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: 811-7803
Name of Registrant: Vanguard Scottsdale 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: August 31
Date of reporting period: September 1, 2009 – August 31, 2010
Item 1: Reports to Shareholders
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Vanguard Sector Bond Index Funds |
Annual Report |
August 31, 2010 |
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Vanguard Short-Term Government Bond Index Fund |
Vanguard Intermediate-Term Government Bond Index Fund |
Vanguard Long-Term Government Bond Index Fund |
Vanguard Short-Term Corporate Bond Index Fund |
Vanguard Intermediate-Term Corporate Bond Index Fund |
Vanguard Long-Term Corporate Bond Index Fund |
Vanguard Mortgage-Backed Securities Index Fund |
> The partial year covered by this report was marked by unusually high volatility in the fixed income markets as investors’ appetite for risk waxed and waned.
> From November 19, 2009, through August 31, 2010, the ETF Shares of Vanguard’s Sector Bond Index Funds posted returns (as measured by net asset value) ranging from less than 2% for the Short-Term Government Bond Index Fund to more than 16% for the Long-Term Government Bond Index Fund.
> For the same period, the broad U.S. taxable bond market returned almost 7%, well ahead of the –1% return of the broad U.S. stock market.
Contents | |
Your Fund’s Total Returns | 1 |
Chairman’s Letter | 4 |
Short-Term Government Bond Index Fund | 9 |
Intermediate-Term Government Bond Index Fund | 24 |
Long-Term Government Bond Index Fund | 39 |
Short-Term Corporate Bond Index Fund | 53 |
Intermediate-Term Corporate Bond Index Fund | 78 |
Long-Term Corporate Bond Index Fund | 102 |
Mortgage-Backed Securities Index Fund | 121 |
About Your Fund’s Expenses | 137 |
Glossary | 140 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Periods Ended August 31, 2010 | ||
Return Since | ||
Ticker | Share-Class | |
Symbol | Inception | |
Vanguard Short-Term Government Bond Index Fund | ||
Signal Shares1 (Inception: 12/28/2009) | VSBSX | 2.16% |
Barclays Capital U.S. 1–3 Year Government Float Adjusted Index | 2.26 | |
Institutional Shares1 (Inception: 8/23/2010) | VSBIX | 0.03 |
Barclays Capital U.S. 1–3 Year Government Float Adjusted Index | 0.04 | |
ETF Shares2 (Inception: 11/19/2009) | VGSH | |
Market Price | 1.79 | |
Net Asset Value | 1.69 | |
Barclays Capital U.S. 1–3 Year Government Float Adjusted Index | 1.83 | |
Vanguard Intermediate-Term Government Bond Index Fund | ||
Signal Shares1 (Inception: 8/4/2010) | VSIGX | 1.98% |
Barclays Capital U.S. 3–10 Year Government Float Adjusted Index | 1.96 | |
Institutional Shares1 (Inception: 3/19/2010) | VIIGX | 7.69 |
Barclays Capital U.S. 3–10 Year Government Float Adjusted Index | 7.78 | |
ETF Shares2 (Inception: 11/19/2009) | VGIT | |
Market Price | 7.70 | |
Net Asset Value | 7.65 | |
Barclays Capital U.S. 3–10 Year Government Float Adjusted Index | 7.76 | |
Vanguard Long-Term Government Bond Index Fund | ||
Signal Shares1 (Inception: 3/1/2010) | VLGSX | 17.75% |
Barclays Capital U.S. Long Government Float Adjusted Index | 17.66 | |
Institutional Shares1 (Inception: 7/30/2010) | VLGIX | 6.91 |
Barclays Capital U.S. Long Government Float Adjusted Index | 6.63 | |
ETF Shares2 (Inception: 11/19/2009) | VGLT | |
Market Price | 16.28 | |
Net Asset Value | 16.21 | |
Barclays Capital U.S. Long Government Float Adjusted Index | 16.12 |
1 Signal Shares and Institutional Shares are available to certain investors who meet specific administrative, service, and account-size criteria.
2 These Vanguard ETF® Shares are traded on the Nasdaq exchange and are available only through brokers. The table shows the ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. No. 6,879,964 B2; 7,337,138.
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Your Fund’s Total Returns
Periods Ended August 31, 2010 | ||
Return Since | ||
Ticker | Share-Class | |
Symbol | Inception | |
Vanguard Short-Term Corporate Bond Index Fund | ||
Institutional Shares1 (Inception: 11/19/2009) | VSTBX | 5.39% |
ETF Shares2 (Inception: 11/19/2009) | VCSH | |
Market Price | 5.53 | |
Net Asset Value | 5.34 | |
Barclays Capital U.S. 1–5 Year Corporate Bond Index | 5.61 | |
Vanguard Intermediate-Term Corporate Bond Index Fund | ||
Signal Shares1 (Inception: 3/2/2010) | VICSX | 8.86% |
Barclays Capital U.S. 5–10 Year Corporate Bond Index | 8.67 | |
Institutional Shares1 (Inception: 11/19/2009) | VICBX | 11.38 |
ETF Shares2 (Inception: 11/19/2009) | VCIT | |
Market Price | 11.81 | |
Net Asset Value | 11.30 | |
Barclays Capital U.S. 5–10 Year Corporate Bond Index | 11.41 | |
Vanguard Long-Term Corporate Bond Index Fund | ||
Signal Shares1 (Inception: 1/19/2010) | VLTCX | 13.37% |
Barclays Capital U.S. 10+ Year Corporate Bond Index | 13.47 | |
Institutional Shares1 (Inception: 11/19/2009) | VLCIX | 14.61 |
ETF Shares2 (Inception: 11/19/2009) | VCLT | |
Market Price | 15.59 | |
Net Asset Value | 14.54 | |
Barclays Capital U.S. 10+ Year Corporate Bond Index | 14.46 | |
Vanguard Mortgage-Backed Securities Index Fund | ||
Signal Shares1 (Inception: 12/3/2009) | VMBSX | 4.13% |
Barclays Capital U.S. MBS Float Adjusted Index | 4.13 | |
ETF Shares2 (Inception: 11/19/2009) | VMBS | |
Market Price | 4.59 | |
Net Asset Value | 4.39 | |
Barclays Capital U.S. MBS Float Adjusted Index | 4.23 |
1 Signal Shares and Institutional Shares are available to certain investors who meet specific administrative, service, and account-size criteria.
2 These Vanguard ETF® Shares are traded on the Nasdaq exchange and are available only through brokers. The table shows the ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. No. 6,879,964 B2; 7,337,138.
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Your Fund’s Performance at a Glance
Inception Through August 31, 2010 | |||||
Starting | Ending | Distributions Per Share | 30-Day | ||
Share | Share | Income | Capital | SEC | |
Index Fund | Price | Price | Dividends | Gains | Yield |
Vanguard Short-Term Government Bond | |||||
Signal Shares | $19.92 | $20.25 | $0.100 | $0.000 | 0.38% |
Institutional Shares | 25.46 | 25.45 | 0.018 | 0.000 | 0.44 |
ETF Shares | 60.04 | 60.70 | 0.349 | 0.000 | 0.38 |
Vanguard Intermediate-Term Government Bond | |||||
Signal Shares | $21.11 | $21.49 | $0.038 | $0.000 | 1.52% |
Institutional Shares | 25.01 | 26.65 | 0.273 | 0.000 | 1.58 |
ETF Shares | 60.00 | 63.58 | 0.960 | 0.000 | 1.52 |
Vanguard Long-Term Government Bond | |||||
Signal Shares | $19.66 | $22.75 | $0.358 | $0.000 | 3.20% |
Institutional Shares | 27.07 | 28.87 | 0.069 | 0.000 | 3.26 |
ETF Shares | 59.84 | 67.61 | 1.689 | 0.000 | 3.20 |
Vanguard Short-Term Corporate Bond | |||||
Institutional Shares | $25.02 | $25.90 | $0.455 | $0.000 | 2.02% |
ETF Shares | 75.05 | 77.68 | 1.340 | 0.000 | 1.96 |
Vanguard Intermediate-Term Corporate Bond | |||||
Signal Shares | $20.43 | $21.76 | $0.456 | $0.000 | 3.84% |
Institutional Shares | 24.97 | 26.90 | 0.853 | 0.000 | 3.90 |
ETF Shares | 74.90 | 80.67 | 2.527 | 0.000 | 3.84 |
Vanguard Long-Term Corporate Bond | |||||
Signal Shares | $20.12 | $22.00 | $0.736 | $0.000 | 5.23% |
Institutional Shares | 24.89 | 27.32 | 1.088 | 0.000 | 5.29 |
ETF Shares | 74.67 | 81.96 | 3.232 | 0.000 | 5.23 |
Vanguard Mortgage-Backed Securities | |||||
Signal Shares | $20.04 | $20.52 | $0.339 | $0.000 | 2.32% |
ETF Shares | 49.98 | 51.31 | 0.844 | 0.000 | 2.32 |
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![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx6x1.jpg)
Chairman’s Letter
Dear Shareholder,
I am pleased to present this first annual report for Vanguard’s Sector Bond Index Funds, covering the partial fiscal year that ended August 31. Because the ETF Shares of all seven funds were launched on November 19, 2009, we use that inception date to frame this discussion. For performance information on the other share classes of each fund since their respective inception dates, please see Your Fund’s Total Returns.
The almost ten-month span of this report was a volatile period reflected in a seesaw pattern in bond returns. Early on, corporate bonds outperformed their U.S. Treasury counterparts. But amid European debt concerns and a less certain global economic recovery, investors sought shelter in Treasuries—only to emerge more confident and re-embrace riskier corporate bonds later in the fiscal year.
Against this backdrop, the best performer was Vanguard Long-Term Government Bond Index Fund, with a return of more than 16%. (All returns cited in this letter are for ETF Shares, based on net asset value.) Not far behind was Vanguard Long-Term Corporate Bond Index Fund, with a return of more than 14%. Vanguard Short-Term Government Bond Index Fund had the lowest return, less than 2%.
Please note: we expect the funds to distribute modest capital gains in December. These gains are the result of transaction activity in the new and
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relatively small funds. As the fund assets grow, we would expect such distributions to become less likely.
Bonds produced strong returns as prices rose and yields declined
The economic uncertainty and high stock market volatility during the 12 months ended August 31 created a favorable environment for fixed income investments. For the full fiscal year, the broad taxable bond market returned more than 9%, as investors sought shelter in U.S. Treasury and corporate bonds. The municipal bond market returned a bit more. In both markets, much of the total return came from rising bond prices. The flip side of rising prices, of course, is shrinking yields, which can set the stage for lower future returns.
As it has since December 2008, the Federal Reserve kept its target for short-term interest rates between 0% and 0.25%, in an effort to bolster the economy. This policy has kept a tight lid on the returns available from Treasury bills, commercial paper, and other money market instruments. Near-zero short-term yields also were a factor nudging investors to shift to bonds in search of income, despite the risks such a shift entails.
A ragged 12-month climb in global stock markets
At the start of the period, stock markets moved higher as global economies continued to pull out of a deep downturn. Within a few months, however, optimism began to fade. Europe’s sovereign debt crisis fueled fears of another global financial shock, while persistently high
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended August 31, 2010 | |||
One Year | Three Years | Five Years | |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index | |||
(Broad taxable market) | 9.18% | 7.65% | 5.96% |
Barclays Capital Municipal Bond Index | 9.78 | 6.62 | 5.02 |
Citigroup 3-Month Treasury Bill Index | 0.12 | 1.13 | 2.53 |
Stocks | |||
Russell 1000 Index (Large-caps) | 5.55% | –8.34% | –0.71% |
Russell 2000 Index (Small-caps) | 6.60 | –7.44 | –0.69 |
Dow Jones U.S. Total Stock Market Index | 6.15 | –7.83 | –0.31 |
MSCI All Country World Index ex USA (International) | 3.27 | –7.93 | 3.78 |
CPI | |||
Consumer Price Index | 1.15% | 1.64% | 2.14% |
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unemployment and downward revisions to U.S. economic indicators suggested that the powerful rebound in corporate earnings could be at risk.
This alternating pattern of hope and fear persisted through the period’s final months. The net result for the fiscal year was mid-single-digit gains in the broad U.S. stock market. International stocks returned about 3%, as modest declines in developed markets in Europe and the Pacific region were offset by a strong rally in emerging markets.
Longer-term bonds were the best performers
There was no clear winner between U.S. government and corporate bonds for the nearly ten months from November 19, 2009, through August 31, 2010, as the lead shifted back and forth at different spots along the yield curve. Early on, corporate bonds generally outperformed U.S. Treasury and other government securities as investors favored higher- yielding, riskier investments. A key question on the mind of many investors was when the Federal Reserve might begin raising interest rates.
By spring, however, this question was replaced with four major concerns: European sovereign creditworthiness, “stress tests” for European banks, prospects for financial regulatory reform in the United States, and the fate of Goldman Sachs amid civil fraud charges by the Securities and Exchange Commission. Uncertainty led investors to seek safety in Treasuries: Demand for the 2-year Treasury note was so strong that the yield fell to record lows at several monthly auctions. As these issues were either resolved or addressed sufficiently to allay most investor anxiety, demand again picked up for corporate bonds.
Among both short- and intermediate-term bonds, corporate issues outperformed their Treasury and agency counterparts over the nearly ten-month period. Vanguard Short-Term Corporate Bond Index Fund returned 5.34%, compared with 1.69% for the Short-Term Government Bond Index Fund, and the Intermediate-Term Corporate Bond Index Fund returned 11.30%, compared with 7.65% for the Intermediate-Term Government Bond Index Fund. (Although the average maturities and durations of both of these corporate funds are longer than those of their government counterparts, the broad comparison helps to illustrate market dynamics.)
But at the long end of the maturity spectrum, Treasury and government bonds overtook corporates. The Long-Term Government Bond Index Fund returned 16.21%, and the Long-Term Corporate Bond Index Fund returned 14.54%. The prices of longer-term bonds—which tend to be more sensitive to interest rate changes—benefited as rates fell.
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Across the investment-grade corporate bond market, the three major sectors—industrials, financials, and utilities—produced relatively similar returns. Lower-quality bonds generally outpaced their higher-rated counterparts.
As mortgage rates remained low, Vanguard Mortgage-Backed Securities Index Fund returned 4.39%. Because this fund holds primarily U.S. agency securities, its average quality is similar to that of the government funds.
Please note: Because the Vanguard Sector Bond Index Funds have a track record of less than a year and share classes that were introduced on various dates, this first annual report does not include a year-over-year comparison of 30-day SEC yields. Yields as of August 31 are shown in Your Fund’s Performance at a Glance and on each Fund Profile page.
Off to a good start
The Vanguard Sector Bond Index Funds had attractive returns in their nearly one year of operation, although it would be unrealistic to expect them to earn similar returns (especially in the double digits) over the long term. More important, the funds are off to a good start in closely tracking their target indexes, the hallmark of a successful index fund.
In the semiannual report, we noted that we would expect the differences between fund and target index returns to narrow as fund assets increase. In general, the funds’ have narrowed the gap, a tribute to the index fund management skills and sophisticated technology of Vanguard Fixed Income Group. For example, because it would be very costly and impractical for each fund to own all of the bonds in its target index, the funds are managed using a sampling strategy—each holds a range of securities that, in the aggregate, approximates the full target index in terms of key risk factors and other characteristics. Using sampling puts a premium on manager skill.
Bonds’ volatility underscores the value of diversification
The various fixed income market sectors will likely continue to trade places in the performance rankings over time—just as equity sectors do. Because such twists and turns are hard to predict, we encourage you to diversify your bond holdings across maturities and sectors, consistent with the investment objectives and principles you use in managing your total portfolio. The low-cost Vanguard Sector Bond Index Funds can help by offering you the flexibility to tailor both the credit quality and duration of the fixed income component of your portfolio.
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Many investors are concerned about what may happen to their bond holdings if interest rates rise. Conventional wisdom might suggest reallocating some of your assets into shorter-maturity bond funds, which are often thought to be less sensitive to changes in interest rates. Recent Vanguard research, however, underscores the benefits of maintaining a broadly diversified fixed income portfolio regardless of the future direction of interest rates. In fact, the high uncertainty about the outlook for economic growth, the deficit, inflation, and interest rates would seem to support greater fixed income diversification, not less.
Thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx10x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
September 14, 2010
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Short-Term Government Bond Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Issues | 131 | 508 | 8,214 | |
Yield3 | 0.6% | 2.3% | ||
Signal Shares | 0.4% | |||
Institutional Shares | 0.4% | |||
ETF Shares | 0.4% | |||
Yield to Maturity | 0.6%4 | 0.6% | 2.3% | |
Average Coupon | 2.4% | 2.0% | 4.4% | |
Average Effective | ||||
Maturity | 2.0 years | 2.0 years | 6.4 years | |
Average Duration | 1.8 years | 1.9 years | 4.3 years | |
Expense Ratio5 | — | — | ||
Signal Shares | 0.15% | |||
Institutional Shares | 0.09% | |||
ETF Shares | 0.15% | |||
Short-Term Reserves | 0.1% | — | — |
Sector Diversification6 (% of portfolio) | |
Treasury/Agency | 99.9% |
Short-Term Reserves | 0.1 |
Distribution by Maturity (% of portfolio) | |
Under 1 Year | 0.1% |
1–3 Years | 99.3 |
3– 5 Years | 0.6 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 99.9% |
Aa | 0.1 |
For information about these ratings, see the Glossary entry for Credit Quality. | |
1 Barclays Capital U.S. 1–3 Year Government Float Adjusted Index.
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
4 Before expenses.
5 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.15% for Signal Shares, 0.09% for Institutional Shares, and 0.15% for ETF Shares.
6 The agency sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
9
Short-Term Government Bond Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx12x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Short-Term Government Bond Index Fund | ||
ETF Shares Net Asset Value | 1.69% | $10,169 |
Short-Term Government Bond Index Fund ETF Shares Market Price | 1.79 | 10,179 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. 1–3 Year Government Float Adjusted Index | 1.83 | 10,183 |
Final Value of | ||
Since | a $1,000,000 | |
Inception1 | Investment | |
Short-Term Government Bond Index Fund Signal Shares | 2.16% | $1,021,632 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 8.01 | 1,080,054 |
Barclays Capital U.S. 1–3 Year Government Float Adjusted Index | 2.26 | 1,022,604 |
Final Value of | ||
Since | a $5,000,000 | |
Inception1 | Investment | |
Short-Term Government Bond Index Fund Institutional Shares | 0.03% | $5,001,572 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 0.38 | 5,018,900 |
Barclays Capital U.S. 1–3 Year Government Float Adjusted Index | 0.04 | 5,002,218 |
1 Performance for the fund and its comparative standards is calculated since the following inception dates: November 19, 2009, for the ETF Shares; December 28, 2009, for the Signal Shares; and August 23, 2010, for the Institutional Shares.
See Financial Highlights for dividend and capital gains information.
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Short-Term Government Bond Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 1.1% | 0.6% | 1.7% | 1.8% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Signal Shares | 12/28/2009 | 1.41% | 0.37% | 1.78% |
ETF Shares | 11/19/2009 | |||
Market Price | 1.38 | |||
Net Asset Value | 1.27 |
1 Barclays Capital U.S. 1–3 Year Government Float Adjusted Index.
For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Performance tab. The Premium/Discount table there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.
See Financial Highlights for dividend and capital gains information.
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Short-Term Government Bond Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
U.S. Government and Agency Obligations (99.5%) | ||||
U.S. Government Securities (74.0%) | ||||
United States Treasury Note/Bond | 1.000% | 9/30/11 | 1,805 | 1,818 |
United States Treasury Note/Bond | 4.500% | 9/30/11 | 1,490 | 1,557 |
United States Treasury Note/Bond | 1.000% | 10/31/11 | 2,725 | 2,745 |
United States Treasury Note/Bond | 4.625% | 10/31/11 | 545 | 572 |
United States Treasury Note/Bond | 1.750% | 11/15/11 | 870 | 885 |
United States Treasury Note/Bond | 0.750% | 11/30/11 | 451 | 453 |
United States Treasury Note/Bond | 4.500% | 11/30/11 | 1,490 | 1,567 |
United States Treasury Note/Bond | 1.125% | 12/15/11 | 965 | 974 |
United States Treasury Note/Bond | 1.000% | 12/31/11 | 1,140 | 1,149 |
United States Treasury Note/Bond | 4.625% | 12/31/11 | 596 | 630 |
United States Treasury Note/Bond | 1.125% | 1/15/12 | 270 | 273 |
United States Treasury Note/Bond | 0.875% | 1/31/12 | 650 | 655 |
United States Treasury Note/Bond | 1.375% | 2/15/12 | 369 | 374 |
United States Treasury Note/Bond | 4.875% | 2/15/12 | 1,671 | 1,780 |
United States Treasury Note/Bond | 0.875% | 2/29/12 | 595 | 599 |
United States Treasury Note/Bond | 4.625% | 2/29/12 | 1,610 | 1,712 |
United States Treasury Note/Bond | 1.375% | 3/15/12 | 800 | 812 |
United States Treasury Note/Bond | 1.000% | 3/31/12 | 805 | 812 |
United States Treasury Note/Bond | 4.500% | 3/31/12 | 870 | 926 |
United States Treasury Note/Bond | 1.375% | 4/15/12 | 935 | 949 |
United States Treasury Note/Bond | 1.000% | 4/30/12 | 840 | 848 |
United States Treasury Note/Bond | 4.500% | 4/30/12 | 1,227 | 1,310 |
United States Treasury Note/Bond | 1.375% | 5/15/12 | 626 | 636 |
United States Treasury Note/Bond | 0.750% | 5/31/12 | 730 | 734 |
United States Treasury Note/Bond | 4.750% | 5/31/12 | 885 | 951 |
United States Treasury Note/Bond | 1.875% | 6/15/12 | 1,280 | 1,313 |
United States Treasury Note/Bond | 0.625% | 6/30/12 | 1,262 | 1,266 |
United States Treasury Note/Bond | 4.875% | 6/30/12 | 1,415 | 1,529 |
United States Treasury Note/Bond | 1.500% | 7/15/12 | 265 | 270 |
United States Treasury Note/Bond | 0.625% | 7/31/12 | 1,549 | 1,553 |
United States Treasury Note/Bond | 4.625% | 7/31/12 | 1,410 | 1,523 |
United States Treasury Note/Bond | 1.750% | 8/15/12 | 1,136 | 1,164 |
United States Treasury Note/Bond | 4.375% | 8/15/12 | 1,230 | 1,324 |
United States Treasury Note/Bond | 0.375% | 8/31/12 | 100 | 100 |
United States Treasury Note/Bond | 4.125% | 8/31/12 | 1,125 | 1,207 |
United States Treasury Note/Bond | 1.375% | 9/15/12 | 3,615 | 3,678 |
United States Treasury Note/Bond | 4.250% | 9/30/12 | 495 | 534 |
United States Treasury Note/Bond | 1.375% | 10/15/12 | 1,190 | 1,211 |
United States Treasury Note/Bond | 3.875% | 10/31/12 | 1,595 | 1,712 |
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Short-Term Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
United States Treasury Note/Bond | 1.375% | 11/15/12 | 1,528 | 1,556 |
United States Treasury Note/Bond | 4.000% | 11/15/12 | 512 | 551 |
United States Treasury Note/Bond | 3.375% | 11/30/12 | 330 | 351 |
United States Treasury Note/Bond | 1.125% | 12/15/12 | 990 | 1,003 |
United States Treasury Note/Bond | 3.625% | 12/31/12 | 780 | 836 |
United States Treasury Note/Bond | 1.375% | 1/15/13 | 578 | 589 |
United States Treasury Note/Bond | 2.875% | 1/31/13 | 1,415 | 1,495 |
United States Treasury Note/Bond | 1.375% | 2/15/13 | 747 | 761 |
United States Treasury Note/Bond | 3.875% | 2/15/13 | 1,190 | 1,287 |
United States Treasury Note/Bond | 2.750% | 2/28/13 | 1,175 | 1,239 |
United States Treasury Note/Bond | 1.375% | 3/15/13 | 1,209 | 1,232 |
United States Treasury Note/Bond | 2.500% | 3/31/13 | 1,344 | 1,410 |
United States Treasury Note/Bond | 1.750% | 4/15/13 | 1,380 | 1,420 |
United States Treasury Note/Bond | 3.125% | 4/30/13 | 747 | 797 |
United States Treasury Note/Bond | 1.375% | 5/15/13 | 1,135 | 1,157 |
United States Treasury Note/Bond | 3.625% | 5/15/13 | 521 | 564 |
United States Treasury Note/Bond | 3.500% | 5/31/13 | 1,060 | 1,144 |
United States Treasury Note/Bond | 1.125% | 6/15/13 | 1,493 | 1,511 |
United States Treasury Note/Bond | 3.375% | 6/30/13 | 255 | 275 |
United States Treasury Note/Bond | 1.000% | 7/15/13 | 1,167 | 1,177 |
United States Treasury Note/Bond | 3.375% | 7/31/13 | 1,313 | 1,416 |
United States Treasury Note/Bond | 0.750% | 8/15/13 | 1,298 | 1,300 |
United States Treasury Note/Bond | 4.250% | 8/15/13 | 1,193 | 1,318 |
68,494 | ||||
Agency Bonds and Notes (25.5%) | ||||
1 Bank of America Corp. | 2.100% | 4/30/12 | 530 | 543 |
1 Bank of America Corp. | 3.125% | 6/15/12 | 200 | 209 |
1 Citibank NA | 1.750% | 12/28/12 | 300 | 307 |
1 Citigroup Funding Inc. | 1.875% | 10/22/12 | 115 | 118 |
1 Citigroup Inc. | 2.125% | 4/30/12 | 100 | 102 |
2 Federal Farm Credit Bank | 1.750% | 2/21/13 | 200 | 205 |
2 Federal Farm Credit Bank | 1.375% | 6/25/13 | 60 | 61 |
2 Federal Home Loan Banks | 1.000% | 12/28/11 | 875 | 882 |
2 Federal Home Loan Banks | 1.125% | 5/18/12 | 465 | 469 |
2 Federal Home Loan Banks | 1.375% | 6/8/12 | 50 | 51 |
2 Federal Home Loan Banks | 1.750% | 8/22/12 | 320 | 327 |
2 Federal Home Loan Banks | 1.625% | 9/26/12 | 690 | 704 |
2 Federal Home Loan Banks | 4.500% | 11/15/12 | 100 | 108 |
2 Federal Home Loan Banks | 1.625% | 11/21/12 | 200 | 204 |
2 Federal Home Loan Banks | 1.750% | 12/14/12 | 50 | 51 |
2 Federal Home Loan Banks | 1.500% | 1/16/13 | 25 | 25 |
2 Federal Home Loan Banks | 1.625% | 3/20/13 | 25 | 25 |
2 Federal Home Loan Banks | 3.875% | 6/14/13 | 50 | 54 |
2 Federal Home Loan Banks | 1.875% | 6/21/13 | 825 | 849 |
2 Federal Home Loan Mortgage Corp. | 1.125% | 12/15/11 | 730 | 737 |
2 Federal Home Loan Mortgage Corp. | 5.750% | 1/15/12 | 100 | 107 |
2 Federal Home Loan Mortgage Corp. | 2.125% | 3/23/12 | 460 | 471 |
2 Federal Home Loan Mortgage Corp. | 1.750% | 6/15/12 | 770 | 786 |
2 Federal Home Loan Mortgage Corp. | 5.125% | 7/15/12 | 325 | 352 |
2 Federal Home Loan Mortgage Corp. | 1.125% | 7/27/12 | 415 | 419 |
2 Federal Home Loan Mortgage Corp. | 1.000% | 8/28/12 | 225 | 227 |
2 Federal Home Loan Mortgage Corp. | 2.125% | 9/21/12 | 500 | 515 |
2 Federal Home Loan Mortgage Corp. | 4.125% | 12/21/12 | 100 | 108 |
2 Federal Home Loan Mortgage Corp. | 1.625% | 4/15/13 | 650 | 664 |
2 Federal Home Loan Mortgage Corp. | 0.875% | 10/28/13 | 600 | 598 |
2 Federal National Mortgage Assn. | 5.000% | 10/15/11 | 300 | 315 |
13
Short-Term Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
2 | Federal National Mortgage Assn. | 5.375% | 11/15/11 | 650 | 689 |
2 | Federal National Mortgage Assn. | 1.000% | 11/23/11 | 580 | 584 |
2 | Federal National Mortgage Assn. | 2.000% | 1/9/12 | 50 | 51 |
2 | Federal National Mortgage Assn. | 0.875% | 1/12/12 | 25 | 25 |
2 | Federal National Mortgage Assn. | 5.000% | 2/16/12 | 25 | 27 |
2 | Federal National Mortgage Assn. | 6.125% | 3/15/12 | 525 | 570 |
2 | Federal National Mortgage Assn. | 1.000% | 4/4/12 | 100 | 101 |
2 | Federal National Mortgage Assn. | 1.875% | 4/20/12 | 25 | 26 |
2 | Federal National Mortgage Assn. | 4.875% | 5/18/12 | 100 | 107 |
2 | Federal National Mortgage Assn. | 1.250% | 6/22/12 | 270 | 273 |
2 | Federal National Mortgage Assn. | 1.125% | 7/30/12 | 225 | 227 |
2 | Federal National Mortgage Assn. | 5.250% | 8/1/12 | 125 | 135 |
2 | Federal National Mortgage Assn. | 1.750% | 8/10/12 | 100 | 102 |
2 | Federal National Mortgage Assn. | 4.375% | 9/15/12 | 450 | 484 |
2,3 | Federal National Mortgage Assn. | 1.550% | 9/17/12 | 1,000 | 1,000 |
2 | Federal National Mortgage Assn. | 0.625% | 9/24/12 | 375 | 375 |
2,3 | Federal National Mortgage Assn. | 2.000% | 9/28/12 | 2,500 | 2,503 |
2,3 | Federal National Mortgage Assn. | 1.600% | 10/1/12 | 50 | 50 |
2 | Federal National Mortgage Assn. | 0.850% | 4/8/13 | 27 | 27 |
2 | Federal National Mortgage Assn. | 3.250% | 4/9/13 | 175 | 186 |
2 | Federal National Mortgage Assn. | 1.750% | 5/7/13 | 25 | 26 |
2 | Federal National Mortgage Assn. | 1.500% | 6/26/13 | 475 | 484 |
2 | Federal National Mortgage Assn. | 1.250% | 8/20/13 | 675 | 682 |
1 | General Electric Capital Corp. | 2.200% | 6/8/12 | 115 | 118 |
1 | General Electric Capital Corp. | 2.000% | 9/28/12 | 115 | 118 |
1 | General Electric Capital Corp. | 2.125% | 12/21/12 | 255 | 263 |
1 | Goldman Sachs Group Inc. | 2.150% | 3/15/12 | 100 | 102 |
1 | Goldman Sachs Group Inc. | 3.250% | 6/15/12 | 300 | 314 |
1 | HSBC USA Inc. | 3.125% | 12/16/11 | 250 | 259 |
1 | John Deere Capital Corp. | 2.875% | 6/19/12 | 490 | 510 |
1 | JPMorgan Chase & Co. | 3.125% | 12/1/11 | 450 | 465 |
1 | JPMorgan Chase & Co. | 2.200% | 6/15/12 | 310 | 319 |
1 | JPMorgan Chase & Co. | 2.125% | 6/22/12 | 210 | 216 |
1 | Morgan Stanley | 3.250% | 12/1/11 | 300 | 310 |
1 | Morgan Stanley | 2.250% | 3/13/12 | 220 | 226 |
1 | Morgan Stanley | 1.950% | 6/20/12 | 400 | 410 |
1 | PNC Funding Corp. | 2.300% | 6/22/12 | 200 | 206 |
1 | Wells Fargo & Co. | 3.000% | 12/9/11 | 375 | 387 |
23,550 | |||||
Total U.S. Government and Agency Obligations (Cost $91,336) | 92,044 | ||||
Shares | |||||
Temporary Cash Investment (0.3%) | |||||
Money Market Fund (0.3%) | |||||
4 | Vanguard Market Liquidity Fund (Cost $241) | 0.288% | 240,822 | 241 | |
Total Investments (99.8%) (Cost $91,577) | 92,285 | ||||
Other Assets and Liabilities (0.2%) | |||||
Other Assets | 6,303 | ||||
Liabilities | (6,073) | ||||
230 | |||||
Net Assets (100%) | 92,515 |
14
Short-Term Government Bond Index Fund
Market | |
Value• | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | 92,285 |
Receivables for Investment Securities Sold | 5,784 |
Other Assets | 519 |
Total Assets | 98,588 |
Liabilities | |
Payables for Investment Securities Purchased | 5,977 |
Other Liabilities | 96 |
Total Liabilities | 6,073 |
Net Assets | 92,515 |
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 91,763 |
Undistributed Net Investment Income | — |
Accumulated Net Realized Gains | 44 |
Unrealized Appreciation (Depreciation) | 708 |
Net Assets | 92,515 |
Signal Shares—Net Assets | |
Applicable to 276,488 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 5,599 |
Net Asset Value Per Share—Signal Shares | $20.25 |
Institutional Shares—Net Assets | |
Applicable to 314,443 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 8,003 |
Net Asset Value Per Share—Institutional Shares | $25.45 |
ETF Shares—Net Assets | |
Applicable to 1,300,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 78,913 |
Net Asset Value Per Share—ETF Shares | $60.70 |
• See Note A in Notes to Financial Statements.
1 Guaranteed by the Federal Deposit Insurance Corporation (FDIC) as part of the Temporary Liquidity Guarantee Program.
2 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
3 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.
15
Short-Term Government Bond Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest2 | 333 |
Total Income | 333 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 1 |
Management and Administrative—Signal Shares | 3 |
Management and Administrative—Institutional Shares | — |
Management and Administrative—ETF Shares | 30 |
Marketing and Distribution—Signal Shares | — |
Marketing and Distribution—Institutional Shares | — |
Marketing and Distribution—ETF Shares | 2 |
Custodian Fees | 3 |
Auditing Fees | 10 |
Shareholders’ Reports—Signal Shares | — |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 1 |
Total Expenses | 50 |
Net Investment Income | 283 |
Realized Net Gain (Loss) on Investment Securities Sold | 44 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 708 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,035 |
1 Inception. | |
2 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
Short-Term Government Bond Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 283 |
Realized Net Gain (Loss) | 44 |
Change in Unrealized Appreciation (Depreciation) | 708 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,035 |
Distributions | |
Net Investment Income | |
Signal Shares | (25) |
Institutional Shares | (6) |
ETF Shares | (252) |
Realized Capital Gain | |
Signal Shares | — |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (283) |
Capital Share Transactions | |
Signal Shares | 5,526 |
Institutional Shares | 8,005 |
ETF Shares | 78,232 |
Net Increase (Decrease) from Capital Share Transactions | 91,763 |
Total Increase (Decrease) | 92,515 |
Net Assets | |
Beginning of Period | — |
End of Period | 92,515 |
1 Inception. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Short-Term Government Bond Index Fund
Financial Highlights
Signal Shares | |
December 28, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $19.92 |
Investment Operations | |
Net Investment Income | .101 |
Net Realized and Unrealized Gain (Loss) on Investments | .329 |
Total from Investment Operations | .430 |
Distributions | |
Dividends from Net Investment Income | (.100) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.100) |
Net Asset Value, End of Period | $20.25 |
Total Return | 2.16% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $6 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 0.84%2 |
Portfolio Turnover Rate3 | 69% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
18
Short-Term Government Bond Index Fund
Financial Highlights
Institutional Shares | |
August 23, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $25.46 |
Investment Operations | |
Net Investment Income | .005 |
Net Realized and Unrealized Gain (Loss) on Investments | .003 |
Total from Investment Operations | .008 |
Distributions | |
Dividends from Net Investment Income | (.018) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.018) |
Net Asset Value, End of Period | $25.45 |
Total Return | 0.03% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $8 |
Ratio of Total Expenses to Average Net Assets | 0.09%2 |
Ratio of Net Investment Income to Average Net Assets | 0.90%2 |
Portfolio Turnover Rate3 | 69% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
19
Short-Term Government Bond Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $60.04 |
Investment Operations | |
Net Investment Income | .349 |
Net Realized and Unrealized Gain (Loss) on Investments | .660 |
Total from Investment Operations | 1.009 |
Distributions | |
Dividends from Net Investment Income | (.349) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.349) |
Net Asset Value, End of Period | $60.70 |
Total Return | 1.69% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $79 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 0.84%2 |
Portfolio Turnover Rate3 | 69% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
20
Short-Term Government Bond Index Fund
Notes to Financial Statements
Vanguard Short-Term Government Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. Signal Shares were first issued on December 28, 2009, and Institutional Shares were first issued on August 23, 2010. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees, if any, assessed on purchases of capital shares are credited to paid-in capital.
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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $15,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
21
Short-Term Government Bond Index 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.
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 fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 92,044 | — |
Temporary Cash Investments | 241 | — | — |
Total | 241 | 92,044 | — |
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.
For tax purposes, at August 31, 2010, the fund had short-term capital gains of $44,000 available for distribution. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $91,577,000. Net unrealized appreciation of investment securities for tax purposes was $708,000, consisting of unrealized gains of $716,000 on securities that had risen in value since their purchase and $8,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the period ended August 31, 2010, the fund purchased $117,390,000 of investment securities and sold $29,182,000 of investment securities, other than temporary cash investments.
22
Short-Term Government Bond Index Fund
F. Capital share transactions for each class of shares were:
Inception to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Signal Shares | ||
Issued | 5,501 | 275 |
Issued in Lieu of Cash Distributions | 25 | 1 |
Redeemed | — | — |
Net Increase (Decrease)—Signal Shares | 5,526 | 276 |
Institutional Shares | ||
Issued | 7,999 | 314 |
Issued in Lieu of Cash Distributions | 6 | — |
Redeemed | — | — |
Net Increase (Decrease)—Institutional Shares | 8,005 | 314 |
ETF Shares | ||
Issued | 78,232 | 1,300 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | — | — |
Net Increase (Decrease)—ETF Shares | 78,232 | 1,300 |
1 Inception was November 19, 2009, for ETF Shares, December 28, 2009, for Signal Shares, and August 23, 2010, for Institutional Shares. |
G. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
23
Intermediate-Term Government Bond Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Issues | 126 | 416 | 8,214 | |
Yield3 | 1.6% | 2.3% | ||
Signal Shares | 1.5% | |||
Institutional Shares | 1.6% | |||
ETF Shares | 1.5% | |||
Yield to Maturity | 1.6%4 | 1.6% | 2.3% | |
Average Coupon | 3.3% | 3.3% | 4.4% | |
Average Effective | ||||
Maturity | 5.8 years | 5.9 years | 6.4 years | |
Average Duration | 5.3 years | 5.3 years | 4.3 years | |
Expense Ratio5 | — | — | ||
Signal Shares | 0.15% | |||
Institutional Shares | 0.09% | |||
ETF Shares | 0.15% | |||
Short-Term Reserves | 1.4% | — | — |
Sector Diversification6 (% of portfolio) | |
Treasury/Agency | 98.6% |
Short-Term Reserves | 1.4 |
Distribution by Maturity (% of portfolio) | |
Under 1 Year | 1.4% |
1– 5 Years | 46.9 |
5–10 Years | 51.7 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 99.8% |
Aa | 0.2 |
For information about these ratings, see the Glossary entry for Credit Quality. |
1 Barclays Capital U.S. 3–10 Year Government Float Adjusted Index.
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
4 Before expenses.
5 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.15% for Signal Shares, 0.09% for Institutional Shares, and 0.15% for ETF Shares.
6 The agency sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
24
Intermediate-Term Government Bond Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx27x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Intermediate-Term Government Bond Index Fund | ||
ETF Shares Net Asset Value | 7.65% | $10,765 |
Intermediate-Term Government Bond Index Fund ETF Shares Market Price | 7.70 | 10,770 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. 3–10 Year Government Float Adjusted Index | 7.76 | 10,776 |
Final Value of | ||
Since | a $1,000,000 | |
Inception1 | Investment | |
Intermediate-Term Government Bond Index Fund Signal Shares | 1.98% | $1,019,805 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 1.44 | 1,014,425 |
Barclays Capital U.S. 3–10 Year Government Float Adjusted Index | 1.96 | 1,019,555 |
Final Value of | ||
Since | a $5,000,000 | |
Inception1 | Investment | |
Intermediate-Term Government Bond Index Fund Institutional Shares | 7.69% | $5,384,724 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 5.62 | 5,281,086 |
Barclays Capital U.S. 3–10 Year Government Float Adjusted Index | 7.78 | 5,389,173 |
1 Performance for the fund and its comparative standards is calculated since the following inception dates: November 19, 2009, for the ETF Shares; August 4, 2010, for the Signal Shares; and March 19, 2010, for the Institutional Shares.
See Financial Highlights for dividend and capital gains information.
25
Intermediate-Term Government Bond Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 6.0% | 1.7% | 7.7% | 7.8% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Institutional Shares | 3/19/2010 | 3.92% | 0.72% | 4.64% |
ETF Shares | 11/19/2009 | |||
Market Price | 4.68 | |||
Net Asset Value | 4.62 |
See Financial Highlights for dividend and capital gains information.
26
Intermediate-Term Government Bond Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
U.S. Government and Agency Obligations (98.1%) | ||||
U.S. Government Securities (88.0%) | ||||
United States Treasury Note/Bond | 0.875% | 12/31/10 | 80 | 80 |
United States Treasury Note/Bond | 3.125% | 8/31/13 | 820 | 879 |
United States Treasury Note/Bond | 3.125% | 9/30/13 | 1,755 | 1,883 |
United States Treasury Note/Bond | 2.750% | 10/31/13 | 2,222 | 2,360 |
United States Treasury Note/Bond | 4.250% | 11/15/13 | 1,848 | 2,055 |
United States Treasury Note/Bond | 2.000% | 11/30/13 | 924 | 960 |
United States Treasury Note/Bond | 1.500% | 12/31/13 | 859 | 879 |
United States Treasury Note/Bond | 1.750% | 1/31/14 | 944 | 973 |
United States Treasury Note/Bond | 4.000% | 2/15/14 | 974 | 1,079 |
United States Treasury Note/Bond | 1.875% | 2/28/14 | 465 | 481 |
United States Treasury Note/Bond | 1.750% | 3/31/14 | 1,153 | 1,188 |
United States Treasury Note/Bond | 1.875% | 4/30/14 | 882 | 912 |
United States Treasury Note/Bond | 4.750% | 5/15/14 | 799 | 912 |
United States Treasury Note/Bond | 2.250% | 5/31/14 | 1,091 | 1,144 |
United States Treasury Note/Bond | 2.625% | 6/30/14 | 111 | 118 |
United States Treasury Note/Bond | 2.625% | 7/31/14 | 3,147 | 3,342 |
United States Treasury Note/Bond | 2.375% | 8/31/14 | 382 | 402 |
United States Treasury Note/Bond | 2.375% | 9/30/14 | 252 | 265 |
United States Treasury Note/Bond | 2.375% | 10/31/14 | 319 | 336 |
United States Treasury Note/Bond | 4.250% | 11/15/14 | 340 | 385 |
United States Treasury Note/Bond | 2.125% | 11/30/14 | 460 | 479 |
United States Treasury Note/Bond | 2.625% | 12/31/14 | 1,090 | 1,158 |
United States Treasury Note/Bond | 2.250% | 1/31/15 | 271 | 283 |
United States Treasury Note/Bond | 4.000% | 2/15/15 | 2,243 | 2,520 |
United States Treasury Note/Bond | 11.250% | 2/15/15 | 435 | 626 |
United States Treasury Note/Bond | 2.375% | 2/28/15 | 4,244 | 4,464 |
United States Treasury Note/Bond | 2.500% | 3/31/15 | 2,550 | 2,697 |
United States Treasury Note/Bond | 2.500% | 4/30/15 | 3,048 | 3,223 |
United States Treasury Note/Bond | 4.125% | 5/15/15 | 1,000 | 1,132 |
United States Treasury Note/Bond | 2.125% | 5/31/15 | 2,611 | 2,715 |
United States Treasury Note/Bond | 1.875% | 6/30/15 | 2,533 | 2,603 |
United States Treasury Note/Bond | 1.750% | 7/31/15 | 2,480 | 2,532 |
United States Treasury Note/Bond | 4.250% | 8/15/15 | 1,029 | 1,173 |
United States Treasury Note/Bond | 10.625% | 8/15/15 | 213 | 308 |
United States Treasury Note/Bond | 4.500% | 11/15/15 | 78 | 90 |
United States Treasury Note/Bond | 9.250% | 2/15/16 | 121 | 170 |
United States Treasury Note/Bond | 2.625% | 2/29/16 | 729 | 771 |
United States Treasury Note/Bond | 2.375% | 3/31/16 | 1,003 | 1,047 |
27
Intermediate-Term Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
United States Treasury Note/Bond | 2.625% | 4/30/16 | 2,337 | 2,470 |
United States Treasury Note/Bond | 5.125% | 5/15/16 | 601 | 719 |
United States Treasury Note/Bond | 7.250% | 5/15/16 | 123 | 161 |
United States Treasury Note/Bond | 3.250% | 5/31/16 | 917 | 1,000 |
United States Treasury Note/Bond | 3.250% | 6/30/16 | 700 | 763 |
United States Treasury Note/Bond | 3.250% | 7/31/16 | 182 | 198 |
United States Treasury Note/Bond | 4.875% | 8/15/16 | 172 | 204 |
United States Treasury Note/Bond | 3.000% | 8/31/16 | 375 | 403 |
United States Treasury Note/Bond | 3.000% | 9/30/16 | 1,035 | 1,113 |
United States Treasury Note/Bond | 3.125% | 10/31/16 | 325 | 352 |
United States Treasury Note/Bond | 4.625% | 11/15/16 | 84 | 99 |
United States Treasury Note/Bond | 7.500% | 11/15/16 | 315 | 422 |
United States Treasury Note/Bond | 2.750% | 11/30/16 | 1,240 | 1,313 |
United States Treasury Note/Bond | 3.250% | 12/31/16 | 500 | 544 |
United States Treasury Note/Bond | 3.125% | 1/31/17 | 2,680 | 2,895 |
United States Treasury Note/Bond | 4.625% | 2/15/17 | 370 | 434 |
United States Treasury Note/Bond | 3.000% | 2/28/17 | 1,146 | 1,229 |
United States Treasury Note/Bond | 3.250% | 3/31/17 | 1,639 | 1,782 |
United States Treasury Note/Bond | 3.125% | 4/30/17 | 1,218 | 1,315 |
United States Treasury Note/Bond | 4.500% | 5/15/17 | 669 | 781 |
United States Treasury Note/Bond | 8.750% | 5/15/17 | 387 | 557 |
United States Treasury Note/Bond | 2.750% | 5/31/17 | 1,204 | 1,271 |
United States Treasury Note/Bond | 2.500% | 6/30/17 | 1,131 | 1,176 |
United States Treasury Note/Bond | 2.375% | 7/31/17 | 1,109 | 1,143 |
United States Treasury Note/Bond | 4.750% | 8/15/17 | 703 | 835 |
United States Treasury Note/Bond | 8.875% | 8/15/17 | 438 | 639 |
United States Treasury Note/Bond | 1.875% | 8/31/17 | 1,084 | 1,080 |
United States Treasury Note/Bond | 4.250% | 11/15/17 | 1,193 | 1,380 |
United States Treasury Note/Bond | 3.500% | 2/15/18 | 1,382 | 1,527 |
United States Treasury Note/Bond | 3.875% | 5/15/18 | 1,090 | 1,233 |
United States Treasury Note/Bond | 9.125% | 5/15/18 | 171 | 260 |
United States Treasury Note/Bond | 4.000% | 8/15/18 | 1,240 | 1,413 |
United States Treasury Note/Bond | 3.750% | 11/15/18 | 1,998 | 2,238 |
United States Treasury Note/Bond | 9.000% | 11/15/18 | 198 | 302 |
United States Treasury Note/Bond | 2.750% | 2/15/19 | 2,151 | 2,237 |
United States Treasury Note/Bond | 8.875% | 2/15/19 | 329 | 500 |
United States Treasury Note/Bond | 3.125% | 5/15/19 | 2,303 | 2,454 |
United States Treasury Note/Bond | 3.625% | 8/15/19 | 2,383 | 2,629 |
United States Treasury Note/Bond | 8.125% | 8/15/19 | 659 | 969 |
United States Treasury Note/Bond | 3.375% | 11/15/19 | 2,623 | 2,834 |
United States Treasury Note/Bond | 3.625% | 2/15/20 | 2,469 | 2,718 |
United States Treasury Note/Bond | 8.500% | 2/15/20 | 260 | 394 |
United States Treasury Note/Bond | 3.500% | 5/15/20 | 2,799 | 3,051 |
United States Treasury Note/Bond | 8.750% | 5/15/20 | 186 | 288 |
United States Treasury Note/Bond | 2.625% | 8/15/20 | 803 | 814 |
United States Treasury Note/Bond | 8.750% | 8/15/20 | 200 | 311 |
101,074 | ||||
Agency Bonds and Notes (10.1%) | ||||
1 Federal Farm Credit Bank | 2.625% | 4/17/14 | 550 | 579 |
1 Federal Home Loan Banks | 5.125% | 8/14/13 | 285 | 320 |
1 Federal Home Loan Banks | 4.000% | 9/6/13 | 250 | 273 |
1 Federal Home Loan Banks | 3.625% | 10/18/13 | 185 | 200 |
1 Federal Home Loan Banks | 2.500% | 6/13/14 | 100 | 105 |
1 Federal Home Loan Banks | 5.500% | 8/13/14 | 175 | 204 |
1 Federal Home Loan Banks | 4.500% | 11/14/14 | 100 | 113 |
1 Federal Home Loan Banks | 2.750% | 12/12/14 | 25 | 26 |
28
Intermediate-Term Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
1 | Federal Home Loan Banks | 5.375% | 5/18/16 | 485 | 578 |
1 | Federal Home Loan Banks | 4.750% | 12/16/16 | 225 | 261 |
1 | Federal Home Loan Banks | 5.375% | 5/15/19 | 325 | 397 |
1 | Federal Home Loan Banks | 4.125% | 3/13/20 | 225 | 249 |
1 | Federal Home Loan Mortgage Corp. | 4.500% | 7/15/13 | 300 | 331 |
1 | Federal Home Loan Mortgage Corp. | 4.125% | 9/27/13 | 200 | 219 |
1 | Federal Home Loan Mortgage Corp. | 2.500% | 1/7/14 | 195 | 204 |
1 | Federal Home Loan Mortgage Corp. | 2.500% | 4/23/14 | 200 | 210 |
1 | Federal Home Loan Mortgage Corp. | 3.000% | 7/28/14 | 100 | 107 |
1 | Federal Home Loan Mortgage Corp. | 4.500% | 1/15/15 | 540 | 611 |
1 | Federal Home Loan Mortgage Corp. | 5.050% | 1/26/15 | 50 | 58 |
1 | Federal Home Loan Mortgage Corp. | 2.875% | 2/9/15 | 500 | 531 |
1 | Federal Home Loan Mortgage Corp. | 5.000% | 2/16/17 | 100 | 117 |
1 | Federal Home Loan Mortgage Corp. | 5.000% | 4/18/17 | 200 | 235 |
1 | Federal Home Loan Mortgage Corp. | 5.125% | 11/17/17 | 225 | 267 |
1 | Federal Home Loan Mortgage Corp. | 3.750% | 3/27/19 | 325 | 354 |
1,2 | Federal National Mortgage Assn. | 2.000% | 5/24/13 | 20 | 20 |
1 | Federal National Mortgage Assn. | 3.875% | 7/12/13 | 280 | 304 |
1 | Federal National Mortgage Assn. | 4.625% | 10/15/13 | 100 | 111 |
1 | Federal National Mortgage Assn. | 2.875% | 12/11/13 | 505 | 535 |
1 | Federal National Mortgage Assn. | 2.750% | 2/5/14 | 75 | 79 |
1 | Federal National Mortgage Assn. | 2.750% | 3/13/14 | 200 | 211 |
1 | Federal National Mortgage Assn. | 2.500% | 5/15/14 | 400 | 419 |
1 | Federal National Mortgage Assn. | 2.625% | 11/20/14 | 200 | 211 |
1,2 | Federal National Mortgage Assn. | 3.000% | 3/9/15 | 100 | 100 |
1 | Federal National Mortgage Assn. | 5.000% | 4/15/15 | 270 | 312 |
1 | Federal National Mortgage Assn. | 2.375% | 7/28/15 | 675 | 700 |
1 | Federal National Mortgage Assn. | 4.375% | 10/15/15 | 175 | 198 |
1 | Federal National Mortgage Assn. | 5.000% | 2/13/17 | 340 | 399 |
1 | Federal National Mortgage Assn. | 5.000% | 5/11/17 | 340 | 400 |
1 | Federal National Mortgage Assn. | 5.375% | 6/12/17 | 420 | 503 |
1 | Financing Corp. Fico | 10.700% | 10/6/17 | 100 | 153 |
Private Export Funding Corp. | 3.050% | 10/15/14 | 175 | 186 | |
1 | Tennessee Valley Authority | 5.500% | 7/18/17 | 125 | 150 |
11,540 | |||||
Total U.S. Government and Agency Obligations (Cost $108,190) | 112,614 | ||||
Shares | |||||
Temporary Cash Investment (2.2%) | |||||
Money Market Fund (2.2%) | |||||
3 | Vanguard Market Liquidity Fund (Cost $2,568) | 0.288% | 2,568,048 | 2,568 | |
Total Investments (100.3%) (Cost $110,758) | 115,182 | ||||
Other Assets and Liabilities (-0.3%) | |||||
Other Assets | 11,918 | ||||
Liabilities | (12,250) | ||||
(332) | |||||
Net Assets (100%) | 114,850 |
29
Intermediate-Term Government Bond Index Fund
Market | |
Value• | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | 115,182 |
Receivables for Investment Securities Sold | 11,050 |
Other Assets | 868 |
Total Assets | 127,100 |
Liabilities | |
Payables for Investment Securities Purchased | 11,985 |
Other Liabilities | 265 |
Total Liabilities | 12,250 |
Net Assets | 114,850 |
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 109,437 |
Undistributed Net Investment Income | 1 |
Accumulated Net Realized Gains | 988 |
Unrealized Appreciation (Depreciation) | 4,424 |
Net Assets | 114,850 |
Signal Shares—Net Assets | |
Applicable to 157,555 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 3,386 |
Net Asset Value Per Share—Signal Shares | $21.49 |
Institutional Shares—Net Assets | |
Applicable to 2,751,360 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 73,319 |
Net Asset Value Per Share—Institutional Shares | $26.65 |
ETF Shares—Net Assets | |
Applicable to 600,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 38,145 |
Net Asset Value Per Share—ETF Shares | $63.58 |
• See Note A in Notes to Financial Statements.
1 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
2 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.
30
Intermediate-Term Government Bond Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest2 | 926 |
Total Income | 926 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 1 |
Management and Administrative—Signal Shares | — |
Management and Administrative—Institutional Shares | 9 |
Management and Administrative—ETF Shares | 17 |
Marketing and Distribution—Signal Shares | — |
Marketing and Distribution—Institutional Shares | 2 |
Marketing and Distribution—ETF Shares | 2 |
Custodian Fees | 2 |
Auditing Fees | 10 |
Total Expenses | 43 |
Net Investment Income | 883 |
Realized Net Gain (Loss) on Investment Securities Sold | 988 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 4,424 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,295 |
1 Inception. | |
2 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
31
Intermediate-Term Government Bond Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 883 |
Realized Net Gain (Loss) | 988 |
Change in Unrealized Appreciation (Depreciation) | 4,424 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,295 |
Distributions | |
Net Investment Income | |
Signal Shares | (6) |
Institutional Shares | (537) |
ETF Shares | (339) |
Realized Capital Gain | |
Signal Shares | — |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (882) |
Capital Share Transactions | |
Signal Shares | 3,365 |
Institutional Shares | 69,740 |
ETF Shares | 36,332 |
Net Increase (Decrease) from Capital Share Transactions | 109,437 |
Total Increase (Decrease) | 114,850 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 114,850 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed net investment income of $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
32
Intermediate-Term Government Bond Index Fund
Financial Highlights
Signal Shares | |
August 4, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $21.11 |
Investment Operations | |
Net Investment Income | .033 |
Net Realized and Unrealized Gain (Loss) on Investments | .385 |
Total from Investment Operations | .418 |
Distributions | |
Dividends from Net Investment Income | (.038) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.038) |
Net Asset Value, End of Period | $21.49 |
Total Return | 1.98% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $3 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 2.29%2 |
Portfolio Turnover Rate3 | 106% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
33
Intermediate-Term Government Bond Index Fund
Financial Highlights
Institutional Shares | |
March 19, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $25.01 |
Investment Operations | |
Net Investment Income | .239 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.674 |
Total from Investment Operations | 1.913 |
Distributions | |
Dividends from Net Investment Income | (.273) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.273) |
Net Asset Value, End of Period | $26.65 |
Total Return | 7.69% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $73 |
Ratio of Total Expenses to Average Net Assets | 0.09%2 |
Ratio of Net Investment Income to Average Net Assets | 2.35%2 |
Portfolio Turnover Rate3 | 106% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
34
Intermediate-Term Government Bond Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $60.00 |
Investment Operations | |
Net Investment Income | .961 |
Net Realized and Unrealized Gain (Loss) on Investments | 3.579 |
Total from Investment Operations | 4.540 |
Distributions | |
Dividends from Net Investment Income | (.960) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.960) |
Net Asset Value, End of Period | $63.58 |
Total Return | 7.65% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $38 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 2.29%2 |
Portfolio Turnover Rate3 | 106% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
35
Intermediate-Term Government Bond Index Fund
Notes to Financial Statements
Vanguard Intermediate-Term Government Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. Signal Shares were first issued on August 4, 2010, and Institutional Shares were first issued on March 19, 2010. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees, if any, assessed on purchases of capital shares are credited to paid-in capital.
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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $21,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
36
Intermediate-Term Government Bond Index 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.
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 fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 112,614 | — |
Temporary Cash Investments | 2,568 | — | — |
Total | 2,568 | 112,614 | — |
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.
For tax purposes, at August 31, 2010, the fund had short-term capital gains of $991,000 available for distribution. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $110,762,000. Net unrealized appreciation of investment securities for tax purposes was $4,420,000, consisting of unrealized gains of $4,425,000 on securities that had risen in value since their purchase and $5,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the period ended August 31, 2010, the fund purchased $160,081,000 of investment securities and sold $52,817,000 of investment securities, other than temporary cash investments.
37
Intermediate-Term Government Bond Index Fund
F. Capital share transactions for each class of shares were:
Inception1 to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Signal Shares | ||
Issued | 3,359 | 158 |
Issued in Lieu of Cash Distributions | 6 | — |
Redeemed | — | — |
Net Increase (Decrease)—Signal Shares | 3,365 | 158 |
Institutional Shares | ||
Issued | 69,387 | 2,737 |
Issued in Lieu of Cash Distributions | 353 | 14 |
Redeemed | — | — |
Net Increase (Decrease)—Institutional Shares | 69,740 | 2,751 |
ETF Shares | ||
Issued | 36,332 | 600 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | — | — |
Net Increase (Decrease)—ETF Shares | 36,332 | 600 |
1 Inception was November 19, 2009, for ETF Shares, March 19, 2010, for Institutional Shares, and August 4, 2010, for Signal Shares. |
G. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
38
Long-Term Government Bond Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Issues | 49 | 115 | 8,214 | |
Yield3 | 3.3% | 2.3% | ||
Signal Shares | 3.2% | |||
Institutional Shares | 3.3% | |||
ETF Shares | 3.2% | |||
Yield to Maturity | 3.2%4 | 3.3% | 2.3% | |
Average Coupon | 5.4% | 5.3% | 4.4% | |
Average Effective | ||||
Maturity | 21.8 years | 22.1 years | 6.4 years | |
Average Duration | 14.2 years | 14.2 years | 4.3 years | |
Expense Ratio5 | — | — | ||
Signal Shares | 0.15% | |||
Institutional Shares | 0.09% | |||
ETF Shares | 0.15% | |||
Short-Term Reserves | 0.5% | — | — |
Sector Diversification6 (% of portfolio) | |
Treasury/Agency | 99.5% |
Short-Term Reserves | 0.5 |
Distribution by Maturity (% of portfolio) | |
Under 1 Year | 0.5% |
1–5 Years | 0.9 |
5–10 Years | 0.0 |
10–20 Years | 43.2 |
20–30 Years | 55.2 |
Over 30 Years | 0.2 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 100.0% |
For information about these ratings, see the Glossary entry for Credit Quality. | |
1 Barclays Capital U.S. Long Government Float Adjusted Index.
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
4 Before expenses.
5 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.15% for Signal Shares, 0.09% for Institutional Shares, and 0.15% for ETF Shares.
6 The agency sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
39
Long-Term Government Bond Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx42x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Long-Term Government Bond Index Fund ETF Shares Net Asset Value | 16.21% | $11,621 |
Long-Term Government Bond Index Fund ETF Shares Market Price | 16.28 | 11,628 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. Long Government Float Adjusted Index | 16.12 | 11,612 |
Final Value of | ||
Since | a $1,000,000 | |
Inception1 | Investment | |
Long-Term Government Bond Index Fund Signal Shares | 17.75% | $1,177,533 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 5.89 | 1,058,890 |
Barclays Capital U.S. Long Government Float Adjusted Index | 17.66 | 1,176,574 |
Final Value of | ||
Since | a $5,000,000 | |
Inception1 | Investment | |
Long-Term Government Bond Index Fund Institutional Shares | 6.91% | $5,345,327 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 1.36 | 5,067,941 |
Barclays Capital U.S. Long Government Float Adjusted Index | 6.63 | 5,331,721 |
1 Performance for the fund and its comparative standards is calculated since the following inception dates: November 19, 2009, for the ETF Shares; March 1, 2010, for the Signal Shares; and July 30, 2010, for the Institutional Shares.
See Financial Highlights for dividend and capital gains information.
40
Long-Term Government Bond Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 13.0% | 3.2% | 16.2% | 16.1% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Signal Shares | 3/1/2010 | 8.70% | 1.46% | 10.16% |
ETF Shares | 11/19/2009 | |||
Market Price | 8.74 | |||
Net Asset Value | 8.72 |
For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Performance tab. The Premium/Discount table there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.
See Financial Highlights for dividend and capital gains information.
41
Long-Term Government Bond Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
U.S. Government and Agency Obligations (98.8%) | ||||
U.S. Government Securities (91.3%) | ||||
United States Treasury Note/Bond | 1.000% | 10/31/11 | 680 | 685 |
United States Treasury Note/Bond | 0.750% | 5/31/12 | 60 | 60 |
United States Treasury Note/Bond | 7.875% | 2/15/21 | 2,729 | 4,067 |
United States Treasury Note/Bond | 8.125% | 5/15/21 | 290 | 440 |
United States Treasury Note/Bond | 8.125% | 8/15/21 | 2,435 | 3,711 |
United States Treasury Note/Bond | 8.000% | 11/15/21 | 583 | 885 |
United States Treasury Note/Bond | 7.250% | 8/15/22 | 510 | 744 |
United States Treasury Note/Bond | 7.625% | 11/15/22 | 570 | 858 |
United States Treasury Note/Bond | 7.125% | 2/15/23 | 810 | 1,177 |
United States Treasury Note/Bond | 6.250% | 8/15/23 | 929 | 1,270 |
United States Treasury Note/Bond | 7.500% | 11/15/24 | 2,085 | 3,195 |
United States Treasury Note/Bond | 7.625% | 2/15/25 | 774 | 1,202 |
United States Treasury Note/Bond | 6.875% | 8/15/25 | 2,543 | 3,742 |
United States Treasury Note/Bond | 6.000% | 2/15/26 | 1,745 | 2,391 |
United States Treasury Note/Bond | 6.750% | 8/15/26 | 136 | 201 |
United States Treasury Note/Bond | 6.500% | 11/15/26 | 25 | 36 |
United States Treasury Note/Bond | 6.625% | 2/15/27 | 380 | 557 |
United States Treasury Note/Bond | 6.375% | 8/15/27 | 1,130 | 1,622 |
United States Treasury Note/Bond | 6.125% | 11/15/27 | 1,225 | 1,718 |
United States Treasury Note/Bond | 5.500% | 8/15/28 | 732 | 967 |
United States Treasury Note/Bond | 5.250% | 11/15/28 | 379 | 488 |
United States Treasury Note/Bond | 5.250% | 2/15/29 | 1,599 | 2,059 |
United States Treasury Note/Bond | 6.125% | 8/15/29 | 1,575 | 2,234 |
United States Treasury Note/Bond | 6.250% | 5/15/30 | 610 | 880 |
United States Treasury Note/Bond | 5.375% | 2/15/31 | 1,975 | 2,595 |
United States Treasury Note/Bond | 4.500% | 2/15/36 | 3,214 | 3,800 |
United States Treasury Note/Bond | 4.750% | 2/15/37 | 1,630 | 2,005 |
United States Treasury Note/Bond | 5.000% | 5/15/37 | 1,382 | 1,765 |
United States Treasury Note/Bond | 4.375% | 2/15/38 | 1,031 | 1,195 |
United States Treasury Note/Bond | 4.500% | 5/15/38 | 1,565 | 1,851 |
United States Treasury Note/Bond | 3.500% | 2/15/39 | 2,549 | 2,540 |
United States Treasury Note/Bond | 4.250% | 5/15/39 | 4,335 | 4,906 |
United States Treasury Note/Bond | 4.500% | 8/15/39 | 4,290 | 5,055 |
United States Treasury Note/Bond | 4.375% | 11/15/39 | 4,765 | 5,503 |
United States Treasury Note/Bond | 4.625% | 2/15/40 | 4,849 | 5,829 |
United States Treasury Note/Bond | 4.375% | 5/15/40 | 5,254 | 6,073 |
United States Treasury Note/Bond | 3.875% | 8/15/40 | 1,795 | 1,912 |
80,218 |
42
Long-Term Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Agency Bonds and Notes (7.5%) | |||||
1 | Federal Home Loan Banks | 5.500% | 7/15/36 | 870 | 1,073 |
1 | Federal Home Loan Mortgage Corp. | 6.750% | 9/15/29 | 520 | 726 |
1 | Federal Home Loan Mortgage Corp. | 6.750% | 3/15/31 | 515 | 728 |
1 | Federal Home Loan Mortgage Corp. | 6.250% | 7/15/32 | 455 | 619 |
1 | Federal National Mortgage Assn. | 6.250% | 5/15/29 | 360 | 477 |
1 | Federal National Mortgage Assn. | 7.125% | 1/15/30 | 650 | 944 |
1 | Federal National Mortgage Assn. | 7.250% | 5/15/30 | 650 | 959 |
1 | Federal National Mortgage Assn. | 6.625% | 11/15/30 | 330 | 459 |
1 | Federal National Mortgage Assn. | 5.625% | 7/15/37 | 105 | 132 |
1 | Tennessee Valley Authority | 5.250% | 9/15/39 | 212 | 254 |
1 | Tennessee Valley Authority | 4.875% | 1/15/48 | 100 | 115 |
1 | Tennessee Valley Authority | 5.375% | 4/1/56 | 50 | 62 |
6,548 | |||||
Total U.S. Government and Agency Obligations (Cost $81,396) | 86,766 | ||||
Shares | |||||
Temporary Cash Investment (1.7%) | |||||
Money Market Fund (1.7%) | |||||
2 | Vanguard Market Liquidity Fund (Cost $1,509) | 0.288% | 1,509,000 | 1,509 | |
Total Investments (100.5%) (Cost $82,905) | 88,275 | ||||
Other Assets and Liabilities (-0.5%) | |||||
Other Assets | 8,737 | ||||
Liabilities | (9,159) | ||||
(422) | |||||
Net Assets (100%) | 87,853 | ||||
Statement of Assets and Liabilities | |||||
Assets | |||||
Investments in Securities, at Value | 88,275 | ||||
Receivables for Investment Securities Sold | 3,794 | ||||
Receivables for Capital Shares Issued | 4,320 | ||||
Other Assets | 623 | ||||
Total Assets | 97,012 | ||||
Liabilities | |||||
Payables for Investment Securities Purchased | 8,868 | ||||
Other Liabilities | 291 | ||||
Total Liabilities | 9,159 | ||||
Net Assets | 87,853 |
43
Long-Term Government Bond Index Fund
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 82,389 |
Undistributed Net Investment Income | 2 |
Accumulated Net Realized Gains | 92 |
Unrealized Appreciation (Depreciation) | 5,370 |
Net Assets | 87,853 |
Signal Shares—Net Assets | |
Applicable to 52,858 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 1,203 |
Net Asset Value Per Share—Signal Shares | $22.75 |
Institutional Shares—Net Assets | |
Applicable to 308,409 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 8,903 |
Net Asset Value Per Share—Institutional Shares | $28.87 |
ETF Shares—Net Assets | |
Applicable to 1,150,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 77,747 |
Net Asset Value Per Share—ETF Shares | $67.61 |
• See Note A in Notes to Financial Statements.
1 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
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.
See accompanying Notes, which are an integral part of the Financial Statements.
44
Long-Term Government Bond Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest | 609 |
Total Income | 609 |
Expenses | |
The Vanguard Group—Note B | |
Management and Administrative—Signal Shares | — |
Management and Administrative—Institutional Shares | — |
Management and Administrative—ETF Shares | 11 |
Custodian Fees | 2 |
Auditing Fees | 10 |
Total Expenses | 23 |
Net Investment Income | 586 |
Realized Net Gain (Loss) on Investment Securities Sold | 133 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 5,370 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,089 |
See accompanying Notes, which are an integral part of the Financial Statements.
45
Long-Term Government Bond Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 586 |
Realized Net Gain (Loss) | 133 |
Change in Unrealized Appreciation (Depreciation) | 5,370 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,089 |
Distributions | |
Net Investment Income | |
Signal Shares | (19) |
Institutional Shares | (11) |
ETF Shares | (554) |
Realized Capital Gain | |
Signal Shares | — |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (584) |
Capital Share Transactions | |
Signal Shares | 1,037 |
Institutional Shares | 8,532 |
ETF Shares | 72,779 |
Net Increase (Decrease) from Capital Share Transactions | 82,348 |
Total Increase (Decrease) | 87,853 |
Net Assets | |
Beginning of Period | — |
End of Period | 87,853 |
1 Inception. |
See accompanying Notes, which are an integral part of the Financial Statements.
46
Long-Term Government Bond Index Fund
Financial Highlights
Signal Shares | |
March 1, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $19.66 |
Investment Operations | |
Net Investment Income | .364 |
Net Realized and Unrealized Gain (Loss) on Investments | 3.084 |
Total from Investment Operations | 3.448 |
Distributions | |
Dividends from Net Investment Income | (.358) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.358) |
Net Asset Value, End of Period | $22.75 |
Total Return | 17.75% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $1 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 3.75%2 |
Portfolio Turnover Rate3 | 70% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
47
Long-Term Government Bond Index Fund
Financial Highlights
Institutional Shares | |
July 30, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $27.07 |
Investment Operations | |
Net Investment Income | .070 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.799 |
Total from Investment Operations | 1.869 |
Distributions | |
Dividends from Net Investment Income | (.069) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.069) |
Net Asset Value, End of Period | $28.87 |
Total Return | 6.91% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $9 |
Ratio of Total Expenses to Average Net Assets | 0.09%2 |
Ratio of Net Investment Income to Average Net Assets | 3.81%2 |
Portfolio Turnover Rate3 | 70% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
48
Long-Term Government Bond Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $59.84 |
Investment Operations | |
Net Investment Income | 1.691 |
Net Realized and Unrealized Gain (Loss) on Investments | 7.768 |
Total from Investment Operations | 9.459 |
Distributions | |
Dividends from Net Investment Income | (1.689) |
Distributions from Realized Capital Gains | — |
Total Distributions | (1.689) |
Net Asset Value, End of Period | $67.61 |
Total Return | 16.21% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $78 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 3.75%2 |
Portfolio Turnover Rate3 | 70% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
49
Long-Term Government Bond Index Fund
Notes to Financial Statements
Vanguard Long-Term Government Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. Signal Shares were first issued on March 1, 2010, and Institutional Shares were first issued on July 30, 2010. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees, if any, assessed on purchases of capital shares are credited to paid-in capital.
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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $11,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
50
Long-Term Government Bond Index 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.
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 fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | --- | 86,766 | --- |
Temporary Cash Investments | 1,509 | --- | --- |
Total | 1,509 | 86,766 | --- |
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.
During the period ended August 31, 2010, the fund realized $31,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.
The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the period as distributions from realized capital gains. Accordingly, the fund has reclassified $10,000 from accumulated net realized gains to paid-in capital.
For tax purposes, at August 31, 2010, the fund had short-term capital gains of $94,000 available for distribution. Short-term gain distibutions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $82,908,000. Net unrealized appreciation of investment securities for tax purposes was $5,367,000, consisting of unrealized gains of $5,370,000 on securities that had risen in value since their purchase and $3,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the period ended August 31, 2010, the fund purchased $103,609,000 of investment securities and sold $22,235,000 of investment securities, other than temporary cash investments.
51
Long-Term Government Bond Index Fund
F. Capital share transactions for each class of shares were:
Inception1 to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Signal Shares | ||
Issued | 1,018 | 52 |
Issued in Lieu of Cash Distributions | 19 | 1 |
Redeemed | — | — |
Net Increase (Decrease)—Signal Shares | 1,037 | 53 |
Institutional Shares | ||
Issued | 8,521 | 308 |
Issued in Lieu of Cash Distributions | 11 | — |
Redeemed | — | — |
Net Increase (Decrease)—Institutional Shares | 8,532 | 308 |
ETF Shares | ||
Issued | 78,645 | 1,250 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | (5,866) | (100) |
Net Increase (Decrease)—ETF Shares | 72,779 | 1,150 |
1 Inception was November 19, 2009, for ETF Shares; March 1, 2010, for Signal Shares; and July 30, 2010, for Institutional Shares. |
G. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
52
Short-Term Corporate Bond Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Issues | 703 | 1,279 | 8,214 | |
Yield3 | 2.3% | 2.3% | ||
Institutional Shares | 2.0% | |||
ETF Shares | 2.0% | |||
Yield to Maturity | 2.2%4 | 2.3% | 2.3% | |
Average Coupon | 5.1% | 5.2% | 4.4% | |
Average Effective | ||||
Maturity | 3.0 years | 3.0 years | 6.4 years | |
Average Duration | 2.8 years | 2.8 years | 4.3 years | |
Expense Ratio5 | — | — | ||
Institutional Shares | 0.09% | |||
ETF Shares | 0.15% | |||
Short-Term Reserves | 0.5% | — | — |
Sector Diversification6 (% of portfolio) | |
Finance | 43.3% |
Industrial | 48.0 |
Treasury/Agency | 0.6 |
Utilities | 7.6 |
Other | 0.5 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 1.8% |
Aa | 24.1 |
A | 44.4 |
Baa | 29.7 |
For information about these ratings, see the Glossary entry for Credit Quality. | |
Distribution by Maturity (% of portfolio) | |
Under 1 Year | 2.3% |
1–3 Years | 51.0 |
3– 5 Years | 46.0 |
Over 5 Years | 0.7 |
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
4 Before expenses.
5 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.09% for Institutional Shares and 0.15% for ETF Shares.
6 The agency sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
53
Short-Term Corporate Bond Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx56x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Short-Term Corporate Bond Index Fund ETF Shares Net Asset Value | 5.34% | $10,534 |
Short-Term Corporate Bond Index Fund ETF Shares Market Price | 5.53 | 10,553 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. 1–5 Year Corporate Bond Index | 5.61 | 10,561 |
Final Value of | ||
Since | a $5,000,000 | |
Inception1 | Investment | |
Short-Term Corporate Bond Index Fund Institutional Shares2 | 5.13% | $5,256,262 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 5,346,901 |
Barclays Capital U.S. 1–5 Year Corporate Bond Index | 5.61 | 5,280,747 |
2 Performance figures are adjusted for the 0.25% transaction fee on purchases.
See Financial Highlights for dividend and capital gains information.
54
Short-Term Corporate Bond Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 3.5% | 1.8% | 5.3% | 5.6% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Institutional Shares | 11/19/2009 | 1.76% | 1.41% | 3.17% |
Fee-Adjusted Returns2 | 1.50 | 1.42 | 2.92 | |
ETF Shares | 11/19/2009 | |||
Market Price | 3.50 | |||
Net Asset Value | 3.13 |
2 Performance figures are adjusted for the 0.25% transaction fee on purchases.
For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Performance tab. The Premium/Discount table there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.
See Financial Highlights for dividend and capital gains information.
55
Short-Term Corporate Bond Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
U.S. Government and Agency Obligations (0.8%) | ||||
U.S. Government Securities (0.8%) | ||||
United States Treasury Note/Bond | 1.000% | 8/31/11 | 1,440 | 1,450 |
United States Treasury Note/Bond | 4.625% | 8/31/11 | 230 | 240 |
United States Treasury Note/Bond | 4.500% | 11/30/11 | 690 | 726 |
United States Treasury Note/Bond | 3.625% | 5/15/13 | 30 | 32 |
United States Treasury Note/Bond | 3.375% | 7/31/13 | 35 | 38 |
United States Treasury Note/Bond | 0.750% | 8/15/13 | 4,500 | 4,506 |
United States Treasury Note/Bond | 4.250% | 8/15/13 | 15 | 16 |
Total U.S. Government and Agency Obligations (Cost $7,007) | 7,008 | |||
Corporate Bonds (97.8%) | ||||
Finance (42.6%) | ||||
Banking (30.6%) | ||||
American Express Bank FSB | 5.550% | 10/17/12 | 750 | 809 |
American Express Co. | 4.875% | 7/15/13 | 75 | 81 |
American Express Co. | 7.250% | 5/20/14 | 496 | 578 |
American Express Credit Corp. | 5.875% | 5/2/13 | 975 | 1,070 |
American Express Credit Corp. | 7.300% | 8/20/13 | 4,050 | 4,632 |
American Express Credit Corp. | 5.125% | 8/25/14 | 2,750 | 3,021 |
Astoria Financial Corp. | 5.750% | 10/15/12 | 150 | 155 |
Bank of America Corp. | 6.250% | 4/15/12 | 5,900 | 6,295 |
Bank of America Corp. | 4.875% | 1/15/13 | 100 | 106 |
Bank of America Corp. | 4.900% | 5/1/13 | 450 | 478 |
Bank of America Corp. | 7.375% | 5/15/14 | 1,325 | 1,516 |
Bank of America Corp. | 4.500% | 4/1/15 | 4,950 | 5,131 |
Bank of America Corp. | 7.750% | 8/15/15 | 1,000 | 1,152 |
Bank of America Corp. | 3.700% | 9/1/15 | 2,350 | 2,348 |
Bank of Montreal | 2.125% | 6/28/13 | 500 | 513 |
Bank of New York Mellon Corp. | 4.950% | 11/1/12 | 200 | 217 |
Bank of New York Mellon Corp. | 4.500% | 4/1/13 | 75 | 81 |
Bank of New York Mellon Corp. | 5.125% | 8/27/13 | 2,317 | 2,575 |
Bank of New York Mellon Corp. | 4.300% | 5/15/14 | 3,463 | 3,797 |
Bank of New York Mellon Corp. | 4.950% | 3/15/15 | 1,000 | 1,116 |
Bank of New York Mellon Corp. | 2.950% | 6/18/15 | 500 | 523 |
Bank of Nova Scotia | 2.250% | 1/22/13 | 1,350 | 1,386 |
Bank of Nova Scotia | 3.400% | 1/22/15 | 3,150 | 3,351 |
Bank of Tokyo-Mitsubishi UFJ Ltd. | 7.400% | 6/15/11 | 250 | 262 |
Bank One Corp. | 5.250% | 1/30/13 | 50 | 54 |
Barclays Bank PLC | 5.450% | 9/12/12 | 2,925 | 3,163 |
Barclays Bank PLC | 2.500% | 1/23/13 | 3,000 | 3,055 |
56
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Barclays Bank PLC | 5.200% | 7/10/14 | 100 | 109 |
Barclays Bank PLC | 3.900% | 4/7/15 | 1,000 | 1,052 |
BB&T Corp. | 3.850% | 7/27/12 | 2,650 | 2,777 |
Bear Stearns Cos. LLC | 5.350% | 2/1/12 | 400 | 424 |
Bear Stearns Cos. LLC | 6.950% | 8/10/12 | 424 | 469 |
Bear Stearns Cos. LLC | 5.700% | 11/15/14 | 1,652 | 1,847 |
BNP Paribas / BNP Paribas US Medium-Term | ||||
Note Program LLC | 2.125% | 12/21/12 | 3,075 | 3,126 |
Capital One Bank USA NA | 6.500% | 6/13/13 | 200 | 221 |
Capital One Financial Corp. | 7.375% | 5/23/14 | 2,500 | 2,914 |
Citigroup Inc. | 6.500% | 1/18/11 | 250 | 255 |
Citigroup Inc. | 6.000% | 2/21/12 | 100 | 106 |
Citigroup Inc. | 5.250% | 2/27/12 | 4,225 | 4,423 |
Citigroup Inc. | 5.625% | 8/27/12 | 3,025 | 3,178 |
Citigroup Inc. | 5.300% | 10/17/12 | 3,600 | 3,815 |
Citigroup Inc. | 5.500% | 4/11/13 | 4,825 | 5,134 |
Citigroup Inc. | 6.500% | 8/19/13 | 1,305 | 1,431 |
Citigroup Inc. | 6.000% | 12/13/13 | 550 | 596 |
Citigroup Inc. | 6.375% | 8/12/14 | 425 | 466 |
Citigroup Inc. | 5.000% | 9/15/14 | 2,975 | 3,067 |
Citigroup Inc. | 5.500% | 10/15/14 | 300 | 319 |
Citigroup Inc. | 6.010% | 1/15/15 | 1,750 | 1,886 |
Citigroup Inc. | 4.875% | 5/7/15 | 1,000 | 1,031 |
Citigroup Inc. | 4.750% | 5/19/15 | 3,260 | 3,359 |
Countrywide Financial Corp. | 5.800% | 6/7/12 | 850 | 904 |
Credit Suisse | 3.450% | 7/2/12 | 2,725 | 2,829 |
Credit Suisse | 5.000% | 5/15/13 | 8,035 | 8,697 |
Credit Suisse | 5.500% | 5/1/14 | 675 | 749 |
Credit Suisse | 3.500% | 3/23/15 | 3,400 | 3,537 |
Credit Suisse USA Inc. | 5.250% | 3/2/11 | 150 | 154 |
Credit Suisse USA Inc. | 6.500% | 1/15/12 | 250 | 268 |
Credit Suisse USA Inc. | 4.875% | 1/15/15 | 500 | 550 |
Credit Suisse USA Inc. | 5.125% | 8/15/15 | 1,600 | 1,787 |
Deutsche Bank AG | 5.375% | 10/12/12 | 550 | 596 |
Deutsche Bank AG | 4.875% | 5/20/13 | 3,345 | 3,606 |
Deutsche Bank AG | 3.875% | 8/18/14 | 3,750 | 3,986 |
Deutsche Bank AG | 3.450% | 3/30/15 | 1,250 | 1,312 |
Fifth Third Bancorp | 6.250% | 5/1/13 | 1,700 | 1,861 |
1 Goldman Sachs Capital II | 5.793% | 12/29/49 | 650 | 522 |
Goldman Sachs Group Inc. | 6.600% | 1/15/12 | 467 | 500 |
Goldman Sachs Group Inc. | 3.625% | 8/1/12 | 5,125 | 5,321 |
Goldman Sachs Group Inc. | 5.450% | 11/1/12 | 500 | 537 |
Goldman Sachs Group Inc. | 5.250% | 4/1/13 | 375 | 404 |
Goldman Sachs Group Inc. | 4.750% | 7/15/13 | 400 | 427 |
Goldman Sachs Group Inc. | 5.250% | 10/15/13 | 7,400 | 8,023 |
Goldman Sachs Group Inc. | 5.150% | 1/15/14 | 125 | 135 |
Goldman Sachs Group Inc. | 6.000% | 5/1/14 | 3,850 | 4,275 |
Goldman Sachs Group Inc. | 5.125% | 1/15/15 | 1,425 | 1,534 |
Goldman Sachs Group Inc. | 3.700% | 8/1/15 | 2,875 | 2,904 |
HSBC Bank USA NA | 4.625% | 4/1/14 | 400 | 427 |
HSBC Holdings PLC | 5.250% | 12/12/12 | 3,050 | 3,282 |
ICICI Bank Ltd. | 6.625% | 10/3/12 | 775 | 826 |
JPMorgan Chase & Co. | 4.600% | 1/17/11 | 200 | 203 |
JPMorgan Chase & Co. | 6.750% | 2/1/11 | 400 | 409 |
JPMorgan Chase & Co. | 4.500% | 1/15/12 | 200 | 209 |
JPMorgan Chase & Co. | 6.625% | 3/15/12 | 200 | 216 |
57
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
JPMorgan Chase & Co. | 5.375% | 10/1/12 | 4,650 | 5,034 |
JPMorgan Chase & Co. | 5.750% | 1/2/13 | 464 | 503 |
JPMorgan Chase & Co. | 4.750% | 5/1/13 | 6,550 | 7,089 |
JPMorgan Chase & Co. | 4.875% | 3/15/14 | 175 | 190 |
JPMorgan Chase & Co. | 4.650% | 6/1/14 | 1,339 | 1,456 |
JPMorgan Chase & Co. | 5.125% | 9/15/14 | 2,700 | 2,955 |
JPMorgan Chase & Co. | 3.700% | 1/20/15 | 3,100 | 3,246 |
JPMorgan Chase & Co. | 4.750% | 3/1/15 | 150 | 164 |
KeyCorp | 6.500% | 5/14/13 | 1,440 | 1,575 |
M&I Marshall & Ilsley Bank | 6.375% | 9/1/11 | 425 | 435 |
MBNA Corp. | 5.000% | 6/15/15 | 300 | 319 |
1 Mellon Capital IV | 6.244% | 6/29/49 | 100 | 86 |
Merrill Lynch & Co. Inc. | 6.050% | 8/15/12 | 2,425 | 2,599 |
Merrill Lynch & Co. Inc. | 5.450% | 2/5/13 | 1,850 | 1,974 |
Merrill Lynch & Co. Inc. | 6.150% | 4/25/13 | 625 | 680 |
Merrill Lynch & Co. Inc. | 5.000% | 1/15/15 | 775 | 817 |
Morgan Stanley | 5.625% | 1/9/12 | 1,625 | 1,706 |
Morgan Stanley | 6.600% | 4/1/12 | 4,250 | 4,563 |
Morgan Stanley | 5.750% | 8/31/12 | 975 | 1,043 |
Morgan Stanley | 5.300% | 3/1/13 | 5,185 | 5,530 |
Morgan Stanley | 4.750% | 4/1/14 | 800 | 821 |
Morgan Stanley | 6.000% | 5/13/14 | 550 | 598 |
Morgan Stanley | 4.200% | 11/20/14 | 250 | 258 |
Morgan Stanley | 4.100% | 1/26/15 | 2,775 | 2,825 |
Morgan Stanley | 6.000% | 4/28/15 | 2,925 | 3,194 |
Morgan Stanley | 4.000% | 7/24/15 | 2,000 | 2,007 |
National City Bank | 4.625% | 5/1/13 | 175 | 186 |
1 National City Preferred Capital Trust I | 12.000% | 12/31/49 | 600 | 664 |
Northern Trust Corp. | 5.500% | 8/15/13 | 1,000 | 1,122 |
PNC Funding Corp. | 5.400% | 6/10/14 | 850 | 948 |
PNC Funding Corp. | 3.625% | 2/8/15 | 2,000 | 2,098 |
Regions Financial Corp. | 4.875% | 4/26/13 | 300 | 302 |
Regions Financial Corp. | 7.750% | 11/10/14 | 350 | 378 |
Regions Financial Corp. | 5.750% | 6/15/15 | 425 | 432 |
Royal Bank of Canada | 2.100% | 7/29/13 | 1,925 | 1,982 |
Royal Bank of Scotland Group PLC | 6.375% | 2/1/11 | 132 | 134 |
Royal Bank of Scotland Group PLC | 5.000% | 10/1/14 | 2,015 | 2,026 |
Royal Bank of Scotland Group PLC | 5.050% | 1/8/15 | 600 | 595 |
Royal Bank of Scotland PLC | 3.400% | 8/23/13 | 250 | 253 |
Royal Bank of Scotland PLC | 4.875% | 3/16/15 | 1,425 | 1,491 |
State Street Corp. | 4.300% | 5/30/14 | 580 | 635 |
SunTrust Banks Inc. | 5.250% | 11/5/12 | 1,600 | 1,696 |
UBS AG | 2.250% | 8/12/13 | 1,000 | 1,002 |
UBS AG | 3.875% | 1/15/15 | 1,275 | 1,323 |
US Bancorp | 4.200% | 5/15/14 | 225 | 246 |
US Bancorp | 2.875% | 11/20/14 | 325 | 340 |
US Bancorp | 2.450% | 7/27/15 | 600 | 612 |
US Bank NA | 6.375% | 8/1/11 | 3,150 | 3,320 |
US Bank NA | 6.300% | 2/4/14 | 150 | 172 |
US Bank NA | 4.950% | 10/30/14 | 360 | 401 |
US Bank NA | 4.800% | 4/15/15 | 600 | 665 |
Wachovia Bank NA | 4.800% | 11/1/14 | 650 | 705 |
Wachovia Corp. | 5.300% | 10/15/11 | 200 | 210 |
Wachovia Corp. | 5.500% | 5/1/13 | 1,000 | 1,098 |
Wells Fargo & Co. | 6.375% | 8/1/11 | 800 | 840 |
Wells Fargo & Co. | 4.375% | 1/31/13 | 4,275 | 4,565 |
58
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Wells Fargo & Co. | 4.950% | 10/16/13 | 1,000 | 1,078 |
Wells Fargo & Co. | 3.750% | 10/1/14 | 11,725 | 12,366 |
Wells Fargo & Co. | 5.000% | 11/15/14 | 150 | 162 |
Wells Fargo & Co. | 3.625% | 4/15/15 | 600 | 628 |
Wells Fargo Bank NA | 6.450% | 2/1/11 | 257 | 263 |
Wells Fargo Bank NA | 4.750% | 2/9/15 | 500 | 539 |
1 Wells Fargo Capital XIII | 7.700% | 12/29/49 | 2,725 | 2,776 |
1 Wells Fargo Capital XV | 9.750% | 12/29/49 | 700 | 760 |
Westpac Banking Corp. | 2.250% | 11/19/12 | 3,775 | 3,835 |
Westpac Banking Corp. | 2.100% | 8/2/13 | 450 | 455 |
Westpac Banking Corp. | 4.200% | 2/27/15 | 225 | 242 |
Westpac Banking Corp. | 3.000% | 8/4/15 | 1,300 | 1,313 |
Brokerage (0.9%) | ||||
BlackRock Inc. | 2.250% | 12/10/12 | 1,625 | 1,669 |
BlackRock Inc. | 3.500% | 12/10/14 | 200 | 213 |
Charles Schwab Corp. | 4.950% | 6/1/14 | 775 | 855 |
Franklin Resources Inc. | 2.000% | 5/20/13 | 175 | 178 |
Franklin Resources Inc. | 3.125% | 5/20/15 | 150 | 158 |
Jefferies Group Inc. | 7.750% | 3/15/12 | 750 | 809 |
Jefferies Group Inc. | 5.875% | 6/8/14 | 100 | 108 |
Lazard Group LLC | 7.125% | 5/15/15 | 975 | 1,057 |
Nomura Holdings Inc. | 5.000% | 3/4/15 | 1,450 | 1,563 |
TD Ameritrade Holding Corp. | 4.150% | 12/1/14 | 700 | 742 |
Finance Companies (5.5%) | ||||
Block Financial LLC | 7.875% | 1/15/13 | 800 | 884 |
Block Financial LLC | 5.125% | 10/30/14 | 250 | 263 |
General Electric Capital Corp. | 5.000% | 11/15/11 | 2,900 | 3,042 |
General Electric Capital Corp. | 5.875% | 2/15/12 | 1,510 | 1,611 |
General Electric Capital Corp. | 5.000% | 4/10/12 | 625 | 661 |
General Electric Capital Corp. | 6.000% | 6/15/12 | 1,670 | 1,806 |
General Electric Capital Corp. | 5.250% | 10/19/12 | 705 | 762 |
General Electric Capital Corp. | 2.800% | 1/8/13 | 300 | 308 |
General Electric Capital Corp. | 5.450% | 1/15/13 | 16,375 | 17,790 |
General Electric Capital Corp. | 4.800% | 5/1/13 | 75 | 81 |
General Electric Capital Corp. | 5.900% | 5/13/14 | 1,050 | 1,189 |
General Electric Capital Corp. | 3.750% | 11/14/14 | 2,500 | 2,624 |
General Electric Capital Corp. | 3.500% | 6/29/15 | 800 | 828 |
HSBC Finance Corp. | 6.375% | 10/15/11 | 2,950 | 3,115 |
HSBC Finance Corp. | 7.000% | 5/15/12 | 862 | 934 |
HSBC Finance Corp. | 5.900% | 6/19/12 | 3,650 | 3,894 |
HSBC Finance Corp. | 6.375% | 11/27/12 | 305 | 332 |
HSBC Finance Corp. | 4.750% | 7/15/13 | 150 | 160 |
HSBC Finance Corp. | 5.250% | 1/15/14 | 525 | 566 |
HSBC Finance Corp. | 5.000% | 6/30/15 | 1,000 | 1,082 |
SLM Corp. | 5.400% | 10/25/11 | 500 | 502 |
SLM Corp. | 5.000% | 10/1/13 | 4,025 | 3,792 |
SLM Corp. | 5.375% | 5/15/14 | 325 | 299 |
Insurance (4.5%) | ||||
ACE INA Holdings Inc. | 5.875% | 6/15/14 | 375 | 428 |
ACE INA Holdings Inc. | 5.600% | 5/15/15 | 750 | 851 |
Aetna Inc. | 5.750% | 6/15/11 | 175 | 182 |
Allstate Corp. | 5.000% | 8/15/14 | 207 | 232 |
Allstate Life Global Funding Trusts | 5.375% | 4/30/13 | 3,072 | 3,400 |
59
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
American International Group Inc. | 4.250% | 5/15/13 | 950 | 950 |
Assurant Inc. | 5.625% | 2/15/14 | 350 | 374 |
Berkshire Hathaway Finance Corp. | 4.000% | 4/15/12 | 630 | 663 |
Berkshire Hathaway Finance Corp. | 4.750% | 5/15/12 | 1,000 | 1,066 |
Berkshire Hathaway Finance Corp. | 4.600% | 5/15/13 | 996 | 1,086 |
Berkshire Hathaway Finance Corp. | 5.000% | 8/15/13 | 750 | 831 |
Berkshire Hathaway Finance Corp. | 4.850% | 1/15/15 | 575 | 644 |
Berkshire Hathaway Inc. | 2.125% | 2/11/13 | 2,875 | 2,958 |
Berkshire Hathaway Inc. | 3.200% | 2/11/15 | 3,475 | 3,670 |
Chubb Corp. | 5.200% | 4/1/13 | 25 | 27 |
CNA Financial Corp. | 5.850% | 12/15/14 | 1,200 | 1,284 |
Coventry Health Care Inc. | 6.300% | 8/15/14 | 200 | 214 |
Genworth Financial Inc. | 5.750% | 6/15/14 | 635 | 652 |
Hartford Financial Services Group Inc. | 4.625% | 7/15/13 | 250 | 263 |
Jefferson-Pilot Corp. | 4.750% | 1/30/14 | 525 | 554 |
Lincoln National Corp. | 5.650% | 8/27/12 | 175 | 187 |
Lincoln National Corp. | 4.300% | 6/15/15 | 400 | 421 |
Marsh & McLennan Cos. Inc. | 4.850% | 2/15/13 | 400 | 419 |
Marsh & McLennan Cos. Inc. | 5.375% | 7/15/14 | 175 | 187 |
MetLife Inc. | 6.125% | 12/1/11 | 2,275 | 2,407 |
MetLife Inc. | 5.000% | 6/15/15 | 600 | 660 |
Metropolitan Life Global Funding I | 5.125% | 6/10/14 | 100 | 111 |
Pricoa Global Funding I | 5.625% | 5/24/11 | 125 | 129 |
Principal Financial Group Inc. | 7.875% | 5/15/14 | 850 | 1,000 |
Principal Life Global Funding I | 5.125% | 10/15/13 | 175 | 192 |
Principal Life Income Funding Trusts | 5.300% | 4/24/13 | 800 | 871 |
Protective Life Secured Trusts | 5.450% | 9/28/12 | 150 | 161 |
Prudential Financial Inc. | 5.800% | 6/15/12 | 25 | 27 |
Prudential Financial Inc. | 2.750% | 1/14/13 | 225 | 229 |
Prudential Financial Inc. | 5.150% | 1/15/13 | 200 | 214 |
Prudential Financial Inc. | 5.100% | 9/20/14 | 3,675 | 3,995 |
Prudential Financial Inc. | 6.200% | 1/15/15 | 400 | 449 |
Prudential Financial Inc. | 4.750% | 6/13/15 | 775 | 831 |
Travelers Cos. Inc. | 5.375% | 6/15/12 | 50 | 54 |
UnitedHealth Group Inc. | 4.875% | 2/15/13 | 575 | 620 |
UnitedHealth Group Inc. | 4.875% | 4/1/13 | 500 | 539 |
UnitedHealth Group Inc. | 4.875% | 3/15/15 | 500 | 548 |
WellPoint Health Networks Inc. | 6.375% | 1/15/12 | 200 | 214 |
WellPoint Inc. | 6.800% | 8/1/12 | 1,700 | 1,856 |
WellPoint Inc. | 6.000% | 2/15/14 | 595 | 677 |
Willis North America Inc. | 5.625% | 7/15/15 | 275 | 293 |
XL Capital Finance Europe PLC | 6.500% | 1/15/12 | 175 | 183 |
Other Finance (0.3%) | ||||
Brookfield Asset Management Inc. | 7.125% | 6/15/12 | 550 | 590 |
CME Group Inc. | 5.750% | 2/15/14 | 787 | 895 |
NASDAQ OMX Group Inc. | 4.000% | 1/15/15 | 225 | 233 |
NYSE Euronext | 4.800% | 6/28/13 | 600 | 654 |
ORIX Corp. | 5.480% | 11/22/11 | 575 | 601 |
Real Estate Investment Trusts (0.8%) | ||||
Boston Properties LP | 6.250% | 1/15/13 | 600 | 661 |
Brandywine Operating Partnership LP | 7.500% | 5/15/15 | 450 | 504 |
Duke Realty LP | 7.375% | 2/15/15 | 850 | 968 |
ERP Operating LP | 5.250% | 9/15/14 | 100 | 111 |
HCP Inc. | 6.450% | 6/25/12 | 500 | 532 |
60
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
HCP Inc. | 5.650% | 12/15/13 | 100 | 107 |
Hospitality Properties Trust | 6.750% | 2/15/13 | 500 | 532 |
Hospitality Properties Trust | 7.875% | 8/15/14 | 150 | 168 |
Liberty Property LP | 5.125% | 3/2/15 | 600 | 635 |
ProLogis | 7.625% | 8/15/14 | 750 | 814 |
Regency Centers LP | 6.750% | 1/15/12 | 250 | 263 |
Regency Centers LP | 5.250% | 8/1/15 | 250 | 268 |
Simon Property Group LP | 6.750% | 5/15/14 | 95 | 111 |
Simon Property Group LP | 4.200% | 2/1/15 | 600 | 641 |
Simon Property Group LP | 5.100% | 6/15/15 | 175 | 194 |
358,147 | ||||
Industrial (47.6%) | ||||
Basic Industry (4.4%) | ||||
Air Products & Chemicals Inc. | 4.150% | 2/1/13 | 100 | 106 |
Alcoa Inc. | 5.375% | 1/15/13 | 350 | 370 |
Alcoa Inc. | 6.000% | 7/15/13 | 1,950 | 2,117 |
ArcelorMittal | 5.375% | 6/1/13 | 1,800 | 1,925 |
ArcelorMittal | 9.000% | 2/15/15 | 1,225 | 1,469 |
ArcelorMittal USA Inc. | 6.500% | 4/15/14 | 250 | 275 |
Barrick Gold Financeco LLC | 6.125% | 9/15/13 | 1,155 | 1,313 |
BHP Billiton Finance USA Ltd. | 5.125% | 3/29/12 | 1,650 | 1,752 |
BHP Billiton Finance USA Ltd. | 5.500% | 4/1/14 | 1,150 | 1,296 |
Celulosa Arauco y Constitucion SA | 5.625% | 4/20/15 | 450 | 490 |
Dow Chemical Co. | 4.850% | 8/15/12 | 1,800 | 1,903 |
Dow Chemical Co. | 7.600% | 5/15/14 | 1,300 | 1,520 |
Dow Chemical Co. | 5.900% | 2/15/15 | 1,650 | 1,828 |
EI du Pont de Nemours & Co. | 5.000% | 7/15/13 | 1,475 | 1,634 |
EI du Pont de Nemours & Co. | 5.875% | 1/15/14 | 1,430 | 1,632 |
EI du Pont de Nemours & Co. | 4.875% | 4/30/14 | 450 | 502 |
Freeport-McMoRan Copper & Gold Inc. | 8.250% | 4/1/15 | 375 | 400 |
International Paper Co. | 7.400% | 6/15/14 | 1,400 | 1,605 |
Potash Corp. of Saskatchewan Inc. | 5.250% | 5/15/14 | 1,525 | 1,698 |
PPG Industries Inc. | 5.750% | 3/15/13 | 1,400 | 1,535 |
Praxair Inc. | 6.375% | 4/1/12 | 450 | 489 |
Praxair Inc. | 1.750% | 11/15/12 | 1,150 | 1,171 |
Praxair Inc. | 5.250% | 11/15/14 | 1,950 | 2,242 |
Rio Tinto Alcan Inc. | 5.000% | 6/1/15 | 700 | 766 |
Rio Tinto Finance USA Ltd. | 5.875% | 7/15/13 | 4,725 | 5,258 |
Rio Tinto Finance USA Ltd. | 8.950% | 5/1/14 | 700 | 860 |
Rohm and Haas Co. | 5.600% | 3/15/13 | 275 | 296 |
Teck Resources Ltd. | 9.750% | 5/15/14 | 450 | 555 |
Capital Goods (5.4%) | ||||
3M Co. | 4.500% | 11/1/11 | 1,400 | 1,464 |
3M Co. | 4.375% | 8/15/13 | 760 | 837 |
Bemis Co. Inc. | 5.650% | 8/1/14 | 75 | 84 |
Boeing Capital Corp. | 6.500% | 2/15/12 | 425 | 459 |
Boeing Capital Corp. | 3.250% | 10/27/14 | 300 | 320 |
Boeing Co. | 1.875% | 11/20/12 | 1,740 | 1,776 |
Boeing Co. | 3.500% | 2/15/15 | 2,125 | 2,295 |
Caterpillar Financial Services Corp. | 5.125% | 10/12/11 | 375 | 394 |
Caterpillar Financial Services Corp. | 1.900% | 12/17/12 | 150 | 153 |
Caterpillar Financial Services Corp. | 2.000% | 4/5/13 | 2,450 | 2,509 |
Caterpillar Financial Services Corp. | 6.125% | 2/17/14 | 3,574 | 4,116 |
Cooper US Inc. | 5.250% | 11/15/12 | 25 | 27 |
Cooper US Inc. | 5.450% | 4/1/15 | 950 | 1,090 |
61
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
CRH America Inc. | 5.300% | 10/15/13 | 1,225 | 1,306 |
Deere & Co. | 6.950% | 4/25/14 | 125 | 149 |
Eaton Corp. | 5.750% | 7/15/12 | 250 | 271 |
Eaton Corp. | 4.900% | 5/15/13 | 500 | 547 |
General Dynamics Corp. | 5.250% | 2/1/14 | 1,575 | 1,787 |
General Electric Co. | 5.000% | 2/1/13 | 5,850 | 6,352 |
Honeywell International Inc. | 6.125% | 11/1/11 | 225 | 239 |
Honeywell International Inc. | 4.250% | 3/1/13 | 1,925 | 2,086 |
Illinois Tool Works Inc. | 5.150% | 4/1/14 | 150 | 169 |
Ingersoll-Rand Global Holding Co. Ltd. | 6.000% | 8/15/13 | 525 | 586 |
Ingersoll-Rand Global Holding Co. Ltd. | 9.500% | 4/15/14 | 450 | 557 |
John Deere Capital Corp. | 5.400% | 10/17/11 | 50 | 53 |
John Deere Capital Corp. | 7.000% | 3/15/12 | 5,205 | 5,702 |
John Deere Capital Corp. | 5.250% | 10/1/12 | 1,015 | 1,105 |
John Deere Capital Corp. | 2.950% | 3/9/15 | 550 | 580 |
Lockheed Martin Corp. | 4.121% | 3/14/13 | 300 | 322 |
Northrop Grumman Corp. | 3.700% | 8/1/14 | 225 | 241 |
Raytheon Co. | 5.500% | 11/15/12 | 757 | 830 |
Roper Industries Inc. | 6.625% | 8/15/13 | 1,275 | 1,439 |
Tyco International Finance SA | 6.000% | 11/15/13 | 350 | 396 |
Tyco International Finance SA | 4.125% | 10/15/14 | 1,050 | 1,142 |
United Technologies Corp. | 4.875% | 5/1/15 | 1,550 | 1,768 |
Vulcan Materials Co. | 5.600% | 11/30/12 | 1,050 | 1,123 |
Waste Management Inc. | 6.375% | 11/15/12 | 325 | 358 |
Waste Management Inc. | 5.000% | 3/15/14 | 100 | 110 |
Waste Management Inc. | 6.375% | 3/11/15 | 534 | 626 |
Communication (10.1%) | ||||
America Movil SAB de CV | 5.500% | 3/1/14 | 1,250 | 1,373 |
America Movil SAB de CV | 3.625% | 3/30/15 | 500 | 523 |
AT&T Corp. | 7.300% | 11/15/11 | 1,061 | 1,142 |
AT&T Inc. | 5.875% | 2/1/12 | 266 | 285 |
AT&T Inc. | 4.950% | 1/15/13 | 6,850 | 7,463 |
AT&T Inc. | 6.700% | 11/15/13 | 600 | 696 |
AT&T Inc. | 4.850% | 2/15/14 | 275 | 306 |
AT&T Inc. | 5.100% | 9/15/14 | 1,000 | 1,128 |
AT&T Inc. | 2.500% | 8/15/15 | 3,700 | 3,745 |
BellSouth Corp. | 5.200% | 9/15/14 | 200 | 226 |
British Telecommunications PLC | 5.150% | 1/15/13 | 1,075 | 1,139 |
CBS Corp. | 8.200% | 5/15/14 | 400 | 477 |
Cellco Partnership / Verizon Wireless Capital LLC | 3.750% | 5/20/11 | 775 | 792 |
Cellco Partnership / Verizon Wireless Capital LLC | 5.550% | 2/1/14 | 5,225 | 5,919 |
CenturyLink Inc. | 5.000% | 2/15/15 | 300 | 309 |
Comcast Cable Communications Holdings Inc. | 8.375% | 3/15/13 | 2,480 | 2,888 |
Comcast Cable Holdings LLC | 9.800% | 2/1/12 | 145 | 162 |
Comcast Corp. | 5.300% | 1/15/14 | 1,200 | 1,336 |
Comcast Corp. | 6.500% | 1/15/15 | 250 | 292 |
COX Communications Inc. | 4.625% | 6/1/13 | 1,725 | 1,855 |
COX Communications Inc. | 5.450% | 12/15/14 | 1,375 | 1,544 |
Deutsche Telekom International Finance BV | 5.250% | 7/22/13 | 575 | 630 |
Deutsche Telekom International Finance BV | 5.875% | 8/20/13 | 146 | 163 |
Deutsche Telekom International Finance BV | 4.875% | 7/8/14 | 1,100 | 1,210 |
DIRECTV Holdings LLC | 3.550% | 3/15/15 | 2,075 | 2,136 |
DIRECTV Holdings LLC / DIRECTV | ||||
Financing Co. Inc. | 4.750% | 10/1/14 | 550 | 594 |
62
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
DIRECTV Holdings LLC / DIRECTV | ||||
Financing Co. Inc. | 6.375% | 6/15/15 | 775 | 801 |
Discovery Communications LLC | 3.700% | 6/1/15 | 500 | 525 |
France Telecom SA | 4.375% | 7/8/14 | 2,125 | 2,351 |
McGraw-Hill Cos. Inc. | 5.375% | 11/15/12 | 200 | 214 |
NBC Universal Inc. | 3.650% | 4/30/15 | 375 | 394 |
New Cingular Wireless Services Inc. | 8.125% | 5/1/12 | 3,450 | 3,855 |
News America Inc. | 5.300% | 12/15/14 | 875 | 991 |
Qwest Corp. | 7.875% | 9/1/11 | 975 | 1,029 |
Qwest Corp. | 8.875% | 3/15/12 | 3,100 | 3,410 |
Reed Elsevier Capital Inc. | 6.750% | 8/1/11 | 250 | 263 |
Reed Elsevier Capital Inc. | 7.750% | 1/15/14 | 50 | 58 |
Rogers Communications Inc. | 7.875% | 5/1/12 | 500 | 554 |
Rogers Communications Inc. | 6.375% | 3/1/14 | 1,850 | 2,119 |
RR Donnelley & Sons Co. | 4.950% | 4/1/14 | 100 | 103 |
RR Donnelley & Sons Co. | 5.500% | 5/15/15 | 150 | 156 |
TCI Communications Inc. | 8.750% | 8/1/15 | 125 | 157 |
Telecom Italia Capital SA | 5.250% | 11/15/13 | 230 | 244 |
Telecom Italia Capital SA | 6.175% | 6/18/14 | 3,425 | 3,779 |
Telecom Italia Capital SA | 4.950% | 9/30/14 | 150 | 158 |
Telefonica Emisiones SAU | 2.582% | 4/26/13 | 2,650 | 2,689 |
Telefonica Emisiones SAU | 4.949% | 1/15/15 | 250 | 270 |
Telefonica Emisiones SAU | 3.729% | 4/27/15 | 550 | 571 |
Thomson Reuters Corp. | 5.950% | 7/15/13 | 1,350 | 1,516 |
Thomson Reuters Corp. | 5.250% | 8/15/13 | 145 | 160 |
Thomson Reuters Corp. | 5.700% | 10/1/14 | 950 | 1,085 |
Time Warner Cable Inc. | 5.400% | 7/2/12 | 1,367 | 1,466 |
Time Warner Cable Inc. | 6.200% | 7/1/13 | 1,775 | 1,997 |
Time Warner Cable Inc. | 7.500% | 4/1/14 | 625 | 735 |
Time Warner Cable Inc. | 3.500% | 2/1/15 | 425 | 444 |
Time Warner Entertainment Co. LP | 8.875% | 10/1/12 | 250 | 285 |
Verizon Communications Inc. | 4.350% | 2/15/13 | 175 | 189 |
Verizon Communications Inc. | 5.250% | 4/15/13 | 3,090 | 3,415 |
Verizon Global Funding Corp. | 6.875% | 6/15/12 | 475 | 524 |
Verizon Global Funding Corp. | 7.375% | 9/1/12 | 250 | 281 |
Verizon New Jersey Inc. | 5.875% | 1/17/12 | 350 | 372 |
Verizon New York Inc. | 6.875% | 4/1/12 | 4,250 | 4,603 |
Vodafone Group PLC | 5.350% | 2/27/12 | 100 | 106 |
Vodafone Group PLC | 4.150% | 6/10/14 | 3,281 | 3,525 |
WPP Finance UK | 8.000% | 9/15/14 | 925 | 1,089 |
Consumer Cyclical (4.6%) | ||||
AutoZone Inc. | 5.750% | 1/15/15 | 100 | 112 |
Best Buy Co. Inc. | 6.750% | 7/15/13 | 1,500 | 1,682 |
CVS Caremark Corp. | 3.250% | 5/18/15 | 1,475 | 1,532 |
1 CVS Caremark Corp. | 6.302% | 6/1/37 | 1,050 | 964 |
Daimler Finance North America LLC | 5.750% | 9/8/11 | 200 | 209 |
Daimler Finance North America LLC | 7.300% | 1/15/12 | 1,970 | 2,125 |
Daimler Finance North America LLC | 6.500% | 11/15/13 | 2,625 | 2,994 |
Darden Restaurants Inc. | 5.625% | 10/15/12 | 50 | 54 |
Harley-Davidson Funding Corp. | 5.250% | 12/15/12 | 175 | 183 |
Home Depot Inc. | 5.250% | 12/16/13 | 1,725 | 1,916 |
Lowe’s Cos. Inc. | 5.600% | 9/15/12 | 1,000 | 1,094 |
McDonald’s Corp. | 4.300% | 3/1/13 | 1,961 | 2,127 |
Nordstrom Inc. | 6.750% | 6/1/14 | 50 | 58 |
PACCAR Financial Corp. | 1.950% | 12/17/12 | 175 | 178 |
63
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
PACCAR Inc. | 6.875% | 2/15/14 | 675 | 788 |
Staples Inc. | 7.375% | 10/1/12 | 150 | 166 |
Staples Inc. | 9.750% | 1/15/14 | 2,425 | 3,001 |
Target Corp. | 5.875% | 3/1/12 | 1,350 | 1,452 |
Time Warner Inc. | 3.150% | 7/15/15 | 1,300 | 1,333 |
Toll Brothers Finance Corp. | 5.150% | 5/15/15 | 250 | 249 |
Toyota Motor Credit Corp. | 3.200% | 6/17/15 | 750 | 791 |
Turner Broadcasting System Inc. | 8.375% | 7/1/13 | 1,050 | 1,226 |
Viacom Inc. | 4.375% | 9/15/14 | 1,375 | 1,492 |
Wal-Mart Stores Inc. | 4.250% | 4/15/13 | 950 | 1,032 |
Wal-Mart Stores Inc. | 4.550% | 5/1/13 | 1,950 | 2,134 |
Wal-Mart Stores Inc. | 3.200% | 5/15/14 | 900 | 963 |
Wal-Mart Stores Inc. | 4.500% | 7/1/15 | 1,200 | 1,364 |
Wal-Mart Stores Inc. | 2.250% | 7/8/15 | 625 | 645 |
Walgreen Co. | 4.875% | 8/1/13 | 700 | 777 |
Walt Disney Co. | 6.375% | 3/1/12 | 725 | 786 |
Walt Disney Co. | 4.500% | 12/15/13 | 2,950 | 3,272 |
Western Union Co. | 5.400% | 11/17/11 | 750 | 787 |
Western Union Co. | 6.500% | 2/26/14 | 475 | 545 |
Yum! Brands Inc. | 7.700% | 7/1/12 | 150 | 165 |
Consumer Noncyclical (13.0%) | ||||
Abbott Laboratories | 5.150% | 11/30/12 | 2,175 | 2,383 |
Altria Group Inc. | 8.500% | 11/10/13 | 2,500 | 2,976 |
AmerisourceBergen Corp. | 5.625% | 9/15/12 | 25 | 27 |
AmerisourceBergen Corp. | 5.875% | 9/15/15 | 200 | 229 |
Amgen Inc. | 4.850% | 11/18/14 | 900 | 1,016 |
Anheuser-Busch InBev Worldwide Inc. | 3.000% | 10/15/12 | 3,175 | 3,283 |
Anheuser-Busch InBev Worldwide Inc. | 2.500% | 3/26/13 | 1,375 | 1,402 |
Anheuser-Busch InBev Worldwide Inc. | 7.200% | 1/15/14 | 150 | 175 |
Anheuser-Busch InBev Worldwide Inc. | 4.125% | 1/15/15 | 925 | 993 |
AstraZeneca PLC | 5.400% | 9/15/12 | 1,625 | 1,774 |
AstraZeneca PLC | 5.400% | 6/1/14 | 375 | 428 |
Avon Products Inc. | 5.625% | 3/1/14 | 275 | 312 |
Baxter International Inc. | 4.000% | 3/1/14 | 333 | 362 |
Baxter International Inc. | 4.625% | 3/15/15 | 400 | 448 |
Biogen Idec Inc. | 6.000% | 3/1/13 | 25 | 27 |
Bottling Group LLC | 6.950% | 3/15/14 | 475 | 565 |
Bristol-Myers Squibb Co. | 5.250% | 8/15/13 | 600 | 667 |
Bunge Ltd. Finance Corp. | 5.875% | 5/15/13 | 400 | 433 |
Bunge Ltd. Finance Corp. | 5.350% | 4/15/14 | 525 | 559 |
Campbell Soup Co. | 3.375% | 8/15/14 | 100 | 108 |
Cardinal Health Inc. | 4.000% | 6/15/15 | 325 | 345 |
CareFusion Corp. | 5.125% | 8/1/14 | 1,925 | 2,108 |
Clorox Co. | 5.000% | 3/1/13 | 3,000 | 3,267 |
Coca-Cola Co. | 3.625% | 3/15/14 | 150 | 162 |
Coca-Cola Enterprises Inc. | 7.375% | 3/3/14 | 1,575 | 1,891 |
Coca-Cola Enterprises Inc. | 4.250% | 3/1/15 | 1,085 | 1,206 |
Covidien International Finance SA | 1.875% | 6/15/13 | 2,150 | 2,186 |
Delhaize Group SA | 5.875% | 2/1/14 | 25 | 28 |
Diageo Capital PLC | 5.200% | 1/30/13 | 225 | 246 |
Diageo Finance BV | 5.500% | 4/1/13 | 2,200 | 2,436 |
Dr Pepper Snapple Group Inc. | 1.700% | 12/21/11 | 1,175 | 1,183 |
Dr Pepper Snapple Group Inc. | 2.350% | 12/21/12 | 600 | 613 |
Eli Lilly & Co. | 3.550% | 3/6/12 | 650 | 678 |
Eli Lilly & Co. | 4.200% | 3/6/14 | 600 | 658 |
64
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Express Scripts Inc. | 5.250% | 6/15/12 | 2,975 | 3,177 |
Express Scripts Inc. | 6.250% | 6/15/14 | 100 | 115 |
Fortune Brands Inc. | 3.000% | 6/1/12 | 375 | 381 |
Genentech Inc. | 4.750% | 7/15/15 | 375 | 423 |
General Mills Inc. | 6.000% | 2/15/12 | 1,000 | 1,071 |
General Mills Inc. | 5.650% | 9/10/12 | 150 | 164 |
General Mills Inc. | 5.250% | 8/15/13 | 3,175 | 3,541 |
GlaxoSmithKline Capital Inc. | 4.850% | 5/15/13 | 4,358 | 4,791 |
Hasbro Inc. | 6.125% | 5/15/14 | 25 | 27 |
HJ Heinz Finance Co. | 6.000% | 3/15/12 | 623 | 667 |
Hormel Foods Corp. | 6.625% | 6/1/11 | 150 | 157 |
Hospira Inc. | 5.550% | 3/30/12 | 25 | 27 |
Hospira Inc. | 5.900% | 6/15/14 | 25 | 28 |
Johnson & Johnson | 5.150% | 8/15/12 | 725 | 789 |
Kellogg Co. | 5.125% | 12/3/12 | 2,090 | 2,270 |
Kimberly-Clark Corp. | 4.875% | 8/15/15 | 850 | 977 |
Koninklijke Philips Electronics NV | 4.625% | 3/11/13 | 75 | 81 |
Kraft Foods Inc. | 5.625% | 11/1/11 | 3,475 | 3,660 |
Kraft Foods Inc. | 6.250% | 6/1/12 | 1,535 | 1,668 |
Kraft Foods Inc. | 6.000% | 2/11/13 | 130 | 144 |
Kraft Foods Inc. | 2.625% | 5/8/13 | 775 | 801 |
Kraft Foods Inc. | 5.250% | 10/1/13 | 635 | 700 |
Kraft Foods Inc. | 6.750% | 2/19/14 | 125 | 145 |
Kroger Co. | 6.750% | 4/15/12 | 25 | 27 |
Kroger Co. | 5.000% | 4/15/13 | 875 | 951 |
Kroger Co. | 7.500% | 1/15/14 | 1,975 | 2,333 |
Life Technologies Corp. | 4.400% | 3/1/15 | 1,050 | 1,117 |
McKesson Corp. | 6.500% | 2/15/14 | 375 | 428 |
Medco Health Solutions Inc. | 6.125% | 3/15/13 | 900 | 998 |
Medco Health Solutions Inc. | 7.250% | 8/15/13 | 700 | 808 |
Medtronic Inc. | 4.500% | 3/15/14 | 100 | 110 |
Medtronic Inc. | 3.000% | 3/15/15 | 2,300 | 2,428 |
Merck & Co. Inc. | 5.300% | 12/1/13 | 3,425 | 3,864 |
Merck & Co. Inc. | 4.750% | 3/1/15 | 550 | 621 |
Merck & Co. Inc. | 4.000% | 6/30/15 | 175 | 194 |
Newell Rubbermaid Inc. | 5.500% | 4/15/13 | 1,150 | 1,250 |
Novartis Capital Corp. | 1.900% | 4/24/13 | 750 | 768 |
Novartis Capital Corp. | 4.125% | 2/10/14 | 1,525 | 1,666 |
Novartis Capital Corp. | 2.900% | 4/24/15 | 1,250 | 1,308 |
PepsiAmericas Inc. | 4.875% | 1/15/15 | 225 | 254 |
PepsiCo Inc. | 5.150% | 5/15/12 | 187 | 201 |
PepsiCo Inc. | 4.650% | 2/15/13 | 279 | 304 |
PepsiCo Inc. | 3.750% | 3/1/14 | 650 | 702 |
PepsiCo Inc. | 3.100% | 1/15/15 | 4,850 | 5,159 |
Pfizer Inc. | 4.450% | 3/15/12 | 4,549 | 4,801 |
Pfizer Inc. | 5.350% | 3/15/15 | 3,200 | 3,692 |
Philip Morris International Inc. | 6.875% | 3/17/14 | 1,550 | 1,827 |
Procter & Gamble Co. | 1.375% | 8/1/12 | 375 | 381 |
Procter & Gamble Co. | 3.150% | 9/1/15 | 1,000 | 1,074 |
Reynolds American Inc. | 7.250% | 6/1/13 | 200 | 224 |
Safeway Inc. | 5.800% | 8/15/12 | 1,950 | 2,119 |
Safeway Inc. | 6.250% | 3/15/14 | 100 | 115 |
Sara Lee Corp. | 6.250% | 9/15/11 | 550 | 582 |
Sara Lee Corp. | 2.750% | 9/15/15 | 675 | 675 |
St. Jude Medical Inc. | 2.200% | 9/15/13 | 450 | 461 |
St. Jude Medical Inc. | 3.750% | 7/15/14 | 50 | 54 |
65
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Stryker Corp. | 3.000% | 1/15/15 | 1,375 | 1,445 |
Sysco Corp. | 4.200% | 2/12/13 | 75 | 81 |
Teva Pharmaceutical Finance II BV/Teva | ||||
Pharmaceutical Finance III LLC | 3.000% | 6/15/15 | 400 | 416 |
Teva Pharmaceutical Finance III LLC | 1.500% | 6/15/12 | 1,725 | 1,744 |
Thermo Fisher Scientific Inc. | 3.250% | 11/20/14 | 150 | 159 |
Unilever Capital Corp. | 3.650% | 2/15/14 | 300 | 324 |
UST LLC | 6.625% | 7/15/12 | 750 | 812 |
Whirlpool Corp. | 5.500% | 3/1/13 | 550 | 591 |
Wyeth | 5.500% | 3/15/13 | 50 | 56 |
Wyeth | 5.500% | 2/1/14 | 1,305 | 1,479 |
Energy (5.6%) | ||||
Anadarko Petroleum Corp. | 5.750% | 6/15/14 | 560 | 568 |
Apache Corp. | 5.250% | 4/15/13 | 895 | 978 |
Apache Corp. | 6.000% | 9/15/13 | 1,200 | 1,350 |
Baker Hughes Inc. | 6.500% | 11/15/13 | 1,200 | 1,378 |
BP Capital Markets PLC | 3.125% | 3/10/12 | 1,600 | 1,600 |
BP Capital Markets PLC | 5.250% | 11/7/13 | 2,700 | 2,801 |
BP Capital Markets PLC | 3.625% | 5/8/14 | 1,025 | 1,012 |
BP Capital Markets PLC | 3.875% | 3/10/15 | 1,175 | 1,160 |
Burlington Resources Finance Co. | 6.500% | 12/1/11 | 350 | 375 |
Canadian Natural Resources Ltd. | 5.150% | 2/1/13 | 1,000 | 1,084 |
Canadian Natural Resources Ltd. | 4.900% | 12/1/14 | 400 | 445 |
Cenovus Energy Inc. | 4.500% | 9/15/14 | 75 | 83 |
Chevron Corp. | 3.450% | 3/3/12 | 400 | 416 |
Chevron Corp. | 3.950% | 3/3/14 | 2,725 | 2,975 |
ConocoPhillips | 4.750% | 2/1/14 | 800 | 887 |
ConocoPhillips | 4.600% | 1/15/15 | 3,625 | 4,065 |
Devon Energy Corp. | 5.625% | 1/15/14 | 150 | 169 |
Devon Financing Corp. ULC | 6.875% | 9/30/11 | 500 | 532 |
Diamond Offshore Drilling Inc. | 5.150% | 9/1/14 | 750 | 826 |
EnCana Holdings Finance Corp. | 5.800% | 5/1/14 | 2,450 | 2,777 |
EOG Resources Inc. | 2.950% | 6/1/15 | 1,925 | 2,011 |
Husky Energy Inc. | 5.900% | 6/15/14 | 2,200 | 2,468 |
Marathon Oil Corp. | 6.125% | 3/15/12 | 125 | 134 |
Marathon Oil Corp. | 6.500% | 2/15/14 | 500 | 572 |
Murphy Oil Corp. | 6.375% | 5/1/12 | 250 | 269 |
Nexen Inc. | 5.050% | 11/20/13 | 575 | 625 |
Noble Holding International Ltd. | 3.450% | 8/1/15 | 225 | 234 |
Occidental Petroleum Corp. | 7.000% | 11/1/13 | 1,725 | 2,037 |
Shell International Finance BV | 5.625% | 6/27/11 | 1,875 | 1,950 |
Shell International Finance BV | 1.300% | 9/22/11 | 1,250 | 1,261 |
Shell International Finance BV | 1.875% | 3/25/13 | 625 | 638 |
Shell International Finance BV | 4.000% | 3/21/14 | 2,075 | 2,244 |
Shell International Finance BV | 3.100% | 6/28/15 | 400 | 420 |
Statoil ASA | 3.875% | 4/15/14 | 500 | 541 |
Statoil ASA | 2.900% | 10/15/14 | 1,350 | 1,417 |
Total Capital SA | 3.000% | 6/24/15 | 400 | 419 |
Total Capital SA | 3.125% | 10/2/15 | 100 | 106 |
Transocean Inc. | 5.250% | 3/15/13 | 550 | 562 |
Valero Energy Corp. | 6.875% | 4/15/12 | 950 | 1,023 |
Weatherford International Inc. | 5.950% | 6/15/12 | 1,105 | 1,182 |
XTO Energy Inc. | 4.625% | 6/15/13 | 150 | 165 |
XTO Energy Inc. | 4.900% | 2/1/14 | 1,125 | 1,263 |
XTO Energy Inc. | 5.000% | 1/31/15 | 25 | 29 |
XTO Energy Inc. | 5.300% | 6/30/15 | 275 | 320 |
66
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Other Industrial (0.0%) | ||||
Yale University | 2.900% | 10/15/14 | 175 | 185 |
Technology (3.7%) | ||||
Adobe Systems Inc. | 3.250% | 2/1/15 | 375 | 393 |
Agilent Technologies Inc. | 4.450% | 9/14/12 | 25 | 26 |
Cisco Systems Inc. | 2.900% | 11/17/14 | 1,000 | 1,061 |
Dell Inc. | 3.375% | 6/15/12 | 1,125 | 1,170 |
Dun & Bradstreet Corp. | 6.000% | 4/1/13 | 50 | 55 |
Fiserv Inc. | 6.125% | 11/20/12 | 1,450 | 1,588 |
Hewlett-Packard Co. | 5.250% | 3/1/12 | 1,000 | 1,065 |
Hewlett-Packard Co. | 4.500% | 3/1/13 | 2,700 | 2,925 |
Hewlett-Packard Co. | 6.125% | 3/1/14 | 2,768 | 3,200 |
HP Enterprise Services LLC | 6.000% | 8/1/13 | 425 | 483 |
IBM International Group Capital LLC | 5.050% | 10/22/12 | 1,590 | 1,732 |
International Business Machines Corp. | 4.750% | 11/29/12 | 125 | 136 |
International Business Machines Corp. | 2.100% | 5/6/13 | 2,125 | 2,188 |
International Business Machines Corp. | 1.000% | 8/5/13 | 800 | 800 |
International Business Machines Corp. | 6.500% | 10/15/13 | 925 | 1,075 |
Intuit Inc. | 5.400% | 3/15/12 | 175 | 186 |
Lexmark International Inc. | 5.900% | 6/1/13 | 150 | 160 |
Maxim Integrated Products Inc. | 3.450% | 6/14/13 | 150 | 154 |
Microsoft Corp. | 2.950% | 6/1/14 | 2,450 | 2,605 |
Motorola Inc. | 8.000% | 11/1/11 | 350 | 373 |
Oracle Corp. | 4.950% | 4/15/13 | 1,175 | 1,296 |
Oracle Corp. | 3.750% | 7/8/14 | 1,330 | 1,443 |
Pitney Bowes Inc. | 4.875% | 8/15/14 | 1,800 | 1,933 |
Tyco Electronics Group SA | 6.000% | 10/1/12 | 277 | 300 |
Xerox Corp. | 5.500% | 5/15/12 | 3,800 | 4,052 |
Xerox Corp. | 5.650% | 5/15/13 | 125 | 136 |
Xerox Corp. | 4.250% | 2/15/15 | 525 | 561 |
Transportation (0.8%) | ||||
Burlington Northern Santa Fe LLC | 5.900% | 7/1/12 | 100 | 108 |
Burlington Northern Santa Fe LLC | 7.000% | 2/1/14 | 750 | 880 |
Canadian National Railway Co. | 6.375% | 10/15/11 | 375 | 399 |
CSX Corp. | 6.750% | 3/15/11 | 900 | 929 |
CSX Corp. | 6.250% | 4/1/15 | 1,125 | 1,317 |
Ryder System Inc. | 6.000% | 3/1/13 | 150 | 163 |
Ryder System Inc. | 5.850% | 3/1/14 | 500 | 548 |
Southwest Airlines Co. | 10.500% | 12/15/11 | 150 | 166 |
Union Pacific Corp. | 6.500% | 4/15/12 | 60 | 65 |
Union Pacific Corp. | 5.450% | 1/31/13 | 900 | 986 |
United Parcel Service Inc. | 4.500% | 1/15/13 | 500 | 542 |
United Parcel Service Inc. | 3.875% | 4/1/14 | 600 | 652 |
400,375 | ||||
Utilities (7.6%) | ||||
Electric (5.9%) | ||||
Alabama Power Co. | 4.850% | 12/15/12 | 200 | 217 |
Allegheny Energy Supply Co. LLC | 8.250% | 4/15/12 | 200 | 216 |
Ameren Corp. | 8.875% | 5/15/14 | 525 | 608 |
Appalachian Power Co. | 5.650% | 8/15/12 | 50 | 54 |
Carolina Power & Light Co. | 6.500% | 7/15/12 | 1,075 | 1,174 |
Carolina Power & Light Co. | 5.125% | 9/15/13 | 75 | 83 |
Carolina Power & Light Co. | 5.150% | 4/1/15 | 237 | 272 |
Cleveland Electric Illuminating Co. | 5.650% | 12/15/13 | 75 | 82 |
67
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Commonwealth Edison Co. | 5.400% | 12/15/11 | 250 | 263 |
Commonwealth Edison Co. | 6.150% | 3/15/12 | 350 | 377 |
Commonwealth Edison Co. | 4.700% | 4/15/15 | 600 | 670 |
Consolidated Edison Co. of New York Inc. | 4.875% | 2/1/13 | 900 | 974 |
Consolidated Natural Gas Co. | 5.000% | 12/1/14 | 225 | 252 |
Constellation Energy Group Inc. | 4.550% | 6/15/15 | 525 | 569 |
Consumers Energy Co. | 5.375% | 4/15/13 | 50 | 55 |
Dayton Power & Light Co. | 5.125% | 10/1/13 | 710 | 787 |
Dominion Resources Inc. | 5.700% | 9/17/12 | 175 | 190 |
Dominion Resources Inc. | 5.000% | 3/15/13 | 200 | 218 |
Dominion Resources Inc. | 5.150% | 7/15/15 | 1,000 | 1,135 |
Duke Energy Corp. | 6.300% | 2/1/14 | 1,100 | 1,265 |
Duke Energy Corp. | 3.950% | 9/15/14 | 575 | 617 |
Duke Energy Corp. | 3.350% | 4/1/15 | 2,550 | 2,678 |
Exelon Corp. | 4.900% | 6/15/15 | 2,600 | 2,863 |
FirstEnergy Solutions Corp. | 4.800% | 2/15/15 | 1,650 | 1,776 |
FPL Group Capital Inc. | 5.625% | 9/1/11 | 1,350 | 1,413 |
FPL Group Capital Inc. | 2.550% | 11/15/13 | 375 | 385 |
FPL Group Capital Inc. | 7.875% | 12/15/15 | 175 | 219 |
Great Plains Energy Inc. | 2.750% | 8/15/13 | 325 | 326 |
Iberdrola Finance Ireland Ltd. | 3.800% | 9/11/14 | 50 | 51 |
KCP&L Greater Missouri Operations Co. | 11.875% | 7/1/12 | 175 | 202 |
MidAmerican Energy Co. | 5.650% | 7/15/12 | 75 | 81 |
Midamerican Energy Holdings Co. | 3.150% | 7/15/12 | 475 | 492 |
Midamerican Energy Holdings Co. | 5.875% | 10/1/12 | 1,650 | 1,789 |
National Rural Utilities Cooperative Finance Corp. | 7.250% | 3/1/12 | 2,975 | 3,249 |
National Rural Utilities Cooperative Finance Corp. | 5.500% | 7/1/13 | 975 | 1,093 |
Nevada Power Co. | 8.250% | 6/1/11 | 75 | 79 |
Niagara Mohawk Power Corp. | 3.553% | 10/1/14 | 50 | 53 |
Nisource Finance Corp. | 6.150% | 3/1/13 | 1,200 | 1,310 |
Nisource Finance Corp. | 5.400% | 7/15/14 | 600 | 662 |
Northeast Utilities | 7.250% | 4/1/12 | 125 | 135 |
Northeast Utilities | 5.650% | 6/1/13 | 25 | 27 |
Northern States Power Co. | 8.000% | 8/28/12 | 840 | 957 |
Northern States Power Co. | 1.950% | 8/15/15 | 125 | 126 |
NSTAR Electric Co. | 4.875% | 10/15/12 | 50 | 54 |
Oncor Electric Delivery Co. LLC | 6.375% | 5/1/12 | 1,475 | 1,589 |
Oncor Electric Delivery Co. LLC | 5.950% | 9/1/13 | 525 | 586 |
Pacific Gas & Electric Co. | 4.200% | 3/1/11 | 875 | 891 |
Pacific Gas & Electric Co. | 6.250% | 12/1/13 | 310 | 356 |
Pacific Gas & Electric Co. | 4.800% | 3/1/14 | 1,225 | 1,356 |
PacifiCorp | 6.900% | 11/15/11 | 135 | 144 |
Peco Energy Co. | 5.000% | 10/1/14 | 25 | 28 |
PG&E Corp. | 5.750% | 4/1/14 | 50 | 56 |
PPL Energy Supply LLC | 6.300% | 7/15/13 | 1,650 | 1,844 |
PPL Energy Supply LLC | 5.400% | 8/15/14 | 75 | 83 |
Progress Energy Inc. | 6.850% | 4/15/12 | 400 | 434 |
Progress Energy Inc. | 6.050% | 3/15/14 | 1,050 | 1,199 |
PSEG Power LLC | 5.000% | 4/1/14 | 100 | 110 |
PSEG Power LLC | 5.500% | 12/1/15 | 975 | 1,111 |
Public Service Co. of Colorado | 7.875% | 10/1/12 | 365 | 415 |
Public Service Electric & Gas Co. | 5.125% | 9/1/12 | 600 | 645 |
Public Service Electric & Gas Co. | 2.700% | 5/1/15 | 150 | 157 |
Southern California Edison Co. | 5.750% | 3/15/14 | 75 | 86 |
Southern California Edison Co. | 4.150% | 9/15/14 | 1,089 | 1,199 |
Southern California Edison Co. | 4.650% | 4/1/15 | 600 | 678 |
68
Short-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Southern Co. | 5.300% | 1/15/12 | 450 | 476 |
Southern Co. | 4.150% | 5/15/14 | 766 | 832 |
Southern Power Co. | 6.250% | 7/15/12 | 250 | 274 |
Southern Power Co. | 4.875% | 7/15/15 | 200 | 223 |
Tampa Electric Co. | 6.875% | 6/15/12 | 100 | 109 |
TransAlta Corp. | 4.750% | 1/15/15 | 2,600 | 2,800 |
Virginia Electric and Power Co. | 5.100% | 11/30/12 | 1,300 | 1,418 |
Natural Gas (1.7%) | ||||
Atmos Energy Corp. | 5.125% | 1/15/13 | 300 | 325 |
Atmos Energy Corp. | 4.950% | 10/15/14 | 105 | 116 |
CenterPoint Energy Resources Corp. | 7.750% | 2/15/11 | 300 | 309 |
Enbridge Inc. | 5.800% | 6/15/14 | 325 | 374 |
Energy Transfer Partners LP | 5.650% | 8/1/12 | 1,650 | 1,749 |
Energy Transfer Partners LP | 6.000% | 7/1/13 | 340 | 369 |
Energy Transfer Partners LP | 5.950% | 2/1/15 | 600 | 661 |
Enterprise Products Operating LLC | 7.625% | 2/15/12 | 700 | 757 |
Enterprise Products Operating LLC | 4.600% | 8/1/12 | 100 | 105 |
Enterprise Products Operating LLC | 6.375% | 2/1/13 | 100 | 110 |
Enterprise Products Operating LLC | 9.750% | 1/31/14 | 425 | 522 |
Enterprise Products Operating LLC | 5.600% | 10/15/14 | 825 | 924 |
Enterprise Products Operating LLC | 5.000% | 3/1/15 | 206 | 226 |
Enterprise Products Operating LLC | 3.700% | 6/1/15 | 1,300 | 1,353 |
Kinder Morgan Energy Partners LP | 5.850% | 9/15/12 | 300 | 323 |
Kinder Morgan Energy Partners LP | 5.000% | 12/15/13 | 1,550 | 1,673 |
Oneok Inc. | 5.200% | 6/15/15 | 225 | 247 |
ONEOK Partners LP | 5.900% | 4/1/12 | 150 | 160 |
Plains All American Pipeline LP / PAA Finance Corp. 4.250% | 9/1/12 | 525 | 548 | |
Southern California Gas Co. | 4.375% | 1/15/11 | 250 | 253 |
Spectra Energy Capital LLC | 6.250% | 2/15/13 | 1,725 | 1,884 |
Texas Gas Transmission LLC | 4.600% | 6/1/15 | 175 | 188 |
TransCanada PipeLines Ltd. | 4.000% | 6/15/13 | 425 | 456 |
TransCanada PipeLines Ltd. | 3.400% | 6/1/15 | 500 | 531 |
Williams Partners LP | 3.800% | 2/15/15 | 400 | 420 |
63,780 | ||||
Total Corporate Bonds (Cost $805,713) | 822,302 | |||
Shares | ||||
Temporary Cash Investment (0.8%) | ||||
Money Market Fund (0.8%) | ||||
2 Vanguard Market Liquidity Fund (Cost $6,762) | 0.288% | 6,762,243 | 6,762 | |
Total Investments (99.4%) (Cost $819,482) | 836,072 | |||
Other Assets and Liabilities (0.6%) | ||||
Other Assets | 23,588 | |||
Liabilities | (18,770) | |||
4,818 | ||||
Net Assets (100%) | 840,890 |
69
Short-Term Corporate Bond Index Fund
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 823,836 |
Overdistributed Net Investment Income | (67) |
Accumulated Net Realized Gains | 531 |
Unrealized Appreciation (Depreciation) | 16,590 |
Net Assets | 840,890 |
Institutional Shares—Net Assets | |
Applicable to 5,173,925 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 133,998 |
Net Asset Value Per Share—Institutional Shares | $25.90 |
ETF Shares—Net Assets | |
Applicable to 9,100,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 706,892 |
Net Asset Value Per Share—ETF Shares | $77.68 |
• See Note A in Notes to Financial Statements.
1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
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.
See accompanying Notes, which are an integral part of the Financial Statements.
70
Short-Term Corporate Bond Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest2 | 8,173 |
Total Income | 8,173 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 15 |
Management and Administrative—Institutional Shares | 37 |
Management and Administrative—ETF Shares | 289 |
Marketing and Distribution—Institutional Shares | 8 |
Marketing and Distribution—ETF Shares | 35 |
Custodian Fees | 14 |
Auditing Fees | 10 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 8 |
Total Expenses | 416 |
Net Investment Income | 7,757 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 584 |
Futures Contracts | (49) |
Realized Net Gain (Loss) | 535 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 16,590 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 24,882 |
1 Inception. | |
2 Interest income from an affiliated company of the fund was $6,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
71
Short-Term Corporate Bond Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 7,757 |
Realized Net Gain (Loss) | 535 |
Change in Unrealized Appreciation (Depreciation) | 16,590 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 24,882 |
Distributions | |
Net Investment Income | |
Institutional Shares | (1,442) |
ETF Shares | (6,382) |
Realized Capital Gain | |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (7,824) |
Capital Share Transactions | |
Institutional Shares | 130,482 |
ETF Shares | 693,350 |
Net Increase (Decrease) from Capital Share Transactions | 823,832 |
Total Increase (Decrease) | 840,890 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 840,890 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($67,000). |
See accompanying Notes, which are an integral part of the Financial Statements.
72
Short-Term Corporate Bond Index Fund
Financial Highlights
Institutional Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $25.02 |
Investment Operations | |
Net Investment Income | .453 |
Net Realized and Unrealized Gain (Loss) on Investments | .882 |
Total from Investment Operations | 1.335 |
Distributions | |
Dividends from Net Investment Income | (.455) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.455) |
Net Asset Value, End of Period | $25.90 |
Total Return2 | 5.39% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $134 |
Ratio of Total Expenses to Average Net Assets | 0.09%3 |
Ratio of Net Investment Income to Average Net Assets | 2.62%3 |
Portfolio Turnover Rate4 | 68% |
2 Total returns do not reflect the 0.25% transaction fee on purchases.
3 Annualized.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
73
Short-Term Corporate Bond Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $75.05 |
Investment Operations | |
Net Investment Income | 1.334 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.636 |
Total from Investment Operations | 3.970 |
Distributions | |
Dividends from Net Investment Income | (1.340) |
Distributions from Realized Capital Gains | — |
Total Distributions | (1.340) |
Net Asset Value, End of Period | $77.68 |
Total Return | 5.34% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $707 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 2.56%2 |
Portfolio Turnover Rate3 | 68% |
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
74
Short-Term Corporate Bond Index Fund
Notes to Financial Statements
Vanguard Short-Term Corporate Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. The fund has not issued any Signal Shares as of August 31, 2010. Institutional Shares were first issued on November 19, 2009. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on purchases of capital shares are credited to paid-in capital.
75
Short-Term Corporate Bond Index Fund
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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $138,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.06% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 7,008 | — |
Corporate Bonds | — | 822,302 | — |
Temporary Cash Investments | 6,762 | — | — |
Total | 6,762 | 829,310 | — |
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 used a tax accounting practice to treat a portion of the price of capital shares redeemed during the period as distributions from realized capital gains. Accordingly, the fund has reclassified $4,000 from accumulated net realized gains to paid-in capital.
76
Short-Term Corporate Bond Index Fund
For tax purposes, at August 31, 2010, the fund had short-term and long-term capital gains of $587,000 and $10,000, respectively, available for distribution. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $819,548,000. Net unrealized appreciation of investment securities for tax purposes was $16,524,000, consisting of unrealized gains of $16,760,000 on securities that had risen in value since their purchase and $236,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the period ended August 31, 2010, the fund purchased $879,642,000 of investment securities and sold $87,265,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $186,040,000 and $179,034,000, respectively.
F. Capital share transactions for each class of shares were:
Inception1 to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Institutional Shares | ||
Issued2 | 132,040 | 5,234 |
Issued in Lieu of Cash Distributions | 1,442 | 57 |
Redeemed | (3,000) | (117) |
Net Increase (Decrease)—Institutional Shares | 130,482 | 5,174 |
ETF Shares | ||
Issued2 | 693,350 | 9,100 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | — | — |
Net Increase (Decrease)—ETF Shares | 693,350 | 9,100 |
1 November 19, 2009. | ||
2 Includes purchase fees of $178,000 (fund total). |
G. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
77
Intermediate-Term Corporate Bond Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Issues | 501 | 1,235 | 8,214 | |
Yield3 | 4.0% | 2.3% | ||
Signal Shares | 3.8% | |||
Institutional Shares | 3.9% | |||
ETF Shares | 3.8% | |||
Yield to Maturity | 4.0%4 | 4.1% | 2.3% | |
Average Coupon | 6.0% | 6.0% | 4.4% | |
Average Effective | ||||
Maturity | 7.6 years | 7.6 years | 6.4 years | |
Average Duration | 6.2 years | 6.2 years | 4.3 years | |
Expense Ratio5 | — | — | ||
Signal Shares | 0.15% | |||
Institutional Shares | 0.09% | |||
ETF Shares | 0.15% | |||
Short-Term Reserves | 0.2% | — | — |
Sector Diversification6 (% of portfolio) | |
Finance | 36.9% |
Industrial | 52.3 |
Treasury/Agency | 0.0 |
Utilities | 10.6 |
Other | 0.2 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 1.2% |
Aa | 11.5 |
A | 45.7 |
Baa | 41.6 |
For information about these ratings, see the Glossary entry for Credit Quality. | |
Distribution by Maturity (% of portfolio) | |
Under 1 Year | 0.3% |
1– 5 Years | 1.0 |
5–10 Years | 98.7 |
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
4 Before expenses.
5 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.15% for Signal Shares, 0.09% for Institutional Shares,
and 0.15% for ETF Shares.
6 The agency sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
78
Intermediate-Term Corporate Bond Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx81x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Intermediate-Term Corporate Bond Index Fund | ||
ETF Shares Net Asset Value | 11.30% | $11,130 |
Intermediate-Term Corporate Bond Index Fund ETF Shares Market Price | 11.81 | 11,181 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. 5–10 Year Corporate Bond Index | 11.41 | 11,141 |
Final Value of | ||
Since | a $1,000,000 | |
Inception1 | Investment | |
Intermediate-Term Corporate Bond Index Fund Signal Shares2 | 8.31% | $1,083,134 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 5.81 | 1,058,091 |
Barclays Capital U.S. 5–10 Year Corporate Bond Index | 8.67 | 1,086,662 |
Final Value of | ||
Since | a $5,000,000 | |
Inception1 | Investment | |
Intermediate-Term Corporate Bond Index Fund Institutional Shares2 | 10.83% | $5,541,253 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 5,346,901 |
Barclays Capital U.S. 5–10 Year Corporate Bond Index | 11.41 | 5,570,509 |
2 Performance figures are adjusted for the 0.50% transaction fee on purchases.
See Financial Highlights for dividend and capital gains information.
79
Intermediate-Term Corporate Bond Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 7.7% | 3.6% | 11.3% | 11.4% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Signal Shares | 3/2/2010 | 2.59% | 1.52% | 4.11% |
Fee-Adjusted Returns2 | 2.08 | 1.51 | 3.59 | |
Institutional Shares | 11/19/2009 | 3.76 | 2.76 | 6.52 |
Fee-Adjusted Returns2 | 3.25 | 2.73 | 5.98 | |
ETF Shares | 11/19/2009 | |||
Market Price | 7.06 | |||
Net Asset Value | 6.45 |
2 Performance figures are adjusted for the 0.50% transaction fee on purchases.
For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Performance tab. The Premium/Discount table there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.
See Financial Highlights for dividend and capital gains information.
80
Intermediate-Term Corporate Bond Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
U.S. Government and Agency Obligations (0.3%) | ||||
U.S. Government Securities (0.3%) | ||||
United States Treasury Note/Bond | 1.750% | 11/15/11 | 90 | 92 |
United States Treasury Note/Bond | 2.750% | 5/31/17 | 5 | 5 |
United States Treasury Note/Bond | 3.625% | 8/15/19 | 20 | 22 |
United States Treasury Note/Bond | 2.625% | 8/15/20 | 800 | 811 |
Total U.S. Government and Agency Obligations (Cost $929) | 930 | |||
Corporate Bonds (98.3%) | ||||
Finance (36.0%) | ||||
Banking (23.9%) | ||||
American Express Co. | 6.150% | 8/28/17 | 425 | 489 |
American Express Co. | 7.000% | 3/19/18 | 1,300 | 1,564 |
American Express Co. | 8.125% | 5/20/19 | 700 | 900 |
1 American Express Co. | 6.800% | 9/1/66 | 400 | 390 |
Bank of America Corp. | 3.700% | 9/1/15 | 350 | 350 |
Bank of America Corp. | 6.500% | 8/1/16 | 1,250 | 1,397 |
Bank of America Corp. | 6.000% | 9/1/17 | 200 | 214 |
Bank of America Corp. | 5.750% | 12/1/17 | 475 | 504 |
Bank of America Corp. | 5.650% | 5/1/18 | 1,375 | 1,435 |
Bank of America Corp. | 5.625% | 7/1/20 | 1,050 | 1,081 |
Bank of America NA | 5.300% | 3/15/17 | 3,600 | 3,693 |
Bank of New York Mellon Corp. | 4.600% | 1/15/20 | 825 | 918 |
Barclays Bank PLC | 5.000% | 9/22/16 | 1,875 | 2,039 |
Barclays Bank PLC | 6.750% | 5/22/19 | 425 | 504 |
BB&T Corp. | 5.200% | 12/23/15 | 400 | 443 |
BB&T Corp. | 3.950% | 4/29/16 | 650 | 683 |
BB&T Corp. | 6.850% | 4/30/19 | 150 | 182 |
Bear Stearns Cos. LLC | 5.550% | 1/22/17 | 75 | 82 |
Bear Stearns Cos. LLC | 6.400% | 10/2/17 | 1,275 | 1,481 |
Bear Stearns Cos. LLC | 7.250% | 2/1/18 | 475 | 572 |
Capital One Bank USA NA | 8.800% | 7/15/19 | 975 | 1,236 |
Capital One Financial Corp. | 6.150% | 9/1/16 | 225 | 245 |
Capital One Financial Corp. | 6.750% | 9/15/17 | 150 | 179 |
Citigroup Inc. | 5.850% | 8/2/16 | 400 | 432 |
Citigroup Inc. | 5.500% | 2/15/17 | 300 | 309 |
Citigroup Inc. | 6.000% | 8/15/17 | 425 | 458 |
Citigroup Inc. | 6.125% | 11/21/17 | 1,425 | 1,541 |
Citigroup Inc. | 6.125% | 5/15/18 | 1,875 | 2,043 |
Citigroup Inc. | 8.500% | 5/22/19 | 250 | 306 |
Citigroup Inc. | 5.375% | 8/9/20 | 550 | 555 |
81
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Comerica Bank | 5.200% | 8/22/17 | 150 | 160 |
Credit Suisse | 6.000% | 2/15/18 | 1,975 | 2,158 |
Credit Suisse | 5.300% | 8/13/19 | 100 | 110 |
Credit Suisse AG | 5.400% | 1/14/20 | 675 | 711 |
1 Credit Suisse/Guernsey | 5.860% | 5/15/49 | 400 | 366 |
Deutsche Bank AG | 6.000% | 9/1/17 | 1,050 | 1,221 |
Discover Bank | 8.700% | 11/18/19 | 300 | 358 |
Fifth Third Bancorp | 5.450% | 1/15/17 | 900 | 942 |
1 Fifth Third Capital Trust IV | 6.500% | 4/15/67 | 125 | 108 |
First Niagara Financial Group Inc. | 6.750% | 3/19/20 | 100 | 110 |
Goldman Sachs Group Inc. | 5.350% | 1/15/16 | 1,725 | 1,870 |
Goldman Sachs Group Inc. | 5.625% | 1/15/17 | 875 | 916 |
Goldman Sachs Group Inc. | 5.950% | 1/18/18 | 900 | 976 |
Goldman Sachs Group Inc. | 6.150% | 4/1/18 | 1,400 | 1,531 |
Goldman Sachs Group Inc. | 7.500% | 2/15/19 | 385 | 452 |
Goldman Sachs Group Inc. | 5.375% | 3/15/20 | 825 | 852 |
Goldman Sachs Group Inc. | 6.000% | 6/15/20 | 450 | 484 |
HSBC Bank USA NA | 6.000% | 8/9/17 | 450 | 505 |
HSBC Bank USA NA | 4.875% | 8/24/20 | 175 | 181 |
JPMorgan Chase & Co. | 3.700% | 1/20/15 | 50 | 52 |
JPMorgan Chase & Co. | 6.125% | 6/27/17 | 725 | 824 |
JPMorgan Chase & Co. | 6.000% | 1/15/18 | 750 | 851 |
JPMorgan Chase & Co. | 6.300% | 4/23/19 | 1,200 | 1,376 |
JPMorgan Chase & Co. | 4.400% | 7/22/20 | 450 | 456 |
JPMorgan Chase Bank NA | 5.875% | 6/13/16 | 200 | 225 |
JPMorgan Chase Bank NA | 6.000% | 10/1/17 | 1,585 | 1,785 |
Merrill Lynch & Co. Inc. | 6.050% | 5/16/16 | 590 | 621 |
Merrill Lynch & Co. Inc. | 5.700% | 5/2/17 | 400 | 414 |
Merrill Lynch & Co. Inc. | 6.875% | 4/25/18 | 1,425 | 1,576 |
Merrill Lynch & Co. Inc. | 6.875% | 11/15/18 | 400 | 439 |
Morgan Stanley | 5.375% | 10/15/15 | 950 | 1,012 |
Morgan Stanley | 5.450% | 1/9/17 | 1,950 | 2,031 |
Morgan Stanley | 5.550% | 4/27/17 | 900 | 942 |
Morgan Stanley | 5.950% | 12/28/17 | 175 | 185 |
Morgan Stanley | 6.625% | 4/1/18 | 525 | 573 |
Morgan Stanley | 7.300% | 5/13/19 | 350 | 399 |
Morgan Stanley | 5.625% | 9/23/19 | 1,640 | 1,672 |
Morgan Stanley | 5.500% | 7/24/20 | 1,125 | 1,132 |
PNC Funding Corp. | 4.250% | 9/21/15 | 1,175 | 1,256 |
PNC Funding Corp. | 5.125% | 2/8/20 | 875 | 945 |
Regions Bank | 7.500% | 5/15/18 | 525 | 548 |
Royal Bank of Canada | 2.625% | 12/15/15 | 150 | 155 |
Royal Bank of Scotland Group PLC | 6.400% | 10/21/19 | 1,000 | 1,070 |
Royal Bank of Scotland PLC | 5.625% | 8/24/20 | 75 | 77 |
SunTrust Bank | 5.000% | 9/1/15 | 65 | 70 |
SunTrust Banks Inc. | 6.000% | 9/11/17 | 100 | 109 |
UBS AG | 5.875% | 12/20/17 | 525 | 590 |
UBS AG | 5.750% | 4/25/18 | 1,775 | 1,980 |
UBS AG | 4.875% | 8/4/20 | 625 | 653 |
Wachovia Bank NA | 5.600% | 3/15/16 | 275 | 302 |
Wachovia Corp. | 5.625% | 10/15/16 | 550 | 609 |
Wachovia Corp. | 5.750% | 6/15/17 | 225 | 255 |
Wells Fargo & Co. | 5.625% | 12/11/17 | 2,000 | 2,254 |
Wells Fargo Bank NA | 5.750% | 5/16/16 | 525 | 584 |
Westpac Banking Corp. | 4.875% | 11/19/19 | 550 | 590 |
82
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Brokerage (0.9%) | ||||
1 Ameriprise Financial Inc. | 7.518% | 6/1/66 | 350 | 344 |
BlackRock Inc. | 6.250% | 9/15/17 | 200 | 236 |
BlackRock Inc. | 5.000% | 12/10/19 | 600 | 665 |
Charles Schwab Corp. | 4.450% | 7/22/20 | 400 | 419 |
Jefferies Group Inc. | 8.500% | 7/15/19 | 300 | 351 |
Lazard Group LLC | 6.850% | 6/15/17 | 200 | 214 |
Nomura Holdings Inc. | 6.700% | 3/4/20 | 375 | 426 |
Finance Companies (2.8%) | ||||
Discover Financial Services | 6.450% | 6/12/17 | 100 | 107 |
Discover Financial Services | 10.250% | 7/15/19 | 50 | 64 |
1 GE Capital Trust I | 6.375% | 11/15/67 | 800 | 770 |
General Electric Capital Corp. | 4.375% | 9/21/15 | 100 | 108 |
General Electric Capital Corp. | 5.625% | 9/15/17 | 2,610 | 2,886 |
General Electric Capital Corp. | 5.625% | 5/1/18 | 625 | 690 |
2 General Electric Capital Corp. | 6.000% | 8/7/19 | 750 | 845 |
General Electric Capital Corp. | 5.550% | 5/4/20 | 250 | 273 |
1 General Electric Capital Corp. | 6.375% | 11/15/67 | 150 | 144 |
1 HSBC Finance Capital Trust IX | 5.911% | 11/30/35 | 100 | 90 |
HSBC Finance Corp. | 5.500% | 1/19/16 | 1,150 | 1,256 |
SLM Corp. | 8.450% | 6/15/18 | 400 | 367 |
SLM Corp. | 8.000% | 3/25/20 | 600 | 525 |
Insurance (5.9%) | ||||
ACE INA Holdings Inc. | 5.700% | 2/15/17 | 200 | 225 |
ACE INA Holdings Inc. | 5.900% | 6/15/19 | 525 | 610 |
Aegon NV | 4.625% | 12/1/15 | 525 | 553 |
Aetna Inc. | 6.000% | 6/15/16 | 625 | 727 |
Allstate Corp. | 7.450% | 5/16/19 | 525 | 649 |
American International Group Inc. | 5.050% | 10/1/15 | 250 | 244 |
American International Group Inc. | 5.450% | 5/18/17 | 100 | 95 |
American International Group Inc. | 5.850% | 1/16/18 | 350 | 339 |
American International Group Inc. | 8.250% | 8/15/18 | 1,800 | 1,944 |
Axis Specialty Finance LLC | 5.875% | 6/1/20 | 100 | 101 |
Berkshire Hathaway Finance Corp. | 5.400% | 5/15/18 | 475 | 546 |
Chubb Corp. | 5.750% | 5/15/18 | 475 | 553 |
1 Chubb Corp. | 6.375% | 3/29/67 | 300 | 293 |
CNA Financial Corp. | 6.500% | 8/15/16 | 250 | 269 |
CNA Financial Corp. | 5.875% | 8/15/20 | 75 | 76 |
Genworth Financial Inc. | 8.625% | 12/15/16 | 50 | 55 |
Genworth Financial Inc. | 6.515% | 5/22/18 | 100 | 100 |
Hartford Financial Services Group Inc. | 6.300% | 3/15/18 | 100 | 108 |
Hartford Financial Services Group Inc. | 6.000% | 1/15/19 | 475 | 498 |
Hartford Financial Services Group Inc. | 5.500% | 3/30/20 | 175 | 177 |
Humana Inc. | 6.450% | 6/1/16 | 275 | 304 |
Lincoln National Corp. | 8.750% | 7/1/19 | 150 | 192 |
1 Lincoln National Corp. | 7.000% | 5/17/66 | 425 | 388 |
Marsh & McLennan Cos. Inc. | 5.750% | 9/15/15 | 650 | 706 |
MetLife Inc. | 6.750% | 6/1/16 | 1,050 | 1,245 |
MetLife Inc. | 7.717% | 2/15/19 | 145 | 183 |
PartnerRe Finance B LLC | 5.500% | 6/1/20 | 100 | 103 |
1 Progressive Corp. | 6.700% | 6/15/37 | 75 | 72 |
Protective Life Corp. | 7.375% | 10/15/19 | 100 | 114 |
Prudential Financial Inc. | 4.750% | 9/17/15 | 1,050 | 1,129 |
Prudential Financial Inc. | 7.375% | 6/15/19 | 200 | 243 |
83
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
1 Prudential Financial Inc. | 8.875% | 6/15/38 | 175 | 192 |
1 Reinsurance Group of America Inc. | 6.750% | 12/15/65 | 175 | 147 |
Travelers Cos. Inc. | 5.900% | 6/2/19 | 825 | 961 |
1 Travelers Cos. Inc. | 6.250% | 3/15/37 | 400 | 383 |
UnitedHealth Group Inc. | 5.375% | 3/15/16 | 300 | 340 |
UnitedHealth Group Inc. | 6.000% | 2/15/18 | 650 | 764 |
WellPoint Inc. | 5.250% | 1/15/16 | 825 | 922 |
WellPoint Inc. | 5.875% | 6/15/17 | 175 | 202 |
Willis North America Inc. | 7.000% | 9/29/19 | 150 | 165 |
Other Finance (0.1%) | ||||
NASDAQ OMX Group Inc. | 5.550% | 1/15/20 | 300 | 318 |
Real Estate Investment Trusts (2.4%) | ||||
AMB Property LP | 4.500% | 8/15/17 | 200 | 201 |
Boston Properties LP | 5.875% | 10/15/19 | 600 | 670 |
Duke Realty LP | 6.750% | 3/15/20 | 125 | 140 |
ERP Operating LP | 5.125% | 3/15/16 | 150 | 163 |
ERP Operating LP | 5.750% | 6/15/17 | 775 | 876 |
HCP Inc. | 6.700% | 1/30/18 | 850 | 937 |
Health Care REIT Inc. | 6.200% | 6/1/16 | 275 | 307 |
Hospitality Properties Trust | 5.625% | 3/15/17 | 350 | 353 |
Kimco Realty Corp. | 6.875% | 10/1/19 | 100 | 116 |
ProLogis | 7.375% | 10/30/19 | 450 | 454 |
ProLogis | 6.875% | 3/15/20 | 875 | 850 |
Simon Property Group LP | 5.875% | 3/1/17 | 550 | 626 |
Simon Property Group LP | 6.125% | 5/30/18 | 175 | 203 |
Simon Property Group LP | 10.350% | 4/1/19 | 200 | 280 |
Simon Property Group LP | 5.650% | 2/1/20 | 750 | 834 |
103,873 | ||||
Industrial (51.8%) | ||||
Basic Industry (5.7%) | ||||
Alcoa Inc. | 5.550% | 2/1/17 | 650 | 664 |
Alcoa Inc. | 6.750% | 7/15/18 | 200 | 214 |
ArcelorMittal | 6.125% | 6/1/18 | 500 | 534 |
ArcelorMittal | 9.850% | 6/1/19 | 175 | 220 |
ArcelorMittal | 5.250% | 8/5/20 | 475 | 464 |
Barrick Gold Corp. | 6.950% | 4/1/19 | 725 | 907 |
Barrick North America Finance LLC | 6.800% | 9/15/18 | 125 | 157 |
BHP Billiton Finance USA Ltd. | 5.250% | 12/15/15 | 725 | 827 |
BHP Billiton Finance USA Ltd. | 6.500% | 4/1/19 | 200 | 244 |
Cliffs Natural Resources Inc. | 5.900% | 3/15/20 | 50 | 54 |
Dow Chemical Co. | 5.700% | 5/15/18 | 175 | 189 |
Dow Chemical Co. | 8.550% | 5/15/19 | 1,150 | 1,437 |
EI du Pont de Nemours & Co. | 6.000% | 7/15/18 | 225 | 271 |
EI du Pont de Nemours & Co. | 4.625% | 1/15/20 | 1,075 | 1,199 |
Freeport-McMoRan Copper & Gold Inc. | 8.375% | 4/1/17 | 1,280 | 1,421 |
International Paper Co. | 7.950% | 6/15/18 | 1,050 | 1,272 |
International Paper Co. | 9.375% | 5/15/19 | 175 | 227 |
Lubrizol Corp. | 8.875% | 2/1/19 | 300 | 387 |
Newmont Mining Corp. | 5.125% | 10/1/19 | 150 | 166 |
Potash Corp. of Saskatchewan Inc. | 3.750% | 9/30/15 | 500 | 534 |
Potash Corp. of Saskatchewan Inc. | 6.500% | 5/15/19 | 100 | 121 |
Potash Corp. of Saskatchewan Inc. | 4.875% | 3/30/20 | 200 | 217 |
PPG Industries Inc. | 6.650% | 3/15/18 | 400 | 487 |
Praxair Inc. | 3.250% | 9/15/15 | 200 | 213 |
84
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Praxair Inc. | 4.500% | 8/15/19 | 300 | 330 |
Rio Tinto Finance USA Ltd. | 6.500% | 7/15/18 | 1,000 | 1,184 |
Rio Tinto Finance USA Ltd. | 9.000% | 5/1/19 | 175 | 242 |
Teck Resources Ltd. | 10.250% | 5/15/16 | 300 | 361 |
Teck Resources Ltd. | 3.850% | 8/15/17 | 400 | 406 |
Teck Resources Ltd. | 10.750% | 5/15/19 | 275 | 341 |
Vale Overseas Ltd. | 5.625% | 9/15/19 | 1,175 | 1,260 |
Capital Goods (5.6%) | ||||
Acuity Brands Lighting Inc. | 6.000% | 12/15/19 | 200 | 218 |
Allied Waste North America Inc. | 7.125% | 5/15/16 | 400 | 428 |
Allied Waste North America Inc. | 6.875% | 6/1/17 | 200 | 220 |
Boeing Co. | 3.750% | 11/20/16 | 300 | 327 |
Boeing Co. | 6.000% | 3/15/19 | 225 | 274 |
Caterpillar Financial Services Corp. | 7.150% | 2/15/19 | 750 | 960 |
Caterpillar Inc. | 5.700% | 8/15/16 | 150 | 176 |
Caterpillar Inc. | 7.900% | 12/15/18 | 200 | 265 |
CRH America Inc. | 6.000% | 9/30/16 | 525 | 579 |
CRH America Inc. | 8.125% | 7/15/18 | 200 | 237 |
Danaher Corp. | 5.400% | 3/1/19 | 475 | 559 |
Deere & Co. | 4.375% | 10/16/19 | 450 | 498 |
Embraer Overseas Ltd. | 6.375% | 1/24/17 | 200 | 219 |
Embraer Overseas Ltd. | 6.375% | 1/15/20 | 225 | 249 |
Emerson Electric Co. | 4.875% | 10/15/19 | 100 | 115 |
General Electric Co. | 5.250% | 12/6/17 | 1,500 | 1,685 |
Goodrich Corp. | 4.875% | 3/1/20 | 225 | 252 |
Harsco Corp. | 5.750% | 5/15/18 | 475 | 551 |
Honeywell International Inc. | 5.300% | 3/1/18 | 975 | 1,151 |
Illinois Tool Works Inc. | 6.250% | 4/1/19 | 25 | 31 |
Ingersoll-Rand Global Holding Co. Ltd. | 6.875% | 8/15/18 | 550 | 666 |
John Deere Capital Corp. | 5.350% | 4/3/18 | 100 | 116 |
L-3 Communications Corp. | 5.200% | 10/15/19 | 100 | 108 |
L-3 Communications Corp. | 4.750% | 7/15/20 | 325 | 341 |
Lockheed Martin Corp. | 4.250% | 11/15/19 | 775 | 846 |
Northrop Grumman Corp. | 5.050% | 8/1/19 | 475 | 544 |
Owens Corning | 6.500% | 12/1/16 | 850 | 906 |
Raytheon Co. | 4.400% | 2/15/20 | 125 | 140 |
Roper Industries Inc. | 6.250% | 9/1/19 | 600 | 697 |
Tyco International Finance SA | 3.375% | 10/15/15 | 250 | 265 |
Tyco International Finance SA | 8.500% | 1/15/19 | 250 | 333 |
United Technologies Corp. | 6.125% | 2/1/19 | 225 | 278 |
United Technologies Corp. | 4.500% | 4/15/20 | 800 | 901 |
Waste Management Inc. | 6.100% | 3/15/18 | 650 | 758 |
Waste Management Inc. | 4.750% | 6/30/20 | 150 | 161 |
Communication (9.7%) | ||||
America Movil SAB de CV | 5.625% | 11/15/17 | 450 | 507 |
America Movil SAB de CV | 5.000% | 3/30/20 | 450 | 484 |
American Tower Corp. | 7.000% | 10/15/17 | 600 | 693 |
AT&T Inc. | 5.500% | 2/1/18 | 1,100 | 1,268 |
AT&T Inc. | 5.800% | 2/15/19 | 675 | 795 |
British Telecommunications PLC | 5.950% | 1/15/18 | 200 | 219 |
CBS Corp. | 5.750% | 4/15/20 | 440 | 487 |
Cellco Partnership / Verizon Wireless Capital LLC | 8.500% | 11/15/18 | 600 | 811 |
Comcast Corp. | 6.500% | 1/15/17 | 1,025 | 1,215 |
Comcast Corp. | 6.300% | 11/15/17 | 1,450 | 1,711 |
85
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Comcast Corp. | 5.150% | 3/1/20 | 200 | 218 |
COX Communications Inc. | 5.500% | 10/1/15 | 525 | 591 |
Deutsche Telekom International Finance BV | 6.750% | 8/20/18 | 200 | 244 |
Deutsche Telekom International Finance BV | 6.000% | 7/8/19 | 475 | 560 |
DIRECTV Holdings LLC | 5.200% | 3/15/20 | 200 | 215 |
DIRECTV Holdings LLC / DIRECTV | ||||
Financing Co. Inc. | 7.625% | 5/15/16 | 300 | 331 |
DIRECTV Holdings LLC / DIRECTV | ||||
Financing Co. Inc. | 5.875% | 10/1/19 | 875 | 986 |
Discovery Communications LLC | 5.050% | 6/1/20 | 775 | 835 |
Embarq Corp. | 7.082% | 6/1/16 | 925 | 1,011 |
France Telecom SA | 5.375% | 7/8/19 | 500 | 578 |
Grupo Televisa SA | 6.000% | 5/15/18 | 400 | 449 |
NBC Universal Inc. | 5.150% | 4/30/20 | 125 | 136 |
News America Inc. | 6.900% | 3/1/19 | 475 | 578 |
Omnicom Group Inc. | 5.900% | 4/15/16 | 565 | 649 |
Qwest Corp. | 8.375% | 5/1/16 | 700 | 814 |
Reed Elsevier Capital Inc. | 8.625% | 1/15/19 | 450 | 590 |
Rogers Communications Inc. | 6.800% | 8/15/18 | 475 | 588 |
RR Donnelley & Sons Co. | 6.125% | 1/15/17 | 600 | 620 |
Telecom Italia Capital SA | 5.250% | 10/1/15 | 1,275 | 1,361 |
Telecom Italia Capital SA | 6.999% | 6/4/18 | 175 | 199 |
Telefonica Emisiones SAU | 5.877% | 7/15/19 | 310 | 351 |
Telefonica Emisiones SAU | 5.134% | 4/27/20 | 375 | 403 |
Thomson Reuters Corp. | 6.500% | 7/15/18 | 150 | 181 |
Time Warner Cable Inc. | 5.850% | 5/1/17 | 125 | 143 |
Time Warner Cable Inc. | 6.750% | 7/1/18 | 1,125 | 1,340 |
Time Warner Cable Inc. | 8.250% | 4/1/19 | 925 | 1,183 |
Verizon Communications Inc. | 5.500% | 2/15/18 | 1,950 | 2,228 |
Verizon Communications Inc. | 6.100% | 4/15/18 | 200 | 236 |
Verizon Communications Inc. | 8.750% | 11/1/18 | 425 | 572 |
Vodafone Group PLC | 3.375% | 11/24/15 | 200 | 208 |
Vodafone Group PLC | 5.750% | 3/15/16 | 175 | 201 |
Vodafone Group PLC | 5.625% | 2/27/17 | 725 | 823 |
Vodafone Group PLC | 4.625% | 7/15/18 | 250 | 269 |
Consumer Cyclical (4.6%) | ||||
Costco Wholesale Corp. | 5.500% | 3/15/17 | 450 | 532 |
CVS Caremark Corp. | 5.750% | 6/1/17 | 800 | 917 |
CVS Caremark Corp. | 6.600% | 3/15/19 | 500 | 601 |
CVS Caremark Corp. | 4.750% | 5/18/20 | 75 | 80 |
Darden Restaurants Inc. | 6.200% | 10/15/17 | 300 | 352 |
Expedia Inc. | 5.950% | 8/15/20 | 75 | 77 |
Home Depot Inc. | 5.400% | 3/1/16 | 975 | 1,099 |
Johnson Controls Inc. | 5.000% | 3/30/20 | 725 | 799 |
Lowe’s Cos. Inc. | 5.000% | 10/15/15 | 800 | 920 |
McDonald’s Corp. | 5.350% | 3/1/18 | 900 | 1,061 |
Nordstrom Inc. | 6.250% | 1/15/18 | 400 | 468 |
Target Corp. | 5.875% | 7/15/16 | 200 | 240 |
Target Corp. | 6.000% | 1/15/18 | 800 | 969 |
Time Warner Inc. | 5.875% | 11/15/16 | 675 | 781 |
Time Warner Inc. | 4.875% | 3/15/20 | 550 | 589 |
TJX Cos. Inc. | 6.950% | 4/15/19 | 150 | 192 |
Toll Brothers Finance Corp. | 6.750% | 11/1/19 | 200 | 206 |
Viacom Inc. | 6.250% | 4/30/16 | 725 | 846 |
Wal-Mart Stores Inc. | 5.375% | 4/5/17 | 200 | 235 |
86
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Wal-Mart Stores Inc. | 5.800% | 2/15/18 | 100 | 121 |
Wal-Mart Stores Inc. | 3.625% | 7/8/20 | 725 | 752 |
Walgreen Co. | 5.250% | 1/15/19 | 250 | 292 |
Walt Disney Co. | 5.625% | 9/15/16 | 150 | 179 |
Western Union Co. | 5.930% | 10/1/16 | 300 | 348 |
Yum! Brands Inc. | 6.250% | 3/15/18 | 650 | 770 |
Consumer Noncyclical (13.3%) | ||||
Abbott Laboratories | 5.875% | 5/15/16 | 875 | 1,049 |
Abbott Laboratories | 5.600% | 11/30/17 | 750 | 899 |
Abbott Laboratories | 5.125% | 4/1/19 | 550 | 632 |
Altria Group Inc. | 4.125% | 9/11/15 | 300 | 318 |
Altria Group Inc. | 9.700% | 11/10/18 | 1,425 | 1,886 |
Altria Group Inc. | 9.250% | 8/6/19 | 575 | 754 |
AmerisourceBergen Corp. | 5.875% | 9/15/15 | 150 | 171 |
Amgen Inc. | 5.850% | 6/1/17 | 925 | 1,113 |
Amgen Inc. | 5.700% | 2/1/19 | 175 | 209 |
Anheuser-Busch Cos. Inc. | 5.500% | 1/15/18 | 200 | 225 |
Anheuser-Busch InBev Worldwide Inc. | 5.375% | 1/15/20 | 1,250 | 1,412 |
Anheuser-Busch InBev Worldwide Inc. | 5.000% | 4/15/20 | 175 | 192 |
Archer-Daniels-Midland Co. | 5.450% | 3/15/18 | 500 | 585 |
AstraZeneca PLC | 5.900% | 9/15/17 | 850 | 1,028 |
Baxter International Inc. | 5.900% | 9/1/16 | 700 | 844 |
Bottling Group LLC | 5.500% | 4/1/16 | 175 | 206 |
Bottling Group LLC | 5.125% | 1/15/19 | 500 | 576 |
Bunge Ltd. Finance Corp. | 8.500% | 6/15/19 | 300 | 363 |
Campbell Soup Co. | 3.050% | 7/15/17 | 125 | 131 |
CareFusion Corp. | 6.375% | 8/1/19 | 625 | 742 |
Coca-Cola Co. | 5.350% | 11/15/17 | 650 | 766 |
Covidien International Finance SA | 6.000% | 10/15/17 | 425 | 506 |
Diageo Capital PLC | 5.500% | 9/30/16 | 200 | 233 |
Diageo Capital PLC | 4.828% | 7/15/20 | 100 | 113 |
Diageo Finance BV | 5.300% | 10/28/15 | 400 | 460 |
Dr Pepper Snapple Group Inc. | 6.820% | 5/1/18 | 600 | 740 |
Eli Lilly & Co. | 5.200% | 3/15/17 | 450 | 521 |
Fortune Brands Inc. | 5.375% | 1/15/16 | 150 | 163 |
General Mills Inc. | 5.700% | 2/15/17 | 900 | 1,069 |
General Mills Inc. | 5.650% | 2/15/19 | 200 | 236 |
GlaxoSmithKline Capital Inc. | 5.650% | 5/15/18 | 975 | 1,157 |
Johnson & Johnson | 5.550% | 8/15/17 | 175 | 209 |
Johnson & Johnson | 5.150% | 7/15/18 | 700 | 814 |
Kellogg Co. | 4.450% | 5/30/16 | 500 | 560 |
Kellogg Co. | 4.150% | 11/15/19 | 175 | 191 |
Kimberly-Clark Corp. | 7.500% | 11/1/18 | 425 | 560 |
Kimberly-Clark Corp. | 3.625% | 8/1/20 | 100 | 104 |
Koninklijke Philips Electronics NV | 5.750% | 3/11/18 | 600 | 701 |
Kraft Foods Inc. | 4.125% | 2/9/16 | 1,175 | 1,261 |
Kraft Foods Inc. | 6.500% | 8/11/17 | 175 | 209 |
Kraft Foods Inc. | 6.125% | 2/1/18 | 1,225 | 1,434 |
Kraft Foods Inc. | 5.375% | 2/10/20 | 675 | 752 |
Kroger Co. | 3.900% | 10/1/15 | 325 | 351 |
Kroger Co. | 6.150% | 1/15/20 | 250 | 298 |
Life Technologies Corp. | 6.000% | 3/1/20 | 125 | 143 |
Lorillard Tobacco Co. | 8.125% | 6/23/19 | 200 | 230 |
Lorillard Tobacco Co. | 6.875% | 5/1/20 | 450 | 474 |
Medco Health Solutions Inc. | 7.125% | 3/15/18 | 825 | 1,014 |
87
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Medtronic Inc. | 4.450% | 3/15/20 | 475 | 525 |
Merck & Co. Inc. | 6.000% | 9/15/17 | 400 | 488 |
Novartis Capital Corp. | 4.400% | 4/24/20 | 300 | 335 |
Novartis Securities Investment Ltd. | 5.125% | 2/10/19 | 700 | 808 |
PepsiCo Inc. | 5.000% | 6/1/18 | 450 | 516 |
PepsiCo Inc. | 7.900% | 11/1/18 | 850 | 1,140 |
Pfizer Inc. | 6.200% | 3/15/19 | 400 | 494 |
Philip Morris International Inc. | 5.650% | 5/16/18 | 675 | 786 |
Procter & Gamble Co. | 4.700% | 2/15/19 | 995 | 1,134 |
Quest Diagnostics Inc. | 5.450% | 11/1/15 | 300 | 337 |
Quest Diagnostics Inc. | 4.750% | 1/30/20 | 250 | 264 |
Reynolds American Inc. | 7.625% | 6/1/16 | 375 | 439 |
Reynolds American Inc. | 6.750% | 6/15/17 | 150 | 167 |
Safeway Inc. | 6.350% | 8/15/17 | 425 | 506 |
Safeway Inc. | 5.000% | 8/15/19 | 125 | 137 |
Sara Lee Corp. | 4.100% | 9/15/20 | 50 | 50 |
St. Jude Medical Inc. | 4.875% | 7/15/19 | 400 | 452 |
Stryker Corp. | 4.375% | 1/15/20 | 100 | 110 |
Sysco Corp. | 5.250% | 2/12/18 | 150 | 173 |
Wyeth | 5.450% | 4/1/17 | 900 | 1,058 |
Energy (6.4%) | ||||
Anadarko Petroleum Corp. | 5.950% | 9/15/16 | 775 | 765 |
Anadarko Petroleum Corp. | 6.375% | 9/15/17 | 475 | 470 |
Apache Corp. | 5.625% | 1/15/17 | 600 | 696 |
BP Capital Markets PLC | 4.750% | 3/10/19 | 150 | 147 |
Canadian Natural Resources Ltd. | 5.700% | 5/15/17 | 675 | 779 |
Cenovus Energy Inc. | 5.700% | 10/15/19 | 250 | 290 |
Chevron Corp. | 4.950% | 3/3/19 | 400 | 462 |
ConocoPhillips | 5.750% | 2/1/19 | 450 | 536 |
ConocoPhillips Canada Funding Co. I | 5.625% | 10/15/16 | 700 | 823 |
Devon Energy Corp. | 6.300% | 1/15/19 | 225 | 272 |
Encana Corp. | 5.900% | 12/1/17 | 175 | 205 |
Encana Corp. | 6.500% | 5/15/19 | 500 | 609 |
EOG Resources Inc. | 5.625% | 6/1/19 | 150 | 177 |
Halliburton Co. | 6.150% | 9/15/19 | 700 | 828 |
Hess Corp. | 8.125% | 2/15/19 | 400 | 523 |
Husky Energy Inc. | 7.250% | 12/15/19 | 200 | 249 |
Marathon Oil Corp. | 5.900% | 3/15/18 | 425 | 489 |
Nabors Industries Inc. | 9.250% | 1/15/19 | 650 | 831 |
Noble Energy Inc. | 8.250% | 3/1/19 | 350 | 456 |
Occidental Petroleum Corp. | 4.125% | 6/1/16 | 300 | 336 |
Shell International Finance BV | 3.250% | 9/22/15 | 800 | 844 |
Shell International Finance BV | 4.300% | 9/22/19 | 775 | 837 |
Smith International Inc. | 9.750% | 3/15/19 | 300 | 427 |
Statoil ASA | 3.125% | 8/17/17 | 125 | 129 |
Statoil ASA | 5.250% | 4/15/19 | 875 | 1,011 |
Suncor Energy Inc. | 6.100% | 6/1/18 | 1,050 | 1,227 |
Talisman Energy Inc. | 7.750% | 6/1/19 | 300 | 383 |
Total Capital SA | 3.125% | 10/2/15 | 475 | 502 |
Total Capital SA | 4.450% | 6/24/20 | 125 | 137 |
Transocean Inc. | 6.000% | 3/15/18 | 500 | 499 |
Valero Energy Corp. | 9.375% | 3/15/19 | 500 | 637 |
Valero Energy Corp. | 6.125% | 2/1/20 | 125 | 136 |
Weatherford International Ltd. | 9.625% | 3/1/19 | 575 | 753 |
XTO Energy Inc. | 5.500% | 6/15/18 | 300 | 358 |
XTO Energy Inc. | 6.500% | 12/15/18 | 500 | 637 |
88
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Technology (4.6%) | ||||
Adobe Systems Inc. | 4.750% | 2/1/20 | 400 | 430 |
Agilent Technologies Inc. | 6.500% | 11/1/17 | 500 | 580 |
Cisco Systems Inc. | 4.950% | 2/15/19 | 850 | 975 |
Cisco Systems Inc. | 4.450% | 1/15/20 | 1,600 | 1,757 |
Computer Sciences Corp. | 6.500% | 3/15/18 | 200 | 232 |
Dell Inc. | 5.875% | 6/15/19 | 200 | 232 |
Hewlett-Packard Co. | 5.400% | 3/1/17 | 300 | 350 |
Hewlett-Packard Co. | 5.500% | 3/1/18 | 350 | 415 |
International Business Machines Corp. | 5.700% | 9/14/17 | 1,150 | 1,377 |
International Business Machines Corp. | 7.625% | 10/15/18 | 729 | 969 |
International Game Technology | 5.500% | 6/15/20 | 50 | 53 |
Microsoft Corp. | 4.200% | 6/1/19 | 700 | 782 |
Nokia Oyj | 5.375% | 5/15/19 | 500 | 550 |
Oracle Corp. | 5.250% | 1/15/16 | 1,900 | 2,205 |
Oracle Corp. | 5.750% | 4/15/18 | 300 | 360 |
Oracle Corp. | 3.875% | 7/15/20 | 60 | 63 |
Pitney Bowes Inc. | 4.750% | 1/15/16 | 500 | 526 |
Xerox Corp. | 6.400% | 3/15/16 | 325 | 375 |
Xerox Corp. | 6.350% | 5/15/18 | 800 | 919 |
Transportation (1.9%) | ||||
Burlington Northern Santa Fe LLC | 5.650% | 5/1/17 | 150 | 173 |
Burlington Northern Santa Fe LLC | 5.750% | 3/15/18 | 500 | 580 |
Canadian National Railway Co. | 5.550% | 3/1/19 | 125 | 149 |
1 Continental Airlines 2009-2 Class A | ||||
Pass Through Trust | 7.250% | 11/10/19 | 200 | 219 |
CSX Corp. | 6.250% | 3/15/18 | 350 | 413 |
CSX Corp. | 7.375% | 2/1/19 | 125 | 157 |
1 Delta Air Lines Inc. | 7.750% | 12/17/19 | 221 | 242 |
FedEx Corp. | 8.000% | 1/15/19 | 150 | 196 |
Norfolk Southern Corp. | 5.750% | 1/15/16 | 100 | 116 |
Norfolk Southern Corp. | 5.750% | 4/1/18 | 100 | 116 |
Norfolk Southern Corp. | 5.900% | 6/15/19 | 800 | 952 |
Ryder System Inc. | 3.600% | 3/1/16 | 160 | 161 |
Ryder System Inc. | 5.850% | 11/1/16 | 100 | 112 |
Union Pacific Corp. | 5.700% | 8/15/18 | 400 | 464 |
Union Pacific Corp. | 7.875% | 1/15/19 | 425 | 558 |
Union Pacific Corp. | 6.125% | 2/15/20 | 150 | 181 |
United Parcel Service Inc. | 5.500% | 1/15/18 | 150 | 177 |
United Parcel Service Inc. | 5.125% | 4/1/19 | 350 | 411 |
149,421 | ||||
Utilities (10.5%) | ||||
Electric (7.0%) | ||||
Ameren Energy Generating Co. | 7.000% | 4/15/18 | 475 | 509 |
American Water Capital Corp. | 6.085% | 10/15/17 | 450 | 513 |
Appalachian Power Co. | 7.950% | 1/15/20 | 175 | 230 |
Atlantic City Electric Co. | 7.750% | 11/15/18 | 75 | 98 |
Carolina Power & Light Co. | 5.300% | 1/15/19 | 925 | 1,080 |
Commonwealth Edison Co. | 4.000% | 8/1/20 | 400 | 424 |
Consolidated Edison Co. of New York Inc. | 5.850% | 4/1/18 | 600 | 716 |
Consolidated Edison Co. of New York Inc. | 7.125% | 12/1/18 | 200 | 259 |
Consumers Energy Co. | 6.125% | 3/15/19 | 25 | 30 |
Consumers Energy Co. | 6.700% | 9/15/19 | 125 | 157 |
Consumers Energy Co. | 5.650% | 4/15/20 | 175 | 201 |
Dominion Resources Inc. | 8.875% | 1/15/19 | 450 | 612 |
89
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Dominion Resources Inc. | 5.200% | 8/15/19 | 1,000 | 1,144 |
1 Dominion Resources Inc. | 7.500% | 6/30/66 | 200 | 205 |
Duke Energy Carolinas LLC | 7.000% | 11/15/18 | 200 | 258 |
Duke Energy Corp. | 5.050% | 9/15/19 | 775 | 875 |
Duke Energy Indiana Inc. | 3.750% | 7/15/20 | 300 | 316 |
Entergy Gulf States Louisiana LLC | 6.000% | 5/1/18 | 150 | 176 |
Exelon Generation Co. LLC | 6.200% | 10/1/17 | 275 | 325 |
Exelon Generation Co. LLC | 5.200% | 10/1/19 | 875 | 985 |
Florida Power Corp. | 5.650% | 6/15/18 | 225 | 267 |
FPL Group Capital Inc. | 7.875% | 12/15/15 | 600 | 750 |
FPL Group Capital Inc. | 6.000% | 3/1/19 | 200 | 235 |
1 FPL Group Capital Inc. | 6.650% | 6/15/67 | 225 | 215 |
Georgia Power Co. | 5.700% | 6/1/17 | 300 | 355 |
Georgia Power Co. | 4.250% | 12/1/19 | 300 | 325 |
Midamerican Energy Holdings Co. | 5.750% | 4/1/18 | 850 | 990 |
National Rural Utilities Cooperative Finance Corp. | 5.450% | 4/10/17 | 300 | 347 |
National Rural Utilities Cooperative Finance Corp. | 10.375% | 11/1/18 | 725 | 1,043 |
Nevada Power Co. | 7.125% | 3/15/19 | 750 | 928 |
Nisource Finance Corp. | 10.750% | 3/15/16 | 175 | 232 |
Nisource Finance Corp. | 6.400% | 3/15/18 | 825 | 949 |
Northern States Power Co. | 5.250% | 3/1/18 | 900 | 1,047 |
Oncor Electric Delivery Co. LLC | 6.800% | 9/1/18 | 475 | 575 |
Pacific Gas & Electric Co. | 5.625% | 11/30/17 | 500 | 582 |
Pacific Gas & Electric Co. | 8.250% | 10/15/18 | 175 | 234 |
Pennsylvania Electric Co. | 5.200% | 4/1/20 | 350 | 385 |
Public Service Electric & Gas Co. | 3.500% | 8/15/20 | 375 | 386 |
Southern California Edison Co. | 5.500% | 8/15/18 | 100 | 119 |
Southwestern Electric Power Co. | 5.875% | 3/1/18 | 300 | 337 |
TransAlta Corp. | 6.650% | 5/15/18 | 550 | 635 |
Union Electric Co. | 6.700% | 2/1/19 | 200 | 245 |
Natural Gas (3.4%) | ||||
Enbridge Energy Partners LP | 9.875% | 3/1/19 | 300 | 409 |
Energy Transfer Partners LP | 9.700% | 3/15/19 | 200 | 259 |
Energy Transfer Partners LP | 9.000% | 4/15/19 | 400 | 500 |
Enterprise Products Operating LLC | 6.300% | 9/15/17 | 450 | 523 |
Enterprise Products Operating LLC | 6.500% | 1/31/19 | 500 | 582 |
EQT Corp. | 8.125% | 6/1/19 | 575 | 709 |
Kinder Morgan Energy Partners LP | 5.950% | 2/15/18 | 200 | 227 |
Kinder Morgan Energy Partners LP | 9.000% | 2/1/19 | 675 | 879 |
National Grid PLC | 6.300% | 8/1/16 | 700 | 821 |
ONEOK Partners LP | 8.625% | 3/1/19 | 475 | 611 |
Plains All American Pipeline LP / PAA Finance Corp. | 6.500% | 5/1/18 | 150 | 173 |
Plains All American Pipeline LP / PAA Finance Corp. | 5.750% | 1/15/20 | 800 | 884 |
Sempra Energy | 9.800% | 2/15/19 | 650 | 911 |
TransCanada PipeLines Ltd. | 7.125% | 1/15/19 | 800 | 1,027 |
1 TransCanada PipeLines Ltd. | 6.350% | 5/15/67 | 250 | 230 |
Williams Partners LP | 5.250% | 3/15/20 | 125 | 135 |
Williams Partners LP / Williams Partners | ||||
Finance Corp. | 7.250% | 2/1/17 | 800 | 954 |
Other Utility (0.1%) | ||||
Veolia Environnement | 6.000% | 6/1/18 | 150 | 172 |
30,300 | ||||
Total Corporate Bonds (Cost $269,301) | 283,594 |
90
Intermediate-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Taxable Municipal Bonds (0.1%) | ||||
Board of Trustees of The Leland | ||||
Stanford Junior University | 4.750% | 5/1/19 | 150 | 169 |
Johns Hopkins University | 5.250% | 7/1/19 | 100 | 117 |
Total Taxable Municipal Bonds (Cost $267) | 286 | |||
Shares | ||||
Temporary Cash Investment (0.4%) | ||||
Money Market Fund (0.4%) | ||||
3 Vanguard Market Liquidity Fund (Cost $1,256) | 0.288% | 1,256,000 | 1,256 | |
Total Investments (99.1%) (Cost $271,753) | 286,066 | |||
Other Assets and Liabilities (0.9%) | ||||
Other Assets | 10,701 | |||
Liabilities | (8,124) | |||
2,577 | ||||
Net Assets (100%) | 288,643 |
91
Intermediate-Term Corporate Bond Index Fund
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 273,785 |
Overdistributed Net Investment Income | (28) |
Accumulated Net Realized Gains | 572 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 14,313 |
Futures Contracts | 1 |
Net Assets | 288,643 |
Signal Shares—Net Assets | |
Applicable to 104,213 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 2,268 |
Net Asset Value Per Share—Signal Shares | $21.76 |
Institutional Shares—Net Assets | |
Applicable to 449,608 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 12,093 |
Net Asset Value Per Share—Institutional Shares | $26.90 |
ETF Shares—Net Assets | |
Applicable to 3,400,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 274,282 |
Net Asset Value Per Share—ETF Shares | $80.67 |
• See Note A in Notes to Financial Statements.
1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
2 Securities with a value of $56,000 have been segregated as initial margin for open futures contracts.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
92
Intermediate-Term Corporate Bond Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest2 | 5,423 |
Total Income | 5,423 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 6 |
Management and Administrative—Signal Shares | 1 |
Management and Administrative—Institutional Shares | 3 |
Management and Administrative—ETF Shares | 118 |
Marketing and Distribution—Signal Shares | — |
Marketing and Distribution—Institutional Shares | 2 |
Marketing and Distribution—ETF Shares | 17 |
Custodian Fees | 6 |
Auditing Fees | 10 |
Shareholders’ Reports—Signal Shares | — |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 4 |
Total Expenses | 167 |
Net Investment Income | 5,256 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 569 |
Futures Contracts | 3 |
Realized Net Gain (Loss) | 572 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 14,313 |
Futures Contracts | 1 |
Change in Unrealized Appreciation (Depreciation) | 14,314 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 20,142 |
1 Inception. | |
2 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
93
Intermediate-Term Corporate Bond Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 5,256 |
Realized Net Gain (Loss) | 572 |
Change in Unrealized Appreciation (Depreciation) | 14,314 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 20,142 |
Distributions | |
Net Investment Income | |
Signal Shares | (54) |
Institutional Shares | (300) |
ETF Shares | (4,930) |
Realized Capital Gain | |
Signal Shares | — |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (5,284) |
Capital Share Transactions | |
Signal Shares | 2,118 |
Institutional Shares | 11,439 |
ETF Shares | 260,228 |
Net Increase (Decrease) from Capital Share Transactions | 273,785 |
Total Increase (Decrease) | 288,643 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 288,643 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($28,000). |
See accompanying Notes, which are an integral part of the Financial Statements.
94
Intermediate-Term Corporate Bond Index Fund
Financial Highlights
Signal Shares | |
March 2, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $20.43 |
Investment Operations | |
Net Investment Income | .441 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.345 |
Total from Investment Operations | 1.786 |
Distributions | |
Dividends from Net Investment Income | (.456) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.456) |
Net Asset Value, End of Period | $21.76 |
Total Return2 | 8.86% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $2 |
Ratio of Total Expenses to Average Net Assets | 0.15%3 |
Ratio of Net Investment Income to Average Net Assets | 4.60%3 |
Portfolio Turnover Rate4 | 61% |
1 Inception.
2 Total returns do not reflect the 0.50% transaction fee on purchases.
3 Annualized.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
95
Intermediate-Term Corporate Bond Index Fund
Financial Highlights
Institutional Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $24.97 |
Investment Operations | |
Net Investment Income | .850 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.933 |
Total from Investment Operations | 2.783 |
Distributions | |
Dividends from Net Investment Income | (.853) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.853) |
Net Asset Value, End of Period | $26.90 |
Total Return2 | 11.38% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $12 |
Ratio of Total Expenses to Average Net Assets | 0.09%3 |
Ratio of Net Investment Income to Average Net Assets | 4.66%3 |
Portfolio Turnover Rate4 | 61% |
1 Inception.
2 Total returns do not reflect the 0.50% transaction fee on purchases.
3 Annualized.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
96
Intermediate-Term Corporate Bond Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $74.90 |
Investment Operations | |
Net Investment Income | 2.519 |
Net Realized and Unrealized Gain (Loss) on Investments | 5.778 |
Total from Investment Operations | 8.297 |
Distributions | |
Dividends from Net Investment Income | (2.527) |
Distributions from Realized Capital Gains | — |
Total Distributions | (2.527) |
Net Asset Value, End of Period | $80.67 |
Total Return | 11.30% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $274 |
Ratio of Total Expenses to Average Net Assets | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 4.60%2 |
Portfolio Turnover Rate3 | 61% |
1 Inception.
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
97
Intermediate-Term Corporate Bond Index Fund
Notes to Financial Statements
Vanguard Intermediate-Term Corporate Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. Signal Shares were first issued on March 2, 2010, and Institutional Shares were first issued on November 19, 2009. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on purchases of capital shares are credited to paid-in capital.
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Intermediate-Term Corporate Bond Index Fund
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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $48,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 930 | — |
Corporate Bonds | — | 283,594 | — |
Taxable Municipal Bonds | — | 286 | — |
Temporary Cash Investments | 1,256 | — | — |
Futures Contracts—Assets1 | 1 | — | — |
Futures Contracts—Liabilities1 | (2) | — | — |
Total | 1,255 | 284,810 | — |
1 Represents variation margin on the last day of the reporting period. |
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Intermediate-Term Corporate Bond Index Fund
D. At August 31, 2010, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
10-Year U.S. Treasury Note | December 2010 | 7 | 879 | 1 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
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.
For tax purposes, at August 31, 2010, the fund had short-term and long-term capital gains of $577,000 and $13,000, respectively, available for distribution. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $271,771,000. Net unrealized appreciation of investment securities for tax purposes was $14,295,000, consisting of unrealized gains of $14,538,000 on securities that had risen in value since their purchase and $243,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the period ended August 31, 2010, the fund purchased $317,362,000 of investment securities and sold $48,673,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $45,065,000 and $44,154,000, respectively.
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Intermediate-Term Corporate Bond Index Fund
G. Capital share transactions for each class of shares were:
Inception1 to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Signal Shares | ||
Issued2 | 3,064 | 149 |
Issued in Lieu of Cash Distributions | 54 | 3 |
Redeemed | (1,000) | (48) |
Net Increase (Decrease)—Signal Shares | 2,118 | 104 |
Institutional Shares | ||
Issued2 | 11,139 | 438 |
Issued in Lieu of Cash Distributions | 300 | 12 |
Redeemed | — | — |
Net Increase (Decrease)—Institutional Shares | 11,439 | 450 |
ETF Shares | ||
Issued2 | 260,228 | 3,400 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | — | — |
Net Increase (Decrease)—ETF Shares | 260,228 | 3,400 |
1 Inception was November 19, 2009, for ETF Shares and Instititional Shares, and March 2, 2010, for Signal Shares. | ||
2 Includes purchase fees of $71,000 (fund total). |
H. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
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Long-Term Corporate Bond Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Issues | 287 | 958 | 8,214 |
Yield3 | 5.4% | 2.3% | |
Signal Shares | 5.2% | ||
Institutional Shares | 5.3% | ||
ETF Shares | 5.2% | ||
Yield to Maturity | 5.3%4 | 5.4% | 2.3% |
Average Coupon | 6.7% | 6.6% | 4.4% |
Average Effective | |||
Maturity | 24.3 years | 24.6 years | 6.4 years |
Average Duration | 12.9 years | 12.9 years | 4.3 years |
Expense Ratio5 | — | — | |
Signal Shares | 0.15% | ||
Institutional Shares | 0.09% | ||
ETF Shares | 0.15% | ||
Short-Term Reserves | 0.7% | — | — |
Sector Diversification6 (% of portfolio) | |
Finance | 20.6% |
Industrial | 61.2 |
Treasury/Agency | 0.6 |
Utilities | 16.9 |
Other | 0.7 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 2.1% |
Aa | 11.8 |
A | 44.6 |
Baa | 41.5 |
For information about these ratings, see the Glossary entry for Credit Quality. | |
Distribution by Maturity (% of portfolio) | |
Under 1 Year | 1.0% |
1– 5 Years | 0.2 |
5–10 Years | 1.2 |
10–20 Years | 16.8 |
20–30 Years | 80.1 |
Over 30 Years | 0.7 |
1 Barclays Capital U.S. 10+ Year Corporate Bond Index.
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
4 Before expenses.
5 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.15% for Signal Shares, 0.09% for Institutional Shares, and 0.15% for ETF Shares.
6 The agency sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
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Long-Term Corporate Bond Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx105x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Long-Term Corporate Bond Index Fund ETF Shares Net Asset Value | 14.54% | $11,454 |
Long-Term Corporate Bond Index Fund ETF Shares Market Price | 15.59 | 11,559 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. 10+ Year Corporate Bond Index | 14.46 | 11,446 |
Final Value of | ||
Since | a $1,000,000 | |
Inception1 | Investment | |
Long-Term Corporate Bond Index Fund Signal Shares2 | 12.23% | $1,122,328 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.71 | 1,067,096 |
Barclays Capital U.S. 10+ Year Corporate Bond Index | 13.47 | 1,134,683 |
Final Value of | ||
Since | a $5,000,000 | |
Inception1 | Investment | |
Long-Term Corporate Bond Index Fund Institutional Shares2 | 13.46% | $5,673,034 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 5,346,901 |
Barclays Capital U.S. 10+ Year Corporate Bond Index | 14.46 | 5,722,914 |
1 Performance for the fund and its comparative standards is calculated since the following inception dates: November 19, 2009, for the ETF and Institutional Shares; and January 19, 2010, for the Signal Shares.
2 Performance figures are adjusted for the 1.00% transaction fee on purchases.
See Financial Highlights for dividend and capital gains information.
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Long-Term Corporate Bond Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 9.8% | 4.7% | 14.5% | 14.5% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end
of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Signal Shares | 1/19/2010 | 3.28% | 2.94% | 6.22% |
Fee-Adjusted Returns2 | 2.25 | 2.91 | 5.16 | |
Institutional Shares | 11/19/2009 | 3.66 | 3.70 | 7.36 |
Fee-Adjusted Returns2 | 2.62 | 3.66 | 6.28 | |
ETF Shares | 11/19/2009 | |||
Market Price | 7.78 | |||
Net Asset Value | 7.32 |
1 Barclays Capital U.S. 10+ Year Corporate Bond Index.
2 Performance figures are adjusted for the 1.00% transaction fee on purchases.
For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Performance tab. The Premium/Discount table there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.
See Financial Highlights for dividend and capital gains information.
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Long-Term Corporate Bond Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
U.S. Government and Agency Obligations (0.7%) | ||||
U.S. Government Securities (0.7%) | ||||
United States Treasury Note/Bond | 4.875% | 5/31/11 | 40 | 41 |
United States Treasury Note/Bond | 4.625% | 8/31/11 | 145 | 151 |
United States Treasury Note/Bond | 1.000% | 9/30/11 | 135 | 136 |
United States Treasury Note/Bond | 3.500% | 5/15/20 | 20 | 22 |
United States Treasury Note/Bond | 2.625% | 8/15/20 | 180 | 182 |
United States Treasury Note/Bond | 4.375% | 5/15/40 | 25 | 29 |
Total U.S. Government and Agency Obligations (Cost $561) | 561 | |||
Corporate Bonds (97.6%) | ||||
Finance (20.2%) | ||||
Banking (11.5%) | ||||
American Express Co. | 8.150% | 3/19/38 | 155 | 219 |
Bank One Capital III | 8.750% | 9/1/30 | 100 | 123 |
1 BB&T Capital Trust IV | 6.820% | 6/12/57 | 275 | 267 |
Capital One Capital III | 7.686% | 8/15/36 | 450 | 450 |
Capital One Capital IV | 6.745% | 2/17/37 | 100 | 95 |
Citigroup Inc. | 6.125% | 8/25/36 | 150 | 148 |
Citigroup Inc. | 6.875% | 3/5/38 | 675 | 733 |
Citigroup Inc. | 8.125% | 7/15/39 | 375 | 467 |
Credit Suisse USA Inc. | 7.125% | 7/15/32 | 25 | 33 |
Fifth Third Bancorp | 8.250% | 3/1/38 | 100 | 120 |
FleetBoston Financial Corp. | 6.700% | 7/15/28 | 100 | 107 |
Goldman Sachs Group Inc. | 5.950% | 1/15/27 | 300 | 301 |
Goldman Sachs Group Inc. | 6.125% | 2/15/33 | 75 | 79 |
Goldman Sachs Group Inc. | 6.450% | 5/1/36 | 325 | 326 |
Goldman Sachs Group Inc. | 6.750% | 10/1/37 | 750 | 769 |
HSBC Holdings PLC | 6.500% | 5/2/36 | 225 | 256 |
HSBC Holdings PLC | 6.500% | 9/15/37 | 75 | 86 |
HSBC Holdings PLC | 6.800% | 6/1/38 | 700 | 826 |
JP Morgan Chase Capital XX | 6.550% | 9/29/36 | 75 | 74 |
JP Morgan Chase Capital XXII | 6.450% | 2/2/37 | 175 | 170 |
JPMorgan Chase & Co. | 6.400% | 5/15/38 | 655 | 787 |
JPMorgan Chase Bank NA | 6.000% | 10/1/17 | 150 | 169 |
Merrill Lynch & Co. Inc. | 6.220% | 9/15/26 | 375 | 379 |
Merrill Lynch & Co. Inc. | 6.110% | 1/29/37 | 50 | 48 |
Merrill Lynch & Co. Inc. | 7.750% | 5/14/38 | 500 | 572 |
Morgan Stanley | 6.250% | 8/9/26 | 200 | 213 |
Wachovia Bank NA | 5.850% | 2/1/37 | 200 | 207 |
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Long-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Wachovia Bank NA | 6.600% | 1/15/38 | 450 | 509 |
Wachovia Corp. | 5.500% | 8/1/35 | 140 | 138 |
Wells Fargo Capital X | 5.950% | 12/15/36 | 100 | 95 |
Brokerage (0.1%) | ||||
Jefferies Group Inc. | 6.250% | 1/15/36 | 100 | 94 |
Finance Companies (2.8%) | ||||
General Electric Capital Corp. | 5.550% | 1/5/26 | 250 | 253 |
General Electric Capital Corp. | 6.750% | 3/15/32 | 550 | 620 |
General Electric Capital Corp. | 6.150% | 8/7/37 | 175 | 187 |
General Electric Capital Corp. | 5.875% | 1/14/38 | 950 | 976 |
SLM Corp. | 5.625% | 8/1/33 | 100 | 68 |
Insurance (5.5%) | ||||
ACE INA Holdings Inc. | 6.700% | 5/15/36 | 100 | 125 |
Aetna Inc. | 6.750% | 12/15/37 | 360 | 433 |
Aflac Inc. | 6.900% | 12/17/39 | 100 | 112 |
Allstate Corp. | 5.550% | 5/9/35 | 200 | 212 |
Allstate Corp. | 6.900% | 5/15/38 | 75 | 94 |
1 Allstate Corp. | 6.500% | 5/15/57 | 100 | 92 |
American International Group Inc. | 6.250% | 5/1/36 | 90 | 80 |
AXA SA | 8.600% | 12/15/30 | 100 | 116 |
Berkshire Hathaway Finance Corp. | 5.750% | 1/15/40 | 200 | 226 |
Chubb Corp. | 6.000% | 5/11/37 | 75 | 88 |
Chubb Corp. | 6.500% | 5/15/38 | 50 | 62 |
Endurance Specialty Holdings Ltd. | 7.000% | 7/15/34 | 70 | 68 |
Lincoln National Corp. | 6.150% | 4/7/36 | 125 | 132 |
MetLife Inc. | 6.400% | 12/15/36 | 535 | 492 |
MetLife Inc. | 5.875% | 2/6/41 | 140 | 153 |
Protective Life Corp. | 8.450% | 10/15/39 | 100 | 111 |
Prudential Financial Inc. | 5.750% | 7/15/33 | 525 | 540 |
Transatlantic Holdings Inc. | 8.000% | 11/30/39 | 75 | 79 |
Travelers Cos. Inc. | 6.250% | 6/15/37 | 175 | 209 |
UnitedHealth Group Inc. | 6.875% | 2/15/38 | 285 | 347 |
Validus Holdings Ltd. | 8.875% | 1/26/40 | 35 | 37 |
WellPoint Inc. | 6.375% | 6/15/37 | 200 | 227 |
WellPoint Inc. | 5.800% | 8/15/40 | 50 | 53 |
XL Group PLC | 6.250% | 5/15/27 | 100 | 100 |
Real Estate Investment Trusts (0.3%) | ||||
Simon Property Group LP | 4.375% | 3/1/21 | 80 | 81 |
Simon Property Group LP | 6.750% | 2/1/40 | 75 | 90 |
15,323 | ||||
Industrial (60.7%) | ||||
Basic Industry (4.3%) | ||||
Alcoa Inc. | 5.900% | 2/1/27 | 275 | 265 |
Alcoa Inc. | 6.750% | 1/15/28 | 100 | 101 |
ArcelorMittal | 7.000% | 10/15/39 | 90 | 92 |
Barrick Australian Finance Pty Ltd. | 5.950% | 10/15/39 | 50 | 57 |
Barrick North America Finance LLC | 7.500% | 9/15/38 | 75 | 101 |
Dow Chemical Co. | 9.400% | 5/15/39 | 300 | 428 |
Eastman Chemical Co. | 7.250% | 1/15/24 | 50 | 62 |
International Paper Co. | 7.500% | 8/15/21 | 325 | 386 |
Monsanto Co. | 5.875% | 4/15/38 | 100 | 116 |
106
Long-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Newmont Mining Corp. | 6.250% | 10/1/39 | 150 | 172 |
Nucor Corp. | 6.400% | 12/1/37 | 50 | 62 |
Rio Tinto Finance USA Ltd. | 7.125% | 7/15/28 | 300 | 378 |
Southern Copper Corp. | 7.500% | 7/27/35 | 300 | 346 |
Teck Resources Ltd. | 6.125% | 10/1/35 | 50 | 54 |
Vale Overseas Ltd. | 6.875% | 11/21/36 | 500 | 566 |
Vale Overseas Ltd. | 6.875% | 11/10/39 | 55 | 62 |
Capital Goods (4.5%) | ||||
Boeing Co. | 6.875% | 3/15/39 | 250 | 331 |
Caterpillar Inc. | 6.050% | 8/15/36 | 400 | 495 |
Deere & Co. | 5.375% | 10/16/29 | 75 | 85 |
Emerson Electric Co. | 5.250% | 11/15/39 | 80 | 91 |
Honeywell International Inc. | 5.700% | 3/15/37 | 125 | 149 |
Lafarge SA | 7.125% | 7/15/36 | 150 | 146 |
Litton Industries Inc. | 7.750% | 3/15/26 | 85 | 117 |
Lockheed Martin Corp. | 5.720% | 6/1/40 | 270 | 315 |
Northrop Grumman Systems Corp. | 7.750% | 2/15/31 | 25 | 35 |
Owens Corning | 7.000% | 12/1/36 | 100 | 103 |
Republic Services Inc. | 5.250% | 11/15/21 | 225 | 249 |
Stanley Black & Decker Inc. | 5.200% | 9/1/40 | 25 | 25 |
Tyco International Ltd. / Tyco International | ||||
Finance SA | 6.875% | 1/15/21 | 200 | 250 |
United Technologies Corp. | 7.500% | 9/15/29 | 425 | 590 |
United Technologies Corp. | 5.700% | 4/15/40 | 25 | 29 |
Waste Management Inc. | 7.750% | 5/15/32 | 75 | 99 |
Waste Management Inc. | 6.125% | 11/30/39 | 250 | 284 |
Communication (16.0%) | ||||
Alltel Corp. | 7.875% | 7/1/32 | 100 | 135 |
America Movil SAB de CV | 6.375% | 3/1/35 | 100 | 115 |
America Movil SAB de CV | 6.125% | 3/30/40 | 125 | 142 |
AT&T Inc. | 6.150% | 9/15/34 | 450 | 496 |
AT&T Inc. | 6.800% | 5/15/36 | 150 | 184 |
AT&T Inc. | 6.500% | 9/1/37 | 350 | 417 |
AT&T Inc. | 6.300% | 1/15/38 | 425 | 491 |
AT&T Inc. | 6.400% | 5/15/38 | 675 | 798 |
British Telecommunications PLC | 9.875% | 12/15/30 | 425 | 587 |
CBS Corp. | 7.875% | 7/30/30 | 150 | 182 |
Comcast Corp. | 5.650% | 6/15/35 | 225 | 235 |
Comcast Corp. | 6.450% | 3/15/37 | 175 | 200 |
Comcast Corp. | 6.950% | 8/15/37 | 615 | 742 |
Comcast Corp. | 6.400% | 5/15/38 | 150 | 171 |
Deutsche Telekom International Finance BV | 8.750% | 6/15/30 | 480 | 677 |
DIRECTV Holdings LLC | 6.350% | 3/15/40 | 100 | 110 |
DIRECTV Holdings LLC / DIRECTV | ||||
Financing Co. Inc. | 6.000% | 8/15/40 | 200 | 210 |
Discovery Communications LLC | 6.350% | 6/1/40 | 70 | 78 |
Embarq Corp. | 7.995% | 6/1/36 | 225 | 233 |
France Telecom SA | 8.500% | 3/1/31 | 200 | 293 |
Grupo Televisa SA | 6.625% | 1/15/40 | 125 | 142 |
Koninklijke KPN NV | 8.375% | 10/1/30 | 100 | 139 |
NBC Universal Inc. | 6.400% | 4/30/40 | 50 | 56 |
New Cingular Wireless Services Inc. | 8.750% | 3/1/31 | 225 | 331 |
News America Inc. | 6.400% | 12/15/35 | 150 | 169 |
News America Inc. | 6.150% | 3/1/37 | 725 | 793 |
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Long-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Qwest Corp. | 7.250% | 9/15/25 | 100 | 104 |
Qwest Corp. | 7.125% | 11/15/43 | 75 | 72 |
Telecom Italia Capital SA | 7.200% | 7/18/36 | 275 | 296 |
Telecom Italia Capital SA | 7.721% | 6/4/38 | 75 | 85 |
Telefonica Emisiones SAU | 7.045% | 6/20/36 | 275 | 332 |
Time Warner Cable Inc. | 6.550% | 5/1/37 | 375 | 428 |
Time Warner Cable Inc. | 7.300% | 7/1/38 | 325 | 401 |
United States Cellular Corp. | 6.700% | 12/15/33 | 100 | 108 |
Verizon Communications Inc. | 8.750% | 11/1/18 | 100 | 135 |
Verizon Communications Inc. | 6.900% | 4/15/38 | 685 | 846 |
Verizon Communications Inc. | 8.950% | 3/1/39 | 250 | 377 |
Verizon Communications Inc. | 7.350% | 4/1/39 | 115 | 151 |
Verizon Global Funding Corp. | 7.750% | 12/1/30 | 50 | 65 |
Vodafone Group PLC | 7.875% | 2/15/30 | 475 | 628 |
Consumer Cyclical (7.5%) | ||||
CVS Caremark Corp. | 6.250% | 6/1/27 | 375 | 431 |
Daimler Finance North America LLC | 8.500% | 1/18/31 | 275 | 376 |
Historic TW Inc. | 6.625% | 5/15/29 | 1,075 | 1,232 |
Home Depot Inc. | 5.875% | 12/16/36 | 200 | 213 |
Kohl’s Corp. | 6.875% | 12/15/37 | 75 | 95 |
Lowe’s Cos. Inc. | 5.500% | 10/15/35 | 375 | 412 |
McDonald’s Corp. | 6.300% | 10/15/37 | 350 | 450 |
Target Corp. | 7.000% | 7/15/31 | 350 | 444 |
Target Corp. | 6.500% | 10/15/37 | 50 | 62 |
Time Warner Inc. | 4.700% | 1/15/21 | 75 | 79 |
Time Warner Inc. | 6.100% | 7/15/40 | 125 | 136 |
Viacom Inc. | 6.875% | 4/30/36 | 175 | 209 |
Wal-Mart Stores Inc. | 5.875% | 4/5/27 | 150 | 178 |
Wal-Mart Stores Inc. | 7.550% | 2/15/30 | 200 | 278 |
Wal-Mart Stores Inc. | 5.250% | 9/1/35 | 350 | 381 |
Wal-Mart Stores Inc. | 6.500% | 8/15/37 | 325 | 415 |
Wal-Mart Stores Inc. | 5.625% | 4/1/40 | 50 | 58 |
Yum! Brands Inc. | 6.875% | 11/15/37 | 200 | 244 |
Consumer Noncyclical (13.3%) | ||||
Abbott Laboratories | 6.150% | 11/30/37 | 200 | 248 |
Abbott Laboratories | 5.300% | 5/27/40 | 75 | 84 |
Altria Group Inc. | 9.950% | 11/10/38 | 150 | 215 |
Altria Group Inc. | 10.200% | 2/6/39 | 300 | 436 |
Amgen Inc. | 6.375% | 6/1/37 | 450 | 560 |
Anheuser-Busch Cos. Inc. | 6.450% | 9/1/37 | 250 | 296 |
Archer-Daniels-Midland Co. | 5.375% | 9/15/35 | 250 | 280 |
AstraZeneca PLC | 6.450% | 9/15/37 | 400 | 513 |
Bristol-Myers Squibb Co. | 6.125% | 5/1/38 | 375 | 462 |
Coca-Cola Enterprises Inc. | 8.500% | 2/1/22 | 400 | 574 |
Covidien International Finance SA | 6.550% | 10/15/37 | 175 | 223 |
Diageo Capital PLC | 5.875% | 9/30/36 | 100 | 119 |
Eli Lilly & Co. | 5.500% | 3/15/27 | 200 | 229 |
GlaxoSmithKline Capital Inc. | 6.375% | 5/15/38 | 425 | 540 |
Johnson & Johnson | 4.950% | 5/15/33 | 450 | 494 |
Kellogg Co. | 7.450% | 4/1/31 | 250 | 347 |
Koninklijke Philips Electronics NV | 6.875% | 3/11/38 | 200 | 258 |
Kraft Foods Inc. | 7.000% | 8/11/37 | 100 | 124 |
Kraft Foods Inc. | 6.500% | 2/9/40 | 550 | 658 |
Kroger Co. | 7.500% | 4/1/31 | 300 | 392 |
108
Long-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Mead Johnson Nutrition Co. | 4.900% | 11/1/19 | 100 | 110 |
Medtronic Inc. | 6.500% | 3/15/39 | 100 | 128 |
Merck & Co. Inc. | 6.400% | 3/1/28 | 75 | 94 |
Merck & Co. Inc. | 6.550% | 9/15/37 | 300 | 398 |
PepsiCo Inc. | 7.000% | 3/1/29 | 125 | 167 |
PepsiCo Inc. | 5.500% | 1/15/40 | 100 | 116 |
Pfizer Inc. | 7.200% | 3/15/39 | 490 | 687 |
Pharmacia Corp. | 6.600% | 12/1/28 | 250 | 313 |
Philip Morris International Inc. | 6.375% | 5/16/38 | 100 | 126 |
Procter & Gamble Co. | 5.550% | 3/5/37 | 490 | 589 |
Ralcorp Holdings Inc. | 6.625% | 8/15/39 | 75 | 82 |
Safeway Inc. | 7.250% | 2/1/31 | 125 | 155 |
Unilever Capital Corp. | 5.900% | 11/15/32 | 100 | 123 |
Energy (9.6%) | ||||
Anadarko Finance Co. | 7.500% | 5/1/31 | 75 | 73 |
Anadarko Petroleum Corp. | 6.450% | 9/15/36 | 325 | 283 |
Apache Corp. | 6.000% | 1/15/37 | 200 | 231 |
Apache Corp. | 5.100% | 9/1/40 | 25 | 26 |
Baker Hughes Inc. | 5.125% | 9/15/40 | 135 | 140 |
Canadian Natural Resources Ltd. | 6.250% | 3/15/38 | 400 | 461 |
Cenovus Energy Inc. | 6.750% | 11/15/39 | 175 | 214 |
ConocoPhillips Holding Co. | 6.950% | 4/15/29 | 125 | 160 |
Devon Financing Corp. ULC | 7.875% | 9/30/31 | 300 | 410 |
Encana Corp. | 6.625% | 8/15/37 | 150 | 180 |
Encana Corp. | 6.500% | 2/1/38 | 100 | 118 |
Halliburton Co. | 7.450% | 9/15/39 | 300 | 402 |
Hess Corp. | 7.875% | 10/1/29 | 450 | 571 |
Hess Corp. | 7.300% | 8/15/31 | 20 | 24 |
Husky Energy Inc. | 7.250% | 12/15/19 | 100 | 125 |
Nexen Inc. | 6.400% | 5/15/37 | 400 | 448 |
Noble Holding International Ltd. | 6.200% | 8/1/40 | 50 | 56 |
Petro-Canada | 6.800% | 5/15/38 | 375 | 451 |
Shell International Finance BV | 6.375% | 12/15/38 | 325 | 414 |
Statoil ASA | 5.100% | 8/17/40 | 190 | 204 |
Suncor Energy Inc. | 6.500% | 6/15/38 | 275 | 322 |
Tosco Corp. | 8.125% | 2/15/30 | 575 | 795 |
Total Capital SA | 4.250% | 12/15/21 | 25 | 27 |
Transocean Inc. | 6.800% | 3/15/38 | 175 | 166 |
Valero Energy Corp. | 6.625% | 6/15/37 | 225 | 228 |
Weatherford International Ltd. | 6.500% | 8/1/36 | 350 | 365 |
Williams Cos. Inc. | 7.875% | 9/1/21 | 300 | 366 |
XTO Energy Inc. | 6.750% | 8/1/37 | 40 | 55 |
Technology (2.9%) | ||||
Cisco Systems Inc. | 5.900% | 2/15/39 | 315 | 370 |
Cisco Systems Inc. | 5.500% | 1/15/40 | 75 | 84 |
Corning Inc. | 5.750% | 8/15/40 | 25 | 27 |
International Business Machines Corp. | 5.875% | 11/29/32 | 550 | 655 |
Motorola Inc. | 6.500% | 9/1/25 | 45 | 50 |
Motorola Inc. | 6.625% | 11/15/37 | 10 | 11 |
Nokia Oyj | 6.625% | 5/15/39 | 100 | 116 |
Oracle Corp. | 6.500% | 4/15/38 | 400 | 496 |
Oracle Corp. | 5.375% | 7/15/40 | 195 | 212 |
Pitney Bowes Inc. | 5.250% | 1/15/37 | 100 | 106 |
Xerox Corp. | 6.750% | 12/15/39 | 100 | 119 |
109
Long-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Transportation (2.6%) | ||||
Burlington Northern Santa Fe LLC | 6.150% | 5/1/37 | 75 | 88 |
Burlington Northern Santa Fe LLC | 5.750% | 5/1/40 | 425 | 476 |
Canadian National Railway Co. | 6.375% | 11/15/37 | 100 | 129 |
CSX Corp. | 6.150% | 5/1/37 | 275 | 316 |
1 Delta Air Lines Inc. | 6.821% | 8/10/22 | 163 | 168 |
Norfolk Southern Corp. | 7.250% | 2/15/31 | 375 | 478 |
Union Pacific Corp. | 6.625% | 2/1/29 | 250 | 308 |
United Parcel Service Inc. | 6.200% | 1/15/38 | 25 | 31 |
46,183 | ||||
Utilities (16.7%) | ||||
Electric (12.8%) | ||||
Ameren Energy Generating Co. | 7.950% | 6/1/32 | 125 | 133 |
Appalachian Power Co. | 7.000% | 4/1/38 | 475 | 606 |
Consolidated Edison Co. of New York Inc. | 6.300% | 8/15/37 | 225 | 277 |
Consolidated Edison Co. of New York Inc. | 5.500% | 12/1/39 | 50 | 56 |
Duke Energy Carolinas LLC | 6.050% | 4/15/38 | 475 | 590 |
Duke Energy Indiana Inc. | 6.450% | 4/1/39 | 100 | 129 |
Exelon Generation Co. LLC | 6.250% | 10/1/39 | 375 | 420 |
FirstEnergy Corp. | 7.375% | 11/15/31 | 625 | 695 |
Florida Power & Light Co. | 5.950% | 2/1/38 | 50 | 61 |
Florida Power & Light Co. | 5.960% | 4/1/39 | 375 | 461 |
Florida Power Corp. | 6.400% | 6/15/38 | 525 | 664 |
Georgia Power Co. | 5.950% | 2/1/39 | 200 | 238 |
Iberdrola USA Inc. | 6.750% | 7/15/36 | 90 | 105 |
Midamerican Energy Holdings Co. | 6.125% | 4/1/36 | 450 | 524 |
Midamerican Energy Holdings Co. | 6.500% | 9/15/37 | 310 | 377 |
Nisource Finance Corp. | 6.125% | 3/1/22 | 300 | 338 |
Northern States Power Co. | 5.350% | 11/1/39 | 100 | 113 |
Oncor Electric Delivery Co. LLC | 7.000% | 9/1/22 | 300 | 376 |
Pacific Gas & Electric Co. | 6.050% | 3/1/34 | 175 | 206 |
Pacific Gas & Electric Co. | 5.800% | 3/1/37 | 400 | 458 |
Pacific Gas & Electric Co. | 6.250% | 3/1/39 | 50 | 61 |
PacifiCorp | 7.700% | 11/15/31 | 80 | 113 |
PacifiCorp | 6.000% | 1/15/39 | 125 | 151 |
Potomac Electric Power Co. | 6.500% | 11/15/37 | 125 | 160 |
PSEG Power LLC | 8.625% | 4/15/31 | 275 | 386 |
Public Service Co. of Colorado | 6.250% | 9/1/37 | 150 | 189 |
Puget Sound Energy Inc. | 5.795% | 3/15/40 | 150 | 169 |
San Diego Gas & Electric Co. | 6.125% | 9/15/37 | 100 | 126 |
South Carolina Electric & Gas Co. | 6.050% | 1/15/38 | 175 | 212 |
Southern California Edison Co. | 6.000% | 1/15/34 | 600 | 717 |
TransAlta Corp. | 6.500% | 3/15/40 | 75 | 81 |
Virginia Electric and Power Co. | 8.875% | 11/15/38 | 375 | 576 |
Natural Gas (3.9%) | ||||
El Paso Natural Gas Co. | 8.625% | 1/15/22 | 150 | 190 |
Enbridge Energy Partners LP | 7.500% | 4/15/38 | 30 | 38 |
Energy Transfer Partners LP | 7.500% | 7/1/38 | 35 | 41 |
Enterprise Products Operating LLC | 6.650% | 10/15/34 | 125 | 143 |
Enterprise Products Operating LLC | 6.125% | 10/15/39 | 325 | 348 |
Kinder Morgan Energy Partners LP | 6.950% | 1/15/38 | 550 | 630 |
ONEOK Partners LP | 6.650% | 10/1/36 | 150 | 169 |
Plains All American Pipeline LP / | ||||
PAA Finance Corp. | 6.650% | 1/15/37 | 50 | 55 |
Sempra Energy | 6.000% | 10/15/39 | 225 | 260 |
110
Long-Term Corporate Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Sunoco Logistics Partners Operations LP | 6.850% | 2/15/40 | 25 | 28 |
Tennessee Gas Pipeline Co. | 7.000% | 3/15/27 | 100 | 111 |
TransCanada PipeLines Ltd. | 6.200% | 10/15/37 | 275 | 314 |
TransCanada PipeLines Ltd. | 7.250% | 8/15/38 | 325 | 425 |
TransCanada PipeLines Ltd. | 7.625% | 1/15/39 | 50 | 67 |
TransCanada PipeLines Ltd. | 6.100% | 6/1/40 | 50 | 57 |
Williams Partners LP | 6.300% | 4/15/40 | 75 | 84 |
12,728 | ||||
Total Corporate Bonds (Cost $69,668) | 74,234 | |||
Shares | ||||
Temporary Cash Investment (0.8%) | ||||
Money Market Fund (0.8%) | ||||
2 Vanguard Market Liquidity Fund (Cost $618) | 0.288% | 617,700 | 618 | |
Total Investments (99.1%) (Cost $70,847) | 75,413 | |||
Other Assets and Liabilities (0.9%) | ||||
Other Assets | 1,924 | |||
Liabilities | (1,247) | |||
677 | ||||
Net Assets (100%) | 76,090 |
111
Long-Term Corporate Bond Index Fund
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 71,310 |
Undistributed Net Investment Income | 4 |
Accumulated Net Realized Gains | 210 |
Unrealized Appreciation (Depreciation) | 4,566 |
Net Assets | 76,090 |
Signal Shares—Net Assets | |
Applicable to 159,151 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 3,501 |
Net Asset Value Per Share—Signal Shares | $22.00 |
Institutional Shares—Net Assets | |
Applicable to 257,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 7,020 |
Net Asset Value Per Share—Institutional Shares | $27.32 |
ETF Shares—Net Assets | |
Applicable to 800,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 65,569 |
Net Asset Value Per Share—ETF Shares | $81.96 |
• See Note A in Notes to Financial Statements.
1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
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.
See accompanying Notes, which are an integral part of the Financial Statements.
112
Long-Term Corporate Bond Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest2 | 2,122 |
Total Income | 2,122 |
Expenses | |
The Vanguard Group—Note B | |
Management and Administrative—Signal Shares | 2 |
Management and Administrative—Institutional Shares | 2 |
Management and Administrative—ETF Shares | 30 |
Marketing and Distribution—Signal Shares | — |
Marketing and Distribution—Institutional Shares | — |
Marketing and Distribution—ETF Shares | 1 |
Custodian Fees | 6 |
Auditing Fees | 10 |
Shareholders’ Reports—Signal Shares | — |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 1 |
Total Expenses | 52 |
Net Investment Income | 2,070 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 342 |
Futures Contracts | (16) |
Realized Net Gain (Loss) | 326 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 4,566 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,962 |
1 Inception. | |
2 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
113
Long-Term Corporate Bond Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 2,070 |
Realized Net Gain (Loss) | 326 |
Change in Unrealized Appreciation (Depreciation) | 4,566 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 6,962 |
Distributions | |
Net Investment Income | |
Signal Shares | (103) |
Institutional Shares | (252) |
ETF Shares | (1,711) |
Realized Capital Gain | |
Signal Shares | — |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (2,066) |
Capital Share Transactions | |
Signal Shares | 3,202 |
Institutional Shares | 6,453 |
ETF Shares | 61,539 |
Net Increase (Decrease) from Capital Share Transactions | 71,194 |
Total Increase (Decrease) | 76,090 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 76,090 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $4,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
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Long-Term Corporate Bond Index Fund
Financial Highlights
Signal Shares | |
January 19, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $20.12 |
Investment Operations | |
Net Investment Income | .680 |
Net Realized and Unrealized Gain (Loss) on Investments2 | 1.936 |
Total from Investment Operations | 2.616 |
Distributions | |
Dividends from Net Investment Income | (.736) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.736) |
Net Asset Value, End of Period | $22.00 |
Total Return3 | 13.37% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $4 |
Ratio of Total Expenses to Average Net Assets | 0.15%4 |
Ratio of Net Investment Income to Average Net Assets | 5.65%4 |
Portfolio Turnover Rate5 | 41% |
1 Inception.
2 Includes increase from purchase fees of $.03.
3 Total returns do not reflect the 1.00% transaction fee on purchases.
4 Annualized.
5 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
115
Long-Term Corporate Bond Index Fund
Financial Highlights
Institutional Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $24.89 |
Investment Operations | |
Net Investment Income | 1.090 |
Net Realized and Unrealized Gain (Loss) on Investments2 | 2.428 |
Total from Investment Operations | 3.518 |
Distributions | |
Dividends from Net Investment Income | (1.088) |
Distributions from Realized Capital Gains | — |
Total Distributions | (1.088) |
Net Asset Value, End of Period | $27.32 |
Total Return3 | 14.61% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $7 |
Ratio of Total Expenses to Average Net Assets | 0.09%4 |
Ratio of Net Investment Income to Average Net Assets | 5.71%4 |
Portfolio Turnover Rate5 | 41% |
1 Inception.
2 Includes increase from purchase fees of $.03.
3 Total returns do not reflect the 1.00% transaction fee on purchases.
4 Annualized.
5 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
116
Long-Term Corporate Bond Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $74.67 |
Investment Operations | |
Net Investment Income | 3.236 |
Net Realized and Unrealized Gain (Loss) on Investments2 | 7.286 |
Total from Investment Operations | 10.522 |
Distributions | |
Dividends from Net Investment Income | (3.232) |
Distributions from Realized Capital Gains | — |
Total Distributions | (3.232) |
Net Asset Value, End of Period | $81.96 |
Total Return | 14.54% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $66 |
Ratio of Total Expenses to Average Net Assets | 0.15%3 |
Ratio of Net Investment Income to Average Net Assets | 5.65%3 |
Portfolio Turnover Rate4 | 41% |
1 Inception.
2 Includes increase from purchase fees of $.10.
3 Annualized.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
117
Long-Term Corporate Bond Index Fund
Notes to Financial Statements
Vanguard Long-Term Corporate Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. Signal Shares were first issued on January 19, 2010, and Institutional Shares were first issued on November 19, 2009. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on purchases of capital shares are credited to paid-in capital.
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
118
Long-Term Corporate Bond Index Fund
expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $11,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 561 | — |
Corporate Bonds | — | 74,234 | — |
Temporary Cash Investments | 618 | — | — |
Total | 618 | 74,795 | — |
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.
During the period ended August 31, 2010, the fund realized $94,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.
119
Long-Term Corporate Bond Index Fund
The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the period as distributions from realized capital gains. Accordingly, the fund has reclassified $22,000 from accumulated net realized gains to paid-in capital.
For tax purposes, at August 31, 2010, the fund had short-term capital gains of $228,000 available for distribution. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $70,849,000. Net unrealized appreciation of investment securities for tax purposes was $4,564,000, consisting of unrealized gains of $4,673,000 on securities that had risen in value since their purchase and $109,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the period ended August 31, 2010, the fund purchased $88,596,000 of investment securities and sold $21,044,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $13,419,000 and $13,023,000, respectively.
F. Capital share transactions for each class of shares were:
Inception to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Signal Shares | ||
Issued2 | 3,099 | 154 |
Issued in Lieu of Cash Distributions | 103 | 5 |
Redeemed | — | — |
Net Increase (Decrease)—Signal Shares | 3,202 | 159 |
Institutional Shares | ||
Issued2 | 6,201 | 247 |
Issued in Lieu of Cash Distributions | 252 | 10 |
Redeemed | — | — |
Net Increase (Decrease)—Institutional Shares | 6,453 | 257 |
ETF Shares | ||
Issued2 | 76,625 | 1,000 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | (15,086) | (200) |
Net Increase (Decrease)—ETF Shares | 61,539 | 800 |
1 Inception was November 19, 2009, for ETF Shares and Institutional Shares, and January 19, 2010, for Signal Shares. | ||
2 Includes purchase fees of $94,000 (fund total). |
G. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
120
Mortgage-Backed Securities Index Fund
Fund Profile
As of August 31, 2010
Financial Attributes | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Issues | 233 | 1,326 | 8,214 |
Yield4 | 2.3% | 2.3% | |
Signal Shares | 2.3% | ||
ETF Shares | 2.3% | ||
Yield to Maturity | 2.3%5 | 2.3% | 2.3% |
Average Coupon | 5.2% | 5.2% | 4.4% |
Average Effective | |||
Maturity | 3.2 years | 3.2 years | 6.4 years |
Average Duration | 1.1 years | 1.1 years | 4.3 years |
Expense Ratio6 | — | — | |
Signal Shares | 0.15% | ||
ETF Shares | 0.15% | ||
Short-Term Reserves | 2.0% | — | — |
Sector Diversification7 (% of portfolio) | |
Government Mortgage-Backed | 98.0% |
Other | 2.0 |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 100.0% |
For information about these ratings, see the Glossary entry for Credit Quality. | |
Distribution by Coupon (% of portfolio) | |
Below 5% | 63.3% |
5%–6% | 31.7 |
Above 6% | 5.0 |
1 Barclays Capital U.S. MBS Float Adjusted Index.
2 Barclays Capital U.S. Aggregate Float Adjusted Index.
3 Issues are mortgage pools grouped by coupon.
4 30-day SEC yield for the fund; index yield assumes that all bonds are called or prepaid at the earliest possible dates.
5 Before expenses.
6 The expense ratios shown are from the prospectus dated November 19, 2009, and represent estimated costs for the current fiscal year. For the fiscal period ended August 31, 2010, the annualized expense ratios were 0.15% for Signal Shares and 0.15% for ETF Shares.
7 The mortgage-backed securities sector may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
See the Glossary of investment terms.
121
Mortgage-Backed Securities Index 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.
Cumulative Performance: November 19, 2009–August 31, 2010
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/sectorbondindexx124x1.jpg)
Total Returns | Final Value of | |
Period Ended August 31, 2010 | a $10,000 | |
Since Inception1 | Investment | |
Mortgage-Backed Securities Index Fund | ||
ETF Shares Net Asset Value | 4.39% | $10,439 |
Mortgage-Backed Securities Index Fund ETF Shares Market Price | 4.59 | 10,459 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.94 | 10,694 |
Barclays Capital U.S. MBS Float Adjusted Index | 4.23 | 10,423 |
Final Value of | ||
Since | a $1,000,000 | |
Inception1 | Investment | |
Mortgage-Backed Securities Index Fund Signal Shares | 4.13% | $1,041,266 |
Barclays Capital U.S. Aggregate Float Adjusted Index | 6.81 | 1,068,101 |
Barclays Capital U.S. MBS Float Adjusted Index | 4.13 | 1,041,332 |
1 Performance for the fund and its comparative standards is calculated since the following inception dates: November 19, 2009, for the ETF Shares; and December 3, 2009, for the Signal Shares.
See Financial Highlights for dividend and capital gains information.
122
Mortgage-Backed Securities Index Fund
Fiscal-Period Total Returns (%): November 19, 2009–August 31, 2010
ETF Shares Net Asset Value | Barclays1 | |||
Fiscal | Capital | Income | Total | Total |
Period | Return | Return | Return | Return |
2010 | 2.7% | 1.7% | 4.4% | 4.2% |
Total Returns: Period Ended June 30, 2010
This table presents average annual total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Since Inception | ||||
Inception Date | Capital | Income | Total | |
Signal Shares | 12/3/2009 | 2.10% | 1.32% | 3.42% |
ETF Shares | 11/19/2009 | |||
Market Price | 3.67 | |||
Net Asset Value | 3.66 |
1 Barclays Capital U.S. MBS Float Adjusted Index.
For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Performance tab. The Premium/Discount table there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.
See Financial Highlights for dividend and capital gains information.
123
Mortgage-Backed Securities Index Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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).
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
U.S. Government and Agency Obligations (99.6%) | |||||
Conventional Mortgage-Backed Securities (96.0%) | |||||
1,2 | Fannie Mae Pool | 4.000% | 12/1/18–9/1/40 | 1,251 | 1,310 |
1,2 | Fannie Mae Pool | 4.500% | 7/1/18–9/1/40 | 2,107 | 2,237 |
1,2 | Fannie Mae Pool | 5.000% | 10/1/17–9/1/40 | 3,968 | 4,243 |
1,2 | Fannie Mae Pool | 5.500% | 12/1/16–9/1/40 | 3,497 | 3,768 |
1,2 | Fannie Mae Pool | 6.000% | 12/1/13–12/1/38 | 2,692 | 2,915 |
1,2 | Fannie Mae Pool | 6.500% | 4/1/16–6/1/38 | 941 | 1,031 |
1,2 | Fannie Mae Pool | 7.000% | 12/1/29–4/1/37 | 221 | 246 |
1,2 | Freddie Mac Gold Pool | 4.000% | 7/1/18–1/1/40 | 776 | 818 |
1,2 | Freddie Mac Gold Pool | 4.500% | 8/1/18–9/1/40 | 2,168 | 2,284 |
1,2 | Freddie Mac Gold Pool | 5.000% | 10/1/17–9/1/40 | 2,594 | 2,764 |
1,2 | Freddie Mac Gold Pool | 5.500% | 9/1/16–2/1/39 | 3,201 | 3,428 |
1,2 | Freddie Mac Gold Pool | 6.000% | 4/1/14–11/1/37 | 1,837 | 1,987 |
1,2 | Freddie Mac Gold Pool | 6.500% | 1/1/29–12/1/37 | 360 | 395 |
1,2 | Freddie Mac Gold Pool | 7.000% | 5/1/29–10/1/32 | 159 | 179 |
1,2 | Freddie Mac Gold Pool | 8.000% | 11/1/22 | 5 | 6 |
2 | Ginnie Mae I Pool | 4.000% | 7/15/39–9/1/40 | 171 | 179 |
2 | Ginnie Mae I Pool | 4.500% | 9/15/18–9/1/40 | 924 | 981 |
2 | Ginnie Mae I Pool | 5.000% | 1/15/18–9/1/40 | 1,131 | 1,218 |
2 | Ginnie Mae I Pool | 5.500% | 11/15/32–9/1/40 | 802 | 869 |
2 | Ginnie Mae I Pool | 6.000% | 8/15/32–9/1/40 | 642 | 700 |
2 | Ginnie Mae I Pool | 6.500% | 5/15/24–9/1/40 | 350 | 387 |
2 | Ginnie Mae II Pool | 4.500% | 7/1/40–9/1/40 | 1,125 | 1,192 |
2 | Ginnie Mae II Pool | 5.000% | 6/20/33–9/1/40 | 1,355 | 1,457 |
2 | Ginnie Mae II Pool | 5.500% | 6/20/34–9/1/40 | 541 | 585 |
2 | Ginnie Mae II Pool | 6.000% | 10/20/32–7/20/39 | 241 | 265 |
2 | Ginnie Mae II Pool | 6.500% | 3/20/31 | 11 | 12 |
2 | Ginnie Mae II Pool | 7.000% | 4/20/38 | 34 | 37 |
35,493 | |||||
Nonconventional Mortgage-Backed Securities (3.6%) | |||||
1,2 | Fannie Mae Pool | 3.302% | 1/1/40 | 42 | 44 |
1,2 | Fannie Mae Pool | 3.523% | 3/1/40 | 65 | 68 |
1,2 | Fannie Mae Pool | 5.665% | 3/1/37 | 479 | 508 |
1,2 | Fannie Mae Pool | 5.740% | 4/1/37 | 108 | 116 |
1,2 | Fannie Mae Pool | 6.305% | 9/1/37 | 81 | 87 |
1,2 | Freddie Mac Non Gold Pool | 3.329% | 4/1/40 | 72 | 75 |
124
Mortgage-Backed Securities Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
1,2 Freddie Mac Non Gold Pool | 3.361% | 5/1/40 | 50 | 51 |
1,2 Freddie Mac Non Gold Pool | 3.627% | 1/1/40 | 161 | 168 |
1,2 Freddie Mac Non Gold Pool | 6.433% | 2/1/37 | 199 | 214 |
1,331 | ||||
Total U.S. Government and Agency Obligations (Cost $36,429) | 36,824 | |||
Shares | ||||
Temporary Cash Investment (27.2%) | ||||
Money Market Fund (27.2%) | ||||
3 Vanguard Market Liquidity Fund (Cost $10,043) | 0.288% | 10,043,040 | 10,043 | |
Total Investments (126.8%) (Cost $46,472) | 46,867 | |||
Other Assets and Liabilities (–26.8%) | ||||
Other Assets | 3,777 | |||
Liabilities | (13,707) | |||
(9,930) | ||||
Net Assets (100%) | 36,937 | |||
Statement of Assets and Liabilities | ||||
Assets | ||||
Investments in Securities, at Value | 46,867 | |||
Receivables for Investment Securities Sold | 3,617 | |||
Other Assets | 160 | |||
Total Assets | 50,644 | |||
Liabilities | ||||
Payables for Investment Securities Purchased | 13,573 | |||
Other Liabilities | 134 | |||
Total Liabilities | 13,707 | |||
Net Assets | 36,937 |
125
Mortgage-Backed Securities Index Fund
At August 31, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 35,906 |
Overdistributed Net Investment Income | (6) |
Accumulated Net Realized Gains | 642 |
Unrealized Appreciation (Depreciation) | 395 |
Net Assets | 36,937 |
Signal Shares—Net Assets | |
Applicable to 297,250 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 6,100 |
Net Asset Value Per Share—Signal Shares | $20.52 |
ETF Shares—Net Assets | |
Applicable to 600,980 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 30,837 |
Net Asset Value Per Share—ETF Shares | $51.31 |
• See Note A in Notes to Financial Statements.
1 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
2 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.
126
Mortgage-Backed Securities Index Fund
Statement of Operations
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Interest | 774 |
Total Income2 | 774 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 1 |
Management and Administrative—Signal Shares | 4 |
Management and Administrative—Institutional Shares | — |
Management and Administrative—ETF Shares | 19 |
Marketing and Distribution—Signal Shares | — |
Marketing and Distribution—Institutional Shares | — |
Marketing and Distribution—ETF Shares | 4 |
Custodian Fees | 12 |
Auditing Fees | 10 |
Total Expenses | 50 |
Net Investment Income | 724 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 753 |
Futures Contracts | 1 |
Realized Net Gain (Loss) | 754 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 395 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,873 |
1 Inception. | |
2 Interest income from an affiliated company of the fund was $19,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
127
Mortgage-Backed Securities Index Fund
Statement of Changes in Net Assets
November 19, 20091 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 724 |
Realized Net Gain (Loss) | 754 |
Change in Unrealized Appreciation (Depreciation) | 395 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,873 |
Distributions | |
Net Investment Income | |
Signal Shares | (97) |
Institutional Shares | (41) |
ETF Shares | (592) |
Realized Capital Gain | |
Signal Shares | — |
Institutional Shares | — |
ETF Shares | — |
Total Distributions | (730) |
Capital Share Transactions | |
Signal Shares | 5,965 |
Institutional Shares | 148 |
ETF Shares | 29,681 |
Net Increase (Decrease) from Capital Share Transactions | 35,794 |
Total Increase (Decrease) | 36,937 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 36,937 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($6,000). |
See accompanying Notes, which are an integral part of the Financial Statements.
128
Mortgage-Backed Securities Index Fund
Financial Highlights
Signal Shares | |
December 3, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $20.04 |
Investment Operations | |
Net Investment Income | .332 |
Net Realized and Unrealized Gain (Loss) on Investments | .487 |
Total from Investment Operations | .819 |
Distributions | |
Dividends from Net Investment Income | (.339) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.339) |
Net Asset Value, End of Period | $20.52 |
Total Return | 4.13% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $6 |
Ratio of Total Expenses to Average Net Assets | 0.15%² |
Ratio of Net Investment Income to Average Net Assets | 2.12%² |
Portfolio Turnover Rate | 402%3 |
1 Inception. | |
2 Annualized. | |
3 Includes 166% that is attributable to mortgage-dollar-roll activity. |
See accompanying Notes, which are an integral part of the Financial Statements.
129
Mortgage-Backed Securities Index Fund
Financial Highlights
Institutional Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | December 29, 20092 |
Net Asset Value, Beginning of Period | $24.99 |
Investment Operations | |
Net Investment Income | .051 |
Net Realized and Unrealized Gain (Loss) on Investments | (.180) |
Total from Investment Operations | (.129) |
Distributions | |
Dividends from Net Investment Income | (.051) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.051) |
Net Asset Value, End of Period | $24.81² |
Total Return | –0.52% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $0 |
Ratio of Total Expenses to Average Net Assets | 0.09%³ |
Ratio of Net Investment Income to Average Net Assets | 1.72%³ |
Portfolio Turnover Rate | 402%4 |
1 Inception.
2 Net asset value as of December 29, 2009, at which date the sole shareholder account converted into ETF Shares.
3 Annualized.
4 Includes 166% that is attributable to mortgage-dollar-roll activity.
See accompanying Notes, which are an integral part of the Financial Statements.
130
Mortgage-Backed Securities Index Fund
Financial Highlights
ETF Shares | |
November 19, 20091 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $49.98 |
Investment Operations | |
Net Investment Income | .836 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.338 |
Total from Investment Operations | 2.174 |
Distributions | |
Dividends from Net Investment Income | (.844) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.844) |
Net Asset Value, End of Period | $51.31 |
Total Return | 4.39% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $31 |
Ratio of Total Expenses to Average Net Assets | 0.15%² |
Ratio of Net Investment Income to Average Net Assets | 2.12%² |
Portfolio Turnover Rate | 402%3 |
1 Inception.
2 Annualized.
3 Includes 166% that is attributable to mortgage-dollar-roll activity.
See accompanying Notes, which are an integral part of the Financial Statements.
131
Mortgage-Backed Securities Index Fund
Notes to Financial Statements
Vanguard Mortgage-Backed Securities Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: Signal Shares, Institutional Shares, and ETF Shares. Signal Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. Signal Shares were first issued on December 3, 2009, and Institutional Shares were first issued on November 19, 2009. All outstanding Institutional Shares were converted to ETF Shares on December 29, 2009. The fund has not issued any additional Institutional Shares as of August 31, 2010. ETF Shares were first issued on November 19, 2009, and first offered to the public on November 23, 2009. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Mortgage Dollar Rolls: The fund has entered into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities, and is compensated by interest earned on the proceeds of the initial sale and by a lower price on the securities to be repurchased. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities. The primary risk associated with mortgage dollar rolls is that a counterparty will default on its obligations to deliver purchased securities. This risk is mitigated by entering into mortgage dollar rolls with only highly rated counterparties, allocating transactions among numerous counterparties, and monitoring exposure to each counterparty.
132
Mortgage-Backed Securities Index Fund
4. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, and has concluded that no provision for federal income taxes is required in the financial statements.
5. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees, if any, assessed on purchases of capital shares are credited to paid-in capital.
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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $7,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 36,824 | — |
Temporary Cash Investments | 10,043 | — | — |
Total | 10,043 | 36,824 | — |
133
Mortgage-Backed Securities Index Fund
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 used a tax accounting practice to treat a portion of the price of capital shares redeemed during the period as distributions from realized capital gains. Accordingly, the fund has reclassified $112,000 from accumulated net realized gains to paid-in capital.
For tax purposes, at August 31, 2010, the fund had short-term capital gains of $644,000 available for distribution. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
At August 31, 2010, the cost of investment securities for tax purposes was $46,474,000. Net unrealized appreciation of investment securities for tax purposes was $393,000, consisting of unrealized gains of $436,000 on securities that had risen in value since their purchase and $43,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the period ended August 31, 2010, the fund purchased $211,111,000 of investment securities and sold $174,966,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Inception1 to | ||
August 31, 2010 | ||
Amount | Shares | |
($000) | (000) | |
Signal Shares | ||
Issued | 5,893 | 293 |
Issued in Lieu of Cash Distributions | 97 | 5 |
Redeemed | (25) | (1) |
Net Increase (Decrease)—Signal Shares | 5,965 | 297 |
Institutional Shares | ||
Issued | 20,007 | 800 |
Issued in Lieu of Cash Distributions | 41 | 2 |
Redeemed | (19,900) | (802) |
Net Increase (Decrease)—Institutional Shares | 148 | —² |
ETF Shares | ||
Issued | 50,061 | 1,001 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | (20,380) | (400) |
Net Increase (Decrease)—ETF Shares | 29,681 | 601 |
1 Inception was November 19, 2009, for ETF Shares and Institutional Shares, and December 3, 2009, for Signal Shares. | ||
2 On December 29, 2009, all shares held in Institutional Shares were converted into ETF Shares. |
G. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
134
Report of Independent Registered Public Accounting Firm
To the Trustees of Vanguard Scottsdale Funds and the Shareholders of Vanguard Short-Term Government Bond Index Fund, Vanguard Intermediate-Term Government Bond Index Fund, Vanguard Long-Term Government Bond Index Fund, Vanguard Short-Term Corporate Bond Index Fund, Vanguard Intermediate-Term Corporate Bond Index Fund, Vanguard Long-Term Corporate Bond Index Fund and Vanguard Mortgage-Backed Securities Index Fund:
In our opinion, the accompanying statements of net assets, the statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Short-Term Government Bond Index Fund, Vanguard Intermediate-Term Government Bond Index Fund, Vanguard Long-Term Government Bond Index Fund, Vanguard Short-Term Corporate Bond Index Fund, Vanguard Intermediate-Term Corporate Bond Index Fund, Vanguard Long-Term Corporate Bond Index Fund and Vanguard Mortgage-Backed Securities Index Fund (constituting separate portfolios of Vanguard Scottsdale Funds, hereafter referred to as the “Funds”) at August 31, 2010 and the results of each of their operations, the changes in each of their net assets and the financial highlights for the period November 19, 2009 (commencement of operations) through August 31, 2010, in conformity with accoun ting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2010 by correspondence with the custodian and brokers and by agreement to the underlying ownership records of Vanguard Market Liquidity Fund, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 11, 2010
Special 2010 tax information (unaudited) for Vanguard Short-Term Government Bond Index Fund
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the Internal Revenue Code.
For nonresident alien shareholders, 100% of income dividends are interest-related dividends.
135
Special 2010 tax information (unaudited) for Vanguard Intermediate-Term Government |
Bond Index Fund |
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the |
Internal Revenue Code. |
For nonresident alien shareholders, 100% of income dividends are interest-related dividends. |
Special 2010 tax information (unaudited) for Vanguard Long-Term Government Bond Index Fund |
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the |
Internal Revenue Code. |
For nonresident alien shareholders, 100% of income dividends are interest-related dividends. |
Special 2010 tax information (unaudited) for Vanguard Short-Term Corporate Bond Index Fund |
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the |
Internal Revenue Code. |
For nonresident alien shareholders, 81.3% of income dividends are interest-related dividends. |
Special 2010 tax information (unaudited) for Vanguard Intermediate-Term Corporate |
Bond Index Fund |
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the |
Internal Revenue Code. |
For nonresident alien shareholders, 84.0% of income dividends are interest-related dividends. |
Special 2010 tax information (unaudited) for Vanguard Long-Term Corporate Bond Index Fund |
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the |
Internal Revenue Code. |
For nonresident alien shareholders, 82.2% of income dividends are interest-related dividends. |
Special 2010 tax information (unaudited) for Vanguard Mortgage-Backed Securities Index Fund |
This information for the fiscal year ended August 31, 2010, is included pursuant to provisions of the |
Internal Revenue Code. |
For nonresident alien shareholders, 99.2% of income dividends are interest-related dividends. |
The fund distributed $1,000 as capital gain dividends (from net long-term capital gains) to shareholders |
during the fiscal year. |
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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 tables illustrate 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 the transaction fees or the account service fee described in the 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.
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Six Months Ended August 31, 20101 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Index Fund | 2/28/2010 | 8/31/2010 | Period2 |
Based on Actual Fund Return | |||
Short-Term Government Bond Index Fund | |||
Signal Shares | $1,000.00 | $1,013.49 | $0.76 |
ETF Shares | 1,000.00 | 1,013.55 | 0.76 |
Intermediate-Term Government Bond Index Fund | |||
ETF Shares | $1,000.00 | $1,072.61 | $0.78 |
Long-Term Government Bond Index Fund | |||
ETF Shares | $1,000.00 | $1,178.79 | $0.82 |
Short-Term Corporate Bond Index Fund | |||
Institutional Shares | $1,000.00 | $1,037.55 | $0.46 |
ETF Shares | 1,000.00 | 1,037.28 | 0.77 |
Intermediate-Term Corporate Bond Index Fund | |||
Institutional Shares | $1,000.00 | $1,092.08 | $0.47 |
ETF Shares | 1,000.00 | 1,091.77 | 0.79 |
Long-Term Corporate Bond Index Fund | |||
Signal Shares | $1,000.00 | $1,136.05 | $0.81 |
Institutional Shares | 1,000.00 | 1,136.92 | 0.48 |
ETF Shares | 1,000.00 | 1,136.13 | 0.81 |
Mortgage-Backed Securities Index Fund | |||
Signal Shares | $1,000.00 | $1,035.19 | $0.77 |
ETF Shares | 1,000.00 | 1,035.43 | 0.77 |
1 This table does not include data for funds or share classes of funds with fewer than six months of history.
2 These calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Short-Term Government Bond Index Fund, 0.15% for Signal Shares, 0.15% for ETF Shares; for the Intermediate-Term Government Bond Index Fund, 0.15% for ETF Shares; for the Long-Term Government Bond Index Fund, 0.15% for ETF Shares; for the Short- Term Corporate Bond Index Fund, 0.09% for Institutional Shares, 0.15% for ETF Shares; for the Intermediate-Term Corporate Bond Index Fund, 0.09% for Institutional Shares, 0.15% for ETF Shares; for the Long-Term Corporate Bond Index Fund, 0.15% for Signal Shares, 0.09% for Institutional Shares, 0.15% for ETF Shares; for the Mortgage-Backed Securities Index Fund, 0.15% for Signal Shares, 0.15% for ETF 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.
138
Six Months Ended August 31, 20101 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Index Fund | 2/28/2010 | 8/31/2010 | Period2 |
Based on Hypothetical 5% Yearly Return | |||
Short-Term Government Bond Index Fund | |||
Signal Shares | $1,000.00 | $1,024.45 | $0.77 |
ETF Shares | 1,000.00 | 1,024.45 | 0.77 |
Intermediate-Term Government Bond Index Fund | |||
ETF Shares | $1,000.00 | $1,024.45 | $0.77 |
Long-Term Government Bond Index Fund | |||
ETF Shares | $1,000.00 | $1,024.45 | $0.77 |
Short-Term Corporate Bond Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.75 | $0.46 |
ETF Shares | 1,000.00 | 1,024.45 | 0.77 |
Intermediate-Term Corporate Bond Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.75 | $0.46 |
ETF Shares | 1,000.00 | 1,024.45 | 0.77 |
Long-Term Corporate Bond Index Fund | |||
Signal Shares | $1,000.00 | $1,024.45 | $0.77 |
Institutional Shares | 1,000.00 | 1,024.75 | 0.46 |
ETF Shares | 1,000.00 | 1,024.45 | 0.77 |
Mortgage-Backed Securities Index Fund | |||
Signal Shares | $1,000.00 | $1,024.45 | $0.77 |
ETF Shares | 1,000.00 | 1,024.45 | 0.77 |
1 This table does not include data for funds or share classes of funds with fewer than six months of history.
2 These calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Short-Term Government Bond Index Fund, 0.15% for Signal Shares, 0.15% for ETF Shares; for the Intermediate-Term Government Bond Index Fund, 0.15% for ETF Shares; for the Long-Term Government Bond Index Fund, 0.15% for ETF Shares; for the Short-Term Corporate Bond Index Fund, 0.09% for Institutional Shares, 0.15% for ETF Shares; for the Intermediate-Term Corporate Bond Index Fund, 0.09% for Institutional Shares, 0.15% for ETF Shares; for the Long-Term Corporate Bond Index Fund, 0.15% for Signal Shares, 0.09% for Institutional Shares, 0.15% for ETF Shares; for the Mortgage-Backed Securities Index Fund, 0.15% for Signal Shares, 0.15% for ETF
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.
139
Glossary
Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.
Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.
Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.
Credit Quality. The credit ratings assigned to fixed income securities are an indicator of risk. They represent a rating agency’s assessment of the issuer’s ability to meet its obligations. For this report, credit-quality ratings for each issue are obtained from Barclays Capital using ratings derived from Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s. When ratings from all three agencies are available, the median rating is used; when ratings are available from two of the agencies, the lower rating is used; and when one rating is available, that rating is used.
Expense Ratio. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
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.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
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 (in the case of bonds) 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.
Yield to Maturity. The rate of return an investor would receive if the fixed income securities held by a fund were held to their maturity dates.
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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 163 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.
Interested Trustee1 | Amy Gutmann |
Born 1949. Trustee Since June 2006. Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years: President |
Born 1957. Trustee Since July 2009. Chairman of the | of the University of Pennsylvania; Christopher H. |
Board. Principal Occupation(s) During the Past Five | Browne Distinguished Professor of Political Science |
Years: Chairman of the Board of The Vanguard Group, | in the School of Arts and Sciences with secondary |
Inc., and of each of the investment companies served | appointments at the Annenberg School for Commu- |
by The Vanguard Group, since January 2010; Director | nication and the Graduate School of Education of |
of The Vanguard Group since 2008; Chief Executive | the University of Pennsylvania; Director of Carnegie |
Officer and President of The Vanguard Group and of | Corporation of New York, Schuylkill River Development |
each of the investment companies served by The | Corporation, and Greater Philadelphia Chamber of |
Vanguard Group since 2008; Director of Vanguard | Commerce; Trustee of the National Constitution Center; |
Marketing Corporation; Managing Director of The | Chair of the Presidential Commission for the Study of |
Vanguard Group (1995–2008). | Bioethical Issues. |
JoAnn Heffernan Heisen | |
Independent Trustees | Born 1950. Trustee Since July 1998. Principal |
Occupation(s) During the Past Five Years: Corporate | |
Emerson U. Fullwood | Vice President and Chief Global Diversity Officer since |
Born 1948. Trustee Since January 2008. Principal | 2006 (retired 2008) and Member of the Executive |
Occupation(s) During the Past Five Years: Executive | Committee (retired 2008) of Johnson & Johnson |
Chief Staff and Marketing Officer for North America | (pharmaceuticals/consumer products); Vice President |
and Corporate Vice President (retired 2008) of Xerox | and Chief Information Officer of Johnson & Johnson |
Corporation (document management products and | (1997–2005); Director of the University Medical Center |
services); Director of SPX Corporation (multi-industry | at Princeton and Women’s Research and Education |
manufacturing), the United Way of Rochester, | Institute; Member of the Advisory Board of the |
Amerigroup Corporation (managed health care), | Maxwell School of Citizenship and Public Affairs |
the University of Rochester Medical Center, and | at Syracuse University. |
Monroe Community College Foundation. | |
F. Joseph Loughrey | |
Rajiv L. Gupta | Born 1949. Trustee Since October 2009. Principal |
Born 1945. Trustee Since December 2001.2 | Occupation(s) During the Past Five Years: President |
Principal Occupation(s) During the Past Five Years: | and Chief Operating Officer since 2005 (retired 2009) |
Chairman and Chief Executive Officer (retired 2009) | and Vice Chairman of the Board (2008–2009) of |
and President (2006–2008) of Rohm and Haas Co. | Cummins Inc. (industrial machinery); Director of |
(chemicals); Director of Tyco International, Ltd. | SKF AB (industrial machinery), Hillenbrand, Inc. |
(diversified manufacturing and services) and Hewlett- | (specialized consumer services), Sauer-Danfoss Inc. |
Packard Co. (electronic computer manufacturing); | (machinery), the Lumina Foundation for Education, |
Trustee of The Conference Board; Member of the | and Oxfam America; Chairman of the Advisory Council |
Board of Managers of Delphi Automotive LLP | for the College of Arts and Letters at the University of |
(automotive components). | Notre Dame. |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School; Chair of the Investment Committee | the investment companies served by The Vanguard | |
of HighVista Strategies LLC (private investment firm). | Group since 2008; Assistant Treasurer of each of the | |
investment companies served by The Vanguard Group | ||
Alfred M. Rankin, Jr. | (1988–2008). | |
Born 1941. Trustee Since January 1993. Principal | ||
Occupation(s) During the Past Five Years: Chairman, | Heidi Stam | |
President, and Chief Executive Officer of NACCO | Born 1956. Secretary Since July 2005. Principal | |
Industries, Inc. (forklift trucks/housewares/lignite); | Occupation(s) During the Past Five Years: Managing | |
Director of Goodrich Corporation (industrial products/ | Director of The Vanguard Group, Inc., since 2006; | |
aircraft systems and services); Chairman of the Federal | General Counsel of The Vanguard Group since 2005; | |
Reserve Bank of Cleveland; Trustee of The Cleveland | Secretary of The Vanguard Group and of each of the | |
Museum of Art. | investment companies served by The Vanguard Group | |
since 2005; Director and Senior Vice President of | ||
Peter F. Volanakis | Vanguard Marketing Corporation since 2005; | |
Born 1955. Trustee Since July 2009. Principal | Principal of The Vanguard Group (1997–2006). | |
Occupation(s) During the Past Five Years: President | ||
since 2007 and Chief Operating Officer since 2005 | Vanguard Senior Management Team | |
of Corning Incorporated (communications equipment); | ||
President of Corning Technologies (2001–2005); | R. Gregory Barton | Michael S. Miller |
Director of Corning Incorporated and Dow Corning; | Mortimer J. Buckley | James M. Norris |
Trustee of the Corning Incorporated Foundation and | Kathleen C. Gubanich | Glenn W. Reed |
the Corning Museum of Glass; Overseer of the | Paul A. Heller | George U. Sauter |
Amos Tuck School of Business Administration at | ||
Dartmouth College. | ||
Chairman Emeritus and Senior Advisor | ||
Executive Officers | John J. Brennan | |
Chairman, 1996–2009 | ||
Glenn Booraem | Chief Executive Officer and President, 1996–2008 | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | Founder | |
the investment companies served by The Vanguard | ||
Group since 2010; Assistant Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group (2001–2010). | ||
Thomas J. Higgins | ||
Born 1957. Chief Financial Officer Since September | ||
2008. Principal Occupation(s) During the Past Five | ||
Years: Principal of The Vanguard Group, Inc.; Chief | ||
Financial Officer of each of the investment companies | ||
served by The Vanguard Group since 2008; Treasurer | ||
of each of the investment companies served by The | ||
Vanguard Group (1998–2008). |
![]() | |
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 |
Connect with Vanguard® > Vanguard.com
Fund Information > 800-662-7447 | All comparative mutual fund data are from Lipper Inc. |
or Morningstar, Inc., unless otherwise noted. | |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | You can obtain a free copy of Vanguard’s proxy voting |
guidelines by visiting vanguard.com/proxyreporting or | |
Text Telephone for People | by calling Vanguard at 800-662-2739. The guidelines |
With Hearing Impairment > 800-749-7273 | 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 | |
This material may be used in conjunction | either vanguard.com/proxyreporting or sec.gov. |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | 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 e-mail addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2010 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q16420 102010 |
![]() |
Vanguard Explorer Value™ Fund |
Annual Report |
August 31, 2010 |
![]() |
> From its inception date of March 30, 2010, through August 31, Vanguard Explorer Value Fund returned –9.55%, slightly behind the return of its benchmark index and ahead of the average return of its peer group.
> The fund’s launch coincided with a period of high volatility in the stock market.
> The industrial, financial, and information technology sectors weighed on the fund’s performance.
Contents | |
Your Fund’s Total Returns | 1 |
Chairman’s Letter | 2 |
Advisors’ Report | 6 |
Fund Profile | 9 |
Performance Summary | 10 |
Financial Statements | 11 |
Trustees Approve Advisory Agreements | 21 |
Glossary | 23 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Fiscal Period Ended August 31, 2010
Ticker | Returns Since | |
Symbol | Fund Inception | |
Vanguard Explorer Value Fund (Inception: 3/30/2010) | VEVFX | –9.55% |
Russell 2500 Value Index | –9.44 | |
Small-Cap Value Funds Average1 | –11.13 |
Your Fund’s Performance at a Glance
March 30, 2010–August 31, 2010
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Explorer Value Fund | $20.00 | $18.09 | $0.000 | $0.000 |
1
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/explorervaluex4x1.jpg)
Chairman’s Letter
Dear Shareholder,
Vanguard Explorer Value Fund, a new fund that focuses on small- and mid-capitalization value stocks, seeks to offer investors exposure to the stocks of high-quality companies selling at a bargain price.
From its inception on March 30, 2010, through August 31, the fund returned –9.55%. This result was slightly behind that of the fund’s benchmark, the Russell 2500 Value Index, for the abbreviated fiscal year but was more than 1 percentage point ahead of the average return of small-cap value funds.
Although disappointing, the fund’s negative performance was not surprising, given the stock market’s high volatility at the time of the fund’s launch. Equity markets declined sharply in the spring and early summer in reaction to several market-jolting events, including the “flash crash” of early May, Europe’s sovereign debt crisis, BP’s oil rig explosion off the Gulf Coast, and the release of several negative reports on the U.S. economy.
Eight of the fund’s ten sectors posted negative returns for the five-month period. The industrial, financial, and information technology sectors were among the poorest performers.
2
We begin this report with a look at the financial markets over the full 12 months of the fund’s fiscal year, then review the fund’s performance since March 30, when it began operations.
A ragged 12-month climb in global stock markets
At the start of the 12-month period, stock markets moved higher as global economies continued to pull out of a deep downturn. Within a few months, however, optimism began to fade. Europe’s sovereign debt crisis fueled fears of another global financial shock, while persistently high unemployment and downward revisions to U.S. economic indicators suggested that the powerful rebound in corporate earnings could be at risk.
This alternating pattern of hope and fear persisted through the period’s final months. The net result for the fiscal year was mid-single-digit gains in the broad U.S. stock market. International stocks returned about 3%, as modest declines in developed markets in Europe and the Pacific region were offset by a strong rally in emerging markets.
Bonds produced strong returns as prices rose and yields declined
The economic uncertainty and high stock market volatility over the fiscal period created a favorable environment for fixed income investments. The broad, taxable bond market returned more than 9%, as investors sought shelter in U.S. Treasury and corporate bonds. The municipal bond
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended August 31, 2010 | |||
One Year | Three Years | Five Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 5.55% | –8.34% | –0.71% |
Russell 2000 Index (Small-caps) | 6.60 | –7.44 | –0.69 |
Dow Jones U.S. Total Stock Market Index | 6.15 | –7.83 | –0.31 |
MSCI All Country World Index ex USA (International) | 3.27 | –7.93 | 3.78 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index | |||
(Broad taxable market) | 9.18% | 7.65% | 5.96% |
Barclays Capital Municipal Bond Index (Broad tax-exempt market) | 9.78 | 6.62 | 5.02 |
Citigroup 3-Month Treasury Bill Index | 0.12 | 1.13 | 2.53 |
CPI | |||
Consumer Price Index | 1.15% | 1.64% | 2.14% |
3
market returned a bit more. In both markets, much of the total return came from rising bond prices. The flip side of rising prices, of course, is shrinking yields, which can set the stage for lower future returns.
As it has since December 2008, the Federal Reserve kept its target for short-term interest rates between 0% and 0.25%, in an effort to bolster the economy. This policy has kept a tight lid on the returns available from Treasury bills, commercial paper, and other money market instruments. Near-zero short-term yields also were a factor nudging investors to shift to bonds in search of income, despite the risks such a shift entails.
Weakness in the broad market hurt the fund’s result
Vanguard Explorer Value Fund’s portfolio consists of about 180 small- and mid-cap stocks that, in the advisors’ judgment, represent attractive values for investors because of their strong fundamentals and cash flow, coupled with discounted prices.
Over time, the success of the fund’s three advisors—Cardinal Capital, Frontier Capital, and Sterling Capital—in identifying underappreciated securities will help determine its performance relative to its comparative standards. In seeking value for this actively managed fund, the advisors are, of course, not held to the composition of the fund’s benchmark. For example, during its abbreviated first fiscal year, the fund’s weightings in information technology and industrials were about twice those of the Russell 2500 Value Index, while its exposure to utilities was just one-fifth that of the index.
In the five months since the fund’s inception, the effect of individual stock and sector selections was more or less overwhelmed by the broad market’s troubles and fears of a weaker global economic recovery. As stock markets worldwide trembled at the possibility of another financial crisis—this time sparked by Europe’s government debt problems—investors abandoned risk and scrambled to find stability, often seeking the safety of conservative investments such as bonds.
In this climate, even stocks with strong balance sheets and solid earnings suffered. Eight of the fund’s ten sectors reported negative returns, with industrials, financials, and IT detracting most from the fund’s result. The three sectors combined subtracted more than 6 percentage points from the fund’s total result. Industrials, the second-largest sector in the fund after financials, struggled as the economy downshifted. Regional commercial banks and brokerage firms within the financial sector came under pressure from growing concerns about credit losses, the weak economy, and the potential impact of tightened government regulation. In IT,
4
software developers and semiconductor equipment-makers lost ground despite posting strong earnings.
The fund had limited exposure to the one sector that made it through the choppy five-month stretch with a strong positive return: utilities. This decision held back short-term performance but is consistent with the fund’s long-term strategy. While many utility companies are well-financed, most don’t have much opportunity to reinvest their cash and grow, because of the highly regulated nature of the industry.
Focus on the long term; ignore short-term hiccups
The stock market’s sudden decline in the months following the debut of Vanguard Explorer Value Fund was no doubt unnerving for some of the fund’s new shareholders, but short-term ups and downs are inevitable and can never be predicted.
Given that market volatility is a fact of life, a prudent response is to accept it and then focus on those factors over which you have more control, such as the makeup of your portfolio, your reaction to the market’s shifts, and how much you pay for your investments. Vanguard encourages you to maintain a balanced portfolio of stock, bond, and money market funds that is consistent with your long-term goals, time horizon, and tolerance for risk. While it’s impossible to completely shield yourself from market gyrations, you can help protect your holdings by diversifying them among and within different asset classes.
Vanguard Explorer Value Fund can play a solid supporting role in such a balanced portfolio by providing a low-cost, effective way to gain exposure to small- and mid-sized value companies within the U.S. stock market.
Thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/explorervaluex7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
September 14, 2010
5
Advisors’ Report
For the abbreviated fiscal year ended August 31, 2010, Vanguard Explorer Value Fund returned about –9%. Your fund is managed by three independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct, yet complementary, investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment. The advisors, the amount and percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal period and of how their portfolio positioning reflects this assessment. These comments were prepared on September 21, 2010.
Frontier Capital Management Co., LLC
Portfolio Managers:
Thomas W. Duncan, Jr., Senior Vice President
William A. Teichner, CFA, Senior Vice President
Small-cap value stocks, like other U.S. stocks, were weak during the fund’s five-month fiscal period. The decline in the markets coincided with investor concerns about the pace of employment growth, possible weakening in consumer confidence, and economic troubles in Europe.
Our portion of the fund benefited from favorable stock selection in the consumer discretionary, energy, technology, and financial services sectors. The strongest
Vanguard Explorer Value Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Frontier Capital | 33 | 25 | The advisor selects stocks by identifying companies |
Management Co., LLC | it believes are underpriced relative to their long-term | ||
value. These companies are generally inexpensive and | |||
have low price-to-book and price-to-earnings ratios. | |||
Cardinal Capital | 32 | 24 | The advisor seeks stocks that are able to generate |
Management, L.L.C. | excess cash flow and reinvest the cash to increase | ||
shareholder value. | |||
Sterling Capital | 31 | 23 | The advisor searches for stocks of quality companies |
Management LLC | selling at large discounts compared to their underlying | ||
value. It defines quality stocks as those that generate | |||
considerable cash flow, reinvest in opportunities with | |||
attractive returns, and have a competitive advantage | |||
with their business sector. | |||
Cash Investments | 4 | 3 | These short-term reserves are invested by Vanguard in |
equity index products to simulate investment in stocks. | |||
Each advisor may also maintain a modest cash position. |
6
contributor was ADC Telecommunications, a technology equipment provider that agreed to be acquired by Tyco Electronics.
Although we experienced unfavorable stock selection in the health care sector, the adverse effect was small and was offset by positive contributions from other sectors. The weakest contributor in our portion of the portfolio was Penson Worldwide, a provider of services to brokerage firms. The company, which earns interest income from investing its customers’ cash balances, was hurt by low interest rates and missed consensus estimates during the first half of 2010. We maintain a small weighting in the stock as it is inexpensive on several measures.
During the period, we bought seven stocks that we did not own at the fund’s inception. We also sold seven stocks. The purchases were spread across six sectors and the sales across four. The net effect was an increase in our holdings of producer durable and health care stocks and a reduction in consumer discretionary, financial, and technology issues. As is typical for Frontier, the changes were based on company-specific reasons, rather than top-down positioning.
Cardinal Capital Management, L.L.C.
Portfolio Managers:
Amy K. Minella, Partner
Eugene Fox III, Partner
Robert B. Kirkpatrick, CFA, Partner
In the five months since Vanguard Explorer Value Fund launched, the U.S. stock market has reacted to indicators that economic growth has slowed and to the possibility of a double-dip recession. As disciplined, bottom-up investors, we take advantage of temporary equity price declines caused by fear, apathy, and other nonfundamental factors to invest in companies with the potential to earn attractive, long-term returns.
During this period, our portfolio’s performance was hurt by its allocation across economic sectors but benefited from our stock selection. With respect to sector allocation, the absence of better-performing utility stocks and our larger weightings in the poorly performing industrials, information technology, and health care sectors detracted from results. Our stock selection was most beneficial in the information technology sector, where Hewitt Associates was acquired by Aon at a substantial premium. Other stocks that produced positive returns were U.K. cable service provider Virgin Media, in the consumer discretionary sector; oil producer Concho Resources, in the energy sector; and NBTY, a vitamin supplier in the consumer staples sector that was acquired by Carlyle Group. The companies that detracted most from the portfolio’s performance during the period were commercial printer R.R. Donnelley & Sons, which declined on fears of an economic sl owdown, and asset management company Affiliated Managers Group.
7
Despite the economic fears that have dominated the stock market’s direction recently, we remain optimistic about the market’s prospects. Valuations remain reasonable in light of very low interest rates; corporations’ balance sheets and operations are generally in good shape; and merger-and-acquisition activity is increasing as both corporations and private equity are motivated buyers.
Sterling Capital Management LLC
Portfolio Managers:
Eduardo A. Brea, CFA, Managing Director
Brian R. Walton, CFA, Managing Director
The fund encountered some choppy markets during its initial five months, as global equity markets were rattled by sovereign debt issues, the flash crash, and slowing economic metrics. Within this environment, corporate earnings were generally stronger than market expectations, while investors remained skeptical about the sustainability of the progress. Overall, our portfolio’s cyclical bias hurt performance during the period as macro issues overwhelmed company fundamentals.
The technology sector, which represented a large overweighting, underperformed. This was surprising, because earnings were solid and mergers and acquisitions occurred throughout the group. Large portfolio holdings such as MicroStrategy, Compuware, and CA all claimed free cash flow yields in excess of 10%. We continue to be optimistic about the sector, as valuations are very compelling.
The high correlation among all stocks during the period brought down even defensive sectors such as health care. Concern about growing government deficits and their potential influence on Medicare funding also weighed on these stocks. Within the portfolio, Coventry Health Care, Omnicare, and King Pharmaceuticals hurt performance.
The portfolio’s largest exposure—financials, specifically, credit-sensitive companies—also weighed on performance. As economic data increasingly suggested slowing activity during the fiscal period, renewed concern about credit losses began to resurface. Although a weak housing market will no doubt limit the pace of recovery, we believe that the portfolio’s bank holdings have sufficient capital and reserves to overcome this challenge. Furthermore, as many small and regional banks trade for only slight premiums to tangible book value, we view these positions as undervalued.
As we look forward, valuations throughout the small-cap universe appear to be attractive. Balance sheets generally are solid and have excess cash. Finally, recent merger-and-acquisition activity could prove to be a positive force in unlocking valuations in a slow-growth economic environment.
8
Explorer Value Fund
Fund Profile
As of August 31, 2010
Portfolio Characteristics | |||
Comparative | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 179 | 1,636 | 4,100 |
Median Market Cap | $1.8B | $2.0B | $26.3B |
Price/Earnings Ratio | 16.5x | 19.4x | 15.7x |
Price/Book Ratio | 1.4x | 1.2x | 1.9x |
Yield3 | 0.7% | 2.2% | 2.0% |
Return on Equity | 12.3% | 9.3% | 19.0% |
Earnings Growth Rate | 5.0% | 0.3% | 6.2% |
Foreign Holdings | 0.3% | 0.0% | 0.0% |
Turnover Rate | 16% | — | — |
Expense Ratio4 | 0.59% | — | — |
Short-Term Reserves | 3.1% | — | — |
Sector Diversification (% of equity exposure) | |||
Comparative | Broad | ||
Fund | Index1 | Index2 | |
Consumer Discretionary | 7.3% | 9.6% | 11.5% |
Consumer Staples | 2.4 | 4.2 | 10.6 |
Energy | 7.7 | 7.7 | 9.6 |
Financials | 28.1 | 33.7 | 17.1 |
Health Care | 6.9 | 5.7 | 11.3 |
Industrials | 21.1 | 10.9 | 10.8 |
Information Technology | 17.6 | 8.4 | 18.2 |
Materials | 4.9 | 7.1 | 4.3 |
Telecommunication | |||
Services | 1.5 | 1.1 | 2.9 |
Utilities | 2.5 | 11.6 | 3.7 |
Ten Largest Holdings5 (% of total net assets) | ||
Concho Resources Inc. | Oil & Gas | |
Exploration | ||
& Production | 2.0% | |
Silgan Holdings Inc. | Metal & Glass | |
Containers | 1.4 | |
Virgin Media Inc. | Cable & Satellite | 1.4 |
Willis Group | ||
Holdings PLC | Insurance Brokers | 1.4 |
Aspen Insurance | Property & Casualty | |
Holdings Ltd. | Insurance | 1.2 |
Affiliated Managers | Asset Management | |
Group Inc. | & Custody Banks | 1.2 |
Endurance Specialty | ||
Holdings Ltd. | Reinsurance | 1.1 |
MicroStrategy Inc. | Application | |
Class A | Software | 1.0 |
CA Inc. | Systems Software | 1.0 |
j2 Global | Internet Software | |
Communications Inc. | & Services | 1.0 |
Top Ten | 12.7% |
Investment Focus
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/explorervaluex11x1.jpg)
1 Russell 2500 Value Index.
2 Dow Jones U.S. Total Stock Market Index.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes.
4 The expense ratio shown is from the prospectus dated March 16, 2010, and represents estimated costs for the current fiscal period. For the period ended August 31, 2010, the annualized expense ratio was 0.56%.
5 The holdings listed exclude any temporary cash investments and equity index products.
See the Glossary for investment terms.
9
Explorer Value 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.
Cumulative Performance: March 30, 2010–August 31, 2010
Initial Investment of $10,000
Total Returns | Final Value | |
Period Ended August 31, 2010 | of a $10,000 | |
Since Inception1 | Investment | |
Explorer Value Fund | –9.55% | $9,045 |
Dow Jones U.S. Total Stock Market Index | –9.77 | 9,023 |
Russell 2500 Value Index | –9.44 | 9,056 |
Small-Cap Value Funds Average2 | –11.13 | 8,887 |
Fiscal-Period Total Returns (%) March 30, 2010–August 31, 2010
![](https://capedge.com/proxy/N-CSR/0000932471-10-003300/explorervaluex12x1.jpg)
Total Return: Period Ended June 30, 2010
This table presents total returns through the latest calendar quarter—rather than through the end of the fiscal period. Securities and Exchange Commission rules require that we provide this information.
Inception | Since | |
Date | Inception1 | |
Explorer Value Fund | 3/30/2010 | –9.55% |
2 Derived from data provided by Lipper Inc.
See Financial Highlights for dividend and capital gains information.
10
Explorer Value Fund
Financial Statements
Statement of Net Assets
As of August 31, 2010
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 (92.8%)1 | |||
Consumer Discretionary (6.5%) | |||
Virgin Media Inc. | 50,300 | 1,047 | |
American Eagle | |||
Outfitters Inc. | 40,600 | 513 | |
Chico’s FAS Inc. | 57,327 | 473 | |
* | Dollar Tree Inc. | 9,220 | 418 |
Newell Rubbermaid Inc. | 27,103 | 407 | |
* | Interpublic Group of Cos. Inc. | 42,200 | 360 |
Tiffany & Co. | 8,700 | 345 | |
* | Exide Technologies | 76,900 | 322 |
Meredith Corp. | 9,061 | 265 | |
Wendy’s/Arby’s Group Inc. | |||
Class A | 51,600 | 201 | |
* | Dress Barn Inc. | 9,000 | 188 |
* | Entercom Communications | ||
Corp. Class A | 26,600 | 146 | |
Christopher & Banks Corp. | 20,100 | 129 | |
* | Cambium Learning Group Inc. | 41,100 | 117 |
4,931 | |||
Consumer Staples (2.2%) | |||
JM Smucker Co. | 8,900 | 521 | |
Inter Parfums Inc. | 23,678 | 389 | |
* | Ralcorp Holdings Inc. | 6,400 | 382 |
* | Pantry Inc. | 13,998 | 263 |
* | Winn-Dixie Stores Inc. | 19,100 | 125 |
1,680 | |||
Energy (7.2%) | |||
* | Concho Resources Inc. | 25,665 | 1,499 |
SM Energy Co. | 13,603 | 517 | |
* | Plains Exploration & | ||
Production Co. | 20,800 | 497 | |
* | Oceaneering International Inc. | 9,700 | 485 |
* | Carrizo Oil & Gas Inc. | 22,278 | 467 |
* | Resolute Energy Corp. | 43,700 | 467 |
Holly Corp. | 16,800 | 437 | |
World Fuel Services Corp. | 16,600 | 424 | |
* | Forest Oil Corp. | 13,500 | 352 |
EXCO Resources Inc. | 22,100 | 297 | |
5,442 |
Market | |||
Value• | |||
Shares | ($000) | ||
Financials (26.3%) | |||
Willis Group Holdings PLC | 35,300 | 1,027 | |
Aspen Insurance | |||
Holdings Ltd. | 32,996 | 937 | |
* | Affiliated Managers | ||
Group Inc. | 14,200 | 912 | |
Endurance Specialty | |||
Holdings Ltd. | 21,800 | 803 | |
Discover Financial Services | 48,500 | 704 | |
Hudson City Bancorp Inc. | 59,800 | 689 | |
First Citizens | |||
BancShares Inc. Class A | 3,875 | 651 | |
Comerica Inc. | 18,800 | 647 | |
Marshall & Ilsley Corp. | 95,800 | 628 | |
Cash America | |||
International Inc. | 18,100 | 554 | |
Nelnet Inc. Class A | 23,100 | 506 | |
Argo Group International | |||
Holdings Ltd. | 16,222 | 494 | |
Corporate Office | |||
Properties Trust | 12,897 | 466 | |
Assured Guaranty Ltd. | 29,100 | 450 | |
HCC Insurance Holdings Inc. | 17,733 | 447 | |
Fifth Third Bancorp | 38,500 | 425 | |
Bank of the Ozarks Inc. | 11,285 | 415 | |
Raymond James | |||
Financial Inc. | 17,834 | 412 | |
Assurant Inc. | 11,200 | 410 | |
First American | |||
Financial Corp. | 27,600 | 409 | |
Ares Capital Corp. | 27,000 | 403 | |
Entertainment | |||
Properties Trust | 9,300 | 401 | |
Allied World Assurance Co. | |||
Holdings Ltd. | 7,456 | 376 | |
Hatteras Financial Corp. | 12,500 | 362 | |
Northwest Bancshares Inc. | 32,400 | 348 | |
Parkway Properties Inc. | 22,900 | 335 | |
National Retail Properties Inc. | 13,704 | 334 |
11
Explorer Value Fund
Market | |||
Value• | |||
Shares | ($000) | ||
First Community | |||
Bancshares Inc. | 25,794 | 333 | |
* | Texas Capital Bancshares Inc. | 21,060 | 322 |
Regency Centers Corp. | 8,800 | 321 | |
Digital Realty Trust Inc. | 5,340 | 317 | |
Validus Holdings Ltd. | 12,173 | 310 | |
Flushing Financial Corp. | 26,500 | 287 | |
Brookline Bancorp Inc. | 29,100 | 272 | |
Realty Income Corp. | 8,261 | 269 | |
Essex Property Trust Inc. | 2,520 | 267 | |
Synovus Financial Corp. | 126,300 | 260 | |
First Financial Holdings Inc. | 26,900 | 243 | |
Washington Federal Inc. | 16,900 | 241 | |
* | Investment Technology | ||
Group Inc. | 18,000 | 239 | |
BOK Financial Corp. | 5,340 | 237 | |
Renasant Corp. | 17,621 | 236 | |
* | optionsXpress Holdings Inc. | 16,322 | 233 |
GFI Group Inc. | 49,774 | 223 | |
* | First Horizon National Corp. | 18,166 | 183 |
SWS Group Inc. | 24,585 | 177 | |
* | Pinnacle Financial | ||
Partners Inc. | 16,267 | 139 | |
* | Penson Worldwide Inc. | 25,895 | 119 |
EastGroup Properties Inc. | 1,500 | 53 | |
19,826 | |||
Health Care (6.2%) | |||
Chemed Corp. | 14,300 | 713 | |
* | King Pharmaceuticals Inc. | 68,400 | 596 |
* | Henry Schein Inc. | 10,000 | 528 |
* | Coventry Health Care Inc. | 25,100 | 486 |
Beckman Coulter Inc. | 10,100 | 461 | |
Cooper Cos. Inc. | 9,464 | 382 | |
* | Martek Biosciences Corp. | 15,300 | 334 |
Omnicare Inc. | 15,800 | 303 | |
* | CONMED Corp. | 15,122 | 280 |
Teleflex Inc. | 4,600 | 221 | |
West Pharmaceutical | |||
Services Inc. | 6,300 | 212 | |
* | IRIS International Inc. | 17,900 | 137 |
4,653 | |||
Industrials (19.9%) | |||
RR Donnelley & Sons Co. | 45,300 | 686 | |
UTi Worldwide Inc. | 42,500 | 595 | |
* | FTI Consulting Inc. | 18,000 | 590 |
* | Teledyne Technologies Inc. | 15,300 | 554 |
* | Atlas Air Worldwide | ||
Holdings Inc. | 12,300 | 533 | |
* | KAR Auction Services Inc. | 42,400 | 513 |
Harsco Corp. | 25,500 | 508 | |
* | WABCO Holdings Inc. | 14,106 | 497 |
* | Alliant Techsystems Inc. | 7,500 | 494 |
AMETEK Inc. | 11,400 | 490 | |
Mueller Industries Inc. | 20,400 | 481 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Colfax Corp. | 38,124 | 476 |
JB Hunt Transport | |||
Services Inc. | 14,400 | 471 | |
A.O. Smith Corp. | 8,665 | 445 | |
Equifax Inc. | 13,900 | 410 | |
* | BE Aerospace Inc. | 13,793 | 372 |
* | Altra Holdings Inc. | 28,415 | 366 |
* | WESCO International Inc. | 10,766 | 348 |
* | GrafTech International Ltd. | 24,300 | 342 |
Viad Corp. | 21,300 | 338 | |
* | DXP Enterprises Inc. | 18,495 | 336 |
Granite Construction Inc. | 15,100 | 332 | |
Snap-On Inc. | 8,055 | 332 | |
* | Celadon Group Inc. | 28,338 | 332 |
* | Titan Machinery Inc. | 22,066 | 330 |
Actuant Corp. Class A | 16,121 | 319 | |
Herman Miller Inc. | 19,400 | 319 | |
Roper Industries Inc. | 5,400 | 314 | |
Interface Inc. Class A | 23,477 | 301 | |
* | Kirby Corp. | 7,658 | 282 |
* | RailAmerica Inc. | 27,204 | 271 |
* | Beacon Roofing Supply Inc. | 16,423 | 229 |
* | Insituform Technologies Inc. | ||
Class A | 10,900 | 222 | |
* | Saia Inc. | 18,496 | 216 |
* | Orbital Sciences Corp. | 16,195 | 210 |
Brink’s Co. | 10,300 | 194 | |
* | Furmanite Corp. | 43,900 | 190 |
* | Columbus McKinnon Corp. | 14,585 | 187 |
* | On Assignment Inc. | 38,269 | 166 |
HNI Corp. | 6,136 | 143 | |
* | SYKES Enterprises Inc. | 10,000 | 120 |
* | CRA International Inc. | 6,952 | 111 |
14,965 | |||
Information Technology (16.3%) | |||
* | MicroStrategy Inc. Class A | 9,700 | 756 |
CA Inc. | 40,800 | 735 | |
* | j2 Global | ||
Communications Inc. | 33,700 | 727 | |
* | Progress Software Corp. | 24,300 | 649 |
* | Convergys Corp. | 60,200 | 610 |
Earthlink Inc. | 67,200 | 575 | |
* | Compuware Corp. | 77,600 | 557 |
* | Axcelis Technologies Inc. | 389,400 | 529 |
* | Synopsys Inc. | 19,800 | 453 |
Fair Isaac Corp. | 19,600 | 439 | |
Broadridge Financial | |||
Solutions Inc. | 19,000 | 406 | |
DST Systems Inc. | 9,900 | 403 | |
* | Cabot Microelectronics Corp. | 12,900 | 386 |
* | Actel Corp. | 24,485 | 350 |
* | OSI Systems Inc. | 11,386 | 337 |
Harris Corp. | 7,900 | 332 | |
* | Anaren Inc. | 23,275 | 317 |
12
Explorer Value Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Pericom Semiconductor Corp. | 37,240 | 315 |
* | SAIC Inc. | 20,000 | 298 |
* | Insight Enterprises Inc. | 22,400 | 294 |
MTS Systems Corp. | 10,367 | 276 | |
National Semiconductor Corp. | 21,800 | 275 | |
* | Virtusa Corp. | 29,000 | 256 |
* | Orbotech Ltd. | 24,300 | 247 |
* | Lexmark International Inc. | ||
Class A | 7,001 | 245 | |
* | Acxiom Corp. | 19,700 | 244 |
* | Coherent Inc. | 6,549 | 243 |
* | Avid Technology Inc. | 20,830 | 231 |
Jabil Circuit Inc. | 20,487 | 210 | |
* | Integral Systems Inc. | 29,422 | 199 |
Diebold Inc. | 7,658 | 199 | |
* | Littelfuse Inc. | 4,378 | 163 |
12,256 | |||
Materials (4.5%) | |||
Silgan Holdings Inc. | 36,000 | 1,076 | |
FMC Corp. | 8,100 | 505 | |
Albemarle Corp. | 9,670 | 388 | |
Cabot Corp. | 13,502 | 384 | |
HB Fuller Co. | 17,400 | 330 | |
Cytec Industries Inc. | 6,142 | 291 | |
PH Glatfelter Co. | 22,400 | 229 | |
* | RTI International Metals Inc. | 6,442 | 178 |
3,381 | |||
Telecommunication Services (1.4%) | |||
* | NII Holdings Inc. | 17,600 | 638 |
Windstream Corp. | 36,900 | 426 | |
1,064 | |||
Utilities (2.3%) | |||
Westar Energy Inc. | 20,555 | 493 | |
Portland General Electric Co. | 20,353 | 407 | |
Piedmont Natural | |||
Gas Co. Inc. | 11,386 | 310 | |
Allete Inc. | 7,600 | 270 | |
Southwest Gas Corp. | 7,355 | 231 | |
1,711 | |||
Total Common Stocks | |||
(Cost $78,676) | 69,909 |
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investments (7.5%)1 | ||
Money Market Fund (6.6%) | ||
2 Vanguard Market | ||
Liquidity Fund, 0.288% | 4,930,114 | 4,930 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.9%) | ||
3,4 Fannie Mae Discount | ||
Notes, 0.300%, 9/15/10 | 700 | 700 |
Total Temporary Cash Investments | ||
(Cost $5,630) | 5,630 | |
Total Investments (100.3%) | ||
(Cost $84,306) | 75,539 | |
Other Assets and Liabilities (–0.3%) | ||
Other Assets | 257 | |
Liabilities | (499) | |
(242) | ||
Net Assets (100%) | ||
Applicable to 4,162,568 outstanding | ||
$.001 par value shares of beneficial | ||
interest (unlimited authorization) | 75,297 | |
Net Asset Value Per Share | $18.09 | |
At August 31, 2010, net assets consisted of: | ||
Amount | ||
($000) | ||
Paid-in Capital | 84,061 | |
Undistributed Net Investment Income | 184 | |
Accumulated Net Realized Gains | 71 | |
Unrealized Appreciation (Depreciation) | ||
Investment Securities | (8,767) | |
Futures Contracts | (252) | |
Net Assets | 75,297 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 97.2% and 3.1%, respectively, of net assets.
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 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
4 Securities with a value of $700,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
13
Explorer Value Fund
Statement of Operations
March 16, 20101 to | |
August 31, 2010 | |
($000) | |
Investment Income | |
Income | |
Dividends | 359 |
Interest2 | 12 |
Total Income | 371 |
Expenses | |
Investment Advisory Fees—Note B | 114 |
The Vanguard Group—Note C | |
Management and Administrative | 53 |
Marketing and Distribution | 4 |
Custodian Fees | 3 |
Auditing Fees | 10 |
Shareholders’ Reports | 3 |
Total Expenses | 187 |
Net Investment Income | 184 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 335 |
Futures Contracts | (264) |
Realized Net Gain (Loss) | 71 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | (8,767) |
Futures Contracts | (252) |
Change in Unrealized Appreciation (Depreciation) | (9,019) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (8,764) |
1 Commencement of subscription period for the fund. | |
2 Interest income from an affiliated company of the fund was $11,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
14
Explorer Value Fund
Statement of Changes in Net Assets
March 16, 20101 to | |
August 31, 2010 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 184 |
Realized Net Gain (Loss) | 71 |
Change in Unrealized Appreciation (Depreciation) | (9,019) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (8,764) |
Distributions | |
Net Investment Income | — |
Realized Capital Gain | — |
Total Distributions | — |
Capital Share Transactions | |
Issued | 96,958 |
Issued in Lieu of Cash Distributions | — |
Redeemed | (12,897) |
Net Increase (Decrease) from Capital Share Transactions | 84,061 |
Total Increase (Decrease) | 75,297 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 75,297 |
1 Commencement of subscription period for the fund. | |
2 Net Assets—End of Period includes undistributed net investment income of $184,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
15
Explorer Value Fund
Financial Highlights
March 16, 20101 to | |
For a Share Outstanding Throughout the Period | August 31, 2010 |
Net Asset Value, Beginning of Period | $20.00 |
Investment Operations | |
Net Investment Income | .044 |
Net Realized and Unrealized Gain (Loss) on Investments | (1.954) |
Total from Investment Operations | (1.910) |
Distributions | |
Dividends from Net Investment Income | — |
Distributions from Realized Capital Gains | — |
Total Distributions | — |
Net Asset Value, End of Period | $18.09 |
Total Return2 | –9.55% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $75 |
Ratio of Total Expenses to Average Net Assets | 0.56%3 |
Ratio of Net Investment Income to Average Net Assets | 0.55%3 |
Portfolio Turnover Rate | 16% |
2 Total returns do not include account service fees that may have applied in the period shown. Fund prospectuses provide information about any applicable account service fees.
3 Annualized.
See accompanying Notes, which are an integral part of the Financial Statements.
16
Explorer Value Fund
Notes to Financial Statements
Vanguard Explorer Value Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. 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 materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for its open federal income tax period ended August 31, 2010, 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. 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.
17
Explorer Value Fund
B. Frontier Capital Management Co., LLC, Cardinal Capital Management, L.L.C., and Sterling Capital Management LLC each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. In accordance with the advisory contracts entered into with Frontier Capital Management Co., LLC, Cardinal Capital Management L.L.C., and Sterling Capital Management LLC in March 2010, the investment advisory fees will be subject to quarterly adjustments, beginning March 1, 2011, based on performance since May 31, 2010, relative to the Russell 2000 Value Index, Russell Mid-Cap Value Custom Cap-Range Index, and Russell 2500 Value Index, respectively.
The Vanguard Group manages the cash reserves of the fund on an at-cost basis.
For the period ended August 31, 2010, the aggregate investment advisory fee represented an effective annual basic rate of 0.34% of the fund’s average net assets, with no adjustment required based on performance.
C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At August 31, 2010, the fund had contributed capital of $16,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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 fund’s investments as of August 31, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 69,909 | — | — |
Temporary Cash Investments | 4,930 | 700 | — |
Futures Contracts—Assets1 | 7 | — | — |
Futures Contracts—Liabilities1 | (2) | — | — |
Total | 74,844 | 700 | — |
1 Represents variation margin on the last day of the reporting period. |
18
Explorer Value Fund
E. At August 31, 2010, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
E-mini Russell 2000 Index | September 2010 | 55 | 3,309 | (252) |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
F. 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.
For tax purposes, at August 31, 2010, the fund had $193,000 of ordinary income available for distribution. The fund realized losses of $181,000 during the period which are deferred and will be treated as realized for tax purposes in fiscal 2011.
At August 31, 2010, the cost of investment securities for tax purposes was $84,306,000. Net unrealized depreciation of investment securities for tax purposes was $8,767,000, consisting of unrealized gains of $1,284,000 on securities that had risen in value since their purchase and $10,051,000 in unrealized losses on securities that had fallen in value since their purchase.
G. During the period ended August 31, 2010, the fund purchased $89,201,000 of investment securities and sold $10,860,000 of investment securities, other than temporary cash investments.
H. Capital shares issued and redeemed were:
March 16, 20101 to | |
August 31, 2010 | |
Shares | |
(000) | |
Issued | 4,840 |
Issued in Lieu of Cash Distributions | — |
Redeemed | (677) |
Net Increase (Decrease) in Shares Outstanding | 4,163 |
1 Commencement of subscription period for the fund. |
I. In preparing the financial statements as of August 31, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
19
Report of Independent Registered
Public Accounting Firm
To the Trustees of Vanguard Scottsdale Funds and the Shareholders of Vanguard Explorer Value Fund:
In our opinion, the accompanying statement of net assets and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Explorer Value Fund (constituting a separate portfolio of Vanguard Scottsdale Funds, hereafter referred to as the “Fund”) at August 31, 2010 and the results of its operations, the changes in its net assets and the financial highlights for the period March 16, 2010 (commencement of operations) through August 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at August 31, 2010 by correspondence with the custodian and broker and by agreement to the underlying ownership records of Vanguard Market Liquidity Fund, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 11, 2010
Special 2010 tax information (unaudited) for Vanguard Explorer Value Fund
This information for the period ended August 31, 2010, is included pursuant to provisions of the Internal Revenue Code.
For corporate shareholders, 100% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.
20
Trustees Approve Advisory Agreements
Effective December 2009, the board of trustees approved the launch of Vanguard Explorer Value Fund and its externalized management structure, whereby Cardinal Capital Management, L.L.C., Frontier Capital Management Co., LLC, and Sterling Capital Management LLC provide investment advisory services to the fund. The board determined that the investment advisory agreements with Cardinal, Frontier, and Sterling were in the best interests of the fund and its prospective shareholders.
Effective October 1, 2010, the board approved a new investment advisory agreement with Sterling that is identical to the existing agreement except for its date. Certain management-employee shareholders of Sterling sold a portion of their equity interest in Sterling to BB&T Corporation. The sale was considered a change in control of Sterling, resulting in an “assignment,” and therefore automatic termination, of the then-current advisory agreement.
The board based its decision upon an evaluation of each 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 agreements. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board considered the quality of the investment management services to be provided to the fund and took into account the organizational depth and stability of each advisor. The board noted the following:
Cardinal Capital Management, L.L.C. Founded in 1995, Cardinal is an investment management boutique that focuses solely on investing in small- and mid-cap value stocks. Cardinal employs a traditional, bottom-up, fundamental approach with a cash-flow-oriented investment process. The team believes that a company’s stock price is ultimately determined by its ability to generate excess cash flow and redeploy that cash to enhance shareholder value. The cornerstone of the investment process is a discounted cash-flow analysis based on detailed five-year projections, which is driven by the team’s fundamental research.
Frontier Capital Management Co., LLC. Founded in 1980, Frontier is an investment management boutique that specializes in small- and mid-cap “GARP” (growth at a reasonable price) investing. Frontier employs a traditional, bottom-up approach to stock selection in order to identify companies that are mispriced relative to their long-term intrinsic value. Analysts meet regularly with company management, competitors, and other companies in the supply chain. The process tends to yield few “deep value” stocks and instead favors companies that typically fall into one of four categories: “Fallen Angels,” “Early Stories,” “Value Plus,” and “Cyclicals and Special Situations.”
Sterling Capital Management LLC. Founded in 1970, Sterling manages enhanced cash and fixed income products for corporate customers and small- to mid-cap value equities in the small- and mid-cap value strategy. Sterling’s philosophy is fundamental, bottom-up, and value-oriented. The strategy seeks to identify stocks of quality companies selling at large discounts to the underlying value of the business. Quality businesses are defined as those that generate substantial levels of free cash flow, have numerous reinvestment opportunities at attractive returns, and enjoy competitive advantages. In certain circumstances, Sterling will actively engage management to seek changes that will drive a company’s share price toward its intrinsic value.
21
The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted approval of the advisory agreements.
Investment performance
The board determined that the three advisors are quality firms with strong performance records and enduring investment approaches that, in combination, ought to benefit shareholders over the long- term. Information about the fund’s performance since inception can be found in the Performance Summary section of this report.
Cost
The board considered the cost of services to be provided and concluded that the fund’s expense ratio will be below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate will also be below its peer-group average. Information about the fund’s expense ratio appears in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider profitability analysis of the fund’s advisors in determining whether to approve the advisory fees, because the firms are independent of Vanguard, and the advisory fees are the result of arm’s-length negotiations.
The benefit of economies of scale
The board concluded that the fund’s shareholders will benefit from economies of scale because of breakpoints in the advisory fee schedules. The breakpoints will reduce the effective rate of the fees as the fund’s assets managed by each firm increase.
The board will consider whether to renew the advisory agreements again after a one-year period.
22
Glossary
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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks 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.
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.
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 (in the case of bonds) 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.
23
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 163 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.
Interested Trustee1 | Amy Gutmann |
Born 1949. Trustee Since June 2006. Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years: President |
Born 1957. Trustee Since July 2009. Chairman of the | of the University of Pennsylvania; Christopher H. |
Board. Principal Occupation(s) During the Past Five | Browne Distinguished Professor of Political Science |
Years: Chairman of the Board of The Vanguard Group, | in the School of Arts and Sciences with secondary |
Inc., and of each of the investment companies served | appointments at the Annenberg School for Commu- |
by The Vanguard Group, since January 2010; Director | nication and the Graduate School of Education of |
of The Vanguard Group since 2008; Chief Executive | the University of Pennsylvania; Director of Carnegie |
Officer and President of The Vanguard Group and of | Corporation of New York, Schuylkill River Development |
each of the investment companies served by The | Corporation, and Greater Philadelphia Chamber of |
Vanguard Group since 2008; Director of Vanguard | Commerce; Trustee of the National Constitution Center; |
Marketing Corporation; Managing Director of The | Chair of the Presidential Commission for the Study of |
Vanguard Group (1995–2008). | Bioethical Issues. |
JoAnn Heffernan Heisen | |
Independent Trustees | Born 1950. Trustee Since July 1998. Principal |
Occupation(s) During the Past Five Years: Corporate | |
Emerson U. Fullwood | Vice President and Chief Global Diversity Officer since |
Born 1948. Trustee Since January 2008. Principal | 2006 (retired 2008) and Member of the Executive |
Occupation(s) During the Past Five Years: Executive | Committee (retired 2008) of Johnson & Johnson |
Chief Staff and Marketing Officer for North America | (pharmaceuticals/consumer products); Vice President |
and Corporate Vice President (retired 2008) of Xerox | and Chief Information Officer of Johnson & Johnson |
Corporation (document management products and | (1997–2005); Director of the University Medical Center |
services); Director of SPX Corporation (multi-industry | at Princeton and Women’s Research and Education |
manufacturing), the United Way of Rochester, | Institute; Member of the Advisory Board of the |
Amerigroup Corporation (managed health care), | Maxwell School of Citizenship and Public Affairs |
the University of Rochester Medical Center, and | at Syracuse University. |
Monroe Community College Foundation. | |
F. Joseph Loughrey | |
Rajiv L. Gupta | Born 1949. Trustee Since October 2009. Principal |
Born 1945. Trustee Since December 2001.2 | Occupation(s) During the Past Five Years: President |
Principal Occupation(s) During the Past Five Years: | and Chief Operating Officer since 2005 (retired 2009) |
Chairman and Chief Executive Officer (retired 2009) | and Vice Chairman of the Board (2008–2009) of |
and President (2006–2008) of Rohm and Haas Co. | Cummins Inc. (industrial machinery); Director of |
(chemicals); Director of Tyco International, Ltd. | SKF AB (industrial machinery), Hillenbrand, Inc. |
(diversified manufacturing and services) and Hewlett- | (specialized consumer services), Sauer-Danfoss Inc. |
Packard Co. (electronic computer manufacturing); | (machinery), the Lumina Foundation for Education, |
Trustee of The Conference Board; Member of the | and Oxfam America; Chairman of the Advisory Council |
Board of Managers of Delphi Automotive LLP | for the College of Arts and Letters at the University of |
(automotive components). | Notre Dame. |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School; Chair of the Investment Committee | the investment companies served by The Vanguard | |
of HighVista Strategies LLC (private investment firm). | Group since 2008; Assistant Treasurer of each of the | |
investment companies served by The Vanguard Group | ||
Alfred M. Rankin, Jr. | (1988–2008). | |
Born 1941. Trustee Since January 1993. Principal | ||
Occupation(s) During the Past Five Years: Chairman, | Heidi Stam | |
President, and Chief Executive Officer of NACCO | Born 1956. Secretary Since July 2005. Principal | |
Industries, Inc. (forklift trucks/housewares/lignite); | Occupation(s) During the Past Five Years: Managing | |
Director of Goodrich Corporation (industrial products/ | Director of The Vanguard Group, Inc., since 2006; | |
aircraft systems and services); Chairman of the Federal | General Counsel of The Vanguard Group since 2005; | |
Reserve Bank of Cleveland; Trustee of The Cleveland | Secretary of The Vanguard Group and of each of the | |
Museum of Art. | investment companies served by The Vanguard Group | |
since 2005; Director and Senior Vice President of | ||
Peter F. Volanakis | Vanguard Marketing Corporation since 2005; | |
Born 1955. Trustee Since July 2009. Principal | Principal of The Vanguard Group (1997–2006). | |
Occupation(s) During the Past Five Years: President | ||
since 2007 and Chief Operating Officer since 2005 | Vanguard Senior Management Team | |
of Corning Incorporated (communications equipment); | ||
President of Corning Technologies (2001–2005); | R. Gregory Barton | Michael S. Miller |
Director of Corning Incorporated and Dow Corning; | Mortimer J. Buckley | James M. Norris |
Trustee of the Corning Incorporated Foundation and | Kathleen C. Gubanich | Glenn W. Reed |
the Corning Museum of Glass; Overseer of the | Paul A. Heller | George U. Sauter |
Amos Tuck School of Business Administration at | ||
Dartmouth College. | ||
Chairman Emeritus and Senior Advisor | ||
Executive Officers | John J. Brennan | |
Chairman, 1996–2009 | ||
Glenn Booraem | Chief Executive Officer and President, 1996–2008 | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | Founder | |
the investment companies served by The Vanguard | ||
Group since 2010; Assistant Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group (2001–2010). | ||
Thomas J. Higgins | ||
Born 1957. Chief Financial Officer Since September | ||
2008. Principal Occupation(s) During the Past Five | ||
Years: Principal of The Vanguard Group, Inc.; Chief | ||
Financial Officer of each of the investment companies | ||
served by The Vanguard Group since 2008; Treasurer | ||
of each of the investment companies served by The | ||
Vanguard Group (1998–2008). |
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, Vanguard Growth Equity 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 | All comparative mutual fund data are from Lipper Inc. |
or Morningstar, Inc., unless otherwise noted. | |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | You can obtain a free copy of Vanguard’s proxy voting |
guidelines by visiting vanguard.com/proxyreporting or | |
Text Telephone for People | by calling Vanguard at 800-662-2739. The guidelines |
With Hearing Impairment > 800-749-7273 | 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. | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | You can review and copy information about your fund |
the fund’s current prospectus. | at the SEC’s Public Reference Room in Washington, D.C. |
To find out more about this public service, call the SEC | |
CFA® is a trademark owned by CFA Institute. | 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 e-mail addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2010 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q16900 102010 |
Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.
Item 3: Audit Committee Financial Expert. The following members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts serving on its Audit Committee, and to be independent: Charles D. Ellis, Rajiv L. Gupta, JoAnn Heffernan Heisen, André F. Perold, and Alfred M. Rankin, Jr.
Item 4: Principal Accountant Fees and Services.
(a) Audit Fees.
Audit Fees of the Registrant
Fiscal Year Ended August 31, 2010: $80,000 Fiscal Year Ended August 31, 2009: $1,000
Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.
Fiscal Year Ended August 31, 2010: $3,607,060
Fiscal Year Ended August 31, 2009: $3,354,640
(b) Audit-Related Fees.
Fiscal Year Ended August 31, 2010: $791,350
Fiscal Year Ended August 31, 2009: $876,210
Includes fees billed in connection with assurance and related services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.
(c) Tax Fees.
Fiscal Year Ended August 31, 2010: $336,090
Fiscal Year Ended August 31, 2009: $423,070
Includes fees billed in connection with tax compliance, planning and advice services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group and related to income and excise taxes.
(d) All Other Fees.
Fiscal Year Ended August 31, 2010: $16,000
Fiscal Year Ended August 31, 2009: $0
Includes fees billed for services related to risk management and privacy matters. Services were provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.
0231632
(e) (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; and (4) other registered investment companies in the Vanguard Group. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.
In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Chairman of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.
The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; or (4) other registered investment companies in the Vanguard Group.
(2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.
(g) Aggregate Non-Audit Fees.
Fiscal Year Ended August 31, 2010: $352,090
Fiscal Year Ended August 31, 2009: $423,070
Includes fees billed for non-audit services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.
(h) For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.
Item 5: Audit Committee of Listed Registrants. The Registrant is a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934 (“Exchange Act”). The Registrant has separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are: Emerson U. Fullwood, Rajiv L. Gupta, Amy Gutmann, JoAnn Heffernan Heisen, F. Joseph Loughrey, André F. Perold, Alfred M. Rankin, Jr., and Peter F. Volanakis.
Item 6: Investments.
Not Applicable.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not Applicable.
0231632
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not Applicable.
Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not Applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. There were no significant changes in Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
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Item 12: Exhibits.
(a) Code of Ethics.
(b) Certifications.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD SCOTTSDALE FUNDS | |
By: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: October 21, 2010 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
VANGUARD SCOTTSDALE FUNDS | |
By: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: October 21, 2010 |
VANGUARD SCOTTSDALE FUNDS | |
By: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: October 21, 2010 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on April 26, 2010, see file Number 33-53683, Incorporated by Reference.
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