Contents

Your Fund’s Performance at a Glance	1
About Your Fund’s Expenses	2
Performance Summary	4
Financial Statements	6

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your portfolio are spelled out in the prospectus.

Your Fund’s Performance at a Glance

•	For the 12 months ended December 31, 2022, Vanguard Institutional Index Fund returned –18.14% for Institutional Shares and –18.13% for Institutional Plus Shares, closely tracking its target index, the Standard & Poor’s 500 Index. The fund provides exposure to the stocks of the largest U.S. companies.
•	The period was a volatile, challenging one for financial markets. Overall, the economic backdrop deteriorated as inflation soared to multidecade highs, driven by government spending during the pandemic as well as higher energy and food prices in the wake of Russia’s invasion of Ukraine. That prompted aggressive tightening by many central banks to bring inflation back in check, which increased fears of recession.
•	The majority of the 11 sectors recorded negative returns for the 12 months. Information technology, consumer discretionary, communication services, and financial stocks hurt performance the most.
•	For the 10 years ended December 31, 2022, the fund posted average annual returns of 12.53% for Institutional Shares and 12.55% for Institutional Plus Shares, closely tracking the return of its target index.

1

About Your Fund’s Expenses

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

The accompanying table illustrates your fund’s costs in two ways:

•

Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“

•

Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

2

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.035% for Institutional Shares, and 0.02% for Institutional Plus Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).

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Institutional Index Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

Cumulative Performance: December 31, 2012, Through December 31, 2022

See Financial Highlights for dividend and capital gains information.

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Institutional Index Fund

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Institutional Index Fund

Statement of Assets and Liabilities

As of December 31, 2022

($000s, except shares, footnotes, and per-share amounts)	Amount
Assets
Investments in Securities, at Value1
Unaffiliated Issuers (Cost $90,901,279)	224,314,468
Affiliated Issuers (Cost $899,062)	899,174
Total Investments in Securities	225,213,642
Investment in Vanguard	8,832
Cash	10,055
Cash Collateral Pledged—Futures Contracts	51,280
Cash Collateral Pledged—Over-the-Counter Swap Contracts	10,790
Receivables for Investment Securities Sold	698,208
Receivables for Accrued Income	198,726
Receivables for Capital Shares Issued	175,557
Unrealized Appreciation—Over-the-Counter Swap Contracts	426
Total Assets	226,367,516
Liabilities
Payables for Investment Securities Purchased	12,951
Collateral for Securities on Loan	22,190
Payables for Capital Shares Redeemed	848,276
Payables to Vanguard	2,624
Variation Margin Payable—Futures Contracts	2,526
Unrealized Depreciation—Over-the-Counter Swap Contracts	1,580
Total Liabilities	890,147
Net Assets	225,477,369
1 Includes $20,636,000 of securities on loan.
At December 31, 2022, net assets consisted of:
Paid-in Capital	91,294,679
Total Distributable Earnings (Loss)	134,182,690
Net Assets	225,477,369
Institutional Shares—Net Assets
Applicable to 299,033,981 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	96,178,509
Net Asset Value Per Share—Institutional Shares	$321.63
Institutional Plus Shares—Net Assets
Applicable to 402,020,617 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	129,298,860
Net Asset Value Per Share—Institutional Plus Shares	$321.62

  

See accompanying Notes, which are an integral part of the Financial Statements.

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Institutional Index Fund

Statement of Operations

	Year Ended December 31, 2022
	($000)
Investment Income
Income
Dividends1	4,117,287
Interest2	12,720
Securities Lending—Net	920
Total Income	4,130,927
Expenses
The Vanguard Group—Note B
Investment Advisory Services	3,806
Management and Administrative—Institutional Shares	32,155
Management and Administrative—Institutional Plus Shares	22,170
Marketing and Distribution—Institutional Shares	2,650
Marketing and Distribution—Institutional Plus Shares	4,142
Custodian Fees	985
Auditing Fees	31
Shareholders’ Reports—Institutional Shares	363
Shareholders’ Reports—Institutional Plus Shares	665
Trustees’ Fees and Expenses	95
Other Expenses	39
Total Expenses	67,101
Expenses Paid Indirectly	(6)
Net Expenses	67,095
Net Investment Income	4,063,832
Realized Net Gain (Loss)
Investment Securities Sold2,3	14,663,550
Futures Contracts	(200,215)
Swap Contracts	(13,460)
Realized Net Gain (Loss)	14,449,875
Change in Unrealized Appreciation (Depreciation)
Investment Securities2	(73,020,285)
Futures Contracts	(42,238)
Swap Contracts	(1,529)
Change in Unrealized Appreciation (Depreciation)	(73,064,052)
Net Increase (Decrease) in Net Assets Resulting from Operations	(54,550,345)

1	Dividends are net of foreign withholding taxes of $978,000.
2	Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $12,276,000, ($100,000), $2,000, and $114,000, respectively. Purchases and sales are for temporary cash investment purposes.
3	Includes $11,078,870,000 of net gain (loss) resulting from in-kind redemptions.

  

See accompanying Notes, which are an integral part of the Financial Statements.

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Institutional Index Fund

Statement of Changes in Net Assets

	Year Ended December 31,
	2022 ($000)	2021 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	4,063,832	3,874,070
Realized Net Gain (Loss)	14,449,875	16,602,502
Change in Unrealized Appreciation (Depreciation)	(73,064,052)	50,863,901
Net Increase (Decrease) in Net Assets Resulting from Operations	(54,550,345)	71,340,473
Distributions
Institutional Shares	(3,275,361)	(6,220,924)
Institutional Plus Shares	(4,563,380)	(8,234,215)
Total Distributions	(7,838,741)	(14,455,139)
Capital Share Transactions
Institutional Shares	(6,285,999)	(15,740,353)
Institutional Plus Shares	(10,703,285)	2,524,999
Net Increase (Decrease) from Capital Share Transactions	(16,989,284)	(13,215,354)
Total Increase (Decrease)	(79,378,370)	43,669,980
Net Assets
Beginning of Period	304,855,739	261,185,759
End of Period	225,477,369	304,855,739

  

See accompanying Notes, which are an integral part of the Financial Statements.

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Institutional Index Fund

Financial Highlights

Institutional Shares
For a Share Outstanding Throughout Each Period	Year Ended December 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$405.79	$331.47	$290.23	$227.55	$243.46
Investment Operations
Net Investment Income1	5.515	5.048	5.261	5.203	5.059
Net Realized and Unrealized Gain (Loss) on Investments	(78.817)	88.637	46.122	65.746	(15.434)
Total from Investment Operations	(73.302)	93.685	51.383	70.949	(10.375)
Distributions
Dividends from Net Investment Income	(5.584)	(5.199)	(5.273)	(5.550)	(4.837)
Distributions from Realized Capital Gains	(5.274)	(14.166)	(4.870)	(2.719)	(.698)
Total Distributions	(10.858)	(19.365)	(10.143)	(8.269)	(5.535)
Net Asset Value, End of Period	$321.63	$405.79	$331.47	$290.23	$227.55
Total Return	-18.14%	28.67%	18.39%	31.46%	-4.42%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$96,179	$128,441	$119,012	$116,814	$104,296
Ratio of Total Expenses to Average Net Assets	0.035%2	0.035%	0.035%	0.035%	0.035%
Ratio of Net Investment Income to Average Net Assets	1.58%	1.35%	1.83%	1.98%	2.03%
Portfolio Turnover Rate3	3%	3%	4%	4%	6%

1	Calculated based on average shares outstanding.
2	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.035%.
3	Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

  

See accompanying Notes, which are an integral part of the Financial Statements.

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Institutional Index Fund

Financial Highlights

Institutional Plus Shares
For a Share Outstanding Throughout Each Period	Year Ended December 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$405.80	$331.48	$290.25	$227.57	$243.48
Investment Operations
Net Investment Income1	5.563	5.117	5.310	5.252	5.167
Net Realized and Unrealized Gain (Loss) on Investments	(78.832)	88.627	46.108	65.739	(15.503)
Total from Investment Operations	(73.269)	93.744	51.418	70.991	(10.336)
Distributions
Dividends from Net Investment Income	(5.637)	(5.256)	(5.318)	(5.592)	(4.876)
Distributions from Realized Capital Gains	(5.274)	(14.168)	(4.870)	(2.719)	(.698)
Total Distributions	(10.911)	(19.424)	(10.188)	(8.311)	(5.574)
Net Asset Value, End of Period	$321.62	$405.80	$331.48	$290.25	$227.57
Total Return	-18.13%	28.69%	18.41%	31.48%	-4.41%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$129,299	$176,415	$142,174	$125,359	$95,707
Ratio of Total Expenses to Average Net Assets	0.02%2	0.02%	0.02%	0.02%	0.02%
Ratio of Net Investment Income to Average Net Assets	1.60%	1.37%	1.84%	1.99%	2.05%
Portfolio Turnover Rate3	3%	3%	4%	4%	6%

1	Calculated based on average shares outstanding.
2	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.02%.
3	Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

  

See accompanying Notes, which are an integral part of the Financial Statements.

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Institutional Index Fund

Institutional Index Fund

3.  Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.

During the year ended December 31, 2022, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.

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Institutional Index Fund

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

7. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.4 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

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Institutional Index Fund

For the year ended December 31, 2022, the fund did not utilize the credit facilities or the Interfund Lending Program.

8. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

B.

In accordance with the terms of a Funds' Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At December 31, 2022, the fund had contributed to Vanguard capital in the amount of $8,832,000, representing less than 0.01% of the fund’s net assets and 3.53% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

C.	The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the year ended December 31, 2022, custodian fee offset arrangements reduced the fund’s expenses by $6,000 (an annual rate of less than 0.01% of average net assets).
D.	Various inputs may be used to determine the value of the fund’s investments and derivatives. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.

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