-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gs7JuOu0oRwwDdzpqk+7qgLpRW2GNqxt98NcAtREukj3sfCuqxpaqya9hUBzILvp hq4VCELncU1Ed77Y/PwGlQ== 0000932471-03-000781.txt : 20031027 0000932471-03-000781.hdr.sgml : 20031027 20031027151858 ACCESSION NUMBER: 0000932471-03-000781 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031027 EFFECTIVENESS DATE: 20031027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANGUARD ADMIRAL FUNDS CENTRAL INDEX KEY: 0000891190 IRS NUMBER: 232696041 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07043 FILM NUMBER: 03958465 BUSINESS ADDRESS: STREET 1: P.O. BOX 2600, V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 215-669-6295 MAIL ADDRESS: STREET 1: P.O. BOX 2600 V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD ADMIRAL FUNDS INC DATE OF NAME CHANGE: 19920908 N-CSR 1 formncsradmiral.txt VANGUARD ADMIRAL FUNDS--FORM N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-7043 Name of Registrant: VANGUARD ADMIRAL FUNDS Address of Registrant: P.O. BOX 2600, VALLEY FORGE, PA 19482 Name and address of agent for service: R. GREGORY BARTON P.O. BOX 876 VALLEY FORGE, PA 19482 Registrant's telephone number, including area code: (610) 669-1000 Date of fiscal year end: August 31 Date of reporting period: September 1, 2002 - August 31, 2003 ITEM 1: Reports to Shareholders VANGUARD(R) MONEY MARKET FUNDS AUGUST 31, 2003 [GRAPHIC] ANNUAL REPORT [THE VANGUARD GROUP(R) LOGO] LETTER FROM THE CHAIRMAN Fellow Shareholder, During the 12 months ended August 31, 2003, the yields of money market instruments plumbed new depths, which translated into very modest total returns for the Vanguard Money Market Funds. ================================================================================ 2003 TOTAL RETURNS FISCAL YEAR ENDED AUGUST 31 - --------------------------------------------------------------- SEC 7-DAY AVERAGE ANNUALIZED VANGUARD COMPETING YIELD**: VANGUARD MONEY MARKET FUND FUND FUND* 8/31/2003 - --------------------------------------------------------------- PRIME Investor Shares 1.1% 0.6% 0.76% Institutional Shares+ 1.3 1.0 0.95 FEDERAL 1.1 0.7 0.75 TREASURY 1.0 0.7 0.70 ADMIRAL TREASURY++ 1.2 0.7 0.86 - --------------------------------------------------------------- *For the Prime and Federal Funds, derived from data provided by Lipper Inc.; for the Treasury and Admiral Treasury Funds, data provided by iMoneyNet, Inc. **The yield of a money market fund more closely reflects the current earnings of the fund than its total return. +Minimum initial investment is $10 million. ++Minimum initial investment is $50,000. ================================================================================ These returns were nevertheless significantly better than the average returns of our funds' peer groups, as illustrated by the adjacent table. The table also displays each fund's annualized yield as of August 31. One easy-to-overlook achievement in this low-return environment is the funds' continued success in meeting their mandates to preserve principal (the share price of each fund held steady at $1, as is expected but not guaranteed), provide liquidity, and generate superior relative returns. DISMAL AT THE START, THE STOCK MARKET PERKED UP A slumping economy, weak corporate profits, and growing geopolitical tensions weighed heavily on the stock market as our fiscal year began, and a two-month rally from mid-October quickly ran out of steam. However, following the successful conclusion of major combat operations in Iraq, a distinctly upbeat mood began to permeate the market 1 place. Stock prices began to rebound across capitalizations and industry sectors in response to solid corporate earnings announcements and a slew of positive economic reports. The U.S. stock market, as measured by the Wilshire 5000 Total Market Index, returned 14.9% for the fiscal year. Technology and other growth-oriented stocks, which had sustained massive losses during the past few years, were among the most impressive gainers. The market's smaller stocks outpaced larger issues, demonstrating investors' renewed appetite for risk. U.S. investors were rewarded with good returns in many international markets as well, although stock performance was only part of the story. The weakening of the U.S. dollar by almost 10% relative to the euro and Japanese yen transformed results that were mediocre by local-currency standards into strong dollar-denominated returns. INTEREST RATES FELL THROUGH MUCH OF THE FISCAL YEAR, THEN BOUNCED BACK A BIT In the bond market, the fiscal year was marked by two distinctly different phases. Prior to mid-June, the lethargic economy and ongoing flight from equities to bonds drove the prices of bonds higher and their yields lower. The yield of the benchmark 10-year U.S. Treasury note dropped to a 45-year low of 3.11% on June 13. After that point, however, longer- term interest rates rose rapidly, with the yield of the 10-year T-note standing at 4.46% on August 31. For the 12 months, the Lehman Brothers Aggregate Bond Index, a measure of the taxable investment-grade bond market, provided a total return of 4.4%. ================================================================================ MARKET BAROMETER AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED AUGUST 31, 2003 --------------------------------- ONE THREE FIVE YEAR YEARS YEARS - -------------------------------------------------------------------------------- BONDS Lehman Aggregate Bond Index 4.4% 8.2% 6.6% (Broad taxable market) Lehman Municipal Bond Index 3.1 6.5 5.3 Citigroup 3-Month Treasury Bill Index 1.3 2.9 3.8 - -------------------------------------------------------------------------------- STOCKS Russell 1000 Index (Large-caps) 12.9% -11.4% 3.1% Russell 2000 Index (Small-caps) 29.1 -1.2 9.5 Wilshire 5000 Index (Entire market) 14.9 -10.7 3.5 MSCI All Country World Index Free ex USA (International) 12.2 -10.0 1.1 ================================================================================ CPI Consumer Price Index 2.2% 2.2% 2.5% ================================================================================ Corporate bonds outperformed Treasuries across all maturities. High-yield corporate bonds performed spectacularly--the Lehman High 2 Yield Index, which tracks the performance of bonds issued by companies with low credit ratings, returned 24.9% for the period. ====================================================== CHANGES IN YIELDS SEC 7-DAY ANNUALIZED YIELD -------------------------- AUGUST 31, AUGUST 31, MONEY MARKET FUND 2003 2002 - ------------------------------------------------------ Prime Investor Shares 0.76% 1.53% Institutional Shares 0.95 1.77 Federal 0.75 1.56 Treasury 0.70 1.44 Admiral Treasury 0.86 1.62 - ------------------------------------------------------ Short-term interest rates generally declined for the 12 months, but rose somewhat toward the end. In an effort to add fuel to the economic recovery, the Federal Reserve Board trimmed its target for the federal funds rate twice--in November 2002 and June 2003--by a total of 75 basis points (0.75 percentage point). The rate stood at 1.00% at the fiscal year-end. The yield of the 3-month Treasury bill, which typically lags Fed moves, began the fiscal year at 1.67% and closed at 0.97% after falling to a low of 0.81% in mid-June. ALREADY LOW INTEREST RATES HEADED EVEN LOWER The result of the Federal Reserve's long campaign to reduce short-term interest rates has been most visible in the returns of money market instruments. When the fiscal year opened, the annualized yields of the Vanguard Money Market Funds hovered between 1% and 2%, lows uncharted since the introduction of the money market mutual fund in the 1970s. In the ensuing 12 months, as the Fed trimmed its target for short-term rates from 1.75% to 1.00%, money market yields moved even lower. The Investor Shares of Vanguard Prime Money Market Fund, our oldest and largest money market fund, returned 1.1%--their lowest fiscal-year return since the fund's June 1975 inception. The Institutional Shares of Vanguard Prime Money Market Fund returned 1.3%, our money market funds' best result. Institutional investors' significant account balances create economies of scale that reduce fund operating costs, enhancing returns. (The Institutional Shares, which require a minimum investment of $10 million, carried an expense ratio of 0.10% in fiscal 2003; the Investor Shares, with a minimum investment requirement of just $3,000, operated at an expense ratio of 0.32%.) Vanguard Treasury Money Market Fund's 1.0% return reflected its exclusive focus on T-bills, which are generally the lowest yielding, 3 but highest quality, money market securities. Vanguard Federal Money Market Fund, which seeks to enhance the returns of an all-Treasury portfolio by investing in short-term securities issued by federal agencies, returned 1.1%. IN THE LONG RUN, COSTS ARE KEY Although skilled portfolio management is critical to obtaining the largest possible share of the returns available in the money market, the rewards of good management can be realized only if operating expenses are low, too. The Vanguard Money Market Funds boast some of the lowest operating costs in the industry, which is why each fund outperformed its respective peer group average in 2003. For example, the 1.1% return of the Investor Shares of the Prime Money Market Fund was almost twice the 0.6% return of the average competitor. Not coincidentally, our fund boasted an expense advantage over the average competitor of 0.6 percentage points. The role of costs in money market fund returns becomes especially clear over longer time periods. The table below shows the average annual returns of the Vanguard Money Market Funds and those of their peer groups for the ten years ended August 31, 2003. It also displays how equal investments in our funds and their average competitors would have grown. In each case, the Vanguard fund produced a higher total return--and created more wealth for shareholders--than its average peer. ================================================================================ TOTAL RETURNS TEN YEARS ENDED AUGUST 31, 2003 - -------------------------------------------------------------------------------- FINAL VALUE OF A $10,000 AVERAGE ANNUAL TOTAL RETURN INITIAL INVESTMENT* ------------------------------ ------------------------ VANGUARD AVERAGE VANGUARD AVERAGE MONEY MARKET FUND FUND COMPETING FUND FUND COMPETING FUND - -------------------------------------------------------------------------------- Prime Investor Shares 4.5% 3.9% $ 15,478 $ 14,694 Institutional Shares 4.7 4.3 15,762,009 15,303,223 Federal 4.4 3.9 15,415 14,693 Treasury 4.2 3.8 15,061 14,562 Admiral Treasury 4.4 3.8 76,585 72,809 - -------------------------------------------------------------------------------- *For Prime Money Market Institutional Shares, final value of a $10 million initial investment; for Admiral Treasury Money Market, final value of a $50,000 initial investment. ================================================================================ 4 TIMELESS PRINCIPLES AMID PERSISTENT CHANGE Since early 2000, the financial markets have followed trajectories unfamiliar to most market participants. Stocks endured one of the longest and deepest declines in financial history, while interest rates crept down to levels not seen in a generation or more. In recent months, the cycles seemed to turn: Stocks produced exceptional returns, and interest rates began to rise. These events are in fact no more than extreme manifestations of the uncertainty that always rules the financial markets. We believe that the best approach to this uncertainty is the faithful use of time-tested principles: balance, diversification, and low costs. A balance among stocks, bonds, and money market funds allows you to pursue growth of capital while securing some protection from the markets' inevitable downturns. Due to their stability and liquidity, money market funds can play a special role as a repository for money needed for short-term goals. In any asset mix, low costs are key to ensuring that you reap the maximum possible share of the financial markets' rewards. We thank you for entrusting your assets to us. Sincerely, /s:/ John J. Brennan John J. Brennan CHAIRMAN AND CHIEF EXECUTIVE OFFICER SEPTEMBER 9, 2003 5 REPORT FROM THE ADVISOR The yields of the Vanguard Money Market Funds declined during the past year, as the Federal Reserve Board continued to trim its target for short-term interest rates. Lower yields translated into modest returns for our four portfolios, ranging from 1.0% for Vanguard Treasury Money Market Fund to 1.3% for the Institutional Shares of Vanguard Prime Money Market Fund. Each fund outperformed its average peer. THE INVESTMENT ENVIRONMENT During the first half of the fiscal year, a weak stock market and geopolitical uncertainties restrained economic growth. But in March, once the war in Iraq was under way, business and consumer activity improved. In the second calendar quarter, real (inflation-adjusted) gross domestic product (GDP) grew at an annualized rate of 3.3%, well above market expectations. Signs of rising demand from U.S. businesses included a surge in imported goods (up 8.8%) and a decline in business inventories. Stronger demand bodes well for continued economic growth in the second half of the calendar year. ================================================================================ INVESTMENT PHILOSOPHY THE FUNDS REFLECT A BELIEF THAT THE HIGHEST LEVEL OF CURRENT INCOME CONSISTENT WITH CAPITAL PRESERVATION AND LIQUIDITY CAN BE PROVIDED BY HOLDING HIGH-QUALITY MONEY MARKET INSTRUMENTS ISSUED BY FINANCIAL INSTITUTIONAL, NONFINANCIAL CORPORATIONS, THE U.S. GOVERNMENT, AND FEDERAL AGENCIES. ================================================================================ The economy has benefited from stimulative fiscal and monetary policies. For example, the tax reductions recently signed into law were front-loaded in ways that should provide a significant near-term boost to GDP. The extra pocket money should lead to an increase in consumer spending, which has propped up an otherwise anemic economy the past few years. Also driving gains has been the availability of inexpensive credit, especially in the mortgage and home equity markets. The Federal Reserve Board has tried to accelerate the economic expansion as well. In June the Fed lowered the target federal funds rate again, the 13th time since January 2001, bringing it to 1.00%--the lowest level in 45 years. This most recent cut brought the reduction over the 6 Vanguard Money Market Funds' fiscal year to 75 basis points (0.75 percentage point). The Fed's actions, while aimed at helping the economy, have also highlighted the risks implied by unusually low interest rates, namely the possibility of deflation--a general decline in prices. At the end of our fiscal year, one of the most visible economic concerns was weakness in the labor market. While the unemployment rate was 6.1% in August, down from its June peak of 6.4%, the labor market remained weak. Over time, rising unemployment could create a drag on the economy, although it isn't unusual to see such a trend in the early stages of a recovery, as businesses struggle to maintain their productive capacity in an uncertain environment. OUR INVESTMENT APPROACH During the year, we extended the duration of the money market portfolios, anticipating that short-term rates would remain low for an extended period. This positioning allowed us to capture the higher interest rates that were available farther out on the yield curve, enhancing the funds' performance. In the Federal Money Market Fund, we took advantage of periods when the federal funds rate was higher than the Fed's target rate through our management of overnight repurchase agreements. This strategy allowed us to capture the higher rates of return that are periodically available on short-term funding obligations. In both the Federal and Prime Money Market Funds, we increased our exposure to Treasury bills, and reduced our exposure to agency securities, when the yield differential between these two groups narrowed to a point at which the credit-risk-free T-bills became a more attractive option. Toward the end of our fiscal year, revelations concerning the accounting practices at the Federal Home Loan Mortgage Corporation (FHLMC), and the subsequent departure of a number of senior FHLMC executives, led to a rise in the relative yields of all agency securities. In keeping with our conservative investment philosophy, we took steps to reduce both the Federal and Prime Money Market Funds' exposure to FHLMC securities and increase our weighting in Treasury securities. This decision caused us to give up a modest amount of yield, but we believe that the precautionary steps were warranted. 7 After allowing the maturity of the Prime Money Market Fund to increase earlier this year, we've begun to let it drift lower in anticipation that the past year's efforts at fiscal and monetary stimulus may be sufficient to revive the economy. Absent an extraordinary advance in near-term economic activity, however, we expect short-term money market rates to remain at low levels for the rest of the year. Whether rates rise or fall further, we're confident in our ability to provide strong relative returns, in large part because of our low operating costs. Low costs put us in the enviable position of being able to provide portfolios with higher-than-average credit quality and higher-than-average net yield. Robert F. Auwaerter, PRINCIPAL John Hollyer, PRINCIPAL David R. Glocke, PRINCIPAL VANGUARD FIXED INCOME GROUP SEPTEMBER 16, 2003 ================================================================================ IAN MACKINNON RETIRES Vanguard Managing Director Ian A. MacKinnon, who served this company and its shareholders for more than two decades as head of our Fixed Income Group, retired on June 30. It's impossible to adequately summarize Ian's many accomplishments, but I must express my deep gratitude to him for establishing our fixed income practices and philosophy, and for serving our shareholders with great skill, integrity, and commitment since he formed our Fixed Income Group in 1981. He leaves behind an outstanding performance record in our money market and bond funds, a tradition of excellence, and a terrific team of investment professionals. We wish him the very best. Robert F. Auwaerter, who also has more than 20 years' experience managing Vanguard's fixed income funds, now oversees all of the group's portfolio management activities. George U. Sauter, managing director of our Quantitative Equity Group, has assumed overall responsibility for the Fixed Income Group in the newly created position of chief investment officer. --John J. Brennan ================================================================================ 8 ================================================================================ FUND PROFILES AS OF 8/31/2003 These Profiles provide a snapshot of each fund's characteristics. Key terms are defined on page 10. ================================================================================ PRIME MONEY MARKET FUND - ---------------------------------------------------- FINANCIAL ATTRIBUTES Yield Investor Shares 0.8% Institutional Shares 1.0% Average Maturity 63 days Average Quality Aaa Expense Ratio Investor Shares 0.32% Institutional Shares 0.10% - ---------------------------------------------------- - ---------------------------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) Treasury/Agency 51% Aaa 13 Aa 34 A 2 - ---------------------------------------------------- Total 100% - ---------------------------------------------------- - ---------------------------------------------------- SECTOR DIVERSIFICATION (% of portfolio) Finance Certificates of Deposit 18% Commercial Paper 28 Treasury/Agency 51 Other 3 - ---------------------------------------------------- Total 100% - ---------------------------------------------------- FEDERAL MONEY MARKET FUND - ---------------------------------------------------- FINANCIAL ATTRIBUTES Yield 0.8% Average Maturity 64 days Average Quality Agency Expense Ratio 0.32% - ---------------------------------------------------- - ---------------------------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) Treasury/Agency 100% - ---------------------------------------------------- Visit our website at Vanguard.com for regularly updated fund information. 9 FUND PROFILES (CONTINUED) TREASURY MONEY MARKET FUND - ---------------------------------------------------- FINANCIAL ATTRIBUTES Yield 0.7% Average Maturity 66 days Average Quality Treasury Expense Ratio 0.32% - ---------------------------------------------------- - ---------------------------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) Treasury 100% - ---------------------------------------------------- ADMIRAL TREASURY MONEY MARKET FUND - ---------------------------------------------------- FINANCIAL ATTRIBUTES Yield 0.9% Average Maturity 66 days Average Quality Treasury Expense Ratio 0.14% - ---------------------------------------------------- - ---------------------------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) Treasury 100% - ---------------------------------------------------- ================================================================================ GLOSSARY OF INVESTMENT TERMS ================================================================================ AVERAGE MATURITY. The average length of time until securities held by a fund reach maturity and are repaid. - -------------------------------------------------------------------------------- AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the ratings assigned to a fund's holdings by credit-rating agencies. The agencies make their judgment after appraising an issuer's ability to meet its obligations. Quality is graded on a scale, with Aaa or AAA indicating the most creditworthy issuers. U.S. Treasury securities are considered to have the highest credit quality. - -------------------------------------------------------------------------------- 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 interest income. The yield, expressed as a percentage of the fund's net asset value, is based on income earned over the past seven days and is annualized, or projected forward for the coming year. - -------------------------------------------------------------------------------- 10 ================================================================================ PERFORMANCE SUMMARIES AS OF 8/31/2003 All of the returns in this report represent past performance, which cannot be used to predict future returns that may be achieved by the funds. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the funds. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The annualized yields shown reflect the current earnings of the funds more closely than do the average annual returns shown. ================================================================================ PRIME MONEY MARKET FUND - -------------------------------------------------------------------------------- Cumulative Performance August 31, 1993-August 31, 2003 PRIME MONEY MKT AVERAGE MONEY CITIGROUP 3-MONTH FUND INV MARKET FUND T-BILL INDEX --------------- ------------- ----------------- 08/1993 10,000 10,000 10,000 11/1993 10,074 10,064 10,076 02/1994 10,148 10,131 10,153 05/1994 10,235 10,208 10,246 08/1994 10,341 10,300 10,356 11/1994 10,463 10,412 10,480 02/1995 10,609 10,546 10,624 05/1995 10,767 10,692 10,779 08/1995 10,922 10,828 10,933 11/1995 11,073 10,969 11,082 02/1996 11,221 11,106 11,228 05/1996 11,364 11,237 11,371 08/1996 11,512 11,363 11,518 11/1996 11,661 11,499 11,667 02/1997 11,810 11,635 11,813 05/1997 11,967 11,775 11,969 08/1997 12,129 11,913 12,123 11/1997 12,292 12,060 12,279 02/1998 12,456 12,208 12,435 05/1998 12,624 12,360 12,596 08/1998 12,793 12,501 12,756 11/1998 12,958 12,650 12,907 02/1999 13,114 12,790 13,047 05/1999 13,269 12,926 13,196 08/1999 13,428 13,054 13,349 11/1999 13,602 13,210 13,511 02/2000 13,791 13,382 13,686 05/2000 13,995 13,563 13,882 08/2000 14,221 13,749 14,084 11/2000 14,447 13,954 14,301 02/2001 14,665 14,147 14,513 05/2001 14,849 14,303 14,686 08/2001 14,993 14,403 14,825 11/2001 15,101 14,487 14,938 02/2002 15,175 14,539 15,008 05/2002 15,244 14,583 15,073 08/2002 15,307 14,606 15,139 11/2002 15,363 14,644 15,201 02/2003 15,408 14,671 15,249 05/2003 15,446 14,695 15,293 08/2003 15,478 14,694 15,335 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED AUGUST 31, 2003 ---------------------------------- FINAL VALUE OF ONE FIVE TEN A $10,000 YEAR YEARS YEARS INVESTMENT - -------------------------------------------------------------------------------- Prime Money Market Fund Investor Shares 1.12% 3.88% 4.46% $15,478 Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,335 Average Money Market Fund* 0.60 3.29 3.92 14,694 ================================================================================ ================================================================================ FINAL VALUE OF ONE FIVE TEN A $10,000,000 YEAR YEARS YEARS INVESTMENT - -------------------------------------------------------------------------------- Prime Money Market Fund Institutional Shares** 1.33% 4.08% 4.66% $15,762,009 Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,334,793 Average Institutional Money Market Fund+ 1.00 3.74 4.35 15,303,223 ================================================================================ ================================================================================ Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003 - -------------------------------------------------------------------------------- PRIME MONEY MARKET FUND AVERAGE INVESTOR SHARES FUND* FISCAL TOTAL TOTAL YEAR RETURN RETURN - --------------------------------------------- 1994 3.4% 3.0% 1995 5.6 5.1 1996 5.4 4.9 1997 5.4 4.8 1998 5.5 4.9 1999 5.0% 4.4% 2000 5.9 5.3 2001 5.4 4.8 2002 2.1 1.4 2003 1.1 0.6 - --------------------------------------------- SEC 7-Day Annualized Yield (8/31/2003): 0.76% ================================================================================ *Returns for Average Money Market Fund are derived from data provided by Lipper Inc. **Prior to October 28, 1995, total returns are for Vanguard Institutional Money Market Portfolio. +Derived from data provided by Lipper Inc. Note: See Financial Highlights tables on pages 33 and 34 for dividend information. 11 PERFORMANCE SUMMARIES (CONTINUED) ================================================================================ AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003 This table presents average annual total returns through the latest calendar quarter--rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information. TEN YEARS ONE FIVE ------------------------- INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- PRIME MONEY MARKET FUND Investor Shares 6/4/1975 1.25% 4.04% 0.00% 4.50% 4.50% Institutional Shares* 10/3/1989 1.47 4.24 0.00 4.69 4.69 ================================================================================ *Prior to October 28, 1995, total returns are for Vanguard Institutional Money Market Portfolio. 12 FEDERAL MONEY MARKET FUND ================================================================================ Cumulative Performance August 31, 1993-August 31, 2003 FEDERAL MONEY AVERAGE GOV'T. MONEY CITIGROUP 3-MONTH MKT FUND MARKET FUND T-BILL INDEX ------------ -------------------- ----------------- 08/1993 10,000 10,000 10,000 11/1993 10,073 10,063 10,076 02/1994 10,147 10,126 10,153 05/1994 10,232 10,202 10,246 08/1994 10,337 10,294 10,356 11/1994 10,458 10,403 10,480 02/1995 10,601 10,532 10,624 05/1995 10,758 10,675 10,779 08/1995 10,912 10,812 10,933 11/1995 11,061 10,951 11,082 02/1996 11,208 11,082 11,228 05/1996 11,350 11,212 11,371 08/1996 11,496 11,340 11,518 11/1996 11,643 11,475 11,667 02/1997 11,791 11,605 11,813 05/1997 11,946 11,747 11,969 08/1997 12,106 11,887 12,123 11/1997 12,267 12,034 12,279 02/1998 12,429 12,177 12,435 05/1998 12,594 12,335 12,596 08/1998 12,761 12,483 12,756 11/1998 12,923 12,628 12,907 02/1999 13,077 12,759 13,047 05/1999 13,229 12,898 13,196 08/1999 13,387 13,034 13,349 11/1999 13,556 13,184 13,511 02/2000 13,740 13,343 13,686 05/2000 13,941 13,532 13,882 08/2000 14,162 13,726 14,084 11/2000 14,384 13,925 14,301 02/2001 14,598 14,111 14,513 05/2001 14,781 14,274 14,686 08/2001 14,929 14,388 14,825 11/2001 15,041 14,465 14,938 02/2002 15,120 14,510 15,008 05/2002 15,184 14,562 15,073 08/2002 15,245 14,598 15,139 11/2002 15,301 14,630 15,201 02/2003 15,346 14,651 15,249 05/2003 15,384 14,680 15,293 08/2003 15,415 14,693 15,335 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED AUGUST 31, 2003 ----------------------------- FINAL VALUE OF ONE FIVE TEN A $10,000 YEAR YEARS YEARS INVESTMENT - -------------------------------------------------------------------------------- Federal Money Market Fund 1.11% 3.85% 4.42% $15,415 Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,335 Average Government Money Market Fund* 0.65 3.31 3.92 14,693 - -------------------------------------------------------------------------------- ================================================================================ Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003 FEDERAL MONEY MARKET FUND AVERAGE FUND* FISCAL TOTAL TOTAL YEAR RETURN RETURN - ---------------------------------------------------- 1994 3.4% 2.9% 1995 5.6 5.0 1996 5.4 4.9 1997 5.3 4.8 1998 5.4 5.0 1999 4.9% 4.4% 2000 5.8 5.3 2001 5.4 4.8 2002 2.1 1.5 2003 1.1 0.7 - ---------------------------------------------------- SEC 7-Day Annualized Yield (8/31/2003): 0.75% ================================================================================ AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003 This table presents average annual total returns through the latest calendar quarter--rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information. TEN YEARS ONE FIVE ------------------------- INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- Federal Money Market Fund 7/13/1981 1.25% 4.01% 0.00% 4.46% 4.46% ================================================================================ *Average Government Money Market Fund; derived from data provided by Lipper Inc. Note: See Financial Highlights table on page 35 for dividend information. 13 PERFORMANCE SUMMARIES (continued) TREASURY MONEY MARKET FUND ================================================================================ Cumulative Performance August 31, 1993-August 31, 2003 TREASURY MONEY IMONEYNET MFR AVERAGE CITIGROUP 3-MONTH MKT FUND TREASURY MM T-BILL INDEX -------------- --------------------- ----------------- 08/1993 10,000 10,000 10,000 11/1993 10,070 10,064 10,076 02/1994 10,141 10,129 10,153 05/1994 10,222 10,202 10,246 08/1994 10,321 10,294 10,356 11/1994 10,435 10,400 10,480 02/1995 10,570 10,526 10,624 05/1995 10,718 10,666 10,779 08/1995 10,864 10,804 10,933 11/1995 11,006 10,938 11,082 02/1996 11,147 11,070 11,228 05/1996 11,285 11,195 11,371 08/1996 11,426 11,324 11,518 11/1996 11,569 11,455 11,667 02/1997 11,709 11,585 11,813 05/1997 11,857 11,723 11,969 08/1997 12,009 11,865 12,123 11/1997 12,159 12,004 12,279 02/1998 12,312 12,145 12,435 05/1998 12,469 12,290 12,596 08/1998 12,626 12,433 12,756 11/1998 12,775 12,569 12,907 02/1999 12,914 12,693 13,047 05/1999 13,054 12,820 13,196 08/1999 13,199 12,951 13,349 11/1999 13,351 13,091 13,511 02/2000 13,518 13,243 13,686 05/2000 13,704 13,413 13,882 08/2000 13,905 13,596 14,084 11/2000 14,113 13,788 14,301 02/2001 14,314 13,972 14,513 05/2001 14,484 14,123 14,686 08/2001 14,619 14,239 14,825 11/2001 14,725 14,325 14,938 02/2002 14,792 14,377 15,008 05/2002 14,851 14,421 15,073 08/2002 14,907 14,465 15,139 11/2002 14,958 14,502 15,201 02/2003 14,998 14,528 15,249 05/2003 15,032 14,547 15,293 08/2003 15,061 14,562 15,335 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED AUGUST 31, 2003 ----------------------------- FINAL VALUE OF ONE FIVE TEN A $10,000 YEAR YEARS YEARS INVESTMENT - -------------------------------------------------------------------------------- Treasury Money Market Fund* 1.03% 3.59% 4.18% $15,061 Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,335 iMoneyNet Money Fund Report's Average 100% Treasury Fund 0.67 3.21 3.83 14,562 - -------------------------------------------------------------------------------- ================================================================================ Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003 TREASURY MONEY MARKET FUND* AVERAGE FUND** FISCAL TOTAL TOTAL YEAR RETURN RETURN - ---------------------------------------------------- 1994 3.2% 2.9% 1995 5.3 5.0 1996 5.2 4.8 1997 5.1 4.8 1998 5.1 4.8 1999 4.5% 4.2% 2000 5.4 5.0 2001 5.1 4.7 2002 2.0 1.6 2003 1.0 0.7 - ---------------------------------------------------- SEC 7-Day Annualized Yield (8/31/2003): 0.70% ================================================================================ AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003 This table presents average annual total returns through the latest calendar quarter--rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information. TEN YEARS ONE FIVE ---------------------- INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- Treasury Money Market Fund* 3/9/1983 1.16% 3.74% 0.00% 4.22% 4.22% *Prior to December 2, 1996, known as the U.S. Treasury Portfolio. **iMoneyNet Money Fund Report's Average 100% Treasury Fund. Note: See Financial Highlights table on page 36 for dividend information. 14 ADMIRAL TREASURY MONEY MARKET FUND ================================================================================ Cumulative Performance August 31, 1993-August 31, 2003 ADMIRAL TRSY IMONEYNET MFR AVERAGE CITIGROUP 3-MONTH MONEY MKT TREASURY MM T-BILL INDEX ------------- --------------------- ------------------ 08/1993 50,000 50,000 50,000 11/1993 50,370 50,321 50,381 02/1994 50,744 50,643 50,765 05/1994 51,172 51,009 51,228 08/1994 51,691 51,469 51,778 11/1994 52,284 52,001 52,402 02/1995 52,977 52,628 53,118 05/1995 53,742 53,331 53,897 08/1995 54,498 54,022 54,666 11/1995 55,233 54,689 55,408 02/1996 55,963 55,348 56,142 05/1996 56,677 55,976 56,853 08/1996 57,409 56,622 57,589 11/1996 58,149 57,276 58,335 02/1997 58,880 57,925 59,067 05/1997 59,650 58,617 59,845 08/1997 60,437 59,323 60,614 11/1997 61,219 60,020 61,393 02/1998 62,015 60,725 62,176 05/1998 62,833 61,451 62,982 08/1998 63,650 62,166 63,779 11/1998 64,430 62,846 64,534 02/1999 65,156 63,464 65,234 05/1999 65,897 64,101 65,978 08/1999 66,655 64,757 66,744 11/1999 67,454 65,453 67,554 02/2000 68,328 66,215 68,431 05/2000 69,299 67,066 69,409 08/2000 70,348 67,982 70,422 11/2000 71,430 68,938 71,506 02/2001 72,479 69,859 72,564 05/2001 73,366 70,616 73,428 08/2001 74,084 71,197 74,126 11/2001 74,647 71,625 74,688 02/2002 75,020 71,883 75,038 05/2002 75,353 72,106 75,366 08/2002 75,673 72,323 75,697 11/2002 75,964 72,511 76,003 02/2003 76,199 72,642 76,246 05/2003 76,405 72,736 76,467 08/2003 76,585 72,809 76,674 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED AUGUST 31, 2003 ------------------------------ FINAL VALUE OF ONE FIVE TEN A $50,000 YEAR YEARS YEARS INVESTMENT - -------------------------------------------------------------------------------- Admiral Treasury Money Market Fund 1.20% 3.77% 4.36% $76,585 Citigroup 3-Month Treasury Index 1.29 3.75 4.37 76,674 iMoneyNet Money Fund Report's Average 100% Treasury Fund 0.67 3.21 3.83 72,809 - -------------------------------------------------------------------------------- ================================================================================ Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003 ADMIRAL TREASURY AVERAGE MONEY MARKET FUND FUND* FISCAL TOTAL TOTAL YEAR RETURN RETURN - ---------------------------------------- 1994 3.4% 2.9% 1995 5.4 5.0 1996 5.3 4.8 1997 5.3 4.8 1998 5.3 4.8 1999 4.7% 4.2% 2000 5.5 5.0 2001 5.3 4.7 2002 2.1 1.6 2003 1.2 0.7 - --------------------------------------------- SEC 7-Day Annualized Yield (8/31/2003): 0.86% ================================================================================ AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003 This table presents average annual total returns through the latest calendar quarter--rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information. TEN YEARS ONE FIVE -------------------- INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL - -------------------------------------------------------------------------------- Admiral Treasury Money Market Fund 12/14/1992 1.33% 3.92% 0.00% 4.39% 4.39% ================================================================================ *iMoneyNet Money Fund Report's Average 100% Treasury Fund. Note: See Financial Highlights table on page 37 for dividend information. 15 ABOUT YOUR FUND EXPENSES All mutual funds have operating expenses. These expenses 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 net assets. This figure is known as the expense ratio. A HYPOTHETICAL EXAMPLE We believe it is important for you to understand the impact of costs on your investment. The following example illustrates the costs that you would incur over a 12-month period if you invested $10,000 in the fund, using the fund's actual return and operating expenses for the fiscal year ended August 31, 2003. For comparative purposes, we also list the average expense ratio for the fund's peer group, which is derived from data provided by Lipper Inc. ================================================================================ FUND COST OF $10,000 PEER GROUP MONEY MARKET FUND EXPENSE RATIO INVESTMENT IN FUND EXPENSE RATIO - -------------------------------------------------------------------------------- PRIME Investor Shares 0.32% $32 0.92% Institutional Shares 0.10 10 0.44 FEDERAL 0.32 32 0.78 TREASURY 0.32 32 0.77 ADMIRAL TREASURY 0.14 14 0.77 ================================================================================ The funds do not charge transaction fees; these results apply whether or not you redeemed your investment at the end of the given period. Your actual costs may have been higher or lower, depending on the amount of your investment and your holding period. Peer-group ratios capture data through year-end 2002. You can find more information about a fund's expense ratio, including annual expense ratios for the past five years, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to the fund's prospectus. The prospectus presents hypothetical shareholder costs over various time periods based upon a $10,000 investment and a return of 5% a year. This standardized example, which appears in all mutual fund prospectuses, may be useful to you in comparing the costs of investing in different funds. 16 FINANCIAL STATEMENTS AS OF 8/31/2003 STATEMENT OF NET ASSETS This Statement provides a detailed list of each fund's holdings on the last day of the reporting period, including each security's maturity date, coupon rate or yield to maturity at the time of purchase, and statement-date market value. Securities are grouped and subtotaled by type of instrument (U.S. government obligations, commercial paper, certificates of deposit, etc.). Other assets are added to, and liabilities are subtracted from, the value of Total Investments to calculate the fund's Net Assets. Finally, Net Assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) Per Share. Each fund's objective is to maintain a constant NAV of $1.00 per share. At the end of the Statement of Net Assets of each fund, you will find a table displaying the composition of the fund's net assets. Virtually the entire amount of net assets consists of Paid-in Capital (money invested by shareholders). Undistributed Net Investment Income is usually zero because the fund distributes its net income to shareholders as a dividend each day, and Accumulated Realized Gains (Losses) are very small because the fund seldom realizes any significant gains or losses on sales of securities.
=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS (51.4%) Federal Home Loan Bank 1.207% 9/3/2003 150,000 149,990 Federal Home Loan Bank 1.025% 9/8/2003(1) 465,000 464,999 Federal Home Loan Bank 0.99% 9/15/2003(1) 1,170,000 1,169,973 Federal Home Loan Bank 1.01% 9/17/2003 47,407 47,386 Federal Home Loan Bank 1.177% 9/26/2003 97,990 97,910 Federal Home Loan Bank 1.062% 11/5/2003 237,700 237,245 Federal Home Loan Bank 1.052% 11/12/2003 305,842 305,200 Federal Home Loan Bank 1.052% 11/14/2003 200,000 199,568 Federal National Mortgage Assn. 1.227% 9/3/2003 400,575 400,548 Federal National Mortgage Assn. 1.196% 10/15/2003 255,000 254,679 Federal National Mortgage Assn. 1.167% 10/22/2003 244,255 243,899 Federal National Mortgage Assn. 1.197% 10/29/2003 161,129 160,856 Federal National Mortgage Assn. 1.105% 10/31/2003 300,000 299,450 Federal National Mortgage Assn. 1.176% 11/5/2003 1,601,386 1,598,305 Federal National Mortgage Assn. 1.105% 11/12/2003 532,175 531,014 Federal National Mortgage Assn. 1.116% 11/19/2003 1,435,590 1,432,124 Federal National Mortgage Assn. 1.083% 11/26/2003 400,000 398,968 Federal National Mortgage Assn. 1.096% 12/3/2003 100,000 99,718 U.S. Treasury Bill 1.179% 9/4/2003 1,750,000 1,749,840 U.S. Treasury Bill 1.096% 9/11/2003 499,500 499,348 U.S. Treasury Bill 1.111% 9/18/2003 999,500 998,969 U.S. Treasury Bill 1.154% 9/25/2003 1,000,000 999,235 U.S. Treasury Bill 1.101% 10/2/2003 500,000 499,529 U.S. Treasury Bill 1.136% 10/9/2003 1,000,000 998,818 U.S. Treasury Bill 1.161% 10/16/2003 1,250,000 1,248,174 U.S. Treasury Bill 1.146% 10/30/2003 500,000 499,062 U.S. Treasury Bill 1.134% 11/6/2003 1,000,000 997,976 U.S. Treasury Bill 1.07% 11/13/2003 500,000 498,920 U.S. Treasury Bill 1.075% 11/28/2003 1,210,000 1,206,979 U.S. Treasury Bill 0.979% 12/11/2003 1,196,100 1,192,820 U.S. Treasury Bill 0.939% 1/2/2004 500,000 498,403 ===================================================================================================================
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=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- U.S. Treasury Bill 0.944% 1/8/2004 1,015,000 1,011,563 U.S. Treasury Bill 0.934% 1/15/2004 2,003,500 1,996,404 U.S. Treasury Bill 0.949% 1/22/2004 800,000 796,997 U.S. Treasury Bill 0.984% 1/29/2004 980,000 975,998 U.S. Treasury Bill 1.035% 2/19/2004 789,450 785,559 U.S. Treasury Bill 1.045% 2/26/2004 1,000,000 994,858 - ------------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $26,541,284) 26,541,284 - ------------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER (28.0%) - ------------------------------------------------------------------------------------------------------------------- FINANCE--AUTO (6.2%) BMW US Capital Corp. 1.061% 10/6/2003 175,250 175,069 DaimlerChrysler Rev. Auto Conduit LLC 1.032% 9/17/2003 73,345 73,311 DaimlerChrysler Rev. Auto Conduit LLC 1.061% 9/18/2003 47,271 47,247 DaimlerChrysler Rev. Auto Conduit LLC 1.061% 9/22/2003 20,030 20,018 DaimlerChrysler Rev. Auto Conduit LLC 1.042% 9/24/2003 75,000 74,950 DaimlerChrysler Rev. Auto Conduit LLC 1.032% 10/15/2003 90,000 89,887 DaimlerChrysler Rev. Auto Conduit LLC 1.062% 10/16/2003 13,448 13,430 DaimlerChrysler Rev. Auto Conduit LLC 1.072% 10/16/2003 20,069 20,042 DaimlerChrysler Rev. Auto Conduit LLC 1.072% 11/5/2003 166,358 166,037 FCAR Owner Trust 1.032% 10/2/2003 150,000 149,867 FCAR Owner Trust 1.032% 10/6/2003 300,000 299,698 FCAR Owner Trust 1.051% 10/7/2003 100,000 99,895 FCAR Owner Trust 1.082% 11/12/2003 150,000 149,676 FCAR Owner Trust 1.082% 11/13/2003 100,000 99,781 FCAR Owner Trust 1.082% 11/14/2003 105,000 104,767 FCAR Owner Trust 1.082% 11/17/2003 94,500 94,282 New Center Asset Trust 1.093% 9/8/2003 100,000 99,979 New Center Asset Trust 1.032% 10/6/2003 210,000 209,787 New Center Asset Trust 1.032% 10/8/2003 125,000 124,868 New Center Asset Trust 1.062% 10/27/2003 100,000 99,835 New Center Asset Trust 1.072% 11/17/2003 214,970 214,478 New Center Asset Trust 1.073% 11/19/2003 250,000 249,413 Toyota Motor Credit 1.042% 9/4/2003(2) 16,960 16,958 Toyota Motor Credit 1.032% 9/5/2003(2) 21,000 20,998 Toyota Motor Credit 0.972% 9/8/2003(2) 50,000 49,991 Toyota Motor Credit 0.972% 9/9/2003(2) 25,000 24,995 Toyota Motor Credit 1.002% 9/9/2003(2) 45,000 44,990 Toyota Motor Credit 0.972% 9/10/2003(2) 50,000 49,988 Toyota Motor Credit 1.022% 10/7/2003(2) 44,500 44,455 Toyota Motor Credit 1.022% 10/9/2003(2) 26,059 26,031 Toyota Motor Credit 1.022% 10/15/2003(2) 24,000 23,970 Toyota Motor Credit 1.032% 10/27/2003(2) 58,000 57,907 Toyota Motor Credit 1.032% 10/28/2003(2) 38,150 38,088 Toyota Motor Credit 1.052% 10/30/2003(2) 48,000 47,917 Toyota Motor Credit 1.062% 10/31/2003(2) 50,000 49,912 Toyota Motor Credit 1.062% 11/21/2003(2) 4,120 4,110 ------------- 3,176,627 ------------- FINANCE--OTHER (7.5%) American Express Credit Corp. 1.011% 9/8/2003 100,000 99,980 American Express Credit Corp. 1.031% 9/29/2003 50,000 49,960 American Express Credit Corp. 1.031% 9/30/2003 50,000 49,958 ===================================================================================================================
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=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- American Express Credit Corp. 1.041% 10/20/2003 50,000 49,929 Asset Securitization Cooperative Corp. 1.031% 9/2/2003(2) 120,000 119,997 Asset Securitization Cooperative Corp. 1.031% 9/3/2003(2) 70,000 69,996 Asset Securitization Cooperative Corp. 1.031% 9/9/2003(2) 50,000 49,989 Cafco, LLC 1.061% 10/9/2003(2) 112,495 112,369 Cafco, LLC 1.072% 10/28/2003(2) 14,600 14,575 Ciesco LLC 1.042% 10/7/2003(2) 91,000 90,905 Corporate Receivables Corp. LLC 0.992% 9/12/2003(2) 19,000 18,994 Corporate Receivables Corp. LLC 1.041% 9/24/2003(2) 29,000 28,981 Delaware Funding 1.036% 9/17/2003(2) 69,500 69,468 Delaware Funding 1.061% 9/18/2003(2) 44,000 43,978 Delaware Funding 1.061% 9/19/2003(2) 74,795 74,755 General Electric Capital Corp. 1.092% 9/2/2003 15,000 15,000 General Electric Capital Corp. 1.133% 9/8/2003 155,000 154,966 General Electric Capital Corp. 1.138% 9/9/2003 44,000 43,989 General Electric Capital Corp. 1.072% 11/19/2003 215,000 214,495 General Electric Capital Corp. 1.082% 11/21/2003 85,000 84,793 GovCo Inc. 1.031% 9/15/2003(2) 50,000 49,980 GovCo Inc. 1.042% 10/7/2003(2) 73,000 72,924 GovCo Inc. 1.032% 10/10/2003(2) 100,000 99,888 GovCo Inc. 1.032% 10/17/2003(2) 50,000 49,934 GovCo Inc. 1.042% 10/20/2003(2) 31,954 31,908 GovCo Inc. 1.072% 10/27/2003(2) 18,300 18,270 GovCo Inc. 1.062% 11/10/2003(2) 100,000 99,794 GovCo Inc. 1.062% 11/20/2003(2) 81,000 80,809 GovCo Inc. 1.072% 11/21/2003(2) 68,050 67,886 GovCo Inc. 1.082% 11/24/2003(2) 26,500 26,433 Intrepid Funding Master Trust 1.07% 9/15/2003(2) 95,083 95,043 Old Line Funding Corp. 1.031% 9/4/2003(2) 23,036 23,034 Old Line Funding Corp. 1.031% 9/8/2003(2) 12,049 12,047 Old Line Funding Corp. 1.031% 9/9/2003(2) 109,418 109,393 Old Line Funding Corp. 1.031% 9/12/2003(2) 111,911 111,876 Old Line Funding Corp. 1.032% 9/15/2003(2) 233,671 233,577 Old Line Funding Corp. 1.032% 9/16/2003(2) 19,308 19,300 Old Line Funding Corp. 1.051% 9/22/2003(2) 16,000 15,990 Old Line Funding Corp. 1.051% 9/23/2003(2) 34,141 34,119 Old Line Funding Corp. 1.061% 10/8/2003(2) 20,000 19,978 Preferred Receivables Funding Co. 1.071% 9/3/2003(2) 59,920 59,916 Preferred Receivables Funding Co. 1.071% 9/4/2003(2) 27,080 27,078 Preferred Receivables Funding Co. 1.061% 9/17/2003(2) 68,704 68,672 Preferred Receivables Funding Co. 1.061% 9/22/2003(2) 94,000 93,942 Private Export Funding Corp. 1.022% 10/21/2003(2) 28,000 27,960 Triple A One Funding Corp. 1.05% 9/3/2003(2) 61,673 61,669 Triple A One Funding Corp. 1.051% 9/8/2003(2) 7,775 7,773 Triple A One Funding Corp. 1.06% 9/10/2003(2) 20,059 20,054 Triple A One Funding Corp. 1.07% 9/12/2003(2) 29,414 29,404 Triple A One Funding Corp. 1.07% 9/16/2003(2) 90,700 90,660 Triple A One Funding Corp. 1.05% 9/19/2003(2) 40,000 39,979 Variable Funding Capital Corp. 1.06% 9/3/2003(2) 192,920 192,909 Variable Funding Capital Corp. 1.052% 9/4/2003(2) 17,000 16,998 Variable Funding Capital Corp. 1.031% 9/9/2003(2) 40,000 39,991 Yorktown Capital LLC 1.071% 9/17/2003(2) 103,514 103,465 ===================================================================================================================
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=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- Yorktown Capital LLC 1.071% 9/18/2003(2) 80,022 79,982 Yorktown Capital LLC 1.061% 9/22/2003(2) 60,073 60,036 Yorktown Capital LLC 1.09% 9/26/2003(2) 6,981 6,976 Yorktown Capital LLC 1.071% 10/10/2003(2) 60,860 60,789 Yorktown Capital LLC 1.062% 10/21/2003(2) 22,950 22,916 Yorktown Capital LLC 1.083% 11/3/2003(2) 43,421 43,338 ---------- 3,883,767 ---------- FOREIGN BANKS (6.4%) ABN-AMRO North America Finance Inc. 0.875% 9/25/2003 40,000 39,972 ABN-AMRO North America Finance Inc. 1.022% 10/14/2003 150,000 149,817 ABN-AMRO North America Finance Inc. 1.052% 11/6/2003 200,000 199,615 ANZ (Delaware) Inc. 1.073% 9/12/2003 290,700 290,608 ANZ (Delaware) Inc. 1.032% 10/1/2003 50,000 49,957 ANZ (Delaware) Inc. 1.032% 10/9/2003 70,000 69,924 ANZ (Delaware) Inc. 1.052% 11/18/2003 100,000 99,772 CBA (Delaware) Finance Inc. 1.031% 9/8/2003 75,000 74,985 CBA (Delaware) Finance Inc. 1.032% 10/7/2003 60,000 59,938 CBA (Delaware) Finance Inc. 1.022% 10/10/2003 100,000 99,889 CBA (Delaware) Finance Inc. 1.042% 10/29/2003 100,000 99,832 Danske Corp. 1.133% 9/8/2003 100,000 99,978 Danske Corp. 1.031% 9/15/2003 85,000 84,966 Danske Corp. 1.032% 10/2/2003 75,000 74,933 Danske Corp. 1.022% 10/14/2003 175,000 174,787 Fortis Funding LLC 0.982% 9/12/2003(2) 50,000 49,985 Fortis Funding LLC 1.031% 9/15/2003(2) 108,700 108,656 Fortis Funding LLC 1.031% 9/16/2003(2) 91,300 91,261 Fortis Funding LLC 1.032% 9/26/2003(2) 49,400 49,365 HBOS Treasury Services PLC 1.032% 10/14/2003 2,100 2,097 HBOS Treasury Services PLC 1.032% 10/22/2003 25,000 24,963 HBOS Treasury Services PLC 1.052% 10/24/2003 10,000 9,985 Rabobank Nederlanden 1.072% 9/8/2003 175,000 174,964 Royal Bank of Canada 0.982% 9/22/2003 220,400 220,272 Societe Generale N.A. Inc. 1.022% 9/3/2003 35,000 34,998 Societe Generale N.A. Inc. 1.032% 9/10/2003 104,544 104,517 Societe Generale N.A. Inc. 0.927% 9/24/2003 110,000 109,935 UBS Finance (Delaware), Inc. 1.002% 9/10/2003 174,700 174,656 Westpac Capital Corp. 1.032% 10/3/2003 100,000 99,908 Westpac Trust Securities New Zealand Ltd. 1.203% 9/3/2003 75,000 74,995 Westpac Trust Securities New Zealand Ltd. 1.042% 9/25/2003 47,950 47,917 Westpac Trust Securities New Zealand Ltd. 1.032% 9/26/2003 150,000 149,893 Westpac Trust Securities New Zealand Ltd. 1.042% 10/27/2003 76,000 75,877 Westpac Trust Securities New Zealand Ltd. 1.062% 11/13/2003 10,700 10,677 Westpac Trust Securities New Zealand Ltd. 1.072% 11/21/2003 40,000 39,904 ----------- 3,323,798 ----------- FOREIGN FINANCE--OTHER (2.1%) CDC Commercial Paper Corp. 1.022% 10/14/2003(2) 100,000 99,878 CDC Commercial Paper Corp. 1.042% 10/16/2003(2) 75,000 74,902 CDC Commercial Paper Corp. 1.022% 10/17/2003(2) 149,400 149,205 CDC Commercial Paper Corp. 1.052% 11/4/2003(2) 50,000 49,907 CDC Commercial Paper Corp. 1.052% 11/10/2003(2) 17,000 16,965 CDC Commercial Paper Corp. 1.052% 11/12/2003(2) 66,271 66,132 ===================================================================================================================
20
=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- CDC Commercial Paper Corp. 1.062% 11/17/2003(2) 50,000 49,887 Canadian Wheat Board 1.002% 9/23/2003 35,000 34,979 KFW International Finance Inc. 1.133% 9/4/2003(2) 27,800 27,798 KFW International Finance Inc. 1.072% 9/5/2003(2) 16,574 16,572 KFW International Finance Inc. 1.072% 9/10/2003(2) 50,000 49,987 KFW International Finance Inc. 0.892% 9/26/2003(2) 75,000 74,949 KFW International Finance Inc. 1.042% 11/4/2003(2) 50,000 49,908 KFW International Finance Inc. 1.042% 11/5/2003(2) 109,310 109,105 KFW International Finance Inc. 1.042% 11/6/2003(2) 130,000 129,752 KFW International Finance Inc. 1.052% 11/14/2003(2) 50,000 49,892 Oesterreichische Kontrollbank 1.03% 9/15/2003 18,300 18,293 ---------- 1,068,111 ---------- FOREIGN INDUSTRIAL (4.6%) GlaxoSmithKline Finance PLC 1.203% 9/4/2003(2) 249,400 249,375 GlaxoSmithKline Finance PLC 0.982% 9/10/2003(2) 27,000 26,993 GlaxoSmithKline Finance PLC 1.021% 9/18/2003(2) 44,000 43,979 Nestle Capital Corp. 1.04% 9/19/2003(2) 93,100 93,052 Nestle Capital Corp. 1.022% 10/10/2003(2) 57,000 56,937 Nestle Capital Corp. 1.022% 10/14/2003(2) 125,000 124,848 Nestle Capital Corp. 1.052% 10/29/2003(2) 78,650 78,517 Nestle Capital Corp. 1.042% 11/7/2003(2) 72,170 72,030 Nestle Capital Corp. 1.052% 11/25/2003(2) 89,000 88,779 Network Rail CP Finance PLC 1.052% 10/14/2003(2) 135,000 134,831 Network Rail CP Finance PLC 1.032% 10/15/2003(2) 100,000 99,874 Network Rail CP Finance PLC 1.042% 10/21/2003(2) 99,480 99,336 Network Rail CP Finance PLC 1.052% 10/30/2003(2) 75,000 74,871 Network Rail CP Finance PLC 1.052% 11/6/2003(2) 90,400 90,226 Shell Finance U.K. PLC 1.022% 10/8/2003(2) 71,500 71,425 Shell Finance U.K. PLC 1.052% 10/9/2003(2) 50,000 49,945 Shell Finance U.K. PLC 1.012% 10/15/2003(2) 50,000 49,938 Shell Finance U.K. PLC 1.012% 10/17/2003(2) 50,000 49,935 Shell Finance U.K. PLC 1.042% 10/28/2003(2) 78,000 77,872 Shell Finance U.K. PLC 1.052% 11/17/2003(2) 114,240 113,981 Shell Finance U.K. PLC 1.062% 12/1/2003(2) 100,000 99,732 Total Capital 1.021% 9/23/2003(2) 45,475 45,446 Total Capital 1.012% 9/30/2003(2) 300,000 299,756 Total Capital 1.051% 10/6/2003(2) 50,000 49,949 Total Capital 1.022% 10/7/2003(2) 36,400 36,363 Total Capital 1.042% 11/10/2003(2) 78,125 77,967 ----------- 2,355,957 ----------- INDUSTRIAL (1.0%) Abbott Laboratories 1.00% 9/2/2003(2) 122,540 122,537 Chevron U.K. Investment PLC 1.133% 9/8/2003(2) 34,400 34,392 Chevron U.K. Investment PLC 1.012% 9/15/2003(2) 30,000 29,988 Chevron U.K. Investment PLC 1.031% 9/22/2003(2) 20,000 19,988 Chevron U.K. Investment PLC 1.012% 9/23/2003(2) 20,000 19,988 Merck 1.031% 10/9/2003(2) 31,275 31,241 Pfizer Inc. 1.051% 9/17/2003(2) 71,475 71,442 Pfizer Inc. 1.041% 10/6/2003(2) 190,200 190,008 --------- 519,584 --------- ===================================================================================================================
21
=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* PRIME MONEY MARKET FUND YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- INSURANCE (0.2%) AIG Funding Inc. 1.025% 9/19/2003 66,850 66,816 AIG Funding Inc. 1.036% 10/8/2003 50,000 49,947 --------- 116,763 --------- - ------------------------------------------------------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (Cost $14,444,607) 14,444,607 - ------------------------------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT (13.0%) - ------------------------------------------------------------------------------------------------------------------- Certificates of Deposit--U.S. Banks (3.6%) Citibank, N.A. 0.98% 9/18/2003 99,650 99,650 Citibank, N.A. 1.03% 9/29/2003 35,000 35,000 Fifth Third Bank 1.02% 10/15/2003 490,400 490,400 State Street Bank & Trust 1.02% 10/15/2003 97,700 97,700 State Street Bank & Trust 1.02% 10/20/2003 100,000 100,000 State Street Bank & Trust 1.04% 10/30/2003 60,000 60,000 Sun Trust Bank, Atlanta 1.06% 11/25/2003 83,760 83,762 Sun Trust Bank, Atlanta 1.06% 11/26/2003 375,000 375,009 Wells Fargo Bank, NA 1.05% 11/12/2003 85,000 85,000 Wells Fargo Bank, NA 1.05% 11/12/2003 225,000 225,000 Wells Fargo Bank, NA 1.05% 11/18/2003 200,000 200,000 ----------- 1,851,521 ----------- YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES (9.4%) BNP Paribas (New York Branch) 1.05% 11/12/2003 225,000 225,000 BNP Paribas (New York Branch) 1.055% 11/19/2003 295,000 295,000 Bank of Montreal (Chicago Branch) 1.05% 10/30/2003 250,000 250,000 Bank of Nova Scotia (Portland Branch) 1.03% 9/15/2003 100,000 100,000 Bank of Nova Scotia (Portland Branch) 1.06% 10/27/2003 150,000 150,000 Bayerische Landesbank Giroentrale (New York Branch) 1.03% 9/2/2003 250,000 250,000 Credit Agricole Indosuez (New York Branch) 0.93% 9/24/2003 280,000 280,000 Credit Agricole Indosuez (New York Branch) 0.96% 9/17/2003 20,000 20,000 Credit Agricole Indosuez (New York Branch) 1.03% 10/21/2003 43,000 43,000 Dexia Bank (New York Branch) 1.03% 9/15/2003 35,000 35,000 Dexia Bank (New York Branch) 0.93% 9/23/2003 300,000 300,000 Dexia Bank (New York Branch) 1.04% 9/29/2003 45,000 45,000 Dexia Bank (New York Branch) 1.07% 11/28/2003 136,000 136,000 Fortis Bank NV-SA (New York Branch) 1.03% 10/14/2003 60,000 60,000 Fortis Bank NV-SA (New York Branch) 1.02% 10/15/2003 100,000 100,000 Fortis Bank NV-SA (New York Branch) 1.06% 11/4/2003 50,000 50,000 HSH Nordbank AG (New York Branch) 1.055% 11/10/2003 199,440 199,442 HSH Nordbank AG (New York Branch) 1.065% 11/12/2003 200,000 200,004 HSH Nordbank AG (New York Branch) 1.075% 11/17/2003 71,000 71,001 HSH Nordbank AG (New York Branch) 1.09% 12/1/2003 44,000 44,001 Landesbank Baden-Wuerttemberg (New York Branch) 1.03% 10/22/2003 291,000 291,000 Landesbank Baden-Wuerttemberg (New York Branch) 1.03% 10/27/2003 200,000 200,000 Landesbank Hessen-Thueringen 1.18% 9/5/2003 290,100 290,103 Lloyds Bank (New York Branch) 1.00% 9/16/2003 250,000 250,003 Lloyds Bank (New York Branch) 0.965% 9/16/2003 50,000 50,001 Lloyds Bank (New York Branch) 1.03% 10/21/2003 50,000 50,000 Lloyds Bank (New York Branch) 1.02% 10/22/2003 160,000 160,000 Rabobank Nederlanden (New York Branch) 1.03% 9/30/2003 200,000 200,002 Rabobank Nederlanden (New York Branch) 1.04% 10/30/2003 135,000 135,000 ===================================================================================================================
22
=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- Royal Bank of Scotland PLC (New York Branch) 1.03% 9/3/2003 $ 105,000 105,000 Royal Bank of Scotland PLC (New York Branch) 1.02% 9/26/2003 255,000 255,000 --------- 4,839,557 --------- - ------------------------------------------------------------------------------------------------------------------- TOTAL CERTIFICATES OF DEPOSIT (Cost $6,691,078) 6,691,078 - ------------------------------------------------------------------------------------------------------------------- EURODOLLAR CERTIFICATES OF DEPOSIT (5.0%) - ------------------------------------------------------------------------------------------------------------------- ABM-AMRO Bank NV 0.97% 9/17/2003 60,000 60,000 Barclays Bank PLC 1.04% 10/27/2003 150,000 150,000 Barclays Bank PLC 1.075% 11/4/2003 210,000 210,000 Barclays Bank PLC 1.06% 11/17/2003 150,000 150,000 Commonwealth Bank of Australia 1.04% 10/3/2003 175,000 175,002 Credit Agricole Indosuez 1.19% 9/17/2003 167,000 167,013 Danske Bank 1.05% 10/1/2003 73,000 73,001 HBOS Treasury Services PLC 1.05% 10/7/2003 212,000 212,000 HBOS Treasury Services PLC 1.08% 11/20/2003 95,000 95,000 HBOS Treasury Services PLC 1.09% 12/1/2003 170,000 170,000 ING Bank 0.925% 9/25/2003 200,000 200,000 ING Bank 1.05% 10/10/2003 140,000 140,000 ING Bank 1.05% 10/14/2003 70,000 70,000 ING Bank 1.05% 10/30/2003 100,000 100,000 Landesbank Baden-Wuerttemberg 1.07% 11/6/2003 19,000 19,000 Landesbank Hessen-Thueringen 1.05% 10/2/2003 200,000 200,002 Royal Bank of Scotland 1.04% 9/3/2003 150,000 150,000 Societe Generale 1.06% 11/3/2003 260,000 260,000 - ------------------------------------------------------------------------------------------------------------------- TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (Cost $2,601,018) 2,601,018 - ------------------------------------------------------------------------------------------------------------------- OTHER NOTES (0.1%) - ------------------------------------------------------------------------------------------------------------------- LaSalle National Bank (Bank Notes) (Cost $60,000) 1.03% 9/10/2003 60,000 60,000 - ------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT (0.4%) - ------------------------------------------------------------------------------------------------------------------- Collateralized by U.S. Government Obligations in a Pooled Cash Account (Cost $211,025) 1.05% 9/2/2003 211,025 211,025 - ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (97.9%) (Cost $50,549,012) 50,549,012 - ------------------------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (2.1%) - ------------------------------------------------------------------------------------------------------------------- Other Assets--Note B 1,233,807 Liabilities (145,664) ---------- 1,088,143 ---------- - ------------------------------------------------------------------------------------------------------------------- NET ASSETS (100%) $51,637,155 ===================================================================================================================
*See Note A in Notes to Financial Statements. **Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. (1) Adjustable-rate note. (2) Security exempt from registration under Section 4(2) of the Securities Act of 1933. These securities may be sold in transactions exempt from registration only to dealers in that program or other "accredited investors." At August 31, 2003, the value of these securities was $7,810,654,000, representing 15.1% of net assets. 23 ================================================================================ AMOUNT PRIME MONEY MARKET FUND (000) - -------------------------------------------------------------------------------- AT AUGUST 31, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- Paid-in Capital $51,635,661 Undistributed Net Investment Income -- Accumulated Net Realized Gains 1,494 - -------------------------------------------------------------------------------- NET ASSETS $51,637,155 ================================================================================ Investor Shares--Net Assets Applicable to 47,339,810,383 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $47,341,242 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INVESTOR SHARES $1.00 ================================================================================ Institutional Shares--Net Assets Applicable to 4,295,859,380 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $4,295,913 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE-- INSTITUTIONAL SHARES $1.00 ================================================================================ 24
=================================================================================================================== FACE MARKET MATURITY AMOUNT VALUE* FEDERAL MONEY MARKET FUND YIELD** DATE (000) (000) - ------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS (87.4%) - ------------------------------------------------------------------------------------------------------------------- Federal Farm Credit Bank 1.106% 11/17/2003 20,528 20,480 Federal Home Loan Bank 1.197% 9/12/2003 216,350 216,287 Federal Home Loan Bank 1.01% 9/17/2003 201,200 201,110 Federal Home Loan Bank 1.196% 10/8/2003 2,181 2,178 Federal Home Loan Bank 1.115% 10/17/2003 22,693 22,661 Federal Home Loan Bank 1.196% 10/20/2003 2,215 2,212 Federal Home Loan Bank 1.146% 10/24/2003 239,285 238,889 Federal Home Loan Bank 1.105% 10/29/2003 33,201 33,142 Federal Home Loan Bank 1.105% 10/31/2003 16,413 16,383 Federal Home Loan Bank 1.105% 11/7/2003 129,105 128,839 Federal Home Loan Bank 1.06% 11/19/2003 587,000 585,637 Federal Home Loan Bank 1.116% 11/21/2003 8,000 7,980 Federal Home Loan Bank 1.106% 12/8/2003 23,449 23,379 Federal National Mortgage Assn. 1.227% 9/3/2003 42,000 41,997 Federal National Mortgage Assn. 1.192% 9/17/2003 246,103 245,974 Federal National Mortgage Assn. 1.196% 10/15/2003 100,465 100,336 Federal National Mortgage Assn. 0.985% 10/28/2003 300,000 299,844 Federal National Mortgage Assn. 1.197% 10/29/2003 123,454 123,240 Federal National Mortgage Assn. 1.176% 11/5/2003 250,000 249,519 Federal National Mortgage Assn. 1.105% 11/12/2003 39,000 38,916 Federal National Mortgage Assn. 1.156% 11/14/2003 29,500 29,436 Federal National Mortgage Assn. 1.116% 11/19/2003 50,000 49,875 Federal National Mortgage Assn. 1.083% 11/26/2003 740,000 738,091 U.S. Treasury Bill 1.096% 9/11/2003 499,500 499,360 U.S. Treasury Bill 1.136% 10/9/2003 200,000 199,760 U.S. Treasury Bill 1.161% 10/16/2003 100,000 99,853 U.S. Treasury Bill 1.146% 10/30/2003 63,000 62,888 U.S. Treasury Bill 1.075% 11/28/2003 90,000 89,784 U.S. Treasury Bill 0.979% 12/11/2003 250,000 249,313 U.S. Treasury Bill 0.934% 1/15/2004 250,000 249,122 U.S. Treasury Bill 0.949% 1/22/2004 250,000 249,062 U.S. Treasury Bill 1.035% 2/19/2004 85,000 84,584 U.S. Treasury Bill 1.045% 2/26/2004 300,000 298,457 - ------------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $5,498,588) 5,498,588 - ------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT (14.8%) - ------------------------------------------------------------------------------------------------------------------- Collateralized by U.S. Government Obligations in a Pooled Cash Account (Cost $930,658) 1.05% 9/2/2003 930,658 930,658 - ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (102.2%) (Cost $6,429,246) 6,429,246 - -------------------------------------------------------------------------------------------------------------------
25 ================================================================================ MARKET VALUE* FEDERAL MONEY MARKET FUND (000) - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-2.2%) - -------------------------------------------------------------------------------- Other Assets--Note B 21,627 Liabilities (161,803) --------- (140,176) --------- - -------------------------------------------------------------------------------- NET ASSETS (100%) ================================================================================ Applicable to 6,288,924,944 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $6,289,070 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE $1.00 ================================================================================ *See Note A in Notes to Financial Statements. **Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. ================================================================================ AT AUGUST 31, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- AMOUNT PER (000) SHARE - -------------------------------------------------------------------------------- Paid-in Capital $6,288,936 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Gains 134 -- - -------------------------------------------------------------------------------- NET ASSETS $6,289,070 $1.00 ================================================================================ 26 ================================================================================ FACE MARKET MATURITY AMOUNT VALUE* TREASURY MONEY MARKET FUND YIELD** DATE (000) (000) - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES (99.8%) - -------------------------------------------------------------------------------- U.S. Treasury Bill 1.179% 9/4/2003 108,683 108,673 U.S. Treasury Bill 1.096% 9/11/2003 203,080 203,023 U.S. Treasury Bill 1.111% 9/18/2003 518,528 518,288 U.S. Treasury Bill 1.154% 9/25/2003 487,913 487,584 U.S. Treasury Bill 1.101% 10/2/2003 343,110 342,786 U.S. Treasury Bill 1.161% 10/16/2003 105,000 104,846 U.S. Treasury Bill 1.146% 10/30/2003 222,836 222,493 U.S. Treasury Bill 1.134% 11/6/2003 710,000 708,719 U.S. Treasury Bill 1.07% 11/13/2003 638,000 636,715 U.S. Treasury Bill 1.075% 11/28/2003 387,000 386,074 U.S. Treasury Bill 0.833% 12/18/2003 319,303 318,508 U.S. Treasury Bill 0.838% 12/26/2003 190,000 189,449 U.S. Treasury Bill 0.944% 1/8/2004 423,841 422,413 U.S. Treasury Bill 1.045% 2/26/2004 300,000 298,457 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,948,028) 4,948,028 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (0.2%) - -------------------------------------------------------------------------------- Other Assets--Note B 23,845 Liabilities (12,588) --------- 11,257 --------- - -------------------------------------------------------------------------------- NET ASSETS (100%) ================================================================================ Applicable to 4,958,728,943 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $4,959,285 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE $1.00 ================================================================================ *See Note A in Notes to Financial Statements. **Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. ================================================================================ AT AUGUST 31, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- AMOUNT PER (000) SHARE - -------------------------------------------------------------------------------- Paid-in Capital $4,958,748 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Gains 537 -- - -------------------------------------------------------------------------------- NET ASSETS $4,959,285 $1.00 ================================================================================ 27 ================================================================================ FACE MARKET MATURITY AMOUNT VALUE* ADMIRAL TREASURY MONEY MARKET FUND YIELD** DATE (000) (000) - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES (99.8%) - -------------------------------------------------------------------------------- U.S. Treasury Bill 1.179% 9/4/2003 634,476 634,421 U.S. Treasury Bill 1.096% 9/11/2003 420,047 419,930 U.S. Treasury Bill 1.111% 9/18/2003 701,023 700,689 U.S. Treasury Bill 1.154% 9/25/2003 992,463 991,773 U.S. Treasury Bill 1.101% 10/2/2003 1,855,967 1,854,416 U.S. Treasury Bill 1.161% 10/16/2003 295,000 294,567 U.S. Treasury Bill 1.146% 10/30/2003 1,016,718 1,015,149 U.S. Treasury Bill 1.134% 11/6/2003 1,660,000 1,657,014 U.S. Treasury Bill 1.07% 11/13/2003 1,540,000 1,536,971 U.S. Treasury Bill 1.075% 11/28/2003 1,103,000 1,100,237 U.S. Treasury Bill 0.833% 12/18/2003 750,000 748,132 U.S. Treasury Bill 0.838% 12/26/2003 569,152 567,665 U.S. Treasury Bill 0.944% 1/8/2004 340,569 339,418 U.S. Treasury Bill 1.035% 2/19/2004 200,000 199,021 U.S. Treasury Bill 1.045% 2/26/2004 1,055,000 1,049,575 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $13,108,978) 13,108,978 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (0.2%) - -------------------------------------------------------------------------------- Other Assets--Note B 51,767 Liabilities (31,442) ---------- 20,325 ---------- - -------------------------------------------------------------------------------- NET ASSETS (100%) ================================================================================ Applicable to 13,128,877,540 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $13,129,303 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE $1.00 ================================================================================ *See Note A in Notes to Financial Statements. **Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. ================================================================================ AT AUGUST 31, 2003, NET ASSETS CONSISTED OF: - -------------------------------------------------------------------------------- Amount Per (000) Share - -------------------------------------------------------------------------------- Paid-in Capital $13,128,877 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Gains 426 -- - -------------------------------------------------------------------------------- NET ASSETS $13,129,303 $1.00 ================================================================================ 28 STATEMENT OF OPERATIONS This Statement shows interest income earned by each fund during the reporting period, and details the operating expenses charged to each class of its shares. These expenses directly reduce the amount of investment income available to pay to shareholders as income dividends. This Statement also shows any Net Gain (Loss) realized on the sale of investments, and any Unrealized Appreciation (Depreciation) of investments during the period. For money market funds, Realized Net Gain (Loss) should always be minimal, and Unrealized Appreciation (Depreciation) should be zero.
============================================================================================================ ADMIRAL PRIME FEDERAL TREASURY TREASURY MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------ YEAR ENDED AUGUST 31, 2003 - ------------------------------------------------------------------------------------------------------------ (000) (000) (000) (000) - ------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME Interest $770,020 $96,251 $67,083 $ 155,541 - ------------------------------------------------------------------------------------------------------------ Total Income 770,020 96,251 67,083 155,541 - ------------------------------------------------------------------------------------------------------------ EXPENSES The Vanguard Group--Note B Investment Advisory Services 7,768 973 717 1,652 Management and Administrative Investor Shares 138,935 18,964 14,090 12,430 Institutional Shares 2,949 -- -- -- Marketing and Distribution Investor Shares 9,392 1,278 933 2,113 Institutional Shares 817 -- -- -- Custodian Fees 856 105 84 191 Auditing Fees 11 10 10 10 Shareholders' Reports and Proxies Investor Shares 1,091 104 81 130 Institutional Shares 54 -- -- -- Trustees' Fees and Expenses 77 10 7 14 - ------------------------------------------------------------------------------------------------------------ Total Expenses 161,950 21,444 15,922 16,540 - ------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME 608,070 74,807 51,161 139,001 - ------------------------------------------------------------------------------------------------------------ REALIZED NET GAIN (LOSS) ON INVESTMENT SECURITIES SOLD 1,332 (153) (9) 44 - ------------------------------------------------------------------------------------------------------------ UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES -- -- -- -- - ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $609,402 $74,654 $51,152 $139,045 ============================================================================================================
29 STATEMENT OF CHANGES IN NET ASSETS This Statement shows how the fund's total net assets changed during the two most recent reporting periods. The Operations section summarizes information detailed in the Statement of Operations. Because the fund distributes its income to shareholders each day, the amounts of Dividends from Net Investment Income generally equal the net income earned as shown under the Operations section. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. Dividends and Capital Share Transactions are shown separately for each class of shares.
======================================================================================= PRIME MONEY MARKET FUND ------------------------- YEAR ENDED AUGUST 31, - --------------------------------------------------------------------------------------- 2003 2002 (000) (000) - --------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 608,070 $ 1,140,839 Realized Net Gain (Loss) 1,332 (482) Unrealized Appreciation (Depreciation) -- -- - --------------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 609,402 1,140,357 - --------------------------------------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME Investor Shares (550,161) (1,046,743) Institutional Shares (57,909) (94,096) - --------------------------------------------------------------------------------------- Total Dividends (608,070) (1,140,839) - --------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES (at $1.00) Issued 46,693,289 52,357,925 Issued in Lieu of Cash Distributions 533,180 1,011,836 Redeemed (49,670,671) (54,080,737) - --------------------------------------------------------------------------------------- Net Increase (Decrease)--Investor Shares (2,444,202) (710,976) - --------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES (at $1.00) Issued 7,135,394 7,642,777 Issued in Lieu of Cash Distributions 51,505 81,893 Redeemed (6,783,602) (7,681,922) - --------------------------------------------------------------------------------------- Net Increase (Decrease)--Instituional Shares 403,297 42,748 - --------------------------------------------------------------------------------------- Total Increase (Decrease) (2,039,573) (668,710) - --------------------------------------------------------------------------------------- NET ASSETS Beginning of Period 53,676,728 54,345,438 - --------------------------------------------------------------------------------------- End of Period $51,637,155 $53,676,728 =======================================================================================
30 ================================================================================ FEDERAL MONEY MARKET FUND --------------------- YEAR ENDED AUGUST 31, - -------------------------------------------------------------------------------- 2003 2002 (000) (000) - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 74,807 $ 147,038 Realized Net Gain (Loss) (153) 343 Unrealized Appreciation (Depreciation) -- -- - -------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 74,654 147,381 - -------------------------------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME (74,807) (147,038) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (at $1.00) Issued 4,382,951 6,898,037 Issued in Lieu of Cash Distributions 72,576 141,459 Redeemed (4,959,946) (6,773,356) - -------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions (504,419) 266,140 - -------------------------------------------------------------------------------- Total Increase (Decrease) (504,572) 266,483 - -------------------------------------------------------------------------------- Net Assets Beginning of Period 6,793,642 6,527,159 - -------------------------------------------------------------------------------- End of Period $6,289,070 $6,793,642 ================================================================================ ================================================================================ TREASURY MONEY MARKET FUND ---------------------- YEAR ENDED AUGUST 31, - -------------------------------------------------------------------------------- 2003 2002 (000) (000) - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 51,161 $ 93,598 Realized Net Gain (Loss) (9) (92) Unrealized Appreciation (Depreciation) -- -- - -------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 51,152 93,506 - -------------------------------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME (51,161) (93,598) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (at $1.00) Issued 4,132,876 4,625,147 Issued in Lieu of Cash Distributions 49,561 90,263 Redeemed (4,045,418) (4,345,601) - -------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 137,019 369,809 - -------------------------------------------------------------------------------- Total Increase (Decrease) 137,010 369,717 - -------------------------------------------------------------------------------- Net Assets Beginning of Period 4,822,275 4,452,558 - -------------------------------------------------------------------------------- End of Period $4,959,285 $4,822,275 ================================================================================ 31 STATEMENT OF CHANGES IN NET ASSETS (continued) ================================================================================ ADMIRAL TREASURY MONEY MARKET FUND --------------------------- YEAR ENDED AUGUST 31, - -------------------------------------------------------------------------------- 2003 2002 (000) (000) - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 139,001 $ 199,697 Realized Net Gain (Loss) 44 (221) Unrealized Appreciation (Depreciation) -- -- - -------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 139,045 199,476 - -------------------------------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME (139,001) (199,697) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (at $1.00) Issued 12,787,090 11,321,970 Issued in Lieu of Cash Distributions 131,227 191,450 Redeemed (10,396,787) (8,756,890) - -------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 2,521,530 2,756,530 - -------------------------------------------------------------------------------- Total Increase (Decrease) 2,521,574 2,756,309 - -------------------------------------------------------------------------------- NET ASSETS Beginning of Period 10,607,729 7,851,420 - -------------------------------------------------------------------------------- End of Period $13,129,303 $10,607,729 ================================================================================ 32 FINANCIAL HIGHLIGHTS Each fund's objective is to maintain a constant net asset value of $1.00 per share by distributing all of the fund's net investment income and avoiding capital gains or losses. The financial highlights table summarizes each fund's investment results and distributions to shareholders on a per-share basis for each class of shares. The table also presents the Total Return and shows net investment income and expenses as percentages of average net assets. These data will help you assess the variability of net income returns from year to year and how much it costs to operate the fund. PRIME MONEY MARKET FUND INVESTOR SHARES
================================================================================================================================= YEAR ENDED DEC. 1, AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30, ------------------------ AUG. 31, -------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .011 .021 .037 .060 .049 .053 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations .011 .021 .037 .060 .049 .053 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.011) (.021) (.037) (.060) (.049) (.053) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total Distributions (.011) (.021) (.037) (.060) (.049) (.053) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.12% 2.09% 3.78% 6.21% 4.97% 5.42% - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $47,341 $49,784 $50,495 $45,719 $39,430 $33,732 Ratio of Total Expenses to Averae Net Assets 0.32% 0.33% 0.33%** 0.33% 0.33% 0.33% Ratio of Net Investment Income to Average Net Assets 1.12% 2.07% 4.92%** 6.04% 4.85% 5.28% =================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective August 31, 2001. **Annualized. 33 FINANCIAL HIGHLIGHTS (CONTINUED) PRIME MONEY MARKET FUND INSTITUTIONAL SHARES
================================================================================================================================= YEAR ENDED DEC. 1, AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30, ------------------------ AUG. 31, -------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .013 .023 .039 .062 .050 .055 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations .013 .023 .039 .062 .050 .055 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.013) (.023) (.039) (.062) (.050) (.055) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total Distributions (.013) (.023) (.039) (.062) (.050) (.055) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.33% 2.31% 3.93% 6.39% 5.15% 5.61% ================================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $4,296 $3,893 $3,850 $2,660 $1,776 $1,143 Ratio of Total Expenses to Average Net Assets 0.10% 0.11% 0.13%** 0.15% 0.15% 0.15% Ratio of Net Investment Income to Average Net Assets 1.32% 2.27% 5.03%** 6.24% 5.04% 5.46% =================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective August 31, 2001. **Annualized. 34 FEDERAL MONEY MARKET FUND
================================================================================================================================= YEAR ENDED DEC. 1, AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30, ------------------------ AUG. 31, -------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .011 .021 .037 .059 .048 .052 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations .011 .021 .037 .059 .048 .052 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.011) (.021) (.037) (.059) (.048) (.052) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total Distributions (.011) (.021) (.037) (.059) (.048) (.052) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ================================================================================================================================= TOTAL RETURN 1.11% 2.12% 3.78% 6.11% 4.89% 5.35% ================================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $6,289 $6,794 $6,527 $5,495 $5,243 $4,263 Ratio of Total Expenses to Average Net Assets 0.32% 0.33% 0.33%** 0.33% 0.33% 0.33% Ratio of Net Investment Income to Average Net Assets 1.11% 2.10% 4.92%** 5.94% 4.79% 5.21% =================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective August 31, 2001. **Annualized. 35 FINANCIAL HIGHLIGHTS (CONTINUED) TREASURY MONEY MARKET FUND
================================================================================================================================= YEAR ENDED DEC. 1, AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30, ------------------------ AUG. 31, -------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .010 .020 .035 .056 .044 .050 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations .010 .020 .035 .056 .044 .050 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.010) (.020) (.035) (.056) (.044) (.050) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total Distributions (.010) (.020) (.035) (.056) (.044) (.050) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.03% 1.98% 3.58% 5.70% 4.51% 5.06% ================================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $4,959 $4,822 $4,453 $4,107 $4,593 $3,942 Ratio of Total Expenses to Average Net Assets 0.32% 0.33% 0.33%** 0.33% 0.33% 0.33% Ratio of Net Investment Income to Average Net Assets 1.03% 1.95% 4.68%** 5.53% 4.41% 4.94% =================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective August 31, 2001. **Annualized. 36 ADMIRAL TREASURY MONEY MARKET FUND
================================================================================================================================= YEAR ENDED FEB. 1, AUGUST 31, 2001, TO YEAR ENDED January 31, ------------------------ AUG. 31, -------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .012 .021 .026 .059 .047 .050 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations .012 .021 .026 .059 .047 .050 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.012) (.021) (.026) (.059) (.047) (.050) Distributions from Realized Capital Gains -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total Distributions (.012) (.021) (.026) (.059) (.047) (.050) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ================================================================================================================================= TOTAL RETURN 1.20% 2.15% 2.65% 6.07% 4.79% 5.12% ================================================================================================================================= RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $13,129 $10,608 $7,851 $6,746 $5,648 $5,057 Ratio of Total Expenses to Average Net Assets 0.14% 0.14% 0.15%** 0.15% 0.15% 0.15% Ratio of Net Investment Income to Average Net Assets 1.18% 2.09% 4.49%** 5.90% 4.69% 4.97% =================================================================================================================================
*The fund's fiscal year-end changed from January 31 to August 31, effective August 31, 2001. **Annualized. NOTES TO FINANCIAL STATEMENTS Vanguard Money Market Funds comprise the Prime Money Market Fund, Federal Money Market Fund, Treasury Money Market Fund, and Admiral Treasury Money Market Fund, each of which is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The Prime Money Market Fund invests in short-term debt instruments of companies primarily operating in specific industries, particularly financial services; the issuers' abilities to meet their obligations may be affected by economic developments in such industries. The Federal Money Market Fund invests in short-term debt instruments issued by the U.S. government or its agencies and instrumentalities. The Treasury Money Market Fund and the Admiral Treasury Money Market Fund invest in short-term debt instruments backed by the full faith and credit of the U.S. government. The Prime Money Market Fund offers two classes of shares, Investor Shares and Institutional Shares. Investor Shares are available to any investor who meets the fund's minimum purchase requirements. Institutional Shares are designed for investors who meet certain administrative and servicing criteria and invest a minimum of $10 million. The Federal, Treasury, and Admiral Treasury Money Market Funds each offer only Investor Shares. 37 NOTES TO FINANCIAL STATEMENTS (CONTINUED) A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The funds consistently follow such policies in preparing their financial statements. 1. SECURITY VALUATION: Securities are valued at amortized cost, which approximates market value. 2. REPURCHASE AGREEMENTS: The Prime Money Market and Federal Money Market Funds, along with other members of The Vanguard Group, may transfer uninvested cash balances to a pooled cash account, which is invested in repurchase agreements secured by U.S. government securities. These funds may also invest directly in repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. 3. FEDERAL INCOME TAXES: Each 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. 4. DISTRIBUTIONS: Dividends from net investment income are declared daily and paid on the first business day of the following month. 5. OTHER: Security transactions are accounted for on the date the securities are purchased or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Discounts and premiums are accreted and amortized, respectively, to interest income over the lives of the respective securities. 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), shareholder reporting, and proxies. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets. B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, shareholder accounting, marketing, and distribution services. The costs of such services are allocated to each fund under methods approved by the board of trustees. Each fund has committed to provide up to 0.40% of its assets in capital contributions to Vanguard. At August 31, 2003, the funds had contributed capital to Vanguard (included in Other Assets) of: ================================================================================ CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF TO VANGUARD OF FUND VANGUARD'S MONEY MARKET FUND (000) NET ASSETS CAPITALIZATION - -------------------------------------------------------------------------------- Prime $8,850 0.02% 8.85% Federal 1,107 0.02 1.11 Treasury 847 0.02 0.85 Admiral Treasury 2,179 0.02 2.18 ================================================================================ The funds' trustees and officers are also directors and officers of Vanguard. 38 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Trustees of Vanguard Money Market 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 Prime Money Market Fund, Federal Money Market Fund, Treasury Money Market Fund and Admiral Treasury Money Market Fund (hereafter referred to as the "Funds") at August 31, 2003, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the 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 auditing standards generally accepted in the United States of America, 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 August 31, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 7, 2003 39 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
- ------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME FUND (NUMBER OF (YEAR OF BIRTH) VANGUARD FUNDS TRUSTEE/OFFICER OVERSEEN BY SINCE TRUSTEE/OFFICER) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------ JOHN J. BRENNAN* Chairman of the Chairman of the Board, Chief Executive Officer, and Director/Trustee (1954) Board, Chief of The Vanguard Group, Inc., and of each of the investment companies May 1987 Executive Officer, served by The Vanguard Group. and Trustee (112) - ------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES CHARLES D. ELLIS Trustee The Partners of '63 (pro bono ventures in education); Senior Advisor (1937) (112) to Greenwich Associates (international business strategy consulting); January 2001 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 Trustee Chairman and Chief Executive Officer (since October 1999), Vice (1945) (112) Chairman (JanuarySeptember 1999), and Vice President (prior to December 2001 September 1999) of Rohm and Haas Co. (chemicals); Director of Technitrol, Inc. (electronic components), and Agere Systems (communications components); Board Member of the American Chemistry Council; and Trustee of Drexel University. - ------------------------------------------------------------------------------------------------------------ JOANN HEFFERNAN Trustee Vice President, Chief Information Officer, and Member of the HEISEN (112) Executive Committee of Johnson & Johnson (pharmaceuticals/consumer (1950) products); Director of the Medical Center at Princeton and Women's July 1998 Research and Education Institute. - ------------------------------------------------------------------------------------------------------------ BURTON G. MALKIEL TRUSTEE Chemical Bank Chairman's Professor of Economics,Princeton University; (1932) (110) Director of Vanguard Investment Series plc (Irish invest-ment fund) May 1977 (since November 2001), Vanguard Group (Ireland)Limited (Irish investment management firm)(since November 2001),Prudential Insurance Co. of America, BKF Capital (investment management), The Jeffrey Co. (holding company), and NeuVis, Inc.(software company). - ------------------------------------------------------------------------------------------------------------
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.
POSITION(S) HELD WITH NAME FUND (NUMBER OF (YEAR OF BIRTH) VANGUARD FUNDS TRUSTEE/OFFICER OVERSEEN BY SINCE TRUSTEE/OFFICER) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------ Alfred M. Rankin, Jr. Trustee Chairman, President, Chief Executive Officer, and Director of NACCO (1941) (112) Industries, Inc. (forklift trucks/housewares/lignite); Director of January 1993 Goodrich Corporation (industrial products/aircraft systems and services); Director of Standard Products Company (supplier for the automotive industry) until 1998. - ------------------------------------------------------------------------------------------------------------ J. Lawrence Wilson Trustee Retired Chairman and Chief Executive Officer of Rohm and Haas Co. (1936) (112) (chemicals); Director of Cummins Inc. (diesel engines), The Mead April 1985 Corp. (paper products), and AmerisourceBergen Corp. (pharmaceuti-cal distribution); Trustee of Vanderbilt University. - ------------------------------------------------------------------------------------------------------------ EXECUTIVE OFFICERS* R. Gregory Barton Secretary Managing Director and General Counsel of The Vanguard Group, Inc.; (1951) (112) Secretary of The Vanguard Group and of each of the investment June 2001 companies served by The Vanguard Group. - ------------------------------------------------------------------------------------------------------------ Thomas J. Higgins Treasurer Principal of The Vanguard Group, Inc.; Treasurer of each of the (1957) (112) investment companies served by The Vanguard Group. July 1998 - ------------------------------------------------------------------------------------------------------------ *Officers of the funds are "interested persons" as defined in the Investment Company Act of 1940. More information about the trustees is in the Statement of Additional Information, available from The Vanguard Group. - ------------------------------------------------------------------------------------------------------------ VANGUARD SENIOR MANAGEMENT TEAM MORTIMER J. BUCKLEY, Information Technology. MICHAEL S. MILLER, Planning and Development. JAMES H. GATELY, Investment Programs and Services. RALPH K. PACKARD, Finance. KATHLEEN C. GUBANICH, Human Resources. GEORGE U. SAUTER, Chief Investment Officer. F. WILLIAM MCNABB, III, Client Relationship Group. - ------------------------------------------------------------------------------------------------------------ JOHN C. BOGLE, Founder; Chairman and Chief Executive Officer, 1974-1996. - ------------------------------------------------------------------------------------------------------------
[SHIP] [THE VANGUARD GROUP(R) LOGO] Post Office Box 2600 Valley Forge, PA 19482-2600 Vanguard, The Vanguard Group, Vanguard.com, Admiral, and the ship logo are trademarks of The Vanguard Group, Inc. All other marks are the exclusive property of their respective owners. ABOUT OUR COVER The photographs that appear on the cover of this report are copyrighted by Michael Kahn. FOR MORE INFORMATION This report is intended for the fund's shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current fund prospectus. To receive a free copy of the prospectus or the Statement of Additional Information, or to request additional information about the fund or other Vanguard funds, please contact us at one of the adjacent telephone numbers or by e-mail through Vanguard.com(R). Prospectuses may also be viewed online. You can obtain a free copy of Vanguard's proxy voting guidelines by visiting our website, www.vanguard.com, and searching for "proxy voting guidelines," or by calling 1-800-662-2739. The guidelines are also available from the SEC's website, www.sec.gov. All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc., unless otherwise noted. WORLD WIDE WEB www.vanguard.com FUND INFORMATION 1-800-662-7447 DIRECT INVESTOR ACCOUNT SERVICES 1-800-662-2739 INSTITUTIONAL INVESTOR SERVICES 1-800-523-1036 TEXT TELEPHONE 1-800-952-3335 (C) 2003 THE VANGUARD GROUP, INC. ALL RIGHTS RESERVED. VANGUARD MARKETING CORPORATION, DISTRIBUTOR. Q300 102003 ITEM 2: Code of Ethics. The Board of Trustees has adopted a code of ethics that applies to 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, Burton G. Malkiel, Alfred M. Rankin, Jr., and J. Lawrence Wilson. All Audit Committee members are independent under applicable rules. ITEM 4: Not Applicable ITEM 5: Not applicable. ITEM 6: Reserved. ITEM 7: Not applicable. ITEM 8: Reserved. ITEM 9: 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 10: EXHIBITS. The following exhibits are attached hereto: (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 ADMIRAL FUNDS BY:_____________(signature)________________ (HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER Date: October 27, 2003 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 ADMIRAL FUNDS BY:_____________(signature)________________ (HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER Date: October 27, 2003 VANGUARD ADMIRAL FUNDS BY:_____________(signature)________________ (HEIDI STAM) THOMAS J. HIGGINS* TREASURER Date: October 27, 2003 *By Power of Attorney. See File Number 2-57689, filed on December 26, 2002. Incorporated by Reference. EX-31 3 cert302admiral.txt CERT. 302 CERTIFICATIONS I, John J. Brennan, certify that: 1. I have reviewed this report on Form N-CSR of Vanguard Admiral Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 24, 2003 /S/ JOHN J. BRENNAN ---------------------------- CHIEF EXECUTIVE OFFICER CERTIFICATIONS I, Thomas J. Higgins, certify that: 1. I have reviewed this report on Form N-CSR of Vanguard Admiral Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 24, 2003 /S/ THOMAS J. HIGGINS ----------------------- TREASURER EX-32 4 cert906admiral.txt CERT. 906 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 Admiral 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: October 24, 2003 /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 Admiral 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: October 24, 2003 /S/ THOMAS J. HIGGINS -------------------------------- Thomas J. Higgins Treasurer EX-99.CODE ETH 5 codeofethics.txt CODE OF ETHICS THE VANGUARD FUNDS' CODE OF ETHICS FOR SENIOR EXECUTIVE AND FINANCIAL OFFICERS I. INTRODUCTION The Board of Trustees of each registered investment company that is managed, sponsored, and distributed by The Vanguard Group, Inc. ("VGI") (each a "Vanguard Fund" and collectively the "Vanguard Funds") has adopted this code of ethics (the "Code") as required by Section 406 of the Sarbanes-Oxley Act. The Code applies to the individuals in positions listed on Exhibit A (the "Covered Officers"). All Covered Officers, along with employees of The Vanguard Group, Inc., are subject to separate and distinct obligations from this Code under a Code of Ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940 ("17j-1 Code of Ethics"), policies to prevent the misuse of non-public information, and other internal compliance guidelines and policies that may be in effect from time to time. This Code is designed to promote: o Honest and ethical conduct, including the ethical handling of conflicts of interest; o Full, fair, accurate, timely, and understandable disclosure in reports and documents that a Vanguard Fund files with, or submits to, the U.S. Securities and Exchange Commission, or in other public communications made by the Vanguard Funds or VGI; o Compliance with applicable laws, governmental rules, and regulations; o Prompt internal reporting to those identified in the Code of violations of the Code; and o Accountability for adherence to the Code. II. ACTUAL OR APPARENT CONFLICTS OF INTEREST A. Covered Officers should conduct all activities in accordance with the following principles: 1. Shareholders' interests come first. In the course of fulfilling their duties and responsibilities to Vanguard Fund shareholders, Covered Officers must at all times place the interests of Vanguard Fund shareholders first. In particular, Covered Officers must avoid serving their own personal interests ahead of the interests of Vanguard Fund shareholders. 2. Conflicts of interest must be avoided. Covered Officers 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. 3. Compromising situations must be avoided. Covered Officers must not take advantage of their position of trust and responsibility. Covered Officers 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 Covered Officers should be guided by and adhere to these fiduciary standards regardless of whether the activity is specifically described in this Code. B. Restricted Activities 1. Gifts. Covered Officers are prohibited from seeking or accepting gifts of material value from any person or entity, including any portfolio companies and service providers, when such gifts are in relation to doing business with a Vanguard entity. In certain cases, Covered Officers may accept gifts of de minimis value but only if they obtain the approval of the General Counsel of VGI. 2. Prohibition on secondary employment. Covered Officers are prohibited from accepting or serving in any form of secondary employment. Secondary employment that does not create a potential conflict of interest may be approved by the General Counsel of VGI. 3. Prohibition on service as director or public official. Unless approved by the General Counsel of VGI, Covered Officers are prohibited from serving on the board of directors of any publicly traded company or in an official capacity for any federal, state, or local government (or governmental agency or instrumentality). 4. Prohibition on misuse of Vanguard time or property. Covered Officers are prohibited from making use of time, equipment, services, personnel or property of any Vanguard entity for any purposes other than the performance of their duties and responsibilities in connection with the Vanguard Funds or other Vanguard-related entities. III. DISCLOSURE AND COMPLIANCE A. Each Covered Officer should be familiar with the disclosure requirements generally applicable to the Vanguard Funds. B. Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Vanguard Funds to others, including to the Vanguard Funds' directors and auditors, or to government regulators and self-regulatory organizations. C. Each Covered Officer should, to the extent appropriate within the Covered Officer's area of responsibility, consult with other officers and employees of VGI and advisers to a Vanguard Fund with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the fund files with, or submits to, the SEC and in other public communications made by a Vanguard Fund. D. It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules, regulations, and the 17j-1 Code of Ethics. 2 IV. REPORTING AND ACCOUNTABILITY A. Each Covered Officer must: 1. Upon adoption or amendment of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing that he or she has received, read, and understands the Code; 2. Affirm at least annually in writing that he or she has complied with the requirements of the Code; 3. Not retaliate against any other Covered Officer or any employee of VGI for reports of potential violations of the Code that are made in good faith; and 4. Notify the General Counsel of VGI promptly if the Covered Officer knows of any violations of this Code. B. The Vanguard Funds will use the following procedures in investigating and enforcing this Code: 1. The General Counsel of VGI is responsible for applying this Code to specific situations and has the authority to interpret this Code in any particular situation. All determinations made by the General Counsel will be reported to the Board of Trustees of the Vanguard Funds in an annual report regarding activities subject to the Code. 2. The General Counsel will take all appropriate action to investigate any potential violations of the Code that are reported to him. 3. If, after investigation, the General Counsel believes that no material violation of the Code has occurred, the General Counsel is not required to take any further action. 4. Any matter that the General Counsel believes is a material violation of the Code will be reported to the Board of Trustees of the Vanguard Funds. 5. If the Board of Trustees of the Vanguard Funds concurs that a material violation of the Code has occurred, the Board will consider appropriate action. Appropriate action may include reassignment, suspension, or dismissal of the applicable Covered Officer(s), or any other sanctions the Board deems appropriate. Appropriate action may also include review of, and appropriate modifications to, applicable policies and procedures. 6. Any changes to or waiver of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures 3 This Code shall be the sole code of conduct adopted by the Vanguard Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Vanguard Funds, VGI, or other service providers govern or purport to govern the behavior or activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. VGI's and the Vanguard Funds' 17j-1 Code of Ethics, policies to prevent the misuse of non-public information, and other internal compliance guidelines and policies that may be in effect from time to time are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS This Code may not be amended except by the approval of a majority vote of the Vanguard Funds' Board of Trustees. All amendments must be in writing and communicated promptly to the Covered Officers, who shall affirm receipt of the amended Code in accordance with Section IV. A. 1. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Vanguard Funds' Board of Trustees and VGI's General Counsel. Date: October 20, 2003 EXHIBIT A TO THE VANGUARD FUNDS' CODE OF ETHICS FOR SENIOR EXECUTIVE AND FINANCIAL OFFICERS Covered Officers: - ---------------- Chairman and Chief Executive Officer of The Vanguard Group, Inc. and the Vanguard Funds Managing Director and Chief Financial Officer of The Vanguard Group, Inc. Controller of The Vanguard Group, Inc. Assistant Controller(s) of The Vanguard Group, Inc. Principal of Internal Audit, The Vanguard Group, Inc. Treasurer of the Vanguard Funds Assistant Treasurer(s) of the Vanguard Funds Assistant Controller(s) of the Vanguard Funds -----END PRIVACY-ENHANCED MESSAGE-----