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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 45
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 47
VANGUARD MONEY MARKET
RESERVES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
100 VANGUARD BLVD., (P.O. BOX 876) VALLEY FORGE, PA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER (610) 669-6000
RAYMOND J. KLAPINSKY, SECRETARY
VANGUARD MONEY MARKET RESERVES, INC.
100 VANGUARD BLVD., (P.O. BOX 876)
VALLEY FORGE, PA 19482
(NAME AND ADDRESS OF AGENT FOR SERVICE)
No filing fee is required because an indefinite number of shares have
previously been registered pursuant to Rule 24f-2 under the Investment Company
Act of 1940.
IT IS PROPOSED THAT THIS AMENDMENT BECOME EFFECTIVE ON SEPTEMBER 18, 1995,
PURSUANT TO RULE 488(a) UNDER THE SECURITIES ACT OF 1933.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE REGISTRANT'S MOST RECENT 24f-2 NOTICE FOR ITS FISCAL YEAR NOVEMBER
30, 1994 WAS FILED WITH THE COMMISSION ON JANUARY 30, 1995.
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VANGUARD MONEY MARKET RESERVES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 488 (a) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
N-14
ITEM NUMBER CAPTION IN PROSPECTUS
<C> <S> <C>
Item 1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus........ Cover Page of Registration Statement;
Front Cover Prospectus
Item 2. Beginning and Outside Back Cover Page of
Prospectus.................................... Table of Contents
Item 3. Synopsis Information and Risk Factors......... Summary
Item 4. Information About the Transaction............. Summary; The Proposed Reorganization;
Additional Information About the
Proposed Reorganization
Item 5. Information About the Registrant.............. Prospectus Cover Page; Summary; The
Proposed Reorganization; Additional
Information on the Fund and Vanguard
Institutional Money Market Fund;
Condensed Financial Information;
Performance Summary; Information
Filed with the Securities and
Exchange Commission.
Item 6. Information About the Company Being
Acquired...................................... Summary; The Proposed Reorganization;
Additional Information on the Fund
and Vanguard Institutional Money
Market Fund; Performance Summary;
Condensed Financial Information;
Information Filed with the Securities
and Exchange Commission.
Item 7. Voting Information............................ Notice of Special Meeting of
Shareholders; Summary; Proposed
Reorganization; Additional
Information About Proposed
Reorganization;
Vote Required
Item 8. Interest of Certain Persons and Experts....... Additional Information About the
Proposed Reorganization
Item 9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters.......... Not Applicable
</TABLE>
<PAGE> 3
[VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO LOGO]
Dear Institutional Shareholder:
The accompanying Combined Proxy Statement and Prospectus presents an
important proposal for your consideration as a shareholder of Vanguard
Institutional Money Market Portfolio (the "Institutional Portfolio"). In
substance, your Board of Directors has proposed that the Institutional Portfolio
be reorganized as a Class of Vanguard Money Market Reserves, Inc.-Prime
Portfolio (the "Prime Portfolio"), in a tax-free reorganization effective on
September --, 1995 (the "Closing Date"). If this proposal is approved by
shareholders, your Institutional Portfolio shares will be exchanged for an
equal-dollar amount of a special class of shares of the Prime Portfolio known as
the "Institutional Shares" on the Closing Date.
BACKGROUND
Given these circumstances, the Officers and Directors of the Institutional
Portfolio have carefully evaluated the proposed reorganization, giving careful
consideration to the impact of the change on existing shareholders. The Officers
and Directors have concluded that it would be in the best interest of the
Institutional Portfolio and its shareholders that the Institutional Portfolio be
merged into a newly-created separate class of shares in the Prime Portfolio.
We hope this Proxy statement and the Vanguard Money Market Reserves
prospectus will answer all of your questions, but if you have further questions
at any time, please do not hesitate to call Vanguard at 1-800-523-8066.
Sincerely,
[Signature]
John C. Bogle
Chairman of the Board
<PAGE> 4
(VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO LOGO)
VANGUARD MONEY MARKET RESERVES, INC.
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED SEPTEMBER --, 1995
This combined Proxy Statement and Prospectus includes this cover page, a
Notice of Special Meeting of Shareholders for Vanguard Institutional Portfolios,
Inc.-Institutional Money Market Portfolio (the "Institutional Portfolio"), a
Proxy Statement, a form of proxy and the current prospectus for Vanguard Money
Market Reserves, Inc. ("Vanguard Money Market Reserves").
Vanguard Money Market Reserves is an open-end diversified investment
company which is made up of three different portfolios. The investment objective
of Vanguard Money Market Reserves is to provide the maximum current income that
is consistent with the preservation of capital and liquidity by investing in
specified money market instruments. Each Portfolio also seeks to maintain a
constant net asset value of $1.00 per share.
The principal executive offices of the Institutional Portfolio and Vanguard
Money Market Reserves are located at Vanguard Financial Center, One Hundred
Vanguard Boulevard, Malvern, PA 19355 (Telephone No.: 1-800-662-7447).
This Combined Proxy Statement and Prospectus sets forth concisely the
information that a shareholder of the Institutional Portfolio should know before
voting on the proposed reorganization. It should be read and retained for future
reference.
A Prospectus, Statement of Additional information, and the 1994 Annual
Report to Shareholders of Vanguard Money Market Reserves Fund, including
financial statements, and the 1994 Annual Report of the Institutional Portfolio,
including financial statements, are on file with the Securities and Exchange
Commission (the "Commission"). Vanguard Money Market Reserves' Prospectus and
Statement of Additional Information (dated --, 1995) and Vanguard Money Market
Reserves Fund's 1994 Annual Report to Shareholders are incorporated by reference
into this Combined Proxy Statement and Prospectus. The Vanguard Money Market
Reserves Prospectus is included with this document as Exhibit II. The Vanguard
Money Market Reserves Statement of Additional Information and the Institutional
Portfolio's 1994 Annual Report to Shareholders are available, without charge, by
writing to Vanguard Financial Center, P.O. Box 876, Valley Forge, PA 19482 or by
calling the toll-free telephone number listed above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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2
<PAGE> 5
VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO:
Notice is hereby given that a special meeting of shareholders of Vanguard
Institutional Money Market Portfolio (the "Institutional Portfolio") will be
held in the Majestic Building, Room 118A, Vanguard Financial Center, 100
Vanguard Boulevard, Malvern, PA 19355, on October --, 1995, at 9:30 A.M., E.T.
for the following purposes:
1. To approve or disapprove a proposal providing for the reorganization of
all of the Institutional Portfolio's assets as an institutional class of
the Prime Portfolio of Vanguard Money Market Reserves, Inc.
2. To consider and act upon any other matters which may properly come
before this meeting.
By Order of the Board of Directors
Raymond J. Klapinsky, Secretary
September --, 1995
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOU TO
COOPERATE IN MAILING YOUR PROXY PROMPTLY.
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3
<PAGE> 6
VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER --, 1995
PROXY STATEMENT
The enclosed proxy is solicited by and on behalf of the management of
Vanguard Institutional Money Market Portfolio (the "Institutional Portfolio").
In addition to the solicitation of proxies by mail, officers and employees of
the Institutional Portfolio may solicit in person or by telephone. Persons
holding stock as nominees will, upon request, be reimbursed for their reasonable
expenses in sending soliciting materials to their principals.
Holders of record as of the close of business on August --, 1995 are
entitled to vote at the meeting or any adjourned session. As of the record date
there were issued and outstanding approximately -- shares of common stock of the
Institutional Portfolio.
Shares represented by a properly executed proxy will be voted in accordance
with the instructions thereon, or if no specification is made, the persons named
as proxies will vote in favor of the proposals set forth in the Notice of
Meeting and in this Proxy Statement. Abstentions and broker non-votes will be
included for purposes of determining whether a quorum is present at the meeting,
but will not be counted as votes in favor of or against the proposal. Proxies
may be revoked at any time before they are exercised by the subsequent execution
and submission of a revised proxy, by written notice of revocation to the
Secretary of the Institutional Portfolio, or by voting in person at the meeting.
The business address of the Fund is c/o Vanguard Financial Center, 100 Vanguard
Boulevard (P.O. Box 876), Valley Forge, PA 19482.
A copy of the Institutional Portfolio's Annual Report for the fiscal year
ended November 30, 1994, including financial statements, has been mailed to each
shareholder of the Institutional Portfolio as of the record date. This Combined
Prospectus and Proxy Statement was mailed to shareholders on or about September
--, 1995.
APPROVAL OR DISAPPROVAL OF THE PROPOSED REORGANIZATION
SUMMARY
The following is a summary of the proposed reorganization and the parties
thereto contained elsewhere in this Combined Proxy Statement and Prospectus
(including documents incorporated by reference herein).
COMPARISON OF THE INSTITUTIONAL PORTFOLIO AND PRIME PORTFOLIO
1. Investment Objectives and Policies
The investment objective of the Institutional Portfolio and the Prime
Portfolio is to provide the maximum current income that is consistent with the
preservation of capital and liquidity by investing in specified money market
instruments. The Portfolios seek to maintain a constant net asset value of $1.00
per share.
4
<PAGE> 7
2. Advisory Fees
The Institutional Portfolio and the Prime Portfolio receive all investment
advisory services on an at-cost basis from Vanguard's Fixed Income Group. The
Group provides investment advisory services to more than 40 Vanguard money
market and bond portfolios, both taxable and tax-exempt. Total assets under
management by Vanguard's Fixed Income Group were $55 billion as of December 31,
1994. The Fixed Income Group is supervised by the Officers of the Vanguard
Group, Inc. ("Vanguard"). Ian A. MacKinnon, Senior Vice President of Vanguard,
has been in charge of the Group since its inception in 1981.
The Fixed Income Group manages the investment and reinvestment of the
assets of both the Institutional Portfolio and the Prime Portfolio and
continuously reviews, supervises and administers their investment programs,
subject to the maturity and quality standards specified in their respective
Prospectuses and supplemental guidelines approved by the Board of Directors. The
Fixed Income Group's selection of investments for both the Institutional
Portfolio and the Prime Portfolio is based on: (a) continuing credit analysis of
those instruments held in each Portfolio and those being considered for
inclusion therein; (b) possible disparities in yield relationships between
different money market instruments; and (c) actual or anticipated movements in
the general level of interest rates.
The Fixed Income Group is also responsible for the allocation of principal
business and portfolio brokerage and the negotiation of commissions. The
purchase and sale of investment securities will ordinarily be principal
transactions. Portfolio securities will normally be purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
will be no brokerage commissions paid by either Portfolio for securities
purchased directly from an issuer. Purchases from underwriters of securities
will include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers serving as market makers will include a dealer's mark-up.
In purchasing and selling securities, it is each Portfolio's policy to seek
to obtain quality execution at the most favorable prices through responsible
broker-dealers. In selecting broker-dealers to execute the securities
transactions for each Portfolio, consideration will be given to such factors as:
the price of the security; the rate of the commission; the size and difficulty
of the order; the reliability, integrity, financial condition, general execution
and operational capabilities of competing broker-dealers; and the brokerage and
research services provided to each Portfolio.
For the fiscal year ended November 30, 1994, the aggregate investment
advisory fee paid by the Prime Portfolio for investment advisory expenses was
approximately $1,460,000.
3. Management, Administrative and Distribution Services
The Institutional Portfolio and the Prime Portfolio are members of The
Vanguard Group of Investment Companies. Through their jointly-owned subsidiary,
Vanguard, the member funds of the Vanguard Group obtain at-cost virtually all of
their corporate management, administrative, and distribution services. Each Fund
pays its share of Vanguard's total expenses relating to these services, which
are allocated among the Funds under methods approved by the Board of Directors
of each Fund.
5
<PAGE> 8
4. Asset Size and Expense Ratios
On June 30, 1995 the Institutional Portfolio had total net assets of
approximately $637 million. On the same date, the Prime Portfolio had total net
assets of approximately $17.7 billion. For the fiscal year ended November 30,
1994, the Institutional Portfolio had an expense ratio of .15 of 1% of its
average net assets. The expense ratio for the Prime Portfolio for its 1994
fiscal year was .32 of 1% of its average net assets.
5. Purchase, Redemption and Exchange Procedures
Purchase procedures for the Institutional Portfolio and the Prime Portfolio
are virtually identical, and are described on page 15 of the Prime prospectus.
No fee will be charged for the exchange of Institutional Portfolio shares for
Prime Institutional shares. Shareholders of both the Institutional Portfolio and
the Prime Portfolio may exchange shares for shares of other Vanguard Funds as
described on page 21 of the Prime Portfolio Prospectus.
6. Income Dividends and Capital Gains Distributions
Both the Institutional Portfolio and the Prime Portfolio declare income
dividends daily and pay these dividends on the first business day of each month.
Capital gains distributions, if any, are made annually. Shareholders may elect
to accept such dividends in additional shares or take them in cash.
7. Performance
The following chart illustrates the cumulative total return of each
Portfolio for various periods ended November 30, 1994.
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
-------- ---------- ---------
<S> <C> <C> <C>
Prime Portfolio....................................... 3.87% 28.15% 85.43%
Institutional Portfolio............................... 4.06% 29.10% 30.91%*
*Fund inception was October 3, 1989.
</TABLE>
THE PROPOSED REORGANIZATION
1. The Agreement and Plan of Reorganization
The Directors of the Institutional Portfolio and the Prime Portfolio have
determined that the proposed reorganization is in the best interests of each
Fund. The terms and conditions under which the proposed reorganization may be
consummated are set forth in the Agreement and Plan of Reorganization, dated
October --, 1995, between the Institutional Portfolio and the Prime Portfolio
(the "Agreement"). The Agreement is attached as Exhibit I to this Combined Proxy
Statement and Prospectus. Significant provisions of the Agreement are summarized
elsewhere in this Combined Proxy Statement and Prospectus.
2. The Closing Date
The Agreement provides that the Prime Portfolio will acquire substantially
all of the assets of the Institutional Portfolio in exchange solely for shares
of Prime Institutional to be issued to shareholders of the Institutional
Portfolio on October --, 1995, or such later date as may be agreed upon by the
parties (the
6
<PAGE> 9
"Closing Date"). The number of shares of Prime Institutional to be issued to
shareholders of the Institutional Portfolio will be equal to the number of
shares of the Institutional Portfolio held by each such shareholder. Immediately
following the Closing Date, the Institutional Portfolio will dissolve and
distribute pro rata to its shareholders of record, as of the close of business
on the Closing Date, the shares of Prime Institutional received by the
Institutional Portfolio.
3. Federal Income Tax Consequences
Consummation of the reorganization is subject to the condition that the
Institutional Portfolio and the Prime Portfolio receive an opinion of counsel to
the effect that the reorganization will not result in a recognition of gain or
loss for Federal income tax purposes for either the Institutional Portfolio or
the Prime Portfolio, or their respective shareholders.
4. Vote Required for Shareholder Approval of the Reorganization
Approval of the Plan of Reorganization will require the affirmative vote of
a majority of the shares of the Institutional Portfolio's common stock
outstanding and entitled to vote at this Special Meeting of Shareholders.
RISK FACTORS
Both the Institutional Portfolio and the Prime Portfolio invest principally
in high-quality money market obligations issued by financial institutions,
non-financial corporations, the U.S. Government, its agencies and
instrumentalities and state and municipal governments and their agencies and
instrumentalities.
ADDITIONAL INFORMATION ABOUT THE PROPOSED REORGANIZATION
REASONS FOR THE PROPOSED REORGANIZATION
The Institutional Portfolio was formed as a member of the Vanguard Group of
Investment Companies in 1989, with the objective of providing the maximum
current income that is consistent with the preservation of capital and liquidity
by investing in specified money market instruments. The Institutional Portfolio
was designed to have identical investment policies to the Prime Portfolio of
Vanguard Money Market Reserves, but to operate more cost-effectively by
restricting participation in the Institutional Portfolio to certain
institutional clients meeting a $10 million minimum investment. The
Institutional Portfolio has one of the lowest expense ratios of any money market
fund (0.15%). These characteristics of the Fund will not change as a result of
the merger. Simply, following the merger, the Prime Portfolio will consist of
two separate classes of shares, the existing Prime Portfolio and the new Prime
Portfolio Institutional class of shares ("Prime Institutional").
The Board of Directors has proposed this merger because a multiple class
structure avoids some of the expense and investment advisory complexities of
managing and administering separate funds. Such a structure will provide greater
investment diversification to the shareholders of the Institutional Portfolio
and allow Vanguard to realize fund management and fund accounting efficiencies
from administering one portfolio instead of two. In addition, over the period
since the inception of the Institutional Portfolio has been faced with a
relatively small number of shareholders owning a large portion of the
Portfolio's assets.
7
<PAGE> 10
The merger of the Institutional Portfolio and Prime Portfolio will mitigate
current and future shareholder concentration issues.
Given these circumstances, the Officers and Directors of The Institutional
Portfolio have carefully evaluated the proposed reorganization, giving special
consideration to the impact of the change on existing shareholders. The Officers
and Directors have concluded that it would be in the best interest of the
Institutional Portfolio and its shareholders that the Institutional Portfolio be
merged into a newly created separate class of shares in the Prime Portfolio.
THE PLAN OF REORGANIZATION
The Agreement provides that the Prime Portfolio will acquire substantially
all of the assets of the Institutional Portfolio in exchange solely for shares
of common stock ($.001 par value) of Prime Institutional on the Closing Date,
October --, 1995 or such later date as may be agreed upon by the parties. The
number of shares of Prime Institutional to be issued to shareholders of the
Institutional Portfolio will be equal to the number of shares of the
Institutional Portfolio held by each such shareholder. The net asset value per
share for each Portfolio will be determined by dividing the total value of each
Portfolio's investments and other assets, less any liabilities, by the total of
its outstanding shares using the valuation procedures set forth under "The Share
Price of each Portfolio" on page 13 of the accompanying Vanguard Money Market
Reserves prospectus. For purposes of calculating the net asset value per share,
securities are valued by the "amortized cost" method of valuation, which does
not take into account unrealized gains or losses. The net asset value per share
is expected to be $1.00 per share.
Immediately following the Closing Date, the Institutional Portfolio will
dissolve and distribute pro rata to its shareholders of record as of the close
of business on the Closing Date, the shares of Prime Institutional received by
the Institutional Portfolio. Such liquidation and distribution will be
accomplished by the establishment of open accounts on the share records of Prime
Institutional in the names of such Institutional Portfolio shareholders and
representing the respective pro rata number of shares of Prime Institutional due
such shareholders. Fractional shares of Prime Institutional will be carried to
the third decimal place.
The consummation of the Agreement is further subject to the customary
conditions applicable to corporate reorganizations of this type as set forth in
Section 8 of the Agreement. Moreover, the Agreement may be terminated and the
reorganization abandoned at any time, before or after consent of the two
parties, or by either party if any condition set forth in Section 8 has not been
fulfilled by the other party or waived by the party entitled to its benefits.
EXPENSES OF THE REORGANIZATION
The Institutional Portfolio and the Prime Portfolio will each bear such
expenses of entering into and carrying out the provisions of the Agreement as
will be separately incurred by it. The expenses of the Prime Portfolio will
include legal and accounting fees estimated at $--. The Institutional Portfolio
expenses will include: the costs of the special meeting; proxy costs (including
all costs of solicitation, printing and mailing of this Proxy Statement); the
expenses of its proposed liquidation and dissolution; and legal and accounting
fees. It is estimated that these expenses will not exceed $--.
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<PAGE> 11
TAX CONSEQUENCES
Consummation of the proposed reorganization is conditioned upon receipt of
an opinion of Stradley, Ronon, Stevens and Young, counsel to the Institutional
and Prime Portfolios, that the acquisition will qualify as a reorganization
within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended, and that the proposed reorganization will not result in the
recognition of gain or loss for Federal income tax purposes for either the
Institutional Portfolio, the Prime Portfolio or their respective shareholders.
See Section 8(f ) of the Agreement.
SHAREHOLDERS' RIGHTS
There are no material differences between the rights of the Institutional
Portfolio's shareholders and the rights of Prime Portfolio shareholders.
Vanguard Money Market Reserves, Inc. and the Institutional Portfolio are each
Maryland corporations. Shares of both Funds are fully paid and nonassessable.
Holders thereof have noncumulative voting rights and equal rights with respect
to dividends, assets and liquidations, but no preemptive rights. Shareholders of
the Institutional Portfolio will not be entitled to any "dissenters rights"
under Maryland law since the reorganization is between two open-end investment
companies registered under the Investment Company Act of 1940.
However, shareholders who find that the proposed reorganization does not
meet their particular investment needs and objectives, may consider two
additional options: (1) exchanging their holdings without sales commissions into
another mutual fund in The Vanguard Group, currently offering its shares to new
investors, which is better suited to their goals; or (2) redeeming shares for
cash. These options are available to an Institutional Portfolio shareholder both
before and, as a Prime Institutional shareholder, after the reorganization.
CAPITALIZATION
The following table shows the capitalization of the Institutional Portfolio
and the Prime Portfolio as of July 31, 1995, and on a pro forma basis as of that
date giving effect to the proposed acquisition of assets at net asset value.
<TABLE>
<CAPTION>
INSTITUTIONAL PRIME PRO FORMA
PORTFOLIO PORTFOLIO COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
Net Assets (000)............................ $ 647,517 $ 17,981,673 $ 18,629,190
Net Assets Per Share........................ $ 1.00 $ 1.00 $ 1.00
Shares Outstanding (000).................... 647,517 17,981,673 18,629,190
</TABLE>
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<PAGE> 12
ADDITIONAL INFORMATION ON THE INSTITUTIONAL PORTFOLIO
AND VANGUARD MONEY MARKET RESERVES
THE INSTITUTIONAL PORTFOLIO
1. Background
The Institutional Portfolio was established in 1989. The objective in
forming the Institutional Portfolio was to provide institutional investors with
the means to invest in high-quality money market instruments and realize the
efficiencies which result from the administration of larger institutional
accounts.
2. Investment Objective and Policies
The Institutional Portfolio is designed primarily for institutional
investors. The Portfolio's objective is to provide the maximum current income
that is consistent with the preservation of capital and liquidity by investing
in specified money market instruments. The Portfolio also seeks to maintain a
constant net asset value of $1.00 per share.
3. Investment Adviser
The Institutional Portfolio receives all investment advisory services on an
at-cost basis from Vanguard's Fixed Income Group. The Group provides investment
advisory services to more than 40 Vanguard money market and bond portfolios,
both taxable and tax-exempt. Total assets under management by Vanguard's Fixed
Income Group were $55 billion as of December 31, 1994. The Fixed Income Group is
supervised by the Officers of the Institutional Portfolio. Ian A. MacKinnon,
Senior Vice President of Vanguard, has been in charge of the Group since its
inception in 1981.
The Fixed Income Group manages the investment and reinvestment of the
assets of the Institutional Portfolio and continuously reviews, supervises and
administers the Institutional Portfolio's investment program, subject to the
maturity and quality standards specified in the Prospectus and supplemental
guidelines approved by the Board of Directors.
During the fiscal years ended November 30, 1992, 1993 and 1994, the
Institutional Portfolio paid advisory fees of $18,000, $28,000, and $48,000.
VANGUARD MONEY MARKET RESERVES
1. Background
Vanguard Money Market Reserves, Inc. was organized in 1975 as an open-end
diversified management investment company known as a money market fund. The Fund
offers three separate Portfolios: the Prime, Federal and U.S. Treasury
Portfolios.
2. Investment Objective and Policies
Each Portfolio of the Fund seeks to provide the maximum current income that
is consistent with the preservation of capital and liquidity by investing in
specified money market instruments. See "Investment Objective" and "Investment
Policies" on pages 6 and 7 of the Money Market Reserves Prospectus.
10
<PAGE> 13
3. Investment Adviser
The three Portfolios of the Fund receive all investment advisory services
on an at-cost basis from Vanguard's Fixed Income Group. The Group also provides
investment advisory services to more than 40 Vanguard money market and bond
portfolios, both taxable and tax-exempt. Total assets under management by
Vanguard's Fixed Income Group were approximately $55 billion as of December 31,
1994. The Fixed Income Group is supervised by the Officers of the Fund. Ian A.
MacKinnon, Senior Vice President of Vanguard, has been in charge of the Group
since its inception in 1981.
The Fixed Income Group manages the investment and reinvestment of the
assets of the Fund's Portfolios and continuously reviews, supervises and
administers each Portfolio's investment program, subject to the maturity and
quality standards specified in this Prospectus and supplemental guidelines
approved by the Fund's Board of Directors. The Fixed Income Group's selection of
investments for the Portfolios is based on: (a) continuing credit analysis of
those instruments held in the Portfolios and those being considered for
inclusion therein; (b) possible disparities in yield relationships between
different money market instruments; and (c) actual or anticipated movements in
the general level of interest rates.
INVESTMENT LIMITATIONS
The investment limitations for Vanguard Money Market Reserves summarized on
page 10 of the Prospectus are substantially identical to those applicable to the
Institutional Portfolio. These investment limitations may not be changed without
shareholder approval.
PORTFOLIO BROKERAGE
The portfolio brokerage policies of the Institutional Portfolio and Money
Market Reserves are identical.
The Fixed Income Group is responsible for the allocation of principal
business and portfolio brokerage and the negotiation of commissions for both the
Institutional Portfolio and Vanguard Money Market Reserves. The purchase and
sale of investment securities by each Portfolio will ordinarily be principal
transactions. Portfolio securities will normally be purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
will be no brokerage commissions paid by a Portfolio for securities purchased
from an issuer. Purchases from underwriters of securities will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers will include a dealer's mark-up.
In purchasing and selling securities for each of the Portfolios, it is each
Portfolio's policy to seek to obtain quality execution at the most favorable
prices through issuers or responsible broker-dealers. In selecting
broker-dealers to execute the securities transactions for the Portfolios,
consideration will be given to such factors as: the price of the security; the
rate of the commission; the size and difficulty of the order; the reliability,
integrity, financial condition, general execution and operational capabilities
of competing broker-dealers; and the overall brokerage and research services
provided to each Fund.
During the fiscal year ended November 30, 1994, the Institutional Portfolio
paid no brokerage commissions.
11
<PAGE> 14
THE VANGUARD GROUP
The Institutional Portfolio and Vanguard Money Market Reserves are members
of The Vanguard Group of Investment Companies. Through their jointly-owned
subsidiary, The Vanguard Group, Inc., the member Funds obtain at cost virtually
all of their corporate management, administrative and distribution services. See
page 10 of the Vanguard Money Market Reserves Prospectus.
LITIGATION
Neither the Institutional Portfolio nor Vanguard Money Market Reserves is
involved in any litigation.
12
<PAGE> 15
PERFORMANCE SUMMARY
VANGUARD MONEY MARKET RESERVES FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period, insofar as they relate to each of the five years in the period ended
November 30, 1994, have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the Fund's financial statements and notes thereto,
which, together with the remaining portions of the Fund's 1994 Annual Report to
Shareholders, are incorporated by reference in the Statement of Additional
Information and this Prospectus, and which appear, along with the report of
Price Waterhouse LLP, in the Fund's 1994 Annual Report to Shareholders. The
information on selected per share data and ratios for the six months ended May
31, 1995 for the Fund is unaudited and should be read in conjunction with the
financial statements appearing in the Fund's May 31, 1995 Semi-Annual Report to
Shareholders. For a more complete discussion of the Fund's performance, please
see the 1994 Annual Report or the May 31, 1995 Semi-Annual Report of the Fund,
which may be obtained without charge by writing to the Fund or by calling our
Investor Information Department at 1-800-662-7447.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PRIME PORTFOLIO
SIX --------------------------------------------------------------------------------
MONTHS YEAR ENDED NOVEMBER 30,
ENDED
MAY 31, ------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING
OF
YEAR.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
INVESTMENT
OPERATIONS
Net
Investment
Income... .029 .038 .030 .038 .062 .080 .090 .072 .063 .066 .079
Net
Realized
and
Unrealized
Gain
on
Investment
Securities... -- -- -- -- -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
TOTAL
FROM
INVESTMENT
OPERATIONS... .029 .038 .030 .038 .062 .080 .090 .072 .063 .066 .079
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends
from
Net
Investment
Income... (.029) (.038) (.030) (.038) (.062) (.080) (.090) (.072) (.063) (.066) (.079)
Distributions
from
Realized
Capital
Gains... -- -- -- -- -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
TOTAL
DISTRIBUTIONS... (.029) (.038) (.030) (.038) (.062) (.080) (.090) (.072) (.063) (.066) (.079)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET
VALUE,
END OF
YEAR.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN... +2.90% 3.87% 3.02% 3.89% 6.39% 8.32% 9.40% 7.47% 6.49% 6.78% 8.20%
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net
Assets,
End of
Year
(Millions)... $16,934 $15,109 $12,367 $12,638 $13,496 $13,579 $11,067 $6,863 $4,088 $2,186 $1,725
Ratio of
Expenses
to
Average
Net
Assets... .32%* .32% .32% .30% .30% .30% .28% .33% .37% .48% .51%
Ratio of
Net
Investment
Income to
Average
Net
Assets... 5.74%* 3.84% 2.98% 3.82% 6.20% 8.06% 9.05% 7.28% 6.30% 6.60% 7.90%
</TABLE>
* Annualized.
13
<PAGE> 16
INSTITUTIONAL PORTFOLIO FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout each
period presented have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and notes thereto, which,
together with the remaining portions of the Fund's 1994 Annual Report to
Shareholders, are incorporated by reference in the Statement of Additional
Information and this Prospectus, and which appear, along with the report of
Price Waterhouse LLP, in the Vanguard Institutional Money Market Portfolio's
1994 Annual Report to Shareholders. The information on selected per share data
and ratios for the six months ended May 31, 1995 for the Portfolio is unaudited
and should be read in conjunction with the financial statements appearing in the
Portfolio's May 31, 1995 Semi-Annual Report to Shareholders. For a more complete
discussion of the Portfolio's performance, please see the 1994 Annual Report or
the May 31, 1995 Semi-Annual Report of the Portfolio, which may be obtained
without charge by writing to the Portfolio or calling our Investor Information
Department at 1-800-662-7447.
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED NOVEMBER 30,
ENDED
MAY 31, ------------------------------ OCT. 3, 1989*
1995 1994 1993 1992 1991 1990 TO NOV. 30, 1989
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- -----------
INVESTMENT OPERATIONS
Net Investment Income................................ .030 .040 .031 .040 .063 .082 .014
Net Realized and Unrealized Gain on Investments...... -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----------
TOTAL FROM INVESTMENT OPERATIONS................... .030 .040 .031 .040 .063 .082 .014
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income................. (.030) (.040) (.031) (.040) (.063) (.082) (.014)
Distributions from Realized Capital Gains............ -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----------
TOTAL DISTRIBUTIONS................................ (.030) (.040) (.031) (.040) (.063) (.082) (.014)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.......................................... +2.99% 4.06% 3.19% 4.02% 6.52% 8.49% 1.40%
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions).................. $ 634 $ 677 $ 306 $ 269 $ 218 $ 91 $ 69
Ratio of Expenses to Average Net Assets............... .15% .15% .15% .15% .15% .15% .15%**
Ratio of Net Investment Income to Average Net
Assets............................................... 5.92%* 4.14% 3.14% 3.93% 6.14% 8.24% 8.90%**
</TABLE>
* Commencement of operations.
** Annualized.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of the Institutional Portfolio and Vanguard Money
Market Reserves have been audited by Price Waterhouse LLP, independent
accountants, for the periods indicated in said firm's reports thereon which are
included in the respective 1994 Annual Reports to Shareholders. Such financial
statements have been referred to herein in reliance on the reports of Price
Waterhouse LLP given on the authority of said firm as experts in auditing and
accounting.
14
<PAGE> 17
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
The Institutional Portfolio and Vanguard Money Market Reserves are subject
to the informational requirements of the Securities and Exchange Act of 1934 and
the Investment Company Act of 1940, and in accordance therewith file reports,
proxy material and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy material and other information can be
inspected and copied at the Public Reference Room maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material
can be obtained at prescribed rates from the Public Reference Section of the
Commission., Washington, D.C. 20549.
VOTE REQUIRED
Approval of the Agreement and Plan of Reorganization, including the
dissolution of the Institutional Portfolio, will require the favorable vote of a
majority of the shares of common stock of the Institutional Portfolio
outstanding and entitled to vote at this Special Meeting of Shareholders. THE
DIRECTORS RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
The Board of Directors of the Institutional Portfolio has not determined
what action it will take in the event shareholders fail to approve the
Reorganization or for any reason the transaction with Vanguard Money Market
Reserves is not consummated. However, if the Reorganization is not approved by
the shareholders of the Institutional Portfolio, the Board of Directors will
consider alternative dispositions of the Fund's net assets, including the sale
of assets to, or merger with, another investment company.
OTHER MATTERS
On July 31, 1995, the following shareholders held more than 5% of the
outstanding shares of the Institutional Portfolio:
Vanguard Fiduciary Trust Company
Kaiser Permanente Deferred Retirement Plan
First Boston Corp. Profit Sharing and Savings Plan
New York State Deferred Compensation Board
The Board of Directors knows of no other business to be brought before the
meeting. However, if any other matters come before the meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
Further information about Vanguard Money Market Reserves is contained in
the accompanying Vanguard Money Market Reserves Prospectus (Exhibit II).
Shareholders of the Institutional Portfolio are urged to read this Proxy
Statement and the Prospectus carefully prior to executing and returning their
proxies and to retain the Prospectus for future reference.
15
<PAGE> 18
VANGUARD INSTITUTIONAL PORTFOLIOS, INC. -- INSTITUTIONAL
MONEY MARKET PORTFOLIO
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS JOHN C. BOGLE, BURTON G. MALKIEL AND
RAYMOND J. KLAPINSKY AS PROXIES, EACH WITH POWER TO APPOINT HIS SUBSTITUTE, AND
HEREBY AUTHORIZES THEM TO REPRESENT AND TO VOTE AS DESIGNATED BELOW, ALL THE
SHARES OF VANGUARD INSTITUTIONAL PORTFOLIOS, INC. -- INSTITUTIONAL MONEY MARKET
PORTFOLIO (THE "INSTITUTIONAL PORTFOLIO") HELD ON RECORD BY THE UNDERSIGNED ON
SEPTEMBER --, 1995, AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER
--, 1995, OR AT ANY ADJOURNMENT THEREOF.
SUMMARY OF PROPOSALS
TO VOTE MARK AN X IN THE APPROPRIATE BOX ON THE PROXY CARD BELOW
A. Proposal to approve a plan of reorganization providing for: (1) the
tax-free reorganization of the Institutional Portfolio as a class of Vanguard
Money Market Reserves, Inc.-Prime Portfolio; (2) the dissolution and
deregistration of the Institutional Portfolio as an investment company.
By signing and dating the lower portion of this card, you authorize the
proxies to vote each proposal as marked, or, if not marked to vote "FOR" the
proposal and to use their discretion to vote any other matter as may properly
come before the meeting. If you do not intend to personally attend the meeting,
please complete, detach and mail the lower portion of this card at once in the
enclosed envelope.
VANGUARD INSTITUTIONAL PORTFOLIOS, INC. -- INSTITUTIONAL
MONEY MARKET PORTFOLIO
(DETACH HERE AND RETURN THIS PORTION ONLY)
THIS PROXY MUST BE SIGNED AND DATED ON REVERSE SIDE
<PAGE> 1
EXHIBIT I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, made as of this the -- day of
October, 1995, by and between Vanguard Institutional Portfolios,
Inc.-Institutional Money Market Portfolio (hereinafter called the "Institutional
Portfolio"), a Maryland corporation, with its principal place of business at 100
Vanguard Boulevard, Malvern Pennsylvania 19355 and Vanguard Money Market
Reserves, Inc.-Prime Portfolio (hereinafter called the "Prime Portfolio"), a
Maryland corporation, with its principal place of business at 100 Vanguard
Boulevard, Malvern, Pennsylvania 19355.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by the Prime Portfolio of
substantially all of the property, assets and goodwill of the Institutional
Portfolio in exchange solely for shares of an institutional class of the common
stock, $.001 par value per share, of an institutional class of the Prime
Portfolio ("Prime Institutional Shares"), (ii) the distribution of such shares
of Prime Institutional common stock to the stockholders of the Institutional
Portfolio according to their respective interests, and (iii) the dissolution of
the Institutional Portfolio as soon as practicable after the closing provided
for in Section 3, all upon and subject to the terms and conditions of the
Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration of
the premises and of the covenants and agreements hereinafter set forth, the
parties hereto covenant and agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF THE INSTITUTIONAL
PORTFOLIO
a. The Institutional Portfolio agrees that it will convey, transfer and
deliver to the Prime Portfolio at the closing provided for in Section 3
(hereinafter called the "Closing") all of its then existing assets free and
clear of all liens, encumbrances and claims whatsoever, except for cash or bank
deposits in an amount necessary to pay: (1) its costs and expenses of carrying
out this Agreement (including but not limited to fees of counsel and
accountants, its income dividend payable prior to the Closing Date, and expenses
of its liquidation and dissolution contemplated hereunder); (2) to discharge its
unpaid liabilities on its books at the Closing Date; and (3) to pay such
contingent liabilities as the directors shall reasonably deem to exist against
the Institutional Portfolio, if any, at the Closing Date, for which contingent
and other appropriate liability reserves shall be established on the
Institutional Portfolio's books. Any unspent portion of such funds retained
shall be delivered to the Prime Portfolio upon dissolution of the Institutional
Portfolio.
b. Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of the Institutional Portfolio herein
contained, and in consideration of such sale, conveyance, transfer and delivery,
the Prime Portfolio agrees at the Closing to deliver to the Institutional
Portfolio the number of shares of common stock of the Prime Portfolio ($.001 par
value) determined as set forth in Section 2 hereof.
<PAGE> 2
c. Immediately following the Closing Date, the Institutional Portfolio will
liquidate and distribute pro rata to its stockholders of record as of the close
of business on the Closing Date, the shares of Prime Institutional common stock
received by the Institutional Portfolio pursuant to this Section 1. Such
liquidation and distribution will be accompanied by the establishment of open
accounts on the stock records of the Prime Portfolio in the names of such
stockholders of the Institutional Portfolio representing the respective pro rata
number of Prime shares due such stockholders. Fractional shares of Prime
Institutional common stock will be carried to the third decimal place. As
promptly as practicable after the Closing Date, each holder of any outstanding
certificate or certificates theretofore representing shares of common stock of
the Institutional Portfolio may surrender the same to a Transfer Agent
designated by the Prime Portfolio and request in exchange therefore a
certificate or certificates representing the number of whole and fractional
shares of common stock of Prime Institutional into which the shares of common
stock of the Institutional Portfolio theretofore represented by the certificate
or certificates so surrendered shall have been converted. Certificates for
fractional shares of Prime Institutional will not be issued, however, but shall
continue to be carried for the open account of such stockholder. Until so
surrendered, each outstanding certificate which, prior to the Closing Date,
represented common stock of the Institutional Portfolio shall be deemed for all
corporate purposes to evidence ownership of the number of shares of common stock
of Prime Institutional into which the common stock of the Institutional
Portfolio (which, prior to the Closing Date, were represented thereby) have been
so converted.
d. As promptly as practicable after the liquidation of the Institutional
Portfolio as aforesaid, the Institutional Portfolio shall be dissolved pursuant
to the provisions of the General Laws of the State of Maryland and its legal
existence shall be terminated as provided therein.
2. EXCHANGE RATIO
a. The value of the Institutional Portfolio's assets to be acquired by the
Prime Portfolio hereunder shall be the net asset value computed as of the close
of business (close of the New York Stock Exchange) on the Closing Date, using
the valuation procedures set forth in Vanguard Money Market Reserves, Inc.'s
("Vanguard Money Market Reserves") registration statement under the Securities
Act of 1933.
b. The total net assets of the Institutional Portfolio determined under (a)
shall be divided by the number of shares of its outstanding common stock,
excluding treasury shares, to determine the Institutional Portfolio's net asset
value per share as of the close of business on the Closing Date.
c. The net asset value of a share of common stock of the Prime Portfolio
shall be determined to the nearest full cent as of the close of business on the
Closing Date, using the valuation as set forth in Vanguard Money Market
Reserves' registration statement under the Securities Act of 1933.
d. The net asset value per share for the Institutional Portfolio as
determined in (b) shall then be divided by the Prime Portfolio net asset value
per share as determined in (c) to determine the exchange ratio. See Appendix A
to this Agreement for an example of how to determine the exchange ratio.
3. CLOSING AND CLOSING DATE
The Closing shall be September, 1995 or such later date as the parties may
mutually agree. The Closing shall take place at the principal office of Vanguard
Money Market Reserves, 100 Vanguard Boulevard,
2
<PAGE> 3
Malvern, Pennsylvania 19355, at -- . The Institutional Portfolio shall have
provided for delivery at the Closing all of its assets to CoreStates Bank, N.A.,
Philadelphia, Pennsylvania, as Custodian for Vanguard Money Market Reserves. The
Institutional Portfolio shall deliver at the Closing a list of names and
addresses of the stockholders of the Institutional Portfolio and the number of
shares owned by each such stockholder, indicating thereon which such shares are
represented by outstanding certificates and which by open accounts, all as of
the close of business on the Closing Date, certified by its Transfer Agent.
Vanguard Money Market Reserves shall issue and deliver a certificate or
certificates evidencing the shares of Prime Institutional common stock to be
delivered at the Closing to said Transfer Agent registered in such manner as the
Institutional Portfolio may request, or provide evidence satisfactory to the
Institutional Portfolio that such shares of Prime Institutional common stock
have been registered in an open account on the books of Vanguard Money Market
Reserves in such manner as the Institutional Portfolio may request. Simultaneous
with the Closing, the parties shall cause the filing of Articles of Transfer
with respect to the sale and transfer of assets contemplated hereunder with the
Department of Assessments and Taxation of the State of Maryland.
4. REPRESENTATIONS AND WARRANTIES BY THE INSTITUTIONAL PORTFOLIO
The Institutional Portfolio represents and warrants that:
a. The Institutional Portfolio is a series of shares of a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has all corporate power and authority to conduct its business as
such business is now being conducted.
b. The Institutional Portfolio has a duly authorized capital consisting of
20,000,000,000 shares of common stock ($.001 par value) of which approximately
-- shares were issued and outstanding on the date hereof. All of its
presently outstanding shares are validly issued, fully paid and non-assessable
by it.
c. The Institutional Portfolio is duly registered as a diversified,
open-end management company under the Investment Company Act of 1940.
d. There has been mailed to each stockholder of record of the Institutional
Portfolio entitled to vote at the meeting of stockholders, at which action on
this Agreement is to be considered, a Combined Proxy Statement and Prospectus
which complies in all material respects with the applicable provisions of the
federal securities laws and the rules and regulations thereunder.
e. The financial statements appearing in the Institutional Portfolio's
annual report for the year ended November 30, 1994, audited by Price Waterhouse
LLP, a copy of which has been delivered to Vanguard Money Market Reserves, and
similar unaudited financial statements and other financial data as of --, and
for the period then ended, which will be delivered to Vanguard Money Market
Reserves by the principal financial officer of the Institutional Portfolio prior
to Closing, fairly present the financial position of the Institutional Portfolio
as of the respective dates indicated and the results of its operations and
changes in net assets for the respective periods indicated, in conformity with
generally accepted accounting principles applied on a consistent basis.
3
<PAGE> 4
5. REPRESENTATIONS AND WARRANTIES BY VANGUARD MONEY MARKET RESERVES
Vanguard Money Market Reserves represents and warrants that:
a. Vanguard Money Market Reserves is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all corporate power and authority to conduct its business as such business is
presently being conducted.
b. Vanguard Money Market Reserves has a duly authorized capital consisting
of 35,000,000,000 shares of common stock ($.001 par value), 25,000,000,000 of
which are allocated to the Prime Portfolio. On the date of this Agreement
Vanguard Money Market Reserves had issued and outstanding approximately --
shares of common stock. All of its presently outstanding shares are validly
issued, fully paid and non-assessable by it.
c. Vanguard Money Market Reserves is duly registered as a diversified,
open-end investment company under the Investment Company Act of 1940 and is
authorized to offer and sell shares of common stock of its two series.
d. Vanguard Money Market Reserves will file with the United States
Securities and Exchange Commission a Registration Statement on Form N-14 under
the Securities Act of 1933 relating to the shares of Prime Institutional common
stock issuable hereunder. Appropriate portions of such Registration Statement
after effectiveness will be delivered to stockholders of the Institutional
Portfolio as proxy materials in connection with the solicitation of proxies
approving the proposed transaction, and other portions will be available upon
request by stockholders. The Registration Statement will note, on its facing
page, that the securities proposed to be distributed thereunder have previously
been registered in accordance with Rule 24f-2 under the Investment Company Act
of 1940. At the time such Registration Statement becomes effective, it (i) will
comply in all material respects with the provisions of the Securities Act of
1933 and the rules and regulations promulgated thereunder, and (ii) will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated herein or necessary to make the statements therein not
misleading; and at the time the Registration Statement becomes effective, at the
time of the Institutional Portfolio's stockholders' meeting and at the Closing
Date, the prospectus included therein will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
e. The common stock of Vanguard Money Market Reserves is duly qualified for
offering to the public in all states of the United States, and there are a
sufficient number or value of shares of such stock so qualified and a sufficient
number of shares registered under the Securities Act of 1933 pursuant to the
Investment Company Act of 1940 Rule 24f-2 to permit the transfers contemplated
by this Agreement to be consummated.
f. The financial statements appearing in the Vanguard Money Market Reserves
Annual Report for the year ended November 30, 1994, audited by Price Waterhouse
LLP, copies of which have been delivered to the Institutional Portfolio, and
similar unaudited financial statements and other financial data as of -- and for
the period then ended, which will be delivered to the Institutional Portfolio
prior to the Closing by the principal financial officer of Vanguard Money Market
Reserves, fairly present the financial position of Vanguard Money Market
Reserves, as of the respective dates indicated and the results of its operations
and changes in its net assets for the respective periods indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
4
<PAGE> 5
6. REPRESENTATIONS AND WARRANTIES BY THE INSTITUTIONAL PORTFOLIO AND VANGUARD
MONEY MARKET RESERVES
The Institutional Portfolio and Vanguard Money Market Reserves each
represents and warrants to the other that:
a. The statement of assets and liabilities to be furnished by it as of the
close of business on the Closing Date for the purpose of determining the number
of shares of Prime Institutional common stock to be issued pursuant to Section 1
of this Agreement will accurately reflect its net assets and outstanding shares
of common stock as of such date in conformity with generally accepted accounting
principles applied on a consistent basis.
b. On the Closing Date it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above free and clear of all liens or encumbrances of any
nature whatever except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
c. There is no material suit, action or legal or administrative proceeding
pending or threatened against it, other than as disclosed in the Combined Proxy
Statement and Prospectus prepared in connection with the meeting at which action
on this Agreement will be taken.
d. By Closing Date, all of its Federal and other tax returns and reports
required by law to be filed shall have been filed, and all Federal and other
taxes shown due on said returns shall have been paid.
e. The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary corporate action on
the part of each corporation and this Agreement constitutes the valid and
binding obligation of each corporation enforceable in accordance with its terms.
7. COVENANTS OF THE INSTITUTIONAL PORTFOLIO AND VANGUARD MONEY MARKET RESERVES
a. The Institutional Portfolio and Vanguard Money Market Reserves each
covenant to operate its business in the ordinary course between the date hereof
and the Closing Date.
b. The Institutional Portfolio undertakes that it will not acquire the
Prime Institutional shares for the purpose of making any distribution thereof
other than to its own stockholders.
c. The Institutional Portfolio undertakes that it will at its own expense
prepare and file with the Securities and Exchange Commission a Report on Form
N-SAR pursuant to the requirements of the Investment Company Act of 1940 for the
period November 30, 1994 through the Closing Date.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY INSTITUTIONAL PORTFOLIO AND VANGUARD
MONEY MARKET RESERVES
The obligations of each of the parties to effectuate the Plan of
Reorganization hereunder shall be subject to the following conditions:
a. The representations and warranties of each Party contained herein shall
be true as of and at the Closing Date with the same effect as though made at
such date; each Party shall have performed all obligations required by this
Agreement to be performed by it prior to the Closing Date; and each Party shall
have delivered to it a certificate dated the Closing Date signed by its Chairman
of the Board or President and by its Secretary or Assistant Secretary to the
foregoing effect.
5
<PAGE> 6
b. Each Party shall have delivered a certified copy of the resolution
approving this Agreement adopted by at least a majority vote of its directors,
including a majority of its directors who are not "interested persons" as
defined in the Investment Company Act of 1940.
c. The Securities and Exchange Commission shall not have issued an
unfavorable advisory report under Section 25(b) of the Investment Company Act of
1940 nor instituted any proceeding seeking to enjoin consummation of the
reorganization under Section 25(c) of the Investment Company Act of 1940.
d. The holders of at least a majority of the outstanding shares of common
stock of the Institutional Portfolio shall have voted in favor of the adoption
of this Agreement and the reorganization contemplated hereby at an annual or
special meeting.
e. The Institutional Portfolio shall have declared a distribution or
distributions prior to the Closing Date which, together with all previous
distributions, shall have the effect of distributing to its stockholders all of
its net investment income and capital gains since the close of its last fiscal
year.
f. That there shall be delivered to the Fund an opinion from Messrs.
Stradley, Ronon, Stevens & Young, counsel to the Fund, to the effect that
provided the acquisition contemplated hereby is carried out in accordance with
this Plan:
(1) Provided the acquisition is carried out in accordance with the
applicable laws of Maryland, the acquisition by the Prime Portfolio of
substantially all of the assets of the Institutional Portfolio as provided
for herein in exchange for Prime Institutional shares will qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
the Institutional Portfolio and the Prime Portfolio will each be a party to
the respective reorganization within the meaning of Section 368(b) of the
Code; for purposes of this opinion, "substantially all" means at least 70%
of the fair market of the gross assets and at least 90% of the fair market
value of the net assets;
(2) No gain or loss will be recognized by the Institutional Portfolio
upon the transfer of substantially all of its assets to the Prime Portfolio
in exchange solely for voting shares of Prime Institutional (Code Section
361(a));
(3) No gain or loss will be recognized by the Prime Portfolio upon the
receipt of substantially all of the assets of the Institutional Portfolio
in exchange solely for voting shares of Prime Institutional (Code Section
1032(a));
(4) The basis of the assets of the Institutional Portfolio received by
Vanguard Money Market Reserves will be the same as the basis of such assets
to the Prime Portfolio immediately prior to the exchange (Code Section
362(b));
(5) The holding period of the assets of the Institutional Portfolio
received by the Prime Portfolio will include the period during which such
assets were held by the Institutional Portfolio (Code Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of the
Institutional Portfolio upon the exchange of their shares in the
Institutional Portfolio for voting shares of Prime Institutional (including
fractional shares to which they may be entitled) (Code Section 354(a)(1));
6
<PAGE> 7
(7) The basis of Prime Institutional voting shares received by the
Institutional Portfolio shareholders (including fractional shares to which
they may be entitled) will be the same as the basis of the shares of the
Institutional Portfolio surrendered in exchange therefor (Code Section
358(a)(1));
(8) The holding period of Prime Institutional voting shares received
by the Institutional Portfolio shareholders (including fractional shares to
which they may be entitled) will include the holding period of the
Institutional Portfolio shares surrendered in exchange therefor, provided
that the Institutional Portfolio shares were held as a capital asset on the
date of the exchange (Code Section 1223(1)); and
(9) Pursuant to Section 381(a) of the Code and Treasury Regulation
Section 1.381-1(a), the Prime Portfolio will succeed to and take into
account as of the date of the proposed transfer (as defined in Treasury
Regulation sec. 1.381 (b)-1(b)) the items of the Institutional Portfolio
described in Section 381(c) of the Code, including any "pre-change capital
loss" of the Institutional Portfolio within the meaning of Treasury
Regulation sec. 1.383-1(c)(2), subject to the conditions and limitations
specified in Sections 381(b) and (c), 382, 383 and 384 of the Code.
(10) Where a dissenting shareholder of the Institutional Portfolio
receives cash solely in exchange for his or her stock, such cash will be
treated as having been received by the shareholder as a distribution in
redemption of his or her stock subject to the provisions and limitations of
Section 302 of the Code.
9. BROKERAGE FEES AND EXPENSES
a. The Institutional Portfolio and Vanguard Money Market Reserves each
represent and warrant to the other that there are no brokers or finders fees
payable in connection with the transactions provided for herein.
The Institutional Portfolio and Vanguard Money Market Reserves shall each
bear such expenses of entering into and carrying out the provisions of this
Agreement as have been separately incurred by it. No Party shall pay any
expenses, if any, of its stockholders arising out of the reorganization.
10. TERMINATION; WAIVER; ORDER
a. Anything contained in this Agreement to the contrary notwithstanding,
this Agreement may be terminated and the reorganization abandoned at any time
whether before or after adoption hereof by the stockholders of the Institutional
Portfolio prior to the Closing Date.
(1) by mutual consent of the Parties;
(2) by either of the Parties if any condition set forth in Section 8
hereof has not been fulfilled or waived by it;
b. An election by a Party to terminate this Agreement and abandon the
reorganization shall be exercised by its Board of Directors.
c. In the event of termination of this Agreement pursuant to the provisions
hereof the same shall become void and have no effect without any liability on
the part of either of the Parties or persons who are its directors, officers or
stockholders in respect of this Agreement, provided that this provision shall
not
7
<PAGE> 8
protect any director or officer of either of the Parties against any liability
to such Party or its stockholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
d. At any time prior to the filing of the Articles of Transfer with the
State of Maryland any of the terms or conditions of this Agreement may be waived
by the Party entitled to the benefit thereof by action taken by its Board of
Directors, or its Chairman of the Board, if, in the judgment of the Board of
Directors or Chairman of the Board taking such action, such waiver will not have
material adverse effect on the benefits intended under this Agreement to the
stockholders of the Party on behalf of which such action is taken.
e. The respective representations and warranties of the Parties contained
in Sections 4 through 7 hereof shall expire with, and be terminated by, the
reorganization contemplated by this Agreement, and neither the respective
Parties nor any of their directors shall be under any liability with respect to
any such representations or warranties after the Closing Date. This provision
shall not protect any director or officer of a corporation against any liability
to such corporation or to its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
f. If any order or orders of the Securities and Exchange Commission with
respect to this Agreement shall impose any terms or conditions which are
acceptable to both the Institutional Portfolio and Vanguard Money Market
Reserves, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the stockholders of the
Institutional Portfolio, unless such terms and conditions shall result in a
change in the method of computing the number of shares of Prime Institutional to
be issued to the Institutional Portfolio, in which event, unless such terms and
conditions shall have been included in the Combined Proxy Statement and
Prospectus solicitation material furnished to the stockholders of the
Institutional Portfolio prior to the meeting at which the transactions
contemplated by this Agreement shall have been approved, this Agreement shall
not be consummated and shall terminate unless the Institutional Portfolio shall
promptly call a special meeting of stockholders at which conditions so imposed
shall be submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS
This Agreement embodies the entire agreement between the parties and there
are no agreements, understandings, restrictions or warranties among the parties
other than those set forth herein or herein provided for.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original but all such counterparts together shall
constitute but one instrument.
13. NOTICES
Any notice, report or demand required or permitted by any provision of this
Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage postpaid, addressed
8
<PAGE> 9
to the Institutional Portfolio or Vanguard Money Market Reserves, as the case
may be, at 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement and Plan
of Reorganization to be executed on its behalf by its President or a Vice
President and its corporate seal to be affixed hereto and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
<TABLE>
<S> <C>
Attest: VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
/s/ RAYMOND J. KLAPINSKY By: /s/ JOHN J. BRENNAN
--------------------------------------------- ---------------------------------------------
Secretary President
(Corporate Seal)
Attest: VANGUARD MONEY MARKET RESERVES, INC.
/s/ RAYMOND J. KLAPINSKY By: /s/ JOHN J. BRENNAN
--------------------------------------------- ---------------------------------------------
Secretary President
</TABLE>
9
<PAGE> 10
APPENDIX A
INSTITUTIONAL PORTFOLIO AND PRIME
PRO FORMA COMPUTATION OF EXCHANGE RATIO
AS OF OCTOBER --, 1995
<TABLE>
<CAPTION>
PRIME INSTITUTIONAL
PORTFOLIO PORTFOLIO PRO FORMA
-------------- ------------- --------------
<S> <C> <C> <C>
Net assets.................................. $ -- $ -- $ --
============== =========== ==============
Percent of combined assets.................. --% --% --%
============== =========== ==============
Issued and outstanding shares............... -- -- --
============== =========== ==============
Net asset value per share................... $ 1.00 $ 1.00 $ 1.00
============== =========== ==============
Prime Institutional shares to be issued for
each Institutional Portfolio share (--)... --
--------------
--------------
</TABLE>
<PAGE> 1
EXHIBIT II
The Vanguard Money Market Reserves--Prime Portfolio Institutional Shares (the
"Portfolio") prospectus which has been included as Exhibit II is the version of
the Prospectus developed for the Prime Portfolio Institutional class of shares.
The prospectus is being filed simultaneously with the Securities and Exchange
Commission as part of the Fund's Registration Statement on Form N-1A and will be
used by the Portfolio when the Commission has declared the Registration
Statement filed as Form N-1A effective.
<PAGE> 2
--------------------------------------------------------------------------------
EXHIBIT II
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(VANGUARD MONEY MARKET RESERVES LOGO)
A Member of The Vanguard Group
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROSPECTUS -- OCTOBER --, 1995
--------------------------------------------------------------------------------
NEW ACCOUNT INFORMATION: 1-800-523-1188
--------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE AND
POLICIES The Prime Portfolio of Vanguard Money Market Reserves,
Inc. (the "Portfolio") is an open-end diversified
investment company. Designed primarily for institutional
investors, the Portfolio's objective is to provide the
maximum current income that is consistent with the
preservation of capital and liquidity by investing in
specified money market instruments. The Portfolio seeks to
maintain a constant net asset value of $1.00 per share.
ALTHOUGH THE PORTFOLIO INVESTS IN HIGH-QUALITY
INSTRUMENTS, AN INVESTMENT IN THE PORTFOLIO IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE
CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
--------------------------------------------------------------------------------
INVESTMENT
ALTERNATIVES The Prime Portfolio of Vanguard Money Market Reserves,
Inc. offers two separate classes of shares to investors.
The "Prime Portfolio Institutional Shares" are designed
primarily for investors who meet certain administrative
requirements and a minimum initial investment of $10
million. Only the Institutional class of shares are
offered through this prospectus. The second class of
shares, "Prime Portfolio" are available to all
institutional and individual investors and are offered
through a separate prospectus. To obtain information on
the "Prime Portfolio" class of shares, please call
1-800-662-7447 (SHIP), Monday through Friday, from 8:00
a.m. to 9:00 p.m. and Saturday from 9:00 a.m. to 4:00 p.m.
(Eastern time).
--------------------------------------------------------------------------------
OPENING AN
ACCOUNT Shares of the Portfolio may be purchased by Federal Funds
wire. The minimum initial investment is $10 million.
--------------------------------------------------------------------------------
ABOUT THIS
PROSPECTUS This Prospectus is designed to set forth concisely the
information an investor should know about the Portfolio
before investing. It should be retained for future
reference. A "Statement of Additional Information"
containing additional information about the Portfolio has
been filed with the Securities and Exchange Commission.
This Statement is dated October --, 1995 and has been
incorporated by reference into this Prospectus. A copy may
be obtained without charge by writing to or calling
Vanguard at 1-800-523-1188.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page Page Page
Portfolio Expenses ............ 2 Investment Limitations ........ 5 SHAREHOLDER GUIDE
Financial Highlights .......... 2 Management of the Portfolio ... 5 Opening an Account and
Yield and Total Return ........ 2 Investment Adviser ............ 6 Purchasing Shares ......... 10
PORTFOLIO INFORMATION Dividends and Taxes ........... 6 Dividend and Trade Date
Investment Objective .......... 3 Share Price Determination ..... 8 Policy .................... 11
Investment Policies ........... 3 General Information .......... 9 Selling Shares ............. 11
Implementation of Exchanging Shares .......... 12
Policies .................... 4 Important Information About
Telephone Transactions .... 13
Other Account
Information ............... 13
</TABLE>
--------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 3
PORTFOLIO
EXPENSES The following table illustrates all expenses and fees that
you would incur as a shareholder of the Fund's
"Institutional Shares." The expenses set forth below for
the "Institutional Shares" are estimates for its first
full year of operation.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------------------------
Sales Load Imposed on Purchases........................................ None
Sales Load Imposed on Reinvested Dividends............................. None
Redemption Fees*....................................................... None
Exchange Fees.......................................................... None
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------------------
Management & Administrative Expenses................................... 0.10%
Investment Advisory Fees............................................... 0.01
12b-1 Fees............................................................. None
Other Expenses
Distribution Costs........................................... 0.02%
Miscellaneous Expenses....................................... 0.02
----
Total Other Expenses................................................... 0.04
-----
TOTAL OPERATING EXPENSES...................................... 0.15%
-----
-----
</TABLE>
* Wire redemptions of less than $5,000 are subject to a
$5 processing fee.
The purpose of this table is to assist an investor in
understanding the various expenses that an investor in the
Portfolio would bear directly or indirectly.
The following example illustrates the expenses that an
investor would incur on a $1,000 investment over various
periods, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each period. As noted in the
table above, the Portfolio charges no redemption fees of
any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$2 $ 5 $ 8 $ 19
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES
MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
--------------------------------------------------------------------------------
YIELD AND TOTAL
RETURN From time to time the Portfolio may advertise its yield
and total return. Both yield and total return figures are
based on historical earnings and are not intended to
indicate future performance. The "total return" of the
Portfolio refers to the average annual compounded rates of
return over one-, five- and ten-year periods or over the
life of the Portfolio (as stated in the advertisement)
that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable
value of the investment, assuming the reinvestment of all
dividends and distributions.
In accordance with industry guidelines set forth by the
U.S. Securities and Exchange Commission, the "seven-day"
or "current" yield of the Portfolio reflects the income
earned by a hypothetical account in the Portfolio during a
seven-day period, expressed as an annual percentage rate.
The "effective yield" of the Portfolio assumes the income
over the seven-day period is reinvested weekly, resulting
in a slightly higher stated yield through compounding.
Methods used to calculate advertised yields are
standardized for all money market funds. However,
2
<PAGE> 4
these methods differ from the accounting methods used by
the Portfolio to maintain its books and records, and so
advertised yields may not fully reflect the income paid to
a shareholder's account or the yield reported in the
Portfolio's Annual Report.
--------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE The Portfolio is designed primarily for institutional
investors. The Portfolio's objective is to provide the
maximum current income that is consistent with the
preservation of capital and liquidity by investing in
specified money market instruments. The Portfolio also
seeks to maintain a constant net asset value of $1.00 per
share.
--------------------------------------------------------------------------------
INVESTMENT
POLICIES
THE PORTFOLIO INVESTS
HIGH QUALITY MONEY
MARKET SECURITIES The Portfolio will invest in the following high-quality
money market obligations issued by financial institutions,
non-financial corporations, the U.S. Government, its
agencies and instrumentalities and state and municipal
governments and their agencies or instrumentalities:
(1) Negotiable certificates of deposit and bankers'
acceptances of U.S. banks having total assets in
excess of $1 billion.
(2) Commercial paper (including variable amount master
demand notes) rated Prime-1 by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Corporation
or, if unrated, issued by a corporation having an
outstanding debt issue rated Aa3 or better by Moody's
or AA- or better by Standard & Poor's.
(3) Short-term corporate obligations rated Aa3 or better
by Moody's or AA- or better by Standard & Poor's.
(4) Eurodollar and Yankee bank obligations. Eurodollar
bank obligations are dollar-denominated certificates
of deposit or time deposits issued outside the U.S. by
the foreign branches of U.S. banks and by foreign
banks; Yankee bank obligations are dollar-denominated
obligations issued in the U.S. by foreign banks.
(5) United States Treasury obligations including bills,
notes, bonds, and other debt obligations issued by the
United States Treasury. These securities are backed by
the full faith and credit of the U.S. Government.
(6) Securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government. These
include securities issued by the Federal Home Loan
Bank, Federal Land Bank, Farmers Home Administration,
Farm Credit Bank, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal
Financing Bank, Tennessee Valley Authority, and
others. Such "agency" securities may not be backed by
the full faith and credit of the U.S. Government.
(7) Repurchase agreements collateralized by the securities
listed in (5) and (6) above.
In addition, up to 10% of the Portfolio's net assets may
be invested in "restricted" money market securities, which
are not freely marketable or which are subject to
restrictions on disposition under the Securities Act of
1933. As an operational policy, the Portfolio will not, in
the aggregate, enter into repurchase agreements maturing
in more than seven days, purchase restricted securities,
or invest in any
3
<PAGE> 5
other illiquid securities if, as a result, more than 10%
of the net assets of the Portfolio would be invested in
such assets.
The Portfolio invests in money market instruments that
mature in 13 months or less. The Portfolio will also
maintain an average weighted maturity of 90 days or less.
--------------------------------------------------------------------------------
IMPLEMENTATION
OF POLICIES
THE PORTFOLIO MAY
INVEST IN REPURCHASE
AGREEMENTS The Portfolio may invest in repurchase agreements
according to the restrictions and limitations set forth on
page 4 in "Investment Policies." A repurchase agreement is
a means of investing monies for a short period. In a
repurchase agreement, a seller -- a U.S. commercial bank
or recognized U.S. securities dealer -- sells securities
to the Portfolio and agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified
period (normally one day). In these transactions, the
securities purchased by the Portfolio will have a total
value equal to or in excess of the value of the repurchase
agreement, and will be held by the Portfolio's Custodian
Bank until repurchased.
The use of repurchase agreements involves certain risks.
For example, if the seller of the agreement defaults on
its obligation to repurchase the underlying securities at
a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them.
If the seller of the agreement becomes insolvent and
subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral
not within the control of the Portfolio and therefore
subject to sale by the trustee in bankruptcy. Finally, it
is possible that the Portfolio may not be able to
substantiate its interest in the underlying securities.
While the Portfolio's management acknowledges these risks,
it is expected that they can be controlled through
stringent security selection and careful monitoring.
THE PORTFOLIO MAY
INVEST IN EURODOLLAR OR
YANKEE OBLIGATIONS Eurodollar bank obligations are dollar-denominated
certificates of deposit or time deposits issued outside
the U.S. capital markets by the foreign branches of U.S.
banks and by foreign banks. Yankee bank obligations are
dollar-denominated obligations issued in the U.S. capital
markets by foreign banks.
Eurodollar and Yankee obligations are subject to the same
risks that pertain to domestic issues, notably credit
risk, market risk and liquidity risk. Additionally,
Eurodollar (and to a limited extent, Yankee) obligations
are subject to certain sovereign risks. One such risk is
the possibility that a foreign government might prevent
dollar-denominated funds from flowing across its borders.
Other risks include: adverse political and economic
developments in a foreign country; the extent and quality
of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes;
and expropriation or nationalization of foreign issuers.
However, Eurodollar and Yankee obligations will undergo
the same credit analysis as domestic issues in which the
Portfolio invests, and foreign issuers will be required to
meet the same tests of financial strength as the domestic
issuers approved for the Portfolio.
PORTFOLIO TURNOVER
WILL BE HIGH The Portfolio is expected to have a high portfolio
turnover rate due to the short maturities of the
securities purchased. However, this high turnover rate
should not
4
<PAGE> 6
increase the Portfolio's costs since brokerage commissions
are not normally charged on the purchase or sale of money
market instruments.
--------------------------------------------------------------------------------
INVESTMENT
LIMITATIONS
THE PORTFOLIO HAS
ADOPTED CERTAIN
FUNDAMENTAL
LIMITATIONS The Portfolio has adopted certain limitations designed to
reduce its risk exposure. These limitations include the
following:
(a) The Portfolio will not invest more than 5% of its
assets in the securities of any single company,
excluding obligations of the United States Government.
(b) The Portfolio will not purchase more than 10% of any
class of securities of any issuer.
(c) The Portfolio will not invest more than 25% of its
assets in any one industry, excluding obligations of
the United States Government or certificates of
deposit or banker's acceptances of domestic
institutions.
(d) The Portfolio will not borrow money except for
emergency purposes and then not in excess of 15% of
total assets.
These investment limitations are considered at the time
investment securities are purchased. The limitations
described here and in the Statement of Additional
Information may be changed only with the approval of a
majority of the Portfolio's shareholders.
--------------------------------------------------------------------------------
MANAGEMENT OF
THE PORTFOLIO
VANGUARD ADMINISTERS
AND DISTRIBUTES THE
PORTFOLIO The Portfolio is a member of The Vanguard Group of
Investment Companies, a family of more than 30 investment
companies with more than 80 distinct investment portfolios
and total assets in excess of $160 billion. Through their
jointly-owned subsidiary, The Vanguard Group, Inc.
("Vanguard"), the Fund and the other funds in the Group
obtain at cost virtually all of their corporate
management, administrative, shareholder accounting and
distribution services. Vanguard also provides investment
advisory services on an at-cost basis to certain Vanguard
funds. As a result of Vanguard's unique corporate
structure, the Vanguard funds have costs substantially
lower than those of most competing mutual funds. In 1994,
the average expense ratio (annual costs including advisory
fees divided by total net assets) for the Vanguard funds
amounted to approximately .30% compared to an average of
1.05% for the mutual fund industry (data provided by
Lipper Analytical Services).
The Officers of the Portfolio manage its day-to-day
operations and are responsible to the Portfolio's Board of
Directors. The Directors set broad policies for the
Portfolio and choose its Officers. A list of Directors and
Officers of the Portfolio and a statement of their present
positions and principal occupations during the past five
years can be found in the Statement of Additional
Information.
Vanguard employs a supporting staff of management and
administrative personnel needed to provide the requisite
services to the funds and also furnishes the funds with
necessary office space, furnishings and equipment. Each
fund pays its share of Vanguard's total expenses, which
are allocated among the funds under methods approved by
the Board of Directors (Trustees) of each fund. In
addition, each fund bears its own direct expenses, such as
legal, auditing and custodian fees.
5
<PAGE> 7
Vanguard also provides distribution and marketing services
to the Vanguard funds. The funds are available on a
no-load basis (i.e., there are no sales commissions or
12b-1 fees). However, each fund bears its share of the
Group's distribution costs.
--------------------------------------------------------------------------------
INVESTMENT
ADVISER
VANGUARD MANAGES
THE PORTFOLIO'S
INVESTMENTS The Portfolio receives all investment advisory services on
an at-cost basis from Vanguard's Fixed Income Group. The
Group provides investment advisory services to more than
40 Vanguard money market and bond portfolios, both taxable
and tax-exempt. Total assets under management by
Vanguard's Fixed Income Group were $55 billion as of
December 31, 1994. The Fixed Income Group is supervised by
the Officers of the Portfolio. Ian A. MacKinnon, Senior
Vice President of Vanguard, has been in charge of the
Group since its inception in 1981.
The Fixed Income Group manages the investment and
reinvestment of the assets of the Portfolio and
continuously reviews, supervises and administers the
Portfolio's investment program, subject to the maturity
and quality standards specified in this Prospectus and
supplemental guidelines approved by the Board of
Directors. The Fixed Income Group's selection of
investments for the Portfolio is based on: (a) continuing
credit analysis of those instruments held in the Portfolio
and those being considered for inclusion therein; (b)
possible disparities in yield relationships between
different money market instruments; and (c) actual or
anticipated movements in the general level of interest
rates.
The Fixed Income Group is also responsible for the
allocation of principal business and portfolio brokerage
and the negotiation of commissions. The purchase and sale
of investment securities will ordinarily be principal
transactions. Portfolio securities will normally be
purchased directly from the issuer or from an underwriter
or market maker for the securities. There usually will be
no brokerage commissions paid by the Portfolio for
securities purchased directly from an issuer. Purchases
from underwriters of securities will include a commission
or concession paid by the issuer to the underwriter.
Purchases from dealers serving as market makers will
include a dealer's mark-up.
In purchasing and selling securities, it is the
Portfolio's policy to seek to obtain quality execution at
the most favorable prices through responsible
broker-dealers. In selecting broker-dealers to execute the
securities transactions for the Portfolio, consideration
will be given to such factors as: the price of the
security; the rate of the commission; the size and
difficulty of the order; the reliability, integrity,
financial condition, general execution and operational
capabilities of competing broker-dealers; and the
brokerage and research services provided to the Portfolio.
--------------------------------------------------------------------------------
DIVIDENDS
AND TAXES
DIVIDENDS ARE PAID ON
THE FIRST BUSINESS DAY
OF EACH MONTH The Portfolio's dividends are accrued daily and are
distributed on the first business day of the month. The
Portfolio's dividends will be automatically reinvested in
additional shares unless the Portfolio is notified
otherwise.
The Portfolio's dividends are computed and declared as of
the regular close of the New York Stock Exchange
(generally 4:00 p.m. Eastern time) each day, and are
payable to shareholders of record as of 12:00 noon
(Eastern time) on that day. In other words, shareholders
whose purchases of shares are effective as of 12:00 noon
6
<PAGE> 8
will receive the dividend for that day. See "Dividend and
Trade Date Policy" for more information about the
crediting of dividends.
Net realized short-term capital gains of the Portfolio, if
any, will be distributed whenever the Directors determine
that such distributions would be in the best interest of
shareholders, but in any event at least once a year. The
Portfolio does not expect to realize any long-term capital
gains. Should any such gains be realized, they will be
distributed annually.
In addition, in order to satisfy certain distribution
requirements of the Tax Reform Act of 1986, the Fund may
declare special or regular year-end dividend and capital
gains distributions during December. Such distributions,
if received by shareholders by January 31, are deemed to
have been paid by the Fund and received by shareholders on
December 31 of the prior year.
DIVIDENDS WILL BE
SUBJECT TO FEDERAL
INCOME TAX The Portfolio intends to continue to qualify for taxation
as a "regulated investment company" under the Internal
Revenue Code so that it will not be subject to federal
income tax to the extent its income is distributed to
shareholders. Dividends paid by the Portfolio from net
investment income, whether received in cash or reinvested
in additional shares, will be taxable to shareholders as
ordinary income. For corporate investors, dividends from
net investment income will not qualify for the
intercorporate dividends-received deduction.
Although the Portfolio does not expect to distribute any
long-term capital gains, any capital gains distribution
made by the Portfolio would be subject to federal income
tax. Such distributions would not qualify for the
intercorporate dividends-received deduction.
A sale of shares of the Portfolio, either by redemption or
exchange, is a taxable event, and may result in a capital
gain or loss. However, since the Portfolio seeks to
maintain a constant $1.00 share price for both purchases
and redemptions, shareholders are not expected to realize
a capital gain or loss upon sale.
Dividend distributions, any capital gains distributions,
and any capital gains or losses from redemptions and
exchanges may be subject to state and local taxes.
However, depending on a state's tax rules, the portion of
the Portfolio's income derived from direct U.S. Treasury
obligations may be exempt from state and local taxes.
Vanguard will indicate each year the portion of the
Portfolio's income, if any, that may qualify for this
exemption.
The Portfolio is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions
paid to shareholders who have not complied with IRS
taxpayer identification regulations. This withholding
requirement may be avoided by certifying on the Account
Registration Form the appropriate Taxpayer Identification
Number and by certifying that backup withholding does not
apply.
The Portfolio has obtained a Certificate of Authority to
do business as a foreign corporation in Pennsylvania, and
does business and maintains an office in that state. In
the opinion of counsel, the shares of the Portfolio will
be exempt from Pennsylvania personal property taxes.
7
<PAGE> 9
The tax discussion set forth above is included for general
information only. Prospective investors should consult
their own tax advisers concerning the tax consequences of
an investment in the Portfolio. The Portfolio is managed
without regard to tax ramifications.
--------------------------------------------------------------------------------
SHARE PRICE
DETERMINATION The Portfolio's share price or "net asset value" per share
is calculated daily at the regular close of trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern
time.) The Portfolio determines its net asset value per
share by subtracting the Portfolio's liabilities
(including accrued expenses and dividends payable) from
the total value of the Portfolio's investments and other
assets and dividing the result by the total outstanding
shares of the Portfolio.
For the purpose of calculating the Portfolio's net asset
value per share, securities are valued by the "amortized
cost" method of valuation, which does not take into
account unrealized gains or losses. This involves valuing
an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in
periods during which value, as determined by amortized
cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument.
The use of amortized cost and the maintenance of the
Portfolio's per share net asset value at $1.00 is based on
its election to operate under the provisions of Rule 2a-7
under the Investment Company Act of 1940. As a condition
of operating under that rule, the Portfolio must maintain
a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining
maturities of 13 months or less, and invest only in
securities which are determined by the Directors to
present minimal credit risks and which are of high-quality
as determined by any major rating service, or in the case
of any instrument not so rated, considered by the
Directors to be of comparable quality.
The Directors have established procedures designed to
stabilize the net asset value per share as computed for
the purposes of sales and redemptions at $1.00. These
procedures include periodic review, as the Directors deem
appropriate and at such intervals as are reasonable in
light of current market conditions, of the relationship
between the amortized cost value per share and a net asset
value per share based upon available indications of market
value. In such a review, investments for which market
quotations are readily available are valued at the most
recent bid price or quoted yield equivalent for such
securities or for securities of comparable maturity,
quality and type as obtained from one or more of the major
market makers for the securities to be valued. Other
investments and assets are valued at fair value, as
determined in good faith by the Directors.
In the event of a deviation of over 1/2 of 1% between the
Portfolio's net asset value based upon available market
quotations or market equivalents and $1.00 per share based
on amortized cost, the Directors will promptly consider
what action, if any, should be taken. The Directors will
also take such action as they deem appropriate to
eliminate or to reduce to the extent reasonably
practicable any material dilution
8
<PAGE> 10
or other unfair results to investors or existing
shareholders which might arise from differences between
the two. Such action may include redeeming shares in kind,
selling instruments prior to maturity to realize capital
gains or losses or to shorten average maturity,
withholding dividends, paying distributions from capital
or capital gains, or utilizing a net asset value per share
based upon available market quotations.
--------------------------------------------------------------------------------
GENERAL
INFORMATION The Prime Portfolio Institutional Shares, is a class of
shares offered by Vanguard Money Market Reserves, Inc., a
Maryland corporation. The Articles of Incorporation permit
the Directors to issue 35,000,000,000 shares of common
stock, with a $.001 par value. The Board of Directors has
the power to designate one or more classes Prime Portfolio
Institutional Shares of shares of common stock and to
classify or reclassify any unissued shares with respect to
such Portfolios and classes. Currently, the Company is
offering shares of three Portfolios. The Prime Portfolio
offers two separate classes of shares; the Prime Portfolio
which is open to investors with a minimum investment of
$3,000, and the Prime Portfolio Institutional Shares which
are designed for investors who meet certain administrative
criteria and a minimum initial investment of $10 million.
The shares of the Portfolio are fully paid and
non-assessable; have no preference as to conversion,
exchange, dividends, retirement or other features; and
have no pre-emptive rights. The shares of the Portfolio
have non-cumulative voting rights, meaning that the
holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if
they choose to do so.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other
applicable law. An annual meeting will be held to vote on
the removal of a Director or Directors of the Portfolio if
requested in writing by holders of not less than 10% of
the outstanding shares of the Portfolio.
CoreStates Bank, N.A., Philadelphia, PA, has been retained
to act as Custodian of the assets of the Portfolio. The
Vanguard Group, Inc., Valley Forge, PA, serves as the
Portfolio's Transfer and Dividend Disbursing Agent. Price
Waterhouse LLP serves as independent accountants for the
Portfolio and will audit its financial statements
annually. The Portfolio is not involved in any litigation.
--------------------------------------------------------------------------------
9
<PAGE> 11
SHAREHOLDER GUIDE
OPENING AN
ACCOUNT AND
PURCHASING
SHARES To open a new account, complete an Account Registration
Form and mail it to:
VANGUARD FINANCIAL CENTER
VANGUARD PRIME PORTFOLIO INSTITUTIONAL SHARES
ATTN: INSTITUTIONAL INVESTOR SERVICES
P.O. BOX 1472
VALLEY FORGE, PA 19482
For express or registered mail, send your registration
form to: Vanguard Financial Center, Vanguard Prime
Portfolio Institutional Shares, Attn: Institutional
Investor Services, 100 Vanguard Boulevard, Malvern, PA
19355.
Once the account has been opened, Vanguard will assign an
Institutional Investor Services Representative for future
account transactions.
Shares of the Portfolio may be purchased by Federal Funds
wire. The minimum initial investment for the Portfolio is
$10 million. Please contact your Institutional Investor
Services Representative or call the Vanguard Group at
1-800-523-1188 to notify the Portfolio of the intended
investment and to receive an account number. Wiring
instructions are provided below.
Subsequent investments of $5 million or more will qualify
for dividends on the date of purchase if Vanguard is
notified one business day in advance of the intended
purchase, and a Federal Funds wire is received by the
close of the New York Stock Exchange (generally 4:00 p.m.
Eastern time) on the date of purchase. See "Dividend and
Trade Date Policy".
ADDITIONAL
INVESTMENTS
Please contact your
Institutional Investor
Services Representative
Additional investments may be made at any time by wiring
monies to Vanguard. As noted above, subsequent investments
of $5 million or more require prior day notification to
qualify for dividends on the date of purchase. To ensure
prompt investment, please notify your Institutional
Investor Services Representative in advance of the wire.
--------------------------------------------------------------------------------
PURCHASING BY WIRE
BEFORE WIRING
Please contact
your institutional
Investor Services
Representative Monies should be wired to:
CORESTATES BANK, N.A.
ABA 031000011
CORESTATES NO 0144 6936
ATTN VANGUARD
VANGUARD MONEY MARKET RESERVES
VANGUARD PRIME PORTFOLIO INSTITUTIONAL SHARES
ACCOUNT NUMBER
ACCOUNT REGISTRATION
To ensure proper receipt, please be sure to include in the
wiring instructions the complete Portfolio name and the
account number Vanguard has assigned. Note: Federal Funds
wire purchase orders will be accepted only when the
Portfolio and Custodian Bank are open for business.
--------------------------------------------------------------------------------
10
<PAGE> 12
PURCHASING BY
EXCHANGE (from a
Vanguard account) Purchases may also be made by exchange from an existing
Vanguard Fund account. However, the Portfolio reserves the
right to refuse any exchange purchase request. Please call
your Institutional Investor Services Representative or
call Participant Services at 1-800-523-1188 for more
information.
DIVIDEND
DISTRIBUTIONS Dividend distributions paid by the Portfolio will be
automatically reinvested in additional Portfolio shares. A
cash dividend option is also available from the Portfolio.
Please contact your Institutional Investor Services
Representative for further information.
CERTIFICATES Share certificates will not be issued for the Portfolio.
ELECTRONIC
PROSPECTUS
DELIVERY If you would prefer to receive a prospectus for the Fund
or any of the Vanguard Funds in an electronic format,
please call 1-800-231-7870 for additional information. If
you elect to do so, you may also receive a paper copy of
the prospectus, by calling 1-800-523-1188.
--------------------------------------------------------------------------------
DIVIDEND AND
TRADE DATE POLICY Investments will qualify for dividends on the date of
purchase under the following conditions:
- FOR INVESTMENTS OF $5 MILLION OR MORE: The Portfolio
must be notified of the intended purchase by 4:00 p.m.
(Eastern time) on the prior business day and the Federal
Funds wire must be received by Vanguard by 4:00 p.m.
(Eastern time) on the day of purchase.
- FOR INVESTMENTS OF LESS THAN $5 MILLION: The Portfolio
must be notified of the intended purchase by 10:45 a.m.
(Eastern time) on the day of purchase and the Federal
Funds wire must be received by 4:00 p.m. (Eastern time).
Generally, if these requirements are not met, an
investment will begin to earn dividends on the business
day following receipt of a Federal Funds wire.
The trade date, the day on which an account is credited,
is generally the day on which the Portfolio receives an
investment in the form of Federal Funds. For purchases by
Federal Funds wire or by exchange, the Portfolio is
credited immediately with Federal Funds. If a purchase by
Federal Funds wire or exchange is received by the close of
the Exchange, the trade date is the day of receipt. If a
purchase is received after the close of the Exchange, the
trade date is the business day following the receipt of
the wire or exchange. Vanguard will not accept third-party
checks to open an account. Please be sure your purchase is
made payable to the Vanguard Group.
The Portfolio reserves the right to suspend the offering
of shares for a period of time. The Portfolio also
reserves the right to reject any specific purchase
request.
--------------------------------------------------------------------------------
SELLING SHARES
WIRE PROCEEDS Any portion of an account may be withdrawn by contacting
your Institutional Investor Services Representative. The
redemption proceeds will be wired to the bank account
indicated on the Account Registration Form on the business
day following receipt of a request.
11
<PAGE> 13
For a redemption of an entire account balance, accrued
dividends will not be included in the initial redemption
wire, but will be sent separately by check or wire.
Wire redemptions of less than $5,000 are subject to a $5
charge deducted from the principal in your account. There
is no charge for wire redemptions of $5,000 or more, or
for subsequent dividend wires.
For our mutual protection, wiring instructions must be on
file at Vanguard prior to executing any redemption
request. A request to change the bank account associated
with the wire redemption feature or a request to wire
funds to a bank other than that on file must be received
in writing. A signature guarantee of an authorized officer
is required if the bank registration is not identical to
the Vanguard Fund account registration.
--------------------------------------------------------------------------------
SELLING BY EXCHANGE Shares may also be sold by making an exchange to another
Vanguard Fund account. For further information, please
contact your Institutional Investor Services
Representative.
--------------------------------------------------------------------------------
OTHER REDEMPTION
INFORMATION The Portfolio may suspend the redemption rights or
postpone payment at times when the New York Stock Exchange
is closed or under any emergency circumstances as
determined by the United States Securities and Exchange
Commission.
The Portfolio reserves the right, for any account with a
balance of less than $5 million, either to redeem shares
or to transfer the account balance to another identically
registered Vanguard money market portfolio. Shareholders
will be provided with 60 days notice before any action is
taken.
--------------------------------------------------------------------------------
EXCHANGING
SHARES Shares of the Portfolio may be exchanged for those of
other available Vanguard Funds either by telephone or
mail. Contact your Institutional Investor Services
Representative for further information. Telephone exchange
requests must ordinarily be received by the close of
trading on the New York Stock Exchange (generally 4:00
p.m. Eastern time) in order to be processed on the date of
receipt. The new Fund account will bear the identical
registration of the Vanguard Institutional Money Market
Portfolio account.
Telephone exchanges are not permitted for several Vanguard
Funds, and there also may be restrictions on new
investments in certain Funds. Large exchange requests
(i.e., those over $250,000) require prior approval by
Vanguard on behalf of the Fund. Contact your Institutional
Investor Services Representative for full information,
including a prospectus.
Neither the Portfolio nor Vanguard is responsible for the
authenticity of exchange instructions received by
telephone. Every effort will be made to maintain the
exchange privilege. However, the Portfolio reserves the
right to revise or terminate its provisions, limit the
amount of or reject any exchange, as deemed necessary, at
any time.
--------------------------------------------------------------------------------
12
<PAGE> 14
IMPORTANT
INFORMATION
ABOUT TELEPHONE
TRANSACTIONS The ability to initiate redemptions (except wire
redemptions) and exchanges by telephone is automatically
established on your account unless you request in writing
that telephone transactions on your account not be
permitted. The ability to initiate wire redemptions by
telephone will be established on your account only if you
specifically elect this option in writing.
To protect your account from losses resulting from
unauthorized or fraudulent telephone instructions,
Vanguard adheres to the following security procedures:
1. SECURITY CHECK. To request a transaction by telephone,
the caller must know (i) the name of the Portfolio;
(ii) the 10-digit account number; (iii) the exact name
and address used in the registration; and (iv) the
Social Security or Employer Identification number
listed on the account.
2. PAYMENT POLICY. The proceeds of any telephone
redemption by mail will be made payable to the
registered shareowner and mailed to the address of
record, only. In the case of a telephone redemption by
wire, the wire transfer will be made only in accordance
with the shareowner's prior written instructions.
Neither the Portfolio nor Vanguard will be responsible for
the authenticity of transaction instructions received by
telephone, provided that reasonable security procedures
have been followed. Vanguard believes that the security
procedures described above are reasonable, and that if
such procedures are followed, you will bear the risk of
any losses resulting from unauthorized or fraudulent
telephone transactions on your account.
--------------------------------------------------------------------------------
OTHER ACCOUNT
INFORMATION For corporate investors, a current corporate resolution
must be maintained on file at Vanguard at all times. The
initial application serves as a corporate resolution. Any
revisions to a corporate resolution must be submitted to
your Institutional Investor Services Representative at
Vanguard.
To change the registration of an account, a request must
be submitted in writing to Vanguard and include the
following information: the account number and portfolio
name; authorized signatures; any applicable signature
guarantees; and other supporting legal documents as
necessary.
All requests should be mailed to the following address:
VANGUARD FINANCIAL CENTER
ATTN: INSTITUTIONAL INVESTOR SERVICES
P.O. BOX 1472
VALLEY FORGE, PA 19482
--------------------------------------------------------------------------------
13
<PAGE> 15
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<PAGE> 16
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<PAGE> 17
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------
(LOGO)
(VANGUARD MONEY MARKET RESERVES LOGO) (VANGUARD MONEY MARKET RESERVES LOGO)
--------------------------- P R O S P E C T U S
THE VANGUARD GROUP
OF INVESTMENT OCTOBER --, 1995
COMPANIES
INSTITUTIONAL INVESTOR SERVICE
Vanguard Financial Center
P.O. Box 2600
Valley Forge, PA 19482
PARTICIPANT SERVICES:
1-800-523-1188
TRANSFER AGENT:
The Vanguard Group, Inc.
Vanguard Financial Center
Valley Forge, PA 19482 (THE VANGUARD GROUP LOGO)
PI066
------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
VANGUARD INSTITUTIONAL PORTFOLIOS -- INSTITUTIONAL MONEY MARKET PORTFOLIO
VANGUARD MONEY MARKET RESERVES
COMBINED PROXY STATEMENT AND PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Cover Page............................................................................. 2
Notice of Special Meeting of Shareholders.............................................. 3
Approval or Disapproval of the Proposed Reorganization................................. 4
Summary................................................................................ 4
Comparison of the Institutional Portfolio and the Prime Portfolio................. 4
The Proposed Reorganization....................................................... 6
Additional Information about the Proposed Reorganization............................... 7
Reasons for the Proposed Reorganization........................................... 7
The Plan of Reorganization........................................................ 8
Expenses of the Reorganization.................................................... 8
Tax Consequences.................................................................. 9
Shareholders' Rights.............................................................. 9
Capitalization......................................................................... 9
Additional Information on the Institutional Portfolio and Vanguard Money Market
Reserves............................................................................. 10
The Institutional Portfolio....................................................... 10
Vanguard Money Market Reserves.................................................... 10
The Vanguard Group................................................................ 12
Litigation........................................................................ 18
Performance Summary.................................................................... 13
Financial Statements and Experts....................................................... 15
Information filed with the Securities and Exchange Commission.......................... 16
Vote Required.......................................................................... 16
Other Matters.......................................................................... 16
Agreement and Plan of Reorganization................................................... Exhibit I
Money Market Reserves Prospectus....................................................... Exhibit II
</TABLE>
(RECYCLE LOGO)
<PAGE> 19
VANGUARD MONEY MARKET RESERVES, INC.
REGISTRATION STATEMENT ON FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER --, 1995
This statement is not a prospectus, but should be read in conjunction with
the Combined Proxy Statement and Prospectus of Vanguard Money Market Reserves,
Inc. ("Vanguard Money Market Reserves") and Vanguard Institutional Portfolios,
Inc. -- Institutional Money Market Portfolio ("Institutional Portfolio") dated
September --, 1995. Vanguard Money Market Reserves' Prospectus (dated --, 1995)
and Statement of Additional Information (dated --, 1995) and the 1994 Annual
Report to Shareholders of Vanguard Money Market Reserves and the 1994 Annual
Report to Shareholders of the Institutional Portfolio are on file with the
Securities and Exchange Commission and are hereby incorporated by reference.
Each of the aforementioned documents may be obtained without charge by writing
to Vanguard Financial Center, 100 Vanguard Boulevard, (P.O. Box 876), Valley
Forge, PA 19482 or by calling 1-800-662-7447.
<PAGE> 20
VANGUARD MONEY MARKET RESERVES, INC.
REGISTRATION STATEMENT ON FORM N-14
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article TENTH of the Registrant's Amended and Restated Articles of
Incorporation provides as follows:
"TENTH: (a) The corporation shall indemnify its directors and officers to
the fullest extent allowed, and in the manner provided, by Maryland law,
including the advancing of expenses incurred in connection therewith. Such
indemnification shall be in addition to any other right or claim to which any
director or officer may otherwise be entitled. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
corporation would have had the power to indemnify such liability.
(b) Nothing in this Article protects or purports to protect, or may be
interpreted or construed to protect, any director or officer against any
liability to the corporation or its security holders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
(c) Each section or portion thereof of this Article shall be deemed
severable from the remainder, and the invalidity of any such section or portion
shall not affect the validity of the remainder of this Article."
ITEM 16. EXHIBITS
(1) Amended and Restated Articles of Incorporation of Registrant.*
(2) Amended and Restated By-Laws of Registrant.*
(3) Not applicable.
(4) Agreement and Plan of Reorganization dated September --, 1995, filed
as part of the Combined Proxy Statement and Prospectus.**
(5) Specimen stock certificate of Registrant.*
(6) Investment Advisory Agreement.*
(7) Not applicable.
(8) Not applicable.
(9) Copy of Custodian Agreement with CoreStates Bank, N.A.*
(10) Not applicable.
(11) Not applicable.
(12) Opinion of Stradley, Ronon, Stevens & Young relating to Federal tax
matters.***
(13) Not applicable.
(14) Consent of Price Waterhouse LLP.**
(15) Not applicable.
(16) Not applicable.
(17) Not applicable.
---------------
* Previously Filed.
** Filed Herewith.
*** To Be Filed.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of this Rule 145(c) of the Securities Act the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
<PAGE> 21
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) The undersigned registrant agrees that it will file with the Commission
the Opinion of Stradley, Ronon, Stevens & Young relating to federal tax matters,
within a reasonable time after the tax opinion that will be delivered in
connection with the Proposed Reorganization has been received by the undersigned
registrant.
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby has duly caused this
Post-Effective Amendment to this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Valley
Forge and the Commonwealth of Pennsylvania, on the 18th day of August, 1995.
VANGUARD MONEY MARKET RESERVES, INC.
BY: (Raymond J. Klapinsky) John C. Bogle*, Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
BY: (Raymond J. Klapinsky)
John C. Bogle*, Chairman of the Board,
Director and Chief Executive Officer
August 18, 1995
BY: (Raymond J. Klapinsky)
John J. Brennan*, Director and President
August 18, 1995
BY: (Raymond J. Klapinsky)
Barbara B. Hauptfuhrer*, Director
August 18, 1995
BY: (Raymond J. Klapinsky)
Burton G. Malkiel*, Director
August 18, 1995
BY: (Raymond J. Klapinsky)
Bruce K. MacLaury*, Director
August 18, 1995
BY: (Raymond J. Klapinsky)
John C. Sawhill*, Director
August 18, 1995
BY: (Raymond J. Klapinsky)
James O. Welch, Jr.*, Director
August 18, 1995
BY: (Raymond J. Klapinsky)
J. Lawrence Wilson*, Director
August 18, 1995
BY: (Raymond J. Klapinsky)
Richard F. Hyland*, Treasurer and Principal
Financial Officer and Accounting Officer
August 18, 1995
BY: Raymond J. Klapinsky
Raymond J. Klapinsky*, Secretary
August 18, 1995
*By Power of Attorney. See File Number 2-14336, January 23, 1990. Incorporated
by Reference.
<PAGE> 1
EXHIBIT 14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined Proxy
Statement and Prospectus and Statement of Additional Information, constituting
parts of this Registration Statement on Form N-14, of our report dated December
30, 1994, relating to the financial statements, including the financial
highlights, appearing in the November 30, 1994 Annual Report of Vanguard Money
Market Reserves, Inc. and of our report dated December 30, 1994, relating to the
financial statements, including the financial highlights, appearing in the
November 30, 1994 Annual Report of Vanguard Institutional Money Market
Portfolio. We also consent to the references to us under the headings "Money
Market Reserves Financial Highlights," "Institutional Portfolio Financial
Highlights" and "Financial Statements and Experts" in the Combined Proxy
Statement and Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, PA
August 17, 1995
