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  • Vanguard Money Market FundsVanguard Prime Money Market Fund

    Vanguard Federal Money Market Fund

    Vanguard Treasury Money Market Fund

    Semiannual Report | February 28, 2018

  • Contents

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

    See the Glossary for definitions of investment terms used in this report.About the cover: Nautical images have been part of Vanguards rich heritage since its start in 1975. For anincoming ship, a lighthouse offers a beacon and safe path to shore. You can similarly depend on Vanguard to putyou firstand light the wayas you strive to meet your financial goals. Our client focus and low costs,stemming from our unique ownership structure, assure that your interests are paramount.

    Vanguards Principles for Investing Success

    We want to give you the best chance of investment success. Theseprinciples, grounded in Vanguards research and experience, can put you onthe right path.

    Goals. Create clear, appropriate investment goals.

    Balance. Develop a suitable asset allocation using broadly diversified funds.

    Cost. Minimize cost.

    Discipline. Maintain perspective and long-term discipline.

    A single theme unites these principles: Focus on the things you can control.We believe there is no wiser course for any investor.

    Your Funds Performance at a Glance. . . . . . . . . . . . . . . . . . 1

    CEOs Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

    Advisors Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

    Results of Proxy Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

    Prime Money Market Fund. . . . . . . . . . . . . . . . . . . . . . . . . .12

    Federal Money Market Fund. . . . . . . . . . . . . . . . . . . . . . . . 30

    Treasury Money Market Fund. . . . . . . . . . . . . . . . . . . . . . . 44

    About Your Funds Expenses. . . . . . . . . . . . . . . . . . . . . . . . 53

    Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

  • Your Funds Performance at a Glance

    1

    Total Returns: Six Months Ended February 28, 2018

    7-Day SEC Yield

    TotalReturns

    Vanguard Prime Money Market Fund

    Investor Shares 1.52% 0.63%

    Admiral Shares 1.58 0.66

    Money Market Funds Average 0.41

    Money Market Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

    Vanguard Federal Money Market Fund 1.36% 0.56%

    Government Money Market Funds Average 0.29

    Government Money Market Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

    Vanguard Treasury Money Market Fund 1.41% 0.55%

    iMoneyNet Money Fund Reports 100% Treasury Funds Average 0.31

    iMoneyNet Money Fund Reports 100% Treasury Funds Average: Derived from data provided by iMoneyNet, Inc.

    The 7-day SEC yield of a money market fund more closely reflects the current earnings of the fund than its total return.

    Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

    For the six months ended February 28, 2018, Investor Shares of Vanguard Prime Money Market Fund returned 0.63%, while Admiral Shares, with their lower expense ratio, returned 0.66%. Vanguard Federal Money Market Fund returned 0.56% and Vanguard Treasury Money Market Fund returned 0.55%. All three funds surpassed the average returns of their peers.

    The Federal Reserve raised the federal funds rate by a quarter of a percentage point during the period, pushing its target range to 1.25%1.5%. It also began trimming its $4.5 trillion balance sheet.

    A surge in volatility allowed us to add to the funds floating-rate securities exposures at attractive prices. These moves helped the funds returns.

  • 2

    Expense RatiosYour Fund Compared With Its Peer Group

    FundPeer Group

    Average

    Prime Money Market Fund

    Investor Shares 0.16% 0.50%

    Admiral Shares 0.10 0.50

    Federal Money Market Fund 0.11 0.48

    Treasury Money Market Fund 0.09 0.40

    The fund expense ratios shown are from the prospectus dated December 22, 2017, and represent estimated costs for the current fiscalyear. For the six months ended February 28, 2018, the funds annualized expense ratios were: for the Prime Money Market Fund, 0.16% forInvestor Shares and 0.10% for Admiral Shares; for the Federal Money Market Fund, 0.11%; and for the Treasury Money Market Fund,0.09%.

    Peer groups: For the Prime Money Market Fund Investor Shares and Admiral Shares, Money Market Funds; for the Federal Money MarketFund, Government Money Market Funds; and for the Treasury Money Market Fund, iMoneyNet Money Fund Reports 100% TreasuryFunds.

  • Dear Shareholder,

    As I begin my tenure as Vanguards fourth chief executive, Ive been reflecting on both the past and the future of the company where I have spent my entire professional career.

    I feel extremely fortunate to have the chance to lead a company filled with people who come to work every day passionate about Vanguards core purpose: to take a stand for all investors, to treat them fairly, and to give them the best chance for investment success.

    Making a real differenceWhen I joined Vanguard in 1991, I found a mission-driven team focused on improving liveshelping people retire more com-fortably, put their children through college, and achieve financial security. I found a company with purpose in an industry ripe for improvement.

    It was clear, even early in my career, that the cards were stacked against most investors. Hidden fees, performance-chasing, and poor advice were relentlessly eroding investors dreams.

    We knew Vanguard could be different and, as a result, could make a real difference. Over the past 25 years, for example, Vanguard has lowered our funds asset-weighted average expense ratio

    CEOs Perspective

    Tim BuckleyPresident and Chief Executive Officer

    3

  • from 0.31% to 0.12%. And over the past decade, 94% of our funds have beaten the average annual return of their peers.1

    Focused on your successVanguard is built for Vanguard investorsas a client-owned company, we focus solely on you, our fund shareholders. Everything we do is designed to give our clients the best chance for investment success. In my role as CEO, I intend to keep this priority front and center. Were proud of what weve achieved, but were even more excited about whats to come.

    As I write this, weve experienced a period of pronounced market volatility. Strong economic growth and budding signs of inflation have raised concerns about a more aggressive Federal Reserve. Although volatility can test investors nerves, we sometimes think of this as Vanguard weathera time when having a disciplined, low-cost, and long-term approach to investment management serves investors well.

    Market Barometer Total Returns Periods Ended February 28, 2018

    Six One Five Years Months Year (Annualized)

    Stocks

    Russell 1000 Index (Large-caps) 10.62% 16.70% 14.56%

    Russell 2000 Index (Small-caps) 8.30 10.51 12.19

    Russell 3000 Index (Broad U.S. market) 10.45 16.22 14.37

    FTSE All-World ex US Index (International) 7.84 21.50 6.69

    Bonds

    Bloomberg Barclays U.S. Aggregate Bond Index (Broad taxable market) -2.18% 0.51% 1.71%

    Bloomberg Barclays Municipal Bond Index (Broad tax-exempt market) -1.24 2.50 2.57

    Citigroup Three-Month U.S. Treasury Bill Index 0.59 0.98 0.27

    CPI

    Consumer Price Index 1.41% 2.21% 1.41%

    The performance data shown represent past performance, which is not a guarantee of future results.1 For the ten-year period through December 31, 2017, 9 of 9 Vanguard money market funds, 56 of 60 bond funds, 21 of 22 balanced funds,

    and 131 of 140 stock funds, or 217 of 231 Vanguard funds, outperformed their peer-group averages. Sources: Vanguard, based on data from Lipper, a Thomson Reuters Company.

    4

  • Steady, time-tested guidanceOur guidance for investors, as always, is to stay the course, tune out the hyperbolic headlines, and focus on your goals and what you can control, such as costs and how much you save. This time-tested advice has served our clients well over the decades.

    Regardless of how the markets perform in the short term, Im incredibly optimistic about the future for our investors. We have a dedicated team serving you, and we will never stop striving to make Vanguard the best place for you to invest through our high-quality funds and services, advice

    and guidance to help you meet your financial goals, and an experience that makes you feel good about entrusting us with your hard-earned savings.

    Thank you for your continued loyalty.

    Sincerely,

    Mortimer J. Buckley President and Chief Executive Officer March 19, 2018

    5

  • Advisors Report

    6

    For the six months ended February 28, 2018, Investor Shares of Vanguard Prime Money Market Fund returned 0.63%, while Admiral Shares, with their lower expense ratio, returned 0.66%. Vanguard Federal Money Market Fund returned 0.56% and Vanguard Treasury Money Market Fund 0.55%. Each fund exceeded the average returns of its peer group.

    The investment environmentCongress passed a tax reform bill during the period, overcoming political debate that had waylaid much of the administrations agenda throughout 2017. Investors pushed U.S. stocks to new hi