UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07175
Name of Registrant: Vanguard Tax-Managed Funds
Address of Registrant: P.O. Box 2600
Valley Forge, PA 19482
Name and address of agent for service: R. Gregory Barton, Esquire
P.O. Box 876
Valley Forge, PA 19482
Registrant's telephone number, including area code: (610) 669-1000
Date of fiscal year end: December 31
Date of reporting period: January 1, 2003 - June 30, 2003
Item 1: Reports to Shareholders
VANGUARD TAX-MANAGED FUNDS(R)
SEMIANNUAL REPORT
JUNE 30, 2003
VANGUARD(R) TAX-MANAGED BALANCED FUND
VANGUARD(R) TAX-MANAGED GROWTH AND INCOME FUND
VANGUARD(R) TAX-MANAGED CAPITAL APPRECIATION FUND
VANGUARD(R) TAX-MANAGED SMALL-CAP FUND
VANGUARD(R) TAX-MANAGED INTERNATIONAL FUND
ETERNAL PRINCIPLES
Markets change, but the principles of successful investing do not. During
the past few years, radical upheaval in the stock market has displayed the power
of this simple truth to dramatic effect.
In the late 1990s, stocks experienced one of the greatest bull markets in
financial history. Then, in March 2000, the longest downturn since the Great
Depression began.
In both bull and bear markets, however, the principles of successful
investing are identical: balance, diversification, and attention to costs.
Balance among stock, bond, and money market funds allows you to pursue long-term
growth while moderating your risk. Diversification limits your exposure to the
disasters that can befall any one security or sector. Attention to costs means
you keep a larger share of any rewards produced by your investments.
These principles are timeless. In fact, they're the basis of our very first
mutual fund--Vanguard(R) Wellington(TM) Fund, a balanced portfolio established
in 1929. Over time, balance, diversification, and attention to costs have proven
to be the master keys to investment success.
- --------------------------------------------------------------------------------
SUMMARY
* During the first half of 2003, returns for Vanguard's five tax-managed
funds ranged from 8.4% to 13.4%.
* Bonds posted respectable returns and stocks surged, with smaller
growth stocks leading the market.
* Three of the five funds outperformed their respective average peer
funds during the half-year.
- --------------------------------------------------------------------------------
CONTENTS
1 Letter from the Chairman
6 Fund Profiles
13 Glossary of Investment Terms
15 Performance Summaries
18 Your Fund's After-Tax Returns
19 Financial Statements
40 Advantages of Vanguard.com
- --------------------------------------------------------------------------------
[Picture of John J. Brennan]
JOHN J. BRENNAN
LETTER FROM THE CHAIRMAN
Fellow Shareholder,
The stock market surged during the first half of 2003, with smaller growth
stocks leading the charge. In this environment, Vanguard's tax-managed funds
posted six-month returns ranging from 8.4% for Vanguard Tax-Managed Balanced
Fund to 13.4% for the Institutional Shares of Vanguard Tax-Managed Capital
Appreciation Fund. Three of the five funds also outpaced their average mutual
fund peers. The table at left shows the total returns for the funds' various
share classes, the average peers, and the unmanaged benchmark indexes. Each
fund's total returns are based on the change in net asset value during the
half-year plus income dividends distributed to shareholders. The table on page 5
provides details about share prices and distributions.
STOCKS RALLIED DESPITE WAR
The war with Iraq, a lackluster economy, and rising unemployment did little to
impede the U.S. stock market during the half-year ended June 30. Indeed, the
start of the war in mid-March marked the beginning of a sharp rally in stocks
that outlasted the conflict. For the first half of 2003, the overall U.S. stock
market, as measured by the Wilshire 5000 Total Market Index, returned a stellar
12.9%.
The gain was almost universal, with all market
- -----------------------------------------------------------
TOTAL RETURNS SIX MONTHS ENDED
JUNE 30, 2003
- -----------------------------------------------------------
VANGUARD TAX-MANAGED BALANCED FUND 8.4%
Average Balanced Fund* 8.7
Balanced Composite Index** 8.1
- -----------------------------------------------------------
VANGUARD TAX-MANAGED GROWTH AND INCOME FUND
Investor Shares 11.7%
Admiral Shares 11.7
Institutional Shares 11.7
Average Large-Cap Core Fund* 10.4
S&P 500 Index 11.8
- -----------------------------------------------------------
VANGUARD TAX-MANAGED CAPITAL APPRECIATION FUND
Investor Shares 13.3%
Admiral Shares 13.3
Institutional Shares 13.4
Average Multi-Cap Core Fund* 12.0
Russell 1000 Index 12.3
- -----------------------------------------------------------
VANGUARD TAX-MANAGED SMALL-CAP FUND
Investor Shares 12.8%
Institutional Shares 12.9
Average Small-Cap Core Fund* 15.6
S&P SmallCap 600 Index 12.9
- -----------------------------------------------------------
VANGUARD TAX-MANAGED INTERNATIONAL FUND
Investor Shares 9.5%
Institutional Shares 9.5
Average International Fund* 8.6
MSCI EAFE Index 9.5
- -----------------------------------------------------------
*Derived from data provided by Lipper Inc. For the average balanced fund, the
bond component is not tax-exempt.
**50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
1
- ---------------------------------------------------------------
MARKET BAROMETER TOTAL RETURNS
PERIODS ENDED JUNE 30, 2003
--------------------------------
Six One Five
Months Year Years*
- ---------------------------------------------------------------
STOCKS
Russell 1000 Index (Large-caps) 12.3% 1.0% -1.2%
Russell 2000 Index (Small-caps) 17.9 -1.6 1.0
Wilshire 5000 Index (Entire market) 12.9 1.3 -1.3
MSCI All Country World Index Free
ex USA (International) 11.1 -4.2 -2.8
--------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 3.9% 10.4% 7.5%
(Broad taxable market)
Lehman Municipal Bond Index 3.8 8.7 6.3
Citigroup 3-Month Treasury Bill Index 0.6 1.4 3.9
===============================================================
CPI
Consumer Price Index 1.5% 2.1% 2.4%
- ---------------------------------------------------------------
*Annualized.
segments and industrial sectors within the broad index posting positive returns.
Small-capitalization stocks outperformed large-caps. And according to most (but
not all) style-based indexes, growth stocks, whose prices reflect expectations
for above-average earnings growth, outpaced value stocks. Technology and
consumer discretionary stocks (such as retailers and restaurants) were among the
biggest winners, with each sector returning more than 17%.
Almost without exception, markets overseas contributed to the bounty. The
Morgan Stanley Capital International All Country World Index Free ex USA
returned 11.1% in U.S. dollars, with emerging markets posting the highest
returns.
BONDS ALSO RALLIED; INTEREST RATES FELL TO 45-YEAR LOWS
In the fixed income arena, risk was rewarded during the six months. The lower
the credit rating of the bond issuer, the higher the return. The Lehman Brothers
High Yield Bond Index surged 18.5%--well above the respectable six-month return
of 3.9% for the overall bond market, as measured by the Lehman Aggregate Bond
Index. The yield of the 10-year U.S. Treasury note fell 30 basis points (0.30
percentage point) to 3.51%, as bond prices rose.
Meanwhile, short-term interest rates fell to their lowest levels in 45
years. In late June, citing concerns about sustainable economic growth and
potential deflation, the Federal Reserve Board lowered the target for the
federal funds rate (the interest rate charged for overnight loans between banks)
by 25 basis points to 1.00%. It was the 13th rate cut in 21/2 years. The yield
of the 3-month Treasury bill fell 34 basis points during the six months.
- --------------------------------------------------------------------------------
ADMIRAL(TM) SHARES
A lower-cost class of shares available to many longtime shareholders and to
those with significant investments in the fund.
INSTITUTIONAL SHARES
This class of shares also carries low expenses and is available for a minimum
investment of $10 million. Exposure to smaller growth stocks gave the
Tax-Managed Capital Appreciation Fund an edge over its sibling funds during the
half-year.
- --------------------------------------------------------------------------------
2
OUR FUNDS' RETURNS TRACKED MARKET TRENDS
As index-oriented portfolios, the five funds reflected overall trends in the
financial markets for the six months.
THE TAX-MANAGED BALANCED FUND, as you would expect, provided a return
midway between the stock market's leap and the bond market's respectable step
upward. The fund's half-year return of 8.4% was excellent in absolute terms,
although it slightly lagged the average gain of competing balanced funds, which
generally devote more of their assets to stocks and taxable bonds. To maintain a
tax-exempt status for income from its municipal bond holdings, the Tax-Managed
Balanced Fund keeps slightly more than 50% of its assets in muni issues.
The TAX-MANAGED GROWTH AND INCOME FUND and the TAX-MANAGED CAPITAL
APPRECIATION FUND (+11.7% and +13.3%, respectively, for Investor Shares) each
outpaced the average return of peer funds by 1.3 percentage points. Every
industry sector within each fund gained value during the half-year, and the
majority posted double-digit returns.
The TAX-MANAGED CAPITAL APPRECIATION FUND had the largest gain because its
benchmark, the Russell 1000 Index, includes a range of mid-cap stocks as well as
large-caps. In addition, the Capital Appreciation Fund favors the lower-yielding
stocks in its index. The fund therefore has both exposure to mid-cap stocks and
a growth tilt--an advantage when smaller growth stocks lead the market as they
did during the half-year. The Tax-Managed Growth and Income Fund bases its
strategy on the Standard & Poor's 500 Index, which is heavily dominated by
large-cap stocks.
The TAX-MANAGED SMALL-CAP FUND, with a 12.8% return for Investor Shares,
fell in between the results of its two larger fund siblings. The fund's
benchmark is the S&P SmallCap 600 Index, whose composition, determined by a
committee, generally excludes companies with less than three years of operating
history and four quarters of profits. The S&P criteria eliminated many of the
more speculative stocks that benefited most from the rebound during the
half-year. This factor partly explains why the fund lagged the Tax-Managed
Capital Appreciation Fund and the average small-cap core fund. (We note,
however, that this same factor worked in the Small-Cap Fund's favor during much
of the previous three years, when those speculative stocks were pummeled.)
With its six-month return of 9.5%, the TAX-MANAGED INTERNATIONAL FUND
outperformed its average competitor among international equity funds. The fund's
gain, while impressive in absolute terms, was the lowest among our
- --------------------------------------------------------------------------------
Exposure to smaller growth stocks gace the Tax-Managed Capital Appreciation Fund
an edge over its sibling funds the half-year.
- --------------------------------------------------------------------------------
3
four all-stock portfolios. This reflected the fact that international markets
lagged the U.S. market for the period. However, their exposure to foreign
currency almost universally enhanced their returns as the U.S. dollar declined
in response to the weak economy and the increasing trade deficit.
THE VALUE OF DIVERSIFICATION
Events of the past several years--which saw the height of the dot-com boom, the
long bear market in stocks that followed, and the recent resurgence of
equities--remind us of the value of diversification, both across and within
asset classes.
Maintaining a well-diversified portfolio through such times can be a
struggle, as investors are constantly being tempted or repelled by the returns
of various asset classes or market segments. The balanced investor will never be
at the top of the heap at any one moment--after all, one asset class will always
do better than another--but he or she won't be on the bottom, either: Balance
lets us enjoy much of the gains of the financial markets without plunging to
their depths. Vanguard's low-cost tax-managed funds, designed to maximize after-
tax returns from the financial markets, can contribute to a diversified
portfolio for the tax-sensitive investor.
Thank you for entrusting your hard-earned money to us.
Sincerely,
/S/JOHN J. BRENNAN
John J. Brennan
Chairman and Chief Executive Officer
July 18, 2003
4
- --------------------------------------------------------------------------------
YOUR FUND'S PERFORMANCE AT A GLANCE DECEMBER 31, 2002-JUNE 30, 2003
DISTRIBUTIONS PER SHARE
-----------------------
STARTING ENDING INCOME CAPITAL
SHARE PRICE SHARE PRICE DIVIDENDS GAINS
- --------------------------------------------------------------------------------
Tax-Managed Balanced Fund $15.54 $16.65 $0.190 $0.000
- --------------------------------------------------------------------------------
Tax-Managed Growth and Income Fund
Investor Shares $19.15 $21.24 $0.140 $0.000
Admiral Shares 39.35 43.65 0.303 0.000
Institutional Shares 19.15 21.24 0.149 0.000
- --------------------------------------------------------------------------------
Tax-Managed Capital Appreciation Fund
Investor Shares $19.49 $22.09 $0.000 $0.000
Admiral Shares 39.24 44.47 0.000 0.000
Institutional Shares 19.49 22.10 0.000 0.000
- --------------------------------------------------------------------------------
Tax-Managed Small-Cap Fund
Investor Shares $12.67 $14.29 $0.000 $0.000
Institutional Shares 12.68 14.31 0.000 0.000
- --------------------------------------------------------------------------------
Tax-Managed International Fund
Investor Shares $6.43 $7.04 $0.000 $0.000
Institutional Shares 6.43 7.04 0.000 0.000
- --------------------------------------------------------------------------------
5
FUND PROFILES AS OF JUNE 30, 2003
These Profiles provide snapshots of the funds' characteristics, compared where
indicated with both an appropriate market index and a broad market index. Key
terms are defined on pages 13 and 14.
TAX-MANAGED BALANCED FUND
- --------------------------------------------
TOTAL FUND CHARACTERISTICS
Yield 1.8%
Turnover Rate 15%*
Expense Ratio 0.17%*
Cash Investments 0.0%
- --------------------------------------------
- --------------------------------------------
TEN LARGEST STOCKS (% of equities)
General Electric Co. 3.1%
(conglomerate)
Pfizer Inc. 3.0
(pharmaceuticals)
ExxonMobil Corp. 2.6
(oil)
Microsoft Corp. 2.5
(software)
Citigroup, Inc. 2.4
(banking)
Johnson & Johnson 1.7
(pharmaceuticals)
Wal-Mart Stores, Inc. 1.6
(retail)
Intel Corp. 1.5
(computer hardware)
International Business Machines Corp. 1.5
(computer hardware)
American International Group, Inc. 1.4
(insurance)
- ------------------------------------------
Top Ten 21.3%
- ------------------------------------------
Top Ten as % of Total Net Assets 10.3%
- ------------------------------------------
The "Ten Largest Stocks" excludes any
equity index products.
- ----------------------------------------------
VOLATILITY MEASURES
COMPARATIVE BROAD
FUND INDEX** FUND INDEX+
- ----------------------------------------------
R-Squared 0.99 1.00 0.95 1.00
Beta 1.05 1.00 0.48 1.00
- ----------------------------------------------
- -----------------------------------------------------
SECTOR DIVERSIFICATION (% OF EQUITY PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX** INDEX+
- -----------------------------------------------------
Auto & Transportation 2.4% 2.1% 2.6%
Consumer Discretionary 16.0 13.9 15.7
Consumer Staples 7.1 7.5 6.9
Financial Services 19.7 22.7 22.3
Health Care 16.8 15.4 14.3
Integrated Oils 3.7 4.2 3.5
Other Energy 2.9 1.6 2.3
Materials & Processing 2.9 3.2 3.6
Producer Durables 4.1 3.6 4.0
Technology 14.9 13.7 13.5
Utilities 5.3 7.7 7.1
Other 4.2 4.4 4.2
- -----------------------------------------------------
- ---------------------
FUND ASSET ALLOCATION
Bonds 52%
Stocks 48%
- ---------------------
*Annualized.
**Russell 1000 Index.
+Wilshire 5000 Index.
6
- -----------------------------------------------------
EQUITY CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -----------------------------------------------------
Number of Stocks 548 1,000 5,403
Median Market Cap $33.1B $36.8B $27.7B
Price/Earnings Ratio 22.2x 20.9x 21.8x
Price/Book Ratio 3.0x 2.9x 2.7x
Dividend Yield 1.2% 1.7% 1.6%
Return on Equity 21.7% 21.7% 20.5%
Earnings Growth Rate 10.2% 8.7% 8.6%
Foreign Holdings 0.0% 0.0% 0.9%
- -----------------------------------------------------
- ------------------------
EQUITY INVESTMENT FOCUS
Market Cap Large
Style Blend
- ------------------------
- -------------------------------------------------------
FIXED INCOME CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX+ INDEX++
- -------------------------------------------------------
Number of Bonds 148 5,474 46,897
Yield to Maturity 2.5% -- --
Average Coupon 4.3% 5.3% 5.2%
Average Maturity 5.7 years 6.9 years 13.8 years
Average Quality AAA AA+ AA+
Average Duration 4.7 years 5.4 years 7.9 years
- -------------------------------------------------------
- -----------------------------
FIXED INCOME INVESTMENT FOCUS
Credit Equity High
Average Maturity Medium
- -----------------------------
- -------------_------------------
DISTRIBUTION BY CREDIT QUALITY
(% of fixed income portfolio)
Aaa 79.0%
Aa 17.2
A 1.9
Baa 1.9
- --------------------------------
Total 100.0%
- --------------------------------
- --------------------------------
LARGEST STATE CONCENTRATIONS
(% of fixed income portfolio)
New York 12.5%
Texas 8.7
Pennsylvania 8.5
Massachusetts 7.1
Ohio 7.0
California 6.2
New Jersey 4.9
Arizona 4.6
Michigan 4.1
Florida 3.8
- --------------------------------
Total 67.4%
- --------------------------------
- -------------------------------------------------------
DISTRIBUTION BY MATURITY (% of fixed income portfolio)
Under 1 Year 21.3%
1-5 Years 13.5
5-10 Years 58.0
10-20 Years 7.2
- -------------------------------------------------------
Total 100.0%
- -------------------------------------------------------
*Russell 1000 Index.
**Wilshire 5000 Index.
+Lehman 7 Year Municipal Bond Index.
++Lehman Municipal Bond Index.
VISIT OUR WEBSITE AT
WWW.VANGUARD.COM
FOR REGULARLY UPDATED FUND INFORMATION.
7
FUND PROFILES (continued)
TAX-MANAGED GROWTH AND INCOME FUND
- -------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Number of Stocks 501 500 5,403
Median Market Cap $50.4B $50.4B $27.7B
Price/Earnings Ratio 20.8x 20.9x 21.8x
Price/Book Ratio 3.0x 3.0x 2.7x
Yield 1.7% 1.6%
Investor Shares 1.5%
Admiral Shares 1.6%
Institutional Shares 1.6%
Return on Equity 22.5% 22.4% 20.5%
Earnings Growth Rate 8.5% 8.5% 8.6%
Foreign Holdings 0.0% 0.0% 0.9%
Turnover Rate 5%+ -- --
Expense Ratio -- --
Investor Shares 0.18%+
Admiral Shares 0.11%+
Institutional Shares 0.08%+
Cash Investments 0.0% -- --
- -------------------------------------------------------
- --------------------------------------------
TEN LARGEST HOLDINGS (% of total net assets)
General Electric Co. 3.2%
(conglomerate)
Microsoft Corp. 3.1
(software)
Pfizer Inc. 3.0
(pharmaceuticals)
ExxonMobil Corp. 2.7
(oil)
Wal-Mart Stores, Inc. 2.6
(retail)
Citigroup, Inc. 2.5
(banking)
Johnson & Johnson 1.7
(pharmaceuticals)
American International Group, Inc. 1.6
(insurance)
International Business Machines Corp. 1.6
(computer hardware)
Intel Corp. 1.5
(computer hardware)
- --------------------------------------------
Top Ten 23.5%
- --------------------------------------------
The "Ten Largest Holdings" excludes any
temporary cash investments and equity
index products.
- ----------------------------------------------
VOLATILITY MEASURES
COMPARATIVE BROAD
FUND INDEX* FUND INDEX**
- ----------------------------------------------
R-Squared 1.00 1.00 0.98 1.00
Beta 1.00 1.00 0.96 1.00
- ----------------------------------------------
- ------------------------
INVESTMENT FOCUS
Market Cap Large
Style Blend
- ------------------------
- -------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Auto & Transportation 2.4% 2.5% 2.6%
Consumer Discretionary 13.9 13.9 15.7
Consumer Staples 7.9 7.9 6.9
Financial Services 21.9 21.7 22.5
Health Care 14.7 14.7 14.3
Integrated Oils 4.3 4.3 3.5
Other Energy 1.6 1.6 2.3
Materials & Processing 3.1 3.1 3.6
Producer Durables 3.7 3.7 4.0
Technology 14.2 14.3 13.5
Utilities 7.4 7.5 7.1
Other 4.9 4.8 4.2
- -------------------------------------------------------
*S&P 500 Index.
**Wilshire 5000 Index.
+Annualized.
8
TAX-MANAGED CAPITAL APPRECIATION FUND
- -------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Number of Stocks 545 1,000 5,403
Median Market Cap $31.0B $36.8B $27.7B
Price/Earnings Ratio 22.5x 20.9x 21.8x
Price/Book Ratio 2.9x 2.9x 2.7x
Yield 1.7% 1.6%
Investor Shares 1.0%
Admiral Shares 1.1%
Institutional Shares 1.1%
Return on Equity 21.4% 21.7% 20.5%
Earnings Growth Rate 10.2% 8.7% 8.6%
Foreign Holdings 0.1% 0.0% 0.9%
Turnover Rate 13%+ -- --
Expense Ratio -- --
Investor Shares 0.18%+
Admiral Shares 0.11%+
Institutional Shares 0.08%+
Cash Investments 0.0% -- --
- -------------------------------------------------------
- --------------------------------------------
TEN LARGEST HOLDINGS (% of total net assets)
General Electric Co. 3.0%
(conglomerate)
Pfizer Inc. 2.9
(pharmaceuticals)
ExxonMobil Corp. 2.5
(oil)
Microsoft Corp. 2.4
(software)
Citigroup, Inc. 2.4
(banking)
Johnson & Johnson 1.7
(pharmaceuticals)
Wal-Mart Stores, Inc. 1.6
(retail)
Intel Corp. 1.5
(computer hardware)
International Business Machines Corp. 1.5
(computer hardware)
Merck & Co., Inc. 1.4
(pharmaceuticals)
- --------------------------------------------
Top Ten 20.9%
- --------------------------------------------
The "Ten Largest Holdings" excludes and
temporary cash investments and equity
index products.
- -------------------------------------------------------
VOLATILITY MEASURES
COMPARATIVE BROAD
FUND INDEX* FUND INDEX**
- -------------------------------------------------------
R-Squared 0.99 1.00 0.99 1.00
Beta 1.12 1.00 1.11 1.00
- -------------------------------------------------------
- ------------------------
INVESTMENT FOCUS
Market Cap Large
Style Blend
- ------------------------
- -------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Auto & Transportation 2.1% 2.1% 2.6%
Consumer Discretionary 16.5 13.9 15.7
Consumer Staples 6.8 7.5 6.9
Financial Services 19.6 22.7 22.3
Health Care 16.9 15.4 14.3
Integrated Oils 3.5 4.2 3.5
Other Energy 3.0 1.6 2.3
Materials & Processing 2.8 3.2 3.6
Producer Durables 4.4 3.6 4.0
Technology 14.9 13.7 13.5
Utilities 5.7 7.7 7.1
Other 3.8 4.4 4.2
- -------------------------------------------------------
*Russell 1000 Index.
**Wilshire 5000 Index.
+Annualized.
VISIT OUR WEBSITE AT
WWW.VANGUARD.COM
FOR REGULARLY UPDATED FUND INFORMATION.
9
FUND PROFILES (continued)
TAX-MANAGED SMALL-CAP FUND
- -------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Number of Stocks 603 600 5,403
Median Market Cap $0.8B $0.8B $27.7B
Price/Earnings Ratio 20.5x 20.6x 21.8x
Price/Book Ratio 2.0x 1.9x 2.7x
Yield 0.9% 1.6%
Investor Shares 0.8%
Institutional Shares 0.9%
Return on Equity 14.0% 14.0% 20.5%
Earnings Growth Rate 11.6% 11.5% 8.6%
Foreign Holdings 0.0% 0.0% 0.9%
Turnover Rate 27%+ -- --
Expense Ratio -- --
Investor Shares 0.17%+
Institutional Shares 0.10%+
Cash Investments 0.0% -- --
- -------------------------------------------------------
- --------------------------------------------
TEN LARGEST HOLDINGS (% of total net assets)
NVR, Inc. 0.8%
(real estate)
Harman International Industries, Inc. 0.7
(consumer electronics)
Mid Atlantic Medical Services, Inc. 0.7
(health care)
Zebra Technologies Corp. Class A 0.6
(computer technology)
Cephalon, Inc. 0.6
(biotechnology)
Newfield Exploration Co. 0.6
(oil)
Alliant Techsystems, Inc. 0.6
(aerospace and defense)
O'Reilly Automotive, Inc. 0.5
(retail)
Ryland Group, Inc. 0.5
(real estate)
Renal Care Group, Inc. 0.5
(health care)
- --------------------------------------------
Top Ten 6.1%
- --------------------------------------------
The "Ten Largest Holdings" excludes any
temporary cash investments and equity
index products.
- ---------------------------------------------------
VOLATILITY MEASURES
COMPARATIVE BROAD
FUND INDEX* FUND INDEX**
- ---------------------------------------------------
R-Squared 1.00 1.00 0.72 1.00
Beta 0.99 1.00 0.95 1.00
- ---------------------------------------------------
- ------------------------
INVESTMENT FOCUS
Market Cap Small
Style Blend
- ------------------------
- -------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Auto & Transportation 4.8% 4.8% 2.6%
Consumer Discretionary 21.6 21.7 15.7
Consumer Staples 2.6 2.7 6.9
Financial Services 16.5 16.4 22.3
Health Care 12.1 12.2 14.3
Integrated Oils 0.0 0.0 3.5
Other Energy 5.6 5.6 2.3
Materials & Processing 10.4 10.4 3.6
Producer Durables 11.3 11.5 4.0
Technology 10.1 10.2 13.5
Utilities 4.7 4.4 7.1
Other 0.3 0.1 4.2
- -------------------------------------------------------
*S&P SmallCap 600 Index.
**Wilshire 5000 Index.
+Annualized.
10
TAX-MANAGED INTERNATIONAL FUND
- -------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Number of Stocks 1,004 1,005 1,741
Turnover Rate 16%+ -- --
Expense Ratio -- --
Investor Shares 0.29%+
Institutional Shares 0.20%+
Cash Investments 0.0% -- --
- -------------------------------------------------------
- --------------------------------------------
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
BP PLC 2.6%
(oil)
Vodafone GroupPLC 2.3
(cellular communications)
HSBC Holdings PLC 2.2
(banking)
GlaxoSmithKline PLC 2.1
(pharmaceuticals)
Total SA 1.7
(integrated oil)
Royal Dutch Petroleum Co. 1.7
(energy)
Novartis AG (Registered) 1.6
(pharmaceuticals)
Nestle SA (Registered) 1.4
(food, beverage, and tobacco)
Nokia Oyj 1.4
(telecommunications)
Royal Bank of Scotland Group PLC 1.3
(banking)
- --------------------------------------------
Top Ten 18.3%
- --------------------------------------------
The "Ten Largest Holdings" excludes any
temporary cash investments and equity
index products.
- ---------------------------------------------------
VOLATILITY MEASURES
COMPARATIVE BROAD
FUND INDEX* FUND INDEX**
- ---------------------------------------------------
R-Squared 1.0 1.00 0.99 1.00
Beta 1.01 1.00 0.99 1.00
- ---------------------------------------------------
- -------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
Consumer Discretionary 12.5% 12.6% 11.8%
Consumer Staples 9.0 9.0 8.5
Energy 9.0 9.0 9.6
Financials 25.7 25.6 25.5
Health Care 9.7 9.7 8.7
Industrials 8.5 8.4 8.1
Information Technology 6.5 6.6 7.4
Materials 6.3 6.2 7.5
Telecommunication Services 7.9 7.9 8.0
Utilities 4.9 5.0 4.9
- -------------------------------------------------------
- -------------------------
FUND ALLOCATION BY REGION
Pacific 28%
Europe 72%
- -------------------------
*MSCI EAFE Index.
**MSCI All Country World Index Free ex USA.
+Annualized.
VISIT OUR WEBSITE AT
WWW.VANGUARD.COM
FOR REGULARLY UPDATED FUND INFORMATION.
11
FUND PROFILES (continued)
- -------------------------------------------------------
COUNTRY DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------
EUROPE
United Kingdom 27.3% 27.3% 23.7%
France 9.8 9.6 8.2
Switzerland 7.5 7.5 6.5
Germany 6.4 6.4 5.5
Netherlands 5.2 5.3 4.6
Italy 3.9 3.9 3.3
Spain 3.9 3.8 3.3
Sweden 2.2 2.1 1.8
Finland 1.9 1.9 1.6
Belgium 1.0 1.1 0.9
Ireland 0.8 0.8 0.7
Denmark 0.8 0.8 0.7
Norway 0.4 0.4 0.4
Greece 0.4 0.4 0.3
Portugal 0.3 0.4 0.3
Austria 0.2 0.2 0.2
Luxembourg 0.0 0.0 0.1
- -------------------------------------------------------
Subtotal 72.0% 71.9% 62.1%
- -------------------------------------------------------
PACIFIC
Japan 20.4% 20.5% 17.5%
Australia 5.1 5.1 4.4
Hong Kong 1.5 1.5 1.7
Singapore 0.8 0.8 0.7
New Zealand 0.2 0.2 0.2
- -------------------------------------------------------
Subtotal 28.0% 28.1% 24.5%
- -------------------------------------------------------
Emerging Markets Region 0.0% 0.0% 7.9%
- -------------------------------------------------------
Other 0.0% 0.0% 5.5%
- -------------------------------------------------------
Total 100.0% 100.0% 100.0%
- -------------------------------------------------------
*MSCI EAFE Index.
**MSCI All Country World Index Free ex USA.
12
GLOSSARY OF INVESTMENT TERMS
AVERAGE COUPON. The average interest rate paid on the fixed income securities
held by a fund. It is expressed as a percentage of face value.
- --------------------------------------------------------------------------------
AVERAGE DURATION. An estimate of how much the value of the bonds held by a fund
will fluctuate in response to a change in interest rates. To see how the value
could change, multiply the average duration by the change in rates. If interest
rates rise by 1 percentage point, the value of the bonds in a fund with an
average duration of five years would decline by about 5%. If rates decrease by a
percentage point, the value would rise by 5%.
- --------------------------------------------------------------------------------
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. The prices of longer-term bonds are
more sensitive than those of shorter-term bonds to changes in interest rates.
- --------------------------------------------------------------------------------
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's holdings by credit-rating agencies. The agencies
make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
- --------------------------------------------------------------------------------
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of a comparative index and an overall market
index. Each index is assigned a beta of 1.00. Compared with a given index, a
fund with a beta of 1.20 typically would have seen its share price rise or fall
by 12% when the index rose or fell by 10%. However, a fund's beta should be
reviewed in conjunction with its R-squared (see definition on next page). The
lower the R-squared, the less correlation there is between the fund and the
benchmark, and the less reliable beta is as an indicator of volatility.
- --------------------------------------------------------------------------------
CASH INVESTMENTS. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts or other index-based
products to simulate stock or bond investment.
- --------------------------------------------------------------------------------
DIVIDEND YIELD. The current, annualized rate of dividends paid on a share of
stock, divided by its current share price. For a fund, the weighted average
yield for stocks it holds. The index yield is based on the current annualized
rate of dividends paid on stocks in the index.
- --------------------------------------------------------------------------------
EARNINGS GROWTH RATE. The average annual rate of growth in earnings over the
past five years for the stocks now in a fund.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
FOREIGN HOLDINGS. The percentage of a fund's equity assets represented by stocks
or American Depositary Receipts of companies based outside the United States.
- --------------------------------------------------------------------------------
LARGEST STATE CONCENTRATIONS. An indicator of diversification. The less
concentrated a fund's holdings of bonds, the less the fund will be hurt by any
financial problems in a single state or region.
- --------------------------------------------------------------------------------
MEDIAN MARKET CAP. An indicator of the size of companies in which a fund
invests; the midpoint of market capitalization (market price x shares
outstanding) of a fund's stocks, weighted by the proportion of the fund's assets
invested in each stock. Stocks representing half of the fund's assets have
market capitalizations above the median, and the rest are below it.
13
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO. The share price of a stock divided by its net worth, or book
value, per share. For a fund, the weighted average price/book ratio of the
stocks it holds.
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO. The ratio of a stock's current price to its per-share
earnings over the past year. For a fund, the weighted average P/E of the stocks
it holds. P/E is an indicator of market expectations about corporate prospects;
the higher the P/E, the greater the expectations for a company's future growth.
- --------------------------------------------------------------------------------
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the market in general, as measured by a comparative index or an
overall market index. If a fund's total returns were precisely synchronized with
an index's returns, its R-squared would be 1.00. If the fund's returns bore no
relationship to the index's returns, its R-squared would be 0.
- --------------------------------------------------------------------------------
RETURN ON EQUITY. The annual average rate of return generated by a company
during the past five years for each dollar of shareholder's equity (net income
divided by shareholder's equity). For a fund, the weighted average return on
equity for the companies whose stocks it holds.
- --------------------------------------------------------------------------------
TURNOVER RATE. An indication of the fund's trading activity. Funds with high
turnover rates incur higher transaction costs and are more likely to distribute
capital gains (which are taxable to investors).
- --------------------------------------------------------------------------------
YIELD. A snapshot of a fund's income from interest and dividends. The yield,
expressed as a percentage of the fund's net asset value, is based on income
earned over the past 30 days and is annualized, or projected forward for the
coming year. The index yield is based on the current annualized rate of
dividends paid on stocks in the index.
- --------------------------------------------------------------------------------
YIELD TO MATURITY. The rate of return an investor would receive if the fixed
income securities held by a fund were held to their maturity dates.
- --------------------------------------------------------------------------------
14
PERFORMANCE SUMMARIES AS OF JUNE 30, 2003
All of the returns in this report represent past performance, which cannot be
used to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost. The returns
shown do not reflect taxes that a shareholder would pay on fund distributions or
on the redemption of fund shares.
TAX-MANAGED BALANCED FUND
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-JUNE 30, 2003
TAX-MANAGED BALANCED
FISCAL YEAR BALANCED FUND COMPOSITE INDEX*
1994 -1.4% -1.8%
1995 24.5 25.5
1996 12.2 13.2
1997 16.6 19.9
1998 16.9 17.0
1999 15.5 10.2
2000 -0.5 0.6
2001 -3.5 -3.5
2002 -7.1 -6.2
2003** 8.4 8.1
- --------------------------------------------------------------------------------
*50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
**Six months ended June 30, 2003.
Note: See Financial Highlights table on page 24 for dividend and capital gains
information.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2003
SINCE INCEPTION
---------------
ONE FIVE
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
Tax-Managed Balanced Fund 9/6/1994 5.95% 3.56% 5.93% 2.83% 8.76%
Fee-Adjusted Returns* 4.92 3.56 5.93 2.83 8.76
- --------------------------------------------------------------------------------
*Reflective of the 2% fee assessed on redemptions of shares that are held in the
fund for less than one year and the 1% fee assessed on redemptions of shares
that are held in the fund for at least one year but less than five years.
15
PERFORMANCE SUMMARIES (continued)
TAX-MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-JUNE 30, 2003
TAX-MANAGED GROWTH
AND INCOME FUND S&P 500
FISCAL YEAR INVESTOR SHARES INDEX
1994 -1.7% -1.8%
1995 37.5 37.6
1996 23.0 23.0
1997 33.3 33.4
1998 28.7 28.6
1999 21.1 21.0
2000 -9.0 -9.1
2001 -11.9 -11.9
2002 -21.9 -22.1
2003* 11.7 11.8
- --------------------------------------------------------------------------------
*Six months ended June 30, 2003.
Note: See FINANCIAL HIGHLIGHTS tables on pages 25-27 for dividend and capital
gains information.
TAX-MANAGED CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-JUNE 30, 2003
TAX-MANAGED
CAPITAL APPRECIATION RUSSELL
FISCAL YEAR INVESTOR SHARES 1000 INDEX
1994 -0.5% -1.9%
1995 34.4 37.8
1996 20.9 22.4
1997 27.3 32.9
1998 28.0 27.0
1999 33.5 20.9
2000 -10.1 - 7.8
2001 -15.3 -12.5
2002 -23.5 -21.7
2003* 13.3 12.3
- --------------------------------------------------------------------------------
*Six months ended June 30, 2003.
Note: See FINANCIAL HIGHLIGHTS tables on pages 28-30 for dividend and capital
gains information.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2003
SINCE INCEPTION
ONE FIVE --------------------------
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND
Investor Shares 9/6/1994 0.33% -1.56% .89% 1.62% 10.51%
Fee-Adjusted Returns* -0.66 -1.56 8.89 1.62 10.51
Admiral Shares 11/12/2001 0.41 -6.42** -- -- --
Fee-Adjusted Returns* -0.57 -6.98** -- -- --
Institutional Shares 3/4/1999 0.42 -4.08** -- -- --
Fee-Adjusted Returns* -0.56 -4.29** -- -- --
- --------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND
Investor Shares 9/6/1994 1.52% -0.79% 9.36% 0.66% 10.02%
Fee-Adjusted Returns* 0.51 -0.79 9.36 0.66 10.02
Admiral Shares 11/12/2001 1.58 -5.92** -- -- --
Fee-Adjusted Returns* 0.58 -6.48** -- -- --
Institutional Shares 2/24/1999 1.62 -3.32** -- -- --
Fee-Adjusted Returns* 0.61 -3.54** -- -- --
- --------------------------------------------------------------------------------
*Reflective of the 2% fee assessed on redemptions of shares that are held in the
fund for less than one year and the 1% fee assessed on redemptions of shares
that are held in the fund for at least one year but less than five years.
**Return since inception.
16
TAX-MANAGED SMALL-CAP FUND
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) MARCH 25, 1999-JUNE 30, 2003
TAX-MANAGED
SMALL-CAP S&P SMALL-CAP
FISCAL YEAR INVESTOR SHARES 600 INDEX
1999 26.30% 24.90%
2000 13.4 11.8
2001 5.4 6.5
2002 -14.4 -14.6
2003* 12.8 12.9
- --------------------------------------------------------------------------------
*Six months ended June 30, 2003.
Note: See FINANCIAL HIGHLIGHTS tables on pages 31 and 32 for dividend and
capital gains information.
TAX-MANAGED INTERNATIONAL FUND
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) AUGUST 17, 1999-JUNE 30, 2003
TAX-MANAGED
INTERNATIONAL MSCI EAFE
FISCAL YEAR INVESTOR SHARES INDEX
1999 20.0% 19.3%
2000 -14.3 -14.2
2001 -21.9 -21.4
2002 -15.6 -15.9
2003* 9.5 9.5
- --------------------------------------------------------------------------------
*Six months ended June 30, 2003.
Note: See FINANCIAL HIGHLIGHTS tables on pages 33 and 34 for dividend and
capital gains information.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2003
SINCE INCEPTION
ONE --------------------------
INCEPTION DATE YEAR CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
Tax-Managed Small-Cap Fund
Investor Shares 3/25/1999 -3.63% 8.65% 0.58% 9.23%
Fee-Adjusted Returns* -4.59 8.40 0.58 8.98
Institutional Shares 4/21/1999 -3.54 7.04 0.64 7.68
Fee-Adjusted Returns* -4.50 6.78 0.65 7.43
- --------------------------------------------------------------------------------
Tax-Managed International Fund
Investor Shares 8/17/1999 -6.53% -8.67% 1.24% -7.43%
Fee-Adjusted Returns* -7.44 -8.91 1.25 -7.66
Institutional Shares 1/4/2001 -6.43 -13.62 1.41 -12.21
Fee-Adjusted Returns* -7.34 -13.97 1.42 -12.55
- --------------------------------------------------------------------------------
*Reflective of the 2% fee assessed on redemptions of shares that are held in the
fund for less than one year and the 1% fee assessed on redemptions of shares
that are held in the fund for at least one year but less than five years.
17
YOUR FUND'S AFTER-TAX RETURNS
This table presents returns for your fund both before and after taxes. The
after-tax returns are shown in two ways: (1) assuming that an investor owned the
fund during the entire period and paid taxes on the fund's distributions, and
(2) assuming that an investor paid taxes on the fund's distributions and sold
all shares at the end of each period.
Calculations are based on the highest individual federal income tax and
capital gains tax rates in effect at the times of the distributions and the
hypothetical sales. State and local taxes were not considered. After-tax returns
reflect the reduced tax rates on ordinary income and short-term capital gains
that became effective as of January 1, 2003. However, they do not reflect the
reduced rates on "qualified dividend income" and on long-term capital gains
realized on or after May 6, 2003. (In the examples that assume all fund shares
were sold, a negative pre-tax total return translates into a higher after-tax
return. This is because the calculation assumes that the investor received a tax
deduction for the loss incurred on the sale.)
The table shows returns for Investor Shares only; returns for other share
classes will differ. Please note that your actual after-tax returns will depend
on your tax situation and may differ from those shown. Also note that if you own
the fund in a tax-deferred account, such as an individual retirement account or
a 401(k) plan, this information does not apply to you. Such accounts are not
subject to current taxes.
Finally, keep in mind that a fund's performance--whether before or after
taxes--does not indicate how it will perform in the future.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED JUNE 30, 2003
ONE FIVE SINCE
YEAR YEARS INCEPTION**
----------------------------
TAX-MANAGED BALANCED FUND
Returns Before Taxes 4.92% 3.56% 8.76%
Returns After Taxes on Distributions 4.72 3.42 8.61
Returns After Taxes on Distributions
and Sale of Fund Shares 3.95 3.27 7.75
- --------------------------------------------------------------------------------
TAX-MANAGED GROWTH & Income Fund
Returns Before Taxes -0.66% -1.56% 10.51%
Returns After Taxes on Distributions -1.28 -2.03 9.87
Returns After Taxes on Distributions
and Sale of Fund Shares -0.50 -1.45 8.58
- --------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND
Returns Before Taxes 0.51% -0.79% 10.02%
Returns After Taxes on Distributions 0.10 -1.02 9.76
Returns After Taxes on Distributions
and Sale of Fund Shares 0.27 -0.74 8.37
- --------------------------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND
Returns Before Taxes -4.59% -- 8.98%
Returns After Taxes on Distributions -4.87 -- 8.75
Returns After Taxes on Distributions
and Sale of Fund Shares -3.03 -- 7.25
- --------------------------------------------------------------------------------
TAX-MANAGED INTERNATIONAL FUND
Returns Before Taxes -7.44% -- -7.66%
Returns After Taxes on Distributions -8.08 -- -8.05
Returns After Taxes on Distributions
and Sale of Fund Shares -4.82 -- -6.10
- --------------------------------------------------------------------------------
*All fund returns are adjusted to reflect fees. Each of the Vanguard Tax-Managed
Funds assesses a 2% fee on redemptions of shares held in the fund for less than
one year and a 1% fee on redemptions of shares held in the fund for at least one
year but less than five years.
**Inception dates are September 6, 1994, for the Tax-Managed Balanced,
Tax-Managed Growth and Income, and Tax-Managed Capital Appreciation Funds; March
25, 1999, for the Tax-Managed Small-Cap Fund; and August 17, 1999, for the
Tax-Managed International Fund.
18
FINANCIAL STATEMENTS JUNE 30, 2003 (UNAUDITED)
The Statement of Net Assets--an integral part of the Financial Statements for
each of the Vanguard Tax-Managed Funds--is included as an insert to this report.
STATEMENT OF OPERATIONS
This Statement shows the types of income earned by each fund during the
reporting period, and details the operating expenses charged to each class of
its shares. These expenses directly reduce the amount of investment income
available to pay to shareholders as income dividends. This Statement also shows
any Net Gain (Loss) realized on the sale of investments, and the increase or
decrease in the Unrealized Appreciation (Depreciation) of investments during the
period.
- --------------------------------------------------------------------------------
TAX-MANAGED BALANCED FUND
SIX MONTHS ENDED JUNE 30, 2003
(000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,262
Interest 4,658
Security Lending 1
- --------------------------------------------------------------------------------
Total Income 5,921
- --------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 34
Management and Administrative 287
Marketing and Distribution 24
Custodian Fees 9
Shareholders' Reports 9
- --------------------------------------------------------------------------------
Total Expenses 363
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,558
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD (7,954)
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 37,064
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $34,668
================================================================================
19
STATEMENT OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
GROWTH AND CAPITAL TAX-MANAGED TAX-MANAGED
INCOME APPRECIATION SMALL-CAP INTERNATIONAL
FUND FUND FUND FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003
- --------------------------------------------------------------------------------
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends* $ 16,078 $ 12,363 $ 2,998 $ 7,216
Interest 2 16 3 5
Security Lending 14 25 106 87
- --------------------------------------------------------------------------------
Total Income 16,094 12,404 3,107 7,308
- --------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 75 75 75 19
Management and Administrative
Investor Shares 817 901 381 273
Admiral Shares 243 359 -- --
Institutional Shares 47 31 6 20
Marketing and Distribution
Investor Shares 63 69 36 23
Admiral Shares 26 37 -- --
Institutional Shares 11 7 2 3
Custodian Fees 25 14 18 193
Shareholders' Reports
Investor Shares 34 33 15 6
Admiral Shares 1 2 -- --
Institutional Shares -- -- -- --
Trustees' Fees and Expenses 1 1 -- --
- --------------------------------------------------------------------------------
Total Expenses 1,343 1,529 533 537
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 14,751 10,875 2,574 6,771
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (39,634) (126,787) (17,984) (19,301)
Foreign Currencies -- -- -- 70
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (39,634) (126,787) (17,984) (19,231)
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 231,131 383,560 97,318 49,653
Foreign Currencies -- -- -- 14
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 231,131 383,560 97,318 49,667
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $206,248 $267,648 $81,908 $37,207
================================================================================
*Dividends for the Tax-Managed International Fund are net of foreign withholding
taxes of $823,000.
20
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. The amounts shown as Distributions to
shareholders from the fund's net income and capital gains may not match the
amounts shown in the Operations section, because distributions are determined on
a tax basis and may be made in a period different from the one in which the
income was earned or the gains were realized on the financial statements. The
Capital Share Transactions section shows the net amount shareholders invested in
or redeemed from the fund. Distributions and Capital Share Transactions are
shown separately for each class of shares.
- --------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
BALANCED FUND GROWTH AND INCOME FUND
-----------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2003 DEC.31, 2002 JUNE 30, 2003 DEC. 31, 2002
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 5,558 $ 11,239 $ 14,751 $ 29,589
Realized Net Gain (Loss) (7,954) (11,097) (39,634) (245,531)
Change in Unrealized
Appreciation (Depreciation) 37,064 (32,216) 231,131 (298,017)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 34,668 (32,074) 206,248 (513,959)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (5,110) (11,176) (7,745) (19,117)
Admiral Shares -- -- (4,198) (8,546)
Institutional Shares -- -- (1,289) (2,921)
Realized Capital Gain
Investor Shares -- -- -- --
Admiral Shares -- -- -- --
Institutional Shares -- -- -- --
- --------------------------------------------------------------------------------
Total Distributions (5,110) (11,176) (13,232) (30,584)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE F
Investor Shares 6,063 40,067 (25,391) (175,369)
Admiral Shares -- -- 46,174 156,028
Institutional Shares -- -- 1,895 56,906
- --------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 6,063 40,067 22,678 37,565
- --------------------------------------------------------------------------------
Total Increase (Decrease) 35,621 (3,183) 215,694 (506,978)
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 415,720 418,903 1,762,548 2,269,526
- --------------------------------------------------------------------------------
End of Period $451,341 $415,720 $1,978,242 $1,762,548
================================================================================
21
STATEMENT OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
TAX-MANAGED
CAPITAL APPRECIATION TAX-MANAGED
FUND SMALL-CAP FUND
----------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2003 DEC.31, 2002 JUNE 30, 2003 DEC. 31, 2002
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,875 $ 20,534 $ 2,574 $ 4,490
Realized Net Gain (Loss) (126,787) (106,097) (17,984) (36,397)
Change in Unrealized
Appreciation (Depreciation) 383,560 (536,013) 97,318 (72,576)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 267,648 (621,576) 81,908 (104,483)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares -- (12,093) -- (4,465)
Admiral Shares -- (8,248) -- --
Institutional Shares -- (1,216) -- (227)
Realized Capital Gain
Investor Shares -- -- -- --
Admiral Shares -- -- -- --
Institutional Shares -- -- -- --
- --------------------------------------------------------------------------------
Total Distributions -- (21,557) -- (4,692)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE F
Investor Shares (25,169) (134,940) 21,959 135,406
Admiral Shares 53,705 187,073 -- --
Institutional Shares (3,571) 14,355 (8,630) (17,238)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 24,965 66,488 13,329 118,168
- --------------------------------------------------------------------------------
Total Increase (Decrease) 292,613 (576,645) 95,237 8,993
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 2,001,135 2,577,780 630,705 621,712
- --------------------------------------------------------------------------------
End of Period $2,293,748 $2,001,135 $725,942 $630,705
================================================================================
22
- --------------------------------------------------------------------------------
TAX-MANAGED
INTERNATIONAL FUND
--------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2003 DEC. 31, 2002
(000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 6,771 $ 8,166
Realized Net Gain (Loss) (19,231) (24,940)
Change in Unrealized Appreciation (Depreciation) 49,667 (51,327)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 37,207 (68,101)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares -- (7,187)
Institutional Shares -- (1,040)
Realized Capital Gain
Investor Shares -- --
Institutional Shares -- --
- --------------------------------------------------------------------------------
Total Distributions -- (8,227)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--Note F
Investor Shares (2,502) 73,746
Institutional Shares 11,978 1,040
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transactions 9,476 74,786
- --------------------------------------------------------------------------------
Total Increase (Decrease) 46,683 (1,542)
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 380,898 382,440
- --------------------------------------------------------------------------------
End of Period $427,581 $380,898
- --------------------------------------------------------------------------------
23
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis for each class of shares. It also presents the
Total Return and shows net investment income and expenses as percentages of
average net assets. These data will help you assess: the variability of the
fund's net income and total returns from year to year; the relative
contributions of net income and capital gains to the fund's total return; how
much it costs to operate the fund; and the extent to which the fund tends to
distribute capital gains. The table also shows the Portfolio Turnover Rate, a
measure of trading activity. A turnover rate of 100% means that the average
security is held in the fund for one year.
TAX-MANAGED BALANCED FUND
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.54 $17.18 $18.30 $18.87 $16.74 $14.67
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .20 .44 .46 .48 .43 .39
Net Realized and Unrealized Gain (Loss)
on Investments* 1.10 (1.65) (1.12) (.56) 2.13 2.07
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.30 (1.21) (.66) (.08) 2.56 2.46
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income** (.19) (.43) (.46) (.49) (.43) (.39)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (.19) (.43) (.46) (.49) (.43) (.39)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.65 $15.54 $17.18 $18.30 $18.87 $16.74
=====================================================================================================================
TOTAL RETURN+ 8.41% -7.07% -3.54% -0.50% 15.49% 16.93%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $451 $416 $419 $400 $330 $207
Ratio of Total Expenses to
Average Net Assets 0.17%++ 0.18% 0.19% 0.20% 0.20% 0.19%
Ratio of Net Investment Income to
Average Net Assets 2.63%++ 2.69% 2.64% 2.61% 2.52% 2.63%
Portfolio Turnover Rate 15%++ 24% 21% 15% 13% 7%
=====================================================================================================================
*Includes increases from redemption fees of $.00, $.01, $.01, $.01, $.01, and
$.01.
**Nontaxable dividends represent 79%, 82%, 87%, 92%, 90%, and 86% of dividends
from net investment income. +Total returns do not reflect the 2% redemption fee
on shares held less than one year or the 1% redemption fee on shares held at
least one year but less than five years.
++Annualized.
24
TAX-MANAGED GROWTH AND INCOME FUND INVESTOR SHARES
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.15 $24.93 $28.66 $31.81 $26.55 $20.88
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .16 .313 .294 .295 .307 .29
Net Realized and Unrealized Gain (Loss)
on Investments* 2.07 (5.768) (3.725) (3.148) 5.267 5.67
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.23 (5.455) (3.431) (2.853) 5.574 5.96
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.14) (.325) (.299) (.297) (.314) (.29)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (.14) (.325) (.299) (.297) (.314) (.29)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $21.24 $19.15 $24.93 $28.66 $31.81 $26.55
=====================================================================================================================
TOTAL RETURN** 11.69% -21.95% -11.93% -9.03% 21.12% 28.67%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,167 $1,077 $1,606 $2,320 $2,240 $1,352
Ratio of Total Expenses to
Average Net Assets 0.18%+ 0.17% 0.18% 0.19% 0.19% 0.19%
Ratio of Net Investment Income to
Average Net Assets 1.61%+ 1.44% 1.13% 0.96% 1.11% 1.32%
Portfolio Turnover Rate 5%+ 9% 5% 5% 4% 4%
=====================================================================================================================
*Includes increases from redemption fees of $.00, $.03, $.02, $.02, $.01, and
$.01.
**Total returns do not reflect the 2% redemption fee on shares held less than
one year or the 1% redemption fee on shares held at least one year but less than
five years.
+Annualized.
25
FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED GROWTH AND INCOME FUND ADMIRAL SHARES
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED NOV. 12* TO
FOR A SHARE OUTSTANDING THROUGHOUT JUNE 30, DEC. 31, DEC. 31,
EACH PERIOD 2003 2002 2001
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $39.35 $51.24 $50.00
- --------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .336 .673 .087
Net Realized and Unrealized Gain (Loss) 4.267 (11.870) 1.348
on Investments**
- --------------------------------------------------------------------------------
Total from Investment Operations 4.603 (11.197) 1.435
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.303) (.693) (.195)
Distributions from Realized Capital Gains -- -- --
- --------------------------------------------------------------------------------
Total Distributions (.303) (.693) (.195)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $43.65 $39.35 $51.24
================================================================================
TOTAL RETURN+ 11.74% -21.92% 2.87%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $625 $520 $505
Ratio of Total Expenses to Average
Net Assets 0.11%++ 0.11% 0.14%++
Ratio of Net Investment Income to
Average Net Assets 1.68%++ 1.52% 1.26%++
Portfolio Turnover Rate 5%++ 9% 5%
================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.05, and $.03.
+Total returns do not reflect the 2% redemption fee on shares held less than one
year or the 1% redemption fee on shares held at least one year but less than
five years.
++Annualized.
26
TAX-MANAGED GROWTH AND INCOME FUND INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED MAR. 4* TO
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
-------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.15 $24.93 $28.66 $31.81 $26.99
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .167 .331 .319 .319 .274
Net Realized and Unrealized Gain (Loss)
on Investments** 2.072 (5.768) (3.725) (3.148) 4.882
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.239 (5.437) (3.406) (2.829) 5.156
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.149) (.343) (.324) (.321) (.336)
Distributions from Realized Capital Gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions (.149) (.343) (.324) (.321) (.336)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $21.24 $19.15 $24.93 $28.66 $31.81
==========================================================================================================
TOTAL RETURN+ 11.74% -21.88% -11.84% -8.96% 19.23%
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $187 $167 $158 $95 $108
Ratio of Total Expenses to Average Net Assets 0.08%++ 0.08% 0.08% 0.11% 0.10%++
Ratio of Net Investment Income to Average
Net Assets 1.71%++ 1.54% 1.25% 1.04% 1.18%++
Portfolio Turnover Rate 5%++ 9% 5% 5% 4%
==========================================================================================================
*Inception.
**Includes increases from redemption fees of $.00, $.03, $.02, $.02, and $.01.
+Total returns do not reflect the 2% redemption fee on shares held less than one
year or the 1% redemption fee on shares held at least one year but less than
five years.
++Annualized.
27
FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED CAPITAL APPRECIATION FUND INVESTOR SHARES
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.49 $25.73 $30.59 $34.17 $25.69 $20.18
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .10 .196 .164 .117 .117 .13
Net Realized and Unrealized Gain (Loss)
on Investments* 2.50 (6.231) (4.854) (3.578) 8.487 5.51
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.60 (6.035) (4.690) (3.461) 8.604 5.64
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.205) (.170) (.119) (.124) (.13)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions -- (.205) (.170) (.119) (.124) (.13)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $22.09 $19.49 $25.73 $30.59 $34.17 $25.69
=====================================================================================================================
Total Return** 13.34% -23.45% -15.34% -10.13% 33.50% 27.95%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,280 $1,154 $1,678 $2,643 $2,378 $1,479
Ratio of Total Expenses to
Average Net Assets 0.18%+ 0.17% 0.18% 0.19% 0.19% 0.19%
Ratio of Net Investment Income to
Average Net Assets 1.02%+ 0.87% 0.60% 0.36% 0.47% 0.62%
Portfolio Turnover Rate 13%+ 10% 13% 17% 12% 5%
=====================================================================================================================
*Includes increases from redemption fees of $.00, $.02, $.02, $.01, $.01, and
$.01.
**Total returns do not reflect the 2% redemption fee on shares held less than
one year or the 1% redemption fee on shares held at least one year but less than
five years.
+Annualized.
28
TAX-MANAGED CAPITAL APPRECIATION FUND ADMIRAL SHARES
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED NOV. 12* TO
JUNE 30, DEC. 31, DEC. 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $39.24 $51.79 $50.00
- --------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .22 .42 .064
Net Realized and Unrealized Gain (Loss)
on Investments** 5.01 (12.53) 2.072
- --------------------------------------------------------------------------------
Total from Investment Operations 5.23 (12.11) 2.136
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.44) (.346)
Distributions from Realized Capital Gains -- -- --
- --------------------------------------------------------------------------------
Total Distributions -- (.44) (.346)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $44.47 $39.24 $51.79
================================================================================
TOTAL RETURN+ 13.33% -23.38% 4.26%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $898 $741 $778
Ratio of Total Expenses to Average Net Assets 0.11%++ .11% 0.14%++
Ratio of Net Investment Income to Average
Net Assets 1.09%++ .95% 0.79%++
Portfolio Turnover Rate 13%++ 10% 13%
================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.03, and $.03.
+Total returns do not reflect the 2% redemption fee on shares held less than one
year or the 1% redemption fee on shares held at least one year but less than
five years.
++Annualized.
29
FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED CAPITAL APPRECIATION FUND INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FEB. 24* TO
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.49 $25.73 $30.59 $34.18 $26.32
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .11 .216 .188 .136 .129
Net Realized and Unrealized Gain (Loss)
on Investments** 2.50 (6.231) (4.854) (3.578) 7.877
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.61 (6.015) (4.666) (3.442) 8.006
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.225) (.194) (.148) (.146)
Distributions from Realized Capital Gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- (.225) (.194) (.148) (.146)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $22.10 $19.49 $25.73 $30.59 $34.18
==========================================================================================================
TOTAL RETURN+ 13.39% -23.37% -15.26% -10.07% 30.43%
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $116 $106 $121 $210 $165
Ratio of Total Expenses to Average Net Assets 0.08%++ 0.08% 0.08% 0.10% 0.10%++
Ratio of Net Investment Income to Average
Net Assets 1.12%++ 0.98% 0.69% 0.46% 0.56%++
Portfolio Turnover Rate 13%++ 10% 13% 17% 12%
==========================================================================================================
*Inception.
**Includes increases from redemption fees of $.00, $.02, $.02, $.01, and $.01.
+Total returns do not reflect the 2% redemption fee on shares held less than one
year or the 1% redemption fee on shares held at least one year but less than
five years.
++Annualized.
30
TAX-MANAGED SMALL-CAP FUND INVESTOR SHARES
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FEB. 25* TO
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
---------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.67 $14.92 $14.23 $12.61 $10.00
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .05 .092 .079 .074 .049
Net Realized and Unrealized Gain (Loss)
on Investments** 1.57 (2.247) .696 1.620 2.615
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.62 (2.155) .775 1.694 2.664
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.095) (.085) (.074) (.054)
Distributions from Realized Capital Gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- (.095) (.085) (.074) (.054)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.29 $12.67 $14.92 $14.23 $12.61
==========================================================================================================
TOTAL RETURN+ 12.79% -14.44% 5.44% 13.44% 26.28%
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $702 $601 $568 $368 $194
Ratio of Total Expenses to Average Net Assets 0.17%++ 0.17% 0.20% 0.20% 0.19%++
Ratio of Net Investment Income to Average
Net Assets 0.80%++ 0.68% 0.63% 0.64% 0.70%++
Portfolio Turnover Rate 27%++ 21% 25% 64% 27%
==========================================================================================================
*Initial share purchase date. Subscription period for the fund was February 22,
1999, to March 24, 1999, during which time all assets were held in money market
instruments. Performance measurement begins March 25, 1999.
**Includes increases from redemption fees of $.01, $.01, $.00, $.00, and $.00.
+Total returns do not reflect the transaction fee on purchases (0.5% from April
1, 2000, through March 31, 2002; 1% through March 31, 2000), the 2% redemption
fee on shares held less than one year, or the 1% redemption fee on shares held
at least one year but less than five years.
++Annualized.
31
FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED SMALL-CAP FUND INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APR. 21* TO
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.68 $14.92 $14.23 $12.61 $10.76
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .06 .105 .092 .085 .044
Net Realized and Unrealized Gain (Loss)
on Investments** 1.57 (2.247) .696 1.62 1.866
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.63 (2.142) .788 1.705 1.910
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.098) (.098) (.085) (.060)
Distributions from Realized Capital Gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- (.098) (.098) (.085) (.060)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.31 $12.68 $14.92 $14.23 $12.61
==========================================================================================================
TOTAL RETURN+ 12.85% -14.36% 5.53% 13.53% 17.77%
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $24 $29 $53 $46 $19
Ratio of Total Expenses to Average Net Assets 0.10%++ 0.10% 0.10% 0.10% 0.10%++
Ratio of Net Investment Income to Average
Net Assets 0.87%++ 0.74% 0.73% 0.76% 0.74%++
Portfolio Turnover Rate 27%++ 21% 25% 64% 27%
==========================================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.01, $.00, $.00, and $.00.
+Total returns do not reflect the transaction fee on purchases (0.5% from April
1, 2000, through March 31, 2002; 1% through March 31, 2000), the 2% redemption
fee on shares held less than one year, or the 1% redemption fee on shares held
at least one year but less than five years.
++Annualized.
32
TAX-MANAGED INTERNATIONAL FUND INVESTOR SHARES
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED AUG. 17* TO
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
-------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $6.43 $7.79 $10.14 $11.96 $10.00
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .11 .14 .111 .11 .03
Net Realized and Unrealized Gain (Loss)
on Investments** .50 (1.36) (2.336) (1.82) 1.97
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations .61 (1.22) (2.225) (1.71) 2.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.14) (.125) (.11) (.04)
Distributions from Realized Capital Gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- (.14) (.125) (.11) (.04)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $7.04 $6.43 $7.79 $10.14 $11.96
==========================================================================================================
TOTAL RETURN+ 9.49% -15.62% -21.94% -14.29% 20.01%
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $364 $334 $327 $241 $135
Ratio of Total Expenses to Average Net Assets 0.29%++ 0.31% 0.35% 0.35% 0.35%++
Ratio of Net Investment Income to Average
Net Assets 3.50%++ 2.04% 1.49% 1.24% 0.96%++
Portfolio Turnover Rate 16%++ 7% 20% 5% 7%
==========================================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.01, $.00, $.01, and $.00.
+Total returns do not reflect the transaction fee on purchases (0.25% from April
1, 2000, through March 31, 2002; 0.75% through March 31, 2000), the 2%
redemption fee on shares held less than one year, or the 1% redemption fee on
shares held at least one year but less than five years.
++Annualized.
33
FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED INTERNATIONAL FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 4* TO
JUNE 30, DEC. 31, DEC. 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001
- ------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $6.43 $7.79 $10.13
- ------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .11 .148 .123
Net Realized and Unrealized Gain (Loss)
on Investments** .50 (1.361) (2.329)
- ------------------------------------------------------------------------------------
Total from Investment Operations .61 (1.213) (2.206)
- ------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- (.147) (.134)
Distributions from Realized Capital Gains -- -- --
- ------------------------------------------------------------------------------------
Total Distributions -- (.147) (.134)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $7.04 $6.43 $ 7.79
====================================================================================
TOTAL RETURN+ 9.49% -15.52% -21.77%
====================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $63 $47 $55
Ratio of Total Expenses to Average Net Assets 0.20%++ 0.20% 0.22%++
Ratio of Net Investment Income to Average
Net Assets 3.56%++ 2.16% 1.68%++
Portfolio Turnover Rate 16%++ 7% 20%
====================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.01, and $.00.
+Total returns do not reflect the 0.25% transaction fee on purchases through
March 31, 2002, the 2% redemption fee on shares held less than one year, or the
1% redemption fee on shares held at least one year but less than five years.
++Annualized.
SEE ACCOMPANYING NOTES, WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
34
NOTES TO FINANCIAL STATEMENTS
Vanguard Tax-Managed Funds comprise the Tax-Managed Balanced, Tax-Managed Growth
and Income, Tax-Managed Capital Appreciation, Tax-Managed Small-Cap, and
Tax-Managed International Funds, each of which is registered under the
Investment Company Act of 1940 as an open-end investment company, or mutual
fund.
The Tax-Managed Growth and Income and Tax-Managed Capital Appreciation
Funds each offer three classes of shares: Investor Shares, Admiral Shares, and
Institutional Shares. The Tax-Managed Small-Cap and Tax-Managed International
Funds each offer two classes of shares: Investor Shares and Institutional
Shares. The Tax-Managed Balanced Fund offers only Investor Shares. Investor
Shares are available to any investor who meets the funds' minimum purchase
requirements. Admiral Shares are designed for investors who meet certain
administrative, servicing, tenure, and account-size criteria. Institutional
Shares are designed for investors who meet certain administrative and servicing
criteria and invest a minimum of $10 million.
The Tax-Managed Balanced Fund invests in debt instruments of many municipal
issuers; the issuers' abilities to meet their obligations may be affected by
economic and political developments in a specific state or region. The
Tax-Managed International Fund invests in securities of foreign issuers, which
may subject it to investment risks not normally associated with investing in
securities of United States corporations.
A. The following significant accounting policies conform to generally accepted
accounting principles for U.S. mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Securities are valued as of the close of trading on
the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation
date. Equity securities are valued at the latest quoted sales prices or official
closing prices taken from the primary market in which each security trades; such
securities not traded on the valuation date are valued at the mean of the latest
quoted bid and asked prices. Bonds, and temporary cash investments acquired over
60 days to maturity, are valued using the latest bid prices or using valuations
based on a matrix system (which considers such factors as security prices,
yields, maturities, and ratings), both as furnished by independent pricing
services. Other temporary cash investments are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available, or whose values have been materially affected by events
occurring before the funds' pricing time but after the close of the securities'
primary markets, are valued by methods deemed by the board of trustees to
represent fair value.
2. FOREIGN CURRENCY: Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
exchange rates on the valuation date as employed by Morgan Stanley Capital
International in the calculation of its indexes.
Realized gains (losses) and unrealized appreciation (depreciation) on
investment securities include the effects of changes in exchange rates since the
securities were purchased, combined with the effects of changes in security
prices. Fluctuations in the value of other assets and liabilities resulting from
changes in exchange rates are recorded as unrealized foreign currency gains
(losses) until the asset or liability is settled in cash, when they are recorded
as realized foreign currency gains (losses).
3. REPURCHASE AGREEMENTS: Each fund, along with other members of The
Vanguard Group, transfers uninvested cash balances to a pooled cash account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other party
to the agreement, retention of the collateral may be subject to legal
proceedings.
35
NOTES TO FINANCIAL STATEMENTS (continued)
4. 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.
5. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date.
6. OTHER: Dividend income is recorded on the ex-dividend date. Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold. Premiums and discounts on municipal
bonds are amortized and accreted, respectively, to interest income over the
lives of the respective securities. Fees assessed on capital share transactions
are credited to paid-in capital.
Each class of shares has equal rights as to assets and earnings, except
that each class separately bears certain class-specific expenses related to
maintenance of shareholder accounts (included in Management and Administrative
expenses) and shareholder reporting. Marketing and distribution expenses are
allocated to each class of shares based on a method approved by the board of
trustees. Income, other non-class-specific expenses, and gains and losses on
investments are allocated to each class of shares based on its relative net
assets.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to each fund under methods approved by the board of
trustees. Each fund has committed to provide up to 0.40% of its assets in
capital contributions to Vanguard. At June 30, 2003, the funds had contributed
capital to Vanguard (included in Other Assets) of:
- --------------------------------------------------------------------------------
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
TAX-MANAGED FUND (000) NET ASSETS CAPITALIZATION
- --------------------------------------------------------------------------------
Balanced $ 78 0.02% 0.08%
Growth and Income 339 0.02 0.34
Capital Appreciation 392 0.02 0.39
Small-Cap 123 0.02 0.12
International 74 0.02 0.07
- --------------------------------------------------------------------------------
The funds' trustees and officers are also directors and officers of Vanguard.
C. Distributions are determined on a tax basis and may differ from net
investment income and realized capital gains for financial reporting purposes.
Differences may be permanent or temporary. Permanent differences are
reclassified among capital accounts in the financial statements to reflect their
tax character. Temporary differences arise when certain items of income,
expense, gain, or loss are recognized in different periods for financial
statement and tax purposes; these differences will reverse at some time in the
future. Differences in classification may also result from the treatment of
short-term gains as ordinary income for tax purposes.
During the six months ended June 30, 2003, the Tax-Managed International
Fund realized net foreign currency gains of $70,000, which increased
distributable net income for tax purposes; accordingly, such gains have been
reclassified from accumulated net realized losses to undistributed net
investment income.
36
The funds' tax-basis capital gains and losses are determined only at the
end of each fiscal year. For tax purposes, at December 31, 2002, the following
funds had tax-basis capital losses available to offset future net capital gains:
- --------------------------------------------------------------------------------
CAPITAL LOSSES
-----------------------------
EXPIRATION: FISCAL
AMOUNT YEARS ENDING
TAX-MANAGED FUND (000) DECEMBER 31,
- --------------------------------------------------------------------------------
Balanced $ 28,436 2005-2011
Growth and Income 394,471 2004-2011
Capital Appreciation 443,154 2004-2010
Small-Cap 43,444 2007-2011
International 60,013 2007-2011
- --------------------------------------------------------------------------------
The funds will use these capital losses to offset net taxable capital gains, if
any, realized during the year ending December 31, 2003; should the funds realize
net capital losses for the year, the losses will be added to the loss
carryforward balances above.
At June 30, 2003, net unrealized appreciation (depreciation) of investment
securities for tax purposes was:
- -------------------------------------------------------------------------
(000)
--------------------------------------------
NET UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION
TAX-MANAGED FUND SECURITIES SECURITIES (DEPRECIATION)
- -------------------------------------------------------------------------
Balanced $ 63,974 $ (4,094) $ 59,880
Growth and Income 351,097 (134,264) 216,833
Capital Appreciation 596,967 (95,708) 501,259
Small-Cap 161,125 (28,247) 132,878
International 23,442 (91,495) (68,053)
- -------------------------------------------------------------------------
The Tax-Managed International Fund had net unrealized foreign currency
gains of $80,000 resulting from the translation of other assets and liabilities
at June 30, 2003.
D. During the six months ended June 30, 2003, purchases and sales of investment
securities other than temporary cash investments were:
- -------------------------------------------------------------------------
(000)
--------------------------------
TAX-MANAGED FUND PURCHASES SALES
- -------------------------------------------------------------------------
Balanced $ 31,310 $ 42,614
Growth and Income 71,127 46,329
Capital Appreciation 167,521 132,007
Small-Cap 106,196 89,117
International 47,454 31,937
- -------------------------------------------------------------------------
37
NOTES TO FINANCIAL STATEMENTS (continued)
E. The market value of securities on loan to broker/dealers at June 30, 2003,
and collateral received with respect to such loans were:
- -------------------------------------------------------------------------
(000)
--------------------------------
MARKET VALUE CASH
OF LOANED COLLATERAL
TAX-MANAGED FUND SECURITIES RECEIVED
- -------------------------------------------------------------------------
Growth and Income $ 711 $ 778
Capital Appreciation 5,671 6,009
Small-Cap 13,923 14,615
International 14,239 15,166
- -------------------------------------------------------------------------
The funds invest cash collateral received in repurchase agreements, and
record a liability for the return of the collateral, during the period the
securities are on loan.
F. Capital share transactions for each class of shares were:
- ----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------- -------------------
AMOUNT SHARES AMOUNT SHARES
TAX-MANAGED FUND (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------
BALANCED
Issued $ 19,384 1,217 $ 71,312 4,331
Issued in Lieu of Cash Distributions 4,302 266 9,614 605
Redeemed* (17,623) (1,120) (40,859) (2,569)
------------------------------------------
Net Increase (Decrease) 6,063 363 40,067 2,367
- ----------------------------------------------------------------------------------------
GROWTH AND INCOME
Investor Shares
Issued $ 45,405 2,313 $ 150,458 6,864
Issued in Lieu of Cash Distributions 6,702 333 16,381 804
Redeemed** (77,498) (3,938) (342,208) (15,869)
------------------------------------------
Net Increase (Decrease)--Investor Shares (25,391) (1,292) (175,369) (8,201)
------------------------------------------
Admiral Shares
Issued 58,169 1,409 227,266 5,042
Issued in Lieu of Cash Distributions 3,139 76 6,429 155
Redeemed** (15,134) (377) (77,667) (1,852)
------------------------------------------
Net Increase (Decrease)--Admiral Shares 46,174 1,108 156,028 3,345
------------------------------------------
Institutional Shares
Issued 5,449 276 65,035 2,752
Issued in Lieu of Cash Distributions 1,205 60 2,082 102
Redeemed** (4,759) (253) (10,211) (494)
------------------------------------------
Net Increase (Decrease)-
Institutional Shares 1,895 83 56,906 2,360
- ----------------------------------------------------------------------------------------
*Net of redemption fees for 2003 and 2002 of $131,000 and $338,000,
respectively.
**Net of redemption fees for 2003 and 2002 of $410,000 and $2,036,000,
respectively (fund totals).
38
- ----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------- -------------------
AMOUNT SHARES AMOUNT SHARES
TAX-MANAGED FUND (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------
CAPITAL APPRECIATION
Investor Shares
Issued $ 56,580 2,802 $ 161,791 7,252
Issued in Lieu of Cash Distributions -- -- 10,694 551
Redeemed* (81,749) (4,053) (307,425) (13,791)
------------------------------------------
Net Increase (Decrease) (25,169) (1,252) (134,940) (5,988)
------------------------------------------
Admiral Shares
Issued 79,041 1,935 260,923 5,607
Issued in Lieu of Cash Distributions -- -- 6,265 160
Redeemed** (25,336) (631) (80,115) (1,918)
------------------------------------------
Net Increase (Decrease)--Admiral Shares 53,705 1,304 187,073 3,849
------------------------------------------
Institutional Shares
Issued 61 4 16,774 829
Issued in Lieu of Cash Distributions -- -- 564 29
Redeemed** (3,632) (198) (2,983) (146)
------------------------------------------
Net Increase (Decrease)-
Institutional Shares (3,571) (194) 14,355 712
- ----------------------------------------------------------------------------------------
SMALL-CAP
Investor Shares
Issued $ 47,683 3,753 $ 165,515 11,625
Issued in Lieu of Cash Distributions -- -- 3,630 287
Redeemed** (25,724) (2,049) (33,739) (2,556)
------------------------------------------
Net Increase (Decrease)-Investor Shares 21,959 1,704 135,406 9,356
------------------------------------------
Institutional Shares
Issued -- -- 5,208 416
Issued in Lieu of Cash Distributions -- -- 102 8
Redeemed** (8,630) (670) (22,548) (1,679)
------------------------------------------
Net Increase (Decrease)-
Institutional Shares (8,630) (670) (17,238) (1,255)
- ----------------------------------------------------------------------------------------
International
Investor Shares
Issued $ 50,041 7,881 $ 123,341 17,238
Issued in Lieu of Cash Distributions -- -- 5,637 899
Redeemed** (52,543) (8,168) (55,232) (8,132)
------------------------------------------
Net Increase (Decrease)-Investor Shares (2,502) (287) 73,476 10,005
------------------------------------------
Institutional Shares
Issued 11,978 1,732 -- --
Issued in Lieu of Cash Distributions -- -- 1,040 166
Redeemed** -- -- -- --
------------------------------------------
Net Increase (Decrease)-
Institutional Shares 11,978 1,732 1,040 166
- ----------------------------------------------------------------------------------------
*Net of redemption fees for 2003 and 2002 of $444,000 and $1,686,000,
respectively (fund totals).
**Net of redemption fees for 2003 and 2002 of $332,000 and $613,000,
respectively (fund totals).
+Net of redemption fees for 2003 and 2002 of $306,000 and $415,000, respectively
(fund totals).
38
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39
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 a part owner of
the fund. Your fund trustees also serve on the board of directors of The
Vanguard Group, Inc., which is owned by the Vanguard(R) funds and provides
services to them on an at-cost basis.
A majority of Vanguard's board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
investments they have made as private individuals. Our independent board members
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 dates in parentheses below show when each trustee was
initially elected.
- --------------------------------------------------------------------------------
JOHN J. BRENNAN* Chairman of the Board, Chief Executive Officer, and
(1987) Director/Trustee of The Vanguard Group, Inc., and
of each of the investment companies served by The
Vanguard Group.
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
CHARLES D. ELLIS The Partners of '63 (pro bono ventures in education);
(2001) Senior Adviser to Greenwich Associates (international
business strategy consulting); Successor Trustee of
Yale University; Overseer of the Stern School of
Business at New York University; Trustee of the
Whitehead Institute for Biomedical Research.
- --------------------------------------------------------------------------------
RAJIV L. GUPTA Chairman and Chief Executive Officer (since October
(2002) 1999), Vice Chairman (January-September 1999), and
Vice President (prior to September1999) of Rohm and
Haas Co. (chemicals); Director of Technitrol, Inc.
(electroniccomponents), and Agere Systems
(communications components); Board Member of the
American Chemistry Council; Trustee of Drexel
University.
- --------------------------------------------------------------------------------
JOANN HEFFERNAN HEISEN Vice President, Chief Information Officer, and Member
(1998) of the Executive Committee of Johnson & Johnson
(pharmaceuticals/consumer products); Director of the
Medical Center at Princeton and Women's Research and
Education Institute.
- --------------------------------------------------------------------------------
BURTON G. MALKIEL Chemical Bank Chairman's Professor of Economics,
(1977) Princeton University; Director of Vanguard Investment
Series plc (Irish investment fund) (since November
2001), Vanguard Group (Ireland) Limited (Irish
investment management firm) (since November 2001),
Prudential Insurance Co. of America, BKF Capital
(investment management firm), The Jeffrey Co.(holding
company), and NeuVis, Inc.(software company).
- --------------------------------------------------------------------------------
ALFRED M. RANKIN, JR. Chairman, President, Chief Executive Officer, and
(1993) Director of NACCO Industries, Inc. (forklift trucks/
housewares/lignite); Director of Goodrich Corporation
(industrial products/aircraft systems and services);
Director until 1998 of Standard Products Company (a
supplier for the automotive industry).
- --------------------------------------------------------------------------------
J. LAWRENCE WILSON Retired Chairman and Chief Executive Officer of Rohm
(1985) and Haas Co. (chemicals); Director of Cummins Inc.
(diesel engines), MeadWestvaco Corp.(paper products),
and AmerisourceBergen Corp. (pharmaceutical
distribution); Trustee of Vanderbilt University.
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS*
R. Gregory Barton Secretary; Managing Director and General Counsel of
The Vanguard Group, Inc. (since September 1997);
Secretary of The Vanguard Group and of each of the
investment companies served by The Vanguard Group;
Principal of The Vanguard Group (prior to September
1997).
- --------------------------------------------------------------------------------
THOMAS J. HIGGINS Treasurer; Principal of The Vanguard Group, Inc.;
Treasurer of each of the investment companies served
by The Vanguard Group.
- --------------------------------------------------------------------------------
* Officers of the funds are "interested persons" as defined in the Investment
Company Act of 1940.
More information about the trustees is in the Statement of Additional
Information, available from The Vanguard Group.
- --------------------------------------------------------------------------------
VANGUARD SENIOR MANAGEMENT TEAM
MORTIMER J. BUCKLEY, Information Technology.
F. WILLIAM MCNABB, III, Client Relationship Group.
JAMES H. GATELY, Investment Programs and Services.
MICHAEL S. MILLER, Planning and Development.
KATHLEEN C. GUBANICH, Human Resources.
RALPH K. PACKARD, Finance.
IAN A. MACKINNON, Fixed Income Group.
GEORGE U. SAUTER, Quantitative Equity Group.
- --------------------------------------------------------------------------------
JOHN C. BOGLE, Founder; Chairman and Chief Executive Officer, 1974-1996.
[PICTURE OF SHIP]
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POST OFFICE BOX 2600
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S&P(R), S&P 500(R), Standard & Poor's 500, 500, and S&P SmallCap 600 are
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All other marks are the exclusive property of their respective owners.
ABOUT OUR COVER
The photographs of the sails and ship that appear on the cover of this report
are copyrighted by Michael Kahn.
FOR MORE INFORMATION
This report is intended for the fund's shareholders. It may not be distributed
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To receive a free copy of the prospectus or the Statement of Additional
Information, or to request additional information about the fund or other
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unless otherwise noted.
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(C)2003 THE VANGUARD GROUP, INC.
ALL RIGHTS RESERVED.
VANGUARD MARKETING
CORPORATION, DISTRIBUTOR.
Q872 082003
VANGUARD TAX-MANAGED FUNDS(R)
Semiannual Report June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS
The Statement of Net Assets should be read in conjunction with the Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes
to Financial Statements, all of which appear in the accompanying report.
This Statement provides a detailed list of each fund's holdings, including
each security's market value on the last day of the reporting period. Securities
are grouped and subtotaled by asset type (common stocks, bonds, etc.), with
common stocks listed in descending market-value order (grouped by country for
the Tax-Managed International Fund). The Tax-Managed Balanced Fund's municipal
bond holdings are grouped and subtotaled by state. Other assets are added to,
and liabilities are subtracted from, the value of Total Investments to calculate
the fund's Net Assets. Finally, Net Assets are divided by the outstanding shares
of the fund to arrive at its share price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets of each fund, you will find a
table displaying the composition of the fund's net assets. Because all income
and any realized gains must be distributed to shareholders each year, the bulk
of net assets consists of Paid-in Capital (money invested by shareholders). The
amounts shown for Undistributed Net Investment Income and Accumulated Net
Realized Gains usually approximate the sums the fund had available to distribute
to shareholders as income dividends or capital gains as of the statement date,
but may differ because certain investments or transactions may be treated
differently for financial statement and tax purposes. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net income or
net realized gains, will appear as negative balances. Unrealized Appreciation
(Depreciation) is the difference between the market value of the fund's
investments and their cost, and reflects the gains (losses) that would be
realized if the fund were to sell all of its investments at their statement-date
values.
================================================================================
CONTENTS
- --------------------------------------------------------------------------------
Tax-Managed Balanced Fund 1
Tax-Managed Growth and Income Fund 12
Tax-Managed Capital Appreciation Fund 18
Tax-Managed Small-Cap Fund 25
Tax-Managed International Fund 32
================================================================================
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (47.9%)
- --------------------------------------------------------------------------------
General Electric Co. 236,609 6,786
Pfizer Inc. 187,210 6,393
ExxonMobil Corp. 159,244 5,718
Microsoft Corp. 213,700 5,473
Citigroup, Inc. 121,897 5,217
Johnson & Johnson 72,232 3,734
Wal-Mart Stores, Inc. 64,500 3,462
Intel Corp. 159,900 3,323
International Business
Machines Corp. 38,700 3,193
American International Group, Inc. 55,606 3,068
Merck & Co., Inc. 50,400 3,052
* Cisco Systems, Inc. 174,600 2,914
Bank of America Corp. 33,505 2,648
The Procter & Gamble Co. 28,300 2,524
Verizon Communications 58,900 2,324
The Coca-Cola Co. 44,800 2,079
* Amgen, Inc. 30,000 1,993
Altria Group, Inc. 43,300 1,968
Wells Fargo & Co. 38,400 1,934
* Dell Computer Corp. 57,400 1,835
SBC Communications Inc. 68,844 1,759
PepsiCo, Inc. 39,500 1,758
* Viacom Inc. Class B 39,371 1,719
Home Depot, Inc. 49,200 1,630
ChevronTexaco Corp. 21,419 1,546
Medtronic, Inc. 31,400 1,506
* AOL Time Warner Inc. 85,610 1,377
Fannie Mae 20,200 1,362
Abbott Laboratories 31,000 1,357
Eli Lilly & Co. 19,100 1,317
================================================================================
1
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 37,600 1,285
* Oracle Corp. 104,400 1,255
Wyeth 26,200 1,193
Anheuser-Busch Cos., Inc. 21,000 1,072
American Express Co. 25,200 1,054
Wachovia Corp. 25,700 1,027
Hewlett-Packard Co. 48,012 1,023
3M Co. 7,300 942
Morgan Stanley 21,960 939
Bristol-Myers Squibb Co. 34,100 926
Lowe's Cos., Inc. 21,200 911
Merrill Lynch & Co., Inc. 19,400 906
BellSouth Corp. 33,600 895
* Comcast Corp. Class A 27,316 823
United Technologies Corp. 11,300 800
U.S. Bancorp 32,500 796
UnitedHealth Group Inc. 15,800 794
* Comcast Corp. Special Class A 27,492 793
Cardinal Health, Inc. 12,190 784
The Walt Disney Co. 39,400 778
Colgate-Palmolive Co. 13,200 765
* Liberty Media Corp. 64,928 751
Bank One Corp. 20,164 750
* Applied Materials, Inc. 46,800 741
Freddie Mac 14,600 741
ConocoPhillips 13,476 738
United Parcel Service, Inc. 11,400 726
E.I. du Pont de Nemours & Co. 16,900 704
First Data Corp. 15,968 662
Walgreen Co. 21,600 650
Washington Mutual, Inc. 15,671 647
Fifth Third Bancorp 11,100 636
* Boston Scientific Corp. 10,000 611
Texas Instruments, Inc. 34,500 607
Sysco Corp. 20,200 607
Gillette Co. 18,800 599
* Cendant Corp. 32,495 595
The Goldman Sachs Group, Inc. 7,100 595
* Clear Channel Communications, Inc. 13,930 590
Prudential Financial, Inc. 17,500 589
FedEx Corp. 9,100 564
Kimberly-Clark Corp. 10,672 556
* EMC Corp. 53,000 555
* Forest Laboratories, Inc. 10,100 553
Lockheed Martin Corp. 11,200 533
Lehman Brothers Holdings, Inc. 7,900 525
SLM Corp. 13,400 525
* eBay Inc. 5,000 521
Target Corp. 13,200 499
QUALCOMM Inc. 13,900 497
AFLAC Inc. 16,100 495
* Genentech, Inc. 6,800 490
Progressive Corp. of Ohio 6,500 475
Waste Management, Inc. 19,501 470
* Yahoo! Inc. 14,300 468
* Sun Microsystems, Inc. 101,700 468
Illinois Tool Works, Inc. 7,100 468
* Costco Wholesale Corp. 12,700 465
Southwest Airlines Co. 26,718 460
Alcoa Inc. 17,988 459
* NEXTEL Communications, Inc. 24,900 450
* Kohl's Corp. 8,700 447
Union Pacific Corp. 7,659 444
Guidant Corp. 10,000 444
Devon Energy Corp. 8,223 439
* Veritas Software Corp. 15,219 436
The Boeing Co. 12,640 434
* WellPoint Health Networks Inc.
Class A 5,100 430
* Analog Devices, Inc. 12,334 429
FleetBoston Financial Corp. 14,400 428
MBNA Corp. 20,400 425
* Best Buy Co., Inc. 9,650 424
Dow Chemical Co. 13,500 418
Newmont Mining Corp.
(Holding Company) 12,789 415
Harley-Davidson, Inc. 10,300 411
* Bed Bath & Beyond, Inc. 10,400 404
State Street Corp. 10,200 402
Baker Hughes, Inc. 11,940 401
* Anthem, Inc. 5,136 396
Burlington Resources, Inc. 7,300 395
Capital One Financial Corp. 8,000 393
Charles Schwab Corp. 38,950 393
Travelers Property Casualty Corp.
Class A 24,698 393
Maxim Integrated Products, Inc. 11,100 380
The Gap, Inc. 20,125 378
* St. Jude Medical, Inc. 6,484 373
* InterActiveCorp 9,400 372
Golden West Financial Corp. 4,600 368
Marsh & McLennan Cos., Inc. 7,200 368
Praxair, Inc. 6,100 367
Schering-Plough Corp. 19,700 366
Apache Corp. 5,623 366
* KLA-Tencor Corp. 7,800 363
McDonald's Corp. 16,300 360
Aetna Inc. 5,969 359
* PG&E Corp. 16,800 355
The Principal Financial Group, Inc. 11,000 355
* Starbucks Corp. 14,200 348
* Electronic Arts Inc. 4,700 348
Anadarko Petroleum Corp. 7,796 347
* Yum! Brands, Inc. 11,700 346
================================================================================
2
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Corning, Inc. 46,200 341
Stryker Corp. 4,900 340
* Lexmark International, Inc. 4,800 340
* International Game Technology 3,300 338
Wm. Wrigley Jr. Co. 6,000 337
Allstate Corp. 9,400 335
General Dynamics Corp. 4,600 334
* AT&T Wireless Services Inc. 40,469 332
Metropolitan Life Insurance Co. 11,700 331
* EchoStar Communications Corp.
Class A 9,557 331
Avon Products, Inc. 5,300 330
* Xerox Corp. 31,100 329
The Hartford Financial Services
Group Inc. 6,500 327
* Staples, Inc. 17,737 325
* SunGard Data Systems, Inc. 12,500 324
John Hancock Financial
Services, Inc. 10,500 322
Federated Department Stores, Inc. 8,700 321
Marriott International, Inc. Class A 8,300 319
MBIA, Inc. 6,500 317
* Concord EFS, Inc. 21,450 316
* MedImmune Inc. 8,624 314
Countrywide Financial Corp. 4,500 313
AmerisourceBergen Corp. 4,500 312
* Amazon.com, Inc. 8,500 310
* Zimmer Holdings, Inc. 6,870 309
* Apollo Group, Inc. Class A 5,000 309
* Intuit, Inc. 6,900 307
* Xilinx, Inc. 12,100 306
* Caremark Rx, Inc. 11,900 306
Adobe Systems, Inc. 9,500 305
Mattel, Inc. 16,080 304
Bear Stearns Co., Inc. 4,100 297
* Fiserv, Inc. 8,325 296
Biomet, Inc. 10,225 293
Danaher Corp. 4,300 293
Moody's Corp. 5,500 290
Mylan Laboratories, Inc. 8,300 289
HCA Inc. 8,902 285
Paychex, Inc. 9,650 283
Ambac Financial Group, Inc. 4,250 282
M & T Bank Corp. 3,300 278
Burlington Northern Santa Fe Corp. 9,738 277
* BJ Services Co. 7,400 276
* The Kroger Co. 16,500 275
ITT Industries, Inc. 4,200 275
Automatic Data Processing, Inc. 8,100 274
* Broadcom Corp. 11,000 274
* Apple Computer, Inc. 14,300 273
* Symantec Corp. 6,200 272
Norfolk Southern Corp. 14,100 271
Franklin Resources Corp. 6,900 270
* Altera Corp. 16,400 269
* Network Appliance, Inc. 16,539 268
Kinder Morgan, Inc. 4,900 268
* Synopsys, Inc. 4,300 266
* Edison International 16,100 265
Linear Technology Corp. 8,200 264
CenturyTel, Inc. 7,575 264
Honeywell International Inc. 9,800 263
Starwood Hotels & Resorts
Worldwide, Inc. 9,101 260
* Computer Sciences Corp. 6,800 259
* Genzyme Corp.-General Division 6,200 259
* Cox Communications, Inc. Class A 8,100 258
* QLogic Corp. 5,300 256
CVS Corp. 9,128 256
Northrop Grumman Corp. 2,959 255
* Watson Pharmaceuticals, Inc. 6,300 254
* Office Depot, Inc. 17,500 254
* Coach, Inc. 5,100 254
* Intersil Corp. 9,500 253
Centex Corp. 3,200 249
* Quest Diagnostics, Inc. 3,900 249
EOG Resources, Inc. 5,900 247
Legg Mason Inc. 3,800 247
* Express Scripts Inc. 3,600 246
* Oxford Health Plans, Inc. 5,800 244
* DST Systems, Inc. 6,400 243
* AutoZone Inc. 3,200 243
* Dollar Tree Stores, Inc. 7,650 243
* Harrah's Entertainment, Inc. 6,000 241
Microchip Technology, Inc. 9,800 241
* Dean Foods Co. 7,650 241
Sigma-Aldrich Corp. 4,400 238
* American Standard Cos., Inc. 3,200 237
* CarMax, Inc. 7,803 235
* Citizens Communications Co. 18,137 234
* Waters Corp. 8,000 233
* Univision Communications Inc. 7,600 231
* Health Net Inc. 7,000 231
The Clorox Co. 5,400 230
* Varian Medical Systems, Inc. 4,000 230
* Unisys Corp. 18,700 230
Janus Capital Group Inc. 14,000 230
Liz Claiborne, Inc. 6,500 229
* Sealed Air Corp. 4,800 229
Torchmark Corp. 6,100 227
Loews Corp. 4,800 227
Sovereign Bancorp, Inc. 14,500 227
D. R. Horton, Inc. 8,050 226
NIKE, Inc. Class B 4,200 225
================================================================================
3
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Thermo Electron Corp. 10,675 224
* UTStarcom, Inc. 6,300 224
MGIC Investment Corp. 4,800 224
Hilton Hotels Corp. 17,279 221
Dollar General Corp. 12,060 220
* Citrix Systems, Inc. 10,800 220
* Robert Half International, Inc. 11,600 220
* Career Education Corp. 3,200 219
* National Semiconductor Corp. 11,100 219
Health Management Associates
Class A 11,812 218
* Lear Corp. 4,700 216
* Novellus Systems, Inc. 5,900 216
* Chiron Corp. 4,940 216
* IVAX Corp. 12,037 215
Emerson Electric Co. 4,200 215
Lennar Corp. Class A 3,000 215
Cintas Corp. 6,050 214
* Michaels Stores, Inc. 5,600 213
* Fox Entertainment Group, Inc.
Class A 7,400 213
* BEA Systems, Inc. 19,600 213
Zions Bancorp 4,200 213
* Rent-A-Center, Inc. 2,800 212
* Energizer Holdings, Inc. 6,700 210
* Williams-Sonoma, Inc. 7,200 210
* Smith International, Inc. 5,700 209
XTO Energy, Inc. 10,400 209
* Republic Services, Inc. Class A 9,200 209
Mellon Financial Corp. 7,500 208
* AutoNation, Inc. 13,200 207
Archer-Daniels-Midland Co. 16,121 207
* Brinker International, Inc. 5,750 207
* Sanmina-SCI Corp. 32,808 207
Coca-Cola Enterprises, Inc. 11,400 207
* Affiliated Computer Services, Inc.
Class A 4,500 206
Rouse Co. REIT 5,400 206
Southern Co. 6,600 206
* NVR, Inc. 500 206
Hasbro, Inc. 11,725 205
* Jones Apparel Group, Inc. 7,000 205
* Lincare Holdings, Inc. 6,500 205
* Markel Corp. 800 205
* General Motors Corp. Class H 15,962 204
Molex, Inc. 7,566 204
* PeopleSoft, Inc. 11,600 204
Pulte Homes, Inc. 3,300 203
Freeport-McMoRan
Copper & Gold, Inc. Class B 8,300 203
* SPX Corp. 4,600 203
* Smithfield Foods, Inc. 8,800 202
Radian Group, Inc. 5,500 202
* The Dun & Bradstreet Corp. 4,900 201
Expeditors International of
Washington, Inc. 5,800 201
Manpower Inc. 5,400 200
The Pepsi Bottling Group, Inc. 10,000 200
McKesson Corp. 5,600 200
* Mohawk Industries, Inc. 3,600 200
* Compuware Corp. 34,200 197
General Motors Corp. 5,479 197
ENSCO International, Inc. 7,300 196
* First Health Group Corp. 7,100 196
* Pride International, Inc. 10,400 196
CSX Corp. 6,500 196
* JDS Uniphase Corp. 55,600 195
* Pactiv Corp. 9,900 195
* Constellation Brands, Inc. Class A 6,200 195
* Toys R Us, Inc. 16,000 194
* Barr Laboratories, Inc. 2,950 193
* Cablevision Systems- NY Group
Class A 9,294 193
Pogo Producing Co. 4,500 192
* Celgene Corp. 6,300 192
* L-3 Communications Holdings, Inc. 4,400 191
* Tenet Healthcare Corp. 16,390 191
IMS Health, Inc. 10,576 190
* Siebel Systems, Inc. 19,910 190
Foot Locker, Inc. 14,300 189
* MGM Mirage, Inc. 5,514 188
* Henry Schein, Inc. 3,600 188
DENTSPLY International Inc. 4,600 188
* BMC Software, Inc. 11,500 188
NSTAR 4,100 187
* Gentex Corp. 6,100 187
Gannett Co., Inc. 2,400 184
* Providian Financial Corp. 19,900 184
* American Power Conversion Corp. 11,800 184
Telephone & Data Systems, Inc. 3,700 184
* PETsMART, Inc. 11,000 183
* Westwood One, Inc. 5,400 183
* CDW Corp. 4,000 183
* Safeway, Inc. 8,934 183
* Pioneer Natural Resources Co. 7,000 183
W.W. Grainger, Inc. 3,900 182
* Big Lots Inc. 12,100 182
RadioShack Corp. 6,900 182
* Cooper Cameron Corp. 3,600 181
Outback Steakhouse 4,650 181
* LSI Logic Corp. 25,600 181
* Jabil Circuit, Inc. 8,200 181
* Toll Brothers, Inc. 6,400 181
Precision Castparts Corp. 5,800 180
================================================================================
4
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Apogent Technologies Inc. 9,000 180
* Navistar International Corp. 5,500 179
Darden Restaurants Inc. 9,450 179
* Rowan Cos., Inc. 8,000 179
Plum Creek Timber Co. Inc. REIT 6,900 179
* BISYS Group, Inc. 9,700 178
IndyMac Bancorp, Inc. REIT 7,000 178
Noble Energy, Inc. 4,700 178
* Furniture Brands International Inc. 6,800 177
E.W. Scripps Co. Class A 2,000 177
* Teradyne, Inc. 10,200 177
* JetBlue Airways Corp. 4,150 176
Motorola, Inc. 18,606 175
Roslyn Bancorp, Inc. 8,150 175
Fluor Corp. 5,200 175
* Cadence Design Systems, Inc. 14,500 175
* Certegy, Inc. 6,300 175
HCC Insurance Holdings, Inc. 5,900 174
* Andrx Group 8,753 174
* GTECH Holdings Corp. 4,600 173
Total System Services, Inc. 7,700 172
* Qwest Communications
International Inc. 35,751 171
C.H. Robinson Worldwide, Inc. 4,800 171
* Iron Mountain, Inc. 4,600 171
Fastenal Co. 5,000 170
Kerr-McGee Corp. 3,774 169
* Laboratory Corp. of
America Holdings 5,600 169
* Jacobs Engineering Group Inc. 4,000 169
* Patterson-UTI Energy, Inc. 5,200 168
* Ceridian Corp. 9,900 168
* NVIDIA Corp. 7,300 168
* Hispanic Broadcasting Corp. 6,600 168
* Tellabs, Inc. 25,500 167
* Agilent Technologies, Inc. 8,563 167
* Catellus Development Corp. 7,600 167
* Biogen, Inc. 4,400 167
The Bank of New York Co., Inc. 5,800 167
* Performance Food Group Co. 4,500 167
Dominion Resources, Inc. 2,590 166
Baxter International, Inc. 6,400 166
Reynolds & Reynolds Class A 5,800 166
* Smurfit-Stone Container Corp. 12,688 165
* Phelps Dodge Corp. 4,300 165
* Reebok International Ltd. 4,900 165
* Krispy Kreme Doughnuts, Inc. 4,000 165
* Varco International, Inc. 8,400 165
* Allied Waste Industries, Inc. 16,300 164
The PMI Group Inc. 6,100 164
Reinsurance Group of America, Inc. 5,100 164
Rockwell Collins, Inc. 6,600 163
* Universal Health Services Class B 4,100 162
Ford Motor Co. 14,765 162
* Newfield Exploration Co. 4,300 161
* Owens-Illinois, Inc. 11,700 161
Black & Decker Corp. 3,700 161
* Columbia Sportswear Co. 3,100 159
Mandalay Resort Group 5,000 159
* BOK Financial Corp. 4,120 159
* Alleghany Corp. 830 159
* National-Oilwell, Inc. 7,200 158
Estee Lauder Cos. Class A 4,700 158
Lyondell Chemical Co. 11,600 157
* SICOR, Inc. 7,700 157
* LAM Research Corp. 8,600 157
Leucadia National Corp. 4,200 156
Caterpillar, Inc. 2,800 156
ALLTEL Corp. 3,230 156
Williams Cos., Inc. 19,700 156
Tyson Foods, Inc. 14,631 155
Helmerich & Payne, Inc. 5,300 155
* Stericycle, Inc. 4,000 154
* NTL Incorporated 4,500 154
* Timberland Co. 2,900 153
Medicis Pharmaceutical Corp. 2,700 153
* Grant Prideco, Inc. 13,015 153
The St. Joe Co. 4,900 153
Transatlantic Holdings, Inc. 2,200 152
* Cytec Industries, Inc. 4,500 152
* Convergys Corp. 9,500 152
* Entercom Communications Corp. 3,100 152
* Lamar Advertising Co. Class A 4,300 151
Sabre Holdings Corp. 6,140 151
* J.B. Hunt Transport Services, Inc. 4,000 151
* Avnet, Inc. 11,900 151
* Del Monte Foods Co. 17,000 150
Brunswick Corp. 6,000 150
Northeast Utilities 8,900 149
* Hovnanian Enterprises Class A 2,500 147
* Whole Foods Market, Inc. 3,100 147
* WellChoice Inc. 5,000 146
* Pharmaceutical Resources, Inc. 3,000 146
* Sprint PCS 25,300 145
* BearingPoint, Inc. 15,000 145
Peabody Energy Corp. 4,300 144
Polo Ralph Lauren Corp. 5,600 144
* Sepracor Inc. 8,000 144
* ADC Telecommunications, Inc. 61,900 144
National City Corp. 4,400 144
Becton, Dickinson & Co. 3,700 144
* FMC Technologies Inc. 6,803 143
Nucor Corp. 2,900 142
Tootsie Roll Industries, Inc. 4,642 142
================================================================================
5
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Weight Watchers International, Inc. 3,100 141
* 3Com Corp. 30,000 140
* Key Energy Services, Inc. 13,000 139
PepsiAmericas, Inc. 11,000 138
* Westport Resources Corp. 6,000 137
* Patterson Dental Co. 3,000 136
* Hearst-Argyle Television Inc. 5,200 135
Neuberger Berman Inc. 3,300 132
* ChoicePoint Inc. 3,800 131
Valero Energy Corp. 3,600 131
* United Defense Industries Inc. 5,000 130
Wesco Financial Corp. 410 128
* Solectron Corp. 34,200 128
ServiceMaster Co. 11,900 127
Herman Miller, Inc. 6,300 127
* BlackRock, Inc. 2,800 126
Northern Trust Corp. 3,000 125
* Host Marriott Corp. REIT 13,700 125
* Borders Group, Inc. 7,100 125
* Abercrombie & Fitch Co. 4,400 125
* Scotts Co. 2,500 124
* Eon Labs, Inc. 3,500 123
* Swift Transportation Co., Inc. 6,600 123
* NCR Corp. 4,768 122
* Ingram Micro, Inc. Class A 10,900 120
* American Pharmaceuticals
Partners, Inc. 3,500 119
* Endo Pharmaceuticals Holdings, Inc. 7,000 118
Monsanto Co. 5,454 118
International Paper Co. 3,300 118
Alberto-Culver Co. Class B 2,300 118
Eaton Vance Corp. 3,700 117
* Barnes & Noble, Inc. 5,000 115
General Mills, Inc. 2,400 114
Exelon Corp. 1,900 114
BB&T Corp. 3,300 113
Clayton Homes Inc. 9,000 113
* Packaging Corp. of America 6,100 112
* Park Place Entertainment Corp. 12,200 111
Kellogg Co. 3,200 110
* DeVry, Inc. 4,700 109
* Saks Inc. 11,200 109
* The Cheesecake Factory 2,900 104
* Arrow Electronics, Inc. 6,800 104
Amerada Hess Corp. 2,100 103
Diamond Offshore Drilling, Inc. 4,900 103
* Mettler-Toledo International Inc. 2,800 103
* Millipore Corp. 2,300 102
* U.S. Cellular Corp. 4,000 102
Federated Investors, Inc. 3,700 101
AT&T Corp. 5,231 101
Georgia Pacific Group 5,272 100
Duke Energy Corp. 5,000 100
* Rite Aid Corp. 22,300 99
* AGCO Corp. 5,800 99
* Storage Technology Corp. 3,800 98
* Interactive Data Corp. 5,400 91
* Advanced Micro Devices, Inc. 14,200 91
Investors Financial Services Corp. 3,100 90
Sara Lee Corp. 4,700 88
Winn-Dixie Stores, Inc. 6,900 85
Sprint Corp. 5,600 81
LaBranche & Co. Inc. 3,800 79
Martin Marietta Materials, Inc. 2,300 77
SunTrust Banks, Inc. 1,300 77
* Metro-Goldwyn-Mayer Inc. 6,000 75
The MONY Group Inc. 2,700 73
* AES Corp. 11,300 72
* CNA Financial Corp. 2,900 71
* King Pharmaceuticals, Inc. 4,700 69
Travelers Property Casualty Corp.
Class B 4,379 69
NiSource, Inc. 3,377 64
* CIENA Corp. 11,300 59
* Triad Hospitals, Inc. 2,300 57
R.J. Reynolds Tobacco Holdings, Inc. 1,501 56
Computer Associates
International, Inc. 2,362 53
Albertson's, Inc. 2,700 52
* Polycom, Inc. 3,600 50
* Level 3 Communications, Inc. 7,300 48
SCANA Corp. 1,400 48
* Valassis Communications, Inc. 1,800 46
Beckman Coulter, Inc. 1,100 45
* IDEC Pharmaceuticals Corp. 1,300 44
* Micron Technology, Inc. 3,700 43
ProLogis REIT 1,565 43
* Avaya Inc. 6,600 43
* Amkor Technology, Inc. 3,220 42
* Brocade Communications
Systems, Inc. 6,800 40
* Tech Data Corp. 1,300 35
* Vishay Intertechnology, Inc. 2,600 34
Newell Rubbermaid, Inc. 1,218 34
Limited Brands, Inc. 2,138 33
St. Paul Cos., Inc. 900 33
Instinet Group Inc. 6,800 32
Belo Corp. Class A 1,400 31
Nationwide Financial Services, Inc. 900 29
ConAgra Foods, Inc. 1,200 28
FirstEnergy Corp. 700 27
Cinergy Corp. 700 26
Electronic Data Systems Corp. 1,100 24
Lennar Corp. Class B 340 23
================================================================================
6
================================================================================
MARKET
TAX-MANAGED VALUE
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
Autodesk, Inc. 1,400 23
* Alliant Techsystems, Inc. 400 21
PNC Financial Services Group 400 20
Nordstrom, Inc. 900 18
Xcel Energy, Inc. 900 14
TXU Corp. 600 13
First Tennessee National Corp. 300 13
Delphi Corp. 1,235 11
El Paso Corp. 1,300 11
Dynegy, Inc. 1,900 8
* Monster Worldwide Inc. 400 8
* Pixar, Inc. 100 6
StanCorp Financial Group, Inc. 100 5
Trizec Properties, Inc. REIT 200 2
* Corrections Corp. of America REIT 74 2
* Agere Systems Inc. Class B 277 1
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $172,939) 216,277
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (52.4%)
- --------------------------------------------------------------------------------
ALASKA (0.7%)
Matanuska-Susitna Borough AK GO
5.50%, 3/1/2012 (3) $1,695 1,985
Valdez AK Marine Terminal Rev.
(Exxon Pipeline Co.) VRDO
0.90%, 7/1/2003 1,100 1,100
------------
3,085
------------
ARIZONA (2.4%)
Arizona Transp. Board Highway Rev.
5.25%, 7/1/2017 2,215 2,456
5.25%, 7/1/2020 1,965 2,138
Phoenix AZ Civic Improvement Corp.
Water System Rev.
5.50%, 7/1/2015 (3) 5,525 6,331
------------
10,925
------------
CALIFORNIA (3.3%)
California State Dept. Water Resources
Power Supply Rev.
5.50%, 5/1/2015 (2) 3,000 3,411
California Dept. of Water Resources
Water System Rev. (Central Valley)
8.25%, 12/1/2003 290 299
California GO
6.00%, 2/1/2016 2,000 2,334
6.40%, 2/1/2006 (1) 500 561
California Health Fac. Finance Auth. Rev.
(Catholic Healthcare West)
6.25%, 7/1/2006 (1) 395 448
California Public Works Board Lease Rev.
(Dept. of Corrections)
5.00%, 9/1/2011 (2) 1,535 1,692
Central Coast California Water
Auth. Rev.
6.00%, 10/1/2008 (2) 1,000 1,154
Clovis CA Unified School Dist. GO
0.00%, 8/1/2005 (3) (ETM) 2,000 1,943
Los Angeles CA Unified School Dist. GO
6.00%, 7/1/2008 (3) 1,000 1,178
San Bernardino County CA Medical
Center COP
5.50%, 8/1/2005 (1) 500 543
South Orange County CA Public
Finance Auth. Rev.
7.00%, 9/1/2006 (1) 875 1,021
------------
14,584
------------
COLORADO (0.7%)
Colorado Springs CO Util. System Rev.
5.375%, 11/15/2013 2,775 3,214
------------
CONNECTICUT (0.2%)
South Central Connecticut Regional
Water Auth. Water System Rev.
5.75%, 8/1/2006 (3) 900 922
------------
DISTRICT OF COLUMBIA (1.5%)
District of Columbia GO
5.50%, 6/1/2004 (4) 740 770
5.50%, 6/1/2004 (4) (ETM) 260 271
6.75%, 6/1/2005 (1) 5 5
5.50%, 6/1/2007 (4) 1,490 1,684
5.40%, 6/1/2012 (2) 455 516
District of Columbia Univ. Rev.
(George Washington Univ.)
6.00%, 9/15/2011 (1) 3,000 3,567
------------
6,813
------------
FLORIDA (2.0%)
Florida Division Board Financial Dept.
of General Services Systems Rev.
(Dept. of Environmental Protection)
5.00%, 7/1/2009 3,000 3,405
Florida Turnpike Auth. Rev.
5.25%, 7/1/2009 (3) 485 550
5.25%, 7/1/2010 (3) 825 941
Jacksonville FL Electric Auth. Rev.
(Electric System) VRDO
1.00%, 7/1/2003 2,900 2,900
Tampa FL Health System Rev.
(Catholic Healthcare East)
5.00%, 11/15/2009 (1) 1,000 1,134
------------
8,930
------------
================================================================================
7
================================================================================
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
GEORGIA (1.7%)
Atlanta GA Airport Fac. Rev.
5.75%, 1/1/2013 (3) 3,370 3,907
Georgia Muni. Electric Power Auth. Rev.
6.25%, 1/1/2012 (1) 3,000 3,671
------------
7,578
------------
HAWAII (0.5%)
Hawaii GO
5.875%, 10/1/2014 (1) (Prere.) 1,870 2,254
------------
ILLINOIS (1.9%)
Chicago IL (City Colleges Improvement) GO
0.00%, 1/1/2012 (3) 2,380 1,738
Illinois GO.
5.25%, 8/1/2012 3,700 4,271
Illinois Sales Tax Rev
0.00%, 12/15/2016 (2) 5,000 2,780
------------
8,789
------------
KANSAS (0.7%)
Kansas Dept. of Transp.
Highway Rev. VRDO
1.00%, 7/1/2003 1,430 1,430
Kansas Dev. Finance Auth. Rev.
(Board of Regents)
5.50%, 10/1/2003 (2) 1,800 1,821
------------
3,251
------------
LOUISIANA (1.2%)
Louisiana GO
5.50%, 5/15/2015 (3) 2,665 3,037
St. Charles Parish LA PCR
(Entergy Inc.) PUT
5.35%, 10/1/2003 2,400 2,420
------------
5,457
------------
MASSACHUSETTS (3.7%)
Chelsea MA GO
5.50%, 6/15/2011 (2) 740 851
5.50%, 6/15/2012 (2) 735 845
Massachusetts Bay Transp.
Auth. Rev.
6.25%, 3/1/2005 1,000 1,081
5.125%, 3/1/2013 1,695 1,910
Massachusetts Dev. Finance
Agency Rev. (Smith College) VRDO
0.95%, 7/7/2003 3,300 3,300
Massachusetts Health & Educ. Fac.
Auth. Rev. (Caritas Christi
Obligated Group)
6.50%, 7/1/2012 1,880 1,963
Massachusetts Health & Educ. Fac.
Auth. Rev. (Northeastern Univ.)
5.00%, 10/1/2017 (1) 1,000 1,070
Massachusetts Water Pollution
Abatement Trust
6.00%, 8/1/2010 1,780 2,098
Massachusetts Water Resources
Auth. Rev.
5.75%, 8/1/2004 (1) (Prere.) 300 320
5.25%, 8/1/2017 (4) 3,000 3,460
------------
16,898
------------
MICHIGAN (2.1%)
Dickinson County MI Memorial
Hosp. System Rev.
7.625%, 11/1/2004 (Prere.) 180 185
Michigan Building Auth. Rev.
5.30%, 10/1/2010 1,250 1,430
5.125%, 10/15/2011 3,015 3,408
Michigan Muni. Bond Auth. Rev.
(Clean Water Revolving Fund)
5.875%, 10/1/2014 (Prere.) 2,110 2,562
Univ. of Michigan Hosp. Rev. VRDO
0.95%, 7/1/2003 2,000 2,000
------------
9,585
------------
MISSISSIPPI (1.2%)
Mississippi GO
5.50%, 12/1/2018 2,750 3,249
5.50%, 12/1/2019 2,000 2,359
------------
5,608
------------
MISSOURI (1.8%)
Missouri Health & Educ. Fac. Auth.
Health Fac. Rev. (St. Luke's Episcopal -
Presbyterian Hosp.)
5.50%, 12/1/2015 (4) 2,965 3,346
Missouri Health & Educ. Fac. Auth.
(Washington Univ.)
6.00%, 3/1/2030 4,000 4,816
------------
8,162
------------
NEBRASKA (0.1%)
Nebraska Public Power Dist. Rev.
5.25%, 1/1/2010 (1) 125 141
5.25%, 1/1/2011 (1) 225 254
------------
395
------------
NEVADA (0.6%)
Clark County NV Airport
Improvement Rev.
5.00%, 7/1/2005 (1) 1,705 1,827
Clark County NV School Dist. GO
5.90%, 6/15/2006 (3) (Prere.) 750 853
------------
2,680
------------
================================================================================
8
================================================================================
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
NEW JERSEY (2.6%)
New Jersey Econ. Dev. Auth. Market
Transition Fac. Rev.
5.70%, 7/1/2004 (1) (Prere.) 400 427
New Jersey Transp. Corp. COP
5.50%, 9/15/2011 (2) 3,000 3,517
New Jersey Transp. Trust Fund
Auth. Rev.
6.00%, 6/15/2005 (2) 2,500 2,725
6.00%, 6/15/2008 250 289
6.00%, 12/15/2011 (1) (Prere.) 625 772
5.00%, 6/15/2014 1,555 1,694
6.00%, 12/15/2014 (1) 330 396
6.00%, 12/15/2015 (1) (Prere.) 1,440 1,779
------------
11,599
------------
NEW YORK (6.5%)
Erie County NY GO
6.125%, 1/15/2011 (3) 610 730
Hempstead NY GO
5.625%, 2/1/2011 (3) 685 756
5.625%, 2/1/2011 155 175
Huntington NY GO
6.70%, 2/1/2010 (3) 375 459
Long Island NY Power Auth. Electric
System Rev.
5.50%, 12/1/2009 (2) 2,000 2,331
5.50%, 12/1/2012 (4) 2,000 2,390
Metro. New York Transp. Auth. Rev.
(Commuter Fac.)
6.00%, 7/1/2006 (1) 1,000 1,133
Metro. New York Transp. Auth. Rev.
(Dedicated Petroleum Tax)
6.125%, 4/1/2014 (3) (Prere.) 2,110 2,555
New York City NY GO
7.10%, 8/15/2004 (Prere.) 500 539
6.375%, 8/15/2005 (Prere.) 135 151
6.375%, 8/15/2009 505 554
New York City NY GO VRDO
0.95%, 7/1/2003 LOC 800 800
New York City NY Muni. Water Finance
Auth. Water & Sewer
System Rev. VRDO
0.95%, 7/1/2003 (3) 1,800 1,800
New York City NY Transitional
Finance Auth. Rev.
5.875%, 11/1/2012 3,305 3,866
5.375%, 2/1/2013 2,000 2,294
New York State Dormitory Auth. Rev.
(State Univ.)
5.375%, 5/15/2007 (2) 400 451
New York State Dormitory Auth. Rev.
(Vassar Brothers Hosp.)
5.10%, 7/1/2010 (4) 1,500 1,658
New York State Environmental
Fac. Corp. PCR (State Water
Recovery Fund)
6.35%, 6/15/2004 295 315
6.35%, 6/15/2006 225 239
New York State Thruway Auth. Rev.
(Service Contract)
5.40%, 4/1/2005 (1) 400 420
5.50%, 4/1/2014 4,000 4,602
Suffolk County NY GO
5.00%, 4/1/2007 (3) 1,120 1,246
------------
29,464
------------
NORTH CAROLINA (0.6%)
North Carolina Eastern Muni.
Power Agency Rev.
5.125%, 1/1/2014 2,400 2,507
------------
OHIO (3.7%)
Butler County OH Transp.
Improvement Dist. Rev.
6.00%, 4/1/2012 (4) 2,250 2,651
Cleveland OH Public Power
System Rev.
7.00%, 11/15/2004 (1) (Prere.) 2,750 3,028
Hamilton County OH Hosp. Fac. Rev.
(Health Alliance of Greater
Cincinnati) VRDO
0.97%, 7/7/2003 (1) 1,040 1,040
Lorain County OH Hosp. Fac. Rev.
(Catholic Healthcare Partners)
6.00%, 9/1/2004 (1) 1,080 1,142
5.625%, 9/1/2013 (1) 1,775 2,039
Ohio State-Infrastructure Improvements
5.50%, 2/1/2019 2,000 2,353
Ohio Air Quality Dev. Auth.
(Cincinnati Gas & Electric Co.) VRDO
0.95%, 7/1/2003 LOC 1,795 1,795
Ohio Higher Educ. Fac. Comm. Rev.
(Case Western Reserve Univ.) VRDO
0.95%, 7/1/2003 1,500 1,500
Ohio Housing Finance Agency
Mortgage Rev.
5.025%, 3/1/2021 545 547
Ohio Water Dev. Auth. Rev. (Pure Water)
5.75%, 12/1/2005 105 107
================================================================================
9
================================================================================
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
Ohio Water Dev. Auth. Rev.
6.00%, 12/1/2004 (2) (Prere.) 315 323
6.00%, 12/1/2008 (2) (Prere.) 75 77
------------
16,602
------------
OREGON (0.6%)
Oregon State Dept.
Administrative Services
5.75%, 4/1/2014 (4) 2,400 2,775
PENNSYLVANIA (4.5%)
Geisinger Health System Auth. of
Pennsylvania Rev. (Penn State
Geisinger Health System) VRDO
0.98%, 7/1/2003 800 800
Montgomery County PA IDA PCR
(PECO Energy) PUT
5.20%, 10/1/2004 2,000 2,073
Pennsylvania Convention Center
Auth. Rev.
6.70%, 9/1/2014 (1) 500 540
Pennsylvania GO
5.00%, 7/1/2009 5,000 5,690
Pennsylvania Turnpike Comm. Oil
Franchise Tax Rev.
5.25%, 12/1/2009 (2) 615 703
5.25%, 12/1/2011 (2) 455 523
Philadelphia PA Airport Parking Auth.
5.75%, 9/1/2008 (2) 1,150 1,335
Philadelphia PA Hosp. & Higher Educ.
Fac. Auth. Rev. (Children's Hosp. of
Philadelphia) VRDO
0.98%, 7/1/2003 3,500 3,500
0.98%, 7/1/2003 (1) 1,900 1,900
Philadelphia PA School Dist. GO
6.25%, 9/1/2005 (2) 870 961
Philadelphia PA Water & Waste
Water Rev.
6.25%, 8/1/2009 (1) 1,000 1,205
Pittsburgh PA GO
5.20%, 3/1/2010 (3) 580 624
Pittsburgh PA Water & Sewer Auth. Rev.
5.60%, 9/1/2005 (3) (Prere.) 235 257
------------
20,111
------------
SOUTH DAKOTA (0.3%)
South Dakota Building Auth. Lease Rev.
5.25%, 12/1/2010 (2) 1,000 1,133
------------
TENNESSEE (0.5%)
Metro. Govt. of Nashville & Davidson
County TN Water & Sewer Rev.
6.50%, 1/1/2009 (3) 2,000 2,403
------------
TEXAS (4.6%)
Austin TX Combined Util. System Rev.
5.60%, 5/15/2005 (1) (Prere.) 1,205 1,302
Austin TX Water & Wastewater
System Rev.
5.75%, 5/15/2011 (1) 2,200 2,549
Brazos River TX Harbor Navigation
Dist. Brazoria County Environmental
(Dow Chemical Co. Project) PUT
5.20%, 5/15/2008 800 850
Carrollton TX Independent
School Dist. GO
6.00%, 2/15/2012 (Prere.) 2,925 3,474
Dallas TX Civic Center Refunding &
Improvement Rev.
4.60%, 8/15/2009 (1) 110 121
4.70%, 8/15/2010 (1) 815 890
Harris County TX GO VRDO
1.10%, 7/7/2003 900 900
Harris County TX Health Fac.
Dev. Corp. Rev. (St. Luke's
Episcopal Hosp.) VRDO
0.95%, 7/1/2003 1,070 1,070
Houston TX Water & Sewer
System Rev.
0.00%, 12/1/2008 (2) 2,750 2,381
Lubbock TX Health Fac. Dev. Corp. Rev.
(St. Joseph's Health System)
5.00%, 7/1/2008 (4) 1,645 1,825
Northwest Texas Independent
School Dist. GO
0.00%, 8/15/2004 2,205 2,179
San Antonio TX Electric & Gas Rev.
5.125%, 2/1/2009 1,000 1,131
San Antonio TX Water Rev.
6.50%, 5/15/2010 75 91
6.50%, 5/15/2010 15 16
Texas Muni. Power Agency Rev.
0.00%, 9/1/2010 (2) (ETM) 160 127
Texas Water Finance Assistance GO
5.00%, 8/1/2008 690 692
5.00%, 8/1/2009 1,050 1,054
------------
20,652
------------
UTAH (0.3%)
Intermountain Power Agency Utah
Power Supply Rev.
5.20%, 7/1/2006 725 740
5.20%, 7/1/2006 425 434
Salt Lake City UT Building Auth. Lease Rev.
5.90%, 10/1/2004 (1) (Prere.) 260 278
------------
1,452
------------
================================================================================
10
================================================================================
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
VIRGINIA (0.5%)
Henrico County VA Water & Sewer Rev.
5.25%, 5/1/2011 1,485 1,698
Virginia Transp. Board Rev.
6.00%, 5/15/2007 500 527
------------
2,225
------------
WASHINGTON (0.7%)
King County WA Library System GO
6.05%, 12/1/2007 (Prere.) 1,000 1,150
Seattle WA Muni. Light & Power Rev.
6.25%, 7/1/2004 (Prere.) 700 751
Washington GO
6.00%, 6/1/2012 1,000 1,207
------------
3,108
------------
WISCONSIN (0.7%)
Wisconsin GO
5.75%, 5/1/2011 (Prere.) 1,340 1,605
5.75%, 5/1/2012 1,355 1,586
------------
3,191
------------
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $219,810) 236,352
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost $392,749) 452,629
- --------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
- --------------------------------------------------------------------------------
Other Assets--Note B $ 5,271
Liabilities (6,559)
------------
(1,288)
------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------
Applicable to 27,108,382 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $451,341
================================================================================
NET ASSET VALUE PER SHARE $16.65
================================================================================
- -See Note A in Notes to Financial Statements.
*Non-income-producing security.
COP--Certificate of Participation.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
REIT--Real Estate Investment Trust.
VRDO--Variable Rate Demand Obligation.
(Prere.)--Prerefunded.
(ETM)--Escrowed to Maturity.
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (AMBAC Indemnity Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
The insurance does not guarantee the market value of the
municipal bonds.
LOC--Scheduled principal and interest payments are guaranteed by
bank letter of credit.
================================================================================
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------
Paid-in Capital $427,797 $15.78
Undistributed Net
Investment Income 52 --
Accumulated Net Realized Losses (36,388) (1.34)
Unrealized Appreciation 59,880 2.21
- --------------------------------------------------------------------------------
NET ASSETS $451,341 $16.65
================================================================================
See Note C in Notes to Financial Statements for the tax-basis
components of net assets.
11
================================================================================
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- --------------------------------------------------------------------------------
General Electric Co. 2,220,616 63,687
Microsoft Corp. 2,386,068 61,107
Pfizer Inc. 1,754,187 59,905
ExxonMobil Corp. 1,484,394 53,305
Wal-Mart Stores, Inc. 973,086 52,226
Citigroup, Inc. 1,144,110 48,968
Johnson & Johnson 659,792 34,111
American International
Group, Inc. 579,763 31,991
International Business
Machines Corp. 384,036 31,683
Intel Corp. 1,452,036 30,179
Merck & Co., Inc. 498,358 30,176
Bank of America Corp. 333,001 26,317
* Cisco Systems, Inc. 1,559,802 26,033
The Procter & Gamble Co. 287,768 25,663
The Coca-Cola Co. 547,426 25,406
Verizon Communications 611,264 24,114
Altria Group, Inc. 449,979 20,447
SBC Communications Inc. 738,370 18,865
Wells Fargo & Co. 372,204 18,759
* Amgen, Inc. 279,904 18,597
* Dell Computer Corp. 570,700 18,240
Eli Lilly & Co. 249,696 17,222
ChevronTexaco Corp. 237,475 17,146
PepsiCo, Inc. 382,480 17,020
Home Depot, Inc. 510,629 16,911
* Viacom Inc. Class B 387,175 16,904
United Parcel Service, Inc. 250,100 15,931
J.P. Morgan Chase & Co. 451,490 15,432
Abbott Laboratories 346,994 15,184
* AOL Time Warner Inc. 915,314 14,727
Fannie Mae 217,732 14,684
Hewlett-Packard Co. 678,381 14,450
* Oracle Corp. 1,166,972 14,027
Wyeth 295,136 13,443
* Comcast Corp. Class A 442,530 13,356
Medtronic, Inc. 271,036 13,002
American Express Co. 288,464 12,061
Wachovia Corp. 298,930 11,945
3M Co. 86,945 11,214
BellSouth Corp. 410,372 10,928
Bristol-Myers Squibb Co. 390,976 10,615
U.S. Bancorp 426,654 10,453
Morgan Stanley 241,678 10,332
Merrill Lynch & Co., Inc. 206,784 9,653
Anheuser-Busch Cos., Inc. 185,528 9,471
Bank One Corp. 253,854 9,438
E.I. du Pont de Nemours & Co. 221,433 9,220
The Walt Disney Co. 454,096 8,968
The Goldman Sachs Group, Inc. 104,800 8,777
Washington Mutual, Inc. 206,770 8,540
ConocoPhillips 150,893 8,269
Freddie Mac 152,760 7,756
Target Corp. 202,428 7,660
Lowe's Cos., Inc. 173,312 7,444
United Technologies Corp. 104,489 7,401
* eBay Inc. 70,600 7,355
Fifth Third Bancorp 128,254 7,354
Tyco International Ltd. 382,062 7,252
Gillette Co. 226,916 7,230
FleetBoston Financial Corp. 233,777 6,945
Colgate-Palmolive Co. 119,712 6,937
First Data Corp. 166,376 6,895
Walgreen Co. 227,860 6,859
UnitedHealth Group Inc. 131,856 6,626
The Boeing Co. 186,883 6,414
Cardinal Health, Inc. 99,368 6,389
Dow Chemical Co. 203,496 6,300
QUALCOMM Inc. 175,500 6,274
McDonald's Corp. 282,830 6,239
Schlumberger Ltd. 129,510 6,161
Marsh & McLennan Cos., Inc. 119,112 6,083
MBNA Corp. 283,992 5,918
Kimberly-Clark Corp. 113,044 5,894
* Applied Materials, Inc. 368,400 5,843
Texas Instruments, Inc. 331,569 5,836
* Clear Channel
Communications, Inc. 136,557 5,789
Allstate Corp. 156,480 5,579
* Boston Scientific Corp. 91,182 5,571
Honeywell International Inc. 190,728 5,121
* EMC Corp. 487,850 5,108
Southern Co. 160,412 4,998
Schering-Plough Corp. 268,385 4,992
The Bank of New York Co., Inc. 171,400 4,928
Alcoa Inc. 187,956 4,793
Metropolitan Life Insurance Co. 169,200 4,792
Emerson Electric Co. 93,632 4,785
Lockheed Martin Corp. 100,276 4,770
Gannett Co., Inc. 59,704 4,586
Carnival Corp. 139,700 4,542
Automatic Data Processing, Inc. 133,136 4,508
Illinois Tool Works, Inc. 68,438 4,507
General Motors Corp. 124,702 4,489
National City Corp. 136,160 4,454
Dominion Resources, Inc. 69,133 4,443
* Forest Laboratories, Inc. 80,700 4,417
* Yahoo! Inc. 134,100 4,393
Sysco Corp. 144,816 4,350
Exelon Corp. 72,093 4,312
Caterpillar, Inc. 76,590 4,263
* Cendant Corp. 226,897 4,157
================================================================================
12
================================================================================
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
FedEx Corp. 66,484 4,124
* NEXTEL Communications, Inc. 228,000 4,122
Prudential Financial, Inc. 122,400 4,119
Duke Energy Corp. 200,306 3,996
* AT&T Wireless Services Inc. 481,309 3,952
SLM Corp. 100,500 3,937
General Mills, Inc. 82,182 3,896
* Kohl's Corp. 75,400 3,874
International Paper Co. 106,632 3,810
Motorola, Inc. 403,073 3,801
SunTrust Banks, Inc. 62,652 3,718
The Gap, Inc. 197,985 3,714
* Costco Wholesale Corp. 101,152 3,702
BB&T Corp. 107,797 3,697
HCA Inc. 113,986 3,652
Lehman Brothers Holdings, Inc. 53,900 3,583
Progressive Corp. of Ohio 48,500 3,545
Travelers Property Casualty Corp.
Class B 223,926 3,531
AFLAC Inc. 114,600 3,524
Northrop Grumman Corp. 40,749 3,516
Baxter International, Inc. 132,788 3,452
Ford Motor Co. 307,911 3,384
ALLTEL Corp. 69,436 3,348
Tribune Co. 68,691 3,318
* Sun Microsystems, Inc. 717,784 3,302
Union Pacific Corp. 56,600 3,284
Sara Lee Corp. 173,572 3,265
Avon Products, Inc. 52,284 3,252
General Dynamics Corp. 44,032 3,192
Waste Management, Inc. 132,151 3,184
* Best Buy Co., Inc. 71,650 3,147
NIKE, Inc. Class B 58,712 3,141
The Hartford Financial Services
Group Inc. 62,202 3,132
Kellogg Co. 90,636 3,115
PNC Financial Services Group 63,101 3,080
Stryker Corp. 44,200 3,066
Guidant Corp. 68,800 3,054
Charles Schwab Corp. 300,175 3,029
Omnicom Group Inc. 41,900 3,004
Raytheon Co. 91,319 2,999
Southwest Airlines Co. 173,132 2,978
State Street Corp. 74,100 2,920
Newmont Mining Corp.
(Holding Company) 89,609 2,909
Sprint Corp. 199,844 2,878
Computer Associates
International, Inc. 128,500 2,863
Occidental Petroleum Corp. 84,345 2,829
* Analog Devices, Inc. 81,200 2,827
ConAgra Foods, Inc. 119,692 2,825
* The Kroger Co. 169,276 2,824
Wm. Wrigley Jr. Co. 50,194 2,822
* WellPoint Health Networks Inc.
Class A 32,500 2,740
Devon Energy Corp. 51,303 2,739
Golden West Financial Corp. 34,054 2,725
FPL Group, Inc. 40,749 2,724
Harley-Davidson, Inc. 67,200 2,679
Mellon Financial Corp. 96,056 2,666
Entergy Corp. 50,186 2,649
* Veritas Software Corp. 92,189 2,643
Weyerhaeuser Co. 48,669 2,628
The McGraw-Hill Cos., Inc. 42,376 2,627
American Electric Power Co., Inc. 87,837 2,620
H.J. Heinz Co. 78,088 2,575
* Bed Bath & Beyond, Inc. 65,700 2,550
FirstEnergy Corp. 66,161 2,544
Masco Corp. 106,368 2,537
XL Capital Ltd. Class A 30,400 2,523
Baker Hughes, Inc. 74,991 2,517
Capital One Financial Corp. 50,400 2,479
The Chubb Corp. 41,209 2,473
Maxim Integrated Products, Inc. 72,200 2,469
Anadarko Petroleum Corp. 55,509 2,468
CVS Corp. 87,624 2,456
Paychex, Inc. 83,675 2,453
Deere & Co. 53,479 2,444
Equity Office Properties Trust REIT 89,800 2,425
AT&T Corp. 125,798 2,422
Burlington Resources, Inc. 44,717 2,418
* Apollo Group, Inc. Class A 39,000 2,409
* Electronic Arts Inc. 32,400 2,397
* Anthem, Inc. 30,910 2,385
KeyCorp 94,348 2,384
Burlington Northern
Santa Fe Corp. 83,227 2,367
Progress Energy, Inc. 53,611 2,354
The Principal Financial
Group, Inc. 72,800 2,348
Apache Corp. 35,975 2,341
Danaher Corp. 34,100 2,321
McKesson Corp. 64,569 2,308
Sears, Roebuck & Co. 68,599 2,308
* St. Jude Medical, Inc. 39,992 2,300
Electronic Data Systems Corp. 106,400 2,282
Campbell Soup Co. 91,612 2,244
Allergan, Inc. 29,036 2,239
Halliburton Co. 97,278 2,237
Linear Technology Corp. 69,400 2,235
Franklin Resources Corp. 57,200 2,235
Becton, Dickinson & Co. 56,692 2,202
Praxair, Inc. 36,160 2,173
================================================================================
13
================================================================================
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
Consolidated Edison Inc. 49,700 2,151
TJX Cos., Inc. 114,008 2,148
* Starbucks Corp. 86,800 2,128
Public Service Enterprise Group, Inc. 50,235 2,122
Air Products & Chemicals, Inc. 50,780 2,112
SouthTrust Corp. 76,700 2,086
The Clorox Co. 48,914 2,086
* Corning, Inc. 281,339 2,079
Northern Trust Corp. 49,188 2,055
* Agilent Technologies, Inc. 104,801 2,049
Hershey Foods Corp. 29,298 2,041
* Intuit, Inc. 45,700 2,035
* MedImmune Inc. 55,900 2,033
Aetna Inc. 33,759 2,032
Countrywide Financial Corp. 29,100 2,024
Pitney Bowes, Inc. 52,680 2,023
ACE, Ltd. 58,900 2,020
* Lexmark International, Inc. 28,400 2,010
* Genzyme Corp.-General Division 48,000 2,005
Marriott International, Inc. Class A 51,968 1,997
* Staples, Inc. 108,300 1,987
John Hancock Financial
Services, Inc. 64,400 1,979
* Zimmer Holdings, Inc. 43,697 1,969
Loews Corp. 41,500 1,963
* KLA-Tencor Corp. 42,200 1,962
* International Game Technology 19,000 1,944
* Yum! Brands, Inc. 65,650 1,941
* PG&E Corp. 91,158 1,928
PPG Industries, Inc. 37,725 1,914
* Xilinx, Inc. 74,800 1,893
St. Paul Cos., Inc. 50,666 1,850
Mattel, Inc. 97,720 1,849
Archer-Daniels-Midland Co. 143,314 1,844
* Xerox Corp. 173,730 1,840
Coca-Cola Enterprises, Inc. 100,500 1,824
Marathon Oil Corp. 69,178 1,823
Comerica, Inc. 39,153 1,821
* Chiron Corp. 41,500 1,814
Limited Brands, Inc. 116,194 1,801
Ingersoll-Rand Co. 37,890 1,793
Eastman Kodak Co. 64,828 1,773
Moody's Corp. 33,480 1,765
PACCAR, Inc. 25,740 1,739
H & R Block, Inc. 39,900 1,726
AmSouth Bancorp 78,963 1,725
AmerisourceBergen Corp. 24,700 1,713
Johnson Controls, Inc. 19,976 1,710
Newell Rubbermaid, Inc. 60,973 1,707
Fortune Brands, Inc. 32,288 1,685
Aon Corp. 69,450 1,672
Norfolk Southern Corp. 87,019 1,671
Regions Financial Corp. 49,400 1,669
Unocal Corp. 57,723 1,656
Adobe Systems, Inc. 51,600 1,655
Biomet, Inc. 57,615 1,651
* Comcast Corp. Special Class A 57,192 1,649
* SunGard Data Systems, Inc. 63,500 1,645
Simon Property Group, Inc. REIT 42,100 1,643
TXU Corp. 72,044 1,616
PPL Corp. 37,480 1,612
* Concord EFS, Inc. 108,800 1,602
Bear Stearns Co., Inc. 22,101 1,601
* Computer Sciences Corp. 41,644 1,587
Ameren Corp. 35,905 1,583
Ambac Financial Group, Inc. 23,800 1,577
MBIA, Inc. 32,300 1,575
Equity Residential REIT 60,600 1,573
* Transocean Inc. 71,400 1,569
Charter One Financial, Inc. 50,202 1,565
* Univision Communications Inc. 51,300 1,560
Federated Department Stores, Inc. 42,200 1,555
* Apple Computer, Inc. 81,300 1,554
* Broadcom Corp. 62,300 1,552
Marshall & Ilsley Corp. 50,400 1,541
Rohm & Haas Co. 49,557 1,538
New York Times Co. Class A 33,630 1,530
* Fiserv, Inc. 42,950 1,529
* AutoZone Inc. 20,000 1,519
* Quest Diagnostics, Inc. 23,600 1,506
Ecolab, Inc. 58,460 1,497
Kinder Morgan, Inc. 27,300 1,492
CIGNA Corp. 31,338 1,471
Family Dollar Stores, Inc. 38,400 1,465
Synovus Financial Corp. 67,700 1,456
DTE Energy Co. 37,502 1,449
Cinergy Corp. 39,206 1,442
* Symantec Corp. 32,800 1,439
May Department Stores Co. 64,520 1,436
CSX Corp. 47,714 1,436
* Lucent Technologies, Inc. 698,810 1,419
Lincoln National Corp. 39,542 1,409
* Altera Corp. 84,936 1,393
Union Planters Corp. 44,450 1,379
Dollar General Corp. 74,662 1,363
Dover Corp. 45,280 1,357
ITT Industries, Inc. 20,601 1,349
Cintas Corp. 37,882 1,343
Xcel Energy, Inc. 89,236 1,342
Cincinnati Financial Corp. 35,900 1,332
Jefferson-Pilot Corp. 31,943 1,324
* BJ Services Co. 35,400 1,323
Sempra Energy 46,184 1,318
Eaton Corp. 16,759 1,317
UST, Inc. 37,299 1,307
* Nabors Industries, Inc. 32,400 1,281
================================================================================
14
================================================================================
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc. 44,700 1,278
Constellation Energy Group, Inc. 36,898 1,266
Knight Ridder 18,270 1,259
Monsanto Co. 58,120 1,258
The Pepsi Bottling Group, Inc. 62,300 1,247
KeySpan Corp. 35,100 1,244
Genuine Parts Co. 38,837 1,243
Avery Dennison Corp. 24,684 1,239
* PeopleSoft, Inc. 70,400 1,238
First Tennessee National Corp. 28,200 1,238
* Tenet Healthcare Corp. 105,199 1,226
North Fork Bancorp, Inc. 35,900 1,223
* Novellus Systems, Inc. 33,300 1,219
* Network Appliance, Inc. 75,200 1,219
* Edison International 73,028 1,200
* American Standard Cos., Inc. 16,100 1,190
Textron, Inc. 30,404 1,186
Molex, Inc. 42,625 1,150
CenturyTel, Inc. 32,000 1,115
MeadWestvaco Corp. 44,979 1,111
* JDS Uniphase Corp. 315,975 1,109
NiSource, Inc. 58,359 1,109
Parker Hannifin Corp. 26,273 1,103
SAFECO Corp. 30,720 1,084
Delphi Corp. 125,473 1,083
Centex Corp. 13,916 1,083
Hilton Hotels Corp. 84,367 1,079
EOG Resources, Inc. 25,700 1,075
Plum Creek Timber Co. Inc. REIT 41,200 1,069
* Qwest Communications
International Inc. 223,276 1,067
Brown-Forman Corp. Class B 13,522 1,063
Georgia Pacific Group 55,984 1,061
Tiffany & Co. 32,400 1,059
MGIC Investment Corp. 22,400 1,045
Zions Bancorp 20,300 1,027
T. Rowe Price Group Inc. 27,100 1,023
* Noble Corp. 29,800 1,022
Huntington Bancshares Inc. 52,310 1,021
Kerr-McGee Corp. 22,679 1,016
J.C. Penney Co., Inc.
(Holding Company) 60,206 1,014
* AutoNation, Inc. 64,400 1,012
* QLogic Corp. 20,900 1,010
* Office Depot, Inc. 69,200 1,004
* Harrah's Entertainment, Inc. 24,849 1,000
Rockwell Automation, Inc. 41,653 993
Health Management Associates
Class A 53,600 989
RadioShack Corp. 37,564 988
Rockwell Collins, Inc. 40,053 987
Amerada Hess Corp. 20,017 984
* Jabil Circuit, Inc. 44,500 983
Torchmark Corp. 26,298 980
Whirlpool Corp. 15,353 978
IMS Health, Inc. 54,245 976
W.W. Grainger, Inc. 20,646 965
* Watson Pharmaceuticals, Inc. 23,800 961
* Safeway, Inc. 44,106 902
* Unisys Corp. 73,381 901
* Sealed Air Corp. 18,836 898
Sherwin-Williams Co. 33,394 898
Leggett & Platt, Inc. 43,300 888
Applera Corp.-Applied
Biosystems Group 46,500 885
Janus Capital Group Inc. 53,800 882
UnumProvident Corp. 64,662 867
Sigma-Aldrich Corp. 16,000 867
Cooper Industries, Inc. Class A 20,795 859
* BMC Software, Inc. 52,385 855
Nucor Corp. 17,397 850
Liz Claiborne, Inc. 24,038 847
McCormick & Co., Inc. 31,100 846
* Jones Apparel Group, Inc. 28,800 843
* Waters Corp. 28,900 842
Pulte Homes, Inc. 13,621 840
El Paso Corp. 103,800 839
Vulcan Materials Co. 22,600 838
Equifax, Inc. 31,900 829
C.R. Bard, Inc. 11,577 826
VF Corp. 24,242 824
* Citizens Communications Co. 63,400 817
Scientific-Atlanta, Inc. 33,956 810
Freeport-McMoRan
Copper & Gold, Inc. Class B 32,700 801
* National Semiconductor Corp. 40,551 800
* AES Corp. 124,800 792
Sabre Holdings Corp. 31,931 787
Dow Jones & Co., Inc. 18,240 785
* Citrix Systems, Inc. 38,200 778
Williams Cos., Inc. 97,900 773
Pinnacle West Capital Corp. 20,500 768
* Thermo Electron Corp. 36,300 763
* Phelps Dodge Corp. 19,856 761
Black & Decker Corp. 17,486 760
Wendy's International, Inc. 25,751 746
* NVIDIA Corp. 32,100 739
* Robert Half International, Inc. 38,600 731
Apartment Investment &
Management Co. Class A REIT 21,100 730
* Mercury Interactive Corp. 18,900 730
Darden Restaurants Inc. 38,111 723
* Teradyne, Inc. 41,300 715
* Sanmina-SCI Corp. 113,000 713
Engelhard Corp. 28,590 708
================================================================================
15
================================================================================
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
* Pactiv Corp. 35,777 705
R.J. Reynolds Tobacco
Holdings, Inc. 18,900 703
* Sprint PCS 120,072 690
* American Power Conversion Corp. 43,600 680
Alberto-Culver Co. Class B 13,186 674
Hasbro, Inc. 38,525 674
Federated Investors, Inc. 24,500 672
International Flavors &
Fragrances, Inc. 20,982 670
R.R. Donnelley & Sons Co. 25,541 668
Symbol Technologies, Inc. 51,250 667
KB HOME 10,711 664
Sunoco, Inc. 17,245 651
SuperValu Inc. 30,192 644
* Comverse Technology, Inc. 41,700 627
Pall Corp. 27,395 616
Fluor Corp. 18,280 615
* Micron Technology, Inc. 52,846 615
* Providian Financial Corp. 65,328 605
* Tellabs, Inc. 91,400 600
Nordstrom, Inc. 30,748 600
* LSI Logic Corp. 83,974 595
Albertson's, Inc. 30,874 593
* Toys R Us, Inc. 48,191 584
Ball Corp. 12,802 583
Deluxe Corp. 12,882 577
* Calpine Corp. 85,900 567
Bemis Co., Inc. 12,075 565
* NCR Corp. 21,980 563
CenterPoint Energy Inc. 68,887 561
Goodrich Corp. 26,254 551
* Humana Inc. 36,300 548
* Avaya Inc. 84,759 548
Eastman Chemical Co. 17,282 547
* Convergys Corp. 33,900 542
The Stanley Works 19,606 541
Temple-Inland Inc. 12,100 519
Brunswick Corp. 20,426 511
* Navistar International Corp. 15,556 508
* Siebel Systems, Inc. 52,800 504
* Manor Care, Inc. 20,113 503
Meredith Corp. 11,296 497
* Monster Worldwide Inc. 25,000 493
* Compuware Corp. 85,100 491
* Millipore Corp. 10,994 488
* Rowan Cos., Inc. 21,286 477
Ashland, Inc. 15,406 473
* Allied Waste Industries, Inc. 46,500 467
* Biogen, Inc. 12,287 467
* Reebok International Ltd. 13,491 454
Bausch & Lomb, Inc. 12,002 450
* Solectron Corp. 119,200 446
* PMC Sierra Inc. 37,600 441
Maytag Corp. 17,564 429
* Tektronix, Inc. 19,552 422
Autodesk, Inc. 25,720 416
* Applied Micro Circuits Corp. 68,100 412
Adolph Coors Co. Class B 8,228 403
* Big Lots Inc. 26,552 399
PerkinElmer, Inc. 28,280 391
Winn-Dixie Stores, Inc. 31,308 385
Dana Corp. 33,293 385
United States Steel Corp. 23,400 383
Snap-On Inc. 13,067 379
NICOR Inc. 10,080 374
* Quintiles Transnational Corp. 26,300 373
Ryder System, Inc. 14,164 363
Delta Air Lines, Inc. 24,100 354
Peoples Energy Corp. 8,219 353
Dynegy, Inc. 82,900 348
* ADC Telecommunications, Inc. 147,300 343
* King Pharmaceuticals, Inc. 22,666 335
Cummins Inc. 9,241 332
Boise Cascade Corp. 13,030 311
Crane Co. 13,654 309
Cooper Tire & Rubber Co. 16,385 288
* American Greetings Corp. Class A 14,647 288
* CIENA Corp. 51,449 267
CMS Energy Corp. 32,600 264
Dillard's Inc. 19,586 264
Interpublic Group of Cos., Inc. 19,454 260
* Louisiana-Pacific Corp. 24,000 260
* Novell, Inc. 83,702 258
Worthington Industries, Inc. 19,102 256
* Hercules, Inc. 25,017 248
Great Lakes Chemical Corp. 11,643 238
The Goodyear Tire & Rubber Co. 39,116 205
Allegheny Energy, Inc. 24,200 204
* Thomas & Betts Corp. 13,228 191
Tupperware Corp. 13,017 187
* Viacom Inc. Class A 3,800 166
* Power-One, Inc. 18,200 130
Allegheny Technologies Inc. 17,200 114
* Mirant Corp. 35,900 104
* McDermott International, Inc. 16,041 102
* Gateway, Inc. 27,800 101
TECO Energy, Inc. 6,900 83
* Parametric Technology Corp. 22,000 67
Visteon Corp. 4,795 33
* Advanced Micro Devices, Inc. 1,400 9
Circuit City Stores, Inc. 1,000 9
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,762,407) 1,979,240
- --------------------------------------------------------------------------------
16
================================================================================
FACE MARKET
AMOUNT VALUE*
(000) (000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.1%)
- --------------------------------------------------------------------------------
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
1.16%, 7/1/2003 $1,010 $ 1,010
1.16%, 7/1/2003--Note E 778 778
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $1,788) 1,788
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(Cost $1,764,195) 1,981,028
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.1%)
Other Assets--Note B 3,573
Liabilities--Note E (6,359)
------------
(2,786)
------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $1,978,242
================================================================================
oSee Note A in Notes to Financial Statements.
*Non-income-producing security.
REIT--Real Estate Investment Trust.
================================================================================
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $2,200,694
Overdistributed Net Investment Income (1,059)
Accumulated Net Realized Losses (438,226)
Unrealized Appreciation 216,833
- --------------------------------------------------------------------------------
NET ASSETS $1,978,242
================================================================================
Investor Shares--Net Assets
Applicable to 54,932,543 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $1,166,942
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $21.24
================================================================================
Admiral Shares--Net Assets
Applicable to 14,311,695 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $624,760
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
ADMIRAL SHARES $43.65
================================================================================
Institutional Shares--Net Assets
Applicable to 8,780,598 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $186,540
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $21.24
================================================================================
See Note C in Notes to Financial Statements for the tax-basis components
of net assets.
17
================================================================================
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- --------------------------------------------------------------------------------
General Electric Co. 2,399,034 68,804
Pfizer Inc. 1,979,460 67,599
ExxonMobil Corp. 1,571,734 56,441
Microsoft Corp. 2,194,000 56,188
Citigroup, Inc. 1,282,844 54,906
Johnson & Johnson 744,298 38,480
Wal-Mart Stores, Inc. 678,400 36,410
Intel Corp. 1,657,700 34,454
International Business
Machines Corp. 416,400 34,353
Merck & Co., Inc. 535,000 32,394
American International
Group, Inc. 580,731 32,045
* Cisco Systems, Inc. 1,808,500 30,184
Bank of America Corp. 334,575 26,441
The Procter & Gamble Co. 280,800 25,042
The Coca-Cola Co. 515,300 23,915
Verizon Communications 582,842 22,993
* Amgen, Inc. 314,075 20,867
Altria Group, Inc. 449,500 20,425
PepsiCo, Inc. 457,200 20,345
* Dell Computer Corp. 595,800 19,042
Wells Fargo & Co. 350,590 17,670
SBC Communications Inc. 683,420 17,461
* Viacom Inc. Class B 397,830 17,369
* AOL Time Warner Inc. 1,076,647 17,323
Home Depot, Inc. 476,500 15,782
ChevronTexaco Corp. 216,819 15,654
Medtronic, Inc. 314,000 15,063
Abbott Laboratories 310,400 13,583
Fannie Mae 198,500 13,387
J.P. Morgan Chase & Co. 385,300 13,170
* Oracle Corp. 1,075,048 12,922
American Express Co. 307,800 12,869
Hewlett-Packard Co. 602,958 12,843
Eli Lilly & Co. 183,300 12,642
Morgan Stanley 295,600 12,637
Wyeth 255,800 11,652
The Walt Disney Co. 563,509 11,129
Merrill Lynch & Co., Inc. 223,600 10,438
Wachovia Corp. 256,200 10,238
Lowe's Cos., Inc. 216,800 9,312
Bristol-Myers Squibb Co. 342,500 9,299
First Data Corp. 221,224 9,168
3M Co. 70,200 9,054
* Comcast Corp. Class A 293,157 8,847
BellSouth Corp. 331,400 8,825
* Liberty Media Corp. 737,758 8,528
McDonald's Corp. 379,700 8,376
UnitedHealth Group Inc. 165,200 8,301
* Comcast Corp. Special Class A 282,232 8,137
QUALCOMM Inc. 226,100 8,083
U.S. Bancorp 325,200 7,967
The Boeing Co. 225,470 7,738
Anheuser-Busch Cos., Inc. 151,400 7,729
* Applied Materials, Inc. 485,600 7,702
Bank One Corp. 205,059 7,624
* EMC Corp. 696,100 7,288
Walgreen Co. 241,300 7,263
ConocoPhillips 130,974 7,177
Cardinal Health, Inc. 111,412 7,164
Freddie Mac 139,800 7,098
E.I. du Pont de Nemours & Co. 164,300 6,841
* Clear Channel
Communications, Inc. 158,784 6,731
* Boston Scientific Corp. 106,300 6,495
Washington Mutual, Inc. 157,111 6,489
* Cendant Corp. 345,025 6,321
Alcoa Inc. 242,128 6,174
The Goldman Sachs Group, Inc. 71,400 5,980
Prudential Financial, Inc. 177,500 5,973
* Forest Laboratories, Inc. 107,900 5,908
FedEx Corp. 94,800 5,880
* eBay Inc. 56,155 5,850
United Parcel Service, Inc. 91,600 5,835
* Costco Wholesale Corp. 154,100 5,640
SLM Corp. 141,700 5,550
Lehman Brothers Holdings, Inc. 82,300 5,471
Sysco Corp. 181,700 5,458
Texas Instruments, Inc. 308,600 5,431
Lockheed Martin Corp. 113,000 5,375
AFLAC Inc. 173,700 5,341
* NEXTEL Communications, Inc. 284,990 5,153
* Sun Microsystems, Inc. 1,109,500 5,104
* Yahoo! Inc. 154,500 5,061
MBNA Corp. 241,500 5,033
Progressive Corp. of Ohio 68,500 5,007
Gillette Co. 156,716 4,993
HCA Inc. 155,821 4,993
Guidant Corp. 111,700 4,958
* Kohl's Corp. 95,800 4,922
Waste Management, Inc. 204,297 4,922
Target Corp. 129,500 4,900
Southwest Airlines Co. 279,087 4,800
United Technologies Corp. 67,600 4,788
State Street Corp. 118,500 4,669
* The Kroger Co. 279,800 4,667
* Analog Devices, Inc. 133,166 4,637
Colgate-Palmolive Co. 78,900 4,572
Kimberly-Clark Corp. 87,496 4,562
* WellPoint Health Networks Inc.
Class A 54,072 4,558
================================================================================
18
================================================================================
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
FleetBoston Financial Corp. 153,400 4,558
Devon Energy Corp. 84,111 4,492
* Best Buy Co., Inc. 101,300 4,449
Newmont Mining Corp.
(Holding Company) 134,656 4,371
Fifth Third Bancorp 75,800 4,346
* Genentech, Inc. 60,050 4,331
* General Motors Corp. Class H 334,983 4,291
* Veritas Software Corp. 149,400 4,283
Travelers Property Casualty
Corp. Class A 269,068 4,278
Harley-Davidson, Inc. 106,200 4,233
* Bed Bath & Beyond, Inc. 106,400 4,129
Capital One Financial Corp. 83,100 4,087
* St. Jude Medical, Inc. 70,716 4,066
Golden West Financial Corp. 50,100 4,009
* Anthem, Inc. 51,755 3,993
Apache Corp. 61,131 3,977
Maxim Integrated Products, Inc. 115,500 3,949
Anadarko Petroleum Corp. 88,708 3,945
* InterActiveCorp 98,060 3,880
* International Game Technology 37,800 3,868
* Agilent Technologies, Inc. 196,925 3,850
* Starbucks Corp. 156,652 3,841
Stryker Corp. 55,300 3,836
Linear Technology Corp. 118,800 3,827
Paychex, Inc. 128,680 3,772
* Yum! Brands, Inc. 127,580 3,771
Aetna Inc. 62,397 3,756
* PG&E Corp. 176,800 3,739
Illinois Tool Works, Inc. 56,600 3,727
* KLA-Tencor Corp. 79,200 3,682
* Electronic Arts Inc. 49,500 3,663
The Principal Financial Group, Inc. 113,500 3,660
Dow Chemical Co. 117,700 3,644
* AT&T Wireless Services Inc. 443,810 3,644
Emerson Electric Co. 71,200 3,638
Marsh & McLennan Cos., Inc. 70,600 3,606
* Lexmark International, Inc. 50,800 3,595
Schering-Plough Corp. 193,100 3,592
* Corning, Inc. 484,400 3,580
Metropolitan Life Insurance Co. 126,300 3,577
* Zimmer Holdings, Inc. 78,970 3,558
* Safeway, Inc. 172,784 3,535
* EchoStar Communications Corp.
Class A 102,000 3,531
John Hancock Financial
Services, Inc. 114,400 3,516
* Apollo Group, Inc. Class A 56,184 3,470
* Staples, Inc. 188,830 3,465
* Xilinx, Inc. 135,600 3,432
* Xerox Corp. 323,300 3,424
* SunGard Data Systems, Inc. 131,400 3,405
Federated Department Stores, Inc. 92,000 3,390
Danaher Corp. 49,200 3,348
* Caremark Rx, Inc. 130,200 3,344
Countrywide Financial Corp. 48,000 3,339
Automatic Data Processing, Inc. 98,100 3,322
Mattel, Inc. 175,332 3,317
Biomet, Inc. 115,475 3,310
Mylan Laboratories, Inc. 94,325 3,280
Wm. Wrigley Jr. Co. 58,200 3,273
* Genzyme Corp.-General Division 78,200 3,269
* Apple Computer, Inc. 170,300 3,256
* Concord EFS, Inc. 219,100 3,225
Franklin Resources Corp. 81,900 3,200
Praxair, Inc. 53,100 3,191
* Fiserv, Inc. 89,150 3,175
* MedImmune Inc. 87,200 3,171
Adobe Systems, Inc. 98,700 3,165
Becton, Dickinson & Co. 80,600 3,131
Northrop Grumman Corp. 36,134 3,118
* Intuit, Inc. 69,900 3,113
Moody's Corp. 58,400 3,078
Honeywell International Inc. 114,500 3,074
* Cox Communications, Inc. Class A 95,800 3,056
Allstate Corp. 84,600 3,016
* Computer Sciences Corp. 77,800 2,966
Ambac Financial Group, Inc. 44,650 2,958
M & T Bank Corp. 35,100 2,956
ITT Industries, Inc. 45,000 2,946
Norfolk Southern Corp. 152,500 2,928
* Altera Corp. 177,376 2,909
* Qwest Communications
International Inc. 607,379 2,903
Kinder Morgan, Inc. 53,100 2,902
* Novellus Systems, Inc. 78,100 2,860
AmerisourceBergen Corp. 41,200 2,857
Charles Schwab Corp. 281,700 2,842
* Broadcom Corp. 114,100 2,842
General Dynamics Corp. 39,100 2,835
CenturyTel, Inc. 81,000 2,823
Starwood Hotels & Resorts
Worldwide, Inc. 98,724 2,823
* Amazon.com, Inc. 77,000 2,810
Centex Corp. 35,800 2,785
* Edison International 168,400 2,767
Plum Creek Timber Co. Inc. REIT 105,900 2,748
CVS Corp. 97,428 2,731
Burlington Resources, Inc. 50,500 2,731
* Coach, Inc. 54,700 2,721
* BJ Services Co. 72,800 2,720
Legg Mason Inc. 41,400 2,689
* Watson Pharmaceuticals, Inc. 66,600 2,689
================================================================================
19
================================================================================
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
* Synopsys, Inc. 43,427 2,686
* Office Depot, Inc. 184,700 2,680
* Express Scripts Inc. 39,100 2,671
* Network Appliance, Inc. 164,063 2,659
EOG Resources, Inc. 63,400 2,653
The Gap, Inc. 141,187 2,649
* Biogen, Inc. 69,600 2,645
* Symantec Corp. 60,200 2,640
* Sprint PCS 457,820 2,632
* Fox Entertainment Group, Inc.
Class A 90,700 2,610
Health Management Associates
Class A 141,168 2,605
Loews Corp. 54,900 2,596
* Harrah's Entertainment, Inc. 64,000 2,575
Sigma-Aldrich Corp. 47,500 2,574
* QLogic Corp. 53,000 2,561
* Quest Diagnostics, Inc. 40,100 2,558
* American Standard Cos., Inc. 34,600 2,558
* Waters Corp. 87,800 2,558
* Chiron Corp. 58,440 2,555
SCANA Corp. 74,200 2,544
* Oxford Health Plans, Inc. 60,300 2,534
* AutoZone Inc. 33,300 2,530
Motorola, Inc. 267,646 2,524
* Citizens Communications Co. 195,702 2,523
* Dollar Tree Stores, Inc. 79,150 2,511
Microchip Technology, Inc. 101,800 2,507
Liz Claiborne, Inc. 70,900 2,499
* Dean Foods Co. 79,200 2,495
* Unisys Corp. 201,800 2,478
The Hartford Financial Services
Group Inc. 49,200 2,478
* PeopleSoft, Inc. 140,400 2,470
* Brinker International, Inc. 68,500 2,467
* Affiliated Computer Services, Inc.
Class A 53,900 2,465
* Thermo Electron Corp. 117,134 2,462
Caterpillar, Inc. 44,000 2,449
* Career Education Corp. 35,700 2,443
* Univision Communications Inc. 80,300 2,441
* Barr Laboratories, Inc. 37,250 2,440
* AutoNation, Inc. 154,800 2,433
* Republic Services, Inc. Class A 107,200 2,430
Zions Bancorp 47,600 2,409
* Jabil Circuit, Inc. 108,600 2,400
ENSCO International, Inc. 89,000 2,394
XTO Energy, Inc. 117,700 2,367
* DST Systems, Inc. 62,200 2,364
Estee Lauder Cos. Class A 70,300 2,357
Dollar General Corp. 128,687 2,350
Coca-Cola Enterprises, Inc. 129,100 2,343
* Lear Corp. 50,800 2,338
* Constellation Brands, Inc. Class A 74,400 2,336
Neuberger Berman Inc. 58,400 2,331
* Smith International, Inc. 63,400 2,329
Freeport-McMoRan Copper &
Gold, Inc. Class B 95,000 2,328
* UTStarcom, Inc. 65,425 2,327
* Pioneer Natural Resources Co. 89,100 2,326
RadioShack Corp. 88,300 2,323
MGIC Investment Corp. 49,400 2,304
Rouse Co. REIT 60,400 2,301
* Michaels Stores, Inc. 60,300 2,295
Cintas Corp. 64,600 2,289
* CarMax, Inc. 75,879 2,288
Pulte Homes, Inc. 37,100 2,288
Molex, Inc. 84,656 2,285
Manpower Inc. 61,600 2,285
* NTL Incorporated 66,900 2,283
* SPX Corp. 51,800 2,282
* Tenet Healthcare Corp. 195,905 2,282
* Intersil Corp. 85,600 2,278
* Jones Apparel Group, Inc. 77,600 2,271
Sovereign Bancorp, Inc. 145,000 2,269
Kerr-McGee Corp. 50,649 2,269
Expeditors International of
Washington, Inc. 65,500 2,269
* Energizer Holdings, Inc. 72,228 2,268
* Health Net Inc. 68,800 2,267
Bear Stearns Co., Inc. 31,300 2,267
* JDS Uniphase Corp. 643,700 2,259
* BMC Software, Inc. 138,100 2,255
* Laboratory Corp. of
America Holdings 74,700 2,252
* Pactiv Corp. 113,400 2,235
* Calpine Corp. 338,600 2,235
DENTSPLY International Inc. 54,600 2,233
* Williams-Sonoma, Inc. 76,400 2,231
* Teradyne, Inc. 128,800 2,230
Lennar Corp. Class A 31,100 2,224
* Providian Financial Corp. 239,700 2,220
* Robert Half International, Inc. 117,100 2,218
* Sealed Air Corp. 46,336 2,208
* CDW Corp. 47,900 2,194
* Varian Medical Systems, Inc. 38,000 2,188
* IVAX Corp. 122,275 2,183
NIKE, Inc. Class B 40,800 2,182
* Phelps Dodge Corp. 56,900 2,182
* MGM Mirage, Inc. 63,432 2,168
* The Dun & Bradstreet Corp. 52,600 2,162
* Mohawk Industries, Inc. 38,900 2,160
Outback Steakhouse 55,250 2,155
FirstEnergy Corp. 55,900 2,149
================================================================================
20
================================================================================
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
* Celgene Corp. 70,600 2,146
* GTECH Holdings Corp. 57,000 2,146
D. R. Horton, Inc. 76,350 2,145
Rockwell Collins, Inc. 86,800 2,138
Fluor Corp. 63,400 2,133
* Park Place Entertainment Corp. 234,600 2,133
* Siebel Systems, Inc. 222,900 2,126
Darden Restaurants Inc. 111,850 2,123
* Smithfield Foods, Inc. 92,200 2,113
* Pride International, Inc. 111,700 2,102
Radian Group, Inc. 57,320 2,101
NSTAR 46,000 2,095
* Apogent Technologies Inc. 104,600 2,092
Black & Decker Corp. 48,100 2,090
* Toys R Us, Inc. 171,500 2,079
* Markel Corp. 8,100 2,074
ALLTEL Corp. 42,953 2,071
* American Power Conversion Corp. 132,700 2,070
Federated Investors, Inc. 75,350 2,066
* Jacobs Engineering Group Inc. 49,000 2,065
* Iron Mountain, Inc. 55,600 2,062
The Pepsi Bottling Group, Inc. 102,800 2,058
* Host Marriott Corp. REIT 224,843 2,057
Noble Energy, Inc. 54,300 2,053
* National Semiconductor Corp. 104,000 2,051
* Cooper Cameron Corp. 40,700 2,050
* Millipore Corp. 46,200 2,050
* BEA Systems, Inc. 188,600 2,048
MBIA, Inc. 42,000 2,048
* Reebok International Ltd. 60,700 2,041
* Gentex Corp. 66,603 2,039
* Patterson-UTI Energy, Inc. 62,900 2,038
* Cablevision Systems-NY Group
Class A 98,144 2,037
C.H. Robinson Worldwide, Inc. 57,200 2,034
* Lincare Holdings, Inc. 64,500 2,032
Baker Hughes, Inc. 60,480 2,030
Roslyn Bancorp, Inc. 94,400 2,029
* Solectron Corp. 541,600 2,026
Tyson Foods, Inc. 190,345 2,021
* Newfield Exploration Co. 53,800 2,020
General Motors Corp. 55,882 2,012
* LAM Research Corp. 110,400 2,010
Herman Miller, Inc. 99,300 2,007
Alberto-Culver Co. Class B 39,200 2,003
Southern Co. 64,200 2,000
* Catellus Development Corp. 90,800 1,998
* Owens-Illinois, Inc. 144,700 1,993
Beckman Coulter, Inc. 49,000 1,991
* Navistar International Corp. 61,000 1,990
Sprint Corp. 138,000 1,987
Marriott International, Inc. Class A 51,700 1,986
Torchmark Corp. 53,300 1,985
* NVR, Inc. 4,800 1,973
* Abercrombie & Fitch Co. 69,000 1,960
* Borders Group, Inc. 111,200 1,958
* Rent-A-Center, Inc. 25,760 1,953
* SICOR, Inc. 95,900 1,951
* Mercury Interactive Corp. 50,500 1,950
* Big Lots Inc. 129,606 1,949
* L-3 Communications Holdings, Inc. 44,800 1,948
* Convergys Corp. 121,700 1,947
* Rowan Cos., Inc. 86,800 1,944
Fastenal Co. 57,200 1,941
* AES Corp. 301,100 1,912
* Sanmina-SCI Corp. 301,854 1,905
Peabody Energy Corp. 56,300 1,891
* Allied Waste Industries, Inc. 187,300 1,882
* Universal Health Services Class B 47,300 1,874
Transatlantic Holdings, Inc. 27,050 1,871
Amerada Hess Corp. 37,800 1,859
* National-Oilwell, Inc. 84,400 1,857
* Toll Brothers, Inc. 65,300 1,849
* Storage Technology Corp. 71,700 1,846
* Varco International, Inc. 94,100 1,844
* Henry Schein, Inc. 35,100 1,837
Telephone & Data Systems, Inc. 36,900 1,834
Leucadia National Corp. 49,400 1,834
The Bank of New York Co., Inc. 63,700 1,831
Lyondell Chemical Co. 135,200 1,829
* Westwood One, Inc. 53,800 1,825
* Timberland Co. 34,500 1,824
Medicis Pharmaceutical Corp. 32,100 1,820
The PMI Group Inc. 67,800 1,820
The St. Joe Co. 58,300 1,819
* Rite Aid Corp. 407,900 1,815
* JetBlue Airways Corp. 42,900 1,814
Union Pacific Corp. 31,253 1,813
Gannett Co., Inc. 23,600 1,813
* Lamar Advertising Co. Class A 51,460 1,812
Total System Services, Inc. 80,950 1,805
Northeast Utilities 107,400 1,798
Pogo Producing Co. 42,000 1,796
* Columbia Sportswear Co. 34,900 1,794
* Patterson Dental Co. 39,315 1,784
* ICOS Corp. 48,500 1,782
* Packaging Corp. of America 96,400 1,777
Polo Ralph Lauren Corp. 68,700 1,772
The MONY Group Inc. 65,000 1,752
* Tellabs, Inc. 266,500 1,751
* NCR Corp. 68,337 1,751
PepsiAmericas, Inc. 139,200 1,748
Reinsurance Group of America, Inc. 54,200 1,740
Mandalay Resort Group 54,400 1,733
================================================================================
21
================================================================================
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
* Furniture Brands International Inc. 66,300 1,730
* BISYS Group, Inc. 94,100 1,729
Valero Energy Corp. 47,500 1,726
* PETsMART, Inc. 102,700 1,712
* Performance Food Group Co. 46,100 1,706
* FMC Technologies Inc. 81,025 1,706
* Coventry Health Care Inc. 36,900 1,703
Wesco Financial Corp. 5,430 1,694
Investors Financial
Services Corp. 58,000 1,683
Foot Locker, Inc. 126,700 1,679
* CNA Financial Corp. 68,000 1,673
* AdvancePCS 43,424 1,660
HCC Insurance Holdings, Inc. 56,000 1,656
* Certegy, Inc. 59,500 1,651
* Grant Prideco, Inc. 139,700 1,641
Precision Castparts Corp. 52,300 1,627
* Reliant Resources, Inc. 264,600 1,622
CSX Corp. 53,900 1,622
* Avnet, Inc. 127,800 1,621
* Smurfit-Stone Container Corp. 122,865 1,601
* Alliant Techsystems, Inc. 30,800 1,599
* Saks Inc. 164,800 1,599
* Whole Foods Market, Inc. 33,600 1,597
National City Corp. 48,800 1,596
* Krispy Kreme Doughnuts, Inc. 38,500 1,585
* BlackRock, Inc. 35,200 1,585
* Tech Data Corp. 59,200 1,581
* Alleghany Corp. 8,211 1,568
* Pharmaceutical Resources, Inc. 32,200 1,567
* Mettler-Toledo International Inc. 42,100 1,543
* Del Monte Foods Co. 173,900 1,537
Ford Motor Co. 138,813 1,526
* Andrx Group 75,377 1,500
* Stericycle, Inc. 38,900 1,497
* Advanced Micro Devices, Inc. 232,700 1,492
Dominion Resources, Inc. 23,139 1,487
* O'Reilly Automotive, Inc. 44,524 1,487
* Key Energy Services, Inc. 138,200 1,482
* Level 3 Communications, Inc. 223,115 1,481
StanCorp Financial Group, Inc. 28,200 1,473
* Swift Transportation Co., Inc. 78,900 1,469
W.W. Grainger, Inc. 31,400 1,468
* Interactive Data Corp. 86,600 1,464
* Cytec Industries, Inc. 43,200 1,460
* J.B. Hunt Transport Services, Inc. 37,800 1,427
Janus Capital Group Inc. 87,000 1,427
* AGCO Corp. 83,400 1,424
IndyMac Bancorp, Inc. REIT 56,000 1,424
* BOK Financial Corp. 36,874 1,422
* Weight Watchers International, Inc. 31,200 1,419
* Sepracor Inc. 77,800 1,403
* Arrow Electronics, Inc. 91,500 1,394
* Lucent Technologies, Inc. 685,954 1,392
* 3Com Corp. 296,575 1,388
* PanAmSat Corp. 74,800 1,379
* WellChoice Inc. 47,000 1,376
Clayton Homes Inc. 109,600 1,375
* Scotts Co. 27,600 1,366
* Westport Resources Corp. 59,900 1,363
E.W. Scripps Co. Class A 15,235 1,352
* Ingram Micro, Inc. Class A 122,400 1,346
LaBranche & Co. Inc. 65,000 1,345
* Hovnanian Enterprises Class A 22,800 1,344
* Amphenol Corp. 28,700 1,344
* Metro-Goldwyn-Mayer Inc. 108,000 1,341
* Hispanic Broadcasting Corp. 52,600 1,339
* Entercom Communications Corp. 27,100 1,328
Brunswick Corp. 53,000 1,326
Monsanto Co. 60,867 1,317
Tootsie Roll Industries, Inc. 43,072 1,313
* United Defense Industries Inc. 49,900 1,294
* Eon Labs, Inc. 36,700 1,290
Autodesk, Inc. 79,800 1,290
* U.S. Cellular Corp. 50,100 1,275
* Hearst-Argyle Television Inc. 48,700 1,261
* 99 Cents Only Stores 36,700 1,260
* The Cheesecake Factory 34,900 1,253
Exelon Corp. 20,800 1,244
* Premcor, Inc. 57,700 1,243
* BearingPoint, Inc. 128,800 1,243
* American Pharmaceuticals
Partners, Inc. 36,600 1,241
* American Axle & Manufacturing
Holdings, Inc. 51,800 1,238
International Paper Co. 34,600 1,236
* Endo Pharmaceuticals Holdings, Inc. 71,500 1,210
Martin Marietta Materials, Inc. 35,900 1,207
IMS Health, Inc. 65,752 1,183
* King Pharmaceuticals, Inc. 78,900 1,165
* Mirant Corp. 395,300 1,146
BB&T Corp. 33,300 1,142
Nationwide Financial Services, Inc. 34,300 1,115
* First Health Group Corp. 39,700 1,096
Baxter International, Inc. 41,800 1,087
Hasbro, Inc. 62,100 1,086
General Mills, Inc. 22,200 1,053
Eaton Vance Corp. 32,500 1,027
McKesson Corp. 27,524 984
* LSI Logic Corp. 138,500 981
* Aramark Corp. Class B 43,500 975
* Valassis Communications, Inc. 37,200 957
================================================================================
22
================================================================================
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
Computer Associates
International, Inc. 42,289 942
Sabre Holdings Corp. 38,200 942
* Cadence Design Systems, Inc. 77,700 937
Newell Rubbermaid, Inc. 32,660 914
Hilton Hotels Corp. 69,750 892
Limited Brands, Inc. 56,874 882
* Compuware Corp. 151,200 872
Belo Corp. Class A 38,400 859
* Zebra Technologies Corp. Class A 11,200 842
Sara Lee Corp. 44,600 839
Travelers Property Casualty Corp.
Class B 51,662 815
SunTrust Banks, Inc. 13,600 807
Duke Energy Corp. 40,200 802
Interpublic Group of Cos., Inc. 59,200 792
Diamond Offshore Drilling, Inc. 33,700 707
ServiceMaster Co. 66,000 706
* Barnes & Noble, Inc. 30,300 698
NiSource, Inc. 35,920 682
Reynolds & Reynolds Class A 23,500 671
* Micron Technology, Inc. 56,500 657
* Viacom Inc. Class A 13,688 598
Nucor Corp. 11,900 581
ProLogis REIT 18,389 502
AT&T Corp. 23,017 443
* Atmel Corp. 174,855 442
Instinet Group Inc. 92,245 430
Burlington Northern
Santa Fe Corp. 14,493 412
Mellon Financial Corp. 12,500 347
* Ceridian Corp. 19,100 324
Lennar Corp. Class B 4,150 285
The Clorox Co. 6,420 274
ConAgra Foods, Inc. 11,200 264
Nordstrom, Inc. 13,500 264
Albertson's, Inc. 12,800 246
* ADC Telecommunications, Inc. 92,800 216
Helmerich & Payne, Inc. 7,200 210
Cinergy Corp. 5,700 210
PNC Financial Services Group 3,800 185
TXU Corp. 7,965 179
St. Paul Cos., Inc. 4,800 175
Georgia Pacific Group 8,642 164
Winn-Dixie Stores, Inc. 11,400 140
Avon Products, Inc. 2,000 124
* CIENA Corp. 22,335 116
* NVIDIA Corp. 4,000 92
* Comverse Technology, Inc. 5,000 75
Archer-Daniels-Midland Co. 4,773 61
First Tennessee National Corp. 300 13
Kellogg Co. 100 3
R.J. Reynolds Tobacco Holdings, Inc. 53 2
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,791,926) 2,293,185
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.3%)
- --------------------------------------------------------------------------------
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
1.16%, 7/1/2003 $ 515 515
1.16%, 7/1/2003--Note E 6,009 6,009
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $6,524) 6,524
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost $1,798,450) 2,299,709
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
Other Assets--Note B 34,169
Liabilities--Note E (40,130)
------------
(5,961)
------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $2,293,748
================================================================================
oSee Note A in Notes to Financial Statements.
*Non-income-producing security.
REIT--Real Estate Investment Trust.
23
================================================================================
TAX-MANAGED AMOUNT
CAPITAL APPRECIATION FUND (000)
- --------------------------------------------------------------------------------
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $2,354,548
Undistributed Net Investment Income 7,882
Accumulated Net Realized Losses (569,941)
Unrealized Appreciation 501,259
- --------------------------------------------------------------------------------
NET ASSETS $2,293,748
================================================================================
Investor Shares--Net Assets
Applicable to 57,973,573 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $1,280,374
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $22.09
================================================================================
Admiral Shares--Net Assets
Applicable to 20,183,515 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $897,605
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
ADMIRAL SHARES $44.47
================================================================================
Institutional Shares--Net Assets
Applicable to 5,239,080 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $115,769
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $22.10
================================================================================
See Note C in Notes to Financial Statements for the tax-basis components
of net assets.
24
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.1%)
- --------------------------------------------------------------------------------
* NVR, Inc. 14,300 5,877
Harman International
Industries, Inc. 65,300 5,168
* Mid Atlantic Medical Services, Inc. 93,900 4,911
* Zebra Technologies Corp.
Class A 62,400 4,692
* Cephalon, Inc. 110,560 4,551
* Newfield Exploration Co. 111,200 4,176
* Alliant Techsystems, Inc. 78,300 4,065
* O'Reilly Automotive, Inc. 106,900 3,569
Ryland Group, Inc. 50,200 3,484
* Renal Care Group, Inc. 97,600 3,436
* Performance Food Group Co. 92,400 3,419
Cullen/Frost Bankers, Inc. 104,000 3,338
Washington Federal Inc. 141,011 3,262
* Pharmaceutical Product
Development, Inc. 112,900 3,244
Raymond James Financial, Inc. 96,300 3,183
Hudson United Bancorp 90,789 3,100
* Scotts Co. 62,400 3,089
The Timken Co. 175,700 3,077
Medicis Pharmaceutical Corp. 53,800 3,050
FactSet Research Systems Inc. 68,400 3,013
Flagstar Bancorp, Inc. 119,400 2,919
Graco, Inc. 90,725 2,903
* NBTY, Inc. 135,500 2,854
MDC Holdings, Inc. 57,098 2,757
Jefferies Group, Inc. 54,900 2,733
First Midwest Bancorp, Inc. 94,300 2,717
UGI Corp. Holding Co. 84,700 2,685
Polaris Industries, Inc. 43,600 2,677
* ITT Educational Services, Inc. 91,000 2,662
* ResMed Inc. 67,300 2,638
AptarGroup Inc. 73,200 2,635
* AnnTaylor Stores Corp. 90,350 2,616
Ethan Allen Interiors, Inc. 74,380 2,615
Whitney Holdings Corp. 81,700 2,612
Piedmont Natural Gas, Inc. 67,200 2,608
Global Payments Inc. 73,440 2,607
* Zale Corp. 65,100 2,604
* Respironics, Inc. 68,075 2,554
* Hyperion Solutions Corp. 75,200 2,539
* P.F. Chang's China Bistro, Inc. 51,300 2,524
Regis Corp. 86,700 2,519
Roper Industries Inc. 67,400 2,507
La-Z-Boy Inc. 111,910 2,505
* Techne Corp. 81,400 2,470
Atmos Energy Corp. 99,500 2,468
Essex Property Trust, Inc. REIT 42,800 2,450
UCBH Holdings, Inc. 84,740 2,430
* Pacific Sunwear of California, Inc. 100,600 2,423
United Bankshares, Inc. 84,549 2,422
* Take-Two Interactive Software, Inc. 85,455 2,422
* United Stationers, Inc. 66,700 2,413
IDEX Corp. 66,400 2,406
* INAMED Corp. 44,700 2,400
Florida Rock Industries, Inc. 58,100 2,398
* Panera Bread Co. 59,700 2,388
Diagnostic Products Corp. 58,100 2,385
* Southern Union Co. 140,727 2,384
Thor Industries, Inc. 58,200 2,376
* IDEXX Laboratories Corp. 70,500 2,374
Shurgard Storage Centers, Inc.
Class A REIT 71,500 2,365
Downey Financial Corp. 56,900 2,350
Staten Island Bancorp, Inc. 120,000 2,338
Energen Corp. 69,800 2,324
Hilb, Rogal and Hamilton Co. 67,600 2,301
Alpharma, Inc. Class A 106,400 2,298
* Cymer, Inc. 71,400 2,286
* Heartland Express, Inc. 102,134 2,272
* Kroll Inc. 82,900 2,243
Patina Oil & Gas Corp. 69,750 2,242
* Stone Energy Corp. 53,480 2,242
First Bancorp/Puerto Rico 81,400 2,234
Skywest, Inc. 117,100 2,232
* Fossil, Inc. 94,700 2,231
* Tom Brown, Inc. 80,207 2,229
The South Financial Group, Inc. 95,389 2,225
* Southwest Bancorporation of
Texas, Inc. 68,433 2,225
Briggs & Stratton Corp. 43,800 2,212
Standard Pacific Corp. 66,500 2,205
Corn Products International, Inc. 72,700 2,183
Cooper Cos., Inc. 62,700 2,180
Community First Bankshares, Inc. 79,600 2,173
* FLIR Systems, Inc. 71,800 2,165
* Arbitron Inc. 60,200 2,149
* Commonwealth Telephone
Enterprises, Inc. 48,548 2,135
* Linens `n Things, Inc. 89,800 2,120
* Accredo Health, Inc. 97,025 2,115
Invacare Corp. 63,800 2,105
Fremont General Corp. 153,600 2,104
* Evergreen Resources, Inc. 38,690 2,101
New Century Financial Corp. 47,700 2,082
* Kronos, Inc. 40,627 2,064
Chittenden Corp. 75,475 2,064
* CEC Entertainment Inc. 55,850 2,063
* Varian Semiconductor
Equipment Associates, Inc. 69,200 2,059
* Waste Connections, Inc. 58,500 2,050
* Cimarex Energy Co. 86,100 2,045
================================================================================
25
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Landstar System, Inc. 32,400 2,036
Oshkosh Truck Corp. 34,050 2,020
Massey Energy Co. 152,711 2,008
* Avid Technology, Inc. 57,000 1,999
Clarcor Inc. 51,200 1,974
* Sonic Corp. 77,300 1,966
The Toro Co. 49,400 1,964
New Jersey Resources Corp. 55,050 1,954
Delphi Financial Group, Inc. 41,666 1,950
Fred's, Inc. 52,400 1,948
* CACI International, Inc. 56,500 1,937
* Skyworks Solutions, Inc. 283,059 1,916
Commercial Federal Corp. 90,100 1,910
* Mueller Industries Inc. 70,300 1,906
* Knight Transportation, Inc. 76,400 1,902
Susquehanna Bancshares, Inc. 80,748 1,885
* Cognex Corp. 84,100 1,880
* Tetra Tech, Inc. 108,668 1,861
Mentor Corp. 95,300 1,847
* Christopher & Banks Corp. 49,900 1,846
* Unit Corp. 87,800 1,836
* Philadelphia Consolidated
Holding Corp. 45,400 1,834
Colonial Properties Trust REIT 51,900 1,826
* Quiksilver, Inc. 110,700 1,825
Albany International Corp. 66,600 1,825
* Sybron Dental Specialties, Inc. 77,200 1,822
Capital Automotive REIT 65,062 1,821
* ADVO, Inc. 40,800 1,812
* Anixter International Inc. 77,100 1,806
Flowers Foods, Inc. 90,450 1,787
* Simpson Manufacturing Co. 48,700 1,782
LandAmerica Financial Group, Inc. 37,450 1,779
MAF Bancorp, Inc. 47,900 1,776
East West Bancorp, Inc. 49,100 1,774
* Tractor Supply Co. 37,100 1,772
Cabot Oil & Gas Corp. 63,800 1,762
* Spinnaker Exploration Co. 67,200 1,761
* SERENA Software, Inc. 84,100 1,756
MacDermid, Inc. 66,300 1,744
* Hutchinson Technology, Inc. 52,900 1,740
Kellwood Co. 54,700 1,730
* Dionex Corp. 43,300 1,721
* Men's Wearhouse, Inc. 78,700 1,720
* Hot Topic, Inc. 63,850 1,718
TrustCo Bank NY 154,646 1,713
* Adaptec, Inc. 218,100 1,697
* SCP Pool Corp. 48,925 1,683
* Priority Healthcare Corp. Class B 90,497 1,679
Hughes Supply, Inc. 48,200 1,673
* Pediatrix Medical Group, Inc. 46,850 1,670
Cleco Corp. 96,100 1,664
* Cal Dive International, Inc. 76,200 1,660
* Jack in the Box Inc. 74,350 1,658
R.L.I. Corp. 50,300 1,655
Delta & Pine Land Co. 74,700 1,642
* Maverick Tube Corp. 85,500 1,637
Burlington Coat Factory
Warehouse Corp. 90,100 1,613
A.O. Smith Corp. 57,000 1,605
* Cerner Corp. 69,800 1,602
Wolverine World Wide, Inc. 82,500 1,589
* Manhattan Associates, Inc. 60,910 1,582
* ATMI, Inc. 63,306 1,581
* Cost Plus, Inc. 44,100 1,573
* AMERIGROUP Corp. 42,160 1,568
Brady Corp. Class A 47,000 1,567
Republic Bancorp, Inc. 116,300 1,561
St. Mary Land & Exploration Co. 56,800 1,551
Owens & Minor, Inc. Holding Co. 69,200 1,547
Kilroy Realty Corp. REIT 56,200 1,546
* Watson Wyatt & Co. Holdings 66,600 1,544
* Benchmark Electronics, Inc. 50,000 1,538
ABM Industries Inc. 99,800 1,537
Acuity Brands, Inc. 84,400 1,534
Russ Berrie and Co., Inc. 41,800 1,526
Gables Residential Trust REIT 50,200 1,518
* EMCOR Group, Inc. 30,700 1,515
* American Italian Pasta Co. 36,300 1,512
Lennox International Inc. 117,438 1,511
* Group 1 Automotive, Inc. 46,520 1,508
* Kansas City Southern 123,900 1,491
* Regeneron Pharmaceuticals, Inc. 94,400 1,487
USF Corp. 55,100 1,486
John H. Harland Co. 56,690 1,483
Irwin Financial Corp. 57,100 1,479
* Urban Outfitters, Inc. 40,891 1,468
* Ralcorp Holdings, Inc. 58,800 1,468
* SEACOR SMIT Inc. 40,200 1,467
* Biosite Inc. 30,410 1,463
CH Energy Group, Inc. 32,500 1,463
* Rare Hospitality International Inc. 44,500 1,454
Vintage Petroleum, Inc. 128,600 1,451
Casey's General Stores, Inc. 102,499 1,449
* Coherent, Inc. 61,200 1,449
The Pep Boys
(Manny, Moe & Jack) 106,800 1,443
Winnebago Industries, Inc. 37,900 1,436
* Yellow Corp. 61,900 1,433
Northwest Natural Gas Co. 52,300 1,425
Southwest Gas Corp. 67,100 1,421
* Barra, Inc. 39,700 1,417
* Too Inc. 69,800 1,413
Black Box Corp. 39,000 1,412
================================================================================
26
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Trimble Navigation Ltd. 61,519 1,411
* Progress Software Corp. 67,800 1,405
* Power Integrations, Inc. 57,700 1,403
* Kirby Corp. 49,700 1,402
Avista Corp. 98,000 1,387
IHOP Corp. 43,800 1,383
* Pinnacle Systems, Inc. 128,900 1,379
* UICI 91,100 1,373
Analogic Corp. 28,100 1,370
Selective Insurance Group 54,550 1,366
Reliance Steel & Aluminum Co. 65,800 1,362
Dime Community Bancshares 52,850 1,345
* Integra LifeSciences Holdings 50,900 1,343
Engineered Support Systems, Inc. 32,000 1,339
* Enzo Biochem, Inc. 62,217 1,339
* US Oncology, Inc. 180,500 1,334
Curtiss-Wright Corp. 21,100 1,334
Landry's Restaurants, Inc. 56,330 1,329
* FileNET Corp. 73,300 1,322
* Steel Dynamics, Inc. 96,500 1,322
* Triarc Cos., Inc. Class A 43,900 1,317
NDCHealth Corp. 71,700 1,316
Baldor Electric Co. 63,860 1,316
* URS Corp. 67,400 1,312
* MGI Pharma, Inc. 50,800 1,302
Georgia Gulf Corp. 65,700 1,301
* DRS Technologies, Inc. 46,400 1,295
UniSource Energy Corp. 68,800 1,293
* Exar Corp. 81,500 1,290
H.B. Fuller Co. 58,500 1,288
* Atlantic Coast Airlines
Holdings Inc. 95,360 1,286
* Oceaneering International, Inc. 49,970 1,277
Provident Bankshares Corp. 49,944 1,269
G & K Services, Inc. Class A 42,700 1,264
Kaydon Corp. 60,700 1,263
* Hydrill Co. 46,000 1,254
K-Swiss, Inc. 36,300 1,253
Russell Corp. 65,700 1,248
* Lone Star Technologies, Inc. 58,900 1,248
* Movie Gallery, Inc. 67,570 1,247
* BankUnited Financial Corp. 61,800 1,245
* CUNO Inc. 34,400 1,243
Cambrex Corp. 53,900 1,241
* Argosy Gaming Co. 59,200 1,238
* Viasys Healthcare Inc. 59,800 1,238
* Axcelis Technologies, Inc. 202,243 1,238
* FEI Co. 65,900 1,236
* American Management
Systems, Inc. 86,282 1,232
* Ryan's Family Steak Houses, Inc. 87,950 1,231
* El Paso Electric Co. 99,700 1,229
Arkansas Best Corp. 51,500 1,225
* First Federal Financial Corp. 34,700 1,225
Cubic Corp. 54,700 1,215
* MAXIMUS, Inc. 43,200 1,194
The Manitowac Co., Inc. 53,500 1,193
Anchor Bancorp Wisconsin Inc. 49,920 1,193
PolyMedica Corp. 26,000 1,191
* Aztar Corp. 73,900 1,191
* DSP Group Inc. 55,200 1,188
Rock-Tenn Co. 70,000 1,186
UIL Holdings Corp. 29,200 1,184
Waypoint Financial Corp. 65,600 1,183
* THQ Inc. 65,600 1,181
Sterling Bancshares, Inc. 89,800 1,175
Tredegar Corp. 78,300 1,174
* AmSurg Corp. 38,300 1,168
CARBO Ceramics Inc. 31,300 1,166
* MICROS Systems, Inc. 34,900 1,151
Aaron Rents, Inc. Class B 44,300 1,145
* Sierra Health Services, Inc. 56,900 1,138
* Photronics Inc. 64,600 1,127
* The Children's Place
Retail Stores, Inc. 56,745 1,127
Cato Corp. Class A 53,400 1,126
Roadway Corp. 39,451 1,126
* Southwestern Energy Co. 74,600 1,120
* American Medical Systems
Holdings, Inc. 66,300 1,118
Zenith National Insurance Corp. 39,200 1,117
* SurModics, Inc. 36,400 1,110
* eFunds Corp. 96,196 1,109
* School Specialty, Inc. 38,600 1,099
* Forward Air Corp. 43,300 1,099
* United Natural Foods, Inc. 39,000 1,097
Inter-Tel, Inc. 51,000 1,082
Glenborough Realty Trust, Inc. REIT 56,500 1,082
* W-H Energy Services, Inc. 55,200 1,075
Brown Shoe Co., Inc. 36,000 1,073
* Rogers Corp. 32,000 1,066
* CONMED Corp. 58,100 1,061
* Papa John's International, Inc. 37,800 1,060
* Griffon Corp. 66,010 1,056
Wintrust Financial Corp. 35,600 1,054
* Dendrite International, Inc. 81,100 1,045
Texas Industries, Inc. 43,800 1,042
The Laclede Group, Inc. 38,400 1,029
Commercial Metals Co. 57,500 1,023
* Stewart Information
Services Corp. 36,700 1,022
* CDI Corp. 39,200 1,018
* Jo-Ann Stores, Inc. Class A 40,100 1,015
* Offshore Logistics, Inc. 46,500 1,011
================================================================================
27
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Technitrol, Inc. 67,100 1,010
* Sunrise Senior Living, Inc. 45,100 1,009
* Actel Corp. 49,174 1,008
* Advanced Medical Optics, Inc. 58,800 1,003
* The Gymboree Corp. 59,700 1,002
* Allen Telecom Inc. 60,300 996
* Global Imaging Systems, Inc. 42,976 995
Quanex Corp. 33,450 994
Coca-Cola Bottling Co. 18,185 993
A. Schulman Inc. 61,700 991
WD-40 Co. 34,589 988
* Insight Enterprises, Inc. 97,700 983
Watts Industries Class A 54,900 980
Boston Private Financial
Holdings, Inc. 46,400 978
* Remington Oil & Gas Corp. 53,200 978
Regal-Beloit Corp. 51,000 974
* General Communication, Inc. 112,240 972
* WMS Industries, Inc. 62,310 971
* Aeroflex, Inc. 125,434 971
Seacoast Financial Services Corp. 48,784 966
* Checkpoint Systems, Inc. 68,100 964
The Standard Register Co. 58,300 961
* NCO Group, Inc. 53,600 960
Barnes Group, Inc. 44,100 960
* Shuffle Master, Inc. 32,600 958
* Verity, Inc. 75,420 955
* Advanced Energy Industries, Inc. 66,825 952
Thomas Industries, Inc. 34,800 941
* AFC Enterprises, Inc. 57,800 939
Valmont Industries, Inc. 48,200 938
* Microsemi Corp. 58,329 933
* Triumph Group, Inc. 33,100 932
* Financial Federal Corp. 38,200 932
* ANSYS, Inc. 29,700 924
Lone Star Steakhouse & Saloon, Inc. 42,400 923
* Ciber, Inc. 131,300 922
Central Parking Corp. 74,200 917
* ICU Medical, Inc. 29,400 916
* International Multifoods Corp. 39,800 912
* Shaw Group, Inc. 75,620 911
The Marcus Corp. 60,900 910
GBC Bancorp 23,700 910
* Paxar Corp. 82,400 906
Stewart & Stevenson Services, Inc. 57,500 906
* Centene Corp. 23,220 903
Datascope Corp. 30,000 891
* Imagistics International Inc. 34,520 891
OM Group, Inc. 60,450 890
* Itron, Inc. 41,300 890
* Pre-Paid Legal Services, Inc. 36,200 888
* Electro Scientific Industries, Inc. 58,493 887
ElkCorp 39,400 887
* InVision Technologies, Inc. 35,300 885
* Photon Dynamics, Inc. 31,875 881
* Spherion Corp. 126,700 881
* O'Charley's Inc. 40,800 878
Bowne & Co., Inc. 67,300 877
Arctic Cat, Inc. 45,720 876
Riggs National Corp. 57,400 874
Presidential Life Corp. 61,900 873
* Nautica Enterprises, Inc. 68,000 872
* TETRA Technologies, Inc. 29,400 872
* Monaco Coach Corp. 56,850 871
* Coinstar, Inc. 46,100 869
Arch Chemicals, Inc. 45,400 867
* Sola International Inc. 49,700 865
Watsco, Inc. 52,040 862
Phillips-Van Heusen Corp. 62,900 857
* Teledyne Technologies, Inc. 65,200 854
* Kopin Corp. 139,405 853
* Ultratech, Inc. 46,000 851
* Vicor Corp. 88,354 848
Hooper Holmes, Inc. 131,300 846
American States Water Co. 30,650 837
PolyOne Corp. 187,500 834
* Hain Celestial Group, Inc. 51,900 830
* Steak n Shake Co. 54,400 830
The Stride Rite Corp. 82,700 824
Applied Industrial Technology, Inc. 38,900 821
* TBC Corp. 43,000 819
The Nautilus Group, Inc. 65,600 813
* Province Healthcare Co. 73,050 809
* Ionics, Inc. 36,100 808
* Veeco Instruments, Inc. 47,297 805
Frontier Oil Corp. 52,900 804
New England Business Service, Inc. 26,800 804
Park Electrochemical Corp. 40,250 803
* Pegasus Solutions Inc. 49,400 803
GenCorp, Inc. 90,100 801
* Mercury Computer Systems, Inc. 44,100 801
* Orthodontic Centers of America, Inc. 99,700 799
* Atwood Oceanics, Inc. 29,400 798
* First Republic Bank 30,000 798
Methode Electronics, Inc. Class A 73,500 790
* CIMA Labs Inc. 29,200 785
* Genesco, Inc. 43,658 773
* SOURCECORP, Inc. 35,700 771
Haverty Furniture Cos., Inc. 44,000 770
* PRG-Schultz International, Inc. 129,900 766
* The Dress Barn, Inc. 60,200 763
* ShopKo Stores, Inc. 58,600 762
Roto-Rooter, Inc. 19,900 760
Wellman, Inc. 67,745 759
================================================================================
28
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
Universal Forest Products, Inc. 36,200 758
* Startek, Inc. 28,800 757
* ViaSat, Inc. 52,800 757
CTS Corp. 72,200 754
* Armor Holdings, Inc. 55,400 742
* Esterline Technologies Corp. 42,500 740
Schweitzer-Mauduit
International, Inc. 30,400 734
* Wabash National Corp. 52,300 734
* ArthroCare Corp. 43,733 733
* PAREXEL International Corp. 51,500 718
Helix Technology Corp. 54,300 718
SWS Group, Inc. 35,292 711
Woodward Governor Co. 16,200 697
* Websense, Inc. 43,900 687
Vital Signs, Inc. 26,400 685
* The Great Atlantic & Pacific
Tea Co., Inc. 77,600 683
* Plains Resources Inc. 48,000 679
Deltic Timber Corp. 23,800 677
* Nuevo Energy Co. 38,800 677
Cohu, Inc. 42,890 669
* J. Jill Group, Inc. 39,700 669
* Intermagnetics General Corp. 33,695 669
* JDA Software Group, Inc. 59,472 665
Chesapeake Corp. of Virginia 30,400 664
Oshkosh B' Gosh, Inc. Class A 24,600 664
Oxford Industries, Inc. 15,900 660
Cash America International Inc. 49,900 660
* JAKKS Pacific, Inc. 49,600 659
* Cable Design Technologies Corp. 91,900 657
Dimon Inc. 91,300 654
* Bally Total Fitness Holding Corp. 72,300 653
* K2 Inc. 53,200 652
* Gardner Denver Inc. 31,800 651
Libbey, Inc. 28,400 645
Talx Corp. 28,400 642
* Champion Enterprises, Inc. 123,300 639
* Kulicke & Soffa Industries, Inc. 98,800 631
JLG Industries, Inc. 92,700 630
* Odyssey Healthcare, Inc. 17,000 629
Hancock Fabrics, Inc. 38,800 627
* Insituform Technologies Inc.
Class A 35,300 624
* Administaff, Inc. 60,500 623
* Consolidated Graphics, Inc. 26,700 611
* Swift Energy Co. 55,400 609
* Boston Communications Group, Inc. 35,500 608
* Haemonetics Corp. 32,450 607
* Systems & Computer
Technology Corp. 66,700 600
* ESS Technology, Inc. 61,100 596
* Labor Ready, Inc. 82,500 592
* J & J Snack Foods Corp. 18,700 591
Myers Industries, Inc. 60,162 572
* SPSS, Inc. 34,000 569
* Brooks Automation, Inc. 49,376 560
Lindsay Manufacturing Co. 24,100 560
* Footstar Inc. 42,800 556
* Frontier Airlines, Inc. 61,050 554
* Tollgrade Communications, Inc. 29,638 553
* Planar Systems, Inc. 28,100 550
* Rudolph Technologies, Inc. 34,200 546
* Prima Energy Corp. 26,100 545
* Fleetwood Enterprises, Inc. 73,630 544
* Input/Output, Inc. 100,800 542
* Savient Pharmaceuticals Inc. 116,678 541
Kaman Corp. Class A 45,900 537
Sturm, Ruger & Co., Inc. 53,600 536
Robbins & Myers, Inc. 28,800 533
Lawson Products, Inc. 19,300 532
Skyline Corp. 17,700 531
* Audiovox Corp. 47,000 526
Standex International Corp. 25,000 525
* Hologic, Inc. 39,600 522
Bel Fuse, Inc. Class B 22,650 519
* Harmonic, Inc. 127,300 518
Apogee Enterprises, Inc. 57,200 516
* Standard Microsystem Corp. 34,000 516
* Mesa Air Group Inc. 64,400 515
* Buckeye Technology, Inc. 75,600 514
* Information Holdings Inc. 27,900 509
* MemberWorks, Inc. 25,700 508
NUI Corp. 32,700 508
* Veritas DGC Inc. 43,200 497
* Goody's Family Clothing 57,100 494
Belden, Inc. 31,000 493
* Concord Communications, Inc. 35,600 489
* RadiSys Corp. 36,955 488
* American Healthways Inc. 13,500 488
AAR Corp. 69,000 487
* Noven Pharmaceuticals, Inc. 47,500 486
Quaker Chemical Corp. 19,300 483
* PC-Tel, Inc. 40,400 479
* Possis Medical Inc. 34,900 479
* Pericom Semiconductor Corp. 51,300 477
* 4Kids Entertainment Inc. 25,300 471
* Supertex, Inc. 25,400 467
* Impath, Inc. 32,770 463
Central Vermont Public
Service Corp. 23,600 461
* Rainbow Technologies, Inc. 54,700 460
* Osteotech, Inc. 33,600 457
Action Performance Cos., Inc. 24,000 456
================================================================================
29
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Heidrick & Struggles
International, Inc. 36,100 456
Keithley Instruments Inc. 31,500 455
* Tower Automotive, Inc. 124,000 454
C & D Technologies, Inc. 31,500 452
* Duane Reade Inc. 30,500 450
* RTI International Metals 41,500 449
* Caraustar Industries, Inc. 56,100 449
Cascade Natural Gas Corp. 22,900 437
Ryerson Tull, Inc. 49,700 436
* NYFIX, Inc. 68,500 435
* Artesyn Technologies, Inc. 77,479 435
Interface, Inc. 93,480 434
* Volt Information Sciences Inc. 31,700 433
National Presto Industries, Inc. 13,500 427
* The Wet Seal, Inc. Class A 39,600 423
* DuPont Photomasks, Inc. 22,300 420
* MRO Software Inc. 48,600 419
* SPS Technologies, Inc. 15,400 416
Standard Motor Products, Inc. 37,500 416
* Midas Inc. 34,100 413
* CryoLife Inc. 39,700 411
X-Rite Inc. 41,300 409
* Netegrity, Inc. 69,948 408
* Concord Camera Corp. 57,200 406
* Curative Health Services Inc. 23,800 405
Nash-Finch Co. 24,293 404
* Applica Inc. 47,200 401
* Department 56 Inc. 25,900 397
EDO Corp. 22,400 396
* Network Equipment
Technologies, Inc. 46,300 390
Building Materials Holding Corp. 26,200 388
* Ultimate Electronics, Inc. 29,872 383
Coachmen Industries, Inc. 31,970 382
* Symmetricom Inc. 85,700 377
* Cleveland-Cliffs Inc. 21,100 377
* Thomas Nelson, Inc. 30,100 376
Milacron Inc. 76,400 374
* Radiant Systems, Inc. 55,200 372
* C-COR Electronics, Inc. 75,674 371
BEI Technologies, Inc. 30,737 369
* Omnova Solutions Inc. 90,500 366
* Lydall, Inc. 33,200 355
* Roxio, Inc. 53,100 355
* Dril-Quip, Inc. 19,400 353
Pope & Talbot, Inc. 31,400 347
* Alliance Semiconductor Corp. 70,667 342
* Astec Industries, Inc. 39,200 342
* SBS Technologies, Inc. 33,605 330
* Gerber Scientific, Inc. 49,300 328
* Brush Engineered Materials Inc. 38,200 319
Bassett Furniture Industries, Inc. 23,300 309
* Prime Hospitality Corp. 46,000 309
* Phoenix Technologies Ltd. 53,900 305
Angelica Corp. 17,400 295
* Insurance Auto Auctions, Inc. 23,200 291
Advanced Marketing Services 22,400 291
* Catapult Communications Corp. 27,000 287
Century Aluminum Co. 40,661 286
CPI Corp. 16,100 284
Material Sciences Corp. 28,200 274
* Metro One
Telecommunications, Inc. 49,650 256
* Digi International, Inc. 44,500 256
* Mobile Mini, Inc. 15,300 250
Nature's Sunshine Inc. 30,700 246
* MapInfo Corp. 33,033 240
* A.M. Castle & Co. 35,300 231
Lance, Inc. 25,000 228
* Carreker Corp. 49,700 228
* Concerto Software Inc. 24,600 226
* ArQule, Inc. 53,500 225
* Huffy Corp. 31,900 223
Butler Manufacturing Co. 13,500 223
Pioneer Standard Electronics Inc. 25,800 219
* Captaris Inc. 63,500 217
* SCM Microsystems, Inc. 39,400 215
* Stein Mart, Inc. 35,589 213
* Bell Microproducts Inc. 49,200 210
* QRS Corp. 39,300 208
* IMCO Recycling, Inc. 31,300 208
* Enesco Group, Inc. 28,000 207
* Ashworth, Inc. 29,050 206
* Brooktrout Technology, Inc. 26,300 204
Green Mountain Power Corp. 10,075 202
* Salton, Inc. 21,900 198
Steel Technologies, Inc. 19,300 195
* A.T. Cross Co. Class A 32,700 194
Fedders Corp. 62,440 192
Penford Corp. 16,800 188
Northwestern Corp. 89,900 180
Haggar Corp. 13,900 174
Intermet Corp. 50,500 170
* RehabCare Group, Inc. 11,300 166
SCPIE Holdings Inc. 20,600 158
* AstroPower, Inc. 47,700 157
Commonwealth Industries Inc. 32,500 153
* Wolverine Tube, Inc. 24,700 141
* Magnatek, Inc. 46,600 118
* Pinnacle Entertainment, Inc. 17,400 118
* On Assignment, Inc. 20,029 80
* Three-Five Systems, Inc. 11,599 80
* Zix Corp. 13,600 51
================================================================================
30
================================================================================
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Midway Games Inc. 12,300 45
* Meade Instruments Corp. 6,348 20
* Theragenics Corp. 2,300 10
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $593,452) 726,330
- --------------------------------------------------------------------------------
Face
Amount
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (2.0%)
- --------------------------------------------------------------------------------
Repurchase Agreement
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
1.16%, 7/1/2003--Note E
(Cost $14,615) $14,615 14,615
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.1%)
(Cost $608,067) 740,945
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.1%)
Other Assets--Note B 5,531
Security Lending Collateral
Payable to Brokers--Note E (14,615)
Other Liabilities (5,919)
-----------
(15,003)
-----------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $725,942
================================================================================
oSee Note A in Notes to Financial Statements.
*Non-income-producing security.
REIT--Real Estate Investment Trust.
- --------------------------------------------------------------------------------
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $654,445
Undistributed Net Investment Income 1,890
Accumulated Net Realized Losses (63,271)
Unrealized Appreciation 132,878
- --------------------------------------------------------------------------------
NET ASSETS $725,942
================================================================================
Investor Shares--Net Assets
Applicable to 49,171,527 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $702,439
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $14.29
================================================================================
Institutional Shares--Net Assets
Applicable to 1,642,852 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $23,503
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $14.31
================================================================================
See Note C in Notes to Financial Statements for the tax-basis components
of net assets.
31
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- --------------------------------------------------------------------------------
AUSTRALIA (5.1%)
National Australia Bank Ltd. 114,075 2,563
Commonwealth Bank of Australia 94,065 1,864
BHP Billiton Ltd. 276,412 1,602
Westpac Banking Corp., Ltd. 133,468 1,455
Australia & New Zealand Bank
Group Ltd. 112,810 1,408
News Corp. Ltd. Pfd. 154,470 952
News Corp. Ltd. 108,905 818
Woolworths Ltd. 78,008 655
Telstra Corp. Ltd. 170,556 503
Wesfarmers Ltd. 28,879 490
Rio Tinto Ltd. 23,658 463
Foster's Group Ltd. 164,102 463
Coles Myer Ltd. 82,498 387
AMP Ltd. 110,530 368
Macquarie Infrastucture Group 144,307 347
Amcor Ltd. 61,925 337
Macquarie Bank Ltd. 16,575 320
Suncorp-Metway Ltd. 40,932 318
Woodside Petroleum Ltd. 36,777 305
QBE Insurance Group Ltd. 46,707 292
Insurance Australia Group Ltd. 124,082 283
Mirvac Group 92,528 276
Rinker Group Ltd. 77,619 273
Australian Gas Light Co., Ltd. 35,693 262
Brambles Industries Ltd. 79,461 244
Alumina Ltd. 86,549 236
Tabcorp Holdings Ltd. 31,322 226
* WMC Resources Ltd. 87,731 207
Lend Lease Corp. 32,157 180
Santos Ltd. 45,053 178
Centro Properties Group 63,704 170
James Hardie Industries NV 35,037 165
CFS Gandel Retail Trust 182,418 163
Boral Ltd. 46,643 158
Orica Ltd. 21,390 155
BHP Steel Ltd. 58,448 146
John Fairfax Holdings Ltd. 71,015 137
Origin Energy Ltd. 50,235 136
Transurban Group 39,387 126
Coca-Cola Amatil Ltd. 31,916 122
Macquarie Goodman
Industrial Trust 117,395 120
Investa Property Group 89,517 119
Mayne Group Ltd. 64,403 118
Newcrest Mining Ltd. 20,908 107
Patrick Corp. Ltd. 12,500 105
CSL Ltd. 12,692 102
Southcorp Ltd. 53,600 101
Cochlear Ltd. 4,638 100
CSR Ltd. 71,149 93
Deutsche Office Trust 122,237 92
Paperlinx Ltd. 27,326 84
Leighton Holdings Ltd. 12,171 82
Harvey Norman Holdings Ltd. 48,047 81
Lion Nathan Ltd. 22,372 80
Sonic Healthcare Ltd. 18,149 80
Tab Ltd. 35,420 77
Toll Holdings Ltd. 15,853 75
Publishing & Broadcasting Ltd. 10,900 72
Australian Stock Exchange Ltd. 6,731 57
* Ansell Ltd. 13,630 53
Iluka Resources Ltd. 19,443 53
OneSteel Ltd. 40,356 52
Computershare Ltd. 28,645 36
Futuris Corp., Ltd. 30,676 35
Aristocrat Leisure Ltd. 23,600 21
----------
21,748
----------
AUSTRIA (0.2%)
* Immofinanz Immobilien
Anlagen AG 46,576 335
* Telekom Austria AG 15,438 175
Erste Bank der Oesterreichischen
Sparkassen AG 1,679 148
OMV AG 945 114
Voestalpine AG 1,095 43
Wienerberger AG 2,259 40
Flughafen Wien AG 777 28
* RHI AG 1,970 23
Boehler-Uddeholm AG 422 23
Oesterreichische
Elektrizitaetswirtschafts AG Class A 177 16
* VA Technologies AG 319 8
Mayr-Melnhof Karton AG 73 6
----------
959
----------
BELGIUM (1.1%)
Fortis Group 78,829 1,369
Dexia 48,870 618
Electrabel SA 2,191 558
Solvay SA 4,739 327
KBC Bankverzekeringsholding 7,162 281
Interbrew 10,894 242
Delhaize Group 5,784 176
UCB SA 6,298 173
Agfa Gevaert NV 8,099 172
Colruyt NV 1,331 92
Cofinimmo 620 75
* Mobistar SA 1,657 68
Bekaert NV 1,402 66
Umicore 1,218 63
Omega Pharma SA 1,527 46
Barco NV 743 44
================================================================================
32
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
D'Ieteren SA 283 41
Compagnie Maritime Belge SA 164 6
----------
4,417
----------
DENMARK (0.8%)
Danske Bank A/S 37,790 736
Novo Nordisk A/S B Shares 18,718 655
AP Moller-Maersk A/S 80 432
TDC A/S 10,141 303
Danisco A/S 4,029 158
ISS A/S 3,076 110
Vestas Wind Systems A/S 8,834 101
Novozymes A/S 3,624 101
H. Lundbeck A/S 4,818 98
Group 4 Falck A/S 5,100 85
Coloplast A/S B Shares 1,075 83
* Topdanmark A/S 2,000 73
Carlsberg A/S B Shares 1,846 66
* GN Store Nord A/S 15,167 62
* William Demant A/S 2,600 59
DSV, De Sammensluttede
Vognmaend A/S 1,900 49
Kobenhavns Lufthavne A/S 460 37
East Asiatic Co. A/S 1,350 37
* NEG Micon A/S 3,595 37
Bang & Olufsen A/S B Shares 909 25
* FLS Industries A/S B Shares 1,399 12
NKT Holding A/S 740 10
----------
3,329
----------
FINLAND (1.9%)
Nokia Oyj 352,375 5,803
Stora Enso Oyj R Shares 48,466 542
UPM-Kymmene Oyj 36,332 530
Fortum Oyj 23,577 189
Sampo Oyj A Shares 20,550 151
Instrumentarium Oyj 3,600 137
TietoEnator Oyj B Shares 6,575 111
Kone Corp. B Shares 2,365 99
* Elisa Oyj Class A 9,750 84
Metso Oyj 7,540 67
Outokumpu Oyj A Shares 7,400 65
Kesko Oyj 4,360 51
Amer Group Ltd. 1,607 49
Uponor Oyj 2,095 49
Orion-Yhtyma Oyj B Shares 2,550 42
Wartsila Oyj B Shares 2,770 34
Nokian Renkaat Oyj 609 31
* Rautaruuki Oyj 6,970 30
Pohjola Group PLC D Shares 1,290 22
KCI Konecranes Oyj 500 12
----------
8,098
----------
FRANCE (9.8%)
Total SA 48,039 7,260
BNP Paribas SA 59,634 3,030
Aventis SA 50,284 2,766
Carrefour SA 42,552 2,086
L'Oreal SA 25,187 1,776
AXA 105,218 1,632
Sanofi-Synthelabo SA 27,038 1,583
Societe Generale Class A 23,710 1,503
* France Telecom SA 57,365 1,407
Groupe Danone 9,152 1,266
L'Air Liquide SA (Registered) 7,347 1,089
* Vivendi Universal SA 56,494 1,028
Suez SA 60,033 955
STMicroelectronics NV 43,923 921
Cie. de St. Gobain SA 23,077 908
LVMH Louis Vuitton
Moet Hennessy 16,396 813
Schneider Electric SA 15,765 741
* Alcatel SA 77,943 703
Lafarge SA 11,947 700
PSA Peugeot Citroen 13,109 637
Renault SA 11,694 618
Accor SA 14,099 510
Credit Agricole SA 23,860 453
Bouygues SA 16,167 446
Lagardere S.C.A. 9,344 406
Pinault-Printemps-Redoute SA 5,213 393
Compagnie Generale des
Etablissements Michelin SA
B Shares 9,982 390
Veolia Environnement 17,871 367
Vinci SA 4,985 336
Pernod Ricard SA 3,734 333
Arcelor 25,798 300
* Cap Gemini SA 7,835 278
Essilor International SA 6,859 276
Societe Television Francaise 1 8,588 264
European Aeronautic Defence
and Space Co. 20,570 252
Unibail Company 3,344 248
Thomson SA 14,611 225
Pechiney SA 5,735 206
Valeo SA 5,921 205
Etablissements Economiques du
Casino Guichard-Perrachon SA 2,599 203
Publicis Groupe SA 7,555 203
Sodexho Alliance SA 7,451 201
* Wanadoo 29,399 197
Thales SA 5,523 164
Autoroutes du Sud de la France 5,047 148
Gecina SA 1,202 139
================================================================================
33
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Klepierre 2,795 138
Technip-Coflexip SA 1,450 127
Sagem SA 1,549 125
Dassault Systemes SA 3,534 116
CNP Assurances 2,484 105
* Business Objects SA 4,494 100
Hermes International 649 91
Societe BIC SA 2,221 86
* Alstom 24,839 86
Air France 6,563 85
Imerys 543 79
* Atos Origin SA 2,033 70
Zodiac SA 2,484 61
----------
41,834
----------
GERMANY (6.4%)
Siemens AG 59,437 2,916
Deutsche Bank AG 38,829 2,518
* Deutsche Telekom AG 155,453 2,372
E.On AG 43,433 2,233
DaimlerChrysler AG (Registered) 63,604 2,220
SAP AG 15,119 1,783
BASF AG 40,703 1,739
Allianz AG 17,108 1,422
Bayer AG 48,961 1,135
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered) 8,647 882
RWE AG 26,896 812
Volkswagen AG 16,119 681
Schering AG 12,565 614
Commerzbank AG 33,398 467
Deutsche Post AG 28,854 424
* Bayerische Hypo-und
Vereinsbank AG 25,628 423
Deutsche Boerse AG 7,004 371
Metro AG 10,475 339
Altana AG 5,231 330
* Infineon Technologies AG 32,007 309
Adidas-Salomon AG 3,437 294
Henkel KGaA 4,517 280
ThyssenKrupp AG 23,004 265
Porsche AG 599 254
Beiersdorf AG 1,869 250
Volkswagen AG Pfd. 8,106 243
Linde AG 6,095 226
Continental AG 9,151 192
Deutsche Lufthansa AG 15,019 176
TUI AG 9,568 142
Wella AG Pfd. 1,693 126
Man AG 7,301 123
Fresenius Medical Care AG 2,350 116
* Qiagen NV 11,113 94
Merck KGaA 2,871 83
Celesio AG 2,066 81
RWE AG Pfd. 2,938 79
Fresenius Medical Care AG 2,150 78
* MLP AG 5,051 75
Buderus AG 2,181 73
Karstadt Quelle AG 2,931 63
Suedzucker AG 3,469 60
* EPCOS AG 4,367 56
Douglas Holding AG 2,498 54
* HeidelbergerCement AG 2,346 52
ProSieben Sat.1 Media AG 7,445 50
----------
27,575
----------
GREECE (0.4%)
National Bank of Greece SA 13,433 227
* Hellenic Telecommunication
Organization SA 19,080 226
Alpha Credit Bank SA 10,500 183
EFG Eurobank Ergasias 11,800 178
Titan Cement Co. SA 2,400 87
Commercial Bank of Greece SA 4,800 84
Public Power Corp. 4,600 83
Coca-Cola Hellenic Bottling Co. SA 4,900 82
Vodafone-Panafon SA 11,900 79
Bank of Piraeus 8,900 67
Greek Organization of Football
Prognostics 4,900 50
Hellenic Petroleum SA 6,700 45
Technical Olympic SA 8,000 31
* Intracom SA 4,400 29
Papastratos Cigarettes Co. SA 1,400 29
Viohalco, Hellenic Copper &
Aluminum Industry SA 5,500 26
Hellenic Technodomiki Tev SA 4,230 24
Aluminum of Greece SA 970 20
Hellenic Duty Free Shops SA 800 10
Folli-Follie SA 300 5
----------
1,565
----------
HONG KONG (1.5%)
Hutchison Whampoa Ltd. 156,512 953
Cheung Kong Holdings Ltd. 118,000 710
Hang Seng Bank Ltd. 56,943 602
CLP Holdings Ltd. 131,732 576
Sun Hung Kai Properties Ltd. 99,064 501
Hong Kong Electric Holdings Ltd. 101,000 396
Hong Kong & China Gas Co., Ltd. 276,177 349
Swire Pacific Ltd. A Shares 68,298 299
Bank of East Asia Ltd. 95,400 188
Boc Hong Kong Holdings Ltd. 186,000 187
Wharf Holdings Ltd. 92,215 177
Li & Fung Ltd. 117,850 152
Johnson Electric Holdings Ltd. 120,998 150
================================================================================
34
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Henderson Land
Development Co. Ltd. 49,006 141
Hong Kong Exchanges &
Clearing Ltd. 79,000 113
MTR Corp. 93,000 107
Esprit Holdings Ltd. 42,072 103
Cathay Pacific Airways Ltd. 72,170 97
Hang Lung Properties Ltd. 96,500 87
Television Broadcasts Ltd. 23,000 82
Yue Yuen Industrial (Holdings) Ltd. 30,500 78
Cheung Kong Infrastructure
Holdings Ltd. 35,000 68
Techtronic Industries Co., Ltd. 32,000 54
Sino Land Co. 159,000 49
Hopewell Holdings Ltd. 43,000 46
New World Development Co., Ltd. 115,000 45
Shangri-La Asia Ltd. 68,078 43
Giordano International Ltd. 129,000 40
Hysan Development Co., Ltd. 45,000 37
SCMP Group Ltd. 79,863 31
ASM Pacific Technology Ltd. 10,000 29
Texwinca Holdings Ltd. 36,000 29
SmarTone
Telecommunications Ltd. 21,500 25
----------
6,544
----------
IRELAND (0.8%)
* Allied Irish Banks PLC 65,748 988
Bank of Ireland 74,760 906
* CRH PLC 39,481 619
Irish Life & Permanent PLC 19,522 211
Kerry Group PLC A Shares 9,405 145
* Elan Corp. PLC 24,705 128
* Ryanair Holdings PLC 14,266 103
DCC PLC 6,580 88
* Independent News & Media PLC 35,429 64
Grafton Group PLC 13,538 60
Fyffes PLC 21,558 34
* Greencore Group PLC 7,267 24
* Waterford Wedgewood PLC 36,700 10
----------
3,380
----------
ITALY (3.9%)
ENI SpA 191,699 2,899
Assicurazioni Generali SpA 70,959 1,644
Telecom Italia SpA 174,890 1,583
Telecom Italia Mobile SpA 280,230 1,381
Unicredito Italiano SpA 275,745 1,314
ENEL SpA 156,743 977
Banca Intesa SpA 259,260 829
Telecom Italia SpA Risp. 150,196 823
San Paolo-IMI SpA 73,068 679
Banco Popolare di
Verona e Novara 27,039 369
Mediaset SpA 42,450 359
Riunione Adriatica di
Sicurta SpA 22,752 345
Mediobanca Banca di Credito
Finanziaria SpA 34,401 343
Alleanza Assicurazioni SpA 35,388 336
* Seat Pagine Gialle SpA 379,522 264
Finmeccanica SpA 405,219 260
Snam Rete Gas SpA 64,198 252
Banca Monte dei Paschi di
Siena SpA 67,935 185
* Banca Nazionale del
Lavoro (BNL) 107,561 180
* Capitalia SpA 87,507 154
Luxottica Group SpA 10,687 146
Banca Intesa SpA Non
Convertible Risp. 62,241 143
* Fiat SpA 17,240 126
Banca Fideuram SpA 22,354 122
Banca Popolare di Milano SpA 26,700 117
Mediolanum SpA 18,883 105
* Autogrill SpA 8,600 94
Parmalat Finanziaria SpA 26,924 85
Mondadori (Arnoldo) Editore SpA 10,600 77
Italcementi SpA 6,455 74
* Tiscali SpA 13,670 70
* FinecoGroup SpA 126,087 68
* Pirelli SpA 66,740 68
Gruppo Editoriale L'Espresso SpA 14,836 59
Bulgari SpA 10,300 57
Snia SpA 21,912 43
Benetton Group SpA 2,556 27
----------
16,657
----------
JAPAN (20.4%)
Toyota Motor Corp. 199,700 5,172
NTT DoCoMo, Inc. 1,302 2,819
Canon, Inc. 61,000 2,799
Takeda Chemical Industries Ltd. 62,500 2,306
Honda Motor Co., Ltd. 57,600 2,183
Nissan Motor Co., Ltd. 182,800 1,748
Nomura Holdings Inc. 132,000 1,675
Tokyo Electric Power Co. 84,800 1,621
Nippon Telegraph and
Telephone Corp. 398 1,561
Matsushita Electric
Industrial Co., Ltd. 157,034 1,555
Sony Corp. 53,200 1,498
Mitsubishi Tokyo Financial
Group Inc. 302 1,365
East Japan Railway Co. 253 1,125
Fuji Photo Film Co., Ltd. 34,000 983
Hitachi Ltd. 222,000 941
================================================================================
35
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Shin-Etsu Chemical Co., Ltd. 26,900 919
Sharp Corp. 68,000 873
Rohm Co., Ltd. 8,000 872
Millea Holdings, Inc. 111 849
Chubu Electric Power Co. 45,100 823
Kansai Electric Power Co., Inc. 48,300 762
Ricoh Co. 46,000 752
Seven Eleven Japan Co. Ltd. 30,000 747
Kao Corp. 40,000 745
Toshiba Corp. 209,000 719
Kyocera Corp. 12,300 704
Murata Manufacturing Co., Ltd. 17,700 696
Bridgestone Corp. 48,000 652
Ito-Yokado Co., Ltd. 26,000 623
Yamanouchi
Pharmaceuticals Co., Ltd. 22,200 579
Denso Corp. 35,700 566
Hoya Corp. 8,100 558
Nippon Steel Corp. 402,000 552
Mitsubishi Heavy Industries Ltd. 212,000 549
Tokyo Electron Ltd. 11,500 545
Daiwa Securities Group Inc. 94,000 540
Nintendo Co. 7,400 538
Tokyo Gas Co., Ltd. 187,000 537
Mitsubishi Corp. 75,000 520
Mitsubishi Estate Co., Ltd. 76,000 515
JFE Holdings, Inc. 34,300 514
Dai-Nippon Printing Co., Ltd. 45,000 476
Central Japan Railway Co. 66 473
Sumitomo Mitsui Financial
Group, Inc. 214 468
Mitsubishi Electric Corp. 141,000 458
Tohoku Electric Power Co. 30,100 445
Kyushu Electric Power Co., Inc. 28,500 444
Keyence Corp. 2,410 442
Secom Co., Ltd. 15,000 440
Mitsui & Co., Ltd. 87,000 436
Fanuc Co., Ltd. 8,800 436
Mitsui Sumitomo Insurance Co. 93,880 435
TDK Corp. 8,500 420
Nippon Oil Corp. 95,000 412
Nikko Securities Co., Ltd. 101,000 405
Aeon Co., Ltd. 17,300 396
* UFJ Holdings Inc. 270 396
Ajinomoto Co., Inc. 41,000 393
Fujisawa Pharmaceutical Co., Ltd. 20,000 375
Sanyo Electric Co., Ltd. 109,000 373
Osaka Gas Co., Ltd. 149,000 369
* Mizuho Financial Group, Inc. 452 357
Asahi Glass Co., Ltd. 57,000 353
Kirin Brewery Co., Ltd. 50,000 351
Yamato Transport Co., Ltd. 31,000 343
Eisai Co., Ltd. 16,600 341
Mitsui Fudosan Co., Ltd. 53,000 339
SMC Corp. 4,000 337
Orix Corp. 6,000 332
Sumitomo Electric Industries Ltd. 45,000 329
Nitto Denko Corp. 9,800 321
West Japan Railway Co. 82 311
Olympus Optical Co., Ltd. 15,000 310
Sankyo Co., Ltd. 25,800 308
Sompo Japan Insurance Inc. 56,000 305
NTT Data Corp. 99 305
Shizuoka Bank Ltd. 45,000 302
Shionogi & Co., Ltd. 22,000 298
Toppan Printing Co., Ltd. 41,000 294
Softbank Corp. 15,400 292
* Kinki Nippon Railway Co. 110,190 285
Japan Tobacco, Inc. 52 281
Sumitomo Chemical Co. 89,000 279
Komatsu Ltd. 72,000 276
* NEC Corp. 55,000 275
Sekisui House Ltd. 36,000 273
Nippon Yusen Kabushiki
Kaisha Co. 70,000 273
Omron Corp. 16,000 270
Tostem Inax Holding Corp. 18,512 267
Pioneer Corp. 11,700 263
Nippon Unipac Holding 66 258
Daikin Industries Ltd. 14,000 257
Takefuji Corp. 4,950 257
Sumitomo Trust &
Banking Co., Ltd. 74,000 256
OJI Paper Co., Ltd. 58,000 254
Itochu Corp. 100,000 252
Asahi Kasei Corp. 87,000 249
Daiichi Pharmaceutical Co., Ltd. 18,700 244
Tokyu Corp. 75,000 242
Bank of Yokohama Ltd. 74,000 242
Mitsubishi Chemical Corp. 118,000 241
Promise Co., Ltd. 6,400 239
* Fujitsu Ltd. 58,000 238
* Resona Holdings Inc. 340,000 235
Shiseido Co., Ltd. 24,000 233
Nippon Express Co., Ltd. 60,000 233
Sumitomo Corp. 50,000 231
Advantest Corp. 5,200 230
Chugai Pharmaceutical Co., Ltd. 20,200 229
Konica Corp. 20,000 228
Marui Co., Ltd. 25,400 226
Daiwa House Industry Co., Ltd. 32,000 220
Terumo Corp. 12,800 213
Toray Industries, Inc. 89,000 207
Acom Co., Ltd. 5,590 202
================================================================================
36
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Kubota Corp. 74,000 201
Daido Life Insurance Co. 88 191
Taisho Pharmaceutical Co. 13,000 188
Mabuchi Motor Co. 2,400 183
Asahi Breweries Ltd. 30,000 181
Nidec Corp. 2,700 178
Matsushita Electric Works, Ltd. 30,000 178
Mitsui Chemicals, Inc. 38,000 176
Hirose Electric Co., Ltd. 2,100 174
Credit Saison Co., Ltd. 10,500 172
Kuraray Co., Ltd. 26,000 171
Mitsui Osk Lines Ltd. 56,000 170
Keio Electric Railway Co., Ltd. 37,000 169
* Nikon Corp. 20,000 165
Chiba Bank Ltd. 46,000 163
ToneGeneral Sekiyu K.K. 23,000 162
Yamaha Corp. 11,700 160
Sumitomo Metal Industries Ltd. 228,000 158
Stanley Electric Co. 11,000 157
Bank of Fukuoka, Ltd. 40,000 154
Tobu Railway Co., Ltd. 53,000 151
Teijin Ltd. 60,000 150
Oriental Land Co., Ltd. 3,400 149
Furukawa Electric Co. 45,000 147
JSR Corp. 12,000 146
Kajima Corp. 60,000 142
Alps Electric Co., Ltd. 11,000 141
Aiful Corp. 3,300 141
Kyowa Hakko Kogyo Co. 26,000 140
Joyo Bank Ltd. 50,000 139
Yamada Denki Co., Ltd. 6,300 139
Sumitomo Metal Mining Co. 36,000 138
CSK Corp. 5,000 136
Daito Trust Construction Co., Ltd. 6,300 132
Yokogawa Electric Corp. 17,000 131
* Showa Denko K.K. 75,000 131
Jafco Co., Ltd. 2,300 130
Mitsui Mining &
Smelting Co., Ltd. 44,000 130
Fast Retailing Co., Ltd. 4,200 130
Sumitomo Realty &
Development Co. 29,000 129
Keihin Electric Express
Railway Co., Ltd. 26,000 127
Marubeni Corp. 97,000 126
Uni-Charm Corp. 2,900 125
Ohbayashi Corp. 40,000 123
Toto Ltd. 20,000 119
Konami Corp. 6,600 118
Lawson Inc. 4,300 118
* Trend Micro Inc. 7,500 116
* Oki Electric Industry Co. Ltd. 40,000 115
Gunma Bank Ltd. 25,000 114
77 Bank Ltd. 25,000 113
Japan Airlines System Co. 52,000 113
Nissin Food Products Co., Ltd. 5,300 111
Sekisui Chemical Co. 32,000 108
Citizen Watch Co., Ltd. 20,000 107
Yakult Honsha Co., Ltd. 8,000 107
NTN Corp. 29,000 107
Taisei Corp. 54,000 106
Shimizu Corp. 38,000 105
Kaneka Corp. 17,000 105
Ushio Inc. 9,000 104
Nippon Meat Packers, Inc. 11,000 104
* Mitsubishi Materials Corp. 81,000 104
Toyo Seikan Kaisha Ltd. 11,000 103
Japan Real Estate Investment Corp. 19 103
JGC Corp. 15,000 101
Fuji Electric Co. , Ltd. 46,000 101
NGK Insulators Ltd. 18,000 100
Takashimaya Co. 20,000 99
Ishikawajima-Harima Heavy
Industries Co. 88,000 99
NSK Ltd. 31,000 99
Mitsubishi Rayon Co., Ltd. 36,000 96
Casio Computer Co. 15,000 96
Bandai Co., Ltd. 2,500 95
Taiheiyo Cement Corp. 55,000 94
THK Co., Inc. 7,000 94
Office Building Fund of Japan Inc. 17 93
Nomura Research Institute, Ltd. 1,200 92
Shimano, Inc. 5,800 91
NGK Spark Plug Co. 13,000 91
Obic Co., Ltd. 500 89
FamilyMart Co., Ltd. 5,000 89
Benesse Corp. 5,100 88
Taiyo Yuden Co., Ltd. 9,000 88
Sankyo Co., Ltd. 3,500 87
Ube Industries Ltd. 59,000 87
Nippon Sheet Glass Co., Ltd. 29,000 87
The Suruga Bank, Ltd. 15,000 86
Uny Co., Ltd. 10,000 86
Kawasaki Heavy Industries Ltd. 84,000 86
Meitec Corp. 2,800 85
Nippon Mining Holdings Inc. 39,000 84
* Mitsui Trust Holding Inc. 38,100 84
Minebea Co., Ltd. 21,000 83
Dai-Nippon Ink & Chemicals, Inc. 41,000 83
* Ashikaga Financial Group, Inc. 55,000 82
* Hokuriku Bank Ltd. 53,000 81
Kawasaki Kisen Kaisha Ltd. 33,000 80
Oracle Corp. Japan 2,200 79
Toho Co., Ltd. 9,000 79
Toyoda Gosei Co., Ltd. 4,000 79
Net One Systems Co., Ltd. 16 78
================================================================================
37
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Fuji Television Network, Inc. 22 78
Denki Kagaku Kogyo K.K. 28,000 78
Kurita Water Industries Ltd. 7,000 77
Shimamura Co., Ltd. 1,400 77
Dowa Mining Co. Ltd. 20,000 77
Toyobo Ltd. 44,000 77
Central Glass Co., Ltd. 13,000 76
Daimaru, Inc. 19,000 76
Yamaha Motor Co., Ltd. 9,000 76
Tosoh Corp. 34,000 76
Fujikura Ltd. 23,000 76
Isetan Co. 11,000 74
Hitachi Chemical Co., Ltd. 7,000 72
Susuken Co., Ltd. 3,000 71
Skylark Co., Ltd. 6,000 71
Nisshin Seifun Group Inc. 10,000 71
* All Nippon Airways Co., Ltd. 37,000 71
Hino Motors, Ltd. 15,000 71
Kamigumi Co., Ltd. 14,000 70
USS Co., Ltd. 1,370 69
Mitsukoshi Ltd. 26,000 68
Q.P. Corp. 8,600 68
Ito En, Ltd. 2,000 67
Kikkoman Corp. 10,000 66
Nichii Gakkan Co. 1,300 65
Makita Corp. 8,000 65
Sumitomo Osaka Cement Co., Ltd. 33,000 65
Onward Kashiyama Co., Ltd. 8,000 65
Mitsumi Electric Co., Ltd. 6,200 64
Ebara Corp. 18,000 63
Dentsu Inc. 20 62
* Sumitomo Heavy Industries Ltd. 42,000 62
Meiji Seika Kaisha Ltd. 19,000 62
Mitsubishi Gas Chemical Co. 29,000 61
TIS Inc. 3,200 61
Toyo Suisan Kaisha, Ltd. 6,000 61
Mitsui Engineering &
Shipbuilding Co., Ltd. 48,000 60
Aoyama Trading Co., Ltd. 4,500 60
Aeon Credit Service Co. Ltd. 1,870 59
Nissan Chemical Industries, Ltd. 11,000 59
Sumitomo Bakelite Co. Ltd. 14,000 58
Bellsystem24, Inc. 360 58
Showa Shell Sekiyu K.K. 8,000 57
Daicel Chemical Industries Ltd. 18,000 57
Wacoal Corp. 7,000 55
* Sega Corp. 7,600 54
Takara Holdings Inc. 10,000 54
Nichirei Corp. 15,000 52
Amada Co., Ltd. 16,000 51
Nippon Comsys Corp. 10,000 51
Asatsu-DK Inc. 2,800 50
Koyo Seiko Co., Ltd. 7,000 50
Aderans Co. Ltd. 2,800 50
World Co., Ltd. 2,600 49
Teikoku Oil Co., Ltd. 15,000 49
Gunze Ltd. 13,000 49
Itochu Techno-Science Corp. 2,100 49
Mitsubishi Logistics Corp. 8,000 48
Meiji Dairies Corp. 13,000 48
Coca-Cola West Japan Co. Ltd. 2,900 48
Nippon Shokubai Co., Ltd. 8,000 48
Shimachu Co. 3,000 47
Matsumotokiyoshi Co., Ltd. 1,100 47
Hankyu Department Stores, Inc. 8,000 47
Capcom Co., Ltd. 4,500 46
Katokichi Co., Ltd. 2,700 46
Seino Transportation Co., Ltd. 8,000 46
Yamazaki Baking Co., Ltd. 7,000 45
Nishimatsu Construction Co. 13,000 44
* Dai-Nippon Screen
Manufacturing Co., Ltd. 9,000 44
Hitachi Software
Engineering Co., Ltd. 2,100 44
* Ishihara Sangyo Kaisha Ltd. 25,000 42
Nippon Sanso Corp. 13,000 42
Nisshinbo Industries, Inc. 9,000 41
Autobacs Seven Co., Ltd. 2,200 41
Kokuyo Co., Ltd. 4,300 41
Tokyo Style Co. 5,000 41
Hitachi Cable Ltd. 15,000 40
Namco Ltd. 2,500 40
Kaken Pharmaceutical Co. 7,000 38
Sapparo Breweries Ltd. 15,000 37
Tokyo Broadcasting System, Inc. 3,000 37
Toda Corp. 16,000 34
* Kanebo Ltd. 29,000 34
Kinden Corp. 10,000 34
Ariake Japan Co., Ltd. 1,100 33
* Anritsu Corp. 6,000 33
Komori Corp. 3,000 31
* Snow Brand Milk Products Co. 12,000 30
Nippon Kayaku Co., Ltd. 7,000 30
Okumura Corp. 9,000 29
Amano Corp. 5,000 29
Sanden Corp. 6,000 29
Saizeriya Co., Ltd. 2,900 27
House Foods Industry Corp. 2,800 26
Takuma Co., Ltd. 4,000 19
----------
87,339
----------
NETHERLANDS (5.2%)
Royal Dutch Petroleum Co. 154,603 7,176
Unilever NV 42,348 2,272
ING Groep NV 126,877 2,204
================================================================================
38
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
ABN-AMRO Holding NV 112,217 2,146
Koninklijke (Royal) Philips
Electronics NV 99,054 1,884
* Koninklijke KPN NV 129,606 918
Aegon NV 80,514 806
Reed Elsevier NV 47,041 555
Akzo Nobel NV 20,440 542
Heineken NV 14,585 518
Verenigde Nederlandse
Uitgeversbedrijven
Verenigd Bezit 16,354 504
TPG NV 25,324 440
Koninklijke Ahold NV 46,752 388
* ASML Holding NV 35,876 341
DSM NV 5,919 250
Wolters Kluwer NV 19,973 241
Rodamco Europe NV 3,457 181
Euronext NV 6,694 166
Koninklijke Numico NV 10,674 164
IHC Caland NV 2,264 116
Corio NV 3,504 113
Wereldhave NV 1,563 98
Koninklijke Vendex KBB NV 7,459 86
Vedior NV 7,831 71
Oce NV 5,052 52
Hagemeyer NV 13,187 51
----------
22,283
----------
NEW ZEALAND (0.2%)
Telecom Corp. of New Zealand Ltd. 153,571 471
Contact Energy Ltd. 27,315 81
Sky City Entertainment Group Ltd. 13,874 77
Fletcher Building Ltd. 34,487 74
Carter Holt Harvey Ltd. 63,968 67
Auckland International Airport Ltd. 16,132 58
The Warehouse Group Ltd. 13,360 41
Fisher & Paykel Appliances
Holdings Ltd. 4,388 35
Fisher & Paykel Healthcare
Corp. Ltd. 4,355 31
* Fletcher Challenge Forests Ltd. Pfd. 43,386 29
* Sky Network Television, Ltd. 8,195 21
NGC Holdings, Ltd. 22,652 21
Independent Newspapers Ltd. 6,105 15
Tower Ltd. 7,601 7
* Fletcher Challenge Forests Ltd. 2,482 2
----------
1,030
----------
NORWAY (0.4%)
Norsk Hydro ASA 10,492 516
Statoil ASA 31,870 272
Orkla ASA 15,120 262
DNB Holding ASA 28,160 139
Gjensidige NOR ASA 3,900 136
Telenor ASA 32,730 136
Norske Skogindustrier ASA 8,000 120
Tomra Systems ASA 13,900 60
Schibsted ASA 3,930 54
Frontline Ltd. 3,610 52
Tandberg ASA 9,400 48
* Storebrand ASA 10,600 43
* Aker Kvaerner ASA 1,837 24
Smedvig ASA A Shares 3,320 21
----------
1,883
----------
PORTUGAL (0.3%)
Portugal Telecom SGPS SA 73,218 525
Electricidade de Portugal SA 133,736 286
Banco Comercial Portugues SA 146,149 257
Banco Espirito Santo SA 7,581 112
Brisa-Auto Estradas de Portugal SA 17,975 101
Banco BPI SA 24,706 70
* PT Multimedia-Servicos de
Telecomunicacoes e
Multimedia, SGPS, SA 3,064 54
* Sonae SGPS SA 80,058 45
Cimpor-Cimento de Portugal SA 6,183 24
* Jeronimo Martins & Filho, SGPS, SA 2,748 22
----------
1,496
----------
SINGAPORE (0.8%)
United Overseas Bank Ltd. 87,504 616
DBS Group Holdings Ltd. 78,082 457
Oversea-Chinese Banking
Corp., Ltd. 71,650 407
Singapore
Telecommunications Ltd. 454,900 390
Singapore Press Holdings Ltd. 28,000 291
Singapore Airlines Ltd. 41,751 247
Venture Corporation Ltd. 15,000 137
Keppel Corp., Ltd. 40,000 111
Singapore Technologies
Engineering Ltd. 100,906 100
City Developments Ltd. 37,000 93
Fraser & Neave Ltd. 15,700 77
Capitaland Ltd. 95,000 67
* ComfortDelgro Corp Ltd. 110,000 50
Sembcorp Industries Ltd. 56,000 41
* Neptune Orient Lines Ltd. 47,000 40
Creative Technology Ltd. 4,450 36
Allgreen Properties Ltd. 65,000 35
* Chartered Semiconductor
Manufacturing Ltd. 66,398 34
Singapore Land Ltd. 16,000 34
Sembcorp Logistics Ltd. 28,000 30
United Overseas Land Ltd. 22,000 26
* Datacraft Asia Ltd. 25,000 25
Keppel Land Ltd. 29,000 21
================================================================================
39
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Singapore Exchange Ltd. 27,000 21
Cycle & Carriage Ltd. 6,900 19
SembCorp Marine Ltd. 24,000 13
* ST Assembly Test Services Ltd. 12,000 12
Wing Tai Holdings Ltd. 25,000 11
Parkway Holdings Ltd. 20,000 9
SMRT Corp. Ltd. 25,000 9
Overseas Union Enterprise Ltd. 2,000 8
----------
3,467
----------
SPAIN (3.9%)
* Telefonica SA 338,739 3,933
Banco Santander Central
Hispano SA 316,790 2,776
Banco Bilbao Vizcaya
Argentaria SA 224,964 2,364
Endesa SA 66,521 1,114
Repsol-YPF SA 66,139 1,072
Iberdrola SA 55,536 962
Banco Popular Espanol SA 11,207 566
Altadis SA 21,001 538
Industria de Diseno Textil SA 16,437 413
Gas Natural SDG SA 15,103 304
Abertis Infraestructuras SA 20,686 289
Union Fenosa SA 14,696 249
Telefonica SA ADR 6,192 214
Grupo Dragados SA 8,778 177
* Terra Networks, SA 28,864 175
Acerinox SA 3,820 146
Grupo Ferrovial, SA 4,984 135
ACS, Actividades de
Construccion y Servicios, SA 2,791 119
Amadeus Global Travel
Distribution SA 18,872 108
Fomento de Construc y Contra SA 3,820 107
Acciona SA 2,144 102
Sacyr Vallehermoso SA 8,461 94
Indra Sistemas, SA 9,069 92
* NH Hoteles SA 7,885 83
* Zeltia SA 10,674 72
Iberia (Linea Aer Espana) 35,600 69
Corporacion Mapfre SA 6,152 66
Sociedad General de
Aguas de Barcelona SA 4,442 61
Telefonica Publicidad e
Informacion, SA 10,006 48
Promotora de Informaciones SA 4,785 43
----------
16,491
----------
SWEDEN (2.2%)
* Telefonaktiebolaget LM
Ericsson AB Class B 870,161 935
Nordea AB 178,674 862
Hennes & Mauritz AB B Shares 35,115 807
Svenska Handelsbanken AB
A Shares 41,170 674
TeliaSonera AB 123,643 513
Svenska Cellulosa AB B Shares 14,327 490
Electrolux AB Series B 22,936 453
Sandvik AB 16,083 421
Volvo AB B Shares 17,170 378
Skandinaviska Enskilda
Banken AB A Shares 34,524 351
* Tele2 AB B Shares 7,696 286
Securitas AB B Shares 24,340 249
Assa Abloy AB 24,200 234
Atlas Copco AB A Shares 9,000 228
Skandia Forsakrings AB 72,000 192
Swedish Match AB 24,331 184
Skanska AB B Shares 28,376 162
SKF AB B Shares 5,470 158
Volvo AB A Shares 7,152 150
Atlas Copco AB B Shares 4,730 111
Holmen AB 3,800 104
Gambro AB A Shares 15,600 103
Eniro AB 11,800 101
Nobel Biocare Holding AG 1,400 93
Drott AB B Shares 6,870 87
Svenskt Stal AB A Shares 5,730 77
Getinge AB 2,800 73
* Modern Times Group AB 4,600 71
Trelleborg AB B Shares 6,220 66
SKF AB A Shares 2,260 65
Castellum AB 3,200 55
Billerud Aktiebolag 4,600 54
OM AB 6,760 48
* WM-Data AB Class B 31,500 48
Hoganas AB B Shares 2,300 47
Alfa Laval AB 4,900 47
Svenska Handelsbanken AB
B Shares 2,890 45
* SAS AB 7,875 43
Perbio Science 2,300 43
Gambro AB B Shares 6,200 41
Axfood AB 1,550 28
SAPA AB 500 10
Svenskt Stal AB 580 7
----------
9,194
----------
SWITZERLAND (7.5%)
Novartis AG (Registered) 176,595 6,988
Nestle SA (Registered) 29,804 6,150
UBS AG 86,966 4,838
Roche Holdings AG 51,616 4,049
Credit Suisse Group (Registered) 87,433 2,301
Swiss Re (Registered) 24,127 1,337
* Zurich Financial Services AG 10,729 1,279
================================================================================
40
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Cie. Financiere Richemont AG 37,995 614
Swisscom AG 1,984 564
Holcim Ltd. (Registered) 10,833 400
Adecco SA (Registered) 9,581 395
Syngenta AG 7,517 377
Serono SA Class B 531 312
Roche Holdings AG (Bearer) 2,328 286
* CIBA Specialty Chemicals AG
(Registered) 4,674 283
* ABB Ltd. 77,221 254
Synthes-Stratec Inc. 312 224
Swatch Group AG (Bearer) 2,353 213
Givaudan SA 502 211
* Centerpulse (Registered) 690 186
Lonza AG (Registered) 3,101 142
* Logitech International SA 3,050 114
SGS Societe Generale de
Surveillance Holding SA
(Registered) 286 112
* Clariant AG 11,804 108
Swatch Group AG (Registered) 5,145 94
Geberit AG 247 76
Unaxis Holding AG 722 59
* Schindler Holding AG (Ptg. Ctf.) 329 53
Valora Holding AG 246 50
Kuoni Reisen Holding AG (Registered) 190 49
UBS AG 741 41
* Kudelski SA 2,051 37
Sulzer AG (Registered) 191 27
----------
32,223
----------
UNITED KINGDOM (27.2%)
BP PLC 1,589,644 11,024
Vodafone Group PLC 5,013,766 9,804
HSBC Holdings PLC 791,677 9,354
GlaxoSmithKline PLC 442,223 8,925
Royal Bank of Scotland Group PLC 203,093 5,697
AstraZeneca Group PLC 127,341 5,106
Shell Transport & Trading Co. PLC 711,439 4,696
HBOS PLC 278,897 3,610
Barclays PLC 482,460 3,583
Lloyds TSB Group PLC 409,617 2,908
Diageo PLC 232,018 2,477
BT Group PLC 641,887 2,158
Tesco PLC 533,812 1,931
Unilever PLC 202,413 1,612
National Grid Transco PLC 227,788 1,545
Rio Tinto PLC 77,960 1,467
British American Tobacco PLC 121,131 1,374
Aviva PLC 168,877 1,173
BG Group PLC 257,439 1,141
* British Sky Broadcasting Group PLC 93,726 1,039
Imperial Tobacco Group PLC 53,764 961
BHP Billiton PLC 180,797 952
Prudential PLC 150,210 910
Centrica PLC 309,660 898
Cadbury Schweppes PLC 150,794 891
Compass Group PLC 161,525 871
Marks & Spencer Group PLC 166,387 867
Kingfisher PLC 189,363 866
GUS PLC 73,261 821
Reckitt Benckiser PLC 43,531 799
Reed Elsvier PLC 92,634 771
ScottishPower PLC 126,082 757
Legal & General Group PLC 490,824 680
Scottish & Southern Energy PLC 63,510 654
Boots Group PLC 60,256 645
BAA PLC 77,554 628
WPP Group PLC 76,230 598
Pearson PLC 58,897 550
BAE Systems PLC 226,097 532
BOC Group PLC 36,809 472
Smiths Group PLC 40,380 468
Land Securities Group PLC 36,181 467
Wolseley PLC 41,474 459
J. Sainsbury PLC 107,316 450
Rentokil Initial PLC 141,280 441
3i Group PLC 44,620 416
Man Group PLC 20,616 407
SABMiller PLC 58,500 392
* InterContinental Hotels Group PLC 54,627 388
BP PLC ADR 9,184 386
Smith & Nephew PLC 67,040 385
Amersham PLC 51,326 385
United Utilities PLC 38,783 377
Carnival PLC 12,122 368
Next PLC 21,102 357
Hilton Group PLC 116,928 355
Scottish & Newcastle PLC 57,094 345
Amvescap PLC 49,282 340
Safeway PLC 78,371 333
Dixons Group PLC 142,581 311
Hanson PLC 54,646 305
Granada PLC 202,433 304
Reuters Group PLC 104,397 303
British Land Co., PLC 36,475 289
Severn Trent PLC 24,979 282
Emap PLC 18,969 268
The Sage Group PLC 91,738 245
Royal & Sun Alliance
Insurance Group PLC 106,734 244
Whitbread PLC 21,350 239
Johnson Matthey PLC 16,100 235
Bunzl PLC 33,215 233
Exel PLC 22,227 228
================================================================================
41
================================================================================
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Friends Provident PLC 121,698 228
Rolls-Royce Group PLC 106,801 226
Rexam PLC 34,930 220
Tomkins PLC 57,140 214
* Mitchells & Butlers PLC 54,627 211
GKN PLC 56,992 209
Liberty International PLC 20,007 205
Provident Financial PLC 19,185 202
Daily Mail and General Trust 21,396 201
The Peninsular & Oriental
Steam Navigation Co. 51,719 201
Kelda Group PLC 28,193 199
Slough Estates PLC 33,907 191
BPB PLC 37,249 189
Capita Group PLC 50,539 188
Cable and Wireless PLC 97,435 182
Signet Group PLC 120,660 180
Rank Group PLC 43,658 179
Hammerson PLC 21,558 176
Imperial Chemical Industries PLC 86,511 175
Electrocomponents PLC 32,657 175
Misys PLC 41,047 174
* International Power PLC 80,761 172
Canary Wharf Group PLC 40,766 172
Tate & Lyle PLC 30,439 172
Enterprise Inns PLC 12,412 166
Associated British Ports
Holdings PLC 24,730 162
Brambles Industries PLC 56,129 152
Persimmon PLC 19,131 151
RMC Group PLC 19,734 150
Alliance Unichem PLC 17,585 144
FirstGroup PLC 31,833 142
* George Wimpey PLC 28,691 140
Taylor Woodrow PLC 41,355 137
EMI Group PLC 66,627 134
United Business Media PLC 26,403 132
Barratt Developments PLC 18,327 131
LogicaCMG PLC 55,055 130
Cattles PLC 24,169 129
* Celltech Group PLC 22,810 129
MFI Furniture Group PLC 43,698 121
Close Brothers Group PLC 11,081 120
Carlton Communications PLC 47,711 119
William Hill PLC 24,601 116
Cobham PLC 6,036 115
IMI PLC 22,957 114
BBA Group PLC 32,803 113
Schroders PLC 9,729 101
Aegis Group PLC 77,307 101
Amec PLC 23,276 100
Chubb PLC 78,191 97
The Berkeley Group PLC 7,707 95
Balfour Beatty PLC 29,324 93
* British Airways PLC 37,200 93
Serco Group PLC 34,984 92
* ARM Holdings PLC 83,466 92
Pilkington PLC 83,735 92
The Davis Service Group PLC 13,854 87
Kidde PLC 59,064 83
Invensys PLC 239,034 81
Stagecoach Group PLC 78,315 80
WPP Group PLC ADR 2,004 80
SSL International PLC 15,601 75
Securicor PLC 49,390 61
De La Rue Group PLC 15,481 60
FKI PLC 45,877 60
Novar PLC 28,502 58
Great Portland Estates PLC 14,749 56
ScottishPower PLC ADR 2,320 56
Aggreko PLC 21,868 44
Hays PLC 7,582 12
------------
116,189
------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $495,754) 427,701
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (3.6%)
- --------------------------------------------------------------------------------
Repurchase Agreement
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
1.16%, 7/1/2003--Note E
(Cost $15,166) $15,166 15,166
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.6%)
(Cost $510,920) 442,867
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-3.6%)
Other Assets--Note B 5,092
Security Lending Collateral
Payable to Brokers--Note E (15,166)
Other Liabilities (5,212)
------------
(15,286)
------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $427,581
================================================================================
oSee Note A in Notes to Financial Statements.
*Non-income-producing security.
ADR--American Depositary Receipt.
(Ptg. Ctf.)--Participating Certificates.
42
================================================================================
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $568,556
Undistributed Net Investment Income 6,312
Accumulated Net Realized Losses (79,314)
Unrealized Appreciation (Depreciation)
Investment Securities (68,053)
Foreign Currencies 80
- --------------------------------------------------------------------------------
NET ASSETS $427,581
================================================================================
Investor Shares--Net Assets
Applicable to 51,752,889 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $364,371
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $7.04
================================================================================
Institutional Shares--Net Assets
Applicable to 8,972,883 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $63,210
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $7.04
================================================================================
See Note C in Notes to Financial Statements for the tax-basis
components of net assets.
43
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(C)2003 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
F872 082003
Item 2: Code(s) of Ethics for senior financial officers - Item not applicable to
semi-annual report.
Item 3: Audit Committee Financial Expert - Item not applicable to semi-annual
report.
Item 4: Principal Accountant Fees and Services - Item not applicable to
semi-annual report.
Item 5: Not Applicable.
Item 6: Reserved.
Item 7: Not applicable.
Item 8: Reserved.
Item 9: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and
Financial Officers concluded that the Registrant's Disclosure Controls and
Procedures are effective based on their evaluation of the Disclosure Controls
and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Controls. There were no significant changes in Registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Item 10: Exhibits attached hereto. (Attach certifications as exhibits)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD TAX-MANAGED FUNDS
BY: (signature)
----------------------------------------
(HEIDI STAM)
JOHN J. BRENNAN*
CHIEF EXECUTIVE OFFICER
Date: August 18, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
VANGUARD TAX-MANAGED FUNDS
BY: (signature)
----------------------------------------
(HEIDI STAM)
JOHN J. BRENNAN*
CHIEF EXECUTIVE OFFICER
Date: : August 18, 2003
VANGUARD TAX-MANAGED FUNDS
BY: (signature)
----------------------------------------
(HEIDI STAM)
THOMAS J. HIGGINS*
TREASURER
Date: : August 18, 2003
*By Power of Attorney. See File Number 2-57689, filed on December 26, 2002.
Incorporated by Reference.