<PAGE> 1
VANGUARD MONEY
MARKET RESERVES
VANGUARD TREASURY MONEY
MARKET PORTFOLIO
Annual Report - November 30, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
<PAGE> 2
OUR CREW MAKES THE DIFFERENCE
Throughout our history, The Vanguard Group has received considerable attention
as the low-cost provider of mutual funds. While such accolades are gratifying,
we are most proud, not of our low operating expenses or the billions of dollars
we manage, but of our sterling reputation created by the Vanguard crew.
We recognize that it is our crew members--more than 6,000 highly
motivated men and women--who form the cornerstone of our operations. As with
any cornerstone, we could not survive long--let alone prosper--without it.
That's why we chose this fiscal year's annual report to celebrate the spirit,
enthusiasm, and achievements of our crew. (We call those who work at Vanguard
crew members, not employees, because they operate as a team to accomplish our
mission of serving you, our clients.)
But while we prize the collective contributions of our crew, we also
take time to recognize the importance of the individual. Each calendar quarter,
we present our Award For Excellence to a handful of crew members who have
demonstrated particular excellence in the performance of their jobs and who
embody "The Vanguard Spirit." Our report cover shows only a few of the more
than 300 crew members who have received this distinction since 1984.
They, along with the rest of our valiant crew, look forward to serving
you in the years ahead.
[PHOTO] [PHOTO]
John C. Bogle John J. Brennan
Chairman President
CONTENTS
<TABLE>
<S> <C>
A Message To Our Shareholders . . . . . . . . . . . . . . 1
The Markets In Perspective . . . . . . . . . . . . . . . 3
Report From The Adviser . . . . . . . . . . . . . . . . . 5
Performance Summaries . . . . . . . . . . . . . . . . . . 7
Portfolio Profiles . . . . . . . . . . . . . . . . . . . 11
Financial Statements . . . . . . . . . . . . . . . . . . 13
Report Of Independent Accountants . . . . . . . . . . . . 30
</TABLE>
All comparative mutual fund data are from Lipper Analytical Services, Inc., or
Morningstar unless otherwise noted.
<PAGE> 3
FELLOW SHAREHOLDER,
Short-term interest rates held relatively steady during the twelve
months ended November 30, 1997, the fiscal year for Vanguard Money Market
Reserves and Vanguard Treasury Money Market Portfolio. The total return of our
Prime Portfolio-Investor Shares during fiscal 1997 was +5.4%, up just a hair
from our return in the previous year. Given the extremely modest 1.8% rise in
the Consumer Price Index during the period, our "real" yield (taking inflation
into account) was 3.6%, the highest since 1989.
The table below presents the total return for each of our Portfolios
and for the average competing money market fund. It also shows the premium that
each Portfolio provided over its average competitor, an edge we call the
"Vanguard Advantage."
FISCAL 1997 PERFORMANCE OVERVIEW
Money market interest rates fluctuated within a tight range of 56 basis points
(0.56 percentage point) during the fiscal year ended November 30, 1997. The
yield on the three-month U.S. Treasury bill ended the period at 5.20%, a scant
7 basis points above the yield of a year earlier. Early in the fiscal year, the
market's attention focused on whether the Federal Reserve Board would act to
forestall inflationary pressures by increasing the federal funds rate (the rate
at which banks borrow from one another). Ultimately, the Fed adjusted the rate
just once, by 0.25 percentage point, on March 25, 1997. From a peak of 5.40% in
late March, interest rates on three-month T-bills declined to a fiscal-year low
of 4.84% on June 2.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
TOTAL RETURNS
FISCAL YEAR ENDED
NOVEMBER 30, 1997
-----------------------------------------------------
AVERAGE
VANGUARD COMPETING VANGUARD
PORTFOLIO FUND ADVANTAGE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime-
Investor Shares +5.4% +4.9% +0.5%
Federal +5.4 +4.9 +0.5
Treasury Money Market* +5.1 +4.8 +0.3
- -----------------------------------------------------------------------------------------
Prime-
Institutional Shares** +5.6% +5.3% +0.3%
- -----------------------------------------------------------------------------------------
</TABLE>
*Before December 2, 1996, known as the U.S. Treasury Portfolio of Vanguard
Money Market Reserves.
**Minimum initial investment is $10 million.
Crises in Asian currencies during the summer and fall led foreign
investors to seek refuge in U.S. Treasury securities, which helped to keep
interest rates down even as the vigorous U.S. economy grew at a real rate of
more than 3%.
Our four Portfolios' annualized seven-day yields on November 30 (see
the table below) were generally higher than the market rates prevailing on that
date because yields of money market funds lag slightly in adjusting to the
trend of market rates.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
ON NOVEMBER 30,
-----------------------
1997 1996
- ---------------------------------------------------------------
<S> <C> <C>
Prime-Investor Shares 5.40% 5.17%
Federal 5.33 5.12
Treasury Money Market 5.05 5.03
- ---------------------------------------------------------------
Prime-Institutional Shares 5.57% 5.34%
- ---------------------------------------------------------------
</TABLE>
Each of our four Portfolios retained its customary margin of
superiority over competitors, primarily because of Vanguard's lower operating
expenses. The Prime-Investor Shares, Federal, and Treasury Money Market
Portfolios operated in fiscal 1997 at expense ratios (expenses as a percentage
of average net assets) of 0.32%, or $3.20 per $1,000 of assets--less than half
the annual expense ratio of 0.76% for the average money market fund. Our
Prime-Institutional Shares Portfolio operated at an expense ratio of 0.15%, a
mere one-
1
<PAGE> 4
third of the 0.45% expense ratio for the average institutional money market
portfolio. These expense differentials, averaging 40 basis points, are far from
trivial--they represent a boost in net yield of almost 8%, available to the
investor at no additional risk.
LONG-TERM PERFORMANCE OVERVIEW
Our record in fiscal year 1997 continues a long tradition of excellent
performance, aided greatly by both our low operating costs and the investment
advisory expertise of our Fixed Income Group. The table at left shows the
average annual return of each Portfolio and the cumulative growth of a
hypothetical $10,000 investment in each over the past ten years. For comparison
purposes, the same information is presented for the average competing money
market fund.
The year-in, year-out cost advantage that we consistently have held
over our competitors has translated over time into significantly enhanced
earnings for our shareholders--totaling about $800 on a $10,000 investment made
a decade ago in either the Prime or Federal Portfolios. Because differences in
operating costs account for most of the difference in the performance of money
market funds, we fully expect these "extra" earnings relative to the
competition to persist in the years ahead. However, we caution that no one can
predict the absolute returns that money market funds--Vanguard's or anyone
else's--will provide in the future. Returns over the next decade could be
higher or lower than those of the past decade.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
TOTAL RETURNS
TEN YEARS ENDED NOVEMBER 30, 1997
----------------------------------------------------------
FINAL VALUE OF
AVERAGE A $10,000
ANNUAL RATE INITIAL INVESTMENT
----------------------------------------------------------
AVERAGE AVERAGE
VANGUARD COMPETING VANGUARD COMPETING
PORTFOLIO FUND PORTFOLIO FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime-
Investor Shares +5.9% +5.4% $17,701 $16,899
Federal +5.8 +5.3 17,500 16,732
Treasury Money Market* +5.6 +5.3 17,178 16,793
- --------------------------------------------------------------------------------------------------
Prime-
Institutional Shares** +5.5% +5.2% $15,457 $15,138
- --------------------------------------------------------------------------------------------------
</TABLE>
*Prior to March 13, 1989, returns are for the Insured Portfolio.
**Since Portfolio's inception on October 3, 1989. Minimum initial investment
is $10 million.
IN SUMMARY
Money market mutual funds can serve an important role in an investment
portfolio, whether as a permanent cash reserve or as a temporary haven from
market turbulence. They offer safety, liquidity, and current income in
dependable, although rarely sensational, fashion. For the long-term investor,
the advantages of money market funds should be considered alongside those of
stocks and bonds, whose higher short-term risks are likely to be outweighed
over time by higher returns. Our dedication to offering high-quality money
market portfolios at the lowest reasonable cost allows you to achieve returns
that closely parallel those earned by the overall money market. We intend to
"stay the course" Vanguard has maintained since we launched our first money
market fund more than 22 years ago.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
December 15, 1997
2
<PAGE> 5
THE MARKETS IN PERSPECTIVE
Year Ended November 30, 1997
U.S. EQUITY MARKETS
The fiscal year ended November 30 tested investors' mettle on a number of
occasions, but most ended on a positive note. The increasingly global nature of
investing has rarely been more in evidence than it was over the period. Turmoil
in Southeast Asia raised serious questions about future growth in the region
and, significantly, called into question the earnings outlook for U.S.
companies with exposure there.
Over the 12 months, large-capitalization stocks continued their
advance, propelling the S&P 500 Index to a 28.5% gain. Small-cap stocks also
fared well, as illustrated by the 23.4% increase of the Russell 2000 Index.
These gains withstood a rocky October, when the sharp declines in Asian markets
led many investors to question their expectations regarding U.S. equities.
Although the domestic market dropped substantially--the Dow Jones Industrial
Average fell 554 points, or 7.2%, on October 27--it then rebounded smartly over
the next few days.
Among large-cap stocks, the financial services sector was again one of
the best performers, with an increase of 34.8% in fiscal 1997. Also noteworthy
was a November surge in utility stocks, which brought that sector's 12-month
return up to 34.5%. Utilities, those seemingly perennial cellar-dwellers, were
boosted by a drop in interest rates and by a general consensus that their
valuations at last adequately reflected the risks associated with the new
competitive landscape. In the final quarter of the fiscal year, utility stocks
jumped 23.6%, roughly three times the return generated by the S&P 500 Index
(6.7%). In sharp contrast were a number of market sectors that felt the brunt
of the disarray in Asian economies and--while showing positive gains for the
year--turned in negative fourth fiscal quarters. As the fiscal year ended,
there were growing indications from technology and manufacturing companies that
the economic distress in Southeast Asia would likely reduce their current and
future earnings.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED NOVEMBER 30, 1997
-----------------------------------
1 YEAR 3 YEARS 5 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 28.5% 31.1% 20.2%
Russell 2000 Index 23.4 22.7 16.8
MSCI EAFE Index -0.1 6.5 11.6
- ----------------------------------------------------------------------------------
FIXED INCOME
Lehman Aggregate Bond Index 7.6% 10.3% 7.6%
Lehman 10-Year Municipal Bond Index 7.1 10.3 7.5
Salomon Brothers Three-Month
U.S. Treasury Bill Index 5.2 5.4 4.7
- ----------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.8% 2.6% 2.6%
- ----------------------------------------------------------------------------------
</TABLE>
While small-company stocks failed to match the outsized advance of
the S&P 500 Index, their performance grew notably stronger in the second half of
the fiscal year. For the year, the Russell 2000 Index gained 23.4%. During the
second six months, the Russell 2000's 13.8% essentially matched the S&P 500's
13.6%. The improved performance of smaller companies cannot be attributed to any
single factor, but is, rather, due to a combination of attractive valuations and
good earnings.
3
<PAGE> 6
U.S. FIXED-INCOME MARKETS
Bonds were overshadowed by stocks for much of the year. Investors' returns from
bonds, however, were quite respectable. As the year progressed, investors grew
more confident that four seemingly strange bedfellows--strong economic growth,
reasonable inflation, low unemployment, and stable wage growth--would continue
to coexist peacefully. As a result, when interest rates dipped noticeably
toward the fiscal year's end, they fell furthest for issues with the longest
maturities. The yield on the 30-year U.S. Treasury bond closed the fiscal year
at 6.05%, compared to 6.35% on November 30, 1996. Falling rates flattened the
yield curve considerably: Only 0.85% separated the yield on Treasury bills from
the yield on the 30-year issue, down from a spread of 1.22% at the previous
fiscal year-end.
The positive effect of the yield drop on bond prices was apparent in
the 7.6% return of the Lehman Aggregate Bond Index, the broadest measure of
investment-grade issues. Investors in lower-quality securities fared even
better, as shown by the 12.6% gain of the Lehman High Yield Bond Index. The
strength of the economy, together with the lack of inflationary pressure,
produced an ideal environment for junk bonds.
INTERNATIONAL EQUITY MARKETS
Arguably, investors' greatest disappointments were in international
markets--and, of course, Asian markets in particular. During the fiscal year,
the Morgan Stanley Capital International (MSCI) Pacific Index declined by 26.3%
in U.S. dollar terms; the index fell 17.3% in the fourth quarter alone. Among
individual markets, the fiscal year saw sharp declines (in U.S. dollar terms)
in Japan, down 24.5%, including a 16.1% drop in the fourth quarter; Hong Kong,
down 25%; Malaysia, down 68%; and Singapore, down 23%. The general slump in
Asian markets began in midsummer with currency devaluations by a number of
countries. Because the values of many of these currencies had been linked to
the U.S. dollar, their fall caused it to appreciate greatly--so much so that
Asian businesses soon found it difficult to purchase American-made products and
to repay dollar-denominated loans. This situation raised questions about how
the region's economic growth would be affected. Related worries focused on
imprudent aspects of various countries' financial systems and the probability
of corporate bankruptcies. In short, there was no place to hide.
By contrast, the European markets continued to provide U.S. investors
with solid returns, although they, too, stumbled in late October and recovered
in November. The MSCI Europe Index posted a gain of 21.8% for the 12 months.
The robust character of the European markets reflects strong corporate earnings
and optimism that the European Monetary Union will provide a solid framework
for future fiscal responsibility and economic growth.
4
<PAGE> 7
REPORT FROM THE ADVISER
In the fiscal year ended November 30, 1997, money market interest
rates experienced a mild increase of 0.1 to 0.4 percentage point. The rates on
U.S. Treasury securities changed least, while those on securities from
nongovernment issuers rose the most. Returns to shareholders of the Prime and
Federal Portfolios of Vanguard Money Market Reserves and of Vanguard Treasury
Money Market Portfolio were 5% or slightly higher for the 12-month period.
(Please see the Message To Shareholders, beginning on page 1, for more details
on returns.) With year-over-year inflation running a little under 2%, the
remaining 3% "real" return is rather extraordinary by money market standards
and is unlikely to be repeated with any regularity in the future.
Because of the influence of the Federal Reserve Board on short-term
interest rates, any discussion of money markets must revolve around factors
affecting the Fed's monetary policy. In most years, these factors are
overwhelmingly associated with the state of the U.S. economy. This year,
however, events overseas also formed a significant part of the picture.
In many ways, the U.S. economy has rarely been in better condition
than it was in fiscal 1997. Low unemployment and rising wages fueled consumer
confidence and boosted the economy's growth rate above the 2% to 2.5% speed
limit that has been viewed in the past as noninflationary. In response, on
March 25, 1997, the Fed engineered a 0.25 percentage point increase in the
benchmark federal funds rate, the central bank's first tightening of monetary
policy since early 1995. Remarks at the time by Fed officials indicated that
they felt the economic headwinds (primarily job insecurity) that had kept
inflationary pressures in check had largely dissipated.
Since the Fed's action, economic growth has remained strong and,
paradoxically, inflation is at its lowest level in years. Although
technology-based enhancements in productivity are certainly contributing to
this improbable combination of circumstances, we believe the business cycle has
not disappeared. The risk of higher inflation is very real when spare workers
are in such short supply as they are now.
Considered in a vacuum, the domestic economic situation just outlined
is one in which the Fed would be expected to tighten monetary policy further to
forestall future inflation. However, the turmoil in Asian economies and markets
in recent months has exerted a new set of exogenous forces on the U.S. economy.
Currency devaluations and economic slumps in Asia probably will put downward
pressure on import prices and will limit U.S. exports to the region. Federal
Reserve officials have gone so far as to say that they expect the international
situation to have an effect that is "the equivalent of some degree of
tightening" of monetary policy by the Fed.
At present, the question is whether these outside influences will
restrain our economy and reduce the demand for skilled workers sufficiently to
prevent a typical late-cycle burst of inflation. We will not know the answer
for some time, because it takes months--or even years--for the full impact of
such events to be felt.
Another feature of the short-term securities markets during the past
12 months has been the tremendous improvement in the federal government's
fiscal situation,
5
<PAGE> 8
a development that has reduced the Treasury's borrowing needs. The Treasury's
procedure has been to use its short-term borrowings in the T-bill market as a
shock absorber to avoid undue disruption in its long-term borrowing schedule.
As unexpectedly high tax revenues have reduced the government's need to borrow,
the issuance of T-bills has shrunk, reducing their yield relative to other
money market securities.
In managing the Portfolios, our response to the uncertainty engendered
by the unlikely balance of robust growth and falling inflation at home,
combined with the wild card of economic dislocations overseas, has been to take
a neutral stance, thus ending the bearish tilt in the interest-rate sensitivity
of our Portfolios that had been in place since the spring. By extending the
Portfolios' average maturity, we will invest at slightly higher yields (due to
the upward slope of the money market yield curve) and be positioned to respond
in a more balanced fashion as events unfold.
We note that a long-standing feature of our investment policy has been
to avoid investments in Japanese banks (whose credit quality has deteriorated
significantly as a result of the financial crisis in Asia). Over the years,
this exclusion of Japanese banks, as well as other conservative decisions on
our part, has occasionally given our higher-risk competitors a slight
performance advantage measured before expenses. Nevertheless, day in and day
out, our low expenses have enabled us to offer our shareholders a winning
combination of high-quality portfolios and top-notch returns.
Ian A. MacKinnon, Managing Director
Robert F. Auwaerter, Principal
John Hollyer, Principal
Vanguard Fixed Income Group
December 9, 1997
INVESTMENT PHILOSOPHY
The Portfolios reflect a belief that the highest level of current income
consistent with capital preservation and liquidity can be provided by holding
high-quality money market instruments issued by financial institutions,
nonfinancial corporations, the U.S. government, and federal agencies.
6
<PAGE> 9
PERFORMANCE SUMMARY
Prime Portfolio-Investor Shares
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note that
annual returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. government, and there is no
assurance that the fund will be able to maintain a stable net asset value of $1
per share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: NOVEMBER 30, 1977-NOVEMBER 30, 1997
- -----------------------------------------------------
PRIME PORTFOLIO-INVESTOR SHARES AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------
<S> <C> <C> <C> <C>
1978 0.0% 6.7% 6.7% 6.9%
1979 0.0 10.8 10.8 10.5
1980 0.0 12.8 12.8 12.5
1981 0.0 17.6 17.6 17.5
1982 0.0 13.1 13.1 12.8
1983 0.0 8.9 8.9 8.6
1984 0.0 10.6 10.6 10.1
1985 0.0 8.2 8.2 7.9
1986 0.0 6.8 6.8 6.4
1987 0.0 6.5 6.5 6.0
1988 0.0 7.5 7.5 6.9
1989 0.0 9.4 9.4 8.8
1990 0.0 8.3 8.3 7.8
1991 0.0 6.4 6.4 5.9
1992 0.0 3.9 3.9 3.4
1993 0.0 3.0 3.0 2.6
1994 0.0 3.9 3.9 3.5
1995 0.0 5.8 5.8 5.4
1996 0.0 5.3 5.3 4.8
1997 0.0 5.4 5.4 4.9
- -----------------------------------------------------
</TABLE>
*Average Money Market Fund.
See Financial Highlights table on page 27 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1987-NOVEMBER 30, 1997
- -----------------------------------------------------
PRIME AVERAGE MM SALOMON THREE
- -----------------------------------------------------
<S> <C> <C> <C>
1987 11 10000 10000 10000
1988 02 10176 10162 10143
1988 05 10345 10323 10290
1988 08 10535 10498 10463
1988 11 10748 10689 10656
1989 02 10981 10913 10877
1989 05 11248 11166 11120
1989 08 11510 11409 11351
1989 11 11759 11634 11576
1990 02 11998 11864 11802
1990 05 12244 12094 12040
1990 08 12492 12325 12276
1990 11 12738 12545 12499
1991 02 12973 12767 12710
1991 05 13180 12956 12899
1991 08 13374 13131 13080
1991 11 13553 13286 13247
1992 02 13708 13430 13387
1992 05 13845 13549 13519
1992 08 13971 13655 13637
1992 11 14081 13743 13738
1993 02 14191 13841 13851
1993 05 14296 13930 13953
1993 08 14401 14016 14058
1993 11 14507 14103 14163
1994 02 14615 14201 14279
1994 05 14739 14309 14408
1994 08 14892 14436 14560
1994 11 15069 14590 14734
1995 02 15278 14783 14944
1995 05 15505 14989 15163
1995 08 15729 15177 15377
1995 11 15946 15370 15582
1996 02 16159 15569 15797
1996 05 16365 15752 15996
1996 08 16579 15927 16200
1996 11 16793 16113 16405
1997 02 17008 16310 16622
1997 05 17234 16506 16837
1997 08 17467 16697 17050
1997 11 17701 16899 17265
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Portfolio-Investor Shares 5.41% 4.68% 5.88% $17,701
Average Money Market Fund 4.88 4.22 5.39 16,899
Salomon Three-Month U.S. Treasury Index 5.24 4.68 5.61 17,265
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1997*
- --------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Portfolio-Investor Shares 6/4/1975 5.38% 4.60% 0.00% 5.91% 5.91%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
7
<PAGE> 10
PERFORMANCE SUMMARY
Prime Portfolio-Institutional Shares
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note that
annual returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. government, and there is no
assurance that the fund will be able to maintain a stable net asset value of $1
per share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: OCTOBER 3, 1989-NOVEMBER 30, 1997
- ----------------------------------------------------------
PRIME PORTFOLIO-INSTITUTIONAL SHARES AVERAGE
FUND**
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN* RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1989 0.0% 1.4% 1.4% 1.4%
1990 0.0 8.5 8.5 8.3
1991 0.0 6.5 6.5 6.2
1992 0.0 4.0 4.0 3.8
1993 0.0 3.2 3.2 2.9
1994 0.0 4.1 4.1 3.8
1995 0.0 6.0 6.0 5.7
1996 0.0 5.5 5.5 5.2
1997 0.0 5.6 5.6 5.3
- ----------------------------------------------------------
</TABLE>
*Prior to 10/28/1995, total returns are for Vanguard Institutional Money
Market Portfolio.
**Average Institutional Money Market Fund.
See Financial Highlights table on page 27 for dividend information.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: OCTOBER 3, 1989-NOVEMBER 30, 1997
INTRODUCTION OF INSTITUTIONAL SHARES
- ----------------------------------------------------------
PRIME INST AVERAGE INSTI SALOMON THREE
- ----------------------------------------------------------
<S> <C> <C> <C>
Oct 3, 89 10000000 10000000 10000000
1989 11 10140494 10136959 10133938
1990 02 10350954 10343236 10329481
1990 05 10567462 10554594 10537764
1990 08 10786481 10766972 10743631
1990 11 11001752 10977021 10939471
1991 02 11208097 11172764 11123818
1991 05 11390381 11348299 11289106
1991 08 11561297 11510970 11447339
1991 11 11719410 11660890 11593651
1992 02 11856859 11773859 11716718
1992 05 11979213 11907770 11832112
1992 08 12091815 12010546 11934996
1992 11 12191380 12099339 12023776
1993 02 12291501 12174170 12122116
1993 05 12387968 12281674 12211923
1993 08 12484047 12369661 12303787
1993 11 12580752 12455060 12395310
1994 02 12679512 12528438 12496690
1994 05 12793128 12655037 12610032
1994 08 12932905 12782808 12743033
1994 11 13091443 12927106 12894841
1995 02 13279646 13084701 13079035
1995 05 13483260 13297913 13270797
1995 08 13683325 13485863 13457917
1995 11 13877492 13667830 13637584
1996 02 14069266 13830529 13825848
1996 05 14254510 14026639 13999364
1996 08 14446193 14204659 14177915
1996 11 14639214 14379924 14357649
1997 02 14833280 14538652 14547558
1997 05 15036360 14750413 14735731
1997 08 15246243 14947563 14922256
1997 11 15456944 15138227 15109990
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997
------------------------------- FINAL VALUE OF A
SINCE $10,000,000
1 YEAR 5 YEARS INCEPTION INVESTMENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Portfolio-Institutional Shares* 5.59% 4.86% 5.48% $15,456,944
Average Institutional Money Market Fund 5.29 4.59 5.21 15,138,227
Salomon Three-Month U.S. Treasury Index 5.24 4.68 5.19 15,109,990
- --------------------------------------------------------------------------------------------------
</TABLE>
*Prior to 10/28/1995, total returns are for Vanguard Institutional Money Market
Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1997*
- --------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Portfolio-Institutional Shares** 10/3/1989 5.55% 4.78% 0.00% 5.48% 5.48%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Prior to 10/28/1995, total returns are for Vanguard Institutional Money
Market Portfolio.
8
<PAGE> 11
PERFORMANCE SUMMARY
Federal Portfolio
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note that
annual returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. government, and there is no
assurance that the fund will be able to maintain a stable net asset value of $1
per share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: JULY 13, 1981-NOVEMBER 30, 1997
- ---------------------------------------------------------
FEDERAL PORTFOLIO AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1981 0.0% 5.9% 5.9% 5.7%
1982 0.0 11.9 11.9 11.7
1983 0.0 8.5 8.5 8.3
1984 0.0 10.2 10.2 9.8
1985 0.0 8.0 8.0 7.7
1986 0.0 6.6 6.6 6.3
1987 0.0 6.3 6.3 5.9
1988 0.0 7.2 7.2 6.7
1989 0.0 9.2 9.2 8.6
1990 0.0 8.1 8.1 7.7
1991 0.0 6.2 6.2 5.7
1992 0.0 3.8 3.8 3.4
1993 0.0 3.0 3.0 2.6
1994 0.0 3.8 3.8 3.4
1995 0.0 5.8 5.8 5.3
1996 0.0 5.3 5.3 4.8
1997 0.0 5.4 5.4 4.9
- ---------------------------------------------------------
</TABLE>
*Average U.S. Government Money Market Fund.
See Financial Highlights table on page 28 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1987-NOVEMBER 30, 1997
- -----------------------------------------------------------------------------------
AVERAGE U.S. GOVERNMENT SALOMON THREE-MONTH
VMMR - FEDERAL PORTFOLIO MONEY MARKET FUND TREASURY INDEX
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
1987 11 10000 10000 10000
1988 02 10168 10154 10143
1988 05 10332 10314 10290
1988 08 10515 10487 10463
1988 11 10721 10665 10656
1989 02 10946 10888 10877
1989 05 11206 11133 11120
1989 08 11461 11371 11351
1989 11 11703 11582 11576
1990 02 11936 11816 11802
1990 05 12176 12040 12040
1990 08 12418 12270 12276
1990 11 12656 12475 12499
1991 02 12878 12694 12710
1991 05 13077 12876 12899
1991 08 13264 13053 13080
1991 11 13439 13191 13247
1992 02 13589 13341 13387
1992 05 13723 13461 13519
1992 08 13847 13571 13637
1992 11 13954 13641 13738
1993 02 14059 13748 13851
1993 05 14162 13835 13953
1993 08 14266 13926 14058
1993 11 14370 13992 14163
1994 02 14476 14099 14279
1994 05 14598 14203 14408
1994 08 14748 14336 14560
1994 11 14920 14465 14734
1995 02 15124 14664 14944
1995 05 15348 14862 15163
1995 08 15567 15057 15377
1995 11 15780 15227 15582
1996 02 15990 15430 15797
1996 05 16192 15609 15996
1996 08 16401 15793 16200
1996 11 16611 15955 16405
1997 02 16822 16158 16622
1997 05 17043 16354 16837
1997 08 17271 16554 17050
1997 11 17500 16732 17265
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Portfolio 5.35% 4.63% 5.76% $17,500
Average U.S. Government Money Market Fund 4.87 4.17 5.28 16,732
Salomon Three-Month U.S. Treasury Index 5.24 4.68 5.61 17,265
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1997*
- ---------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal Portfolio 7/13/1981 5.32% 4.55% 0.00% 5.78% 5.78%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
9
<PAGE> 12
PERFORMANCE SUMMARY
Treasury Money Market Portfolio
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note that
annual returns can fluctuate widely. An investment in a money market fund is
neither insured nor guaranteed by the U.S. government, and there is no
assurance that the fund will be able to maintain a stable net asset value of $1
per share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: MARCH 9, 1983-NOVEMBER 30, 1997
- --------------------------------------------------
TREASURY MONEY MARKET AVERAGE
PORTFOLIO* FUND**
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN+ RETURN
- --------------------------------------------------
<S> <C> <C> <C> <C>
1983 0.0% 6.1% 6.1% 6.2%
1984 0.0 9.9 9.9 10.1
1985 0.0 7.5 7.5 7.9
1986 0.0 6.2 6.2 6.4
1987 0.0 6.0 6.0 6.0
1988 0.0 7.0 7.0 6.9
1989 0.0 8.9 8.9 8.7
1990 0.0 8.0 8.0 7.8
1991 0.0 5.9 5.9 5.8
1992 0.0 3.7 3.7 3.5
1993 0.0 2.9 2.9 2.6
1994 0.0 3.6 3.6 3.4
1995 0.0 5.5 5.5 5.2
1996 0.0 5.1 5.1 4.8
1997 0.0 5.1 5.1 4.8
- --------------------------------------------------
</TABLE>
*Prior to 12/2/1996, known as the U.S. Treasury Portfolio.
**Average Money Market Fund through 3/31/1989; Average U.S. Treasury Money
Market Fund thereafter.
+Prior to 3/13/1989, total returns are for the Insured Portfolio.
See Financial Highlights table on page 28 for dividend information for the past
five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1987-NOVEMBER 30, 1997
THE INSURED PORTFOLIO REORGANIZED AS THE U.S. TREASURY PORTFOLIO
- -------------------------------------------------
TREASURY MM AVERAGE U.S. SALOMON THREE
- -------------------------------------------------
<S> <C> <C> <C> <C>
1987 11 10000 10000 10000
1988 02 10161 10162 10143
1988 05 10319 10323 10290
1988 08 10501 10498 10463
1988 11 10703 10689 10656
1989 02 10927 10913 10877
1989 05 11176 11167 11120
1989 08 11422 11403 11351
1989 11 11655 11630 11576
1990 02 11884 11851 11802
1990 05 12120 12077 12040
1990 08 12358 12308 12276
1990 11 12591 12515 12499
1991 02 12801 12737 12710
1991 05 12992 12922 12899
1991 08 13171 13099 13080
1991 11 13340 13259 13247
1992 02 13482 13396 13387
1992 05 13611 13519 13519
1992 08 13731 13628 13637
1992 11 13831 13700 13738
1993 02 13930 13811 13851
1993 05 14028 13903 13953
1993 08 14128 13992 14058
1993 11 14227 14079 14163
1994 02 14327 14172 14279
1994 05 14441 14277 14408
1994 08 14582 14406 14560
1994 11 14743 14555 14734
1995 02 14933 14736 14944
1995 05 15142 14934 15163
1995 08 15349 15127 15377
1995 11 15550 15318 15582
1996 02 15748 15503 15797
1996 05 15943 15684 15996
1996 08 16143 15864 16200
1996 11 16344 16047 16405
1997 02 16543 16230 16622
1997 05 16752 16423 16837
1997 08 16966 16618 17050
1997 11 17178 16793 17265
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Money Market Portfolio*+ 5.10% 4.43% 5.56% $17,178
Average U.S. Treasury Money Market Fund** 4.79 4.15 5.32 16,793
Salomon Three-Month U.S. Treasury Index 5.24 4.68 5.61 17,265
- ---------------------------------------------------------------------------------------------------
</TABLE>
*Prior to 12/2/1996, known as the U.S. Treasury Portfolio.
**Average Money Market Fund through 3/31/1989; Average U.S. Treasury Money
Market Fund thereafter.
+Prior to 3/13/1989, total returns are for the Insured Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1997*
- -------------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION -----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Treasury Money Market Portfolio**+ 3/9/1983 5.10% 4.36% 0.00% 5.59% 5.59%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.
**Prior to 12/2/1996, known as the U.S. Treasury Portfolio.
+Prior to 3/13/1989, total returns are for the Insured Portfolio.
10
<PAGE> 13
PORTFOLIO PROFILE
Prime Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
November 30, 1997. Key elements of this Profile are defined below.
<TABLE>
<CAPTION>
INVESTOR SHARES--FINANCIAL ATTRIBUTES
- -------------------------------------------------
<S> <C>
Yield 5.4%
Average Maturity 60 days
Average Quality Aa1
Expense Ratio 0.32%
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES--FINANCIAL ATTRIBUTES
- -------------------------------------------------
<S> <C>
Yield 5.6%
Average Maturity 60 days
Average Quality Aa1
Expense Ratio 0.15%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------
<S> <C>
Aaa 36.3%
Aa 48.8
A 14.9
Baa 0.0
Ba 0.0
B 0.0
Not Rated 0.0
- -------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- -------------------------------------------------
<S> <C>
Bank Notes 0.7%
Certificates of Deposit 34.1
Commercial Paper 39.2
U.S. Government and Agency 26.0
- -------------------------------------------------
Total 100.0%
</TABLE>
AVERAGE MATURITY. The average length of time until bonds held by a portfolio
reach maturity (or are called) and are repaid. In general, the longer the
average maturity, the more a portfolio's share price will fluctuate in response
to changes in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a portfolio's securities holdings by credit-rating
agencies. The agencies make their judgment after appraising an issuer's ability
to meet its obligations. For issuers other than the U.S. government, quality
is graded on a scale, with Aaa or AAA indicating the most creditworthy bond
issuers and A-1 or MIG-1 indicating the most creditworthy issuers of money
market securities. U.S. Treasury securities are considered to have the highest
credit quality.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a portfolio's securities by
credit rating can help in gauging the risk that returns could be affected by
defaults or other credit problems.
DISTRIBUTION BY ISSUER. A breakdown of a portfolio's holdings by type of issuer
or by type of instrument.
EXPENSE RATIO. The percentage of a portfolio's average net assets used to pay
its annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
YIELD. A snapshot of a portfolio's interest income. The yield, expressed as a
percentage of the portfolio's net asset value, is based on income earned over
the past seven days and is annualized, or projected forward for the coming
year.
11
<PAGE> 14
PORTFOLIO PROFILE
Federal Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
November 30, 1997. Key elements of this Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------
<S> <C>
Yield 5.3%
Average Maturity 54 days
Average Quality Agency
Expense Ratio 0.32%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
U.S. Government and Agency 100.0%
</TABLE>
PORTFOLIO PROFILE
Treasury Money Market Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
November 30, 1997. Key elements of this Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- -----------------------------------------------
<S> <C>
Yield 5.1%
Average Maturity 59 days
Average Quality U.S. Treasury
Expense Ratio 0.32%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
U.S. Treasury 100.0%
</TABLE>
12
<PAGE> 15
FINANCIAL STATEMENTS
November 30, 1997
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio's holdings on the
last day of the reporting period, including each security's maturity date,
coupon rate or yield to maturity at the time of purchase, and statement-date
market value. Securities are grouped and subtotaled by type of instrument (U.S.
government obligations, commercial paper, certificates of deposit, etc.). Other
assets are added to, and liabilities are subtracted from, the value of Total
Investments to calculate the Portfolio's Net Assets. Finally, Net Assets are
divided by the outstanding shares of the Portfolio to arrive at its share
price, or Net Asset Value (NAV) Per Share. Each Portfolio's objective is to
maintain a constant NAV of $1.00 per share.
At the end of the Statement of Net Assets of each Portfolio, you will
find a table displaying the composition of the Portfolio's net assets on both a
dollar and per-share basis. Virtually the entire amount of net assets consists
of Paid in Capital (money invested by shareholders). Undistributed Net
Investment Income is usually zero because the Portfolio distributes its net
income to shareholders as a dividend each day, and Accumulated Realized Gains
(Losses) are very small because the Portfolio seldom realizes any significant
gains or losses on sales of securities.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (26.2%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Farm Credit Bank 5.456% 12/5/1997 (1) $ 20,000 $ 19,994
Federal Farm Credit Bank 5.485% 12/14/1997 (1) 150,000 149,928
Federal Farm Credit Bank 5.488% 12/25/1997 (1) 80,000 79,974
Federal Home Loan Bank 5.459% 12/30/1997 (1) 245,000 244,821
Federal Home Loan Bank 5.436% 12/6/1997 (1) 286,000 285,810
Federal Home Loan Bank 5.456% 12/10/1997 (1) 300,000 299,908
Federal Home Loan Bank 5.426% 12/7/1997 (1) 135,000 134,923
Federal Home Loan Bank 5.462% 12/17/1997 (1) 270,000 269,831
Federal Home Loan Bank 5.467% 12/26/1997 (1) 195,000 194,913
Federal Home Loan Bank 5.499% 12/17/1997 (1) 200,000 199,951
Federal Home Loan Bank 5.50% 1/2/1998 149,000 148,973
Federal Home Loan Bank 5.508% 12/19/1997 (1) 145,000 144,969
Federal Home Loan Bank 5.522% 12/26/1997 (1) 200,000 199,989
Federal Home Loan Bank 5.527% 12/19/1997 (1) 300,000 299,990
Federal Home Loan Bank 5.643% 12/12/1997 (1) 215,000 214,962
Federal Home Loan Mortgage Corp. 5.468% 12/20/1997 (1) 240,000 239,896
Federal National Mortgage Assn. 5.411% 12/2/1997 (1) 400,000 399,707
Federal National Mortgage Assn. 5.449% 12/24/1997 (1) 300,000 299,761
Federal National Mortgage Assn. 5.452% 12/15/1997 (1) 450,000 449,686
Federal National Mortgage Assn. 5.457% 12/21/1997 (1) 250,000 249,842
Federal National Mortgage Assn. 5.48% 1/2/1998 90,000 89,982
Federal National Mortgage Assn. 5.497% 12/15/1997 (1) 250,000 249,894
Federal National Mortgage Assn. 5.503% 1/5/1998 (1) 300,000 299,792
Federal National Mortgage Assn. 5.507% 12/15/1997 (1) 970,000 969,708
Federal National Mortgage Assn. 5.528% 12/13/1997 (1) 750,000 749,912
Federal National Mortgage Assn. 5.63% 1/23/1998 (1) 300,000 299,943
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $7,187,059) 7,187,059
- ------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (39.4%)
- ------------------------------------------------------------------------------------------------------------------------------
BANK HOLDING COMPANIES (3.3%)
BankAmerica Corp. 5.648% 1/9/1998 100,000 99,394
BankAmerica Corp. 5.732% 2/17/1998 25,000 24,694
Bank of New York Co. Inc. 5.755% 1/14/1998 80,157 79,599
J.P. Morgan & Co. 5.586% 12/15/1997 39,600 39,514
J.P. Morgan & Co. 5.62% 2/5/1998 250,000 247,461
NationsBank Corp. 5.582% 12/1/1997 41,539 41,539
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NationsBank Corp. 5.75% 2/23/1998 $ 150,000 $ 148,016
Norwest Corp. 5.759% 3/5/1998 50,000 49,260
Norwest Corp. 5.772% 3/6/1998 100,000 98,502
SunTrust Banks Inc. 5.646% 1/23/1998 50,000 49,590
SunTrust Banks Inc. 5.637% 1/27/1998 12,000 11,894
----------
889,463
----------
FINANCE-AUTO (3.5%)
Daimler-Benz NA Corp. 5.668% 2/2/1998 33,000 32,677
Ford Motor Credit Corp. 5.637% 1/27/1998 100,000 99,120
Ford Motor Credit Corp. 5.677% 1/23/1998 50,000 49,588
Ford Motor Credit Corp. 5.678% 2/4/1998 50,000 49,494
Ford Motor Credit Corp. 5.746% 1/29/1998 150,000 148,604
Ford Motor Credit Corp. 5.748% 2/13/1998 150,000 148,252
New Center Asset Trust 5.688% 2/3/1998 200,000 198,005
New Center Asset Trust 5.781% 2/17/1998 100,000 98,765
Toyota Motor Credit Corp. 5.529% 12/1/1997 60,000 60,000
Toyota Motor Credit Corp. 5.725% 2/10/1998 29,000 28,677
Toyota Motor Credit Corp. 5.736% 1/30/1998 40,000 39,622
Toyota Motor Credit Corp. 5.748% 2/27/1998 15,000 14,792
----------
967,596
----------
FINANCE-OTHER (16.0%)
A.I. Credit Corp. 5.639% 2/19/1998 10,000 9,878
A.I. Credit Corp. 5.69% 1/8/1998 20,000 19,883
American Express Credit Corp. 5.598% 12/3/1997 50,000 49,985
Ameritech Capital Funding 5.649% 1/29/1998 50,000 49,544
Asset Securitization Cooperative Corp. 5.547% 12/5/1997 100,000 99,939
Asset Securitization Cooperative Corp. 5.589% 12/1/1997 16,000 16,000
Asset Securitization Cooperative Corp. 5.698% 1/30/1998 25,000 24,766
Asset Securitization Cooperative Corp. 5.768% 1/26/1998 15,000 14,867
Asset Securitization Cooperative Corp. 5.769% 1/27/1998 85,000 84,233
Asset Securitization Cooperative Corp. 5.778% 2/23/1998 25,000 24,668
Asset Securitization Cooperative Corp. 5.785% 2/18/1998 50,000 49,375
Associates Corp. of North America 5.591% 12/17/1997 50,000 49,877
Associates Corp. of North America 5.645% 1/22/1998 50,000 49,598
Associates Corp. of North America 5.647% 1/27/1998 45,000 44,603
Associates Corp. of North America 5.666% 1/29/1998 50,000 49,542
Associates Corp. of North America 5.677% 1/23/1998 75,000 74,382
Associates Corp. of North America 5.698% 2/6/1998 80,000 79,163
Associates Corp. of North America 5.739% 2/9/1998 50,000 49,450
Associates Corp. of North America 5.74% 2/10/1998 50,000 49,442
Associates Corp. of North America 5.758% 2/12/1998 50,000 49,424
CIT Group Holdings Inc. 5.678% 2/4/1998 100,000 98,989
CIT Group Holdings Inc. 5.683% 2/6/1998 150,000 148,435
CIT Group Holdings Inc. 5.73% 2/10/1998 50,000 49,443
CIT Group Holdings Inc. 5.758% 2/13/1998 50,000 49,416
CIT Group Holdings Inc. 5.759% 2/12/1998 150,000 148,272
Cargill Financial Services Corp. 5.737% 3/24/1998 50,000 49,116
Ciesco LP 5.659% 1/16/1998 18,000 17,871
Ciesco LP 5.691% 2/10/1998 38,000 37,580
Ciesco LP 5.704% 12/1/1997 1,288 1,288
Commercial Credit Co. 5.541% 12/4/1997 25,000 24,989
Commercial Credit Co. 5.656% 1/29/1998 25,000 24,771
Commercial Credit Co. 5.658% 1/27/1998 40,000 39,647
Commercial Credit Co. 5.675% 1/20/1998 25,000 24,806
Commercial Credit Co. 5.677% 1/23/1998 25,000 24,794
Commercial Credit Co. 5.678% 1/21/1998 50,000 49,603
Commercial Credit Co. 5.742% 2/19/1998 60,000 59,245
John Deere Capital Corp. 5.666% 1/30/1998 25,000 24,767
John Deere Capital Corp. 5.668% 2/3/1998 100,000 99,006
John Deere Capital Corp. 5.677% 2/6/1998 25,000 24,739
Delaware Funding 5.702% 1/16/1998 27,856 27,656
Delaware Funding 5.711% 1/14/1998 59,129 58,721
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware Funding 5.756% 2/13/1998 $ 40,543 $ 40,070
Delaware Funding 5.759% 2/19/1998 10,820 10,683
Delaware Funding 5.761% 2/11/1998 100,000 98,864
Delaware Funding 5.772% 2/12/1998 50,000 49,422
Delaware Funding 5.786% 1/28/1998 25,000 24,770
Eiger Capital Corp. 5.611% 12/8/1997 24,000 23,974
Eiger Capital Corp. 5.615% 12/12/1997 30,749 30,696
Eiger Capital Corp. 5.626% 12/17/1997 24,995 24,933
Eiger Capital Corp. 5.631% 12/19/1997 62,960 62,784
Eiger Capital Corp. 5.798% 1/26/1998 37,486 37,151
Eiger Capital Corp. 5.802% 1/30/1998 36,000 35,656
Enterprise Funding Corp. 5.567% 12/8/1997 25,213 25,186
Enterprise Funding Corp. 5.58% 12/1/1997 30,000 30,000
Enterprise Funding Corp. 5.673% 1/14/1998 47,166 46,842
Enterprise Funding Corp. 5.697% 1/30/1998 84,185 83,392
Enterprise Funding Corp. 5.71% 1/28/1998 28,746 28,485
Enterprise Funding Corp. 5.726% 1/29/1998 52,548 52,061
Enterprise Funding Corp. 5.796% 1/13/1998 25,000 24,829
Enterprise Funding Corp. 5.809% 1/16/1998 25,272 25,086
First Chicago Financial Corp. 5.65% 1/30/1998 50,000 49,536
First Chicago Financial Corp. 5.784% 2/17/1998 10,000 9,877
First Chicago Financial Corp. 5.784% 2/24/1998 10,000 9,865
First Chicago Financial Corp. 5.789% 2/13/1998 12,000 11,859
General Electric Capital Corp. 5.687% 3/23/1998 100,000 98,280
General Electric Capital Corp. 5.708% 2/24/1998 50,000 49,345
General Electric Capital Corp. 5.709% 3/9/1998 50,000 49,245
General Electric Capital Corp. 5.712% 2/27/1998 200,000 197,287
General Electric Capital Corp. 5.721% 4/1/1998 18,919 18,565
General Electric Capital Corp. 5.778% 3/13/1998 50,000 49,197
General Electric Capital Corp. 5.813% 5/18/1998 200,000 194,727
General Electric Capital Corp. 5.825% 5/12/1998 200,000 194,906
International Business Machines Credit 5.727% 1/27/1998 150,000 148,656
International Business Machines Credit 5.749% 1/28/1998 150,000 148,627
Matterhorn Capital 5.596% 12/15/1997 25,000 24,946
Matterhorn Capital 5.605% 12/17/1997 14,347 14,311
Matterhorn Capital 5.788% 1/26/1998 10,000 9,911
Norwest Financial Corp. 5.666% 1/30/1998 75,000 74,301
Riverwoods Funding Corp. 5.757% 2/19/1998 15,000 14,811
Riverwoods Funding Corp. 5.762% 2/20/1998 144,977 143,124
Riverwoods Funding Corp. 5.765% 2/27/1998 89,828 88,581
----------
4,376,614
----------
INDUSTRIAL (3.6%)
Allied Signal, Inc. 5.588% 12/4/1997 55,500 55,474
Allied Signal, Inc. 5.589% 12/5/1997 59,000 58,963
Archer-Daniels-Midland Co. 5.644% 1/23/1998 15,000 14,877
Archer-Daniels-Midland Co. 5.649% 2/2/1998 67,500 66,842
Archer-Daniels-Midland Co. 5.672% 2/12/1998 17,000 16,807
Archer-Daniels-Midland Co. 5.747% 2/13/1998 15,000 14,825
Archer-Daniels-Midland Co. 5.771% 2/9/1998 25,000 24,723
Bayer Corp. 5.671% 2/10/1998 10,000 9,890
Bayer Corp. 5.731% 2/18/1998 75,000 74,070
Campbell Soup Co. 5.733% 2/27/1998 63,123 62,251
Cargill Inc. 5.735% 3/23/1998 50,000 49,124
Cargill Inc. 5.738% 3/25/1998 50,000 49,109
Cargill Inc. 5.748% 3/18/1998 50,000 49,162
Chevron Transport Co. 5.699% 2/3/1998 10,000 9,900
Chevron Transport Co. 5.78% 2/13/1998 15,000 14,824
Chevron U.K. Investment PLC 5.599% 12/10/1997 25,000 24,965
Chevron U.K. Investment PLC 5.606% 12/9/1997 29,000 28,964
Chevron U.K. Investment PLC 5.698% 2/6/1998 10,000 9,895
E.I. du Pont de Nemours & Co. 5.57% 12/8/1997 35,000 34,962
E.I. du Pont de Nemours & Co. 5.572% 12/10/1997 27,250 27,212
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E.I. du Pont de Nemours & Co. 5.573% 12/11/1997 19,600 19,570
EDS Finance PLC 5.755% 1/30/1998 35,000 34,668
Gannett Co. 5.716% 1/16/1998 25,000 24,819
General Electric Co. 5.54% 12/5/1997 150,000 149,909
Lucent Technologies 5.543% 12/10/1997 22,200 22,170
Lucent Technologies 5.579% 12/18/1997 25,000 24,934
Vermont American Corp. 5.579% 12/18/1997 22,522 22,463
----------
995,372
----------
INSURANCE (2.1%)
General RE Corp. 5.577% 12/29/1997 30,000 29,872
John Hancock Capital Corp. 5.578% 12/30/1997 12,500 12,445
MetLife Funding Corp. 5.682% 1/28/1998 25,484 25,254
MetLife Funding Corp. 5.733% 2/19/1998 57,000 56,284
MetLife Funding Corp. 5.736% 2/18/1998 102,686 101,413
MetLife Funding Corp. 5.737% 1/15/1998 31,456 31,233
MetLife Funding Corp. 5.743% 2/17/1998 50,560 49,940
MetLife Funding Corp. 5.759% 1/16/1998 62,408 61,954
New York Life Capital Corp. 5.753% 2/25/1998 40,000 39,458
USAA Capital Corp. 5.581% 12/3/1997 21,250 21,244
USAA Capital Corp. 5.672% 2/10/1998 13,000 12,858
USAA Capital Corp. 5.699% 3/11/1998 16,000 15,754
USAA Capital Corp. 5.725% 3/6/1998 15,000 14,777
USAA Capital Corp. 5.727% 2/12/1998 44,275 43,768
USAA Capital Corp. 5.732% 2/19/1998 10,660 10,526
USAA Capital Corp. 5.739% 3/20/1998 24,000 23,591
USAA Capital Corp. 5.759% 3/26/1998 15,000 14,729
----------
565,100
----------
FOREIGN BANKS (5.1%)
ABN-AMRO North America Finance Inc. 5.681% 4/30/1998 49,500 48,359
ABN-AMRO North America Finance Inc. 5.699% 1/5/1998 52,934 52,649
ABN-AMRO North America Finance Inc. 5.703% 1/12/1998 30,403 30,206
Abbey National North America 5.586% 12/23/1997 25,000 24,916
Abbey National North America 5.701% 2/25/1998 59,000 58,219
Abbey National North America 5.709% 3/3/1998 80,000 78,865
Abbey National North America 5.719% 3/11/1998 80,000 78,764
Bank Austria Finance Inc. 5.55% 12/8/1997 20,000 19,979
Bank Austria Finance Inc. 5.753% 2/20/1998 30,000 29,617
Commonwealth Bank of Australia 5.599% 1/6/1998 25,000 24,862
Halifax PLC 5.612% 12/23/1997 15,000 14,949
Halifax PLC 5.654% 1/29/1998 200,000 198,171
Halifax PLC 5.675% 3/17/1998 50,000 49,187
Halifax PLC 5.746% 2/17/1998 45,000 44,448
Lloyds Bank 5.667% 3/23/1998 50,000 49,143
Lloyds Bank 5.756% 1/21/1998 200,000 198,385
National Australia Funding Inc. 5.634% 2/3/1998 100,000 99,012
National Australia Funding Inc. 5.677% 1/20/1998 50,000 49,611
Rabobank Nederlanden 5.699% 4/2/1998 100,000 98,123
Westpac Capital Corp. 5.66% 2/6/1998 90,000 89,065
Westpac Capital Corp. 5.662% 2/9/1998 70,000 69,241
----------
1,405,771
----------
UTILITIES (0.4%)
Ameritech Corp. 5.648% 1/27/1998 30,000 29,735
Ameritech Corp. 5.649% 1/30/1998 50,000 49,536
Bell Atlantic Financial Services 5.577% 12/16/1997 25,000 24,942
Bell Atlantic Financial Services 5.582% 12/22/1997 11,800 11,762
----------
115,975
----------
CANADIAN GOVERNMENT-NATIONAL & PROVINCIAL (0.1%)
Province of British Columbia 5.671% 3/10/1998 20,709 20,395
Province of British Columbia 5.757% 4/15/1998 10,800 10,572
----------
30,967
----------
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER FOREIGN GOVERNMENT (4.2%)
Caisse d'Amortissement de la Dette Sociale 5.656% 3/30/1998 $ 46,873 $ 46,016
Caisse d'Amortissement de la Dette Sociale 5.661% 4/7/1998 46,000 45,103
Caisse d'Amortissement de la Dette Sociale 5.697% 3/9/1998 43,825 43,164
Caisse d'Amortissement de la Dette Sociale 5.727% 3/17/1998 75,000 73,759
Caisse d'Amortissement de la Dette Sociale 5.729% 3/16/1998 200,000 196,722
Caisse d'Amortissement de la Dette Sociale 5.748% 3/19/1998 100,000 98,308
Caisse d'Amortissement de la Dette Sociale 5.783% 5/26/1998 100,000 97,252
Caisse d'Amortissement de la Dette Sociale 5.784% 5/22/1998 50,000 48,657
Caisse d'Amortissement de la Dette Sociale 6.02% 12/29/1997 45,000 44,798
Caisse des Depots et Consignations 5.536% 12/3/1997 100,000 99,969
Caisse des Depots et Consignations 5.659% 2/6/1998 50,000 49,481
Caisse des Depots et Consignations 5.743% 2/12/1998 55,000 54,369
Caisse des Depots et Consignations 5.761% 2/19/1998 15,000 14,811
Export Development Corp. 5.643% 1/26/1998 19,174 19,008
KFW International Finance Inc. 5.705% 4/24/1998 15,000 14,669
KFW International Finance Inc. 5.735% 2/20/1998 40,000 39,491
Oesterreichische Kontroll Bank 5.579% 12/8/1997 97,200 97,096
Oesterreichische Kontroll Bank 5.789% 4/16/1998 46,625 45,633
Western Australia Treasury Corp. 5.755% 2/23/1998 10,000 9,868
----------
1,138,174
----------
FOREIGN INDUSTRIAL (0.7%)
Glaxo Wellcome PLC 5.573% 12/18/1997 30,000 29,922
Glaxo Wellcome PLC 5.641% 1/5/1998 13,600 13,526
Glaxo Wellcome PLC 5.741% 2/17/1998 18,000 17,779
Glaxo Wellcome PLC 5.744% 2/27/1998 23,000 22,682
Reed Elsevier 5.646% 1/29/1998 30,000 29,726
Reed Elsevier 5.65% 1/30/1998 20,000 19,814
Reed Elsevier 5.732% 2/13/1998 18,000 17,791
Siemens Capital Corp. 5.66% 2/6/1998 40,000 39,585
Siemens Capital Corp. 5.662% 2/19/1998 10,000 9,876
----------
200,701
----------
FOREIGN UTILITY (0.4%)
France Telecom 5.573% 12/1/1997 15,000 15,000
France Telecom 5.596% 12/15/1997 70,000 69,848
France Telecom 5.667% 2/12/1998 9,650 9,541
Telstra 5.552% 12/10/1997 10,000 9,986
Telstra 5.767% 3/18/1998 10,000 9,832
----------
114,207
----------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $10,799,940) 10,799,940
- ------------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (21.0%)
- ------------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT-U.S. BANKS (2.9%)
Bank of America N.T.S.A. 5.67% 1/30/1998 200,000 200,000
Chase Manhattan Bank 5.62% 1/12/1998 100,000 100,000
Chase Manhattan Bank 5.63% 2/4/1998 300,000 300,000
Chase Manhattan Bank 5.64% 1/15/1998 50,000 50,000
Chase Manhattan Bank 5.75% 2/23/1998 50,000 50,000
Morgan Guaranty Trust Co. 5.71% 1/6/1998 100,000 99,996
----------
799,996
----------
YANKEE CERTIFICATES OF DEPOSIT-CANADIAN BRANCHES (0.1%)
National Westminster Bank 5.709% 4/30/1998 15,000 14,653
Societe Generale 5.608% 12/2/1997 15,000 14,998
----------
29,651
----------
YANKEE CERTIFICATES OF DEPOSIT-U.S. BRANCHES (18.0%)
ABN-AMRO Bank 5.70% 3/2/1998 50,000 50,000
Bank Austria AG 5.75% 2/25/1998 50,000 50,001
Bank of Montreal 5.58% 12/1/1997 100,000 100,000
Bank of Montreal 5.65% 2/3/1998 50,000 50,000
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank of Montreal 5.66% 1/30/1998 $100,000 $ 100,000
Bank of Montreal 5.75% 2/11/1998 100,000 100,000
Bayerische Landesbank 5.558% 12/26/1997 (1) 175,000 174,923
Bayerische Landesbank 5.71% 2/6/1998 75,000 74,978
Bayerische Vereinsbank 5.64% 1/9/1998 100,000 100,000
Canadian Imperial Bank of Commerce 5.68% 2/12/1998 150,000 150,000
Canadian Imperial Bank of Commerce 5.73% 2/12/1998 50,000 50,000
Canadian Imperial Bank of Commerce 5.76% 2/27/1998 100,000 100,000
Credit Agricole Indosuez 5.63% 1/7/1998 50,000 50,000
Credit Agricole Indosuez 5.63% 1/15/1998 50,000 50,000
Credit Agricole Indosuez 5.63% 2/3/1998 100,000 100,000
Credit Agricole Indosuez 5.75% 3/20/1998 50,000 50,000
Deutsche Bank 5.64% 1/9/1998 50,000 50,000
Deutsche Bank 5.64% 1/16/1998 50,000 49,998
Deutsche Bank 5.67% 2/12/1998 165,000 164,990
Deutsche Bank 5.75% 1/9/1998 50,000 49,998
Deutsche Bank 6.18% 4/2/1998 50,000 49,994
Dresdner Bank 5.63% 1/30/1998 200,000 200,000
Dresdner Bank 5.65% 3/4/1998 150,000 150,000
Dresdner Bank 5.66% 2/5/1998 50,000 50,000
Dresdner Bank 5.76% 2/27/1998 150,000 150,000
Dresdner Bank 5.78% 3/30/1998 50,000 50,000
Dresdner Bank 6.13% 3/9/1998 21,000 21,016
Landesbank Hassen-Thueringen 5.78% 1/27/1998 33,000 32,996
Landesbank Hassen-Thueringen 5.96% 3/20/1998 80,000 80,002
Landesbank Hassen-Thueringen 6.13% 4/1/1998 150,000 149,962
Landesbank Hassen-Thueringen 6.13% 4/7/1998 100,000 99,960
National Westminster Bank 5.66% 2/11/1998 12,000 11,995
National Westminster Bank 5.78% 1/7/1998 15,000 15,001
National Westminster Bank 5.78% 4/2/1998 200,000 200,000
National Westminster Bank 5.935% 6/26/1998 37,000 36,998
Rabobank Nederlanden 5.65% 2/10/1998 20,000 19,993
Rabobank Nederlanden 5.68% 3/17/1998 50,000 50,001
Rabobank Nederlanden 5.69% 2/2/1998 50,000 50,001
Rabobank Nederlanden 5.71% 2/17/1998 49,000 49,003
Rabobank Nederlanden 5.75% 5/26/1998 50,000 50,000
Rabobank Nederlanden 5.81% 5/19/1998 21,000 21,003
Rabobank Nederlanden 5.97% 3/20/1998 20,000 19,986
Rabobank Nederlanden 5.98% 3/20/1998 10,000 9,993
Rabobank Nederlanden 6.20% 4/9/1998 107,500 107,462
Societe Generale 5.60% 12/1/1997 50,000 50,000
Societe Generale 5.61% 12/2/1997 200,000 200,000
Societe Generale 5.62% 1/6/1998 50,000 50,001
Societe Generale 5.77% 2/20/1998 50,000 50,000
Swiss Bank 5.63% 1/16/1998 200,000 200,000
Swiss Bank 5.64% 1/20/1998 100,000 100,000
Swiss Bank 5.69% 5/6/1998 100,000 100,000
Swiss Bank 5.70% 3/9/1998 100,000 100,000
Swiss Bank 5.70% 3/16/1998 50,000 50,000
Swiss Bank 5.71% 3/4/1998 100,000 100,000
Swiss Bank 5.78% 5/26/1998 100,000 100,000
Westdeutsche Landesbank 5.65% 1/30/1998 100,000 100,000
Westdeutsche Landesbank 5.66% 2/5/1998 100,000 100,000
Westdeutsche Landesbank 5.75% 2/18/1998 200,000 200,000
Westdeutsche Landesbank 5.75% 3/19/1998 100,000 100,000
----------
4,940,255
----------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $5,769,902) 5,769,902
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (13.3%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABN-AMRO Bank 5.65% 1/9/1998 $150,000 $ 150,002
ABN-AMRO Bank 5.665% 1/30/1998 10,000 10,000
ABN-AMRO Bank 5.70% 4/1/1998 10,000 10,000
ABN-AMRO Bank 5.72% 2/27/1998 50,000 50,001
ABN-AMRO Bank 5.81% 3/25/1998 50,000 50,002
Abbey National PLC 5.65% 2/6/1998 190,000 190,003
Abbey National PLC 5.76% 2/17/1998 50,000 50,000
Barclays Bank PLC 5.60% 1/9/1998 189,000 188,994
Barclays Bank PLC 5.60% 1/12/1998 100,000 100,001
Barclays Bank PLC 5.64% 1/20/1998 50,000 49,997
Barclays Bank PLC 5.71% 5/12/1998 20,000 19,992
Barclays Bank PLC 5.76% 3/17/1998 50,000 50,000
Barclays Bank PLC 5.77% 3/16/1998 100,000 100,003
Barclays Bank PLC 5.80% 4/23/1998 50,000 50,002
Bayerische Landesbank 5.63% 1/20/1998 50,000 50,001
Bayerische Landesbank 5.645% 1/20/1998 50,000 49,997
Bayerische Landesbank 5.705% 1/9/1998 50,000 50,000
Bayerische Landesbank 5.71% 3/2/1998 65,000 65,003
Bayerische Landesbank 5.715% 2/27/1998 150,000 150,002
Bayerische Landesbank 5.73% 2/27/1998 25,000 25,001
Bayerische Vereinsbank 5.60% 12/11/1997 100,000 100,000
Bayerische Vereinsbank 5.69% 1/23/1998 124,000 124,005
Bayerische Vereinsbank 5.70% 3/2/1998 75,000 75,002
Bayerische Vereinsbank 5.71% 4/1/1998 100,000 100,003
Bayerische Vereinsbank 5.73% 3/16/1998 50,000 50,005
Canadian Imperial Bank of Commerce 5.67% 1/29/1998 50,000 50,001
Credit Agricole Indosuez 5.62% 12/1/1997 76,000 76,000
Credit Agricole Indosuez 5.63% 2/9/1998 100,000 100,002
Deutsche Bank AG 5.70% 3/10/1998 65,000 65,000
Deutsche Bank AG 5.72% 3/2/1998 20,000 20,001
Deutsche Bank AG 5.75% 2/19/1998 100,000 100,000
Deutsche Bank AG 5.86% 3/6/1998 25,000 24,990
Dresdner Bank AG 5.76% 2/20/1998 50,000 50,001
International Nederlanden Bank NV 5.65% 1/16/1998 105,000 105,001
Landesbank Hessen-Thueringen 5.71% 3/10/1998 100,000 100,003
Landesbank Hessen-Thueringen 5.76% 4/27/1998 50,000 50,002
Lloyds Bank 5.67% 2/2/1998 25,000 25,000
Lloyds Bank 5.72% 3/4/1998 50,000 49,999
National Australia Bank 5.66% 1/21/1998 81,000 80,999
National Australia Bank 5.69% 1/22/1998 50,000 50,001
National Australia Bank 5.70% 1/23/1998 50,000 50,001
Rabobank Nederlanden 5.59% 12/24/1997 30,000 30,000
Rabobank Nederlanden 5.59% 1/9/1998 32,000 31,998
Rabobank Nederlanden 5.67% 2/12/1998 90,000 90,000
Rabobank Nederlanden 5.86% 6/8/1998 49,000 49,002
Toronto Dominion 5.60% 1/8/1998 145,000 144,999
Toronto Dominion 5.68% 2/12/1998 100,000 100,000
Toronto Dominion 5.76% 2/24/1998 50,000 50,000
Westdeutsche Landesbank 5.715% 3/10/1998 100,000 100,001
Westpac Banking Corp. 5.77% 2/20/1998 140,000 140,005
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES Of DEPOSIT
(COST $3,641,022) 3,641,022
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
BANK NOTES (0.7%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. BANKS (0.5%)
CoreStates Bank NA 5.73% 1/15/1998 $ 20,000 $ 20,000
CoreStates Bank NA 5.75% 1/16/1998 50,000 50,000
First USA Bank 6.16% 2/17/1998 (1) 19,000 19,015
Morgan Guaranty Trust Co. 6.10% 4/2/1998 49,000 48,980
----------
137,995
----------
CANADIAN BRANCH (0.2%)
Republic National Bank of New York 5.57% 12/31/1997 60,000 60,000
----------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES
(COST $197,995) 197,995
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(COST $27,595,918) 27,595,918
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.6%)
- ------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 204,540
Liabilities (369,880)
----------
(165,340)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $27,430,578
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
(1) Floating Rate Note.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------------
AMOUNT
(000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paid in Capital $27,430,687
Undistributed Net Investment Income --
Accumulated Net Realized Losses (109)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $27,430,578
==============================================================================================================================
Investor Shares--Net Assets applicable to 26,479,963,883 outstanding $.001 par value shares
(authorized 36,000,000,000 shares) $26,479,871
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INVESTOR SHARES $1.00
==============================================================================================================================
Institutional Shares--Net Assets applicable to 950,720,421 outstanding $.001 par value shares
(authorized 4,500,000,000 shares) $950,707
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--INSTITUTIONAL SHARES $1.00
==============================================================================================================================
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
FEDERAL PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (95.6%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Farm Credit Bank 5.456% 12/5/1997 (1) $200,000 $ 199,941
Federal Farm Credit Bank 5.51% 1/2/1998 15,000 14,997
Federal Farm Credit Bank 5.90% 12/3/1997 20,000 20,000
Federal Home Loan Bank 5.426% 12/7/1997 (1) 100,000 99,947
Federal Home Loan Bank 5.50% 12/24/1997 50,000 49,827
Federal Home Loan Bank 5.508% 12/19/1997 (1) 25,000 24,995
Federal Home Loan Bank 5.522% 12/26/1997 (1) 35,000 34,998
Federal Home Loan Bank 5.573% 1/16/1998 107,690 106,933
Federal Home Loan Bank 5.574% 3/5/1998 1,335 1,316
Federal Home Loan Bank 5.575% 2/18/1998 16,110 15,918
Federal Home Loan Bank 5.575% 3/6/1998 56,380 55,573
Federal Home Loan Bank 5.577% 1/21/1998 49,900 49,511
Federal Home Loan Bank 5.583% 2/27/1998 58,968 58,186
Federal Home Loan Bank 5.593% 3/11/1998 27,060 26,651
Federal Home Loan Bank 5.643% 12/12/1997 (1) 75,000 74,987
Federal Home Loan Bank 5.647% 2/25/1998 13,952 13,766
Federal Home Loan Bank 6.025% 4/15/1998 50,000 49,987
Federal Home Loan Mortgage Corp. 5.468% 12/20/1997 (1) 50,000 49,978
Federal Home Loan Mortgage Corp. 5.513% 12/1/1997 102,860 102,860
Federal Home Loan Mortgage Corp. 5.522% 1/26/1998 40,250 39,910
Federal Home Loan Mortgage Corp. 5.552% 1/27/1998 100,000 99,131
Federal Home Loan Mortgage Corp. 5.56% 1/30/1998 238,000 235,817
Federal Home Loan Mortgage Corp. 5.577% 1/21/1998 1,405 1,394
Federal Home Loan Mortgage Corp. 5.579% 2/6/1998 105,165 104,086
Federal Home Loan Mortgage Corp. 5.585% 2/13/1998 49,266 48,708
Federal Home Loan Mortgage Corp. 5.599% 2/17/1998 94,000 92,875
Federal Home Loan Mortgage Corp. 5.617% 2/23/1998 69,320 68,425
Federal National Mortgage Assn. 5.464% 12/10/1997 (1) 225,000 224,856
Federal National Mortgage Assn. 5.503% 1/5/1998 (1) 76,000 75,947
Federal National Mortgage Assn. 5.504% 12/29/1997 1,415 1,409
Federal National Mortgage Assn. 5.507% 12/15/1997 (1) 25,000 24,993
Federal National Mortgage Assn. 5.516% 1/29/1998 175,705 174,129
Federal National Mortgage Assn. 5.528% 12/13/1997 (1) 75,000 74,991
Federal National Mortgage Assn. 5.556% 2/4/1998 195,345 193,412
Federal National Mortgage Assn. 5.563% 2/5/1998 84,370 83,522
Federal National Mortgage Assn. 5.576% 1/20/1998 77,970 77,374
Federal National Mortgage Assn. 5.577% 1/21/1998 33,000 32,743
Federal National Mortgage Assn. 5.577% 3/30/1998 25,000 24,552
Federal National Mortgage Assn. 5.578% 1/22/1998 52,770 52,351
Federal National Mortgage Assn. 5.578% 1/30/1998 100,000 99,083
Federal National Mortgage Assn. 5.589% 2/18/1998 78,200 77,254
Federal National Mortgage Assn. 5.593% 2/26/1998 96,335 95,070
Federal National Mortgage Assn. 5.596% 3/19/1998 50,000 49,188
Federal National Mortgage Assn. 5.61% 2/20/1998 50,494 49,866
Federal National Mortgage Assn. 5.69% 3/13/1998 45,000 44,981
Federal National Mortgage Assn. 6.00% 4/17/1998 22,000 21,988
Overseas Private Investment Corp. 5.46% 12/31/1997 (1) 4,000 4,000
Overseas Private Investment Corp. 5.669% 12/15/1997 (1) 27,708 27,708
Overseas Private Investment Corp. 5.708% 1/15/1998 (1) 17,425 17,425
Overseas Private Investment Corp. 5.779% 12/2/1997 (1) 13,235 13,235
Overseas Private Investment Corp. 5.833% 12/2/1997 (1) 12,500 12,500
U.S. Treasury Note 7.875% 1/15/1998 50,000 50,132
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $3,343,426) 3,343,426
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
FEDERAL PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (4.3%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PaineWebber
(Dated 11/24/1997, Repurchase Value $125,271,000,
Collateralized by Federal Home Loan Mortgage Corp.
7.00%, 8/1/2027, and Federal National Mortgage Assn.
6.50%-8.00%, 4/1/2009-4/1/2025) 5.57% 12/8/1997 $125,000 $ 125,000
PaineWebber
(Dated 11/25/1997, Repurchase Value $25,054,000,
Collateralized by Federal Home Loan Mortgage Corp.
7.00%, 8/1/2027) 5.57% 12/9/1997 25,000 25,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(COST $150,000) 150,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(COST $3,493,426) 3,493,426
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- ------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 17,884
Liabilities (16,016)
----------
1,868
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------------------
Applicable to 3,495,343,121 outstanding $.001 par value shares
(authorized 7,500,000,000 shares) $3,495,294
==============================================================================================================================
NET ASSET VALUE PER SHARE $1.00
==============================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
(1) Floating Rate Note.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1997, NET ASSETS CONSISTED OF:
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $3,495,372 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (78) --
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $3,495,294 $1.00
==============================================================================================================================
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
TREASURY MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (99.3%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bill 5.02% 1/22/1998 $800,916 $ 794,878
U.S. Treasury Bill 5.512% 12/16/1997 780,500 778,699
U.S. Treasury Note 5.00% 1/31/1998 371,660 371,316
U.S. Treasury Note 5.125% 2/28/1998 214,548 214,388
U.S. Treasury Note 5.25% 12/31/1997 205,000 204,960
U.S. Treasury Note 5.875% 4/30/1998 312,115 312,722
U.S. Treasury Note 7.25% 2/15/1998 358,161 359,344
U.S. Treasury Note 7.875% 4/15/1998 115,000 115,980
U.S. Treasury Note 8.125% 2/15/1998 60,514 60,822
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $3,213,109) 3,213,109
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES-Net (0.7%) 23,484
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------------------
Applicable to 3,236,614,143 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $3,236,593
==============================================================================================================================
NET ASSET VALUE PER SHARE $1.00
==============================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in Securities, at Value $3,213,109
Receivables for Investment Securities Sold 762,656
----------
Other Assets--Note B 56,292
Total Assets 4,032,057
----------
LIABILITIES
Payables for Investment Securities Purchased 783,188
Other Liabilities 12,276
----------
Total Liabilities 795,464
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $3,236,593
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $3,236,634 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (41) --
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $3,236,593 $1.00
==============================================================================================================================
</TABLE>
23
<PAGE> 26
STATEMENT OF OPERATIONS
This Statement shows interest earned by each Portfolio during the reporting
period, and details the operating expenses charged to the Portfolio. The Prime
Portfolio also reports the breakdown of expenses charged to each class of its
shares. Expenses directly reduce the amount of investment income available to
pay to shareholders as income dividends. This Statement also shows any Net Gain
(Loss) realized on the sale of investments, and any Unrealized Appreciation
(Depreciation) on investments during the period. Realized Net Gain (Loss)
should always be minimal, and Unrealized Appreciation (Depreciation) should be
zero, for money market portfolios.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TREASURY
PRIME FEDERAL MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997
----------------------------------------------------
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income
Interest $1,439,135 $183,472 $166,422
----------------------------------------------------
Total Income 1,439,135 183,472 166,422
----------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 3,782 489 466
Management and Administrative 23,177 3,308 3,685
Shareholder Account Maintenance(1) 41,741 5,204 4,615
Marketing and Distribution(1) 8,110 1,055 1,010
Custodian Fees 875 128 13
Taxes (other than income taxes) 1,916 247 18
Auditing Fees 43 9 9
Shareholders' Reports(1) 655 101 84
Annual Meeting and Proxy Costs(1) 263 37 128
Directors' Fees and Expenses 61 8 8
----------------------------------------------------
Total Expenses 80,623 10,586 10,036
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,358,512 172,886 156,386
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD (92) 14 79
- -------------------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES -- -- --
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,358,420 $172,900 $156,465
=========================================================================================================================
</TABLE>
(1)Expenses of the Prime Portfolio by Class are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(000)
----------------------------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class-Specific Expenses:
Shareholder Account Maintenance $41,734 $ 7 $41,741
Marketing and Distribution 7,801 309 8,110
Shareholders' Reports 653 2 655
Annual Meeting and Proxy Costs 255 8 263
----------------------------------------------------
Total Class-Specific Expenses 50,443 326 50,769
All Other Portfolio Expenses 28,749 1,105 29,854
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses $79,192 $1,431 $80,623
=========================================================================================================================
</TABLE>
See Note C in Notes to Financial Statements.
24
<PAGE> 27
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information that is detailed in the Statement of Operations. Because the
Portfolio distributes its income to shareholders each day, the amounts of
Dividends from Net Investment Income generally equal the net income earned as
shown under the Operations section. The Capital Share Transactions section
shows the amount shareholders invested in the Portfolio, either by purchasing
shares or by reinvesting distributions, and the amounts redeemed. The Prime
Portfolio-Investor and -Institutional shares' Distributions and Capital Share
Transactions are shown separately.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO
----------------------------------
YEAR ENDED NOVEMBER 30,
----------------------------------
1997 1996
(000) (000)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 1,358,512 $ 1,089,905
Realized Net Gain (Loss) (92) (105)
Unrealized Appreciation (Depreciation) -- --
----------------------------------
Net Increase in Net Assets Resulting from Operations 1,358,420 1,089,800
----------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares (1,306,563) (1,042,723)
Institutional Shares (51,949) (47,182)
----------------------------------
Total Dividends (1,358,512) (1,089,905)
----------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES (AT $1.00)
Issued 31,513,673 25,059,503
Issued in Lieu of Cash Distributions 1,250,400 995,998
Redeemed (28,501,916) (22,601,499)
----------------------------------
Net Increase--Investor Shares 4,262,157 3,454,002
----------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES (AT $1.00)
Issued 1,397,375 549,247
Issued in Lieu of Cash Distributions 47,111 43,406
Redeemed (1,404,015) (475,358)
----------------------------------
Net Increase--Institutional Shares 40,471 117,295
- ------------------------------------------------------------------------------------------------------------
Total Increase 4,302,536 3,571,192
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 23,128,042 19,556,850
----------------------------------
End of Year $27,430,578 $23,128,042
============================================================================================================
</TABLE>
25
<PAGE> 28
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FEDERAL TREASURY MONEY MARKET
PORTFOLIO PORTFOLIO*
---------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
1997 1996 1997 1996
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 172,886 $ 144,974 $ 156,386 $ 139,287
Realized Net Gain (Loss) 14 (164) 79 (340)
Unrealized Appreciation (Depreciation) -- -- --
---------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 172,900 144,810 156,465 138,947
---------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME (172,886) (144,974) (156,386) (139,287)
---------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (AT $1.00)
Issued 3,056,215 2,485,267 3,454,680 3,440,062
Issued in Lieu of Cash Distributions 166,374 139,177 149,759 132,823
Redeemed (2,827,790) (2,160,404) (3,284,455) (3,183,441)
---------------------------------------------------------------
Net Increase from Capital Share Transactions 394,799 464,040 319,984 389,444
- --------------------------------------------------------------------------------------------------------------------------
Total Increase 394,813 463,876 320,063 389,104
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 3,100,481 2,636,605 2,916,530 2,527,426
---------------------------------------------------------------
End of Year $3,495,294 $3,100,481 $3,236,593 $2,916,530
==========================================================================================================================
</TABLE>
*Prior to December 2, 1996, known as Vanguard Money Market Reserves-U.S.
Treasury Portfolio. See Note D in Notes to Financial Statements.
26
<PAGE> 29
FINANCIAL HIGHLIGHTS
Each Portfolio's objective is to maintain a constant net asset value (NAV) of
$1.00 per share by distributing all of its income and avoiding capital gains or
losses. The financial highlights table summarizes each Portfolio's investment
results and distributions to shareholders on a per-share basis; the Prime
Portfolio-Investor and -Institutional shares' results are shown separately. The
table also presents the Total Return and shows net investment income and
expenses as percentages of average net assets for each Portfolio or class of
shares. These data will help you assess the variability of net income returns
from year to year and how much it costs to operate the Portfolio.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRIME PORTFOLIO-INVESTOR SHARES
YEAR ENDED NOVEMBER 30,
------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .053 .052 .057 .038 .030
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
------------------------------------------------------
Total from Investment Operations .053 .052 .057 .038 .030
------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.053) (.052) (.057) (.038) (.030)
Distributions from Realized Capital Gains -- -- -- -- --
------------------------------------------------------
Total Distributions (.053) (.052) (.057) (.038) (.030)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 5.41% 5.31% 5.82% 3.87% 3.02%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $26,480 $22,218 $18,764 $15,109 $12,367
Ratio of Total Expenses to Average Net Assets 0.32% 0.32% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 5.28% 5.18% 5.64% 3.84% 2.98%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRIME PORTFOLIO-
INSTITUTIONAL SHARES
YEAR ENDED NOVEMBER 30,
----------------------- OCT. 28* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 1997 1996 NOV. 30, 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .054 .054 .005
Net Realized and Unrealized Gain (Loss) on Investments -- -- --
--------------------------------------------
Total from Investment Operations .054 .054 .005
--------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.054) (.054) (.005)
Distributions from Realized Capital Gains -- -- --
--------------------------------------------
Total Distributions (.054) (.054) (.005)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 5.59% 5.49% 0.53%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $951 $910 $793
Ratio of Total Expenses to Average Net Assets 0.15% 0.15% 0.15%**
Ratio of Net Investment Income to Average Net Assets 5.44% 5.35% 5.65%**
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
**Annualized.
27
<PAGE> 30
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FEDERAL PORTFOLIO
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .052 .051 .056 .038 .029
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
----------------------------------------------------
Total from Investment Operations .052 .051 .056 .038 .029
----------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.052) (.051) (.056) (.038) (.029)
Distributions from Realized Capital Gains -- -- -- -- --
----------------------------------------------------
Total Distributions (.052) (.051) (.056) (.038) (.029)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 5.35% 5.26% 5.77% 3.82% 2.98%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $3,495 $3,100 $2,637 $2,196 $1,907
Ratio of Total Expenses to Average Net Assets 0.32% 0.32% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 5.22% 5.13% 5.61% 3.78% 2.94%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TREASURY MONEY MARKET PORTFOLIO*
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .050 .050 .053 .036 .028
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
-----------------------------------------------------
Total from Investment Operations .050 .050 .053 .036 .028
-----------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.050) (.050) (.053) (.036) (.028)
Distributions from Realized Capital Gains -- -- -- -- --
-----------------------------------------------------
Total Distributions (.050) (.050) (.053) (.036) (.028)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 5.10% 5.11% 5.47% 3.63% 2.86%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $3,237 $2,917 $2,527 $2,056 $1,751
Ratio of Total Expenses to Average Net Assets 0.32% 0.32% 0.32% 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets 4.98% 4.99% 5.33% 3.59% 2.83%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Prior to December 2, 1996, known as Vanguard Money Market Reserves-U.S.
Treasury Portfolio. See Note D in Notes to Financial Statements.
28
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
Vanguard Money Market Reserves and Vanguard Treasury Money Market Portfolio are
registered under the Investment Company Act of 1940 as diversified open-end
investment companies, or mutual funds. Vanguard Money Market Reserves consists
of the Prime and Federal Portfolios. The Prime Portfolio invests in short-term
debt instruments of companies primarily operating in specific industries; the
issuers' abilities to meet their obligations may be affected by economic
developments in such industries. The Federal Portfolio invests in short-term
debt instruments issued by the U.S. government or its agencies and
instrumentalities. The Treasury Money Market Portfolio invests in short-term
debt instruments backed by the full faith and credit of the U.S. government.
A. The following significant accounting policies conform to generally
accepted accounting principles for mutual funds. The Portfolios consistently
follow such policies in preparing their financial statements.
1. SECURITY VALUATION: Securities are valued at amortized cost, which
approximates market value.
2. FEDERAL INCOME TAXES: Each Portfolio intends to continue to qualify
as a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
3. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used to determine realized gains
(losses) on the sale of investment securities are those of the specific
securities sold. Discounts and premiums are accreted and amortized,
respectively, to interest income over the lives of the respective securities.
Dividends from net investment income are declared daily and paid on the first
business day of the following month.
4. REPURCHASE AGREEMENTS: Securities pledged as collateral for
repurchase agreements are held by a custodian bank until the agreements mature.
Each agreement requires that the market value of the collateral be sufficient
to cover payments of interest and principal; however, in the event of default
or bankruptcy by the other party to the agreement, retention of the collateral
may be subject to legal proceedings.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, shareholder accounting, marketing, and distribution
services. The costs of such services are allocated to the Portfolios under
methods approved by the Board of Directors of Vanguard Money Market Reserves
and the Board of Trustees of Vanguard Treasury Money Market Portfolio. At
November 30, 1997, the Portfolios had contributed capital aggregating
$2,303,000 to Vanguard (included in Other Assets), representing 11.5% of
Vanguard's capitalization. The Portfolios' Directors (or Trustees) and officers
are also Directors and officers of Vanguard.
C. The Prime Portfolio offers two classes of shares, the Investor Shares
and the Institutional Shares. Institutional shares are designed primarily for
institutional investors that meet certain administrative and servicing criteria
and have a minimum investment of $10 million. Investor shares are offered to
all other investors. Both classes of shares have equal rights as to assets and
earnings, except that each class bears certain class-specific expenses related
to its shareholder activity.
D. On November 19, 1996, shareholders of the former Vanguard Money Market
Reserves-U.S. Treasury Portfolio voted to approve its reorganization into the
Treasury Money Market Portfolio of Vanguard Treasury Fund, a newly created
Delaware business trust, effective December 2, 1996.
29
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors and Trustees of
Vanguard Money Market Reserves and
Vanguard Treasury Money Market Portfolio
In our opinion, the accompanying statements of net assets (and statement of
assets and liabilities for Treasury Money Market Portfolio) and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Prime Portfolio and Federal Portfolio, constituting Vanguard Money Market
Reserves, and Vanguard Treasury Money Market Portfolio (the "Portfolios") at
November 30, 1997, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolios' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at November 30, 1997 by correspondence with the custodian and the
application of alternative auditing procedures where securities purchased had
not been settled, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 1998
30
<PAGE> 33
DIRECTORS, TRUSTEES, AND OFFICERS
JOHN C. BOGLE
Chairman of the Board and Director of The Vanguard Group, Inc., and of each of
the investment companies in The Vanguard Group.
JOHN J. BRENNAN
President, Chief Executive Officer, and Director of The Vanguard Group, Inc.,
and of each of the investment companies in The Vanguard Group.
ROBERT E. CAWTHORN
Chairman Emeritus and Director of Rhone-Poulenc Rorer, Inc.; Managing Director
of Global Health Care Partners/DLJ Merchant Banking Partners; Director of Sun
Company, Inc., and Westinghouse Electric Corp.
BARBARA BARNES HAUPTFUHRER
Director of The Great Atlantic and Pacific Tea Co., IKON Office Solutions,
Inc., Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance
Co., and Ladies Professional Golf Association; Trustee Emerita of Wellesley
College.
BRUCE K. MACLAURY
President Emeritus of The Brookings Institution; Director of American Express
Bank Ltd., The St. Paul Companies, Inc., and National Steel Corp.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Amdahl Corp., Baker Fentress & Co., The
Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, Jr.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co., and
NACCO Industries.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
RICHARD F. HYLAND
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
KAREN E. WEST
Controller; Principal of The Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DISTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MACKINNON
Managing Director, Fixed Income Group.
F. WILLIAM MCNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's 500," "S&P 500(R)," "Standard & Poor's(R)," "S&P(R)," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell Company
is the owner of trademarks and copyrights relating to the Russell
Indexes. "Wilshire 4500" and "Wilshire 5000" are trademarks of
Wilshire Associates.
<PAGE> 34
VANGUARD FAMILY OF FUNDS
STOCK FUNDS
Convertible Securities Fund
Equity Income Fund
Explorer Fund
Growth and Income Portfolio
Horizon Fund
Aggressive Growth Portfolio
Capital Opportunity Portfolio
Global Equity Portfolio
Index Trust
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Small Capitalization Stock
Portfolio
Total Stock Market Portfolio
Value Portfolio
Institutional Index Fund
International Equity Index Fund
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
International Growth Portfolio
International Value Portfolio
Morgan Growth Fund
PRIMECAP Fund
Selected Value Portfolio
Specialized Portfolios
Energy Portfolio
Gold & Precious Metals
Portfolio
Health Care Portfolio
REIT Index Portfolio
Utilities Income Portfolio
Tax-Managed Fund
Capital Appreciation
Portfolio
Growth and Income Portfolio
Total International Portfolio
Trustees' Equity Fund
U.S. Portfolio
U.S. Growth Portfolio
Windsor Fund
Windsor II
BALANCED FUNDS
Asset Allocation Fund
Balanced Index Fund
Horizon Fund
Global Asset Allocation
Portfolio
LifeStrategy Portfolios
Conservative Growth
Portfolio
Growth Portfolio
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MONEY MARKET FUNDS
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Q300-11/97
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complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
