N-30D 1 n-30d.txt VANGUARD MONEY MARKET FUND SEMI ANNUAL REPORT 2000 1 VANGUARD(R) MONEY MARKET FUNDS May 31, 2000 semiannual VANGUARD PRIME MONEY MARKET FUND VANGUARD FEDERAL MONEY MARKET FUND VANGUARD TREASURY MONEY MARKET FUND [PHOTO] [THE VANGUARD GROUP LOGO] 2 HAVE THE PRINCIPLES OF INVESTING CHANGED? In a world of frenetic change in business, technology, and the financial markets, it is natural to wonder whether the basic principles of investing have changed. We don't think so. The most successful investors over the coming decade will be those who began the new century with a fundamental understanding of risk and who had the discipline to stick with long-term investment programs. Certainly, investors today confront a challenging, even unprecedented, environment. Valuations of market indexes are at or near historic highs. The strength and duration of the bull market in U.S. stocks have inflated people's expectations and diminished their recognition of the market's considerable risks. And the incredible divergence in stock returns--many technology-related stocks gained 100% or more in 1999, yet prices fell for more than half of all stocks--has made some investors question the idea of diversification. And then there is the Internet. Undeniably, it is a powerful medium for communications and transacting business. For investors, the Internet is a vast source of information about investments, and online trading has made it inexpensive and convenient to trade stocks and invest in mutual funds. However, new tools do not guarantee good workmanship. Information is not the same as wisdom. Indeed, much of the information, opinion, and rumor that swirl about financial markets each day amounts to "noise" of no lasting significance. And the fact that rapid-fire trading is easy does not make it beneficial. Frequent trading is almost always counterpro-ductive because costs--even at low commission rates--and taxes detract from the returns that the markets provide. Sadly, many investors jump into a "hot" mutual fund just in time to see it cool off. Meanwhile, long-term fund investors are hurt by speculative trading activity because they bear part of the costs involved in accommodating purchases and redemptions. Vanguard believes that intelligent investors should resist short-term thinking and focus instead on a few time-tested principles: - Invest for the long term. Pursuing your long-term investment goals is more like a marathon than a sprint. - Diversify your investments with holdings in stocks, bonds, and cash investments. Remember that, at any moment, some part of a diversified portfolio will lag other parts, and be wary of taking on more risk by "piling onto" the best-performing part of your holdings. Today's leader could well be tomorrow's laggard. - Step back from the daily frenzy of the markets; focus on your overall asset allocation. - Capture as much of the market's return as possible by minimizing costs and taxes. Costs and taxes diminish long-term returns while doing nothing to reduce the risks you incur as an investor.
CONTENTS REPORT FROM THE CHAIRMAN ................................. 1 THE MARKETS IN PERSPECTIVE ............................... 4 REPORT FROM THE ADVISER .................................. 6 PERFORMANCE SUMMARIES .................................... 8 FUND PROFILES ............................................ 12 FINANCIAL STATEMENTS ..................................... 14
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. 3 [PHOTO] John J. Brennan REPORT FROM THE CHAIRMAN Money market funds provided refuge from the turbulence of the stock and bond markets during the six months ended May 31, 2000, the first half of the fiscal year for the Vanguard Money Market Funds. Short-term interest rates rose during the half-year, and the interest income paid by our funds rose along with them. The Prime Money Market Fund earned 2.9% during the period (slightly ahead of the stock market's return), bringing its return over the twelve months ended May 31 to 5.5%. Adjusting for inflation (as measured by the Consumer Price Index) of 1.8% for the six-month period and 3.1% for the year, the Prime Money Market Fund's real total return was 1.1% for the six months and 2.4% for the year.
-------------------------------------------------------------------------------------------------- TOTAL RETURNS PERIODS ENDED MAY 31, 2000 ------------------------------------------------------- TWELVE MONTHS SIX MONTHS ------------------------------------------------------- AVERAGE AVERAGE VANGUARD COMPETING VANGUARD COMPETING MONEY MARKET FUND FUND FUND* FUND FUND* -------------------------------------------------------------------------------------------------- Prime 5.5% 4.9% 2.9% 2.6% (SEC 7-Day Annualized Yield: 6.23%) Federal 5.4 4.9 2.8 2.6 (SEC 7-Day Annualized Yield: 6.19%) Treasury 5.0 4.6 2.6 2.5 (SEC 7-Day Annualized Yield: 5.73%) -------------------------------------------------------------------------------------------------- Prime Institutional Shares** 5.7% 5.4% 3.0% 2.8% (SEC 7-Day Annualized Yield: 6.41%) --------------------------------------------------------------------------------------------------
*Derived from data provided by Lipper Inc. **Minimum initial investment is $10 million. The table above presents the total returns for our funds and their peers for the half-year and for the past twelve months. The share price of each fund held steady at $1 throughout the period, as is expected but not guaranteed. We also present the annualized yields for our funds as of May 31. During the six- and twelve-month periods ended May 31, each fund provided what we call the "Vanguard advantage"--superior returns compared with those of money market funds with comparable quality standards. This advantage stems from our low operating costs: Each fund has an annual expense ratio (expenses as a percentage of average net assets) less than half the expense ratio charged by the average competing fund. (The Prime Institutional Shares have an expense ratio of 0.15%; the other Vanguard money market funds have a ratio of 0.33%.) THE PERIOD IN REVIEW The U.S. economy, now well into its tenth consecutive year without a recession, continued to display impressive strength. The economy grew at an annual rate of 5.4% during the 1 4 first quarter of 2000, a strong follow-up to the previous quarter's astounding 7.3% rate. However, the economy's strength also triggered fears of inflation and higher interest rates. Late in the period there were signs that the torrid pace of economic growth was abating. The apparent slowdown was attributed in part to the Federal Reserve Board's interest rate hikes over the past year, including increases totaling 100 basis points (1.00 percentage point) in the federal funds rate during the half-year, raising it to 6.50%. Rising short-term interest rates, which benefited money market funds, were bad news for bond investors because the prices of existing bonds move in the opposite direction from interest rates. An exception to the downtrend in bond prices was long-term U.S. Treasury bonds. The government began buying back some of its long-term debt, and expectations of a diminishing supply drove up demand and prices. The 30-year Treasury bond's yield fell from 6.29% to 6.01% during the half-year. At the other end of the maturity spectrum, the 3-month Treasury bill's yield rose 32 basis points to 5.62%. The yield of the 10-year Treasury note rose from 6.19% to 6.27%. The overall taxable bond market, as measured by the Lehman Brothers Aggregate Bond Index, recorded a 1.4% total return. The overall U.S. stock market, as measured by the Wilshire 5000 Total Market Index, rose 2.4% for the half-year. Stock prices were extremely volatile, particularly for small-capitalization and technology issues. For example, the tech-heavy Nasdaq Composite Index returned an astounding 41.1% for the first three months of the period, only to plunge -27.4% from March to May. The Fed-engineered rise in short-term interest rates pushed up the yields for our money market funds. As the table below shows, the 7-day annualized yields of our funds were considerably higher as of May 31 than they were six months or one year ago. Money market funds respond to changes in market interest rates with a brief lag, as the proceeds from maturing investments are reinvested in new holdings.
----------------------------------------------------------------------- 7-DAY ANNUALIZED YIELDS -------------------------------- MAY 31, NOV. 30, MAY 31, MONEY MARKET FUND 2000 1999 1999 ----------------------------------------------------------------------- Prime 6.23% 5.36% 4.62% Federal 6.19 5.21 4.60 Treasury 5.73 4.77 4.28 ----------------------------------------------------------------------- Prime Institutional Shares 6.41% 5.54% 4.80% -----------------------------------------------------------------------
Forecasting trends in interest rates is devilishly difficult, and it is far from certain whether the Fed is through raising interest rates in an effort to cool off the economy. We can say with confidence that future yields and returns on our funds will reflect overall trends in short-term interest rates. We also are confident that our cost advantage over competitors--a crucial edge in money market funds--will persist. IN SUMMARY The attributes of money market funds--current income, liquidity, and preservation of capital--tend to be appreciated most during volatile periods in the stock and bond markets, such as those experienced in recent months. But these same attributes make money market funds a valuable part of a balanced portfolio in any market environment. We believe that a diversified portfolio of stock, bond, and money market funds-- apportioned in accordance with your goals, investment time horizon, and risk tolerance-- 2 5 can help investors to ride out market turbulence while they stay on course toward long-term goals. Once you've put such an investment plan in place, we recommend sticking with it for the long haul. /s/ JOHN J. BRENNAN John J. Brennan Chairman and Chief Executive Officer June 16, 2000 IN MEMORY It is with great sadness that I report the death of John C. Sawhill, an independent trustee of the fund and a member of The Vanguard Group's board of directors since 1991. John, an economist who was president and chief executive officer of The Nature Conservancy, died on May 18 at age 63. He was a senior lecturer at the Harvard Business School and had formerly served as president of New York University and as deputy secretary of the U.S. Department of Energy under President Jimmy Carter. John was a remarkable man who was full of energy, vigor, and life. His experience and wisdom added a great deal to Vanguard, and his death is a blow to everyone who knew and loved him. Though John's work on behalf of our funds was often carried on behind the scenes, he was a dedicated advocate for the best interests of our shareholders. He will be missed. 3 6 THE MARKETS IN PERSPECTIVE SIX MONTHS ENDED MAY 31, 2000 Strong crosscurrents pushed and tugged at financial markets during the six months ended May 31, 2000. Positive influences included very strong economic growth and rising corporate profits. Negative factors included tighter monetary policy, higher inflation, and concerns about stock valuations. Interest rates rose in most segments of the bond market, and bond prices slipped. Stock prices rose slightly, on balance, although wide day-to-day price swings were frequent. Uncertainty in both the bond and stock markets centered on the surprising performance of the U.S. economy, which grew at a torrid 7.3% pace in the final three months of 1999 and at a still-robust 5.4% during the first quarter of 2000. With U.S. unemployment at around 4.0% of the workforce, the Federal Reserve Board continued to be concerned that inflation would worsen unless the economic expansion slowed. The Fed raised short-term interest rates by 0.25 percentage point in February and again in March, before boosting rates by 0.50 percentage point in mid-May. These boosts, following three quarter-percentage-point increases in 1999, took the Fed's target for short-term rates to 6.5%. By the end of May, some signs of slowing had emerged in the economy, although it was not certain that the Fed had finished applying the brakes.
----------------------------------------------------------------------------------------------- TOTAL RETURNS PERIODS ENDED MAY 31, 2000 ---------------------------------------- 6 MONTHS 1 YEAR 5 YEARS* ----------------------------------------------------------------------------------------------- STOCKS S&P 500 Index 2.9% 10.5% 23.8% Russell 2000 Index 5.5 9.9 13.5 Wilshire 5000 Index 2.4 10.7 22.3 MSCI EAFE Index 0.7 17.4 10.4 ----------------------------------------------------------------------------------------------- BONDS Lehman Aggregate Bond Index 1.4% 2.1% 6.0% Lehman 10 Year Municipal Bond Index 0.7 -0.2 5.3 Salomon Smith Barney 3-Month U.S. Treasury Bill Index 2.7 5.2 5.2 ----------------------------------------------------------------------------------------------- OTHER Consumer Price Index 1.8% 3.1% 2.4% -----------------------------------------------------------------------------------------------
*Annualized. Evidence on inflation was ambiguous. The Consumer Price Index increased 1.8% and 3.1%, respectively, for the six- and twelve-month periods ended May 31, but much of the increase was due to higher energy and food prices. Core inflation, which excludes those sectors, was up a less-scary 2.4% during the twelve months ended May 31. U.S. STOCK MARKETS Optimism about long-term prospects for technology, media, and telecommunications companies dominated the equity markets through the first three months of the period. But sentiment shifted suddenly in mid-March, sending the tech and telecom groups sharply lower. The tech-heavy Nasdaq Composite Index, for example, registered a 41.1% return from November 30 through February 29, only to give back most of the gains over the next three months. End result: a 2.4% return for the six months ended May 31. The overall stock market, as measured by the Wilshire 5000 Index, also returned 2.4%. Value stocks, those characterized by above-average dividend yields and below-average price/earnings and price/book value ratios, enjoyed a resurgence beginning in mid-March. 4 7 For the full six months, the value components of both the large-capitalization S&P 500 Index and the small-cap Russell 2000 Index outperformed the indexes' growth components. Within the S&P 500, the half-year's best return was the 48% gain recorded by "other energy" stocks, including oil-drilling and services companies that benefited from a continuing rise in oil prices. The producer-durables sector gained 18%, largely because of big gains for a number of manufacturers of telecommunications gear and semiconductor testing and fabrication equipment. Technology stocks, which now account for about one-quarter of the total stock market's value, gained about 12% for the six months. Poor performers included the utilities sector (-14% return), which was hurt by downturns in several large telephone stocks, and many consumer staples (-9%) and consumer-discretionary (-6%) companies. Prices fell steeply for a number of high-profile retailers, beverage and food makers, tobacco companies, and entertainment enterprises. U.S. BOND MARKETS The Federal Reserve's influence on interest rates is strongest for short-term securities. Over the six months, the Fed pushed up the rate charged on overnight loans between banks by 1 percentage point to 6.5%. Yields of 3-month U.S. Treasury bills rose only one-third as far (0.32 percentage point, or 32 basis points), to 5.62%. And long-term Treasury yields moved even less. The 10-year Treasury note rose just 8 basis points to 6.27% as of May 31, and yields fell for very long-term Treasury bonds due to a cutback in issuance of new bonds. As a result of the shrinking supply of long-term bonds, the yield of the 30-year Treasury bond declined 28 basis points--from 6.29% to 6.01%--during the half-year. Because short-term rates moved higher while long-term rates declined, there was an unusual "inversion" in the yield curve. Instead of sloping upward--with yields increasing along with the maturity of Treasury securities--the curve sloped down. The 6.01% yield of 30-year Treasuries on May 31 was 70 basis points below the 6.71% yield on 3-year Treasury notes. Corporate and municipal bonds did not perform as well as Treasury securities, and the yield curve for these sectors remained positive--yields of long-term bonds remained higher than those of short-term securities. The Lehman Aggregate Bond Index, a proxy for the overall taxable bond market, returned 1.4%, as a price decline of 2% offset most of the 3.4% income provided by bonds during the half-year. INTERNATIONAL STOCK MARKETS A stronger U.S. dollar and weak Asian markets made the half-year a lackluster one for U.S. investors in foreign stocks. Improving economic growth in most of the world helped a number of markets in Europe, Asia, and Latin America to produce good gains in their local currencies. However, the U.S. dollar increased in value versus most currencies, significantly reducing the returns received by dollar-based investors. (Conversely, when the dollar falls in value, returns from abroad are enhanced for U.S. investors.) The overall return in dollars from developed foreign markets was a scant 0.7%, as measured by the Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index. However, in local currencies, the EAFE Index return for the six months was a very respectable 7.8%. In Europe, where stocks benefited from a continuance of corporate acquisitions, an average 12.8% gain in local-currency terms was reduced to 4.7% for U.S. investors because of the dollar's strength. Stocks in the Pacific region, which is dominated by Japan, returned -7.0% in dollars, as a -2.0% return in local-currency terms was further diminished by the dollar's gains. The Select Emerging Markets Free Index returned -2.8% in U.S. dollars. 5 8 REPORT FROM THE ADVISER In the semiannual period ended May 31, 2000, money market funds were an island of serenity in a sea of bond and stock market chaos. Rising interest rates, the enemy of stock and bond investors, boosted the returns for money market investors. Vanguard Prime, Federal, and Treasury Money Market Funds produced six-month returns of 2.9%, 2.8%, and 2.6%, respectively. (The Report From The Chairman starting on page 1 provides a more complete account of the funds' performance during the half-year.) The funds' returns were roughly in line with the 2.9% gain of the S&P 500 Index of stocks and more than 1 percentage point ahead of the 1.4% overall return for the bond market, as measured by the Lehman Aggregate Bond Index. Much of the activity in money markets was driven by the Federal Reserve Board's pursuit of a more restrictive monetary policy. Fed officials have been concerned that growth in demand in the U.S. economy is exceeding growth in supply by a dangerous margin, despite the technology-led advances in productivity that have occurred in recent years. American consumers, feeling wealthier because of rising home values and the gains in their stock portfolios, have been spending freely. This stimulus in turn has encouraged firms to expand, thus bringing the unemployment rate to a 30-year low and putting upward pressure on wages. Seeking to avoid an inflationary spiral that could interrupt the current extraordinary economic expansion, the Fed has raised short-term interest rates by 1 full percentage point (100 basis points) since February. As the Fed's primary policy tool, changes in short-term interest rates are a blunt instrument, at best. They affect the economy with long and uncertain time lags. By acting before inflation becomes a problem, the Fed is seeking to avoid an inflationary pileup by applying the monetary policy brakes more lightly, rather than stomping on them later. Money market interest rates rose in response to the Fed's actions and at present reflect expectations of additional tightening moves. To take advantage of today's higher rates, we have lengthened the funds' average maturities somewhat. There is a good possibility that the Fed will pause in its market-moving behavior for a while to assess the economy's response. Indeed, the most recent employment and sales data indicate that the economy's growth rate is moderating, just as called for in the Fed's script. One big unanswered question is the impact of recent stock market corrections on consumer spending. It will be some time before the effectiveness of the central bank's actions to date can be judged. We would not be surprised to see the Fed raise rates again later this year. On another front, in recent months the market has developed a new appreciation of the potential magnitude of federal budget surpluses and their impact on reducing U.S. Treasury debt. The Treasury has cut back on issuance of new securities, particularly in longer maturities. In March, the Treasury started buying back outstanding long-term bonds with a goal of repurchasing $30 billion worth this year. Private analysts are projecting a surplus of more than $200 billion this year, and federal officials will soon revise their own forecasts upward. In this climate, the relative value of Treasury securities versus other fixed income investments is 6 9 changing in what amounts to a tectonic shift for the markets. Some analysts predict that Treasury debt held by the public will be paid off by the end of the decade. Treasury investors should follow this situation and evaluate the widening differentials between the yields available on Treasuries and the higher yields on government agency and corporate instruments. At some point, Treasury investors may find that the added income on other debt securities justifies a move down the credit-quality ladder. In Vanguard Prime, Federal, and Treasury Money Market Funds, investors can choose the combination of credit quality and yield that fits their needs best. To all three funds, we bring our long-standing commitment to conservative investment policies and low cost. We believe this makes each a consistently high-value proposition. We look forward to reporting on the entire fiscal year six months hence. Ian A. MacKinnon, Managing Director Robert F. Auwaerter, Principal John Hollyer, Principal David R. Glocke, Principal Vanguard Fixed Income Group June 9, 2000 INVESTMENT PHILOSOPHY The funds reflect a belief that the highest level of current income consistent with capital preservation and liquidity can be provided by holding high-quality money market instruments issued by financial institutions, nonfinancial corporations, the U.S. government, and federal agencies. 7 10 PERFORMANCE SUMMARIES All of the data on this page represent past performance, which cannot be used to predict future returns that may be achieved by the fund. Note that returns can fluctuate widely. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.
PRIME MONEY MARKET FUND TOTAL INVESTMENT RETURNS: NOVEMBER 30, 1979-MAY 31, 2000 --------------------------------------------------------------------- PRIME MONEY MARKET FUND AVERAGE FUND* FISCAL CAPITAL INCOME TOTAL TOTAL YEAR RETURN RETURN RETURN RETURN --------------------------------------------------------------------- 1980 0.0% 12.8% 12.8% 12.5% 1981 0.0 17.6 17.6 17.5 1982 0.0 13.1 13.1 12.8 1983 0.0 8.9 8.9 8.6 1984 0.0 10.6 10.6 10.1 1985 0.0 8.2 8.2 7.9 1986 0.0 6.8 6.8 6.4 1987 0.0 6.5 6.5 6.0 1988 0.0 7.5 7.5 6.9 1989 0.0 9.4 9.4 8.8 1990 0.0 8.3 8.3 7.8 1991 0.0 6.4 6.4 5.9 1992 0.0 3.9 3.9 3.4 1993 0.0 3.0 3.0 2.6 1994 0.0 3.9 3.9 3.5 1995 0.0 5.8 5.8 5.4 1996 0.0 5.3 5.3 4.8 1997 0.0 5.4 5.4 4.9 1998 0.0 5.4 5.4 4.9 1999 0.0 5.0 5.0 4.4 2000** 0.0 2.9 2.9 2.6 --------------------------------------------------------------------- SEC 7-Day Annualized Yield (5/31/2000): 6.23% ---------------------------------------------------------------------
*Average Money Market Fund; derived from data provided by Lipper Inc. **Six months ended May 31, 2000. See Financial Highlights table on page 28 for dividend information for the past five years.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000* ------------------------------------------------------------------------------------------------------------------------ INCEPTION 10 Years DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL ------------------------------------------------------------------------------------------------------------------------ Prime Money Market Fund 6/4/1975 5.25% 5.38% 0.00% 5.15% 5.15% ------------------------------------------------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information through the latest calendar quarter. 8 11 All of the data on this page represent past performance, which cannot be used to predict future returns that may be achieved by the fund. Note that returns can fluctuate widely. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.
PRIME MONEY MARKET FUND INSTITUTIONAL SHARES TOTAL INVESTMENT RETURNS: OCTOBER 3, 1989-MAY 31, 2000 -------------------------------------------------------------------- PRIME MONEY MARKET FUND AVERAGE INSTITUTIONAL SHARES FUND** FISCAL CAPITAL INCOME TOTAL TOTAL YEAR RETURN RETURN RETURN* RETURN -------------------------------------------------------------------- 1989 0.0% 1.4% 1.4% 1.4% 1990 0.0 8.5 8.5 8.3 1991 0.0 6.5 6.5 6.2 1992 0.0 4.0 4.0 3.8 1993 0.0 3.2 3.2 2.9 1994 0.0 4.1 4.1 3.8 1995 0.0 6.0 6.0 5.7 1996 0.0 5.5 5.5 5.2 1997 0.0 5.6 5.6 5.3 1998 0.0 5.6 5.6 5.3 1999 0.0 5.1 5.1 4.9 2000+ 0.0 3.0 3.0 2.8 -------------------------------------------------------------------- SEC 7-Day Annualized Yield (5/31/2000): 6.41% --------------------------------------------------------------------
*Prior to 10/28/1995, total returns are for Vanguard Institutional Money Market Portfolio. **Average Institutional Money Market Fund; derived from data provided by Lipper Inc. +Six months ended May 31, 2000. See Financial Highlights table on page 28 for dividend information.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000* --------------------------------------------------------------------------------------------------------------------- INCEPTION 10 YEARS DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL --------------------------------------------------------------------------------------------------------------------- Prime Money Market Fund Institutional Shares** 10/3/1989 5.43% 5.56% 0.00% 5.32% 5.32% ---------------------------------------------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information through the latest calendar quarter. **Prior to 10/28/1995, total returns are for Vanguard Institutional Money Market Portfolio. 9 12 PERFORMANCE SUMMARIES (continued) All of the data on this page represent past performance, which cannot be used to predict future returns that may be achieved by the fund. Note that returns can fluctuate widely. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.
FEDERAL MONEY MARKET FUND TOTAL INVESTMENT RETURNS: JULY 13, 1981-MAY 31, 2000 --------------------------------------------------------------------- FEDERAL MONEY MARKET FUND AVERAGE FUND* FISCAL CAPITAL INCOME TOTAL TOTAL YEAR RETURN RETURN RETURN RETURN --------------------------------------------------------------------- 1981 0.0% 5.9% 5.9% 5.7% 1982 0.0 11.9 11.9 11.7 1983 0.0 8.5 8.5 8.3 1984 0.0 10.2 10.2 9.8 1985 0.0 8.0 8.0 7.7 1986 0.0 6.6 6.6 6.3 1987 0.0 6.3 6.3 5.9 1988 0.0 7.2 7.2 6.7 1989 0.0 9.2 9.2 8.6 1990 0.0 8.1 8.1 7.7 1991 0.0 6.2 6.2 5.7 1992 0.0 3.8 3.8 3.4 1993 0.0 3.0 3.0 2.6 1994 0.0 3.8 3.8 3.4 1995 0.0 5.8 5.8 5.3 1996 0.0 5.3 5.3 4.8 1997 0.0 5.4 5.4 4.9 1998 0.0 5.4 5.4 4.9 1999 0.0 4.9 4.9 4.4 2000** 0.0 2.8 2.8 2.6 --------------------------------------------------------------------- SEC 7-Day Annualized Yield (5/31/2000): 6.19% ---------------------------------------------------------------------
*Average Government Money Market Fund; derived from data provided by Lipper Inc. **Six months ended May 31, 2000. See Financial Highlights table on page 29 for dividend information for the past five years.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000* ------------------------------------------------------------------------------------------------------------------ INCEPTION 10 Years DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL ------------------------------------------------------------------------------------------------------------------ Federal Money Market Fund 7/13/1981 5.15% 5.32% 0.00% 5.07% 5.07% ------------------------------------------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information through the latest calendar quarter. 10 13 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 that returns can fluctuate widely. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.
TREASURY MONEY MARKET FUND TOTAL INVESTMENT RETURNS: MARCH 9, 1983-MAY 31, 2000 -------------------------------------------------------------------- TREASURY MONEY MARKET FUND* AVERAGE FUND** FISCAL CAPITAL INCOME TOTAL TOTAL YEAR RETURN RETURN RETURN RETURN -------------------------------------------------------------------- 1983 0.0% 6.1% 6.1% 6.2% 1984 0.0 9.9 9.9 10.1 1985 0.0 7.5 7.5 7.9 1986 0.0 6.2 6.2 6.4 1987 0.0 6.0 6.0 6.0 1988 0.0 7.0 7.0 6.9 1989 0.0 8.9 8.9 8.7 1990 0.0 8.0 8.0 7.8 1991 0.0 5.9 5.9 5.8 1992 0.0 3.7 3.7 3.5 1993 0.0 2.9 2.9 2.6 1994 0.0 3.6 3.6 3.4 1995 0.0 5.5 5.5 5.2 1996 0.0 5.1 5.1 4.8 1997 0.0 5.1 5.1 4.8 1998 0.0 5.1 5.1 4.8 1999 0.0 4.5 4.5 4.2 2000+ 0.0 2.6 2.6 2.5 -------------------------------------------------------------------- SEC 7-Day Annualized Yield (5/31/2000): 5.73% --------------------------------------------------------------------
*Prior to 12/2/1996, known as the U.S. Treasury Portfolio; prior to 3/13/1989, total returns are for the Insured Portfolio. **Average Money Market Fund through 3/31/1989; Average Treasury Money Market Fund thereafter; derived from data provided by Lipper Inc. +Six months ended May 31, 2000. See Financial Highlights table on page 29 for dividend information for the past five years.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000* -------------------------------------------------------------------------------------------------------------------- INCEPTION 10 Years DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL -------------------------------------------------------------------------------------------------------------------- Treasury Money Market Fund** 3/9/1983 4.77% 5.04% 0.00% 4.84% 4.84% --------------------------------------------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information through the latest calendar quarter. **Prior to 12/2/1996, known as the U.S. Treasury Portfolio. 11 14 FUND PROFILE PRIME MONEY MARKET FUND This Profile provides a snapshot of the fund's characteristics as of May 31, 2000. Key elements of this Profile are defined below.
FINANCIAL ATTRIBUTES ---------------------------------------------------------------------- Yield 6.2% Yield--Institutional Shares 6.4% Average Maturity 64 days Average Quality Aa1 Expense Ratio 0.33%* Expense Ratio--Institutional Shares 0.15%*
*Annualized.
DISTRIBUTION BY ISSUER (% OF PORTFOLIO) -------------------------------------------------------------------- Certificates of Deposit 29.6% Commercial Paper 46.2 Treasury/Agency 15.7 Other 8.5 -------------------------------------------------------------------- Total 100.0%
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO) -------------------------------------------------------------------- Treasury/Agency 15.7% Aaa 15.3 Aa 40.5 A 28.5 Baa 0.0 Ba 0.0 B 0.0 Not Rated 0.0 -------------------------------------------------------------------- Total 100.0%
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. U.S. Treasury securities are considered to have the highest credit quality. 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 ISSUER. A breakdown of a fund's holdings by type of issuer or type of instrument. 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. YIELD. A snapshot of a fund's interest income. The yield, expressed as a percentage of the fund's net asset value, is based on income earned over the past seven days and is annualized, or projected forward for the coming year. 12 15 FUND PROFILE FEDERAL MONEY MARKET FUND This Profile provides a snapshot of the fund's characteristics as of May 31, 2000. Key elements of this Profile are defined on page 12.
FINANCIAL ATTRIBUTES ---------------------------------------------------------------------- Yield 6.2% Average Maturity 59 days Average Quality Agency Expense Ratio 0.33%*
*Annualized.
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO) ---------------------------------------------------------------------- Agency 100.0%
FUND PROFILE TREASURY MONEY MARKET FUND This Profile provides a snapshot of the fund's characteristics as of May 31, 2000. Key elements of this Profile are defined on page 12. FINANCIAL ATTRIBUTES ---------------------------------------------------------------------- Yield 5.7% Average Maturity 74 days Average Quality Treasury Expense Ratio 0.33%*
*Annualized.
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO) ---------------------------------------------------------------------- Treasury 100.0%
13 16 FINANCIAL STATEMENTS MAY 31, 2000 (unaudited) STATEMENT OF NET ASSETS This Statement provides a detailed list of each fund's holdings on the last day of the reporting period, including each security's maturity date, coupon rate or yield to maturity at the time of purchase, and statement-date market value. Securities are grouped and subtotaled by type of instrument (U.S. government obligations, commercial paper, certificates of deposit, etc.). 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. Each fund's objective is to maintain a constant NAV of $1.00 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. Virtually the entire amount of net assets consists of Paid in Capital (money invested by shareholders). Undistributed Net Investment Income is usually zero because the fund distributes its net income to shareholders as a dividend each day, and Accumulated Realized Gains (Losses) are very small because the fund seldom realizes any significant gains or losses on sales of securities.
----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS (15.8%) ----------------------------------------------------------------------------------------------------------------------------- Federal Home Loan Bank 6.28% 6/9/2000 (1) $300,000 $ 299,971 Federal Home Loan Bank 6.325% 6/12/2000 (1) 500,000 499,971 Federal Home Loan Bank 6.431% 6/28/2000 (1) 183,000 182,980 Federal Home Loan Bank 6.58% 2/9/2001 250,000 250,000 Federal Home Loan Mortgage Corp. 6.439% 6/22/2000 (1) 300,000 299,992 Federal National Mortgage Assn. 6.015% 6/2/2000 (1) 500,000 499,943 Federal National Mortgage Assn. 6.172% 6/4/2000 (1) 500,000 499,937 Federal National Mortgage Assn. 6.25% 6/7/2000 (1) 200,000 199,988 Federal National Mortgage Assn. 6.338% 6/14/2000 (1) 715,000 714,945 Federal National Mortgage Assn. 6.426% 6/21/2000 (1) 980,000 979,910 Federal National Mortgage Assn. 6.428% 6/26/2000 (1) 930,000 929,906 Federal National Mortgage Assn. 6.435% 6/7/2000 (1) 500,000 499,585 Federal National Mortgage Assn. 6.435% 6/23/2000 (1) 710,000 709,974 Federal National Mortgage Assn. 6.436% 6/28/2000 (1) 500,000 499,978 ----------------------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (COST $7,067,080) 7,067,080 ----------------------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER (46.4%) ----------------------------------------------------------------------------------------------------------------------------- BANK HOLDING COMPANIES (3.3%) Bank One Corp. 6.235% 7/11/2000 50,000 49,659 Bank One Corp. 6.298% 7/25/2000 100,000 99,070 Bank One Corp. 6.336% 8/1/2000 150,000 148,417 Bank One Corp. 6.424% 7/6/2000 50,000 49,691 Bank One Corp. 6.772% 8/21/2000 50,000 49,251 Bank One Corp. 6.774% 8/22/2000 50,000 49,242 Citigroup 6.387% 6/6/2000 100,000 99,912 Citigroup 6.388% 6/7/2000 100,000 99,894 Citigroup 6.478% 6/12/2000 100,000 99,803 First Union Corp. 6.432% 6/8/2000 150,000 149,813 Wells Fargo & Co. 6.419% 6/5/2000 200,000 199,858 Wells Fargo & Co. 6.436% 6/13/2000 100,000 99,787 Wells Fargo & Co. 6.513% 6/6/2000 100,000 99,910 Wells Fargo & Co. 6.535% 6/14/2000 50,000 49,883 Wells Fargo & Co. 6.535% 6/15/2000 150,000 149,621 ------------ 1,493,811 ------------
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----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- FINANCE--AUTO (9.5%) BMW US Capital Corp. 6.383% 6/7/2000 $ 30,000 $ 29,968 BMW US Capital Corp. 6.448% 6/19/2000 50,000 49,840 BMW US Capital Corp. 6.533% 6/14/2000 90,000 89,789 BMW US Capital Corp. 6.534% 6/15/2000 80,670 80,466 Daimler-Chrysler NA Holding Corp. 6.184% 6/20/2000 100,000 99,679 Daimler-Chrysler NA Holding Corp. 6.337% 6/6/2000 100,000 99,913 Daimler-Chrysler NA Holding Corp. 6.358% 6/7/2000 400,000 399,577 Daimler-Chrysler NA Holding Corp. 6.434% 6/8/2000 150,000 149,813 Daimler-Chrysler NA Holding Corp. 6.438% 6/12/2000 250,000 249,511 Daimler-Chrysler NA Holding Corp. 6.447% 6/13/2000 150,000 149,680 Daimler-Chrysler NA Holding Corp. 6.479% 7/11/2000 100,000 99,289 Daimler-Chrysler NA Holding Corp. 6.763% 8/21/2000 100,000 98,504 Daimler-Chrysler NA Holding Corp. 6.772% 8/28/2000 100,000 98,372 Ford Motor Credit Co. 6.393% 6/7/2000 350,000 349,629 Ford Motor Credit Co. 6.395% 6/8/2000 400,000 399,505 Ford Motor Credit Co. 6.428% 6/12/2000 650,000 648,731 General Motors Acceptance Corp. 6.158% 6/5/2000 200,000 199,865 General Motors Acceptance Corp. 6.266% 7/19/2000 200,000 198,267 General Motors Acceptance Corp. 6.589% 7/18/2000 50,000 49,576 General Motors Acceptance Corp. 6.662% 7/25/2000 100,000 99,015 General Motors Acceptance Corp. 6.662% 7/26/2000 200,000 197,993 General Motors Acceptance Corp. 6.687% 7/31/2000 100,000 98,902 General Motors Acceptance Corp. 6.749% 8/15/2000 100,000 98,617 General Motors Acceptance Corp. 6.754% 8/22/2000 150,000 147,731 New Center Asset Trust 6.18% 6/5/2000 50,000 49,966 Toyota Motor Credit Corp. 6.191% 6/16/2000 25,000 24,936 ------------ 4,257,134 ------------ FINANCE--OTHER (17.4%) American Express Credit Corp. 6.384% 6/8/2000 200,000 199,753 American Express Credit Corp. 6.505% 6/14/2000 200,000 199,533 Asset Securitization Cooperative Corp. 6.043% 6/5/2000 168,000 167,888 Asset Securitization Cooperative Corp. 6.044% 6/6/2000 31,000 30,974 Asset Securitization Cooperative Corp. 6.31% 6/13/2000 75,000 74,844 Asset Securitization Cooperative Corp. 6.412% 6/19/2000 58,000 57,816 Associates Corp. of North America 6.358% 6/7/2000 50,000 49,947 Associates Corp. of North America 6.393% 6/8/2000 100,000 99,876 Associates Corp. of North America 6.444% 7/6/2000 100,000 99,381 Associates Corp. of North America 6.540% 6/19/2000 100,000 99,675 Associates Corp. of North America 6.541% 6/20/2000 100,000 99,657 Caterpillar Financial Services Corp. 6.555% 7/11/2000 25,300 25,118 Centric Capital Corp. 6.193% 6/13/2000 26,955 26,900 Centric Capital Corp. 6.244% 6/26/2000 76,580 76,251 Centric Capital Corp. 6.481% 6/30/2000 33,300 33,128 Centric Capital Corp. 6.567% 7/6/2000 16,600 16,495 CIT Group Holdings Inc. 6.019% 6/1/2000 50,000 50,000 CIT Group Holdings Inc. 6.194% 6/20/2000 100,000 99,678 CIT Group Holdings Inc. 6.432% 6/19/2000 100,000 99,681 CIT Group Holdings Inc. 6.474% 7/6/2000 50,000 49,689 CIT Group Holdings Inc. 6.478% 7/10/2000 100,000 99,307 CIT Group Holdings Inc. 6.503% 7/5/2000 200,000 198,785 Delaware Funding 6.182% 6/22/2000 141,683 141,169 Delaware Funding 6.188% 6/12/2000 25,364 25,317 Delaware Funding 6.199% 6/20/2000 76,047 75,800 Delaware Funding 6.204% 6/27/2000 25,431 25,319 Delaware Funding 6.536% 6/15/2000 148,172 147,797 Enterprise Funding Corp. 6.199% 6/20/2000 22,375 22,303 Enterprise Funding Corp. 6.288% 6/5/2000 63,094 63,050 Enterprise Funding Corp. 6.452% 6/8/2000 35,980 35,935 Enterprise Funding Corp. 6.536% 6/15/2000 157,085 156,688
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----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- Enterprise Funding Corp. 6.759% 8/14/2000 $ 40,332 $ 39,781 General Electric Capital Corp. 6.159% 6/5/2000 500,000 499,662 General Electric Capital Corp. 6.159% 6/6/2000 200,000 199,831 General Electric Capital Corp. 6.272% 8/30/2000 222,874 219,497 General Electric Capital Corp. 6.35% 6/16/2000 250,000 249,344 General Electric Capital Corp. 6.353% 6/19/2000 250,000 249,213 General Electric Capital Corp. 6.393% 6/7/2000 200,000 199,788 General Electric Capital Corp. 6.762% 8/28/2000 50,000 49,187 General Electric Capital International Funding Co. 6.424% 6/8/2000 150,000 149,814 Household Finance Corp. 6.393% 6/7/2000 150,000 149,841 International Business Machines Credit 6.436% 6/12/2000 379,525 378,783 Intrepid Funding 6.064% 6/8/2000 40,768 40,721 Intrepid Funding 6.453% 7/5/2000 27,113 26,950 Norwest Financial 6.184% 6/20/2000 100,000 99,679 Park Avenue Receivable Corp. 6.171% 6/12/2000 104,567 104,373 Park Avenue Receivable Corp. 6.283% 6/1/2000 72,342 72,342 Preferred Receivables Funding Co. 6.275% 6/9/2000 89,525 89,401 Preferred Receivables Funding Co. 6.309% 6/12/2000 89,669 89,497 Preferred Receivables Funding Co. 6.317% 6/13/2000 47,362 47,263 Preferred Receivables Funding Co. 6.408% 6/16/2000 115,024 114,719 Preferred Receivables Funding Co. 6.412% 6/19/2000 146,550 146,084 Preferred Receivables Funding Co. 6.432% 6/6/2000 75,000 74,933 Preferred Receivables Funding Co. 6.543% 6/21/2000 30,590 30,480 Preferred Receivables Funding Co. 6.546% 6/15/2000 200,000 199,494 Private Export Funding Corp. 5.988% 6/1/2000 50,000 50,000 Private Export Funding Corp. 5.992% 6/5/2000 17,500 17,489 Private Export Funding Corp. 6.149% 6/9/2000 10,100 10,086 Riverwoods Funding Corp. 6.195% 6/19/2000 274,965 274,126 Riverwoods Funding Corp. 6.443% 6/7/2000 13,000 12,986 Riverwoods Funding Corp. 6.553% 6/12/2000 148,385 148,089 Three Rivers Funding 6.282% 6/1/2000 12,596 12,596 Triple A One Funding Corp. 6.211% 6/14/2000 24,212 24,158 Triple A One Funding Corp. 6.288% 6/5/2000 139,338 139,239 Triple A One Funding Corp. 6.31% 6/8/2000 95,188 95,071 Triple A One Funding Corp. 6.521% 6/1/2000 166,497 166,497 Triple A One Funding Corp. 6.565% 6/15/2000 61,788 61,631 Variable Funding Capital Corp. 6.178% 6/5/2000 125,000 124,913 Variable Funding Capital Corp. 6.393% 7/5/2000 50,000 49,702 Variable Funding Capital Corp. 6.424% 6/7/2000 125,000 124,867 Variable Funding Capital Corp. 6.456% 6/12/2000 250,000 249,510 Variable Funding Capital Corp. 6.565% 6/15/2000 95,000 94,759 ------------ 7,824,150 ------------ INDUSTRIAL (2.7%) Bayer Corp. 6.489% 7/7/2000 150,000 149,037 Chevron Transport Co. 6.753% 8/17/2000 20,000 19,716 Chevron U.K. Investment PLC 6.451% 6/8/2000 25,000 24,969 E.I. du Pont de Nemours & Co. 6.447% 6/20/2000 10,000 9,966 E.I. du Pont de Nemours & Co. 6.457% 6/27/2000 50,000 49,769 E.I. du Pont de Nemours & Co. 6.458% 6/28/2000 25,000 24,880 Emerson Electric Co. 6.381% 6/20/2000 39,500 39,368 Equilon Enterprises LLC 6.160% 6/5/2000 22,588 22,573 Glaxo Wellcome PLC 6.398% 6/12/2000 110,400 110,185 Glaxo Wellcome PLC 6.515% 6/21/2000 50,000 49,820 Glaxo Wellcome PLC 6.74% 8/15/2000 50,000 49,309 International Business Machines Corp. 6.435% 6/12/2000 50,000 49,902 Lucent Technologies 6.479% 6/1/2000 34,816 34,816 Motorola Credit 6.144% 6/2/2000 3,960 3,959 Motorola Credit 6.74% 8/23/2000 78,888 77,682 Motorola Inc. 6.175% 6/19/2000 28,635 28,547 Motorola Inc. 6.735% 8/15/2000 20,000 19,724
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----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- Pfizer Inc. 6.503% 6/14/2000 $ 96,006 $ 95,782 Procter & Gamble 6.141% 6/1/2000 25,000 25,000 Procter & Gamble 6.142% 6/5/2000 170,000 169,884 Procter & Gamble 6.421% 6/8/2000 25,000 24,969 Procter & Gamble 6.541% 6/20/2000 25,000 24,914 Wal Mart Stores Inc. 6.502% 6/13/2000 102,000 101,780 ------------ 1,206,551 ------------ INSURANCE (3.1%) Aegon Funding Corp. 6.206% 8/14/2000 50,000 49,381 Aegon Funding Corp. 6.243% 6/1/2000 112,500 112,500 Aegon Funding Corp. 6.375% 9/18/2000 135,000 132,474 Aegon Funding Corp. 6.384% 9/15/2000 96,388 94,631 Aegon Funding Corp. 6.413% 6/7/2000 21,500 21,477 Aegon Funding Corp. 6.424% 7/7/2000 23,400 23,251 Aegon Funding Corp. 6.515% 6/14/2000 50,000 49,883 Aegon Funding Corp. 6.524% 6/6/2000 18,000 17,984 Aegon Funding Corp. 6.535% 6/15/2000 67,000 66,831 Aegon Funding Corp. 6.731% 8/16/2000 203,000 200,163 Aegon Funding Corp. 6.741% 8/17/2000 50,000 49,291 Aegon Funding Corp. 6.761% 8/22/2000 28,000 27,576 Marsh USA Inc. 6.49% 7/18/2000 14,220 14,101 Marsh USA Inc. 6.491% 7/19/2000 21,000 20,821 Metlife Funding Inc. 6.392% 6/6/2000 40,208 40,172 Metlife Funding Inc. 6.727% 8/10/2000 25,377 25,050 Prudential Funding 6.304% 7/24/2000 150,000 148,631 Prudential Funding 6.304% 7/25/2000 150,000 148,605 Teacher Insurance & Annuity Assoc. of America 6.382% 6/6/2000 40,000 39,965 Teacher Insurance & Annuity Assoc. of America 6.527% 6/8/2000 19,808 19,783 USAA Capital Corp. 6.741% 8/15/2000 52,900 52,169 USAA Capital Corp. 6.745% 8/18/2000 16,000 15,770 ------------ 1,370,509 ------------ UTILITIES (2.2%) Bell Atlantic Financial Services 6.503% 7/7/2000 25,000 24,839 Bell Atlantic Financial Services 6.506% 7/10/2000 16,000 15,889 Bell Atlantic Financial Services 6.515% 7/3/2000 48,500 48,222 Bell Atlantic Financial Services 6.517% 7/5/2000 50,000 49,695 Bell Atlantic Financial Services 6.518% 7/6/2000 49,500 49,190 Bell Atlantic Financial Services 6.524% 7/11/2000 50,000 49,642 Bell Atlantic Financial Services 6.526% 7/12/2000 40,000 39,706 Bell Atlantic Financial Services 6.679% 7/26/2000 14,000 13,859 BellSouth Capital Funding Corp. 6.419% 6/6/2000 100,000 99,911 National Rural Utilities 6.744% 8/22/2000 92,000 90,609 SBC Communications Inc. 6.146% 6/6/2000 25,000 24,979 SBC Communications Inc. 6.345% 6/12/2000 22,860 22,816 SBC Communications Inc. 6.346% 6/13/2000 2,850 2,844 SBC Communications Inc. 6.361% 6/26/2000 100,000 99,563 SBC Communications Inc. 6.393% 7/6/2000 150,000 149,078 SBC Communications Inc. 6.428% 7/10/2000 90,775 90,151 SBC Communications Inc. 6.429% 7/11/2000 50,000 49,647 SBC Communications Inc. 6.463% 6/27/2000 10,635 10,586 SBC Communications Inc. 6.736% 8/16/2000 50,000 49,300 ------------ 980,526 ------------ FOREIGN BANKS (2.8%) Abbey National North America 6.253% 8/15/2000 110,000 108,614 ABN-AMRO North America Finance Inc. 6.123% 7/13/2000 100,000 99,307 Bayerische Landesbank Girozentrale 6.365% 6/29/2000 190,700 189,766 CBA (Delaware) Finance Inc. 6.746% 8/21/2000 150,000 147,762 CBA (Delaware) Finance Inc. 6.754% 8/23/2000 65,000 64,005 Halifax PLC 6.206% 8/9/2000 100,000 98,846 Halifax PLC 6.316% 6/5/2000 100,000 99,930
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----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- Halifax PLC 6.505% 6/7/2000 $250,000 $ 249,730 Westpac Trust 6.746% 8/21/2000 200,000 197,017 ------------ 1,254,977 ------------ CANADIAN GOVERNMENT--NATIONAL & PROVINCIAL Province of British Columbia 6.183% 6/16/2000 31,000 30,921 ------------ OTHER FOREIGN GOVERNMENT (1.8%) Caisse Damortissement de la Dette Sociale 6.078% 7/7/2000 100,000 99,410 Caisse des Depots et Consignations 6.391% 6/5/2000 100,000 99,929 Caisse des Depots et Consignations 6.531% 6/12/2000 80,709 80,549 Caisse des Depots et Consignations 6.729% 8/23/2000 300,000 295,428 Electricite de France 6.509% 6/16/2000 20,000 19,946 Electricite de France 6.515% 6/21/2000 50,000 49,820 KFW International Finance Inc. 6.41% 6/6/2000 50,000 49,956 KFW International Finance Inc. 6.414% 6/8/2000 20,000 19,975 Oesterreichische Kontrollbank 6.397% 6/16/2000 32,375 32,289 Oesterreichische Kontrollbank 6.471% 7/5/2000 47,800 47,511 ------------ 794,813 ------------ FOREIGN UTILITIES (3.6%) British Telecommunications PLC 6.152% 6/9/2000 50,000 49,933 British Telecommunications PLC 6.233% 8/8/2000 50,000 49,429 British Telecommunications PLC 6.236% 7/12/2000 189,310 187,986 British Telecommunications PLC 6.238% 8/2/2000 47,500 47,005 British Telecommunications PLC 6.239% 8/3/2000 100,000 98,940 British Telecommunications PLC 6.239% 8/14/2000 50,000 49,378 British Telecommunications PLC 6.240% 8/7/2000 50,000 49,437 British Telecommunications PLC 6.381% 6/19/2000 100,000 99,684 British Telecommunications PLC 6.389% 6/13/2000 100,000 99,788 British Telecommunications PLC 6.427% 7/10/2000 194,400 193,063 British Telecommunications PLC 6.469% 10/30/2000 75,000 73,059 British Telecommunications PLC 6.472% 10/10/2000 100,000 97,718 British Telecommunications PLC 6.476% 10/12/2000 136,250 133,087 France Telecom 6.157% 6/2/2000 21,542 21,538 France Telecom 6.163% 6/8/2000 32,553 32,515 France Telecom 6.174% 6/19/2000 100,000 99,696 France Telecom 6.176% 6/20/2000 100,000 99,679 France Telecom 6.307% 6/5/2000 23,705 23,688 France Telecom 6.753% 8/23/2000 32,504 32,006 Telstra Corp. 6.240% 7/6/2000 30,000 29,821 Telstra Corp. 6.245% 7/11/2000 58,996 58,593 ------------ 1,626,043 ------------ ----------------------------------------------------------------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (COST $20,839,435) 20,839,435 ----------------------------------------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT (25.3%) ----------------------------------------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT--U.S. BANKS (1.7%) State Street Bank & Trust 6.35% 6/6/2000 150,000 150,000 State Street Bank & Trust 6.42% 6/12/2000 100,000 100,000 State Street Bank & Trust 6.75% 8/30/2000 50,000 50,000 State Street Bank & Trust 6.75% 8/29/2000 100,000 100,000 U.S. Bank N.A. 6.64% 6/2/2000 (1) 385,000 385,000 ------------ 785,000 ------------ YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES (23.6%) ABN-AMRO Bank 6.47% 1/18/2001 50,000 49,985 ABN-AMRO Bank 6.51% 1/22/2001 100,000 99,969 ABN-AMRO Bank 6.69% 2/7/2001 200,000 199,935 ABN-AMRO Bank 6.695% 6/2/2000 200,000 199,984 ABN-AMRO Bank 7.375% 5/30/2001 250,000 249,918 Bank of Montreal 6.15% 6/19/2000 300,000 300,000
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----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- Bank of Montreal 6.19% 6/26/2000 $200,000 $ 200,000 Bank of Montreal 6.30% 6/1/2000 150,000 150,000 Bank of Montreal 6.43% 6/12/2000 200,000 200,000 Bank of Montreal 6.51% 6/15/2000 150,000 150,000 Bank of Nova Scotia 6.75% 8/23/2000 100,000 100,000 Barclays Bank PLC 6.65% 6/2/2000 (1) 200,000 199,997 Barclays Bank PLC 6.67% 2/8/2001 100,000 99,967 Barclays Bank PLC 6.68% 2/12/2001 200,000 199,933 Barclays Bank PLC 6.69% 2/12/2001 200,000 199,947 Bayerische Hypo und Vereinsbank AG 6.50% 7/5/2000 200,000 200,000 Bayerische Hypo und Vereinsbank AG 6.75% 8/17/2000 100,000 100,000 Canadian Imperial Bank of Commerce 6.19% 6/19/2000 250,000 250,000 Canadian Imperial Bank of Commerce 6.32% 7/26/2000 50,000 50,000 Canadian Imperial Bank of Commerce 6.63% 8/8/2000 53,000 52,988 Canadian Imperial Bank of Commerce 6.75% 8/24/2000 200,000 200,000 Credit Agricole Indosuez 6.20% 6/26/2000 200,000 200,000 Credit Agricole Indosuez 6.75% 8/24/2000 200,000 200,000 Credit Communal de Belgique SA 6.39% 6/8/2000 200,000 200,000 Deutsche Bank 6.40% 6/8/2000 700,000 700,000 Deutsche Bank 6.45% 6/19/2000 300,000 300,000 Deutsche Bank 6.75% 8/21/2000 130,000 130,000 Deutsche Bank 6.75% 8/22/2000 70,000 70,000 Dexia Bank 6.75% 8/24/2000 200,000 200,000 Dexia Bank 6.75% 8/28/2000 100,000 100,000 Dresdner Bank 6.21% 6/26/2000 100,000 100,000 Dresdner Bank 6.36% 6/6/2000 500,000 500,000 Dresdner Bank 6.43% 6/12/2000 100,000 100,000 Dresdner Bank 6.50% 6/15/2000 300,000 300,000 Landesbank Baden-Wurttemberg 6.75% 8/21/2000 500,000 500,000 Lloyds Bank 6.56% 7/11/2000 150,000 150,000 Lloyds Bank 6.67% 2/8/2001 190,000 189,938 Lloyds Bank 6.87% 4/2/2001 95,000 94,977 Lloyds Bank 7.29% 5/16/2001 95,000 94,991 Lloyds Bank 7.38% 5/30/2001 250,000 249,930 Rabobank Nederlanden 6.47% 1/18/2001 300,000 299,910 Rabobank Nederlanden 6.53% 1/18/2001 100,000 99,968 Rabobank Nederlanden 6.66% 2/5/2001 200,000 199,935 Rabobank Nederlanden 6.675% 2/14/2001 100,000 99,966 Rabobank Nederlanden 6.69% 2/7/2001 100,000 99,967 Rabobank Nederlanden 7.05% 5/2/2001 100,000 99,974 Rabobank Nederlanden 7.08% 5/3/2001 299,500 299,422 Rabobank Nederlanden 7.29% 5/16/2001 100,000 99,991 UBS AG 6.53% 1/18/2001 400,000 399,874 UBS AG 6.85% 3/28/2001 200,000 199,938 UBS AG 6.88% 3/29/2001 200,000 199,937 UBS AG 6.88% 4/30/2001 300,000 299,948 UBS AG 6.95% 5/1/2001 75,000 74,935 Westdeutsche Landesbank 6.17% 6/21/2000 200,000 200,000 Westdeutsche Landesbank 6.19% 6/19/2000 100,000 100,000 ------------ 10,606,224 ------------ ----------------------------------------------------------------------------------------------------------------------------- TOTAL CERTIFICATES OF DEPOSIT (COST $11,391,224) 11,391,224 ----------------------------------------------------------------------------------------------------------------------------- EURODOLLAR CERTIFICATES OF DEPOSIT (4.4%) ----------------------------------------------------------------------------------------------------------------------------- Abbey National PLC 7.42% 5/21/2001 57,000 57,008 Barclays Bank PLC 6.10% 6/7/2000 67,000 67,000 Barclays Bank PLC 6.46% 10/16/2000 200,000 200,000 Bayerische Hypo und Vereinsbank AG 6.48% 7/5/2000 300,000 300,000 Bayerische Landesbank Girozentrale 6.33% 9/18/2000 51,000 51,000
19 22
----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) ----------------------------------------------------------------------------------------------------------------------------- Bayerische Landesbank Girozentrale 6.34% 7/31/2000 $150,000 $ 150,000 Bayerische Landesbank Girozentrale 6.76% 8/23/2000 50,000 50,001 Halifax PLC 6.44% 10/16/2000 100,000 100,004 Halifax PLC 6.75% 8/21/2000 90,000 90,000 Halifax PLC 6.75% 8/25/2000 200,000 200,000 Halifax PLC 6.78% 9/1/2000 100,000 100,000 Landesbank Baden-Wurttemberg 6.77% 8/22/2000 50,000 50,002 Landesbank Baden-Wurttemberg 6.77% 8/24/2000 42,000 41,999 Landesbank Hessen-Thueringen 6.75% 8/21/2000 500,000 500,000 ----------------------------------------------------------------------------------------------------------------------------- TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (COST $1,957,014) 1,957,014 ----------------------------------------------------------------------------------------------------------------------------- OTHER NOTES (8.7%) ----------------------------------------------------------------------------------------------------------------------------- Abbey National Treasury Services 6.48% 1/18/2001 97,000 96,971 Abbey National Treasury Services 6.52% 1/22/2001 100,000 99,969 Abbey National Treasury Services 6.67% 2/5/2001 100,000 99,968 Abbey National Treasury Services 6.69% 2/7/2001 200,000 199,935 Associates Corp. of North America 6.54% 6/29/2000 (1) 500,000 499,977 Bank of America N.T.S.A 6.30% 10/10/2000 95,000 94,953 Bank of America National Association 6.71% 2/8/2001 350,000 350,000 Bank of America National Association 6.72% 2/5/2001 100,000 100,000 Bank of America National Association 6.75% 8/15/2000 200,000 200,000 Bank of America National Association 7.32% 5/16/2001 200,000 200,000 Bank of America National Association 7.40% 5/25/2001 100,000 100,000 Bank One N.A. 6.17% 6/21/2000 200,000 200,000 Bank One N.A. 6.75% 8/15/2000 100,000 100,000 Bank One N.A. 6.75% 8/16/2000 200,000 200,000 Bank One N.A. 6.75% 8/17/2000 100,000 100,000 Dakota Certificate (Citibank Credit Card Master Trust) 6.237% 6/19/2000 65,000 64,799 Dakota Certificate (Citibank Credit Card Master Trust) 6.288% 6/5/2000 75,000 74,948 Dakota Certificate (Citibank Credit Card Master Trust) 6.304% 6/2/2000 100,000 99,983 Dakota Certificate (Citibank Credit Card Master Trust) 6.316% 6/5/2000 50,000 49,965 Dakota Certificate (Citibank Credit Card Master Trust) 6.317% 6/5/2000 100,000 99,930 Dakota Certificate (Citibank Credit Card Master Trust) 6.326% 7/14/2000 50,000 49,627 Dakota Certificate (Citibank Credit Card Master Trust) 6.356% 6/6/2000 50,000 49,956 Dakota Certificate (Citibank Credit Card Master Trust) 6.358% 6/6/2000 65,100 65,043 Dakota Certificate (Citibank Credit Card Master Trust) 6.44% 6/12/2000 92,000 91,820 Dakota Certificate (Citibank Credit Card Master Trust) 6.544% 6/13/2000 25,000 24,946 Dakota Certificate (Citibank Credit Card Master Trust) 6.57% 6/19/2000 75,000 74,755 Fifth Third Bank 6.54% 6/19/2000 500,000 500,000 ----------------------------------------------------------------------------------------------------------------------------- TOTAL OTHER NOTES (COST $3,887,545) 3,887,545 ----------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (100.6%) (COST $45,142,298) 45,142,298 ----------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-0.6%) ----------------------------------------------------------------------------------------------------------------------------- Other Assets--Note B 556,311 Liabilities (817,147) ----------- (260,836) ----------------------------------------------------------------------------------------------------------------------------- NET ASSETS (100%) $44,881,462 -----------------------------------------------------------------------------------------------------------------------------
* See Note A in Notes to Financial Statements. ** Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. (1) Adjustable Rate Note. 20 23
------------------------------------------------------------------------------------------------------------------- AMOUNT (000) ------------------------------------------------------------------------------------------------------------------- AT MAY 31, 2000, NET ASSETS CONSISTED OF: ------------------------------------------------------------------------------------------------------------------- Paid in Capital $44,882,050 Undistributed Net Investment Income -- Accumulated Net Realized Losses (588) ------------------------------------------------------------------------------------------------------------------- NET ASSETS $44,881,462 =================================================================================================================== Investor Shares--Net Assets applicable to 43,051,221,720 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $43,050,666 ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE--INVESTOR SHARES $1.00 =================================================================================================================== Institutional Shares--Net Assets applicable to 1,830,824,684 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $1,830,796 ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $1.00 ===================================================================================================================
21 24
---------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* FEDERAL MONEY MARKET FUND YIELD** DATE (000) (000) ---------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS (85.6%) ---------------------------------------------------------------------------------------------------------------------------- Federal Farm Credit Bank 6.346% 1/11/2001 $ 25,000 $ 24,070 Federal Home Loan Bank 6.049% 6/9/2000 81,495 81,387 Federal Home Loan Bank 6.05% 11/3/2000 250,000 249,943 Federal Home Loan Bank 6.065%-6.392% 6/14/2000 171,071 170,687 Federal Home Loan Bank 6.071% 6/21/2000 100,000 99,668 Federal Home Loan Bank 6.325% 1/12/2001 152,265 146,603 Federal Home Loan Bank 6.386% 6/28/2000 125,000 124,404 Federal Home Loan Bank 6.62% 6/2/2000(1) 175,000 174,970 Federal Home Loan Bank 6.63% 6/2/2000(1) 15,000 14,996 Federal Home Loan Mortgage Corp. 5.00% 2/15/2001 60,000 59,423 Federal Home Loan Mortgage Corp. 5.731% 8/1/2000 30,000 29,724 Federal Home Loan Mortgage Corp. 6.192% 7/20/2000 200,000 198,339 Federal Home Loan Mortgage Corp. 6.347% 6/27/2000 14,575 14,509 Federal Home Loan Mortgage Corp. 6.399% 6/20/2000(1) 250,000 249,828 Federal Home Loan Mortgage Corp. 6.401% 6/20/2000 200,000 199,328 Federal Home Loan Mortgage Corp. 6.442%-6.443% 6/13/2000 350,000 349,252 Federal Home Loan Mortgage Corp. 6.443%-6.456% 7/5/2000 486,000 483,070 Federal Home Loan Mortgage Corp. 6.505%-6.51% 7/11/2000 360,000 357,423 Federal National Mortgage Assn. 6.25% 6/7/2000(1) 100,000 99,994 Federal National Mortgage Assn. 6.338% 6/14/2000(1) 135,000 134,990 Federal National Mortgage Assn. 6.345% 2/2/2001 150,000 149,892 Federal National Mortgage Assn. 6.464%-6.47% 8/3/2000 350,000 346,103 Federal National Mortgage Assn. 6.611% 8/11/2000 140,000 138,205 Federal National Mortgage Assn. 6.63% 6/7/2000(1) 490,000 489,594 Federal National Mortgage Assn. 7.26% 5/24/2001 200,000 200,000 Overseas Private Investment Corp. (U.S. Government Guaranteed) 6.10% 6/15/2000(1) 21,146 21,146 ----------------------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (COST $4,607,548) 4,607,548 ----------------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (23.1%) ----------------------------------------------------------------------------------------------------------------------------- Bank of America N.A. (Dated 5/31/2000, Repurchase Value $500,091,000 Collateralized by Federal National Mortgage Assn. 6.00%, 10/1/2013) 6.52% 6/1/2000 500,000 500,000 Bear Stearns & Co. (Dated 5/12/2000, Repurchase Value $252,009,000 Collateralized by Federal National Mortgage Assn. 5.50%-8.00%, 12/1/2018-12/1/2029) 6.43% 6/26/2000 250,000 250,000 Bear Stearns & Co. (Dated 5/17/2000, Repurchase Value $90,644,000 Collateralized by Federal Home Loan Mortgage Corp. 6.50%, 2/1/2029; Federal National Mortgage Assn. 5.50%-6.50%, 11/1/2013-5/1/2028) 6.44% 6/26/2000 90,000 90,000 Bear Stearns & Co. (Dated 5/16/2000, Repurchase Value $100,611,000 Collateralized by Federal National Mortgage Assn. 6.0%, 9/1/2029) 6.47% 6/19/2000 100,000 100,000 Bear Stearns & Co. (Dated 5/15/2000, Repurchase Value $100,810,000 Collateralized by Federal Home Loan Mortgage Corp. 6.50%, 2/1/2029; Federal National Mortgage Assn. 6.50%, 5/1/2028) 6.48% 6/29/2000 100,000 100,000
22 25
---------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) ---------------------------------------------------------------------------------------------------------------------------- Goldman Sachs & Co. (Dated 5/17/2000, Repurchase Value $201,439,000 Collateralized by Federal National Mortgage Assn. 6.00%, 2/1/2029-6/1/2029) 6.475% 6/26/2000 $ 200,000 $ 200,000 PaineWebber (Dated 5/31/2000, Repurchase Value $6,143,000 Collateralized by U.S. Treasury Note 14.25%, 2/15/2002) 6.33% 6/1/2000 6,142 6,142 ---------------------------------------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENTS (COST $1,246,142) 1,246,142 ---------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (108.7%) (COST $5,853,690) 5,853,690 ---------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-8.7%) ---------------------------------------------------------------------------------------------------------------------------- Other Assets--Note B 43,321 Payables for Investment Securities Purchased (489,594) Other Liabilities (22,569) ----------- (468,842) ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS (100%) ---------------------------------------------------------------------------------------------------------------------------- Applicable to 5,384,909,384 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $5,384,848 ============================================================================================================================ NET ASSET VALUE PER SHARE $1.00 ============================================================================================================================
* See Note A in Notes to Financial Statements. ** Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. (1) Adjustable Rate Note.
---------------------------------------------------------------------------------------------------------------------------- AT MAY 31, 2000, NET ASSETS CONSISTED OF: ---------------------------------------------------------------------------------------------------------------------------- AMOUNT PER (000) Share ---------------------------------------------------------------------------------------------------------------------------- Paid in Capital $5,384,939 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Losses (91) -- ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS $5,384,848 $1.00 ============================================================================================================================
23 26
--------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* Treasury Money Market Fund YIELD** DATE (000) (000) --------------------------------------------------------------------------------------------------- U.S.GOVERNMENT OBLIGATIONS (108.2%) --------------------------------------------------------------------------------------------------- U.S. Treasury Bill 4.50%-5.757% 6/1/2000 $ 371,679 $ 371,678 U.S. Treasury Bill 5.595%-5.799% 6/8/2000 411,732 411,276 U.S. Treasury Bill 5.608%-5.692% 8/3/2000 41,551 41,142 U.S. Treasury Bill 5.622%-6.103% 8/10/2000 294,367 290,985 U.S. Treasury Bill 5.665%-5.777% 7/6/2000 52,027 51,739 U.S. Treasury Bill 5.752%-5.922% 8/24/2000 322,592 318,224 U.S. Treasury Bill 5.783%-5.799% 7/13/2000 204,395 203,036 U.S. Treasury Bill 5.819%-5.845% 8/31/2000 385,000 379,405 U.S. Treasury Bill 6.03%-6.175% 8/17/2000 611,912 603,958 U.S. Treasury Bill 6.039% 9/7/2000 4,421 4,350 U.S. Treasury Note 4.00% 10/31/2000 80,000 79,196 U.S. Treasury Note 4.50% 9/30/2000 428,000 425,417 U.S. Treasury Note 5.125% 8/31/2000 350,000 349,056 U.S. Treasury Note 5.375% 7/31/2000 183,910 183,732 U.S. Treasury Note 6.00% 8/15/2000 290,164 290,152 U.S. Treasury Note 6.125% 9/30/2000 190,000 189,727 U.S. Treasury Note 6.25% 8/31/2000 290,000 289,950 --------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $4,483,023) 4,483,023 --------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-8.2%) --------------------------------------------------------------------------------------------------- Other Assets--Note B 60,770 Payables for Investment Securities Purchased (379,405) Other Liabilities (21,316) ------------ (339,951) --------------------------------------------------------------------------------------------------- NET ASSETS (100%) --------------------------------------------------------------------------------------------------- Applicable to 4,142,843,690 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $4,143,072 =================================================================================================== NET ASSET VALUE PER SHARE $1.00 ===================================================================================================
*See Note A in Notes to Financial Statements. **Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities.
--------------------------------------------------------------------------------------------------- AT MAY 31, 2000, NET ASSETS CONSISTED OF: --------------------------------------------------------------------------------------------------- AMOUNT PER (000) Share --------------------------------------------------------------------------------------------------- Paid in Capital $4,142,863 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Gains 209 -- --------------------------------------------------------------------------------------------------- NET ASSETS $4,143,072 $1.00 ===================================================================================================
24 27 STATEMENT OF OPERATIONS This Statement shows interest earned by each fund during the reporting period, and details the operating expenses charged to each class of its shares. Expenses directly reduce the amount of investment income available to pay to shareholders as income dividends. This Statement also shows any Net Gain (Loss) realized on the sale of investments, and any Unrealized Appreciation (Depreciation) on investments during the period. For money market funds, Realized Net Gain (Loss) should always be minimal and Unrealized Appreciation (Depreciation) should be zero.
------------------------------------------------------------------------------------------------------------------ PRIME FEDERAL TREASURY MONEY MARKET MONEY MARKET MONEY MARKET FUND FUND FUND ---------------------------------------------------- SIX MONTHS ENDED MAY 31, 2000 ---------------------------------------------------- (000) (000) (000) ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME Interest $1,313,766 $158,179 $123,444 --------------------------------------------------- Total Income 1,313,766 158,179 123,444 --------------------------------------------------- EXPENSES The Vanguard Group--Note B Investment Advisory Services 2,511 313 272 Management and Administrative--Investor Shares 61,285 7,827 6,515 Management and Administrative--Institutional Shares* 1,100 -- -- Marketing and Distribution--Investor Shares 4,125 539 474 Marketing and Distribution--Institutional Shares* 173 -- -- Custodian Fees 350 44 40 Auditing Fees 14 5 5 Shareholders' Reports--Investor Shares 510 70 60 Shareholders' Reports--Institutional Shares* 2 -- -- Trustees' Fees and Expenses 26 3 3 --------------------------------------------------- Total Expenses 70,096 8,801 7,369 Expenses Paid Indirectly--Note C -- (1) (1) --------------------------------------------------- Net Expenses 70,096 8,800 7,368 ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME 1,243,670 149,379 116,076 ------------------------------------------------------------------------------------------------------------------ REALIZED NET LOSS ON INVESTMENT SECURITIES SOLD (527) (180) (159) ------------------------------------------------------------------------------------------------------------------ UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES -- -- -- ------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,243,143 $149,199 $115,917 ==================================================================================================================
*The Federal and Treasury Money Market Funds do not offer Institutional Shares. 25 28 STATEMENT OF CHANGES IN NET ASSETS This Statement shows how each fund's total net assets changed during the two most recent reporting periods. The Operations section summarizes information detailed in the Statement of Operations. Because the fund distributes its income to shareholders each day, the amounts of Dividends from Net Investment Income generally equal the net income earned as shown under the Operations section. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. Dividends and Capital Share Transactions are shown separately for each class of shares.
------------------------------------------------------------------------------------------ PRIME MONEY MARKET FUND --------------------------- SIX MONTHS YEAR ENDED ENDED MAY 31, 2000 NOV. 30, 1999 (000) (000) ------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 1,243,670 $ 1,865,313 Realized Net Gain (Loss) (527) 462 Unrealized Appreciation (Depreciation) -- -- ------------------------------- Net Increase in Net Assets Resulting from Operations 1,243,143 1,865,775 ------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME Investor Shares (1,188,829) (1,797,001) Institutional Shares (54,841) (68,312) -------------------------------- Total Dividends (1,243,670) (1,865,313) -------------------------------- CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES (AT $1.00) Issued 35,018,433 50,885,818 Issued in Lieu of Cash Distributions 1,143,919 1,727,975 Redeemed (32,541,575) (46,916,245) -------------------------------- Net Increase--Investor Shares 3,620,777 5,697,548 -------------------------------- CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES (AT $1.00) Issued 2,258,339 3,264,695 Issued in Lieu of Cash Distributions 43,954 62,112 Redeemed (2,247,265) (2,693,960) -------------------------------- Net Increase--Institutional Shares 55,028 632,847 -------------------------------------------------------------------------------------------- Total Increase 3,675,278 6,330,857 -------------------------------------------------------------------------------------------- NET ASSETS Beginning of Period 41,206,184 34,875,327 -------------------------------- End of Period $44,881,462 $41,206,184 ============================================================================================
26 29
---------------------------------------------------------------------------------------------------- FEDERAL MONEY MARKET FUND TREASURY MONEY MARKET FUND ---------------------------------------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED MAY 31, 2000 NOV. 30, 1999 MAY 31, 2000 NOV. 30, 1999 (000) (000) (000) (000) ---------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 149,379 $ 228,431 $ 116,076 $ 191,010 Realized Net Gain (Loss) (180) 159 (159) 292 Unrealized Appreciation (Depreciation) -- -- -- -- ----------------------------------------------------------- Net Increase in Net Assets Resulting from Operations 149,199 228,590 115,917 191,302 ----------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME (149,379) (228,431) (116,076) (191,010) ----------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (AT $1.00) Issued 2,894,387 4,831,291 2,767,955 4,821,379 Issued in Lieu of Cash Distributions 144,324 220,153 110,939 183,629 Redeemed (2,896,877) (4,071,311) (3,328,277) (4,354,937) ----------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 141,834 980,133 (449,383) 650,071 ---------------------------------------------------------------------------------------------------- Total Increase (Decrease) 141,654 980,292 (449,542) 650,363 ---------------------------------------------------------------------------------------------------- NET ASSETS Beginning of Period 5,243,194 4,262,902 4,592,614 3,942,251 ----------------------------------------------------------- End of Period $5,384,848 $ 5,243,194 $4,143,072 $4,592,614 ====================================================================================================
27 30 FINANCIAL HIGHLIGHTS Each fund's objective is to maintain a constant NAV of $1.00 per share by distributing all of its income and avoiding capital gains or losses. The financial highlights table summarizes each fund's investment results and distributions to shareholders on a per-share basis for each class of shares. The table also presents the Total Return and shows net investment income and expenses as percentages of average net assets for each fund or class of shares. These data will help you assess the variability of net income returns from year to year and how much it costs to operate the fund.
--------------------------------------------------------------------------------------------------------- PRIME MONEY MARKET FUND INVESTOR SHARES YEAR ENDED NOVEMBER 30, ---------------------------------------------- FOR A SHARE OUTSTANDING SIX MONTHS ENDED THROUGHOUT EACH PERIOD MAY 31, 2000 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 -------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .029 .049 .053 .053 .052 .057 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- -------------------------------------------------------- Total from Investment Operations .029 .049 .053 .053 .052 .057 -------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.029) (.049) (.053) (.053) (.052) (.057) Distributions from Realized Capital Gains -- -- -- -- -- -- -------------------------------------------------------- Total Distributions (.029) (.049) (.053) (.053) (.052) (.057) -------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ======================================================================================================== TOTAL RETURN 2.89% 4.97% 5.42% 5.41% 5.31% 5.82% ======================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $43,051 $39,430 $33,732 $26,480 $22,218 $18,764 Ratio of Total Expenses to Average Net Assets 0.33%* 0.33% 0.33% 0.32% 0.32% 0.32% Ratio of Net Investment Income to Average Net Assets 5.70%* 4.85% 5.28% 5.28% 5.18% 5.64% ========================================================================================================
*Annualized.
------------------------------------------------------------------------------------------------------------------------- PRIME MONEY MARKET FUND INSTITUTIONAL SHARES YEAR ENDED NOVEMBER 30, -------------------------------------------------------------- FOR A SHARE OUTSTANDING SIX MONTHS ENDED OCT. 28* TO THROUGHOUT EACH PERIOD MAY 31, 2000 1999 1998 1997 1996 NOV. 30, 1995 ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .029 .050 .055 .054 .054 .005 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- ---------------------------------------------------------------- Total from Investment Operations .029 .050 .055 .054 .054 .005 ---------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.029) (.050) (.055) (.054) (.054) (.005) Distributions from Realized Capital Gains -- -- -- -- -- -- ---------------------------------------------------------------- Total Distributions (.029) (.050) (.055) (.054) (.054) (.005) ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ========================================================================================================================= TOTAL RETURN 2.98% 5.15% 5.61% 5.59% 5.49% 0.53% ========================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $1,831 $1,776 $1,143 $951 $910 $793 Ratio of Total Expenses to Average Net Assets 0.15%** 0.15% 0.15% 0.15% 0.15% 0.15%** Ratio of Net Investment Income to Average Net Assets 5.88%** 5.04% 5.46% 5.44% 5.35% 5.65%** =========================================================================================================================
*Inception. **Annualized. 28 31
----------------------------------------------------------------------------------------------------------------- FEDERAL MONEY MARKET FUND YEAR ENDED NOVEMBER 30, ------------------------------------------ FOR A SHARE OUTSTANDING SIX MONTHS ENDED THROUGHOUT EACH PERIOD MAY 31, 2000 1999 1998 1997 1996 1995 ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .028 .048 .052 .052 .051 .056 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- --------------------------------------------------------- Total from Investment Operations .028 .048 .052 .052 .051 .056 --------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.028) (.048) (.052) (.052) (.051) (.056) Distributions from Realized Capital Gains -- -- -- -- -- -- --------------------------------------------------------- Total Distributions (.028) (.048) (.052) (.052) (.051) (.056) ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ================================================================================================================= TOTAL RETURN 2.84% 4.89% 5.35% 5.35% 5.26% 5.77% ================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $5,385 $5,243 $4,263 $3,495 $3,100 $2,637 Ratio of Total Expenses to Average Net Assets 0.33%* 0.33% 0.33% 0.32% 0.32% 0.32% Ratio of Net Investment Income to Average Net Assets 5.59%* 4.79% 5.21% 5.22% 5.13% 5.61% =================================================================================================================
*Annualized.
----------------------------------------------------------------------------------------------------------------- TREASURY MONEY MARKET FUND YEAR ENDED NOVEMBER 30, FOR A SHARE OUTSTANDING SIX MONTHS ENDED THROUGHOUT EACH PERIOD MAY 31, 2000 1999 1998 1997 1996 1995 ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .026 .044 .050 .050 .050 .053 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- --------------------------------------------------------- Total from Investment Operations .026 .044 .050 .050 .050 .053 --------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.026) (.044) (.050) (.050) (.050) (.053) Distributions from Realized Capital Gains -- -- -- -- -- -- --------------------------------------------------------- Total Distributions (.026) (.044) (.050) (.050) (.050) (.053) ----------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ================================================================================================================= TOTAL RETURN 2.64% 4.51% 5.06% 5.10% 5.11% 5.47% ================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $4,143 $4,593 $3,942 $3,237 $2,917 $2,527 Average Net Assets 0.33%* 0.33% 0.33% 0.32% 0.32% 0.32% Ratio of Net Investment Income to Average Net Assets 5.19%* 4.41% 4.94% 4.98% 4.99% 5.33% =================================================================================================================
*Annualized. 29 32 NOTES TO FINANCIAL STATEMENTS Vanguard Money Market Funds comprise the Prime Money Market Fund, Federal Money Market Fund, and Treasury Money Market Fund, each of which is registered under the Investment Company Act of 1940 as a diversified open-end investment company, or mutual fund. The Prime Money Market Fund invests in short-term debt instruments of companies primarily operating in specific industries; the issuers' abilities to meet their obligations may be affected by economic developments in such industries. The Federal Money Market Fund invests in short-term debt instruments issued by the U.S. government or its agencies and instrumentalities. The Treasury Money Market Fund invests in short-term debt instruments backed by the full faith and credit of the U.S. government. 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: Securities are valued at amortized cost, which approximates market 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. OTHER: Security transactions are accounted for on the date the securities are purchased or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Discounts and premiums are accreted and amortized, respectively, to interest income over the lives of the respective securities. Dividends from net investment income are declared daily and paid on the first business day of the following month. 4. REPURCHASE AGREEMENTS: 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. B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, shareholder accounting, 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 May 31, 2000, the funds had contributed capital to Vanguard (included in Other Assets) of:
----------------------------------------------------------------------------- CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE TO VANGUARD OF PORTFOLIO OF VANGUARD'S MONEY MARKET FUND (000) NET ASSETS CAPITALIZATION ----------------------------------------------------------------------------- Prime $8,236 0.02% 8.2% Federal 1,031 0.02 1.0 Treasury 802 0.02 0.8 -----------------------------------------------------------------------------
The funds' trustees and officers are also directors and officers of Vanguard. 30 33 C. The funds' custodian bank has agreed to reduce its fees when the funds maintain cash on deposit in their non-interest-bearing custody accounts. For the six months ended May 31, 2000, custodian fee offset arrangements reduced expenses by:
----------------------------------------------------------------------------- EXPENSE REDUCTION MONEY MARKET FUND (000) ----------------------------------------------------------------------------- Federal $1 Treasury 1 -----------------------------------------------------------------------------
D. The Prime Money Market Fund offers two classes of shares, the Investor Shares and the Institutional Shares. Institutional shares are designed primarily for institutional investors that meet certain administrative and servicing criteria and have a minimum investment of $10 million. Investor shares are offered to all other investors. Both classes of shares have equal rights as to assets and earnings, except that each class bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expense), marketing and distribution, and shareholder reporting. For the six months ended May 31, 2000, class-specific expenses of the Investor Shares and Institutional Shares represented effective annual rates of 0.22% and 0.04%, respectively, of their average net assets. Income, expenses not attributable to a specific class, and gains and losses on investments are allocated to each class of shares based on its relative net assets. 31 34 THE VANGUARD(R) FAMILY OF FUNDS
STOCK FUNDS ------------------------------------------------------------------------------------------------------------- 500 Index Fund Growth Equity Fund Small-Cap Value Index Fund* Aggressive Growth Fund Growth Index Fund* Tax-Managed Capital Calvert Social Index(TM) Fund Health Care Fund Appreciation Fund* Capital Opportunity Fund Institutional Developed Markets Tax-Managed Growth and Convertible Securities Fund Index Fund Income Fund* Developed Markets Index Fund Institutional Index Fund* Tax-Managed International Fund* Emerging Markets Stock International Growth Fund Tax-Managed Small-Cap Fund* Index Fund* International Value Fund Total International Stock Energy Fund Mid-Cap Index Fund* Index Fund Equity Income Fund Morgan(TM) Growth Fund Total Stock Market Index Fund* European Stock Index Fund* Pacific Stock Index Fund* U.S. Growth Fund Explorer(TM) Fund PRIMECAP Fund U.S. Value Fund Extended Market Index Fund* REIT Index Fund Utilities Income Fund Global Equity Fund Selected Value Fund Value Index Fund* Gold and Precious Metals Fund Small-Cap Growth Index Fund* Windsor(TM) Fund Growth and Income Fund Small-Cap Index Fund* Windsor(TM) II Fund BALANCED FUNDS ------------------------------------------------------------------------------------------------------------- Asset Allocation Fund LifeStrategy(R) Growth Fund STAR(TM) Fund Balanced Index Fund LifeStrategy(R) Income Fund Tax-Managed Balanced Fund Global Asset Allocation Fund LifeStrategy(R) Moderate Wellesley(R) Income Fund LifeStrategy(R) Conservative Growth Fund Wellington(TM) Fund Growth Fund BOND FUNDS ------------------------------------------------------------------------------------------------------------- Admiral(TM) Intermediate-Term Intermediate-Term Bond Preferred Stock Fund Treasury Fund Index Fund Short-Term Bond Index Fund Admiral(TM) Long-Term Treasury Intermediate-Term Corporate Fund Short-Term Corporate Fund* Fund Intermediate-Term Tax-Exempt Short-Term Federal Fund Admiral(TM) Short-Term Treasury Fund Short-Term Tax-Exempt Fund 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, Inflation-Protected Securities Fund Long-Term Tax-Exempt Fund New York, Ohio, Pennsylvania) Insured Long-Term Tax-Exempt Long-Term Treasury Fund Total Bond Market Index Fund* Fund MONEY MARKET FUNDS ------------------------------------------------------------------------------------------------------------- Admiral(TM) 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* VARIABLE ANNUITY PLAN ------------------------------------------------------------------------------------------------------------- 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
*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. 32 35 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. Six of Vanguard's seven 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 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 & Johnson Merck 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. 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 AmeriSource Health Corporation, 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 - Quantitative Equity Group. 36 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. [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. Q302 072000 (C) 2000 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor.