<PAGE> 1
CHAIRMAN'S LETTER
DEAR SHAREHOLDER:
Following the sharp rise in short-term interest rates that took place from
March to December of 1994, rates stabilized at high levels during most of the
six months ended May 31--the first half of the 1995 fiscal year for Vanguard
Institutional Money Market Portfolio--before sliding lower in the final weeks
of the period. The end result was that the Portfolio's net income increased by
about +80% compared to the first half of 1994.
The table below shows the impact of the dramatic surge in short-term
rates on our annualized yields over the past year and one-half:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Seven-Day Annualized Yield
------------------------------------------------------------------------
May 31, November 30, May 31, November 30,
1995 1994 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIMMP 6.03% 5.29% 3.95% 3.16%
- ----------------------------------------------------------------------------------------
</TABLE>
With the Federal Reserve Board remaining relatively tight-fisted in its
monetary policy during the past six months, the stability in money market
yields resulted from the diminishing threat of further increases in the Federal
funds rate. Contrast this stability with fiscal 1994, when the Fed raised this
key rate on fully six separate occasions. It would appear that the Fed's tough
policy is bearing fruit: inflation so far remains quite subdued, and business
activity has slowed to a more normal growth rate.
As always, the pundits do not agree on what comes next. Some look for
a continuation of the present tight monetary policy; others expect a rate
reduction, given lessened inflation expectations and the likely pressure that
the Administration, with a presidential election year before it, is apt to put
on the Fed to stimulate the economy. Still others, expecting inflation to
return to the economy, believe that a further rise in short-term rates may be
required. That is a wide spread of opinion! My guess is that extreme changes in
rates--either up or down--are unlikely to take place during the remainder of
our fiscal year.
Whatever the case may be, you can be confident that Vanguard
Institutional Money Market Portfolio will continue to provide an attractive
yield relative to other comparable money market fund portfolios. The principal
reason for our income advantage, as you know, is that our operating expenses
are so much lower than industry norms. Our Portfolio, for example, operates at
an annual expense ratio of 0.15% compared with 0.43% for our average
institutional competitor. This advantage of 0.28% carries directly to the
bottom line: the yield you receive. As a result, our return has been
consistently higher than that of competitive funds. For the twelve months ended
May 31, our Portfolio's total return was +5.4%, or 30 basis points higher than
the +5.1% return for the average institutional money market fund.
I want to underscore that our higher yield does not arise from the
Portfolio's ownership of lower quality money market instruments. Our Portfolio
quality is, we believe, unsurpassed in the money market field. Other funds
which stinted on quality last year ran the risk of price declines that would
potentially reduce their net asset values below the $1.00 level that investors
have come to take for granted. In fact, the managers of some 25 money market
funds actually had to shore up their funds' asset values with cash infusions.
Our focus on quality precluded our having to do so.
PROPOSED REORGANIZATION
As you may know, Vanguard Institutional Money Market Portfolio was created in
October 1989 for institutional clients as a more cost-effective investment
alternative to the Prime Portfolio of Vanguard Money Market Reserves. Since
then, the Institutional Portfolio has maintained the same high credit quality
standards as the Prime Portfolio and yet has operated with a significantly
lower expense ratio and a corresponding yield advantage. It is now feasible,
through a "multiple-class" structure, to offer an institutional class of shares
of the Prime Portfolio with an expense ratio identical to that of Vanguard
Institutional Money Market Portfolio. In a proxy statement, which we will mail
to you shortly, the Board of Directors of Vanguard Institutional Money Market
Portfolio will recommend to shareholders that the shares of the Portfolio be
acquired, through a
1
<PAGE> 2
tax-free merger, by the Prime Portfolio of Vanguard Money Market Reserves. If
approved by shareholders, the merger will result in Vanguard Institutional
Money Market Portfolio shareholders receiving, in exchange for their current
holdings, an identical number of shares of Prime Portfolio Institutional
Shares.
We believe the proposed merger offers several important benefits. Most
importantly, shareholders will participate in a substantially more diversified
Portfolio (Prime Portfolio had assets of $16.9 billion on May 31, 1995,
compared to $634 million for Vanguard Institutional Money Market Portfolio).
The Prime Portfolio will also be less subject to the impact of potentially
large purchases or redemptions by any one shareholder. Finally, the proposed
merger will offer Vanguard certain expense savings to the benefit of Vanguard
Fund shareholders as a group. The benefits, we emphasize, come at no expense to
the shareholders of Vanguard Institutional Money Market Portfolio: our annual
expense ratio will remain unchanged at 0.15%. More details will be provided in
the forthcoming proxy statement.
We think Vanguard Institutional Money Market Portfolio has served our
shareholders well over the course of the past five and one-half years. The
reorganization we are proposing will in no way reduce our unwavering commitment
to low costs and high quality which have been the hallmarks of our investment
program.
Sincerely,
/s/ JOHN C. BOGLE
- -----------------
John C. Bogle
Chairman of the Board
June 22, 1995
Note: Mutual fund data from Lipper Analytical Services, Inc.
AVERAGE ANNUAL TOTAL RETURNS--THE CURRENT YIELDS PROVIDED IN THE CHAIRMAN'S
LETTER ARE CALCULATED IN ACCORDANCE WITH THE SEC GUIDELINES. THE AVERAGE ANNUAL
TOTAL RETURNS FOR THE PORTFOLIO (PERIODS ENDED MARCH 31, 1995) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
---------- ----------------------------------------
<S> <C> <C> <C> <C>
VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO 10/3/89 +4.98% +5.07% +5.40%
</TABLE>
ALL OF THESE DATA REPRESENT PAST PERFORMANCE; FUTURE RETURNS WILL FLUCTUATE. AN
INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00.
2
<PAGE> 3
REPORT FROM THE INVESTMENT ADVISER
On balance, money market interest rates fell somewhat in the first half of
fiscal year 1995 as expectations of future short-term rates traveled from
extreme pessimism to outright optimism. The bond markets started the fiscal
year with the worst case scenario of a protracted period of rising interest
rates factored into interest rate levels. This pessimism was fostered by the
experience of 1994, when the Federal Reserve (the "Fed") raised interest rates
with the intention of cooling the surging economy.
The Fed, which attempts to steer the economy on a path of sustainable,
non-inflationary growth by raising and lowering the cost of borrowing for
businesses and consumers, did in fact raise short-term interest rates in
February 1995. The Fed increased the Federal funds rate (the rate at which
banks borrow and lend reserves among themselves) by 0.5% to 6.0%. However, by
this time, government statistics were giving preliminary hints that economic
growth was moderating and inflation was relatively well behaved. As is typical
of markets, investors looked to the most current data and began to abandon
their expectations of more Fed rate hikes. This touched off an impressive bond
market rally that has continued up to the time of this writing.
As signs of the slower economy have proliferated, money market
interest rates actually have included expectations of cuts in short-term
interest rates by the Fed. The money market yield curve (the curve plotting the
relationship of interest rates for investments of various maturities from
short-term to long-term) has adopted an inverted configuration with six-month
and one-year rates below those for shorter maturities. This condition indicates
that the market expects the Fed to lower short-term rates by as much as 0.5% in
the coming months.
The underlying assumption is that the Fed has succeeded in engineering
a "soft landing" for the economy. While a soft landing no doubt would be a
highly desirable outcome for bond and stock market investors, a review of
economic history shows that it is highly unlikely. Monetary policy is not
precise enough to achieve such a result without a healthy dose of good luck.
Unfortunately, the high variability in both the timing and magnitude of the
economy's response to policy changes makes the Fed's activities more an art
than a science.
Throughout the wild swings in market expectations of this fiscal half
year, we have steered a conservative course for the Vanguard Institutional
Money Market Portfolio. Specifically, we have kept the average weighted
maturity of the Portfolio in the market neutral band of our investment policy
guidelines. This has helped us to ride out the market's gyrations this year. By
keeping our interest rate sensitivity stable, we were able to lock in some
attractive yields when rates were higher, and by the same token, we are not
making excessive commitments to the market now that rates have fallen.
In terms of the credit quality of our investments, we have determined
that lower quality money market securities generally do not provide adequate
additional return for the additional credit risk taken. Thus, we have
emphasized high credit quality issuers in the Institutional Portfolio, the
holdings of which are all rated in the highest category by the nationally
recognized credit rating agencies.
Finally, we have not invested (nor will we) in the risky or exotic
derivative securities that have caused losses for investors whose managers did
not fully evaluate the risks of such strategies. As always, we are relying on
our conservative management philosophy in combination with our exceptionally
low cost structure to provide our investors with highly competitive returns and
peace of mind.
Sincerely,
Ian A. MacKinnon, Senior Vice President
Robert F. Auwaerter, Vice President
John Hollyer, Assistant Vice President
Vanguard Fixed Income Group
June 22, 1995
3
<PAGE> 4
FINANCIAL STATEMENTS
(unaudited)
May 31, 1995
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT &
AGENCY OBLIGATIONS (1.7%)
- ---------------------------------------------------------------------------
Federal Home Loan Bank
5.86%, 6/6/96 $ 6,000 $ 5,994
Federal National Mortgage Assn.
6.669%, 6/29/95 5,000 4,975
- ---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (Cost $10,969) 10,969
- ---------------------------------------------------------------------------
COMMERCIAL PAPER (62.6%)
- ---------------------------------------------------------------------------
BANK HOLDING COMPANIES (3.5%)
Banc One Corp.
6.112%, 7/7/95 7,000 6,958
CoreStates Capital
6.136%, 6/6/95 2,000 1,998
J.P. Morgan & Co., Inc.
6.042%-6.114%, 6/6/95-6/19/95 13,000 12,983
----------
GROUP TOTAL 21,939
----------
- ---------------------------------------------------------------------------
FINANCE--AUTO (2.0%)
Ford Motor Credit Co.
6.022%-6.04%, 6/23/95-7/25/95 10,000 9,931
Toyota Motor Credit Corp.
6.831%, 7/10/95 3,000 2,979
----------
GROUP TOTAL 12,910
----------
- ---------------------------------------------------------------------------
FINANCE--OTHER (11.9%)
A.I. Credit Corp.
6.065%, 7/18/95 7,000 6,945
American Express Credit Corp.
6.114%, 6/6/95 1,397 1,396
Asset Securitization
Cooperative Corp.
5.977%-6.071%, 6/15/95-8/4/95 12,000 11,938
Associates Corp.
6.018%-6.042%, 6/7/95-8/7/95 12,500 12,450
Ciesco L.P.
6.035%, 6/20/95 7,000 6,978
General Electric Capital Corp.
6.05%-6.806%, 7/10/95-9/19/95 23,000 22,711
Pitney Bowes Credit Corp.
6.019%-6.069%,
6/20/95-7/26/95 9,860 9,799
Stanford Univ.
6.309%-6.782%,
7/10/95-8/10/95 3,000 2,974
----------
GROUP TOTAL 75,191
----------
- ---------------------------------------------------------------------------
INDUSTRIAL (14.6%)
Bayer Corp.
5.989%-6.114%, 6/5/95-7/6/95 10,000 9,969
Hewlett Packard Co.
5.973%-6.062%,
7/18/95-8/29/95 9,000 8,903
Eli Lilly & Co.
6.043%-6.072%, 8/3/95-8/18/95 9,000 8,894
Miles Inc.
6.137%, 6/20/95 5,000 4,984
Mobil Australia Finance Co.
6.065%-6.093%, 8/1/95-8/18/95 13,300 13,152
Motorola Inc.
6.003%, 8/17/95 16,000 15,798
Norfolk Southern Corp.
6.007%, 6/12/95 2,400 2,396
Pfizer Inc.
5.959%, 6/8/95 8,000 7,991
United Parcel Service of America Inc.
6.004%, 8/2/95 5,000 4,949
Vermont American Corp.
5.971%, 6/13/95 397 396
Warner Lambert Co.
6.005%-6.016%,
7/13/95-7/24/95 15,200 15,082
----------
GROUP TOTAL 92,514
----------
- ---------------------------------------------------------------------------
INSURANCE (6.3%)
AIG Funding Inc.
5.961%-6.108%,
6/16/95-7/12/95 12,000 11,940
MetLife Funding Corp.
5.994%-6.067%,
7/11/95-7/28/95 13,400 13,298
SAFECO Credit Corp.
6.033%-6.163%, 6/12/95-8/7/95 11,000 10,933
USAA Capital Corp.
6.023%, 6/1/95 4,000 4,000
----------
GROUP TOTAL 40,171
----------
- ---------------------------------------------------------------------------
UTILITIES (5.1%)
AT&T Corp.
6.003%-6.026%,
6/20/95-6/28/95 4,469 4,451
Ameritech Corp.
6.077%-6.468%,
6/29/95-7/31/95 8,000 7,935
Southwestern Bell Telephone Co.
6.114%, 6/2/95 10,000 9,998
U S WEST Communications Inc.
6.061%, 7/26/95 10,000 9,909
----------
GROUP TOTAL 32,293
----------
- ---------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------
<S> <C> <C>
FOREIGN BANKS (8.0%)
Abbey National N.A.
6.145%-6.733%,
6/13/95-6/20/95 $ 5,000 $ 4,986
Commonwealth Bank of Australia
6.01%, 7/19/95 4,000 3,968
Canadian Imperial Holdings Inc.
6.009%, 7/7/95 10,000 9,941
Commerzbank U.S. Finance Inc.
6.003%-6.137%, 6/2/95-6/21/95 12,000 11,976
Rabobank Nederlanden
6.744%, 6/20/95 5,000 4,983
Toronto Dominion Holdings
USA Inc.
6.086%, 8/1/95 14,000 13,858
UBS Finance (DE) Inc.
5.958%, 6/9/95 1,236 1,234
----------
GROUP TOTAL 50,946
----------
- ---------------------------------------------------------------------------
CANADIAN GOVERNMENT--
NATIONAL AND PROVINCIAL (3.5%)
Canadian Wheat Board
6.033%-6.244%, 6/5/95-8/14/95 17,150 17,097
Province of British Columbia
6.887%, 7/10/95 5,000 4,964
----------
GROUP TOTAL 22,061
----------
- ---------------------------------------------------------------------------
OTHER FOREIGN GOVERNMENT (7.3%)
Caisse des Depots et Consignations
5.951%-6.083%, 6/14/95-9/1/95 12,500 12,377
KFW International Finance Inc.
5.981%-6.009%,
6/13/95-7/21/95 20,000 19,877
New South Wales Treasury Corp.
6.006%-6.081%, 6/5/95-7/18/95 9,000 8,951
Oesterreichische Kontrollbank
6.11%, 6/9/95 5,000 4,993
----------
GROUP TOTAL 46,198
----------
- ---------------------------------------------------------------------------
FOREIGN INDUSTRIAL (.4%)
Glaxo PLC
6.04%, 6/23/95 2,500 2,491
----------
- ---------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $396,714) 396,714
- ---------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (18.0%)
- ---------------------------------------------------------------------------
U.S. BANK (.8%)
National Bank of Detroit
6.00%, 6/30/95 5,000 5,000
----------
- ---------------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT--
U.S. BRANCHES (17.2%)
ABN-AMRO
5.98%-6.26%, 8/4/95-8/25/95 12,000 12,001
Bayerische Hypo Bank
6.01%, 7/10/95 10,000 10,000
Bayerische Landesbank Girozentrale
6.06%-6.10%, 6/19/95-7/13/95 15,000 15,000
Bayerische Vereinsbank
6.01%, 7/17/95 5,000 5,000
Caisse Nationale de Credit Agricole
6.17%-6.31%, 6/30/95-9/22/95 10,000 10,000
Credit Suisse
5.53%, 6/26/95 2,000 1,998
Dresdner Bank
5.45%-6.65%, 6/21/95-3/15/96 6,000 6,007
Bank of Montreal
6.06%, 6/9/95 10,000 10,000
Bank of Nova Scotia
6.02%-6.18%, 7/5/95-7/10/95 12,000 12,000
Rabobank Nederlanden
6.75%, 6/5/95 5,000 5,000
Societe Generale
6.01%-6.20%, 6/13/95-7/25/95 12,000 12,000
Swiss Bank
5.97%, 8/29/95 5,000 5,000
Westdeutsche Landesbank
6.08%, 7/27/95 5,000 5,000
----------
GROUP TOTAL 109,006
----------
- ---------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $114,006) 114,006
- ---------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (6.3%)
- ---------------------------------------------------------------------------
Abbey National
6.22%, 6/12/95 10,000 10,000
Deutsche Bank
5.40%-6.82%, 6/22/95-8/8/95 16,000 15,999
National Westminster Bank
6.29%, 10/5/95 10,000 10,010
Toronto Dominion
5.95%, 11/1/95 4,000 4,000
- ---------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES
OF DEPOSIT (Cost $40,009) 40,009
- ---------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES (1.6%)
- ---------------------------------------------------------------------------
Bank One (Texas)
6.337%, 6/1/95(1) $ 5,000 $ 5,000
Morgan Bank (Delaware)
5.86%, 6/6/95(1) 5,000 5,000
- ---------------------------------------------------------------------------
TOTAL BANK NOTES
(Cost $10,000) 10,000
- ---------------------------------------------------------------------------
BANKERS ACCEPTANCES (2.8%)
- ---------------------------------------------------------------------------
U.S. BANKS (1.2%)
CoreStates Bank N.A.
6.102%, 6/13/95 2,700 2,695
Wachovia Bank of Georgia
6.093%, 8/1/95 5,400 5,345
----------
GROUP TOTAL 8,040
----------
- ---------------------------------------------------------------------------
YANKEE BANKERS ACCEPTANCES (1.6%)
Barclays Bank
6.032%, 7/31/95 2,000 1,980
Swiss Bank
6.82%, 6/22/95 3,000 2,988
Union Bank of Switzerland
6.104%, 6/5/95 5,000 4,997
----------
GROUP TOTAL 9,965
----------
- ---------------------------------------------------------------------------
TOTAL BANKERS ACCEPTANCES
(Cost $18,005) 18,005
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENTS (10.0%)
- ---------------------------------------------------------------------------
Chase Securities, Inc.
6.15%, 6/1/95
(Collateralized by U.S. Treasury
Note 7.75%, 12/31/99) 50,000 50,000
Goldman Sachs & Co.
6.10%, 6/1/95
(Collateralized by U.S. Treasury
Bond 12.50%, 8/15/14) 13,332 13,332
- ---------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $63,332) 63,332
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS (103.0%)
(Cost $653,035) 653,035
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)+
- ---------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-3.0%)
- ---------------------------------------------------------------------------
Other Assets--Note B $ 2,450
Liabilities (21,519)
----------
(19,069)
- ---------------------------------------------------------------------------
NET ASSETS (100%)
- ---------------------------------------------------------------------------
Applicable to 633,970,718 outstanding
$.001 par value shares
(authorized 20,000,000,000 shares) $633,966
- ---------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
===========================================================================
</TABLE>
+See Note A to Financial Statements.
(1)Floating Rate Note.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
AT MAY 31, 1995, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------
Amount Per
(000) Share
---------- ----------
<S> <C> <C>
Paid in Capital $633,971 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net
Realized Losses (5) --
Unrealized Appreciation
of Investments -- --
- ---------------------------------------------------------------------------
NET ASSETS $633,966 $1.00
- ---------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1995
(000)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,654
- ---------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . 19,654
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . . . . . . . . . . . . . $ 42
Management and Administrative . . . . . . . . . . . . . . . . 287
Marketing and Distribution . . . . . . . . . . . . . . . . . . 93 422
-----
Custodian's Fees . . . . . . . . . . . . . . . . . . . . . . . . 26
Taxes (other than income taxes) . . . . . . . . . . . . . . . . 24
Shareholders' Reports . . . . . . . . . . . . . . . . . . . . . 9
Auditing Fees . . . . . . . . . . . . . . . . . . . . . . . . . 4
Directors' Fees and Expenses . . . . . . . . . . . . . . . . . . 1
- ---------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . 486
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . 19,168
- ---------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN ON INVESTMENT
SECURITIES SOLD . . . . . . . . . . . . . . . . . . . . . . . . . 1
- ---------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENT SECURITIES . . . . . . . . . . . . . --
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations . . $19,169
===============================================================================================================
</TABLE>
7
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED Year Ended
MAY 31, 1995 November 30, 1994
(000) (000)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . $ 19,168 $ 20,325
Realized Net Gain (Loss) . . . . . . . . . . . . . . . . . . . . . 1 (5)
Unrealized Appreciation (Depreciation) . . . . . . . . . . . . . . -- --
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations . . . 19,169 20,320
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . (19,168) (20,325)
- ---------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (at $1.00 per share)
Issued --Regular . . . . . . . . . . . . . . . . . . . . . . . 259,336 445,486
--In Lieu of Cash Distributions . . . . . . . . . . . . 16,796 18,410
--Exchange . . . . . . . . . . . . . . . . . . . . . . . 2,485 86,890
Redeemed --Regular . . . . . . . . . . . . . . . . . . . . . . . (274,738) (152,819)
--Exchange . . . . . . . . . . . . . . . . . . . . . . . (46,836) (26,591)
- ---------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transactions . (42,957) 371,376
- ---------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . . . . . . . . . . . . . (42,956) 371,371
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . 676,922 305,551
- ---------------------------------------------------------------------------------------------------------------
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . $633,966 $676,922
===============================================================================================================
(1) Income Dividends Per Share . . . . . . . . . . . . . . . . . . $.030 $.040
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended November 30,
SIX MONTHS ENDED -------------------------------------------------------
For a Share Outstanding Throughout Each Period MAY 31, 1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . .030 .040 .031 .040 .063 .082
Net Realized and Unrealized Gain
on Investments . . . . . . . . . . . . . . . . . -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS . . . . . . .030 .040 .031 .040 .063 .082
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.030) (.040) (.031) (.040) (.063) (.082)
Distributions from Realized Capital Gains . . . . . -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . (.030) (.040) (.031) (.040) (.063) (.082)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
============================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . +2.99% +4.06% +3.19% +4.02% +6.52% +8.49%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (Millions) . . . . . . . . $634 $677 $306 $269 $218 $91
Ratio of Expenses to Average Net Assets . . . . . . . .15%* .15% .15% .15% .15% .15%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . . 5.92%* 4.14% 3.14% 3.93% 6.14% 8.24%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
Vanguard Institutional Money Market Portfolio is a Portfolio of Vanguard
Institutional Portfolios, which is registered under the Investment Company Act
of 1940 as a diversified open-end investment company. The Fund invests in
short-term debt instruments of companies primarily operating in specific
industries; the issuers' abilities to meet these obligations may be affected by
economic developments in such industries.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of financial
statements.
1. SECURITY VALUATION: Securities are stated at amortized cost which
approximates market value.
2. FEDERAL INCOME TAXES: The Fund intends to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.
3. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Discounts and premiums are accreted and amortized, respectively, to interest
income over the lives of the respective securities. Distributions from net
investment income are declared on a daily basis payable on the first
business day of the following month.
B. The Vanguard Group, Inc. furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the Fund under methods approved by the Board of
Directors. At May 31, 1995, the Fund had contributed capital of $82,000 to
Vanguard (included in Other Assets), representing .4% of Vanguard's
capitalization. The directors and officers of the Fund are also directors and
officers of Vanguard.
10
<PAGE> 11
DIRECTORS AND OFFICERS
JOHN C. BOGLE, Chairman and Chief Executive Officer
Chairman and Director of The Vanguard Group, Inc.,
and of each of the investment companies in The
Vanguard Group.
JOHN J. BRENNAN, President
President and Director of The Vanguard Group, Inc.,
and of each of the investment companies in The
Vanguard Group.
ROBERT E. CAWTHORN, Chairman of Rhone-Poulenc
Rorer, Inc.; Director of Sun Company, Inc.
BARBARA BARNES HAUPTFUHRER, Director of The Great
Atlantic and Pacific Tea Company, Alco Standard Corp.,
Raytheon Company, Knight-Ridder, Inc., and
Massachusetts Mutual Life Insurance Co.
BRUCE K. MACLAURY, President of The Brookings
Institution; Director of American Express Bank Ltd.,
The St. Paul Companies, Inc., and Scott Paper Company.
BURTON G. MALKIEL, Chemical Bank Chairman's
Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Amdahl
Corporation, Baker Fentress & Co., The Jeffrey Co.,
and Southern New England Communications Company.
ALFRED M. RANKIN, JR., Chairman, President, and
Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich
Company, Reliance Electric Company, and The Standard
Products Company.
JOHN C. SAWHILL, President and Chief Executive Officer
of The Nature Conservancy; formerly, Director and
Senior Partner of McKinsey & Co. and President of
New York University; Director of Pacific Gas and
Electric Company and NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco
Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc.
J. LAWRENCE WILSON, Chairman and Chief Executive
Officer of Rohm & Haas Company; Director of
Cummins Engine Company; Trustee of Vanderbilt
University and the Culver Educational Foundation.
OTHER FUND OFFICERS
RICHARD F. HYLAND, Treasurer; Treasurer of The
Vanguard Group, Inc., and of each of the investment
companies in The Vanguard Group.
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President
and Secretary of The Vanguard Group, Inc.; Secretary of
each of the investment companies in The Vanguard Group.
KAREN E. WEST, Controller; Vice President of The
Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD GROUP OFFICERS
ROBERT A. DISTEFANO IAN A. MACKINNON
Senior Vice President Senior Vice President
Information Technology Fixed Income Group
JEREMY G. DUFFIELD F. WILLIAM MCNABB III
Senior Vice President Senior Vice President
Planning & Development Institutional
JAMES H. GATELY RALPH K. PACKARD
Senior Vice President Senior Vice President
Individual Investor Group Chief Financial Officer
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
[THE VANGUARD GROUP LOGO]
<TABLE>
<S> <C>
Vanguard Financial Center Valley Forge, Pennsylvania 19482
New Account Information: 1-(800) 662-7447 Shareholder Account Services: 1-(800) 662-2739
</TABLE>
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.
Q662-5/95
VANGUARD INSTITUTIONAL
MONEY MARKET PORTFOLIO
SEMI-ANNUAL REPORT
MAY 31, 1995
