<PAGE> 1
VANGUARD
LIFESTRATEGY
PORTFOLIOS
Semiannual Report
June 30, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
<PAGE> 2
[PHOTO]
THE VANGUARD GROUP: LINKING TRADITION AND INNOVATION
At Vanguard, we treasure our rich nautical heritage--even as we steer our
course toward the twenty-first century. Our Report cover reflects that blending
of tradition and innovation, of past, present, and future. The montage includes
a bronze medallion with a likeness of our namesake, HMS Vanguard (Lord Nelson's
flagship at The Battle of the Nile); a clock built circa 1816 in Scotland,
featuring a portrait of Nelson; and several views of our recently completed
campus, which is steeped in nautical imagery--from our buildings named after
Nelson's warships (Victory, Majestic, and Goliath are three shown), to our
artwork and ornamental compass rose.
CONTENTS
A Message To
Our Shareholders
1
The Markets
In Perspective
4
Performance
Summaries
6
Financial
Statements
8
Trustees And
Officers
INSIDE BACK COVER
All comparative mutual fund data
are from Lipper Analytical Services, Inc.
or Morningstar unless otherwise noted.
<PAGE> 3
[PHOTO]
FELLOW SHAREHOLDER,
The stock market staged another remarkable advance during the first six months
of 1997, while the bond market was essentially unchanged, on balance. The four
Vanguard LifeStrategy Portfolios provided solid returns, ranging from +6.2% for
the Income Portfolio (holding about 80% of its assets in bonds and cash
reserves) to +13.9% for the Growth Portfolio (with about 80% of its assets in
common stocks).
The following table shows the total return (capital change plus
reinvested dividends) of each Portfolio for the six months ended June 30. Also
shown are the results of the composite indexes against which we measure our
Portfolios. These composites are constructed from unmanaged indexes in
proportions that match the target asset-class weightings of the respective
Portfolios. Each Portfolio slightly exceeded its target.
The Portfolios' net asset values at the beginning and the end of the
period, income dividends, and yields as of June 30 are shown in the table at
the end of this letter.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
JUNE 30, 1997
- -----------------------------------------------------------
<S> <C>
LIFESTRATEGY INCOME + 6.2%
Income Composite Index* + 5.8
- -----------------------------------------------------------
LIFESTRATEGY CONSERVATIVE GROWTH + 8.8%
Conservative Growth Composite Index* + 8.4
- -----------------------------------------------------------
LIFESTRATEGY MODERATE GROWTH +11.3%
Moderate Growth Composite Index* +11.1
- -----------------------------------------------------------
LIFESTRATEGY GROWTH +13.9%
Growth Composite Index* +13.8
- -----------------------------------------------------------
</TABLE>
* Total returns for the composite indexes are derived by applying the
Portfolio's target allocation to the results of the following benchmarks: for
U.S. stocks, the Wilshire 5000 Index; for international stocks, the Morgan
Stanley Capital International Europe, Australasia, Far East Index; for bonds,
the Lehman Aggregate Bond Index; and for cash reserves, the Salomon
Three-Month U.S. Treasury Bill Index.
THE PERIOD IN REVIEW
A nearly perfect climate for common stocks--strong economic growth, rising
corporate profits, and decelerating inflation--prevailed during the six months
ended June 30. The total U.S. stock market, as measured by the Wilshire 5000
Equity Index, climbed 17.6% from January through June. The Index rose for each
of the months except February and March, when jitters about interest rates and
inflation led to a brief downturn in the stock market. By early May, however,
the U.S. market had resumed its ascent into record territory.
International stocks also provided good six-month returns, even though
a general strengthening of the dollar worked against U.S.-based investors. The
MSCI EAFE Index, which measures securities in 20 countries in Europe and the
Pacific Rim, returned +11.4% for the period. European markets were up +14.4%
overall and the Pacific region rewarded investors with a gain of +7.0%.
In the bond market, prices lost ground early in the period, then
recovered. The Lehman Brothers Aggregate Bond Index, a good measure of the
overall bond market, returned +3.1% during the half year, essentially
reflecting its interest income.
THE LIFESTRATEGY PORTFOLIOS
As you know, each LifeStrategy Portfolio is a diversified "fund of funds"
consisting of underlying Vanguard mutual funds chosen to represent a targeted
mix of stocks, bonds,
1
<PAGE> 4
and short-term reserves. The asset allocation for each Portfolio as of June 30
is shown in the table below. The allocations were precisely in line with our
target allocations.
Early in the period, however, each Portfolio's allocation to stocks
was about 2 percentage points higher as a result of our holdings in Vanguard
Asset Allocation Fund. Because U.S. stocks produced the highest returns among
the major asset classes during the period, the higher the percentage of
domestic equities held by a Portfolio, the higher its return. In contrast,
because returns on bonds were relatively modest, the heavier a Portfolio's
weighting in bonds, the lower its overall return.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
CONSERVATIVE MODERATE
INCOME GROWTH GROWTH GROWTH
ASSET CLASS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. stocks 20% 35% 50% 65%
International
stocks -- 5 10 15
Bonds 60 40 40 20
Reserves 20 20 -- --
- ---------------------------------------------------------------------
TOTAL 100% 100% 100% 100%
- ---------------------------------------------------------------------
</TABLE>
The marginal outperformance of our Portfolios' returns relative to
their composite indexes, therefore, was largely the result of the Portfolios'
holdings in Vanguard Asset Allocation Fund. The Fund's allocation was 70%
stocks and 30% bonds until late March, when it switched to 60% stocks and 40%
bonds. In addition, LifeStrategy's Income and Conservative Growth Portfolios
invest their short-term reserves in the Short-Term Corporate Portfolio of
Vanguard Fixed Income Securities Fund, which returned +2.8% for the six months,
compared to the +2.6% return on the Salomon Brothers Three-Month U.S. Treasury
Bill Index.
IN SUMMARY
The extraordinary bull market for U.S. stocks that began almost 15 years ago
has amply demonstrated the rewards of long-term investing. Risk, the
inseparable companion of reward, may not be so apparent after such a period.
Nevertheless, investors disregard risk at their peril. Thus, we hope that the
sizable, sudden fluctuations in the stock market during the first half of 1997
reinforced two key messages that we have repeatedly stressed in these Reports
to you.
The first message concerns the importance of holding a balanced
portfolio of stock funds, bond funds, and money market funds in proportions
appropriate to your financial situation, tolerance for risk, and investment
objectives. Such a balanced approach is, of course, what the LifeStrategy
Portfolios are all about. By making it easier to ride out episodes of market
volatility, a balanced portfolio can help investors to adhere to our second
message: Always "stay the course" toward your long-term investment goals.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
July 18, 1997
2
<PAGE> 5
<TABLE>
<CAPTION>
PORTFOLIO STATISTICS
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1997
NET ASSET VALUE PER SHARE ------------------------------
------------------------------- INCOME CAPITAL GAINS SEC
PORTFOLIO DEC. 31, 1996 JUN. 30, 1997 DIVIDENDS DISTRIBUTIONS YIELD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LifeStrategy Income $11.55 $11.97 $0.29 -- 5.53%
LifeStrategy Conservative Growth 12.14 12.96 0.24 -- 4.45
LifeStrategy Moderate Growth 12.97 14.25 0.19 -- 3.51
LifeStrategy Growth 13.68 15.46 0.12 -- 2.47
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JUNE 30, 1997
[PHOTO]
U.S. EQUITY MARKETS
As the economy continued to grow while the rate of inflation did not, a robust
market provided solid gains to investors in U.S. common stocks during the
first half of 1997. The best performers were primarily larger-capitalization
issues, although the small-company indexes exhibited some strength in the final
two months of the period. Over the half-year, the Standard & Poor's 500
Composite Stock Price Index gained 20.6%, fueled by a 10.8% boost since the end
of April. Reflecting the gains among smaller companies, the Russell 2000 Index
posted a 10.2% increase for the six-month period, driven by an 11.1% jump in
May and a 4.3% rise in June. It was particularly noteworthy that the recent
small-cap gains were led by small growth stocks, the worst segment of the U.S.
market during the past 12 months. This group has surged 17.6% since the end of
March, although at the half-year's end it still lagged the S&P 500 Index by a
sizable margin (5.2% versus 20.6%).
Stocks benefited from the continued strength of corporate earnings,
which rose some 15% during the past year, and from a widespread confidence
reflected in increased price/earnings ratios. The strength in earnings, the
expectation that income will continue to increase at an attractive pace, and
the further conviction that inflation is not a problem helped stocks to
continue to produce solid gains in the fiscal period. What's more, earnings
have shown not only good strength but remarkable consistency in beating the
consensus forecasts of Wall Street analysts.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997
------------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 20.6% 34.7% 19.8%
Russell 2000 Index 10.2 16.3 17.9
MSCI EAFE Index 11.4 13.2 13.2
- -------------------------------------------------------------------------------
FIXED-INCOME
Lehman Aggregate Bond Index 3.1% 8.2% 7.1%
Lehman 10-Year Municipal
Bond Index 3.3 8.3 7.4
Salomon Brothers Three-Month
U.S. Treasury Bill Index 2.6 5.3 4.5
- -------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.1% 2.3% 2.7%
- -------------------------------------------------------------------------------
</TABLE>
*Average annual.
The strongest gains in the S&P 500 Index during the past six months
came from the health-care sector (up 31.4%) and the consumer-staples sector (up
23.9%). By contrast, numerous uncertainties for utilities caused the issues in
that sector to lag the broad market, although, on an absolute basis, their 8.2%
return over six months is quite good.
U.S. FIXED-INCOME MARKETS
The modest rise in interest rates during the past six months reflects the
economy's underlying momentum. The 10-year U.S. Treasury's yield increased from
6.42% at the end of December to 6.97% by the middle of April. In the following
weeks, economic reports indicated a slowing in economic growth and further
reduced fears of an increase in inflation. This news helped interest rates fall
to 6.50% by the end of June.
4
<PAGE> 7
Fueled by robust consumer spending, the U.S. economy expanded at a
remarkable 5.8% rate in the first three months of 1997. Reflecting the vibrant
economy, the nation's unemployment rate stood at 5.0% in June. Strong economic
growth and tight labor markets have often led to rising inflation because of
increased demand for goods and services. With this in mind, the Federal Reserve
raised its federal funds interest rate target by 0.25% on March 25 in a
"preemptive" strike against mounting inflationary pressures. Observed price
increases have been subdued in recent months, however. Wholesale prices have
fallen in each of the first six months of 1997, and so far this year consumer
prices have risen at a slower pace than last year.
With interest rates very close to year-end levels, bond investors have
fared reasonably well during the past six months, as illustrated by the 3.1%
return of the Lehman Brothers Aggregate Bond Index. Investors who favored
shorter-maturity and lower-quality issues achieved somewhat better returns.
Mortgage-backed securities continued to perform well because refinancing
activity has been reduced to historically low levels as interest rates have
risen. Municipal issues also tended to perform better than their taxable
counterparts.
INTERNATIONAL EQUITY MARKETS
International investors received fairly good returns over the past six months.
As measured by the broad Morgan Stanley Capital International Europe,
Australasia, Far East Index, foreign markets gained 11.4%.
The period saw two major developments. First, the Japanese stock
market moved sharply higher in the spring, returning 11.1% in May and 7.5% in
June to U.S. investors. Better tone in the economy, plus strong earnings
reported by export-oriented companies benefiting from the weak yen, gave Japan
a long-awaited boost. For the six months, the Japanese market is up 9.2%. The
competitive benefits of a weak currency relative to the dollar extended to
Germany, where the export-driven capital goods and chemical manufacturers
gained; overall, the German market rose 17.0% during the six-month period.
Arguably the biggest news came from the French elections at the end of
May. The new government is considered to be less friendly toward the austerity
measures needed to meet the eligibility requirements for the European Monetary
Union (EMU) in 1999. The French elections also had a broad impact across the
continent. Although most investors appear to agree that the elections won't
jeopardize the continent's move toward the EMU, the timing and intensity of the
fiscal measures are now lesscertain. For the six months, Europe gained 24.8% in
local currencies, which a strong dollar trimmed to 14.4% for U.S. investors.
5
<PAGE> 8
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolios could lose money.
INCOME PORTFOLIO
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 30, 1994-JUNE 30, 1997
- ----------------------------------------------------------
INCOME PORTFOLIO MUTUAL FUND
BENCHMARK*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -1.2% 1.4% 0.2% -0.2%
1995 17.7 5.3 23.0 16.0
1996 1.9 5.7 7.6 7.5
1997** 3.6 2.6 6.2 4.9
- ----------------------------------------------------------
</TABLE>
* 60% Lipper Fixed Income Funds Average, 20% Lipper General Equity Funds
Average, and 20% Lipper Money Market Instrument Funds Average.
** Six months ended June 30, 1997.
See Financial Highlights table on page 16 for dividend and capital gains
information since the Portfolio's inception.
CONSERVATIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 30, 1994-JUNE 30, 1997
- ----------------------------------------------------------
CONSERVATIVE GROWTH PORTFOLIO MUTUAL FUND
BENCHMARK*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -1.3% 1.4% 0.1% -0.5%
1995 19.3 5.0 24.3 18.0
1996 5.6 4.8 10.4 10.0
1997** 6.8 2.0 8.8 6.9
- ----------------------------------------------------------
</TABLE>
* 40% Lipper Fixed Income Funds Average, 35% Lipper General Equity Funds
Average, 20% Lipper Money Market Instrument Funds Average, and 5% Lipper
International Funds Average.
** Six months ended June 30, 1997.
See Financial Highlights table on page 17 for dividend and capital gains
information since the Portfolio's inception.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Portfolio 9/30/94 12.93% 7.76% 5.52% 13.28%
Conservative Growth Portfolio 9/30/94 16.25 10.88 4.86 15.74
- ----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolios could lose money.
MODERATE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 30, 1994-JUNE 30, 1997
- ----------------------------------------------------------
MODERATE GROWTH PORTFOLIO MUTUAL FUND
BENCHMARK*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -2.1% 1.4% -0.7% -1.1%
1995 24.1 3.8 27.9 22.1
1996 9.0 3.7 12.7 12.5
1997** 9.9 1.4 11.3 9.0
- ----------------------------------------------------------
</TABLE>
* 50% Lipper General Equity Funds Average, 40% Lipper Fixed Income Funds
Average, and 10% Lipper International Funds Average.
** Six months ended June 30, 1997.
See Financial Highlights table on page 17 for dividend and capital gains
information since the Portfolio's inception.
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 30, 1994-JUNE 30, 1997
- ----------------------------------------------------------
GROWTH PORTFOLIO MUTUAL FUND
BENCHMARK*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1994 -1.5% 1.4% -0.1% -1.5%
1995 26.0 3.2 29.2 24.1
1996 12.5 2.9 15.4 15.1
1997** 13.0 0.9 13.9 11.0
- ----------------------------------------------------------
</TABLE>
* 65% Lipper General Equity Funds Average, 20% Lipper Fixed Income Funds
Average, and 15% Lipper International Funds Average.
** Six months ended June 30, 1997.
See Financial Highlights table on page 18 for dividend and capital gains
information since the Portfolio's inception.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Moderate Growth Portfolio 9/30/94 19.73% 14.63% 3.87% 18.50%
Growth Portfolio 9/30/94 23.07 18.06 3.16 21.22
- ----------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
FINANCIAL STATEMENTS
JUNE 30, 1997 (unaudited)
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each LifeStrategy Portfolio's
investments in shares of each Vanguard portfolio, along with the value of each
investment on the last day of the reporting period. 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.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the Portfolio's net assets on both a dollar and
per-share basis. Because all income and any realized gains must be distributed
to shareholders each year, the bulk of net assets consists of Paid in Capital
(money invested by shareholders). The amounts shown for Undistributed Net
Investment Income and Accumulated Net Realized Gains usually approximate the
sums the Portfolio had available to distribute to shareholders as income
dividends or capital gains as of the statement date. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net income or
net realized gains, will appear as negative balances. Unrealized Appreciation
(Depreciation) is the difference between the market value of the Portfolio's
investments and their cost, and reflects the gains (losses) that would be
realized if the Portfolio were to sell all of its investments at their
statement-date values.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARKET
VALUE*
INCOME PORTFOLIO SHARES (000)
- --------------------------------------------------------------------------------------------------
<S> <S> <C>
INVESTMENT COMPANIES (99.6%)
- --------------------------------------------------------------------------------------------------
Vanguard Asset Allocation Fund 2,244,032 $ 45,329
Vanguard Bond Index Fund-Total Bond Market Portfolio 9,283,024 90,974
Vanguard Fixed Income Securities Fund-Short-Term Corporate Portfolio 3,400,040 36,448
Vanguard Index Trust-Total Stock Market Portfolio 451,976 9,365
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $170,904) 182,116
- --------------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.2%)
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a Pooled Cash Account
5.93%, 7/1/97
(COST $450) $450 450
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%)
(COST $171,354) 182,566
- --------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- --------------------------------------------------------------------------------------------------
Other Assets 1,929
Liabilities (1,617)
--------------
312
- --------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------
Applicable to 15,271,904 shares of beneficial interest
(unlimited authorization--no par value) $182,878
==================================================================================================
NET ASSET VALUE PER SHARE $11.97
==================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
8
<PAGE> 11
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------------------------
Paid in Capital $172,742 $11.31
Overdistributed Net Investment Income (42) --
Accumulated Net Realized Losses (1,034) (.07)
Unrealized Appreciation--Note D 11,212 .73
- ---------------------------------------------------------------------------------------------
NET ASSETS $182,878 $11.97
=============================================================================================
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
MARKET
VALUE*
CONSERVATIVE GROWTH PORTFOLIO SHARES (000)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES (99.7%)
- ------------------------------------------------------------------------------------------------
Vanguard Asset Allocation Fund 7,618,031 $153,884
Vanguard Bond Index Fund-Total Bond Market Portfolio 18,976,243 185,967
Vanguard Fixed Income Securities Fund-Short-Term Corporate Portfolio 11,546,751 123,781
Vanguard Index Trust-Total Stock Market Portfolio 6,084,451 126,070
Vanguard Total International Portfolio 2,733,411 30,970
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $555,428) 620,672
- ------------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.1%)
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a Pooled Cash Account
5.93%, 7/1/97
(COST $975) $975 975
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%)
(COST $556,403) 621,647
- ------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- ------------------------------------------------------------------------------------------------
Other Assets 5,687
Liabilities (4,598)
---------------
1,089
- ------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------
Applicable to 48,054,541 shares of beneficial interest
(unlimited authorization--no par value) $622,736
================================================================================================
NET ASSET VALUE PER SHARE $12.96
================================================================================================
*See Note A in Notes to Financial Statements.
- ------------------------------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------
Paid in Capital $557,123 $11.59
Overdistributed Net Investment Income (56) --
Accumulated Net Realized Gains 425 .01
Unrealized Appreciation--Note D 65,244 1.36
- ------------------------------------------------------------------------------------------------
NET ASSETS $622,736 $12.96
================================================================================================
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
MARKET
VALUE*
MODERATE GROWTH PORTFOLIO SHARES (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES (99.8%)
- ---------------------------------------------------------------------------------------------
Vanguard Asset Allocation Fund 13,437,582 $ 271,439
Vanguard Bond Index Fund-Total Bond Market Portfolio 33,457,842 327,887
Vanguard Index Trust-Total Stock Market Portfolio 18,386,196 380,962
Vanguard Total International Portfolio 9,592,556 108,684
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $945,023) 1,088,972
- --------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.1%)
- ---------------------------------------------------------------------------------------------
Repurchase Agreement
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
5.93%, 7/1/97
(COST $1,415) $1,415 1,415
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(COST $946,438) 1,090,387
- --------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- --------------------------------------------------------------------------------------------
Other Assets 16,759
Liabilities (15,509)
--------------
1,250
- --------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------
Applicable to 76,618,397 shares of beneficial interest
(unlimited authorization--no par value) $1,091,637
============================================================================================
NET ASSET VALUE PER SHARE $14.25
============================================================================================
*See Note A in Notes to Financial Statements.
- --------------------------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------
Paid in Capital $ 949,182 $12.39
Overdistributed Net Investment Income (188) --
Accumulated Net Realized Losses (1,306) (.02)
Unrealized Appreciation--Note D 143,949 1.88
- --------------------------------------------------------------------------------------------
NET ASSETS $1,091,637 $14.25
============================================================================================
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
MARKET
VALUE*
GROWTH PORTFOLIO SHARES (000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES (99.7%)
- --------------------------------------------------------------------------------------------
Vanguard Asset Allocation Fund 11,207,669 $226,395
Vanguard Bond Index Fund-Total Bond Market Portfolio 9,350,204 91,632
Vanguard Index Trust-Total Stock Market Portfolio 21,949,436 454,792
Vanguard Total International Portfolio 12,207,210 138,308
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(COST $753,301) 911,127
- --------------------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
5.93%, 7/1/97
(COST $626) $626 626
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%)
(COST $753,927) 911,753
- --------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- --------------------------------------------------------------------------------------------
Other Assets 4,081
Liabilities (1,663)
--------------
2,418
- --------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------
Applicable to 59,140,742 shares of beneficial interest
(unlimited authorization--no par value) $914,171
============================================================================================
NET ASSET VALUE PER SHARE $15.46
============================================================================================
*See Note A in Notes to Financial Statements.
- --------------------------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------
Paid in Capital $755,320 $12.77
Overdistributed Net Investment Income (122) --
Accumulated Net Realized Gains 1,147 .02
Unrealized Appreciation--Note D 157,826 2.67
- --------------------------------------------------------------------------------------------
NET ASSETS $914,171 $15.46
============================================================================================
</TABLE>
12
<PAGE> 15
STATEMENT OF OPERATIONS
This Statement shows each Portfolio's Income Distributions Received from the
other Vanguard portfolios in which it invests. This Statement also shows any
Capital Gain Distributions Received from the other Portfolios' realized net
gains, Net Gain (Loss) realized on the sale of investments, and the increase or
decrease in the Unrealized Appreciation (Depreciation) on investments during
the period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CONSERVATIVE MODERATE
INCOME GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1997
----------------------------------------------------
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Income Distributions Received $ 4,254 $10,784 $ 14,240 $ 7,185
Interest 8 34 76 52
- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME--Note B 4,262 10,818 14,316 7,237
- ---------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Capital Gain Distributions Received 18 228 700 786
Investment Securities Sold (962) 462 (1,547) 379
- ---------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (944) 690 (847) 1,165
- ---------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENT SECURITIES 6,823 35,520 92,527 95,344
- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $10,141 $47,028 $105,996 $103,746
=============================================================================================
</TABLE>
13
<PAGE> 16
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. The amounts shown
as Distributions to shareholders from the Portfolio's net income and capital
gains may not match the amounts shown in the Operations section, because
distributions are determined on a tax basis and may be made in a period
different from the one in which the income was earned or the gains were
realized on the financial statements. The Capital Share Transactions section
shows the amount shareholders invested in the Portfolio, either by purchasing
shares or by reinvesting distributions, as well as the amounts redeemed. The
corresponding numbers of Shares Issued and Redeemed are shown at the end of the
Statement.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
INCOME CONSERVATIVE
PORTFOLIO GROWTH PORTFOLIO
---------------------------- -----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1997 DEC. 31, 1996 JUN. 30, 1997 DEC. 31, 1996
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 4,262 $ 7,881 $ 10,818 $ 16,809
Realized Net Gain (Loss) (944) 2,615 690 7,187
Change in Unrealized Appreciation
(Depreciation) 6,823 110 35,520 12,584
Net Increase in Net Assets
Resulting from Operations 10,141 10,606 47,028 36,580
DISTRIBUTIONS
Net Investment Income (4,282) (7,907) (10,895) (16,731)
Realized Capital Gain -- (2,654) -- (7,326)
Total Distributions (4,282) (10,561) (10,895) (24,057)
CAPITAL SHARE TRANSACTIONS(1)
Issued 54,086 90,016 178,969 297,016
Issued in Lieu of Cash Distributions 3,565 9,108 10,179 22,450
Redeemed (32,114) (68,426) (65,040) (88,762)
Net Increase from Capital
Share Transactions 25,537 30,698 124,108 230,704
- -------------------------------------------------------------------------------------------------
Total Increase 31,396 30,743 160,241 243,227
- -------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 151,482 120,739 462,495 219,268
End of Period $182,878 $151,482 $622,736 $462,495
=================================================================================================
(1)Shares Issued (Redeemed)
Issued 4,606 7,797 14,384 24,891
Issued in Lieu of Cash Distributions 302 790 802 1,858
Redeemed (2,750) (5,937) (5,239) (7,409)
Net Increase in Shares Outstanding 2,158 2,650 9,947 19,340
=================================================================================================
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
MODERATE GROWTH
GROWTH PORTFOLIO PORTFOLIO
------------------------------ -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUN. 30, 1997 DEC. 31, 1996 JUN. 30, 1997 DEC. 31, 1996
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 14,316 $ 19,999 $ 7,237 $ 13,739
Realized Net Gain (Loss) (847) 11,128 1,165 10,306
Change in Unrealized Appreciation
(Depreciation) 92,527 31,082 95,344 40,378
----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 105,996 62,209 103,746 64,423
----------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (14,504) (19,971) (7,008) (14,036)
Realized Capital Gain -- (11,572) -- (10,183)
----------------------------------------------------------
Total Distributions (14,504) (31,543) (7,008) (24,219)
----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 258,649 651,410 247,923 420,869
Issued in Lieu of Cash Distributions 13,126 28,857 6,888 23,804
Redeemed (97,348) (119,901) (66,049) (73,627)
----------------------------------------------------------
Net Increase from Capital
Share Transactions 174,427 560,366 188,762 371,046
- ----------------------------------------------------------------------------------------------------
Total Increase 265,919 591,032 285,500 411,250
- ----------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 825,718 234,686 628,671 217,421
----------------------------------------------------------
End of Period $1,091,637 $825,718 $914,171 $628,671
====================================================================================================
(1)Shares Issued (Redeemed)
Issued 19,236 51,569 17,379 32,215
Issued in Lieu of Cash Distributions 918 2,225 444 1,737
Redeemed (7,200) (9,501) (4,648) (5,575)
----------------------------------------------------------
Net Increase in Shares Outstanding 12,954 44,293 13,175 28,377
====================================================================================================
</TABLE>
15
<PAGE> 18
FINANCIAL HIGHLIGHTS
This table summarizes each Portfolio's investment results and distributions to
shareholders on a per-share basis. The table also presents the Portfolio's
Total Return and shows net investment income and expenses as percentages of
average net assets. The expense ratio is zero because the Portfolio pays no
direct expenses; its share of the expenses of the other portfolios in which it
invests indirectly reduces the income received from them. The data in the table
will help you assess: the variability of the Portfolio's net income and total
returns from year to year; the relative contributions of net income and capital
gains to the Portfolio's total return; the extent to which the Portfolio tends
to distribute capital gains; and the portion of capital gains distributions
representing the "pass-through" of capital gains distributions received from
other Vanguard portfolios. The table also shows the Portfolio Turnover Rate, a
measure of trading activity. A turnover rate of 100% means that the average
security is held in the Portfolio for one year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
INCOME PORTFOLIO
YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED --------------- SEP. 30* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUN. 30, 1997 1996 1995 DEC. 31, 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.55 $11.54 $ 9.88 $10.00
- --------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Income Distributions Received .29 .64 .49 .14
Capital Gain Distributions Received -- .19 .09 --
Total Distributions Received .29 .83 .58 .14
Net Realized and Unrealized Gain (Loss) on Investments .42 .03 1.66 (.12)
Total from Investment Operations .71 .86 2.24 .02
DISTRIBUTIONS
Dividends from Net Investment Income (.29) (.64) (.49) (.14)
Distributions from Realized Capital Gains -- (.21) (.09) --
Total Distributions (.29) (.85) (.58) (.14)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.97 $11.55 $11.54 $ 9.88
========================================================================================================
TOTAL RETURN 6.20% 7.65% 22.99% 0.20%
========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $183 $151 $121 $11
Ratio of Expenses to Average Net Assets--Note B 0% 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets 5.11%** 5.66% 5.76% 7.31%**
Portfolio Turnover Rate 10%** 22% 4% 1%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
**Annualized.
16
<PAGE> 19
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CONSERVATIVE GROWTH PORTFOLIO
YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED ------------ SEP. 30* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUN. 30, 1997 1996 1995 DEC. 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.14 $11.68 $ 9.89 $10.03
- -------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Income Distributions Received .24 .53 .47 .14
Capital Gain Distributions Received .01 .20 .11 .01
Total Distributions Received .25 .73 .58 .15
Net Realized and Unrealized Gain (Loss) on Investments .81 .46 1.80 (.14)
Total from Investment Operations 1.06 1.19 2.38 .01
DISTRIBUTIONS
Dividends from Net Investment Income (.24) (.53) (.47) (.14)
Distributions from Realized Capital Gains -- (.20) (.12) (.01)
Total Distributions (.24) (.73) (.59) (.15)
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.96 $12.14 $11.68 $ 9.89
======================================================================================================
TOTAL RETURN 8.78% 10.36% 24.35% 0.10%
======================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $623 $462 $219 $41
Ratio of Expenses to Average Net Assets--Note B 0% 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets 4.01%** 4.86% 5.14% 7.07%**
Portfolio Turnover Rate 2%** 2% 1% 0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
**Annualized.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MODERATE GROWTH PORTFOLIO
YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED --------------- SEP. 30* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUN. 30, 1997 1996 1995 DEC. 31, 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.97 $12.11 $ 9.86 $10.08
- --------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Income Distributions Received .19 .44 .36 .14
Capital Gain Distributions Received .01 .22 .13 .01
Total Distributions Received .20 .66 .49 .15
Net Realized and Unrealized Gain (Loss) on Investments 1.27 .87 2.25 (.22)
Total from Investment Operations 1.47 1.53 2.74 (.07)
DISTRIBUTIONS
Dividends from Net Investment Income (.19) (.44) (.36) (.14)
Distributions from Realized Capital Gains -- (.23) (.13) (.01)
Total Distributions (.19) (.67) (.49) (.15)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.25 $12.97 $12.11 $ 9.86
========================================================================================================
TOTAL RETURN 11.33% 12.71% 27.94% -0.70%
========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,092 $826 $235 $35
Ratio of Expenses to Average Net Assets--Note B 0% 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets 3.01%** 3.98% 4.42% 7.10%**
Portfolio Turnover Rate 4%** 3% 1% 0%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
**Annualized.
17
<PAGE> 20
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED --------------- SEP. 30* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JUN. 30, 1997 1996 1995 DEC. 31, 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.68 $12.36 $ 9.93 $10.10
- --------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Income Distributions Received .13 .34 .32 .13
Capital Gain Distributions Received .01 .24 .14 .02
----------------------------------------------
Total Distributions Received .14 .58 .46 .15
Net Realized and Unrealized Gain (Loss) on Investments 1.76 1.32 2.43 (.16)
----------------------------------------------
Total from Investment Operations 1.90 1.90 2.89 (.01)
----------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.12) (.35) (.31) (.14)
Distributions from Realized Capital Gains -- (.23) (.15) (.02)
----------------------------------------------
Total Distributions (.12) (.58) (.46) (.16)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.46 $13.68 $12.36 $ 9.93
========================================================================================================
TOTAL RETURN 13.89% 15.41% 29.24% -0.10%
========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $914 $629 $217 $38
Ratio of Expenses to Average Net Assets--Note B 0% 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets 1.91%** 3.18% 3.67% 7.06%**
Portfolio Turnover Rate 1%** 0% 1% 1%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
**Annualized.
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
Vanguard LifeStrategy Portfolios comprises the Income, Conservative Growth,
Moderate Growth, and Growth Portfolios of Vanguard STAR Fund. Each Portfolio is
registered under the Investment Company Act of 1940 as an open-end investment
company, or mutual fund.
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. VALUATION: Investments are valued at the net asset value of each Vanguard
portfolio determined as of the close of the New York Stock Exchange (generally
4:00 p.m. Eastern time) on the valuation date. Temporary cash investments are
valued at 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. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date.
4. REPURCHASE AGREEMENTS: Each Portfolio, along with members of The Vanguard
Group, transfers uninvested cash balances to a Pooled Cash Account, which is
invested in repurchase agreements secured by U.S. government securities.
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.
5. OTHER: Income and capital gain distributions received are recorded on the
ex-dividend date. Security transactions are accounted for on the date
securities are bought or sold. Costs used to determine realized gains (losses)
on the sale of investment securities are those of the specific securities sold.
B. Under a special service agreement, The Vanguard Group furnishes corporate
management, administrative, marketing, and distribution services to the
Portfolios. The special service agreement provides that Vanguard will reimburse
the Portfolios' expenses to the extent of savings in administrative and
marketing costs realized by Vanguard in the operation of the Portfolios.
Accordingly, all expenses incurred by the Portfolios during the six months
ended June 30, 1997, were reimbursed by Vanguard. The Portfolios' trustees and
officers are also directors and officers of Vanguard.
C. During the six months ended June 30, 1997, purchases and sales of
investment securities were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(000)
------------------------
PORTFOLIO PURCHASES SALES
- --------------------------------------------------------------------------------
<S> <C> <C>
Income $ 32,616 $ 7,898
Conservative Growth 127,293 3,974
Moderate Growth 191,806 18,980
Growth 192,434 5,142
- --------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
D. At June 30, 1997, net unrealized appreciation of investment securities
for financial reporting and federal income tax purposes was:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
(000)
------------------------------------------
NET
APPRECIATED DEPRECIATED UNREALIZED
PORTFOLIO SECURITIES SECURITIES APPRECIATION
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income $ 11,212 -- $ 11,212
Conservative Growth 65,244 -- 65,244
Moderate Growth 143,949 -- 143,949
Growth 157,826 -- 157,826
- -----------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
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 Business Solutions, Inc., Raytheon Co., Knight-Ridder, Inc., and
Massachusetts Mutual Life Insurance Co.; 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
Communications 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.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment companies
in The Vanguard Group.
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
ROBERT A. DISTEFANO, Senior Vice President, Information Technology.
JAMES H. GATELY, Senior Vice President, Individual Investor Group.
IAN A. MACKINNON, Senior Vice President, Fixed Income GROUP.
F. WILLIAM MCNABB III, Senior Vice President, Institutional Investor Group.
RALPH K. PACKARD, Senior Vice President and Chief Financial Officer.
[THE VANGUARD GROUP LOGO]
Please send your comments to us at:
Post Office Box 2600, Valley Forge, Pennsylvania 19482
Fund Information: 1-800-662-7447
Individual Account Services: 1-800-662-2739
Institutional Investor Services: 1-800-523-1036
http://www.vanguard.com [email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before investing or sending money. Prospectuses
may be obtained directly from The Vanguard Group.
(C) 1997 Vanguard Marketing Corporation, Distributor
<PAGE> 24
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard/Windsor Fund
Vanguard/Windsor II
Vanguard Equity Income Fund
Vanguard Growth and Income Portfolio
Vanguard Selected Value Portfolio
Vanguard/Trustees' Equity-U.S. Portfolio
Vanguard Convertible Securities Fund
BALANCED FUNDS
Vanguard/Wellington Fund
Vanguard/Wellesley Income Fund
Vanguard STAR Portfolio
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Portfolios
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
Vanguard Horizon Fund
INTERNATIONAL FUNDS
Vanguard International Growth Portfolio
Vanguard International Value Portfolio
INDEX FUNDS
Vanguard Index Trust
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
Vanguard Bond Index Fund
Vanguard International Equity Index Fund
Vanguard Total International Portfolio
FIXED-INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
Vanguard Treasury Money Market Portfolio
Vanguard Admiral Funds
INCOME FUNDS
Vanguard Fixed Income Securities Fund
Vanguard Admiral Funds
Vanguard Preferred Stock Fund
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, FL, NJ, NY, OH, PA)
Q882-6/97
[PHOTO]
