<PAGE> 1
VANGUARD(R)
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
VANGUARD TAX-MANAGED
INTERNATIONAL FUND
[PHOTO]
Annual Report
December 31, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
FELLOW SHAREHOLDERS:
[PHOTO]
JOHN C. BOGLE
Two roads diverged in a wood, and I--I took the one less traveled by, and that
has made all the difference.
I can think of no better words than those of Robert Frost to begin this special
letter to our shareholders, who have placed such extraordinary trust in me and
in Vanguard over the past quarter century. When the firm was founded 25 years
ago, we deliberately took a new road to managing a mutual fund enterprise.
Instead of having the funds controlled by an outside management company with its
own financial interests, the Vanguard funds--there were only 11 of them
then--would be controlled by their own shareholders and operate solely in their
financial interests. The outcome of our unprecedented decision was by no means
certain. We described it then as "The Vanguard Experiment."
Well, I guess it's fair to say it's an experiment no more. During the past
25 years, the assets we hold in stewardship for investors have grown from $1
billion to more than $500 billion, and I believe that our reputation for
integrity, fair-dealing, and sound investment principles is second to none in
this industry. Our staggering growth--which I never sought--has come in
important part as a result of the simple investment ideas and basic human values
that are the foundation of my personal philosophy. I have every confidence that
they will long endure at Vanguard, for they are the right ideas and right
values, unshakable and eternal.
While Emerson believed that "an institution is the lengthened shadow of one
man," Vanguard today is far greater than any individual. The Vanguard crew has
splendidly implemented and enthusiastically supported our founding ideas and
values, and deserves the credit for a vital role in forging our success over the
years. It is a dedicated crew of fine human beings, working together in an
organization that is well prepared to press on regardless long after I am gone.
Creating and leading this enterprise has been an exhilarating run. Through it
all, I've taken the kudos and the blows alike, enjoying every moment to the
fullest, and even getting a second chance at life with a heart transplant nearly
four years ago. What more could a man ask?
While I shall no longer be serving on the Vanguard Board, I want to assure
you that I will remain vigorous and active in a newly created Vanguard unit,
researching the financial markets, writing, and speaking. I'll continue to focus
whatever intellectual power and ethical strength I possess on my mission to
assure that mutual fund investors everywhere receive a fair shake. In the spirit
of Robert Frost:
But I have promises to keep, and miles to go before I sleep, and miles to go
before I sleep.
You have given me your loyalty and friendship over these long years, and I
deeply appreciate your thousands of letters of support. For my part, I will
continue to keep an eagle eye on your interests, for you deserve no less. May
God bless you all, always.
/s/ JOHN C. BOGLE
[GRAPHIC]
CONTENTS
REPORT FROM THE CHAIRMAN ........ 1
THE MARKETS IN PERSPECTIVE ...... 9
PERFORMANCE SUMMARIES ........... 11
FUND PROFILES ................... 19
FINANCIAL STATEMENTS ............ 28
<PAGE> 3
REPORT FROM THE CHAIRMAN
[PHOTO]
JOHN J. BRENNAN
Technology stocks rocketed higher during 1999 and carried most market indexes
along with them. The Vanguard Tax-Managed Funds benefited from this advance,
each posting double-digit returns during the 12 months ended December 31, 1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
TOTAL RETURNS
YEAR ENDED
DECEMBER 31, 1999*
- ---------------------------------------------------------------------------
<S> <C>
TAX-MANAGED BALANCED FUND 15.5%
Average Balanced Fund** 8.7
Balanced Composite Index+ 10.2
- ---------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND 21.1%
Average Large-Cap Core Fund** 22.4
S&P 500 Index 21.0
- ---------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND 33.5%
Average Multi-Cap Core Fund** 22.5
Russell 1000 Index 20.9
- ---------------------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND 26.3%
Average Small-Cap Core Fund** 39.4
S&P SmallCap 600 Index 24.9
- ---------------------------------------------------------------------------
TAX-MANAGED INTERNATIONAL FUND 20.0%
Average International Fund** 29.5
MSCI EAFE Index 19.7
- ---------------------------------------------------------------------------
</TABLE>
*Returns are since inception. For Small-Cap Fund, March 25, 1999; for
International Fund, August 17, 1999.
**Derived from data provided by Lipper Inc. For the average balanced fund, the
bond component is not tax-exempt.
+50% Russell 1000 Index, 50% Lehman Brothers 7 Year Municipal Bond Index.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES*
- --------------------------------------------------
<S> <C>
TAX-MANAGED GROWTH AND INCOME FUND 19.2%
Tax-Managed Capital Appreciation Fund 30.4
Tax-Managed Small-Cap Fund 17.8
- --------------------------------------------------
</TABLE>
*Returns for Institutional Shares are since inception. For Growth and Income
Fund, March 4, 1999; for Capital Appreciation Fund, February 24, 1999; for
Small-Cap Fund, April 21, 1999.
The table at right compares our funds' total returns (capital change plus
reinvested dividends) with those of their respective unmanaged benchmark
indexes. As you can see, each of our funds outpaced its unmanaged market index.
And two of the three funds that were in existence during the entire
year--Vanguard Tax-Managed Capital Appreciation Fund and Vanguard Tax-Managed
Balanced Fund--handily outpaced their average peers. Vanguard Tax-Managed Growth
and Income Fund trailed its peer group by 1.3 percentage points. As you should
expect, our funds were very tax-efficient during 1999, as they have been since
we created them more than five years ago. On page 4 you'll find an examination
of our after-tax performance.
For the record, the table also presents the returns for the newest
additions to our Tax-Managed lineup: Vanguard Tax-Managed Small-Cap Fund, which
was introduced on March 25, 1999, and Vanguard Tax-Managed International Fund,
which was launched on August 17. And we present the returns since inception for
Institutional Shares available for three of our funds for minimum investments of
$10 million.
Per-share figures for each fund, including net asset values and income
dividends, are presented in the table that follows this letter. None of the
Tax-Managed Funds realized net capital gains in 1999. In fact, the funds have
never made capital gains distributions, and thus have provided a high level of
tax efficiency.
1
<PAGE> 4
FINANCIAL MARKETS IN REVIEW
The U.S. stock market rode the technology wave in 1999 to an unprecedented fifth
consecutive year of returns exceeding 20%. Stocks got off to a strong start
during the first four months but, weighed down by higher interest rates,
struggled through most of the summer and into the fall. Through September, the
Wilshire 5000 Total Market Index returned 4.6%. But then technology stocks led
the market on an upward tear over the final three months of 1999, bringing the
Wilshire 5000's full-year return to a remarkable 23.8%.
The Standard & Poor's 500 Index, which is dominated by
large-capitalization stocks, returned 21.0%. Small-cap stocks, as measured by
the Russell 2000 Index, returned 21.3%--a fine showing for a market segment that
had badly lagged large-cap stocks in the five previous years.
The rise of the major indexes in 1999 suggests a broad advance for the
market, but in truth it was a year of "haves" and "have nots"--many stocks did
not join in the market's ascent. Fully 60% of those listed on the New York Stock
Exchange actually declined in price in 1999, and so did 48% of the stocks listed
on the Nasdaq market. (In fact, 36% of NYSE stocks and 31% of Nasdaq stocks fell
in value by more than 20%.)
As mentioned, the technology sector was the leading "have"--technology
stocks in the S&P 500 Index gained 74% for the year and were largely responsible
for growth stocks within the index (+28.2%) far outpacing value stocks (+12.7%).
Among small stocks, technology stocks gained 107%, and the difference between
growth and value was an amazing 44.6 percentage points (+43.1% for the Russell
2000 Index's growth stocks and -1.5% for its value stocks).
Somewhat surprisingly, these stock market returns occurred in an
environment of rising interest rates. Rates increased substantially during
1999--a rise encouraged by Federal Reserve policymakers, who boosted short-term
interest rates in three steps by a total of 0.75 percentage point (75 basis
points). Rising interest rates can depress stock prices, especially for growth
issues, because they lessen the current value of future earnings. But during
1999, investors decided that improving prospects for corporate profits
outweighed the negative impact of higher rates.
Bond prices are, of course, tightly linked to interest rates, and rising
rates cause prices of existing bonds to fall. Rates rose across all maturities
in 1999, and prices dropped accordingly. The yield of the 30-year U.S. Treasury
bond stood at 6.48% on December 31, 1.38 percentage points above its starting
point of 5.10%. The total return of the Lehman Brothers Aggregate Bond Index, a
broad measure of the U.S. bond market, was -0.8%, as a price decline of -7.0%
more than offset interest income of 6.2%. Municipal bonds generally performed
better than taxable bonds during 1999.
1999 PERFORMANCE OVERVIEW
During 1999, the absolute returns of the Vanguard Tax-Managed Funds were
excellent. The returns of each fund closely matched or surpassed the return of
its unmanaged benchmark index. However, our performance relative to our mutual
fund peer groups was mixed. The Capital Appreciation Fund and the Balanced Fund
outpaced their indexes and average peer funds by big margins, primarily because
they emphasized growth stocks, which led the market in 1999.
As you may have noticed, the peer groups in this report are slightly
different from those in past reports. The change reflects a recent
reclassification by Lipper Inc., which provides the data used to calculate
returns for our peer groups. We use the Lipper category that we believe most
closely resembles the characteristics and investment style of our funds.
2
<PAGE> 5
VANGUARD TAX-MANAGED BALANCED FUND's 1999 return of 15.5%, which
reflected the remarkable gains from stocks and the poor returns from bonds, was
almost twice that of the average balanced mutual fund and was 5.3 percentage
points ahead of the return of our unmanaged composite index. As you may know, a
little more than half of the fund's assets are invested in high-quality,
tax-exempt municipal bonds, and the other half in large, growth-oriented stocks
(similar to those held by the Capital Appreciation Fund.) We slightly overweight
municipal bonds because at least 50% of the fund's assets must be invested in
munis to preserve the tax exemption for the interest we earn on those bonds.
(Municipal bonds accounted for an average of about 52% of our assets in 1999.)
Our investment in municipal bonds rather than taxable bonds makes the
composition of the Tax-Managed Balanced Fund quite different from that of the
average balanced mutual fund. Taxable bonds typically offer higher pretax yields
than municipal bonds. Thus, our margin over the average balanced fund actually
understates our relative success during the year.
The Balanced Fund's emphasis on the growth stocks within the Russell 1000
Index helped our relative performance, boosting our return above that of our
composite index, whose stock portion includes both growth and value stocks
within the Russell 1000. For the record, the 20.9% return of the Russell 1000
Index was way ahead of the -0.1% return of the Lehman 7 Year Municipal Bond
Index.
VANGUARD TAX-MANAGED GROWTH AND INCOME FUND's 1999 total return of 21.1%
was a hair better than that of its target index, the S&P 500, but was 1.3
percentage points behind the average return of large-cap core funds. Our
relative shortfall can be attributed to the market's significant tilt toward a
small cadre of growth stocks--mainly from the technology sector.
The startling run-up among technology stocks was the year's big news, but
several other market segments also registered big gains. The producer-durables
sector, which features some large technology-related companies, registered a
gain of 49%. The consumer-discretionary segment, which includes retailers and
media companies, returned 28%.
Three sectors had negative returns for the year (consumer staples, such
as food, beverage, and tobacco producers, returned -16%; health care, -10%; and
auto & transportation, -4%). The financial-services group, which at 16% of the
S&P 500 is the second-largest sector in the index, was up just 5%.
It's important to note that while the S&P 500 Index includes more than
75% of the market value of U.S. stocks, it excludes about 6,600 stocks,
representing more than 20% of the market's capitalization.
VANGUARD TAX-MANAGED CAPITAL APPRECIATION FUND earned a terrific return
of 33.5%, outpacing the 22.5% return of the average multi-cap core fund and the
20.9% return of the Russell 1000 Index. We beat both comparative standards
because of our emphasis on the lower-yielding growth stocks within the Russell
1000. We emphasize these stocks to minimize income dividends and, thus, improve
tax efficiency. During 1999, this emphasis boosted our performance, thanks to
the huge gap between the performance of the index's growth stocks and value
stocks. The growth component of the Russell 1000 Index returned 33.2% in 1999,
while the value component returned 7.3%. Our growth emphasis will not always
work in our favor. Just two years ago, for example, the index's value stocks
outpaced its growth stocks and our fund's relative performance suffered.
Our two new additions, VANGUARD TAX-MANAGED SMALL-CAP FUND and VANGUARD
TAX-MANAGED INTERNATIONAL FUND, fell short of the average returns of their peer
groups but outpaced their index benchmarks, the S&P SmallCap 600 Index and the
Morgan
3
<PAGE> 6
Stanley Capital International Europe, Australasia, Far East Index. Records for
such brief periods--the Small-Cap Fund was launched in March and the
International Fund in August--tell nothing about how a fund will perform in the
future. We are confident that these funds will provide long-term after-tax
returns that are superior to those of similar mutual funds.
A LOOK AT TAX EFFICIENCY
For funds that hold tax efficiency as a priority, it's important to examine the
returns that were actually received by investors who held the funds in taxable
accounts. We are pleased to report that our funds have been extremely
tax-efficient, particularly compared with their peer groups. The table presents
our pretax and after-tax returns and compares them with the average returns of a
group of similar funds. In 1999--as well as over the past five years--our
Tax-Managed Growth and Income, Capital Appreciation, and Balanced Funds earned
returns that surpassed the average returns of peer groups, both before and after
taxes.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS: PRETAX AND AFTER-TAX
PERIODS ENDED DECEMBER 31, 1999
----------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION*
----------------------------------------------------------
PRETAX AFTER-TAX PRETAX AFTER-TAX PRETAX AFTER-TAX
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax-Managed Balanced Fund 15.5% 15.4% 17.1% 16.9% 15.7% 15.5%
Average Domestic
Hybrid Fund** 8.8 6.5 15.6 12.7 -- --
- -----------------------------------------------------------------------------------------
Tax-Managed Growth and
Income Fund 21.1% 20.6% 28.6% 27.8% 26.3% 25.5%
Tax-Managed Capital
Appreciation Fund 33.5 33.3 28.7 28.4 26.7 26.4
Average Large Blend Fund** 19.5 17.5 23.9 21.2 -- --
- -----------------------------------------------------------------------------------------
</TABLE>
*September 6, 1994.
**Based on data from Morningstar, Inc.
Two things to keep in mind about the figures presented here:
- The after-tax return calculations use the top federal income tax rates
in effect at the time of each distribution. The tax burden, therefore, would be
somewhat less, and the after-tax return somewhat more, for those in lower tax
brackets. See the note at the bottom of this page for more details about our
calculations.
- The peer funds' returns are provided by Morningstar, Inc. (Elsewhere in
this report, returns for comparable mutual funds are derived from data provided
by Lipper Inc., which differ somewhat.)
As you can see, the Tax-Managed Funds preserved a high level of their
pretax returns. The most tax-efficient was the Tax-Managed Balanced Fund, which
invests a little more than half of its assets in tax-exempt municipal bonds. In
1999, the fund's pretax return of 15.5% was barely nicked by taxes, giving the
fund an after-tax return of 15.4%.
A NOTE ABOUT OUR CALCULATIONS: Pretax total returns assume that all
distributions received (income dividends, short-term capital gains, and
long-term capital gains) are reinvested in new shares, while our after-tax
returns assume that distributions are reduced by any taxes owed on them before
reinvestment. Total returns do not reflect any transaction fees. When
calculating the taxes due, we used the highest individual federal income tax
rates at the time of the distributions. Those rates are currently 39.6% for
dividends and short-term capital gains and 20% for long-term capital gains.
State and local income taxes were not considered. The competitive group returns
provided by Morningstar are calculated in a manner consistent with that used for
Vanguard funds.
4
<PAGE> 7
The Tax-Managed Capital Appreciation Fund lost just 0.2 percentage point
of its return to taxes in 1999. The return of its average peer, however, was
reduced by 2 percentage points. Over a longer period, the gap is even wider.
Over the past five years, the Capital Appreciation Fund's pretax return of 28.7%
a year was reduced by taxes to 28.4%--just 0.3 percentage point. Our average
competitor, which lost 2.7 percentage points of its average annual return to
taxes over the past five years, recorded a return that was lower than ours by
4.8 percentage points before taxes and by 7.2 percentage points after taxes.
The Tax-Managed Growth and Income Fund was not quite as tax-efficient as
its siblings, but has still built a solid record. Unlike the Capital
Appreciation Fund and the equity portion of the Balanced Fund, the Growth and
Income Fund invests in all the stocks in its target index and does not emphasize
the lower-yielding ones. Therefore, it has higher taxable dividend income from
stocks than the other two funds.
I must point out that each of our funds has amassed sizable unrealized
gains. We do not anticipate realizing these gains, but we cannot guarantee that
they will remain unrealized forever. If realized by the funds, these gains would
be taxable to fund shareholders. As of December 31, 1999, the Growth and Income
Fund had net unrealized gains of $10.15 per share, or 32% of net asset value;
Capital Appreciation, $15.94 per share, or 47% of net asset value; and Balanced,
$4.63 per share, or 25% of net asset value. We attempt to reduce the likelihood
of realizing gains in several ways: We minimize turnover by following a strict
indexing strategy; we sell our highest-cost shares first; and we discourage
frequent trading of our fund shares. In addition, we have "harvested" losses
that we use to offset gains that could result from changes in the indexes or
shareholder redemptions.
Fund turnover--trading activity as a percentage of assets--is extremely
low among the Vanguard Tax-Managed Funds, which closely track their benchmark
indexes and thus do not make frequent moves in and out of stocks. Our turnover,
in fact, is generally limited to changes in the indexes, such as from corporate
takeovers, and to sales of securities on which we can harvest a loss that we can
use to offset future gains. In 1999, the turnover rates for our funds were:
Growth and Income, 4%; Capital Appreciation, 12%; Balanced Fund, 13%. In sharp
contrast, the average stock mutual fund turns over its securities at an annual
rate of 88%, according to Lipper Inc.
Our accounting policies also help us to maximize tax efficiency. For
example, when markets turn down, investors may decide to sell shares. If we must
sell shares to meet these redemptions, we will sell our highest-cost shares
first. This means that in most cases, we will record losses--not gains--on those
sales because some of our shares will have declined in value.
We discourage frequent trading by imposing redemption fees of 2% on
shares held less than one year and 1% on shares held from one to five years.
This policy--which has been effective--can help limit our vulnerability to the
negative impact of large redemptions, which can cause a fund to realize capital
gains. During 1999, the redemption rate for the Tax-Managed Funds averaged about
8%, well below the industry average for equity funds of about 37%.
Because many interrelated factors affect how tax-friendly a fund may be,
it's very difficult to predict tax efficiency. A fund's tax efficiency can be
influenced by its turnover rate, the types of securities it holds, the
accounting practices it uses when selling shares, and the net cash flow it
receives. However, we expect Vanguard Tax Managed Funds to maintain excellent
tax efficiency.
5
<PAGE> 8
Finally, it's important to understand that our calculation does not
reflect the effect of your own investment activities. Specifically, you may
incur additional capital gains taxes--thereby lowering your after-tax return--if
you decide to sell all or some of your shares.
LIFETIME PERFORMANCE OVERVIEW
A one-year period is, of course, far too brief to evaluate funds that are
designed to help investors reach long-term goals such as retirement. The
adjacent table presents the average annual returns for our funds since their
1994 inceptions, along with the returns of their mutual fund peers and unmanaged
benchmark indexes. It also presents the results of hypothetical $10,000
investments made at the time of each fund's launch.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
SEPTEMBER 6, 1994, THROUGH
DECEMBER 31, 1999
-----------------------------------
AVERAGE FINAL VALUE OF
ANNUAL A $10,000
RETURN INITIAL INVESTMENT
- --------------------------------------------------------------------------
<S> <C> <C>
TAX-MANAGED BALANCED FUND 15.7% $21,685
Average Balanced Fund* 14.5 20,524
Balanced Composite Index 15.5 21,554
- --------------------------------------------------------------------------
TAX-MANAGED GROWTH AND
INCOME FUND 26.3% $34,556
Average Large-Cap Core Fund 23.3 30,501
S&P 500 Index 26.2 34,495
- --------------------------------------------------------------------------
TAX-MANAGED CAPITAL
APPRECIATION FUND 26.7% $35,156
Average Multi-Cap Core Fund 21.5 28,123
Russell 1000 Index 25.7 33,762
- --------------------------------------------------------------------------
</TABLE>
*Bond component not tax exempt.
Our performance was excellent in both an absolute and relative sense. The
Tax-Managed Capital Appreciation Fund earned the biggest margin over the average
return of its peer group: The fund has returned 26.7% a year since its
inception, 5.2 percentage points ahead of the average return of multi-cap core
funds. For our shareholders, this difference added up to a significant sum:
$7,033, or more than 70% of the original investment. The Tax-Managed Growth and
Income Fund earned an average return that was 3 percentage points higher than
its average peer--and even a hair ahead of the S&P 500 Index. The lifetime
return of the Tax-Managed Balanced Fund also outpaced the average return of
balanced mutual funds and the return of its composite index.
The fine performance of our funds versus their competitors is largely
explained by a simple but powerful force: low costs. By holding operating and
trading costs to a minimum, our funds garner a large portion of the market's
return for our shareholders. The expense ratio (annualized expenses as a
percentage of average net assets) is about 0.19% ($1.90 per $1,000 invested) for
each of our domestic funds and 0.35% ($3.50 per $1,000 invested) for our
International Fund. In comparison, the average U.S. stock mutual fund charges
expenses of about 1.40%, and funds that invest in international securities
charge an average of nearly 1.70%.
Vanguard's Core Management Group has excelled at keeping our funds
closely in line with their unmanaged benchmarks. Our funds incur operating
expenses, albeit at very low levels, while the theoretical indexes do not. This
handicap makes matching the index returns a difficult task. However, through
deft and efficient management, the Core Management Group has helped our funds
overcome most--or even all--of our cost handicap. This is a significant
achievement that benefits shareholders by allowing them to capture a larger
share of the market's return.
The final year of the 1990s capped an amazing decade for stocks. The U.S.
stock market, as measured by the Wilshire 5000 Index, produced an average annual
return of
6
<PAGE> 9
17.6% for those years, more than 11/2 times the average return of about 11%
achieved by stocks since 1925. In part, the outsized returns reflect the
underlying growth in the U.S. economy and in corporate profits. But part of the
gains can be traced to growing optimism about stocks and less fear about their
risks. These changes in perception are reflected in the extraordinary rise in
the average stock's price/earnings ratio--from about 16 as the decade of the
1990s began to an unprecedented 33 when it ended. No one knows whether or how
investor perceptions may change. But the moods of markets, like those of the
millions of individuals who make up the markets, can shift dramatically.
The odds are heavily stacked against the stock market's repeating its
performance of the 1990s in the decade ahead. This isn't a forecast of doom. If
inflation remains in the neighborhood of 3% annually, it would take stock
returns of only 8% to 9% a year to provide decent real, or inflation-adjusted,
returns of 5% to 6%.
IN SUMMARY
As we enter a new century, the temptation for investors to chase hot performance
may be stronger than ever. But building an investment program around a
relatively narrow group of stocks that have recently skyrocketed is a
dangerous--and unnecessary--gamble. The financial markets are ever cyclical.
Stocks of all styles and sizes--as well as entire asset classes--move in and out
of favor in unpredictable patterns. That is why we recommend that investors hold
balanced, diversified portfolios of stock funds, bond funds, and short-term
reserves that are suited to their individual goals, investment time horizon, and
temperament for risk-taking. Such balanced portfolios are a solid foundation for
long-term investment success.
Minding the tax-efficiency of investments is a wise move for those who
hold mutual funds in taxable accounts. As we often remind investors, minimizing
the costs of investing is a key to long-term success. Taxes are a very real--yet
often overlooked--cost that can be mitigated, to a large degree, by combining
the inherent tax advantages of indexing with sensible investment strategies that
limit the realization of taxable gains.
/s/ JOHN J. BRENNAN
John J. Brennan
Chairman and Chief Executive Officer
January 24, 2000
- --------------------------------------------------------------------------------
A NOTE OF THANKS TO OUR FOUNDER
- --------------------------------------------------------------------------------
As you may have read on the inside cover of our report, our founder, John C.
Bogle, retired on December 31, 1999, as Senior Chairman of our Board after
nearly 25 years of devoted service to Vanguard and our shareholders. Vanguard
investors have Jack to thank for creating a truly mutual mutual fund company
that operates solely in the interest of its fund shareholders. And mutual fund
investors everywhere have benefited from his energetic efforts to improve this
industry. Finally, on a personal note, I am forever grateful to Jack for giving
me the opportunity to join this great company in 1982.
7
<PAGE> 10
<TABLE>
<CAPTION>
FUND STATISTICS
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999
NET ASSET VALUE PER SHARE ----------------------------------
------------------------------- INCOME CAPITAL GAINS
TAX-MANAGED FUND DEC. 31, 1998* DEC. 31, 1999 DIVIDENDS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced $16.74 $18.87 $0.430 $0.00
Growth and Income 26.55 31.81 0.314 0.00
Capital Appreciation 25.69 34.17 0.124 0.00
Small-Cap 10.03 12.61 0.054 0.00
International 10.00 11.96 0.040 0.00
- -----------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------
Growth and Income $26.99 $31.81 $0.336 $0.00
Capital Appreciation 26.32 34.18 0.146 0.00
Small-Cap 10.76 12.61 0.060 0.00
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*Net asset values as of inception for Small-Cap, March 25, 1999; for
International, August 17, 1999; for Growth and Income Institutional Shares,
March 4, 1999; for Capital Appreciation Institutional Shares, February 24,
1999; for Small-Cap Institutional Shares, April 21, 1999.
8
<PAGE> 11
THE MARKETS IN PERSPECTIVE
YEAR ENDED DECEMBER 31, 1999
A global expansion in economic activity bolstered stocks at home and abroad
during 1999. The muscular U.S. economy provided a good bit of the oomph, but it
got an assist from solid growth in Asian, European, and Latin American economies
that had slumped in 1997 and 1998.
Interest rates increased significantly--causing bond prices to fall--as
both investors and monetary policymakers grew concerned that economic growth was
so vigorous that it would cause inflation to accelerate.
U.S. STOCK MARKETS
The booming economy and growing corporate profits provided plenty of fuel for
stock prices during 1999. However, higher interest rates restrained the rise,
especially for financial-services and electric utility stocks regarded as
interest rate sensitive.
U.S. economic output increased at an inflation-adjusted rate of about
4%--a very rapid pace for such a large, mature economy. Analysts estimated that
corporate profits would grow by 14% in 1999 and again in 2000. Consumer
spending, which accounts for roughly two-thirds of economic activity, was
strong. People felt prosperous, thanks to the long bull market, plentiful jobs,
and rising incomes. (After-tax personal income grew by more than 5% in 1999, and
unemployment at year-end was at a three-decade low of 4.1% of the workforce.)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
---------------------------------
1 YEAR 3 YEARS 5 YEARS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 21.0% 27.6% 28.6%
Russell 2000 Index 21.3 13.1 16.7
Wilshire 5000 Index 23.8 26.1 27.1
MSCI EAFE Index 27.3 16.1 13.2
- -----------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -0.8% 5.7% 7.7%
Lehman 10 Year Municipal Bond Index -1.3 4.8 7.1
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 4.7 5.0 5.2
- -----------------------------------------------------------------------------
OTHER
Consumer Price Index 2.7% 2.0% 2.4%
- -----------------------------------------------------------------------------
</TABLE>
The stock market, as measured by the Wilshire 5000 Index, gained 23.8%,
with more than three-quarters of the gain coming in the final quarter of 1999.
For the first time in several years, smaller stocks outpaced
large-capitalization issues. The S&P 500 Index, which is dominated by large-cap
stocks and accounts for more than three-quarters of the U.S. stock market's
total value, gained 21.0% during the year; the rest of the market gained 35.4%.
Hidden in the market averages was an amazing divergence in stock
performance. Prices soared for most technology-related stocks, but performance
was pedestrian, at best, for most other issues. Indeed, three-fifths of stocks
on the New York Stock Exchange fell in 1999. The technology sector of the S&P
500 Index gained 74%, and the producer-durables sector, driven by huge gains for
some makers of telecommunications and technology gear, was up 49%. These results
were in stark contrast to the declines suffered by food and beverage companies
in the consumer-staples sector (-16%) and by many companies in the health-care
group (-10%).
9
<PAGE> 12
Investors seemed bedazzled by the prospects for growth in revenue and
profits among tech stocks, but less interested in the actual profits for nontech
companies. Remarkably, the average S&P 500 stock without earnings gained 36.5%
in 1999, while the average stock with earnings rose 11.5%. There is general
agreement that growth in Internet commerce, computers, software, wireless
communications, and other key tech sectors will be stupendous. However, there is
much disagreement about whether profits will grow so impressively, given the
intense competition. During 1999, optimists clearly ruled.
U.S. BOND MARKETS
The pickup in worldwide economic activity buoyed stock prices but depressed bond
prices. Interest rates, which move in the opposite direction from bond prices,
rose sharply. The rate increase stemmed from increased borrowing by corporations
and individuals and from investors' fears that a sizzling economy was bound to
send inflation soaring.
The inflation evidence was ambiguous. Price increases were greater in
1999 than in 1998 at both the wholesale and consumer levels. Wholesale prices
rose 3.0%, the biggest gain since 1990. And the Consumer Price Index advanced
2.7% in 1999 after a gain of just 1.6% in 1998. However, energy prices, which
plunged in 1998 and shot up in 1999, skewed the figures in both periods. At the
consumer level, the "core rate" of inflation, which excludes food and energy
prices, was up just 1.9% in 1999, the smallest increase in 35 years.
At midyear, the Federal Reserve Board, aiming to cool the economy a bit
to head off price pressures, began raising short-term interest rates. In all,
the Fed pushed up rates by 0.75 percentage point in three quarter-point steps.
The bond market anticipated the Fed--interest rates began rising sharply in
February--and at year-end the yield of 30-year U.S. Treasury bonds was up 1.38
percentage points (138 basis points) to 6.48%. The 10-year Treasury note--a
benchmark for mortgage lenders--rose 179 basis points, from 4.65% to 6.44%.
Short-term rates didn't rise as far; 3-month Treasury bill yields were up 88
basis points to 5.33% at year-end.
Price declines, as usual, were greatest for long-term bonds and least for
short-term bonds. The overall market, as measured by the Lehman Aggregate Bond
Index, which has an intermediate-term average maturity, posted a -0.8% total
return in 1999. Short-term bonds generally provided returns of 2% to 3%.
Long-term bonds suffered significant price declines, and the Lehman Long
Government/Corporate Index recorded a -7.7% total return.
INTERNATIONAL STOCK MARKETS
Bullishness among stock investors was an international phenomenon in 1999. The
biggestgains came in Pacific-region and emerging markets that had suffered most
from economic slumps and currency crises during 1997 and 1998.
Overall, the Morgan Stanley Capital International Europe, Australasia,
Far East (EAFE) Index of major developed markets produced a 27.3% return for
U.S. dollar-based investors. The MSCI Pacific Free Index gained an astounding
56.4% for U.S. investors, as a strong rise in the Japanese yen against the U.S.
dollar tacked on about 12.5 percentage points to a 43.9% return in local
currencies. In Europe, currency fluctuations had the opposite effect: European
currencies, including the new 11-nation common currency, the euro, mostly fell
against the dollar, and the 30.3% return in local currencies was nearly halved
to 15.8% in U.S. dollars.
Emerging markets managed a stunning turnaround, as the Select Emerging
Markets Free Index rose 60.9% in U.S.-dollar terms after having plummeted -18.4%
in 1998 and -16.4% in 1997.
10
<PAGE> 13
PERFORMANCE SUMMARY
TAX-MANAGED BALANCED FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
TOTAL INVESTMENT RETURNS: SEPTEMBER 6, 1994-DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------
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 12.7 2.8 15.5 10.2
- ---------------------------------------------------------
</TABLE>
*50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
See Financial Highlights table on page 33 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: SEPTEMBER 6, 1994-DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Tax-Managed Average Tax-Managed Balanced Lehman 7 Year
Balanced Fund* Balanced Fund** Composite Index+ Russell 1000 Index Municipal Bond Index
<S> <C> <C> <C> <C> <C>
9/6/94 10000 10000 10000 10000 10000
1994 09 9920 9920 9920 9847 9924
1994 12 9860 9812 9820 9809 9827
1995 03 10576 10409 10543 10742 10343
1995 06 11255 11163 11186 11753 10636
1995 09 11949 11804 11841 12800 10940
1995 12 12278 12292 12321 13513 11215
1996 03 12589 12611 12636 14258 11175
1996 06 12860 12895 12921 14840 11223
1996 09 13196 13275 13257 15324 11425
1996 12 13777 13983 13950 16547 11705
1997 03 13733 13966 14056 16803 11691
1997 06 14998 15398 15411 19627 12012
1997 09 16012 16465 16297 21341 12333
1997 12 16057 16640 16726 21983 12602
1998 03 17250 17894 17926 24922 12746
1998 06 17602 18103 18260 25545 12895
1998 09 16716 17001 17641 22911 13304
1998 12 18776 18883 19567 27923 13387
1999 03 19404 19052 20057 29075 13501
1999 06 19993 19910 20598 31146 13272
1999 09 19517 19137 19994 29089 13381
1999 12 21685 20524 21554 33762 13367
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
---------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Balanced Fund* 14.34% 17.07% 15.67% $21,685
Average Balanced Fund** 8.69 15.89 14.48 20,524
Tax-Managed Balanced Composite Index+ 10.16 17.03 15.54 21,554
Russell 1000 Index 20.91 28.05 25.71 33,762
Lehman 7 Year Municipal Bond Index -0.14 6.35 5.61 13,367
- -----------------------------------------------------------------------------------------------------
</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.
**Derived from data provided by Lipper Inc.; bond component not tax-exempt.
+50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax-Managed Balanced Fund 9/6/1994 15.49% 17.07% 12.64% 3.03% 15.67%
Fee-Adjusted Returns* 14.34 17.07 12.64 3.03 15.67
- -----------------------------------------------------------------------------------------------------------
</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.
11
<PAGE> 14
PERFORMANCE SUMMARY
TAX-MANAGED GROWTH AND INCOME FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 6, 1994-DECEMBER 31, 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 19.8 1.3 21.1 21.0
- -------------------------------------------------------------
</TABLE>
See Financial Highlights table on page 34 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: SEPTEMBER 6, 1994-DECEMBER 31, 1999
- ------------------------------------------------------------------------------
Tax-Managed Growth Average Large-Cap
and Income Fund* Core Fund** S&P 500 Index
<S> <C> <C> <C>
9/6/94 10000 10000 10000
1994 09 9831 9831 9826
1994 12 9831 9723 9824
1995 03 10787 10519 10781
1995 06 11818 11416 11810
1995 09 12753 12278 12749
1995 12 13519 12859 13516
1996 03 14238 13532 14241
1996 06 14888 14048 14881
1996 09 15344 14502 15341
1996 12 16633 15497 16619
1997 03 17071 15686 17065
1997 06 20052 18222 20044
1997 09 21549 19591 21545
1997 12 22175 19878 22164
1998 03 25266 22539 25256
1998 06 26107 23142 26090
1998 09 23510 20482 23495
1998 12 28532 24929 28498
1999 03 29940 26159 29918
1999 06 32044 27867 32027
1999 09 30046 26164 30027
1999 12 34556 30501 34495
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
---------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Growth and Income Fund* 19.91% 28.58% 26.26% $34,556
Average Large-Cap Core Fund** 22.35 25.71 23.33 30,501
S&P 500 Index 21.04 28.56 26.22 34,495
- ------------------------------------------------------------------------------------------------------------
</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.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax-Managed Growth and Income Fund 9/6/1994 21.12% 28.58% 24.24% 2.02% 26.26%
Fee-Adjusted Returns* 19.91 28.58 24.24 2.02 26.26
- -----------------------------------------------------------------------------------------------------------------
</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.
12
<PAGE> 15
PERFORMANCE SUMMARY
TAX-MANAGED GROWTH AND INCOME FUND INSTITUTIONAL SHARES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS:
MARCH 4, 1999-DECEMBER 31, 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 17.9% 1.3% 19.2% 19.1%
- ------------------------------------------------------
</TABLE>
See Financial Highlights table on page 34 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MARCH 4, 1999-DECEMBER 31, 1999
- --------------------------------------------------------------------
Tax-Managed Growth Average
and Income Fund Large-Cap
Institutional Shares* Core Fund** S&P 500 Index
<S> <C> <C> <C>
3/4/99 10000000 10000000 10000000
1999 03 10322401 10322406 10326619
1999 06 11051238 11001620 11054466
1999 09 10363802 10335825 10364180
1999 12 11684690 12072903 11906282
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1999 FINAL VALUE OF
------------------------------ A $10,000,000
SINCE INCEPTION INVESTMENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax-Managed Growth and Income Fund Institutional Shares* 16.85% $11,684,690
Average Large-Cap Core Fund** 20.73 12,072,903
S&P 500 Index 19.06 11,906,282
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
TOTAL RETURNS: PERIOD ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Growth and Income Fund Institutional Shares 3/4/1999 17.86% 1.37% 19.23%
Fee-Adjusted Returns* 15.50 1.35 16.85
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year.
13
<PAGE> 16
PERFORMANCE SUMMARY
TAX-MANAGED CAPITAL APPRECIATION FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 6, 1994-DECEMBER 31, 1999
- -------------------------------------------------------------
TAX-MANAGED RUSSELL
CAPITAL APPRECIATION FUND 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 33.0 0.5 33.5 20.9
- -------------------------------------------------------------
</TABLE>
See Financial Highlights table on page 35 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: SEPTEMBER 6, 1994-DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Tax-Managed Capital Average Multi-Cap
Appreciation Fund* Core Fund** Russell 1000 Index
<S> <C> <C> <C>
9/6/94 10000 10000 10000
1994 09 9910 9910 9847
1994 12 9950 9752 9809
1995 03 10860 10519 10742
1995 06 11950 11407 11753
1995 09 12990 12316 12800
1995 12 13370 12784 13513
1996 03 14165 13545 14258
1996 06 14749 14049 14840
1996 09 15212 14553 15324
1996 12 16167 15442 16547
1997 03 16137 15493 16803
1997 06 18843 17758 19627
1997 09 20972 19563 21341
1997 12 20580 19455 21983
1998 03 23588 21968 24922
1998 06 24149 22090 25545
1998 09 20988 19156 22911
1998 12 26333 22967 27923
1999 03 28096 23576 29075
1999 06 30443 25575 31146
1999 09 28659 24000 29089
1999 12 35156 28123 33762
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
---------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Capital Appreciation Fund* 32.16% 28.72% 26.67% $35,156
Average Multi-Cap Core Fund** 22.45 23.60 21.46 28,123
Russell 1000 Index 20.91 28.05 25.71 33,762
- ------------------------------------------------------------------------------------------------------------
</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.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax-Managed Capital Appreciation Fund 9/6/1994 33.50% 28.72% 25.90% 0.77% 26.67%
Fee-Adjusted Returns* 32.16 28.72 25.90 0.77 26.67
- -------------------------------------------------------------------------------------------------------------------------
</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.
14
<PAGE> 17
PERFORMANCE SUMMARY
TAX-MANAGED CAPITAL APPRECIATION FUND
INSTITUTIONAL SHARES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS:
FEBRUARY 24, 1999-DECEMBER 31, 1999
- ---------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION
FUND INSTITUTIONAL SHARES RUSSELL 1000
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1999 29.9% 0.5% 30.4% 19.7%
- ---------------------------------------------------------
</TABLE>
See Financial Highlights table on page 35 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: FEBRUARY 24, 1999-DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Tax-Managed Capital
Appreciation Fund Average Multi-Cap
Fund Institutional Shares* Core Fund** Russell 1000 Index
<S> <C> <C> <C>
2/24/99 10000000 10000000 10000000
1999 03 10414134 10175982 10197786
1999 06 11287994 10973923 10924267
1999 09 10626900 10292319 10202998
1999 12 12781879 12113557 11965321
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1999 FINAL VALUE OF
------------------------------ A $10,000,000
SINCE INCEPTION INVESTMENT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax-Managed Capital Appreciation Fund Institutional Shares* 27.82% $12,781,879
Average Multi-Cap Core Fund** 21.14 12,113,557
Russell 1000 Index 19.65 11,965,321
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
TOTAL RETURNS: PERIOD ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Capital Appreciation Fund Institutional Shares 2/24/1999 29.86% 0.57% 30.43%
Fee-Adjusted Returns* 27.27 0.55 27.82
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 2% fee that is assessed on redemptions of shares that are
held in the fund for less than one year.
15
<PAGE> 18
PERFORMANCE SUMMARY
TAX-MANAGED SMALL-CAP FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS:
MARCH 25, 1999-DECEMBER 31, 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 25.7% 0.6% 26.3% 24.9%
- --------------------------------------------------------
</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.
See Financial Highlights table on page 36 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: MARCH 25, 1999-DECEMBER 31, 1999
- -------------------------------------------------------------------
Tax-Managed Average Small-Cap S&P SmallCap
Small-Cap Fund* Core Fund** 600 Index
<S> <C> <C> <C>
3/25/99 9900 10000 10000
1999 03 10028 10130 10109
1999 06 11627 11854 11668
1999 09 11114 11403 11103
1999 12 12252 13939 12486
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1999 FINAL VALUE OF
------------------------------ A $10,000
SINCE INCEPTION INVESTMENT
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Tax-Managed Small-Cap Fund* 22.52% $12,252
Average Small-Cap Core Fund** 39.39 13,939
S&P SmallCap 600 Index 24.86 12,486
- ---------------------------------------------------------------------------------------------
</TABLE>
*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.
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.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
TOTAL RETURNS: PERIOD ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Small-Cap Fund 3/25/1999 25.72% 0.56% 26.28%
Fee-Adjusted Returns* 21.98 0.54 22.52
- ---------------------------------------------------------------------------------------------
</TABLE>
*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.
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.
16
<PAGE> 19
PERFORMANCE SUMMARY
TAX-MANAGED SMALL-CAP FUND INSTITUTIONAL SHARES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS:
APRIL 21, 1999-DECEMBER 31, 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 17.2% 0.6% 17.8% 16.9%
- ----------------------------------------------------------
</TABLE>
See Financial Highlights table on page 36 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: APRIL 21, 1999-DECEMBER 31, 1999
- ------------------------------------------------------------------------------
Tax-Managed Small-Cap Average Small-Cap S&P SmallCap
Fund Institutional Shares* Core Fund** 600 Index
<S> <C> <C> <C>
4/21/99 9900000 10000000 10000000
1999 06 10838475 11003525 10927072
1999 09 10360037 10530623 10397838
1999 12 11426475 12922300 11686606
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1999 FINAL VALUE OF
------------------------------ A $10,000,000
SINCE INCEPTION INVESTMENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax-Managed Small-Cap Fund Institutional Shares* 14.26% $11,426,475
Average Small-Cap Core Fund** 29.22 12,922,300
S&P SmallCap 600 Index 16.87 11,686,606
- -------------------------------------------------------------------------------------------------------
</TABLE>
*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.
**Derived from data provided by Lipper Inc.
<TABLE>
<CAPTION>
TOTAL RETURNS: PERIOD ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Small-Cap Fund Institutional Shares 4/21/1999 17.19% 0.58% 17.77%
Fee-Adjusted Returns* 13.70 0.56 14.26
- ------------------------------------------------------------------------------------------------------
</TABLE>
*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.
17
<PAGE> 20
PERFORMANCE SUMMARY
TAX-MANAGED INTERNATIONAL FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS:
AUGUST 17, 1999-DECEMBER 31, 1999
- --------------------------------------------------------
TAX-MANAGED INTERNATIONAL FUND MSCI EAFE
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1999 19.6% 0.4% 20.0% 19.7%
- --------------------------------------------------------
</TABLE>
See Financial Highlights table on page 37 for dividend information since the
fund's inception.
<TABLE>
<CAPTION>
TOTAL RETURNS: PERIOD ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed International Fund 8/17/1999 19.60% 0.41% 20.01%
Fee-Adjusted Returns* 16.33 0.40 16.73
- -----------------------------------------------------------------------------------------------
</TABLE>
*Reflective of the 0.75% transaction fee on purchases and the 2% fee assessed on
redemptions of shares that are held in the fund for less than one year.
18
<PAGE> 21
FUND PROFILE
TAX-MANAGED BALANCED FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 21-22.
<TABLE>
<CAPTION>
TOTAL FUND CHARACTERISTICS
- -----------------------------------------------------
<S> <C>
Yield 2.5%
Turnover Rate 13%
Expense Ratio 0.20%
Cash Reserves 0.0%
</TABLE>
<TABLE>
<CAPTION>
FUND ASSET ALLOCATION
- ------------------------
<S> <C>
STOCKS 48%
BONDS 52%
</TABLE>
<TABLE>
<CAPTION>
TOTAL FUND VOLATILITY MEASURES
- ---------------------------------------------
BALANCED S&P 500
- ---------------------------------------------
<S> <C> <C>
R-Squared 0.93 1.00
Beta 0.55 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST STOCKS
(% OF EQUITIES)
- -------------------------------------------------------
<S> <C>
General Electric Co. 4.3%
Microsoft Corp. 3.7
Cisco Systems, Inc. 2.9
Intel Corp. 2.3
Lucent Technologies, Inc. 2.0
QUALCOMM, Inc. 1.9
Wal-Mart Stores, Inc. 1.6
Citigroup, Inc. 1.5
International Business Machines Corp. 1.4
Home Depot, Inc. 1.4
- -------------------------------------------------------
Top Ten 23.0%
- -------------------------------------------------------
Top Ten as % of Total Net Assets 10.9%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- -------------------------------------------------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
-----------------------------------------------
RUSSELL
BALANCED BALANCED 1000
-----------------------------------------------
<S> <C> <C> <C>
Auto & Transportation ..... 3.4% 2.7% 2.1%
Consumer Discretionary .... 16.3 16.4 14.2
Consumer Staples .......... 5.9 2.9 6.0
Financial Services ........ 10.9 9.6 15.2
Health Care ............... 14.5 9.7 9.7
Integrated Oils ........... 2.0 2.1 3.7
Other Energy .............. 2.4 3.0 1.3
Materials & Processing .... 3.4 2.6 3.0
Producer Durables ......... 3.7 3.6 2.9
Technology ................ 23.8 32.4 25.4
Utilities ................. 7.8 10.1 11.0
Other ..................... 5.9 4.9 5.5
- -------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
FUND PROFILE (continued)
<TABLE>
<CAPTION>
EQUITY CHARACTERISTICS
- ----------------------------------------------------------
BALANCED RUSSELL 1000
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 426 975
Median Market Cap $47.9B $64.7B
Price/Earnings Ratio 35.8x 28.1x
Price/Book Ratio 6.2x 5.2x
Dividend Yield 0.4% 1.2%
Return on Equity 22.1% 23.1%
Earnings Growth Rate 21.6% 17.0%
Foreign Holdings 0.0% 0.0%
</TABLE>
<TABLE>
<CAPTION>
EQUITY INVESTMENT FOCUS
- -----------------------
<S> <C>
STYLE Blend
MARKET CAP Large
</TABLE>
<TABLE>
<CAPTION>
FIXED-INCOME CHARACTERISTICS
- ----------------------------------------------------------
BALANCED LEHMAN*
- ----------------------------------------------------------
<S> <C> <C>
Number of Bonds 152 52,533
Yield to Maturity 5.0% --
Average Coupon 5.3% 5.5%
Average Maturity 7.1 years 13.4 years
Average Quality AA+ AA+
Average Duration 5.5 years 7.7 years
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
FIXED-INCOME INVESTMENT FOCUS
- -----------------------------
<S> <C>
AVERAGE MATURITY MEDIUM
CREDIT QUALITY HIGH
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY
(% OF BONDS)
- -----------------------------
<S> <C>
Under 1 Year 8.6%
1-5 Years 28.2
5-10 Years 35.1
10-20 Years 26.9
20-30 Years 1.2
Over 30 Years 0.0
- -----------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF BONDS)
- -------------------------------
<S> <C>
AAA 72.4%
AA 21.6
A 2.0
BBB 3.8
BB 0.0
B 0.0
Not Rated 0.2
- -------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
LARGEST STATE CONCENTRATIONS
(% OF BONDS)
- -------------------------------
<S> <C>
Texas 15.8%
New York 11.0
Ohio 7.7
Pennsylvania 6.8
California 6.1
Massachusetts 4.7
Michigan 4.6
Florida 4.2
District of Columbia 3.8
Georgia 3.4
- -------------------------------
Top Ten 68.1%
</TABLE>
20
<PAGE> 23
ALLOCATION BY REGION. This chart shows the geographic distribution of a fund's
holdings.
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.
COUNTRY DIVERSIFICATION. The percentages of a fund's common stock invested in
securities of various countries.
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.
21
<PAGE> 24
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.
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.
22
<PAGE> 25
FUND PROFILE
TAX-MANAGED GROWTH AND INCOME FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 21-22.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
GROWTH AND
INCOME S&P 500
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 517 500
Median Market Cap $86.7B $86.7B
Price/Earnings Ratio 29.8x 29.8x
Price/Book Ratio 5.6x 5.5x
Yield 1.0% 1.1%
Yield--Institutional Shares 1.1% 1.1%
Return on Equity 23.4% 23.4%
Earnings Growth Rate 16.7% 16.6%
Foreign Holdings 1.3% 1.3%
Turnover Rate 4% --
Expense Ratio 0.19% --
Expense Ratio--
Institutional Shares 0.10%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
EQUITY INVESTMENT FOCUS
- -----------------------
<S> <C>
STYLE Blend
MARKET CAP Large
</TABLE>
<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. 4.9%
General Electric Co. 4.1
Cisco Systems, Inc. 2.8
Wal-Mart Stores, Inc. 2.5
Exxon Mobil Corp. 2.2
Intel Corp. 2.2
Lucent Technologies, Inc. 1.9
International Business Machines Corp. 1.6
Citigroup, Inc. 1.5
America Online, Inc. 1.4
- -------------------------------------------------------
Top Ten 25.1%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------------------------------------
GROWTH AND INCOME GROWTH AND INCOME S&P 500
----------------------------------------------
<S> <C> <C> <C>
Auto & Transportation ..... 2.5% 1.9% 1.9%
Consumer Discretionary .... 12.0 13.8 13.9
Consumer Staples .......... 9.8 6.3 6.3
Financial Services ........ 16.2 13.9 13.8
Health Care ............... 12.5 9.2 9.3
Integrated Oils ........... 5.2 4.8 4.8
Other Energy .............. 1.0 1.4 1.3
Materials & Processing .... 3.7 3.2 3.2
Producer Durables ......... 3.1 3.6 3.6
Technology ................ 16.7 25.5 25.4
Utilities ................. 11.7 10.3 10.2
Other ..................... 5.6 6.1 6.3
- --------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 26
FUND PROFILE
TAX-MANAGED CAPITAL APPRECIATION FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 21-22.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
CAPITAL RUSSELL
APPRECIATION 1000
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 520 975
Median Market Cap $46.5B $64.7B
Price/Earnings Ratio 33.8x 28.1x
Price/Book Ratio 5.8x 5.2x
Yield 0.4% 1.2%
Yield--Institutional Shares 0.5% 1.2%
Return on Equity 22.1% 23.1%
Earnings Growth Rate 20.4% 17.0%
Foreign Holdings 0.4% 0.0%
Turnover Rate 12% --
Expense Ratio 0.19% --
Expense Ratio--
Institutional Shares 0.10%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
EQUITY INVESTMENT FOCUS
- -----------------------
<S> <C>
STYLE BLEND
MARKET CAP LARGE
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ---------------------------------------------------
CAPITAL S&P
APPRECIATION 500
- ---------------------------------------------------
<S> <C> <C>
R-Squared 0.94 1.00
Beta 1.14 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
- -------------------------------------------------------
<S> <C>
General Electric Co. 4.2%
Microsoft Corp. 3.6
Cisco Systems, Inc. 2.8
Intel Corp. 2.3
Lucent Technologies, Inc. 1.9
QUALCOMM, Inc. 1.6
Wal-Mart Stores, Inc. 1.6
International Business Machines Corp. 1.6
Citigroup, Inc. 1.5
America Online, Inc. 1.4
- -------------------------------------------------------
Top Ten 22.5%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- -------------------------------------------------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
---------------------------------------------
CAPITAL CAPITAL RUSSELL
APPRECIATION APPRECIATION 1000
---------------------------------------------
<S> <C> <C> <C>
Auto & Transportation ..... 2.9% 2.3% 2.1%
Consumer Discretionary .... 16.6 17.3 14.2
Consumer Staples .......... 6.6 4.3 6.0
Financial Services ........ 10.7 10.0 15.2
Health Care ............... 13.7 10.5 9.7
Integrated Oils ........... 1.6 1.5 3.7
Other Energy .............. 2.7 2.5 1.3
Materials & Processing .... 4.5 2.9 3.0
Producer Durables ......... 4.1 3.3 2.9
Technology ................ 23.4 30.6 25.4
Utilities ................. 7.0 9.5 11.0
Other ..................... 6.2 5.3 5.5
- -------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
FUND PROFILE
TAX-MANAGED SMALL-CAP FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 21-22.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
SMALL-CAP S&P*
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 605 600
Median Market Cap $0.9B $0.9B
Price/Earnings Ratio 20.0x 19.9x
Price/Book Ratio 2.8x 2.8x
Yield 0.6% 0.7%
Yield--Institutional Shares 0.7% 0.7%
Return on Equity 16.2% 16.3%
Earnings Growth Rate 19.1% 18.8%
Foreign Holdings 0.2% 0.2%
Turnover Rate 27% --
Expense Ratio 0.19%** --
Expense Ratio--
Institutional Shares 0.10%** --
Cash Reserves 0.3% --
</TABLE>
*S&P SmallCap 600 Index.
**Annualized.
<TABLE>
<CAPTION>
EQUITY INVESTMENT FOCUS
- -----------------------
<S> <C>
STYLE BLEND
MARKET CAP SMALL
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
- -------------------------------------------------------
<S> <C>
IDEC Pharmaceuticals Corp. 1.1%
Mercury Interactive Corp. 1.1
Macromedia, Inc. 1.0
Whittman-Hart, Inc. 0.8
Clarify, Inc. 0.8
RSA Security Inc. 0.8
HNC Software, Inc. 0.7
C-Cube Microsystems, Inc. 0.7
Valassis Communications, Inc. 0.6
Micrel, Inc. 0.6
- -------------------------------------------------------
Top Ten 8.2%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- -----------------------------------------------------------------
DECEMBER 31, 1999
---------------------------
S&P
SMALL-CAP SMALLCAP 600
---------------------------
<S> <C> <C>
Auto & Transportation ..... 5.5% 5.5%
Consumer Discretionary .... 18.2 17.9
Consumer Staples .......... 2.4 2.4
Financial Services ........ 12.7 12.8
Health Care ............... 11.4 11.1
Integrated Oils ........... 0.0 0.0
Other Energy .............. 3.0 2.9
Materials & Processing .... 9.0 9.1
Producer Durables ......... 10.0 10.3
Technology ................ 23.5 23.6
Utilities ................. 4.0 4.0
Other ..................... 0.3 0.4
- -----------------------------------------------------------------
</TABLE>
25
<PAGE> 28
FUND PROFILE
TAX-MANAGED INTERNATIONAL FUND
This Profile provides a snapshot of the fund's characteristics as of December
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 21-22.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
INTERNATIONAL MSCI EAFE
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 899 967
Turnover Rate 7% --
Expense Ratio 0.35%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
ALLOCATION BY REGION
- -------------------------
<S> <C>
Europe 67%
Pacific 33%
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
- -------------------------------------------------------
<S> <C>
Nokia Oyj 2.2%
Nippon Telegraph and Telephone Corp. 2.2
Deutsche Telekom AG 2.1
BP Amoco PLC 1.9
Toyota Motor Corp. 1.8
British Telecommunications PLC 1.6
Vodafone Airtouch PLC 1.5
France Telecom SA 1.3
Royal Dutch Petroleum Co. 1.3
LM Ericsson Telephone AB B Shares 1.2
- -------------------------------------------------------
Top Ten 17.1%
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- -------------------------------------------------------------
DECEMBER 31, 1999
--------------------------------
INTERNATIONAL MSCI EAFE INDEX
--------------------------------
<S> <C> <C>
Australia .......... 2.4% 2.5%
Austria ............ 0.2 0.2
Belgium ............ 1.0 0.9
Denmark ............ 0.8 0.8
Finland ............ 3.0 3.0
France ............. 9.7 10.3
Germany ............ 10.4 10.5
Hong Kong .......... 2.3 2.3
Ireland ............ 0.4 0.4
Italy .............. 4.3 4.2
Japan .............. 27.4 27.2
Netherlands ........ 5.7 5.2
New Zealand ........ 0.2 0.2
Norway ............. 0.4 0.4
Portugal ........... 0.5 0.5
Singapore .......... 1.1 1.1
Spain .............. 2.7 2.7
Sweden ............. 2.7 2.7
Switzerland ........ 5.7 5.7
United Kingdom ..... 19.1 19.2
- -------------------------------------------------------------
Total 100.0% 100.0%
</TABLE>
27
<PAGE> 30
FINANCIAL STATEMENTS
DECEMBER 31, 1999
The Statements of Net Assets, integral parts of the Financial Statements for
each of the Vanguard Tax-Managed Funds, and the Report of Independent
Accountants are included as an insert to this report.
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. If
a fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TAX-MANAGED
BALANCED
FUND
-----------------
YEAR ENDED
DECEMBER 31, 1999
(000)
- --------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $ 753
Interest 6,377
Security Lending 28
--------
Total Income 7,158
--------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 83
Management and Administrative 368
Marketing and Distribution 38
Custodian Fees 14
Auditing Fees 8
Shareholders' Reports 4
Trustees' Fees and Expenses --
--------
Total Expenses 515
Expenses Paid Indirectly--Note C (6)
--------
Net Expenses 509
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,649
- --------------------------------------------------------------------------------------------
REALIZED NET LOSS ON INVESTMENT SECURITIES SOLD (600)
- --------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 34,103
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,152
============================================================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
GROWTH AND CAPITAL TAX-MANAGED TAX-MANAGED
INCOME APPRECIATION SMALL-CAP INTERNATIONAL
FUND FUND FUND FUND
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED FEB. 25* TO AUG. 17** TO
DEC. 31, 1999 DEC. 31, 1999 DEC. 31, 1999 DEC. 31, 1999
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends*** $ 23,678 $ 11,784 $ 880 $ 418
Interest 138 134 90 62
Security Lending 59 480 29 --
----------------------------------------------------------------
Total Income 23,875 12,398 999 480
----------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 67 67 27 1
Management and Administrative 951 1,018 12 15
Shareholder Account Maintenance--
Investor Shares 2,059 2,079 96 41
Shareholder Account Maintenance--
Institutional Shares 20 40 1 --
Marketing and Distribution--Investor Shares 265 233 5 2
Marketing and Distribution--Institutional Shares 1 3 -- --
Custodian Fees 74 41 56 60
Auditing Fees 9 9 7 8
Shareholders' Reports--Investor Shares 31 33 -- --
Shareholders' Reports--Institutional Shares -- -- -- --
Trustees' Fees and Expenses 2 2 -- --
----------------------------------------------------------------
Total Expenses 3,479 3,525 204 127
Expenses Paid Indirectly--Note C -- (4) -- --
----------------------------------------------------------------
Net Expenses 3,479 3,521 204 127
- --------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 20,396 8,877 795 353
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED NET LOSS
Investment Securities Sold (22,026) (21,987) (1,719) (816)
Futures Contracts -- -- (150) --
Foreign Currencies -- -- -- (3)
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED NET LOSS (22,026) (21,987) (1,869) (819)
- --------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 367,353 598,867 33,471 19,400
Futures Contracts -- -- -- --
Foreign Currencies -- -- -- (1)
- --------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 367,353 598,867 33,471 19,399
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 365,723 $ 585,757 $ 32,397 $ 18,933
================================================================================================================================
</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.
**Inception.
***Dividends for the Tax-Managed International Fund are net of foreign
withholding taxes of $36,000.
29
<PAGE> 32
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
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1999 1998
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 6,649 $ 4,272 $ 20,396 $ 12,438
Realized Net Loss (600) (2,941) (22,026) (779)
Change in Unrealized Appreciation (Depreciation) 34,103 24,859 367,353 228,690
---------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations 40,152 26,190 365,723 240,349
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (6,810) (4,316) (20,158) (12,573)
Institutional Shares* -- -- (829) --
Realized Capital Gain
Investor Shares -- -- -- --
Institutional Shares* -- -- -- --
---------------------------------------------------------------------
Total Distributions (6,810) (4,316) (20,987) (12,573)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 95,687 69,200 704,246 578,935
Issued in Lieu of Cash Distributions 5,935 3,808 16,735 10,083
Redeemed** (12,215) (7,715) (167,468) (43,655)
---------------------------------------------------------------------
Net Increase--Investor Shares 89,407 65,293 553,513 545,363
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued -- -- 100,931 --
Issued in Lieu of Cash Distributions -- -- 425 --
Redeemed** -- -- (3,823) --
---------------------------------------------------------------------
Net Increase--Institutional Shares* -- -- 97,533 --
- --------------------------------------------------------------------------------------------------------------------------------
Total Increase 122,749 87,167 995,782 773,139
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 206,932 119,765 1,352,431 579,292
---------------------------------------------------------------------
End of Period $ 329,681 $ 206,932 $ 2,348,213 $ 1,352,431
================================================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 5,480 4,462 24,799 24,760
Issued in Lieu of Cash Distributions 335 239 577 411
Redeemed (704) (500) (5,867) (1,982)
---------------------------------------------------------------------
Net Increase in Shares Outstanding 5,111 4,201 19,509 23,189
================================================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued -- -- 3,511 --
Issued in Lieu of Cash Distributions -- -- 15 --
Redeemed -- -- (137) --
---------------------------------------------------------------------
Net Increase in Shares Outstanding* -- -- 3,389 --
================================================================================================================================
</TABLE>
*The Tax-Managed Balanced Fund does not offer Institutional Shares.
**Net of redemption fees of $125,000, $77,000, $814,000, and $523,000,
respectively (fund totals by year).
30
<PAGE> 33
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
CAPITAL APPRECIATION SMALL-CAP
FUND FUND
--------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------- FEB. 25* TO
1999 1998 DEC. 31, 1999
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 8,877 $ 7,239 $ 795
Realized Net Loss (21,987) (12,991) (1,869)
Change in Unrealized Appreciation (Depreciation) 598,867 299,070 33,471
--------------------------------------------------
Net Increase in Net Assets Resulting
from Operations 585,757 293,318 32,397
--------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (8,469) (7,427) (788)
Institutional Shares (703) -- (90)
Realized Capital Gain
Investor Shares -- -- --
Institutional Shares -- -- --
--------------------------------------------------
Total Distributions (9,172) (7,427) (878)
--------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 500,092 342,075 181,354
Issued in Lieu of Cash Distributions 7,351 6,434 711
Redeemed** (148,263) (48,108) (16,758)
--------------------------------------------------
Net Increase--Investor Shares 359,180 300,401 165,307
--------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued 128,423 -- 16,312
Issued in Lieu of Cash Distributions 563 -- 90
Redeemed -- -- --
--------------------------------------------------
Net Increase--Institutional Shares 128,986 -- 16,402
- -------------------------------------------------------------------------------------------------------------
Total Increase 1,064,751 586,292 213,228
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,478,799 892,507 --
--------------------------------------------------
End of Period $ 2,543,550 $ 1,478,799 $ 213,228
=============================================================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 17,329 15,346 16,893
Issued in Lieu of Cash Distributions 219 252 59
Redeemed (5,527) (2,255) (1,550)
--------------------------------------------------
Net Increase in Shares Outstanding 12,021 13,343 15,402
=============================================================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued 4,817 -- 1,500
Issued in Lieu of Cash Distributions 17 -- 7
Redeemed -- -- --
--------------------------------------------------
Net Increase in Shares Outstanding 4,834 -- 1,507
=============================================================================================================
</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 $380,000, $489,000, and $36,000, respectively.
31
<PAGE> 34
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (continued)
- -----------------------------------------------------------------------------
TAX-MANAGED
INTERNATIONAL
FUND
-------------
AUG. 17* TO
DEC. 31, 1999
(000)
- -----------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 353
Realized Net Loss (819)
Change in Unrealized Appreciation (Depreciation) 19,399
-----------
Net Increase in Net Assets Resulting from Operations 18,933
-----------
DISTRIBUTIONS
Net Investment Income
Investor Shares (432)
Institutional Shares --
Realized Capital Gain
Investor Shares --
Institutional Shares --
-----------
Total Distributions (432)
-----------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES(1)
Issued 116,067
Issued in Lieu of Cash Distributions 308
Redeemed** (44)
-----------
Net Increase--Investor Shares 116,331
-----------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES(2)
Issued --
Issued in Lieu of Cash Distributions --
Redeemed --
-----------
Net Increase--Institutional Shares --
- -----------------------------------------------------------------------------
Total Increase 134,832
- -----------------------------------------------------------------------------
NET ASSETS
Beginning of Period --
-----------
End of Period $ 134,832
=============================================================================
(1)Shares Issued (Redeemed)--Investor Shares
Issued 11,252
Issued in Lieu of Cash Distributions 26
Redeemed (3)
-----------
Net Increase in Shares Outstanding 11,275
=============================================================================
(2)Shares Issued (Redeemed)--Institutional Shares
Issued --
Issued in Lieu of Cash Distributions --
Redeemed --
-----------
Net Increase in Shares Outstanding --
=============================================================================
</TABLE>
*Inception.
**Net of redemption fees of $1,000.
32
<PAGE> 35
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 THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 16.74 $ 14.67 $ 12.92 $ 11.85 $ 9.79
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .43 .39 .37 .36 .31
Net Realized and Unrealized Gain (Loss) on Investments 2.13 2.07 1.75 1.07 2.07
---------------------------------------------------------------------
Total from Investment Operations 2.56 2.46 2.12 1.43 2.38
---------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.43) (.39) (.37) (.36) (.32)
Distributions from Realized Capital Gains -- -- -- -- --
---------------------------------------------------------------------
Total Distributions (.43) (.39) (.37) (.36) (.32)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 18.87 $ 16.74 $ 14.67 $ 12.92 $ 11.85
==================================================================================================================================
TOTAL RETURN* 15.49% 16.93% 16.55% 12.21% 24.52%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 330 $ 207 $ 120 $ 63 $ 39
Ratio of Total Expenses to Average Net Assets 0.20% 0.19% 0.17% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 2.52% 2.63% 2.77% 3.04% 3.06%
Portfolio Turnover Rate 13% 7% 7% 5% 5%
==================================================================================================================================
</TABLE>
*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.
33
<PAGE> 36
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND INVESTOR SHARES
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 26.55 $ 20.88 $ 15.89 $ 13.16 $ 9.77
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .307 .29 .29 .27 .25
Net Realized and Unrealized Gain (Loss) on Investments 5.267 5.67 4.98 2.74 3.39
-------------------------------------------------------------------
Total from Investment Operations 5.574 5.96 5.27 3.01 3.64
-------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.314) (.29) (.28) (.28) (.25)
Distributions from Realized Capital Gains -- -- -- -- --
-------------------------------------------------------------------
Total Distributions (.314) (.29) (.28) (.28) (.25)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 31.81 $ 26.55 $ 20.88 $ 15.89 $ 13.16
=================================================================================================================================
TOTAL RETURN* 21.12% 28.67% 33.31% 23.03% 37.53%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 2,240 $ 1,352 $ 579 $ 235 $ 98
Ratio of Total Expenses to Average Net Assets 0.19% 0.19% 0.17% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 1.11% 1.32% 1.62% 2.04% 2.37%
Portfolio Turnover Rate 4% 4% 2% 7% 6%
=================================================================================================================================
</TABLE>
*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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
MAR. 4* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DEC. 31, 1999
- ---------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.99
- ---------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .274
Net Realized and Unrealized Gain (Loss) on Investments 4.882
---------
Total from Investment Operations 5.156
---------
DISTRIBUTIONS
Dividends from Net Investment Income (.336)
Distributions from Realized Capital Gains --
---------
Total Distributions (.336)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.81
=========================================================================================================
TOTAL RETURN** 19.23%
=========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 108
Ratio of Total Expenses to Average Net Assets 0.10%+
Ratio of Net Investment Income to Average Net Assets 1.18%+
Portfolio Turnover Rate 4%
==========================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 2% redemption fee.
+Annualized.
34
<PAGE> 37
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND INVESTOR SHARES
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 25.69 $ 20.18 $ 15.95 $ 13.28 $ 9.95
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .117 .13 .11 .12 .08
Net Realized and Unrealized Gain (Loss) on Investments 8.487 5.51 4.24 2.66 3.34
--------------------------------------------------------------------
Total from Investment Operations 8.604 5.64 4.35 2.78 3.42
--------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.124) (.13) (.12) (.11) (.09)
Distributions from Realized Capital Gains -- -- -- -- --
--------------------------------------------------------------------
Total Distributions (.124) (.13) (.12) (.11) (.09)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 34.17 $ 25.69 $ 20.18 $ 15.95 $ 13.28
==================================================================================================================================
TOTAL RETURN* 33.50% 27.95% 27.29% 20.92% 34.38%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 2,378 $ 1,479 $ 893 $ 517 $ 254
Ratio of Total Expenses to Average Net Assets 0.19% 0.19% 0.17% 0.20% 0.20%
Ratio of Net Investment Income to Average Net Assets 0.47% 0.62% 0.70% 0.91% 0.97%
Portfolio Turnover Rate 12% 5% 4% 12% 7%
==================================================================================================================================
</TABLE>
*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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND
INSTITUTIONAL SHARES
FEB. 24* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DEC. 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.32
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .129
Net Realized and Unrealized Gain (Loss) on Investments 7.877
---------
Total from Investment Operations 8.006
---------
DISTRIBUTIONS
Dividends from Net Investment Income (.146)
Distributions from Realized Capital Gains --
---------
Total Distributions (.146)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 34.18
=======================================================================================================================
TOTAL RETURN** 30.43%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 165
Ratio of Total Expenses to Average Net Assets 0.10%+
Ratio of Net Investment Income to Average Net Assets 0.56%+
Portfolio Turnover Rate 12%
=======================================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 2% redemption fee.
+Annualized.
35
<PAGE> 38
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND
INVESTOR SHARES
FEB. 25* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DEC. 31, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .049
Net Realized and Unrealized Gain (Loss) on Investments 2.615
---------
Total from Investment Operations 2.664
---------
DISTRIBUTIONS
Dividends from Net Investment Income (.054)
Distributions from Realized Capital Gains --
---------
Total Distributions (.054)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.61
============================================================================================================
TOTAL RETURN** 26.28%
============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 194
Ratio of Total Expenses to Average Net Assets 0.19%+
Ratio of Net Investment Income to Average Net Assets 0.70%+
Portfolio Turnover Rate 27%
============================================================================================================
</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 DEC. 31, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.76
- ------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .044
Net Realized and Unrealized Gain (Loss) on Investments 1.866
---------
Total from Investment Operations 1.910
---------
DISTRIBUTIONS
Dividends from Net Investment Income (.060)
Distributions from Realized Capital Gains --
---------
Total Distributions (.060)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.61
============================================================================================================
TOTAL RETURN** 17.77%
============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 19
Ratio of Total Expenses to Average Net Assets 0.10%+
Ratio of Net Investment Income to Average Net Assets 0.74%+
Portfolio Turnover Rate 27%
============================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 1% purchase fee or 2% redemption fee.
+Annualized.
36
<PAGE> 39
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TAX-MANAGED INTERNATIONAL FUND
AUG. 17* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DEC. 31, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .03
Net Realized and Unrealized Gain (Loss) on Investments 1.97
---------
Total from Investment Operations 2.00
---------
DISTRIBUTIONS
Dividends from Net Investment Income (.04)
Distributions from Realized Capital Gains --
---------
Total Distributions (.04)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.96
============================================================================================================
TOTAL RETURN** 20.01%
============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $ 135
Ratio of Total Expenses to Average Net Assets 0.35%+
Ratio of Net Investment Income to Average Net Assets 0.96%+
Portfolio Turnover Rate 7%
============================================================================================================
</TABLE>
*Inception.
**Total returns do not reflect the 0.75% purchase fee or 2% redemption fee.
+Annualized.
37
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS
Vanguard Tax-Managed Funds comprise the Tax-Managed Balanced, Tax-Managed Growth
and Income, Tax-Managed Capital Appreciation, Tax-Managed Small-Cap, and
Tax-Managed International 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. FOREIGN CURRENCY: Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
exchange rates on the valuation date as employed by Morgan Stanley Capital
International in the calculation of its indexes.
Realized gains (losses) and unrealized appreciation (depreciation) on
investment securities include the effects of changes in exchange rates since the
securities were purchased, combined with the effects of changes in security
prices. Fluctuations in the value of other assets and liabilities resulting from
changes in exchange rates are recorded as unrealized foreign currency gains
(losses) until the asset or liability is settled in cash, when they are recorded
as realized foreign currency gains (losses).
5. 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).
6. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined on a tax basis and may differ
from net investment income and realized capital gains for financial reporting
purposes.
38
<PAGE> 41
7. 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 capital share
transactions 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 each fund under methods approved by the Board of Trustees. Each
fund has committed to provide up to 0.40% of its assets in capital contributions
to Vanguard. At December 31, 1999, the funds had contributed capital to Vanguard
(included in Other Assets) of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
TAX-MANAGED FUND (000) NET ASSETS CAPITALIZATION
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $ 63 0.02% 0.06%
Growth and Income 446 0.02 0.44
Capital Appreciation 464 0.02 0.46
Small-Cap 38 0.02 0.04
International 23 0.02 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 banks have also
agreed to reduce their fees when the funds maintain cash on deposit in their
non-interest-bearing custody accounts. For the year ended December 31, 1999,
these arrangements reduced expenses by:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
EXPENSE
REDUCTION
(000)
----------------------------------
MANAGEMENT AND CUSTODIAN
TAX-MANAGED FUND ADMINISTRATIVE FEES
----------------------------------------------------------------------------
<S> <C> <C>
Balanced $3 $3
Capital Appreciation -- 4
----------------------------------------------------------------------------
</TABLE>
D. The Tax-Managed Growth and Income, Capital Appreciation, Small-Cap, and
International 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. As of December 31, 1999, the Tax-Managed
International Fund has not issued Institutional Shares. Institutional shares are
designed primarily for
39
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS (continued)
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 year ended December
31, 1999, represented the following percentages of average net assets:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
INVESTOR INSTITUTIONAL
TAX-MANAGED FUND SHARES SHARES
-----------------------------------------------------------------------
<S> <C> <C>
Growth and Income 0.13% 0.04%*
Capital Appreciation 0.13 0.04*
Small-Cap 0.13 0.04*
-----------------------------------------------------------------------
* Annualized.
</TABLE>
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.
E. During the year ended December 31, 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 $115,809 $ 34,236
Growth and Income 725,452 69,115
Capital Appreciation 706,820 217,051
Small-Cap 216,879 36,244
International 122,961 6,116
-----------------------------------------------------------------------
</TABLE>
During the period ended December 31, 1999, the Tax-Managed International
Fund realized net foreign currency losses of $3,000, which decreased
distributable net income for tax purposes; accordingly, such losses have been
reclassified from accumulated net realized losses to overdistributed net
investment income.
At December 31, 1999, 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 2003-2008 $ 4,032
Growth and Income 2004-2008 24,461
Capital Appreciation 2004-2008 52,452
Small-Cap 2007-2008 1,869
International 2007 816
-----------------------------------------------------------------------
</TABLE>
40
<PAGE> 43
F. At December 31, 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 $ 85,301 $ (4,363) $ 80,938
Growth and Income 813,219 (63,762) 749,457
Capital Appreciation 1,226,318 (40,039) 1,186,279
Small-Cap 46,038 (12,567) 33,471
International 23,051 (3,651) 19,400
-----------------------------------------------------------------------------------------------
</TABLE>
The Tax-Managed International Fund had net unrealized foreign currency
losses of $1,000 resulting from the translation of other assets and liabilities
at December 31, 1999.
G. The market value of securities on loan to broker/dealers at December 31,
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 $ 694 $ 732
Growth and Income 8,303 8,748
Capital Appreciation 42,053 43,507
Small-Cap 1,357 1,599
----------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements.
41
<PAGE> 44
- --------------------------------------------------------------------------------
SPECIAL 1999 TAX INFORMATION (UNAUDITED) FOR
VANGUARD TAX-MANAGED FUNDS
This information for the fiscal year ended December 31, 1999, is included
pursuant to provisions of the Internal Revenue Code.
The Tax-Managed Balanced Fund designates $6,028,000 of its income
dividends as exempt-interest dividends.
The International Fund has elected to pass through the credit for
taxes paid in foreign countries. Shareholders received detailed information
on foreign income and foreign tax per share by country along with their
1999 Form 1099-DIV.
For corporate shareholders, the following percentage of investment
income (dividend income plus short-term gains, if any) qualifies for the
dividends-received deduction:
------------------------------------------------------------
Tax-Managed Balanced Fund 100%*
Tax-Managed Growth and Income Fund 100%
Tax-Managed Capital Appreciation Fund 100%
Tax-Managed Small-Cap Fund 100%
------------------------------------------------------------
*The percentage applies only to the taxable ordinary income
that has been reported on Form 1099-DIV.
- --------------------------------------------------------------------------------
42
<PAGE> 45
THE VANGUARD FAMILY OF FUNDS
<TABLE>
<CAPTION>
STOCK FUNDS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
500 Index Fund Growth Index Fund* Tax-Managed Capital
Aggressive Growth Fund Health Care Fund Appreciation Fund*
Capital Opportunity Fund Institutional Index Fund* Tax-Managed Growth and
Convertible Securities Fund International Growth Fund Income Fund*
Emerging Markets Stock International Value Fund Tax-Managed International Fund*
Index Fund Mid-Cap Index Fund* Tax-Managed Small-Cap Fund*
Energy Fund Morgan Growth Fund Total International Stock
Equity Income Fund Pacific Stock Index Fund Index Fund
European Stock Index Fund PRIMECAP Fund Total Stock Market Index Fund*
Explorer Fund REIT Index Fund U.S. Growth Fund
Extended Market Index Fund* Selected Value Fund Utilities Income Fund
Global Equity Fund Small-Cap Growth Index Fund* Value Index Fund*
Gold and Precious Metals Fund Small-Cap Index Fund* Windsor Fund
Growth and Income Fund Small-Cap Value Index Fund* Windsor II Fund
</TABLE>
<TABLE>
<CAPTION>
BALANCED FUNDS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund LifeStrategy Growth Fund STAR Fund
Balanced Index Fund LifeStrategy Income Fund Tax-Managed Balanced Fund
Global Asset Allocation Fund LifeStrategy Moderate Wellesley Income Fund
LifeStrategy Conservative Growth Fund Wellington Fund
Growth Fund
</TABLE>
<TABLE>
<CAPTION>
BOND FUNDS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Admiral Intermediate-Term Intermediate-Term Corporate Fund Short-Term Corporate Fund*
Treasury Fund Intermediate-Term Tax-Exempt Short-Term Federal Fund
Admiral Long-Term Treasury Fund Fund Short-Term Tax-Exempt Fund
Admiral Short-Term Treasury Fund Intermediate-Term Treasury Fund Short-Term Treasury Fund
GNMA Fund Limited-Term Tax-Exempt Fund State Tax-Exempt Bond Funds
High-Yield Corporate Fund Long-Term Bond Index Fund (California, Florida,
High-Yield Tax-Exempt Fund Long-Term Corporate Fund Massachusetts, New Jersey,
Insured Long-Term Tax-Exempt Long-Term Tax-Exempt Fund New York, Ohio,
Fund Long-Term Treasury Fund Pennsylvania)
Intermediate-Term Bond Preferred Stock Fund Total Bond Market Index Fund*
Index Fund Short-Term Bond Index Fund
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET FUNDS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Admiral Treasury Money State Tax-Exempt Money Market Tax-Exempt Money Market Fund
Market Fund Funds (California, New Jersey, Treasury Money Market Fund
Federal Money Market Fund New York, Ohio, Pennsylvania)
Prime Money Market Fund*
</TABLE>
<TABLE>
<CAPTION>
VARIABLE ANNUITY PLAN
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balanced Portfolio High-Grade Bond Portfolio Money Market Portfolio
Diversified Value Portfolio High Yield Bond Portfolio REIT Index Portfolio
Equity Income Portfolio International Portfolio Short-Term Corporate Portfolio
Equity Index Portfolio Mid-Cap Index Portfolio Small Company Growth Portfolio
Growth Portfolio
</TABLE>
*Offers Institutional Shares.
For information about Vanguard funds and our variable annuity plan, including
charges and expenses, obtain a prospectus from The Vanguard Group,
P.O. Box 2600, Valley Forge, PA 19482-2600.
Read it carefully before you invest or send money.
43
<PAGE> 46
[GRAPHIC]
THE PEOPLE WHO GOVERN YOUR FUND
The Trustees of your mutual fund are there to see that the fund is operated and
managed in your best interests since, as a shareholder, you are part owner of
the fund. Your fund Trustees also serve on the Board of Directors of The
Vanguard Group, which is owned by the funds and exists solely to provide
services to them on an at-cost basis.
Seven of Vanguard's nine board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.
Among board members' responsibilities are selecting investment advisers for
the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new Trustees/Directors; and electing
Vanguard officers.
The list below provides a brief description of each Trustee's professional
affiliations. Noted in parentheses is the year in which the Trustee joined the
Vanguard Board.
TRUSTEES
JOHN C. BOGLE - (1967) Founder, Senior Chairman of the Board, and
Director/Trustee of The Vanguard Group, Inc., and each of the investment
companies in The Vanguard Group.
JOHN J. BRENNAN - (1987) Chairman of the Board, Chief Executive Officer, and
Director/Trustee of The Vanguard Group, Inc., and each of the investment
companies in The Vanguard Group.
JOANN HEFFERNAN HEISEN - (1998) Vice President, Chief Information Officer, and a
member of the Executive Committee of Johnson & Johnson; Director of Johnson &
JohnsonoMerck Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.
BRUCE K. MACLAURY - (1990) President Emeritus of The Brookings Institution;
Director of American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.
BURTON G. MALKIEL - (1977) Chemical Bank Chairman's Professor of Economics,
Princeton University; Director of Prudential Insurance Co. of America, Banco
Bilbao Gestinova, Baker Fentress & Co., The Jeffrey Co., and Select Sector SPDR
Trust.
ALFRED M. RANKIN, JR. - (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.
JOHN C. SAWHILL - (1991) President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co. and
President of New York University; Director of Pacific Gas and Electric Co.,
Procter & Gamble Co., NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR. - (1971) Retired Chairman of Nabisco Brands, Inc.; retired
Vice Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc., and
Kmart Corp.
J. LAWRENCE WILSON - (1985) Retired Chairman of Rohm & Haas Co.; Director of
Cummins Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY - Secretary; Managing Director and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment companies in The
Vanguard Group.
THOMAS J. HIGGINS - Treasurer; Principal of The Vanguard Group, Inc.; Treasurer
of each of the investment companies in The Vanguard Group.
VANGUARD MANAGING DIRECTORS
R. GREGORY BARTON - Legal Department.
ROBERT A. DISTEFANO - Information Technology.
JAMES H. GATELY - Individual Investor Group.
KATHLEEN C. GUBANICH - Human Resources.
IAN A. MACKINNON - Fixed Income Group.
F. WILLIAM MCNABB, III - Institutional Investor Group.
MICHAEL S. MILLER - Planning and Development.
RALPH K. PACKARD - Chief Financial Officer.
GEORGE U. SAUTER - Core Management Group.
<PAGE> 47
ABOUT OUR COVER
Our cover art, depicting HMS Vanguard at sea, is a reproduction of Leading the
Way, a 1984 work created and copyrighted by noted naval artist Tom Freeman, of
Forest Hill, Maryland.
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc.
Frank Russell Company is the owner of trademarks and copyrights relating to the
Russell Indexes. "Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire
Associates.
[PHOTO]
[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.
Q870-02/28/2000
(C) 2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
<PAGE> 48
VANGUARD TAX-MANAGED FUNDS
STATEMENT OF NET ASSETS - DECEMBER 31, 1999
The Statement of Net Assets should be read in conjunction with the Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes
to Financial Statements, which begin on page 28 of the accompanying report.
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. 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>
CONTENTS
<S> <C>
Tax-Managed Balanced Fund .................. 1
Tax-Managed Growth and Income Fund ......... 10
Tax-Managed Capital Appreciation Fund ...... 15
Tax-Managed Small-Cap Fund ................. 20
Tax-Managed International Fund ............. 26
Report of Independent Accountants .......... 35
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- ---------------------------------------------------------------------------------
COMMON STOCKS (47.5%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
General Electric Co. 43,103 $ 6,670
- - Microsoft Corp. 49,400 5,768
- - Cisco Systems, Inc. 43,100 4,617
Intel Corp. 44,600 3,671
Lucent Technologies, Inc. 41,341 3,093
- - QUALCOMM, Inc. 16,800 2,959
Wal-Mart Stores, Inc. 37,300 2,578
Citigroup, Inc. 41,095 2,283
International Business
Machines Corp. 20,700 2,236
Home Depot, Inc. 31,200 2,139
- - America Online, Inc. 28,160 2,124
- - MCI WorldCom, Inc. 38,865 2,062
AT&T Corp. 39,090 1,984
American International Group, Inc. 18,118 1,959
- - Oracle Corp. 17,375 1,947
Exxon Mobil Corp. 23,872 1,923
Merck & Co., Inc. 28,600 1,918
Procter & Gamble Co. 16,300 1,786
Johnson & Johnson 19,094 1,778
- - Sun Microsystems, Inc. 22,800 1,766
- - Yahoo!, Inc. 4,000 1,731
- - EMC Corp. 14,800 1,617
Pfizer, Inc. 47,300 1,534
- - Dell Computer Corp. 29,700 1,515
Time Warner, Inc. 17,200 1,246
Motorola, Inc. 7,900 1,163
Texas Instruments, Inc. 11,700 1,134
Morgan Stanley Dean Witter & Co. 7,680 1,096
- - AT&T Corp.-Liberty Media Class A 18,480 1,049
Hewlett-Packard Co. 9,200 1,048
The Coca-Cola Co. 17,700 1,031
- - Amgen, Inc. 16,400 985
- - Veritas Software Corp. 6,600 945
- - CBS Corp. 14,750 943
- - Applied Materials, Inc. 7,300 925
- - VoiceStream Wireless Corp. 5,600 797
The Walt Disney Co. 25,800 755
- - MediaOne Group, Inc. 9,700 745
Schering-Plough Corp. 17,600 743
Fannie Mae 11,500 718
- - AES Corp. 9,600 718
Sprint Corp. 10,200 687
- - Teradyne, Inc. 10,400 687
- - Analog Devices, Inc. 7,367 685
</TABLE>
1
<PAGE> 49
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Comcast Corp. Class A Special 13,300 $ 673
- - NEXTEL Communications, Inc. 6,500 670
- - Sprint PCS 6,350 651
- - JDS Uniphase Corp. 4,000 645
McDonald's Corp. 15,600 629
- - Siebel Systems, Inc. 7,400 622
Abbott Laboratories 16,600 603
- - Clear Channel
Communications, Inc. 6,730 601
- - Viacom Inc. Class B 9,526 576
- - Solectron Corp. 6,000 571
- - Xilinx, Inc. 12,400 564
BellSouth Corp. 12,000 562
Computer Associates
International, Inc. 7,837 548
American Express Co. 3,200 532
Charles Schwab Corp. 13,500 518
- - Comverse Technology, Inc. 3,450 499
Compaq Computer Corp. 18,181 492
- - Level 3 Communications, Inc. 6,000 491
- - Continental Airlines, Inc. Class B 11,000 488
- - Infinity Broadcasting Corp. 13,475 488
Automatic Data Processing, Inc. 9,000 485
The Gap, Inc. 10,525 484
Medtronic, Inc. 13,000 474
- - Apple Computer, Inc. 4,600 473
- - Novell, Inc. 11,800 470
- - 3Com Corp. 9,900 465
Conoco Inc. Class B 18,700 465
- - BMC Software, Inc. 5,800 464
- - Gateway, Inc. 6,400 461
- - Atmel Corp. 15,400 455
- - Smurfit-Stone Container Corp. 18,288 448
- - Citrix Systems, Inc. 3,600 443
- - Global Crossing Ltd. 8,815 441
- - Immunex Corp. 4,000 437
E.I. du Pont de Nemours & Co. 6,600 435
Alcoa Inc. 5,190 431
- - Safeguard Scientifics, Inc. 2,600 421
- - Costco Wholesale Corp. 4,600 420
- - KLA-Tencor Corp. 3,700 412
- - Micron Technology, Inc. 5,300 412
- - Tellabs, Inc. 6,400 411
Walgreen Co. 14,000 410
- - Maxim Integrated Products, Inc. 8,600 406
- - General Instrument Corp. 4,700 400
- - Lexmark International Group,
Inc. Class A 4,400 398
- - Cendant Corp. 14,926 396
Linear Technology Corp. 5,400 386
- - General Motors Corp. Class H 4,000 384
- - MedImmune Inc. 2,300 382
First Data Corp. 7,684 379
Telephone & Data Systems, Inc. 3,000 378
- - Intuit, Inc. 6,300 378
- - McLeodUSA, Inc. Class A 6,400 377
- - Biogen, Inc. 4,400 372
- - Computer Sciences Corp. 3,900 369
- - Compuware Corp. 9,700 361
- - Altera Corp. 7,200 357
- - BJ Services Co. 8,500 355
- - NEXTLINK Communications, Inc. 4,200 349
Lehman Brothers Holdings, Inc. 4,100 347
- - AMFM Inc. 4,400 344
- - U.S. Cellular Corp. 3,400 343
- - Cox Communications, Inc. Class A 6,600 340
- - Electronic Arts Inc. 4,000 336
- - Amazon.com, Inc. 4,400 335
The Boeing Co. 8,040 334
BroadWing Inc. 9,000 332
- - National Semiconductor Corp. 7,700 330
- - Noble Drilling Corp. 10,000 328
- - Parametric Technology Corp. 12,100 327
- - Western Wireless Corp. Class A 4,800 320
- - Nabors Industries, Inc. 10,300 319
- - LSI Logic Corp. 4,700 317
PepsiCo, Inc. 9,000 317
Lowe's Cos., Inc. 5,300 317
- - Watson Pharmaceuticals, Inc. 8,800 315
- - Winstar Communications, Inc. 4,200 314
Providian Financial Corp. 3,400 310
Adobe Systems, Inc. 4,600 309
- - Federated Department Stores, Inc. 6,100 308
Kansas City Southern
Industries, Inc. 4,100 306
General Motors Corp. 4,200 305
Weatherford International, Inc. 7,615 304
- - SCI Systems, Inc. 3,700 304
- - AMR Corp. 4,500 302
- - Rowan Cos., Inc. 13,800 299
- - ADC Telecommunications, Inc. 4,100 298
- - FDX Corp. 7,200 295
- - Conexant Systems, Inc. 4,400 292
- - Chiron Corp. 6,840 290
Harley-Davidson, Inc. 4,500 288
- - Univision Communications Inc. 2,800 286
Capital One Financial Corp. 5,900 284
- - Seagate Technology Inc. 6,090 284
Ford Motor Co. 5,300 283
- - Calpine Corp. 4,400 282
- - Global TeleSystems Group, Inc. 8,100 280
- - Guidant Corp. 5,900 277
- - R & B Falcon Corp. 20,904 277
United Healthcare Corp. 5,200 276
Paychex, Inc. 6,900 276
- - Tenet Healthcare Corp. 11,727 276
- - Freeport-McMoRan Copper &
Gold Inc. Class B 13,000 275
- - Centennial Cellular Corp. Class A 3,283 272
Circuit City Stores, Inc. 6,000 270
- - Smith International, Inc. 5,400 268
- - Kohl's Corp. 3,700 267
ALLTEL Corp. 3,230 267
MGIC Investment Corp. 4,400 265
- - Adaptec, Inc. 5,300 264
The Goldman Sachs Group, Inc. 2,800 264
Illinois Tool Works, Inc. 3,900 263
Molex, Inc. 4,613 261
- - Convergys Corp. 8,500 261
Bank of America Corp. 5,205 261
- - Forest Laboratories, Inc. 4,200 258
- - PanAmSat Corp. 4,344 258
</TABLE>
2
<PAGE> 50
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - At Home Corp. Series A 6,000 $ 257
AFLAC, Inc. 5,300 250
- - Cablevision Systems Corp. Class B 3,300 249
- - Qwest Communications
International Inc. 5,794 249
- - Sepracor Inc. 2,500 248
- - Global Marine, Inc. 14,800 246
- - AutoZone Inc. 7,600 246
Freddie Mac 5,200 245
Minnesota Mining &
Manufacturing Co. 2,500 245
- - Citizens Utilities Co. Class B 17,137 243
Wells Fargo Co. 6,000 243
Champion International Corp. 3,900 242
State Street Corp. 3,300 241
Kerr-McGee Corp. 3,874 240
- - IVAX Corp. 9,300 239
Dynegy,Inc. 9,800 238
- - Safeway, Inc. 6,634 236
Southwest Airlines Co. 14,512 235
- - BISYS Group, Inc. 3,600 235
- - USA Networks, Inc. 4,200 232
- - Associated Group, Inc. 2,500 228
- - CDW Computer Centers, Inc. 2,900 228
- - Dollar Tree Stores, Inc. 4,700 228
- - Wellpoint Health Networks Inc.
Class A 3,433 226
- - American Tower Corp. Class A 7,400 226
- - Cooper Cameron Corp. 4,600 225
- - American Standard Cos., Inc. 4,900 225
- - Fiserv, Inc. 5,850 224
- - Allegiance Telecom, Inc. 2,400 221
- - Best Buy Co., Inc. 4,400 221
Delta Air Lines, Inc. 4,400 219
- - Medical Manager Corp. 2,600 219
Manpower Inc. 5,800 218
Stryker Corp. 3,100 216
- - Gentex Corp. 7,700 214
- - Synopsys, Inc. 3,200 214
The PMI Group Inc. 4,350 212
- - Concord EFS, Inc. 8,175 211
- - Health Management Associates
Class A 15,712 210
- - UAL Corp. 2,700 209
- - Bed Bath & Beyond, Inc. 6,000 209
Newmont Mining Corp. 8,489 208
Cardinal Health, Inc. 4,327 207
M & T Bank Corp. 500 207
- - PeopleSoft, Inc. 9,700 207
- - DST Systems, Inc. 2,700 206
Expeditors International of
Washington, Inc. 4,700 206
- - Advanced Micro Devices, Inc. 7,000 203
CenturyTel, Inc. 4,275 203
- - Genzyme Corp. 4,500 203
ENSCO International, Inc. 8,800 201
- - BJ's Wholesale Club, Inc. 5,500 201
- - Howmet International Inc. 11,100 200
Kimberly-Clark Corp. 3,072 200
Merrill Lynch & Co., Inc. 2,400 200
- - Navistar International Corp. 4,200 199
- - Lincare Holdings, Inc. 5,700 198
American Home Products Corp. 5,000 197
AXA Financial, Inc. 5,800 196
Honeywell International Inc. 3,400 196
- - Abercrombie & Fitch Co. 7,316 195
Coastal Corp. 5,500 195
- - Starbucks Corp. 8,000 194
- - Ocean Energy, Inc. 24,900 193
Associates First Capital Corp. 6,976 191
NSTAR 4,700 190
- - NTL Inc. 1,525 190
- - Tricon Global Restaurants, Inc. 4,900 189
- - Affiliated Computer Services, Inc.
Class A 4,100 189
Danaher Corp. 3,900 188
- - Harrah's Entertainment, Inc. 7,100 188
- - US Airways Group, Inc. 5,800 186
Northeast Utilities 8,900 183
Wrigley, (Wm.) Jr. Co. 2,200 182
- - Unisys Corp. 5,700 182
- - MidAmerican Energy Holdings Co. 5,400 182
Golden West Financial Corp. 5,400 181
Nucor Corp. 3,300 181
- - American Power Conversion Corp. 6,800 179
- - Litton Industries, Inc. 3,500 175
IMS Health, Inc. 6,400 174
SBC Communications Inc. 3,544 173
- - Oxford Health Plan 13,500 171
- - Jones Apparel Group, Inc. 6,300 171
Amerada Hess Corp. 3,000 170
- - Jabil Circuit, Inc. 2,300 168
Mylan Laboratories, Inc. 6,600 166
Zions Bancorp 2,800 166
- - Owens-Illinois, Inc. 6,600 165
- - RCN Corp. 3,400 165
Biomet, Inc. 4,100 164
Anadarko Petroleum Corp. 4,800 164
- - SPX Corp. 2,000 162
Franklin Resources Corp. 5,000 160
- - Waters Corp. 3,000 159
- - Modis Professional Services Inc. 11,100 158
- - Park Place Entertainment 12,600 158
- - Niagara Mohawk Holdings Inc. 11,300 157
- - CNA Financial Corp. 4,000 156
The St. Joe Co. 6,400 156
- - Sybron International Corp. 6,300 156
Columbia/HCA Healthcare Corp. 5,302 155
Roslyn Bancorp, INC. 8,400 155
Apache Corp. 4,200 155
- - Thermo Electron Corp. 10,300 155
- - Staples, Inc. 7,437 154
- - Sterling Commerce, Inc. 4,500 153
- - Williams Sonoma, Inc. 3,300 152
- - Sealed Air Corp. 2,920 151
- - Cadence Design Systems, Inc. 6,300 151
- - NCR Corp. 3,968 150
Rouse Co. REIT 7,000 149
- - Blyth Industries, Inc. 6,050 149
- - PRIMEDIA Inc. 9,000 149
- - Toys R Us, Inc. 10,300 147
- - ALZA Corp. 4,200 145
</TABLE>
3
<PAGE> 51
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - American Eagle Outfitters, Inc. 3,200 $ 144
- - Santa Fe Snyder Corp. 18,000 144
General Dynamics Corp. 2,700 142
AMBAC Financial Group Inc. 2,700 141
Transatlantic Holdings, Inc. 1,800 141
International Game Technology 6,900 140
- - Robert Half International, Inc. 4,900 140
NIKE, Inc. Class B 2,800 139
Emerson Electric Co. 2,400 138
- - Polo Ralph Lauren Corp. 7,800 133
Sigma-Aldrich Corp. 4,400 132
- - Keebler Foods Co. 4,700 132
- - Brinker International, Inc. 5,500 132
Caterpillar, Inc. 2,800 132
- - St. Jude Medical, Inc. 4,292 132
Great Lakes Chemical Corp. 3,400 130
- - Sterling Software, Inc. 4,100 129
- - Outback Steakhouse 4,950 128
Monsanto Co. 3,600 128
Electronic Data Systems Corp. 1,900 127
- - Manor Care, Inc. 7,900 126
EOG Resources, Inc. 7,000 123
- - Chris-Craft Industries, Inc. 1,671 121
Sysco Corp. 3,000 119
Darden Restaurants Inc. 6,500 118
Total System Services, Inc. 7,200 117
- - MiniMed, Inc. 1,600 117
- - Catellus Development Corp. 9,000 115
- - Foundation Health Systems
Class A 11,600 115
USG Corp. 2,400 113
Pharmacia & Upjohn, Inc. 2,500 113
- - Universal Health Services Class B 3,100 112
International Paper Co. 1,900 107
Aetna Inc. 1,869 104
- - Quantum Corp.-DLT &
Storage Systems 6,800 103
CVS Corp. 2,528 101
Cintas Corp. 1,900 101
- - Lear Corp. 3,100 99
- - MGM Grand, Inc. 1,957 98
Martin Marietta Materials, Inc. 2,400 98
Marriott International, Inc. Class A 3,100 98
Praxair, Inc. 1,900 96
Gillette Co. 2,304 95
Columbia Energy Group 1,500 95
The Hartford Financial Services
Group Inc. 2,000 95
Newell Rubbermaid, Inc. 3,218 93
Burlington Northern Santa Fe Corp. 3,738 91
Fort James Corp. 3,300 90
Fastenal Co. 2,000 90
- - Mohawk Industries, Inc. 3,200 84
Bank One Corp. 2,564 82
Alberto-Culver Co. Class B 3,100 80
BHC Communications, Inc. Class A 500 80
- - Trigon Healthcare, Inc. 2,700 80
Tyson Foods, Inc. 4,900 80
- - ACNielson Corp. 3,200 79
Investment Technology Group, Inc. 2,700 78
Hilton Hotels Corp. 7,778 75
American General Corp. 975 74
- - Ceridian Corp. 3,300 71
Reynolds Metals Co. 900 69
- - FMC Corp. 1,200 69
- - Safety-Kleen Corp. 6,000 68
- - Healtheon/WebMD Corp. 1,800 68
Allmerica Financial Corp. 1,200 67
- - Payless ShoeSource, Inc. 1,400 66
- - Knight/Trimark Group, Inc. 1,400 64
Becton, Dickinson & Co. 2,400 64
- - Pacificare Health Systems, Inc. 1,200 64
- - Northwest Airlines Corp. Class A 2,700 60
Travelers Property Casualty Corp. 1,700 58
W.W. Grainger, Inc. 1,200 57
DENTSPLY International Inc. 2,400 57
- - Storage Technology Corp. 3,000 55
- - Cabletron Systems, Inc. 2,100 55
Starwood Hotels & Resorts
Worldwide, Inc. 2,300 54
Autodesk, Inc. 1,600 54
- - Silicon Graphics, Inc. 5,500 54
Baker Hughes, Inc. 2,540 53
- - Arrow Electronics, Inc. 2,100 53
- - Electronics for Imaging, Inc. 900 52
Archer-Daniels-Midland Co. 4,159 51
Diamond Offshore Drilling, Inc. 1,600 49
Mattel, Inc. 3,680 48
The Limited, Inc. 1,069 46
Delphi Automotive Systems Corp. 2,935 46
Dollar General Corp. 1,968 45
Noble Affiliates, Inc. 2,000 43
IBP, Inc. 2,300 41
- - Barnes & Noble, Inc. 2,000 41
- - Office Depot, Inc. 3,700 40
Dime Bancorp, Inc. 2,600 39
Hasbro, Inc. 2,025 39
Texaco Inc. 688 37
Burlington Resources, Inc. 1,100 36
Johns Manville Corp. 2,500 35
- - Consolidated Stores, Inc. 2,100 34
Sealed Air Corp. $ 2.00 Cvt. Pfd. 617 31
- - Boston Scientific Corp. 1,400 31
- - Kmart Corp. 3,000 30
Shaw Industries, Inc. 1,900 29
- - SunGard Data Systems, Inc. 1,200 29
- - Network Associates, Inc. 1,050 28
- - The Kroger Co. 1,400 26
Nordstrom, Inc. 1,000 26
20th Century Industries of CA 1,300 25
Kellogg Co. 800 25
- - Quantum Corp.- Hard Disk Drive 3,400 24
Investors Financial Services Corp. 500 23
Mallinckrodt, Inc. 700 22
- - Cybex Computer Products Corp. 500 20
ITT Industries, Inc. 600 20
- - Adelphia Communications Corp.
Class A 300 20
Tandy Corp. 400 20
- - Zale Corp. 400 19
Cummins Engine Co., Inc. 400 19
IMC Global Inc. 1,135 19
</TABLE>
4
<PAGE> 52
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cinergy Corp. 700 $ 17
Texas Utilities Co. 472 17
- - Thermo Instrument Systems, Inc. 1,500 17
FirstEnergy Corp. 700 16
Union Pacific Corp. 359 16
- - Golden State Bancorp Inc. 900 16
First Union Corp. 468 15
- - U.S. Foodservice 900 15
U S WEST, Inc. 207 15
Solutia, Inc. 900 14
Conseco Inc. 741 13
- - eToys Inc. 500 13
Clayton Homes Inc. 1,222 11
Scientific-Atlanta, Inc. 200 11
- - Gartner Group, Inc. Class B 633 9
El Paso Energy Corp. 222 9
- - Fox Entertainment Group, Inc.
Class A 300 7
Centex Corp. 300 7
- - Pac-West Telecom, Inc. 260 7
Allegheny Technologies Inc. 288 6
Autoliv, Inc. 211 6
- - Too Inc. 152 3
Raytheon Co. Class A 83 2
- - Teledyne Technologies, Inc. 82 1
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $72,510) 156,657
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------
MUNICIPAL BONDS (52.9%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ALASKA (0.8%)
Matanuska-Susitna Borough AK GO
5.50%, 3/1/2012 (3) $1,695 1,704
North Slope Borough AK GO
7.50%, 6/30/2001 (3) 1,000 1,042
-------
2,746
-------
ARIZONA (0.7%)
Arizona Transp. Board Highway Rev.
6.50%, 7/1/2011 1,000 1,058
Arizona Transp. Excise Tax Rev.
6.50%, 7/1/2004 1,250 1,335
-------
2,393
-------
CALIFORNIA (3.2%)
California Dept. of Water Resource
Rev. (Central Valley Project)
8.25%, 12/1/2003 290 327
California GO
6.40%, 2/1/2006 (1) 500 540
California Health Fac. Finance Auth.
(Catholic Healthcare West)
6.25%, 7/1/2006 (1) 395 424
California Health Fac. Finance Auth.
VRDO (Catholic Healthcare West)
5.00%, 1/5/2000 (1) 1,430 1,430
California Public Works Board
Lease Rev. (Dept. of Corrections)
5.00%, 9/1/2011 (2) 1,535 1,498
Central Coast CA Water Auth.
6.00%, 10/1/2008 (2) 1,000 1,070
Clovis CA Unified School Dist. GO
0.00%, 8/1/2005 (3) 2,000 1,526
Irvine CA Ranch Water Dist. VRDO
4.00%, 1/4/2000 LOC 235 235
Los Angeles CA Unified School
Dist. GO
6.00%, 7/1/2008 (3) 1,000 1,067
Los Angeles CA Wastewater
System Rev.
5.75%, 6/1/2010 (1) 400 412
San Bernardino CA Medical
Center COP
5.50%, 8/1/2005 (1) 500 516
South Orange County CA Public
Finance Auth.
7.00%, 9/1/2006 (1) 875 977
Univ. of California Rev.
(Multiple Purpose Project)
12.00%, 9/1/2003 (2) 500 621
-------
10,643
-------
COLORADO (1.3%)
Colorado Health Fac. Auth. Rev.
(Sisters of Charity Health
System Inc.)
5.25%, 12/1/2012 (1) 2,250 2,162
Denver CO City & County School
Dist. GO
5.25%, 12/1/2016 (3) 2,080 1,945
-------
4,107
-------
CONNECTICUT (0.6%)
Connecticut GO
6.00%, 5/15/2003 1,000 1,043
South Central Connecticut Regional
Water Auth. Water System Rev.
5.75%, 8/1/2006 (3) 900 933
-------
1,976
-------
DISTRICT OF COLUMBIA (2.0%)
District of Columbia GO
5.40%, 6/1/2012 (2) 455 446
5.50%, 6/1/2004 (4) 1,000 1,023
5.50%, 6/1/2007 2,000 2,039
6.75%, 6/1/2005 (1) 5 5
District of Columbia Rev.
(George Washington Univ.)
6.00%, 9/15/2011 (1) + 3,000 3,135
-------
6,648
-------
FLORIDA (2.2%)
Broward County FL School Dist. GO
5.30%, 2/15/2004 1,295 1,323
Florida Dept. of General Services
6.00%, 7/1/2002 (2) (Prere.) 1,000 1,041
Florida Turnpike Auth. Rev.
5.25%, 7/1/2009 (3) 485 490
5.25%, 7/1/2010 (3) 825 828
Hillsborough County FL IDA PCR VRDO
(Tampa Electric Co. Project)
4.00%, 1/4/2000 1,665 1,665
Lee County FL School Board COP
6.00%, 8/1/2005 (3) 800 844
</TABLE>
5
<PAGE> 53
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
St. Lucie County FL PCR VRDO
(Florida Power & Light Co.)
4.00%, 1/4/2000 $ 80 $ 80
Tampa FL Health System Rev.
(Catholic Health)
5.00%, 11/15/2009 (2) 1,000 987
-------
7,258
-------
GEORGIA (1.8%)
Burke County GA Dev. Auth.
PCR VRDO (Oglethorpe
Power Corp.)
5.40%, 1/5/2000 (3) 1,680 1,680
Georgia GO
6.00%, 3/1/2004 1,000 1,049
Georgia Municipal Electric Auth.
6.25%, 1/1/2012 (1) 3,000 3,204
-------
5,933
-------
ILLINOIS (1.3%)
Chicago IL GO (City Colleges
Improvement Projects)
0.00%, 1/1/2012 (3) 2,380 1,203
Illinois Dev. Finance Auth. PCR PUT
(Commonwealth Edison)
4.40%, 12/1/2006 (2) 1,500 1,418
Illinois Health Fac. Auth. Rev.
(Hosp. Sisters Services Inc.)
5.00%, 6/1/2002 1,635 1,646
-------
4,267
-------
KANSAS (0.6%)
Kansas Dev. Finance Auth.
Board of Regents
5.50%, 10/1/2003 1,800 1,851
-------
KENTUCKY (0.1%)
Kentucky Property & Buildings Comm.
Rev.
5.80%, 9/1/2006 400 413
-------
LOUISIANA (1.3%)
Louisiana Public Fac. Auth. Hosp. Rev.
(Franciscan Missionaries)
5.00%, 7/1/2002 (4) 2,000 2,012
St. Charles Parish LA Pollution Rev.
(Entergy Inc.)
5.35%, 10/1/2003 2,400 2,392
-------
4,404
-------
MARYLAND (1.0%)
Maryland Dept. of Transp.
5.20%, 9/15/2004 400 407
Maryland Health & Higher Educ.
Fac. Auth. Rev. (Johns Hopkins Univ.)
6.00%, 7/1/2005 2,740 2,899
-------
3,306
-------
MASSACHUSETTS (2.5%)
Chelsea MA GO
5.50%, 6/15/2011 (2) 740 745
5.50%, 6/15/2012 (2) 735 734
Massachusetts Bay Transp. Auth.
5.125%, 3/1/2013 1,695 1,613
6.25%, 3/1/2005 1,000 1,062
Massachusetts Health & Educ.
Fac. Auth. Rev. (Northeastern Univ.)
5.00%, 10/1/2017 (1) 1,000 892
Massachusetts Ind. Finance Agency
(Refusetech Inc. Project)
6.30%, 7/1/2005 1,000 1,033
Massachusetts Water Pollution
Abatement Trust
6.00%, 8/1/2010 1,780 1,883
Massachusetts Water
Resources Auth.
5.75%, 8/1/2004 (1)(Prere.) 300 315
-------
8,277
-------
MICHIGAN (2.4%)
Dickinson County MI Memorial
Hosp. System Rev.
7.625%, 11/1/2005 370 397
Greater Detroit MI Resource
Recovery Auth.
6.25%, 12/13/2006 (2) 1,200 1,285
Michigan Building Auth.
5.125%, 10/15/2011 3,015 2,938
5.30%, 10/1/2010 1,250 1,252
Michigan Environmental Protection
Program GO
6.25%, 11/1/2008 (Prere.) 1,000 1,059
Michigan Housing Dev. Auth. Rev.
6.30%, 4/1/2004 1,000 1,040
-------
7,971
-------
NEBRASKA (0.7%)
Nebraska Public Power Dist. Rev.
5.25%, 1/1/2005 (1) 2,000 2,033
5.25%, 1/1/2010 (1) 125 125
5.25%, 1/1/2011 (1) 225 222
-------
2,380
-------
NEVADA (1.5%)
Clark County NV Airport
Improvement Rev. VRDO
(McCarran International Airport)
5.15%, 1/5/2000 LOC 64 64
5.20%, 1/5/2000 (1) 1,355 1,355
Clark County NV Airport Rev.
5.00%, 7/1/2005 (1) 1,705 1,711
Clark County NV Passenger Fac.
Charge Rev.
(McCarran International Airport)
6.00%, 7/1/2002 (2) (Prere.) 1,000 1,049
Clark County NV School Dist. GO
5.90%, 6/15/2006 (3) (Prere.) 750 794
-------
4,973
-------
NEW JERSEY (1.8%)
New Jersey Econ. Dev. Auth.
Market Transition Fac.
5.70%, 7/1/2005 (1) 400 416
New Jersey Health Care
Fac. Auth. Rev.
(Atlantic City Medical Center)
6.80%, 7/1/2005 1,000 1,058
</TABLE>
6
<PAGE> 54
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
New Jersey Transp. Trust Fund Auth.
5.00%, 6/15/2014 $ 1,555 $ 1,449
6.00%, 6/15/2008 250 265
New Jersey Transp. Corp. Grant
Anticipation Notes
5.50%, 9/1/2003 2,500 2,559
-------
5,747
-------
NEW YORK (5.8%)
Erie County NY GO
6.125%, 1/15/2011 (3) 610 653
Hempstead NY GO
5.625%, 2/1/2011 (3) 840 857
Huntington NY GO
6.70%, 2/1/2010 (3) 375 417
Long Island NY Power Auth.
Electric System Rev.
5.50%, 12/1/2009 (2) 2,000 2,040
Long Island NY Power Auth.
Electric System Rev. VRDO
4.70%, 1/4/2000 LOC 1,200 1,200
Metro. NY Transp. Auth.
6.00%, 7/1/2006 (1) 1,000 1,054
New York City NY GO
6.375%, 8/15/2005 (Prere.) 135 146
6.375%, 8/15/2009 505 537
7.10%, 8/15/2004 (Prere.) 500 550
New York City NY IDA
(USTA National Tennis Center)
6.25%, 11/15/2006 2,000 2,141
New York City NY Muni. Water
Finance Auth. Water & Sewer
System Rev. VRDO
5.00%, 1/4/2000 (3) 1,550 1,550
New York State Dormitory Auth. Rev.
(State Univ.)
5.375%, 5/15/2007 (2) 400 408
New York State Dormitory Auth. Rev.
(Vassar Brothers Hosp.)
5.10%, 7/1/2010 (4) 1,500 1,464
New York State Environmental
Fac. Corp. PCR
(State Water Recovery Fund)
6.35%, 6/15/2004 (Prere.) 295 317
6.35%, 6/15/2006 225 240
New York State GO
4.50%, 9/15/2000 1,600 1,604
New York State Local Govt.
Assistance Corp. VRDO
5.40%, 1/5/2000 LOC 400 400
New York State Thruway Auth.
(Service Contract)
5.40%, 4/1/2005 (1) 400 409
Suffolk County NY GO
5.00%, 4/1/2007 (3) 1,120 1,116
Triborough Bridge & Tunnel NY
Auth. Rev.
5.50%, 1/1/2006 (4) 2,000 2,053
-------
19,156
-------
OHIO (4.1%)
CLEVELAND OH PUBLIC POWER
SYSTEM REV.
7.00%, 11/15/2004 (1)(PRERE.) 2,750 3,054
Hamilton County OH Hosp. Fac.
Rev. VRDO (Health Alliance of
Greater Cincinnati)
5.35%, 1/5/2000 (1) 1,000 1,000
5.40%, 1/5/2000 (1) 955 955
Lorain County OH Hosp. Rev.
(Catholic Healthcare Partners)
5.625%, 9/1/2013 (1) 1,775 1,776
6.00%, 9/1/2004 (1) 1,080 1,130
Ohio Housing Finance Agency
Mortgage Rev.
5.025%, 3/1/2021 2,000 1,967
Ohio Public Fac. Comm.
Higher Educ. Fac.
5.50%, 12/1/2006 (1) 400 409
Ohio Water Dev. Auth.
5.00%, 6/1/2015 (1) 2,000 1,823
5.75%, 12/1/2005 (1) 540 561
6.00%, 12/1/2004 (2) (Prere.) 315 331
6.00%, 12/1/2008 (2) 435 453
-------
13,459
-------
OKLAHOMA (0.3%)
Oklahoma Dev. Finance Auth. Rev.
(Hillcrest Healthcare)
5.00%, 8/15/2009 1,185 1,051
-------
OREGON (0.7%)
Oregon Dept. of Administrative
Services Lottery Rev.
5.75%, 4/1/2014 (4) 2,400 2,424
-------
PENNSYLVANIA (3.6%)
Geisinger Health System Auth. of
Pennsylvania VRDO (Penn State
Geisinger Health System)
4.80%, 1/4/2000 2,065 2,065
Montgomery County PA IDA
Pollution Rev. (PECO Energy)
5.20%, 10/1/2004 2,000 1,979
Pennsylvania Convention Center Auth.
6.70%, 9/1/2014 (1) 500 539
Pennsylvania GO
5.90%, 11/15/2001 1,000 1,026
Pennsylvania Higher Educ. Fac. Auth.
Rev. (Allegheny/Delaware Valley)
5.00%, 11/15/2006 (1) 1,125 1,101
Pennsylvania Turnpike Comm.
Oil Franchise Tax Rev.
5.25%, 12/1/2009 (2) 615 617
5.25%, 12/1/2011 (2) 455 449
Philadelphia PA Airport Parking Auth.
5.75%, 9/1/2008 (2) 1,150 1,197
Philadelphia PA School Dist. GO
6.25%, 9/1/2005 (2) 870 926
</TABLE>
7
<PAGE> 55
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Philadelphia PA Water &
Wastewater Rev.
6.25%, 8/1/2009 (1) $ 1,000 $ 1,074
Pittsburgh PA GO
5.20%, 3/1/2010 (3) 580 574
Pittsburgh PA Water & Sewer
Auth. Rev.
5.60%, 9/1/2005 (3)(Prere.) 235 243
-------
11,790
-------
SOUTH DAKOTA (0.3%)
South Dakota Building Auth.
Lease Rev.
5.25%, 12/1/2010 (2) 1,000 990
-------
TENNESSEE (0.7%)
Metro. Govt. & Davidson County TN
Water & Sewer Rev.
6.50%, 1/1/2009 (3) 2,000 2,190
-------
TEXAS (8.4%)
Carrollton TX Independent School Dist.
6.00%, 2/15/2012 2,925 3,041
Dallas TX Civic Center
Refunding & Improvement
4.60%, 8/15/2009 (1) 110 102
4.70%, 8/15/2010 (1) 815 756
Fort Worth TX Water & Sewer Rev.
5.25%, 2/15/2011 3,800 3,753
Grand Prairie TX GO
5.50%, 2/15/2003 3,065 3,134
Gulf Coast TX Waste Disposal Auth.
PCR VRDO (Exxon Project)
4.85%, 1/4/2000 1,650 1,650
Harris County TX Health Fac.
Dev. Corp. (Christus Health)
5.25%, 7/1/2004 3,945 3,953
Houston TX GO
5.70%, 3/1/2001 500 508
Houston TX Hotel Occupancy Tax Rev.
5.25%, 7/1/2007 (4) 500 502
Lower Colorado River Auth. TX
5.75%, 5/15/2011 (4) 3,000 3,070
Lubbock TX Health Fac. Corp.
(St. Joseph Health System)
5.00%, 7/1/2008 1,645 1,588
Northwest Texas Independent
School Dist.
0.00%, 8/15/2004 2,205 1,746
San Antonio TX Electric & Gas Rev.
5.125%, 2/1/2009 1,000 992
San Antonio TX Water Rev.
6.50%, 5/15/2002 (1)(Prere.) 145 154
6.50%, 5/15/2010 (1) 280 294
6.50%, 5/15/2010 (1)(ETM) 75 82
Texas Water Finance Assistance GO
5.00%, 8/1/2008 690 686
5.00%, 8/1/2009 1,050 1,037
Univ. of Texas Permanent Fund
6.60%, 7/1/2001 (Prere.) 500 524
-------
27,572
-------
UTAH (0.4%)
Intermountain Power Agency Utah
Power Supply Rev.
5.20%, 7/1/2006 1,150 1,153
Salt Lake County UT Building
Auth. Lease Rev.
5.90%, 10/1/2006 (1) 260 271
-------
1,424
-------
VIRGINIA (0.6%)
Henrico County VA Water &
Sewer Rev.
5.25%, 5/1/2011 1,485 1,472
Virginia Transp. Board
6.00%, 5/15/2007 500 524
-------
1,996
-------
WASHINGTON (1.4%)
King County WA Library System GO
6.05%, 12/1/2007 1,000 1,054
Seattle WA Muni. Light & Power Rev.
6.25%, 7/1/2004 (Prere.) 700 751
Seattle WA Water System Rev.
5.20%, 12/1/2005 2,320 2,347
Tacoma WA Electric System Rev.
5.50%, 1/1/2012 500 498
-------
4,650
-------
WEST VIRGINIA (0.6%)
West Virginia Building Comm. Rev.
5.25%, 7/1/2008 (1) 1,150 1,158
West Virginia School Building
Auth. Capital Improvement Rev.
5.625%, 7/1/2002 655 671
-------
1,829
-------
WISCONSIN (0.1%)
Wisconsin GO
5.00%, 5/1/2000 335 336
-------
WYOMING (0.1%)
Lincoln County WY PCR VRDO
(Exxon Project)
4.85%, 1/4/2000 230 230
-------
- ---------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $177,599) 174,390
- ---------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.2%)
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
3.47%, 1/3/2000--Note G
(COST $732) 732 732
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(COST $250,841) 331,779
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.6%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 4,586
Liabilities--Note G (6,684)
---------
(2,098)
- ---------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 56
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- ---------------------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
Applicable to 17,475,472 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $329,681
=================================================================================
NET ASSET VALUE PER SHARE $18.87
=================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
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.
+Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of December 31, 1999.
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>
- ---------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $253,335 $14.50
Overdistributed Net
Investment Income (257) (.01)
Accumulated Net Realized
Losses--Note E (4,335) (.25)
Unrealized Appreciation--Note F 80,938 4.63
- ---------------------------------------------------------------------------------
NET ASSETS $329,681 $18.87
=================================================================================
</TABLE>
9
<PAGE> 57
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- ---------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - Microsoft Corp. 984,684 $ 114,962
General Electric Co. 626,172 96,900
- - Cisco Systems, Inc. 624,394 66,888
Wal-Mart Stores, Inc. 849,586 58,728
Exxon Mobil Corp. 652,947 52,603
Intel Corp. 637,868 52,505
Lucent Technologies, Inc. 598,310 44,761
International Business
Machines Corp. 340,836 36,810
Citigroup, Inc. 644,007 35,783
- - America Online, Inc. 427,000 32,212
American International
Group, Inc. 295,736 31,977
SBC Communications Inc. 651,670 31,769
AT&T Corp. 610,452 30,981
- - Oracle Corp. 272,018 30,483
Home Depot, Inc. 439,629 30,142
Merck & Co., Inc. 442,158 29,652
- - MCI WorldCom, Inc. 541,992 28,759
Procter & Gamble Co. 250,668 27,464
The Coca-Cola Co. 471,126 27,443
Nortel Networks Corp. 254,748 25,730
Royal Dutch Petroleum Co. ADR 409,116 24,726
- - Dell Computer Corp. 484,700 24,720
Johnson & Johnson 265,288 24,705
Bristol-Myers Squibb Co. 378,376 24,287
Pfizer, Inc. 738,540 23,956
- - Sun Microsystems, Inc. 298,092 23,083
- - QUALCOMM, Inc. 126,000 22,192
Hewlett-Packard Co. 194,452 22,155
- - Yahoo!, Inc. 50,300 21,764
- - EMC Corp. 194,225 21,219
Bell Atlantic Corp. 296,414 18,248
Time Warner, Inc. 243,282 17,623
Motorola, Inc. 116,301 17,125
BellSouth Corp. 359,372 16,823
Bank of America Corp. 323,001 16,211
Morgan Stanley Dean
Witter & Co. 106,389 15,187
Texas Instruments, Inc. 153,104 14,832
American Express Co. 85,488 14,212
Eli Lilly & Co. 208,296 13,852
Warner-Lambert Co. 164,036 13,441
E.I. du Pont de Nemours & Co. 199,733 13,157
GTE Corp. 183,764 12,967
Wells Fargo Co. 313,804 12,689
Tyco International Ltd. 323,371 12,571
Ford Motor Co. 230,918 12,340
Fannie Mae 196,032 12,240
The Chase Manhattan Corp. 155,992 12,119
Schering-Plough Corp. 280,972 11,854
- - Amgen, Inc. 195,352 11,733
The Walt Disney Co. 394,296 11,533
Sprint Corp. 166,644 11,217
Chevron Corp. 125,524 10,874
Abbott Laboratories 294,494 10,694
McDonald's Corp. 259,130 10,446
Philip Morris Cos., Inc. 447,679 10,381
American Home Products Corp. 250,236 9,869
PepsiCo, Inc. 278,452 9,815
- - CBS Corp. 146,222 9,349
- - Applied Materials, Inc. 72,600 9,198
- - MediaOne Group, Inc. 117,346 9,014
General Motors Corp. 122,541 8,907
Compaq Computer Corp. 325,939 8,821
Honeywell International Inc. 151,828 8,759
- - Sprint PCS 82,536 8,460
Gillette Co. 203,016 8,362
Medtronic, Inc. 227,936 8,305
- - Viacom Inc. Class B 132,148 7,987
The Gap, Inc. 163,985 7,543
Minnesota Mining &
Manufacturing Co. 76,545 7,492
The Boeing Co. 176,883 7,352
- - Global Crossing Ltd. 145,740 7,287
Colgate-Palmolive Co. 111,712 7,261
- - NEXTEL Communications, Inc. 69,800 7,198
Computer Associates
International, Inc. 102,916 7,198
Comcast Corp. Special-Class A 139,292 7,043
Bank One Corp. 218,754 7,014
U S WEST, Inc. 97,060 6,988
Kimberly-Clark Corp. 103,944 6,782
Automatic Data Processing, Inc. 119,336 6,429
Anheuser-Busch Cos., Inc. 89,314 6,330
Freddie Mac 132,560 6,239
Dayton Hudson Corp. 84,464 6,203
First Union Corp. 188,704 6,192
FleetBoston Financial Corp. 175,953 6,125
Enron Corp. 136,600 6,062
Charles Schwab Corp. 157,550 6,046
Corning, Inc. 46,713 6,023
Electronic Data Systems Corp. 89,800 6,011
Unilever NV ADR 109,921 5,984
United Technologies Corp. 91,889 5,973
Merrill Lynch & Co., Inc. 70,792 5,911
Schlumberger Ltd. 105,010 5,907
Alcoa Inc. 70,442 5,847
- - Clear Channel
Communications, Inc. 64,957 5,797
Texaco Inc. 105,468 5,728
Carnival Corp. 117,800 5,632
Dow Chemical Co. 42,140 5,631
The Bank of New York Co., Inc. 140,500 5,620
Walgreen Co. 191,860 5,612
- - Solectron Corp. 56,400 5,365
Atlantic Richfield Co. 61,592 5,328
ALLTEL Corp. 59,936 4,956
- - Tellabs, Inc. 76,800 4,930
Marsh & McLennan Cos., Inc. 51,356 4,914
Emerson Electric Co. 83,032 4,764
International Paper Co. 79,316 4,476
Pharmacia & Upjohn, Inc. 98,970 4,454
- - Gateway, Inc. 61,000 4,396
Lowe's Cos., Inc. 73,306 4,380
Gannett Co., Inc. 53,204 4,339
Monsanto Co. 121,625 4,333
Fifth Third Bancorp 58,914 4,323
SunTrust Banks, Inc. 61,152 4,208
MBNA Corp. 154,395 4,207
J.P. Morgan & Co., Inc. 33,160 4,199
</TABLE>
10
<PAGE> 58
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - Micron Technology, Inc. 51,600 $ 4,012
First Data Corp. 81,138 4,001
Eastman Kodak Co. 60,328 3,997
Firstar Corp. 187,506 3,961
Illinois Tool Works, Inc. 57,839 3,908
- - Costco Wholesale Corp. 42,626 3,890
Sara Lee Corp. 175,464 3,871
Associates First Capital Corp. 139,216 3,820
- - BMC Software, Inc. 46,785 3,740
Allstate Corp. 155,580 3,734
The Seagram Co. Ltd. 82,872 3,724
- - Cendant Corp. 137,837 3,661
American General Corp. 47,276 3,587
Duke Energy Corp. 69,903 3,504
Baxter International, Inc. 55,644 3,495
- - Safeway, Inc. 97,400 3,464
Omnicom Group Inc. 34,300 3,430
Halliburton Co. 84,478 3,400
Household International, Inc. 90,411 3,368
Mellon Financial Corp. 97,456 3,320
U.S. Bancorp 138,741 3,304
Weyerhaeuser Co. 44,869 3,222
- - Apple Computer, Inc. 31,300 3,218
Columbia/HCA Healthcare Corp. 109,486 3,209
Caterpillar, Inc. 67,990 3,200
Campbell Soup Co. 82,412 3,188
Interpublic Group of Cos., Inc. 53,870 3,108
- - 3Com Corp. 66,050 3,104
- - Analog Devices, Inc. 33,300 3,097
Southern Co. 129,812 3,051
CVS Corp. 75,924 3,032
Conoco Inc. Class B 121,151 3,014
- - Computer Sciences Corp. 31,844 3,013
- - AES Corp. 40,000 2,990
Washington Mutual, Inc. 111,954 2,911
Xerox Corp. 127,230 2,887
CIGNA Corp. 35,638 2,871
- - General Instrument Corp. 33,200 2,822
- - The Kroger Co. 149,476 2,821
Bestfoods 53,422 2,808
National City Corp. 118,160 2,799
- - Xilinx, Inc. 60,800 2,765
- - Guidant Corp. 58,700 2,759
H.J. Heinz Co. 68,688 2,735
NIKE, Inc. Class B 53,512 2,652
Wachovia Corp. 38,863 2,643
Albertson's, Inc. 81,201 2,619
Cardinal Health, Inc. 53,779 2,575
- - Novell, Inc. 64,000 2,548
- - Compuware Corp. 68,300 2,544
PNC Bank Corp. 57,001 2,537
Williams Cos., Inc. 82,961 2,535
Sysco Corp. 63,958 2,530
Providian Financial Corp. 27,614 2,515
Tribune Co. 45,516 2,506
Pitney Bowes, Inc. 50,880 2,458
AFLAC, Inc. 51,100 2,411
- - Network Appliance, Inc. 29,000 2,409
Kellogg Co. 77,836 2,398
PE Corp.-PE Biosystems Group 19,800 2,382
- - FDX Corp. 57,284 2,345
Phillips Petroleum Co. 49,292 2,317
The McGraw-Hill Cos., Inc. 37,576 2,316
- - Kohl's Corp. 31,800 2,296
The Clorox Co. 45,214 2,278
Northern Trust Corp. 42,788 2,268
Textron, Inc. 29,504 2,263
- - Teradyne, Inc. 34,200 2,257
State Street Corp. 30,800 2,250
- - Lexmark International Group,
Inc. Class A 24,600 2,226
Sears, Roebuck & Co. 72,699 2,213
Masco Corp. 85,868 2,179
Burlington Northern
Santa Fe Corp. 89,327 2,166
ConAgra, Inc. 95,092 2,146
- - Citrix Systems, Inc. 17,400 2,140
General Mills, Inc. 59,282 2,119
Union Pacific Corp. 47,800 2,085
PPG Industries, Inc. 33,225 2,079
- - ADC Telecommunications, Inc. 28,600 2,075
General Dynamics Corp. 39,232 2,069
May Department Stores Co. 63,920 2,061
The Hartford Financial
Services Group Inc. 43,202 2,047
- - Federated Department Stores, Inc. 40,200 2,033
- - Best Buy Co., Inc. 39,600 1,987
- - Comverse Technology, Inc. 13,700 1,983
Aon Corp. 49,350 1,974
Lehman Brothers Holdings, Inc. 23,100 1,956
Deere & Co. 45,079 1,955
- - AMR Corp. 29,018 1,944
- - Unisys Corp. 60,481 1,932
- - LSI Logic Corp. 28,600 1,931
- - KLA-Tencor Corp. 17,300 1,927
KeyCorp 86,648 1,917
The Chubb Corp. 33,909 1,910
Texas Utilities Co. 53,044 1,886
Paychex, Inc. 47,150 1,886
Wrigley, (Wm.) Jr. Co. 22,397 1,858
- - Seagate Technology Inc. 39,800 1,853
- - Staples, Inc. 88,900 1,845
Capital One Financial Corp. 38,100 1,836
Tandy Corp. 36,864 1,813
Dover Corp. 39,880 1,810
The Limited, Inc. 41,397 1,793
Alcan Aluminium Ltd. 43,265 1,782
United Healthcare Corp. 33,364 1,772
Rockwell International Corp. 36,753 1,760
Circuit City Stores, Inc. 38,756 1,746
Ingersoll-Rand Co. 31,590 1,739
Edison International 66,328 1,737
BB&T Corp. 63,416 1,736
Ralston-Ralston Purina Group 62,226 1,735
Rohm & Haas Co. 42,257 1,719
Delphi Automotive Systems Corp. 109,073 1,718
El Paso Energy Corp. 43,997 1,708
Union Carbide Corp. 25,515 1,703
Georgia Pacific Group 33,500 1,700
The Quaker Oats Co. 25,756 1,690
New York Times Co. Class A 33,830 1,662
- - Boston Scientific Corp. 75,682 1,656
</TABLE>
11
<PAGE> 59
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
IMS Health, Inc. 59,860 $ 1,627
Avery Dennison Corp. 22,184 1,617
Aetna Inc. 28,959 1,616
Kansas City Southern
Industries, Inc. 21,300 1,590
Adobe Systems, Inc. 23,500 1,580
Unocal Corp. 46,923 1,575
Southwest Airlines Co. 97,255 1,574
Newell Rubbermaid, Inc. 54,273 1,574
Franklin Resources Corp. 48,800 1,565
Praxair, Inc. 30,660 1,543
Occidental Petroleum Corp. 70,645 1,528
Lincoln National Corp. 38,142 1,526
PG&E Corp. 74,158 1,520
Avon Products, Inc. 45,884 1,514
Norfolk Southern Corp. 73,519 1,507
Marriott International, Inc. Class A 47,668 1,505
Air Products & Chemicals, Inc. 44,780 1,503
St. Paul Cos., Inc. 44,166 1,488
FPL Group, Inc. 34,649 1,483
USX-Marathon Group 59,478 1,468
UnumProvident Corp. 45,762 1,467
Coastal Corp. 41,314 1,464
Public Service Enterprise
Group, Inc. 42,035 1,463
Consolidated Edison Inc. 42,300 1,459
AmSouth Bancorp 75,563 1,459
Dominion Resources, Inc. 37,074 1,455
Republic New York Corp. 20,100 1,447
Archer-Daniels-Midland Co. 118,248 1,441
Molex, Inc. 25,300 1,434
- - National Semiconductor Corp. 33,151 1,419
Unicom Corp. 42,129 1,411
Comerica, Inc. 30,150 1,408
- - Parametric Technology Corp. 52,000 1,407
- - Tenet Healthcare Corp. 59,466 1,397
Raytheon Co. Class B 52,522 1,395
Burlington Resources, Inc. 42,117 1,392
Jefferson-Pilot Corp. 20,229 1,381
Coca-Cola Enterprises, Inc. 67,700 1,362
Barrick Gold Corp. 76,279 1,349
Delta Air Lines, Inc. 26,944 1,342
Baker Hughes, Inc. 63,191 1,331
Transocean Sedco Forex Inc. 39,430 1,328
Danaher Corp. 27,300 1,317
Becton, Dickinson & Co. 48,992 1,311
CenturyTel, Inc. 27,600 1,308
CSX Corp. 41,614 1,306
SLM Holding Corp. 30,800 1,301
Reliant Energy, Inc. 56,687 1,297
Hershey Foods Corp. 26,798 1,273
PECO Energy Corp. 36,556 1,270
Allergan, Inc. 25,436 1,265
MGIC Investment Corp. 21,000 1,264
Loews Corp. 20,600 1,250
SouthTrust Corp. 32,900 1,244
TJX Cos., Inc. 60,804 1,243
Consolidated Natural Gas Co. 19,017 1,235
TRW, Inc. 23,540 1,223
Entergy Corp. 47,386 1,220
American Electric Power Co., Inc. 37,930 1,219
Fort James Corp. 43,379 1,188
Dollar General Corp. 51,350 1,168
Dow Jones & Co., Inc. 17,140 1,166
- - Tricon Global Restaurants, Inc. 30,175 1,166
Champion International Corp. 18,517 1,147
Conseco Inc. 64,130 1,146
Parker Hannifin Corp. 21,673 1,112
PaineWebber Group, Inc. 28,600 1,110
Union Planters Corp. 28,100 1,108
Regions Financial Corp. 44,100 1,108
- - PeopleSoft, Inc. 51,700 1,102
Fortune Brands, Inc. 32,788 1,084
Huntington Bancshares Inc. 45,373 1,083
Synovus Financial Corp. 54,100 1,075
Mattel, Inc. 81,720 1,073
Golden West Financial Corp. 31,854 1,067
Phelps Dodge Corp. 15,756 1,058
Summit Bancorp 33,900 1,038
Eaton Corp. 14,259 1,036
Kerr-McGee Corp. 16,679 1,034
Bear Stearns Co., Inc. 24,101 1,030
FirstEnergy Corp. 45,246 1,027
MBIA, Inc. 19,400 1,025
Progressive Corp. of Ohio 14,000 1,024
- - Adaptec, Inc. 20,400 1,017
Columbia Energy Group 15,859 1,003
Willamette Industries, Inc. 21,600 1,003
Amerada Hess Corp. 17,617 1,000
Cincinnati Financial Corp. 32,000 998
Knight Ridder 16,770 998
Ecolab, Inc. 25,230 987
- - Kmart Corp. 97,650 983
Dana Corp. 32,093 961
Whirlpool Corp. 14,753 960
- - Bed Bath & Beyond, Inc. 27,300 949
Carolina Power & Light Co. 31,111 947
Reynolds Metals Co. 12,306 943
Johnson Controls, Inc. 16,476 937
- - AutoZone Inc. 28,900 934
Nucor Corp. 16,997 932
Black & Decker Corp. 17,486 914
Dun & Bradstreet Corp. 30,880 911
Biomet, Inc. 22,685 907
- - Inco Ltd. 38,597 907
- - Cabletron Systems, Inc. 34,700 902
Genuine Parts Co. 35,837 889
Ameren Corp. 26,805 878
Anadarko Petroleum Corp. 25,700 877
DTE Energy Co. 27,902 875
Scientific-Atlanta, Inc. 15,678 872
W.W. Grainger, Inc. 18,146 868
The Mead Corp. 19,604 852
T. Rowe Price 23,000 850
UST, Inc. 33,699 849
- - Sealed Air Corp. 16,336 846
H & R Block, Inc. 19,300 844
- - Advanced Micro Devices, Inc. 29,108 842
Constellation Energy Group 28,998 841
Maytag Corp. 17,464 838
Central & South West Corp. 41,545 831
- - Wellpoint Health Networks
Inc. Class A 12,500 824
</TABLE>
12
<PAGE> 60
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Apache Corp. 22,300 $ 824
Leggett & Platt, Inc. 38,400 823
Newmont Mining Corp. 33,509 821
Sempra Energy 47,017 817
Florida Progress Corp. 19,200 812
The Times Mirror Co. Class A 11,834 793
Old Kent Financial Corp. 22,400 792
Bausch & Lomb, Inc. 11,502 787
Tosco Corp. 28,900 786
Vulcan Materials Co. 19,600 783
Brown-Forman Corp. Class B 13,435 769
International Flavors &
Fragrances, Inc. 20,082 758
Northrop Grumman Corp. 13,968 755
Temple-Inland Inc. 11,300 745
Cooper Industries, Inc. 18,395 744
- - Owens-Illinois, Inc. 29,600 742
Cinergy Corp. 30,606 738
Eastman Chemical Co. 15,382 734
Torchmark Corp. 25,198 732
GPU, Inc. 24,300 727
Winn-Dixie Stores, Inc. 30,208 723
Placer Dome, Inc. 66,252 712
PACCAR, Inc. 15,960 707
Fluor Corp. 15,380 706
Hasbro, Inc. 36,925 704
Nordstrom, Inc. 26,748 700
Hilton Hotels Corp. 72,267 696
CMS Energy Corp. 22,300 695
- - ALZA Corp. 20,079 695
Sherwin-Williams Co. 32,994 693
- - Toys R Us, Inc. 47,891 685
- - Freeport-McMoRan Copper &
Gold Inc. Class B 32,300 682
PP&L Resources Inc. 29,780 681
New Century Energies, Inc. 22,400 680
Lockheed Martin Corp. 31,076 680
VF Corp. 22,542 676
Nabisco Group Holdings Corp. 63,300 673
- - Watson Pharmaceuticals, Inc. 18,300 655
- - Harrah's Entertainment, Inc. 24,549 649
Equifax, Inc. 27,300 643
Westvaco Corp. 19,143 625
Northern States Power Co. 31,856 621
Union Pacific Resources
Group, Inc. 47,891 611
R.R. Donnelley & Sons Co. 24,241 601
USX-U.S. Steel Group 18,200 601
- - Navistar International Corp. 12,656 600
- - Ceridian Corp. 27,702 597
Harcourt General, Inc. 14,566 586
- - Mirage Resorts, Inc. 38,100 583
Sigma-Aldrich Corp. 19,300 580
Countrywide Credit Industries, Inc. 22,600 571
Hercules, Inc. 20,317 566
ITT Industries, Inc. 16,701 558
The Goodyear Tire & Rubber Co. 19,216 542
- - St. Jude Medical, Inc. 17,546 538
SuperValu Inc. 26,592 532
C.R. Bard, Inc. 9,777 518
The Stanley Works 17,106 515
Pinnacle West Capital Corp. 16,800 513
Pall Corp. 23,795 513
Wendy's International, Inc. 24,551 506
Engelhard Corp. 26,490 500
- - Niagara Mohawk Holdings Inc. 35,793 499
SAFECO Corp. 19,720 491
- - Thermo Electron Corp. 32,700 491
Darden Restaurants Inc. 26,341 477
- - Quintiles Transnational Corp. 25,500 477
Mallinckrodt, Inc. 14,962 476
Ashland, Inc. 14,306 471
Boise Cascade Corp. 11,530 467
- - US Airways Group, Inc. 14,302 459
Sunoco, Inc. 19,245 452
Liz Claiborne, Inc. 11,869 447
Great Lakes Chemical Corp. 11,343 433
Cummins Engine Co., Inc. 8,941 432
Waste Management, Inc. 24,551 422
- - HEALTHSOUTH Corp. 78,342 421
Meredith Corp. 10,096 421
Autodesk, Inc. 12,360 417
Adolph Coors Co. Class B 7,928 416
Brunswick Corp. 18,526 412
Bemis Co., Inc. 11,375 397
Homestake Mining Co. 50,368 394
Deluxe Corp. 14,182 389
PerkinElmer, Inc. 9,290 387
Thomas & Betts Corp. 11,828 377
Tektronix, Inc. 9,576 372
The BFGoodrich Co. 13,154 362
- - Silicon Graphics, Inc. 35,900 352
Millipore Corp. 8,994 347
- - FMC Corp. 6,023 345
- - Rowan Cos., Inc. 15,786 342
Snap-On Inc. 12,767 339
Ryder System, Inc. 13,164 322
- - Andrew Corp. 16,960 321
Dillard's Inc. 15,786 319
Crown Cork & Seal Co., Inc. 14,203 318
- - Manor Care, Inc. 19,813 317
Louisiana-Pacific Corp. 22,000 314
- - Humana, Inc. 37,900 310
Allegheny Technologies Inc. 13,773 309
Shared Medical Systems Corp. 5,976 304
American Greetings Corp. Class A 12,847 304
NICOR, Inc. 9,280 302
Eastern Enterprises 5,172 297
Worthington Industries, Inc. 17,302 287
Centex Corp. 11,316 279
Alberto-Culver Co. Class B 10,786 278
National Service Industries, Inc. 9,369 276
The Timken Co. 13,010 266
Crane Co. 12,854 255
Ball Corp. 6,401 252
Potlatch Corp. 5,500 245
Briggs & Stratton Corp. 4,498 241
Tupperware Corp. 13,717 232
Cooper Tire & Rubber Co. 14,585 227
Peoples Energy Corp. 6,719 225
Kaufman & Broad Home Corp. 9,211 223
- - Bethlehem Steel Corp. 25,931 217
</TABLE>
13
<PAGE> 61
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Pulte Corp. 9,388 $ 211
Great Atlantic & Pacific
Tea Co., Inc. 7,430 207
- - Consolidated Stores, Inc. 12,652 206
ONEOK, Inc. 7,891 198
Comcast Corp. Class A 4,100 196
Longs Drug Stores, Inc. 7,542 195
- - W.R. Grace & Co. 13,520 188
Jostens Inc. 7,055 172
Polaroid Corp. 8,560 161
Armstrong World Industries Inc. 4,627 154
Springs Industries Inc. Class A 3,560 142
Rite Aid Corp. 12,602 141
Raytheon Co. Class A 5,497 136
Fleetwood Enterprises, Inc. 6,556 135
McKesson HBOC, Inc. 5,769 130
J.C. Penney Co., Inc. 6,006 120
- - Office Depot, Inc. 10,500 115
Russell Corp. 6,820 114
Milacron Inc. 7,215 111
IKON Office Solutions, Inc. 15,266 104
NACCO Industries, Inc. Class A 1,531 85
Foster Wheeler Corp. 8,822 78
The Pep Boys
(Manny, Moe & Jack) 8,036 73
- - Pactiv Corp. 4,177 44
Service Corp. International 2,180 15
- - Viacom Inc. Class A 200 12
- - Reebok International Ltd. 791 6
- - Allied Waste Industries, Inc. 200 2
Owens Corning 47 1
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,599,687) 2,349,144
- ---------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.6%)
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
3.25%, 1/3/2000 $4,393 4,393
3.47%, 1/3/2000--Note G 8,748 8,748
- ---------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $13,141) 13,141
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(COST $1,612,828) 2,362,285
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.6%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 7,244
Liabilities--Note G (21,316)
-----------
(14,072)
- ---------------------------------------------------------------------------------
NET ASSETS (100%) $2,348,213
=================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
AMOUNT
(000)
- -------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------
<S> <C>
Paid in Capital $1,624,009
Overdistributed Net Investment Income (792)
Accumulated Net Realized Losses--Note E (24,461)
Unrealized Appreciation--Note F 749,457
- --------------------------------------------------------------------
NET ASSETS $2,348,213
====================================================================
Investor Shares--Net Assets
Applicable to 70,439,435 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $2,240,420
- --------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $31.81
====================================================================
Institutional Shares--Net Assets
Applicable to 3,388,992 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $107,793
- --------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $31.81
====================================================================
</TABLE>
14
<PAGE> 62
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- ---------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
General Electric Co. 684,178 $ 105,876
- - Microsoft Corp. 777,000 90,715
- - Cisco Systems, Inc. 662,100 70,927
Intel Corp. 705,300 58,055
Lucent Technologies, Inc. 642,154 48,041
- - QUALCOMM, Inc. 236,800 41,706
Wal-Mart Stores, Inc. 588,000 40,646
International Business
Machines Corp. 375,800 40,586
Citigroup, Inc. 704,877 39,165
- - America Online, Inc. 467,922 35,299
Home Depot, Inc. 475,800 32,622
- - MCI WorldCom, Inc. 608,598 32,294
Procter & Gamble Co. 278,500 30,513
American International
Group, Inc. 275,835 29,825
Merck & Co., Inc. 439,000 29,440
The Coca-Cola Co. 481,300 28,036
- - Oracle Corp. 248,412 27,838
Pfizer, Inc. 821,300 26,641
AT&T Corp. 523,114 26,548
- - Sun Microsystems, Inc. 329,100 25,485
Johnson & Johnson 273,248 25,446
Exxon Mobil Corp. 304,267 24,513
- - Dell Computer Corp. 457,200 23,317
- - EMC Corp. 210,100 22,953
Time Warner, Inc. 262,850 19,040
Morgan Stanley Dean
Witter & Co. 126,300 18,029
Hewlett-Packard Co. 154,000 17,546
Texas Instruments, Inc. 175,100 16,963
American Express Co. 100,400 16,692
- - AT&T Corp.-Liberty Media Group
Class A 271,090 15,384
Motorola, Inc. 102,100 15,034
- - Yahoo!, Inc. 34,000 14,711
- - Amgen, Inc. 241,300 14,493
- - CBS Corp. 215,040 13,749
- - Veritas Software Corp. 90,900 13,010
The Walt Disney Co. 435,309 12,733
Schering-Plough Corp. 296,700 12,517
McDonald's Corp. 295,200 11,900
- - Applied Materials, Inc. 91,900 11,643
Fannie Mae 180,100 11,245
MediaOne Group, Inc. 143,100 10,992
- - JDS Uniphase Corp. 66,800 10,776
- - Sprint PCS 103,000 10,558
Sprint Corp. 154,000 10,366
Medtronic, Inc. 278,200 10,137
- - Siebel Systems, Inc. 117,000 9,828
- - VoiceStream Wireless Corp. 69,000 9,820
Abbott Laboratories 264,400 9,601
Alcoa Inc. 115,446 9,582
Comcast Corp.-Special Class A 185,432 9,376
PepsiCo, Inc. 263,600 9,292
E.I. du Pont de Nemours & Co. 140,600 9,262
Vodafone Airtouch PLC ADR 181,750 8,997
- - Teradyne, Inc. 136,200 8,989
American Home Products Corp. 218,800 8,629
Gillette Co. 206,916 8,522
- - Analog Devices, Inc. 90,133 8,382
- - Xilinx, Inc. 178,800 8,130
- - Solectron Corp. 84,000 7,991
- - Clear Channel
Communications, Inc. 88,720 7,918
The Gap, Inc. 170,787 7,856
- - NEXTEL Communications, Inc. 75,300 7,765
Computer Associates
International, Inc. 108,462 7,586
Compaq Computer Corp. 276,930 7,494
- - Viacom Inc. Class B 120,312 7,271
Charles Schwab Corp. 187,800 7,207
Bristol-Myers Squibb Co. 112,000 7,189
- - Apple Computer, Inc. 69,700 7,166
Walgreen Co. 241,300 7,058
- - BMC Software, Inc. 88,200 7,050
The Boeing Co. 165,470 6,877
- - Qwest Communications
International Inc. 157,476 6,771
- - Global Crossing Ltd. 134,890 6,745
- - McLeodUSA, Inc. Class A 112,200 6,606
Honeywell International Inc. 114,500 6,605
Freddie Mac 139,800 6,579
- - Cendant Corp. 242,125 6,431
- - KLA-Tencor Corp. 57,600 6,415
- - General Instrument Corp. 75,100 6,384
- - Novell, Inc. 159,800 6,362
Adobe Systems, Inc. 94,200 6,335
- - Level 3 Communications, Inc. 76,900 6,296
BellSouth Corp. 132,400 6,198
- - Infinity Broadcasting Corp. 167,400 6,058
- - Micron Technology, Inc. 77,200 6,002
- - Lexmark International Group,
Inc. Class A 66,200 5,991
Monsanto Co. 165,700 5,903
Lowe's Cos., Inc. 98,700 5,897
- - Biogen, Inc. 69,600 5,881
Bank of America Corp. 115,875 5,815
- - Immunex Corp. 53,200 5,815
- - Smurfit-Stone Container Corp. 234,602 5,748
- - Intuit, Inc. 95,400 5,718
Kimberly-Clark Corp. 87,496 5,709
Merrill Lynch & Co., Inc. 68,000 5,678
- - Atmel Corp. 191,600 5,664
- - Costco Wholesale Corp. 62,000 5,658
- - Cablevision Systems Corp.
Class B 74,800 5,647
- - Compuware Corp. 151,200 5,632
- - 3Com Corp. 117,375 5,517
First Data Corp. 111,262 5,487
- - Tellabs, Inc. 85,200 5,469
- - LSI Logic Corp. 78,400 5,292
Automatic Data Processing, Inc. 98,100 5,285
Electronic Data Systems Corp. 78,800 5,275
- - Altera Corp. 105,000 5,204
- - Computer Sciences Corp. 54,800 5,185
- - General Motors Corp. Class H 53,800 5,165
- - Gateway, Inc. 70,400 5,073
- - Maxim Integrated Products, Inc. 107,200 5,059
Columbia/HCA Healthcare Corp. 170,821 5,007
- - Safeway, Inc. 140,784 5,007
</TABLE>
15
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - Safeguard Scientifics, Inc. 30,700 $ 4,975
- - Citrix Systems, Inc. 40,100 4,932
- - NEXTLINK Communications, Inc. 58,800 4,884
Conoco Inc. Class B 190,000 4,726
Associates First Capital Corp. 171,388 4,702
Telephone & Data Systems, Inc. 36,900 4,649
- - MedImmune Inc. 28,000 4,645
- - AES Corp. 62,000 4,635
- - ADC Telecommunications, Inc. 62,300 4,521
Providian Financial Corp. 49,500 4,508
- - Guidant Corp. 95,300 4,479
- - NTL Inc. 35,625 4,444
- - Seagate Technology Inc. 94,670 4,408
- - Adaptec, Inc. 87,700 4,374
- - SCI Systems, Inc. 52,800 4,340
- - AMFM Inc. 54,400 4,257
Linear Technology Corp. 59,400 4,251
- - Parametric Technology Corp. 156,400 4,233
- - Nabors Industries, Inc. 136,200 4,214
- - Amazon.com, Inc. 54,800 4,172
Lehman Brothers Holdings, Inc. 49,100 4,158
- - FDX Corp. 101,100 4,139
- - Cox Communications, Inc.
Class A 80,200 4,130
Emerson Electric Co. 71,200 4,085
- - U.S. Cellular Corp. 40,200 4,058
- - Federated Department Stores, Inc. 79,700 4,030
- - Chiron Corp. 94,840 4,019
- - National Semiconductor Corp. 93,200 3,990
BroadWing Inc. 106,100 3,912
CVS Corp. 97,428 3,891
Molex, Inc. 68,525 3,885
AFLAC, Inc. 81,900 3,865
Kansas City Southern
Industries, Inc. 51,500 3,843
- - Forest Laboratories, Inc. 62,400 3,834
- - Electronic Arts Inc. 45,600 3,830
Circuit City Stores, Inc. 85,000 3,830
- - Kohl's Corp. 53,000 3,826
- - AMR Corp. 57,100 3,826
Illinois Tool Works, Inc. 56,600 3,824
Philip Morris Cos., Inc. 163,800 3,798
Harley-Davidson, Inc. 59,100 3,786
General Motors Corp. 51,500 3,743
ENSCO International, Inc. 162,000 3,706
State Street Corp. 50,300 3,675
- - Western Wireless Corp. Class A 55,000 3,671
- - Conexant Systems, Inc. 55,200 3,664
- - Noble Drilling Corp. 111,100 3,639
- - Advanced Micro Devices, Inc. 124,500 3,603
- - Univision Communications Inc. 35,100 3,587
- - Winstar Communications, Inc. 47,800 3,579
- - The Kroger Co. 188,900 3,565
- - Calpine Corp. 55,600 3,558
Cardinal Health, Inc. 74,275 3,556
ALLTEL Corp. 42,953 3,552
IMS Health, Inc. 130,400 3,545
- - Freeport-McMoRan Copper &
Gold Inc. Class B 167,687 3,542
Sysco Corp. 89,200 3,529
Capital One Financial Corp. 73,100 3,523
- - Staples, Inc. 169,130 3,509
Paychex, Inc. 87,587 3,503
- - Cadence Design Systems, Inc. 145,500 3,492
- - Sanmina Corp. 34,600 3,456
MGIC Investment Corp. 57,100 3,437
- - Tenet Healthcare Corp. 145,737 3,425
- - Allegiance Telecom, Inc. 36,500 3,367
- - Citizens Utilities Co. Class B 235,002 3,334
Southwest Airlines Co. 205,425 3,325
Dynegy,Inc. 136,100 3,309
The Goldman Sachs Group, Inc. 35,000 3,297
United Healthcare Corp. 61,900 3,288
- - USA Networks, Inc. 59,480 3,286
Tandy Corp. 66,600 3,276
- - PeopleSoft, Inc. 153,400 3,269
- - Global TeleSystems Group, Inc. 94,000 3,255
- - BJ Services Co. 77,000 3,220
Champion International Corp. 51,800 3,208
- - Best Buy Co., Inc. 63,700 3,197
- - Health Management Associates
Class A 238,868 3,195
- - Vitesse Semiconductor Corp. 60,400 3,167
- - Rowan Cos., Inc. 145,000 3,145
Kerr-McGee Corp. 50,649 3,140
- - Cooper Cameron Corp. 63,700 3,117
CenturyTel, Inc. 64,200 3,041
- - Boston Scientific Corp. 138,600 3,032
UnumProvident Corp. 94,420 3,027
- - Smith International, Inc. 60,700 3,016
Delta Air Lines, Inc. 60,300 3,004
Stryker Corp. 43,000 2,994
- - Medical Manager Corp. 35,500 2,991
- - AutoZone Inc. 92,100 2,976
- - American Tower Corp. Class A 96,000 2,934
- - TV Guide, Inc. 68,200 2,933
AXA Financial, Inc. 86,500 2,930
Minnesota Mining &
Manufacturing Co. 29,900 2,926
- - CDW Computer Centers, Inc. 37,200 2,925
Biomet, Inc. 72,700 2,908
- - At Home Corp. Series A 67,600 2,898
- - Tricon Global Restaurants, Inc. 74,540 2,879
- - Comverse Technology, Inc. 19,800 2,866
- - PanAmSat Corp. 48,100 2,856
- - Synopsys, Inc. 42,627 2,845
Manpower Inc. 74,900 2,818
- - Kmart Corp. 279,400 2,811
- - Global Marine, Inc. 169,100 2,811
- - Gentex Corp. 101,200 2,808
- - Genzyme Corp. 62,200 2,799
- - Wellpoint Health Networks Inc.
Class A 42,203 2,783
- - i2 Technologies, Inc. 14,200 2,769
- - IVAX Corp. 106,800 2,750
The PMI Group Inc. 56,100 2,738
- - Concord EFS, Inc. 105,550 2,718
- - Navistar International Corp. 57,000 2,700
- - Unisys Corp. 84,500 2,699
- - Fox Entertainment Group, Inc.
Class A 108,200 2,698
</TABLE>
16
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - American Standard Cos., Inc. 58,500 $ 2,684
Praxair, Inc. 53,100 2,672
- - Fiserv, Inc. 69,400 2,659
- - Jabil Circuit, Inc. 36,400 2,657
- - American Power
Conversion Corp. 100,400 2,648
Golden West Financial Corp. 78,900 2,643
Starwood Hotels & Resorts
Worldwide, Inc. 112,024 2,633
Coastal Corp. 74,100 2,626
- - Dollar Tree Stores, Inc. 54,000 2,616
Weatherford International, Inc. 65,400 2,612
- - UnitedGlobalCom Inc. Class A 36,900 2,606
Newmont Mining Corp. 105,856 2,593
- - Associated Group, Inc. 28,350 2,587
- - Waters Corp. 48,700 2,581
Mylan Laboratories, Inc. 102,150 2,573
Danaher Corp. 53,300 2,572
Delphi Automotive Systems Corp. 162,994 2,567
- - Office Depot, Inc. 234,400 2,564
- - Bed Bath & Beyond, Inc. 73,700 2,561
- - Owens-Illinois, Inc. 101,800 2,551
- - Network Associates, Inc. 95,550 2,550
Nucor Corp. 46,400 2,543
- - Modis Professional Services Inc. 178,400 2,542
- - DST Systems, Inc. 33,300 2,541
- - PSINet, Inc. 41,000 2,532
- - Sepracor Inc. 25,400 2,519
- - R & B Falcon Corp. 189,746 2,514
- - BISYS Group, Inc. 38,400 2,506
- - St. Jude Medical, Inc. 81,208 2,492
Franklin Resources Corp. 77,500 2,485
- - Express Scripts 38,800 2,483
ServiceMaster Co. 198,500 2,444
- - Continental Airlines, Inc. Class B 54,900 2,436
Anadarko Petroleum Corp. 70,600 2,409
Archer-Daniels-Midland Co. 197,530 2,407
- - Affiliated Computer Services,
Inc. Class A 52,300 2,406
- - Starbucks Corp. 98,976 2,400
- - Harrah's Entertainment, Inc. 90,500 2,393
- - Time Warner Telecom Inc. 47,900 2,392
International Game Technology 117,400 2,385
- - Jones Apparel Group, Inc. 87,900 2,384
- - Watson Pharmaceuticals, Inc. 66,300 2,374
- - FMC Corp. 41,300 2,367
Wrigley, (Wm.) Jr. Co. 28,400 2,355
- - Pacificare Health Systems, Inc. 44,428 2,355
- - Park Place Entertainment 188,100 2,351
- - UAL Corp. 30,300 2,350
- - SPX Corp. 29,000 2,344
Dollar General Corp. 102,950 2,342
Burlington Northern
Santa Fe Corp. 96,393 2,338
- - Convergys Corp. 75,900 2,334
The Hartford Financial
Services Group Inc. 49,200 2,331
- - Metromedia Fiber Network, Inc. 48,600 2,330
- - Sealed Air Corp. 44,836 2,323
- - BJ's Wholesale Club, Inc. 63,400 2,314
Expeditors International of
Washington, Inc. 52,500 2,300
- - Robert Half International, Inc. 80,200 2,291
NSTAR 56,500 2,288
McKesson HBOC, Inc. 101,124 2,282
- - US Airways Group, Inc. 70,900 2,273
- - Sybron International Corp. 90,900 2,244
AMBAC Financial Group Inc. 42,900 2,239
- - Toys R Us, Inc. 156,000 2,233
- - Lincare Holdings, Inc. 63,900 2,217
Allmerica Financial Corp. 39,844 2,216
Northeast Utilities 107,400 2,208
- - Knight/Trimark Group, Inc. 47,850 2,201
- - Tech Data Corp. 81,000 2,197
- - Abercrombie & Fitch Co. 82,316 2,197
- - Howmet International Inc. 121,600 2,196
Sigma-Aldrich Corp. 72,800 2,189
- - Litton Industries, Inc. 43,600 2,175
- - MiniMed, Inc. 29,500 2,161
Becton, Dickinson & Co. 80,600 2,156
- - Chris-Craft Industries, Inc. 29,801 2,149
Amerada Hess Corp. 37,800 2,145
Cintas Corp. 40,200 2,136
- - Niagara Mohawk Holdings Inc. 153,000 2,132
- - Mohawk Industries, Inc. 80,700 2,128
NIKE, Inc. Class B 42,500 2,106
- - MidAmerican Energy Holdings Co. 62,200 2,095
Progressive Corp. of Ohio 28,600 2,091
- - Lear Corp. 65,200 2,086
- - ALZA Corp. 60,200 2,084
- - NCR Corp. 54,937 2,081
Apache Corp. 56,300 2,080
Caterpillar, Inc. 44,000 2,071
Tenneco Automotive, Inc. 221,705 2,065
General Dynamics Corp. 39,100 2,063
- - Payless ShoeSource, Inc. 43,800 2,059
- - Saks Inc. 132,100 2,056
Zions Bancorp 34,600 2,048
- - Ocean Energy, Inc. 263,540 2,042
- - eBay Inc. 16,300 2,041
SBC Communications Inc. 41,720 2,034
- - Zale Corp. 41,800 2,022
- - Catellus Development Corp. 157,400 2,017
- - PRIMEDIA Inc. 122,100 2,015
- - RCN Corp. 41,500 2,013
International Paper Co. 35,600 2,009
Investment Technology
Group, Inc. 69,800 2,007
- - Universal Health Services
Class B 55,700 2,005
Newell Rubbermaid, Inc. 68,510 1,987
- - Santa Fe Snyder Corp. 248,070 1,985
- - Electronics for Imaging, Inc. 34,100 1,982
- - The Neiman Marcus Group,
Inc. Class A 70,600 1,972
Rouse Co. REIT 92,000 1,955
Aetna Inc. 34,997 1,953
- - Trigon Healthcare, Inc. 66,200 1,953
The St. Joe Co. 79,600 1,935
Columbia Energy Group 30,300 1,916
</TABLE>
17
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - Safety-Kleen Corp. 169,234 $ 1,914
- - ICOS Corp. 65,200 1,907
M & T Bank Corp. 4,600 1,906
Lyondell Chemical Co. 149,100 1,901
- - Healtheon/WebMD Corp. 50,300 1,886
- - American Eagle Outfitters, Inc. 41,800 1,881
USG Corp. 39,700 1,871
- - Keebler Foods Co. 66,400 1,868
- - CNA Financial Corp. 47,900 1,865
- - AutoNation, Inc. 201,600 1,865
- - Adelphia Communications
Corp. Class A 28,400 1,864
Roslyn Bancorp, Inc. 100,400 1,857
- - Sterling Commerce, Inc. 54,300 1,850
- - Polo Ralph Lauren Corp. 108,300 1,848
Great Lakes Chemical Corp. 48,200 1,841
- - Manor Care, Inc. 114,600 1,834
- - Golden State Bancorp Inc. 106,100 1,830
- - Outback Steakhouse 70,550 1,830
- - Williams Sonoma, Inc. 39,600 1,822
Total System Services, Inc. 111,550 1,820
Transatlantic Holdings, Inc. 23,300 1,819
- - U.S. Foodservice 108,300 1,814
Darden Restaurants Inc. 99,900 1,811
- - Blyth Industries, Inc. 73,700 1,810
- - Teledyne Technologies, Inc. 190,877 1,801
- - SunGard Data Systems, Inc. 75,500 1,793
- - Exodus Communications, Inc. 20,000 1,776
EOG Resources, Inc. 101,100 1,776
Loews Corp. 29,100 1,766
- - Metro-Goldwyn-Mayer Inc. 74,800 1,762
Alberto-Culver Co. Class B 68,000 1,755
- - Northwest Airlines Corp. Class A 78,300 1,742
- - VISIX Inc. 33,600 1,739
Tyson Foods, Inc. 106,450 1,730
- - Too Inc. 100,068 1,726
- - MGM Grand, Inc. 34,066 1,714
- - Brinker International, Inc. 71,400 1,714
- - Barnes & Noble, Inc. 82,600 1,704
Shaw Industries, Inc. 110,000 1,698
- - United Rentals, Inc. 98,500 1,687
- - Ceridian Corp. 78,200 1,686
Fastenal Co. 37,500 1,685
Burlington Resources, Inc. 50,500 1,670
- - Arrow Electronics, Inc. 65,500 1,662
Solutia, Inc. 105,800 1,633
Marriott International, Inc. Class A 51,700 1,632
- - ACNielson Corp. 65,500 1,613
Clayton Homes Inc. 174,795 1,606
Noble Affiliates, Inc. 74,900 1,606
- - Andrx Corp. 37,500 1,587
- - Venator Group, Inc. 225,759 1,580
Autoliv, Inc. 53,947 1,578
- - Hispanic Broadcasting Corp. 17,000 1,568
- - J.D. Edwards & Co. 52,200 1,559
Centex Corp. 62,700 1,548
- - Oxford Health Plan 121,700 1,544
- - Portal Software, Inc. 15,000 1,543
Fluor Corp. 33,600 1,541
ITT Industries, Inc. 45,900 1,535
- - Linens 'n Things, Inc. 51,700 1,532
Millipore Corp. 39,200 1,514
W.W. Grainger, Inc. 31,400 1,501
- - Allied Waste Industries, Inc. 169,400 1,493
MBIA, Inc. 28,000 1,479
Martin Marietta Materials, Inc. 35,900 1,472
Homestake Mining Co. 187,200 1,463
CNF Transportation, Inc. 42,200 1,456
IBP, Inc. 79,900 1,438
- - HEALTHSOUTH Corp. 257,602 1,385
- - Centennial Cellular Corp. Class A 16,600 1,376
Wesco Financial Corp. 5,580 1,367
Union Pacific Corp. 31,253 1,363
- - Premier Parks Inc. 47,000 1,357
Autodesk, Inc. 39,900 1,347
Kellogg Co. 43,700 1,347
Williams Cos., Inc. 43,789 1,338
- - Quantum Corp.-DLT &
Storage Systems 87,200 1,319
- - Sterling Software, Inc. 41,700 1,314
The Pepsi Bottling Group, Inc. 78,000 1,292
Baker Hughes, Inc. 60,480 1,274
Senior Housing Properties
Trust REIT 102,000 1,269
FirstEnergy Corp. 55,900 1,268
Fort James Corp. 46,087 1,262
R.J. Reynolds Tobacco
Holdings, Inc. 70,953 1,251
Beckman Coulter, Inc. 24,500 1,246
The Limited, Inc. 28,437 1,232
Johns Manville Corp. 87,000 1,218
- - Silicon Graphics, Inc. 123,300 1,210
- - Mirage Resorts, Inc. 78,400 1,201
BHC Communications, Inc. Class A 7,500 1,200
Hasbro, Inc. 62,100 1,184
- - Republic Services, Inc. Class A 79,700 1,146
Dime Bancorp, Inc. 75,400 1,140
Coca-Cola Enterprises, Inc. 55,000 1,107
Ford Motor Co. 20,200 1,079
Waste Management, Inc. 62,797 1,079
- - eToys Inc. 40,300 1,058
Bank One Corp. 32,959 1,057
Diamond Offshore Drilling, Inc. 33,700 1,030
- - Humana, Inc. 125,400 1,027
Sodexho Marriott Services, Inc. 77,525 1,008
Lancaster Colony Corp. 30,050 995
- - Storage Technology Corp. 52,200 962
- - Brocade Communications
Systems, Inc. 5,400 956
Nordstrom, Inc. 36,200 948
American General Corp. 12,461 945
- - Foundation Health Systems
Class A 93,970 934
Reinsurance Group of
America, Inc. 33,200 921
- - LHS Group, Inc. 37,500 921
20th Century Industries of CA 47,300 913
New Century Energies, Inc. 29,800 905
- - Revlon, Inc. Class A 110,400 876
DENTSPLY International Inc. 36,400 860
- - Thermo Electron Corp. 56,900 854
- - Viacom Inc. Class A 13,688 827
</TABLE>
18
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cummins Engine Co., Inc. 16,900 $ 816
- - Quintiles Transnational Corp. 43,500 813
Rohm & Haas Co. 19,950 812
Mattel, Inc. 61,632 809
- - Scient Corp. 9,000 778
A. H. Belo Corp. Class A 38,400 732
E.W. Scripps Co. Class A 15,235 683
Hilton Hotels Corp. 69,750 671
Conseco Inc. 35,039 626
- - Thermo Instrument Systems, Inc. 55,458 617
- - Priceline.com Inc. 12,500 592
- - Cabletron Systems, Inc. 21,700 564
Mallinckrodt, Inc. 16,800 534
Reynolds & Reynolds Class A 23,500 529
Sealed Air Corp. $2.00 Cvt. Pfd. 10,117 511
Whitman Corp. 35,600 478
Young & Rubicam Inc. 6,500 460
- - International Specialty
Products, Inc. 48,353 444
- - Consolidated Stores, Inc. 27,206 442
Texaco Inc. 7,960 432
Host Marriott Corp. REIT 50,543 417
Cooper Tire & Rubber Co. 26,500 412
Reynolds Metals Co. 5,300 406
- - Snyder Communications, Inc. 19,300 372
Albertson's, Inc. 10,800 348
Federal-Mogul Corp. 16,200 326
The Clorox Co. 6,420 323
Allegheny Technologies Inc. 13,571 304
- - Quantum Corp.- Hard Disk Drive 43,600 302
- - Mandalay Resort Group 14,200 286
Texas Utilities Co. 7,965 283
- - NorthPoint Communications
Group, Inc. 10,000 240
U S WEST, Inc. 3,009 217
IKON Office Solutions, Inc. 26,500 181
St. Paul Cos., Inc. 4,800 162
Cinergy Corp. 5,700 138
Baxter International, Inc. 2,000 126
- - Covad Communications Group, Inc. 2,000 112
Dole Food Co. 5,200 85
Raytheon Co. Class A 3,284 81
- - Pac-West Telecom, Inc. 3,070 81
- - Associated Group, Inc. Class B 750 69
- - DLJdirect 5,000 68
- - Ventiv Health, Inc. 6,433 59
- - Gartner Group, Inc. Class B 2,895 40
- - Water Pik Technologies, Inc. 1,357 13
Union Pacific Resources Group, Inc. 239 3
York International Corp. 100 3
- - Freeport-McMoRan Copper &
Gold, Inc. Class A 138 3
Crown Cork & Seal Co., Inc. 100 2
Lockheed Martin Corp. 100 2
Dillard's Inc. 100 2
Owens Corning 100 2
IMC Global Inc. 106 2
- - Circle.com 125 2
Gartner Group, Inc. Class A 100 2
The Warnaco Group, Inc. Class A 100 1
J.C. Penney Co., Inc. 54 1
Louisiana-Pacific Corp. 50 1
Meditrust Corp. 122 1
Nabisco Group Holdings Corp. 60 1
- - Genzyme Surgical Products 100 1
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,358,046) 2,544,325
- ---------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.0%)
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
3.25%, 1/3/2000 $ 5,540 5,540
3.47%, 1/3/2000--Note G 43,507 43,507
- ---------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $49,047) 49,047
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.0%)
(COST $1,407,093) 2,593,372
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.0%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 6,433
Liabilities--Note G (56,255)
-----------
(49,822)
- ---------------------------------------------------------------------------------
NET ASSETS (100%) $2,543,550
=================================================================================
</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 DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
AMOUNT
(000)
- ---------------------------------------------------------------------------------
<S> <C>
Paid in Capital $1,410,534
Overdistributed Net Investment Income (811)
Accumulated Net Realized Losses--Note E (52,452)
Unrealized Appreciation--Note F 1,186,279
- ---------------------------------------------------------------------------------
NET ASSETS $2,543,550
=================================================================================
Investor Shares--Net Assets
Applicable to 69,594,606 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $2,378,342
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $34.17
=================================================================================
Institutional Shares--Net Assets
Applicable to 4,833,689 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $165,208
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $34.18
=================================================================================
</TABLE>
19
<PAGE> 67
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- ---------------------------------------------------------------------------------
COMMON STOCKS (99.7%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - IDEC Pharmaceuticals Corp. 23,800 $ 2,338
- - Mercury Interactive Corp. 21,600 2,331
- - Macromedia, Inc. 27,900 2,040
- - Whittman-Hart, Inc. 31,900 1,711
- - Clarify, Inc. 13,300 1,676
- - RSA Security Inc. 21,600 1,674
- - HNC Software, Inc. 13,800 1,459
- - C-Cube Microsystems, Inc. 22,800 1,419
- - Valassis Communications, Inc. 31,700 1,339
- - Micrel, Inc. 23,200 1,321
- - Lattice Semiconductor Corp. 26,900 1,268
Expeditors International of
Washington, Inc. 28,300 1,240
True North Communications 27,000 1,206
- - Xircom, Inc. 15,900 1,192
- - Catalina Marketing Corp. 10,300 1,192
SEI Corp. 10,000 1,190
CTS Corp. 15,400 1,161
- - CommScope, Inc. 28,500 1,149
- - Gentex Corp. 41,200 1,143
- - Burr-Brown Corp. 31,200 1,127
- - National Instruments Corp. 28,100 1,075
- - Aspect Communications Corp. 27,400 1,072
Jones Pharma, Inc. 24,350 1,058
- - Oak Industries, Inc. 9,900 1,051
Dallas Semiconductor Corp. 16,300 1,050
- - Zebra Technologies Corp. Class A 17,700 1,035
- - Williams Sonoma, Inc. 22,100 1,017
- - KEMET Corp. 22,300 1,005
- - BISYS Group, Inc. 15,400 1,005
Radian Group, Inc. 20,900 998
- - INCYTE Pharmaceuticals, Inc. 16,000 960
- - Zale Corp. 19,700 953
- - Vicor Corp. 23,200 940
- - Ciber, Inc. 33,300 916
- - Cognex Corp. 23,400 913
- - Digital Microwave Corp. 38,300 898
- - Interim Services, Inc. 35,590 881
U.S. Trust Corp. 10,500 842
Applied Power, Inc. 22,000 808
- - Visio Corp. 17,000 807
- - Patterson Dental Co. 18,800 801
- - QRS Corp. 7,600 798
- - Technology Solutions Co. 24,200 792
- - Snyder Communications, Inc. 40,200 774
Cullen/Frost Bankers, Inc. 30,000 772
Eaton Vance Corp. 20,300 771
- - AmeriCredit Corp. 41,600 770
- - Remedy Corp. 16,200 767
UST Corp. 24,100 765
- - International Rectifier Corp. 29,400 764
- - Hyperion Solutions Corp. 17,400 757
United Water Resources, Inc. 21,900 749
- - Dendrite International, Inc. 22,100 749
- - Protein Design Labs, Inc. 10,600 742
Ethan Allen Interiors, Inc. 23,000 737
Hudson United Bancorp 28,527 729
- - The Profit Recovery Group
International, Inc. 27,450 729
- - Proxim, Inc. 6,600 726
- - Black Box Corp. 10,700 717
- - American Management
Systems, Inc. 22,800 715
USFreightways Corp. 14,900 713
- - Verity, Inc. 16,700 711
FactSet Research Systems Inc. 8,900 709
- - Mueller Industries Inc. 19,500 707
- - Eagle USA Airfreight, Inc. 16,100 694
- - Men's Wearhouse, Inc. 23,600 693
Centura Banks, Inc. 15,700 693
- - ChoicePoint Inc. 16,700 691
- - MICROS Systems, Inc. 9,300 688
Corn Products International, Inc. 21,000 688
- - Harbinger Corp. 21,600 687
- - Whole Foods Market, Inc. 14,800 686
- - Medicis Pharmaceutical Corp. 16,100 685
- - Stillwater Mining Co. 21,400 682
MacDermid, Inc. 16,500 677
Arthur J. Gallagher & Co. 10,400 673
National Computer Systems, Inc. 17,800 670
- - Plantronics, Inc. 9,300 665
- - Powerwave Technologies, Inc. 11,400 665
- - Adaptive Broadband Corp. 9,000 664
- - Copart, Inc. 15,100 657
- - Project Software &
Development, Inc. 11,800 655
- - Linens 'n Things, Inc. 22,000 652
- - C-COR Electronics, Inc. 8,500 651
- - Great Plains Software, Inc. 8,700 650
- - TALK.com, Inc. 36,600 650
- - Scotts Co. 16,000 644
National Data Corp. 18,900 641
Roper Industries Inc. 16,900 639
Commerce Bancorp, Inc. 15,800 639
- - Dycom Industries, Inc. 14,500 639
Methode Electronics, Inc. Class A 19,800 636
- - Cephalon, Inc. 18,300 632
- - Enzo Biochem, Inc. 14,000 631
- - Techne 11,400 628
- - Alpha Industries, Inc. 10,900 625
- - Silicon Valley Bancshares 12,600 624
- - Universal Health Services Class B 17,300 623
- - Newfield Exploration Co. 23,200 621
- - Timberland Co. 11,700 619
- - O'Reilly Automotive, Inc. 28,700 617
First Midwest Bancorp 23,200 615
- - Smithfield Foods, Inc. 25,600 614
Air Express International Corp. 19,000 614
Wicor, Inc. 21,000 613
Jack Henry & Associates 11,400 612
- - AnnTaylor Stores Corp. 17,600 606
Commercial Federal Corp. 33,100 589
- - Insight Enterprises, Inc. 14,400 585
- - Renal Care Group, Inc. 24,900 582
United Bankshares, Inc. 24,100 575
Helix Technology Corp. 12,600 565
- - Progress Software Corp. 9,900 562
- - Pacific Sunwear of California 17,600 561
- - Kulicke & Soffa Industries, Inc. 13,100 557
- - ETEC Systems, Inc. 12,200 547
</TABLE>
20
<PAGE> 68
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Harman International
Industries, Inc. 9,700 $ 544
- - United Stationers, Inc. 19,000 543
- - Pinnacle Systems, Inc. 13,300 541
- - Barrett Resources Corp. 18,200 536
- - 99 Cents Only Stores 14,000 535
- - Electro Scientific Industries, Inc. 7,300 533
Piedmont Natural Gas, Inc. 17,400 526
- - Southern Union Co. 27,000 516
- - MedQuist, Inc. 20,000 516
- - Canandaigua Brands, Inc. Class A 10,100 515
- - Dionex Corp. 12,500 515
- - Varian Medical Systems, Inc. 17,200 513
Aptargroup Inc. 20,300 510
- - Midway Games Inc. 21,200 507
Alpharma, Inc. Class A 16,500 507
- - Vertex Pharmaceuticals, Inc. 14,400 504
IDEX Corp. 16,500 501
Polaris Industries, Inc. 13,800 500
Texas Industries, Inc. 11,700 498
Manitowac Co., Inc. 14,550 495
D. R. Horton, Inc. 35,800 494
Raymond James Financial, Inc. 26,400 493
La-Z-Boy Inc. 29,300 493
- - Pride International Inc. 33,600 491
- - S3, Inc. 42,400 490
- - Ames Department Stores, Inc. 16,500 475
Philadelphia Suburban Corp. 22,900 474
Cambrex Corp. 13,700 472
Chittenden Corp. 15,800 468
Whitney Holdings 12,600 467
- - FileNet Corp. 18,300 467
OM Group, Inc. 13,500 465
Applebee's International, Inc. 15,700 463
- - Michaels Stores, Inc. 16,200 462
E.W. Blanch Holdings, Inc. 7,500 459
Pogo Producing Co. 22,400 459
- - Shire Pharmaceuticals Group ADR 15,745 458
First American Financial Corp. 36,600 455
- - Biotechnology General 29,500 450
- - Jack in the Box Inc. 21,300 441
Community First Bankshares 27,900 439
- - NBTY, Inc. 37,600 435
- - Artesyn Technologies, Inc. 20,700 435
- - Plexus Corp. 9,800 431
Brady Corp. Class A 12,700 431
- - CEC Entertainment Inc. 15,150 430
Geon Co. 13,200 429
Tredegar Corp. 20,700 428
- - Kronos, Inc. 7,100 426
- - InterVoice-Brite, Inc. 17,800 421
- - Vintage Petroleum, Inc. 34,800 420
Hooper Holmes, Inc. 16,200 417
United Illuminating Co. 8,100 416
- - Anixter International Inc. 20,100 414
Mutual Risk Management Ltd. 24,600 413
Fair Issac & Co. 7,800 413
- - Fossil, Inc. 17,800 412
Regis Corp. 21,800 411
Graco, Inc. 11,400 409
- - Cost Plus, Inc. 11,400 406
- - Tower Automotive, Inc. 26,200 404
- - Insituform Technologies Class A 14,300 404
- - Barr Labs Inc. 12,800 402
Trustco Bank 30,300 401
Technitrol, Inc. 9,000 400
- - MAXIMUS, Inc. 11,800 400
Southwest Gas Corp. 17,200 396
JLG Industries, Inc. 24,900 395
- - Tuboscope Inc. 24,800 394
- - The Cheesecake Factory 11,200 392
New Jersey Resources Corp. 10,000 391
Central Parking Corp. 20,400 390
- - Brightpoint, Inc. 29,700 390
- - ShopKo Stores, Inc. 16,900 389
Earthgrains Co. 24,100 389
- - Safeskin Corp. 32,000 388
- - Hadco Corp. 7,600 388
- - Photronics Labs Inc. 13,500 386
- - Orbital Sciences Corp. 20,800 386
- - Toll Brothers, Inc. 20,700 385
Skywest, Inc. 13,700 384
Rollins Truck Leasing 31,900 381
- - Cor Therapeutics, Inc. 14,000 376
G & K Services, Inc. 11,600 376
- - Apex Inc. 11,600 374
Werner Enterprises, Inc. 26,600 374
Investors Financial Services Corp. 8,100 373
- - Cerner Corp. 18,900 372
Delta & Pine Land Co. 21,400 372
Public Service Co. of
North Carolina, Inc. 11,500 372
- - Wesley Jessen VisionCare, Inc. 9,800 371
- - Aspen Technologies, Inc. 14,000 370
Florida Rock Industries, Inc. 10,700 368
Baldor Electric Co. 20,300 368
- - Cable Design Technologies 15,900 366
- - Stone Energy Corp. 10,200 363
- - MedImmune Inc. 2,190 363
Reliance Steel & Aluminum Co. 15,450 362
- - Nabors Industries, Inc. 11,685 362
TJ International, Inc. 8,600 361
Inter-Tel, Inc. 14,400 360
- - Coherent, Inc. 13,400 358
- - Kent Electronics Corp. 15,700 357
Mentor Corp. 13,800 356
Atmos Energy Corp. 17,400 356
- - Concord Communications, Inc. 8,000 355
- - Footstar Inc. 11,600 354
Bank North Group 13,100 350
- - Delphi Financial Group, Inc. 11,666 350
- - Alliant Techsystems, Inc. 5,600 349
- - IDEXX Laboratories Corp. 21,600 348
Enhance Financial Services
Group, Inc. 21,400 348
Pier 1 Imports Inc. 54,400 347
- - ResMed Inc. 8,300 347
Eastern Utilities Associates 11,400 346
- - Dura Pharmaceuticals, Inc. 24,700 344
- - Priority Healthcare Corp. Class B 11,850 343
- - Ralcorp Holdings, Inc. 17,100 341
Caraustar Industries, Inc. 14,200 341
</TABLE>
21
<PAGE> 69
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - ZixIt Corp. 8,600 $ 341
- - SEACOR SMIT Inc. 6,500 336
Datascope Corp. 8,400 336
Invacare Corp. 16,700 335
- - Valence Technology 17,600 334
First Bancorp/Puerto Rico 16,100 334
Elcor Corp. 11,000 331
- - Tetra Tech, Inc. 21,375 329
Susquehanna Bancshares, Inc. 20,600 327
- - Silicon Valley Group, Inc. 18,400 327
Dain Rauscher Corp. 7,000 326
- - Hollywood Park, Inc. 14,500 325
- - Orthodontic Centers of
America, Inc. 27,100 324
Queens County Bancorp, Inc. 11,900 323
- - P-Com, Inc. 36,400 322
Ruby Tuesday, Inc. 17,600 320
MascoTech Inc. 25,000 317
Downey Financial Corp. 15,700 317
Northwest Natural Gas Co. 14,200 312
- - Primark Corp. 11,200 312
- - Summit Technology, Inc. 26,600 311
CH Energy Group, Inc. 9,400 310
TNP Enterprises, Inc. 7,500 309
Casey's General Stores 29,500 308
- - Pre-Paid Legal Services, Inc. 12,800 307
Energen Corp. 17,000 307
John H. Harland Co. 16,700 306
Russ Berrie and Co., Inc. 11,600 305
Kellwood Co. 15,600 303
C & D Technology Inc. 7,100 302
- - Hutchinson Technology, Inc. 14,100 300
- - Sonic Corp. 10,500 299
Jefferies Group, Inc. 13,600 299
- - Buckeye Technology, Inc. 20,100 299
- - Dril-Quip, Inc. 9,800 298
- - Cybex Computer Products Corp. 7,300 296
- - General Semiconductor, Inc. 20,800 295
- - Simpson Manufacturing Co. 6,700 293
- - American Freightways 18,100 293
Belden, Inc. 13,900 292
- - Anchor Gaming 6,700 291
Fremont General Corp. 39,400 291
- - Labor Ready, Inc. 23,850 289
- - Cal Dive International, Inc. 8,700 288
- - Shorewood Packaging Corp. 15,200 288
MAF Bancorp, Inc. 13,700 287
A.O. Smith Corp. 13,100 287
- - Electroglas, Inc. 11,200 284
Northwestern Corp. 12,900 284
- - Kirby Corp. 13,800 283
Bindly Western Industries, Inc. 18,766 283
Michael Foods Group, Inc. 11,400 281
- - ADVO, Inc. 11,800 280
- - NFO Worldwide, Inc. 12,500 280
Gerber Scientific, Inc. 12,700 279
Hughes Supply, Inc. 12,900 278
- - Atwood Oceanics, Inc. 7,200 278
Bowne & Co., Inc. 20,600 278
- - Trimble Navigation Ltd. 12,800 277
- - Three-Five Systems, Inc. 6,666 273
- - SLI, Inc. 20,100 273
Commercial Metals Co. 8,000 272
- - Agribrands International, Inc. 5,900 271
AAR Corp. 15,100 271
JSB Financial 5,200 270
- - The Liposome Co., Inc. 22,000 268
- - Monaco Coach Corp. 10,500 268
- - DBT Online Inc. 10,900 266
- - Heartland Express, Inc. 16,700 263
Selective Insurance Group 15,300 263
Carolina First Corp. 14,400 263
- - Aztar Corp. 24,100 262
The Toro Co. 7,000 261
- - CDI Corp. 10,800 261
- - Ionics, Inc. 9,200 259
Libbey, Inc. 9,000 259
ABM Industries 12,600 257
- - Specialty Equipment Cos., Inc. 10,700 256
- - Cygnus Inc. 14,000 256
- - Advance Paradigm, Inc. 11,800 254
Wolverine World Wide, Inc. 23,200 254
- - Triarc Cos., Inc. Class A 13,800 254
Winnebago Industries, Inc. 12,600 253
- - Midwest Express Holdings, Inc. 7,900 252
- - Barra, Inc. 7,900 251
Provident Bankshares Corp. 14,485 251
Cross Timbers Oil Co. 27,400 248
Clarcor Inc. 13,700 247
- - Biomatrix, Inc. 12,800 246
AMCOL International Corp. 15,200 245
- - Prime Hospitality Corp. 27,800 245
- - Atlantic Coast Airlines Holdings 10,300 245
Regal-Beloit Corp. 11,800 243
Premier Bancshares, Inc. 17,800 243
- - US Oncology, Inc. 48,900 241
- - Pioneer Group, Inc. 15,200 239
Cooper Cos., Inc. 7,900 238
- - Yellow Corp. 14,100 237
Aquarion Co. 6,400 237
- - THQ Inc. 10,200 237
Fidelity National Financial, Inc. 16,400 236
- - Landstar System 5,500 235
GenCorp, Inc. 23,600 233
Coca-Cola Bottling Co. 4,900 232
Analogic Corp. 7,000 231
- - Morrison Knudsen Corp. 29,300 229
The Marcus Corp. 16,900 227
- - Regeneron Pharmaceuticals, Inc. 17,700 226
- - Coventry Health Care Inc. 33,400 225
ChemFirst Inc. 10,300 225
- - Conmed Corp. 8,700 225
Fleming Cos., Inc. 21,900 224
- - Champion Enterprises, Inc. 26,200 224
- - Nautica Enterprises, Inc. 19,800 224
- - SPS Technologies, Inc. 7,000 224
Cabot Oil & Gas Corp. Class A 13,800 222
Connecticut Energy Corp. 5,700 222
Watts Industries Class A 15,000 221
- - Fritz Cos., Inc. 21,000 221
- - Paxar Corp. 26,100 220
- - Noven Pharmaceuticals, Inc. 12,100 219
</TABLE>
22
<PAGE> 70
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - Department 56 Inc. 9,600 $ 217
Valmont Industries, Inc. 13,500 217
Pioneer Standard Electronics Inc. 15,000 217
Anchor Bancorp Wisconsin Inc. 14,300 216
Justin Industries, Inc. 14,500 216
- - Benchmark Electronics, Inc. 9,300 213
- - SpeedFam-IPEC, Inc. 16,400 212
Riggs National Corp. 15,800 208
Thor Industries, Inc. 6,800 207
Hilb, Rogal and Hamilton Co. 7,300 206
- - Astec Industries, Inc. 10,900 205
Zenith National Insurance Corp. 9,900 204
- - The Kroll-O'Gara Co. 12,300 203
- - HA-LO Industries, Inc. 26,900 202
Quanex Corp. 7,900 201
- - Quiksilver, Inc. 12,800 198
- - Volt Information Sciences Inc. 8,300 198
Wabash National Corp. 13,200 198
WD-40 Co. 8,900 197
- - U.S. Home Corp. 7,700 197
- - Syncor International Corp. 6,700 195
- - Performance Food Group Co. 8,000 195
Applied Industrial Technology, Inc. 11,700 195
- - Oceaneering International, Inc. 13,000 194
- - Ultratech Stepper, Inc. 12,000 194
Aaron Rents, Inc. Class B 10,900 193
MDC Holdings, Inc. 12,300 193
- - IHOP Corp. 11,500 192
Cato Corp. Class A 15,200 192
- - Inacom Corp. 26,100 191
Watsco, Inc. 16,500 191
- - Scott Technologies, Inc. 10,000 189
- - Sola International Inc. 13,600 189
- - URS Corp. 8,700 189
New England Business
Service, Inc. 7,700 188
- - The Dress Barn, Inc. 11,300 188
Ryland Group, Inc. 8,100 187
- - American Xtal Technology, Inc. 10,600 185
Standard Pacific Corp. 16,800 185
Omnova Solutions Inc. 23,800 184
Diagnostic Products Corp. 7,500 184
American States Water Co. 5,100 184
- - HS Resources Inc. 10,600 183
Myers Industries, Inc. 11,460 180
- - Alliance Pharmaceutical Corp. 24,400 180
Chiquita Brands International, Inc. 37,700 179
Thomas Industries, Inc. 8,700 178
CKE Restaurants Inc. 30,100 177
- - Ryan's Family Steak Houses, Inc. 20,700 176
- - Allen Telecom Inc. 15,200 176
Interface, Inc. 30,500 175
Tenneco Automotive, Inc. 18,700 174
Trenwick Group Inc. 10,200 173
The Stride Rite Corp. 26,500 172
- - Discount Auto Parts Inc. 9,500 172
Barnes Group, Inc. 10,500 171
Kaman Corp. Class A 13,300 171
- - Avid Technology, Inc. 13,100 171
Lilly Industries Inc. Class A 12,700 171
Computer Task Group, Inc. 11,500 170
- - Checkpoint Systems, Inc. 16,700 170
- - PAREXEL International Corp. 14,300 169
- - Pharmaceutical Product
Development, Inc. 14,200 169
- - Billing Concepts Corp. 25,900 168
Universal Forest Products, Inc. 11,300 167
Chemed Corp. 5,800 166
- - Consolidated Products Inc. 16,390 166
- - Group 1 Automotive, Inc. 11,900 166
Owens & Minor, Inc. Holding Co. 18,300 164
Analysts International Corp. 13,000 163
Intermet Corp. 13,900 162
Oshkosh B Gosh, Inc. Class A 7,600 160
- - M.S. Carriers, Inc. 6,700 160
Vital Signs, Inc. 6,900 158
- - Auspex Systems, Inc. 15,200 156
St. Mary Land & Exploration Co. 6,200 153
Brush Wellman, Inc. 9,100 153
Park Electrochemical Corp. 5,700 151
- - Friede Goldman Halter, Inc. 21,779 151
- - Information Resources, Inc. 16,300 151
Wynn's International Inc. 10,600 150
- - Laser Vision Centers, Inc. 14,100 149
Watkins-Johnson Co. 3,700 148
Brown Shoe Company, Inc. 10,400 147
- - Organogenesis, Inc. 16,900 147
Standex International Corp. 7,000 147
National Presto Industries, Inc. 4,100 146
- - Players International, Inc. 17,700 145
- - Theragenics Corp. 16,000 145
Telxon Corp. 9,000 144
Robbins & Myers, Inc. 6,300 143
Luby's, Inc. 12,500 142
- - Gardner Denver Inc. 8,500 142
- - Network Equipment
Technologies, Inc. 12,000 142
- - Stein Mart, Inc. 24,700 140
Pope & Talbot, Inc. 8,700 139
Arctic Cat, Inc. 13,900 139
- - Teledyne Technologies, Inc. 14,700 139
- - Input/Output, Inc. 27,400 139
Cash America International Inc. 14,200 138
Lawson Products, Inc. 5,900 136
Coachmen Industries, Inc. 9,000 136
- - Aviation Sales Co. 8,200 135
- - Respironics, Inc. 16,900 135
- - Read Rite Corp. 28,100 133
Sturm, Ruger & Co., Inc. 14,700 130
- - Arkansas Best Corp. 10,800 130
- - Griffon Corp. 16,500 129
- - Plains Resources 10,300 129
Phillips-Van Heusen Corp. 15,300 127
- - Consolidated Graphics, Inc. 8,500 127
CPI Corp. 5,600 126
Stone & Webster, Inc. 7,500 126
- - Landry's Seafood Restaurants, Inc. 14,500 126
- - StaffMark, Inc. 16,600 126
Pittston BAX Group 11,800 125
Schweitzer-Mauduit
International, Inc. 9,200 124
Lindsay Manufacturing Co. 6,700 122
</TABLE>
23
<PAGE> 71
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
- - Lason Holdings, Inc. 11,100 $ 122
Skyline Corp. 5,100 120
Commonwealth Industries Inc. 9,200 120
- - General Communication, Inc. 27,300 119
- - ADAC Laboratories 11,100 119
Standard Motor Products, Inc. 7,400 119
- - United Natural Foods, Inc. 9,900 119
- - BE Avionics Inc. 13,800 116
- - Offshore Logistics, Inc. 12,400 116
- - Epicor Software Corp. 22,900 116
- - Magellan Health Services, Inc. 18,300 116
- - Jo-Ann Stores, Inc. Class A 10,200 115
- - Esterline Technologies Corp. 9,900 114
IMCO Recycling, Inc. 9,000 114
Simpson Industries, Inc. 10,100 114
K-Swiss, Inc. 6,100 113
Bassett Furniture Industries, Inc. 7,000 112
- - GC Cos. 4,300 111
- - Osteotech, Inc. 8,200 110
- - Wolverine Tube, Inc. 7,700 109
Fedders Corp. 19,700 108
- - Hanger Orthopedic Group, Inc. 10,700 107
- - Action Performance Cos., Inc. 9,200 106
- - Cyrk International, Inc. 8,800 105
- - SpaceLabs Medical, Inc. 5,600 104
- - Goody's Family Clothing 19,100 103
- - Insurance Auto Auctions, Inc. 6,500 102
- - J & J Snack Foods Corp. 4,900 100
Cascade Natural Gas Corp. 6,200 100
- - Komag, Inc. 31,700 99
A.M. Castle & Co. 8,300 99
Republic Group Inc. 6,500 98
- - Sierra Health Services 14,600 98
- - PictureTel Corp. 22,400 97
- - Standard Microsystem 8,900 96
- - Flow International Corp. 8,400 96
- - Exabyte Corp. 12,700 95
- - RailTex, Inc. 5,200 93
Southwestern Energy Co. 14,100 93
- - Mesa Air Group Inc. 19,300 92
- - Bombay Co. 20,300 91
- - McWorter Technologies Inc. 5,700 91
- - Seitel, Inc. 13,500 91
- - WetSeal, Inc. Class A 7,400 91
- - Symmetricom Inc. 9,100 90
Enesco Group, Inc. 8,000 89
Mississippi Chemical Corp. 14,200 88
Birmingham Steel Corp. 16,500 88
Butler Manufacturing Co. 3,900 87
- - Material Sciences Corp. 8,500 87
- - RTI International Metals 11,500 86
Guilford Mills, Inc. 11,800 86
Steel Technologies, Inc. 5,900 86
- - Gibson Greetings, Inc. 9,500 85
Oxford Industries, Inc. 4,300 85
- - Digi International, Inc. 8,100 85
- - North American Vaccine, Inc. 18,700 84
- - Franklin Covey Co. 11,100 83
- - Books-a-Million Inc. 9,900 82
Amcast Industrial Corp. 5,000 82
Oakwood Homes Corp. 25,500 81
Nature's Sunshine Inc. 10,000 80
Apogee Enterprises, Inc. 15,800 80
- - Advanced Tissue Sciences Inc. 31,500 79
Titan International, Inc. 12,100 79
- - The Gymboree Corp. 13,900 78
Dimon Inc. 24,000 78
K2 Inc. 10,200 78
Innovex, Inc. 8,200 77
- - TBC Corp. 12,100 76
Thomas Nelson, Inc. 8,100 75
- - Building Materials Holding Corp. 7,300 75
X-Rite Inc. 11,900 74
- - Sunrise Medical, Inc. 11,800 73
Harmon Industries, Inc. 6,000 73
- - Hartmarx Corp. 17,900 73
Penford Corp. 4,100 71
BMC Industries, Inc. 14,400 70
- - WHX Corp. 7,800 70
- - Centigram Communications 4,100 69
Quaker Chemical Corp. 4,800 68
Frontier Insurance Group, Inc. 19,500 67
Central Vermont Public
Service Corp. 6,300 67
- - Taco Cabana 8,100 66
- - Cone Mills Corp. 14,600 66
Bangor Hydro-Electric Co. 4,000 65
- - DAMARK International, Inc. 4,000 63
- - Lydall, Inc. 9,400 62
- - Immune Response 14,300 62
Lillian Vernon Corp. 5,500 61
- - Intermagnetics General Corp. 6,900 60
- - Pediatrix Medical Group, Inc. 8,500 60
- - TETRA Technologies, Inc. 8,200 59
- - Itron, Inc. 9,200 56
- - Service Experts, Inc. 9,600 56
- - Coeur D'Alene Mines Corp. 16,200 56
- - Genesis Health Ventures Inc. 26,200 54
TCBY Enterprises, Inc. 14,000 53
- - The Dixie Group, Inc. 7,100 52
- - Panera Bread Co. 6,700 52
Angelica Corp. 5,300 52
- - Royal Appliance
Manufacturing Co. 10,600 52
- - E. Gottschalk & Co., Inc. 6,900 51
Haggar Corp. 4,500 51
J. Baker, Inc. 8,400 50
- - Carmike Cinemas, Inc. Class A 6,400 50
- - Curative Health Services Inc. 6,200 48
- - Hologic, Inc. 8,300 48
- - Remington Oil & Gas Corp. 12,300 48
Pillowtex Designs 7,700 48
- - Microage, Inc. 13,300 47
- - A.T. Cross Co. Class A 9,800 44
Insteel Industries, Inc. 4,700 43
- - The Sports Authority, Inc. 20,700 41
Nash-Finch Co. 6,400 41
- - Rural/Metro Corp. 9,100 39
- - Amresco, Inc. 27,200 38
- - Jan Bell Marketing Inc. 13,200 38
Frozen Food Express
Industries, Inc. 9,200 36
</TABLE>
24
<PAGE> 72
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Hancock Fabrics, Inc. 11,100 $ 35
Spartan Motors, Inc. 7,500 33
- - Ashworth, Inc. 7,700 32
Huffy Corp. 5,800 30
- - Swiss Army Brands, Inc. 4,200 30
- - NCS HealthCare, Inc. 12,100 29
- - Nashua Corp. 3,800 29
Green Mountain Power Corp. 3,300 25
- - Southern Energy Homes, Inc. 9,400 22
- - USA Detergents, Inc. 7,200 20
- - Priority Healthcare Corp. Class A 600 17
- - Just for Feet, Inc. 23,100 6
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $179,085) 212,556
- ---------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.1%)
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
3.25%, 1/3/2000 $ 803 803
3.47%, 1/3/2000--Note G 1,599 1,599
- ---------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $2,402) 2,402
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%)
(COST $181,487) 214,958
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.8%)
Other Assets--Note B 2,054
Liabilities--Note G (3,784)
-----------
(1,730)
- ---------------------------------------------------------------------------------
NET ASSETS (100%) $213,228
=================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
AMOUNT
(000)
- ----------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------
<S> <C>
Paid in Capital $181,709
Overdistributed Net Investment Income (83)
Accumulated Net Realized Losses--Note E (1,869)
Unrealized Appreciation--Note F 33,471
- ----------------------------------------------------------------------
NET ASSETS $213,228
======================================================================
Investor Shares--Net Assets
Applicable to 15,401,846 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $194,219
- ----------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $12.61
======================================================================
Institutional Shares--Net Assets
Applicable to 1,507,230 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $19,009
- ----------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $12.61
======================================================================
</TABLE>
25
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- ---------------------------------------------------------------------------------
COMMON STOCKS (100.3%)
- ---------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (2.4%)
Telstra Corp. Ltd. 100,451 $ 544
National Australia Bank Ltd. 20,436 312
Broken Hill Proprietary Co. Ltd. 19,740 258
News Corp. Ltd. 26,259 254
News Corp. Ltd. Pfd. 27,793 237
Westpac Banking Corp., Ltd. 24,740 170
AMP Ltd. 12,720 140
North Ltd. 41,820 98
Metal Manufactures Ltd. 57,700 85
WMC Ltd. 14,240 78
Coles Myer Ltd. 13,309 69
Colonial Ltd. 14,600 65
Foster's Brewing Group Ltd. 22,200 63
Brambles Industries Ltd. 2,160 60
Rio Tinto Ltd. 2,790 60
Sons of Gwalia Ltd. 17,600 59
Mayne Nickless Ltd. 19,097 49
CSR Ltd. 17,540 42
Woolworths Ltd. 12,050 41
Suncorp-Metway Ltd. 7,490 40
Australian Gas Light Co., Ltd. 6,680 39
Normandy Mining Ltd. 55,060 39
Resolute Ltd. 148,300 38
Westfield Trust (Units) 18,890 37
Boral Ltd. 23,210 36
Amcor Ltd. 7,000 33
Orica Ltd. 5,770 31
Pioneer International Ltd. 10,320 31
Goodman Fielder Ltd. 27,440 24
AMP Group Finance Services
Ltd. Income Security 396 24
Santos Ltd. 8,600 23
Delta Gold NL 13,790 21
Hardie (James) Industries Ltd. 7,880 21
Coca-Cola Amatil Ltd. 6,800 19
MIM Holdings Ltd. 15,500 16
Stockland Trust Group Ltd. 7,770 16
Tabcorp Holdings Ltd. 2,440 16
David Jones Ltd. 17,000 15
CSL Ltd. 950 14
Pacific Dunlop Ltd. 9,500 13
QBE Insurance Group Ltd. 2,630 12
Howard Smith Ltd. 1,260 9
F.H. Faulding & Co., Ltd. 1,190 8
British American Tobacco
Australasia Ltd. 850 8
Leighton Holdings Ltd. 1,810 7
- - Newcrest Mining Ltd. 2,160 7
Westralian Sands Ltd. 2,420 6
Email Ltd. 3,030 5
Futuris Corp., Ltd. 3,905 5
-----------
3,297
-----------
AUSTRIA (0.2%)
Bank Austria AG 1,600 90
- - Oesterreichische
Elektrizitaetswirtschafts AG
Class A 415 58
Austria Tabak AG 550 26
Wienerberger Baustoffindustrie AG 1,190 26
OMV AG 260 25
EA-Generali AG 130 22
Bau Holding AG 300 11
VA Technologies AG 100 7
Mayr-Melnhof Karton AG 120 6
RHI AG 210 6
Flughafen Wien AG 140 5
Oesterreichische
Brau-Beteiligungs AG 120 5
Boehler-Uddeholm AG 110 5
Austrian Airlines AG 250 5
-----------
297
-----------
BELGIUM (1.0%)
Fortis AG (B) 10,432 375
Electrabel SA 776 253
Suez Lyonnaise Des Eaux 1,000 159
Solvay SA 1,480 122
UCB SA 2,380 103
Groupe Bruxelles Lambert SA 440 88
Delhaize-Le Lion SA 710 53
D'Ieteren SA 90 37
Colruyt NV 580 33
Bekaert NV 500 28
Union Miniere SA 680 26
Barco NV 120 17
Compagnie Maritime
Belge SA (CMB) 340 16
Glaverbel SA 80 7
Suez Lyonnaise-Strips VVPR 1,000 0
-----------
1,317
-----------
DENMARK (0.8%)
Tele Danmark A/S 2,833 209
D/S Svendborg B Shares 10 166
D/S 1912 B Shares 14 164
Novo Nordisk A/S B Shares 1,024 135
Den Danske Bank A/S 1,026 112
Unidanmark A/S A Shares 1,181 83
Carlsberg A/S A Shares 945 35
- - ISS International Service Systems
A/S B Shares 452 30
Danisco A/S 623 24
- - Navision Software A/S 300 22
- - Vestas Wind Systems A/S 100 18
Carlsberg A/S B Shares 460 17
Falck A/S 100 10
William Demant A/S 100 9
FLS Industries A/S B Shares 299 7
SAS Danmark A/S 545 6
Radiometer A/S B Shares 126 5
- - Topdanmark A/S 200 4
Bang & Olufsen Holding
A/S B Shares 96 3
NKT Holding A/S 48 3
-----------
1,062
-----------
FINLAND (3.0%)
Nokia Oyj 16,214 2,925
Sonera Oyj 9,510 649
</TABLE>
26
<PAGE> 74
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
UPM-Kymmene Oyj 3,670 $ 147
Tieto Corp. B Shares 800 50
Kemira Oyj 7,040 43
Pohjola Group Insurance 690 42
Kesko Oyj 2,760 35
Sampo Insurance Co., Ltd.
A Shares 860 30
- - Metso Oyj 2,040 26
Rautaruuki Oyj 2,870 20
Raisio Group PLC 3,000 12
Amer Group Ltd. 370 7
Finnlines Oyj 190 6
Uponor Oyj 340 6
Hartwall Oyj Abp 440 6
Kone Corp. Oyj B shares 120 6
Instrumentarium Group B Shares 150 5
Metra Oyj B Shares 270 5
Stockmann AB Oyj B Shares 370 5
Stockmann AB Oyj A Shares 280 4
-----------
4,029
-----------
FRANCE (9.8%)
France Telecom SA 13,657 1,797
Total Fina SA B Shares 9,548 1,268
Carrefour SA 4,637 851
L'Oreal SA 922 736
Vivendi 7,783 699
AXA 4,768 661
Aventis SA 10,543 610
Alcatel 2,663 608
LVMH Moet Hennessy
Louis Vuitton SA 1,309 583
Banque Nationale de Paris SA 6,154 565
Pinault-Printemps-Redoute SA 1,560 410
- - Sanofi-Synthelabo SA 9,744 404
Societe Generale SA 1,437 333
Suez Lyonnaise des Eaux 1,770 282
Cap Gemini SA 1,025 259
Groupe Danone SA 1,036 243
Canal Plus SA 1,672 242
Bouygues SA 379 240
Cie de St. Gobain SA 1,174 220
L'Air Liquide SA (Registered) 1,121 187
PSA Peugeot Citroen SA 750 169
Lafarge SA 1,451 168
Schneider Electric SA 2,104 164
Accor SA 2,450 118
Etablissements Economiques du
Casino Guichard-Perrachon SA 990 113
Dassault Systemes SA 1,360 88
Valeo SA 1,080 83
Sagem SA 120 83
Lagardere SCA 1,510 82
Pechiney SA A Shares 1,080 77
Sodexho Alliance SA 430 76
Thomson-CSF SA 2,200 72
Compagnie Generale des
Etablissements Michelin SA
B Shares 1,840 72
Usinor Sacilor SA 3,657 68
Pernod Ricard SA 1,020 58
Essilor International SA 150 46
Eridania Beghin-Say SA 420 45
Imerys 260 39
Group Pour L'Finance D'Construction 340 38
Sidel SA 370 38
Publicis SA 89 33
Elf Aquitaine SA 206 32
Simco SA 350 28
Societe BIC SA 590 27
Coflexip SA 326 24
Groupe GTM 230 22
Compagnie Francaise d'Etudes
et de Construction SA 220 22
Zodiac SA 100 21
Chargeurs SA 343 19
Compagnie Parisienne de
Reescompte SA 440 17
Groupe SEB SA 186 13
- - Club Mediterranee SA 90 10
Etablissements Economiques du
Casino Guichard-Perrachon
SA Pfd. 100 8
-----------
13,171
-----------
GERMANY (10.4%)
Deutsche Telekom AG 40,400 2,875
Mannesmann AG 6,678 1,620
Allianz AG 3,267 1,094
DaimlerChrysler AG 13,106 1,011
Siemens AG 7,872 1,002
Deutsche Bank AG 8,361 702
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered) 2,330 594
Bayer AG 9,660 456
BASF AG 8,251 423
SAP AG 817 400
Dresdner Bank AG 7,042 388
Bayerische Hypo-und
Vereinsbank AG 5,663 386
SAP AG Pfd. 587 352
Veba AG 6,553 318
RWE AG 6,304 245
Volkswagen AG 3,911 219
- - Thyssen Krupp AG 6,812 206
Metro AG 3,565 191
Viag AG 9,523 174
Deutsche Lufthansa AG 5,471 130
Preussag AG 2,061 117
Schering AG 839 102
WCM Beteiligungs-und
Grundbesitz AG 2,400 93
EM.TV & Merchandising AG 1,400 90
Fresenius Medical Care AG 1,000 87
Linde AG 1,537 85
Merck KGaA 2,587 80
Beiersdorf AG 1,047 70
Man AG 1,739 64
Heidelberger Zement AG 817 63
Karstadt Quelle AG 1,481 59
Volkswagen AG Pfd. 1,374 44
</TABLE>
27
<PAGE> 75
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Adidas-Salomon AG 550 $ 41
RWE AG Pfd. 1,238 38
Hochtief AG 900 33
Gehe AG 750 29
Douglas Holding AG 654 28
- - SGL Carbon AG 416 28
Continental AG 1,345 27
Buderus AG 1,223 21
Dyckerhoff AG Pfd. 648 20
Salamander AG 1,492 18
Man AG Pfd. 610 13
Kamps AG 100 7
Friederich Grohe AG Pfd. 19 6
Metro AG Pfd. 1 174 5
Fag Kugelfischer Georg Schaefer AG 506 5
Bilfinger & Berger Bau AG 220 5
AGIV AG 246 4
-----------
14,068
-----------
HONG KONG (2.3%)
Hutchison Whampoa Ltd. 51,000 741
Cable & Wireless Ltd. 160,400 463
Cheung Kong Holdings Ltd. 30,000 381
Sun Hung Kai Properties Ltd. 32,000 333
Hang Seng Bank Ltd. 26,400 301
CLP Holdings Ltd. 28,500 131
Swire Pacific Ltd. A Shares 17,000 100
New World Development Co., Ltd. 39,000 88
Hong Kong & China Gas Co., Ltd. 62,000 85
Cathay Pacific Airways Ltd. 42,000 75
Johnson Electric Holdings Ltd. 11,000 71
Wharf Holdings Ltd. 26,000 60
Bank of East Asia Ltd. 17,000 47
Hysan Development Co., Ltd. 33,000 42
Television Broadcasts Ltd. 5,000 34
Tai Cheung Holdings Ltd. 121,000 29
Hang Lung Development Co., Ltd. 21,000 24
Shangri-La Asia Ltd. 18,078 21
South China Morning Post Ltd. 24,000 21
Varitronix International Ltd. 7,000 16
Elec & Eltek International
Holdings Ltd. 80,000 15
Wing Lung Bank Ltd. 2,000 8
Giordano International Ltd. 6,000 6
Hopewell Holdings Ltd. 8,000 5
- - Hong Kong and Shanghai
Hotels Ltd. 8,000 5
Miramar Hotel & Investment Ltd. 5,000 5
-----------
3,107
-----------
IRELAND (0.4%)
Allied Irish Banks PLC 12,820 145
Eircom PLC 24,780 106
CRH PLC 4,220 91
Irish Life & Permanent PLC 5,260 50
Kerry Group PLC A Shares 3,709 44
Jefferson Smurfit Group PLC 12,510 38
Greencore Group PLC 6,617 20
- - Ryanair Holdings PLC 1,120 12
Independent News & Media PLC 1,720 11
DCC PLC 780 6
FYFFES PLC 2,770 6
Waterford Wedgewood PLC 5,700 6
Jurys Hotel Group PLC 690 5
-----------
540
-----------
ITALY (4.3%)
Telecom Italia Mobile SpA 89,700 997
Telecom Italia SpA 50,000 702
Ente Nazionale Idrocarburi SpA 106,300 582
Assicurazioni Generali SpA 18,481 607
- - Enel SpA 98,713 412
San Paolo-IMI SpA 22,100 299
Mediaset SpA 15,800 244
Banco Intesa SpA 59,172 239
- - Olivetti SpA 63,000 181
Fiat SpA 4,590 130
Telecom Italia Mobile SpA Risp. 26,600 126
Banca di Roma SpA 92,100 118
Riunione Adriatica di Sicurta SpA 10,600 106
Pirelli SpA 33,900 93
Telecom Italia SpA Risp. 13,000 79
Montedison SpA 40,800 66
Alitalia SpA 21,800 52
Italgas SpA 13,500 51
Benetton Group SpA 22,500 51
Mondadori (Arnoldo) Editore SpA 1,500 47
Banca Intesa Non-Convertible
Risp. SpA 21,600 44
Banco Popolare Di Milano SpA 5,200 40
Autogrill SpA 3,100 39
Societa Assicuratrice
Industriale SpA 3,050 34
Magneti Marelli SpA 9,000 34
Danieli & Co. SpA 5,900 33
Italcementi SpA 2,600 31
Bulgari SpA 3,500 31
Parmalat Finanziaria SpA 23,700 30
Danieli & Co. SpA Risp. 12,000 29
La Rinascente SpA 4,500 29
Banca Commerciale Italiana SpA 4,870 26
Fiat SpA Pfd. 1,750 25
Fiat SpA-RNC 1,670 24
Burgo (Cartiere) SpA 3,200 21
Sirti SpA 5,400 19
Reno De Medici SpA 6,900 19
Montedison SpA 17,500 17
Societa Assicuratrice Industriale
SpA Risp. 1,700 8
SNIA BPD SpA 7,800 8
Banca Intesa SpA Put Warrants
Exp. 11/15/2002 4,870 8
Italcementi SpA Risp. 1,500 7
Cementir SpA 5,100 6
Impregilo SpA 10,000 6
Marzotto & Figli SpA 800 6
La Rinascente SpA Pfd. 1,300 6
SNIA SpA 7,100 6
- - Beni Stabili SpA 18,100 6
Pirelli SpA Risp. 2,900 5
La Rinascente SpA Risp. 1,500 5
-----------
5,784
-----------
</TABLE>
28
<PAGE> 76
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (27.6%)
Nippon Telegraph and
Telephone Corp. 170 $ 2,906
Toyota Motor Corp. 50,000 2,418
Sony Corp. 5,300 1,569
Softbank Corp. 1,400 1,338
Fujitsu Ltd. 26,000 1,184
The Bank of Tokyo-
Mitsubishi Ltd. 63,000 876
Matsushita Electric Industrial
Co., Ltd. 27,000 746
Hitachi Ltd. 44,000 705
Murata Manufacturing Co., Ltd. 3,000 703
Ito-Yokado Co., Ltd. 6,000 651
Kyocera Corp. 2,400 621
Rohm Co., Ltd. 1,500 615
Takeda Chemical Industries Ltd. 12,000 592
Sumitomo Bank Ltd. 42,000 574
NEC Corp. 21,000 499
Tokyo Electric Power Co. 18,600 498
Nomura Securities Co., Ltd. 27,000 487
Honda Motor Co., Ltd. 13,000 483
Fuji Bank Ltd. 46,000 446
Canon, Inc. 11,000 436
Trans Cosmos, Inc. 1,000 426
Tokyo Electron Ltd. 3,000 410
Sharp Corp. 15,000 383
Fanuc Co., Ltd. 2,900 369
Advantest Corp. 1,300 343
Industrial Bank of Japan Ltd. 35,000 337
Kadokawa Shoten Publishing
Co., Ltd. 1,000 336
Nintendo Co. 2,000 332
Secom Co., Ltd. 3,000 330
Toshiba Corp. 42,000 320
Sakura Bank Ltd. 54,000 312
East Japan Railway Co. 54 291
Nidec Corp. 1,000 288
Denso Corp. 12,000 286
Daiwa Securities Group Inc. 18,000 281
Takefuji Corp. 2,200 275
Shin-Etsu Chemical Co., Ltd. 6,000 258
Kao Corp. 9,000 256
Fuji Photo Film Co., Ltd. 7,000 255
Kansai Electric Power Co., Inc. 14,200 247
Bridgestone Corp. 11,000 242
Benesse Corp. 1,000 240
Asahi Bank Ltd. 38,000 234
Tokio Marine & Fire Insurance Co. 20,000 234
Yamato Transport Co., Ltd. 6,000 232
Hirose Electric Co., Ltd. 1,000 224
SMC Corp. 1,000 221
Nippon Steel Corp. 92,000 215
Japan Tobacco, Inc. 27 206
Nissan Motor Co., Ltd. 52,000 204
Central Japan Railway Co. 32 200
Tokai Bank Ltd. 30,000 189
Mitsubishi Electric Corp. 28,000 181
Konami Co., Ltd. 1,000 178
Yamanouchi Pharmaceuticals
Co., Ltd. 5,000 174
Mitsubishi Estate Co., Ltd. 17,000 166
CSK Corp. 1,000 162
Mitsubishi Corp. 21,000 162
Shimamura Co., Ltd. 1,000 158
Hoya Corp. 2,000 157
Mitsubishi Trust & Banking Corp. 17,000 149
Kirin Brewery Co., Ltd. 14,000 147
Mitsubishi Heavy Industries Ltd. 44,000 147
Mitsui & Co., Ltd. 21,000 147
Nikon Corp. 5,000 147
Taisho Pharmaceutical Co. 5,000 147
Sumitomo Corp. 15,000 145
Dai-Nippon Printing Co., Ltd. 8,000 127
Asahi Glass Co., Ltd. 16,000 124
World Co., Ltd. 1,000 124
Sankyo Co., Ltd. 6,000 123
Shizuoka Bank Ltd. 12,000 123
Tohoku Electric Power Co. 8,200 122
Taiyo Yuden Co., Ltd. 2,000 118
Furukawa Electric Co. 7,000 106
Sumitomo Electric Industries Ltd. 9,000 104
Oriental Land Co.,Ltd. 1,200 103
Promise Co.,Ltd. 2,000 102
Nitto Denko Corp. 2,000 100
Sumitomo Chemical Co. 20,000 94
Kinki Nippon Railway Co. 23,000 92
Mitsubishi Chemical Corp. 26,000 91
Itochu Corp. 18,000 90
Asahi Chemical Industry Co., Ltd. 17,000 87
Minebea Co., Ltd. 5,000 86
Sanyo Electric Co., Ltd. 21,000 85
Nippon Mitsubishi Oil Corp. 19,000 84
Ajinomoto Co., Inc. 8,000 83
Tokyo Gas Co., Ltd. 34,000 83
Bank of Yokohama Ltd. 18,000 83
Fuji Machine Manufacturing
Co., Ltd. 1,000 81
Sekisui House Ltd. 9,000 80
Terumo Corp. 3,000 80
Toppan Printing Co., Ltd. 8,000 80
Kawasaki Steel Corp. 44,000 79
Fuji Soft ABC Inc. 1,000 78
Eisai Co., Ltd. 4,000 77
Nippon Express Co., Ltd. 14,000 77
Osaka Gas Co., Ltd. 32,000 77
Mitsui Fudosan Co., Ltd. 11,000 74
Kubota Corp. 19,000 73
77 Bank Ltd. 7,000 73
Shiseido Co., Ltd. 5,000 73
OJI Paper Co., Ltd. 12,000 72
Gunma Bank Ltd. 11,000 71
Marubeni Corp. 17,000 71
Jusco Co., Ltd. 4,000 70
Toyo Information Systems Co., Ltd. 1,000 70
Omron Corp. 3,000 69
Tokyo Broadcasting System, Inc. 2,000 68
Asahi Breweries Ltd. 6,000 66
Toray Industries, Inc. 17,000 66
Japan Air Lines Co., Ltd. 22,000 65
Namco Ltd. 1,000 65
Nippon Yusen Kabushiki Kaisha Co. 16,000 65
</TABLE>
29
<PAGE> 77
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Sumitomo Marine & Fire
Insurance Co. 10,000 $ 62
Nippon Paper Industries Co. 11,000 61
Joyo Bank Ltd. 13,000 60
Komatsu Ltd. 13,000 60
Marui Co., Ltd. 4,000 60
Daiwa Bank, Ltd. 20,000 59
Uni-Charm Corp. 1,000 58
Bank of Fukuoka, Ltd. 8,000 55
Daikin Industries Ltd. 4,000 54
Tostem Corp. 3,000 54
Pioneer Corporation 2,000 53
Daiichi Pharmaceutical Co., Ltd. 4,000 52
Daiwa House Industry Co., Ltd. 7,000 52
Kaneka Corp. 4,000 51
Shionogi & Co., Ltd. 4,000 49
NSK Ltd. 7,000 48
Mitsui Marine & Fire Insurance Co. 8,000 47
Sega Enterprises Ltd. 1,400 44
Toyo Seikan Kaisha Ltd. 3,000 43
Nippon Comsys Corp. 2,000 41
Asatsu-DK Inc. 600 40
Kuraray Co., Ltd. 4,000 40
Nissin Food Products Co., Ltd. 1,700 40
Kajima Corp. 13,000 39
Mitsui Trust & Banking Co. 17,000 38
Ohbayashi Corp. 8,000 38
Sanrio Co., Ltd. 1,000 37
Teijin Ltd. 10,000 37
- - Daiei, Inc. 9,000 36
Tokyu Corp. 14,000 34
Autobacs Seven Co., Ltd. 1,000 33
Chugai Pharmaceutical Co., Ltd. 3,000 32
Meitec Corp. 1,000 32
Mitsubishi Materials Corp. 13,000 32
Shimano, Inc. 1,800 32
Kinden Corp. 4,000 31
Nippon Sheet Glass Co., Ltd. 6,000 31
Sekisui Chemical Co. 7,000 31
Takara Shuzo Co. 2,000 31
Alps Electric Co., Ltd. 2,000 30
NGK Insulators Ltd. 4,000 30
Shimizu Corp. 9,000 30
Tosoh Corp. 8,000 30
Mitsui Mining & Smelting Co., Ltd. 6,000 28
Olympus Optical Co., Ltd. 2,000 28
Dai-Nippon Ink & Chemicals, Inc. 9,000 27
Onward Kashiyama Co., Ltd. 2,000 27
Kawasaki Heavy Industries Ltd. 20,000 27
Kikkoman Corp. 4,000 27
Makita Corp. 3,000 27
Taisei Corp. 14,000 27
Hokuriku Bank Ltd. 11,000 26
Koyo Seiko Co., Ltd. 3,000 26
Nippon Meat Packers, Inc. 2,000 26
- - Sumitomo Metal Industries Ltd. 34,000 26
Wacoal Corp. 3,000 26
Mitsukoshi Ltd. 7,000 25
Kyowa Hakko Kogyo Co. 4,000 24
Mitsubishi Rayon Co., Ltd. 10,000 24
Skylark Co., Ltd. 1,000 24
Toto Ltd. 4,000 24
Toyobo Ltd. 18,000 23
Ube Industries Ltd. 11,000 23
Ebara Corp. 2,000 22
Isetan Co. 3,000 22
Katokichi Co., Ltd. 1,000 22
Nichiei Co., Ltd. 1,000 22
Showa Shell Sekiyu K.K. 5,000 22
Yamazaki Baking Co., Ltd. 2,000 22
Aoyama Trading Co., Ltd. 1,000 21
Ashikaga Bank Ltd. 10,000 20
Uny Co., Ltd. 2,000 20
Daito Trust Construction Co., Ltd. 1,700 19
Komori Corp. 1,000 19
NGK Spark Plug Co. 2,000 18
Sho-Bond Corp. 1,000 18
Tobu Railway Co., Ltd. 6,000 18
Arabian Oil Co., Ltd. 1,000 17
Casio Computer Co. 2,000 17
Kyowa Exeo Corp. 2,000 17
Meiji Seika Kaisha Ltd. 3,000 17
Kurita Water Industries Ltd. 1,000 16
Nishimatsu Construction Co. 4,000 16
House Foods Industry Corp. 1,000 15
Taiheiyo Cement Corp 8,000 15
Keihin Electric Express Railway
Co., Ltd. 4,000 14
Nisshin Flour Milling Co., Ltd. 2,000 14
Takashimaya Co. 2,000 14
Citizen Watch Co., Ltd. 2,000 13
Kokuyo Co., Ltd. 1,000 13
Mori Seiki Co. 1,000 13
Yamaha Corp. 2,000 13
Oyo Corp. 1,000 13
Ishikawajima-Harima Heavy
Industries Co. 10,000 12
Toda Corp. 3,000 12
Amada Co., Ltd. 2,000 11
INAX Corp. 2,000 11
Sumitomo Heavy Industries Ltd. 4,000 11
Toei Co. 2,000 11
- - Renown, Inc. 4,000 10
Denki Kagaku Kogyo K.K. 3,000 9
Mycal Corp. 2,000 9
Nisshinbo Industries, Inc. 2,000 9
NTN Corp. 3,000 9
Fujikura Ltd. 2,000 8
Kamigumi Co., Ltd. 2,000 8
- - Showa Denko K.K. 7,000 8
Snow Brand Milk Products Co. 2,000 8
Sumitomo Forestry Co. 1,000 8
Tokyo Style Co. 1,000 8
Daimaru, Inc. 2,000 7
Konica Corp. 2,000 7
Makino Milling Machine Co. 1,000 7
Nippon Shinpan Co. 3,000 7
Okumura Corp. 2,000 7
Takuma Co., Ltd. 1,000 7
Yokogawa Electric Corp. 1,000 7
Amano Corp. 1,000 6
Daifuku Co., Ltd. 1,000 6
</TABLE>
30
<PAGE> 78
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Daicel Chemical Industries Ltd. 2,000 $ 6
- - Dai-Nippon Screen Manufacturing
Co., Ltd. 1,000 6
Daiwa Kosho Lease Co., Ltd. 2,000 6
Kaken Pharmaceutical Co. 1,000 6
- - Kanebo Ltd. 4,000 6
Kawasaki Kisen Kaisha Ltd. 4,000 6
Meiji Milk Products Co., Ltd. 2,000 6
Mitsubishi Logistics Corp. 1,000 6
Mitsubishi Gas Chemical Co. 3,000 6
Sapparo Breweries Ltd. 2,000 6
Teikoku Oil Co., Ltd. 2,000 6
Yakult Honsha Co., Ltd. 1,000 6
Brother Industries Ltd. 2,000 5
Gunze Ltd. 2,000 5
Hankyu Department Stores, Inc. 1,000 5
Hitachi Zosen Corp. 6,000 5
Iwatani International Corp. 3,000 5
Nippon Shokubai K.K. 1,000 5
- - Japan Steel Works Ltd. 5,000 5
- - JGC Corp. 2,000 5
- - Tokyo Dome Corp. 1,000 5
Kureha Chemical Industry Co. 2,000 5
Maeda Road Construction Co., Ltd. 1,000 5
NOF Corp. 2,000 5
Nichirei Corp. 2,000 5
Nippon Suisan Kaisha Ltd. 3,000 5
Japan Energy Corp. 6,000 5
Seino Transportation Co., Ltd. 1,000 5
Takara Standard Co. 1,000 5
Tokyo Tatemono Co., Ltd. 3,000 5
- - Chiyoda Corp. 3,000 4
Cosmo Oil Co., Ltd. 3,000 4
- - Daikyo, Inc. 2,000 4
- - Ishihara Sangyo Kaisha Ltd. 3,000 4
- - Kumagai Gumi Co., Ltd. 6,000 4
Mitsubishi Paper Mills Ltd. 3,000 4
- - Mitsui Engineering & Shipbuilding
Co., Ltd. 6,000 4
Mitsui Soko Co., Ltd. 2,000 4
Nippon Light Metal Co. 4,000 4
Noritake Co., Ltd. 1,000 4
Nippon Sharyo Ltd. 2,000 4
- - Penta-Ocean Construction Co. 3,000 4
Sanwa Shutter Corp. 1,000 4
Sumitomo Osaka Cement Co., Ltd. 3,000 4
Tokyotokeiba Co. 3,000 4
Tsubakimoto Chain Co. 1,000 4
Okuma Corp. 1,000 3
-----------
37,180
-----------
NETHERLANDS (5.7%)
Royal Dutch Petroleum Co. 28,336 1,728
Aegon NV 8,915 857
ING Groep NV 13,546 814
Philips Electronics NV 4,572 619
Kon KPN NV 6,286 611
STMicroelectronics NV 3,791 580
ABN-AMRO Holding NV 20,589 512
Unilever NV 7,872 433
Koninklijke Ahold NV 8,738 257
Akzo Nobel NV 4,140 207
- - ASM Lithography Holding NV 1,871 207
Heineken NV 4,064 197
TNT Post Group NV 6,336 181
Wolters Kluwer NV 3,789 128
Getronics NV 1,380 109
Elsevier NV 9,139 109
Hagemeyer NV 1,898 44
- - Baan Co. NV 2,188 31
Oce NV 1,690 28
Buhrmann NV 1,610 24
- - Koninklijke Vopak NV 901 21
IHC Caland NV 460 17
KLM Royal Dutch 450 12
Hollandsche Beton Groep NV 1,000 10
Vedior NV 640 7
Nedlloyd Groep NV 210 6
Stork NV 240 3
-----------
7,752
-----------
NEW ZEALAND (0.2%)
Telecom Corp. of New Zealand Ltd. 26,870 126
Carter Holt Harvey Ltd. 40,830 53
Lion Nathan Ltd. 9,060 21
Contact Energy Ltd. 4,330 8
Fisher & Paykel Industries Ltd. 1,890 7
- - Brierley Investments Ltd. 27,700 6
Fletcher Challenge Ltd. Building 4,020 6
- - Fletcher Challenge Ltd. Forest 12,410 5
Fletcher Challenge Ltd. Energy 2,060 5
Fletcher Challenge Ltd. Paper 6,000 4
-----------
241
-----------
NORWAY (0.4%)
Norsk Hydro ASA 4,120 172
Christiania Bank Og
Kreditkasse ASA 14,440 71
DNB Holding ASA 11,360 47
Orkla ASA A Shares 2,370 41
Bergesen D.Y. ASA B Shares 1,920 33
- - Storebrand ASA 4,300 33
Bergesen D.Y. ASA A Shares 1,540 28
Smedvig ASA B Shares 2,449 26
Lief Hoegh & Co. ASA 1,410 17
- - Petro Geo-Services ASA 700 12
Norske Skogindustrier ASA
A Shares 200 10
Schibsted ASA 530 10
Tomra Systems ASA 600 10
Merkantildata ASA 740 9
Elkem ASA 360 8
- - NCL Holdings ASA 1,800 8
- - Kvaerner ASA 330 7
SAS Norge ASA B Shares 630 7
Smedvig ASA A Shares 460 6
-----------
555
-----------
PORTUGAL (0.5%)
Portugal Telecom SA (Registered) 13,550 148
Electricidade de Portugal SA 7,390 128
Banco Comercial Portugues SA 16,300 90
Banco Espirito Santo SA 2,620 73
Sonae SGPS SA 830 44
</TABLE>
31
<PAGE> 79
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Jeronimo Martins & Filho,
SGPS, S.A. 1,330 $ 34
Cimpor-Cimento de Portugal SA 1,590 26
Brisa-Auto Estradas de Portugal SA 3,450 26
Unicer-Uniao Cervejeira SA 1,240 24
Cin-Corporacao Industrial do
Norte SA 640 16
Inapa-Investimentos Participacoes
e Gestao SA 1,320 11
Portucel Industrial-Empresa
Productora de Cellulosa SA 850 6
Companhia de Seguros
Tranquilidade 190 6
-----------
632
-----------
SINGAPORE (1.1%)
- - DBS Group Holdings Ltd. 17,978 294
Singapore Telecommunications
Ltd. 84,000 173
Singapore Airlines Ltd. 15,000 170
Oversea-Chinese Banking
Corp.,Ltd. 14,650 134
United Overseas Bank Ltd. 11,504 102
Singapore Technologies
Engineering Ltd. 60,000 93
Singapore Press Holdings Ltd. 4,000 87
First Capital Corp., Ltd. 37,000 49
City Developments Ltd. 8,000 47
Inchcape Bhd. 42,000 44
Cycle & Carriage Ltd. 11,000 34
Venture Manufacturing
(Singapore) Ltd. 3,000 34
Sembcorp Industries Ltd. 21,000 29
United Industrial Corp., Ltd. 43,000 24
Parkway Holdings Ltd. 10,000 23
Fraser & Neave Ltd. 6,000 22
Hotel Properties Ltd. 24,000 22
- - Neptune Orient Lines Ltd. 14,000 19
Creative Technology Ltd. 1,000 18
Natsteel Ltd. 9,000 18
Overseas Union Enterprise Ltd. 2,000 7
-----------
1,443
-----------
SPAIN (2.7%)
- - Telefonica SA 42,603 1,059
Banco Santander Central
Hispano, SA 50,400 568
Banco Bilbao Vizcaya SA 29,227 414
Repsol SA 15,063 348
Endesa SA 14,440 285
Argentaria SA 7,600 178
Iberdrola SA 11,500 159
Gas Natural SDG SA 6,044 139
Union Electrica Fenosa SA 4,500 78
Altadis SA 3,869 55
Acerinox SA 1,025 41
Corporacion Financiera Alba SA 1,200 41
ACS, Actividades de Construccion
y Servicios, SA 1,100 26
Azucarera Ebro Agricolas 1,400 20
Fomento De Construc y Contra 971 20
Grupo Dragados SA 2,200 19
Corporacion Mapfre SA 1,100 18
Portland Valderrivas SA 600 16
Autopista Concesionaria
Espanola SA 1,600 15
- - Sol Melia SA 1,200 14
Sociedad General de Aguas de
Barcelona SA 900 13
Uralita SA 1,600 11
Metrovacesa SA 500 9
Cortefiel, SA 300 8
Vallehermoso SA 1,200 8
Zardoya Otis SA 800 8
- - TelePizza, SA 1,500 6
- - Asturiana de Zinc, SA 400 5
Prosegur Cia de Seguridad
SA (Registered) 600 5
Immobiliaria Urbis SA 900 4
-----------
3,590
-----------
SWEDEN (2.7%)
LM Ericsson Telephone AB
B Shares 26,009 1,665
Hennes & Mauritz AB 11,124 371
Skandia Forsakrings AB 6,710 202
Electrolux AB Series B 4,850 121
Volvo AB B Shares 4,570 118
Svenska Handelsbanken A Shares 9,370 117
ForeningsSparbanken AB 7,290 107
Skandinaviska Eeskilda Banken
AB A Shares 9,660 97
- - NetCom AB Shares 1,340 94
Sandvik AB A Shares 2,953 92
Svenska Cellulosa AB B Shares 2,770 82
Securitas AB B shares 3,990 72
OM Gruppen AB 2,960 64
Skanska AB B Shares 1,590 59
Atlas Copco AB A Shares 1,900 56
WM-Data AB B Shares 880 54
Volvo AB A Shares 1,850 47
Swedish Match AB 8,006 28
Gambro AB 3,100 28
Atlas Copco AB B Shares 930 26
Sandvik AB B Shares 830 26
Svenskt Stal AB (SSAB)-Series A 1,530 24
Svenska Handelsbanken AB
B Shares 1,590 19
Svenskt Stal AB (SSAB) 1,180 17
Assidoman AB 700 11
Drott AB B Shares 870 10
SKF AB B Shares 370 9
SKF AB A Shares 260 6
Trelleborg AB B Shares 620 6
Diligentia AB 720 6
Granges AB 290 6
Gambro AB 600 5
-----------
3,645
-----------
SWITZERLAND (5.7%)
Novartis AG (Registered) 974 1,423
Roche Holdings AG 95 1,122
Nestle SA (Registered) 537 979
UBS AG 2,923 785
</TABLE>
32
<PAGE> 80
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Credit Suisse Group AG
(Registered) 3,697 $ 731
- - ABB Ltd. 3,917 476
Swisscom AG 966 389
Schweizerische
Rueckversicherungs-Gesellschaft 187 382
Zurich Allied AG 668 379
Roche Holding AG (Bearer) 22 357
Adecco SA (Bearer) 210 163
Holderbank Financiere Glarus AG
(Bearer) 75 102
Alusuisse-Lonza Group AG
(Registered) 105 77
The Swatch Group AG 49 56
The Swatch Group AG (Registered) 221 51
- - Lonza AG 77 47
Holderbank Financiere Glarus AG
(Registered) 122 43
Sulzer AG (Registered) 47 30
Sairgroup 139 28
Georg Fischer AG (Registered) 79 27
Kuoni Reisen Holding AG
(Registered) 2 8
Schindler Holding AG (Registered) 5 8
- - SGS Societe Generale de
Surveillance Holding SA (Bearer) 6 8
Forbo Holding AG (Registered) 14 7
Grands Magasins Jelmoli SA (Bearer) 6 7
Valora Holding AG 27 7
Moevenpick Holding AG (Bearer) 12 6
Schindler Holding AG (Ptg. Ctf.) 4 6
Sika Finanz AG (Bearer) 19 6
- - SGS Societe Generale de
Surveillance Holding SA
(Registered) 20 6
-----------
7,716
-----------
UNITED KINGDOM (19.1%)
BP Amoco PLC 259,209 2,601
British Telecommunications PLC 86,296 2,104
Vodafone Airtouch PLC 404,083 1,998
HSBC Holdings PLC 113,506 1,579
Glaxo Wellcome PLC 48,777 1,376
AstraZeneca Group PLC 23,953 991
SmithKline Beecham PLC 75,053 956
Lloyds TSB Group PLC 74,112 925
Marconi PLC 35,502 627
Barclays PLC 20,084 577
Prudential PLC 25,849 508
Diageo PLC 46,644 374
British Sky Broadcasting
Group PLC 22,974 369
Halifax PLC 31,394 347
Abbey National PLC 20,183 322
BG PLC 49,337 318
Rio Tinto PLC 12,690 306
Unilever PLC 39,240 288
Tesco PLC 91,591 278
CGU PLC 17,102 275
Pearson PLC 8,303 268
British Aerospace PLC 40,291 266
Invensys PLC 46,115 250
Allied Zurich PLC 21,212 249
Reuters Group PLC 18,139 248
Granada Group PLC 23,387 237
Royal Bank of Scotland Group PLC 12,568 222
Kingfisher PLC 18,464 204
3i Group PLC 11,062 197
Marks & Spencer PLC 39,743 189
The Sage Group PLC 15,264 186
Legal & General Group PLC 66,910 182
British American Tobacco PLC 29,898 170
Cadbury Schweppes PLC 27,597 166
Hays PLC 10,095 160
GKN PLC 9,814 154
- - Arm Holdings PLC 2,254 152
Centrica PLC 53,774 152
J. Sainsbury PLC 26,680 150
National Grid Group PLC 19,320 147
WPP Group PLC 9,284 147
The Peninsular & Oriental
Steam Navigation Co. 8,229 137
Bass PLC 10,926 136
BOC Group PLC 6,280 135
Dixons Group PLC 5,389 129
Rentokil Initial PLC 35,520 129
Logica PLC 4,881 126
Boots Co. PLC 12,130 118
Misys PLC 7,495 116
Reed International PLC 15,440 115
Amvesco PLC 9,761 113
Scottish Power PLC 14,810 112
Railtrack Group PLC 6,681 112
- - Corus Group PLC 42,676 111
Compass Group PLC 7,980 109
Imperial Chemical Industries PLC 10,201 108
Sema Group PLC 5,458 98
National Power PLC 16,870 97
Land Securities PLC 8,585 96
EMI Group PLC 9,600 94
BAA PLC 13,200 93
British Airways PLC 14,070 92
United Utilities PLC 8,650 90
Schroders PLC 4,444 89
Carlton Communications PLC 8,027 78
Great Universal Stores PLC 13,333 78
Unigate PLC 15,600 78
Hanson PLC 8,000 67
Hilton Group PLC 20,312 65
ScottishPower PLC ADR 2,320 65
Blue Circle Industries PLC 10,800 63
Thames Water PLC 4,730 59
Smiths Industries PLC 3,990 59
Stagecoach Holdings PLC 22,727 58
Wolseley PLC 7,212 55
- - Canary Wharf Finance PLC 8,399 52
Electrocomponents PLC 4,500 50
Nycomed Amersham PLC 7,918 49
RMC Group PLC 3,525 48
Williams PLC 10,180 46
BBA Group PLC 5,445 44
British Land Co., PLC 6,650 44
Anglian Water PLC 4,880 44
</TABLE>
33
<PAGE> 81
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Psion PLC 993 $ 43
MEPC PLC 5,510 41
Barratt Developments PLC 8,630 40
Racal Electronics PLC 4,480 40
TI Group PLC 5,135 39
Rank Group PLC 11,900 38
Slough Estates PLC 6,760 38
Arjo Wiggins Appleton PLC 10,000 36
Smith & Nephew PLC 10,183 34
Bunzl PLC 6,090 33
Tate & Lyle PLC 4,760 31
Airtours PLC 4,942 30
Hammerson PLC 4,280 29
Rexam PLC 6,860 28
Johnson Matthey PLC 2,493 28
London Bridge Software
Holdings PLC 405 28
SSL International PLC 2,186 28
Jarvis PLC 7,350 26
Capita Group PLC 1,352 25
FKI PLC 6,160 24
Taylor Woodrow PLC 9,900 22
Pilkington PLC 15,260 21
Caradon PLC 8,080 20
United Biscuits Holdings PLC 4,400 19
Lasmo PLC 10,200 19
The Berkeley Group PLC 1,600 18
Meyer International PLC 2,800 17
Hepworth PLC 5,380 16
Ocean Group PLC 860 16
George Wimpey PLC 8,820 16
IMI PLC 2,700 12
- - Eidos PLC 130 11
De La Rue PLC 1,470 8
- - Celltech Chiroscience PLC 765 7
Amec PLC 1,360 5
BICC PLC 3,710 5
Lex Service PLC 640 4
Coats Viyella PLC 6,500 4
-----------
25,771
-----------
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $115,796) 135,197
- ---------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------
CORPORATE BONDS
- ---------------------------------------------------------------------------------
BG Transco Holdings PLC
7.06%, 12/14/2009 (1) GBP 6 10
BG Transco Holdings PLC
4.187%, 12/14/2022 GBP 6 10
BG Transco Holdings PLC
7.00%, 12/16/2024 GBP 6 9
- ---------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $30) 29
- ---------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (2.7%)
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
3.25%, 1/3/2000
(COST $3,690) $3,690 $ 3,690
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.0%)
(COST $119,516) 138,916
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-3.0%)
- ---------------------------------------------------------------------------------
Other Assets--Note B 977
Payables for Investment Securities Purchased (4,905)
Other Liabilities (156)
-----------
(4,084)
- ---------------------------------------------------------------------------------
NET ASSETS (100%) $134,832
=================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
GBP--Great Britain Pound.
(1) Adjustable Rate Security.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AT DECEMBER 31, 1999, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------
AMOUNT
(000)
- ---------------------------------------------------------------------------------
<S> <C>
Paid in Capital $116,331
Overdistributed Net Investment Income--
Note E (82)
Accumulated Net Realized Losses--Note E (816)
Unrealized Appreciation (Depreciation)--
Note F
Investment Securities 19,400
Foreign Currencies (1)
- ---------------------------------------------------------------------------------
NET ASSETS $134,832
=================================================================================
Investor Shares--Net Assets
Applicable to 11,274,782 outstanding $.001
par value shares of beneficial interest.
(unlimited authorization) $134,832
- ---------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $11.96
=================================================================================
</TABLE>
34
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Vanguard Tax-Managed Funds
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights appearing in the Annual Report to Shareholders present fairly, in all
material respects, the financial position of Vanguard Tax-Managed Balanced Fund,
Vanguard Tax-Managed Growth and Income Fund, Vanguard Tax-Managed Capital
Appreciation Fund, Vanguard Tax- Managed Small-Cap Fund, and Vanguard
Tax-Managed International Fund (separate portfolios of Vanguard Tax-Managed
Funds, hereafter referred to as the "Funds") at December 31, 1999, and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
February 9, 2000
35
<PAGE> 83
F870-02/18/2000
