chesterfunds_final.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-04098

Name of Registrant: Vanguard Chester Funds


Address of Registrant:	P.O. Box 2600
	Valley Forge, PA 19482


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

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

Date of fiscal year end: September 30

Date of reporting period: October 1, 2015 – March 31, 2016

Item 1: Reports to Shareholders

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.

Goals. Create clear, appropriate investment goals.

Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.

Discipline. Maintain perspective and long-term discipline.

A single theme unites these principles: Focus on the things you can control.

We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Advisor’s Report.	8
Fund Profile.	12
Performance Summary.	13
Financial Statements.	14
About Your Fund’s Expenses.	25
Glossary.	27

See the Glossary for definitions of investment terms used in this report.

About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.

Chairman’s Letter

Dear Shareholder,

Vanguard PRIMECAP Fund generally followed the same patchy but positive path as the broader stock market over the six months ended March 31, 2016. However, the fund’s lows were a bit lower than the market’s, and it didn’t quite hit all of the market’s high notes, either.

PRIMECAP recorded a solid return of about 7% over the period, but it trailed its benchmark, the Standard & Poor’s 500 Index, by nearly 2 percentage points. Still, it finished well ahead of the nearly 3% average return of its multi-capitalization growth peers.

Stocks charted an uneven course en route to a favorable outcome
The broad U.S. stock market returned about 7% for the six months. The period began and ended strongly, with fluctuations in the middle as China’s economic slowdown and falling oil and commodity prices worried investors.

Stocks rallied in March as investors again seemed encouraged by news about monetary policy. The Federal Reserve indicated, after a mid-March meeting, that it would raise interest rates fewer times in 2016 than previously anticipated. And central bankers in Europe and Asia kept up stimulus measures to combat weak growth and low inflation.

International stocks returned about 3% for the period after surging more than 8% in March. Stocks from emerging markets and from developed markets of the Pacific region outperformed European stocks, which were nearly flat.

Bonds produced gains following a subpar start
After posting weak results for the first three months of the period, bonds managed solid gains. The broad U.S. taxable bond market returned 2.44% for the fiscal half year.

With stocks volatile and the Fed proceeding cautiously with rate hikes, bonds proved attractive. The yield of the 10-year U.S. Treasury note closed at 1.77% at the end of March, down from 2.05% six months earlier. (Bond prices and yields move in opposite directions.)

Returns for money market funds and savings accounts remained limited by the Fed’s target rate of 0.25%–0.5% —still low despite rising a quarter of a percentage point in December.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 6.90%. International bonds got a boost as foreign currencies strengthened against the dollar, a turnabout from the trend of recent years. Even without this currency benefit, however, international bond returns were solidly positive.


Market Barometer

			Total Returns
		Periods Ended March 31, 2016
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	7.75%	0.50%	11.35%
Russell 2000 Index (Small-caps)	2.02	-9.76	7.20
Russell 3000 Index (Broad U.S. market)	7.30	-0.34	11.01
FTSE All-World ex US Index (International)	3.09	-8.53	0.70

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.44%	1.96%	3.78%
Barclays Municipal Bond Index (Broad tax-exempt market)	3.20	3.98	5.59
Citigroup Three-Month U.S. Treasury Bill Index	0.06	0.08	0.04

CPI
Consumer Price Index	0.08%	0.85%	1.28%

Technology stocks delivered, while health care struggled
Since its 1984 inception, Vanguard PRIMECAP Fund’s overall performance has been noticeably better than that of its comparative standards, recording an average annual return of about 13% through March 31. Both the broad market and the S&P 500 Index have posted average annual returns of about 11% over that span, while the average annual return of multi-cap growth funds has been about 10%.

Such long-term outperformance, which is rather unusual, is a result of the portfolio manager’s conviction, patience, and skill. PRIMECAP Management Company, the fund’s advisor, has achieved success by constructing and managing a portfolio that is quite different from its benchmark. This approach offers potential rewards but also brings the risk of occasional short-term underperformance.

The information technology and health care sectors have dominated the portfolio’s holdings over the years, and the recent six-month period was no exception. Their outcomes, however, were at opposite ends of the spectrum—IT boosted the fund’s return the most, and health care hurt it the most.

IT holdings accounted for more than 35% of the PRIMECAP Fund’s portfolio on average and returned about 16%, handily outpacing those of the benchmark. Software, internet, semiconductor, and hardware companies contributed most to results. PRIMECAP Management provides


Expense Ratios
Your Fund Compared With Its Peer Group
	Investor	Admiral	Peer Group
	Shares	Shares	Average
PRIMECAP Fund	0.40%	0.34%	1.25%

The fund expense ratios shown are from the prospectus dated January 28, 2016, and represent estimated costs for the current fiscal year. For the six months ended March 31, 2016, the fund’s annualized expense ratios were 0.38% for Investor Shares and 0.32% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.

Peer group: Multi-Cap Growth Funds.

valuable research and insight into the industry, which is defined by innovation and marked by fierce competition as corporations move toward cloud computing and consumers seek the latest gadgets.

The fund’s allocation to health care stocks approached an average of nearly 29% over the period, about double that of the benchmark. The large exposure was a disadvantage. The sector returned about –3% for the fund, compared with more

Vanguard’s growth translates into lower costs for you

Research indicates that lower-cost investments have tended to outperform higher-cost ones.

So it’s little wonder that funds with lower expense ratios—including those at Vanguard—have

dominated the industry’s cash inflows in recent years.

Vanguard has long been a low-cost leader, with expenses well below those of many other

investment management companies. That cost difference remains a powerful advantage for

Vanguard clients. Why? Because a lower expense ratio allows a fund to pass along a greater

share of its returns to its investors.

What’s more, as you can see in the chart below, we’ve been able to lower our costs continually

as our assets under management have grown. Our steady growth has not been an explicit

business objective. Rather, we focus on putting our clients’ interests first at all times, and

giving them the best chance for investment success. But economies of scale—the cost

efficiencies that come with our growth—have allowed us to keep lowering our fund costs,

even as we invest in our people and technology.

The benefit of economies of scale

than 3% for the benchmark. Most of the weakness came from pharmaceutical and biotechnology stocks, which slid as the possibility of increased government regulation threatened future profits. A slowdown in merger and acquisition activity also didn’t help stock prices, and biotech stocks felt the burden of high valuations.

Industrials was the only other sector to which the PRIMECAP Fund devoted more than 9% of its holdings. Results here were generally solid; airline and air freight and logistics firms were the top contributors as lower fuel prices saved costs.

For more about the advisor’s strategy and the fund’s positioning during the six months, please see the Advisor’s Report that follows this letter.

Consider rebalancing to manage your risk
Let’s say you’ve taken the time to carefully create an appropriate asset allocation for your investment portfolio. Your efforts have produced a diversified mix of stock, bond, and money market funds tailored to your goals, time horizon, and risk tolerance

But what should you do when your portfolio drifts from its original asset allocation as the financial markets rise or fall? Consider rebalancing to bring it back to the proper mix.

Just one year of outsized returns can throw your allocation out of whack. Take 2013 as an example. That year, the broad stock market (as measured by the Russell 3000 Index) returned 33.55% and the broad taxable bond market (as measured by the Barclays U.S. Aggregate Bond Index) returned –2.02%. A hypothetical portfolio that tracked the broad domestic market indexes and started the year with 60% stocks and 40% bonds would have ended with a more aggressive mix of 67% stocks and 33% bonds.

Rebalancing to bring your portfolio back to its original targets would require you to shift assets away from areas that have been performing well toward those that have been falling behind. That isn’t easy or intuitive. It’s a way to minimize risk rather than maximize returns and to stick with your investment plan through different types of markets. (You can read more about our approach in Best Practices for Portfolio Rebalancing at vanguard.com/ research.)

It’s not necessary to check your portfolio every day or every month, much less rebalance it that frequently. It may be more appropriate to monitor it annually or semiannually and rebalance when your allocation swings 5 percentage points or more from its target.

It’s important, of course, to be aware of the tax implications. You’ll want to consult with your tax advisor, but generally speaking, it may be a good idea to make any asset changes within a tax-advantaged retirement account or to direct new cash flows into the underweighted asset class.

Advisor’s Report

For the six months ended March 31, 2016, Vanguard PRIMECAP Fund returned 6.64% for Investor Shares and 6.67% for Admiral Shares, trailing the 8.49% return of its benchmark, the unmanaged Standard & Poor’s 500 Index, while surpassing the 2.63% average return of its multi-capitalization growth fund competitors. Unfavorable stock selection and an overweight position in health care, the worst-performing sector over the period, as well as the fund’s underweight positions in consumer staples, utilities, and telecommunication services, were the primary sources of underperformance relative to the unmanaged S&P 500 Index. These negatives were partially offset by favorable stock selection and an overweight position in information technology, as well as an underweight position in financials, the worst-performing sector in the benchmark.

The investment environment
The six months were characterized by significant volatility in various financial markets worldwide, including the U.S. equity markets. Stocks rallied from the beginning of October through the end of December, then sold off sharply in January and early February before rallying into the end of March. The February stock market trough roughly coincided with the bottom in West Texas Intermediate crude oil, which fell to $26 per barrel before rebounding to end March at $38.

Contrary to the expectations of many investors, Treasury bond yields fell as the Federal Reserve signaled it would raise interest rates more gradually than it had planned going into 2016. Faced with lower net interest margins, financials underperformed the S&P 500 Index by nearly 8%, with some of the largest banks and brokerages faring far worse. Sluggish economic growth and below-target inflation led central banks in Europe and Japan to introduce negative short-term interest rates and ramp up government bond purchases, further pressuring already-low long-term interest rates. Ten-year German and Japanese bonds currently yield within 15 basis points of 0%, an unprecedented situation.

Relative to the economies of other developed countries, the U.S. economy was a bright spot as real gross domestic product (GDP) continued to expand at a modest pace (+2.4% in 2015). Supported by rising incomes, healthy household balance sheets, low inflation (in part because of falling energy prices), and improving access to historically inexpensive credit, U.S. consumer spending appears to be on solid footing. We are concerned, however, by the upcoming presidential election. Candidates on both sides have vilified U.S. corporations and espoused trade policies that could harm global companies, including many of the fund’s holdings.

Outlook for U.S. equities
S&P 500 Index earnings per share are expected to decline 7% in the first calendar quarter of 2016, the worst performance since the third calendar quarter of 2009. Even excluding the troubled energy sector, earnings per share are expected to decline

by 2%. Trading at approximately 16.5 times the next 12 months’ estimated earnings per share, the S&P 500 Index appears fully valued by historical standards. However, with the 10-year Treasury bond yielding 1.8%, well below the S&P 500 Index dividend yield of 2.3%, we continue to believe that stocks represent a more attractive investment than bonds at current prices. We find certain stocks to be attractively valued, notably the fund’s biotechnology holdings, which, after a period of significant underperformance, trade at a discount to the S&P 500 Index price-to-earnings multiple in spite of their far superior long-term growth prospects.

Portfolio update and outlook
Although the fund’s total return exceeded that of the S&P 500 Index during the fourth calendar quarter of 2015 thanks to favorable sector allocations and strong selection in information technology, this was more than offset by relative underper-formance during the first calendar quarter of 2016. Sector allocations (overweighted in health care and underweighted in consumer staples, utilities, and telecom) became a challenge, and several of the fund’s largest pharmaceutical and biotech holdings declined.

After several consecutive years of outperformance, the health care sector lagged the S&P 500 Index over the six months. Biotech stocks (defined as the AMEX Biotechnology Index) were hit especially hard, declining 14%, compared with a 3% increase in the S&P 500 Index health care sector. The decline was

precipitated by price increases of high-profile generic drugs and subsequent broader scrutiny of the biotech and pharmaceutical industry. Novartis (–19%), Eli Lilly (–13%), Biogen (–11%), and Roche (–3%) detracted most. Biotech and pharmaceutical holdings constituted 22% of the fund’s assets at the end of the period, more than double the S&P 500 Index weighting of 9%. In spite of the near-term uncertainty and current political rhetoric over drug pricing, we believe that the industry’s fundamentals remain intact and that demand for health care products will continue to grow, driven by demographic trends and the potential for safer and more effective therapies.

We believe that companies which develop novel therapies that extend lives and represent meaningful advancements will ultimately receive favorable pricing and reimbursement for their products.

The fund also remains overweighted in information technology stocks, which constituted about 36% of assets on average, compared with 21% in the S&P 500 Index. The fund’s largest IT holdings are in software, semiconductor, and internet stocks. S&P 500 Index internet (+21%) and software (+20%) stocks significantly outperformed the sector (+12%) for the six months, with semiconductors (+12%) about the same as the overall sector. The fund’s holdings in these industries performed relatively in line with their underlying S&P 500 industry indexes. Strong relative performance in hardware, thanks to gains in Hewlett Packard Enterprise (+23% for the fund)

and a minimal position in Apple (flat), led the fund’s holdings to outperform the S&P 500 Index IT sector.

Although industry research firm Gartner expects global IT spending to fall 0.5% (+1.6% in constant currency) in 2016, we remain confident in the long-term outlook for the fund’s holdings. Microsoft and Adobe, its largest software holdings, are transforming their products and business models to adapt to the “cloud,” where resources are consumed on demand over the internet. Alphabet and Alibaba, the fund’s largest internet holdings, are growing rapidly as consumers worldwide spend more time and money on internet-based services. Texas Instruments and NVIDIA, two of the fund’s largest semiconductor holdings, stand to benefit from secular trends such as virtual reality, artificial intelligence, and the incorporation of connectivity into previously unconnected objects. Although the fund’s hardware holdings, including Hewlett Packard Enterprise and NetApp, face more challenging transitions to the cloud, they trade at extremely low valuations that more than compensate investors for the associated risks.

Over 6% of the fund’s assets were invested in airline stocks as of March 31. Industry fundamentals remain strong, with robust traffic leading to high load factors and lower fuel costs boosting earnings. Nevertheless, investors remain leery of the industry. We recognize that terrorism presents a significant risk and are especially concerned given the recent terrorist attacks in Paris and Brussels. But we believe that structural changes over the last several years—the most important of which is industry consolidation—have enabled airlines to prosper under normal conditions. Furthermore, the industry benefits from secular trends, as demonstrated by the fact that global passenger traffic growth of 6% far exceeds real global GDP growth. In spite of these positives, several of our airline holdings trade at among the lowest price-to-earnings multiples in the S&P 500 Index.

The fund remains significantly underweighted in energy stocks. We have found few compelling investments in the sector, as we believe current valuations (over 60 times forward earnings per share) assume a significant increase in oil prices from recent levels. We view declining production costs and slower demand from China and other emerging markets as secular, not cyclical, trends. And new technologies such as vehicle electrification may reduce oil demand over the long term.

After rallying strongly during the six months as investors flocked to perceived safe haven investments, telecommunication services, utilities, and consumer staples stocks appear stretched relative to their growth prospects. For example, consumer staples stocks trade for 21 times forward earnings per share, the most expensive sector on a price-to-earnings basis except for the reeling energy sector, in spite of minimal expected revenue growth.

PRIMECAP Fund

Fund Profile
As of March 31, 2016


Share-Class Characteristics

	Investor	Admiral
	Shares	Shares
Ticker Symbol	VPMCX	VPMAX
Expense Ratio¹	0.40%	0.34%
30-Day SEC Yield	1.35%	1.43%


Portfolio Characteristics
			DJ
			U.S. Total
		S&P 500	Market
	Fund	Index	FA Index
Number of Stocks	128	504	3,900
Median Market Cap	$58.0B	$79.4B	$52.5B
Price/Earnings Ratio	20.3x	20.5x	21.8x
Price/Book Ratio	3.6x	2.8x	2.7x
Return on Equity	19.1%	18.5%	17.5%
Earnings Growth
Rate	8.5%	7.6%	8.0%
Dividend Yield	1.8%	2.2%	2.1%
Foreign Holdings	9.7%	0.0%	0.0%
Turnover Rate
(Annualized)	7%	—	—
Short-Term Reserves	3.7%	—	—


Sector Diversification (% of equity exposure)
			DJ
			U.S. Total
		S&P 500	Market
	Fund	Index FA Index
Consumer
Discretionary	8.6%	12.9%	13.6%
Consumer Staples	0.7	10.4	9.2
Energy	1.5	6.8	6.1
Financials	6.8	15.6	17.4
Health Care	26.5	14.3	13.7
Industrials	16.7	10.1	10.7
Information
Technology	36.4	20.8	20.1
Materials	1.7	2.8	3.2
Telecommunication
Services	1.1	2.8	2.5
Utilities	0.0	3.5	3.5


Volatility Measures
		DJ
		U.S. Total
	S&P 500	Market
	Index	FA Index
R-Squared	0.90	0.91
Beta	0.96	0.94
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.


Ten Largest Holdings (% of total net assets)
Biogen Inc.	Biotechnology	5.4%
Amgen Inc.	Biotechnology	5.1
Alphabet Inc.	Internet Software &
	Services	4.7
Microsoft Corp.	Systems Software	4.7
Eli Lilly & Co.	Pharmaceuticals	4.6
Adobe Systems Inc.	Application Software	4.4
Texas Instruments Inc.	Semiconductors	4.4
FedEx Corp.	Air Freight &
	Logistics	3.4
Southwest Airlines Co.	Airlines	3.4
Roche Holding AG	Pharmaceuticals	3.1
Top Ten		43.2%
The holdings listed exclude any temporary cash investments and equity index products.

Investment Focus

1 The expense ratios shown are from the prospectus dated January 28, 2016, and represent estimated costs for the current fiscal year. For the six months ended March 31, 2016, the annualized expense ratios were 0.38% for Investor Shares and 0.32% for Admiral Shares.

12

PRIMECAP Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

Fiscal-Year Total Returns (%): September 30, 2005, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

	Inception	One	Five	Ten
	Date	Year	Years	Years
Investor Shares	11/1/1984	-1.64%	12.40%	8.54%
Admiral Shares	11/12/2001	-1.59	12.49	8.65

See Financial Highlights for dividend and capital gains information.

PRIMECAP Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016

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


			Market
			Value^•
		Shares	($000)
Common Stocks (96.0%)
Consumer Discretionary (8.3%)
	L Brands Inc.	9,714,418	853,023
	TJX Cos. Inc.	7,104,300	556,622
	Ross Stores Inc.	9,045,200	523,717
^	Sony Corp. ADR	17,564,300	451,754
	Walt Disney Co.	4,450,000	441,929
	Carnival Corp.	7,201,500	380,023
*	Bed Bath & Beyond Inc.	2,300,975	114,220
*	Amazon.com Inc.	192,265	114,136
	Royal Caribbean
	Cruises Ltd.	1,250,000	102,688
	Time Warner Cable Inc.	293,304	60,016
	VF Corp.	772,400	50,021
	Whirlpool Corp.	135,000	24,346
	Newell Rubbermaid Inc.	505,000	22,366
	Las Vegas Sands Corp.	400,000	20,672
	McDonald’s Corp.	144,100	18,110
	Marriott International Inc.
	Class A	220,000	15,660
*	CarMax Inc.	161,100	8,232
	Hilton Worldwide
	Holdings Inc.	280,000	6,306
	Comcast Corp. Class A	52,800	3,225
*	AutoZone Inc.	2,100	1,673
			3,768,739
Consumer Staples (0.6%)
	CVS Health Corp.	2,249,065	233,296
	Tyson Foods Inc. Class A	835,000	55,661
			288,957
Energy (1.4%)
	Schlumberger Ltd.	2,935,900	216,522
	EOG Resources Inc.	2,145,000	155,684
^	Transocean Ltd.	9,282,079	84,838
	Noble Energy Inc.	2,475,000	77,740
	Exxon Mobil Corp.	615,000	51,408
	National Oilwell Varco Inc.	580,000	18,038


			Market
			Value^•
		Shares	($000)
*	Cameron International
	Corp.	186,200	12,485
	Cabot Oil & Gas Corp.	290,000	6,586
^{^,*}	Southwestern Energy Co.	700,000	5,649
*	Petroleo Brasileiro SA
	ADR Preference Shares	600,000	2,718
*	Petroleo Brasileiro SA ADR	400,000	2,336
			634,004
Financials (6.5%)
	Charles Schwab Corp.	25,733,100	721,041
	Marsh & McLennan
	Cos. Inc.	10,456,100	635,626
	JPMorgan Chase & Co.	9,008,500	533,483
	Wells Fargo & Co.	11,020,000	532,927
	Progressive Corp.	6,463,000	227,110
	US Bancorp	3,425,000	139,021
	CME Group Inc.	864,150	83,002
	Discover Financial
	Services	1,216,100	61,924
	American Express Co.	422,100	25,917
	Chubb Ltd.	42,133	5,020
			2,965,071
Health Care (25.5%)
*	Biogen Inc.	9,455,200	2,461,378
	Amgen Inc.	15,527,800	2,328,083
	Eli Lilly & Co.	29,110,000	2,096,211
	Roche Holding AG	5,681,300	1,394,988
	Novartis AG ADR	12,353,965	894,921
	Medtronic plc	8,626,952	647,021
*	Boston Scientific Corp.	27,842,560	523,719
	Thermo Fisher
	Scientific Inc.	2,641,000	373,939
	Abbott Laboratories	6,617,234	276,799
	AstraZeneca plc ADR	7,600,500	214,030
	Johnson & Johnson	1,190,000	128,758
	Sanofi ADR	1,545,000	62,047
	Zimmer Biomet
	Holdings Inc.	340,000	36,254

PRIMECAP Fund


			Market
			Value^•
		Shares	($000)
	Agilent Technologies Inc.	880,500	35,088
	AbbVie Inc.	600,000	34,272
	Stryker Corp.	250,000	26,823
	GlaxoSmithKline plc ADR	600,000	24,330
			11,558,661
Industrials (16.0%)
	FedEx Corp.	9,481,068	1,542,759
1	Southwest Airlines Co.	34,210,300	1,532,621
	Airbus Group SE	11,130,758	737,497
1	Alaska Air Group Inc.	6,431,800	527,536
	Honeywell
	International Inc.	3,390,000	379,850
	American Airlines
	Group Inc.	7,929,100	325,172
*	United Continental
	Holdings Inc.	5,380,800	322,095
	Caterpillar Inc.	4,135,000	316,493
	Union Pacific Corp.	3,567,400	283,787
	Deere & Co.	3,083,300	237,383
	United Parcel Service Inc.
	Class B	2,181,070	230,037
	Delta Air Lines Inc.	4,538,000	220,910
	Boeing Co.	1,200,000	152,328
	United Technologies Corp.	1,087,000	108,809
	Pentair plc	1,370,000	74,336
	CH Robinson
	Worldwide Inc.	1,000,000	74,230
	Safran SA	1,036,800	72,369
	CSX Corp.	2,390,000	61,543
	Expeditors International
	of Washington Inc.	600,000	29,286
*	Hertz Global Holdings Inc.	2,090,000	22,008
	Rockwell Automation Inc.	157,250	17,887
	Tyco International plc	200,000	7,342
	Norfolk Southern Corp.	83,687	6,967
	Republic Services Inc.
	Class A	17,000	810
			7,284,055
Information Technology (34.9%)
	Microsoft Corp.	38,467,300	2,124,549
*	Adobe Systems Inc.	21,161,770	1,984,974
	Texas Instruments Inc.	34,459,000	1,978,636
*	Alphabet Inc. Class A	1,419,843	1,083,198
*	Alphabet Inc. Class C	1,425,903	1,062,226
*	Alibaba Group Holding
	Ltd. ADR	8,310,900	656,810
	Intel Corp.	18,310,500	592,345
	Hewlett Packard
	Enterprise Co.	27,780,885	492,555
	Intuit Inc.	4,725,000	491,447
	QUALCOMM Inc.	9,130,050	466,911
	EMC Corp.	17,094,600	455,571


			Market
			Value^•
		Shares	($000)
	NVIDIA Corp.	12,675,000	451,610
	KLA-Tencor Corp.	6,198,100	451,284
	Cisco Systems Inc.	15,107,950	430,123
	HP Inc.	32,119,885	395,717
	NetApp Inc.	14,427,200	393,718
	Telefonaktiebolaget LM
	Ericsson ADR	36,198,004	363,066
*	Micron Technology Inc.	31,170,000	326,350
	Oracle Corp.	6,525,000	266,938
	Activision Blizzard Inc.	6,183,300	209,243
	SanDisk Corp.	2,211,416	168,245
1	Plantronics Inc.	3,701,500	145,062
	Visa Inc. Class A	1,785,000	136,517
	Analog Devices Inc.	2,260,000	133,769
	Corning Inc.	5,243,200	109,530
^{^,*}	BlackBerry Ltd.	10,438,600	84,448
*	PayPal Holdings Inc.	1,708,200	65,936
	Apple Inc.	552,000	60,162
	MasterCard Inc. Class A	532,500	50,321
*	Yahoo! Inc.	1,163,100	42,814
*	eBay Inc.	1,729,500	41,266
*	Rambus Inc.	2,685,000	36,919
*	Entegris Inc.	2,583,472	35,187
*	salesforce.com inc	282,000	20,820
	Applied Materials Inc.	970,000	20,545
	ASML Holding NV	98,175	9,856
*	Keysight Technologies Inc.	340,000	9,432
*	Twitter Inc.	161,000	2,665
			15,850,765
Materials (1.7%)
	Monsanto Co.	6,050,125	530,838
	Praxair Inc.	925,000	105,866
	Potash Corp. of
	Saskatchewan Inc.	4,919,200	83,725
	Celanese Corp. Class A	535,000	35,043
	LyondellBasell Industries
	NV Class A	9,400	804
			756,276
Telecommunication Services (1.1%)
	AT&T Inc.	12,371,642	484,597
Total Common Stocks
(Cost $21,848,603)			43,591,125
Temporary Cash Investment (3.8%)
Money Market Fund (3.8%)
^2,3	Vanguard Market
	Liquidity Fund,
	0.495%
	(Cost $1,713,089) 1,713,088,650		1,713,089
Total Investments (99.8%)
(Cost $23,561,692)			45,304,214

PRIMECAP Fund


	Amount
	($000)
Other Assets and Liabilities (0.2%)
Other Assets
Investment in Vanguard	3,817
Receivables for Investment Securities Sold	896
Receivables for Accrued Income	60,438
Receivables for Capital Shares Issued	181,025
Other Assets	22,180
Total Other Assets	268,356
Liabilities
Payables for Investment Securities
Purchased	(2,151)
Collateral for Securities on Loan	(48,299)
Payables to Investment Advisor	(21,449)
Payables for Capital Shares Redeemed	(29,080)
Payables for Distributions	(1)
Payables to Vanguard	(63,350)
Other Liabilities	(609)
Total Liabilities	(164,939)
Net Assets (100%)	45,407,631


At March 31, 2016, net assets consisted of:
	Amount
	($000)
Paid-in Capital	22,951,624
Undistributed Net Investment Income	170,217
Accumulated Net Realized Gains	543,490
Unrealized Appreciation (Depreciation)
Investment Securities	21,742,522
Foreign Currencies	(222)
Net Assets	45,407,631

Investor Shares—Net Assets
Applicable to 79,091,354 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	7,730,618
Net Asset Value Per Share—
Investor Shares	$97.74

Admiral Shares—Net Assets
Applicable to 372,069,840 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	37,677,013
Net Asset Value Per Share—
Admiral Shares	$101.26

• See Note A in Notes to Financial Statements.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $44,082,000.
* Non-income-producing security.
1 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 Includes $48,299,000 of collateral received for securities on loan.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.

PRIMECAP Fund

Statement of Operations


	Six Months Ended
	March 31, 2016
	($000)
Investment Income
Income
Dividends¹	418,234
Interest	2,428
Securities Lending	2,776
Total Income	423,438
Expenses
Investment Advisory Fees—Note B	43,786
The Vanguard Group—Note C
Management and Administrative—Investor Shares	6,429
Management and Administrative—Admiral Shares	20,995
Marketing and Distribution—Investor Shares	790
Marketing and Distribution—Admiral Shares	1,383
Custodian Fees	334
Shareholders’ Reports—Investor Shares	24
Shareholders’ Reports—Admiral Shares	60
Trustees’ Fees and Expenses	24
Total Expenses	73,825
Net Investment Income	349,613
Realized Net Gain (Loss)
Investment Securities Sold	712,093
Foreign Currencies	(129)
Realized Net Gain (Loss)	711,964
Change in Unrealized Appreciation (Depreciation)
Investment Securities	1,772,715
Foreign Currencies	581
Change in Unrealized Appreciation (Depreciation)	1,773,296
Net Increase (Decrease) in Net Assets Resulting from Operations	2,834,873
1 Dividends are net of foreign withholding taxes of $13,119,000.

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

PRIMECAP Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	349,613	635,434
Realized Net Gain (Loss)	711,964	2,665,957
Change in Unrealized Appreciation (Depreciation)	1,773,296	(3,527,529)
Net Increase (Decrease) in Net Assets Resulting from Operations	2,834,873	(226,138)
Distributions
Net Investment Income
Investor Shares	(86,405)	(107,352)
Admiral Shares	(426,672)	(448,560)
Realized Capital Gain¹
Investor Shares	(370,752)	(528,247)
Admiral Shares	(1,709,106)	(1,890,474)
Total Distributions	(2,592,935)	(2,974,633)
Capital Share Transactions
Investor Shares	(70,616)	(5,130,078)
Admiral Shares	2,722,077	6,589,734
Net Increase (Decrease) from Capital Share Transactions	2,651,461	1,459,656
Total Increase (Decrease)	2,893,399	(1,741,115)
Net Assets
Beginning of Period	42,514,232	44,255,347
End of Period²	45,407,631	42,514,232
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $0 and $17,373,000 respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $170,217,000 and $333,810,000.

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

18

PRIMECAP Fund

Financial Highlights


Investor Shares
	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$96.99	$104.16	$87.83	$69.39	$58.46	$60.36
Investment Operations
Net Investment Income	.754	1.329	1.124	1.033	.866	.651
Net Realized and Unrealized Gain (Loss)
on Investments	5.890	(1.631)	19.812	19.093	12.857	(1.266)
Total from Investment Operations	6.644	(. 302)	20.936	20.126	13.723	(.615)
Distributions
Dividends from Net Investment Income	(1.114)	(1.160)	(.836)	(.965)	(.689)	(.614)
Distributions from Realized Capital Gains	(4.780)	(5.708)	(3.770)	(.721)	(2.104)	(.671)
Total Distributions	(5.894)	(6.868)	(4.606)	(1.686)	(2.793)	(1.285)
Net Asset Value, End of Period	$97.74	$96.99	$104.16	$87.83	$69.39	$58.46

Total Return¹	6.64%	-0.76%	24.72%	29.63%	24.17%	-1.23%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$7,731	$7,741	$13,273	$13,059	$13,632	$14,359
Ratio of Total Expenses to
Average Net Assets	0.38%	0.40%	0.44%	0.45%	0.45%	0.45%
Ratio of Net Investment Income to
Average Net Assets	1.47%	1.33%	1.17%	1.32%	1.30%	0.95%
Portfolio Turnover Rate	7%	9%	11%	5%	6%	8%
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.

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

PRIMECAP Fund

Financial Highlights


Admiral Shares
	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$100.53	$108.08	$91.15	$72.03	$60.69	$62.65
Investment Operations
Net Investment Income	.818	1.550	1.286	1.178	.974	.738
Net Realized and Unrealized Gain (Loss)
on Investments	6.099	(1.784)	20.536	19.769	13.333	(1.319)
Total from Investment Operations	6.917	(.234)	21.822	20.947	14.307	(.581)
Distributions
Dividends from Net Investment Income	(1.236)	(1.403)	(.983)	(1.079)	(.785)	(.683)
Distributions from Realized Capital Gains	(4.951)	(5.913)	(3.909)	(.748)	(2.182)	(.696)
Total Distributions	(6.187)	(7.316)	(4.892)	(1.827)	(2.967)	(1.379)
Net Asset Value, End of Period	$101.26	$100.53	$108.08	$91.15	$72.03	$60.69

Total Return¹	6.67%	-0.69%	24.85%	29.73%	24.29%	-1.14%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$37,677	$34,773	$30,982	$23,129	$15,978	$11,088
Ratio of Total Expenses to
Average Net Assets	0.32%	0.34%	0.35%	0.36%	0.36%	0.36%
Ratio of Net Investment Income to
Average Net Assets	1.53%	1.39%	1.26%	1.41%	1.39%	1.04%
Portfolio Turnover Rate	7%	9%	11%	5%	6%	8%
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.

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

20

PRIMECAP Fund

Notes to Financial Statements

Vanguard PRIMECAP Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities

PRIMECAP Fund

lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

B. PRIMECAP Management Company, provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the six months ended March 31, 2016, the investment advisory fee represented an effective annual rate of 0.20% of the fund’s average net assets.

C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.

PRIMECAP Fund

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $3,817,000, representing 0.01% of the fund’s net assets and 1.53% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
Common Stocks	41,386,271	2,204,854	—
Temporary Cash Investments	1,713,089	—	—
Total	43,099,360	2,204,854	—

E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.

During the period ended March 31, 2016, the fund realized net foreign currency losses of $129,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from accumulated net realized gains to undistributed net investment income.

At March 31, 2016, the cost of investment securities for tax purposes was $23,561,692,000. Net unrealized appreciation of investment securities for tax purposes was $21,742,522,000, consisting of unrealized gains of $22,919,995,000 on securities that had risen in value since their purchase and $1,177,473,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the six months ended March 31, 2016, the fund purchased $1,550,418,000 of investment securities and sold $1,680,146,000 of investment securities, other than temporary cash investments.

PRIMECAP Fund

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


	Six Months Ended			Year Ended
	March 31, 2016		September 30, 2015
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	312,082	3,219	736,805	7,078
Issued in Lieu of Cash Distributions	448,255	4,430	625,187	5,989
Redeemed	(830,953)	(8,370)	(6,492,070)	(60,686)
Net Increase (Decrease)—Investor Shares	(70,616)	(721)	(5,130,078)	(47,619)
Admiral Shares
Issued	1,961,429	19,292	7,079,989	63,906
Issued in Lieu of Cash Distributions	2,027,091	19,341	2,216,430	20,496
Redeemed	(1,266,443)	(12,468)	(2,706,685)	(25,167)
Net Increase (Decrease)—Admiral Shares	2,722,077	26,165	6,589,734	59,235

H. Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold¹	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Alaska Air Group Inc.	528,883	—	17,332	3,075	—	527,536
Plantronics Inc.	188,221	—	—	1,110	—	145,062
Southwest Airlines Co.	1,300,903	531	—	5,131	—	1,532,621
Vanguard Market Liquidity Fund	1,481,214	NA²	NA ²	2,428	—	1,713,089
Total	3,499,221			11,744	—	3,918,308
1 Includes net realized gain (loss) on affiliated investment securities sold of $2,538,000.
2 Not applicable—purchases and sales are for temporary cash investment purposes.

I. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

About Your Fund’s Expenses

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

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

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

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

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

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

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

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

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


Six Months Ended March 31, 2016
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
PRIMECAP Fund	9/30/2015	3/31/2016	Period
Based on Actual Fund Return
Investor Shares	$1,000.00	$1,066.43	$1.96
Admiral Shares	1,000.00	1,066.72	1.65
Based on Hypothetical 5% Yearly Return
Investor Shares	$1,000.00	$1,023.10	$1.92
Admiral Shares	1,000.00	1,023.40	1.62

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.38% for Investor Shares and 0.32% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (183/366).

Glossary

30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.

Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.

Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.

Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.

Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.

Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.

Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.

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

Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.

Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.

Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.

R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.

Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.

Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.

Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.

The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.

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


InterestedTrustee¹	Rajiv L. Gupta
	Born 1945. Trustee Since December 2001.²Principal
F. William McNabb III	Occupation(s) During the Past Five Years and Other
Born 1957. Trustee Since July 2009. Chairman of	Experience: Chairman and Chief Executive Officer
the Board. Principal Occupation(s) During the Past	(retired 2009) and President (2006–2008) of
Five Years and Other Experience: Chairman of the	Rohm and Haas Co. (chemicals); Director of Tyco
Board of The Vanguard Group, Inc., and of each of	International PLC (diversified manufacturing and
the investment companies served by The Vanguard	services), HP Inc. (printer and personal computer
Group, since January 2010; Director of The Vanguard	manufacturing), and Delphi Automotive PLC
Group since 2008; Chief Executive Officer and	(automotive components); Senior Advisor at
President of The Vanguard Group, and of each of	New Mountain Capital.
the investment companies served by The Vanguard
Group, since 2008; Director of Vanguard Marketing	Amy Gutmann
Corporation; Managing Director of The Vanguard	Born 1949. Trustee Since June 2006. Principal
Group (1995–2008).	Occupation(s) During the Past Five Years and
	Other Experience: President of the University of
IndependentTrustees	Pennsylvania; Christopher H. Browne Distinguished
	Professor of Political Science, School of Arts and
Emerson U. Fullwood	Sciences, and Professor of Communication, Annenberg
Born 1948. Trustee Since January 2008. Principal	School for Communication, with secondary faculty
Occupation(s) During the Past Five Years and Other	appointments in the Department of Philosophy, School
Experience: Executive Chief Staff and Marketing	of Arts and Sciences, and at the Graduate School of
Officer for North America and Corporate Vice President	Education, University of Pennsylvania; Trustee of the
(retired 2008) of Xerox Corporation (document manage-	National Constitution Center; Chair of the Presidential
ment products and services); Executive in Residence	Commission for the Study of Bioethical Issues.
and 2009–2010 Distinguished Minett Professor at
the Rochester Institute of Technology; Lead Director	JoAnn Heffernan Heisen
of SPX FLOW, Inc. (multi-industry manufacturing);	Born 1950. Trustee Since July 1998. Principal
Director of the United Way of Rochester, the University	Occupation(s) During the Past Five Years and
of Rochester Medical Center, Monroe Community	Other Experience: Corporate Vice President and
College Foundation, North Carolina A&T University,	Chief Global Diversity Officer (retired 2008) and
and Roberts Wesleyan College.	Member of the Executive Committee (1997–2008)
	of Johnson & Johnson (pharmaceuticals/medical
	devices/consumer products); Director of Skytop
	Lodge Corporation (hotels) and the Robert Wood
	Johnson Foundation; Member of the Advisory
	Board of the Institute for Women’s Leadership
	at Rutgers University.


F. Joseph Loughrey	Executive Officers
Born 1949. Trustee Since October 2009. Principal
Occupation(s) During the Past Five Years and Other	Glenn Booraem
Experience: President and Chief Operating Officer	Born 1967. Treasurer Since May 2015. Principal
(retired 2009) of Cummins Inc. (industrial machinery);	Occupation(s) During the Past Five Years and
Chairman of the Board of Hillenbrand, Inc. (specialized	Other Experience: Principal of The Vanguard Group,
consumer services), and of Oxfam America; Director	Inc.; Treasurer of each of the investment companies
of SKF AB (industrial machinery), Hyster-Yale Materials	served by The Vanguard Group; Controller of each of
Handling, Inc. (forklift trucks), the Lumina Foundation	the investment companies served by The Vanguard
for Education, and the V Foundation for Cancer	Group (2010–2015); Assistant Controller of each of
Research; Member of the Advisory Council for the	the investment companies served by The Vanguard
College of Arts and Letters and of the Advisory Board	Group (2001–2010).
to the Kellogg Institute for International Studies, both
at the University of Notre Dame.	Thomas J. Higgins
	Born 1957. Chief Financial Officer Since September
Mark Loughridge	2008. Principal Occupation(s) During the Past Five
Born 1953. Trustee Since March 2012. Principal	Years and Other Experience: Principal of The Vanguard
Occupation(s) During the Past Five Years and Other	Group, Inc.; Chief Financial Officer of each of the
Experience: Senior Vice President and Chief Financial	investment companies served by The Vanguard Group;
Officer (retired 2013) at IBM (information technology	Treasurer of each of the investment companies served
services); Fiduciary Member of IBM’s Retirement Plan	by The Vanguard Group (1998–2008).
Committee (2004–2013); Director of the Dow Chemical
Company; Member of the Council on Chicago Booth.	Peter Mahoney
	Born 1974. Controller Since May 2015. Principal
Scott C. Malpass	Occupation(s) During the Past Five Years and
Born 1962. Trustee Since March 2012. Principal	Other Experience: Head of Global Fund Accounting
Occupation(s) During the Past Five Years and Other	at The Vanguard Group, Inc.; Controller of each of the
Experience: Chief Investment Officer and Vice	investment companies served by The Vanguard Group;
President at the University of Notre Dame; Assistant	Head of International Fund Services at The Vanguard
Professor of Finance at the Mendoza College of	Group (2008–2014).
Business at Notre Dame; Member of the Notre Dame
403(b) Investment Committee, the Board of Advisors	Heidi Stam
for Spruceview Capital Partners, and the Investment	Born 1956. Secretary Since July 2005. Principal
Advisory Committee of Major League Baseball; Board	Occupation(s) During the Past Five Years and Other
Member of TIFF Advisory Services, Inc., and Catholic	Experience: Managing Director of The Vanguard
Investment Services, Inc. (investment advisors).	Group, Inc.; General Counsel of The Vanguard Group;
	Secretary of The Vanguard Group and of each of the
André F. Perold	investment companies served by The Vanguard Group;
Born 1952. Trustee Since December 2004. Principal	Director and Senior Vice President of Vanguard
Occupation(s) During the Past Five Years and Other	Marketing Corporation.
Experience: George Gund Professor of Finance and
Banking, Emeritus at the Harvard Business School	Vanguard Senior ManagementTeam
(retired 2011); Chief Investment Officer and Managing
Partner of HighVista Strategies LLC (private investment	Mortimer J. Buckley	James M. Norris
firm); Director of Rand Merchant Bank; Overseer of	Kathleen C. Gubanich	Thomas M. Rampulla
the Museum of Fine Arts Boston.	Martha G. King	Glenn W. Reed
	John T. Marcante	Karin A. Risi
Peter F. Volanakis	Chris D. McIsaac
Born 1955. Trustee Since July 2009. Principal
Occupation(s) During the Past Five Years and Other	Chairman Emeritus and Senior Advisor
Experience: President and Chief Operating Officer
(retired 2010) of Corning Incorporated (communications	John J. Brennan
equipment); Trustee of Colby-Sawyer College and	Chairman, 1996–2009
Chairman of its Finance and Enrollment Committee;	Chief Executive Officer and President, 1996–2008
Member of the Advisory Board of the Norris Cotton
Cancer Center.	Founder

	John C. Bogle
	Chairman and Chief Executive Officer, 1974–1996

1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.


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



Connect with Vanguard® > vanguard.com



Fund Information > 800-662-7447
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Who Are Deaf or Hard of Hearing> 800-749-7273

This material may be used in conjunction
with the offering of shares of any Vanguard
fund only if preceded or accompanied by
the fund’s current prospectus.

All comparative mutual fund data are from Lipper, a
Thomson Reuters Company, or Morningstar, Inc., unless
otherwise noted.

You can obtain a free copy of Vanguard’s proxy voting
guidelines by visiting vanguard.com/proxyreporting or by
calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, sec.gov. In
addition, you may obtain a free report on how your fund
voted the proxies for securities it owned during the 12
months ended June 30. To get the report, visit either
vanguard.com/proxyreporting or sec.gov.

You can review and copy information about your fund at
the SEC’s Public Reference Room in Washington, D.C. To
find out more about this public service, call the SEC at
202-551-8090. Information about your fund is also
available on the SEC’s website, and you can receive
copies of this information, for a fee, by sending a
request in either of two ways: via email addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

	© 2016 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.

	Q592 052016

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.

Goals. Create clear, appropriate investment goals.

Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.

Discipline. Maintain perspective and long-term discipline.

A single theme unites these principles: Focus on the things you can control.

We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Target Retirement Income Fund.	8
Target Retirement 2010 Fund.	18
Target Retirement 2015 Fund.	28
Target Retirement 2020 Fund.	38
Target Retirement 2025 Fund.	48
Target Retirement 2030 Fund.	58
About Your Fund’s Expenses.	68
Trustees Approve Advisory Arrangements.	70
Glossary.	71

See the Glossary for definitions of investment terms used in this report.

Your Fund’s Total Returns


Six Months Ended March 31, 2016
	Total
	Returns
Vanguard Target Retirement Income Fund	3.53%
Target Income Composite Index	3.68
Mixed-Asset Target Today Funds Average	2.76
Mixed-Asset Target Today Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2010 Fund	3.66%
Target 2010 Composite Index	3.85
Mixed-Asset Target 2010 Funds Average	3.37
Mixed-Asset Target 2010 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2015 Fund	4.08%
Target 2015 Composite Index	4.37
Mixed-Asset Target 2015 Funds Average	3.37
Mixed-Asset Target 2015 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2020 Fund	4.49%
Target 2020 Composite Index	4.78
Mixed-Asset Target 2020 Funds Average	3.30
Mixed-Asset Target 2020 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2025 Fund	4.66%
Target 2025 Composite Index	5.01
Mixed-Asset Target 2025 Funds Average	3.87
Mixed-Asset Target 2025 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2030 Fund	4.84%
Target 2030 Composite Index	5.21
Mixed-Asset Target 2030 Funds Average	3.92
Mixed-Asset Target 2030 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

For a benchmark description, see the Glossary.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.

Chairman’s Letter

Dear Shareholder,

Despite considerable stock market volatility, U.S. stocks notched strong gains—more than double those of international stocks—for the six months ended March 31, 2016. On the fixed income side, international bonds fared best, while U.S. bonds generated solid results.

Returns for the six Vanguard Target Retirement Funds covered in this report—the Target Retirement Income Fund and the funds with retirement dates of 2010 through 2030—ranged from more than 3% to nearly 5%. (The funds with retirement dates of 2035 through 2060 are covered in a separate report.)

Stocks charted an uneven course en route to a solid outcome
The broad U.S. stock market returned about 7% over the six months. The period began and ended strongly, with fluctuations in the middle as China’s economic slowdown and falling oil and commodity prices worried investors.

International stocks returned about 3%.

Returns for money market funds and savings accounts remained limited by the Fed’s target rate of 0.25%–0.5%—still low despite rising a quarter percentage point in December.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 6.90%. International bonds benefited as foreign currencies strengthened against the dollar, a turn-about from the trend of recent years. Even in local currencies, however, international bond returns were solidly positive, boosted in part by additional stimulus measures in Europe and Asia to combat weak growth and low inflation.

All underlying funds advanced, led by the broad U.S. stock fund
The Vanguard Target Retirement Funds offer investors a broadly diversified portfolio within a single fund that adjusts its underlying asset mix over time. Each fund invests in some of Vanguard’s broadest index funds, providing access to thousands of U.S. and international stocks and bonds.


Market Barometer

			Total Returns
		Periods Ended March 31, 2016
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	7.75%	0.50%	11.35%
Russell 2000 Index (Small-caps)	2.02	-9.76	7.20
Russell 3000 Index (Broad U.S. market)	7.30	-0.34	11.01
FTSE All-World ex US Index (International)	3.09	-8.53	0.70

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.44%	1.96%	3.78%
Barclays Municipal Bond Index (Broad tax-exempt market)	3.20	3.98	5.59
Citigroup Three-Month U.S. Treasury Bill Index	0.06	0.08	0.04

CPI
Consumer Price Index	0.08%	0.85%	1.28%

The asset allocation in these “funds of funds” gradually shifts from stocks to bonds and becomes more conservative as investors approach retirement. (More on this later in this letter.) Once its target date is reached, each fund continues to adjust until it enters an income phase, when the portfolio will convert to the Target Retirement Income Fund. The Income Fund, which represents a static allocation of about 70% bonds and 30% stocks, is designed to help investors generate income and preserve their wealth.

The funds covered in this report are designed for investors already in retirement or within 20 years of retiring. Therefore, they tend to be more conservative than their counterparts with later target dates.

For the half year, the 2030 Fund—which held about three-quarters of its assets in stocks and the rest in bonds—performed best, with a 4.84% return. The Income Fund, with the most conservative asset mix, returned 3.53%. The results of the four other funds fell in between.

Among the funds’ underlying investments, Vanguard Total Stock Market Index Fund stood out most, with a 7.18% return. Its international counterpart, Vanguard Total International Stock Index Fund, returned 2.50%. Stocks from emerging markets and from developed markets of the Pacific region outperformed European stocks, which were nearly flat.


Expense Ratios
Your Fund Compared With Its Peer Group
	Acquired Fund Fees	Peer Group
	and Expenses	Average
Target Retirement Income Fund	0.14%	0.53%
Target Retirement 2010 Fund	0.14	0.41
Target Retirement 2015 Fund	0.14	0.41
Target Retirement 2020 Fund	0.14	0.49
Target Retirement 2025 Fund	0.15	0.43
Target Retirement 2030 Fund	0.15	0.48

The fund expense figures shown—drawn from the prospectus dated January 28, 2016—represent an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement Funds invest. The Target Retirement Funds do not charge any expenses or fees of their own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.14% for the Income Fund, 0.14% for the 2010 Fund, 0.15% for the 2015 Fund, 0.15% for the 2020 Fund, 0.15% for the 2025 Fund, and 0.16% for the 2030 Fund. Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2015.

Peer groups: For the Income Fund, Mixed-Asset Target Today Funds; for the 2010 Fund, Mixed-Asset Target 2010 Funds; for the 2015 Fund, Mixed-Asset Target 2015 Funds; for the 2020 Fund, Mixed-Asset Target 2020 Funds; for the 2025 Fund, Mixed-Asset Target 2025 Funds; and for the 2030 Fund, Mixed-Asset Target 2030 Funds.

The upside of rising rates for target-date investors

Target-date fund investors may wonder about the potential effect of rising interest rates on

bond prices—especially as the funds shift their allocations toward more bonds.

Initially, as interest rates rise, the market value of bonds in a portfolio will decline, bringing

their yields closer to those of newer issues. However, the opportunity to reinvest cash flow

into higher-yielding bonds over time can benefit investors who can wait.

Consider a hypothetical example of an intermediate-term investment-grade bond fund with

an initial yield of 2.25%. Assume rates rise by a quarter percentage point every January and

July from 2016 through 2019, ending at 4.25%. The cumulative total return would be negative

through the first quarter of 2018. But by mid-2023, the fund’s total return would be higher than

if rates hadn’t changed. It’s important to note that the pace and magnitude of rate increases

would affect the time until breakeven.

And keep in mind that bond prices tend to be less volatile than those of stocks. That’s why

target-date funds increase their bond holdings as the retirement date approaches.

The silver lining of higher yields

Cumulative rate of return

Notes: This hypothetical example shows the impact for a generic intermediate-term bond fund not included in the Target Retirement Funds.

It illustrates the fund’s performance if the Federal Reserve raised interest rates by a quarter percentage point every January and July from

2016 through 2019. Intermediate-term rates are assumed to rise by the same amount. The bond fund has a duration of 5.5 years. (Duration

is a measure of the sensitivity of bond—and bond mutual fund—prices to interest rate movements.)

Source: Vanguard.

On the fixed income side, Vanguard Total International Bond Index Fund was the stronger performer, returning 3.88% (after hedging against currency fluctuations). And the funds’ U.S. bond holdings, represented by Vanguard Total Bond Market II Index Fund, returned 2.31%. (For a hypothetical example of how a Fed rate hike might affect a generic bond fund, see the box on page 5.)

Vanguard Short-Term Inflation-Protected Securities Index Fund—which is held by the four most conservative Target Retirement Funds (the Income, 2010, 2015, and 2020 Funds)—returned 1.40%. With U.S. inflation relatively subdued, there wasn’t great demand for inflation protection.

Target-date funds do the rebalancing for you
Investing in a balanced, diversified portfolio is one of the best ways to prepare for retirement. However, for some investors, maintaining that carefully designed portfolio through disciplined rebalancing is easier said than done.

Rebalancing is about controlling risk by keeping your portfolio in line with your target asset allocation. But it can feel counterintuitive to shift assets away from areas that have been performing well toward those that have fallen behind.

Vanguard Target Retirement Funds address this challenge by offering investors broadly diversified all-in-one portfolios that automatically rebalance over time. But, as I mentioned, instead of returning the portfolios to their original asset allocations, Target Retirement Funds gradually shift to a more conservative mix of stocks and bonds as you approach retirement.

This continuing shift is called the glide path. The approach helps ensure that you have more stocks in your portfolio when you are younger—and can presumably take on more risk—and more bonds and short-term reserves as you get closer to or enter retirement. The stock portion of the fund’s asset mix will never fully go away, but it will be reduced significantly after you’ve retired.

Your fund’s automatic rebalancing feature can have a significant effect on the risks and returns of your portfolio. Without rebalancing, market fluctuations will alter your asset mix, potentially leaving you with a riskier portfolio than you intended. (You can read more in

Vanguard’s Approach to Target-Date Funds at vanguard.com/research.)

As always, thank you for investing with Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
April 13, 2016

Target Retirement Income Fund

Fund Profile
As of March 31, 2016


Total Fund Characteristics

Ticker Symbol	VTINX
30-Day SEC Yield	1.86%
Acquired Fund Fees and Expenses¹	0.14%


Allocation to Underlying Vanguard Funds
Vanguard Total Bond Market II Index Fund
Investor Shares	37.4%
Vanguard Total Stock Market Index Fund
Investor Shares	17.9
Vanguard Short-Term Inflation-Protected
Securities Index Fund Investor Shares	16.8
Vanguard Total International Bond Index
Fund Investor Shares	15.9
Vanguard Total International Stock Index
Fund Investor Shares	12.0


Total Fund Volatility Measures
	Target	Barclays
	Income	Aggregate
	Composite	Bond
	Index	Index
R-Squared	0.99	0.27
Beta	0.99	0.72
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Fund Asset Allocation

1 This figure—drawn from the prospectus dated January 28, 2016—represents an estimate of the weighted average of the expense ratios and any
transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement Income Fund invests. The fund does
not charge any expenses or fees of its own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.14%.

8

Target Retirement Income Fund

Performance Summary

Fiscal-Year Total Returns (%): September 30, 2005, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

						Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Target Retirement Income
Fund	10/27/2003	0.41%	4.95%	2.77%	2.45%	5.22%

See Financial Highlights for dividend and capital gains information.

Target Retirement Income Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016


		Market
		Value^•
	Shares	($000)
Investment Companies (100.0%)
U.S. Stock Fund (17.9%)
Vanguard Total Stock Market Index Fund Investor Shares	36,331,406	1,853,265

International Stock Fund (11.9%)
Vanguard Total International Stock Index Fund Investor Shares	85,879,369	1,238,381

U.S. Bond Funds (54.3%)
1 Vanguard Total Bond Market II Index Fund Investor Shares	357,244,536	3,879,676
Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares	70,788,425	1,739,271
		5,618,947
International Bond Fund (15.9%)
Vanguard Total International Bond Index Fund Investor Shares	151,045,236	1,643,372
Total Investment Companies (Cost $9,182,572)		10,353,965
Temporary Cash Investment (0.1%)
Money Market Fund (0.1%)
1 Vanguard Market Liquidity Fund, 0.495% (Cost $5,733)	5,732,764	5,733
Total Investments (100.1%) (Cost $9,188,305)		10,359,698


	Amount
	($000)
Other Assets and Liabilities (-0.1%)
Other Assets
Receivables for Investment Securities Sold	38,262
Receivables for Accrued Income	9,431
Receivables for Capital Shares Issued	7,830
Total Other Assets	55,523
Liabilities
Payables for Investment Securities Purchased	(9,430)
Payables for Capital Shares Redeemed	(57,393)
Total Liabilities	(66,823)
Net Assets (100%)
Applicable to 815,043,679 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	10,348,398
Net Asset Value Per Share	$12.70

Target Retirement Income Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	93,319	209,351
Realized Net Gain (Loss)	56,765	188,014
Change in Unrealized Appreciation (Depreciation)	209,133	(371,136)
Net Increase (Decrease) in Net Assets Resulting from Operations	359,217	26,229
Distributions
Net Investment Income	(96,069)	(207,968)
Realized Capital Gain¹	(171,451)	(36,816)
Total Distributions	(267,520)	(244,784)
Capital Share Transactions
Issued	978,079	2,628,108
Issued in Lieu of Cash Distributions	255,284	234,102
Redeemed	(1,610,083)	(3,224,763)
Net Increase (Decrease) from Capital Share Transactions	(376,720)	(362,553)
Total Increase (Decrease)	(285,023)	(581,108)
Net Assets
Beginning of Period	10,633,421	11,214,529
End of Period²	10,348,398	10,633,421
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $8,126,000 and $14,025,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $5,418,000 and $8,168,000.

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

Target Retirement Income Fund

Financial Highlights


	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$12.59	$12.84	$12.46	$12.23	$11.22	$11.13
Investment Operations
Net Investment Income	.115	.238	.220	.246	.275	.303¹
Capital Gain Distributions Received	.007	.015	.002	.067	.052	.030¹
Net Realized and Unrealized Gain (Loss)
on Investments	.317	(.225)	.572	.185	.977	.080
Total from Investment Operations	.439	.028	.794	.498	1.304	.413
Distributions
Dividends from Net Investment Income	(.118)	(. 236)	(. 218)	(. 247)	(. 273)	(. 299)
Distributions from Realized Capital Gains	(. 211)	(. 042)	(.196)	(. 021)	(. 021)	(. 024)
Total Distributions	(. 329)	(. 278)	(. 414)	(. 268)	(. 294)	(. 323)
Net Asset Value, End of Period	$12.70	$12.59	$12.84	$12.46	$12.23	$11.22

Total Return²	3.53%	0.18%	6.47%	4.12%	11.74%	3.70%

Ratios/Supplemental Data
Net Assets, End of Period (Millions) $10,348		$10,633	$11,215	$10,163	$9,382	$4,765
Ratio of Total Expenses to
Average Net Assets	—	—	—	—	—	—
Acquired Fund Fees and Expenses	0.14%	0.14%	0.16%	0.16%	0.16%	0.17%
Ratio of Net Investment Income to
Average Net Assets	1.80%	1.83%	1.74%	1.99%	2.31%	2.65%
Portfolio Turnover Rate	11%	14%	6%	40%	7%	14%³
The expense ratio, acquired fund fees and expenses, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3 Excludes the value of mutual fund shares delivered and received in connection with a change in the fund’s international equity investments from Vanguard European, Pacific, and Emerging Markets Stock Index Funds to Vanguard Total International Stock Index Fund because those transactions were effected in kind and did not cause the fund to incur transaction costs.

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

14

Target Retirement Income Fund

Notes to Financial Statements

Vanguard Target Retirement Income Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. and international stocks, and U.S. and international bonds. Financial statements and other information about each underlying fund are available on vanguard.com.

1. Security Valuation: Investments are valued at the net asset value of each underlying Vanguard fund determined as of the close of the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date.

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and borne by the funds in which the fund invests (see Note B). Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

5. Other: Income and capital gain distributions received are recorded on the ex-dividend date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. The FSA provides that expenses otherwise allocable to Vanguard funds-of-funds may be reduced or eliminated to the extent of savings realized by the underlying Vanguard funds by virtue of being part of a fund-of-funds. Accordingly, all expenses for services provided by Vanguard to the fund and all other expenses incurred by the fund during the period ended March 31, 2016, were borne by the underlying Vanguard funds in which the fund invests. The fund’s trustees and officers are also trustees and officers, respectively, of the underlying Vanguard funds, as well as directors and employees, respectively, of Vanguard.

Target Retirement Income Fund

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

At March 31, 2016, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

D. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.

At March 31, 2016, the cost of investment securities for tax purposes was $9,188,305,000. Net unrealized appreciation of investment securities for tax purposes was $1,171,393,000, consisting of unrealized gains of $1,228,728,000 on securities that had risen in value since their purchase and $57,335,000 in unrealized losses on securities that had fallen in value since their purchase.

E. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	March 31, 2016	September 30, 2015
	Shares	Shares
	(000)	(000)
Issued	77,778	202,353
Issued in Lieu of Cash Distributions	20,394	18,131
Redeemed	(127,793)	(249,340)
Net Increase (Decrease) in Shares Outstanding	(29,621)	(28,856)

Target Retirement Income Fund

F. Transactions during the period in affiliated underlying Vanguard funds were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Vanguard Market Liquidity Fund	—	NA¹	NA¹	2	—	5,733
Vanguard Short-Term Inflation-
Protected Securities Index Fund	1,779,726	44,891	108,859	—	—	1,739,271
Vanguard Total Bond Market II
Index Fund	4,004,448	206,662	365,572	46,607	5,925	3,879,676
Vanguard Total International
Bond Index Fund	1,687,462	25,656	116,739	15,249	—	1,643,372
Vanguard Total International
Stock Index Fund	1,233,178	104,951	125,278	13,326	—	1,238,381
Vanguard Total Stock Market
Index Fund	1,935,693	203,635	415,863	18,135	—	1,853,265
Total	10,640,507	585,795	1,132,311	93,319	5,925	10,359,698
1 Not applicable—purchases and sales are for temporary cash investment purposes.

G. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

Target Retirement 2010 Fund

Fund Profile
As of March 31, 2016


Total Fund Characteristics

Ticker Symbol	VTENX
30-Day SEC Yield	1.89%
Acquired Fund Fees and Expenses¹	0.14%


Allocation to Underlying Vanguard Funds
Vanguard Total Bond Market II Index Fund
Investor Shares	36.1%
Vanguard Total Stock Market Index Fund
Investor Shares	19.9
Vanguard Total International Bond Index
Fund Investor Shares	15.4
Vanguard Short-Term Inflation-Protected
Securities Index Fund Investor Shares	15.2
Vanguard Total International Stock Index
Fund Investor Shares	13.4


Total Fund Volatility Measures
		MSCI US
	Target 2010	Broad
	Composite	Market
	Index	Index
R-Squared	1.00	0.78
Beta	0.99	0.36
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Fund Asset Allocation

1 This figure—drawn from the prospectus dated January 28, 2016—represents an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement 2010 Fund invests. The fund does not charge any expenses or fees of its own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.14%.

18

Target Retirement 2010 Fund

Performance Summary

Fiscal-Year Total Returns (%): June 7, 2006, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

					Since Inception
	Inception Date	One Year	Five Years	Income	Capital	Total
Target Retirement 2010
Fund	6/7/2006	0.14%	5.45%	2.26%	3.16%	5.42%

See Financial Highlights for dividend and capital gains information.

Target Retirement 2010 Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016


		Market
		Value^•
	Shares	($000)
Investment Companies (100.2%)
U.S. Stock Fund (19.9%)
Vanguard Total Stock Market Index Fund Investor Shares	22,469,619	1,146,175

International Stock Fund (13.4%)
Vanguard Total International Stock Index Fund Investor Shares	53,423,840	770,372

U.S. Bond Funds (51.4%)
1 Vanguard Total Bond Market II Index Fund Investor Shares	191,811,837	2,083,076
Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares	35,653,423	876,005
		2,959,081
International Bond Fund (15.5%)
Vanguard Total International Bond Index Fund Investor Shares	81,686,360	888,748
Total Investment Companies (Cost $5,007,788)		5,764,376


	Amount
	($000)
Other Assets and Liabilities (-0.2%)
Other Assets
Receivables for Investment Securities Sold	52,995
Receivables for Accrued Income	5,083
Receivables for Capital Shares Issued	5,260
Total Other Assets	63,338
Liabilities
Payables for Investment Securities Purchased	(5,082)
Payables for Capital Shares Redeemed	(64,974)
Other Liabilities	(4,256)
Total Liabilities	(74,312)
Net Assets (100%)
Applicable to 226,281,947 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	5,753,402
Net Asset Value Per Share	$25.43

Target Retirement 2010 Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	53,684	129,088
Realized Net Gain (Loss)	73,880	234,006
Change in Unrealized Appreciation (Depreciation)	83,840	(342,401)
Net Increase (Decrease) in Net Assets Resulting from Operations	211,404	20,693
Distributions
Net Investment Income	(106,386)	(120,953)
Realized Capital Gain¹	(204,297)	(87,847)
Total Distributions	(310,683)	(208,800)
Capital Share Transactions
Issued	561,026	1,543,822
Issued in Lieu of Cash Distributions	304,528	204,793
Redeemed	(1,155,354)	(2,370,440)
Net Increase (Decrease) from Capital Share Transactions	(289,800)	(621,825)
Total Increase (Decrease)	(389,079)	(809,932)
Net Assets
Beginning of Period	6,142,481	6,952,413
End of Period²	5,753,402	6,142,481
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $3,122,000 and $9,384,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $22,596,000 and $75,298,000.

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

Target Retirement 2010 Fund

Financial Highlights


	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$25.90	$26.67	$25.50	$24.45	$21.91	$21.87
Investment Operations
Net Investment Income	. 259	.529	.487	.516	.571	.560¹
Capital Gain Distributions Received	.013	.036	.004	.103	.100	.056¹
Net Realized and Unrealized Gain (Loss)
on Investments	.651	(.534)	1.402	.999	2.502	(.022)
Total from Investment Operations	.923	.031	1.893	1.618	3.173	.594
Distributions
Dividends from Net Investment Income	(. 477)	(. 464)	(. 422)	(. 531)	(. 596)	(. 511)
Distributions from Realized Capital Gains	(. 916)	(. 337)	(. 301)	(. 037)	(. 037)	(. 043)
Total Distributions	(1.393)	(. 801)	(.723)	(. 568)	(. 633)	(. 554)
Net Asset Value, End of Period	$25.43	$25.90	$26.67	$25.50	$24.45	$21.91

Total Return²	3.66%	0.06%	7.55%	6.76%	14.74%	2.68%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$5,753	$6,142	$6,952	$6,679	$6,155	$4,747
Ratio of Total Expenses to
Average Net Assets	—	—	—	—	—	—
Acquired Fund Fees and Expenses	0.14%	0.14%	0.16%	0.16%	0.16%	0.17%
Ratio of Net Investment Income to
Average Net Assets	1.83%	1.86%	1.83%	2.08%	2.51%	2.46%
Portfolio Turnover Rate	10%	15%	13%	38%	12%	27%³
The expense ratio, acquired fund fees and expenses, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3 Excludes the value of mutual fund shares delivered and received in connection with a change in the fund’s international equity investments from Vanguard European, Pacific, and Emerging Markets Stock Index Funds to Vanguard Total International Stock Index Fund because those transactions were effected in kind and did not cause the fund to incur transaction costs.

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

24

Target Retirement 2010 Fund

Notes to Financial Statements

Vanguard Target Retirement 2010 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. and international stocks, and U.S. and international bonds. Financial statements and other information about each underlying fund are available on vanguard.com.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

Target Retirement 2010 Fund

At March 31, 2016, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

At March 31, 2016, the cost of investment securities for tax purposes was $5,007,788,000. Net unrealized appreciation of investment securities for tax purposes was $756,588,000, consisting of unrealized gains of $780,698,000 on securities that had risen in value since their purchase and $24,110,000 in unrealized losses on securities that had fallen in value since their purchase.

E. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	March 31, 2016	September 30, 2015
	Shares	Shares
	(000)	(000)
Issued	22,069	57,848
Issued in Lieu of Cash Distributions	12,186	7,751
Redeemed	(45,126)	(89,126)
Net Increase (Decrease) in Shares Outstanding	(10,871)	(23,527)

Target Retirement 2010 Fund

F. Transactions during the period in affiliated underlying Vanguard funds were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Vanguard Market Liquidity Fund	2,851	NA¹	NA¹	2	—	—
Vanguard Short-Term Inflation-
Protected Securities Index Fund	914,950	18,683	69,496	—	—	876,005
Vanguard Total Bond Market II
Index Fund	2,183,777	134,041	252,727	25,322	3,197	2,083,076
Vanguard Total International
Bond Index Fund	927,963	9,631	74,465	8,331	—	888,748
Vanguard Total International
Stock Index Fund	835,177	43,125	125,044	8,544	—	770,372
Vanguard Total Stock Market
Index Fund	1,286,888	93,575	316,225	11,485	—	1,146,175
Total	6,151,606	299,055	837,957	53,684	3,197	5,764,376
1 Not applicable—purchases and sales are for temporary cash investment purposes.

G. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

Target Retirement 2015 Fund

Fund Profile
As of March 31, 2016


Total Fund Characteristics

Ticker Symbol	VTXVX
30-Day SEC Yield	2.00%
Acquired Fund Fees and Expenses¹	0.14%


Allocation to Underlying Vanguard Funds
Vanguard Total Bond Market II Index Fund
Investor Shares	30.3%
Vanguard Total Stock Market Index Fund
Investor Shares	28.4
Vanguard Total International Stock Index
Fund Investor Shares	19.0
Vanguard Total International Bond Index
Fund Investor Shares	13.4
Vanguard Short-Term Inflation-Protected
Securities Index Fund Investor Shares	8.9


Total Fund Volatility Measures
		MSCI US
	Target 2015	Broad
	Composite	Market
	Index	Index
R-Squared	1.00	0.88
Beta	0.99	0.49
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Fund Asset Allocation

1 This figure—drawn from the prospectus dated January 28, 2016—represents an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement 2015 Fund invests. The fund does not charge any expenses or fees of its own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.15%.

28

Target Retirement 2015 Fund

Performance Summary

Fiscal-Year Total Returns (%): September 30, 2005, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

						Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Target Retirement 2015
Fund	10/27/2003	-0.59%	6.02%	2.46%	2.84%	5.30%

See Financial Highlights for dividend and capital gains information.

Target Retirement 2015 Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016


		Market
		Value^•
	Shares	($000)
Investment Companies (100.1%)
U.S. Stock Fund (28.5%)
Vanguard Total Stock Market Index Fund Investor Shares	99,250,602	5,062,773

International Stock Fund (19.0%)
Vanguard Total International Stock Index Fund Investor Shares	234,620,107	3,383,222

U.S. Bond Funds (39.2%)
1 Vanguard Total Bond Market II Index Fund Investor Shares	496,927,419	5,396,632
Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares	64,210,445	1,577,650
		6,974,282
International Bond Fund (13.4%)
Vanguard Total International Bond Index Fund Investor Shares	218,672,743	2,379,160
Total Investment Companies (Cost $14,787,492)		17,799,437

		Amount
		($000)
Other Assets and Liabilities (-0.1%)
Other Assets
Receivables for Investment Securities Sold		210,944
Receivables for Accrued Income		13,156
Receivables for Capital Shares Issued		17,562
Total Other Assets		241,662
Liabilities
Payables for Investment Securities Purchased		(113,146)
Payables for Capital Shares Redeemed		(144,901)
Other Liabilities		(164)
Total Liabilities		(258,211)
Net Assets (100%)
Applicable to 1,226,213,332 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)		17,782,888
Net Asset Value Per Share		$14.50

Target Retirement 2015 Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	175,488	424,842
Realized Net Gain (Loss)	300,057	960,256
Change in Unrealized Appreciation (Depreciation)	257,917	(1,454,776)
Net Increase (Decrease) in Net Assets Resulting from Operations	733,462	(69,678)
Distributions
Net Investment Income	(358,455)	(397,934)
Realized Capital Gain¹	(835,597)	(235,397)
Total Distributions	(1,194,052)	(633,331)
Capital Share Transactions
Issued	1,603,254	4,554,230
Issued in Lieu of Cash Distributions	1,169,880	621,730
Redeemed	(3,388,020)	(7,355,716)
Net Increase (Decrease) from Capital Share Transactions	(614,886)	(2,179,756)
Total Increase (Decrease)	(1,075,476)	(2,882,765)
Net Assets
Beginning of Period	18,858,364	21,741,129
End of Period²	17,782,888	18,858,364
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $10,790,000 and $35,029,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $72,283,000 and $255,250,000.

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

Target Retirement 2015 Fund

Financial Highlights


	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$14.90	$15.44	$14.49	$13.54	$11.91	$12.03
Investment Operations
Net Investment Income	.156	.327	.300	.298	.327	.283¹
Capital Gain Distributions Received	.007	.018	.002	.039	.053	.031¹
Net Realized and Unrealized Gain (Loss)
on Investments	.433	(.433)	.996	.929	1.583	(.134)
Total from Investment Operations	.596	(.088)	1.298	1.266	1.963	.180
Distributions
Dividends from Net Investment Income	(. 299)	(. 284)	(. 261)	(. 298)	(. 313)	(. 276)
Distributions from Realized Capital Gains	(. 697)	(.168)	(. 087)	(. 018)	(. 020)	(. 024)
Total Distributions	(. 996)	(. 452)	(. 348)	(. 316)	(. 333)	(. 300)
Net Asset Value, End of Period	$14.50	$14.90	$15.44	$14.49	$13.54	$11.91

Total Return²	4.08%	-0.66%	9.07%	9.56%	16.76%	1.40%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$17,783	$18,858	$21,741	$19,739	$16,838	$13,435
Ratio of Total Expenses to
Average Net Assets	—	—	—	—	—	—
Acquired Fund Fees and Expenses	0.15%	0.14%	0.16%	0.16%	0.16%	0.17%
Ratio of Net Investment Income to
Average Net Assets	1.93%	1.95%	1.99%	2.17%	2.59%	2.24%
Portfolio Turnover Rate	12%	16%	10%	26%	13%	27%³
The expense ratio, acquired fund fees and expenses, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3 Excludes the value of mutual fund shares delivered and received in connection with a change in the fund’s international equity investments from Vanguard European, Pacific, and Emerging Markets Stock Index Funds to Vanguard Total International Stock Index Fund because those transactions were effected in kind and did not cause the fund to incur transaction costs.

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

34

Target Retirement 2015 Fund

Notes to Financial Statements

Vanguard Target Retirement 2015 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. and international stocks, and U.S. and international bonds. Financial statements and other information about each underlying fund are available on vanguard.com.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

Target Retirement 2015 Fund

At March 31, 2016, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

At March 31, 2016, the cost of investment securities for tax purposes was $14,787,492,000. Net unrealized appreciation of investment securities for tax purposes was $3,011,945,000, consisting of unrealized gains of $3,145,574,000 on securities that had risen in value since their purchase and $133,629,000 in unrealized losses on securities that had fallen in value since their purchase.

E. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	March 31, 2016	September 30, 2015
	Shares	Shares
	(000)	(000)
Issued	109,999	293,455
Issued in Lieu of Cash Distributions	81,639	40,425
Redeemed	(231,255)	(476,492)
Net Increase (Decrease) in Shares Outstanding	(39,617)	(142,612)

Target Retirement 2015 Fund

F. Transactions during the period in affiliated underlying Vanguard funds were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Vanguard Market Liquidity Fund	—	NA¹	NA¹	3	—	—
Vanguard Short-Term Inflation-
Protected Securities Index Fund	1,611,487	66,759	121,872	—	—	1,577,650
Vanguard Total Bond Market II
Index Fund	5,651,159	388,187	689,483	65,850	8,381	5,396,632
Vanguard Total International
Bond Index Fund	2,410,427	156,143	253,227	21,552	—	2,379,160
Vanguard Total International
Stock Index Fund	3,664,850	181,877	534,442	37,546	—	3,383,222
Vanguard Total Stock Market
Index Fund	5,530,138	312,632	1,124,791	50,537	—	5,062,773
Total	18,868,061	1,105,598	2,723,815	175,488	8,381	17,799,437
1 Not applicable—purchases and sales are for temporary cash investment purposes.

G. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

Target Retirement 2020 Fund

Fund Profile
As of March 31, 2016


Total Fund Characteristics

Ticker Symbol	VTWNX
30-Day SEC Yield	2.12%
Acquired Fund Fees and Expenses¹	0.14%


Allocation to Underlying Vanguard Funds
Vanguard Total Stock Market Index Fund
Investor Shares	35.0%
Vanguard Total Bond Market II Index Fund
Investor Shares	28.3
Vanguard Total International Stock Index
Fund Investor Shares	23.3
Vanguard Total International Bond Index
Fund Investor Shares	12.2
Vanguard Short-Term Inflation-Protected
Securities Index Fund Investor Shares	1.2


Total Fund Volatility Measures
		MSCI US
	Target 2020	Broad
	Composite	Market
	Index	Index
R-Squared	1.00	0.92
Beta	0.99	0.59
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Fund Asset Allocation

1 This figure—drawn from the prospectus dated January 28, 2016—represents an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement 2020 Fund invests. The fund does not charge any expenses or fees of its own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.15%.

38

Target Retirement 2020 Fund

Performance Summary

Fiscal-Year Total Returns (%): June 7, 2006, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

					Since Inception
	Inception Date	One Year	Five Years	Income	Capital	Total
Target Retirement 2020
Fund	6/7/2006	-1.12%	6.45%	2.16%	3.61%	5.77%

See Financial Highlights for dividend and capital gains information.

Target Retirement 2020 Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016


		Market
		Value^•
	Shares	($000)
Investment Companies (100.1%)
U.S. Stock Fund (35.0%)
Vanguard Total Stock Market Index Fund Investor Shares	179,786,581	9,170,913

International Stock Fund (23.4%)
Vanguard Total International Stock Index Fund Investor Shares	424,990,011	6,128,356

U.S. Bond Funds (29.5%)
1 Vanguard Total Bond Market II Index Fund Investor Shares	684,952,144	7,438,580
Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares	12,570,062	308,847
		7,747,427
International Bond Fund (12.2%)
Vanguard Total International Bond Index Fund Investor Shares	295,039,328	3,210,028
Total Investment Companies (Cost $22,048,752)		26,256,724
Temporary Cash Investment (0.0%)
Money Market Fund (0.0%)
1 Vanguard Market Liquidity Fund, 0.495% (Cost $5,842)	5,841,858	5,842
Total Investments (100.1%) (Cost $22,054,594)		26,262,566

		Amount
		($000)
Other Assets and Liabilities (-0.1%)
Other Assets
Receivables for Investment Securities Sold		328,176
Receivables for Accrued Income		18,054
Receivables for Capital Shares Issued		31,000
Total Other Assets		377,230
Liabilities
Payables for Investment Securities Purchased		(103,034)
Payables for Capital Shares Redeemed		(294,059)
Other Liabilities		(18)
Total Liabilities		(397,111)
Net Assets (100%)
Applicable to 950,008,750 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)		26,242,685
Net Asset Value Per Share		$27.62

Target Retirement 2020 Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	274,109	613,993
Realized Net Gain (Loss)	286,204	438,274
Change in Unrealized Appreciation (Depreciation)	604,128	(1,397,892)
Net Increase (Decrease) in Net Assets Resulting from Operations	1,164,441	(345,625)
Distributions
Net Investment Income	(550,583)	(534,873)
Realized Capital Gain¹	(498,412)	(40,536)
Total Distributions	(1,048,995)	(575,409)
Capital Share Transactions
Issued	3,177,577	8,676,675
Issued in Lieu of Cash Distributions	1,028,444	564,612
Redeemed	(4,772,021)	(9,114,649)
Net Increase (Decrease) from Capital Share Transactions	(566,000)	126,638
Total Increase (Decrease)	(450,554)	(794,396)
Net Assets
Beginning of Period	26,693,239	27,487,635
End of Period²	26,242,685	26,693,239
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $47,512,000 and $36,581,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $113,045,000 and $389,519,000.

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

Target Retirement 2020 Fund

Financial Highlights


	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$27.52	$28.40	$26.26	$24.04	$20.83	$21.17
Investment Operations
Net Investment Income	. 308	.622	.577	.528	.569	.473¹
Capital Gain Distributions Received	.012	.026	.004	.047	.079	.044¹
Net Realized and Unrealized Gain (Loss)
on Investments	.906	(.946)	2.054	2.179	3.106	(.378)
Total from Investment Operations	1.226	(.298)	2.635	2.754	3.754	.139
Distributions
Dividends from Net Investment Income	(. 591)	(. 541)	(. 484)	(. 508)	(. 513)	(. 444)
Distributions from Realized Capital Gains	(. 535)	(. 041)	(. 011)	(. 026)	(. 031)	(. 035)
Total Distributions	(1.126)	(. 582)	(. 495)	(. 534)	(. 544)	(. 479)
Net Asset Value, End of Period	$27.62	$27.52	$28.40	$26.26	$24.04	$20.83

Total Return²	4.49%	-1.13%	10.13%	11.70%	18.30%	0.53%

Ratios/Supplemental Data
Net Assets, End of Period (Millions) $26,243		$26,693	$27,488	$21,785	$16,078	$11,032
Ratio of Total Expenses to
Average Net Assets	—	—	—	—	—	—
Acquired Fund Fees and Expenses	0.15%	0.14%	0.16%	0.16%	0.16%	0.17%
Ratio of Net Investment Income to
Average Net Assets	2.09%	2.07%	2.14%	2.23%	2.62%	2.11%
Portfolio Turnover Rate	17%	25%	7%	17%	8%	23%³

The expense ratio, acquired fund fees and expenses, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
3 Excludes the value of mutual fund shares delivered and received in connection with a change in the fund’s international equity investments from Vanguard European, Pacific, and Emerging Markets Stock Index Funds to Vanguard Total International Stock Index Fund because those transactions were effected in kind and did not cause the fund to incur transaction costs.

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

44

Target Retirement 2020 Fund

Notes to Financial Statements

Vanguard Target Retirement 2020 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. and international stocks, and U.S. and international bonds. Financial statements and other information about each underlying fund are available on vanguard.com.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

Target Retirement 2020 Fund

At March 31, 2016, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

At March 31, 2016, the cost of investment securities for tax purposes was $22,054,594,000. Net unrealized appreciation of investment securities for tax purposes was $4,207,972,000, consisting of unrealized gains of $4,561,299,000 on securities that had risen in value since their purchase and $353,327,000 in unrealized losses on securities that had fallen in value since their purchase.

E. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	March 31, 2016	September 30, 2015
	Shares	Shares
	(000)	(000)
Issued	115,898	300,789
Issued in Lieu of Cash Distributions	37,534	19,693
Redeemed	(173,260)	(318,675)
Net Increase (Decrease) in Shares Outstanding	(19,828)	1,807

Target Retirement 2020 Fund

F. Transactions during the period in affiliated underlying Vanguard funds were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Vanguard Market Liquidity Fund	3,128	NA¹	NA¹	14	—	5,842
Vanguard Short-Term Inflation-
Protected Securities Index Fund	121,747	189,407	6,172	—	—	308,847
Vanguard Total Bond Market II
Index Fund	7,500,945	852,792	979,805	89,132	11,341	7,438,580
Vanguard Total International
Bond Index Fund	3,197,336	255,461	332,244	29,189	—	3,210,028
Vanguard Total International
Stock Index Fund	6,286,631	403,569	681,750	66,253	—	6,128,356
Vanguard Total Stock Market
Index Fund	9,578,982	590,244	1,599,410	89,521	—	9,170,913
Total	26,688,769	2,291,473	3,599,381	274,109	11,341	26,262,566
1 Not applicable—purchases and sales are for temporary cash investment purposes.

G. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

Target Retirement 2025 Fund

Fund Profile
As of March 31, 2016


Total Fund Characteristics

Ticker Symbol	VTTVX
30-Day SEC Yield	2.15%
Acquired Fund Fees and Expenses¹	0.15%


Allocation to Underlying Vanguard Funds
Vanguard Total Stock Market Index Fund
Investor Shares	39.8%
Vanguard Total International Stock Index
Fund Investor Shares	26.6
Vanguard Total Bond Market II Index Fund
Investor Shares	23.7
Vanguard Total International Bond Index
Fund Investor Shares	9.9


Total Fund Volatility Measures
		MSCI US
	Target 2025	Broad
	Composite	Market
	Index	Index
R-Squared	1.00	0.94
Beta	0.99	0.67
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Fund Asset Allocation

1 This figure—drawn from the prospectus dated January 28, 2016—represents an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement 2025 Fund invests. The fund does not charge any expenses or fees of its own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.15%.

Target Retirement 2025 Fund

Performance Summary

Fiscal-Year Total Returns (%): September 30, 2005, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

						Ten Years
	Inception Date	One Year	Five Years	Income	Capital	Total
Target Retirement 2025
Fund	10/27/2003	-1.53%	6.70%	2.33%	3.04%	5.37%

See Financial Highlights for dividend and capital gains information.

Target Retirement 2025 Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016


		Market
		Value^•
	Shares	($000)
Investment Companies (100.1%)
U.S. Stock Fund (39.9%)
Vanguard Total Stock Market Index Fund Investor Shares	236,117,438	12,044,351

International Stock Fund (26.6%)
Vanguard Total International Stock Index Fund Investor Shares	556,508,946	8,024,859

U.S. Bond Fund (23.7%)
1 Vanguard Total Bond Market II Index Fund Investor Shares	658,224,471	7,148,318

International Bond Fund (9.9%)
Vanguard Total International Bond Index Fund Investor Shares	274,742,685	2,989,200
Total Investment Companies (Cost $24,591,875)		30,206,728
Temporary Cash Investment (0.0%)
Money Market Fund (0.0%)
1 Vanguard Market Liquidity Fund, 0.495% (Cost $6,589)	6,589,225	6,589
Total Investments (100.1%) (Cost $24,598,464)		30,213,317

		Amount
		($000)
Other Assets and Liabilities (-0.1%)
Other Assets
Receivables for Investment Securities Sold		247,115
Receivables for Accrued Income		17,235
Receivables for Capital Shares Issued		34,328
Total Other Assets		298,678
Liabilities
Payables for Investment Securities Purchased		(17,220)
Payables for Capital Shares Redeemed		(317,682)
Other Liabilities		(12)
Total Liabilities		(334,914)
Net Assets (100%)
Applicable to 1,902,575,314 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)		30,177,081
Net Asset Value Per Share		$15.86

Target Retirement 2025 Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	312,272	694,304
Realized Net Gain (Loss)	276,211	764,620
Change in Unrealized Appreciation (Depreciation)	801,626	(1,996,620)
Net Increase (Decrease) in Net Assets Resulting from Operations	1,390,109	(537,696)
Distributions
Net Investment Income	(624,625)	(619,150)
Realized Capital Gain¹	(796,306)	(57,685)
Total Distributions	(1,420,931)	(676,835)
Capital Share Transactions
Issued	3,443,687	8,666,183
Issued in Lieu of Cash Distributions	1,393,339	664,059
Redeemed	(4,676,662)	(9,496,257)
Net Increase (Decrease) from Capital Share Transactions	160,364	(166,015)
Total Increase (Decrease)	129,542	(1,380,546)
Net Assets
Beginning of Period	30,047,539	31,428,085
End of Period²	30,177,081	30,047,539
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $69,403,000 and $40,379,000. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $126,530,000 and $438,883,000.

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

Target Retirement 2025 Fund

Financial Highlights


	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$15.90	$16.50	$15.18	$13.70	$11.71	$11.97
Investment Operations
Net Investment Income	.177	.364	.350	.316	.331	.257¹
Capital Gain Distributions Received	.006	.012	.002	.021	.036	.020¹
Net Realized and Unrealized Gain (Loss)
on Investments	.555	(.624)	1.272	1.451	1.927	(.271)
Total from Investment Operations	.738	(.248)	1.624	1.788	2.294	.006
Distributions
Dividends from Net Investment Income	(. 342)	(. 322)	(. 287)	(. 296)	(. 291)	(. 250)
Distributions from Realized Capital Gains	(. 436)	(. 030)	(. 017)	(. 012)	(. 013)	(. 016)
Total Distributions	(.778)	(. 352)	(. 304)	(. 308)	(. 304)	(. 266)
Net Asset Value, End of Period	$15.86	$15.90	$16.50	$15.18	$13.70	$11.71

Total Return²	4.66%	-1.60%	10.80%	13.34%	19.89%	-0.11%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$30,177	$30,048	$31,428	$25,642	$20,022	$14,997
Ratio of Total Expenses to
Average Net Assets	—	—	—	—	—	—
Acquired Fund Fees and Expenses	0.15%	0.15%	0.17%	0.17%	0.17%	0.18%
Ratio of Net Investment Income to
Average Net Assets	2.10%	2.07%	2.15%	2.27%	2.64%	2.01%
Portfolio Turnover Rate	16%	24%	7%	16%	9%	23%³
The expense ratio, acquired fund fees and expenses, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3 Excludes the value of mutual fund shares delivered and received in connection with a change in the fund’s international equity investments from Vanguard European, Pacific, and Emerging Markets Stock Index Funds to Vanguard Total International Stock Index Fund because those transactions were effected in kind and did not cause the fund to incur transaction costs.

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

54

Target Retirement 2025 Fund

Notes to Financial Statements

Vanguard Target Retirement 2025 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. and international stocks, and U.S. and international bonds. Financial statements and other information about each underlying fund are available on vanguard.com.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

Target Retirement 2025 Fund

At March 31, 2016, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

At March 31, 2016, the cost of investment securities for tax purposes was $24,598,464,000. Net unrealized appreciation of investment securities for tax purposes was $5,614,853,000, consisting of unrealized gains of $6,111,227,000 on securities that had risen in value since their purchase and $496,374,000 in unrealized loss on securities that had fallen in value since their purchase.

E. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	March 31, 2016	September 30, 2015
	Shares	Shares
	(000)	(000)
Issued	218,711	516,906
Issued in Lieu of Cash Distributions	88,242	39,836
Redeemed	(294,276)	(571,576)
Net Increase (Decrease) in Shares Outstanding	12,677	(14,834)

Target Retirement 2025 Fund

F. Transactions during the period in affiliated underlying Vanguard funds were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Vanguard Market Liquidity Fund	6,905	NA¹	NA¹	20	—	6,589
Vanguard Total Bond Market II
Index Fund	6,992,554	1,031,359	939,466	83,855	10,684	7,148,318
Vanguard Total International
Bond Index Fund	2,969,760	173,629	238,563	27,351	—	2,989,200
Vanguard Total International
Stock Index Fund	8,033,865	458,322	612,092	85,089	—	8,024,859
Vanguard Total Stock Market
Index Fund	12,055,309	697,318	1,482,420	115,957	—	12,044,351
Total	30,058,393	2,360,628	3,272,541	312,272	10,684	30,213,317
1 Not applicable—purchases and sales are for temporary cash investment purposes.

G. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

Target Retirement 2030 Fund

Fund Profile
As of March 31, 2016


Total Fund Characteristics

Ticker Symbol	VTHRX
30-Day SEC Yield	2.16%
Acquired Fund Fees and Expenses¹	0.15%


Allocation to Underlying Vanguard Funds
Vanguard Total Stock Market Index Fund
Investor Shares	44.3%
Vanguard Total International Stock Index
Fund Investor Shares	29.5
Vanguard Total Bond Market II Index Fund
Investor Shares	18.5
Vanguard Total International Bond Index
Fund Investor Shares	7.7


Total Fund Volatility Measures
		MSCI US
	Target 2030	Broad
	Composite	Market
	Index	Index
R-Squared	1.00	0.95
Beta	0.99	0.74
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Fund Asset Allocation

1 This figure—drawn from the prospectus dated January 28, 2016—represents an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement 2030 Fund invests. The fund does not charge any expenses or fees of its own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.16%.

58

Target Retirement 2030 Fund

Performance Summary

Fiscal-Year Total Returns (%): June 7, 2006, Through March 31, 2016


Average Annual Total Returns: Periods Ended March 31, 2016

					Since Inception
	Inception Date	One Year	Five Years	Income	Capital	Total
Target Retirement 2030
Fund	6/7/2006	-2.01%	6.93%	2.05%	3.73%	5.78%

See Financial Highlights for dividend and capital gains information.

Target Retirement 2030 Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016


		Market
		Value^•
	Shares	($000)
Investment Companies (100.0%)
U.S. Stock Fund (44.3%)
Vanguard Total Stock Market Index Fund Investor Shares	200,414,665	10,223,152

International Stock Fund (29.5%)
Vanguard Total International Stock Index Fund Investor Shares	472,654,809	6,815,682

U.S. Bond Fund (18.5%)
1 Vanguard Total Bond Market II Index Fund Investor Shares	392,199,467	4,259,286

International Bond Fund (7.7%)
Vanguard Total International Bond Index Fund Investor Shares	163,200,068	1,775,617
Total Investment Companies (Cost $18,938,725)		23,073,737
Temporary Cash Investment (0.0%)
Money Market Fund (0.0%)
1 Vanguard Market Liquidity Fund, 0.495% (Cost $9,912)	9,912,000	9,912
Total Investments (100.0%) (Cost $18,948,637)		23,083,649


	Amount
	($000)
Other Assets and Liabilities (0.0%)
Other Assets
Receivables for Investment Securities Sold	220,085
Receivables for Accrued Income	10,215
Receivables for Capital Shares Issued	38,250
Total Other Assets	268,550
Liabilities
Payables for Investment Securities Purchased	(10,206)
Payables for Capital Shares Redeemed	(265,391)
Other Liabilities	(5)
Total Liabilities	(275,602)
Net Assets (100%)
Applicable to 821,830,458 outstanding $.001 par value shares of
beneficial interest (unlimited authorization)	23,076,597
Net Asset Value Per Share	$28.08

Target Retirement 2030 Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	March 31,	September 30,
	2016	2015
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	235,942	521,844
Realized Net Gain (Loss)	206,422	285,257
Change in Unrealized Appreciation (Depreciation)	656,058	(1,391,581)
Net Increase (Decrease) in Net Assets Resulting from Operations	1,098,422	(584,480)
Distributions
Net Investment Income	(471,699)	(452,597)
Realized Capital Gain¹	(343,700)	(23,522)
Total Distributions	(815,399)	(476,119)
Capital Share Transactions
Issued	3,227,964	7,676,431
Issued in Lieu of Cash Distributions	798,016	466,220
Redeemed	(3,916,720)	(7,482,627)
Net Increase (Decrease) from Capital Share Transactions	109,260	660,024
Total Increase (Decrease)	392,283	(400,575)
Net Assets
Beginning of Period	22,684,314	23,084,889
End of Period²	23,076,597	22,684,314
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $40,296,000 and $21,900,000 respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $95,524,000 and $331,281,000.

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

Target Retirement 2030 Fund

Financial Highlights


	Six Months
	Ended
For a Share Outstanding	March 31,			Year Ended September 30,
Throughout Each Period	2016	2015	2014	2013	2012	2011
Net Asset Value, Beginning of Period	$27.77	$28.95	$26.46	$23.51	$19.81	$20.36
Investment Operations
Net Investment Income	. 307	. 633	. 613	. 540	. 561	. 398
Capital Gain Distributions Received	.008	.016	.002	.027	.044	.011
Net Realized and Unrealized Gain (Loss)
on Investments	1.027	(1.242)	2.402	2.897	3.580	(.542)
Total from Investment Operations	1.342	(.593)	3.017	3.464	4.185	(.133)
Distributions
Dividends from Net Investment Income	(. 597)	(. 558)	(. 491)	(. 499)	(. 468)	(. 395)
Distributions from Realized Capital Gains	(. 435)	(. 029)	(. 036)	(. 015)	(. 017)	(. 022)
Total Distributions	(1.032)	(. 587)	(. 527)	(. 514)	(. 485)	(. 417)
Net Asset Value, End of Period	$28.08	$27.77	$28.95	$26.46	$23.51	$19.81

Total Return¹	4.84%	-2.16%	11.51%	15.05%	21.43%	-0.83%

Ratios/Supplemental Data
Net Assets, End of Period (Millions) $23,077		$22,684	$23,085	$17,795	$12,647	$8,245
Ratio of Total Expenses to
Average Net Assets	—	—	—	—	—	—
Acquired Fund Fees and Expenses	0.16%	0.15%	0.17%	0.17%	0.17%	0.18%
Ratio of Net Investment Income to
Average Net Assets	2.09%	2.08%	2.16%	2.30%	2.66%	1.91%
Portfolio Turnover Rate	17%	24%	7%	14%	4%	19%²
The expense ratio, acquired fund fees and expenses, net income ratio, and turnover rate for the current period have been annualized.
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Excludes the value of mutual fund shares delivered and received in connection with a change in the fund’s international equity investments from Vanguard European, Pacific, and Emerging Markets Stock Index Funds to Vanguard Total International Stock Index Fund because those transactions were effected in kind and did not cause the fund to incur transaction costs.

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

64

Target Retirement 2030 Fund

Notes to Financial Statements

Vanguard Target Retirement 2030 Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund follows a balanced investment strategy by investing in selected Vanguard funds to achieve its targeted allocation of assets to U.S. and international stocks, and U.S. and international bonds. Financial statements and other information about each underlying fund are available on vanguard.com.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

Target Retirement 2030 Fund

At March 31, 2016, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

At March 31, 2016, the cost of investment securities for tax purposes was $18,948,637,000. Net unrealized appreciation of investment securities for tax purposes was $4,135,012,000, consisting of unrealized gains of $4,614,268,000 on securities that had risen in value since their purchase and $479,256,000 in unrealized losses on securities that had fallen in value since their purchase.

E. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	March 31, 2016	September 30, 2015
	Shares	Shares
	(000)	(000)
Issued	116,252	260,591
Issued in Lieu of Cash Distributions	28,460	15,901
Redeemed	(139,815)	(256,833)
Net Increase (Decrease) in Shares Outstanding	4,897	19,659

Target Retirement 2030 Fund

F. Transactions during the period in affiliated underlying Vanguard funds were as follows:


			Current Period Transactions
	Sept. 30,		Proceeds			March 31,
	2015		from		Capital Gain	2016
	Market	Purchases	Securities		Distributions	Market
	Value	at Cost	Sold	Income	Received	Value
	($000)	($000)	($000)	($000)	($000)	($000)
Vanguard Market Liquidity Fund	—	NA¹	NA¹	22	—	9,912
Vanguard Total Bond Market II
Index Fund	4,079,108	824,871	682,963	49,461	6,272	4,259,286
Vanguard Total International
Bond Index Fund	1,729,322	162,852	166,048	16,193	—	1,775,617
Vanguard Total International
Stock Index Fund	6,746,275	428,419	477,217	72,022	—	6,815,682
Vanguard Total Stock Market
Index Fund	10,120,273	565,503	1,112,866	98,244	—	10,223,152
Total	22,674,978	1,981,645	2,439,094	235,942	6,272	23,083,649
1 Not applicable—purchases and sales are for temporary cash investment purposes.

G. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

About Your Fund’s Expenses

A typical fund’s expenses are expressed as a percentage of its average net assets. The Target Retirement Funds have no direct expenses, but each fund bears its proportionate share of the costs for the underlying funds in which it invests. These indirect expenses make up the acquired fund fees and expenses, also expressed as a percentage of average net assets.

The following examples are intended to help you understand the ongoing cost (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The costs were calculated using the acquired fund fees and expenses for each Target Retirement Fund.

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

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

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


Six Months Ended March 31, 2016
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
	9/30/2015	3/31/2016	Period
Based on Actual Fund Return
Target Retirement Income Fund	$1,000.00	$1,035.33	$0.71
Target Retirement 2010 Fund	$1,000.00	$1,036.58	$0.71
Target Retirement 2015 Fund	$1,000.00	$1,040.79	$0.77
Target Retirement 2020 Fund	$1,000.00	$1,044.88	$0.77
Target Retirement 2025 Fund	$1,000.00	$1,046.63	$0.77
Target Retirement 2030 Fund	$1,000.00	$1,048.38	$0.82
Based on Hypothetical 5% Yearly Return
Target Retirement Income Fund	$1,000.00	$1,024.30	$0.71
Target Retirement 2010 Fund	$1,000.00	$1,024.30	$0.71
Target Retirement 2015 Fund	$1,000.00	$1,024.25	$0.76
Target Retirement 2020 Fund	$1,000.00	$1,024.25	$0.76
Target Retirement 2025 Fund	$1,000.00	$1,024.25	$0.76
Target Retirement 2030 Fund	$1,000.00	$1,024.20	$0.81

The calculations are based on the acquired fund fees and expenses for the most recent six-month period. The funds’ annualized expense figures for that period are (in order as listed from top to bottom above) 0.14%, 0.14%, 0.15%, 0.15%, 0.15%, and 0.16%. The dollar amounts shown as ”Expenses Paid” are equal to the annualized expense figures for the underlying funds multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (183/366).

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard Target Retirement Funds has renewed each fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard), through its Equity Index Group. The board determined that continuing each fund’s internalized management structure was in the best interests of the funds and their shareholders.

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

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

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

Investment performance
The board considered the performance of the funds, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about each fund’s most recent performance can be found in the Performance Summary pages of this report.

Cost
The board concluded that the funds’ acquired fund fees and expenses were well below the average expense ratios charged by funds in their respective peer groups. The funds do not incur advisory expenses directly; however, the board noted that each of the underlying funds in which the funds invest has advisory expenses well below the relevant peer-group average. Information about the funds’ acquired fund fees and expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements sections.

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

The benefit of economies of scale
The board concluded that Vanguard’s at-cost arrangements with the Target Retirement Funds and their underlying funds ensures that the funds will realize economies of scale as the assets of the underlying funds grow, with the cost to shareholders declining as assets increase.

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

Glossary

Acquired Fund Fees and Expenses. Funds that invest in other Vanguard funds incur no direct expenses, but they do bear proportionate shares of the operating, administrative, and advisory expenses of the underlying funds, and they must pay any fees charged by those funds. The figure for acquired fund fees and expenses represents a weighted average of these underlying costs. Acquired is a term that the Securities and Exchange Commission applies to any mutual fund whose shares are owned by another fund.

Benchmark Information

Target 2010 Composite Index: Derived by applying the fund’s target asset allocation to the results of the following benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for U.S. bonds, the Barclays U.S. Aggregate Bond Index through December 31, 2009, and the Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Barclays U.S. Treasury Inflation Protected Securities Index through June 2, 2013, and the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for short-term reserves, the Citigroup Three-Month Treasury Bill Index through June 2, 2013; for international bonds, the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI US Broad Market Index through June 2, 2013, and the CRSP US Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2015 Composite Index: Derived by applying the fund’s target asset allocation to the results of the following benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for U.S. bonds, the Barclays U.S. Aggregate Bond Index through December 31, 2009, and the Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Barclays U.S. Treasury Inflation Protected Securities Index through June 2, 2013, and the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for international bonds, the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005, the MSCI US Broad Market Index through June 2, 2013, and the CRSP US Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2020 Composite Index: Derived by applying the fund’s target asset allocation to the results of the following benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for U.S. bonds, the Barclays U.S. Aggregate Bond Index through December 31, 2009, and the Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI US Broad Market Index through June 2, 2013, and the CRSP US Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2025 Composite Index: Derived by applying the fund’s target asset allocation to the results of the following benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for U.S. bonds, the Barclays U.S. Aggregate Bond Index through December 31, 2009, and the Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005, the MSCI US Broad Market Index through June 2, 2013, and the CRSP US Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2030 Composite Index: Derived by applying the fund’s target asset allocation to the results of the following benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for U.S. bonds, the Barclays U.S. Aggregate Bond Index through December 31, 2009, and the Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI US Broad Market Index through June 2, 2013, and the CRSP US Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target Income Composite Index: Derived by applying the fund’s target asset allocation to the results of the following benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex US Index thereafter; for U.S. bonds, the Barclays U.S. Aggregate Bond Index through December 31, 2009, and the Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Barclays U.S. Treasury Inflation Protected Securities Index through June 2, 2013, and the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for short-term reserves, the Citigroup Three-Month Treasury Bill Index through June 2, 2013; for international bonds, the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005, the MSCI US Broad Market Index through June 2, 2013, and the CRSP US Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

The People Who Govern Your Fund


InterestedTrustee¹	Rajiv L. Gupta
	Born 1945. Trustee Since December 2001.²Principal
F. William McNabb III	Occupation(s) During the Past Five Years and Other
Born 1957. Trustee Since July 2009. Chairman of	Experience: Chairman and Chief Executive Officer
the Board. Principal Occupation(s) During the Past	(retired 2009) and President (2006–2008) of
Five Years and Other Experience: Chairman of the	Rohm and Haas Co. (chemicals); Director of Tyco
Board of The Vanguard Group, Inc., and of each of	International PLC (diversified manufacturing and
the investment companies served by The Vanguard	services), HP Inc. (printer and personal computer
Group, since January 2010; Director of The Vanguard	manufacturing), and Delphi Automotive PLC
Group since 2008; Chief Executive Officer and	(automotive components); Senior Advisor at
President of The Vanguard Group, and of each of	New Mountain Capital.
the investment companies served by The Vanguard
Group, since 2008; Director of Vanguard Marketing	Amy Gutmann
Corporation; Managing Director of The Vanguard	Born 1949. Trustee Since June 2006. Principal
Group (1995–2008).	Occupation(s) During the Past Five Years and
	Other Experience: President of the University of
IndependentTrustees	Pennsylvania; Christopher H. Browne Distinguished
	Professor of Political Science, School of Arts and
Emerson U. Fullwood	Sciences, and Professor of Communication, Annenberg
Born 1948. Trustee Since January 2008. Principal	School for Communication, with secondary faculty
Occupation(s) During the Past Five Years and Other	appointments in the Department of Philosophy, School
Experience: Executive Chief Staff and Marketing	of Arts and Sciences, and at the Graduate School of
Officer for North America and Corporate Vice President	Education, University of Pennsylvania; Trustee of the
(retired 2008) of Xerox Corporation (document manage-	National Constitution Center; Chair of the Presidential
ment products and services); Executive in Residence	Commission for the Study of Bioethical Issues.
and 2009–2010 Distinguished Minett Professor at
the Rochester Institute of Technology; Lead Director	JoAnn Heffernan Heisen
of SPX FLOW, Inc. (multi-industry manufacturing);	Born 1950. Trustee Since July 1998. Principal
Director of the United Way of Rochester, the University	Occupation(s) During the Past Five Years and
of Rochester Medical Center, Monroe Community	Other Experience: Corporate Vice President and
College Foundation, North Carolina A&T University,	Chief Global Diversity Officer (retired 2008) and
and Roberts Wesleyan College.	Member of the Executive Committee (1997–2008)
	of Johnson & Johnson (pharmaceuticals/medical
	devices/consumer products); Director of Skytop
	Lodge Corporation (hotels) and the Robert Wood
	Johnson Foundation; Member of the Advisory
	Board of the Institute for Women’s Leadership
	at Rutgers University.


F. Joseph Loughrey	Executive Officers
Born 1949. Trustee Since October 2009. Principal
Occupation(s) During the Past Five Years and Other	Glenn Booraem
Experience: President and Chief Operating Officer	Born 1967. Treasurer Since May 2015. Principal
(retired 2009) of Cummins Inc. (industrial machinery);	Occupation(s) During the Past Five Years and
Chairman of the Board of Hillenbrand, Inc. (specialized	Other Experience: Principal of The Vanguard Group,
consumer services), and of Oxfam America; Director	Inc.; Treasurer of each of the investment companies
of SKF AB (industrial machinery), Hyster-Yale Materials	served by The Vanguard Group; Controller of each of
Handling, Inc. (forklift trucks), the Lumina Foundation	the investment companies served by The Vanguard
for Education, and the V Foundation for Cancer	Group (2010–2015); Assistant Controller of each of
Research; Member of the Advisory Council for the	the investment companies served by The Vanguard
College of Arts and Letters and of the Advisory Board	Group (2001–2010).
to the Kellogg Institute for International Studies, both
at the University of Notre Dame.	Thomas J. Higgins
	Born 1957. Chief Financial Officer Since September
Mark Loughridge	2008. Principal Occupation(s) During the Past Five
Born 1953. Trustee Since March 2012. Principal	Years and Other Experience: Principal of The Vanguard
Occupation(s) During the Past Five Years and Other	Group, Inc.; Chief Financial Officer of each of the
Experience: Senior Vice President and Chief Financial	investment companies served by The Vanguard Group;
Officer (retired 2013) at IBM (information technology	Treasurer of each of the investment companies served
services); Fiduciary Member of IBM’s Retirement Plan	by The Vanguard Group (1998–2008).
Committee (2004–2013); Director of the Dow Chemical
Company; Member of the Council on Chicago Booth.	Peter Mahoney
	Born 1974. Controller Since May 2015. Principal
Scott C. Malpass	Occupation(s) During the Past Five Years and
Born 1962. Trustee Since March 2012. Principal	Other Experience: Head of Global Fund Accounting
Occupation(s) During the Past Five Years and Other	at The Vanguard Group, Inc.; Controller of each of the
Experience: Chief Investment Officer and Vice	investment companies served by The Vanguard Group;
President at the University of Notre Dame; Assistant	Head of International Fund Services at The Vanguard
Professor of Finance at the Mendoza College of	Group (2008–2014).
Business at Notre Dame; Member of the Notre Dame
403(b) Investment Committee, the Board of Advisors	Heidi Stam
for Spruceview Capital Partners, and the Investment	Born 1956. Secretary Since July 2005. Principal
Advisory Committee of Major League Baseball; Board	Occupation(s) During the Past Five Years and Other
Member of TIFF Advisory Services, Inc., and Catholic	Experience: Managing Director of The Vanguard
Investment Services, Inc. (investment advisors).	Group, Inc.; General Counsel of The Vanguard Group;
	Secretary of The Vanguard Group and of each of the
André F. Perold	investment companies served by The Vanguard Group;
Born 1952. Trustee Since December 2004. Principal	Director and Senior Vice President of Vanguard
Occupation(s) During the Past Five Years and Other	Marketing Corporation.
Experience: George Gund Professor of Finance and
Banking, Emeritus at the Harvard Business School	Vanguard Senior ManagementTeam
(retired 2011); Chief Investment Officer and Managing
Partner of HighVista Strategies LLC (private investment	Mortimer J. Buckley	James M. Norris
firm); Director of Rand Merchant Bank; Overseer of	Kathleen C. Gubanich	Thomas M. Rampulla
the Museum of Fine Arts Boston.	Martha G. King	Glenn W. Reed
	John T. Marcante	Karin A. Risi
Peter F. Volanakis	Chris D. McIsaac
Born 1955. Trustee Since July 2009. Principal
Occupation(s) During the Past Five Years and Other	Chairman Emeritus and Senior Advisor
Experience: President and Chief Operating Officer
(retired 2010) of Corning Incorporated (communications	John J. Brennan
equipment); Trustee of Colby-Sawyer College and	Chairman, 1996–2009
Chairman of its Finance and Enrollment Committee;	Chief Executive Officer and President, 1996–2008
Member of the Advisory Board of the Norris Cotton
Cancer Center.	Founder

	John C. Bogle
	Chairman and Chief Executive Officer, 1974–1996


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



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This material may be used in conjunction
with the offering of shares of any Vanguard
fund only if preceded or accompanied by
the fund’s current prospectus.

All comparative mutual fund data are from Lipper, a
Thomson Reuters Company, or Morningstar, Inc., unless
otherwise noted.

You can obtain a free copy of Vanguard’s proxy voting
guidelines by visiting vanguard.com/proxyreporting or by
calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, sec.gov. In
addition, you may obtain a free report on how your fund
voted the proxies for securities it owned during the 12
months ended June 30. To get the report, visit either
vanguard.com/proxyreporting or sec.gov.

You can review and copy information about your fund at
the SEC’s Public Reference Room in Washington, D.C. To
find out more about this public service, call the SEC at
202-551-8090. Information about your fund is also
available on the SEC’s website, and you can receive
copies of this information, for a fee, by sending a
request in either of two ways: via email addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

	© 2016 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.

	Q3082 052016

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.

Goals. Create clear, appropriate investment goals.

Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.

Discipline. Maintain perspective and long-term discipline.

A single theme unites these principles: Focus on the things you can control.

We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Target Retirement 2035 Fund.	8
Target Retirement 2040 Fund.	18
Target Retirement 2045 Fund.	28
Target Retirement 2050 Fund.	38
Target Retirement 2055 Fund.	48
Target Retirement 2060 Fund.	58
About Your Fund’s Expenses.	68
Trustees Approve Advisory Arrangements.	70
Glossary.	71

See the Glossary for definitions of investment terms used in this report.

Your Fund’s Total Returns


Six Months Ended March 31, 2016
	Total
	Returns
Vanguard Target Retirement 2035 Fund	5.04%
Target 2035 Composite Index	5.40
Mixed-Asset Target 2035 Funds Average	4.29
Mixed-Asset Target 2035 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2040 Fund	5.14%
Target 2040 Composite Index	5.58
Mixed-Asset Target 2040 Funds Average	4.23
Mixed-Asset Target 2040 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2045 Fund	5.12%
Target 2045 Composite Index	5.59
Mixed-Asset Target 2045 Funds Average	4.45
Mixed-Asset Target 2045 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2050 Fund	5.11%
Target 2050 Composite Index	5.59
Mixed-Asset Target 2050 Funds Average	4.36
Mixed-Asset Target 2050 Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2055 Fund	5.09%
Target 2055 Composite Index	5.59
Mixed-Asset Target 2055+ Funds Average	4.44
Mixed-Asset Target 2055+ Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Vanguard Target Retirement 2060 Fund	5.12%
Target 2060 Composite Index	5.59
Mixed-Asset Target 2055+ Funds Average	4.44
Mixed-Asset Target 2055+ Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

For a benchmark description, see the Glossary.

Chairman’s Letter

Dear Shareholder,

Despite considerable stock market volatility, U.S. stocks notched strong gains—more than double that of international stocks—for the six months ended March 31, 2016. On the fixed income side, international bonds fared best. U.S. bonds, meanwhile, generated solid results.

Each of the six Vanguard Target Retirement Funds covered in this report—those with retirement dates of 2035 through 2060—returned about 5% for the fiscal period. (The Target Retirement Income Fund and the funds with retirement dates of 2010 through 2030 are covered in a separate report.)

International stocks returned about 3% for the period.

Bonds produced gains following a subpar start
After posting weak results for the first three months of the period, bonds managed solid gains in the final three. The broad U.S. taxable bond market returned 2.44% for the fiscal half year.

With stocks volatile and the Fed proceeding cautiously with rate hikes, bonds proved attractive to investors. The yield of the 10-year U.S. Treasury note closed at 1.77% at the end of March, down from 2.05% six months earlier. (Bond prices and yields move in opposite directions.)

Returns for money market funds and savings accounts remained limited by the Fed’s target rate of 0.25%–0.5%, despite the central bank’s 0.25% rate hike in December.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 6.90%. International bonds benefited as foreign currencies strengthened against the dollar, a turnabout from the trend of recent years. Even in local currencies, however, international bond returns were solidly positive, boosted in part by additional stimulus measures taken in Europe and Asia to combat weak growth and low inflation.


Market Barometer

			Total Returns
		Periods Ended March 31, 2016
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	7.75%	0.50%	11.35%
Russell 2000 Index (Small-caps)	2.02	-9.76	7.20
Russell 3000 Index (Broad U.S. market)	7.30	-0.34	11.01
FTSE All-World ex US Index (International)	3.09	-8.53	0.70

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.44%	1.96%	3.78%
Barclays Municipal Bond Index (Broad tax-exempt market)	3.20	3.98	5.59
Citigroup Three-Month U.S. Treasury Bill Index	0.06	0.08	0.04

CPI
Consumer Price Index	0.08%	0.85%	1.28%

Led by the broad U.S. stock fund, all four underlying funds advanced
Vanguard Target Retirement Funds offer investors a broadly diversified portfolio within a single fund that adjusts its underlying asset mix over time. Each fund invests in some of the broadest Vanguard index funds, providing investors access to thousands of U.S. and international stocks and bonds.

The asset allocation in these “funds of funds” gradually shifts from stocks to bonds and becomes more conservative as investors approach retirement. (I’ll discuss this shift in asset allocation later in this letter). Once its target date is reached, each fund continues to adjust until it enters an income phase, when the portfolio will convert to the Target Retirement Income

Fund. The Income Fund, which represents a static allocation of about 70% bonds and 30% stocks, is mostly focused on helping investors generate income and preserve their wealth.

The funds covered in this report are designed for investors who plan to retire sometime after 2030. Because these funds aim to invest for long-term growth, they have a larger allocation to stocks than their more conservative counterparts with earlier target dates.

Among the funds’ four underlying investments, Vanguard Total Stock Market Index Fund stood out most, with a 7.18% return. Its international counterpart, Vanguard Total International Stock Index Fund, returned 2.50%. Stocks from


Expense Ratios
Your Fund Compared With Its Peer Group
	Acquired Fund Fees	Peer Group
	and Expenses	Average
Target Retirement 2035 Fund	0.15%	0.41%
Target Retirement 2040 Fund	0.16	0.46
Target Retirement 2045 Fund	0.16	0.41
Target Retirement 2050 Fund	0.16	0.43
Target Retirement 2055 Fund	0.16	0.37
Target Retirement 2060 Fund	0.16	0.37

The fund expense figures shown—drawn from the prospectus dated January 28, 2016—represent an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the Target Retirement Funds invest. The Target Retirement Funds do not charge any expenses or fees of their own. For the six months ended March 31, 2016, the annualized acquired fund fees and expenses were 0.16% for the 2035 Fund, 0.17% for the 2040 Fund, 0.17% for the 2045 Fund, 0.17% for the 2050 Fund, 0.17% for the 2055 Fund, and 0.17% for the 2060 Fund. Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2015.

Peer groups: For the 2035 Fund, Mixed-Asset Target 2035 Funds; for the 2040 Fund, Mixed-Asset Target 2040 Funds; for the 2045 Fund, Mixed-Asset Target 2045 Funds; for the 2050 Fund, Mixed-Asset Target 2050 Funds; for the 2055 and 2060 Funds, Mixed-Asset Target 2055+ Funds.