<PAGE> 1
CHAIRMAN'S LETTER
Fellow Shareholder:
During the six months ended June 30, the first half of Vanguard Quantitative
Portfolios' 1995 fiscal year, we participated in the strongest bull market for
common stocks in recent memory. The rally was sharp, sustained, and bereft of
even mild interim setbacks. What is more, large blue-chip stocks--such as those
held by our Fund--provided the leadership that propelled the market during the
period.
In this environment, our Fund posted a total return (capital change plus
income) of +19.5%, just shy of the +20.2% return for the unmanaged Standard &
Poor's 500 Composite Stock Price Index, but nicely ahead of the +17.0% gain
achieved by the average growth and income mutual fund, our competitive fund
standard. The total returns are summarized in this table:
<TABLE>
<CAPTION>
--------------------------------------------------------
TOTAL RETURN
----------------
SIX MONTHS ENDED
JUNE 30, 1995
--------------------------------------------------------
<S> <C>
VANGUARD QUANTITATIVE PORTFOLIOS +19.5%
--------------------------------------------------------
STANDARD & POOR'S 500 STOCK INDEX +20.2%
AVERAGE GROWTH & INCOME FUND +17.0
--------------------------------------------------------
</TABLE>
The Fund's total return is based on net asset values of $15.56 per share on
December 31, 1994, and $18.44 on June 30, 1995, with the latter figure adjusted
to take into account a dividend of $.15 per share from net investment income.
THE PERIOD IN REVIEW
After a moderately disappointing 1994, the stock market sprung to life as 1995
began. During the past six months, the market has moved upward, week after
week, in virtually straight-line fashion, delighting the bulls and astonishing
the bears. On balance, the Dow Jones Industrial Average rose from 3834 as the
year began to 4556 on June 30.
As usual, there were many opinions as to the source of the market's
surprising strength. In my view, it resulted from a combination of: (1) the
sharp decline in interest rates (the yield on the long-term U.S. Treasury bond
fell from 7.8% to 6.6% during the period, a dip of 120 basis points); (2) the
diminishing threat of additional increases in short-term interest rates by the
Federal Reserve Board; (3) a slight softening in U.S. economic growth,
resulting in continued optimism about the outlook for inflation; (4)
record-breaking corporate profits; and (5) a hint of speculative fever in the
marketplace. Whatever the cause, the stock market, as measured by the Standard
& Poor's 500 Index, provided a stunning six-month return of +20.2%.
Of particular note during this brief period was the dominance of the
Standard & Poor's 500 Index over the average professionally managed equity
mutual fund. The Index outpaced fully 83% of all general equity mutual funds
during the past six months--the best ranking that I can recall. This success
follows an equally good 1994, when the Index outpaced 78% of the equity funds.
That said, I would strongly caution that these two excellent periods
follow relatively low rankings in 1991-1993, during which the Index outpaced
"only" about 44% of all general equity funds. Much of this shift during
1994-1995 is accounted for by a gradual trend away from more speculative mutual
funds, which provided the market leadership during those three earlier years.
During the past eighteen months, the market leadership has been provided by
blue-chip stocks with large market capitalizations, which, of course, dominate
the Standard & Poor's 500 Index.
As you know, the objective of Vanguard Quantitative Portfolios is to
provide an enhancement of the returns achieved by the Standard & Poor's 500
Index, even as it maintains risk characteristics (i.e., sector and industry
weightings) that are similar to the Index. Thus, the Fund's absolute returns
are driven primarily by the performance of this Index. Due largely to the use
of the S&P 500 as our target benchmark, the Fund comfortably outpaced the
returns of the average growth and income fund for the period.
Two fundamental factors account for much of our success relative to
comparable funds. First, virtually all of our portfolio is invested in large
1
<PAGE> 2
capitalization companies, while our competitors frequently purchase smaller and
more speculative equities. Second, while traditional active managers typically
hold cash reserves to be prepared for redemptions, our adviser, Franklin
Portfolio Associates, maintains low cash levels in order to fully participate
in market upswings. Because of the strong performance of the stock market,
managers with a minimal portion of their portfolios in cash have been rewarded.
It should go without saying, of course, that these bullish absolute returns
encompass but a six-month period and are exceptionally high relative to
historical norms. Not only should they not be considered predictive of absolute
or relative future returns, they should be considered, in both cases, as
magnitudes that are unlikely to be repeated with great frequency.
SUMMING UP
This year's bull market in stocks has been extraordinarily strong and swift,
but "trees do not grow to the sky." The second half of the year seems unlikely
to witness a repeat of the bounties of the first half. What this means is that
long-term investors should continue to balance stock holdings with holdings of
bonds and reserves, and not attempt to outguess the market by making major,
precipitate reallocations among these three basic classes of financial assets.
In our 1994 Annual Report six months ago, we urged you to "stay the course." It
proved fine advice then; we reiterate it now.
I look forward to reporting to you on the full 1995 fiscal year in our
Annual Report six months hence.
Sincerely,
/s/ JOHN C. BOGLE
------------------
John C. Bogle
Chairman of the Board
July 18, 1995
Note: Mutual fund data from Lipper Analytical Services, Inc.
AVERAGE ANNUAL TOTAL RETURNS--THE AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
(PERIODS ENDED JUNE 30, 1995) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
SINCE INCEPTION
-------------------------------
INCEPTION TOTAL CAPITAL INCOME
DATE 1 YEAR 5 YEARS RETURN RETURN RETURN
--------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
VANGUARD QUANTITATIVE PORTFOLIOS 12/10/86 +24.69% +12.34% +13.06% +10.01% +3.05%
</TABLE>
ALL OF THESE DATA REPRESENT PAST PERFORMANCE. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT INVESTORS' SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
2
<PAGE> 3
REPORT FROM THE INVESTMENT ADVISER
During the first six months of the fiscal year, the economy has shown
substantial signs of slowing, and the outlook for interest rates has seemingly
improved because of the slowdown. Administration officials show no signs of
trying to protect the dollar, other than by appropriate gestures. The trade
negotiations between the U.S. and Japan underscore some of the frailties in the
current economy.
The Republican Congress seems able to push the economic agenda toward the
right, although the pace and duration of this move are subject to significant
debate. The political consensus on the deficit seems to be moving in the
direction of significant spending cuts and lower deficits, marred only by
politically motivated tax cuts. Additionally, the dollar has stabilized after
considerable weakness earlier in the year.
Against this backdrop, U.S. financial markets rose strongly in the first
half of 1995. Particular strength was shown by technology-related issues.
Economically sensitive issues, such as transportation (excluding airlines,
which appreciated nicely over the six-month period), had less positive
performance than the general market. Energy, utilities, and autos also lagged
the broad averages. Larger issues outperformed smaller issues. Most
measurements of year-to-date performance indicated that growth stocks had a
slight performance edge over value issues.
We claim modest bragging rights for the somewhat optimistic outlook for
equities expressed in our last letter. If pinned down today, we would say that
equities look fairly valued. We would also point out that market timing is not,
in our view, an ingredient of most successful investment strategies. "Staying
the course" with a well-chosen investment mix suits most investors' needs and
temperaments. Looking forward, uncertainties continue to block our view of the
far horizon; uncertainty however, leads to investment opportunity. With our
long-term view, we are not alarmed at the current state of the world.
Vanguard Quantitative Portfolios has completed eight and one-half years of
existence. We judge our own performance versus the S&P 500 Index--our
investment policy proxy--and versus our competitors. For a competitive proxy,
we have switched to the Morningstar Mutual Fund computer database. To
facilitate our transition from CADENCE to the more familiar Morningstar, this
table illustrates our performance versus both universes:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Vanguard Quantitative Portfolios versus
CADENCE Growth and Income Funds
Through 6/30/95
------------------------------------------------------------------------------
<S> <C>
SINCE 12/31/86 10TH OUT OF 133
LAST 5 YEARS 40TH OUT OF 195
LAST 3 YEARS 34TH OUT OF 213
LAST 12 MONTHS 10TH OUT OF 218
YEAR TO DATE 16TH OUT OF 218
------------------------------------------------------------------------------
</TABLE>
Source: CADENCE.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Vanguard Quantitative Portfolios versus
Morningstar Growth and Income Funds
-----------------------------------
Through 6/30/95
<S> <C>
SINCE 12/31/86 13TH OUT OF 132
LAST 5 YEARS 33RD OUT OF 186
LAST 3 YEARS 40TH OUT OF 243
LAST 12 MONTHS 60TH OUT OF 369
YEAR TO DATE 100TH OUT OF 425
------------------------------------------------------------------------------
</TABLE>
Source: Morningstar.
We lagged the S&P 500 Index performance during the first six months of the
year, as did most equity funds. Our investment performance in 1995 has been
subject to the pressures facing other active managers. Most actively managed
equity funds, including Quantitative Portfolios to a modest degree, hold a
portfolio of stocks with smaller market capitalizations than the S&P 500 Index.
One component of our stock valuation process, our momentum measures (which
compare the business health of our investment universe), was not particularly
effective among the larger stocks in the Index during the first half of 1995.
Our performance compared to growth and income funds was much more
favorable. Our longer-term performance compares quite favorably to both of our
competitive universes. We would point out that the eight and one-half year
period shown above was a
3
<PAGE> 4
difficult one for active equity managers. We would also point out that our
ranking was only slightly better than the ranking of the Vanguard Index Trust
500 Portfolio.
We do not always expect to have pleasing short-term results, but we would
be disappointed if our longer-term results lagged available investment
alternatives. We would like to remind our investors that our focus is on the
longer term. We will inevitably have periods when shorter-term performance will
not compare favorably with competitive benchmarks.
Our outlook for the future is positive. We have demonstrated an ability to
outperform most active managers in a difficult period for active management. In
periods when active management outperforms indexing, we believe that we will
outperform both our peers and indexing alternatives to a meaningful degree.
We believe our past success is illustrative of the effectiveness of the
Franklin game plan . . . seeking to win while avoiding periods of major loss.
Our goal with your assets is to be consistently above average. We believe that
consistency builds strong long-term performance and will continue to make
Quantitative Portfolios an attractive option for equity investors.
Respectfully,
John Nagorniak
Franklin Portfolio Associates
July 14, 1995
4
<PAGE> 5
TOTAL INVESTMENT RETURN TABLE
The following table illustrates the results of a single-share investment in
Vanguard Quantitative Portfolios since inception through June 30, 1995. During
the period illustrated, stock prices fluctuated widely; these results should
not be considered a representation of the dividend income or capital gain or
loss that may be realized from an investment made in the Fund today.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERIOD PER SHARE DATA TOTAL INVESTMENT RETURN*
------------------------------------------------------------------------------------------------------------------------------------
Quantitative Portfolios
Value with Income ------------------------------------- S&P 500
Year Ended Net Asset Capital Gains Income Dividends & Capital Capital Income Total Index Total
December 31 Value Distributions Dividends Gains Reinvested Return Return Return Return
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial (12/86) $10.00 -- -- $10.00 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
1986 9.69 -- -- 9.69 - 3.1% 0.0% - 3.1% - 3.3%
------------------------------------------------------------------------------------------------------------------------------------
1987 9.80 $ .06 $.25 10.08 + 1.8 +2.2 + 4.0 + 5.2
------------------------------------------------------------------------------------------------------------------------------------
1988 11.08 -- .35 11.77 + 13.1 +3.7 + 16.8 + 16.5
------------------------------------------------------------------------------------------------------------------------------------
1989 14.14 -- .47 15.54 + 27.6 +4.4 + 32.0 + 31.6
------------------------------------------------------------------------------------------------------------------------------------
1990 13.29 .04 .47 15.16 - 5.7 +3.3 - 2.4 - 3.1
------------------------------------------------------------------------------------------------------------------------------------
1991 16.32 .44 .47 19.75 + 26.4 +3.9 + 30.3 + 30.4
------------------------------------------------------------------------------------------------------------------------------------
1992 16.30 .71 .44 21.13 + 4.2 +2.8 + 7.0 + 7.6
------------------------------------------------------------------------------------------------------------------------------------
1993 16.45 1.69 .39 24.06 + 11.4 +2.4 + 13.8 + 10.1
------------------------------------------------------------------------------------------------------------------------------------
1994 15.56 .40 .39 23.91 - 3.1 +2.5 - 0.6 + 1.3
------------------------------------------------------------------------------------------------------------------------------------
1995 (6/30) 18.44 -- .15 28.57 + 18.5 +1.0 + 19.5 + 20.2
------------------------------------------------------------------------------------------------------------------------------------
LIFETIME +185.7% +184.0%
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN + 13.1% + 13.0%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Includes reinvestment of income dividends and any capital gains distributions
for both the Fund and the Index.
Note: No adjustment has been made for income taxes payable by shareholders on
reinvested income dividends and capital gains distributions.
5
<PAGE> 6
FINANCIAL STATEMENTS
(unaudited)
June 30, 1995
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
-------------------------------------------------------------------------------
COMMON STOCKS (96.6%)
-------------------------------------------------------------------------------
<S> <C> <C>
Exxon Corp. 349,900 $ 24,712
General Electric Co. 421,200 23,745
Philip Morris Cos., Inc. 275,900 20,520
International Business
Machines Corp. 200,500 19,248
Merck & Co., Inc. 385,000 18,865
Johnson & Johnson 228,300 15,439
The Walt Disney Co. 223,400 12,427
Procter & Gamble Co. 169,984 12,218
Royal Dutch Petroleum Co. ADR 96,000 11,700
The Coca-Cola Co. 182,700 11,647
GTE Corp. 336,900 11,497
Archer-Daniels-Midland Co. 600,887 11,192
E.I. du Pont de Nemours & Co. 162,300 11,158
Motorola, Inc. 162,700 10,921
CIGNA Corp. 137,100 10,642
Abbott Laboratories, Inc. 256,240 10,378
BankAmerica Corp. 194,900 10,257
Capital Cities/ABC, Inc. 94,900 10,249
Pfizer, Inc. 110,000 10,161
Dow Chemical Co. 141,200 10,149
Union Carbide Corp. 278,500 9,295
St. Paul Cos., Inc. 187,800 9,249
Unilever NV ADR 65,900 8,575
Mobil Corp. 89,000 8,544
Pacific Gas & Electric Co. 281,600 8,166
Unicom Corp. 299,100 7,964
The Seagram Co. Ltd. 229,700 7,953
Central & South West Corp. 288,400 7,571
Amoco Corp. 107,700 7,176
Sears, Roebuck & Co. 118,000 7,065
Textron, Inc. 114,400 6,650
SBC Communications, Inc. 138,100 6,577
NBD Bancorp, Inc. 198,350 6,347
Phelps Dodge Corp. 107,200 6,325
Phillips Petroleum Co. 186,200 6,214
First Mississippi Corp. 182,000 6,211
* Viacom International Class B 132,600 6,149
Newell Co. 250,900 6,147
AT&T Corp. 103,400 5,493
Parker Hannifin Corp. 149,000 5,401
Temple-Inland Inc. 112,500 5,358
Lockheed Martin Corp. 84,800 5,353
Intel Corp. 83,400 5,275
Ryder System, Inc. 215,200 5,138
Columbia/HCA Healthcare Corp. 118,775 5,137
Panhandle Eastern Corp. 208,400 5,080
American General Corp. 148,718 5,019
ASARCO, Inc. 162,900 4,968
Weyerhaeuser Co. 104,800 4,939
International Paper Co. 57,200 4,905
Echlin, Inc. 140,400 4,879
Eaton Corp. 83,500 4,853
Rite Aid Corp. 185,700 4,759
Avery Dennison Corp. 118,900 4,756
* Varity Corp. 107,500 4,730
Federal Paper Board Co., Inc. 133,700 4,730
* Community Psychiatric Centers 408,500 4,596
Service Corp. International 143,900 4,551
United Healthcare Corp. 107,300 4,440
Computer Associates
International, Inc. 65,400 4,431
Consolidated Edison Co.
of New York, Inc. 141,400 4,171
NationsBank, Inc. 77,500 4,156
Halliburton Co. 113,900 4,072
PPG Industries, Inc. 94,500 4,063
* Advanced Micro Devices, Inc. 110,700 4,027
Chemical Banking Corp. 84,700 4,002
Hewlett-Packard Co. 52,900 3,941
Brunswick Corp. 228,500 3,885
Pacific Enterprises 153,400 3,758
PepsiCo, Inc. 81,600 3,723
Federal National Mortgage Assn. 38,000 3,586
Black & Decker Corp. 112,400 3,470
The Bank of New York Co., Inc. 85,700 3,460
American International Group, Inc. 29,900 3,409
Household International, Inc. 68,100 3,371
Cyprus Amax Minerals Co. 117,300 3,343
New York Times Co. Class A 139,100 3,269
Praxair, Inc. 130,700 3,267
* Navistar International Corp. 214,000 3,237
Browning-Ferris Industries, Inc. 88,400 3,193
Moore Corp. Ltd. 142,100 3,144
* Amdahl Corp. 276,400 3,075
Citicorp 52,200 3,021
* Federal Express Corp. 49,400 3,001
First Union Corp. 65,400 2,959
MBNA Corp. 87,100 2,940
* Sun Microsystems, Inc. 59,900 2,905
Circuit City Stores, Inc. 87,300 2,761
ConAgra, Inc. 78,300 2,731
Jostens Inc. 128,000 2,720
Georgia-Pacific Corp. 29,100 2,524
Union Camp Corp. 43,600 2,523
TRW, Inc. 30,600 2,444
Bruno's Inc. 209,900 2,440
Lowes Cos., Inc. 81,500 2,435
Public Service Enterprise Group Inc. 86,100 2,389
Marriott International 65,000 2,332
* The Kroger Co. 83,300 2,239
American Stores Co. 79,100 2,225
Rockwell International Corp. 48,100 2,201
Ball Corp. 60,400 2,106
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
-------------------------------------------------------------------------------
<S> <C> <C>
McDonnell Douglas Corp. 27,200 $ 2,088
Wal-Mart Stores, Inc. 76,800 2,054
Tandy Corp. 39,500 2,049
Sprint Corp. 60,500 2,034
Pittston Services Group 83,500 2,004
* Oracle Corp. 48,600 1,871
Aluminum Co. of America 35,300 1,769
Westvaco Corp. 39,400 1,743
Schering-Plough Corp. 39,400 1,739
Morton International, Inc. 58,100 1,699
Conrail, Inc. 30,300 1,685
Barrick Gold Corp. 65,300 1,649
USF&G Corp. 100,600 1,635
Worthington Industries, Inc. 79,700 1,624
Boise Cascade Corp. 39,300 1,592
Raytheon Co. 20,500 1,591
Meredith Corp. 61,400 1,558
Northrop Grumman Corp. 26,500 1,381
* Silicon Graphics, Inc. 33,900 1,352
ONEOK, Inc. 61,900 1,323
Springs Industries Inc. Class A 34,600 1,289
The Mead Corp. 20,500 1,217
Wachovia Corp. 33,200 1,187
Cooper Tire & Rubber Co. 47,800 1,165
Texas Instruments, Inc. 8,700 1,165
Consolidated Freightways, Inc. 52,100 1,153
Eastman Chemical 19,200 1,142
Eastern Enterprises 37,800 1,129
* Armco, Inc. 167,100 1,128
The Timkin Co. 24,200 1,116
Baker Hughes, Inc. 52,200 1,070
Dover Corp. 13,000 946
* AirTouch Communications Inc. 31,900 909
Schlumberger Ltd. 14,100 876
Fleetwood Enterprises, Inc. 42,400 837
Alberto-Culver Co. Class B 27,500 832
Upjohn Co. 21,600 818
American Greetings Corp. Class A 27,600 807
Santa Fe Pacific Gold Corp. 65,900 799
Great Western Financial Corp. 35,300 728
First Interstate Bancorp. 8,700 698
Atlantic Richfield Co. 5,900 648
Alcan Aluminium Ltd. 20,400 617
Scientific-Atlanta, Inc. 26,900 592
Caterpillar, Inc. 8,200 527
Baxter International, Inc. 14,400 524
Louisiana Land & Exploration Co. 10,300 411
MCI Communications Corp. 16,500 361
* Hartmarx Corp. 69,100 346
* Stone Container Corp. 4,300 91
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $577,317) 706,180
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
-------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS (2.5%)
-------------------------------------------------------------------------------
U.S. TREASURY BILL--NOTE E
5.43%, 9/14/95 $ 850 $ 840
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account 6.13%, 7/3/95 17,284 17,284
-------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $18,124) 18,124
-------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.1%)
(Cost $595,441) 724,304
-------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (.9%)
Other Assets--Note C 27,199
Liabilities (20,597)
--------
6,602
-------------------------------------------------------------------------------
NET ASSETS (100%)
-------------------------------------------------------------------------------
Applicable to 39,638,260 outstanding
$.001 par value shares
(authorized 1,000,000,000 shares) $730,906
-------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $18.44
===============================================================================
+ See Note A to Financial Statements.
* Non-Income Producing Security.
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
AT JUNE 30, 1995, NET ASSETS CONSISTED OF:
-------------------------------------------------------------------------------
Amount Per
(000) Share
--------- ------
<S> <C> <C>
Paid in Capital $585,908 $14.78
Undistributed Net
Investment Income 4,599 .12
Accumulated Net
Realized Gains--Note D 11,240 .28
Unrealized Appreciation of
Investments--Note E 129,159 3.26
-------------------------------------------------------------------------------
NET ASSETS $730,906 $18.44
-------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
(000)
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,718
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752
-------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . 9,470
-------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fee--Note B
Basic Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $581
Performance Adjustment . . . . . . . . . . . . . . . . . . . . . . . -- 581
-----
The Vanguard Group--Note C
Management and Administrative . . . . . . . . . . . . . . . . . . . . 943
Marketing and Distribution . . . . . . . . . . . . . . . . . . . . . 68 1,011
----
Taxes (other than income taxes) . . . . . . . . . . . . . . . . . . . . . . . 27
Custodian's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Auditing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholders' Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Annual Meeting and Proxy Costs . . . . . . . . . . . . . . . . . . . . . . . 5
Directors' Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 1
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,660
-------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . 7,810
-------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold . . . . . . . . . . . . . . . . . . . . . . . . . 12,635
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,060
-------------------------------------------------------------------------------------------------------------
Realized Net Gain . . . . . . . . . . . . . . . . . . . . 15,695
-------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,396
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation (Depreciation) . . . . . 94,408
-------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations . . $117,913
=============================================================================================================
</TABLE>
8
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED Year Ended
JUNE 30, 1995 December 31, 1994
(000) (000)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . $ 7,810 $ 14,361
Realized Net Gain (Loss) . . . . . . . . . . . . . . . . . . . . . . 15,695 (4,453)
Change in Unrealized Appreciation (Depreciation) . . . . . . . . . 94,408 (13,905)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . . . . . . . . . 117,913 (3,997)
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . (5,931) (14,418)
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . -- (13,668)
--------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . . . . . . . . (5,931) (28,086)
--------------------------------------------------------------------------------------------------------------
NET EQUALIZATION CREDITS--NOTE A . . . . . . . . . . . . . . . . . . . 201 673
--------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued -- Regular . . . . . . . . . . . . . . . . . . . . . 65,930 175,535
-- In Lieu of Cash Distributions . . . . . . . . . . 5,621 26,576
-- Exchange . . . . . . . . . . . . . . . . . . . . 13,116 28,135
Redeemed -- Regular . . . . . . . . . . . . . . . . . . . . . (43,853) (99,386)
-- Exchange . . . . . . . . . . . . . . . . . . . . (18,140) (34,137)
--------------------------------------------------------------------------------------------------------------
Net Increase from Capital Share Transactions . . . . . . 22,674 96,723
--------------------------------------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . . . . . . . . . 134,857 65,313
--------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . 596,049 530,736
--------------------------------------------------------------------------------------------------------------
End of Period (3) . . . . . . . . . . . . . . . . . . . . . . . . . $730,906 $596,049
==============================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . . . . . . . . . . . . $.15 $.39
Realized Net Gain . . . . . . . . . . . . . . . . . . . . -- $.40
--------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . . . . . . . 4,686 12,877
Issued in Lieu of Cash Distributions . . . . . . . . . . 308 1,690
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . (3,659) (8,525)
--------------------------------------------------------------------------------------------------------------
1,335 6,042
--------------------------------------------------------------------------------------------------------------
(3) Undistributed Net Investment Income . . . . . . . . . . $ 4,599 $ 2,519
--------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Year Ended December 31,
SIX MONTHS ENDED -----------------------------------------------------------
For a Share Outstanding Throughout Each Period JUNE 30, 1995 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . $15.56 $16.45 $16.30 $16.32 $13.29 $14.14
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . .20 .40 .40 .44 .47 .49
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . . . . . . . . 2.83 (.50) 1.83 .69 3.47 (.83)
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . 3.03 (.10) 2.23 1.13 3.94 (.34)
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . . . (.15) (.39) (.39) (.44) (.47) (.47)
Distributions from Realized Capital Gains . . . . . . -- (.40) (1.69) (.71) (.44) (.04)
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . (.15) (.79) (2.08) (1.15) (.91) (.51)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . $18.44 $15.56 $16.45 $16.30 $16.32 $13.29
===================================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . +19.48% -0.61% +13.83% +7.01% +30.29% -2.44%
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------
Net Assets, End of Period (Millions) . . . . . . . . . . $731 $596 $531 $416 $335 $211
Ratio of Expenses to Average Net Assets . . . . . . . . . .50%* .48% .50% .40% .43% .48%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . . . 2.56%* 2.50% 2.22% 2.67% 2.95% 3.34%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . 78%* 71% 85% 51% 61% 81%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
NOTES TO FINANCIAL STATEMENTS
Vanguard Quantitative Portfolios is registered under the Investment Company Act
of 1940 as a diversified open-end investment company.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of financial
statements.
1. SECURITY VALUATION: Securities listed on an exchange are valued at the
latest quoted sales prices as of the close of the New York Stock
Exchange (generally 4:00 PM) on the valuation date; securities not
traded are valued at the mean of the latest quoted bid and asked
prices. Securities not listed are valued at the latest quoted bid
prices. Temporary cash investments are valued at amortized cost which
approximates market value.
2. FEDERAL INCOME TAXES: The Fund intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the
financial statements.
3. EQUALIZATION: The Fund follows the accounting practice known as
"equalization," under which a portion of the price of capital shares
issued and redeemed, equivalent to undistributed net investment income
per share on the date of the transaction, is credited or charged to
undistributed income. As a result, undistributed income per share is
unaffected by Fund share sales or redemptions.
10
<PAGE> 11
4. REPURCHASE AGREEMENTS: The Fund, along with other members of The
Vanguard Group of Investment Companies, transfers uninvested cash
balances into a Pooled Cash Account, the daily aggregate of which is
invested in repurchase agreements secured by U.S. Government
obligations. Securities pledged as collateral for repurchase
agreements are held by the Fund's custodian bank until maturity of
each repurchase agreement. Provisions of each agreement require that
the market value of this collateral is sufficient in the event of
default; however, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral
may be subject to legal proceedings.
5. FUTURES: The Fund utilizes Standard & Poor's 500 Index futures
contracts to a limited extent, with the objectives of maintaining full
exposure to the stock market, maintaining liquidity and minimizing
transaction costs. The Fund may purchase futures contracts to
immediately position incoming cash in the market, thereby simulating a
fully invested position in the underlying index while maintaining a
cash balance for liquidity. In the event of redemptions, the Fund may
pay departing shareholders from its cash balance and reduce its
futures position accordingly.
The primary risks associated with the use of futures contracts are
imperfect correlation between changes in market values of stocks held
by the Fund and the prices of futures contracts, and the possibility
of an illiquid market. Futures contracts are valued based upon their
quoted daily settlement prices. Fluctuations in the values of futures
contracts are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains (losses) are recognized.
Unrealized appreciation (depreciation) related to open futures
contracts is required to be treated as realized gain (loss) for
Federal income tax purposes.
6. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized
gains and losses on the sale of investment securities are those of
specific securities sold. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
B. Under the terms of a contract which expires September 30, 1995, the
Fund pays Franklin Portfolio Associates a basic advisory fee calculated at an
annual percentage rate of average net assets. The basic fee thus computed is
subject to quarterly adjustments based on performance relative to the Standard &
Poor's 500 Stock Index. For the six months ended June 30, 1995, the advisory fee
represented an effective annual rate of .18 of 1% of average net assets. No
performance adjustment was required during this period.
C. The Vanguard Group, Inc. furnishes at cost corporate management,
administrative, marketing, and distribution services. The costs of such services
are allocated to the Fund under methods approved by the Board of Directors. At
June 30, 1995, the Fund had contributed capital of $97,000 to Vanguard (included
at cost in Other Assets), representing .5% of Vanguard's capitalization. The
Fund's directors and officers are also directors and officers of Vanguard.
D. During the six months ended June 30, 1995, the Fund made purchases of
$283,042,000 and sales of $249,722,000 of investment securities other than U.S.
Government securities and temporary cash investments. At December 31, 1994, the
Fund had available realized capital losses of $4,225,000 to offset future net
capital gains through December 31, 2003.
E. At June 30, 1995, unrealized appreciation of investment securities for
financial reporting and Federal income tax purposes aggregated $128,863,000, of
which $131,845,000 related to appreciated securities and $2,982,000 related to
depreciated securities.
At June 30, 1995, the aggregate settlement value of open Standard & Poor's 500
Index futures contracts expiring in September 1995, the related unrealized
appreciation, and the market value of securities deposited as initial margin for
those contracts were $21,886,000, $296,000, and $840,000, respectively.
11
<PAGE> 12
THE VANGUARD FAMILY OF FUNDS
FIXED INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Admiral Funds
U.S. Treasury Money
Market Portfolio
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Money Market Portfolio
Vanguard State Tax-Free Funds
Money Market Portfolios
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
Insured Longer-Term Portfolios
(CA, FL, NJ, NY, OH, PA)
INCOME FUNDS
Vanguard Admiral Funds
Vanguard Fixed Income
Securities Fund
Vanguard Preferred Stock Fund
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible
Securities Fund
Vanguard Equity Income Fund
Vanguard Quantitative Portfolios
Vanguard/Trustees Equity Fund
U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Funds
Income Portfolio
Conservative Growth Portfolio
Moderate Growth Portfolio
Growth Portfolio
Vanguard STAR Portfolio
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International
Growth Portfolio
Vanguard/Trustees Equity Fund
International Portfolio
INDEX FUNDS
Vanguard Index Trust
Total Stock Market Portfolio
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Value Portfolio
Small Capitalization Stock Portfolio
Vanguard International Equity Index Fund
European Portfolio
Pacific Portfolio
Emerging Markets Portfolio
Vanguard Bond Index Fund
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
[LOGO]
<TABLE>
<S> <C>
Vanguard Financial Center Valley Forge, Pennsylvania 19482
New Account Information: Shareholder Account Services:
1-(800) 662-7447 1-(800) 662-2739
This Report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus. All Funds in the
Vanguard Family are offered by prospectus only.
Q932-6/95
</TABLE>
VANGUARD
QUANTITATIVE
PORTFOLIOS
SEMI-ANNUAL REPORT
JUNE 30, 1995
