UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-7043
Name of Registrant: VANGUARD ADMIRAL FUNDS
Address of Registrant: P.O. BOX 2600, VALLEY FORGE, PA 19482
Name and address of agent for service: R. GREGORY BARTON
P.O. BOX 876
VALLEY FORGE, PA 19482
Registrant's telephone number, including area code: (610) 669-1000
Date of fiscal year end: August 31
Date of reporting period: September 1, 2002 - August 31, 2003
ITEM 1: Reports to Shareholders
VANGUARD(R) MONEY MARKET FUNDS
AUGUST 31, 2003
[GRAPHIC]
ANNUAL REPORT
[THE VANGUARD GROUP(R) LOGO]
LETTER FROM THE CHAIRMAN
Fellow Shareholder,
During the 12 months ended August 31, 2003, the yields of money market
instruments plumbed new depths, which translated into very modest total returns
for the Vanguard Money Market Funds.
================================================================================
2003 TOTAL RETURNS FISCAL YEAR ENDED AUGUST 31
- ---------------------------------------------------------------
SEC 7-DAY
AVERAGE ANNUALIZED
VANGUARD COMPETING YIELD**:
VANGUARD MONEY MARKET FUND FUND FUND* 8/31/2003
- ---------------------------------------------------------------
PRIME
Investor Shares 1.1% 0.6% 0.76%
Institutional Shares+ 1.3 1.0 0.95
FEDERAL 1.1 0.7 0.75
TREASURY 1.0 0.7 0.70
ADMIRAL TREASURY++ 1.2 0.7 0.86
- ---------------------------------------------------------------
*For the Prime and Federal Funds, derived from data provided by Lipper Inc.;
for the Treasury and Admiral Treasury Funds, data provided by iMoneyNet, Inc.
**The yield of a money market fund more closely reflects the current earnings of
the fund than its total return.
+Minimum initial investment is $10 million.
++Minimum initial investment is $50,000.
================================================================================
These returns were nevertheless significantly better than the average returns of
our funds' peer groups, as illustrated by the adjacent table. The table also
displays each fund's annualized yield as of August 31.
One easy-to-overlook achievement in this low-return environment is the funds'
continued success in meeting their mandates to preserve principal (the share
price of each fund held steady at $1, as is expected but not guaranteed),
provide liquidity, and generate superior relative returns.
DISMAL AT THE START, THE STOCK MARKET PERKED UP
A slumping economy, weak corporate profits, and growing geopolitical tensions
weighed heavily on the stock market as our fiscal year began, and a two-month
rally from mid-October quickly ran out of steam. However, following the
successful conclusion of major combat operations in Iraq, a distinctly upbeat
mood began to permeate the market
1
place. Stock prices began to rebound across capitalizations and industry sectors
in response to solid corporate earnings announcements and a slew of positive
economic reports.
The U.S. stock market, as measured by the Wilshire 5000 Total Market Index,
returned 14.9% for the fiscal year. Technology and other growth-oriented stocks,
which had sustained massive losses during the past few years, were among the
most impressive gainers. The market's smaller stocks outpaced larger issues,
demonstrating investors' renewed appetite for risk.
U.S. investors were rewarded with good returns in many international markets as
well, although stock performance was only part of the story. The weakening of
the U.S. dollar by almost 10% relative to the euro and Japanese yen transformed
results that were mediocre by local-currency standards into strong
dollar-denominated returns.
INTEREST RATES FELL THROUGH MUCH OF
THE FISCAL YEAR, THEN BOUNCED BACK A BIT
In the bond market, the fiscal year was marked by two distinctly different
phases. Prior to mid-June, the lethargic economy and ongoing flight from
equities to bonds drove the prices of bonds higher and their yields lower. The
yield of the benchmark 10-year U.S. Treasury note dropped to a 45-year low of
3.11% on June 13. After that point, however, longer- term interest rates rose
rapidly, with the yield of the 10-year T-note standing at 4.46% on August 31.
For the 12 months, the Lehman Brothers Aggregate Bond Index, a measure of the
taxable investment-grade bond market, provided a total return of 4.4%.
================================================================================
MARKET BAROMETER AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2003
---------------------------------
ONE THREE FIVE
YEAR YEARS YEARS
- --------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 4.4% 8.2% 6.6%
(Broad taxable market)
Lehman Municipal Bond Index 3.1 6.5 5.3
Citigroup 3-Month Treasury Bill Index 1.3 2.9 3.8
- --------------------------------------------------------------------------------
STOCKS
Russell 1000 Index (Large-caps) 12.9% -11.4% 3.1%
Russell 2000 Index (Small-caps) 29.1 -1.2 9.5
Wilshire 5000 Index (Entire market) 14.9 -10.7 3.5
MSCI All Country World Index Free
ex USA (International) 12.2 -10.0 1.1
================================================================================
CPI
Consumer Price Index 2.2% 2.2% 2.5%
================================================================================
Corporate bonds outperformed Treasuries across all maturities. High-yield
corporate bonds performed spectacularly--the Lehman High
2
Yield Index, which tracks the performance of bonds issued by companies with low
credit ratings, returned 24.9% for the period.
======================================================
CHANGES IN YIELDS
SEC 7-DAY ANNUALIZED YIELD
--------------------------
AUGUST 31, AUGUST 31,
MONEY MARKET FUND 2003 2002
- ------------------------------------------------------
Prime
Investor Shares 0.76% 1.53%
Institutional Shares 0.95 1.77
Federal 0.75 1.56
Treasury 0.70 1.44
Admiral Treasury 0.86 1.62
- ------------------------------------------------------
Short-term interest rates generally declined for the 12 months, but rose
somewhat toward the end. In an effort to add fuel to the economic recovery, the
Federal Reserve Board trimmed its target for the federal funds rate twice--in
November 2002 and June 2003--by a total of 75 basis points (0.75 percentage
point). The rate stood at 1.00% at the fiscal year-end. The yield of the 3-month
Treasury bill, which typically lags Fed moves, began the fiscal year at 1.67%
and closed at 0.97% after falling to a low of 0.81% in mid-June.
ALREADY LOW INTEREST RATES HEADED EVEN LOWER
The result of the Federal Reserve's long campaign to reduce short-term interest
rates has been most visible in the returns of money market instruments. When the
fiscal year opened, the annualized yields of the Vanguard Money Market Funds
hovered between 1% and 2%, lows uncharted since the introduction of the money
market mutual fund in the 1970s.
In the ensuing 12 months, as the Fed trimmed its target for short-term rates
from 1.75% to 1.00%, money market yields moved even lower. The Investor Shares
of Vanguard Prime Money Market Fund, our oldest and largest money market fund,
returned 1.1%--their lowest fiscal-year return since the fund's June 1975
inception.
The Institutional Shares of Vanguard Prime Money Market Fund returned 1.3%, our
money market funds' best result. Institutional investors' significant account
balances create economies of scale that reduce fund operating costs, enhancing
returns. (The Institutional Shares, which require a minimum investment of $10
million, carried an expense ratio of 0.10% in fiscal 2003; the Investor Shares,
with a minimum investment requirement of just $3,000, operated at an expense
ratio of 0.32%.)
Vanguard Treasury Money Market Fund's 1.0% return reflected its exclusive focus
on T-bills, which are generally the lowest yielding,
3
but highest quality, money market securities. Vanguard Federal Money Market
Fund, which seeks to enhance the returns of an all-Treasury portfolio by
investing in short-term securities issued by federal agencies, returned 1.1%.
IN THE LONG RUN, COSTS ARE KEY
Although skilled portfolio management is critical to obtaining the largest
possible share of the returns available in the money market, the rewards of good
management can be realized only if operating expenses are low, too. The Vanguard
Money Market Funds boast some of the lowest operating costs in the industry,
which is why each fund outperformed its respective peer group average in 2003.
For example, the 1.1% return of the Investor Shares of the Prime Money Market
Fund was almost twice the 0.6% return of the average competitor. Not
coincidentally, our fund boasted an expense advantage over the average
competitor of 0.6 percentage points.
The role of costs in money market fund returns becomes especially clear over
longer time periods. The table below shows the average annual returns of the
Vanguard Money Market Funds and those of their peer groups for the ten years
ended August 31, 2003. It also displays how equal investments in our funds and
their average competitors would have grown. In each case, the Vanguard fund
produced a higher total return--and created more wealth for shareholders--than
its average peer.
================================================================================
TOTAL RETURNS TEN YEARS ENDED AUGUST 31, 2003
- --------------------------------------------------------------------------------
FINAL VALUE OF A $10,000
AVERAGE ANNUAL TOTAL RETURN INITIAL INVESTMENT*
------------------------------ ------------------------
VANGUARD AVERAGE VANGUARD AVERAGE
MONEY MARKET FUND FUND COMPETING FUND FUND COMPETING FUND
- --------------------------------------------------------------------------------
Prime
Investor Shares 4.5% 3.9% $ 15,478 $ 14,694
Institutional Shares 4.7 4.3 15,762,009 15,303,223
Federal 4.4 3.9 15,415 14,693
Treasury 4.2 3.8 15,061 14,562
Admiral Treasury 4.4 3.8 76,585 72,809
- --------------------------------------------------------------------------------
*For Prime Money Market Institutional Shares, final value of a $10 million
initial investment; for Admiral Treasury Money Market, final value of a $50,000
initial investment.
================================================================================
4
TIMELESS PRINCIPLES AMID PERSISTENT CHANGE
Since early 2000, the financial markets have followed trajectories unfamiliar to
most market participants. Stocks endured one of the longest and deepest declines
in financial history, while interest rates crept down to levels not seen in a
generation or more. In recent months, the cycles seemed to turn: Stocks produced
exceptional returns, and interest rates began to rise.
These events are in fact no more than extreme manifestations of the uncertainty
that always rules the financial markets. We believe that the best approach to
this uncertainty is the faithful use of time-tested principles: balance,
diversification, and low costs. A balance among stocks, bonds, and money market
funds allows you to pursue growth of capital while securing some protection from
the markets' inevitable downturns. Due to their stability and liquidity, money
market funds can play a special role as a repository for money needed for
short-term goals. In any asset mix, low costs are key to ensuring that you reap
the maximum possible share of the financial markets' rewards.
We thank you for entrusting your assets to us.
Sincerely,
/s:/ John J. Brennan
John J. Brennan
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SEPTEMBER 9, 2003
5
REPORT FROM THE ADVISOR
The yields of the Vanguard Money Market Funds declined during the past year, as
the Federal Reserve Board continued to trim its target for short-term interest
rates. Lower yields translated into modest returns for our four portfolios,
ranging from 1.0% for Vanguard Treasury Money Market Fund to 1.3% for the
Institutional Shares of Vanguard Prime Money Market Fund. Each fund outperformed
its average peer.
THE INVESTMENT ENVIRONMENT
During the first half of the fiscal year, a weak stock market and geopolitical
uncertainties restrained economic growth. But in March, once the war in Iraq was
under way, business and consumer activity improved. In the second calendar
quarter, real (inflation-adjusted) gross domestic product (GDP) grew at an
annualized rate of 3.3%, well above market expectations. Signs of rising demand
from U.S. businesses included a surge in imported goods (up 8.8%) and a decline
in business inventories. Stronger demand bodes well for continued economic
growth in the second half of the calendar year.
================================================================================
INVESTMENT PHILOSOPHY
THE FUNDS REFLECT A BELIEF THAT THE HIGHEST LEVEL OF CURRENT INCOME CONSISTENT
WITH CAPITAL PRESERVATION AND LIQUIDITY CAN BE PROVIDED BY HOLDING HIGH-QUALITY
MONEY MARKET INSTRUMENTS ISSUED BY FINANCIAL INSTITUTIONAL, NONFINANCIAL
CORPORATIONS, THE U.S. GOVERNMENT, AND FEDERAL AGENCIES.
================================================================================
The economy has benefited from stimulative fiscal and monetary policies. For
example, the tax reductions recently signed into law were front-loaded in ways
that should provide a significant near-term boost to GDP. The extra pocket money
should lead to an increase in consumer spending, which has propped up an
otherwise anemic economy the past few years. Also driving gains has been the
availability of inexpensive credit, especially in the mortgage and home equity
markets.
The Federal Reserve Board has tried to accelerate the economic expansion as
well. In June the Fed lowered the target federal funds rate again, the 13th time
since January 2001, bringing it to 1.00%--the lowest level in 45 years. This
most recent cut brought the reduction over the
6
Vanguard Money Market Funds' fiscal year to 75 basis points (0.75 percentage
point). The Fed's actions, while aimed at helping the economy, have also
highlighted the risks implied by unusually low interest rates, namely the
possibility of deflation--a general decline in prices.
At the end of our fiscal year, one of the most visible economic concerns was
weakness in the labor market. While the unemployment rate was 6.1% in August,
down from its June peak of 6.4%, the labor market remained weak. Over time,
rising unemployment could create a drag on the economy, although it isn't
unusual to see such a trend in the early stages of a recovery, as businesses
struggle to maintain their productive capacity in an uncertain environment.
OUR INVESTMENT APPROACH
During the year, we extended the duration of the money market portfolios,
anticipating that short-term rates would remain low for an extended period. This
positioning allowed us to capture the higher interest rates that were available
farther out on the yield curve, enhancing the funds' performance.
In the Federal Money Market Fund, we took advantage of periods when the federal
funds rate was higher than the Fed's target rate through our management of
overnight repurchase agreements. This strategy allowed us to capture the higher
rates of return that are periodically available on short-term funding
obligations.
In both the Federal and Prime Money Market Funds, we increased our exposure to
Treasury bills, and reduced our exposure to agency securities, when the yield
differential between these two groups narrowed to a point at which the
credit-risk-free T-bills became a more attractive option. Toward the end of our
fiscal year, revelations concerning the accounting practices at the Federal Home
Loan Mortgage Corporation (FHLMC), and the subsequent departure of a number of
senior FHLMC executives, led to a rise in the relative yields of all agency
securities. In keeping with our conservative investment philosophy, we took
steps to reduce both the Federal and Prime Money Market Funds' exposure to FHLMC
securities and increase our weighting in Treasury securities. This decision
caused us to give up a modest amount of yield, but we believe that the
precautionary steps were warranted.
7
After allowing the maturity of the Prime Money Market Fund to increase earlier
this year, we've begun to let it drift lower in anticipation that the past
year's efforts at fiscal and monetary stimulus may be sufficient to revive the
economy. Absent an extraordinary advance in near-term economic activity,
however, we expect short-term money market rates to remain at low levels for the
rest of the year.
Whether rates rise or fall further, we're confident in our ability to provide
strong relative returns, in large part because of our low operating costs. Low
costs put us in the enviable position of being able to provide portfolios with
higher-than-average credit quality and higher-than-average net yield.
Robert F. Auwaerter, PRINCIPAL
John Hollyer, PRINCIPAL
David R. Glocke, PRINCIPAL
VANGUARD FIXED INCOME GROUP
SEPTEMBER 16, 2003
================================================================================
IAN MACKINNON RETIRES
Vanguard Managing Director Ian A. MacKinnon, who served this company and its
shareholders for more than two decades as head of our Fixed Income Group,
retired on June 30. It's impossible to adequately summarize Ian's many
accomplishments, but I must express my deep gratitude to him for establishing
our fixed income practices and philosophy, and for serving our shareholders with
great skill, integrity, and commitment since he formed our Fixed Income Group in
1981. He leaves behind an outstanding performance record in our money market and
bond funds, a tradition of excellence, and a terrific team of investment
professionals. We wish him the very best.
Robert F. Auwaerter, who also has more than 20 years' experience managing
Vanguard's fixed income funds, now oversees all of the group's portfolio
management activities.
George U. Sauter, managing director of our Quantitative Equity Group, has
assumed overall responsibility for the Fixed Income Group in the newly created
position of chief investment officer. --John J. Brennan
================================================================================
8
================================================================================
FUND PROFILES AS OF 8/31/2003
These Profiles provide a snapshot of each fund's characteristics. Key terms are
defined on page 10.
================================================================================
PRIME MONEY MARKET FUND
- ----------------------------------------------------
FINANCIAL ATTRIBUTES
Yield
Investor Shares 0.8%
Institutional Shares 1.0%
Average Maturity 63 days
Average Quality Aaa
Expense Ratio
Investor Shares 0.32%
Institutional Shares 0.10%
- ----------------------------------------------------
- ----------------------------------------------------
DISTRIBUTION BY CREDIT QUALITY (% of portfolio)
Treasury/Agency 51%
Aaa 13
Aa 34
A 2
- ----------------------------------------------------
Total 100%
- ----------------------------------------------------
- ----------------------------------------------------
SECTOR DIVERSIFICATION (% of portfolio)
Finance
Certificates of Deposit 18%
Commercial Paper 28
Treasury/Agency 51
Other 3
- ----------------------------------------------------
Total 100%
- ----------------------------------------------------
FEDERAL MONEY MARKET FUND
- ----------------------------------------------------
FINANCIAL ATTRIBUTES
Yield 0.8%
Average Maturity 64 days
Average Quality Agency
Expense Ratio 0.32%
- ----------------------------------------------------
- ----------------------------------------------------
DISTRIBUTION BY CREDIT QUALITY (% of portfolio)
Treasury/Agency 100%
- ----------------------------------------------------
Visit our website at Vanguard.com
for regularly updated fund information.
9
FUND PROFILES (CONTINUED)
TREASURY MONEY MARKET FUND
- ----------------------------------------------------
FINANCIAL ATTRIBUTES
Yield 0.7%
Average Maturity 66 days
Average Quality Treasury
Expense Ratio 0.32%
- ----------------------------------------------------
- ----------------------------------------------------
DISTRIBUTION BY CREDIT QUALITY (% of portfolio)
Treasury 100%
- ----------------------------------------------------
ADMIRAL TREASURY
MONEY MARKET FUND
- ----------------------------------------------------
FINANCIAL ATTRIBUTES
Yield 0.9%
Average Maturity 66 days
Average Quality Treasury
Expense Ratio 0.14%
- ----------------------------------------------------
- ----------------------------------------------------
DISTRIBUTION BY CREDIT QUALITY (% of portfolio)
Treasury 100%
- ----------------------------------------------------
================================================================================
GLOSSARY OF INVESTMENT TERMS
================================================================================
AVERAGE MATURITY. The average length of time until securities held by a fund
reach maturity and are repaid.
- --------------------------------------------------------------------------------
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's holdings by credit-rating agencies. The agencies
make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy issuers. U.S. Treasury securities are considered to have the
highest credit quality.
- --------------------------------------------------------------------------------
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
- --------------------------------------------------------------------------------
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past seven days and is annualized, or projected forward for the coming year.
- --------------------------------------------------------------------------------
10
================================================================================
PERFORMANCE SUMMARIES AS OF 8/31/2003
All of the returns in this report represent past performance, which cannot be
used to predict future returns that may be achieved by the funds. An investment
in a money market fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the funds seek to
preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the funds. The returns shown do not reflect taxes that a
shareholder would pay on fund distributions or on the redemption of fund shares.
The annualized yields shown reflect the current earnings of the funds more
closely than do the average annual returns shown.
================================================================================
PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
Cumulative Performance August 31, 1993-August 31, 2003
PRIME MONEY MKT AVERAGE MONEY CITIGROUP 3-MONTH
FUND INV MARKET FUND T-BILL INDEX
--------------- ------------- -----------------
08/1993 10,000 10,000 10,000
11/1993 10,074 10,064 10,076
02/1994 10,148 10,131 10,153
05/1994 10,235 10,208 10,246
08/1994 10,341 10,300 10,356
11/1994 10,463 10,412 10,480
02/1995 10,609 10,546 10,624
05/1995 10,767 10,692 10,779
08/1995 10,922 10,828 10,933
11/1995 11,073 10,969 11,082
02/1996 11,221 11,106 11,228
05/1996 11,364 11,237 11,371
08/1996 11,512 11,363 11,518
11/1996 11,661 11,499 11,667
02/1997 11,810 11,635 11,813
05/1997 11,967 11,775 11,969
08/1997 12,129 11,913 12,123
11/1997 12,292 12,060 12,279
02/1998 12,456 12,208 12,435
05/1998 12,624 12,360 12,596
08/1998 12,793 12,501 12,756
11/1998 12,958 12,650 12,907
02/1999 13,114 12,790 13,047
05/1999 13,269 12,926 13,196
08/1999 13,428 13,054 13,349
11/1999 13,602 13,210 13,511
02/2000 13,791 13,382 13,686
05/2000 13,995 13,563 13,882
08/2000 14,221 13,749 14,084
11/2000 14,447 13,954 14,301
02/2001 14,665 14,147 14,513
05/2001 14,849 14,303 14,686
08/2001 14,993 14,403 14,825
11/2001 15,101 14,487 14,938
02/2002 15,175 14,539 15,008
05/2002 15,244 14,583 15,073
08/2002 15,307 14,606 15,139
11/2002 15,363 14,644 15,201
02/2003 15,408 14,671 15,249
05/2003 15,446 14,695 15,293
08/2003 15,478 14,694 15,335
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2003
---------------------------------- FINAL VALUE OF
ONE FIVE TEN A $10,000
YEAR YEARS YEARS INVESTMENT
- --------------------------------------------------------------------------------
Prime Money Market Fund
Investor Shares 1.12% 3.88% 4.46% $15,478
Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,335
Average Money Market Fund* 0.60 3.29 3.92 14,694
================================================================================
================================================================================
FINAL VALUE OF
ONE FIVE TEN A $10,000,000
YEAR YEARS YEARS INVESTMENT
- --------------------------------------------------------------------------------
Prime Money Market Fund
Institutional Shares** 1.33% 4.08% 4.66% $15,762,009
Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,334,793
Average Institutional Money Market Fund+ 1.00 3.74 4.35 15,303,223
================================================================================
================================================================================
Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND AVERAGE
INVESTOR SHARES FUND*
FISCAL TOTAL TOTAL
YEAR RETURN RETURN
- ---------------------------------------------
1994 3.4% 3.0%
1995 5.6 5.1
1996 5.4 4.9
1997 5.4 4.8
1998 5.5 4.9
1999 5.0% 4.4%
2000 5.9 5.3
2001 5.4 4.8
2002 2.1 1.4
2003 1.1 0.6
- ---------------------------------------------
SEC 7-Day Annualized Yield (8/31/2003): 0.76%
================================================================================
*Returns for Average Money Market Fund are derived from data provided by Lipper
Inc.
**Prior to October 28, 1995, total returns are for Vanguard Institutional Money
Market Portfolio.
+Derived from data provided by Lipper Inc.
Note: See Financial Highlights tables on pages 33 and 34 for dividend
information.
11
PERFORMANCE SUMMARIES (CONTINUED)
================================================================================
AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003
This table presents average annual total returns through the latest calendar
quarter--rather than through the end of the fiscal period. Securities and
Exchange Commission rules require that we provide this information.
TEN YEARS
ONE FIVE -------------------------
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
Investor Shares 6/4/1975 1.25% 4.04% 0.00% 4.50% 4.50%
Institutional Shares* 10/3/1989 1.47 4.24 0.00 4.69 4.69
================================================================================
*Prior to October 28, 1995, total returns are for Vanguard Institutional Money
Market Portfolio.
12
FEDERAL MONEY MARKET FUND
================================================================================
Cumulative Performance August 31, 1993-August 31, 2003
FEDERAL MONEY AVERAGE GOV'T. MONEY CITIGROUP 3-MONTH
MKT FUND MARKET FUND T-BILL INDEX
------------ -------------------- -----------------
08/1993 10,000 10,000 10,000
11/1993 10,073 10,063 10,076
02/1994 10,147 10,126 10,153
05/1994 10,232 10,202 10,246
08/1994 10,337 10,294 10,356
11/1994 10,458 10,403 10,480
02/1995 10,601 10,532 10,624
05/1995 10,758 10,675 10,779
08/1995 10,912 10,812 10,933
11/1995 11,061 10,951 11,082
02/1996 11,208 11,082 11,228
05/1996 11,350 11,212 11,371
08/1996 11,496 11,340 11,518
11/1996 11,643 11,475 11,667
02/1997 11,791 11,605 11,813
05/1997 11,946 11,747 11,969
08/1997 12,106 11,887 12,123
11/1997 12,267 12,034 12,279
02/1998 12,429 12,177 12,435
05/1998 12,594 12,335 12,596
08/1998 12,761 12,483 12,756
11/1998 12,923 12,628 12,907
02/1999 13,077 12,759 13,047
05/1999 13,229 12,898 13,196
08/1999 13,387 13,034 13,349
11/1999 13,556 13,184 13,511
02/2000 13,740 13,343 13,686
05/2000 13,941 13,532 13,882
08/2000 14,162 13,726 14,084
11/2000 14,384 13,925 14,301
02/2001 14,598 14,111 14,513
05/2001 14,781 14,274 14,686
08/2001 14,929 14,388 14,825
11/2001 15,041 14,465 14,938
02/2002 15,120 14,510 15,008
05/2002 15,184 14,562 15,073
08/2002 15,245 14,598 15,139
11/2002 15,301 14,630 15,201
02/2003 15,346 14,651 15,249
05/2003 15,384 14,680 15,293
08/2003 15,415 14,693 15,335
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2003
----------------------------- FINAL VALUE OF
ONE FIVE TEN A $10,000
YEAR YEARS YEARS INVESTMENT
- --------------------------------------------------------------------------------
Federal Money Market Fund 1.11% 3.85% 4.42% $15,415
Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,335
Average Government Money Market Fund* 0.65 3.31 3.92 14,693
- --------------------------------------------------------------------------------
================================================================================
Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003
FEDERAL MONEY MARKET FUND AVERAGE FUND*
FISCAL TOTAL TOTAL
YEAR RETURN RETURN
- ----------------------------------------------------
1994 3.4% 2.9%
1995 5.6 5.0
1996 5.4 4.9
1997 5.3 4.8
1998 5.4 5.0
1999 4.9% 4.4%
2000 5.8 5.3
2001 5.4 4.8
2002 2.1 1.5
2003 1.1 0.7
- ----------------------------------------------------
SEC 7-Day Annualized Yield (8/31/2003): 0.75%
================================================================================
AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003
This table presents average annual total returns through the latest calendar
quarter--rather than through the end of the fiscal period. Securities and
Exchange Commission rules require that we provide this information.
TEN YEARS
ONE FIVE -------------------------
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
Federal Money Market Fund 7/13/1981 1.25% 4.01% 0.00% 4.46% 4.46%
================================================================================
*Average Government Money Market Fund; derived from data provided by Lipper Inc.
Note: See Financial Highlights table on page 35 for dividend information.
13
PERFORMANCE SUMMARIES (continued)
TREASURY MONEY MARKET FUND
================================================================================
Cumulative Performance August 31, 1993-August 31, 2003
TREASURY MONEY IMONEYNET MFR AVERAGE CITIGROUP 3-MONTH
MKT FUND TREASURY MM T-BILL INDEX
-------------- --------------------- -----------------
08/1993 10,000 10,000 10,000
11/1993 10,070 10,064 10,076
02/1994 10,141 10,129 10,153
05/1994 10,222 10,202 10,246
08/1994 10,321 10,294 10,356
11/1994 10,435 10,400 10,480
02/1995 10,570 10,526 10,624
05/1995 10,718 10,666 10,779
08/1995 10,864 10,804 10,933
11/1995 11,006 10,938 11,082
02/1996 11,147 11,070 11,228
05/1996 11,285 11,195 11,371
08/1996 11,426 11,324 11,518
11/1996 11,569 11,455 11,667
02/1997 11,709 11,585 11,813
05/1997 11,857 11,723 11,969
08/1997 12,009 11,865 12,123
11/1997 12,159 12,004 12,279
02/1998 12,312 12,145 12,435
05/1998 12,469 12,290 12,596
08/1998 12,626 12,433 12,756
11/1998 12,775 12,569 12,907
02/1999 12,914 12,693 13,047
05/1999 13,054 12,820 13,196
08/1999 13,199 12,951 13,349
11/1999 13,351 13,091 13,511
02/2000 13,518 13,243 13,686
05/2000 13,704 13,413 13,882
08/2000 13,905 13,596 14,084
11/2000 14,113 13,788 14,301
02/2001 14,314 13,972 14,513
05/2001 14,484 14,123 14,686
08/2001 14,619 14,239 14,825
11/2001 14,725 14,325 14,938
02/2002 14,792 14,377 15,008
05/2002 14,851 14,421 15,073
08/2002 14,907 14,465 15,139
11/2002 14,958 14,502 15,201
02/2003 14,998 14,528 15,249
05/2003 15,032 14,547 15,293
08/2003 15,061 14,562 15,335
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2003
----------------------------- FINAL VALUE OF
ONE FIVE TEN A $10,000
YEAR YEARS YEARS INVESTMENT
- --------------------------------------------------------------------------------
Treasury Money Market Fund* 1.03% 3.59% 4.18% $15,061
Citigroup 3-Month Treasury Index 1.29 3.75 4.37 15,335
iMoneyNet Money Fund Report's
Average 100% Treasury Fund 0.67 3.21 3.83 14,562
- --------------------------------------------------------------------------------
================================================================================
Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003
TREASURY MONEY MARKET FUND* AVERAGE FUND**
FISCAL TOTAL TOTAL
YEAR RETURN RETURN
- ----------------------------------------------------
1994 3.2% 2.9%
1995 5.3 5.0
1996 5.2 4.8
1997 5.1 4.8
1998 5.1 4.8
1999 4.5% 4.2%
2000 5.4 5.0
2001 5.1 4.7
2002 2.0 1.6
2003 1.0 0.7
- ----------------------------------------------------
SEC 7-Day Annualized Yield (8/31/2003): 0.70%
================================================================================
AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003
This table presents average annual total returns through the latest calendar
quarter--rather than through the end of the fiscal period. Securities and
Exchange Commission rules require that we provide this information.
TEN YEARS
ONE FIVE ----------------------
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
Treasury Money Market Fund* 3/9/1983 1.16% 3.74% 0.00% 4.22% 4.22%
*Prior to December 2, 1996, known as the U.S. Treasury Portfolio.
**iMoneyNet Money Fund Report's Average 100% Treasury Fund.
Note: See Financial Highlights table on page 36 for dividend information.
14
ADMIRAL TREASURY MONEY MARKET FUND
================================================================================
Cumulative Performance August 31, 1993-August 31, 2003
ADMIRAL TRSY IMONEYNET MFR AVERAGE CITIGROUP 3-MONTH
MONEY MKT TREASURY MM T-BILL INDEX
------------- --------------------- ------------------
08/1993 50,000 50,000 50,000
11/1993 50,370 50,321 50,381
02/1994 50,744 50,643 50,765
05/1994 51,172 51,009 51,228
08/1994 51,691 51,469 51,778
11/1994 52,284 52,001 52,402
02/1995 52,977 52,628 53,118
05/1995 53,742 53,331 53,897
08/1995 54,498 54,022 54,666
11/1995 55,233 54,689 55,408
02/1996 55,963 55,348 56,142
05/1996 56,677 55,976 56,853
08/1996 57,409 56,622 57,589
11/1996 58,149 57,276 58,335
02/1997 58,880 57,925 59,067
05/1997 59,650 58,617 59,845
08/1997 60,437 59,323 60,614
11/1997 61,219 60,020 61,393
02/1998 62,015 60,725 62,176
05/1998 62,833 61,451 62,982
08/1998 63,650 62,166 63,779
11/1998 64,430 62,846 64,534
02/1999 65,156 63,464 65,234
05/1999 65,897 64,101 65,978
08/1999 66,655 64,757 66,744
11/1999 67,454 65,453 67,554
02/2000 68,328 66,215 68,431
05/2000 69,299 67,066 69,409
08/2000 70,348 67,982 70,422
11/2000 71,430 68,938 71,506
02/2001 72,479 69,859 72,564
05/2001 73,366 70,616 73,428
08/2001 74,084 71,197 74,126
11/2001 74,647 71,625 74,688
02/2002 75,020 71,883 75,038
05/2002 75,353 72,106 75,366
08/2002 75,673 72,323 75,697
11/2002 75,964 72,511 76,003
02/2003 76,199 72,642 76,246
05/2003 76,405 72,736 76,467
08/2003 76,585 72,809 76,674
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2003
------------------------------ FINAL VALUE OF
ONE FIVE TEN A $50,000
YEAR YEARS YEARS INVESTMENT
- --------------------------------------------------------------------------------
Admiral Treasury Money Market Fund 1.20% 3.77% 4.36% $76,585
Citigroup 3-Month Treasury Index 1.29 3.75 4.37 76,674
iMoneyNet Money Fund Report's Average
100% Treasury Fund 0.67 3.21 3.83 72,809
- --------------------------------------------------------------------------------
================================================================================
Fiscal-Year Total Returns (%) August 31, 1993-August 31, 2003
ADMIRAL TREASURY AVERAGE
MONEY MARKET FUND FUND*
FISCAL TOTAL TOTAL
YEAR RETURN RETURN
- ----------------------------------------
1994 3.4% 2.9%
1995 5.4 5.0
1996 5.3 4.8
1997 5.3 4.8
1998 5.3 4.8
1999 4.7% 4.2%
2000 5.5 5.0
2001 5.3 4.7
2002 2.1 1.6
2003 1.2 0.7
- ---------------------------------------------
SEC 7-Day Annualized Yield (8/31/2003): 0.86%
================================================================================
AVERAGE ANNUAL TOTAL RETURNS for periods ended June 30, 2003
This table presents average annual total returns through the latest calendar
quarter--rather than through the end of the fiscal period. Securities and
Exchange Commission rules require that we provide this information.
TEN YEARS
ONE FIVE --------------------
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
Admiral Treasury Money Market Fund 12/14/1992 1.33% 3.92% 0.00% 4.39% 4.39%
================================================================================
*iMoneyNet Money Fund Report's Average 100% Treasury Fund.
Note: See Financial Highlights table on page 37 for dividend information.
15
ABOUT YOUR FUND EXPENSES
All mutual funds have operating expenses. These expenses include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of the fund. A fund's
expenses are expressed as a percentage of its net assets. This figure is known
as the expense ratio.
A HYPOTHETICAL EXAMPLE
We believe it is important for you to understand the impact of costs on your
investment. The following example illustrates the costs that you would incur
over a 12-month period if you invested $10,000 in the fund, using the fund's
actual return and operating expenses for the fiscal year ended August 31, 2003.
For comparative purposes, we also list the average expense ratio for the fund's
peer group, which is derived from data provided by Lipper Inc.
================================================================================
FUND COST OF $10,000 PEER GROUP
MONEY MARKET FUND EXPENSE RATIO INVESTMENT IN FUND EXPENSE RATIO
- --------------------------------------------------------------------------------
PRIME
Investor Shares 0.32% $32 0.92%
Institutional Shares 0.10 10 0.44
FEDERAL 0.32 32 0.78
TREASURY 0.32 32 0.77
ADMIRAL TREASURY 0.14 14 0.77
================================================================================
The funds do not charge transaction fees; these results apply whether or not you
redeemed your investment at the end of the given period. Your actual costs may
have been higher or lower, depending on the amount of your investment and your
holding period. Peer-group ratios capture data through year-end 2002.
You can find more information about a fund's expense ratio, including annual
expense ratios for the past five years, in the Financial Statements section of
this report. For additional information on operating expenses and other
shareholder costs, please refer to the fund's prospectus. The prospectus
presents hypothetical shareholder costs over various time periods based upon a
$10,000 investment and a return of 5% a year. This standardized example, which
appears in all mutual fund prospectuses, may be useful to you in comparing the
costs of investing in different funds.
16
FINANCIAL STATEMENTS AS OF 8/31/2003
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's holdings on the last day
of the reporting period, including each security's maturity date, coupon rate or
yield to maturity at the time of purchase, and statement-date market value.
Securities are grouped and subtotaled by type of instrument (U.S. government
obligations, commercial paper, certificates of deposit, etc.). Other assets are
added to, and liabilities are subtracted from, the value of Total Investments to
calculate the fund's Net Assets. Finally, Net Assets are divided by the
outstanding shares of the fund to arrive at its share price, or Net Asset Value
(NAV) Per Share. Each fund's objective is to maintain a constant NAV of $1.00
per share.
At the end of the Statement of Net Assets of each fund, you will find a table
displaying the composition of the fund's net assets. Virtually the entire amount
of net assets consists of Paid-in Capital (money invested by shareholders).
Undistributed Net Investment Income is usually zero because the fund distributes
its net income to shareholders as a dividend each day, and Accumulated Realized
Gains (Losses) are very small because the fund seldom realizes any significant
gains or losses on sales of securities.
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (51.4%)
Federal Home Loan Bank 1.207% 9/3/2003 150,000 149,990
Federal Home Loan Bank 1.025% 9/8/2003(1) 465,000 464,999
Federal Home Loan Bank 0.99% 9/15/2003(1) 1,170,000 1,169,973
Federal Home Loan Bank 1.01% 9/17/2003 47,407 47,386
Federal Home Loan Bank 1.177% 9/26/2003 97,990 97,910
Federal Home Loan Bank 1.062% 11/5/2003 237,700 237,245
Federal Home Loan Bank 1.052% 11/12/2003 305,842 305,200
Federal Home Loan Bank 1.052% 11/14/2003 200,000 199,568
Federal National Mortgage Assn. 1.227% 9/3/2003 400,575 400,548
Federal National Mortgage Assn. 1.196% 10/15/2003 255,000 254,679
Federal National Mortgage Assn. 1.167% 10/22/2003 244,255 243,899
Federal National Mortgage Assn. 1.197% 10/29/2003 161,129 160,856
Federal National Mortgage Assn. 1.105% 10/31/2003 300,000 299,450
Federal National Mortgage Assn. 1.176% 11/5/2003 1,601,386 1,598,305
Federal National Mortgage Assn. 1.105% 11/12/2003 532,175 531,014
Federal National Mortgage Assn. 1.116% 11/19/2003 1,435,590 1,432,124
Federal National Mortgage Assn. 1.083% 11/26/2003 400,000 398,968
Federal National Mortgage Assn. 1.096% 12/3/2003 100,000 99,718
U.S. Treasury Bill 1.179% 9/4/2003 1,750,000 1,749,840
U.S. Treasury Bill 1.096% 9/11/2003 499,500 499,348
U.S. Treasury Bill 1.111% 9/18/2003 999,500 998,969
U.S. Treasury Bill 1.154% 9/25/2003 1,000,000 999,235
U.S. Treasury Bill 1.101% 10/2/2003 500,000 499,529
U.S. Treasury Bill 1.136% 10/9/2003 1,000,000 998,818
U.S. Treasury Bill 1.161% 10/16/2003 1,250,000 1,248,174
U.S. Treasury Bill 1.146% 10/30/2003 500,000 499,062
U.S. Treasury Bill 1.134% 11/6/2003 1,000,000 997,976
U.S. Treasury Bill 1.07% 11/13/2003 500,000 498,920
U.S. Treasury Bill 1.075% 11/28/2003 1,210,000 1,206,979
U.S. Treasury Bill 0.979% 12/11/2003 1,196,100 1,192,820
U.S. Treasury Bill 0.939% 1/2/2004 500,000 498,403
===================================================================================================================
17
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bill 0.944% 1/8/2004 1,015,000 1,011,563
U.S. Treasury Bill 0.934% 1/15/2004 2,003,500 1,996,404
U.S. Treasury Bill 0.949% 1/22/2004 800,000 796,997
U.S. Treasury Bill 0.984% 1/29/2004 980,000 975,998
U.S. Treasury Bill 1.035% 2/19/2004 789,450 785,559
U.S. Treasury Bill 1.045% 2/26/2004 1,000,000 994,858
- -------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $26,541,284) 26,541,284
- -------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (28.0%)
- -------------------------------------------------------------------------------------------------------------------
FINANCE--AUTO (6.2%)
BMW US Capital Corp. 1.061% 10/6/2003 175,250 175,069
DaimlerChrysler Rev. Auto Conduit LLC 1.032% 9/17/2003 73,345 73,311
DaimlerChrysler Rev. Auto Conduit LLC 1.061% 9/18/2003 47,271 47,247
DaimlerChrysler Rev. Auto Conduit LLC 1.061% 9/22/2003 20,030 20,018
DaimlerChrysler Rev. Auto Conduit LLC 1.042% 9/24/2003 75,000 74,950
DaimlerChrysler Rev. Auto Conduit LLC 1.032% 10/15/2003 90,000 89,887
DaimlerChrysler Rev. Auto Conduit LLC 1.062% 10/16/2003 13,448 13,430
DaimlerChrysler Rev. Auto Conduit LLC 1.072% 10/16/2003 20,069 20,042
DaimlerChrysler Rev. Auto Conduit LLC 1.072% 11/5/2003 166,358 166,037
FCAR Owner Trust 1.032% 10/2/2003 150,000 149,867
FCAR Owner Trust 1.032% 10/6/2003 300,000 299,698
FCAR Owner Trust 1.051% 10/7/2003 100,000 99,895
FCAR Owner Trust 1.082% 11/12/2003 150,000 149,676
FCAR Owner Trust 1.082% 11/13/2003 100,000 99,781
FCAR Owner Trust 1.082% 11/14/2003 105,000 104,767
FCAR Owner Trust 1.082% 11/17/2003 94,500 94,282
New Center Asset Trust 1.093% 9/8/2003 100,000 99,979
New Center Asset Trust 1.032% 10/6/2003 210,000 209,787
New Center Asset Trust 1.032% 10/8/2003 125,000 124,868
New Center Asset Trust 1.062% 10/27/2003 100,000 99,835
New Center Asset Trust 1.072% 11/17/2003 214,970 214,478
New Center Asset Trust 1.073% 11/19/2003 250,000 249,413
Toyota Motor Credit 1.042% 9/4/2003(2) 16,960 16,958
Toyota Motor Credit 1.032% 9/5/2003(2) 21,000 20,998
Toyota Motor Credit 0.972% 9/8/2003(2) 50,000 49,991
Toyota Motor Credit 0.972% 9/9/2003(2) 25,000 24,995
Toyota Motor Credit 1.002% 9/9/2003(2) 45,000 44,990
Toyota Motor Credit 0.972% 9/10/2003(2) 50,000 49,988
Toyota Motor Credit 1.022% 10/7/2003(2) 44,500 44,455
Toyota Motor Credit 1.022% 10/9/2003(2) 26,059 26,031
Toyota Motor Credit 1.022% 10/15/2003(2) 24,000 23,970
Toyota Motor Credit 1.032% 10/27/2003(2) 58,000 57,907
Toyota Motor Credit 1.032% 10/28/2003(2) 38,150 38,088
Toyota Motor Credit 1.052% 10/30/2003(2) 48,000 47,917
Toyota Motor Credit 1.062% 10/31/2003(2) 50,000 49,912
Toyota Motor Credit 1.062% 11/21/2003(2) 4,120 4,110
-------------
3,176,627
-------------
FINANCE--OTHER (7.5%)
American Express Credit Corp. 1.011% 9/8/2003 100,000 99,980
American Express Credit Corp. 1.031% 9/29/2003 50,000 49,960
American Express Credit Corp. 1.031% 9/30/2003 50,000 49,958
===================================================================================================================
18
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
American Express Credit Corp. 1.041% 10/20/2003 50,000 49,929
Asset Securitization Cooperative Corp. 1.031% 9/2/2003(2) 120,000 119,997
Asset Securitization Cooperative Corp. 1.031% 9/3/2003(2) 70,000 69,996
Asset Securitization Cooperative Corp. 1.031% 9/9/2003(2) 50,000 49,989
Cafco, LLC 1.061% 10/9/2003(2) 112,495 112,369
Cafco, LLC 1.072% 10/28/2003(2) 14,600 14,575
Ciesco LLC 1.042% 10/7/2003(2) 91,000 90,905
Corporate Receivables Corp. LLC 0.992% 9/12/2003(2) 19,000 18,994
Corporate Receivables Corp. LLC 1.041% 9/24/2003(2) 29,000 28,981
Delaware Funding 1.036% 9/17/2003(2) 69,500 69,468
Delaware Funding 1.061% 9/18/2003(2) 44,000 43,978
Delaware Funding 1.061% 9/19/2003(2) 74,795 74,755
General Electric Capital Corp. 1.092% 9/2/2003 15,000 15,000
General Electric Capital Corp. 1.133% 9/8/2003 155,000 154,966
General Electric Capital Corp. 1.138% 9/9/2003 44,000 43,989
General Electric Capital Corp. 1.072% 11/19/2003 215,000 214,495
General Electric Capital Corp. 1.082% 11/21/2003 85,000 84,793
GovCo Inc. 1.031% 9/15/2003(2) 50,000 49,980
GovCo Inc. 1.042% 10/7/2003(2) 73,000 72,924
GovCo Inc. 1.032% 10/10/2003(2) 100,000 99,888
GovCo Inc. 1.032% 10/17/2003(2) 50,000 49,934
GovCo Inc. 1.042% 10/20/2003(2) 31,954 31,908
GovCo Inc. 1.072% 10/27/2003(2) 18,300 18,270
GovCo Inc. 1.062% 11/10/2003(2) 100,000 99,794
GovCo Inc. 1.062% 11/20/2003(2) 81,000 80,809
GovCo Inc. 1.072% 11/21/2003(2) 68,050 67,886
GovCo Inc. 1.082% 11/24/2003(2) 26,500 26,433
Intrepid Funding Master Trust 1.07% 9/15/2003(2) 95,083 95,043
Old Line Funding Corp. 1.031% 9/4/2003(2) 23,036 23,034
Old Line Funding Corp. 1.031% 9/8/2003(2) 12,049 12,047
Old Line Funding Corp. 1.031% 9/9/2003(2) 109,418 109,393
Old Line Funding Corp. 1.031% 9/12/2003(2) 111,911 111,876
Old Line Funding Corp. 1.032% 9/15/2003(2) 233,671 233,577
Old Line Funding Corp. 1.032% 9/16/2003(2) 19,308 19,300
Old Line Funding Corp. 1.051% 9/22/2003(2) 16,000 15,990
Old Line Funding Corp. 1.051% 9/23/2003(2) 34,141 34,119
Old Line Funding Corp. 1.061% 10/8/2003(2) 20,000 19,978
Preferred Receivables Funding Co. 1.071% 9/3/2003(2) 59,920 59,916
Preferred Receivables Funding Co. 1.071% 9/4/2003(2) 27,080 27,078
Preferred Receivables Funding Co. 1.061% 9/17/2003(2) 68,704 68,672
Preferred Receivables Funding Co. 1.061% 9/22/2003(2) 94,000 93,942
Private Export Funding Corp. 1.022% 10/21/2003(2) 28,000 27,960
Triple A One Funding Corp. 1.05% 9/3/2003(2) 61,673 61,669
Triple A One Funding Corp. 1.051% 9/8/2003(2) 7,775 7,773
Triple A One Funding Corp. 1.06% 9/10/2003(2) 20,059 20,054
Triple A One Funding Corp. 1.07% 9/12/2003(2) 29,414 29,404
Triple A One Funding Corp. 1.07% 9/16/2003(2) 90,700 90,660
Triple A One Funding Corp. 1.05% 9/19/2003(2) 40,000 39,979
Variable Funding Capital Corp. 1.06% 9/3/2003(2) 192,920 192,909
Variable Funding Capital Corp. 1.052% 9/4/2003(2) 17,000 16,998
Variable Funding Capital Corp. 1.031% 9/9/2003(2) 40,000 39,991
Yorktown Capital LLC 1.071% 9/17/2003(2) 103,514 103,465
===================================================================================================================
19
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
Yorktown Capital LLC 1.071% 9/18/2003(2) 80,022 79,982
Yorktown Capital LLC 1.061% 9/22/2003(2) 60,073 60,036
Yorktown Capital LLC 1.09% 9/26/2003(2) 6,981 6,976
Yorktown Capital LLC 1.071% 10/10/2003(2) 60,860 60,789
Yorktown Capital LLC 1.062% 10/21/2003(2) 22,950 22,916
Yorktown Capital LLC 1.083% 11/3/2003(2) 43,421 43,338
----------
3,883,767
----------
FOREIGN BANKS (6.4%)
ABN-AMRO North America Finance Inc. 0.875% 9/25/2003 40,000 39,972
ABN-AMRO North America Finance Inc. 1.022% 10/14/2003 150,000 149,817
ABN-AMRO North America Finance Inc. 1.052% 11/6/2003 200,000 199,615
ANZ (Delaware) Inc. 1.073% 9/12/2003 290,700 290,608
ANZ (Delaware) Inc. 1.032% 10/1/2003 50,000 49,957
ANZ (Delaware) Inc. 1.032% 10/9/2003 70,000 69,924
ANZ (Delaware) Inc. 1.052% 11/18/2003 100,000 99,772
CBA (Delaware) Finance Inc. 1.031% 9/8/2003 75,000 74,985
CBA (Delaware) Finance Inc. 1.032% 10/7/2003 60,000 59,938
CBA (Delaware) Finance Inc. 1.022% 10/10/2003 100,000 99,889
CBA (Delaware) Finance Inc. 1.042% 10/29/2003 100,000 99,832
Danske Corp. 1.133% 9/8/2003 100,000 99,978
Danske Corp. 1.031% 9/15/2003 85,000 84,966
Danske Corp. 1.032% 10/2/2003 75,000 74,933
Danske Corp. 1.022% 10/14/2003 175,000 174,787
Fortis Funding LLC 0.982% 9/12/2003(2) 50,000 49,985
Fortis Funding LLC 1.031% 9/15/2003(2) 108,700 108,656
Fortis Funding LLC 1.031% 9/16/2003(2) 91,300 91,261
Fortis Funding LLC 1.032% 9/26/2003(2) 49,400 49,365
HBOS Treasury Services PLC 1.032% 10/14/2003 2,100 2,097
HBOS Treasury Services PLC 1.032% 10/22/2003 25,000 24,963
HBOS Treasury Services PLC 1.052% 10/24/2003 10,000 9,985
Rabobank Nederlanden 1.072% 9/8/2003 175,000 174,964
Royal Bank of Canada 0.982% 9/22/2003 220,400 220,272
Societe Generale N.A. Inc. 1.022% 9/3/2003 35,000 34,998
Societe Generale N.A. Inc. 1.032% 9/10/2003 104,544 104,517
Societe Generale N.A. Inc. 0.927% 9/24/2003 110,000 109,935
UBS Finance (Delaware), Inc. 1.002% 9/10/2003 174,700 174,656
Westpac Capital Corp. 1.032% 10/3/2003 100,000 99,908
Westpac Trust Securities New Zealand Ltd. 1.203% 9/3/2003 75,000 74,995
Westpac Trust Securities New Zealand Ltd. 1.042% 9/25/2003 47,950 47,917
Westpac Trust Securities New Zealand Ltd. 1.032% 9/26/2003 150,000 149,893
Westpac Trust Securities New Zealand Ltd. 1.042% 10/27/2003 76,000 75,877
Westpac Trust Securities New Zealand Ltd. 1.062% 11/13/2003 10,700 10,677
Westpac Trust Securities New Zealand Ltd. 1.072% 11/21/2003 40,000 39,904
-----------
3,323,798
-----------
FOREIGN FINANCE--OTHER (2.1%)
CDC Commercial Paper Corp. 1.022% 10/14/2003(2) 100,000 99,878
CDC Commercial Paper Corp. 1.042% 10/16/2003(2) 75,000 74,902
CDC Commercial Paper Corp. 1.022% 10/17/2003(2) 149,400 149,205
CDC Commercial Paper Corp. 1.052% 11/4/2003(2) 50,000 49,907
CDC Commercial Paper Corp. 1.052% 11/10/2003(2) 17,000 16,965
CDC Commercial Paper Corp. 1.052% 11/12/2003(2) 66,271 66,132
===================================================================================================================
20
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
CDC Commercial Paper Corp. 1.062% 11/17/2003(2) 50,000 49,887
Canadian Wheat Board 1.002% 9/23/2003 35,000 34,979
KFW International Finance Inc. 1.133% 9/4/2003(2) 27,800 27,798
KFW International Finance Inc. 1.072% 9/5/2003(2) 16,574 16,572
KFW International Finance Inc. 1.072% 9/10/2003(2) 50,000 49,987
KFW International Finance Inc. 0.892% 9/26/2003(2) 75,000 74,949
KFW International Finance Inc. 1.042% 11/4/2003(2) 50,000 49,908
KFW International Finance Inc. 1.042% 11/5/2003(2) 109,310 109,105
KFW International Finance Inc. 1.042% 11/6/2003(2) 130,000 129,752
KFW International Finance Inc. 1.052% 11/14/2003(2) 50,000 49,892
Oesterreichische Kontrollbank 1.03% 9/15/2003 18,300 18,293
----------
1,068,111
----------
FOREIGN INDUSTRIAL (4.6%)
GlaxoSmithKline Finance PLC 1.203% 9/4/2003(2) 249,400 249,375
GlaxoSmithKline Finance PLC 0.982% 9/10/2003(2) 27,000 26,993
GlaxoSmithKline Finance PLC 1.021% 9/18/2003(2) 44,000 43,979
Nestle Capital Corp. 1.04% 9/19/2003(2) 93,100 93,052
Nestle Capital Corp. 1.022% 10/10/2003(2) 57,000 56,937
Nestle Capital Corp. 1.022% 10/14/2003(2) 125,000 124,848
Nestle Capital Corp. 1.052% 10/29/2003(2) 78,650 78,517
Nestle Capital Corp. 1.042% 11/7/2003(2) 72,170 72,030
Nestle Capital Corp. 1.052% 11/25/2003(2) 89,000 88,779
Network Rail CP Finance PLC 1.052% 10/14/2003(2) 135,000 134,831
Network Rail CP Finance PLC 1.032% 10/15/2003(2) 100,000 99,874
Network Rail CP Finance PLC 1.042% 10/21/2003(2) 99,480 99,336
Network Rail CP Finance PLC 1.052% 10/30/2003(2) 75,000 74,871
Network Rail CP Finance PLC 1.052% 11/6/2003(2) 90,400 90,226
Shell Finance U.K. PLC 1.022% 10/8/2003(2) 71,500 71,425
Shell Finance U.K. PLC 1.052% 10/9/2003(2) 50,000 49,945
Shell Finance U.K. PLC 1.012% 10/15/2003(2) 50,000 49,938
Shell Finance U.K. PLC 1.012% 10/17/2003(2) 50,000 49,935
Shell Finance U.K. PLC 1.042% 10/28/2003(2) 78,000 77,872
Shell Finance U.K. PLC 1.052% 11/17/2003(2) 114,240 113,981
Shell Finance U.K. PLC 1.062% 12/1/2003(2) 100,000 99,732
Total Capital 1.021% 9/23/2003(2) 45,475 45,446
Total Capital 1.012% 9/30/2003(2) 300,000 299,756
Total Capital 1.051% 10/6/2003(2) 50,000 49,949
Total Capital 1.022% 10/7/2003(2) 36,400 36,363
Total Capital 1.042% 11/10/2003(2) 78,125 77,967
-----------
2,355,957
-----------
INDUSTRIAL (1.0%)
Abbott Laboratories 1.00% 9/2/2003(2) 122,540 122,537
Chevron U.K. Investment PLC 1.133% 9/8/2003(2) 34,400 34,392
Chevron U.K. Investment PLC 1.012% 9/15/2003(2) 30,000 29,988
Chevron U.K. Investment PLC 1.031% 9/22/2003(2) 20,000 19,988
Chevron U.K. Investment PLC 1.012% 9/23/2003(2) 20,000 19,988
Merck 1.031% 10/9/2003(2) 31,275 31,241
Pfizer Inc. 1.051% 9/17/2003(2) 71,475 71,442
Pfizer Inc. 1.041% 10/6/2003(2) 190,200 190,008
---------
519,584
---------
===================================================================================================================
21
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
PRIME MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
INSURANCE (0.2%)
AIG Funding Inc. 1.025% 9/19/2003 66,850 66,816
AIG Funding Inc. 1.036% 10/8/2003 50,000 49,947
---------
116,763
---------
- -------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $14,444,607) 14,444,607
- -------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (13.0%)
- -------------------------------------------------------------------------------------------------------------------
Certificates of Deposit--U.S. Banks (3.6%)
Citibank, N.A. 0.98% 9/18/2003 99,650 99,650
Citibank, N.A. 1.03% 9/29/2003 35,000 35,000
Fifth Third Bank 1.02% 10/15/2003 490,400 490,400
State Street Bank & Trust 1.02% 10/15/2003 97,700 97,700
State Street Bank & Trust 1.02% 10/20/2003 100,000 100,000
State Street Bank & Trust 1.04% 10/30/2003 60,000 60,000
Sun Trust Bank, Atlanta 1.06% 11/25/2003 83,760 83,762
Sun Trust Bank, Atlanta 1.06% 11/26/2003 375,000 375,009
Wells Fargo Bank, NA 1.05% 11/12/2003 85,000 85,000
Wells Fargo Bank, NA 1.05% 11/12/2003 225,000 225,000
Wells Fargo Bank, NA 1.05% 11/18/2003 200,000 200,000
-----------
1,851,521
-----------
YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES (9.4%)
BNP Paribas (New York Branch) 1.05% 11/12/2003 225,000 225,000
BNP Paribas (New York Branch) 1.055% 11/19/2003 295,000 295,000
Bank of Montreal (Chicago Branch) 1.05% 10/30/2003 250,000 250,000
Bank of Nova Scotia (Portland Branch) 1.03% 9/15/2003 100,000 100,000
Bank of Nova Scotia (Portland Branch) 1.06% 10/27/2003 150,000 150,000
Bayerische Landesbank Giroentrale (New York Branch) 1.03% 9/2/2003 250,000 250,000
Credit Agricole Indosuez (New York Branch) 0.93% 9/24/2003 280,000 280,000
Credit Agricole Indosuez (New York Branch) 0.96% 9/17/2003 20,000 20,000
Credit Agricole Indosuez (New York Branch) 1.03% 10/21/2003 43,000 43,000
Dexia Bank (New York Branch) 1.03% 9/15/2003 35,000 35,000
Dexia Bank (New York Branch) 0.93% 9/23/2003 300,000 300,000
Dexia Bank (New York Branch) 1.04% 9/29/2003 45,000 45,000
Dexia Bank (New York Branch) 1.07% 11/28/2003 136,000 136,000
Fortis Bank NV-SA (New York Branch) 1.03% 10/14/2003 60,000 60,000
Fortis Bank NV-SA (New York Branch) 1.02% 10/15/2003 100,000 100,000
Fortis Bank NV-SA (New York Branch) 1.06% 11/4/2003 50,000 50,000
HSH Nordbank AG (New York Branch) 1.055% 11/10/2003 199,440 199,442
HSH Nordbank AG (New York Branch) 1.065% 11/12/2003 200,000 200,004
HSH Nordbank AG (New York Branch) 1.075% 11/17/2003 71,000 71,001
HSH Nordbank AG (New York Branch) 1.09% 12/1/2003 44,000 44,001
Landesbank Baden-Wuerttemberg (New York Branch) 1.03% 10/22/2003 291,000 291,000
Landesbank Baden-Wuerttemberg (New York Branch) 1.03% 10/27/2003 200,000 200,000
Landesbank Hessen-Thueringen 1.18% 9/5/2003 290,100 290,103
Lloyds Bank (New York Branch) 1.00% 9/16/2003 250,000 250,003
Lloyds Bank (New York Branch) 0.965% 9/16/2003 50,000 50,001
Lloyds Bank (New York Branch) 1.03% 10/21/2003 50,000 50,000
Lloyds Bank (New York Branch) 1.02% 10/22/2003 160,000 160,000
Rabobank Nederlanden (New York Branch) 1.03% 9/30/2003 200,000 200,002
Rabobank Nederlanden (New York Branch) 1.04% 10/30/2003 135,000 135,000
===================================================================================================================
22
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
Royal Bank of Scotland PLC (New York Branch) 1.03% 9/3/2003 $ 105,000 105,000
Royal Bank of Scotland PLC (New York Branch) 1.02% 9/26/2003 255,000 255,000
---------
4,839,557
---------
- -------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $6,691,078) 6,691,078
- -------------------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (5.0%)
- -------------------------------------------------------------------------------------------------------------------
ABM-AMRO Bank NV 0.97% 9/17/2003 60,000 60,000
Barclays Bank PLC 1.04% 10/27/2003 150,000 150,000
Barclays Bank PLC 1.075% 11/4/2003 210,000 210,000
Barclays Bank PLC 1.06% 11/17/2003 150,000 150,000
Commonwealth Bank of Australia 1.04% 10/3/2003 175,000 175,002
Credit Agricole Indosuez 1.19% 9/17/2003 167,000 167,013
Danske Bank 1.05% 10/1/2003 73,000 73,001
HBOS Treasury Services PLC 1.05% 10/7/2003 212,000 212,000
HBOS Treasury Services PLC 1.08% 11/20/2003 95,000 95,000
HBOS Treasury Services PLC 1.09% 12/1/2003 170,000 170,000
ING Bank 0.925% 9/25/2003 200,000 200,000
ING Bank 1.05% 10/10/2003 140,000 140,000
ING Bank 1.05% 10/14/2003 70,000 70,000
ING Bank 1.05% 10/30/2003 100,000 100,000
Landesbank Baden-Wuerttemberg 1.07% 11/6/2003 19,000 19,000
Landesbank Hessen-Thueringen 1.05% 10/2/2003 200,000 200,002
Royal Bank of Scotland 1.04% 9/3/2003 150,000 150,000
Societe Generale 1.06% 11/3/2003 260,000 260,000
- -------------------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT
(Cost $2,601,018) 2,601,018
- -------------------------------------------------------------------------------------------------------------------
OTHER NOTES (0.1%)
- -------------------------------------------------------------------------------------------------------------------
LaSalle National Bank (Bank Notes)
(Cost $60,000) 1.03% 9/10/2003 60,000 60,000
- -------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.4%)
- -------------------------------------------------------------------------------------------------------------------
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
(Cost $211,025) 1.05% 9/2/2003 211,025 211,025
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.9%)
(Cost $50,549,012) 50,549,012
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.1%)
- -------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 1,233,807
Liabilities (145,664)
----------
1,088,143
----------
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $51,637,155
===================================================================================================================
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
(1) Adjustable-rate note.
(2) Security exempt from registration under Section 4(2) of the Securities Act
of 1933. These securities may be sold in transactions exempt from registration
only to dealers in that program or other "accredited investors." At August 31,
2003, the value of these securities was $7,810,654,000, representing 15.1% of
net assets.
23
================================================================================
AMOUNT
PRIME MONEY MARKET FUND (000)
- --------------------------------------------------------------------------------
AT AUGUST 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $51,635,661
Undistributed Net Investment Income --
Accumulated Net Realized Gains 1,494
- --------------------------------------------------------------------------------
NET ASSETS $51,637,155
================================================================================
Investor Shares--Net Assets
Applicable to 47,339,810,383 outstanding $.001
par value shares of beneficial interest (unlimited authorization) $47,341,242
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $1.00
================================================================================
Institutional Shares--Net Assets
Applicable to 4,295,859,380 outstanding $.001
par value shares of beneficial interest (unlimited authorization) $4,295,913
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INSTITUTIONAL SHARES $1.00
================================================================================
24
===================================================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
FEDERAL MONEY MARKET FUND YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (87.4%)
- -------------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank 1.106% 11/17/2003 20,528 20,480
Federal Home Loan Bank 1.197% 9/12/2003 216,350 216,287
Federal Home Loan Bank 1.01% 9/17/2003 201,200 201,110
Federal Home Loan Bank 1.196% 10/8/2003 2,181 2,178
Federal Home Loan Bank 1.115% 10/17/2003 22,693 22,661
Federal Home Loan Bank 1.196% 10/20/2003 2,215 2,212
Federal Home Loan Bank 1.146% 10/24/2003 239,285 238,889
Federal Home Loan Bank 1.105% 10/29/2003 33,201 33,142
Federal Home Loan Bank 1.105% 10/31/2003 16,413 16,383
Federal Home Loan Bank 1.105% 11/7/2003 129,105 128,839
Federal Home Loan Bank 1.06% 11/19/2003 587,000 585,637
Federal Home Loan Bank 1.116% 11/21/2003 8,000 7,980
Federal Home Loan Bank 1.106% 12/8/2003 23,449 23,379
Federal National Mortgage Assn. 1.227% 9/3/2003 42,000 41,997
Federal National Mortgage Assn. 1.192% 9/17/2003 246,103 245,974
Federal National Mortgage Assn. 1.196% 10/15/2003 100,465 100,336
Federal National Mortgage Assn. 0.985% 10/28/2003 300,000 299,844
Federal National Mortgage Assn. 1.197% 10/29/2003 123,454 123,240
Federal National Mortgage Assn. 1.176% 11/5/2003 250,000 249,519
Federal National Mortgage Assn. 1.105% 11/12/2003 39,000 38,916
Federal National Mortgage Assn. 1.156% 11/14/2003 29,500 29,436
Federal National Mortgage Assn. 1.116% 11/19/2003 50,000 49,875
Federal National Mortgage Assn. 1.083% 11/26/2003 740,000 738,091
U.S. Treasury Bill 1.096% 9/11/2003 499,500 499,360
U.S. Treasury Bill 1.136% 10/9/2003 200,000 199,760
U.S. Treasury Bill 1.161% 10/16/2003 100,000 99,853
U.S. Treasury Bill 1.146% 10/30/2003 63,000 62,888
U.S. Treasury Bill 1.075% 11/28/2003 90,000 89,784
U.S. Treasury Bill 0.979% 12/11/2003 250,000 249,313
U.S. Treasury Bill 0.934% 1/15/2004 250,000 249,122
U.S. Treasury Bill 0.949% 1/22/2004 250,000 249,062
U.S. Treasury Bill 1.035% 2/19/2004 85,000 84,584
U.S. Treasury Bill 1.045% 2/26/2004 300,000 298,457
- -------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $5,498,588) 5,498,588
- -------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (14.8%)
- -------------------------------------------------------------------------------------------------------------------
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
(Cost $930,658) 1.05% 9/2/2003 930,658 930,658
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.2%)
(Cost $6,429,246) 6,429,246
- -------------------------------------------------------------------------------------------------------------------
25
================================================================================
MARKET
VALUE*
FEDERAL MONEY MARKET FUND (000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.2%)
- --------------------------------------------------------------------------------
Other Assets--Note B 21,627
Liabilities (161,803)
---------
(140,176)
---------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
================================================================================
Applicable to 6,288,924,944 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $6,289,070
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
================================================================================
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
================================================================================
AT AUGUST 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------
Paid-in Capital $6,288,936 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 134 --
- --------------------------------------------------------------------------------
NET ASSETS $6,289,070 $1.00
================================================================================
26
================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
TREASURY MONEY MARKET FUND YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (99.8%)
- --------------------------------------------------------------------------------
U.S. Treasury Bill 1.179% 9/4/2003 108,683 108,673
U.S. Treasury Bill 1.096% 9/11/2003 203,080 203,023
U.S. Treasury Bill 1.111% 9/18/2003 518,528 518,288
U.S. Treasury Bill 1.154% 9/25/2003 487,913 487,584
U.S. Treasury Bill 1.101% 10/2/2003 343,110 342,786
U.S. Treasury Bill 1.161% 10/16/2003 105,000 104,846
U.S. Treasury Bill 1.146% 10/30/2003 222,836 222,493
U.S. Treasury Bill 1.134% 11/6/2003 710,000 708,719
U.S. Treasury Bill 1.07% 11/13/2003 638,000 636,715
U.S. Treasury Bill 1.075% 11/28/2003 387,000 386,074
U.S. Treasury Bill 0.833% 12/18/2003 319,303 318,508
U.S. Treasury Bill 0.838% 12/26/2003 190,000 189,449
U.S. Treasury Bill 0.944% 1/8/2004 423,841 422,413
U.S. Treasury Bill 1.045% 2/26/2004 300,000 298,457
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $4,948,028) 4,948,028
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- --------------------------------------------------------------------------------
Other Assets--Note B 23,845
Liabilities (12,588)
---------
11,257
---------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
================================================================================
Applicable to 4,958,728,943 outstanding $.001
par value shares of beneficial interest (unlimited authorization) $4,959,285
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
================================================================================
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
================================================================================
AT AUGUST 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------
Paid-in Capital $4,958,748 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 537 --
- --------------------------------------------------------------------------------
NET ASSETS $4,959,285 $1.00
================================================================================
27
================================================================================
FACE MARKET
MATURITY AMOUNT VALUE*
ADMIRAL TREASURY MONEY MARKET FUND YIELD** DATE (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (99.8%)
- --------------------------------------------------------------------------------
U.S. Treasury Bill 1.179% 9/4/2003 634,476 634,421
U.S. Treasury Bill 1.096% 9/11/2003 420,047 419,930
U.S. Treasury Bill 1.111% 9/18/2003 701,023 700,689
U.S. Treasury Bill 1.154% 9/25/2003 992,463 991,773
U.S. Treasury Bill 1.101% 10/2/2003 1,855,967 1,854,416
U.S. Treasury Bill 1.161% 10/16/2003 295,000 294,567
U.S. Treasury Bill 1.146% 10/30/2003 1,016,718 1,015,149
U.S. Treasury Bill 1.134% 11/6/2003 1,660,000 1,657,014
U.S. Treasury Bill 1.07% 11/13/2003 1,540,000 1,536,971
U.S. Treasury Bill 1.075% 11/28/2003 1,103,000 1,100,237
U.S. Treasury Bill 0.833% 12/18/2003 750,000 748,132
U.S. Treasury Bill 0.838% 12/26/2003 569,152 567,665
U.S. Treasury Bill 0.944% 1/8/2004 340,569 339,418
U.S. Treasury Bill 1.035% 2/19/2004 200,000 199,021
U.S. Treasury Bill 1.045% 2/26/2004 1,055,000 1,049,575
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $13,108,978) 13,108,978
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- --------------------------------------------------------------------------------
Other Assets--Note B 51,767
Liabilities (31,442)
----------
20,325
----------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
================================================================================
Applicable to 13,128,877,540 outstanding $.001
par value shares of beneficial interest (unlimited authorization) $13,129,303
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
================================================================================
*See Note A in Notes to Financial Statements.
**Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
================================================================================
AT AUGUST 31, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Amount Per
(000) Share
- --------------------------------------------------------------------------------
Paid-in Capital $13,128,877 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 426 --
- --------------------------------------------------------------------------------
NET ASSETS $13,129,303 $1.00
================================================================================
28
STATEMENT OF OPERATIONS
This Statement shows interest income earned by each fund during the reporting
period, and details the operating expenses charged to each class of its shares.
These expenses directly reduce the amount of investment income available to pay
to shareholders as income dividends. This Statement also shows any Net Gain
(Loss) realized on the sale of investments, and any Unrealized Appreciation
(Depreciation) of investments during the period. For money market funds,
Realized Net Gain (Loss) should always be minimal, and Unrealized Appreciation
(Depreciation) should be zero.
============================================================================================================
ADMIRAL
PRIME FEDERAL TREASURY TREASURY
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2003
- ------------------------------------------------------------------------------------------------------------
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Interest $770,020 $96,251 $67,083 $ 155,541
- ------------------------------------------------------------------------------------------------------------
Total Income 770,020 96,251 67,083 155,541
- ------------------------------------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 7,768 973 717 1,652
Management and Administrative
Investor Shares 138,935 18,964 14,090 12,430
Institutional Shares 2,949 -- -- --
Marketing and Distribution
Investor Shares 9,392 1,278 933 2,113
Institutional Shares 817 -- -- --
Custodian Fees 856 105 84 191
Auditing Fees 11 10 10 10
Shareholders' Reports and Proxies
Investor Shares 1,091 104 81 130
Institutional Shares 54 -- -- --
Trustees' Fees and Expenses 77 10 7 14
- ------------------------------------------------------------------------------------------------------------
Total Expenses 161,950 21,444 15,922 16,540
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 608,070 74,807 51,161 139,001
- ------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
ON INVESTMENT SECURITIES SOLD 1,332 (153) (9) 44
- ------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES -- -- -- --
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $609,402 $74,654 $51,152 $139,045
============================================================================================================
29
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how the fund's total net assets changed during the two most
recent reporting periods. The Operations section summarizes information detailed
in the Statement of Operations. Because the fund distributes its income to
shareholders each day, the amounts of Dividends from Net Investment Income
generally equal the net income earned as shown under the Operations section. The
Capital Share Transactions section shows the amount shareholders invested in the
fund, either by purchasing shares or by reinvesting distributions, and the
amounts redeemed. Dividends and Capital Share Transactions are shown separately
for each class of shares.
=======================================================================================
PRIME MONEY MARKET FUND
-------------------------
YEAR ENDED AUGUST 31,
- ---------------------------------------------------------------------------------------
2003 2002
(000) (000)
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 608,070 $ 1,140,839
Realized Net Gain (Loss) 1,332 (482)
Unrealized Appreciation (Depreciation) -- --
- ---------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 609,402 1,140,357
- ---------------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares (550,161) (1,046,743)
Institutional Shares (57,909) (94,096)
- ---------------------------------------------------------------------------------------
Total Dividends (608,070) (1,140,839)
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INVESTOR SHARES (at $1.00)
Issued 46,693,289 52,357,925
Issued in Lieu of Cash Distributions 533,180 1,011,836
Redeemed (49,670,671) (54,080,737)
- ---------------------------------------------------------------------------------------
Net Increase (Decrease)--Investor Shares (2,444,202) (710,976)
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--INSTITUTIONAL SHARES (at $1.00)
Issued 7,135,394 7,642,777
Issued in Lieu of Cash Distributions 51,505 81,893
Redeemed (6,783,602) (7,681,922)
- ---------------------------------------------------------------------------------------
Net Increase (Decrease)--Instituional Shares 403,297 42,748
- ---------------------------------------------------------------------------------------
Total Increase (Decrease) (2,039,573) (668,710)
- ---------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 53,676,728 54,345,438
- ---------------------------------------------------------------------------------------
End of Period $51,637,155 $53,676,728
=======================================================================================
30
================================================================================
FEDERAL
MONEY MARKET FUND
---------------------
YEAR ENDED AUGUST 31,
- --------------------------------------------------------------------------------
2003 2002
(000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 74,807 $ 147,038
Realized Net Gain (Loss) (153) 343
Unrealized Appreciation (Depreciation) -- --
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 74,654 147,381
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME (74,807) (147,038)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (at $1.00)
Issued 4,382,951 6,898,037
Issued in Lieu of Cash Distributions 72,576 141,459
Redeemed (4,959,946) (6,773,356)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions (504,419) 266,140
- --------------------------------------------------------------------------------
Total Increase (Decrease) (504,572) 266,483
- --------------------------------------------------------------------------------
Net Assets
Beginning of Period 6,793,642 6,527,159
- --------------------------------------------------------------------------------
End of Period $6,289,070 $6,793,642
================================================================================
================================================================================
TREASURY
MONEY MARKET FUND
----------------------
YEAR ENDED AUGUST 31,
- --------------------------------------------------------------------------------
2003 2002
(000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 51,161 $ 93,598
Realized Net Gain (Loss) (9) (92)
Unrealized Appreciation (Depreciation) -- --
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 51,152 93,506
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME (51,161) (93,598)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (at $1.00)
Issued 4,132,876 4,625,147
Issued in Lieu of Cash Distributions 49,561 90,263
Redeemed (4,045,418) (4,345,601)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions 137,019 369,809
- --------------------------------------------------------------------------------
Total Increase (Decrease) 137,010 369,717
- --------------------------------------------------------------------------------
Net Assets
Beginning of Period 4,822,275 4,452,558
- --------------------------------------------------------------------------------
End of Period $4,959,285 $4,822,275
================================================================================
31
STATEMENT OF CHANGES IN NET ASSETS (continued)
================================================================================
ADMIRAL TREASURY
MONEY MARKET FUND
---------------------------
YEAR ENDED AUGUST 31,
- --------------------------------------------------------------------------------
2003 2002
(000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 139,001 $ 199,697
Realized Net Gain (Loss) 44 (221)
Unrealized Appreciation (Depreciation) -- --
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 139,045 199,476
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME (139,001) (199,697)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (at $1.00)
Issued 12,787,090 11,321,970
Issued in Lieu of Cash Distributions 131,227 191,450
Redeemed (10,396,787) (8,756,890)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions 2,521,530 2,756,530
- --------------------------------------------------------------------------------
Total Increase (Decrease) 2,521,574 2,756,309
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 10,607,729 7,851,420
- --------------------------------------------------------------------------------
End of Period $13,129,303 $10,607,729
================================================================================
32
FINANCIAL HIGHLIGHTS
Each fund's objective is to maintain a constant net asset value of $1.00 per
share by distributing all of the fund's net investment income and avoiding
capital gains or losses. The financial highlights table summarizes each fund's
investment results and distributions to shareholders on a per-share basis for
each class of shares. The table also presents the Total Return and shows net
investment income and expenses as percentages of average net assets. These data
will help you assess the variability of net income returns from year to year and
how much it costs to operate the fund.
PRIME MONEY MARKET FUND INVESTOR SHARES
=================================================================================================================================
YEAR ENDED DEC. 1,
AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30,
------------------------ AUG. 31, --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .011 .021 .037 .060 .049 .053
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .011 .021 .037 .060 .049 .053
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.011) (.021) (.037) (.060) (.049) (.053)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.011) (.021) (.037) (.060) (.049) (.053)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.12% 2.09% 3.78% 6.21% 4.97% 5.42%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $47,341 $49,784 $50,495 $45,719 $39,430 $33,732
Ratio of Total Expenses to
Averae Net Assets 0.32% 0.33% 0.33%** 0.33% 0.33% 0.33%
Ratio of Net Investment Income to
Average Net Assets 1.12% 2.07% 4.92%** 6.04% 4.85% 5.28%
=================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective
August 31, 2001.
**Annualized.
33
FINANCIAL HIGHLIGHTS (CONTINUED)
PRIME MONEY MARKET FUND INSTITUTIONAL SHARES
=================================================================================================================================
YEAR ENDED DEC. 1,
AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30,
------------------------ AUG. 31, --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .013 .023 .039 .062 .050 .055
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .013 .023 .039 .062 .050 .055
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.013) (.023) (.039) (.062) (.050) (.055)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.013) (.023) (.039) (.062) (.050) (.055)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.33% 2.31% 3.93% 6.39% 5.15% 5.61%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $4,296 $3,893 $3,850 $2,660 $1,776 $1,143
Ratio of Total Expenses to
Average Net Assets 0.10% 0.11% 0.13%** 0.15% 0.15% 0.15%
Ratio of Net Investment Income to
Average Net Assets 1.32% 2.27% 5.03%** 6.24% 5.04% 5.46%
=================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective
August 31, 2001.
**Annualized.
34
FEDERAL MONEY MARKET FUND
=================================================================================================================================
YEAR ENDED DEC. 1,
AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30,
------------------------ AUG. 31, --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .011 .021 .037 .059 .048 .052
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .011 .021 .037 .059 .048 .052
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.011) (.021) (.037) (.059) (.048) (.052)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.011) (.021) (.037) (.059) (.048) (.052)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================================
TOTAL RETURN 1.11% 2.12% 3.78% 6.11% 4.89% 5.35%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $6,289 $6,794 $6,527 $5,495 $5,243 $4,263
Ratio of Total Expenses to
Average Net Assets 0.32% 0.33% 0.33%** 0.33% 0.33% 0.33%
Ratio of Net Investment Income to
Average Net Assets 1.11% 2.10% 4.92%** 5.94% 4.79% 5.21%
=================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective
August 31, 2001.
**Annualized.
35
FINANCIAL HIGHLIGHTS (CONTINUED)
TREASURY MONEY MARKET FUND
=================================================================================================================================
YEAR ENDED DEC. 1,
AUGUST 31, 2000, TO YEAR ENDED NOVEMBER 30,
------------------------ AUG. 31, --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .010 .020 .035 .056 .044 .050
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .010 .020 .035 .056 .044 .050
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.010) (.020) (.035) (.056) (.044) (.050)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.010) (.020) (.035) (.056) (.044) (.050)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.03% 1.98% 3.58% 5.70% 4.51% 5.06%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $4,959 $4,822 $4,453 $4,107 $4,593 $3,942
Ratio of Total Expenses to
Average Net Assets 0.32% 0.33% 0.33%** 0.33% 0.33% 0.33%
Ratio of Net Investment Income to
Average Net Assets 1.03% 1.95% 4.68%** 5.53% 4.41% 4.94%
=================================================================================================================================
*The fund's fiscal year-end changed from November 30 to August 31, effective
August 31, 2001.
**Annualized.
36
ADMIRAL TREASURY MONEY MARKET FUND
=================================================================================================================================
YEAR ENDED FEB. 1,
AUGUST 31, 2001, TO YEAR ENDED January 31,
------------------------ AUG. 31, --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001* 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .012 .021 .026 .059 .047 .050
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .012 .021 .026 .059 .047 .050
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.012) (.021) (.026) (.059) (.047) (.050)
Distributions from Realized Capital Gains -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.012) (.021) (.026) (.059) (.047) (.050)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================================
TOTAL RETURN 1.20% 2.15% 2.65% 6.07% 4.79% 5.12%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $13,129 $10,608 $7,851 $6,746 $5,648 $5,057
Ratio of Total Expenses to
Average Net Assets 0.14% 0.14% 0.15%** 0.15% 0.15% 0.15%
Ratio of Net Investment Income to
Average Net Assets 1.18% 2.09% 4.49%** 5.90% 4.69% 4.97%
=================================================================================================================================
*The fund's fiscal year-end changed from January 31 to August 31, effective
August 31, 2001.
**Annualized.
NOTES TO FINANCIAL STATEMENTS
Vanguard Money Market Funds comprise the Prime Money Market Fund, Federal Money
Market Fund, Treasury Money Market Fund, and Admiral Treasury Money Market Fund,
each of which is registered under the Investment Company Act of 1940 as an
open-end investment company, or mutual fund. The Prime Money Market Fund invests
in short-term debt instruments of companies primarily operating in specific
industries, particularly financial services; the issuers' abilities to meet
their obligations may be affected by economic developments in such industries.
The Federal Money Market Fund invests in short-term debt instruments issued by
the U.S. government or its agencies and instrumentalities. The Treasury Money
Market Fund and the Admiral Treasury Money Market Fund invest in short-term debt
instruments backed by the full faith and credit of the U.S. government.
The Prime Money Market Fund offers two classes of shares, Investor Shares and
Institutional Shares. Investor Shares are available to any investor who meets
the fund's minimum purchase requirements. Institutional Shares are designed for
investors who meet certain administrative and servicing criteria and invest a
minimum of $10 million. The Federal, Treasury, and Admiral Treasury Money Market
Funds each offer only Investor Shares.
37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A. The following significant accounting policies conform to generally accepted
accounting principles for U.S. mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Securities are valued at amortized cost, which
approximates market value.
2. REPURCHASE AGREEMENTS: The Prime Money Market and Federal Money Market Funds,
along with other members of The Vanguard Group, may transfer uninvested cash
balances to a pooled cash account, which is invested in repurchase agreements
secured by U.S. government securities. These funds may also invest directly in
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the other party to the agreement, retention of the collateral may
be subject to legal proceedings.
3. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for federal income taxes is required in the financial statements.
4. DISTRIBUTIONS: Dividends from net investment income are declared daily and
paid on the first business day of the following month.
5. OTHER: Security transactions are accounted for on the date the securities are
purchased or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Discounts
and premiums are accreted and amortized, respectively, to interest income over
the lives of the respective securities.
Each class of shares has equal rights as to assets and earnings, except that
each class separately bears certain class-specific expenses related to
maintenance of shareholder accounts (included in Management and Administrative
expenses), shareholder reporting, and proxies. Marketing and distribution
expenses are allocated to each class of shares based on a method approved by the
board of trustees. Income, other non-class-specific expenses, and gains and
losses on investments are allocated to each class of shares based on its
relative net assets.
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, shareholder accounting, marketing, and distribution
services. The costs of such services are allocated to each fund under methods
approved by the board of trustees. Each fund has committed to provide up to
0.40% of its assets in capital contributions to Vanguard. At August 31, 2003,
the funds had contributed capital to Vanguard (included in Other Assets) of:
================================================================================
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
MONEY MARKET FUND (000) NET ASSETS CAPITALIZATION
- --------------------------------------------------------------------------------
Prime $8,850 0.02% 8.85%
Federal 1,107 0.02 1.11
Treasury 847 0.02 0.85
Admiral Treasury 2,179 0.02 2.18
================================================================================
The funds' trustees and officers are also directors and officers of Vanguard.
38
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of Vanguard Money Market Funds:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Prime Money Market Fund, Federal Money Market Fund, Treasury Money Market Fund
and Admiral Treasury Money Market Fund (hereafter referred to as the "Funds") at
August 31, 2003, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 7, 2003
39
THE PEOPLE WHO GOVERN YOUR FUND
The trustees of your mutual fund are there to see that the fund is operated and
managed in your best interests since, as a shareholder, you are a part owner of
the fund. Your fund trustees also serve on the board of directors of The
Vanguard Group, Inc., which is owned by the Vanguard funds and provides services
to them on an at-cost basis.
A majority of Vanguard's board members are independent, meaning that they have
no affiliation with Vanguard or the funds they oversee, apart from the sizable
personal investments they have made as private individuals.
Our independent board members bring distinguished backgrounds in business,
academia, and public service to their task of working with Vanguard officers to
establish the policies and oversee the activities of
- ------------------------------------------------------------------------------------------------------------
POSITION(S) HELD WITH
NAME FUND (NUMBER OF
(YEAR OF BIRTH) VANGUARD FUNDS
TRUSTEE/OFFICER OVERSEEN BY
SINCE TRUSTEE/OFFICER) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------
JOHN J. BRENNAN* Chairman of the Chairman of the Board, Chief Executive Officer, and Director/Trustee
(1954) Board, Chief of The Vanguard Group, Inc., and of each of the investment companies
May 1987 Executive Officer, served by The Vanguard Group.
and Trustee
(112)
- ------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
CHARLES D. ELLIS Trustee The Partners of '63 (pro bono ventures in education); Senior Advisor
(1937) (112) to Greenwich Associates (international business strategy consulting);
January 2001 Successor Trustee of Yale University; Overseer of the Stern School of
Business at New York University; Trustee of the Whitehead Institute
for Biomedical Research.
- ------------------------------------------------------------------------------------------------------------
RAJIV L. GUPTA Trustee Chairman and Chief Executive Officer (since October 1999), Vice
(1945) (112) Chairman (JanuarySeptember 1999), and Vice President (prior to
December 2001 September 1999) of Rohm and Haas Co. (chemicals); Director of
Technitrol, Inc. (electronic components), and Agere Systems
(communications components); Board Member of the American Chemistry
Council; and Trustee of Drexel University.
- ------------------------------------------------------------------------------------------------------------
JOANN HEFFERNAN Trustee Vice President, Chief Information Officer, and Member of the
HEISEN (112) Executive Committee of Johnson & Johnson (pharmaceuticals/consumer
(1950) products); Director of the Medical Center at Princeton and Women's
July 1998 Research and Education Institute.
- ------------------------------------------------------------------------------------------------------------
BURTON G. MALKIEL TRUSTEE Chemical Bank Chairman's Professor of Economics,Princeton University;
(1932) (110) Director of Vanguard Investment Series plc (Irish invest-ment fund)
May 1977 (since November 2001), Vanguard Group (Ireland)Limited (Irish
investment management firm)(since November 2001),Prudential Insurance
Co. of America, BKF Capital (investment management), The Jeffrey Co.
(holding company), and NeuVis, Inc.(software company).
- ------------------------------------------------------------------------------------------------------------
the funds. Among board members' responsibilities are selecting investment
advisors for the funds; monitoring fund operations, performance, and costs;
reviewing contracts; nominating and selecting new trustees/directors; and
electing Vanguard officers.
Each trustee serves a fund until its termination; or until the trustee's
retirement, resignation, or death; or otherwise as specified in the fund's
organizational documents. Any trustee may be removed at a shareholders' meeting
by a vote representing two-thirds of the net asset value of all shares of the
fund together with shares of other Vanguard funds organized within the same
trust. The table on these two pages shows information for each trustee and
executive officer of the fund. The mailing address of the trustees and officers
is P.O. Box 876, Valley Forge, PA 19482.
POSITION(S) HELD WITH
NAME FUND (NUMBER OF
(YEAR OF BIRTH) VANGUARD FUNDS
TRUSTEE/OFFICER OVERSEEN BY
SINCE TRUSTEE/OFFICER) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------
Alfred M. Rankin, Jr. Trustee Chairman, President, Chief Executive Officer, and Director of NACCO
(1941) (112) Industries, Inc. (forklift trucks/housewares/lignite); Director of
January 1993 Goodrich Corporation (industrial products/aircraft systems and
services); Director of Standard Products Company (supplier for
the automotive industry) until 1998.
- ------------------------------------------------------------------------------------------------------------
J. Lawrence Wilson Trustee Retired Chairman and Chief Executive Officer of Rohm and Haas Co.
(1936) (112) (chemicals); Director of Cummins Inc. (diesel engines), The Mead
April 1985 Corp. (paper products), and AmerisourceBergen Corp. (pharmaceuti-cal
distribution); Trustee of Vanderbilt University.
- ------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS*
R. Gregory Barton Secretary Managing Director and General Counsel of The Vanguard Group, Inc.;
(1951) (112) Secretary of The Vanguard Group and of each of the investment
June 2001 companies served by The Vanguard Group.
- ------------------------------------------------------------------------------------------------------------
Thomas J. Higgins Treasurer Principal of The Vanguard Group, Inc.; Treasurer of each of the
(1957) (112) investment companies served by The Vanguard Group.
July 1998
- ------------------------------------------------------------------------------------------------------------
*Officers of the funds are "interested persons" as defined in the Investment
Company Act of 1940.
More information about the trustees is in the Statement of Additional
Information, available from The Vanguard Group.
- ------------------------------------------------------------------------------------------------------------
VANGUARD SENIOR MANAGEMENT TEAM
MORTIMER J. BUCKLEY, Information Technology. MICHAEL S. MILLER, Planning and Development.
JAMES H. GATELY, Investment Programs and Services. RALPH K. PACKARD, Finance.
KATHLEEN C. GUBANICH, Human Resources. GEORGE U. SAUTER, Chief Investment Officer.
F. WILLIAM MCNABB, III, Client Relationship Group.
- ------------------------------------------------------------------------------------------------------------
JOHN C. BOGLE, Founder; Chairman and Chief Executive Officer, 1974-1996.
- ------------------------------------------------------------------------------------------------------------
[SHIP]
[THE VANGUARD GROUP(R) LOGO]
Post Office Box 2600
Valley Forge, PA 19482-2600
Vanguard, The Vanguard Group, Vanguard.com, Admiral, and the ship logo are
trademarks of The Vanguard Group, Inc.
All other marks are the exclusive property of their respective owners.
ABOUT OUR COVER
The photographs that appear on the cover of this report are copyrighted by
Michael Kahn.
FOR MORE INFORMATION
This report is intended for the fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
To receive a free copy of the prospectus or the Statement of Additional
Information, or to request additional information about the fund or other
Vanguard funds, please contact us at one of the adjacent telephone numbers or by
e-mail through Vanguard.com(R). Prospectuses may also be viewed online.
You can obtain a free copy of Vanguard's proxy voting guidelines by visiting our
website, www.vanguard.com, and searching for "proxy voting guidelines," or by
calling 1-800-662-2739. The guidelines are also available from the SEC's
website, www.sec.gov.
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
DIRECT INVESTOR ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
TEXT TELEPHONE
1-800-952-3335
(C) 2003 THE VANGUARD GROUP, INC.
ALL RIGHTS RESERVED.
VANGUARD MARKETING
CORPORATION, DISTRIBUTOR.
Q300 102003
ITEM 2: Code of Ethics. The Board of Trustees has adopted a code of ethics that
applies to principal executive officer, principal financial officer, principal
accounting officer or controller of the Registrant and The Vanguard Group, Inc.,
and to persons performing similar functions.
ITEM 3: Audit Committee Financial Expert. All of the members of the Audit
Committee have been determined by the Registrant's Board of Trustees to be Audit
Committee Financial Experts. The members of the Audit Committee are: Charles D.
Ellis, Rajiv L. Gupta, JoAnn Heffernan Heisen, Burton G. Malkiel, Alfred M.
Rankin, Jr., and J. Lawrence Wilson. All Audit Committee members are independent
under applicable rules.
ITEM 4: Not Applicable
ITEM 5: Not applicable.
ITEM 6: Reserved.
ITEM 7: Not applicable.
ITEM 8: Reserved.
ITEM 9: CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures. The Principal Executive and
Financial Officers concluded that the Registrant's Disclosure Controls and
Procedures are effective based on their evaluation of the Disclosure Controls
and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. There were no significant changes
in Registrant's internal control over financial reporting or in other factors
that could significantly affect this control subsequent to the date of the
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10: EXHIBITS. The following exhibits are attached hereto:
(a) code of ethics
(b) certifications
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD ADMIRAL FUNDS
BY:_____________(signature)________________
(HEIDI STAM)
JOHN J. BRENNAN*
CHIEF EXECUTIVE OFFICER
Date: October 27, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
VANGUARD ADMIRAL FUNDS
BY:_____________(signature)________________
(HEIDI STAM)
JOHN J. BRENNAN*
CHIEF EXECUTIVE OFFICER
Date: October 27, 2003
VANGUARD ADMIRAL FUNDS
BY:_____________(signature)________________
(HEIDI STAM)
THOMAS J. HIGGINS*
TREASURER
Date: October 27, 2003
*By Power of Attorney. See File Number 2-57689, filed on December 26, 2002.
Incorporated by Reference.