N-CSR 1 admiralfundsfinal.htm VANGUARD ADMIRAL FUNDS admiralfundsfinal.htm - Generated by SEC Publisher for SEC Filing

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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-7043

Name of Registrant: Vanguard Admiral Funds

Address of Registrant:  P.O. Box 2600   
  Valley Forge, PA 19482 
 
Name and address of agent for service:  Heidi Stam, Esquire 
    P.O. Box 876 
    Valley Forge, PA 19482 

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

Date of fiscal year end: August 31

Date of reporting period: September 1, 2008 – August 31, 2009

Item 1: Reports to Shareholders


 

Vanguard Money Market Funds 
Annual Report 
August 31, 2009 

 

Vanguard Prime Money Market Fund 
Vanguard Federal Money Market Fund 
Vanguard Admiral™ Treasury Money Market Fund 


> Vanguard’s three money market funds posted returns ranging from 0.70% to 1.47% for the fiscal year ended August 31, 2009.

> The Federal Reserve Board cut its target for short-term interest rates to 0%–0.25% in December 2008, stifling money market yields in the process.

> Despite challenges, Vanguard’s money market funds performed better than their respective peer-group averages—not only for the year but also for the ten-year period ended August 31.

 

Contents   
 
Your Fund’s Total Returns  1 
President’s Letter  2 
Advisor’s Report  8 
Results of Proxy Voting  10 
Prime Money Market Fund  13 
Federal Money Market Fund  30 
Admiral Treasury Money Market Fund  41 
About Your Fund’s Expenses  53 
Trustees Approve Advisory Arrangement  55 
Glossary  56 

 

Investment returns will fluctuate. All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at www.vanguard.com/performance.) An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

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

Cover photograph: Veronica Coia.


Your Fund’s Total Returns       
 
 
 
 
Fiscal Year Ended August 31, 2009       
      7-Day SEC 
  Ticker     Total  Yield1 
  Symbol  Returns  8/31/2009 
Vanguard Prime Money Market Fund       
     Investor Shares  VMMXX     1.31%  0.19% 
Money Market Funds Average2       0.62  — 
     Institutional Shares3  VMRXX     1.47       0.34 
Institutional Money Market Funds Average2       0.89  — 
 
Vanguard Federal Money Market Fund  VMFXX     1.06%  0.15% 
Government Money Market Funds Average2       0.43  — 
 
Vanguard Admiral Treasury Money Market Fund4  VUSXX     0.70%  0.07% 
iMoneyNet Money Fund Report’s Average 100% Treasury Fund2       0.17  — 

 

1 The yield of a money market fund more closely reflects the current earnings of the fund than its total return.
2 For the Prime and Federal Money Market Funds, peer-group returns are derived from data provided by Lipper Inc.; for the Admiral Treasury
Money Market Fund, peer-group returns are based on data provided by iMoneyNet, Inc.
3 This class of shares carries low expenses and is available for a minimum initial investment is $5 million.
4 Minimum initial investment is $50,000.

 

1



President’s Letter

Dear Shareholder,

In December 2008, the Federal Reserve cut its target for short-term interest rates to a range of 0.0%–0.25%, the lowest level on record. These extremely low rates weighed on money market yields, resulting in lower returns for all three Vanguard Money Market Funds.

For the fiscal year ended August 31, 2009, the funds’ total returns ranged from 0.70% for the Admiral Treasury Money Market Fund to 1.47% for the Prime Money Market Fund’s Institutional Shares. Each fund surpassed the average return of its respective peer group.

In response to the challenging yield environment, Vanguard took several steps to protect shareholders’ interests. In early August, we merged the Treasury Money Market Fund into the lower-cost Admiral Treasury Money Market Fund. As our fiscal year ended, both the Admiral Treasury Money Market Fund and the Federal Money Market Fund were closed to new investors. These actions were taken to protect current shareholders and to help ensure that the funds’ yields remain competitive.

2


Among bond investors, safety and yield traded places

The 12 months ended August 31 spanned two strikingly different half-years. The period began with the September collapse of a major investment bank and the government-engineered rescue of several giant financial institutions. Investors were also shaken in September by news that a prominent money market mutual fund, the Reserve Primary Fund, could no longer maintain a $1 share price. As credit markets deteriorated, investors rushed to the relative safety and liquidity of U.S. Treasury securities, driving their prices up and yields down.

Investors were so risk-averse that short-term Treasury yields briefly turned negative. November and December were among the ten best months ever for Treasury bond returns (adjusted for inflation). Corporate bonds, especially those of lower credit quality, struggled, and their yield spreads above comparable Treasuries widened to near-historic levels during the first six months.

Several moves by the Federal Reserve Board and the Treasury—including a temporary program to guarantee the assets of money market investors under specified conditions—helped credit markets to attain some stability by

Market Barometer       
    Average Annual Total Returns 
    Periods Ended August 31, 2009 
  One Year  Three Years  Five Years 
Bonds       
Barclays Capital U.S. Aggregate Bond Index       
(Broad taxable market)  7.94%  6.35%       4.96% 
Barclays Capital Municipal Bond Index  5.67  4.14       4.15 
Citigroup 3-Month Treasury Bill Index  0.51  2.77       2.98 
 
Stocks       
Russell 1000 Index (Large-caps)  –18.39%  –5.61%       0.94% 
Russell 2000 Index (Small-caps)  –21.29  –6.08       2.21 
Dow Jones U.S. Total Stock Market Index  –18.10  –5.17       1.45 
MSCI All Country World Index ex USA (International)  –13.96  –2.41       8.18 
 
CPI       
Consumer Price Index  –1.48%  1.91%       2.64% 

3


the spring. In a dramatic reversal, investors regained their appetite for risk, favoring corporate bonds over Treasuries.

After all the ups and downs, Treasuries and high-yield corporate bonds produced similar 12-month returns of about 6%–7%. Overall, the broad U.S. taxable bond market returned about 8%. Tax-exempt municipal bonds, after a flat first half, returned more than 5% for the fiscal year.

Stocks sank, then soared as credit and economy stabilized

The U.S. stock market also performed a U-turn during the year. Stocks sank as the ensuing crisis spread from Wall Street to Main Street and around the globe. Stricken by seized-up credit markets and a near-total lack of confidence, businesses and consumers put the brakes on economic growth.

Governments in the United States and abroad responded with unprecedented stimulus and other programs. Over the past six months, these efforts started to take hold. Credit-market conditions improved, and the outlook for the U.S. economy brightened. From their early-March lows, stocks took off on an almost-unbroken winning streak.

Even so, the broad U.S. stock market ended the 12 months in negative territory, with a return of about –18%. International markets performed somewhat better, as

Expense Ratios1     
Your Fund Compared With Its Peer Group     
       Fund  Peer-Group 
  Expense  Expense 
Money Market Fund       Ratio           Ratio 
Prime     
     Investor Shares     0.28%         0.89% 
     Institutional Shares     0.13         0.44 
Federal     0.28         0.80 
Admiral Treasury     0.15         0.75 

1 The fund expense ratios shown are from the prospectuses dated December 29, 2008, and represent estimated costs for the fiscal year based on the funds’ net assets as of the prospectus date. The expense ratios for the fiscal year ended August 31, 2009, were 0.28% for the Prime Money Market Fund Investor Shares and 0.13% for the Institutional Shares; 0.27% for the Federal Money Market Fund; and 0.15% for the Admiral Treasury Money Market Fund. Peer groups are: for the Prime Money Market Fund Investor Shares, the Money Market Funds Average; for the Prime Money Market Fund Institutional Shares, the Institutional Money Market Funds Average; for the Federal Money Market Fund, the Government Money Market Funds Average; for the Admiral Treasury Money Market Fund, the U.S.

Treasury Money Market Funds Average. The peer-group expense ratios are derived from data provided by Lipper Inc. and capture information through year-end 2008.

4


major European economies emerged from recession; the MSCI All Country World Index ex USA returned about –14%.

Despite the robust second-half rally, it may be premature to sound the all-clear signal. As the fiscal year came to a close, home foreclosures and the unemployment rate were rising, and the federal government’s list of problem banks had climbed above 400—the most since June 1994. There is considerable historical evidence that recovery from a recession caused by a financial crisis tends to take longer than average.

Coping with record-low rates, the funds performed well

When the Federal Reserve slashed short-term interest rates to record lows, it caused money market yields to plummet. Low rates, combined with turmoil in the short-term debt markets, meant that some higher-cost and riskier funds struggled to maintain the share price of $1.

In this environment, the Vanguard Money Market Funds were well served by their customary emphasis on the highest-quality securities and by the prescient judgments of the investment advisor—

Total Returns     
Ten Years Ended August 31, 2009     
         Average Annual Return 
  Vanguard     Peer 
Money Market Fund       Fund  Group1 
Prime     
     Investor Shares     3.20%  2.59% 
     Institutional Shares     3.39  3.03 
Federal     3.14  2.57 
Admiral Treasury     3.03  2.39 

Investment returns will fluctuate. All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at www.vanguard.com/performance.) An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

1 Peer groups are: for the Prime Money Market Fund Investor Shares, the Money Market Funds Average; for the Prime Money Market Fund Institutional Shares, the Institutional Money Market Funds Average; for the Federal Money Market Fund, the Government Money Market Funds Average; for the Admiral Treasury Money Market Fund, the iMoneyNet Money Fund Report’s Average 100% Treasury Fund. For the Prime and Federal Money Market Funds, peer-group returns are derived from data provided by Lipper Inc.; for the Admiral Treasury Money Market Fund, data provided by iMoneyNet, Inc.

5


Vanguard’s Fixed Income Group—about some of the risks percolating in the money markets. Each fund’s share price remained solidly at $1, as is expected but not guaranteed.

Still, the funds were not immune to the challenges presented by extremely low interest rates for short-term securities. During the 12-month period, each of the funds’ yields fell significantly. Nonetheless, each managed to return more than the average for its peer group. The funds’ competitive advantages reflected prudent portfolio management, exceptional credit standards, and our customarily low costs.

The Prime Money Market Fund was the top performer of the group, returning 1.31% for Investor Shares and 1.47% for Institutional Shares. The Federal Money Market Fund returned 1.06%, while the Admiral Treasury Money Market Fund posted a return of 0.70%. The variation in the funds’ performance largely reflects their different levels of exposure to U.S. Treasury and agency securities, whose yields were driven lowest during the fiscal year.

The table on page 4 compares the expense ratios of our funds with the average costs of their peers. The table below shows the change in yield over the year for each fund.

The funds’ long-term record remains competitive

It’s been quite a year for money market mutual funds. To ease the minds of nervous investors, the U.S. Treasury

Changes in Yields     
    7-Day SEC Yield 
  August 31,  August 31, 
Money Market Fund           2009                     2008 
Prime     
     Investor Shares         0.19%                 2.17% 
     Institutional Shares         0.34                 2.32 
Federal         0.15                 2.01 
Admiral Treasury         0.07                 1.80 

6


initially set up a temporary money market guarantee program, which our funds took part in. With the guarantee program ending on September 19, it’s only logical for investors to wonder what the future will be like for money market funds.

In response to these concerns, the fund industry has proposed new ideas for fine-tuning risk control and strengthening reporting requirements for money market funds. Vanguard’s own funds already meet or exceed the proposed standards, but we are always pleased by broad actions in support of investors’ interests. The advisor’s letter included in this report discusses the anticipated changes in more detail.

Our funds did well in this extremely difficult period, and their long-term performance also remains impressive in comparison with the average returns of peers, as you can see in the table on page 5. The funds’ solid ten-year returns are the product of several factors, including an emphasis on high-quality securities, skilled portfolio management by Vanguard’s Fixed Income Group, and the funds’ exceptionally low operating costs.

In all market conditions, costs and quality are key

Over the past 12 months, investors have experienced one of the toughest economic periods since the 1930s. Even as turmoil in the stock and bond markets has unnerved those investing in riskier assets, record-low interest rates and a steep decline in yields have left money market shareholders frustrated.

However, disruptions in the market and fluctuations in short-term interest rates can be expected to happen periodically. To help prepare for such volatility, it’s important to pay attention to how your investment is managed and how much you are paying in expenses. A well-managed money market fund is designed to deliver stability, liquidity, and yield—in that order. A failure to respect those priorities can put these critical savings vehicles at risk, as some money market fund providers learned in late 2008.

We believe that Vanguard’s Money Market Funds—with their rock-bottom expense ratios and strict dedication to quality—are good vehicles for your short-term investment needs.

As always, thank you for entrusting your assets to Vanguard.

Sincerely,


F. William McNabb III
President and Chief Executive Officer
September 14, 2009

7


Advisor’s Report

For the 12 months ended August 31, 2009, the three Vanguard Money Market Funds produced returns ranging from 0.70% for the Admiral Treasury Money Market Fund to 1.47% for the Institutional Shares of the Prime Money Market Fund.

The investment environment

On Monday, September 15, 2008, Lehman Brothers Holdings Inc. filed for bankruptcy. The next day, the $62 billion Reserve Primary Fund—still carrying a $785 million position in Lehman commercial paper—“broke the buck,” when its per-share value dropped below $1. In the days that followed, the U.S. Treasury Department announced a temporary program to insure investors’ holdings in eligible money market funds. Although we had no concerns about the stability of the Vanguard Money Market Funds, we agreed to participate in this program, reasoning that a coordinated effort to support short-term debt markets would benefit our own shareholders.

The market had been volatile in the months leading up to Lehman’s bankruptcy amid increasing concerns over structured investment vehicles, auction rate securities, and Bear Stearns. These events led us to take defensive measures by allocating a large portion of the Prime Money Market Fund’s assets into less-volatile Treasury and agency securities.

The management of the funds

Since December 16, 2008, the Federal Reserve Board has kept its target for the federal funds rate, the key benchmark for short-term debt securities, at a range of 0% to 0.25%. This historically low level has presented a challenge to all money market funds, including Vanguard’s.

We have been managing our money market portfolios to the longest average maturity allowed, which lets us take advantage of the steepness in the money market yield curve. The Federal Reserve has made it clear that they intend to keep rates on hold for an “extended period,” so we consider this positioning an effective strategy to enhance shareholder returns.

Our credit analysts, who did an outstanding job protecting the funds throughout the crisis, have been adding issuers to our approved list as market conditions continue to improve, expanding our selection of investment options. A number of these issuers weathered the storm or received government support, allowing our analysts to remove previous restrictions.

In early August, we merged the Treasury Money Market Fund into the lower-cost Admiral Treasury Money Market Fund, which remains closed to new investors. The Federal Money Market Fund also remains closed to new investors. The yields of both funds have come under

8


severe pressure during this period of exceptionally low interest rates. We took these actions to limit new investments that would force us to buy lower-yielding securities, which would in turn dilute the yields for existing shareholders.

The investment outlook

Money market funds have been through their toughest period ever. Given the circumstances, regulatory changes are inevitable and certainly warranted. The mutual fund industry has proposed ways to fine-tune risk control and strengthen reporting standards for money market funds. Recommendations from an Investment Company Institute (ICI) panel led by Vanguard Chairman Jack Brennan, which were quickly adopted by Vanguard, included:

• Mandating daily and weekly liquidity requirements.

• Lowering the maximum average maturity of fund holdings from 90 to 75 days.

• Raising quality standards even higher.

• Enhancing disclosures to investors.

• Requiring funds to adopt “know your client” procedures, so that they will be better prepared for periods when redemptions surge.

The Securities and Exchange Commission (SEC) has also been actively working to create new rules and regulations to strengthen the regulatory framework and make money market funds more resilient to widespread disruptions. However, even if no regulatory changes were made, Vanguard would be comfortable that our longstanding emphasis on the highest-quality securities, prudent portfolio management, and strict risk controls can help ensure the stability of our money market funds.

David R. Glocke, Principal
Vanguard Fixed Income Group
September 18, 2009

9


Results of Proxy Voting

At a special meeting of shareholders on July 2, 2009, fund shareholders approved the following two proposals:

Proposal 1—Elect trustees for each fund.*

The individuals listed in the table below were elected as trustees for each fund. All trustees with the exception of Messrs. McNabb and Volanakis (both of whom already served as directors of The Vanguard Group, Inc.) served as trustees to the funds prior to the shareholder meeting.

Prime Money Market Fund, Federal Money Market Fund       
      Percentage 
Trustee  For  Withheld  For 
John J. Brennan  85,273,008,179  2,974,404,432  96.6% 
Charles D. Ellis  84,253,645,907  3,993,766,704  95.5% 
Emerson U. Fullwood  84,969,784,444  3,277,628,167  96.3% 
Rajiv L. Gupta  85,000,330,621  3,247,081,990  96.3% 
Amy Gutmann  85,074,471,804  3,172,940,807  96.4% 
JoAnn Heffernan Heisen  85,067,261,046  3,180,151,565  96.4% 
F. William McNabb III  85,321,879,989  2,925,532,622  96.7% 
André F. Perold  84,771,886,780  3,475,525,831  96.1% 
Alfred M. Rankin, Jr.  85,133,627,728  3,113,784,883  96.5% 
Peter F. Volanakis  85,289,356,411  2,958,056,200  96.6% 
* Results are for all funds within the same trust.       
 
Treasury Money Market Fund       
      Percentage 
Trustee  For  Withheld  For 
John J. Brennan  4,565,203,593  139,661,352  97.0% 
Charles D. Ellis  4,540,888,368  163,976,577  96.5% 
Emerson U. Fullwood  4,546,420,640  158,444,305  96.6% 
Rajiv L. Gupta  4,546,854,223  158,010,722  96.6% 
Amy Gutmann  4,551,595,314  153,269,631  96.7% 
JoAnn Heffernan Heisen  4,549,243,273  155,621,672  96.7% 
F. William McNabb III  4,560,826,120  144,038,825  96.9% 
André F. Perold  4,546,576,538  158,288,407  96.6% 
Alfred M. Rankin, Jr.  4,554,521,190  150,343,755  96.8% 
Peter F. Volanakis  4,557,292,269  147,572,676  96.9% 

10


Admiral Treasury Money Market Fund       
      Percentage 
Trustee  For  Withheld  For 
John J. Brennan  14,560,683,635  566,077,527  96.3% 
Charles D. Ellis  14,477,279,932  649,481,230  95.7% 
Emerson U. Fullwood  14,505,482,056  621,279,106  95.9% 
Rajiv L. Gupta  14,521,318,192  605,442,970  96.0% 
Amy Gutmann  14,479,677,010  647,084,151  95.7% 
JoAnn Heffernan Heisen  14,478,329,292  648,431,869  95.7% 
F. William McNabb III  14,561,370,833  565,390,329  96.3% 
André F. Perold  14,532,160,580  594,600,582  96.1% 
Alfred M. Rankin, Jr.  14,529,823,546  596,937,616  96.1% 
Peter F. Volanakis  14,572,323,224  554,437,938  96.3% 

Proposal 2—Update and standardize the funds’ fundamental policies regarding:
(a) Purchasing and selling real estate.
(b) Issuing senior securities.
(c) Borrowing money.
(d) Making loans.
(e) Purchasing and selling commodities.
(f) Concentrating investments in a particular industry or group of industries.
(g) Eliminating outdated fundamental investment policies not required by law.

The revised fundamental policies are clearly stated and simple, yet comprehensive, making oversight and compliance more efficient than under the former policies. The revised fundamental policies will allow the funds to respond more quickly to regulatory and market changes, while avoiding the costs and delays associated with successive shareholder meetings.

        Broker  Percentage 
Vanguard Fund  For  Abstain  Against  Non-Votes  For 
Prime Money Market Fund           
2a  72,246,038,319  1,698,123,676  3,577,604,815  2,622,121,527  90.1% 
2b  72,341,722,460  1,933,128,005  3,246,916,352  2,622,121,520  90.3% 
2c  71,211,610,543  1,860,572,094  4,449,584,181  2,622,121,519  88.9% 
2d  71,750,843,619  1,856,608,889  3,914,314,303  2,622,121,526  89.5% 
2e  71,469,689,076  1,807,233,689  4,244,844,046  2,622,121,526  89.2% 
2f  71,886,346,214  1,870,805,159  3,764,615,441  2,622,121,523  89.7% 
2g  73,329,984,826  1,842,933,859  2,348,848,127  2,622,121,525  91.5% 

11


        Broker  Percentage 
Vanguard Fund  For  Abstain  Against  Non-Votes  For 
Federal Money Market Fund           
2a  7,182,581,140  131,524,771  559,466,049  229,952,314  88.6% 
2b  7,175,369,297  159,499,914  538,702,751  229,952,312  88.5% 
2c  6,705,190,610  167,896,337  1,000,485,014  229,952,314  82.7% 
2d  6,713,027,875  168,425,140  992,118,946  229,952,313  82.8% 
2e  7,080,861,762  169,716,743  622,993,456  229,952,314  87.4% 
2f  7,127,611,490  173,357,259  572,603,212  229,952,313  88.0% 
2g  7,299,010,455  153,779,861  420,781,645  229,952,313  90.1% 
 
Treasury Money Market Fund           
2a  4,119,717,135  107,970,012  331,955,665  145,222,134  87.6% 
2b  4,143,645,435  125,847,454  290,149,922  145,222,135  88.1% 
2c  4,082,272,157  112,058,862  365,311,792  145,222,135  86.8% 
2d  4,092,264,028  109,290,410  358,088,372  145,222,135  87.0% 
2e  4,083,874,290  112,500,268  363,268,250  145,222,137  86.8% 
2f  4,116,729,480  127,986,884  314,926,445  145,222,135  87.5% 
2g  4,200,099,539  121,711,518  237,831,752  145,222,136  89.3% 
 
Admiral Treasury Money Market Fund         
2a  12,618,790,355  379,489,540  1,714,928,588  413,552,679  83.4% 
2b  12,779,718,784  414,231,208  1,519,258,491  413,552,679  84.5% 
2c  12,602,411,177  397,276,483  1,713,520,823  413,552,679  83.3% 
2d  12,645,576,735  404,386,229  1,663,245,517  413,552,681  83.6% 
2e  12,604,651,422  392,588,909  1,715,968,151  413,552,679  83.3% 
2f  12,829,089,054  435,235,700  1,448,883,727  413,552,681  84.8% 
2g  13,060,171,203  516,362,206  1,136,675,073  413,552,680  86.3% 

Fund shareholders did not approve this proposal:

Proposal 3—Institute procedures to prevent holding investments in companies that, in the judgment of the board, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.

The trustees recommended a vote against the proposal because it called for procedures that duplicate existing practices and procedures of the Vanguard funds.

        Broker  Percentage 
Vanguard Fund  For  Abstain  Against  Non-Votes  For 
Prime Money Market Fund  9,745,422,293  2,773,601,829  65,002,742,666  2,622,121,549  12.2% 

12


Prime Money Market Fund

Fund Profile
As of August 31, 2009

Financial Attributes   
 
Yield1   
   Investor Shares  0.19% 
   Institutional Shares  0.34% 
Average Weighted Maturity  74 days 
Average Quality2  Aa1 
Expense Ratio3   
   Investor Shares  0.28% 
   Institutional Shares  0.13% 

Distribution by Credit Quality2 (% of portfolio)

Aaa  46.0% 
Aa  41.8 
A  12.2 

Sector Diversification (% of portfolio)   
 
Finance   
     Commercial Paper  16.8% 
     Certificates of Deposit  43.9 
Treasury/Agency  38.8 
Other  0.5 

1 7-day SEC yield. See the Glossary.
2 Moody’s Investors Service.

3 The expense ratios shown are from the prospectuses dated December 29, 2008, and represent estimated costs for the fiscal year based on the fund’s net assets as of the prospectus date. The expense ratios for the fiscal year ended August 31, 2009, were 0.28% for the Investor Shares and 0.13% for the Institutional Shares.

13


Prime Money Market Fund

Performance Summary

Investment returns will fluctuate. All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at www.vanguard.com/performance.) The returns shown do not reflect taxes that a shareholder would pay on fund distributions. 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 fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. The fund’s 7-day SEC yield reflects its current earnings more closely than do the average annual returns.

Cumulative Performance: August 31, 1999–August 31, 2009
Initial Investment of $10,000


    Average Annual Total Returns  Final Value of 
    Periods Ended August 31, 2009  a $10,000 
  One Year  Five Years  Ten Years  Investment 
Prime Money Market Fund Investor Shares1     1.31%               3.35%  3.20%  $13,706 
Citigroup 3-Month Treasury Index     0.51               2.98     3.00  13,439 
Money Market Funds Average2     0.62               2.70     2.59  12,908 

 

        Final Value of 
        a $5,000,000 
  One Year  Five Years  Ten Years  Investment 
Prime Money Market Fund Institutional Shares     1.47%       3.53%     3.39%  $6,981,419 
Citigroup 3-Month Treasury Index     0.51       2.98     3.00  6,719,371 
Institutional Money Market Funds Average2     0.89       3.15     3.03  6,739,024 

1 Total returns do not include the account service fee that may be applicable to certain accounts with balances below $10,000.

2 Returns for Money Market Funds Average and Institutional Money Market Funds Average are derived from data provided by Lipper Inc.

14


Prime Money Market Fund

Fiscal-Year Total Returns (%): August 31, 1999–August 31, 2009     
 
     Prime Money   
Fiscal       Market Fund     Peer 
Year  Investor Shares1  Group2 
2000                     5.9%   5.3% 
2001                     5.4   4.7 
2002                     2.1   1.4 
2003                     1.1   0.6 
2004                     0.8   0.4 
2005                     2.3   1.7 
2006                     4.4   3.7 
2007                     5.2   4.6 
2008                     3.6   3.0 
2009                     1.3   0.6 
7-day SEC yield (8/31/2009): 0.19%     

 

Average Annual Total Returns: Periods Ended June 30, 2009

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.

  Inception Date  One Year  Five Years  Ten Years 
Investor Shares1  6/4/1975     1.65%       3.39%       3.28% 
Institutional Shares  10/3/1989     1.81       3.56       3.48 

1 Total returns do not include the account service fee that may be applicable to certain accounts with balances below $10,000. 2 Returns for Money Market Funds Average are derived from data provided by Lipper Inc.

Note: See Financial Highlights tables for dividend information.

15


Prime Money Market Fund

Financial Statements

Statement of Net Assets

As of August 31, 2009

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

        Face  Market 
      Maturity  Amount  Value• 
    Yield1  Date  ($000)  ($000) 
U.S. Government and Agency Obligations (38.3%)       
2  Federal Home Loan Bank  0.220%  9/16/09  349,200  349,168 
2  Federal Home Loan Bank  0.220%  9/18/09  1,317,161  1,317,024 
2  Federal Home Loan Bank  0.240%  9/23/09  500,000  499,927 
2  Federal Home Loan Bank  0.240%  9/25/09  59,000  58,991 
2,3  Federal Home Loan Bank  0.601%  9/29/09  4,640,000  4,640,000 
2,3  Federal Home Loan Bank  0.324%  11/13/09  1,079,640  1,079,258 
2  Federal Home Loan Bank  0.857%  12/14/09  300,000  299,263 
2  Federal Home Loan Bank  0.754%–0.806%  12/15/09  247,990  247,426 
2  Federal Home Loan Bank  0.827%  12/16/09  11,625  11,597 
2  Federal Home Loan Bank  0.857%  12/29/09  300,000  299,157 
2  Federal Home Loan Bank  0.856%  1/19/10  153,561  153,053 
2  Federal Home Loan Mortgage Corp.  0.220%  9/8/09  176,478  176,470 
2  Federal Home Loan Mortgage Corp.  0.220%  9/21/09  126,650  126,634 
2,3  Federal Home Loan Mortgage Corp.  0.609%  10/7/09  3,247,000  3,246,634 
2  Federal Home Loan Mortgage Corp.  0.785%  12/21/09  208,818  208,316 
2  Federal Home Loan Mortgage Corp.  0.341%  2/2/10  160,000  159,767 
2  Federal National Mortgage Assn.  0.230%  9/21/09  495,000  494,937 
2  Federal National Mortgage Assn.  0.805%  11/2/09  1,500,000  1,497,933 
2,3  Federal National Mortgage Assn.  0.334%  11/13/09  3,000,000  2,999,491 
2  Federal National Mortgage Assn.  0.826%  11/16/09  1,490,000  1,487,421 
2  Federal National Mortgage Assn.  0.755%–0.846%  12/1/09  1,610,800  1,607,411 
2  Federal National Mortgage Assn.  0.847%  12/2/09  950,000  947,961 
2  Federal National Mortgage Assn.  0.867%  12/14/09  1,635,000  1,630,938 
  U.S. Treasury Bill  0.401%  10/8/09  2,000,000  1,999,178 
  U.S. Treasury Bill  0.371%  10/15/09  2,500,000  2,498,869 
  U.S. Treasury Bill  0.185%  10/22/09  3,000,000  2,999,214 
  U.S. Treasury Bill  0.180%–0.567%  11/19/09  1,650,000  1,649,221 
  U.S. Treasury Bill  0.150%  12/3/09  1,500,000  1,499,431 
  U.S. Treasury Bill  0.346%  12/10/09  1,000,000  999,042 
  U.S. Treasury Bill  0.290%  12/17/09  1,500,000  1,498,707 
  U.S. Treasury Bill  0.336%  12/24/09  2,650,000  2,647,189 
  U.S. Treasury Bill  0.351%  12/31/09  500,000  499,412 
  U.S. Treasury Bill  0.275%  1/28/10  1,000,000  998,862 
  U.S. Treasury Bill  0.270%  2/18/10  1,500,000  1,498,087 
  U.S. Treasury Bill  0.255%  2/25/10  500,000  499,373 
  U.S. Treasury Bill  0.240%  3/4/10  1,000,000  998,787 
Total U.S. Government and Agency Obligations (Cost $43,824,149)      43,824,149 

16


Prime Money Market Fund           
 
 
 
        Face  Market 
      Maturity  Amount  Value• 
    Yield1  Date  ($000)  ($000) 
Commercial Paper (16.8%)           
Finance—Auto (0.6%)           
     Toyota Motor Credit Corp.    0.350%  10/5/09  291,000  290,904 
     Toyota Motor Credit Corp.    0.350%  10/6/09  300,000  299,898 
     Toyota Motor Credit Corp.    0.350%  10/7/09  140,000  139,951 
          730,753 
Finance—Other (2.2%)           
   General Electric Capital Corp.    0.250%  9/14/09  492,000  491,956 
   General Electric Capital Corp.    0.210%  9/21/09  1,250,000  1,249,854 
   General Electric Capital Corp.    0.350%  10/5/09  800,000  799,735 
          2,541,545 
Foreign Banks (10.3%)           
4 Australia & New Zealand Banking Group, Ltd.  0.330%  9/4/09  270,000  269,993 
4 Australia & New Zealand Banking Group, Ltd.  0.531%  9/8/09  206,570  206,549 
4 Australia & New Zealand Banking Group, Ltd.  0.391%  9/18/09  119,000  118,978 
4 Australia & New Zealand Banking Group, Ltd.  0.501%  10/20/09  150,000  149,898 
4 Australia & New Zealand Banking Group, Ltd.  0.803%  10/23/09  196,500  196,273 
4 Australia & New Zealand           
   Banking Group, Ltd.  0.451%–0.572%  11/23/09  234,000  233,728 
4 Australia & New Zealand Banking Group, Ltd.  0.451%  12/7/09  295,000  294,642 
  CBA (Delaware) Finance Inc.    0.300%  9/3/09  84,000  83,999 
  CBA (Delaware) Finance Inc.  0.330%–0.491%  9/8/09  453,000  452,968 
  CBA (Delaware) Finance Inc.    0.350%  9/16/09  96,500  96,486 
  CBA (Delaware) Finance Inc.    0.391%  10/6/09  147,500  147,444 
  CBA (Delaware) Finance Inc.    0.330%  10/9/09  85,000  84,970 
  CBA (Delaware) Finance Inc.    0.310%  10/15/09  100,000  99,962 
  CBA (Delaware) Finance Inc.    0.743%  11/9/09  27,500  27,461 
  CBA (Delaware) Finance Inc.    0.461%  11/25/09  147,500  147,340 
  CBA (Delaware) Finance Inc.    0.240%  11/30/09  398,225  397,986 
  CBA (Delaware) Finance Inc.    0.491%  12/14/09  98,000  97,861 
  CBA (Delaware) Finance Inc.    0.501%  12/21/09  45,350  45,280 
  CBA (Delaware) Finance Inc.    0.501%  12/22/09  100,000  99,844 
  CBA (Delaware) Finance Inc.    0.401%  1/29/10  100,000  99,833 
4 Danske Corp.    0.360%  10/9/09  100,000  99,962 
4 Danske Corp.    1.106%  10/16/09  49,294  49,226 
4 Danske Corp.    1.056%  10/26/09  200,000  199,679 
4 Danske Corp.    0.894%  10/28/09  50,000  49,930 
4 Danske Corp.    0.803%  11/2/09  200,000  199,724 
4 Danske Corp.    0.592%  12/15/09  497,000  496,145 
4 Danske Corp.    0.501%  1/15/10  73,100  72,962 
4 Danske Corp.    0.491%  1/19/10  805,000  803,466 
4 Danske Corp.    0.481%  1/20/10  134,900  134,646 
4 Danske Corp.    0.451%  1/22/10  650,000  648,838 
4 Danske Corp.    0.351%  2/25/10  497,000  496,145 
4 DNB NOR Bank ASA    0.280%  9/14/09  495,000  494,950 
4 DNB NOR Bank ASA    0.501%  1/4/10  300,000  299,479 
4 DNB NOR Bank ASA    0.481%  1/15/10  200,000  199,637 
4 DNB NOR Bank ASA    0.451%  1/22/10  300,000  299,464 
4 DNB NOR Bank ASA    0.421%  2/10/10  207,000  206,609 
  Santander Central Hispano Finance (Delaware), Inc.  1.044%  9/8/09  162,500  162,467 
  Santander Central Hispano Finance (Delaware), Inc.  0.651%  9/18/09  121,000  120,963 
  Santander Central Hispano Finance (Delaware), Inc.  0.501%  11/18/09  26,000  25,972 
  Santander Central Hispano Finance (Delaware), Inc.  0.652%  12/2/09  109,000  108,819 
  Santander Central Hispano Finance (Delaware), Inc.  0.652%  12/4/09  197,000  196,666 
  Santander Central Hispano Finance (Delaware), Inc.  0.803%  12/9/09  290,315  289,676 

17


Prime Money Market Fund           
 
 
 
        Face  Market 
      Maturity  Amount  Value• 
    Yield1  Date  ($000)  ($000) 
  Santander Central Hispano Finance (Delaware), Inc.  0.552%  1/14/10  210,750  210,315 
4 Westpac Banking Corp.    0.320%  9/3/09  73,901  73,900 
4 Westpac Banking Corp.    0.320%  9/4/09  250,000  249,993 
4 Westpac Banking Corp.    0.350%  9/21/09  177,000  176,966 
4 Westpac Banking Corp.    0.370%  10/5/09  98,000  97,966 
4 Westpac Banking Corp.    0.844%  10/27/09  305,000  304,602 
4 Westpac Banking Corp.    0.813%  11/4/09  200,000  199,712 
4 Westpac Banking Corp.    0.451%  12/7/09  295,000  294,642 
4 Westpac Banking Corp.    0.401%  1/21/10  617,000  616,027 
4 Westpac Banking Corp.    0.401%  2/9/10  200,000  199,642 
4 Westpac Banking Corp.    0.401%  2/10/10  250,000  249,550 
4 Westpac Banking Corp.    0.381%  2/22/10  118,000  117,783 
          11,798,018 
Foreign Governments (2.8%)           
     Caisse D’Amortissement de la Dette Sociale    0.521%  9/21/09  77,000  76,978 
     Caisse D’Amortissement de la Dette Sociale    0.521%  9/22/09  461,000  460,860 
     Caisse D’Amortissement de la Dette Sociale    0.591%  10/1/09  150,000  149,926 
     Caisse D’Amortissement de la Dette Sociale    0.542%  12/11/09  447,775  447,097 
     Caisse D’Amortissement           
        de la Dette Sociale  0.501%–0.511%  12/28/09  90,000  89,850 
     Caisse D’Amortissement de la Dette Sociale    0.401%  1/14/10  300,000  299,550 
     Caisse D’Amortissement de la Dette Sociale    0.351%  2/5/10  112,000  111,829 
4 Kreditanstalt Fuer Wiederaufbau    0.330%  9/8/09  594,000  593,962 
4 Kreditanstalt Fuer Wiederaufbau    0.330%  9/9/09  519,000  518,962 
4 Kreditanstalt Fuer Wiederaufbau    0.310%  9/21/09  493,000  492,915 
          3,241,929 
Foreign Industrial (0.8%)           
4 BP Capital Markets PLC    0.789%  10/19/09  25,000  24,974 
4 Nestle Capital Corp.    0.704%  10/26/09  50,000  49,947 
4 Nestle Capital Corp.  0.673%–0.704%  1/19/10  393,700  392,639 
4 Nestle Capital Corp.    0.603%  2/16/10  28,165  28,086 
4 Nestle Capital Corp.    0.603%  2/17/10  77,000  76,783 
4 Total Capital Canada, Ltd.    0.270%  10/8/09  84,000  83,977 
4 Total Capital Canada, Ltd.    0.270%  10/14/09  88,635  88,606 
4 Total Capital Canada, Ltd.    0.230%  12/1/09  106,000  105,938 
          850,950 
Industrial (0.1%)           
4 Pfizer Inc.    0.280%  9/1/09  98,000  98,000 
Total Commercial Paper (Cost $19,261,195)          19,261,195 
Certificates of Deposit (43.7%)           
Domestic Banks (2.1%)           
     Bank of America, NA    0.400%  9/17/09  500,000  500,000 
     Bank of America, NA    0.380%  10/13/09  500,000  500,000 
     Bank of America, NA    0.330%  10/27/09  500,000  500,000 
     Bank of America, NA    0.300%  11/2/09  175,000  175,000 
     State Street Bank & Trust Co.    0.350%  10/13/09  350,000  350,000 
     State Street Bank & Trust Co.    0.290%  10/22/09  350,000  350,000 
          2,375,000 
Eurodollar Certificates of Deposit (13.2%)           
     Australia & New Zealand Banking Group, Ltd.  0.330%  9/3/09  500,000  500,000 
     Australia & New Zealand Banking Group, Ltd.  0.800%  10/30/09  100,000  100,000 
     Australia & New Zealand Banking Group, Ltd.  0.600%  11/16/09  497,000  497,000 
     Australia & New Zealand Banking Group, Ltd.  0.420%  1/28/10  430,000  430,000 
     Banco Bilbao Vizcaya Argentaria, SA    0.350%  9/11/09  250,000  250,000 

18


Prime Money Market Fund         
 
 
 
      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
     Banco Bilbao Vizcaya Argentaria, SA  1.000%  11/9/09  200,000  200,000 
     Bank of Nova Scotia  0.500%  12/14/09  98,000  98,000 
     BNP Paribas  0.370%  10/6/09  211,000  211,000 
     BNP Paribas  0.360%  10/13/09  100,000  100,000 
     Commonwealth Bank of Australia  0.900%  10/29/09  250,000  250,000 
     Commonwealth Bank of Australia  0.380%  2/18/10  246,000  246,000 
     Credit Agricole S.A.  0.500%  10/26/09  500,000  500,000 
     Credit Agricole S.A.  0.450%  11/2/09  450,000  450,000 
     Credit Agricole S.A.  0.600%  11/19/09  500,000  500,000 
     Credit Agricole S.A.  0.650%  12/2/09  500,000  500,000 
     Credit Agricole S.A.  0.530%  1/15/10  300,000  300,000 
     Credit Agricole S.A.  0.500%  1/27/10  500,000  500,000 
     Credit Agricole S.A.  0.530%  2/5/10  700,000  700,000 
     DNB NOR Bank ASA  0.320%  10/15/09  250,000  250,000 
     DNB NOR Bank ASA  0.320%  10/15/09  250,000  250,000 
     DNB NOR Bank ASA  0.420%  2/8/10  400,000  400,000 
     HSBC Bank PLC  0.350%  9/24/09  500,000  500,000 
     HSBC Bank PLC  0.240%  12/1/09  284,000  284,000 
     ING Bank N.V.  0.440%  10/22/09  500,000  500,000 
     ING Bank N.V.  0.350%  11/18/09  250,000  250,000 
     ING Bank N.V.  0.350%  11/20/09  800,000  800,000 
     ING Bank N.V.  0.350%  11/23/09  225,000  225,000 
     ING Bank N.V.  0.340%  11/30/09  515,000  515,000 
     National Australia Bank Ltd.  0.370%  9/3/09  492,000  492,000 
     National Australia Bank Ltd.  0.370%  9/11/09  250,000  250,000 
     National Australia Bank Ltd.  0.380%  10/1/09  300,000  300,000 
     National Australia Bank Ltd.  0.350%  10/8/09  250,000  250,000 
     National Australia Bank Ltd.  1.000%  10/21/09  300,000  300,000 
     National Australia Bank Ltd.  1.000%  11/5/09  300,000  300,000 
     National Australia Bank Ltd.  1.010%  11/5/09  98,000  98,002 
     National Australia Bank Ltd.  0.800%  11/9/09  200,000  200,000 
     National Australia Bank Ltd.  0.500%  12/16/09  250,000  250,000 
     National Australia Bank Ltd.  0.470%  1/8/10  250,000  250,000 
     National Australia Bank Ltd.  0.400%  2/8/10  275,000  275,000 
     National Australia Bank Ltd.  0.370%  3/1/10  470,000  470,000 
     Societe Generale  0.320%  11/2/09  300,000  300,000 
     Societe Generale  0.970%  11/2/09  300,000  300,000 
     Societe Generale  0.940%  11/6/09  200,000  200,000 
     Societe Generale  0.290%  11/25/09  540,000  540,000 
        15,081,002 
Yankee Certificates of Deposit (28.4%)         
     Abbey National Treasury Services PLC (US Branch)  0.400%  2/17/10  246,000  246,000 
     Abbey National Treasury Services PLC (US Branch)  0.330%  3/1/10  400,000  400,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  1.110%  10/30/09  100,000  100,005 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  1.080%  11/4/09  300,000  300,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  1.010%  11/6/09  295,000  295,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.650%  12/1/09  49,000  49,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.700%  12/2/09  445,000  445,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.500%  1/13/10  100,000  100,000 

19


Prime Money Market Fund         
 
 
 
      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.500%  1/14/10  400,000  400,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.450%  1/21/10  250,000  250,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.450%  1/27/10  110,000  110,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.400%  2/10/10  450,000  450,000 
     Banco Bilbao Vizcaya Argentaria, SA         
       (New York Branch)  0.355%  3/1/10  485,000  485,000 
     Bank of Montreal (Chicago Branch)  0.320%  9/1/09  500,000  500,000 
     Bank of Montreal (Chicago Branch)  0.310%  9/10/09  250,000  250,000 
     Bank of Montreal (Chicago Branch)  0.350%  9/16/09  253,000  253,000 
     Bank of Montreal (Chicago Branch)  0.240%  9/18/09  500,000  500,000 
     Bank of Montreal (Chicago Branch)  0.350%  10/7/09  350,000  350,000 
     Bank of Montreal (Chicago Branch)  0.310%  10/14/09  200,000  200,000 
     Bank of Montreal (Chicago Branch)  0.230%  10/28/09  180,000  180,000 
     Bank of Montreal (Chicago Branch)  0.290%  11/6/09  50,000  50,000 
     Bank of Nova Scotia (Houston Branch)  0.850%  10/27/09  295,000  295,000 
     Bank of Nova Scotia (Houston Branch)  0.780%  11/2/09  500,000  500,000 
     Bank of Nova Scotia (Houston Branch)  0.460%  11/23/09  500,000  500,000 
     Bank of Nova Scotia (Houston Branch)  0.470%  12/1/09  500,000  500,000 
     Bank of Nova Scotia (Houston Branch)  0.500%  12/15/09  150,000  150,000 
     Bank of Nova Scotia (Houston Branch)  0.500%  12/23/09  300,000  300,000 
     Bank of Nova Scotia (Houston Branch)  0.400%  1/29/10  495,000  495,000 
     Bank of Nova Scotia (Houston Branch)  0.400%  2/1/10  495,000  495,000 
     Bank of Nova Scotia (Houston Branch)  0.370%  2/24/10  100,000  100,000 
     BNP Paribas (New York Branch)  0.920%  10/28/09  300,000  300,000 
     BNP Paribas (New York Branch)  0.870%  11/5/09  500,000  500,000 
     BNP Paribas (New York Branch)  0.840%  11/6/09  500,000  500,000 
     BNP Paribas (New York Branch)  0.450%  1/13/10  250,000  250,000 
     BNP Paribas (New York Branch)  0.420%  2/5/10  400,000  400,000 
     BNP Paribas (New York Branch)  0.380%  2/26/10  175,000  175,000 
     Dexia Credit Local SA (New York Branch)  0.630%  10/6/09  406,000  406,000 
     Dexia Credit Local SA (New York Branch)  0.500%  11/4/09  412,000  412,000 
     DNB NOR Bank ASA (New York Branch)  0.300%  9/14/09  250,000  250,000 
     DNB NOR Bank ASA (New York Branch)  0.500%  1/4/10  300,000  300,000 
     DNB NOR Bank ASA (New York Branch)  0.380%  2/26/10  480,000  480,000 
     Fortis Bank SA/NV (New York Branch)  0.750%  9/8/09  500,000  500,000 
     Fortis Bank SA/NV (New York Branch)  0.470%  10/9/09  250,000  250,000 
     Fortis Bank SA/NV (New York Branch)  0.500%  10/13/09  250,000  250,000 
     Lloyds TSB Bank PLC (New York Branch)  0.580%  9/11/09  500,000  500,000 
     Lloyds TSB Bank PLC (New York Branch)  0.565%  9/15/09  75,000  75,000 
     Lloyds TSB Bank PLC (New York Branch)  0.440%  10/15/09  375,000  375,000 
     Lloyds TSB Bank PLC (New York Branch)  0.450%  10/23/09  550,000  550,000 
     Lloyds TSB Bank PLC (New York Branch)  0.420%  11/5/09  300,000  300,000 
     Lloyds TSB Bank PLC (New York Branch)  0.310%  12/1/09  496,000  496,000 
     Nordea Bank Finland PLC (New York Branch)  0.450%  9/1/09  300,000  300,000 
     Nordea Bank Finland PLC (New York Branch)  0.410%  9/8/09  200,000  200,000 
     Nordea Bank Finland PLC (New York Branch)  0.510%  9/29/09  200,000  200,000 
     Nordea Bank Finland PLC (New York Branch)  0.220%  10/1/09  500,000  500,000 
     Nordea Bank Finland PLC (New York Branch)  0.220%  10/1/09  340,000  340,000 
     Nordea Bank Finland PLC (New York Branch)  0.470%  10/5/09  200,000  200,000 
     Nordea Bank Finland PLC (New York Branch)  1.300%  10/13/09  105,345  105,412 
     Nordea Bank Finland PLC (New York Branch)  0.590%  10/29/09  200,000  200,000 
     Nordea Bank Finland PLC (New York Branch)  0.530%  11/5/09  200,000  200,000 

20


Prime Money Market Fund         
 
 
 
      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
     Nordea Bank Finland PLC (New York Branch)  0.410%  1/25/10  500,000  500,000 
     Nordea Bank Finland PLC (New York Branch)  0.400%  1/27/10  197,000  197,000 
     Nordea Bank Finland PLC (New York Branch)  0.400%  2/4/10  493,000  493,000 
     Rabobank Nederland NV (New York Branch)  0.400%  10/5/09  500,000  500,000 
     Rabobank Nederland NV (New York Branch)  0.750%  11/5/09  600,000  600,000 
     Rabobank Nederland NV (New York Branch)  0.700%  11/9/09  420,000  420,000 
     Rabobank Nederland NV (New York Branch)  0.420%  1/25/10  997,500  997,500 
     Rabobank Nederland NV (New York Branch)  0.400%  2/5/10  450,000  450,000 
     Rabobank Nederland NV (New York Branch)  0.400%  2/18/10  246,000  246,000 
     Rabobank Nederland NV (New York Branch)  0.350%  3/1/10  500,000  500,000 
     Royal Bank of Canada (New York Branch)  0.350%  2/22/10  495,000  495,000 
     Royal Bank of Scotland PLC (Connecticut Branch)  0.660%  9/1/09  500,000  500,000 
     Royal Bank of Scotland PLC (Connecticut Branch)  0.650%  9/10/09  500,000  500,000 
     Royal Bank of Scotland PLC (Connecticut Branch)  0.550%  10/19/09  500,000  500,000 
     Royal Bank of Scotland PLC (Connecticut Branch)  0.490%  11/4/09  800,000  800,000 
     Societe Generale (New York Branch)  0.330%  9/8/09  700,000  700,000 
     Societe Generale (New York Branch)  0.350%  9/21/09  250,000  250,000 
     Svenska Handelsbanken (New York Branch)  0.350%  9/10/09  500,000  500,000 
     Svenska Handelsbanken (New York Branch)  0.350%  9/16/09  500,000  500,000 
     Svenska Handelsbanken (New York Branch)  0.280%  11/23/09  500,000  500,000 
     Svenska Handelsbanken (New York Branch)  0.240%  12/1/09  500,000  500,000 
     Toronto Dominion Bank (New York Branch)  0.420%  10/2/09  163,000  163,000 
     Toronto Dominion Bank (New York Branch)  0.550%  11/2/09  300,000  300,000 
     Toronto Dominion Bank (New York Branch)  0.500%  11/20/09  210,000  210,000 
     Toronto Dominion Bank (New York Branch)  0.500%  11/23/09  99,000  99,000 
     Toronto Dominion Bank (New York Branch)  0.550%  11/30/09  246,000  246,000 
     Toronto Dominion Bank (New York Branch)  0.500%  12/16/09  197,000  197,000 
     Toronto Dominion Bank (New York Branch)  0.450%  1/4/10  200,000  200,000 
     Toronto Dominion Bank (New York Branch)  0.520%  1/25/10  53,000  53,047 
     Toronto Dominion Bank (New York Branch)  0.400%  2/1/10  250,000  250,000 
     Toronto Dominion Bank (New York Branch)  0.400%  2/3/10  197,000  197,000 
     Toronto Dominion Bank (New York Branch)  0.500%  2/8/10  115,000  115,026 
     Toronto Dominion Bank (New York Branch)  0.400%  2/16/10  195,000  195,045 
     Westpac Banking Corp. (New York Branch)  0.500%  12/9/09  250,000  250,000 
     Westpac Banking Corp. (New York Branch)  0.480%  12/16/09  300,000  300,000 
     Westpac Banking Corp. (New York Branch)  0.470%  1/7/10  300,000  300,000 
        32,486,035 
Total Certificates of Deposit (Cost $49,942,037)        49,942,037 
Other Notes (0.2%)         
     Bank of America, NA (Cost $220,000)  0.230%  9/23/09  220,000  220,000 
Repurchase Agreements (3.3%)         
     Banc of America Securities, LLC         
       (Dated 8/31/09, Repurchase Value         
       $195,001,000, collateralized by U.S. Treasury         
       Inflation Adjusted Bond 2.375%, 1/15/25,         
       U.S. Treasury Note 4.000%, 8/15/18)  0.200%  9/1/09  195,000  195,000 
     Barclays Capital Inc.         
       (Dated 8/31/09, Repurchase Value         
       $86,783,000, collateralized by U.S. Treasury         
       Inflation Adjusted Note 1.875%, 7/15/15)  0.210%  9/1/09  86,782  86,782 
     Barclays Capital Inc.         
       (Dated 8/31/09, Repurchase Value         
       $346,002,000, collateralized by U.S. Treasury         
       Note 2.750%, 7/31/10)  0.220%  9/1/09  346,000  346,000 

21


Prime Money Market Fund         
 
 
 
      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
     BNP Paribas Securities Corp.         
       (Dated 8/31/09, Repurchase Value         
       $624,004,000, collateralized by U.S. Treasury         
       Note 2.125%–4.500%, 1/31/10–3/31/16)  0.210%  9/1/09  624,000  624,000 
     Credit Suisse Securities (USA) LLC         
       (Dated 8/31/09, Repurchase Value         
       $416,002,000, collateralized by U.S. Treasury         
       Note 2.375%, 8/31/14)  0.200%  9/1/09  416,000  416,000 
     Deutsche Bank Securities, Inc.         
       (Dated 8/31/09, Repurchase Value         
       $208,001,000, collateralized by         
       U.S. Treasury Bond 4.500%–8.125%,         
       8/15/21–8/15/39)  0.190%  9/1/09  208,000  208,000 
     Goldman, Sachs & Co.         
       (Dated 8/31/09, Repurchase Value         
       $58,500,000, collateralized by U.S. Treasury         
       Inflation Adjusted Bond 2.000%, 1/15/26)  0.210%  9/1/09  58,500  58,500 
     J.P. Morgan Securities Inc.         
       (Dated 8/31/09, Repurchase Value         
       $500,003,000, collateralized by Federal         
       Home Loan Bank 3.250%–7.375%,         
       10/9/09–5/15/19, Federal Home Loan         
       Mortgage Corp. 2.875%–5.350%,         
       6/28/10–8/1/15, Federal National         
       Mortgage Assn. 1.375%–7.125%,         
       4/9/10–1/15/30)  0.210%  9/1/09  500,000  500,000 
     RBC Capital Markets Corp.         
       (Dated 8/31/09, Repurchase Value         
       $250,002,000, collateralized by Federal         
       National Mortgage Assn. 5.000%, 2/13/17)  0.220%  9/1/09  250,000  250,000 
     RBS Securities, Inc.         
       (Dated 8/31/09, Repurchase Value         
       $457,003,000, collateralized by Federal         
       Home Loan Bank 3.625%–4.625%,         
       7/1/11–8/15/12, Federal Home Loan         
       Mortgage Corp. 3.750%–5.250%,         
       4/18/11–4/18/16, Federal National         
       Mortgage Assn. 4.375%–6.625%,         
       9/13/10–12/15/16)  0.220%  9/1/09  457,000  457,000 
     Societe Generale         
       (Dated 8/31/09, Repurchase Value         
       $533,003,000, collateralized by         
       U.S. Treasury Inflation Adjusted         
       Note 2.500%–4.250%, 1/15/10–7/15/16,         
       U.S. Treasury Bond 8.125%, 8/15/19,         
       U.S. Treasury Note 1.375%–4.750%,         
       5/15/12–8/15/18)  0.200%  9/1/09  533,000  533,000 
     UBS Securities LLC         
       (Dated 8/31/09, Repurchase Value         
       $117,001,000, collateralized by Federal         
       National Mortgage Assn. 6.625%, 11/15/30)  0.210%  9/1/09  117,000  117,000 
Total Repurchase Agreements (Cost $3,791,282)        3,791,282 
Medium-Term Note (0.1%)         
Industrial (0.1%)         
3 Procter & Gamble Co. (Cost $81,012)  0.663%  9/9/09  81,000  81,012 

22

 

Prime Money Market Fund       
 
 
      Market 
      Value• 
  Yield1  Shares  ($000) 
Money Market Fund (0.4%)       
5 Vanguard Municipal Cash       
       Management Fund (Cost $447,464)  0.241%  447,463,756  447,464 
Total Investments (102.8%) (Cost $117,567,139)      117,567,139 
Other Assets and Liabilities (–2.8%)       
Other Assets      548,267 
Liabilities      (3,714,609) 
      (3,166,342) 
Net Assets (100%)      114,400,797 

At August 31, 2009, net assets consisted of:   
  Amount 
  ($000) 
Paid-in-Capital  114,385,161 
Undistributed Net Investment Income  — 
Accumulated Net Realized Gains  15,636 
Net Assets  114,400,797 
 
Investor Shares—Net Assets   
Applicable to 96,064,522,067 outstanding $.001 par value shares of   
beneficial interest (unlimited authorization)  96,077,976 
Net Asset Value per Share—Investor Shares  $1.00 
 
Institutional Shares—Net Assets   
Applicable to 18,320,644,318 outstanding $.001 par value shares of   
beneficial interest (unlimited authorization)  18,322,821 
Net Asset Value Per Share—Institutional Shares  $1.00 

• See Note A in Notes to Financial Statements.
1 Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities.
2 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
3 Adjustable-rate security.
4 Security exempt from registration under Section 4(2) of the Securities Act of 1933. Such securities may be sold in transactions exempt from
registration only to dealers in that program or other “accredited investors.” At August 31, 2009, the aggregate value of these securities
was $11,356,495,000, representing 9.9% of net assets.
5 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.

23


Prime Money Market Fund   
 
 
Statement of Operations   
 
  Year Ended 
  August 31, 2009 
  ($000) 
Investment Income   
Income   
Interest1  1,742,763 
Total Income  1,742,763 
Expenses   
The Vanguard Group—Note B   
     Investment Advisory Services  8,802 
     Management and Administrative—Investor Shares  189,892 
     Management and Administrative—Institutional Shares  9,612 
     Marketing and Distribution—Investor Shares  30,412 
     Marketing and Distribution—Institutional Shares  5,010 
Money Market Guarantee Program  39,563 
Custodian Fees  1,677 
Auditing Fees  24 
Shareholders’ Reports and Proxies—Investor Shares  3,977 
Shareholders’ Reports and Proxies—Institutional Shares  50 
Trustees’ Fees and Expenses  187 
Total Expenses  289,206 
Net Investment Income  1,453,557 
Realized Net Gain (Loss) on Investment Securities Sold  12,330 
Net Increase (Decrease) in Net Assets Resulting from Operations  1,465,887 

1 Interest income from an affiliated company of the fund was $384,000.

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

24


Prime Money Market Fund     
 
 
Statement of Changes in Net Assets     
 
  Year Ended August 31, 
  2009  2008 
  ($000)  ($000) 
Increase (Decrease) in Net Assets     
Operations     
Net Investment Income  1,453,557  3,623,514 
Realized Net Gain (Loss)  12,330  8,193 
Net Increase (Decrease) in Net Assets Resulting from Operations  1,465,887  3,631,707 
Distributions     
Net Investment Income     
     Investor Shares  (1,231,299)  (3,177,270) 
     Institutional Shares  (222,258)  (446,244) 
Realized Capital Gain     
     Investor Shares  —  — 
     Institutional Shares  —  — 
Total Distributions  (1,453,557)  (3,623,514) 
Capital Share Transactions     
     Investor Shares  3,583,887  8,424,398 
     Institutional Shares  4,477,418  3,820,996 
Net Increase (Decrease) from Capital Share Transactions  8,061,305  12,245,394 
Total Increase (Decrease)  8,073,635  12,253,587 
Net Assets     
Beginning of Period  106,327,162  94,073,575 
End of Period  114,400,797  106,327,162 

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

25


Prime Money Market Fund           
 
 
Financial Highlights           
 
 
Investor Shares           
 
For a Share Outstanding        Year Ended August 31, 
Throughout Each Period  2009  2008  2007  2006  2005 
Net Asset Value, Beginning of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
Investment Operations           
Net Investment Income  .013  .035  .051  .043  .023 
Net Realized and Unrealized Gain (Loss)           
on Investments  —  —  —  —  — 
Total from Investment Operations  .013  .035  .051  .043  .023 
Distributions           
Dividends from Net Investment Income  (.013)  (.035)  (.051)  (.043)  (.023) 
Distributions from Realized Capital Gains  —  —  —  —  — 
Total Distributions  (.013)  (.035)  (.051)  (.043)  (.023) 
Net Asset Value, End of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
 
Total Return1  1.31%  3.60%  5.23%  4.38%  2.31% 
 
Ratios/Supplemental Data           
Net Assets, End of Period (Millions)  $96,078  $92,483  $84,052  $64,578  $46,454 
Ratio of Total Expenses to           
Average Net Assets  0.28%2  0.23%  0.24%  0.29%  0.30% 
Ratio of Net Investment Income to           
Average Net Assets  1.25%  3.49%  5.10%  4.33%  2.29% 

1 Total returns do not include the account service fee that may be applicable to certain accounts with balances below $10,000.

2 Includes 0.03% of fees to participate in the Treasury Temporary Guarantee Program for Money Market Funds. See Note E in Notes to Financial Statements.

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

26


Prime Money Market Fund           
 
 
Financial Highlights           
 
 
Institutional Shares           
 
For a Share Outstanding        Year Ended August 31, 
Throughout Each Period  2009  2008  2007  2006  2005 
Net Asset Value, Beginning of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
Investment Operations           
Net Investment Income  .015  .037  .053  .045  .025 
Net Realized and Unrealized Gain (Loss)           
on Investments  —  —  —  —  — 
Total from Investment Operations  .015  .037  .053  .045  .025 
Distributions           
Dividends from Net Investment Income  (.015)  (.037)  (.053)  (.045)  (.025) 
Distributions from Realized Capital Gains  —  —  —  —  — 
Total Distributions  (.015)  (.037)  (.053)  (.045)  (.025) 
Net Asset Value, End of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
 
Total Return  1.47%  3.75%  5.39%  4.58%  2.52% 
 
Ratios/Supplemental Data           
Net Assets, End of Period (Millions)  $18,323  $13,844  $10,022  $6,269  $5,764 
Ratio of Total Expenses to           
Average Net Assets  0.13%1  0.08%  0.08%  0.09%  0.09% 
Ratio of Net Investment Income to           
Average Net Assets  1.40%  3.64%  5.26%  4.53%  2.51% 

1 Includes 0.03% of fees to participate in the Treasury Temporary Guarantee Program for Money Market Funds. See Note E in Notes to Financial Statements.

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

27


Prime Money Market Fund

Notes to Financial Statements

Vanguard Prime Money Market Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The 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 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 service criteria and invest a minimum of $5 million.

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

1. Security Valuation: Securities are valued at amortized cost, which approximates market value. Investments in Vanguard Municipal Cash Management Fund are valued at that fund’s net asset value.

2. Repurchase Agreements: The fund may invest 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: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2006–2009), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

4. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month.

5. Other: Interest income includes income distributions received from Vanguard Municipal Cash Management Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses), 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, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2009, the fund had contributed capital of $25,612,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 10.24% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

28


Prime Money Market Fund

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

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

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The fund’s investment in Vanguard Municipal Cash Management Fund is valued based on Level 1 inputs. All of the fund’s other investments were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, securities valued at amortized cost are considered to be valued using Level 2 inputs.

D. Capital share transactions for each class of shares were:       
      Year Ended August 31, 
    2009    2008 
  Amount  Shares  Amount  Shares 
  ($000)  (000)  ($000)  (000) 
Investor Shares         
Issued  113,259,182  113,259,182  106,732,520  106,732,520 
Issued in Lieu of Cash Distributions  1,193,463  1,193,463  3,079,532  3,079,532 
Redeemed  (110,868,758)  (110,868,758)  (101,387,654)  (101,387,654) 
Net Increase (Decrease)—Investor Shares  3,583,887  3,583,887  8,424,398  8,424,398 
Institutional Shares         
Issued  23,083,370  23,083,370  18,040,054  18,040,054 
Issued in Lieu of Cash Distributions  211,837  211,837  424,301  424,301 
Redeemed  (18,817,789)  (18,817,789)  (14,643,359)  (14,643,359) 
Net Increase (Decrease)—Institutional Shares  4,477,418  4,477,418  3,820,996  3,820,996 

E. On October 7, 2008, the board of trustees approved the fund’s participation in a temporary program introduced by the U.S. Treasury to guarantee the account values of shareholders in a money market fund in the event the fund’s net asset value falls below $0.995 and the fund’s trustees decide to liquidate the fund. The program covers the lesser of a shareholder’s account value on September 19, 2008, or on the date of liquidation. To participate, the fund was required to pay a fee of 0.01% of its net assets as of September 19, 2008, for coverage through December 18, 2008. In December 2008, the U.S. Treasury extended the program through April 30, 2009, and the fund’s trustees approved the fund’s continuing participation in the program at a cost of an additional 0.015% of its net assets as of September 19, 2008. In March 2009, the U.S. Treasury extended the program through September 18, 2009, and the fund’s trustees approved the fund’s continuing participation in the program at a cost of an additional 0.015% of its net assets as of September 19, 2008.

F. In preparing the financial statements as of August 31, 2009, management considered the impact of subsequent events occurring through October 15, 2009, for potential recognition or disclosure in these financial statements.

29


Federal Money Market Fund

Fund Profile

As of August 31, 2009

Financial Attributes   
 
Yield1  0.15% 
Average Weighted Maturity  75 days 
Average Quality2  Aaa 
Expense Ratio3  0.28% 

Distribution by Credit Quality2 (% of portfolio) 
Aaa  100.0% 

Sector Diversification (% of portfolio)   
 
U.S. Government/Agency  96.0% 
Other  4.0 

1 7-day SEC yield. See the Glossary.
2 Moody’s Investors Service.
3 The expense ratio shown is from the prospectus dated December 29, 2008, and represents estimated costs for the fiscal year based on the
fund’s net assets as of the prospectus date. The expense ratio for the fiscal year ended August 31, 2009, was 0.27%.

30


Federal Money Market Fund

Performance Summary

Investment returns will fluctuate. All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at www.vanguard.com/performance.) The returns shown do not reflect taxes that a shareholder would pay on fund distributions. 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 fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. The fund’s 7-day SEC yield reflects its current earnings more closely than do the average annual returns.

Cumulative Performance: August 31, 1999–August 31, 2009
Initial Investment of $10,000

 

 

    Average Annual Total Returns  Final Value of 
    Periods Ended August 31, 2009  a $10,000 
  One Year  Five Years  Ten Years  Investment 
Federal Money Market Fund1     1.06%               3.24%  3.14%  $13,617 
Citigroup 3-Month Treasury Index     0.51               2.98     3.00  13,439 
Government Money Market Funds Average2     0.43               2.64     2.57  12,893 

1 Total returns do not include the account service fee that may be applicable to certain accounts with balances below $10,000 2 Returns for the Government Money Market Funds Average are derived from data provided by Lipper Inc.

31


Federal Money Market Fund     
 
 
 
 
Fiscal-Year Total Returns (%): August 31, 1999–August 31, 2009     
 
Fiscal  Federal Money     Peer 
Year   Market Fund1  Group2 
2000                   5.8%   5.3% 
2001                   5.4   4.8 
2002                   2.1   1.5 
2003                   1.1   0.6 
2004                   0.8   0.4 
2005                   2.3   1.7 
2006                   4.3   3.8 
2007                   5.2   4.6 
2008                   3.5   2.7 
2009                   1.1   0.4 
7-day SEC yield (8/31/2009): 0.15%     

Average Annual Total Returns: Periods Ended June 30, 2009

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.

  Inception Date  One Year  Five Years  Ten Years 
Federal Money Market Fund1  7/13/1981  1.38%  3.28%  3.22% 

1 Total returns do not include the account service fee that may be applicable to certain accounts with balances below $10,000 2 Returns for the Government Money Market Funds Average are derived from data provided by Lipper Inc.

Note: See Financial Highlights table for dividend information.

32


Federal Money Market Fund

Financial Statements

Statement of Net Assets

As of August 31, 2009

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

        Face  Market 
      Maturity  Amount  Value• 
    Yield1  Date  ($000)  ($000) 
U.S. Government and Agency Obligations (96.7%)       
2  Federal Home Loan Bank  0.170%  9/1/09  100,000  100,000 
2  Federal Home Loan Bank  0.180%–0.185%  9/4/09  153,000  152,998 
2  Federal Home Loan Bank  0.180%–0.185%  9/9/09  67,500  67,497 
2  Federal Home Loan Bank  0.180%  9/11/09  50,000  49,997 
2  Federal Home Loan Bank  0.190%  9/23/09  93,400  93,389 
2,3  Federal Home Loan Bank  0.601%  9/29/09  600,000  600,000 
2,3  Federal Home Loan Bank  0.388%  10/6/09  386,150  386,001 
2  Federal Home Loan Bank  0.210%  10/9/09  31,780  31,773 
2,3  Federal Home Loan Bank  0.324%  11/13/09  165,000  164,944 
2  Federal Home Loan Bank  0.805%–0.835%  11/18/09  386,892  386,212 
2  Federal Home Loan Bank  0.825%  11/23/09  56,500  56,393 
2  Federal Home Loan Bank  0.190%  11/27/09  25,000  24,989 
2  Federal Home Loan Bank  0.836%  12/1/09  50,000  49,895 
2  Federal Home Loan Bank  0.376%–0.401%  12/4/09  65,675  65,610 
2  Federal Home Loan Bank  0.371%  1/5/10  22,161  22,132 
2  Federal Home Loan Bank  0.361%  1/7/10  20,000  19,974 
2  Federal Home Loan Bank  0.361%  1/8/10  10,000  9,987 
2  Federal Home Loan Bank  0.321%  1/20/10  25,000  24,969 
2  Federal Home Loan Bank  0.285%  2/12/10  40,000  39,948 
2  Federal Home Loan Bank  0.684%  4/1/10  75,000  74,700 
2  Federal Home Loan Bank  0.735%  4/20/10  100,000  99,532 
2  Federal Home Loan Mortgage Corp.  0.230%  9/8/09  93,500  93,496 
2  Federal Home Loan Mortgage Corp.  0.190%  9/9/09  21,280  21,279 
2  Federal Home Loan Mortgage Corp.  0.220%–0.693%  9/14/09  300,000  299,942 
2  Federal Home Loan Mortgage Corp.  0.612%  9/15/09  36,975  36,966 
2  Federal Home Loan Mortgage Corp.  0.250%  9/21/09  21,100  21,097 
2  Federal Home Loan Mortgage Corp.  0.250%  9/22/09  13,000  12,998 
2  Federal Home Loan Mortgage Corp.  0.250%  9/23/09  31,000  30,995 
2,3  Federal Home Loan Mortgage Corp.  0.609%  10/7/09  500,000  499,939 
2  Federal Home Loan Mortgage Corp.  0.270%  10/13/09  200,000  199,937 
2  Federal Home Loan Mortgage Corp.  0.270%  10/14/09  175,000  174,944 
2  Federal Home Loan Mortgage Corp.  0.300%–0.361%  11/2/09  325,000  324,817 
2  Federal Home Loan Mortgage Corp.  0.165%  11/3/09  20,000  19,994 
2  Federal Home Loan Mortgage Corp.  0.250%  11/9/09  65,000  64,969 
2  Federal Home Loan Mortgage Corp.  0.805%  12/7/09  24,489  24,436 
2  Federal Home Loan Mortgage Corp.  0.351%–0.371%  1/6/10  94,000  93,880 
2  Federal Home Loan Mortgage Corp.  0.321%  1/11/10  50,000  49,941 
2  Federal Home Loan Mortgage Corp.  0.310%–0.321%  1/19/10  135,417  135,252 
2  Federal Home Loan Mortgage Corp.  0.310%–0.321%  1/25/10  137,000  136,824 

33


Federal Money Market Fund         
 
 
 
      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
2 Federal Home Loan Mortgage Corp.  0.310%  1/26/10  41,000  40,948 
2 Federal Home Loan Mortgage Corp.  0.320%–0.361%  2/1/10  89,397  89,269 
2 Federal Home Loan Mortgage Corp.  0.341%–0.361%  2/2/10  97,500  97,355 
2 Federal Home Loan Mortgage Corp.  0.265%–0.290%  2/16/10  87,000  86,887 
2 Federal Home Loan Mortgage Corp.  0.341%  2/22/10  32,500  32,447 
2 Federal National Mortgage Assn.  0.582%  9/1/09  53,500  53,500 
2 Federal National Mortgage Assn.  0.582%  9/2/09  75,000  74,999 
2 Federal National Mortgage Assn.  0.587%–0.592%  9/9/09  113,000  112,985 
2 Federal National Mortgage Assn.  0.180%–0.200%  9/14/09  275,000  274,982 
2 Federal National Mortgage Assn.  0.220%  9/16/09  165,000  164,985 
2 Federal National Mortgage Assn.  0.632%  9/25/09  75,000  74,968 
2 Federal National Mortgage Assn.  0.703%–0.734%  10/16/09  120,893  120,786 
2 Federal National Mortgage Assn.  0.210%–0.220%  10/19/09  63,235  63,217 
2 Federal National Mortgage Assn.  0.240%–0.300%  11/2/09  127,424  127,370 
2 Federal National Mortgage Assn.  0.300%  11/4/09  37,500  37,480 
2 Federal National Mortgage Assn.  0.845%  11/9/09  75,000  74,879 
2 Federal National Mortgage Assn.  0.320%  12/2/09  48,000  47,961 
2 Federal National Mortgage Assn.  0.310%  1/13/10  8,844  8,834 
2 Federal National Mortgage Assn.  0.310%–0.321%  1/20/10  141,433  141,257 
2 Federal National Mortgage Assn.  0.310%  1/27/10  280,000  279,643 
2 Federal National Mortgage Assn.  0.321%  2/3/10  49,200  49,132 
2 Federal National Mortgage Assn.  0.290%–0.300%  2/10/10  137,388  137,206 
2 Federal National Mortgage Assn.  0.265%–0.280%  2/17/10  369,000  368,526 
2 Federal National Mortgage Assn.  0.492%  2/22/10  60,000  59,858 
2 Federal National Mortgage Assn.  0.270%  2/24/10  57,761  57,685 
2 Federal National Mortgage Assn.  0.573%  4/1/10  100,000  99,664 
     U.S. Treasury Bill  0.401%  10/8/09  150,000  149,938 
     U.S. Treasury Bill  0.371%  10/15/09  300,000  299,864 
     U.S. Treasury Bill  0.181%  10/22/09  130,000  129,967 
     U.S. Treasury Bill  0.180%  11/19/09  125,000  124,951 
     U.S. Treasury Bill  0.346%  12/10/09  150,000  149,856 
     U.S. Treasury Bill  0.336%–0.338%  12/24/09  400,000  399,574 
     U.S. Treasury Bill  0.351%  12/31/09  200,000  199,765 
     U.S. Treasury Bill  0.280%  2/4/10  50,000  49,939 
     U.S. Treasury Bill  0.285%  2/11/10  35,000  34,955 
Total U.S. Government and Agency Obligations (Cost $9,078,278)      9,078,278 
Repurchase Agreements (4.1%)         
     Banc of America Securities, LLC         
       (Dated 8/31/09, Repurchase Value         
       $46,000,000 collateralized by         
       U.S. Treasury Note 3.875%, 5/15/18)  0.200%  9/1/09  46,000  46,000 
     BNP Paribas Securities Corp.         
       (Dated 8/31/09 Repurchase Value         
       $97,001,000 collateralized by         
       U.S. Treasury Inflation Adjusted Note         
       2.375%, 4/15/11)  0.210%  9/1/09  97,000  97,000 
     Credit Suisse Securities (USA), LLC         
       (Dated 8/31/09, Repurchase Value         
       $46,000,000 collateralized by         
       U.S. Treasury Bill 0.000%, 12/17/09)  0.200%  9/1/09  46,000  46,000 
     J.P. Morgan Securities Inc.         
       (Dated 8/31/09, Repurchase Value         
       $84,487,000 collateralized by         
       Federal Home Loan Bank 2.000%–5.375%,       
       9/14/12–8/15/24)  0.210%  9/1/09  84,487  84,487 

34


Federal Money Market Fund         
 
 
 
      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
      RBS Securities, Inc.         
       (Dated 8/31/09, Repurchased Value         
       $51,000,000 collateralized by Federal         
       Home Loan Mortgage Corp. 1.450%,         
       9/10/10, Federal National         
       Mortgage Assn. 4.750%, 12/15/10)  0.220%  9/1/09  51,000  51,000 
     Societe Generale         
       (Dated 8/31/09, Repurchase Value         
       $58,000,000 collateralized by         
       U.S. Treasury Note 3.125%, 8/31/13)  0.200%  9/1/09  58,000  58,000 
Total Repurchase Agreements (Cost $382,487)        382,487 
Total Investments (100.8%) (Cost $9,460,765)        9,460,765 
Other Assets and Liabilities (–0.8%)         
Other Assets        19,071 
Liabilities        (93,483) 
        (74,412) 
Net Assets (100%)         
Applicable to 9,385,833,460 outstanding $.001 par value shares of       
beneficial interest (unlimited authorization)        9,386,353 
Net Asset Value per Share        $1.00 
 
 
At August 31, 2009, net assets consisted of:         
        Amount 
        ($000) 
Paid-in-Capital        9,385,845 
Undistributed Net Investment Income        — 
Accumulated Net Realized Gains        508 
Net Assets        9,386,353 

• See Note A in Notes to Financial Statements.
1 Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities.
2 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
3 Adjustable-rate security.
See accompanying Notes, which are an integral part of the Financial Statements.

35


Federal Money Market Fund   
 
 
Statement of Operations   
 
  Year Ended 
  August 31, 2009 
  ($000) 
Investment Income   
Income   
Interest  140,787 
Total Income  140,787 
Expenses   
The Vanguard Group—Note B   
     Investment Advisory Services  842 
     Management and Administrative  22,185 
     Marketing and Distribution  3,386 
Money Market Guarantee Program  2,281 
Custodian Fees  130 
Auditing Fees  23 
Shareholders’ Reports and Proxies  352 
Trustees’ Fees and Expenses  18 
Total Expenses  29,217 
Net Investment Income  111,570 
Realized Net Gain (Loss) on Investment Securities Sold  492 
Net Increase (Decrease) in Net Assets Resulting from Operations  112,062 

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

36


Federal Money Market Fund     
 
 
Statement of Changes in Net Assets     
 
  Year Ended August 31, 
  2009  2008 
  ($000)  ($000) 
Increase (Decrease) in Net Assets     
Operations     
Net Investment Income  111,570  292,078 
Realized Net Gain (Loss)  492  54 
Net Increase (Decrease) in Net Assets Resulting from Operations  112,062  292,132 
Distributions     
Net Investment Income  (111,570)  (292,078) 
Realized Capital Gain  —  — 
Total Distributions  (111,570)  (292,078) 
Capital Share Transactions (at $1.00)     
Issued  12,201,190  10,018,883 
Issued in Lieu of Cash Distributions  107,157  282,195 
Redeemed  (11,904,665)  (8,991,301) 
Net Increase (Decrease) from Capital Share Transactions  403,682  1,309,777 
Total Increase (Decrease)  404,174  1,309,831 
Net Assets     
Beginning of Period  8,982,179  7,672,348 
End of Period  9,386,353  8,982,179 

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

37


Federal Money Market Fund           
 
 
Financial Highlights           
 
 
For a Share Outstanding        Year Ended August 31, 
Throughout Each Period  2009  2008  2007  2006  2005 
Net Asset Value, Beginning of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
Investment Operations           
Net Investment Income  .011  .034  .051  .042  .022 
Net Realized and Unrealized Gain (Loss)           
on Investments  —  —  —  —  — 
Total from Investment Operations  .011  .034  .051  .042  .022 
Distributions           
Dividends from Net Investment Income  (.011)  (.034)  (.051)  (.042)  (.022) 
Distributions from Realized Capital Gains  —  —  —  —  — 
Total Distributions  (.011)  (.034)  (.051)  (.042)  (.022) 
Net Asset Value, End of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
 
Total Return1  1.06%  3.46%  5.17%  4.31%  2.26% 
 
Ratios/Supplemental Data           
Net Assets, End of Period (Millions)  $9,386  $8,982  $7,672  $6,360  $5,507 
Ratio of Total Expenses to           
Average Net Assets  0.27%2  0.23%  0.24%  0.29%  0.30% 
Ratio of Net Investment Income to           
Average Net Assets  1.03%  3.33%  5.05%  4.25%  2.23% 

1 Total returns do not include the account service fee that may be applicable to certain accounts with balances below $10,000.

2 Includes 0.02% of fees to participate in the Treasury Temporary Guarantee Program for Money Market Funds. See Note D in Notes to Financial Statements.

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

38


Federal Money Market Fund

Notes to Financial Statements

Vanguard Federal Money Market Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund invests in short-term debt instruments issued by the U.S. government or its agencies and instrumentalities, and repurchase agreements collateralized by such instruments.

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

1. Security Valuation: Securities are valued at amortized cost, which approximates market value.

2. Repurchase Agreements: The fund may invest 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: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2006–2009), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

4. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month.

5. Other: Interest income is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2009, the fund had contributed capital of $2,243,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.90% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

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

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

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

At August 31, 2009, 100% of the fund’s investments were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, securities valued at amortized cost are considered to be valued using Level 2 inputs.

39


Federal Money Market Fund

D. On October 7, 2008, the board of trustees approved the fund’s participation in a temporary program introduced by the U.S. Treasury to guarantee the account values of shareholders in a money market fund in the event the fund’s net asset value falls below $0.995 and the fund’s trustees decide to liquidate the fund. The program covers the lesser of a shareholder’s account value on September 19, 2008, or on the date of liquidation. To participate, the fund was required to pay a fee of 0.01% of its net assets as of September 19, 2008, for coverage through December 18, 2008. In December 2008, the U.S. Treasury extended the program through April 30, 2009, and the fund’s trustees approved the fund’s continuing participation in the program at a cost of an additional 0.015% of its net assets as of September 19, 2008. In March 2009, the U.S. Treasury extended the program through September 18, 2009. The fund’s trustees elected to discontinue the fund’s participation in the program effective April 30, 2009.

E. In preparing the financial statements as of August 31, 2009, management considered the impact of subsequent events occurring through October 15, 2009, for potential recognition or disclosure in these financial statements.

40


Admiral Treasury Money Market Fund

Fund Profile
As of August 31, 2009

Financial Attributes   
 
Yield1  0.07% 
Average Weighted Maturity  73 days 
Average Quality2  Aaa 
Expense Ratio3  0.15% 

Distribution by Credit Quality2 (% of portfolio) 
Aaa  100.0% 

Sector Diversification (% of portfolio)   
Treasury  100.0% 

1 7-day SEC yield. See the Glossary.
2 Moody’s Investors Service.
3 The expense ratio shown is from the prospectus dated December 29, 2008, and represents estimated costs for the fiscal year based on the
fund’s net assets as of the prospectus date. The expense ratio for the fiscal year ended August 31, 2009, was 0.15%.

41


Admiral Treasury Money Market Fund

Performance Summary

Investment returns will fluctuate. All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at www.vanguard.com/performance.) The returns shown do not reflect taxes that a shareholder would pay on fund distributions. 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 fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. The fund’s 7-day SEC yield reflects its current earnings more closely than do the average annual returns.

Cumulative Performance: August 31, 1999–August 31, 2009
Initial Investment of $50,000

 

    Average Annual Total Returns  Final Value of 
    Periods Ended August 31, 2009  a $50,000 
  One Year  Five Years  Ten Years  Investment 
Admiral Treasury Money Market Fund     0.70%               3.05%  3.03%  $67,373 
Citigroup 3-Month Treasury Index     0.51               2.98     3.00  67,194 
iMoneyNet Money Fund Report’s         
Average 100% Treasury Fund     0.17               2.34     2.39  63,349 

42


Admiral Treasury Money Market Fund     
 
 
 
 
Fiscal-Year Total Returns (%): August 31, 1999–August 31, 2009     
 
Fiscal       Admiral Treasury     Peer 
Year  Money Market Fund  Group1 
2000                           5.5%   5.0% 
2001                           5.3   4.7 
2002                           2.1   1.6 
2003                           1.2   0.7 
2004                           0.9   0.4 
2005                           2.3   1.6 
2006                           4.2   3.5 
2007                           5.0   4.3 
2008                           3.1   2.1 
2009                           0.7   0.2 
7-day SEC yield (8/31/2009): 0.07%     

 

Average Annual Total Returns: Periods Ended June 30, 2009

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.

  Inception Date  One Year  Five Years  Ten Years 
Admiral Treasury Money Market  12/14/1992  0.99%  3.09%  3.10% 

1 Derived from iMoneyNet Money Fund Report’s Average 100% Treasury Fund.
Note: See Financial Highlights table for dividend information.

43


Admiral Treasury Money Market Fund

Financial Statements

Statement of Net Assets

As of August 31, 2009

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

      Face  Market 
    Maturity  Amount  Value• 
  Yield1  Date  ($000)  ($000) 
U.S. Government and Agency Obligations (105.2%)       
     U.S. Treasury Bill  0.150%–0.441%  9/3/09  1,299,944  1,299,920 
     U.S. Treasury Bill  0.190%–0.461%  9/10/09  965,000  964,934 
     U.S. Treasury Bill  0.445%–0.446%  9/17/09  1,280,000  1,279,747 
     U.S. Treasury Bill  0.195%  9/24/09  1,857,631  1,857,400 
     U.S. Treasury Bill  0.195%  10/1/09  1,341,000  1,340,782 
     U.S. Treasury Bill  0.190%–0.400%  10/8/09  1,030,000  1,029,777 
     U.S. Treasury Bill  0.180%  10/15/09  1,510,000  1,509,668 
     U.S. Treasury Bill  0.185%–0.190%  10/22/09  1,400,000  1,399,626 
     U.S. Treasury Bill  0.305%  10/29/09  1,475,000  1,474,275 
     U.S. Treasury Bill  0.180%  11/5/09  1,075,840  1,075,490 
     U.S. Treasury Bill  0.185%–0.305%  11/12/09  1,687,000  1,686,132 
     U.S. Treasury Bill  0.180%–0.295%  11/19/09  1,985,000  1,983,967 
     U.S. Treasury Bill  0.160%–0.300%  11/27/09  2,040,583  2,039,466 
     U.S. Treasury Bill  0.150%–0.290%  12/3/09  1,600,000  1,599,097 
     U.S. Treasury Bill  0.345%–0.346%  12/10/09  662,000  661,366 
     U.S. Treasury Bill  0.290%  12/17/09  605,000  604,479 
     U.S. Treasury Bill  0.351%  12/31/09  248,000  247,708 
     U.S. Treasury Bill  0.285%  1/7/10  570,000  569,422 
     U.S. Treasury Bill  0.285%  1/21/10  906,000  904,982 
     U.S. Treasury Bill  0.275%  1/28/10  1,137,225  1,135,931 
     U.S. Treasury Bill  0.281%–0.285%  2/11/10  612,000  611,214 
     U.S. Treasury Bill  0.270%  2/18/10  516,000  515,342 
     U.S. Treasury Bill  0.255%  2/25/10  460,000  459,423 
     U.S. Treasury Bill  0.240%  3/4/10  500,000  499,393 
Total U.S. Government and Agency Obligations (Cost $26,749,541)      26,749,541 
Other Assets and Liabilities (–5.2%)         
Other Assets        37,907 
Liabilities        (1,352,635) 
        (1,314,728) 
Net Assets (100%)         
Applicable to 25,431,762,193 outstanding $.001 par value shares of       
beneficial interest (unlimited authorization)        25,434,813 
Net Asset Value per Share        $1.00 

44


Admiral Treasury Money Market Fund   
 
 
 
At August 31, 2009, net assets consisted of:   
  Amount 
  ($000) 
Paid-in-Capital  25,432,445 
Undistributed Net Investment Income  — 
Accumulated Net Realized Gains  2,368 
Net Assets  25,434,813 

• See Note A in Notes to Financial Statements.
1 Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities.
See accompanying Notes, which are an integral part of the Financial Statements.

45


Admiral Treasury Money Market Fund   
 
 
Statement of Operations   
 
  Year Ended 
  August 31, 2009 
  ($000) 
Investment Income   
Income   
Interest  218,978 
Total Income  218,978 
Expenses   
The Vanguard Group—Note B   
     Investment Advisory Services  2,019 
     Management and Administrative  20,149 
     Marketing and Distribution  7,905 
Money Market Guarantee Program  6,316 
Custodian Fees  292 
Auditing Fees  24 
Shareholders’ Reports and Proxies  192 
Trustees’ Fees and Expenses  34 
Total Expenses  36,931 
Net Investment Income  182,047 
Realized Net Gain (Loss) on Investment Securities Sold  1,680 
Net Increase (Decrease) in Net Assets Resulting from Operations  183,727 

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

46


Admiral Treasury Money Market Fund     
 
 
Statement of Changes in Net Assets     
 
  Year Ended August 31, 
  2009  2008 
  ($000)  ($000) 
Increase (Decrease) in Net Assets     
Operations     
Net Investment Income  182,047  634,389 
Realized Net Gain (Loss)  1,680  (142) 
Net Increase (Decrease) in Net Assets Resulting from Operations  183,727  634,247 
Distributions     
Net Investment Income  (182,047)  (634,389) 
Realized Capital Gain  —  — 
Total Distributions  (182,047)  (634,389) 
Capital Share Transactions (at $1.00)     
Issued  15,029,687  19,825,341 
Issued in Connection with Acquisition of Treasury Money Market Fund  6,138,800  — 
Issued in Lieu of Cash Distributions  174,037  601,195 
Redeemed  (19,198,371)  (17,201,363) 
Net Increase (Decrease) from Capital Share Transactions  2,144,153  3,225,173 
Total Increase (Decrease)  2,145,833  3,225,031 
Net Assets     
Beginning of Period  23,288,980  20,063,949 
End of Period  25,434,813  23,288,980 

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

47


Admiral Treasury Money Market Fund           
 
 
Financial Highlights           
 
 
For a Share Outstanding        Year Ended August 31, 
Throughout Each Period  2009  2008  2007  2006  2005 
Net Asset Value, Beginning of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
Investment Operations           
Net Investment Income  .007  .030  .049  .041  .023 
Net Realized and Unrealized Gain (Loss)           
on Investments  —  —  —  —  — 
Total from Investment Operations  .007  .030  .049  .041  .023 
Distributions           
Dividends from Net Investment Income  (.007)  (.030)  (.049)  (.041)  (.023) 
Distributions from Realized Capital Gains  —  —  —  —  — 
Total Distributions  (.007)  (.030)  (.049)  (.041)  (.023) 
Net Asset Value, End of Period  $1.00  $1.00  $1.00  $1.00  $1.00 
 
Total Return  0.70%  3.08%  5.02%  4.22%  2.29% 
 
Ratios/Supplemental Data           
Net Assets, End of Period (Millions)  $25,435  $23,289  $20,064  $15,982  $13,838 
Ratio of Total Expenses to           
Average Net Assets  0.15%1  0.10%  0.10%  0.13%  0.13% 
Ratio of Net Investment Income to           
Average Net Assets  0.74%  2.98%  4.90%  4.15%  2.27% 

1 Includes 0.03% of fees to participate in the Treasury Temporary Guarantee Program for Money Market Funds. See Note D in Notes to Financial Statements.

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

48


Admiral Treasury Money Market Fund

Notes to Financial Statements

Vanguard Admiral Treasury Money Market Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund invests in short-term debt instruments backed by the full faith and credit of the U.S. government.

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

1. Security Valuation: Securities are valued at amortized cost, which approximates market value.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2006–2009), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

3. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month.

4. Other: Interest income is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2009, the fund had contributed capital of $5,839,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 2.34% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

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

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

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

At August 31, 2009, 100% of the fund’s investments were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, securities valued at amortized cost are considered to be valued using Level 2 inputs.

49


Admiral Treasury Money Market Fund

D. On October 7, 2008, the board of trustees approved the fund’s participation in a temporary program introduced by the U.S. Treasury to guarantee the account values of shareholders in a money market fund in the event the fund’s net asset value falls below $0.995 and the fund’s trustees decide to liquidate the fund. The program covers the lesser of a shareholder’s account value on September 19, 2008, or on the date of liquidation. To participate, the fund was required to pay a fee of 0.01% of its net assets as of September 19, 2008, for coverage through December 18, 2008. In December 2008, the U.S. Treasury extended the program through April 30, 2009, and the fund’s trustees approved the fund’s continuing participation in the program at a cost of an additional 0.015% of its net assets as of September 19, 2008. In March 2009, the U.S. Treasury extended the program through September 18, 2009. The fund’s trustees elected to discontinue the fund’s participation in the program effective April 30, 2009.

E. Effective August 11, 2009, the fund acquired all the net assets of Vanguard Treasury Money Market Fund pursuant to a plan of reorganization approved by the fund’s board of trustees. The acquisition was accomplished by a tax-free exchange of one share of the fund for each share of the Treasury Money Market Fund outstanding on August 11, 2009. The Treasury Money Market Fund’s net assets on August 11, 2009, were $6,138,800,000. The net assets of the fund immediately before the acquisition were $19,955,141,000. The net assets of the fund immediately following the acquisition were $26,093,941,000.

F. In preparing the financial statements as of August 31, 2009, management considered the impact of subsequent events occurring through October 15, 2009, for potential recognition or disclosure in these financial statements.

50


Report of Independent Registered Public Accounting Firm

To the Trustees of Vanguard Money Market Reserves and Vanguard Admiral Funds and the Shareholders of Vanguard Prime Money Market Fund, Vanguard Federal Money Market Fund and Vanguard Admiral Treasury Money Market Fund:

In our opinion, the accompanying statements of net assets and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Prime Money Market Fund, Vanguard Federal Money Market Fund and Vanguard Admiral Treasury Money Market Fund (the “Funds”) at August 31, 2009, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2009 by correspondence with the custodians and brokers and by agreement to the underlying ownership records for Vanguard Municipal Cash Management Fund, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania

October 15, 2009

51


Special 2009 tax information (unaudited) for Vanguard Prime Money Market Fund 

This information for the fiscal year ended August 31, 2009, is included pursuant to provisions of the Internal Revenue Code.

For nonresident alien shareholders, 87.1% of income dividends are interest-related dividends.

 

Special 2009 tax information (unaudited) for Vanguard Federal Money Market Fund 

This information for the fiscal year ended August 31, 2009, is included pursuant to provisions of the Internal Revenue Code.

For nonresident alien shareholders, 100% of income dividends are interest-related dividends.

 

Special 2009 tax information (unaudited) for Vanguard Admiral Treasury Money Market Fund 

This information for the fiscal year ended August 31, 2009, is included pursuant to provisions of the Internal Revenue Code.

For nonresident alien shareholders, 100% of income dividends are interest-related dividends.

 

Special 2009 tax information (unaudited) for Vanguard Treasury Money Market Fund 

This information for the period from September 1, 2008, to August 11, 2009, is included pursuant to provisions of the Internal Revenue Code.

For nonresident alien shareholders, 100% of income dividends are interest-related dividends.

52


About Your Fund’s Expenses

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

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

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

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

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

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

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include the account service fee described in the prospectus (the fee does not apply to the Prime Money Market Fund’s Institutional Shares or the Admiral Treasury Money Market Fund). If such a fee were applied to your account, your costs would be higher. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it carry a “sales load.”

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

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

53


Six Months Ended August 31, 2009       
  Beginning  Ending  Expenses 
  Account Value  Account Value  Paid During 
Money Market Fund  2/28/2009  8/31/2009  Period1 
Based on Actual Fund Return       
Prime       
     Investor Shares  $1,000.00  $1,002.23  $1.41 
     Institutional Shares  1,000.00  1,003.00  0.66 
Federal  1,000.00  1,001.83  1.36 
Admiral Treasury  1,000.00  1,001.25  0.81 
Based on Hypothetical 5% Yearly Return       
Prime       
     Investor Shares  $1,000.00  $1,023.79  $1.43 
     Institutional Shares  1,000.00  1,024.55  0.66 
Federal  1,000.00  1,023.84  1.38 
Admiral Treasury  1,000.00  1,024.40  0.82 

1 The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Prime Money Market Fund, 0.28% for Investor Shares and 0.13% for Institutional Shares; for the Federal Money Market Fund, 0.27%; for the Admiral Treasury Money Market Fund, 0.16%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.

54


Trustees Approve Advisory Arrangement

The board of trustees of Vanguard Prime Money Market Fund, Federal Money Market Fund, and Admiral Treasury Money Market Fund has renewed the funds’ investment advisory arrangement with The Vanguard Group, Inc. Vanguard—through its Fixed Income Group—serves as the investment advisor to the funds. The board determined that continuing the funds’ internalized management structure was in the best interests of the funds and their shareholders.

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

Nature, extent, and quality of services

The board considered the quality of the funds’ investment management over both the short and long term, and took into account the organizational depth and stability of the advisor. The board noted that Vanguard has been managing investments for more than three decades. The Fixed Income Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.

The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.

Investment performance

The board considered the short- and long-term performance of the funds, including any periods of outperformance or underperformance of relevant benchmarks and peer groups. The board concluded that the funds have performed in line with expectations, and that their results have been consistent with their investment policies. Information about each fund’s most recent performance can be found on the Performance Summary pages of this report.

Cost

The board concluded that the funds’ expense ratios were well below the average expense ratios charged by funds in their respective peer groups and that the funds’ advisory expense ratios were also well below their peer-group averages. Information about the funds’ expense ratios appears in the About Your Fund’s Expenses section of this report.

The board does not conduct a profitability analysis of Vanguard, because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.

The benefit of economies of scale

The board concluded that the funds’ low-cost arrangement with Vanguard ensures that the funds will realize economies of scale as they grow, with the cost to shareholders declining as fund assets increase.

The board will consider whether to renew the advisory arrangement again after a one-year period.

55


Glossary

Average Quality. An indicator of credit risk, this figure is the average of the ratings assigned to a fund’s fixed income 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 bond issuers. U.S. Treasury securities are considered to have the highest credit quality.

Average Weighted Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid. The figure reflects the proportion of fund assets represented by each security.

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.

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

Yield. A money market fund’s 7-day SEC yield is calculated by annualizing its income distributions for the previous seven days, as required by the U.S. Securities and Exchange Commission.

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The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 157 Vanguard funds.

The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at www.vanguard.com.

Interested Trustees  Emerson U. Fullwood 
  Born 1948. Trustee Since January 2008. Principal 
John J. Brennan1  Occupation(s) During the Past Five Years: Retired 
Born 1954. Trustee Since May 1987. Chairman of  Executive Chief Staff and Marketing Officer for North 
the Board. Principal Occupation(s) During the Past  America and Corporate Vice President of Xerox 
Five Years: Chairman of the Board and Director/Trustee  Corporation (photocopiers and printers); Director of 
of The Vanguard Group, Inc., and of each of the  SPX Corporation (multi-industry manufacturing), the 
investment companies served by The Vanguard Group;  United Way of Rochester, the Boy Scouts of America, 
Chief Executive Officer and President of The Vanguard  Amerigroup Corporation (direct health and medical 
Group and of each of the investment companies served  insurance carriers), and Monroe Community College 
by The Vanguard Group (1996–2008); Chairman of  Foundation. 
the Financial Accounting Foundation; Governor of   
the Financial Industry Regulatory Authority (FINRA);  Rajiv L. Gupta 
Director of United Way of Southeastern Pennsylvania.  Born 1945. Trustee Since December 2001.2 Principal 
  Occupation(s) During the Past Five Years: Retired 
F. William McNabb III1  Chairman and Chief Executive Officer of Rohm and 
Born 1957. Trustee Since July 2009. Principal  Haas Co. (chemicals); President of Rohm and Haas Co. 
Occupation(s) During the Past Five Years: Director of  (2006–2008); Board Member of American Chemistry 
The Vanguard Group, Inc., since 2008; Chief Executive  Council; Director of Tyco International, Ltd. (diversified 
Officer and President of The Vanguard Group and of  manufacturing and services) and Hewlett-Packard Co. 
each of the investment companies served by The  (electronic computer manufacturing); Trustee of The 
Vanguard Group since 2008; Director of Vanguard  Conference Board. 
Marketing Corporation; Managing Director of The   
Vanguard Group (1995–2008).  Amy Gutmann 
  Born 1949. Trustee Since June 2006. Principal 
  Occupation(s) During the Past Five Years: President of 
Independent Trustees  the University of Pennsylvania; Christopher H. Browne 
  Distinguished Professor of Political Science in the School 
Charles D. Ellis  of Arts and Sciences with Secondary Appointments 
Born 1937. Trustee Since January 2001. Principal  at the Annenberg School for Communication and the 
Occupation(s) During the Past Five Years: Applecore  Graduate School of Education of the University of 
Partners (pro bono ventures in education); Senior  Pennsylvania; Director of Carnegie Corporation of 
Advisor to Greenwich Associates (international business  New York, Schuylkill River Development Corporation, 
strategy consulting); Successor Trustee of Yale University;  and Greater Philadelphia Chamber of Commerce; 
Overseer of the Stern School of Business at New York  Trustee of the National Constitution Center. 
University; Trustee of the Whitehead Institute for   
Biomedical Research.   


JoAnn Heffernan Heisen  Executive Officers   
Born 1950. Trustee Since July 1998. Principal     
Occupation(s) During the Past Five Years: Retired  Thomas J. Higgins1   
Corporate Vice President, Chief Global Diversity Officer,  Born 1957. Chief Financial Officer Since September 
and Member of the Executive Committee of Johnson  2008. Principal Occupation(s) During the Past Five 
& Johnson (pharmaceuticals/consumer products);  Years: Principal of The Vanguard Group, Inc.; Chief 
Vice President and Chief Information Officer of Johnson  Financial Officer of each of the investment companies 
& Johnson (1997–2005); Director of the University  served by The Vanguard Group since 2008; Treasurer 
Medical Center at Princeton and Women’s Research  of each of the investment companies served by The 
and Education Institute.  Vanguard Group (1998–2008). 
 
André F. Perold  Kathryn J. Hyatt1   
Born 1952. Trustee Since December 2004. Principal  Born 1955. Treasurer Since November 2008. Principal 
Occupation(s) During the Past Five Years: George Gund  Occupation(s) During the Past Five Years: Principal of 
Professor of Finance and Banking, Harvard Business  The Vanguard Group, Inc.; Treasurer of each of the 
School; Director and Chairman of UNX, Inc. (equities  investment companies served by The Vanguard 
trading firm); Chair of the Investment Committee of  Group since 2008; Assistant Treasurer of each of the 
HighVista Strategies LLC (private investment firm).  investment companies served by The Vanguard Group 
  (1988–2008).   
Alfred M. Rankin, Jr.     
Born 1941. Trustee Since January 1993. Principal  Heidi Stam1   
Occupation(s) During the Past Five Years: Chairman,  Born 1956. Secretary Since July 2005. Principal 
President, Chief Executive Officer, and Director of  Occupation(s) During the Past Five Years: Managing 
NACCO Industries, Inc. (forklift trucks/housewares/  Director of The Vanguard Group, Inc., since 2006; 
lignite); Director of Goodrich Corporation (industrial  General Counsel of The Vanguard Group since 2005; 
products/aircraft systems and services).  Secretary of The Vanguard Group and of each of the 
  investment companies served by The Vanguard Group 
Peter F. Volanakis  since 2005; Director and Senior Vice President of 
Born 1955. Trustee Since July 2009. Principal  Vanguard Marketing Corporation since 2005; Principal 
Occupation(s) During the Past Five Years: President  of The Vanguard Group (1997–2006). 
since 2007 and Chief Operating Officer since 2005     
of Corning Incorporated (communications equipment);     
President of Corning Technologies (2001–2005); Director  Vanguard Senior Management Team 
of Corning Incorporated and Dow Corning; Trustee of     
the Corning Incorporated Foundation and the Corning  R. Gregory Barton  Michael S. Miller 
Museum of Glass; Overseer of the Amos Tuck School  Mortimer J. Buckley  James M. Norris 
of Business Administration at Dartmouth College.  Kathleen C. Gubanich  Glenn W. Reed 
  Paul A. Heller  George U. Sauter 
 
 
  Founder   
 
  John C. Bogle   
  Chairman and Chief Executive Officer, 1974–1996 

1 These individuals are “interested persons” as defined in the Investment Company Act of 1940.

2 December 2002 for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.


 

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

Connect with Vanguard® > www.vanguard.com

Fund Information > 800-662-7447  All comparative mutual fund data are from Lipper Inc. 
  or Morningstar, Inc., unless otherwise noted. 
Direct Investor Account Services > 800-662-2739   
 
Institutional Investor Services > 800-523-1036  You can obtain a free copy of Vanguard’s proxy voting 
  guidelines by visiting our website, www.vanguard.com, 
Text Telephone for People  and searching for “proxy voting guidelines,” or by 
With Hearing Impairment > 800-952-3335  calling Vanguard at 800-662-2739. The guidelines are 
  also available from the SEC’s website, www.sec.gov. 
  In addition, you may obtain a free report on how your 
  fund voted the proxies for securities it owned during 
This material may be used in conjunction   the 12 months ended June 30. To get the report, visit 
with the offering of shares of any Vanguard  either www.vanguard.com or www.sec.gov. 
fund only if preceded or accompanied by   
the fund’s current prospectus.  You can review and copy information about your fund 
  at the SEC’s Public Reference Room in Washington, D.C. 
  To find out more about this public service, call the SEC 
  at 202-551-8090. Information about your fund is also 
  available on the SEC’s website, and you can receive 
  copies of this information, for a fee, by sending a 
  request in either of two ways: via e-mail addressed to 
  publicinfo@sec.gov or via regular mail addressed to the 
  Public Reference Section, Securities and Exchange 
  Commission, Washington, DC 20549-0102. 
 
 
 
 
  © 2009 The Vanguard Group, Inc. 
  All rights reserved. 
  Vanguard Marketing Corporation, Distributor. 
  Q300 102009 


Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.

Item 3: Audit Committee Financial Expert. The following members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts serving on its Audit Committee, and to be independent: Charles D. Ellis, Rajiv L. Gupta, JoAnn Heffernan Heisen, André F. Perold, and Alfred M. Rankin, Jr.

Item 4: Principal Accountant Fees and Services.

(a) Audit Fees.

Audit Fees of the Registrant

Fiscal Year Ended August 31, 2009: $24,000 Fiscal Year Ended August 31, 2008: $19,000

Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.

Fiscal Year Ended August 31, 2009: $3,354,640
Fiscal Year Ended August 31, 2008: $3,055,590

(b) Audit-Related Fees.

Fiscal Year Ended August 31, 2009: $876,210
Fiscal Year Ended August 31, 2008: $626,240

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

(c) Tax Fees.

Fiscal Year Ended August 31, 2009: $423,070
Fiscal Year Ended August 31, 2008: $230,400

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


(d) All Other Fees.

Fiscal Year Ended August 31, 2009: $0
Fiscal Year Ended August 31, 2008: $0

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

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

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

     The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; or (4) other registered investment companies in the Vanguard Group.

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

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

(g) Aggregate Non-Audit Fees.

Fiscal Year Ended August 31, 2009: $423,070
Fiscal Year Ended August 31, 2008: $230,400

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


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

Item 5: Not Applicable.

Item 6: Not Applicable.

Item 7: Not Applicable.

Item 8: Not Applicable.

Item 9: Not Applicable.

Item 10: Not Applicable.

Item 11: Controls and Procedures.

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

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


Item 12: Exhibits.

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

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

  VANGUARD ADMIRAL FUNDS 
 
By:  /s/ F. WILLIAM MCNABB III* 
  F. WILLIAM MCNABB III 
  CHIEF EXECUTIVE OFFICER 
 
Date: October 22, 2009 

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:  /s/ F. WILLIAM MCNABB III* 
  F. WILLIAM MCNABB III 
  CHIEF EXECUTIVE OFFICER 
 
Date: October 22, 2009 

VANGUARD ADMIRAL FUNDS  
 
By:  /s/ THOMAS J. HIGGINS* 
  THOMAS J. HIGGINS 
  CHIEF FINANCIAL OFFICER 
 
Date: October 22, 2009 

*By: /s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on July 24, 2009, see File Number 2-88373, and a Power of Attorney filed on October 16, 2009, see File Number 2-52698, both Incorporated by Reference.