-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R5QYbwMmPGfUUm+v9SuTaOk+2qVdJ+XXDstk8GINs9USklGm3erhD3EQwxJo0T0s DhRARTZgjcBHDsU8mwgx0w== 0000932471-03-000737.txt : 20030904 0000932471-03-000737.hdr.sgml : 20030904 20030904092029 ACCESSION NUMBER: 0000932471-03-000737 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030904 EFFECTIVENESS DATE: 20030904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANGUARD TAX MANAGED FUNDS CENTRAL INDEX KEY: 0000923202 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07175 FILM NUMBER: 03880445 BUSINESS ADDRESS: STREET 1: PO BOX 2600 STREET 2: VM #V34 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 610-669-62 MAIL ADDRESS: STREET 1: PO BOX 2600 VM V#34 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD TAX-MANAGED FUNDS DATE OF NAME CHANGE: 20011121 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD TAX MANAGED FUND INC DATE OF NAME CHANGE: 19940517 N-CSR 1 taxmanagedformncsr.txt TAX MANAGED SEMIANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-07175 Name of Registrant: Vanguard Tax-Managed Funds Address of Registrant: P.O. Box 2600 Valley Forge, PA 19482 Name and address of agent for service: R. Gregory Barton, Esquire P.O. Box 876 Valley Forge, PA 19482 Registrant's telephone number, including area code: (610) 669-1000 Date of fiscal year end: December 31 Date of reporting period: January 1, 2003 - June 30, 2003 Item 1: Reports to Shareholders VANGUARD TAX-MANAGED FUNDS(R) SEMIANNUAL REPORT JUNE 30, 2003 VANGUARD(R) TAX-MANAGED BALANCED FUND VANGUARD(R) TAX-MANAGED GROWTH AND INCOME FUND VANGUARD(R) TAX-MANAGED CAPITAL APPRECIATION FUND VANGUARD(R) TAX-MANAGED SMALL-CAP FUND VANGUARD(R) TAX-MANAGED INTERNATIONAL FUND ETERNAL PRINCIPLES Markets change, but the principles of successful investing do not. During the past few years, radical upheaval in the stock market has displayed the power of this simple truth to dramatic effect. In the late 1990s, stocks experienced one of the greatest bull markets in financial history. Then, in March 2000, the longest downturn since the Great Depression began. In both bull and bear markets, however, the principles of successful investing are identical: balance, diversification, and attention to costs. Balance among stock, bond, and money market funds allows you to pursue long-term growth while moderating your risk. Diversification limits your exposure to the disasters that can befall any one security or sector. Attention to costs means you keep a larger share of any rewards produced by your investments. These principles are timeless. In fact, they're the basis of our very first mutual fund--Vanguard(R) Wellington(TM) Fund, a balanced portfolio established in 1929. Over time, balance, diversification, and attention to costs have proven to be the master keys to investment success. - -------------------------------------------------------------------------------- SUMMARY * During the first half of 2003, returns for Vanguard's five tax-managed funds ranged from 8.4% to 13.4%. * Bonds posted respectable returns and stocks surged, with smaller growth stocks leading the market. * Three of the five funds outperformed their respective average peer funds during the half-year. - -------------------------------------------------------------------------------- CONTENTS 1 Letter from the Chairman 6 Fund Profiles 13 Glossary of Investment Terms 15 Performance Summaries 18 Your Fund's After-Tax Returns 19 Financial Statements 40 Advantages of Vanguard.com - -------------------------------------------------------------------------------- [Picture of John J. Brennan] JOHN J. BRENNAN LETTER FROM THE CHAIRMAN Fellow Shareholder, The stock market surged during the first half of 2003, with smaller growth stocks leading the charge. In this environment, Vanguard's tax-managed funds posted six-month returns ranging from 8.4% for Vanguard Tax-Managed Balanced Fund to 13.4% for the Institutional Shares of Vanguard Tax-Managed Capital Appreciation Fund. Three of the five funds also outpaced their average mutual fund peers. The table at left shows the total returns for the funds' various share classes, the average peers, and the unmanaged benchmark indexes. Each fund's total returns are based on the change in net asset value during the half-year plus income dividends distributed to shareholders. The table on page 5 provides details about share prices and distributions. STOCKS RALLIED DESPITE WAR The war with Iraq, a lackluster economy, and rising unemployment did little to impede the U.S. stock market during the half-year ended June 30. Indeed, the start of the war in mid-March marked the beginning of a sharp rally in stocks that outlasted the conflict. For the first half of 2003, the overall U.S. stock market, as measured by the Wilshire 5000 Total Market Index, returned a stellar 12.9%. The gain was almost universal, with all market - ----------------------------------------------------------- TOTAL RETURNS SIX MONTHS ENDED JUNE 30, 2003 - ----------------------------------------------------------- VANGUARD TAX-MANAGED BALANCED FUND 8.4% Average Balanced Fund* 8.7 Balanced Composite Index** 8.1 - ----------------------------------------------------------- VANGUARD TAX-MANAGED GROWTH AND INCOME FUND Investor Shares 11.7% Admiral Shares 11.7 Institutional Shares 11.7 Average Large-Cap Core Fund* 10.4 S&P 500 Index 11.8 - ----------------------------------------------------------- VANGUARD TAX-MANAGED CAPITAL APPRECIATION FUND Investor Shares 13.3% Admiral Shares 13.3 Institutional Shares 13.4 Average Multi-Cap Core Fund* 12.0 Russell 1000 Index 12.3 - ----------------------------------------------------------- VANGUARD TAX-MANAGED SMALL-CAP FUND Investor Shares 12.8% Institutional Shares 12.9 Average Small-Cap Core Fund* 15.6 S&P SmallCap 600 Index 12.9 - ----------------------------------------------------------- VANGUARD TAX-MANAGED INTERNATIONAL FUND Investor Shares 9.5% Institutional Shares 9.5 Average International Fund* 8.6 MSCI EAFE Index 9.5 - ----------------------------------------------------------- *Derived from data provided by Lipper Inc. For the average balanced fund, the bond component is not tax-exempt. **50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index. 1 - --------------------------------------------------------------- MARKET BAROMETER TOTAL RETURNS PERIODS ENDED JUNE 30, 2003 -------------------------------- Six One Five Months Year Years* - --------------------------------------------------------------- STOCKS Russell 1000 Index (Large-caps) 12.3% 1.0% -1.2% Russell 2000 Index (Small-caps) 17.9 -1.6 1.0 Wilshire 5000 Index (Entire market) 12.9 1.3 -1.3 MSCI All Country World Index Free ex USA (International) 11.1 -4.2 -2.8 -------------------------------------------------------------- BONDS Lehman Aggregate Bond Index 3.9% 10.4% 7.5% (Broad taxable market) Lehman Municipal Bond Index 3.8 8.7 6.3 Citigroup 3-Month Treasury Bill Index 0.6 1.4 3.9 =============================================================== CPI Consumer Price Index 1.5% 2.1% 2.4% - --------------------------------------------------------------- *Annualized. segments and industrial sectors within the broad index posting positive returns. Small-capitalization stocks outperformed large-caps. And according to most (but not all) style-based indexes, growth stocks, whose prices reflect expectations for above-average earnings growth, outpaced value stocks. Technology and consumer discretionary stocks (such as retailers and restaurants) were among the biggest winners, with each sector returning more than 17%. Almost without exception, markets overseas contributed to the bounty. The Morgan Stanley Capital International All Country World Index Free ex USA returned 11.1% in U.S. dollars, with emerging markets posting the highest returns. BONDS ALSO RALLIED; INTEREST RATES FELL TO 45-YEAR LOWS In the fixed income arena, risk was rewarded during the six months. The lower the credit rating of the bond issuer, the higher the return. The Lehman Brothers High Yield Bond Index surged 18.5%--well above the respectable six-month return of 3.9% for the overall bond market, as measured by the Lehman Aggregate Bond Index. The yield of the 10-year U.S. Treasury note fell 30 basis points (0.30 percentage point) to 3.51%, as bond prices rose. Meanwhile, short-term interest rates fell to their lowest levels in 45 years. In late June, citing concerns about sustainable economic growth and potential deflation, the Federal Reserve Board lowered the target for the federal funds rate (the interest rate charged for overnight loans between banks) by 25 basis points to 1.00%. It was the 13th rate cut in 21/2 years. The yield of the 3-month Treasury bill fell 34 basis points during the six months. - -------------------------------------------------------------------------------- ADMIRAL(TM) SHARES A lower-cost class of shares available to many longtime shareholders and to those with significant investments in the fund. INSTITUTIONAL SHARES This class of shares also carries low expenses and is available for a minimum investment of $10 million. Exposure to smaller growth stocks gave the Tax-Managed Capital Appreciation Fund an edge over its sibling funds during the half-year. - -------------------------------------------------------------------------------- 2 OUR FUNDS' RETURNS TRACKED MARKET TRENDS As index-oriented portfolios, the five funds reflected overall trends in the financial markets for the six months. THE TAX-MANAGED BALANCED FUND, as you would expect, provided a return midway between the stock market's leap and the bond market's respectable step upward. The fund's half-year return of 8.4% was excellent in absolute terms, although it slightly lagged the average gain of competing balanced funds, which generally devote more of their assets to stocks and taxable bonds. To maintain a tax-exempt status for income from its municipal bond holdings, the Tax-Managed Balanced Fund keeps slightly more than 50% of its assets in muni issues. The TAX-MANAGED GROWTH AND INCOME FUND and the TAX-MANAGED CAPITAL APPRECIATION FUND (+11.7% and +13.3%, respectively, for Investor Shares) each outpaced the average return of peer funds by 1.3 percentage points. Every industry sector within each fund gained value during the half-year, and the majority posted double-digit returns. The TAX-MANAGED CAPITAL APPRECIATION FUND had the largest gain because its benchmark, the Russell 1000 Index, includes a range of mid-cap stocks as well as large-caps. In addition, the Capital Appreciation Fund favors the lower-yielding stocks in its index. The fund therefore has both exposure to mid-cap stocks and a growth tilt--an advantage when smaller growth stocks lead the market as they did during the half-year. The Tax-Managed Growth and Income Fund bases its strategy on the Standard & Poor's 500 Index, which is heavily dominated by large-cap stocks. The TAX-MANAGED SMALL-CAP FUND, with a 12.8% return for Investor Shares, fell in between the results of its two larger fund siblings. The fund's benchmark is the S&P SmallCap 600 Index, whose composition, determined by a committee, generally excludes companies with less than three years of operating history and four quarters of profits. The S&P criteria eliminated many of the more speculative stocks that benefited most from the rebound during the half-year. This factor partly explains why the fund lagged the Tax-Managed Capital Appreciation Fund and the average small-cap core fund. (We note, however, that this same factor worked in the Small-Cap Fund's favor during much of the previous three years, when those speculative stocks were pummeled.) With its six-month return of 9.5%, the TAX-MANAGED INTERNATIONAL FUND outperformed its average competitor among international equity funds. The fund's gain, while impressive in absolute terms, was the lowest among our - -------------------------------------------------------------------------------- Exposure to smaller growth stocks gace the Tax-Managed Capital Appreciation Fund an edge over its sibling funds the half-year. - -------------------------------------------------------------------------------- 3 four all-stock portfolios. This reflected the fact that international markets lagged the U.S. market for the period. However, their exposure to foreign currency almost universally enhanced their returns as the U.S. dollar declined in response to the weak economy and the increasing trade deficit. THE VALUE OF DIVERSIFICATION Events of the past several years--which saw the height of the dot-com boom, the long bear market in stocks that followed, and the recent resurgence of equities--remind us of the value of diversification, both across and within asset classes. Maintaining a well-diversified portfolio through such times can be a struggle, as investors are constantly being tempted or repelled by the returns of various asset classes or market segments. The balanced investor will never be at the top of the heap at any one moment--after all, one asset class will always do better than another--but he or she won't be on the bottom, either: Balance lets us enjoy much of the gains of the financial markets without plunging to their depths. Vanguard's low-cost tax-managed funds, designed to maximize after- tax returns from the financial markets, can contribute to a diversified portfolio for the tax-sensitive investor. Thank you for entrusting your hard-earned money to us. Sincerely, /S/JOHN J. BRENNAN John J. Brennan Chairman and Chief Executive Officer July 18, 2003 4 - -------------------------------------------------------------------------------- YOUR FUND'S PERFORMANCE AT A GLANCE DECEMBER 31, 2002-JUNE 30, 2003 DISTRIBUTIONS PER SHARE ----------------------- STARTING ENDING INCOME CAPITAL SHARE PRICE SHARE PRICE DIVIDENDS GAINS - -------------------------------------------------------------------------------- Tax-Managed Balanced Fund $15.54 $16.65 $0.190 $0.000 - -------------------------------------------------------------------------------- Tax-Managed Growth and Income Fund Investor Shares $19.15 $21.24 $0.140 $0.000 Admiral Shares 39.35 43.65 0.303 0.000 Institutional Shares 19.15 21.24 0.149 0.000 - -------------------------------------------------------------------------------- Tax-Managed Capital Appreciation Fund Investor Shares $19.49 $22.09 $0.000 $0.000 Admiral Shares 39.24 44.47 0.000 0.000 Institutional Shares 19.49 22.10 0.000 0.000 - -------------------------------------------------------------------------------- Tax-Managed Small-Cap Fund Investor Shares $12.67 $14.29 $0.000 $0.000 Institutional Shares 12.68 14.31 0.000 0.000 - -------------------------------------------------------------------------------- Tax-Managed International Fund Investor Shares $6.43 $7.04 $0.000 $0.000 Institutional Shares 6.43 7.04 0.000 0.000 - -------------------------------------------------------------------------------- 5 FUND PROFILES AS OF JUNE 30, 2003 These Profiles provide snapshots of the funds' characteristics, compared where indicated with both an appropriate market index and a broad market index. Key terms are defined on pages 13 and 14. TAX-MANAGED BALANCED FUND - -------------------------------------------- TOTAL FUND CHARACTERISTICS Yield 1.8% Turnover Rate 15%* Expense Ratio 0.17%* Cash Investments 0.0% - -------------------------------------------- - -------------------------------------------- TEN LARGEST STOCKS (% of equities) General Electric Co. 3.1% (conglomerate) Pfizer Inc. 3.0 (pharmaceuticals) ExxonMobil Corp. 2.6 (oil) Microsoft Corp. 2.5 (software) Citigroup, Inc. 2.4 (banking) Johnson & Johnson 1.7 (pharmaceuticals) Wal-Mart Stores, Inc. 1.6 (retail) Intel Corp. 1.5 (computer hardware) International Business Machines Corp. 1.5 (computer hardware) American International Group, Inc. 1.4 (insurance) - ------------------------------------------ Top Ten 21.3% - ------------------------------------------ Top Ten as % of Total Net Assets 10.3% - ------------------------------------------ The "Ten Largest Stocks" excludes any equity index products. - ---------------------------------------------- VOLATILITY MEASURES COMPARATIVE BROAD FUND INDEX** FUND INDEX+ - ---------------------------------------------- R-Squared 0.99 1.00 0.95 1.00 Beta 1.05 1.00 0.48 1.00 - ---------------------------------------------- - ----------------------------------------------------- SECTOR DIVERSIFICATION (% OF EQUITY PORTFOLIO) COMPARATIVE BROAD FUND INDEX** INDEX+ - ----------------------------------------------------- Auto & Transportation 2.4% 2.1% 2.6% Consumer Discretionary 16.0 13.9 15.7 Consumer Staples 7.1 7.5 6.9 Financial Services 19.7 22.7 22.3 Health Care 16.8 15.4 14.3 Integrated Oils 3.7 4.2 3.5 Other Energy 2.9 1.6 2.3 Materials & Processing 2.9 3.2 3.6 Producer Durables 4.1 3.6 4.0 Technology 14.9 13.7 13.5 Utilities 5.3 7.7 7.1 Other 4.2 4.4 4.2 - ----------------------------------------------------- - --------------------- FUND ASSET ALLOCATION Bonds 52% Stocks 48% - --------------------- *Annualized. **Russell 1000 Index. +Wilshire 5000 Index. 6 - ----------------------------------------------------- EQUITY CHARACTERISTICS COMPARATIVE BROAD FUND INDEX* INDEX** - ----------------------------------------------------- Number of Stocks 548 1,000 5,403 Median Market Cap $33.1B $36.8B $27.7B Price/Earnings Ratio 22.2x 20.9x 21.8x Price/Book Ratio 3.0x 2.9x 2.7x Dividend Yield 1.2% 1.7% 1.6% Return on Equity 21.7% 21.7% 20.5% Earnings Growth Rate 10.2% 8.7% 8.6% Foreign Holdings 0.0% 0.0% 0.9% - ----------------------------------------------------- - ------------------------ EQUITY INVESTMENT FOCUS Market Cap Large Style Blend - ------------------------ - ------------------------------------------------------- FIXED INCOME CHARACTERISTICS COMPARATIVE BROAD FUND INDEX+ INDEX++ - ------------------------------------------------------- Number of Bonds 148 5,474 46,897 Yield to Maturity 2.5% -- -- Average Coupon 4.3% 5.3% 5.2% Average Maturity 5.7 years 6.9 years 13.8 years Average Quality AAA AA+ AA+ Average Duration 4.7 years 5.4 years 7.9 years - ------------------------------------------------------- - ----------------------------- FIXED INCOME INVESTMENT FOCUS Credit Equity High Average Maturity Medium - ----------------------------- - -------------_------------------ DISTRIBUTION BY CREDIT QUALITY (% of fixed income portfolio) Aaa 79.0% Aa 17.2 A 1.9 Baa 1.9 - -------------------------------- Total 100.0% - -------------------------------- - -------------------------------- LARGEST STATE CONCENTRATIONS (% of fixed income portfolio) New York 12.5% Texas 8.7 Pennsylvania 8.5 Massachusetts 7.1 Ohio 7.0 California 6.2 New Jersey 4.9 Arizona 4.6 Michigan 4.1 Florida 3.8 - -------------------------------- Total 67.4% - -------------------------------- - ------------------------------------------------------- DISTRIBUTION BY MATURITY (% of fixed income portfolio) Under 1 Year 21.3% 1-5 Years 13.5 5-10 Years 58.0 10-20 Years 7.2 - ------------------------------------------------------- Total 100.0% - ------------------------------------------------------- *Russell 1000 Index. **Wilshire 5000 Index. +Lehman 7 Year Municipal Bond Index. ++Lehman Municipal Bond Index. VISIT OUR WEBSITE AT WWW.VANGUARD.COM FOR REGULARLY UPDATED FUND INFORMATION. 7 FUND PROFILES (continued) TAX-MANAGED GROWTH AND INCOME FUND - ------------------------------------------------------- PORTFOLIO CHARACTERISTICS COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Number of Stocks 501 500 5,403 Median Market Cap $50.4B $50.4B $27.7B Price/Earnings Ratio 20.8x 20.9x 21.8x Price/Book Ratio 3.0x 3.0x 2.7x Yield 1.7% 1.6% Investor Shares 1.5% Admiral Shares 1.6% Institutional Shares 1.6% Return on Equity 22.5% 22.4% 20.5% Earnings Growth Rate 8.5% 8.5% 8.6% Foreign Holdings 0.0% 0.0% 0.9% Turnover Rate 5%+ -- -- Expense Ratio -- -- Investor Shares 0.18%+ Admiral Shares 0.11%+ Institutional Shares 0.08%+ Cash Investments 0.0% -- -- - ------------------------------------------------------- - -------------------------------------------- TEN LARGEST HOLDINGS (% of total net assets) General Electric Co. 3.2% (conglomerate) Microsoft Corp. 3.1 (software) Pfizer Inc. 3.0 (pharmaceuticals) ExxonMobil Corp. 2.7 (oil) Wal-Mart Stores, Inc. 2.6 (retail) Citigroup, Inc. 2.5 (banking) Johnson & Johnson 1.7 (pharmaceuticals) American International Group, Inc. 1.6 (insurance) International Business Machines Corp. 1.6 (computer hardware) Intel Corp. 1.5 (computer hardware) - -------------------------------------------- Top Ten 23.5% - -------------------------------------------- The "Ten Largest Holdings" excludes any temporary cash investments and equity index products. - ---------------------------------------------- VOLATILITY MEASURES COMPARATIVE BROAD FUND INDEX* FUND INDEX** - ---------------------------------------------- R-Squared 1.00 1.00 0.98 1.00 Beta 1.00 1.00 0.96 1.00 - ---------------------------------------------- - ------------------------ INVESTMENT FOCUS Market Cap Large Style Blend - ------------------------ - ------------------------------------------------------- SECTOR DIVERSIFICATION (% OF PORTFOLIO) COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Auto & Transportation 2.4% 2.5% 2.6% Consumer Discretionary 13.9 13.9 15.7 Consumer Staples 7.9 7.9 6.9 Financial Services 21.9 21.7 22.5 Health Care 14.7 14.7 14.3 Integrated Oils 4.3 4.3 3.5 Other Energy 1.6 1.6 2.3 Materials & Processing 3.1 3.1 3.6 Producer Durables 3.7 3.7 4.0 Technology 14.2 14.3 13.5 Utilities 7.4 7.5 7.1 Other 4.9 4.8 4.2 - ------------------------------------------------------- *S&P 500 Index. **Wilshire 5000 Index. +Annualized. 8 TAX-MANAGED CAPITAL APPRECIATION FUND - ------------------------------------------------------- PORTFOLIO CHARACTERISTICS COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Number of Stocks 545 1,000 5,403 Median Market Cap $31.0B $36.8B $27.7B Price/Earnings Ratio 22.5x 20.9x 21.8x Price/Book Ratio 2.9x 2.9x 2.7x Yield 1.7% 1.6% Investor Shares 1.0% Admiral Shares 1.1% Institutional Shares 1.1% Return on Equity 21.4% 21.7% 20.5% Earnings Growth Rate 10.2% 8.7% 8.6% Foreign Holdings 0.1% 0.0% 0.9% Turnover Rate 13%+ -- -- Expense Ratio -- -- Investor Shares 0.18%+ Admiral Shares 0.11%+ Institutional Shares 0.08%+ Cash Investments 0.0% -- -- - ------------------------------------------------------- - -------------------------------------------- TEN LARGEST HOLDINGS (% of total net assets) General Electric Co. 3.0% (conglomerate) Pfizer Inc. 2.9 (pharmaceuticals) ExxonMobil Corp. 2.5 (oil) Microsoft Corp. 2.4 (software) Citigroup, Inc. 2.4 (banking) Johnson & Johnson 1.7 (pharmaceuticals) Wal-Mart Stores, Inc. 1.6 (retail) Intel Corp. 1.5 (computer hardware) International Business Machines Corp. 1.5 (computer hardware) Merck & Co., Inc. 1.4 (pharmaceuticals) - -------------------------------------------- Top Ten 20.9% - -------------------------------------------- The "Ten Largest Holdings" excludes and temporary cash investments and equity index products. - ------------------------------------------------------- VOLATILITY MEASURES COMPARATIVE BROAD FUND INDEX* FUND INDEX** - ------------------------------------------------------- R-Squared 0.99 1.00 0.99 1.00 Beta 1.12 1.00 1.11 1.00 - ------------------------------------------------------- - ------------------------ INVESTMENT FOCUS Market Cap Large Style Blend - ------------------------ - ------------------------------------------------------- SECTOR DIVERSIFICATION (% OF PORTFOLIO) COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Auto & Transportation 2.1% 2.1% 2.6% Consumer Discretionary 16.5 13.9 15.7 Consumer Staples 6.8 7.5 6.9 Financial Services 19.6 22.7 22.3 Health Care 16.9 15.4 14.3 Integrated Oils 3.5 4.2 3.5 Other Energy 3.0 1.6 2.3 Materials & Processing 2.8 3.2 3.6 Producer Durables 4.4 3.6 4.0 Technology 14.9 13.7 13.5 Utilities 5.7 7.7 7.1 Other 3.8 4.4 4.2 - ------------------------------------------------------- *Russell 1000 Index. **Wilshire 5000 Index. +Annualized. VISIT OUR WEBSITE AT WWW.VANGUARD.COM FOR REGULARLY UPDATED FUND INFORMATION. 9 FUND PROFILES (continued) TAX-MANAGED SMALL-CAP FUND - ------------------------------------------------------- PORTFOLIO CHARACTERISTICS COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Number of Stocks 603 600 5,403 Median Market Cap $0.8B $0.8B $27.7B Price/Earnings Ratio 20.5x 20.6x 21.8x Price/Book Ratio 2.0x 1.9x 2.7x Yield 0.9% 1.6% Investor Shares 0.8% Institutional Shares 0.9% Return on Equity 14.0% 14.0% 20.5% Earnings Growth Rate 11.6% 11.5% 8.6% Foreign Holdings 0.0% 0.0% 0.9% Turnover Rate 27%+ -- -- Expense Ratio -- -- Investor Shares 0.17%+ Institutional Shares 0.10%+ Cash Investments 0.0% -- -- - ------------------------------------------------------- - -------------------------------------------- TEN LARGEST HOLDINGS (% of total net assets) NVR, Inc. 0.8% (real estate) Harman International Industries, Inc. 0.7 (consumer electronics) Mid Atlantic Medical Services, Inc. 0.7 (health care) Zebra Technologies Corp. Class A 0.6 (computer technology) Cephalon, Inc. 0.6 (biotechnology) Newfield Exploration Co. 0.6 (oil) Alliant Techsystems, Inc. 0.6 (aerospace and defense) O'Reilly Automotive, Inc. 0.5 (retail) Ryland Group, Inc. 0.5 (real estate) Renal Care Group, Inc. 0.5 (health care) - -------------------------------------------- Top Ten 6.1% - -------------------------------------------- The "Ten Largest Holdings" excludes any temporary cash investments and equity index products. - --------------------------------------------------- VOLATILITY MEASURES COMPARATIVE BROAD FUND INDEX* FUND INDEX** - --------------------------------------------------- R-Squared 1.00 1.00 0.72 1.00 Beta 0.99 1.00 0.95 1.00 - --------------------------------------------------- - ------------------------ INVESTMENT FOCUS Market Cap Small Style Blend - ------------------------ - ------------------------------------------------------- SECTOR DIVERSIFICATION (% OF PORTFOLIO) COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Auto & Transportation 4.8% 4.8% 2.6% Consumer Discretionary 21.6 21.7 15.7 Consumer Staples 2.6 2.7 6.9 Financial Services 16.5 16.4 22.3 Health Care 12.1 12.2 14.3 Integrated Oils 0.0 0.0 3.5 Other Energy 5.6 5.6 2.3 Materials & Processing 10.4 10.4 3.6 Producer Durables 11.3 11.5 4.0 Technology 10.1 10.2 13.5 Utilities 4.7 4.4 7.1 Other 0.3 0.1 4.2 - ------------------------------------------------------- *S&P SmallCap 600 Index. **Wilshire 5000 Index. +Annualized. 10 TAX-MANAGED INTERNATIONAL FUND - ------------------------------------------------------- PORTFOLIO CHARACTERISTICS COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Number of Stocks 1,004 1,005 1,741 Turnover Rate 16%+ -- -- Expense Ratio -- -- Investor Shares 0.29%+ Institutional Shares 0.20%+ Cash Investments 0.0% -- -- - ------------------------------------------------------- - -------------------------------------------- TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS) BP PLC 2.6% (oil) Vodafone GroupPLC 2.3 (cellular communications) HSBC Holdings PLC 2.2 (banking) GlaxoSmithKline PLC 2.1 (pharmaceuticals) Total SA 1.7 (integrated oil) Royal Dutch Petroleum Co. 1.7 (energy) Novartis AG (Registered) 1.6 (pharmaceuticals) Nestle SA (Registered) 1.4 (food, beverage, and tobacco) Nokia Oyj 1.4 (telecommunications) Royal Bank of Scotland Group PLC 1.3 (banking) - -------------------------------------------- Top Ten 18.3% - -------------------------------------------- The "Ten Largest Holdings" excludes any temporary cash investments and equity index products. - --------------------------------------------------- VOLATILITY MEASURES COMPARATIVE BROAD FUND INDEX* FUND INDEX** - --------------------------------------------------- R-Squared 1.0 1.00 0.99 1.00 Beta 1.01 1.00 0.99 1.00 - --------------------------------------------------- - ------------------------------------------------------- SECTOR DIVERSIFICATION (% OF PORTFOLIO) COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- Consumer Discretionary 12.5% 12.6% 11.8% Consumer Staples 9.0 9.0 8.5 Energy 9.0 9.0 9.6 Financials 25.7 25.6 25.5 Health Care 9.7 9.7 8.7 Industrials 8.5 8.4 8.1 Information Technology 6.5 6.6 7.4 Materials 6.3 6.2 7.5 Telecommunication Services 7.9 7.9 8.0 Utilities 4.9 5.0 4.9 - ------------------------------------------------------- - ------------------------- FUND ALLOCATION BY REGION Pacific 28% Europe 72% - ------------------------- *MSCI EAFE Index. **MSCI All Country World Index Free ex USA. +Annualized. VISIT OUR WEBSITE AT WWW.VANGUARD.COM FOR REGULARLY UPDATED FUND INFORMATION. 11 FUND PROFILES (continued) - ------------------------------------------------------- COUNTRY DIVERSIFICATION (% OF PORTFOLIO) COMPARATIVE BROAD FUND INDEX* INDEX** - ------------------------------------------------------- EUROPE United Kingdom 27.3% 27.3% 23.7% France 9.8 9.6 8.2 Switzerland 7.5 7.5 6.5 Germany 6.4 6.4 5.5 Netherlands 5.2 5.3 4.6 Italy 3.9 3.9 3.3 Spain 3.9 3.8 3.3 Sweden 2.2 2.1 1.8 Finland 1.9 1.9 1.6 Belgium 1.0 1.1 0.9 Ireland 0.8 0.8 0.7 Denmark 0.8 0.8 0.7 Norway 0.4 0.4 0.4 Greece 0.4 0.4 0.3 Portugal 0.3 0.4 0.3 Austria 0.2 0.2 0.2 Luxembourg 0.0 0.0 0.1 - ------------------------------------------------------- Subtotal 72.0% 71.9% 62.1% - ------------------------------------------------------- PACIFIC Japan 20.4% 20.5% 17.5% Australia 5.1 5.1 4.4 Hong Kong 1.5 1.5 1.7 Singapore 0.8 0.8 0.7 New Zealand 0.2 0.2 0.2 - ------------------------------------------------------- Subtotal 28.0% 28.1% 24.5% - ------------------------------------------------------- Emerging Markets Region 0.0% 0.0% 7.9% - ------------------------------------------------------- Other 0.0% 0.0% 5.5% - ------------------------------------------------------- Total 100.0% 100.0% 100.0% - ------------------------------------------------------- *MSCI EAFE Index. **MSCI All Country World Index Free ex USA. 12 GLOSSARY OF INVESTMENT TERMS AVERAGE COUPON. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value. - -------------------------------------------------------------------------------- AVERAGE DURATION. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%. - -------------------------------------------------------------------------------- AVERAGE MATURITY. The average length of time until bonds held by a fund reach maturity (or are called) and are repaid. The prices of longer-term bonds are more sensitive than those of shorter-term bonds to changes in interest rates. - -------------------------------------------------------------------------------- AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the ratings assigned to a fund's holdings by credit-rating agencies. The agencies make their judgment after appraising an issuer's ability to meet its obligations. Quality is graded on a scale, with Aaa or AAA indicating the most creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy issuers of money market securities. - -------------------------------------------------------------------------------- BETA. A measure of the magnitude of a fund's past share-price fluctuations in relation to the ups and downs of a comparative index and an overall market index. Each index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. However, a fund's beta should be reviewed in conjunction with its R-squared (see definition on next page). The lower the R-squared, the less correlation there is between the fund and the benchmark, and the less reliable beta is as an indicator of volatility. - -------------------------------------------------------------------------------- CASH INVESTMENTS. The percentage of a fund's net assets invested in "cash equivalents"--highly liquid, short-term, interest-bearing securities. This figure does not include cash invested in futures contracts or other index-based products to simulate stock or bond investment. - -------------------------------------------------------------------------------- DIVIDEND YIELD. The current, annualized rate of dividends paid on a share of stock, divided by its current share price. For a fund, the weighted average yield for stocks it holds. The index yield is based on the current annualized rate of dividends paid on stocks in the index. - -------------------------------------------------------------------------------- EARNINGS GROWTH RATE. The average annual rate of growth in earnings over the past five years for the stocks now in a fund. - -------------------------------------------------------------------------------- EXPENSE RATIO. The percentage of a fund's average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors. - -------------------------------------------------------------------------------- FOREIGN HOLDINGS. The percentage of a fund's equity assets represented by stocks or American Depositary Receipts of companies based outside the United States. - -------------------------------------------------------------------------------- LARGEST STATE CONCENTRATIONS. An indicator of diversification. The less concentrated a fund's holdings of bonds, the less the fund will be hurt by any financial problems in a single state or region. - -------------------------------------------------------------------------------- MEDIAN MARKET CAP. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund's stocks, weighted by the proportion of the fund's assets invested in each stock. Stocks representing half of the fund's assets have market capitalizations above the median, and the rest are below it. 13 - -------------------------------------------------------------------------------- PRICE/BOOK RATIO. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds. - -------------------------------------------------------------------------------- PRICE/EARNINGS RATIO. The ratio of a stock's current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company's future growth. - -------------------------------------------------------------------------------- R-SQUARED. A measure of how much of a fund's past returns can be explained by the returns from the market in general, as measured by a comparative index or an overall market index. If a fund's total returns were precisely synchronized with an index's returns, its R-squared would be 1.00. If the fund's returns bore no relationship to the index's returns, its R-squared would be 0. - -------------------------------------------------------------------------------- RETURN ON EQUITY. The annual average rate of return generated by a company during the past five years for each dollar of shareholder's equity (net income divided by shareholder's equity). For a fund, the weighted average return on equity for the companies whose stocks it holds. - -------------------------------------------------------------------------------- TURNOVER RATE. An indication of the fund's trading activity. Funds with high turnover rates incur higher transaction costs and are more likely to distribute capital gains (which are taxable to investors). - -------------------------------------------------------------------------------- YIELD. A snapshot of a fund's income from interest and dividends. The yield, expressed as a percentage of the fund's net asset value, is based on income earned over the past 30 days and is annualized, or projected forward for the coming year. The index yield is based on the current annualized rate of dividends paid on stocks in the index. - -------------------------------------------------------------------------------- YIELD TO MATURITY. The rate of return an investor would receive if the fixed income securities held by a fund were held to their maturity dates. - -------------------------------------------------------------------------------- 14 PERFORMANCE SUMMARIES AS OF JUNE 30, 2003 All of the returns in this report represent past performance, which cannot be used to predict future returns that may be achieved by the fund. Note, too, that both share price and return can fluctuate widely. An investor's shares, when redeemed, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. TAX-MANAGED BALANCED FUND - -------------------------------------------------------------------------------- FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-JUNE 30, 2003 TAX-MANAGED BALANCED FISCAL YEAR BALANCED FUND COMPOSITE INDEX* 1994 -1.4% -1.8% 1995 24.5 25.5 1996 12.2 13.2 1997 16.6 19.9 1998 16.9 17.0 1999 15.5 10.2 2000 -0.5 0.6 2001 -3.5 -3.5 2002 -7.1 -6.2 2003** 8.4 8.1 - -------------------------------------------------------------------------------- *50% Russell 1000 Index, 50% Lehman 7 Year Municipal Bond Index. **Six months ended June 30, 2003. Note: See Financial Highlights table on page 24 for dividend and capital gains information. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION --------------- ONE FIVE INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- Tax-Managed Balanced Fund 9/6/1994 5.95% 3.56% 5.93% 2.83% 8.76% Fee-Adjusted Returns* 4.92 3.56 5.93 2.83 8.76 - -------------------------------------------------------------------------------- *Reflective of the 2% fee assessed on redemptions of shares that are held in the fund for less than one year and the 1% fee assessed on redemptions of shares that are held in the fund for at least one year but less than five years. 15 PERFORMANCE SUMMARIES (continued) TAX-MANAGED GROWTH AND INCOME FUND - -------------------------------------------------------------------------------- FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-JUNE 30, 2003 TAX-MANAGED GROWTH AND INCOME FUND S&P 500 FISCAL YEAR INVESTOR SHARES INDEX 1994 -1.7% -1.8% 1995 37.5 37.6 1996 23.0 23.0 1997 33.3 33.4 1998 28.7 28.6 1999 21.1 21.0 2000 -9.0 -9.1 2001 -11.9 -11.9 2002 -21.9 -22.1 2003* 11.7 11.8 - -------------------------------------------------------------------------------- *Six months ended June 30, 2003. Note: See FINANCIAL HIGHLIGHTS tables on pages 25-27 for dividend and capital gains information. TAX-MANAGED CAPITAL APPRECIATION FUND - -------------------------------------------------------------------------------- FISCAL-YEAR TOTAL RETURNS (%) SEPTEMBER 6, 1994-JUNE 30, 2003 TAX-MANAGED CAPITAL APPRECIATION RUSSELL FISCAL YEAR INVESTOR SHARES 1000 INDEX 1994 -0.5% -1.9% 1995 34.4 37.8 1996 20.9 22.4 1997 27.3 32.9 1998 28.0 27.0 1999 33.5 20.9 2000 -10.1 - 7.8 2001 -15.3 -12.5 2002 -23.5 -21.7 2003* 13.3 12.3 - -------------------------------------------------------------------------------- *Six months ended June 30, 2003. Note: See FINANCIAL HIGHLIGHTS tables on pages 28-30 for dividend and capital gains information. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION ONE FIVE -------------------------- INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- TAX-MANAGED GROWTH AND INCOME FUND Investor Shares 9/6/1994 0.33% -1.56% .89% 1.62% 10.51% Fee-Adjusted Returns* -0.66 -1.56 8.89 1.62 10.51 Admiral Shares 11/12/2001 0.41 -6.42** -- -- -- Fee-Adjusted Returns* -0.57 -6.98** -- -- -- Institutional Shares 3/4/1999 0.42 -4.08** -- -- -- Fee-Adjusted Returns* -0.56 -4.29** -- -- -- - -------------------------------------------------------------------------------- TAX-MANAGED CAPITAL APPRECIATION FUND Investor Shares 9/6/1994 1.52% -0.79% 9.36% 0.66% 10.02% Fee-Adjusted Returns* 0.51 -0.79 9.36 0.66 10.02 Admiral Shares 11/12/2001 1.58 -5.92** -- -- -- Fee-Adjusted Returns* 0.58 -6.48** -- -- -- Institutional Shares 2/24/1999 1.62 -3.32** -- -- -- Fee-Adjusted Returns* 0.61 -3.54** -- -- -- - -------------------------------------------------------------------------------- *Reflective of the 2% fee assessed on redemptions of shares that are held in the fund for less than one year and the 1% fee assessed on redemptions of shares that are held in the fund for at least one year but less than five years. **Return since inception. 16 TAX-MANAGED SMALL-CAP FUND - -------------------------------------------------------------------------------- FISCAL-YEAR TOTAL RETURNS (%) MARCH 25, 1999-JUNE 30, 2003 TAX-MANAGED SMALL-CAP S&P SMALL-CAP FISCAL YEAR INVESTOR SHARES 600 INDEX 1999 26.30% 24.90% 2000 13.4 11.8 2001 5.4 6.5 2002 -14.4 -14.6 2003* 12.8 12.9 - -------------------------------------------------------------------------------- *Six months ended June 30, 2003. Note: See FINANCIAL HIGHLIGHTS tables on pages 31 and 32 for dividend and capital gains information. TAX-MANAGED INTERNATIONAL FUND - -------------------------------------------------------------------------------- FISCAL-YEAR TOTAL RETURNS (%) AUGUST 17, 1999-JUNE 30, 2003 TAX-MANAGED INTERNATIONAL MSCI EAFE FISCAL YEAR INVESTOR SHARES INDEX 1999 20.0% 19.3% 2000 -14.3 -14.2 2001 -21.9 -21.4 2002 -15.6 -15.9 2003* 9.5 9.5 - -------------------------------------------------------------------------------- *Six months ended June 30, 2003. Note: See FINANCIAL HIGHLIGHTS tables on pages 33 and 34 for dividend and capital gains information. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION ONE -------------------------- INCEPTION DATE YEAR CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- Tax-Managed Small-Cap Fund Investor Shares 3/25/1999 -3.63% 8.65% 0.58% 9.23% Fee-Adjusted Returns* -4.59 8.40 0.58 8.98 Institutional Shares 4/21/1999 -3.54 7.04 0.64 7.68 Fee-Adjusted Returns* -4.50 6.78 0.65 7.43 - -------------------------------------------------------------------------------- Tax-Managed International Fund Investor Shares 8/17/1999 -6.53% -8.67% 1.24% -7.43% Fee-Adjusted Returns* -7.44 -8.91 1.25 -7.66 Institutional Shares 1/4/2001 -6.43 -13.62 1.41 -12.21 Fee-Adjusted Returns* -7.34 -13.97 1.42 -12.55 - -------------------------------------------------------------------------------- *Reflective of the 2% fee assessed on redemptions of shares that are held in the fund for less than one year and the 1% fee assessed on redemptions of shares that are held in the fund for at least one year but less than five years. 17 YOUR FUND'S AFTER-TAX RETURNS This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund's distributions, and (2) assuming that an investor paid taxes on the fund's distributions and sold all shares at the end of each period. Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect the reduced tax rates on ordinary income and short-term capital gains that became effective as of January 1, 2003. However, they do not reflect the reduced rates on "qualified dividend income" and on long-term capital gains realized on or after May 6, 2003. (In the examples that assume all fund shares were sold, a negative pre-tax total return translates into a higher after-tax return. This is because the calculation assumes that the investor received a tax deduction for the loss incurred on the sale.) The table shows returns for Investor Shares only; returns for other share classes will differ. Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes. Finally, keep in mind that a fund's performance--whether before or after taxes--does not indicate how it will perform in the future. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED JUNE 30, 2003 ONE FIVE SINCE YEAR YEARS INCEPTION** ---------------------------- TAX-MANAGED BALANCED FUND Returns Before Taxes 4.92% 3.56% 8.76% Returns After Taxes on Distributions 4.72 3.42 8.61 Returns After Taxes on Distributions and Sale of Fund Shares 3.95 3.27 7.75 - -------------------------------------------------------------------------------- TAX-MANAGED GROWTH & Income Fund Returns Before Taxes -0.66% -1.56% 10.51% Returns After Taxes on Distributions -1.28 -2.03 9.87 Returns After Taxes on Distributions and Sale of Fund Shares -0.50 -1.45 8.58 - -------------------------------------------------------------------------------- TAX-MANAGED CAPITAL APPRECIATION FUND Returns Before Taxes 0.51% -0.79% 10.02% Returns After Taxes on Distributions 0.10 -1.02 9.76 Returns After Taxes on Distributions and Sale of Fund Shares 0.27 -0.74 8.37 - -------------------------------------------------------------------------------- TAX-MANAGED SMALL-CAP FUND Returns Before Taxes -4.59% -- 8.98% Returns After Taxes on Distributions -4.87 -- 8.75 Returns After Taxes on Distributions and Sale of Fund Shares -3.03 -- 7.25 - -------------------------------------------------------------------------------- TAX-MANAGED INTERNATIONAL FUND Returns Before Taxes -7.44% -- -7.66% Returns After Taxes on Distributions -8.08 -- -8.05 Returns After Taxes on Distributions and Sale of Fund Shares -4.82 -- -6.10 - -------------------------------------------------------------------------------- *All fund returns are adjusted to reflect fees. Each of the Vanguard Tax-Managed Funds assesses a 2% fee on redemptions of shares held in the fund for less than one year and a 1% fee on redemptions of shares held in the fund for at least one year but less than five years. **Inception dates are September 6, 1994, for the Tax-Managed Balanced, Tax-Managed Growth and Income, and Tax-Managed Capital Appreciation Funds; March 25, 1999, for the Tax-Managed Small-Cap Fund; and August 17, 1999, for the Tax-Managed International Fund. 18 FINANCIAL STATEMENTS JUNE 30, 2003 (UNAUDITED) The Statement of Net Assets--an integral part of the Financial Statements for each of the Vanguard Tax-Managed Funds--is included as an insert to this report. STATEMENT OF OPERATIONS This Statement shows the types of income earned by each fund during the reporting period, and details the operating expenses charged to each class of its shares. These expenses directly reduce the amount of investment income available to pay to shareholders as income dividends. This Statement also shows any Net Gain (Loss) realized on the sale of investments, and the increase or decrease in the Unrealized Appreciation (Depreciation) of investments during the period. - -------------------------------------------------------------------------------- TAX-MANAGED BALANCED FUND SIX MONTHS ENDED JUNE 30, 2003 (000) - -------------------------------------------------------------------------------- INVESTMENT INCOME INCOME Dividends $ 1,262 Interest 4,658 Security Lending 1 - -------------------------------------------------------------------------------- Total Income 5,921 - -------------------------------------------------------------------------------- EXPENSES The Vanguard Group--Note B Investment Advisory Services 34 Management and Administrative 287 Marketing and Distribution 24 Custodian Fees 9 Shareholders' Reports 9 - -------------------------------------------------------------------------------- Total Expenses 363 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 5,558 - -------------------------------------------------------------------------------- REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD (7,954) - -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 37,064 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $34,668 ================================================================================ 19 STATEMENT OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- TAX-MANAGED TAX-MANAGED GROWTH AND CAPITAL TAX-MANAGED TAX-MANAGED INCOME APPRECIATION SMALL-CAP INTERNATIONAL FUND FUND FUND FUND - -------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2003 - -------------------------------------------------------------------------------- (000) (000) (000) (000) - -------------------------------------------------------------------------------- INVESTMENT INCOME INCOME Dividends* $ 16,078 $ 12,363 $ 2,998 $ 7,216 Interest 2 16 3 5 Security Lending 14 25 106 87 - -------------------------------------------------------------------------------- Total Income 16,094 12,404 3,107 7,308 - -------------------------------------------------------------------------------- EXPENSES The Vanguard Group--Note B Investment Advisory Services 75 75 75 19 Management and Administrative Investor Shares 817 901 381 273 Admiral Shares 243 359 -- -- Institutional Shares 47 31 6 20 Marketing and Distribution Investor Shares 63 69 36 23 Admiral Shares 26 37 -- -- Institutional Shares 11 7 2 3 Custodian Fees 25 14 18 193 Shareholders' Reports Investor Shares 34 33 15 6 Admiral Shares 1 2 -- -- Institutional Shares -- -- -- -- Trustees' Fees and Expenses 1 1 -- -- - -------------------------------------------------------------------------------- Total Expenses 1,343 1,529 533 537 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 14,751 10,875 2,574 6,771 - -------------------------------------------------------------------------------- REALIZED NET GAIN (LOSS) Investment Securities Sold (39,634) (126,787) (17,984) (19,301) Foreign Currencies -- -- -- 70 - -------------------------------------------------------------------------------- REALIZED NET GAIN (LOSS) (39,634) (126,787) (17,984) (19,231) - -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) Investment Securities 231,131 383,560 97,318 49,653 Foreign Currencies -- -- -- 14 - -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 231,131 383,560 97,318 49,667 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $206,248 $267,648 $81,908 $37,207 ================================================================================ *Dividends for the Tax-Managed International Fund are net of foreign withholding taxes of $823,000. 20 STATEMENT OF CHANGES IN NET ASSETS This Statement shows how each fund's total net assets changed during the two most recent reporting periods. The Operations section summarizes information detailed in the Statement of Operations. The amounts shown as Distributions to shareholders from the fund's net income and capital gains may not match the amounts shown in the Operations section, because distributions are determined on a tax basis and may be made in a period different from the one in which the income was earned or the gains were realized on the financial statements. The Capital Share Transactions section shows the net amount shareholders invested in or redeemed from the fund. Distributions and Capital Share Transactions are shown separately for each class of shares. - -------------------------------------------------------------------------------- TAX-MANAGED TAX-MANAGED BALANCED FUND GROWTH AND INCOME FUND ----------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, 2003 DEC.31, 2002 JUNE 30, 2003 DEC. 31, 2002 (000) (000) (000) (000) - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 5,558 $ 11,239 $ 14,751 $ 29,589 Realized Net Gain (Loss) (7,954) (11,097) (39,634) (245,531) Change in Unrealized Appreciation (Depreciation) 37,064 (32,216) 231,131 (298,017) - -------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 34,668 (32,074) 206,248 (513,959) - -------------------------------------------------------------------------------- DISTRIBUTIONS Net Investment Income Investor Shares (5,110) (11,176) (7,745) (19,117) Admiral Shares -- -- (4,198) (8,546) Institutional Shares -- -- (1,289) (2,921) Realized Capital Gain Investor Shares -- -- -- -- Admiral Shares -- -- -- -- Institutional Shares -- -- -- -- - -------------------------------------------------------------------------------- Total Distributions (5,110) (11,176) (13,232) (30,584) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS--NOTE F Investor Shares 6,063 40,067 (25,391) (175,369) Admiral Shares -- -- 46,174 156,028 Institutional Shares -- -- 1,895 56,906 - -------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 6,063 40,067 22,678 37,565 - -------------------------------------------------------------------------------- Total Increase (Decrease) 35,621 (3,183) 215,694 (506,978) - -------------------------------------------------------------------------------- NET ASSETS Beginning of Period 415,720 418,903 1,762,548 2,269,526 - -------------------------------------------------------------------------------- End of Period $451,341 $415,720 $1,978,242 $1,762,548 ================================================================================ 21 STATEMENT OF CHANGES IN NET ASSETS (continued) - -------------------------------------------------------------------------------- TAX-MANAGED CAPITAL APPRECIATION TAX-MANAGED FUND SMALL-CAP FUND ---------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, 2003 DEC.31, 2002 JUNE 30, 2003 DEC. 31, 2002 (000) (000) (000) (000) - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 10,875 $ 20,534 $ 2,574 $ 4,490 Realized Net Gain (Loss) (126,787) (106,097) (17,984) (36,397) Change in Unrealized Appreciation (Depreciation) 383,560 (536,013) 97,318 (72,576) - -------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 267,648 (621,576) 81,908 (104,483) - -------------------------------------------------------------------------------- DISTRIBUTIONS Net Investment Income Investor Shares -- (12,093) -- (4,465) Admiral Shares -- (8,248) -- -- Institutional Shares -- (1,216) -- (227) Realized Capital Gain Investor Shares -- -- -- -- Admiral Shares -- -- -- -- Institutional Shares -- -- -- -- - -------------------------------------------------------------------------------- Total Distributions -- (21,557) -- (4,692) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS--NOTE F Investor Shares (25,169) (134,940) 21,959 135,406 Admiral Shares 53,705 187,073 -- -- Institutional Shares (3,571) 14,355 (8,630) (17,238) - -------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 24,965 66,488 13,329 118,168 - -------------------------------------------------------------------------------- Total Increase (Decrease) 292,613 (576,645) 95,237 8,993 - -------------------------------------------------------------------------------- NET ASSETS Beginning of Period 2,001,135 2,577,780 630,705 621,712 - -------------------------------------------------------------------------------- End of Period $2,293,748 $2,001,135 $725,942 $630,705 ================================================================================ 22 - -------------------------------------------------------------------------------- TAX-MANAGED INTERNATIONAL FUND -------------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, 2003 DEC. 31, 2002 (000) (000) - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 6,771 $ 8,166 Realized Net Gain (Loss) (19,231) (24,940) Change in Unrealized Appreciation (Depreciation) 49,667 (51,327) - -------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 37,207 (68,101) - -------------------------------------------------------------------------------- DISTRIBUTIONS Net Investment Income Investor Shares -- (7,187) Institutional Shares -- (1,040) Realized Capital Gain Investor Shares -- -- Institutional Shares -- -- - -------------------------------------------------------------------------------- Total Distributions -- (8,227) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS--Note F Investor Shares (2,502) 73,746 Institutional Shares 11,978 1,040 - -------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 9,476 74,786 - -------------------------------------------------------------------------------- Total Increase (Decrease) 46,683 (1,542) - -------------------------------------------------------------------------------- NET ASSETS Beginning of Period 380,898 382,440 - -------------------------------------------------------------------------------- End of Period $427,581 $380,898 - -------------------------------------------------------------------------------- 23 FINANCIAL HIGHLIGHTS This table summarizes each fund's investment results and distributions to shareholders on a per-share basis for each class of shares. It also presents the Total Return and shows net investment income and expenses as percentages of average net assets. These data will help you assess: the variability of the fund's net income and total returns from year to year; the relative contributions of net income and capital gains to the fund's total return; how much it costs to operate the fund; and the extent to which the fund tends to distribute capital gains. The table also shows the Portfolio Turnover Rate, a measure of trading activity. A turnover rate of 100% means that the average security is held in the fund for one year.
TAX-MANAGED BALANCED FUND - --------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------ THROUGHOUT EACH PERIOD JUNE 30, 2003 2002 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $15.54 $17.18 $18.30 $18.87 $16.74 $14.67 - --------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .20 .44 .46 .48 .43 .39 Net Realized and Unrealized Gain (Loss) on Investments* 1.10 (1.65) (1.12) (.56) 2.13 2.07 - --------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 1.30 (1.21) (.66) (.08) 2.56 2.46 - --------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income** (.19) (.43) (.46) (.49) (.43) (.39) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------- Total Distributions (.19) (.43) (.46) (.49) (.43) (.39) - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $16.65 $15.54 $17.18 $18.30 $18.87 $16.74 ===================================================================================================================== TOTAL RETURN+ 8.41% -7.07% -3.54% -0.50% 15.49% 16.93% ===================================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $451 $416 $419 $400 $330 $207 Ratio of Total Expenses to Average Net Assets 0.17%++ 0.18% 0.19% 0.20% 0.20% 0.19% Ratio of Net Investment Income to Average Net Assets 2.63%++ 2.69% 2.64% 2.61% 2.52% 2.63% Portfolio Turnover Rate 15%++ 24% 21% 15% 13% 7% =====================================================================================================================
*Includes increases from redemption fees of $.00, $.01, $.01, $.01, $.01, and $.01. **Nontaxable dividends represent 79%, 82%, 87%, 92%, 90%, and 86% of dividends from net investment income. +Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 24
TAX-MANAGED GROWTH AND INCOME FUND INVESTOR SHARES - --------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------ THROUGHOUT EACH PERIOD JUNE 30, 2003 2002 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.15 $24.93 $28.66 $31.81 $26.55 $20.88 - --------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .16 .313 .294 .295 .307 .29 Net Realized and Unrealized Gain (Loss) on Investments* 2.07 (5.768) (3.725) (3.148) 5.267 5.67 - --------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.23 (5.455) (3.431) (2.853) 5.574 5.96 - --------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.14) (.325) (.299) (.297) (.314) (.29) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------- Total Distributions (.14) (.325) (.299) (.297) (.314) (.29) - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $21.24 $19.15 $24.93 $28.66 $31.81 $26.55 ===================================================================================================================== TOTAL RETURN** 11.69% -21.95% -11.93% -9.03% 21.12% 28.67% ===================================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $1,167 $1,077 $1,606 $2,320 $2,240 $1,352 Ratio of Total Expenses to Average Net Assets 0.18%+ 0.17% 0.18% 0.19% 0.19% 0.19% Ratio of Net Investment Income to Average Net Assets 1.61%+ 1.44% 1.13% 0.96% 1.11% 1.32% Portfolio Turnover Rate 5%+ 9% 5% 5% 4% 4% =====================================================================================================================
*Includes increases from redemption fees of $.00, $.03, $.02, $.02, $.01, and $.01. **Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. +Annualized. 25 FINANCIAL HIGHLIGHTS (continued) TAX-MANAGED GROWTH AND INCOME FUND ADMIRAL SHARES - -------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED NOV. 12* TO FOR A SHARE OUTSTANDING THROUGHOUT JUNE 30, DEC. 31, DEC. 31, EACH PERIOD 2003 2002 2001 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $39.35 $51.24 $50.00 - -------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .336 .673 .087 Net Realized and Unrealized Gain (Loss) 4.267 (11.870) 1.348 on Investments** - -------------------------------------------------------------------------------- Total from Investment Operations 4.603 (11.197) 1.435 - -------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.303) (.693) (.195) Distributions from Realized Capital Gains -- -- -- - -------------------------------------------------------------------------------- Total Distributions (.303) (.693) (.195) - -------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $43.65 $39.35 $51.24 ================================================================================ TOTAL RETURN+ 11.74% -21.92% 2.87% ================================================================================ RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $625 $520 $505 Ratio of Total Expenses to Average Net Assets 0.11%++ 0.11% 0.14%++ Ratio of Net Investment Income to Average Net Assets 1.68%++ 1.52% 1.26%++ Portfolio Turnover Rate 5%++ 9% 5% ================================================================================ *Inception. **Includes increases from redemption fees of $.01, $.05, and $.03. +Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 26
TAX-MANAGED GROWTH AND INCOME FUND INSTITUTIONAL SHARES - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAR. 4* TO JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31, ------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.15 $24.93 $28.66 $31.81 $26.99 - ---------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .167 .331 .319 .319 .274 Net Realized and Unrealized Gain (Loss) on Investments** 2.072 (5.768) (3.725) (3.148) 4.882 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.239 (5.437) (3.406) (2.829) 5.156 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.149) (.343) (.324) (.321) (.336) Distributions from Realized Capital Gains -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Total Distributions (.149) (.343) (.324) (.321) (.336) - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $21.24 $19.15 $24.93 $28.66 $31.81 ========================================================================================================== TOTAL RETURN+ 11.74% -21.88% -11.84% -8.96% 19.23% ========================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $187 $167 $158 $95 $108 Ratio of Total Expenses to Average Net Assets 0.08%++ 0.08% 0.08% 0.11% 0.10%++ Ratio of Net Investment Income to Average Net Assets 1.71%++ 1.54% 1.25% 1.04% 1.18%++ Portfolio Turnover Rate 5%++ 9% 5% 5% 4% ==========================================================================================================
*Inception. **Includes increases from redemption fees of $.00, $.03, $.02, $.02, and $.01. +Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 27 FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED CAPITAL APPRECIATION FUND INVESTOR SHARES - --------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------ THROUGHOUT EACH PERIOD JUNE 30, 2003 2002 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.49 $25.73 $30.59 $34.17 $25.69 $20.18 - --------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .10 .196 .164 .117 .117 .13 Net Realized and Unrealized Gain (Loss) on Investments* 2.50 (6.231) (4.854) (3.578) 8.487 5.51 - --------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.60 (6.035) (4.690) (3.461) 8.604 5.64 - --------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income -- (.205) (.170) (.119) (.124) (.13) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------- Total Distributions -- (.205) (.170) (.119) (.124) (.13) - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $22.09 $19.49 $25.73 $30.59 $34.17 $25.69 ===================================================================================================================== Total Return** 13.34% -23.45% -15.34% -10.13% 33.50% 27.95% ===================================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $1,280 $1,154 $1,678 $2,643 $2,378 $1,479 Ratio of Total Expenses to Average Net Assets 0.18%+ 0.17% 0.18% 0.19% 0.19% 0.19% Ratio of Net Investment Income to Average Net Assets 1.02%+ 0.87% 0.60% 0.36% 0.47% 0.62% Portfolio Turnover Rate 13%+ 10% 13% 17% 12% 5% =====================================================================================================================
*Includes increases from redemption fees of $.00, $.02, $.02, $.01, $.01, and $.01. **Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. +Annualized. 28 TAX-MANAGED CAPITAL APPRECIATION FUND ADMIRAL SHARES - -------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED NOV. 12* TO JUNE 30, DEC. 31, DEC. 31, FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $39.24 $51.79 $50.00 - -------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .22 .42 .064 Net Realized and Unrealized Gain (Loss) on Investments** 5.01 (12.53) 2.072 - -------------------------------------------------------------------------------- Total from Investment Operations 5.23 (12.11) 2.136 - -------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income -- (.44) (.346) Distributions from Realized Capital Gains -- -- -- - -------------------------------------------------------------------------------- Total Distributions -- (.44) (.346) - -------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $44.47 $39.24 $51.79 ================================================================================ TOTAL RETURN+ 13.33% -23.38% 4.26% ================================================================================ RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $898 $741 $778 Ratio of Total Expenses to Average Net Assets 0.11%++ .11% 0.14%++ Ratio of Net Investment Income to Average Net Assets 1.09%++ .95% 0.79%++ Portfolio Turnover Rate 13%++ 10% 13% ================================================================================ *Inception. **Includes increases from redemption fees of $.01, $.03, and $.03. +Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 29 FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED CAPITAL APPRECIATION FUND INSTITUTIONAL SHARES - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED FEB. 24* TO JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31, ------------------------------ FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.49 $25.73 $30.59 $34.18 $26.32 - ---------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .11 .216 .188 .136 .129 Net Realized and Unrealized Gain (Loss) on Investments** 2.50 (6.231) (4.854) (3.578) 7.877 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.61 (6.015) (4.666) (3.442) 8.006 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income -- (.225) (.194) (.148) (.146) Distributions from Realized Capital Gains -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Total Distributions -- (.225) (.194) (.148) (.146) - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $22.10 $19.49 $25.73 $30.59 $34.18 ========================================================================================================== TOTAL RETURN+ 13.39% -23.37% -15.26% -10.07% 30.43% ========================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $116 $106 $121 $210 $165 Ratio of Total Expenses to Average Net Assets 0.08%++ 0.08% 0.08% 0.10% 0.10%++ Ratio of Net Investment Income to Average Net Assets 1.12%++ 0.98% 0.69% 0.46% 0.56%++ Portfolio Turnover Rate 13%++ 10% 13% 17% 12% ==========================================================================================================
*Inception. **Includes increases from redemption fees of $.00, $.02, $.02, $.01, and $.01. +Total returns do not reflect the 2% redemption fee on shares held less than one year or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 30
TAX-MANAGED SMALL-CAP FUND INVESTOR SHARES - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED FEB. 25* TO JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31, --------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $12.67 $14.92 $14.23 $12.61 $10.00 - ---------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .05 .092 .079 .074 .049 Net Realized and Unrealized Gain (Loss) on Investments** 1.57 (2.247) .696 1.620 2.615 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations 1.62 (2.155) .775 1.694 2.664 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income -- (.095) (.085) (.074) (.054) Distributions from Realized Capital Gains -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Total Distributions -- (.095) (.085) (.074) (.054) - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $14.29 $12.67 $14.92 $14.23 $12.61 ========================================================================================================== TOTAL RETURN+ 12.79% -14.44% 5.44% 13.44% 26.28% ========================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $702 $601 $568 $368 $194 Ratio of Total Expenses to Average Net Assets 0.17%++ 0.17% 0.20% 0.20% 0.19%++ Ratio of Net Investment Income to Average Net Assets 0.80%++ 0.68% 0.63% 0.64% 0.70%++ Portfolio Turnover Rate 27%++ 21% 25% 64% 27% ==========================================================================================================
*Initial share purchase date. Subscription period for the fund was February 22, 1999, to March 24, 1999, during which time all assets were held in money market instruments. Performance measurement begins March 25, 1999. **Includes increases from redemption fees of $.01, $.01, $.00, $.00, and $.00. +Total returns do not reflect the transaction fee on purchases (0.5% from April 1, 2000, through March 31, 2002; 1% through March 31, 2000), the 2% redemption fee on shares held less than one year, or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 31 FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED SMALL-CAP FUND INSTITUTIONAL SHARES - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED APR. 21* TO JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31, ------------------------------ FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $12.68 $14.92 $14.23 $12.61 $10.76 - ---------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .06 .105 .092 .085 .044 Net Realized and Unrealized Gain (Loss) on Investments** 1.57 (2.247) .696 1.62 1.866 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations 1.63 (2.142) .788 1.705 1.910 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income -- (.098) (.098) (.085) (.060) Distributions from Realized Capital Gains -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Total Distributions -- (.098) (.098) (.085) (.060) - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $14.31 $12.68 $14.92 $14.23 $12.61 ========================================================================================================== TOTAL RETURN+ 12.85% -14.36% 5.53% 13.53% 17.77% ========================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $24 $29 $53 $46 $19 Ratio of Total Expenses to Average Net Assets 0.10%++ 0.10% 0.10% 0.10% 0.10%++ Ratio of Net Investment Income to Average Net Assets 0.87%++ 0.74% 0.73% 0.76% 0.74%++ Portfolio Turnover Rate 27%++ 21% 25% 64% 27% ==========================================================================================================
*Inception. **Includes increases from redemption fees of $.01, $.01, $.00, $.00, and $.00. +Total returns do not reflect the transaction fee on purchases (0.5% from April 1, 2000, through March 31, 2002; 1% through March 31, 2000), the 2% redemption fee on shares held less than one year, or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 32
TAX-MANAGED INTERNATIONAL FUND INVESTOR SHARES - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED AUG. 17* TO JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31, ------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $6.43 $7.79 $10.14 $11.96 $10.00 - ---------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .11 .14 .111 .11 .03 Net Realized and Unrealized Gain (Loss) on Investments** .50 (1.36) (2.336) (1.82) 1.97 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations .61 (1.22) (2.225) (1.71) 2.00 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income -- (.14) (.125) (.11) (.04) Distributions from Realized Capital Gains -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Total Distributions -- (.14) (.125) (.11) (.04) - ---------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $7.04 $6.43 $7.79 $10.14 $11.96 ========================================================================================================== TOTAL RETURN+ 9.49% -15.62% -21.94% -14.29% 20.01% ========================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $364 $334 $327 $241 $135 Ratio of Total Expenses to Average Net Assets 0.29%++ 0.31% 0.35% 0.35% 0.35%++ Ratio of Net Investment Income to Average Net Assets 3.50%++ 2.04% 1.49% 1.24% 0.96%++ Portfolio Turnover Rate 16%++ 7% 20% 5% 7% ==========================================================================================================
*Inception. **Includes increases from redemption fees of $.01, $.01, $.00, $.01, and $.00. +Total returns do not reflect the transaction fee on purchases (0.25% from April 1, 2000, through March 31, 2002; 0.75% through March 31, 2000), the 2% redemption fee on shares held less than one year, or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. 33 FINANCIAL HIGHLIGHTS (continued)
TAX-MANAGED INTERNATIONAL FUND INSTITUTIONAL SHARES - ------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JAN. 4* TO JUNE 30, DEC. 31, DEC. 31, FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 - ------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $6.43 $7.79 $10.13 - ------------------------------------------------------------------------------------ INVESTMENT OPERATIONS Net Investment Income .11 .148 .123 Net Realized and Unrealized Gain (Loss) on Investments** .50 (1.361) (2.329) - ------------------------------------------------------------------------------------ Total from Investment Operations .61 (1.213) (2.206) - ------------------------------------------------------------------------------------ DISTRIBUTIONS Dividends from Net Investment Income -- (.147) (.134) Distributions from Realized Capital Gains -- -- -- - ------------------------------------------------------------------------------------ Total Distributions -- (.147) (.134) - ------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $7.04 $6.43 $ 7.79 ==================================================================================== TOTAL RETURN+ 9.49% -15.52% -21.77% ==================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $63 $47 $55 Ratio of Total Expenses to Average Net Assets 0.20%++ 0.20% 0.22%++ Ratio of Net Investment Income to Average Net Assets 3.56%++ 2.16% 1.68%++ Portfolio Turnover Rate 16%++ 7% 20% ====================================================================================
*Inception. **Includes increases from redemption fees of $.01, $.01, and $.00. +Total returns do not reflect the 0.25% transaction fee on purchases through March 31, 2002, the 2% redemption fee on shares held less than one year, or the 1% redemption fee on shares held at least one year but less than five years. ++Annualized. SEE ACCOMPANYING NOTES, WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 34 NOTES TO FINANCIAL STATEMENTS Vanguard Tax-Managed Funds comprise the Tax-Managed Balanced, Tax-Managed Growth and Income, Tax-Managed Capital Appreciation, Tax-Managed Small-Cap, and Tax-Managed International Funds, each of which is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The Tax-Managed Growth and Income and Tax-Managed Capital Appreciation Funds each offer three classes of shares: Investor Shares, Admiral Shares, and Institutional Shares. The Tax-Managed Small-Cap and Tax-Managed International Funds each offer two classes of shares: Investor Shares and Institutional Shares. The Tax-Managed Balanced Fund offers only Investor Shares. Investor Shares are available to any investor who meets the funds' minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, servicing, tenure, and account-size criteria. Institutional Shares are designed for investors who meet certain administrative and servicing criteria and invest a minimum of $10 million. The Tax-Managed Balanced Fund invests in debt instruments of many municipal issuers; the issuers' abilities to meet their obligations may be affected by economic and political developments in a specific state or region. The Tax-Managed International Fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of United States corporations. A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The funds consistently follow such policies in preparing their financial statements. 1. SECURITY VALUATION: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the funds' pricing time but after the close of the securities' primary markets, are valued by methods deemed by the board of trustees to represent fair value. 2. FOREIGN CURRENCY: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates on the valuation date as employed by Morgan Stanley Capital International in the calculation of its indexes. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the asset or liability is settled in cash, when they are recorded as realized foreign currency gains (losses). 3. REPURCHASE AGREEMENTS: Each fund, along with other members of The Vanguard Group, transfers uninvested cash balances to a pooled cash account, which is invested in repurchase agreements secured by U.S. government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. 35 NOTES TO FINANCIAL STATEMENTS (continued) 4. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements. 5. DISTRIBUTIONS: Distributions to shareholders are recorded on the ex-dividend date. 6. OTHER: Dividend income is recorded on the ex-dividend date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Premiums and discounts on municipal bonds are amortized and accreted, respectively, to interest income over the lives of the respective securities. Fees assessed on capital share transactions are credited to paid-in capital. Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets. B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to each fund under methods approved by the board of trustees. Each fund has committed to provide up to 0.40% of its assets in capital contributions to Vanguard. At June 30, 2003, the funds had contributed capital to Vanguard (included in Other Assets) of: - -------------------------------------------------------------------------------- CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF TO VANGUARD OF FUND VANGUARD'S TAX-MANAGED FUND (000) NET ASSETS CAPITALIZATION - -------------------------------------------------------------------------------- Balanced $ 78 0.02% 0.08% Growth and Income 339 0.02 0.34 Capital Appreciation 392 0.02 0.39 Small-Cap 123 0.02 0.12 International 74 0.02 0.07 - -------------------------------------------------------------------------------- The funds' trustees and officers are also directors and officers of Vanguard. C. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. During the six months ended June 30, 2003, the Tax-Managed International Fund realized net foreign currency gains of $70,000, which increased distributable net income for tax purposes; accordingly, such gains have been reclassified from accumulated net realized losses to undistributed net investment income. 36 The funds' tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at December 31, 2002, the following funds had tax-basis capital losses available to offset future net capital gains: - -------------------------------------------------------------------------------- CAPITAL LOSSES ----------------------------- EXPIRATION: FISCAL AMOUNT YEARS ENDING TAX-MANAGED FUND (000) DECEMBER 31, - -------------------------------------------------------------------------------- Balanced $ 28,436 2005-2011 Growth and Income 394,471 2004-2011 Capital Appreciation 443,154 2004-2010 Small-Cap 43,444 2007-2011 International 60,013 2007-2011 - -------------------------------------------------------------------------------- The funds will use these capital losses to offset net taxable capital gains, if any, realized during the year ending December 31, 2003; should the funds realize net capital losses for the year, the losses will be added to the loss carryforward balances above. At June 30, 2003, net unrealized appreciation (depreciation) of investment securities for tax purposes was: - ------------------------------------------------------------------------- (000) -------------------------------------------- NET UNREALIZED APPRECIATED DEPRECIATED APPRECIATION TAX-MANAGED FUND SECURITIES SECURITIES (DEPRECIATION) - ------------------------------------------------------------------------- Balanced $ 63,974 $ (4,094) $ 59,880 Growth and Income 351,097 (134,264) 216,833 Capital Appreciation 596,967 (95,708) 501,259 Small-Cap 161,125 (28,247) 132,878 International 23,442 (91,495) (68,053) - ------------------------------------------------------------------------- The Tax-Managed International Fund had net unrealized foreign currency gains of $80,000 resulting from the translation of other assets and liabilities at June 30, 2003. D. During the six months ended June 30, 2003, purchases and sales of investment securities other than temporary cash investments were: - ------------------------------------------------------------------------- (000) -------------------------------- TAX-MANAGED FUND PURCHASES SALES - ------------------------------------------------------------------------- Balanced $ 31,310 $ 42,614 Growth and Income 71,127 46,329 Capital Appreciation 167,521 132,007 Small-Cap 106,196 89,117 International 47,454 31,937 - ------------------------------------------------------------------------- 37 NOTES TO FINANCIAL STATEMENTS (continued) E. The market value of securities on loan to broker/dealers at June 30, 2003, and collateral received with respect to such loans were: - ------------------------------------------------------------------------- (000) -------------------------------- MARKET VALUE CASH OF LOANED COLLATERAL TAX-MANAGED FUND SECURITIES RECEIVED - ------------------------------------------------------------------------- Growth and Income $ 711 $ 778 Capital Appreciation 5,671 6,009 Small-Cap 13,923 14,615 International 14,239 15,166 - ------------------------------------------------------------------------- The funds invest cash collateral received in repurchase agreements, and record a liability for the return of the collateral, during the period the securities are on loan. F. Capital share transactions for each class of shares were:
- ---------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 ------------------- ------------------- AMOUNT SHARES AMOUNT SHARES TAX-MANAGED FUND (000) (000) (000) (000) - ---------------------------------------------------------------------------------------- BALANCED Issued $ 19,384 1,217 $ 71,312 4,331 Issued in Lieu of Cash Distributions 4,302 266 9,614 605 Redeemed* (17,623) (1,120) (40,859) (2,569) ------------------------------------------ Net Increase (Decrease) 6,063 363 40,067 2,367 - ---------------------------------------------------------------------------------------- GROWTH AND INCOME Investor Shares Issued $ 45,405 2,313 $ 150,458 6,864 Issued in Lieu of Cash Distributions 6,702 333 16,381 804 Redeemed** (77,498) (3,938) (342,208) (15,869) ------------------------------------------ Net Increase (Decrease)--Investor Shares (25,391) (1,292) (175,369) (8,201) ------------------------------------------ Admiral Shares Issued 58,169 1,409 227,266 5,042 Issued in Lieu of Cash Distributions 3,139 76 6,429 155 Redeemed** (15,134) (377) (77,667) (1,852) ------------------------------------------ Net Increase (Decrease)--Admiral Shares 46,174 1,108 156,028 3,345 ------------------------------------------ Institutional Shares Issued 5,449 276 65,035 2,752 Issued in Lieu of Cash Distributions 1,205 60 2,082 102 Redeemed** (4,759) (253) (10,211) (494) ------------------------------------------ Net Increase (Decrease)- Institutional Shares 1,895 83 56,906 2,360 - ----------------------------------------------------------------------------------------
*Net of redemption fees for 2003 and 2002 of $131,000 and $338,000, respectively. **Net of redemption fees for 2003 and 2002 of $410,000 and $2,036,000, respectively (fund totals). 38
- ---------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 ------------------- ------------------- AMOUNT SHARES AMOUNT SHARES TAX-MANAGED FUND (000) (000) (000) (000) - ---------------------------------------------------------------------------------------- CAPITAL APPRECIATION Investor Shares Issued $ 56,580 2,802 $ 161,791 7,252 Issued in Lieu of Cash Distributions -- -- 10,694 551 Redeemed* (81,749) (4,053) (307,425) (13,791) ------------------------------------------ Net Increase (Decrease) (25,169) (1,252) (134,940) (5,988) ------------------------------------------ Admiral Shares Issued 79,041 1,935 260,923 5,607 Issued in Lieu of Cash Distributions -- -- 6,265 160 Redeemed** (25,336) (631) (80,115) (1,918) ------------------------------------------ Net Increase (Decrease)--Admiral Shares 53,705 1,304 187,073 3,849 ------------------------------------------ Institutional Shares Issued 61 4 16,774 829 Issued in Lieu of Cash Distributions -- -- 564 29 Redeemed** (3,632) (198) (2,983) (146) ------------------------------------------ Net Increase (Decrease)- Institutional Shares (3,571) (194) 14,355 712 - ---------------------------------------------------------------------------------------- SMALL-CAP Investor Shares Issued $ 47,683 3,753 $ 165,515 11,625 Issued in Lieu of Cash Distributions -- -- 3,630 287 Redeemed** (25,724) (2,049) (33,739) (2,556) ------------------------------------------ Net Increase (Decrease)-Investor Shares 21,959 1,704 135,406 9,356 ------------------------------------------ Institutional Shares Issued -- -- 5,208 416 Issued in Lieu of Cash Distributions -- -- 102 8 Redeemed** (8,630) (670) (22,548) (1,679) ------------------------------------------ Net Increase (Decrease)- Institutional Shares (8,630) (670) (17,238) (1,255) - ---------------------------------------------------------------------------------------- International Investor Shares Issued $ 50,041 7,881 $ 123,341 17,238 Issued in Lieu of Cash Distributions -- -- 5,637 899 Redeemed** (52,543) (8,168) (55,232) (8,132) ------------------------------------------ Net Increase (Decrease)-Investor Shares (2,502) (287) 73,476 10,005 ------------------------------------------ Institutional Shares Issued 11,978 1,732 -- -- Issued in Lieu of Cash Distributions -- -- 1,040 166 Redeemed** -- -- -- -- ------------------------------------------ Net Increase (Decrease)- Institutional Shares 11,978 1,732 1,040 166 - ----------------------------------------------------------------------------------------
*Net of redemption fees for 2003 and 2002 of $444,000 and $1,686,000, respectively (fund totals). **Net of redemption fees for 2003 and 2002 of $332,000 and $613,000, respectively (fund totals). +Net of redemption fees for 2003 and 2002 of $306,000 and $415,000, respectively (fund totals). 38 INVESTING IS FAST AND EASY ON VANGUARD.COM If you're like many Vanguard investors, you believe in planning and taking control of your own investments. VANGUARD.COM(R) was built for you--and it's getting better all the time. MANAGE YOUR INVESTMENTS WITH EASE Log on to Vanguard.com and: * See what you own (at Vanguard and elsewhere) and how you're doing by using our Consolidated View(TM) tool. * Check your overall asset allocation, no matter where your assets are held. * Compare your holdings with industry benchmarks. * Analyze your personal performance. * Invest online and even manage the mail you get from us. (Prefer to get fund reports like this one online? Just let us know!) * Set up a Watch List to make it easy to track funds and securities of interest. PLAN YOUR INVESTMENTS WITH CONFIDENCE Go to our PLANNING & ADVICE and RESEARCH FUNDS & STOCKS sections and: * Take our Investor Questionnaire to find out what asset allocation might best suit your needs. * Find out how much you should save for retirement and for college costs. * Discover how investment costs affect your bottom line by using our Compare Fund Costs tool. * Find out how to maximize your after-tax returns in our PlainTalk(R) guide BE A TAX-SAVVY INVESTOR. * Attend our quarterly PlainTalk webcasts on investing. Find out what Vanguard.com can do for you. Log on today! 39 THE PEOPLE WHO GOVERN YOUR FUND The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard(R) funds and provides services to them on an at-cost basis. A majority of Vanguard's board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the investments they have made as private individuals. Our independent board members bring distinguished backgrounds in business, academia, and public service to their task of working with Vanguard officers to establish the policies and oversee the activities of the funds. Among board members' responsibilities are selecting investment advisers for the funds; monitoring fund operations, performance, and costs; reviewing contracts; nominating and selecting new trustees/directors; and electing Vanguard officers. The dates in parentheses below show when each trustee was initially elected. - -------------------------------------------------------------------------------- JOHN J. BRENNAN* Chairman of the Board, Chief Executive Officer, and (1987) Director/Trustee of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group. - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES CHARLES D. ELLIS The Partners of '63 (pro bono ventures in education); (2001) Senior Adviser to Greenwich Associates (international business strategy consulting); Successor Trustee of Yale University; Overseer of the Stern School of Business at New York University; Trustee of the Whitehead Institute for Biomedical Research. - -------------------------------------------------------------------------------- RAJIV L. GUPTA Chairman and Chief Executive Officer (since October (2002) 1999), Vice Chairman (January-September 1999), and Vice President (prior to September1999) of Rohm and Haas Co. (chemicals); Director of Technitrol, Inc. (electroniccomponents), and Agere Systems (communications components); Board Member of the American Chemistry Council; Trustee of Drexel University. - -------------------------------------------------------------------------------- JOANN HEFFERNAN HEISEN Vice President, Chief Information Officer, and Member (1998) of the Executive Committee of Johnson & Johnson (pharmaceuticals/consumer products); Director of the Medical Center at Princeton and Women's Research and Education Institute. - -------------------------------------------------------------------------------- BURTON G. MALKIEL Chemical Bank Chairman's Professor of Economics, (1977) Princeton University; Director of Vanguard Investment Series plc (Irish investment fund) (since November 2001), Vanguard Group (Ireland) Limited (Irish investment management firm) (since November 2001), Prudential Insurance Co. of America, BKF Capital (investment management firm), The Jeffrey Co.(holding company), and NeuVis, Inc.(software company). - -------------------------------------------------------------------------------- ALFRED M. RANKIN, JR. Chairman, President, Chief Executive Officer, and (1993) Director of NACCO Industries, Inc. (forklift trucks/ housewares/lignite); Director of Goodrich Corporation (industrial products/aircraft systems and services); Director until 1998 of Standard Products Company (a supplier for the automotive industry). - -------------------------------------------------------------------------------- J. LAWRENCE WILSON Retired Chairman and Chief Executive Officer of Rohm (1985) and Haas Co. (chemicals); Director of Cummins Inc. (diesel engines), MeadWestvaco Corp.(paper products), and AmerisourceBergen Corp. (pharmaceutical distribution); Trustee of Vanderbilt University. - -------------------------------------------------------------------------------- EXECUTIVE OFFICERS* R. Gregory Barton Secretary; Managing Director and General Counsel of The Vanguard Group, Inc. (since September 1997); Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Principal of The Vanguard Group (prior to September 1997). - -------------------------------------------------------------------------------- THOMAS J. HIGGINS Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group. - -------------------------------------------------------------------------------- * Officers of the funds are "interested persons" as defined in the Investment Company Act of 1940. More information about the trustees is in the Statement of Additional Information, available from The Vanguard Group. - -------------------------------------------------------------------------------- VANGUARD SENIOR MANAGEMENT TEAM MORTIMER J. BUCKLEY, Information Technology. F. WILLIAM MCNABB, III, Client Relationship Group. JAMES H. GATELY, Investment Programs and Services. MICHAEL S. MILLER, Planning and Development. KATHLEEN C. GUBANICH, Human Resources. RALPH K. PACKARD, Finance. IAN A. MACKINNON, Fixed Income Group. GEORGE U. SAUTER, Quantitative Equity Group. - -------------------------------------------------------------------------------- JOHN C. BOGLE, Founder; Chairman and Chief Executive Officer, 1974-1996. [PICTURE OF SHIP] THE VANGUARD GROUP LOGO(R) POST OFFICE BOX 2600 VALLEY FORGE, PA 19482-2600 Vanguard, The Vanguard Group, Vanguard.com, Vanguard Tax-Managed Funds, Admiral, Consolidated View, PlainTalk, Wellington, and the ship logo are trademarks of The Vanguard Group, Inc. S&P(R), S&P 500(R), Standard & Poor's 500, 500, and S&P SmallCap 600 are trademarks of The McGraw-Hill Companies, Inc., and have been licensed for use by The Vanguard Group, Inc. Vanguard mutual funds are not sponsored, endorsed, sold, or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the funds. All other marks are the exclusive property of their respective owners. ABOUT OUR COVER The photographs of the sails and ship that appear on the cover of this report are copyrighted by Michael Kahn. FOR MORE INFORMATION This report is intended for the fund's shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current fund prospectus. To receive a free copy of the prospectus or the Statement of Additional Information, or to request additional information about the fund or other Vanguard funds, please contact us at one of the adjacent telephone numbers or by e-mail through VANGUARD.COM(R). Prospectuses may also be viewed online. All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc., unless otherwise noted. WORLD WIDE WEB www.vanguard.com FUND INFORMATION 1-800-662-7447 DIRECT INVESTOR ACCOUNT SERVICES 1-800-662-2739 INSTITUTIONAL INVESTOR SERVICES 1-800-523-1036 TEXT TELEPHONE 1-800-952-3335 (C)2003 THE VANGUARD GROUP, INC. ALL RIGHTS RESERVED. VANGUARD MARKETING CORPORATION, DISTRIBUTOR. Q872 082003 VANGUARD TAX-MANAGED FUNDS(R) Semiannual Report June 30, 2003 (unaudited) STATEMENT OF NET ASSETS The Statement of Net Assets should be read in conjunction with the Statement of Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes to Financial Statements, all of which appear in the accompanying report. This Statement provides a detailed list of each fund's holdings, including each security's market value on the last day of the reporting period. Securities are grouped and subtotaled by asset type (common stocks, bonds, etc.), with common stocks listed in descending market-value order (grouped by country for the Tax-Managed International Fund). The Tax-Managed Balanced Fund's municipal bond holdings are grouped and subtotaled by state. Other assets are added to, and liabilities are subtracted from, the value of Total Investments to calculate the fund's Net Assets. Finally, Net Assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) Per Share. At the end of the Statement of Net Assets of each fund, you will find a table displaying the composition of the fund's net assets. Because all income and any realized gains must be distributed to shareholders each year, the bulk of net assets consists of Paid-in Capital (money invested by shareholders). The amounts shown for Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the sums the fund had available to distribute to shareholders as income dividends or capital gains as of the statement date, but may differ because certain investments or transactions may be treated differently for financial statement and tax purposes. Any Accumulated Net Realized Losses, and any cumulative excess of distributions over net income or net realized gains, will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values. ================================================================================ CONTENTS - -------------------------------------------------------------------------------- Tax-Managed Balanced Fund 1 Tax-Managed Growth and Income Fund 12 Tax-Managed Capital Appreciation Fund 18 Tax-Managed Small-Cap Fund 25 Tax-Managed International Fund 32 ================================================================================ ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (47.9%) - -------------------------------------------------------------------------------- General Electric Co. 236,609 6,786 Pfizer Inc. 187,210 6,393 ExxonMobil Corp. 159,244 5,718 Microsoft Corp. 213,700 5,473 Citigroup, Inc. 121,897 5,217 Johnson & Johnson 72,232 3,734 Wal-Mart Stores, Inc. 64,500 3,462 Intel Corp. 159,900 3,323 International Business Machines Corp. 38,700 3,193 American International Group, Inc. 55,606 3,068 Merck & Co., Inc. 50,400 3,052 * Cisco Systems, Inc. 174,600 2,914 Bank of America Corp. 33,505 2,648 The Procter & Gamble Co. 28,300 2,524 Verizon Communications 58,900 2,324 The Coca-Cola Co. 44,800 2,079 * Amgen, Inc. 30,000 1,993 Altria Group, Inc. 43,300 1,968 Wells Fargo & Co. 38,400 1,934 * Dell Computer Corp. 57,400 1,835 SBC Communications Inc. 68,844 1,759 PepsiCo, Inc. 39,500 1,758 * Viacom Inc. Class B 39,371 1,719 Home Depot, Inc. 49,200 1,630 ChevronTexaco Corp. 21,419 1,546 Medtronic, Inc. 31,400 1,506 * AOL Time Warner Inc. 85,610 1,377 Fannie Mae 20,200 1,362 Abbott Laboratories 31,000 1,357 Eli Lilly & Co. 19,100 1,317 ================================================================================ 1 ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 37,600 1,285 * Oracle Corp. 104,400 1,255 Wyeth 26,200 1,193 Anheuser-Busch Cos., Inc. 21,000 1,072 American Express Co. 25,200 1,054 Wachovia Corp. 25,700 1,027 Hewlett-Packard Co. 48,012 1,023 3M Co. 7,300 942 Morgan Stanley 21,960 939 Bristol-Myers Squibb Co. 34,100 926 Lowe's Cos., Inc. 21,200 911 Merrill Lynch & Co., Inc. 19,400 906 BellSouth Corp. 33,600 895 * Comcast Corp. Class A 27,316 823 United Technologies Corp. 11,300 800 U.S. Bancorp 32,500 796 UnitedHealth Group Inc. 15,800 794 * Comcast Corp. Special Class A 27,492 793 Cardinal Health, Inc. 12,190 784 The Walt Disney Co. 39,400 778 Colgate-Palmolive Co. 13,200 765 * Liberty Media Corp. 64,928 751 Bank One Corp. 20,164 750 * Applied Materials, Inc. 46,800 741 Freddie Mac 14,600 741 ConocoPhillips 13,476 738 United Parcel Service, Inc. 11,400 726 E.I. du Pont de Nemours & Co. 16,900 704 First Data Corp. 15,968 662 Walgreen Co. 21,600 650 Washington Mutual, Inc. 15,671 647 Fifth Third Bancorp 11,100 636 * Boston Scientific Corp. 10,000 611 Texas Instruments, Inc. 34,500 607 Sysco Corp. 20,200 607 Gillette Co. 18,800 599 * Cendant Corp. 32,495 595 The Goldman Sachs Group, Inc. 7,100 595 * Clear Channel Communications, Inc. 13,930 590 Prudential Financial, Inc. 17,500 589 FedEx Corp. 9,100 564 Kimberly-Clark Corp. 10,672 556 * EMC Corp. 53,000 555 * Forest Laboratories, Inc. 10,100 553 Lockheed Martin Corp. 11,200 533 Lehman Brothers Holdings, Inc. 7,900 525 SLM Corp. 13,400 525 * eBay Inc. 5,000 521 Target Corp. 13,200 499 QUALCOMM Inc. 13,900 497 AFLAC Inc. 16,100 495 * Genentech, Inc. 6,800 490 Progressive Corp. of Ohio 6,500 475 Waste Management, Inc. 19,501 470 * Yahoo! Inc. 14,300 468 * Sun Microsystems, Inc. 101,700 468 Illinois Tool Works, Inc. 7,100 468 * Costco Wholesale Corp. 12,700 465 Southwest Airlines Co. 26,718 460 Alcoa Inc. 17,988 459 * NEXTEL Communications, Inc. 24,900 450 * Kohl's Corp. 8,700 447 Union Pacific Corp. 7,659 444 Guidant Corp. 10,000 444 Devon Energy Corp. 8,223 439 * Veritas Software Corp. 15,219 436 The Boeing Co. 12,640 434 * WellPoint Health Networks Inc. Class A 5,100 430 * Analog Devices, Inc. 12,334 429 FleetBoston Financial Corp. 14,400 428 MBNA Corp. 20,400 425 * Best Buy Co., Inc. 9,650 424 Dow Chemical Co. 13,500 418 Newmont Mining Corp. (Holding Company) 12,789 415 Harley-Davidson, Inc. 10,300 411 * Bed Bath & Beyond, Inc. 10,400 404 State Street Corp. 10,200 402 Baker Hughes, Inc. 11,940 401 * Anthem, Inc. 5,136 396 Burlington Resources, Inc. 7,300 395 Capital One Financial Corp. 8,000 393 Charles Schwab Corp. 38,950 393 Travelers Property Casualty Corp. Class A 24,698 393 Maxim Integrated Products, Inc. 11,100 380 The Gap, Inc. 20,125 378 * St. Jude Medical, Inc. 6,484 373 * InterActiveCorp 9,400 372 Golden West Financial Corp. 4,600 368 Marsh & McLennan Cos., Inc. 7,200 368 Praxair, Inc. 6,100 367 Schering-Plough Corp. 19,700 366 Apache Corp. 5,623 366 * KLA-Tencor Corp. 7,800 363 McDonald's Corp. 16,300 360 Aetna Inc. 5,969 359 * PG&E Corp. 16,800 355 The Principal Financial Group, Inc. 11,000 355 * Starbucks Corp. 14,200 348 * Electronic Arts Inc. 4,700 348 Anadarko Petroleum Corp. 7,796 347 * Yum! Brands, Inc. 11,700 346 ================================================================================ 2 ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- * Corning, Inc. 46,200 341 Stryker Corp. 4,900 340 * Lexmark International, Inc. 4,800 340 * International Game Technology 3,300 338 Wm. Wrigley Jr. Co. 6,000 337 Allstate Corp. 9,400 335 General Dynamics Corp. 4,600 334 * AT&T Wireless Services Inc. 40,469 332 Metropolitan Life Insurance Co. 11,700 331 * EchoStar Communications Corp. Class A 9,557 331 Avon Products, Inc. 5,300 330 * Xerox Corp. 31,100 329 The Hartford Financial Services Group Inc. 6,500 327 * Staples, Inc. 17,737 325 * SunGard Data Systems, Inc. 12,500 324 John Hancock Financial Services, Inc. 10,500 322 Federated Department Stores, Inc. 8,700 321 Marriott International, Inc. Class A 8,300 319 MBIA, Inc. 6,500 317 * Concord EFS, Inc. 21,450 316 * MedImmune Inc. 8,624 314 Countrywide Financial Corp. 4,500 313 AmerisourceBergen Corp. 4,500 312 * Amazon.com, Inc. 8,500 310 * Zimmer Holdings, Inc. 6,870 309 * Apollo Group, Inc. Class A 5,000 309 * Intuit, Inc. 6,900 307 * Xilinx, Inc. 12,100 306 * Caremark Rx, Inc. 11,900 306 Adobe Systems, Inc. 9,500 305 Mattel, Inc. 16,080 304 Bear Stearns Co., Inc. 4,100 297 * Fiserv, Inc. 8,325 296 Biomet, Inc. 10,225 293 Danaher Corp. 4,300 293 Moody's Corp. 5,500 290 Mylan Laboratories, Inc. 8,300 289 HCA Inc. 8,902 285 Paychex, Inc. 9,650 283 Ambac Financial Group, Inc. 4,250 282 M & T Bank Corp. 3,300 278 Burlington Northern Santa Fe Corp. 9,738 277 * BJ Services Co. 7,400 276 * The Kroger Co. 16,500 275 ITT Industries, Inc. 4,200 275 Automatic Data Processing, Inc. 8,100 274 * Broadcom Corp. 11,000 274 * Apple Computer, Inc. 14,300 273 * Symantec Corp. 6,200 272 Norfolk Southern Corp. 14,100 271 Franklin Resources Corp. 6,900 270 * Altera Corp. 16,400 269 * Network Appliance, Inc. 16,539 268 Kinder Morgan, Inc. 4,900 268 * Synopsys, Inc. 4,300 266 * Edison International 16,100 265 Linear Technology Corp. 8,200 264 CenturyTel, Inc. 7,575 264 Honeywell International Inc. 9,800 263 Starwood Hotels & Resorts Worldwide, Inc. 9,101 260 * Computer Sciences Corp. 6,800 259 * Genzyme Corp.-General Division 6,200 259 * Cox Communications, Inc. Class A 8,100 258 * QLogic Corp. 5,300 256 CVS Corp. 9,128 256 Northrop Grumman Corp. 2,959 255 * Watson Pharmaceuticals, Inc. 6,300 254 * Office Depot, Inc. 17,500 254 * Coach, Inc. 5,100 254 * Intersil Corp. 9,500 253 Centex Corp. 3,200 249 * Quest Diagnostics, Inc. 3,900 249 EOG Resources, Inc. 5,900 247 Legg Mason Inc. 3,800 247 * Express Scripts Inc. 3,600 246 * Oxford Health Plans, Inc. 5,800 244 * DST Systems, Inc. 6,400 243 * AutoZone Inc. 3,200 243 * Dollar Tree Stores, Inc. 7,650 243 * Harrah's Entertainment, Inc. 6,000 241 Microchip Technology, Inc. 9,800 241 * Dean Foods Co. 7,650 241 Sigma-Aldrich Corp. 4,400 238 * American Standard Cos., Inc. 3,200 237 * CarMax, Inc. 7,803 235 * Citizens Communications Co. 18,137 234 * Waters Corp. 8,000 233 * Univision Communications Inc. 7,600 231 * Health Net Inc. 7,000 231 The Clorox Co. 5,400 230 * Varian Medical Systems, Inc. 4,000 230 * Unisys Corp. 18,700 230 Janus Capital Group Inc. 14,000 230 Liz Claiborne, Inc. 6,500 229 * Sealed Air Corp. 4,800 229 Torchmark Corp. 6,100 227 Loews Corp. 4,800 227 Sovereign Bancorp, Inc. 14,500 227 D. R. Horton, Inc. 8,050 226 NIKE, Inc. Class B 4,200 225 ================================================================================ 3 ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- * Thermo Electron Corp. 10,675 224 * UTStarcom, Inc. 6,300 224 MGIC Investment Corp. 4,800 224 Hilton Hotels Corp. 17,279 221 Dollar General Corp. 12,060 220 * Citrix Systems, Inc. 10,800 220 * Robert Half International, Inc. 11,600 220 * Career Education Corp. 3,200 219 * National Semiconductor Corp. 11,100 219 Health Management Associates Class A 11,812 218 * Lear Corp. 4,700 216 * Novellus Systems, Inc. 5,900 216 * Chiron Corp. 4,940 216 * IVAX Corp. 12,037 215 Emerson Electric Co. 4,200 215 Lennar Corp. Class A 3,000 215 Cintas Corp. 6,050 214 * Michaels Stores, Inc. 5,600 213 * Fox Entertainment Group, Inc. Class A 7,400 213 * BEA Systems, Inc. 19,600 213 Zions Bancorp 4,200 213 * Rent-A-Center, Inc. 2,800 212 * Energizer Holdings, Inc. 6,700 210 * Williams-Sonoma, Inc. 7,200 210 * Smith International, Inc. 5,700 209 XTO Energy, Inc. 10,400 209 * Republic Services, Inc. Class A 9,200 209 Mellon Financial Corp. 7,500 208 * AutoNation, Inc. 13,200 207 Archer-Daniels-Midland Co. 16,121 207 * Brinker International, Inc. 5,750 207 * Sanmina-SCI Corp. 32,808 207 Coca-Cola Enterprises, Inc. 11,400 207 * Affiliated Computer Services, Inc. Class A 4,500 206 Rouse Co. REIT 5,400 206 Southern Co. 6,600 206 * NVR, Inc. 500 206 Hasbro, Inc. 11,725 205 * Jones Apparel Group, Inc. 7,000 205 * Lincare Holdings, Inc. 6,500 205 * Markel Corp. 800 205 * General Motors Corp. Class H 15,962 204 Molex, Inc. 7,566 204 * PeopleSoft, Inc. 11,600 204 Pulte Homes, Inc. 3,300 203 Freeport-McMoRan Copper & Gold, Inc. Class B 8,300 203 * SPX Corp. 4,600 203 * Smithfield Foods, Inc. 8,800 202 Radian Group, Inc. 5,500 202 * The Dun & Bradstreet Corp. 4,900 201 Expeditors International of Washington, Inc. 5,800 201 Manpower Inc. 5,400 200 The Pepsi Bottling Group, Inc. 10,000 200 McKesson Corp. 5,600 200 * Mohawk Industries, Inc. 3,600 200 * Compuware Corp. 34,200 197 General Motors Corp. 5,479 197 ENSCO International, Inc. 7,300 196 * First Health Group Corp. 7,100 196 * Pride International, Inc. 10,400 196 CSX Corp. 6,500 196 * JDS Uniphase Corp. 55,600 195 * Pactiv Corp. 9,900 195 * Constellation Brands, Inc. Class A 6,200 195 * Toys R Us, Inc. 16,000 194 * Barr Laboratories, Inc. 2,950 193 * Cablevision Systems- NY Group Class A 9,294 193 Pogo Producing Co. 4,500 192 * Celgene Corp. 6,300 192 * L-3 Communications Holdings, Inc. 4,400 191 * Tenet Healthcare Corp. 16,390 191 IMS Health, Inc. 10,576 190 * Siebel Systems, Inc. 19,910 190 Foot Locker, Inc. 14,300 189 * MGM Mirage, Inc. 5,514 188 * Henry Schein, Inc. 3,600 188 DENTSPLY International Inc. 4,600 188 * BMC Software, Inc. 11,500 188 NSTAR 4,100 187 * Gentex Corp. 6,100 187 Gannett Co., Inc. 2,400 184 * Providian Financial Corp. 19,900 184 * American Power Conversion Corp. 11,800 184 Telephone & Data Systems, Inc. 3,700 184 * PETsMART, Inc. 11,000 183 * Westwood One, Inc. 5,400 183 * CDW Corp. 4,000 183 * Safeway, Inc. 8,934 183 * Pioneer Natural Resources Co. 7,000 183 W.W. Grainger, Inc. 3,900 182 * Big Lots Inc. 12,100 182 RadioShack Corp. 6,900 182 * Cooper Cameron Corp. 3,600 181 Outback Steakhouse 4,650 181 * LSI Logic Corp. 25,600 181 * Jabil Circuit, Inc. 8,200 181 * Toll Brothers, Inc. 6,400 181 Precision Castparts Corp. 5,800 180 ================================================================================ 4 ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- * Apogent Technologies Inc. 9,000 180 * Navistar International Corp. 5,500 179 Darden Restaurants Inc. 9,450 179 * Rowan Cos., Inc. 8,000 179 Plum Creek Timber Co. Inc. REIT 6,900 179 * BISYS Group, Inc. 9,700 178 IndyMac Bancorp, Inc. REIT 7,000 178 Noble Energy, Inc. 4,700 178 * Furniture Brands International Inc. 6,800 177 E.W. Scripps Co. Class A 2,000 177 * Teradyne, Inc. 10,200 177 * JetBlue Airways Corp. 4,150 176 Motorola, Inc. 18,606 175 Roslyn Bancorp, Inc. 8,150 175 Fluor Corp. 5,200 175 * Cadence Design Systems, Inc. 14,500 175 * Certegy, Inc. 6,300 175 HCC Insurance Holdings, Inc. 5,900 174 * Andrx Group 8,753 174 * GTECH Holdings Corp. 4,600 173 Total System Services, Inc. 7,700 172 * Qwest Communications International Inc. 35,751 171 C.H. Robinson Worldwide, Inc. 4,800 171 * Iron Mountain, Inc. 4,600 171 Fastenal Co. 5,000 170 Kerr-McGee Corp. 3,774 169 * Laboratory Corp. of America Holdings 5,600 169 * Jacobs Engineering Group Inc. 4,000 169 * Patterson-UTI Energy, Inc. 5,200 168 * Ceridian Corp. 9,900 168 * NVIDIA Corp. 7,300 168 * Hispanic Broadcasting Corp. 6,600 168 * Tellabs, Inc. 25,500 167 * Agilent Technologies, Inc. 8,563 167 * Catellus Development Corp. 7,600 167 * Biogen, Inc. 4,400 167 The Bank of New York Co., Inc. 5,800 167 * Performance Food Group Co. 4,500 167 Dominion Resources, Inc. 2,590 166 Baxter International, Inc. 6,400 166 Reynolds & Reynolds Class A 5,800 166 * Smurfit-Stone Container Corp. 12,688 165 * Phelps Dodge Corp. 4,300 165 * Reebok International Ltd. 4,900 165 * Krispy Kreme Doughnuts, Inc. 4,000 165 * Varco International, Inc. 8,400 165 * Allied Waste Industries, Inc. 16,300 164 The PMI Group Inc. 6,100 164 Reinsurance Group of America, Inc. 5,100 164 Rockwell Collins, Inc. 6,600 163 * Universal Health Services Class B 4,100 162 Ford Motor Co. 14,765 162 * Newfield Exploration Co. 4,300 161 * Owens-Illinois, Inc. 11,700 161 Black & Decker Corp. 3,700 161 * Columbia Sportswear Co. 3,100 159 Mandalay Resort Group 5,000 159 * BOK Financial Corp. 4,120 159 * Alleghany Corp. 830 159 * National-Oilwell, Inc. 7,200 158 Estee Lauder Cos. Class A 4,700 158 Lyondell Chemical Co. 11,600 157 * SICOR, Inc. 7,700 157 * LAM Research Corp. 8,600 157 Leucadia National Corp. 4,200 156 Caterpillar, Inc. 2,800 156 ALLTEL Corp. 3,230 156 Williams Cos., Inc. 19,700 156 Tyson Foods, Inc. 14,631 155 Helmerich & Payne, Inc. 5,300 155 * Stericycle, Inc. 4,000 154 * NTL Incorporated 4,500 154 * Timberland Co. 2,900 153 Medicis Pharmaceutical Corp. 2,700 153 * Grant Prideco, Inc. 13,015 153 The St. Joe Co. 4,900 153 Transatlantic Holdings, Inc. 2,200 152 * Cytec Industries, Inc. 4,500 152 * Convergys Corp. 9,500 152 * Entercom Communications Corp. 3,100 152 * Lamar Advertising Co. Class A 4,300 151 Sabre Holdings Corp. 6,140 151 * J.B. Hunt Transport Services, Inc. 4,000 151 * Avnet, Inc. 11,900 151 * Del Monte Foods Co. 17,000 150 Brunswick Corp. 6,000 150 Northeast Utilities 8,900 149 * Hovnanian Enterprises Class A 2,500 147 * Whole Foods Market, Inc. 3,100 147 * WellChoice Inc. 5,000 146 * Pharmaceutical Resources, Inc. 3,000 146 * Sprint PCS 25,300 145 * BearingPoint, Inc. 15,000 145 Peabody Energy Corp. 4,300 144 Polo Ralph Lauren Corp. 5,600 144 * Sepracor Inc. 8,000 144 * ADC Telecommunications, Inc. 61,900 144 National City Corp. 4,400 144 Becton, Dickinson & Co. 3,700 144 * FMC Technologies Inc. 6,803 143 Nucor Corp. 2,900 142 Tootsie Roll Industries, Inc. 4,642 142 ================================================================================ 5 ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- * Weight Watchers International, Inc. 3,100 141 * 3Com Corp. 30,000 140 * Key Energy Services, Inc. 13,000 139 PepsiAmericas, Inc. 11,000 138 * Westport Resources Corp. 6,000 137 * Patterson Dental Co. 3,000 136 * Hearst-Argyle Television Inc. 5,200 135 Neuberger Berman Inc. 3,300 132 * ChoicePoint Inc. 3,800 131 Valero Energy Corp. 3,600 131 * United Defense Industries Inc. 5,000 130 Wesco Financial Corp. 410 128 * Solectron Corp. 34,200 128 ServiceMaster Co. 11,900 127 Herman Miller, Inc. 6,300 127 * BlackRock, Inc. 2,800 126 Northern Trust Corp. 3,000 125 * Host Marriott Corp. REIT 13,700 125 * Borders Group, Inc. 7,100 125 * Abercrombie & Fitch Co. 4,400 125 * Scotts Co. 2,500 124 * Eon Labs, Inc. 3,500 123 * Swift Transportation Co., Inc. 6,600 123 * NCR Corp. 4,768 122 * Ingram Micro, Inc. Class A 10,900 120 * American Pharmaceuticals Partners, Inc. 3,500 119 * Endo Pharmaceuticals Holdings, Inc. 7,000 118 Monsanto Co. 5,454 118 International Paper Co. 3,300 118 Alberto-Culver Co. Class B 2,300 118 Eaton Vance Corp. 3,700 117 * Barnes & Noble, Inc. 5,000 115 General Mills, Inc. 2,400 114 Exelon Corp. 1,900 114 BB&T Corp. 3,300 113 Clayton Homes Inc. 9,000 113 * Packaging Corp. of America 6,100 112 * Park Place Entertainment Corp. 12,200 111 Kellogg Co. 3,200 110 * DeVry, Inc. 4,700 109 * Saks Inc. 11,200 109 * The Cheesecake Factory 2,900 104 * Arrow Electronics, Inc. 6,800 104 Amerada Hess Corp. 2,100 103 Diamond Offshore Drilling, Inc. 4,900 103 * Mettler-Toledo International Inc. 2,800 103 * Millipore Corp. 2,300 102 * U.S. Cellular Corp. 4,000 102 Federated Investors, Inc. 3,700 101 AT&T Corp. 5,231 101 Georgia Pacific Group 5,272 100 Duke Energy Corp. 5,000 100 * Rite Aid Corp. 22,300 99 * AGCO Corp. 5,800 99 * Storage Technology Corp. 3,800 98 * Interactive Data Corp. 5,400 91 * Advanced Micro Devices, Inc. 14,200 91 Investors Financial Services Corp. 3,100 90 Sara Lee Corp. 4,700 88 Winn-Dixie Stores, Inc. 6,900 85 Sprint Corp. 5,600 81 LaBranche & Co. Inc. 3,800 79 Martin Marietta Materials, Inc. 2,300 77 SunTrust Banks, Inc. 1,300 77 * Metro-Goldwyn-Mayer Inc. 6,000 75 The MONY Group Inc. 2,700 73 * AES Corp. 11,300 72 * CNA Financial Corp. 2,900 71 * King Pharmaceuticals, Inc. 4,700 69 Travelers Property Casualty Corp. Class B 4,379 69 NiSource, Inc. 3,377 64 * CIENA Corp. 11,300 59 * Triad Hospitals, Inc. 2,300 57 R.J. Reynolds Tobacco Holdings, Inc. 1,501 56 Computer Associates International, Inc. 2,362 53 Albertson's, Inc. 2,700 52 * Polycom, Inc. 3,600 50 * Level 3 Communications, Inc. 7,300 48 SCANA Corp. 1,400 48 * Valassis Communications, Inc. 1,800 46 Beckman Coulter, Inc. 1,100 45 * IDEC Pharmaceuticals Corp. 1,300 44 * Micron Technology, Inc. 3,700 43 ProLogis REIT 1,565 43 * Avaya Inc. 6,600 43 * Amkor Technology, Inc. 3,220 42 * Brocade Communications Systems, Inc. 6,800 40 * Tech Data Corp. 1,300 35 * Vishay Intertechnology, Inc. 2,600 34 Newell Rubbermaid, Inc. 1,218 34 Limited Brands, Inc. 2,138 33 St. Paul Cos., Inc. 900 33 Instinet Group Inc. 6,800 32 Belo Corp. Class A 1,400 31 Nationwide Financial Services, Inc. 900 29 ConAgra Foods, Inc. 1,200 28 FirstEnergy Corp. 700 27 Cinergy Corp. 700 26 Electronic Data Systems Corp. 1,100 24 Lennar Corp. Class B 340 23 ================================================================================ 6 ================================================================================ MARKET TAX-MANAGED VALUE BALANCED FUND SHARES (000) - -------------------------------------------------------------------------------- Autodesk, Inc. 1,400 23 * Alliant Techsystems, Inc. 400 21 PNC Financial Services Group 400 20 Nordstrom, Inc. 900 18 Xcel Energy, Inc. 900 14 TXU Corp. 600 13 First Tennessee National Corp. 300 13 Delphi Corp. 1,235 11 El Paso Corp. 1,300 11 Dynegy, Inc. 1,900 8 * Monster Worldwide Inc. 400 8 * Pixar, Inc. 100 6 StanCorp Financial Group, Inc. 100 5 Trizec Properties, Inc. REIT 200 2 * Corrections Corp. of America REIT 74 2 * Agere Systems Inc. Class B 277 1 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $172,939) 216,277 - -------------------------------------------------------------------------------- FACE AMOUNT (000) - -------------------------------------------------------------------------------- MUNICIPAL BONDS (52.4%) - -------------------------------------------------------------------------------- ALASKA (0.7%) Matanuska-Susitna Borough AK GO 5.50%, 3/1/2012 (3) $1,695 1,985 Valdez AK Marine Terminal Rev. (Exxon Pipeline Co.) VRDO 0.90%, 7/1/2003 1,100 1,100 ------------ 3,085 ------------ ARIZONA (2.4%) Arizona Transp. Board Highway Rev. 5.25%, 7/1/2017 2,215 2,456 5.25%, 7/1/2020 1,965 2,138 Phoenix AZ Civic Improvement Corp. Water System Rev. 5.50%, 7/1/2015 (3) 5,525 6,331 ------------ 10,925 ------------ CALIFORNIA (3.3%) California State Dept. Water Resources Power Supply Rev. 5.50%, 5/1/2015 (2) 3,000 3,411 California Dept. of Water Resources Water System Rev. (Central Valley) 8.25%, 12/1/2003 290 299 California GO 6.00%, 2/1/2016 2,000 2,334 6.40%, 2/1/2006 (1) 500 561 California Health Fac. Finance Auth. Rev. (Catholic Healthcare West) 6.25%, 7/1/2006 (1) 395 448 California Public Works Board Lease Rev. (Dept. of Corrections) 5.00%, 9/1/2011 (2) 1,535 1,692 Central Coast California Water Auth. Rev. 6.00%, 10/1/2008 (2) 1,000 1,154 Clovis CA Unified School Dist. GO 0.00%, 8/1/2005 (3) (ETM) 2,000 1,943 Los Angeles CA Unified School Dist. GO 6.00%, 7/1/2008 (3) 1,000 1,178 San Bernardino County CA Medical Center COP 5.50%, 8/1/2005 (1) 500 543 South Orange County CA Public Finance Auth. Rev. 7.00%, 9/1/2006 (1) 875 1,021 ------------ 14,584 ------------ COLORADO (0.7%) Colorado Springs CO Util. System Rev. 5.375%, 11/15/2013 2,775 3,214 ------------ CONNECTICUT (0.2%) South Central Connecticut Regional Water Auth. Water System Rev. 5.75%, 8/1/2006 (3) 900 922 ------------ DISTRICT OF COLUMBIA (1.5%) District of Columbia GO 5.50%, 6/1/2004 (4) 740 770 5.50%, 6/1/2004 (4) (ETM) 260 271 6.75%, 6/1/2005 (1) 5 5 5.50%, 6/1/2007 (4) 1,490 1,684 5.40%, 6/1/2012 (2) 455 516 District of Columbia Univ. Rev. (George Washington Univ.) 6.00%, 9/15/2011 (1) 3,000 3,567 ------------ 6,813 ------------ FLORIDA (2.0%) Florida Division Board Financial Dept. of General Services Systems Rev. (Dept. of Environmental Protection) 5.00%, 7/1/2009 3,000 3,405 Florida Turnpike Auth. Rev. 5.25%, 7/1/2009 (3) 485 550 5.25%, 7/1/2010 (3) 825 941 Jacksonville FL Electric Auth. Rev. (Electric System) VRDO 1.00%, 7/1/2003 2,900 2,900 Tampa FL Health System Rev. (Catholic Healthcare East) 5.00%, 11/15/2009 (1) 1,000 1,134 ------------ 8,930 ------------ ================================================================================ 7 ================================================================================ FACE MARKET TAX-MANAGED AMOUNT VALUE* BALANCED FUND (000) (000) - -------------------------------------------------------------------------------- GEORGIA (1.7%) Atlanta GA Airport Fac. Rev. 5.75%, 1/1/2013 (3) 3,370 3,907 Georgia Muni. Electric Power Auth. Rev. 6.25%, 1/1/2012 (1) 3,000 3,671 ------------ 7,578 ------------ HAWAII (0.5%) Hawaii GO 5.875%, 10/1/2014 (1) (Prere.) 1,870 2,254 ------------ ILLINOIS (1.9%) Chicago IL (City Colleges Improvement) GO 0.00%, 1/1/2012 (3) 2,380 1,738 Illinois GO. 5.25%, 8/1/2012 3,700 4,271 Illinois Sales Tax Rev 0.00%, 12/15/2016 (2) 5,000 2,780 ------------ 8,789 ------------ KANSAS (0.7%) Kansas Dept. of Transp. Highway Rev. VRDO 1.00%, 7/1/2003 1,430 1,430 Kansas Dev. Finance Auth. Rev. (Board of Regents) 5.50%, 10/1/2003 (2) 1,800 1,821 ------------ 3,251 ------------ LOUISIANA (1.2%) Louisiana GO 5.50%, 5/15/2015 (3) 2,665 3,037 St. Charles Parish LA PCR (Entergy Inc.) PUT 5.35%, 10/1/2003 2,400 2,420 ------------ 5,457 ------------ MASSACHUSETTS (3.7%) Chelsea MA GO 5.50%, 6/15/2011 (2) 740 851 5.50%, 6/15/2012 (2) 735 845 Massachusetts Bay Transp. Auth. Rev. 6.25%, 3/1/2005 1,000 1,081 5.125%, 3/1/2013 1,695 1,910 Massachusetts Dev. Finance Agency Rev. (Smith College) VRDO 0.95%, 7/7/2003 3,300 3,300 Massachusetts Health & Educ. Fac. Auth. Rev. (Caritas Christi Obligated Group) 6.50%, 7/1/2012 1,880 1,963 Massachusetts Health & Educ. Fac. Auth. Rev. (Northeastern Univ.) 5.00%, 10/1/2017 (1) 1,000 1,070 Massachusetts Water Pollution Abatement Trust 6.00%, 8/1/2010 1,780 2,098 Massachusetts Water Resources Auth. Rev. 5.75%, 8/1/2004 (1) (Prere.) 300 320 5.25%, 8/1/2017 (4) 3,000 3,460 ------------ 16,898 ------------ MICHIGAN (2.1%) Dickinson County MI Memorial Hosp. System Rev. 7.625%, 11/1/2004 (Prere.) 180 185 Michigan Building Auth. Rev. 5.30%, 10/1/2010 1,250 1,430 5.125%, 10/15/2011 3,015 3,408 Michigan Muni. Bond Auth. Rev. (Clean Water Revolving Fund) 5.875%, 10/1/2014 (Prere.) 2,110 2,562 Univ. of Michigan Hosp. Rev. VRDO 0.95%, 7/1/2003 2,000 2,000 ------------ 9,585 ------------ MISSISSIPPI (1.2%) Mississippi GO 5.50%, 12/1/2018 2,750 3,249 5.50%, 12/1/2019 2,000 2,359 ------------ 5,608 ------------ MISSOURI (1.8%) Missouri Health & Educ. Fac. Auth. Health Fac. Rev. (St. Luke's Episcopal - Presbyterian Hosp.) 5.50%, 12/1/2015 (4) 2,965 3,346 Missouri Health & Educ. Fac. Auth. (Washington Univ.) 6.00%, 3/1/2030 4,000 4,816 ------------ 8,162 ------------ NEBRASKA (0.1%) Nebraska Public Power Dist. Rev. 5.25%, 1/1/2010 (1) 125 141 5.25%, 1/1/2011 (1) 225 254 ------------ 395 ------------ NEVADA (0.6%) Clark County NV Airport Improvement Rev. 5.00%, 7/1/2005 (1) 1,705 1,827 Clark County NV School Dist. GO 5.90%, 6/15/2006 (3) (Prere.) 750 853 ------------ 2,680 ------------ ================================================================================ 8 ================================================================================ FACE MARKET TAX-MANAGED AMOUNT VALUE* BALANCED FUND (000) (000) - -------------------------------------------------------------------------------- NEW JERSEY (2.6%) New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.70%, 7/1/2004 (1) (Prere.) 400 427 New Jersey Transp. Corp. COP 5.50%, 9/15/2011 (2) 3,000 3,517 New Jersey Transp. Trust Fund Auth. Rev. 6.00%, 6/15/2005 (2) 2,500 2,725 6.00%, 6/15/2008 250 289 6.00%, 12/15/2011 (1) (Prere.) 625 772 5.00%, 6/15/2014 1,555 1,694 6.00%, 12/15/2014 (1) 330 396 6.00%, 12/15/2015 (1) (Prere.) 1,440 1,779 ------------ 11,599 ------------ NEW YORK (6.5%) Erie County NY GO 6.125%, 1/15/2011 (3) 610 730 Hempstead NY GO 5.625%, 2/1/2011 (3) 685 756 5.625%, 2/1/2011 155 175 Huntington NY GO 6.70%, 2/1/2010 (3) 375 459 Long Island NY Power Auth. Electric System Rev. 5.50%, 12/1/2009 (2) 2,000 2,331 5.50%, 12/1/2012 (4) 2,000 2,390 Metro. New York Transp. Auth. Rev. (Commuter Fac.) 6.00%, 7/1/2006 (1) 1,000 1,133 Metro. New York Transp. Auth. Rev. (Dedicated Petroleum Tax) 6.125%, 4/1/2014 (3) (Prere.) 2,110 2,555 New York City NY GO 7.10%, 8/15/2004 (Prere.) 500 539 6.375%, 8/15/2005 (Prere.) 135 151 6.375%, 8/15/2009 505 554 New York City NY GO VRDO 0.95%, 7/1/2003 LOC 800 800 New York City NY Muni. Water Finance Auth. Water & Sewer System Rev. VRDO 0.95%, 7/1/2003 (3) 1,800 1,800 New York City NY Transitional Finance Auth. Rev. 5.875%, 11/1/2012 3,305 3,866 5.375%, 2/1/2013 2,000 2,294 New York State Dormitory Auth. Rev. (State Univ.) 5.375%, 5/15/2007 (2) 400 451 New York State Dormitory Auth. Rev. (Vassar Brothers Hosp.) 5.10%, 7/1/2010 (4) 1,500 1,658 New York State Environmental Fac. Corp. PCR (State Water Recovery Fund) 6.35%, 6/15/2004 295 315 6.35%, 6/15/2006 225 239 New York State Thruway Auth. Rev. (Service Contract) 5.40%, 4/1/2005 (1) 400 420 5.50%, 4/1/2014 4,000 4,602 Suffolk County NY GO 5.00%, 4/1/2007 (3) 1,120 1,246 ------------ 29,464 ------------ NORTH CAROLINA (0.6%) North Carolina Eastern Muni. Power Agency Rev. 5.125%, 1/1/2014 2,400 2,507 ------------ OHIO (3.7%) Butler County OH Transp. Improvement Dist. Rev. 6.00%, 4/1/2012 (4) 2,250 2,651 Cleveland OH Public Power System Rev. 7.00%, 11/15/2004 (1) (Prere.) 2,750 3,028 Hamilton County OH Hosp. Fac. Rev. (Health Alliance of Greater Cincinnati) VRDO 0.97%, 7/7/2003 (1) 1,040 1,040 Lorain County OH Hosp. Fac. Rev. (Catholic Healthcare Partners) 6.00%, 9/1/2004 (1) 1,080 1,142 5.625%, 9/1/2013 (1) 1,775 2,039 Ohio State-Infrastructure Improvements 5.50%, 2/1/2019 2,000 2,353 Ohio Air Quality Dev. Auth. (Cincinnati Gas & Electric Co.) VRDO 0.95%, 7/1/2003 LOC 1,795 1,795 Ohio Higher Educ. Fac. Comm. Rev. (Case Western Reserve Univ.) VRDO 0.95%, 7/1/2003 1,500 1,500 Ohio Housing Finance Agency Mortgage Rev. 5.025%, 3/1/2021 545 547 Ohio Water Dev. Auth. Rev. (Pure Water) 5.75%, 12/1/2005 105 107 ================================================================================ 9 ================================================================================ FACE MARKET TAX-MANAGED AMOUNT VALUE* BALANCED FUND (000) (000) - -------------------------------------------------------------------------------- Ohio Water Dev. Auth. Rev. 6.00%, 12/1/2004 (2) (Prere.) 315 323 6.00%, 12/1/2008 (2) (Prere.) 75 77 ------------ 16,602 ------------ OREGON (0.6%) Oregon State Dept. Administrative Services 5.75%, 4/1/2014 (4) 2,400 2,775 PENNSYLVANIA (4.5%) Geisinger Health System Auth. of Pennsylvania Rev. (Penn State Geisinger Health System) VRDO 0.98%, 7/1/2003 800 800 Montgomery County PA IDA PCR (PECO Energy) PUT 5.20%, 10/1/2004 2,000 2,073 Pennsylvania Convention Center Auth. Rev. 6.70%, 9/1/2014 (1) 500 540 Pennsylvania GO 5.00%, 7/1/2009 5,000 5,690 Pennsylvania Turnpike Comm. Oil Franchise Tax Rev. 5.25%, 12/1/2009 (2) 615 703 5.25%, 12/1/2011 (2) 455 523 Philadelphia PA Airport Parking Auth. 5.75%, 9/1/2008 (2) 1,150 1,335 Philadelphia PA Hosp. & Higher Educ. Fac. Auth. Rev. (Children's Hosp. of Philadelphia) VRDO 0.98%, 7/1/2003 3,500 3,500 0.98%, 7/1/2003 (1) 1,900 1,900 Philadelphia PA School Dist. GO 6.25%, 9/1/2005 (2) 870 961 Philadelphia PA Water & Waste Water Rev. 6.25%, 8/1/2009 (1) 1,000 1,205 Pittsburgh PA GO 5.20%, 3/1/2010 (3) 580 624 Pittsburgh PA Water & Sewer Auth. Rev. 5.60%, 9/1/2005 (3) (Prere.) 235 257 ------------ 20,111 ------------ SOUTH DAKOTA (0.3%) South Dakota Building Auth. Lease Rev. 5.25%, 12/1/2010 (2) 1,000 1,133 ------------ TENNESSEE (0.5%) Metro. Govt. of Nashville & Davidson County TN Water & Sewer Rev. 6.50%, 1/1/2009 (3) 2,000 2,403 ------------ TEXAS (4.6%) Austin TX Combined Util. System Rev. 5.60%, 5/15/2005 (1) (Prere.) 1,205 1,302 Austin TX Water & Wastewater System Rev. 5.75%, 5/15/2011 (1) 2,200 2,549 Brazos River TX Harbor Navigation Dist. Brazoria County Environmental (Dow Chemical Co. Project) PUT 5.20%, 5/15/2008 800 850 Carrollton TX Independent School Dist. GO 6.00%, 2/15/2012 (Prere.) 2,925 3,474 Dallas TX Civic Center Refunding & Improvement Rev. 4.60%, 8/15/2009 (1) 110 121 4.70%, 8/15/2010 (1) 815 890 Harris County TX GO VRDO 1.10%, 7/7/2003 900 900 Harris County TX Health Fac. Dev. Corp. Rev. (St. Luke's Episcopal Hosp.) VRDO 0.95%, 7/1/2003 1,070 1,070 Houston TX Water & Sewer System Rev. 0.00%, 12/1/2008 (2) 2,750 2,381 Lubbock TX Health Fac. Dev. Corp. Rev. (St. Joseph's Health System) 5.00%, 7/1/2008 (4) 1,645 1,825 Northwest Texas Independent School Dist. GO 0.00%, 8/15/2004 2,205 2,179 San Antonio TX Electric & Gas Rev. 5.125%, 2/1/2009 1,000 1,131 San Antonio TX Water Rev. 6.50%, 5/15/2010 75 91 6.50%, 5/15/2010 15 16 Texas Muni. Power Agency Rev. 0.00%, 9/1/2010 (2) (ETM) 160 127 Texas Water Finance Assistance GO 5.00%, 8/1/2008 690 692 5.00%, 8/1/2009 1,050 1,054 ------------ 20,652 ------------ UTAH (0.3%) Intermountain Power Agency Utah Power Supply Rev. 5.20%, 7/1/2006 725 740 5.20%, 7/1/2006 425 434 Salt Lake City UT Building Auth. Lease Rev. 5.90%, 10/1/2004 (1) (Prere.) 260 278 ------------ 1,452 ------------ ================================================================================ 10 ================================================================================ FACE MARKET TAX-MANAGED AMOUNT VALUE* BALANCED FUND (000) (000) - -------------------------------------------------------------------------------- VIRGINIA (0.5%) Henrico County VA Water & Sewer Rev. 5.25%, 5/1/2011 1,485 1,698 Virginia Transp. Board Rev. 6.00%, 5/15/2007 500 527 ------------ 2,225 ------------ WASHINGTON (0.7%) King County WA Library System GO 6.05%, 12/1/2007 (Prere.) 1,000 1,150 Seattle WA Muni. Light & Power Rev. 6.25%, 7/1/2004 (Prere.) 700 751 Washington GO 6.00%, 6/1/2012 1,000 1,207 ------------ 3,108 ------------ WISCONSIN (0.7%) Wisconsin GO 5.75%, 5/1/2011 (Prere.) 1,340 1,605 5.75%, 5/1/2012 1,355 1,586 ------------ 3,191 ------------ - -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (Cost $219,810) 236,352 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (100.3%) (Cost $392,749) 452,629 - -------------------------------------------------------------------------------- MARKET VALUE* (000) - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-0.3%) - -------------------------------------------------------------------------------- Other Assets--Note B $ 5,271 Liabilities (6,559) ------------ (1,288) ------------ - -------------------------------------------------------------------------------- NET ASSETS (100%) - -------------------------------------------------------------------------------- Applicable to 27,108,382 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $451,341 ================================================================================ NET ASSET VALUE PER SHARE $16.65 ================================================================================ - -See Note A in Notes to Financial Statements. *Non-income-producing security. COP--Certificate of Participation. GO--General Obligation Bond. IDA--Industrial Development Authority Bond. PCR--Pollution Control Revenue Bond. PUT--Put Option Obligation. REIT--Real Estate Investment Trust. VRDO--Variable Rate Demand Obligation. (Prere.)--Prerefunded. (ETM)--Escrowed to Maturity. Scheduled principal and interest payments are guaranteed by: (1) MBIA (Municipal Bond Insurance Association). (2) AMBAC (AMBAC Indemnity Corporation). (3) FGIC (Financial Guaranty Insurance Company). (4) FSA (Financial Security Assurance). The insurance does not guarantee the market value of the municipal bonds. LOC--Scheduled principal and interest payments are guaranteed by bank letter of credit. ================================================================================ AT JUNE 30, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- AMOUNT PER (000) SHARE - -------------------------------------------------------------------------------- Paid-in Capital $427,797 $15.78 Undistributed Net Investment Income 52 -- Accumulated Net Realized Losses (36,388) (1.34) Unrealized Appreciation 59,880 2.21 - -------------------------------------------------------------------------------- NET ASSETS $451,341 $16.65 ================================================================================ See Note C in Notes to Financial Statements for the tax-basis components of net assets. 11 ================================================================================ MARKET TAX-MANAGED VALUE* GROWTH AND INCOME FUND SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (100.0%) - -------------------------------------------------------------------------------- General Electric Co. 2,220,616 63,687 Microsoft Corp. 2,386,068 61,107 Pfizer Inc. 1,754,187 59,905 ExxonMobil Corp. 1,484,394 53,305 Wal-Mart Stores, Inc. 973,086 52,226 Citigroup, Inc. 1,144,110 48,968 Johnson & Johnson 659,792 34,111 American International Group, Inc. 579,763 31,991 International Business Machines Corp. 384,036 31,683 Intel Corp. 1,452,036 30,179 Merck & Co., Inc. 498,358 30,176 Bank of America Corp. 333,001 26,317 * Cisco Systems, Inc. 1,559,802 26,033 The Procter & Gamble Co. 287,768 25,663 The Coca-Cola Co. 547,426 25,406 Verizon Communications 611,264 24,114 Altria Group, Inc. 449,979 20,447 SBC Communications Inc. 738,370 18,865 Wells Fargo & Co. 372,204 18,759 * Amgen, Inc. 279,904 18,597 * Dell Computer Corp. 570,700 18,240 Eli Lilly & Co. 249,696 17,222 ChevronTexaco Corp. 237,475 17,146 PepsiCo, Inc. 382,480 17,020 Home Depot, Inc. 510,629 16,911 * Viacom Inc. Class B 387,175 16,904 United Parcel Service, Inc. 250,100 15,931 J.P. Morgan Chase & Co. 451,490 15,432 Abbott Laboratories 346,994 15,184 * AOL Time Warner Inc. 915,314 14,727 Fannie Mae 217,732 14,684 Hewlett-Packard Co. 678,381 14,450 * Oracle Corp. 1,166,972 14,027 Wyeth 295,136 13,443 * Comcast Corp. Class A 442,530 13,356 Medtronic, Inc. 271,036 13,002 American Express Co. 288,464 12,061 Wachovia Corp. 298,930 11,945 3M Co. 86,945 11,214 BellSouth Corp. 410,372 10,928 Bristol-Myers Squibb Co. 390,976 10,615 U.S. Bancorp 426,654 10,453 Morgan Stanley 241,678 10,332 Merrill Lynch & Co., Inc. 206,784 9,653 Anheuser-Busch Cos., Inc. 185,528 9,471 Bank One Corp. 253,854 9,438 E.I. du Pont de Nemours & Co. 221,433 9,220 The Walt Disney Co. 454,096 8,968 The Goldman Sachs Group, Inc. 104,800 8,777 Washington Mutual, Inc. 206,770 8,540 ConocoPhillips 150,893 8,269 Freddie Mac 152,760 7,756 Target Corp. 202,428 7,660 Lowe's Cos., Inc. 173,312 7,444 United Technologies Corp. 104,489 7,401 * eBay Inc. 70,600 7,355 Fifth Third Bancorp 128,254 7,354 Tyco International Ltd. 382,062 7,252 Gillette Co. 226,916 7,230 FleetBoston Financial Corp. 233,777 6,945 Colgate-Palmolive Co. 119,712 6,937 First Data Corp. 166,376 6,895 Walgreen Co. 227,860 6,859 UnitedHealth Group Inc. 131,856 6,626 The Boeing Co. 186,883 6,414 Cardinal Health, Inc. 99,368 6,389 Dow Chemical Co. 203,496 6,300 QUALCOMM Inc. 175,500 6,274 McDonald's Corp. 282,830 6,239 Schlumberger Ltd. 129,510 6,161 Marsh & McLennan Cos., Inc. 119,112 6,083 MBNA Corp. 283,992 5,918 Kimberly-Clark Corp. 113,044 5,894 * Applied Materials, Inc. 368,400 5,843 Texas Instruments, Inc. 331,569 5,836 * Clear Channel Communications, Inc. 136,557 5,789 Allstate Corp. 156,480 5,579 * Boston Scientific Corp. 91,182 5,571 Honeywell International Inc. 190,728 5,121 * EMC Corp. 487,850 5,108 Southern Co. 160,412 4,998 Schering-Plough Corp. 268,385 4,992 The Bank of New York Co., Inc. 171,400 4,928 Alcoa Inc. 187,956 4,793 Metropolitan Life Insurance Co. 169,200 4,792 Emerson Electric Co. 93,632 4,785 Lockheed Martin Corp. 100,276 4,770 Gannett Co., Inc. 59,704 4,586 Carnival Corp. 139,700 4,542 Automatic Data Processing, Inc. 133,136 4,508 Illinois Tool Works, Inc. 68,438 4,507 General Motors Corp. 124,702 4,489 National City Corp. 136,160 4,454 Dominion Resources, Inc. 69,133 4,443 * Forest Laboratories, Inc. 80,700 4,417 * Yahoo! Inc. 134,100 4,393 Sysco Corp. 144,816 4,350 Exelon Corp. 72,093 4,312 Caterpillar, Inc. 76,590 4,263 * Cendant Corp. 226,897 4,157 ================================================================================ 12 ================================================================================ MARKET TAX-MANAGED VALUE* GROWTH AND INCOME FUND SHARES (000) - -------------------------------------------------------------------------------- FedEx Corp. 66,484 4,124 * NEXTEL Communications, Inc. 228,000 4,122 Prudential Financial, Inc. 122,400 4,119 Duke Energy Corp. 200,306 3,996 * AT&T Wireless Services Inc. 481,309 3,952 SLM Corp. 100,500 3,937 General Mills, Inc. 82,182 3,896 * Kohl's Corp. 75,400 3,874 International Paper Co. 106,632 3,810 Motorola, Inc. 403,073 3,801 SunTrust Banks, Inc. 62,652 3,718 The Gap, Inc. 197,985 3,714 * Costco Wholesale Corp. 101,152 3,702 BB&T Corp. 107,797 3,697 HCA Inc. 113,986 3,652 Lehman Brothers Holdings, Inc. 53,900 3,583 Progressive Corp. of Ohio 48,500 3,545 Travelers Property Casualty Corp. Class B 223,926 3,531 AFLAC Inc. 114,600 3,524 Northrop Grumman Corp. 40,749 3,516 Baxter International, Inc. 132,788 3,452 Ford Motor Co. 307,911 3,384 ALLTEL Corp. 69,436 3,348 Tribune Co. 68,691 3,318 * Sun Microsystems, Inc. 717,784 3,302 Union Pacific Corp. 56,600 3,284 Sara Lee Corp. 173,572 3,265 Avon Products, Inc. 52,284 3,252 General Dynamics Corp. 44,032 3,192 Waste Management, Inc. 132,151 3,184 * Best Buy Co., Inc. 71,650 3,147 NIKE, Inc. Class B 58,712 3,141 The Hartford Financial Services Group Inc. 62,202 3,132 Kellogg Co. 90,636 3,115 PNC Financial Services Group 63,101 3,080 Stryker Corp. 44,200 3,066 Guidant Corp. 68,800 3,054 Charles Schwab Corp. 300,175 3,029 Omnicom Group Inc. 41,900 3,004 Raytheon Co. 91,319 2,999 Southwest Airlines Co. 173,132 2,978 State Street Corp. 74,100 2,920 Newmont Mining Corp. (Holding Company) 89,609 2,909 Sprint Corp. 199,844 2,878 Computer Associates International, Inc. 128,500 2,863 Occidental Petroleum Corp. 84,345 2,829 * Analog Devices, Inc. 81,200 2,827 ConAgra Foods, Inc. 119,692 2,825 * The Kroger Co. 169,276 2,824 Wm. Wrigley Jr. Co. 50,194 2,822 * WellPoint Health Networks Inc. Class A 32,500 2,740 Devon Energy Corp. 51,303 2,739 Golden West Financial Corp. 34,054 2,725 FPL Group, Inc. 40,749 2,724 Harley-Davidson, Inc. 67,200 2,679 Mellon Financial Corp. 96,056 2,666 Entergy Corp. 50,186 2,649 * Veritas Software Corp. 92,189 2,643 Weyerhaeuser Co. 48,669 2,628 The McGraw-Hill Cos., Inc. 42,376 2,627 American Electric Power Co., Inc. 87,837 2,620 H.J. Heinz Co. 78,088 2,575 * Bed Bath & Beyond, Inc. 65,700 2,550 FirstEnergy Corp. 66,161 2,544 Masco Corp. 106,368 2,537 XL Capital Ltd. Class A 30,400 2,523 Baker Hughes, Inc. 74,991 2,517 Capital One Financial Corp. 50,400 2,479 The Chubb Corp. 41,209 2,473 Maxim Integrated Products, Inc. 72,200 2,469 Anadarko Petroleum Corp. 55,509 2,468 CVS Corp. 87,624 2,456 Paychex, Inc. 83,675 2,453 Deere & Co. 53,479 2,444 Equity Office Properties Trust REIT 89,800 2,425 AT&T Corp. 125,798 2,422 Burlington Resources, Inc. 44,717 2,418 * Apollo Group, Inc. Class A 39,000 2,409 * Electronic Arts Inc. 32,400 2,397 * Anthem, Inc. 30,910 2,385 KeyCorp 94,348 2,384 Burlington Northern Santa Fe Corp. 83,227 2,367 Progress Energy, Inc. 53,611 2,354 The Principal Financial Group, Inc. 72,800 2,348 Apache Corp. 35,975 2,341 Danaher Corp. 34,100 2,321 McKesson Corp. 64,569 2,308 Sears, Roebuck & Co. 68,599 2,308 * St. Jude Medical, Inc. 39,992 2,300 Electronic Data Systems Corp. 106,400 2,282 Campbell Soup Co. 91,612 2,244 Allergan, Inc. 29,036 2,239 Halliburton Co. 97,278 2,237 Linear Technology Corp. 69,400 2,235 Franklin Resources Corp. 57,200 2,235 Becton, Dickinson & Co. 56,692 2,202 Praxair, Inc. 36,160 2,173 ================================================================================ 13 ================================================================================ MARKET TAX-MANAGED VALUE* GROWTH AND INCOME FUND SHARES (000) - -------------------------------------------------------------------------------- Consolidated Edison Inc. 49,700 2,151 TJX Cos., Inc. 114,008 2,148 * Starbucks Corp. 86,800 2,128 Public Service Enterprise Group, Inc. 50,235 2,122 Air Products & Chemicals, Inc. 50,780 2,112 SouthTrust Corp. 76,700 2,086 The Clorox Co. 48,914 2,086 * Corning, Inc. 281,339 2,079 Northern Trust Corp. 49,188 2,055 * Agilent Technologies, Inc. 104,801 2,049 Hershey Foods Corp. 29,298 2,041 * Intuit, Inc. 45,700 2,035 * MedImmune Inc. 55,900 2,033 Aetna Inc. 33,759 2,032 Countrywide Financial Corp. 29,100 2,024 Pitney Bowes, Inc. 52,680 2,023 ACE, Ltd. 58,900 2,020 * Lexmark International, Inc. 28,400 2,010 * Genzyme Corp.-General Division 48,000 2,005 Marriott International, Inc. Class A 51,968 1,997 * Staples, Inc. 108,300 1,987 John Hancock Financial Services, Inc. 64,400 1,979 * Zimmer Holdings, Inc. 43,697 1,969 Loews Corp. 41,500 1,963 * KLA-Tencor Corp. 42,200 1,962 * International Game Technology 19,000 1,944 * Yum! Brands, Inc. 65,650 1,941 * PG&E Corp. 91,158 1,928 PPG Industries, Inc. 37,725 1,914 * Xilinx, Inc. 74,800 1,893 St. Paul Cos., Inc. 50,666 1,850 Mattel, Inc. 97,720 1,849 Archer-Daniels-Midland Co. 143,314 1,844 * Xerox Corp. 173,730 1,840 Coca-Cola Enterprises, Inc. 100,500 1,824 Marathon Oil Corp. 69,178 1,823 Comerica, Inc. 39,153 1,821 * Chiron Corp. 41,500 1,814 Limited Brands, Inc. 116,194 1,801 Ingersoll-Rand Co. 37,890 1,793 Eastman Kodak Co. 64,828 1,773 Moody's Corp. 33,480 1,765 PACCAR, Inc. 25,740 1,739 H & R Block, Inc. 39,900 1,726 AmSouth Bancorp 78,963 1,725 AmerisourceBergen Corp. 24,700 1,713 Johnson Controls, Inc. 19,976 1,710 Newell Rubbermaid, Inc. 60,973 1,707 Fortune Brands, Inc. 32,288 1,685 Aon Corp. 69,450 1,672 Norfolk Southern Corp. 87,019 1,671 Regions Financial Corp. 49,400 1,669 Unocal Corp. 57,723 1,656 Adobe Systems, Inc. 51,600 1,655 Biomet, Inc. 57,615 1,651 * Comcast Corp. Special Class A 57,192 1,649 * SunGard Data Systems, Inc. 63,500 1,645 Simon Property Group, Inc. REIT 42,100 1,643 TXU Corp. 72,044 1,616 PPL Corp. 37,480 1,612 * Concord EFS, Inc. 108,800 1,602 Bear Stearns Co., Inc. 22,101 1,601 * Computer Sciences Corp. 41,644 1,587 Ameren Corp. 35,905 1,583 Ambac Financial Group, Inc. 23,800 1,577 MBIA, Inc. 32,300 1,575 Equity Residential REIT 60,600 1,573 * Transocean Inc. 71,400 1,569 Charter One Financial, Inc. 50,202 1,565 * Univision Communications Inc. 51,300 1,560 Federated Department Stores, Inc. 42,200 1,555 * Apple Computer, Inc. 81,300 1,554 * Broadcom Corp. 62,300 1,552 Marshall & Ilsley Corp. 50,400 1,541 Rohm & Haas Co. 49,557 1,538 New York Times Co. Class A 33,630 1,530 * Fiserv, Inc. 42,950 1,529 * AutoZone Inc. 20,000 1,519 * Quest Diagnostics, Inc. 23,600 1,506 Ecolab, Inc. 58,460 1,497 Kinder Morgan, Inc. 27,300 1,492 CIGNA Corp. 31,338 1,471 Family Dollar Stores, Inc. 38,400 1,465 Synovus Financial Corp. 67,700 1,456 DTE Energy Co. 37,502 1,449 Cinergy Corp. 39,206 1,442 * Symantec Corp. 32,800 1,439 May Department Stores Co. 64,520 1,436 CSX Corp. 47,714 1,436 * Lucent Technologies, Inc. 698,810 1,419 Lincoln National Corp. 39,542 1,409 * Altera Corp. 84,936 1,393 Union Planters Corp. 44,450 1,379 Dollar General Corp. 74,662 1,363 Dover Corp. 45,280 1,357 ITT Industries, Inc. 20,601 1,349 Cintas Corp. 37,882 1,343 Xcel Energy, Inc. 89,236 1,342 Cincinnati Financial Corp. 35,900 1,332 Jefferson-Pilot Corp. 31,943 1,324 * BJ Services Co. 35,400 1,323 Sempra Energy 46,184 1,318 Eaton Corp. 16,759 1,317 UST, Inc. 37,299 1,307 * Nabors Industries, Inc. 32,400 1,281 ================================================================================ 14 ================================================================================ MARKET TAX-MANAGED VALUE* GROWTH AND INCOME FUND SHARES (000) - -------------------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc. 44,700 1,278 Constellation Energy Group, Inc. 36,898 1,266 Knight Ridder 18,270 1,259 Monsanto Co. 58,120 1,258 The Pepsi Bottling Group, Inc. 62,300 1,247 KeySpan Corp. 35,100 1,244 Genuine Parts Co. 38,837 1,243 Avery Dennison Corp. 24,684 1,239 * PeopleSoft, Inc. 70,400 1,238 First Tennessee National Corp. 28,200 1,238 * Tenet Healthcare Corp. 105,199 1,226 North Fork Bancorp, Inc. 35,900 1,223 * Novellus Systems, Inc. 33,300 1,219 * Network Appliance, Inc. 75,200 1,219 * Edison International 73,028 1,200 * American Standard Cos., Inc. 16,100 1,190 Textron, Inc. 30,404 1,186 Molex, Inc. 42,625 1,150 CenturyTel, Inc. 32,000 1,115 MeadWestvaco Corp. 44,979 1,111 * JDS Uniphase Corp. 315,975 1,109 NiSource, Inc. 58,359 1,109 Parker Hannifin Corp. 26,273 1,103 SAFECO Corp. 30,720 1,084 Delphi Corp. 125,473 1,083 Centex Corp. 13,916 1,083 Hilton Hotels Corp. 84,367 1,079 EOG Resources, Inc. 25,700 1,075 Plum Creek Timber Co. Inc. REIT 41,200 1,069 * Qwest Communications International Inc. 223,276 1,067 Brown-Forman Corp. Class B 13,522 1,063 Georgia Pacific Group 55,984 1,061 Tiffany & Co. 32,400 1,059 MGIC Investment Corp. 22,400 1,045 Zions Bancorp 20,300 1,027 T. Rowe Price Group Inc. 27,100 1,023 * Noble Corp. 29,800 1,022 Huntington Bancshares Inc. 52,310 1,021 Kerr-McGee Corp. 22,679 1,016 J.C. Penney Co., Inc. (Holding Company) 60,206 1,014 * AutoNation, Inc. 64,400 1,012 * QLogic Corp. 20,900 1,010 * Office Depot, Inc. 69,200 1,004 * Harrah's Entertainment, Inc. 24,849 1,000 Rockwell Automation, Inc. 41,653 993 Health Management Associates Class A 53,600 989 RadioShack Corp. 37,564 988 Rockwell Collins, Inc. 40,053 987 Amerada Hess Corp. 20,017 984 * Jabil Circuit, Inc. 44,500 983 Torchmark Corp. 26,298 980 Whirlpool Corp. 15,353 978 IMS Health, Inc. 54,245 976 W.W. Grainger, Inc. 20,646 965 * Watson Pharmaceuticals, Inc. 23,800 961 * Safeway, Inc. 44,106 902 * Unisys Corp. 73,381 901 * Sealed Air Corp. 18,836 898 Sherwin-Williams Co. 33,394 898 Leggett & Platt, Inc. 43,300 888 Applera Corp.-Applied Biosystems Group 46,500 885 Janus Capital Group Inc. 53,800 882 UnumProvident Corp. 64,662 867 Sigma-Aldrich Corp. 16,000 867 Cooper Industries, Inc. Class A 20,795 859 * BMC Software, Inc. 52,385 855 Nucor Corp. 17,397 850 Liz Claiborne, Inc. 24,038 847 McCormick & Co., Inc. 31,100 846 * Jones Apparel Group, Inc. 28,800 843 * Waters Corp. 28,900 842 Pulte Homes, Inc. 13,621 840 El Paso Corp. 103,800 839 Vulcan Materials Co. 22,600 838 Equifax, Inc. 31,900 829 C.R. Bard, Inc. 11,577 826 VF Corp. 24,242 824 * Citizens Communications Co. 63,400 817 Scientific-Atlanta, Inc. 33,956 810 Freeport-McMoRan Copper & Gold, Inc. Class B 32,700 801 * National Semiconductor Corp. 40,551 800 * AES Corp. 124,800 792 Sabre Holdings Corp. 31,931 787 Dow Jones & Co., Inc. 18,240 785 * Citrix Systems, Inc. 38,200 778 Williams Cos., Inc. 97,900 773 Pinnacle West Capital Corp. 20,500 768 * Thermo Electron Corp. 36,300 763 * Phelps Dodge Corp. 19,856 761 Black & Decker Corp. 17,486 760 Wendy's International, Inc. 25,751 746 * NVIDIA Corp. 32,100 739 * Robert Half International, Inc. 38,600 731 Apartment Investment & Management Co. Class A REIT 21,100 730 * Mercury Interactive Corp. 18,900 730 Darden Restaurants Inc. 38,111 723 * Teradyne, Inc. 41,300 715 * Sanmina-SCI Corp. 113,000 713 Engelhard Corp. 28,590 708 ================================================================================ 15 ================================================================================ MARKET TAX-MANAGED VALUE* GROWTH AND INCOME FUND SHARES (000) - -------------------------------------------------------------------------------- * Pactiv Corp. 35,777 705 R.J. Reynolds Tobacco Holdings, Inc. 18,900 703 * Sprint PCS 120,072 690 * American Power Conversion Corp. 43,600 680 Alberto-Culver Co. Class B 13,186 674 Hasbro, Inc. 38,525 674 Federated Investors, Inc. 24,500 672 International Flavors & Fragrances, Inc. 20,982 670 R.R. Donnelley & Sons Co. 25,541 668 Symbol Technologies, Inc. 51,250 667 KB HOME 10,711 664 Sunoco, Inc. 17,245 651 SuperValu Inc. 30,192 644 * Comverse Technology, Inc. 41,700 627 Pall Corp. 27,395 616 Fluor Corp. 18,280 615 * Micron Technology, Inc. 52,846 615 * Providian Financial Corp. 65,328 605 * Tellabs, Inc. 91,400 600 Nordstrom, Inc. 30,748 600 * LSI Logic Corp. 83,974 595 Albertson's, Inc. 30,874 593 * Toys R Us, Inc. 48,191 584 Ball Corp. 12,802 583 Deluxe Corp. 12,882 577 * Calpine Corp. 85,900 567 Bemis Co., Inc. 12,075 565 * NCR Corp. 21,980 563 CenterPoint Energy Inc. 68,887 561 Goodrich Corp. 26,254 551 * Humana Inc. 36,300 548 * Avaya Inc. 84,759 548 Eastman Chemical Co. 17,282 547 * Convergys Corp. 33,900 542 The Stanley Works 19,606 541 Temple-Inland Inc. 12,100 519 Brunswick Corp. 20,426 511 * Navistar International Corp. 15,556 508 * Siebel Systems, Inc. 52,800 504 * Manor Care, Inc. 20,113 503 Meredith Corp. 11,296 497 * Monster Worldwide Inc. 25,000 493 * Compuware Corp. 85,100 491 * Millipore Corp. 10,994 488 * Rowan Cos., Inc. 21,286 477 Ashland, Inc. 15,406 473 * Allied Waste Industries, Inc. 46,500 467 * Biogen, Inc. 12,287 467 * Reebok International Ltd. 13,491 454 Bausch & Lomb, Inc. 12,002 450 * Solectron Corp. 119,200 446 * PMC Sierra Inc. 37,600 441 Maytag Corp. 17,564 429 * Tektronix, Inc. 19,552 422 Autodesk, Inc. 25,720 416 * Applied Micro Circuits Corp. 68,100 412 Adolph Coors Co. Class B 8,228 403 * Big Lots Inc. 26,552 399 PerkinElmer, Inc. 28,280 391 Winn-Dixie Stores, Inc. 31,308 385 Dana Corp. 33,293 385 United States Steel Corp. 23,400 383 Snap-On Inc. 13,067 379 NICOR Inc. 10,080 374 * Quintiles Transnational Corp. 26,300 373 Ryder System, Inc. 14,164 363 Delta Air Lines, Inc. 24,100 354 Peoples Energy Corp. 8,219 353 Dynegy, Inc. 82,900 348 * ADC Telecommunications, Inc. 147,300 343 * King Pharmaceuticals, Inc. 22,666 335 Cummins Inc. 9,241 332 Boise Cascade Corp. 13,030 311 Crane Co. 13,654 309 Cooper Tire & Rubber Co. 16,385 288 * American Greetings Corp. Class A 14,647 288 * CIENA Corp. 51,449 267 CMS Energy Corp. 32,600 264 Dillard's Inc. 19,586 264 Interpublic Group of Cos., Inc. 19,454 260 * Louisiana-Pacific Corp. 24,000 260 * Novell, Inc. 83,702 258 Worthington Industries, Inc. 19,102 256 * Hercules, Inc. 25,017 248 Great Lakes Chemical Corp. 11,643 238 The Goodyear Tire & Rubber Co. 39,116 205 Allegheny Energy, Inc. 24,200 204 * Thomas & Betts Corp. 13,228 191 Tupperware Corp. 13,017 187 * Viacom Inc. Class A 3,800 166 * Power-One, Inc. 18,200 130 Allegheny Technologies Inc. 17,200 114 * Mirant Corp. 35,900 104 * McDermott International, Inc. 16,041 102 * Gateway, Inc. 27,800 101 TECO Energy, Inc. 6,900 83 * Parametric Technology Corp. 22,000 67 Visteon Corp. 4,795 33 * Advanced Micro Devices, Inc. 1,400 9 Circuit City Stores, Inc. 1,000 9 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,762,407) 1,979,240 - -------------------------------------------------------------------------------- 16 ================================================================================ FACE MARKET AMOUNT VALUE* (000) (000) - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS (0.1%) - -------------------------------------------------------------------------------- Repurchase Agreements Collateralized by U.S. Government Obligations in a Pooled Cash Account 1.16%, 7/1/2003 $1,010 $ 1,010 1.16%, 7/1/2003--Note E 778 778 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $1,788) 1,788 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (100.1%) (Cost $1,764,195) 1,981,028 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-0.1%) Other Assets--Note B 3,573 Liabilities--Note E (6,359) ------------ (2,786) ------------ - -------------------------------------------------------------------------------- NET ASSETS (100%) $1,978,242 ================================================================================ oSee Note A in Notes to Financial Statements. *Non-income-producing security. REIT--Real Estate Investment Trust. ================================================================================ AMOUNT (000) - -------------------------------------------------------------------------------- AT JUNE 30, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- Paid-in Capital $2,200,694 Overdistributed Net Investment Income (1,059) Accumulated Net Realized Losses (438,226) Unrealized Appreciation 216,833 - -------------------------------------------------------------------------------- NET ASSETS $1,978,242 ================================================================================ Investor Shares--Net Assets Applicable to 54,932,543 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $1,166,942 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INVESTOR SHARES $21.24 ================================================================================ Admiral Shares--Net Assets Applicable to 14,311,695 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $624,760 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- ADMIRAL SHARES $43.65 ================================================================================ Institutional Shares--Net Assets Applicable to 8,780,598 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $186,540 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $21.24 ================================================================================ See Note C in Notes to Financial Statements for the tax-basis components of net assets. 17 ================================================================================ MARKET TAX-MANAGED VALUE* CAPITAL APPRECIATION FUND SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (100.0%) - -------------------------------------------------------------------------------- General Electric Co. 2,399,034 68,804 Pfizer Inc. 1,979,460 67,599 ExxonMobil Corp. 1,571,734 56,441 Microsoft Corp. 2,194,000 56,188 Citigroup, Inc. 1,282,844 54,906 Johnson & Johnson 744,298 38,480 Wal-Mart Stores, Inc. 678,400 36,410 Intel Corp. 1,657,700 34,454 International Business Machines Corp. 416,400 34,353 Merck & Co., Inc. 535,000 32,394 American International Group, Inc. 580,731 32,045 * Cisco Systems, Inc. 1,808,500 30,184 Bank of America Corp. 334,575 26,441 The Procter & Gamble Co. 280,800 25,042 The Coca-Cola Co. 515,300 23,915 Verizon Communications 582,842 22,993 * Amgen, Inc. 314,075 20,867 Altria Group, Inc. 449,500 20,425 PepsiCo, Inc. 457,200 20,345 * Dell Computer Corp. 595,800 19,042 Wells Fargo & Co. 350,590 17,670 SBC Communications Inc. 683,420 17,461 * Viacom Inc. Class B 397,830 17,369 * AOL Time Warner Inc. 1,076,647 17,323 Home Depot, Inc. 476,500 15,782 ChevronTexaco Corp. 216,819 15,654 Medtronic, Inc. 314,000 15,063 Abbott Laboratories 310,400 13,583 Fannie Mae 198,500 13,387 J.P. Morgan Chase & Co. 385,300 13,170 * Oracle Corp. 1,075,048 12,922 American Express Co. 307,800 12,869 Hewlett-Packard Co. 602,958 12,843 Eli Lilly & Co. 183,300 12,642 Morgan Stanley 295,600 12,637 Wyeth 255,800 11,652 The Walt Disney Co. 563,509 11,129 Merrill Lynch & Co., Inc. 223,600 10,438 Wachovia Corp. 256,200 10,238 Lowe's Cos., Inc. 216,800 9,312 Bristol-Myers Squibb Co. 342,500 9,299 First Data Corp. 221,224 9,168 3M Co. 70,200 9,054 * Comcast Corp. Class A 293,157 8,847 BellSouth Corp. 331,400 8,825 * Liberty Media Corp. 737,758 8,528 McDonald's Corp. 379,700 8,376 UnitedHealth Group Inc. 165,200 8,301 * Comcast Corp. Special Class A 282,232 8,137 QUALCOMM Inc. 226,100 8,083 U.S. Bancorp 325,200 7,967 The Boeing Co. 225,470 7,738 Anheuser-Busch Cos., Inc. 151,400 7,729 * Applied Materials, Inc. 485,600 7,702 Bank One Corp. 205,059 7,624 * EMC Corp. 696,100 7,288 Walgreen Co. 241,300 7,263 ConocoPhillips 130,974 7,177 Cardinal Health, Inc. 111,412 7,164 Freddie Mac 139,800 7,098 E.I. du Pont de Nemours & Co. 164,300 6,841 * Clear Channel Communications, Inc. 158,784 6,731 * Boston Scientific Corp. 106,300 6,495 Washington Mutual, Inc. 157,111 6,489 * Cendant Corp. 345,025 6,321 Alcoa Inc. 242,128 6,174 The Goldman Sachs Group, Inc. 71,400 5,980 Prudential Financial, Inc. 177,500 5,973 * Forest Laboratories, Inc. 107,900 5,908 FedEx Corp. 94,800 5,880 * eBay Inc. 56,155 5,850 United Parcel Service, Inc. 91,600 5,835 * Costco Wholesale Corp. 154,100 5,640 SLM Corp. 141,700 5,550 Lehman Brothers Holdings, Inc. 82,300 5,471 Sysco Corp. 181,700 5,458 Texas Instruments, Inc. 308,600 5,431 Lockheed Martin Corp. 113,000 5,375 AFLAC Inc. 173,700 5,341 * NEXTEL Communications, Inc. 284,990 5,153 * Sun Microsystems, Inc. 1,109,500 5,104 * Yahoo! Inc. 154,500 5,061 MBNA Corp. 241,500 5,033 Progressive Corp. of Ohio 68,500 5,007 Gillette Co. 156,716 4,993 HCA Inc. 155,821 4,993 Guidant Corp. 111,700 4,958 * Kohl's Corp. 95,800 4,922 Waste Management, Inc. 204,297 4,922 Target Corp. 129,500 4,900 Southwest Airlines Co. 279,087 4,800 United Technologies Corp. 67,600 4,788 State Street Corp. 118,500 4,669 * The Kroger Co. 279,800 4,667 * Analog Devices, Inc. 133,166 4,637 Colgate-Palmolive Co. 78,900 4,572 Kimberly-Clark Corp. 87,496 4,562 * WellPoint Health Networks Inc. Class A 54,072 4,558 ================================================================================ 18 ================================================================================ MARKET TAX-MANAGED VALUE* CAPITAL APPRECIATION FUND SHARES (000) - -------------------------------------------------------------------------------- FleetBoston Financial Corp. 153,400 4,558 Devon Energy Corp. 84,111 4,492 * Best Buy Co., Inc. 101,300 4,449 Newmont Mining Corp. (Holding Company) 134,656 4,371 Fifth Third Bancorp 75,800 4,346 * Genentech, Inc. 60,050 4,331 * General Motors Corp. Class H 334,983 4,291 * Veritas Software Corp. 149,400 4,283 Travelers Property Casualty Corp. Class A 269,068 4,278 Harley-Davidson, Inc. 106,200 4,233 * Bed Bath & Beyond, Inc. 106,400 4,129 Capital One Financial Corp. 83,100 4,087 * St. Jude Medical, Inc. 70,716 4,066 Golden West Financial Corp. 50,100 4,009 * Anthem, Inc. 51,755 3,993 Apache Corp. 61,131 3,977 Maxim Integrated Products, Inc. 115,500 3,949 Anadarko Petroleum Corp. 88,708 3,945 * InterActiveCorp 98,060 3,880 * International Game Technology 37,800 3,868 * Agilent Technologies, Inc. 196,925 3,850 * Starbucks Corp. 156,652 3,841 Stryker Corp. 55,300 3,836 Linear Technology Corp. 118,800 3,827 Paychex, Inc. 128,680 3,772 * Yum! Brands, Inc. 127,580 3,771 Aetna Inc. 62,397 3,756 * PG&E Corp. 176,800 3,739 Illinois Tool Works, Inc. 56,600 3,727 * KLA-Tencor Corp. 79,200 3,682 * Electronic Arts Inc. 49,500 3,663 The Principal Financial Group, Inc. 113,500 3,660 Dow Chemical Co. 117,700 3,644 * AT&T Wireless Services Inc. 443,810 3,644 Emerson Electric Co. 71,200 3,638 Marsh & McLennan Cos., Inc. 70,600 3,606 * Lexmark International, Inc. 50,800 3,595 Schering-Plough Corp. 193,100 3,592 * Corning, Inc. 484,400 3,580 Metropolitan Life Insurance Co. 126,300 3,577 * Zimmer Holdings, Inc. 78,970 3,558 * Safeway, Inc. 172,784 3,535 * EchoStar Communications Corp. Class A 102,000 3,531 John Hancock Financial Services, Inc. 114,400 3,516 * Apollo Group, Inc. Class A 56,184 3,470 * Staples, Inc. 188,830 3,465 * Xilinx, Inc. 135,600 3,432 * Xerox Corp. 323,300 3,424 * SunGard Data Systems, Inc. 131,400 3,405 Federated Department Stores, Inc. 92,000 3,390 Danaher Corp. 49,200 3,348 * Caremark Rx, Inc. 130,200 3,344 Countrywide Financial Corp. 48,000 3,339 Automatic Data Processing, Inc. 98,100 3,322 Mattel, Inc. 175,332 3,317 Biomet, Inc. 115,475 3,310 Mylan Laboratories, Inc. 94,325 3,280 Wm. Wrigley Jr. Co. 58,200 3,273 * Genzyme Corp.-General Division 78,200 3,269 * Apple Computer, Inc. 170,300 3,256 * Concord EFS, Inc. 219,100 3,225 Franklin Resources Corp. 81,900 3,200 Praxair, Inc. 53,100 3,191 * Fiserv, Inc. 89,150 3,175 * MedImmune Inc. 87,200 3,171 Adobe Systems, Inc. 98,700 3,165 Becton, Dickinson & Co. 80,600 3,131 Northrop Grumman Corp. 36,134 3,118 * Intuit, Inc. 69,900 3,113 Moody's Corp. 58,400 3,078 Honeywell International Inc. 114,500 3,074 * Cox Communications, Inc. Class A 95,800 3,056 Allstate Corp. 84,600 3,016 * Computer Sciences Corp. 77,800 2,966 Ambac Financial Group, Inc. 44,650 2,958 M & T Bank Corp. 35,100 2,956 ITT Industries, Inc. 45,000 2,946 Norfolk Southern Corp. 152,500 2,928 * Altera Corp. 177,376 2,909 * Qwest Communications International Inc. 607,379 2,903 Kinder Morgan, Inc. 53,100 2,902 * Novellus Systems, Inc. 78,100 2,860 AmerisourceBergen Corp. 41,200 2,857 Charles Schwab Corp. 281,700 2,842 * Broadcom Corp. 114,100 2,842 General Dynamics Corp. 39,100 2,835 CenturyTel, Inc. 81,000 2,823 Starwood Hotels & Resorts Worldwide, Inc. 98,724 2,823 * Amazon.com, Inc. 77,000 2,810 Centex Corp. 35,800 2,785 * Edison International 168,400 2,767 Plum Creek Timber Co. Inc. REIT 105,900 2,748 CVS Corp. 97,428 2,731 Burlington Resources, Inc. 50,500 2,731 * Coach, Inc. 54,700 2,721 * BJ Services Co. 72,800 2,720 Legg Mason Inc. 41,400 2,689 * Watson Pharmaceuticals, Inc. 66,600 2,689 ================================================================================ 19 ================================================================================ MARKET TAX-MANAGED VALUE* CAPITAL APPRECIATION FUND SHARES (000) - -------------------------------------------------------------------------------- * Synopsys, Inc. 43,427 2,686 * Office Depot, Inc. 184,700 2,680 * Express Scripts Inc. 39,100 2,671 * Network Appliance, Inc. 164,063 2,659 EOG Resources, Inc. 63,400 2,653 The Gap, Inc. 141,187 2,649 * Biogen, Inc. 69,600 2,645 * Symantec Corp. 60,200 2,640 * Sprint PCS 457,820 2,632 * Fox Entertainment Group, Inc. Class A 90,700 2,610 Health Management Associates Class A 141,168 2,605 Loews Corp. 54,900 2,596 * Harrah's Entertainment, Inc. 64,000 2,575 Sigma-Aldrich Corp. 47,500 2,574 * QLogic Corp. 53,000 2,561 * Quest Diagnostics, Inc. 40,100 2,558 * American Standard Cos., Inc. 34,600 2,558 * Waters Corp. 87,800 2,558 * Chiron Corp. 58,440 2,555 SCANA Corp. 74,200 2,544 * Oxford Health Plans, Inc. 60,300 2,534 * AutoZone Inc. 33,300 2,530 Motorola, Inc. 267,646 2,524 * Citizens Communications Co. 195,702 2,523 * Dollar Tree Stores, Inc. 79,150 2,511 Microchip Technology, Inc. 101,800 2,507 Liz Claiborne, Inc. 70,900 2,499 * Dean Foods Co. 79,200 2,495 * Unisys Corp. 201,800 2,478 The Hartford Financial Services Group Inc. 49,200 2,478 * PeopleSoft, Inc. 140,400 2,470 * Brinker International, Inc. 68,500 2,467 * Affiliated Computer Services, Inc. Class A 53,900 2,465 * Thermo Electron Corp. 117,134 2,462 Caterpillar, Inc. 44,000 2,449 * Career Education Corp. 35,700 2,443 * Univision Communications Inc. 80,300 2,441 * Barr Laboratories, Inc. 37,250 2,440 * AutoNation, Inc. 154,800 2,433 * Republic Services, Inc. Class A 107,200 2,430 Zions Bancorp 47,600 2,409 * Jabil Circuit, Inc. 108,600 2,400 ENSCO International, Inc. 89,000 2,394 XTO Energy, Inc. 117,700 2,367 * DST Systems, Inc. 62,200 2,364 Estee Lauder Cos. Class A 70,300 2,357 Dollar General Corp. 128,687 2,350 Coca-Cola Enterprises, Inc. 129,100 2,343 * Lear Corp. 50,800 2,338 * Constellation Brands, Inc. Class A 74,400 2,336 Neuberger Berman Inc. 58,400 2,331 * Smith International, Inc. 63,400 2,329 Freeport-McMoRan Copper & Gold, Inc. Class B 95,000 2,328 * UTStarcom, Inc. 65,425 2,327 * Pioneer Natural Resources Co. 89,100 2,326 RadioShack Corp. 88,300 2,323 MGIC Investment Corp. 49,400 2,304 Rouse Co. REIT 60,400 2,301 * Michaels Stores, Inc. 60,300 2,295 Cintas Corp. 64,600 2,289 * CarMax, Inc. 75,879 2,288 Pulte Homes, Inc. 37,100 2,288 Molex, Inc. 84,656 2,285 Manpower Inc. 61,600 2,285 * NTL Incorporated 66,900 2,283 * SPX Corp. 51,800 2,282 * Tenet Healthcare Corp. 195,905 2,282 * Intersil Corp. 85,600 2,278 * Jones Apparel Group, Inc. 77,600 2,271 Sovereign Bancorp, Inc. 145,000 2,269 Kerr-McGee Corp. 50,649 2,269 Expeditors International of Washington, Inc. 65,500 2,269 * Energizer Holdings, Inc. 72,228 2,268 * Health Net Inc. 68,800 2,267 Bear Stearns Co., Inc. 31,300 2,267 * JDS Uniphase Corp. 643,700 2,259 * BMC Software, Inc. 138,100 2,255 * Laboratory Corp. of America Holdings 74,700 2,252 * Pactiv Corp. 113,400 2,235 * Calpine Corp. 338,600 2,235 DENTSPLY International Inc. 54,600 2,233 * Williams-Sonoma, Inc. 76,400 2,231 * Teradyne, Inc. 128,800 2,230 Lennar Corp. Class A 31,100 2,224 * Providian Financial Corp. 239,700 2,220 * Robert Half International, Inc. 117,100 2,218 * Sealed Air Corp. 46,336 2,208 * CDW Corp. 47,900 2,194 * Varian Medical Systems, Inc. 38,000 2,188 * IVAX Corp. 122,275 2,183 NIKE, Inc. Class B 40,800 2,182 * Phelps Dodge Corp. 56,900 2,182 * MGM Mirage, Inc. 63,432 2,168 * The Dun & Bradstreet Corp. 52,600 2,162 * Mohawk Industries, Inc. 38,900 2,160 Outback Steakhouse 55,250 2,155 FirstEnergy Corp. 55,900 2,149 ================================================================================ 20 ================================================================================ MARKET TAX-MANAGED VALUE* CAPITAL APPRECIATION FUND SHARES (000) - -------------------------------------------------------------------------------- * Celgene Corp. 70,600 2,146 * GTECH Holdings Corp. 57,000 2,146 D. R. Horton, Inc. 76,350 2,145 Rockwell Collins, Inc. 86,800 2,138 Fluor Corp. 63,400 2,133 * Park Place Entertainment Corp. 234,600 2,133 * Siebel Systems, Inc. 222,900 2,126 Darden Restaurants Inc. 111,850 2,123 * Smithfield Foods, Inc. 92,200 2,113 * Pride International, Inc. 111,700 2,102 Radian Group, Inc. 57,320 2,101 NSTAR 46,000 2,095 * Apogent Technologies Inc. 104,600 2,092 Black & Decker Corp. 48,100 2,090 * Toys R Us, Inc. 171,500 2,079 * Markel Corp. 8,100 2,074 ALLTEL Corp. 42,953 2,071 * American Power Conversion Corp. 132,700 2,070 Federated Investors, Inc. 75,350 2,066 * Jacobs Engineering Group Inc. 49,000 2,065 * Iron Mountain, Inc. 55,600 2,062 The Pepsi Bottling Group, Inc. 102,800 2,058 * Host Marriott Corp. REIT 224,843 2,057 Noble Energy, Inc. 54,300 2,053 * National Semiconductor Corp. 104,000 2,051 * Cooper Cameron Corp. 40,700 2,050 * Millipore Corp. 46,200 2,050 * BEA Systems, Inc. 188,600 2,048 MBIA, Inc. 42,000 2,048 * Reebok International Ltd. 60,700 2,041 * Gentex Corp. 66,603 2,039 * Patterson-UTI Energy, Inc. 62,900 2,038 * Cablevision Systems-NY Group Class A 98,144 2,037 C.H. Robinson Worldwide, Inc. 57,200 2,034 * Lincare Holdings, Inc. 64,500 2,032 Baker Hughes, Inc. 60,480 2,030 Roslyn Bancorp, Inc. 94,400 2,029 * Solectron Corp. 541,600 2,026 Tyson Foods, Inc. 190,345 2,021 * Newfield Exploration Co. 53,800 2,020 General Motors Corp. 55,882 2,012 * LAM Research Corp. 110,400 2,010 Herman Miller, Inc. 99,300 2,007 Alberto-Culver Co. Class B 39,200 2,003 Southern Co. 64,200 2,000 * Catellus Development Corp. 90,800 1,998 * Owens-Illinois, Inc. 144,700 1,993 Beckman Coulter, Inc. 49,000 1,991 * Navistar International Corp. 61,000 1,990 Sprint Corp. 138,000 1,987 Marriott International, Inc. Class A 51,700 1,986 Torchmark Corp. 53,300 1,985 * NVR, Inc. 4,800 1,973 * Abercrombie & Fitch Co. 69,000 1,960 * Borders Group, Inc. 111,200 1,958 * Rent-A-Center, Inc. 25,760 1,953 * SICOR, Inc. 95,900 1,951 * Mercury Interactive Corp. 50,500 1,950 * Big Lots Inc. 129,606 1,949 * L-3 Communications Holdings, Inc. 44,800 1,948 * Convergys Corp. 121,700 1,947 * Rowan Cos., Inc. 86,800 1,944 Fastenal Co. 57,200 1,941 * AES Corp. 301,100 1,912 * Sanmina-SCI Corp. 301,854 1,905 Peabody Energy Corp. 56,300 1,891 * Allied Waste Industries, Inc. 187,300 1,882 * Universal Health Services Class B 47,300 1,874 Transatlantic Holdings, Inc. 27,050 1,871 Amerada Hess Corp. 37,800 1,859 * National-Oilwell, Inc. 84,400 1,857 * Toll Brothers, Inc. 65,300 1,849 * Storage Technology Corp. 71,700 1,846 * Varco International, Inc. 94,100 1,844 * Henry Schein, Inc. 35,100 1,837 Telephone & Data Systems, Inc. 36,900 1,834 Leucadia National Corp. 49,400 1,834 The Bank of New York Co., Inc. 63,700 1,831 Lyondell Chemical Co. 135,200 1,829 * Westwood One, Inc. 53,800 1,825 * Timberland Co. 34,500 1,824 Medicis Pharmaceutical Corp. 32,100 1,820 The PMI Group Inc. 67,800 1,820 The St. Joe Co. 58,300 1,819 * Rite Aid Corp. 407,900 1,815 * JetBlue Airways Corp. 42,900 1,814 Union Pacific Corp. 31,253 1,813 Gannett Co., Inc. 23,600 1,813 * Lamar Advertising Co. Class A 51,460 1,812 Total System Services, Inc. 80,950 1,805 Northeast Utilities 107,400 1,798 Pogo Producing Co. 42,000 1,796 * Columbia Sportswear Co. 34,900 1,794 * Patterson Dental Co. 39,315 1,784 * ICOS Corp. 48,500 1,782 * Packaging Corp. of America 96,400 1,777 Polo Ralph Lauren Corp. 68,700 1,772 The MONY Group Inc. 65,000 1,752 * Tellabs, Inc. 266,500 1,751 * NCR Corp. 68,337 1,751 PepsiAmericas, Inc. 139,200 1,748 Reinsurance Group of America, Inc. 54,200 1,740 Mandalay Resort Group 54,400 1,733 ================================================================================ 21 ================================================================================ MARKET TAX-MANAGED VALUE* CAPITAL APPRECIATION FUND SHARES (000) - -------------------------------------------------------------------------------- * Furniture Brands International Inc. 66,300 1,730 * BISYS Group, Inc. 94,100 1,729 Valero Energy Corp. 47,500 1,726 * PETsMART, Inc. 102,700 1,712 * Performance Food Group Co. 46,100 1,706 * FMC Technologies Inc. 81,025 1,706 * Coventry Health Care Inc. 36,900 1,703 Wesco Financial Corp. 5,430 1,694 Investors Financial Services Corp. 58,000 1,683 Foot Locker, Inc. 126,700 1,679 * CNA Financial Corp. 68,000 1,673 * AdvancePCS 43,424 1,660 HCC Insurance Holdings, Inc. 56,000 1,656 * Certegy, Inc. 59,500 1,651 * Grant Prideco, Inc. 139,700 1,641 Precision Castparts Corp. 52,300 1,627 * Reliant Resources, Inc. 264,600 1,622 CSX Corp. 53,900 1,622 * Avnet, Inc. 127,800 1,621 * Smurfit-Stone Container Corp. 122,865 1,601 * Alliant Techsystems, Inc. 30,800 1,599 * Saks Inc. 164,800 1,599 * Whole Foods Market, Inc. 33,600 1,597 National City Corp. 48,800 1,596 * Krispy Kreme Doughnuts, Inc. 38,500 1,585 * BlackRock, Inc. 35,200 1,585 * Tech Data Corp. 59,200 1,581 * Alleghany Corp. 8,211 1,568 * Pharmaceutical Resources, Inc. 32,200 1,567 * Mettler-Toledo International Inc. 42,100 1,543 * Del Monte Foods Co. 173,900 1,537 Ford Motor Co. 138,813 1,526 * Andrx Group 75,377 1,500 * Stericycle, Inc. 38,900 1,497 * Advanced Micro Devices, Inc. 232,700 1,492 Dominion Resources, Inc. 23,139 1,487 * O'Reilly Automotive, Inc. 44,524 1,487 * Key Energy Services, Inc. 138,200 1,482 * Level 3 Communications, Inc. 223,115 1,481 StanCorp Financial Group, Inc. 28,200 1,473 * Swift Transportation Co., Inc. 78,900 1,469 W.W. Grainger, Inc. 31,400 1,468 * Interactive Data Corp. 86,600 1,464 * Cytec Industries, Inc. 43,200 1,460 * J.B. Hunt Transport Services, Inc. 37,800 1,427 Janus Capital Group Inc. 87,000 1,427 * AGCO Corp. 83,400 1,424 IndyMac Bancorp, Inc. REIT 56,000 1,424 * BOK Financial Corp. 36,874 1,422 * Weight Watchers International, Inc. 31,200 1,419 * Sepracor Inc. 77,800 1,403 * Arrow Electronics, Inc. 91,500 1,394 * Lucent Technologies, Inc. 685,954 1,392 * 3Com Corp. 296,575 1,388 * PanAmSat Corp. 74,800 1,379 * WellChoice Inc. 47,000 1,376 Clayton Homes Inc. 109,600 1,375 * Scotts Co. 27,600 1,366 * Westport Resources Corp. 59,900 1,363 E.W. Scripps Co. Class A 15,235 1,352 * Ingram Micro, Inc. Class A 122,400 1,346 LaBranche & Co. Inc. 65,000 1,345 * Hovnanian Enterprises Class A 22,800 1,344 * Amphenol Corp. 28,700 1,344 * Metro-Goldwyn-Mayer Inc. 108,000 1,341 * Hispanic Broadcasting Corp. 52,600 1,339 * Entercom Communications Corp. 27,100 1,328 Brunswick Corp. 53,000 1,326 Monsanto Co. 60,867 1,317 Tootsie Roll Industries, Inc. 43,072 1,313 * United Defense Industries Inc. 49,900 1,294 * Eon Labs, Inc. 36,700 1,290 Autodesk, Inc. 79,800 1,290 * U.S. Cellular Corp. 50,100 1,275 * Hearst-Argyle Television Inc. 48,700 1,261 * 99 Cents Only Stores 36,700 1,260 * The Cheesecake Factory 34,900 1,253 Exelon Corp. 20,800 1,244 * Premcor, Inc. 57,700 1,243 * BearingPoint, Inc. 128,800 1,243 * American Pharmaceuticals Partners, Inc. 36,600 1,241 * American Axle & Manufacturing Holdings, Inc. 51,800 1,238 International Paper Co. 34,600 1,236 * Endo Pharmaceuticals Holdings, Inc. 71,500 1,210 Martin Marietta Materials, Inc. 35,900 1,207 IMS Health, Inc. 65,752 1,183 * King Pharmaceuticals, Inc. 78,900 1,165 * Mirant Corp. 395,300 1,146 BB&T Corp. 33,300 1,142 Nationwide Financial Services, Inc. 34,300 1,115 * First Health Group Corp. 39,700 1,096 Baxter International, Inc. 41,800 1,087 Hasbro, Inc. 62,100 1,086 General Mills, Inc. 22,200 1,053 Eaton Vance Corp. 32,500 1,027 McKesson Corp. 27,524 984 * LSI Logic Corp. 138,500 981 * Aramark Corp. Class B 43,500 975 * Valassis Communications, Inc. 37,200 957 ================================================================================ 22 ================================================================================ MARKET TAX-MANAGED VALUE* CAPITAL APPRECIATION FUND SHARES (000) - -------------------------------------------------------------------------------- Computer Associates International, Inc. 42,289 942 Sabre Holdings Corp. 38,200 942 * Cadence Design Systems, Inc. 77,700 937 Newell Rubbermaid, Inc. 32,660 914 Hilton Hotels Corp. 69,750 892 Limited Brands, Inc. 56,874 882 * Compuware Corp. 151,200 872 Belo Corp. Class A 38,400 859 * Zebra Technologies Corp. Class A 11,200 842 Sara Lee Corp. 44,600 839 Travelers Property Casualty Corp. Class B 51,662 815 SunTrust Banks, Inc. 13,600 807 Duke Energy Corp. 40,200 802 Interpublic Group of Cos., Inc. 59,200 792 Diamond Offshore Drilling, Inc. 33,700 707 ServiceMaster Co. 66,000 706 * Barnes & Noble, Inc. 30,300 698 NiSource, Inc. 35,920 682 Reynolds & Reynolds Class A 23,500 671 * Micron Technology, Inc. 56,500 657 * Viacom Inc. Class A 13,688 598 Nucor Corp. 11,900 581 ProLogis REIT 18,389 502 AT&T Corp. 23,017 443 * Atmel Corp. 174,855 442 Instinet Group Inc. 92,245 430 Burlington Northern Santa Fe Corp. 14,493 412 Mellon Financial Corp. 12,500 347 * Ceridian Corp. 19,100 324 Lennar Corp. Class B 4,150 285 The Clorox Co. 6,420 274 ConAgra Foods, Inc. 11,200 264 Nordstrom, Inc. 13,500 264 Albertson's, Inc. 12,800 246 * ADC Telecommunications, Inc. 92,800 216 Helmerich & Payne, Inc. 7,200 210 Cinergy Corp. 5,700 210 PNC Financial Services Group 3,800 185 TXU Corp. 7,965 179 St. Paul Cos., Inc. 4,800 175 Georgia Pacific Group 8,642 164 Winn-Dixie Stores, Inc. 11,400 140 Avon Products, Inc. 2,000 124 * CIENA Corp. 22,335 116 * NVIDIA Corp. 4,000 92 * Comverse Technology, Inc. 5,000 75 Archer-Daniels-Midland Co. 4,773 61 First Tennessee National Corp. 300 13 Kellogg Co. 100 3 R.J. Reynolds Tobacco Holdings, Inc. 53 2 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,791,926) 2,293,185 - -------------------------------------------------------------------------------- FACE AMOUNT (000) - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS (0.3%) - -------------------------------------------------------------------------------- Repurchase Agreements Collateralized by U.S. Government Obligations in a Pooled Cash Account 1.16%, 7/1/2003 $ 515 515 1.16%, 7/1/2003--Note E 6,009 6,009 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $6,524) 6,524 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (100.3%) (Cost $1,798,450) 2,299,709 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-0.3%) Other Assets--Note B 34,169 Liabilities--Note E (40,130) ------------ (5,961) ------------ - -------------------------------------------------------------------------------- NET ASSETS (100%) $2,293,748 ================================================================================ oSee Note A in Notes to Financial Statements. *Non-income-producing security. REIT--Real Estate Investment Trust. 23 ================================================================================ TAX-MANAGED AMOUNT CAPITAL APPRECIATION FUND (000) - -------------------------------------------------------------------------------- AT JUNE 30, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- Paid-in Capital $2,354,548 Undistributed Net Investment Income 7,882 Accumulated Net Realized Losses (569,941) Unrealized Appreciation 501,259 - -------------------------------------------------------------------------------- NET ASSETS $2,293,748 ================================================================================ Investor Shares--Net Assets Applicable to 57,973,573 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $1,280,374 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INVESTOR SHARES $22.09 ================================================================================ Admiral Shares--Net Assets Applicable to 20,183,515 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $897,605 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- ADMIRAL SHARES $44.47 ================================================================================ Institutional Shares--Net Assets Applicable to 5,239,080 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $115,769 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $22.10 ================================================================================ See Note C in Notes to Financial Statements for the tax-basis components of net assets. 24 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (100.1%) - -------------------------------------------------------------------------------- * NVR, Inc. 14,300 5,877 Harman International Industries, Inc. 65,300 5,168 * Mid Atlantic Medical Services, Inc. 93,900 4,911 * Zebra Technologies Corp. Class A 62,400 4,692 * Cephalon, Inc. 110,560 4,551 * Newfield Exploration Co. 111,200 4,176 * Alliant Techsystems, Inc. 78,300 4,065 * O'Reilly Automotive, Inc. 106,900 3,569 Ryland Group, Inc. 50,200 3,484 * Renal Care Group, Inc. 97,600 3,436 * Performance Food Group Co. 92,400 3,419 Cullen/Frost Bankers, Inc. 104,000 3,338 Washington Federal Inc. 141,011 3,262 * Pharmaceutical Product Development, Inc. 112,900 3,244 Raymond James Financial, Inc. 96,300 3,183 Hudson United Bancorp 90,789 3,100 * Scotts Co. 62,400 3,089 The Timken Co. 175,700 3,077 Medicis Pharmaceutical Corp. 53,800 3,050 FactSet Research Systems Inc. 68,400 3,013 Flagstar Bancorp, Inc. 119,400 2,919 Graco, Inc. 90,725 2,903 * NBTY, Inc. 135,500 2,854 MDC Holdings, Inc. 57,098 2,757 Jefferies Group, Inc. 54,900 2,733 First Midwest Bancorp, Inc. 94,300 2,717 UGI Corp. Holding Co. 84,700 2,685 Polaris Industries, Inc. 43,600 2,677 * ITT Educational Services, Inc. 91,000 2,662 * ResMed Inc. 67,300 2,638 AptarGroup Inc. 73,200 2,635 * AnnTaylor Stores Corp. 90,350 2,616 Ethan Allen Interiors, Inc. 74,380 2,615 Whitney Holdings Corp. 81,700 2,612 Piedmont Natural Gas, Inc. 67,200 2,608 Global Payments Inc. 73,440 2,607 * Zale Corp. 65,100 2,604 * Respironics, Inc. 68,075 2,554 * Hyperion Solutions Corp. 75,200 2,539 * P.F. Chang's China Bistro, Inc. 51,300 2,524 Regis Corp. 86,700 2,519 Roper Industries Inc. 67,400 2,507 La-Z-Boy Inc. 111,910 2,505 * Techne Corp. 81,400 2,470 Atmos Energy Corp. 99,500 2,468 Essex Property Trust, Inc. REIT 42,800 2,450 UCBH Holdings, Inc. 84,740 2,430 * Pacific Sunwear of California, Inc. 100,600 2,423 United Bankshares, Inc. 84,549 2,422 * Take-Two Interactive Software, Inc. 85,455 2,422 * United Stationers, Inc. 66,700 2,413 IDEX Corp. 66,400 2,406 * INAMED Corp. 44,700 2,400 Florida Rock Industries, Inc. 58,100 2,398 * Panera Bread Co. 59,700 2,388 Diagnostic Products Corp. 58,100 2,385 * Southern Union Co. 140,727 2,384 Thor Industries, Inc. 58,200 2,376 * IDEXX Laboratories Corp. 70,500 2,374 Shurgard Storage Centers, Inc. Class A REIT 71,500 2,365 Downey Financial Corp. 56,900 2,350 Staten Island Bancorp, Inc. 120,000 2,338 Energen Corp. 69,800 2,324 Hilb, Rogal and Hamilton Co. 67,600 2,301 Alpharma, Inc. Class A 106,400 2,298 * Cymer, Inc. 71,400 2,286 * Heartland Express, Inc. 102,134 2,272 * Kroll Inc. 82,900 2,243 Patina Oil & Gas Corp. 69,750 2,242 * Stone Energy Corp. 53,480 2,242 First Bancorp/Puerto Rico 81,400 2,234 Skywest, Inc. 117,100 2,232 * Fossil, Inc. 94,700 2,231 * Tom Brown, Inc. 80,207 2,229 The South Financial Group, Inc. 95,389 2,225 * Southwest Bancorporation of Texas, Inc. 68,433 2,225 Briggs & Stratton Corp. 43,800 2,212 Standard Pacific Corp. 66,500 2,205 Corn Products International, Inc. 72,700 2,183 Cooper Cos., Inc. 62,700 2,180 Community First Bankshares, Inc. 79,600 2,173 * FLIR Systems, Inc. 71,800 2,165 * Arbitron Inc. 60,200 2,149 * Commonwealth Telephone Enterprises, Inc. 48,548 2,135 * Linens `n Things, Inc. 89,800 2,120 * Accredo Health, Inc. 97,025 2,115 Invacare Corp. 63,800 2,105 Fremont General Corp. 153,600 2,104 * Evergreen Resources, Inc. 38,690 2,101 New Century Financial Corp. 47,700 2,082 * Kronos, Inc. 40,627 2,064 Chittenden Corp. 75,475 2,064 * CEC Entertainment Inc. 55,850 2,063 * Varian Semiconductor Equipment Associates, Inc. 69,200 2,059 * Waste Connections, Inc. 58,500 2,050 * Cimarex Energy Co. 86,100 2,045 ================================================================================ 25 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- * Landstar System, Inc. 32,400 2,036 Oshkosh Truck Corp. 34,050 2,020 Massey Energy Co. 152,711 2,008 * Avid Technology, Inc. 57,000 1,999 Clarcor Inc. 51,200 1,974 * Sonic Corp. 77,300 1,966 The Toro Co. 49,400 1,964 New Jersey Resources Corp. 55,050 1,954 Delphi Financial Group, Inc. 41,666 1,950 Fred's, Inc. 52,400 1,948 * CACI International, Inc. 56,500 1,937 * Skyworks Solutions, Inc. 283,059 1,916 Commercial Federal Corp. 90,100 1,910 * Mueller Industries Inc. 70,300 1,906 * Knight Transportation, Inc. 76,400 1,902 Susquehanna Bancshares, Inc. 80,748 1,885 * Cognex Corp. 84,100 1,880 * Tetra Tech, Inc. 108,668 1,861 Mentor Corp. 95,300 1,847 * Christopher & Banks Corp. 49,900 1,846 * Unit Corp. 87,800 1,836 * Philadelphia Consolidated Holding Corp. 45,400 1,834 Colonial Properties Trust REIT 51,900 1,826 * Quiksilver, Inc. 110,700 1,825 Albany International Corp. 66,600 1,825 * Sybron Dental Specialties, Inc. 77,200 1,822 Capital Automotive REIT 65,062 1,821 * ADVO, Inc. 40,800 1,812 * Anixter International Inc. 77,100 1,806 Flowers Foods, Inc. 90,450 1,787 * Simpson Manufacturing Co. 48,700 1,782 LandAmerica Financial Group, Inc. 37,450 1,779 MAF Bancorp, Inc. 47,900 1,776 East West Bancorp, Inc. 49,100 1,774 * Tractor Supply Co. 37,100 1,772 Cabot Oil & Gas Corp. 63,800 1,762 * Spinnaker Exploration Co. 67,200 1,761 * SERENA Software, Inc. 84,100 1,756 MacDermid, Inc. 66,300 1,744 * Hutchinson Technology, Inc. 52,900 1,740 Kellwood Co. 54,700 1,730 * Dionex Corp. 43,300 1,721 * Men's Wearhouse, Inc. 78,700 1,720 * Hot Topic, Inc. 63,850 1,718 TrustCo Bank NY 154,646 1,713 * Adaptec, Inc. 218,100 1,697 * SCP Pool Corp. 48,925 1,683 * Priority Healthcare Corp. Class B 90,497 1,679 Hughes Supply, Inc. 48,200 1,673 * Pediatrix Medical Group, Inc. 46,850 1,670 Cleco Corp. 96,100 1,664 * Cal Dive International, Inc. 76,200 1,660 * Jack in the Box Inc. 74,350 1,658 R.L.I. Corp. 50,300 1,655 Delta & Pine Land Co. 74,700 1,642 * Maverick Tube Corp. 85,500 1,637 Burlington Coat Factory Warehouse Corp. 90,100 1,613 A.O. Smith Corp. 57,000 1,605 * Cerner Corp. 69,800 1,602 Wolverine World Wide, Inc. 82,500 1,589 * Manhattan Associates, Inc. 60,910 1,582 * ATMI, Inc. 63,306 1,581 * Cost Plus, Inc. 44,100 1,573 * AMERIGROUP Corp. 42,160 1,568 Brady Corp. Class A 47,000 1,567 Republic Bancorp, Inc. 116,300 1,561 St. Mary Land & Exploration Co. 56,800 1,551 Owens & Minor, Inc. Holding Co. 69,200 1,547 Kilroy Realty Corp. REIT 56,200 1,546 * Watson Wyatt & Co. Holdings 66,600 1,544 * Benchmark Electronics, Inc. 50,000 1,538 ABM Industries Inc. 99,800 1,537 Acuity Brands, Inc. 84,400 1,534 Russ Berrie and Co., Inc. 41,800 1,526 Gables Residential Trust REIT 50,200 1,518 * EMCOR Group, Inc. 30,700 1,515 * American Italian Pasta Co. 36,300 1,512 Lennox International Inc. 117,438 1,511 * Group 1 Automotive, Inc. 46,520 1,508 * Kansas City Southern 123,900 1,491 * Regeneron Pharmaceuticals, Inc. 94,400 1,487 USF Corp. 55,100 1,486 John H. Harland Co. 56,690 1,483 Irwin Financial Corp. 57,100 1,479 * Urban Outfitters, Inc. 40,891 1,468 * Ralcorp Holdings, Inc. 58,800 1,468 * SEACOR SMIT Inc. 40,200 1,467 * Biosite Inc. 30,410 1,463 CH Energy Group, Inc. 32,500 1,463 * Rare Hospitality International Inc. 44,500 1,454 Vintage Petroleum, Inc. 128,600 1,451 Casey's General Stores, Inc. 102,499 1,449 * Coherent, Inc. 61,200 1,449 The Pep Boys (Manny, Moe & Jack) 106,800 1,443 Winnebago Industries, Inc. 37,900 1,436 * Yellow Corp. 61,900 1,433 Northwest Natural Gas Co. 52,300 1,425 Southwest Gas Corp. 67,100 1,421 * Barra, Inc. 39,700 1,417 * Too Inc. 69,800 1,413 Black Box Corp. 39,000 1,412 ================================================================================ 26 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- * Trimble Navigation Ltd. 61,519 1,411 * Progress Software Corp. 67,800 1,405 * Power Integrations, Inc. 57,700 1,403 * Kirby Corp. 49,700 1,402 Avista Corp. 98,000 1,387 IHOP Corp. 43,800 1,383 * Pinnacle Systems, Inc. 128,900 1,379 * UICI 91,100 1,373 Analogic Corp. 28,100 1,370 Selective Insurance Group 54,550 1,366 Reliance Steel & Aluminum Co. 65,800 1,362 Dime Community Bancshares 52,850 1,345 * Integra LifeSciences Holdings 50,900 1,343 Engineered Support Systems, Inc. 32,000 1,339 * Enzo Biochem, Inc. 62,217 1,339 * US Oncology, Inc. 180,500 1,334 Curtiss-Wright Corp. 21,100 1,334 Landry's Restaurants, Inc. 56,330 1,329 * FileNET Corp. 73,300 1,322 * Steel Dynamics, Inc. 96,500 1,322 * Triarc Cos., Inc. Class A 43,900 1,317 NDCHealth Corp. 71,700 1,316 Baldor Electric Co. 63,860 1,316 * URS Corp. 67,400 1,312 * MGI Pharma, Inc. 50,800 1,302 Georgia Gulf Corp. 65,700 1,301 * DRS Technologies, Inc. 46,400 1,295 UniSource Energy Corp. 68,800 1,293 * Exar Corp. 81,500 1,290 H.B. Fuller Co. 58,500 1,288 * Atlantic Coast Airlines Holdings Inc. 95,360 1,286 * Oceaneering International, Inc. 49,970 1,277 Provident Bankshares Corp. 49,944 1,269 G & K Services, Inc. Class A 42,700 1,264 Kaydon Corp. 60,700 1,263 * Hydrill Co. 46,000 1,254 K-Swiss, Inc. 36,300 1,253 Russell Corp. 65,700 1,248 * Lone Star Technologies, Inc. 58,900 1,248 * Movie Gallery, Inc. 67,570 1,247 * BankUnited Financial Corp. 61,800 1,245 * CUNO Inc. 34,400 1,243 Cambrex Corp. 53,900 1,241 * Argosy Gaming Co. 59,200 1,238 * Viasys Healthcare Inc. 59,800 1,238 * Axcelis Technologies, Inc. 202,243 1,238 * FEI Co. 65,900 1,236 * American Management Systems, Inc. 86,282 1,232 * Ryan's Family Steak Houses, Inc. 87,950 1,231 * El Paso Electric Co. 99,700 1,229 Arkansas Best Corp. 51,500 1,225 * First Federal Financial Corp. 34,700 1,225 Cubic Corp. 54,700 1,215 * MAXIMUS, Inc. 43,200 1,194 The Manitowac Co., Inc. 53,500 1,193 Anchor Bancorp Wisconsin Inc. 49,920 1,193 PolyMedica Corp. 26,000 1,191 * Aztar Corp. 73,900 1,191 * DSP Group Inc. 55,200 1,188 Rock-Tenn Co. 70,000 1,186 UIL Holdings Corp. 29,200 1,184 Waypoint Financial Corp. 65,600 1,183 * THQ Inc. 65,600 1,181 Sterling Bancshares, Inc. 89,800 1,175 Tredegar Corp. 78,300 1,174 * AmSurg Corp. 38,300 1,168 CARBO Ceramics Inc. 31,300 1,166 * MICROS Systems, Inc. 34,900 1,151 Aaron Rents, Inc. Class B 44,300 1,145 * Sierra Health Services, Inc. 56,900 1,138 * Photronics Inc. 64,600 1,127 * The Children's Place Retail Stores, Inc. 56,745 1,127 Cato Corp. Class A 53,400 1,126 Roadway Corp. 39,451 1,126 * Southwestern Energy Co. 74,600 1,120 * American Medical Systems Holdings, Inc. 66,300 1,118 Zenith National Insurance Corp. 39,200 1,117 * SurModics, Inc. 36,400 1,110 * eFunds Corp. 96,196 1,109 * School Specialty, Inc. 38,600 1,099 * Forward Air Corp. 43,300 1,099 * United Natural Foods, Inc. 39,000 1,097 Inter-Tel, Inc. 51,000 1,082 Glenborough Realty Trust, Inc. REIT 56,500 1,082 * W-H Energy Services, Inc. 55,200 1,075 Brown Shoe Co., Inc. 36,000 1,073 * Rogers Corp. 32,000 1,066 * CONMED Corp. 58,100 1,061 * Papa John's International, Inc. 37,800 1,060 * Griffon Corp. 66,010 1,056 Wintrust Financial Corp. 35,600 1,054 * Dendrite International, Inc. 81,100 1,045 Texas Industries, Inc. 43,800 1,042 The Laclede Group, Inc. 38,400 1,029 Commercial Metals Co. 57,500 1,023 * Stewart Information Services Corp. 36,700 1,022 * CDI Corp. 39,200 1,018 * Jo-Ann Stores, Inc. Class A 40,100 1,015 * Offshore Logistics, Inc. 46,500 1,011 ================================================================================ 27 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- * Technitrol, Inc. 67,100 1,010 * Sunrise Senior Living, Inc. 45,100 1,009 * Actel Corp. 49,174 1,008 * Advanced Medical Optics, Inc. 58,800 1,003 * The Gymboree Corp. 59,700 1,002 * Allen Telecom Inc. 60,300 996 * Global Imaging Systems, Inc. 42,976 995 Quanex Corp. 33,450 994 Coca-Cola Bottling Co. 18,185 993 A. Schulman Inc. 61,700 991 WD-40 Co. 34,589 988 * Insight Enterprises, Inc. 97,700 983 Watts Industries Class A 54,900 980 Boston Private Financial Holdings, Inc. 46,400 978 * Remington Oil & Gas Corp. 53,200 978 Regal-Beloit Corp. 51,000 974 * General Communication, Inc. 112,240 972 * WMS Industries, Inc. 62,310 971 * Aeroflex, Inc. 125,434 971 Seacoast Financial Services Corp. 48,784 966 * Checkpoint Systems, Inc. 68,100 964 The Standard Register Co. 58,300 961 * NCO Group, Inc. 53,600 960 Barnes Group, Inc. 44,100 960 * Shuffle Master, Inc. 32,600 958 * Verity, Inc. 75,420 955 * Advanced Energy Industries, Inc. 66,825 952 Thomas Industries, Inc. 34,800 941 * AFC Enterprises, Inc. 57,800 939 Valmont Industries, Inc. 48,200 938 * Microsemi Corp. 58,329 933 * Triumph Group, Inc. 33,100 932 * Financial Federal Corp. 38,200 932 * ANSYS, Inc. 29,700 924 Lone Star Steakhouse & Saloon, Inc. 42,400 923 * Ciber, Inc. 131,300 922 Central Parking Corp. 74,200 917 * ICU Medical, Inc. 29,400 916 * International Multifoods Corp. 39,800 912 * Shaw Group, Inc. 75,620 911 The Marcus Corp. 60,900 910 GBC Bancorp 23,700 910 * Paxar Corp. 82,400 906 Stewart & Stevenson Services, Inc. 57,500 906 * Centene Corp. 23,220 903 Datascope Corp. 30,000 891 * Imagistics International Inc. 34,520 891 OM Group, Inc. 60,450 890 * Itron, Inc. 41,300 890 * Pre-Paid Legal Services, Inc. 36,200 888 * Electro Scientific Industries, Inc. 58,493 887 ElkCorp 39,400 887 * InVision Technologies, Inc. 35,300 885 * Photon Dynamics, Inc. 31,875 881 * Spherion Corp. 126,700 881 * O'Charley's Inc. 40,800 878 Bowne & Co., Inc. 67,300 877 Arctic Cat, Inc. 45,720 876 Riggs National Corp. 57,400 874 Presidential Life Corp. 61,900 873 * Nautica Enterprises, Inc. 68,000 872 * TETRA Technologies, Inc. 29,400 872 * Monaco Coach Corp. 56,850 871 * Coinstar, Inc. 46,100 869 Arch Chemicals, Inc. 45,400 867 * Sola International Inc. 49,700 865 Watsco, Inc. 52,040 862 Phillips-Van Heusen Corp. 62,900 857 * Teledyne Technologies, Inc. 65,200 854 * Kopin Corp. 139,405 853 * Ultratech, Inc. 46,000 851 * Vicor Corp. 88,354 848 Hooper Holmes, Inc. 131,300 846 American States Water Co. 30,650 837 PolyOne Corp. 187,500 834 * Hain Celestial Group, Inc. 51,900 830 * Steak n Shake Co. 54,400 830 The Stride Rite Corp. 82,700 824 Applied Industrial Technology, Inc. 38,900 821 * TBC Corp. 43,000 819 The Nautilus Group, Inc. 65,600 813 * Province Healthcare Co. 73,050 809 * Ionics, Inc. 36,100 808 * Veeco Instruments, Inc. 47,297 805 Frontier Oil Corp. 52,900 804 New England Business Service, Inc. 26,800 804 Park Electrochemical Corp. 40,250 803 * Pegasus Solutions Inc. 49,400 803 GenCorp, Inc. 90,100 801 * Mercury Computer Systems, Inc. 44,100 801 * Orthodontic Centers of America, Inc. 99,700 799 * Atwood Oceanics, Inc. 29,400 798 * First Republic Bank 30,000 798 Methode Electronics, Inc. Class A 73,500 790 * CIMA Labs Inc. 29,200 785 * Genesco, Inc. 43,658 773 * SOURCECORP, Inc. 35,700 771 Haverty Furniture Cos., Inc. 44,000 770 * PRG-Schultz International, Inc. 129,900 766 * The Dress Barn, Inc. 60,200 763 * ShopKo Stores, Inc. 58,600 762 Roto-Rooter, Inc. 19,900 760 Wellman, Inc. 67,745 759 ================================================================================ 28 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- Universal Forest Products, Inc. 36,200 758 * Startek, Inc. 28,800 757 * ViaSat, Inc. 52,800 757 CTS Corp. 72,200 754 * Armor Holdings, Inc. 55,400 742 * Esterline Technologies Corp. 42,500 740 Schweitzer-Mauduit International, Inc. 30,400 734 * Wabash National Corp. 52,300 734 * ArthroCare Corp. 43,733 733 * PAREXEL International Corp. 51,500 718 Helix Technology Corp. 54,300 718 SWS Group, Inc. 35,292 711 Woodward Governor Co. 16,200 697 * Websense, Inc. 43,900 687 Vital Signs, Inc. 26,400 685 * The Great Atlantic & Pacific Tea Co., Inc. 77,600 683 * Plains Resources Inc. 48,000 679 Deltic Timber Corp. 23,800 677 * Nuevo Energy Co. 38,800 677 Cohu, Inc. 42,890 669 * J. Jill Group, Inc. 39,700 669 * Intermagnetics General Corp. 33,695 669 * JDA Software Group, Inc. 59,472 665 Chesapeake Corp. of Virginia 30,400 664 Oshkosh B' Gosh, Inc. Class A 24,600 664 Oxford Industries, Inc. 15,900 660 Cash America International Inc. 49,900 660 * JAKKS Pacific, Inc. 49,600 659 * Cable Design Technologies Corp. 91,900 657 Dimon Inc. 91,300 654 * Bally Total Fitness Holding Corp. 72,300 653 * K2 Inc. 53,200 652 * Gardner Denver Inc. 31,800 651 Libbey, Inc. 28,400 645 Talx Corp. 28,400 642 * Champion Enterprises, Inc. 123,300 639 * Kulicke & Soffa Industries, Inc. 98,800 631 JLG Industries, Inc. 92,700 630 * Odyssey Healthcare, Inc. 17,000 629 Hancock Fabrics, Inc. 38,800 627 * Insituform Technologies Inc. Class A 35,300 624 * Administaff, Inc. 60,500 623 * Consolidated Graphics, Inc. 26,700 611 * Swift Energy Co. 55,400 609 * Boston Communications Group, Inc. 35,500 608 * Haemonetics Corp. 32,450 607 * Systems & Computer Technology Corp. 66,700 600 * ESS Technology, Inc. 61,100 596 * Labor Ready, Inc. 82,500 592 * J & J Snack Foods Corp. 18,700 591 Myers Industries, Inc. 60,162 572 * SPSS, Inc. 34,000 569 * Brooks Automation, Inc. 49,376 560 Lindsay Manufacturing Co. 24,100 560 * Footstar Inc. 42,800 556 * Frontier Airlines, Inc. 61,050 554 * Tollgrade Communications, Inc. 29,638 553 * Planar Systems, Inc. 28,100 550 * Rudolph Technologies, Inc. 34,200 546 * Prima Energy Corp. 26,100 545 * Fleetwood Enterprises, Inc. 73,630 544 * Input/Output, Inc. 100,800 542 * Savient Pharmaceuticals Inc. 116,678 541 Kaman Corp. Class A 45,900 537 Sturm, Ruger & Co., Inc. 53,600 536 Robbins & Myers, Inc. 28,800 533 Lawson Products, Inc. 19,300 532 Skyline Corp. 17,700 531 * Audiovox Corp. 47,000 526 Standex International Corp. 25,000 525 * Hologic, Inc. 39,600 522 Bel Fuse, Inc. Class B 22,650 519 * Harmonic, Inc. 127,300 518 Apogee Enterprises, Inc. 57,200 516 * Standard Microsystem Corp. 34,000 516 * Mesa Air Group Inc. 64,400 515 * Buckeye Technology, Inc. 75,600 514 * Information Holdings Inc. 27,900 509 * MemberWorks, Inc. 25,700 508 NUI Corp. 32,700 508 * Veritas DGC Inc. 43,200 497 * Goody's Family Clothing 57,100 494 Belden, Inc. 31,000 493 * Concord Communications, Inc. 35,600 489 * RadiSys Corp. 36,955 488 * American Healthways Inc. 13,500 488 AAR Corp. 69,000 487 * Noven Pharmaceuticals, Inc. 47,500 486 Quaker Chemical Corp. 19,300 483 * PC-Tel, Inc. 40,400 479 * Possis Medical Inc. 34,900 479 * Pericom Semiconductor Corp. 51,300 477 * 4Kids Entertainment Inc. 25,300 471 * Supertex, Inc. 25,400 467 * Impath, Inc. 32,770 463 Central Vermont Public Service Corp. 23,600 461 * Rainbow Technologies, Inc. 54,700 460 * Osteotech, Inc. 33,600 457 Action Performance Cos., Inc. 24,000 456 ================================================================================ 29 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- * Heidrick & Struggles International, Inc. 36,100 456 Keithley Instruments Inc. 31,500 455 * Tower Automotive, Inc. 124,000 454 C & D Technologies, Inc. 31,500 452 * Duane Reade Inc. 30,500 450 * RTI International Metals 41,500 449 * Caraustar Industries, Inc. 56,100 449 Cascade Natural Gas Corp. 22,900 437 Ryerson Tull, Inc. 49,700 436 * NYFIX, Inc. 68,500 435 * Artesyn Technologies, Inc. 77,479 435 Interface, Inc. 93,480 434 * Volt Information Sciences Inc. 31,700 433 National Presto Industries, Inc. 13,500 427 * The Wet Seal, Inc. Class A 39,600 423 * DuPont Photomasks, Inc. 22,300 420 * MRO Software Inc. 48,600 419 * SPS Technologies, Inc. 15,400 416 Standard Motor Products, Inc. 37,500 416 * Midas Inc. 34,100 413 * CryoLife Inc. 39,700 411 X-Rite Inc. 41,300 409 * Netegrity, Inc. 69,948 408 * Concord Camera Corp. 57,200 406 * Curative Health Services Inc. 23,800 405 Nash-Finch Co. 24,293 404 * Applica Inc. 47,200 401 * Department 56 Inc. 25,900 397 EDO Corp. 22,400 396 * Network Equipment Technologies, Inc. 46,300 390 Building Materials Holding Corp. 26,200 388 * Ultimate Electronics, Inc. 29,872 383 Coachmen Industries, Inc. 31,970 382 * Symmetricom Inc. 85,700 377 * Cleveland-Cliffs Inc. 21,100 377 * Thomas Nelson, Inc. 30,100 376 Milacron Inc. 76,400 374 * Radiant Systems, Inc. 55,200 372 * C-COR Electronics, Inc. 75,674 371 BEI Technologies, Inc. 30,737 369 * Omnova Solutions Inc. 90,500 366 * Lydall, Inc. 33,200 355 * Roxio, Inc. 53,100 355 * Dril-Quip, Inc. 19,400 353 Pope & Talbot, Inc. 31,400 347 * Alliance Semiconductor Corp. 70,667 342 * Astec Industries, Inc. 39,200 342 * SBS Technologies, Inc. 33,605 330 * Gerber Scientific, Inc. 49,300 328 * Brush Engineered Materials Inc. 38,200 319 Bassett Furniture Industries, Inc. 23,300 309 * Prime Hospitality Corp. 46,000 309 * Phoenix Technologies Ltd. 53,900 305 Angelica Corp. 17,400 295 * Insurance Auto Auctions, Inc. 23,200 291 Advanced Marketing Services 22,400 291 * Catapult Communications Corp. 27,000 287 Century Aluminum Co. 40,661 286 CPI Corp. 16,100 284 Material Sciences Corp. 28,200 274 * Metro One Telecommunications, Inc. 49,650 256 * Digi International, Inc. 44,500 256 * Mobile Mini, Inc. 15,300 250 Nature's Sunshine Inc. 30,700 246 * MapInfo Corp. 33,033 240 * A.M. Castle & Co. 35,300 231 Lance, Inc. 25,000 228 * Carreker Corp. 49,700 228 * Concerto Software Inc. 24,600 226 * ArQule, Inc. 53,500 225 * Huffy Corp. 31,900 223 Butler Manufacturing Co. 13,500 223 Pioneer Standard Electronics Inc. 25,800 219 * Captaris Inc. 63,500 217 * SCM Microsystems, Inc. 39,400 215 * Stein Mart, Inc. 35,589 213 * Bell Microproducts Inc. 49,200 210 * QRS Corp. 39,300 208 * IMCO Recycling, Inc. 31,300 208 * Enesco Group, Inc. 28,000 207 * Ashworth, Inc. 29,050 206 * Brooktrout Technology, Inc. 26,300 204 Green Mountain Power Corp. 10,075 202 * Salton, Inc. 21,900 198 Steel Technologies, Inc. 19,300 195 * A.T. Cross Co. Class A 32,700 194 Fedders Corp. 62,440 192 Penford Corp. 16,800 188 Northwestern Corp. 89,900 180 Haggar Corp. 13,900 174 Intermet Corp. 50,500 170 * RehabCare Group, Inc. 11,300 166 SCPIE Holdings Inc. 20,600 158 * AstroPower, Inc. 47,700 157 Commonwealth Industries Inc. 32,500 153 * Wolverine Tube, Inc. 24,700 141 * Magnatek, Inc. 46,600 118 * Pinnacle Entertainment, Inc. 17,400 118 * On Assignment, Inc. 20,029 80 * Three-Five Systems, Inc. 11,599 80 * Zix Corp. 13,600 51 ================================================================================ 30 ================================================================================ MARKET TAX-MANAGED VALUE* SMALL-CAP FUND SHARES (000) - -------------------------------------------------------------------------------- * Midway Games Inc. 12,300 45 * Meade Instruments Corp. 6,348 20 * Theragenics Corp. 2,300 10 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $593,452) 726,330 - -------------------------------------------------------------------------------- Face Amount (000) - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENT (2.0%) - -------------------------------------------------------------------------------- Repurchase Agreement Collateralized by U.S. Government Obligations in a Pooled Cash Account 1.16%, 7/1/2003--Note E (Cost $14,615) $14,615 14,615 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (102.1%) (Cost $608,067) 740,945 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-2.1%) Other Assets--Note B 5,531 Security Lending Collateral Payable to Brokers--Note E (14,615) Other Liabilities (5,919) ----------- (15,003) ----------- - -------------------------------------------------------------------------------- NET ASSETS (100%) $725,942 ================================================================================ oSee Note A in Notes to Financial Statements. *Non-income-producing security. REIT--Real Estate Investment Trust. - -------------------------------------------------------------------------------- AMOUNT (000) - -------------------------------------------------------------------------------- AT JUNE 30, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- Paid-in Capital $654,445 Undistributed Net Investment Income 1,890 Accumulated Net Realized Losses (63,271) Unrealized Appreciation 132,878 - -------------------------------------------------------------------------------- NET ASSETS $725,942 ================================================================================ Investor Shares--Net Assets Applicable to 49,171,527 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $702,439 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INVESTOR SHARES $14.29 ================================================================================ Institutional Shares--Net Assets Applicable to 1,642,852 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $23,503 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $14.31 ================================================================================ See Note C in Notes to Financial Statements for the tax-basis components of net assets. 31 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (100.0%) - -------------------------------------------------------------------------------- AUSTRALIA (5.1%) National Australia Bank Ltd. 114,075 2,563 Commonwealth Bank of Australia 94,065 1,864 BHP Billiton Ltd. 276,412 1,602 Westpac Banking Corp., Ltd. 133,468 1,455 Australia & New Zealand Bank Group Ltd. 112,810 1,408 News Corp. Ltd. Pfd. 154,470 952 News Corp. Ltd. 108,905 818 Woolworths Ltd. 78,008 655 Telstra Corp. Ltd. 170,556 503 Wesfarmers Ltd. 28,879 490 Rio Tinto Ltd. 23,658 463 Foster's Group Ltd. 164,102 463 Coles Myer Ltd. 82,498 387 AMP Ltd. 110,530 368 Macquarie Infrastucture Group 144,307 347 Amcor Ltd. 61,925 337 Macquarie Bank Ltd. 16,575 320 Suncorp-Metway Ltd. 40,932 318 Woodside Petroleum Ltd. 36,777 305 QBE Insurance Group Ltd. 46,707 292 Insurance Australia Group Ltd. 124,082 283 Mirvac Group 92,528 276 Rinker Group Ltd. 77,619 273 Australian Gas Light Co., Ltd. 35,693 262 Brambles Industries Ltd. 79,461 244 Alumina Ltd. 86,549 236 Tabcorp Holdings Ltd. 31,322 226 * WMC Resources Ltd. 87,731 207 Lend Lease Corp. 32,157 180 Santos Ltd. 45,053 178 Centro Properties Group 63,704 170 James Hardie Industries NV 35,037 165 CFS Gandel Retail Trust 182,418 163 Boral Ltd. 46,643 158 Orica Ltd. 21,390 155 BHP Steel Ltd. 58,448 146 John Fairfax Holdings Ltd. 71,015 137 Origin Energy Ltd. 50,235 136 Transurban Group 39,387 126 Coca-Cola Amatil Ltd. 31,916 122 Macquarie Goodman Industrial Trust 117,395 120 Investa Property Group 89,517 119 Mayne Group Ltd. 64,403 118 Newcrest Mining Ltd. 20,908 107 Patrick Corp. Ltd. 12,500 105 CSL Ltd. 12,692 102 Southcorp Ltd. 53,600 101 Cochlear Ltd. 4,638 100 CSR Ltd. 71,149 93 Deutsche Office Trust 122,237 92 Paperlinx Ltd. 27,326 84 Leighton Holdings Ltd. 12,171 82 Harvey Norman Holdings Ltd. 48,047 81 Lion Nathan Ltd. 22,372 80 Sonic Healthcare Ltd. 18,149 80 Tab Ltd. 35,420 77 Toll Holdings Ltd. 15,853 75 Publishing & Broadcasting Ltd. 10,900 72 Australian Stock Exchange Ltd. 6,731 57 * Ansell Ltd. 13,630 53 Iluka Resources Ltd. 19,443 53 OneSteel Ltd. 40,356 52 Computershare Ltd. 28,645 36 Futuris Corp., Ltd. 30,676 35 Aristocrat Leisure Ltd. 23,600 21 ---------- 21,748 ---------- AUSTRIA (0.2%) * Immofinanz Immobilien Anlagen AG 46,576 335 * Telekom Austria AG 15,438 175 Erste Bank der Oesterreichischen Sparkassen AG 1,679 148 OMV AG 945 114 Voestalpine AG 1,095 43 Wienerberger AG 2,259 40 Flughafen Wien AG 777 28 * RHI AG 1,970 23 Boehler-Uddeholm AG 422 23 Oesterreichische Elektrizitaetswirtschafts AG Class A 177 16 * VA Technologies AG 319 8 Mayr-Melnhof Karton AG 73 6 ---------- 959 ---------- BELGIUM (1.1%) Fortis Group 78,829 1,369 Dexia 48,870 618 Electrabel SA 2,191 558 Solvay SA 4,739 327 KBC Bankverzekeringsholding 7,162 281 Interbrew 10,894 242 Delhaize Group 5,784 176 UCB SA 6,298 173 Agfa Gevaert NV 8,099 172 Colruyt NV 1,331 92 Cofinimmo 620 75 * Mobistar SA 1,657 68 Bekaert NV 1,402 66 Umicore 1,218 63 Omega Pharma SA 1,527 46 Barco NV 743 44 ================================================================================ 32 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- D'Ieteren SA 283 41 Compagnie Maritime Belge SA 164 6 ---------- 4,417 ---------- DENMARK (0.8%) Danske Bank A/S 37,790 736 Novo Nordisk A/S B Shares 18,718 655 AP Moller-Maersk A/S 80 432 TDC A/S 10,141 303 Danisco A/S 4,029 158 ISS A/S 3,076 110 Vestas Wind Systems A/S 8,834 101 Novozymes A/S 3,624 101 H. Lundbeck A/S 4,818 98 Group 4 Falck A/S 5,100 85 Coloplast A/S B Shares 1,075 83 * Topdanmark A/S 2,000 73 Carlsberg A/S B Shares 1,846 66 * GN Store Nord A/S 15,167 62 * William Demant A/S 2,600 59 DSV, De Sammensluttede Vognmaend A/S 1,900 49 Kobenhavns Lufthavne A/S 460 37 East Asiatic Co. A/S 1,350 37 * NEG Micon A/S 3,595 37 Bang & Olufsen A/S B Shares 909 25 * FLS Industries A/S B Shares 1,399 12 NKT Holding A/S 740 10 ---------- 3,329 ---------- FINLAND (1.9%) Nokia Oyj 352,375 5,803 Stora Enso Oyj R Shares 48,466 542 UPM-Kymmene Oyj 36,332 530 Fortum Oyj 23,577 189 Sampo Oyj A Shares 20,550 151 Instrumentarium Oyj 3,600 137 TietoEnator Oyj B Shares 6,575 111 Kone Corp. B Shares 2,365 99 * Elisa Oyj Class A 9,750 84 Metso Oyj 7,540 67 Outokumpu Oyj A Shares 7,400 65 Kesko Oyj 4,360 51 Amer Group Ltd. 1,607 49 Uponor Oyj 2,095 49 Orion-Yhtyma Oyj B Shares 2,550 42 Wartsila Oyj B Shares 2,770 34 Nokian Renkaat Oyj 609 31 * Rautaruuki Oyj 6,970 30 Pohjola Group PLC D Shares 1,290 22 KCI Konecranes Oyj 500 12 ---------- 8,098 ---------- FRANCE (9.8%) Total SA 48,039 7,260 BNP Paribas SA 59,634 3,030 Aventis SA 50,284 2,766 Carrefour SA 42,552 2,086 L'Oreal SA 25,187 1,776 AXA 105,218 1,632 Sanofi-Synthelabo SA 27,038 1,583 Societe Generale Class A 23,710 1,503 * France Telecom SA 57,365 1,407 Groupe Danone 9,152 1,266 L'Air Liquide SA (Registered) 7,347 1,089 * Vivendi Universal SA 56,494 1,028 Suez SA 60,033 955 STMicroelectronics NV 43,923 921 Cie. de St. Gobain SA 23,077 908 LVMH Louis Vuitton Moet Hennessy 16,396 813 Schneider Electric SA 15,765 741 * Alcatel SA 77,943 703 Lafarge SA 11,947 700 PSA Peugeot Citroen 13,109 637 Renault SA 11,694 618 Accor SA 14,099 510 Credit Agricole SA 23,860 453 Bouygues SA 16,167 446 Lagardere S.C.A. 9,344 406 Pinault-Printemps-Redoute SA 5,213 393 Compagnie Generale des Etablissements Michelin SA B Shares 9,982 390 Veolia Environnement 17,871 367 Vinci SA 4,985 336 Pernod Ricard SA 3,734 333 Arcelor 25,798 300 * Cap Gemini SA 7,835 278 Essilor International SA 6,859 276 Societe Television Francaise 1 8,588 264 European Aeronautic Defence and Space Co. 20,570 252 Unibail Company 3,344 248 Thomson SA 14,611 225 Pechiney SA 5,735 206 Valeo SA 5,921 205 Etablissements Economiques du Casino Guichard-Perrachon SA 2,599 203 Publicis Groupe SA 7,555 203 Sodexho Alliance SA 7,451 201 * Wanadoo 29,399 197 Thales SA 5,523 164 Autoroutes du Sud de la France 5,047 148 Gecina SA 1,202 139 ================================================================================ 33 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Klepierre 2,795 138 Technip-Coflexip SA 1,450 127 Sagem SA 1,549 125 Dassault Systemes SA 3,534 116 CNP Assurances 2,484 105 * Business Objects SA 4,494 100 Hermes International 649 91 Societe BIC SA 2,221 86 * Alstom 24,839 86 Air France 6,563 85 Imerys 543 79 * Atos Origin SA 2,033 70 Zodiac SA 2,484 61 ---------- 41,834 ---------- GERMANY (6.4%) Siemens AG 59,437 2,916 Deutsche Bank AG 38,829 2,518 * Deutsche Telekom AG 155,453 2,372 E.On AG 43,433 2,233 DaimlerChrysler AG (Registered) 63,604 2,220 SAP AG 15,119 1,783 BASF AG 40,703 1,739 Allianz AG 17,108 1,422 Bayer AG 48,961 1,135 Muenchener Rueckversicherungs- Gesellschaft AG (Registered) 8,647 882 RWE AG 26,896 812 Volkswagen AG 16,119 681 Schering AG 12,565 614 Commerzbank AG 33,398 467 Deutsche Post AG 28,854 424 * Bayerische Hypo-und Vereinsbank AG 25,628 423 Deutsche Boerse AG 7,004 371 Metro AG 10,475 339 Altana AG 5,231 330 * Infineon Technologies AG 32,007 309 Adidas-Salomon AG 3,437 294 Henkel KGaA 4,517 280 ThyssenKrupp AG 23,004 265 Porsche AG 599 254 Beiersdorf AG 1,869 250 Volkswagen AG Pfd. 8,106 243 Linde AG 6,095 226 Continental AG 9,151 192 Deutsche Lufthansa AG 15,019 176 TUI AG 9,568 142 Wella AG Pfd. 1,693 126 Man AG 7,301 123 Fresenius Medical Care AG 2,350 116 * Qiagen NV 11,113 94 Merck KGaA 2,871 83 Celesio AG 2,066 81 RWE AG Pfd. 2,938 79 Fresenius Medical Care AG 2,150 78 * MLP AG 5,051 75 Buderus AG 2,181 73 Karstadt Quelle AG 2,931 63 Suedzucker AG 3,469 60 * EPCOS AG 4,367 56 Douglas Holding AG 2,498 54 * HeidelbergerCement AG 2,346 52 ProSieben Sat.1 Media AG 7,445 50 ---------- 27,575 ---------- GREECE (0.4%) National Bank of Greece SA 13,433 227 * Hellenic Telecommunication Organization SA 19,080 226 Alpha Credit Bank SA 10,500 183 EFG Eurobank Ergasias 11,800 178 Titan Cement Co. SA 2,400 87 Commercial Bank of Greece SA 4,800 84 Public Power Corp. 4,600 83 Coca-Cola Hellenic Bottling Co. SA 4,900 82 Vodafone-Panafon SA 11,900 79 Bank of Piraeus 8,900 67 Greek Organization of Football Prognostics 4,900 50 Hellenic Petroleum SA 6,700 45 Technical Olympic SA 8,000 31 * Intracom SA 4,400 29 Papastratos Cigarettes Co. SA 1,400 29 Viohalco, Hellenic Copper & Aluminum Industry SA 5,500 26 Hellenic Technodomiki Tev SA 4,230 24 Aluminum of Greece SA 970 20 Hellenic Duty Free Shops SA 800 10 Folli-Follie SA 300 5 ---------- 1,565 ---------- HONG KONG (1.5%) Hutchison Whampoa Ltd. 156,512 953 Cheung Kong Holdings Ltd. 118,000 710 Hang Seng Bank Ltd. 56,943 602 CLP Holdings Ltd. 131,732 576 Sun Hung Kai Properties Ltd. 99,064 501 Hong Kong Electric Holdings Ltd. 101,000 396 Hong Kong & China Gas Co., Ltd. 276,177 349 Swire Pacific Ltd. A Shares 68,298 299 Bank of East Asia Ltd. 95,400 188 Boc Hong Kong Holdings Ltd. 186,000 187 Wharf Holdings Ltd. 92,215 177 Li & Fung Ltd. 117,850 152 Johnson Electric Holdings Ltd. 120,998 150 ================================================================================ 34 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Henderson Land Development Co. Ltd. 49,006 141 Hong Kong Exchanges & Clearing Ltd. 79,000 113 MTR Corp. 93,000 107 Esprit Holdings Ltd. 42,072 103 Cathay Pacific Airways Ltd. 72,170 97 Hang Lung Properties Ltd. 96,500 87 Television Broadcasts Ltd. 23,000 82 Yue Yuen Industrial (Holdings) Ltd. 30,500 78 Cheung Kong Infrastructure Holdings Ltd. 35,000 68 Techtronic Industries Co., Ltd. 32,000 54 Sino Land Co. 159,000 49 Hopewell Holdings Ltd. 43,000 46 New World Development Co., Ltd. 115,000 45 Shangri-La Asia Ltd. 68,078 43 Giordano International Ltd. 129,000 40 Hysan Development Co., Ltd. 45,000 37 SCMP Group Ltd. 79,863 31 ASM Pacific Technology Ltd. 10,000 29 Texwinca Holdings Ltd. 36,000 29 SmarTone Telecommunications Ltd. 21,500 25 ---------- 6,544 ---------- IRELAND (0.8%) * Allied Irish Banks PLC 65,748 988 Bank of Ireland 74,760 906 * CRH PLC 39,481 619 Irish Life & Permanent PLC 19,522 211 Kerry Group PLC A Shares 9,405 145 * Elan Corp. PLC 24,705 128 * Ryanair Holdings PLC 14,266 103 DCC PLC 6,580 88 * Independent News & Media PLC 35,429 64 Grafton Group PLC 13,538 60 Fyffes PLC 21,558 34 * Greencore Group PLC 7,267 24 * Waterford Wedgewood PLC 36,700 10 ---------- 3,380 ---------- ITALY (3.9%) ENI SpA 191,699 2,899 Assicurazioni Generali SpA 70,959 1,644 Telecom Italia SpA 174,890 1,583 Telecom Italia Mobile SpA 280,230 1,381 Unicredito Italiano SpA 275,745 1,314 ENEL SpA 156,743 977 Banca Intesa SpA 259,260 829 Telecom Italia SpA Risp. 150,196 823 San Paolo-IMI SpA 73,068 679 Banco Popolare di Verona e Novara 27,039 369 Mediaset SpA 42,450 359 Riunione Adriatica di Sicurta SpA 22,752 345 Mediobanca Banca di Credito Finanziaria SpA 34,401 343 Alleanza Assicurazioni SpA 35,388 336 * Seat Pagine Gialle SpA 379,522 264 Finmeccanica SpA 405,219 260 Snam Rete Gas SpA 64,198 252 Banca Monte dei Paschi di Siena SpA 67,935 185 * Banca Nazionale del Lavoro (BNL) 107,561 180 * Capitalia SpA 87,507 154 Luxottica Group SpA 10,687 146 Banca Intesa SpA Non Convertible Risp. 62,241 143 * Fiat SpA 17,240 126 Banca Fideuram SpA 22,354 122 Banca Popolare di Milano SpA 26,700 117 Mediolanum SpA 18,883 105 * Autogrill SpA 8,600 94 Parmalat Finanziaria SpA 26,924 85 Mondadori (Arnoldo) Editore SpA 10,600 77 Italcementi SpA 6,455 74 * Tiscali SpA 13,670 70 * FinecoGroup SpA 126,087 68 * Pirelli SpA 66,740 68 Gruppo Editoriale L'Espresso SpA 14,836 59 Bulgari SpA 10,300 57 Snia SpA 21,912 43 Benetton Group SpA 2,556 27 ---------- 16,657 ---------- JAPAN (20.4%) Toyota Motor Corp. 199,700 5,172 NTT DoCoMo, Inc. 1,302 2,819 Canon, Inc. 61,000 2,799 Takeda Chemical Industries Ltd. 62,500 2,306 Honda Motor Co., Ltd. 57,600 2,183 Nissan Motor Co., Ltd. 182,800 1,748 Nomura Holdings Inc. 132,000 1,675 Tokyo Electric Power Co. 84,800 1,621 Nippon Telegraph and Telephone Corp. 398 1,561 Matsushita Electric Industrial Co., Ltd. 157,034 1,555 Sony Corp. 53,200 1,498 Mitsubishi Tokyo Financial Group Inc. 302 1,365 East Japan Railway Co. 253 1,125 Fuji Photo Film Co., Ltd. 34,000 983 Hitachi Ltd. 222,000 941 ================================================================================ 35 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Shin-Etsu Chemical Co., Ltd. 26,900 919 Sharp Corp. 68,000 873 Rohm Co., Ltd. 8,000 872 Millea Holdings, Inc. 111 849 Chubu Electric Power Co. 45,100 823 Kansai Electric Power Co., Inc. 48,300 762 Ricoh Co. 46,000 752 Seven Eleven Japan Co. Ltd. 30,000 747 Kao Corp. 40,000 745 Toshiba Corp. 209,000 719 Kyocera Corp. 12,300 704 Murata Manufacturing Co., Ltd. 17,700 696 Bridgestone Corp. 48,000 652 Ito-Yokado Co., Ltd. 26,000 623 Yamanouchi Pharmaceuticals Co., Ltd. 22,200 579 Denso Corp. 35,700 566 Hoya Corp. 8,100 558 Nippon Steel Corp. 402,000 552 Mitsubishi Heavy Industries Ltd. 212,000 549 Tokyo Electron Ltd. 11,500 545 Daiwa Securities Group Inc. 94,000 540 Nintendo Co. 7,400 538 Tokyo Gas Co., Ltd. 187,000 537 Mitsubishi Corp. 75,000 520 Mitsubishi Estate Co., Ltd. 76,000 515 JFE Holdings, Inc. 34,300 514 Dai-Nippon Printing Co., Ltd. 45,000 476 Central Japan Railway Co. 66 473 Sumitomo Mitsui Financial Group, Inc. 214 468 Mitsubishi Electric Corp. 141,000 458 Tohoku Electric Power Co. 30,100 445 Kyushu Electric Power Co., Inc. 28,500 444 Keyence Corp. 2,410 442 Secom Co., Ltd. 15,000 440 Mitsui & Co., Ltd. 87,000 436 Fanuc Co., Ltd. 8,800 436 Mitsui Sumitomo Insurance Co. 93,880 435 TDK Corp. 8,500 420 Nippon Oil Corp. 95,000 412 Nikko Securities Co., Ltd. 101,000 405 Aeon Co., Ltd. 17,300 396 * UFJ Holdings Inc. 270 396 Ajinomoto Co., Inc. 41,000 393 Fujisawa Pharmaceutical Co., Ltd. 20,000 375 Sanyo Electric Co., Ltd. 109,000 373 Osaka Gas Co., Ltd. 149,000 369 * Mizuho Financial Group, Inc. 452 357 Asahi Glass Co., Ltd. 57,000 353 Kirin Brewery Co., Ltd. 50,000 351 Yamato Transport Co., Ltd. 31,000 343 Eisai Co., Ltd. 16,600 341 Mitsui Fudosan Co., Ltd. 53,000 339 SMC Corp. 4,000 337 Orix Corp. 6,000 332 Sumitomo Electric Industries Ltd. 45,000 329 Nitto Denko Corp. 9,800 321 West Japan Railway Co. 82 311 Olympus Optical Co., Ltd. 15,000 310 Sankyo Co., Ltd. 25,800 308 Sompo Japan Insurance Inc. 56,000 305 NTT Data Corp. 99 305 Shizuoka Bank Ltd. 45,000 302 Shionogi & Co., Ltd. 22,000 298 Toppan Printing Co., Ltd. 41,000 294 Softbank Corp. 15,400 292 * Kinki Nippon Railway Co. 110,190 285 Japan Tobacco, Inc. 52 281 Sumitomo Chemical Co. 89,000 279 Komatsu Ltd. 72,000 276 * NEC Corp. 55,000 275 Sekisui House Ltd. 36,000 273 Nippon Yusen Kabushiki Kaisha Co. 70,000 273 Omron Corp. 16,000 270 Tostem Inax Holding Corp. 18,512 267 Pioneer Corp. 11,700 263 Nippon Unipac Holding 66 258 Daikin Industries Ltd. 14,000 257 Takefuji Corp. 4,950 257 Sumitomo Trust & Banking Co., Ltd. 74,000 256 OJI Paper Co., Ltd. 58,000 254 Itochu Corp. 100,000 252 Asahi Kasei Corp. 87,000 249 Daiichi Pharmaceutical Co., Ltd. 18,700 244 Tokyu Corp. 75,000 242 Bank of Yokohama Ltd. 74,000 242 Mitsubishi Chemical Corp. 118,000 241 Promise Co., Ltd. 6,400 239 * Fujitsu Ltd. 58,000 238 * Resona Holdings Inc. 340,000 235 Shiseido Co., Ltd. 24,000 233 Nippon Express Co., Ltd. 60,000 233 Sumitomo Corp. 50,000 231 Advantest Corp. 5,200 230 Chugai Pharmaceutical Co., Ltd. 20,200 229 Konica Corp. 20,000 228 Marui Co., Ltd. 25,400 226 Daiwa House Industry Co., Ltd. 32,000 220 Terumo Corp. 12,800 213 Toray Industries, Inc. 89,000 207 Acom Co., Ltd. 5,590 202 ================================================================================ 36 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Kubota Corp. 74,000 201 Daido Life Insurance Co. 88 191 Taisho Pharmaceutical Co. 13,000 188 Mabuchi Motor Co. 2,400 183 Asahi Breweries Ltd. 30,000 181 Nidec Corp. 2,700 178 Matsushita Electric Works, Ltd. 30,000 178 Mitsui Chemicals, Inc. 38,000 176 Hirose Electric Co., Ltd. 2,100 174 Credit Saison Co., Ltd. 10,500 172 Kuraray Co., Ltd. 26,000 171 Mitsui Osk Lines Ltd. 56,000 170 Keio Electric Railway Co., Ltd. 37,000 169 * Nikon Corp. 20,000 165 Chiba Bank Ltd. 46,000 163 ToneGeneral Sekiyu K.K. 23,000 162 Yamaha Corp. 11,700 160 Sumitomo Metal Industries Ltd. 228,000 158 Stanley Electric Co. 11,000 157 Bank of Fukuoka, Ltd. 40,000 154 Tobu Railway Co., Ltd. 53,000 151 Teijin Ltd. 60,000 150 Oriental Land Co., Ltd. 3,400 149 Furukawa Electric Co. 45,000 147 JSR Corp. 12,000 146 Kajima Corp. 60,000 142 Alps Electric Co., Ltd. 11,000 141 Aiful Corp. 3,300 141 Kyowa Hakko Kogyo Co. 26,000 140 Joyo Bank Ltd. 50,000 139 Yamada Denki Co., Ltd. 6,300 139 Sumitomo Metal Mining Co. 36,000 138 CSK Corp. 5,000 136 Daito Trust Construction Co., Ltd. 6,300 132 Yokogawa Electric Corp. 17,000 131 * Showa Denko K.K. 75,000 131 Jafco Co., Ltd. 2,300 130 Mitsui Mining & Smelting Co., Ltd. 44,000 130 Fast Retailing Co., Ltd. 4,200 130 Sumitomo Realty & Development Co. 29,000 129 Keihin Electric Express Railway Co., Ltd. 26,000 127 Marubeni Corp. 97,000 126 Uni-Charm Corp. 2,900 125 Ohbayashi Corp. 40,000 123 Toto Ltd. 20,000 119 Konami Corp. 6,600 118 Lawson Inc. 4,300 118 * Trend Micro Inc. 7,500 116 * Oki Electric Industry Co. Ltd. 40,000 115 Gunma Bank Ltd. 25,000 114 77 Bank Ltd. 25,000 113 Japan Airlines System Co. 52,000 113 Nissin Food Products Co., Ltd. 5,300 111 Sekisui Chemical Co. 32,000 108 Citizen Watch Co., Ltd. 20,000 107 Yakult Honsha Co., Ltd. 8,000 107 NTN Corp. 29,000 107 Taisei Corp. 54,000 106 Shimizu Corp. 38,000 105 Kaneka Corp. 17,000 105 Ushio Inc. 9,000 104 Nippon Meat Packers, Inc. 11,000 104 * Mitsubishi Materials Corp. 81,000 104 Toyo Seikan Kaisha Ltd. 11,000 103 Japan Real Estate Investment Corp. 19 103 JGC Corp. 15,000 101 Fuji Electric Co. , Ltd. 46,000 101 NGK Insulators Ltd. 18,000 100 Takashimaya Co. 20,000 99 Ishikawajima-Harima Heavy Industries Co. 88,000 99 NSK Ltd. 31,000 99 Mitsubishi Rayon Co., Ltd. 36,000 96 Casio Computer Co. 15,000 96 Bandai Co., Ltd. 2,500 95 Taiheiyo Cement Corp. 55,000 94 THK Co., Inc. 7,000 94 Office Building Fund of Japan Inc. 17 93 Nomura Research Institute, Ltd. 1,200 92 Shimano, Inc. 5,800 91 NGK Spark Plug Co. 13,000 91 Obic Co., Ltd. 500 89 FamilyMart Co., Ltd. 5,000 89 Benesse Corp. 5,100 88 Taiyo Yuden Co., Ltd. 9,000 88 Sankyo Co., Ltd. 3,500 87 Ube Industries Ltd. 59,000 87 Nippon Sheet Glass Co., Ltd. 29,000 87 The Suruga Bank, Ltd. 15,000 86 Uny Co., Ltd. 10,000 86 Kawasaki Heavy Industries Ltd. 84,000 86 Meitec Corp. 2,800 85 Nippon Mining Holdings Inc. 39,000 84 * Mitsui Trust Holding Inc. 38,100 84 Minebea Co., Ltd. 21,000 83 Dai-Nippon Ink & Chemicals, Inc. 41,000 83 * Ashikaga Financial Group, Inc. 55,000 82 * Hokuriku Bank Ltd. 53,000 81 Kawasaki Kisen Kaisha Ltd. 33,000 80 Oracle Corp. Japan 2,200 79 Toho Co., Ltd. 9,000 79 Toyoda Gosei Co., Ltd. 4,000 79 Net One Systems Co., Ltd. 16 78 ================================================================================ 37 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Fuji Television Network, Inc. 22 78 Denki Kagaku Kogyo K.K. 28,000 78 Kurita Water Industries Ltd. 7,000 77 Shimamura Co., Ltd. 1,400 77 Dowa Mining Co. Ltd. 20,000 77 Toyobo Ltd. 44,000 77 Central Glass Co., Ltd. 13,000 76 Daimaru, Inc. 19,000 76 Yamaha Motor Co., Ltd. 9,000 76 Tosoh Corp. 34,000 76 Fujikura Ltd. 23,000 76 Isetan Co. 11,000 74 Hitachi Chemical Co., Ltd. 7,000 72 Susuken Co., Ltd. 3,000 71 Skylark Co., Ltd. 6,000 71 Nisshin Seifun Group Inc. 10,000 71 * All Nippon Airways Co., Ltd. 37,000 71 Hino Motors, Ltd. 15,000 71 Kamigumi Co., Ltd. 14,000 70 USS Co., Ltd. 1,370 69 Mitsukoshi Ltd. 26,000 68 Q.P. Corp. 8,600 68 Ito En, Ltd. 2,000 67 Kikkoman Corp. 10,000 66 Nichii Gakkan Co. 1,300 65 Makita Corp. 8,000 65 Sumitomo Osaka Cement Co., Ltd. 33,000 65 Onward Kashiyama Co., Ltd. 8,000 65 Mitsumi Electric Co., Ltd. 6,200 64 Ebara Corp. 18,000 63 Dentsu Inc. 20 62 * Sumitomo Heavy Industries Ltd. 42,000 62 Meiji Seika Kaisha Ltd. 19,000 62 Mitsubishi Gas Chemical Co. 29,000 61 TIS Inc. 3,200 61 Toyo Suisan Kaisha, Ltd. 6,000 61 Mitsui Engineering & Shipbuilding Co., Ltd. 48,000 60 Aoyama Trading Co., Ltd. 4,500 60 Aeon Credit Service Co. Ltd. 1,870 59 Nissan Chemical Industries, Ltd. 11,000 59 Sumitomo Bakelite Co. Ltd. 14,000 58 Bellsystem24, Inc. 360 58 Showa Shell Sekiyu K.K. 8,000 57 Daicel Chemical Industries Ltd. 18,000 57 Wacoal Corp. 7,000 55 * Sega Corp. 7,600 54 Takara Holdings Inc. 10,000 54 Nichirei Corp. 15,000 52 Amada Co., Ltd. 16,000 51 Nippon Comsys Corp. 10,000 51 Asatsu-DK Inc. 2,800 50 Koyo Seiko Co., Ltd. 7,000 50 Aderans Co. Ltd. 2,800 50 World Co., Ltd. 2,600 49 Teikoku Oil Co., Ltd. 15,000 49 Gunze Ltd. 13,000 49 Itochu Techno-Science Corp. 2,100 49 Mitsubishi Logistics Corp. 8,000 48 Meiji Dairies Corp. 13,000 48 Coca-Cola West Japan Co. Ltd. 2,900 48 Nippon Shokubai Co., Ltd. 8,000 48 Shimachu Co. 3,000 47 Matsumotokiyoshi Co., Ltd. 1,100 47 Hankyu Department Stores, Inc. 8,000 47 Capcom Co., Ltd. 4,500 46 Katokichi Co., Ltd. 2,700 46 Seino Transportation Co., Ltd. 8,000 46 Yamazaki Baking Co., Ltd. 7,000 45 Nishimatsu Construction Co. 13,000 44 * Dai-Nippon Screen Manufacturing Co., Ltd. 9,000 44 Hitachi Software Engineering Co., Ltd. 2,100 44 * Ishihara Sangyo Kaisha Ltd. 25,000 42 Nippon Sanso Corp. 13,000 42 Nisshinbo Industries, Inc. 9,000 41 Autobacs Seven Co., Ltd. 2,200 41 Kokuyo Co., Ltd. 4,300 41 Tokyo Style Co. 5,000 41 Hitachi Cable Ltd. 15,000 40 Namco Ltd. 2,500 40 Kaken Pharmaceutical Co. 7,000 38 Sapparo Breweries Ltd. 15,000 37 Tokyo Broadcasting System, Inc. 3,000 37 Toda Corp. 16,000 34 * Kanebo Ltd. 29,000 34 Kinden Corp. 10,000 34 Ariake Japan Co., Ltd. 1,100 33 * Anritsu Corp. 6,000 33 Komori Corp. 3,000 31 * Snow Brand Milk Products Co. 12,000 30 Nippon Kayaku Co., Ltd. 7,000 30 Okumura Corp. 9,000 29 Amano Corp. 5,000 29 Sanden Corp. 6,000 29 Saizeriya Co., Ltd. 2,900 27 House Foods Industry Corp. 2,800 26 Takuma Co., Ltd. 4,000 19 ---------- 87,339 ---------- NETHERLANDS (5.2%) Royal Dutch Petroleum Co. 154,603 7,176 Unilever NV 42,348 2,272 ING Groep NV 126,877 2,204 ================================================================================ 38 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- ABN-AMRO Holding NV 112,217 2,146 Koninklijke (Royal) Philips Electronics NV 99,054 1,884 * Koninklijke KPN NV 129,606 918 Aegon NV 80,514 806 Reed Elsevier NV 47,041 555 Akzo Nobel NV 20,440 542 Heineken NV 14,585 518 Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 16,354 504 TPG NV 25,324 440 Koninklijke Ahold NV 46,752 388 * ASML Holding NV 35,876 341 DSM NV 5,919 250 Wolters Kluwer NV 19,973 241 Rodamco Europe NV 3,457 181 Euronext NV 6,694 166 Koninklijke Numico NV 10,674 164 IHC Caland NV 2,264 116 Corio NV 3,504 113 Wereldhave NV 1,563 98 Koninklijke Vendex KBB NV 7,459 86 Vedior NV 7,831 71 Oce NV 5,052 52 Hagemeyer NV 13,187 51 ---------- 22,283 ---------- NEW ZEALAND (0.2%) Telecom Corp. of New Zealand Ltd. 153,571 471 Contact Energy Ltd. 27,315 81 Sky City Entertainment Group Ltd. 13,874 77 Fletcher Building Ltd. 34,487 74 Carter Holt Harvey Ltd. 63,968 67 Auckland International Airport Ltd. 16,132 58 The Warehouse Group Ltd. 13,360 41 Fisher & Paykel Appliances Holdings Ltd. 4,388 35 Fisher & Paykel Healthcare Corp. Ltd. 4,355 31 * Fletcher Challenge Forests Ltd. Pfd. 43,386 29 * Sky Network Television, Ltd. 8,195 21 NGC Holdings, Ltd. 22,652 21 Independent Newspapers Ltd. 6,105 15 Tower Ltd. 7,601 7 * Fletcher Challenge Forests Ltd. 2,482 2 ---------- 1,030 ---------- NORWAY (0.4%) Norsk Hydro ASA 10,492 516 Statoil ASA 31,870 272 Orkla ASA 15,120 262 DNB Holding ASA 28,160 139 Gjensidige NOR ASA 3,900 136 Telenor ASA 32,730 136 Norske Skogindustrier ASA 8,000 120 Tomra Systems ASA 13,900 60 Schibsted ASA 3,930 54 Frontline Ltd. 3,610 52 Tandberg ASA 9,400 48 * Storebrand ASA 10,600 43 * Aker Kvaerner ASA 1,837 24 Smedvig ASA A Shares 3,320 21 ---------- 1,883 ---------- PORTUGAL (0.3%) Portugal Telecom SGPS SA 73,218 525 Electricidade de Portugal SA 133,736 286 Banco Comercial Portugues SA 146,149 257 Banco Espirito Santo SA 7,581 112 Brisa-Auto Estradas de Portugal SA 17,975 101 Banco BPI SA 24,706 70 * PT Multimedia-Servicos de Telecomunicacoes e Multimedia, SGPS, SA 3,064 54 * Sonae SGPS SA 80,058 45 Cimpor-Cimento de Portugal SA 6,183 24 * Jeronimo Martins & Filho, SGPS, SA 2,748 22 ---------- 1,496 ---------- SINGAPORE (0.8%) United Overseas Bank Ltd. 87,504 616 DBS Group Holdings Ltd. 78,082 457 Oversea-Chinese Banking Corp., Ltd. 71,650 407 Singapore Telecommunications Ltd. 454,900 390 Singapore Press Holdings Ltd. 28,000 291 Singapore Airlines Ltd. 41,751 247 Venture Corporation Ltd. 15,000 137 Keppel Corp., Ltd. 40,000 111 Singapore Technologies Engineering Ltd. 100,906 100 City Developments Ltd. 37,000 93 Fraser & Neave Ltd. 15,700 77 Capitaland Ltd. 95,000 67 * ComfortDelgro Corp Ltd. 110,000 50 Sembcorp Industries Ltd. 56,000 41 * Neptune Orient Lines Ltd. 47,000 40 Creative Technology Ltd. 4,450 36 Allgreen Properties Ltd. 65,000 35 * Chartered Semiconductor Manufacturing Ltd. 66,398 34 Singapore Land Ltd. 16,000 34 Sembcorp Logistics Ltd. 28,000 30 United Overseas Land Ltd. 22,000 26 * Datacraft Asia Ltd. 25,000 25 Keppel Land Ltd. 29,000 21 ================================================================================ 39 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Singapore Exchange Ltd. 27,000 21 Cycle & Carriage Ltd. 6,900 19 SembCorp Marine Ltd. 24,000 13 * ST Assembly Test Services Ltd. 12,000 12 Wing Tai Holdings Ltd. 25,000 11 Parkway Holdings Ltd. 20,000 9 SMRT Corp. Ltd. 25,000 9 Overseas Union Enterprise Ltd. 2,000 8 ---------- 3,467 ---------- SPAIN (3.9%) * Telefonica SA 338,739 3,933 Banco Santander Central Hispano SA 316,790 2,776 Banco Bilbao Vizcaya Argentaria SA 224,964 2,364 Endesa SA 66,521 1,114 Repsol-YPF SA 66,139 1,072 Iberdrola SA 55,536 962 Banco Popular Espanol SA 11,207 566 Altadis SA 21,001 538 Industria de Diseno Textil SA 16,437 413 Gas Natural SDG SA 15,103 304 Abertis Infraestructuras SA 20,686 289 Union Fenosa SA 14,696 249 Telefonica SA ADR 6,192 214 Grupo Dragados SA 8,778 177 * Terra Networks, SA 28,864 175 Acerinox SA 3,820 146 Grupo Ferrovial, SA 4,984 135 ACS, Actividades de Construccion y Servicios, SA 2,791 119 Amadeus Global Travel Distribution SA 18,872 108 Fomento de Construc y Contra SA 3,820 107 Acciona SA 2,144 102 Sacyr Vallehermoso SA 8,461 94 Indra Sistemas, SA 9,069 92 * NH Hoteles SA 7,885 83 * Zeltia SA 10,674 72 Iberia (Linea Aer Espana) 35,600 69 Corporacion Mapfre SA 6,152 66 Sociedad General de Aguas de Barcelona SA 4,442 61 Telefonica Publicidad e Informacion, SA 10,006 48 Promotora de Informaciones SA 4,785 43 ---------- 16,491 ---------- SWEDEN (2.2%) * Telefonaktiebolaget LM Ericsson AB Class B 870,161 935 Nordea AB 178,674 862 Hennes & Mauritz AB B Shares 35,115 807 Svenska Handelsbanken AB A Shares 41,170 674 TeliaSonera AB 123,643 513 Svenska Cellulosa AB B Shares 14,327 490 Electrolux AB Series B 22,936 453 Sandvik AB 16,083 421 Volvo AB B Shares 17,170 378 Skandinaviska Enskilda Banken AB A Shares 34,524 351 * Tele2 AB B Shares 7,696 286 Securitas AB B Shares 24,340 249 Assa Abloy AB 24,200 234 Atlas Copco AB A Shares 9,000 228 Skandia Forsakrings AB 72,000 192 Swedish Match AB 24,331 184 Skanska AB B Shares 28,376 162 SKF AB B Shares 5,470 158 Volvo AB A Shares 7,152 150 Atlas Copco AB B Shares 4,730 111 Holmen AB 3,800 104 Gambro AB A Shares 15,600 103 Eniro AB 11,800 101 Nobel Biocare Holding AG 1,400 93 Drott AB B Shares 6,870 87 Svenskt Stal AB A Shares 5,730 77 Getinge AB 2,800 73 * Modern Times Group AB 4,600 71 Trelleborg AB B Shares 6,220 66 SKF AB A Shares 2,260 65 Castellum AB 3,200 55 Billerud Aktiebolag 4,600 54 OM AB 6,760 48 * WM-Data AB Class B 31,500 48 Hoganas AB B Shares 2,300 47 Alfa Laval AB 4,900 47 Svenska Handelsbanken AB B Shares 2,890 45 * SAS AB 7,875 43 Perbio Science 2,300 43 Gambro AB B Shares 6,200 41 Axfood AB 1,550 28 SAPA AB 500 10 Svenskt Stal AB 580 7 ---------- 9,194 ---------- SWITZERLAND (7.5%) Novartis AG (Registered) 176,595 6,988 Nestle SA (Registered) 29,804 6,150 UBS AG 86,966 4,838 Roche Holdings AG 51,616 4,049 Credit Suisse Group (Registered) 87,433 2,301 Swiss Re (Registered) 24,127 1,337 * Zurich Financial Services AG 10,729 1,279 ================================================================================ 40 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Cie. Financiere Richemont AG 37,995 614 Swisscom AG 1,984 564 Holcim Ltd. (Registered) 10,833 400 Adecco SA (Registered) 9,581 395 Syngenta AG 7,517 377 Serono SA Class B 531 312 Roche Holdings AG (Bearer) 2,328 286 * CIBA Specialty Chemicals AG (Registered) 4,674 283 * ABB Ltd. 77,221 254 Synthes-Stratec Inc. 312 224 Swatch Group AG (Bearer) 2,353 213 Givaudan SA 502 211 * Centerpulse (Registered) 690 186 Lonza AG (Registered) 3,101 142 * Logitech International SA 3,050 114 SGS Societe Generale de Surveillance Holding SA (Registered) 286 112 * Clariant AG 11,804 108 Swatch Group AG (Registered) 5,145 94 Geberit AG 247 76 Unaxis Holding AG 722 59 * Schindler Holding AG (Ptg. Ctf.) 329 53 Valora Holding AG 246 50 Kuoni Reisen Holding AG (Registered) 190 49 UBS AG 741 41 * Kudelski SA 2,051 37 Sulzer AG (Registered) 191 27 ---------- 32,223 ---------- UNITED KINGDOM (27.2%) BP PLC 1,589,644 11,024 Vodafone Group PLC 5,013,766 9,804 HSBC Holdings PLC 791,677 9,354 GlaxoSmithKline PLC 442,223 8,925 Royal Bank of Scotland Group PLC 203,093 5,697 AstraZeneca Group PLC 127,341 5,106 Shell Transport & Trading Co. PLC 711,439 4,696 HBOS PLC 278,897 3,610 Barclays PLC 482,460 3,583 Lloyds TSB Group PLC 409,617 2,908 Diageo PLC 232,018 2,477 BT Group PLC 641,887 2,158 Tesco PLC 533,812 1,931 Unilever PLC 202,413 1,612 National Grid Transco PLC 227,788 1,545 Rio Tinto PLC 77,960 1,467 British American Tobacco PLC 121,131 1,374 Aviva PLC 168,877 1,173 BG Group PLC 257,439 1,141 * British Sky Broadcasting Group PLC 93,726 1,039 Imperial Tobacco Group PLC 53,764 961 BHP Billiton PLC 180,797 952 Prudential PLC 150,210 910 Centrica PLC 309,660 898 Cadbury Schweppes PLC 150,794 891 Compass Group PLC 161,525 871 Marks & Spencer Group PLC 166,387 867 Kingfisher PLC 189,363 866 GUS PLC 73,261 821 Reckitt Benckiser PLC 43,531 799 Reed Elsvier PLC 92,634 771 ScottishPower PLC 126,082 757 Legal & General Group PLC 490,824 680 Scottish & Southern Energy PLC 63,510 654 Boots Group PLC 60,256 645 BAA PLC 77,554 628 WPP Group PLC 76,230 598 Pearson PLC 58,897 550 BAE Systems PLC 226,097 532 BOC Group PLC 36,809 472 Smiths Group PLC 40,380 468 Land Securities Group PLC 36,181 467 Wolseley PLC 41,474 459 J. Sainsbury PLC 107,316 450 Rentokil Initial PLC 141,280 441 3i Group PLC 44,620 416 Man Group PLC 20,616 407 SABMiller PLC 58,500 392 * InterContinental Hotels Group PLC 54,627 388 BP PLC ADR 9,184 386 Smith & Nephew PLC 67,040 385 Amersham PLC 51,326 385 United Utilities PLC 38,783 377 Carnival PLC 12,122 368 Next PLC 21,102 357 Hilton Group PLC 116,928 355 Scottish & Newcastle PLC 57,094 345 Amvescap PLC 49,282 340 Safeway PLC 78,371 333 Dixons Group PLC 142,581 311 Hanson PLC 54,646 305 Granada PLC 202,433 304 Reuters Group PLC 104,397 303 British Land Co., PLC 36,475 289 Severn Trent PLC 24,979 282 Emap PLC 18,969 268 The Sage Group PLC 91,738 245 Royal & Sun Alliance Insurance Group PLC 106,734 244 Whitbread PLC 21,350 239 Johnson Matthey PLC 16,100 235 Bunzl PLC 33,215 233 Exel PLC 22,227 228 ================================================================================ 41 ================================================================================ MARKET TAX-MANAGED VALUE* INTERNATIONAL FUND SHARES (000) - -------------------------------------------------------------------------------- Friends Provident PLC 121,698 228 Rolls-Royce Group PLC 106,801 226 Rexam PLC 34,930 220 Tomkins PLC 57,140 214 * Mitchells & Butlers PLC 54,627 211 GKN PLC 56,992 209 Liberty International PLC 20,007 205 Provident Financial PLC 19,185 202 Daily Mail and General Trust 21,396 201 The Peninsular & Oriental Steam Navigation Co. 51,719 201 Kelda Group PLC 28,193 199 Slough Estates PLC 33,907 191 BPB PLC 37,249 189 Capita Group PLC 50,539 188 Cable and Wireless PLC 97,435 182 Signet Group PLC 120,660 180 Rank Group PLC 43,658 179 Hammerson PLC 21,558 176 Imperial Chemical Industries PLC 86,511 175 Electrocomponents PLC 32,657 175 Misys PLC 41,047 174 * International Power PLC 80,761 172 Canary Wharf Group PLC 40,766 172 Tate & Lyle PLC 30,439 172 Enterprise Inns PLC 12,412 166 Associated British Ports Holdings PLC 24,730 162 Brambles Industries PLC 56,129 152 Persimmon PLC 19,131 151 RMC Group PLC 19,734 150 Alliance Unichem PLC 17,585 144 FirstGroup PLC 31,833 142 * George Wimpey PLC 28,691 140 Taylor Woodrow PLC 41,355 137 EMI Group PLC 66,627 134 United Business Media PLC 26,403 132 Barratt Developments PLC 18,327 131 LogicaCMG PLC 55,055 130 Cattles PLC 24,169 129 * Celltech Group PLC 22,810 129 MFI Furniture Group PLC 43,698 121 Close Brothers Group PLC 11,081 120 Carlton Communications PLC 47,711 119 William Hill PLC 24,601 116 Cobham PLC 6,036 115 IMI PLC 22,957 114 BBA Group PLC 32,803 113 Schroders PLC 9,729 101 Aegis Group PLC 77,307 101 Amec PLC 23,276 100 Chubb PLC 78,191 97 The Berkeley Group PLC 7,707 95 Balfour Beatty PLC 29,324 93 * British Airways PLC 37,200 93 Serco Group PLC 34,984 92 * ARM Holdings PLC 83,466 92 Pilkington PLC 83,735 92 The Davis Service Group PLC 13,854 87 Kidde PLC 59,064 83 Invensys PLC 239,034 81 Stagecoach Group PLC 78,315 80 WPP Group PLC ADR 2,004 80 SSL International PLC 15,601 75 Securicor PLC 49,390 61 De La Rue Group PLC 15,481 60 FKI PLC 45,877 60 Novar PLC 28,502 58 Great Portland Estates PLC 14,749 56 ScottishPower PLC ADR 2,320 56 Aggreko PLC 21,868 44 Hays PLC 7,582 12 ------------ 116,189 ------------ - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $495,754) 427,701 - -------------------------------------------------------------------------------- FACE AMOUNT (000) - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENT (3.6%) - -------------------------------------------------------------------------------- Repurchase Agreement Collateralized by U.S. Government Obligations in a Pooled Cash Account 1.16%, 7/1/2003--Note E (Cost $15,166) $15,166 15,166 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (103.6%) (Cost $510,920) 442,867 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-3.6%) Other Assets--Note B 5,092 Security Lending Collateral Payable to Brokers--Note E (15,166) Other Liabilities (5,212) ------------ (15,286) ------------ - -------------------------------------------------------------------------------- NET ASSETS (100%) $427,581 ================================================================================ oSee Note A in Notes to Financial Statements. *Non-income-producing security. ADR--American Depositary Receipt. (Ptg. Ctf.)--Participating Certificates. 42 ================================================================================ AMOUNT (000) - -------------------------------------------------------------------------------- AT JUNE 30, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- Paid-in Capital $568,556 Undistributed Net Investment Income 6,312 Accumulated Net Realized Losses (79,314) Unrealized Appreciation (Depreciation) Investment Securities (68,053) Foreign Currencies 80 - -------------------------------------------------------------------------------- NET ASSETS $427,581 ================================================================================ Investor Shares--Net Assets Applicable to 51,752,889 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $364,371 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INVESTOR SHARES $7.04 ================================================================================ Institutional Shares--Net Assets Applicable to 8,972,883 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $63,210 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $7.04 ================================================================================ See Note C in Notes to Financial Statements for the tax-basis components of net assets. 43 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. (C)2003 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor. F872 082003 Item 2: Code(s) of Ethics for senior financial officers - Item not applicable to semi-annual report. Item 3: Audit Committee Financial Expert - Item not applicable to semi-annual report. Item 4: Principal Accountant Fees and Services - Item not applicable to semi-annual report. Item 5: Not Applicable. Item 6: Reserved. Item 7: Not applicable. Item 8: Reserved. Item 9: Controls and Procedures. (a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. (b) Internal Controls. There were no significant changes in Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10: Exhibits attached hereto. (Attach certifications as exhibits) Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VANGUARD TAX-MANAGED FUNDS BY: (signature) ---------------------------------------- (HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER Date: August 18, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. VANGUARD TAX-MANAGED FUNDS BY: (signature) ---------------------------------------- (HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER Date: : August 18, 2003 VANGUARD TAX-MANAGED FUNDS BY: (signature) ---------------------------------------- (HEIDI STAM) THOMAS J. HIGGINS* TREASURER Date: : August 18, 2003 *By Power of Attorney. See File Number 2-57689, filed on December 26, 2002. Incorporated by Reference. EX-99 3 cert302.txt TAXMANAGED CERTIFICATION 302 CERTIFICATIONS I, John J. Brennan, certify that: 1. I have reviewed this report on Form N-CSR of Vanguard Tax-Managed Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 18, 2003 ---------------------------- Chief Executive Officer CERTIFICATIONS I, Thomas J. Higgins, certify that: 1. I have reviewed this report on Form N-CSR of Vanguard Tax-Managed Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 18, 2003 ----------------------- Treasurer EX-99.1 4 cert906.txt TAX MANAGED CERTIFICATION 906 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Name of Issuer: VANGUARD TAX-MANAGED FUNDS In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Date: August 18, 2003 ________________________________ John J. Brennan Chief Executive Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Name of Issuer: VANGUARD TAX-MANAGED FUNDS In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Date: August 18, 2003 ________________________________ Thomas J. Higgins Treasurer -----END PRIVACY-ENHANCED MESSAGE-----