fixedincome_final.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES


Investment Company Act file number:	811-02368
Name of Registrant:	Vanguard Fixed Income Securities Funds
Address of Registrant:	P.O. Box 2600
	Valley Forge, PA 19482
Name and address of agent for service:	Anne E. Robinson, Esquire
	P.O. Box 876
	Valley Forge, PA 19482
Registrant’s telephone number, including area code: (610) 669-1000
Date of fiscal year end: January 31
Date of reporting period: February 1, 2016 – January 31, 2017
Item 1: Reports to Shareholders

A new format, unwavering commitment

As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.

Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.

In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.

We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.

At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.


Contents
Your Fund’s Performance at a Glance.	1
Chairman’s Perspective.	4
Advisors’ Report.	8
Short-Term Treasury Fund.	14
Short-Term Federal Fund.	31
Intermediate-Term Treasury Fund.	49
GNMA Fund.	66
Long-Term Treasury Fund.	84
About Your Fund’s Expenses.	102
Glossary.	105

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 fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary
focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown
translated into seven languages, reflecting our expanding global presence.

Your Fund’s Performance at a Glance

• For the 12 months ended January 31, 2017, the funds covered in this report posted returns ranging from 0.49% for both Vanguard Short-Term Federal Fund and Vanguard GNMA Fund to –3.21% for Vanguard Long-Term Treasury Fund. (Returns cited are for Investor Shares.) The returns were close to or better than those of the funds’ benchmark indexes; results versus their peer-group averages were mixed.

• Demand for high-quality bonds, which was solid early in the fiscal year, waned and then slumped as markets began to anticipate faster growth and higher inflation.

• The Short-Term Federal Fund, Vanguard Short-Term Treasury Fund, and Vanguard Intermediate-Term Treasury Fund benefited from relatively shorter durations.

• Allocations to inflation-protected and mortgage-backed securities helped the Short-Term Federal Fund and all three Treasury Funds. The Treasury Funds also got a boost from the out-of-benchmark agency debt they held.

• In the GNMA Fund, security selection and some out-of-benchmark holdings in mortgage-related securities helped relative performance.


Total Returns: Fiscal Year Ended January 31, 2017
	30-Day SEC	Income	Capital	Total
	Yield	Returns	Returns	Returns
Vanguard Short-Term Treasury Fund
Investor Shares	0.99%	0.88%	-0.45%	0.43%
Admiral™ Shares	1.10	0.98	-0.45	0.53
Bloomberg Barclays U.S. 1–5 Year Treasury Bond Index				0.11
Short-Term U.S. Treasury Funds Average				0.74
Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Short-Term Federal Fund
Investor Shares	1.21%	1.07%	-0.58%	0.49%
Admiral Shares	1.31	1.17	-0.58	0.59
Bloomberg Barclays U.S. 1–5 Year Government Bond Index				0.13
Short-Intermediate U.S. Government Funds Average				-0.16
Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


	30-Day SEC	Income	Capital	Total
	Yield	Returns	Returns	Returns
Vanguard Intermediate-Term Treasury Fund
Investor Shares	1.70%	1.51%	-2.35%	-0.84%
Admiral Shares	1.81	1.61	-2.35	-0.74
Bloomberg Barclays U.S. 5–10 Year Treasury Bond Index				-1.41
General U.S. Treasury Funds Average				-1.94
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard GNMA Fund
Investor Shares	1.96%	2.19%	-1.70%	0.49%
Admiral Shares	2.06	2.29	-1.70	0.59
Bloomberg Barclays U.S. GNMA Bond Index				0.28
GNMA Funds Average				0.13
GNMA Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Long-Term Treasury Fund
Investor Shares	2.64%	2.44%	-5.65%	-3.21%
Admiral Shares	2.74	2.53	-5.65	-3.12
Bloomberg Barclays U.S. Long Treasury Bond Index				-3.14
General U.S. Treasury Funds Average				-1.94
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.


Total Returns: Ten Years Ended January 31, 2017
	Average
	Annual Return
Short-Term Treasury Fund Investor Shares	2.34%
Bloomberg Barclays U.S. 1–5 Year Treasury Bond Index	2.77
Short-Term U.S. Treasury Funds Average	1.93
Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Short-Term Federal Fund Investor Shares	2.71%
Bloomberg Barclays U.S. 1–5 Year Government Bond Index	2.76
Short-Intermediate U.S. Government Funds Average	2.37
Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Intermediate-Term Treasury Fund Investor Shares	4.47%
Bloomberg Barclays U.S. 5–10 Year Treasury Bond Index	5.08
General U.S. Treasury Funds Average	4.85
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


	Average
	Annual Return
GNMA Fund Investor Shares	4.36%
Bloomberg Barclays U.S. GNMA Bond Index	4.34
GNMA Funds Average	3.77
GNMA Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Long-Term Treasury Fund Investor Shares	6.57%
Bloomberg Barclays U.S. Long Treasury Bond Index	6.80
General U.S. Treasury Funds Average	4.85
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

The figures shown represent past performance, which is not a guarantee of future results. (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.


Expense Ratios
Your Fund Compared With Its Peer Group
	Investor	Admiral	Peer Group
	Shares	Shares	Average
Short-Term Treasury Fund	0.20%	0.10%	0.52%
Short-Term Federal Fund	0.20	0.10	0.89
Intermediate-Term Treasury Fund	0.20	0.10	0.42
GNMA Fund	0.21	0.11	0.90
Long-Term Treasury Fund	0.20	0.10	0.42

The fund expense ratios shown are from the prospectus dated May 26, 2016, and represent estimated costs for the current fiscal year. For the
fiscal year ended January 31, 2017, the funds’ expense ratios were: for the Short-Term Treasury Fund, 0.20% for Investor Shares and 0.10%
for Admiral Shares; for the Short-Term Federal Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Intermediate-Term
Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the GNMA Fund, 0.21% for Investor Shares and 0.11% for
Admiral Shares; and for the Long-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares. Peer-group expense ratios
are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2016.

Peer groups: For the Short-Term Treasury Fund, Short-Term U.S. Treasury Funds; for the Short-Term Federal Fund, Short-Intermediate U.S.
Government Funds; for the Intermediate-Term Treasury Fund, General U.S. Treasury Funds; for the GNMA Fund, GNMA Funds; and for the
Long-Term Treasury Fund, General U.S. Treasury Funds.

Chairman’s Perspective

Bill McNabb

Chairman and Chief Executive Officer

Dear Shareholder,

As investors, we’re accustomed to hearing about risk. There’s market risk, inflation risk, currency risk, and so on. No form of risk, though, challenges investors quite the way uncertainty can. In my experience, how well we respond to uncertainty can be a key to long-term investing success.

Of course, we never have the luxury of complete clarity when investing—none of us has a crystal ball, after all—but the current environment seems to have more than its fair share of uncertainty.

There are plenty of question marks surrounding the economy as a new administration rolls out its policies, the Federal Reserve shifts its thinking, and global growth, especially in China, continues to worry market watchers. A general feeling of unsettledness is reflected in many questions I’ve been getting from clients in recent months.

Confronting the challenge of the unknowable

First, a bit about the difference between risk and uncertainty. Risk can be measured, albeit not with 100% accuracy. An investor armed with the right data can calculate a reasonable probability of, say, a given company missing earnings expectations.

Uncertainty can’t be quantified that easily. There are “black swan” events that fall completely outside the realm of the expected. The data needed to make sense of such an event are either not known or unknowable.

In times of uncertainty, it’s easy for investors to make bad decisions. Markets often respond to surprise events with volatility. We had plenty of those in 2016, and I expect similar market-rattling events to occur this year. Some investors may interpret volatility as a sign of trouble and flee to whatever they perceive as a safe haven. Others may see buying opportunities at every turn. Both are likely to fall prey to common investor biases, like these:

• Focusing on just the information that confirms our decisions.

• Buying into the mistaken belief that past performance indicates future results.

• Sticking to the familiar at the cost of smart diversification.

The problem with these natural inclinations is that they can make us forget about our long-term investment plan. That’s never a good thing.

Help yourself avoid unforced errors

Sound investing was ingrained in me from an early age. My mother and father did a good job of saving for retirement by building a diversified portfolio. They recognized that diversification is the most logical response to a future that is, inevitably, uncertain. But my family, just like yours, can succumb to common biases.

During the 1990s tech boom, my mom, who has always paid close attention to the markets, wanted to invest in some of the high-flying stocks of the moment. She had


Market Barometer
	Average Annual Total Returns
	Periods Ended January 31, 2017
	One	Three	Five
	Year	Years	Years
Stocks
Russell 1000 Index (Large-caps)	20.81%	10.50%	14.06%
Russell 2000 Index (Small-caps)	33.53	7.89	13.00
Russell 3000 Index (Broad U.S. market)	21.73	10.28	13.97
FTSE All-World ex US Index (International)	16.35	1.50	4.79

Bonds
Bloomberg Barclays U.S. Aggregate Bond Index
(Broad taxable market)	1.45%	2.59%	2.09%
Bloomberg Barclays Municipal Bond Index
(Broad tax-exempt market)	-0.28	3.70	2.94
Citigroup Three-Month U.S. Treasury Bill Index	0.30	0.10	0.09

CPI
Consumer Price Index	2.50%	1.26%	1.39%

The perils of performance-chasing

A gap often exists between a mutual fund’s stated return and how much the average investor

in that fund actually earned over the same period. That’s because fund returns and investor

returns don’t measure quite the same thing. Simply put, the size of the gap depends on when

you owned shares in the fund and, maybe even more importantly, when you didn’t.

The usual performance yardstick for a mutual fund is its “time-weighted” return. That’s the

average annual 3-, 5-, or 10-year performance you might see in a fund report, for example.

To get that return, you would have had to buy shares of the fund at the beginning of the stated

period, hold onto those shares without adding or selling any, and reinvest all distributions.

In contrast, the return earned by the average investor is “dollar-weighted”—it reflects not only

the performance of the fund over a given period, but also the timing and amount of cash flows

into and out of the fund.

Whether you’re looking at stock funds or bond funds, investors as a whole generally don’t fare

as well as the funds they invest in, as you can see in the chart below. There may be a number

of reasons for this, but cash-flow data suggest that a key factor is investors pouring money into

funds that have done well recently and selling those that have disappointed. That might seem

like a reasonable strategy, but in practice it often leads to performance-chasing, with investors

buying high and selling low.

The difference between fund returns and investor returns

For the ten years ended December 31, 2015

Note: A basis point is equal to one one-hundredth of a percentage point.

Sources: Vanguard calculations, based on data from Morningstar, Inc., for the ten years ended December 31, 2015, the most recent period

for which data are available.

read about them and heard about them on TV, which confirmed her thinking that they were good buys. Years later, she wanted to sell some holdings when stocks were at their low point during the financial crisis, just before the stock market rebounded. Those were scary times, and she was just trying to protect the nest egg she had so diligently built up over all those years. I’m happy to say she rethought both decisions.

None of us, of course, is immune from mistakes. I can fall into traps as well, so I’ve tried to develop habits that help me counter the biases that affect most of us as investors. These habits don’t require great investment acumen.

For example, I try to remove emotion from the investing equation. At the end of every year, I look at my retirement account and determine if I need to rebalance. Rarely, though, do I spend time trying to figure out why a certain fund over- or under-performed. I don’t want to be tempted by market noise.

Another way to cope with uncertainty: Save more. Just as we can’t know for sure where the markets are headed, we can’t predict when we might have to contend with a health or career setback. Putting away something extra isn’t easy, but it can give us the flexibility to make the most of bad situations.

The one thing we can be sure of

In investing, there is always going to be uncertainty—and a little pain. It’s difficult to continue to dollar-cost average into a tumbling market. Likewise, short-term noise can tempt us to not rebalance on a regular basis. Disciplined rebalancing is vital to achieving long-term goals. To paraphrase legendary investor John Neff, the best time to invest can be when your stomach is churning most.

Because my portfolio is fully diversified, it always contains something that under-performs expectations. There almost always are surprises on the upside, too. This is the power of diversification and a secret to investment success.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
February 14, 2017

Advisors’ Report

For the Short-, Intermediate-, and Long-Term Treasury Funds and the Short-Term Federal Fund

Government bond prices fell and yields rose over the 12 months ended January 31, 2017, especially for longer-dated bonds. Returns for the four U.S. Government Bond Funds managed by Vanguard’s Fixed Income Group ranged from 0.59% for Admiral Shares of Vanguard Short-Term Federal Fund to –3.21% for Investor Shares of Vanguard Long-Term Treasury Fund.

In relative terms, all but the Long-Term Treasury Fund outpaced the returns of their benchmark indexes. Versus their peer averages, results for the four funds were mixed.

The funds’ 30-day SEC yields ranged from 0.99% to 2.74% at the end of January, 14 to 29 basis points higher than they stood a year earlier. (A basis point is one-hundredth of a percentage point.)

The investment environment

The fiscal year opened with commodity prices continuing to decline and global economic growth proving unexpectedly sluggish, especially in China. That supported demand for less-risky assets, including U.S. Treasuries. Against that backdrop, the Federal Reserve seemed less inclined to raise interest rates as it became unclear whether its inflation and unemployment targets would be met. The United Kingdom’s June vote to leave the European Union further clouded the Fed’s outlook.


Yields of U.S. Treasury Securities
	January 31,	January 31,
Maturity	2016	2017
2 years	0.82%	1.21%
3 years	1.03	1.46
5 years	1.40	1.91
10 years	1.98	2.45
30 years	2.79	3.06
Source: Vanguard.

Abroad, major central banks kept their policies accommodative as well. The Bank of Japan began charging a negative interest rate on financial institutions’ excess reserves—a move intended to complement its qualitative and quantitative easing efforts to spur growth and ward off deflation. The European Central Bank cut its deposit rate further into negative territory, increased its sovereign-bond purchases, and began buying corporate bonds. And in the wake of the Brexit vote, the Bank of England cut its benchmark interest rate and revived its bond-buying program.

The markets, though, began to anticipate faster growth and higher inflation as the fiscal year went on. After subpar readings in the first half of 2016, the U.S. economy appeared to pick up steam. Commodity prices regained some ground, and the employment picture continued to improve, with some signs of a long-awaited upturn in wages. That backdrop played a part in the Fed’s decision at its December meeting to raise the federal funds rate by 0.25 percentage point, to 0.5%–0.75%—only the second increase in a decade. A number of central banks abroad also grew slightly less accommodative.

The brighter outlook, coupled with the prospect of more infrastructure spending, greater deregulation, and possible tax-code changes under the new U.S. administration, helped fuel a rally in riskier assets that carried into 2017.

Although corporate bonds, especially those of lower quality and with longer maturities, participated in the rally, demand for Treasuries slumped, leading their prices to fall and yields to rise. Over the 12 months, the yield of the 2-year Treasury note climbed 39 basis points to 1.21%. The bellwether 10-year yield jumped 47 basis points to 2.45%, and the 30-year yield rose 27 basis points to 3.06%.

Management of the funds

All the funds’ durations were shorter than those of their benchmarks. (Duration is a measure of sensitivity to interest rate changes.) Although that stance can hurt fund performance relative to the benchmark when rates are falling, it helped for this period as interest rates finished higher than where they started. The Short-Term Federal, Short-Term Treasury, and Intermediate-Term Treasury Funds got a significant boost from this positioning.

With market expectations for medium-term inflation appearing low early in the period given our outlook for growth, we added Treasury Inflation-Protected Securities, or TIPS, to the funds’ holdings. That allocation helped relative performance as the consensus on inflation ticked higher.

Other allocation choices proved beneficial as well. All four funds held mortgage-backed securities (MBS), a segment of securitized debt that is not in their benchmarks. Those were modestly positive for

the funds. So were their holdings in agency debt, which constituted an overweight position in the Short-Term Federal Fund and an out-of-benchmark allocation in the three Treasury Funds.

Investment outlook

Absent an unexpected external shock, the U.S. economy looks to continue its steady growth, with real gross domestic product (GDP) likely to be about 2% in 2017, or maybe closer to 2.5% if policies prove expansionary. As the labor market moves closer to the Fed’s full employment target, competition for labor could push the pace of annual wage increases into the 3%–4% range. That should fan inflation in the short term, but not to the point of overheating.

In the longer term, the continued strength of the U.S. dollar is likely to hold down import prices. And even though interest rates rose sharply in the fourth quarter, the cost of borrowing should not get out of hand. Other developed economies are still striving to boost their economies and inflation with ultralow rates, so the U.S. bond market’s yields look set to remain attractive to international investors.

We’re encouraged by the Fed’s decision to continue normalizing rates, which have been near zero since 2009. Although the federal funds rate could increase to 1.25%–1.5% by the end of 2017, we nevertheless think the Fed will maintain its “dovish” tightening approach, given the anti-inflationary forces still at work in the global economy. In fact, we wouldn’t be surprised to see the federal funds rate remain below 2% through 2018.

Given the uncertainties around federal fiscal policy, trade policy, and geopolitical concerns, we are being very tactical in our management of the funds and remain cognizant of the winds of change that could dampen our outlook.

Whatever the markets may bring, our experienced team of portfolio managers and traders will continue to seek out opportunities to add to the funds’ performance, primarily through duration calls and yield-curve positioning.

Gregory Davis, CFA, Principal
and Global Head of Fixed Income Group

Gemma Wright-Casparius, Principal
and Portfolio Manager

Brian Quigley, Portfolio Manager

Vanguard Fixed Income Group

February 13, 2017

For the GNMA Fund

For the 12 months ended January 31, 2017, Investor Shares of Vanguard GNMA Fund returned 0.49%, and Admiral Shares returned 0.59%. The fund outperformed its benchmark index and peer-group average.

The investment environment

Global fixed income markets were influenced during the period by global growth concerns, expectations for central bank monetary policies, and oil prices. Early in 2016, falling oil prices, concerns over slowing growth in China, and questions about the effectiveness of central bank policies sparked a broad sell-off in credit markets, while government bond prices benefited from safe-haven status. Following the lead of several central banks in Europe, the Bank of Japan introduced negative interest rates as volatility and instability in financial markets threatened to tip Japan back into deflation.

Markets reversed course in mid-February as the major central banks adopted more dovish stances in an effort to ease market risk. The People’s Bank of China resumed its easing cycle with a surprise cut in reserve requirement ratio, and the European Central Bank (ECB) announced significant easing measures.

A rebound in crude oil prices, accommodative global central bank monetary policies, and signs of near-term stabilization in China further supported global financial markets through the second quarter. In June, the United Kingdom’s momentous vote to leave the European Union led to a spike in global market volatility and a flight to safety, with U.K. and European equity and credit markets bearing the brunt of the sell-off.

The policy paths of major central banks appeared to diverge in the third quarter. The Bank of England unveiled a stimulus package designed to prevent a recession following the Brexit vote, while the ECB kept its stimulus program unchanged and avoided any firm commitment to further expand its bond-buying program.

Global government bond yields moved sharply higher in the fourth quarter, especially after the U.S. presidential election as Donald Trump’s proposed expansionary fiscal policy lifted inflation expectations. In December, the Federal Reserve raised rates for only the second time in ten years. Although markets had largely anticipated the decision, the Fed’s postmeeting statement and news conference leaned more hawkish than expected.

Government bond prices in non-U.S. developed markets advanced over the fiscal year as global uncertainties kept central banks in easing mode for most of the period. In the United States, the yield curve flattened; front-end yields, which

were heavily influenced by Fed monetary policy expectations, rose more than intermediate- and long-term yields.

The U.S. dollar ended higher against a broad basket of currencies, particularly after the November election and the December rate hike. Emerging-market currencies also weakened significantly against the dollar after Donald Trump’s election, amid concerns about potential U.S. trade protectionism. The British pound depreciated in the aftermath of the Brexit vote.

Absolute returns in the major fixed income spread sectors were positive for the 12 months, aided by the decline in non-U.S. government bond yields. In the United States, coupon income helped offset the impact of higher Treasury yields. On an excess-return basis, most spread sectors posted positive returns—including high yield, emerging-market debt, and investment-grade corporates—as credit spreads tightened during the year. However, this masked considerable volatility in spread-sector returns, including a drawdown in many spread sectors in the first part of 2016 and immediately following the Brexit referendum.

The agency mortgage-backed-securities (MBS) market returned 0.33% as measured by the Bloomberg Barclays MBS Fixed Rate Index, outperforming duration-equivalent Treasuries by 3 basis points (as measured by Wellington). Over the first half of the period, mortgages held up reasonably well, driven by strong investor demand, especially from U.S. banks and non-U.S. buyers. Rates rallied into August, which increased prepayment speeds, especially in the newer-issue mid- to low-coupon mortgages. Continued strong demand from investors looking for yield offset this. However, performance reversed after the Fed rate increase, which led durations to lengthen and brought concerns about the end of Fed reinvestment into the conversation.

GNMA MBS returned 0.28%, as measured by the Bloomberg Barclays U.S. GNMA Bond Index; they underperformed duration-equivalent Treasuries by 8 basis points (as measured by Wellington) and underper-formed conventional mortgages.

The fund’s successes

The fund outperformed its benchmark for the period. Selection within 30-year GNMA securities contributed to relative results. On average, the fund was underweighted in GNMAs, instead favoring conventionals, FNMA (Fannie Mae) multifamily Delegated Underwriting and Servicing (DUS) bonds, and agency collateralized mortgage obligations (CMOs). This positioning largely helped, as GNMAs underperformed DUS bonds and agency CMOs on an excess return basis.

The fund’s shortfalls

As discussed earlier, the fund has held a modest allocation to FNMA securities, concentrated primarily in low-coupon 15-year bonds. This positioning partly offset positive results during the fiscal year, as our low-coupon securities underperformed GNMAs on an excess return basis.

The fund’s positioning

We are neutral on agency MBS spreads in the near term. Following the surprising U.S. election result and new expectations of fiscal stimulus, markets (rates, equity, credit) seem to be pricing in bullish outcomes.

Many risks remain, however, including continued global central bank policy uncertainty, the economy’s ability to deliver on growth expectations, uncertainty about a future Fed chair appointment, reexamination of government-sponsored enterprises (GSE) reform, and possible adjustments to the Fed’s asset-purchase program exit strategy. Current MBS spreads don’t seem to compensate investors for all the uncertainty. Still, fundamental factors are supportive, so we view current MBS spreads as being within a reasonable valuation range given the environment.

Over the intermediate term, we are more concerned about MBS. Pro-growth policies at a time when the U.S. economy is close to full employment may lead to a further rise in inflation. Higher inflation is likely to lead to a faster pace of interest rate hikes and therefore may generate conversations at the Fed about paring the reinvestment of MBS paydowns. We would expect this to be accompanied by additional MBS spread-widening.

Over the longer term, we still expect MBS spreads to remain toward the tight end of their range relative to long-term history, given their favorable supply compared with U.S. Treasuries, the reduced leverage in the system, a shift in the MBS buyer base to long-term investors, constrained mortgage credit, and lower refinancing risk.

Within the sector, we are underweighting GNMA pass-throughs in favor of conventionals, based on relative valuations. We are also focused on securities with more stable cash flows than agency MBS pass-throughs, such as agency CMOs and Fannie Mae DUS bonds.

Michael F. Garrett
Senior Managing Director and
Fixed Income Portfolio Manager

Wellington Management Company llp

February 13, 2017

Short-Term Treasury Fund

Fund Profile
As of January 31, 2017


Share-Class Characteristics
	Investor	Admiral
	Shares	Shares
Ticker Symbol	VFISX	VFIRX
Expense Ratio¹	0.20%	0.10%
30-Day SEC Yield	0.99%	1.10%


Financial Attributes


		Bloomberg
		Barclays	Bloomberg
		1–5 Year	Barclays
		Treasury	Aggregate
	Fund	Index	Bond Index

Number of Bonds	119	156	10,069

Yield to Maturity
(before expenses)	1.3%	1.4%	2.6%

Average Coupon	1.3%	1.7%	3.1%

Average Duration	2.3 years	2.8 years	6.0 years

Average Effective
Maturity	2.4 years	2.9 years	8.2 years

Short-Term
Reserves	7.1%	—	—


Sector Diversification (% of portfolio)
Government Mortgage-Backed	1.4%
Treasury/Agency	98.6

The agency and mortgage-backed securities sectors may include
issues from government-sponsored enterprises; such issues are
generally not backed by the full faith and credit of the U.S.
government.


Volatility Measures
	Bloomberg
	Barclays	Bloomberg
	1–5 Year	Barclays
	Treasury	Aggregate Bond
	Index	Index
R-Squared	0.95	0.67
Beta	0.71	0.29

These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.


Distribution by Effective Maturity
(% of portfolio)
Under 1 Year	9.0%
1 - 3 Years	63.0
3 - 5 Years	25.4
5 - 7 Years	0.2
7 - 10 Years	2.4


Distribution by Credit Quality (% of portfolio)
U.S. Government	92.7%
Not Rated	7.3

Credit-quality ratings are obtained from Moody's and S&P, and the
higher rating for each issue is shown. "Not Rated" is used to
classify securities for which a rating is not available. Not rated
securities include a fund's investment in Vanguard Market Liquidity
Fund or Vanguard Municipal Cash Management Fund, each of
which invests in high-quality money market instruments and may
serve as a cash management vehicle for the Vanguard funds,
trusts, and accounts. For more information about these ratings, see
the Glossary entry for Credit Quality.

Investment Focus

1 The expense ratios shown are from the prospectus dated May 26, 2016, and represent estimated costs for the current fiscal year. For the fiscal
year ended January 31, 2017, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

Short-Term Treasury 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: January 31, 2007, Through January 31, 2017
Initial Investment of $10,000


		Average Annual Total Returns
		Periods Ended January 31, 2017

					Final Value
		One	Five	Ten	of a $10,000
		Year	Years	Years	Investment
	Short-Term Treasury Fund Investor
	Shares	0.43%	0.55%	2.34%	$12,603

• • • • • • • •	Bloomberg Barclays U.S. 1–5 Year
	Treasury Bond Index	0.11	0.74	2.77	13,148
– – – –	Short-Term U.S. Treasury Funds Average	0.74	0.29	1.93	12,110
	Bloomberg Barclays U.S. Aggregate Bond Index	1.45	2.09	4.37	15,337
Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


				Final Value
	One	Five	Ten	of a $50,000
	Year	Years	Years	Investment
Short-Term Treasury Fund Admiral Shares	0.53%	0.65%	2.45%	$63,675
Bloomberg Barclays U.S. 1–5 Year Treasury
Bond Index	0.11	0.74	2.77	65,742
Bloomberg Barclays U.S. Aggregate Bond
Index	1.45	2.09	4.37	76,684

See Financial Highlights for dividend and capital gains information.

Short-Term Treasury Fund


Fiscal-Year Total Returns (%): January 31, 2007, Through January 31, 2017
				Bloomberg
				Barclays
				1–5 Year
				Treasury
			Investor Shares	Index
Fiscal Year	Income Returns	Capital Returns	Total Returns	Total Returns
2008	4.58%	5.26%	9.84%	10.35%
2009	2.70	1.79	4.49	5.84
2010	1.60	0.90	2.50	1.95
2011	1.09	0.83	1.92	2.94
2012	0.68	1.56	2.24	3.38
2013	0.41	-0.02	0.39	0.45
2014	0.36	-0.08	0.28	0.38
2015	0.51	0.50	1.01	1.75
2016	0.70	-0.04	0.66	1.04
2017	0.88	-0.45	0.43	0.11

Average Annual Total Returns: Periods Ended December 31, 2016
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.


						Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Investor Shares	10/28/1991	0.99%	0.55%	1.36%	0.97%	2.33%
Admiral Shares	2/13/2001	1.18	0.67	1.47	0.98	2.45

Short-Term Treasury Fund

Financial Statements

Statement of Net Assets
As of January 31, 2017

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).


			Face	Market
		Maturity	Amount	Value^•
	Coupon	Date	($000)	($000)
U.S. Government and Agency Obligations (95.6%)
U.S. Government Securities (86.7%)
United States Treasury Inflation Indexed Bonds	1.625%	1/15/18	39,300	46,528
United States Treasury Inflation Indexed Bonds	0.125%	4/15/18	84,100	88,960
United States Treasury Inflation Indexed Bonds	0.375%	1/15/27	158,907	158,424
United States Treasury Note/Bond	0.750%	12/31/17	73,000	72,931
United States Treasury Note/Bond	1.000%	12/31/17	68,000	68,096
United States Treasury Note/Bond	0.875%	1/15/18	65,000	65,000
United States Treasury Note/Bond	0.750%	1/31/18	73,500	73,408
United States Treasury Note/Bond	0.875%	1/31/18	60,000	60,000
United States Treasury Note/Bond	2.625%	1/31/18	45,000	45,766
United States Treasury Note/Bond	1.000%	2/15/18	74,000	74,081
United States Treasury Note/Bond	3.500%	2/15/18	62,000	63,647
United States Treasury Note/Bond	0.750%	2/28/18	176,000	175,725
United States Treasury Note/Bond	2.750%	2/28/18	38,000	38,742
United States Treasury Note/Bond	1.000%	3/15/18	61,000	61,057
United States Treasury Note/Bond	0.750%	3/31/18	107,000	106,781
United States Treasury Note/Bond	0.875%	3/31/18	80,000	79,950
United States Treasury Note/Bond	0.750%	7/31/18	55,000	54,768
United States Treasury Note/Bond	2.250%	7/31/18	39,000	39,701
United States Treasury Note/Bond	1.000%	8/15/18	500	500
United States Treasury Note/Bond	0.750%	8/31/18	128,300	127,659
United States Treasury Note/Bond	1.000%	9/15/18	70,000	69,901
United States Treasury Note/Bond	0.750%	9/30/18	157,000	156,091
United States Treasury Note/Bond	1.375%	9/30/18	22,000	22,096
United States Treasury Note/Bond	0.875%	10/15/18	42,000	41,830
United States Treasury Note/Bond	0.750%	10/31/18	330,000	327,730
United States Treasury Note/Bond	1.250%	10/31/18	113,250	113,463
United States Treasury Note/Bond	1.750%	10/31/18	156,600	158,240
United States Treasury Note/Bond	1.250%	11/15/18	70,000	70,120
United States Treasury Note/Bond	1.000%	11/30/18	214,000	213,362
United States Treasury Note/Bond	1.250%	11/30/18	348,500	348,991
United States Treasury Note/Bond	1.375%	11/30/18	148,000	148,579
United States Treasury Note/Bond	1.250%	12/15/18	149,000	149,186
United States Treasury Note/Bond	1.250%	12/31/18	106,800	106,916
United States Treasury Note/Bond	1.375%	12/31/18	82,000	82,282
United States Treasury Note/Bond	1.500%	12/31/18	141,000	141,815
United States Treasury Note/Bond	1.125%	1/15/19	85,000	84,880
United States Treasury Note/Bond	1.250%	1/31/19	167,000	167,104
United States Treasury Note/Bond	1.500%	1/31/19	38,000	38,214
United States Treasury Note/Bond	2.750%	2/15/19	84,000	86,546


Short-Term Treasury Fund



			Face	Market
		Maturity	Amount	Value^•
	Coupon	Date	($000)	($000)
United States Treasury Note/Bond	1.500%	2/28/19	50,000	50,258
United States Treasury Note/Bond	1.000%	3/15/19	51,500	51,218
United States Treasury Note/Bond	1.625%	3/31/19	27,500	27,706
United States Treasury Note/Bond	0.875%	4/15/19	54,800	54,312
United States Treasury Note/Bond	1.250%	4/30/19	15,000	14,984
United States Treasury Note/Bond	1.625%	4/30/19	136,200	137,179
United States Treasury Note/Bond	3.125%	5/15/19	20,000	20,809
United States Treasury Note/Bond	1.500%	5/31/19	53,600	53,818
United States Treasury Note/Bond	1.625%	6/30/19	82,000	82,538
United States Treasury Note/Bond	0.750%	7/15/19	50,000	49,281
United States Treasury Note/Bond	0.875%	7/31/19	32,750	32,366
United States Treasury Note/Bond	1.625%	7/31/19	95,100	95,694
United States Treasury Note/Bond	3.625%	8/15/19	22,000	23,231
United States Treasury Note/Bond	1.000%	8/31/19	12,000	11,886
United States Treasury Note/Bond	1.625%	8/31/19	1,750	1,761
United States Treasury Note/Bond	1.750%	9/30/19	89,000	89,793
United States Treasury Note/Bond	1.500%	10/31/19	51,000	51,112
United States Treasury Note/Bond	1.000%	11/15/19	20,000	19,766
United States Treasury Note/Bond	1.000%	11/30/19	5,200	5,137
United States Treasury Note/Bond	1.500%	11/30/19	10,000	10,016
United States Treasury Note/Bond	1.375%	12/15/19	56,000	55,886
United States Treasury Note/Bond	1.125%	12/31/19	12,000	11,886
United States Treasury Note/Bond	1.625%	12/31/19	15,000	15,068
United States Treasury Note/Bond	1.250%	1/31/20	13,500	13,407
United States Treasury Note/Bond	3.625%	2/15/20	40,000	42,512
United States Treasury Note/Bond	1.250%	2/29/20	25,000	24,805
United States Treasury Note/Bond	1.375%	2/29/20	26,000	25,882
United States Treasury Note/Bond	1.125%	3/31/20	13,000	12,840
United States Treasury Note/Bond	1.375%	3/31/20	43,100	42,885
United States Treasury Note/Bond	1.125%	4/30/20	75,000	73,992
United States Treasury Note/Bond	1.375%	4/30/20	93,350	92,796
United States Treasury Note/Bond	3.500%	5/15/20	60,000	63,675
United States Treasury Note/Bond	1.375%	5/31/20	55,000	54,622
United States Treasury Note/Bond	1.500%	5/31/20	30,000	29,916
United States Treasury Note/Bond	1.625%	6/30/20	103,700	103,781
United States Treasury Note/Bond	1.875%	6/30/20	14,000	14,133
United States Treasury Note/Bond	1.625%	7/31/20	40,000	40,000
United States Treasury Note/Bond	2.000%	7/31/20	26,700	27,046
United States Treasury Note/Bond	2.625%	8/15/20	24,000	24,817
United States Treasury Note/Bond	1.375%	8/31/20	86,000	85,207
United States Treasury Note/Bond	2.125%	8/31/20	111,000	112,856
United States Treasury Note/Bond	1.375%	9/30/20	24,000	23,753
United States Treasury Note/Bond	2.000%	9/30/20	75,000	75,914
United States Treasury Note/Bond	1.375%	10/31/20	23,000	22,741
United States Treasury Note/Bond	1.750%	10/31/20	42,000	42,105
United States Treasury Note/Bond	2.625%	11/15/20	74,750	77,273
United States Treasury Note/Bond	1.625%	11/30/20	32,500	32,393
United States Treasury Note/Bond	2.000%	11/30/20	17,000	17,181
United States Treasury Note/Bond	1.750%	12/31/20	91,415	91,486
United States Treasury Note/Bond	1.375%	1/31/21	60,000	59,128
1 United States Treasury Note/Bond	2.125%	1/31/21	30,000	30,431
United States Treasury Note/Bond	3.625%	2/15/21	32,000	34,355
United States Treasury Note/Bond	1.125%	2/28/21	60,000	58,463
United States Treasury Note/Bond	1.375%	4/30/21	45,000	44,199
United States Treasury Note/Bond	2.000%	5/31/21	25,000	25,180
United States Treasury Note/Bond	1.125%	7/31/21	42,000	40,674
United States Treasury Note/Bond	2.250%	7/31/21	35,000	35,585


Short-Term Treasury Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
	United States Treasury Note/Bond	1.125%	8/31/21	35,000	33,873
	United States Treasury Note/Bond	1.250%	10/31/21	35,000	33,983
	United States Treasury Note/Bond	2.000%	10/31/21	23,000	23,093
					6,681,757
Agency Bonds and Notes (7.6%)
2	AID-Iraq	2.149%	1/18/22	35,700	35,612
2	AID-Tunisia	1.416%	8/5/21	16,500	15,902
2	AID-Ukraine	1.471%	9/29/21	25,950	25,239
3	Fannie Mae Interest Strip	0.000%	1/15/19	2,197	2,137
3	Federal National Mortgage Assn.	0.000%	10/9/19	162,100	154,467
4	Financing Corp.	0.000%	5/11/18	72,000	70,949
4	Financing Corp.	0.000%	11/2/18	2,150	2,103
4	Financing Corp.	0.000%	3/7/19	5,475	5,320
	Private Export Funding Corp.	4.375%	3/15/19	13,330	14,138
	Private Export Funding Corp.	1.450%	8/15/19	30,534	30,500
	Private Export Funding Corp.	2.250%	3/15/20	5,800	5,886
	Private Export Funding Corp.	2.300%	9/15/20	7,550	7,649
	Residual Funding Corp. Principal Strip	0.000%	10/15/19	101,170	96,974
	Residual Funding Corp. Principal Strip	0.000%	7/15/20	19,100	17,947
	Residual Funding Corp. Principal Strip	0.000%	10/15/20	58,220	54,297
	Residual Funding Corp. Principal Strip	0.000%	1/15/21	47,000	43,491
					582,611
Conventional Mortgage-Backed Securities (0.0%)
^3,5	Freddie Mac Gold Pool	6.000%	5/1/18–4/1/28	117	132

Nonconventional Mortgage-Backed Securities (1.3%)
^3,5	Fannie Mae Pool	2.995%	5/1/38	24,413	25,954
^3,5,6Fannie Mae REMICS		1.121%	2/25/46–12/25/46	24,513	24,428
^3,5,6Fannie Mae REMICS		1.221%	2/25/46	9,073	9,059
^3,5	Freddie Mac Non Gold Pool	2.872%	11/1/38	12,783	13,526
^3,5	Freddie Mac Non Gold Pool	3.003%	12/1/37	8,864	9,404
^3,5,6Freddie Mac REMICS		1.167%	5/15/46	10,819	10,819
^3,5,6Freddie Mac REMICS		1.217%	10/15/46	8,402	8,367
					101,557
Total U.S. Government and Agency Obligations (Cost $7,388,605)					7,366,057

				Shares
Temporary Cash Investment (7.3%)
Money Market Fund (7.3%)
7	Vanguard Market Liquidity Fund (Cost $563,513)	0.856%		5,634,569	563,513

			Expiration
			Date	Contracts
Options on Futures Purchased (0.0%)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/10/17	409	313
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $122.00		2/24/17	244	15
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/10/17	409	122
Total Options on Futures Purchased (Cost $486)					450
Total Investments (102.9%) (Cost $7,952,604)					7,930,020


Short-Term Treasury Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
U.S. Government Obligations—Sale Commitments (-1.6%)
8	United States Treasury Note/Bond (Net)	0.750%	4/15/18	(23,500)	(23,449)
9	United States Treasury Note/Bond	0.625%	4/30/18	(100,000)	(99,578)
Total U.S. Government Obligations—Sale Commitments (Net Proceeds ($123,041))					(123,027)

			Expiration
			Date	Contracts
Liability for Options Written (0.0%)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/3/17	260	(175)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/24/17	149	(140)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $127.00		2/24/17	265	(25)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $126.50		2/24/17	168	(21)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $125.50		2/24/17	56	(17)
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/3/17	260	(85)
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/24/17	149	(70)
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $122.50		2/24/17	252	(27)
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $123.50		2/24/17	56	(17)
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $123.00		2/24/17	56	(10)
Total Liability for Options Written (Premiums Received $674)					(587)
Other Assets and Liabilities (-1.3%)
Other Assets					653,723
Liabilities					(755,648)
					(101,925)
Net Assets (100%)					7,704,481

					Amount
					($000)
Statement of Assets and Liabilities
Assets
Investments in Securities, at Value
Unaffiliated Issuers					7,366,507
Affiliated Vanguard Funds					563,513
Total Investments in Securities					7,930,020
Investment in Vanguard					569
Receivables for Investment Securities Sold					621,914
Receivables for Accrued Income					22,472
Receivables for Capital Shares Issued					7,774
Other Assets					994
Total Assets					8,583,743


Short-Term Treasury Fund




	Amount
	($000)
Liabilities
Sale Commitment	123,027
Payables for Investment Securities Purchased	737,769
Payables for Capital Shares Redeemed	6,127
Payables for Distributions	937
Payables to Vanguard	3,556
Options Contracts Written	587
Other Liabilities	7,259
Total Liabilities	879,262
Net Assets	7,704,481


At January 31, 2017, net assets consisted of:
	Amount
	($000)
Paid-in Capital	7,738,174
Overdistributed Net Investment Income	(15)
Accumulated Net Realized Losses	(12,096)
Unrealized Appreciation (Depreciation)
Investment Securities	(22,534)
Futures Contracts	901
Options on Futures Contracts	51
Net Assets	7,704,481


Investor Shares—Net Assets
Applicable to 84,518,190 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	899,851
Net Asset Value Per Share—Investor Shares	$10.65


Admiral Shares—Net Assets
Applicable to 639,123,382 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	6,804,630
Net Asset Value Per Share—Admiral Shares	$10.65

• See Note A in Notes to Financial Statements.
1 Securities with a value of $2,625,000 have been segregated as initial margin for open futures contracts.
2 U.S. government-guaranteed.
3 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange
for senior preferred stock.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the
full faith and credit of the U.S. government.
5 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and
prepayments or the possibility of the issue being called.
6 Adjustable-rate security.
7 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
8 Represents sale commitments made on January 31, 2017, which settled on February 1, 2017. The fund purchased the same respective
securities, and such transactions were traded and settled on February 1, 2017.
9 Adjusted by the long position in the same issuer and coupon with a cost and market value of approximately $6,991,000 and $6,934,000.
REMICS—Real Estate Mortgage Investment Conduits.
See accompanying Notes, which are an integral part of the Financial Statements.

Short-Term Treasury Fund

Statement of Operations


	Year Ended
	January 31, 2017
	($000)
Investment Income
Income
Interest¹	81,171
Total Income	81,171
Expenses
The Vanguard Group—Note B
Investment Advisory Services	863
Management and Administrative—Investor Shares	1,520
Management and Administrative—Admiral Shares	4,831
Marketing and Distribution—Investor Shares	210
Marketing and Distribution—Admiral Shares	703
Custodian Fees	90
Auditing Fees	39
Shareholders’ Reports—Investor Shares	52
Shareholders’ Reports—Admiral Shares	100
Trustees’ Fees and Expenses	6
Total Expenses	8,414
Net Investment Income	72,757
Realized Net Gain (Loss)
Investment Securities Sold¹	18,024
Futures Contracts	(2,216)
Options on Futures Contracts	1,352
Realized Net Gain (Loss)	17,160
Change in Unrealized Appreciation (Depreciation)
Investment Securities	(56,314)
Futures Contracts	1,775
Options on Futures Contracts	99
Change in Unrealized Appreciation (Depreciation)	(54,440)
Net Increase (Decrease) in Net Assets Resulting from Operations	35,477
1 Interest income and realized net gain (loss) from an affiliated company of the fund were $903,000 and ($9,000), respectively.

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

Short-Term Treasury Fund

Statement of Changes in Net Assets


	Year Ended January 31,
	2017	2016
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	72,757	54,766
Realized Net Gain (Loss)	17,160	7,402
Change in Unrealized Appreciation (Depreciation)	(54,440)	(11,032)
Net Increase (Decrease) in Net Assets Resulting from Operations	35,477	51,136
Distributions
Net Investment Income
Investor Shares	(8,403)	(6,900)
Admiral Shares	(64,428)	(47,866)
Realized Capital Gain¹
Investor Shares	(2,705)	(1,466)
Admiral Shares	(20,173)	(9,214)
Total Distributions	(95,709)	(65,446)
Capital Share Transactions
Investor Shares	(98,559)	(36,476)
Admiral Shares	586,883	367,994
Net Increase (Decrease) from Capital Share Transactions	488,324	331,518
Total Increase (Decrease)	428,092	317,208
Net Assets
Beginning of Period	7,276,389	6,959,181
End of Period²	7,704,481	7,276,389
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $21,440,000 and $9,345,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($15,000) and $22,000.

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

Short-Term Treasury Fund

Financial Highlights


Investor Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$10.73	$10.75	$10.71	$10.73	$10.81
Investment Operations
Net Investment Income	.094	.074	.055	.039	.044
Net Realized and Unrealized Gain (Loss)
on Investments	(. 048)	(. 004)	. 053	(. 009)	(. 002)
Total from Investment Operations	.046	.070	.108	.030	.042
Distributions
Dividends from Net Investment Income	(. 094)	(. 074)	(. 055)	(. 039)	(. 044)
Distributions from Realized Capital Gains	(. 032)	(. 016)	(. 013)	(. 011)	(. 078)
Total Distributions	(.126)	(. 090)	(. 068)	(. 050)	(.122)
Net Asset Value, End of Period	$10.65	$10.73	$10.75	$10.71	$10.73

Total Return¹	0.43%	0.66%	1.01%	0.28%	0.39%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$900	$1,005	$1,044	$1,151	$1,448
Ratio of Total Expenses to Average Net Assets	0.20%	0.20%	0.20%	0.20%	0.20%
Ratio of Net Investment Income to
Average Net Assets	0.87%	0.69%	0.52%	0.37%	0.41%
Portfolio Turnover Rate ²	249%	211%	87%	80%	176%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 3%, 35%, 22%, 0%, and 63% attributable to mortgage-dollar-roll activity.

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

Short-Term Treasury Fund

Financial Highlights


Admiral Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$10.73	$10.75	$10.71	$10.73	$10.81
Investment Operations
Net Investment Income	.105	.085	.066	.050	.055
Net Realized and Unrealized Gain (Loss)
on Investments	(. 048)	(. 004)	. 053	(. 009)	(. 002)
Total from Investment Operations	.057	.081	.119	.041	.053
Distributions
Dividends from Net Investment Income	(.105)	(. 085)	(. 066)	(. 050)	(. 055)
Distributions from Realized Capital Gains	(. 032)	(. 016)	(. 013)	(. 011)	(. 078)
Total Distributions	(.137)	(.101)	(. 079)	(. 061)	(.133)
Net Asset Value, End of Period	$10.65	$10.73	$10.75	$10.71	$10.73

Total Return¹	0.53%	0.76%	1.11%	0.38%	0.49%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$6,805	$6,271	$5,915	$5,360	$4,879
Ratio of Total Expenses to Average Net Assets	0.10%	0.10%	0.10%	0.10%	0.10%
Ratio of Net Investment Income to
Average Net Assets	0.97%	0.79%	0.62%	0.47%	0.51%
Portfolio Turnover Rate²	249%	211%	87%	80%	176%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 3%, 35%, 22%, 0%, and 63% attributable to mortgage-dollar-roll activity.

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

Short-Term Treasury Fund

Notes to Financial Statements

Vanguard Short-Term Treasury Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

2. Futures and Options: The fund uses futures contracts and options on futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.

Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the year ended January 31, 2017, the fund’s average investments in long and short futures contracts represented 13% and 3% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

Short-Term Treasury Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded in the Statement of Assets and Liabilities as an asset that is subsequently adjusted daily to the current market value of the option purchased. The premium received for a written option is recorded in the Statement of Assets and Liabilities as an asset with an equal liability that is subsequently adjusted daily to the current market value of the option written. Fluctuations in the value of the options are recorded in the Statement of Operations as unrealized appreciation (depreciation) until expired, closed, or exercised, at which time realized gains (losses) are recognized.

During the year ended January 31, 2017, the fund’s average value of investments in options purchased and options written each represented less than 1%of net assets, based on the average market values at each quarter-end during the period.

3. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for settlement at a future date. The fund may be a seller of TBA transactions to reduce its exposure to the mortgage-backed securities market or in order to sell mortgage-backed securities it owns under delayed-delivery arrangements. When the fund is a buyer of TBA transactions, it maintains cash or short-term investments in an amount sufficient to meet the purchase price at the settlement date of the TBA transaction. The primary risk associated with TBA transactions is that a counterparty may default on its obligations. The fund mitigates its counterparty risk by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counterparties, and monitoring its exposure to each counterparty. The fund may also enter into a Master Securities Forward Transaction Agreement (MSFTA) with certain counterparties and require them 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. Under an MSFTA, upon a counterparty default (including bankruptcy), the fund may terminate any TBA transactions 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.

5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2014–2017), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

6. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

Short-Term Treasury Fund

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees 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 this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.

The fund had no borrowings outstanding at January 31, 2017, or at any time during the period then ended.

8. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. 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. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2017, the fund had contributed to Vanguard capital in the amount of $569,000, representing 0.01% of the fund’s net assets and 0.23% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

C. Various inputs may be used to determine the value of the fund’s investments. 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).

Short-Term Treasury Fund

The following table summarizes the market value of the fund’s investments as of January 31, 2017, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
U.S. Government and Agency Obligations	—	7,366,057	—
Temporary Cash Investments	563,513	—	—
Options on Futures Purchased	450	—	—
Liability for Options Written	(587)	—	—
U.S. Government Obligations-Sale Commitments	—	(123,027)	—
Futures Contracts—Assets¹	277	—	—
Futures Contracts—Liabilities¹	(560)	—	—
Total	563,093	7,243,030	—
1 Represents variation margin on the last day of the reporting period.

D. At January 31, 2017, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


			($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
2-Year U.S. Treasury Note	March 2017	4,575	991,846	348
Ultra 10-Year U.S. Treasury Note	March 2017	(1,304)	(174,940)	637
5-Year U.S. Treasury Note	March 2017	(727)	(85,689)	(20)
Ultra Long U.S. Treasury Bond	March 2017	(40)	(6,428)	(64)
				901

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $1,775,000 from accumulated net realized losses to paid-in capital.

For tax purposes, at January 31, 2017, the fund had available capital losses totaling $11,028,000 that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2017, the cost of investment securities for tax purposes was $7,829,077,000.

Net unrealized depreciation of investment securities for tax purposes was $22,534,000, consisting of unrealized gains of $3,280,000 on securities that had risen in value since their purchase and $25,814,000 in unrealized losses on securities that had fallen in value since their purchase.

Short-Term Treasury Fund

F. During the year ended January 31, 2017, the fund purchased $17,772,118,000 of investment securities and sold $18,386,078,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2017.


		Premiums
	Number of	Received
Options Written	Contracts	($000)
Balance at January 31, 2016	527	213
Options Written	15,087	5,363
Options Expired	(1,424)	(471)
Options Closed	(12,519)	(4,431)
Options Exercised	—	—
Balance at January 31, 2017	1,671	674

G. Capital share transactions for each class of shares were:


	Year Ended January 31,
	2017		2016
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	315,668	29,426	270,929	25,290
Issued in Lieu of Cash Distributions	10,044	938	7,625	712
Redeemed	(424,271)	(39,539)	(315,030)	(29,413)
Net Increase (Decrease)—Investor Shares	(98,559)	(9,175)	(36,476)	(3,411)
Admiral Shares
Issued	1,937,149	180,557	1,633,121	152,471
Issued in Lieu of Cash Distributions	70,788	6,614	47,683	4,453
Redeemed	(1,421,054)	(132,567)	(1,312,810)	(122,569)
Net Increase (Decrease)—Admiral Shares	586,883	54,604	367,994	34,355

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2017, that would require recognition or disclosure in these financial statements.

Short-Term Federal Fund

Fund Profile
As of January 31, 2017


Share-Class Characteristics
	Investor	Admiral
	Shares	Shares
Ticker Symbol	VSGBX	VSGDX
Expense Ratio¹	0.20%	0.10%
30-Day SEC Yield	1.21%	1.31%


Financial Attributes


		Bloomberg
		Barclays	Bloomberg
		1–5 Year	Barclays
		Gov’t	Aggregate
	Fund	Index	Bond Index

Number of Bonds	120	534	10,069

Yield to Maturity
(before expenses)	1.5%	1.4%	2.6%

Average Coupon	1.3%	1.7%	3.1%

Average Duration	2.3 years	2.8 years	6.0 years

Average Effective
Maturity	2.8 years	2.9 years	8.2 years

Short-Term
Reserves	2.0%	—	—


Sector Diversification (% of portfolio)
Government Mortgage-Backed	12.5%
Treasury/Agency	87.5

The agency and mortgage-backed securities sectors may include
issues from government-sponsored enterprises; such issues are
generally not backed by the full faith and credit of the U.S.
government.


Volatility Measures
	Bloomberg
	Barclays	Bloomberg
	1–5 Year	Barclays
	Gov’t	Aggregate Bond
	Index	Index
R-Squared	0.97	0.78
Beta	0.74	0.32
These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.


Distribution by Effective Maturity
(% of portfolio)
Under 1 Year	9.4%
1 - 3 Years	59.3
3 - 5 Years	21.6
5 - 7 Years	4.6
7 - 10 Years	4.3
10 - 20 Years	0.8


Distribution by Credit Quality (% of portfolio)
U.S. Government	98.0%
Not Rated	2.0

Credit-quality ratings are obtained from Moody's and S&P, and the higher rating for each issue is shown. "Not Rated" is used to
classify securities for which a rating is not available. Not rated securities include a fund's investment in Vanguard Market Liquidity
Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may
serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. For more information about these ratings, see
the Glossary entry for Credit Quality.

Investment Focus

Short-Term Federal Fund

Performance Summary

Cumulative Performance: January 31, 2007, Through January 31, 2017
Initial Investment of $10,000


		Average Annual Total Returns
		Periods Ended January 31, 2017

					Final Value
		One	Five	Ten	of a $10,000
		Year	Years	Years	Investment
	Short-Term Federal Fund Investor
	Shares	0.49%	0.75%	2.71%	$13,064

• • • • • • • •	Bloomberg Barclays U.S. 1–5 Year
	Government Bond Index	0.13	0.76	2.76	13,133
– – – –	Short-Intermediate U.S. Government Funds Average	-0.16	0.43	2.37	12,642
	Bloomberg Barclays U.S. AggregateBond Index	1.45	2.09	4.37	15,337
Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


				Final Value
	One	Five	Ten	of a $50,000
	Year	Years	Years	Investment
Short-Term Federal Fund Admiral Shares	0.59%	0.85%	2.81%	$65,988
Bloomberg Barclays U.S. 1–5 Year
Government Bond Index	0.13	0.76	2.76	65,664
Bloomberg Barclays U.S. Aggregate Bond
Index	1.45	2.09	4.37	76,684

See Financial Highlights for dividend and capital gains information.

Short-Term Federal Fund


Fiscal-Year Total Returns (%): January 31, 2007, Through January 31, 2017
				Bloomberg
				Barclays
				1–5 Year
				Gov’t
			Investor Shares	Index
Fiscal Year	Income Returns	Capital Returns	Total Returns	Total Returns
2008	4.77%	4.48%	9.25%	9.86%
2009	3.94	0.84	4.78	5.66
2010	2.39	1.62	4.01	2.56
2011	1.53	0.97	2.50	2.84
2012	1.00	2.09	3.09	3.26
2013	0.56	0.20	0.76	0.51
2014	0.54	-0.32	0.22	0.40
2015	0.62	0.74	1.36	1.75
2016	0.88	0.05	0.93	1.05
2017	1.07	-0.58	0.49	0.13


				Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Investor Shares	12/31/1987	1.14%	0.82%	1.74%	0.97%	2.71%
Admiral Shares	2/12/2001	1.24	0.92	1.84	0.97	2.81

Short-Term Federal Fund

Financial Statements

Statement of Net Assets
As of January 31, 2017


				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
U.S. Government and Agency Obligations (96.7%)
U.S. Government Securities (13.3%)
	United States Treasury Inflation Indexed Bonds	1.625%	1/15/18	28,900	34,216
	United States Treasury Inflation Indexed Bonds	0.125%	4/15/18	61,850	65,424
	United States Treasury Inflation Indexed Bonds	0.375%	1/15/27	115,336	114,986
	United States Treasury Note/Bond	0.875%	1/31/18	335,000	335,000
	United States Treasury Note/Bond	1.250%	2/29/20	2,400	2,381
	United States Treasury Note/Bond	1.375%	3/31/20	700	697
	United States Treasury Note/Bond	1.625%	6/30/20	9,500	9,507
	United States Treasury Note/Bond	1.625%	7/31/20	29,500	29,500
1	United States Treasury Note/Bond	1.375%	8/31/20	69,500	68,859
	United States Treasury Note/Bond	1.375%	9/30/20	9,500	9,402
	United States Treasury Note/Bond	1.375%	10/31/20	40,500	40,044
	United States Treasury Note/Bond	1.625%	11/30/20	40,300	40,168
					750,184
Agency Bonds and Notes (71.3%)
2	AID-Iraq	2.149%	1/18/22	26,600	26,535
2	AID-Israel	5.500%	9/18/23	7,000	8,289
2	AID-Israel	5.500%	4/26/24	9,300	11,121
2	AID-Jordan	2.578%	6/30/22	33,500	34,108
2	AID-Tunisia	1.416%	8/5/21	12,300	11,854
2	AID-Ukraine	1.471%	9/29/21	18,850	18,334
3	Fannie Mae Interest Strip	0.000%	1/15/19	1,560	1,518
3	Fannie Mae Principal Strip	0.000%	2/1/19	18,382	17,867
4	Federal Farm Credit Banks	1.110%	2/20/18	14,000	14,030
4	Federal Home Loan Banks	1.375%	3/9/18	75,700	76,066
4	Federal Home Loan Banks	0.875%	3/19/18	54,000	53,958
4	Federal Home Loan Banks	1.125%	4/25/18	42,575	42,653
4	Federal Home Loan Banks	0.875%	6/29/18	48,200	48,066
4	Federal Home Loan Banks	0.625%	8/7/18	6,440	6,392
4	Federal Home Loan Banks	1.750%	12/14/18	3,000	3,028
4	Federal Home Loan Banks	1.250%	1/16/19	107,900	107,849
4	Federal Home Loan Banks	5.375%	5/15/19	46,000	50,132
4	Federal Home Loan Banks	0.875%	8/5/19	83,500	82,358
4	Federal Home Loan Banks	1.000%	9/26/19	48,600	48,018
4	Federal Home Loan Banks	1.750%	6/12/20	20,000	20,070
4	Federal Home Loan Banks	1.375%	2/18/21	49,100	48,211
^3,5	Federal Home Loan Mortgage Corp.	1.050%	2/26/18	150,000	150,036
3	Federal Home Loan Mortgage Corp.	0.875%	3/7/18	23,150	23,135
3	Federal Home Loan Mortgage Corp.	0.750%	4/9/18	33,600	33,515


Short-Term Federal Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
^3,5	Federal Home Loan Mortgage Corp.	1.050%	5/25/18	50,000	49,972
3	Federal Home Loan Mortgage Corp.	4.875%	6/13/18	16,000	16,823
^3,5	Federal Home Loan Mortgage Corp.	1.060%	6/22/18	50,000	49,953
3	Federal Home Loan Mortgage Corp.	0.850%	7/27/18	63,000	62,764
^3,5	Federal Home Loan Mortgage Corp.	1.050%	7/27/18	50,000	49,914
3	Federal Home Loan Mortgage Corp.	0.875%	10/12/18	220,210	219,067
^3,5	Federal Home Loan Mortgage Corp.	1.050%	11/7/18	75,000	74,704
3	Federal Home Loan Mortgage Corp.	1.125%	4/15/19	167,250	166,419
^3,5	Federal Home Loan Mortgage Corp.	1.275%	6/28/19	50,000	49,705
3	Federal Home Loan Mortgage Corp.	0.875%	7/19/19	109,200	107,777
^3,5	Federal Home Loan Mortgage Corp.	1.250%	7/26/19	50,000	49,630
3	Federal Home Loan Mortgage Corp.	1.250%	10/2/19	86,550	86,049
3	Federal Home Loan Mortgage Corp.	1.500%	1/17/20	46,800	46,743
^3,5	Federal Home Loan Mortgage Corp.	1.800%	1/27/20	150,000	150,168
3	Federal Home Loan Mortgage Corp.	1.125%	8/12/21	43,350	41,767
^3,5	Federal National Mortgage Assn.	0.750%	7/27/18	90,000	89,420
^3,5	Federal National Mortgage Assn.	1.250%	9/27/18	10,000	10,014
3	Federal National Mortgage Assn.	1.375%	1/28/19	33,750	33,810
3	Federal National Mortgage Assn.	1.000%	2/26/19	14,150	14,062
^3,5	Federal National Mortgage Assn.	1.250%	2/26/19	75,000	74,727
^3,5	Federal National Mortgage Assn.	1.250%	6/13/19	50,000	49,705
3	Federal National Mortgage Assn.	0.875%	8/2/19	16,950	16,719
3	Federal National Mortgage Assn.	1.000%	8/28/19	67,750	66,996
3	Federal National Mortgage Assn.	0.000%	10/9/19	275,300	262,336
3	Federal National Mortgage Assn.	1.000%	10/24/19	113,500	112,012
^3,5	Federal National Mortgage Assn.	1.250%	11/25/19	75,000	74,263
^3,5	Federal National Mortgage Assn.	1.150%	11/29/19	77,500	76,651
3	Federal National Mortgage Assn.	1.500%	11/30/20	8,050	7,966
3	Federal National Mortgage Assn.	1.875%	12/28/20	15,100	15,147
3	Federal National Mortgage Assn.	1.375%	2/26/21	12,750	12,523
3	Federal National Mortgage Assn.	1.250%	8/17/21	3,350	3,245
3	Federal National Mortgage Assn.	2.000%	1/5/22	150,000	149,710
3	Federal National Mortgage Assn.	1.875%	9/24/26	75,650	69,822
4	Financing Corp.	0.000%	10/6/17	42,394	42,155
4	Financing Corp.	0.000%	11/11/17	2,000	1,987
4	Financing Corp.	0.000%	11/30/17	1,905	1,891
4	Financing Corp.	0.000%	11/30/17	29,145	28,935
4	Financing Corp.	0.000%	5/11/18	108,000	106,423
4	Financing Corp.	0.000%	11/2/18	1,540	1,506
4	Financing Corp.	0.000%	12/6/18	32,496	31,731
4	Financing Corp.	0.000%	3/7/19	3,910	3,799
	Government Trust Certificate	0.000%	4/1/20	10,419	9,780
	Private Export Funding Corp.	1.375%	2/15/17	7,744	7,746
	Private Export Funding Corp.	5.450%	9/15/17	11,352	11,668
	Private Export Funding Corp.	2.250%	12/15/17	12,286	12,417
	Private Export Funding Corp.	4.375%	3/15/19	9,570	10,150
	Private Export Funding Corp.	1.450%	8/15/19	22,550	22,525
	Private Export Funding Corp.	2.250%	3/15/20	12,393	12,576
	Private Export Funding Corp.	2.300%	9/15/20	17,450	17,680
	Private Export Funding Corp.	4.300%	12/15/21	4,430	4,865
	Private Export Funding Corp.	2.800%	5/15/22	13,545	13,907
	Private Export Funding Corp.	3.550%	1/15/24	19,900	21,080
	Private Export Funding Corp.	2.450%	7/15/24	5,300	5,221
	Private Export Funding Corp.	3.250%	6/15/25	16,200	16,788
	Residual Funding Corp. Principal Strip	0.000%	10/15/19	124,331	119,175
	Residual Funding Corp. Principal Strip	0.000%	7/15/20	93,000	87,385


Short-Term Federal Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
	Residual Funding Corp. Principal Strip	0.000%	10/15/20	41,800	38,983
	Residual Funding Corp. Principal Strip	0.000%	1/15/21	41,100	38,031
	Resolution Funding Corp. Interest Strip	0.000%	1/15/27	1,584	1,169
	Resolution Funding Corp. Interest Strip	0.000%	4/15/27	13,756	10,050
	Resolution Funding Corp. Interest Strip	0.000%	7/15/27	7,094	5,126
	Resolution Funding Corp. Interest Strip	0.000%	10/15/27	7,094	5,082
4	Tennessee Valley Authority	4.700%	7/15/33	20,990	24,577
4	Tennessee Valley Authority Principal Strip	0.000%	11/1/25	17,342	13,294
					4,025,428
Conventional Mortgage-Backed Securities (10.1%)
^3,5	Fannie Mae Pool	2.000%	10/1/27–1/1/32	25,215	24,536
^3,5,6Fannie Mae Pool		2.500%	2/1/28–3/1/32	148,715	148,844
^3,5,6Fannie Mae Pool		3.000%	12/1/20–3/1/32	126,742	130,100
^3,5	Fannie Mae Pool	3.500%	8/1/20–12/1/46	53,352	55,811
^3,5	Fannie Mae Pool	4.000%	6/1/18–12/1/28	18,105	18,814
^3,5	Fannie Mae Pool	4.500%	1/1/18–10/1/25	5,632	5,774
^3,5	Fannie Mae Pool	5.000%	3/1/17–3/1/38	6,665	6,998
^3,5	Fannie Mae Pool	5.500%	2/1/17–1/1/25	1,485	1,511
^3,5	Fannie Mae Pool	6.000%	4/1/17–5/1/24	43	44
^3,5	Freddie Mac Gold Pool	2.000%	9/1/28–6/1/30	8,655	8,423
^3,5,6Freddie Mac Gold Pool		2.500%	6/1/22–3/1/32	72,604	72,677
^3,5,6Freddie Mac Gold Pool		3.000%	4/1/27–3/1/32	53,422	54,835
^3,5	Freddie Mac Gold Pool	3.500%	3/1/21–8/1/29	19,885	20,847
^3,5	Freddie Mac Gold Pool	4.000%	6/1/18–1/1/29	11,731	12,163
^3,5	Freddie Mac Gold Pool	4.500%	5/1/18–9/1/26	7,192	7,447
^3,5	Freddie Mac Gold Pool	5.000%	6/1/17–6/1/25	3,280	3,380
^3,5	Freddie Mac Gold Pool	5.500%	7/1/17–2/1/19	38	38
^3,5	Freddie Mac Gold Pool	6.000%	10/1/18	25	25
					572,267
Nonconventional Mortgage-Backed Securities (2.0%)
^3,5,7Fannie Mae Pool		2.814%	12/1/40	2,222	2,349
^3,5	Fannie Mae Pool	2.829%	9/1/37	4,554	4,816
^3,5,7Fannie Mae Pool		2.932%	8/1/36	4,209	4,449
^3,5	Fannie Mae Pool	2.951%	8/1/35	3,499	3,695
^3,5	Fannie Mae Pool	2.979%	4/1/40	13,551	14,451
^3,5,7Fannie Mae REMICS		1.021%	9/25/46	7,643	7,612
^3,5,7Fannie Mae REMICS		1.071%	9/25/41–4/25/45	4,188	4,165
^3,5,7Fannie Mae REMICS		1.091%	6/25/36	4,518	4,512
^3,5,7Fannie Mae REMICS		1.121%	5/25/43–12/25/46	16,357	16,349
^3,5,7Fannie Mae REMICS		1.141%	6/25/35	1,239	1,237
^3,5,7Fannie Mae REMICS		1.171%	11/25/42–9/25/46	8,997	9,021
^3,5,7Fannie Mae REMICS		1.181%	11/25/35	1,613	1,614
^3,5,7Fannie Mae REMICS		1.216%	2/25/37	804	803
^3,5,7Fannie Mae REMICS		1.271%	8/25/46	3,474	3,471
^3,5	Freddie Mac Non Gold Pool	2.745%	7/1/35	9,360	9,877
^3,5,7Freddie Mac Non Gold Pool		2.803%	9/1/37	7,321	7,771
^3,5	Freddie Mac Non Gold Pool	2.972%	7/1/33	1,175	1,241
^3,5	Freddie Mac Non Gold Pool	3.152%	11/1/35	6,371	6,764
^3,5,7Freddie Mac REMICS		1.117%	11/15/36–8/15/43	3,655	3,650
^3,5,7Freddie Mac REMICS		1.127%	11/15/36	1,264	1,262
^3,5,7Freddie Mac REMICS		1.217%	6/15/42	708	708
					109,817
Total U.S. Government and Agency Obligations (Cost $5,494,573)					5,457,696


Short-Term Federal Fund



				Market
				Value^•
	Coupon		Shares	($000)
Temporary Cash Investment (2.0%)
Money Market Fund (2.0%)
8 Vanguard Market Liquidity Fund
(Cost $111,979)	0.856%		1,119,731	111,984

		Expiration
		Date	Contracts
Options on Futures Purchased (0.0%)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00		2/10/17	300	230
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00		2/10/17	300	89
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $123.50		2/24/17	959	285
Total Options on Futures Purchased (Cost $552)				604
Total Investments (98.7%) (Cost $5,607,104)				5,570,284
Liability for Options Written (0.0%)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00		2/3/17	190	(128)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00		2/24/17	109	(102)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $126.50		2/24/17	126	(16)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $125.50		2/24/17	41	(12)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $127.00		2/24/17	16	(1)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00		2/3/17	190	(62)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $122.50		2/24/17	2,186	(239)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00		2/24/17	109	(51)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $123.00		2/24/17	41	(8)
Total Liability for Options Written (Premiums Received $690)				(619)
Other Assets and Liabilities (1.3%)
Other Assets				1,209,851
Other Liabilities				(1,133,665)
				76,186
Net Assets (100%)				5,645,851


Short-Term Federal Fund




	Amount
	($000)
Statement of Assets and Liabilities
Assets
Investments in Securities, at Value
Unaffiliated Issuers	5,458,300
Affiliated Vanguard Funds	111,984
Total Investments in Securities	5,570,284
Investment in Vanguard	424
Receivables for Investment Securities Sold	1,186,217
Receivables for Accrued Income	16,229
Receivables for Capital Shares Issued	6,430
Other Assets	551
Total Assets	6,780,135
Liabilities
Payables for Investment Securities Purchased	1,113,708
Payables for Capital Shares Redeemed	8,989
Payables for Distributions	506
Payables to Vanguard	3,476
Options Contracts Written	619
Other Liabilities	6,986
Total Liabilities	1,134,284
Net Assets	5,645,851


At January 31, 2017, net assets consisted of:
	Amount
	($000)
Paid-in Capital	5,680,087
Overdistributed Net Investment Income	(42)
Accumulated Net Realized Gains	1,343
Unrealized Appreciation (Depreciation)
Investment Securities	(36,872)
Futures Contracts	1,212
Options on Futures Contracts	123
Net Assets	5,645,851


Investor Shares—Net Assets
Applicable to 77,246,407 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	826,567
Net Asset Value Per Share—Investor Shares	$10.70

Short-Term Federal Fund


	Amount
	($000)
Admiral Shares—Net Assets
Applicable to 450,384,008 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	4,819,284
Net Asset Value Per Share—Admiral Shares	$10.70

• See Note A in Notes to Financial Statements.
1 Securities with a value of $5,225,000 have been segregated as initial margin for open futures contracts.
2 U.S. government-guaranteed.
3 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange
for senior preferred stock.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the
full faith and credit of the U.S. government.
5 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and
prepayments or the possibility of the issue being called.
6 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of January 31, 2017.
7 Adjustable-rate security.
8 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
REMICS—Real Estate Mortgage Investment Conduits.
See accompanying Notes, which are an integral part of the Financial Statements.

Short-Term Federal Fund

Statement of Operations


	Year Ended
	January 31, 2017
	($000)
Investment Income
Income
Interest¹	70,802
Total Income	70,802
Expenses
The Vanguard Group—Note B
Investment Advisory Services	637
Management and Administrative—Investor Shares	1,300
Management and Administrative—Admiral Shares	3,536
Marketing and Distribution—Investor Shares	174
Marketing and Distribution—Admiral Shares	507
Custodian Fees	80
Auditing Fees	41
Shareholders’ Reports—Investor Shares	34
Shareholders’ Reports—Admiral Shares	28
Trustees’ Fees and Expenses	4
Total Expenses	6,341
Net Investment Income	64,461
Realized Net Gain (Loss)
Investment Securities Sold¹	14,226
Futures Contracts	8,966
Options on Futures Contracts	1,597
Realized Net Gain (Loss)	24,789
Change in Unrealized Appreciation (Depreciation)
Investment Securities	(59,726)
Futures Contracts	1,938
Options on Futures Contracts	184
Change in Unrealized Appreciation (Depreciation)	(57,604)
Net Increase (Decrease) in Net Assets Resulting from Operations	31,646
1 Interest income and realized net gain (loss) from an affiliated company of the fund were $1,733,000 and $25,000, respectively.

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

Short-Term Federal Fund

Statement of Changes in Net Assets


	Year Ended January 31,
	2017	2016
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	64,461	48,711
Realized Net Gain (Loss)	24,789	5,399
Change in Unrealized Appreciation (Depreciation)	(57,604)	(4,477)
Net Increase (Decrease) in Net Assets Resulting from Operations	31,646	49,633
Distributions
Net Investment Income
Investor Shares	(8,732)	(7,537)
Admiral Shares	(55,814)	(41,169)
Realized Capital Gain¹
Investor Shares	(2,109)	(2,752)
Admiral Shares	(12,368)	(13,979)
Total Distributions	(79,023)	(65,437)
Capital Share Transactions
Investor Shares	15,964	(103,156)
Admiral Shares	518,055	232,621
Net Increase (Decrease) from Capital Share Transactions	534,019	129,465
Total Increase (Decrease)	486,642	113,661
Net Assets
Beginning of Period	5,159,209	5,045,548
End of Period²	5,645,851	5,159,209
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $14,477,000 and $12,461,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($42,000) and ($23,000).

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

Financial Highlights


Investor Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$10.79	$10.82	$10.74	$10.78	$10.89
Investment Operations
Net Investment Income	.116	.095	.066	.058	.061
Net Realized and Unrealized Gain (Loss)
on Investments	(. 063)	.005	.080	(. 034)	.022
Total from Investment Operations	.053	.100	.146	.024	.083
Distributions
Dividends from Net Investment Income	(.116)	(. 095)	(. 066)	(. 058)	(. 061)
Distributions from Realized Capital Gains	(. 027)	(. 035)	—	(. 006)	(.132)
Total Distributions	(.143)	(.130)	(. 066)	(. 064)	(.193)
Net Asset Value, End of Period	$10.70	$10.79	$10.82	$10.74	$10.78

Total Return¹	0.49%	0.93%	1.36%	0.22%	0.76%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$827	$817	$924	$1,051	$1,884
Ratio of Total Expenses to Average Net Assets	0.20%	0.20%	0.20%	0.20%	0.20%
Ratio of Net Investment Income to
Average Net Assets	1.07%	0.88%	0.61%	0.54%	0.56%
Portfolio Turnover Rate²	304%	314%	361%	418%	436%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 38%, 75%, 99%, 87%, and 139% attributable to mortgage-dollar-roll activity.

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

Short-Term Federal Fund

Financial Highlights


Admiral Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$10.79	$10.82	$10.74	$10.78	$10.89
Investment Operations
Net Investment Income	.127	.105	.077	.069	.071
Net Realized and Unrealized Gain (Loss)
on Investments	(. 063)	.005	.080	(. 034)	.022
Total from Investment Operations	.064	.110	.157	.035	.093
Distributions
Dividends from Net Investment Income	(.127)	(.105)	(. 077)	(. 069)	(. 071)
Distributions from Realized Capital Gains	(. 027)	(. 035)	—	(. 006)	(.132)
Total Distributions	(.154)	(.140)	(. 077)	(. 075)	(. 203)
Net Asset Value, End of Period	$10.70	$10.79	$10.82	$10.74	$10.78

Total Return¹	0.59%	1.03%	1.47%	0.33%	0.86%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$4,819	$4,342	$4,122	$4,205	$3,792
Ratio of Total Expenses to Average Net Assets	0.10%	0.10%	0.10%	0.10%	0.10%
Ratio of Net Investment Income to
Average Net Assets	1.17%	0.98%	0.71%	0.64%	0.66%
Portfolio Turnover Rate²	304%	314%	361%	418%	436%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 38%, 75%, 99%, 87%, and 139% attributable to mortgage-dollar-roll activity.

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

Short-Term Federal Fund

Notes to Financial Statements

Vanguard Short-Term Federal Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

Short-Term Federal Fund

During the year ended January 31, 2017, the fund’s average investments in long and short futures contracts represented 10% and 6% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

During the year ended January 31, 2017, the fund’s average value of investments in options purchased and options written each represented less than 1% of net assets, based on the average market values at each quarter-end during the period.

4. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are typically invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities sold, and is compensated by interest earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund has also entered into mortgage-dollar-roll transactions in which the fund buys mortgage-backed securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell similar securities in the future at a predetermined price. The securities bought in mortgage-dollar-roll transactions are used to cover an open TBA sell position. The fund continues to earn interest on mortgage-backed security pools already held and receives a lower price on the securities to be sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities.

Short-Term Federal Fund

The fund had no borrowings outstanding at January 31, 2017, or at any time during the period then ended.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2017, the fund had contributed to Vanguard capital in the amount of $424,000, representing 0.01% of the fund’s net assets and 0.17% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

Short-Term Federal Fund

The following table summarizes the market value of the fund’s investments as of January 31, 2017, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
U.S. Government and Agency Obligations	—	5,457,696	—
Temporary Cash Investments	111,984	—	—
Options on Futures Purchased	604	—	—
Liability for Options Written	(619)	—	—
Futures Contracts—Assets¹	150	—	—
Futures Contracts—Liabilities¹	(1,137)	—	—
Total	110,982	5,457,696	—
1 Represents variation margin on the last day of the reporting period.

D. At January 31, 2017, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


			($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
2-Year U.S. Treasury Note	March 2017	4,424	959,109	250
Ultra 10-Year U.S. Treasury Note	March 2017	(1,935)	(259,592)	1,131
5-Year U.S. Treasury Note	March 2017	(1,558)	(183,637)	(369)
10-Year U.S. Treasury Note	March 2017	(361)	(44,933)	(50)
30-Year U.S. Treasury Bond	March 2017	(153)	(23,079)	301
Ultra Long U.S. Treasury Bond	March 2017	(31)	(4,981)	(51)
				1,212

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

Short-Term Federal Fund

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $2,317,000 from accumulated net realized gains to paid-in capital.

The fund used capital loss carryforwards of $6,724,000 to offset taxable capital gains realized during the year ended January 31, 2017, reducing the amount of capital gains that would otherwise be available to distribute to shareholders. For tax purposes, at January 31, 2017, the fund had $3,331,000 of long-term capital gains available for distribution.

At January 31, 2017, the cost of investment securities for tax purposes was $5,606,552,000.

Net unrealized depreciation of investment securities for tax purposes was $36,872,000, consisting of unrealized gains of $4,184,000 on securities that had risen in value since their purchase and $41,056,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2017, the fund purchased $13,988,511,000 of investment securities and sold $14,733,695,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2017.


		Premiums
	Number of	Received
Options Written	Contracts	($000)
Balance at January 31, 2016	572	215
Options Written	12,513	4,441
Options Expired	(2,065)	(807)
Options Closed	(8,012)	(3,159)
Options Exercised	—	—
Balance at January 31, 2017	3,008	690

G. Capital share transactions for each class of shares were:


	Year Ended January 31,
	2017		2016
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	270,833	25,077	166,939	15,490
Issued in Lieu of Cash Distributions	9,944	923	9,450	878
Redeemed	(264,813)	(24,536)	(279,545)	(25,944)
Net Increase (Decrease)—Investor Shares	15,964	1,464	(103,156)	(9,576)
Admiral Shares
Issued	1,688,505	156,406	1,230,824	114,220
Issued in Lieu of Cash Distributions	61,066	5,670	48,588	4,513
Redeemed	(1,231,516)	(114,263)	(1,046,791)	(97,150)
Net Increase (Decrease)—Admiral Shares	518,055	47,813	232,621	21,583

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2017, that would require recognition or disclosure in these financial statements.

Intermediate-Term Treasury Fund

Fund Profile
As of January 31, 2017


Share-Class Characteristics
	Investor	Admiral
	Shares	Shares
Ticker Symbol	VFITX	VFIUX
Expense Ratio¹	0.20%	0.10%
30-Day SEC Yield	1.70%	1.81%


Financial Attributes


		Bloomberg
		Barclays Bloomberg
		5–10 Year	Barclays
		Treasury	Aggregate
	Fund	Index Bond Index

Number of Bonds	114	54	10,069

Yield to Maturity
(before expenses)	2.0%	2.2%	2.6%

Average Coupon	2.1%	2.1%	3.1%

Average Duration	5.3 years	6.6 years	6.0 years

Average Effective
Maturity	5.6 years	7.1 years	8.2 years

Short-Term
Reserves	0.5%	—	—


Sector Diversification (% of portfolio)
Government Mortgage-Backed	1.0%
Treasury/Agency	99.0

The agency and mortgage-backed securities sectors may include
issues from government-sponsored enterprises; such issues are
generally not backed by the full faith and credit of the U.S.
government.


Volatility Measures
	Bloomberg
	Barclays	Bloomberg
	5–10 Year	Barclays
	Treasury	Aggregate Bond
	Index	Index
R-Squared	0.99	0.88
Beta	0.80	1.14
These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.


Distribution by Effective Maturity
(% of portfolio)
Under 1 Year	1.0%
3 - 5 Years	49.1
5 - 7 Years	25.9
7 - 10 Years	23.6
10 - 20 Years	0.4


Distribution by Credit Quality (% of portfolio)
U.S. Government	99.5%
Not Rated	0.5

Investment Focus

Intermediate-Term Treasury Fund

Performance Summary

Cumulative Performance: January 31, 2007, Through January 31, 2017
Initial Investment of $10,000


		Average Annual Total Returns
		Periods Ended January 31, 2017

					Final Value
		One	Five	Ten	of a $10,000
		Year	Years	Years	Investment
	Intermediate-Term Treasury Fund
	Investor Shares	-0.84%	1.19%	4.47%	$15,485

• • • • • • • •	Bloomberg Barclays U.S. 5–10 Year
	Treasury Bond Index	-1.41	1.47	5.08	16,418


– – – –	General Treasury U. Funds S. Average	-1.94	1.45	4.85	16,064
	Bloomberg Barclays U.S. Aggregate Bond Index	1.45	2.09	4.37	15,337
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


				Final Value
	One	Five	Ten	of a $50,000
	Year	Years	Years	Investment
Intermediate-Term Treasury Fund Admiral
Shares	-0.74%	1.29%	4.59%	$78,315
Bloomberg Barclays U.S. 5–10 Year Treasury
Bond Index	-1.41	1.47	5.08	82,088
Bloomberg Barclays U.S. Aggregate Bond
Index	1.45	2.09	4.37	76,684

See Financial Highlights for dividend and capital gains information.

Intermediate-Term Treasury Fund


Fiscal-Year Total Returns (%): January 31, 2007, Through January 31, 2017
				Bloomberg
				Barclays
				5–10 Year
				Treasury
			Investor Shares	Index
Fiscal Year	Income Returns	Capital Returns	Total Returns	Total Returns
2008	4.98%	8.70%	13.68%	14.13%
2009	3.88	3.41	7.29	9.48
2010	3.10	-0.39	2.71	0.47
2011	2.70	2.89	5.59	6.69
2012	2.11	8.25	10.36	13.95
2013	1.34	-0.24	1.10	1.46
2014	1.47	-2.21	-0.74	-1.47
2015	1.74	3.64	5.38	7.66
2016	1.65	-0.48	1.17	1.38
2017	1.51	-2.35	-0.84	-1.41


				Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Investor Shares	10/28/1991	1.19%	1.29%	2.44%	1.97%	4.41%
Admiral Shares	2/12/2001	1.29	1.39	2.56	1.97	4.53

Intermediate-Term Treasury Fund

Financial Statements

Statement of Net Assets
As of January 31, 2017


				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
U.S. Government and Agency Obligations (98.6%)
U.S. Government Securities (93.2%)
	United States Treasury Inflation Indexed Bonds	0.375%	1/15/27	141,142	140,713
	United States Treasury Note/Bond	1.625%	8/31/19	2	2
	United States Treasury Note/Bond	1.375%	4/30/20	38,969	38,738
	United States Treasury Note/Bond	3.500%	5/15/20	64,294	68,232
1	United States Treasury Note/Bond	8.750%	5/15/20	31,589	38,815
	United States Treasury Note/Bond	1.500%	5/31/20	30,000	29,916
	United States Treasury Note/Bond	1.625%	6/30/20	70,861	70,916
	United States Treasury Note/Bond	1.625%	7/31/20	80,000	80,000
	United States Treasury Note/Bond	2.625%	8/15/20	95,803	99,066
	United States Treasury Note/Bond	8.750%	8/15/20	15,000	18,656
	United States Treasury Note/Bond	1.375%	8/31/20	46,121	45,696
	United States Treasury Note/Bond	2.125%	8/31/20	43,070	43,790
	United States Treasury Note/Bond	1.375%	9/30/20	57,100	56,511
	United States Treasury Note/Bond	2.000%	9/30/20	53,870	54,527
	United States Treasury Note/Bond	1.375%	10/31/20	74,271	73,435
	United States Treasury Note/Bond	1.750%	10/31/20	17,070	17,113
	United States Treasury Note/Bond	2.625%	11/15/20	121,431	125,529
	United States Treasury Note/Bond	1.625%	11/30/20	120,231	119,837
	United States Treasury Note/Bond	2.000%	11/30/20	69,866	70,608
	United States Treasury Note/Bond	1.750%	12/31/20	137,372	137,479
	United States Treasury Note/Bond	2.375%	12/31/20	50,000	51,235
	United States Treasury Note/Bond	1.375%	1/31/21	111,940	110,314
	United States Treasury Note/Bond	2.125%	1/31/21	92,599	93,931
	United States Treasury Note/Bond	3.625%	2/15/21	127,554	136,941
	United States Treasury Note/Bond	7.875%	2/15/21	22,862	28,285
	United States Treasury Note/Bond	1.125%	2/28/21	53,693	52,317
	United States Treasury Note/Bond	2.000%	2/28/21	78,751	79,490
	United States Treasury Note/Bond	1.250%	3/31/21	106,769	104,467
	United States Treasury Note/Bond	2.250%	3/31/21	36,260	36,929
	United States Treasury Note/Bond	1.375%	4/30/21	83,821	82,328
	United States Treasury Note/Bond	2.250%	4/30/21	61,460	62,574
	United States Treasury Note/Bond	3.125%	5/15/21	68,808	72,495
	United States Treasury Note/Bond	8.125%	5/15/21	16,919	21,292
	United States Treasury Note/Bond	1.375%	5/31/21	68,459	67,175
	United States Treasury Note/Bond	2.000%	5/31/21	63,191	63,645
	United States Treasury Note/Bond	1.125%	6/30/21	55,452	53,780
	United States Treasury Note/Bond	2.125%	6/30/21	62,353	63,094
	United States Treasury Note/Bond	1.125%	7/31/21	51,550	49,923


Intermediate-Term Treasury Fund



			Face	Market
		Maturity	Amount	Value^•
	Coupon	Date	($000)	($000)
United States Treasury Note/Bond	2.250%	7/31/21	70,919	72,105
United States Treasury Note/Bond	2.125%	8/15/21	77,435	78,282
United States Treasury Note/Bond	8.125%	8/15/21	34,701	44,114
United States Treasury Note/Bond	1.125%	8/31/21	27,000	26,131
United States Treasury Note/Bond	2.000%	8/31/21	68,609	68,963
United States Treasury Note/Bond	1.125%	9/30/21	20,000	19,328
United States Treasury Note/Bond	2.125%	9/30/21	68,345	69,050
United States Treasury Note/Bond	2.000%	10/31/21	65,000	65,264
United States Treasury Note/Bond	2.000%	11/15/21	95,000	95,356
United States Treasury Note/Bond	8.000%	11/15/21	20,938	26,761
United States Treasury Note/Bond	1.875%	11/30/21	23,000	22,964
United States Treasury Note/Bond	2.000%	2/15/22	10,000	10,025
United States Treasury Note/Bond	1.750%	2/28/22	57	56
United States Treasury Note/Bond	1.750%	3/31/22	15,000	14,836
United States Treasury Note/Bond	1.750%	4/30/22	25,000	24,699
United States Treasury Note/Bond	1.750%	5/15/22	25,000	24,688
United States Treasury Note/Bond	2.125%	6/30/22	25,000	25,133
United States Treasury Note/Bond	2.000%	7/31/22	55,129	55,025
United States Treasury Note/Bond	1.625%	8/15/22	82,462	80,658
United States Treasury Note/Bond	7.250%	8/15/22	20,727	26,375
United States Treasury Note/Bond	1.875%	8/31/22	63,824	63,206
United States Treasury Note/Bond	1.750%	9/30/22	54,836	53,876
United States Treasury Note/Bond	1.875%	10/31/22	40,331	39,852
United States Treasury Note/Bond	1.625%	11/15/22	34,659	33,782
United States Treasury Note/Bond	7.625%	11/15/22	12,000	15,630
United States Treasury Note/Bond	2.000%	11/30/22	45,000	44,740
United States Treasury Note/Bond	2.125%	12/31/22	46,752	46,766
United States Treasury Note/Bond	1.750%	1/31/23	60,000	58,706
United States Treasury Note/Bond	2.000%	2/15/23	115,783	114,915
United States Treasury Note/Bond	1.500%	2/28/23	53,159	51,216
United States Treasury Note/Bond	1.500%	3/31/23	60,337	58,056
United States Treasury Note/Bond	1.625%	4/30/23	62,500	60,508
United States Treasury Note/Bond	1.750%	5/15/23	128,957	125,733
United States Treasury Note/Bond	1.625%	5/31/23	65,781	63,623
United States Treasury Note/Bond	1.375%	6/30/23	87,279	83,024
United States Treasury Note/Bond	2.500%	8/15/23	134,880	137,324
United States Treasury Note/Bond	1.375%	8/31/23	75,300	71,453
United States Treasury Note/Bond	1.375%	9/30/23	43,000	40,769
United States Treasury Note/Bond	1.625%	10/31/23	20,000	19,253
United States Treasury Note/Bond	2.750%	11/15/23	131,353	135,663
United States Treasury Note/Bond	2.750%	2/15/24	69,119	71,376
United States Treasury Note/Bond	2.500%	5/15/24	64,223	65,186
United States Treasury Note/Bond	2.375%	8/15/24	95,018	95,464
United States Treasury Note/Bond	2.250%	11/15/24	130,000	129,147
United States Treasury Note/Bond	2.000%	2/15/25	155,384	151,232
United States Treasury Note/Bond	2.125%	5/15/25	142,000	139,204
United States Treasury Note/Bond	2.000%	8/15/25	99,009	95,884
United States Treasury Note/Bond	2.250%	11/15/25	115,990	114,395
United States Treasury Note/Bond	1.625%	2/15/26	95,084	88,814
United States Treasury Note/Bond	6.000%	2/15/26	29,000	37,446
United States Treasury Note/Bond	1.625%	5/15/26	59,891	55,820
United States Treasury Note/Bond	1.500%	8/15/26	71,900	66,103
United States Treasury Note/Bond	6.750%	8/15/26	17,300	23,641
United States Treasury Note/Bond	2.000%	11/15/26	75,000	72,070
United States Treasury Note/Bond	6.500%	11/15/26	7,000	9,465
				5,942,949


Intermediate-Term Treasury Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
Agency Bonds and Notes (4.4%)
2	AID-Iraq	2.149%	1/18/22	29,800	29,727
2	AID-Israel	5.500%	9/18/23	8,000	9,473
2	AID-Israel	5.500%	4/26/24	10,700	12,795
2	AID-Israel	0.000%	5/1/24	13,215	10,541
2	AID-Israel	0.000%	11/1/24	75,000	59,827
2	AID-Israel	0.000%	8/15/25	15,929	12,178
2	AID-Tunisia	1.416%	8/5/21	15,200	14,649
2	AID-Ukraine	1.471%	9/29/21	23,100	22,467
	Private Export Funding Corp.	2.300%	9/15/20	13,600	13,779
	Private Export Funding Corp.	4.300%	12/15/21	4,150	4,558
	Private Export Funding Corp.	2.800%	5/15/22	15,470	15,883
	Private Export Funding Corp.	3.550%	1/15/24	23,800	25,211
	Private Export Funding Corp.	2.450%	7/15/24	6,085	5,995
	Private Export Funding Corp.	3.250%	6/15/25	18,600	19,275
	Resolution Funding Corp. Interest Strip	0.000%	1/15/27	1,988	1,468
	Resolution Funding Corp. Interest Strip	0.000%	4/15/27	16,673	12,181
	Resolution Funding Corp. Interest Strip	0.000%	7/15/27	8,704	6,290
	Resolution Funding Corp. Interest Strip	0.000%	10/15/27	8,704	6,236
					282,533
Nonconventional Mortgage-Backed Securities (1.0%)
^3,4	Fannie Mae Pool	2.995%	5/1/38	21,948	23,332
^3,4,5Fannie Mae REMICS		1.121%	2/25/46	12,638	12,563
^3,4,5Fannie Mae REMICS		1.221%	2/25/46	8,130	8,117
^3,4,5Freddie Mac REMICS		1.167%	5/15/46	9,624	9,624
^3,4,5Freddie Mac REMICS		1.217%	10/15/46	7,420	7,389
					61,025
Total U.S. Government and Agency Obligations (Cost $6,369,062)					6,286,507

				Shares
Temporary Cash Investment (0.5%)
Money Market Fund (0.5%)
6	Vanguard Market Liquidity Fund (Cost $32,545)	0.856%		325,414	32,544

			Expiration
			Date	Contracts
Options on Futures Purchased (0.0%)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/10/17	338	259
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $122.00		2/24/17	204	13
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/10/17	338	100
Total Options on Futures Purchased (Cost $401)					372
Total Investments (99.1%) (Cost $6,402,008)					6,319,423


Intermediate-Term Treasury Fund



			Market
	Expiration		Value^•
	Date	Contracts	($000)
Liability for Options Written (0.0%)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/3/17	215	(144)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/24/17	123	(115)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $127.00	2/24/17	221	(21)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $126.50	2/24/17	141	(17)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $125.50	2/24/17	46	(14)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/3/17	215	(70)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/24/17	123	(58)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $122.50	2/24/17	209	(23)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $123.50	2/24/17	46	(14)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $123.00	2/24/17	46	(9)
Total Liability for Options Written (Premiums received $557)			(485)

			Amount
			($000)
Other Assets and Liabilities (0.9%)
Other Assets
Investment in Vanguard			480
Receivables for Investment Securities Sold			216,720
Receivables for Accrued Income			38,481
Receivables for Capital Shares Issued			3,508
Other Assets			651
Total Other Assets			259,840
Liabilities
Payables for Investment Securities Purchased			(183,167)
Payables for Capital Shares Redeemed			(8,935)
Payables for Distributions			(1,281)
Payables to Vanguard			(3,857)
Other Liabilities			(6,266)
Total Liabilities			(203,506)
Net Assets (100%)			6,375,272

Intermediate-Term Treasury Fund


At January 31, 2017, net assets consisted of:
	Amount
	($000)
Paid-in Capital	6,489,372
Overdistributed Net Investment Income	(39)
Accumulated Net Realized Losses	(32,338)
Unrealized Appreciation (Depreciation)
Investment Securities	(82,556)
Futures Contracts	790
Options on Futures Contracts	43
Net Assets	6,375,272


Investor Shares—Net Assets
Applicable to 106,684,039 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	1,185,273
Net Asset Value Per Share—Investor Shares	$11.11


Admiral Shares—Net Assets
Applicable to 467,142,029 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	5,189,999
Net Asset Value Per Share—Admiral Shares	$11.11

• See Note A in Notes to Financial Statements.
1 Securities with a value of $2,105,000 have been segregated as initial margin for open futures contracts.
2 U.S. government-guaranteed.
3 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and
prepayments or the possibility of the issue being called.
4 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange
for senior preferred stock.
5 Adjustable-rate security.
6 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
REMICS—Real Estate Mortgage Investment Conduits.
See accompanying Notes, which are an integral part of the Financial Statements.

Intermediate-Term Treasury Fund

Statement of Operations


	Year Ended
	January 31, 2017
	($000)
Investment Income
Income
Interest¹	115,546
Total Income	115,546
Expenses
The Vanguard Group—Note B
Investment Advisory Services	756
Management and Administrative—Investor Shares	2,084
Management and Administrative—Admiral Shares	3,942
Marketing and Distribution—Investor Shares	300
Marketing and Distribution—Admiral Shares	569
Custodian Fees	72
Auditing Fees	40
Shareholders’ Reports—Investor Shares	58
Shareholders’ Reports—Admiral Shares	74
Trustees’ Fees and Expenses	5
Total Expenses	7,900
Net Investment Income	107,646
Realized Net Gain (Loss)
Investment Securities Sold¹	51,197
Futures Contracts	(2,525)
Options on Futures Contracts	1,187
Realized Net Gain (Loss)	49,859
Change in Unrealized Appreciation (Depreciation)
Investment Securities	(219,086)
Futures Contracts	345
Options on Futures Contracts	83
Change in Unrealized Appreciation (Depreciation)	(218,658)
Net Increase (Decrease) in Net Assets Resulting from Operations	(61,153)
1 Interest income and realized net gain (loss) from an affiliated company of the fund were $263,000 and $6,000, respectively.

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

Intermediate-Term Treasury Fund

Statement of Changes in Net Assets


	Year Ended January 31,
	2017	2016
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	107,646	99,163
Realized Net Gain (Loss)	49,859	54,613
Change in Unrealized Appreciation (Depreciation)	(218,658)	(73,463)
Net Increase (Decrease) in Net Assets Resulting from Operations	(61,153)	80,313
Distributions
Net Investment Income
Investor Shares	(20,235)	(21,690)
Admiral Shares	(87,462)	(77,473)
Realized Capital Gain¹
Investor Shares	(13,925)	(10,674)
Admiral Shares	(60,625)	(37,140)
Total Distributions	(182,247)	(146,977)
Capital Share Transactions
Investor Shares	(95,973)	(46,493)
Admiral Shares	540,212	609,495
Net Increase (Decrease) from Capital Share Transactions	444,239	563,002
Total Increase (Decrease)	200,839	496,338
Net Assets
Beginning of Period	6,174,433	5,678,095
End of Period²	6,375,272	6,174,433
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $31,363,000 and $10,971,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($39,000) and $12,000.

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

Intermediate-Term Treasury Fund

Financial Highlights


Investor Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$11.51	$11.66	$11.29	$11.60	$11.78
Investment Operations
Net Investment Income	.177	.188	.188	.170	.156
Net Realized and Unrealized Gain (Loss)
on Investments	(. 271)	(. 057)	. 410	(. 256)	(. 028)
Total from Investment Operations	(. 094)	.131	. 598	(. 086)	.128
Distributions
Dividends from Net Investment Income	(.177)	(.188)	(.188)	(.170)	(.156)
Distributions from Realized Capital Gains	(.129)	(. 093)	(. 040)	(. 054)	(.152)
Total Distributions	(. 306)	(. 281)	(. 228)	(. 224)	(. 308)
Net Asset Value, End of Period	$11.11	$11.51	$11.66	$11.29	$11.60

Total Return¹	-0.84%	1.17%	5.38%	-0.74%	1.10%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,185	$1,326	$1,391	$1,469	$1,902
Ratio of Total Expenses to Average Net Assets	0.20%	0.20%	0.20%	0.20%	0.20%
Ratio of Net Investment Income to
Average Net Assets	1.53%	1.64%	1.66%	1.48%	1.33%
Portfolio Turnover Rate²	152%	142%	63%	42%	117%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 3%, 34%, 22%, 0%, and 64% attributable to mortgage-dollar-roll activity.

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

Intermediate-Term Treasury Fund

Financial Highlights


Admiral Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$11.51	$11.66	$11.29	$11.60	$11.78
Investment Operations
Net Investment Income	.188	.199	.199	.181	.168
Net Realized and Unrealized Gain (Loss)
on Investments	(. 271)	(. 057)	. 410	(. 256)	(. 028)
Total from Investment Operations	(. 083)	.142	. 609	(. 075)	.140
Distributions
Dividends from Net Investment Income	(.188)	(.199)	(.199)	(.181)	(.168)
Distributions from Realized Capital Gains	(.129)	(. 093)	(. 040)	(. 054)	(.152)
Total Distributions	(. 317)	(. 292)	(. 239)	(. 235)	(. 320)
Net Asset Value, End of Period	$11.11	$11.51	$11.66	$11.29	$11.60

Total Return¹	-0.74%	1.27%	5.48%	-0.64%	1.20%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$5,190	$4,849	$4,287	$3,619	$4,112
Ratio of Total Expenses to Average Net Assets	0.10%	0.10%	0.10%	0.10%	0.10%
Ratio of Net Investment Income to
Average Net Assets	1.63%	1.74%	1.76%	1.58%	1.43%
Portfolio Turnover Rate²	152%	142%	63%	42%	117%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 3%, 34%, 22%, 0%, and 64% attributable to mortgage-dollar-roll activity.

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

Intermediate-Term Treasury Fund

Notes to Financial Statements

Vanguard Intermediate-Term Treasury Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the year ended January 31, 2017, the fund’s average investments in long and short futures contracts represented 4% and 2% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

Intermediate-Term Treasury Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded in the Statement of Net Assets as an asset that is subsequently adjusted daily to the current market value of the option purchased. The premium received for a written option is recorded in the Statement of Net Assets as an asset with an equal liability that is subsequently adjusted daily to the current market value of the option written. Fluctuations in the value of the options are recorded in the Statement of Operations as unrealized appreciation (depreciation) until expired, closed, or exercised, at which time realized gains (losses) are recognized.

During the year ended January 31, 2017, the fund’s average value of investments in options purchased and options written each represented less than 1% of net assets, based on the average market values at each quarter-end during the period.

Intermediate-Term Treasury Fund

The fund had no borrowings outstanding at January 31, 2017, or at any time during the period then ended.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2017, the fund had contributed to Vanguard capital in the amount of $480,000, representing 0.01% of the fund’s net assets and 0.19% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

Intermediate-Term Treasury Fund

The following table summarizes the market value of the fund’s investments as of January 31, 2017, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
U.S. Government and Agency Obligations	—	6,286,507	—
Temporary Cash Investments	32,544	—	—
Options on Futures Purchased	372	—	—
Liability for Options Written	(485)	—	—
Futures Contracts—Assets¹	432	—	—
Futures Contracts—Liabilities¹	(347)	—	—
Total	32,516	6,286,507	—
1 Represents variation margin on the last day of the reporting period.

D. At January 31, 2017, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


			($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
2-Year U.S. Treasury Note	March 2017	1,052	228,070	147
5-Year U.S. Treasury Note	March 2017	701	82,625	259
Ultra 10-Year U.S. Treasury Note	March 2017	(511)	(68,554)	106
10-Year U.S. Treasury Note	March 2017	542	67,462	331
Ultra Long U.S. Treasury Bond	March 2017	(33)	(5,303)	(53)
				790

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $6,188,000 from accumulated net realized losses to paid-in capital.

For tax purposes, at January 31, 2017, the fund had available capital losses totaling $29,342,000 that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2017, the cost of investment securities for tax purposes was $6,403,770,000.

Net unrealized depreciation of investment securities for tax purposes was $84,719,000, consisting of unrealized gains of $7,993,000 on securities that had risen in value since their purchase and $92,712,000 in unrealized losses on securities that had fallen in value since their purchase.

Intermediate-Term Treasury Fund

F. During the year ended January 31, 2017, the fund purchased $10,237,567,000 of investment securities and sold $10,006,298,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2017.


		Premiums
	Number of	Received
Options Written	Contracts	($000)
Balance at January 31, 2016	441	178
Options Written	12,709	4,594
Options Expired	(810)	(346)
Options Closed	(10,955)	(3,869)
Options Exercised	—	—
Balance at January 31, 2017	1,385	557

G. Capital share transactions for each class of shares were:


	Year Ended January 31,
	2017		2016
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	373,162	32,365	363,612	31,784
Issued in Lieu of Cash Distributions	31,595	2,791	29,945	2,628
Redeemed	(500,730)	(43,639)	(440,050)	(38,566)
Net Increase (Decrease)—Investor Shares	(95,973)	(8,483)	(46,493)	(4,154)
Admiral Shares
Issued	1,898,262	164,741	1,399,945	122,568
Issued in Lieu of Cash Distributions	124,816	11,036	96,859	8,502
Redeemed	(1,482,866)	(129,928)	(887,309)	(77,630)
Net Increase (Decrease) —Admiral Shares	540,212	45,849	609,495	53,440

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2017, that would require recognition or disclosure in these financial statements.

GNMA Fund

Fund Profile
As of January 31, 2017


Share-Class Characteristics
	Investor	Admiral
	Shares	Shares
Ticker Symbol	VFIIX	VFIJX
Expense Ratio¹	0.21%	0.11%
30-Day SEC Yield	1.96%	2.06%


Financial Attributes

		Bloomberg Bloomberg
		Barclays	Barclays
		GNMA	Aggregate
	Fund	Index	Bond Index
Number of Bonds	37	91	10,069
Yield to Maturity
(before expenses)	2.9%	2.8%	2.6%
Average Coupon	3.6%	3.6%	3.1%
Average Duration	5.0 years	4.8 years	6.0 years
Average Effective
Maturity	7.5 years	7.2 years	8.2 years
Short-Term
Reserves	4.1%	—	—
Number of Bonds: Issues are mortgage pools grouped by coupon.


Sector Diversification (% of portfolio)
Collateralized Mortgage Obligations	1.4%
Government Mortgage-Backed	97.8
Other Government	0.8

The agency and mortgage-backed securities sectors may include
issues from government-sponsored enterprises; such issues are
generally not backed by the full faith and credit of the U.S.
government.


Volatility Measures
	Bloomberg	Bloomberg
	Barclays	Barclays
	GNMA	Aggregate Bond
	Index	Index
R-Squared	0.97	0.79
Beta	1.07	0.60
These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.


Distribution by Credit Quality (% of portfolio)
U.S. Government	99.3%
Aaa	0.7

Credit-quality ratings are obtained from Barclays and are from
Moody's, Fitch, and S&P. When ratings from all three agencies are
used, the median rating is shown. When ratings from two of the
agencies are used, the lower rating for each issue is shown. "Not
Rated" is used to classify securities for which a rating is not
available. Not rated securities include a fund's investment in
Vanguard Market Liquidity Fund or Vanguard Municipal Cash
Management Fund, each of which invests in high-quality money
market instruments and may serve as a cash management vehicle
for the Vanguard funds, trusts, and accounts. For more information
about these ratings, see the Glossary entry for Credit Quality.


Distribution by Coupon (% of portfolio)
Less Than 1.0%	0.7%
1.0% to 4.0%	65.9
4.0% to 6.0%	30.1
6.0% and above	3.3

Investment Focus

1 The expense ratios shown are from the prospectus dated May 26, 2016, and represent estimated costs for the current fiscal year. For the fiscal
year ended January 31, 2017, the expense ratios were 0.21% for Investor Shares and 0.11% for Admiral Shares.

GNMA Fund

Performance Summary

Cumulative Performance: January 31, 2007, Through January 31, 2017
Initial Investment of $10,000


		Average Annual Total Returns
		Periods Ended January 31, 2017

					Final Value
		One	Five	Ten	of a $10,000
		Year	Years	Years	Investment

	GNMA Fund Investor Shares	0.49%	1.84%	4.36%	$15,316

• • • • • • • •	Bloomberg Barclays U.S. GNMA Bond
	Index	0.28	1.73	4.34	15,293


– – – –	GNMA Funds Average	0.13	1.16	3.77	14,482
	Bloomberg Barclays U.S. Aggregate Bond Index	1.45	2.09	4.37	15,337
GNMA Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


				Final Value
	One	Five	Ten	of a $50,000
	Year	Years	Years	Investment
GNMA Fund Admiral Shares	0.59%	1.94%	4.46%	$77,366
Bloomberg Barclays U.S. GNMA Bond Index	0.28	1.73	4.34	76,466
Bloomberg Barclays U.S. Aggregate Bond
Index	1.45	2.09	4.37	76,684

See Financial Highlights for dividend and capital gains information.

GNMA Fund

Financial Statements

Statement of Net Assets
As of January 31, 2017


				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
U.S. Government and Agency Obligations (99.2%)
Conventional Mortgage-Backed Securities (97.1%)
^1,2	Fannie Mae Pool	2.250%	10/1/26–11/1/26	65,374	62,422
^1,2	Fannie Mae Pool	2.500%	10/1/26–2/1/47	25,271	25,365
^1,2	Fannie Mae Pool	2.640%	12/1/31	15,675	14,924
^1,2	Fannie Mae Pool	2.710%	9/1/31	7,110	6,779
^1,2	Fannie Mae Pool	2.720%	9/1/31	1,491	1,439
^1,2	Fannie Mae Pool	2.870%	2/1/32	21,360	20,265
^1,2	Fannie Mae Pool	2.950%	11/1/25–6/1/31	6,449	6,484
^1,2	Fannie Mae Pool	2.960%	6/1/31	2,612	2,582
^1,2	Fannie Mae Pool	3.000%	4/1/25–2/1/32	3,071	3,181
^1,2	Fannie Mae Pool	3.050%	7/1/31	2,000	1,960
^1,2	Fannie Mae Pool	3.220%	12/1/26	5,668	5,850
^1,2	Fannie Mae Pool	3.230%	2/1/27–8/1/27	5,305	5,460
^1,2	Fannie Mae Pool	3.240%	1/1/27	3,800	3,927
^1,2	Fannie Mae Pool	3.250%	11/1/23	9,492	9,808
^1,2	Fannie Mae Pool	3.270%	12/1/23–7/1/30	51,645	52,265
^1,2	Fannie Mae Pool	3.300%	12/1/23	5,890	6,100
^1,2	Fannie Mae Pool	3.320%	7/1/23–7/1/30	15,246	15,465
^1,2	Fannie Mae Pool	3.340%	4/1/24–1/1/32	14,702	15,260
^1,2	Fannie Mae Pool	3.350%	7/1/27–11/1/30	19,409	19,747
^1,2	Fannie Mae Pool	3.360%	11/1/23–12/1/23	18,697	19,407
^1,2	Fannie Mae Pool	3.370%	3/1/24–7/1/25	7,734	8,039
^1,2	Fannie Mae Pool	3.380%	1/1/27–7/1/27	7,694	7,989
^1,2	Fannie Mae Pool	3.410%	11/1/23–7/1/27	11,834	12,286
^1,2	Fannie Mae Pool	3.415%	11/1/23	6,418	6,675
^1,2	Fannie Mae Pool	3.420%	4/1/31	1,530	1,526
^1,2	Fannie Mae Pool	3.430%	6/1/30	1,314	1,348
^1,2	Fannie Mae Pool	3.440%	1/1/24	5,835	6,080
^1,2	Fannie Mae Pool	3.450%	1/1/24–1/1/24	22,658	23,621
^1,2	Fannie Mae Pool	3.460%	9/1/23–9/1/29	103,911	108,579
^1,2	Fannie Mae Pool	3.470%	11/1/23–1/1/24	6,229	6,497
^1,2	Fannie Mae Pool	3.480%	1/1/24	4,392	4,585
^1,2	Fannie Mae Pool	3.490%	7/1/30	9,952	10,228
^1,2,3	Fannie Mae Pool	3.500%	2/1/27–2/1/47	188,281	192,508
^1,2	Fannie Mae Pool	3.510%	12/1/23–1/1/24	27,646	28,884
^1,2	Fannie Mae Pool	3.520%	1/1/24	4,791	5,010
^1,2	Fannie Mae Pool	3.530%	2/1/24	7,506	7,857


GNMA Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
^1,2	Fannie Mae Pool	3.540%	8/1/23–6/1/30	27,822	29,082
^1,2	Fannie Mae Pool	3.550%	10/1/23–2/1/30	42,867	44,876
^1,2	Fannie Mae Pool	3.560%	12/1/23–1/1/24	6,742	7,063
^1,2	Fannie Mae Pool	3.570%	12/1/23–3/1/24	39,660	41,526
^1,2	Fannie Mae Pool	3.580%	2/1/24–1/1/31	54,685	56,973
^1,2	Fannie Mae Pool	3.590%	7/1/23–9/1/30	52,984	54,587
^1,2	Fannie Mae Pool	3.600%	12/1/23–4/1/28	8,372	8,766
^1,2	Fannie Mae Pool	3.610%	8/1/23–10/1/29	35,785	37,288
^1,2	Fannie Mae Pool	3.620%	2/1/24	8,038	8,454
^1,2	Fannie Mae Pool	3.640%	10/1/23–1/1/24	16,311	17,142
^1,2	Fannie Mae Pool	3.650%	8/1/23–11/1/23	22,980	24,152
^1,2	Fannie Mae Pool	3.660%	11/1/23	2,583	2,717
^1,2	Fannie Mae Pool	3.665%	1/1/24	36,898	38,873
^1,2	Fannie Mae Pool	3.670%	8/1/23–3/1/28	22,663	23,831
^1,2	Fannie Mae Pool	3.680%	10/1/23–1/1/24	15,418	16,243
^1,2	Fannie Mae Pool	3.690%	1/1/24	5,652	5,966
^1,2	Fannie Mae Pool	3.700%	10/1/23–12/1/25	22,034	23,175
^1,2	Fannie Mae Pool	3.710%	9/1/23	7,401	7,798
^1,2	Fannie Mae Pool	3.725%	10/1/23	3,393	3,580
^1,2	Fannie Mae Pool	3.750%	9/1/23–7/1/25	9,932	10,482
^1,2	Fannie Mae Pool	3.755%	8/1/25	6,997	7,389
^1,2	Fannie Mae Pool	3.760%	3/1/24–1/1/26	8,152	8,618
^1,2	Fannie Mae Pool	3.765%	12/1/25	42,997	45,555
^1,2	Fannie Mae Pool	3.790%	8/1/25	2,505	2,650
^1,2	Fannie Mae Pool	3.800%	10/1/23	7,304	7,735
^1,2	Fannie Mae Pool	3.820%	11/1/25–11/1/25	10,899	11,575
^1,2	Fannie Mae Pool	3.830%	2/1/24–6/1/34	19,455	20,653
^1,2	Fannie Mae Pool	3.840%	1/1/24	2,926	3,110
^1,2	Fannie Mae Pool	3.855%	12/1/25	6,600	7,033
^1,2	Fannie Mae Pool	3.860%	11/1/23	3,435	3,649
^1,2	Fannie Mae Pool	3.870%	10/1/25	11,181	11,901
^1,2	Fannie Mae Pool	3.890%	5/1/30	14,365	15,218
^1,2	Fannie Mae Pool	3.910%	11/1/25	13,000	13,892
^1,2	Fannie Mae Pool	3.930%	10/1/23–3/1/26	22,606	24,128
^1,2	Fannie Mae Pool	3.940%	8/1/25	12,116	12,937
^1,2	Fannie Mae Pool	3.960%	12/1/25–5/1/34	7,517	8,020
^1,2	Fannie Mae Pool	3.970%	7/1/23–5/1/29	7,485	8,007
^1,2	Fannie Mae Pool	3.990%	9/1/25	9,406	9,728
^1,2	Fannie Mae Pool	4.000%	5/1/46–6/1/46	10,898	11,445
^1,2	Fannie Mae Pool	4.060%	9/1/25–3/1/29	15,548	16,793
^1,2	Fannie Mae Pool	4.070%	1/1/26	2,276	2,454
^1,2	Fannie Mae Pool	4.080%	2/1/29	2,974	3,202
^1,2	Fannie Mae Pool	4.150%	10/1/28–1/1/31	75,105	80,996
^1,2	Fannie Mae Pool	4.180%	11/1/30	29,927	32,050
^1,2	Fannie Mae Pool	4.190%	10/1/23	725	780
^1,2	Fannie Mae Pool	4.210%	1/1/26	985	1,068
^1,2	Fannie Mae Pool	4.250%	10/1/28–9/1/33	4,613	4,900
^1,2	Fannie Mae Pool	4.280%	11/1/28	5,370	5,836
^1,2	Fannie Mae Pool	4.380%	10/1/28	9,845	10,747
^1,2	Fannie Mae Pool	4.400%	8/1/28	2,223	2,428
^1,2	Fannie Mae Pool	4.500%	7/1/39–2/1/47	13,898	15,630
^1,2	Fannie Mae Pool	5.180%	2/1/26	2,952	3,337
^1,2	Fannie Mae Pool	6.000%	7/1/22	7	8
^1,2	Fannie Mae Pool	6.500%	2/1/29–5/1/40	3,830	4,351


GNMA Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
^1,2	Freddie Mac Gold Pool	3.000%	6/1/43–2/1/47	1,104,840	1,095,155
^1,2	Freddie Mac Gold Pool	3.500%	10/1/46–12/1/46	13,548	13,855
^1,2,3Freddie Mac Gold Pool		4.000%	9/1/30–3/1/47	718,416	752,642
^1,2	Freddie Mac Gold Pool	4.500%	4/1/34–1/1/47	106,964	115,274
^1,2	Freddie Mac Gold Pool	5.000%	6/1/29–8/1/44	42,270	46,065
1	Ginnie Mae I Pool	2.500%	11/15/42–9/15/43	119,907	116,738
1	Ginnie Mae I Pool	3.000%	1/15/26–2/1/47	1,448,317	1,464,822
1	Ginnie Mae I Pool	3.500%	7/15/39–2/1/47	951,578	991,199
1	Ginnie Mae I Pool	3.750%	7/15/42	3,716	3,918
1	Ginnie Mae I Pool	3.875%	5/15/42–6/15/42	8,140	8,696
1	Ginnie Mae I Pool	4.000%	6/15/19–3/1/47	1,321,195	1,405,694
1	Ginnie Mae I Pool	4.500%	5/15/19–1/15/45	921,715	999,498
1	Ginnie Mae I Pool	5.000%	1/15/30–2/1/47	889,199	976,337
1	Ginnie Mae I Pool	5.500%	9/15/23–2/1/47	542,422	601,364
1	Ginnie Mae I Pool	6.000%	1/15/19–2/1/47	304,022	337,824
1	Ginnie Mae I Pool	6.500%	4/15/23–7/15/40	221,406	246,625
1	Ginnie Mae I Pool	7.000%	11/15/31–11/15/36	65,039	75,469
1	Ginnie Mae I Pool	7.250%	1/15/27–2/15/27	59	60
^1,4	Ginnie Mae I Pool	7.500%	10/15/31	24,668	28,721
1	Ginnie Mae I Pool	7.750%	2/15/27	25	26
1	Ginnie Mae I Pool	8.000%	8/15/31	9,304	10,852
1	Ginnie Mae I Pool	8.500%	2/15/17–6/15/28	1,276	1,347
1	Ginnie Mae I Pool	9.000%	3/15/17–5/15/21	29	34
1	Ginnie Mae I Pool	9.500%	6/15/17–8/15/21	328	349
1	Ginnie Mae I Pool	10.000%	11/15/17–7/15/19	6	6
1	Ginnie Mae I Pool	11.000%	2/15/18	1	1
1	Ginnie Mae II Pool	1.500%	6/20/39–12/20/44	757	671
1	Ginnie Mae II Pool	2.000%	10/20/43	170	149
1	Ginnie Mae II Pool	2.500%	11/20/42–1/20/47	699,766	677,693
^1,3	Ginnie Mae II Pool	3.000%	4/20/31–2/1/47	3,357,761	3,390,300
^1,3	Ginnie Mae II Pool	3.500%	11/20/26–2/1/47	7,026,607	7,278,232
1	Ginnie Mae II Pool	4.000%	4/20/39–2/1/47	716,396	759,326
^1,3	Ginnie Mae II Pool	4.500%	12/20/32–2/1/47	1,180,074	1,274,933
1	Ginnie Mae II Pool	5.000%	10/20/32–2/1/47	420,654	455,754
1	Ginnie Mae II Pool	5.500%	1/20/34–7/20/40	46,122	50,810
1	Ginnie Mae II Pool	6.000%	4/20/28–8/20/40	60,680	68,347
1	Ginnie Mae II Pool	6.500%	4/20/37–3/20/41	1,671	1,902
1	Ginnie Mae II Pool	7.000%	10/20/25	16	16
1	Ginnie Mae II Pool	7.500%	6/20/25–8/20/25	140	160
1	Ginnie Mae II Pool	10.000%	3/20/18–7/20/18	2	2
					24,861,665
Nonconventional Mortgage-Backed Securities (2.1%)
^1,2	Fannie Mae Pool	2.331%	8/1/43	17,063	17,230
^1,2	Fannie Mae Pool	2.768%	9/1/44	19,413	19,745
^1,2	Fannie Mae REMICS	3.000%	6/25/43	26,646	22,024
^1,2	Fannie Mae REMICS	6.000%	10/25/28–9/25/32	6,292	7,058
^1,2	Freddie Mac Non Gold Pool	2.269%	9/1/43	10,824	10,875
^1,2	Freddie Mac Non Gold Pool	2.272%	8/1/43	28,167	28,367
^1,2	Freddie Mac Non Gold Pool	2.735%	10/1/44	35,476	35,806
^1,2	Freddie Mac Non Gold Pool	2.823%	10/1/44	16,879	17,058
^1,2	Freddie Mac Non Gold Pool	2.838%	7/1/44	13,602	13,765
^1,2	Freddie Mac Non Gold Pool	2.924%	4/1/44	19,119	19,319
^1,2	Freddie Mac Non Gold Pool	2.946%	9/1/44	11,310	11,406
^1,2	Freddie Mac Non Gold Pool	3.116%	10/1/44	24,238	24,494


GNMA Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
^1,2	Freddie Mac REMICS	3.000%	8/15/42–3/15/43	72,069	67,275
^1,2	Freddie Mac REMICS	6.000%	4/15/28–11/15/32	17,608	19,899
^1,5	Ginnie Mae REMICS	0.977%	2/20/37	4,449	4,395
1	Ginnie Mae REMICS	2.500%	8/16/42–11/20/43	44,344	38,160
1	Ginnie Mae REMICS	3.000%	3/20/40–8/20/44	62,635	58,233
1	Ginnie Mae REMICS	3.250%	8/20/44	7,719	6,945
1	Ginnie Mae REMICS	3.500%	7/20/43	23,327	23,889
1	Ginnie Mae REMICs	3.500%	9/20/44	8,334	8,603
1	Ginnie Mae REMICS	3.750%	7/20/44	1,782	1,777
1	Ginnie Mae REMICS	4.500%	6/20/39	4,594	4,973
1	Ginnie Mae REMICS	5.000%	6/16/37	19,296	21,382
1	Ginnie Mae REMICS	5.500%	1/20/33–8/16/36	23,677	25,924
^1,5	Government National Mortgage Assn.	2.700%	5/16/35	14,046	13,643
1	Government National Mortgage Assn.	2.400%	12/16/56	27,336	27,283
					549,528
Total U.S. Government and Agency Obligations (Cost $25,314,531)					25,411,193
Temporary Cash Investments (4.2%)
Repurchase Agreements (2.1%)
	Bank of America Securities, LLC (Dated 1/31/17,
	Repurchase Value $37,801,000, collateralized
	by Government National Mortgage Assn.,
	3.500%, 1/20/47, with a value of $38,556,000)	0.540%	2/1/17	37,800	37,800
	Bank of Montreal (Dated 1/31/17, Repurchase
	Value $38,801,000, collateralized by U.S.
	Treasury Bill 0.000%, 5/25/17, and U.S. Treasury
	Note/Bond 0.875%–2.750%, 5/31/17–8/15/46,
	with a value of $39,576,000)	0.520%	2/1/17	38,800	38,800
	Bank of Nova Scotia (Dated 1/31/17, Repurchase
	Value $20,000,000, collateralized by U.S.
	Treasury Note/Bond 0.875%–8.500%,
	3/31/18–1/31/22, with a value of $20,400,000)	0.540%	2/1/17	20,000	20,000
	Barclays Capital Inc. (Dated 1/31/17, Repurchase
	Value $62,501,000, collateralized by U.S.
	Treasury Note/Bond 2.750%–3.000%,
	11/15/42–11/15/44, with a value of $63,750,000)	0.530%	2/1/17	62,500	62,500
	Citigroup Global Markets Inc. (Dated 1/31/17,
	Repurchase Value $6,600,000, collateralized
	by U.S. Treasury Note/Bond 1.125%, 1/31/19,
	with a value of $6,732,000)	0.540%	2/1/17	6,600	6,600
	Credit Suisse Securities (USA), LLC (Dated
	1/31/17, Repurchase Value $30,000,000,
	collateralized by U.S. Treasury Note/Bond
	2.000%–2.125%, 6/30/21–8/31/21, with a
	value of $30,603,000)	0.530%	2/1/17	30,000	30,000
	HSBC Securities USA (Dated 1/31/17,
	Repurchase Value $75,001,000, collateralized
	by Federal National Mortgage Assn. 3.500%,
	12/1/46, with a value of $76,503,000)	0.520%	2/1/17	75,000	75,000
	Societe Generale (Dated 1/31/17, Repurchase
	Value $48,101,000, collateralized by U.S.
	Treasury Note/Bond 1.125%–3.625%,
	1/31/19–2/15/20, with a value of $49,062,000)	0.530%	2/1/17	48,100	48,100


GNMA Fund



			Face	Market
		Maturity	Amount	Value^•
	Coupon	Date	($000)	($000)
TD Securities (USA) LLC (Dated 1/31/17,
Repurchase Value $1,900,000, collateralized
by Federal National Mortgage Assn. 3.000%,
12/1/46, with a value of $1,938,000)	0.550%	2/1/17	1,900	1,900
Wells Fargo & Co. (Dated 1/31/17, Repurchase
Value $230,404,000, collateralized by Federal
Home Loan Mortgage Corp. 3.500%, 12/1/46,
with a value of $235,008,000)	0.550%	2/1/17	230,400	230,400
				551,100

			Shares
Money Market Fund (1.3%)
6 Vanguard Market Liquidity Fund	0.856%		3,246,171	324,650

			Face
			Amount
			($000)
U.S. Government and Agency Obligations (0.8%)
United States Treasury Bill	0.460%	2/2/17	200,000	199,998
Total Temporary Cash Investments (Cost $1,075,715)				1,075,748
Total Investments (103.4%) (Cost $26,390,246)				26,486,941
Other Assets and Liabilities (-3.4%)
Other Assets⁷				3,858,217
Liabilities				(4,738,708)
				(880,491)
Net Assets (100%)				25,606,450

				Amount
				($000)
Statement of Assets and Liabilities
Assets
Investments in Securities, at Value
Unaffiliated Issuers				26,162,291
Affiliated Vanguard Funds				324,650
Total Investments in Securities				26,486,941
Investment in Vanguard				1,912
Receivables for Investment Securities Sold				3,751,416
Receivables for Accrued Income				86,187
Receivables for Capital Shares Issued				11,716
Other Assets⁷				6,986
Total Assets				30,345,158
Liabilities
Payables for Investment Securities Purchased				4,647,994
Payables to Investment Advisor				628
Payables for Capital Shares Redeemed				24,946
Payables for Distributions				7,790
Payables to Vanguard				43,638
Other Liabilities				13,712
Total Liabilities				4,738,708
Net Assets				25,606,450


GNMA Fund



At January 31, 2017, net assets consisted of:
	Amount
	($000)
Paid-in Capital	25,700,241
Overdistributed Net Investment Income	(6,035)
Accumulated Net Realized Losses	(183,774)
Unrealized Appreciation (Depreciation)
Investment Securities	96,695
Futures Contracts	(677)
Net Assets	25,606,450


Investor Shares—Net Assets
Applicable to 760,601,903 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	7,993,017
Net Asset Value Per Share—Investor Shares	$10.51


Admiral Shares—Net Assets
Applicable to 1,676,064,026 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	17,613,433
Net Asset Value Per Share—Admiral Shares	$10.51

• See Note A in Notes to Financial Statements.
1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and
prepayments.
2 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange
for senior preferred stock.
3 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of January 31, 2017.
4 Securities with a value of $28,384,000 have been segregated as initial margin for open futures contracts.
5 Adjustable-rate security.
6 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
7 Cash of $3,072,000 has been segregated as collateral for certain open To Be Announced (TBA) transactions.
REMICS—Real Estate Mortgage Investment Conduits.
See accompanying Notes, which are an integral part of the Financial Statements.

GNMA Fund


Statement of Operations

	Year Ended
	January 31, 2017
	($000)
Investment Income
Income
Interest¹	636,280
Total Income	636,280
Expenses
Investment Advisory Fees—Note B	2,538
The Vanguard Group—Note C
Management and Administrative—Investor Shares	14,635
Management and Administrative—Admiral Shares	15,500
Marketing and Distribution—Investor Shares	1,534
Marketing and Distribution—Admiral Shares	1,390
Custodian Fees	1,017
Auditing Fees	43
Shareholders’ Reports—Investor Shares	292
Shareholders’ Reports—Admiral Shares	192
Trustees’ Fees and Expenses	45
Total Expenses	37,186
Net Investment Income	599,094
Realized Net Gain (Loss)
Investment Securities Sold¹	(4,170)
Futures Contracts	10,863
Realized Net Gain (Loss)	6,693
Change in Unrealized Appreciation (Depreciation)
Investment Securities	(468,630)
Futures Contracts	6,328
Change in Unrealized Appreciation (Depreciation)	(462,302)
Net Increase (Decrease) in Net Assets Resulting from Operations	143,485
1 Interest income and realized net gain (loss) from an affiliated company of the fund was $6,958,000 and $100,000, respectively.

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

GNMA Fund

Statement of Changes in Net Assets


	Year Ended January 31,
	2017	2016
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	599,094	626,184
Realized Net Gain (Loss)	6,693	40,285
Change in Unrealized Appreciation (Depreciation)	(462,302)	(178,662)
Net Increase (Decrease) in Net Assets Resulting from Operations	143,485	487,807
Distributions
Net Investment Income
Investor Shares	(186,773)	(204,826)
Admiral Shares	(415,068)	(421,902)
Realized Capital Gain¹
Investor Shares	(58,484)	(45,393)
Admiral Shares	(127,768)	(87,317)
Total Distributions	(788,093)	(759,438)
Capital Share Transactions
Investor Shares	(291,177)	(583,543)
Admiral Shares	640,086	50,674
Net Increase (Decrease) from Capital Share Transactions	348,909	(532,869)
Total Increase (Decrease)	(295,699)	(804,500)
Net Assets
Beginning of Period	25,902,149	26,706,649
End of Period²	25,606,450	25,902,149
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $186,251,000 and $68,321,000, respectively. Short-term gain
distributions are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($6,035,000) and ($3,308,000).

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

GNMA Fund

Financial Highlights


Investor Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$10.77	$10.88	$10.61	$10.83	$11.09
Investment Operations
Net Investment Income	.236	.249	.275	.244	.288
Net Realized and Unrealized Gain (Loss)
on Investments	(.183)	(. 055)	. 278	(. 210)	(.139)
Total from Investment Operations	.053	.194	.553	.034	.149
Distributions
Dividends from Net Investment Income	(. 237)	(. 250)	(. 274)	(. 244)	(. 288)
Distributions from Realized Capital Gains	(. 076)	(. 054)	(. 009)	(. 010)	(.121)
Total Distributions	(. 313)	(. 304)	(. 283)	(. 254)	(. 409)
Net Asset Value, End of Period	$10.51	$10.77	$10.88	$10.61	$10.83

Total Return¹	0.49%	1.83%	5.29%	0.34%	1.35%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$7,993	$8,483	$9,163	$9,535	$13,745
Ratio of Total Expenses to Average Net Assets	0.21%	0.21%	0.21%	0.21%	0.21%
Ratio of Net Investment Income to
Average Net Assets	2.19%	2.33%	2.56%	2.31%	2.59%
Portfolio Turnover Rate²	926%	706%	685%	167%	130%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 300%, 219%, 268%, 149%, and 82% attributable to mortgage-dollar-roll activity.

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

GNMA Fund

Financial Highlights


Admiral Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$10.77	$10.88	$10.61	$10.83	$11.09
Investment Operations
Net Investment Income	.247	.260	.286	.255	.299
Net Realized and Unrealized Gain (Loss)
on Investments	(.183)	(. 055)	. 278	(. 210)	(.139)
Total from Investment Operations	.064	.205	.564	.045	.160
Distributions
Dividends from Net Investment Income	(. 248)	(. 261)	(. 285)	(. 255)	(. 299)
Distributions from Realized Capital Gains	(. 076)	(. 054)	(. 009)	(. 010)	(.121)
Total Distributions	(. 324)	(. 315)	(. 294)	(. 265)	(. 420)
Net Asset Value, End of Period	$10.51	$10.77	$10.88	$10.61	$10.83

Total Return¹	0.59%	1.93%	5.39%	0.44%	1.45%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$17,613	$17,419	$17,544	$17,277	$25,127
Ratio of Total Expenses to Average Net Assets	0.11%	0.11%	0.11%	0.11%	0.11%
Ratio of Net Investment Income to
Average Net Assets	2.29%	2.43%	2.66%	2.41%	2.69%
Portfolio Turnover Rate²	926%	706%	685%	167%	130%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 300%, 219%, 268%, 149%, and 82% attributable to mortgage-dollar-roll activity.

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

GNMA Fund

Notes to Financial Statements

Vanguard GNMA Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.

During the year ended January 31, 2017, the fund’s average investments in long and short futures contracts represented less than 1% and 3% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

GNMA Fund

cash or short-term investments in an amount sufficient to meet the purchase price at the settlement date of the TBA transaction. The primary risk associated with TBA transactions is that a counterparty may default on its obligations. The fund mitigates its counterparty risk by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counter-parties, and monitoring its exposure to each counterparty. The fund may also enter into a Master Securities Forward Transaction Agreement (MSFTA) with certain counterparties and require them 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. Under an MSFTA, upon a counterparty default (including bankruptcy), the fund may terminate any TBA transactions 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.

At January 31, 2017, counterparties had deposited in segregated accounts securities and cash with a value of $6,388,000 in connection with TBA transactions.

5. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

6. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2014–2017), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

GNMA Fund

7. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

8. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees 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 this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.

The fund had no borrowings outstanding at January 31, 2017, or at any time during the period then ended.

9. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. 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.

B. Wellington Management Company LLP provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the year ended January 31, 2017, the investment advisory fee represented an effective annual rate of 0.01% of the fund’s average net assets.

C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund 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. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2017, the fund had contributed to Vanguard capital in the amount of $1,912,000, representing 0.01% of the fund’s net assets and 0.76% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

GNMA Fund

D. Various inputs may be used to determine the value of the fund’s investments. 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.

The following table summarizes the market value of the fund’s investments as of January 31, 2017, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
U.S. Government and Agency Obligations	—	25,388,029	23,164
Temporary Cash Investments	324,650	751,098	—
Futures Contracts—Assets¹	61	—	—
Futures Contracts—Liabilities¹	(1,231)	—	—
Total	323,480	26,139,127	23,164
1 Represents variation margin on the last day of the reporting period.

E. At January 31, 2017, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


			($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
30-Year U.S. Treasury Bond	March 2017	(1,305)	(196,851)	(514)
10-Year U.S. Treasury Note	March 2017	(413)	(51,405)	(130)
Ultra 10-Year U.S. Treasury Note	March 2017	162	21,733	(33)
				(677)

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

F. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $9,560,000 from accumulated net realized losses to paid-in capital.

GNMA Fund

For tax purposes, at January 31, 2017, the fund had available capital losses totaling $180,977,000 that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2017, the cost of investment securities for tax purposes was $26,393,719,000. Net unrealized appreciation of investment securities for tax purposes was $93,222,000, consisting of unrealized gains of $332,681,000 on securities that had risen in value since their purchase and $239,459,000 in unrealized losses on securities that had fallen in value since their purchase.

G. During the year ended January 31, 2017, the fund purchased $242,882,796,000 of investment securities and sold $242,217,426,000 of investment securities, other than temporary cash investments.

H. Capital share transactions for each class of shares were:


	Year Ended January 31,
	2017		2016
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	1,214,567	112,786	1,129,494	105,200
Issued in Lieu of Cash Distributions	226,412	21,185	230,862	21,477
Redeemed	(1,732,156)	(161,229)	(1,943,899)	(181,283)
Net Increase (Decrease)—Investor Shares	(291,177)	(27,258)	(583,543)	(54,606)
Admiral Shares
Issued	3,297,937	306,270	2,432,969	226,679
Issued in Lieu of Cash Distributions	430,560	40,297	399,396	37,158
Redeemed	(3,088,411)	(288,180)	(2,781,691)	(259,262)
Net Increase (Decrease)—Admiral Shares	640,086	58,387	50,674	4,575

I. Management has determined that no material events or transactions occurred subsequent to January 31, 2017, that would require recognition or disclosure in these financial statements.

Long-Term Treasury Fund

Fund Profile
As of January 31, 2017


Share-Class Characteristics
	Investor	Admiral
	Shares	Shares
Ticker Symbol	VUSTX	VUSUX
Expense Ratio¹	0.20%	0.10%
30-Day SEC Yield	2.64%	2.74%


Financial Attributes


		Bloomberg
		Barclays	Bloomberg
		Long	Barclays
		Treasury	Aggregate
	Fund	Index	Bond Index

Number of Bonds	58	46	10,069

Yield to Maturity
(before expenses)	3.0%	3.0%	2.6%

Average Coupon	3.2%	3.4%	3.1%

Average Duration	16.6 years	17.4 years	6.0 years

Average Effective
Maturity	24.4 years	25.1 years	8.2 years

Short-Term
Reserves	0.4%	—	—


Sector Diversification (% of portfolio)
Government Mortgage-Backed	1.1%
Treasury/Agency	98.9

The agency and mortgage-backed securities sectors may include
issues from government-sponsored enterprises; such issues are
generally not backed by the full faith and credit of the U.S.
government.


Volatility Measures
	Bloomberg
	Barclays	Bloomberg
	Long	Barclays
	Treasury	Aggregate Bond
	Index	Index
R-Squared	0.99	0.87
Beta	1.04	3.61
These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.


Distribution by Effective Maturity
(% of portfolio)
Under 1 Year	0.4%
3 - 5 Years	0.4
5 - 7 Years	0.3
7 - 10 Years	2.7
10 - 20 Years	8.8
20 - 30 Years	87.4


Distribution by Credit Quality (% of portfolio)
U.S. Government	99.7%
Not Rated	0.3

Investment Focus

Long-Term Treasury Fund

Performance Summary

Cumulative Performance: January 31, 2007, Through January 31, 2017
Initial Investment of $10,000


		Average Annual Total Returns
		Periods Ended January 31, 2017

					Final Value
		One	Five	Ten	of a $10,000
		Year	Years	Years	Investment
	Long-Term Treasury Fund Investor Shares	-3.21%	2.47%	6.57%	$18,902

• • • • • • • •	Bloomberg Barclays U.S. Long Treasury
	Bond Index	-3.14	2.61	6.80	19,307


– – – –	General U.S. Treasury Funds Average	-1.94	1.45	4.85	16,064
	Bloomberg Barclays U.S. Aggregate Bond Index	1.45	2.09	4.37	15,337
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


				Final Value
	One	Five	Ten	of a $50,000
	Year	Years	Years	Investment
Long-Term Treasury Fund Admiral Shares	-3.12%	2.57%	6.70%	$95,596
Bloomberg Barclays U.S. Long Treasury Bond
Index	-3.14	2.61	6.80	96,536
Bloomberg Barclays U.S. Aggregate Bond
Index	1.45	2.09	4.37	76,684

See Financial Highlights for dividend and capital gains information.

Long-Term Treasury Fund


Fiscal-Year Total Returns (%): January 31, 2007, Through January 31, 2017
				Bloomberg
				Barclays
				Long
				Treasury
			Investor Shares	Index
Fiscal Year	Income Returns	Capital Returns	Total Returns	Total Returns
2008	5.27%	7.82%	13.09%	13.58%
2009	4.57	4.68	9.25	10.38
2010	3.98	-5.33	-1.35	-2.19
2011	4.03	-0.45	3.58	4.29
2012	4.13	28.40	32.53	32.74
2013	2.73	-2.73	0.00	-0.02
2014	2.97	-7.42	-4.45	-4.49
2015	3.80	24.67	28.47	28.66
2016	2.59	-7.50	-4.91	-4.43
2017	2.44	-5.65	-3.21	-3.14


				Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Investor Shares	5/19/1986	1.20%	2.35%	3.63%	2.78%	6.41%
Admiral Shares	2/12/2001	1.30	2.45	3.76	2.78	6.54

Long-Term Treasury Fund

Financial Statements

Statement of Net Assets
As of January 31, 2017


				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
U.S. Government and Agency Obligations (98.8%)
U.S. Government Securities (95.8%)
	United States Treasury Inflation Indexed Bonds	0.375%	1/15/27	80,918	80,672
	United States Treasury Note/Bond	6.375%	8/15/27	18,000	24,458
	United States Treasury Note/Bond	6.125%	11/15/27	52,700	70,675
	United States Treasury Note/Bond	5.500%	8/15/28	35,300	45,686
	United States Treasury Note/Bond	5.250%	11/15/28	13,300	16,937
	United States Treasury Note/Bond	5.250%	2/15/29	7,650	9,775
	United States Treasury Note/Bond	6.125%	8/15/29	8,000	11,048
	United States Treasury Note/Bond	6.250%	5/15/30	10,000	14,138
	United States Treasury Note/Bond	5.375%	2/15/31	10,000	13,323
	United States Treasury Note/Bond	4.500%	2/15/36	24,000	30,337
	United States Treasury Note/Bond	4.750%	2/15/37	5,000	6,503
	United States Treasury Note/Bond	5.000%	5/15/37	39,000	52,309
	United States Treasury Note/Bond	4.375%	2/15/38	10,000	12,431
	United States Treasury Note/Bond	4.500%	5/15/38	11,000	13,896
	United States Treasury Note/Bond	3.500%	2/15/39	25,300	27,684
	United States Treasury Note/Bond	4.250%	5/15/39	47,866	58,142
	United States Treasury Note/Bond	4.500%	8/15/39	43,600	54,786
	United States Treasury Note/Bond	4.375%	11/15/39	51,000	63,025
	United States Treasury Note/Bond	4.625%	2/15/40	67,000	85,676
	United States Treasury Note/Bond	4.375%	5/15/40	66,049	81,652
	United States Treasury Note/Bond	3.875%	8/15/40	71,300	82,029
	United States Treasury Note/Bond	4.250%	11/15/40	62,850	76,382
	United States Treasury Note/Bond	4.750%	2/15/41	46,200	60,277
	United States Treasury Note/Bond	4.375%	5/15/41	43,000	53,280
	United States Treasury Note/Bond	3.750%	8/15/41	72,500	81,823
	United States Treasury Note/Bond	3.125%	11/15/41	47,720	48,570
	United States Treasury Note/Bond	3.125%	2/15/42	46,200	47,008
	United States Treasury Note/Bond	3.000%	5/15/42	35,000	34,825
	United States Treasury Note/Bond	2.750%	8/15/42	75,550	71,630
	United States Treasury Note/Bond	2.750%	11/15/42	92,550	87,691
	United States Treasury Note/Bond	3.125%	2/15/43	98,000	99,500
1	United States Treasury Note/Bond	2.875%	5/15/43	86,087	83,423
	United States Treasury Note/Bond	3.625%	8/15/43	113,000	125,448
	United States Treasury Note/Bond	3.750%	11/15/43	133,300	151,295
	United States Treasury Note/Bond	3.625%	2/15/44	137,700	152,847
	United States Treasury Note/Bond	3.375%	5/15/44	121,000	128,600


Long-Term Treasury Fund



				Face	Market
			Maturity	Amount	Value^•
		Coupon	Date	($000)	($000)
	United States Treasury Note/Bond	3.125%	8/15/44	126,000	127,831
	United States Treasury Note/Bond	3.000%	11/15/44	137,150	135,757
	United States Treasury Note/Bond	2.500%	2/15/45	127,300	113,754
	United States Treasury Note/Bond	3.000%	5/15/45	147,000	145,323
	United States Treasury Note/Bond	2.875%	8/15/45	142,800	137,691
	United States Treasury Note/Bond	3.000%	11/15/45	148,400	146,637
	United States Treasury Note/Bond	2.500%	2/15/46	132,417	117,913
	United States Treasury Note/Bond	2.500%	5/15/46	136,600	121,574
	United States Treasury Note/Bond	2.250%	8/15/46	100,000	84,125
	United States Treasury Note/Bond	2.875%	11/15/46	70,500	68,076
					3,356,462
Agency Bonds and Notes (1.9%)
2	Fannie Mae Interest Strip	0.000%	5/15/29	4,592	3,023
2	Fannie Mae Principal Strip	0.000%	5/15/30	25,912	16,466
2	Federal Home Loan Mortgage Corp.	0.000%	12/14/29	20,000	13,023
2	Freddie Mac Coupon Strips	0.000%	3/15/28	1,771	1,230
2	Freddie Mac Coupon Strips	0.000%	9/15/28	1,000	680
2	Freddie Mac Coupon Strips	0.000%	1/15/30	15,658	10,038
2	Freddie Mac Coupon Strips	0.000%	3/15/30	12,896	8,199
	Resolution Funding Corp. Interest Strip	0.000%	4/15/28	21,802	15,259
					67,918
Conventional Mortgage-Backed Securities (0.0%)
^2,3	Fannie Mae Pool	6.000%	2/1/26–11/1/28	18	20
					20
Nonconventional Mortgage-Backed Securities (1.1%)
^2,3	Fannie Mae Pool	2.995%	5/1/38	13,469	14,319
^2,3,4Fannie Mae REMICS		1.121%	2/25/46	7,666	7,620
^2,3,4Fannie Mae REMICS		1.221%	2/25/46	4,931	4,924
^2,3,4Freddie Mac REMICS		1.167%	5/15/46	5,700	5,700
^2,3,4Freddie Mac REMICS		1.217%	10/15/46	4,371	4,353
					36,916
Total U.S. Government and Agency Obligations (Cost $3,421,203)					3,461,316

				Shares
Temporary Cash Investment (0.3%)
Money Market Fund (0.3%)
5	Vanguard Market Liquidity Fund
	(Cost $12,163)	0.856%		121,616	12,163

			Expiration
			Date	Contracts
Options on Futures Purchased (0.0%)
	Call Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/10/17	185	142
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $124.00		2/10/17	185	55
	Put Options on 10-year U.S. Treasury Note
	Futures Contracts, Strike Price $122.00		2/24/17	114	7
Total Options on Futures Purchased (Cost $220)					204
Total Investments (99.1%) (Cost $3,433,586)					3,473,683


Long-Term Treasury Fund



			Market
	Expiration		Value^•
	Date	Contracts	($000)
Liability for Options Written (0.0%)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/3/17	118	(79)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/24/17	68	(64)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $127.00	2/24/17	124	(11)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $126.50	2/24/17	78	(10)
Call Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $125.50	2/24/17	26	(8)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/3/17	118	(39)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $124.00	2/24/17	68	(32)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $122.50	2/24/17	115	(12)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $123.50	2/24/17	26	(8)
Put Options on 10-year U.S. Treasury Note
Futures Contracts, Strike Price $123.00	2/24/17	26	(5)
Total Liability for Options Written (Premiums Received $308)			(268)

			Amount
			($000)
Other Assets and Liabilities (0.9%)
Other Assets
Investment in Vanguard			258
Receivables for Investment Securities Sold			63,549
Receivables for Accrued Income			36,366
Receivables for Capital Shares Issued			2,151
Other Assets			691
Total Other Assets			103,015
Liabilities
Payables for Investment Securities Purchased			(60,680)
Payables for Capital Shares Redeemed			(4,253)
Payables for Distributions			(857)
Payables to Vanguard			(3,670)
Other Liabilities			(3,218)
Total Liabilities			(72,678)
Net Assets (100%)			3,503,752


Long-Term Treasury Fund



At January 31, 2017, net assets consisted of:
	Amount
	($000
Paid-in Capital	3,512,093
Overdistributed Net Investment Income	(43)
Accumulated Net Realized Losses	(48,076)
Unrealized Appreciation (Depreciation)
Investment Securities	40,113
Futures Contracts	(359)
Options on Futures Contracts	24
Net Assets	3,503,752


Investor Shares—Net Assets
Applicable to 84,426,196 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	995,135
Net Asset Value Per Share—Investor Shares	$11.79


Admiral Shares—Net Assets
Applicable to 212,829,508 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	2,508,617
Net Asset Value Per Share—Admiral Shares	$11.79

• See Note A in Notes to Financial Statements.
1 Securities with a value of $4,638,000 have been segregated as initial margin for open futures contracts.
2 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange
for senior preferred stock.
3 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and
prepayments or the possibility of the issue being called.
4 Adjustable-rate security.
5 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is
the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.

Long-Term Treasury Fund

Statement of Operations


	Year Ended
	January 31, 2017
	($000)
Investment Income
Income
Interest¹	107,282
Total Income	107,282
Expenses
The Vanguard Group—Note B
Investment Advisory Services	440
Management and Administrative—Investor Shares	1,867
Management and Administrative—Admiral Shares	1,997
Marketing and Distribution—Investor Shares	269
Marketing and Distribution—Admiral Shares	290
Custodian Fees	44
Auditing Fees	37
Shareholders’ Reports—Investor Shares	52
Shareholders’ Reports—Admiral Shares	50
Trustees’ Fees and Expenses	3
Total Expenses	5,049
Net Investment Income	102,233
Realized Net Gain (Loss)
Investment Securities Sold¹	48,598
Futures Contracts	(5,774)
Options on Futures Contracts	704
Realized Net Gain (Loss)	43,528
Change in Unrealized Appreciation (Depreciation)
Investment Securities	(275,667)
Futures Contracts	(144)
Options on Futures Contracts	47
Change in Unrealized Appreciation (Depreciation)	(275,764)
Net Increase (Decrease) in Net Assets Resulting from Operations	(130,003)
1 Interest income and realized net gain (loss) from an affiliated company of the fund was $143,000 and $0, respectively.

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

Long-Term Treasury Fund

Statement of Changes in Net Assets


	Year Ended January 31,
	2017	2016
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	102,233	92,934
Realized Net Gain (Loss)	43,528	69,199
Change in Unrealized Appreciation (Depreciation)	(275,764)	(355,349)
Net Increase (Decrease) in Net Assets Resulting from Operations	(130,003)	(193,216)
Distributions
Net Investment Income
Investor Shares	(29,991)	(31,297)
Admiral Shares	(72,285)	(61,637)
Realized Capital Gain¹
Investor Shares	(23,887)	(28,164)
Admiral Shares	(58,782)	(55,511)
Total Distributions	(184,945)	(176,609)
Capital Share Transactions
Investor Shares	(67,432)	(38,178)
Admiral Shares	338,231	189,834
Net Increase (Decrease) from Capital Share Transactions	270,799	151,656
Total Increase (Decrease)	(44,149)	(218,169)
Net Assets
Beginning of Period	3,547,901	3,766,070
End of Period²	3,503,752	3,547,901
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $14,459,000 and $7,337,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($43,000) and $0.

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

Long-Term Treasury Fund

Financial Highlights


Investor Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$12.80	$14.19	$11.55	$12.61	$13.32
Investment Operations
Net Investment Income	.332	.351	.372	.374	.369
Net Realized and Unrealized Gain (Loss)
on Investments	(.725)	(1.070)	2.833	(.937)	(.361)
Total from Investment Operations	(. 393)	(.719)	3.205	(. 563)	. 008
Distributions
Dividends from Net Investment Income	(. 332)	(. 351)	(. 372)	(. 374)	(. 369)
Distributions from Realized Capital Gains	(. 285)	(. 320)	(.193)	(.123)	(. 349)
Total Distributions	(. 617)	(. 671)	(. 565)	(. 497)	(.718)
Net Asset Value, End of Period	$11.79	$12.80	$14.19	$11.55	$12.61

Total Return¹	-3.21%	-4.91%	28.47%	-4.45%	0.00%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$995	$1,148	$1,318	$1,013	$1,349
Ratio of Total Expenses to Average Net Assets	0.20%	0.20%	0.20%	0.20%	0.20%
Ratio of Net Investment Income to
Average Net Assets	2.53%	2.76%	3.02%	3.14%	2.78%
Portfolio Turnover Rate²	94%	117%	59%	44%	105%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 3%, 36%, 22%, 0%, and 61% attributable to mortgage-dollar-roll activity.

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

Long-Term Treasury Fund

Financial Highlights


Admiral Shares

For a Share Outstanding	Year Ended January 31,
Throughout Each Period	2017	2016	2015	2014	2013
Net Asset Value, Beginning of Period	$12.80	$14.19	$11.55	$12.61	$13.32
Investment Operations
Net Investment Income	.345	.363	.384	.386	.382
Net Realized and Unrealized Gain (Loss)
on Investments	(.725)	(1.070)	2.833	(.937)	(.361)
Total from Investment Operations	(. 380)	(.707)	3.217	(. 551)	. 021
Distributions
Dividends from Net Investment Income	(. 345)	(. 363)	(. 384)	(. 386)	(. 382)
Distributions from Realized Capital Gains	(. 285)	(. 320)	(.193)	(.123)	(. 349)
Total Distributions	(. 630)	(. 683)	(. 577)	(. 509)	(.731)
Net Asset Value, End of Period	$11.79	$12.80	$14.19	$11.55	$12.61

Total Return¹	-3.12%	-4.81%	28.60%	-4.36%	0.10%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$2,509	$2,400	$2,448	$1,563	$2,063
Ratio of Total Expenses to Average Net Assets	0.10%	0.10%	0.10%	0.10%	0.10%
Ratio of Net Investment Income to
Average Net Assets	2.63%	2.86%	3.12%	3.24%	2.88%
Portfolio Turnover Rate²	94%	117%	59%	44%	105%
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes 3%, 36%, 22%, 0%, and 61% attributable to mortgage-dollar-roll activity.

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

Long-Term Treasury Fund

Notes to Financial Statements

Vanguard Long-Term Treasury Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

During the year ended January 31, 2017, the fund’s average investments in long and short futures contracts represented 4% and 1% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

Long-Term Treasury Fund

During the year ended January 31, 2017, the fund’s average value of investments in options purchased and options written each represented less than 1% of net assets, respectively, based on the average market values at each quarter-end during the period.

Long-Term Treasury Fund

The fund had no borrowings outstanding at January 31, 2017, or at any time during the period then ended.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2017, the fund had contributed to Vanguard capital in the amount of $258,000, representing 0.01% of the fund’s net assets and 0.10% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

Long-Term Treasury Fund

The following table summarizes the market value of the fund’s investments as of January 31, 2017, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
U.S. Government and Agency Obligations	—	3,461,316	—
Temporary Cash Investments	12,163	—	—
Options on Futures Purchased	204	—	—
Liability for Options Written	(268)	—	—
Futures Contracts—Assets¹	576	—	—
Futures Contracts—Liabilities¹	(242)	—	—
Total	12,433	3,461,316	—
1 Represents variation margin on the last day of the reporting period.

D. At January 31, 2017, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


			($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
Ultra Long U.S. Treasury Bond	March 2017	425	68,292	66
10-Year Ultra U.S. Treasury Note	March 2017	(386)	(51,784)	(447)
2-Year U.S. Treasury Note	March 2017	213	46,178	(7)
30-Year U.S. Treasury Bond	March 2017	267	40,275	32
5-Year U.S. Treasury Note	March 2017	(69)	(8,133)	(3)
				(359)

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $7,920,000 from accumulated net realized losses to paid-in capital.

For tax purposes, at January 31, 2017, the fund had available capital losses totaling $48,412,000 that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2017, the cost of investment securities for tax purposes was $3,433,366,000. Net unrealized appreciation of investment securities for tax purposes was $40,113,000, consisting of unrealized gains of $116,943,000 on securities that had risen in value since their purchase and $76,830,000 in unrealized losses on securities that had fallen in value since their purchase.

Long-Term Treasury Fund

F. During the year ended January 31, 2017, the fund purchased $3,781,730,000 of investment securities and sold $3,652,534,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2017.


		Premiums
	Number of	Received
Options Written	Contracts	($000)
Balance at January 31, 2016	251	101
Options Written	7,337	2,663
Options Expired	(486)	(208)
Options Closed	(6,335)	(2,248)
Options Exercised	—	—
Balance at January 31, 2017	767	308

G. Capital share transactions for each class of shares were:


	Year Ended January 31,
	2017		2016
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	406,152	30,783	325,204	25,434
Issued in Lieu of Cash Distributions	51,078	4,121	56,655	4,473
Redeemed	(524,662)	(40,135)	(420,037)	(33,161)
Net Increase (Decrease)—Investor Shares	(67,432)	(5,231)	(38,178)	(3,254)
Admiral Shares
Issued	1,305,813	99,466	788,569	62,079
Issued in Lieu of Cash Distributions	115,440	9,335	100,412	7,938
Redeemed	(1,083,022)	(83,467)	(699,147)	(55,077)
Net Increase (Decrease)—Admiral Shares	338,231	25,334	189,834	14,940

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2017, that would require recognition or disclosure in these financial statements.

Report of Independent Registered
Public Accounting Firm

To the Board of Trustees of Vanguard Fixed Income Securities Funds and the Shareholders of Vanguard Short-Term Treasury Fund, Vanguard Short-Term Federal Fund, Vanguard Intermediate-Term Treasury Fund, Vanguard GNMA Fund and Vanguard Long-Term Treasury Fund:

In our opinion, the accompanying statements of net assets, statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Short-Term Treasury Fund, Vanguard Short-Term Federal Fund, Vanguard Intermediate-Term Treasury Fund, Vanguard GNMA Fund and Vanguard Long-Term Treasury Fund (constituting separate portfolios of Vanguard Fixed Income Securities Funds, hereafter referred to as the “Funds”) as of January 31, 2017, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of January 31, 2017 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 14, 2017

Special 2016 tax information (unaudited) for Vanguard Short-Term Treasury Fund

This information for the fiscal year ended January 31, 2017, is included pursuant to provisions of the
Internal Revenue Code.

The fund distributed $1,544,000 as capital gain dividends (20% rate gain distributions) to shareholders
during the fiscal year.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund
are qualified short-term capital gains.

For nonresident alien shareholders, 95.7% of income dividends are interest-related dividends.

100

Special 2016 tax information (unaudited) for Vanguard Short-Term Federal Fund

This information for the fiscal year ended January 31, 2017, is included pursuant to provisions of the
Internal Revenue Code.

The fund distributed $2,317,000 as capital gain dividends (20% rate gain distributions) to shareholders
during the fiscal year.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund
are qualified short-term capital gains.

For nonresident alien shareholders, 97.1% of income dividends are interest-related dividends.

Special 2016 tax information (unaudited) for Vanguard Intermediate-Term Treasury Fund

This information for the fiscal year ended January 31, 2017, is included pursuant to provisions of the
Internal Revenue Code.

The fund distributed $46,598,000 as capital gain dividends (20% rate gain distributions) to
shareholders during the fiscal year.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund
are qualified short-term capital gains.

For nonresident alien shareholders, 99.3% of income dividends are interest-related dividends.

Special 2016 tax information (unaudited) for Vanguard GNMA Fund

This information for the fiscal year ended January 31, 2017, is included pursuant to provisions of the
Internal Revenue Code.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund
are qualified short-term capital gains.

For nonresident alien shareholders, 99.5% of income dividends are interest-related dividends.

Special 2016 tax information (unaudited) for Vanguard Long-Term Treasury Fund

This information for the fiscal year ended January 31, 2017, is included pursuant to provisions of the
Internal Revenue Code.

The fund distributed $74,706,000 as capital gain dividends (20% rate gain distributions) to
shareholders during the fiscal year.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund
are qualified short-term capital gains.

For nonresident alien shareholders, 99.5% of income dividends are interest-related dividends.

101

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.

102


Six Months Ended January 31, 2017
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
	7/31/2016	1/31/2017	Period
Based on Hypothetical 5% Yearly Return
Short-Term Treasury Fund
Investor Shares	$1,000.00	$1,024.13	$1.02
Admiral Shares	1,000.00	1,024.63	0.51
Short-Term Federal Fund
Investor Shares	$1,000.00	$1,024.13	$1.02
Admiral Shares	1,000.00	1,024.63	0.51
Intermediate-Term Treasury Fund
Investor Shares	$1,000.00	$1,024.13	$1.02
Admiral Shares	1,000.00	1,024.63	0.51
GNMA Fund
Investor Shares	$1,000.00	$1,024.08	$1.07
Admiral Shares	1,000.00	1,024.58	0.56
Long-Term Treasury Fund
Investor Shares	$1,000.00	$1,024.13	$1.02
Admiral Shares	1,000.00	1,024.63	0.51

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that
period are: for the Short-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Short-Term Federal Fund,
0.20% for Investor Shares and 0.10% for Admiral Shares; for the Intermediate-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for
Admiral Shares; for the GNMA Fund, 0.21% for Investor Shares and 0.11% for Admiral Shares; and for the Long-Term Treasury Fund, 0.20%
for Investor Shares and 0.10% for Admiral 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 (184/366).

104

Glossary

30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.

Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.

Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.

Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.

Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.

Credit Quality. Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under “U.S. Government.” For the federal and Treasury funds, credit-quality ratings are obtained from Moody’s and S&P, and the higher rating for each issue is shown. For the GNMA Fund, credit-quality ratings are obtained from Barclays and are from Moody’s, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating for each issue is shown. “Not Rated” is used to classify securities for which a rating is not available. Not rated securities include a fund’s investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts.

105

Distribution by Coupon. A breakdown of the securities in a fund according to coupon rate—the interest rate that an issuer promises to pay, expressed as an annual percentage of face value. Securities with unusually high coupon rates may be subject to call risk, the possibility that they will be redeemed (or “called”) early by the issuer.

Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.

Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.

R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.

Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.

Yield to Maturity. The rate of return an investor would receive if the fixed income securities held by a fund were held to their maturity dates.

106

Vanguard Bond Funds are not sponsored, endorsed, issued, sold or promoted by Barclays Risk Analytics and Index Solutions
Limited or any of its affiliates (“Barclays”). Barclays makes no representation or warranty, express or implied, to the owners
or purchasers of the Vanguard Bond Funds or any member of the public regarding the advisability of investing in securities
generally or in the Vanguard Bond Funds particularly or the ability of the Barclays Index to track general bond market
performance. Barclays has not passed on the legality or suitability of the Vanguard Bond Funds with respect to any person
or entity. Barclays’ only relationship to Vanguard and the Vanguard Bond Funds is the licensing of the Barclays Index which is
determined, composed and calculated by Barclays without regard to Vanguard or the Vanguard Bond Funds or any owners or
purchasers of the Vanguard Bond Funds. Barclays has no obligation to take the needs of Vanguard, the Vanguard Bond Funds
or the owners of the Vanguard Bond Funds into consideration in determining, composing or calculating the Barclays Index.
Barclays is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the
Vanguard Bond Funds to be issued. Barclays has no obligation or liability in connection with the administration, marketing
or trading of the Vanguard Bond Funds.

BARCLAYS SHALL HAVE NO LIABILITY TO THIRD PARTIES FOR THE QUALITY, ACCURACY AND/OR COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN OR FOR INTERRUPTIONS IN THE DELIVERY OF THE INDEX. BARCLAYS MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY OWNERS OF THE VANGUARD BOND FUNDS OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH
THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. BARCLAYS RESERVES THE RIGHT TO CHANGE THE METHODS
OF CALCULATION OR PUBLICATION, OR TO CEASE THE CALCULATION OR PUBLICATION OF THE BLOOMBERG BARCLAYS
INDICES, AND BARCLAYS SHALL NOT BE LIABLE FOR ANY MISCALCULATION OF OR ANY INCORRECT, DELAYED OR
INTERRUPTED PUBLICATION WITH RESPECT TO ANY OF THE BLOOMBERG BARCLAYS INDICES. BARCLAYS MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
BARCLAYS SHALL NOT BE LIABLE FOR ANY DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY INDIRECT OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN.

© 2017 Barclays. Used with Permission.

Source: Barclays Global Family of Indices. Copyright 2017, Barclays. All rights reserved.

107

The People Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.

The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

InterestedTrustee¹

F. William McNabb III

Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).

IndependentTrustees

Emerson U. Fullwood

Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.

Rajiv L. Gupta

Born 1945. Trustee Since December 2001.²Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.

Amy Gutmann

Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.

JoAnn Heffernan Heisen

Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Chief Global Diversity Officer (retired 2008) and Member of the Executive Committee (1997–2008) of Johnson & Johnson (pharmaceuticals/medical devices/consumer products); Director of Skytop Lodge Corporation (hotels) and the Robert Wood Johnson Foundation; Member of the Advisory Board of the Institute for Women’s Leadership at Rutgers University.

F. Joseph Loughrey

Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.

Mark Loughridge

Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.

Scott C. Malpass

Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors).

André F. Perold

Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.

Peter F. Volanakis

Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).

Executive Officers

Glenn Booraem

Born 1967. Treasurer Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Controller of each of the investment companies served by The Vanguard Group (2010–2015); Assistant Controller of each of the investment companies served by The Vanguard Group (2001–2010).

Thomas J. Higgins

Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).

Peter Mahoney

Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).

Anne E. Robinson

Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).


Vanguard Senior Management Team
Mortimer J. Buckley	James M. Norris
John James	Thomas M. Rampulla
Martha G. King	Glenn W. Reed
John T. Marcante	Karin A. Risi
Chris D. McIsaac	Michael Rollings

Chairman Emeritus and Senior Advisor
John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008

Founder
John C. Bogle
Chairman and Chief Executive Officer, 1974–1996

1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.


	P.O. Box 2600
	Valley Forge, PA 19482-2600



Connect with Vanguard® > vanguard.com



Fund Information > 800-662-7447	CFA® is a registered trademark owned by CFA Institute.
Direct Investor Account Services > 800-662-2739
Institutional Investor Services > 800-523-1036
Text Telephone for People
Who Are Deaf or Hard of Hearing > 800-749-7273

This material may be used in conjunction
with the offering of shares of any Vanguard
fund only if preceded or accompanied by
the fund’s current prospectus.

All comparative mutual fund data are from Lipper, a
Thomson Reuters Company, or Morningstar, Inc., unless
otherwise noted.

You can obtain a free copy of Vanguard’s proxy voting
guidelines by visiting vanguard.com/proxyreporting or by
calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, sec.gov. In
addition, you may obtain a free report on how your fund
voted the proxies for securities it owned during the 12
months ended June 30. To get the report, visit either
vanguard.com/proxyreporting or sec.gov.

You can review and copy information about your fund at
the SEC’s Public Reference Room in Washington, D.C. To
find out more about this public service, call the SEC at
202-551-8090. Information about your fund is also
available on the SEC’s website, and you can receive
copies of this information, for a fee, by sending a
request in either of two ways: via email addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

	© 2017 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.

	Q320 032017

A new format, unwavering commitment

As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.

Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.

In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.

We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.

At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.


Contents
Your Fund’s Performance at a Glance.	1
Chairman’s Perspective.	4
Advisors’ Report.	8
Short-Term Investment-Grade Fund.	15
Intermediate-Term Investment-Grade Fund.	52
Long-Term Investment-Grade Fund.	85
High-Yield Corporate Fund.	113
About Your Fund’s Expenses.	137
Glossary.	139

Your Fund’s Performance at a Glance

• For the 12 months ended January 31, 2017, returns of the Vanguard Corporate Bond Funds ranged from 2.52% for Vanguard Short-Term Investment-Grade Fund to 13.43% for Vanguard High-Yield Corporate Fund. (Returns cited are for Investor Shares.) The funds’ results compared with those of their benchmarks were mixed; all but the High-Yield Fund did better than their peer groups.

• With lower-rated bonds outperforming their higher-rated counterparts during the year, underweighting BBB bonds in the Short-Term Fund and Vanguard Intermediate-Term Investment-Grade Fund hurt relative performance. However, an out-of-benchmark allocation to those bonds in Vanguard Long-Term Investment-Grade Fund was beneficial.

• In the Short- and Intermediate-Term Funds, out-of-benchmark allocations to commercial mortgage-backed and asset-backed securities bolstered returns.

• Underweighting industrials hurt all four funds.


Total Returns: Fiscal Year Ended January 31, 2017
	30-Day SEC	Income	Capital	Total
	Yield	Returns	Returns	Returns
Vanguard Short-Term Investment-Grade Fund
Investor Shares	1.85%	1.95%	0.57%	2.52%
Admiral™ Shares	1.95	2.05	0.57	2.62
Institutional Shares	2.00	2.08	0.57	2.65
Bloomberg Barclays U.S. 1–5 Year Credit Bond Index				2.42
1–5 Year Investment-Grade Debt Funds Average				2.19
1–5 Year Investment-Grade Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


Vanguard Intermediate-Term Investment-Grade Fund
Investor Shares	2.62%	2.82%	0.34%	3.16%
Admiral Shares	2.73	2.93	0.34	3.27
Bloomberg Barclays U.S. 5–10 Year Credit Bond Index				4.80
Core Bond Funds Average				2.46
Core Bond Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


	30-Day SEC	Income	Capital	Total
	Yield	Returns	Returns	Returns
Vanguard Long-Term Investment-Grade Fund
Investor Shares	3.89%	4.29%	2.42%	6.71%
Admiral Shares	3.99	4.40	2.42	6.82
Bloomberg Barclays U.S. Long Credit A or Better Bond
Index				6.44
Corporate A-Rated Debt Funds Average				3.97
Corporate A-Rated Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard High-Yield Corporate Fund
Investor Shares	4.77%	6.07%	7.36%	13.43%
Admiral Shares	4.86	6.18	7.36	13.54
High-Yield Corporate Composite Index				16.01
High Yield Funds Average				16.35

For a benchmark description, see the Glossary.
High Yield Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements. Institutional Shares are
available to certain institutional investors who meet specific administrative, service, and account-size criteria.


Total Returns: Ten Years Ended January 31, 2017
	Average
	Annual Return
Short-Term Investment-Grade Fund Investor Shares	3.24%
Bloomberg Barclays U.S. 1–5 Year Credit Bond Index	3.88
1–5 Year Investment-Grade Debt Funds Average	2.27
1–5 Year Investment-Grade Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Intermediate-Term Investment-Grade Fund Investor Shares	5.33%
Bloomberg Barclays U.S. 5–10 Year Credit Bond Index	5.90
Spliced Core Bond Funds Average	3.86
For a benchmark description, see the Glossary.
Spliced Core Bond Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Long-Term Investment-Grade Fund Investor Shares	7.07%
Bloomberg Barclays U.S. Long Credit A or Better Bond Index	6.58
Corporate A-Rated Debt Funds Average	4.30
Corporate A-Rated Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


	Average
	Annual Return
High-Yield Corporate Fund Investor Shares	6.35%
High-Yield Corporate Composite Index	6.89
Bloomberg Barclays U.S. Corporate High Yield Bond Index	7.49
High Yield Funds Average	5.46
For a benchmark description, see the Glossary.
High Yield Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


Expense Ratios
Your Fund Compared With Its Peer Group
	Investor	Admiral	Institutional	Peer Group
	Shares	Shares	Shares	Average
Short-Term Investment-Grade Fund	0.20%	0.10%	0.07%	0.73%
Intermediate-Term Investment-Grade Fund	0.20	0.10	—	0.78
Long-Term Investment-Grade Fund	0.21	0.12	—	0.84
High-Yield Corporate Fund	0.23	0.13	—	1.08

The fund expense ratios shown are from the prospectus dated May 26, 2016, and represent estimated costs for the current fiscal year. For the
fiscal year ended January 31, 2017, the funds’ expense ratios were: for the Short-Term Investment-Grade Fund, 0.20% for Investor Shares,
0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Intermediate-Term Investment-Grade Fund, 0.20% for Investor Shares
and 0.10% for Admiral Shares; for the Long-Term Investment-Grade Fund, 0.22% for Investor Shares and 0.11% for Admiral Shares; and for
the High-Yield Corporate Fund, 0.23% for Investor Shares and 0.13% for Admiral Shares. Peer-group expense ratios are derived from data
provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2016.

Peer groups: For the Short-Term Investment-Grade Fund, 1–5 Year Investment-Grade Debt Funds; for the Intermediate-Term Investment-Grade
Fund, Core Bond Funds; for the Long-Term Investment-Grade Fund, Corporate A-Rated Debt Funds; and for the High-Yield Corporate Fund, High
Yield Funds.

Chairman’s Perspective

Bill McNabb
Chairman and Chief Executive Officer

Dear Shareholder,

Of course, we never have the luxury of complete clarity when investing—none of us has a crystal ball, after all—but the current environment seems to have more than its fair share of uncertainty.

Confronting the challenge of the unknowable

• Focusing on just the information that
confirms our decisions.

• Buying into the mistaken belief that
past performance indicates future results.

• Sticking to the familiar at the cost of
smart diversification.

The problem with these natural inclinations is that they can make us forget about our long-term investment plan. That’s never a good thing.

Help yourself avoid unforced errors

During the 1990s tech boom, my mom, who has always paid close attention to the markets, wanted to invest in some of the high-flying stocks of the moment. She had


Market Barometer
	Average Annual Total Returns
	Periods Ended January 31, 2017
	One	Three	Five
	Year	Years	Years
Stocks
Russell 1000 Index (Large-caps)	20.81%	10.50%	14.06%
Russell 2000 Index (Small-caps)	33.53	7.89	13.00
Russell 3000 Index (Broad U.S. market)	21.73	10.28	13.97
FTSE All-World ex US Index (International)	16.35	1.50	4.79

Bonds
Bloomberg Barclays U.S. Aggregate Bond Index
(Broad taxable market)	1.45%	2.59%	2.09%
Bloomberg Barclays Municipal Bond Index
(Broad tax-exempt market)	-0.28	3.70	2.94
Citigroup Three-Month U.S. Treasury Bill Index	0.30	0.10	0.09

CPI
Consumer Price Index	2.50%	1.26%	1.39%