<PAGE> 1
CHAIRMAN'S LETTER
FELLOW SHAREHOLDER:
Interest rates moved sharply upward during the six months ended July 31, 1994,
the first half of Vanguard Admiral Funds' fiscal year. The yield increase
benefited holders of the Money Market Portfolio, but led to a decline in bond
prices--moderate in dimension for short-term bonds and substantial for
long-term bonds--with corresponding declines in the net asset values of our
longer-term Portfolios.
This table shows the total return and current yield for each Portfolio
for the twelve-month period ending July 31, 1994. The Money Market Portfolio's
results simply reflect the dividends earned. The total returns for our bond
Portfolios incorporate both the income earned by each Portfolio and the impact
of changes in capital values.
- - --------------------------------------------------------------------
<TABLE>
<CAPTION>
Twelve Months Ended
July 31, 1994
-----------------------------------
Components of SEC
Total Return 30-Day
--------------------
U.S. Treasury Portfolio Return Income Capital Yield
- - -------------------------------------------------------------------
<S> <C> <C> <C> <C>
MONEY MARKET +3.3% +3.3% -- 4.1%
- - --------------------------------------------------------------------
SHORT-TERM +1.8% +4.5% -2.7% 6.2%
- - --------------------------------------------------------------------
INTERMEDIATE-TERM -0.7% +5.3% -6.0% 6.9%
- - --------------------------------------------------------------------
LONG-TERM -2.6% +6.1% -8.7% 7.3%
- - --------------------------------------------------------------------
</TABLE>
The detailed per share figures for each Portfolio--including net asset values,
income dividends, any distributions from net realized capital gains, as well as
total returns for the six-month and twelve-month periods ended July 31,
1994--are provided in the table that follows this letter. (We use twelve-month
returns as our major standard, since they give effect to a full year's yield.)
* THE BOND MARKET IN 1994
To state the obvious, the most significant event of the past six months for the
bond market was the continuation--indeed the acceleration--of the sharp rise in
interest rates that began last October. Since that time, short-term yields
(90-day U.S. Treasury bills) have risen from 3.1% to 4.5% and long-term yields
(30-year U.S. Treasury bonds) have risen from 5.9% to 7.4%. The market value of
the Treasury bill was substantially unaffected by this change; new Treasury
bills produce "merely" 50% more income. In contrast, the interest coupon on the
long-term bond remains largely unchanged, but, to reflect the rising cost of $1
of interest, its market value has declined by -18% (price change, excluding
interest income). However painful this decline may have been for investors in
long-term bonds, it is worth noting that interest rates had been falling
steadily during the seven years preceding the October lows. The retracement
through July 31 has served to return rates to the level prevailing at the
beginning of 1993.
A primary cause of the interest rate rise was investor fears about a
resurgence of inflation. So far, at least, there is little evidence of it. The
U.S. Consumer Price Index has risen just 2.8% over the past twelve months,
although more sensitive indicators--such as commodity prices--have been rising
at a higher rate. In an effort to quell inflationary fears, the Federal Reserve
has acted to "tighten" the money supply and slow economic growth and potential
future inflation. Four rate increases--in February, March, April, and again in
May--combined to raise the Federal funds rate (at which banks borrow from one
another) from 3.00% to 4.25%. Theory suggests that increases in short-term
rates should be regarded by market participants as a restraint on potential
inflation, and thus cause long-term rates to fall. However, this theory seldom
holds true in practice, and 1994 has proved to be no exception.
* SIX-MONTH PERFORMANCE REVIEW
As noted at the outset, only the Money Market Portfolio has been a beneficiary
of the rising rate environment that we have had so far this year. Yields have
risen steadily and, for the first time in several years, money market funds now
provide a premium over the inflation rate that falls within historical norms.
(continued)
1
<PAGE> 2
The total returns of our longer-term Portfolios have been
significantly impaired by the rise in interest rates this year. In each case,
the total returns were negative for the six-month period (-0.9% for the
Short-Term Portfolio, -4.3% for the Intermediate-Term Portfolio, and -7.3% for
the Long-Term Portfolio). Although the steady income provided by each Portfolio
should offset the effects of these net asset value declines over the long run,
the total returns over the past twelve months (+1.8% for our Short-Term
Portfolio, -0.7% for our Intermediate-Term Portfolio, and -2.6% for our
Long-Term Portfolio) can only be described as "lackluster." Nonetheless, each
Portfolio's results closely paralleled the returns of the Treasury market
segment in which it invests.
During the past six months, there have been a number of bond funds
that have not adhered to the sort of investment disciplines that characterize
the Portfolios of Vanguard Admiral Funds. There has been too much "stretching"
for high yields by some funds, and the substantial extra risk that they chose
to take--often in the form of exotic derivative instruments--has, in some
cases, already come home to roost. I would like to assure you that our quality
and maturity policies are inviolate, and that your management has no intention
of "playing the games" available in a marketplace behind which a tempting
"casino" always lurks.
Common prudence tells us to avoid extra risk. Common sense tells us
that by maintaining the lowest costs in this industry, we can provide you with
returns above those of the average competitor without compromising on quality.
Our Portfolios maintain annual expense ratios of 0.15%--the lowest in the
industry. By comparison, the average money market fund has an expense ratio of
0.72%, and the average bond fund 1.00%. Other factors held equal, this lower
cost should enable Vanguard to add 0.6% or more to your yield each year
relative to the average competitor.
* IN SUMMARY
I want to be clear that all funds inevitably incur risk. Money market funds
entail the risk that the returns they offer will be inadequate to build an
investor's real capital. Bond funds usually offer higher yields but, as we have
been reminded over the past six months, entail principal risk when interest
rates rise. You can rest assured that Vanguard will not add to those market
risks by departing from the "straight and narrow."
On the positive side, the rise in interest rates has increased the
relative attractiveness of fixed- income funds as an investment alternative,
and rates "across the board" provide a substantial premium over the current
annualized inflation rate. So, we look forward optimistically to a more
positive report to you in our Annual Report six months hence.
Sincerely,
/s/ JOHN C. BOGLE
- - ---------------------
John C. Bogle
Chairman of the Board August 22, 1994
Note: Mutual fund data from Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share Last Twelve Months Total Returns SEC 30-Day
------------------------------- ------------------ -----------------
U.S. Treasury Average Average July 31, January 31, July 31, Income Capital Six Twelve Annualized
Portfolio Maturity Quality* 1993 1994 1994 Dividends Gains Months Months Yield
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET 39 DAYS Aaa $ 1.00 $ 1.00 $1.00 $.032 -- +1.7% +3.3% 4.09%**
SHORT-TERM 2.2 YEARS Aaa 10.22 10.26 9.91 .459 $.033 -0.9 +1.8 6.15
INTERMEDIATE-TERM 6.0 YEARS Aaa 10.60 10.58 9.84 .560 .133 -4.3 -0.7 6.93
LONG-TERM 19.5 YEARS Aaa 10.97 10.90 9.68 .679 .360 -7.3 -2.6 7.28
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Ratings provided by Moody's Investors Services. Securities receiving a Aaa
rating are judged to be of the best quality, carrying the smallest degree
of credit risk. U.S. Government and agency securities are considered to
have Aaa ratings.
** 7-day yield.
2
<PAGE> 3
REPORT FROM THE INVESTMENT ADVISER
The bond markets turned decidedly unfriendly over the last six months. Interest
rates across the entire spectrum of maturities rose irregularly higher,
prompting price declines among all fixed-income securities. The magnitudes of
their descent varied, as expected, according to their terms-to-maturity. On
average for the full six months, long-term bonds dropped about 10% to 14% in
price, intermediate-term notes (5-10 years to maturity) fell 7% to 9%, and
short-term notes (2-5 years) dropped about 4% to 5%. The bear market occurred
quickly and, as a consequence, the interest income generated by bond
investments during this brief period could do little to ameliorate the price
declines. With respect to your Portfolios' total returns, which include both
principal changes and interest income, details are included in the Chairman's
letter. Suffice it to say it was an unhappy interlude that reduced, but in no
way came close to eliminating, the attractive rates of return earned by bonds
since 1987.
The Portfolios of Vanguard Admiral Funds in general fared slightly
better than the unmanaged Lehman Bond Indexes and the Donoghue U.S. Treasury
Money Market group against which we compare ourselves. Our average maturities
have been "hunkered down" moderately in 1994, in the belief that the Federal
Reserve Bank policymakers would tighten monetary reserve availability, and in
so doing raise short-term interest rates. Thus, it came as no surprise to us
when the "Fed" acted on four separate occasions to engineer an increase in the
Federal funds rate (a key interest rate bellwether), which moved from 3.0% at
the beginning of the fiscal year to 4.25% at July 31. Currently, the Fed
appears poised to tighten again. Whether it does or not is open to conjecture.
Regardless, by the time you read this letter you'll have the answer.
What motivated the Fed to act when the inflation statistics seemed to
be so benign? The answer lies in some fairly arcane calculations that compare
actual and potential aggregate economic activity. Theory suggests that when
actual and potential output get too close to one another, price inflation is
the inevitable consequence. Hence, the Fed acted because they were concerned
that capacity constraints would exacerbate future inflation. Indeed, certain
commodity price indices appeared to corroborate the supposition that price
pressures were building. Now the guessing game for armchair economists is
whether the amount of tightening already undertaken is sufficient to eliminate
inflationary pressures and, equally important, expectations of higher
inflation. The correct answer to that question will determine the likely
duration and intensity of this bear market in bonds. Stay tuned.
While we await the ultimate resolution of these unknowns, we continue
to pursue the normal risk-controlled strategies that we hope will add some
value to the three Admiral Funds bond Portfolios over time. To wit, we are
exploiting the relatively steep slope of the "yield curve" in order to position
our bond holdings. The incremental income one obtains through sequential bond
maturities can go a long way toward offsetting any adverse trend in the overall
market. In addition, we make use of lesser-known United States government
guaranteed issuers that carry higher yields than garden-variety Treasury debt.
Lastly, we seek to exploit the small price inefficiencies embodied in the
municipal/Treasury markets through moderate futures "arbitrage" (offsetting
long and short positions). Under no circumstances do any of these strategies
change the fundamental risk/return characteristics of the respective
Portfolios. Rather, they will, if effective, produce incremental return "at the
margin."
In recent months, the financial press has reported several disturbing
incidents of money market funds requiring infusions of capital from their
sponsors to make up for losses on risky "derivative" securities. We find these
attempts to reach out too far on the risk "limb" for extra yield
abhorrent--whether they fail or whether they happened to succeed. While not all
derivative investments are unduly risky (indeed, some actually help control
risk), the mission of a money market fund--to maintain a stable net asset
value--demands a level of conservatism several orders of
3
<PAGE> 4
magnitude greater than that of other types of mutual funds. Rest assured that
the Money Market Portfolio of the Vanguard Admiral Funds contains only U.S.
Treasury securities and no derivative investments of any kind.
In conclusion, we would note that the recent market correction, while
painful, was hardly extreme in any historical context. The 1980-81 and 1987
experiences were appreciably more severe and protracted than what we've seen so
far. Long-term investors know to take these corrections "in stride." Over the
long haul, what matters most is interest income and the power of compounding.
The exceptionally low expenses charged by Vanguard Admiral Funds markedly
enhance these two factors, and are especially well-suited to the return
objectives of the Funds.
Sincerely,
Ian A. MacKinnon, Senior Vice President
Robert F. Auwaerter, Vice President
John W. Hollyer, Assistant Vice President
Vanguard Fixed Income Group August 15, 1994
AVERAGE ANNUAL TOTAL RETURNS--THE CURRENT YIELDS NOTED IN THE CHAIRMAN'S LETTER
ARE CALCULATED IN ACCORDANCE WITH SEC GUIDELINES. THE AVERAGE ANNUAL TOTAL
RETURNS FOR THE PORTFOLIOS (PERIODS ENDED JUNE 30, 1994) ARE AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. TREASURY PORTFOLIO 1 YEAR SINCE INCEPTION*
- - ----------------------- ------ ----------------
<S> <C> <C>
MONEY MARKET +3.18% +3.12%
SHORT-TERM +0.82 +3.87
INTERMEDIATE-TERM -2.24 +4.70
LONG-TERM -4.22 +5.38
</TABLE>
THESE DATA REPRESENT PAST PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT INVESTORS' SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
PLEASE NOTE THAT AN INVESTMENT IN A MONEY MARKET FUND, SUCH AS THE ADMIRAL U.S.
TREASURY MONEY MARKET PORTFOLIO, IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
*INCEPTION, DECEMBER 14, 1992.
4
<PAGE> 5
STATEMENT OF NET ASSETS FINANCIAL STATEMENTS (unaudited)
July 31, 1994
<TABLE>
<CAPTION>
Face Market
U.S. TREASURY Amount Value
MONEY MARKET PORTFOLIO (000) (000)+
- - -----------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (96.7%)
- - -----------------------------------------------------
U.S. TREASURY BILLS
<S> <C> <C>
3.05%, 8/4/94 $ 94,803 $ 94,771
3.85%, 8/25/94 5,850 5,834
3.88%, 8/18/94 4,809 4,800
4.02%, 9/8/94 121,283 120,757
4.12%, 9/22/94 2,504 2,489
4.158%, 9/15/94 96,639 96,144
4.173%, 9/1/94 13,000 12,954
4.24%, 10/6/94 184,222 182,780
4.26%, 9/22/94 176,522 175,436
4.37%, 10/13/94 21,095 20,907
U.S. TREASURY NOTES
4.25%, 8/31/94 180,900 180,899
6.875%, 8/15/94 48,111 48,158
8.625%, 8/15/94 34,000 34,057
9.50%, 10/15/94 25,000 25,246
12.625%, 8/15/94 105,400 105,733
- - -----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $1,110,965) 1,110,965
- - -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (3.3%)
- - -----------------------------------------------------
Other Assets--Note B 41,395
Liabilities (3,050)
----------
38,345
- - -----------------------------------------------------
NET ASSETS (100%)
- - -----------------------------------------------------
Applicable to 1,149,345,596
outstanding $.001 par value
shares (authorized
20,000,000,000 shares) $1,149,310
- - -----------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
=====================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- - -----------------------------------------------------
AT JULY 31, 1994, NET ASSETS CONSISTED OF:
- - -----------------------------------------------------
Amount Per
(000) Share
---------- -----
<S> <C> <C>
Paid in Capital $1,149,345 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net Realized
Losses (35) --
Unrealized Appreciation
of Investments -- --
- - -----------------------------------------------------
NET ASSETS $1,149,310 $1.00
- - -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
SHORT-TERM Amount Value
U.S. TREASURY PORTFOLIO (000) (000)+
- - -----------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (97.3%)
- - -----------------------------------------------------
U.S. TREASURY NOTES
<S> <C> <C>
4.625%, 2/15/96 $ 9,500 $ 9,340
5.125%, 3/31/98 17,200 16,442
5.50%, 4/30/96 28,000 27,821
5.75%, 10/31/97 5,000 4,904
5.875%, 5/31/96 12,600 12,588
6.00%, 12/31/97 6,000 5,919
7.25%, 11/15/96 2,000 2,048
7.375%, 5/15/96 4,000 4,098
7.50%, 2/29/96 18,300 18,766
7.625%, 4/30/96 19,000 19,540
7.875%, 2/15/96 33,550 34,572
8.00%, 10/15/96 32,700 33,972
8.50%, 4/15/97-5/15/97 38,400 40,524
8.75%, 10/15/97 8,000 8,534
8.875%, 2/15/96-11/15/97 6,000 6,299
BANAMEX EXPORT FUNDING
(U.S. Government Guaranteed)
4.91%, 10/15/96 5,400 5,217
BANCO NATIONAL DE
COMMERCIO EXTERIOR
(U.S. Government Guaranteed)
4.62%, 10/14/96 5,498 5,304
5.10%, 7/15/96 4,800 4,682
5.48%, 4/15/96 2,124 2,096
GUARANTEED TRADE TRUST
(U.S. Government Guaranteed)
4.61%, 8/31/96 1,080 1,043
4.743%, 9/14/96 8,100 7,834
4.86%, 7/1/96 4,000 3,894
5.69%, 5/2/96 800 792
6.61%, 2/20/97 8,000 8,003
- - -----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $287,973) 284,232
- - -----------------------------------------------------
TEMPORARY CASH INVESTMENT (.9%)
- - -----------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account 4.23%, 8/1/94
(Cost $2,523) 2,523 2,523
- - -----------------------------------------------------
TOTAL INVESTMENTS (98.2%)
(Cost $290,496) 286,755
- - -----------------------------------------------------
</TABLE>
5
<PAGE> 6
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
(000)+
- - -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.8%)
- - -----------------------------------------------------
<S> <C>
Other Assets--Note B $ 12,093
Liabilities (6,899)
-----------
5,194
- - -----------------------------------------------------
NET ASSETS (100%)
- - -----------------------------------------------------
Applicable to 29,465,667 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $ 291,949
- - -----------------------------------------------------
NET ASSET VALUE PER SHARE $9.91
=====================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- - -----------------------------------------------------
AT JULY 31, 1994, NET ASSETS CONSISTED OF:
- - -----------------------------------------------------
Amount Per
(000) Share
-------- ------
<S> <C> <C>
Paid in Capital $299,321 $10.16
Undistributed Net
Investment Income -- --
Accumulated Net Realized Losses (3,575) (.12)
Unrealized Depreciation
of Investments--Note D (3,797) (.13)
- - -----------------------------------------------------
NET ASSETS $291,949 $ 9.91
- - -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
INTERMEDIATE-TERM Amount Value
U.S. TREASURY PORTFOLIO (000) (000)+
- - -----------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (95.2%)
- - -----------------------------------------------------
U.S. TREASURY BONDS
<S> <C> <C>
10.75%, 5/15/03 $ 3,800 $ 4,697
11.125%, 8/15/03 1,500 1,897
11.625%, 11/15/02-11/15/04 30,300 39,394
11.875%, 11/15/03 5,000 6,586
U.S. TREASURY NOTES
5.125%, 11/30/98 8,550 8,069
5.75%, 8/15/03 4,000 3,643
6.00%, 10/15/99 9,800 9,486
6.25%, 2/15/03 6,775 6,417
6.375%, 7/15/99-8/15/02 21,200 20,832
6.75%, 5/31/99 4,140 4,147
7.00%, 4/15/99 44,360 44,922
7.125%, 10/15/98 1,000 1,019
7.875%, 11/15/99-8/15/01 49,173 51,644
8.00%, 5/15/01 2,500 2,647
8.25%, 7/15/98 7,600 8,037
8.50%, 11/15/00 14,283 15,466
8.75%, 8/15/00 4,000 4,376
8.875%, 11/15/98-2/15/99 25,700 27,902
AGENCY FOR INTERNATIONAL
DEVELOPMENT
(U.S. Government Guaranteed)
5.25%, 9/15/00 5,240 4,782
6.00%, 2/15/99 6,075 5,862
GOVERNMENT EXPORT TRUST
(U.S. Government Guaranteed)
6.00%, 10/30/99 8,940 8,437
7.46%, 6/14/00 16,000 16,096
OVERSEAS PRIVATE INVESTMENT CORP.
(U.S. Government Guaranteed)
5.735%, 4/15/99 6,000 5,640
5.94%, 12/19/01 5,000 4,550
- - -----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $323,674) 306,548
- - -----------------------------------------------------
TEMPORARY CASH INVESTMENT (2.8%)
- - -----------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account 4.23%, 8/1/94
(Cost $9,069) 9,069 9,069
- - -----------------------------------------------------
TOTAL INVESTMENTS (98.0%)
(Cost $332,743) 315,617
- - -----------------------------------------------------
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Market
Value
(000)+
- - -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.0%)
- - -----------------------------------------------------
<S> <C>
Other Assets--Notes B and E $ 6,982
Liabilities--Note E (680)
-----------
6,302
- - -----------------------------------------------------
NET ASSETS (100%)
- - -----------------------------------------------------
Applicable to 32,702,533 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $ 321,919
- - -----------------------------------------------------
NET ASSET VALUE PER SHARE $9.84
=====================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- - -----------------------------------------------------
AT JULY 31, 1994, NET ASSETS CONSISTED OF:
- - -----------------------------------------------------
Amount Per
(000) Share
--------- ------
<S> <C> <C>
Paid in Capital $342,569 $10.47
Undistributed Net
Investment Income -- --
Accumulated Net Realized Losses (3,462) (.11)
Unrealized Depreciation of
Investments--Note D (17,188) (.52)
- - -----------------------------------------------------
NET ASSETS $321,919 $ 9.84
- - -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
LONG-TERM Amount Value
U.S. TREASURY PORTFOLIO (000) (000)+
- - -----------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (86.8%)
- - -----------------------------------------------------
U.S. TREASURY BONDS
<S> <C> <C>
7.875%, 2/15/21 $15,250 $ 15,936
8.125%, 8/15/19 7,100 7,603
8.75%, 5/15/17 1,000 1,136
8.875%, 8/15/17-2/15/19 26,300 30,275
9.25%, 2/15/16 15,000 17,810
9.875%, 11/15/15 1,750 2,194
10.375%, 11/15/12 6,900 8,602
10.625%, 8/15/15 3,000 3,996
11.250%, 2/15/15 3,000 4,182
11.875%, 11/15/03 2,800 3,688
- - -----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $100,519) 95,422
- - -----------------------------------------------------
TEMPORARY CASH INVESTMENT (10.3%)
- - -----------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account 4.23%, 8/1/94
(Cost $11,333) 11,333 11,333
- - -----------------------------------------------------
TOTAL INVESTMENTS (97.1%)
(Cost $111,852) 106,755
- - -----------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.9%)
- - -----------------------------------------------------
Other Assets--Note B 3,598
Liabilities (444)
-----------
3,154
- - -----------------------------------------------------
NET ASSETS (100%)
- - -----------------------------------------------------
Applicable to 11,355,152
outstanding $.001 par value
shares
(authorized 500,000,000 shares) $109,909
- - -----------------------------------------------------
NET ASSET VALUE PER SHARE $9.68
=====================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- - -----------------------------------------------------
AT JULY 31, 1994, NET ASSETS CONSISTED OF:
Amount Per
(000) Share
-------- ------
<S> <C> <C>
Paid in Capital $115,261 $10.15
Undistributed Net
Investment Income -- --
Accumulated Net Realized Losses (235) (.02)
Unrealized Depreciation of
Investments--Note D (5,117) (.45)
- - -----------------------------------------------------
NET ASSETS $109,909 $ 9.68
- - -----------------------------------------------------
</TABLE>
7
<PAGE> 8
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
U.S. TREASURY SHORT-TERM
MONEY MARKET U.S. TREASURY
PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended
July 31, 1994 July 31, 1994
(000) (000)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . . . . $18,085 $ 6,498
- - -------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . 18,085 6,498
- - -------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . . . . . . $ 52 $ 15
Management and Administrative . . . . . . . . . . 531 123
Marketing and Distribution . . . . . . . . . . . 92 675 28 166
----- -----
Custodians' Fees . . . . . . . . . . . . . . . . . . 13 7
Taxes (other than income taxes)--Note A . . . . . . 38 10
Auditing Fees . . . . . . . . . . . . . . . . . . . 3 3
Shareholders' Reports . . . . . . . . . . . . . . . 8 10
Annual Meeting and Proxy Costs . . . . . . . . . . . 1 1
Directors' Fees and Expenses . . . . . . . . . . . . 1 --
- - -------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . 739 197
- - -------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . 17,346 6,301
- - -------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . (40) (3,794)
Futures Contracts -- 148
- - -------------------------------------------------------------------------------------------------------------------
Realized Net Loss . . . . . . . . . . (40) (3,646)
- - -------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . -- (4,483)
Futures Contracts . . . . . . . . . . . . . . . . . -- 25
- - -------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . -- (4,458)
- - -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations . . $17,306 $(1,803)
===================================================================================================================
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
INTERMEDIATE-TERM LONG-TERM
U.S. TREASURY U.S. TREASURY
PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended
July 31, 1994 July 31, 1994
(000) (000)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Interest . . . . . . . . . . . . . . . . . . . $ 8,977 $ 3,387
- - -------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . 8,977 3,387
- - -------------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services . . . . . . . . . . $ 18 $ 5
Management and Administrative . . . . . . . . . . 156 50
Marketing and Distribution . . . . . . . . . . . 34 208 9 64
----- ----
Custodians' Fees . . . . . . . . . . . . . . . . . . 4 4
Taxes (other than income taxes)--Note A . . . . . . 12 4
Auditing Fees . . . . . . . . . . . . . . . . . . . 3 3
Shareholders' Reports . . . . . . . . . . . . . . . 5 --
Annual Meeting and Proxy Costs . . . . . . . . . . . 1 --
Directors' Fees and Expenses . . . . . . . . . . . . 1 --
- - -------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . 234 75
- - -------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . 8,743 3,312
- - -------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . (3,707) (318)
Futures Contracts . . . . . . . . . . . . . . . . . 240 84
- - -------------------------------------------------------------------------------------------------------------------
Realized Net Loss . . . . . . . . . . (3,467) (234)
- - -------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . (19,550) (10,072)
Futures Contracts . . . . . . . . . . . . . . . . . (30) (22)
- - -------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . (19,580) (10,094)
- - -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . $(14,304) $ (7,016)
===================================================================================================================
</TABLE>
9
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. TREASURY SHORT-TERM
MONEY MARKET U.S. TREASURY
PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED Year Ended ENDED Year Ended
JULY 31, 1994 January 31, 1994 JULY 31, 1994 January 31, 1994
(000) (000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . $ 17,346 $ 18,296 $ 6,301 $ 7,115
Realized Net Gain (Loss) . . . . . . (40) 3 (3,646) 873
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . -- -- (4,458) 83
- - -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . 17,306 18,299 (1,803) 8,071
- - -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . (17,346) (18,296) (6,301) (7,115)
Realized Net Gain . . . . . . . . . -- -- (540) (277)
- - -------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . (17,346) (18,296) (6,841) (7,392)
- - -------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued -- Regular . . . . . 289,560 427,499 71,372 154,592
-- In Lieu of Cash
Distributions . 16,446 17,612 5,104 6,000
-- Exchange . . . . . 392,394 723,022 75,179 168,608
Redeemed -- Regular . . . . . (271,839) (229,101) (30,898) (67,535)
-- Exchange . . . . . (137,671) (227,837) (72,127) (73,429)
- - -------------------------------------------------------------------------------------------------------------------
Net Increase from Capital
Share Transactions . . . . . . 288,890 711,195 48,630 188,236
- - -------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . 288,850 711,198 39,986 188,915
- - -------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . 860,460 149,262 251,963 63,048
- - -------------------------------------------------------------------------------------------------------------------
End of Period . . . . . . . . . . $ 1,149,310 $ 860,460 $ 291,949 $251,963
===================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . $ .017 $ .029 $ .237 $ .448
Realized Net Gain . . . . . . . -- -- $ .022 $ .011
- - -------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . 681,954 1,150,521 14,780 31,521
Issued in Lieu of Cash
Distributions . . . . . . . . 16,446 17,612 513 585
Redeemed . . . . . . . . . . (409,510) (456,938) (10,386) (13,749)
- - -------------------------------------------------------------------------------------------------------------------
288,890 711,195 4,907 18,357
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
INTERMEDIATE-TERM LONG-TERM
U.S. TREASURY U.S. TREASURY
PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED Year Ended ENDED Year Ended
JULY 31, 1994 January 31, 1994 JULY 31, 1994 January 31, 1994
(000) (000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . $ 8,743 $ 11,892 $ 3,312 $ 5,607
Realized Net Gain (Loss) . . . . . . (3,467) 3,990 (234) 3,102
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . (19,580) 905 (10,094) 3,798
- - -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations (14,304) 16,787 (7,016) 12,507
- - -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . (8,743) (11,892) (3,312) (5,607)
Realized Net Gain . . . . . . . . . (156) (3,829) (892) (2,312)
- - -------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . (8,899) (15,721) (4,204) (7,919)
- - -------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued -- Regular . . . . . 42,778 176,466 11,552 36,314
-- In Lieu of Cash
Distributions . . 6,951 12,855 3,460 6,912
-- Exchange . . . . . 49,059 183,101 38,108 72,371
Redeemed -- Regular . . . . . (19,483) (28,582) (8,072) (15,652)
-- Exchange . . . . . (66,331) (90,786) (23,136) (54,735)
- - -------------------------------------------------------------------------------------------------------------------
Net Increase from Capital
Share Transactions . . . . . . 12,974 253,054 21,912 45,210
- - -------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . (10,229) 254,120 10,692 49,798
- - -------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . 332,148 78,028 99,217 49,419
- - -------------------------------------------------------------------------------------------------------------------
End of Period . . . . . . . . . . $ 321,919 $ 332,148 $ 109,909 $ 99,217
===================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . $ .276 $ .578 $ .327 $ .709
Realized Net Gain . . . . . . . $ .005 $ .128 $ .095 $ .281
- - -------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . 9,351 33,808 5,094 10,090
Issued in Lieu of Cash
Distributions . . . . . . . 702 1,215 354 637
Redeemed . . . . . . . . . . (8,737) (11,220) (3,191) (6,428)
- - -------------------------------------------------------------------------------------------------------------------
1,316 23,803 2,257 4,299
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. TREASURY SHORT-TERM
MONEY MARKET U.S. TREASURY
PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
SIX MONTHS December 14, SIX MONTHS December 14,
ENDED Year Ended 1992, to ENDED Year Ended 1992, to
For a Share Outstanding JULY 31, January 31, January 31, JULY 31, January 31, January 31,
Throughout Each Period 1994 1994 1993 1994 1994 1993
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . $1.00 $1.00 $1.00 $10.26 $10.17 $10.00
----- ----- ----- ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . .017 .029 .004 .237 .448 .065
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . -- -- -- (.328) .101 .170
----- ----- ----- ------ ------ ------
TOTAL FROM
INVESTMENT OPERATIONS . . . . .017 .029 .004 (.091) .549 .235
- - -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income . . . . . . . . . (.017) (.029) (.004) (.237) (.448) (.065)
Distributions from
Realized Capital Gains . . . . . . . -- -- -- (.022) (.011) --
----- ----- ----- ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . (.017) (.029) (.004) (.259) (.459) (.065)
- - -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . $1.00 $1.00 $1.00 $ 9.91 $10.26 $10.17
===================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . +1.74% +2.99% +0.41% -0.87% +5.50% +2.35%
- - -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . $1,149 $860 $149 $292 $252 $63
Ratio of Expenses to Average Net Assets . .15%* .15% .15%* .15%* .15% .15%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . 3.51%* 3.06% 3.12%* 4.81%* 4.38% 4.87%*
Portfolio Turnover Rate . . . . . . . . . N/A N/A N/A 124%* 90% 7%
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
12
<PAGE> 13
<TABLE>
<CAPTION>
INTERMEDIATE-TERM LONG-TERM
U.S. TREASURY U.S. TREASURY
PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
SIX MONTHS December 14, SIX MONTHS December 14,
ENDED Year Ended 1992, to ENDED Year Ended 1992, to
For a Share Outstanding JULY 31, January 31, January 31, JULY 31, January 31, January 31,
Throughout Each Period 1994 1994 1993 1994 1994 1993
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . $10.58 $10.29 $10.00 $10.90 $10.30 $10.00
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . .276 .578 .084 .327 .709 .096
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . (.735) .418 .290 (1.125) .881 .300
------ ------ ------ ------ ------ ------
TOTAL FROM
INVESTMENT OPERATIONS . . . . (.459) .996 .374 (.798) 1.590 .396
- - -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income . . . . . . . . . (.276) (.578) (.084) (.327) (.709) (.096)
Distributions from
Realized Capital Gains . . . . . . . (.005) (.128) -- (.095) (.281) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS . . . . . . . (.281) (.706) (.084) (.422) (.990) (.096)
- - -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . $ 9.84 $10.58 $10.29 $ 9.68 $10.90 $10.30
===================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . -4.32% +9.89% +3.75% -7.30% +15.90% +3.97%
- - -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . $322 $332 $78 $110 $99 $49
Ratio of Expenses to Average Net Assets . .15%* .15% .15%* .15%* .15% .15%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . 5.59%* 5.46% 6.31%* 6.68%* 6.58% 7.22%*
Portfolio Turnover Rate . . . . . . . . . 84%* 102% 0% 54%* 51% 17%
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
Vanguard Admiral Funds is registered under the Investment Company Act of 1940
as a diversified open-end investment company and consists of the U.S. Treasury
Money Market, Short-Term U.S. Treasury, Intermediate-Term U.S. Treasury, and
Long-Term U.S. Treasury Portfolios.
* 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: U.S. Treasury Money Market Portfolio: Securities
are stated at amortized cost which approximates market value. Other Portfolios:
Securities are valued utilizing the latest bid prices and on the basis of a
matrix system (which considers such factors as security prices, yields,
maturities, and ratings), both as furnished by independent pricing services.
Temporary cash investments are valued at amortized cost which approximates
market value.
2. FEDERAL INCOME TAXES: Each Portfolio of 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. REPURCHASE AGREEMENTS: The Short-Term U.S. Treasury, Intermediate-Term
U.S. Treasury, and Long-Term U.S. Treasury Portfolios of the Fund, along with
other members of The Vanguard Group of Investment Companies, transfer
uninvested cash balances into a Pooled Cash Account, the daily aggregate of
which is invested in repurchase agreements secured by U.S. Government
obligations. Securities pledged as collateral for repurchase agreements are
held by the Fund's custodian banks until maturity of each repurchase agreement.
Provisions of each agreement ensure that the market value of the collateral is
sufficient in the event of default; however, in the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral may be subject to legal proceedings.
4. FUTURES: The Short-Term U.S. Treasury, Intermediate-Term U.S.
Treasury, and Long-Term U.S. Treasury Portfolios utilize futures contracts to a
limited extent. The primary risks associated with the use of futures contracts
are imperfect correlation between the change in market value of the bonds held
by a Portfolio 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 value 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 sales of investment securities are those of specific securities sold.
Discounts and premiums on securities purchased are amortized to interest income
over the lives of the respective securities. Dividends from net investment
income are declared on a daily basis payable on the first business day of the
following month.
* B. The Vanguard Group, Inc. furnishes at cost investment advisory,
corporate management, administrative, marketing and distribution services. The
costs of such services are allocated to the Fund under methods approved by the
Board of Directors. At July 31, 1994, the Fund had contributed capital of
$282,000 to Vanguard (included in Other Assets), representing 1.4% of
Vanguard's capitalization. The Fund's directors and officers are also directors
and officers of Vanguard.
14
<PAGE> 15
* C. During the six months ended July 31, 1994, purchases and sales of U.S.
Government securities were:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
(000)
--------------------------
Portfolio Purchases Sales
- - ----------------------------------------------------------------
<S> <C> <C>
SHORT-TERM U.S. TREASURY $213,636 $160,855
INTERMEDIATE-TERM U.S. TREASURY 136,637 127,607
LONG-TERM U.S. TREASURY 36,188 24,458
- - ----------------------------------------------------------------
</TABLE>
* D. At July 31, 1994, unrealized depreciation of investment securities
for financial reporting and Federal income tax purposes was:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
(000)
--------------------------------------
Net
Appreciated Depreciated Unrealized
Portfolio Securities Securities Depreciation
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM
U.S. TREASURY $117 $ (3,858) $ (3,741)
INTERMEDIATE-TERM
U.S. TREASURY 131 (17,257) (17,126)
LONG-TERM
U.S. TREASURY 38 (5,135) (5,097)
- - ------------------------------------------------------------------------
</TABLE>
At July 31, 1994, the aggregate settlement value and unrealized depreciation of
long positions in Municipal Bond Index futures contracts and short positions in
U.S. Treasury Bond and U.S. Treasury Note futures contracts expiring in
September 1994, were:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
(000)
-------------------------------
Aggregate
Settlement Unrealized
Portfolio Value Depreciation
- - -----------------------------------------------------------------
<S> <C> <C>
SHORT-TERM U.S. TREASURY
LONG POSITIONS $14,008 $(14)
SHORT POSITIONS 15,927 (42)
INTERMEDIATE-TERM U.S. TREASURY
LONG POSITIONS 15,298 (23)
SHORT POSITIONS 17,394 (39)
LONG-TERM U.S. TREASURY
LONG POSITIONS 5,069 (7)
SHORT POSITIONS 5,763 (13)
- - ----------------------------------------------------------------
</TABLE>
The market values of securities deposited as initial margin for open futures
contracts by the Short-Term U.S. Treasury, Intermediate-Term U.S. Treasury, and
the Long-Term U.S. Treasury Portfolios were $1,055,000, $1,088,000, and
$1,187,000, respectively.
* E. The market values of securities on loan to broker/dealers at July 31,
1994, and collateral received with respect to such loans, were:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------
(000)
----------------------------------
Collateral Received
Market ------------------------
Value of Market Value of
Loaned U.S. Treasury
Portfolio Securities Cash Securities
- - ---------------------------------------------------------
<S> <C> <C> <C>
INTERMEDIATE-TERM
U.S. TREASURY $5,429 -- $5,759
- - ---------------------------------------------------------
</TABLE>
Security loans are required to be secured at all times by collateral at least
equal to the market value of securities loaned; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
15
<PAGE> 16
THE VANGUARD FAMILY OF FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund-Money Market Portfolio
Vanguard State Tax-Free Funds (CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds (CA, FL, NJ, NY, OH, PA)
FIXED INCOME FUNDS
Vanguard Admiral Funds
Vanguard Bond Index Fund
Vanguard Fixed Income Securities Fund
Vanguard Preferred Stock Fund
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard Balanced Index Fund
Vanguard STAR Fund
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
EQUITY FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible Securities Fund
Vanguard Equity Income Fund
Vanguard Index Trust
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund-U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International Equity Index Fund
Vanguard International Growth Portfolio
Vanguard/Trustees' Equity Fund-International Portfolio
The Vanguard Group * Vanguard Financial Center
Valley Forge, PA 19482
New Account Information: 1-(800) 662-7447
Shareholder Account Services: 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.
Q122-07/94
VANGUARD
ADMIRAL FUNDS
[PHOTO -- SEE EDGAR APPENDIX]
SEMI-ANNUAL REPORT
JULY 31, 1994
<PAGE> 17
EDGAR APPENDIX
The back cover of the printed version of this report features the
flags of the United States of America and Vanguard flying from a halyard.
