vanguard u.s. government bond · pdf fileyour fund’s performance at a glance 1 total...

Vanguard U.S. Government Bond Funds

Vanguard Short-Term Treasury Fund

Vanguard Short-Term Federal Fund

Vanguard Intermediate-Term Treasury Fund

Vanguard GNMA Fund

Vanguard Long-Term Treasury Fund

Annual Report | January 31, 2018

Contents

Please note: The opinions expressed in this report are just that—informed 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 Vanguard’s 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 first––and light the way––as 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.

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. Theseprinciples, grounded in Vanguard’s 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 Fund’s Performance at a Glance. . . . . . . . . . . . . . . . . . 1

CEO’s Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Advisors’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Results of Proxy Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Short-Term Treasury Fund. . . . . . . . . . . . . . . . . . . . . . . . . . 15

Short-Term Federal Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Intermediate-Term Treasury Fund. . . . . . . . . . . . . . . . . . . . 51

GNMA Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Long-Term Treasury Fund. . . . . . . . . . . . . . . . . . . . . . . . . . 89

About Your Fund’s Expenses. . . . . . . . . . . . . . . . . . . . . . . 107

Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Your Fund’s Performance at a Glance

1

Total Returns: Fiscal Year Ended January 31, 2018

30-Day SECYield

IncomeReturns

CapitalReturns

TotalReturns

Vanguard Short-Term Treasury Fund

Investor Shares 1.80% 1.19% -1.50% -0.31%

Admiral™ Shares 1.90 1.29 -1.50 -0.21

Bloomberg Barclays U.S. 1–5 Year Treasury BondIndex -0.10

Short-Term U.S. Treasury Funds Average 0.34

Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Short-Term Federal Fund

Investor Shares 1.90% 1.32% -1.34% -0.02%

Admiral Shares 2.00 1.42 -1.34 0.08

Bloomberg Barclays U.S. 1–5 Year Government BondIndex -0.08

Short-Intermediate U.S. Government Funds Average -0.12

Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Intermediate-Term Treasury Fund

Investor Shares 2.22% 1.76% -2.07% -0.31%

Admiral Shares 2.33 1.86 -2.07 -0.21

Bloomberg Barclays U.S. 5–10 Year Treasury BondIndex 0.07

General U.S. Treasury Funds Average 1.73

General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

• For the 12 months ended January 31, 2018, the returns of the funds in this report ranged from –0.31% for both Vanguard Short-Term Treasury Fund and Vanguard Intermediate-Term Treasury Fund to 4.21% for Vanguard Long-Term Treasury Fund. (Returns cited are for Investor Shares.) Results versus their benchmark indexes and peer groups were mixed.

• Short-term interest rates moved significantly higher during the period as the Federal Reserve raised its federal funds target rate three times. Longer-term rates, which are driven more by expectations for growth and inflation down the road, moved less.

• Holding more shorter maturities proved a headwind for the Short-Term and Intermediate-Term Treasury Funds, whereas the Short-Term Federal Fund’s over-weighted allocation to agency debt helped. Yield curve positioning and duration worked against the Long-Term Treasury Fund.

• In the GNMA Fund, mortgage-related securities other than GNMAs added value.

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30-Day SECYield

IncomeReturns

CapitalReturns

TotalReturns

Vanguard GNMA Fund

Investor Shares 2.71% 2.66% -1.81% 0.85%

Admiral Shares 2.81 2.76 -1.81 0.95

Bloomberg Barclays U.S. GNMA Bond Index 0.86

GNMA Funds Average 0.15

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

Vanguard Long-Term Treasury Fund

Investor Shares 2.68% 2.77% 1.44% 4.21%

Admiral Shares 2.79 2.88 1.44 4.32

Bloomberg Barclays U.S. Long Treasury Bond Index 4.62


General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

Total Returns: Ten Years Ended January 31, 2018

Average

Annual Return

Short-Term Treasury Fund Investor Shares 1.35%

Bloomberg Barclays U.S. 1–5 Year Treasury Bond Index 1.76

Short-Term U.S. Treasury Funds Average 1.16


Short-Term Federal Fund Investor Shares 1.80%

Bloomberg Barclays U.S. 1–5 Year Government Bond Index 1.79

Short-Intermediate U.S. Government Funds Average 1.59


Intermediate-Term Treasury Fund Investor Shares 3.11%

Bloomberg Barclays U.S. 5–10 Year Treasury Bond Index 3.71



GNMA Fund Investor Shares 3.59%

Bloomberg Barclays U.S. GNMA Bond Index 3.55

GNMA Funds Average 2.98


3

Average

Annual Return

Long-Term Treasury Fund Investor Shares 5.71%

Bloomberg Barclays U.S. Long Treasury Bond Index 5.93



The figures shown represent past performance, which is not a guarantee of future results. (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 vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost.

Expense RatiosYour Fund Compared With Its Peer Group

Investor

Shares

Admiral

Shares

Peer Group

Average

Short-Term Treasury Fund 0.20% 0.10% 0.47%

Short-Term Federal Fund 0.20 0.10 0.89

Intermediate-Term Treasury Fund 0.20 0.10 0.37

GNMA Fund 0.21 0.11 0.86

Long-Term Treasury Fund 0.20 0.10 0.37

The fund expense ratios shown are from the prospectus dated May 26, 2017, and represent estimated costs for the current fiscal year. Forthe fiscal year ended January 31, 2018, the funds’ expense ratios were: for the Short-Term Treasury Fund, 0.20% for Investor Shares and0.10% for Admiral Shares; for the Short-Term Federal Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for theIntermediate-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the GNMA Fund, 0.21% for InvestorShares and 0.11% for Admiral Shares; and for the Long-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares.Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information throughyear-end 2017.

Peer groups: For the Short-Term Treasury Fund, Short-Term U.S. Treasury Funds; for the Short-Term Federal Fund, Short-Intermediate U.S.Government Funds; for the Intermediate-Term Treasury Fund, General U.S. Treasury Funds; for the GNMA Fund, GNMA Funds; and for theLong-Term Treasury Fund, General U.S. Treasury Funds.

Dear Shareholder,

When you start a new job, it’s natural

to reflect on both the past and the future.

And so it is in my case, having begun my

service as just the fourth chief executive

in Vanguard’s history.

I feel extremely fortunate to have the

chance to lead a company filled with people

who come to work every day passionate

about Vanguard’s 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 difference

When I joined Vanguard in 1991, I found a

mission-driven team focused on improving

lives—helping 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

CEO’s Perspective

Tim Buckley

President and Chief Executive Officer

4

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 success

Vanguard is built for Vanguard investors—

as 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 new role as CEO, I intend

to keep this priority front and center. We’re

proud of what we’ve achieved, but we’re

even more excited about what’s to come.

As I write this, we’ve 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 weather”—a time when having

a disciplined, low-cost, and long-term

approach to investment management

serves investors well.

Market Barometer

Average Annual Total Returns

Periods Ended January 31, 2018

One Year Three Years Five Years

Stocks

Russell 1000 Index (Large-caps) 25.84% 14.28% 15.72%

Russell 2000 Index (Small-caps) 17.18 12.12 13.33

Russell 3000 Index (Broad U.S. market) 25.16 14.11 15.53

FTSE All-World ex US Index (International) 29.63 10.20 7.48

Bonds

Bloomberg Barclays U.S. Aggregate Bond Index

(Broad taxable market) 2.15% 1.14% 2.01%

Bloomberg Barclays Municipal Bond Index

(Broad tax-exempt market) 3.52 1.97 2.69

Citigroup Three-Month U.S. Treasury Bill Index 0.91 0.41 0.25

CPI

Consumer Price Index 2.07% 1.98% 1.48%

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.

5

Steady, time-tested guidance

Our 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, I’m 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

February 15, 2018

6

7

Advisors’ Report

For the Short-, Intermediate-, and Long-Term Treasury Funds and the Short-Term Federal Fund

Interest rates mostly moved higher, with short-term rates rising the most. Returns for the four U.S. Government Bond Funds managed by Vanguard’s Fixed Income Group ranged from –0.31% for Investor Shares of both Vanguard Short-Term Treasury Fund and Vanguard Intermediate-Term Treasury Fund to 4.32% for Admiral Shares of Vanguard Long-Term Treasury Fund.

The Short-Term Federal Fund finished just ahead of its benchmark index; the other funds lagged theirs. The Short-Term Federal Fund and the Long-Term Treasury Fund outpaced the average returns of

their peer groups, while the Short-Term Treasury Fund and the Intermediate-Term Treasury Fund underperformed theirs.

With more movement at the short end of the yield curve, the 30-day SEC yield for Investor Shares of the Short-Term Treasury Fund gained the most, rising 81 basis points to 1.80%. Investor Shares of the Long-Term Treasury Fund rose the least, edging up only 4 basis points to 2.68%. (A basis point is one one-hundredth of a percentage point.)

Investment environment

Anticipation of higher infrastructure spending, deregulation, and tax cuts under a new presidential administration contributed to strong stock market returns during the funds’ fiscal year. Although

Yields of U.S. Treasury Securities January 31, January 31, Maturity 2017 2018

2 years 1.21% 2.14%

3 years 1.46 2.29

5 years 1.91 2.52

10 years 2.45 2.71

30 years 3.06 2.94

Source: Vanguard.

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political debates waylaid much of the administration’s agenda, tax legislation ultimately passed in December 2017. The economy remained strong and inflation was subdued. Many stock market indexes reached record highs as companies posted strong profits.

The Federal Reserve under Janet Yellen was also enthusiastic about the health of the U.S. economy. It raised short-term interest rates three times during the year, pushing its target range for the federal funds rate to 1.25%–1.5%. It also began to reduce the $4.5 trillion balance sheet it had amassed as part of a stimulus package during the 2008–2009 recession. All were signals that the central bank was intent on normalizing monetary policy.

The Fed’s decisions were supported by solid economic readings. The U.S. economy made up for a sluggish start to the year with stronger growth later on. For 2017, gross domestic product grew at a rate of 2.3%, up from 1.5% in 2016. The unemployment rate continued to grind lower, hovering at 4.1% at the end of the fiscal year compared with 4.8% at the beginning. Wage growth remained softer than expected for much of the period, and inflation expectations drifted lower before ending the year on an upward track.

Fed action contributed to a significant rise in short-term yields. The 2-year Treasury note rose 93 basis points to 2.14%, and the 5-year note rose 61 basis points to 2.52%. Longer-term yields, which are more affected by market expectations

for growth and inflation, moved less. The yield of the bellwether 10-year Treasury note was lower than where it had started for a good part of the year but finished up 26 basis points at 2.71%.

Management of the funds

The Short-Term and Intermediate-Term Treasury Funds have a structurally short duration relative to their benchmarks. (Duration is a measure of a portfolio’s sensitivity to interest rate changes.) Although that stance might have been expected to help the funds during this period of rising rates, it dampened their relative performance this time around as shorter rates rose more than longer ones.

Bond fund managers often adjust the duration of their portfolios based on where they think the economy is headed and what that might mean for interest rates. However, duration calls are hard to consistently get right over time.

We try to take advantage of a broader set of opportunities to generate alpha that are not correlated with duration calls. Our investment toolkit includes AAA-rated debt other than Treasuries such as mortgage-backed securities, other agency debt, and Treasury Inflation-Protected Securities (TIPS). Security selection plays a role as well: We use relative value metrics to identify individual bonds that offer attractive return potential.

A tactical opportunity arose during the period, and we added mortgage-backed securities when they cheapened on the

9

prospect of the Fed’s moving to unwind its balance sheet. We then reduced our exposure once their valuations recovered after the gradual pace of tapering was announced.

We selectively purchased agency debt as well, which added some income to the funds. An overweighted allocation to these securities helped the Short-Term Federal Fund surpass its benchmark and the average return of its peer group.

We also added Treasury inflation- protected securities to all four funds early in the period when medium-term inflation expectations seemed low. We then reduced that out-of-benchmark allocation as breakeven inflation widened toward our targeted valuation levels.

Outlook

The pace of productivity growth, demographic trends, and the impact of new technologies, among other things, pose long-term structural challenges. Nonetheless, the U.S. economy is on pace to break above its long-term potential and grow at around 2.5% in 2018.

The unemployment rate has fallen to its lowest level since 2000 and is likely to move even lower. Although it’s taken longer than expected, we’ve seen some indications of late that the tight labor market is putting some upward pressure on wages. Along with stable and broader global growth, that may well lead to a

cyclical upswing in inflation, a scenario the financial markets are now beginning to price in. Recent weakness in the U.S. dollar is also likely to bolster core inflation metrics, albeit moderately and over the course of the next year. However, our long-term outlook, which calls for tepid inflation, remains unchanged.

That backdrop should justify the Fed, now under the chairmanship of Jerome Powell, in raising the federal funds rate to at least 2% by the end of 2018. The Fed will probably want to stick to the framework and timetable it has laid out for reductions in its balance sheet, barring unexpected economic data or unintended consequences from tapering in the bond market.

Volatility has recently picked up from the very low levels we’ve been experiencing for some time, bringing with it more opportunities to take advantage of price dislocations in the market. Rising inflation expectations seem to have been the trigger, but other potential developments could also fuel volatility. These include midterm elections, stalled or scuttled trade negotiations, and flare-ups in geopolitical tensions.

In addition, as 2018 unfolds, we anticipate a convergence of monetary policy, with central banks adopting a less accommod-ative stance—some raising rates, some planning to do so, and some reducing quantitative easing.

10

It’s worth restating that investors should look beyond short-term volatility and adhere to their long-term investment strategies. And keep in mind the silver lining in higher rates for long-term investors—coupon payments and proceeds from maturing bonds can be reinvested at higher rates.

Whatever the markets may bring, our experienced team of portfolio managers and traders will continue to seek out opportunities to add to the funds’ performance.

John Hollyer, CFA, Principal and Global Head of Fixed Income Group

Gemma Wright-Casparius, Principal and Portfolio Manager

Brian Quigley, Portfolio Manager

Vanguard Fixed Income Group

February 16, 2018

For the GNMA Fund

For the 12 months ended January 31, 2018, Investor Shares of Vanguard GNMA Fund returned 0.85% and Admiral Shares returned 0.95%. The fund’s benchmark index, the Bloomberg Barclays U.S. GNMA Bond Index, returned 0.86%.

Investment environment

Over the period, global fixed income markets generated solid gains. Escalating geopolitical tensions and serial disappoint-

ments in inflation data helped contain the increase in sovereign yields prompted by central bank policy normalization.

U.S. political controversies—in particular, the ongoing investigation into alleged involve ment by Russia in the 2016 presidential election—led to a short-lived dip in risk assets. Elections in France and the United Kingdom presented potential sources of volatility but proved benign. Despite concerns about prospects for retailers, particularly in the United States, generally solid corporate earnings, strong global economic data, and continued demand for yield-producing assets supported credit markets and led to tighter spreads.

Monetary policy continued down an incrementally more hawkish path. The Federal Reserve announced it would begin tapering its asset purchases in October, raised rates three times over the period, and projected an additional three hikes in 2018. At its October meeting, the European Central Bank announced a reduction in its monthly asset purchases to €30 billion from €60 billion beginning in January, but it extended the purchase program through September 2018.

Strong growth and inflation data prompted the Bank of Canada to increase rates for the first time in seven years. The Bank of England raised interest rates for the first time in ten years. However, it tilted dovish at the press conference announcing the

11

move, noting that future rate hikes would depend on the stability of the Brexit transition.

Developed-market government yields ended mixed as improving global economic data were balanced by subdued inflation readings. In the United States, the yield curve flattened. Front-end yields, heavily influenced by Fed monetary policy expectations, rose the most, while the 30-year Treasury yield declined. German bund yields increased along with improving growth prospects in the region. Longer-term U.K. yields fell amid Brexit uncertainty. Japanese government bond yields, anchored by the Bank of Japan’s yield-targeting policy, were little changed.

Absolute returns in most major fixed income spread sectors were positive. On an excess return basis, all of the major spread sectors posted positive returns, including securitized, high-yield, emerging-market debt and investment-grade corporates, led by lower-rated sectors.

The agency mortgage-backed securities (MBS) market returned 1.31% as measured by the Barclays MBS Fixed Rate Index, surpassing duration-equivalent Treasuries by 69 basis points (as measured by Wellington). Mortgages started the period with a cautious outlook amid concerns over the timing of the Federal Reserve’s balance sheet tapering. However, increased clarity about the Fed’s plan to gradually taper its MBS reinvestments helped provide stability to the sector.

In September, the Fed announced it would officially begin its balance sheet normal ization process in October. Extremely low levels of volatility and generally range-bound 10-year Treasury yields helped MBS outperform for the balance of the year. The current coupon mortgage spread compressed to its tightest level since the announcement of quantitative easing in 2012.

Within the MBS sector, conventionals (FHLMC, FNMA) bested GNMA pass-throughs as the possibility of reduced banking regulations lowered demand for GNMAs. Thirty-year securities surpassed 15-year, and lower coupons did better than higher ones. GNMA securities returned 0.86% as measured by the Bloomberg Barclays U.S. GNMA Bond Index. They beat duration-equivalent Treasuries by 16 basis points (as measured by Wellington) but fell behind conventional mortgages.

The fund’s successes

On average, the fund had an under-weighted allocation to GNMAs, instead favoring conventionals, Fannie Mae multifamily Delegated Underwriting and Servicing (DUS) bonds, and agency collateralized mortgage obligations (CMOs). This positioning was beneficial as GNMAs lagged DUS bonds and agency CMOs on an excess return basis. The fund’s tactical duration and yield curve position also helped relative performance.

The fund’s shortfalls

Selection within 30-year GNMA securities detracted from relative results.

12

The fund’s positioning

Our overall MBS positioning, which includes agency pass-throughs, CMOs, and DUS bonds, is relatively neutral. Within that mix, we have underweighted agency pass-throughs in favor of DUS bonds, agency CMOs, and high-quality agency multifamily bonds with relatively stable cash flows and duration profiles. The underweighted allocation to pass-throughs is primarily concentrated in 30-year GNMA 3.0% and 3.5% coupons.

Although we do not see a significant near-term source of underperformance, historically tight spreads and ultra-low volatility leave us with a negative view of agency MBS pass-throughs. As a result, we have tilted our holdings toward other sectors with attractive income and less sensitivity to prepayments or a pickup in volatility. In fact, while we often maintain this bias toward stability, our MBS portfolios now have their lowest weighting in agency pass-throughs since the crisis.

Mortgage spreads to Treasuries are historically tight during this time of steady economic growth, benign inflation, and low volatility. And tight valuations in competing spread sectors are creating demand for MBS as investors de-risk and shift into high-quality assets. However, we are not advocating underweighted allocations to all sectors of the agency MBS market. They are able to earn positive carry in a steady state environment, which

often continues for longer than expected. Instead, we have shifted our portfolio to the more stable MBS sectors, positioning us for an increase in volatility without a significant sacrifice in income.

The Fed has orchestrated a smooth balance-sheet exit so far, judging by the muted response from the agency MBS market. Still, the market may begin to price in the Fed’s actions as its balance sheet begins to shrink more rapidly during 2018. Overall, we still expect a muted impact, with the potential for a modest spread-widening in agency MBS as tapering reinvestments progress. Since the Fed has been very transparent over the timing and measured pace of the plan, we expect the path to wider spreads will be very gradual and partially offset by the benefit of MBS income.

We still expect MBS spreads to remain toward the tight end of their range relative to long-term history. We base this opinion on their favorable supply relative to U.S. Treasuries, lower leverage in the system, a more stable buyer base of long-term investors, a constrained mortgage credit environment, and lower refinancing risk.

Michael F. Garrett Senior Managing Director and Fixed Income Portfolio Manager

Wellington Management Company LLP

February 16, 2018

Results of Proxy Voting

At a special meeting of shareholders on November 15, 2017, fund shareholders approved the

following proposals:

Proposal 1—Elect trustees for the fund.*The individuals listed in the table below were elected as trustees for the fund. All trustees with the

exception of Ms. Mulligan, Ms. Raskin, and Mr. Buckley (each of whom already serves as a director

of The Vanguard Group, Inc.) served as trustees to the funds prior to the shareholder meeting.

Percentage

Trustee For Withheld For

Mortimer J. Buckley 13,797,659,368 374,742,595 97.4%

Emerson U. Fullwood 13,808,942,286 363,459,677 97.4%

Amy Gutmann 13,799,031,978 373,369,985 97.4%

JoAnn Heffernan Heisen 13,818,500,075 353,901,888 97.5%

F. Joseph Loughrey 13,816,747,083 355,654,880 97.5%

Mark Loughridge 13,824,483,242 347,918,721 97.5%

Scott C. Malpass 13,800,329,999 372,071,964 97.4%

F. William McNabb III 13,774,270,568 398,131,395 97.2%

Deanna Mulligan 13,816,630,219 355,771,744 97.5%

André F. Perold 13,628,951,260 543,450,703 96.2%

Sarah Bloom Raskin 13,806,213,368 366,188,595 97.4%

Peter F. Volanakis 13,807,988,460 364,413,503 97.4%

* Results are for all funds within the same trust.

Proposal 2—Approve a manager-of-managers arrangement with third-party investment advisors.This arrangement enables the fund to enter into and materially amend investment advisory

arrangements with third-party investment advisors, subject to the approval of the fund’s board

of trustees and certain conditions imposed by the Securities and Exchange Commission, while

avoiding the costs and delays associated with obtaining future shareholder approval.

Broker Percentage

Vanguard Fund For Abstain Against Non-Votes For

Intermediate-Term

Treasury Fund 286,317,571 12,639,826 11,540,619 54,440,763 78.5%

Long-Term Treasury Fund 145,796,839 12,002,445 10,434,089 25,700,290 75.2%

Short-Term Federal Fund 272,373,176 7,741,900 5,487,483 63,981,435 77.9%

Short-Term Treasury Fund 344,126,370 12,115,520 11,319,781 84,922,784 76.1%

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Proposal 3—Approve a manager-of-managers arrangement with wholly owned subsidiaries of Vanguard.This arrangement enables Vanguard or the fund to enter into and materially amend investment

advisory arrangements with wholly owned subsidiaries of Vanguard, subject to the approval of the

fund’s board of trustees and any conditions imposed by the Securities and Exchange Commission

(SEC), while avoiding the costs and delays associated with obtaining future shareholder approval.

The ability of the fund to operate in this manner is contingent upon the SEC’s approval of a pending

application for an order of exemption.

Broker Percentage


GNMA Fund 1,473,758,217 72,909,320 68,557,072 233,357,326 79.7%

Intermediate-Term

Treasury Fund 288,856,662 11,475,169 10,166,185 54,440,763 79.2%


Short-Term Federal Fund 273,366,771 7,441,705 4,794,082 63,981,435 78.2%


Shareholders of Vanguard GNMA Fund, Vanguard Intermediate-Term Treasury Fund, Vanguard

Long-Term Treasury Fund, and Vanguard Short-Term Treasury Fund did not approve the following

proposal:

Proposal 7—Institute transparent procedures to avoid holding investments in companies that, in

management’s judgment, substantially contribute to genocide or crimes against humanity, the most

egregious violations of human rights. Such procedures may include time-limited engagement with

problem companies if management believes that their behavior can be changed.

The trustees recommended a vote against the proposal for the following reasons: (1) Vanguard

is fully compliant with all applicable U.S. laws and regulations that prohibit the investment in any

company owned or controlled by the government of Sudan; (2) the addition of further investment

constraints is not in fund shareholders’ best interests if those constraints are unrelated to a fund’s

stated investment objective, policies, and strategies; and (3) divestment is an ineffective means

to implement social change, as it often puts the shares into the hands of another owner with

no direct impact to the company’s capitalization.

Broker Percentage


GNMA Fund 352,003,560 98,040,853 1,165,180,195 233,357,326 19.0%

Intermediate-Term

Treasury Fund 57,596,356 22,025,615 230,876,045 54,440,763 15.8%



14

Short-Term Treasury Fund

Fund ProfileAs of January 31, 2018

1 The expense ratios shown are from the prospectus dated May 26, 2017, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2018, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

15

Volatility Measures

Bloomberg

Barclays

1–5 Year

Treasury

Index

Bloomberg

Barclays

Aggregate

Bond Index

R-Squared 0.96 0.66

Beta 0.74 0.31

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Sector Diversification (% of portfolio)

Government Mortgage-Backed 0.6%

Treasury/Agency 99.4

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Financial Attributes

Fund

Bloomberg

Barclays

1–5 Year

Treasury

Index

Bloomberg

Barclays

Aggregate

Bond Index

Number of Bonds 83 155 9,734

Yield to Maturity

(before expenses) 2.3% 2.3% 3.0%

Average Coupon 1.3% 1.8% 3.1%

Average Duration 2.4 years 2.7 years 6.1 years

Average Effective

Maturity 2.0 years 2.8 years 8.3 years

Short-Term

Reserves 1.0% — —

Share-Class Characteristics

InvestorShares

AdmiralShares

Ticker Symbol VFISX VFIRX

Expense Ratio1 0.20% 0.10%

30-Day SEC Yield 1.80% 1.90%

Distribution by Effective Maturity

(% of portfolio)

Under 1 Year 11.6%

1 - 3 Years 73.0

3 - 5 Years 15.0

5 - 7 Years 0.1

7 - 10 Years 0.3

Distribution by Credit Quality (% of portfolio)

U.S. Government 99.1%

Not Rated 0.9

Credit-quality ratings are obtained from Moody's and S&P, and the higher rating for each issue is shown. "Not Rated" is used to classify securities for which a rating is not available. Not rated securities include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. For more information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus

Average Maturity

Short

Treasury/ Agency

Investment-Grade

Corporate

Below Investment-Grade

Med. Long

Credit Quality

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 thanthe performance data cited. For performance data current to the most recent month-end, visitour website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay

on fund distributions or on the sale of fund shares.

Performance Summary


See Financial Highlights for dividend and capital gains information.

16

Cumulative Performance: January 31, 2008, Through January 31, 2018Initial Investment of $10,000

2018201720162015201420132012201120102009

$18,000

6,000

11,437

Average Annual Total Returns

Periods Ended January 31, 2018

OneYear

FiveYears

TenYears

Final Valueof a $10,000Investment

Short-Term Treasury Fund InvestorShares -0.31% 0.41% 1.35% $11,437

• • • • • • • •Bloomberg Barclays U.S. 1–5 YearTreasury Bond Index -0.10 0.63 1.76 11,904

– – – – Short-Term U.S. Treasury FundsAverage 0.34 0.38 1.16 11,218

________ Bloomberg Barclays U.S. AggregateBond Index 2.15 2.01 3.71 14,398


OneYear

FiveYears

TenYears


Short-Term Treasury Fund Admiral Shares -0.21% 0.51% 1.46% $57,774

Bloomberg Barclays U.S. 1–5 Year TreasuryBond Index -0.10 0.63 1.76 59,519

Bloomberg Barclays U.S. Aggregate BondIndex 2.15 2.01 3.71 71,990


17

Fiscal-Year Total Returns (%): January 31, 2008, Through January 31, 2018

Investor Shares

BloombergBarclays1–5 YearTreasury

Index

Fiscal Year Income Returns Capital Returns Total Returns Total Returns

2009 2.70% 1.79% 4.49% 5.84%

2010 1.60 0.90 2.50 1.95

2011 1.09 0.83 1.92 2.94

2012 0.68 1.56 2.24 3.38

2013 0.41 -0.02 0.39 0.45

2014 0.36 -0.08 0.28 0.38

2015 0.51 0.50 1.01 1.75

2016 0.70 -0.04 0.66 1.04

2017 0.88 -0.45 0.43 0.11

2018 1.19 -1.50 -0.31 -0.10

Average Annual Total Returns: Periods Ended December 31, 2017 This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

Ten Years

Inception Date One Year Five Years Income Capital Total

Investor Shares 10/28/1991 0.39% 0.49% 1.03% 0.57% 1.60%

Admiral Shares 2/13/2001 0.39 0.59 1.13 0.57 1.70


Financial Statements

Statement of Net AssetsAs of January 31, 2018

U.S. Government and Agency Obligations (98.0%)

U.S. Government Securities (90.2%)

United States Treasury Inflation Indexed Bonds 0.125% 4/15/19 576,500 606,311

United States Treasury Note/Bond 1.250% 11/15/18 190,000 189,109



































Face Market

Maturity Amount Value•

Coupon Date ($000) ($000)

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 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).

18












United States Treasury Note/Bond 1.750% 12/31/20 23,415 23,0531 United States Treasury Note/Bond 2.125% 1/31/21 64,000 63,660

















7,014,052

Agency Bonds and Notes (7.2%) 2 AID-Iraq 2.149% 1/18/22 11,991 11,8132 AID-Tunisia 1.416% 8/5/21 16,500 15,9133 Fannie Mae Interest Strip 0.000% 1/15/19 2,197 2,1523 Fannie Mae Principal Strip 0.000% 2/1/19 9,900 9,6903 Federal National Mortgage Assn. 0.000% 10/9/19 162,100 155,9784 Financing Corp. 0.000% 5/11/18 72,000 71,6664 Financing Corp. 0.000% 11/2/18 2,150 2,1184 Financing Corp. 0.000% 3/7/19 5,475 5,3484 Financing Corp. 9.700% 4/5/19 9,060 9,843

Private Export Funding Corp. 4.375% 3/15/19 13,330 13,660




Residual Funding Corp. Principal Strip 0.000% 1/15/21 47,000 43,734

Resolution Funding Corp. Principal Strip 0.000% 10/15/19 101,170 97,377



563,239

Conventional Mortgage-Backed Securities (0.0%) 3,5 Freddie Mac Gold Pool 6.000% 5/1/18–4/1/28 82 91

Nonconventional Mortgage-Backed Securities (0.6%) 3,5,6 Fannie Mae REMICS 2016-1 1.911% 2/25/46 11,828 11,8493,5,6 Fannie Mae REMICS 2016-6 2.011% 2/25/46 7,966 8,009

Face Market



19


3,5,6 Fannie Mae REMICS 2016-93 1.911% 12/25/46 8,597 8,6043,5,6 Freddie Mac REMICS 1.959% 5/15/46 8,335 8,3813,5,6 Freddie Mac REMICS 2.009% 10/15/46 7,595 7,643

44,486

Total U.S. Government and Agency Obligations (Cost $7,682,883) 7,621,868

Shares

Temporary Cash Investment (0.9%)

Money Market Fund (0.9%) 7 Vanguard Market Liquidity Fund

(Cost $73,545) 1.545% 735,454 73,546

Total Investments (98.9%) (Cost $7,756,428) 7,695,414

Notional

Expiration Exercise Amount

Date Contracts Price ($000)

Liability for Options Written (0.0%)

Call Options on 10-Year

U.S. Treasury Note

Futures Contracts 02/23/18 53 USD 123.00 6,519 (4)

Put Options on 10-Year

U.S. Treasury Note



U.S. Treasury Note


Total Liability for Options Written (Premiums Received $150) (590)

Amount

($000)

Other Assets and Other Liabilities (1.1%)

Other Assets

Investment in Vanguard 427

Receivables for Investment Securities Sold 168,674

Receivables for Accrued Income 24,716

Receivables for Capital Shares Issued 11,062

Variation Margin Receivable—Futures Contracts 198

Other Assets 747

Total Other Assets 205,824

Other Liabilities

Payables for Investment Securities Purchased (105,625)

Payables for Capital Shares Redeemed (8,260)

Payables for Distributions (1,819)

Payables to Vanguard (3,311)

Variation Margin Payable—Futures Contracts (1,083)

Total Other Liabilities (120,098)

Net Assets (100%) 7,780,550

Face Market



20


Paid-in Capital 7,931,132

Undistributed Net Investment Income 17

Accumulated Net Realized Losses (84,919)

Unrealized Appreciation (Depreciation)

Investment Securities (61,014)

Futures Contracts (4,226)

Options on Futures Contracts8 (440)

Net Assets 7,780,550

Investor Shares—Net Assets

Applicable to 70,255,894 outstanding $.001 par value shares of

beneficial interest (unlimited authorization) 736,896

Net Asset Value Per Share—Investor Shares $10.49

Admiral Shares—Net Assets


beneficial interest (unlimited authorization) 7,043,654

Net Asset Value Per Share—Admiral Shares $10.49

• See Note A in Notes to Financial Statements.

1 Securities with a value of $4,381,000 have been segregated as initial margin for open futures contracts.

2 U.S. government-guaranteed.

3 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.

4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.

5 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.

6 Adjustable-rate security based upon 1-month USD LIBOR plus spread.

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

8 Unrealized appreciation (depreciation) on options on futures contracts is required to be treated as realized gain (loss) for tax purposes.

REMICS—Real Estate Mortgage Investment Conduits.

At January 31, 2018, net assets consisted of:

Amount

($000)

21


Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

($000)

Value and

Number of Unrealized

Long (Short) Notional Appreciation

Expiration Contracts Amount (Depreciation)

Long Futures Contracts

2-Year U.S. Treasury Note March 2018 4,550 970,216 (3,494)

5-Year U.S. Treasury Note March 2018 3,205 367,649 (639)

Ultra 10-Year U.S. Treasury Note March 2018 419 54,555 (361)

10-Year U.S. Treasury Note March 2018 309 37,568 62

(4,432)

Short Futures Contracts

Ultra Long U.S. Treasury Bond March 2018 (308) (49,877) 206

(4,226)

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized

gain (loss) for tax purposes.

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

22

Year Ended

January 31, 2018

($000)

Investment Income

Income

Interest1 109,139

Total Income 109,139

Expenses

The Vanguard Group—Note B

Investment Advisory Services 1,039

Management and Administrative—Investor Shares 1,309

Management and Administrative—Admiral Shares 5,135

Marketing and Distribution—Investor Shares 160

Marketing and Distribution—Admiral Shares 586

Custodian Fees 82

Auditing Fees 39

Shareholders’ Reports and Proxy—Investor Shares 73

Shareholders’ Reports and Proxy—Admiral Shares 203

Trustees’ Fees and Expenses 6

Total Expenses 8,632

Net Investment Income 100,507

Realized Net Gain (Loss)

Investment Securities Sold1 (57,275)


Purchased Options (679)

Written Options 2,372

Realized Net Gain (Loss) (72,823)

Change in Unrealized Appreciation (Depreciation)

Investment Securities1 (38,480)


Purchased Options 36

Written Options (527)

Change in Unrealized Appreciation (Depreciation) (44,098)

Net Increase (Decrease) in Net Assets Resulting from Operations (16,414)

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $2,185,000, ($60,000), and $0, respectively.

Statement of Operations



23

Statement of Changes in Net Assets



Year Ended January 31,

2018 2017

($000) ($000)

Increase (Decrease) in Net Assets

Operations

Net Investment Income 100,507 72,757

Realized Net Gain (Loss) (72,823) 17,160

Change in Unrealized Appreciation (Depreciation) (44,098) (54,440)

Net Increase (Decrease) in Net Assets Resulting from Operations (16,414) 35,477

Distributions

Net Investment Income

Investor Shares (9,933) (8,403)

Admiral Shares (90,580) (64,428)

Realized Capital Gain1

Investor Shares — (2,705)

Admiral Shares — (20,173)

Total Distributions (100,513) (95,709)

Capital Share Transactions


Admiral Shares 344,449 586,883

Net Increase (Decrease) from Capital Share Transactions 192,996 488,324

Total Increase (Decrease) 76,069 428,092

Net Assets

Beginning of Period 7,704,481 7,276,389

End of Period2 7,780,550 7,704,481

1 Includes fiscal 2018 and 2017 short-term gain distributions totaling $0 and $21,440,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $17,000 and ($15,000).

24

Investor Shares

For a Share Outstanding Year Ended January 31,

Throughout Each Period 2018 2017 2016 2015 2014

Net Asset Value, Beginning of Period $10.65 $10.73 $10.75 $10.71 $10.73

Investment Operations

Net Investment Income .1271 .094 .074 .055 .039

Net Realized and Unrealized Gain (Loss)

on Investments (.160) (.048) (.004) .053 (.009)

Total from Investment Operations (.033) .046 .070 .108 .030

Distributions

Dividends from Net Investment Income (.127) (.094) (.074) (.055) (.039)

Distributions from Realized Capital Gains — (.032) (.016) (.013) (.011)

Total Distributions (.127) (.126) (.090) (.068) (.050)

Net Asset Value, End of Period $10.49 $10.65 $10.73 $10.75 $10.71

Total Return2 -0.31% 0.43% 0.66% 1.01% 0.28%

Ratios/Supplemental Data

Net Assets, End of Period (Millions) $737 $900 $1,005 $1,044 $1,151

Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.20% 0.20%

Ratio of Net Investment Income to

Average Net Assets 1.20% 0.87% 0.69% 0.52% 0.37%

Portfolio Turnover Rate3 280% 249% 211% 87% 80%

1 Calculated based on average shares outstanding.

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3 Includes 7%, 3%, 35%, 22%, and 0% attributable to mortgage-dollar-roll activity.

Financial Highlights



25

Admiral Shares







on Investments (.160) (.048) (.004) .053 (.009)


Distributions





Total Return2 -0.21% 0.53% 0.76% 1.11% 0.38%


Net Assets, End of Period (Millions) $7,044 $6,805 $6,271 $5,915 $5,360











26

Notes to Financial Statements


Vanguard Short-Term Treasury Fund is registered under the Investment Company Act of 1940 as

an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor

Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s

minimum purchase requirements. Admiral Shares are designed for investors who meet certain

administrative, service, and account-size criteria.

A. The following significant accounting policies conform to generally accepted accounting

principles for U.S. investment companies. The fund consistently follows such policies in preparing

its financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock

Exchange (generally 4 p.m., Eastern time) on the valuation date. Bonds and temporary cash

investments are valued using the latest bid prices or using valuations based on a matrix system

(which considers such factors as security prices, yields, maturities, and ratings), both as furnished

by independent pricing services. Structured debt securities, including mortgages and asset-backed

securities, are valued using the latest bid prices or using valuations based on a matrix system that

considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average

coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard

Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market quotations

are not readily available, or whose values have been affected by events occurring before the fund’s

pricing time but after the close of the securities’ primary markets, are valued by methods deemed

by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on futures contracts to invest

in fixed income asset classes with greater efficiency and lower cost than is possible through direct

investment, to add value when these instruments are attractively priced, or to adjust sensitivity

to changes in interest rates. The primary risks associated with the use of futures contracts are

imperfect correlation between changes in market values of bonds held by the fund and the prices

of futures contracts, and the possibility of an illiquid market. The primary risk associated with

purchasing options is that interest rates move in such a way that the option is out-of-the-money,

the position is worthless at expiration, and the fund loses the premium paid. The primary risk

associated with writing options is that interest rates move in such a way that the option is

in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the

market value of the option written less the premium received. Counterparty risk involving futures

and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty

instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and

options on an exchange, monitors the financial strength of its clearing brokers and clearinghouse,

and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes

initial margin requirements to secure the fund’s performance and requires daily settlement of

variation margin representing changes in the market value of each contract.

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of

the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the

contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement

of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they

are recorded as realized futures gains (losses).

27


During the year ended January 31, 2018, the fund’s average investments in long and short futures

contracts represented 22% and 4% of net assets, respectively, based on the average of aggregate

settlement values at each quarter-end during the period.

Options on futures contracts are also valued at their quoted daily settlement prices. The premium

paid for a purchased option is recorded in the Statement of Net Assets as an asset that is

subsequently adjusted daily to the current market value of the option purchased. The premium

received for a written option is recorded in the Statement of Net Assets as an asset with an

equal liability that is subsequently adjusted daily to the current market value of the option written.

Fluctuations in the value of the options are recorded in the Statement of Operations as unrealized

appreciation (depreciation) until expired, closed, or exercised, at which time realized gains (losses)

are recognized.

During the year ended January 31, 2018, the fund’s average value of investments in options

purchased and options written each represented less than 1% of net assets, based on the average

market values at each quarter-end during the period.

3. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell

mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity)

for settlement at a future date. The fund may be a seller of TBA transactions to reduce its

exposure to the mortgage-backed securities market or in order to sell mortgage-backed securities

it owns under delayed-delivery arrangements. When the fund is a buyer of TBA transactions, it

maintains cash or short-term investments in an amount sufficient to meet the purchase price at

the settlement date of the TBA transaction. The primary risk associated with TBA transactions

is that a counterparty may default on its obligations. The fund mitigates its counterparty risk

by, among other things, performing a credit analysis of counterparties, allocating transactions

among numerous counterparties, and monitoring its exposure to each counterparty. The fund

may also enter into a Master Securities Forward Transaction Agreement (MSFTA) with certain

counterparties and require them to transfer collateral as security for their performance. In the

absence of a default, the collateral pledged or received by the fund cannot be repledged, resold,

or rehypothecated. Under an MSFTA, upon a counterparty default (including bankruptcy), the fund

may terminate any TBA transactions with that counterparty, determine the net amount owed by

either party in accordance with its master netting arrangements, and sell or retain any collateral

held up to the net amount owed to the fund under the master netting arrangements.

4. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the

fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar

securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-

dollar-roll transactions are typically invested in high-quality short-term fixed income securities.

The fund forgoes principal and interest paid on the securities sold, and is compensated by interest

earned on the proceeds of the sale and by a lower price on the securities to be repurchased.

The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these

transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in

connection with open mortgage dollar rolls are included in Receivables for Investment Securities

Sold or Payables for Investment Securities Purchased in the Statement of Net Assets.

28


5. 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 (January 31, 2015–2018), and has concluded

that no provision for federal income tax is required in the fund’s financial statements.

6. Distributions: Distributions from net investment income are declared daily and paid on the first

business day of the following month. Annual distributions from realized capital gains, if any, are

recorded on the ex-dividend date.

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”)

participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to

a credit agreement that may be renewed annually; each fund is individually liable for its borrowings,

if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes,

and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating

funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn

amount of the facility; these fees are allocated to the funds based on a method approved by the

fund’s board of trustees and included in Management and Administrative expenses on the fund’s

Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the

higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight

bank funding rate plus an agreed-upon spread.

The fund had no borrowings outstanding at January 31, 2018, or at any time during the period

then ended.

8. Other: Interest income includes income distributions received from Vanguard Market Liquidity

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 the proxy. 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. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard

and the fund, Vanguard furnishes to the fund investment advisory, corporate management,

administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined

by the FSA). These costs of operations are allocated to the fund based on methods and guidelines

approved by the board of trustees. Vanguard does not require reimbursement in the current period

for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs);

the fund’s liability for these costs of operations is included in Payables to Vanguard on the

Statement of Net Assets.

29


Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in

Vanguard. At January 31, 2018, the fund had contributed to Vanguard capital in the amount of

$427,000, representing 0.01% of the fund’s net assets and 0.17% of Vanguard’s capitalization.

The fund’s trustees and officers are also directors and employees, respectively, 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). Any investments valued with significant unobservable inputs are

noted on the Statement of Net Assets.

The following table summarizes the market value of the fund’s investments as of January 31, 2018,

based on the inputs used to value them:

Level 1 Level 2 Level 3

Investments ($000) ($000) ($000)

U.S. Government and Agency Obligations — 7,621,868 —

Temporary Cash Investments 73,546 — —

Liability for Options Written (590) — —

Futures Contracts—Assets1 198 — —

Futures Contracts—Liabilities1 (1,083) — —

Total 72,071 7,621,868 —

1 Represents variation margin on the last day of the reporting period.

D. Capital gain distributions are determined on a tax basis and may differ from realized capital

gains for financial reporting purposes. Differences may be permanent or temporary. Permanent

differences are reclassified among capital accounts in the financial statements to reflect their tax

character. Temporary differences arise when gains or losses are recognized in different periods for

financial statement and tax purposes. These differences will reverse at some time in the future.

For tax purposes, at January 31, 2018, the fund had available capital losses totaling $89,470,000

that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2018, the cost of investment securities for tax purposes was $7,756,428,000.

Net unrealized depreciation of investment securities for tax purposes was $61,014,000, consisting

of unrealized gains of $278,000 on securities that had risen in value since their purchase and

$61,292,000 in unrealized losses on securities that had fallen in value since their purchase.

30


E. During the year ended January 31, 2018, the fund purchased $19,788,407,000 of investment securities and sold $20,713,456,000 of investment securities, other than temporary cash investments.

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


2018 2017

Amount Shares Amount Shares ($000) (000) ($000) (000)

Investor Shares

Issued 217,914 20,530 315,668 29,426

Issued in Lieu of Cash Distributions 8,783 828 10,044 938

Redeemed (378,150) (35,620) (424,271) (39,539)

Net Increase (Decrease)—Investor Shares (151,453) (14,262) (98,559) (9,175)

Admiral Shares

Issued 1,626,582 153,201 1,937,149 180,557

Issued in Lieu of Cash Distributions 74,786 7,049 70,788 6,614

Redeemed (1,356,919) (127,829) (1,421,054) (132,567)

Net Increase (Decrease)—Admiral Shares 344,449 32,421 586,883 54,604

G. Management has determined that no material events or transactions occurred subsequent to January 31, 2018, that would require recognition or disclosure in these financial statements.

31

Short-Term Federal Fund



32

Volatility Measures

BloombergBarclays1–5 Year

Gov’tIndex

BloombergBarclays

AggregateBond Index

R-Squared 0.96 0.78

Beta 0.79 0.35



Asset-Backed 1.5%

Government Mortgage-Backed 11.2




Fund


Gov’tIndex

BloombergBarclays

AggregateBond Index


Yield to Maturity(before expenses) 2.3% 2.3% 3.0%



Average EffectiveMaturity 2.7 years 2.8 years 8.3 years

Short-Term Reserves 1.2% — —


InvestorShares

AdmiralShares

Ticker Symbol VSGBX VSGDX


30-Day SEC Yield 1.90% 2.00%


(% of portfolio)

Under 1 Year 11.4%

1 - 3 Years 63.6

3 - 5 Years 15.7

5 - 7 Years 5.8

7 - 10 Years 3.0

10 - 20 Years 0.5



Aa 0.2

Not Rated 1.5


Short-Term Federal Fund-3

33

Investment Focus

Average Maturity

Short

Treasury/ Agency

Investment-Grade

Corporate


Med. Long

Credit Quality

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 thanthe performance data cited. For performance data current to the most recent month-end, visitour website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would payon fund distributions or on the sale of fund shares.

Performance Summary



34


2018201720162015201420132012201120102009

$18,000

6,000

11,955

Average Annual Total ReturnsPeriods Ended January 31, 2018

OneYear

FiveYears

TenYears


Short-Term Federal Fund InvestorShares -0.02% 0.60% 1.80% $11,955

• • • • • • • •Bloomberg Barclays U.S. 1–5 YearGovernment Bond Index -0.08 0.65 1.79 11,945

– – – – Short-Intermediate U.S. GovernmentFunds Average -0.12 0.23 1.59 11,712



OneYear

FiveYears

TenYears


Short-Term Federal Fund Admiral Shares 0.08% 0.70% 1.91% $60,385

Bloomberg Barclays U.S. 1–5 YearGovernment Bond Index -0.08 0.65 1.79 59,724



35


Investor Shares


Gov’tIndex


2009 3.94% 0.84% 4.78% 5.66%

2010 2.39 1.62 4.01 2.56

2011 1.53 0.97 2.50 2.84

2012 1.00 2.09 3.09 3.26

2013 0.56 0.20 0.76 0.51

2014 0.54 -0.32 0.22 0.40

2015 0.62 0.74 1.36 1.75

2016 0.88 0.05 0.93 1.05

2017 1.07 -0.58 0.49 0.13

2018 1.32 -1.34 -0.02 -0.08

Average Annual Total Returns: Periods Ended December 31, 2017 This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.Securities and Exchange Commission rules require that we provide this information.

Ten Years


Investor Shares 12/31/1987 0.70% 0.68% 1.41% 0.64% 2.05%

Admiral Shares 2/12/2001 0.80 0.78 1.51 0.64 2.15




















792,741

Agency Bonds and Notes (70.8%) 2 AID-Iraq 2.149% 1/18/22 15,366 15,1382 AID-Israel 0.000% 11/1/19 14,470 13,8452 AID-Israel 5.500% 9/18/23 12,700 14,5052 AID-Israel 5.500% 4/26/24 4,100 4,7282 AID-Jordan 2.578% 6/30/22 33,500 33,2262 AID-Tunisia 1.416% 8/5/21 12,300 11,8622 AID-Ukraine 1.844% 5/16/19 11,665 11,5943 Fannie Mae Interest Strip 0.000% 1/15/19 1,560 1,5283 Fannie Mae Principal Strip 0.000% 2/1/19 25,682 25,1384 Federal Home Loan Banks 0.625% 8/7/18 6,440 6,4064 Federal Home Loan Banks 1.750% 12/14/18 3,000 2,9974 Federal Home Loan Banks 1.250% 1/16/19 45,400 45,1094 Federal Home Loan Banks 1.375% 3/18/19 21,000 20,8574 Federal Home Loan Banks 5.375% 5/15/19 46,000 47,9264 Federal Home Loan Banks 1.375% 5/28/19 34,300 33,9934 Federal Home Loan Banks 0.875% 8/5/19 83,500 81,9594 Federal Home Loan Banks 1.500% 10/21/19 46,500 45,9974 Federal Home Loan Banks 1.750% 6/12/20 20,000 19,7744,5 Federal Home Loan Banks 1.800% 8/28/20 50,000 49,278

Face Market









36


4,5 Federal Home Loan Banks 1.800% 8/28/20 123,250 121,4694 Federal Home Loan Banks 1.375% 9/28/20 145,540 142,0443,5 Federal Home Loan Mortgage Corp. 1.050% 5/25/18 50,000 49,9203,5 Federal Home Loan Mortgage Corp. 1.060% 6/22/18 50,000 49,8893,5 Federal Home Loan Mortgage Corp. 1.050% 7/27/18 50,000 49,8443 Federal Home Loan Mortgage Corp. 0.875% 10/12/18 81,510 81,0093,5 Federal Home Loan Mortgage Corp. 1.050% 11/7/18 75,000 74,5063,5 Federal Home Loan Mortgage Corp. 1.275% 6/28/19 50,000 49,3803 Federal Home Loan Mortgage Corp. 0.875% 7/19/19 82,350 80,8973,5 Federal Home Loan Mortgage Corp. 1.250% 7/26/19 50,000 49,3133 Federal Home Loan Mortgage Corp. 1.375% 8/15/19 96,700 95,6113 Federal Home Loan Mortgage Corp. 1.250% 10/2/19 120,650 118,8923 Federal Home Loan Mortgage Corp. 1.500% 1/17/20 31,400 30,9973,5 Federal Home Loan Mortgage Corp. 1.800% 4/13/20 75,000 74,1583,5 Federal Home Loan Mortgage Corp. 1.700% 9/29/20 164,060 161,1813,5 Federal Home Loan Mortgage Corp. 1.800% 9/29/20 75,000 73,8563 Federal Home Loan Mortgage Corp. 1.875% 11/17/20 134,600 132,9813,5 Federal Home Loan Mortgage Corp. 2.753% 1/30/23 50,000 49,8703,5 Federal National Mortgage Assn. 1.250% 9/27/18 10,000 9,9683 Federal National Mortgage Assn. 1.375% 1/28/19 33,750 33,5683,5 Federal National Mortgage Assn. 1.250% 6/13/19 50,000 49,3813 Federal National Mortgage Assn. 0.875% 8/2/19 16,950 16,6393 Federal National Mortgage Assn. 0.000% 10/9/19 275,300 264,9023,5 Federal National Mortgage Assn. 1.250% 11/25/19 75,000 73,6643,5 Federal National Mortgage Assn. 1.150% 11/29/19 77,500 76,1143,5 Federal National Mortgage Assn. 1.750% 1/17/20 50,000 49,4823 Federal National Mortgage Assn. 2.375% 1/19/23 85,400 84,6063 Federal National Mortgage Assn. 1.875% 9/24/26 75,650 69,8664 Financing Corp. 0.000% 5/11/18 108,000 107,4994 Financing Corp. 0.000% 11/2/18 1,540 1,5174 Financing Corp. 0.000% 12/6/18 32,496 31,9484 Financing Corp. 0.000% 3/7/19 3,910 3,8194 Financing Corp. 9.700% 4/5/19 5,820 6,323

Government Trust Certificate 0.000% 4/1/20 10,419 9,833









Residual Funding Corp. Principal Strip 0.000% 1/15/21 43,408 40,392

Resolution Funding Corp. Interest Strip 0.000% 4/15/26 12,990 10,200







Resolution Funding Corp. Principal Strip 0.000% 10/15/20 228,817 214,4504 Tennessee Valley Authority 4.700% 7/15/33 20,990 24,9884 Tennessee Valley Authority Principal Strip 0.000% 11/1/25 17,342 13,745

3,513,726

Face Market



37


Conventional Mortgage-Backed Securities (9.9%) 3,5 Fannie Mae Pool 2.000% 10/1/27–1/1/32 22,375 21,5533,5 Fannie Mae Pool 2.500% 2/1/28–11/1/31 132,475 130,6203,5,6 Fannie Mae Pool 3.000% 12/1/20–2/1/33 110,568 111,3103,5 Fannie Mae Pool 3.500% 8/1/20–5/1/30 42,224 43,4673,5 Fannie Mae Pool 4.000% 6/1/18–12/1/28 13,142 13,5643,5 Fannie Mae Pool 4.500% 2/1/18–10/1/25 2,065 2,0973,5 Fannie Mae Pool 5.000% 3/1/18–3/1/38 3,825 4,0173,5 Fannie Mae Pool 5.500% 2/1/18–1/1/25 488 4973,5 Fannie Mae Pool 6.000% 5/1/24 1 13,5 Freddie Mac Gold Pool 2.000% 9/1/28–6/1/30 7,500 7,2353,5 Freddie Mac Gold Pool 2.500% 6/1/22–1/1/33 71,343 70,2903,5,6 Freddie Mac Gold Pool 3.000% 4/1/27–3/1/33 52,248 52,5853,5 Freddie Mac Gold Pool 3.500% 3/1/21–8/1/29 15,875 16,3493,5 Freddie Mac Gold Pool 4.000% 6/1/18–1/1/29 8,335 8,6003,5 Freddie Mac Gold Pool 4.500% 5/1/18–9/1/26 5,569 5,6753,5 Freddie Mac Gold Pool 5.000% 3/1/18–6/1/25 2,104 2,1553,5 Freddie Mac Gold Pool 5.500% 7/1/18–2/1/19 13 133,5 Freddie Mac Gold Pool 6.000% 10/1/18 5 5

490,033

Nonconventional Mortgage-Backed Securities (1.2%) 3,5,7 Fannie Mae Pool 3.203% 12/1/40 1,794 1,8873,5,8 Fannie Mae REMICS 2005-45 1.931% 6/25/35 1,029 1,0313,5,8 Fannie Mae REMICS 2005-95 1.971% 11/25/35 1,383 1,3893,5,8 Fannie Mae REMICS 2006-46 1.881% 6/25/36 3,867 3,8643,5,8 Fannie Mae REMICS 2007-4 2.006% 2/25/37 484 4853,5,8 Fannie Mae REMICS 2012-122 1.961% 11/25/42 1,408 1,4093,5,8 Fannie Mae REMICS 2013-19 1.861% 9/25/41 1,957 1,9513,5,8 Fannie Mae REMICS 2013-39 1.911% 5/25/43 1,818 1,8143,5,8 Fannie Mae REMICS 2015-22 1.861% 4/25/45 1,532 1,5243,5,8 Fannie Mae REMICS 2016-55 2.061% 8/25/46 3,024 3,0533,5,8 Fannie Mae REMICS 2016-60 1.811% 9/25/46 6,177 6,1573,5,8 Fannie Mae REMICS 2016-62 1.961% 9/25/46 6,159 6,1793,5,8 Fannie Mae REMICS 2016-93 1.911% 12/25/46 11,716 11,7263,5,7 Freddie Mac Non Gold Pool 3.301% 9/1/37 5,620 5,9213,5,7 Freddie Mac Non Gold Pool 3.329% 7/1/35 7,132 7,4843,5 Freddie Mac Non Gold Pool 3.437% 7/1/33 964 1,0113,5,8 Freddie Mac REMICS 1.909% 11/15/36–8/15/43 2,892 2,8953,5,8 Freddie Mac REMICS 1.919% 11/15/36 1,026 1,0283,5,8 Freddie Mac REMICS 2.009% 6/15/42 540 543

61,351


Face Market Maturity Amount Value• Coupon Date ($000) ($000)

38


Asset-Backed/Commercial Mortgage-Backed Securities (1.5%)

5 Small Business Administration Participation

Certs 2017-20 2.880% 5/1/37 3,976 3,9135 Small Business Administration Participation


Certs 2017-20K 2.790% 11/1/37 27,800 27,2325 Small Business Administration Participation

Certs 2018-20A 2.920% 1/1/38 19,600 19,409

Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $74,814) 73,877

Share


Money Market Fund (1.2%)9 Vanguard Market Liquidity Fund

(Cost $58,453) 1.545% 584,532 58,453


Notional





U.S. Treasury Note



U.S. Treasury Note



U.S. Treasury Note



Other Assets and Liabilities (-0.6%)

Other Assets 361,178

Other Liabilities (392,966)

(31,788)

Net Assets (100%) 4,957,994

Face Market



39


Statement of Assets and Liabilities

Assets

Investments in Securities, at Value

Unaffiliated Issuers 4,930,275

Collateral for Futures Contracts 1,453

Total Unaffiliated Issuers 4,931,728

Affiliated Vanguard Funds 58,453

Total Investments in Securities 4,990,181






Other Assets 402

Total Assets 5,351,359

Liabilities

Payables for Investment Securities Purchased 379,278

Payables for Capital Shares Redeemed 9,148

Payables for Distributions 696

Payables to Vanguard 3,106

Liabilities for Options Written 399

Variation Margin Payable—Futures Contracts 735

Other Liabilities 3

Total Liabilities 393,365



Amount

($000)


Overdistributed Net Investment Income (23)




Futures Contracts (789)







Amount

($000)

40










4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.


6 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of January 31, 2018.

7 Adjustable-rate security based upon one-year Constant Maturity Treasury yield plus spread.






Futures Contracts

($000)

Value and







(2,370)


10-Year U.S. Treasury Note March 2018 (820) (99,694) 109

Ultra 10-Year U.S. Treasury Note March 2018 (374) (48,696) 586


30-Year U.S. Treasury Bond March 2018 (159) (23,502) 752

1,581

(789)



Amount

($000)


41

Year Ended

January 31, 2018

($000)

Investment Income

Income

Interest1 83,062

Total Income 83,062

Expenses


Investment Advisory Services 717





Custodian Fees 84

Auditing Fees 41









Purchased Options (2,032)









Net Increase (Decrease) in Net Assets Resulting from Operations 9,020

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $1,524,000, ($4,000), and ($5,000), respectively.




42





2018 2017

($000) ($000)


Operations




Net Increase (Decrease) in Net Assets Resulting from Operations 9,020 31,646

Distributions





Investor Shares (486) (2,109)




Investor Shares (97,217) 15,964

Admiral Shares (519,477) 518,055

Net Increase (Decrease) from Capital Share Transactions (616,694) 534,019

Total Increase (Decrease) (687,857) 486,642

Net Assets


End of Period2 4,957,994 5,645,851


2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($23,000) and ($42,000).

43

Investor Shares







on Investments (.144) (.063) .005 .080 (.034)


Distributions


Distributions from Realized Capital Gains (.006) (.027) (.035) — (.006)



Total Return2 -0.02% 0.49% 0.93% 1.36% 0.22%


Net Assets, End of Period (Millions) $719 $827 $817 $924 $1,051











44

Admiral Shares







on Investments (.144) (.063) .005 .080 (.034)

Total from Investment Operations .009 .064 .110 .157 .035

Distributions


Distributions from Realized Capital Gains (.006) (.027) (.035) — (.006)



Total Return2 0.08% 0.59% 1.03% 1.47% 0.33%













45



Vanguard Short-Term Federal Fund is registered under the Investment Company Act of 1940 as







































contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the

Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed,

when they are recorded as realized futures gains (losses).

46



contracts represented 18% and 7% of net assets, respectively, based on the average of the

notional amounts at each quarter-end during the period.


paid for a purchased option is recorded in the Statement of Assets and Liabilities as an asset that

is subsequently adjusted daily to the current market value of the option purchased. The premium

received for a written option is recorded in the Statement of Assets and Liabilities as an asset

with an equal liability that is subsequently adjusted daily to the current market value of the option

written. Fluctuations in the value of the options are recorded in the Statement of Operations as

unrealized appreciation (depreciation) until expired, closed, or exercised, at which time realized

gains (losses) are recognized.


























earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The

fund has also entered into mortgage-dollar-roll transactions in which the fund buys mortgage-

backed securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell

similar securities in the future at a predetermined price. The securities bought in mortgage-dollar-

roll transactions are used to cover an open TBA sell position. The fund continues to earn interest

on mortgage-backed security pools already held and receives a lower price on the securities to

be sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and

47


sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to

be received or paid in connection with open mortgage dollar rolls are included in Receivables for

Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of

Assets and Liabilities.


company and distribute all of its taxable income. Management has analyzed the fund’s tax positions

taken for all open federal income tax years (January 31, 2015–2018), and has concluded that no

provision for federal income tax is required in the fund’s financial statements.
















then ended.



















Statement of Assets and Liabilities.

48









those securities.










Investments ($000) ($000) ($000)


Asset-Backed/Commercial Mortgage-Backed Securities — 73,877 —




Futures Contracts—Liabilities1 (735) — —

Total 57,503 4,931,728 —













49





2018 2017


Investor Shares

Issued 136,535 12,788 270,833 25,077

Issued in Lieu of Cash Distributions 10,071 944 9,944 923

Redeemed (243,823) (22,844) (264,813) (24,536)

Net Increase (Decrease)—Investor Shares (97,217) (9,112) 15,964 1,464

Admiral Shares

Issued 1,255,782 117,654 1,688,505 156,406


Redeemed (1,836,508) (172,159) (1,231,516) (114,263)

Net Increase (Decrease)—Admiral Shares (519,477) (48,766) 518,055 47,813


50

Intermediate-Term Treasury Fund



51

Volatility Measures

BloombergBarclays

5–10 YearTreasury

Index

BloombergBarclays

AggregateBond Index

R-Squared 0.99 0.86

Beta 0.80 1.12



Asset-Backed 1.5%





Fund

BloombergBarclays

5–10 YearTreasury

Index

BloombergBarclays

AggregateBond Index








InvestorShares

AdmiralShares

Ticker Symbol VFITX VFIUX


30-Day SEC Yield 2.22% 2.33%


(% of portfolio)

Under 1 Year 0.5%

1 - 3 Years 0.2

3 - 5 Years 47.0

5 - 7 Years 29.7

7 - 10 Years 22.6



Not Rated 0.3


Investment Focus

Average Maturity

Short

Treasury/ Agency

Investment-Grade

Corporate


Med. Long

Credit Quality


Performance Summary



52


2018201720162015201420132012201120102009

$18,000

6,000

13,579


OneYear

FiveYears

TenYears


Intermediate-Term Treasury FundInvestor Shares -0.31% 0.90% 3.11% $13,579

• • • • • • • •Bloomberg Barclays U.S. 5–10 YearTreasury Bond Index 0.07 1.19 3.71 14,395

– – – – General U.S. Treasury Funds Average 1.73 1.75 3.89 14,645



OneYear

FiveYears

TenYears


Intermediate-Term Treasury Fund AdmiralShares -0.21% 1.00% 3.22% $68,636

Bloomberg Barclays U.S. 5–10 Year TreasuryBond Index 0.07 1.19 3.71 71,977



53


Investor Shares

BloombergBarclays

5–10 YearTreasury

Index


2009 3.88% 3.41% 7.29% 9.48%

2010 3.10 -0.39 2.71 0.47

2011 2.70 2.89 5.59 6.69

2012 2.11 8.25 10.36 13.95

2013 1.34 -0.24 1.10 1.46

2014 1.47 -2.21 -0.74 -1.47

2015 1.74 3.64 5.38 7.66

2016 1.65 -0.48 1.17 1.38

2017 1.51 -2.35 -0.84 -1.41

2018 1.76 -2.07 -0.31 0.07


Ten Years


Investor Shares 10/28/1991 1.57% 1.07% 2.14% 1.44% 3.58%

Admiral Shares 2/12/2001 1.67 1.17 2.26 1.44 3.70










































Face Market









54
































5,656,593

Agency Bonds and Notes (4.0%) 2 AID-Iraq 2.149% 1/18/22 9,930 9,7822 AID-Israel 5.500% 9/18/23 14,500 16,5612 AID-Israel 5.500% 4/26/24 4,700 5,4202 AID-Israel 0.000% 5/1/24 13,215 10,8082 AID-Israel 0.000% 11/1/24 75,000 61,3392 AID-Israel 0.000% 8/15/25 15,929 12,5652 AID-Tunisia 1.416% 8/5/21 15,200 14,659











243,495

Face Market



55


Nonconventional Mortgage-Backed Securities (0.5%) 3,4,5 Fannie Mae REMICS 2016-1 1.911% 2/25/46 10,598 10,6173,4,5 Fannie Mae REMICS 2016-6 2.011% 2/25/46 7,138 7,1773,4,5 Freddie Mac REMICS 1.959% 5/15/46 7,414 7,4543,4,5 Freddie Mac REMICS 2.009% 10/15/46 6,707 6,750

31,998



3 Small Business Administration Participation



Certs 2017-20K 2.790% 11/1/37 32,600 31,9343 Small Business Administration Participation

Certs 2018-20A 2.920% 1/1/38 24,200 23,964


Shares



(Cost $16,045) 1.545% 160,455 16,045


Notional





U.S. Treasury Note



U.S. Treasury Note



U.S. Treasury Note


Total Liability on Options Written (Premiums Received $120) (472)

Face Market



56



Other Assets





Variation Margin Receivable-Futures Contracts 48

Other Assets 256


Other Liabilities



Payables for Distributions (1,590)


Liabilities for Options Written (472)

Variation Margin Payable-Futures Contracts (585)


Net Assets (100%) 6,067,408


Amount

($000)













Amount

($000)

57
















Futures Contracts

($000)

Value and








(1,997)



10-Year U.S. Treasury Note March 2018 (220) (26,747) 8

171

(1,826)



Amount

($000)


58

Year Ended

January 31, 2018

($000)

Investment Income

Income

Interest1 124,281


Expenses







Custodian Fees 63

Auditing Fees 41


















Net Increase (Decrease) in Net Assets Resulting from Operations (10,245)

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $275,000, ($1,000), and $0, respectively.




59





2018 2017

($000) ($000)


Operations




Net Increase (Decrease) in Net Assets Resulting from Operations (10,245) (61,153)

Distributions












Total Increase (Decrease) (307,864) 200,839

Net Assets


End of Period2 6,067,408 6,375,272



60

Investor Shares







on Investments (.230) (.271) (.057) .410 (.256)

Total from Investment Operations (.032) (.094) .131 .598 (.086)

Distributions





Total Return2 -0.31% -0.84% 1.17% 5.38% -0.74%


Net Assets, End of Period (Millions) $967 $1,185 $1,326 $1,391 $1,469











61

Admiral Shares







on Investments (.230) (.271) (.057) .410 (.256)

Total from Investment Operations (.020) (.083) .142 .609 (.075)

Distributions





Total Return2 -0.21% -0.74% 1.27% 5.48% -0.64%













62



Vanguard Intermediate-Term Treasury Fund is registered under the Investment Company Act of

1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares:

Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the

fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet

certain administrative, service, and account-size criteria.






































63



contracts represented 8% and 2% of net assets, respectively, based on the average of the notional

amounts at each quarter-end during the period.








are recognized.

















or rehypothecated. Under an MSFTA, upon a counterparty default (including bankruptcy), the

fund may terminate any TBA transactions with that counterparty, determine the net amount

owed by either party in accordance with its master netting arrangements, and sell or retain any

collateral held up to the net amount owed to the fund under the master netting arrangements.











64





















then ended.




















65









those securities.










Investments ($000) ($000) ($000)







Total 15,036 6,020,147 —













66





2018 2017


Investor Shares

Issued 223,142 20,010 373,162 32,365


Redeemed (439,345) (39,398) (500,730) (43,639)


Admiral Shares

Issued 1,260,285 112,952 1,898,262 164,741


Redeemed (1,323,264) (118,721) (1,482,866) (129,928)



67

GNMA Fund



68

Volatility Measures

BloombergBarclays

GNMAIndex

BloombergBarclays

AggregateBond Index

R-Squared 0.98 0.83

Beta 1.06 0.62



Asset-Backed 1.8%

Collateralized Mortgage Obligations 2.3


Other Government 0.6



Fund

BloombergBarclays

GNMAIndex

BloombergBarclays

AggregateBond Index







Number of Bonds: Issues are mortgage pools grouped by coupon.


InvestorShares

AdmiralShares

Ticker Symbol VFIIX VFIJX


30-Day SEC Yield 2.71% 2.81%



Credit-quality ratings are obtained from Barclays and are from Moody's, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating for each issue is shown. "Not Rated" is used to classify securities for which a rating is not available. Not rated securities include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. For more information about these ratings, see the Glossary entry for Credit Quality.

Distribution by Coupon (% of portfolio)

Less Than 1.0% 2.1%

1.0% to 4.0% 62.7

4.0% to 6.0% 32.5

6.0% and above 2.7

Investment Focus

Average Maturity

Short

Treasury/ Agency

Investment-Grade

Corporate


Med. Long

Credit Quality


Performance Summary

GNMA Fund


69


2018201720162015201420132012201120102009

$18,000

6,000

14,229


OneYear

FiveYears

TenYears


GNMA Fund Investor Shares 0.85% 1.74% 3.59% $14,229

• • • • • • • •Bloomberg Barclays U.S. GNMA BondIndex 0.86 1.60 3.55 14,177

– – – – GNMA Funds Average 0.15 0.87 2.98 13,419



OneYear

FiveYears

TenYears


GNMA Fund Admiral Shares 0.95% 1.84% 3.70% $71,873

Bloomberg Barclays U.S. GNMA Bond Index 0.86 1.60 3.55 70,886


GNMA Fund

70


Investor Shares

BloombergBarclays

GNMAIndex


2009 5.08% 0.57% 5.65% 5.98%

2010 3.94 2.87 6.81 6.78

2011 3.42 2.29 5.71 5.33

2012 3.41 4.55 7.96 8.21

2013 2.61 -1.26 1.35 1.54

2014 2.28 -1.94 0.34 0.25

2015 2.66 2.63 5.29 4.56

2016 2.35 -0.52 1.83 2.10

2017 2.19 -1.70 0.49 0.28

2018 2.66 -1.81 0.85 0.86


Ten Years


Investor Shares 6/27/1980 1.87% 1.86% 3.07% 0.78% 3.85%

Admiral Shares 2/12/2001 1.97 1.96 3.17 0.78 3.95

GNMA Fund




Conventional Mortgage-Backed Securities (94.7%) 1,2 Fannie Mae Pool 2.500% 10/1/26–2/1/48 18,230 17,7171,2 Fannie Mae Pool 2.615% 11/1/27 20,035 19,3411,2 Fannie Mae Pool 2.640% 12/1/31 15,654 14,9651,2 Fannie Mae Pool 2.690% 10/1/27 33,670 32,4941,2 Fannie Mae Pool 2.710% 9/1/31 7,110 6,8231,2 Fannie Mae Pool 2.720% 9/1/31 1,465 1,4131,2 Fannie Mae Pool 2.775% 11/1/27 3,420 3,3051,2 Fannie Mae Pool 2.860% 12/1/27 76,375 74,7761,2 Fannie Mae Pool 2.870% 12/1/27–2/1/32 102,715 100,2651,2 Fannie Mae Pool 2.890% 12/1/27 27,087 26,5781,2 Fannie Mae Pool 2.910% 12/1/27 22,670 22,2771,2 Fannie Mae Pool 2.940% 12/1/27 44,540 43,8781,2 Fannie Mae Pool 2.950% 11/1/27–6/1/31 20,825 20,5711,2 Fannie Mae Pool 2.960% 12/1/27–6/1/31 40,070 39,5321,2 Fannie Mae Pool 2.970% 12/1/27 6,559 6,4661,2 Fannie Mae Pool 2.990% 3/1/27–12/1/27 77,561 76,8311,2 Fannie Mae Pool 3.000% 4/1/25–1/1/31 — —1,2 Fannie Mae Pool 3.020% 11/1/27 10,280 10,2771,2 Fannie Mae Pool 3.030% 5/1/29 25,320 25,0131,2 Fannie Mae Pool 3.050% 7/1/31 2,000 1,9761,2 Fannie Mae Pool 3.060% 11/1/27 32,000 31,8901,2 Fannie Mae Pool 3.110% 11/1/27 17,000 16,8641,2 Fannie Mae Pool 3.140% 7/1/32 50,388 49,9641,2 Fannie Mae Pool 3.160% 2/1/27 6,409 6,5061,2 Fannie Mae Pool 3.170% 4/1/27 8,200 8,2971,2 Fannie Mae Pool 3.210% 7/1/26–3/1/29 6,589 6,5951,2 Fannie Mae Pool 3.230% 2/1/27–8/1/27 5,215 5,3101,2 Fannie Mae Pool 3.240% 1/1/27 3,738 3,8081,2 Fannie Mae Pool 3.250% 5/1/32 28,500 28,6061,2 Fannie Mae Pool 3.260% 2/1/27 6,930 7,0701,2 Fannie Mae Pool 3.270% 7/1/30 40,538 40,7571,2 Fannie Mae Pool 3.280% 4/1/27–5/1/29 48,453 48,7191,2 Fannie Mae Pool 3.290% 6/1/29 22,065 22,1511,2 Fannie Mae Pool 3.320% 7/1/30 14,200 14,3431,2 Fannie Mae Pool 3.330% 4/1/32 10,818 10,8681,2 Fannie Mae Pool 3.340% 1/1/27 2,805 2,871

Face Market









71

GNMA Fund

1,2 Fannie Mae Pool 3.350% 7/1/27–11/1/30 19,262 19,5271,2 Fannie Mae Pool 3.380% 7/1/27 2,415 2,4731,2 Fannie Mae Pool 3.410% 7/1/27–5/1/32 9,020 9,1951,2 Fannie Mae Pool 3.420% 4/1/31 1,503 1,5001,2 Fannie Mae Pool 3.430% 6/1/30 1,292 1,3151,2 Fannie Mae Pool 3.460% 9/1/29 6,863 6,9891,2 Fannie Mae Pool 3.480% 3/1/37 21,564 22,0891,2 Fannie Mae Pool 3.490% 7/1/30 9,811 10,0221,2,3 Fannie Mae Pool 3.500% 2/1/27–2/1/48 30,568 30,9611,2 Fannie Mae Pool 3.540% 6/1/30 1,723 1,7651,2 Fannie Mae Pool 3.550% 2/1/30 8,875 9,0971,2 Fannie Mae Pool 3.570% 10/1/29 1,042 1,0671,2 Fannie Mae Pool 3.580% 7/1/29–1/1/31 29,351 30,1061,2 Fannie Mae Pool 3.590% 9/1/30 50,357 51,6281,2 Fannie Mae Pool 3.600% 4/1/28 569 5761,2 Fannie Mae Pool 3.610% 10/1/29 4,727 4,8511,2 Fannie Mae Pool 3.670% 3/1/28 460 4681,2 Fannie Mae Pool 3.700% 12/1/25 2,183 2,2021,2 Fannie Mae Pool 3.750% 7/1/25 4,628 4,8241,2 Fannie Mae Pool 3.755% 8/1/25 6,880 7,1511,2 Fannie Mae Pool 3.760% 1/1/26 3,677 3,8101,2 Fannie Mae Pool 3.790% 8/1/25 2,459 2,5611,2 Fannie Mae Pool 3.820% 11/1/25 10,735 11,1961,2 Fannie Mae Pool 3.830% 6/1/34 3,321 3,4781,2 Fannie Mae Pool 3.855% 12/1/25 6,600 6,8691,2 Fannie Mae Pool 3.870% 10/1/25 10,990 11,4721,2 Fannie Mae Pool 3.890% 5/1/30 14,201 14,7511,2 Fannie Mae Pool 3.910% 11/1/25 13,000 13,5721,2 Fannie Mae Pool 3.930% 11/1/25–3/1/26 7,308 7,6331,2 Fannie Mae Pool 3.960% 12/1/25–5/1/34 7,397 7,7871,2 Fannie Mae Pool 3.970% 12/1/25–5/1/29 5,936 6,1891,2 Fannie Mae Pool 3.990% 9/1/25 9,247 9,4671,2 Fannie Mae Pool 4.000% 5/1/46–6/1/46 9,754 10,0761,2 Fannie Mae Pool 4.060% 9/1/25–3/1/29 15,235 16,0171,2 Fannie Mae Pool 4.070% 1/1/26 2,241 2,3551,2 Fannie Mae Pool 4.080% 2/1/29 2,930 3,0711,2 Fannie Mae Pool 4.150% 10/1/28–1/1/31 74,300 78,6131,2 Fannie Mae Pool 4.180% 11/1/30 29,583 31,1651,2 Fannie Mae Pool 4.210% 1/1/26 970 1,0271,2 Fannie Mae Pool 4.250% 10/1/28–9/1/33 4,472 4,7321,2 Fannie Mae Pool 4.280% 11/1/28 5,288 5,6251,2 Fannie Mae Pool 4.380% 10/1/28 9,708 10,3981,2 Fannie Mae Pool 4.400% 8/1/28 2,192 2,3511,2 Fannie Mae Pool 4.500% 12/1/40–3/1/44 3,291 3,4861,2 Fannie Mae Pool 5.180% 2/1/26 2,901 3,2231,2 Fannie Mae Pool 6.000% 7/1/22 5 51,2 Fannie Mae Pool 6.500% 2/1/29–5/1/40 2,853 3,1761,2 Freddie Mac Gold Pool 3.000% 6/1/43–2/1/48 7,092 6,9771,2 Freddie Mac Gold Pool 4.000% 9/1/30–4/1/44 8,268 8,5621,2 Freddie Mac Gold Pool 4.500% 4/1/34–2/1/48 4,381 4,9951,2 Freddie Mac Gold Pool 5.000% 5/1/23–2/1/48 33,011 35,5101 Ginnie Mae I Pool 2.500% 11/15/42–9/15/43 102,765 98,6091 Ginnie Mae I Pool 3.000% 1/15/26–2/1/48 1,229,478 1,223,4191 Ginnie Mae I Pool 3.500% 7/15/39–2/1/48 834,525 853,943


72

GNMA Fund

1 Ginnie Mae I Pool 3.750% 7/15/42 3,521 3,6481 Ginnie Mae I Pool 3.875% 5/15/42–6/15/42 6,506 6,8061 Ginnie Mae I Pool 4.000% 6/15/19–2/1/48 1,071,351 1,118,6381 Ginnie Mae I Pool 4.500% 5/15/19–1/15/45 736,571 775,8821 Ginnie Mae I Pool 5.000% 1/15/30–2/1/48 654,090 697,8891 Ginnie Mae I Pool 5.500% 9/15/23–2/1/48 447,835 485,4091 Ginnie Mae I Pool 6.000% 3/15/19–2/1/48 243,406 267,1311 Ginnie Mae I Pool 6.500% 4/15/23–7/15/40 175,647 189,6791 Ginnie Mae I Pool 7.000% 11/15/31–11/15/36 53,253 60,3701 Ginnie Mae I Pool 7.250% 1/15/27–2/15/27 25 261,4 Ginnie Mae I Pool 7.500% 10/15/31 20,278 23,3721 Ginnie Mae I Pool 8.000% 8/15/31 7,482 8,6121 Ginnie Mae I Pool 8.500% 8/15/18–6/15/28 957 1,0081 Ginnie Mae I Pool 9.000% 4/15/18–5/15/21 4 51 Ginnie Mae I Pool 9.500% 5/15/18–8/15/21 186 1911 Ginnie Mae I Pool 10.000% 8/15/18–7/15/19 2 21 Ginnie Mae II Pool 1.500% 6/20/39–6/20/47 1,318 1,1111 Ginnie Mae II Pool 2.000% 10/20/43–2/20/47 967 8491 Ginnie Mae II Pool 2.500% 11/20/42–2/1/48 523,678 502,2951 Ginnie Mae II Pool 3.000% 4/20/31–2/1/48 3,597,738 3,566,2691,3 Ginnie Mae II Pool 3.500% 10/20/40–2/1/48 6,817,080 6,947,8351,3 Ginnie Mae II Pool 4.000% 4/20/39–2/1/48 3,100,611 3,216,2381,3 Ginnie Mae II Pool 4.500% 12/20/32–2/1/48 852,852 901,8581 Ginnie Mae II Pool 5.000% 10/20/32–3/20/45 338,817 360,2561 Ginnie Mae II Pool 5.500% 1/20/34–7/20/40 36,808 39,6201 Ginnie Mae II Pool 6.000% 4/20/28–8/20/40 47,540 52,8441 Ginnie Mae II Pool 6.500% 4/20/37–3/20/41 1,288 1,4341 Ginnie Mae II Pool 7.500% 6/20/25–8/20/25 107 1201 Ginnie Mae II Pool 10.000% 4/20/18–7/20/18 — —

22,802,440Nonconventional Mortgage-Backed Securities (3.7%) 1,2 Fannie Mae Pool 2.323% 8/1/43 14,349 14,2541,2 Fannie Mae Pool 2.778% 9/1/44 15,337 15,2981,2 Fannie Mae REMICS 3.000% 6/25/43–6/25/47 30,874 28,1551,2 Fannie Mae REMICS 6.000% 10/25/28–9/25/32 5,195 5,7221,2 Freddie Mac Non Gold Pool 2.266% 8/1/43 21,805 21,6121,2 Freddie Mac Non Gold Pool 2.279% 9/1/43 9,660 9,5521,2 Freddie Mac Non Gold Pool 2.703% 10/1/44 27,384 27,0771,2 Freddie Mac Non Gold Pool 2.801% 7/1/44 9,455 9,3751,2 Freddie Mac Non Gold Pool 2.839% 10/1/44 12,642 12,5271,2 Freddie Mac Non Gold Pool 2.904% 4/1/44 13,530 13,4171,2 Freddie Mac Non Gold Pool 2.948% 9/1/44 9,462 9,3601,2 Freddie Mac Non Gold Pool 3.103% 10/1/44 20,532 20,2391,2 Freddie Mac REMICS 3.000% 8/15/42–12/15/46 82,993 76,8051,2 Freddie Mac REMICS 6.000% 4/15/28–11/15/32 14,170 15,5231,5 Ginnie Mae REMICS 1.761% 2/20/37 3,611 3,6181 Ginnie Mae REMICS 2.350% 5/17/46 35,678 34,6591 Ginnie Mae REMICS 2.500% 12/16/39–11/20/43 67,585 60,7701 Ginnie Mae REMICS 2.650% 11/17/48 16,359 15,7611,6 Ginnie Mae REMICS 2.700% 5/16/35 13,210 12,4931 Ginnie Mae REMICS 3.000% 3/20/40–5/20/47 76,106 69,9671 Ginnie Mae REMICs 3.000% 4/20/47 12,723 12,1071 Ginnie Mae REMICS 3.250% 8/20/44 7,974 7,0591 Ginnie Mae REMICS 3.500% 7/20/43–9/20/44 31,957 32,034


73

GNMA Fund

1 Ginnie Mae REMICS 3.750% 7/20/44 1,851 1,8861 Ginnie Mae REMICS 4.500% 6/20/39 4,662 5,0001 Ginnie Mae REMICS 5.000% 6/16/37 16,033 17,5701 Ginnie Mae REMICS 5.500% 8/16/36 13,825 14,4601 Government National Mortgage Assn. 2.000% 10/20/44 5,292 5,0211 Government National Mortgage Assn. 2.400% 9/16/46 26,442 25,7451 Government National Mortgage Assn. 2.500% 10/20/45 64,784 62,3471 Government National Mortgage Assn. 3.000% 7/20/43–7/20/44 59,486 57,9641,7 Government National Mortgage Assn. 3.000% 1/20/48 176,189 175,267

892,644



1,2,6 Fannie Mae-Aces 2.986% 12/25/27 125,000 123,5611,2 FHLMC Multifamily Structured Pass

Through Certificates K062 3.413% 12/25/26 25,000 25,6001,2 FHLMC Multifamily Structured Pass



Through Certificates K072 3.444% 12/25/27 62,000 63,688


Temporary Cash Investments (3.1%)

Repurchase Agreements (1.7%)

Bank of America Securities, LLC

(Dated 1/31/18, Repurchase Value

$9,900,000, collateralized by

Government National Mortgage

Assn., 3.500%, 5/20/46, with a

value of $10,098,000) 1.360% 2/1/18 9,900 9,900

Bank of Montreal



U.S. Treasury Bill 0.000%, 4/12/18,

and U.S. Treasury Note/Bond

1.125%–7.875%, 4/12/18–2/28/22,

with a value of $5,100,000) 1.300% 2/1/18 5,000 5,000

Barclays Capital Inc.



U.S. Treasury Note/Bond 1.750%–

2.875%, 10/31/18–5/15/43, with

a value of $41,004,000) 1.350% 2/1/18 40,200 40,200

HSBC Bank USA



Federal National Mortgage Assn.

4.000%, 12/1/41–2/1/47, with a

value of $26,423,000) 1.310% 2/1/18 25,900 25,900

Face Market



74

GNMA Fund

Societe Generale



Federal Home Loan Mortgage Bank,

3.500%, 11/1/47, Federal National

Mortgage Assn. 3.500%–4.000%,

6/1/20–5/1/47, and U.S. Treasury

Note/Bond 1.250%–6.875%,

4/30/19–8/15/25, with a value

of $51,000,000) 1.320% 2/1/18 50,000 50,000

TD Securities (USA) LLC



Federal Farm Credit Bank, 0.875%–

3.93%, 6/11/18–8/1/44, Federal

Home Loan Bank 0.000%–4.625%,

2/23/18–7/6/32, Federal Home

Loan Mortgage Corp. 0.000%–

6.250%, 2/2/18–7/15/32, Federal

National Mortgage Assn., 1.000%–

7.125%, 9/18/18–7/15/37, and U.S.

Treasury Note 2.375%, 1/31/23,

with a value of $45,492,000) 1.310% 2/1/18 44,600 44,600

Citigroup Global Markets Inc.



U.S. Treasury Note/Bond 2.125%,

6/30/21, with a value of $53,142,000) 1.310% 2/1/18 52,100 52,100

HSBC Bank USA



U.S. Treasury Note/Bond 0.646%–

1.625%, 1/31/19–10/15/20, with

a value of $34,172,000) 1.300% 2/1/18 33,500 33,500

Wells Fargo & Co.



Federal National Mortgage Assn.,

3.500%, 12/1/47, with a value of

$161,466,000) 1.360% 2/1/18 158,300 158,300

419,500

Shares

Money Market Fund (1.4%)8 Vanguard Market Liquidity Fund 1.545% 3,284,276 328,428

Total Temporary Cash Investments (Cost $747,928) 747,928


Face Market



75

GNMA Fund

Other Assets and Liabilities (-2.5%)

Other Assets9 2,666,242

Liabilities (3,259,922)

(593,680)

Net Assets (100%) 24,088,747

Amount

($000)

Statement of Assets and Liabilities

Assets

Investments in Securities, at Value

Unaffiliated Issuers 24,353,999

Affiliated Vanguard Funds 328,428

Total Investments in Securities 24,682,427

Investment in Vanguard 1,341

Receivables for Investment Securities Sold 2,414,113




Variation Margin Receivable—Swaps Contracts 99

Other Assets9 155,255

Total Assets 27,348,669

Liabilities

Payables for Investment Securities Purchased 3,121,517

Payables to Investment Advisor 596

Payables for Capital Shares Redeemed 88,203

Payables for Distributions 9,522

Payables to Vanguard 39,004

Variation Margin Payable—Futures Contracts 893

Variation Margin Payable—Swaps Contracts 167

Other Liabilities 20

Total Liabilities 3,259,922


Market

Value•

($000)

76

GNMA Fund

Paid-in Capital 24,615,595Overdistributed Net Investment Income (1,601)Accumulated Net Realized Losses (281,984)Unrealized Appreciation (Depreciation) Investment Securities (262,312) Futures Contracts (27,649) Swap Contracts 46,698



Applicable to 735,994,818 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 7,597,918



Applicable to 1,597,432,557 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 16,490,829



1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments.


3 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of January 31, 2018.



6 Adjustable-rate security.

7 Security value determined using significant unobservable inputs.


9 Cash of $5,059,000 has been segregated as collateral for certain open To Be Announced (TBA) transactions. Cash of $81,538,000 has been segregated as collateral for open centrally cleared interest rate swaps.


At January 31, 2018, net assets consisted of: Amount ($000)

77

GNMA Fund


Futures Contracts

($000)

Value and





10-Year U.S. Treasury Note March 2018 8,309 1,010,193 (10,347)

Ultra 10-Year U.S. Treasury Note March 2018 2,163 281,629 (6,225)

30-Year U.S. Treasury Bond March 2018 810 119,728 (4,923)


Ultra Long U.S. Treasury Bond March 2018 463 74,977 (2,315)

(27,649)



Centrally Cleared Interest Rate Swaps

Fixed Floating

Interest Interest

Rate Rate Unrealized

Future Notional Received Received Appreciation

Effective Amount (Paid)1 (Paid) Value (Depreciation)

Termination Date Date ($000) (%) (%) ($000) ($000)

11/13/43 N/A 65,875 (2.550) 1.6003 3,543 3,547

7/14/27 N/A 292,775 (2.270) 1.7203 11,313 11,313

3/21/28 3/21/182 1,036,465 (2.250) 0.0003 47,223 31,838

62,079 46,698

1 Fixed interest payment received/paid semi-annually.2 Forward interest rate swap. In a forward interest rate swap, the fund and the counterparty agree to make periodic net payments

beginning on a specified future effective date.3 Based on 3-month London Interbank Offered Rate (LIBOR) as of the most recent payment date. Floating interest payment received/

paid quarterly.

Unrealized appreciation (depreciation) on open swap contracts is generally treated the same for

financial reporting and tax purposes.


78

Year Ended

January 31, 2018

($000)

Investment Income

Income

Interest1 726,691


Expenses

Investment Advisory Fees—Note B 2,421

The Vanguard Group—Note C



Marketing and Distribution—Investor Shares 1,124

Marketing and Distribution—Admiral Shares 1,127

Custodian Fees 829

Auditing Fees 44








Futures Contracts 21,091

Swap Contracts 5,148





Swap Contracts 46,698



1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from affiliated companies of the fund were $3,811,000, $0, and $33,000 respectively.


GNMA Fund


79


GNMA Fund



2018 2017

($000) ($000)


Operations




Net Increase (Decrease) in Net Assets Resulting from Operations 251,776 143,485

Distributions



Admiral Shares (476,434) (415,068)







Admiral Shares (823,487) 640,086

Net Increase (Decrease) from Capital Share Transactions (1,083,909) 348,909

Total Increase (Decrease) (1,517,703) (295,699)

Net Assets


End of Period2 24,088,747 25,606,450


2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($1,601,000) and ($6,035,000).

80

Investor Shares







on Investments (.193) (.183) (.055) .278 (.210)


Distributions





Total Return2 0.85% 0.49% 1.83% 5.29% 0.34%












GNMA Fund

81

Admiral Shares







on Investments (.192) (.183) (.055) .278 (.210)


Distributions





Total Return2 0.95% 0.59% 1.93% 5.39% 0.44%












GNMA Fund

82


GNMA Fund

Vanguard GNMA Fund is registered under the Investment Company Act of 1940 as an open-end

investment company, or mutual fund. The fund offers two classes of shares: Investor Shares

and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum

purchase requirements. Admiral Shares are designed for investors who meet certain administrative,

service, and account-size criteria.












Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market

quotations are not readily available, or whose values have been affected by events occurring before

the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods

deemed by the board of trustees to represent fair value.

2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with

greater efficiency and lower cost than is possible through direct investment, to add value when

these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The

primary risks associated with the use of futures contracts are imperfect correlation between changes

in market values of bonds held by the fund and the prices of futures contracts, and the possibility of

an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse

is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund

trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and

clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse

imposes initial margin requirements to secure the fund’s performance and requires daily settlement

of variation margin representing changes in the market value of each contract.

Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement

values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value

of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the

Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed,

when they are recorded as realized futures gains (losses).


contracts represented 3% and 1% of net assets, respectively, based on the average of aggregate

settlement values at each quarter-end during the period.

3. Swap Contracts: The fund enters into interest rate swap transactions to adjust the fund’s sensitivity

to changes in interest rates and maintain the ability to generate income at prevailing market rates.

Under the terms of the swaps, one party pays the other an amount that is a fixed percentage rate

applied to a notional amount. In return, the counterparty agrees to pay a floating rate, which is reset

periodically based on short-term interest rates, applied to the same notional amount.

83

GNMA Fund

The notional amounts of swap contracts are not recorded in the Statement of Net Assets.

Swaps are valued daily based on market quotations received from independent pricing services

or recognized dealers and the change in value is recorded in the Statement of Net Assets as an

asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until

periodic payments are made, or the swap terminates, at which time realized gain (loss) is recorded.

A risk associated with all types of swaps is the possibility that a counterparty may default

on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to

counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its

counterparty risk by entering into swaps only with a diverse group of prequalified counterparties,

monitoring their financial strength, entering into master netting arrangements with its counterparties,

and requiring its counterparties to transfer collateral as security for their performance. In the


or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may

terminate any swap contracts with that counterparty, determine the net amount owed by either

party in accordance with its master netting arrangements, and sell or retain any collateral held up

to the net amount owed to the fund under the master netting arrangements. The swap contracts

contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets

decline below a certain level, triggering a payment by the fund if the fund is in a net liability position

at the time of the termination. The payment amount would be reduced by any collateral the fund

has pledged. Any securities pledged as collateral for open contracts are noted in the Statement

of Net Assets. The value of collateral received or pledged is compared daily to the value of the

swap contracts exposure with each counterparty, and any difference, if in excess of a specified

minimum transfer amount, is adjusted and settled within two business days.

The fund enters into centrally cleared interest rate swaps to achieve the same objectives specified

with respect to the equivalent over-the-counter swaps but with less counterparty risk because

a regulated clearinghouse is the counterparty instead of the clearing broker or executing broker.

The clearinghouse imposes initial margin requirements to secure the fund’s performance, and

requires daily settlement of variation margin representing changes in the market value of each

contract. To further mitigate counterparty risk, the fund trades with a diverse group of prequalified

executing brokers; monitors the financial strength of its clearing brokers, executing brokers, and

clearinghouse; and has entered into agreements with its clearing brokers and executing brokers.

During the year ended January 31, 2018, the average amount of investments in interest rate swaps

represented 2% of net assets, based on the average of notional amounts at each quarter-end

during the period.


mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for

settlement at a future date. The fund may be a seller of TBA transactions to reduce its exposure to

the mortgage-backed securities market or in order to sell mortgage-backed securities it owns under

delayed-delivery arrangements. When the fund is a buyer of TBA transactions, it maintains cash or

short-term investments in an amount sufficient to meet the purchase price at the settlement date of

the TBA transaction. The primary risk associated with TBA transactions is that a counterparty may

default on its obligations. The fund mitigates its counterparty risk by, among other things, performing

a credit analysis of counterparties, allocating transactions among numerous counterparties, and

monitoring its exposure to each counterparty. The fund may also enter into a Master Securities

Forward Transaction Agreement (MSFTA) with certain counterparties and require them to transfer

84

GNMA Fund

collateral as security for their performance. In the absence of a default, the collateral pledged or

received by the fund cannot be repledged, resold, or rehypothecated. Under an MSFTA, upon a

counterparty default (including bankruptcy), the fund may terminate any TBA transactions with

that counterparty, determine the net amount owed by either party in accordance with its master

netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund

under the master netting arrangements.

At January 31, 2018, counterparties had deposited in segregated accounts securities and cash

with a value of $10,516,000 in connection with TBA transactions.

5. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund

sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities

in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll

transactions are typically invested in high-quality short-term fixed income securities. The fund

forgoes principal and interest paid on the securities sold, and is compensated by interest earned

on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund

has also entered into mortgage-dollar-roll transactions in which the fund buys mortgage-backed

securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell similar

securities in the future at a predetermined price. The securities bought in mortgage-dollar-roll

transactions are used to cover an open TBA sell position. The fund continues to earn interest on

mortgage-backed security pools already held and receives a lower price on the securities to be

sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and sales;

as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received

or paid in connection with open mortgage dollar rolls are included in Receivables for Investment

Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets

and Liabilities.

6. Repurchase Agreements: The fund enters into repurchase agreements with institutional

counterparties. Securities pledged as collateral to the fund under repurchase agreements are held

by a custodian bank until the agreements mature, and in the absence of a default, such collateral

cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of

the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its

counterparty risk by entering into repurchase agreements only with a diverse group of prequalified

counterparties, monitoring their financial strength, and entering into master repurchase agreements

with its counterparties. The master repurchase agreements provide that, in the event of a

counterparty’s default (including bankruptcy), the fund may terminate any repurchase agreements

with that counterparty, determine the net amount owed, and sell or retain the collateral up to the

net amount owed to the fund. Such action may be subject to legal proceedings, which may delay

or limit the disposition of collateral.








85

GNMA Fund













then ended.








Management and Administrative expenses) and shareholder reporting. Marketing and distribution

expenses are allocated to each class of shares based on a method approved by the board of

trustees. Income, other non-class-specific expenses, and gains and losses on investments are

allocated to each class of shares based on its relative net assets.

B. Wellington Management Company LLP provides investment advisory services to the fund for a

fee calculated at an annual percentage rate of average net assets. For the year ended January 31,

2018, the investment advisory fee represented an effective annual rate of 0.01% of the fund’s

average net assets.

C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard

and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing,

and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs

of operations are allocated to the fund based on methods and guidelines approved by the board

of trustees. Vanguard does not require reimbursement in the current period for certain costs of

operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability

for these costs of operations is included in Payables to Vanguard on the Statement of Assets

and Liabilities.



$1,341,000, representing 0.01% of the fund’s net assets and 0.54% of Vanguard’s capitalization.


86

GNMA Fund

D. Various inputs may be used to determine the value of the fund’s investments. These inputs



those securities.










Investments ($000) ($000) ($000)

U.S. Government and Agency Obligations — 23,519,817 175,267


Temporary Cash Investments 328,428 419,500 —

Futures Contracts —Assets1 996 — —


Swap Contracts—Assets1 99 — —

Swap Contracts—Liabilities1 (167) — —

Total 328,463 24,178,732 175,267


E. Capital gain distributions are determined on a tax basis and may differ from realized capital







At January 31, 2018, the cost of investment securities for tax purposes was $24,946,174,000. Net

unrealized depreciation of investment securities for tax purposes was $263,747,000, consisting of

unrealized gains of $178,209,000 on securities that had risen in value since their purchase and


87

GNMA Fund

F. During the year ended January 31, 2018, the fund purchased $152,755,034,000 of investment securities and sold $153,797,535,000 of investment securities, other than temporary cash investments.

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


2018 2017


Investor Shares

Issued 1,032,418 98,416 1,214,567 112,786


Redeemed (1,486,791) (141,482) (1,732,156) (161,229)


Admiral Shares

Issued 2,267,131 215,668 3,297,937 306,270


Redeemed (3,463,080) (329,749) (3,088,411) (288,180)

Net Increase (Decrease)—Admiral Shares (823,487) (78,631) 640,086 58,387

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2018, that would require recognition or disclosure in these financial statements.

88

Long-Term Treasury Fund



89

Volatility Measures

BloombergBarclays

U.S. LongTreasury

Bond Index

BloombergBarclays

AggregateBond Index

R-Squared 0.99 0.87

Beta 1.04 3.47



Government Mortgage-Backed 0.6%




Fund

BloombergBarclays

U.S. LongTreasury

Bond Index

BloombergBarclays

AggregateBond Index








InvestorShares

AdmiralShares

Ticker Symbol VUSTX VUSUX


30-Day SEC Yield 2.68% 2.79%


(% of portfolio)

Under 1 Year 0.3%

3 - 5 Years 0.1

5 - 7 Years 0.1

7 - 10 Years 0.3

10 - 20 Years 8.5

20 - 30 Years 90.7



Not Rated 0.4


Investment Focus

Average Maturity

Short

Treasury/ Agency

Investment-Grade

Corporate


Med. Long

Credit Quality


Performance Summary



90


2018201720162015201420132012201120102009

$22,000

6,000

17,419


OneYear

FiveYears

TenYears


Long-Term Treasury Fund InvestorShares 4.21% 3.32% 5.71% $17,419

• • • • • • • •Bloomberg Barclays U.S. LongTreasury Bond Index 4.62 3.54 5.93 17,783

– – – – General U.S. Treasury Funds Average 1.73 1.75 3.89 14,645



OneYear

FiveYears

TenYears


Long-Term Treasury Fund Admiral Shares 4.32% 3.42% 5.82% $88,042

Bloomberg Barclays U.S. Long Treasury BondIndex 4.62 3.54 5.93 88,917



91


Investor Shares

Bloomberg BarclaysU.S. Long Treasury

Bond Index


2009 4.57% 4.68% 9.25% 10.38%

2010 3.98 -5.33 -1.35 -2.19

2011 4.03 -0.45 3.58 4.29

2012 4.13 28.40 32.53 32.74

2013 2.73 -2.73 0.00 -0.02

2014 2.97 -7.42 -4.45 -4.49

2015 3.80 24.67 28.47 28.66

2016 2.59 -7.50 -4.91 -4.43

2017 2.44 -5.65 -3.21 -3.14

2018 2.77 1.44 4.21 4.62


Ten Years


Investor Shares 5/19/1986 8.58% 3.35% 3.41% 2.94% 6.35%

Admiral Shares 2/12/2001 8.69 3.45 3.53 2.94 6.47









































Face Market









92








3,338,889

Agency Bonds and Notes (2.0%) 2 Fannie Mae Interest Strip 0.000% 5/15/29 4,592 3,1702 Fannie Mae Principal Strip 0.000% 5/15/30 25,912 17,3942 Federal Home Loan Mortgage Corp. 0.000% 12/14/29 20,000 13,5462 Freddie Mac Coupon Strips 0.000% 3/15/28 1,771 1,2762 Freddie Mac Coupon Strips 0.000% 9/15/28 1,000 7062 Freddie Mac Coupon Strips 0.000% 1/15/30 15,658 10,5502 Freddie Mac Coupon Strips 0.000% 3/15/30 12,896 8,631


71,171

Conventional Mortgage-Backed Securities (0.0%) 2,3 Fannie Mae Pool 6.000% 2/1/26–11/1/28 12 14

Nonconventional Mortgage-Backed Securities (0.6%) 2,3,4 Fannie Mae REMICS 2016-1 1.911% 2/25/46 6,429 6,4402,3,4 Fannie Mae REMICS 2016-6 2.011% 2/25/46 4,330 4,3532,3,4 Freddie Mac REMICS 1.959% 5/15/46 4,391 4,4152,3,4 Freddie Mac REMICS 2.009% 10/15/46 3,951 3,976

19,184


Shares



(Cost $14,440) 1.545% 144,391 14,439


Notional





U.S. Treasury Note



U.S. Treasury Note



U.S. Treasury Note



Face Market



93



Other Assets






Other Assets 115


Other Liabilities



Payables for Distributions (887)


Variation Margin Payable—Futures Contracts (353)

Other Liabilities (4)


Net Assets (100%) 3,470,405


Amount

($000)





Investment Securities 32,353








Amount

($000)

94















Futures Contracts

($000)

Value and





2-Year U.S. Treasury Note March 2018 596 127,088 (612)

5-Year U.S. Treasury Note March 2018 368 42,214 (161)


30-Year U.S. Treasury Bond March 2018 118 17,442 (477)

10-Year U.S. Treasury Note March 2018 137 16,656 28

Ultra Long U.S. Treasury Bond March 2018 32 5,182 3

(1,305)



Amount

($000)

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

95

Year Ended

January 31, 2018

($000)

Investment Income

Income

Interest1 101,606


Expenses







Custodian Fees 36

Auditing Fees 38







Investment Securities Sold1 52,523




Realized Net Gain (Loss) 52,940








1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $229,000, $0, and $0, respectively.




96





2018 2017

($000) ($000)


Operations


Realized Net Gain (Loss) 52,940 43,528


Net Increase (Decrease) in Net Assets Resulting from Operations 141,135 (130,003)

Distributions












Total Increase (Decrease) (33,347) (44,149)

Net Assets


End of Period2 3,470,405 3,503,752



97

Investor Shares







on Investments .170 (.725) (1.070) 2.833 (.937)

Total from Investment Operations .498 (.393) (.719) 3.205 (.563)

Distributions





Total Return2 4.21% -3.21% -4.91% 28.47% -4.45%


Net Assets, End of Period (Millions) $882 $995 $1,148 $1,318 $1,013




Portfolio Turnover Rate3 103%4 94% 117% 59% 44%




4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.




98

Admiral Shares







on Investments .170 (.725) (1.070) 2.833 (.937)

Total from Investment Operations .510 (.380) (.707) 3.217 (.551)

Distributions





Total Return2 4.32% -3.12% -4.81% 28.60% -4.36%






Portfolio Turnover Rate3 103%4 94% 117% 59% 44%




4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.




99



Vanguard Long-Term Treasury Fund is registered under the Investment Company Act of 1940 as










































100



contracts represented 6% and 2% of net assets, respectively, based on the average of the notional

amounts at each quarter-end during the period.








are recognized.








it owns under delayed-delivery arrangements. When the fund is a buyer of TBA transactions,

it maintains cash or short-term investments in an amount sufficient to meet the purchase price

at the settlement date of the TBA transaction. The primary risk associated with TBA transactions





















101





















then ended.




















102









those securities.










Investments ($000) ($000) ($000)






Total 14,247 3,429,258 —







During the year ended January 31, 2018, the fund realized $6,342,000 of net capital gains resulting

from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the

fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to

shareholders, they have been reclassified from accumulated net realized losses to paid-in capital.

The fund used capital loss carryforwards of $39,010,000 to offset taxable capital gains realized

during the year ended January 31, 2018. For tax purposes, at January 31, 2018, the fund had

available capital losses totaling $2,985,000 that may be carried forward indefinitely to offset

future net capital gains.

103


At January 31, 2018, the cost of investment securities for tax purposes was $3,411,344,000. Net unrealized appreciation of investment securities for tax purposes was $32,353,000, consisting of unrealized gains of $74,848,000 on securities that had risen in value since their purchase and $42,495,000 in unrealized losses on securities that had fallen in value since their purchase.

E. During the year ended January 31, 2018, the fund purchased $3,621,822,000 of investment securities and sold $3,696,323,000 of investment securities, other than temporary cash investments. Purchases and sales include $0 and $115,275,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.



2018 2017


Investor Shares

Issued 184,444 15,192 406,152 30,783


Redeemed (338,619) (27,882) (524,662) (40,135)


Admiral Shares

Issued 867,209 71,229 1,305,813 99,466


Redeemed (876,142) (72,736) (1,083,022) (83,467)



104

To the Board of Trustees of Vanguard Fixed Income Securities Funds and Shareholders of

Vanguard Short-Term Treasury Fund, Vanguard Short-Term Federal Fund, Vanguard Intermediate-

Term Treasury Fund, Vanguard GNMA Fund and Vanguard Long-Term Treasury Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities of Vanguard Short-Term

Federal Fund and Vanguard GNMA Fund and statements of net assets of Vanguard Short-Term

Treasury Fund, Vanguard Short-Term Federal Fund, Vanguard Intermediate-Term Treasury Fund,

Vanguard GNMA Fund and Vanguard Long-Term Treasury Fund (five of the funds constituting

Vanguard Fixed Income Securities Funds, hereafter collectively referred to as the “Funds”) as of

January 31, 2018, the related statements of operations for the year ended January 31, 2018, the

statements of changes in net assets for each of the two years in the period ended January 31,

2018, including the related notes, and the financial highlights for each of the five years in the period

ended January 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the

financial statements present fairly, in all material respects, the financial position of each of the

Funds as of January 31, 2018, 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 ended January 31, 2018

and each of the financial highlights for each of the five years in the period ended January 31, 2018

in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility

is to express an opinion on the Funds’ financial statements based on our audits. We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States)

(“PCAOB”) and are required to be independent with respect to the Funds in accordance with the

U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of

the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement, whether

due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the

financial statements, whether due to error or fraud, and performing procedures that respond to

those risks. Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the financial statements. Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements. Our procedures included confirmation of securities owned

as of January 31, 2018 by correspondence with the custodians and brokers and by agreement

to the underlying ownership records of the transfer agent; when replies were not received from

brokers, we performed other auditing procedures. We believe that our audits provide a reasonable

basis for our opinions.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

March 15, 2018

We have served as the auditor of one or more investment companies in The Vanguard Group

of Funds since 1975.

Report of Independent Registered Public Accounting Firm

105

Special 2017 tax information (unaudited) for Vanguard Short-Term Treasury Fund

This information for the fiscal year ended January 31, 2018, is included pursuant to provisions

of the Internal Revenue Code.

For nonresident alien shareholders, 96.6% of income dividends are interest-related dividends.

Special 2017 tax information (unaudited) for Vanguard Short-Term Federal Fund



The fund distributed $3,310,000 as capital gain dividends (20% rate gain distributions) to

shareholders during the fiscal year.


Special 2017 tax information (unaudited) for Vanguard Intermediate-Term Treasury Fund




Special 2017 tax information (unaudited) for Vanguard GNMA Fund




Special 2017 tax information (unaudited) for Vanguard Long-Term Treasury Fund




106

About Your Fund’s Expenses

107

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 ongoingcosts only and do not reflect transaction costs incurred by the fund for buying and sellingsecurities. Further, the expenses do not include any purchase, redemption, or account servicefees described in the fund prospectus. If such fees were applied to your account, your costswould be higher. Your fund does not 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.

108

Six Months Ended January 31, 2018

Beginning

Account Value

7/31/2017

Ending

Account Value

1/31/2018

Expenses

Paid During

Period

Based on Actual Fund Return


Investor Shares $1,000.00 $991.30 $1.00

Admiral Shares 1,000.00 991.80 0.50


Investor Shares $1,000.00 $991.88 $1.00

Admiral Shares 1,000.00 992.38 0.50


Investor Shares $1,000.00 $979.46 $1.00

Admiral Shares 1,000.00 979.97 0.50

GNMA Fund

Investor Shares $1,000.00 $992.57 $1.05

Admiral Shares 1,000.00 993.07 0.55


Investor Shares $1,000.00 $998.38 $1.01

Admiral Shares 1,000.00 998.91 0.50

109

Six Months Ended January 31, 2018

Beginning

Account Value

7/31/2017

Ending

Account Value

1/31/2018

Expenses

Paid During

Period

Based on Hypothetical 5% Yearly Return


Investor Shares $1,000.00 $1,024.20 $1.02

Admiral Shares 1,000.00 1,024.70 0.51


Investor Shares $1,000.00 $1,024.20 $1.02

Admiral Shares 1,000.00 1,024.70 0.51


Investor Shares $1,000.00 $1,024.20 $1.02

Admiral Shares 1,000.00 1,024.70 0.51

GNMA Fund

Investor Shares $1,000.00 $1,024.15 $1.07

Admiral Shares 1,000.00 1,024.65 0.56


Investor Shares $1,000.00 $1,024.20 $1.07

Admiral Shares 1,000.00 1,024.70 0.51

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios forthat period are: for the Short-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Short-Term FederalFund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Intermediate-Term Treasury Fund, 0.20% for Investor Shares and0.10% for Admiral Shares; for the GNMA Fund, 0.21% for Investor Shares and 0.11% for Admiral Shares; and for the Long-Term TreasuryFund, 0.20% for Investor Shares and 0.10% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualizedexpense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-monthperiod, then divided by the number of days in the most recent 12-month period (184/365).

Glossary

110

30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S.

Securities and Exchange Commission. Under the formula, data related to the fund’s security

holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that

period, which is then annualized and divided by the fund’s estimated average net assets over the

calculation period. For the purposes of this calculation, a security’s income is based on its current

market yield to maturity (for bonds), its actual income (for asset-backed securities), or its

projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized

income, it will differ—at times significantly—from the fund’s actual experience. As a result, the

fund’s income distributions may be higher or lower than implied by the SEC yield.

Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It

is expressed as a percentage of face value.

Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate

in response to a change in interest rates. To see how the value could change, multiply the

average duration by the change in rates. If interest rates rise by 1 percentage point, the value of

the bonds in a fund with an average duration of five years would decline by about 5%. If rates

decrease by a percentage point, the value would rise by 5%.

Average Effective Maturity. The average length of time until fixed income securities held by a

fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call

the bond before its maturity date. The figure reflects the proportion of fund assets represented by

each security; it also reflects any futures contracts held. In general, the longer the average

effective maturity, the more a fund’s share price will fluctuate in response to changes in market

interest rates.

Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups

and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given

index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12%

when the index rose or fell by 10%. For this report, beta is based on returns over the past 36

months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction

with its R-squared (see definition). The lower the R-squared, the less correlation there is between

the fund and the index, and the less reliable beta is as an indicator of volatility.

Credit Quality. Credit-quality ratings are measured on a scale that generally ranges from AAA

(highest) to D (lowest). U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities

appear under “U.S. Government.” For the federal and Treasury funds, credit-quality ratings are

obtained from Moody’s and S&P, and the higher rating for each issue is shown. For the GNMA

Fund, credit-quality ratings are obtained from Barclays and are from Moody’s, Fitch, and S&P.

When ratings from all three agencies are used, the median rating is shown. When ratings from

two of the agencies are used, the lower rating for each issue is shown. “Not Rated” is used to

classify securities for which a rating is not available. Not rated securities include a fund’s

investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund,

each of which invests in high-quality money market instruments and may serve as a cash

management vehicle for the Vanguard funds, trusts, and accounts.

111

Distribution by Coupon. A breakdown of the securities in a fund according to coupon rate—the

interest rate that an issuer promises to pay, expressed as an annual percentage of face value.

Securities with unusually high coupon rates may be subject to call risk, the possibility that they

will be redeemed (or “called”) early by the issuer.

Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s

average net assets. The expense ratio includes management and administrative expenses, but

does not include the transaction costs of buying and selling portfolio securities.

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.

R-Squared. A measure of how much of a fund’s past returns can be explained by the returns

from the market in general, as measured by a given index. If a fund’s total returns were precisely

synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no

relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based

on returns over the past 36 months for both the fund and the index.

Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities

that can be readily converted to cash.

Yield to Maturity. The rate of return an investor would receive if the fixed income securities held

by a fund were held to their maturity dates.

BLOOMBERG is a trademark and service mark of Bloomberg Finance L.P. BARCLAYS is a trademark and service mark of

Barclays Bank Plc, used under license. Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited

(BISL) (collectively, Bloomberg), or Bloomberg’s licensors, own all proprietary rights in the Bloomberg Barclays U.S. 1–5

Year Treasury Bond Index, Bloomberg Barclays U.S. 1–5 Year Government Bond Index, Bloomberg Barclays U.S. 5–10 Year

Treasury Bond Index, Bloomberg Barclays U.S. GNMA Bond Index, and Bloomberg Barclays U.S. Long Treasury Bond Index

(the Indices or Bloomberg Barclays Indices).

Neither Barclays Bank Plc, Barclays Capital Inc., or any affiliate (collectively Barclays) or Bloomberg is the issuer or producer

of the U.S. Government Bond Funds and neither Bloomberg nor Barclays has any responsibilities, obligations or duties to

investors in the U.S. Government Bond Funds. The Indices are licensed for use by The Vanguard Group, Inc. (Vanguard) as

the sponsor of the U.S. Government Bond Funds. Bloomberg and Barclays’ only relationship with Vanguard in respect of the

Indices is the licensing of the Indices, which are determined, composed and calculated by BISL, or any successor thereto,

without regard to the Issuer or the U.S. Government Bond Funds or the owners of the U.S. Government Bond Funds.

Additionally, Vanguard may for itself execute transaction(s) with Barclays in or relating to the Indices in connection with

the U.S. Government Bond Funds. Investors acquire the U.S. Government Bond Funds from Vanguard and investors neither

acquire any interest in the Indices nor enter into any relationship of any kind whatsoever with Bloomberg or Barclays upon

making an investment in the U.S. Government Bond Funds. The U.S. Government Bond Funds are not sponsored, endorsed,

sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays makes any representation or warranty, express

or implied regarding the advisability of investing in the U.S. Government Bond Funds or the advisability of investing in

securities generally or the ability of the Indices to track corresponding or relative market performance. Neither Bloomberg

nor Barclays has passed on the legality or suitability of the U.S. Government Bond Funds with respect to any person or

entity. Neither Bloomberg nor Barclays is responsible for and has not participated in the determination of the timing of,

prices at, or quantities of the U.S. Government Bond Funds to be issued. Neither Bloomberg nor Barclays has any obligation

to take the needs of the Issuer or the owners of the U.S. Government Bond Funds or any other third party into consideration

in determining, composing or calculating the Indices. Neither Bloomberg nor Barclays has any obligation or liability in

connection with administration, marketing or trading of the U.S. Government Bond Funds.

The licensing agreement between Bloomberg and Barclays is solely for the benefit of Bloomberg and Barclays and not for

the benefit of the owners of the U.S. Government Bond Funds, investors or other third parties. In addition, the licensing

agreement between Vanguard and Bloomberg is solely for the benefit of Vanguard and Bloomberg and not for the benefit

of the owners of the U.S. Government Bond Funds, investors or other third parties.

112

NEITHER BLOOMBERG NOR BARCLAYS SHALL HAVE ANY LIABILITY TO THE ISSUER, INVESTORS OR TO OTHER THIRD

PARTIES FOR THE QUALITY, ACCURACY AND/OR COMPLETENESS OF THE BLOOMBERG BARCLAYS INDICES OR ANY

DATA INCLUDED THEREIN OR FOR INTERRUPTIONS IN THE DELIVERY OF THE BLOOMBERG BARCLAYS INDICES. NEITHER

BLOOMBERG NOR BARCLAYS MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY

THE ISSUER, THE INVESTORS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BLOOMBERG BARCLAYS

INDICES OR ANY DATA INCLUDED THEREIN. NEITHER BLOOMBERG NOR BARCLAYS MAKES ANY EXPRESS OR IMPLIED

WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR

A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE BLOOMBERG BARCLAYS INDICES OR ANY DATA INCLUDED

THEREIN. BLOOMBERG RESERVES THE RIGHT TO CHANGE THE METHODS OF CALCULATION OR PUBLICATION, OR TO

CEASE THE CALCULATION OR PUBLICATION OF THE BLOOMBERG BARCLAYS INDICES, AND NEITHER BLOOMBERG

NOR BARCLAYS SHALL BE LIABLE FOR ANY MISCALCULATION OF OR ANY INCORRECT, DELAYED OR INTERRUPTED

PUBLICATION WITH RESPECT TO THE BLOOMBERG BARCLAYS INDICES. NEITHER BLOOMBERG NOR BARCLAYS SHALL

BE LIABLE FOR ANY DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL

DAMAGES, OR ANY LOST PROFITS AND EVEN IF ADVISED OF THE POSSIBLITY OF SUCH, RESULTING FROM THE USE

OF THE BLOOMBERG BARCLAYS INDICES OR ANY DATA INCLUDED THEREIN OR WITH RESPECT TO THE U.S.

GOVERNMENT BOND FUNDS.

None of the information supplied by Bloomberg or Barclays and used in this publication may be reproduced in any manner

without the prior written permission of both Bloomberg and Barclays Capital, the investment banking division of Barclays

Bank Plc. Barclays Bank Plc is registered in England No. 1026167. Registered office 1 Churchill Place London E14 5HP.

© 2017 Bloomberg. Used with Permission.

Source: Bloomberg Index Services Limited. Copyright 2017, Bloomberg. All rights reserved.

113

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

201 Vanguard funds.

Information for each trustee and executive officer of the fund appears below. The mailing address

of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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 vanguard.com.

Interested Trustees1

F. William McNabb III

Mr. McNabb has served as chairman of the board of

Vanguard and of each of the investment companies

served by Vanguard since January 2010; as a trustee of

each of the investment companies served by Vanguard

since 2009; and as director of Vanguard since 2008.

Mr. McNabb served as chief executive officer and

president of Vanguard and each of the investment

companies served by Vanguard from 2008 to 2017

and as a managing director of Vanguard from 1995

to 2008. Mr. McNabb also serves as a director of

Vanguard Marketing Corporation. He was born in 1957.

Mortimer J. Buckley

Mr. Buckley has served as chief executive officer

of Vanguard since January 2018; as chief executive

officer, president, and trustee of each of the

investment companies served by Vanguard since

January 2018; and as president and director of

Vanguard since 2017. Previous positions held by

Mr. Buckley at Vanguard include chief investment

officer (2013–2017), head of the Retail Investor

Group (2006–2012), and chief information officer

(2001–2006). Mr. Buckley also served as chairman

of the board of the Children’s Hospital of Philadelphia

from 2011 to 2017. He was born in 1969.

Independent Trustees

Emerson U. Fullwood

Mr. Fullwood has served as trustee since July 2008.

Mr. Fullwood is the former executive chief staff and

marketing officer for North America and corporate

vice president (retired 2008) of Xerox Corporation

(document management products and services).

Previous positions held at Xerox by Mr. Fullwood

include president of the Worldwide Channels Group,

president of Latin America, executive chief staff

officer of Developing Markets, and president of

Worldwide Customer Services. Mr. Fullwood is

the executive in residence at the Rochester Institute

of Technology, where he was the 2009–2010

Distinguished Minett Professor. Mr. Fullwood

serves as lead director of SPX FLOW, Inc. (multi-

industry manufacturing); director of the University of

Rochester Medical Center, the Monroe Community

College Foundation, the United Way of Rochester,

North Carolina A&T University, and Roberts Wesleyan

College; and a trustee of the University of Rochester.

He was born in 1948.

Amy Gutmann

Dr. Gutmann has served as trustee since June 2006.

Dr. Gutmann has served as the president of the

University of Pennsylvania since 2004. She is the

Christopher H. Browne Distinguished Professor of

Political Science, School of Arts and Sciences, and

Professor of Communication, Annenberg School for

1 Mr. McNabb and Mr. Buckley are considered “interested persons,” as defined in the Investment Company Act of 1940, because they are officers of the Vanguard funds.

Communication, with secondary faculty appointments

in the Department of Philosophy, School of Arts and

Sciences, and at the Graduate School of Education,

University of Pennsylvania. Dr. Gutmann also serves

as a trustee of the National Constitution Center. She

was born in 1949.

JoAnn Heffernan Heisen

Ms. Heisen has served as trustee since July 1998.

Ms. Heisen is the former corporate vice president

of Johnson & Johnson (pharmaceuticals/medical

devices/consumer products) and a former member

of its executive committee (1997–2008). During her

tenure at Johnson & Johnson, Ms. Heisen held

multiple roles, including: chief global diversity officer

(retired 2008), vice president and chief information

officer (1997–2006), controller (1995–1997), treasurer

(1991–1995), and assistant treasurer (1989–1991).

Ms. Heisen serves as a director of Skytop Lodge

Corporation (hotels) and the Robert Wood Johnson

Foundation and as a member of the advisory board

of the Institute for Women’s Leadership at Rutgers

University. She was born in 1950.

F. Joseph Loughrey

Mr. Loughrey has served as trustee since October

2009. Mr. Loughrey is the former president and chief

operating officer (retired 2009) and vice chairman of

the board (2008–2009) of Cummins Inc. (industrial

machinery). Mr. Loughrey serves as chairman of the

board of Hillenbrand, Inc. (specialized consumer

services), Oxfam America, and the Lumina Foundation

for Education; as a director of the V Foundation for

Cancer Research; and as a member of the advisory

council for the College of Arts and Letters and chair

of the advisory board to the Kellogg Institute for

International Studies, both at the University of Notre

Dame. He was born in 1949.

Mark Loughridge

Mr. Loughridge has served as trustee since March

2012. Mr. Loughridge is the former senior vice

president and chief financial officer (retired 2013) at

IBM (information technology services). Mr. Loughridge

also served as a fiduciary member of IBM’s retirement

plan committee (2004–2013). Previous positions held

by Mr. Loughridge at IBM include senior vice president

and general manager of Global Financing (2002–2004),

vice president and controller (1998–2002), and a

variety of management roles. Mr. Loughridge serves

as a member of the Council on Chicago Booth. He

was born in 1953.

Scott C. Malpass

Mr. Malpass has served as trustee since March 2012.

Mr. Malpass has served as chief investment officer

since 1989 and as vice president since 1996 at the

University of Notre Dame. Mr. Malpass serves as an

assistant professor of finance at the Mendoza College

of Business at the University of Notre Dame and is

a member of the Notre Dame 403(b) investment

committee. Mr. Malpass also serves as chairman

of the board of TIFF Advisory Services, Inc.; as a

member of the board of Catholic Investment Services,

Inc. (investment advisors); as a member of the board

of advisors for Spruceview Capital Partners; and as

a member of the board of superintendence of the

Institute for the Works of Religion. He was born

in 1962.

Deanna Mulligan

Ms. Mulligan has served as trustee since January

2018. Ms. Mulligan has served as president since

2010 and chief executive officer since 2011 at

The Guardian Life Insurance Company of America.

Previous positions held by Ms. Mulligan at The

Guardian Life Insurance Company of America include

chief operating officer (2010–2011) and executive vice

president of Individual Life and Disability (2008–2010).

Ms. Mulligan serves as a board member of The

Guardian Life Insurance Company of America, the

American Council of Life Insurers, the Partnership

for New York City (business leadership), and the

Committee Encouraging Corporate Philanthropy. She

also serves as a trustee of the Economic Club of New

York and the Bruce Museum (arts and science) and

as a member of the Advisory Council for the Stanford

Graduate School of Business. She was born in 1963.

André F. Perold

Dr. Perold has served as trustee since December

2004. Dr. Perold is the George Gund Professor of

Finance and Banking, Emeritus at the Harvard

Business School (retired 2011). Dr. Perold serves

as chief investment officer and co-managing partner

of HighVista Strategies LLC (private investment firm).

Dr. Perold also serves as an overseer of the Museum

of Fine Arts Boston. He was born in 1952.

Sarah Bloom Raskin

Ms. Raskin has served as trustee since January 2018.

Ms. Raskin served as deputy secretary of the United

States Department of the Treasury (2014–2017), as a

governor of the Federal Reserve Board (2010–2014),

and as commissioner of financial regulation of the

State of Maryland (2007–2010). Ms. Raskin also

served as a member of the Neighborhood

Reinvestment Corporation’s board of directors

(2012–2014). Ms. Raskin serves as a director

of i(x) Investments, LLC. She was born in 1961.

Peter F. Volanakis

Mr. Volanakis has served as trustee since July 2009.

Mr. Volanakis is the retired president and chief

operating officer (retired 2010) of Corning Incorporated

(communications equipment) and a former director of

Corning Incorporated (2000–2010) and Dow Corning

(2001–2010). Mr. Volanakis served as a director of

SPX Corporation (multi-industry manufacturing)

(2012) and as an overseer of the Amos Tuck School

of Business Administration at Dartmouth College

(2001–2013). Mr. Volanakis serves as chairman of

the board of trustees of Colby-Sawyer College and is

a member of the board of Hypertherm Inc. (industrial

cutting systems, software, and consumables). He

was born in 1955.

Executive Officers

Glenn Booraem

Mr. Booraem, a principal of Vanguard, has served

as investment stewardship officer of each of the

investment companies served by Vanguard since

February 2017. Mr. Booraem served as treasurer

(2015–2017), controller (2010–2015), and assistant

controller (2001–2010) of each of the investment

companies served by Vanguard. He was born in 1967.

Christine M. Buchanan

Ms. Buchanan, a principal of Vanguard, has served

as treasurer of each of the investment companies

served by Vanguard since November 2017. She

also serves as global head of Fund Administration

at Vanguard. Ms. Buchanan served as a partner at

KPMG LLP (audit, tax, and advisory services)

(2005–2017). She was born in 1970.

Thomas J. Higgins

Mr. Higgins, a principal of Vanguard, has served

as chief financial officer of each of the investment

companies served by Vanguard since 2008.

Mr. Higgins served as treasurer of each of the

investment companies served by Vanguard

(1998–2008). He was born in 1957.

Peter Mahoney

Mr. Mahoney, a principal of Vanguard, has served

as controller of each of the investment companies

served by Vanguard since May 2015. Mr. Mahoney

served as head of International Fund Services at

Vanguard (2008–2014). He was born in 1974.

Anne E. Robinson

Ms. Robinson has served as general counsel

of Vanguard since September 2016; as secretary

of Vanguard and of each of the investment companies

served by Vanguard since September 2016; as director

and senior vice president of Vanguard Marketing

Corporation since September 2016; and as a

managing director of Vanguard since August 2016.

Ms. Robinson served as managing director and

general counsel of Global Cards and Consumer

Services at Citigroup (2014–2016). She served

as counsel at American Express (2003–2014).

She was born in 1970.

Michael Rollings

Mr. Rollings, a managing director of Vanguard since

June 2016, has served as finance director of each

of the investment companies served by Vanguard

since November 2017 and as a director of Vanguard

Marketing Corporation since June 2016. Mr. Rollings

served as treasurer of each of the investment

companies served by Vanguard from February 2017 to

November 2017. He also served as the executive vice

president and chief financial officer of MassMutual

Financial Group (2006–2016). He was born in 1963.

Vanguard Senior Management Team

Mortimer J. Buckley James M. Norris

Gregory Davis Thomas M. Rampulla

John James Karin A. Risi

Martha G. King Anne E. Robinson

John T. Marcante Michael Rollins

Chris D. McIsaac

Chairman Emeritus and Senior Advisor

John J. Brennan

Chairman, 1996–2009

Chief Executive Officer and President, 1996–2008

Founder

John C. Bogle

Chairman and Chief Executive Officer, 1974–1996

P.O. Box 2600

Valley Forge, PA 19482-2600

Connect with Vanguard® > vanguard.com

Fund Information > 800-662-7447

Direct Investor Account Services > 800-662-2739

Institutional Investor Services > 800-523-1036

Text Telephone for PeopleWho Are Deaf or Hard of Hearing > 800-749-7273

This material may be used in conjunctionwith the offering of shares of any Vanguardfund only if preceded or accompanied bythe fund’s current prospectus.

All comparative mutual fund data are from Lipper, aThomson Reuters Company, or Morningstar, Inc., unlessotherwise noted.

You can obtain a free copy of Vanguard’s proxy votingguidelines by visiting vanguard.com/proxyreporting or bycalling Vanguard at 800-662-2739. The guidelines arealso available from the SEC’s website, sec.gov. Inaddition, you may obtain a free report on how your fundvoted the proxies for securities it owned during the 12months ended June 30. To get the report, visit eithervanguard.com/proxyreporting or sec.gov.

You can review and copy information about your fund atthe SEC’s Public Reference Room in Washington, D.C. Tofind out more about this public service, call the SEC at202-551-8090. Information about your fund is alsoavailable on the SEC’s website, and you can receivecopies of this information, for a fee, by sending arequest in either of two ways: via email addressed [email protected] or via regular mail addressed to thePublic Reference Section, Securities and ExchangeCommission, Washington, DC 20549-1520.

CFA® is a registered trademark owned by CFA Institute.

© 2018 The Vanguard Group, Inc.All rights reserved.Vanguard Marketing Corporation, Distributor.

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