<PAGE> 1
VANGUARD MONEY
MARKET RESERVES
VANGUARD TREASURY MONEY MARKET PORTFOLIO
Semiannual Report
May 31, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
<PAGE> 2
[PHOTO]
THE VANGUARD GROUP: LINKING TRADITION AND INNOVATION
At Vanguard, we treasure our rich nautical heritage--even as we steer our
course toward the twenty-first century. Our Report cover reflects that blending
of tradition and innovation, of past, present, and future. The montage includes
a bronze medallion with a likeness of our namesake, HMS Vanguard (Lord Nelson's
flagship at The Battle of the Nile); a clock built circa 1816 in Scotland,
featuring a portrait of Nelson; and several views of our recently completed
campus, which is steeped in nautical imagery--from our buildings named after
Nelson's warships (Victory, Majestic, and Goliath are three shown), to our
artwork and ornamental compass rose.
CONTENTS
A Message To
Our Shareholders
1
The Markets
In Perspective
3
Report From
The Adviser
5
Performance
Summaries
7
Financial
Statements
9
Directors, Trustees,
And Officers
INSIDE BACK COVER
All comparative mutual fund data
are from Lipper Analytical Services, Inc.
or Morningstar unless otherwise noted
<PAGE> 3
[PHOTO]
FELLOW SHAREHOLDER,
Short-term interest rates rose and then subsided gently during the six months
ended May 31, the first half of fiscal 1997 for Vanguard Money Market Reserves
and Vanguard Treasury Money Market Portfolio. The May 31 annualized yields
provided by our Prime and Federal Portfolios were slightly higher at the end of
the half-year than when it began; the yield on the Treasury Money Market
Portfolio was essentially unchanged.
The table below presents the total return for each Portfolio (including
the Portfolio designed for institutional investors who are able to meet a $10
million investment requirement) and for the average competing money market fund
for the past six months. It also shows the premium that each Portfolio provided
over its average competitor, an edge we call the "Vanguard Advantage." On an
annual basis, it normally adds up to 0.5% to your yield, increasing an
after-expenses yield of 4.8% per year by more than 10% to 5.3%.
<TABLE>
<CAPTION>
- -------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED MAY 31, 1997
-------------------------------
AVERAGE
VANGUARD COMPETITIVE VANGUARD
PORTFOLIO PORTFOLIO FUND ADVANTAGE
- -------------------------------------------------------
<S> <C> <C> <C>
Prime-
Investor Shares +2.6% +2.4% +0.2%
Federal +2.6 +2.4 +0.2
Treasury Money
Market* +2.5 +2.3 +0.2
- -------------------------------------------------------
Prime-
Institutional Shares +2.7% +2.6% +0.1%
- -------------------------------------------------------
</TABLE>
*Prior to 12/2/96, known as the U.S. Treasury Portfolio.
THE PERIOD IN REVIEW
The yield on 90-day U.S. Treasury bills slipped from 5.13% on November 30 to
4.94% on May 31, the lowest level of the six-month period. Rates rose modestly
from November through March, reaching a high of 5.40% on March 21. This period
was characterized by speculation about what the Federal Reserve Board would do
to the federal funds rate (the rate at which banks borrow from one another) at
its March and May meetings. As it turned out, the board decided on an increase
of 0.25 percentage point in March, but left the rate alone in May. The Fed took
its action in March to keep inflation at bay and thus try to sustain the
national economic expansion that is now in its seventh year.
Short-term interest rates ended the period on a downward drift--assisted
by a shrinkage in the supply of new bills by the U.S. Treasury, which was
flush with cash from surprisingly strong tax receipts.
Our Portfolios' annualized seven-day yields on May 31 (see the table at
right) were generally higher than the market rates prevailing on that date,
because yields of money market funds adjust with a lag to the trend of market
rates.
<TABLE>
<CAPTION>
- -------------------------------------------------------
ANNUALIZED 7-DAY YIELD
-------------------------------
MAY 31, NOV. 30, MAY 31,
PORTFOLIO 1997 1996 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Prime-
Investor Shares 5.34% 5.17% 5.08%
Federal 5.27 5.12 5.04
Treasury Money
Market* 5.02 5.03 4.87
- -------------------------------------------------------
Prime-
Institutional Shares 5.51% 5.34% 5.25%
- -------------------------------------------------------
</TABLE>
*Prior to 12/2/96, known as the U.S. Treasury Portfolio.
As we noted at the outset of this message, all of our Portfolios maintained
their
1
<PAGE> 4
customary margin of superiority over their average competitor. The main reason
our returns and yields are higher is that our operating expenses are lower. The
Prime, Federal, and Treasury Portfolios operated in fiscal 1996 at expense
ratios (expenses as a percentage of average net assets) of 0.32%, or $3.20 per
$1,000 of assets--less than half the ratio of 0.76% of the average money fund.
The expense ratio of our Prime Portfolio-Institutional Shares in the past
fiscal year was 0.15%, compared with 0.45% for the average institutional money
market portfolio. These expense differentials represent a boost in net yield
that is there for the taking, at no additional risk to the investor.
We look forward to providing you with more detail on the Portfolios'
results in our Annual Report six months from now.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
June 16, 1997
2
<PAGE> 5
[PHOTO]
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MAY 31, 1997
U.S. EQUITY MARKETS
With the economy continuing to exhibit strong growth and modest levels of
inflation, investors in U.S. common stocks were rewarded with solid gains
during the past six months. The best performers were primarily
larger-capitalization issues, although the small-company indexes finally
exhibited some strength in May. For example, during the last six months, the
Standard & Poor's 500 Composite Stock Price Index gained 13.1%, fueled by a
6.1% boost in May. Reflecting the gains among smaller companies, the Russell
2000 Index posted an 8.4% increase for the six-month period, driven by an 11.1%
jump in May. It was particularly noteworthy that May's small-cap gains were led
by a 15.0% surge among small growth stocks, the worst segment of the U.S.
market during the past 12 months.
Stocks benefited from the continued strength of corporate earnings, which
rose some 15% during the past year. The strength in earnings and the
expectation that income will increase at an attractive pace helped stocks to
continue to produce solid gains in the fiscal period, despite the 0.6% increase
in the yield of the 10-year U.S. Treasury bond over the past six months. What's
more, earnings have shown not only good strength but remarkable consistency in
beating the consensus forecasts of Wall Street analysts.
The strongest gains in the S&P 500 Index during the past six months came
from the technology sector (up 17.5%) and the consumer-staples sector (up
20.4%). By contrast, the more economically sensitive and less predictable
earnings of stocks in the materials & processing sector caused these issues to
lag the broad market, although, on an absolute basis, their 8.2% return over
six months is quite good.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED MAY 31, 1997
---------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- ----------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 13.1% 29.4% 18.4%
Russell 2000 Index 8.4 7.0 15.8
MSCI-EAFE Index 4.2 7.9 10.9
- ----------------------------------------------------------------------
FIXED-INCOME
Lehman Aggregate Bond Index 0.9% 8.3% 7.2%
Lehman 10-Year Municipal
Bond Index 1.7 8.2 7.5
Salomon 90-Day U.S. Treasury Bills 2.6 5.3 4.5
- ----------------------------------------------------------------------
OTHER
Consumer Price Index 0.9% 2.2% 2.8%
- ----------------------------------------------------------------------
</TABLE>
*Average annual.
U.S. FIXED-INCOME MARKETS
The general rise in interest rates during the past six months reflects the
economy's underlying momentum. The 10-year U.S. Treasury's yield increased
from 6.04% at the end of November to 6.97% by the middle of April. Economic
reports released in the last several weeks of the period indicated a possible
slowing in economic growth, which reduced fears that inflation might accelerate
and helped interest rates fall to 6.66% by the end of May.
3
<PAGE> 6
Fueled by robust consumer spending, the U.S. economy expanded at a strong
3.8% annual rate in the fourth quarter of 1996 and a remarkable 5.8% rate in
the first three months of 1997. The nation's unemployment rate, at 4.8% in May,
was the lowest in a generation. Strong economic growth and tight labor markets
often lead bond investors to expect an acceleration in inflation because of
increased demand for goods and services. Reflecting this expectation, the
Federal Reserve raised its federal funds interest rate target by 0.25% on March
25 in a "preemptive" strike against mounting inflationary pressures. Observed
price increases have been subdued in recent months, however. Wholesale prices
have fallen in each of the first four months of 1997, and so far this year
consumer prices have risen at a slower pace than last year.
Higher interest rates dampened returns for bond investors. The Lehman
Brothers Aggregate Bond Index gained 0.94% over the past six months, reflecting
an income return of 3.43% that was partially offset by a capital decline of
- -2.49%. During this period, investors who favored shorter-maturity and
lower-quality issues achieved somewhat better returns. Mortgage-backed
securities continued to perform well because refinancing activity has been
reduced to historically low levels as interest rates have risen. Municipal
issues also tended to perform better than their taxable counterparts.
INTERNATIONAL EQUITY MARKETS
International investors fared reasonably well over the past six months. As
measured by the broad Morgan Stanley Capital International-Europe, Australasia,
Far East Index, foreign markets gained 4.2%.
The period saw two major developments. First, the Japanese stock market
moved sharply higher in the spring, gaining 11% in May alone. Better tone in
the economy, plus strong earnings reported by export-oriented companies
benefiting from the weak yen, gave Japan a long-awaited boost. For the six
months, however, the Japanese market remained in negative territory (-5.5%).
The competitive benefits of a weak currency relative to the dollar extended to
Germany, where the export-driven capital goods and chemical manufacturers
gained; overall, the German market rose 12.4% during the six-month period.
Arguably the biggest news came from the French elections at the end of
May. The new government is considered to be less friendly toward the austerity
measures needed to meet the eligibility requirements for the European Monetary
Union (EMU) in 1999. The French elections also had a broad impact across the
continent. Although most investors appear to agree that the elections won't
jeopardize the continent's move toward the EMU, the timing and intensity of the
fiscal measures are now less certain. Market reaction to the new French
government was mixed. France lost -2.1% in May (in francs), while Germany
gained 2.7% (in deutsche marks). For the six months, Europe gained 20.1% in
local currencies, which a strong dollar trimmed to 11.1% for U.S. investors.
4
<PAGE> 7
[PHOTO]
REPORT FROM THE ADVISER
During the first half of fiscal 1997, which ended on May 31, money market
interest rates in general rose by approximately 0.25 percentage point. Yields
on the Prime and Federal Portfolios of Vanguard Money Market Reserves and on
Vanguard Treasury Money Market Portfolio were clustered around 5.00% to 5.35%
on an annualized basis, about 2% above the rate of inflation. Such a real yield
(after inflation) should be considered relatively generous by historic
standards.
The increase in market rates during the half-year paralleled the increase
in the benchmark federal funds rate engineered on March 25, 1997, by the
Federal Reserve Board in its first tightening of monetary policy since early
1995. Remarks by Fed officials indicate that they feel the economic headwinds
(primarily job insecurity) that have kept inflationary pressures in check have
largely dissipated. Low unemployment and rising wages are fueling consumer
confidence and boosting the economy's growth rate above the 2.0%-2.5% speed
limit that has been viewed in the past as noninflationary. Ironically,
broad-based inflation measures are well behaved. However, monetary policy is a
blunt instrument that affects the economy with significant time lags and to
varying degrees, and U.S. central bankers are acting to protect hard-won
progress against inflation before serious damage is done.
Bucking the rising rate trend was the 3-month U.S. Treasury bill.
Unexpectedly high tax receipts allowed the Treasury to pay down more than $50
billion in T-bills during April and May. Because of the shortage of new
T-bills, the yield on 3-month bills dropped by 19 basis points (0.19 percentage
point) from 5.13% to 4.94% during the six-month period. While issuance will
pick up somewhat to accommodate seasonal needs later this year, the dramatic
improvement in the budget deficit outlook for 1997 and 1998 will keep the
supply below previously forecast levels for some time.
In managing the Portfolios, we are sticking with our conservative
approach. Consistent with our view that the present pace of economic expansion
is likely to foster more Fed tightening and higher interest rates, we have
reduced the average maturity of the Portfolios so that their yields will more
promptly reflect changes in market rates.
The credit quality of the Prime Portfolio is relatively high, even by the
strict regulatory standards of money market fund investing. During the period,
there was yet another reminder of the futility of compromising
creditworthiness to reach for yield. More than one of our competitors held the
defaulted commercial paper of Mercury Finance, a company specializing in
"sub-prime" loans. These investments qualified for money market funds by only
the thinnest of margins and were well outside the boundaries of our investment
policy. One fund that invested in this suspect paper had been a leader in the
performance charts (a status due almost entirely to its temporary waiver of
expenses, with minimal contribution from its aggressive investments), but by a
differential so small as to be meaningless when compared with the risks being
taken. While the sponsor of the fund in question
INVESTMENT PHILOSOPHY
The Portfolios reflect a belief that the highest level of current income
consistent with capital preservation and liquidity can be provided by holding
high-quality money market instruments issued by financial institutions,
non-financial corporations, the U.S. government, and federal agencies.
5
<PAGE> 8
"bailed out" investors from any losses, it should be emphasized that the
sponsor was under no legal requirement to do so.
Suffice it to say that our philosophy is that high quality and consistently
low expenses are the right route to long-term success in money market
investing. We look forward to reporting to you on the full fiscal year in six
months.
Ian A. MacKinnon, Senior Vice President
Robert F. Auwaerter, Principal
John Hollyer, Principal
Vanguard Fixed Income Group
June 10, 1997
6
<PAGE> 9
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. Note that
annual returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. government, and there is no
assurance that the fund will be able to maintain a stable net asset value of $1
per share.
<TABLE>
<CAPTION>
PRIME PORTFOLIO-INVESTOR SHARES
TOTAL INVESTMENT RETURNS: NOVEMBER 30, 1977-MAY 31, 1997
- --------------------------------------------------------
PRIME PORTFOLIO-INVESTOR SHARES AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1978 0.0% 6.7% 6.7% 6.9%
1979 0.0 10.8 10.8 10.5
1980 0.0 12.8 12.8 12.5
1981 0.0 17.6 17.6 17.5
1982 0.0 13.1 13.1 12.8
1983 0.0 8.9 8.9 8.6
1984 0.0 10.6 10.6 10.1
1985 0.0 8.2 8.2 7.9
1986 0.0 6.8 6.8 6.4
1987 0.0 6.5 6.5 6.0
1988 0.0 7.5 7.5 6.9
1989 0.0 9.4 9.4 8.8
1990 0.0 8.3 8.3 7.8
1991 0.0 6.4 6.4 5.9
1992 0.0 3.9 3.9 3.4
1993 0.0 3.0 3.0 2.6
1994 0.0 3.9 3.9 3.5
1995 0.0 5.8 5.8 5.4
1996 0.0 5.3 5.3 4.8
1997** 0.0 2.6 2.6 2.4
- --------------------------------------------------------
</TABLE>
*Average Money Market Fund.
**Six months ended May 31, 1997.
See Financial Highlights table on page 22 for dividend information for the past
five years.
<TABLE>
<CAPTION>
PRIME PORTFOLIO-INSTITUTIONAL SHARES
TOTAL INVESTMENT RETURNS: OCTOBER 3, 1989-MAY 31, 1997
- --------------------------------------------------------
PRIME PORTFOLIO-INSTITUTIONAL SHARES AVERAGE
FUND**
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN* RETURN
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1989 0.0% 1.4% 1.4% 1.4%
1990 0.0 8.5 8.5 8.3
1991 0.0 6.5 6.5 6.2
1992 0.0 4.0 4.0 3.8
1993 0.0 3.2 3.2 2.9
1994 0.0 4.1 4.1 3.8
1995 0.0 6.0 6.0 5.7
1996 0.0 5.5 5.5 5.2
1997+ 0.0 2.7 2.7 2.6
- --------------------------------------------------------
</TABLE>
*Prior to 10/28/95, total returns are for Vanguard Institutional Money Market
Portfolio.
**Average Institutional Money Market Fund.
+Six months ended May 31, 1997.
See Financial Highlights table on page 22 for dividend information.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1997*
- -------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Portfolio-Investor Shares 6/4/75 5.26% 4.43% 0.00% 5.97% 5.97%
Prime Portfolio-Institutional Shares** 10/3/89 5.44 4.60 0.00+ 5.47+ 5.47+
- -------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Prior to 10/28/95, total returns are for Vanguard Institutional Money Market
Portfolio.
+Since inception.
7
<PAGE> 10
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. Note that
annual returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. government, and there is no
assurance that the fund will be able to maintain a stable net asset value of $1
per share.
<TABLE>
<CAPTION>
FEDERAL PORTFOLIO
TOTAL INVESTMENT RETURNS: JULY 13, 1981-MAY 31, 1997
- ----------------------------------------------------
FEDERAL PORTFOLIO AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------
<S> <C> <C> <C> <C>
1981 0.0% 5.9% 5.9% 5.7%
1982 0.0 11.9 11.9 11.7
1983 0.0 8.5 8.5 8.3
1984 0.0 10.2 10.2 9.8
1985 0.0 8.0 8.0 7.7
1986 0.0 6.6 6.6 6.3
1987 0.0 6.3 6.3 5.9
1988 0.0 7.2 7.2 6.7
1989 0.0 9.2 9.2 8.6
1990 0.0 8.1 8.1 7.7
1991 0.0 6.2 6.2 5.7
1992 0.0 3.8 3.8 3.4
1993 0.0 3.0 3.0 2.6
1994 0.0 3.8 3.8 3.4
1995 0.0 5.8 5.8 5.3
1996 0.0 5.3 5.3 4.8
1997** 0.0 2.6 2.6 2.4
- ----------------------------------------------------
</TABLE>
*Average U.S. Government Money Market Fund.
**Six months ended May 31, 1997.
See Financial Highlights table on page 23 for dividend information for the past
five years.
<TABLE>
<CAPTION>
TREASURY MONEY MARKET PORTFOLIO*
TOTAL INVESTMENT RETURNS: MARCH 9, 1983-MAY 31, 1997
- ----------------------------------------------------
TREASURY MONEY MARKET AVERAGE
PORTFOLIO FUND**
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------
<S> <C> <C> <C> <C>
1983 0.0% 6.1% 6.1% 6.2%
1984 0.0 9.9 9.9 10.1
1985 0.0 7.5 7.5 7.9
1986 0.0 6.2 6.2 6.4
1987 0.0 6.0 6.0 6.0
1988 0.0 7.0 7.0 6.9
1989 0.0 8.9 8.9 8.7
1990 0.0 8.0 8.0 7.7
1991 0.0 5.9 5.9 5.8
1992 0.0 3.7 3.7 3.5
1993 0.0 2.9 2.9 2.6
1994 0.0 3.6 3.6 3.4
1995 0.0 5.5 5.5 5.2
1996 0.0 5.1 5.1 4.8
1997+ 0.0 2.5 2.5 2.3
- ----------------------------------------------------
</TABLE>
*Prior to 12/2/96, known as the U.S. Treasury Portfolio.
**Average Money Market Fund through 3/31/89; Average U.S. Treasury Money Market
Fund thereafter.
+Six months ended May 31, 1997.
See Financial Highlights table on page 23 for dividend information for the past
five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1997*
- -----------------------------------------------------------------------------------------------
10 YEARS
INCEPTION ---------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal Portfolio 7/13/81 5.21% 4.38% 0.00% 5.83% 5.83%
Treasury Money Market Portfolio** 3/09/83 5.05 4.20 0.00 5.64 5.64
- -----------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Prior to 12/2/96, known as the U.S. Treasury Portfolio.
8
<PAGE> 11
[PHOTO]
FINANCIAL STATEMENTS
MAY 31, 1997 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio's holdings on the
last day of the reporting period, including each security's maturity date,
coupon rate or yield to maturity at the time of purchase, and statement-date
market value. Securities are grouped and subtotaled by type of instrument (U.S.
government obligations, commercial paper, certificates of deposit, etc.). Other
assets are added to, and liabilities are subtracted from, the value of Total
Investments to calculate the Portfolio's Net Assets. Finally, Net Assets are
divided by the outstanding shares of the Portfolio to arrive at its share
price, or Net Asset Value (NAV) Per Share. Each Portfolio's objective is to
maintain a constant NAV of $1.00 per share.
At the end of the Statement of Net Assets of each Portfolio, you will find
a table displaying the composition of the Portfolio's net assets on both a
dollar and per-share basis. Virtually the entire amount of net assets consists
of Paid in Capital (money invested by shareholders). Undistributed Net
Investment Income is usually zero because the Portfolio distributes its net
income to shareholders as a dividend each day, and Accumulated Realized Gains
(Losses) are very small because the Portfolio seldom realizes any significant
gains or losses on sales of securities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (28.4%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank 5.343% 6/17/97 (1) $200,000 $ 199,868
Federal Home Loan Bank 5.362% 6/12/97 (1) 215,000 214,895
Federal Home Loan Bank 5.388% 6/19/97 (1) 145,000 144,916
Federal Home Loan Bank 5.50% 1/2/98 149,000 148,820
Federal Home Loan Bank 5.507% 6/19/97 (1) 250,000 249,955
Federal Home Loan Bank 5.517% 6/23/97 (1) 300,000 299,927
Federal Home Loan Bank 5.517% 6/24/97 (1) 100,000 99,973
Federal Home Loan Bank 5.522% 6/26/97 (1) 200,000 199,905
Federal Home Loan Bank 5.527% 6/19/97 (1) 300,000 299,886
Federal Home Loan Bank 5.538% 6/26/97 (1) 50,000 49,996
Federal Home Loan Bank 5.84% 6/27/97 37,000 36,997
Federal Home Loan Bank 5.87% 6/27/97 100,000 99,991
Federal Home Loan Mortgage Corp. 5.488% 6/15/97 (1) 250,000 249,947
Federal Home Loan Mortgage Corp. 5.728% 6/6/97 23,290 23,289
Federal National Mortgage Assn. 5.353% 6/5/97 200,000 199,883
Federal National Mortgage Assn. 5.383% 6/9/97 (1) 350,000 349,921
Federal National Mortgage Assn. 5.48% 1/2/98 90,000 89,881
Federal National Mortgage Assn. 5.507% 6/5/97 (1) 420,000 419,839
Federal National Mortgage Assn. 5.507% 6/24/97 (1) 85,000 84,974
Federal National Mortgage Assn. 5.518% 6/12/97 (1) 90,000 89,980
Federal National Mortgage Assn. 5.528% 6/13/97 (1) 750,000 749,694
Federal National Mortgage Assn. 5.542% 6/15/97 (1) 445,000 444,919
Federal National Mortgage Assn. 5.616% 6/24/97 72,500 72,243
Federal National Mortgage Assn. 5.618% 6/26/97 78,870 78,567
Federal National Mortgage Assn. 5.63% 1/23/98 300,000 299,745
Federal National Mortgage Assn. 5.632% 8/6/97 (1) 200,000 199,972
Federal National Mortgage Assn. 5.632% 8/14/97 (1) 650,000 649,770
Federal National Mortgage Assn. 5.632% 8/25/97 (1) 465,000 464,825
Federal National Mortgage Assn. 5.636% 8/19/97 (1) 330,000 329,880
Federal National Mortgage Assn. 5.64% 8/7/97 (1) 200,000 199,972
Federal National Mortgage Assn. 5.664% 7/16/97 (1) 150,000 149,957
Federal National Mortgage Assn. 5.755% 10/3/97 50,000 49,037
Private Export Funding Corp. 5.422% 6/9/97 24,000 23,971
Private Export Funding Corp. 5.704% 7/28/97 50,000 49,555
- --------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $7,314,950) 7,314,950
- --------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (36.4%)
- --------------------------------------------------------------------------------------------------------------
BANK HOLDING COMPANIES (1.5%)
<S> <C> <C> <C> <C>
Banc One Corp. 5.532% 6/24/97 $ 30,000 $ 29,894
Banc One Corp. 5.548% 6/30/97 50,000 49,778
Banc One Corp. 5.549% 6/25/97 50,000 49,816
Banc One Corp. 5.563% 7/8/97 45,000 44,744
Bank of New York Co. Inc. 5.559% 6/9/97 40,000 39,951
Bank of New York Co. Inc. 5.576% 6/12/97 25,000 24,958
J.P. Morgan & Co. 5.527% 6/24/97 50,000 49,824
Norwest Corp. 5.542% 6/16/97 93,000 92,786
-------------
381,751
-------------
FINANCE-AUTO (3.3%)
Daimler-Benz NA Corp. 5.553% 6/17/97 25,000 24,939
Ford Motor Credit Corp. 5.537% 6/3/97 150,000 149,954
Ford Motor Credit Corp. 5.57% 7/7/97 65,000 64,641
Ford Motor Credit Corp. 5.623% 6/23/97 100,000 99,660
Ford Motor Credit Corp. 5.65% 7/10/97 135,000 134,182
New Center Asset Trust 5.555% 6/20/97 100,000 99,708
New Center Asset Trust 5.622% 6/3/97 200,000 199,938
Toyota Motor Credit Corp. 5.50% 6/17/97 12,500 12,470
Toyota Motor Credit Corp. 5.518% 6/5/97 49,000 48,970
-------------
834,462
-------------
FINANCE-OTHER (13.9%)
A.I. Credit Corp. 5.44% 6/24/97 10,000 9,966
A.I. Credit Corp. 5.492% 7/10/97 20,000 19,883
A.I. Credit Corp. 5.602% 6/23/97 25,000 24,916
A.I. Credit Corp. 5.658% 7/7/97 10,000 9,944
American Express Credit Corp. 5.527% 6/24/97 100,000 99,649
American Express Credit Corp. 5.535% 6/26/97 125,000 124,522
American Express Credit Corp. 5.555% 6/20/97 75,000 74,781
Asset Securitization Cooperative Corp. 5.548% 6/26/97 35,000 34,866
Asset Securitization Cooperative Corp. 5.574% 6/19/97 100,000 99,723
Asset Securitization Cooperative Corp. 5.599% 6/9/97 140,000 139,827
Asset Securitization Cooperative Corp. 5.736% 8/4/97 38,000 37,618
Associates Corp. of North America 5.59% 7/8/97 80,000 79,544
Associates Corp. of North America 5.591% 7/9/97 50,000 49,707
Associates Corp. of North America 5.664% 6/23/97 70,000 69,760
Associates Corp. of North America 5.664% 6/24/97 50,000 49,821
Associates Corp. of North America 5.675% 7/1/97 50,000 49,766
CIT Group Holdings Inc. 5.545% 6/27/97 100,000 99,601
CIT Group Holdings Inc. 5.555% 6/20/97 150,000 149,562
CIT Group Holdings Inc. 5.602% 7/22/97 100,000 99,214
Cargill Financial Services Corp. 5.516% 6/3/97 20,000 19,994
Cargill Financial Services Corp. 5.521% 6/16/97 25,000 24,943
Cargill Financial Services Corp. 5.537% 6/11/97 25,000 24,962
Ciesco LP 5.521% 6/17/97 23,000 22,944
Ciesco LP 5.522% 6/18/97 25,000 24,935
Ciesco LP 5.565% 7/2/97 25,000 24,881
Ciesco LP 5.57% 7/7/97 50,000 49,724
Commercial Credit Co. 5.535% 6/26/97 30,000 29,885
Commercial Credit Co. 5.565% 6/13/97 50,000 49,908
Commercial Credit Co. 5.601% 6/9/97 35,000 34,957
Commercial Credit Co. 5.602% 6/10/97 35,000 34,951
Commercial Credit Co. 5.675% 7/1/97 40,000 39,813
John Deere Capital Corp. 5.612% 6/23/97 50,000 49,830
Delaware Funding 5.553% 6/17/97 93,622 93,392
Delaware Funding 5.554% 6/26/97 53,249 53,045
Delaware Funding 5.596% 7/16/97 10,949 10,873
Delaware Funding 5.601% 6/9/97 50,422 50,360
Delaware Funding 5.612% 7/23/97 5,049 5,008
Delaware Funding 5.621% 7/25/97 24,061 23,860
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware Funding 5.623% 7/28/97 $ 15,147 $ 15,013
Delaware Funding 5.624% 7/29/97 65,581 64,992
Eiger Capital Corp. 5.544% 6/19/97 44,169 44,047
Eiger Capital Corp. 5.552% 6/23/97 16,000 15,946
Eiger Capital Corp. 5.555% 6/20/97 25,000 24,927
Eiger Capital Corp. 5.555% 6/27/97 20,000 19,920
Eiger Capital Corp. 5.573% 6/2/97 18,000 17,997
Eiger Capital Corp. 5.574% 6/3/97 48,800 48,785
Eiger Capital Corp. 5.575% 6/5/97 25,000 24,985
Eiger Capital Corp. 5.579% 6/9/97 13,014 12,998
Eiger Capital Corp. 5.58% 6/16/97 26,000 25,940
Enterprise Funding Corp. 5.56% 6/2/97 33,390 33,385
Enterprise Funding Corp. 5.56% 6/16/97 12,045 12,017
Enterprise Funding Corp. 5.568% 6/30/97 10,000 9,955
Enterprise Funding Corp. 5.569% 7/1/97 38,000 37,825
Enterprise Funding Corp. 5.61% 7/7/97 129,906 129,182
Enterprise Funding Corp. 5.62% 6/4/97 24,249 24,238
Enterprise Funding Corp. 5.622% 6/9/97 41,673 41,621
Enterprise Funding Corp. 5.635% 6/13/97 10,000 9,981
First Chicago Financial Corp. 5.545% 6/20/97 25,000 24,927
First Chicago Financial Corp. 5.547% 6/23/97 10,000 9,966
First Chicago Financial Corp. 5.565% 7/7/97 18,000 17,900
General Electric Capital Corp. 5.413% 6/10/97 100,000 99,867
General Electric Capital Corp. 5.425% 6/6/97 50,000 49,963
General Electric Capital Corp. 5.435% 6/5/97 100,000 99,940
General Electric Capital Corp. 5.48% 7/7/97 200,000 198,934
General Electric Capital Corp. 5.531% 6/11/97 7,762 7,750
General Electric Capital Corp. 5.671% 7/9/97 100,000 99,410
International Business Machines Credit 5.545% 6/20/97 100,000 99,709
International Business Machines Credit 5.598% 6/9/97 23,219 23,190
International Business Machines Credit 5.603% 6/10/97 50,000 49,931
International Business Machines Credit 5.613% 6/24/97 50,000 49,822
Matterhorn Capital 5.558% 6/23/97 33,000 32,888
Norwest Financial Corp. 5.557% 6/23/97 50,000 49,831
Panasonic Finance 5.543% 6/24/97 30,000 29,894
Panasonic Finance 5.618% 6/3/97 18,000 17,994
Pitney Bowes Credit 5.775% 9/15/97 12,450 12,243
-------------
3,578,848
-------------
INDUSTRIAL (4.5%)
Bayer Corp. 5.66% 7/8/97 20,000 19,885
Campbell Soup Co. 5.511% 6/12/97 24,800 24,758
Chevron Transport Co. 5.691% 7/9/97 25,000 24,852
Chevron U.K. Investment PLC 5.425% 6/5/97 8,000 7,995
The Coca-Cola Co. 5.527% 6/24/97 25,000 24,912
The Coca-Cola Co. 5.527% 6/25/97 25,000 24,908
E.I. du Pont de Nemours & Co. 5.387% 6/3/97 50,000 49,985
E.I. du Pont de Nemours & Co. 5.388% 6/4/97 50,000 49,978
E.I. du Pont de Nemours & Co. 5.50% 6/17/97 13,520 13,487
E.I. du Pont de Nemours & Co. 5.539% 7/9/97 50,000 49,710
E.I. du Pont de Nemours & Co. 5.54% 7/10/97 25,000 24,851
E.I. du Pont de Nemours & Co. 5.602% 6/2/97 32,135 32,130
Exxon Imperial U.S. Inc. 5.507% 6/5/97 7,481 7,476
First Data Corp. 5.586% 7/8/97 10,146 10,088
First Data Corp. 5.596% 6/3/97 45,000 44,986
General Electric Co. 5.516% 6/24/97 100,000 99,649
General Electric Co. 5.555% 6/20/97 100,000 99,708
Halifax Building Society 5.527% 6/23/97 140,000 139,529
H.J. Heinz Co. 5.524% 6/26/97 35,000 34,866
H.J. Heinz Co. 5.57% 7/7/97 17,000 16,906
International Business Machines Corp. 5.553% 6/19/97 29,100 29,020
Eli Lilly & Co. 5.494% 6/13/97 60,000 59,893
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mobil Australia Finance 5.429% 6/17/97 $10,940 $ 10,914
PepsiCo Inc. 5.542% 6/16/97 93,000 92,786
Pfizer Inc. 5.523% 6/20/97 26,000 25,925
Pfizer Inc. 5.527% 6/23/97 60,000 59,798
Pfizer Inc. 5.539% 6/13/97 16,693 16,662
Reed Eslevier 5.679% 7/8/97 25,000 24,856
Vermont American Corp. 5.525% 6/4/97 25,000 24,989
-------------
1,145,502
-------------
INSURANCE (1.4%)
AIG Funding Inc. 5.506% 6/24/97 24,000 23,916
AIG Funding Inc. 5.524% 6/27/97 50,000 49,801
AIG Funding Inc. 5.542% 6/2/97 10,000 9,998
John Hancock Capital Corp. 5.681% 6/27/97 10,000 9,960
MetLife Funding Corp. 5.425% 6/5/97 20,000 19,988
MetLife Funding Corp. 5.523% 6/20/97 45,000 44,869
MetLife Funding Corp. 5.527% 6/23/97 50,248 50,079
MetLife Funding Corp. 5.538% 6/4/97 15,304 15,297
MetLife Funding Corp. 5.542% 6/16/97 12,932 12,902
MetLife Funding Corp. 5.592% 6/9/97 28,884 28,848
Pacific Mutual Life 5.512% 6/6/97 16,000 15,988
SAFECO Credit Co. Inc. 5.673% 7/15/97 27,000 26,816
SAFECO Credit Co. Inc. 5.678% 7/7/97 8,000 7,955
USAA Capital Corp. 5.59% 6/9/97 15,600 15,581
USAA Capital Corp. 5.602% 6/4/97 15,000 14,993
USAA Capital Corp. 5.619% 6/10/97 10,000 9,986
USAA Capital Corp. 5.685% 7/7/97 14,000 13,922
-------------
370,899
-------------
FOREIGN BANKS (7.4%)
ABN-AMRO North America Finance 5.424% 6/5/97 50,000 49,970
ABN-AMRO North America Finance 5.519% 7/8/97 50,000 49,724
Abbey National North America 5.429% 6/11/97 25,000 24,963
Abbey National North America 5.445% 8/12/97 50,000 49,470
Abbey National North America 5.68% 7/3/97 100,000 99,502
Abbey National North America 5.69% 7/9/97 50,000 49,704
Abbey National North America 5.732% 8/1/97 25,000 24,761
Abbey National North America 5.869% 10/10/97 50,000 48,963
Bank of Montreal 5.564% 6/27/97 24,600 24,502
Barclays US Funding 5.435% 6/5/97 35,000 34,979
Cheltenham & Gloucester PLC 5.425% 6/12/97 15,000 14,975
Commonwealth Bank of Australia 5.424% 6/12/97 20,000 19,967
Commonwealth Bank of Australia 5.426% 6/16/97 100,000 99,777
Commonwealth Bank of Australia 5.436% 6/12/97 52,500 52,414
Commonwealth Bank of Australia 5.437% 6/16/97 20,000 19,955
Commonwealth Bank of Australia 5.447% 6/17/97 40,000 39,905
Halifax Building Society 5.545% 6/12/97 60,000 59,899
Lloyds Bank 5.519% 6/27/97 50,000 49,802
Lloyds Bank 5.858% 10/9/97 100,000 97,945
National Australia Funding 5.515% 6/6/97 25,000 24,981
National Australia Funding 5.517% 7/11/97 50,000 49,687
National Australia Funding 5.526% 6/5/97 140,000 139,914
National Australia Funding 5.674% 7/1/97 50,000 49,767
National Australia Funding 5.681% 7/3/97 45,000 44,776
Societe Generale NA Inc. 5.527% 6/24/97 120,000 119,578
Societe Generale NA Inc. 5.689% 7/1/97 80,000 79,626
UBS Finance (Delaware), Inc. 5.564% 6/20/97 495,000 493,553
-------------
1,913,059
-------------
CANADIAN GOVERNMENT-NATIONAL AND PROVINCIAL (0.4%)
Province of British Columbia 5.442% 8/7/97 30,853 30,549
Province of British Columbia 5.455% 8/11/97 39,500 39,086
Ontario Hydro 5.704% 7/3/97 25,000 24,875
-------------
94,510
-------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
OTHER FOREIGN GOVERNMENT (3.6%)
<S> <C> <C> <C> <C>
Caisse d'Amortissement de la Dette Sociale 5.445% 8/12/97 $ 50,000 $ 49,470
Caisse d'Amortissement de la Dette Sociale 5.498% 7/7/97 50,000 49,733
Caisse d'Amortissement de la Dette Sociale 5.507% 7/30/97 47,000 46,587
Caisse d'Amortissement de la Dette Sociale 5.516% 6/23/97 50,000 49,832
Caisse d'Amortissement de la Dette Sociale 5.573% 10/3/97 150,000 147,224
Caisse d'Amortissement de la Dette Sociale 6.02% 12/29/97 45,000 43,481
Caisse des Depots et Consignations 5.433% 6/6/97 30,000 29,978
Caisse des Depots et Consignations 5.51% 6/4/97 100,000 99,954
Caisse des Depots et Consignations 5.535% 6/27/97 100,000 99,602
Caisse des Depots et Consignations 5.634% 7/7/97 50,000 49,721
Electricite de France 5.503% 6/20/97 15,418 15,373
KFW International Finance Inc. 5.517% 6/12/97 94,000 93,842
KFW International Finance Inc. 5.544% 6/19/97 36,000 35,901
KFW International Finance Inc. 5.891% 10/30/97 10,000 9,760
Oesterreichische Kontroll Bank 5.473% 7/31/97 115,250 114,226
-------------
934,684
-------------
FOREIGN INDUSTRIAL (0.3%)
Glaxo Wellcome 5.424% 6/13/97 23,000 22,959
Glaxo Wellcome 5.505% 6/4/97 45,000 44,979
Glaxo Wellcome 5.669% 7/2/97 24,484 24,366
-------------
92,304
-------------
FOREIGN UTILITY (0.1%)
France Telecom 5.543% 6/18/97 15,000 14,961
France Telecom 5.679% 7/1/97 10,000 9,953
-------------
24,914
-------------
- --------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $9,370,933) 9,370,933
- --------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (22.2%)
- --------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT-U.S. BANKS (2.6%)
Chase Manhattan Bank 5.53% 6/27/97 293,000 293,000
CoreStates Bank 5.54% 6/20/97 50,000 50,000
Morgan Guaranty Trust Co. 5.41% 6/11/97 50,000 50,000
Morgan Guaranty Trust Co. 5.71% 1/6/98 100,000 99,977
Morgan Guaranty Trust Co. 5.91% 9/18/97 125,000 124,961
Morgan Guaranty Trust Co. 5.93% 6/6/97 50,000 50,000
-------------
667,938
-------------
YANKEE CERTIFICATES OF DEPOSIT-CANADIAN
BRANCHES (0.2%)
ABN-AMRO Bank 5.712% 7/2/97 47,000 46,772
National Westminster Bank 5.847% 9/30/97 16,000 15,695
-------------
62,467
-------------
YANKEE CERTIFICATES OF DEPOSIT-U.S.
BRANCHES (19.4%)
ABN-AMRO Bank 5.42% 6/9/97 50,000 50,000
ABN-AMRO Bank 5.55% 6/27/97 100,000 100,001
ABN-AMRO Bank 5.70% 7/7/97 50,000 50,000
ABN-AMRO Bank 6.12% 7/14/97 9,000 9,004
Bank Austria AG 5.43% 6/10/97 50,000 50,000
Bank of Montreal 5.54% 6/20/97 50,000 50,000
Bank of Montreal 5.69% 7/8/97 150,000 150,000
Bank of Montreal 5.75% 7/28/97 90,000 90,000
Bank of Nova Scotia 5.60% 6/10/97 50,000 50,000
Barclays Bank PLC 5.44% 6/13/97 100,000 100,000
Barclays Bank PLC 5.55% 6/23/97 165,000 165,000
Barclays Bank PLC 5.56% 6/6/97 50,000 50,000
Bayerische Landesbank 5.45% 6/16/97 100,000 100,000
Bayerische Landesbank 5.61% 7/22/97 100,000 100,003
Bayerische Landesbank 5.95% 9/26/97 75,000 75,060
Bayerische Vereinsbank 5.45% 7/2/97 50,000 50,000
Bayerische Vereinsbank 5.53% 6/23/97 150,000 150,000
Caisse Nationale de Credit Agricole 5.42% 6/13/97 100,000 100,000
Caisse Nationale de Credit Agricole 5.54% 7/29/97 100,000 100,000
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Caisse Nationale de Credit Agricole 5.60% 6/16/97 $100,000 $ 100,000
Canadian Imperial Bank of Commerce 5.55% 6/23/97 50,000 50,000
Canadian Imperial Bank of Commerce 5.58% 7/2/97 150,000 150,000
Canadian Imperial Bank of Commerce 5.66% 7/9/97 100,000 100,001
Deutsche Bank 5.42% 6/6/97 60,000 60,000
Deutsche Bank 5.42% 6/12/97 100,000 100,000
Deutsche Bank 5.52% 7/21/97 150,000 150,000
Deutsche Bank 5.60% 7/28/97 200,000 200,000
Deutsche Bank 5.75% 1/9/98 50,000 49,991
Deutsche Bank 6.18% 4/2/98 50,000 49,984
Dresdner Bank 5.53% 6/5/97 290,000 290,000
Dresdner Bank 5.53% 6/10/97 200,000 200,000
Landesbank Hessen-Thueringen 5.96% 3/20/98 45,000 44,976
Landesbank Hessen-Thueringen 6.01% 7/18/97 8,000 8,003
Landesbank Hessen-Thueringen 6.03% 6/13/97 50,000 50,000
Landesbank Hessen-Thueringen 6.05% 6/13/97 50,000 50,000
Landesbank Hessen-Thueringen 6.07% 6/11/97 50,000 50,000
Landesbank Hessen-Thueringen 6.09% 9/11/97 20,000 20,004
Landesbank Hessen-Thueringen 6.13% 4/1/98 150,000 149,904
Landesbank Hessen-Thueringen 6.13% 4/7/98 100,000 99,903
National Westminster Bank 5.50% 7/29/97 50,000 50,000
National Westminster Bank 5.85% 10/3/97 200,000 199,999
Rabobank Nederlanden 5.42% 6/5/97 50,000 50,000
Rabobank Nederlanden 5.43% 6/6/97 40,000 40,000
Rabobank Nederlanden 5.43% 6/10/97 50,000 50,000
Rabobank Nederlanden 5.50% 8/4/97 50,000 50,002
Rabobank Nederlanden 5.81% 9/29/97 50,000 50,000
Rabobank Nederlanden 5.81% 10/1/97 30,000 29,995
Rabobank Nederlanden 5.88% 11/3/97 50,000 50,002
Rabobank Nederlanden 5.97% 3/20/98 20,000 19,961
Rabobank Nederlanden 5.98% 3/20/98 10,000 9,981
Rabobank Nederlanden 6.20% 4/9/98 107,500 107,408
Swiss Bank 5.46% 8/11/97 100,000 100,000
Swiss Bank 5.49% 7/10/97 30,000 29,993
Swiss Bank 5.55% 6/23/97 250,000 250,002
Swiss Bank 5.96% 6/3/97 200,000 200,000
Westdeutsche Landesbank 5.58% 6/9/97 80,000 80,000
Westpac Banking Corp. 5.45% 6/13/97 50,000 50,000
-------------
4,979,177
-------------
- --------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $5,709,582) 5,709,582
- --------------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (7.9%)
- --------------------------------------------------------------------------------------------------------------
ABN-AMRO Bank 5.54% 6/27/97 70,000 70,001
ABN-AMRO Bank 5.88% 10/9/97 30,000 29,996
Abbey National 5.54% 7/23/97 150,000 150,002
Bank of Nova Scotia 5.55% 6/23/97 100,000 100,000
Bank of Nova Scotia 5.62% 6/11/97 125,000 125,000
Barclays Bank 5.54% 7/14/97 50,000 50,001
Bayerische Landesbank 5.41% 6/4/97 25,000 25,000
Bayerische Landesbank 5.49% 7/7/97 70,000 70,001
Bayerische Landesbank 5.50% 6/24/97 46,000 46,000
Bayerische Landesbank 5.52% 7/7/97 50,000 50,000
Bayerische Landesbank 5.53% 8/4/97 30,000 30,001
Bayerische Landesbank 5.63% 6/4/97 90,000 90,000
Bayerische Landesbank 5.69% 7/3/97 25,000 25,000
Bayerische Vereinsbank 5.48% 8/11/97 47,000 47,003
Bayerische Vereinsbank 5.54% 7/9/97 50,000 50,001
Bayerische Vereinsbank 5.64% 6/4/97 200,000 200,000
Caisse National de Credit Agricole 5.42% 6/4/97 90,000 90,000
Caisse National de Credit Agricole 5.52% 7/24/97 50,000 50,005
Landesbank Hessen-Thueringen 5.48% 7/7/97 25,000 24,999
Morgan Guaranty Trust Co. 5.55% 7/31/97 48,000 48,002
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rabobank Nederlanden 5.48% 7/7/97 $ 25,000 $ 25,000
Toronto Dominion 5.42% 6/6/97 50,000 50,000
Toronto Dominion 5.73% 7/16/97 145,000 145,000
Union Bank of Switzerland 5.55% 6/6/97 190,000 190,000
Westdeutsche Landesbank 5.69% 7/11/97 200,000 200,000
Westdeutsche Landesbank 6.075% 6/11/97 50,000 50,000
- --------------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT
(COST $2,031,012) 2,031,012
- --------------------------------------------------------------------------------------------------------------
BANKERS ACCEPTANCE (0.1%)
- --------------------------------------------------------------------------------------------------------------
U.S. BANK
SunTrust Bank
(COST $26,077) 5.679% 6/30/97 26,195 26,077
- --------------------------------------------------------------------------------------------------------------
OTHER NOTES (4.6%)
- --------------------------------------------------------------------------------------------------------------
Amtrak Trust 5.70% 6/2/97 (1) 76,786 76,786
Bank of America 5.45% 6/16/97 100,000 100,000
Bank of America 5.54% 6/2/97 40,000 40,000
Bank of America 5.70% 8/1/97 50,000 49,998
Bank of America, Illinois 5.41% 6/10/97 50,000 50,000
CoreStates Bank 5.53% 6/24/97 50,000 50,000
CoreStates Bank 5.55% 6/24/97 50,000 50,000
Morgan Guaranty Trust Co. 5.95% 6/6/97 100,000 100,002
Morgan Guaranty Trust Co. 6.10% 4/2/98 49,000 48,949
NationsBank 5.52% 6/2/97 250,000 250,000
SMM 1996-U 5.738% 6/20/97 (1) 30,000 30,000
Wachovia Bank 5.547% 6/20/97 (1) 200,000 199,961
Wachovia Bank 5.55% 6/23/97 100,000 100,000
Wachovia Bank 5.55% 6/24/97 50,000 50,000
- --------------------------------------------------------------------------------------------------------------
TOTAL OTHER NOTES
(COST $1,195,696) 1,195,696
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%)
(COST $25,648,250) 25,648,250
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
- --------------------------------------------------------------------------------------------------------------
Other Assets--Note B 263,917
Liabilities (171,164)
-------------
92,753
- --------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $25,741,003
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
(1)Floating Rate Note.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
AT MAY 31, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------
AMOUNT
(000)
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $25,740,979
Undistributed Net Investment Income --
Accumulated Net Realized Gains 24
- --------------------------------------------------------------------------------------------------------------
NET ASSETS $25,741,003
==============================================================================================================
Investor Shares--Net Assets applicable to 24,978,752,842 outstanding $.001 par value shares
(authorized 30,000,000,000 shares) $24,978,790
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $1.00
==============================================================================================================
Institutional Shares--Net Assets applicable to 762,223,022 outstanding $.001 par value shares
(authorized 4,500,000,000 shares) $762,213
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $1.00
==============================================================================================================
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
FEDERAL PORTFOLIO YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (104.3%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Farm Credit Bank 5.372% 7/23/97 $ 1,035 $ 1,027
Federal Farm Credit Bank 5.51% 1/2/98 15,000 14,983
Federal Home Loan Bank 5.362% 6/12/97 (1) 75,000 74,963
Federal Home Loan Bank 5.372% 7/23/97 30,000 29,773
Federal Home Loan Bank 5.388% 6/19/97 (1) 25,000 24,985
Federal Home Loan Bank 5.407% 6/19/97 410,000 408,896
Federal Home Loan Bank 5.467% 6/12/97 142,460 142,224
Federal Home Loan Bank 5.516% 6/13/97 24,800 24,755
Federal Home Loan Bank 5.517% 6/24/97 (1) 50,000 49,986
Federal Home Loan Bank 5.522% 6/26/97 (1) 35,000 34,983
Federal Home Loan Bank 5.87% 6/27/97 25,000 24,998
Federal Home Loan Bank 6.025% 4/15/98 50,000 49,970
Federal Home Loan Mortgage Corp. 5.352% 6/4/97 74,832 74,798
Federal Home Loan Mortgage Corp. 5.362% 6/5/97 3,565 3,563
Federal Home Loan Mortgage Corp. 5.371% 6/11/97 21,576 21,544
Federal Home Loan Mortgage Corp. 5.394% 6/3/97 12,825 12,821
Federal Home Loan Mortgage Corp. 5.394% 6/10/97 3,190 3,186
Federal Home Loan Mortgage Corp. 5.41% 6/12/97 124,877 124,671
Federal Home Loan Mortgage Corp. 5.411% 6/18/97 36,905 36,811
Federal Home Loan Mortgage Corp. 5.415% 7/15/97 50,000 49,678
Federal Home Loan Mortgage Corp. 5.418% 6/20/97 29,288 29,204
Federal Home Loan Mortgage Corp. 5.423% 6/19/97 43,000 42,884
Federal Home Loan Mortgage Corp. 5.433% 7/8/97 300,000 298,335
Federal Home Loan Mortgage Corp. 5.488% 7/18/97 11,051 10,972
Federal Home Loan Mortgage Corp. 5.509% 6/9/97 15,518 15,499
Federal Home Loan Mortgage Corp. 5.515% 6/16/97 75,773 75,601
Federal Home Loan Mortgage Corp. 5.52% 6/13/97 70,125 69,998
Federal Home Loan Mortgage Corp. 5.552% 6/2/97 950 950
Federal Home Loan Mortgage Corp. 5.568% 6/30/97 5,467 5,443
Federal Home Loan Mortgage Corp. 5.578% 7/16/97 45,000 44,691
Federal Home Loan Mortgage Corp. 5.594% 7/11/97 50,000 49,693
Federal Home Loan Mortgage Corp. 5.597% 7/3/97 35,000 34,828
Federal Home Loan Mortgage Corp. 5.728% 6/6/97 50,000 49,999
Federal Home Loan Mortgage Corp. 5.89% 6/20/97 25,000 24,999
Federal National Mortgage Assn. 5.326% 6/6/97 130,000 129,905
Federal National Mortgage Assn. 5.353% 6/5/97 1,055 1,054
Federal National Mortgage Assn. 5.382% 7/10/97 45,000 44,744
Federal National Mortgage Assn. 5.383% 6/9/97 (1) 50,000 49,989
Federal National Mortgage Assn. 5.405% 6/20/97 25,000 24,930
Federal National Mortgage Assn. 5.414% 6/17/97 2,935 2,928
Federal National Mortgage Assn. 5.416% 6/30/97 15,000 14,936
Federal National Mortgage Assn. 5.507% 6/5/97 (1) 300,000 299,846
Federal National Mortgage Assn. 5.528% 6/13/97 (1) 75,000 74,969
Federal National Mortgage Assn. 5.542% 6/15/97 (1) 50,000 49,991
Federal National Mortgage Assn. 5.577% 7/11/97 25,000 24,847
Federal National Mortgage Assn. 5.602% 8/4/97 25,000 24,755
Federal National Mortgage Assn. 5.616% 6/24/97 130,000 129,540
Federal National Mortgage Assn. 5.623% 7/2/97 19,245 19,153
Federal National Mortgage Assn. 5.632% 8/6/97 (1) 50,000 49,993
Federal National Mortgage Assn. 5.632% 8/14/97 (1) 100,000 99,965
Federal National Mortgage Assn. 5.632% 8/25/97 (1) 25,000 24,991
Federal National Mortgage Assn. 5.664% 7/16/97 (1) 100,000 99,971
Federal National Mortgage Assn. 5.69% 3/13/98 45,000 44,946
Federal National Mortgage Assn. 5.731% 10/2/97 15,240 14,950
Federal National Mortgage Assn. 5.755% 10/3/97 45,980 45,095
Federal National Mortgage Assn. 5.765% 6/20/97 49,400 49,394
Federal National Mortgage Assn. 6.00% 4/17/98 22,000 21,971
Overseas Private Investment Corp. 5.513% 6/16/97 (1) 29,167 29,167
Overseas Private Investment Corp. 5.71% 6/3/97 (1) 14,900 14,900
Overseas Private Investment Corp. 5.766% 7/15/97 (1) 19,475 19,475
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Overseas Private Investment Corp. 5.81% 6/30/97 (1) $ 4,000 $ 4,000
Overseas Private Investment Corp. 5.85% 6/3/97 (1) 14,118 14,118
U.S. Treasury Note 5.25% 12/31/97 25,000 24,956
U.S. Treasury Note 7.875% 1/15/98 50,000 50,662
- --------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $3,461,852) 3,461,852
- --------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.5%)
- --------------------------------------------------------------------------------------------------------------
Toronto Dominion Bank
(Collateralized by U.S. Treasury Bill 5.36%, 3/5/98
and U.S. Treasury Note 5.125%, 2/28/98)
(COST $50,000) 5.58% 6/2/97 50,000 50,000
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (105.8%)
(COST $3,511,852) 3,511,852
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-5.8%)
- --------------------------------------------------------------------------------------------------------------
Other Assets--Note B 23,445
Payables for Investment Securities Purchased (199,883)
Other Liabilities (15,761)
-------------
(192,199)
- --------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------
Applicable to 3,319,709,355 outstanding $.001 par value shares
(authorized 7,500,000,000 shares) $3,319,653
==============================================================================================================
NET ASSET VALUE PER SHARE $1.00
==============================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
(1)Floating Rate Note.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
AT MAY 31, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $3,319,739 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (86) --
- --------------------------------------------------------------------------------------------------------------
NET ASSETS $3,319,653 $1.00
==============================================================================================================
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TREASURY MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (98.1%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bill 5.09% 6/19/97 $ 1,192 $ 1,189
U.S. Treasury Bill 5.21% 7/24/97 219 217
U.S. Treasury Bill 5.26% 6/17/97 935,000 933,099
U.S. Treasury Note 5.625% 6/30/97 344,484 344,561
U.S. Treasury Note 5.875% 7/31/97 1,081,366 1,082,011
U.S. Treasury Note 6.50% 8/15/97 470,508 471,356
U.S. Treasury Note 8.50% 7/15/97 172,662 173,286
U.S. Treasury Note 8.625% 8/15/97 103,402 104,045
- --------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $3,109,764) 3,109,764
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.9%)
- --------------------------------------------------------------------------------------------------------------
Receivables for Investment Securities Sold 1,850,620
Other Assets--Note B 85,731
Payables for Investment Securities Purchased (1,857,787)
Other Liabilities (16,805)
-------------
61,759
- --------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------
Applicable to 3,171,580,700 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $3,171,523
==============================================================================================================
NET ASSET VALUE PER SHARE $1.00
==============================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
AT MAY 31, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $3,171,600 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (77) --
- --------------------------------------------------------------------------------------------------------------
NET ASSETS $3,171,523 $1.00
==============================================================================================================
</TABLE>
18
<PAGE> 21
STATEMENT OF OPERATIONS
This Statement shows interest earned by each Portfolio during the reporting
period, and details the operating expenses charged to the Portfolio. The Prime
Portfolio also reports the breakdown of expenses charged to each class of its
shares. Expenses directly reduce the amount of investment income available to
pay to shareholders as income dividends. This Statement also shows any Net Gain
(Loss) realized on the sale of investments, and any Unrealized Appreciation
(Depreciation) on investments during the period. Realized Net Gain (Loss)
should always be minimal, and Unrealized Appreciation (Depreciation) should be
zero, for money market portfolios.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
TREASURY
PRIME FEDERAL MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
SIX MONTHS ENDED MAY 31, 1997
-------------------------------------
(000) (000) (000)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $680,530 $87,815 $81,487
-------------------------------------
Total Income 680,530 87,815 81,487
-------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 1,774 231 225
Management and Administrative 10,518 1,501 1,757
Shareholder Account Maintenance(1) 20,273 2,569 2,252
Marketing and Distribution(1) 4,116 543 527
Custodian Fees 532 94 9
Taxes (other than income taxes) 917 120 18
Auditing Fees 11 4 4
Shareholders' Reports(1) 344 54 45
Annual Meeting and Proxy Costs(1) 41 6 101
Directors' Fees and Expenses 32 4 4
-------------------------------------
Total Expenses 38,558 5,126 4,942
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 641,972 82,689 76,545
- ----------------------------------------------------------------------------------------------------
REALIZED NET GAIN ON INVESTMENT SECURITIES SOLD 41 6 43
- ----------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES -- -- --
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $642,013 $82,695 $76,588
====================================================================================================
</TABLE>
(1)Expenses of the Prime Portfolio by Class are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(000)
-----------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES TOTAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class-Specific Expenses:
Shareholder Account Maintenance $20,266 $ 7 $20,273
Marketing and Distribution 3,943 173 4,116
Shareholders' Reports 344 -- 344
Annual Meeting and Proxy Costs 41 -- 41
Total Class-Specific Expenses 24,594 180 24,774
All Other Portfolio Expenses 13,245 539 13,784
- --------------------------------------------------------------------------------------------------
Total Expenses $37,839 $719 $38,558
==================================================================================================
</TABLE>
See Note C in Notes to Financial Statements.
19
<PAGE> 22
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information that is detailed in the Statement of Operations. Because the
Portfolio distributes its income to shareholders each day, the amounts of
Dividends from Net Investment Income generally equal the net income earned as
shown under the Operations section. The Capital Share Transactions section
shows the amount shareholders invested in the Portfolio, either by purchasing
shares or by reinvesting distributions, and the amounts redeemed. The Prime
Portfolio-Investor and -Institutional shares' Distributions and Capital Share
Transactions are shown separately.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO
--------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MAY 31, 1997 NOV. 30, 1996
(000) (000)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 641,972 $ 1,089,905
Realized Net Gain (Loss) 41 (105)
Unrealized Appreciation (Depreciation) -- --
--------------------------------------
Net Increase in Net Assets Resulting from Operations 642,013 1,089,800
--------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares (616,191) (1,042,723)
Institutional Shares (25,781) (47,182)
--------------------------------------
Total Dividends (641,972) (1,089,905)
--------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES (AT $1.00)
Issued 16,174,705 25,059,503
Issued in Lieu of Cash Distributions 589,463 995,998
Redeemed (14,003,222) (22,601,499)
--------------------------------------
Net Increase--Investor Shares 2,760,946 3,454,002
--------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES (AT $1.00)
Issued 628,075 549,247
Issued in Lieu of Cash Distributions 23,368 43,406
Redeemed (799,469) (475,358)
--------------------------------------
Net Increase (Decrease)--Institutional Shares (148,026) 117,295
- -----------------------------------------------------------------------------------------------------------
Total Increase 2,612,961 3,571,192
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 23,128,042 19,556,850
--------------------------------------
End of Period $25,741,003 $23,128,042
===========================================================================================================
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FEDERAL TREASURY MONEY MARKET
PORTFOLIO PORTFOLIO*
------------------------------- ---------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1997 NOV. 30, 1996 MAY 31, 1997 NOV. 30, 1996
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 82,689 $ 144,974 $ 76,545 $ 139,287
Realized Net Gain (Loss) 6 (164) 43 (340)
Unrealized Appreciation (Depreciation) -- -- -- --
---------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 82,695 144,810 76,588 138,947
---------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME (82,689) (144,974) (76,545) (139,287)
---------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (AT $1.00)
Issued 1,609,070 2,485,267 1,979,232 3,440,062
Issued in Lieu of Cash Distributions 79,503 139,177 72,965 132,823
Redeemed (1,469,407) (2,160,404) (1,797,247) (3,183,441)
---------------------------------------------------------------
Net Increase from Capital Share Transactions 219,166 464,040 254,950 389,444
- --------------------------------------------------------------------------------------------------------------------------
Total Increase 219,172 463,876 254,993 389,104
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 3,100,481 2,636,605 2,916,530 2,527,426
---------------------------------------------------------------
End of Period $3,319,653 $3,100,481 $3,171,523 $2,916,530
==========================================================================================================================
</TABLE>
*Prior to December 2, 1996, known as Vanguard Money Market Reserves-U.S.
Treasury Portfolio. See Note D in Notes to Financial Statements.
21
<PAGE> 24
FINANCIAL HIGHLIGHTS
Each Portfolio's objective is to maintain a constant net asset value (NAV) of
$1.00 per share by distributing all of its income and avoiding capital gains or
losses. The financial highlights table summarizes each Portfolio's investment
results and distributions to shareholders on a per-share basis; the Prime
Portfolio-Investor and -Institutional shares' results are shown separately. The
table also presents the Total Return and shows net investment income and
expenses as percentages of average net assets for each Portfolio or class of
shares. These data will help you assess the variability of net income returns
from year to year and how much it costs to operate the Portfolio.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRIME PORTFOLIO-INVESTOR SHARES
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .026 .052 .057 .038 .030 .038
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
--------------------------------------------------------------------------
Total from Investment Operations .026 .052 .057 .038 .030 .038
--------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.026) (.052) (.057) (.038) (.030) (.038)
Distributions from Realized Capital Gains -- -- -- -- -- --
--------------------------------------------------------------------------
Total Distributions (.026) (.052) (.057) (.038) (.030) (.038)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN 2.63% 5.31% 5.82% 3.87% 3.02% 3.89%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $24,979 $22,218 $18,764 $15,109 $12,367 $12,638
Ratio of Total Expenses to
Average Net Assets 0.32%* 0.32% 0.32% 0.32% 0.32% 0.30%
Ratio of Net Investment Income to
Average Net Assets 5.21%* 5.18% 5.64% 3.84% 2.98% 3.82%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRIME PORTFOLIO-INSTITUTIONAL SHARES
----------------------------------------
SIX MONTHS YEAR
FOR A SHARE OUTSTANDING ENDED ENDED OCT. 28* TO
THROUGHOUT EACH PERIOD MAY 31, 1997 NOV. 30, 1996 NOV. 30, 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .027 .054 .005
Net Realized and Unrealized Gain (Loss) on Investments -- -- --
----------------------------------------
Total from Investment Operations .027 .054 .005
----------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.027) (.054) (.005)
Distributions from Realized Capital Gains -- -- --
----------------------------------------
Total Distributions (.027) (.054) (.005)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN 2.71% 5.49% 0.53%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $762 $910 $793
Ratio of Total Expenses to Average Net Assets 0.15%** 0.15% 0.15%**
Ratio of Net Investment Income to Average Net Assets 5.37%** 5.35% 5.65%**
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
**Annualized.
22
<PAGE> 25
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FEDERAL PORTFOLIO
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .026 .051 .056 .038 .029 .038
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
---------------------------------------------------------------------------
Total from Investment Operations .026 .051 .056 .038 .029 .038
---------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.026) (.051) (.056) (.038) (.029) (.038)
Distributions from Realized Capital Gains -- -- -- -- -- --
---------------------------------------------------------------------------
Total Distributions (.026) (.051) (.056) (.038) (.029) (.038)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN 2.60% 5.26% 5.77% 3.82% 2.98% 3.83%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $3,320 $3,100 $2,637 $2,196 $1,907 $1,986
Ratio of Total Expenses to
Average Net Assets 0.32%* 0.32% 0.32% 0.32% 0.32% 0.30%
Ratio of Net Investment Income to
Average Net Assets 5.16%* 5.13% 5.61% 3.78% 2.94% 3.76%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TREASURY MONEY MARKET PORTFOLIO*
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .025 .050 .053 .036 .028 .036
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
---------------------------------------------------------------------------
Total from Investment Operations .025 .050 .053 .036 .028 .036
---------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.025) (.050) (.053) (.036) (.028) (.036)
Distributions from Realized Capital Gains -- -- -- -- -- --
---------------------------------------------------------------------------
Total Distributions (.025) (.050) (.053) (.036) (.028) (.036)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN 2.50% 5.11% 5.47% 3.63% 2.86% 3.68%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $3,172 $2,917 $2,527 $2,056 $1,751 $2,321
Ratio of Total Expenses to
Average Net Assets 0.32%** 0.32% 0.32% 0.32% 0.32% 0.30%
Ratio of Net Investment Income to
Average Net Assets 4.95%** 4.99% 5.33% 3.59% 2.83% 3.60%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Prior to December 2, 1996, known as Vanguard Money Market Reserves-U.S.
Treasury Portfolio. See Note D in Notes to Financial Statements.
**Annualized.
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
Vanguard Money Market Reserves and Vanguard Treasury Money Market Portfolio are
registered under the Investment Company Act of 1940 as diversified open-end
investment companies, or mutual funds. Vanguard Money Market Reserves consists
of the Prime and Federal Portfolios. The Prime Portfolio invests in short-term
debt instruments of companies primarily operating in specific industries; the
issuers' abilities to meet their obligations may be affected by economic
developments in such industries. The Federal Portfolio invests in short-term
debt instruments issued by the U.S. government or its agencies and
instrumentalities. The Treasury Money Market Portfolio invests in short-term
debt instruments backed by the full faith and credit of the U.S. government.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The Portfolios consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Securities are valued at amortized cost, which
approximates market value.
2. FEDERAL INCOME TAXES: Each Portfolio intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
3. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used to determine realized gains
(losses) on the sale of investment securities are those of the specific
securities sold. Discounts and premiums are accreted and amortized,
respectively, to interest income over the lives of the respective securities.
Distributions from net investment income are declared daily and paid on the
first business day of the following month.
4. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, shareholder accounting, marketing, and distribution
services. The costs of such services are allocated to the Portfolios under
methods approved by the board of directors of Vanguard Money Market Reserves and
the board of trustees of Vanguard Treasury Money Market Portfolio. At May 31,
1997, the Portfolios had contributed capital aggregating $2,577,500 to Vanguard
(included in Other Assets), representing 12.9% of Vanguard's capitalization.
The Portfolios' directors (or trustees) and officers are also directors and
officers of Vanguard.
C. The Prime Portfolio offers two classes of shares, the Investor Shares and
the Institutional Shares. Institutional shares are designed primarily for
institutional investors that meet certain administrative and servicing criteria
and have a minimum investment of $10 million. Investor shares are offered to
all other investors. Both classes of shares have equal rights as to assets and
earnings, except that each class bears certain class-specific expenses related
to its shareholder activity.
D. On November 19, 1996, shareholders of the former Vanguard Money Market
Reserves-U.S. Treasury Portfolio voted to approve its reorganization into the
Treasury Money Market Portfolio of Vanguard Treasury Fund, a newly created
Delaware business trust, effective December 2, 1996.
24
<PAGE> 27
DIRECTORS, TRUSTEES, AND OFFICERS
JOHN C. BOGLE, Chairman of the Board and Director of The Vanguard Group, Inc.
and of each of the investment companies in The Vanguard
Group.
JOHN J. BRENNAN, President, Chief Executive Officer, and Director of The
Vanguard Group, Inc. and of each of the investment companies
in The Vanguard Group.
ROBERT E. CAWTHORN, Chairman Emeritus and Director of Rhone-Poulenc Rorer,
Inc.; Managing Director of Global Health Care Partners/DLJ
Merchant Banking Partners; Director of Sun Company, Inc. and
Westinghouse Electric Corp.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea Co.,
Ikon Business Solutions, Inc., Raytheon Co., Knight-Ridder,
Inc., and Massachusetts Mutual Life Insurance Co.; Trustee
Emerita of Wellesley College.
BRUCE K. MACLAURY, President Emeritus of The Brookings Institution; Director of
American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.
BURTON G. MALKIEL, Chemical Bank Chairman's Professor of Economics, Princeton
University; Director of Prudential Insurance Co. of America,
Amdahl Corp., Baker Fentress & Co., The Jeffrey Co., and
Southern New England Communications Co.
ALFRED M. RANKIN, JR., Chairman, President, and Chief Executive Officer of
NACCO Industries, Inc.; Director of NACCO Industries, The
BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL, President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of
McKinsey & Co. and President of New York University; Director
of Pacific Gas and Electric Co., Procter & Gamble Co., and
NACCO Industries.
JAMES O. WELCH, Jr., Retired Chairman of Nabisco Brands, Inc.; retired Vice
Chairman and Director of RJR Nabisco; Director of TECO
Energy, Inc. and Kmart Corp.
J. LAWRENCE WILSON, Chairman and Chief Executive Officer of Rohm & Haas Co.;
Director of Cummins Engine Co.; Trustee of Vanderbilt
University
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment
companies in The Vanguard Group.
RICHARD F. HYLAND, Treasurer; Principal of The Vanguard Group, Inc.; Treasurer
of each of the investment companies in The Vanguard Group.
KAREN E. WEST, Controller; Principal of The Vanguard Group, Inc.; Controller of
each of the investment companies in The Vanguard Group
OTHER VANGUARD OFFICERS
ROBERT A. DISTEFANO, Senior Vice President, Information Technology.
JAMES H. GATELY, Senior Vice President,
Individual Investor Group.
IAN A. MACKINNON, Senior Vice President,
Fixed Income Group.
F. WILLIAM MCNABB III, Senior Vice President, Institutional Investor Group.
Ralph K. Packard, Senior Vice President and
Chief Financial Officer
[THE VANGUARD GROUP(R) LOGO]
Please send your comments to us at:
Post Office Box 2600, Valley Forge, Pennsylvania 19482
Fund Information: 1-800-662-7447
Individual Account Services: 1-800-662-2739
Institutional Investor Services: 1-800-523-1036
http://www.vanguard.com [email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
(C) 1997 Vanguard Marketing Corporation, Distributor
<PAGE> 28
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
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Vanguard Equity Income Fund
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BALANCED FUNDS
Vanguard/Wellington Fund
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Vanguard STAR Portfolio
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Portfolios
GROWTH FUNDS
Vanguard/Morgan Growth Fund
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Vanguard U.S. Growth Portfolio
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INTERNATIONAL FUNDS
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INDEX FUNDS
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Q302-5/97
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