Falling yields are leading Vanguard to revamp its money fund. The fund giant will be changing the landscape for three of its money market funds. The company has plans to merge its $6.7 billion Vanguard Treasury Money Market Fund into $21.8 billion Vanguard Admiral Treasury Market Fund. The latter will bring lower costs to run the fund.

The company has also announced its plan for another fund, the Vanguard Federal Money Market Fund. They will be closing the fund to all new accounts and additional purchases.

CEO Bill McNabb stated that "preventative measures" such as these are essential for keeping the funds competitive and the moves offer the right fit for investors who seek to remain "consistent with their goals and risk tolerance."

Press Release

VALLEY FORGE, PA, June 2, 2009 �Vanguard has announced plans to merge the $6.7 billion Vanguard Treasury Money Market Fund (VMPXX) into the lower-cost $21.8 billion Vanguard Admiral� Treasury Money Market Fund (VUSXX). The merger is planned for early August.

In addition, Vanguard has closed the Vanguard Federal Money Market Fund to all new accounts and to additional purchases from current institutional accounts. A $10,000 daily investment limit has been placed on current retail accounts.

�Taking these preventative measures will protect fund shareholders and will help ensure that the yields of the funds remain competitive,� said Bill McNabb, Vanguard CEO. �It is quite possible that yields on government-backed securities, and consequently the Vanguard Admiral Treasury Money Market and Vanguard Federal Money Market Funds, will remain quite low for the foreseeable future. Shareholders may wish to consider switching to alternative Vanguard fund options that are consistent with their goals and risk tolerance.�

Vanguard offers several other high-quality money market funds, including Vanguard Prime Money Market Fund (VMMXX) and Vanguard�s national and state-specific tax-exempt money market funds.

The merger of the Vanguard Treasury Money Market Fund, which has an expense ratio of 0.28%, into the Admiral Treasury Money Market Fund, with its lower expense ratio of 0.15%, will reduce expenses for Treasury Fund shareholders. After the merger, the fund is expected to maintain its expense ratio of 0.15%. Additionally, reducing new cash flow into the Vanguard Federal Money Market Fund may slow the decline of that fund�s yield.

Vanguard�s actions come amid continuing strong demand for government-backed securities, which have served as a safe-haven during the global financial crisis. This increased demand, coupled with cuts to prevailing interest rates by the Federal Reserve, has driven yields of government-backed securities to record lows, with current one- and three-month Treasury bills yielding less than 0.20%. As securities in Vanguard money market funds mature, the reinvestment of assets into new, lower-yielding securities decreases the funds� yields.

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world�s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages more than $1.1 trillion in U.S. mutual fund assets, including nearly $490 billion in retirement assets. Vanguard offers more than 150 funds to U.S. investors and more than 50 additional funds in non-U.S. markets.

Edited by: Kimberly Chin

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