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: 33-53683
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
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 - December 31, 2003
ITEM 1: Reports to Shareholders
VANGUARD TAX-MANAGED FUNDS(R)
DECEMBER 31, 2003
ANNUAL REPORT
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
THE VANGUARD GROUP(R)LOGO
HOW TO READ YOUR FUND REPORT
This report contains information that can help you evaluate your investment. It
includes details about your fund's return and presents data and analysis that
provide insight into the fund's performance and investment approach.
By reading the letter from Vanguard's chairman, you'll get an understanding of
how the fund invests and how the market environment affected its performance.
The statistical information that follows can help you understand how the fund's
performance and characteristics stack up against those of similar funds and
market benchmarks.
It's important to keep in mind that any opinions expressed here are just that:
informed opinions. They should not be considered promises or advice. These
opinions, like the statistics, cover the period through the date on the cover of
this report. The risks of investing in the fund are spelled out in the
prospectus.
Frequent updates on the fund's performance and information about some of its
holdings are available on Vanguard.com(R).
- --------------------------------------------------------------------------------
CONTENTS
1 letter from the chairman
8 fund profiles
15 glossary of investment terms
17 performance summaries
22 your fund's after-tax returns
23 about your fund's expenses
24 financial statements
47 advantages of vanguard.com
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SUMMARY
* The Vanguard Tax-Managed Funds posted stellar returns that ranged from
17.1% to 38.9% during 2003.
* Small-cap and international stocks recorded the best results.
* Fixed income securities generally made modest gains, though "junk" bonds
were popular. Munis outperformed taxable investment-grade bonds during the
year.
* Three of the five funds outpaced the average returns of their peer groups,
but two lagged because their portfolios are more conservative than those of
typical competitors.
Want less clutter in your mailbox? Just register with VANGUARD.COM and opt to
get fund reports online.
LETTER FROM THE CHAIRMAN
Fellow Shareholder,
The market rebound that began in March turned 2003 into a remarkable year for
equities, particularly small-capitalization and international stocks. In this
environment, the Vanguard Tax-Managed Funds recorded some of their best
fiscal-year results ever, with total returns ranging from 17.1% to 38.9%.
[PICTURES OF JOHN J. BRENNAN]
The table on page 2 compares each fund's return with those of its comparative
measures. As you know, the Tax-Managed Funds are not pure indexed portfolios,
since they are managed with tax consequences in mind; however, they are
index-oriented and typically reflect the performance of their unmanaged market
benchmarks. In 2003, the funds kept closely in step with their indexes; in fact,
two of them came out slightly ahead. However, while three of our funds generated
returns higher than the average for their respective mutual fund peer groups,
the others--Tax-Managed Balanced Fund and Tax-Managed Small-Cap Fund--lagged
their average peers, mainly because of our funds' more conservative portfolios.
Total returns are based on the change in share prices plus income distributions
during the year. The table on page 7 provides figures for these components. In
2003, the funds sustained their unblemished record of distributing no net
capital gains, which are taxable in a nonretirement account. If you wish to
review the funds' after-tax returns, please see the table on page 22.
STOCKS REBOUNDED FROM THE FIERCE BEAR MARKET
Three straight years of stock market declines ended in a spectacular fashion in
2003. The broad U.S. stock market, as measured by the Wilshire 5000 Total Market
Index, returned 31.6% for the 12 months. International markets did even better,
aided in large part by a falling
1
dollar, which bolstered returns for U.S.-based investors. And small-caps surged
well past the broad market, both here and abroad.
- -----------------------------------------------------
2003 TOTAL RETURNS YEAR ENDED
DECEMBER 31
- -----------------------------------------------------
VANGUARD TAX-MANAGED BALANCED FUND 17.1%
Balanced Composite Index* 17.3
Average Balanced Fund** 19.1
- -----------------------------------------------------
VANGUARD TAX-MANAGED GROWTH AND INCOME FUND
Investor Shares 28.5%
Admiral Shares 28.6
Institutional Shares 28.7
S&P 500 Index 28.7
Average Large-Cap Core Fund** 25.6
- -----------------------------------------------------
VANGUARD TAX-MANAGED CAPITAL APPRECIATION FUND
Investor Shares 31.7%
Admiral Shares 31.8
Institutional Shares 31.9
Russell 1000 Index 29.9
Average Multi-Cap Core Fund** 29.9
- -----------------------------------------------------
Vanguard Tax-Managed Small-Cap Fund
Investor Shares 38.5%
Institutional Shares 38.7
S&P SmallCap 600 Index 38.8
Average Small-Cap Core Fund** 44.2
- -----------------------------------------------------
Vanguard Tax-Managed International Fund
Investor Shares 38.7%
Institutional Shares 38.9
MSCI EAFE Index 38.6
Average International Fund** 34.7
- -----------------------------------------------------
*50% Russell 1000 Index, 50% Lehman Brothers 7 Year Municipal Bond Index.
**Derived from data provided by Lipper Inc. For the average balanced fund, the
bond component is not tax-exempt.
The start of combat operations in Iraq in mid-March, and the subsequent quick
end to that phase of the engagement, relieved months of anticipation and
uncertainty that had cast a pall over the financial markets. Other factors also
contributed to U.S. investors' optimism: the Federal Reserve Board's cutting
short-term interest rates to a 45-year low of 1.00%; a falling U.S. dollar,
which aided businesses dependent on exports and profits from operations
overseas; mortgage rates' hitting four-decade lows, which spurred further
home-buying and freed up cash through refinancing; tax cuts and refunds to
consumers, who were more than willing to spend the windfall; a spike in spending
by businesses to replenish inventories and equipment; and the rapid growth of
the economy, which reached an annual rate of 8.2% in the third quarter.
"JUNK" REIGNED SUPREME IN THE BOND MARKET
Investors' renewed appetite for risk was evident not just in the equity markets,
but on the fixed income side as well. Bonds from companies with
below-investment-grade credit ratings (popularly known as "junk" bonds) surged
29.0% during the 12 months, as measured by the Lehman Brothers High Yield Bond
Index. At the other extreme of the credit-quality spectrum, U.S. Treasury
securities at first seemed poised
2
for a fourth straight year of outstanding gains. By June, the rising price of
the 10-year Treasury note drove its yield down to just above 3%--a level not
seen since Dwight Eisenhower occupied the Oval Office.
- ---------------------------------------------------------------------------
MARKET BAROMETER AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 2003
-------------------------------------------
ONE THREE FIVE
YEAR YEARS YEARS
- ---------------------------------------------------------------------------
STOCKS
Russell 1000 Index (Large-caps) 29.9% -3.8% -0.1%
Russell 2000 Index (Small-caps) 47.3 6.3 7.1
Wilshire 5000 Index (Entire market) 31.6 -2.5 0.4
MSCI All Country World Index Free
ex USA (International) 41.4 -1.0 1.5
- ---------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 4.1% 7.6% 6.6%
(Broad taxable market)
Lehman Municipal Bond Index 5.3 6.7 5.8
Citigroup 3-Month Treasury Bill Index 1.1 2.3 3.5
===========================================================================
CPI
Consumer Price Index 1.9% 1.9% 2.4%
- ---------------------------------------------------------------------------
However, the prices of Treasuries subsequently fell, and by year-end the 10-year
note's yield stood at 4.25%, up 44 basis points (0.44 percentage point) from the
beginning of the year. Treasuries' total returns (which include interest income)
for the full 12 months were still in positive territory, but barely so after
adjusting for inflation. Mortgage-backed securities did only marginally better,
while investment-grade corporate bonds--particularly those with longer
maturities--posted solid returns. The Lehman Aggregate Bond Index, the benchmark
for the broad U.S. investment-grade taxable bond market, earned 4.1%. Meanwhile,
in contrast to rising yields for longer-maturity bonds, the yield of the 3-month
U.S. Treasury bill, a proxy for money market rates, finished the year at 0.92%,
27 basis points below its year-ago level.
THE FUNDS' RETURNS CORRESPONDED TO THEIR LEVELS OF RISK
As you would expect given the market environment during the year, the riskiest
portfolios provided the highest returns. Each share class of the Tax-Managed
Small-Cap Fund and the Tax-Managed International Fund returned almost 39%.
Meanwhile, the most conservative portfolio, the Tax-Managed Balanced Fund,
earned 17.1%--well above the historical return of the broad stock market and all
the more remarkable coming from a portfolio half made up of bonds.
- --------------------------------------------------------------------------------
ADMIRAL(TM) SHARES
A lower-cost class of shares available to many longtime sharesholders 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.
- --------------------------------------------------------------------------------
3
Of the remaining two funds, the Tax-Managed Capital Appreciation Fund's exposure
to mid-cap stocks--which are somewhat riskier than large-caps overall--gave it a
3.2-percentage-point lead over the Tax-Managed Growth and Income Fund, which
focuses on larger stocks and returned 28.5% (for Investor Shares) in 2003. These
two funds and their international sibling bested the average results for their
respective peer groups by approximately 2 to 4 percentage points.
The Tax-Managed Balanced Fund lagged its average peer by 2 percentage points.
Keep in mind that most balanced funds hold a greater proportion of stocks than
bonds. Our fund, on the other hand, keeps at least half of its assets in
municipal bonds in order to maintain federal tax-exempt status for the interest
income from those securities. This conservative asset allocation more than
offset the benefits of municipal bonds' strong returns relative to taxable
investment-grade bonds during the period. (Most balanced funds hold taxable
bonds, which normally provide higher pre-tax returns than munis, though not in
2003.)
Despite its impressive performance, the Tax-Managed Small-Cap Fund lagged its
average peer by almost 6 percentage points. The fund's target benchmark, the
Standard & Poor's SmallCap 600 Index, excludes companies with fewer than four
quarters' worth of operating profits, which screens out the most speculative
stocks. That criterion means your fund often displays less volatility than many
of its peers, never reaching the deepest depths, but never reaching the highest
heights, either. This relative temperance proved to be an advantage during the
recent bear market and a drawback during the past 12 months.
THE FUNDS HAVE OUTPACED PEERS SINCE INCEPTION
One year's performance is a mere snapshot; a mutual fund should be evaluated
over longer periods. The table on page 5 compares our funds' annualized returns
since inception with those of their benchmarks and peers. The table also shows
what would have happened to $10,000 investments made in each at the start.
Since inception--a period of more than nine years for three of the funds, and
more than four years for the others--nearly all of our five funds have
outperformed their average peers. The exception, the Tax-Managed Small-Cap Fund,
slightly lagged its average peer during its short life span. Four of our five
funds also provided solid results in
4
absolute terms. The Tax-Managed International Fund, however, posted an
annualized return of -1.4%--a disappointment, but in line with the performance
of its target index and of international stocks in general during the fund's
short lifetime.
- ---------------------------------------------------------------------------
TOTAL RETURNS SEPTEMBER 6, 1994, THROUGH
DECEMBER 31, 2003*
- ---------------------------------------------------------------------------
AVERAGE FINAL VALUE OF
ANNUAL A $10,000
RETURN INITIAL INVESTMENT
- ---------------------------------------------------------------------------
Tax-Managed Balanced Fund 9.2% $22,637
Balanced Composite Index 9.4 23,015
Average Balanced Fund 8.3 20,942
- ---------------------------------------------------------------------------
Tax-Managed Growth and
Income Fund
Investor Shares 11.6% $27,772
S&P 500 Index 11.6 27,695
Average Large-Cap
Core Fund 9.4 23,011
- ---------------------------------------------------------------------------
Tax-Managed Capital
Appreciation Fund
Investor Shares 11.2% $26,970
Russell 1000 Index 11.6 27,740
Average Multi-Cap
Core Fund 10.2 24,717
- ---------------------------------------------------------------------------
Tax-Managed Small-Cap
Fund Investor Shares 13.0% $17,900
S&P SmallCap 600 Index 12.6 17,621
Average Small-Cap
Core Fund 13.9 18,596
- ---------------------------------------------------------------------------
Tax-Managed International
Fund Investor Shares -1.4% $9,396
MSCI EAFE Index -1.5 9,373
Average International Fund -1.6 9,306
- ---------------------------------------------------------------------------
*Annualized returns are since inception for the Tax-Managed Small-Cap Fund
(March 25, 1999) and the Tax-Managed International Fund (August 17, 1999).
Past performance, of course, is no guarantee of future returns. However, we
believe that two factors will help to keep our performance competitive with that
of peers. One is the proven money management skills of Vanguard's Quantitative
Equity Group, which provides investment advisory services to many Vanguard funds
that, like the Tax-Managed Funds, have logged solid long-term results. The other
is Vanguard's continuing focus on low costs, which ensure that more of the
funds' returns goes to you rather than to the funds' operations. Competitors
have to generate higher gross returns than ours to match our net returns--a
difficult obstacle to overcome year after year. (For a comparison of your fund's
expenses with those of its average peer, see page 23.)
2003 BROUGHT STRONG RETURNS--AND DISAPPOINTMENT
Writing about positive stock fund returns is a welcome change. The market's
resurgence has certainly made my task more pleasant--but it has in no way
altered the advice that we offered to shareholders both before and during the
long downturn, and that we continue to offer
5
today. In any market environment, the keys to successful long-term investing are
balance, diversification, and low costs. Make these principles the foundation of
your investment plan, and you'll be positioned to survive--and ultimately
thrive--come what may.
Unfortunately, 2003 also provided a disappointment to many investors. The
reports of late trading and market-timing at some other investment management
firms have been as disturbing to us as they no doubt have been to you. I want to
close this letter with an assurance that Vanguard has long had policies and
procedures in place to identify and deter such behavior. More important,
Vanguard shareholders are served by a crew of the highest integrity, and our
client-owned corporate structure aligns our day-to-day efforts with your
long-term financial goals.
Thank you for investing your assets with Vanguard.
Sincerely,
/S/JOHN J. BRENNAN
John J. Brennan
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
JANUARY 22, 2004
6
- --------------------------------------------------------------------------------
YOUR FUND'S PERFORMANCE AT A GLANCE DECEMBER 31, 2002-DECEMBER 31, 2003
DISTRIBUTIONS PER SHARE
-----------------------
STARTING ENDING INCOME CAPITAL
TAX-MANAGED FUND SHARE PRICE SHARE PRICE DIVIDENDS GAINS
- --------------------------------------------------------------------------------
Balanced $15.54 $17.72 $0.440 $0.000
- --------------------------------------------------------------------------------
GROWTH AND INCOME
Investor Shares $19.15 $24.23 $0.340 $0.000
Admiral Shares 39.35 49.80 0.726 0.000
Institutional Shares 19.15 24.24 0.359 0.000
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION
Investor Shares $19.49 $25.43 $0.238 $0.000
Admiral Shares 39.24 51.20 0.510 0.000
Institutional Shares 19.49 25.44 0.257 0.000
- --------------------------------------------------------------------------------
SMALL-CAP
Investor Shares $12.67 $17.44 $0.109 $0.000
Institutional Shares 12.68 17.47 0.114 0.000
- --------------------------------------------------------------------------------
INTERNATIONAL
Investor Shares $6.43 $8.76 $0.153 $0.000
Institutional Shares 6.43 8.77 0.160 0.000
- --------------------------------------------------------------------------------
7
FUND PROFILES
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 15 and 16.
TAX-MANAGED BALANCED FUND
- ----------------------------------------
TOTAL FUND CHARACTERISTICS
Yield 1.9%
Turnover Rate 16%
Expense Ratio 0.17%
Short-Term Reserves 0%
- ----------------------------------------
- -----------------------------------------------
TEN LARGEST STOCKS (% OF EQUITIES)
General Electric Co. 2.8%
(conglomerate)
Pfizer Inc. 2.6
(pharmaceuticals)
ExxonMobil Corp. 2.5
(oil)
Citigroup, Inc. 2.4
(banking)
Microsoft Corp. 2.2
(software)
Intel Corp. 1.9
(electronics)
Cisco Systems, Inc. 1.6
(computer hardware)
Johnson & Johnson 1.4
(pharmaceuticals)
American International Group, Inc. 1.4
(insurance)
Wal-Mart Stores, Inc. 1.4
(retail)
- -----------------------------------------------
Top Ten 20.2%
- -----------------------------------------------
Top Ten as % of Total Net Assets 9.8%
- -----------------------------------------------
The "Ten Largest Stocks" excludes any temporary cash investments and equity
index products.
- -----------------------------------------------------------------
TOTAL FUND VOLATILITY MEASURES
COMPOSITE BROAD
FUND INDEX* FUND INDEX**
- -----------------------------------------------------------------
R-Squared 0.99 1.00 0.94 1.00
Beta 1.02 1.00 0.45 1.00
- -----------------------------------------------------------------
- -----------------------------------------------------------------
SECTOR DIVERSIFICATION (% OF EQUITY PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX+ INDEX**
- -----------------------------------------------------------------
Auto & Transportation 2% 2% 3%
Consumer Discretionary 16 14 15
Consumer Staples 7 7 7
Financial Services 20 23 23
Health Care 15 14 13
Integrated Oils 4 4 3
Other Energy 3 2 2
Materials & Processing 3 4 4
Producer Durables 5 4 4
Technology 17 15 15
Utilities 5 7 6
Other 3 4 5
- -----------------------------------------------------------------
- ---------------------------
FUND ASSET ALLOCATION
BONDS 51%
STOCKS 48%
SHORT-TERM RESERVES 1%
- ---------------------------
*50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
**Wilshire 5000 Index.
+Russell 1000 Index.
8
- -----------------------------------------------------------------
EQUITY CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -----------------------------------------------------------------
Number of Stocks 553 991 5,216
Median Market Cap $34.5B $41.0B $29.3B
Price Earnings Ratio 24.1x 22.5x 25.6x
Price/Book Ratio 3.2x 3.1x 3.1x
Dividend Yield 1.2% 1.6% 1.5%
Return on Equity 20.4% 20.8% 15.9%
Earnings Growth Rate 10.2% 8.1% 5.3%
Foreign Holdings 0.0% 0.0% 0.8%
- -----------------------------------------------------------------
- ---------------------------
EQUITY INVESTMENT FOCUS
STYLE Blend
MARKET CAP Large
- ---------------------------
- -----------------------------------------------------------------------------
FIXED INCOME CHARACTERISTIC
COMPARATIVE BROAD
FUND INDEX+ INDEX++
- -----------------------------------------------------------------------------
Number of Bonds 151 5,495 47,689
Yield to Maturity 2.8%+ -- --
Average Coupon 4.5% 5.2% 5.2%
Average Effective Maturity 5.6 years 6.9 years 13.8 years
Average Quality AA+ AA+ AA+
Average Duration 4.6 years 5.4 years 8.1 years
- -----------------------------------------------------------------------------
- ------------------------------------
FIXED INCOME INVESTMENT FOCUS
CREDIT QUALITY High
AVERAGE MATURITY Medium
- ------------------------------------
- ------------------------------------------------------------
DISTRIBUTION BY CREDIT QUALITY (% OF FIXED INCOME PORTFOLIO)
Treasury/Agency 0%
Aaa 75
Aa 21
A 1
Baa 3
- ------------------------------------------------------------
Total 100%
- ------------------------------------------------------------
- ------------------------------------
LARGEST STATE CONCENTRATIONS
(% OF FIXED INCOME PORTFOLIO)
New York 12%
Texas 9
Massachusetts 7
Ohio 7
Pennsylvania 6
New Jersey 6
California 6
Arizona 4
Florida 4
Connecticut 4
- ------------------------------------
Top Ten 65%
- ------------------------------------
- ------------------------------------
DISTRIBUTION BY MATURITY
(% OF FIXED INCOME PORTFOLIO)
Under 1 Year 17%
1-5 Years 23
5-10 Years 52
10-20 Years 8
- ------------------------------------
Total 100%
- ------------------------------------
*Russell 1000 Index.
**Wilshire 5000 Index.
+Lehman 7 Year Municipal Bond Index.
++Lehman Municipal Bond Index.
+Before expenses.
VISIT OUR WEBSITE AT VANGUARD.COM
FOR REGULARLY UPDATED FUND INFORMATION.
9
FUND PROFILES (CONTINUED)
TAX-MANAGED GROWTH AND INCOME FUND
- -------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -------------------------------------------------------------------
Number of Stocks 502 500 5,216
Median Market Cap $52.3B $52.3B $29.3B
Price/Earnings Ratio 22.5x 22.6x 25.6x
Price/Book Ratio 3.2x 3.2x 3.1x
Yield 1.6% 1.5%
Investor Shares 1.5%
Admiral Shares 1.5%
Institutional Shares 1.6%
Return on Equity 21.4% 21.4% 15.9%
Earnings Growth Rate 7.7% 7.7% 5.3%
Foreign Holdings 0.0% 0.0% 0.8%
Turnover Rate 5% -- --
Expense Ratio -- --
Investor Shares 0.17%
Admiral Shares 0.11%
Institutional Shares 0.08%
Short-Term Reserves 0% -- --
- -------------------------------------------------------------------
- -----------------------------------------------------
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
General Electric Co. 3.0%
(conglomerate)
Microsoft Corp. 2.9
(software)
ExxonMobil Corp. 2.6
(oil)
Pfizer Inc. 2.6
(pharmaceuticals)
Citigroup, Inc. 2.4
(banking)
Wal-Mart Stores, Inc. 2.2
(retail)
Intel Corp. 2.0
(electronics)
American International Group, Inc. 1.7
(insurance)
Cisco Systems, Inc. 1.6
(computer hardware)
International Business Machines Corp. 1.6
(computer hardware)
- -----------------------------------------------------
Top Ten 22.6%
- -----------------------------------------------------
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 0.99 1.00
Beta 1.00 1.00 0.98 1.00
- ----------------------------------------------------------------------
- -----------------------------------
INVESTMENT FOCUS
STYLE Blend
MARKET CAP Large
- -----------------------------------
- -----------------------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -----------------------------------------------------------------------
Auto & Transportation 3% 3% 3%
Consumer Discretionary 14 14 15
Consumer Staples 8 8 7
Financial Services 22 22 23
Health Care 13 13 13
Integrated Oils 4 4 3
Other Energy 2 2 2
Materials & Processing 4 4 4
Producer Durables 4 4 4
Technology 16 16 15
Utilities 7 7 6
Other 3 3 5
- -----------------------------------------------------------------------
*S&P 500 Index.
**Wilshire 5000 Index.
10
TAX-MANAGED CAPITAL APPRECIATION FUND
- -----------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -----------------------------------------------------------------------
Number of Stocks 557 991 5,216
Median Market Cap $32.1B $41.0B $29.3B
Price/Earnings Ratio 24.3x 22.5x 25.6x
Price/Book Ratio 3.2x 3.1x 3.1x
Yield 1.6% 1.5%
Investor Shares 1.0%
Admiral Shares 1.1%
Institutional Shares 1.1%
Return on Equity 20.5% 20.8% 15.9%
Earnings Growth Rate 10.5% 8.1% 5.3%
Foreign Holdings 0.1% 0.0% 0.8%
Turnover Rate 11% -- --
Expense Ratio -- --
Investor Shares 0.17%
Admiral Shares 0.11%
Institutional Shares 0.08%
Short-Term Reserves 0% -- --
- -----------------------------------------------------------------------
- --------------------------------------------------------
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
General Electric Co. 2.7%
(conglomerate)
Pfizer Inc. 2.6
(pharmaceuticals)
ExxonMobil Corp. 2.4
(oil)
Citigroup, Inc. 2.3
(banking)
Microsoft Corp. 2.2
(software)
Intel Corp. 1.9
(electronics)
Cisco Systems, Inc. 1.6
(computer hardware)
American International Group, Inc. 1.5
(insurance)
Johnson & Johnson 1.4
(pharmaceuticals)
Wal-Mart Stores, Inc. 1.4
(retail)
- --------------------------------------------------------
Top Ten 20.0%
- --------------------------------------------------------
The "Ten Largest Holdings" excludes any 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 1.10 1.00 1.10 1.00
- -----------------------------------------------------------------------
- -----------------------------
INVESTMENT FOCUS
STYLE Blend
MARKET CAP Large
- -----------------------------
- -----------------------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -----------------------------------------------------------------------
Auto & Transportation 2% 2% 3%
Consumer Discretionary 17 14 15
Consumer Staples 6 7 7
Financial Services 20 23 23
Health Care 16 14 13
Integrated Oils 4 4 3
Other Energy 3 2 2
Materials & Processing 3 4 4
Producer Durables 5 4 4
Technology 17 15 15
Utilities 5 7 6
Other 2 4 5
- -----------------------------------------------------------------------
*Russell 1000 Index.
**Wilshire 5000 Index.
VISIT OUR WEBSITE AT VANGUARD.COM
FOR REGULARLY UPDATED FUND INFORMATION.
11
FUND PROFILES (CONTINUED)
TAX-MANAGED SMALL-CAP FUND
- -----------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- -----------------------------------------------------------------------
Number of Stocks 602 600 5,216
Median Market Cap $0.9B $0.9B $29.3B
Price/Earnings Ratio 24.6x 24.6x 25.6x
Price/Book Ratio 2.3x 2.3x 3.1x
Yield 0.8% 1.5%
Investor Shares 0.7%
Institutional Shares 0.7%
Return on Equity 13.5% 13.5% 15.9%
Earnings Growth Rate 12.4% 12.3% 5.3%
Foreign Holdings 0.0% 0.0% 0.8%
Turnover Rate 21% -- --
Expense Ratio -- --
Investor Shares 0.17%
Institutional Shares 0.10%
Short-Term Reserves 0% -- --
- -----------------------------------------------------------------------
- --------------------------------------------------------
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
Harman International Industries, Inc. 1.1%
(consumer electronics)
NVR, Inc. 0.8
(real estate)
Mid Atlantic Medical Services, Inc. 0.7
(health care)
Cephalon, Inc. 0.6
(biotechnology)
Newfield Exploration Co. 0.6
(oil)
Alliant Techsystems, Inc. 0.5
(aerospace and defense)
Ryland Group, Inc. 0.5
(real estate)
ITT Educational Services, Inc. 0.5
(education)
Renal Care Group, Inc. 0.5
(health care)
Medicis Pharmaceutical Corp. 0.4
(pharmaceuticals)
- --------------------------------------------------------
Top Ten 6.2%
- --------------------------------------------------------
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 0.73 1.00
Beta 0.98 1.00 0.93 1.00
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- ---------------------------------------------------------------------
Auto & Transportation 5% 5% 3%
Consumer Discretionary 21 21 15
Consumer Staples 2 3 7
Financial Services 16 14 23
Health Care 13 13 13
Integrated Oils 0 0 3
Other Energy 6 6 2
Materials & Processing 11 11 4
Producer Durables 12 12 4
Technology 10 11 15
Utilities 4 4 6
Other 0 0 5
- ---------------------------------------------------------------------
- -------------------------------
INVESTMENT FOCUS
STYLE Blend
MARKET CAP Small
- -------------------------------
*S&P SmallCap 600 Index.
**Wilshire 5000 Index.
12
TAX-MANAGED INTERNATIONAL FUND
- --------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- --------------------------------------------------------------
Number of Stocks 1,001 1,003 1,746
Turnover Rate 9% -- --
Expense Ratio -- --
Investor Shares 0.28%
Institutional Shares 0.17%
Short-Term Reserves 0% -- --
- --------------------------------------------------------------
- -------------------------------------------------
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
BP PLC 2.4%
(oil)
HSBC Holdings PLC 2.3
(banking)
Vodafone Group PLC 2.3
(cellular communications)
GlaxoSmithKline PLC 1.9
(pharmaceuticals)
Total SA 1.6
(integrated oil)
Royal Dutch Petroleum Co. 1.5
(energy)
Novartis AG (Registered) 1.5
(pharmaceuticals)
Nestle SA (Registered) 1.4
(food, beverage, and tobacco)
Toyota Motor Corp. 1.2
(automobiles)
Royal Bank of Scotland Group PLC 1.1
(banking)
- -------------------------------------------------
Top Ten 17.2%
- -------------------------------------------------
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 0.99 1.00
Beta 1.01 1.00 1.00 1.00
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
SECTOR DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- ---------------------------------------------------------------------
Consumer Discretionary 13% 13% 12%
Consumer Staples 9 9 8
Energy 8 8 9
Financials 25 25 25
Health Care 9 9 8
Industrials 9 9 9
Information Technology 7 7 8
Materials 7 7 8
Telecommunication Services 8 8 8
Utilities 5 5 5
- ---------------------------------------------------------------------
- ------------------------------
FUND ALLOCATION BY REGION
EUROPE 71%
PACIFIC 29%
- ------------------------------
*MSCI EAFE Index.
**MSCI All Country World Index Free ex USA.
Country Diversification table is on the next page.
VISIT OUR WEBSITE AT VANGUARD.COM
FOR REGULARLY UPDATED FUND INFORMATION.
13
FUND PROFILES (CONTINUED)
TAX-MANAGED INTERNATIONAL FUND (CONTINUED)
- ---------------------------------------------------------------------
COUNTRY DIVERSIFICATION (% OF PORTFOLIO)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- ---------------------------------------------------------------------
EUROPE
United Kingdom 26% 27% 22%
France 10 10 8
Switzerland 7 7 6
Germany 7 7 6
Netherlands 5 5 5
Italy 4 4 3
Spain 4 4 3
Sweden 2 2 2
Finland 2 2 1
Belgium 1 1 1
Denmark 1 1 1
Ireland 1 1 1
Norway 1 0 0
Other 0 0 1
- ---------------------------------------------------------------------
Subtotal 71% 71% 60%
- ---------------------------------------------------------------------
PACIFIC
Japan 21% 21% 18%
Australia 5 5 4
Hong Kong 2 2 2
Singapore 1 1 1
New Zealand 0 0 0
- ---------------------------------------------------------------------
Subtotal 29% 29% 25%
- ---------------------------------------------------------------------
EMERGING MARKETS
Combined 0% 0% 10%
- ---------------------------------------------------------------------
NORTH AMERICA
Canada 0% 0% 5%
- ---------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------
*MSCI EAFE Index.
**MSCI All Country World Index Free ex USA.
14
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 EFFECTIVE MATURITY. The average length of time until fixed income
securities held by a fund reach maturity and are repaid, taking into
consideration the possibility that the issuer may call the bond before its
maturity date. The figure reflects the proportion of fund assets represented by
each security; it also reflects any futures contracts held. In general, the
longer the average effective maturity, the more a fund's share price will
fluctuate in response to changes in market interest rates.
- --------------------------------------------------------------------------------
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's fixed income 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. U.S. Treasury securities are considered to have
the highest credit quality.
- --------------------------------------------------------------------------------
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of a given market index. The 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%. A fund's beta should be reviewed in conjunction with its R-squared (see
definition below). The lower the R-squared, the less correlation there is
between the fund and the index, and the less reliable beta is as an indicator of
volatility.
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
15
GLOSSARY OF INVESTMENT TERMS (CONTINUED)
- --------------------------------------------------------------------------------
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 given 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.
- --------------------------------------------------------------------------------
SHORT-TERM RESERVES. The percentage of a fund invested in highly liquid,
short-term securities that can be readily converted to cash.
- --------------------------------------------------------------------------------
TURNOVER RATE. An indication of the fund's trading activity. Funds with high
turnover rates incur higher transaction costs and may be more likely to
distribute capital gains (which may be 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
16
PERFORMANCE SUMMARIES
All of the returns in this report represent past performance, which cannot be
used to predict future returns that may be achieved by the funds. 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
- ------------------------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE SEPTEMBER 6, 1994-DECEMBER 31, 2003
LEHMAN 7 YEAR BALANCED AVERAGE
TAX-MANAGED RUSSELL MUNICIPAL COMPOSITE BALANCED
BALANCED FUND 1000 INDEX BOND INDEX INDEX+ FUND++
9/6/1994 10000 10000 10000 10000 10000
199409 9920 9920 9920 9920 9920
199412 9860 9882 9824 9820 9812
199503 10576 10822 10340 10544 10409
199506 11255 11841 10634 11187 11163
199509 11949 12896 10938 11843 11804
199512 12278 13614 11214 12323 12292
199603 12589 14364 11174 12638 12611
199606 12860 14950 11222 12922 12895
199609 13196 15438 11424 13259 13275
199612 13777 16670 11703 13951 13983
199703 13732 16928 11690 14057 13966
199706 14997 19773 12011 15411 15398
199709 16012 21500 12332 16296 16465
199712 16057 22146 12601 16726 16640
199803 17250 25107 12745 17926 17894
199806 17602 25735 12893 18260 18103
199809 16716 23082 13302 17640 17001
199812 18776 28131 13385 19566 18883
199903 19404 29291 13499 20056 19052
199906 19993 31377 13269 20596 19910
199909 19517 29306 13378 19992 19137
199912 21685 34013 13366 21553 20524
200003 22660 35499 13578 22211 21043
200006 22407 34281 13798 22007 20786
200009 22546 34526 14112 22353 21301
200012 21575 31365 14578 21683 20832
200103 20385 27424 14956 20577 19725
200106 21156 29154 15065 21315 20314
200109 19622 24713 15479 19929 18807
200112 20812 27460 15334 20929 19917
200203 20921 27663 15482 21123 20013
200206 19788 23940 16143 20103 18565
200209 18599 19892 16872 18794 16939
200212 19339 21514 16921 19621 17585
200303 19227 20882 17117 19446 17354
200306 20965 24168 17571 21213 19105
200309 21343 24892 17666 21599 19628
200312 22637 27740 17843 23015 20942
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 2003
------------------------------------ FINAL VALUE
ONE FIVE SINCE OF A $10,000
YEAR YEARS INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Balanced Fund 17.05% 3.81% 9.16% $22,637
Fee-Adjusted Returns** 15.91 3.81 9.16 22,637
Russell 1000 Index 29.89 -0.13 11.57 27,740
Lehman 7 Year Municipal
Bond Index 5.45 5.92 6.41 17,843
Balanced Composite Index+ 17.30 3.30 9.36 23,015
Average Balanced Fund++ 19.09 2.09 8.26 20,942
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-DECEMBER 31, 2003
TAX-MANAGED BALANCED
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 17.1 17.3
- --------------------------------------------------------------------------------
*September 6, 1994.
**Reflective of the 2% fee assessed on redemptions of shares held in the fund
for less than one year and the 1% fee assessed on redemptions of shares held in
the fund for at least one year but less than five years.
+50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index.
++Derived from data provided by Lipper Inc.
Note: See Financial Highlights table on page 29 for dividend and capital gains
information.
17
PERFORMANCE SUMMARIES (CONTINUED)
TAX-MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE SEPTEMBER 6, 1994-DECEMBER 31, 2003
TAX-MANAGED GROWTH AVERAGE
AND INCOME FUND WILSHIRE S&P LARGE-CAP
INVESTOR SHARES 5000 INDEX 500 INDEX CORE FUND+
9/6/1994 10000 10000 10000 10000
199409 9831 9882 9826 9831
199412 9830 9806 9824 9723
199503 10787 10692 10781 10519
199506 11818 11690 11810 11416
199509 12753 12758 12749 12278
199512 13519 13381 13516 12859
199603 14238 14132 14241 13532
199606 14888 14755 14881 14048
199609 15344 15172 15341 14502
199612 16633 16219 16619 15497
199703 17070 16324 17065 15686
199706 20051 19081 20044 18222
199709 21548 20942 21545 19591
199712 22173 21294 22164 19878
199803 25264 24118 25256 22539
199806 26105 24588 26090 23142
199809 23509 21630 23495 20482
199812 28531 26283 28498 24929
199903 29939 27275 29918 26159
199906 32042 29404 32027 27867
199909 30045 27459 30027 26164
199912 34556 32475 34495 30501
200003 35336 33715 35286 31835
200006 34401 32202 34349 31036
200009 34084 32257 34016 30821
200012 31434 28938 31354 27768
200103 27695 25365 27637 24793
200106 29312 27261 29255 26188
200109 25013 22926 24960 22373
200112 27684 25762 27628 23947
200203 27751 26010 27703 24330
200206 24054 22730 23992 21197
200209 19941 18909 19847 17807
200212 21608 20388 21522 18322
200303 20918 19759 20844 18057
200306 24133 23019 24052 20785
200309 24769 23873 24689 21521
200312 27772 26839 27695 23011
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 2003
--------------------------------- FINAL VALUE OF A
ONE FIVE SINCE $10,000
YEAR YEARS INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Growth and
Income Fund Investor Shares 28.53% -0.54% 11.59% $27,772
Fee-Adjusted Returns** 27.26 -0.54 11.59 27,772
Wilshire 5000 Index 31.64 0.42 11.18 26,839
S&P 500 Index 28.68 -0.57 11.55 27,695
Average Large-Cap Core FundY 25.59 -1.59 9.36 23,011
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINAL VALUE OF A
ONE SINCE $250,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Growth and
Income Fund Admiral Shares 28.64% 1.54% $258,296
Fee-Adjusted Returns** 27.37 1.08 255,806
S&P 500 Index 28.68 1.45 257,802
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINAL VALUE OF A
ONE SINCE $10,000,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Growth and Income
Fund Institutional Shares 28.69% -0.80% $9,620,612
Fee-Adjusted Returns** 27.43 -0.99 9,530,801
S&P 500 Index 28.68 -0.93 9,559,296
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-DECEMBER 31, 2003
TAX-MANAGED GROWTH
AND INCOME FUND S&P
INVESTOR SHARES 500 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 28.5 28.7
- --------------------------------------------------------------------------------
*Inception for Tax-Managed Growth and Income Fund Investor Shares is September
6, 1994; for Admiral Shares, November 12, 2001; for Institutional Shares, March
4, 1999.
**Reflective of the 2% fee assessed on redemptions of shares held in the fund
for less than one year and the 1% fee assessed on redemptions of shares held in
the fund for at least one year but less than five years.
+Derived from data provided by Lipper Inc.
NOTE: See Financial Highlights tables on pages 30-32 for dividend and capital
gains information.
18
TAX-MANAGED CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE SEPTEMBER 6, 1994-DECEMBER 31, 2003
TAX-MANAGED CAPITAL AVERAGE
APPRECIATION FUND WILSHIRE RUSSELL MULTI-CAP
INVESTOR SHARES 5000 INDEX 1000 INDEX CORE FUND+
9/6/1994 10000 10000 10000 10000
199409 9910 9882 9847 9910
199412 9950 9806 9810 9752
199503 10860 10692 10742 10519
199506 11950 11690 11754 11407
199509 12990 12758 12802 12316
199512 13371 13381 13515 12784
199603 14166 14132 14260 13545
199606 14750 14755 14841 14049
199609 15213 15172 15325 14553
199612 16169 16219 16548 15442
199703 16138 16324 16804 15493
199706 18845 19081 19629 17758
199709 20974 20942 21343 19563
199712 20581 21294 21985 19455
199803 23590 24118 24924 21968
199806 24151 24588 25547 22090
199809 20989 21630 22913 19156
199812 26334 26283 27926 22967
199903 28098 27275 29077 23576
199906 30445 29404 31149 25575
199909 28661 27459 29092 24000
199912 35156 32475 33765 28123
200003 37770 33715 35239 29590
200006 36216 32202 34029 28527
200009 36041 32257 34273 29179
200012 31595 28938 31135 27290
200103 26978 25365 27223 23583
200106 28899 27261 28941 24895
200109 23528 22926 24532 21441
200112 26749 25762 27259 24318
200203 26780 26010 27461 23798
200206 22861 22730 23765 20588
200209 18806 18909 19746 17674
200212 20476 20388 21357 19029
200303 20003 19759 20729 17984
200306 23207 23019 23991 20502
200309 24016 23873 24710 21891
200312 26970 26839 27740 24717
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 2003
--------------------------------- FINAL VALUE OF A
ONE FIVE SINCE $10,000
YEAR YEARS INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Capital Appreciation
Fund Investor Shares 31.72% 0.48% 11.24% $26,970
Fee-Adjusted Returns** 30.41 0.48 11.24 26,970
Wilshire 5000 Index 31.64 0.42 11.18 26,839
Russell 1000 Index 29.89 -0.13 11.57 27,740
Average Multi-Cap Core FundY 29.89 1.48 10.20 24,717
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINAL VALUE OF A
ONE SINCE $250,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Capital Appreciation Fund
Admiral Shares 31.80% 2.44% $263,226
Fee-Adjusted Returns** 30.49 1.98 260,666
Russell 1000 Index 29.89 2.37 262,794
- --------------------------------------------------------------------------------
FINAL VALUE OF A
ONE SINCE $10,000,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Capital Appreciation Fund
Institutional Shares 31.87% 0.09% $10,042,891
Fee-Adjusted Returns** 30.56 -0.11 9,946,235
Russell 1000 Index 29.89 -0.45 9,781,571
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-DECEMBER 31, 2003
TAX-MANAGED CAPITAL
APPRECIATION FUND RUSSELL
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 27
1999 33.5 20.9
2000 -10.1 -7.8
2001 -15.3 -12.4
2002 -23.5 -21.7
2003 31.7 29.9
- --------------------------------------------------------------------------------
*Inception for Tax-Managed Capital Appreciation Fund Investor Shares is
September 6, 1994; for Admiral Shares, November 12, 2001; for Institutional
Shares, February 24, 1999.
**Reflective of the 2% fee assessed on redemptions of shares held in the fund
for less than one year and the 1% fee assessed on redemptions of shares held in
the fund for at least one year but less than five years.
+Derived from data provided by Lipper Inc.
NOTE: See Financial Highlights tables on pages 33-35 for dividend and capital
gains information.
19
PERFORMANCE SUMMARIES (CONTINUED)
TAX-MANAGED SMALL-CAP FUND
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE MARCH 25, 1999-DECEMBER 31, 2003
TAX-MANAGED S&P AVERAGE
SMALL-CAP FUND WILSHIRE SMALL-CAP SMALL-CAP
INVESTOR SHARES 5000 INDEX 600 INDEX CORE FUND+
3/25/1999 10000 10000 10000 10000
199903 10130 10008 10109 10130
199906 11745 10789 11668 11854
199909 11226 10075 11103 11403
199912 12628 11916 12486 13939
200003 13420 12370 13212 15626
200006 13580 11815 13346 15091
200009 14231 11835 13786 15079
200012 14325 10618 13959 14646
200103 13268 9307 13043 14790
200106 15070 10003 14829 16553
200109 12533 8412 12323 13202
200112 15105 9452 14872 15766
200203 16137 9543 15908 17687
200206 15125 8340 14870 15896
200209 12341 6938 12102 12328
200212 12923 7481 12696 12892
200303 12179 7250 11961 13113
200306 14576 8446 14338 15567
200309 15585 8759 15352 16274
200312 17726 9848 17621 18596
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 2003
--------------------------------- FINAL VALUE OF A
ONE SINCE $10,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Small-Cap Fund
Investor Shares 38.51% 12.98% $17,900
Fee-Adjusted Returns** 37.13 12.75 17,726
Wilshire 5000 Index 31.64 -0.32 9,848
S&P SmallCap 600 Index 38.79 12.61 17,621
Average Small-Cap Core FundY 44.24 13.89 18,596
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINAL VALUE OF A
ONE SINCE $10,000,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed Small-Cap Fund
Institutional Shares 38.68% 11.62% $16,758,326
Fee-Adjusted Returns** 37.30 11.39 16,595,965
S&P SmallCap 600 Index 38.79 11.24 16,492,737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) MARCH 25, 1999-DECEMBER 31, 2003
TAX-MANAGED S&P
SMALL-CAP FUND SMALL-CAP
INVESTOR SHARES 600 INDEX
1999 26.3 24.9
2000 13.4 11.8
2001 5.4 6.5
2002 -14.4 -14.6
2003 38.5 38.8
- --------------------------------------------------------------------------------
*Inception for Tax-Managed Small-Cap Fund Investor Shares is March 25, 1999; for
Institutional Shares, April 21, 1999.
**Reflective of the 2% fee assessed on redemptions of shares held in the fund
for less than one year and the 1% fee assessed on redemptions of shares held in
the fund for at least one year but less than five years.
+Derived from data provided by Lipper Inc.
Note: See Financial Highlights tables on pages 36 and 37 for dividend and
capital gains information.
20
TAX-MANAGED INTERNATIONAL FUND
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE AUGUST 17, 1999-DECEMBER 31, 2003
MSCI
TAX-MANAGED ALL COUNTRY AVERAGE
INTERNATIONAL FUND WORLD INDEX MSCI EAFE INTERNATIONAL
INVESTOR SHARES FREE EX USA INDEX FUND+
8/17/1999 10000 10000 10000 10000
199909 10230 10188 10200 10158
199912 12001 12039 11933 12543
200003 11981 12133 11920 12635
200006 11499 11638 11448 11966
200009 10576 10689 10525 11258
200012 10286 10223 10242 10586
200103 8876 8879 8838 9115
200106 8785 8867 8746 9091
200109 7547 7558 7521 7776
200112 8030 8230 8046 8288
200203 8112 8365 8087 8433
200206 7937 8143 7915 8166
200209 6350 6571 6353 6655
200212 6776 7022 6763 6907
200303 6217 6510 6208 6358
200306 7419 7802 7404 7515
200309 8019 8479 8006 8181
200312 9396 9930 9373 9306
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 2003
--------------------------------- FINAL VALUE OF A
ONE SINCE $10,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed International Fund
Investor Shares 38.67% -1.42% $9,396
Fee-Adjusted Returns** 37.30 -1.63 9,308
MSCI All Country World Index
Free ex USA 41.41 -0.16 9,930
MSCI EAFE Index 38.59 -1.47 9,373
Average International FundY 34.74 -1.63 9,306
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINAL VALUE OF A
ONE SINCE $10,000,000
YEAR INCEPTION* INVESTMENT
- --------------------------------------------------------------------------------
Tax-Managed International Fund
Institutional Shares 38.94% -2.82% $9,181,713
Fee-Adjusted Returns** 37.57 -3.12 9,095,138
MSCI EAFE Index 38.59 -2.89 9,161,857
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) AUGUST 17, 1999-DECEMBER 31, 2003
TAX-MANAGED
INTERNATIONAL FUND MSCI EAFE
INVESTOR SHARES INDEX
1999 20.0 19.3
2000 -14.3 -14.2
2001 -21.9 -21.4
2002 -15.6 -15.9
2003 38.7 38.6
- --------------------------------------------------------------------------------
*Inception for Tax-Managed International Fund Investor Shares is August 17,
1999; for Institutional Shares, January 4, 2001.
**Reflective of the 2% fee assessed on redemptions of shares held in the fund
for less than one year and the 1% fee assessed on redemptions of shares held in
the fund for at least one year but less than five years.
+Derived from data provided by Lipper Inc.
Note: See Financial Highlights tables on pages 38 and 39 for dividend and
capital gains information.
21
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 (including qualified dividend income) and
short-term capital gains that became effective as of January 1, 2003, and on
long-term capital gains realized on or after May 6, 2003. Qualified dividend
income is based on calendar year 2003. (In the example, returns after the sale
of fund shares may be higher than those assuming no sale. This occurs when the
sale would have produced a capital loss. The calculation assumes that the
investor received a tax deduction for the loss.)
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 DECEMBER 31, 2003
SINCE
ONE YEAR FIVE YEARS INCEPTION**
---------------------------------------
TAX-MANAGED BALANCED FUND
Returns Before Taxes 15.91% 3.81% 9.16%
Returns After Taxes on Distributions 15.81 3.69 9.01
Returns After Taxes on Distributions
and Sale of Fund Shares 11.24 3.52 8.34
- --------------------------------------------------------------------------------
TAX-MANAGED GROWTH AND INCOME FUND INVESTOR SHARES
Returns Before Taxes 27.26% -0.54% 11.59%
Returns After Taxes on Distributions 26.96 -0.96 10.98
Returns After Taxes on Distributions
and Sale of Fund Shares 18.05 -0.69 9.95
- --------------------------------------------------------------------------------
TAX-MANAGED CAPITAL APPRECIATION FUND INVESTOR SHARES
Returns Before Taxes 30.41% 0.48% 11.24%
Returns After Taxes on Distributions 30.22 0.26 10.97
Returns After Taxes on Distributions
and Sale of Fund Shares 20.01 0.29 9.88
- --------------------------------------------------------------------------------
TAX-MANAGED SMALL-CAP FUND INVESTOR SHARES
Returns Before Taxes 37.13% -- 12.75%
Returns After Taxes on Distributions 37.00 -- 12.52
Returns After Taxes on Distributions
and Sale of Fund Shares 24.31 -- 11.01
- --------------------------------------------------------------------------------
TAX-MANAGED INTERNATIONAL FUND INVESTOR SHARES
Returns Before Taxes 37.30% -- -1.63%
Returns After Taxes on Distributions 37.14 -- -2.03
Returns After Taxes on Distributions
and Sale of Fund Shares 24.91 -- -1.56
- --------------------------------------------------------------------------------
*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.
22
ABOUT YOUR FUND'S EXPENSES
All mutual funds have operating expenses. These expenses include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of the fund. A fund's
expenses are expressed as a percentage of its net assets. This figure is known
as the expense ratio.
a hypothetical example
We believe it is important for you to understand the impact of costs on your
investment. The following example illustrates the costs that you would incur
over a 12-month period if you invested $10,000 in your fund, using the funds'
actual returns and operating expenses for the fiscal year ended December 31,
2003. The cost in dollars is calculated by applying the expense ratios to the
average balance in the hypothetical account. For comparative purposes, we also
list the average expense ratios for the funds' peer groups, which are derived
from data provided by Lipper Inc.
- --------------------------------------------------------------------------------
COST OF $10,000 FUND PEER GROUP*
TAX-MANAGED FUND INVESTMENT IN FUND EXPENSE RATIO EXPENSE RATIO
- --------------------------------------------------------------------------------
Balanced $18 0.17% 1.31%
- --------------------------------------------------------------------------------
GROWTH AND INCOME
Investor Shares $19 0.17% 1.41%
Admiral Shares 13 0.11 --
Institutional Shares 9 0.08 --
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION
Investor Shares $20 0.17% 1.38%
Admiral Shares 13 0.11 --
Institutional Shares 9 0.08 --
- --------------------------------------------------------------------------------
SMALL-CAP
Investor Shares $20 0.17% 1.58%
Institutional Shares 12 0.10 --
- --------------------------------------------------------------------------------
INTERNATIONAL
Investor Shares $33 0.28% 1.70%
Institutional Shares 20 0.17 --
- --------------------------------------------------------------------------------
*Peer groups are: for the Tax-Managed Balanced Fund, the Average Balanced Fund;
for the Tax-Managed Growth and Income Fund, the Average Large-Cap Core Fund; for
the Tax-Managed Capital Appreciation Fund, the Average Multi-Cap Core Fund; for
the Tax-Managed Small-Cap Fund, the Average Small-Cap Core Fund; for the
Tax-Managed International Fund, the Average International Fund.
The calculation assumes no shares were sold. Your actual costs may have been
higher or lower, depending on the amount of your investment and your holding
period. Peer-group ratios capture data through year-end 2002.
You can find more information about the funds' expenses, including annual
expense ratios for the past five years, in the Financial Statements section of
this report. For additional information on operating expenses and other
shareholder costs, please refer to the appropriate fund prospectus. The
prospectus presents hypothetical shareholder costs over various time periods
based upon a $10,000 investment and a return of 5% a year. This standardized
example, which appears in all mutual fund prospectuses, may be useful to you in
comparing the costs of investing in different funds.
23
FINANCIAL STATEMENTS
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
YEAR ENDED DECEMBER 31, 2003
(000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 2,810
Interest 9,502
Security Lending 3
- --------------------------------------------------------------------------------
Total Income 12,315
- --------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 85
Management and Administrative 569
Marketing and Distribution 49
Custodian Fees 14
Auditing Fees 15
Shareholders' Reports 12
Trustees' Fees and Expenses 1
- --------------------------------------------------------------------------------
Total Expenses 745
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,570
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD (8,560)
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES 68,158
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $71,168
================================================================================
24
- --------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
GROWTH AND CAPITAL TAX-MANAGED TAX-MANAGED
INCOME APPRECIATION SMALL-CAP INTERNATIONAL
FUND FUND FUND FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2003
------------------------------------------------------------
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends* $ 35,378 $ 28,549 $ 6,721 $ 11,426
Interest 6 13 20 3
Security Lending 26 89 235 154
- --------------------------------------------------------------------------------
Total Income 35,410 28,651 6,976 11,583
- --------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B Investment
Advisory Services 113 113 113 53
Management and Administrative
Investor Shares 1,687 1,898 966 548
Admiral Shares 541 799 -- --
Institutional Shares 108 64 14 21
Marketing and Distribution
Investor Shares 124 136 76 45
Admiral Shares 56 81 -- --
Institutional Shares 21 13 4 7
Custodian Fees 56 37 31 477
Auditing Fees 16 16 15 21
Shareholders' Reports
Investor Shares 53 33 13 7
Admiral Shares 3 3 -- --
Institutional Shares -- -- -- --
Trustees' Fees and Expenses 2 2 1 --
- --------------------------------------------------------------------------------
Total Expenses 2,780 3,195 1,233 1,179
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 32,630 25,456 5,743 10,404
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities
Sold (37,853) (163,709) (20,076) (14,161)
Foreign Currencies -- -- -- 252
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (37,853) (163,709) (20,076) (13,909)
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 513,100 779,669 266,346 160,713
Foreign Currencies -- -- -- 41
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 513,100 779,669 266,346 160,754
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS $507,877 $641,416 $252,013 $157,249
================================================================================
*Dividends for the Tax-Managed International Fund are net of foreign withholding
taxes of $1,293,000.
25
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 GROWTH AND
BALANCED FUND INCOME FUND
----------------------- ------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2003 2002
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 11,570 $ 11,239 $ 32,630 $ 29,589
Realized Net Gain (Loss) (8,560) (11,097) (37,853) (245,531)
Change in Unrealized Appreciation
(Depreciation) 68,158 (32,216) 513,100 (298,017)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 71,168 (32,074) 507,877 (513,959)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (12,021) (11,176) (18,634) (19,117)
Admiral Shares -- -- (10,596) (8,546)
Institutional Shares -- -- (3,149) (2,921)
Realized Capital Gain
Investor Shares -- -- -- --
Admiral Shares -- -- -- --
Institutional Shares -- -- -- --
- --------------------------------------------------------------------------------
Total Distributions (12,021) (11,176) (32,379) (30,584)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE F
Investor Shares 23,416 40,067 (35,229) (175,369)
Admiral Shares -- -- 105,703 156,028
Institutional Shares -- -- 5,492 56,906
- --------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 23,416 40,067 75,966 37,565
- --------------------------------------------------------------------------------
Total Increase (Decrease) 82,563 (3,183) 551,464 (506,978)
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 415,720 418,903 1,762,548 2,269,526
- --------------------------------------------------------------------------------
End of Period $498,283 $415,720 $2,314,012 $1,762,548
================================================================================
26
- --------------------------------------------------------------------------------
TAX-MANAGED TAX-MANAGED
CAPITAL APPRECIATION FUND SMALL-CAP FUND
--------------------------- -------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2003 2002
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 25,456 $ 20,534 $ 5,743 $ 4,490
Realized Net Gain (Loss) (163,709) (106,097) (20,076) (36,397)
Change in Unrealized Appreciation
(Depreciation) 779,669 (536,013) 266,346 (72,576)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from
Operations 641,416 (621,576) 252,013 (104,483)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (13,637) (12,093) (5,737) (4,465)
Admiral Shares (10,861) (8,248) -- --
Institutional Shares (1,042) (1,216) (80) (227)
Realized Capital Gain
Investor Shares -- -- -- --
Admiral Shares -- -- -- --
Institutional Shares -- -- -- --
- --------------------------------------------------------------------------------
Total Distributions (25,540) (21,557) (5,817) (4,692)
- --------------------------------------------------------------------------------
Capital Share Transactions--Note F
Investor Shares (32,762) (134,940) 88,797 135,406
Admiral Shares 118,814 187,073 -- --
Institutional Shares (30,325) 14,355 (24,074) (17,238)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 55,727 66,488 64,723 118,168
- --------------------------------------------------------------------------------
Total Increase (Decrease) 671,603 (576,645) 310,919 8,993
- --------------------------------------------------------------------------------
Net Assets
Beginning of Period 2,001,135 2,577,780 630,705 621,712
- --------------------------------------------------------------------------------
End of Period $2,672,738 $2,001,135 $941,624 $630,705
================================================================================
27
sTATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
TAX-MANAGED
INTERNATIONAL FUND
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
2003 2002
(000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,404 $ 8,166
Realized Net Gain (Loss) (13,909) (24,940)
Change in Unrealized Appreciation
(Depreciation) 160,754 (51,327)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 157,249 (68,101)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (8,724) (7,187)
Institutional Shares (1,434) (1,040)
Realized Capital Gain
Investor Shares -- --
Institutional Shares -- --
- --------------------------------------------------------------------------------
Total Distributions (10,158) (8,227)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE F
Investor Shares 52,530 73,746
Institutional Shares 35,424 1,040
- --------------------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 87,954 74,786
- --------------------------------------------------------------------------------
Total Increase (Decrease) 235,045 (1,542)
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 380,898 382,440
- --------------------------------------------------------------------------------
End of Period $615,943 $380,898
================================================================================
28
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 THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.54 $17.18 $18.30 $18.87 $16.74
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .42 .44 .46 .48 .43
Net Realized and Unrealized Gain (Loss)
on Investments* 2.20 (1.65) (1.12) (.56) 2.13
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.62 (1.21) (.66) (.08) 2.56
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income** (.44) (.43) (.46) (.49) (.43)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.44) (.43) (.46) (.49) (.43)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.72 $15.54 $17.18 $18.30 $18.87
=======================================================================================================================
TOTAL RETURN+ 17.05% -7.07% -3.54% -0.50% 15.49%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $498 $416 $419 $400 $330
Ratio of Total Expenses to
Average Net Assets 0.17% 0.18% 0.19% 0.20% 0.20%
Ratio of Net Investment Income to
Average Net Assets 2.58% 2.69% 2.64% 2.61% 2.52%
Portfolio Turnover Rate 16% 24% 21% 15% 13%
=======================================================================================================================
*Includes increases from redemption fees of $.01, $.01, $.01, $.01, and $.01.
**Nontaxable dividends represent 77%, 82%, 87%, 92%, and 90% 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.
29
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX-MANAGED GROWTH AND INCOME FUND INVESTOR SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 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 $26.55
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .34 .313 .294 .295 .307
Net Realized and Unrealized Gain (Loss)
on Investments* 5.08 (5.768) (3.725) (3.148) 5.267
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 5.42 (5.455) (3.431) (2.853) 5.574
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.34) (.325) (.299) (.297) (.314)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.34) (.325) (.299) (.297) (.314)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $24.23 $19.15 $24.93 $28.66 $31.81
=======================================================================================================================
TOTAL RETURN** 28.53% -21.95% -11.93% -9.03% 21.12%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,321 $1,077 $1,606 $2,320 $2,240
Ratio of Total Expenses to
Average Net Assets 0.17% 0.17% 0.18% 0.19% 0.19%
Ratio of Net Investment Income to
Average Net Assets 1.63% 1.44% 1.13% 0.96% 1.11%
Portfolio Turnover Rate 5% 9% 5% 5% 4%
=======================================================================================================================
*Includes increases from redemption fees of $.01, $.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.
30
TAX-MANAGED GROWTH AND INCOME FUND ADMIRAL SHARES
- --------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, NOV. 12* TO
----------------- DEC. 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $39.35 $51.24 $50.00
- --------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .733 .673 .087
Net Realized and Unrealized Gain (Loss)
on Investments** 10.443 (11.870) 1.348
- --------------------------------------------------------------------------------
Total from Investment Operations 11.176 (11.197) 1.435
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.726) (.693) (.195)
Distributions from Realized Capital Gains -- -- --
- --------------------------------------------------------------------------------
Total Distributions (.726) (.693) (.195)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $49.80 $39.35 $51.24
================================================================================
TOTAL RETURN+ 28.64% -21.92% 2.87%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $777 $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 1.69% 1.52% 1.26%++
Portfolio Turnover Rate 5% 9% 5%
- --------------------------------------------------------------------------------
*Inception.
**Includes increases from redemption fees of $.02, $.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.
31
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX-MANAGED GROWTH AND INCOME FUND INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, Mar. 4* to
---------------------------------------------------------- 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 .369 .331 .319 .319 .274
Net Realized and Unrealized Gain (Loss)
on Investments** 5.080 (5.768) (3.725) (3.148) 4.882
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 5.449 (5.437) (3.406) (2.829) 5.156
- -----------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from Net Investment Income (.359) (.343) (.324) (.321) (.336)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.359) (.343) (.324) (.321) (.336)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $24.24 $19.15 $24.93 $28.66 $31.81
=======================================================================================================================
TOTAL RETURN+ 28.69% -21.88% -11.84% -8.96% 19.23%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $217 $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 1.72% 1.54% 1.25% 1.04% 1.18%++
Portfolio Turnover Rate 5% 9% 5% 5% 4%
=======================================================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.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.
32
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX-MANAGED CAPITAL APPRECIATION FUND INVESTOR SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 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 $34.17 $25.69
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .238 .196 .164 .117 .117
Net Realized and Unrealized Gain (Loss)
on Investments* 5.940 (6.231) (4.854) (3.578) 8.487
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 6.178 (6.035) (4.690) (3.461) 8.604
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.238) (.205) (.170) (.119) (.124)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.238) (.205) (.170) (.119) (.124)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $25.43 $19.49 $25.73 $30.59 $34.17
=======================================================================================================================
TOTAL RETURN** 31.72% -23.45% -15.34% -10.13% 33.50%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,466 $1,154 $1,678 $2,643 $2,378
Ratio of Total Expenses to
Average Net Assets 0.17% 0.17% 0.18% 0.19% 0.19%
Ratio of Net Investment Income to
Average Net Assets 1.09% 0.87% 0.60% 0.36% 0.47%
Portfolio Turnover Rate 11% 10% 13% 17% 12%
=======================================================================================================================
*Includes increases from redemption fees of $.01, $.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.
33
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX-MANAGED CAPITAL APPRECIATION FUND ADMIRAL SHARES
- --------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, NOV. 12* TO
----------------- 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 .51 .42 .064
Net Realized and Unrealized Gain (Loss)
on Investments** 11.96 (12.53) 2.072
- --------------------------------------------------------------------------------
Total from Investment Operations 12.47 (12.11) 2.136
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.51) (.44) (.346)
Distributions from Realized Capital Gains -- -- --
- --------------------------------------------------------------------------------
Total Distributions (.51) (.44) (.346)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $51.20 $39.24 $51.79
================================================================================
TOTAL RETURN+ 31.80% -23.38% 4.26%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,103 $741 $778
Ratio of Total Expenses to
Average Net Assets 0.11% 0.11% 0.14%++
Ratio of Net Investment Income to
Average Net Assets 1.16% 0.95% 0.79%++
Portfolio Turnover Rate 11% 10% 13%
================================================================================
*Inception.
**Includes increases from redemption fees of $.02, $.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.
34
TAX-MANAGED CAPITAL APPRECIATION FUND INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FEB. 24* TO
---------------------------------------------------------- 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 .267 .216 .188 .136 .129
Net Realized and Unrealized Gain (Loss)
on Investments** 5.940 (6.231) (4.854) (3.578) 7.877
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 6.207 (6.015) (4.666) (3.442) 8.006
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.257) (.225) (.194) (.148) (.146)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.257) (.225) (.194) (.148) (.146)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $25.44 $19.49 $25.73 $30.59 $34.18
=======================================================================================================================
TOTAL RETURNY 31.87% -23.37% -15.26% -10.07% 30.43%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $104 $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 1.17% 0.98% 0.69% 0.46% 0.56%++
Portfolio Turnover Rate 11% 10% 13% 17% 12%
=======================================================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.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.
35
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX-MANAGED SMALL-CAP FUND INVESTOR SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FEB. 25* TO
---------------------------------------------------------- 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 .109 .092 .079 .074 .049
Net Realized and Unrealized Gain (Loss)
on Investments** 4.770 (2.247) .696 1.620 2.615
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.879 (2.155) .775 1.694 2.664
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.109) (.095) (.085) (.074) (.054)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.109) (.095) (.085) (.074) (.054)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.44 $12.67 $14.92 $14.23 $12.61
=======================================================================================================================
TOTAL RETURN+ 38.51% -14.44% 5.44% 13.44% 26.28%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $929 $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 0.77% 0.68% 0.63% 0.64% 0.70%++
Portfolio Turnover Rate 21% 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, $0, $0, and $0.
+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.
36
TAX-MANAGED SMALL-CAP FUND INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, APR. 21* TO
---------------------------------------------------------- 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 .134 .105 .092 .085 .044
Net Realized and Unrealized Gain (Loss)
on Investments** 4.770 (2.247) .696 1.620 1.866
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.904 (2.142) .788 1.705 1.910
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.114) (.098) (.098) (.085) (.060)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.114) (.098) (.098) (.085) (.060)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.47 $12.68 $14.92 $14.23 $12.61
=======================================================================================================================
TOTAL RETURN+ 38.68% -14.36% 5.53% 13.53% 17.77%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $12 $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 0.84% 0.74% 0.73% 0.76% 0.74%++
Portfolio Turnover Rate 21% 21% 25% 64% 27%
=======================================================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.01, $0, $0, and $0.
+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.
37
FINANCIAL HIGHLIGHTS (CONTINUED)
TAX-MANAGED INTERNATIONAL FUND INVESTOR SHARES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, AUG. 17* TO
---------------------------------------------------------- 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 .158 .14 .111 .11 .03
Net Realized and Unrealized Gain (Loss)
on Investments** 2.325 (1.36) (2.336) (1.82) 1.97
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.483 (1.22) (2.225) (1.71) 2.00
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.153) (.14) (.125) (.11) (.04)
Distributions from Realized Capital Gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.153) (.14) (.125) (.11) (.04)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.76 $6.43 $ 7.79 $10.14 $11.96
=======================================================================================================================
TOTAL RETURN+ 38.67% -15.62% -21.94% -14.29% 20.01%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $514 $334 $327 $241 $135
Ratio of Total Expenses to
Average Net Assets 0.28% 0.31% 0.35% 0.35% 0.35%++
Ratio of Net Investment Income to
Average Net Assets 2.33% 2.04% 1.49% 1.24% 0.96%++
Portfolio Turnover Rate 9% 7% 20% 5% 7%
=======================================================================================================================
*Inception.
**Includes increases from redemption fees of $.01, $.01, $0, $.01, and $0.
+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.
38
TAX-MANAGED INTERNATIONAL FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, JAN. 4* TO
----------------- 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 .17 .148 .123
Net Realized and Unrealized Gain (Loss)
on Investments** 2.33 (1.361) (2.329)
- --------------------------------------------------------------------------------
Total from Investment Operations 2.50 (1.213) (2.206)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.16) (.147) (.134)
Distributions from Realized Capital Gains -- -- --
- --------------------------------------------------------------------------------
Total Distributions (.16) (.147) (.134)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.77 $6.43 $ 7.79
================================================================================
TOTAL RETURN+ 38.94% -15.52% -21.77%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $102 $47 $55
Ratio of Total Expenses to
Average Net Assets 0.17% 0.20% 0.22%++
Ratio of Net Investment Income to
Average Net Assets 2.44% 2.16% 1.68%++
Portfolio Turnover Rate 9% 7% 20%
================================================================================
*Inception.
**Includes increases from redemption fees of $0, $.01, and $0.
+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.
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.
40
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 December 31, 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 $ 77 0.02% 0.08%
Growth and Income 351 0.02 0.35
Capital Appreciation 409 0.02 0.41
Small-Cap 146 0.02 0.15
International 87 0.01 0.09
- --------------------------------------------------------------------------------
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 year ended December 31, 2003, the Tax-Managed International Fund
realized net foreign currency gains of $252,000, which increased distributable
net income for tax purposes; accordingly, such gains have been reclassified from
accumulated net realized losses to undistributed net investment income.
41
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At December 31, 2003, the funds had the following tax-basis amounts available
for distribution, and capital losses available to offset future net capital
gains:
- --------------------------------------------------------------------------------
AMOUNT AVAILABLE FOR
DISTRIBUTION CAPITAL LOSSES
----------------------- ----------------------------
ORDINARY LONG-TERM EXPIRATION: FISCAL
INCOME CAPITAL GAIN AMOUNT YEARS ENDING
TAX-MANAGED FUND (000) (000) (000) DECEMBER 31,
- --------------------------------------------------------------------------------
Balanced $(184)* -- $ 36,996 2005-2012
Growth and Income 308 -- 436,447 2004-2012
Capital Appreciation (123)* -- 606,863 2004-2011
Small-Cap (68)* -- 65,359 2007-2012
International 99 -- 74,226 2007-2012
- --------------------------------------------------------------------------------
*Amount from the fund's December 2003 dividend payable in January 2004 that will
be used to reduce required 2004 ordinary income dividends.
At December 31, 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 $ 93,434 $ (2,460) $ 90,974
Growth and Income 582,774 (83,972) 498,802
Capital Appreciation 937,128 (39,760) 897,368
Small-Cap 306,845 (4,939) 301,906
International 84,360 (41,353) 43,007
- --------------------------------------------------------------------------------
The Tax-Managed International Fund had net unrealized foreign currency gains of
$107,000 resulting from the translation of other assets and liabilities at
December 31, 2003.
D. During the year ended December 31, 2003, purchases and sales of investment
securities other than temporary cash investments were:
- --------------------------------------------------------------------------------
(000)
---------------------------
TAX-MANAGED FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Balanced $ 76,110 $ 68,833
Growth and Income 177,431 100,517
Capital Appreciation 312,540 255,077
Small-Cap 223,615 158,014
International 121,090 41,105
- --------------------------------------------------------------------------------
42
E. The market value of securities on loan to broker/dealers at December 31,
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 $ 313 $ 315
Capital Appreciation 3,717 3,895
Small-Cap 18,515 19,339
International 2,375 2,520
- --------------------------------------------------------------------------------
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:
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
2003 2002
---------------------- ---------------------
AMOUNT SHARES AMOUNT SHARES
TAX-MANAGED FUND (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------
BALANCED
Issued $48,701 2,935 $71,312 4,331
Issued in Lieu of Cash Distributions 10,137 605 9,614 605
Redeemed* (35,422) (2,173) (40,859) (2,569)
-------------------------------------------------
Net Increase (Decrease) 23,416 1,367 40,067 2,367
- ---------------------------------------------------------------------------------------------------
GROWTH AND INCOME
Investor Shares
Issued $111,325 5,244 $150,458 6,864
Issued in Lieu of Cash Distributions 16,193 748 16,381 804
Redeemed** (162,747) (7,721) (342,208) (15,869)
-------------------------------------------------
Net Increase (Decrease)--Investor Shares (35,229) (1,729) (175,369) (8,201)
-------------------------------------------------
Admiral Shares
Issued 142,140 3,222 227,266 5,042
Issued in Lieu of Cash Distributions 8,137 182 6,429 155
Redeemed** (44,574) (1,012) (77,667) (1,852)
-------------------------------------------------
Net Increase (Decrease)--Admiral Shares 105,703 2,392 156,028 3,345
-------------------------------------------------
Institutional Shares
Issued 9,505 454 65,035 2,752
Issued in Lieu of Cash Distributions 2,724 127 2,082 102
Redeemed** (6,737) (342) (10,211) (494)
-------------------------------------------------
Net Increase (Decrease)--Institutional Shares 5,492 239 56,906 2,360
- ---------------------------------------------------------------------------------------------------
*Net of redemption fees for 2003 and 2002 of $240,000 and $338,000,
respectively.
**Net of redemption fees for 2003 and 2002 of $858,000 and $2,036,000,
respectively (fund totals).
43
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
2003 2002
---------------------- ---------------------
AMOUNT SHARES AMOUNT SHARES
TAX-MANAGED FUND (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION
Investor Shares
Issued $127,228 5,787 $161,791 7,252
Issued in Lieu of Cash Distributions 12,060 481 10,694 551
Redeemed* (172,050) (7,873) (307,425) (13,791)
-------------------------------------------------
Net Increase (Decrease)--Investor Shares (32,762) (1,605) (134,940) (5,988)
-------------------------------------------------
Admiral Shares
Issued 170,008 3,847 260,923 5,607
Issued in Lieu of Cash Distributions 8,391 166 6,265 160
Redeemed* (59,585) (1,342) (80,115) (1,918)
-------------------------------------------------
Net Increase (Decrease)--Admiral Shares 118,814 2,671 187,073 3,849
-------------------------------------------------
Institutional Shares
Issued 1,759 76 16,774 829
Issued in Lieu of Cash Distributions 641 26 564 29
Redeemed* (32,725) (1,454) (2,983) (146)
-------------------------------------------------
Net Increase (Decrease)--Institutional Shares (30,325) (1,352) 14,355 712
- ---------------------------------------------------------------------------------------------------
SMALL-CAP
Investor Shares
Issued $130,229 8,882 $165,515 11,625
Issued in Lieu of Cash Distributions 4,651 267 3,630 287
Redeemed** (46,083) (3,337) (33,739) (2,556)
-------------------------------------------------
Net Increase (Decrease)--Investor Shares 88,797 5,812 135,406 9,356
-------------------------------------------------
Institutional Shares
Issued 21 2 5,208 416
Issued in Lieu of Cash Distributions 80 5 102 8
Redeemed** (24,175) (1,616) (22,548) (1,679)
-------------------------------------------------
Net Increase (Decrease)--Institutional Shares (24,074) (1,609) (17,238) (1,255)
- ---------------------------------------------------------------------------------------------------
INTERNATIONAL
Investor Shares
Issued $122,358 17,126 $123,341 17,238
Issued in Lieu of Cash Distributions 6,899 804 5,637 899
Redeemed+ (76,727) (11,353) (55,232) (8,132)
-------------------------------------------------
Net Increase (Decrease)--Investor Shares 52,530 6,577 73,746 10,005
-------------------------------------------------
Institutional Shares
Issued 33,988 4,247 -- --
Issued in Lieu of Cash Distributions 1,436 167 1,040 166
Redeemed+ -- -- -- --
-------------------------------------------------
Net Increase (Decrease)--Institutional Shares 35,424 4,414 1,040 166
- ---------------------------------------------------------------------------------------------------
*Net of redemption fees for 2003 and 2002 of $796,000 and $1,686,000,
respectively (fund totals).
**Net of redemption fees for 2003 and 2002 of $517,000 and $613,000,
respectively (fund totals).
+Net of redemption fees for 2003 and 2002 of $658,000 and $415,000, respectively
(fund totals).
44
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of Vanguard Tax-Managed Funds:
In our opinion, the statements of net assets appearing in the insert to this
annual report and the accompanying related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Tax-Managed Balanced Fund,
Tax-Managed Growth and Income Fund, Tax-Managed Capital Appreciation Fund,
Tax-Managed Small-Cap Fund, and Tax-Managed International Fund (constituting
Vanguard Tax-Managed Funds, hereafter referred to as the "Funds") at December
31, 2003, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodians, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 9, 2004
45
- --------------------------------------------------------------------------------
SPECIAL 2003 TAX INFORMATION
(UNAUDITED) FOR VANGUARD TAX-MANAGED FUNDS
This information for the fiscal year ended December 31, 2003, is included
pursuant to provisions of the Internal Revenue Code.
The Tax-Managed Balanced Fund designates 77.16% of its income dividends as
exempt-interest dividends.
The Tax-Managed International Fund has elected to pass through to shareholders
the credit for taxes paid in foreign countries. Shareholders receive detailed
information on foreign income and foreign tax per share by country along with
their 2003 Form 1099-DIV.
For corporate shareholders, the following percentages of investment income
(dividend income plus short-term gains, if any) qualifies for the
dividends-received deduction.
- --------------------------------------------------------------------------------
PERCENTAGE
- --------------------------------------------------------------------------------
Tax-Managed Balanced Fund 100%*
Tax-Managed Growth and Income Fund 100
Tax-Managed Capital Appreciation Fund 100
Tax-Managed Small-Cap Fund 98.7
- --------------------------------------------------------------------------------
*The percentage applies only to the taxable ordinary income that has been
reported on Form 1099-DIV.
The funds distributed the maximum amount of qualified dividend income allowable.
The amount of qualified dividend distributed by the funds was provided to
individual shareholders on their 2003 Form 1099-DIV.
- --------------------------------------------------------------------------------
46
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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47
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 sizable
personal 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
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
POSITION(S) HELD WITH
NAME FUND (NUMBER OF
(YEAR OF BIRTH) VANGUARD FUNDS
TRUSTEE/OFFICER OVERSEEN BY
SINCE TRUSTEE/OFFICER) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------
JOHN J. BRENNAN* Chairman of the Chairman of the Board, Chief Executive Officer, and Director/Trustee
(1954) Board, Chief of The Vanguard Group, Inc., and of each of the investment companies
May 1987 Executive Officer, served by The Vanguard Group.
and Trustee
(118)
- ------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
CHARLES D. ELLIS Trustee The Partners of '63 (pro bono ventures in education); Senior Advisor
(1937) (118) to Greenwich Associates (international business strategy consulting);
January 2001 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 Trustee Chairman and Chief Executive Officer (since October 1999), Vice
(1945) (118) Chairman (January-September 1999), and Vice President (prior to
December 2001 September 1999) of Rohm and Haas Co. (chemicals); Director of
Technitrol, Inc. (electronic components), and Agere Systems
(communications components); Board Member of the American Chemistry
Council; and Trustee of Drexel University.
- ------------------------------------------------------------------------------------------------------------
JOANN HEFFERNAN Trustee Vice President, Chief Information Officer, and Member of the
HEISEN (118) Executive Committee of Johnson & Johnson (pharmaceuticals/consumer
(1950) products); Director of the Medical Center at Princeton and Women's
July 1998 Research and Education Institute.
- ------------------------------------------------------------------------------------------------------------
BURTON G. MALKIEL TRUSTEE Chemical Bank Chairman's Professor of Economics,Princeton University;
(1932) (116) Director of Vanguard Investment Series plc (Irish invest-ment fund)
May 1977 (since November 2001), Vanguard Group (Ireland)Limited (Irish
investment management firm)(since November 2001),Prudential Insurance
Co. of America, BKF Capital (investment management), The Jeffrey Co.
(holding company), and NeuVis, Inc.(software company).
- ------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the funds. Among board members' responsibilities are selecting investment
advisors for the funds; monitoring fund operations, performance, and costs;
reviewing contracts; nominating and selecting new trustees/directors; and
electing Vanguard officers.
Each trustee serves a fund until its termination; or until the trustee's
retirement, resignation, or death; or otherwise as specified in the fund's
organizational documents. Any trustee may be removed at a shareholders' meeting
by a vote representing two-thirds of the net asset value of all shares of the
fund together with shares of other Vanguard funds organized within the same
trust. The table on these two pages shows information for each trustee and
executive officer of the fund. The mailing address of the trustees and officers
is P.O. Box 876, Valley Forge, PA 19482.
- --------------------------------------------------------------------------------
POSITION(S) HELD WITH
NAME FUND (NUMBER OF
(YEAR OF BIRTH) VANGUARD FUNDS
TRUSTEE/OFFICER OVERSEEN BY
SINCE TRUSTEE/OFFICER) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------
Alfred M. Rankin, Jr. Trustee Chairman, President, Chief Executive Officer, and Director of NACCO
(1941) (118) Industries, Inc. (forklift trucks/housewares/lignite); Director of
January 1993 Goodrich Corporation (industrial products/aircraft systems and
services); Director of Standard Products Company (supplier for
the automotive industry) until 1998.
- ------------------------------------------------------------------------------------------------------------
J. Lawrence Wilson Trustee Retired Chairman and Chief Executive Officer of Rohm and Haas Co.
(1936) (118) (chemicals); Director of Cummins Inc. (diesel engines), The Mead
April 1985 Corp. (paper products), and AmerisourceBergen Corp. (pharmaceuti-cal
distribution); Trustee of Vanderbilt University.
- ------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS*
R. Gregory Barton Secretary Managing Director and General Counsel of The Vanguard Group, Inc.;
(1951) (118) Secretary of The Vanguard Group and of each of the investment
June 2001 companies served by The Vanguard Group.
- ------------------------------------------------------------------------------------------------------------
Thomas J. Higgins Treasurer Principal of The Vanguard Group, Inc.; Treasurer of each of the
(1957) (118) investment companies served by The Vanguard Group.
July 1998
- ------------------------------------------------------------------------------------------------------------
*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. MICHAEL S. MILLER, Planning and Development.
JAMES H. GATELY, Investment Programs and Services. RALPH K. PACKARD, Finance.
KATHLEEN C. GUBANICH, Human Resources. GEORGE U. SAUTER, Chief Investment Officer.
F. WILLIAM MCNABB, III, Client Relationship Group.
- ------------------------------------------------------------------------------------------------------------
JOHN C. BOGLE, Founder; Chairman and Chief Executive Officer, 1974-1996.
- ------------------------------------------------------------------------------------------------------------
[VANGUARD SHIP LOGO]
THE VANGUARD GROUP(R)
POST OFFICE BOX 2600
VALLEY FORGE, PA 19482-2600
Vanguard, The Vanguard Group, Vanguard.com, Vanguard Tax-Managed Funds, Admiral,
PlainTalk, and the ship logo are trademarks of The Vanguard Group, Inc.
All other marks are the exclusive property of their respective owners.
ABOUT OUR COVER
The photographs that appear on the cover of this report are copyrighted by
Michael Kahn.
FOR MORE INFORMATION
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the appropriate
fund prospectus.
To receive a free copy of the prospectus or the Statement of Additional
Information, or to request additional information about the funds or other
Vanguard funds, please contact us at one of the adjacent telephone numbers or by
e-mail through VANGUARD.COM. Prospectuses may also be viewed online.
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.
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(C) 2004 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
Q870 022004
VANGUARD TAX-MANAGED FUNDS(R)
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, Notes to
Financial Statements, and Report of Independent Auditors, 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 13
Tax-Managed Capital Appreciation Fund 19
Tax-Managed Small-Cap Fund 26
Tax-Managed International Fund 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (48.3%)
- --------------------------------------------------------------------------------
General Electric Co. 216,009 $ 6,692
Pfizer Inc. 179,810 6,353
ExxonMobil Corp. 148,644 6,094
Citigroup, Inc. 117,297 5,694
Microsoft Corp. 190,100 5,235
Intel Corp. 142,200 4,579
* Cisco Systems, Inc. 163,100 3,962
Johnson & Johnson 67,232 3,473
American International Group, Inc. 51,806 3,434
Wal-Mart Stores, Inc. 62,500 3,316
International Business Machines Corp. 32,900 3,049
The Procter & Gamble Co. 28,000 2,797
Bank of America Corp. 30,605 2,462
Altria Group, Inc. 41,300 2,248
The Coca-Cola Co. 43,400 2,203
Wells Fargo & Co. 34,000 2,002
Merck & Co., Inc. 43,100 1,991
* Amgen, Inc. 31,400 1,941
Verizon Communications 54,600 1,915
* Dell Inc. 55,700 1,892
PepsiCo, Inc. 40,300 1,879
* Time Warner, Inc. 101,410 1,824
ChevronTexaco Corp. 20,819 1,799
Viacom Inc. Class B 38,271 1,698
SBC Communications Inc. 63,444 1,654
Home Depot, Inc. 46,300 1,643
Medtronic, Inc. 30,400 1,478
Fannie Mae 19,100 1,434
J.P. Morgan Chase & Co. 37,700 1,385
1
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
Abbott Laboratories 29,600 $ 1,379
Merrill Lynch & Co., Inc. 23,200 1,361
Hewlett-Packard Co. 58,512 1,344
* Oracle Corp. 98,200 1,296
Eli Lilly & Co. 18,100 1,273
Morgan Stanley 21,960 1,271
3M Co. 14,600 1,241
U.S. Bancorp 41,500 1,236
American Express Co. 25,100 1,211
Wachovia Corp. 25,700 1,197
Lowe's Cos., Inc. 19,600 1,086
United Technologies Corp. 11,300 1,071
Texas Instruments, Inc. 34,500 1,014
Wyeth 23,300 989
* Applied Materials, Inc. 43,600 979
Anheuser-Busch Cos., Inc. 18,000 948
Bristol-Myers Squibb Co. 32,900 941
Bank One Corp. 20,164 919
ConocoPhillips Co. 13,476 884
UnitedHealth Group Inc. 15,000 873
* Liberty Media Corp. 72,828 866
BellSouth Corp. 30,500 863
* Comcast Corp. Special Class A 27,492 860
McDonald's Corp. 34,500 857
United Parcel Service, Inc. 11,400 850
The Walt Disney Co. 35,800 835
* Comcast Corp. Class A 25,216 829
QUALCOMM Inc. 15,000 809
* EMC Corp. 61,400 793
E.I. du Pont de Nemours & Co. 16,900 776
Walgreen Co. 20,900 760
* eBay Inc. 11,700 756
Freddie Mac 12,600 735
* Nextel Communications, Inc. 25,200 707
The Goldman Sachs Group, Inc. 7,100 701
Sysco Corp. 18,600 692
* Boston Scientific Corp. 18,600 684
FleetBoston Financial Corp. 15,400 672
Prudential Financial, Inc. 15,900 664
* Yahoo! Inc. 14,600 659
* Cendant Corp. 29,595 659
First Data Corp. 15,968 656
Cardinal Health, Inc. 10,290 629
Washington Mutual, Inc. 15,671 629
* Forest Laboratories, Inc. 10,000 618
Alcoa Inc. 16,188 615
Lehman Brothers Holdings, Inc. 7,964 615
HCA Inc. 14,202 610
Gillette Co. 16,500 606
Illinois Tool Works, Inc. 7,100 596
Clear Channel Communications, Inc. 12,530 587
FedEx Corp. 8,600 580
* Genentech, Inc. 6,200 580
Lockheed Martin Corp. 11,200 576
Newmont Mining Corp. Holding Co. 11,689 568
Dow Chemical Co. 13,500 561
AFLAC Inc. 15,500 561
Guidant Corp. 9,300 560
Fifth Third Bancorp 9,400 556
Waste Management, Inc. 18,301 542
* Zimmer Holdings, Inc. 7,570 533
* AT&T Wireless Services Inc. 66,669 533
State Street Corp. 10,200 531
* Costco Wholesale Corp. 14,200 528
Analog Devices, Inc. 11,534 526
Maxim Integrated Products, Inc. 10,300 513
Progressive Corp. of Ohio 6,100 510
MBNA Corp. 20,400 507
Target Corp. 13,200 507
* Veritas Software Corp. 13,319 495
Kimberly-Clark Corp. 8,372 495
* WellPoint Health Networks Inc. Class A 5,000 485
SLM Corp. 12,700 479
The Gap, Inc. 20,125 467
Harley-Davidson, Inc. 9,700 461
* Agilent Technologies, Inc. 15,763 461
* InterActiveCorp 13,400 455
Colgate-Palmolive Co. 9,000 450
* Sun Microsystems, Inc. 100,300 450
Union Pacific Corp. 6,459 449
The Boeing Co. 10,640 448
Best Buy Co., Inc. 8,550 447
* Corning, Inc. 42,800 446
* Xilinx, Inc. 11,500 445
* Staples, Inc. 16,237 443
* The Kroger Co. 23,800 441
Apache Corp. 5,423 440
* Starbucks Corp. 13,300 440
Devon Energy Corp. 7,623 436
Capital One Financial Corp. 7,100 435
* Bed Bath & Beyond, Inc. 10,000 433
Golden West Financial Corp. 4,200 433
Praxair, Inc. 11,200 428
Countrywide Financial Corp. 5,533 420
General Dynamics Corp. 4,600 416
Caterpillar, Inc. 5,000 415
Travelers Property Casualty Corp. Class A 24,698 414
International Game Technology 11,600 414
Motorola, Inc. 29,206 411
Stryker Corp. 4,800 408
2
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Kohl's Corp. 9,000 $ 404
Allstate Corp. 9,400 404
Charles Schwab Corp. 34,050 403
* PG&E Corp. 14,500 403
* Lucent Technologies, Inc. 141,100 401
Southwest Airlines Co. 24,718 399
* St. Jude Medical, Inc. 6,484 398
Anadarko Petroleum Corp. 7,796 398
Danaher Corp. 4,300 394
Metropolitan Life Insurance Co. 11,700 394
John Hancock Financial Services, Inc. 10,400 390
Burlington Resources, Inc. 7,000 388
* KLA-Tencor Corp. 6,600 387
* Amazon.com, Inc. 7,300 384
Baker Hughes, Inc. 11,940 384
* Xerox Corp. 27,700 382
* Electronic Arts Inc. 8,000 382
* Symantec Corp. 11,000 381
* Anthem, Inc. 5,036 378
* Hughes Electronic Corp. 22,771 377
* Yum! Brands, Inc. 10,800 371
Aetna Inc. 5,469 370
* Intuit, Inc. 6,900 365
Biomet, Inc. 9,925 361
The Principal Financial Group, Inc. 10,900 360
Paychex, Inc. 9,650 359
Avon Products, Inc. 5,300 358
* Lexmark International, Inc. 4,500 354
* Safeway, Inc. 15,934 349
Marriott International, Inc. Class A 7,500 346
Linear Technology Corp. 8,200 345
Marsh & McLennan Cos., Inc. 7,200 345
* Medco Health Solutions, Inc. 10,078 343
* Apollo Group, Inc. Class A 5,000 340
Federated Department Stores, Inc. 7,200 339
Franklin Resources Corp. 6,500 338
Wm. Wrigley Jr. Co. 6,000 337
Adobe Systems, Inc. 8,500 334
Norfolk Southern Corp. 14,100 333
MBIA, Inc. 5,600 332
* Altera Corp. 14,600 331
Bear Stearns Co., Inc. 4,100 328
Honeywell International Inc. 9,800 328
CVS Corp. 9,028 326
Automatic Data Processing, Inc. 8,100 321
* SunGard Data Systems, Inc. 11,400 316
Moody's Corp. 5,200 315
* Broadcom Corp. 9,200 314
* Cox Communications, Inc. Class A 9,100 313
* Fiserv, Inc. 7,925 313
* Micron Technology, Inc. 23,100 311
* Concord EFS, Inc. 20,950 311
Mattel, Inc. 16,080 310
* National Semiconductor Corp. 7,800 307
The Hartford Financial Services Group Inc. 5,200 307
* Genzyme Corp.-General Division 6,200 306
* Apple Computer, Inc. 14,300 306
M & T Bank Corp. 3,100 305
* Gilead Sciences, Inc. 5,200 302
Sovereign Bancorp, Inc. 12,700 302
* Computer Sciences Corp. 6,800 301
* Coach, Inc. 7,900 298
ITT Industries, Inc. 4,000 297
* EchoStar Communications Corp. Class A 8,657 294
* Caremark Rx, Inc. 11,600 294
Microchip Technology, Inc. 8,800 294
General Motors Corp. 5,479 293
* American Standard Cos., Inc. 2,900 292
Starwood Hotels & Resorts Worldwide, Inc. 8,101 291
Centex Corp. 2,700 291
* Edison International 13,200 289
Burlington Northern Santa Fe Corp. 8,938 289
* Phelps Dodge Corp. 3,800 289
* Sanmina-SCI Corp. 22,908 289
NIKE, Inc. Class B 4,200 288
* Quest Diagnostics, Inc. 3,900 285
Mylan Laboratories, Inc. 11,250 284
Cintas Corp. 5,650 283
* Affiliated Computer Services, Inc. Class A 5,200 283
Northrop Grumman Corp. 2,959 283
* Qwest Communications International Inc. 64,651 279
* Novellus Systems, Inc. 6,600 278
Health Management Associates Class A 11,512 276
* Univision Communications Inc. 6,910 274
* Laboratory Corp. of America Holdings 7,400 273
Hilton Hotels Corp. 15,879 272
* Siebel Systems, Inc. 19,610 272
Emerson Electric Co. 4,200 272
Kinder Morgan, Inc. 4,600 272
* Interpublic Group of Cos., Inc. 17,300 270
Harrah's Entertainment, Inc. 5,400 269
Ambac Financial Group, Inc. 3,850 267
Freeport-McMoRan Copper & Gold, Inc.Class B 6,300 265
3
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* PeopleSoft, Inc. 11,600 $ 264
Torchmark Corp. 5,800 264
IMS Health, Inc. 10,576 263
* Office Depot, Inc. 15,700 262
The Clorox Co. 5,400 262
* BJ Services Co. 7,300 262
Schering-Plough Corp. 14,900 259
* Chiron Corp. 4,540 259
EOG Resources, Inc. 5,600 259
* Watson Pharmaceuticals, Inc. 5,600 258
Zions Bancorp 4,200 258
D. R. Horton, Inc. 5,950 257
* Varian Medical Systems, Inc. 3,700 256
* AutoZone Inc. 3,000 256
Legg Mason Inc. 3,300 255
Molex, Inc. 7,266 253
* Network Appliance, Inc. 12,339 253
Dollar General Corp. 12,060 253
AmerisourceBergen Corp. 4,500 253
Smurfit-Stone Container Corp. 13,588 252
* Teradyne, Inc. 9,900 252
XTO Energy, Inc. 8,900 252
* Tenet Healthcare Corp. 15,690 252
* Dean Foods Co. 7,650 251
* Avaya Inc. 19,400 251
* Fox Entertainment Group, Inc.Class A 8,600 251
MGIC Investment Corp. 4,400 251
* Synopsys, Inc. 7,400 250
Coca-Cola Enterprises, Inc. 11,400 249
* Sealed Air Corp. 4,600 249
* QLogic Corp. 4,800 248
* SPX Corp. 4,200 247
* Waters Corp. 7,400 245
Archer-Daniels-Midland Co. 16,121 245
The Bank of New York Co., Inc. 7,400 245
Pulte Homes, Inc. 2,600 243
* Advanced Micro Devices, Inc. 16,300 243
The Pepsi Bottling Group, Inc. 10,000 242
Mellon Financial Corp. 7,500 241
Lennar Corp. Class A 2,500 240
Jones Apparel Group, Inc. 6,800 240
* Express Scripts Inc. 3,600 239
* LAM Research Corp. 7,400 239
Radian Group, Inc. 4,900 239
* Thermo Electron Corp. 9,475 239
* Unisys Corp. 16,000 238
Loews Corp. 4,800 237
* JDS Uniphase Corp. 65,000 237
American Power Conversion Corp. 9,700 237
* Pactiv Corp. 9,900 237
Ford Motor Co. 14,765 236
Manpower Inc. 5,000 235
Sigma-Aldrich Corp. 4,100 234
* The Dun & Bradstreet Corp. 4,600 233
* NVIDIA Corp. 10,000 232
* Jabil Circuit, Inc. 8,200 232
* BEA Systems, Inc. 18,800 231
CenturyTel, Inc. 7,075 231
Republic Services, Inc. Class A 9,000 231
* Cadence Design Systems, Inc. 12,800 230
* Celgene Corp. 5,100 230
* Mercury Interactive Corp. 4,700 229
* AES Corp. 24,100 227
Lear Corp. 3,700 227
* Pioneer Natural Resources Co. 7,100 227
* L-3 Communications Holdings, Inc. 4,400 226
Rouse Co. REIT 4,800 226
* DST Systems, Inc. 5,400 225
* Citizens Communications Co. 18,137 225
Gentex Corp. 5,100 225
* Career Education Corp. 5,600 224
* Smith International, Inc. 5,400 224
* Oxford Health Plans, Inc. 5,100 222
* Host Marriott Corp. REIT 18,000 222
* Whole Foods Market, Inc. 3,300 221
* Solectron Corp. 37,400 221
* IVAX Corp. 9,237 221
Foot Locker, Inc. 9,400 220
* NTL Inc. 3,157 220
Liz Claiborne, Inc. 6,200 220
* Barr Pharmaceuticals Inc. 2,850 219
* MedImmune Inc. 8,624 219
* Mohawk Industries, Inc. 3,100 219
Expeditors International of Washington, Inc. 5,800 218
* Robert Half International, Inc. 9,300 217
The PMI Group Inc. 5,800 216
* Tellabs, Inc. 25,500 215
* 3Com Corp. 26,300 215
Fastenal Co. 4,300 215
* Sprint PCS 38,100 214
Gannett Co., Inc. 2,400 214
Telephone & Data Systems, Inc. 3,400 213
* Williams-Sonoma, Inc. 6,100 212
* Patterson Dental Co. 3,300 212
RadioShack Corp. 6,900 212
* Brinker International, Inc. 6,350 211
* Energizer Holdings, Inc. 5,600 210
Plum Creek Timber Co. Inc. REIT 6,900 210
* NVR, Inc. 450 210
Universal Health Services Class B 3,900 209
* Henry Schein, Inc. 3,100 209
* Level 3 Communications, Inc. 36,700 209
4
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
Hasbro, Inc. 9,825 $ 209
CDW Corp. 3,600 208
DENTSPLY International Inc. 4,600 208
Pogo Producing Co. 4,300 208
* AutoNation, Inc. 11,300 208
* SanDisk Corp. 3,387 207
New York Community Bancorp, Inc. 5,437 207
* Coventry Health Care Inc. 3,200 206
Fluor Corp. 5,200 206
* Health Net Inc. 6,300 206
Outback Steakhouse 4,650 206
* Ceridian Corp. 9,800 205
PETsMART, Inc. 8,600 205
* Constellation Brands, Inc. Class A 6,200 204
* MGM Mirage, Inc. 5,414 204
* Avnet, Inc. 9,400 204
* Park Place Entertainment Corp. 18,800 204
GTECH Holdings Corp. 4,100 203
* Allied Waste Industries, Inc. 14,600 203
* LSI Logic Corp. 22,800 202
* Westwood One, Inc. 5,900 202
* Iron Mountain, Inc. 5,100 202
Intersil Corp. 8,100 201
* Navistar International Corp. 4,200 201
* Biogen Idec Inc 5,460 201
* Patterson-UTI Energy, Inc. 6,100 201
* Convergys Corp. 11,500 201
* UTStarcom, Inc. 5,400 200
Noble Energy, Inc. 4,500 200
* Compuware Corp. 33,100 200
Southern Co. 6,600 200
* Providian Financial Corp. 17,100 199
Michaels Stores, Inc. 4,500 199
NSTAR 4,100 199
Darden Restaurants Inc. 9,450 199
Janus Capital Group Inc. 12,100 199
ENSCO International, Inc. 7,300 198
Rockwell Collins, Inc. 6,600 198
* Dollar Tree Stores, Inc. 6,550 197
Lyondell Chemical Co. 11,600 197
Baxter International, Inc. 6,400 195
Precision Castparts Corp. 4,300 195
* Citrix Systems, Inc. 9,200 195
Leucadia National Corp. 4,200 194
* Apogent Technologies Inc. 8,400 194
Williams Cos., Inc. 19,700 193
BB&T Corp. 5,000 193
* SICOR, Inc. 7,100 193
Medicis Pharmaceutical Corp. 2,700 192
Exelon Corp. 2,900 192
* Toys R Us, Inc. 15,200 192
* Pride International, Inc. 10,300 192
* CarMax, Inc. 6,203 192
* Newfield Exploration Co. 4,300 191
Brunswick Corp. 6,000 191
Tyson Foods, Inc. 14,331 190
Catellus Development Corp. 7,843 189
Reebok International Ltd. 4,800 189
* CIENA Corp. 28,400 189
E.W. Scripps Co. Class A 2,000 188
Mandalay Resort Group 4,200 188
HCC Insurance Holdings, Inc. 5,900 188
* Jacobs Engineering Group Inc. 3,900 187
* Lamar Advertising Co. Class A 5,000 187
* Cooper Cameron Corp. 4,000 186
* Andrx Group 7,753 186
* Entercom Communications Corp. 3,500 185
* NCR Corp. 4,768 185
W.W. Grainger, Inc. 3,900 185
* Cablevision Systems NY Group Class A 7,894 185
* Rite Aid Corp. 30,400 184
* Rowan Cos., Inc. 7,900 183
* Toll Brothers, Inc. 4,600 183
* Storage Technology Corp. 7,100 183
C.H. Robinson Worldwide, Inc. 4,800 182
* BMC Software, Inc. 9,700 181
Certegy, Inc. 5,500 180
McKesson Corp. 5,600 180
Northeast Utilities 8,900 179
IndyMac Bancorp, Inc. REIT 6,000 179
Transatlantic Holdings, Inc. 2,200 178
* Markel Corp. 700 177
* Del Monte Foods Co. 17,000 177
* Weight Watchers International, Inc. 4,600 176
* The Cheesecake Factory 4,000 176
Furniture Brands International Inc. 6,000 176
* Pharmaceutical Resources, Inc. 2,700 176
* Metro-Goldwyn-Mayer Inc. 10,273 176
* J.B. Hunt Transport Services, Inc. 6,500 176
The St. Joe Co. 4,700 175
Peabody Energy Corp. 4,200 175
Total System Services, Inc. 5,600 174
* Lincare Holdings, Inc. 5,800 174
* Ingram Micro, Inc. Class A 10,900 173
* Varco International, Inc. 8,400 173
* Cytec Industries, Inc. 4,500 173
* Big Lots Inc. 12,100 172
* Smithfield Foods, Inc. 8,300 172
* Rent-A-Center, Inc. 5,700 170
* Grant Prideco, Inc. 13,015 169
Reynolds & Reynolds Class A 5,800 168
5
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Saks Inc. 11,200 $ 168
* Stericycle, Inc. 3,600 168
PepsiAmericas, Inc. 9,800 168
Valero Energy Corp. 3,600 167
* Hovnanian Enterprises Inc.Class A 1,900 165
Dominion Resources, Inc. 2,590 165
* Sepracor Inc. 6,900 165
* Barnes & Noble, Inc. 5,000 164
* Westport Resources Corp. 5,500 164
Tootsie Roll Industries, Inc. 4,542 163
* Performance Food Group Co. 4,500 163
* Alleghany Corp. 730 162
Nucor Corp. 2,900 162
* WellChoice Inc. 4,700 162
Georgia Pacific Group 5,272 162
* ADC Telecommunications, Inc. 54,400 162
* CNA Financial Corp. 6,700 161
* Krispy Kreme Doughnuts, Inc. 4,400 161
* National-Oilwell, Inc. 7,200 161
* Abercrombie & Fitch Co. 6,500 161
Packaging Corp. of America 7,300 160
* United Defense Industries Inc. 5,000 159
* FMC Technologies Inc. 6,803 158
Polo Ralph Lauren Corp. 5,500 158
* Arrow Electronics, Inc. 6,800 157
Monsanto Co. 5,454 157
Kerr-McGee Corp. 3,374 157
* BOK Financial Corp. 4,020 156
* Borders Group, Inc. 7,100 156
Herman Miller, Inc. 6,300 153
Becton, Dickinson & Co. 3,700 152
* Endo Pharmaceuticals Holdings, Inc. 7,900 152
* Timberland Co. 2,900 151
CSX Corp. 4,200 151
ALLTEL Corp. 3,230 150
National City Corp. 4,400 149
BlackRock, Inc. 2,800 149
Helmerich & Payne, Inc. 5,300 148
* Scotts Co. 2,500 148
* Eon Labs, Inc. 2,900 148
* Columbia Sportswear Co. 2,700 147
Reinsurance Group of America, Inc. 3,800 147
* American Pharmaceuticals Partners, Inc. 4,350 146
* JetBlue Airways Corp. 5,475 145
Alberto-Culver Co. Class B 2,300 145
* ChoicePoint Inc. 3,800 145
* BISYS Group, Inc. 9,700 144
Wesco Financial Corp. 410 144
Hearst-Argyle Television Inc. 5,200 143
International Paper Co. 3,300 142
* U.S. Cellular Corp. 4,000 142
* Owens-Illinois, Inc. 11,700 139
* Swift Transportation Co., Inc. 6,600 139
ServiceMaster Co. 11,900 139
Eaton Vance Corp. 3,700 136
Northern Trust Corp. 2,900 135
* Key Energy Services, Inc. 13,000 134
Omnicom Group Inc. 1,500 131
Estee Lauder Cos. Class A 3,300 130
Black & Decker Corp. 2,500 123
Kellogg Co. 3,200 122
Investors Financial Services Corp. 3,100 119
* Mettler-Toledo International Inc. 2,800 118
General Mills, Inc. 2,400 109
Federated Investors, Inc. 3,700 109
Martin Marietta Materials, Inc. 2,300 108
Duke Energy Corp. 5,000 102
Sara Lee Corp. 4,700 102
* Millipore Corp. 2,300 99
SunTrust Banks, Inc. 1,300 93
AT&T Corp. 4,531 92
Sprint Corp. 5,600 92
* BearingPoint, Inc. 9,000 91
* Interactive Data Corp. 5,400 89
Sabre Holdings Corp. 4,140 89
R.J. Reynolds Tobacco Holdings, Inc. 1,501 87
* The MONY Group Inc. 2,700 84
* Maxtor Corp. 7,500 83
* DeVry, Inc. 3,200 80
News Corp. Ltd. Pfd. ADR 2,546 77
* Triad Hospitals, Inc. 2,300 76
* AGCO Corp. 3,700 74
NiSource, Inc. 3,377 74
* PanAmSat Corp. 3,404 73
* Polycom, Inc. 3,600 70
Computer Associates International, Inc. 2,362 65
Amerada Hess Corp. 1,200 64
* Vishay Intertechnology, Inc. 2,600 60
* Amkor Technology, Inc. 3,220 59
* First Health Group Corp. 3,000 58
Beckman Coulter, Inc. 1,100 56
* Tech Data Corp. 1,300 52
ProLogis REIT 1,565 50
Travelers Property Casualty Corp.Class B 2,879 49
SCANA Corp. 1,400 48
* Valassis Communications, Inc. 1,400 41
Belo Corp. Class A 1,400 40
6
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
BALANCED FUND SHARES (000)
- --------------------------------------------------------------------------------
* Brocade Communications Systems, Inc. 6,800 $ 39
Limited Brands, Inc. 2,138 39
* Instinet Group Inc. 6,800 35
Autodesk, Inc. 1,400 34
* King Pharmaceuticals, Inc. 2,200 34
ConAgra Foods, Inc. 1,200 32
Lennar Corp. Class B 340 31
Nordstrom, Inc. 900 31
Nationwide Financial Services, Inc. 900 30
Albertson's, Inc. 1,300 29
Newell Rubbermaid, Inc. 1,218 28
Cinergy Corp. 700 27
Electronic Data Systems Corp. 1,100 27
FirstEnergy Corp. 700 25
* Alliant Techsystems, Inc. 400 23
LaBranche & Co. Inc. 1,900 22
PNC Financial Services Group 400 22
St. Paul Cos., Inc. 400 16
Xcel Energy, Inc. 900 15
TXU Corp. 600 14
First Tennessee National Corp. 300 13
Delphi Corp. 1,235 13
* Monster Worldwide Inc. 400 9
Diamond Offshore Drilling, Inc. 400 8
* Dynegy, Inc. 1,900 8
* Pixar, Inc. 100 7
StanCorp Financial Group, Inc. 100 6
El Paso Corp. 600 5
Winn-Dixie Stores, Inc. 400 4
Trizec Properties, Inc. REIT 200 3
* Agere Systems Inc. Class B 277 1
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $164,313) 240,780
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (51.1%)
- --------------------------------------------------------------------------------
ALASKA (0.4%)
Matanuska-Susitna Borough AK GO
5.50%, 3/1/2012 (3) 1,695 $ 1,958
ARIZONA (2.2%)
Arizona Transp. Board Highway Rev.
5.25%, 7/1/2017 2,215 2,446
5.25%, 7/1/2020 1,965 2,135
Phoenix AZ Civic Improvement Corp. Water System Rev.
5.50%, 7/1/2015 (3) 5,525 6,267
-------------
$ 10,848
-------------
CALIFORNIA (2.8%)
California GO
6.40%, 2/1/2006 (1) 500 549
6.00%, 2/1/2016 2,000 2,297
California Health Fac. Finance Auth. Rev.
(Catholic Healthcare West)
6.25%, 7/1/2006 (1) 395 439
California Public Works Board Lease Rev.
(Dept. of Corrections)
5.00%, 9/1/2011 (2) 1,535 1,673
California State Dept. Water Resources
Power Supply Rev.
5.50%, 5/1/2015 (2) 3,000 3,401
Central Coast California Water Auth. Rev.
6.00%, 10/1/2008 (2) 1,000 1,129
Clovis CA USD GO
0.00%, 8/1/2005 (3) (ETM) 2,000 1,957
Los Angeles CA USD GO
6.00%, 7/1/2008 (3) 1,000 1,162
San Bernardino County CA Medical Center COP
5.50%, 8/1/2005 (1) 500 533
South Orange County CA Public Finance Auth. Rev.
7.00%, 9/1/2006 (1) 875 997
-------------
$ 14,137
-------------
COLORADO (0.6%)
Colorado Springs CO Util. System Rev.
5.375%, 11/15/2013 2,775 3,128
CONNECTICUT (1.8%)
Connecticut GO
5.00%, 8/1/2009 (4) 3,000 3,370
Connecticut Special Tax Obligation Rev.
(Transp. Infrastructure)
5.00%, 9/1/2009 (4) 5,000 5,621
-------------
$ 8,991
-------------
DISTRICT OF COLUMBIA (1.3%)
District of Columbia GO
5.50%, 6/1/2004 (4) (ETM) 260 265
5.50%, 6/1/2004 (4) 740 754
6.75%, 6/1/2005 (1) 5 5
5.50%, 6/1/2007 (4) 1,490 1,656
5.40%, 6/1/2012 (2) 455 507
District of Columbia Univ. Rev.
(George Washington Univ.)
6.00%, 9/15/2011 (1) 3,000 3,489
-------------
$ 6,676
-------------
7
- --------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
FLORIDA (2.0%)
Florida Division Board Financial Dept. of
General Services Systems Rev.
(Dept. of Environmental Protection)
5.00%, 7/1/2009 (1) 3,000 3,360
Florida Board of Educ. Public Educ.
5.00%, 6/1/2008 3,675 4,088
Florida Turnpike Auth. Rev.
5.25%, 7/1/2009 (3) 485 543
5.25%, 7/1/2010 (3) 825 924
Tampa FL Health System Rev. (Catholic Healthcare East)
5.00%, 11/15/2009 (1) 1,000 1,115
-------------
$ 10,030
-------------
GEORGIA (1.5%)
Atlanta GA Airport Fac. Rev.
5.75%, 1/1/2013 (3) 3,370 3,837
Georgia Muni. Electric Power Auth. Rev.
6.25%, 1/1/2012 (1) 3,000 3,618
-------------
$ 7,455
-------------
HAWAII (0.4%)
Hawaii GO
5.875%, 10/1/2010 (1) (Prere.) 1,870 2,213
ILLINOIS (1.8%)
Chicago IL (City Colleges Improvement) GO
0.00%, 1/1/2012 (3) 2,380 1,750
Illinois GO
5.25%, 8/1/2012 (1) 3,700 4,217
Illinois Sales Tax Rev.
0.00%, 12/15/2016 (2) 5,000 2,809
-------------
$ 8,776
-------------
KANSAS (0.3%)
Kansas Dept. of Transp. Highway Rev. VRDO
1.16%, 1/2/2004 1,430 1,430
LOUISIANA (0.6%)
Louisiana GO
5.50%, 5/15/2015 (3) 2,665 3,001
MARYLAND (0.9%)
Prince Georges County GO
5.00%, 10/1/2008 3,805 4,259
MASSACHUSETTS (3.8%)
Chelsea MA GO
5.50%, 6/15/2011 (2) 740 836
5.50%, 6/15/2012 (2) 735 829
Massachusetts Go
5.00%, 8/1/2007 3,000 3,290
Massachusetts Bay Transp. Auth. Rev.
6.25%, 3/1/2005 1,000 1,058
5.125%, 3/1/2013 1,695 1,868
Massachusetts Dev. Finance Agency Rev.
(Smith College) Vrdo
1.18%, 1/7/2004 1,000 1,000
Massachusetts Health & Educ. Fac. Auth. Rev.
(Caritas Christi Obligated Group)
6.50%, 7/1/2012 1,880 1,955
Massachusetts Health & Educ. Fac. Auth. Rev.
(Harvard Univ.) VRDO
0.95%, 1/7/2004 1,300 1,300
Massachusetts Health & Educ. Fac. Auth. Rev.
(Northeastern Univ.)
5.00%, 10/1/2017 (1) 1,000 1,072
Massachusetts Water Pollution Abatement Trust
6.00%, 8/1/2010 1,780 2,073
Massachusetts Water Resources Auth. Rev.
5.75%, 8/1/2004 (1) (Prere.) 300 313
5.25%, 8/1/2017 (4) 3,000 3,407
-------------
$ 19,001
-------------
MICHIGAN (1.7%)
Dickinson County MI Memorial Hosp. System Rev.
7.625%, 11/1/2004 (Prere.) 130 138
Michigan Building Auth. Rev.
5.30%, 10/1/2007 (2) (Prere.) 1,250 1,420
5.125%, 10/15/2008 3,015 3,390
Michigan Muni. Bond Auth. Rev.
(Clean Water Revolving Fund)
5.875%, 10/1/2010 (Prere.) 2,110 2,516
Univ. of Michigan Hosp. Rev. VRDO
1.12%, 1/7/2004 1,000 1,000
-------------
$ 8,464
-------------
MISSISSIPPI (1.1%)
Mississippi GO
5.50%, 12/1/2018 2,750 3,200
5.50%, 12/1/2019 2,000 2,325
-------------
$ 5,525
-------------
MISSOURI (1.6%)
Missouri Health & Educ. Fac. Auth. (Washington Univ.)
6.00%, 3/1/2010 4,000 4,738
8
- --------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
Missouri Health & Educ. Fac. Auth. Health Fac. Rev.
(St. Luke's Episcopal - Presbyterian Hosp.)
5.50%, 12/1/2015 (4) 2,965 $ 3,308
-------------
$ 8,046
-------------
NEBRASKA (0.1%)
Nebraska Public Power Dist. Rev.
5.25%, 1/1/2010 (1) 125 139
5.25%, 1/1/2011 (1) 225 250
-------------
$ 389
-------------
NEVADA (0.5%)
Clark County NV Airport Improvement Rev.
5.00%, 7/1/2005 (1) 1,705 1,795
Clark County NV School Dist. GO
5.90%, 6/15/2006 (3) (Prere.) 750 834
-------------
$ 2,629
-------------
NEW JERSEY (3.0%)
New Jersey GO
5.00%, 7/15/2009 3,000 3,354
New Jersey Econ. Dev. Auth. Market Transition Fac. Rev.
5.70%, 7/1/2004 (1) (Prere.) 400 417
New Jersey Transp. Corp. COP
5.50%, 9/15/2011 (2) 3,000 3,439
New Jersey Transp. Trust Fund Auth. Rev.
6.00%, 6/15/2005 (2) 2,500 2,666
6.00%, 6/15/2008 250 284
6.00%, 12/15/2011 (1) (Prere.) 625 752
6.00%, 12/15/2011 (1) (Prere.) 1,440 1,732
5.00%, 6/15/2014 1,555 1,691
6.00%, 12/15/2014 (1) 330 390
-------------
$ 14,725
-------------
NEW YORK (6.3%)
Erie County NY GO
6.125%, 1/15/2011 (3) 610 723
Hempstead NY GO
5.625%, 2/1/2006 (3) (Prere.) 155 171
5.625%, 2/1/2011 (3) 685 750
Huntington NY GO
6.70%, 2/1/2010 (3) 375 453
Long Island NY Power Auth. Electric System Rev.
5.50%, 12/1/2009 (2) 2,000 2,294
5.50%, 12/1/2012 (4) (ETM) 2,000 2,343
Metro. New York Transp. Auth. Rev. (Commuter Fac.)
6.00%, 7/1/2006 (1) (ETM) 1,000 1,108
Metro. New York Transp. Auth. Rev.
(Dedicated Petroleum Tax)
6.125%, 4/1/2010 (3) (Prere.) 2,110 2,512
New York City NY GO
7.10%, 8/15/2004 (Prere.) 500 524
6.375%, 8/15/2005 (Prere.) 340 371
6.375%, 8/15/2009 300 324
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO
1.30%, 1/2/2004 (3) 3,250 3,250
New York City NY Transitional Finance Auth. Rev.
5.875%, 11/1/2012 3,305 3,835
5.375%, 2/1/2013 2,000 2,268
New York City NY Transitional Finance Auth. Rev. VRDO
1.28%, 1/2/2004 1,500 1,500
New York State Dormitory Auth. Rev. (State Univ.)
5.375%, 5/15/2007 (2) 400 444
New York State Dormitory Auth. Rev.
(Vassar Brothers Hosp.)
5.10%, 7/1/2010 (4) 1,500 1,643
New York State Environmental Fac. Corp. PCR
(State Water Recovery Fund)
6.35%, 6/15/2004 (Prere.) 295 307
6.35%, 6/15/2006 225 233
New York State Thruway Auth. Rev. (Service Contract)
5.40%, 4/1/2004 (1) (Prere.) 400 412
5.50%, 4/1/2014 4,000 4,505
Suffolk County NY GO
5.00%, 4/1/2007 (3) 1,120 1,228
-------------
$ 31,198
-------------
NORTH CAROLINA (0.5%)
North Carolina Eastern Muni. Power Agency Rev.
5.125%, 1/1/2014 2,400 2,548
OHIO (3.6%)
Butler County OH Transp. Improvement Dist. Rev.
6.00%, 4/1/2012 (4) 2,250 2,602
Cleveland OH Airport System Rev. VRDO
1.25%, 1/7/2004 (4) 3,300 3,300
Cleveland OH Public Power System Rev.
7.00%, 11/15/2004 (1) (Prere.) 2,750 2,947
9
- --------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
Hamilton County OH Hosp. Fac. Rev.
(Health Alliance of Greater Cincinnati) VRDO
1.07%, 1/7/2004 (1) 1,040 $ 1,040
1.12%, 1/7/2004 (1) 960 960
Lorain County OH Hosp. Fac. Rev.
(Catholic Healthcare Partners)
6.00%, 9/1/2004 (1) 1,080 1,115
5.625%, 9/1/2013 (1) 1,775 2,004
OH Infrastructure Improvements
5.50%, 2/1/2019 2,000 2,313
Ohio Higher Educ. Fac. Comm. Rev.
(Case Western Reserve Univ.) VRDO
1.30%, 1/2/2004 800 800
Ohio Housing Finance Agency Mortgage Rev.
5.025%, 3/1/2021 290 291
Ohio Water Dev. Auth. Rev.
6.00%, 12/1/2004 (2) (Prere.) 315 319
6.00%, 12/1/2008 (2) (Prere.) 75 76
Ohio Water Dev. Auth. Rev. (Pure Water)
5.75%, 12/1/2005 (1) 105 106
-------------
$ 17,873
-------------
OREGON (0.6%)
Oregon State Dept. Administrative Services
5.75%, 4/1/2014 (4) 2,400 2,748
PENNSYLVANIA (3.0%)
Montgomery County PA IDA PCR (PECO Energy) PUT
5.20%, 10/1/2004 2,000 2,045
Pennsylvania Convention Center Auth. Rev.
6.70%, 9/1/2014 (1) 500 528
Pennsylvania GO
5.00%, 7/1/2009 (3) 5,000 5,611
Pennsylvania Turnpike Comm. Oil Franchise Tax Rev.
5.25%, 12/1/2009 (2) 195 219
5.25%, 12/1/2009 (2) (ETM) 420 474
5.25%, 12/1/2011 (2) 145 163
5.25%, 12/1/2011 (2) (ETM) 310 349
Philadelphia PA Airport Parking Auth.
5.75%, 9/1/2008 (2) 1,150 1,311
Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev.
(Children's Hosp. of Philadelphia) VRDO
1.30%, 1/2/2004 1,100 1,100
Philadelphia PA School Dist. GO
6.25%, 9/1/2005 (2) 870 938
Philadelphia PA Water & Waste Water Rev.
6.25%, 8/1/2009 (1) 1,000 1,183
Pittsburgh PA GO
5.20%, 3/1/2010 (3) 580 610
Pittsburgh PA Water & Sewer Auth. Rev.
5.60%, 9/1/2005 (3) (Prere.) 235 252
-------------
$ 14,783
-------------
PUERTO RICO (0.6%)
Puerto Rico Public Buildings Auth. Govt. Fac. Rev.
5.25%, 7/1/2014 (3) 2,425 2,793
SOUTH DAKOTA (0.2%)
South Dakota Building Auth. Lease Rev.
5.25%, 12/1/2010 (2) 1,000 1,109
TENNESSEE (1.0%)
Memphis Tennessee Electric System Revenue
5.00%, 12/1/2010 (1) 2,300 2,587
Metro. Govt. of Nashville & Davidson County
TN Water & Sewer Rev.
6.50%, 1/1/2009 (3) 2,000 2,365
-------------
$ 4,952
-------------
TEXAS (4.7%)
Austin TX Combined Util. System Rev.
5.60%, 5/15/2005 (1) (Prere.) 1,205 1,276
Austin TX Water & Wastewater System Rev.
5.75%, 5/15/2011 (1) 2,200 2,527
Brazos River TX Harbor Navigation Dist.
Brazoria County Environmental
(Dow Chemical Co. Project) PUT
5.20%, 5/15/2008 800 856
Carrollton TX Independent School Dist. GO
6.00%, 2/15/2009 (Prere.) 2,925 3,410
Dallas TX Civic Center Refunding & Improvement Rev.
4.60%, 8/15/2009 (1) 110 120
4.70%, 8/15/2010 (1) 815 882
10
- --------------------------------------------------------------------------------
FACE MARKET
TAX-MANAGED AMOUNT VALUE*
BALANCED FUND (000) (000)
- --------------------------------------------------------------------------------
Harris County TX Health Fac.
Dev. Corp. Rev. (St. Luke's
Episcopal Hosp.) VRDO
1.30%, 1/2/2004 2,650 $ 2,650
Harris County TX Health Fac. Dev.
Corp. Rev. (Young Men's
Christian Assoc. of Greater Houston) VRDO
1.30%, 1/2/2004 LOC 700 700
Houston TX Water & Sewer System Rev.
0.00%, 12/1/2008 (2) 2,750 2,401
Lubbock TX Health Fac. Dev. Corp.
Rev. (St. Joseph's Health System)
5.00%, 7/1/2008 (4) 1,645 1,818
Northwest Texas Independent
School Dist. GO
0.00%, 8/15/2004 2,205 2,189
San Antonio TX Electric & Gas Rev.
5.125%, 2/1/2009 1,000 1,120
San Antonio TX Water Rev.
6.50%, 5/15/2004 (1) (Prere.) 15 15
6.50%, 5/15/2010 (1) (ETM) 75 89
Texas Muni. Power Agency Rev.
0.00%, 9/1/2010 (2) (ETM) 160 129
University Houston TX Univ Rev.
5.25%, 2/15/2009 (4) 3,000 3,380
-------------
$ 23,562
-------------
UTAH (0.1%)
Intermountain Power Agency
Utah Power Supply Rev.
5.20%, 7/1/2006 (ETM) 400 409
Salt Lake City UT Building Auth. Lease Rev.
5.90%, 10/1/2004 (1) (Prere.) 260 272
-------------
$ 681
-------------
VIRGINIA (0.9%)
Henrico County VA Water & Sewer Rev.
5.25%, 5/1/2011 1,485 1,660
Virginia Commonwealth Transp.
Board Federal Highway Rev.
5.00%, 10/1/2009 2,000 2,250
Virginia Transp. Board Rev.
6.00%, 5/15/2004 (Prere.) 500 514
-------------
$ 4,424
-------------
WASHINGTON (0.6%)
King County WA Library System GO
6.05%, 12/1/2006 (Prere.) 1,000 1,123
Seattle WA Muni. Light & Power Rev.
6.25%, 7/1/2004 (Prere.) 700 732
Washington GO
6.00%, 6/1/2012 1,000 1,188
-------------
$ 3,043
-------------
WISCONSIN (0.6%)
Wisconsin GO
5.75%, 5/1/2011 (Prere.) 1,340 1,575
5.75%, 5/1/2012 (Prere.) 1,355 1,565
-------------
$ 3,140
-------------
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $240,028) $ 254,535
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.4%)
(Cost $404,341) $ 495,315
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
- --------------------------------------------------------------------------------
Other Assets--Note B 4,078
Liabilities (1,110)
-------------
$ 2,968
-------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------
Applicable to 28,112,294 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 498,283
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 17.72
================================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
- --------------------------------------------------------------------------------
AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------
Paid-in Capital $445,150 $ 15.83
Overdistributed Net
Investment Income (847) (.03)
Accumulated Net Realized Losses (36,994) (1.32)
Unrealized Appreciation 90,974 3.24
- --------------------------------------------------------------------------------
NET ASSETS $498,283 $ 17.72
================================================================================
See Note C in Notes to Financial Statements for the tax-basis components of net
assets..
11
KEY TO ABBREVIATIONS
ADR--American Depositary Receipt.
BAN--Bond Anticipation Note.
COP--Certificate of Participation.
CP--Commercial Paper.
FR--Floating Rate.
GAN--Grant Anticipation Note.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
IDR--Industrial Development Revenue Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
RAN--Revenue Anticipation Note.
REIT--Real Estate Investment Trust.
TAN--Tax Anticipation Note.
TOB--Tender Option Bond.
TRAN--Tax Revenue Anticipation Note.
UFSD--Union Free School District.
USD--United School District.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
SCHEDULED PRINCIPAL AND INTEREST PAYMENTS ARE GUARANTEED BY:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (AMBAC Indemnity Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
(5) BIGI (Bond Investors Guaranty Insurance).
(6) Connie Lee Inc.
(7) FHA (Federal Housing Authority).
(8) CapMAC (Capital Markets Assurance Corporation).
(9) American Capital Access Financial Guaranty Corporation.
(10) XL Capital Assurance Inc.
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.
12
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- --------------------------------------------------------------------------------
General Electric Co. 2,260,816 $ 70,040
Microsoft Corp. 2,434,568 67,048
ExxonMobil Corp. 1,488,194 61,016
Pfizer Inc. 1,718,387 60,711
Citigroup, Inc. 1,161,510 56,380
Wal-Mart Stores, Inc. 974,386 51,691
Intel Corp. 1,470,736 47,358
American International Group, Inc. 587,163 38,917
* Cisco Systems, Inc. 1,554,402 37,756
International Business Machines Corp. 387,436 35,908
Johnson & Johnson 668,392 34,529
The Procter & Gamble Co. 291,868 29,152
The Coca-Cola Co. 551,926 28,010
Bank of America Corp. 334,601 26,912
Altria Group, Inc. 457,379 24,891
Merck & Co., Inc. 500,958 23,144
Wells Fargo & Co. 381,004 22,437
Verizon Communications 621,764 21,811
ChevronTexaco Corp. 240,675 20,792
* Dell Inc. 576,500 19,578
SBC Communications Inc. 745,470 19,434
United Parcel Service, Inc. 253,100 18,869
* Time Warner, Inc. 1,018,214 18,318
Home Depot, Inc. 512,329 18,183
PepsiCo, Inc. 386,580 18,022
* Amgen, Inc. 290,404 17,947
Eli Lilly & Co. 252,796 17,779
Viacom Inc. Class B 390,175 17,316
J.P. Morgan Chase & Co. 459,490 16,877
Fannie Mae 218,732 16,418
Abbott Laboratories 352,094 16,408
Hewlett-Packard Co. 686,681 15,773
* Oracle Corp. 1,176,972 15,536
3M Co. 176,690 15,024
* Comcast Corp. Class A 449,630 14,779
Morgan Stanley 243,878 14,113
American Express Co. 289,619 13,968
Wachovia Corp. 298,030 13,885
Medtronic, Inc. 272,936 13,267
U.S. Bancorp 434,354 12,935
Wyeth 299,836 12,728
Bristol-Myers Squibb Co. 436,676 12,489
Merrill Lynch & Co., Inc. 212,884 12,486
Tyco International Ltd. 450,162 11,929
BellSouth Corp. 416,172 11,778
Bank One Corp. 251,754 11,477
Texas Instruments, Inc. 389,769 11,451
The Walt Disney Co. 460,596 10,746
The Goldman Sachs Group, Inc. 106,600 10,525
FleetBoston Financial Corp. 237,477 10,366
E.I. du Pont de Nemours & Co. 224,433 10,299
ConocoPhillips Co. 153,293 10,051
United Technologies Corp. 105,989 10,045
Lowe's Cos., Inc. 177,012 9,805
QUALCOMM Inc. 180,200 9,718
Anheuser-Busch Cos., Inc. 183,428 9,663
* eBay Inc. 145,500 9,398
Freddie Mac 156,660 9,136
Dow Chemical Co. 207,296 8,617
* Applied Materials, Inc. 374,600 8,410
Walgreen Co. 230,860 8,399
Gillette Co. 227,816 8,368
Washington Mutual, Inc. 202,570 8,127
The Boeing Co. 189,483 7,985
Target Corp. 205,228 7,881
UnitedHealth Group Inc. 132,156 7,689
Fifth Third Bancorp 128,054 7,568
Alcoa Inc. 194,856 7,405
Motorola, Inc. 524,273 7,377
Schlumberger Ltd. 131,910 7,218
MBNA Corp. 287,692 7,149
McDonald's Corp. 285,830 7,097
* EMC Corp. 541,250 6,993
* Nextel Communications, Inc. 247,600 6,948
Allstate Corp. 158,280 6,809
* Boston Scientific Corp. 184,364 6,777
General Motors Corp. 126,202 6,739
First Data Corp. 163,976 6,738
Kimberly-Clark Corp. 113,644 6,715
* Yahoo! Inc. 148,000 6,685
Ford Motor Co. 412,211 6,595
Clear Channel Communications, Inc. 138,657 6,493
Caterpillar, Inc. 78,190 6,491
Honeywell International Inc. 193,928 6,483
Emerson Electric Co. 94,732 6,134
Colgate-Palmolive Co. 121,012 6,057
Cardinal Health, Inc. 97,468 5,961
Illinois Tool Works, Inc. 69,438 5,827
The Bank of New York Co., Inc. 174,100 5,766
Metropolitan Life Insurance Co. 171,200 5,764
Schering-Plough Corp. 330,985 5,756
Marsh & McLennan Cos., Inc. 119,312 5,714
Carnival Corp. 141,800 5,634
Gannett Co., Inc. 61,104 5,448
Sysco Corp. 145,616 5,421
Automatic Data Processing, Inc. 133,736 5,297
Lockheed Martin Corp. 101,476 5,216
* Forest Laboratories, Inc. 82,300 5,086
13
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
* Cendant Corp. 228,097 $ 5,080
Prudential Financial, Inc. 121,600 5,079
Southern Co. 164,812 4,986
Exelon Corp. 73,593 4,884
* AT&T Wireless Services Inc. 611,009 4,882
HCA Inc. 111,486 4,789
BB&T Corp. 122,996 4,753
Newmont Mining Corp. Holding Co. 97,309 4,730
Lehman Brothers Holdings, Inc. 61,063 4,715
The Gap, Inc. 201,585 4,679
Dominion Resources, Inc. 73,033 4,662
International Paper Co. 108,132 4,662
National City Corp. 136,760 4,642
FedEx Corp. 67,184 4,535
SunTrust Banks, Inc. 63,352 4,530
Guidant Corp. 70,000 4,214
Baxter International, Inc. 137,388 4,193
Duke Energy Corp. 204,206 4,176
AFLAC Inc. 115,400 4,175
Progressive Corp. of Ohio 48,600 4,062
NIKE, Inc. Class B 59,112 4,047
General Dynamics Corp. 44,532 4,025
Union Pacific Corp. 57,500 3,995
Northrop Grumman Corp. 41,249 3,943
State Street Corp. 75,200 3,916
Waste Management, Inc. 131,051 3,879
Sara Lee Corp. 177,872 3,862
Travelers Property Casualty Corp. Class B 226,226 3,839
* Costco Wholesale Corp. 103,152 3,835
* Zimmer Holdings, Inc. 54,397 3,830
SLM Corp. 101,400 3,821
Stryker Corp. 44,900 3,817
Best Buy Co., Inc. 72,850 3,806
General Mills, Inc. 83,982 3,804
Analog Devices, Inc. 82,700 3,775
The Hartford Financial Services Group Inc. 63,702 3,760
Omnicom Group Inc. 42,800 3,738
Maxim Integrated Products, Inc. 74,000 3,685
Occidental Petroleum Corp. 86,645 3,660
Tribune Co. 70,291 3,627
Charles Schwab Corp. 305,275 3,614
AT&T Corp. 177,698 3,607
Avon Products, Inc. 53,284 3,596
* Veritas Software Corp. 96,189 3,574
Computer Associates International, Inc. 130,300 3,562
Golden West Financial Corp. 34,254 3,535
Deere & Co. 53,979 3,511
Kellogg Co. 91,936 3,501
* Kohl's Corp. 76,500 3,438
PNC Financial Services Group 62,401 3,415
Sprint Corp. (PCS Group) 203,444 3,341
* WellPoint Health Networks Inc. Class A 34,200 3,317
* Sun Microsystems, Inc. 735,684 3,303
ALLTEL Corp. 70,236 3,272
Harley-Davidson, Inc. 68,200 3,242
CVS Corp. 88,924 3,212
* Electronic Arts Inc. 67,000 3,201
ConAgra Foods, Inc. 120,792 3,188
Capital One Financial Corp. 51,900 3,181
Danaher Corp. 34,600 3,175
Weyerhaeuser Co. 49,469 3,166
Paychex, Inc. 84,775 3,154
Countrywide Financial Corp. 41,466 3,145
* Agilent Technologies, Inc. 107,001 3,129
* Corning, Inc. 299,439 3,123
Mellon Financial Corp. 96,756 3,107
* The Kroger Co. 167,676 3,104
* Staples, Inc. 111,300 3,038
The McGraw-Hill Cos., Inc. 43,076 3,012
Devon Energy Corp. 52,303 2,995
* Xilinx, Inc. 77,100 2,987
Apache Corp. 36,475 2,958
Linear Technology Corp. 70,300 2,958
Entergy Corp. 51,486 2,941
Franklin Resources Corp. 56,500 2,941
* Starbucks Corp. 88,000 2,909
* Bed Bath & Beyond, Inc. 66,600 2,887
H.J. Heinz Co. 79,188 2,885
Anadarko Petroleum Corp. 56,509 2,883
* Univision Communications Inc. 72,487 2,877
The Chubb Corp. 42,209 2,874
Southwest Airlines Co. 177,132 2,859
Masco Corp. 104,268 2,858
Wm. Wrigley Jr. Co. 50,594 2,844
Raytheon Co. 93,719 2,815
Praxair, Inc. 73,120 2,793
International Game Technology 77,900 2,781
KeyCorp 94,348 2,766
American Electric Power Co., Inc. 88,837 2,710
* Biogen Idec Inc. 73,625 2,708
FPL Group, Inc. 41,349 2,705
* Apollo Group, Inc. Class A 39,700 2,700
Burlington Northern Santa Fe Corp. 83,427 2,699
Air Products & Chemicals, Inc. 51,080 2,699
* Lucent Technologies, Inc. 943,310 2,679
Electronic Data Systems Corp. 108,100 2,653
14
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
Ingersoll-Rand Co. 38,990 $ 2,647
FirstEnergy Corp. 74,161 2,610
ACE Ltd. 62,800 2,601
Sears, Roebuck & Co. 57,099 2,597
* PG&E Corp. 93,258 2,590
Equity Office Properties Trust REIT 89,900 2,576
* KLA-Tencor Corp. 43,800 2,570
Halliburton Co. 98,578 2,563
TJX Cos., Inc. 113,208 2,496
Progress Energy, Inc. 55,111 2,494
* Genzyme Corp.-General Division 50,400 2,487
Burlington Resources, Inc. 44,717 2,476
Campbell Soup Co. 92,312 2,474
* Xerox Corp. 177,930 2,455
PPG Industries, Inc. 38,325 2,454
SouthTrust Corp. 74,700 2,445
John Hancock Financial Services, Inc. 65,100 2,441
Baker Hughes, Inc. 75,291 2,421
Marriott International, Inc. Class A 52,068 2,406
* Chiron Corp. 42,200 2,405
* Symantec Corp. 69,400 2,405
The Principal Financial Group, Inc. 72,700 2,404
XL Capital Ltd. Class A 30,900 2,396
* St. Jude Medical, Inc. 38,792 2,380
Johnson Controls, Inc. 20,376 2,366
* Intuit, Inc. 44,600 2,360
Becton, Dickinson & Co. 57,092 2,349
Fortune Brands, Inc. 32,788 2,344
* Anthem, Inc. 31,110 2,333
* Broadcom Corp. 68,200 2,325
Aetna Inc. 34,359 2,322
Public Service Enterprise Group, Inc. 52,935 2,319
Marathon Oil Corp. 69,878 2,312
The Clorox Co. 47,514 2,307
Northern Trust Corp. 49,488 2,297
* Yum! Brands, Inc. 66,250 2,279
* Lexmark International, Inc. 28,900 2,273
Hershey Foods Corp. 29,298 2,256
Allergan, Inc. 29,336 2,253
Coca-Cola Enterprises, Inc. 102,400 2,239
PACCAR, Inc. 26,240 2,234
H & R Block, Inc. 40,100 2,220
Comerica, Inc. 39,453 2,212
Archer-Daniels-Midland Co. 145,214 2,210
* Safeway, Inc. 99,606 2,182
Consolidated Edison Inc. 50,700 2,181
Unocal Corp. 58,323 2,148
Rohm & Haas Co. 50,157 2,142
Pitney Bowes, Inc. 52,480 2,132
McKesson Corp. 65,469 2,105
Limited Brands, Inc. 116,094 2,093
Biomet, Inc. 57,415 2,090
Norfolk Southern Corp. 87,819 2,077
Adobe Systems, Inc. 52,600 2,067
* Medco Health Solutions, Inc. 60,801 2,067
Loews Corp. 41,700 2,062
St. Paul Cos., Inc. 51,366 2,037
Moody's Corp. 33,480 2,027
Simon Property Group, Inc. REIT 43,100 1,997
Synovus Financial Corp. 67,900 1,964
Marshall & Ilsley Corp. 51,000 1,951
AmSouth Bancorp 79,063 1,937
* Altera Corp. 85,036 1,930
Cintas Corp. 38,382 1,924
* PeopleSoft, Inc. 84,200 1,920
MBIA, Inc. 32,400 1,919
Federated Department Stores, Inc. 40,600 1,913
May Department Stores Co. 64,920 1,887
Albertson's, Inc. 82,474 1,868
* Computer Sciences Corp. 42,144 1,864
Mattel, Inc. 96,520 1,860
Regions Financial Corp. 49,900 1,856
* Micron Technology, Inc. 137,446 1,851
Eaton Corp. 17,059 1,842
Equity Residential REIT 61,900 1,827
CIGNA Corp. 31,538 1,813
Dover Corp. 45,480 1,808
* SunGard Data Systems, Inc. 64,600 1,790
* Comcast Corp. Special Class A 57,192 1,789
Bear Stearns Co., Inc. 22,001 1,759
Georgia Pacific Group 57,084 1,751
Textron, Inc. 30,604 1,746
PPL Corp. 39,880 1,745
* Apple Computer, Inc. 81,500 1,742
Charter One Financial, Inc. 50,102 1,731
TXU Corp. 72,944 1,730
* Transocean Inc. 71,900 1,726
CSX Corp. 48,014 1,726
* Fiserv, Inc. 43,550 1,721
* Qwest Communications International Inc. 397,876 1,719
* Quest Diagnostics, Inc. 23,400 1,711
* AutoZone Inc. 20,000 1,704
Monsanto Co. 58,820 1,693
Aon Corp. 70,650 1,691
Ameren Corp. 36,605 1,684
* Tenet Healthcare Corp. 104,699 1,680
Freeport-McMoRan
Copper & Gold, Inc. Class B 39,800 1,677
Ambac Financial Group, Inc. 24,100 1,672
15
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
* American Standard Cos., Inc. 16,400 $ 1,651
Eastman Kodak Co. 64,328 1,651
* National Semiconductor Corp. 41,651 1,641
Kinder Morgan, Inc. 27,700 1,637
Starwood Hotels & Resorts Worldwide, Inc. 45,500 1,637
J.C. Penney Co., Inc. (Holding Co.) 61,506 1,616
Jefferson-Pilot Corp. 31,843 1,613
Lincoln National Corp. 39,942 1,612
* Edison International 73,228 1,606
New York Times Co. Class A 33,430 1,598
* Network Appliance, Inc. 77,500 1,591
Dollar General Corp. 75,762 1,590
Parker Hannifin Corp. 26,673 1,587
Ecolab, Inc. 57,960 1,586
Cinergy Corp. 40,006 1,553
* Concord EFS, Inc. 104,400 1,549
* Siebel Systems, Inc. 111,700 1,549
ITT Industries, Inc. 20,801 1,544
* Phelps Dodge Corp. 20,156 1,534
Sempra Energy 50,884 1,530
Xcel Energy, Inc. 89,636 1,522
Centex Corp. 14,016 1,509
Cincinnati Financial Corp. 36,000 1,508
Molex, Inc. 42,825 1,494
Rockwell Automation, Inc. 41,853 1,490
DTE Energy Co. 37,802 1,489
Tiffany & Co. 32,900 1,487
Constellation Energy Group, Inc. 37,598 1,472
* Sanmina-SCI Corp. 116,000 1,463
Hilton Hotels Corp. 85,267 1,461
* Interpublic Group of Cos., Inc. 93,354 1,456
* Novellus Systems, Inc. 34,300 1,442
The Pepsi Bottling Group, Inc. 59,100 1,429
* MedImmune Inc. 55,800 1,417
AmerisourceBergen Corp. 25,100 1,409
Newell Rubbermaid, Inc. 61,773 1,407
Family Dollar Stores, Inc. 38,800 1,392
Knight Ridder 17,970 1,390
Avery Dennison Corp. 24,784 1,388
North Fork Bancorp, Inc. 34,100 1,380
* Nabors Industries, Inc. 33,100 1,374
MeadWestvaco Corp. 45,079 1,341
UST, Inc. 37,399 1,335
IMS Health, Inc. 53,646 1,334
T. Rowe Price Group Inc. 28,100 1,332
Union Planters Corp. 42,250 1,330
* AES Corp. 140,200 1,323
KeySpan Corp. 35,800 1,317
Pulte Homes, Inc. 14,021 1,313
* Sprint PCS 232,072 1,304
ProLogis REIT 40,600 1,303
Genuine Parts Co. 39,037 1,296
NiSource, Inc. 59,059 1,296
Health Management Associates Inc. Class A 53,900 1,294
Delphi Corp. 125,873 1,285
Brown-Forman Corp. Class B 13,722 1,282
* BJ Services Co. 35,600 1,278
* Jabil Circuit, Inc. 45,000 1,274
MGIC Investment Corp. 22,100 1,258
Plum Creek Timber Co. Inc. REIT 41,100 1,252
First Tennessee National Corp. 28,300 1,248
Zions Bancorp 20,200 1,239
Harrah's Entertainment, Inc. 24,849 1,237
SAFECO Corp. 31,120 1,212
Cooper Industries, Inc. Class A 20,895 1,210
* Avaya Inc. 93,359 1,208
EOG Resources, Inc. 26,000 1,200
Rockwell Collins, Inc. 39,753 1,194
* JDS Uniphase Corp. 322,875 1,179
* Office Depot, Inc. 70,400 1,176
* Express Scripts Inc. 17,700 1,176
* Advanced Micro Devices, Inc. 78,500 1,170
Huntington Bancshares Inc. 51,410 1,157
Torchmark Corp. 25,398 1,157
Williams Cos., Inc. 116,100 1,140
Sherwin-Williams Co. 32,794 1,139
Whirlpool Corp. 15,653 1,137
* AutoNation, Inc. 61,700 1,133
RadioShack Corp. 36,764 1,128
El Paso Corp. 136,800 1,120
* Watson Pharmaceuticals, Inc. 24,200 1,113
* Solectron Corp. 187,600 1,109
R.J. Reynolds Tobacco Holdings, Inc. 19,000 1,105
* Unisys Corp. 74,181 1,102
American Power Conversion Corp. 44,800 1,095
* QLogic Corp. 21,200 1,094
* Teradyne, Inc. 42,900 1,092
Vulcan Materials Co. 22,800 1,085
* Noble Corp. 30,100 1,077
Amerada Hess Corp. 20,117 1,070
Nordstrom, Inc. 31,048 1,065
CenturyTel, Inc. 32,500 1,060
Kerr-McGee Corp. 22,679 1,054
VF Corp. 24,242 1,048
UnumProvident Corp. 66,462 1,048
* Sealed Air Corp. 19,236 1,041
Wendy's International, Inc. 25,751 1,010
Jones Apparel Group, Inc. 28,400 1,001
Nucor Corp. 17,597 985
* Mercury Interactive Corp. 20,200 983
16
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
W.W. Grainger, Inc. 20,546 $ 974
Applera Corp.-Applied Biosystems Group 46,900 971
* BMC Software, Inc. 51,085 953
C.R. Bard, Inc. 11,677 949
McCormick & Co., Inc. 31,200 939
Scientific-Atlanta, Inc. 34,156 932
Leggett & Platt, Inc. 42,900 928
* Thermo Electron Corp. 36,500 920
Dow Jones & Co., Inc. 18,240 909
* Waters Corp. 27,300 905
* Allied Waste Industries, Inc. 65,000 902
* Robert Half International, Inc. 38,600 901
Sunoco, Inc. 17,345 887
Sigma-Aldrich Corp. 15,500 886
Janus Capital Group Inc. 53,900 885
* Novell, Inc. 83,502 878
Symbol Technologies, Inc. 51,550 871
Liz Claiborne, Inc. 24,538 870
SuperValu Inc. 30,292 866
Black & Decker Corp. 17,386 858
* Pactiv Corp. 35,377 846
Engelhard Corp. 28,190 844
* NVIDIA Corp. 36,200 842
Alberto-Culver Co. Class B 13,286 838
Hasbro, Inc. 39,325 837
* King Pharmaceuticals, Inc. 54,266 828
* NCR Corp. 21,280 826
* Humana Inc. 36,000 823
Pinnacle West Capital Corp. 20,500 820
United States Steel Corp. 23,300 816
* Citizens Communications Co. 63,800 792
* Tellabs, Inc. 93,800 791
Goodrich Corp. 26,454 785
* Citrix Systems, Inc. 37,000 785
* PMC Sierra Inc. 38,700 780
Darden Restaurants Inc. 36,911 777
R.R. Donnelley & Sons Co. 25,541 770
Equifax, Inc. 31,200 764
KB HOME 10,511 762
* Comverse Technology, Inc. 43,200 760
* Providian Financial Corp. 65,228 759
Temple-Inland Inc. 12,100 758
Pall Corp. 28,195 757
* LSI Logic Corp. 85,174 756
Ball Corp. 12,602 751
* Navistar International Corp. 15,456 740
Fluor Corp. 18,580 737
International Flavors & Fragrances, Inc. 21,082 736
Apartment Investment &
Management Co. Class A REIT 21,200 731
Federated Investors, Inc. 24,500 719
* CIENA Corp. 105,849 703
Sabre Holdings Corp. 32,231 696
Eastman Chemical Co. 17,482 691
Manor Care, Inc. 19,913 688
The Stanley Works 18,106 686
Ashland, Inc. 15,506 683
CenterPoint Energy Inc. 68,187 661
Brunswick Corp. 20,626 657
Boise Cascade Corp. 19,530 642
Dana Corp. 33,593 616
Autodesk, Inc. 24,820 610
Bausch & Lomb, Inc. 11,702 607
TECO Energy, Inc. 42,100 607
Tektronix, Inc. 19,052 602
* Toys R Us, Inc. 47,591 602
Bemis Co., Inc. 11,975 599
* Convergys Corp. 32,200 562
Meredith Corp. 11,296 551
* Monster Worldwide Inc. 25,100 551
* ADC Telecommunications, Inc. 181,500 539
* Compuware Corp. 86,400 522
Reebok International Ltd. 13,091 515
Maytag Corp. 17,664 492
Ryder System, Inc. 14,364 491
PerkinElmer, Inc. 28,580 488
* Rowan Cos., Inc. 20,886 484
Circuit City Stores, Inc. 47,000 476
Deluxe Corp. 11,482 475
* Millipore Corp. 10,994 473
Cummins Inc. 9,541 467
Adolph Coors Co. Class B 8,228 462
* Calpine Corp. 92,561 445
Snap-On Inc. 13,067 421
* Louisiana-Pacific Corp. 23,500 420
Crane Co. 13,254 407
* Applied Micro Circuits Corp. 68,100 407
* Andrew Corp. 34,700 399
* Big Lots Inc. 26,052 370
* Allegheny Energy, Inc. 28,800 368
* Dynegy, Inc. 83,600 358
Cooper Tire & Rubber Co. 16,685 357
Peoples Energy Corp. 8,319 350
Worthington Industries, Inc. 19,302 348
NICOR Inc. 9,880 336
* Gateway, Inc. 71,800 330
Delta Air Lines, Inc. 27,400 324
* American Greetings Corp. Class A 14,747 323
Great Lakes Chemical Corp. 11,543 314
Winn-Dixie Stores, Inc. 31,508 314
* CMS Energy Corp. 36,100 308
Dillard's Inc. 18,686 308
17
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
GROWTH AND INCOME FUND SHARES (000)
- --------------------------------------------------------------------------------
* The Goodyear Tire & Rubber Co. 38,616 $ 304
Visteon Corp. 29,095 303
Thomas & Betts Corp. 13,228 303
* Hercules, Inc. 24,717 302
Allegheny Technologies Inc. 18,000 238
* Parametric Technology Corp. 58,600 231
Tupperware Corp. 12,817 222
* Power-One, Inc. 19,000 206
Viacom Inc.Class A 3,800 168
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,816,301) $ 2,315,103
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.4%)
- --------------------------------------------------------------------------------
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
0.98%, 1/2/2004 $7,799 7,799
0.99%, 1/2/2004--Note E 315 315
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $8,114) $ 8,114
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $1,824,415) $ 2,323,217
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
- --------------------------------------------------------------------------------
Other Assets--Note B 4,196
Liabilities--Note E (13,401)
-------------
$ (9,205)
-------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 2,314,012
================================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
REIT--Real Estate Investment Trust.
- --------------------------------------------------------------------------------
AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $ 2,253,982
Overdistributed Net Investment Income (2,327)
Accumulated Net Realized Losses (436,445)
Unrealized Appreciation 498,802
- --------------------------------------------------------------------------------
NET ASSETS $ 2,314,012
================================================================================
Investor Shares---Net Assets
Applicable to 54,495,842 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 1,320,703
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INVESTOR SHARES $ 24.23
================================================================================
Admiral Shares--Net Assets
Applicable to 15,595,656 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 776,719
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- ADMIRAL SHARES $ 49.80
================================================================================
Institutional Shares--Net Assets
Applicable to 8,936,704 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $216,590
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $ 24.24
================================================================================
See Note C in Notes to Financial Statements for the tax-basis components of net
assets.
18
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.1%)
- --------------------------------------------------------------------------------
General Electric Co. 2,371,134 $ 73,458
Pfizer Inc. 1,991,460 70,358
ExxonMobil Corp. 1,571,734 64,441
Citigroup, Inc. 1,282,844 62,269
Microsoft Corp. 2,096,400 57,735
Intel Corp. 1,611,700 51,897
* Cisco Systems, Inc. 1,814,300 44,069
American International Group, Inc. 596,831 39,558
Johnson & Johnson 744,298 38,450
Wal-Mart Stores, Inc. 686,900 36,440
International Business Machines Corp. 363,300 33,671
The Procter & Gamble Co. 283,800 28,346
Bank of America Corp. 334,575 26,910
Altria Group, Inc. 449,500 24,462
The Coca-Cola Co. 454,400 23,061
Merck & Co., Inc. 485,100 22,412
PepsiCo, Inc. 461,400 21,510
* Amgen, Inc. 345,875 21,375
Wells Fargo & Co. 355,590 20,941
* Dell Inc. 611,200 20,756
Verizon Communications 583,142 20,457
ChevronTexaco Corp. 219,819 18,990
Viacom Inc. Class B 407,230 18,073
SBC Communications Inc. 669,620 17,457
Home Depot, Inc. 468,300 16,620
* Time Warner, Inc. 917,447 16,505
American Express Co. 316,800 15,279
Medtronic, Inc. 314,000 15,264
Merrill Lynch & Co., Inc. 257,200 15,085
Fannie Mae 198,500 14,899
J.P. Morgan Chase & Co. 399,800 14,685
Abbott Laboratories 310,400 14,465
* Oracle Corp. 1,075,048 14,191
Hewlett-Packard Co. 596,658 13,705
Morgan Stanley 235,000 13,599
Eli Lilly & Co. 186,400 13,110
3M Co. 148,200 12,601
Lowe's Cos., Inc. 216,800 12,009
Wachovia Corp. 256,200 11,936
United Technologies Corp. 125,100 11,856
U.S. Bancorp 392,700 11,695
Wyeth 255,800 10,859
* Applied Materials, Inc. 483,500 10,855
Walgreen Co. 287,400 10,456
The Walt Disney Co. 427,509 9,974
QUALCOMM Inc. 183,100 9,875
Bristol-Myers Squibb Co. 342,000 9,781
* Comcast Corp. Class A 297,357 9,774
UnitedHealth Group Inc. 165,200 9,611
McDonald's Corp. 379,700 9,428
Bank One Corp. 205,059 9,349
* Liberty Media Corp. 785,458 9,339
Alcoa Inc. 242,128 9,201
First Data Corp. 221,224 9,090
Texas Instruments, Inc. 308,600 9,067
BellSouth Corp. 316,600 8,960
* Comcast Corp. Special Class A 282,232 8,828
United Parcel Service, Inc. 117,200 8,737
* EMC Corp. 671,600 8,677
ConocoPhillips Co. 130,974 8,588
The Goldman Sachs Group, Inc. 85,500 8,441
* eBay Inc. 129,510 8,365
Freddie Mac 139,800 8,153
Anheuser-Busch Cos., Inc. 151,400 7,976
* Nextel Communications, Inc. 279,390 7,840
* Boston Scientific Corp. 208,500 7,664
E.I. du Pont de Nemours & Co. 165,600 7,599
FleetBoston Financial Corp. 171,700 7,495
The Boeing Co. 177,770 7,491
Prudential Financial, Inc. 177,500 7,414
* Cendant Corp. 331,925 7,392
* Yahoo! Inc. 162,500 7,340
Cardinal Health, Inc. 115,112 7,040
Lehman Brothers Holdings, Inc. 90,469 6,986
* Forest Laboratories, Inc. 111,600 6,897
Sysco Corp. 181,700 6,765
HCA Inc. 155,821 6,694
Illinois Tool Works, Inc. 78,600 6,595
FedEx Corp. 94,800 6,399
Guidant Corp. 106,100 6,387
Washington Mutual, Inc. 157,111 6,303
AFLAC Inc. 173,700 6,284
* Genentech, Inc. 66,850 6,255
Newmont Mining Corp.Holding Co. 128,256 6,235
Target Corp. 161,500 6,202
Waste Management, Inc. 204,297 6,047
State Street Corp. 115,700 6,026
Lockheed Martin Corp. 116,800 6,004
MBNA Corp. 241,500 6,001
* AT&T Wireless Services Inc. 749,010 5,985
Analog Devices, Inc. 128,166 5,851
* Costco Wholesale Corp. 156,100 5,804
Gillette Co. 156,716 5,756
Maxim Integrated Products, Inc. 115,500 5,752
Progressive Corp. of Ohio 68,500 5,726
* Zimmer Holdings, Inc. 79,770 5,616
* Veritas Software Corp. 149,400 5,552
Dow Chemical Co. 133,100 5,533
19
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
The Gap, Inc. 237,687 $ 5,517
SLM Corp. 141,700 5,339
Avon Products, Inc. 79,000 5,332
Schering-Plough Corp. 306,300 5,327
* Agilent Technologies, Inc. 179,925 5,261
* WellPoint Health Networks Inc. Class A 54,072 5,244
* Sun Microsystems, Inc. 1,160,700 5,212
Kimberly-Clark Corp. 87,496 5,170
* The Kroger Co. 276,600 5,120
* Corning, Inc. 484,400 5,052
Harley-Davidson, Inc. 106,200 5,048
Capital One Financial Corp. 81,700 5,007
Linear Technology Corp. 118,800 4,998
Best Buy Co., Inc. 95,100 4,968
* Staples, Inc. 181,830 4,964
Apache Corp. 61,131 4,958
* Starbucks Corp. 149,852 4,954
* Xilinx, Inc. 127,800 4,951
* InterActiveCorp 145,860 4,949
Golden West Financial Corp. 47,500 4,902
Devon Energy Corp. 84,111 4,816
Countrywide Financial Corp. 63,466 4,814
Paychex, Inc. 128,680 4,787
International Game Technology 133,000 4,748
Stryker Corp. 55,300 4,701
* Bed Bath & Beyond, Inc. 106,400 4,612
Emerson Electric Co. 71,200 4,610
* PG&E Corp. 165,400 4,593
Praxair, Inc. 118,200 4,515
Travelers Property Casualty Corp. Class A 269,068 4,515
Southwest Airlines Co. 279,087 4,504
Charles Schwab Corp. 380,100 4,500
* Kohl's Corp. 100,100 4,498
Fifth Third Bancorp 75,800 4,480
* Lucent Technologies, Inc. 1,576,754 4,478
* KLA-Tencor Corp. 76,100 4,465
* Amazon.com, Inc. 82,900 4,364
NIKE, Inc. Class B 63,600 4,354
* St. Jude Medical, Inc. 70,716 4,338
Metropolitan Life Insurance Co. 128,400 4,323
* Electronic Arts Inc. 90,200 4,310
Danaher Corp. 46,900 4,303
John Hancock Financial Services, Inc. 114,400 4,290
Burlington Resources, Inc. 76,500 4,237
Motorola, Inc. 300,546 4,229
* Yum! Brands, Inc. 122,680 4,220
* Xerox Corp. 305,400 4,215
* Symantec Corp. 120,400 4,172
Anadarko Petroleum Corp. 81,408 4,153
Aetna Inc. 61,397 4,149
Clear Channel Communications, Inc. 88,336 4,137
* Hughes Electronic Corp. 249,502 4,129
Biomet, Inc. 113,075 4,117
* Lexmark International, Inc. 50,800 3,995
* Medco Health Solutions, Inc. 116,321 3,954
Colgate-Palmolive Co. 78,900 3,949
Federated Department Stores, Inc. 83,300 3,926
Franklin Resources Corp. 74,700 3,889
Automatic Data Processing, Inc. 98,100 3,886
* Anthem, Inc. 51,755 3,882
Adobe Systems, Inc. 98,700 3,879
* Genzyme Corp.-General Division 78,200 3,858
* Altera Corp. 168,976 3,836
* Safeway, Inc. 174,984 3,834
* Apollo Group, Inc. Class A 56,184 3,821
* Intuit, Inc. 71,300 3,772
The Principal Financial Group, Inc. 113,500 3,753
Caterpillar, Inc. 44,000 3,653
* SunGard Data Systems, Inc. 131,400 3,641
Allstate Corp. 84,600 3,639
Norfolk Southern Corp. 152,500 3,607
Marriott International, Inc. Class A 77,100 3,562
* Apple Computer, Inc. 166,300 3,554
Moody's Corp. 58,400 3,536
General Dynamics Corp. 39,100 3,534
* Broadcom Corp. 103,100 3,515
* National Semiconductor Corp. 88,000 3,468
* Fiserv, Inc. 87,650 3,463
Northrop Grumman Corp. 36,134 3,454
Sovereign Bancorp, Inc. 145,000 3,444
Bear Stearns Co., Inc. 43,000 3,438
Starwood Hotels & Resorts Worldwide, Inc. 95,524 3,436
Mattel, Inc. 178,032 3,431
* Coach, Inc. 90,600 3,420
Microchip Technology, Inc. 101,800 3,396
* EchoStar Communications Corp. Class A 99,500 3,383
Marsh & McLennan Cos., Inc. 70,600 3,381
* Sanmina-SCI Corp. 267,046 3,367
ITT Industries, Inc. 45,000 3,339
M & T Bank Corp. 33,900 3,332
Mylan Laboratories, Inc. 131,837 3,330
Becton, Dickinson & Co. 80,600 3,316
* American Standard Cos., Inc. 32,900 3,313
* Cox Communications, Inc. Class A 95,800 3,300
20
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
* Caremark Rx, Inc. 130,200 $ 3,298
Centex Corp. 30,600 3,294
* Novellus Systems, Inc. 78,100 3,284
Wm. Wrigley Jr. Co. 58,200 3,271
* Edison International 148,300 3,252
* Concord EFS, Inc. 219,100 3,251
* Phelps Dodge Corp. 42,600 3,241
Cintas Corp. 64,600 3,238
* Tenet Healthcare Corp. 199,805 3,207
CSX Corp. 89,000 3,199
* Univision Communications Inc. 79,595 3,159
Kinder Morgan, Inc. 53,100 3,138
Harrah's Entertainment, Inc. 63,000 3,136
* Micron Technology, Inc. 231,000 3,112
Ambac Financial Group, Inc. 44,650 3,098
Health Management Associates Class A 128,468 3,083
* Qwest Communications International Inc. 713,479 3,082
Plum Creek Timber Co. Inc. REIT 100,900 3,072
Freeport-McMoRan Copper & Gold, Inc. Class B 72,900 3,071
* Chiron Corp. 52,840 3,011
* Watson Pharmaceuticals, Inc. 65,100 2,995
General Motors Corp. 55,882 2,984
* Network Appliance, Inc. 144,463 2,966
* Interpublic Group of Cos., Inc. 189,100 2,950
* Biogen Idec Inc 80,040 2,944
D. R. Horton, Inc. 67,950 2,940
* Affiliated Computer Services, Inc. Class A 53,900 2,935
* Quest Diagnostics, Inc. 40,100 2,932
EOG Resources, Inc. 63,400 2,927
Zions Bancorp 47,600 2,919
* Avaya Inc. 225,000 2,912
The Hartford Financial Services Group Inc. 49,200 2,904
* Teradyne, Inc. 113,700 2,894
XTO Energy, Inc. 101,800 2,881
Legg Mason Inc. 37,300 2,879
* Advanced Micro Devices, Inc. 192,700 2,871
* PeopleSoft, Inc. 125,900 2,871
Honeywell International Inc. 85,700 2,865
* Synopsys, Inc. 84,854 2,865
* Office Depot, Inc. 170,300 2,846
* SPX Corp. 48,300 2,841
Molex, Inc. 81,356 2,839
* AutoZone Inc. 33,300 2,837
Ford Motor Co. 177,313 2,837
Hilton Hotels Corp. 164,950 2,826
Coca-Cola Enterprises, Inc. 129,100 2,823
Valero Energy Corp. 60,900 2,822
* Cadence Design Systems, Inc. 156,900 2,821
* Jabil Circuit, Inc. 99,400 2,813
Pulte Homes, Inc. 29,900 2,799
AmerisourceBergen Corp. 49,800 2,796
Radian Group, Inc. 57,320 2,794
* LAM Research Corp. 86,408 2,791
American Power Conversion Corp. 114,100 2,790
* Sprint PCS 496,200 2,789
* AES Corp. 295,100 2,786
* Waters Corp. 83,300 2,762
* Thermo Electron Corp. 109,534 2,760
Gannett Co., Inc. 30,900 2,755
* BJ Services Co. 76,700 2,754
* QLogic Corp. 53,000 2,735
Jones Apparel Group, Inc. 77,600 2,734
* Solectron Corp. 461,200 2,726
* Siebel Systems, Inc. 196,000 2,719
Sigma-Aldrich Corp. 47,500 2,716
Rockwell Collins, Inc. 90,400 2,715
Lear Corp. 44,200 2,711
MGIC Investment Corp. 47,600 2,710
* Pactiv Corp. 113,400 2,710
RadioShack Corp. 88,300 2,709
Dollar General Corp. 128,687 2,701
Manpower Inc. 56,900 2,679
* Celgene Corp. 59,400 2,674
* Pioneer Natural Resources Co. 83,600 2,669
Torchmark Corp. 58,600 2,669
* The Dun & Bradstreet Corp. 52,600 2,667
Baker Hughes, Inc. 82,480 2,653
* NCR Corp. 68,337 2,651
Smurfit-Stone Container Corp. 142,765 2,651
Republic Services, Inc. Class A 103,300 2,648
* Fox Entertainment Group, Inc. Class A 90,700 2,644
CenturyTel, Inc. 81,000 2,642
* Smith International, Inc. 63,300 2,628
* Varian Medical Systems, Inc. 38,000 2,626
Gentex Corp. 59,426 2,624
* Oxford Health Plans, Inc. 60,300 2,623
Lennar Corp. Class A 27,300 2,621
* Host Marriott Corp. REIT 212,043 2,612
* Dean Foods Co. 79,200 2,603
Foot Locker, Inc. 110,900 2,601
* Express Scripts Inc. 39,100 2,597
* Robert Half International, Inc. 111,000 2,591
Rouse Co. REIT 55,100 2,590
* NTL Inc. 36,996 2,580
* Sealed Air Corp. 47,636 2,579
* AdvancePCS 48,524 2,555
* Barr Pharmaceuticals Inc. 33,150 2,551
21
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
SCANA Corp. 74,200 $ 2,541
* Mohawk Industries, Inc. 35,900 2,532
* DST Systems, Inc. 60,600 2,531
The PMI Group Inc. 67,800 2,524
* Patterson Dental Co. 39,315 2,522
CDW Corp. 43,600 2,518
Liz Claiborne, Inc. 70,900 2,514
Fluor Corp. 63,400 2,513
* Park Place Entertainment Corp. 230,600 2,497
Beckman Coulter, Inc. 49,000 2,491
MBIA, Inc. 42,000 2,488
The Pepsi Bottling Group, Inc. 102,800 2,486
* IVAX Corp. 103,975 2,483
Fastenal Co. 49,700 2,482
Janus Capital Group Inc. 150,500 2,470
* Williams-Sonoma, Inc. 71,000 2,469
Expeditors International of Washington, Inc. 65,500 2,467
DENTSPLY International Inc. 54,600 2,466
New York Community Bancorp, Inc. 64,800 2,466
* Coventry Health Care Inc. 38,200 2,464
* AutoNation, Inc. 134,000 2,462
The Bank of New York Co., Inc. 74,200 2,457
* Mercury Interactive Corp. 50,500 2,456
* Energizer Holdings, Inc. 65,328 2,454
* Constellation Brands, Inc. Class A 74,400 2,450
Black & Decker Corp. 49,600 2,446
PETsMART, Inc. 102,700 2,444
* Whole Foods Market, Inc. 36,400 2,444
Outback Steakhouse 55,250 2,443
* Citizens Communications Co. 195,702 2,431
* 3Com Corp. 296,575 2,423
ENSCO International, Inc. 89,000 2,418
* NVIDIA Corp. 103,800 2,413
Alberto-Culver Co. Class B 38,200 2,410
* Allied Waste Industries, Inc. 173,300 2,405
* SanDisk Corp. 39,200 2,397
* Providian Financial Corp. 205,900 2,397
Michaels Stores, Inc. 54,000 2,387
CVS Corp. 66,022 2,385
* Henry Schein, Inc. 35,100 2,372
* L-3 Communications Holdings, Inc. 46,100 2,368
Universal Health Services Class B 43,900 2,358
Darden Restaurants Inc. 111,850 2,353
* Avnet, Inc. 108,600 2,352
Noble Energy, Inc. 52,900 2,350
* Rite Aid Corp. 387,400 2,340
* King Pharmaceuticals, Inc. 153,000 2,335
* Navistar International Corp. 48,700 2,332
* Career Education Corp. 58,200 2,332
GTECH Holdings Corp. 47,100 2,331
* MGM Mirage, Inc. 61,732 2,322
Investors Financial Services Corp. 60,100 2,308
Telephone & Data Systems, Inc. 36,900 2,308
Precision Castparts Corp. 50,700 2,302
* Computer Sciences Corp. 51,900 2,296
* Apogent Technologies Inc. 99,600 2,295
* AmeriCredit Corp. 144,000 2,294
Lyondell Chemical Co. 135,200 2,292
Tyson Foods, Inc. 173,045 2,291
* Jacobs Engineering Group Inc. 47,700 2,290
Medicis Pharmaceutical Corp. 32,100 2,289
Leucadia National Corp. 49,400 2,277
* Brinker International, Inc. 68,500 2,271
* SICOR, Inc. 83,300 2,266
Autodesk, Inc. 91,794 2,256
* CarMax, Inc. 72,879 2,254
* Health Net Inc. 68,800 2,250
* Cablevision Systems NY Group Class A 96,144 2,249
Mandalay Resort Group 50,100 2,240
* NVR, Inc. 4,800 2,237
Catellus Development Corp. 92,708 2,236
NSTAR 46,000 2,231
* Juniper Networks, Inc. 119,000 2,223
Ryland Group, Inc. 25,000 2,216
* Dollar Tree Stores, Inc. 73,650 2,214
* Saks Inc. 146,500 2,203
* Tech Data Corp. 55,510 2,203
* Borders Group, Inc. 100,400 2,201
* Iron Mountain, Inc. 55,600 2,198
Pogo Producing Co. 45,400 2,193
* Patterson-UTI Energy, Inc. 66,600 2,192
* Newfield Exploration Co. 49,100 2,187
Transatlantic Holdings, Inc. 27,050 2,186
Reebok International Ltd. 55,500 2,182
Union Pacific Corp. 31,253 2,171
Federated Investors, Inc. 73,950 2,171
* Convergys Corp. 124,200 2,169
C.H. Robinson Worldwide, Inc. 57,200 2,168
* Reliant Resources, Inc. 294,400 2,167
Northeast Utilities 107,400 2,166
* Westwood One, Inc. 63,300 2,165
* MedImmune Inc. 84,000 2,134
Estee Lauder Cos. Class A 54,300 2,132
Intersil Corp. 85,600 2,127
* UTStarcom, Inc. 57,325 2,125
* Arrow Electronics, Inc. 91,500 2,117
* Foundry Networks, Inc. 76,900 2,104
* Toll Brothers, Inc. 52,900 2,103
Peabody Energy Corp. 50,400 2,102
22
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
* Pharmaceutical Resources, Inc. 32,200 $ 2,098
* Toys R Us, Inc. 165,900 2,097
* XM Satellite Radio Holdings, Inc. 79,100 2,085
Herman Miller, Inc. 85,800 2,082
* Level 3 Communications, Inc. 362,819 2,068
* Unisys Corp. 139,000 2,064
Packaging Corp. of America 94,400 2,064
* Markel Corp. 8,100 2,053
The St. Joe Co. 55,000 2,051
* Lamar Advertising Co. Class A 54,886 2,048
* J.B. Hunt Transport Services, Inc. 75,600 2,042
* The MONY Group Inc. 65,000 2,034
PepsiAmericas, Inc. 118,100 2,022
* American Axle & Manufacturing Holdings, Inc. 49,900 2,017
* Comverse Technology, Inc. 114,400 2,012
* Rowan Cos., Inc. 86,800 2,011
Amerada Hess Corp. 37,800 2,010
* Andrx Group 83,377 2,004
Total System Services, Inc. 64,350 2,003
* Hovnanian Enterprises Inc. Class A 23,000 2,002
* ICOS Corp. 48,500 2,002
ALLTEL Corp. 42,953 2,001
* Millipore Corp. 46,200 1,989
Polo Ralph Lauren Corp. 68,700 1,979
* CIENA Corp. 296,704 1,970
FirstEnergy Corp. 55,900 1,968
* The Cheesecake Factory 44,600 1,964
Certegy, Inc. 59,500 1,952
* Alliant Techsystems, Inc. 33,700 1,946
* Ingram Micro, Inc. Class A 122,400 1,946
* JDS Uniphase Corp. 533,100 1,946
Furniture Brands International Inc. 66,300 1,945
Southern Co. 64,200 1,942
* Del Monte Foods Co. 186,700 1,942
* Lincare Holdings, Inc. 64,500 1,937
* Storage Technology Corp. 75,000 1,931
* Rent-A-Center, Inc. 64,400 1,924
Wesco Financial Corp. 5,430 1,911
* Smithfield Foods, Inc. 92,200 1,909
* Cooper Cameron Corp. 40,700 1,897
* FMC Technologies Inc. 81,025 1,888
* Ceridian Corp. 89,900 1,882
* Corinthian Colleges, Inc. 33,700 1,872
BlackRock, Inc. 35,200 1,869
* AGCO Corp. 92,600 1,865
* Tellabs, Inc. 219,200 1,848
HCC Insurance Holdings, Inc. 58,100 1,848
Aramark Corp. Class B 67,200 1,843
StanCorp Financial Group, Inc. 29,300 1,842
* Entercom Communications Corp. 34,700 1,838
* Columbia Sportswear Co. 33,700 1,837
* Amphenol Corp. 28,700 1,835
* Sepracor Inc. 76,400 1,828
* Alleghany Corp. 8,211 1,827
* Stericycle, Inc. 38,900 1,817
* BMC Software, Inc. 96,500 1,800
* LSI Logic Corp. 202,800 1,799
Reinsurance Group of America, Inc. 46,500 1,797
* Timberland Co. 34,500 1,796
BB&T Corp. 46,300 1,789
* Westport Resources Corp. 59,900 1,789
* Eon Labs, Inc. 35,000 1,783
Kerr-McGee Corp. 38,266 1,779
* U.S. Cellular Corp. 50,100 1,779
* Mettler-Toledo International Inc. 42,100 1,777
* JetBlue Airways Corp. 66,950 1,776
* Dynegy, Inc. 412,500 1,765
* Big Lots Inc. 123,806 1,759
Monsanto Co. 60,867 1,752
* BISYS Group, Inc. 117,700 1,751
Hasbro, Inc. 82,100 1,747
* American Pharmaceuticals Partners, Inc. 51,900 1,744
Dominion Resources, Inc. 27,139 1,732
* Key Energy Services, Inc. 167,700 1,729
* Owens-Illinois, Inc. 144,700 1,720
* Performance Food Group Co. 47,500 1,718
* Cytec Industries, Inc. 44,600 1,712
* O'Reilly Automotive, Inc. 44,524 1,708
* BEA Systems, Inc. 138,800 1,707
* Metro-Goldwyn-Mayer Inc. 99,863 1,707
LNR Property Corp. 34,400 1,703
* Calpine Corp. 353,900 1,702
* WellChoice Inc. 49,100 1,694
Brunswick Corp. 53,000 1,687
* Valassis Communications, Inc. 57,300 1,682
* Krispy Kreme Doughnuts, Inc. 45,700 1,673
IndyMac Bancorp, Inc. REIT 56,000 1,668
* Scotts Co. 28,100 1,662
* Swift Transportation Co., Inc. 78,900 1,658
National City Corp. 48,800 1,656
* Weight Watchers International, Inc. 42,900 1,646
Exelon Corp. 24,800 1,646
IMS Health, Inc. 65,752 1,635
* Premcor, Inc. 62,800 1,633
Hearst-Argyle Television Inc. 59,000 1,626
* Compuware Corp. 268,662 1,623
* Western Digital Corp. 136,500 1,609
* United Defense Industries Inc. 49,900 1,591
23
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
CAPITAL APPRECIATION FUND SHARES (000)
- --------------------------------------------------------------------------------
* BearingPoint, Inc. 156,500 $ 1,579
* Maxtor Corp. 140,000 1,554
* Varco International, Inc. 74,600 1,539
* Pixar, Inc. 21,943 1,520
* CNA Financial Corp. 63,000 1,518
* Citrix Systems, Inc. 71,356 1,513
* Endo Pharmaceuticals Holdings, Inc. 78,500 1,512
E.W. Scripps Co. Class A 16,035 1,510
International Paper Co. 34,600 1,492
W.W. Grainger, Inc. 31,400 1,488
* BOK Financial Corp. 38,374 1,486
* Interactive Data Corp. 89,600 1,484
* Humana Inc. 64,900 1,483
* Pride International, Inc. 78,000 1,454
* Grant Prideco, Inc. 109,700 1,428
* Ameritrade Holding Corp. 100,000 1,407
Martin Marietta Materials, Inc. 29,500 1,386
* 99 Cents Only Stores 48,800 1,329
* First Health Group Corp. 67,575 1,315
* Instinet Group Inc. 239,717 1,235
* PanAmSat Corp. 57,037 1,230
* Gilead Sciences, Inc. 20,900 1,215
Eaton Vance Corp. 32,500 1,191
* Zebra Technologies Corp.Class A 17,876 1,186
Loews Corp. 23,500 1,162
Computer Associates International, Inc. 42,289 1,156
* Abercrombie & Fitch Co. 46,500 1,149
Helmerich & Payne, Inc. 39,300 1,098
Belo Corp. Class A 38,400 1,088
Duke Energy Corp. 53,200 1,088
* Atmel Corp. 174,855 1,051
Limited Brands, Inc. 56,874 1,025
General Mills, Inc. 22,200 1,006
SunTrust Banks, Inc. 13,600 972
Sara Lee Corp. 44,600 968
Sabre Holdings Corp. 43,200 933
McKesson Corp. 27,524 885
News Corp. Ltd. Pfd. ADR 27,906 844
* Laboratory Corp. of America Holdings 22,500 831
Travelers Property Casualty Corp. Class B 46,662 792
NiSource, Inc. 35,920 788
ServiceMaster Co. 66,000 769
Newell Rubbermaid, Inc. 32,660 744
AT&T Corp. 35,017 711
Reynolds & Reynolds Class A 23,500 683
Baxter International, Inc. 22,300 681
* Barnes & Noble, Inc. 20,400 670
Nucor Corp. 11,900 666
Viacom Inc. Class A 13,688 606
ProLogis REIT 18,389 590
* Chico's FAS, Inc. 14,600 539
* Education Management Corp. 16,200 503
Burlington Northern Santa Fe Corp. 14,493 46
Nordstrom, Inc. 13,500 463
Mellon Financial Corp. 12,500 401
Lennar Corp. Class B 4,150 379
Omnicom Group Inc. 3,900 341
The Clorox Co. 6,420 312
ConAgra Foods, Inc. 11,200 296
* National-Oilwell, Inc. 12,700 284
Georgia Pacific Group 8,642 265
Cinergy Corp. 5,700 221
PNC Financial Services Group 3,800 208
St. Paul Cos., Inc. 4,800 190
Occidental Petroleum Corp. 3,200 135
* ADC Telecommunications, Inc. 34,400 102
Archer-Daniels-Midland Co. 4,773 73
Sprint Corp. 4,000 66
First Tennessee National Corp. 300 13
Kellogg Co. 100 4
R.J. Reynolds Tobacco Holdings, Inc. 53 3
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,776,942) $ 2,674,310
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.3%)
- --------------------------------------------------------------------------------
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
0.98%, 1/2/2004 $ 4,784 4,784
0.99%, 1/2/2004--Note E 3,895 3,895
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $8,679) $ 8,679
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%) (Cost $1,785,621) $ 2,682,989
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
- --------------------------------------------------------------------------------
Other Assets--Note B 4,372
Liabilities--Note E (14,623)
-------------
$ (10,251)
-------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 2,672,738
================================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
ADR--American Depositary Receipt.
REIT--Real Estate Investment Trust.
24
- --------------------------------------------------------------------------------
TAX-MANAGED AMOUNT
CAPITAL APPRECIATION FUND (000)
- --------------------------------------------------------------------------------
AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $ 2,385,310
Overdistributed Net Investment Income (3,077)
Accumulated Net Realized Losses (606,863)
Unrealized Appreciation 897,368
- --------------------------------------------------------------------------------
NET ASSETS $ 2,672,738
================================================================================
Investor Shares--Net Assets
Applicable to 57,620,498 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 1,465,536
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INVESTOR SHARES $ 25.43
- --------------------------------------------------------------------------------
Admiral Shares--Net Assets
Applicable to 21,550,624 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 1,103,380
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- ADMIRAL SHARES $ 51.20
================================================================================
Institutional Shares--Net Assets
Applicable to 4,081,179 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 103,822
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $ 25.44
================================================================================
See Note C in Notes to Financial Statements for the tax-basis components of net
assets.
25
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
- --------------------------------------------------------------------------------
Harman International Industries, Inc. 139,900 $ 10,350
* NVR, Inc. 15,200 7,083
* Mid Atlantic Medical Services, Inc. 104,100 6,746
* Cephalon, Inc. 119,860 5,802
* Newfield Exploration Co. 118,600 5,282
* Alliant Techsystems, Inc. 83,200 4,806
Ryland Group, Inc. 52,900 4,689
* ITT Educational Services, Inc. 96,900 4,551
* Renal Care Group, Inc. 104,700 4,314
Medicis Pharmaceutical Corp. 57,900 4,128
Polaris Industries, Inc. 46,100 4,084
MDC Holdings, Inc. 62,298 4,018
* NBTY, Inc. 144,194 3,873
Jefferies Group, Inc. 116,800 3,857
Oshkosh Truck Corp. 75,100 3,832
UCBH Holdings, Inc. 97,440 3,797
The Timken Co. 188,900 3,789
* Yellow Roadway Corp. 103,586 3,747
* AnnTaylor Stores Corp. 96,050 3,746
Roper Industries Inc. 76,000 3,744
Global Payments Inc. 79,340 3,738
Regis Corp. 93,975 3,714
Shurgard Storage Centers, Inc. Class A REIT 96,700 3,641
* INAMED Corp. 74,850 3,597
Patina Oil & Gas Corp. 72,550 3,554
* Cymer, Inc. 76,800 3,547
Whitney Holdings Corp. 86,100 3,529
Hudson United Bancorp 95,389 3,525
* Performance Food Group Co. 97,000 3,508
* Pacific Sunwear of California, Inc. 165,386 3,493
Thor Industries, Inc. 62,000 3,486
The South Financial Group, Inc. 124,433 3,467
* IDEXX Laboratories Corp. 74,300 3,439
First BanCorp Puerto Rico 86,900 3,437
Standard Pacific Corp. 69,700 3,384
Ethan Allen Interiors, Inc. 80,580 3,375
* Respironics, Inc. 74,704 3,368
Florida Rock Industries, Inc. 61,200 3,357
Massey Energy Co. 158,711 3,301
* Varian Semiconductor Equipment
Associates, Inc. 75,400 3,294
* Techne Corp. 87,075 3,290
First Midwest Bancorp, Inc. 101,100 3,277
* Accredo Health, Inc. 101,625 3,212
* Tom Brown, Inc. 99,207 3,199
* Pharmaceutical Product Development, Inc. 118,100 3,185
Briggs & Stratton Corp. 47,000 3,168
Cooper Cos., Inc. 67,200 3,167
Energen Corp. 77,000 3,159
* Urban Outfitters, Inc. 84,682 3,137
* Avid Technology, Inc. 65,296 3,134
Essex Property Trust, Inc. REIT 48,200 3,095
* Zale Corp. 58,025 3,087
Piedmont Natural Gas, Inc. 70,700 3,073
* Tractor Supply Co. 78,700 3,061
UGI Corp. Holding Co. 89,800 3,044
AptarGroup Inc. 77,500 3,022
* Evergreen Resources, Inc. 92,680 3,013
* Benchmark Electronics, Inc. 86,450 3,009
* ResMed Inc. 72,300 3,003
* Hot Topic, Inc. 101,625 2,994
United Bankshares, Inc. 95,649 2,984
MAF Bancorp, Inc. 71,073 2,978
* CACI International, Inc. 61,000 2,966
Downey Financial Corp. 59,800 2,948
New Century Financial Corp. 74,150 2,942
* United Stationers, Inc. 71,500 2,926
IDEX Corp. 70,000 2,911
* Cerner Corp. 76,699 2,903
* Linens 'n Things, Inc. 95,600 2,876
Engineered Support Systems, Inc. 52,224 2,875
* Tetra Tech, Inc. 115,406 2,869
* Southern Union Co. 155,863 2,868
Southwest Bancorporation of Texas, Inc. 72,933 2,833
Diagnostic Products Corp. 61,000 2,800
Staten Island Bancorp, Inc. 124,015 2,790
* P.F. Chang's China Bistro, Inc. 54,300 2,763
FactSet Research Systems Inc. 72,200 2,759
* MGI Pharma, Inc. 67,000 2,757
Fremont General Corp. 162,900 2,755
Flagstar Bancorp, Inc. 128,575 2,754
* Fossil, Inc. 98,100 2,748
East West Bancorp, Inc. 51,100 2,743
* Pediatrix Medical Group, Inc. 49,550 2,730
Invacare Corp. 67,300 2,717
* Arbitron Inc. 64,796 2,703
* Take-Two Interactive Software, Inc. 93,755 2,701
* Simpson Manufacturing Co. 52,800 2,685
* CEC Entertainment Inc. 56,650 2,685
Heartland Express, Inc. 108,934 2,635
Chittenden Corp. 78,275 2,633
The Pep Boys (Manny, Moe & Jack) 114,705 2,623
* FLIR Systems, Inc. 71,800 2,621
* Trimble Navigation Ltd. 70,319 2,619
26
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Kronos, Inc. 65,990 $ 2,614
Cognex Corp. 92,500 2,612
Corn Products International, Inc. 75,800 2,611
Winnebago Industries, Inc. 37,900 2,606
Atmos Energy Corp. 107,225 2,606
* Hyperion Solutions Corp. 86,000 2,592
Fred's, Inc. 83,000 2,571
Commercial Federal Corp. 96,000 2,564
* Landstar System, Inc. 67,200 2,556
* Sonic Corp. 82,525 2,527
* Mueller Industries Inc. 73,100 2,512
Hughes Supply, Inc. 50,600 2,511
Flowers Foods, Inc. 96,965 2,502
Hilb, Rogal and Hamilton Co. 77,900 2,498
* Panera Bread Co. 62,900 2,486
* SCP Pool Corp. 75,187 2,457
La-Z-Boy Inc. 116,360 2,441
* Stone Energy Corp. 57,080 2,423
Clarcor Inc. 54,700 2,412
The Toro Co. 51,500 2,390
Delphi Financial Group, Inc. 66,249 2,385
* Steel Dynamics, Inc. 101,500 2,384
Albany International Corp. 70,200 2,380
* Cimarex Energy Co. 88,500 2,362
Mentor Corp. 97,700 2,351
Kellwood Co. 57,100 2,341
* Kroll Inc. 89,700 2,332
Acuity Brands, Inc. 89,700 2,314
* Waste Connections, Inc. 61,000 2,304
Community First Bankshares, Inc. 79,600 2,304
MacDermid, Inc. 67,100 2,297
* Philadelphia Consolidated Holding Corp. 46,900 2,290
* Spinnaker Exploration Co. 70,700 2,281
Alpharma, Inc. Class A 113,100 2,273
* Sybron Dental Specialties, Inc. 80,900 2,273
* Odyssey Healthcare, Inc. 77,600 2,271
* Skyworks Solutions, Inc. 259,459 2,257
Reliance Steel & Aluminum Co. 67,900 2,255
New Jersey Resources Corp. 58,450 2,251
* Priority Healthcare Corp. Class B 93,297 2,249
Capital Automotive REIT 69,662 2,229
* Brooks Automation, Inc. 91,876 2,221
* AMERIGROUP Corp. 52,060 2,220
Skywest, Inc. 122,500 2,220
A.O. Smith Corp. 62,600 2,194
* Unit Corp. 92,634 2,182
Colonial Properties Trust REIT 55,000 2,178
* Axcelis Technologies, Inc. 212,543 2,172
Susquehanna Bancshares, Inc. 85,348 2,135
* Power Integrations, Inc. 63,425 2,122
Lennox International Inc. 126,038 2,105
Gables Residential Trust REIT 60,400 2,098
* Quiksilver, Inc. 118,200 2,096
* Men's Wearhouse, Inc. 82,950 2,075
LandAmerica Financial Group, Inc. 39,650 2,072
* FileNET Corp. 76,200 2,063
TrustCo Bank NY 156,846 2,063
* Dionex Corp. 44,500 2,048
ADVO, Inc. 64,450 2,047
Cabot Oil & Gas Corp. 69,400 2,037
Delta & Pine Land Co. 80,100 2,035
* Knight Transportation, Inc. 79,118 2,029
Burlington Coat Factory Warehouse Corp. 95,800 2,027
R.L.I. Corp. 53,600 2,008
USF Corp. 58,700 2,007
Brady Corp. Class A 49,000 1,997
* US Oncology, Inc. 185,500 1,996
* Anixter International Inc. 77,100 1,995
Curtiss-Wright Corp. 44,000 1,980
Georgia Gulf Corp. 68,500 1,978
NDCHealth Corp. 76,600 1,962
* Cal Dive International, Inc. 81,300 1,960
Kilroy Realty Corp. REIT 59,800 1,958
* Wilson Greatbatch Technologies, Inc. 45,700 1,932
* Commonwealth Telephone Enterprises, Inc. 51,031 1,926
* Ralcorp Holdings, Inc. 61,300 1,922
* United Surgical Partners International, Inc. 57,383 1,921
* Kansas City Southern 133,200 1,907
Irwin Financial Corp. 60,700 1,906
Casey's General Stores, Inc. 107,599 1,900
Brookline Bancorp, Inc. 123,100 1,888
* Cost Plus, Inc. 45,800 1,878
* Insight Enterprises, Inc. 99,600 1,872
Wintrust Financial Corp. 41,200 1,858
Black Box Corp. 40,054 1,845
Republic Bancorp, Inc. 136,620 1,843
Commercial Metals Co. 60,500 1,839
Selective Insurance Group 56,750 1,836
Avista Corp. 101,100 1,832
H.B. Fuller Co. 61,400 1,826
Owens & Minor, Inc. Holding Co. 82,800 1,814
* Moog Inc. 36,512 1,804
UniSource Energy Corp. 73,000 1,800
* Technitrol, Inc. 86,700 1,798
* WebEx Communications, Inc. 89,400 1,797
ABM Industries Inc. 103,200 1,797
K-Swiss, Inc. 74,600 1,795
* Sunrise Senior Living, Inc. 46,200 1,790
* Veeco Instruments, Inc. 63,423 1,788
27
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Advanced Energy Industries, Inc. 68,625 $ 1,788
* Southwestern Energy Co. 74,600 1,783
Cleco Corp. 99,100 1,782
* Kirby Corp. 51,000 1,779
The Manitowoc Co., Inc. 56,700 1,769
* Manhattan Associates, Inc. 63,910 1,766
Wolverine World Wide, Inc. 86,500 1,763
IHOP Corp. 45,700 1,759
* Maverick Tube Corp. 90,900 1,750
CARBO Ceramics Inc. 34,000 1,742
* Group 1 Automotive, Inc. 48,120 1,741
* URS Corp. 69,600 1,741
* Hain Celestial Group, Inc. 74,900 1,738
Lexington Corporate Properties Trust REIT 85,700 1,730
* Regeneron Pharmaceuticals, Inc. 117,450 1,728
* Rare Hospitality International Inc. 70,650 1,727
* eFunds Corp. 99,496 1,726
* Province Healthcare Co. 107,450 1,719
* MICROS Systems, Inc. 39,600 1,717
* Sierra Health Services, Inc. 62,500 1,716
* MAXIMUS, Inc. 43,800 1,714
* Hutchinson Technology, Inc. 55,700 1,712
* ManTech International Corp. 68,450 1,708
Vintage Petroleum, Inc. 141,350 1,700
* Watson Wyatt & Co. Holdings 70,400 1,700
St. Mary Land & Exploration Co. 59,500 1,696
* SEACOR SMIT Inc. 40,200 1,690
Northwest Natural Gas Co. 54,600 1,679
* Shaw Group, Inc. 122,670 1,671
* Aztar Corp. 73,900 1,663
Dime Community Bancshares 53,850 1,656
* WMS Industries, Inc. 63,110 1,653
* Piper Jaffray Companies 39,700 1,650
* Integra LifeSciences Holdings 57,500 1,646
* DRS Technologies, Inc. 59,100 1,642
Arkansas Best Corp. 52,300 1,642
* Aeroflex, Inc. 140,334 1,640
Southwest Gas Corp. 73,060 1,640
* Guitar Center, Inc. 50,100 1,632
Texas Industries, Inc. 44,000 1,628
* AmSurg Corp. 42,900 1,625
* American Healthways Inc. 67,800 1,618
* Jack in the Box Inc. 75,650 1,616
G & K Services, Inc. Class A 43,900 1,613
* Wabash National Corp. 55,000 1,612
* Armor Holdings, Inc. 61,200 1,610
John H. Harland Co. 58,690 1,602
* First Federal Financial Corp. 36,800 1,601
* CUNO Inc. 35,500 1,599
* Argosy Gaming Co. 61,500 1,598
* Adaptec, Inc. 180,900 1,597
* BankUnited Financial Corp. 61,800 1,594
Barnes Group, Inc. 49,075 1,586
* American Italian Pasta Co. 37,800 1,584
Quanex Corp. 34,250 1,579
* FEI Co. 70,000 1,575
* SERENA Software, Inc. 85,500 1,569
Seacoast Financial Services Corp. 57,184 1,567
CH Energy Group, Inc. 33,400 1,566
Christopher & Banks Corp. 80,125 1,565
Baldor Electric Co. 68,460 1,564
* Rogers Corp. 35,300 1,557
* The Children's Place Retail Stores, Inc. 58,118 1,553
* American Medical Systems Holdings, Inc. 71,200 1,552
Waypoint Financial Corp. 71,145 1,543
Landry's Restaurants, Inc. 59,930 1,541
Stewart Information Services Corp. 38,000 1,541
* Coherent, Inc. 64,400 1,533
* Progress Software Corp. 74,800 1,530
* DSP Group Inc. 61,226 1,525
Kaydon Corp. 59,018 1,525
* ATMI, Inc. 65,806 1,523
* Exar Corp. 89,000 1,520
* United Natural Foods, Inc. 42,300 1,519
Russ Berrie and Co., Inc. 44,700 1,515
Provident Bankshares Corp. 51,338 1,511
* Microsemi Corp. 61,129 1,503
* CONMED Corp. 63,100 1,502
* Kulicke & Soffa Industries, Inc. 104,400 1,501
* Monaco Coach Corp. 62,750 1,493
* OM Group, Inc. 57,000 1,493
Watts Water Technologies 66,700 1,481
* Global Imaging Systems, Inc. 46,276 1,469
* Ultratech, Inc. 49,559 1,456
Cambrex Corp. 56,900 1,437
UIL Holdings Corp. 31,863 1,437
Barra, Inc. 40,400 1,434
Brown Shoe Co., Inc. 37,800 1,434
* Oceaneering International, Inc. 51,170 1,433
Aaron Rents, Inc. Class B 70,750 1,424
JLG Industries, Inc. 92,700 1,412
* Photon Dynamics, Inc. 34,975 1,407
* El Paso Electric Co. 105,400 1,407
PolyMedica Corp. 53,300 1,402
* Websense, Inc. 47,900 1,401
* American Management Systems, Inc. 92,482 1,394
* Electro Scientific Industries, Inc. 58,493 1,392
* ESS Technology, Inc. 81,657 1,389
28
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* EMCOR Group, Inc. 31,600 $ 1,387
A. Schulman Inc. 64,440 1,374
* THQ Inc. 80,700 1,365
* Verity, Inc. 81,620 1,362
* Imagistics International Inc. 36,320 1,362
* Photronics Inc. 68,100 1,357
CDI Corp. 41,300 1,353
* Dendrite International, Inc. 85,914 1,346
* Ryan's Family Steak Houses, Inc. 87,950 1,332
* School Specialty, Inc. 39,100 1,330
Cubic Corp. 57,700 1,327
Woodward Governor Co. 23,239 1,321
* UICI 99,250 1,318
Inter-Tel, Inc. 52,708 1,317
* Checkpoint Systems, Inc. 69,400 1,312
* Viasys Healthcare Inc. 63,600 1,310
Cash America International Inc. 61,700 1,307
Boston Private Financial Holdings, Inc. 52,600 1,307
* Actel Corp. 54,150 1,305
* Teledyne Technologies, Inc. 68,700 1,295
Watsco, Inc. 56,948 1,294
* ANSYS, Inc. 32,515 1,291
* Movie Gallery, Inc. 68,970 1,288
* Sola International Inc. 68,400 1,286
* Spherion Corp. 131,300 1,285
* Haemonetics Corp. 53,550 1,279
* Griffon Corp. 63,010 1,277
Zenith National Insurance Corp. 39,200 1,276
Rock-Tenn Co. 73,800 1,274
* Too Inc. 75,400 1,273
* Forward Air Corp. 46,000 1,265
* Shuffle Master, Inc. 36,525 1,264
* Papa John's International, Inc. 37,800 1,262
Thomas Industries, Inc. 36,400 1,262
Sterling Bancshares, Inc. 94,300 1,257
* Triumph Group, Inc. 34,300 1,249
Anchor Bancorp Wisconsin Inc. 50,120 1,248
* NCO Group, Inc. 54,500 1,241
WD-40 Co. 34,989 1,237
Tredegar Corp. 79,600 1,236
* PolyOne Corp. 193,200 1,235
Startek, Inc. 30,200 1,232
Umpqua Holdings Corp. 58,800 1,222
Russell Corp. 69,300 1,217
* InVision Technologies, Inc. 36,060 1,211
Universal Forest Products, Inc. 37,500 1,207
* Advanced Medical Optics, Inc. 61,400 1,207
Arch Chemicals, Inc. 47,000 1,206
* Electronics Boutique Holdings Corp. 52,500 1,202
Regal-Beloit Corp. 54,600 1,201
* Ionics, Inc. 37,700 1,201
* Financial Federal Corp. 39,300 1,201
* Esterline Technologies Corp. 44,500 1,187
* Offshore Logistics, Inc. 48,400 1,187
* Pinnacle Systems, Inc. 137,800 1,175
Gold Banc Corp., Inc. 83,574 1,175
Park Electrochemical Corp. 44,150 1,170
* TBC Corp. 45,300 1,169
Glenborough Realty Trust, Inc. REIT 58,600 1,169
* Centene Corp. 41,630 1,166
* Ciber, Inc. 134,000 1,160
* Mercury Computer Systems, Inc. 46,400 1,155
Helix Technology Corp. 56,100 1,155
Analogic Corp. 28,100 1,152
The Laclede Group, Inc. 40,300 1,151
Valmont Industries, Inc. 49,600 1,148
Oxford Industries, Inc. 33,800 1,145
* j2 Global Communications, Inc. 46,206 1,145
* Hydrill 47,800 1,144
Phillips-Van Heusen Corp. 64,300 1,141
* Enzo Biochem, Inc. 63,616 1,139
Belden, Inc. 53,900 1,137
Arctic Cat, Inc. 45,720 1,129
Central Parking Corp. 75,400 1,126
* Cleveland-Cliffs Inc. 21,900 1,116
* The Gymboree Corp. 64,700 1,115
* Labor Ready, Inc. 84,900 1,112
* TETRA Technologies, Inc. 45,800 1,110
* Systems & Computer Technology Corp. 67,900 1,110
* Paxar Corp. 82,400 1,104
Datascope Corp. 30,788 1,104
ElkCorp 41,200 1,100
First Republic Bank 30,700 1,099
* Remington Oil & Gas Corp. 55,800 1,099
EDO Corp. 43,900 1,082
* K2 Inc. 71,145 1,082
* ArthroCare Corp. 43,733 1,071
* ViaSat, Inc. 55,900 1,070
The Standard Register Co. 63,500 1,069
* Administaff, Inc. 60,500 1,051
C & D Technologies, Inc. 54,800 1,051
* Vicor Corp. 91,811 1,048
* Harmonic, Inc. 144,300 1,046
* CIMA Labs Inc. 32,000 1,044
* Frontier Airlines, Inc. 72,950 1,040
* AAR Corp. 69,000 1,032
Lone Star Steakhouse & Saloon, Inc. 44,400 1,029
* Steak n Shake Co. 57,500 1,026
The Marcus Corp. 62,300 1,022
29
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* General Communication, Inc. 116,840 $ 1,017
* Information Holdings Inc. 45,900 1,014
* Lone Star Technologies, Inc. 63,400 1,013
* Kopin Corp. 150,905 1,013
Roto-Rooter, Inc. 21,900 1,010
* Swift Energy Co. 59,900 1,009
Frontier Oil Corp. 58,600 1,009
* ICU Medical, Inc. 29,400 1,008
* Cross Country Healthcare, Inc. 67,200 1,003
* JDA Software Group, Inc. 60,672 1,002
Bowne & Co., Inc. 73,800 1,001
GenCorp, Inc. 92,700 998
Riggs National Corp. 60,346 998
* Nuevo Energy Co. 41,200 996
* Atwood Oceanics, Inc. 31,000 990
* Prime Hospitality Corp. 96,800 987
The Nautilus Group, Inc. 69,230 973
* Atlantic Coast Airlines Holdings Inc. 97,896 969
* W-H Energy Services, Inc. 59,800 969
* Pre-Paid Legal Services, Inc. 37,000 966
* The Dress Barn, Inc. 63,600 953
* Insituform Technologies Inc. Class A 57,488 949
Applied Industrial Technology, Inc. 39,700 947
Lance, Inc. 63,000 947
Triarc Cos., Inc. Class B 87,800 946
* SurModics, Inc. 39,400 942
* Standard Microsystem Corp. 37,200 941
The Stride Rite Corp. 82,700 941
* Jo-Ann Stores, Inc. 45,990 938
* DuPont Photomasks, Inc. 38,800 937
* Prima Energy Corp. 26,600 935
Schweitzer-Mauduit International, Inc. 31,300 932
Haverty Furniture Cos., Inc. 46,550 924
Methode Electronics, Inc. 75,300 921
* Orthodontic Centers of America, Inc. 114,100 919
* SOURCECORP, Inc. 35,700 915
* Consolidated Graphics, Inc. 28,660 905
Cohu, Inc. 46,690 894
* C-COR Electronics, Inc. 79,474 885
Vital Signs, Inc. 26,900 880
* PAREXEL International Corp. 54,000 878
Cato Corp. Class A 42,600 873
Stewart & Stevenson Services, Inc. 62,066 872
CTS Corp. 75,300 866
* Champion Enterprises, Inc. 123,300 863
* ShopKo Stores, Inc. 55,898 852
Chesapeake Corp. of Virginia 32,175 852
* Itron, Inc. 46,200 848
* Tower Automotive, Inc. 124,000 847
* Cable Design Technologies Corp. 93,800 843
* Buckeye Technology, Inc. 83,900 843
* Century Aluminum Co. 44,261 841
* Mesa Air Group Inc. 67,200 841
New England Business Service, Inc. 28,500 841
* Fleetwood Enterprises, Inc. 81,930 841
* Rudolph Technologies, Inc. 34,200 839
* O'Charley's Inc. 46,300 831
Libbey, Inc. 28,400 809
American States Water Co. 32,350 809
* Biosite Inc. 27,900 808
* Caraustar Industries, Inc. 58,524 808
* Veritas DGC Inc. 76,800 805
* Gardner Denver Inc. 33,625 803
* Plains Resources Inc. 49,300 791
* Planar Systems, Inc. 32,100 781
* Intermagnetics General Corp. 35,195 780
Agilysys, Inc. 69,800 778
Myers Industries, Inc. 63,837 774
Deltic Timber Corp. 25,395 772
* Concord Communications, Inc. 38,400 767
Bel Fuse, Inc. Class B 23,480 766
* Heidrick & Struggles International, Inc. 34,750 758
* International Multifoods Corp. 41,800 752
* Netegrity, Inc. 72,887 751
Action Performance Cos., Inc. 38,200 749
* Possis Medical Inc. 37,900 749
* RehabCare Group, Inc. 34,900 742
Wellman, Inc. 72,645 742
* RTI International Metals Inc. 43,850 740
* Hologic, Inc. 42,500 737
* 4Kids Entertainment Inc. 28,240 735
* Genesco, Inc. 48,458 733
* Stein Mart, Inc. 88,957 733
* Volt Information Sciences Inc. 32,200 728
* JAKKS Pacific, Inc. 55,000 724
* Noven Pharmaceuticals, Inc. 47,500 722
Standex International Corp. 25,500 714
* Artesyn Technologies, Inc. 83,779 714
* J & J Snack Foods Corp. 18,700 706
* MRO Software Inc. 52,400 705
* MemberWorks, Inc. 25,700 698
* Carreker Corp. 49,700 696
* PRG-Schultz International, Inc. 140,690 689
* SPSS, Inc. 38,185 683
Apogee Enterprises, Inc. 59,800 679
Sturm, Ruger & Co., Inc. 58,650 667
30
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
Lawson Products, Inc. 19,900 $ 660
Ryerson Tull, Inc. 57,300 656
Talx Corp. 28,400 654
Goody's Family Clothing 69,539 651
SWS Group, Inc. 36,492 650
* EPIQ Systems, Inc. 37,800 648
* RadiSys Corp. 38,155 643
* Intrado Inc. 29,300 643
* Rainbow Technologies, Inc. 57,100 643
* Symmetricom Inc. 88,200 642
Lindsay Manufacturing Co. 25,200 636
Dimon Inc. 93,600 632
* Pericom Semiconductor Corp. 59,084 630
* Audiovox Corp. 48,800 627
Skyline Corp. 17,700 617
BEI Technologies, Inc. 30,737 615
* The Wet Seal, Inc. Class A 61,900 612
Quaker Chemical Corp. 19,900 612
Coachmen Industries, Inc. 33,770 612
NUI Corp. 37,300 601
Kaman Corp. Class A 47,200 601
Keithley Instruments Inc. 32,600 597
* Dril-Quip, Inc. 36,300 592
Central Vermont Public Service Corp. 25,100 590
* Mobile Mini, Inc. 29,856 589
Pope & Talbot, Inc. 33,300 586
* Brush Engineered Materials Inc. 38,200 585
Thomas Nelson, Inc. 30,100 582
* Pegasus Solutions Inc. 55,400 580
* Savient Pharmaceuticals Inc. 125,740 580
* Coinstar, Inc. 31,667 572
Robbins & Myers, Inc. 30,100 572
Nash-Finch Co. 25,297 565
Hancock Fabrics, Inc. 38,800 562
* Radiant Systems, Inc. 65,613 552
* NYFIX, Inc. 68,500 545
* Concord Camera Corp. 58,700 543
* Pinnacle Entertainment, Inc. 58,200 542
* Network Equipment Technologies, Inc. 48,100 529
Oshkosh B' Gosh, Inc. Class A 24,493 526
National Presto Industries, Inc. 14,495 524
* Alliance Semiconductor Corp. 73,667 524
* Tollgrade Communications, Inc. 29,638 520
Triarc Cos., Inc. Class A 43,900 519
* Astec Industries, Inc. 41,800 513
* Supertex, Inc. 26,734 511
* Midway Games Inc. 130,800 508
* Bally Total Fitness Holding Corp. 72,300 506
X-Rite Inc. 44,500 504
* Bell Microproducts Inc. 55,600 504
* Zix Corp. 57,896 503
Standard Motor Products, Inc. 41,300 502
Cascade Natural Gas Corp. 23,700 500
* SBS Technologies, Inc. 33,605 494
* Input/Output, Inc. 109,140 492
* Midas Inc. 34,100 488
Presidential Life Corp. 35,500 467
Building Materials Holding Corp. 29,400 457
* PC-Tel, Inc. 42,600 452
Fedders Corp. 62,440 450
* Magnatek, Inc. 67,500 445
* Phoenix Technologies Ltd. 53,900 436
* Omnova Solutions Inc. 90,500 434
* Digi International, Inc. 44,500 427
Angelica Corp. 19,300 425
Bassett Furniture Industries, Inc. 24,416 403
* Gerber Scientific, Inc. 49,300 392
* Catapult Communications Corp. 27,000 392
Steel Technologies, Inc. 21,790 385
* Captaris Inc. 68,400 384
* Applica Inc. 50,500 384
Milacron Inc. 91,600 382
Hooper Holmes, Inc. 61,300 379
* Department 56 Inc. 28,700 376
* Curative Health Services, Inc. 26,930 372
Commonwealth Industries Inc. 36,934 371
CPI Corp. 18,300 370
* Lydall, Inc. 35,000 357
* Theragenics Corp. 64,800 354
Butler Manufacturing Co. 16,100 354
* Duane Reade Inc. 20,600 349
* IMCO Recycling, Inc. 34,700 343
* Interface, Inc. 61,654 341
* MapInfo Corp. 33,033 333
* Brooktrout Technology, Inc. 26,300 331
* Osteotech, Inc. 37,520 330
* Insurance Auto Auctions, Inc. 25,200 329
* Salton, Inc. 24,475 319
* QRS Corp. 39,300 319
Material Sciences Corp. 30,625 310
* Enesco Group, Inc. 30,000 310
Intermet Corp. 56,503 307
* SCM Microsystems, Inc. 39,400 304
* ArQule, Inc. 61,500 300
* Concerto Software Inc. 24,600 295
* On Assignment, Inc. 53,876 281
* Roxio, Inc. 57,600 276
Haggar Corp. 13,900 271
Green Mountain Power Corp. 11,275 266
Penford Corp. 19,004 261
31
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
SMALL-CAP FUND SHARES (000)
- --------------------------------------------------------------------------------
* Three-Five Systems, Inc. 48,499 $ 254
* CryoLife Inc. 43,500 251
* Ultimate Electronics, Inc. 30,972 236
* Ashworth, Inc. 29,050 234
* A.T. Cross Co. Class A 32,700 218
* A.M. Castle & Co. 29,800 218
Nature's Sunshine Inc. 25,146 212
SCPIE Holdings Inc. 21,700 191
* Wolverine Tube, Inc. 28,400 179
* Huffy Corp. 32,900 173
* Meade Instruments Corp. 46,686 161
* The Great Atlantic & Pacific Tea Co., Inc. 18,500 155
* J. Jill Group, Inc. 8,200 104
* Rewards Network Inc. 5,900 63
Advanced Marketing Services 3,200 36
* Boston Communications Group, Inc. 1,900 18
* Fedders Corp Rights- Exp. 1/16/2004 62,440 4
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $639,848) $ 941,754
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.5%)
- --------------------------------------------------------------------------------
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
0.98%, 1/2/2004 $ 4,175 4,175
0.99%, 1/2/2004--Note E 19,339 19,339
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $23,514) $ 23,514
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.5%)(Cost $663,362) 965,268
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.5%)
- --------------------------------------------------------------------------------
Other Assets--Note B 1,642
Liabilities--Note E (25,286)
-------------
$ (23,644)
-------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 941,624
================================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
REIT--Real Estate Investment Trust.
- --------------------------------------------------------------------------------
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $ 705,839
Overdistributed Net Investment Income (758)
Accumulated Net Realized Losses (65,363)
Unrealized Appreciation 301,906
- --------------------------------------------------------------------------------
NET ASSETS $ 941,624
================================================================================
Investor Shares--Net Assets
Applicable to 53,280,384 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 929,344
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INVESTOR SHARES $ 17.44
================================================================================
Institutional Shares--Net Assets
Applicable to 703,045 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 12,280
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $ 17.47
================================================================================
See Note C in Notes to Financial Statements for the tax- basis components of net
assets.
32
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (98.7%)
- --------------------------------------------------------------------------------
AUSTRALIA (4.7%)
National Australia Bank Ltd. 122,040 $ 2,754
BHP Billiton Ltd. 297,744 2,735
Commonwealth Bank of Australia 101,733 2,257
Australia & New Zealand Bank Group Ltd. 142,612 1,900
Westpac Banking Corp., Ltd. 143,437 1,728
News Corp. Ltd. Pfd. 159,837 1,204
News Corp. Ltd. 115,597 1,044
Woolworths Ltd. 84,685 753
Rio Tinto Ltd. 24,748 694
Telstra Corp. Ltd. 181,734 660
Wesfarmers Ltd. 30,219 603
Foster's Group Ltd. 172,353 584
Coles Myer Ltd. 87,829 500
* AMP Limited 127,439 481
Amcor Ltd. 71,604 446
Macquarie Bank Ltd. 16,575 444
Alumina Ltd. 86,549 428
Insurance Australia Group Ltd. 133,439 427
Mirvac Group 130,280 424
Suncorp-Metway Ltd. 44,033 411
Woodside Petroleum Ltd. 36,777 410
QBE Insurance Group Ltd. 50,526 404
Stockland 101,612 400
Macquarie Infrastucture Group 155,801 399
Rinker Group Ltd. 77,619 383
* WMC Resources Ltd. 87,731 372
Centro Properties Group 123,881 371
Brambles Industries Ltd. 81,044 322
Westfields Holdings Ltd. 29,775 313
Australian Gas Light Co., Ltd. 36,704 311
BlueScope Steel Ltd. 66,344 280
Tabcorp Holdings Ltd. 31,322 265
Lend Lease Corp. 34,945 265
Newcrest Mining Ltd. 27,053 264
Investa Property Group 169,334 250
Santos Ltd. 45,053 233
Orica Ltd. 21,390 225
Origin Energy Ltd. 56,948 204
John Fairfax Holdings Ltd. 72,681 193
Coca-Cola Amatil Ltd. 38,501 181
Boral Ltd. 46,643 179
CSL Ltd. 13,136 177
Patrick Corp. Ltd. 15,185 167
Tab Ltd. 46,741 163
Mayne Group Ltd. 64,403 158
Paperlinx Ltd. 40,702 153
Transurban Group 40,342 136
Lion Nathan Ltd. 29,055 132
Toll Holdings Ltd. 20,705 129
Australian Stock Exchange Ltd. 9,280 119
Leighton Holdings Ltd. 12,171 108
Harvey Norman Holdings Ltd. 48,047 108
Southcorp Ltd. 52,737 107
Publishing & Broadcasting Ltd. 10,900 103
Deutsche Office Trust 122,237 101
Computershare Ltd. 40,096 100
CSR Ltd. 71,149 99
Sonic Healthcare Ltd. 18,149 96
OneSteel Ltd. 57,056 87
Cochlear Ltd. 4,638 75
Iluka Resources Ltd. 19,443 66
Ansell Ltd. 13,630 66
Futuris Corp., Ltd. 51,353 58
Aristocrat Leisure Ltd. 23,600 31
-------------
$ 29,240
-------------
AUSTRIA (0.2%)
Erste Bank der Oesterreichischen
Sparkassen AG 2,332 288
* Telekom Austria AG 15,938 197
OMV AG 1,141 170
* Bank Austria Creditanstalt 3,150 161
Mayr-Melnhof Karton AG 836 100
Voestalpine AG 1,653 67
Wienerberger AG 2,259 60
Oesterreichische Elektrizitaetswirtschafts
AG Class A 415 48
* RHI AG 1,970 38
Flughafen Wien AG 777 36
Boehler-Uddeholm AG 422 28
* VA Technologies AG 319 10
-------------
$ 1,203
-------------
BELGIUM (1.2%)
Fortis Group 89,357 1,797
Dexia 53,952 930
Electrabel SA 2,531 796
Syngenta AG 8,357 563
Solvay SA 5,365 465
KBC Bankverzekeringsholding 7,796 364
Interbrew 12,729 340
Delhaize Group 6,265 322
UCB SA 7,791 294
Cofinimmo 2,106 293
Agfa Gevaert NV 9,099 259
Umicore 1,899 133
Colruyt NV 1,331 128
* Mobistar SA 1,957 110
Bekaert NV 1,402 89
Barco NV 743 65
33
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
D'Ieteren SA 283 $ 58
Omega Pharma SA 1,627 52
UBS AG 741 50
Compagnie Maritime Belge SA 164 13
-------------
$ 7,121
-------------
DENMARK (0.8%)
Danske Bank A/S 41,590 976
Novo Nordisk A/S B Shares 20,594 839
AP Moller-Maersk A/S 87 628
TDC A/S 10,241 370
Telefonica SA ADR 6,192 274
Danisco A/S 4,029 179
ISS A/S 3,576 176
Novozymes A/S 4,424 162
Vestas Wind Systems A/S 8,834 144
Group 4 Falck A/S 6,500 133
* GN Store Nord A/S 18,667 121
* Topdanmark A/S 2,000 107
Iberia (Linea Aer Espana) 35,600 102
H. Lundbeck A/S 5,918 98
Coloplast A/S B Shares 1,075 92
* William Demant A/S 2,600 88
Carlsberg A/S B Shares 1,846 85
DSV, De Sammensluttede Vognmaend A/S 1,900 84
East Asiatic Co. A/S 1,350 59
Kobenhavns Lufthavne A/S 460 54
Bang & Olufsen A/S B Shares 909 38
* NEG Micon A/S 1,795 29
* FLS Industries A/S B Shares 1,399 16
NKT Holding A/S 740 13
-------------
$ 4,867
-------------
FINLAND (1.6%)
Nokia Oyj 401,575 6,944
UPM-Kymmene Oyj 41,332 788
Stora Enso Oyj R Shares 51,266 691
Fortum Oyj 26,377 272
Sampo Oyj A Shares 20,550 213
TietoEnator Oyj B Shares 6,575 180
Kone Corp. B Shares 2,885 166
* Elisa Oyj Class A 11,400 152
Outokumpu Oyj A Shares 7,400 101
Metso Oyj 7,540 92
Kesko Oyj 4,360 76
Amer Group Ltd. 1,607 70
Uponor Oyj 2,095 66
Orion-Yhtyma Oyj B Shares 2,550 55
Wartsila Oyj B Shares 2,770 53
* Rautaruuki Oyj 6,970 51
Nokian Renkaat Oyj 609 46
Pohjola Group PLC D Shares 1,290 34
KCI Konecranes Oyj 700 24
-------------
$ 10,074
-------------
FRANCE (9.6%)
Total SA 53,671 9,979
BNP Paribas SA 67,876 4,274
Aventis SA 56,790 3,754
Carrefour SA 47,684 2,618
* France Telecom SA 90,122 2,576
AXA 117,985 2,525
Societe Generale Class A 27,381 2,418
L'Oreal SA 28,224 2,314
Sanofi-Synthelabo SA 30,611 2,305
* Vivendi Universal SA 75,856 1,844
Groupe Danone 10,184 1,662
LVMH Louis Vuitton Moet Hennessy 20,389 1,484
L'Air Liquide SA (Registered) 8,259 1,458
Suez SA 66,758 1,341
* Alcatel SA 101,614 1,309
Cie. de St. Gobain SA 25,959 1,271
Lafarge SA 13,952 1,242
Schneider Electric SA 17,237 1,128
Renault SA 14,203 980
PSA Peugeot Citroen 15,198 774
Credit Agricole SA 30,242 722
Accor SA 15,848 718
Lagardere S.C.A 10,436 602
Bouygues SA 16,693 584
Pinault-Printemps-Redoute SA 5,664 548
Veolia Environnement 20,101 540
Compagnie Generale des Etablissements
Michelin SA B Shares 11,639 534
Pernod Ricard SA 4,461 496
Vinci SA 5,637 467
BP PLC ADR 9,184 453
* Cap Gemini SA 9,510 422
Thomson SA 19,410 413
Essilor International SA 7,913 409
Unibail Co. 3,815 358
Societe Television Francaise 1 9,741 340
Gecina SA 2,108 310
Etablissements Economiques du
Casino Guichard-Perrachon SA 3,159 307
Publicis Groupe SA 8,390 272
Valeo SA 6,544 262
Sodexho Alliance SA 8,281 250
* Wanadoo 30,243 248
Dassault Systemes SA 4,630 211
34
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Thales SA 6,244 $ 210
Autoroutes du Sud de la France 5,779 194
* Business Objects SA 5,471 191
Sagem SA 1,743 187
Klepierre 2,795 168
Technip SA 1,450 157
Hermes International 800 155
CNP Assurances 2,937 153
Imerys 655 138
Kidde PLC 72,050 137
* Atos Origin SA 2,033 130
Societe BIC SA 2,760 128
Air France 6,563 101
Zodiac SA 3,382 99
WPP Group PLC ADR 2,004 98
* Alstom 37,903 60
-------------
$ 59,028
-------------
GERMANY (7.1%)
Siemens AG 66,794 5,350
* Deutsche Telekom AG 209,993 3,843
Deutsche Bank AG 43,753 3,626
DaimlerChrysler AG (Registered) 71,786 3,350
E.On AG 50,999 3,328
Allianz AG 23,907 3,018
SAP AG 17,040 2,862
BASF AG 44,975 2,529
Bayer AG 54,427 1,594
Muenchener Rueckversicherungs-Gesellschaft
AG (Registered) 11,860 1,438
RWE AG 33,334 1,319
Volkswagen AG 18,617 1,037
Commerzbank AG 39,583 776
Schering AG 13,837 701
* Bayerische Hypo-und Vereinsbank AG 29,157 674
Deutsche Post AG 31,443 648
Metro AG 12,216 539
* Infineon Technologies AG 37,066 515
* Hypo Real Estate Holding AG 20,543 513
ThyssenKrupp AG 24,739 489
Deutsche Boerse AG 8,553 468
Adidas-Salomon AG 3,656 416
Porsche AG 655 389
Continental AG 9,959 378
Henkel KGaA 4,805 376
Linde AG 6,697 361
Altana AG 5,636 339
Volkswagen AG Pfd. 8,742 317
Man AG 9,192 279
Deutsche Lufthansa AG 15,019 251
Beiersdorf AG 2,032 247
Puma AG 1,334 236
TUI AG 11,015 230
Fresenius Medical Care AG 2,790 198
Merck KGaA 3,673 153
* HeidelbergerCement AG 3,295 139
Fresenius Medical Care AG 2,150 108
Wella AG 1,206 107
* MLP AG 5,402 106
RWE AG Pfd. 2,938 104
ProSieben Sat.1 Media AG 6,045 101
Celesio AG 2,066 100
* EPCOS AG 4,367 99
Karstadt Quelle AG 3,791 94
Douglas Holding AG 2,498 69
Suedzucker AG 3,469 66
-------------
$ 43,880
-------------
GREECE (0.4%)
Alpha Credit Bank SA 12,600 381
National Bank of Greece SA 14,433 378
EFG Eurobank Ergasias 15,000 292
Hellenic Telecommunication Organization SA 20,980 277
Public Power Corp. 8,300 205
Greek Organization of Football Prognostics 12,400 178
Bank of Piraeus 13,200 161
Vodafone-Panafon SA 15,700 122
Commercial Bank of Greece SA 4,800 121
Coca-Cola Hellenic Bottling Co. SA 4,900 102
Titan Cement Co. SA 2,400 98
ASM Pacific Technology Ltd. 16,500 72
Viohalco, Hellenic Copper & Aluminum Industry SA 9,400 61
Hellenic Petroleum SA 6,700 59
Intracom SA 7,700 52
Hellenic Duty Free Shops SA 2,400 47
Technical Olympic SA 8,000 43
Folli-Follie SA 1,400 39
Hellenic Technodomiki Tev SA 4,230 27
Aluminum of Greece SA 970 20
-------------
$ 2,735
-------------
HONG KONG (1.6%)
Hutchison Whampoa Ltd. 172,512 1,272
Cheung Kong Holdings Ltd. 124,000 986
Sun Hung Kai Properties Ltd. 107,064 886
Hang Seng Bank Ltd. 62,643 823
CLP Holdings Ltd. 141,732 675
Hong Kong & China Gas Co., Ltd. 323,177 493
Swire Pacific Ltd. A Shares 79,798 492
Hong Kong Electric Holdings Ltd. 112,500 445
Boc Hong Kong Holdings Ltd. 206,500 388
Bank of East Asia Ltd. 105,400 324
35
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Henderson Land Development Co. Ltd. 64,006 $ 283
Wharf Holdings Ltd. 100,215 278
Li & Fung Ltd. 131,850 226
Hong Kong Exchanges & Clearing Ltd. 79,000 171
Cathay Pacific Airways Ltd. 83,170 158
Johnson Electric Holdings Ltd. 121,498 155
Esprit Holdings Ltd. 42,072 140
* PCCW Ltd. 212,000 138
Yue Yuen Industrial (Holdings) Ltd. 46,000 127
Hang Lung Properties Ltd. 96,500 124
MTR Corp. 93,000 123
Television Broadcasts Ltd. 23,000 116
Cheung Kong Infrastructure Holdings Ltd. 46,000 103
Hysan Development Co., Ltd. 64,000 99
New World Development Co., Ltd. 115,000 93
Sino Land Co. 159,000 91
Techtronic Industries Co., Ltd. 32,000 89
Hopewell Holdings Ltd. 43,000 66
Shangri-La Asia Ltd. 68,078 64
Giordano International Ltd. 129,000 60
SCMP Group Ltd. 79,863 35
Texwinca Holdings Ltd. 36,000 26
* Hopewell Highway Infrastructure
Warrants Exp. 8/5/2006 4,300 1
-------------
$ 9,550
-------------
IRELAND (0.8%)
Bank of Ireland 81,237 1,108
* Allied Irish Banks PLC 68,371 1,095
* CRH PLC 43,372 891
Riunione Adriatica di Sicurta SpA 24,323 414
Alleanza Assicurazioni SpA 37,542 411
Irish Life & Permanent PLC 21,533 348
* Elan Corp. PLC 32,401 223
* Ryanair Holdings PLC 16,819 140
Kerry Group PLC A Shares 9,405 177
* Independent News & Media PLC 45,298 107
* Grafton Group PLC 13,538 93
DCC PLC 6,580 90
* Greencore Group PLC 13,017 58
Fyffes PLC 21,558 45
* Waterford Wedgewood PLC 38,659 11
-------------
$ 5,211
-------------
ITALY (3.7%)
ENI SpA 216,647 4,088
* Telecom Italia SpA 764,636 2,267
Assicurazioni Generali SpA 79,951 2,118
Unicredito Italiano SpA 314,738 1,699
Telecom Italia Mobile SpA 304,485 1,655
ENEL SpA 202,050 1,374
Banca Intesa SpA 293,590 1,148
San Paolo-IMI SpA 83,981 1,095
* Telecom Italia SpA RNC 465,007 947
Mediaset SpA 47,088 559
Banco Popolare di Verona e Novara Scrl 28,842 488
* Banche Popolari Unite Scrl 25,700 466
Mediobanca Banca di Credito
Finanziaria SpA 36,739 399
Finmeccanica SpA 503,735 395
Snam Rete Gas SpA 69,983 297
* Capitalia SpA 99,026 290
* Banca Nazionale del Lavoro (BNL) 116,877 279
Banca Monte dei Paschi di Siena SpA 86,426 273
* Autostrade SpA 15,200 267
* Seat Pagine Gialle SpA 270,700 258
* Fiat SpA 32,978 253
Banca Intesa SpA Non Convertible Risp 80,442 230
Banca Popolare di Milano SpA 30,380 199
Luxottica Group SpA 10,687 185
Mediolanum SpA 21,792 172
Pirelli & C. Accomandita per Azioni 155,820 159
Banca Fideuram SpA 25,758 153
* Autogrill SpA 8,600 123
* Tiscali SpA 13,670 96
Bulgari SpA 10,300 95
Mondadori (Arnoldo) Editore SpA 10,600 95
Gruppo EditorialeL'Espresso SpA 14,836 92
* FinecoGroup SpA 126,087 89
Italcementi SpA 6,455 81
* Telecom Italia SpA 130,836 65
Snia SpA 21,912 54
Benetton Group SpA 4,600 53
Parmalat Finanziaria SpA 34,147 5
-------------
$ 22,561
-------------
JAPAN (20.5%)
Toyota Motor Corp. 217,000 7,330
NTT DoCoMo, Inc. 1,406 3,188
Canon, Inc. 67,000 3,120
Honda Motor Co., Ltd. 62,600 2,780
Takeda Chemical Industries Ltd. 67,800 2,689
Mitsubishi Tokyo Financial Group Inc. 324 2,527
36
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Sony Corp. 70,300 $ 2,434
Nomura Holdings Inc. 141,000 2,401
Matsushita Electric Industrial Co., Ltd. 167,034 2,310
Nissan Motor Co., Ltd. 200,000 2,284
Nippon Telegraph and Telephone Corp. 423 2,041
Tokyo Electric Power Co. 92,100 2,020
Sumitomo Mitsui Financial Group, Inc. 300 1,601
Millea Holdings, Inc. 120 1,568
* Mizuho Financial Group, Inc. 488 1,480
Hitachi Ltd. 230,000 1,386
* UFJ Holdings Inc. 284 1,365
East Japan Railway Co. 271 1,277
Fuji Photo Film Co., Ltd. 37,000 1,195
Sharp Corp. 75,000 1,183
Shin-Etsu Chemical Co., Ltd. 28,700 1,173
Chubu Electric Power Co. 51,500 1,074
JFE Holdings, Inc. 37,300 1,018
Rohm Co., Ltd. 8,600 1,008
Ricoh Co. 51,000 1,006
Seven Eleven Japan Co. Ltd. 33,000 1,001
Kansai Electric Power Co., Inc. 55,300 969
Murata Manufacturing Co., Ltd. 17,800 962
Nippon Steel Corp. 439,000 942
Ito-Yokado Co., Ltd. 29,000 912
Tokyo Electron Ltd. 11,900 904
Kao Corp. 44,000 895
NEC Corp. 119,400 879
Kyocera Corp. 13,100 873
Mitsubishi Corp. 81,000 859
Mitsui Sumitomo Insurance Co. 100,880 828
Toshiba Corp. 215,000 815
Hoya Corp. 8,700 799
Denso Corp. 39,500 778
Yamanouchi Pharmaceuticals Co., Ltd. 24,700 767
Mitsui & Co., Ltd. 94,000 757
Mitsubishi Estate Co., Ltd. 79,000 749
* Fujitsu Ltd. 126,000 743
Nintendo Co. 7,800 728
Tokyo Gas Co., Ltd. 201,000 716
Bridgestone Corp. 52,000 699
Dai-Nippon Printing Co., Ltd. 49,000 688
Fanuc Co., Ltd. 11,300 677
Nitto Denko Corp. 12,700 675
TDK Corp. 8,900 641
Daiwa Securities Group Inc. 94,000 639
Mitsubishi Heavy Industries Ltd. 228,000 634
Sanyo Electric Co., Ltd. 121,000 632
Central Japan Railway Co. 73 631
Aeon Co., Ltd. 18,600 623
Tohoku Electric Power Co. 36,900 612
Kyushu Electric Power Co., Inc. 35,200 605
Secom Co., Ltd. 16,000 597
Nikko Securities Co., Ltd. 105,000 585
Mitsubishi Electric Corp. 140,000 581
SMC Corp. 4,400 548
Sankyo Co., Ltd. 28,900 543
Asahi Kasei Corp. 99,000 538
Keyence Corp. 2,510 529
Orix Corp. 6,300 521
Nippon Oil Corp. 101,000 515
Komatsu Ltd. 80,000 508
Ajinomoto Co., Inc. 44,000 506
Mitsui Fudosan Co., Ltd. 56,000 506
Sompo Japan Insurance Inc. 60,000 493
Asahi Glass Co., Ltd. 60,000 493
Softbank Corp. 15,900 487
Kirin Brewery Co., Ltd. 57,000 486
Eisai Co., Ltd. 17,600 475
Sumitomo Trust & Banking Co., Ltd. 78,000 459
Toppan Printing Co., Ltd. 44,000 458
Fujisawa Pharmaceutical Co., Ltd. 21,200 452
* Resona Holdings Inc. 358,000 451
Shionogi & Co., Ltd. 24,000 447
Konica Minolta Holdings, Inc. 32,000 430
Sumitomo Electric Industries Ltd. 48,000 429
Osaka Gas Co., Ltd. 158,000 428
Sumitomo Corp. 57,000 425
Sekisui House Ltd. 41,000 424
Advantest Corp. 5,200 412
Japan Tobacco, Inc. 56 410
Tokyu Corp. 79,000 405
OJI Paper Co., Ltd. 62,000 400
Tostem Inax Holding Corp. 20,512 396
Toray Industries, Inc. 94,000 393
Sumitomo Chemical Co. 95,000 392
Yamato Transport Co., Ltd. 33,000 389
NTT Data Corp. 102 385
Shizuoka Bank Ltd. 51,000 377
Daiwa House Industry Co., Ltd. 35,000 372
Olympus Corp. 17,000 369
Bank of Yokohama Ltd. 79,000 367
Nippon Unipac Holding 71 366
Daiichi Pharmaceutical Co., Ltd. 20,200 364
Itochu Corp. 107,000 353
West Japan Railway Co. 89 350
* Kinki Nippon Railway Co. 116,190 349
Omron Corp. 17,200 349
37
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Pioneer Corp. 12,600 $ 348
Daikin Industries Ltd. 15,000 346
Marui Co., Ltd. 27,200 343
Shiseido Co., Ltd. 28,000 340
Mitsubishi Chemical Corp. 129,000 336
Kubota Corp. 81,000 334
Chugai Pharmaceutical Co., Ltd. 22,300 321
Nippon Yusen Kabushiki Kaisha Co. 70,000 317
JSR Corp. 14,000 313
Mitsui Osk Lines Ltd. 63,000 307
Sumitomo Metal Mining Co. 41,000 304
Promise Co., Ltd. 6,950 303
Nippon Express Co., Ltd. 64,000 302
* Nikon Corp. 20,000 302
Matsushita Electric Works, Ltd. 33,000 297
Daido Life Insurance Co. 96 286
Acom Co., Ltd. 6,050 274
Asahi Breweries Ltd. 30,000 273
Terumo Corp. 14,000 266
Oriental Land Co., Ltd. 4,300 265
Hirose Electric Co., Ltd. 2,300 264
Credit Saison Co., Ltd. 11,500 260
Nidec Corp. 2,700 258
Takefuji Corp. 5,460 255
Fast Retailing Co., Ltd. 4,200 255
Yamaha Corp. 12,900 253
Mitsui Chemicals, Inc. 43,000 251
Sumitomo Metal Industries Ltd. 253,000 250
Yokogawa Electric Corp. 17,000 246
Kuraray Co., Ltd. 29,000 245
Aiful Corp. 3,300 241
* Mitsui Trust Holding Inc. 43,100 241
Kajima Corp. 74,000 240
Taisei Corp. 64,000 234
Seiko Epson Corp. 5,000 233
Taisho Pharmaceutical Co. 13,000 232
Stanley Electric Co. 12,000 232
Sumitomo Realty & Development Co. 25,000 220
Keio Electric Railway Co., Ltd. 42,000 218
Daito Trust Construction Co., Ltd. 7,200 214
Chiba Bank Ltd. 52,000 213
Yamada Denki Co., Ltd. 6,300 212
Tobu Railway Co., Ltd. 59,000 211
Ohbayashi Corp. 47,000 210
Trend Micro Inc. 7,500 201
Teijin Ltd. 68,000 200
Kawasaki Kisen Kaisha Ltd. 40,000 199
Toto Ltd. 23,000 195
Konami Corp. 6,600 192
ToneGeneral Sekiyu K.K 23,000 190
Joyo Bank Ltd. 58,000 189
Nissin Food Products Co., Ltd. 7,500 187
Marubeni Corp. 97,000 186
Mabuchi Motor Co. 2,400 185
Citizen Watch Co., Ltd. 20,000 184
Mitsui Mining & Smelting Co., Ltd. 44,000 183
Jafco Co., Ltd. 2,300 181
CSK Corp. 5,000 181
Keihin Electric Express Railway Co., Ltd. 30,000 176
Alps Electric Co., Ltd. 12,000 176
Nomura Research Institute, Ltd. 1,800 176
THK Co., Inc. 8,600 175
Lawson Inc. 5,000 171
Casio Computer Co. 16,000 169
Showa Denko K.K 75,000 169
Bank of Fukuoka, Ltd. 40,000 168
Uni-Charm Corp. 3,400 167
Kyowa Hakko Kogyo Co. 26,000 165
NGK Insulators Ltd. 22,000 164
77 Bank Ltd. 29,000 163
Sekisui Chemical Co. 32,000 163
NTN Corp. 34,000 162
Fujikura Ltd. 27,000 159
Mitsubishi Rayon Co., Ltd. 42,000 158
JGC Corp. 15,000 156
Gunma Bank Ltd. 35,000 156
* Oki Electric Industry Co. Ltd. 40,000 156
Yakult Honsha Co., Ltd. 10,000 156
Taiheiyo Cement Corp. 55,000 156
Isetan Co. 14,100 155
Toyo Seikan Kaisha Ltd. 11,000 154
Furukawa Electric Co. 45,000 149
Ushio Inc. 9,000 149
Kaneka Corp. 20,000 149
Shimizu Corp. 38,000 145
Takashimaya Co. 20,000 143
Hino Motors, Ltd. 20,000 143
Hitachi Chemical Co., Ltd. 8,400 141
Oracle Corp. Japan 2,700 140
Japan Airlines System Co. 52,000 137
Toho Co., Ltd. 10,700 136
Nippon Mining Holdings Inc. 39,000 136
Amada Co., Ltd. 26,000 135
Minebea Co., Ltd. 26,000 132
Takara Holdings Inc. 14,000 131
* Mitsukoshi, Ltd. 32,000 130
Dowa Mining Co. Ltd. 24,000 129
Nippon Meat Packers, Inc. 13,000 127
38
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Bandai Co., Ltd. 5,000 $ 126
Ishikawajima-Harima Heavy Industries Co. 88,000 126
* Mitsubishi Materials Corp. 81,000 125
Benesse Corp. 5,100 124
Skylark Co., Ltd. 7,500 124
Uny Co., Ltd. 12,000 123
Kawasaki Heavy Industries Ltd. 100,000 123
Shimamura Co., Ltd. 1,800 122
Onward Kashiyama Co., Ltd. 10,000 121
Kamigumi Co., Ltd. 17,000 120
Shimano, Inc. 5,800 120
Dai-Nippon Ink & Chemicals, Inc. 63,000 120
Ube Industries Ltd. 59,000 118
Taiyo Yuden Co., Ltd. 9,000 118
* All Nippon Airways Co., Ltd. 47,000 116
Nisshin Seifun Group Inc. 13,000 116
Toyoda Gosei Co., Ltd. 4,000 115
World Co., Ltd. 3,600 115
FamilyMart Co., Ltd. 5,000 114
Tosoh Corp. 34,000 114
NSK Ltd. 31,000 113
Denki Kagaku Kogyo K.K 35,000 113
Sankyo Co., Ltd. 3,500 111
TIS Inc. 3,200 108
Meitec Corp. 2,800 108
House Foods Industry Corp. 9,500 108
Dentsu Inc. 21 106
Daimaru, Inc. 19,000 105
NGK Spark Plug Co. 13,000 105
Ebara Corp. 24,000 104
Fuji Electric Holdings Co., Ltd. 46,000 101
Obic Co., Ltd. 500 101
Makita Corp. 10,000 100
Mitsubishi Gas Chemical Co. 29,000 99
Yamaha Motor Co., Ltd. 9,000 98
Nissan Chemical Industries, Ltd. 11,000 98
Susuken Co., Ltd. 3,000 97
USS Co., Ltd. 1,370 97
The Suruga Bank, Ltd. 15,000 96
Toyobo Ltd. 44,000 96
* Sumitomo Heavy Industries Ltd. 42,000 95
Showa Shell Sekiyu K.K 11,500 93
Q.P. Corp. 11,200 93
Kikkoman Corp. 13,000 92
Net One Systems Co., Ltd. 12 92
Fuji Television Network, Inc. 17 92
* Sega Corp. 9,600 91
Sumitomo Bakelite Co. Ltd. 14,000 91
Yamazaki Baking Co., Ltd. 11,000 91
Seino Transportation Co., Ltd. 11,000 91
* Hokugin Financial Group, Inc. 66,000 89
Aoyama Trading Co., Ltd. 4,500 89
* Dai-Nippon Screen Manufacturing Co., Ltd. 13,000 89
Itochu Techno-Science Corp. 2,800 87
Ito En, Ltd. 2,000 86
Nippon Sheet Glass Co., Ltd. 29,000 85
Kurita Water Industries Ltd. 7,000 84
Nippon Shokubai Co., Ltd. 11,000 83
Central Glass Co., Ltd. 13,000 82
Gunze Ltd. 18,000 81
Nichii Gakkan Co. 1,430 81
Aeon Credit Service Co. Ltd. 1,870 80
Shimachu Co. 4,000 79
Mitsui Engineering & Shipbuilding Co., Ltd. 48,000 79
Meiji Seika Kaisha Ltd. 19,000 77
Tokyo Style Co. 7,000 76
Teikoku Oil Co., Ltd. 15,000 75
Daicel Chemical Industries Ltd. 18,000 74
Komori Corp. 5,000 74
Asatsu-DK Inc. 2,800 72
Koyo Seiko Co., Ltd. 7,000 72
Namco Ltd. 2,500 69
Mitsumi Electric Co., Ltd. 6,200 68
Sanden Corp. 11,000 68
Toyo Suisan Kaisha, Ltd. 6,000 67
Mitsubishi Logistics Corp. 8,000 67
Nishimatsu Construction Co. 20,000 66
Sumitomo Osaka Cement Co., Ltd. 33,000 65
* Comsys Holdings Corp. 10,000 64
Okumura Corp. 15,000 64
Sapparo Holdings Ltd. 23,000 63
Nippon Kayaku Co., Ltd. 12,000 59
Wacoal Corp. 7,000 58
Coca-Cola West Japan Co. Ltd. 2,900 57
Hitachi Cable Ltd. 15,000 56
Meiji Dairies Corp. 13,000 56
Nippon Sanso Corp. 13,000 55
Hitachi Software Engineering Co., Ltd. 2,100 54
Hankyu Department Stores, Inc. 8,000 54
Autobacs Seven Co., Ltd. 2,200 51
Nisshinbo Industries, Inc. 9,000 50
* Ishihara Sangyo Kaisha Ltd. 25,000 50
Bellsystem24, Inc. 240 49
Nichirei Corp. 15,000 49
Tokyo Broadcasting System, Inc. 3,000 48
Kinden Corp. 10,000 47
Kokuyo Co., Ltd. 4,300 47
Toda Corp. 16,000 45
Aderans Co. Ltd. 2,800 45
Katokichi Co., Ltd. 2,700 44
39
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
* Anritsu Corp. 6,000 $ 40
Amano Corp. 5,000 36
Kaken Pharmaceutical Co. 7,000 35
Ariake Japan Co., Ltd. 1,100 35
* Snow Brand Milk Products Co. 12,000 35
Capcom Co., Ltd. 2,500 31
Saizeriya Co., Ltd. 2,900 29
* Kanebo Ltd. 28,000 28
* Matsumotokiyoshi Co., Ltd. - When Issued 1,100 25
Matsumotokiyoshi Co., Ltd. 1,100 25
Takuma Co., Ltd. 4,000 22
-------------
$ 126,297
-------------
LUXEMBOURG (0.1%)
Arcelor 29,338 511
NETHERLANDS (5.5%)
Royal Dutch Petroleum Co. 173,736 9,160
ING Groep NV 146,906 3,426
Koninklijke (Royal) Philips Electronics NV 109,684 3,203
Unilever NV 47,591 3,113
* ABN-AMRO Holding NV 127,963 2,994
* Aegon NV 112,997 1,672
* Koninklijke KPN NV 176,438 1,362
STMicroelectronics NV 48,879 1,326
Akzo Nobel NV 22,575 871
* ASML Holding NV 38,256 759
* Koninklijke Ahold NV 90,405 689
Reed Elsevier NV 53,079 659
TPG NV 27,443 643
Heineken NV 15,999 609
Verenigde Nederlandse Uitgeversbedrijven NV 18,539 586
European Aeronautic Defence and Space Co. 23,304 554
Wolters Kluwer NV 23,253 364
DSM NV 6,873 338
* Koninklijke Numico NV 12,019 332
Rodamco Europe NV 4,197 244
James Hardie Industries NV 39,967 207
Euronext NV 7,724 196
Wereldhave NV 2,356 176
* Qiagen NV 10,946 134
* IHC Caland NV 2,264 123
Vedior NV 7,831 122
Koninklijke Vendex KBB NV 7,459 104
Oce NV 6,587 101
Hagemeyer NV 6,827 15
-------------
$ 34,082
-------------
NEW ZEALAND (0.2%)
Telecom Corp. of New Zealand Ltd. 160,652 566
Sky City Entertainment Group Ltd. 39,726 120
Contact Energy Ltd. 27,315 96
Fletcher Building Ltd. 34,487 96
Carter Holt Harvey Ltd. 63,968 79
Auckland International Airport Ltd. 16,132 74
The Warehouse Group Ltd. 13,360 45
* Fletcher Challenge Forests Ltd. Pfd. 43,386 39
Fisher & Paykel Healthcare Corp. Ltd. 4,355 36
Fisher & Paykel Appliances Holdings Ltd. 14,260 36
* Tower Ltd. 38,377 31
* Sky Network Television, Ltd. 8,195 30
Independent Newspapers Ltd. 6,105 21
NGC Holdings, Ltd. 12,944 19
* Fletcher Challenge Forests Ltd. 2,482 2
-------------
$ 1,290
-------------
NORWAY (0.5%)
Norsk Hydro ASA 11,492 709
Telenor ASA 63,326 414
Statoil ASA 36,570 411
DNB NOR ASA 60,480 404
Orkla ASA 15,120 339
Norske Skogindustrier ASA 8,000 153
* Storebrand ASA 16,000 104
Frontline Ltd. 3,610 94
Tomra Systems ASA 13,900 84
* Tandberg ASA 9,400 69
Schibsted ASA 3,930 68
* Aker Kvaerner ASA 1,837 31
Smedvig ASA A Shares 3,320 25
-------------
$ 2,905
-------------
PORTUGAL (0.4%)
Portugal Telecom SGPS SA 77,909 784
Electricidade de Portugal SA 143,086 377
Banco Comercial Portugues SA 167,852 375
Banco Espirito Santo SA 9,181 151
Brisa-Auto Estradas de Portugal SA 17,975 120
Banco BPI SA 31,375 116
* PT Multimedia-Servicos de Telecomunicacoes e
Multimedia, SGPS, SA 4,325 84
40
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
* Sonae SGPS SA 80,058 $ 67
Cimpor-Cimento de Portugal SA 12,366 64
* Jeronimo Martins & Filho, SGPS, SA 2,748 36
-------------
$ 2,174
-------------
SINGAPORE (0.8%)
DBS Group Holdings Ltd. 88,082 762
United Overseas Bank Ltd. 93,504 727
Singapore Telecommunications Ltd. 507,900 586
Oversea-Chinese Banking Corp., Ltd. 78,650 560
Singapore Press Holdings Ltd. 28,000 312
Singapore Airlines Ltd. 41,751 275
Venture Corp. Ltd. 17,000 200
Keppel Corp., Ltd. 40,000 144
City Developments Ltd. 37,000 132
Singapore Technologies Engineering Ltd. 100,906 121
* Neptune Orient Lines Ltd. 88,000 112
Fraser & Neave Ltd. 14,130 105
* Chartered Semiconductor Manufacturing Ltd. 90,398 92
Capitaland Ltd. 95,000 87
Singapore Exchange Ltd. 79,000 79
ComfortDelgro Corp Ltd. 110,000 53
United Overseas Land Ltd. 45,000 51
Creative Technology Ltd. 4,450 47
Allgreen Properties Ltd. 65,000 43
Sembcorp Industries Ltd. 56,000 42
SembCorp Marine Ltd. 68,000 40
Singapore Land Ltd. 16,000 37
* ST Assembly Test Services Ltd. 30,000 37
Sembcorp Logistics Ltd. 28,000 33
Singapore Post Ltd. 77,000 32
* Datacraft Asia Ltd. 25,000 32
Keppel Land Ltd. 29,000 27
Jardine Cycle N Carriage Ltd. 7,037 24
Wing Tai Holdings Ltd. 25,000 12
Parkway Holdings Ltd. 20,000 11
SMRT Corp. Ltd. 25,000 9
Overseas Union Enterprise Ltd. 2,000 8
-------------
$ 4,832
-------------
SPAIN (3.6%)
* Telefonica SA 374,393 5,497
Banco Santander Central Hispano SA 358,370 4,245
Banco Bilbao Vizcaya Argentaria SA 251,763 3,477
Repsol-YPF SA 75,638 1,475
Endesa SA 74,193 1,427
Iberdrola SA 63,485 1,255
Banco Popular Espanol SA 12,727 759
Altadis SA 22,927 651
Gas Natural SDG SA 16,209 379
ACS, Actividades de Construccion y Servicios, SA 7,648 373
Industria de Diseno Textil SA 17,704 360
Abertis Infraestructuras SA 19,974 302
Union Fenosa SA 14,696 276
Acerinox SA 3,820 180
Grupo Ferrovial, SA 4,984 175
Fomento de Construc y Contra SA 3,820 141
Acciona SA 2,144 130
Sacyr Vallehermoso SA 8,461 128
Amadeus Global Travel Distribution SA 18,872 123
Indra Sistemas, SA 9,069 116
* Zeltia SA 14,509 102
Promotora de Informaciones SA 6,947 101
Corporacion Mapfre SA 6,152 87
Telefonica Publicidad e Informacion, SA 14,486 79
* NH Hoteles SA 6,197 71
Sociedad General de Aguas de Barcelona SA 4,442 66
* Antena 3 Television 1,199 53
-------------
$ 22,028
-------------
SWEDEN (2.2%)
* Telefonaktiebolaget LM
Ericsson AB Class B 1,212,162 2,173
Nordea AB 195,674 1,469
Hennes & Mauritz AB B Shares 38,265 909
Svenska Handelsbanken AB A Shares 43,770 894
TeliaSonera AB 136,643 714
Sandvik AB 18,283 630
Svenska Cellulosa AB B Shares 15,010 613
Volvo AB B Shares 18,770 574
Skandinaviska Enskilda Banken AB A Shares 38,324 565
Electrolux AB Series B 23,936 526
* Tele2 AB B Shares 7,696 411
Securitas AB B Shares 24,340 328
Atlas Copco AB A Shares 9,000 322
Swedish Match AB 28,831 295
Skanska AB B Shares 32,176 284
Assa Abloy AB 23,800 283
Skandia Forsakrings AB 66,500 242
Volvo AB A Shares 8,152 239
SKF AB B Shares 6,070 235
Atlas Copco AB B Shares 5,330 174
Eniro AB 14,400 138
Holmen AB 3,800 135
41
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Getinge AB-B Shares 13,600 $ 130
Drott AB B Shares 6,870 130
Gambro AB A Shares 15,600 129
Castellum AB 4,600 109
Svenskt Stal AB A Shares 5,730 102
Trelleborg AB B Shares 6,220 101
* Modern Times Group AB 4,600 97
SKF AB A Shares 2,260 88
Svenska Handelsbanken AB B Shares 4,390 87
Alfa Laval AB 4,900 75
Billerud Aktiebolag 4,600 69
* SAS AB 5,875 56
OM HEX AB 4,260 53
Gambro AB B Shares 6,200 51
Hoganas AB B Shares 2,300 49
* WM-Data AB Class B 19,000 41
Axfood AB 1,550 36
Svenskt Stal AB 580 10
-------------
$ 13,566
-------------
SWITZERLAND (7.2%)
Novartis AG (Registered) 196,856 8,938
Nestle SA (Registered) 33,595 8,394
UBS AG 97,185 6,656
Roche Holdings AG 58,430 5,894
Credit Suisse Group (Registered) 99,520 3,641
Swiss Re (Registered) 26,947 1,819
Zurich Financial Services AG 12,037 1,732
Cie. Financiere Richemont AG 41,555 998
Swisscom AG 2,116 698
* ABB Ltd. 136,011 690
Adecco SA (Registered) 10,400 669
Holcim Ltd. (Registered) 11,981 558
* CIBA Specialty Chemicals AG (Registered) 5,364 415
Serono SA Class B 562 401
Roche Holdings AG (Bearer) 2,834 393
Synthes-Stratec Inc. 342 338
Swatch Group AG (Bearer) 2,602 312
Givaudan SA 557 289
SGS Societe Generale de Surveillance
Holding SA (Registered) 335 210
Lonza AG (Registered) 3,101 178
* Clariant AG 11,804 174
Nobel Biocare Holding AG 1,650 161
* Logitech International SA 3,666 159
Geberit AG 314 154
Swatch Group AG (Registered) 5,145 123
* Schindler Holding AG (Ptg. Ctf.) 445 109
Unaxis Holding AG 722 102
Kuoni Reisen Holding AG (Registered) 254 85
Sulzer AG (Registered) 306 82
* Kudelski SA 2,391 79
Valora Holding AG 246 61
-------------
$ 44,512
-------------
UNITED KINGDOM (25.9%)
BP PLC 1,813,782 14,709
* HSBC Holdings PLC 920,592 14,469
Vodafone Group PLC 5,781,563 14,335
GlaxoSmithKline PLC 506,132 11,598
Royal Bank of Scotland Group PLC 239,835 7,067
AstraZeneca Group PLC 146,323 7,020
Shell Transport & Trading Co. PLC 830,211 6,175
Barclays PLC 560,750 5,002
HBOS PLC 327,958 4,248
Lloyds TSB Group PLC 479,463 3,845
Diageo PLC 264,127 3,475
Tesco PLC 624,878 2,883
BT Group PLC 744,360 2,508
Rio Tinto PLC 88,746 2,451
Unilever PLC 237,965 2,218
National Grid Transco PLC 267,332 1,915
British American Tobacco PLC 131,532 1,813
BHP Billiton PLC 205,114 1,792
Aviva PLC 188,395 1,653
BG Group PLC 292,608 1,502
Prudential PLC 167,426 1,415
Centrica PLC 354,130 1,338
* British Sky Broadcasting Group PLC 104,779 1,319
Cadbury Schweppes PLC 171,030 1,256
Compass Group PLC 179,909 1,224
Imperial Tobacco Group PLC 60,433 1,190
GUS PLC 83,682 1,159
Reckitt Benckiser PLC 49,860 1,128
Marks & Spencer Group PLC 195,032 1,009
Legal & General Group PLC 543,503 975
ScottishPower PLC 144,603 964
Kingfisher PLC 191,338 954
Reed Elsevier PLC 105,448 882
WPP Group PLC 87,850 863
Scottish & Southern Energy PLC 71,158 857
Boots Group PLC 66,591 824
BAA PLC 88,858 789
BAE Systems PLC 256,961 774
Amersham PLC 55,780 764
Pearson PLC 66,401 739
Land Securities Group PLC 38,756 688
SABMiller PLC 66,267 687
42
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
J. Sainsbury PLC 121,806 $ 682
Wolseley PLC 47,248 668
Smith & Nephew PLC 77,254 649
BOC Group PLC 41,739 638
InterContinental Hotels Group PLC 60,235 570
Man Group PLC 21,755 569
Carnival PLC 14,011 565
3i Group PLC 48,105 532
Rentokil Initial PLC 155,709 530
Hilton Group PLC 130,884 527
Smiths Group PLC 44,435 526
Reuters Group PLC 118,841 500
Granada PLC 216,871 474
Cable and Wireless PLC 191,262 457
Hanson Building Materials PLC 61,778 454
Next PLC 22,452 451
Scottish & Newcastle PLC 64,315 435
Safeway PLC 83,432 424
British Land Co., PLC 39,204 410
Amvescap PLC 56,290 409
United Utilities PLC 43,994 390
Severn Trent PLC 29,078 390
Rolls-Royce Group PLC 122,351 388
Dixons Group PLC 153,404 382
Royal & Sun Alliance Insurance Group PLC 232,340 367
Imperial Chemical Industries PLC 96,508 344
Rexam PLC 44,102 338
Whitbread PLC 25,165 324
Exel PLC 24,401 323
Emap PLC 20,815 319
Friends Provident PLC 134,935 319
Johnson Matthey PLC 17,675 310
The Sage Group PLC 98,409 310
Daily Mail and General Trust 25,836 305
Tomkins PLC 63,096 302
Slough Estates PLC 37,841 298
Hays PLC 138,406 297
GKN PLC 61,845 296
Liberty International PLC 23,199 283
Hammerson PLC 24,205 281
Bunzl PLC 36,621 280
LogicaCMG PLC 60,863 279
Signet Group PLC 148,365 274
RMC Group PLC 21,744 272
William Hill PLC 34,668 265
Kelda Group PLC 30,905 259
Enterprise Inns PLC 14,135 257
BPB PLC 41,199 256
Capita Group PLC 57,204 249
Provident Financial PLC 21,269 248
Rank Group PLC 48,172 241
The Peninsular & Oriental Steam
Navigation Co. 57,532 237
United Business Media PLC 26,403 232
Taylor Woodrow PLC 47,768 228
Carlton Communications PLC 53,799 222
Electrocomponents PLC 36,965 215
Persimmon PLC 21,821 210
Kesa Electricals PLC 45,320 209
Brambles Industries PLC 56,129 204
Yell Group PLC 37,358 204
* International Power PLC 91,466 202
Associated British Ports Holdings PLC 24,730 199
* Canary Wharf Group PLC 40,766 195
Tate & Lyle PLC 34,861 194
* ARM Holdings PLC 83,466 192
* George Wimpey PLC 28,691 192
EMI Group PLC 66,627 189
* British Airways PLC 45,312 189
Alliance Unichem PLC 20,114 187
Mitchells & Butlers PLC 44,660 180
Barratt Developments PLC 18,327 178
Misys PLC 46,192 175
Cobham PLC 8,315 174
IMI PLC 27,366 165
Aegis Group PLC 89,499 158
FirstGroup PLC 31,833 156
* Celltech Group PLC 22,810 154
The Berkeley Group PLC 9,458 149
BBA Group PLC 32,803 147
Close Brothers Group PLC 11,081 146
Cattles PLC 24,169 145
Pilkington PLC 83,735 144
United Utilities PLC 25,326 138
Balfour Beatty PLC 35,238 138
MFI Furniture Group PLC 43,698 118
Schroders PLC 9,729 110
Stagecoach Group PLC 78,315 110
Amec PLC 23,276 108
Serco Group PLC 34,984 108
* Invensys PLC 303,905 99
The Davis Service Group PLC 13,854 93
SSL International PLC 15,601 92
Great Portland Estates PLC 21,249 89
FKI PLC 45,877 88
* HHG PLC 116,391 84
De La Rue Group PLC 15,481 77
Securicor PLC 41,981 72
43
- --------------------------------------------------------------------------------
MARKET
TAX-MANAGED VALUE*
INTERNATIONAL FUND SHARES (000)
- --------------------------------------------------------------------------------
Novar PLC 28,502 $ 70
ScottishPower PLC ADR 2,320 63
Aggreko PLC 21,868 60
-------------
$ 159,880
-------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $564,540) $ 607,547
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.5%)
- --------------------------------------------------------------------------------
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
0.98%, 1/2/2004 $ 748 748
0.99%, 1/2/2004--Note E 2,520 2,520
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $3,268) $ 3,268
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.2%)(Cost $567,808) $ 610,815
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.8%)
- --------------------------------------------------------------------------------
Receivables for Capital Shares Sold 23,118
Other Assets--Note B 1,206
Payables for Investment Securities Purchased (16,016)
Other Liabilities--Note E (3,180)
-------------
$ 5,128
-------------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 615,943
================================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
ADR--American Depositary Receipt.
(Ptg. Ctf.)--Participating Certificates.
- --------------------------------------------------------------------------------
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $ 647,034
Undistributed Net Investment Income 21
Accumulated Net Realized Losses (74,226)
Unrealized Appreciation
Investment Securities 43,007
Foreign Currencies 107
- --------------------------------------------------------------------------------
NET ASSETS $ 615,943
================================================================================
Investor Shares--Net Assets
Applicable to 58,616,474 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 513,759
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INVESTOR SHARES $ 8.76
================================================================================
Institutional Shares--Net Assets
Applicable to 11,654,507 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $ 102,184
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $ 8.77
================================================================================
See Note C in Notes to Financial Statements for the tax- basis components of net
assets.
44
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THIS PAGE INTENTIONALLY LEFT BLANK.
(C) 2004 THE VANGUARD GROUP, INC.
ALL RIGHTS RESERVED.
VANGUARD MARKETING
CORPORATION, DISTRIBUTOR.
F870 022004
ITEM 2: Code of Ethics. The Board of Trustees has adopted a code of ethics that
applies to the principal executive officer, principal financial officer,
principal accounting officer or controller of the Registrant and The Vanguard
Group, Inc., and to persons performing similar functions.
ITEM 3: Audit Committee Financial Expert. All of the members of the Audit
Committee have been determined by the Registrant's Board of Trustees to be Audit
Committee Financial Experts. The members of the Audit Committee are: Charles D.
Ellis, Rajiv L. Gupta, JoAnn Heffernan Heisen, Burton G. Malkiel, Alfred M.
Rankin, Jr., and J. Lawrence Wilson. All Audit Committee members are independent
under applicable rules.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(A) AUDIT FEES.
AUDIT FEES OF THE REGISTRANT
Fiscal Year Ended December 31, 2003: $83,000
Fiscal Year Ended December 31, 2002: $60,000
AGGREGATE AUDIT FEES OF REGISTERED INVESTMENT COMPANIES IN THE VANGUARD GROUP
Fiscal Year Ended December 31, 2003: $1,660,800
Fiscal Year Ended December 31, 2002: $1,620,200
(B) AUDIT-RELATED FEES.
Fiscal Year Ended December 31, 2003: $324,460
Fiscal Year Ended December 31, 2002: $420,280
Includes fees billed in connection with assurance and related services provided
to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and
other registered investment companies in the Vanguard Group.
(C) TAX FEES.
Fiscal Year Ended December 31, 2003: $409,900
Fiscal Year Ended December 31, 2002: $103,200
Includes fees billed in connection with compliance, planning, and advice
services provided to the Registrant, The Vanguard Group, Inc., Vanguard
Marketing Corporation, and other registered investment companies in the Vanguard
Group and related to income, excise, and stamp taxes.
(D) ALL OTHER FEES.
Fiscal Year Ended December 31, 2003: $31,000
Fiscal Year Ended December 31, 2002: $367,500
Includes fees billed in connection with benefit plans and statements, risk
management, privacy matters, educational training materials, and other business
advisory services provided to the Registrant, The Vanguard Group, Inc., Vanguard
Marketing Corporation, and other registered investment companies in the Vanguard
Group.
(E) (1) PRE-APPROVAL POLICIES. The policy of the Registrant's Audit Committee is
to consider and, if appropriate, approve before the principal accountant is
engaged for such services, all specific audit and permitted non-audit services
provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other
entities controlled by The Vanguard Group, Inc. that provide ongoing services to
the Registrant; and (4) other registered investment companies in the Vanguard
Group. In making a determination, the Audit Committee considers whether the
services are consistent with maintaining the principal accountant's
independence.
In the event of a contingency situation in which the principal accountant
is needed to provide services in between scheduled Audit Committee meetings, the
chairman of the Audit Committee would be called on to consider and, if
appropriate, pre-approve audit or permitted non-audit services in an amount
sufficient to complete services through the next Audit Committee meeting, and to
determine if such services would be consistent with maintaining the accountant's
independence. At the next scheduled Audit Committee meeting, services and fees
would be presented to the Audit Committee for formal consideration, and, if
appropriate, approval by the entire Audit Committee. The Audit Committee would
again consider whether such services and fees are consistent with maintaining
the principal accountant's independence.
The Registrant's Audit Committee is informed at least annually of all audit
and non-audit services provided by the principal accountant to the Vanguard
complex, whether such services are provided to: (1) the Registrant; (2) The
Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc.
that provide ongoing services to the Registrant; or (4) other registered
investment companies in the Vanguard Group.
(2) No percentage of the principal accountant's fees or services were
approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) For the most recent fiscal year, over 50% of the hours worked under the
principal accountant's engagement were not performed by persons other than
full-time, permanent employees of the principal accountant.
(G) AGGREGATE NON-AUDIT FEES.
Fiscal Year Ended December 31, 2003: $440,900
Fiscal Year Ended December 31, 2002: $470,700
Includes fees billed for non-audit services provided to the Registrant, The
Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered
investment companies in the Vanguard Group.
(h) For the most recent fiscal year, the Audit Committee has determined that the
provision of all non-audit services was consistent with maintaining the
principal accountant's independence.
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 Control Over Financial Reporting. There were no significant
changes in Registrant's internal control over financial reporting or in other
factors that could significantly affect this control subsequent to the date of
the evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10: EXHIBITS. The following exhibits are attached hereto:
(a) Code of Ethics
(b) Certifications
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: February 20, 2004
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: February 20, 2004
VANGUARD TAX-MANAGED FUNDS
BY:_____________(signature)________________
(HEIDI STAM)
THOMAS J. HIGGINS*
TREASURER
Date: February 20, 2004
*By Power of Attorney. See File Number 2-57689, filed on December 26, 2002.
Incorporated by Reference.