<PAGE> 1
VANGUARD
MONEY MARKET
FUNDS
VANGUARD PRIME MONEY MARKET FUND
VANGUARD FEDERAL MONEY MARKET FUND
VANGUARD TREASURY MONEY MARKET FUND
[PHOTO]
ANNUAL
REPORT
NOVEMBER 30, 1998
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 8,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
This year, our report cover pays homage to three anniversaries, each of great
significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto-- "Leading the way"--serves as a guiding principle for
our company.
- - The 100th birthday, on July 23, of Walter L. Morgan, founder of Wellington
Fund, the oldest member of what became The Vanguard Group. Mr. Morgan was
friend and mentor to Vanguard founder John C. Bogle, and helped to shape the
standards and business principles that Mr. Bogle laid down for Vanguard at its
beginning nearly 25 years ago: a stress on balanced, diversified investments;
insistence on fair dealing and candor with clients; and a focus on long-term
investing. To our great regret, Mr. Morgan died on September 2.
- - The 70th anniversary, on December 28, of the incorporation of Vanguard
Wellington Fund. It was the nation's first balanced mutual fund, and is one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
4
REPORT FROM
THE ADVISER
6
PERFORMANCE SUMMARIES
8
FUND PROFILES
12
FINANCIAL STATEMENTS
14
REPORT OF
INDEPENDENT ACCOUNTANTS
31
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
The Vanguard Money Market Funds achieved stalwart yields for the fiscal year
ended November 30, 1998. The total return of our Prime Money Market Fund was
+5.4%, unchanged from a year ago. Taking into account the modest 1.5% rise in
the Consumer Price Index, the fund's real, or inflation-adjusted, yield was a
healthy +3.9%, the highest it has been since our fiscal year 1989.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
TOTAL RETURNS
FISCAL YEAR ENDED NOVEMBER 30, 1998
-----------------------------------
AVERAGE
VANGUARD COMPETING VANGUARD
MONEY MARKET FUND FUND FUND ADVANTAGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime +5.4% +4.9% +0.5%
(SEC 7-Day Annualized
Yield: 4.98%)
Federal +5.4 +4.9 +0.5
(SEC 7-Day Annualized
Yield: 4.91%)
Treasury +5.1 +4.8 +0.3
(SEC 7-Day Annualized
Yield: 4.47%)
- ---------------------------------------------------------------------------------------------
Prime Institutional Shares*
(SEC 7-Day Annualized
Yield: 5.16%) +5.6% +5.3% +0.3%
- ---------------------------------------------------------------------------------------------
</TABLE>
*Minimum initial investment is $10 million.
The adjacent table presents the total returns for each of our money market
funds, as well as for their peers. It also shows what we call the "Vanguard
advantage," the extra income our funds provided over their competitors, the
result largely of our exceptionally low operating costs. This yield advantage
was 0.5 percentage point for shareholders in the Prime and Federal Funds and 0.3
percentage point for those in our Treasury Fund and Prime Institutional Shares.
Each fund's share price remained at $1 throughout the period, as is expected but
not guaranteed.
FINANCIAL MARKETS IN REVIEW
The U.S. economy expanded at a robust pace during the fiscal year despite
serious financial troubles that beset Asia, Russia, and Latin America. The
domestic economy's growth was fueled primarily by big increases in consumer
spending encouraged by low unemployment (4.4% as the fiscal year ended) and
strong wage growth (about 4%, well in excess of the 1.5% inflation rate).
Interest rates fell, with the yield of the 30-year U.S. Treasury bond
declining on balance by about 1 percentage point to end the year at 5.06%. Bond
prices benefited from buying by investors seeking a haven from volatility in the
U.S. stock market and in overseas securities and currency markets. Concerns
about the impact of the international economic situation on world markets and
the U.S. economy were cited by the Federal Reserve Board as a factor in its
decision to cut short-term interest rates. The Fed shaved rates by one-quarter
of a percentage point on three occasions: September 29, October 15, and November
17. The Lehman Brothers Aggregate Bond Index, a benchmark for the overall bond
market, achieved a +9.5% return during the fiscal year, with approximately 6.8%
coming from interest income and 2.7% from price appreciation.
Stocks seesawed dramatically during the period. The Standard & Poor's 500
Composite Stock Price Index rose strongly (+25%) through July 17, only to have
earnings
1
<PAGE> 4
decimated by a six-week slump that culminated in a -6.8% single-day decline on
August 31. Stocks then rebounded in September, and by fiscal year-end the S&P
500 Index was up +23.7%.
FISCAL 1998 PERFORMANCE OVERVIEW
The Fed's autumnal easing of monetary policy contributed to the decline in money
market interest rates during our fiscal year. At 4.48%, the yield of the 3-month
U.S. Treasury bill finished the period 72 basis points below its yield of 5.20%
on November 30, 1997. Yields on 3-month Treasuries fluctuated within a range of
185 basis points (1.85 percentage points) during fiscal 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
ANNUALIZED 7-DAY YIELD
ON NOVEMBER 30,
----------------------
MONEY MARKET FUND 1998 1997
- ---------------------------------------------------------
<S> <C> <C>
Prime 4.98% 5.40%
Federal 4.91 5.33
Treasury 4.47 5.05
- ---------------------------------------------------------
Prime Institutional Shares 5.16% 5.57%
- ---------------------------------------------------------
</TABLE>
As the accompanying table shows, the annualized 7-day yields of our money
market funds on November 30, 1998, were slightly lower than they were a year
ago. In this environment of low inflation and falling interest rates, our funds'
yields were excellent. In what we daresay has become the norm, they handily
outperformed their competitors, a triumph we attribute mostly--and proudly--to
our lower operating expenses. The Prime, Federal, and Treasury Money Market
Funds each operated at an expense ratio (expenses as a percentage of average net
assets) of 0.33%, or $3.30 per $1,000 of assets, during our fiscal year. The
expense ratio of the average money market fund was 0.83%, giving us an edge of
half a percentage point. The average institutional money market fund charged a
0.44% expense ratio, nearly three times the 0.15% expense ratio of our Prime
Fund's Institutional Shares. While such differences may appear modest, they give
us a significant head start in delivering to you the higher yields you've come
to expect from our money market funds.
LONG-TERM PERFORMANCE OVERVIEW
We're happy to report that the combination of our low operating costs and the
experienced, skilled leadership of our Fixed Income Group helped make fiscal
1998 the latest in an ongoing series of banner years for the Vanguard Money
Market Funds. The adjacent table shows the average annual return for each
Vanguard fund and its average competitor over the past ten years. It also shows
the value, as of November 30, of hypothetical $10,000 investments made in each
fund a decade ago.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
TOTAL RETURNS
TEN YEARS ENDED NOVEMBER 30, 1998
-----------------------------------------
FINAL VALUE OF
AVERAGE A $10,000
ANNUAL RATE INITIAL INVESTMENT
------------------- ---------------------
AVERAGE AVERAGE
VANGUARD COMPETING VANGUARD COMPETING
MONEY MARKET FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime +5.7% +5.2% $17,363 $16,583
Federal +5.6 +5.1 17,197 16,463
Treasury* +5.4 +5.1 16,863 16,455
- ---------------------------------------------------------------------
Prime
Institutional Shares** +5.5% +5.2% $16,324 $15,949
- ---------------------------------------------------------------------
</TABLE>
*Before December 2, 1996, known as the U.S. Treasury Portfolio; prior to March
13, 1989, returns are for the Insured Portfolio.
**Since Fund's inception on October 3, 1989. Minimum initial investment is $10
million.
As you can see, our cost differential adds up over time. In fact, the
seemingly small difference in annual yield amounted to an extra $400-$800 in
your pocket for each
2
<PAGE> 5
$10,000 initially invested. Because money market funds largely invest in the
same types of securities and vary only modestly in average maturity, the level
of operating costs makes or breaks a fund. Generally, the lower a fund's
expenses, the higher its return. Given our goal of maintaining the lowest
reasonable costs for all of our funds, we are confident that the Vanguard Money
Market Funds will continue to provide strong relative returns. Of course, all
mutual funds are subject to the vagaries of the markets and to unpredictable
changes in interest rates, and there is no way to predict absolute returns over
the next ten years. Yields could be either higher or lower than those during the
past decade.
IN SUMMARY
Money market funds do not occupy a glamorous niche within the financial world.
Their role in a balanced investment program is to be the strong, silent type--to
provide current income, liquidity, and stability of principal. These are
important attributes in helping investors to pursue short-term investment goals
and to add diversity to portfolios that also include stock funds and bond funds.
As always, we recommend that investors thoughtfully construct such a balanced
investment plan--consistent with their personal goals, time horizon, and
tolerance for risk--and then stick with it. We assure you that we, likewise,
will "stay the course" by continuing to focus on providing high-quality,
low-cost money market funds.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
December 16, 1998
3
<PAGE> 6
THE MARKETS IN PERSPECTIVE
YEAR ENDED NOVEMBER 30, 1998
[PHOTO]
U.S. financial markets produced solid overall gains during the fiscal year ended
November 30. The S&P 500 Index gained 23.7% for the 12-month period, overcoming
a sharp summer setback. Bond prices rose as interest rates declined. Returns
from overseas stock markets varied widely, with big gains in Europe and losses
in most other markets.
U.S. STOCK MARKETS
The stock market's gains during the fiscal year were concentrated in
large-capitalization growth stocks. Within the S&P 500 Index, the growth stocks
rose 33.7%, while the value stocks were up 13.2%. The market's overall bias
toward large-caps showed starkly in the contrast between the S&P 500 and other
indexes. While the S&P 500 was rising 23.7%, the rest of the market returned a
paltry 2.6%, as measured by the Wilshire 4500 Equity Index. Small-cap stocks, as
represented by the Russell 2000 Index, did even worse--a negative return of
6.6%.
The market's ascent was not without incident, even for large-cap stocks.
After rising strongly to a record high on July 17, the S&P 500 fell by 19.2%
during the following six weeks, just shy of the 20% mark generally considered
the boundary distinguishing a bear market from a mere "correction." Declines
were certifiably bearish for smaller stocks, however.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED NOVEMBER 30, 1998
-------------------------------
1 YEAR 3 YEARS 5 YEARS
- --------------------------------------------------------------------------
STOCKS
<S> <C> <C> <C>
S&P 500 Index 23.7% 26.7% 23.0%
Russell 2000 Index -6.6 10.3 11.3
MSCI EAFE Index 16.8 9.3 10.2
- --------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 9.5% 7.7% 7.3%
Lehman 10 Year Municipal Bond Index 8.1 6.9 6.8
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 5.1 5.2 5.1
- --------------------------------------------------------------------------
OTHER
Consumer Price Index 1.5% 2.2% 2.4%
- --------------------------------------------------------------------------
</TABLE>
The July-August tumble in stock prices reflected a number of factors that
collectively raised the anxiety level for many investors. Among these were
deteriorating corporate earnings reports and forecasts, Russia's default on its
debts, and a continuance of economic weakness in Asia. The persistence of Asia's
economic troubles--which first surfaced in mid-1997--began to slow the economic
expansions in the United States and Europe.
The rebound in stocks late in the fiscal year occurred even though several
sources of uncertainty remained, including doubts about global economic growth
and reductions in securities analysts' forecasts of future corporate earnings.
Stock prices got considerable help from the decline in interest rates. (Low
inflation and low interest rates help stock prices by raising the estimated
value of future dividends and earnings.)
Three forces clearly shaped the performance of industry sectors. They could
be summarized as faith (the buoyant confidence of consumers), fear (related to
the effects of economic troubles abroad), and fortresses (companies somewhat
protected from competition).
4
<PAGE> 7
In contrast to the cautious stance of investors during fiscal 1998, U.S.
consumers threw caution to the wind. Feeling flush because of plentiful jobs
(the nation's unemployment rate was 4.4% at fiscal year-end) and rising wages,
consumers spent a record proportion of their income. Not surprisingly, then, two
big gainers among sectors of the S&P 500 Index were consumer discretionary
firms, such as retailers (+26%) and consumer staples (+22%).
Fear was a factor in the lagging returns in industry groups considered to be
vulnerable to slowing global growth, falling commodity prices, and tougher price
competition from foreign suppliers. Among these--all traditional value
sectors--were firms in the "other energy" category (-37%); chemical and other
materials & processing firms (essentially a zero return); and makers of producer
durables such as airplanes and machinery (+2%). Conversely, utilities did well
(+35%) in part because they are seen as relatively insulated from foreign
competition or economic woes. Fortresses are companies perceived as relatively
safe from competitors because of patented products or brands. Such companies led
the year's best-performing sectors: technology (+49%) and health care (+43%).
U.S. BOND MARKETS
Interest rates declined during the fiscal year, especially for U.S. Treasury
securities, which benefited from heightened aversion to risk among investors and
from a slight decrease in supply, thanks to a $70 billion federal budget
surplus. The Federal Reserve Board had the flexibility to cut short-term rates
in three quarter-point steps in the autumn because inflation was remarkably
tame--consumer prices rose just 1.5% for our fiscal year.
In this bond-friendly environment, yields on long-term Treasury issues fell
by roughly 100 basis points (1 percentage point), with the 30-year Treasury bond
ending the fiscal year at 5.06%. Lower rates mean higher prices for bonds, and
the Lehman Brothers Long U.S. Treasury Bond Index earned a total return of
15.7%, an astounding margin of some 14 percentage points over the inflation
rate.
Reflecting investors' flight to quality and worries about slowing economic
growth, prices fell for high-yield "junk" bonds. Even high-quality corporate
bonds and mortgage-backed securities did not rise in price as far as Treasury
securities. Mortgage bonds tend to lag Treasuries during periods when falling
rates lead to greater refinancing activity by homeowners, resulting in unwanted
prepayments of principal. The Lehman Aggregate Bond Index, which comprises
high-quality corporate and mortgage-backed bonds as well as Treasuries, and has
an intermediate-term average maturity, earned 9.5%.
Yields on long-term municipal bonds declined only modestly during the fiscal
year, and by November 30 were only slightly lower than yields on comparable
Treasury securities. This was striking because the interest on municipals is
exempt from federal income tax.
INTERNATIONAL STOCK MARKETS
Europe's stock markets outdistanced even the S&P 500 Index, but Asian and Latin
American markets were generally down during the fiscal year. As a group,
European stocks earned 27.8% in U.S.-dollar terms. Europe's bull market was
fueled by continuing economic growth, lower interest rates, increased corporate
merger activity, and optimism about the effects of the euro, a common currency
due to be adopted in 1999 by 11 nations.
Japan's stock market continued to suffer from the effects of a severe
recession and a shaky banking system. Stocks in Tokyo fell 4.5% in U.S.-dollar
terms. Elsewhere in Asia, returns were mixed, ranging from a rebound of 21% in
South Korea, through Australia's 11% gain, to big losses in Indonesia (-52%),
Malaysia (-42%), New Zealand (-25%), and Singapore (-18%). Losses were steep
throughout Latin America, including Mexico (-32%), Venezuela (-59%), Brazil
(-20%), and Chile (-22%).
5
<PAGE> 8
REPORT FROM THE ADVISER
[PHOTO]
Interest rates declined during the fiscal year ended November 30 amid waves of
global financial turmoil that have ebbed and flowed for many months and are
probably not yet over. U.S. stock and bond markets rode a rollercoaster to very
strong returns. The returns of Vanguard's Prime, Federal, and Treasury Money
Market Funds were clustered slightly above 5%, adding to a string of more than
four years of relative stability in money market yields. In light of the low
level of inflation--the Consumer Price Index was up 1.5% during our fiscal
year--the funds' annual real, or inflation-adjusted, returns were about 3.5%,
which is quite generous by historic standards. Recent developments, however,
have put downward pressure on interest rates that will most likely lead to
somewhat lower returns in the near future.
What began in the summer of 1997 as a regional financial crisis affecting
Asia spread to emerging markets in Eastern Europe and Latin America. Years of
increasing confidence in the growth prospects and financial strength of emerging
economies had attracted massive investment flows and resulted in narrower risk
premiums--the extra returns investors expect for taking greater risk. All that
was rapidly undone in a frenzied flight to investments of the highest quality
and liquidity. The Russian government's default on its obligations in late
August was a catalyst for the most extreme market dislocations of the fiscal
year. The stock markets of developed nations plunged as investors contemplated
the impact of a global slowdown on the profits and growth of well-established
companies. Headlines about the troubles of highly leveraged "hedge funds" raised
the specter of forced liquidations. Many bond investors responded by disengaging
from credit, liquidity, and prepayment risk in favor of U.S. Treasury
securities. The perception of an imminent credit crunch--in which otherwise
healthy companies would be cut off from funding for expansion--reinforced the
downward spiral of investor confidence.
Throughout the year, the performance of the U.S. economy stood in striking
contrast to the disruption in the global financial markets. Month after month,
economic statistics showed that job and wage growth were healthy and that key
sectors such as housing were booming, despite expectations that the problems
overseas would eventually restrain the U.S. economic juggernaut. It wouldn't be
the first time that trouble in the financial industry had caused economists to
lose sight of the fundamental strength in the heartland. However, as the
intensifying financial storm began to threaten the efficient functioning of
markets and thereby the funding of the U.S. economic machine, officials of the
Federal Reserve Board began to think more globally. Federal Reserve Chairman
Alan Greenspan remarked that it was not reasonable to expect the United States
to remain an "oasis of prosperity" in the face of so much trouble overseas. The
Fed embarked on a series of monetary-policy easings that resulted in a drop of
0.75% in the benchmark federal funds rate (the rate at which banks borrow and
lend reserves among themselves). The markets have welcomed this additional
liquidity and pledge of support from the central bank.
6
<PAGE> 9
In the bond markets, there has been a partial retracing of risk premiums
from their extremes, and recently the equity markets have staged a furious (some
would argue unwarranted) rally. With the federal funds rate as the cornerstone
of the money market yield curve, rates on the Treasury bills, certificates of
deposit, and commercial paper in which Vanguard's money market funds invest have
also come down. Market expectations are for the Fed to pause and evaluate the
effectiveness of its rate-cutting actions in calming the markets and sustaining
economic expansion. Given the tepid pace of inflation and lingering problems
around the globe, we think the balance of probability tips in favor of further
rate cuts.
During the year, we have extended the average maturities of the money market
funds in anticipation of lower interest rates. We did so last spring in the
Treasury Money Market Fund as it became clear that the historic transition from
federal budget deficit to surplus would lead to a shortage of short-term
Treasury securities. In September, we extended the maturities of the Prime and
Federal Money Market Funds because we judged that the Fed was likely to swing
into action against the market crisis and cut rates.
With regard to credit quality, we remain at the conservative end of the
money market world, as always. World events have made this a busy year for
Vanguard's skilled and experienced credit analysts, upon whom we rely to
maintain rigorous surveillance over the issuers in which we invest. They have
been more than equal to the task. As market rates head lower and fund operating
expenses consume a larger portion of returns, some fund managers may be tempted
to reach for yield by taking on riskier investments. Rest assured that this is
not our mandate. Our cost advantage over the average competing fund is lasting.
We believe that it provides shareholders with an unbeatable combination of high
quality and competitive returns.
Ian A. MacKinnon, Managing Director
Robert F. Auwaerter, Principal
John Hollyer, Principal
David R. Glocke, Principal
Vanguard Fixed Income Group
December 11, 1998
INVESTMENT PHILOSOPHY
The funds reflect a belief that the highest level of current income consistent
with capital preservation and liquidity can be provided by holding high-quality
money market instruments issued by financial institutions, nonfinancial
corporations, the U.S. government, and federal agencies.
7
<PAGE> 10
PERFORMANCE SUMMARY
PRIME MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the fund. Note that 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>
TOTAL INVESTMENT RETURNS: NOVEMBER 30, 1978-NOVEMBER 30, 1998
- -------------------------------------------------------------------
PRIME MONEY MARKET FUND AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 5.4 5.4 4.9
1998 0.0 5.4 5.4 4.9
- -------------------------------------------------------------------
</TABLE>
*Average Money Market Fund.
See Financial Highlights table on page 28 for dividend information for the past
five years.
SEC 7-Day Annualized Yield (11/30/1998): 4.98%
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1988-NOVEMBER 30, 1998
- --------------------------------------------------------------------
Prime Money Average Money Salomon Smith Barney
Market Fund Market Fund 3-Month Treasury Index
<S> <C> <C> <C>
1988 11 10000 10000 10000
1989 02 10217 10204 10205
1989 05 10466 10438 10433
1989 08 10709 10667 10652
1989 11 10940 10884 10863
1990 02 11163 11093 11076
1990 05 11392 11306 11299
1990 08 11623 11523 11520
1990 11 11852 11736 11730
1991 02 12071 11937 11928
1991 05 12263 12112 12105
1991 08 12443 12277 12274
1991 11 12610 12430 12431
1992 02 12754 12558 12563
1992 05 12882 12666 12687
1992 08 12999 12767 12797
1992 11 13101 12857 12893
1993 02 13203 12942 12998
1993 05 13301 13022 13094
1993 08 13399 13104 13193
1993 11 13498 13194 13291
1994 02 13598 13278 13400
1994 05 13713 13377 13521
1994 08 13856 13497 13664
1994 11 14020 13649 13827
1995 02 14215 13823 14024
1995 05 14426 14012 14230
1995 08 14634 14189 14430
1995 11 14836 14380 14623
1996 02 15035 14557 14825
1996 05 15227 14725 15011
1996 08 15425 14890 15202
1996 11 15625 15074 15395
1997 02 15825 15250 15599
1997 05 16035 15430 15800
1997 08 16252 15611 16000
1997 11 16470 15810 16202
1998 02 16690 16002 16419
1998 05 16915 16197 16632
1998 08 17142 16381 16839
1998 11 17363 16583 17033
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Fund 5.42% 5.17% 5.67% $17,363
Average Money Market Fund 4.89 4.68 5.19 16,583
Salomon Smith Barney 3-Month Treasury Index 5.13 5.09 5.47 17,033
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Money Market Fund 6/4/1975 5.47% 5.09% 0.00% 5.73% 5.73%
- --------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
8
<PAGE> 11
PERFORMANCE SUMMARY
PRIME MONEY MARKET FUND INSTITUTIONAL SHARES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note that 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>
TOTAL INVESTMENT RETURNS: OCTOBER 3, 1989-NOVEMBER 30, 1998
- -------------------------------------------------------------------
PRIME MONEY MARKET FUND AVERAGE
INSTITUTIONAL SHARES 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 5.6 5.6 5.3
1998 0.0 5.6 5.6 5.3
- -------------------------------------------------------------------
</TABLE>
*Prior to 10/28/1995, total returns are for Vanguard Institutional Money
Market Portfolio.
**Average Institutional Money Market Fund.
See Financial Highlights table on page 28 for dividend information.
SEC 7-Day Annualized Yield (11/30/1998): 5.16%
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: OCTOBER 3, 1989-NOVEMBER 30, 1998
- ----------------------------------------------------------------
Prime Money Average
Market Fund Institutional
Institutional Money Market Salomon Smith Barney
Shares Fund 3-Month Treasury Index
<S> <C> <C> <C>
10/3/89 10000000 10000000 10000000
1989 11 10140494 10136959 10133938
1990 02 10350954 10343236 10329481
1990 05 10567462 10554594 10537764
1990 08 10786481 10766972 10743631
1990 11 11001752 10977021 10939471
1991 02 11208097 11172764 11123818
1991 05 11390381 11348299 11289106
1991 08 11561297 11510970 11447339
1991 11 11719410 11660890 11593651
1992 02 11856859 11773859 11716718
1992 05 11979213 11907770 11832112
1992 08 12091815 12010546 11934996
1992 11 12191380 12099339 12023776
1993 02 12291501 12174170 12122116
1993 05 12387968 12281674 12211923
1993 08 12484047 12369661 12303787
1993 11 12580752 12455060 12395310
1994 02 12679512 12528438 12496690
1994 05 12793128 12655037 12610032
1994 08 12932905 12782808 12743033
1994 11 13091443 12927106 12894841
1995 02 13279646 13084701 13079035
1995 05 13483260 13297913 13270797
1995 08 13683325 13485863 13457917
1995 11 13877492 13667830 13637584
1996 02 14069266 13830529 13825848
1996 05 14254510 14026639 13999364
1996 08 14446193 14204659 14177915
1996 11 14639214 14379924 14357649
1997 02 14833280 14538652 14547558
1997 05 15036360 14750413 14735731
1997 08 15246243 14947563 14922256
1997 11 15456944 15140621 15109989
1998 02 15670476 15319378 15312759
1998 05 15888376 15546936 15510830
1998 08 16108975 15754731 15704182
1998 11 16323903 15949131 15885132
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
SINCE $10,000,000
1 YEAR 5 YEARS INCEPTION INVESTMENT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Fund Institutional Shares* 5.61% 5.35% 5.50% $16,323,903
Average Institutional Money Market Fund 5.34 5.07 5.23 15,949,131
Salomon Smith Barney 3-Month Treasury Index 5.13 5.09 5.18 15,885,132
- -----------------------------------------------------------------------------------------------
</TABLE>
*Prior to 10/28/1995, total returns are for Vanguard Institutional Money Market
Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- --------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Money Market Fund
Institutional Shares** 10/3/1989 5.65% 5.27% 0.00% 5.50% 5.50%
- --------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Prior to 10/28/1995, total returns are for Vanguard Institutional Money
Market Portfolio.
9
<PAGE> 12
PERFORMANCE SUMMARY
FEDERAL MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note that 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>
TOTAL INVESTMENT RETURNS: JULY 13, 1981-NOVEMBER 30, 1998
- --------------------------------------------------------------------
FEDERAL MONEY MARKET FUND 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 5.4 5.4 4.9
1998 0.0 5.4 5.4 4.9
- --------------------------------------------------------------------
</TABLE>
*Average U.S. Government Money Market Fund.
See Financial Highlights table on page 29 for dividend information for the past
five years.
SEC 7-Day Annualized Yield (11/30/1998): 4.91%
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1988-NOVEMBER 30, 1998
- -------------------------------------------------------------------
Average U.S.
Government
Federal Money Money Market Salomon Smith Barney
Market Fund Fund 3-Month Treasury Index
<S> <C> <C> <C>
1988 11 10000 10000 10000
1989 02 10210 10197 10205
1989 05 10452 10427 10433
1989 08 10691 10651 10652
1989 11 10916 10860 10863
1990 02 11134 11067 11076
1990 05 11358 11277 11299
1990 08 11583 11492 11520
1990 11 11805 11697 11730
1991 02 12012 11889 11928
1991 05 12197 12060 12105
1991 08 12372 12225 12274
1991 11 12535 12369 12431
1992 02 12675 12496 12563
1992 05 12800 12607 12687
1992 08 12916 12711 12797
1992 11 13016 12791 12893
1993 02 13113 12877 12998
1993 05 13209 12958 13094
1993 08 13307 13044 13193
1993 11 13404 13119 13291
1994 02 13502 13205 13400
1994 05 13616 13302 13521
1994 08 13756 13427 13664
1994 11 13916 13563 13827
1995 02 14107 13735 14024
1995 05 14316 13920 14230
1995 08 14520 14103 14430
1995 11 14719 14277 14623
1996 02 14915 14452 14825
1996 05 15103 14620 15011
1996 08 15298 14792 15202
1996 11 15494 14960 15395
1997 02 15690 15134 15599
1997 05 15897 15317 15800
1997 08 16110 15505 16000
1997 11 16323 15688 16202
1998 02 16539 15880 16419
1998 05 16759 16085 16632
1998 08 16981 16282 16839
1998 11 17197 16463 17033
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Money Market Fund 5.35% 5.11% 5.57% $17,197
Average U.S. Government Money Market Fund 4.94 4.65 5.11 16,463
Salomon Smith Barney 3-Month Treasury Index 5.13 5.09 5.47 17,033
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION ------------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal Money Market Fund 7/13/1981 5.40% 5.04% 0.00% 5.62% 5.62%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
10
<PAGE> 13
PERFORMANCE SUMMARY
TREASURY MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note that 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>
TOTAL INVESTMENT RETURNS: MARCH 9, 1983-NOVEMBER 30, 1998
- -----------------------------------------------------------------
TREASURY MONEY MARKET FUND* AVERAGE
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 7.8
1991 0.0 5.9 5.9 5.8
1992 0.0 3.7 3.7 3.5
1993 0.0 2.9 2.9 2.6
1994 0.0 3.6 3.6 3.4
1995 0.0 5.5 5.5 5.2
1996 0.0 5.1 5.1 4.8
1997 0.0 5.1 5.1 4.8
1998 0.0 5.1 5.1 4.8
</TABLE>
*Prior to 12/2/1996, known as the U.S. Treasury Portfolio; prior to 3/13/1989,
total returns are for the Insured Portfolio.
**Average Money Market Fund through 3/31/1989; Average U.S. Treasury Money
Market Fund thereafter.
See Financial Highlights table on page 29 for dividend information for the past
five years.
SEC 7-Day Annualized Yield (11/30/1998): 4.47%
<TABLE>
<CAPTION>
Cumulative Performance: November 30, 1988-November 30, 1998
- -------------------------------------------------------------------------
Treasury Money Average U.S. Treasury Salomon Smith Barney
Money Fund Money Market Fund 3-Month Treasury Index
<S> <C> <C> <C>
1988 11 10000 10000 10000
1989 02 10210 10204 10205
1989 05 10442 10439 10433
1989 08 10672 10660 10652
1989 11 10890 10865 10863
1990 02 11103 11079 11076
1990 05 11324 11290 11299
1990 08 11547 11506 11520
1990 11 11764 11716 11730
1991 02 11960 11907 11928
1991 05 12139 12080 12105
1991 08 12306 12245 12274
1991 11 12464 12386 12431
1992 02 12597 12523 12563
1992 05 12717 12639 12687
1992 08 12829 12740 12797
1992 11 12922 12826 12893
1993 02 13015 12911 12998
1993 05 13107 12997 13094
1993 08 13200 13080 13193
1993 11 13293 13153 13291
1994 02 13386 13248 13400
1994 05 13493 13347 13521
1994 08 13624 13467 13664
1994 11 13775 13607 13827
1995 02 13952 13775 14024
1995 05 14148 13961 14230
1995 08 14340 14142 14430
1995 11 14528 14320 14623
1996 02 14714 14493 14825
1996 05 14896 14662 15011
1996 08 15083 14831 15202
1996 11 15271 15002 15395
1997 02 15456 15173 15599
1997 05 15652 15353 15800
1997 08 15852 15535 16000
1997 11 16050 15720 16202
1998 02 16252 15907 16419
1998 05 16459 16097 16632
1998 08 16666 16288 16839
1998 11 16863 16455 17033
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Money Market Fund* 5.06% 4.87% 5.36% $16,863
Average U.S. Treasury Money Market Fund** 4.75 4.58 5.11 16,455
Salomon Smith Barney 3-Month Treasury Index 5.13 5.09 5.47 17,033
- --------------------------------------------------------------------------------------------------
</TABLE>
*Prior to 12/2/1996, known as the U.S. Treasury Portfolio; prior to 3/13/1989,
total returns are for the Insured Portfolio.
**Average Money Market Fund through 3/31/1989; Average U.S. Treasury Money
Market Fund thereafter.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- -----------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION ----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Treasury Money Market Fund** 3/9/1983 5.13% 4.81% 0.00% 5.42% 5.42%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
**Prior to 12/2/1996, known as the U.S. Treasury Portfolio; prior to 3/13/1989,
total returns are for the Insured Portfolio.
11
<PAGE> 14
FUND PROFILE
PRIME MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998. Key elements of this Profile are defined below.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- --------------------------------------------
<S> <C>
Yield 5.0%
Yield--Institutional Shares 5.2%
Average Maturity 76 days
Average Quality Aa1
Expense Ratio 0.33%
Expense Ratio--Institutional Shares 0.15%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- --------------------------------------------------
<S> <C>
Certificates of Deposit 32.3%
Commercial Paper 34.2
Treasury/Agency 28.1
Other 5.4
- --------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Treasury/Agency 28.1%
Aaa 11.0
Aa 48.6
A 12.3
Baa 0.0
Ba 0.0
B 0.0
Not Rated 0.0
- -----------------------------------------------
Total 100.0%
</TABLE>
AVERAGE MATURITY. The average length of time until bonds held by
a fund reach maturity (or are called) and are repaid. In general, the longer the
average maturity, the more a fund's share price will fluctuate in response to
changes in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY ISSUER. A breakdown of a fund's holdings by type of issuer or
type of instrument.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past seven days and is annualized, or projected forward for the coming year.
12
<PAGE> 15
FUND PROFILE
FEDERAL MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998. Key elements of this Profile are defined on page 12.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------
<S> <C>
Yield 4.9%
Average Maturity 75 days
Average Quality Agency
Expense Ratio 0.33%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ------------------------------------------------
<S> <C>
Treasury/Agency 100.0%
</TABLE>
FUND PROFILE
Treasury Money Market Fund
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998. Key elements of this Profile are defined on page 12.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------------
<S> <C>
Yield 4.5%
Average Maturity 73 days
Average Quality Treasury
Expense Ratio 0.33%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
Treasury 100.0%
</TABLE>
13
<PAGE> 16
FINANCIAL STATEMENTS
NOVEMBER 30, 1998
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings on the last day
of the reporting period, including each security's maturity date, coupon rate or
yield to maturity at the time of purchase, and statement-date market value.
Securities are grouped and subtotaled by type of instrument (U.S. government
obligations, commercial paper, certificates of deposit, etc.). Other assets are
added to, and liabilities are subtracted from, the value of Total Investments to
calculate the fund's Net Assets. Finally, Net Assets are divided by the
outstanding shares of the fund to arrive at its share price, or Net Asset Value
(NAV) Per Share. Each fund's objective is to maintain a constant NAV of $1.00
per share.
At the end of the Statement of Net Assets of each fund, you will find a
table displaying the composition of the fund's net assets. Virtually the entire
amount of net assets consists of Paid in Capital (money invested by
shareholders). Undistributed Net Investment Income is usually zero because the
fund distributes its net income to shareholders as a dividend each day, and
Accumulated Realized Gains (Losses) are very small because the fund seldom
realizes any significant gains or losses on sales of securities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (28.4%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank 5.02% 2/26/1999 (1) $685,000 $ 684,603
Federal Home Loan Bank 5.02% 3/1/1999 (1) 500,000 499,632
Federal Home Loan Bank 5.353% 12/4/1998 (1) 485,000 484,783
Federal Home Loan Bank 5.65% 4/9/1999 185,000 184,983
Federal Home Loan Mortgage Corp. 4.84% 12/26/1998 (1) 300,000 299,968
Federal Home Loan Mortgage Corp. 4.96% 2/27/1999 (1) 500,000 499,475
Federal Home Loan Mortgage Corp. 4.967% 4/1/1999 50,000 49,185
Federal Home Loan Mortgage Corp. 5.052% 3/26/1999 282,547 278,106
Federal Home Loan Mortgage Corp. 5.054% 3/29/1999 200,000 196,768
Federal Home Loan Mortgage Corp. 5.163% 2/25/1999 125,000 123,518
Federal Home Loan Mortgage Corp. 5.168% 3/22/1999 50,000 49,223
Federal Home Loan Mortgage Corp. 5.203% 3/25/1999 297,751 293,009
Federal Home Loan Mortgage Corp. 5.209% 3/19/1999 123,484 121,610
Federal Home Loan Mortgage Corp. 5.261% 2/24/1999 299,600 295,957
Federal Home Loan Mortgage Corp. 5.292% 2/19/1999 46,500 45,968
Federal Home Loan Mortgage Corp. 5.295% 2/16/1999 105,000 103,837
Federal National Mortgage Assn. 4.85% 12/23/1998 (1) 490,000 489,752
Federal National Mortgage Assn. 4.958% 1/23/1999 (1) 800,000 799,597
Federal National Mortgage Assn. 4.967% 4/1/1999 61,597 60,593
Federal National Mortgage Assn. 4.97% 1/21/1999 (1) 300,000 299,850
Federal National Mortgage Assn. 4.989% 2/3/1999 (1) 340,000 339,821
Federal National Mortgage Assn. 4.99% 1/30/1999 (1) 475,000 474,754
Federal National Mortgage Assn. 5.01% 2/28/1999 (1) 310,000 309,866
Federal National Mortgage Assn. 5.051% 3/25/1999 337,045 331,700
Federal National Mortgage Assn. 5.053% 3/26/1999 104,100 102,460
Federal National Mortgage Assn. 5.064% 12/17/1998 (1) 250,000 249,959
Federal National Mortgage Assn. 5.157% 2/14/1999 (1) 505,000 504,810
Federal National Mortgage Assn. 5.169% 2/19/1999 (1) 80,000 79,984
Federal National Mortgage Assn. 5.176% 1/14/1999 (1) 200,000 199,988
Federal National Mortgage Assn. 5.177% 3/18/1999 300,000 295,497
Federal National Mortgage Assn. 5.26% 12/15/1998 (1) 470,000 469,777
Federal National Mortgage Assn. 5.32% 12/17/1998 (1) 500,000 499,762
Federal National Mortgage Assn. 5.45% 4/15/1999 188,200 188,025
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $9,906,820) 9,906,820
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (34.6%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANK HOLDING COMPANIES (1.7%)
BankAmerica Corp. 5.30% 2/4/1999 $ 50,000 $ 49,528
Chase Manhattan Corp. 5.278% 12/28/1998 150,000 149,413
Citigroup 5.361% 1/26/1999 25,000 24,794
First Union Corp. 5.304% 2/16/1999 150,000 148,322
Norwest Corp. 5.005% 2/18/1999 40,000 39,568
Norwest Corp. 5.075% 3/30/1999 100,000 98,364
Republic New York Corp. 5.526% 12/1/1998 40,000 40,000
Wachovia Corp. 5.402% 12/14/1998 35,000 34,933
Wachovia Corp. 5.559% 12/10/1998 20,000 19,973
-----------
604,895
-----------
FINANCE--AUTO (3.8%)
Chrysler Financial Corp. 5.251% 1/8/1999 50,000 49,727
Chrysler Financial Corp. 5.27% 1/14/1999 50,000 49,682
Daimler-Benz NA Corp. 5.258% 12/22/1998 25,000 24,924
Daimler-Benz NA Corp. 5.282% 2/8/1999 50,000 49,501
Daimler-Benz NA Corp. 5.292% 2/16/1999 50,000 49,442
Daimler-Benz NA Corp. 5.319% 2/11/1999 50,000 49,475
Daimler-Benz NA Corp. 5.501% 12/3/1998 21,000 20,994
Daimler-Benz NA Corp. 5.506% 12/9/1998 20,000 19,976
Daimler-Benz NA Corp. 5.511% 12/15/1998 15,000 14,968
Daimler-Benz NA Corp. 5.539% 12/1/1998 6,279 6,279
Ford Motor Credit Co. 5.168% 3/4/1999 69,779 68,860
Ford Motor Credit Co. 5.297% 2/12/1999 50,000 49,470
Ford Motor Credit Co. 5.30% 2/16/1999 100,000 98,881
Ford Motor Credit Co. 5.45% 12/1/1998 200,000 200,000
Ford Motor Credit Co. 5.475% 12/10/1998 180,000 179,757
General Motors Acceptance Corp. 5.145% 1/21/1999 100,000 99,280
General Motors Acceptance Corp. 5.273% 1/19/1999 200,000 198,584
General Motors Acceptance Corp. 5.311% 2/18/1999 100,000 98,850
-----------
1,328,650
-----------
FINANCE--OTHER (13.4%)
American Express Credit Corp. 5.409% 12/10/1998 100,000 99,866
American General Corp. 5.22% 2/5/1999 25,000 24,764
Asset Securitization Cooperative Corp. 5.248% 1/27/1999 50,000 49,590
Asset Securitization Cooperative Corp. 5.248% 2/17/1999 78,750 77,866
Asset Securitization Cooperative Corp. 5.248% 2/18/1999 75,000 74,147
Asset Securitization Cooperative Corp. 5.315% 1/22/1999 50,000 49,621
Asset Securitization Cooperative Corp. 5.389% 1/29/1999 75,000 74,348
Asset Securitization Cooperative Corp. 5.446% 2/19/1999 50,000 49,403
Asset Securitization Cooperative Corp. 5.56% 12/1/1998 124,172 124,172
Asset Securitization Cooperative Corp. 5.583% 12/3/1998 10,000 9,997
Associates Corp. of North America 4.948% 3/15/1999 25,000 24,650
Associates Corp. of North America 4.948% 3/16/1999 75,000 73,939
Associates Corp. of North America 5.072% 4/9/1999 50,000 49,113
Associates Corp. of North America 5.074% 4/12/1999 50,000 49,092
Associates Corp. of North America 5.104% 3/11/1999 100,000 98,611
Associates Corp. of North America 5.162% 2/18/1999 100,000 98,887
Associates Corp. of North America 5.39% 3/8/1999 50,000 49,293
CIT Group Holdings Inc. 5.521% 12/3/1998 40,000 39,988
Centric Capital Corp. 5.211% 12/15/1998 55,335 55,224
Centric Capital Corp. 5.222% 1/25/1999 30,000 29,764
Centric Capital Corp. 5.321% 1/26/1999 10,000 9,918
Centric Capital Corp. 5.42% 1/29/1999 9,375 9,293
Centric Capital Corp. 5.43% 2/11/1999 20,000 19,786
Centric Capital Corp. 5.456% 12/18/1998 15,000 14,962
Centric Capital Corp. 5.457% 1/8/1999 50,000 49,715
Centric Capital Corp. 5.468% 2/4/1999 29,200 28,918
Centric Capital Corp. 5.473% 2/10/1999 19,800 19,592
Centric Capital Corp. 5.528% 12/11/1998 25,000 24,962
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Credit Co. 5.361% 1/26/1999 $ 75,000 $ 74,382
Delaware Funding 5.218% 1/20/1999 50,000 49,642
Delaware Funding 5.22% 1/22/1999 36,844 36,570
Delaware Funding 5.233% 1/14/1999 51,136 50,813
Delaware Funding 5.249% 2/19/1999 15,000 14,827
Delaware Funding 5.316% 12/18/1998 92,177 91,948
Delaware Funding 5.329% 12/8/1998 50,000 49,949
Delaware Funding 5.373% 2/5/1999 12,000 11,883
Delaware Funding 5.392% 1/21/1999 61,180 60,718
Delaware Funding 5.422% 2/10/1999 41,548 41,110
Delaware Funding 5.561% 1/28/1999 37,416 37,084
Enterprise Funding Corp. 5.243% 1/12/1999 15,047 14,956
Enterprise Funding Corp. 5.268% 1/20/1999 34,358 34,110
Enterprise Funding Corp. 5.348% 1/19/1999 15,965 15,850
Enterprise Funding Corp. 5.391% 1/14/1999 10,116 10,050
Enterprise Funding Corp. 5.407% 1/29/1999 156,227 154,839
Enterprise Funding Corp. 5.421% 1/27/1999 10,210 10,123
Enterprise Funding Corp. 5.422% 1/13/1999 14,926 14,831
Enterprise Funding Corp. 5.438% 1/15/1999 61,831 61,419
Enterprise Funding Corp. 5.453% 2/4/1999 50,683 50,191
Enterprise Funding Corp. 5.513% 1/28/1999 33,629 33,334
Enterprise Funding Corp. 5.514% 1/21/1999 25,804 25,605
Enterprise Funding Corp. 5.586% 1/22/1999 34,000 33,728
Enterprise Funding Corp. 5.646% 1/8/1999 21,625 21,497
First Chicago Financial Corp. 5.196% 1/28/1999 50,000 49,587
First Chicago Financial Corp. 5.343% 2/18/1999 30,000 29,653
General Electric Capital Corp. 5.011% 8/9/1999 200,000 193,265
General Electric Capital Corp. 5.056% 4/5/1999 100,000 98,281
General Electric Capital Corp. 5.135% 2/18/1999 125,000 123,605
General Electric Capital Corp. 5.308% 3/4/1999 20,000 19,732
General Electric Capital Corp. 5.46% 2/17/1999 100,000 98,845
General Electric Capital Corp. 5.57% 12/22/1998 150,000 149,520
General Electric Capital Corp. 5.58% 2/22/1999 210,000 207,442
General Electric Capital Corp. 5.615% 1/28/1999 255,000 252,751
General Electric Capital Corp. 5.635% 12/8/1998 50,000 49,947
General Electric Capital Corp. 5.639% 2/1/1999 148,093 146,695
General Electric Capital Corp. 5.649% 12/31/1998 35,000 34,840
General Electric Capital Corp. 5.66% 2/25/1999 50,000 49,345
Norwest Financial Corp. 5.23% 2/18/1999 75,000 74,152
Riverwoods Funding Corp. 5.219% 1/21/1999 106,000 105,220
Riverwoods Funding Corp. 5.424% 2/5/1999 100,000 99,019
Riverwoods Funding Corp. 5.424% 2/12/1999 178,000 176,069
Triple A One Funding Corp. 5.01% 12/4/1998 66,771 66,743
Triple A One Funding Corp. 5.272% 12/9/1998 69,975 69,893
Triple A One Funding Corp. 5.315% 12/7/1998 100,000 99,912
Triple A One Funding Corp. 5.554% 1/15/1999 40,000 39,725
Triple A One Funding Corp. 5.604% 1/8/1999 48,382 48,099
-----------
4,661,280
-----------
INDUSTRIAL (1.3%)
Chevron Transport Co. 5.373% 2/8/1999 20,000 19,798
Chevron Transport Co. 5.373% 3/8/1999 10,000 9,859
Chevron Transport Co. 5.431% 2/9/1999 23,000 22,763
Coca-Cola Co. 5.498% 12/7/1998 50,000 49,955
Deere & Co. 5.243% 1/25/1999 20,000 19,842
E.I. du Pont de Nemours & Co. 5.268% 1/28/1999 100,000 99,161
Exxon Imperial U.S. Inc. 5.267% 3/10/1999 50,000 49,293
Koch Industries 5.263% 2/2/1999 25,000 24,772
Minnesota Mining and Manufacturing Co. 4.971% 2/19/1999 50,000 49,457
Procter & Gamble 5.497% 12/30/1998 100,000 99,565
Procter & Gamble 5.526% 12/16/1998 18,927 18,884
-----------
463,349
-----------
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURANCE (2.5%)
Marsh & McLennan Co. Inc. 5.392% 1/11/1999 $ 85,000 $ 84,483
Marsh & McLennan Co. Inc. 5.443% 1/14/1999 15,000 14,901
New York Life Capital Corp. 4.964% 2/24/1999 60,000 59,309
New York Life Capital Corp. 5.199% 3/19/1999 100,000 98,470
Prudential Funding 5.137% 2/19/1999 50,000 49,437
Prudential Funding 5.156% 1/28/1999 150,000 148,770
Prudential Funding 5.229% 2/4/1999 100,000 99,068
Pr4udential Funding 5.247% 12/10/1998 141,791 141,607
Prudential Funding 5.30% 2/8/1999 100,000 98,998
USAA Capital Corp. 4.995% 2/24/1999 30,000 29,652
USAA Capital Corp. 5.192% 1/29/1999 7,200 7,140
USAA Capital Corp. 5.564% 12/3/1998 27,152 27,144
-----------
858,979
-----------
FOREIGN BANKS (6.2%)
ABN-AMRO North America Finance Inc. 5.086% 3/31/1999 150,000 147,515
ABN-AMRO North America Finance Inc. 5.214% 12/31/1998 200,000 199,142
Abbey National North America 5.649% 2/4/1999 50,000 49,504
Commonwealth Bank of Australia 5.50% 12/10/1998 50,000 49,932
Cregem North America Inc. 5.098% 3/18/1999 100,000 98,517
Cregem North America Inc. 5.18% 1/25/1999 75,000 74,415
Cregem North America Inc. 5.308% 3/17/1999 73,000 71,880
Cregem North America Inc. 5.329% 3/24/1999 100,000 98,371
Cregem North America Inc. 5.372% 3/16/1999 150,000 147,712
Halifax PLC 5.372% 3/11/1999 98,000 96,576
Halifax PLC 5.609% 12/1/1998 50,000 50,000
Internationale Nederlanden U.S. Funding 5.301% 12/11/1998 40,000 39,942
Lloyds Bank 5.098% 3/29/1999 100,000 98,371
Lloyds Bank 5.13% 2/26/1999 100,000 98,787
Lloyds Bank 5.344% 2/18/1999 100,000 98,852
Lloyds Bank 5.606% 12/23/1998 142,200 141,726
Lloyds Bank 5.624% 2/16/1999 100,000 98,832
UBS Finance Inc. 4.985% 2/22/1999 30,000 29,661
UBS Finance Inc. 5.035% 4/16/1999 150,000 147,218
UBS Finance Inc. 5.291% 1/15/1999 25,000 24,837
Westpac Capital Corp. 5.226% 12/30/1998 112,150 111,684
Westpac Capital Corp. 5.322% 2/10/1999 200,000 197,929
-----------
2,171,403
-----------
CANADIAN GOVERNMENT--NATIONAL & PROVINCIAL (0.5%)
Province of British Columbia 4.757% 5/17/1999 35,000 34,248
Province of British Columbia 4.863% 4/21/1999 31,300 30,718
Province of British Columbia 5.185% 3/12/1999 25,500 25,135
Province of British Columbia 5.294% 3/17/1999 8,900 8,765
Province of British Columbia 5.422% 3/8/1999 26,500 26,123
Canadian Wheat Board 5.604% 12/22/1998 23,000 22,927
Province of Ontario 5.402% 2/17/1999 (1) 25,000 25,006
-----------
172,922
-----------
OTHER FOREIGN GOVERNMENT (3.9%)
Caisse d'Amortissement de la Dette Sociale 5.362% 3/16/1999 200,000 196,955
Caisse des Depots et Consignations 4.928% 12/2/1998 135,000 134,982
Caisse des Depots et Consignations 4.949% 12/18/1998 253,620 253,030
Electricite de France 5.279% 3/12/1999 27,900 27,497
Electricite de France 5.325% 2/18/1999 71,000 70,188
KFW International Finance Inc. 5.208% 3/16/1999 110,000 108,357
KFW International Finance Inc. 5.213% 3/22/1999 110,000 108,263
KFW International Finance Inc. 5.267% 3/11/1999 60,000 59,143
KFW International Finance Inc. 5.618% 12/22/1998 45,000 44,856
Oesterreichische Kontollbank 5.308% 3/25/1999 177,450 174,545
Reseau Ferre De France 5.105% 2/19/1999 60,000 59,328
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reseau Ferre De France 5.35% 1/19/1999 $ 60,000 $ 59,567
Reseau Ferre De France 5.351% 1/20/1999 50,000 49,632
-----------
1,346,343
-----------
FOREIGN INDUSTRIAL (0.9%)
BP America Inc. 5.469% 12/3/1998 21,600 21,594
BP America Inc. 5.47% 12/4/1998 16,495 16,488
Diageo Capital PLC 5.116% 2/18/1999 63,000 62,302
Diageo Capital PLC 5.118% 2/22/1999 52,000 51,395
Glaxo Wellcome PLC 5.118% 2/22/1999 55,000 54,360
Glaxo Wellcome PLC 5.27% 2/16/1999 20,000 19,777
Reed Elsevier 5.40% 12/1/1998 30,790 30,790
Siemens Capital Corp. 5.648% 1/12/1999 70,000 69,552
-----------
326,258
-----------
FOREIGN UTILITIES (0.4%)
France Telecom 5.145% 2/25/1999 26,487 26,161
France Telecom 5.422% 12/14/1998 12,000 11,977
France Telecom 5.479% 12/16/1998 26,900 26,839
Telstra Corp. 5.132% 2/4/1999 30,000 29,726
Telstra Corp. 5.22% 3/5/1999 30,000 29,597
Telstra Corp. 5.225% 3/12/1999 30,000 29,567
-----------
153,867
-----------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $12,087,946) 12,087,946
- ------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (21.6%)
- ------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--U.S. BANKS (2.8%)
Bank of America N.T.S.A. 5.24% 9/22/1999 100,000 100,000
Bank of America N.T.S.A. 5.28% 3/23/1999 100,000 100,000
Bank of New York 5.64% 3/26/1999 15,000 15,019
Chase Manhattan Bank 4.90% 3/18/1999 150,000 150,000
Chase Manhattan Bank 5.12% 4/7/1999 100,000 100,000
Chase Manhattan Bank 5.25% 2/8/1999 250,000 250,000
Chase Manhattan Bank 5.30% 2/8/1999 100,000 100,000
LaSalle National Bank 5.03% 4/6/1999 50,000 50,000
Wachovia Bank 5.184% 1/26/1999 (1) 95,000 94,983
-----------
960,002
-----------
YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES (18.8%)
ABN-AMRO Bank 4.96% 11/16/1999 45,000 44,981
ABN-AMRO Bank 4.98% 9/28/1999 50,000 49,992
Bank of Montreal 5.13% 1/26/1999 100,000 100,000
Bank of Montreal 5.15% 1/27/1999 50,000 50,000
Bank of Montreal 5.25% 1/22/1999 100,000 100,000
Bank of Montreal 5.28% 1/29/1999 100,000 100,000
Barclays Bank PLC 5.079% 1/1/1999 (1) 200,000 199,931
Barclays Bank PLC 5.084% 1/2/1999 (1) 100,000 99,963
Barclays Bank PLC 5.63% 3/23/1999 28,000 28,009
Barclays Bank PLC 5.80% 4/29/1999 50,000 49,988
Bayerische Landesbank Girozentrale 4.87% 4/19/1999 200,000 200,000
Bayerische Landesbank Girozentrale 5.08% 3/16/1999 300,000 300,000
Bayerische Landesbank Girozentrale 5.635% 3/15/1999 61,000 61,075
Canadian Imperial Bank of Commerce 5.19% 2/5/1999 150,000 150,000
Canadian Imperial Bank of Commerce 5.23% 12/21/1998 75,000 75,000
Canadian Imperial Bank of Commerce 5.27% 1/14/1999 25,000 25,000
Canadian Imperial Bank of Commerce 5.27% 2/5/1999 150,000 150,000
Credit Agricole Indosuez 5.34% 2/22/1999 70,000 70,000
Credit Agricole Indosuez 5.47% 12/8/1998 150,000 150,000
Credit Agricole Indosuez 5.47% 1/11/1999 100,000 100,000
Credit Agricole Indosuez 5.62% 12/2/1998 100,000 100,000
Deutsche Bank 5.25% 1/19/1999 300,000 300,000
Deutsche Bank 5.635% 4/14/1999 75,000 75,122
Deutsche Bank 5.67% 2/26/1999 11,000 11,011
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutsche Bank 5.70% 1/7/1999 $ 48,000 $ 47,998
Dresdner Bank 4.87% 4/28/1999 100,000 100,000
Dresdner Bank 5.31% 3/17/1999 25,000 25,000
Dresdner Bank 5.33% 3/11/1999 23,000 23,001
Dresdner Bank 5.37% 2/16/1999 42,000 42,000
Landesbank Hassen-Thueringen 5.25% 2/4/1999 150,000 150,003
Lloyds Bank 5.15% 2/19/1999 50,000 50,000
National Westminster Bank 5.15% 3/1/1999 100,000 100,000
National Westminster Bank 5.23% 12/29/1998 100,000 100,000
National Westminster Bank 5.25% 12/28/1998 200,000 200,000
National Westminster Bank 5.25% 1/21/1999 100,000 100,000
National Westminster Bank 5.705% 4/16/1999 99,000 98,984
National Westminster Bank 5.73% 4/6/1999 50,000 49,995
National Westminster Bank 5.79% 4/30/1999 50,000 49,988
National Westminster Bank 5.815% 5/6/1999 50,000 49,988
Rabobank Nederlanden 5.37% 3/15/1999 100,000 100,000
Rabobank Nederlanden 5.60% 3/17/1999 77,000 77,031
Rabobank Nederlanden 5.62% 12/1/1998 50,000 50,000
Rabobank Nederlanden 5.63% 2/9/1999 100,000 100,000
Rabobank Nederlanden 5.68% 5/28/1999 50,000 49,984
Rabobank Nederlanden 5.71% 4/16/1999 100,000 99,986
Rabobank Nederlanden 5.71% 5/21/1999 80,000 80,182
Rabobank Nederlanden 5.72% 4/5/1999 200,000 199,967
Swiss Bank Corp. 5.65% 3/9/1999 130,000 130,123
Swiss Bank Corp. 5.68% 5/28/1999 100,000 99,967
Swiss Bank Corp. 5.68% 6/3/1999 250,000 249,915
Swiss Bank Corp. 5.69% 6/3/1999 50,000 49,986
Swiss Bank Corp. 5.72% 4/5/1999 200,000 199,967
Swiss Bank Corp. 5.74% 6/9/1999 62,000 62,143
Swiss Bank Corp. 5.74% 6/11/1999 125,000 125,292
Swiss Bank Corp. 5.75% 4/2/1999 50,000 50,000
Swiss Bank Corp. 5.82% 5/4/1999 85,000 85,233
Toronto Dominion Bank 5.16% 2/22/1999 100,000 100,000
Toronto Dominion Bank 5.16% 2/23/1999 50,000 50,001
Toronto Dominion Bank 5.64% 2/3/1999 100,000 100,000
Toronto Dominion Bank 5.71% 6/15/1999 100,000 100,467
UBS AG 5.695% 6/30/1999 18,000 18,069
Westdeutsche Landesbank 5.12% 3/29/1999 100,000 100,000
Westdeutsche Landesbank 5.25% 12/18/1998 200,000 200,000
Westdeutsche Landesbank 5.27% 1/25/1999 100,000 100,000
Westdeutsche Landesbank 5.39% 2/5/1999 150,000 150,000
Westdeutsche Landesbank 5.63% 2/4/1999 50,000 50,000
-----------
6,555,342
-----------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $7,515,344) 7,515,344
- -------------------------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (11.1%)
- -------------------------------------------------------------------------------------------------------------------------
Abbey National PLC 5.09% 5/13/1999 100,000 100,000
Abbey National PLC 5.10% 3/16/1999 100,000 100,000
Abbey National PLC 5.33% 3/24/1999 80,000 80,000
ABN-AMRO Bank 5.02% 5/5/1999 80,000 80,000
ABN-AMRO Bank 5.64% 2/3/1999 20,000 20,000
Barclays Bank PLC 4.875% 4/27/1999 100,000 99,993
Barclays Bank PLC 5.54% 2/10/1999 10,000 10,002
Barclays Bank PLC 5.64% 2/5/1999 150,000 150,001
Barclays Bank PLC 5.65% 2/3/1999 100,000 100,000
Barclays Bank PLC 5.70% 4/7/1999 25,000 24,995
Bayerische Landesbank Girozentrale 5.15% 2/22/1999 100,000 100,000
Bayerische Landesbank Girozentrale 5.61% 12/24/1998 100,000 100,000
Bayerische Landesbank Girozentrale 5.61% 12/29/1998 100,000 100,000
Bayerische Hypo und Vereinsbank 5.15% 1/27/1999 150,000 150,000
Bayerische Hypo und Vereinsbank 5.18% 3/2/1999 100,000 100,000
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bayerische Hypo und Vereinsbank 5.23% 12/29/1998 $100,000 $ 100,000
Bayerische Vereinsbank 5.45% 12/14/1998 50,000 50,003
Bayerische Vereinsbank 5.62% 12/4/1998 50,000 50,000
Bayerische Vereinsbank 5.63% 12/29/1998 50,000 50,000
Bayerische Vereinsbank 5.64% 2/4/1999 100,000 100,000
Credit Agricole Indosuez 4.90% 4/28/1999 50,000 50,002
Credit Agricole Indosuez 4.90% 4/29/1999 30,000 30,001
Deutsche Bank AG 5.03% 4/6/1999 150,000 150,000
Deutsche Bank AG 5.08% 4/5/1999 60,000 60,000
Deutsche Bank AG 5.13% 2/26/1999 100,000 100,007
Halifax PLC 4.98% 2/22/1999 75,000 75,002
Halifax PLC 5.11% 3/5/1999 50,000 50,001
Halifax PLC 5.29% 3/23/1999 50,000 50,001
Halifax PLC 5.33% 3/23/1999 50,000 50,002
Halifax PLC 5.65% 1/28/1999 80,000 80,002
Internationale Nederlanden Bank NV 5.14% 1/27/1999 100,000 100,002
Internationale Nederlanden Bank NV 5.15% 2/23/1999 100,000 100,002
Internationale Nederlanden Bank NV 5.16% 2/22/1999 35,000 35,001
Landesbank Hessen-Thueringen 5.07% 5/10/1999 200,000 200,009
Landesbank Hessen-Thueringen 5.28% 2/16/1999 250,000 250,005
Lloyds Bank 5.09% 3/16/1999 100,000 100,003
Lloyds Bank 5.25% 9/15/1999 25,000 25,046
Rabobank Nederlanden 4.87% 4/29/1999 300,000 300,000
Rabobank Nederlanden 4.88% 5/3/1999 200,000 200,000
Rabobank Nederlanden 5.15% 2/22/1999 100,000 100,000
Toronto Dominion 5.61% 12/21/1998 50,000 50,000
Toronto Dominion 5.62% 12/23/1998 50,000 50,000
- -------------------------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT
(COST $3,870,080) 3,870,080
- -------------------------------------------------------------------------------------------------------------------------
OTHER NOTES (5.5%)
- -------------------------------------------------------------------------------------------------------------------------
Abbey National Treasury Services 5.158% 12/15/1998 (1) 250,000 249,969
Abbey National Treasury Services 5.645% 6/1/1999 100,000 99,949
Bank of America N.T.S.A 5.079% 1/1/1999 (1) 244,000 243,917
Bank of America N.T.S.A 5.51% 2/17/1999 (1) 30,000 29,981
Banc One Corp. 5.55% 2/26/1999 44,000 43,977
FCC National Bank 5.49% 1/15/1999 50,000 50,001
FCC National Bank 5.59% 2/12/1999 100,000 100,000
FCC National Bank 5.71% 3/5/1999 18,000 18,010
First National Bank of Chicago 5.04% 4/9/1999 65,000 65,000
First Union National Bank 5.13% 2/18/1999 100,000 100,000
First Union National Bank 5.28% 2/18/1999 150,000 150,000
LaSalle National Bank 5.375% 2/24/1999 50,000 50,000
LaSalle National Bank 5.64% 2/2/1999 50,000 50,000
Nationsbank N.A. 5.07% 5/10/1999 150,000 150,000
Nationsbank N.A. 5.35% 2/23/1999 50,000 50,000
SMM Trust 1998-B 5.28% 12/5/1998 (1) 100,000 100,000
SMM Trust 1998-B 5.50% 12/16/1998 (1) 200,000 200,000
Wachovia Bank 5.10% 1/2/1999 (1) 135,000 134,989
Wachovia Bank 5.50% 1/28/1999 35,000 35,000
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER NOTES
(COST $1,920,793) 1,920,793
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(COST $35,300,983) 35,300,983
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-1.2%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B $ 421,022
Liabilities (846,678)
------------
(425,656)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $34,875,327
- -------------------------------------------------------------------------------------------------------------------------
</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) Adjustable Rate Note.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT
(000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $34,875,850
Undistributed Net Investment Income --
Accumulated Net Realized Losses (523)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $34,875,327
=========================================================================================================================
Investor Shares--Net Assets applicable to 33,732,899,221 outstanding $.001 par
value shares of beneficial interest (unlimited authorization) $33,732,405
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $1.00
=========================================================================================================================
Institutional Shares--Net Assets applicable to 1,142,948,989 outstanding $.001
par value shares of beneficial interest (unlimited authorization) $1,142,922
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $1.00
=========================================================================================================================
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
FEDERAL MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (99.4%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank 4.786% 12/18/1998 $ 42,400 $ 42,305
Federal Home Loan Bank 4.797% 12/4/1998 10,630 10,626
Federal Home Loan Bank 5.043% 2/3/1999 75,000 74,336
Federal Home Loan Bank 5.102% 12/8/1998 (1) 70,000 69,973
Federal Home Loan Bank 5.102% 3/1/1999 (1) 150,000 149,890
Federal Home Loan Bank 5.56% 3/25/1999 25,000 24,990
Federal Home Loan Bank 5.65% 4/9/1999 27,000 26,997
Federal Home Loan Bank 5.80% 12/18/1998 33,330 33,332
Federal Home Loan Mortgage Corp. 4.796% 12/18/1998 70,000 69,843
Federal Home Loan Mortgage Corp. 4.801% 12/10/1998 10,000 9,988
Federal Home Loan Mortgage Corp. 4.84% 12/26/1998 (1) 35,000 34,996
Federal Home Loan Mortgage Corp. 5.052% 3/26/1999 25,000 24,604
Federal Home Loan Mortgage Corp. 5.064% 2/3/1999 12,344 12,234
Federal Home Loan Mortgage Corp. 5.135% 2/18/1999 100,000 98,887
Federal Home Loan Mortgage Corp. 5.146% 2/10/1999 50,000 49,499
Federal Home Loan Mortgage Corp. 5.156% 2/11/1999 100,000 98,982
Federal Home Loan Mortgage Corp. 5.156% 2/26/1999 294,773 291,221
Federal Home Loan Mortgage Corp. 5.163% 2/25/1999 148,575 146,791
Federal Home Loan Mortgage Corp. 5.203% 3/25/1999 100,000 98,394
Federal Home Loan Mortgage Corp. 5.216% 12/23/1998 100,000 99,685
Federal Home Loan Mortgage Corp. 5.261% 2/24/1999 140,000 138,304
Federal Home Loan Mortgage Corp. 5.281% 2/12/1999 313,300 310,064
Federal Home Loan Mortgage Corp. 5.292% 2/19/1999 91,000 89,960
Federal Home Loan Mortgage Corp. 7.125% 7/21/1999 14,000 14,190
Federal National Mortgage Assn. 4.862% 2/2/1999 6,188 6,136
Federal National Mortgage Assn. 4.942% 4/23/1999 13,891 13,624
Federal National Mortgage Assn. 4.958% 1/23/1999 (1) 200,000 199,899
Federal National Mortgage Assn. 4.97% 1/21/1999 (1) 100,000 99,950
Federal National Mortgage Assn. 4.972% 4/9/1999 100,000 98,262
Federal National Mortgage Assn. 4.989% 2/3/1999 (1) 160,000 159,916
Federal National Mortgage Assn. 5.01% 2/28/1999 (1) 275,000 274,881
Federal National Mortgage Assn. 5.046% 2/25/1999 59,000 58,302
Federal National Mortgage Assn. 5.064% 12/17/1998 (1) 150,000 149,975
Federal National Mortgage Assn. 5.064% 2/5/1999 75,000 74,312
Federal National Mortgage Assn. 5.158% 2/19/1999 145,200 143,560
Federal National Mortgage Assn. 5.169% 2/19/1999 (1) 35,000 34,993
Federal National Mortgage Assn. 5.176% 1/14/1999 (1) 100,000 99,994
Federal National Mortgage Assn. 5.231% 3/15/1999 145,386 143,247
Federal National Mortgage Assn. 5.231% 3/19/1999 98,785 97,274
Federal National Mortgage Assn. 5.26% 12/15/1998 (1) 15,000 14,993
Federal National Mortgage Assn. 5.289% 2/18/1999 100,000 98,866
Federal National Mortgage Assn. 5.346% 8/27/1999 50,000 48,102
Federal National Mortgage Assn. 5.36% 2/19/1999 30,000 29,991
Federal National Mortgage Assn. 5.37% 2/26/1999 30,000 29,984
Federal National Mortgage Assn. 5.448% 1/7/1999 85,515 85,061
Federal National Mortgage Assn. 5.45% 4/15/1999 60,000 59,944
Federal National Mortgage Assn. 5.49% 8/3/1999 50,000 49,950
Federal National Mortgage Assn. 5.52% 8/9/1999 60,000 59,954
Federal National Mortgage Assn. 6.43% 4/11/1999 14,000 14,064
Federal National Mortgage Assn. 6.60% 6/24/1999 20,000 20,217
Overseas Private Investment Corp. 4.963% 12/8/1998 (1) 11,471 11,471
Overseas Private Investment Corp. 5.298% 1/15/1999 (1) 13,325 13,325
Overseas Private Investment Corp. 5.45% 12/15/1998 (1) 24,792 24,792
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $4,235,130) 4,235,130
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT (1.4%)
- -------------------------------------------------------------------------------------------------------------------------
Societe General
(Dated 11/30/1998, Repurchase Value $61,236,000
Collateralized by U.S. Treasury Note 6.50%, 8/15/2005,
and U.S. Treasury Bond 9.125%, 5/15/2018) 5.35% 12/1/1998 $61,236 $ 61,236
- -------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $61,236) 61,236
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%)
(COST $4,296,366) 4,296,366
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.8%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 134,056
Payables for Investment Securities Sold (149,890)
Other Liabilities (17,630)
---------
(33,464)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 4,262,943,303 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $4,262,902
=========================================================================================================================
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) Adjustable Rate Note.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $4,262,972 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (70) --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $4,262,902 $1.00
=========================================================================================================================
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TREASURY MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (99.3%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bill 3.88% 12/31/1998 $ 3,339 $ 3,327
U.S. Treasury Bill 3.892% 1/21/1999 1,307,463 1,299,033
U.S. Treasury Bill 3.916% 1/28/1999 100,000 99,349
U.S. Treasury Bill 4.175% 1/7/1999 100,000 99,573
U.S. Treasury Bill 4.387% 2/11/1999 5,993 5,940
U.S. Treasury Bill 4.467% 2/25/1999 400,000 395,765
U.S. Treasury Bill 4.50% 2/4/1999 97,142 96,361
U.S. Treasury Bill 4.501% 3/4/1999 32,060 31,706
U.S. Treasury Bill 4.844% 12/15/1998 40,000 39,925
U.S. Treasury Bill 5.252% 12/17/1998 10,698 10,674
U.S. Treasury Bill 5.512% 12/10/1998 45,000 44,942
U.S. Treasury Note 5.00% 1/31/1999 25,000 25,005
U.S. Treasury Note 5.00% 2/15/1999 13,093 13,108
U.S. Treasury Note 5.125% 12/31/1998 85,000 85,029
U.S. Treasury Note 5.50% 2/28/1999 64,347 64,468
U.S. Treasury Note 5.75% 12/31/1998 35,000 35,018
U.S. Treasury Note 5.875% 1/31/1999 399,831 400,340
U.S. Treasury Note 5.875% 2/28/1999 511,748 512,626
U.S. Treasury Note 6.25% 3/31/1999 18,636 18,748
U.S. Treasury Note 6.25% 5/31/1999 82,453 83,190
U.S. Treasury Note 6.375% 4/30/1999 210,888 212,133
U.S. Treasury Note 6.375% 5/15/1999 40,448 40,825
U.S. Treasury Note 6.50% 4/30/1999 40,000 40,168
U.S. Treasury Note 6.75% 5/31/1999 90,000 91,095
U.S. Treasury Note 7.00% 4/15/1999 1,618 1,633
U.S. Treasury Note 8.875% 2/15/1999 162,422 163,699
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $3,913,680) 3,913,680
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.7%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 86,875
Liabilities (58,304)
------------
28,571
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 3,942,155,531 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $3,942,251
=========================================================================================================================
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 NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $3,942,175 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 76 --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS 3,942,251 $1.00
=========================================================================================================================
</TABLE>
24
<PAGE> 27
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to each class of its shares. Expenses
directly reduce the amount of investment income available to pay to shareholders
as income dividends. This Statement also shows any Net Gain (Loss) realized on
the sale of investments, and any Unrealized Appreciation (Depreciation) on
investments during the period. For money market funds, Realized Net Gain (Loss)
should always be minimal and Unrealized Appreciation (Depreciation) should be
zero.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRIME FEDERAL TREASURY
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
-------------------------------------------------
YEAR ENDED NOVEMBER 30, 1998
-------------------------------------------------
(000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest $1,711,004 $209,330 $187,825
-------------------------------------------------
Total Income 1,711,004 209,330 187,825
-------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 3,811 475 453
Management and Administrative 27,565 4,666 4,771
Shareholder Account Maintenance(1) 55,124 5,791 5,246
Marketing and Distribution(1) 9,537 1,194 1,134
Custodian Fees 915 39 19
Taxes (other than income taxes) 1,069 134 --
Auditing Fees 29 10 10
Shareholders' Reports(1) 627 88 80
Annual Meeting and Proxy Costs(1) 154 21 18
Trustees' Fees and Expenses 58 7 7
-------------------------------------------------
Total Expenses 98,889 12,425 11,738
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,612,115 196,905 176,087
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD (414) 8 117
- ------------------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES -- -- --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,611,701 $196,913 $176,204
========================================================================================================================
</TABLE>
(1)Expenses of the Prime Money Market Fund by Class are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(000)
--------------------------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class-Specific Expenses:
Shareholder Account Maintenance $55,067 $ 57 $55,124
Marketing and Distribution 9,259 278 9,537
Shareholders' Reports 627 -- 627
Annual Meeting and Proxy Costs 154 -- 154
--------------------------------------------------
Total Class-Specific Expenses 65,107 335 65,442
All Other Fund Expenses 32,535 912 33,447
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses $97,642 $1,247 $98,889
=========================================================================================================================
</TABLE>
See Note C in Notes to Financial Statements.
25
<PAGE> 28
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the fund distributes its income
to shareholders each day, the amounts of Dividends from Net Investment Income
generally equal the net income earned as shown under the Operations section. The
Capital Share Transactions section shows the amount shareholders invested in the
fund, either by purchasing shares or by reinvesting distributions, and the
amounts redeemed. Dividends and Capital Share Transactions are shown separately
for each class of shares.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
YEAR ENDED NOVEMBER 30,
---------------------------------
1998 1997
(000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 1,612,115 $ 1,358,512
Realized Net Gain (Loss) (414) (92)
Unrealized Appreciation (Depreciation) --- --
---------------------------------
Net Increase in Net Assets Resulting from Operations 1,611,701 1,358,420
---------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares (1,566,704) (1,306,563)
Institutional Shares (45,411) (51,949)
---------------------------------
Total Dividends (1,612,115) (1,358,512)
---------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES (AT $1.00)
Issued 40,996,560 31,513,673
Issued in Lieu of Cash Distributions 1,502,710 1,250,400
Redeemed (35,246,336) (28,501,916)
---------------------------------
Net Increase--Investor Shares 7,252,934 4,262,157
---------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES (AT $1.00)
Issued 1,343,463 1,397,375
Issued in Lieu of Cash Distributions 43,052 47,111
Redeemed (1,194,286) (1,404,015)
---------------------------------
Net Increase--Institutional Shares 192,229 40,471
- ----------------------------------------------------------------------------------------------------------------------
Total Increase 7,444,749 4,302,536
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 27,430,578 23,128,042
---------------------------------
End of Year $34,875,327 $27,430,578
======================================================================================================================
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FEDERAL MONEY MARKET FUND TREASURY MONEY MARKET FUND
--------------------------- ----------------------------
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------
1998 1997 1998 1997
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 196,905 $ 172,886 $ 176,087 $ 156,386
Realized Net Gain (Loss) 8 14 117 79
Unrealized Appreciation (Depreciation) -- -- -- --
-------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 196,913 172,900 176,204 156,465
-------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME (196,905) (172,886) (176,087) (156,386)
-------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (AT $1.00)
Issued 3,829,342 3,056,215 4,266,305 3,454,680
Issued in Lieu of Cash Distributions 189,680 166,374 168,890 149,759
Redeemed (3,251,422) (2,827,790) (3,729,654) (3,284,455)
-------------------------------------------------------------------
Net Increase from Capital Share Transactions 767,600 394,799 705,541 319,984
- ------------------------------------------------------------------------------------------------------------------------
Total Increase 767,608 394,813 705,658 320,063
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 3,495,294 3,100,481 3,236,593 2,916,530
-------------------------------------------------------------------
End of Year $4,262,902 $3,495,294 $3,942,251 $3,236,593
========================================================================================================================
</TABLE>
27
<PAGE> 30
FINANCIAL HIGHLIGHTS
Each fund's objective is to maintain a constant NAV of $1.00 per share by
distributing all of its income and avoiding capital gains or losses. The
financial highlights table summarizes each fund's investment results and
distributions to shareholders on a per-share basis for each class of shares. The
table also presents the Total Return and shows net investment income and
expenses as percentages of average net assets for each fund or class of shares.
These data will help you assess the variability of net income returns from year
to year and how much it costs to operate the fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRIME MONEY MARKET FUND INVESTOR SHARES
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .053 .053 .052 .057 .038
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
-----------------------------------------------------------
Total from Investment Operations .053 .053 .052 .057 .038
-----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.053) (.053) (.052) (.057) (.038)
Distributions from Realized Capital Gains -- -- -- -- --
-----------------------------------------------------------
Total Distributions (.053) (.053) (.052) (.057) (.038)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
TOTAL RETURN 5.42% 5.41% 5.31% 5.82% 3.87%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $33,732 $26,480 $22,218 $18,764 $15,109
Ratio of Total Expenses to Average Net Assets 0.33% 0.32% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 5.28% 5.28% 5.18% 5.64% 3.84%
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRIME MONEY MARKET FUND INSTITUTIONAL SHARES
YEAR ENDED NOVEMBER 30,
--------------------------------- OCT. 28* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1998 1997 1996 NOV. 30, 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .055 .054 .054 .005
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- --
-------------------------------------------------
Total from Investment Operations .055 .054 .054 .005
-------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.055) (.054) (.054) (.005)
Distributions from Realized Capital Gains -- -- -- --
-------------------------------------------------
Total Distributions (.055) (.054) (.054) (.005)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN 5.61% 5.59% 5.49% 0.53%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,143 $951 $910 $793
Ratio of Total Expenses to Average Net Assets 0.15% 0.15% 0.15% 0.15%**
Ratio of Net Investment Income to Average Net Assets 5.46% 5.44% 5.35% 5.65%**
============================================================================================================================
</TABLE>
*Inception.
**Annualized.
28
<PAGE> 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FEDERAL MONEY MARKET FUND
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .052 .052 .051 .056 .038
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
----------------------------------------------------------
Total from Investment Operations .052 .052 .051 .056 .038
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.052) (.052) (.051) (.056) (.038)
Distributions from Realized Capital Gains -- -- -- -- --
----------------------------------------------------------
Total Distributions (.052) (.052) (.051) (.056) (.038)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
TOTAL RETURN 5.35% 5.35% 5.26% 5.77% 3.82%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $4,263 $3,495 $3,100 $2,637 $2,196
Ratio of Total Expenses to Average Net Assets 0.33% 0.32% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 5.21% 5.22% 5.13% 5.61% 3.78%
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TREASURY MONEY MARKET FUND
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .050 .050 .050 .053 .036
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
----------------------------------------------------------
Total from Investment Operations .050 .050 .050 .053 .036
----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.050) (.050) (.050) (.053) (.036)
Distributions from Realized Capital Gains -- -- -- -- --
----------------------------------------------------------
Total Distributions (.050) (.050) (.050) (.053) (.036)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
TOTAL RETURN 5.06% 5.10% 5.11% 5.47% 3.63%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $3,942 $3,237 $2,917 $2,527 $2,056
Ratio of Total Expenses to Average Net Assets 0.33% 0.32% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 4.94% 4.98% 4.99% 5.33% 3.59%
=========================================================================================================================
</TABLE>
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
Vanguard Money Market Funds comprises the Prime Money Market Fund, Federal Money
Market Fund, and Treasury Money Market Fund, each of which is registered under
the Investment Company Act of 1940 as a diversified open-end investment company,
or mutual fund. The Prime Money Market Fund invests in short-term debt
instruments of companies primarily operating in specific industries; the
issuers' abilities to meet their obligations may be affected by economic
developments in such industries. The Federal Money Market Fund invests in
short-term debt instruments issued by the U.S. government or its agencies and
instrumentalities. The Treasury Money Market Fund invests in short-term debt
instruments backed by the full faith and credit of the U.S. government.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Securities are valued at amortized cost, which
approximates market value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
3. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used to determine realized gains
(losses) on the sale of investment securities are those of the specific
securities sold. Discounts and premiums are accreted and amortized,
respectively, to interest income over the lives of the respective securities.
Dividends from net investment income are declared daily and paid on the first
business day of the following month.
4. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, shareholder accounting, marketing, and distribution
services. The costs of such services are allocated to each fund under methods
approved by the Board of Trustees. Each fund has committed to provide up to
0.40% of its assets in capital contributions to Vanguard. At November 30, 1998,
the funds had contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF PORTFOLIO OF VANGUARD'S
MONEY MARKET FUND (000) NET ASSETS CAPITALIZATION
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime $6,435 0.02% 9.2%
Federal 784 0.02 1.1
Treasury 728 0.02 1.0
-------------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The Prime Fund offers two classes of shares, the Investor Shares and the
Institutional Shares. Institutional shares are designed primarily for
institutional investors that meet certain administrative and servicing criteria
and have a minimum investment of $10 million. Investor shares are offered to all
other investors. Both classes of shares have equal rights as to assets and
earnings, except that each class bears certain class-specific expenses related
to its shareholder activity. For the year ended November 30, 1998,
class-specific expenses of the Investor Shares and Institutional Shares
represented effective annual rates of 0.22% and 0.04%, respectively, of their
average net assets. Income, expenses not attributable to a specific class, and
realized and unrealized gains and losses on investments are allocated to each
class of shares based on its relative net assets.
30
<PAGE> 33
REPORT OF INDEPENDENT
ACCOUNTANTS
[PHOTO]
To the Shareholders and
Trustees of Vanguard Money Market Funds
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Prime Money Market Fund, Federal Money Market Fund and Treasury Money Market
Fund (hereafter referred to as the "Funds") at November 30, 1998, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 1999
31
<PAGE> 34
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
BARBARA BARNES HAUPTFUHRER
Director of The Great Atlantic and Pacific Tea Co., IKON Office Solutions, Inc.,
Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance Co., and
Ladies Professional Golf Association; Trustee Emerita of Wellesley College.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson - Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
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, Banco Bilbao Gestinova, Baker Fentress &
Co., The Jeffrey Co., and Southern New England Telecommunications 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.,
NACCO Industries, and Newfield Exploration Co.
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. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
KAREN E. WEST
Controller; Principal of The Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DiSTEFANO
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JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MacKINNON
Managing Director, Fixed Income Group.
F. WILLIAM McNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"STANDARD & POOR'S(R)," "S&P(R)," "S&P 500(R)," "STANDARD & POOR'S 500," AND
"500" ARE TRADEMARKS OF THE MCGRAW-HILL COMPANIES, INC. FRANK RUSSELL
COMPANY IS THE OWNER OF TRADEMARKS AND COPYRIGHTS RELATING TO THE
RUSSELL INDEXES. "WILSHIRE 4500" AND "WILSHIRE 5000" ARE
TRADEMARKS OF WILSHIRE ASSOCIATES.
<PAGE> 35
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
first balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
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FUND INFORMATION
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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.
Q300-01/20/1999
(C) 1999 Vanguard Marketing Corporation, Distributor. All rights reserved.
