<PAGE> 1
A MESSAGE TO SHAREHOLDERS
TO OUR SHAREHOLDERS:
Despite some weakness in June, the stock market provided solid gains during the
six months ended June 30, the first half of the 1996 fiscal year for Vanguard
Institutional Index Fund. During this continuing bull market, our Fund provided
a return of +10.1%, comfortably outpacing more than one-half of all general
equity mutual funds.
What is more, Vanguard Institutional Index Fund precisely tracked its
unmanaged benchmark standard, the Standard & Poor's 500 Composite Stock Price
Index, despite bearing transaction costs and operating expenses. The total
return for the Fund and its target index is shown in the table below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
TOTAL RETURN
----------------
SIX MONTHS ENDED
JUNE 30, 1996
- ---------------------------------------------------------------
<S> <C>
VANGUARD INSTITUTIONAL INDEX FUND +10.10%
- ---------------------------------------------------------------
STANDARD & POOR'S 500 STOCK INDEX +10.10%
- ---------------------------------------------------------------
</TABLE>
"Standard & Poor's(R)," "S&P 500(R)," and "500" are trademarks of The
McGraw-Hill Companies, Inc.
The Fund's total return is based on net asset values of $57.93 per share on
December 31, 1995, and $63.24 per share on June 30, 1996, adjusted to take into
account distributions of $.09 per share from net realized capital gains and
$.44 per share from net investment income.
THE PERIOD IN REVIEW
The U.S. stock market continued to surge upward during the first half of our
Fund's fiscal year, albeit below the near-record pace that prevailed in 1995.
Even so, the advance was impressive, occurring as it did in the face of a sharp
rise in long-term interest rates.
While the stock market, as measured by the Standard & Poor's 500 Index,
chalked up a +10.1% return from January through June, the bond market slumped.
Short-term interest rates rose only modestly, with the rate on 90-day Treasury
bills rising from 5.0% to 5.2% during the first half of the year. The rate
increase was considerably steeper for long-term bonds. The yield on the
benchmark 30-year U.S. Treasury bond rose from 6.0% at the beginning of the
year to 7.0% at the end of June, engendering a price decline of -12%. The
Lehman Aggregate Bond Index, a benchmark for the overall bond market, provided
a negative total return of -1.2% in the half year, earning income of 3.3%
combined with a price decline of -4.5%.
The primary reason for the divergence in the returns of stocks and bonds
appears to be differing responses by equity and bond investors to the
surprising strength of the overall economy. The faster-than-expected economic
growth during the first half of the year led stock investors to anticipate
accelerated growth in corporate earnings, even as bond investors worried about
higher inflation. It remains to be seen whether the bull market in stocks can
continue in the face of higher interest rates, which may provide heightened
competition for investors' dollars at a time when common stocks offer
historically low dividend yields.
The concentration of the Standard & Poor's 500 Index in stocks with
large market capitalizations slowed its relative performance during the first
five months of the year, as the market's upsurge was led by stocks of small-
and medium-sized companies. Through the end of April, the Index had outpaced
but 30% of all general equity mutual funds. However, the market treated such
stocks rather harshly in June, and the 500 Index closed the half year ahead of
55% of all general equity funds. This was a most acceptable result, we think,
after such remarkable success for the Index in 1994 and again in 1995. Indeed,
in our 1995 Annual Report, we warned that "there will be years when sub-average
returns will (not 'may') occur." So far, 1996 is shaping up very nicely, but
there is always a possibility that it will prove to be just such a year. In the
long-run, however, one year's disparity simply should not concern our long-term
shareholders.
IN SUMMARY
Six months ago in our Annual Report, following an extraordinarily bountiful
1995, we cautioned that the
1
<PAGE> 2
financial markets are not a "one-way street" and that investors should be
prepared for the occasional rough patch by maintaining a balanced portfolio of
stock funds, bond funds, and money market funds. Although the stock market
continued on a relatively smooth, upward path during most of the first half of
the Fund's fiscal year, we believe our cautionary advice still applies. So,
too, does our comment about the major long-term risks of investing: (1) failing
to hold stocks at all because of their short-term risks; and (2) following an
erratic and ever-changing course.
We assure you that Vanguard Institutional Index Fund will hold to its
course, remaining fully invested in the stocks in the Standard & Poor's 500
Index. At the same time, we will dedicate ourselves to maintaining our
operating expenses at the minimum reasonable levels, with the expectation of
providing solid and fully competitive long-term returns.
We look forward to reporting to you on the Fund's full-year results in
our Annual Report six months hence.
Sincerely,
/s/ JOHN C. BOGLE
John C. Bogle
Chairman of the Board
/s/ JOHN J. BRENNAN
John J. Brennan
President
July 25, 1996
Note: Mutual fund data from Lipper Analytical Services, Inc.
2
<PAGE> 3
TOTAL INVESTMENT RETURN TABLE
The following table illustrates the results of a single-share investment in
VANGUARD INSTITUTIONAL INDEX FUND since inception through June 30, 1996. During
the period illustrated, stock prices fluctuated widely; these results should
not be considered a representation of the dividend income or capital gain or
loss that may be realized from an investment made in the Fund today.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PERIOD PER SHARE DATA TOTAL INVESTMENT RETURN*
- -------------------------------------------------------------------------------------------------------------------
Institutional Index Fund S&P 500
Value with Income ----------------------------- -------
Year Ended Net Asset Capital Gains Income Dividends & Capital Capital Income Total Total
December 31 Value Distributions Dividends Gains Reinvested Return Return Return Return
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL (7/90) $34.10 -- -- $34.10 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
1990 31.62 -- $ .52 32.14 - 7.3% +1.6% - 5.7% - 5.7%
- -------------------------------------------------------------------------------------------------------------------
1991 39.91 $.06 1.16 41.89 +26.4 +3.9 +30.3 +30.5
- -------------------------------------------------------------------------------------------------------------------
1992 41.45 .25 1.17 45.05 + 4.5 +3.0 + 7.5 + 7.6
- -------------------------------------------------------------------------------------------------------------------
1993 44.20 .18 1.19 49.56 + 7.1 +2.9 +10.0 +10.1
- -------------------------------------------------------------------------------------------------------------------
1994 43.22 .34 1.21 50.21 - 1.5 +2.8 + 1.3 + 1.3
- -------------------------------------------------------------------------------------------------------------------
1995 57.93 .16 1.27 69.10 +34.4 +3.2 +37.6 +37.6
- -------------------------------------------------------------------------------------------------------------------
1996 (6/30) 63.24 .09 .44 76.08 + 9.3 +0.8 +10.1 +10.1
- -------------------------------------------------------------------------------------------------------------------
LIFETIME +123.1% +123.7%
- -------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN +14.5% +14.6%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
*Includes reinvestment of income dividends and any capital gains distributions
for both the Fund and the Index.
Note: No adjustment has been made for income taxes payable by shareholders on
reinvested income dividends and capital gains distributions.
3
<PAGE> 4
STATEMENT OF NET ASSETS
FINANCIAL STATEMENTS (unaudited)
June 30, 1996
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
- -----------------------------------------------------------------------------
General Electric Co. 2,875,296 $ 248,713
The Coca-Cola Co. 4,316,924 210,990
Exxon Corp. 2,148,265 186,630
AT&T Corp. 2,779,094 172,304
Philip Morris Cos., Inc. 1,435,071 149,247
Royal Dutch Petroleum Co. ADR 936,620 144,005
Merck & Co., Inc. 2,123,084 137,204
* Microsoft Corp. 1,019,924 122,391
Johnson & Johnson 2,304,858 114,090
Procter & Gamble Co. 1,186,265 107,505
Intel Corp. 1,417,658 104,021
Wal-Mart Stores, Inc. 3,966,620 100,653
PepsiCo, Inc. 2,710,807 95,895
International Business
Machines Corp. 946,118 93,666
Hewlett-Packard Co. 881,880 87,857
American International
Group, Inc. 818,577 80,732
Pfizer, Inc. 1,102,102 78,662
Bristol-Myers Squibb Co. 869,739 78,276
E.I. du Pont de Nemours & Co. 969,335 76,699
Mobil Corp. 682,024 76,472
GTE Corp. 1,686,735 75,481
The Walt Disney Co. 1,173,093 73,758
BellSouth Corp. 1,719,481 72,863
Citicorp 840,997 69,487
General Motors Corp. 1,307,460 68,478
Chevron Corp. 1,128,755 66,596
Ford Motor Co. 2,033,185 65,824
American Home Products Corp. 1,094,229 65,790
Motorola, Inc. 1,023,877 64,376
Federal National Mortgage Assn. 1,888,628 63,269
Amoco Corp. 858,730 62,150
Eli Lilly & Co. 952,548 61,916
Abbott Laboratories 1,359,442 59,136
Ameritech Corp. 960,750 57,044
McDonald's Corp. 1,211,395 56,633
* Cisco Systems, Inc. 953,796 54,009
Chase Manhattan Corp. 754,307 53,273
The Boeing Co. 598,611 52,154
SBC Communications Inc. 1,053,524 51,886
Minnesota Mining &
Manufacturing Co. 723,342 49,910
Bell Atlantic Corp. 757,374 48,282
BankAmerica Corp. 636,373 48,205
Gillette Co. 769,534 48,000
Eastman Kodak Co. 598,243 46,513
Home Depot, Inc. 826,665 44,640
* Oracle Corp. 1,129,285 44,465
NationsBank Corp. 517,935 42,794
Columbia/HCA Healthcare Corp. 774,256 41,326
Unilever NV ADR 279,600 40,577
Chrysler Corp. 650,853 40,353
Wells Fargo & Co. 168,761 40,313
Schering-Plough Corp. 637,143 39,981
Pharmacia & Upjohn, Inc. 882,811 39,175
Texaco Inc. 456,949 38,326
Kimberly-Clark Corp. 486,333 37,569
Travelers Group Inc. 820,390 37,430
American Express Co. 835,507 37,284
NYNEX Corp. 755,425 35,883
Schlumberger Ltd. 420,525 35,429
Allstate Corp. 769,974 35,130
Emerson Electric Co. 387,567 35,026
Monsanto Co. 1,018,811 33,111
Dow Chemical Co. 435,394 33,090
Sears, Roebuck & Co. 678,355 32,985
Atlantic Richfield Co. 278,171 32,963
Anheuser-Busch Co., Inc. 438,057 32,854
Sprint Corp. 755,117 31,715
First Data Corp. 386,193 30,751
Campbell Soup Co. 431,307 30,407
First Union Corp. 492,963 30,009
MCI Communications Corp. 1,176,714 30,006
Xerox Corp. 559,605 29,939
Computer Associates
International, Inc. 418,490 29,817
Lockheed Martin Corp. 343,788 28,878
Southern Co. 1,159,994 28,565
WMX Technologies Inc. 855,217 28,008
AlliedSignal Inc. 489,000 27,934
J.P. Morgan & Co., Inc. 324,790 27,485
Sara Lee Corp. 837,155 27,103
Kellogg Co. 368,549 26,996
Time Warner, Inc. 678,837 26,644
Banc One Corp. 781,669 26,577
Federal Home Loan
Mortgage Corp. 309,959 26,501
U S WEST Communications Group 820,229 26,145
Warner-Lambert Co. 469,060 25,798
Nike, Inc. Class B 248,041 25,486
Pacific Telesis Group 741,132 25,013
Union Pacific Corp. 355,662 24,852
* Amgen, Inc. 458,914 24,667
Northern Telecom Ltd. 448,439 24,384
* AirTouch Communications 862,331 24,361
United Technologies Corp. 210,657 24,226
* Viacom International Class B 621,787 24,172
* COMPAQ Computer Corp. 463,839 22,844
Caterpillar, Inc. 335,289 22,716
Medtronic, Inc. 404,885 22,674
Baxter International, Inc. 470,145 22,214
The Seagram Co. Ltd. 658,861 22,154
Norwest Corp. 632,864 22,071
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Rockwell International Corp. 376,014 $ 21,527
Colgate-Palmolive Co. 253,276 21,465
Raytheon Co. 415,436 21,447
General Re Corp. 140,750 21,429
First Chicago NBD Corp. 547,470 21,420
Burlington Northern Santa
Fe Corp. 263,057 21,275
J.C. Penney Co., Inc. 388,482 20,395
* Tele-Communications, Inc.
Class A 1,126,782 20,282
Fleet Financial Group, Inc. 455,701 19,823
H.J. Heinz Co. 639,348 19,420
Automatic Data Processing, Inc. 501,155 19,357
Merrill Lynch & Co., Inc. 296,427 19,305
ConAgra, Inc. 422,430 19,168
International Paper Co. 515,959 19,026
Phillips Petroleum Co. 453,234 18,979
Norfolk Southern Corp. 223,134 18,911
May Department Stores Co. 432,042 18,902
McDonnell Douglas Corp. 384,765 18,661
* Sun Microsystems, Inc. 316,387 18,588
WorldCom, Inc. 334,977 18,507
The Dun & Bradstreet Corp. 293,891 18,368
Deere & Co. 454,147 18,166
Duke Power Co. 354,319 18,159
CPC International, Inc. 251,682 18,121
Albertson's, Inc. 435,717 18,028
Enron Corp. 434,519 17,761
CSX Corp. 365,821 17,651
PNC Bank Corp. 589,708 17,544
Aluminum Co. of America 304,003 17,442
The Bank of New York Co., Inc. 337,965 17,321
Gannett Co., Inc. 243,519 17,229
Archer-Daniels-Midland Co. 899,237 17,198
Barrick Gold Corp. 619,985 16,817
Pacific Gas & Electric Co. 720,705 16,756
Texas Utilities Co. 390,621 16,699
Dean Witter Discover & Co. 288,724 16,529
Texas Instruments, Inc. 327,695 16,344
Loews Corp. 203,791 16,074
The Gap, Inc. 498,748 16,022
PPG Industries, Inc. 327,007 15,942
United Healthcare Corp. 315,460 15,931
CIGNA Corp. 132,241 15,588
KeyCorp 400,961 15,537
Tenneco, Inc. 300,564 15,366
Corning, Inc. 399,250 15,321
The Chubb Corp. 303,723 15,148
AMP, Inc. 376,193 15,095
General Mills, Inc. 275,708 15,026
* U S WEST Media Group 816,858 14,908
CoreStates Financial Corp. 383,184 14,753
Weyerhaeuser Co. 345,934 14,702
FPL Group, Inc. 317,768 14,617
U.S. Healthcare, Inc. 265,730 14,582
SunTrust Banks, Inc. 392,216 14,512
Unocal Corp. 427,744 14,436
Walgreen Co. 425,728 14,262
Aetna Life & Casualty Co. 199,254 14,247
First Bank System, Inc. 245,461 14,237
* AMR Corp. 154,954 14,101
Illinois Tool Works, Inc. 205,903 13,924
American Brands, Inc. 306,786 13,920
* Boston Scientific Corp. 307,805 13,851
American Electric Power Co., Inc. 322,743 13,757
Mattel, Inc. 479,038 13,712
Occidental Petroleum Corp. 552,034 13,663
Edison International 770,090 13,573
* ITT Corp. 204,413 13,542
Westinghouse Electric Corp. 721,456 13,527
Mellon Bank Corp. 237,312 13,527
* Toys R Us, Inc. 472,914 13,478
National City Corp. 382,225 13,426
Morgan Stanley Group, Inc. 268,411 13,186
* 3 Com Corp. 288,043 13,142
American General Corp. 359,058 13,061
The Goodyear Tire & Rubber Co. 268,123 12,937
Dayton-Hudson Corp. 124,669 12,856
Wachovia Corp. 292,732 12,807
Household International, Inc. 167,936 12,763
Pitney Bowes, Inc. 259,987 12,414
Dominion Resources, Inc. 306,540 12,262
* Federated Department Stores 358,801 12,244
Marsh & McLennan Cos., Inc. 125,818 12,141
Alcan Aluminium Ltd. 396,065 12,080
W.R. Grace & Co. 169,517 12,015
UST Inc. 349,509 11,971
Honeywell, Inc. 219,321 11,953
* Digital Equipment Corp. 264,827 11,917
Consolidated Edison Co. of
New York, Inc. 406,353 11,886
Marriott International 220,846 11,870
Ralston-Ralston Purina Group 183,256 11,751
* CUC International, Inc. 329,336 11,691
Service Corp. International 202,821 11,662
Textron, Inc. 145,715 11,639
Public Service Enterprise
Group Inc. 423,173 11,584
Praxair, Inc. 267,661 11,309
PacifiCorp 506,803 11,276
Georgia-Pacific Corp. 158,129 11,227
Houston Industries, Inc. 454,412 11,190
Entergy Corp. 394,349 11,190
Air Products & Chemicals, Inc. 193,415 11,170
Halliburton Co. 198,176 10,999
MBNA Corp. 385,228 10,979
</TABLE>
5
<PAGE> 6
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
ITT Hartford Group, Inc. 204,304 $ 10,879
Boatmen's Bancshares, Inc. 272,166 10,853
Sysco Corp. 314,269 10,764
Tyco International Ltd. 263,860 10,752
Browning-Ferris Industries, Inc. 368,018 10,673
American Stores Co. 258,718 10,672
Avon Products, Inc. 232,804 10,505
Central & South West Corp. 361,256 10,476
Hercules, Inc. 188,509 10,415
Unicom Corp. 371,552 10,357
Kmart Corp. 829,584 10,266
U.S. Bancorp 283,478 10,205
* Tellabs, Inc. 152,862 10,204
Bankers Trust New York Corp. 137,528 10,160
Placer Dome, Inc. 425,079 10,149
Wrigley, (Wm.) Jr. 200,925 10,147
TRW, Inc. 112,782 10,136
ALLTEL Corp. 327,585 10,073
Lowes Cos., Inc. 278,843 10,073
The Limited, Inc. 468,214 10,067
Alco Standard Corp. 221,105 10,005
Carolina Power & Light Co. 263,279 10,005
USX-Marathon Group 497,117 10,004
PECO Energy Corp. 384,224 9,990
Crown Cork & Seal Co., Inc. 221,160 9,952
Barnett Banks, Inc. 162,821 9,932
Hershey Foods Corp. 133,762 9,815
Genuine Parts Co. 210,476 9,629
Bank of Boston Corp. 193,610 9,584
Transamerica Corp. 117,391 9,509
Hilton Hotels Corp. 84,277 9,481
Morton International, Inc. 254,344 9,474
Fifth Third Bancorp 176,045 9,462
Fluor Corp. 144,447 9,443
Burlington Resources, Inc. 218,872 9,412
* Applied Materials, Inc. 309,401 9,398
Micron Technology Inc. 359,398 9,299
Winn Dixie Stores, Inc. 262,680 9,292
R.R. Donnelley & Sons Co. 266,252 9,286
Dresser Industries, Inc. 314,093 9,266
Union Carbide Corp. 230,200 9,150
International Flavors &
Fragrances, Inc. 191,936 9,141
Comerica, Inc. 204,296 9,117
Dover Corp. 196,794 9,077
Conrail, Inc. 135,477 8,992
Williams Cos., Inc. 180,842 8,952
Becton, Dickinson & Co. 110,750 8,888
Delta Air Lines, Inc. 106,941 8,876
Aon Corp. 172,799 8,770
CINergy Corp. 272,669 8,725
* Novell, Inc. 629,253 8,652
Amerada Hess Corp. 160,851 8,626
PanEnergy Corp. 260,850 8,575
* Cabletron Systems, Inc. 124,754 8,561
* The Kroger Co. 214,798 8,485
Newmont Mining Corp. 171,800 8,483
Consolidated Natural Gas Co. 161,850 8,457
Freeport-McMoRan Copper &
Gold Inc. Class B 265,248 8,455
Newell Co. 274,611 8,410
Masco Corp. 277,366 8,390
Eastman Chemical 137,456 8,368
* Bay Networks 324,810 8,364
Lincoln National Corp. 180,320 8,340
Ingersoll-Rand Co. 188,128 8,231
Baker Hughes, Inc. 246,553 8,105
* Federal Express Corp. 98,194 8,052
Inco Ltd. 249,413 8,044
Salomon, Inc. 182,220 8,018
The Quaker Oats Co. 233,845 7,980
The McGraw-Hill Cos. 173,847 7,954
* Tenet Healthcare Corp. 371,819 7,948
The Clorox Co. 89,614 7,942
Tribune Co. 108,962 7,913
Times Mirror Co. Class A 181,001 7,874
UNUM Corp. 126,452 7,872
Eaton Corp. 134,181 7,866
DTE Energy Co. 251,008 7,750
St. Paul Cos., Inc. 144,751 7,744
Cooper Industries, Inc. 186,275 7,730
SAFECO Corp. 217,282 7,686
Green Tree Financial Corp. 245,946 7,686
Nucor Corp. 151,082 7,649
Coastal Corp. 182,432 7,617
Pioneer Hi Bred International 143,556 7,591
* EMC Corp. 397,886 7,411
Melville Corp. 181,475 7,350
General Public Utilities Corp. 208,365 7,345
Southwest Airlines Co. 249,706 7,273
Baltimore Gas & Electric Co. 255,102 7,239
* Computer Sciences Corp. 96,721 7,230
Rohm & Haas Co. 115,171 7,227
* Price/Costco Inc. 337,347 7,211
Phelps Dodge Corp. 114,735 7,157
Rubbermaid, Inc. 262,120 7,143
Dillard Department Stores Class A 195,344 7,130
Union Electric Co. 176,062 7,087
Dow Jones & Co., Inc. 167,730 7,003
Providian Corp. 162,900 6,984
Great Lakes Chemical Corp. 111,553 6,944
Champion International Corp. 165,662 6,916
Sherwin-Williams Co. 148,098 6,887
W.W. Grainger, Inc. 88,135 6,830
General Dynamics Corp. 109,248 6,773
* Silicon Graphics, Inc. 280,696 6,737
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Sonat, Inc. 148,519 $ 6,683
Northrop Grumman Corp. 97,788 6,662
VF Corp. 109,849 6,550
PP&L Resources Inc. 274,791 6,492
Interpublic Group of Cos., Inc. 137,014 6,423
Whirlpool Corp. 127,950 6,350
Jefferson-Pilot Corp. 122,804 6,340
Harcourt General, Inc. 124,738 6,237
Nordstrom, Inc. 140,104 6,200
* General Instrument 214,329 6,189
Knight-Ridder, Inc. 84,549 6,130
Circuit City Stores, Inc. 168,229 6,077
Case Corp. 125,193 6,009
* DSC Communications Corp. 199,689 5,991
Republic New York Corp. 96,186 5,988
* Ceridian Corp. 117,408 5,929
Union Camp Corp. 120,638 5,881
Black & Decker Corp. 151,199 5,840
H & R Block, Inc. 178,501 5,824
Northern States Power Co. 117,502 5,802
* LSI Logic Corp. 222,044 5,773
Ohio Edison Co. 263,063 5,755
Reynolds Metals Co. 109,760 5,721
Engelhard Corp. 248,237 5,709
Golden West Financial Corp. 101,514 5,685
Great Western Financial Corp. 236,438 5,645
Willamette Industries, Inc. 95,168 5,639
* Andrew Corp. 103,585 5,594
Raychem Corp. 76,850 5,524
New York Times Co. Class A 169,061 5,516
Dana Corp. 175,191 5,431
Parker Hannifin Corp. 127,896 5,420
H.F. Ahmanson & Co. 200,672 5,418
Torchmark Corp. 123,729 5,413
Kerr-McGee Corp. 88,296 5,375
Hasbro, Inc. 149,994 5,362
* Western Atlas Inc. 91,972 5,357
Comcast Corp. Class A Special 288,744 5,270
Westvaco Corp. 175,753 5,251
Beneficial Corp. 92,342 5,183
* Woolworth Corp. 229,689 5,168
Laidlaw Inc. Class B 510,379 5,168
ITT Industries, Inc. 203,937 5,124
Deluxe Corp. 142,221 5,049
Avery Dennison Corp. 91,668 5,030
* Harrah's Entertainment, Inc. 177,264 5,008
* Humana, Inc. 279,964 5,004
Mallinckrodt Group, Inc. 128,045 4,978
Columbia Gas Systems, Inc. 95,174 4,961
Tandy Corp. 104,412 4,947
Johnson Controls, Inc. 70,951 4,931
Pall Corp. 198,350 4,785
The Mead Corp. 92,045 4,775
Brown-Forman Corp. Class B 118,912 4,756
The Dial Corp. 162,981 4,665
Sigma Aldrich Corp. 86,136 4,565
The Stanley Works 152,954 4,550
* St. Jude Medical, Inc. 135,874 4,518
* Tupperware Corp. 106,245 4,489
Temple-Inland Inc. 95,908 4,484
TJX Cos., Inc. 132,098 4,458
Apple Computer, Inc. 213,451 4,456
Whitman Corp. 181,742 4,385
Allergan, Inc. 111,615 4,381
Liz Claiborne, Inc. 126,465 4,379
Ashland Inc. 110,076 4,362
Reebok International Ltd. 129,187 4,344
Homestake Mining Co. 252,618 4,326
Pacific Enterprises 145,273 4,304
Rite Aid Corp. 144,588 4,301
Manor Care Inc. 107,971 4,251
* FMC Corp. 64,090 4,182
Bausch & Lomb, Inc. 97,840 4,158
Louisiana-Pacific Corp. 186,836 4,134
USX-U.S. Steel Group 143,802 4,080
Wendy's International, Inc. 218,936 4,078
Harris Corp. 66,814 4,076
Echlin, Inc. 106,000 4,015
* ALZA Corp. 144,927 3,967
Sun Co., Inc. 128,853 3,914
James River Corp. 146,526 3,865
Maytag Corp. 184,978 3,861
Ryder System, Inc. 136,901 3,850
* Owens Corning 88,928 3,824
Mercantile Stores Co., Inc. 63,565 3,727
Pennzoil Co. 80,033 3,702
Giant Food, Inc. Class A 102,803 3,688
SuperValu Inc. 116,626 3,674
Armstrong World Industries Inc. 63,660 3,668
Ecolab, Inc. 110,863 3,658
Nalco Chemical Co. 115,915 3,651
Pep Boys (Manny, Moe & Jack) 107,271 3,647
Cyprus Amax Minerals Co. 160,680 3,635
* National Semiconductor Corp. 233,711 3,623
Polaroid Corp. 78,724 3,592
Perkin-Elmer Corp. 74,208 3,581
American Greetings Corp. Class A 128,906 3,513
Teledyne Inc. 96,288 3,478
Moore Corp. Ltd. 181,850 3,432
The BF Goodrich Co. 90,967 3,400
Brunswick Corp. 169,210 3,384
USF&G Corp. 205,753 3,369
Louisiana Land & Exploration Co. 58,465 3,369
C.R. Bard, Inc. 98,586 3,352
* Fruit of the Loom, Inc. 131,226 3,346
Snap-On Inc. 70,156 3,324
</TABLE>
7
<PAGE> 8
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- -----------------------------------------------------------------------------
<S> <C> <C>
* Varity Corp. 68,785 $ 3,310
United States Surgical Corp. 106,497 3,301
Paccar, Inc. 67,096 3,271
National Service Industries, Inc. 82,687 3,235
Worthington Industries, Inc. 156,762 3,233
General Signal Corp. 85,357 3,233
Cooper Tire & Rubber Co. 144,399 3,213
Santa Fe Pacific Gold Corp. 227,314 3,211
Millipore Corp. 76,170 3,190
* Advanced Micro Devices, Inc. 232,524 3,168
Bemis Co., Inc. 90,401 3,164
Foster Wheeler Corp. 69,838 3,134
Boise Cascade Corp. 83,372 3,054
Darden Restaurants Inc. 274,857 2,955
* Oryx Energy Co. 180,543 2,934
Cummins Engine Co., Inc. 69,255 2,796
* Biomet, Inc. 197,545 2,790
Harnischfeger Industries Inc. 81,195 2,700
Shared Medical Systems Corp. 41,941 2,695
ENSERCH Corp. 123,783 2,692
Thomas & Betts Corp. 69,333 2,600
Tektronix, Inc. 57,179 2,559
NorAm Energy Corp. 232,946 2,533
* Tandem Computers, Inc. 201,164 2,489
NICOR, Inc. 86,315 2,449
Echo Bay Mines Ltd. 224,942 2,418
* Bally Entertainment Corp. 86,568 2,381
Autodesk, Inc. 79,419 2,363
Stone Container Corp. 171,581 2,359
* King World Productions, Inc. 64,626 2,351
* Amdahl Corp. 217,261 2,336
Alberto-Culver Co. Class B 50,207 2,328
Caliber System Inc. 67,747 2,303
Comcast Corp. Class A 124,726 2,292
* Rowan Cos., Inc. 154,875 2,284
* Bethlehem Steel Corp. 191,273 2,271
Great Atlantic & Pacific Tea
Co., Inc. 69,041 2,270
Crane Co. 54,991 2,255
* Beverly Enterprises Inc. 182,196 2,186
Briggs & Stratton Corp. 52,660 2,166
Freeport-McMoRan Copper &
Gold Inc. Class A 72,417 2,163
Scientific-Atlanta, Inc. 139,186 2,157
* Unisys Corp. 302,336 2,154
Fleetwood Enterprises, Inc. 68,261 2,116
The Timkin Co. 54,187 2,100
* USAir Group, Inc. 115,560 2,080
Meredith Corp. 49,777 2,078
ASARCO, Inc. 73,539 2,032
Peoples Energy Corp. 60,410 2,024
McDermott International, Inc. 94,187 1,966
Potlatch Corp. 49,751 1,947
Russell Corp. 70,314 1,942
USLIFE Corp. 58,973 1,939
* Santa Fe Energy Resources, Inc. 163,078 1,937
Niagara Mohawk Power Corp. 246,985 1,914
EG & G, Inc. 86,779 1,855
Safety-Kleen Corp. 103,891 1,818
Springs Industries Inc. Class A 34,584 1,746
Cincinnati Milacron, Inc. 70,762 1,698
Inland Steel Industries, Inc. 84,937 1,667
Trinova Corp. 49,637 1,657
Helmerich & Payne, Inc. 45,197 1,655
Ogden Corp. 90,311 1,637
Consolidated Freightways, Inc. 75,928 1,604
Centex Corp. 50,250 1,564
Ball Corp. 54,245 1,560
Alexander & Alexander
Services, Inc. 76,448 1,510
Longs Drug Stores, Inc. 33,760 1,507
Jostens Inc. 69,658 1,376
John H. Harland Co. 55,273 1,361
Pulte Corp. 49,213 1,316
* Navistar International Corp. 129,776 1,282
* Charming Shoppes, Inc. 174,107 1,208
ONEOK, Inc. 46,929 1,173
Eastern Enterprises 35,069 1,166
Adolph Coors Co. Class B 64,330 1,150
* Intergraph Corp. 80,870 980
Kaufman & Broad Home Corp. 66,461 964
Giddings & Lewis, Inc. 58,913 957
* Aon Corp. Cvt. Pfd. 6.25% 15,000 941
Luby's Cafeterias, Inc. 39,888 937
Fleming Cos., Inc. 64,583 928
* Armco, Inc. 181,803 909
* Data General Corp. 67,405 876
NACCO Industries, Inc. Class A 15,301 847
* Ryan's Family Steak Houses, Inc. 91,547 847
* Shoney's Inc. 71,349 776
* Community Psychiatric Centers 76,643 728
Stride Rite Corp. 85,720 707
* Viacom International Class A 18,016 687
* Yellow Corp. 49,625 651
Outboard Marine Corp. 35,464 643
Brown Group, Inc. 30,658 533
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS (99.9%)(1)
(Cost $6,651,154) 8,762,206
- -----------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- -----------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS (.3%)
- -----------------------------------------------------------------------------
COMMERCIAL PAPER
Koch Industries
5.57%, 7/1/96 $22,936 $ 22,936
U.S. TREASURY BILL--Note D
5.02%, 7/11/96 3,300 3,296
- -----------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $26,231) 26,232
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(Cost $6,677,385) 8,788,438
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.2%)
- -----------------------------------------------------------------------------
Receivables for Investment
Securities Sold 475,378
Other Assets 120,389
Payables for Capital
Shares Redeemed (498,655)
Other Liabilities (115,028)
----------
(17,916)
- -----------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------
Applicable to 138,680,833 outstanding
shares of beneficial interest
(unlimited authorization) $8,770,522
- -----------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $63.24
=============================================================================
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
(1)The combined market value of common stocks and Standard & Poor's 500 Index
futures contracts represents 100% of net assets.
ADR--American Depository Receipt.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
AT JUNE 30, 1996, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
---------- ------
<S> <C> <C>
PAID IN CAPITAL $6,518,270 $47.00
UNDISTRIBUTED NET
INVESTMENT INCOME 37,257 .27
ACCUMULATED NET
REALIZED GAINS 103,955 .75
UNREALIZED APPRECIATION
(DEPRECIATION)--NOTE D:
INVESTMENT SECURITIES 2,111,053 15.22
FUTURES CONTRACTS (13) --
- -----------------------------------------------------------------------------
NET ASSETS $8,770,522 $63.24
- -----------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
STATMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996
(000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,641
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
- -------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,902
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,507
- -------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,507
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,395
- -------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,825
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,359
- -------------------------------------------------------------------------------------------------------------------
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,184
- -------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566,321
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
- -------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation (Depreciation) . . . . . . . . . . . . . . . 566,494
- -------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations . . . . . . . . . . . . . $759,073
===================================================================================================================
</TABLE>
10
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED Year Ended
JUNE 30, 1996 December 31, 1995
(000) (000)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . $ 88,395 $ 119,105
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . . 104,184 44,866
Change in Unrealized Appreciation (Depreciation) . . . . . . . . . . . 566,494 1,311,863
- ------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations . . . . . . . 759,073 1,475,834
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . (60,402) (126,041)
Realized Net Gain . . . . . . . . . . . . . . . . . . . . . . . . . . (11,778) (17,546)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . (72,180) (143,587)
- ------------------------------------------------------------------------------------------------------------------
NET EQUALIZATION CREDITS--Note A . . . . . . . . . . . . . . . . . . . . 4,430 9,730
- ------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (1)
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,212,378 2,536,571
Issued in Lieu of Cash Distributions . . . . . . . . . . . . . . . . . 63,914 128,566
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (871,483) (597,879)
- ------------------------------------------------------------------------------------------------------------------
Net Increase from Capital Share Transactions . . . . . . . . . . . 1,404,809 2,067,258
- ------------------------------------------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . . . . . . . . . . . . . . 2,096,132 3,409,235
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . 6,674,390 3,265,155
- ------------------------------------------------------------------------------------------------------------------
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,770,522 $6,674,390
==================================================================================================================
(1) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,493 48,924
Issued in Lieu of Cash Distributions . . . . . . . . . . . . . . 1,031 2,354
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,063) (11,612)
- ------------------------------------------------------------------------------------------------------------------
23,461 39,666
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended December 31,
SIX MONTHS ENDED -----------------------------------------------
For a Share Outstanding Throughout Each Period JUNE 30, 1996 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $57.93 $43.22 $44.20 $41.45 $39.91 $31.62
INVESTMENT OPERATIONS ------- ------- ------- ------- ------- -------
Net Investment Income . . . . . . . . . . . . .67 1.28 1.23 1.20 1.17 1.16
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . 5.17 14.86 (.66) 2.92 1.79 8.35
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS . . 5.84 16.14 .57 4.12 2.96 9.51
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . (.44) (1.27) (1.21) (1.19) (1.17) (1.16)
Distributions from Realized Capital Gains . . (.09) (.16) (.34) (.18) (.25) (.06)
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . (.53) (1.43) (1.55) (1.37) (1.42) (1.22)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $63.24 $57.93 $43.22 $44.20 $41.45 $39.91
=======================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . +10.10% +37.60% +1.31% +10.02% +7.54% +30.34%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (Millions) . . . . . . . $8,771 $6,674 $3,265 $3,103 $1,525 $1,069
Ratio of Total Expenses to Average Net Assets . . . .06%* .06% .07% .07% .07% .08%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 2.22%* 2.49% 2.80% 2.72% 2.94% 3.15%
Portfolio Turnover Rate . . . . . . . . . . . . . . 15%* 4%+ 23%+ 4%+ 9%+ 4%
Average Commission Rate Paid . . . . . . . . . . . $.0200++ N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Portfolio turnover rates excluding in-kind redemptions were 4%, 19%, 3%,
and 6%, respectively.
++ Represents total commissions paid on portfolio securities divided by the
total number of shares purchased or sold on which commissions were charged.
This disclosure is required by the SEC beginning in 1996.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
Vanguard Institutional Index Fund is registered under the Investment Company
Act of 1940 as a diversified open-end investment company.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of financial
statements.
1. SECURITY VALUATION: Securities listed on an exchange are valued at the
latest quoted sales prices as of the close of the New York Stock Exchange
(generally 4:00 PM) on the valuation date; securities not traded are
valued at the mean of the latest quoted bid and asked prices; securities
not listed are valued at the latest quoted bid prices. Temporary cash
investments are valued at amortized cost which approximates market value.
2. FEDERAL INCOME TAXES: The Fund intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the
financial statements.
3. EQUALIZATION: The Fund follows the accounting practice known as
"equalization," under which a portion of the price of capital shares
issued and redeemed, equivalent to undistributed net investment income per
share on the date of the transaction, is credited or charged to
undistributed income. As a result, undistributed income per share is
unaffected by Fund share sales or redemptions.
4. FUTURES: The Fund utilizes Standard & Poor's 500 Index futures contracts
to a limited extent, with the objectives of maintaining full exposure to
the stock market, enhancing returns, maintaining liquidity and minimizing
transaction costs. The Fund may purchase futures contracts to immediately
position incoming cash in the market, thereby simulating a fully invested
position in the underlying index while maintaining a cash balance for
liquidity. In the event of redemptions, the Fund may pay redeeming
shareholders from its cash balance and reduce its futures position
accordingly. Returns may be enhanced by using futures contracts instead of
the underlying securities when futures are believed to be priced more
attractively than the underlying securities.
The primary risks associated with the use of futures contracts are
imperfect correlation between changes in market values of stocks contained
in the underlying index and the prices of futures contracts, and the
possibility of an illiquid market. Futures contracts are valued based
upon their quoted daily settlement prices. Fluctuations in the values of
futures contracts are recorded as unrealized appreciation (depreciation)
until terminated, at which time realized gains (losses) are recognized.
Unrealized appreciation (depreciation) related to open futures contracts
is required to be treated as realized gain (loss) for Federal income tax
purposes.
5. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities
sold. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
B. The Vanguard Group provides investment advisory, corporate management,
administrative, marketing, and distribution services and pays for all other
operating expenses, except for taxes, in return for a fee calculated at an
annual percentage rate of the average net assets of the Fund. For the six
months ended June 30, 1996, the fee for such services represented an effective
annual rate of .06 of 1% of average net assets. The Fund's trustees and
officers are also directors and officers of Vanguard.
C. During the six months ended June 30, 1996, purchases and sales of
investment securities other than U.S. Government securities and temporary cash
investments were $2,029,788,000 and $587,097,000, respectively.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (continued)
D. At June 30, 1996, unrealized appreciation of investment securities for
financial reporting and Federal income tax purposes was $2,111,053,000, of
which $2,162,303,000 related to appreciated securities and $51,250,000 related
to depreciated securities.
At June 30, 1996, the aggregate settlement value of open Standard & Poor's 500
Index futures contracts expiring in September 1996, the related unrealized
depreciation, and the market value of securities deposited as initial margin
for those contracts were $10,152,000, $13,000, and $3,296,000, respectively.
14
<PAGE> 15
TRUSTEES AND OFFICERS
JOHN C. BOGLE, Chairman of the Board
Chairman and Director of The Vanguard Group, Inc., and of each of the
investment companies in The Vanguard Group.
JOHN J. BRENNAN, President and Chief Executive Officer
President and Director of The Vanguard Group, Inc., and of each of the
investment companies in The Vanguard Group.
ROBERT E. CAWTHORN, Chairman Emeritus of Rhone-Poulenc Rorer Inc.; Director of
Sun Company, Inc.; Director of Westinghouse Electric Corporation.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea Co.,
Alco Standard Corp., Raytheon Co., Knight-Ridder, Inc., and Massachusetts
Mutual Life Insurance Co.
BRUCE K. MACLAURY, President Emeritus of The Brookings Institution; Director of
American Express Bank Ltd., The St. Paul Companies, Inc., and National Steel
Corporation.
BURTON G. MALKIEL, Chemical Bank Chairman's Professor of Economics, Princeton
University; Director of Prudential Insurance Co. of America, Amdahl Corp.,
Baker Fentress & Co., The Jeffrey Co., and Southern New England Communications
Co.
ALFRED M. RANKIN, JR., Chairman, President, and Chief Executive Officer of
NACCO Industries, Inc.; Director of NACCO Industries, The BFGoodrich Co., and
The Standard Products Co.
JOHN C. SAWHILL, President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co. and
President of New York University; Director of Pacific Gas and Electric Co. and
NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco Brands, Inc.; retired Vice
Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc. and Kmart
Corp.
J. LAWRENCE WILSON, Chairman and Chief Executive Officer of Rohm & Haas Co.;
Director of Cummins Engine Co.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment companies in The
Vanguard Group.
RICHARD F. HYLAND, Treasurer; 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.
OTHER VANGUARD GROUP OFFICERS
<TABLE>
<S> <C>
ROBERT A. DISTEFANO F. WILLIAM MCNABB III
Senior Vice President Senior Vice President
Information Technology Institutional
JAMES H. GATELY RALPH K. PACKARD
Senior Vice President Senior Vice President
Individual Investor Group Chief Financial Officer
IAN A. MACKINNON
Senior Vice President
Fixed Income Group
</TABLE>
15
<PAGE> 16
THE VANGUARD FAMILY OF FUNDS
FIXED INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Admiral Funds
U.S. Treasury Money
Market Portfolio
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Money Market Portfolio
Vanguard State Tax-Free Funds
Money Market Portfolios
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
Insured Longer-Term Portfolios
(CA, FL, NJ, NY, OH, PA)
INCOME FUNDS
Vanguard Admiral Funds
Vanguard Fixed Income
Securities Fund
Vanguard Preferred Stock Fund
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible
Securities Fund
Vanguard Equity Income Fund
Vanguard Quantitative Portfolios
Vanguard Selected Value Portfolio
Vanguard/Trustees' Equity Fund
U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Portfolios
Income Portfolio
Conservative Growth Portfolio
Moderate Growth Portfolio
Growth Portfolio
Vanguard STAR Portfolio
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Horizon Fund
Global Equity Portfolio
Global Asset Allocation Portfolio
Capital Opportunity Portfolio
Aggressive Growth Portfolio
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International
Growth Portfolio
Vanguard/Trustees' Equity Fund
International Portfolio
INDEX FUNDS
Vanguard Index Trust
Total Stock Market Portfolio
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Value Portfolio
Small Capitalization Stock Portfolio
Vanguard International Equity
Index Fund
European Portfolio
Pacific Portfolio
Emerging Markets Portfolio
Vanguard Bond Index Fund
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
[THE VANGUARD GROUP LOGO]
Vanguard Financial Center Valley Forge, Pennsylvania 19482
New Account Information: Shareholder Account Services:
1 (800) 662-7447 1 (800) 662-2739
This Report has been prepared for shareholders and may be distributed
to others only if preceded or accompanied by a current prospectus.
All Funds in the Vanguard Family are offered by prospectus only.
Q942-6/96
VANGUARD
INSTITUTIONAL
INDEX FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996
