<PAGE> 1
CHAIRMAN'S LETTER
FELLOW SHAREHOLDER:
It would be hard to imagine a more favorable six-month period for a
conservative balanced fund than the first half of Wellington Fund's 1995 fiscal
year. The stock market, led by the blue-chip stocks, leaped upward. And
long-term bonds, bounding back from a tough 1994, did the same.
In the half year, which ended on May 31, 1995, Wellington Fund's total
return (capital change plus income) was +18.6%. This gain was roughly
commensurate with the returns achieved by the two unmanaged market indexes that
we use as benchmarks: for stocks, the Standard & Poor's 500 Composite Stock
Price Index; and for bonds, the Salomon Brothers High-Grade Bond Index. Perhaps
more significantly, our gain was half again as large as the +12.5% return
achieved by the average balanced fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Total Return
Six Months Ended
---------------------
May 31, 1995
- -----------------------------------------------------------
<S> <C>
WELLINGTON FUND +18.6%
- -----------------------------------------------------------
STANDARD & POOR'S 500 STOCK INDEX +19.2%
SALOMON BROTHERS BOND INDEX +17.0
- -----------------------------------------------------------
</TABLE>
The Fund's total return is based on net asset values of $19.33 per share on
November 30, 1994, and $22.34 on May 31, 1995, with the latter figure adjusted
to take into account the reinvestment of two dividends totaling $.48 per share
from net investment income, and a distribution of $.03 per share from net
capital gains realized during 1994. At May 31, 1995, Wellington's dividend
yield was 4.2%.
THE PERIOD IN REVIEW
After some weakness in November 1994, the stock market sprung to life as fiscal
year 1995 began. The advance has been as steady and solid as any bull market we
have seen, with the Dow Jones Industrial Average rising from 3834 as the
calendar year began to an all-time high of 4465 on May 31.
As usual, there were many opinions as to the source of the market's
strength. From my view, it resulted from a combination of: (1) the sharp
decline in interest rates (the yield on the long-term U.S. Treasury bond fell
from 8.0% to 6.6%, or 140 basis points); (2) the apparently diminishing threat
of additional increases in short-term interest rates by the Federal Reserve
Board; (3) a slight softening in U.S. economic growth, resulting in continued
optimism about the outlook for inflation; (4) record-breaking corporate
profits; and (5) a hint of speculative fever in the equity market. Whatever the
case, the strong market, led as it was by the large capitalization stocks,
resulted in a solid gain of +19.2% for the Standard & Poor's 500 Index.
In fact, the return earned in Wellington's stock portfolio was +20.1%,
slightly higher than the return on the Standard & Poor's 500 Index. Our excess
return over this demanding standard was earned primarily in the financial
group. In the first half of the fiscal year, this sector moved from being a
market laggard to a market leader, and our Fund was well-served by its
overweighted position (21% of the Fund's equity assets versus 11% for the
Index), as well as above-average stock selection on the part of our adviser,
Wellington Management Company. We were also advantaged by below-market
weightings in the consumer cyclical, consumer staples, and utility groups,
which all lagged the overall Index. (We held a total of 15% of our assets in
these groups compared with their 40% weighting in the Index.)
Our remarkable margin over the average balanced mutual fund (+18.6% versus
+12.5%), the largest we have achieved in recent memory, is quite another story.
Our typical competitor presently holds a smaller stock position than Wellington
Fund (52% of assets versus our 65%). In addition, our main focus is on large
capitalization stocks, while our peers maintain a greater concentration in
smaller stocks (smallcap stocks lagged the S&P 500 Index by a significant
margin). Finally, our typical competitor tends to maintain larger cash reserves
(10% of assets versus our 2%). Our low-reserve strategy is beneficial
1
<PAGE> 2
to relative performance in short-term market rises, but harmful in short-term
declines. Given that the return on cash reserves tends to fall short of the
return on stocks and bonds over the long term, our strategy is likely to
enhance Wellington's relative return.
IN SUMMARY
Our advice in the Fund's 1994 Annual Report, coming after a tough year for
stocks and a downright negative year for bonds, was to "stay the course" with
Wellington Fund's balanced program. So far in fiscal 1995, it has proved to be
good advice, with the Fund earning one of the highest absolute total returns
for any comparable period in its history, along with a substantial performance
advantage relative to its peers.
That said, stock and bond markets have increased so much, in such a short
time, it seems appropriate to sound a note of caution, and urge our
shareholders not to count on more of the same during the second half of the
year. We look forward to reporting on the full year's results, six months from
now in our 1995 Annual Report.
Sincerely,
/s/ JOHN C. BOGLE
- -----------------
John C. Bogle
Chairman of the Board
June 13, 1995
Note: Mutual fund data from Lipper Analytical Services, Inc.
AVERAGE ANNUAL TOTAL RETURNS--THE CURRENT YIELD QUOTED IN THE CHAIRMAN'S LETTER
IS CALCULATED IN ACCORDANCE WITH SEC GUIDELINES. THE AVERAGE ANNUAL TOTAL
RETURNS FOR THE FUND (PERIODS ENDED MARCH 31, 1995) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
10 YEARS
-----------------------------------
TOTAL CAPITAL INCOME
1 YEAR 5 YEARS RETURN RETURN RETURN
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
VANGUARD/WELLINGTON FUND +12.18% +10.45% +12.59% +6.56% +6.03%
</TABLE>
ALL OF THESE DATA REPRESENT PAST PERFORMANCE. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT INVESTORS' SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
2
<PAGE> 3
TOTAL INVESTMENT RETURN TABLE
The following table illustrates the results of a single-share investment in
VANGUARD/WELLINGTON FUND for the 25-year period ended May 31, 1995. During the
period illustrated, stock and bond prices fluctuated widely; these results
should not be considered a representation of the dividend income or capital
gain or loss that may be realized from an investment made in the Fund today.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERIOD PER SHARE DATA
- --------------------------------------------------------------------------------
Value With Income
Year Ended Net Asset Capital Gains Income Dividends & Capital
December 31 Value Distributions Dividends Gains Reinvested
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1971 $11.84 -- $.44 $12.30
- --------------------------------------------------------------------------------
1972 12.42 $.25 .44 13.66
- --------------------------------------------------------------------------------
1973 10.26 .25 .47 12.07
- --------------------------------------------------------------------------------
1974 7.73 .25 .50 9.91
- --------------------------------------------------------------------------------
1975 8.91 .25 .48 12.40
- --------------------------------------------------------------------------------
1976 10.19 .25 .49 15.30
- --------------------------------------------------------------------------------
1977 8.98 .25 .50 14.63
- --------------------------------------------------------------------------------
1978 8.65 .25 .54 15.40
- --------------------------------------------------------------------------------
1979 9.13 -- .66 17.49
- --------------------------------------------------------------------------------
1980 10.38 -- .75 21.44
- --------------------------------------------------------------------------------
1981 9.80 -- .84 22.06
- --------------------------------------------------------------------------------
1982 11.21 -- .87 27.48
- --------------------------------------------------------------------------------
1983 12.46 .44 .91 33.95
- --------------------------------------------------------------------------------
1984 12.32 .48 .92 37.59
- --------------------------------------------------------------------------------
1985 14.50 .30 .92 48.31
- --------------------------------------------------------------------------------
1986 15.85 .34 .94 57.20
- --------------------------------------------------------------------------------
1987 15.15 .14 .98 58.50
- --------------------------------------------------------------------------------
1988 16.01 .58 .96 67.93
- --------------------------------------------------------------------------------
1989 17.78 .60 1.02 82.60
- --------------------------------------------------------------------------------
1990 16.26 -- 1.01 80.28
- --------------------------------------------------------------------------------
1991 18.81 .23 .96 99.26
- --------------------------------------------------------------------------------
1992 19.16 .16 .94 107.13
- --------------------------------------------------------------------------------
1993 20.40 .38 .92 121.62
- --------------------------------------------------------------------------------
1994 19.39 .03 .88 121.02
- --------------------------------------------------------------------------------
1995 (5/31) 22.34 -- .20 140.80
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
PERIOD TOTAL INVESTMENT RETURN*
- ----------------------------------------------------------------------------
Wellington Fund
---------------------------------------- Composite
Year Ended Capital Income Total Stock/Bond
December 31 Return Return Return Index**
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1971 + 4.8% + 4.1% + 8.9% + 13.1%
- ----------------------------------------------------------------------------
1972 + 7.1 + 3.9 + 11.0 + 14.9
- ----------------------------------------------------------------------------
1973 - 15.5 + 3.7 - 11.8 - 9.2
- ----------------------------------------------------------------------------
1974 - 22.3 + 4.6 - 17.7 - 18.1
- ----------------------------------------------------------------------------
1975 + 18.6 + 6.6 + 25.2 + 29.2
- ----------------------------------------------------------------------------
1976 + 17.4 + 6.0 + 23.4 + 22.0
- ----------------------------------------------------------------------------
1977 - 9.3 + 4.9 - 4.4 - 4.1
- ----------------------------------------------------------------------------
1978 - 0.8 + 6.1 + 5.3 + 4.2
- ----------------------------------------------------------------------------
1979 + 5.5 + 8.0 + 13.5 + 10.5
- ----------------------------------------------------------------------------
1980 + 13.7 + 8.9 + 22.6 + 20.2
- ----------------------------------------------------------------------------
1981 - 5.6 + 8.5 + 2.9 - 3.5
- ----------------------------------------------------------------------------
1982 + 14.4 + 10.1 + 24.5 + 29.3
- ----------------------------------------------------------------------------
1983 + 15.1 + 8.5 + 23.6 + 16.2
- ----------------------------------------------------------------------------
1984 + 2.8 + 7.9 + 10.7 + 9.8
- ----------------------------------------------------------------------------
1985 + 20.3 + 8.2 + 28.5 + 31.4
- ----------------------------------------------------------------------------
1986 + 11.7 + 6.7 + 18.4 + 19.0
- ----------------------------------------------------------------------------
1987 - 3.5 + 5.8 + 2.3 + 3.3
- ----------------------------------------------------------------------------
1988 + 9.5 + 6.6 + 16.1 + 14.5
- ----------------------------------------------------------------------------
1989 + 14.9 + 6.7 + 21.6 + 26.2
- ----------------------------------------------------------------------------
1990 - 8.5 + 5.7 - 2.8 + 0.3
- ----------------------------------------------------------------------------
1991 + 17.2 + 6.4 + 23.6 + 26.7
- ----------------------------------------------------------------------------
1992 + 2.7 + 5.2 + 7.9 + 8.2
- ----------------------------------------------------------------------------
1993 + 8.5 + 5.0 + 13.5 + 11.2
- ----------------------------------------------------------------------------
1994 - 4.8 + 4.3 - 0.5 - 1.2
- ----------------------------------------------------------------------------
1995 (5/31) + 15.2 + 1.1 + 16.3 + 16.7
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL +1,146.0% +1,225.2%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN + 10.9% + 11.2%
- ----------------------------------------------------------------------------
</TABLE>
*Includes reinvestment of income dividends and any capital gains distributions
for both the Fund and the Index.
**Composite index shown for comparative purposes is composed of the Standard
& Poor's 500 Stock Index (65%) and Salomon Brothers High-Grade Bond Index
(35%).
Note: The initial net asset value was $11.30 on December 31, 1970. No adjustment
has been made for income taxes payable by shareholders on reinvested income
dividends and capital gains distributions.
3
<PAGE> 4
REPORT FROM THE INVESTMENT ADVISER
Both common stocks and bonds provided generous returns during the six-month
period ending May 31, 1995. As measured by the S&P 500 Index, stocks rose
+19.2%, including reinvested dividends, while the Salomon Brothers High-Grade
Index provided a total return of +17.0%. Wellington Fund was well positioned to
benefit in this environment, and its net asset value, including income,
increased +18.6%. The Fund's common stocks were up +20.1%, while its
fixed-income holdings returned very close to +17%.
These are heady gains for a balanced fund, obviously well above the very
long-term returns provided by stocks and bonds in the past, and above what we
would expect in the future. Nevertheless, in our judgment there were good
grounds for the advances shown in each market. In the case of stocks, corporate
earnings grew solidly and have not yet reached levels that could be described
as unsustainable. Dividend increases were also widespread. And, in the case of
long-term bonds, markets were encouraged by continued good behavior on the part
of inflation, a more moderate pace of economic expansion, and believe it or
not, a possibly greater political resolve to deal with the Federal budget
deficit.
An important contributor to investment results so far this fiscal year has
been the combination of satisfactory stock selection in the right sectors.
Large holdings, for example, in Pfizer, Citicorp, Northrop Grumman, DuPont, and
Mobil were especially helpful in a rotational market in which one sector, then
another, turned in attention-getting price performance. One area that has had
an occasional bright day in the sun and in which we have limited representation
is high technology stocks, such as small computers, software, integrated
circuits, et al. Low dividends and unpredictability have always confined the
role these companies play in the portfolio. Approximately 65% of the Fund's net
assets was composed of common stocks and a handful of securities that are
convertible into common stocks.
As of May 31, 1995, the Fund's net assets were deployed as shown in this
summary table:
<TABLE>
<CAPTION>
Percent of Total
- ---------------------------------------------------------
Asset Mix Net Assets
- ---------------------------------------------------------
<S> <C>
BASIC INDUSTRY 20%
FINANCE 13
APPLIED SCIENCE (MOSTLY HEALTH CARE) 11
ENERGY 9
CONSUMER 7
UTILITIES 3
CONVERTIBLE PREFERRED STOCK 2
- ---------------------------------------------------------
TOTAL COMMON STOCKS AND CONVERTIBLES 65%
- ---------------------------------------------------------
FIXED-INCOME SECURITIES 33%
CASH AND EQUIVALENTS 2
- ---------------------------------------------------------
TOTAL 100%
- ---------------------------------------------------------
</TABLE>
As indicated, the proportion of the Fund's assets that is allocated to
long-term bonds was 33% (cash and equivalents, at 2%, remained at typically low
levels). Much of the increase in interest rates (and the decline in bond
prices) witnessed in fiscal 1994 was reversed in the first six months of this
fiscal year. Our strategy reversed as well. Paul Kaplan, manager of the
fixed-income portion, purchased longer-term maturities as they weakened last
year and gradually cut them back as prices strengthened in the first half of
this year. Average quality remained high, and the focus stayed on maximizing
current income.
To recall, the economy strengthened throughout 1994, pushing interest rates
higher through market forces, as well as Federal Reserve policy. Even though
the rate of inflation remained benign, the rapid rise in the structure of
interest rates succeeded in slowing the growth in housing, autos, and retail
sales in general as 1994 ended and the new year began. This deceleration in the
economy is, in fact, healthy in that it heads off overbuilding, speculation in
the various markets, and the accumulation of inflationary pressures. The
probability of a longer lasting, gradual expansion is thus enhanced.
4
<PAGE> 5
How the markets and the Fund fare in the next six months of course is
conjectural. Suffice to say that there will be a confluence of issues that will
be significant to investors. Foremost is the ongoing pace of growth in the
economy and the Federal Reserve's policy adjustments. In an environment of
slackening gains in business activity, recession can't be ruled out, but in our
opinion, lower interest rates and reacceleration later in the year are more
likely.
Another issue is how the budget deficit is dealt with, especially as a
presidential election year approaches. Investors will have a stake in how
present taxation and spending programs are changed. And a couple of the
nation's diplomatic "tiffs" are capable of either amicable resolution or
dangerous escalation. Under it all, however, is a strong economy at home,
reviving economies abroad, ever-strengthening corporations, and a healthy
propensity among Americans to save and invest. These are the factors that keep
longer-term investment prospects bright, and that guide our strategy.
Respectfully,
Vincent Bajakian, Senior Vice President
Portfolio Manager
Wellington Management Company
June 13, 1995
5
<PAGE> 6
FINANCIAL STATEMENTS
(unaudited)
May 31, 1995
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (62.8%)
- ----------------------------------------------------------------------------------
BASIC MATERIALS (12.3%)
Aluminum Co. of America 2,700,000 $ 125,550
British Steel PLC ADR 2,309,000 64,941
Cabot Corp. 900,000 37,913
Dow Chemical Co. 1,446,200 106,115
* E.I. du Pont de Nemours & Co. 2,300,000 156,113
Eastman Chemical 226,150 13,569
Georgia-Pacific Corp. 1,004,000 78,061
International Paper Co. 1,000,000 78,625
J & L Specialty Steel Inc. 1,500,000 28,125
Kimberly-Clark Corp. 2,257,000 135,420
Norsk Hydro AS ADR 805,000 33,206
PPG Industries, Inc. 1,900,000 79,087
Rayonier Inc. 401,200 13,791
Reynolds Metals Co. 1,000,000 49,375
Temple-Inland Inc. 1,984,600 85,834
USX-U.S. Steel Group 1,000,000 32,000
Westvaco Corp. 1,503,000 64,253
Willamette Industries, Inc. 1,007,000 50,098
Witco Chemical Corp. 1,614,200 44,390
---------
GROUP TOTAL 1,276,466
---------
- ----------------------------------------------------------------------------------
CAPITAL GOODS & CONSTRUCTION (5.1%)
* General Electric Co. 3,600,300 208,817
Honeywell, Inc. 3,091,500 122,501
(1) Northrop Grumman Corp. 2,636,800 138,102
United Technologies Corp. 850,000 64,494
---------
GROUP TOTAL 533,914
---------
- ----------------------------------------------------------------------------------
CONSUMER CYCLICAL (6.1%)
Brunswick Corp. 2,500,000 45,937
Eastman Kodak Co. 804,600 48,578
Ford Motor Co. 4,400,000 128,700
* General Motors Corp. 3,700,000 177,600
May Department Stores Co. 1,508,000 59,189
J.C. Penney Co., Inc. 1,600,000 75,400
Sears, Roebuck & Co. 1,807,017 101,871
---------
GROUP TOTAL 637,275
---------
- ----------------------------------------------------------------------------------
CONSUMER STAPLES (.6%)
SuperValu, Inc. 2,000,000 56,750
- ----------------------------------------------------------------------------------
ENERGY (8.9%)
Amerada Hess Corp. 1,506,000 76,430
Amoco Corp. 400,000 27,350
Ashland Inc. 600,000 22,275
Atlantic Richfield Co. 702,000 81,520
Chevron Corp. 805,000 39,546
* Exxon Corp. 2,006,000 143,178
Kerr-McGee Corp. 803,000 44,767
Mobil Corp. 1,275,000 127,978
Pennzoil Co. 433,400 21,399
Phillips Petroleum Co. 1,248,800 45,269
Repsol ADR 2,327,000 75,918
Royal Dutch Petroleum Co. ADR 535,512 67,876
Texaco, Inc. 1,015,000 69,528
USX-Marathon Group 900,000 17,887
Unocal Corp. 2,012,000 59,606
---------
GROUP TOTAL 920,527
---------
- ----------------------------------------------------------------------------------
FINANCIAL (13.4%)
Allstate Corp. 4,012,000 120,862
* Banc One Corp. 4,000,000 139,000
* The Bank of New York Co., Inc. 4,747,000 193,440
BankAmerica Corp. 1,400,000 73,150
* Citicorp 3,177,000 169,970
CoreStates Financial Corp. 2,710,000 90,107
* First Bank System, Inc. 3,502,000 147,084
First Union Corp. 1,000,000 49,000
* General Re Corp. 1,200,000 162,450
KeyCorp 2,005,000 61,403
Norwest Corp. 3,400,000 96,475
Wachovia Corp. 2,377,400 90,044
---------
GROUP TOTAL 1,392,985
---------
- ----------------------------------------------------------------------------------
HEALTH CARE (8.3%)
Abbott Laboratories, Inc. 2,600,000 104,000
American Home Products Corp. 1,625,000 119,641
C.R. Bard, Inc. 457,100 13,484
Baxter International, Inc. 3,500,000 122,063
Bristol-Myers Squibb Co. 1,470,000 97,571
Johnson & Johnson 2,000,000 132,500
* Pfizer, Inc. 2,002,700 176,488
U.S. Healthcare, Inc. 2,250,000 69,750
Zeneca Group ADR 650,000 29,250
---------
GROUP TOTAL 864,747
---------
- ----------------------------------------------------------------------------------
TECHNOLOGY (1.3%)
Xerox Corp. 1,193,100 135,268
- ----------------------------------------------------------------------------------
TRANSPORT & SERVICES (2.7%)
British Airways PLC 1,163,975 76,531
Canadian Pacific Ltd. 5,016,000 85,182
Norfolk Southern Corp. 616,700 42,244
Union Pacific Corp. 1,454,000 80,515
---------
GROUP TOTAL 284,472
---------
- ----------------------------------------------------------------------------------
UTILITIES (2.6%)
AT&T Corp. 1,000,000 50,750
Bell Atlantic Corp. 400,000 22,300
Entergy Corp. 1,500,000 37,125
NYNEX Corp. 700,000 29,225
Pacific Telesis Group 524,600 14,033
PECO Energy Corp. 1,000,800 28,148
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
SBC Communications, Inc. 1,150,000 $ 51,750
U S WEST Inc. 964,856 39,800
---------
GROUP TOTAL 273,131
---------
- ----------------------------------------------------------------------------------
MISCELLANEOUS (1.5%)
Hanson PLC ADR 4,515,000 85,785
Minnesota Mining &
Manufacturing Co. 1,200,000 71,850
---------
GROUP TOTAL 157,635
---------
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $4,678,729) 6,533,170
- ----------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (1.7%)
- ----------------------------------------------------------------------------------
Alumax, Inc. $4.00 240,000 29,280
Bethlehem Steel Corp. $3.50 500,000 22,000
Cyprus Amax $4.00 480,000 28,200
Ford Motor Co. $4.20 277,000 26,211
Norwest Corp. $3.50 490,000 37,240
Reynolds Metals Co. $3.31 634,000 29,560
- ----------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $132,791) 172,491
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (16.3%)
- ----------------------------------------------------------------------------------
ASSET BACKED (.4%)
American Express Credit
5.375%, 7/16/01 $ 22,000 $ 20,845
MBNA Master Credit Card
5.40%, 3/15/99 25,000 24,297
---------
GROUP TOTAL 45,142
---------
- ----------------------------------------------------------------------------------
FINANCIAL (4.9%)
Abbey National First Capital
8.20%, 10/15/04 15,000 16,250
H.F. Ahmanson & Co.
8.25%, 10/1/02 10,000 10,619
Allstate Corp.
7.50%, 6/15/13 15,000 14,672
Associates Corp NA
8.625%, 11/15/04 15,000 16,827
Banc One Corp.
9.875%, 3/1/09 20,000 24,652
Bank of Boston Corp.
6.625%, 12/1/05 27,000 25,831
BankAmerica Corp.
7.20%, 4/15/06 20,000 20,084
The Chase Manhattan Corp.
6.50%, 1/15/09 30,000 27,599
Chemical Banking Corp.
6.50%, 1/15/09 25,000 23,029
Comerica, Inc.
7.125%, 12/1/13 7,000 6,429
8.375%, 7/15/24 15,000 15,807
Continental Bank Corp.
12.50%, 4/1/01 15,000 18,986
Dean Witter Discover & Co.
6.75%, 10/15/13 19,275 17,099
European Investment Bank
9.125%, 6/1/02 10,000 11,404
Exxon Capital Corp.
6.00%, 7/1/05 13,500 12,870
First Bank NA
7.55%, 6/15/04 10,000 10,354
First Bank System
7.625%, 5/1/05 10,000 10,478
First Chicago Corp.
6.375%, 1/30/09 15,000 13,722
General Electric Capital Corp.
8.125%, 5/15/12 30,000 32,904
General Motors Acceptance
Corp. MTN
7.50%, 6/9/00 24,500 25,188
General Re Corp.
9.00%, 9/12/09 15,000 17,529
</TABLE>
7
<PAGE> 8
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
Great Western Financial Corp.
6.125%, 6/15/08 $ 20,000 $ 19,837
National City Corp.
7.20%, 5/15/05 20,000 20,226
National Westminster Bank
9.45%, 5/1/01 10,000 11,323
Norwest Corp. MTN
7.65%, 3/15/05 25,000 26,629
Republic New York Corp.
9.50%, 4/15/14 5,000 6,064
9.70%, 2/1/09 5,000 6,084
Texaco Capital Inc.
9.75%, 3/15/20 15,000 18,935
Transamerica Finance
6.50%, 3/15/11 11,000 9,861
Wells Fargo & Co.
6.125%, 11/1/03 22,000 20,666
---------
GROUP TOTAL 511,958
---------
- ----------------------------------------------------------------------------------
INDUSTRIAL (7.7%)
Arco Chemical Co.
9.80%, 2/1/20 15,000 18,720
Air Products & Chemicals, Inc.
8.75%, 4/15/21 10,000 11,526
American Home Products Corp.
7.25%, 3/1/23 18,350 18,011
Amoco Canada Petroleum Co.
6.75%, 2/15/05 10,000 9,938
7.95%, 10/1/22 20,000 21,209
Archer-Daniels-Midland Co.
8.375%, 4/15/17 30,000 33,560
British Petroleum Co.
7.875%, 5/15/02 20,000 21,462
10.00%, 7/1/18 10,000 11,285
Boeing Co.
8.75%, 8/15/21 20,000 22,936
Chevron Corp.
9.375%, 6/1/16 15,000 15,834
Cola-Coca Enterprises, Inc.
8.50%, 2/1/22 30,000 33,375
E.I. du Pont de Nemours & Co.
8.25%, 1/15/22 25,000 26,168
Eaton Corp.
7.00%, 4/1/11 10,600 10,123
7.625%, 4/1/24 15,000 15,233
Ford Motor Co.
8.875%, 1/15/22 25,000 28,495
Gannett Co., Inc.
5.25%, 3/1/98 25,000 24,318
Georgia Pacific Corp.
9.625%, 3/15/22 22,000 24,506
International Business Machines Corp.
8.375%, 11/1/19 20,000 21,982
Johnson & Johnson
6.73%, 11/15/23 20,000 19,038
McDonald's Corp.
7.375%, 7/15/33 15,000 14,901
Mobil Corp.
8.625%, 8/15/21 20,000 23,191
Morton International, Inc.
9.25%, 6/1/20 10,000 12,177
Motorola Inc.
7.50%, 5/15/25 30,000 30,878
Norfolk Southern Corp.
9.00%, 3/1/21 15,000 17,930
Norsk Hydro AS
7.75%, 6/15/23 9,000 9,170
9.00%, 4/15/12 20,000 23,176
PPG Industries, Inc.
9.00%, 5/1/21 10,000 11,761
Philips Electronics
7.75%, 4/15/04 15,000 15,759
Phillips Petroleum Co.
9.375%, 2/15/11 20,000 23,250
Procter & Gamble Co.
9.36%, 6/23/15 20,000 24,267
Rockwell International Corp.
7.875%, 2/15/05 17,000 18,366
Rohm & Haas Co.
9.80%, 1/14/08 15,000 18,297
Sears, Roebuck & Co.
9.375%, 11/1/11 14,000 16,380
SmithKline Beecham MTN
7.375%, 4/15/05 15,000 15,521
Standard Oil of Ohio
9.00%, 6/1/19 18,000 19,432
Times Mirror
7.50%, 7/1/23 13,000 13,020
United Parcel Service
8.375%, 4/1/20 29,000 32,711
Wal-Mart Stores Inc.
7.25%, 6/1/13 24,000 24,008
Waste Management
7.65%, 3/15/11 20,150 20,453
Whirlpool Corp.
9.10%, 2/1/08 6,715 7,925
Zeneca Group
7.00%, 11/15/23 20,000 18,661
---------
GROUP TOTAL 798,953
---------
- ----------------------------------------------------------------------------------
UTILITIES (3.3%)
AT&T Corp.
7.75%, 3/1/07 30,000 32,172
Arizona Public Service Co.
9.50%, 4/15/21 5,000 5,474
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
BellSouth Telecommunications
7.50%, 6/15/33 $ 30,000 $ 29,752
Chesapeake & Potomac
Telephone MD
7.15%, 5/1/23 10,000 9,778
Chesapeake & Potomac
Telephone VA
7.625%, 12/1/12 8,000 8,297
Consolidated Edison
of New York, Inc.
7.50%, 6/15/23 25,000 24,836
Duke Power Co.
7.00%, 7/1/33 10,000 9,401
8.625%, 3/1/2 28,000 8,564
Illinois Bell Telephone Co.
6.625%, 2/1/25 22,000 19,829
Long Island Lighting Co.
9.00%, 11/1/22 15,000 13,770
New Jersey Bell Telephone Co.
8.00%, 6/1/22 19,000 20,623
New York Telephone Co.
7.25%, 2/15/24 10,000 9,474
Ohio Bell Telephone Co.
7.85%, 12/15/22 20,000 21,129
Pacific Gas & Electric Co.
7.83%, 11/12/98 MTN 10,000 10,355
8.375%, 5/1/25 10,000 10,461
Southern Bell Telephone Co.
6.00%, 10/1/04 5,500 5,179
Southern California Edison
6.90%, 10/1/18 20,750 19,106
Southern Indiana Gas & Electric Co.
8.875%, 6/1/16 5,000 5,795
Texas Utilities Electric Co.
7.875%, 4/1/24 14,000 13,879
U S WEST Communications
6.875%, 9/15/33 30,000 27,106
Wisconsin Electric Power
7.70%, 12/15/27 29,100 30,014
Wisconsin Gas Co.
6.60%, 9/15/13 7,100 6,695
---------
GROUP TOTAL 341,689
---------
- ----------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $1,609,375 )1,697,742
- ----------------------------------------------------------------------------------
FOREIGN BONDS (2.8%)
- ----------------------------------------------------------------------------------
Asian Development Bank
9.125%, 6/1/00 10,000 11,160
Republic of Ireland MTN
7.64%, 1/2/02 30,000 31,691
Italy Global Bond
6.875%, 9/27/23 24,000 21,436
Japanese Financial Corp.
7.375%, 4/27/05 28,500 30,052
KFW International Finance
7.00%, 3/1/13 10,000 9,813
7.20%, 3/15/14 25,000 25,225
Landesbank Baden
7.625%, 2/1/23 24,000 25,164
Manitoba Province
9.25%, 4/1/20 20,000 24,149
Ontario Hydro
5.80%, 3/31/98 25,000 24,697
Scotland International Finance
8.85%, 11/1/06 18,500 20,776
Kingdom of Sweden
8.625%, 3/25/16 7,595 8,013
Swedish Export Credit
8.625%, 4/15/26 14,600 15,403
Toronto-Dominion Bank
6.45%, 1/15/09 14,000 13,185
6.50%, 8/15/08 10,000 9,389
Westdeutsche Landesbank
6.75%, 6/15/05 30,000 30,016
- ----------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(Cost $287,782) 300,169
- ----------------------------------------------------------------------------------
MUNICIPAL BOND (.2%)
- ----------------------------------------------------------------------------------
Los Angeles County Tax
8.57%, 6/30/05
(Cost $20,308) 19,600 21,872
- ----------------------------------------------------------------------------------
U.S. GOVERNMENT &
AGENCY OBLIGATIONS (13.9%)
- ----------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK
7.66%, 7/20/04 10,000 10,728
FEDERAL HOME LOAN
MORTGAGE CORP.
6.19%, 1/21/04 15,000 14,180
FEDERAL NATIONAL
MORTGAGE ASSOCIATION
6.28%, 2/3/04 25,000 24,103
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
11.25%, 10/15/95 4 5
NATIONAL ARCHIVE
8.50%, 7/25/11 23,992 27,435
TENNESSEE VALLEY AUTHORITY
6.875%, 12/15/43 25,000 23,007
U.S. TREASURY BONDS
7.25%, 5/15/16 200,000 210,406
7.50%, 11/15/16 200,000 216,156
</TABLE>
9
<PAGE> 10
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTES
6.25%, 2/15/03 $150,000 $ 149,788
6.375%, 8/15/02 135,000 136,181
7.25%, 8/15/04 175,000 186,046
7.875%, 11/15/04 229,000 253,759
7.75%, 12/31/99 180,000 191,954
- ----------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $1,334,753) 1,443,748
- ----------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (1.5%)
- ----------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account 6.15%, 6/1/95
(Cost $159,951) 159,951 159,951
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.2%)
(Cost $8,223,689) 10,329,143
- ----------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (.8%)
- ----------------------------------------------------------------------------------
Other Assets--Notes C and E 761,231
Liabilities--Note E (682,948)
----------
78,283
- ----------------------------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------------------------
Applicable to 465,935,895 outstanding
$1.00 par value shares
(authorized 550,000,000 shares) $10,407,426
- ----------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $22.34
==================================================================================
</TABLE>
+See Note A to Financial Statements.
*Ten largest common stock investments representing 16.1% of net assets.
(1)Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of the company.
MTN--Medium-Term Note.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
AT MAY 31, 1995, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------------------------
Amount Per
(000) Share
------------ ------
<S> <C> <C>
Paid in Capital $ 8,210,739 $17.62
Undistributed Net
Investment Income 119,093 .26
Accumulated Net
Realized Losses (27,860) (.06)
Unrealized Appreciation
of Investments--Note D 2,105,454 4.52
- ----------------------------------------------------------------------------------
NET ASSETS $10,407,426 $22.34
- ----------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1995
(000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . $ 104,826
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 124,443
- --------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . 229,269
- --------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fee--Note B
Basic Fee . . . . . . . . . . . . . . . . . . . . . . $ 2,484
Performance Adjustment . . . . . . . . . . . . . . . . -- 2,484
---------
The Vanguard Group--Note C
Management and Administrative . . . . . . . . . . . . 12,949
Marketing and Distribution . . . . . . . . . . . . . . 916 13,865
---------
Taxes (other than income taxes) . . . . . . . . . . . . . 369
Custodian's Fees . . . . . . . . . . . . . . . . . . . . . 150
Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . 16
Auditing Fees . . . . . . . . . . . . . . . . . . . . . . 8
Shareholders' Reports . . . . . . . . . . . . . . . . . . 205
Annual Meeting and Proxy Costs . . . . . . . . . . . . . . 30
Directors' Fees and Expenses . . . . . . . . . . . . . . . 18
- --------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . 17,145
- --------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . . . . . 212,124
- --------------------------------------------------------------------------------------------
REALIZED NET LOSS ON INVESTMENT
SECURITIES SOLD . . . . . . . . . . . . . . . . . . . . . . (27,043)
- --------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENT SECURITIES . . . . . . . . . . 1,427,535
- --------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $1,612,616
============================================================================================
</TABLE>
11
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED Year Ended
MAY 31, 1995 November 30, 1994
(000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . $ 212,124 $ 367,255
Realized Net Gain (Loss) . . . . . . . . . . . . . . . . . . . . . (27,043) 14,803
Change in Unrealized Appreciation (Depreciation) . . . . . . . . . 1,427,535 (469,401)
- -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations . . . . . . . . . . . . . . . . . . . . . . . . . 1,612,616 (87,343)
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . (216,322) (376,406)
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . (13,409) (145,379)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . (229,731) (521,785)
- -------------------------------------------------------------------------------------------------------------------
NET EQUALIZATION CREDITS--Note A . . . . . . . . . . . . . . . . . . 1,596 8,194
- -------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . . . . . . . . . . . . . 798,678 1,718,981
--In Lieu of Cash Distributions . . . . . . . . . . . . 210,962 479,469
--Exchange . . . . . . . . . . . . . . . . . . . . . . 164,647 473,982
Redeemed --Regular . . . . . . . . . . . . . . . . . . . . . . . (528,547) (861,047)
--Exchange . . . . . . . . . . . . . . . . . . . . . . (261,068) (488,846)
- -------------------------------------------------------------------------------------------------------------------
Net Increase from Capital Share Transactions . . . . . . . . . 384,672 1,322,539
- -------------------------------------------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . . . . . . . . . . . . 1,769,153 721,605
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . 8,638,273 7,916,668
- -------------------------------------------------------------------------------------------------------------------
End of Period (3) . . . . . . . . . . . . . . . . . . . . . . . . $10,407,426 $8,638,273
===================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . . . . . . . . . . . . $.48 $.92
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . $.03 $.38
- -------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,442 109,655
Issued in Lieu of Cash Distributions . . . . . . . . . . . . . 10,736 23,956
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,045) (67,803)
- -------------------------------------------------------------------------------------------------------------------
19,133 65,808
- -------------------------------------------------------------------------------------------------------------------
(3) Undistributed Net Investment Income . . . . . . . . . . . . . $ 119,093 $ 121,695
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION> Year Ended November 30,
SIX MONTHS ENDED -----------------------------------------
For a Share Outstanding Throughout Each Period MAY 31, 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . $19.33 $20.78 $19.34 $17.95 $16.29 $18.40
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .47 .88 .92 .93 .96 1.01
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . . . . 3.05 (1.03) 1.62 1.65 1.71 (1.46)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . . . 3.52 (.15) 2.54 2.58 2.67 (.45)
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.48) (.92) (.94) (.96) (1.01) (1.06)
Distributions from Realized Capital Gains . . . . (.03) (.38) (.16) (.23) -- (.60)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.51) (1.30) (1.10) (1.19) (1.01) (1.66)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . $22.34 $19.33 $20.78 $19.34 $17.95 $16.29
===========================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . +18.58% -0.82% +13.62% +14.99% +16.81% -2.65%
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (Millions) . . . . . . . . $10,407 $8,638 $7,917 $5,359 $3,473 $2,317
Ratio of Expenses to Average Net Assets . . . . . . . .37%* .35% .34% .33% .35% .43%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 4.52%* 4.35% 4.55% 4.98% 5.39% 5.99%
Portfolio Turnover Rate . . . . . . . . . . . . . . . 30%* 32% 34% 24% 35% 33%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
Vanguard/Wellington Fund is registered under the Investment Company Act of 1940
as a diversified open-end investment company. Certain of the Fund's investments
are in long-term corporate debt instruments; the issuers' abilities to meet
these obligations may be affected by economic developments in their respective
industries.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of financial
statements.
1. SECURITY VALUATION: Common stocks listed on an exchange are valued at the
latest quoted sales prices as of the close of the New York Stock Exchange
(generally 4:00 PM) on the valuation date; such securities not traded are
valued at the mean of the latest quoted bid and asked prices; those
securities not listed are valued at the latest quoted bid prices. Bonds
are valued utilizing the latest bid prices and on the basis of a matrix
system (which considers such factors as security prices, yields,
maturities and ratings), both as furnished by independent pricing
services. Temporary cash investments are valued at cost which
approximates market value.
2. FEDERAL INCOME TAXES: The 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. EQUALIZATION: The Fund follows the accounting practice known as
"equalization," under which a portion of the price of capital shares
issued and redeemed, equivalent to undistributed net investment income
per share on the date of the transaction, is credited or charged to
undistributed income. As a result, undistributed income per share is
unaffected by Fund share sales or redemptions.
4. REPURCHASE AGREEMENTS: The Fund, along with other members of The Vanguard
Group of Investment Companies, transfers uninvested cash balances into a
Pooled Cash Account, the daily aggregate of which is invested in
repurchase agreements secured by U.S. Government obligations. Securities
pledged as collateral for repurchase agreements are held by the Fund's
custodian bank until maturity of each repurchase agreement. Provisions of
the agreement ensure that the market value of the collateral is
sufficient in the event of default; however, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
5. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and
losses on the sale of investment securities are those of specific
securities sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Discounts and premiums on debt
securities purchased are amortized to interest income over the lives of
the respective securities.
B. Under the terms of a contract which expires March 31, 1996, the Fund pays
Wellington Management Company a basic investment advisory fee calculated at an
annual percentage rate of the average net assets of the Fund. The basic fee
thus computed is subject to quarterly adjustments based on performance relative
to a combined index comprised of the Standard & Poor's 500 Stock Index and the
Salomon Brothers High-Grade Corporate Bond Index. For the six months ended May
31, 1995, the investment advisory fee represented an effective annual base rate
of .05 of 1% of average net assets. No performance adjustments were required
during the period.
14
<PAGE> 15
C. The Vanguard Group, Inc. furnishes at cost corporate management,
administrative, marketing, and distribution services. The costs of such
services are allocated to the Fund under methods approved by the Board of
Directors. At May 31, 1995, the Fund had contributed capital of $1,393,000 to
Vanguard (included in Other Assets), representing 7.0% of Vanguard's
capitalization. The Fund's directors and officers are also directors and
officers of Vanguard.
D. During the six months ended May 31, 1995, the Fund made purchases of
$896,083,000 and sales of $665,943,000 of investment securities other than U.S.
Government securities and temporary cash investments. Purchases and sales of
U.S. Government securities were $776,429,000 and $726,496,000, respectively.
At May 31, 1995, unrealized appreciation for financial reporting and Federal
income tax purposes aggregated $2,105,454,000 of which $2,151,643,000 related
to appreciated securities and $46,189,000 related to depreciated securities.
E. The market value of securities on loan to broker/dealers at May 31, 1995,
was $601,737,000 for which the Fund had received as collateral cash of
$557,540,000 and U.S. Treasury securities with a market value of $58,672,000.
Security loans are required to be secured at all times by collateral at least
equal to the market value of securities loaned; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
15
<PAGE> 16
THE VANGUARD FAMILY OF FUNDS
FIXED INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Admiral Funds
U.S. Treasury Money
Market Portfolio
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Money Market Portfolio
Vanguard State Tax-Free Funds
Money Market Portfolios
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
Insured Longer-Term Portfolios
(CA, FL, NJ, NY, OH, PA)
INCOME FUNDS
Vanguard Admiral Funds
Vanguard Fixed Income
Securities Fund
Vanguard Preferred Stock Fund
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible
Securities Fund
Vanguard Equity Income Fund
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund
U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Funds
Income Portfolio
Conservative Growth Portfolio
Moderate Growth Portfolio
Growth Portfolio
Vanguard STAR Portfolio
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International
Growth Portfolio
Vanguard/Trustees' Equity Fund
International Portfolio
INDEX FUNDS
Vanguard Index Trust
Total Stock Market Portfolio
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Value Portfolio
Small Capitalization Stock Portfolio
Vanguard International Equity
Index Fund
European Portfolio
Pacific Portfolio
Emerging Markets Portfolio
Vanguard Bond Index Fund
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
[LOGO]
<TABLE>
<S> <C>
Vanguard Financial Center Valley Forge, Pennsylvania 19482
New Account Information: Shareholder Account Services:
1-(800) 662-7447 1-(800) 662-2739
</TABLE>
This Report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus. All Funds in
the Vanguard Family are offered by prospectus only.
Q212-5/95
[VANGUARD WELLINGTON FUND LOGO]
SEMI-ANNUAL REPORT
MAY 31, 1995
