<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO. 33-27055) UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 6
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 8
VANGUARD INSTITUTIONAL
PORTFOLIOS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1200 MORRIS DRIVE, P.O. BOX 2600,
VALLEY FORGE, PA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER (610) 669-1000
RAYMOND J. KLAPINSKY, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482
IT IS PROPOSED THAT THE AMENDMENT BECOME EFFECTIVE:
on March 31, 1995, pursuant to paragraph (b) of Rule 485 of the Securities Act
of 1933.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes effective*.
REGISTRANT ELECTS TO REGISTER AN INDEFINITE NUMBER OF SHARES PURSUANT TO
REGULATION 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. REGISTRANT FILED ITS
RULE 24f-2 NOTICE FOR THE YEAR ENDED NOVEMBER 30, 1994 ON JANUARY 30, 1995.
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<PAGE> 2
VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS
<C> <S> <C>
Item 1. Cover Page.................................... Cover Page
Item 2. Synopsis...................................... Not Applicable
Item 3. Condensed Financial Information............... Financial Highlights
Item 4. General Description of Registrant............. Investment Objective; Investment
Policies; Investment Limitations;
General Information
Item 5. Management of the Fund........................ Directors and Officers; Management of
the Fund; Investment Adviser
Item 6. Capital Stock and Other Securities............ Opening an Account and Purchasing
Shares; Selling Your Shares; The
Portfolio Share Price; Dividends and
Taxes; General Information
Item 7. Purchase of Securities Being Offered.......... Cover Page; Opening an Account and
Purchasing Shares
Item 8. Redemption or Repurchase...................... Selling Your Shares
Item 9. Pending Legal Proceedings..................... Not Applicable
<CAPTION>
FORM N-1A LOCATION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
<C> <S> <C>
Item 10. Cover Page.................................... Cover Page
Item 11. Table of Contents............................. Cover Page
Item 12. General Information and History............... Investment Objective and Policies
Item 13. Investment Objective and Policies............. Investment Objective and Policies;
Investment Limitations
Item 14. Management of the Fund........................ Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities.................................... Management of the Fund
Item 16. Investment Advisory and Other Services........ Management of the Fund
Item 17. Brokerage Allocation.......................... Not Applicable
Item 18. Capital Stock and Other Securities............ Financial Statements
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................. Purchase of Shares; Redemption of
Shares
Item 20. Tax Status.................................... Appendix
Item 21. Underwriters.................................. Not Applicable
Item 22. Calculations of Yield Quotations of Money
Market Fund................................... Calculation of Yield
Item 23. Financial Statements.......................... Financial Statements
</TABLE>
<PAGE> 3
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[LOGO] A Member of The Vanguard Group
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PROSPECTUS--MARCH 31, 1995
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NEW ACCOUNT INFORMATION: 1-800-523-1188
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INVESTMENT
OBJECTIVE AND
POLICIES Vanguard Institutional Money Market Portfolio (the
"Portfolio") is an open-end diversified investment
company. Designed primarily for institutional investors,
the Portfolio's objective is to provide the maximum
current income that is consistent with the preservation of
capital and liquidity by investing in specified money
market instruments. The Portfolio seeks to maintain a
constant net asset value of $1.00 per share. ALTHOUGH THE
PORTFOLIO INVESTS IN HIGH-QUALITY INSTRUMENTS, AN
INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
The Portfolio is an independent series of Vanguard
Institutional Portfolios, Inc. (the Company). The Company
is currently offering shares of one series.
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OPENING AN
ACCOUNT Shares of the Portfolio may be purchased by Federal Funds
wire. The minimum initial investment is $10 million.
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ABOUT THIS
PROSPECTUS This Prospectus is designed to set forth concisely the
information an investor should know about the Portfolio
before investing. It should be retained for future
reference. A "Statement of Additional Information"
containing additional information about the Portfolio has
been filed with the Securities and Exchange Commission.
This Statement is dated March 31, 1995 and has been
incorporated by reference into this Prospectus. A copy may
be obtained without charge by writing to or calling
Vanguard at 1-800-523-1188.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page Page
<S> <C> <C>
Portfolio Expenses ................ 2 Investment Limitations ............ 6 SHAREHOLDER GUIDE
Financial Highlights .............. 2 Management of the Portfolio ....... 6 Opening an Account and
Yield and Total Return ............ 3 Investment Adviser ................ 7 Purchasing Shares ............... 11
PORTFOLIO INFORMATION Dividends and Taxes ............... 7 Dividend and Trade Date
Investment Objective .............. 3 Share Price Determination ......... 9 Policy ..... 12
Investment Policies ............... 4 General Information ............... 10 Selling Shares .................... 12
Implementation of Policies ........ 5 Exchanging Shares ................. 13
Important Information About
Telephone Transactions .......... 13
Other Account Information ......... 14
</TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<PAGE> 4
PORTFOLIO
EXPENSES The following table illustrates all expenses and fees that
a shareholder of the Portfolio would incur. The expenses
set forth below are for the 1994 fiscal year.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
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Sales Load Imposed on Purchases........................................ None
Sales Load Imposed on Reinvested Dividends............................. None
Redemption Fees*....................................................... None
Exchange Fees.......................................................... None
ANNUAL FUND OPERATING EXPENSES
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Management & Administrative Expenses................................... 0.10%
Investment Advisory Fees............................................... 0.01
12b-1 Fees............................................................. None
Other Expenses
Distribution Costs........................................... 0.02%
Miscellaneous Expenses....................................... 0.02
----
Total Other Expenses................................................... 0.04
-----
TOTAL OPERATING EXPENSES...................................... 0.15%
-----
-----
*Wire redemptions of less than $5,000 are subject to a $5 processing fee.
</TABLE>
The purpose of this table is to assist an investor in
understanding the various expenses that an investor in the
Portfolio would bear directly or indirectly.
The following example illustrates the expenses that an
investor would incur on a $1,000 investment over various
periods, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each period. As noted in the
table above, the Portfolio charges no redemption fees of
any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$2 $5 $8 $19
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES
MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
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FINANCIAL
HIGHLIGHTS The following financial highlights for a share outstanding
throughout each period presented have been audited by
Price Waterhouse LLP, independent accountants, whose
report thereon was unqualified. This information should be
read in conjunction with the financial statements and
notes thereto, which are incorporated by reference in the
Statement of Additional Information and this Prospectus,
and which appear, along with the report of Price
Waterhouse LLP, in the Vanguard Institutional Money Market
Portfolio's 1994 Annual Report to Shareholders. For a more
complete discussion of the Portfolio's performance, please
see the Portfolio's 1994 Annual Report to Shareholders,
which may be obtained without charge by writing to the
Portfolio or by calling Institutional Participant Services
at 1-800-523-1188.
2
<PAGE> 5
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------- OCT. 3, 1989*
1994 1993 1992 1991 1990 TO NOV. 30, 1989
<S> <C> <C> <C> <C> <C> <C>
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NET ASSET VALUE, BEGINNING OF PERIOD......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income...................................... .040 .031 .040 .063 .082 .014
Net Realized and Unrealized Gain on Investments............ -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS......................... .040 .031 .040 .063 .082 .014
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DISTRIBUTIONS
Dividends from Net Investment Income....................... (.040) (.031) (.040) (.063) (.082) (.014)
Distributions from Realized Capital Gains.................. -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS...................................... (.040) (.031) (.040) (.063) (.082) (.014)
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NET ASSET VALUE, END OF PERIOD............................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------------------------------------
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TOTAL RETURN................................................. 4.06% 3.19% 4.02% 6.52% 8.49% 1.40%
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RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions)......................... $677 $306 $269 $218 $91 $69
Ratio of Expenses to Average Net Assets...................... .15% .15% .15% .15% .15% .15%**
Ratio of Net Investment Income to Average Net Assets......... 4.14% 3.14% 3.93% 6.14% 8.24% 8.90%**
</TABLE>
*Commencement of operations.
**Annualized.
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YIELD AND TOTAL
RETURN From time to time the Portfolio may advertise its yield
and total return. Both yield and total return figures are
based on historical earnings and are not intended to
indicate future performance. The "total return" of the
Portfolio refers to the average annual compounded rates of
return over one-, five- and ten-year periods or over the
life of the Portfolio (as stated in the advertisement)
that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable
value of the investment, assuming the reinvestment of all
dividends and distributions.
In accordance with industry guidelines set forth by the
U.S. Securities and Exchange Commission, the "seven-day"
or "current" yield of the Portfolio reflects the income
earned by a hypothetical account in the Portfolio during a
seven-day period, expressed as an annual percentage rate.
The "effective yield" of the Portfolio assumes the income
over the seven-day period is reinvested weekly, resulting
in a slightly higher stated yield through compounding.
Methods used to calculate advertised yields are
standardized for all money market funds. However, these
methods differ from the accounting methods used by the
Portfolio to maintain its books and records, and so
advertised yields may not fully reflect the income paid to
a shareholder's account or the yield reported in the
Portfolio's Annual Report.
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INVESTMENT
OBJECTIVE The Portfolio is designed primarily for institutional
investors. The Portfolio's objective is to provide the
maximum current income that is consistent with the
preservation of capital and liquidity by investing in
specified money market instruments. The Portfolio also
seeks to maintain a constant net asset value of $1.00 per
share.
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3
<PAGE> 6
INVESTMENT
POLICIES
THE PORTFOLIO INVESTS
HIGH QUALITY MONEY
MARKET SECURITIES The Portfolio will invest in the following high-quality
money market obligations issued by financial institutions,
non-financial corporations, the U.S. Government, its
agencies and instrumentalities and state and municipal
governments and their agencies or instrumentalities:
(1) Negotiable certificates of deposit and bankers'
acceptances of U.S. banks having total assets in
excess of $1 billion.
(2) Commercial paper (including variable amount master
demand notes) rated Prime-1 by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Corporation
or, if unrated, issued by a corporation having an
outstanding debt issue rated Aa3 or better by Moody's
or AA- or better by Standard & Poor's.
(3) Short-term corporate obligations rated Aa3 or better
by Moody's or AA- or better by Standard & Poor's.
(4) Eurodollar and Yankee bank obligations. Eurodollar
bank obligations are dollar-denominated certificates
of deposit or time deposits issued outside the U.S. by
the foreign branches of U.S. banks and by foreign
banks; Yankee bank obligations are dollar-denominated
obligations issued in the U.S. by foreign banks.
(5) United States Treasury obligations including bills,
notes, bonds, and other debt obligations issued by the
United States Treasury. These securities are backed by
the full faith and credit of the U.S. Government.
(6) Securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government. These
include securities issued by the Federal Home Loan
Bank, Federal Land Bank, Farmers Home Administration,
Farm Credit Bank, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal
Financing Bank, Tennessee Valley Authority, and
others. Such "agency" securities may not be backed by
the full faith and credit of the U.S. Government.
(7) Repurchase agreements collateralized by the securities
listed in (5) and (6) above.
In addition, up to 10% of the Portfolio's net assets may
be invested in "restricted" money market securities, which
are not freely marketable or which are subject to
restrictions on disposition under the Securities Act of
1933. As an operational policy, the Portfolio will not, in
the aggregate, enter into repurchase agreements maturing
in more than seven days, purchase restricted securities,
or invest in any other illiquid securities if, as a
result, more than 10% of the net assets of the Portfolio
would be invested in such assets.
The Portfolio invests in money market instruments that
mature in 13 months or less. The Portfolio will also
maintain an average weighted maturity of 90 days or less.
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4
<PAGE> 7
IMPLEMENTATION
OF POLICIES
THE PORTFOLIO MAY
INVEST IN REPURCHASE
AGREEMENTS The Portfolio may invest in repurchase agreements
according to the restrictions and limitations set forth
above in "Investment Policies." A repurchase agreement is
a means of investing monies for a short period. In a
repurchase agreement, a seller -- a U.S. commercial bank
or recognized U.S. securities dealer -- sells securities
to the Portfolio and agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified
period (normally one day). In these transactions, the
securities purchased by the Portfolio will have a total
value equal to or in excess of the value of the repurchase
agreement, and will be held by the Portfolio's Custodian
Bank until repurchased.
The use of repurchase agreements involves certain risks.
For example, if the seller of the agreement defaults on
its obligation to repurchase the underlying securities at
a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them.
If the seller of the agreement becomes insolvent and
subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral
not within the control of the Portfolio and therefore
subject to sale by the trustee in bankruptcy. Finally, it
is possible that the Portfolio may not be able to
substantiate its interest in the underlying securities.
While the Portfolio's management acknowledges these risks,
it is expected that they can be controlled through
stringent security selection and careful monitoring.
THE PORTFOLIO MAY
INVEST IN EURODOLLAR OR
YANKEE OBLIGATIONS Eurodollar bank obligations are dollar-denominated
certificates of deposit or time deposits issued outside
the U.S. capital markets by the foreign branches of U.S.
banks and by foreign banks. Yankee bank obligations are
dollar-denominated obligations issued in the U.S. capital
markets by foreign banks.
Eurodollar and Yankee obligations are subject to the same
risks that pertain to domestic issues, notably credit
risk, market risk and liquidity risk. Additionally,
Eurodollar (and to a limited extent, Yankee) obligations
are subject to certain sovereign risks. One such risk is
the possibility that a foreign government might prevent
dollar-denominated funds from flowing across its borders.
Other risks include: adverse political and economic
developments in a foreign country; the extent and quality
of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes;
and expropriation or nationalization of foreign issuers.
However, Eurodollar and Yankee obligations will undergo
the same credit analysis as domestic issues in which the
Portfolio invests, and foreign issuers will be required to
meet the same tests of financial strength as the domestic
issuers approved for the Portfolio.
PORTFOLIO TURNOVER
WILL BE HIGH The Portfolio is expected to have a high portfolio
turnover rate due to the short maturities of the
securities purchased. However, this high turnover rate
should not increase the Portfolio's costs since brokerage
commissions are not normally charged on the purchase or
sale of money market instruments.
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5
<PAGE> 8
INVESTMENT
LIMITATIONS
THE PORTFOLIO HAS
ADOPTED CERTAIN
FUNDAMENTAL
LIMITATIONS The Portfolio has adopted certain limitations designed to
reduce its risk exposure. These limitations include the
following:
(a) The Portfolio will not invest more than 5% of its
assets in the securities of any single company,
excluding obligations of the United States Government.
(b) The Portfolio will not purchase more than 10% of any
class of securities of any issuer.
(c) The Portfolio will not invest more than 25% of its
assets in any one industry, excluding obligations of
the United States Government or certificates of
deposit or banker's acceptances of domestic
institutions.
(d) The Portfolio will not borrow money except for
emergency purposes and then not in excess of 15% of
total assets.
These investment limitations are considered at the time
investment securities are purchased. The limitations
described here and in the Statement of Additional
Information may be changed only with the approval of a
majority of the Portfolio's shareholders.
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MANAGEMENT OF
THE PORTFOLIO
VANGUARD ADMINISTERS
AND DISTRIBUTES THE
PORTFOLIO The Portfolio is a member of The Vanguard Group of
Investment Companies, a family of more than 30 investment
companies with more than 80 distinct investment portfolios
and total assets in excess of $130 billion. Through their
jointly-owned subsidiary, The Vanguard Group, Inc.
("Vanguard"), the Fund and the other funds in the Group
obtain at cost virtually all of their corporate
management, administrative, shareholder accounting and
distribution services. Vanguard also provides investment
advisory services on an at-cost basis to certain Vanguard
funds. As a result of Vanguard's unique corporate
structure, the Vanguard funds have costs substantially
lower than those of most competing mutual funds. In 1994,
the average expense ratio (annual costs including advisory
fees divided by total net assets) for the Vanguard funds
amounted to approximately .30% compared to an average of
1.05% for the mutual fund industry (data provided by
Lipper Analytical Services).
The Officers of the Portfolio manage its day-to-day
operations and are responsible to the Portfolio's Board of
Directors. The Directors set broad policies for the
Portfolio and choose its Officers. A list of Directors and
Officers of the Portfolio and a statement of their present
positions and principal occupations during the past five
years can be found in the Statement of Additional
Information.
Vanguard employs a supporting staff of management and
administrative personnel needed to provide the requisite
services to the funds and also furnishes the funds with
necessary office space, furnishings and equipment. Each
fund pays its share of Vanguard's total expenses, which
are allocated among the funds under methods approved by
the Board of Directors (Trustees) of each fund. In
addition, each fund bears its own direct expenses, such as
legal, auditing and custodian fees.
Vanguard also provides distribution and marketing services
to the Vanguard funds. The funds are available on a
no-load basis (i.e., there are no sales commissions or
12b-1 fees). However, each fund bears its share of the
Group's distribution costs.
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6
<PAGE> 9
INVESTMENT
ADVISER
VANGUARD MANAGES
THE PORTFOLIO'S
INVESTMENTS The Portfolio receives all investment advisory services on
an at-cost basis from Vanguard's Fixed Income Group. The
Group provides investment advisory services to more than
40 Vanguard money market and bond portfolios, both taxable
and tax-exempt. Total assets under management by
Vanguard's Fixed Income Group were $55 billion as of
December 31, 1994. The Fixed Income Group is supervised by
the Officers of the Portfolio. Ian A. MacKinnon, Senior
Vice President of Vanguard, has been in charge of the
Group since its inception in 1981.
The Fixed Income Group manages the investment and
reinvestment of the assets of the Portfolio and
continuously reviews, supervises and administers the
Portfolio's investment program, subject to the maturity
and quality standards specified in this Prospectus and
supplemental guidelines approved by the Board of
Directors. The Fixed Income Group's selection of
investments for the Portfolio is based on: (a) continuing
credit analysis of those instruments held in the Portfolio
and those being considered for inclusion therein; (b)
possible disparities in yield relationships between
different money market instruments; and (c) actual or
anticipated movements in the general level of interest
rates.
The Fixed Income Group is also responsible for the
allocation of principal business and portfolio brokerage
and the negotiation of commissions. The purchase and sale
of investment securities will ordinarily be principal
transactions. Portfolio securities will normally be
purchased directly from the issuer or from an underwriter
or market maker for the securities. There usually will be
no brokerage commissions paid by the Portfolio for
securities purchased directly from an issuer. Purchases
from underwriters of securities will include a commission
or concession paid by the issuer to the underwriter.
Purchases from dealers serving as market makers will
include a dealer's mark-up.
In purchasing and selling securities, it is the
Portfolio's policy to seek to obtain quality execution at
the most favorable prices through responsible
broker-dealers. In selecting broker-dealers to execute the
securities transactions for the Portfolio, consideration
will be given to such factors as: the price of the
security; the rate of the commission; the size and
difficulty of the order; the reliability, integrity,
financial condition, general execution and operational
capabilities of competing broker-dealers; and the
brokerage and research services provided to the Portfolio.
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DIVIDENDS
AND TAXES
DIVIDENDS ARE PAID ON
THE FIRST BUSINESS DAY
OF EACH MONTH The Portfolio's dividends are accrued daily and are
distributed on the first business day of the month. The
Portfolio's dividends will be automatically reinvested in
additional shares unless the Portfolio is notified
otherwise.
The Portfolio's dividends are computed and declared as of
the regular close of the New York Stock Exchange
(generally 4:00 p.m. Eastern time) each day, and are
payable to shareholders of record as of 12:00 noon
(Eastern time) on that day. In other words, shareholders
whose purchases of shares are effective as of 12:00 noon
will receive the dividend for that day. See "Dividend and
Trade Date Policy" for more information about the
crediting of dividends.
Net realized short-term capital gains of the Portfolio, if
any, will be distributed whenever the Directors determine
that such distributions would be in the best
7
<PAGE> 10
interest of shareholders, but in any event at least once a
year. The Portfolio does not expect to realize any
long-term capital gains. Should any such gains be
realized, they will be distributed annually.
In addition, in order to satisfy certain distribution
requirements of the Tax Reform Act of 1986, the Fund may
declare special or regular year-end dividend and capital
gains distributions during December. Such distributions,
if received by shareholders by January 31, are deemed to
have been paid by the Fund and received by shareholders on
December 31 of the prior year.
DIVIDENDS WILL BE
SUBJECT TO FEDERAL
INCOME TAX The Portfolio intends to continue to qualify for taxation
as a "regulated investment company" under the Internal
Revenue Code so that it will not be subject to federal
income tax to the extent its income is distributed to
shareholders. Dividends paid by the Portfolio from net
investment income, whether received in cash or reinvested
in additional shares, will be taxable to shareholders as
ordinary income. For corporate investors, dividends from
net investment income will not qualify for the
intercorporate dividends-received deduction.
Although the Portfolio does not expect to distribute any
long-term capital gains, any capital gains distribution
made by the Portfolio would be subject to federal income
tax. Such distributions would not qualify for the
intercorporate dividends-received deduction.
A sale of shares of the Portfolio, either by redemption or
exchange, is a taxable event, and may result in a capital
gain or loss. However, since the Portfolio seeks to
maintain a constant $1.00 share price for both purchases
and redemptions, shareholders are not expected to realize
a capital gain or loss upon sale.
Dividend distributions, any capital gains distributions,
and any capital gains or losses from redemptions and
exchanges may be subject to state and local taxes.
However, depending on a state's tax rules, the portion of
the Portfolio's income derived from direct U.S. Treasury
obligations may be exempt from state and local taxes.
Vanguard will indicate each year the portion of the
Portfolio's income, if any, that may qualify for this
exemption.
The Portfolio is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions
paid to shareholders who have not complied with IRS
taxpayer identification regulations. This withholding
requirement may be avoided by certifying on the Account
Registration Form the appropriate Taxpayer Identification
Number and by certifying that backup withholding does not
apply.
The Portfolio has obtained a Certificate of Authority to
do business as a foreign corporation in Pennsylvania, and
does business and maintains an office in that state. In
the opinion of counsel, the shares of the Portfolio will
be exempt from Pennsylvania personal property taxes.
The tax discussion set forth above is included for general
information only. Prospective investors should consult
their own tax advisers concerning the tax
8
<PAGE> 11
consequences of an investment in the Portfolio. The
Portfolio is managed without regard to tax ramifications.
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SHARE PRICE
DETERMINATION The Portfolio's share price or "net asset value" per share
is calculated daily at the regular close of trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern
time.) The Portfolio determines its net asset value per
share by subtracting the Portfolio's liabilities
(including accrued expenses and dividends payable) from
the total value of the Portfolio's investments and other
assets and dividing the result by the total outstanding
shares of the Portfolio.
For the purpose of calculating the Portfolio's net asset
value per share, securities are valued by the "amortized
cost" method of valuation, which does not take into
account unrealized gains or losses. This involves valuing
an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in
periods during which value, as determined by amortized
cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument.
The use of amortized cost and the maintenance of the
Portfolio's per share net asset value at $1.00 is based on
its election to operate under the provisions of Rule 2a-7
under the Investment Company Act of 1940. As a condition
of operating under that rule, the Portfolio must maintain
a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining
maturities of 13 months or less, and invest only in
securities which are determined by the Directors to
present minimal credit risks and which are of high-quality
as determined by any major rating service, or in the case
of any instrument not so rated, considered by the
Directors to be of comparable quality.
The Directors have established procedures designed to
stabilize the net asset value per share as computed for
the purposes of sales and redemptions at $1.00. These
procedures include periodic review, as the Directors deem
appropriate and at such intervals as are reasonable in
light of current market conditions, of the relationship
between the amortized cost value per share and a net asset
value per share based upon available indications of market
value. In such a review, investments for which market
quotations are readily available are valued at the most
recent bid price or quoted yield equivalent for such
securities or for securities of comparable maturity,
quality and type as obtained from one or more of the major
market makers for the securities to be valued. Other
investments and assets are valued at fair value, as
determined in good faith by the Directors.
In the event of a deviation of over 1/2 of 1% between the
Portfolio's net asset value based upon available market
quotations or market equivalents and $1.00 per share based
on amortized cost, the Directors will promptly consider
what action, if any, should be taken. The Directors will
also take such action as they deem appropriate to
eliminate or to reduce to the extent reasonably
practicable any material dilution or other unfair results
to investors or existing shareholders which might arise
from differences between the two. Such action may include
redeeming shares in kind,
9
<PAGE> 12
selling instruments prior to maturity to realize capital
gains or losses or to shorten average maturity,
withholding dividends, paying distributions from capital
or capital gains, or utilizing a net asset value per share
based upon available market quotations.
--------------------------------------------------------------------------------
GENERAL
INFORMATION The Portfolio, Vanguard Institutional Money Market
Portfolio, is a class of shares offered by Vanguard
Institutional Portfolios, Inc., a Maryland corporation
established under Articles of Incorporation dated December
15, 1988. The Articles of Incorporation permit the
Directors to issue 20,000,000,000 shares of common stock,
with a $.001 par value. The Board of Directors has the
power to designate one or more classes ("Portfolios") of
shares of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios.
Currently, the Company is offering shares of one
Portfolio.
The shares of the Portfolio are fully paid and
non-assessable; have no preference as to conversion,
exchange, dividends, retirement or other features; and
have no pre-emptive rights. The shares of the Portfolio
have non-cumulative voting rights, meaning that the
holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if
they choose to do so.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other
applicable law. An annual meeting will be held to vote on
the removal of a Director or Directors of the Portfolio if
requested in writing by holders of not less than 10% of
the outstanding shares of the Portfolio.
CoreStates Bank, N.A., Philadelphia, PA, has been retained
to act as Custodian of the assets of the Portfolio. The
Vanguard Group, Inc., Valley Forge, PA, serves as the
Portfolio's Transfer and Dividend Disbursing Agent. Price
Waterhouse LLP serves as independent accountants for the
Portfolio and will audit its financial statements
annually. The Portfolio is not involved in any litigation.
--------------------------------------------------------------------------------
10
<PAGE> 13
SHAREHOLDER GUIDE
OPENING AN
ACCOUNT AND
PURCHASING
SHARES To open a new account, complete an Account Registration
Form and mail it to:
VANGUARD FINANCIAL CENTER
VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO
ATTN: INSTITUTIONAL INVESTOR SERVICES
P.O. BOX 1472
VALLEY FORGE, PA 19482
For express or registered mail, send your registration
form to: Vanguard Financial Center, Vanguard Institutional
Money Market Portfolio, Attn: Institutional Investor
Services, 100 Vanguard Boulevard, Malvern, PA 19355.
Once the account has been opened, Vanguard will assign an
Institutional Investor Services Representative for future
account transactions.
Shares of the Portfolio may be purchased by Federal Funds
wire. The minimum initial investment for the Portfolio is
$10 million. Please contact your Institutional Investor
Services Representative or call the Vanguard Group at
1-800-523-1188 to notify the Portfolio of the intended
investment and to receive an account number. Wiring
instructions are provided below.
Subsequent investments of $5 million or more will qualify
for dividends on the date of purchase if Vanguard is
notified one business day in advance of the intended
purchase, and a Federal Funds wire is received by the
close of the New York Stock Exchange (generally 4:00 p.m.
Eastern time) on the date of purchase. See "Dividend and
Trade Date Policy".
ADDITIONAL
INVESTMENTS
Please contact your
Institutional Investor
Services Representative
Additional investments may be made at any time by wiring
monies to Vanguard. As noted above, subsequent investments
of $5 million or more require prior day notification to
qualify for dividends on the date of purchase. To ensure
prompt investment, please notify your Institutional
Investor Services Representative in advance of the wire.
--------------------------------------------------------------------------------
PURCHASING BY WIRE
BEFORE WIRING
Please contact
your institutional
Investor Services
Representative Monies should be wired to:
CORESTATES BANK, N.A.
ABA 031000011
CORESTATES NO 0144 6936
ATTN VANGUARD
VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO
ACCOUNT NUMBER
ACCOUNT REGISTRATION
To ensure proper receipt, please be sure to include in the
wiring instructions the complete Portfolio name and the
account number Vanguard has assigned. Note: Federal Funds
wire purchase orders will be accepted only when the
Portfolio and Custodian Bank are open for business.
--------------------------------------------------------------------------------
11
<PAGE> 14
PURCHASING BY
EXCHANGE (from a
Vanguard account) Purchases may also be made by exchange from an existing
Vanguard Fund account. However, the Portfolio reserves the
right to refuse any exchange purchase request. Please call
your Institutional Investor Services Representative or
call Participant Services at 1-800-523-1188 for more
information.
DIVIDEND
DISTRIBUTIONS Dividend distributions paid by the Portfolio will be
automatically reinvested in additional Portfolio shares. A
cash dividend option is also available from the Portfolio.
Please contact your Institutional Investor Services
Representative for further information.
CERTIFICATES Share certificates will not be issued for the Portfolio.
ELECTRONIC
PROSPECTUS
DELIVERY If you would prefer to receive a prospectus for the Fund
or any of the Vanguard Funds in an electronic format,
please call 1-800-231-7870 for additional information. If
you elect to do so, you may also receive a paper copy of
the prospectus, by calling 1-800-662-7447.
--------------------------------------------------------------------------------
DIVIDEND AND
TRADE DATE POLICY Investments will qualify for dividends on the date of
purchase under the following conditions:
- FOR INVESTMENTS OF $5 MILLION OR MORE: The Portfolio
must be notified of the intended purchase by 4:00 p.m.
(Eastern time) on the prior business day and the Federal
Funds wire must be received by Vanguard by 4:00 p.m.
(Eastern time) on the day of purchase.
- FOR INVESTMENTS OF LESS THAN $5 MILLION: The Portfolio
must be notified of the intended purchase by 10:45 a.m.
(Eastern time) on the day of purchase and the Federal
Funds wire must be received by 4:00 p.m. (Eastern time).
Generally, if these requirements are not met, an
investment will begin to earn dividends on the business
day following receipt of a Federal Funds wire.
The trade date, the day on which an account is credited,
is generally the day on which the Portfolio receives an
investment in the form of Federal Funds. For purchases by
Federal Funds wire or by exchange, the Portfolio is
credited immediately with Federal Funds. If a purchase by
Federal Funds wire or exchange is received by the close of
the Exchange, the trade date is the day of receipt. If a
purchase is received after the close of the Exchange, the
trade date is the business day following the receipt of
the wire or exchange. Vanguard will not accept third-party
checks to open an account. Please be sure your purchase is
made payable to the Vanguard Group.
The Portfolio reserves the right to suspend the offering
of shares for a period of time. The Portfolio also
reserves the right to reject any specific purchase
request.
--------------------------------------------------------------------------------
SELLING SHARES
WIRE PROCEEDS Any portion of an account may be withdrawn by contacting
your Institutional Investor Services Representative. The
redemption proceeds will be wired to the bank account
indicated on the Account Registration Form on the business
day following receipt of a request.
12
<PAGE> 15
For a redemption of an entire account balance, accrued
dividends will not be included in the initial redemption
wire, but will be sent separately by check or wire.
Wire redemptions of less than $5,000 are subject to a $5
charge deducted from the principal in your account. There
is no charge for wire redemptions of $5,000 or more, or
for subsequent dividend wires.
For our mutual protection, wiring instructions must be on
file at Vanguard prior to executing any redemption
request. A request to change the bank account associated
with the wire redemption feature or a request to wire
funds to a bank other than that on file must be received
in writing. A signature guarantee of an authorized officer
is required if the bank registration is not identical to
the Vanguard Fund account registration.
--------------------------------------------------------------------------------
SELLING BY EXCHANGE Shares may also be sold by making an exchange to another
Vanguard Fund account. For further information, please
contact your Institutional Investor Services
Representative.
--------------------------------------------------------------------------------
OTHER REDEMPTION
INFORMATION The Portfolio may suspend the redemption rights or
postpone payment at times when the New York Stock Exchange
is closed or under any emergency circumstances as
determined by the United States Securities and Exchange
Commission.
The Portfolio reserves the right, for any account with a
balance of less than $5 million, either to redeem shares
or to transfer the account balance to another identically
registered Vanguard money market portfolio. Shareholders
will be provided with 60 days notice before any action is
taken.
--------------------------------------------------------------------------------
EXCHANGING
SHARES Shares of the Portfolio may be exchanged for those of
other available Vanguard Funds either by telephone or
mail. Contact your Institutional Investor Services
Representative for further information. Telephone exchange
requests must ordinarily be received by the close of
trading on the New York Stock Exchange (generally 4:00
p.m. Eastern time) in order to be processed on the date of
receipt. The new Fund account will bear the identical
registration of the Vanguard Institutional Money Market
Portfolio account.
Telephone exchanges are not permitted for several Vanguard
Funds, and there also may be restrictions on new
investments in certain Funds. Large exchange requests
(i.e., those over $250,000) require prior approval by
Vanguard on behalf of the Fund. Contact your Institutional
Investor Services Representative for full information,
including a prospectus.
Neither the Portfolio nor Vanguard is responsible for the
authenticity of exchange instructions received by
telephone. Every effort will be made to maintain the
exchange privilege. However, the Portfolio reserves the
right to revise or terminate its provisions, limit the
amount of or reject any exchange, as deemed necessary, at
any time.
--------------------------------------------------------------------------------
IMPORTANT
INFORMATION
ABOUT TELEPHONE
TRANSACTIONS The ability to initiate redemptions (except wire
redemptions) and exchanges by telephone is automatically
established on your account unless you request in
13
<PAGE> 16
writing that telephone transactions on your account not be
permitted. The ability to initiate wire redemptions by
telephone will be established on your account only if you
specifically elect this option in writing.
To protect your account from losses resulting from
unauthorized or fraudulent telephone instructions,
Vanguard adheres to the following security procedures:
1. SECURITY CHECK. To request a transaction by telephone,
the caller must know (i) the name of the Portfolio;
(ii) the 10-digit account number; (iii) the exact name
and address used in the registration; and (iv) the
Social Security or Employer Identification number
listed on the account.
2. PAYMENT POLICY. The proceeds of any telephone
redemption by mail will be made payable to the
registered shareowner and mailed to the address of
record, only. In the case of a telephone redemption by
wire, the wire transfer will be made only in accordance
with the shareowner's prior written instructions.
Neither the Portfolio nor Vanguard will be responsible for
the authenticity of transaction instructions received by
telephone, provided that reasonable security procedures
have been followed. Vanguard believes that the security
procedures described above are reasonable, and that if
such procedures are followed, you will bear the risk of
any losses resulting from unauthorized or fraudulent
telephone transactions on your account.
--------------------------------------------------------------------------------
OTHER ACCOUNT
INFORMATION For corporate investors, a current corporate resolution
must be maintained on file at Vanguard at all times. The
initial application serves as a corporate resolution. Any
revisions to a corporate resolution must be submitted to
your Institutional Investor Services Representative at
Vanguard.
To change the registration of an account, a request must
be submitted in writing to Vanguard and include the
following information: the account number and portfolio
name; authorized signatures; any applicable signature
guarantees; and other supporting legal documents as
necessary.
All requests should be mailed to the following address:
VANGUARD FINANCIAL CENTER
ATTN: INSTITUTIONAL INVESTOR SERVICES
P.O. BOX 1472
VALLEY FORGE, PA 19482
--------------------------------------------------------------------------------
14
<PAGE> 17
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE> 18
<TABLE>
<S> <C> <C>
[LOGO]
[LOGO]
-------------------------- P R O S P E C T U S
THE VANGUARD GROUP
OF INVESTMENT MARCH 31, 1995
COMPANIES
INSTITUTIONAL INVESTOR SERVICE
Vanguard Financial Center
P.O. Box 2600
Valley Forge, PA 19482
PARTICIPANT SERVICES:
1-800-523-1188
TRANSFER AGENT:
The Vanguard Group, Inc.
Vanguard Financial Center
I066 Valley Forge, PA 19482 [LOGO]
</TABLE>
<PAGE> 19
VANGUARD INSTITUTIONAL PORTFOLIOS
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 31, 1995
This Statement is not a prospectus but should be read in conjunction with
the current Prospectus for Vanguard Institutional Portfolios, Inc. (the "Fund")
(dated March 31, 1995). To obtain the Prospectus please call the Investor
Information Department:
1-800-662-7447
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Limitations.................................................................... 1
Yield and Total Return.................................................................... 2
Calculation of Yield...................................................................... 3
Purchase of Shares........................................................................ 3
Redemption of Shares...................................................................... 3
Performance Measures...................................................................... 4
Management of the Fund.................................................................... 6
Description of Shares and Voting Rights................................................... 9
Appendix--Description of Securities and Ratings........................................... 9
Financial Statements...................................................................... 11
</TABLE>
INVESTMENT LIMITATIONS
The following restrictions and fundamental policies cannot be changed
without approval of the holders of a majority of the outstanding shares of the
Fund (as defined in the Investment Company Act of 1940), including a majority of
the shares of the Fund. The Fund may not under any circumstances:
1) purchase securities for the Fund other than the securities in which the
Fund is authorized to invest as set forth in the Prospectus under
"Investment Objectives and Policies";
2) borrow money in excess of 15% of the total assets of the Fund taken at
market value and then only from banks as a temporary measure for
extraordinary or emergency purposes; the Fund will not borrow to
increase income (leveraging) but only to facilitate redemption requests
which might otherwise require untimely dispositions of portfolio
securities; the Fund will repay all borrowings before making additional
investments and interest paid on such borrowings will reduce net
income;
3) make loans to other persons (except by the purchase of obligations in
which the Fund is authorized to invest); provided, however, that the
Fund will not enter into repurchase agreements if, as a result thereof,
more than 10% of the net assets of the Fund (taken at current value)
would be subject to repurchase agreements maturing in more than seven
days;
4) purchase the securities of any issuer (other than obligations issued or
guaranteed as to principal and interest by the Government of the United
States, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets (taken at current value) would be
invested in the securities of such issuer, or (b) the Fund would hold
more than 10% of any class of securities of such issuer (for this
purpose, all debt obligations of an issuer maturing in less than one
year are treated as a single class of securities);
5) write, or invest in, put, call, straddle or spread options or invest in
interests in oil, gas or other mineral exploration or development
programs;
6) purchase securities on margin or sell any securities short;
1
<PAGE> 20
7) purchase or retain securities of an issuer if an officer or director of
such issuer is an officer or Director of the Fund or its investment
adviser and one or more of such officers or directors (trustees) of the
Fund or its investment adviser owns beneficially more than 1/2% of the
shares of securities of such issuer and all such directors and officers
owning more than 1/2% of such shares or securities together own more
than 5% of such shares or securities;
8) purchase any securities which could cause more than 25% of the value of
the Fund's total net assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to investments in United States Treasury Bills,
other obligations issued or guaranteed by the Federal Government, its
agencies and instrumentalities or certificates of deposit or bankers'
acceptances of domestic institutions;
9) mortgage, pledge or hypothecate its assets except in an amount up to
15% (10% as long as the Fund's shares are registered for sale in
certain states) of the value of the Fund's total assets but only to
secure borrowings for temporary or emergency purposes;
10) engage in the business of underwriting securities issued by other
persons, except to the extent that the Portfolio may technically be
deemed to be an underwriter under the Securities Act of 1933, as
amended, in disposing of investment securities;
11) purchase or otherwise acquire any security if, as a result, more than
10% of its net assets (including any investment in The Vanguard Group
Inc.) would be invested in securities that are illiquid;
12) purchase or sell real estate, real estate investment trust securities,
commodities, or commodity contracts;
13) invest in companies for the purpose of exercising control;
14) invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of
assets; and
15) issue senior securities.
Notwithstanding these limitations, the Fund may own all or any portion of
the securities of, or make loans to, or contribute to the costs or other
financial requirements of, any company which will be: (1) wholly owned by the
Fund and one or more other investment companies, and is (2) primarily engaged in
the business of providing, at-cost, management, administrative, distribution or
related services to the Fund and other investment companies. See "Management of
the Fund." As a non-fundamental policy, the Fund will not invest more than 5% of
the value of its total assets at the time of investment in the securities of any
issuer or issuers which have records of less than three years' continuous
operation.
As an operational policy, the Fund will not, in the aggregate, enter into
repurchase agreements maturing in more than seven days, purchase restricted
securities or invest in any other illiquid securities if, as a result thereof,
more than 10% of the net assets of the Fund would be invested in such assets.
The above-mentioned investment limitations are considered at the time
investment securities are purchased.
YIELD AND TOTAL RETURN
The yield of the Fund for the 7-day period ended November 30, 1994 was
5.29%.
The average annual total return of the Fund for the one- and five-year
periods ended November 30, 1994 and the period since inception (October 3, 1989)
ending November 30, 1994 was +4.06%, +5.24% and +5.36%, respectively. Total
return is computed by finding the average compounded rate of return over the
periods set forth above that would equate an initial amount invested at the
beginning of each period to the ending redeemable value of the investment.
2
<PAGE> 21
CALCULATION OF YIELD
The current yield of the Fund is calculated daily on a base period return
of a hypothetical account having a beginning balance of one share for a
particular period of time (generally 7 days). The return is determined by
dividing the net change (exclusive of any capital changes) in such account by
its average net asset value for the period, and then multiplying it by 365/7 to
get the annualized current yield. The calculation of net change reflects the
value of additional shares purchased with the dividends by the Fund, including
dividends on both the original share and on such additional shares. An effective
yield, which reflects the effects of compounding and represents an annualization
of the current yield with all dividends reinvested, may also be calculated for
the Fund by adding 1 to the net change, raising the sum to the 365/7 power, and
subtracting 1 from the result.
Set forth below is an example, for purposes of illustration only, of the
current and effective yield calculations for the Institutional Money Market
Portfolio for the 7-day base period ended November 30, 1994.
<TABLE>
<CAPTION>
MONEY MARKET
PORTFOLIO
--------------------
11/30/94
--------------------
<S> <C>
Value of account at beginning of period.................... $1.00000
Value of same account at end of period*.................... 1.00102
--------
Net Change in account value................................ .00102
Annualized Current Net Yield (Net Change X 365/7) average
net asset value.......................................... 5.29%
-----
-----
Effective Yield [(Net Change) + 1] 365/7 - 1............... 5.46%
Average Weighted Maturity of Investments................... 38 Days
*Exclusive of any capital changes.
</TABLE>
It is intended that the net asset value of a share of the Fund will remain
at $1.00. The yield of the Fund will fluctuate. The annualization of a week's
dividend is not a representation by the Fund as to what an investment in the
Fund will actually yield in the future. Actual yields will depend on such
variables as investment quality, average maturity, the type of instruments the
Fund invests in, changes in interest rates on instruments, changes in the
expenses of the Fund and other factors. Yields are one basis investors may use
to analyze the Fund, and other investment vehicles; however, yields of other
investment vehicles may not be comparable because of the factors set forth in
the preceding sentence, differences in the time periods compared, and
differences in the methods used in valuing portfolio instruments, computing net
asset value and calculating yield.
PURCHASE OF SHARES
The Fund reserves the right in its sole discretion (i) to suspend the
offerings of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investments for certain
fiduciary accounts or under circumstances where certain economies can be
achieved in sales of the Fund's shares.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges for the Fund or postpone the
date of payment (i) during any period that the New York Stock Exchange is
closed, or trading on the Exchange is restricted as determined by the Securities
and Exchange Commission (the "Commission"), (ii) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for the Fund to dispose of securities owned by
it, or fairly to determine the value of its assets, and (iii) for such other
periods as the Commission may permit.
The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or l% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment
3
<PAGE> 22
readily marketable securities or in cash, as the Directors may deem advisable;
however, payment will be made wholly in cash unless the Directors believe that
economic or market conditions exist which would make such a practice detrimental
to the best interests of the Fund. If redemptions are paid in investment
securities, such securities will be valued as set forth in the Prospectus under
"Share Price Determination" and a redeeming shareholder would normally incur
brokerage expenses if he converted these securities to cash.
No charge is made by the Fund for redemptions; except for wire withdrawals
in amounts less than $5,000 which will be subject to a maximum charge of $5.00
which will be deducted from the principal in your account. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by each Portfolio.
PERFORMANCE MEASURES
Vanguard Institutional Money Market Portfolio may use one or more, either
singularly or in a composite, of the following unmanaged indexes for comparative
performance purposes:
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX -- is a well diversified list
of 500 companies representing the U.S. Stock Market.
WILSHIRE 5000 INDEX -- consists of more than 6,000 common equity securities,
covering all stocks in the U.S. for which daily pricing is available.
WILSHIRE 4500 INDEX -- consists of all stocks in the Wilshire 5000 except for
the 500 stocks in the Standard & Poor's 500 Index.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX -- is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
GOLDMAN SACHS 100 CONVERTIBLE BOND INDEX -- currently includes 67 bonds and 33
preferreds. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The index
is priced monthly.
SALOMON BROTHERS GNMA INDEX -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
SALOMON BROTHERS HIGH-GRADE CORPORATE BOND INDEX -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
LEHMAN LONG-TERM TREASURY BOND -- is composed of all bonds covered by the
Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.
MERRILL LYNCH CORPORATE & GOVERNMENT BOND -- consists of over 4,500 U.S.
Treasury, Agency and investment grade corporate bonds.
LEHMAN CORPORATE (BAA) BOND INDEX -- all publicly offered fixed-rate,
nonconvertible domestic corporate bonds rated Baa by Moody's, with a maturity
longer than 1 year and with more than $25 million outstanding. This index
includes over 1,000 issues.
BOND BUYER MUNICIPAL INDEX (20 YEAR) BOND -- is a yield index on current coupon
high-grade general obligation municipal bonds.
STANDARD & POOR'S PREFERRED INDEX -- is a yield index based upon the average
yield of four high-grade, non-callable preferred stock issues.
NASDAQ INDUSTRIAL INDEX -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
COMPOSITE INDEX -- 70% Standard & Poor's 500 Index and 30% NASDAQ Industrial
Index.
COMPOSITE INDEX -- 35% Standard & Poor's 500 Index and 65% Salomon Brothers High
Grade Bond Index.
COMPOSITE INDEX -- 65% Standard & Poor's 500 Index and 35% Salomon Brothers High
Grade Bond Index.
4
<PAGE> 23
LEHMAN BROTHERS AGGREGATE BOND INDEX -- is a market weighted index that contains
individually priced U.S. Treasury, agency, corporate, and mortgage pass-through
securities corporate rated BBB- or better. The Index has a market value of over
$4 trillion.
LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX -- is a
market weighted index that contains individually priced U.S. Treasury, agency,
and corporate investment grade bonds rated BBB- or better with maturities
between 1 and 5 years. The index has a market value of over $1.3 trillion.
LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE (5-10) GOVERNMENT/CORPORATE INDEX -- is
a market weighted index that contains individually priced U.S. Treasury, agency,
and corporate securities rated BBB- or better with maturities between 5 and 10
years. The index has a market value of over $600 billion.
LEHMAN BROTHERS MUTUAL FUND LONG (10+) GOVERNMENT/CORPORATE INDEX -- is a market
weighted index that contains individually priced U.S. Treasury, agency, and
corporate securities rated BBB- or better with maturities greater than 10 years.
The index has a market value of over $900 billion.
LIPPER SMALL COMPANY GROWTH FUND AVERAGE -- the average performance of small
company growth funds as defined by Lipper Analytical Services, Inc. Lipper
defines a small company growth fund as a fund that by prospectus or portfolio
practice, limits its investments to companies on the basis of the size of the
company. From time to time, Vanguard may advertise using the average performance
and/or the average expense ratio of the small company growth funds. (This fund
category was first established in 1982. For years prior to 1982, the results of
the Lipper Small Company Growth category were estimated using the returns of the
Funds that constituted the Group at its inception.)
RUSSELL 3000 INDEX -- consists of approximately 3,000 largest stocks of U.S.
domiciled companies commonly traded on the New York and American Stock Exchanges
or the NASDAQ over-the-counter market, accounting for over 90% of the market
value of publicly traded Stocks in the U.S.
RUSSELL 2000 SMALL COMPANY STOCK INDEX -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.
LIPPER BALANCED FUND AVERAGE -- An industry benchmark of average balanced funds
with similar investment objectives and policies, as measured by Lipper
Analytical Services, Inc.
LIPPER NON-GOVERNMENT MONEY MARKET FUND AVERAGE -- An industry benchmark of
average non-government money market funds with similar investment objectives and
policies, as measured by Lipper Analytical Services, Inc.
LIPPER GOVERNMENT MONEY MARKET FUND AVERAGE -- An industry benchmark of average
government money market funds with similar investment objectives and policies,
as measured by Lipper Analytical Services, Inc.
Advertisements which refer to the use of the Fund as a potential investment
for Individual Retirement Accounts may quote a total return based upon
compounding of dividends on which it is presumed no federal income tax applies.
In assessing such comparisons of yields, an investor should keep in mind
that the composition of the investments in the reported averages is not
identical to the Fund's Portfolio and that the items included in the
calculations of such averages may not be identical to the formula used by the
Fund to calculate its yield. In addition there can be no assurance that the Fund
will continue its performance as compared to such other averages.
5
<PAGE> 24
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Officers of the Portfolio manage its day-to-day operations and are
responsible to the Portfolio's Board of Directors. The Directors set broad
policies for each Fund and choose its Officers. Following is a list of Directors
and Officers of the Funds and a statement of their present positions and
principal occupations during the past five years. The mailing address of the
Directors and Officers of the Portfolio is Post Office Box 876, Valley Forge, PA
19482.
JOHN C. BOGLE, Chairman, Chief Executive Officer and Director*
Chairman, Chief Executive Officer, and Director of The Vanguard Group,
Inc., and each of the investment companies in The Vanguard Group; Director
of The Mead Corporation and General Accident Insurance.
JOHN J. BRENNAN, President & Director*
President and Director of The Vanguard Group, Inc., and each of the
investment companies in The Vanguard Group.
ROBERT E. CAWTHORN, Director
Chairman of Rhone-Poulenc Rorer, Inc.; Director of Sun Company, Inc.
BARBARA BARNES HAUPTFUHRER, Director
Director of The Great Atlantic and Pacific Tea Company, Raytheon Company,
Knight-Ridder, Inc., Massachusetts Mutual Life Insurance Co., and ALCO
Standard Corp. and Trustee Emerita of Wellesley College.
BRUCE K. MACLAURY, Director
President, The Brookings Institution; Director of American Express Bank,
Ltd., The St. Paul Companies, Inc. and Scott Paper Company.
BURTON G. MALKIEL, Director
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., Director
Chairman, President and Chief Executive Officer of NACCO Industries, Inc.;
Director of The BFGoodrich Company, The Standard Products Company and The
Reliance Electric Company.
JOHN C. SAWHILL, Director
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner, McKinsey & Co., and President, New York
University; Director of Pacific Gas and Electric Company and NACCO
Industries.
JAMES O. WELCH, JR., Director
Retired Chairman of Nabisco Brands, Inc., retired Vice Chairman and
Director of RJR Nabisco; Director of TECO Energy, Inc.
J. LAWRENCE WILSON, Director
Chairman and Chief Executive Officer of Rohm & Haas Company; Director
Cummins Engine Company; Trustee of Vanderbilt University and the Culver
Educational Foundation.
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*
Treasurer of The Vanguard Group, Inc., and 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.
---------------
*Officers of the Portfolio are "interested persons" as defined in the Investment
Company Act of 1940.
THE VANGUARD GROUP
The Fund is a member of The Vanguard Group of Investment Companies. Through
their jointly-owned subsidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund
and the other Funds in the Group obtain at cost
6
<PAGE> 25
virtually all of their corporate management, administrative and distribution
services. Vanguard also provides investment advisory services on an at-cost
basis to certain of the Vanguard Funds.
Vanguard employs a supporting staff of management and administrative
personnel needed to provide the requisite services to the Funds and also
furnishes the Funds with necessary office space, furnishings and equipment. Each
Fund pays its share of Vanguard's total expenses which are allocated among the
Funds under methods approved by the Board of Directors (Trustees) of each Fund.
In addition, each Fund bears its own direct expenses such as legal, auditing and
custodian fees.
The Fund's Officers are also Officers and employees of Vanguard. No Officer
or employee owns, or is permitted to own, any securities of any external adviser
for the Funds.
The Vanguard Group adheres to a Code of Ethics established pursuant to Rule
17j-1 under the Investment Company Act of 1940. The Code is designed to prevent
unlawful practices in connection with the purchase or sale of securities by
persons associated with Vanguard. Under Vanguard's Code of Ethics certain
officers and employees of Vanguard who are considered access persons are
permitted to engage in personal securities transactions. However, such
transactions are subject to procedures and guidelines substantially similar to
those recommended by the mutual fund industry and approved by the U.S.
Securities and Exchange Commission.
The Vanguard Group was established and operates under a Funds' Service
Agreement which was approved by the shareholders of each of the Funds. The
amounts of which each of the Funds have invested are adjusted from time to time
in order to maintain the proportionate relationship between each Fund's relative
net assets and its contribution to Vanguard's capital. At November 30, 1994, the
Fund had contributed capital of $94,000 to Vanguard, representing .5% of
Vanguard's capitalization. The Fund's service agreement provides as follows: (a)
each Vanguard Fund may invest up to 0.40% of its current net assets in Vanguard
and (b) there is no other limitation on the amount that each Vanguard Fund may
contribute to Vanguard's capitalization.
MANAGEMENT Corporate management and administrative services include: (1)
executive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian
relationships; (6) shareholder reporting; and (7) review and evaluation of
advisory and other services provided to the Funds by third parties. During the
year ended November 30, 1994, the Fund's share of Vanguard's actual net costs of
operation relating to management and administrative services, (including
transfer agency) totaled approximately $484,000.
DISTRIBUTION Vanguard provides all distribution and marketing activities
for the Funds in the Group. Vanguard Marketing Corporation, a wholly-owned
subsidiary of The Vanguard Group, Inc., acts as Sales Agent for the shares of
the Funds, in connection with any sales made directly to investors in the states
of Florida, Missouri, New York, Ohio, Texas and such other states as it may be
required.
The principal distribution expenses are for advertising, promotional
materials and marketing personnel. Distribution services may also include
organizing and offering to the public, from time to time, one or more new
investment companies which will become members of the Group. The Directors and
Officers of Vanguard determine the amount to be spent annually on distribution
activities, the manner and amount to be spent on each Fund, and whether to
organize new investment companies.
One half of the distribution expenses of a marketing and promotional nature
is allocated among the Funds based upon relative net assets. The remaining one
half of those expenses is allocated among the Funds based upon each Fund's sales
for the preceding 24 months relative to the total sales of the Funds as a Group,
provided, however, that no Fund's aggregate quarterly rate of contribution for
distribution expenses of a marketing and promotional nature shall exceed 125% of
average distribution expense rate for the Group, and that no Fund shall incur
annual distribution expenses in excess of 20/100 of 1% of its average month-end
net assets. The Group's marketing and distribution expenses allocated to the
Fund for the year ended November 30, 1994 was $117,000 or approximately 2/100 of
1% of its average month-end net assets.
INVESTMENT ADVISORY SERVICES Vanguard also provides the Fund, Vanguard
Money Market Reserves, Vanguard Municipal Bond Fund, Vanguard Bond Index Fund,
several Portfolios of the Vanguard Fixed Income
7
<PAGE> 26
Securities Fund, Vanguard Admiral Funds, Vanguard Index Trust, Vanguard
Institutional Index Fund, Vanguard International Equity Index Fund, Vanguard
Balanced Index Fund, the Vanguard California Tax-Free Fund, the Vanguard
Pennsylvania Tax-Free Fund, the Vanguard New York Insured Tax-Free Fund,
Vanguard Ohio Tax-Free Fund, Vanguard Florida Tax-Free Fund, Vanguard New Jersey
Tax-Free Fund, Vanguard Tax-Managed Fund, several Portfolios of Vanguard
Variable Insurance Fund, a portion of Vanguard/Windsor II, a portion of
Vanguard/Morgan Growth Fund as well as several indexed separate accounts with
investment advisory services. These services are provided on an at-cost basis
from a money management staff employed directly by Vanguard. The compensation
and other expenses of this staff are paid by the Funds utilizing these services.
During the years ended November 30, 1992, 1993 and 1994, the Fund paid
approximately $18,000, $28,000, and $48,000 respectively, of Vanguard's expenses
relating to investment advisory services.
REMUNERATION OF DIRECTORS The Fund pays each Director (Trustee), who is
not also an Officer, an annual fee plus travel and other expenses incurred in
attending Board meetings. The Fund's Officers and employees are paid by Vanguard
which, in turn, is reimbursed by the Fund and each other Fund in the Group, for
its proportionate share of Officers' and employees' salaries and retirement
benefits. During the year ended November 30, 1994, the remuneration paid by
Vanguard to all officers as a group and allocated to the Fund, was approximately
$20,022.
Under its retirement plan, Vanguard contributes annually an amount equal to
10% of each Officer's annual compensation plus 5.7% of that part of an eligible
officer's compensation during the year, if any, that exceeds the Social Security
Taxable Wage Base then in effect. Under its thrift plan, all employees are
permitted to make pre-tax basic contributions in a maximum amount equal to 4% of
total compensation. Vanguard matches the basic contributions on a 100% basis.
Directors who are not officers are paid an annual fee based on the number of
years of service on the board, up to 15 years of service, upon retirement. The
fee is equal to $1,000 for each year of service and each investment company
member of The Vanguard Group contributes a proportionate amount to this fee
based on its relative net assets. This fee is paid, subsequent to a Director's
retirement, for a period of ten years or until the death of a retired Director.
During the year ended November 30, 1994, the Fund's proportionate share of
retirement benefits paid to all officers of the Fund was approximately $3,000.
The following table provides detailed information with respect to the
amounts paid or accrued for the Directors for the fiscal year ended November 30,
1994.
VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL BENEFITS FROM ALL VANGUARD FUNDS
NAMES OF DIRECTORS FROM FUND PART OF FUND EXPENSES UPON RETIREMENT PAID TO DIRECTORS(2)
--------------------------- ------------ --------------------- --------------- -----------------------
<S> <C> <C> <C> <C>
John C. Bogle(1) -- -- -- --
John J. Brennan(1) -- -- -- --
Barbara Barnes Hauptfuhrer $222 $45 $15,000 $50,000
Robert E. Cawthorn $222 $37 $13,000 $50,000
Bruce K. MacLaury $200 $37 $12,000 $45,000
Burton G. Malkiel $222 $30 $15,000 $50,000
Alfred M. Rankin, Jr. $222 $24 $15,000 $50,000
John C. Sawhill $222 $28 $15,000 $50,000
James O. Welch, Jr. $213 $35 $15,000 $48,000
J. Lawrence Wilson $217 $25 $15,000 $49,000
</TABLE>
(1) As "Interested Directors," Messrs. Bogle and Brennan receive no compensation
for their service as Directors.
(2) The amounts reported in this column reflect the total compensation paid to
each Director for their service as Director or Trustee of 33 Vanguard Funds
(26 in the case of Mr. MacLaury).
8
<PAGE> 27
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Articles of Incorporation, as amended and restated, permit the
Directors to issue 20,000,000,000 shares of common stock, with a $.001 par
value. The Board of Directors has the power to designate one more classes
("Portfolios") of shares of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios. Currently the Fund is offering
shares of one Portfolio.
The shares are fully paid and nonassessable, and have no preference as to
conversion, exchange, dividends, retirement or other features. The shares have
no pre-emptive rights. The shares have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Directors can elect 100% of the Directors if they choose to do so. A shareholder
is entitled to one vote for each full share held (and a fractional vote for each
fractional share held), then standing in his name on the books of the Fund. On
any matter submitted to a vote of shareholders, all shares of the Fund then
issued and outstanding and entitled to vote, irrespective of the class, shall be
voted in the aggregate and not by class: except (i) when required by the
Investment Company Act of 1940, shares shall be voted by individual class; and
(ii) when the matter does not affect any interest of a particular class, then
only shareholders of the affected class or classes shall be entitled to vote
thereon.
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
A-1 AND PRIME-1 COMMERCIAL PAPER RATINGS Commercial paper rated A-1 by
Standard & Poor's has the following characteristics: (1) liquidity ratios are
adequate to meet cash requirements; (2) long-term senior debt is rated "A" or
better; (3) the issuer has access to at least two additional channels of
borrowing; (4) basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances; (5) typically, the issuer's industry is well
established and the issuer has a strong position within the industry; and (6)
the reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
A-1, A-2, or A-3. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and the appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
BOND RATINGS Bonds rated AA by Standard & Poor's are judged by S&P to be
high-grade obligations, and in the majority of instances differs only in small
degrees from issues rated AAA (the AA rating may be modified by the addition of
a plus or minus sign to show relative standing with the AA category). Bonds
rated AAA are considered by S&P to be the highest grade obligations and possess
the ultimate degree of protection as to principal and interest. Bonds rated Aa
by Moody's are judged by Moody's to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger. Moody's also supplies numerical
indicators, 1, 2 and 3 to the Aa rating category. The modifier 1 indicates that
the security is in the higher end of its rating category; the modifier 2
indicates a mid-range ranking and 3 indicates a ranking toward the lower end of
the category.
VARIABLE AMOUNT MASTER DEMAND NOTES Variable amount master demand notes
are demand obligations that permit the investment of fluctuating amounts at
varying market rates of interest pursuant to an arrangement between the issuer
and a commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Because variable amount master demand notes are direct lending
arrangements between a lender and a borrower, it is not generally contemplated
that such instruments will be traded, and there is no secondary market for these
notes, although they are redeemable (and thus immediately repayable by the
borrower) at face value, plus
9
<PAGE> 28
accrued interest, at different periods, for varying amounts. In connection with
a Portfolio's investment in variable amount master demand notes, Vanguard's
investment management staff will monitor, on an ongoing basis, the earning
power, cash flow and other liquidity ratios of the issuer, and the borrower's
ability to pay principal and interest on demand.
DESCRIPTION OF U.S. GOVERNMENT SECURITIES As used in this prospectus, the
term "U.S. Government Securities" refers to a variety of securities which are
issued or guaranteed by the United States Treasury, by various agencies of the
United States Government, and by various instrumentalities which have been
established or sponsored by the United States Government. The term also refers
to "repurchase agreements" collateralized by such United States Government
securities.
U.S. Treasury Securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and the U.S.
Government-sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a government agency organized
under Federal charter with government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and the Federal National Mortgage Association.
DESCRIPTION OF REPURCHASE AGREEMENTS Repurchase agreements are
transactions by which a person purchases a security and simultaneously commits
to resell that security to the seller (a member bank of the Federal Reserve
System or recognized securities dealer) at an agreed upon price on an agreed
upon date within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
of the underlying security.
The use of repurchase agreements involves certain risks. For example, if
the seller of the agreement defaults on its obligation to repurchase the
underlying securities at a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Portfolio and
therefore subject to sale by the trustee in bankruptcy. Finally, it is possible
that the Portfolio may not be able to substantiate its interest in the
underlying securities. While the Fund's management acknowledges these risks, it
is expected that they can be controlled through stringent security selection
criteria and careful monitoring procedures.
EURODOLLAR AND YANKEE OBLIGATIONS Eurodollar bank obligations are
dollar-denominated certificates of deposit or time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign banks;
Yankee bank obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks.
Eurodollar and Yankee obligations are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar (and to a limited extent, Yankee) obligations are
subject to certain sovereign risks. One such risk is the possibility that a
sovereign country might prevent capital, in the form of dollars, from flowing
across their borders. Other risks include: adverse political and economic
developments; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers. However, Eurodollar and
Yankee obligations will undergo the same credit analysis as domestic issues
10
<PAGE> 29
in which the Portfolio invests, and will have at least the same financial
strength as the domestic issuers approved for the Portfolio.
FINANCIAL STATEMENTS
The Portfolio's Financial Statements for the year ended November 30, 1994,
including the financial highlights, appearing in the Vanguard Institutional
Money Market Portfolio 1994 Annual Report to Shareholders, and the report
thereon of Price Waterhouse LLP, independent accountants, also appearing
therein, are incorporated by reference in this Statement of Additional
Information. The Portfolio's 1994 Annual Report to Shareholders is enclosed with
this Statement of Additional Information.
11
<PAGE> 30
PART C
VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The Registrant's audited financial statements for the year ended November
30, 1994, including Price Waterhouse LLP's report thereon, are incorporated by
reference, in the Statement of Additional Information, from the Registrant's
1994 Annual Report which has been filed with the Commission. The financial
statements included in the Annual Report are:
1. Statement of Net Assets as of November 30, 1994.
2. Statement of Operations for the year ended November 30, 1994.
3. Statement of Changes in Net Assets for the years ended November 30,
1993 and 1994.
4. Financial Highlights for the respective periods presented (also
appearing in the Prospectus).
5. Notes to Financial Statements.
6. Report of Independent Accountants.
(B) EXHIBITS
1. Articles of Incorporation
2. By-Laws of Registrant
3. Not Applicable
4. Not Applicable
5. Not Applicable
6. Not Applicable
7. Reference is made to the section entitled "Management of the Fund" in
the Registrant's Statement of Additional Information
8. Form of Custody Agreement
9. Form of Vanguard Service Agreement
10. Opinion of Counsel
11. Consent of Independent Accountants*
12. Financial Statements -- reference is made to (a) above
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Schedule for Computation of Performance Quotations*
27. Financial Data Schedule*
---------------
* Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not controlled by or under common control with any person.
The officers of the Registrant, the investment companies in The Vanguard Group
of Investment Companies and The Vanguard Group, Inc. are
<PAGE> 31
identical. Reference is made to the caption "Management of the Fund" in the
Prospectus constituting Part A and in the Statement of Additional Information
constituting Part B of this Registration Statement.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of November 30, 1994 there were 42 shareholders of the Fund.
ITEM 27. INDEMNIFICATION
Reference is made to Article IX of Registrant's Articles of Incorporation.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Investment advisory services are provided to the Registrant on an at cost
basis by The Vanguard Group, Inc. a jointly-owned subsidiary of the Registrant
and the other Funds in the Group. See the information concerning The Vanguard
Group set forth in Parts A and B.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) None.
(b) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the physical possession of Registrant; Registrant's Transfer Agent, The
Vanguard Group, Inc. c/o The Vanguard Financial Center, Valley Forge,
Pennsylvania 19482; and the Registrant's Custodian, CoreStates, N.A.,
Philadelphia, Pa.
ITEM 31. MANAGEMENT SERVICES
Other than the Amended and Restated Funds' Service Agreement with The
Vanguard Group, Inc. which was previously filed as Exhibit 9 and described in
Part B hereof under "Management of the Fund;" the Registrant is not a party of
any management-related service contract.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940 in regard to shareholders' rights to call
a meeting of shareholders for the purpose of voting on the removal of directors
and to assist in shareholder communications in such matters, to the extent
required by law.
Registrant hereby undertakes to provide an Annual Report to Shareholders or
prospective investors, free of charge, upon request.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Valley Forge and the
Commonwealth of Pennsylvania, on the 24th day of March, 1995.
VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
BY: (Raymond J. Klapinsky)
John C. Bogle*, Chief Executive Officer and Director
March 24, 1995
BY: (Raymond J. Klapinsky)
John J. Brennan*, President and Director
March 24, 1995
BY: (Raymond J. Klapinsky)
Barbara B. Hauptfuhrer*, Director
March 24, 1995
BY: (Raymond J. Klapinsky)
Bruce K. MacLaury
March 24, 1995
BY: (Raymond J. Klapinsky)
Burton G. Malkiel*, Director
March 24, 1995
BY: (Raymond J. Klapinsky)
John C. Sawhill*, Director
March 24, 1995
BY: (Raymond J. Klapinsky)
James O. Welch, Jr.*, Director
March 24, 1995
BY: (Raymond J. Klapinsky)
J. Lawrence Wilson*, Director
March 24, 1995
BY: (Raymond J. Klapinsky)
Richard F. Hyland*, Treasurer and Principal
Financial Officer and Accounting Officer
March 24, 1995
*By Power of Attorney. See 1933 Act File No 2-14336, January 23, 1990.
Incorporated by Reference.
<PAGE> 33
VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Consent of Independent Accountants................................................... EX-99.B11
Schedule for Computation of Performance Quotations................................... EX-99.B16
Financial Data Schedule.............................................................. EX-27
</TABLE>
<PAGE> 1
EX-99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
the Statement of Additional Information, constituting parts of this amended
Registration Statement on Form N-1A, of our report dated December 30, 1994,
relating to the financial statements, and the financial highlights, appearing in
the November 30, 1994 Annual Report to Shareholders of Vanguard Institutional
Money Market Portfolio. We also consent to the references to us under the
headings "Financial Highlights" and "General Information" in the Prospectus and
"Financial Statements" in the Statement of Additional Information.
BY: PRICE WATERHOUSE LLP
Philadelphia, PA
March 23, 1995
<PAGE> 1
EX-99.B16
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS*
VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
INSTITUTIONAL MONEY MARKET PORTFOLIO
1. Average Annual Total Return
P (1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at the end of the period
EXAMPLE:
One Year
P = $1,000
T = 4.06%
N = 1
ERV = $1,040.59
Five Year
P = $1,000
T = 5.24%
N = 5
ERV = $1,291.01
Ten Year
P = $1,000
T = 5.36%*
N = *
ERV = $1,309.14*
*Since inception October 3, 1989
*Figures presented are as of the year ended November 30, 1994.
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000846591
<NAME> VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
<SERIES>
<NUMBER> 1
<NAME> VANGUARD INSTITUTIONAL MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-01-1993
<PERIOD-END> NOV-30-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 674888
<INVESTMENTS-AT-VALUE> 674888
<RECEIVABLES> 2795
<ASSETS-OTHER> 106
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 677789
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 867
<TOTAL-LIABILITIES> 867
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