<PAGE> 1
CHAIRMAN'S LETTER
FELLOW SHAREHOLDER:
Short-term interest rates turned sharply upward during the six months
ended May 31, the first half of the 1994 fiscal year for Vanguard Money Market
Reserves. Rates rose steadily throughout the period, driving upwards the
yields of our Portfolios.
This table presents the yields of each of our Portfolios on May
31, 1994, compared with those of six months and one year ago:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
Seven Day Annualized Yield
------------------------------------------------
Portfolio May 31, 1994 November 30, 1993 May 31, 1993
- - ----------------------------------------------------------------
<S> <C> <C> <C>
PRIME 3.8% 3.0% 2.9%
FEDERAL 3.7 3.0 2.9
U.S. TREASURY 3.5 2.8 2.8
- - ----------------------------------------------------------------
</TABLE>
Yields on short-term reserves are rising in part because of higher demands for
credit in the marketplace. But the primary cause of these rate increases is
that the Federal Reserve, fearful of the potential for future inflation, has
forced interest rates upward. The Fed raised the Federal funds rate by fully
1.25%--from 3.00% to 4.25%--during the period. The financial markets seem a bit
"spooked" by this increase, since higher rates drive down prices of long-term
bonds. However, proving that "it is an ill wind (indeed) that blows no good,"
the sole impact on those investing in short-term obligations has been an
increase in interest income.
What is more, further increases in the dividends you receive on your
Vanguard Money Market Reserves holdings are in prospect. Because our Portfolios
(as do virtually all money market funds) hold securities with an average
maturity in the 45- to 60-day range, there is a "lag" from the upturn in
interest rates until they are fully manifested in our yields. By way of
comparison, while the yield on the 90-day U.S. Treasury bill has risen by
nearly 35% (from 3.2% to 4.3%) since November 30, 1993, the annualized yields
of our Portfolios have risen by about 25% over the same period. So, you can
expect increases in the dividends you receive in our three Portfolios, at least
for the next few months.
Our yields have not only risen in an absolute sense. They also remain well
above the yields achieved by most of our competitors, as shown in this table:
<TABLE>
<CAPTION>
Seven Day Annualized Yield
- - -------------------------------------------------------
May 31, 1994
-------------------------------------
Average Vanguard
Portfolio Vanguard Competitor Advantage
- - -------------------------------------------------------
<S> <C> <C> <C>
PRIME 3.8% 3.5% +0.3%
FEDERAL 3.7 3.4 +0.3
U.S. TREASURY 3.5 3.2 +0.3
- - -------------------------------------------------------
</TABLE>
In each case, our gross yield (the yield the Portfolio receives on its
holdings) is quite similar to those of our competitors. Our net yield (the
payments you receive after the deduction of all operating expenses) is so much
higher for the simple reason that our operating expense ratios are so much
lower. Vanguard Money Market Reserves' expense ratio is but 0.3% of average net
assets; competitive funds maintain expense ratios averaging about 0.7%, fully
133% higher than ours. (Almost unbelievable, but true.)
I am pleased to report that our competitive returns are achieved while
maintaining the highest standards of credit quality and a conservative
investment posture. A surprising revelation of the past quarter has been the
news that a number of money market fund sponsors have reimbursed their funds to
compensate for losses on derivative investments. We believe such "exotica" have
no place in a money market fund and, accordingly, eschew them in our
Portfolios.
In our Semi-Annual Report one year ago, I noted that "it is hard to
imagine that the steady trend over the past four years toward ever-lower
short-term interest rates can go much further." At that time, the Treasury bill
yield was 3.2%, and that was about as low as it was to go. While I do not
presume any forecasting ability, it is clear that the
1
<PAGE> 2
end of the rate decline and the subsequent resurgence have enabled Vanguard
Money Market Reserves to provide you with the highest monthly dividends since
July 1992.
I look forward to reporting more fully on our results for the full 1994
fiscal year in our Annual Report six months hence.
Sincerely,
/s/ JOHN C. BOGLE
- - ---------------------
John C. Bogle
Chairman of the Board
June 16, 1994
Note: Mutual fund data from Lipper Analytical Services, Inc.
AVERAGE ANNUAL TOTAL RETURNS--THE CURRENT YIELDS PROVIDED IN THE CHAIRMAN'S
LETTER ARE CALCULATED IN ACCORDANCE WITH SEC GUIDELINES. THE AVERAGE ANNUAL
TOTAL RETURNS FOR THE PORTFOLIOS (PERIODS ENDED MARCH 31, 1994) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PORTFOLIO (INCEPTION DATE) 1 YEAR 5 YEARS 10 YEARS
-------------------------- ------ ------- --------
<S> <C> <C> <C>
PRIME PORTFOLIO (6/4/75) +3.00% +5.77% +6.82%
FEDERAL PORTFOLIO (7/13/81) +2.98 +5.64 +6.62
U.S. TREASURY PORTFOLIO (3/13/89)* +2.86 +5.46 +6.37
</TABLE>
THESE DATA REPRESENT PAST PERFORMANCE; FUTURE RETURNS WILL FLUCTUATE.
*TOTAL RETURNS PROVIDED PRIOR TO MARCH 13, 1989, ARE FOR THE INSURED PORTFOLIO,
WHICH BEGAN OPERATIONS ON MARCH 9, 1983.
PLEASE NOTE THAT 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 $1.00 PER SHARE.
2
<PAGE> 3
REPORT FROM THE INVESTMENT ADVISER
During the six months ended May 31, the first half of the 1994 fiscal year for
Vanguard Money Market Reserves, money market interest rates rose substantially.
The Federal Reserve has increased the Federal funds rate (at which banks borrow
and lend among themselves) from 3.00% to 4.25%. In addition, the discount rate
(at which banks may borrow from the Fed) was moved from 3.00% to 3.50%. It is
through its control of these two key interest rates that the Fed affects
changes in its monetary policy.
Currently, the Fed's monetary policy goal is to remove the stimulative
effects of the low short-term interest rates that have prevailed since 1991,
and implement a "neutral" policy that allows the economy to grow at a
non-inflationary pace. Recent statistics indicate that the economy is doing
very well on its own. The housing and auto sectors are strong, employment
growth has gained momentum, and consumer confidence and business borrowings are
on the rise. Of particular importance is the increasing utilization of spare
economic capacity. In recent years, excess capacity has prevented businesses
from raising prices. As more economic resources are put to use, firms may find
that they can pass on price increases to their customers, which fuels
inflation.
In past economic cycles, inflation has typically become a problem after
the Fed has allowed the economy to grow unchecked for too long. Thereafter,
the Fed has had to overcompensate by pursuing aggressively restrictive monetary
policy. If the current policy is successful, the Fed can avoid larger rate
increases in the future by acting prudently now.
To the benefit of money market investors, rising short-term rates have
increased the nominal yields of money funds. The Fed's move to a neutral stance
also carries with it the likelihood of positive real (after inflation) returns.
Given the low expenses on Vanguard Money Market Reserves and the current level
of short-term interest rates, shareholders should be experiencing positive real
returns before income taxes.
In order to take advantage of the higher interest rate environment, we
have shortened the average maturity of the Portfolios from 60 days to
approximately 40 days. This strategy increases the responsiveness of the
Portfolios' yields to changes in interest rates because the Portfolios'
holdings turn over more frequently. The shorter average weighted maturity also
makes the market value of the Portfolios' investments less sensitive to the
negative effects of rising interest rates. This dovetails well with our
conservative management philosophy.
In recent months, the financial press has been filled with stories of
investment managers who sustained unexpectedly large losses in the volatile
markets that have prevailed since year end. In some cases, these losses were
due to investments in "derivative" securities and the use of leverage to
increase investment exposure above that initially contributed by investors. The
most disturbing of these cases involve money managers who used these tactics to
go outside the investment objectives that were used in marketing their funds.
Make no mistake, money market funds operate in a highly regulated
environment intended to insure that net asset values remain stable. The U.S.
Securities and Exchange Commission prohibits money market funds from investing
in volatile derivative securities or borrowing to increase investment exposure.
At Vanguard, our investment policies are actually more stringent than SEC rules
because, in our judgment, the incremental return gained by going to the legal
limits is not worth the added risk. By virtue of our low expense ratios, we can
manage the Fund well within the spirit and the letter of the law and still
provide highly competitive returns to our shareholders.
Sincerely,
Ian A. MacKinnon, Senior Vice President
Robert F. Auwaerter, Vice President
John Hollyer, Assistant Vice President
Vanguard Fixed Income Group June 9, 1994
3
<PAGE> 4
STATEMENT OF NET ASSETS FINANCIAL STATEMENTS (unaudited)
May 31, 1994
<TABLE>
<CAPTION>
Face Market
Amount Value
PRIME PORTFOLIO (000) (000)+
- - ---------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (14.8%)
- - ---------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank
4.80%, 11/15/94 $ 9,480 $ 9,274
Federal Home Loan
Mortgage Corp.
4.448%, 6/3/94(1) 100,000 99,924
Federal National Mortgage Assn.
3.216%-8.90%,
6/1/94-11/30/94 1,449,350 1,433,996
U.S. Treasury Bill
3.33%, 7/7/94 13,427 13,383
U.S. Treasury Notes
4.25%-12.625%,
8/15/94-8/31/94 425,000 427,557
- - ---------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(Cost $1,984,134) 1,984,134
- - ---------------------------------------------------------------------
COMMERCIAL PAPER (62.3%)
- - ---------------------------------------------------------------------
BANK HOLDING COMPANIES (6.5%)
Bankers Trust New York Corp.
3.703%-3.905%,
6/2/94-6/3/94 203,000 202,968
CoreStates Capital
4.25%, 7/7/94 25,000 24,894
J.P. Morgan & Co., Inc.
3.874%-4.266%,
6/3/94-7/5/94 243,425 242,977
NationsBank Corp.
4.05%-4.10%,
7/1/94-7/5/94 200,000 199,281
Norwest Corp.
4.273%-4.423%,
6/16/94-7/14/94 112,000 111,636
PNC Funding Corp.
4.347%, 6/14/94 50,000 49,922
Republic New York Corp.
3.773%, 6/17/94 50,000 49,917
----------
GROUP TOTAL 881,595
----------
- - ---------------------------------------------------------------------
FINANCE--AUTO (2.3%)
Ford Motor Credit Corp.
4.006%-4.317%,
6/15/94-7/7/94 205,000 204,401
Toyota Motor Credit Corp.
4.306%-4.345%,
6/6/94-6/14/94 105,800 105,684
----------
GROUP TOTAL 310,085
----------
- - ---------------------------------------------------------------------
FINANCE--SECURITIES DEALERS (3.5%)
Bear Stearns Co.
4.281%, 6/22/94 10,000 9,975
Goldman Sachs & Co.
4.372%, 7/8/94 $ 85,000 $ 84,620
Merrill Lynch & Co.
3.836%-4.395%,
6/23/94-7/18/94 246,000 245,174
Morgan Stanley Co.
4.128%-4.181%,
7/1/94-7/7/94 125,000 124,555
----------
GROUP TOTAL 464,324
----------
- - ---------------------------------------------------------------------
FINANCE--OTHER (19.3%)
A.I. Credit Corp.
4.214%, 8/1/94 20,000 19,859
American Express Credit Corp.
3.773%, 6/10/94 100,000 99,906
American General Finance Corp.
4.366%, 6/10/94 25,000 24,973
Asset Securitization
Cooperative Corp.
3.774%-4.447%,
6/2/94-8/2/94 321,200 319,433
Associates Corp.
3.996%-4.345%,
6/8/94-7/5/94 225,000 224,354
Barclays U.S. Funding Corp.
3.964%-3.987%,
6/6/94-6/27/94 170,000 169,597
CIT Group Holdings Inc.
3.804%-4.345%,
6/8/94-6/24/94 230,000 229,564
Cargill Financial Services
3.99%, 7/6/94 35,000 34,866
Ciesco L.P.
3.816%-4.367%,
6/6/94-7/7/94 266,500 265,960
Commercial Credit Co.
3.899%-4.317%,
6/6/94-6/15/94 130,000 129,873
Corporate Asset Funding Corp.
3.774%-4.448%,
6/9/94-7/14/94 195,960 195,554
Eiger Capital Corp.
4.308%, 6/20/94 63,684 63,540
General Electric Capital Corp.
3.805%-4.885%,
6/6/94-11/22/94 376,480 374,870
3.969%-4.406%,
6/1/94-7/11/94(1) 140,000 140,000
MCA Funding Corp.
3.957%-4.297%,
7/13/94-7/18/94 29,200 29,046
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ---------------------------------------------------------------------
<S> <C> <C>
Matterhorn Capital Corp.
4.287%-4.318%,
6/20/94-6/21/94 $ 97,892 $ 97,666
Panasonic Finance
3.816%-4.142%,
6/23/94-7/20/94 38,600 38,466
Pitney Bowes Credit Corp.
3.907%-4.275%,
6/16/94-7/8/94 75,000 74,814
Prudential Home Mortgage Co.
4.433%, 7/25/94 50,000 49,670
----------
GROUP TOTAL 2,582,011
----------
- - ---------------------------------------------------------------------
INDUSTRIAL (7.1%)
Cargill Inc.
3.763%, 6/8/94 15,000 14,989
Chevron Oil Finance Co.
3.976%, 6/28/94 50,000 49,852
Daimler-Benz N.A. Co.
4.312%-4.332%,
6/1/94-6/17/94 160,000 159,894
Dun & Bradstreet
3.812%, 6/21/94 12,000 11,975
Emerson Electric
4.314%, 6/7/94 81,500 81,442
Hewlett Packard Co.
4.314%-4.887%,
6/10/94-11/15/94 32,725 32,269
Intel
4.028%-4.337%,
6/13/94-7/1/94 83,000 82,837
Kellogg
4.267%-4.315%,
6/9/94-6/20/94 46,000 45,911
Kimberly-Clark
4.346%, 6/10/94 22,000 21,976
Merck & Co.
4.358%-4.876%,
8/24/94-11/21/94 59,500 58,267
Mobil Australia Finance
4.334%, 6/9/94 18,000 17,983
Motorola
4.354%, 6/6/94 10,000 9,994
Nestle Capital Corp.
3.876%-4.318%,
6/6/94-6/16/94 173,700 173,539
Norfolk Southern Corp.
3.957%-4.336%,
6/13/94-7/14/94 40,000 39,868
Schering Corp.
3.765%, 6/6/94 13,460 13,453
Texaco
4.306%, 6/15/94 $ 50,000 $ 49,916
Union Pacific Corp.
3.724%, 6/2/94 17,700 17,698
Vermont American
4.365%, 6/9/94 21,185 21,165
Warner Lambert
4.265%, 6/15/94 50,000 49,917
----------
GROUP TOTAL 952,945
----------
- - ---------------------------------------------------------------------
INSURANCE (3.2%)
AIG Funding Inc.
3.802%-4.811%,
6/1/94-11/17/94 91,590 91,065
John Hancock Capital Corp.
3.806%, 6/29/94 26,825 26,746
MetLife Funding Corp.
3.913%-4.315%,
6/8/94-8/2/94 60,000 59,760
Prudential Funding Corp.
3.754%-3.805%,
6/15/94-6/23/94 100,000 99,812
Safeco Credit Corp.
3.805%-3.807%,
6/13/94-6/16/94 25,500 25,462
UNUM Corp.
4.391%, 6/10/94 10,000 9,989
USAA Capital Corp.
3.956%-4.315%,
6/6/94-6/27/94 112,125 111,928
----------
GROUP TOTAL 424,762
----------
- - ---------------------------------------------------------------------
UTILITIES (5.1%)
American Telephone
& Telegraph Co.
3.765%-4.315%,
6/9/94-7/21/94 505,151 503,974
Ameritech Corp.
3.754%-4.815%,
6/13/94-11/22/94 37,000 36,589
BellSouth Telecommunications Inc.
3.913%-4.264%,
6/14/94-7/18/94 83,000 82,639
Duke Power
4.316%, 6/13/94 13,000 12,982
Southern California Edison
4.078%-4.132%,
7/1/94-7/11/94 37,882 37,743
Union Pacific
4.366%, 6/9/94 8,200 8,192
----------
GROUP TOTAL 682,119
----------
- - ---------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ---------------------------------------------------------------------
<S> <C> <C>
FOREIGN BANKS (3.9%)
Abbey National N.A.
4.133%-4.142%,
7/25/94-7/26/94 $ 170,000 $ 168,945
Bayerische Vereinsbank
3.786%, 6/17/94 25,000 24,958
Commerzbank U.S. Finance Inc.
4.265%, 6/30/94 50,000 49,829
Hypo U.S. Finance Inc.
3.887%, 7/13/94 75,000 74,663
International Nederlanden
U.S. Funding
4.295%-4.449%,
6/10/94-8/4/94 160,000 159,669
Rabobank U.S. Financial Corp.
3.343%, 6/16/94 28,042 28,004
Toronto Dominion Holdings
4.428%, 8/4/94 20,000 19,844
----------
GROUP TOTAL 525,912
----------
- - ---------------------------------------------------------------------
CANADIAN GOVERNMENT (5.0%)
Canada Bills
4.111%-4.865%,
7/25/94-11/15/94 260,000 256,306
Canadian Wheat Board
3.775%-4.935%,
6/28/94-11/22/94 150,000 148,685
Province of Alberta
3.763%, 6/7/94 10,000 9,994
Province of British Columbia
3.795%-4.911%,
6/7/94-11/22/94 125,510 123,574
Province of Ontario
3.355%-3.402%,
6/21/94-7/18/94 50,000 49,896
Ontario Hydro
3.796%-3.81%,
6/1/94-6/9/94 79,000 78,946
----------
GROUP TOTAL 667,401
----------
- - ---------------------------------------------------------------------
OTHER FOREIGN GOVERNMENT (4.7%)
Caisse des Depots et
Consignations
4.02%-4.366%, 6/2/94-7/5/94 276,000 275,536
New South Wales Treasury Corp.
3.774%-4.337%,
6/10/94-6/24/94 204,500 204,138
Oesterreichische Kontrollbank
3.355%, 6/30/94 35,000 34,907
Kingdom of Sweden
3.283%, 7/14/94 40,000 39,846
Western Australia Treasury
Corp.
4.159%-4.535%,
7/12/94-7/18/94 53,000 52,700
Wool International
3.801%, 6/13/94 $ 25,000 $ 24,969
----------
GROUP TOTAL 632,096
----------
- - ---------------------------------------------------------------------
FOREIGN INDUSTRIAL (1.7%)
BASF
3.816%-3.836%,
6/21/94-6/28/94 56,000 55,861
British Gas
4.29%-4.314%,
6/6/94-6/10/94 80,000 79,936
Electricite de France
3.261%-3.302%,
6/1/94-7/11/94 60,000 59,844
Siemens Corp.
4.01%, 7/5/94 30,000 29,887
----------
GROUP TOTAL 225,528
----------
- - ---------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $8,348,778) 8,348,778
- - ---------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (17.1%)
- - ---------------------------------------------------------------------
U.S. BANKS (.9%)
American Express Centurion Bank
4.32%, 6/20/94 25,000 25,000
Bank One (Denver)
3.90%-4.30%, 6/3/94-6/23/94 100,000 99,999
----------
GROUP TOTAL 124,999
----------
- - ---------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT--
CANADIAN BRANCHES (.5%)
ABN AMRO
3.816%-3.817%,
6/14/94-6/16/94 53,000 52,919
Societe Generale
3.837%, 6/16/94 20,000 19,968
----------
GROUP TOTAL 72,887
----------
- - ---------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT--
U.S. BRANCHES (15.7%)
ABN AMRO
3.72%-3.88%,
6/3/94-7/8/94 208,000 207,992
Bank of Nova Scotia
4.27%, 6/24/94 143,000 143,000
Barclays Bank
4.35%, 6/13/94 22,000 22,000
Canadian Imperial
Bank of Commerce
3.78%-4.13%,
6/7/94-7/25/94 235,000 235,000
Commerzbank
3.84%-4.36%,
6/1/94-6/10/94 185,000 185,000
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ---------------------------------------------------------------------
<S> <C> <C>
Caisse Nationale de Credit
Agricole
4.85%, 11/21/94 $ 200,000 $ 200,000
Credit Suisse
3.87%-3.88%,
7/12/94-7/13/94 87,000 87,001
National Westminster Bank
3.85%-4.28%,
6/30/94-8/15/94 205,000 204,966
Rabobank Nederland
4.25%-4.75%,
6/15/94-11/4/94 125,000 124,997
Societe Generale
3.80%-4.27%,
6/8/94-8/2/94 237,000 237,001
Swiss Bank
3.80%, 6/14/94 200,000 200,000
Union Bank of Switzerland
3.95%, 7/5/94 50,000 49,995
Westdeutsche Landesbank
3.23%-4.10%,
6/10/94-7/20/94 200,000 200,000
----------
GROUP TOTAL 2,096,952
----------
- - ---------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $2,294,838) 2,294,838
- - ---------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (2.9%)
- - ---------------------------------------------------------------------
Bayerische Hypotheken
und Wechselbank
4.34%, 6/13/94 100,000 100,000
Bayerische Vereinsbank
4.34%, 8/8/94 46,000 45,997
Caisse Nationale de Credit
Agricole
4.97%, 12/9/94 10,000 9,999
Deutsche Bank
4.725%, 11/7/94 50,000 49,990
Dresdner Bank
3.37%-3.62%,
6/15/94-7/1/94 12,000 12,001
Morgan Guaranty
4.04%, 7/6/94 125,000 125,007
Republic Bank of New York
3.89%, 7/14/94 30,000 29,991
Union Bank of Switzerland
4.38%, 6/13/94 10,000 10,000
- - ---------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES
OF DEPOSIT
(Cost $382,985) 382,985
- - ---------------------------------------------------------------------
BANKERS ACCEPTANCE
- - ---------------------------------------------------------------------
Republic Bank of New York
3.894%, 7/15/94 (Cost $6,967) 7,000 6,967
- - ---------------------------------------------------------------------
OTHER NOTES (3.4%)
Amtrak Trust
4.475%, 6/6/94(1) $ 80,581 $ 80,581
Bank One (Texas)
4.43%, 6/2/94-6/3/94(1) 145,000 144,990
Morgan Guaranty Trust
4.37%-4.39%, 6/1/94(1) 200,000 199,910
SMM Trust 4.74%, 8/22/94(1) 20,000 20,000
Westdeutsche Landesbank
3.70%, 1/11/95 13,000 12,893
- - ---------------------------------------------------------------------
TOTAL OTHER NOTES
(Cost $458,374) 458,374
- - ---------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.6%)
- - ---------------------------------------------------------------------
Chase Manhattan Bank
4.25%, 6/13/94*
(Collateralized by Federal
Home Loan Mortgage Corp.
7.00%, 5/1/24) 20,000 20,000
Kidder Peabody & Co. Inc.
3.80%, 6/3/94*
(Collateralized by U.S. Treasury
Bond 7.25%, 5/15/16 and
Federal National Mortgage Assn.
5.30%-8.65%,
12/10/97-12/24/01) 169,565 169,565
3.80%, 6/6/94*
(Collateralized by Federal
National Mortgage Assn.
5.30%-6.30%,
12/10/97-3/11/98) 20,000 20,000
- - ---------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $209,565) 209,565
- - ---------------------------------------------------------------------
TOTAL INVESTMENTS (102.1%)
(Cost $13,685,641) 13,685,641
- - ---------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.1%)
- - ---------------------------------------------------------------------
Other Assets--Note B 239,148
Liabilities (525,878)
----------
(286,730)
- - ---------------------------------------------------------------------
NET ASSETS (100%)
- - ---------------------------------------------------------------------
Applicable to 13,398,591,965 outstanding
$.001 par value shares
(authorized 25,000,000,000 shares) $13,398,911
- - ---------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
=====================================================================
</TABLE>
+ See Note A to Financial Statements.
* Put Option Obligation.
(1) Floating Rate Note.
7
<PAGE> 8
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
AT MAY 31, 1994, NET ASSETS CONSISTED OF:
- - ---------------------------------------------------------------------
Amount Per
(000) Share
----- -----
<S> <C> <C>
Paid in Capital $13,398,668 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains 243 --
Unrealized Appreciation
of Investments -- --
- - ---------------------------------------------------------------------
NET ASSETS $13,398,911 $1.00
- - ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
FEDERAL PORTFOLIO (000) (000)+
- - ---------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (94.5%)
- - ---------------------------------------------------------------------
Federal Home Loan Bank
3.181%-4.80%,
6/8/94-11/15/94 $348,755 $ 346,733
Federal Home Loan
Mortgage Corp.
3.625%-4.625%,
6/3/94-6/16/94(1) 200,000 199,885
3.644%-4.237%,
6/1/94-8/3/94 573,649 571,632
Federal National Mortgage
Assn.
3.216%-4.928%,
6/1/94-11/30/94 671,925 667,216
Overseas Private Investment
Corp.
3.878%-5.26%,
6/1/94-8/25/94(1)* 135,709 135,709
U.S. Treasury Note
12.625%, 8/15/94 15,000 15,282
- - ---------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(Cost $1,936,457) 1,936,457
- - ---------------------------------------------------------------------
REPURCHASE AGREEMENTS (10.3%)
- - ---------------------------------------------------------------------
Cantor Fitzgerald & Co.
4.25%, 6/1/94
(Collateralized by U.S.
Treasury Note
8.875%, 11/15/97) 11,690 11,690
Chase Manhattan Bank
4.25%, 6/13/94*
(Collateralized by Federal
Home Loan Mortgage Corp.
7.00%, 5/1/24) 50,000 50,000
Citicorp
4.28%, 6/1/94
(Collateralized by U.S.
Treasury Notes
4.25%-7.50%,
7/31/94-3/31/96) 100,000 100,000
Lehman Brothers
4.25%, 6/7/94*
(Collateralized by Federal
Home Loan Mortgage Corp.
5.00%, 11/1/98 and
Federal National Mortgage
Assn. 8.00%, 12/1/06-6/1/07) 50,000 50,000
- - ---------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $211,690) 211,690
- - ---------------------------------------------------------------------
TOTAL INVESTMENTS (104.8%)
(Cost $2,148,147) 2,148,147
- - ---------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Market
Value
(000)+
- - ---------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-4.8%)
- - ---------------------------------------------------------------------
Other Assets--Note B $ 12,659
Payables for Securities Purchased (99,943)
Other Liabilities (11,702)
----------
(98,986)
- - ---------------------------------------------------------------------
NET ASSETS (100%)
- - ---------------------------------------------------------------------
Applicable to 2,049,067,117 outstanding
$.001 par value shares
(authorized 5,000,000,000 shares) $2,049,161
- - ---------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
=====================================================================
</TABLE>
+ See Note A to Financial Statements.
* Put option obligation.
(1) Floating Rate Note.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
AT MAY 31, 1994, NET ASSETS CONSISTED OF:
- - ---------------------------------------------------------------------
Amount Per
(000) Share
----- -----
<S> <C> <C>
Paid in Capital $2,049,035 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains 126 --
Unrealized Appreciation
of Investments -- --
- - ---------------------------------------------------------------------
NET ASSETS $2,049,161 $1.00
- - ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
U.S. TREASURY PORTFOLIO (000) (000)+
- - ---------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS
(99.9%)
- - ---------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS
3.47%-4.607%,
6/2/94-8/4/94 $1,641,685 $1,634,682
U.S. TREASURY NOTES
4.25%-12.625%,
6/30/94-8/15/94 343,340 345,799
- - ---------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS (Cost $1,980,481) 1,980,481
- - ---------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (.1%)
- - ---------------------------------------------------------------------
Other Assets--Note B 84,795
Liabilities (81,986)
----------
2,809
- - ---------------------------------------------------------------------
NET ASSETS (100%)
- - ---------------------------------------------------------------------
Applicable to 1,983,134,534 outstanding
$.001 par value shares
(authorized 5,000,000,000 shares) $1,983,290
- - ---------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
=====================================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
AT MAY 31, 1994, NET ASSETS CONSISTED OF:
- - ---------------------------------------------------------------------
Amount Per
(000) Share
---------- -----
<S> <C> <C>
Paid in Capital $1,983,153 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Gains 137 --
Unrealized Appreciation
of Investments -- --
- - ---------------------------------------------------------------------
NET ASSETS $1,983,290 $1.00
- - ---------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PRIME FEDERAL U.S. TREASURY
PORTFOLIO PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended Six Months Ended
May 31, 1994 May 31, 1994 May 31, 1994
(000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . . $222,081 $34,260 $30,746
- - -------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . 222,081 34,260 30,746
- - -------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . $ 660 $ 102 $ 97
Management and Administrative 16,664 2,597 2,442
Marketing and Distribution . . . . . . 1,753 19,077 27 2,971 254 2,793
--------- -------- --------
Custodian's Fees . . . . . . . . . . . . . 176 32 26
Taxes (other than income taxes)--Note A 514 79 74
Auditing Fees . . . . . . . . . . . . . . 12 4 4
Shareholders' Reports . . . . . . . . . . 413 58 44
Annual Meeting and Proxy Costs . . . . . . 19 3 10
Directors' Fees and Expenses . . . . . . . 36 6 5
- - -------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . 20,247 3,153 2,956
- - -------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . 201,834 31,107 27,790
- - -------------------------------------------------------------------------------------------------------------------
REALIZED NET LOSS ON
INVESTMENT SECURITIES SOLD . . . . . . . . . (42) (83) (60)
- - -------------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION
(DEPRECIATION) OF
INVESTMENT SECURITIES . . . . . . . . . . . . -- -- --
- - -------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations . . . . $201,792 $31,024 $27,730
===================================================================================================================
</TABLE>
10
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PRIME FEDERAL U.S. TREASURY
PORTFOLIO PORTFOLIO PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------
SIX MONTHS Year Ended SIX MONTHS Year Ended SIX MONTHS Year Ended
ENDED November 30, ENDED November 30, ENDED November 30,
MAY 31, 1994 1993 MAY 31, 1994 1993 MAY 31, 1994 1993
(000) (000) (000) (000) (000) (000)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net Investment Income . . . $ 201,834 $ 368,074 $ 31,107 $ 56,180 $ 27,790 $ 53,345
Realized Net
Gain (Loss) . . . . . . . (42) 37 (83) 121 (60) (50)
Unrealized Appreciation
(Depreciation) . . . . . -- -- -- -- -- --
- - ----------------------------------------------------------------------------------------------------------------
Net Increase in
Net Assets
Resulting from
Operations . . . . 201,792 368,111 31,024 56,301 27,730 53,295
- - ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . (201,834) (368,074) (31,107) (56,180) (27,790) (53,345)
- - ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
(AT $1.00 PER SHARE)
Issued -- Regular . . . . 5,957,373 12,433,362 657,260 1,384,996 816,128 1,392,485
-- In Lieu of Cash
Distributions . 194,016 354,746 29,713 53,652 26,483 50,552
-- Exchange . . . . 3,042,577 3,266,455 405,788 372,470 370,508 406,070
Redeemed-- Regular . . . . (6,025,453) (11,774,422) (694,588) (1,244,605) (634,201) (1,226,276)
-- Exchange . . . . (2,136,797) (4,551,214) (255,991) (646,049) (346,795) (1,192,291)
- - ----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease)
from Capital Share
Transactions . . . . . . 1,031,716 (271,073) 142,182 (79,536) 232,123 (569,460)
- - ----------------------------------------------------------------------------------------------------------------
Total Increase
(Decrease) . . . . . . . 1,031,674 (271,036) 142,099 (79,415) 232,063 (569,510)
- - ----------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . 12,367,237 12,638,273 1,907,062 1,986,477 1,751,227 2,320,737
- - ----------------------------------------------------------------------------------------------------------------
End of Period . . . . . . . $13,398,911 $12,367,237 $2,049,161 $1,907,062 $1,983,290 $1,751,227
================================================================================================================
(1) Income Dividends
Per Share . . . . . . $.016 $.030 $.016 $.029 $.015 $.028
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PRIME PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
Year Ended November 30,
SIX MONTHS ENDED ---------------------------------------------
For a Share Outstanding Throughout Each Period MAY 31, 1994 1993 1992 1991 1990 1989
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .016 .030 .038 .062 .080 .090
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS . . . . .016 .030 .038 .062 .080 .090
- - -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . (.016) (.030) (.038) (.062) (.080) (.090)
Distributions from Realized Capital Gains . . -- -- -- -- -- --
TOTAL DISTRIBUTIONS . . . . . . . . . . . (.016) (.030) (.038) (.062) (.080) (.090)
- - -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . +1.60% +3.02% +3.89% +6.39% +8.32% +9.40%
- - -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . $13,399 $12,367 $12,638 $13,496 $13,579 $11,067
Ratio of Expenses to Average Net Assets . . . . .32%* .32% .30% .30% .30% .28%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . 3.19%* 2.98% 3.82% 6.20% 8.06% 9.05%
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
FEDERAL PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
Year Ended November 30,
SIX MONTHS ENDED ---------------------------------------------
For a Share Outstanding Throughout Each Period MAY 31, 1994 1993 1992 1991 1990 1989
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . .016 .029 .038 .060 .078 .088
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS . . . .016 .029 .038 .060 .078 .088
- - -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.016) (.029) (.038) (.060) (.078) (.088)
Distributions from Realized Capital Gains . . -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS . . . . . . . . . . (.016) (.029) (.038) (.060) (.078) (.088)
- - -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . +1.58% +2.98% +3.83% +6.18% +8.14% +9.15%
- - -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . $2,049 $1,907 $1,986 $2,000 $1,950 $1,531
Ratio of Expenses to Average Net Assets . . . . .32%* .32% .30% .30% .30% .28%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 3.16%* 2.94% 3.76% 6.01% 7.90% 8.78%
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
12
<PAGE> 13
<TABLE>
<CAPTION>
U.S. TREASURY PORTFOLIO
- - ------------------------------------------------------------------------------------------------------------------
Year Ended November 30,
SIX MONTHS ENDED -------------------------------------------
For a Share Outstanding Throughout Each Period MAY 31, 1994 1993 1992 1991 1990 1989
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .015 .028 .036 .058 .077 .085
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . . . -- -- -- -- -- --
----- ----- ----- ----- ----- ----
TOTAL FROM INVESTMENT OPERATIONS . . . . . .015 .028 .036 .058 .077 .085
- - ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . (.015) (.028) (.036) (.058) (.077) (.085)
Distributions from Realized Capital Gains . . . . -- -- -- -- -- --
----- ----- ----- ----- ----- ----
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.015) (.028) (.036) (.058) (.077) (.085)
- - ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . +1.51% +2.86% +3.68% +5.94% +8.02% +8.89%
- - ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $1,983 $1,751 $2,321 $2,092 $1,594 $412
Ratio of Expenses to Average Net Assets . . . . . . .32%* .32% .30% .30% .30% .31%+
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . 3.01%* 2.83% 3.60% 5.76% 7.74% 8.44%
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
+Insurance premiums represent .03%.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
Vanguard Money Market Reserves is registered under the Investment Company Act
of 1940 as a diversified open-end investment company and consists of the Prime,
Federal, and U.S. Treasury Portfolios. The Prime Portfolio invests in
short-term debt instruments of companies primarily operating in specific
industries; the issuers' abilities to meet their obligations may be affected by
economic developments in such industries. The Federal Portfolio invests in
short-term debt instruments issued by the U.S. Government or its agencies and
instrumentalities. The U.S. Treasury Portfolio invests in short-term debt
instruments backed by the full faith and credit of the U.S. Government.
* A. The following significant accounting policies 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: Securities are stated at amortized cost which
approximates market value.
2. FEDERAL INCOME TAXES: Each Portfolio of 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. 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. Discounts and premiums are accreted and amortized, respectively, to
interest income over the lives of the respective securities. Distributions
from net investment income are declared on a daily basis payable on the
first business day of the following month.
4. REPURCHASE AGREEMENTS: Securities pledged as collateral for repurchase
agreements are held by the Fund's custodian bank until maturity of each
repurchase agreement. Provisions of each 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.
* B. The Vanguard Group, Inc. furnishes at cost investment advisory,
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, 1994, the Fund had contributed capital of
$2,782,000 to Vanguard (included in Other Assets), representing 13.9% of
Vanguard's capitalization. The directors and officers of the Fund are also
directors and officers of Vanguard.
14
<PAGE> 15
DIRECTORS AND OFFICERS
JOHN C. BOGLE, Chairman and Chief Executive Officer
Chairman and Director of The Vanguard Group, Inc.,
and of each of the investment companies in
The Vanguard Group.
JOHN J. BRENNAN, President
President and Director of The Vanguard Group, Inc.,
and of each of the investment companies in
The Vanguard Group.
ROBERT E. CAWTHORN, Chairman and Chief Executive
Officer of Rhone-Poulenc Rorer Inc.; Director of Sun
Company, Inc. and Immune Response Corporation;
Trustee of the Universal Health Realty Income Trust.
BARBARA BARNES HAUPTFUHRER, Director of The Great
Atlantic and Pacific Tea Company, Alco Standard
Corp., Raytheon Company, Knight-Ridder, Inc.,
and Massachusetts Mutual Life Insurance Co.
BRUCE K. MACLAURY, President of The Brookings
Institution; Director of Dayton Hudson Corporation,
American Express Bank Ltd., The St. Paul Companies,
Inc., and Scott Paper Company.
BURTON G. MALKIEL, Chemical Bank Chairman's
Professor of Economics, Princeton University;
Director of Prudential Insurance Co. of America,
Amdahl Corporation, Baker Fentress & Co.,
and The Southern New England Telephone Company.
ALFRED M. RANKIN, JR., President and Chief Executive
Officer of NACCO Industries, Inc.; Director of NACCO
Industries, The BFGoodrich Company, and
The Standard Products Company.
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 Company and NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco
Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc.
J. LAWRENCE WILSON, Chairman and Chief Executive
Officer of Rohm & Haas Company; Director of
Cummins Engine Company; Trustee of Vanderbilt
University and the Culver Educational Foundation.
OTHER FUND OFFICERS
RICHARD F. HYLAND, Treasurer; Treasurer of
The Vanguard Group, Inc., and of each of the
investment companies in The Vanguard Group.
RAYMOND J. KLAPINSKY, Secretary; Senior Vice
President and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in
The Vanguard Group.
KAREN E. WEST, Controller; Vice President of
The Vanguard Group, Inc.; Controller of each of
the investment companies in The Vanguard Group.
OTHER VANGUARD GROUP OFFICERS
JEREMY G. DUFFIELD
Senior Vice President
Planning & Development
JAMES H. GATELY
Senior Vice President
Institutional
IAN A. MACKINNON
Senior Vice President
Fixed Income Group
VINCENT S. MCCORMACK
Senior Vice President
Operations
RALPH K. PACKARD
Senior Vice President
Chief Financial Officer
15
<PAGE> 16
THE VANGUARD FAMILY OF FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund-Money Market Portfolio
Vanguard State Tax-Free Funds (CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds (CA, FL, NJ, NY, OH, PA)
FIXED INCOME FUNDS
Vanguard Admiral Funds
Vanguard Bond Index Fund
Vanguard Fixed Income Securities Fund
Vanguard Preferred Stock Fund
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard Balanced Index Fund
Vanguard STAR Fund
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
EQUITY FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible Securities Fund
Vanguard Equity Income Fund
Vanguard Index Trust
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund-U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
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 Equity Index Fund
Vanguard International Growth Portfolio
Vanguard/Trustees' Equity Fund-International Portfolio
The Vanguard Group * Vanguard Financial Center
Valley Forge, PA 19482
New Account Information: 1-(800) 662-7447
Shareholder Account Services: 1-(800) 662-2739
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.
Q302-05/94
VANGUARD
MONEY MARKET RESERVES
[PHOTO -- SEE EDGAR APPENDIX]
SEMI-ANNUAL REPORT
MAY 31, 1994
<PAGE> 17
EDGAR APPENDIX
The back cover of the printed version of this report features the flags
of the United States of America and Vanguard flying from a halyard.
