P.O. Box 2600
Valley Forge, PA 19482
vanguard.com
February 8, 2021
Lisa N. Larkin, Esq.
U.S. Securities and Exchange Commissionvia electronic filing 100 F Street, N.E.
Washington, DC 20549
RE: Vanguard Charlotte Funds (the "Trust")
File No. 333-177613
Post-Effective Amendment No. 23
Dear Ms. Larkin,
This letter responds to your comments provided on January 22, 2020, to the above-referenced post- effective amendment. The comments apply to Vanguard Total International Bond II Index Fund, a series of the Trust (the "Fund").
Comment 1: | Principal Investment Strategies |
Comment: | Please include additional disclosure regarding the weighting methodology of the Fund's |
| benchmark index. |
Response: | The Fund's benchmark index is the Bloomberg Barclays Global Aggregate ex-USD Float |
| Adjusted RIC Capped Index (USD Hedged) (the "Index"). This Index is market value- |
| weighted and capped to comply with investment company diversification standards of the |
| Internal Revenue Code. The Fund's prospectus disclosure has been revised accordingly. |
Comment 2: | Principal Investment Strategies |
Comment: | The Fund states that under normal circumstances, "at least 80% of the Fund's assets will |
| be invested in bonds included in the Index." Please explain how the Fund will invest the |
| remaining 20% of its assets. |
Response: | Subject to the 20% limit, the Fund may hold bonds that, when acquired, were included in |
| the Index but subsequently were removed and may purchase other investments that are |
| not included in the Index. These investments may include fixed income securities, |
| futures, and other investments, which are generally disclosed in the Fund's prospectus |
| under the Security Selection subheading. The Fund may also hold cash. |
Comment 3: | Other Investment Policies and Risks |
Comment: | The Fund discloses that it may engage in transactions involving total return swaps. |
| Please note that in order to avoid a total return swap being treated as a senior security for |
| purposes of Section 18 of the Investment Company Act of 1940, as amended ("1940 |
| Act"), the Fund will need to set aside an appropriate amount of liquid assets. See |
| Securities Trading Practices of Registered Investment Companies, SEC Release No. IC- |
| 10666 (Apr. 18, 1979). In addition, please note that the Commission has issued a release |
| proposing to update the regulation of fund use of derivatives for purposes of Section 18 |
| of the 1940 Act. See Use of Derivatives by Registered Investment Companies and |
| Business Development Companies, SEC Release No. IC-33704 (Nov. 25, 2019). |
| Accordingly, please be aware that the Commission could issue a new rule and/or |
| guidance relating to fund use of derivatives, such as total return swaps, which could |
| impact the manner in which the Fund operates. |
Response: | We acknowledge the Staff's comment. |
Comment 4: | Other Investment Policies and Risks |
Comment: | The Fund discloses that it may invest a small portion of its assets in shares of exchange- |
| traded funds ("ETFs"). Please confirm whether the Fund needs to include a line item for |
| acquired fund fees and expenses ("AFFE") in its fee table. |
Response: | The Fund is not expected to incur fees and expenses that exceed 0.01 percent (one basis |
| point) of its average net assets as a result of its investment in ETFs. In accordance with |
| Instruction 3(f)(i) to Item 3 of Form N-1A, the fee table in the prospectus will be |
| amended in the future to disclose AFFE if and when the Fund incurs fees and expenses |
| that exceed 0.01 percent (one basis point) of its average net assets as a result of its |
| investment in ETFs. |
Comment 5: | Exhibits to Registration Statement |
Comment: | If the Fund is party to an index licensing agreement, please include that agreement as an |
| exhibit to the registration statement pursuant to Item 28(h) of Form N-1A. |
Response: | The Fund is not party to an index licensing agreement. Accordingly, we will not include |
| an index license agreement as an exhibit to the Fund's registration statement. |
Please contact me at (610) 669-3973 with any questions or comments regarding the above response. Thank you.
Sincerely,
/s/ Ross M. Oklewicz
Ross M. Oklewicz
Associate Counsel
The Vanguard Group, Inc.