N-CSR

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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT COMPANY

Investment Company Act file number: 811-4098

Name of Registrant: Vanguard Chester Funds

Address of Registrant: P.O. Box 2600
Valley Forge, PA 19482

Name and address of agent for service: Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482

Registrant’s telephone number, including area code: (610) 669-1000

Date of fiscal year end: September 30

Date of reporting period: October 1, 2004 - September 30, 2005

Item 1: Reports to Shareholders

   Vanguard^® PRIMECAP Fund

    › Annual Report

   September 30, 2005

   

> Vanguard PRIMECAP Fund outpaced the S&P 500 Index, but trailed the broad market and the average return of its mutual fund peers.

> Technology stocks were the fund’s best performers; health care stocks were the worst.

> The fund earned exceptional returns from its small stake in energy companies.

Contents
Your Fund's Total Returns	1
Chairman's Letter	2
Advisor's Report	7
Fund Profile	9
Performance Summary	10
Financial Statements	12
Your Fund's After-Tax Returns	25
About Your Fund's Expenses	26
Trustees Renew Advisory Agreement	28
Glossary	30

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 cover of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.

Your Fund’s Total Returns

Fiscal Year Ended September 30, 2005
PRIMECAP Fund
Investor Shares	14.1%
Admiral™Shares1	14.3
S&P 500 Index	12.3
Average Multi-Cap Growth Fund2	17.7

Your Fund’s Performance at a Glance
September 30, 2004–September 30, 2005

		Distributions Per Share
Starting	Ending	Income	Capital
Share Price	Share Price	Dividends	Gains

PRIMECAP Fund
Investor Shares	$57.18	$64.79	$0.445	$0.000
Admiral Shares	59.36	67.28	0.552	0.000

1 Admiral Shares: A lower-cost class of shares available to many longtime shareholders and to those with significant investments in the fund.
2 Derived from data provided by Lipper Inc.

1

Chairman’s Letter

Dear Shareholder,

During the 2005 fiscal year, Vanguard PRIMECAP Fund returned more than 14%, outpacing its benchmark, the Standard & Poor’s 500 Index. The engines of your fund’s return included its sizable (and longstanding) commitment to technology stocks and some excellent stock selection in the surging energy sector. Health care stocks were the fund’s major weakness, a key reason that PRIMECAP Fund’s result fell shy of the average return of multi-cap growth funds.

The tables on page 1 show the total returns for your fund and its comparative standards, and also list the fund’s distributions to shareholders in the 12 months ended September 30. If you own the PRIMECAP Fund in a taxable account, you may wish to review our report on the fund’s after-tax returns on page 25.

Please note that as of September 30 the fund remained closed to new investors. Existing shareholders may make additional purchases of up to $25,000 per year.

Despite some economic bumps, stocks fared well

The U.S. stock market navigated through the 12 months to produce strong gains, although it encountered some occasional periods of weakness. Throughout the fiscal year, economic reports generally suggested a solid expansion, though several warning signals flared. Some analysts wondered whether consumers—

2

the pillar of the economy—could continue to withstand both persistently high energy prices and the potentially wide-ranging impact of Hurricane Katrina.

During the fiscal year, the Dow Jones Wilshire 5000 Composite Index, a broad measure of U.S. stock prices, returned 14.7%. Returns from both small- and mid-capitalization stocks outpaced those of large-capitalization issues. Value-oriented stocks (those that typically trade at below-market valuations relative to their earnings, book values, and other fundamental measures) generally produced better returns than growth-oriented issues (those priced in expectation of above-average earnings growth). International stocks, particularly in emerging markets, delivered outstanding returns relative to those of U.S. stocks.

Bonds continued to show a ‘flattening’ yield trend

In the fixed income market, short-term interest rates rose sharply while rates of the longest-term bonds fell. This unusual pattern led to a “flattening” of the yield curve. Since bond prices move in the opposite direction from yields, this flattening resulted in weak returns for short-term bonds and respectable returns for long-term bonds.

The Federal Reserve Board raised its target federal funds rate eight times during the 12 months, for a total increase of 2 percentage points. The yield of the 3-month U.S. Treasury bill, which closely follows the Fed’s moves and serves as a proxy for money market rates, ended the period at 3.54%—more than double its initial 1.70% level. Meanwhile, the yield

Market Barometer
	Average Annual Total Returns Periods Ended September 30, 2005
	One Year	Three Years	Five Years
Stocks
Russell 1000 Index (Large-caps)	14.3%	17.7%	-1.3%
Russell 2000 Index (Small-caps)	18.0	24.1	6.4
Dow Jones Wilshire 5000 Index (Entire market)	14.7	18.4	-0.5
MSCI All Country World Index ex USA (International)	29.5	27.2	4.8
Bonds
Lehman Aggregate Bond Index (Broad taxable market)	2.8%	4.0%	6.6%
Lehman Municipal Bond Index	4.0	4.2	6.3
Citigroup 3-Month Treasury Bill Index	2.5	1.6	2.3
CPI
Consumer Price Index	4.7%	3.2%	2.7%

3

of the 10-year Treasury note, a benchmark for longer-term rates, started the fiscal year at 4.12%, rose to 4.48% in March, dipped to 3.91% by the end of June, and ended the period at 4.32%.

The Lehman Brothers Aggregate Bond Index, a measure of the broad investment-grade bond market, returned 2.8% for the 12 months. The returns of corporate bonds were generally higher than those of government issues. High-yield bonds, whose performance is generally more attuned to the financial health of their issuers than to interest rates, produced higher returns than Treasury and investment-grade corporate bonds.

The fund’s longstanding emphases drove performance

The portfolio positioning that has driven the performance of Vanguard PRIMECAP Fund during the past few years remained in the driver’s seat during the past 12 months. The relative stability of the portfolio’s composition reflects the efforts of the investment advisor, PRIMECAP Management Company, to exploit opportunities that, in its estimation, will unfold over a three- to five-year period.

During the past 12 months, the fund benefited from its emphasis on technology stocks, which outpaced the broad market. Your fund’s tech stocks performed even better than the sector as a whole. Top-ten holdings Adobe Systems, the electronic documents company, and Texas

Expense Ratios¹:
Your fund compared with its peer group

	Investor Shares	Admiral Shares	Average Multi-Cap Growth Fund
PRIMECAP Fund	0.46%	0.31%	1.68%

1 Peer-group expense ratio derived from data provided by Lipper Inc. and captures information through year-end 2004.

4

Instruments, the chipmaker, made significant contributions to the fund’s overall return. At the end of the period, technology stocks accounted for about 25% of fund assets, reflecting the advisor’s conviction that these companies will continue to benefit from a revival in corporate capital spending.

Health care stocks, the portfolio’s other major position, worked against the fund. As I noted six months ago in our semiannual report to you, the fund sustained heavy losses in Biogen Idec, a former high-flier that was hit hard after the company was forced to withdraw a promising therapy from the market. Some of the portfolio’s larger pharmaceutical companies, such as Pfizer and Eli Lilly, also declined in value.

The portfolio’s supporting players—small stakes in energy companies and in materials & processing stocks—also made an important contribution. Energy stocks soared as oil prices tested new highs, and the portfolio’s raw-materials producers benefited from favorable supply/demand fundamentals.

Discipline and perspective created long-term rewards

Over time, PRIMECAP Fund’s long-term orientation has delivered exceptional returns to shareholders. The table below displays the annualized returns of the fund and its comparative standards over the past ten years, as well as the final value of a hypothetical $25,000 investment in each. Your fund would have transformed that $25,000 into $82,731 in wealth. An investment compounded at the average

Total Returns
	Ten Years Ended September 30, 2005
	Average Annual Return	Final Value of a $25,000 Initial Investment
PRIMECAP Fund Investor Shares	12.7%	$82,731
S&P 500 Index	9.5	61,887
Average Multi-Cap Growth Fund	7.6	51,936

5

return of competing multi-cap growth funds would have been worth about $30,000 less.

It would be unreasonable to expect such margins of outperformance to persist. Still, the numbers are a clear demonstration that long-term shareholders stand to benefit when talented portfolio managers approach their task with a disciplined, long-term orientation.

A long-term perspective can benefit your portfolio, too

This same long-term orientation can help you reach your own financial goals. Determine your objectives, develop a plan to meet them, and then follow through with discipline and conviction. A sensible plan should seek to take advantage of opportunities for growth while protecting your assets from the worst of the financial markets’ occasional swoons.

Your investment plan should include a broadly diversified mix of assets—stock, bond, and money market funds—allocated according to your unique circumstances. PRIMECAP can be a valuable component of such a plan, providing access to talented managers focused on the market’s mid-sized and larger growth stocks. If you need help establishing or refining your investment program, I invite you to explore the wealth of planning resources on Vanguard.com.

Thank you for entrusting your assets to Vanguard.

Sincerely,

John J. Brennan
Chairman and Chief Executive Officer
October 11, 2005

6

Advisor’s Report

Equity markets were volatile during the past 12 months, though the ultimate result was strong. Vanguard PRIMECAP Fund returned more than 14%, surpassing the 12.3% return of the S&P 500 Index.

Investment Environment
Investors kept their gaze fixed on the Fed during much of the past 12 months in search of some sign that after 15 months, the tightening effort might be ending. Thus far, however, Fed Chairman Alan Greenspan remains steadfast in his campaign to restrain inflation and cool the housing sector. On September 20, the Fed raised its target for the federal funds rate by 25 basis points for the eleventh consecutive time since June 2004. Despite these gradual, persistent rate increases intended to “normalize” monetary policy, the 10-year Treasury note remains close to year-ago levels, helping to sustain strength in housing and personal consumption. In our opinion, these areas of strength are likely to weaken.

Our Successes
We enjoyed strong performance in our holdings in information technology, which remains our largest sector weighting. While the tech stocks in the S&P 500 Index returned about 15%, for example, our holdings registered a 22% gain. We also enjoyed strong returns from energy-related companies and materials & processing stocks, particularly fertilizer producer Potash Corporation of Saskatchewan and agribusiness giant Monsanto. Potash’s low production costs have helped it capitalize on a favorable supply-and-demand balance in global fertilizer markets. The stock returned 46%, far superior to the average gain of materials stocks. Monsanto has benefited from its strength in plant biotechnology. During the past 12 months, its stock registered a 75% return.

Our Shortfalls
Our most significant shortfall was the one we addressed six months ago in our semiannual letter to shareholders: Biogen Idec. In February 2005, the company’s promising new treatment for multiple sclerosis, Tysabri, was pulled from the market after three patients contracted a rare but serious brain disorder. The stock declined 48% on the day of the announcement. This setback was clearly unexpected, but much of our original investment thesis remains intact: enthusiasm about the company’s high level of R&D spending (30% of revenues) and the growth prospects for its existing drugs, including potential new uses.

Outlook
While we’re optimistic about the prospects for sustained economic growth, we acknowledge a heightened risk of a slowdown in the near term. Of particular concern is the impact that increased fuel prices will have on the consumer (both in terms of confidence and actual expense). Generally, rising energy prices tend to depress the economy with about a one-year lag. This would indicate more downward pressure on the economy even if oil prices decline from here ($60 a barrel).

7

We’re also concerned about the speculative excesses in the leveraged areas of the economy (including the housing market), derivatives, and hedge funds.

One benefit of these risks seems to be better buying opportunities for Vanguard PRIMECAP Fund. The S&P 500 is currently where it was at the end of 1998, but operating earnings have grown approximately 50% since that time. Moreover, it appears that the market is not awarding a premium to companies with market-leading positions or growth rates. Thus, we are finding companies with above-market growth rates and strong competitive positions at attractive valuations. Assuming such companies can capitalize on their leadership position and meet their growth objectives, we believe that they will ultimately be rewarded with premium valuations.

We believe that the prospective drivers of economic growth going forward will arise from the corporate, rather than the consumer sector, as corporations invest in long-deferred capital projects. Consistent with this view, we continue to overweight information technology, materials, and, to a lesser extent, industrials. Health care stocks are another area of focus. We have shifted to a slightly underweight position in energy, as we have been selling while the sector strengthens.

In the technology sector, we’ve been building positions in companies that possess strong competitive positions and low valuations. Oracle, Intuit, Microsoft, and Symantec are prime examples. In the health care sector, our purchases continue to reposition the fund toward the larger-capitalization pharmaceutical stocks, including GlaxoSmithKline, Eli Lilly, Pfizer, and Roche Holding. Generally speaking, these companies have low exposure to patent expiration, highly productive R&D activity, and attractive valuations. We are also enthusiastic about Univision Communications, the leading Spanish-language media company in the United States. The company’s portfolio of television and Internet assets positions it to benefit from the fast-growing Hispanic market.

Howard B. Schow		Theo A. Kolokotrones
Portfolio Manager		Portfolio Manager
	Joel P. Fried
	Portfolio Manager
Mitchell J. Milias		Alfred W. Mordecai
Portfolio Manager		Portfolio Manager
PRIMECAP Management Company, LLP		October 17, 2005

8

Fund Profile
As of September 30, 2005

Portfolio Characteristics	Fund	Comparative Index1
Number of Stocks	132	500
Median Market Cap	$22.8B	$51.5B
Price/Earnings Ratio	24.6x	17.9x
Price/Book Ratio	3.0x	2.8x
Yield		1.8%
Investor Shares	0.6%
Admiral Shares	0.8%
Return on Equity	13.8%	19.0%
Earnings Growth Rate	9.1%	12.6%
Foreign Holdings	11.5%	0.0%
Turnover Rate	12%	—
Expense Ratio		—
Investor Shares	0.46%
Admiral Shares	0.31%
Short-Term Reserves	2%	—

Sector Diversification (% of portfolio)	Fund	Comparative Index1
Auto & Transportation	7%	2%
Consumer Discretionary	14	12
Consumer Staples	0	8
Financial Services	6	21
Health Care	19	13
Integrated Oils	4	7
Other Energy	5	4
Materials & Processing	9	3
Producer Durables	6	4
Technology	26	14
Utilities	1	7
Other	1	5
Short-Term Reserves	2%	—

Volatility Measures	Fund	Comparative Index1
R-Squared	0.88	1.00
Beta	1.14	1.00

Ten Largest Holdings (% of total net assets)2
FedEx Corp.	transportation services	4.6%
Adobe Systems, Inc.	computer software	3.7
Texas Instruments, Inc.	electronics	3.1
Novartis AG ADR	pharmaceuticals	3.0
ConocoPhillips Co.	energy and utilities	2.9
Biogen Idec Inc.	pharmaceuticals	2.6
Pfizer Inc.	pharmaceuticals	2.3
Potash Corp. of Saskatchewan, Inc.	chemicals	2.3
Microsoft Corp.	computer software	2.3
Eli Lilly & Co.	pharmaceuticals	2.3
Top Ten		29.1%

1 S&P 500 Index.
2 “Ten Largest Holdings” excludes any temporary cash investments and equity index products.
    See page 30 for a glossary of investment terms.

9

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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at www.vanguard.com.) 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: September 30, 1995–September 30, 2005
Initial Investment of $25,000

	Average Annual Total Returns Periods Ended September 30, 2005			Final Value of a $25,000
	One Year	Five Years	Ten Years	Investment
PRIMECAP Fund Investor Shares1	14.13%	0.62%	12.71%	$82,731
S&P 500 Index	12.25	-1.49	9.49	61,887
Average Multi-Cap Growth Fund2	17.74	-8.00	7.59	51,936

	One Year	Since Inception3	Final Value of a $100,000 Investment
PRIMECAP Fund Admiral Shares1	14.33%	8.74%	$138,441
S&P 500 Index	12.25	4.24	117,506

1 Total return figures do not reflect the 1% fee assessed on redemptions of shares held less than one year, or the 1% fee assessed until March 23, 2005, on shares purchased on or after April 23, 2001, and held for less than five years.

2 Derived from data provided by Lipper Inc.

3 November 12, 2001.
Note: See Financial Highlights tables on pages 18 and 19 for dividend and capital gains information.

10

Fiscal-Year Total Returns (%): September 30, 1995–September 30, 2005

[Dark Grey] PRIMECAP Fund Investor Shares
[Light Grey] S&P 500 Index

11

Financial Statements

Statement of Net Assets
As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Common Stocks (98.0%)
Auto & Transportation (8.5%)
FedEx Corp.	14,572,500	1,269,702
Union Pacific Corp.	6,606,500	473,686
Southwest Airlines Co.	23,659,737	351,347
*^1AMR Corp.	9,300,000	103,974
*1Alaska Air Group, Inc.	2,540,000	73,812
United Parcel Service, Inc.	495,270	34,238
ArvinMeritor, Inc.	1,620,600	27,096
Consumer Discretionary (13.6%)		2,333,855
* DirecTV Group, Inc.	33,398,900	500,316
Costco Wholesale Corp.	7,500,000	323,175
1Robert Half International, Inc.	8,725,000	310,523
Target Corp.	5,019,000	260,637
TJX Cos., Inc.	12,394,800	253,846
* eBay Inc.	6,025,000	248,230
The News Corp., Inc.	13,784,596	214,902
Eastman Kodak Co.	8,800,000	214,104
* Google Inc.	657,000	207,914
1The Neiman Marcus Group, Inc. Class A	1,800,000	179,910
Time Warner, Inc.	9,516,100	172,337
* Univision Communications Inc.	6,000,000	159,180
The Walt Disney Co.	5,566,000	134,308
1The Neiman Marcus Group, Inc. Class B	1,028,811	102,706
Lowe's Cos., Inc.	1,225,000	78,890
Carnival Corp.	1,530,000	76,469
Best Buy Co., Inc.	1,575,000	68,560
* Kohl's Corp.	1,229,900	61,716
Mattel, Inc.	3,100,000	51,708
Avon Products, Inc.	1,170,000	31,590
Tiffany & Co.	742,000	29,509
Abercrombie & Fitch Co.	500,000	24,925
Royal Caribbean Cruises, Ltd.	412,000	17,798
* Liberty Media Corp.	1,905,000	15,335
Yum! Brands, Inc.	204,000	9,876
* Weight Watchers International, Inc.	150,000	7,737
Sabre Holdings Corp.	356,300	7,226
* Liberty Global, Inc. Class A	114,300	3,095
* Liberty Global, Inc. Series C	114,300	2,943
* Discovery Holding Co. Class A	190,500	2,751
Financial Services (5.9%)		3,772,216
The Chubb Corp.	4,000,000	358,200
The Bank of New York Co., Inc.	9,700,000	285,277
Marsh & McLennan Cos., Inc.	6,791,900	206,406
American International Group, Inc.	3,300,000	204,468
JPMorgan Chase & Co.	4,946,376	167,831
Fannie Mae	1,775,000	79,555

12

	Shares	Market Value• ($000)
Paychex, Inc.	1,860,500	68,987
Transatlantic Holdings, Inc.	1,054,687	60,117
AFLAC Inc.	1,115,000	50,510
Wells Fargo & Co.	575,000	33,678
Capital One Financial Corp.	415,000	33,001
State Street Corp.	400,000	19,568
Freddie Mac	295,000	16,656
Fifth Third Bancorp	450,000	16,528
First Data Corp.	387,537	15,501
Washington Mutual, Inc.	50,000	1,961
Health Care (18.6%)		1,618,244
Novartis AG ADR	16,177,860	825,071
*1Biogen Idec Inc.	18,131,020	715,813
Pfizer Inc.	25,268,793	630,962
Eli Lilly & Co.	11,610,000	621,367
Guidant Corp.	7,567,475	521,323
Medtronic, Inc.	8,038,776	431,039
* Roche Holdings AG	3,000,000	418,505
* Genzyme Corp.- General Division	5,200,000	372,528
* Sepracor Inc.	3,565,100	210,305
*1Millipore Corp.	2,820,000	177,350
GlaxoSmithKline PLC ADR	2,700,000	138,456
* Amgen, Inc.	564,000	44,934
* Applera Corp.- Celera Genomics Group	1,073,600	13,023
Integrated Oils (4.0%)		5,120,676
ConocoPhillips Co.	11,500,000	803,965
Amerada Hess Corp.	2,000,000	275,000
Chevron Corp.	450,000	29,129
Murphy Oil Corp.	120,000	5,984
Other Energy (4.6%)		1,114,078
Schlumberger Ltd.	3,900,000	329,082
Noble Energy, Inc.	5,960,000	279,524
1 Pogo Producing Co.	3,260,000	192,144
EnCana Corp.	3,250,200	189,519
EOG Resources, Inc.	1,200,000	89,880
* Transocean Inc.	1,400,000	85,834
GlobalSantaFe Corp.	1,676,600	76,486
Noble Corp.	275,000	18,826
* Cooper Cameron Corp.	200,000	14,786
Materials & Processing (9.2%)		1,276,081
1Potash Corp. of Saskatchewan, Inc.	6,751,400	630,041
Weyerhaeuser Co.	5,100,000	350,625
Dow Chemical Co.	8,350,000	347,945
Inco Ltd.	4,953,500	234,548
Monsanto Co.	3,297,180	206,898
Praxair, Inc.	3,850,100	184,535
Temple-Inland Inc.	3,350,000	136,847
1 Granite Construction Co.	3,150,000	120,456
Alcoa Inc.	4,854,000	118,535
Fluor Corp.	1,500,000	96,570
Engelhard Corp.	1,889,000	52,722
1 MacDermid, Inc.	1,701,000	44,668
Producer Durables (6.0%)		2,524,390
Caterpillar, Inc.	7,040,000	413,600
* Agilent Technologies, Inc.	11,600,000	379,900
^ LM Ericsson Telephone Co. ADR Class B	4,582,857	168,832
1 Tektronix, Inc.	6,629,600	167,265
1 Plantronics, Inc.	4,701,500	144,853
Applied Materials, Inc.	7,330,000	124,317
Deere & Co.	1,348,500	82,528
Pall Corp.	2,000,000	55,000
Donaldson Co., Inc.	1,600,000	48,848
* Entegris Inc.	2,583,472	29,193
* ASML Holding (New York)	1,601,000	26,433
KLA-Tencor Corp.	250,000	12,190
		1,652,959

13

	Shares	Market Value• ($000)
Technology (25.8%)
CommunicationsTechnology (5.4%)
QUALCOMM Inc.	11,305,000	505,899
* Corning, Inc.	17,647,000	341,117
Motorola, Inc.	13,166,000	290,837
* Nortel Networks Corp.	75,894,400	247,416
* Tellabs, Inc.	5,600,000	58,912
Symbol Technologies, Inc.	5,200,000	50,336
Computer Services Software & System (9.9%)
1Adobe Systems, Inc.	34,156,000	1,019,557
Microsoft Corp.	24,450,000	629,098
* Oracle Corp.	31,725,600	393,080
*1Citrix Systems, Inc.	9,750,000	245,115
* Intuit, Inc.	5,150,000	230,771
* Accenture Ltd.	4,136,200	105,308
* Symantec Corp.	4,550,000	103,103
Computer Technology (1.3%)
Hewlett-Packard Co.	11,880,000	346,896
* Dell Inc.	205,000	7,011
Electronics (1.1%)
Sony Corp. ADR	8,900,000	295,391
Electronics—Semiconductors/Components (6.6%)
Texas Instruments, Inc.	25,260,000	856,314
*1Micron Technology, Inc.	36,512,373	485,615
Intel Corp.	16,525,000	407,341
* Freescale Semiconductor, Inc. Class B	2,163,863	51,024
*^ Rambus Inc	2,500,000	30,250
ElectronicsTechnology (0.7%)
Raytheon Co.	4,212,200	160,148
* Coherent, Inc.	1,420,000	41,578
Scientific Equipment & Supplies (0.8%)
Applera Corp.-Applied Biosystems Group	8,945,300	207,889
Utilities (1.1%)		7,110,006
Sprint Nextel Corp.	9,640,800	229,258
* Comcast Corp. Class A	2,200,000	64,636
Other (0.7%)		293,894
* Berkshire Hathaway Inc.Class B	65,600	179,154
3M Co.	300,000	22,008
Brunswick Corp.	112,000	4,226
		205,388
Total Common Stocks (Cost $18,024,426)		27,021,787
Temporary Cash Investments (2.3%)
2 Vanguard Market Liquidity Fund, 3.744%	613,718,858	613,719
2 Vanguard Market Liquidity Fund, 3.744%—Note G	33,236,182	33,236
Total Temporary Cash Investments (Cost $646,955)		646,955
Total Investments (100.3%) (Cost $18,671,381)		27,668,742
Other Assets and Liabilities—Net(-0.3%)		(95,416)
Net Assets (100%)		27,573,326
Statement of Assets and Liabilities
Assets
Investments in Securities, at Value		27,668,742
Receivables for Capital Shares Issued		22,978
Receivables for Investment Securities Sold		22,104
Other Assets—Note C		22,253
Total Assets		27,736,077
Liabilities
Security Lending Collateral Payable to Brokers—Note G		33,236
Payables for Investment Securities Purchased		54,459
Other Liabilities		75,056
Total Liabilities		162,751
Net Assets		27,573,326

14

At September 30, 2005, net assets consisted of:3	Amount ($000)
Paid-in Capital	17,915,887
Undistributed Net Investment Income	89,985
Accumulated Net Realized Gains	570,093
Unrealized Appreciation	8,997,361
Net Assets	27,573,326
Investor Shares—Net Assets
Applicable to 318,620,868 outstanding $.001 par value shares of beneficial
interest (unlimited authorization)	20,643,332
Net asset value per share—Investor shares	$64.79
Admiral Shares—Net Assets
Applicable to 103,005,634 outstanding $.001 par value shares of beneficial
interest (unlimited authorization)	6,929,994
Net asset value per share—Admiral shares	$67.28

• See Note A in Notes to Financial Statements.

* Non-income-producing security.

^ Part of security position is on loan to broker/dealers. See Note G in Notes to Financial Statements.

1 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company. See Note I in Notes to Financial Statements.

2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

3 See Note E in Notes to Financial Statements for the tax-basis components of net assets.

ADR—American Depositary Receipt.

15

Statement of Operations

Year Ended 

September 30, 2005 

($000)

Investment Income
Income
Dividends1	306,683
Interest1	34,392
Security Lending	2,778
Total Income	343,853
Expenses
Investment Advisory Fees—Note B	56,800
The Vanguard Group—Note C
Management and Administrative
Investor Shares	49,328
Admiral Shares	3,734
Marketing and Distribution
Investor Shares	2,988
Admiral Shares	603
Custodian Fees	339
Auditing Fees	17
Shareholders' Reports
Investor Shares	382
Admiral Shares	4
Trustees' Fees and Expenses	39
Total Expenses	114,234
Expenses Paid Indirectly—Note D	(1,229)
Net Expenses	113,005
Net Investment Income	230,848
Realized Net Gain (Loss) on Investment Securities Sold1	712,533
Change in Unrealized Appreciation (Depreciation) of Investment Securities	2,542,634
Net Increase (Decrease) in Net Assets Resulting from Operations	3,486,015

1 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $12,833,000, $34,392,000, and ($298,909,000), respectively.

16

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept.1 to Sept. 30, 20041 ($000)	Year Ended Aug. 31, 2004 ($000)
Increase (Decrease) In Net Assets
Operations
Net Investment Income	230,848	11,775	112,581
Realized Net Gain (Loss)	712,533	52,246	291,773
Change in Unrealized Appreciation (Depreciation)	2,542,634	906,948	2,253,370
Net Increase (Decrease) in Net Assets Resulting from Operations	3,486,015	970,969	2,657,724
Distributions
Net Investment Income
Investor Shares	(163,617)	—	(74,103)
Admiral Shares	(36,076)	—	(14,552)
Realized Capital Gain
Investor Shares	—	—	—
Admiral Shares	—	—	—
Total Distributions	(199,693)	—	(88,655)
Capital Share Transactions—Note H
Investor Shares	(2,992,661)	(4,990)	1,006,029
Admiral Shares	2,573,706	20,226	1,191,804
Net Increase (Decrease) from Capital Share Transactions	(418,955)	15,236	2,197,833
Total Increase (Decrease)	2,867,367	986,205	4,766,902
Net Assets
Beginning of Period	24,705,959	23,719,754	18,952,852
End of Period2	27,573,326	24,705,959	23,719,754

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Including undistributed net investment income of $89,985,000, $74,580,000, and $62,805,000.

17

Financial Highlights

PRIMECAP Fund Investor Shares

For a Share Outstanding	Year Ended Sept. 30,	Sept. 1 to Sept. 30,	Year Ended August 31,			Jan. 1 to Aug. 31,	Year Ended Dec. 31,
Throughout Each Period	2005	20041	2004	2003	2002	20012	2000
Net Asset Value, Beginning of Period	$57.18	$54.93	$48.50	$39.51	$51.90	$60.38	$62.07
Investment Operations
Net Investment Income	.5113	.03	.25	.23	.188	.21	.52
Net Realized and Unrealized Gain (Loss)
on Investments	7.544	2.22	6.39	8.97	(12.183)	(8.28)	2.33
Total from Investment Operations	8.055	2.25	6.64	9.20	(11.995)	(8.07)	2.85
Distributions
Dividends from Net Investment Income	(.445)	—	(.21)	(.21)	(.260)	(.02)	(.49)
Distributions from Realized Capital Gains	—	—	—	—	(.135)	(.39)	(4.05)
Total Distributions	(.445)	—	(.21)	(.21)	(.395)	(.41)	(4.54)
Net Asset Value, End of Period	$64.79	$57.18	$54.93	$48.50	$39.51	$51.90	$60.38
Total Return4	14.13%	4.10%	13.72%	23.41%	-23.28%	-13.39%	4.47%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$20,643	$20,933	$20,115	$16,886	$13,216	$18,894	$21,762
Ratio of Total Expenses to Average Net Assets	0.46%	0.45%5	0.46%	0.51%	0.49%	0.50%5	0.48%
Ratio of Net Investment
Income to Average Net Assets	0.85%3	0.57%5	0.48%	0.56%	0.42%	0.58%5	0.80%
Portfolio Turnover Rate	12%	1%	9%	12%	11%	7%	11%

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.

2 The fund’s fiscal year-end changed from December 31 to August 31, effective August 31, 2001.

3 Net investment income per share and the ratio of net investment income to average net assets include $.144 and 0.24%, respectively, resulting from a special dividend from Microsoft Corp. in December 2004.

4 Total returns do not reflect the 1% fee assessed on redemptions after March 23, 2005, of shares held for less than one year, or the 1% fee assessed until March 23, 2005, on shares purchased on or after April 23, 2001, and held for less than five years.

5 Annualized.

18

PRIMECAP Fund Admiral Shares

For a Share Outstanding	Year Ended Sept. 30,	Sept. 1 to Sept. 30,		Year Ended August 31,	Nov. 12, 20012 to Aug. 31,
Throughout Each Period	2005	20041	2004	2003	2002

Net Asset Value, Beginning of Period	$59.36	$57.02	$50.34	$41.00	$50.00
Investment Operations
Net Investment Income	.6363	.03	.35	.295	.191
Net Realized and Unrealized Gain (Loss) on Investments	7.836	2.31	6.62	9.310	(8.776)
Total from Investment Operations	8.472	2.34	6.97	9.605	(8.585)
Distributions
Dividends from Net Investment Income	(.552)	—	(.29)	(.265)	(.275)
Distributions from Realized Capital Gains	—	—	—	—	(.140)
Total Distributions	(.552)	—	(.29)	(.265)	(.415)
Net Asset Value, End of Period	$67.28	$59.36	$57.02	$50.34	$41.00
Total Return4	14.33%	4.10%	13.88%	23.58%	-17.35%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$6,930	$3,773	$3,605	$2,067	$1,369
Ratio of Total Expenses to Average Net Assets	0.31%	0.30%5	0.31%	0.37%	0.38%5
Ratio of Net Investment Income to Average Net Assets	0.96%3	0.72%5	0.63%	0.69%	0.52%5
Portfolio Turnover Rate	12%	1%	9%	12%	11%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.

2 Inception.

3 Net investment income per share and the ratio of net investment income to average net assets include $.149 and 0.24%, respectively, resulting from a special dividend from Microsoft Corp. in December 2004.

4 Total returns do not reflect the 1% fee assessed on redemptions after March 23, 2005, of shares held for less than one year, or the 1% fee previously assessed on shares held for less than five years.

5 Annualized.

See accompanying notes, which are an integral part of the financial statements.

19

Notes to Financial Statements

Vanguard PRIMECAP 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, servicing, tenure, and account-size criteria.

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

1.     Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

2.     Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3.     Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4.     Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents the income earned on investing cash collateral, less expenses associated with the loan.

5.     Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on redemptions of capital shares are credited to paid-in capital.

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.

20

B.     PRIMECAP Management Company provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the year ended September 30, 2005, the investment advisory fee represented an effective annual rate of 0.21% of the fund’s average net assets.

C.     The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At September 30, 2005, the fund had contributed capital of $3,306,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 3.30% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

D.     The fund has asked its investment advisor to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. The fund’s custodian bank has also agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the year ended September 30, 2005, these arrangements reduced the fund’s management and administrative expenses by $1,214,000 and custodian fees by $15,000. The total expense reduction represented an effective annual rate of 0.01% of the fund’s average net assets.

E.     Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income 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 net investment income and realized capital gains. Accordingly, the fund has reclassified $15,750,000 from undistributed net investment income, and $40,247,000 from accumulated net realized gains, to paid-in capital.

The fund used a capital loss carryforward of $101,351,000 to offset taxable capital gains realized during the year ended September 30, 2005, reducing the amount of capital gains that would otherwise be available to distribute to shareholders. For tax purposes, at September 30, 2005, the fund had $123,473,000 of ordinary income and $570,936,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $8,997,361,000, consisting of unrealized gains of $10,082,549,000 on securities that had risen in value since their purchase and $1,085,188,000 in unrealized losses on securities that had fallen in value since their purchase.

F.     During the year ended September 30, 2005, the fund purchased $4,455,597,000 of investment securities and sold $3,077,554,000 of investment securities, other than temporary cash investments.

G.     The market value of securities on loan to broker/dealers at September 30, 2005, was $30,963,000, for which the fund received cash collateral of $33,236,000.

21

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

	Year Ended September 30, 2005		September 1 to September 30, 2004		Year Ended August 31, 2004
	Amount ($000)	Shares (000)	Amount ($000)	Shares (000)	Amount ($000)	Shares (000)
Investor Shares
Issued	2,112,455	34,784	134,763	2,387	3,737,544	69,694
Issued in Lieu of Cash Distributions	159,904	2,613	—	—	72,409	1,403
Redeemed1	(5,265,020)	(84,896)	(139,753)	(2,473)	(2,803,924)	(53,060)
Net Increase (Decrease)—Investor Shares	(2,992,661)	(47,499)	(4,990)	(86)	1,006,029	18,037
Admiral Shares
Issued	3,013,929	46,362	51,015	867	1,850,760	33,845
Issued in Lieu of Cash Distributions	33,026	520	—	—	13,269	248
Redeemed1	(473,249)	(7,435)	(30,789)	(525)	(672,225)	(11,927)
Net Increase (Decrease)—Admiral Shares	2,573,706	39,447	20,226	342	1,191,804	22,166

1 Net of redemption fees of $1,126,000, $106,000, and $2,129,000 (fund totals).

22

I.     Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company. Transactions during the period in securities of these companies were as follows:

		Current Period Transactions
	Sept. 30, 2004 Market Value ($000)	Purchases at Cost ($000)	Proceeds from Securities Sold ($000)	Dividend Income ($000)	Sept. 30, 2005 Market Value ($000)
Adobe Systems, Inc.	881,951	—	50,320	445	1,019,557
Alaska Air Group, Inc.	62,941	—	—	—	73,812
AMR Corp.	68,169	—	—	—	103,974
Biogen Idec, Inc.	1,124,737	5,499	26,665	—	715,813
Citrix Systems, Inc.	170,382	538	—	—	245,115
Coherent, Inc.	44,098	—	8,499	—	n/a1
Delta Air Lines, Inc.	26,814	—	6,308	—	—
Granite Construction Co.	75,285	—	—	1,260	120,456
MacDermid, Inc.	49,261	—	—	374	44,668
Micron Technology, Inc.	523,312	—	76,348	—	485,615
Millipore Corp.	134,937	—	—	—	177,350
The Neiman Marcus Group, Inc. Class A	115,000	—	11,550	1,044	179,910
The Neiman Marcus Group, Inc .Class B	54,784	—	—	597	102,706
Noble Energy, Inc.	198,016	—	32,575	—	n/a1
Plantronics, Inc.	203,293	—	—	940	144,853
Pogo Producing Co.	154,687	—	—	815	192,144
Potash Corp. of Saskatchewan, Inc.	410,778	27,646	—	3,373	630,041
Robert Half International, Inc.	229,742	—	6,379	2,394	310,523
Tektronix, Inc.	220,434	—	—	1,591	167,265
	4,748,621			12,833	4,713,802

1 At September 30, 2005, the security is still held but the issuer is no longer an affiliated company of the fund.

23

Report of Independent Registered Public Accounting Firm

To the Shareholders and Trustees of Vanguard PRIMECAP Fund:

In our opinion, the accompanying statement of net assets, including the statement 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 PRIMECAP Fund (the “Fund”) at September 30, 2005, the results of its operations for the year then ended, the changes in its net assets for the year then ended, for the period from September 1, 2004 to September 30, 2004, and for the year ended August 31, 2004 and the financial highlights for each of the periods indicated, 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 Fund’s 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), which 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 at September 30, 2005 by correspondence with the custodian and by agreement to the underlying ownership records for Vanguard Market Liquidity Fund, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania

November 7, 2005

Special 2005 tax information (unaudited) for Vanguard PRIMECAP Fund

This information for the fiscal year ended September 30, 2005, is included pursuant to provisions of the Internal Revenue Code.

The fund distributed $40,247,000 as capital gain dividends (from net long-term capital gains) to shareholders during the fiscal year.

The fund distributed $199,693,000 of qualified dividend income to shareholders during the fiscal year.

For corporate shareholders, 100% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.

24

Your Fund’s After-Tax Returns

This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.

Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect the reduced tax rates on ordinary income (including qualified dividend income) and short-term capital gains that became effective as of January 1, 2003, and on long-term capital gains realized on or after May 6, 2003. To calculate qualified dividend income, we use actual prior-year figures and estimates for 2005. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)

The table shows returns for Investor Shares only; returns for other share classes will differ. Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.

Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.

Average Annual Total Returns: PRIMECAP Fund Investor Shares Periods Ended September 30, 2005	One Year 1	Five Years	Ten Years
Returns Before Taxes	14.13%	0.62%	12.71%
Returns After Taxes on Distributions	14.01	0.18	11.76
Returns After Taxes on Distributions and Sale of Fund Shares	9.34	0.32	10.88

1 Total return figures do not reflect the 1% fee assessed on redemptions of shares held less than one year, or the 1% fee assessed until March 23, 2005, on shares purchased on or after April 23, 2001, and held for less than five years.

25

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 table below 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.

Six Months Ended September 30, 2005	Beginning Account Value 3/31/2005	Ending Account Value 9/30/2005	Expenses Paid During Period1
Based on Actual Fund Return
Investor Shares	$1,000.00	$1,082.54	$2.30
Admiral Shares	1,000.00	1,083.41	1.51
Based on Hypothetical 5% Yearly Return
Investor Shares	$1,000.00	$1,022.86	$2.23
Admiral Shares	1,000.00	1,023.61	1.47

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only; they do not include your fund’s low-balance fee or the 1% fee on redemptions of shares held for less than one year. These fees are fully described in the prospectus. If the fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

1 These calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.44% for Investor Shares and 0.29% 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.

26

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 the appropriate fund prospectus.

27

Trustees Renew Advisory Agreement

The board of trustees of Vanguard PRIMECAP Fund has renewed the fund’s investment advisory agreement with PRIMECAP Management Company. The board determined that the retention of the advisor was in the best interests of the fund and its shareholders.

The board based its decision upon its most recent evaluation of PRIMECAP Management’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the agreement. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services
The board considered the quality of the fund’s investment management over both short- and long-term periods and took into account the organizational depth and stability of the firm. PRIMECAP Management has over two decades of experience managing multi-capitalization growth portfolios. The fund is co-managed by five portfolio managers who collectively have over 90 years of experience with the firm. The five managers are supported by a deep team of financial analysts. The board noted that the firm is very healthy financially and has not lost an account since 2002.

The board concluded that PRIMECAP Management’s experience, stability, and performance, among other factors, warranted continuation of the advisory agreement.

Investment performance
The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance of relevant benchmarks and peer groups. PRIMECAP Management has carried out its investment strategy in disciplined fashion, and the results provided by PRIMECAP Management have been strong, as the fund has outperformed all relevant benchmarks and peer groups since its inception. Information about the fund’s performance, including some of the data considered by the board, can be found in the Performance Summary section of this report.

Cost
The fund’s expense ratio was far below the average expense ratio charged by funds in its peer group. The fund’s advisory fee was also well below the peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the advisory fee rate. The board did not consider profitability of PRIMECAP Management in determining whether to approve the advisory fee, because PRIMECAP Management is independent of Vanguard and the advisory fee is the result of arm’s-length negotiations.

The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the fund’s advisory fee schedule. The breakpoints reduce the effective rate of the fee as the fund’s assets increase.

The advisory agreement will continue for one year and is renewable by the fund’s board after that for successive one-year periods.

28

Vanguard’s Policies for Managing Changes to Investment Advisory Arrangements

The boards of trustees of the Vanguard funds and Vanguard have adopted practical and cost-effective policies for managing the funds’ arrangements with their unaffiliated investment advisors, as permitted by an order from the U.S. Securities and Exchange Commission (SEC).

Background
In 1993, Vanguard was among the first mutual fund companies to streamline the process of changing a fund’s investment advisory arrangements. In essence, the SEC order enabled the boards of the Vanguard funds to enter into new or revised advisory arrangements without the delay and expense of a shareholder vote. This ability, which is subject to a number of SEC conditions designed to protect shareholder interests, has saved the Vanguard funds and their shareholders several million dollars in proxy costs since 1993. It has also enabled the funds’ trustees to quickly implement advisory changes in the best interest of shareholders.

Over the past 12 years, as the SEC gained experience in this area, it has granted more flexible conditions to other fund companies. Consequently, Vanguard received the SEC’s permission to update its policies concerning its arrangements with outside investment advisors.

Our updated policies
Vanguard is adopting several additional practical and cost-effective policies in managing the Vanguard funds’investment advisory arrangements:

Statement of Additional Information (SAI). Vanguard funds that employ an unaffiliated investment advisor will now show advisory fee information on an aggregate basis in their SAIs. (A fund’s SAI provides more detailed information than its prospectus and is available to investors online at Vanguard.com^® or upon request.) Previously, separate fee schedules were presented for each unaffiliated advisor. Each fund’s SAI will also include the amount paid by the fund for any investment advisory services provided on an at-cost basis by The Vanguard Group. Reporting advisory fees in this manner is the same approach used by other fund companies that have received SEC exemptive orders.

Shareholder notification. Like other fund companies, Vanguard will have up to 90 days after a fund enters into a new advisory agreement to notify shareholders of the change. Previously, shareholders were notified at least 30 days before any such change, if possible. In practice, Vanguard expects to continue notifying shareholders of advisory changes as soon as is practical, taking into account opportunities to reduce postage expenses by enclosing notices with previously scheduled mailings.

Redemption fees. Vanguard PRIMECAP Fund charges a redemption fee on shares redeemed within one year of purchase. Previously, redemption fees were required to be waived for 90 days after giving notice of a fund advisory change. The SEC has not generally applied this requirement to other fund companies and has now eliminated it for Vanguard. (Redemption fees—which are paid to the fund, not to Vanguard—are designed to ensure that short-term investors pay their fair share of a fund’s transaction costs.)

29

Glossary

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%. A fund’s beta should be reviewed in conjunction with its R-squared (see definition below). 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.

Earnings Growth Rate.     The average annual rate of growth in earnings over the past five years for the stocks now in a fund.

Expense Ratio.     The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.

Foreign Holdings.     The percentage of a fund’s equity assets represented by stocks or depositary receipts of companies based outside the United States.

Median Market Cap.     An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.

Price/Book Ratio.     The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.

Price/Earnings Ratio.     The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.

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.

Return on Equity.     The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.

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

Turnover Rate.     An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.

Yield.     A snapshot of a fund’s income from interest and dividends. The yield, expressed as a percentage of the fund’s net asset value, is based on income earned over the past 30 days and is annualized, or projected forward for the coming year. The index yield is based on the current annualized rate of income provided by securities in the index.

30

This page intentionally left blank.

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 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.

Our independent board members bring distinguished backgrounds in business, academia, and public service to their task of working with Vanguard officers to establish the policies and oversee the activities of the funds. Among board members’ responsibilities are selecting investment advisors for the funds; monitoring fund operations, performance, and costs; reviewing contracts; nominating and selecting new trustees/directors; and electing Vanguard officers.

Each trustee serves a fund until its termination; or until the trustee’s retirement, resignation, or death; or otherwise as specified in the fund’s organizational documents. Any trustee may be removed at a shareholders’ meeting by a vote representing two-thirds of the net asset value of all shares of the fund together with shares of other Vanguard funds organized within the same trust. The table on these two pages shows 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.



Chairman of the Board, Chief Executive Officer, and Trustee

John J. Brennan1
Born 1954 Chairman of the Board, Chief Executive Officer, and Trustee since May 1987 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Chairman of the Board, Chief Executive Officer, and Director/ Trustee of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group.
IndependentTrustees
Charles D. Ellis
Born 1937 Trustee since January 2001 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Applecore Partners (pro bono ventures in education); Senior Advisor to Greenwich Associates (international business strategy consulting); Successor Trustee of Yale University; Overseer of the Stern School of Business at New York University; Trustee of the Whitehead Institute for Biomedical Research.
Rajiv L. Gupta
Born 1945 Trustee since December 20012 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Board Member of the American Chemistry Council; Director of Tyco International, Ltd. (diversified manufacturing and services) (since 2005); Trustee of Drexel University and of the Chemical Heritage Foundation.
JoAnn Heffernan Heisen
Born 1950 Trustee since July 1998 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Vice President, Chief Information Officer, and Member of the Executive Committee of Johnson & Johnson (pharmaceuticals/ consumer products); Director of the University Medical Center at Princeton and Women’s Research and Education Institute.

André F. Perold
Born 1952 Trustee since December 2004 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: George Gund Professor of Finance and Banking, Harvard Business School (since 2000); Senior Associate Dean, Director of Faculty Recruiting, and Chair of Finance Faculty, Harvard Business School; Director and Chairman of UNX, Inc. (equities trading firm) (since 2003); Director of registered investment companies advised by Merrill Lynch Investment Managers and affiliates (1985–2004), Genbel Securities Limited (South African financial services firm) (1999–2003), Gensec Bank (1999–2003), Sanlam Investment Management (1999–2001), Sanlam, Ltd. (South African insurance company) (2001–2003), Stockback, Inc. (credit card firm) (2000–2002), and Bulldogresearch.com (investment research) (1999–2001); and Trustee of Commonfund (investment management) (1989–2001).
Alfred M. Rankin, Jr.
Born 1941 Trustee since January 1993 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Chairman, President, Chief Executive Officer, and Director of NACCO Industries, Inc. (forklift trucks/housewares/lignite); Director of Goodrich Corporation (industrial products/aircraft systems and services); Director of Standard Products Company (supplier for the automotive industry) until 1998.
J. Lawrence Wilson
Born 1936 Trustee since April 1985 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Retired Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Director of Cummins Inc. (diesel engines), MeadWestvaco Corp. (packaging products), and AmerisourceBergen Corp. (pharmaceutical distribution); Trustee of Vanderbilt University and of Culver Educational Foundation.
Executive Officers1
Heidi Stam
Born 1956 Secretary since July 2005 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group since November 1997; General Counsel of The Vanguard Group since July 2005; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group since July 2005.
Thomas J. Higgins
Born 1957 Treasurer since July 1998 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group.
Vanguard Senior Management Team
R. Gregory Barton
Mortimer J. Buckley
James H. Gately
Kathleen C. Gubanich
F. William McNabb, III
Michael S. Miller
Ralph K. Packard
George U. Sauter
Founder
John C. Bogle
Chairman and Chief Executive Officer, 1974-1996

1	Officers of the funds are “interested persons” as defined in the Investment Company Act of 1940.
2	December 2002 for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
	More information about the trustees is in the Statement of Additional Information, available from Vanguard.

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

Connect with Vanguard ^™ > www.vanguard.com

Fund Information > 800-662-7447	Vanguard, Vanguard.com, Admiral, Connect with
	Vanguard, and the ship logo are trademarks of
Direct Investor Account Services > 800-662-2739	The Vanguard Group, Inc.
Institutional Investor Services > 800-523-1036
	All other marks are the exclusive property of their
Text Telephone > 800-952-3335	respective owners.
	All comparative mutual fund data are from Lipper Inc.
	or Morningstar, Inc., unless otherwise noted.
This material may be used in conjunction
with the offering of shares of any Vanguard
fund only if preceded or accompanied by	You can obtain a free copy of Vanguard's proxy voting
the fund's current prospectus	guidelines by visiting our website, www.vanguard.com,
	and searching for "proxy voting guidelines," or by calling
	Vanguard at 800-662-2739. They are also available from
	the SEC's website, www.sec.gov. In addition, you may
	obtain a free report on how the fund voted the proxies for
	securities it owned during the 12 months ended June 30.
	To get the report, visit either www.vanguard.com or
	www.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 202-942-8090. 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 e-mail addressed to
	publicinfo@sec.gov or via regular mail addressed to the
	Public Reference Section, Securities and Exchange
	Commission, Washington, DC 20549-0102.
	© 2005 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.
	Q590 112005

Vanguard® Target Retirement Funds




> Annual Report




September 30, 2005

> Returns for the Target Retirement Funds ranged from 5.7% for the most income-oriented fund to 15.1% for the fund with the highest allocation to international and domestic stocks.

> International and domestic stock markets produced double-digit returns; bond returns were positive, but fairly modest in the wake of rising interest rates.

> Vanguard Inflation-Protected Securities Fund outperformed the broad bond market, improving returns for the three Target Retirement Funds that include this underlying fund.

Contents
Your Fund's Total Returns	1
Chairman's Letter	2
Target Retirement Income Fund	8
Target Retirement 2005 Fund	17
Target Retirement 2015 Fund	26
Target Retirement 2025 Fund	35
Target Retirement 2035 Fund	44
Target Retirement 2045 Fund	53
Your Fund's After-Tax Returns	64
About Your Fund's Expenses	65
Glossary	67

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 cover of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.

Your Fund’s Total Returns

Fiscal Year Ended September 30, 2005
Vanguard Target Retirement Income Fund	5.7%
Target Income Composite Index1	5.8
Target Income Composite Average2	5.7
Vanguard Target Retirement 2005 Fund	7.0%
Target 2005 Composite Index1	7.1
Target 2005 Composite Average2	7.3
Vanguard Target Retirement 2015 Fund	9.4%
Target 2015 Composite Index1	9.5
Target 2015 Composite Average2	9.9
Vanguard Target Retirement 2025 Fund	10.8%
Target 2025 Composite Index1	11.0
Target 2025 Composite Average2	11.4
Vanguard Target Retirement 2035 Fund	13.5%
Target 2035 Composite Index1	13.6
Target 2035 Composite Average2	14.2
Vanguard Target Retirement 2045 Fund	15.1%
Target 2045 Composite Index1	15.2
Target 2045 Composite Average2	15.8

1 Returns for the composite indexes are derived by applying the funds’ target allocations to the results of the following benchmarks: for U.S. stocks, the Dow Jones Wilshire 5000 Index through April 22, 2005, and the Morgan Stanley Capital International (MSCI) US Broad Market Index thereafter; for international stocks, the MSCI Europe, Australasia, Far East Index; for bonds, the Lehman Brothers Aggregate Bond Index and the Lehman Treasury Inflation Notes Index; and for short-term reserves, the Citigroup 3-Month Treasury Bill Index.
2 Each average is a blended composite that weights the return of the average comparable mutual fund for each asset class in proportion with the target weighting of the appropriate Target Retirement Fund. Average returns for the comparable funds are derived from data provided by Lipper Inc.

1

Chairman’s Letter

Dear Shareholder,

The six Vanguard Target Retirement Funds enjoyed a second year of positive performance, reflecting a generally favorable investment environment. Investment in international stock markets fared best during the 12 months ended September 30, 2005; returns for domestic stocks were strong; and bond returns were modest in the face of rising interest rates. The Target Retirement Funds produced gains in line with their respective allocations to each of these asset classes.

The table on page 1 compares the total returns (capital change plus reinvested distributions) of the funds and their benchmarks, which are weighted to reflect the appropriate asset allocation. The table on page 7 presents the funds’ starting and ending net asset values, distributions for the period, and annualized yields as of September 30. The yields ranged from 3.81% for the Target Retirement Income Fund, with its heavy bond allocation, to 2.04% for the Target Retirement 2045 Fund, whose bond weighting was about 12%.

Despite some economic bumps, stocks fared well

The U.S. stock market navigated through the 12 months to produce strong gains, although it encountered some occasional periods of weakness. Throughout the fiscal year, economic reports generally suggested a solid expansion, though several warning signals flared. Some analysts wondered whether consumers—the pillar of the

2

economy—could continue to withstand both persistently high energy prices and the potentially wide-ranging impact of Hurricane Katrina.

During the fiscal year, the Dow Jones Wilshire 5000 Composite Index, a broad measure of U.S. stock prices, returned 14.7%. Returns from both small- and mid-capitalization stocks outpaced those of large-capitalization issues. Value-oriented stocks (those that typically trade at below-market valuations relative to their earnings, book values, and other fundamental measures) generally produced better returns than growth-oriented issues (those priced in expectation of above-average earnings growth). As noted, international stocks, particularly in emerging markets, delivered outstanding returns relative to those of U.S. stocks.

Bonds continued to show a ‘flattening’ yield curve

In the fixed income market, short-term interest rates rose sharply while rates of the longest-term bonds fell. This unusual pattern led to a “flattening” of the yield curve. Since bond prices move in the opposite direction from yields, this flattening resulted in weak returns for short-term bonds and respectable returns for long-term bonds.

The Federal Reserve Board raised its target federal funds rate eight times during the 12 months, for a total increase of 2 percentage points. The yield of the 3-month U.S. Treasury bill, which closely follows the Fed’s moves and serves as a proxy for money market rates, ended the period at 3.54%—more than double its initial 1.70% level. Meanwhile, the yield

Market Barometer	Average Annual Total Returns Periods Ended September 30, 2005
	One Year	Three Years	Five Years
Stocks
Russell 1000 Index (Large-caps)	14.3%	17.7%	-1.3%
Russell 2000 Index (Small-caps)	18.0	24.1	6.4
Dow Jones Wilshire 5000 Index (Entire market)	14.7	18.4	-0.5
MSCI All Country World Index ex USA (International)	29.5	27.2	4.8
Bonds
Lehman Aggregate Bond Index (Broad taxable market)	2.8%	4.0%	6.6%
Lehman Municipal Bond Index	4.0	4.2	6.3
Citigroup 3-Month Treasury Bill Index	2.5	1.6	2.3
CPI
Consumer Price Index	4.7%	3.2%	2.7%

3

of the 10-year Treasury note, a benchmark for longer-term rates, started the fiscal year at 4.12%, rose to 4.48% in March, dipped to 3.91% by the end of June, and ended the period at 4.32%.

The Lehman Brothers Aggregate Bond Index, a measure of the broad investment-grade bond market, returned 2.8% for the 12 months. The returns of corporate bonds were generally higher than those of government issues. High-yield bonds, whose performance is generally more attuned to the financial health of their issuers than to interest rates, produced higher returns than Treasury and investment-grade corporate bonds.

The Target Retirement Funds met the goal of capturing market returns

Each of the Target Retirement Funds includes a mix of stock, bond, and (in two cases) money market funds that is appropriate for its target maturity date. Each fund is a basket of underlying Vanguard funds that provide the target asset mix. With the exception of the Target Retirement Income Fund, those weightings will shift toward a more income-oriented allocation as retirement nears.

Among the underlying Vanguard funds represented in the Target Retirement series, the best returns came from Vanguard European Stock Index Fund, Vanguard Total Stock Market Fund, and Vanguard Pacific Stock Index Fund, whose 12-month gains were 24.4%, 14.4%, and 29.0%, respectively. The smallest returns in the Target Retirement basket of funds came from Vanguard Prime Money Market Fund and Vanguard Total Bond Market Index Fund, earning 2.5% and 2.7%, respectively.

Performance among the Target Retirement Funds depended on where each fund stood on the time (and, thus, risk) spectrum. The longest-dated fund, Target Retirement 2045, is the most aggressively allocated, with

Asset Allocations at Inception1 and on September 30, 2005
	Stocks2		Bonds		Short-Term Investments
	Inception	Sept. 30	Inception	Sept. 30	Inception	Sept. 30
Income3	20%	20%	75%	75%	5%	5%
2005	35	31	65	68	0	1
2015	50	48	50	52	0	0
2025	60	58	40	42	0	0
2035	80	76	20	24	0	0
2045	90	88	10	12	0	0

1 October 27, 2003.
2 As of September 30, international stock weightings for the 2015, 2025, 2035, and 2045 Funds were approximately 10%, 12%, 15%, and 18% of assets, respectively.
3 Allocations do not change.

about 18% of its assets in international stocks, 70% in U.S. stocks, and 12% in bonds as of September 30. Those proportions explain why its 15.1% gain was the best among the six Target Retirement Funds.

At the other end of the spectrum, with the highest exposure to bonds, the Target Retirement Income Fund gained 5.7%. Late in the fiscal year, interest rates began moving up across the board as inflation fears took root. Higher yields are good news for income-oriented funds in the long run; however, in the short term, they depress bond prices, reducing returns for bond fund investors. The Target Retirement Income Fund fared better than the broad bond market by virtue of its 20% stock weighting and its 25% holding in Vanguard Inflation-Protected Securities Fund. The latter fund seeks to insulate investors against the long-term effects of inflation and, in the short run, can provide a traditional fixed income portfolio with some protection from unexpected inflationary spikes.

The six funds’ asset weightings at inception and at the fiscal year-end are shown in the table on page 4.

Total Returns October 27, 20031-September 30, 2005
	Average Annual Total Return	Final Value of a $10,000 Initial Investment
Vanguard Target Retirement Income Fund	6.2%	$11,223
Target Income Composite Index	6.3	11,244
Target Income Composite Average	5.9	11,166
Vanguard Target Retirement 2005 Fund	7.3	11,463
Target 2005 Composite Index	7.5	11,490
Target 2005 Composite Average	7.1	11,413
Vanguard Target Retirement 2015 Fund	9.1	11,817
Target 2015 Composite Index	9.2	11,841
Target 2015 Composite Average	8.7	11,749
Vanguard Target Retirement 2025 Fund	10.2	12,058
Target 2025 Composite Index	10.3	12,075
Target 2025 Composite Average	9.8	11,972
Vanguard Target Retirement 2035 Fund	12.2	12,474
Target 2035 Composite Index	12.3	12,500
Target 2035 Composite Average	11.6	12,364
Vanguard Target Retirement 2045 Fund	13.3	12,721
Target 2045 Composite Index	13.5	12,754
Target 2045 Composite Average	12.8	12,604

1 Inception

5

You have enough to do; let us manage your retirement funds

As mentioned above, five of Vanguard’s Target Retirement Funds will slowly march to a retirement-appropriate allocation of 75% bonds, 20% stocks, and 5% Vanguard Prime Money Market Fund—the allocation now held by the Target Retirement Income Fund. Along the way, the funds will largely rely on a highly efficient indexing approach, honed by Vanguard, to capture the returns of target stock and bond markets.

The effect of this extremely low-cost approach is reflected in the table on page 5: Each fund is within a hair of the performance of its benchmark index (which reflects market performance with no costs subtracted), and each is slightly ahead of the return for a composite of peer mutual funds. The peer funds are actively managed, so their performance will vary greatly relative to the indexes and to the Target Retirement Funds. The table covers only the funds’ two short years of existence; however, we expect the pattern of very competitive performance to prevail over the long term, due to the funds’ much lower expense ratios (see the table below).

This year marks the first “coming of age” among these funds: Target Retirement 2005. The fund is heading into “retirement” at a deliberate pace: It will not reach the allocation of the Target Retirement Income Fund for five more years. This schedule recognizes the long span of today’s retirement and the pursuant need to move slowly—but not completely—out of stocks and into bonds.

Expense Ratios Your fund compared with its composite peer group
	Fund	Average Weighted Expense Ratio1	Peer-Group Expense Ratio2
Income	0.00%	0.20%	1.07%
2005	0.00	0.20	1.07
2015	0.00	0.20	1.26
2025	0.00	0.20	1.32
2035	0.00	0.21	1.44
2045	0.00	0.21	1.50

1 For underlying funds; annualized.
2 Peer groups are (from top to bottom) the Target Income Composite Average, the Target 2005 Composite Average, the Target 2015 Composite Average, the Target 2025 Composite Average, the Target 2035 Composite Average, and the Target 2045 Composite Average. Each average is a blended composite that weights the return of the average comparable mutual fund for each asset class in proportion to the target weighting of the appropriate Target Retirement fund. Peer-group expense ratios are derived from data provided by Lipper Inc. and capture information through year-end 2004.

6

Rapidly changing markets affirm the need for long-term balance

The returns captured in the 12-month window of this report were anything but even. For the first six months of 2005, bonds outperformed stocks and international returns were negative. Over that time, the Target Retirement 2045 Fund had a negative return, and the Target Retirement Income Fund was the best performer—the reverse of the 12-month result. As an investor with a long-term perspective, you are no doubt aware of the folly of focusing on short periods. However, the year’s repeated changes in market leadership serve as a reminder of how quickly and how severely markets can change course.

In a year when war and weather dominated the news, the market’s shifts could be damaging to anyone who relied too heavily on one market segment. I hope you take comfort in knowing that, in this one investment, you have chosen a fund that at any given time—and over time—is balanced appropriately, given your target retirement time frame.

Thank you for investing with us for the long haul.

Sincerely,

John J. Brennan
Chairman and Chief Executive Officer
October 17, 2005

Your Fund's Performance at a Glance September 30, 2004-September 30, 2005
			Distributions Per Share
	Starting Share Price	Ending Share Price	Income Dividends	Capital Gains	SEC Yield1
Income	$10.31	$10.52	$0.370	$0.004	3.81%
2005	10.65	11.14	0.240	0.004	3.47
2015	10.74	11.54	0.200	0.002	3.10
2025	10.82	11.80	0.180	0.002	2.83
2035	10.92	12.22	0.170	0.000	2.33
2045	10.98	12.47	0.160	0.000	2.04

1 Thirty-day advertised yield net of expenses at month-end.

7

Target Retirement Income Fund

Fund Profile
As of September 30, 2005

Financial Attributes
Yield	3.8%
Expense Ratio	0%
Average Weighted Expense Ratio1	0.20%

Allocation to Underlying Vanguard Funds
Total Bond Market Index Fund	49.8%
Inflation-Protected Securities Fund	24.9
Total Stock Market Index Fund	20.3
Prime Money Market Fund	5.0
Total	100.0%

Fund Asset Allocation



20% Stocks
75% Bonds
  5% Short-Term Reserves

Equity Investment Focus

Fixed Income Investment Focus

1 For underlying funds; annualized.
See page 67 for a glossary of investment terms.

8

Target Retirement Income 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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at ww.vanguard.com.) 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: October 27, 2003–September 30, 2005

	Average Annual Total Returns Periods Ended September 30, 2005		Final Value of a $10,000
	One Year	Since Inception1	Investment
Target Retirement Income Fund	5.73%	6.18%	$11,223
Lehman Aggregate Bond Index	2.80	3.88	10,760
Target Income Composite Index2	5.76	6.28	11,244
Target Income Composite Average3	5.73	5.89	11,166

Total Investment Returns (%): October 27, 2003-September 30, 2005
Fiscal Year	Capital Return	Income Return	Total Return	Target Income Composite Index2
2004	3.3%	2.9%	6.2%	6.3%
2005	2.1	3.6	5.7	5.8

1 October 27, 2003.
2 The Target Income Composite Index is derived by applying the fund’s target allocation to a set of unmanaged benchmarks, weighted as follows: 50% Lehman Aggregate Bond Index, 25% Lehman Treasury Inflation Notes Index, 20% MSCI US Broad Market Index, and 5% Citigroup 3-Month Treasury Index. The MSCI US Broad Market Index replaced the Dow Jones Wilshire 5000 Index in the composite index on April 23, 2005.
3 The Target Income Composite Average is derived by applying the fund’s target allocation to a set of peer-group averages, weighted as follows: 50% average fixed income fund, 25% average Treasury inflation-protected securities fund, 20% average general equity fund, and 5% average money market fund. Derived from data provided by Lipper Inc.
See Financial Highlights table on page 14 for dividend and capital gains information.

9

Target Retirement Income Fund

Financial Statements

Statement of Net Assets

As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Investment Companies (100%)
U.S. Stock Funds (20.3%)
Vanguard Total Stock Market Index Fund Investor Shares	4,530,322	133,690
Vanguard Total Stock Market VIPERs	33,779	4,102
Bond Funds (74.7%)
Vanguard Total Bond Market Index Fund Investor Shares	33,365,491	337,325
Vanguard Inflation-Protected Securities Fund Investor Shares	13,502,293	168,508
Money Market Fund (5.0%)
Vanguard Prime Money Market Fund Investor Shares	33,975,827	33,976
Total Investment Companies
(Cost $671,255)		677,601
Other Assets and Liabilities (0.0%)
Other Assets		3,799
Liabilities		(4,161)
		(362)
Net Assets (100%)
Applicable to 64,391,255 outstanding $.001 par value shares
of beneficial interest (unlimited authorization)		677,239
Net Asset Value Per Share		$10.52

10

Target Retirement Income Fund

At September 30, 2005, net assets consisted of:1
	Amount ($000)	Per Share
Paid-in Capital	669,304	$10.39
Undistributed Net Investment Income	560	.01
Accumulated Net Realized Gains	1,029	.02
Unrealized Appreciation	6,346	.10
Net Assets	677,239	$10.52

• See Note A in Notes to Financial Statements.
1 See Note C in Notes to Financial Statements for the tax-basis components of net assets.

11

Target Retirement Income Fund

Statement of Operations

	Year Ended September 30, 2005 ($000)
Investment Income
Income
Income Distributions Received	18,706
Net Investment Income--Note B	18,706
Realized Net Gain (Loss)
Capital Gain Distributions Received	1,046
Investment Securities Sold	(1)
Realized Net Gain (Loss)	1,045
Change in Unrealized Appreciation (Depreciation) of Investment Securities	5,105
Net Increase (Decrease) in Net Assets Resulting from Operations	24,856

12

Target Retirement Income Fund

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept. 1, 2004, to Sept. 30, 20041 ($000)	Oct. 27, 20032 to Aug. 31, 2004 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	18,706	1,763	3,992
Realized Net Gain (Loss)	1,045	--	190
Change in Unrealized Appreciation (Depreciation)	5,105	(261)	1,502
Net Increase (Decrease) in Net Assets
Resulting from Operations	24,856	1,502	5,684
Distributions
Net Investment Income	(18,511)	(2,397)	(2,993)
Realized Capital Gain3	(151)	--	(55)
Total Distributions	(18,662)	(2,397)	(3,048)
Capital Share Transactions--Note E
Issued	449,883	20,416	327,967
Issued in Lieu of Cash Distributions	16,696	2,136	2,714
Redeemed	(110,338)	(3,850)	(36,320)
Net Increase (Decrease) from Capital Share Transactions	356,241	18,702	294,361
Total Increase (Decrease)	362,435	17,807	296,997
Net Assets
Beginning of Period	314,804	296,997	--
End of Period4	677,239	314,804	296,997

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Includes fiscal 2005 and 2004 short-term gain distributions of $0 and $55,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
4 Including undistributed net investment income of $560,000, $365,000, and $999,000.

13

Target Retirement Income Fund

Financial Highlights

	Year Ended Sept. 30,	Sept. 1, 2004, to Sept. 30,	Oct. 27, 20032 to Aug. 31,
For a Share Outstanding Throughout Each Period	2005	20041	2004
Net Asset Value, Beginning of Period	$10.31	$10.34	$10.00
Investment Operations
Net Investment Income	.3993	.06	.235
Capital Gain Distributions Received	.0223	--	.015
Net Realized and Unrealized Gain (Loss) on Investments	.163	(.01)	.310
Total from Investment Operations	.584	.05	.560
Distributions
Dividends from Net Investment Income	(.370)	(.08)	(.205)
Distributions from Realized Capital Gains	(.004)	--	(.015)
Total Distributions	(.374)	(.08)	(.220)
Net Asset Value, End of Period	$10.52	$10.31	$10.34
Total Return	5.73%	0.48%	5.65%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$677	$315	$297
Ratio of Expenses to Average Net Assets--Note B	0%4	0%	0%
Ratio of Net Investment Income to Average Net Assets	3.80%	3.96%5	3.62%5
Portfolio Turnover Rate	0%	0%	1%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Calculated based on average shares outstanding.
4 The average weighted expense ratio of the underlying funds was 0.20%.
5 Annualized. See accompanying notes, which are an integral part of the financial statements.

14

Target Retirement Income Fund

Notes to Financial Statements

Vanguard Target Retirement Income Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. stocks, bonds, and short-term reserves. The Target Retirement Income Fund’s allocation of assets is expected to remain stable over time.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Investments in other Vanguard funds (with the exception of VIPER® Shares) are valued at that fund’s net asset value. VIPER Shares (and other exchange-traded funds, if applicable) are valued at the latest quoted sales prices or official closing prices taken from their primary market or, if not traded on the valuation date, at the mean of the latest quoted bid and asked prices.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Other: Income and capital gain distributions received are recorded on the ex-dividend date. 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. Under a service agreement, The Vanguard Group furnishes corporate management, administrative, marketing, and distribution services to the fund. The service agreement provides that Vanguard will reimburse the fund’s expenses to the extent of savings in administrative and marketing costs realized by Vanguard in the operation of the fund. Accordingly, all expenses incurred by the fund during the year ended September 30, 2005, were reimbursed by Vanguard. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, at September 30, 2005, the fund had $757,000 of ordinary income and $833,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $6,345,000, consisting of unrealized gains of $11,216,000 on securities that had risen in value since their purchase and $4,871,000 in unrealized losses on securities that had fallen in value since their purchase.

15

Target Retirement Income Fund

D. During the year ended September 30, 2005, the fund purchased $358,946,000 of investment securities and sold $1,716,000 of investment securities, other than temporary cash investments.

E. Capital shares issued and redeemed were:

	Year Ended Sept. 30, 2005	Sept. 1, 2004, to Sept. 30, 20041	Oct. 27, 20032 to Aug. 31, 2004
	Shares (000)
Issued	42,786	1,970	32,002
Issued in Lieu of Cash Distributions	1,592	207	266
Redeemed	(10,507)	(371)	(3,554)
Net Increase (Decrease) in Shares Outstanding	33,871	1,806	28,714

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.

16

Target Retirement 2005 Fund

Fund Profile
As of September 30, 2005

Financial Attributes
Yield	3.5%
Expense Ratio	0%
Average Weighted Expense Ratio1	0.20%

Allocation to Underlying Vanguard Funds
Total Bond Market Index Fund	49.7%
Total Stock Market Index Fund	31.3
Inflation-Protected Securities Fund	17.6
Prime Money Market Fund	1.4
Total	100.0%

Fund Asset Allocation

31% Stocks
68% Bonds
 1% Short-Term Reserves

Equity Investment Focus

Fixed Income Investment Focus

1 For underlying funds; annualized.
See page 67 for a glossary of investment terms.

17

Target Retirement 2005 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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at www.vanguard.com.) 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: October 27, 2003–September 30, 2005

	Average Annual Total Returns Periods Ended September 30, 2005		Final Value of a $10,000
	One Year	Since Inception1	Investment
Target Retirement 2005 Fund	6.96%	7.35%	$11,463
Dow Jones Wilshire 5000 Index	14.65	12.98	12,650
Target 2005 Composite Index2	7.07	7.48	11,490
Target 2005 Composite Average3	7.27	7.10	11,413

Total Investment Returns (%): October 27, 2003-September 30, 2005
Fiscal Year	Capital Return	Income Return	Total Return	Target 2005 Composite Index2
2004	6.6%	0.6%	7.2%	7.3%
2005	4.6	2.4	7.0	7.1

1 October 27, 2003.
2 The Target 2005 Composite Index is derived by applying the fund’s target allocation to a set of unmanaged benchmarks, weighted as follows at the fiscal year-end: 50% Lehman Aggregate Bond Index, 31% MSCI US Broad Market Index, 18% Lehman Treasury Inflation Notes Index, and 1% Citigroup 3-Month Treasury Index. The MSCI US Broad Market Index replaced the Dow Jones Wilshire 5000 Index in the composite index on April 23, 2005. The composite index changes over time with the fund’s asset allocation.
3 The Target 2005 Composite Average is derived by applying the fund’s target allocation to a set of peer-group averages, weighted as follows at the fiscal year-end: 50% average fixed income fund, 31% average general equity fund, 18% average Treasury inflation-protected securities fund, and 1% average money market fund. The composite average changes over time with the fund’s asset allocation. Derived from data provided by Lipper Inc.
See Financial Highlights table on page 23 for dividend and capital gains information.

18

Target Retirement 2005 Fund

Financial Statements

Statement of Net Assets
As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Investment Companies (100.3%)
U.S. Stock Funds (31.4%)
Vanguard Total Stock Market Index Fund Investor Shares	6,599,760	194,759
Vanguard Total Stock Market VIPERs	77,656	9,430
Bond Funds (67.3%)
Vanguard Total Bond Market Index Fund Investor Shares	31,997,426	323,494
Vanguard Inflation-Protected Securities Fund Investor Shares	9,193,664	114,737
Money Market Funds (1.6%)
Vanguard Prime Money Market Fund Investor Shares	9,109,241	9,109
Vanguard Market Liquidity Fund, 3.74%1	1,466,493	1,466
Total Investment Companies
(Cost $642,621)		652,995
Other Assets and Liabilities (-0.3%)
Other Assets		4,660
Liabilities		(6,885)
		(2,225)
Net Assets (100%)
Applicable to 58,427,056 outstanding $.001 par value shares
of beneficial interest (unlimited authorization)		650,770
Net Asset Value Per Share		$11.14

19

Target Retirement 2005 Fund

At September 30, 2005, net assets consisted of:2
	Amount ($000)	Per Share
Paid-in Capital	627,895	$10.74
Undistributed Net Investment Income	12,074	.21
Accumulated Net Realized Gains	427	.01
Unrealized Appreciation	10,374	.18
Net Assets	650,770	$11.14

• See Note A in Notes to Financial Statements.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 See Note C in Notes to Financial Statements for the tax-basis components of net assets.

20

Target Retirement 2005 Fund

Statement of Operations

	Year Ended September 30, 2005 ($000)
Investment Income
Income
Income Distributions Received	14,866
Net Investment Income--Note B	14,866
Realized Net Gain (Loss)
Capital Gain Distributions Received	585
Investment Securities Sold	(142)
Realized Net Gain (Loss)	443
Change in Unrealized Appreciation (Depreciation) of Investment Securities	9,560
Net Increase (Decrease) in Net Assets Resulting from Operations	24,869

21

Target Retirement 2005 Fund

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept. 1, 2004, to Sept. 30, 20041 ($000)	Oct. 27, 20032 to Aug. 31, 2004 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	14,866	1,144	2,942
Realized Net Gain (Loss)	443	--	125
Change in Unrealized Appreciation (Depreciation)	9,560	404	410
Net Increase (Decrease) in Net Assets
Resulting from Operations	24,869	1,548	3,477
Distributions
Net Investment Income	(6,718)	--	(160)
Realized Capital Gain3	(112)	--	(29)
Total Distributions	(6,830)	--	(189)
Capital Share Transactions--Note E
Issued	485,535	19,802	241,347
Issued in Lieu of Cash Distributions	6,633	--	186
Redeemed	(96,913)	(2,374)	(26,321)
Net Increase (Decrease) from Capital Share Transactions	395,255	17,428	215,212
Total Increase (Decrease)	413,294	18,976	218,500
Net Assets
Beginning of Period	237,476	218,500	--
End of Period4	650,770	237,476	218,500

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Includes fiscal 2005 and 2004 short-term gain distributions of $0 and $29,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
4 Including undistributed net investment income of $12,074,000, $3,926,000, and $2,782,000.

22

Target Retirement 2005 Fund

Financial Highlights

	Year Ended Sept. 30,	Sept. 1, 2004, to Sept. 30,	Oct. 27, 20032 to Aug. 31,
For a Share Outstanding Throughout Each Period	2005	20041	2004
Net Asset Value, Beginning of Period	$10.65	$10.58	$10.00
Investment Operations
Net Investment Income	.3883	.05	.185
Capital Gain Distributions Received	.0153	--	.010
Net Realized and Unrealized Gain (Loss) on Investments	.331	.02	.450
Total from Investment Operations	.734	.07	.645
Distributions
Dividends from Net Investment Income	(.240)	--	(.055)
Distributions from Realized Capital Gains	(.004)	--	(.010)
Total Distributions	(.244)	--	(.065)
Net Asset Value, End of Period	$11.14	$10.65	$10.58
Total Return	6.96%	0.66%	6.47%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$651	$237	$219
Ratio of Expenses to Average Net Assets--Note B	0%4	0%	0%
Ratio of Net Investment Income to Average Net Assets	3.57%	3.57%5	3.31%5
Portfolio Turnover Rate	4%	0%	2%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Calculated based on average shares outstanding.
4 The average weighted expense ratio of the underlying funds was 0.20%.
5 Annualized.
See accompanying notes, which are an integral part of the financial statements.

23

Target Retirement 2005 Fund

Notes to Financial Statements

Vanguard Target Retirement 2005 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. stocks, bonds, and short-term reserves.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Investments in other Vanguard funds (with the exception of VIPER Shares) are valued at that fund’s net asset value. VIPER Shares (and other exchange-traded funds, if applicable) are valued at the latest quoted sales prices or official closing prices taken from their primary market or, if not traded on the valuation date, at the mean of the latest quoted bid and asked prices.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Other: Income and capital gain distributions received are recorded on the ex-dividend date. 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. Under a service agreement, The Vanguard Group furnishes corporate management, administrative, marketing, and distribution services to the fund. The service agreement provides that Vanguard will reimburse the fund’s expenses to the extent of savings in administrative and marketing costs realized by Vanguard in the operation of the fund. Accordingly, all expenses incurred by the fund during the year ended September 30, 2005, were reimbursed by Vanguard. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, at September 30, 2005, the fund had $12,189,000 of ordinary income and $469,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $10,216,000, consisting of unrealized gains of $14,529,000 on securities that had risen in value since their purchase and $4,313,000 in unrealized losses on securities that had fallen in value since their purchase.

24

Target Retirement 2005 Fund

D. During the year ended September 30, 2005, the fund purchased $420,131,000 of investment securities and sold $15,554,000 of investment securities, other than temporary cash investments.

E. Capital shares issued and redeemed were:

	Year Ended Sept. 30, 2005	Sept. 1, 2004, to Sept. 30, 20041	Oct. 27, 20032 to Aug. 31, 2004
		Shares (000)
Issued	44,377	1,860	23,171
Issued in Lieu of Cash Distributions	613	--	18
Redeemed	(8,859)	(223)	(2,529)
Net Increase (Decrease) in Shares Outstanding	36,131	1,637	20,660

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30,2004.
2 Inception.

25

Target Retirement 2015 Fund

Fund Profile
As of September 30, 2005

Financial Attributes
Yield	3.1%
Expense Ratio	0%
Average Weighted Expense Ratio1	0.20%

Allocation to Underlying Vanguard Funds
Total Bond Market Index Fund	49.7%
Total Stock Market Index Fund	37.9
European Stock Index Fund	6.5
Pacific Stock Index Fund	3.1
Inflation-Protected Securities Fund	2.8
Total	100.0%

Fund Asset Allocation



48% Stocks
52% Bonds

Equity Investment Focus

Fixed Income Investment Focus

1 For underlying funds; annualized.
See page 67 for a glossary of investment terms.

26

Taget Retirement 2015 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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at www.vanguard.com.) 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: October 27, 2003–September 30, 2005

	Average Annual Total Returns Periods Ended September 30, 2005		Final Value of a $10,000
	One Year	Since Inception1	Investment
Target Retirement 2015 Fund	9.40%	9.06%	$11,817
Dow Jones Wilshire 5000 Index	14.65	12.98	12,650
Target 2015 Composite Index2	9.53	9.17	11,841
Target 2015 Composite Average3	9.87	8.73	11,749

Total Investment Returns (%): October 27, 2003-September 30, 2005
Fiscal Year	Capital Return	Income Return	Total Return	Target 2015 Composite Index2
2004	7.4%	0.6%	8.0%	8.1%
2005	7.5	1.9	9.4	9.5

1 October 27, 2003.
2 The Target 2015 Composite Index is derived by applying the fund’s target allocation to a set of unmanaged benchmarks, weighted as follows at the fiscal year-end: 50% Lehman Aggregate Bond Index, 38% MSCI US Broad Market Index, 9% MSCI EAFE Index, and 3% Lehman Treasury Inflation Notes Index. The MSCI US Broad Market Index replaced the Dow Jones Wilshire 5000 Index in the composite index on April 23, 2005. The composite index changes over time with the fund’s asset allocation.
3 The Target 2015 Composite Average is derived by applying the fund’s target allocation to a set of peer-group averages, weighted as follows at the fiscal year-end: 50% average fixed income fund, 38% average general equity fund, 9% average international fund, and 3% average Treasury inflation-protected securities fund. The composite average changes over time with the fund’s asset allocation. Derived from data provided by Lipper Inc.
See Financial Highlights table on page 32 for dividend and capital gains information.

27

Target Retirement 2015 Fund

Financial Statements

Statement of Net Assets
As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Investment Companies (99.8%)
U.S. Stock Funds (37.8%)
Vanguard Total Stock Market Index Fund Investor Shares	22,273,751	657,299
Vanguard Total Stock Market VIPERs	216,241	26,258
International Stock Funds (9.6%)
Vanguard European Stock Index Fund Investor Shares	4,228,336	117,971
Vanguard Pacific Stock Index Fund Investor Shares	5,176,879	55,030
Bond Funds (52.4%)
Vanguard Total Bond Market Index Fund Investor Shares	88,473,763	894,470
Vanguard Inflation-Protected Securities Fund Investor Shares	4,023,501	50,213
Total Investment Companies
(Cost $1,747,755)		1,801,241
Other Assets and Liabilities (0.2%)
Other Assets		18,396
Liabilities		(15,382)
		3,014
Net Assets (100%)
Applicable to 156,322,999 outstanding $.001 par value shares
of beneficial interest (unlimited authorization)		1,804,255
Net Asset Value Per Share		$11.54

28

Target Retirement 2015 Fund

At September 30, 2005, net assets consisted of:1
	Amount ($000)	Per Share
Paid-in Capital	1,724,038	$11.03
Undistributed Net Investment Income	26,388	.17
Accumulated Net Realized Gains	343	--
Unrealized Appreciation	53,486	.34
Net Assets	1,804,255	$11.54

• See Note A in Notes to Financial Statements.
1 See Note C in Notes to Financial Statements for the tax-basis components of net assets.

29

Target Retirement 2015 Fund


Statementof Operations

	Year Ended September 30, 2005 ($000)
Investment Income
Income
Income Distributions Received	32,748
Net Investment Income--Note B	32,748
Realized Net Gain (Loss)
Capital Gain Distributions Received	392
Investment Securities Sold	(73)
Realized Net Gain (Loss)	319
Change in Unrealized Appreciation (Depreciation) of Investment Securities	51,376
Net Increase (Decrease) in Net Assets Resulting from Operations	84,443

30

Target Retirement 2015 Fund

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept. 1, 2004, to Sept. 30, 20041 ($000)	Oct. 27, 20032 to Aug. 31, 2004 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	32,748	1,527	4,298
Realized Net Gain (Loss)	319	--	144
Change in Unrealized Appreciation (Depreciation)	51,376	2,899	(789)
Net Increase (Decrease) in Net Assets
Resulting from Operations	84,443	4,426	3,653
Distributions
Net Investment Income	(11,959)	--	(226)
Realized Capital Gain	(120)	--	--
Total Distributions	(12,079)	--	(226)
Capital Share Transactions--Note E
Issued	1,399,102	42,483	450,587
Issued in Lieu of Cash Distributions	11,936	--	223
Redeemed	(148,714)	(4,572)	(27,007)
Net Increase (Decrease) from Capital Share Transactions	1,262,324	37,911	423,803
Total Increase (Decrease)	1,334,688	42,337	427,230
Net Assets
Beginning of Period	469,567	427,230	--
End of Period3	1,804,255	469,567	427,230

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Including undistributed net investment income of $26,388,000, $5,599,000, and $4,072,000.

31

Target Retirement 2015 Fund

Financial Highlights

	Year Ended Sept. 30,	Sept. 1, 2004, to Sept. 30,	Oct. 27, 20032 to Aug. 31,
For a Share Outstanding Throughout Each Period	2005	20041	2004
Net Asset Value, Beginning of Period	$10.74	$10.63	$10.00
Investment Operations
Net Investment Income	.3463	.03	.16
Capital Gain Distributions Received	.0043	--	--
Net Realized and Unrealized Gain (Loss) on Investments	.652	.08	.53
Total from Investment Operations	1.002	.11	.69
Distributions
Dividends from Net Investment Income	(.200)	--	(.06)
Distributions from Realized Capital Gains	(.002)	--	--
Total Distributions	(.202)	--	(.06)
Net Asset Value, End of Period	$11.54	$10.74	$10.63
Total Return	9.40%	1.03	6.92%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,804	$470	$427
Ratio of Expenses to Average Net Assets--Note B	0%4	0	0%
Ratio of Net Investment Income to Average Net Assets	3.11%	2.85%5	2.69%5
Portfolio Turnover Rate	1%	0	1%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Calculated based on average shares outstanding.
4 The average weighted expense ratio of the underlying funds was 0.20%.
5 Annualized.
See accompanying notes, which are an integral part of the financial statements.

32

Target Retirement 2015 Fund

Notes to Financial Statements

Vanguard Target Retirement 2015 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. stocks, international stocks, bonds, and short-term reserves.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Investments in other Vanguard funds (with the exception of VIPER Shares) are valued at that fund’s net asset value. VIPER Shares (and other exchange-traded funds, if applicable) are valued at the latest quoted sales prices or official closing prices taken from their primary market or, if not traded on the valuation date, at the mean of the latest quoted bid and asked prices.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Other: Income and capital gain distributions received are recorded on the ex-dividend date. 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. Under a service agreement, The Vanguard Group furnishes corporate management, administrative, marketing, and distribution services to the fund. The service agreement provides that Vanguard will reimburse the fund’s expenses to the extent of savings in administrative and marketing costs realized by Vanguard in the operation of the fund. Accordingly, all expenses incurred by the fund during the year ended September 30, 2005, were reimbursed by Vanguard. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, at September 30, 2005, the fund had $26,454,000 of ordinary income and $369,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $53,393,000, consisting of unrealized gains of $64,647,000 on securities that had risen in value since their purchase and $11,254,000 in unrealized losses on securities that had fallen in value since their purchase.

33

Target Retirement 2015 Fund

D. During the year ended September 30, 2005, the fund purchased $1,285,544,000 of investment securities and sold $5,590,000 of investment securities, other than temporary cash investments.

E. Capital shares issued and redeemed were:

	Year Ended Sept. 30, 2005	Sept. 1, 2004, to Sept. 30, 20041	Oct. 27, 20032 to Aug. 31, 2004
		Shares (000)
Issued	124,762	3,962	42,737
Issued in Lieu of Cash Distributions	1,071	--	22
Redeemed	(13,239)	(426)	(2,565)
Net Increase (Decrease) in Shares Outstanding	112,594	3,536	40,194

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.

34

Target Retirement 2025 Fund

Fund Profile
As of September 30, 2005

Financial Attributes
Yield	2.8%
Expense Ratio	0%
Average Weighted Expense Ratio1	0.20%

Allocation to Underlying Vanguard Funds
Total Stock Market Index Fund	46.4%
Total Bond Market Index Fund	41.8
European Stock Index Fund	8.0
Pacific Stock Index Fund	3.8
Total	100.0%

Fund Asset Allocation



58% Stocks
42% Bonds

Equity Investment Focus

Fixed Income Investment Focus

1 For underlying funds; annualized.
See page 67 for a glossary of investment terms.

35

Target Retirement 2025 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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at www.vanguard.com.) 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: October 27, 2003–September 30, 2005

	Average Annual Total Returns Periods Ended September 30, 2005		Final Value of a $10,000
	One Year	Since Inception1	Investment
Target Retirement 2025 Fund	10.80%	10.21%	$12,058
Dow Jones Wilshire 5000 Index	14.65	12.98	12,650
Target 2025 Composite Index2	10.96	10.28	12,075
Target 2025 Composite Average3	11.38	9.79	11,972

Total Investment Returns (%): October 27, 2003-September 30, 2005
Fiscal Year	Capital Return	Income Return	Total Return	Target 2025 Composite Index2
2004	8.2%	0.6%	8.8%	8.8%
2005	9.1	1.7	10.8	11.0

1 October 27, 2003.
2 The Target 2025 Composite Index is derived by applying the fund’s target allocation to a set of unmanaged benchmarks, weighted as follows at the fiscal year-end: 46% MSCI US Broad Market Index, 42% Lehman Aggregate Bond Index, and 12% MSCI EAFE Index. The MSCI US Broad Market Index replaced the Dow Jones Wilshire 5000 Index in the composite index on April 23, 2005. The composite index changes over time with the fund’s asset allocation.
3 The Target 2025 Composite Average is derived by applying the fund’s target allocation to a set of peer-group averages, weighted as follows at the fiscal year-end: 46% average general equity fund, 42% average fixed income fund, and 12% average international fund. The composite average changes over time with the fund’s asset allocation. Derived from data provided by Lipper Inc.
See Financial Highlights table on page 41 for dividend and capital gains information.

36

Target Retirement 2025 Fund

Financial Statements

Statement of Net Assets
As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Investment Companies (99.9%)
U.S. Stock Funds (46.3%)
Vanguard Total Stock Market Index Fund Investor Shares	29,527,641	871,361
Vanguard Total Stock Market VIPERs	334,292	40,593
International Stock Funds (11.8%)
Vanguard European Stock Index Fund Investor Shares	5,656,507	157,816
Vanguard Pacific Stock Index Fund Investor Shares	6,978,702	74,184
Bond Funds (41.8%)
Vanguard Total Bond Market Index Fund Investor Shares	81,337,361	822,321
Total Investment Companies (Cost $1,896,649)		1,966,275
Other Assets and Liabilities (0.1%)
Other Assets		14,666
Liabilities		(12,898)
		1,768
Net Assets (100%)
Applicable to 166,760,872 outstanding $.001 par value shares
of beneficial interest (unlimited authorization)		1,968,043
Net Asset Value Per Share		$11.80

37

Target Retirement 2025 Fund

At September 30, 2005, net assets consisted of:1
	Amount ($000)	Per Share
Paid-in Capital	1,874,386	$11.24
Undistributed Net Investment Income	23,844	.14
Accumulated Net Realized Gains	187	--
Unrealized Appreciation	69,626	.42
Net Assets	1,968,043	$11.80

• See Note A in Notes to Financial Statements.
1 See Note C in Notes to Financial Statements for the tax-basis components of net assets.

38

Target Retirement 2025 Fund

Statement of Operations

	Year Ended September 30, 2005 ($000)
Investment Income
Income
Income Distributions Received	30,017
Net Investment Income--Note B	30,017
Realized Net Gain (Loss)
Capital Gain Distributions Received	238
Investment Securities Sold	(25)
Realized Net Gain (Loss)	213
Change in Unrealized Appreciation (Depreciation) of Investment Securities	66,626
Net Increase (Decrease) in Net Assets Resulting from Operations	96,856

39

Target Retirement 2025 Fund

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept. 1, 2004, to Sept. 30, 20041 ($000)	Oct. 27, 20032 to Aug. 31, 2004 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	30,017	1,484	2,973
Realized Net Gain (Loss)	213	--	91
Change in Unrealized Appreciation (Depreciation)	66,626	4,043	(1,043)
Net Increase (Decrease) in Net Assets
Resulting from Operations	96,856	5,527	2,021
Distributions
Net Investment Income	(10,500)	--	(130)
Realized Capital Gain	(117)	--	--
Total Distributions	(10,617)	--	(130)
Capital Share Transactions--Note E
Issued	1,538,295	39,946	468,197
Issued in Lieu of Cash Distributions	10,564	--	130
Redeemed	(162,366)	(2,950)	(17,430)
Net Increase (Decrease) from Capital Share Transactions	1,386,493	36,996	450,897
Total Increase (Decrease)	1,472,732	42,523	452,788
Net Assets
Beginning of Period	495,311	452,788	--
End of Period3	1,968,043	495,311	452,788

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Including undistributed net investment income of $23,844,000, $4,327,000, and $2,843,000.

40

Target Retirement 2025 Fund

Financial Highlights

	Year Ended Sept. 30,	Sept. 1, 2004, to Sept. 30,	Oct. 27, 20032 to Aug. 31,
For a Share Outstanding Throughout Each Period	2005	20041	2004
Net Asset Value, Beginning of Period	$10.82	$10.69	$10.00
Investment Operations
Net Investment Income	.3203	.02	.13
Capital Gain Distributions Received	.0033	--	--
Net Realized and Unrealized Gain (Loss) on Investments	.839	.11	.62
Total from Investment Operations	1.162	.13	.75
Distributions
Dividends from Net Investment Income	(.180)	--	(.06)
Distributions from Realized Capital Gains	(.002)	--	--
Total Distributions	(.182)	--	(.06)
Net Asset Value, End of Period	$11.80	$10.82	$10.69
Total Return	10.80%	1.22	7.52%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,968	$495	$453
Ratio of Expenses to Average Net Assets--Note B	0%4	0	0%
Ratio of Net Investment Income to Average Net Assets	2.84%	2.55%5	2.33%5
Portfolio Turnover Rate	2%	0	3%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Calculated based on average shares outstanding.
4 The average weighted expense ratio of the underlying funds was 0.20%.
5 Annualized. See accompanying notes, which are an integral part of the financial statements.

41

Target Retirement 2025 Fund



Notes to Financial Statements

Vanguard Target Retirement 2025 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. stocks, international stocks, bonds, and short-term reserves.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Investments in other Vanguard funds (with the exception of VIPER Shares) are valued at that fund’s net asset value. VIPER Shares (and other exchange-traded funds, if applicable) are valued at the latest quoted sales prices or official closing prices taken from their primary market or, if not traded on the valuation date, at the mean of the latest quoted bid and asked prices.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Other: Income and capital gain distributions received are recorded on the ex-dividend date. 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. Under a service agreement, The Vanguard Group furnishes corporate management, administrative, marketing, and distribution services to the fund. The service agreement provides that Vanguard will reimburse the fund’s expenses to the extent of savings in administrative and marketing costs realized by Vanguard in the operation of the fund. Accordingly, all expenses incurred by the fund during the year ended September 30, 2005, were reimbursed by Vanguard. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, at September 30, 2005, the fund had $23,886,000 of ordinary income and $213,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $69,558,000, consisting of unrealized gains of $79,643,000 on securities that had risen in value since their purchase and $10,085,000 in unrealized losses on securities that had fallen in value since their purchase.

42

Target Retirement 2025 Fund

D. During the year ended September 30, 2005, the fund purchased $1,427,537,000 of investment securities and sold $23,089,000 of investment securities, other than temporary cash investments.

E. Capital shares issued and redeemed were:

	Year Ended Sept. 30, 2005	Sept. 1, 2004, to Sept. 30, 20041	Oct. 27, 20032 to Aug. 31, 2004
		Shares (000)
Issued	134,291	3,701	43,992
Issued in Lieu of Cash Distributions	930	--	12
Redeemed	(14,252)	(273)	(1,640)
Net Increase (Decrease) in Shares Outstanding	120,969	3,428	42,364

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.

43

Target Retirement 2035 Fund

Fund Profile
As of September 30, 2005

Financial Attributes
Yield	2.3%
Expense Ratio	0%
Average Weighted Expense Ratio1	0.21%

Allocation to Underlying Vanguard Funds
Total Stock Market Index Fund	60.7%
Total Bond Market Index Fund	23.8
European Stock Index Fund	10.5
Pacific Stock Index Fund	5.0
Total	100.0%

Fund Asset Allocation



76% Stocks
24% Bonds

Equity Investment Focus

Fixed Income Investment Focus

1 For underlying funds; annualized.
See page 67 for a glossary of investment terms.

44

Target Retirement 2035 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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at www.vanguard.com.) 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: October 27, 2003–September 30, 2005

	Average Annual Total Returns Periods Ended September 30, 2005		Final Value of a $10,000
	One Year	Since Inception1	Investment
Target Retirement 2035 Fund	13.53%	12.16%	$12,474
Dow Jones Wilshire 5000 Index	14.65	12.98	12,650
Target 2035 Composite Index2	13.63	12.28	12,500
Target 2035 Composite Average3	14.18	11.65	12,364

Total Investment Returns (%): October 27, 2003-September 30, 2005
Fiscal Year	Capital Return	Income Return	Total Return	Target 2035 Composite Index2
2004	9.2%	0.7%	9.9%	9.9%
2005	11.9	1.6	13.5	13.6

1 October 27, 2003.
2 The Target 2035 Composite Index is derived by applying the fund’s target allocation to a set of unmanaged benchmarks, weighted as follows at the fiscal year-end: 61% MSCI US Broad Market Index, 24% Lehman Aggregate Bond Index, and 15% MSCI EAFE Index. The MSCI US Broad Market Index replaced the Dow Jones Wilshire 5000 Index in the composite index on April 23, 2005. The composite index changes over time with the fund’s asset allocation.
3 The Target 2035 Composite Average is derived by applying the fund’s target allocation to a set of peer-group averages, weighted as follows at the fiscal year-end: 61% average general equity fund, 24% average fixed income fund, and 15% average international fund. The composite average changes over time with the fund’s asset allocation. Derived from data provided by Lipper Inc.
See Financial Highlights table on page 50 for dividend and capital gains information.

45

Target Retirement 2035 Fund

Financial Statements

Statement of Net Assets
As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Investment Companies (99.8%)
U.S. Stock Funds (60.6%)
Vanguard Total Stock Market Index Fund Investor Shares	21,498,481	634,420
Vanguard Total Stock Market VIPERs	227,819	27,664
International Stock Funds (15.4%)
Vanguard European Stock Index Fund Investor Shares	4,090,455	114,123
Vanguard Pacific Stock Index Fund Investor Shares	5,082,099	54,023
Bond Funds (23.7%)
Vanguard Total Bond Market Index Fund Investor Shares	25,639,012	259,210
Money Market Fund (0.1%)
Vanguard Market Liquidity Fund, 3.744%1	398,739	399
Total Investment Companies
(Cost $1,035,693)		1,089,839
Other Assets and Liabilities (0.2%)
Other Assets		8,228
Liabilities		(6,398)
		1,830
Net Assets (100%)
Applicable to 89,341,228 outstanding $.001 par value shares
of beneficial interest (unlimited authorization)		1,091,669
Net Asset Value Per Share		$12.22

46

Target Retirement 2035 Fund

At September 30, 2005, net assets consisted of:2
	Amount ($000)	Per Share
Paid-in Capital	1,026,992	$11.49
Undistributed Net Investment Income	10,454	.12
Accumulated Net Realized Gains	77	--
Unrealized Appreciation	54,146	.61
Net Assets	1,091,669	$12.22

• See Note A in Notes to Financial Statements.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 See Note C in Notes to Financial Statements for the tax-basis components of net assets.

47

Target Retirement 2035 Fund

Statement of Operations

	Year Ended September 30, 2005 ($000)
Investment Income
Income
Income Distributions Received	13,841
Net Investment Income--Note B	13,841
Realized Net Gain (Loss)
Capital Gain Distributions Received	70
Investment Securities Sold	(16)
Realized Net Gain (Loss)	54
Change in Unrealized Appreciation (Depreciation) of Investment Securities	52,546
Net Increase (Decrease) in Net Assets Resulting from Operations	66,441

48

Target Retirement 2035 Fund

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept. 1, 2004, to Sept. 30, 20041 ($000)	Oct. 27, 20032 to Aug. 31, 2004 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	13,841	667	1,061
Realized Net Gain (Loss)	54	--	23
Change in Unrealized Appreciation (Depreciation)	52,546	2,603	(1,003)
Net Increase (Decrease) in Net Assets
Resulting from Operations	66,441	3,270	81
Distributions
Net Investment Income	(5,025)	--	(90)
Realized Capital Gain	--	--	--
Total Distributions	(5,025)	--	(90)
Capital Share Transactions--Note E
Issued	862,555	23,874	220,339
Issued in Lieu of Cash Distributions	5,015	--	90
Redeemed	(73,460)	(2,019)	(9,402)
Net Increase (Decrease) from Capital Share Transactions	794,110	21,855	211,027
Total Increase (Decrease)	855,526	25,125	211,018
Net Assets
Beginning of Period	236,143	211,018	--
End of Period3	1,091,669	236,143	211,018

1 The fund’s fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Including undistributed net investment income of $10,454,000, $1,638,000, and $971,000.

49

Target Retirement 2035 Fund

Financial Highlights

	Year Ended Sept. 30,	Sept. 1, 2004, to Sept. 30,	Oct. 27, 20032 to Aug. 31,
For a Share Outstanding Throughout Each Period	2005	20041	2004
Net Asset Value, Beginning of Period	$10.92	$10.76	$10.00
Investment Operations
Net Investment Income	.273	.03	.115
Capital Gain Distributions Received	--	--	--
Net Realized and Unrealized Gain (Loss) on Investments	1.20	.13	.710
Total from Investment Operations	1.47	.16	.825
Distributions
Dividends from Net Investment Income	(.17)	--	(.065)
Distributions from Realized Capital Gains	--	--	--
Total Distributions	(.17)	--	(.065)
Net Asset Value, End of Period	$12.22	$10.92	$10.76
Total Return	13.53%	1.49%	8.27%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,092	$236	$211
Ratio of Expenses to Average Net Assets--Note B	0%4	0%	0%
Ratio of Net Investment Income to Average Net Assets	2.33%	1.97%5	1.70%5
Portfolio Turnover Rate	0%	0%	2%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Calculated based on average shares outstanding.
4 The average weighted expense ratio of the underlying funds was 0.21%.
5 Annualized.
See accompanying notes, which are an integral part of the financial statements.

50

Target Retirement 2035 Fund

Notes to Financial Statements

Vanguard Target Retirement 2035 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. stocks, international stocks, bonds, and short-term reserves.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Investments in other Vanguard funds (with the exception of VIPER Shares) are valued at that fund’s net asset value. VIPER Shares (and other exchange-traded funds, if applicable) are valued at the latest quoted sales prices or official closing prices taken from their primary market or, if not traded on the valuation date, at the mean of the latest quoted bid and asked prices.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Other: Income and capital gain distributions received are recorded on the ex-dividend date. 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. Under a service agreement, The Vanguard Group furnishes corporate management, administrative, marketing, and distribution services to the fund. The service agreement provides that Vanguard will reimburse the fund’s expenses to the extent of savings in administrative and marketing costs realized by Vanguard in the operation of the fund. Accordingly, all expenses incurred by the fund during the year ended September 30, 2005, were reimbursed by Vanguard. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, at September 30, 2005, the fund had $10,494,000 of ordinary income and $80,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $54,103,000, consisting of unrealized gains of $57,087,000 on securities that had risen in value since their purchase and $2,984,000 in unrealized losses on securities that had fallen in value since their purchase.

51

Target Retirement 2035 Fund

D. During the year ended September 30, 2005, the fund purchased $803,848,000 of investment securities and sold $2,856,000 of investment securities, other than temporary cash investments.

E. Capital shares issued and redeemed were:

	Year Ended Sept. 30, 2005	Sept. 1, 2004, to Sept. 30, 20041	Oct. 27, 20032 to Aug. 31, 2004
		Shares (000)
Issued	73,546	2,190	20,480
Issued in Lieu of Cash Distributions	428	--	9
Redeemed	(6,256)	(185)	(871)
Net Increase (Decrease) in Shares Outstanding	67,718	2,005	19,618

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.

52

Target Retirement 2045 Fund

Fund Profile
As of September 30, 2005

Financial Attributes
Yield	2.0%
Expense Ratio	0%
Average Weighted Expense Ratio1	0.21%

Allocation to Underlying Vanguard Funds
Total Stock Market Index Fund	70.4%
European Stock Index Fund	12.0
Total Bond Market Index Fund	12.0
Pacific Stock Index Fund	5.6
Total	100.0%

Fund Asset Allocation


88% Stocks
12% Bonds

Equity Investment Focus

Fixed Income Investment Focus

1 For underlying funds; annualized.
See page 67 for a glossary of investment terms.

53

Target Retirement 2045 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. (For performance data current to the most recent month-end, which may be higher or lower than that cited, visit our website at www.vanguard.com.) 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: October 27, 2003–September 30, 2005

	Average Annual Total Returns Periods Ended September 30, 2005		Final Value of a $10,000
	One Year	Since Inception1	Investment
Target Retirement 2045 Fund	15.09%	13.31%	$12,721
Dow Jones Wilshire 5000 Index	14.65	12.98	12,650
Target 2045 Composite Index2	15.18	13.46	12,754
Target 2045 Composite Average3	15.82	12.77	12,604

Total Investment Returns (%): October 27, 2003-September 30, 2005
Fiscal Year	Capital Return	Income Return	Total Return	Target 2045 Composite Index2
2004	9.8%	0.7%	10.5%	10.6%
2005	13.6	1.5	15.1	15.2

1 October 27, 2003.
2 The Target 2045 Composite Index is derived by applying the fund’s target allocation to a set of unmanaged benchmarks, weighted as follows at the fiscal year-end: 70% MSCI US Broad Market Index, 18% MSCI EAFE Index, and 12% Lehman Aggregate Bond Index. The MSCI US Broad Market Index replaced the Dow Jones Wilshire 5000 Index in the composite index on April 23, 2005. The composite index changes over time with the fund’s asset allocation.
3 The Target 2045 Composite Average is derived by applying the fund’s target allocation to a set of peer-group averages, weighted as follows at the fiscal year-end: 70% average general equity fund, 18% average international fund, and 12% average fixed income fund. The composite average changes over time with the fund’s asset allocation. Derived from data provided by Lipper Inc.
See Financial Highlights table on page 59 for dividend and capital gains information.

54

Target Retirement 2045 Fund

Financial Statements

Statement of Net Assets
As of September 30, 2005

The fund provides a complete list of its holdings 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 www.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).

	Shares	Market Value• ($000)
Investment Companies (100.4%)
U.S. Stock Funds (70.1%)
Vanguard Total Stock Market Index Fund Investor Shares	11,166,069	329,511
Vanguard Total Stock Market VIPERs	127,463	15,478
International Stock Funds (17.6%)
Vanguard European Stock Index Fund Investor Shares	2,114,639	58,998
Vanguard Pacific Stock Index Fund Investor Shares	2,602,889	27,669
Bond Funds (12.1%)
Vanguard Total Bond Market Index Fund Investor Shares	5,845,904	59,102
Money Market Fund (0.6%)
Vanguard Market Liquidity Fund, 3.744%1	3,084,351	3,084
Total Investment Companies
(Cost $469,080)		493,842
Other Assets and Liabilities (-0.4%)
Other Assets		6,350
Liabilities		(8,190)
		(1,840)
Net Assets (100%)
Applicable to 39,452,158 outstanding $.001 par value shares
of beneficial interest (unlimited authorization)		492,002
Net Asset Value Per Share		$12.47

55

Target Retirement 2045 Fund

At September 30, 2005, net assets consisted of:2
	Amount ($000)	Per Share
Paid-in Capital	463,787	$11.76
Undistributed Net Investment Income	3,693	.09
Accumulated Net Realized Losses	(240)	(.01)
Unrealized Appreciation	24,762	.63
Net Assets	492,002	$12.47

• See Note A in Notes to Financial Statements.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 See Note C in Notes to Financial Statements for the tax-basis components of net assets.

56

Target Retirement 2045 Fund

Statement of Operations

	Year Ended September 30, 2005 ($000)
Investment Income
Income
Income Distributions Received	4,953
Net Investment Income--Note B	4,953
Realized Net Gain (Loss)
Capital Gain Distributions Received	14
Investment Securities Sold	(255)
Realized Net Gain (Loss)	(241)
Change in Unrealized Appreciation (Depreciation) of Investment Securities	24,158
Net Increase (Decrease) in Net Assets Resulting from Operations	28,870

57

Target Retirement 2045 Fund

Statement of Changes in Net Assets

	Year Ended Sept. 30, 2005 ($000)	Sept. 1, 2004, to Sept. 30, 20041 ($000)	Oct. 27, 20032 to Aug. 31, 2004 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	4,953	233	331
Realized Net Gain (Loss)	(241)	--	1
Change in Unrealized Appreciation (Depreciation)	24,158	1,099	(495)
Net Increase (Decrease) in Net Assets
Resulting from Operations	28,870	1,332	(163)
Distributions
Net Investment Income	(1,786)	--	(38)
Realized Capital Gain	--	--	--
Total Distributions	(1,786)	--	(38)
Capital Share Transactions--Note E
Issued	422,941	8,055	83,829
Issued in Lieu of Cash Distributions	1,771	--	38
Redeemed	(44,437)	(1,199)	(7,211)
Net Increase (Decrease) from Capital Share Transactions	380,275	6,856	76,656
Total Increase (Decrease)	407,359	8,188	76,455
Net Assets
Beginning of Period	84,643	76,455	--
End of Period3	492,002	84,643	76,455

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Including undistributed net investment income of $3,693,000, $526,000, and $293,000.

58

Target Retirement 2045 Fund



Financial Highlights

	Year Ended Sept. 30,	Sept. 1, 2004, to Sept. 30,	Oct. 27, 20032 to Aug. 31,
For a Share Outstanding Throughout Each Period	2005	20041	2004
Net Asset Value, Beginning of Period	$10.98	$10.80	$10.00
Investment Operations
Net Investment Income	.243	.03	.11
Capital Gain Distributions Received	--	--	--
Net Realized and Unrealized Gain (Loss) on Investments	1.41	.15	.76
Total from Investment Operations	1.65	.18	.87
Distributions
Dividends from Net Investment Income	(.16)	--	(.07)
Distributions from Realized Capital Gains	--	--	--
Total Distributions	(.16)	--	(.07)
Net Asset Value, End of Period	$12.47	$10.98	$10.80
Total Return	15.09%	1.67%	8.72%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$492	$85	$76
Ratio of Expenses to Average Net Assets--Note B	0%4	0%	0%
Ratio of Net Investment Income to Average Net Assets	2.07%	1.65%5	1.38%5
Portfolio Turnover Rate	7%	0%	7%

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.
3 Calculated based on average shares outstanding.
4 The average weighted expense ratio of the underlying funds was 0.21%.
5 Annualized.
See accompanying notes, which are an integral part of the financial statements.

59

Target Retirement 2045 Fund

Notes to Financial Statements

Vanguard Target Retirement 2045 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. stocks, international stocks, bonds, and short-term reserves.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Investments in other Vanguard funds (with the exception of VIPER Shares) are valued at that fund’s net asset value. VIPER Shares (and other exchange-traded funds, if applicable) are valued at the latest quoted sales prices or official closing prices taken from their primary market or, if not traded on the valuation date, at the mean of the latest quoted bid and asked prices.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date. 4. Other: Income and capital gain distributions received are recorded on the ex-dividend date. 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. Under a service agreement, The Vanguard Group furnishes corporate management, administrative, marketing, and distribution services to the fund. The service agreement provides that Vanguard will reimburse the fund’s expenses to the extent of savings in administrative and marketing costs realized by Vanguard in the operation of the fund. Accordingly, all expenses incurred by the fund during the year ended September 30, 2005, were reimbursed by Vanguard. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Distributions are determined on a tax basis and may differ from net investment income and 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 certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, at September 30, 2005, the fund had $3,694,000 of ordinary income and $4,000 of long-term capital gains available for distribution.

At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $24,518,000, consisting of unrealized gains of $25,376,000 on securities that had risen in value since their purchase and $858,000 in unrealized losses on securities that had fallen in value since their purchase.

60

Target Retirement 2045 Fund

D. During the year ended September 30, 2005, the fund purchased $400,238,000 of investment securities and sold $17,869,000 of investment securities, other than temporary cash investments.

E. Capital shares issued and redeemed were:

	Year Ended Sept. 30, 2005	Sept. 1, 2004, to Sept. 30, 20041	Oct. 27, 20032 to Aug. 31, 2004
		Shares (000)
Issued	35,327	736	7,741
Issued in Lieu of Cash Distributions	149	--	4
Redeemed	(3,731)	(110)	(664)
Net Increase (Decrease) in Shares Outstanding	31,745	626	7,081

1 The fund's fiscal year-end changed from August 31 to September 30, effective September 30, 2004.
2 Inception.

61

Report of Independent Registered
Public Accounting Firm

To the Shareholders and Trustees of Vanguard Target Retirement Funds:

In our opinion, the accompanying statements of net assets 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 Target Retirement Income Fund, Vanguard Target Retirement 2005 Fund, Vanguard Target Retirement 2015 Fund, Vanguard Target Retirement 2025 Fund, Vanguard Target Retirement 2035 Fund and Vanguard Target Retirement 2045 Fund (hereafter referred to as the “Funds”) at September 30, 2005, the results of each of their operations for the year then ended and the changes in each of their net assets and the financial highlights for each of the periods indicated, 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 at September 30, 2005 by correspondence with the custodian and by agreement to the underlying ownership records for the Vanguard funds, provide a reasonable basis for our opinion

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania

November 7, 2005

62

Special 2005 tax information (unaudited) for Vanguard Target Retirement Funds

This information for the fiscal year ended September 30, 2005, is included pursuant to provisions of the Internal Revenue Code.

The funds distributed capital gain dividends (from net long-term capital gains) to shareholders during the fiscal year as follows:

Fund	Long-Term Gain Distributions ($000)
Target Retirement Income Fund	151
Target Retirement 2005 Fund	112
Target Retirement 2015 Fund	143
Target Retirement 2025 Fund	117
Target Retirement 2035 Fund	21
Target Retirement 2045 Fund	1

The funds distributed qualified dividend income to shareholders during the fiscal year as follows:

Fund	Qualified Dividend Income ($000)
Target Retirement Income Fund	2,180
Target Retirement 2005 Fund	1,246
Target Retirement 2015 Fund	3,724
Target Retirement 2025 Fund	4,333
Target Retirement 2035 Fund	3,041
Target Retirement 2045 Fund	1,296

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends-received deduction is as follows:

Fund	Percentage
Target Retirement Income Fund	9.5
Target Retirement 2005 Fund	17.0
Target Retirement 2015 Fund	23.3
Target Retirement 2025 Fund	31.5
Target Retirement 2035 Fund	50.4
Target Retirement 2045 Fund	63.1

63

Your Fund’s After-Tax Returns

This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.

Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect the reduced tax rates on ordinary income (including qualified dividend income) and short-term capital gains that became effective as of January 1, 2003, and on long-term capital gains realized on or after May 6, 2003. To calculate qualified dividend income, we use actual prior-year figures and estimates for 2005. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.) Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes. Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.

Average Annual Total Returns: Vanguard Target Retirement Funds
Periods Ended September 30, 2005

	One Year	Since Inception1
Target Retirement Income Fund
Returns Before Taxes	5.73%	6.18%
Returns After Taxes on
Distributions	4.52	5.02
Returns After Taxes on
Distributions and Sale of
Fund Shares	3.80	4.63
Target Retirement 2005 Fund
Returns Before Taxes	6.96%	7.35%
Returns After Taxes on
Distributions	6.23	6.86
Returns After Taxes on
Distributions and Sale of
Fund Shares	4.60	6.01
Target Retirement 2015 Fund
Returns Before Taxes	9.40%	9.06%
Returns After Taxes on
Distributions	8.84	8.69
Returns After Taxes on
Distributions and Sale of
Fund Shares	6.22	7.56
Target Retirement 2025 Fund
Returns Before Taxes	10.80%	10.21%
Returns After Taxes on
Distributions	10.34	9.89
Returns After Taxes on
Distributions and Sale of
Fund Shares	7.15	8.58
Target Retirement 2035 Fund
Returns Before Taxes	13.53%	12.16%
Returns After Taxes on
Distributions	13.16	11.90
Returns After Taxes on
Distributions and Sale of
Fund Shares	8.97	10.31
Target Retirement 2045 Fund
Returns Before Taxes	15.09%	13.31%
Returns After Taxes on
Distributions	14.78	13.08
Returns After Taxes on
Distributions and Sale of
Fund Shares	10.01	11.33

1 October 27, 2003.

64

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 typical fund’s expenses are expressed as a percentage of its average net assets. The Target Retirement Funds have no direct expenses, but each fund bears its proportionate share of the expenses of the underlying funds in which it invests. These indirect expenses make up the fund’s average weighted expense ratio, also expressed as a percentage of average net assets.

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 costs were calculated using each fund’s average weighted expense ratio.

The table below 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.

Six Months Ended September 30, 2005
	Beginning Account Value 3/31/2005	Ending Account Value 9/30/2005	Expenses Paid During Period1
Based on Actual
Income	$1,000.00	$1,032.82	$1.02
2005	1,000.00	1,037.24	1.02
2015	1,000.00	1,045.29	1.03
2025	1,000.00	1,049.82	1.03
2035	1,000.00	1,058.93	1.08
2045	1,000.00	1,063.99	1.09
Based on Hypothetical
Income	$1,000.00	$1,024.07	$1.01
2005	1,000.00	1,024.07	1.01
2015	1,000.00	1,024.07	1.01
2025	1,000.00	1,024.07	1.01
2035	1,000.00	1,024.02	1.07
2045	1,000.00	1,024.02	1.07

1 The calculations are based on the funds’ average weighted underlying expense ratios for the most recent six-month period. The funds’ annualized expense ratios for that period are (in order as listed from top to bottom above) 0.20%, 0.20%, 0.20%, 0.20%, 0.21%, and 0.21%. The dollar amounts shown as “Expenses Paid” are equal to the annualized average weighted expense ratio for the underlying funds 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.

65

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.

Please note that the expenses shown in the table on page 65 are meant to highlight and help you compare ongoing costs only and do not reflect any transactional costs or account maintenance fees. They do not include your fund’s low-balance fee, which is described in the prospectus. If this fee were applied to your account, your costs would be higher. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it 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.

For additional information on operating expenses and other shareholder costs, please refer to the appropriate fund prospectus.

66

Glossary

Average Weighted Expense Ratio. Funds that invest in other Vanguard funds incur no direct expenses, but do bear proportionate shares of the operating, administrative, and advisory expenses of the underlying funds. The average weighted expense ratio is the average of these expense ratios, weighted in proportion to the amount of the fund invested in each underlying fund.

Expense Ratio. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors. Yield. A snapshot of a fund’s income from interest and dividends. The yield, expressed as a percentage of the fund’s net asset value, is based on income earned over the past 30 days and is annualized, or projected forward for the coming year.

67

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 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. Our independent board members bring distinguished backgrounds in business, academia, and public service to their task of working with Vanguard officers to establish the policies and oversee the activities of the funds. Among board members’ responsibilities are selecting investment advisors for the funds; monitoring fund operations, performance, and costs; reviewing contracts; nominating and selecting new trustees/directors; and electing Vanguard officers.

Each trustee serves a fund until its termination; or until the trustee’s retirement, resignation, or death; or otherwise as specified in the fund’s organizational documents. Any trustee may be removed at a shareholders’ meeting by a vote representing two-thirds of the net asset value of all shares of the fund together with shares of other Vanguard funds organized within the same trust. The table on these two pages shows 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.

Chairman of the Board, Chief Executive Officer, and Trustee

John J. Brennan1
Born 1954 Chairman of the Board, Chief Executive Officer, and Trustee since May 1987 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Chairman of the Board, Chief Executive Officer, and Director/ Trustee of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group.
IndependentTrustees
Charles D. Ellis
Born 1937 Trustee since January 2001 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Applecore Partners (pro bono ventures in education); Senior Advisor to Greenwich Associates (international business strategy consulting); Successor Trustee of Yale University; Overseer of the Stern School of Business at New York University; Trustee of the Whitehead Institute for Biomedical Research.
Rajiv L. Gupta
Born 1945 Trustee since December 20012 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Board Member of the American Chemistry Council; Director of Tyco International, Ltd. (diversified manufacturing and services) (since 2005); Trustee of Drexel University and of the Chemical Heritage Foundation.
JoAnn Heffernan Heisen
Born 1950 Trustee since July 1998 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Vice President, Chief Information Officer, and Member of the Executive Committee of Johnson & Johnson (pharmaceuticals/ consumer products); Director of the University Medical Center at Princeton and Women’s Research and Education Institute.

André F. Perold
Born 1952 Trustee since December 2004 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: George Gund Professor of Finance and Banking, Harvard Business School (since 2000); Senior Associate Dean, Director of Faculty Recruiting, and Chair of Finance Faculty, Harvard Business School; Director and Chairman of UNX, Inc. (equities trading firm) (since 2003); Director of registered investment companies advised by Merrill Lynch Investment Managers and affiliates (1985–2004), Genbel Securities Limited (South African financial services firm) (1999–2003), Gensec Bank (1999–2003), Sanlam Investment Management (1999–2001), Sanlam, Ltd. (South African insurance company) (2001–2003), Stockback, Inc. (credit card firm) (2000–2002), and Bulldogresearch.com (investment research) (1999–2001); and Trustee of Commonfund (investment management) (1989–2001).
Alfred M. Rankin, Jr.
Born 1941 Trustee since January 1993 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Chairman, President, Chief Executive Officer, and Director of NACCO Industries, Inc. (forklift trucks/housewares/lignite); Director of Goodrich Corporation (industrial products/aircraft systems and services); Director of Standard Products Company (supplier for the automotive industry) until 1998.
J. Lawrence Wilson
Born 1936 Trustee since April 1985 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Retired Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Director of Cummins Inc. (diesel engines), MeadWestvaco Corp. (packaging products), and AmerisourceBergen Corp. (pharmaceutical distribution); Trustee of Vanderbilt University and of Culver Educational Foundation.
Executive Officers1
Heidi Stam
Born 1956 Secretary since July 2005 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group since November 1997; General Counsel of The Vanguard Group since July 2005; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group since July 2005.
Thomas J. Higgins
Born 1957 Treasurer since July 1998 133 Vanguard Funds Overseen	Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group.
Vanguard Senior Management Team
R. Gregory Barton
Mortimer J. Buckley
James H. Gately
Kathleen C. Gubanich
F. William McNabb, III
Michael S. Miller
Ralph K. Packard
George U. Sauter
Founder
John C. Bogle
Chairman and Chief Executive Officer, 1974-1996

1	Officers of the funds are “interested persons” as defined in the Investment Company Act of 1940.
2	December 2002 for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
	More information about the trustees is in the Statement of Additional Information, available from Vanguard.

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

Connect with Vanguard™ > www.vanguard.com

Fund Information > 800-662-7447	Vanguard, VIPER, VIPERs, Connect with Vanguard, and the ship logo are trademarks of The Vanguard Group, Inc.
Direct Investor Account Services > 800-662-2739
	All other marks are the exclusive property of their
Institutional Investor Services > 800-523-1036	respective owners.
Text Telephone > 800-952-3335
	All comparative mutual fund data are from Lipper Inc.
	or Morningstar, Inc., unless otherwise noted.
	You can obtain a free copy of Vanguard's proxy voting
This material may be used in conjunction	guidelines by visiting our website, www.vanguard.com,
with the offering of shares of any Vanguard	and searching for "proxy voting guidelines," or by calling
fund only if preceded or accompanied by	Vanguard at 800-662-2739. They are also available from
the fund's current prospectus	the SEC's website, www.sec.gov. In addition, you may
	obtain a free report on how the fund voted the proxies for
	securities it owned during the 12 months ended June 30.
	To get the report, visit either www.vanguard.com or
	www.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 202-942-8090. 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 e-mail addressed to
	publicinfo@sec.gov or via regular mail addressed to the
	Public Reference Section, Securities and Exchange
	Commission, Washington, DC 20549-0102.
	(C) 2005 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.
	Q3080 112005

Item 2: Code of Ethics. The Board of Trustees has adopted a code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller of the Registrant and The Vanguard Group, Inc., and to persons performing similar functions.

Item 3: Audit Committee Financial Expert. All of the members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts. The members of the Audit Committee are: Charles D. Ellis, Rajiv L. Gupta, JoAnn Heffernan Heisen, André F. Perold, Alfred M. Rankin, Jr., and J. Lawrence Wilson. All Audit Committee members are independent under applicable rules.

Item 4: Principal Accountant Fees and Services.

(a)     Audit Fees.

Audit Fees of the Registrant

Fiscal Year Ended September 30, 2005: $95,000
Fiscal Year Ended September 30, 2004: N/A

Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group

Fiscal Year Ended September 30, 2005: $2,152,740
Fiscal Year Ended September 30, 2004: $1,685,500

(b)     Audit-Related Fees.

Fiscal Year Ended September 30, 2005: $382,200
Fiscal Year Ended September 30, 2004: $257,800

Includes fees billed in connection with assurance and related services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.

(c)     Tax Fees.

Fiscal Year Ended September 30, 2005: $98,400
Fiscal Year Ended September 30, 2004: $76,400

Includes fees billed in connection with tax compliance, planning and advice services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group and related to income and excise taxes.

(d)     All Other Fees.

Fiscal Year Ended September 30, 2005: $0
Fiscal Year Ended September 30, 2004: $0

Includes fees billed for services related to risk management and privacy matters. Services were provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.

(e)     (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; and (4) other registered investment companies in the Vanguard Group. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.

        In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, members of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.

        The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; or other registered investment companies in the Vanguard Group.

    (2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f)     For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.

(g)    Aggregate Non-Audit Fees.

Fiscal Year Ended September 30, 2005: $98,400
Fiscal Year Ended September 30, 2004: $76,400

Includes fees billed for non-audit services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.

(h)     For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.

Item 5: Not applicable.

Item 6: Not applicable.

Item 7: Not applicable.

Item 8: Not applicable.

Item 9: Not applicable.

Item 10: Not applicable

Item 11: Controls and Procedures.

    (a)    Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

    (b)    Internal Control Over Financial Reporting. There were no significant changes in Registrant’s internal control over financial reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 12: Exhibits.

(a) Code of Ethics.
(b) Certifications.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VANGUARD CHESTER FUNDS
BY:	(signature)
	(HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER

Date:   November 16, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	VANGUARD CHESTER FUNDS
BY:	(signature)
	(HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER

Date:   November 16, 2005

	VANGUARD CHESTER FUNDS
BY:	(signature)
	(HEIDI STAM) THOMAS J. HIGGINS* TREASURER

Date:   November 16, 2005

*By Power of Attorney. See File Number 33-19446, filed on September 23, 2005. Incorporated by Reference.

EX-32

Certification Pursuant to 18 U.S.C. Section 1350,As
Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Name of Issuer: Vanguard Chester Funds

        In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Date: November 16, 2005	/s/ John J. Brennan
	John J. Brennan
	Chief Executive Officer

Certification Pursuant to 18 U.S.C. Section 1350,As
Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Name of Issuer: Vanguard Chester Funds

        In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Date: November 16, 2005	/s/ John J. Brennan
	John J. Brennan
	Chief Executive Officer

EX-99.CODE OF ETHICS

THE VANGUARD GROUP, INC.

CODE OF ETHICS

SECTION 1: BACKGROUND

This Code of Ethics has been approved and adopted by the Board of Directors of The Vanguard Group, Inc. (“Vanguard”) and the Boards of Trustees of each of the Vanguard(R) funds in compliance with Rule 17j-1 under the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act of 1940. Except as otherwise provided, the Code applies to all “Vanguard personnel,” which term includes all employees, officers, Directors and Trustees of Vanguard and the Vanguard funds. Employees, officers, directors, and trustees of Vanguard subsidiaries that provide services to Vanguard funds, including subsidiaries located outside the United States, also are subject to the Code unless the subsidiary has adopted its own Code of Ethics. The Code also contains provisions which apply to the investment advisers to the Vanguard funds (see section 11).

SECTION 2: STATEMENT OF GENERAL FIDUCIARY STANDARDS

This Code of Ethics is based on the overriding principle that Vanguard personnel act as fiduciaries for shareholders’ investments in the Vanguard funds. Accordingly, Vanguard personnel must conduct their activities at all times in accordance with federal securities laws and the following standards:

    a)        SHAREHOLDERS’ INTERESTS COME FIRST. In the course of fulfilling their duties and responsibilities to Vanguard fund shareholders, Vanguard personnel must at all times place the interests of Vanguard fund shareholders first. In particular, Vanguard personnel must avoid serving their own personal interests ahead of the interests of Vanguard fund shareholders.

    b)        CONFLICTS OF INTEREST MUST BE AVOIDED. Vanguard personnel must avoid any situation involving an actual or potential conflict of interest or possible impropriety with respect to their duties and responsibilities to Vanguard fund shareholders.

    c)        COMPROMISING SITUATIONS MUST BE AVOIDED. Vanguard personnel must not take advantage of their position of trust and responsibility at Vanguard. Vanguard personnel must avoid any situation that might compromise or call into question their exercise of full independent judgment in the best interests of Vanguard fund shareholders.

All activities of Vanguard personnel should be guided by and adhere to these fiduciary standards. The remainder of this Code sets forth specific rules and procedures which are consistent with these fiduciary standards. However, all activities by Vanguard personnel are required to conform with these fiduciary standards regardless of whether the activity is specifically covered in this Code.

SECTION 3: DUTY OF CONFIDENTIALITY

Vanguard personnel must keep confidential at all times any nonpublic information they may obtain in the course of their employment at Vanguard. This information includes but is not limited to:

a) information on the Vanguard funds, including recent or impending securities transactions by the funds, activities of the funds’ advisers, offerings of new funds, and closings of funds;

b) information on Vanguard fund shareholders and prospective shareholders, including their identities, investments, and account transactions;

c) information on other Vanguard personnel, including their pay, benefits, position level, and performance ratings; and

d) information on Vanguard business activities, including new services, products, technologies, and business initiatives.

Vanguard personnel have the highest fiduciary obligation not to reveal confidential Vanguard information to any party that does not have a clear and compelling need to know such information.

SECTION 4: GIFT POLICY

Vanguard personnel are prohibited from seeking or accepting gifts of material value from any person or entity, including any Vanguard fund shareholder or Vanguard client, when such gift is in relation to doing business with Vanguard. In certain cases, Vanguard personnel may accept gifts of de minimis value (as determined in accordance with guidelines set forth in Vanguard’s Professional Conduct Policy) but only if they obtain the approval of a Vanguard officer.

SECTION 5: OUTSIDE ACTIVITIES

    a)        PROHIBITIONS ON SECONDARY EMPLOYMENT. Vanguard employees are prohibited from working for any business or enterprise in the financial services industry that competes with Vanguard. In addition, Vanguard employees are prohibited from working for any organization that could possibly benefit from the employee’s knowledge of confidential Vanguard information, such as new Vanguard services and technologies. Beyond these prohibitions, Vanguard employees may accept secondary employment, but only with prior approval from the Vanguard Compliance Department. Vanguard officers are prohibited from accepting or serving in any form of secondary employment unless they have received approval from a Vanguard Managing Director or the Vanguard Chairman and Chief Executive Officer.

1)     REPORTABLE ACTIVITIES:

• All compensated positions held outside of Vanguard. Business activities exempt from this reporting are those in retail businesses; including retail/department stores, food services, etc. All other positions should be reported prior to accepting the position.

        • All entrepreneurial activities.

• Volunteer positions that involve recommending or approving of investments for an organization, i.e., finance committees, treasurer. All other volunteer or civic activities do not need reporting.

• Serving in an official capacity for any federal, state, or local government authority; including serving on the board or in any representative capacity for any civic, public interest, or regional business interest organization, such as a local chamber of commerce or a wildlife protection organization.

• Prior to accepting a position to serve on the board of directors of any publicly traded company, approval must be granted by the Compliance Department.

2)     PROHIBITIONS:

• Crew members may not hold a second job with any company or organization whose activities could create a conflict of interest with their Vanguard employment. This includes, but is not limited to, selling securities, term insurance and fixed or variable annuities, providing investment advice or financial planning, or engaging in any business activity similar to Vanguard’s.

• Crew members are prohibited from working for any organization that could possibly benefit from the crew member’s knowledge of confidential Vanguard information, such as new Vanguard services and technologies.

    b)        PROHIBITION ON SERVICE AS MEMBER OF BOARD OF DIRECTORS. Vanguard officers and employees are prohibited from serving on the board of directors of any publicly traded company without prior approval from the Compliance Department.

    c)        PROHIBITION ON MISUSE OF VANGUARD TIME OR PROPERTY. Vanguard personnel are prohibited from using Vanguard time, equipment, services, personnel, or property for any purposes other than the performance of their duties and responsibilities at Vanguard.

SECTION 6: GENERAL RESTRICTIONS ON TRADING

    a)        TRADING ON KNOWLEDGE OF VANGUARD FUNDS ACTIVITIES. All Vanguard personnel are prohibited from taking personal advantage of their knowledge of recent or impending securities activities of the Vanguard funds or the funds’ investment advisers. In particular, Vanguard personnel are prohibited from purchasing or selling, directly or indirectly, any security when they have actual knowledge that the security is being purchased or sold, or considered for purchase or sale, by a Vanguard fund. This prohibition applies to all securities in which the person has acquired or will acquire “beneficial ownership.” For these purposes, a person is considered to have beneficial ownership in all securities over which the person enjoys economic benefits substantially equivalent to ownership (for example, securities held in trust for the person’s benefit), regardless of who is the registered owner. Under this Code of Ethics, Vanguard personnel are considered to have beneficial ownership of all securities owned by their spouse or minor children.

    b)        VANGUARD INSIDER TRADING POLICY. All Vanguard personnel are subject to Vanguard’s Insider Trading Policy, which is considered an integral part of this Code of Ethics. Vanguard’s Insider Trading Policy prohibits Vanguard personnel from buying or selling any security while in the possession of material nonpublic information about the issuer of the security. The policy also prohibits Vanguard personnel from communicating to third parties any material nonpublic information about any security or issuer of securities. Any violation of Vanguard’s Insider Trading Policy may result in penalties which could include termination of employment with Vanguard.

    c)        TRANSACTIONS IN VANGUARD MUTUAL FUNDS. When purchasing, exchanging, or redeeming shares of Vanguard mutual funds, Vanguard personnel must comply in all respects with the policies and standards set forth in the funds’ prospectuses, including specifically the restrictions on market timing activities and exchanges. The Compliance Department will monitor the trading activity of Vanguard personnel and will review all situations where there has been a redemption of shares of a Vanguard fund purchased within the preceding 30 days (a “short-term trade”). Vanguard personnel may be required to relinquish any profit made on a short-term trade and will be subject to disciplinary action (as noted in Section 13) if the Compliance Department or other appropriate department determines that the short-term trade was detrimental to the interests of a fund or its shareholders or because of a history of frequent trading by the Vanguard personnel. For purposes of this paragraph:

• This policy does not cover purchases and redemptions/sales (i) into or out of money market funds, short-term bond funds, or VIPER(R) Share classes; or (ii) effected on a regular periodic basis by automated means, such as 401(k) purchases or monthly redemptions to a checking or savings account.

    d)        TRADING THROUGH VANGUARD BROKERAGE SERVICES(R). All Vanguard personnel must conduct all their securities transactions through Vanguard Brokerage Services.

SECTION 7A: ADDITIONAL TRADING RESTRICTIONS FOR FUND ACCESS PERSONS

a) APPLICATION. The restrictions of this section 7A apply to all fund access persons. For purposes of the Code of Ethics, “fund access persons” include:

1) any Director or Trustee of Vanguard or a Vanguard fund, excluding disinterested Directors and Trustees (i.e., any Director or Trustee who is not an “interested person” of a Vanguard fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940);

2) any officer of Vanguard or a Vanguard fund; and

3) any employee of Vanguard or a Vanguard fund who in the course of his or her regular duties participates in the selection of a Vanguard fund’s securities or who works in a Vanguard department or unit that has access to information regarding a Vanguard fund’s impending purchases or sales of securities. (See Appendix A for a list of RCs, employees of which are all deemed fund access persons.)

The Vanguard Compliance Department will notify all Vanguard personnel who qualify as fund access persons of their duties and responsibilities under this Code of Ethics. The restrictions of this section 7A apply to all transactions in which a fund access person has or will acquire beneficial ownership (see section 6(a)) of a security, including transactions by a spouse or minor child. However, the restrictions of paragraphs (b) and (c) of this Section 7A do not apply to transactions involving the following types of securities: (i) direct obligations of the Government of the United States; (ii) high quality short-term debt instruments, including bankers’ acceptances, bank certificates of deposit, commercial paper, and repurchase agreements; (iii) shares of registered open-end investment companies (including shares of any Vanguard fund); (iv) shares of exchange-traded funds organized as open-end investment companies or unit investment trusts. In addition, the restrictions do not apply to transactions: (v) in accounts over which the fund access person has no direct or indirect control or influence; or (vi) effected pursuant to an automatic investment program.

b) GENERAL RESTRICTIONS FOR ACCESS PERSONS. Fund access persons are subject to the following restrictions with respect to their securities transactions:

1) PRE-CLEARANCE OF SECURITIES TRANSACTIONS. Fund access persons must receive approval from the Vanguard Compliance Department before purchasing or selling any securities. The Vanguard Compliance Department will notify fund access persons if their proposed securities transactions are permitted under this Code of Ethics.

2) PROHIBITION ON INITIAL PUBLIC OFFERINGS. Fund access persons are prohibited from acquiring securities in an initial public offering.

3) PROHIBITION ON PRIVATE PLACEMENTS. Fund access persons are prohibited from acquiring securities in a private placement without prior approval from the Vanguard Compliance Department. In the event a fund access person receives approval to purchase securities in a private placement, the fund access person must disclose that investment if he or she plays any part in a Vanguard fund’s later consideration of an investment in the issuer.

4) PROHIBITION ON FUTURES AND OPTIONS. Fund access persons are prohibited from entering into, acquiring, or selling any futures contract (including single stock futures) or any option on any security.

5) PROHIBITION ON SHORT-SELLING. Fund access persons are prohibited from selling any security that the access person does not own or otherwise engaging in “short-selling” activities.

6) PROHIBITION ON SHORT-TERM TRADING PROFITS. Fund access persons are prohibited from profiting in the purchase and sale, or sale and purchase, of the same (or related) securities within 60 calendar days. If a fund access person realizes profits on such short-term trades, the fund access person must relinquish such profits to The Vanguard Group Foundation(R).

c) BLACKOUT RESTRICTIONS FOR ACCESS PERSONS. All fund access persons are subject to the following restrictions when their purchases and sales of securities coincide with trades by a Vanguard fund (other than a Vanguard index fund):

1) PURCHASES AND SALES WITHIN THREE DAYS FOLLOWING A FUND TRADE. Fund access persons are prohibited from purchasing or selling any security within three calendar days after a Vanguard fund has traded in the same (or a related) security. In the event that a fund access person makes a prohibited purchase or sale within the three-day period, the fund access person must unwind the transaction and relinquish any gain from the transaction to The Vanguard Group Foundation.

2) PURCHASES WITHIN SEVEN DAYS BEFORE A FUND PURCHASE. A fund access person who purchases a security within seven calendar days before a Vanguard fund purchases the same (or a related) security is prohibited from selling the security for a gain (exclusive of commissions) for a period of six months following the fund’s trade. If a fund access person makes a prohibited sale within the six-month period, the fund access person must relinquish to The Vanguard Group Foundation the difference between the purchase and sales prices.

3) SALES WITHIN SEVEN DAYS BEFORE A FUND SALE. A fund access person who sells a security within seven days before a Vanguard fund sells the same (or a related) security must relinquish to The Vanguard Group Foundation the difference between the fund access person’s sale price and the Vanguard fund’s sale price (assuming the fund access person’s sale price is higher).

d) TRANSACTIONS IN VANGUARD MUTUAL FUNDS. Transactions by fund access persons involving Vanguard mutual funds are subject to the reporting requirements of section 9.

SECTION 7B: ADDITIONAL TRADING RESTRICTIONS FOR VANGUARD ADVISERS, INC. (VAI) ACCESS PERSONS

    a)        APPLICATION. The restrictions of this section apply to all VAI access persons. For purposes of the Code of Ethics, “VAI access persons” include all VAI officers, as well as any associated person of VAI who has access to nonpublic information regarding a VAI client’s securities transactions, is involved in making securities recommendations to VAI clients, or has access to nonpublic information regarding the portfolio holdings of VAI clients. (See Appendix B for a list of RCs, employees of which are all deemed VAI access persons).

The Vanguard Compliance Department will notify all Vanguard personnel who qualify as VAI access persons of their duties and responsibilities under this Code of Ethics. The restrictions of this section 7B apply to all transactions in which a VAI access person has or will acquire beneficial ownership (see section 6(a)) of a security, including transactions by a spouse or minor child. However, the restrictions of paragraphs (b) and (c) of this section 7B do not apply to transactions involving the following types of securities: (i) direct obligations of the Government of the United States; (ii) high quality short-term debt instruments, including bankers’ acceptances, bank certificates of deposit, commercial paper, and repurchase agreements; (iii) shares of registered open-end investment companies (including shares of any Vanguard fund); (iv) shares of exchange-traded funds organized as open-end investment companies or unit investment trusts. In addition, the restrictions do not apply to transactions: (v) in accounts over which the VAI access person has no direct or indirect control or influence; or (vi) effected pursuant to an automatic investment program.

b) GENERAL RESTRICTIONS FOR VAI ACCESS PERSONS. VAI access persons are subject to the following restrictions with respect to their securities transactions:

1) PROHIBITION ON INITIAL PUBLIC OFFERINGS. VAI access persons are prohibited from acquiring securities in an initial public offering.

2) PROHIBITION ON PRIVATE PLACEMENTS. VAI access persons are prohibited from acquiring securities in a private placement without prior approval from the Vanguard Compliance Department. In the event a VAI access person receives approval to purchase securities in a private placement, the VAI access person must disclose that investment if he or she plays any part in a Vanguard client’s later consideration of an investment in the issuer.

3) PROHIBITION ON SHORT-TERM TRADING PROFITS. VAI access persons are prohibited from profiting in the purchase and sale, or sale and purchase, of the same (or related) securities within 60 calendar days. If a VAI access person realizes profits on such short-term trades, the VAI access person must relinquish such profits to The Vanguard Group Foundation.

4) PROHIBITION ON SHORT-SELLING. VAI access persons are prohibited from selling any security that the access person does not own or otherwise engaging in “short-selling” activities.

5) PROHIBITION ON TRADING CERTAIN SECURITIES. VAI access persons are prohibited from acquiring securities (or derivatives of those securities) issued by companies of which the officers or directors are current VAI clients. The Vanguard Compliance Department will maintain a list of the restricted securities to which the prohibitions of this section 7B(b)(5) apply. The Vanguard Compliance Department may waive the prohibition on acquiring securities on the VAI restricted list in appropriate cases (including, for example, cases in which the VAI access person acquires securities as part of an inheritance or through an employer-sponsored employee benefits or compensation program).

c) TRANSACTIONS IN VANGUARD MUTUAL FUNDS. Transactions by VAI access persons involving Vanguard mutual funds are subject to the reporting requirements of section 9.

SECTION 7C: ADDITIONAL TRADING RESTRICTIONS FOR NON-ACCESS PERSONS

    a)        GENERALLY, Vanguard’s Compliance and Legal Departments shall have the authority to apply any or all of the trading restrictions specified in Sections 7A and 7B to all non-access persons or to groups of non-access persons.

    b)        ON AN INDIVIDUAL BASIS, Vanguard’s Compliance and Legal Departments shall have the authority to apply any or all of the trading restrictions specified in Sections 7A and 7B to any individual non-access person for cause. For example, they may require a non-access person who has previously violated the Code or who has a history of frequent trading activity to pre-clear trades.

SECTION 8: ADDITIONAL TRADING RESTRICTIONS FOR INSTITUTIONAL CLIENT CONTACTS

    a)        APPLICATION. The restrictions of this section 8 apply to all Vanguard Institutional client contacts. For purposes of the Code of Ethics, an “Institutional client contact” includes any Vanguard employee who works in a department or unit at Vanguard that has significant levels of interaction or dealings with the management of clients of Vanguard’s Institutional Investor Group (see Appendix C). The Vanguard Compliance Department will notify Vanguard employees who qualify as Institutional client contacts of the restrictions of this Section 8.

b)     PROHIBITION ON TRADING SECURITIES OF INSTITUTIONAL CLIENTS. Vanguard Institutional client contacts are prohibited from acquiring securities issued by clients of the Vanguard Institutional Investor Group (including any options or futures contracts based on such securities). The restrictions of this section 8 apply to all transactions in which Institutional client contacts have acquired or would acquire beneficial ownership (see section 6(a)) of a security, including transactions by a spouse or minor child. However, the restrictions do not apply to transactions in any account over which an individual does not possess any direct or indirect control or influence. The Vanguard Compliance Department will maintain a list of the Institutional clients to which the prohibitions of this section 8 apply. The Vanguard Compliance Department may waive the prohibition on acquiring securities of Institutional clients in appropriate cases (including, for example, cases in which an individual acquires securities as part of an inheritance or through an employer-sponsored employee benefits or compensation program).

SECTION 9: COMPLIANCE PROCEDURES

    a)        APPLICATION. The requirements of this section 9 apply to all Vanguard personnel other than disinterested Directors and Trustees (see section 7A(a)(1)). The requirements apply to all transactions in which Vanguard personnel have acquired or would acquire beneficial ownership (see section 6(a)) of a security, including transactions by a spouse or minor child, except (i) transactions in securities or interests excluded by section 7A(a) of this Code, (ii) securities acquired for accounts over which the person has no direct or indirect control or influence, (iii) transactions effected pursuant to an automatic investment plan, and (iv) information that would duplicate information contained in trade confirmations or account statements provided to Vanguard’s Compliance Department, so long as such reports are received no later than 30 days after the end of each applicable quarter.

    b)        DISCLOSURE OF PERSONAL HOLDINGS. All Vanguard personnel must disclose their personal securities holdings to the Vanguard Compliance Department upon commencement of employment with Vanguard. In addition, and notwithstanding section 9(a)(i), all fund access persons and VAI access persons are required to disclose their holdings in Vanguard mutual funds. These disclosures must identify the title, number of shares, and principal amount with respect to each security holding.

    c)        RECORDS OF SECURITIES TRANSACTIONS. All Vanguard personnel must notify the Vanguard Compliance Department if they have opened or intend to open a brokerage account (see section 6(d)). Vanguard Brokerage Services will supply the Vanguard Compliance Department with duplicate confirmations of securities transactions and copies of all periodic statements.

    d)        CERTIFICATION OF COMPLIANCE. All Vanguard personnel must certify annually to the Vanguard Compliance Department that: (i) they have read and understand this Code of Ethics; (ii) they have complied with all requirements of the Code of Ethics; and (iii) they have reported all transactions required to be reported under the Code of Ethics.

    e)        REPORT VIOLATIONS. Any Vanguard employee who becomes aware of a violation of the Code of Ethics must promptly report such violation to the Vanguard Compliance Department via the Compliance Hotline.

SECTION 10: REQUIRED REPORTS BY DISINTERESTED DIRECTORS AND TRUSTEES

Disinterested Directors and Trustees (see section 7A(a)) are required to report their securities transactions to the Vanguard Compliance Department only in cases where the Director or Trustee knew or should have known during the 15-day period immediately preceding or following the date of the transaction that the security had been purchased or sold, or was being considered for purchase or sale, by a Vanguard fund.

SECTION 11: APPLICATION TO INVESTMENT ADVISERS

a) ADOPTION OF CODE OF ETHICS. Each investment adviser to a Vanguard fund must adopt one or more codes of ethics in compliance with Rule 17j-1 under the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act of 1940 and provide the Vanguard Compliance Department with a copy of the codes of ethics and any subsequent amendments. Each investment adviser is responsible for enforcing its codes of ethics and reporting to the Vanguard Compliance Department on a timely basis any violations of the codes of ethics and resulting sanctions.

b) PREPARATION OF ANNUAL REPORTS. Each investment adviser to a Vanguard fund must prepare an annual report on its codes of ethics for review by the Board of Trustees of the Vanguard fund. This report must contain the following:

1) a description of any issues arising under the adviser’s codes of ethics including, but not limited to, information about any violations of the codes, sanctions imposed in response to such violations, changes made to the codes’ provisions or procedures, and any recommended changes to the codes; and

2) a certification that the investment adviser has adopted such procedures as are reasonably necessary to prevent access persons from violating the codes of ethics.

SECTION 12: REVIEW BY BOARDS OF DIRECTORS AND TRUSTEES

a) REVIEW OF INVESTMENT ADVISERS’ CODE OF ETHICS. Prior to retaining the services of any investment adviser for a Vanguard fund, the Board of Trustees of the Vanguard fund must review the code of ethics adopted by the investment adviser pursuant to Rule 17j-1 under the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act of 1940. The Board of Trustees must receive a certification from the investment adviser that the adviser has adopted such procedures as are reasonably necessary to prevent access persons from violating the adviser’s code of ethics. A majority of the Trustees of the Vanguard fund, including a majority of the disinterested Trustees of the Fund, must determine whether the adviser’s code of ethics contains such provisions as are reasonably necessary to prevent access persons from engaging in any act, practice, or course of conduct prohibited by the anti-fraud provisions of Rule 17j-1 and Rule 204A-1.

b) REVIEW OF VANGUARD ANNUAL REPORTS. The Vanguard Compliance Department must prepare an annual report on this Code of Ethics for review by the Board of Directors of Vanguard and the Boards of Trustees of the Vanguard funds. The report must contain the following:

1) a description of issues arising under the Code of Ethics since the last report including, but not limited to, information about any violations of the Code, sanctions imposed in response to such violations, changes made to the Code’s provisions or procedures, and any recommended changes to the Code; and

2) a certification that Vanguard and the Vanguard Funds have adopted such procedures as are reasonably necessary to prevent access persons from violating the Code of Ethics.

SECTION 13: SANCTIONS

In the event of any violation of this Code of Ethics, Vanguard senior management will impose such sanctions as deemed necessary and appropriate under the circumstances and in the best interests of Vanguard fund shareholders. In the case of any violations by Vanguard employees, the range of sanctions could include a letter of censure, suspension of employment without pay, or permanent termination of employment.

SECTION 14: RETENTION OF RECORDS

Vanguard and/or its subsidiaries must maintain all records required by Rule 17j-1 and Rule 204A-1 including: (i) copies of this Code of Ethics and the codes of ethics of all investment advisers to the Vanguard funds; (ii) records of any violations of the codes of ethics and actions taken as a result of the violations; (iii) copies of all certifications made by Vanguard personnel pursuant to section 9(d); (iv) lists of all Vanguard personnel who are, or within the past five years have been, access persons subject to the trading restrictions of sections 7A and 7B, and lists of the Vanguard compliance personnel responsible for monitoring compliance with those trading restrictions; (v) copies of the annual reports to the Boards of Directors and Trustees pursuant to section 12; and (vi) holdings and transaction reports and any other documentation submitted in substitution for these reports.