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   Yield 1  
  Symbol   Returns   8/31/2009  
Vanguard Prime Money Market Fund        
      Investor Shares   VMMXX       1.31%   0.19%  
Money Market Funds Average 2         0.62   —  
      Institutional Shares 3   VMRXX       1.47         0.34  
Institutional Money Market Funds Average 2         0.89   —  
 
Vanguard Federal Money Market Fund   VMFXX       1.06%   0.15%  
Government Money Market Funds Average 2         0.43   —  
 
Vanguard Admiral Treasury Money Market Fund 4   VUSXX       0.70%   0.07%  
iMoneyNet Money Fund Report’s Average 100% Treasury Fund 2         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 Ratios 1      
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   Group 1  
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    
 
Yield 1    
    Investor Shares   0.19%  
    Institutional Shares   0.34%  
Average Weighted Maturity   74 days  
Average Quality 2   Aa1  
Expense Ratio 3    
    Investor Shares   0.28%  
    Institutional Shares   0.13%  

Distribution by Credit Quality 2 (% 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 Shares 1       1.31%                 3.35%   3.20%   $13,706  
Citigroup 3-Month Treasury Index       0.51                 2.98       3.00   13,439  
Money Market Funds Average 2       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 Average 2       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 Shares 1   Group 2  
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 Shares 1   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 •  
    Yield 1   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 •  
    Yield 1   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 •  
    Yield 1   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 •  
  Yield 1   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 •  
  Yield 1   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 •  
  Yield 1   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 •  
  Yield 1   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 •  
  Yield 1   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    
Interest 1   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 Return 1   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    
 
Yield 1   0.15%  
Average Weighted Maturity   75 days  
Average Quality 2   Aaa  
Expense Ratio 3   0.28%  

Distribution by Credit Quality 2 (% 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 Fund 1       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 Average 2       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 Fund 1   Group 2  
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 Fund 1   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 •  
    Yield 1   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 •  
  Yield 1   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 •  
  Yield 1   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 Return 1   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    
 
Yield 1   0.07%  
Average Weighted Maturity   73 days  
Average Quality 2   Aaa  
Expense Ratio 3   0.15%  

Distribution by Credit Quality 2 (% 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   Group 1  
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 •  
  Yield 1   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   Period 1  
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. Brennan 1   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 III 1   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. Higgins 1    
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. Hyatt 1    
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 Stam 1    
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.

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