express Scripts 14,600 879
Legg Mason Inc. 21,800 839
- - Valassis Communications, Inc. 22,100 809
- - Gentex Corp. 28,100 787
- - Acxiom Corp. 30,200 753
- - Williams Sonoma, Inc. 21,600 752
Radian Group, Inc. 14,300 698
Devon Energy Corp. 18,700 669
U.S. Trust Corp. 7,200 666
- - Linens `n Things, Inc. 15,200 665
- - Catalina Marketing Corp. 7,200 662
- - Whittman-Hart, Inc. 20,600 654
Centura Banks, Inc. 11,000 620
- - BISYS Group, Inc. 10,600 620
- - IDEC Pharmaceuticals Corp. 8,000 616
SEI Corp. 6,900 609
Ethan Allen Interiors, Inc. 16,000 604
- - MedQuist, Inc. 13,800 604
- - CommScope, Inc. 19,600 603
- - Universal Health Services Class B 12,500 597
- - Micrel, Inc. 7,800 577
Cullen/Frost Bankers, Inc. 20,800 573
- - Lattice Semiconductor Corp. 9,100 566
Dallas Semiconductor Corp. 11,200 566
- - Macromedia 16,000 564
- - Zale Corp. 14,100 564
Mutual Risk Management Ltd. 16,800 561
National Data Corp. 13,100 560
- - Dycom Industries, Inc. 9,900 554
True North Communications 18,400 552
Commercial Federal Corp. 23,700 550
- - Smithfield Foods, Inc. 16,200 542
- - American Management
Systems, Inc. 16,500 529
Expeditors International of
Washington, Inc. 19,400 529
- - Burr-Brown Corp. 14,200 520
- - National Instruments Corp. 12,800 517
Fremont General Corp. 27,200 513
- - Mercury Interactive Corp. 14,400 509
- - Ames Department Stores, Inc. 11,100 506
UST Corp. 16,500 499
- - Cognex Corp. 15,800 499
- - The Profit Recovery Group
International, Inc. 10,500 497
Central Parking Corp. 14,400 493
Eaton Vance Corp. 14,100 486
- - Whole Foods Market, Inc. 10,100 485
- - O'Reilly Automotive, Inc. 9,600 484
- - C-Cube Microsystems, Inc. 15,200 482
- - Barrett Resources Corp. 12,500 480
Hudson United Bancorp 15,600 478
USFreightways Corp. 10,200 472
- - Mueller Industries Inc. 13,900 472
Delta & Pine Land Co. 14,900 469
La-Z-Boy Inc. 20,300 467
- - Tower Automotive, Inc. 18,200 463
- - Zebra Technologies Class A 12,000 461
- - Foodmaker, Inc. 16,200 460
Commerce Bancorp, Inc. 10,700 457
MacDermid, Inc. 9,800 456
- - AnnTaylor Stores Corp. 10,100 454
First American Financial Corp. 25,300 452
- - Newfield Exploration Co. 15,900 452
- - Patterson Dental Co. 13,000 452
Raymond James Financial, Inc. 18,600 445
United Bankshares, Inc. 16,800 445
- - Renal Care Group, Inc. 17,200 445
- - DSP Communications, Inc. 15,400 445
Corn Products International, Inc. 14,500 441
Jones Pharma, Inc. 11,200 441
- - Ciber, Inc. 23,000 440
Community First Bankshares 18,400 439
- - Stillwater Mining Co. 13,400 438
Sierra Pacific Resources 12,000 437
- - Plantronics, Inc. 6,700 436
First Midwest Bancorp 10,900 433
Earthgrains Co. 16,700 431
Polaris Industries, Inc. 9,900 431
Aptargroup Inc. 14,100 423
Pier 1 Imports Inc. 37,600 423
Manitowac Co., Inc. 10,150 422
G & K Services, Inc. 8,000 419
National Computer Systems, Inc. 12,400 418
Applied Power, Inc. 15,300 418
D. R. Horton, Inc. 24,900 414
Wicor, Inc. 14,800 413
- - Santa Fe Snyder Corp. 53,865 411
- - World Color Press, Inc. 14,900 410
St. Paul Bancorp, Inc. 15,700 400
- - AmeriCredit Corp. 24,800 397
- - Westwood One, Inc. 11,100 396
- - US Oncology, Inc. 32,800 394
- - Fossil, Inc. 8,100 392
Blount International, Inc. 14,400 391
- - Men's Wearhouse, Inc. 15,300 390
Werner Enterprises, Inc. 18,500 384
Executive Risk, Inc. 4,500 383
Alpharma, Inc. Class A 10,700 381
Orion Capital Corp. 10,600 380
CTS Corp. 5,400 378
- - SLI, Inc. 14,000 378
Roper Industries Inc. 11,800 378
Piedmont Natural Gas, Inc. 12,000 373
- - Shopko Stores, Inc. 10,300 373
- - Interim Services, Inc. 17,900 369
Philadelphia Suburban Corp. 16,000 369
- - Canandaigua Brands, Inc. Class A 7,000 367
Whitney Holdings 9,100 362
- - Visio Corp. 9,500 362
- - Summit Technology, Inc. 16,400 361
- - Unitrode Corp. 12,500 359
- - Dendrite International, Inc. 9,900 358
- - Labor Ready, Inc. 11,000 357
- - Alpha Industries, Inc. 7,500 357
- - Hambrecht & Quist Group 9,600 356
- - Barr Labs Inc. 8,900 355
- - Alliant Techsystems, Inc. 4,100 355
- - IDEXX Laboratories Corp. 15,200 354
Commonwealth Energy Systems 8,400 353
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Dionex Corp. 8,700 $ 352
- - Champion Enterprises, Inc. 18,900 352
- - KEMET Corp. 15,300 351
JLG Industries, Inc. 17,100 348
E.W. Blanch Holdings, Inc. 5,100 348
- - Metro Networks, Inc. 6,500 347
Arthur J. Gallagher & Co. 7,000 346
Applebee's International, Inc. 11,400 343
- - Vicor Corp. 16,200 343
- - Scotts Co. 7,200 343
- - Orbital Sciences Corp. 14,500 343
Southwest Gas Corp. 11,900 341
United Water Resources, Inc. 15,000 340
- - Michaels Stores, Inc. 11,100 340
FactSet Research Systems Inc. 6,000 340
- - Superior Services Inc. 12,700 339
- - Security Dynamics
Technologies, Inc. 15,900 338
Cilcorp, Inc. 5,400 337
- - CustomTracks Corp. 6,000 336
Richfood Holdings, Inc. 19,000 335
- - Footstar Inc. 9,000 335
Florida Rock Industries, Inc. 7,300 332
Air Express International Corp. 13,000 330
OM Group, Inc. 9,400 324
Methode Electronics, Inc. Class A 14,000 320
Texas Industries, Inc. 8,200 318
Invacare Corp. 11,800 316
Orange & Rockland Utilities, Inc. 5,400 316
- - HNC Software, Inc. 10,100 311
- - Oak Industries, Inc. 7,100 310
Jack Henry & Associates 7,900 310
- - Digital Microwave Corp. 24,300 310
- - Astec Industries, Inc. 7,600 310
Harman International
Industries, Inc. 7,000 308
Casey's General Stores 20,500 307
- - Toll Brothers, Inc. 14,300 307
Atmos Energy Corp. 12,200 305
Bank North Group 9,200 304
- - Roberts Pharmaceuticals 12,500 303
Varian Medical Systems, Inc. 11,900 300
- - CEC Entertainment Inc. 7,100 300
- - Timberland Co. 4,400 299
Kellwood Co. 11,000 298
- - Pacific Sunwear of California 12,200 297
Geon Co. 9,200 297
Enhance Financial Services
Group, Inc. 14,900 294
MascoTech Inc. 17,300 293
- - The Liposome Co., Inc. 15,300 293
Pogo Producing Co. 15,600 291
- - Dialogic Corp. 6,600 290
Brady Corp. Class A 8,900 289
Reliance Steel & Aluminum Co. 7,400 289
Regis Corp. 15,000 288
- - INCYTE Pharmaceuticals, Inc. 10,800 286
Lone Star Industries, Inc. 7,600 285
- - Consolidated Graphics, Inc. 5,700 285
Hughes Supply, Inc. 9,600 285
Baldor Electric Co. 14,300 284
Trustco Bank 10,500 282
Jefferies Group, Inc. 9,400 282
- - Delphi Financial Group, Inc. 7,846 281
Central Hudson Gas &
Electric Corp. 6,700 281
- - Priority Healthcare Corp. Class B 8,150 281
Ballard Medical Products 12,000 280
- - Xircom, Inc. 9,300 280
Queens County Bancorp, Inc. 8,600 278
- - Cerner Corp. 13,100 275
- - International Rectifier Corp. 20,600 274
Bindly Western Industries, Inc. 11,867 274
- - Anixter International Inc. 14,900 272
- - Hutchinson Technology, Inc. 9,700 269
- - TALK.com, Inc. 23,900 269
XL Capital Ltd. Class A 4,758 269
ABM Industries 8,700 267
Cross Timbers Oil Co. 17,800 265
- - Orthodontic Centers of
America, Inc. 18,700 264
- - Pharmaceutical Product
Development, Inc. 9,600 263
- - SEACOR SMIT Inc. 4,900 262
New Jersey Resources Corp. 7,000 262
First Bancorp/Puerto Rico 11,600 262
- - Safeskin Corp. 21,800 262
Dain Rauscher Corp. 4,800 260
Vintage Petroleum, Inc. 24,000 258
Cambrex Corp. 9,800 257
- - Pre-Paid Legal Services, Inc. 9,400 256
- - CDI Corp. 7,500 255
A.O. Smith Corp. 9,100 255
Susquehanna Bancshares, Inc. 14,400 255
- - Stone Energy Corp. 6,000 254
- - Coventry Health Care Inc. 23,200 254
Rollins Truck Leasing 22,800 254
- - Kulicke & Soffa Industries, Inc. 9,400 252
- - Powerwave Technologies, Inc. 7,800 252
Fidelity National Financial, Inc. 11,800 248
- - Insight Enterprises, Inc. 10,000 247
John H. Harland Co. 12,400 247
- - Prime Hospitality Corp. 20,600 247
- - American Freightways 12,600 246
- - Tetra Tech, Inc. 14,875 245
AAR Corp. 10,800 245
Riggs National Corp. 11,900 245
- - Sonic Corp. 7,500 245
- - Vertex Pharmaceuticals, Inc. 10,100 244
Ruby Tuesday, Inc. 12,800 243
Skywest, Inc. 9,700 242
United Illuminating Co. 5,700 242
- - Nautica Enterprises, Inc. 14,300 241
- - The Cheesecake Factory 7,900 241
Caraustar Industries, Inc. 9,700 239
Downey Financial Corp. 10,900 239
Oakwood Homes Corp. 18,200 239
Northwest Natural Gas Co. 9,900 239
Graco, Inc. 8,100 238
- - Tuboscope Inc. 17,300 237
- - Kronos, Inc. 5,200 237
Eastern Utilities Associates 8,100 236
- - DBT Online Inc. 7,200 236
Public Service Co. of
North Carolina, Inc. 8,000 234
- - Ionics, Inc. 6,400 234
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Marshall Industries 6,500 $ 234
- - Aviation Sales Co. 5,900 233
Belden, Inc. 9,700 232
Chiquita Brands
International, Inc. 25,700 231
Wolverine World Wide, Inc. 16,400 230
MAF Bancorp, Inc. 9,400 228
- - Photronics Labs Inc. 9,300 228
Provident Bankshares Corp. 9,785 228
- - Primark Corp. 8,100 227
Elcor Corp. 5,200 227
- - Anchor Gaming 4,700 226
- - Quiksilver, Inc. 8,600 224
- - Kent Electronics Corp. 11,300 224
- - Silicon Valley Group, Inc. 13,300 224
- - Inacom Corp. 17,700 223
- - MICROS Systems, Inc. 6,500 221
- - PhyCor, Inc. 29,700 220
- - Hadco Corp. 5,500 219
- - Insituform Technologies Class A 10,100 218
- - Action Performance Cos., Inc. 6,600 218
- - Wesley Jessen VisionCare, Inc. 6,700 217
- - Dura Pharmaceuticals, Inc. 18,100 216
Energen Corp. 11,600 216
- - Pride International Inc. 20,400 215
Frontier Insurance Group, Inc. 14,000 215
Carolina First Corp. 8,800 214
- - Hyperion Solutions Corp. 12,000 214
- - Simpson Manufacturing Co. 4,500 214
- - Morrison Knudsen Corp. 20,700 213
- - Electro Scientific Industries, Inc. 5,100 213
- - Buckeye Technology, Inc. 14,000 213
- - Triarc Cos., Inc. Class A 10,000 212
- - Benchmark Electronics, Inc. 5,900 212
Helix Technology Corp. 8,700 208
Selective Insurance Group 10,800 206
K-Swiss, Inc. 4,400 205
Technitrol, Inc. 6,300 203
Russ Berrie and Co., Inc. 8,200 203
Capital Re Corp. 12,600 202
The Toro Co. 5,100 201
Gerber Scientific, Inc. 9,100 201
- - Silicon Valley Bancshares 8,100 200
Fair Issac & Co. 5,700 200
- - Midway Games Inc. 15,400 199
- - Shorewood Packaging Corp. 10,800 199
- - Harbinger Corp. 15,700 196
- - Department 56 Inc. 7,300 196
- - Ralcorp Holdings, Inc. 12,200 196
Winnebago Industries, Inc. 8,700 196
- - Cephalon, Inc. 11,200 195
Regal-Beloit Corp. 8,200 194
- - IHOP Corp. 8,000 192
TJ International, Inc. 6,200 192
TNP Enterprises, Inc. 5,300 192
- - S3, Inc. 21,100 192
- - Heartland Express, Inc. 11,700 192
- - Consolidated Products Inc. 10,600 191
Michael Foods Group, Inc. 8,100 190
St. John Knits, Inc. 6,500 190
Norrell Corp. 10,100 190
Inter-Tel, Inc. 10,400 190
- - Datascope Corp. 5,900 190
- - Sola International Inc. 9,700 189
Bowne & Co., Inc. 14,500 188
Watsco, Inc. 11,500 188
JSB Financial 3,700 188
MDC Holdings, Inc. 8,700 187
- - BE Avionics Inc. 10,000 187
Premier Bancshares, Inc. 10,200 187
The Stride Rite Corp. 18,100 187
- - HA-LO Industries, Inc. 18,900 187
- - Aspect Telecommunications Corp. 19,100 186
- - Respironics, Inc. 12,300 186
Libbey, Inc. 6,400 186
Coca-Cola Bottling Co. 3,300 185
- - NBTY, Inc. 28,400 185
- - U.S. Home Corp. 5,200 185
Clarcor Inc. 9,600 184
- - SPS Technologies, Inc. 4,900 184
Universal Forest Products, Inc. 8,500 183
Mentor Corp. 9,800 183
- - SpeedFam-IPEC, Inc. 11,300 182
- - The Kroll-O'Gara Co. 8,200 181
New England Business
Service, Inc. 5,800 179
- - Ryan's Family Steak Houses, Inc. 15,400 179
Cabot Oil & Gas Corp. Class A 9,600 179
Anchor Bancorp Wisconsin Inc. 10,000 178
Ryland Group, Inc. 6,000 178
- - Plexus Corp. 5,900 178
- - Pioneer Group, Inc. 10,300 178
ChemFirst Inc. 7,300 177
- - Coherent, Inc. 9,500 177
Interface, Inc. 20,500 177
- - ADVO, Inc. 8,500 176
- - URS Corp. 6,000 176
Valmont Industries, Inc. 10,300 175
- - Technology Solutions Co. 16,200 175
- - Pool Energy Service Co. 8,600 175
Fleming Cos., Inc. 15,000 174
Wabash National Corp. 9,000 174
- - Paxar Corp. 19,300 174
- - Stein Mart, Inc. 18,500 173
- - Hollywood Park, Inc. 10,200 173
Lilly Industries Inc. Class A 9,300 173
- - Aztar Corp. 18,700 172
- - Cable Design Technologies 11,100 171
- - Yellow Corp. 9,600 170
- - InterVoice, Inc. 11,800 170
Zenith National Insurance Corp. 6,900 170
Barnes Group, Inc. 7,800 170
- - Kirby Corp. 7,900 167
- - Integrated Health Services, Inc. 20,700 166
- - Syncor International Corp. 4,600 166
Applied Industrial Technology, Inc. 8,600 163
Commercial Metals Co. 5,700 162
- - Billing Concepts Corp. 14,500 162
- - Protein Design Labs 7,300 162
Brown Shoe Company, Inc. 7,400 161
- - Electroglas, Inc. 8,000 160
Quanex Corp. 5,600 160
Standard Products Co. 6,200 159
Connecticut Energy Corp. 4,100 158
- - Service Experts, Inc. 7,200 158
Authentic Fitness Corp. 9,000 157
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
- - Discount Auto Parts Inc. 6,500 $ 157
Aquarion Co. 4,500 156
Analogic Corp. 5,000 155
WD-40 Co. 6,200 155
- - Seitel, Inc. 9,500 154
- - Sierra Health Services 10,600 153
Intermet Corp. 10,100 153
Standard Pacific Corp. 11,800 153
- - Fritz Cos., Inc. 14,200 153
AMCOL International Corp. 10,600 152
Coachmen Industries, Inc. 6,500 151
C & D Technology Inc. 4,900 150
Oshkosh B Gosh, Inc. Class A 7,100 150
Diagnostic Products Corp. 5,400 149
- - Goody's Family Clothing 13,000 149
- - Cor Therapeutics, Inc. 10,000 147
- - Input/Output, Inc. 19,500 147
Kaman Corp. Class A 9,400 147
Computer Task Group, Inc. 8,600 146
The Marcus Corp. 11,800 145
Apogee Enterprises, Inc. 10,800 145
- - Landstar System 4,000 144
Myers Industries, Inc. 7,200 144
Justin Industries, Inc. 10,300 144
- - Oceaneering International, Inc. 8,900 144
- - Banctec, Inc. 8,000 143
- - FileNet Corp. 12,500 143
- - M.S. Carriers, Inc. 4,800 142
Standex International Corp. 5,200 142
Cooper Cos., Inc. 5,700 142
Owens & Minor, Inc. Holding Co. 12,900 142
Stone & Webster, Inc. 5,300 141
- - Scott Technologies, Inc. 7,200 139
- - PAREXEL International Corp. 10,400 138
- - Wolverine Tube, Inc. 5,500 138
- - Biotechnology General 21,200 138
- - General Semiconductor, Inc. 15,000 137
- - Devry, Inc. 6,100 136
Wynn's International Inc. 7,400 136
Chemed Corp. 4,100 136
Thor Industries, Inc. 4,800 136
CPI Corp. 4,100 135
Pennsylvania Enterprises Inc. 4,400 135
- - Brightpoint, Inc. 22,100 134
- - General Communication, Inc. 19,700 134
Analysts International Corp. 9,300 134
Thomas Industries, Inc. 6,500 133
- - Plains Resources 7,000 133
- - Volt Information Sciences Inc. 5,800 133
Standard Motor Products, Inc. 5,400 132
- - Maxxim Medical, Inc. 5,600 131
Luby's, Inc. 8,700 130
- - The Dress Barn, Inc. 8,100 130
- - Adaptive Broadband Corp. 5,900 129
Cato Corp. Class A 11,100 129
- - NFO Worldwide, Inc. 9,200 129
Cash America International Inc. 10,000 129
- - RTI International Metals 8,700 128
- - Magellan Health Services, Inc. 12,700 127
- - Ultratech Stepper, Inc. 8,400 127
- - Epicor Software Corp. 17,000 126
- - PictureTel Corp. 15,800 126
- - Whittaker Corp. 4,500 126
- - Read Rite Corp. 20,100 125
Pioneer Standard Electronics Inc. 10,300 124
- - Vantive Corp. 10,500 120
- - Organogenesis, Inc. 12,800 120
Sturm, Ruger & Co., Inc. 11,200 120
- - GC Cos. 3,300 118
Brush Wellman, Inc. 6,500 118
- - Allen Telecom Inc. 10,900 117
- - Aspen Technologies, Inc. 9,900 116
- - Bombay Co. 15,000 115
Park Electrochemical Corp. 4,000 115
- - Cygnus Inc. 8,800 114
Hilb, Rogal and Hamilton Co. 5,100 114
- - Auspex Systems, Inc. 10,400 113
Bassett Furniture Industries, Inc. 4,900 112
- - Trimble Navigation Ltd. 8,700 112
BMC Industries, Inc. 10,800 111
IMCO Recycling, Inc. 6,500 111
Trenwick Group Inc. 4,500 111
National Presto Industries, Inc. 2,900 111
- - HS Resources Inc. 7,500 111
Southwestern Energy Co. 10,400 110
- - Jo-Ann Stores, Inc. Class A 7,300 110
- - C-COR Electronics, Inc. 3,900 109
Lawson Products, Inc. 4,300 108
- - Checkpoint Systems, Inc. 12,100 108
- - Mesa Air Group Inc. 14,200 107
Phillips-Van Heusen Corp. 10,800 107
- - Hanger Orthopedic Group, Inc. 7,500 106
- - Global Industrial Technologies, Inc. 8,800 106
Titan International, Inc. 8,800 104
- - United Natural Foods, Inc. 4,200 104
- - Gardner Denver Inc. 6,400 103
Skyline Corp. 3,500 103
- - Esterline Technologies Corp. 7,100 102
Mississippi Chemical Corp. 10,300 101
- - Regeneron Pharmaceuticals, Inc. 12,800 100
- - The Gymboree Corp. 9,500 100
Vital Signs, Inc. 5,000 100
Fedders Corp. 14,900 100
American States Water Co. 3,500 99
A.M. Castle & Co. 5,800 99
- - Enzo Biochem, Inc. 9,900 98
Dimon Inc. 18,800 98
Guilford Mills, Inc. 9,400 98
- - Griffon Corp. 12,400 97
Oxford Industries, Inc. 3,400 96
Robbins & Myers, Inc. 4,300 96
Merrill Corp. 6,600 96
Arctic Cat, Inc. 10,700 96
- - Players International, Inc. 13,300 96
- - Offshore Logistics, Inc. 8,500 95
- - Material Sciences Corp. 6,300 94
Schweitzer-Mauduit
International, Inc. 6,300 94
- - J & J Snack Foods Corp. 3,900 94
Pillowtex Designs 5,700 93
St. Mary Land & Exploration Co. 4,500 93
Lindsay Manufacturing Co. 5,200 91
- - Network Equipment
Technologies, Inc. 9,200 91
- - Landry's Seafood Restaurants, Inc. 11,000 88
Butler Manufacturing Co. 3,100 87
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Innovex, Inc. 6,100 $ 85
Republic Group Inc. 4,700 85
- - Arkansas Best Corp. 8,500 84
- - Family Golf Centers, Inc. 10,900 84
Cascade Natural Gas Corp. 4,400 84
- - Valence Technology 11,300 83
- - Just for Feet, Inc. 12,600 81
Nature's Sunshine Inc. 7,700 81
Commonwealth Industries Inc. 6,400 80
- - ETEC Systems, Inc. 2,400 80
Watkins-Johnson Co. 2,700 80
- - SpaceLabs Medical, Inc. 4,200 79
Simpson Industries, Inc. 7,700 79
Pittston BAX Group 8,300 79
- - Halter Marine Group, Inc. 11,800 78
- - U.S. Bioscience 7,900 77
O'Sullivan Corp. 6,200 76
- - Lason Holdings, Inc. 1,500 74
- - Insurance Auto Auctions, Inc. 4,600 74
- - Lydall, Inc. 6,200 71
Thomas Nelson, Inc. 6,100 68
Huffy Corp. 4,800 67
- - Digi International, Inc. 6,400 67
Pope & Talbot, Inc. 5,500 66
CKE Restaurants Inc. 4,000 65
- - Progress Software Corp. 2,300 65
Angelica Corp. 3,600 63
Harmon Industries, Inc. 3,200 63
- - Cone Mills Corp. 10,500 63
- - Flow International Corp. 5,800 63
- - Sunrise Medical, Inc. 8,800 63
- - McWorter Technologies Inc. 4,300 62
- - TBC Corp. 8,700 61
Central Vermont Public
Service Corp. 4,800 61
- - Royal Appliance
Manufacturing Co. 8,800 61
Tredegar Corp. 2,800 61
K2 Inc. 6,700 60
- - Building Materials Holding Corp. 5,200 60
Amcast Industrial Corp. 3,600 59
- - Rural/Metro Corp. 6,100 59
Quaker Chemical Corp. 3,600 58
TCBY Enterprises, Inc. 9,500 58
- - Taco Cabana 5,600 57
J. Baker, Inc. 6,600 57
X-Rite Inc. 8,800 57
- - Noven Pharmaceuticals, Inc. 9,300 56
- - Hartmarx Corp. 13,400 56
Delta Woodside 9,300 56
Frozen Food Express
Industries, Inc. 7,300 56
- - Advanced Tissue Sciences Inc. 17,000 55
Penford Corp. 3,400 55
- - TETRA Technologies, Inc. 6,000 55
Bangor Hydro-Electric Co. 3,400 55
- - Carmike Cinemas, Inc. Class A 3,400 54
- - RailTex, Inc. 3,900 54
Telxon Corp. 6,700 53
- - Applied Magnetics Corp. 17,300 53
- - E. Gottschalk & Co., Inc. 5,800 53
- - Symmetricom Inc. 6,500 53
- - Alliance Pharmaceutical Corp. 20,000 53
- - Itron, Inc. 6,100 52
Nash-Finch Co. 5,100 51
Lillian Vernon Corp. 3,900 51
- - Standard Microsystem 6,700 51
- - Remington Oil & Gas Corp. 10,300 50
Birmingham Steel Corp. 11,900 49
- - Coeur D'Alene Mines Corp. 10,500 49
Steel Technologies, Inc. 5,100 48
- - WHX Corp. 7,300 48
- - Gibson Greetings, Inc. 7,500 48
- - Hecla Mining Co. 22,700 47
The Dixie Group, Inc. 5,500 47
- - Avid Technology, Inc. 2,800 45
- - Cyrk International, Inc. 7,100 43
A.T. Cross Co. Class A 7,600 42
- - Hologic, Inc. 7,400 42
- - Exabyte Corp. 10,400 40
- - Three-Five Systems, Inc. 2,800 39
Hancock Fabrics, Inc. 8,800 39
Haggar Corp. 2,900 38
- - Pediatrix Medical Group, Inc. 1,700 36
- - System Software
Associates, Inc. 21,300 35
- - P-Com, Inc. 6,400 34
- - USA Detergents, Inc. 5,500 33
- - Panera Bread 5,200 33
Insteel Industries, Inc. 3,500 31
Spartan Motors, Inc. 5,400 31
- - Southern Energy Homes, Inc. 5,800 31
- - Swiss Army Brands, Inc. 3,200 28
- - Centigram Communications 3,000 28
- - Genesis Health Ventures Inc. 9,100 27
- - Galey & Lord 6,000 26
- - Ashworth, Inc. 5,600 26
Green Mountain Power Corp. 2,300 26
- - Nashua Corp. 2,600 26
- - Komag, Inc. 7,700 25
- - DAMARK International, Inc. 3,000 25
- - Black Box Corp. 500 25
- - Intermagnetics General Corp. 3,200 25
- - TCSI Corp. 9,600 25
- - Molecular Biosystems, Inc. 8,600 21
- - MicroAge, Inc. 5,200 20
- - Books-a-Million Inc. 2,300 17
- - Jan Bell Marketing Inc. 3,500 12
- - Amresco, Inc. 1,800 12
- - Curative Health Services Inc. 2,100 12
- - Biomatrix, Inc. 500 11
- - Priority Healthcare Corp. Class A 300 10
- - North American Vaccine, Inc. 2,100 10
- - ADAC Laboratories 1,400 10
- - Benton Oil & Gas Co. 2,900 6
- ---------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $121,873) 139,671
- ---------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS (1.7%)
- ---------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.87%, 7/1/1999 $1,279 $ 1,279
4.96%, 7/1/1999--Note G 1,090 1,090
- ---------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $2,369) 2,369
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(COST $124,242) 142,040
- ---------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.2%)
- ---------------------------------------------------------------------------------------
Other Assets--Note B 1,182
Liabilities--Note G (2,845)
---------
(1,663)
- ---------------------------------------------------------------------------------------
NET ASSETS (100%) $140,377
=======================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AMOUNT
(000)
- ------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------
<S> <C>
Paid in Capital $123,068
Undistributed Net Investment Income 276
Accumulated Net Realized Losses (765)
Unrealized Appreciation--Note F 17,798
- ------------------------------------------------------------------------
NET ASSETS $140,377
========================================================================
Investor Shares--Net Assets
Applicable to 10,518,137 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $123,899
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $11.78
========================================================================
Institutional Shares--Net Assets
Applicable to 1,398,612 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $16,478
========================================================================
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $11.78
========================================================================
</TABLE>
41
<PAGE> 44
STATEMENT OF OPERATIONS
This Statement shows dividend and interest income earned by each fund during
the reporting period, and details the operating expenses charged to each class
of its shares. These expenses directly reduce the amount of investment income
available to pay to shareholders as dividends. This Statement also shows any
Net Gain (Loss) realized on the sale of investments, and the increase or
decrease in the Unrealized Appreciation (Depreciation) on investments during
the period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TAX-MANAGED
BALANCED
FUND
-----------------
SIX MONTHS ENDED
JUNE 30, 1999
-----------------
(000)
- -------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $ 356
Interest 2,838
Security Lending 15
-----------------
Total Income 3,209
-----------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 41
Management and Administrative 161
Marketing and Distribution 19
Custodian Fees 7
Auditing Fees 4
Shareholders' Reports 3
Trustees' Fees and Expenses --
-----------------
Total Expenses 235
Expenses Paid Indirectly--Note C (4)
-----------------
Net Expenses 231
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,978
- -------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD 2,332
- -------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 9,462
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,772
===========================================================================================
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
GROWTH AND CAPITAL TAX-MANAGED
INCOME APPRECIATION SMALL-CAP
FUND FUND FUND
-------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED FEB. 25* TO
JUN. 30, 1999 JUN. 30, 1999 JUN. 30, 1999
-------------------------------------------------------
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 11,041 $ 5,570 $ 253
Interest 89 56 73
Security Lending 15 201 4
-------------------------------------------------------
Total Income 11,145 5,827 330
-------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 34 34 3
Management and Administrative 411 446 3
Shareholder Account Maintenance--Investor Shares 942 953 35
Shareholder Account Maintenance--Institutional Shares 7 15 1
Marketing and Distribution--Investor Shares 132 121 --
Marketing and Distribution--Institutional Shares -- -- --
Custodian Fees 41 22 12
Auditing Fees 4 4 --
Shareholders' Reports--Investor Shares 16 17 --
Shareholders' Reports--Institutional Shares -- -- --
Trustees' Fees and Expenses 1 1 --
-------------------------------------------------------
Total Expenses 1,588 1,613 54
Expenses Paid Indirectly--Note C -- (2) --
-------------------------------------------------------
Net Expenses 1,588 1,611 54
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 9,557 4,216 276
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (8,585) 9,931 (615)
Futures Contracts -- -- (150)
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (8,585) 9,931 (765)
- -------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 192,513 234,373 17,798
Futures Contracts -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 192,513 234,373 17,798
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $193,485 $248,520 $17,309
===============================================================================================================================
</TABLE>
*Initial share purchase date. Subscription period for the fund was February 22,
1999, to March 24, 1999, during which time all assets were held in money
market instruments.
43
<PAGE> 46
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. The amounts shown as Distributions to
shareholders from the fund's net income and capital gains may not match the
amounts shown in the Operations section, because distributions are determined
on a tax basis and may be made in a period different from the one in which the
income was earned or the gains were realized on the financial statements. The
Capital Share Transactions section shows the amount shareholders invested in
the fund, either by purchasing shares or by reinvesting distributions, as well
as the amounts redeemed. The corresponding numbers of Shares Issued and
Redeemed are shown at the end of the Statement. Distributions, Capital Share
Transactions, and Shares Issued and Redeemed are shown separately for each
class of shares.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
BALANCED GROWTH AND INCOME
FUND FUND
------------------------------ -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1999 DEC. 31, 1998 JUN. 30, 1999 DEC. 31, 1998
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 2,978 $ 4,272 $ 9,557 $ 12,438
Realized Net Gain (Loss) 2,332 (2,941) (8,585) (779)
Change in Unrealized Appreciation (Depreciation) 9,462 24,859 192,513 228,690
----------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 14,772 26,190 193,485 240,349
----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (2,604) (4,316) (8,337) (12,573)
Institutional Shares* -- -- (308) --
Realized Capital Gain
Investor Shares -- -- -- --
Institutional Shares* -- -- -- --
----------------------------------------------------------------
Total Distributions (2,604) (4,316) (8,645) (12,573)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 52,300 69,200 397,703 578,935
Issued in Lieu of Cash Distributions 2,259 3,808 6,912 10,083
Redeemed** (5,180) (7,715) (96,149) (43,655)
----------------------------------------------------------------
Net Increase--Investor Shares 49,379 65,293 308,466 545,363
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued -- -- 57,383 --
Issued in Lieu of Cash Distributions -- -- 231 --
Redeemed -- -- (246) --
----------------------------------------------------------------
Net Increase--Institutional Shares* -- -- 57,368 --
- ----------------------------------------------------------------------------------------------------------------------------
Total Increase 61,547 87,167 550,674 773,139
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 206,932 119,765 1,352,431 579,292
----------------------------------------------------------------
End of Period $268,479 $206,932 $1,903,105 $1,352,431
============================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 3,030 4,462 14,343 24,760
Issued in Lieu of Cash Distributions 131 239 246 411
Redeemed (302) (500) (3,457) (1,982)
----------------------------------------------------------------
Net Increase in Shares Outstanding 2,859 4,201 11,132 23,189
============================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued -- -- 2,072 --
Issued in Lieu of Cash Distributions -- -- 8 --
Redeemed -- -- (8) --
----------------------------------------------------------------
Net Increase in Shares Outstanding -- -- 2,072 --
============================================================================================================================
</TABLE>
*The Tax-Managed Balanced Fund does not offer Institutional Shares.
**Net of redemption fees of $52,000, $77,000, $336,000, and $523,000,
respectively.
44
<PAGE> 47
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
CAPITAL APPRECIATION SMALL-CAP
FUND FUND
-------------------------------- --------------
SIX MONTHS YEAR
ENDED ENDED FEB. 25* TO
JUN. 30, 1999 DEC. 31, 1998 JUN. 30, 1999
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 4,216 $ 7,239 $ 276
Realized Net Gain (Loss) 9,931 (12,991) (765)
Change in Unrealized Appreciation (Depreciation) 234,373 299,070 17,798
-----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 248,520 293,318 17,309
-----------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares -- (7,427) --
Institutional Shares -- -- --
Realized Capital Gain
Investor Shares -- -- --
Institutional Shares -- -- --
-----------------------------------------------------
Total Distributions -- (7,427) --
-----------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 213,716 342,075 123,104
Issued in Lieu of Cash Distributions -- 6,434 --
Redeemed** (127,716) (48,108) (15,118)
-----------------------------------------------------
Net Increase--Investor Shares 86,000 300,401 107,986
-----------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued 115,556 -- 15,082
Issued in Lieu of Cash Distributions -- -- --
Redeemed -- -- --
-----------------------------------------------------
Net Increase--Institutional Shares 115,556 -- 15,082
- -------------------------------------------------------------------------------------------------------------------
Total Increase 450,076 586,292 140,377
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,478,799 892,507 --
-----------------------------------------------------
End of Period $1,928,875 $1,478,799 $140,377
===================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 7,815 15,346 11,923
Issued in Lieu of Cash Distributions -- 252 --
Redeemed (4,836) (2,255) (1,405)
-----------------------------------------------------
Net Increase in Shares Outstanding 2,979 13,343 10,518
===================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued 4,385 -- 1,399
Issued in Lieu of Cash Distributions -- -- --
Redeemed -- -- --
-----------------------------------------------------
Net Increase in Shares Outstanding 4,385 -- 1,399
===================================================================================================================
</TABLE>
*Initial share purchase date. Subscription period for the fund was February
22, 1999, to March 24, 1999, during which time all assets were held in money
market instruments.
**Net of redemption fees of $182,000, $489,000, and $1,000, respectively.
45
<PAGE> 48
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis for each class of shares. It also presents
the fund's Total Return and shows net investment income and expenses as
percentages of average net assets. These data will help you assess: the
variability of the fund's net income and total returns from year to year; the
relative contributions of net income and capital gains to the fund's total
return; how much it costs to operate the fund; and the extent to which the fund
tends to distribute capital gains. The table also shows the Portfolio Turnover
Rate, a measure of trading activity. A turnover rate of 100% means that the
average security is held in the fund for one year.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED BALANCED FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------- JUL. 25* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 DEC. 31, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.74 $14.67 $12.92 $11.85 $ 9.79 $10.00
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .21 .39 .37 .36 .31 .09
Net Realized and Unrealized Gain (Loss)
on Investments .87 2.07 1.75 1.07 2.07 (.21)
-----------------------------------------------------------------
Total from Investment Operations 1.08 2.46 2.12 1.43 2.38 (.12)
-----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.18) (.39) (.37) (.36) (.32) (.09)
Distributions from Realized Capital Gains -- -- -- -- -- --
-----------------------------------------------------------------
Total Distributions (.18) (.39) (.37) (.36) (.32) (.09)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.64 $16.74 $14.67 $12.92 $11.85 $ 9.79
===============================================================================================================================
TOTAL RETURN** 6.48% 16.93% 16.55% 12.21% 24.52% -1.40%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $268 $207 $120 $63 $39 $17
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.19% 0.17% 0.20% 0.20% 0%
Ratio of Net Investment Income to
Average Net Assets 2.50%+ 2.63% 2.77% 3.04% 3.06% 2.88%+
Portfolio Turnover Rate 11%+ 7% 7% 5% 5% 0%
===============================================================================================================================
</TABLE>
*Subscription period for the fund 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.
**Total returns do not reflect the 2% redemption fee on shares held less than
one year, or the 1% redemption fee on shares held at least one year but less
than five years.
+Annualized.
46
<PAGE> 49
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED --------------------------------------- JUL. 25* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 DEC. 31, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.55 $20.88 $15.89 $13.16 $ 9.77 $10.00
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .155 .29 .29 .27 .25 .09
Net Realized and Unrealized Gain (Loss)
on Investments 3.105 5.67 4.98 2.74 3.39 (.23)
-----------------------------------------------------------------
Total from Investment Operations 3.260 5.96 5.27 3.01 3.64 (.14)
-----------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.140) (.29) (.28) (.28) (.25) (.09)
Distributions from Realized Capital Gains -- -- -- -- -- --
-----------------------------------------------------------------
Total Distributions (.140) (.29) (.28) (.28) (.25) (.09)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $29.67 $26.55 $20.88 $15.89 $13.16 $ 9.77
===============================================================================================================================
TOTAL RETURN** 12.31% 28.67% 33.31% 23.03% 37.53% -1.70%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,842 $1,352 $579 $235 $98 $31
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.19% 0.17% 0.20% 0.20% 0.20%+
Ratio of Net Investment Income to
Average Net Assets 1.17%+ 1.32% 1.62% 2.04% 2.37% 2.82%+
Portfolio Turnover Rate 5%+ 4% 2% 7% 6% 0%
===============================================================================================================================
</TABLE>
*Subscription period for the fund 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.
**Total returns do not reflect the 2% redemption fee on shares held less than
one year, or the 1% redemption fee on shares held at least one year but less
than five years.
+Annualized.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
MAR. 4* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD JUN. 30, 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.99
- -------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .108
Net Realized and Unrealized Gain (Loss) on Investments 2.721
--------------
Total from Investment Operations 2.829
--------------
DISTRIBUTIONS
Dividends from Net Investment Income (.149)
Distributions from Realized Capital Gains --
--------------
Total Distributions (.149)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $29.67
=============================================================================================================
TOTAL RETURN** 10.51%
=============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $61
Ratio of Total Expenses to Average Net Assets 0.10%+
Ratio of Net Investment Income to Average Net Assets 1.26%+
Portfolio Turnover Rate 5%+
=============================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 2% redemption fee.
+Annualized.
47
<PAGE> 50
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ----------------------------------------- JUL. 25* TO
THROUGHOUT EACH PERIOD JUNE 30, 1999 1998 1997 1996 1995 DEC. 31, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $25.69 $20.18 $15.95 $13.28 $ 9.95 $10.00
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .060 .13 .11 .12 .08 .04
Net Realized and Unrealized Gain (Loss)
on Investments 3.950 5.51 4.24 2.66 3.34 (.05)
-------------------------------------------------------------------
Total from Investment Operations 4.010 5.64 4.35 2.78 3.42 (.01)
-------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.13) (.12) (.11) (.09) (.04)
Distributions from Realized Capital Gains -- -- -- -- -- --
-------------------------------------------------------------------
Total Distributions -- (.13) (.12) (.11) (.09) (.04)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $29.70 $25.69 $20.18 $15.95 $13.28 $ 9.95
===============================================================================================================================
TOTAL RETURN** 15.61% 27.95% 27.29% 20.92% 34.38% -0.50%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,799 $1,479 $893 $517 $254 $70
Ratio of Total Expenses to
Average Net Assets 0.20%+ 0.19% 0.17% 0.20% 0.20% 0.20%+
Ratio of Net Investment Income to
Average Net Assets 0.50%+ 0.62% 0.70% 0.91% 0.97% 1.26%+
Portfolio Turnover Rate 17%+ 5% 4% 12% 7% 1%
===============================================================================================================================
</TABLE>
*Subscription period for the fund 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.
**Total returns do not reflect the 2% redemption fee on shares held less than
one year, or the 1% redemption fee on shares held at least one year but less
than five years.
+Annualized.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND
INSTITUTIONAL SHARES
FEB. 24* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD JUN. 30, 1999
- --------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.32
- --------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .060
Net Realized and Unrealized Gain (Loss) on Investments 3.330
--------
Total from Investment Operations 3.390
--------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
--------
Total Distributions --
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $29.71
========================================================================================================
TOTAL RETURN** 12.88%
========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $130
Ratio of Total Expenses to Average Net Assets 0.10%+
Ratio of Net Investment Income to Average Net Assets 0.61%
Portfolio Turnover Rate 17%+
========================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 2% redemption fee.
+Annualized.
48
<PAGE> 51
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND
FEB. 25* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD JUN. 30, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ---------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .023
Net Realized and Unrealized Gain (Loss) on Investments 1.757
--------
Total from Investment Operations 1.780
--------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
--------
Total Distributions --
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.78
===================================================================================================
TOTAL RETURN** 17.45%
===================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $124
Ratio of Total Expenses to Average Net Assets 0.19%+
Ratio of Net Investment Income to Average Net Assets 0.92%+
Portfolio Turnover Rate 32%+
===================================================================================================
</TABLE>
*Initial share purchase date. Subscription period for the fund was February
22, 1999, to March 24, 1999, during which time all assets were held in money
market instruments. Performance measurement begins March 25, 1999.
**Total returns do not reflect the 1% purchase fee or 2% redemption fee.
+Annualized.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND
INSTITUTIONAL SHARES
APR. 21* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD JUN. 30, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.76
- ---------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .013
Net Realized and Unrealized Gain (Loss) on Investments 1.007
--------
Total from Investment Operations 1.020
--------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
--------
Total Distributions --
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.78
===================================================================================================
TOTAL RETURN** 9.48%
===================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $16
Ratio of Total Expenses to Average Net Assets 0.10%+
Ratio of Net Investment Income to Average Net Assets 0.86%+
Portfolio Turnover Rate 32%+
===================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 1% purchase fee or 2% redemption fee.
+Annualized.
49
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS
Vanguard Tax-Managed Funds comprise the Tax-Managed Balanced, Tax-Managed
Growth and Income, Tax-Managed Capital Appreciation, and Tax-Managed Small-Cap
Funds, each of which is registered under the Investment Company Act of 1940 as
a diversified open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Equity securities listed on an exchange are
valued at the latest quoted sales prices as of the close of trading on the New
York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date;
such securities not traded on the valuation date are valued at the mean of the
latest quoted bid and asked prices. Prices are taken from the primary market in
which each security trades. Bonds are valued using the latest bid prices or
using valuations based on a matrix system (which considers such factors as
security prices, yields, maturities, and ratings), both as furnished by
independent pricing services. Temporary cash investments are valued at cost,
which approximates market value. Securities for which market quotations are not
available are valued by methods deemed by the Board of Trustees to represent
fair value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
3. REPURCHASE AGREEMENTS: Each fund, along with other members of The
Vanguard Group, transfers uninvested cash balances to a Pooled Cash Account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
4. FUTURES CONTRACTS: The Tax-Managed Small-Cap Fund used S&P 500
Index, S&P MidCap 400 Index, and Russell 2000 Index futures contracts to a
limited extent to establish full exposure to the stock market at the
commencement of operations of the fund. The primary risks associated with the
use of futures contracts are imperfect correlation between changes in market
values of stocks held by the fund and the prices of futures contracts, and the
possibility of an illiquid market.
Futures contracts are valued at their quoted daily settlement prices.
The aggregate principal amounts of the contracts are not recorded in the
financial statements. Fluctuations in the value of the contracts are recorded in
the Statement of Net Assets as an asset (liability) and in the Statement of
Operations as unrealized appreciation (depreciation) until the contracts are
closed, when they are recorded as realized futures gains (losses).
5. DISTRIBUTIONS: Distributions to shareholders are recorded on the
exdividend date. Distributions are determined on a tax basis and may differ from
net investment income and realized capital gains for financial reporting
purposes.
6. OTHER: Dividend income is recorded on the ex-dividend date.
Security transactions are accounted for on the date securities are bought or
sold. Costs used to determine realized gains (losses) on the sale of investment
securities are those of the specific securities sold. Premiums and original
issue discounts on municipal bonds are amortized and accreted, respectively, to
interest income over the lives of the respective securities. Fees assessed on
redemptions of capital shares are credited to paid in capital.
B. The Vanguard Group provides investment advisory, corporate management,
administrative, marketing, and distribution services. The costs of such services
are allocated to the fund under methods approved by the Board of Trustees. Each
fund has committed to provide up to 0.40% of
50
<PAGE> 53
its assets in capital contributions to Vanguard. At June 30, 1999, the funds
had contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
TAX-MANAGED FUND (000) NET ASSETS CAPITALIZATION
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $ 42 0.01% 0.06%
Growth and Income 273 0.01 0.38
Capital Appreciation 280 0.01 0.40
Small-Cap 14 0.01 0.02
- -----------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The Tax-Managed Balanced Fund's investment adviser may direct new issue
purchases, subject to obtaining the best price and execution, to underwriters
who have agreed to rebate or credit to the fund part of the underwriting fees
generated. Such rebates or credits are used solely to reduce the fund's
management and administrative expenses. The funds' custodian bank has also
agreed to reduce its fees when the funds maintain cash on deposit in their
non-interest-bearing custody accounts. For the six months ended June 30, 1999,
these arrangements reduced expenses by:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
EXPENSE
REDUCTION
(000)
-------------------------------------
MANAGEMENT AND CUSTODIAN
TAX-MANAGED FUND ADMINISTRATIVE FEES
- -----------------------------------------------------------------
<S> <C> <C>
Balanced $2 $2
Capital Appreciation -- 2
- -----------------------------------------------------------------
</TABLE>
D. The Tax-Managed Growth and Income, Capital Appreciation, and Small-Cap Funds
each offer two classes of shares. The Tax-Managed Growth and Income Fund issued
its first Institutional Shares on March 4, 1999, the Tax-Managed Capital
Appreciation Fund issued its first Institutional Shares on February 24, 1999,
and the Tax-Managed Small-Cap Fund issued its first Institutional Shares on
April 21, 1999. Institutional shares are designed primarily for institutional
investors that meet certain administrative and servicing criteria and have a
minimum investment of $10 million. Investor Shares are offered to all other
investors. Both classes of shares have equal rights to assets and earnings,
except that each class bears certain class-specific expenses related to its
shareholder activity. Class-specific expenses for the period ended June 30,
1999, represented the following percentages of average net assets:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL
TAX-MANAGED FUND SHARES SHARES
- ------------------------------------------------------------------------------------
<S> <C> <C>
Growth and Income 0.14%* 0.04%*
Capital Appreciation 0.14* 0.04*
Small-Cap 0.13* 0.04*
- -------------------------------------------------------------------------------------
</TABLE>
*Annualized.
Income, expenses not attributable to a specific class, and realized and
unrealized gains and losses on investments are allocated to each class of
shares based on its relative net assets.
51
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (continued)
E. During the period ended June 30, 1999, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(000)
-------------------------------
TAX-MANAGED FUND PURCHASES SALES
- ---------------------------------------------------------------
<S> <C> <C>
Balanced $ 57,558 $ 12,682
Growth and Income 410,921 36,986
Capital Appreciation 345,512 139,670
Small-Cap 132,052 9,564
- ---------------------------------------------------------------
</TABLE>
At December 31, 1998, the funds had available realized capital losses
to offset future net capital gains through the following fiscal year-ends:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
EXPIRATION
FISCAL YEAR(S) ENDING AMOUNT
TAX-MANAGED FUND DECEMBER 31, (000)
- -------------------------------------------------------------------------
<S> <C> <C>
Balanced 2003-2007 $ 3,738
Growth and Income 2004-2006 2,436
Capital Appreciation 2003-2007 30,465
- -------------------------------------------------------------------------
</TABLE>
F. At June 30, 1999, net unrealized appreciation of investment securities for
financial reporting and federal income tax purposes was:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(000)
------------------------------------------------
APPRECIATED DEPRECIATED NET UNREALIZED
TAX-MANAGED FUND SECURITIES SECURITIES APPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $ 59,028 $ (2,731) $ 56,297
Growth and Income 586,388 (11,771) 574,617
Capital Appreciation 837,953 (16,168) 821,785
Small-Cap 19,785 (1,987) 17,798
- ---------------------------------------------------------------------------
</TABLE>
G. The market value of securities on loan to broker/dealers at June 30, 1999,
and collateral received with respect to such loans were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(000)
-------------------------------------------
MARKET VALUE CASH
OF LOANED COLLATERAL
TAX-MANAGED FUND SECURITIES RECEIVED
- -------------------------------------------------------------------
<S> <C> <C>
Balanced $ 99 $ 205
Capital Appreciation 13,535 14,094
Small-Cap 823 1,090
- -------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements.
52
<PAGE> 55
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson - Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind
and Dyslexic, The Medical Center at Princeton, and Women's Research and
Education Institute.
BRUCE K. MacLAURY
President Emeritus of The Brookings Institution; Director of American Express
Bank Ltd., The St. Paul Companies, Inc., and National Steel Corp.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co., The Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DiSTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MacKINNON
Managing Director, Fixed Income Group.
F. WILLIAM McNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of the Mcgraw-Hill Companies, Inc. Frank Russell
Company is the owner of trademarks and copyrights relating to the
Russell indexes. "Wilshire 4500" and "Wilshire 5000" are
trademarks of Wilshire Associates.
<PAGE> 56
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q872-08/26/1999
(C) 1999 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
