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Semiannual Report | March 31, 2021 |
Vanguard Short-Term Inflation-Protected
Securities Index Fund
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Contents | |
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About Your Fund’s Expenses | 1 |
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Financial Statements | 4 |
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Trustees Approve Advisory Arrangement | 18 |
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Liquidity Risk Management | 20 |
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
Six Months Ended March 31, 2021
| Beginning | Ending | Expenses |
| Account Value | Account Value | Paid During |
Short-Term Inflation-Protected Securities Index Fund | 9/30/2020 | 3/31/2021 | Period |
Based on Actual Fund Return | | | |
Investor Shares | $1,000.00 | $1,023.40 | $0.71 |
ETF Shares | 1,000.00 | 1,023.87 | 0.25 |
Admiral™ Shares | 1,000.00 | 1,024.18 | 0.30 |
Institutional Shares | 1,000.00 | 1,023.86 | 0.20 |
Based on Hypothetical 5% Yearly Return | | | |
Investor Shares | $1,000.00 | $1,024.23 | $0.71 |
ETF Shares | 1,000.00 | 1,024.68 | 0.25 |
Admiral Shares | 1,000.00 | 1,024.63 | 0.30 |
Institutional Shares | 1,000.00 | 1,024.73 | 0.20 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.14% for Investor Shares, 0.05% for ETF Shares, 0.06% for Admiral Shares, and 0.04% for Institutional 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 (182/365).
Short-Term Inflation-Protected Securities Index Fund
Distribution by Stated Maturity
As of March 31, 2021
| Under 1 Year | | 15.3 | % |
| 1 - 2 Years | | 17.7 | |
| 2 - 3 Years | | 18.9 | |
| 3 - 4 Years | | 24.7 | |
| 4 - 5 Years | | 23.4 | |
The table reflects the fund’s investments, except for short-term investments. The fund invests in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.
Short-Term Inflation-Protected Securities Index Fund
Financial Statements (unaudited)
Schedule of Investments
As of March 31, 2021
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
| | | | | | | Face | | Market |
| | | | | Maturity | | Amount | | Value• |
| | | Coupon | | Date | | ($000) | | ($000) |
U.S. Government and Agency Obligations (99.4%) | | | | | | | | |
U.S. Government Securities (99.4%) | | | | | | | | |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 4/15/21 | | 2,180,387 | | 2,411,356 |
United States Treasury Inflation Indexed Bonds | | 0.625% | | 7/15/21 | | 1,651,617 | | 1,947,132 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 1/15/22 | | 2,047,578 | | 2,417,468 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 4/15/22 | | 2,249,825 | | 2,486,072 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 7/15/22 | | 2,063,566 | | 2,439,743 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 1/15/23 | | 2,470,160 | | 2,934,933 |
United States Treasury Inflation Indexed Bonds | | 0.625% | | 4/15/23 | | 2,264,300 | | 2,535,046 |
United States Treasury Inflation Indexed Bonds | | 0.375% | | 7/15/23 | | 2,459,978 | | 2,958,203 |
United States Treasury Inflation Indexed Bonds | | 0.625% | | 1/15/24 | | 2,370,719 | | 2,882,028 |
United States Treasury Inflation Indexed Bonds | | 0.500% | | 4/15/24 | | 1,459,808 | | 1,641,342 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 7/15/24 | | 2,222,177 | | 2,647,358 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 10/15/24 | | 1,976,765 | | 2,180,433 |
United States Treasury Inflation Indexed Bonds | | 0.250% | | 1/15/25 | | 2,254,670 | | 2,704,825 |
United States Treasury Inflation Indexed Bonds | | 2.375% | | 1/15/25 | | 1,108,321 | | 1,801,441 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 4/15/25 | | 1,699,702 | | 1,863,570 |
United States Treasury Inflation Indexed Bonds | | 0.375% | | 7/15/25 | | 2,169,283 | | 2,636,226 |
United States Treasury Inflation Indexed Bonds | | 0.125% | | 10/15/25 | | 2,055,338 | | 2,258,223 |
United States Treasury Inflation Indexed Bonds | | 0.625% | | 1/15/26 | | 1,876,748 | | 2,298,177 |
United States Treasury Inflation Indexed Bonds | | 2.000% | | 1/15/26 | | 838,880 | | 1,306,502 |
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Total U.S. Government and Agency Obligations (Cost $42,635,150) | | | | | | | | 44,350,078 |
| | | | | Shares | | |
Temporary Cash Investment (0.6%) | | | | | | |
Money Market Fund (0.6%) | | | | | | |
1 Vanguard Market Liquidity Fund (Cost $235,016) | | 0.081% | | | | 2,350,249 | | 235,025 |
Total Investments (100.0%) (Cost $42,870,166) | | | | | | 44,585,103 |
Other Assets and Liabilities—Net (0.0%) | | | | | | 21,334 |
Net Assets (100%) | | | | | | 44,606,437 |
Cost is in $000.
| • | See Note A in Notes to Financial Statements. |
| 1 | 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.
Short-Term Inflation-Protected Securities Index Fund
Statement of Assets and Liabilities
As of March 31, 2021
($000s, except shares and per-share amounts) | Amount |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers (Cost $42,635,150) | 44,350,078 |
Affiliated Issuers (Cost $235,016) | 235,025 |
Total Investments in Securities | 44,585,103 |
Investment in Vanguard | 1,593 |
Cash | 1,400 |
Receivables for Accrued Income | 45,529 |
Receivables for Capital Shares Issued | 462,527 |
Total Assets | 45,096,152 |
Liabilities | |
Payables for Investment Securities Purchased | 428,321 |
Payables for Capital Shares Redeemed | 60,751 |
Payables to Vanguard | 643 |
Total Liabilities | 489,715 |
Net Assets | 44,606,437 |
Short-Term Inflation-Protected Securities Index Fund
Statement of Assets and Liabilities (continued)
At March 31, 2021, net assets consisted of: | |
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($000s, except shares and per-share amounts) | Amount |
Paid-in Capital | 42,976,496 |
Total Distributable Earnings (Loss) | 1,629,941 |
Net Assets | 44,606,437 |
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Investor Shares—Net Assets | |
Applicable to 322,623,008 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 8,324,563 |
Net Asset Value Per Share—Investor Shares | $25.80 |
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ETF Shares—Net Assets | |
Applicable to 237,248,565 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 12,216,448 |
Net Asset Value Per Share—ETF Shares | $51.49 |
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Admiral Shares—Net Assets | |
Applicable to 409,614,394 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 10,582,667 |
Net Asset Value Per Share—Admiral Shares | $25.84 |
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| | |
Institutional Shares—Net Assets | |
Applicable to 521,498,915 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 13,482,759 |
Net Asset Value Per Share—Institutional Shares | $25.85 |
See accompanying Notes, which are an integral part of the Financial Statements.
Short-Term Inflation-Protected Securities Index Fund
Statement of Operations
| Six Months Ended |
| March 31, 2021 |
| ($000) |
Investment Income | |
Income | |
Interest1 | 347,585 |
Total Income | 347,585 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 452 |
Management and Administrative—Investor Shares | 5,463 |
Management and Administrative—ETF Shares | 2,211 |
Management and Administrative—Admiral Shares | 2,374 |
Management and Administrative—Institutional Shares | 2,120 |
Marketing and Distribution—Investor Shares | 315 |
Marketing and Distribution—ETF Shares | 221 |
Marketing and Distribution—Admiral Shares | 226 |
Marketing and Distribution—Institutional Shares | 186 |
Custodian Fees | 82 |
Shareholders’ Reports—Investor Shares | — |
Shareholders’ Reports—ETF Shares | 7 |
Shareholders’ Reports—Admiral Shares | 29 |
Shareholders’ Reports—Institutional Shares | 7 |
Trustees’ Fees and Expenses | 5 |
Total Expenses | 13,698 |
Net Investment Income | 333,887 |
Realized Net Gain (Loss) | |
Investment Securities Sold1,2 | 13,130 |
Futures Contracts | 846 |
Realized Net Gain (Loss) | 13,976 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities1 | 605,858 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 953,721 |
1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $235,000, $0, and $0, respectively. Purchases and sales are for temporary cash investment purposes. |
2 | Includes $7,495,000 of net gain (loss) resulting from in-kind redemptions. |
See accompanying Notes, which are an integral part of the Financial Statements.
Short-Term Inflation-Protected Securities Index Fund
Statement of Changes in Net Assets
| Six Months Ended | | Year Ended |
| March 31, | September 30, |
| 2021 | 2020 |
| ($000) | | ($000) |
Increase (Decrease) in Net Assets | | | |
Operations | | | |
Net Investment Income | 333,887 | 399,307 |
Realized Net Gain (Loss) | 13,976 | (22,092) |
Change in Unrealized Appreciation (Depreciation) | 605,858 | 1,120,319 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 953,721 | 1,497,534 |
Distributions | | | |
Investor Shares | (66,736) | (89,472) |
ETF Shares | (137,340) | (50,954) |
Admiral Shares | (76,798) | (99,255) |
Institutional Shares | (103,648) | (139,828) |
Total Distributions | (384,522) | (379,509) |
Capital Share Transactions | | | |
Investor Shares | 131,330 | 815,588 |
ETF Shares | 2,892,449 | 2,047,806 |
Admiral Shares | 1,900,997 | 952,458 |
Institutional Shares | 1,411,171 | 1,568,293 |
Net Increase (Decrease) from Capital Share Transactions | 6,335,947 | 5,384,145 |
Total Increase (Decrease) | 6,905,146 | 6,502,170 |
Net Assets | | | |
Beginning of Period | 37,701,291 | 31,199,121 |
End of Period | 44,606,437 | 37,701,291 |
See accompanying Notes, which are an integral part of the Financial Statements.
Short-Term Inflation-Protected Securities Index Fund
Financial Highlights
Investor Shares
| Six Months | | | |
| Ended | | | Year Ended September 30, |
For a Share Outstanding | March 31, | | |
Throughout Each Period | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
Net Asset Value, Beginning of Period | $25.41 | $24.57 | $24.23 | $24.77 | $24.83 | $24.23 |
Investment Operations | | | | | | |
Net Investment Income1 | .198 | .272 | .483 | .669 | .312 | .080 |
Net Realized and Unrealized Gain (Loss) on Investments | .395 | .862 | .324 | (.448) | (.237) | .520 |
Total from Investment Operations | .593 | 1.134 | .807 | .221 | .075 | .600 |
Distributions | | | | | | |
Dividends from Net Investment Income | (.203) | (.294) | (.467) | (.761) | (.135) | — |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.203) | (.294) | (.467) | (.761) | (.135) | — |
Net Asset Value, End of Period | $25.80 | $25.41 | $24.57 | $24.23 | $24.77 | $24.83 |
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Total Return2 | 2.34% | 4.64% | 3.36% | 0.91% | 0.31% | 2.48% |
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Ratios/Supplemental Data | | | | | | |
Net Assets, End of Period (Millions) | $8,325 | $8,063 | $7,014 | $6,679 | $5,904 | $5,088 |
Ratio of Total Expenses to Average Net Assets | 0.14% | 0.14% | 0.14% | 0.14% | 0.15% | 0.16% |
Ratio of Net Investment Income to Average Net Assets | 1.55% | 1.09% | 1.98% | 2.73% | 1.26% | 0.42% |
Portfolio Turnover Rate3 | 10% | 37% | 26% | 25% | 27% | 28% |
The expense ratio and net investment income ratio for the current period have been annualized. 1 | Calculated based on average shares outstanding. |
2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
3 | Excludes the value of 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.
Short-Term Inflation-Protected Securities Index Fund
Financial Highlights
ETF Shares
| Six Months | | | |
| Ended | | | Year Ended September 30, |
For a Share Outstanding | March 31, | | |
Throughout Each Period | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
Net Asset Value, Beginning of Period | $50.99 | $49.03 | $48.34 | $49.41 | $49.59 | $48.36 |
Investment Operations | | | | | | |
Net Investment Income1 | .431 | .634 | 1.003 | 1.358 | .671 | .251 |
Net Realized and Unrealized Gain (Loss) on Investments | .496 | 1.677 | .652 | (.869) | (.477) | .979 |
Total from Investment Operations | .927 | 2.311 | 1.655 | .489 | .194 | 1.230 |
Distributions | | | | | | |
Dividends from Net Investment Income | (.427) | (.351) | (.965) | (1.559) | (.374) | — |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.427) | (.351) | (.965) | (1.559) | (.374) | — |
Net Asset Value, End of Period | $51.49 | $50.99 | $49.03 | $48.34 | $49.41 | $49.59 |
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Total Return | 2.39% | 4.74% | 3.46% | 1.01% | 0.40% | 2.54% |
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Ratios/Supplemental Data | | | | | | |
Net Assets, End of Period (Millions) | $12,216 | $9,217 | $6,884 | $5,453 | $3,881 | $2,478 |
Ratio of Total Expenses to Average Net Assets | 0.05% | 0.05% | 0.05% | 0.06% | 0.06% | 0.07% |
Ratio of Net Investment Income to Average Net Assets | 1.69% | 1.27% | 2.07% | 2.81% | 1.35% | 0.51% |
Portfolio Turnover Rate2 | 10% | 37% | 26% | 25% | 27% | 28% |
The expense ratio and net investment income ratio for the current period have been annualized. 1 | Calculated based on average shares outstanding. |
2 | 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.
Short-Term Inflation-Protected Securities Index Fund
Financial Highlights
Admiral Shares
| Six Months | | | |
| Ended | | | Year Ended September 30, |
For a Share Outstanding | March 31, | | |
Throughout Each Period | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
Net Asset Value, Beginning of Period | $25.44 | $24.60 | $24.25 | $24.79 | $24.88 | $24.27 |
Investment Operations | | | | | | |
Net Investment Income1 | .215 | .294 | .500 | .692 | .338 | .149 |
Net Realized and Unrealized Gain (Loss) on Investments | .398 | .860 | .332 | (.450) | (.241) | .461 |
Total from Investment Operations | .613 | 1.154 | .832 | .242 | .097 | .610 |
Distributions | | | | | | |
Dividends from Net Investment Income | (.213) | (.314) | (.482) | (.782) | (.187) | — |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.213) | (.314) | (.482) | (.782) | (.187) | — |
Net Asset Value, End of Period | $25.84 | $25.44 | $24.60 | $24.25 | $24.79 | $24.88 |
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Total Return2 | 2.42% | 4.72% | 3.46% | 1.00% | 0.40% | 2.51% |
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Ratios/Supplemental Data | | | | | | |
Net Assets, End of Period (Millions) | $10,583 | $8,541 | $7,333 | $6,525 | $5,078 | $3,373 |
Ratio of Total Expenses to Average Net Assets | 0.06% | 0.06% | 0.06% | 0.06% | 0.06% | 0.07% |
Ratio of Net Investment Income to Average Net Assets | 1.68% | 1.18% | 2.06% | 2.81% | 1.35% | 0.51% |
Portfolio Turnover Rate3 | 10% | 37% | 26% | 25% | 27% | 28% |
The expense ratio and net investment income ratio for the current period have been annualized. 1 | Calculated based on average shares outstanding. |
2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
3 | Excludes the value of 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.
Short-Term Inflation-Protected Securities Index Fund
Financial Highlights
Institutional Shares
| Six Months | | | |
| Ended | | | Year Ended September 30, |
For a Share Outstanding | March 31, | | |
Throughout Each Period | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
Net Asset Value, Beginning of Period | $25.46 | $24.62 | $24.27 | $24.81 | $24.90 | $24.28 |
Investment Operations | | | | | | |
Net Investment Income1 | .215 | .306 | .517 | .696 | .333 | .139 |
Net Realized and Unrealized Gain (Loss) on Investments | .390 | .853 | .319 | (.449) | (.225) | .481 |
Total from Investment Operations | .605 | 1.159 | .836 | .247 | .108 | .620 |
Distributions | | | | | | |
Dividends from Net Investment Income | (.215) | (.319) | (.486) | (.787) | (.198) | — |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.215) | (.319) | (.486) | (.787) | (.198) | — |
Net Asset Value, End of Period | $25.85 | $25.46 | $24.62 | $24.27 | $24.81 | $24.90 |
| | | | | | | |
Total Return | 2.39% | 4.73% | 3.48% | 1.02% | 0.44% | 2.55% |
| | | | | | | |
Ratios/Supplemental Data | | | | | | |
Net Assets, End of Period (Millions) | $13,483 | $11,880 | $9,967 | $8,067 | $6,986 | $5,500 |
Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.04% | 0.04% |
Ratio of Net Investment Income to Average Net Assets | 1.68% | 1.22% | 2.08% | 2.83% | 1.37% | 0.54% |
Portfolio Turnover Rate2 | 10% | 37% | 26% | 25% | 27% | 28% |
The expense ratio and net investment income ratio for the current period have been annualized.1 | Calculated based on average shares outstanding. |
2 | 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.
Short-Term Inflation-Protected Securities Index Fund
Notes to Financial Statements
Vanguard Short-Term Inflation-Protected Securities Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers four classes of shares: Investor Shares, ETF Shares, Admiral Shares, and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.
Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Bonds and temporary cash investments 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. 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. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any securities pledged as initial margin for open contracts are noted in the Schedule of Investments.
Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities 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 gains (losses) on futures contracts.
During the six months ended March 31, 2021, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at March 31, 2021.
Short-Term Inflation-Protected Securities Index Fund
3. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes, subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread, except that borrowings under the uncommitted credit facility may bear interest based upon an alternative rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the six months ended March 31, 2021, the fund did not utilize the credit facilities or the Interfund Lending Program.
6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Inflation adjustments to the face amount of inflation-indexed securities are included in interest income. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution
Short-Term Inflation-Protected Securities 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. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2021, the fund had contributed to Vanguard capital in the amount of $1,593,000, representing less than 0.01% of the fund’s net assets and 0.64% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, 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). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund’s investments as of March 31, 2021, based on the inputs used to value them:
| Level 1 | Level 2 | Level 3 | Total |
| ($000) | ($000) | ($000) | ($000) |
Investments | | | | |
Assets | | | | |
U.S. Government and Agency Obligations | — | 44,350,078 | — | 44,350,078 |
Temporary Cash Investments | 235,025 | — | — | 235,025 |
Total | 235,025 | 44,350,078 | — | 44,585,103 |
D. As of March 31, 2021, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| Amount |
| ($000) |
Tax Cost | 42,871,911 |
Gross Unrealized Appreciation | 1,739,806 |
Gross Unrealized Depreciation | (26,614) |
Net Unrealized Appreciation (Depreciation) | 1,713,192 |
Short-Term Inflation-Protected Securities Index Fund
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at September 30, 2020, the fund had available capital losses totaling $176,382,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending September 30, 2021; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
E. During the six months ended March 31, 2021, the fund purchased $9,771,944,000 of investment securities and sold $4,066,850,000 of investment securities, other than temporary cash investments. Purchases and sales include $2,350,102,000 and $181,374,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
F. | Capital share transactions for each class of shares were: |
| | | Six Months Ended | | | | Year Ended |
| | | March 31, 2021 | | September 30, 2020 |
| | | Amount | | Shares | | Amount | | Shares |
| | | ($000) | | (000) | | ($000) | | (000) |
| Investor Shares | | | | | | | | |
| Issued | | 452,025 | | 17,730 | | 1,738,945 | | 69,825 |
| Issued in Lieu of Cash Distributions | | 66,736 | | 2,608 | | 89,472 | | 3,587 |
| Redeemed | | (387,431) | | (15,031) | | (1,012,829)1 | | (41,545)1 |
| Net Increase (Decrease)—Investor Shares | | 131,330 | | 5,307 | | 815,588 | | 31,867 |
| ETF Shares | | | | | | | | |
| Issued | | 3,086,299 | | 60,264 | | 3,304,061 | | 66,032 |
| Issued in Lieu of Cash Distributions | | — | | — | | — | | — |
| Redeemed | | (193,850) | | (3,800) | | (1,256,255) | | (25,650) |
| Net Increase (Decrease)—ETF Shares | | 2,892,449 | | 56,464 | | 2,047,806 | | 40,382 |
| Admiral Shares | | | | | | | | |
| Issued | | 2,547,450 | | 99,126 | | 3,192,9271 | | 128,0471 |
| Issued in Lieu of Cash Distributions | | 69,503 | | 2,712 | | 88,789 | | 3,552 |
| Redeemed | | (715,956) | | (27,924) | | (2,329,258) | | (93,982) |
| Net Increase (Decrease)—Admiral Shares | | 1,900,997 | | 73,914 | | 952,458 | | 37,617 |
| Institutional Shares | | | | | | | | |
| Issued | | 2,282,711 | | 88,933 | | 3,394,284 | | 135,886 |
| Issued in Lieu of Cash Distributions | | 102,432 | | 3,994 | | 137,605 | | 5,499 |
| Redeemed | | (973,972) | | (38,077) | | (1,963,596) | | (79,604) |
| Net Increase (Decrease)—Institutional Shares | | 1,411,171 | | 54,850 | | 1,568,293 | | 61,781 |
1 | In November 2018, the fund announced changes to the availability and minimum investment criteria of the Investor and Admiral share classes. As a result, all of the outstanding Investor Shares automatically converted to Admiral Shares beginning in April 2019, with the exception of those held by Vanguard funds and certain other institutional investors. Investor Shares—Redeemed and Admiral Shares—Issued include 2,000 and 2,000 shares, respectively, in the amount of $61,000 from the conversion during the year ended September 30, 2020. |
Short-Term Inflation-Protected Securities Index Fund
At March 31, 2021, several Vanguard funds and trusts managed by Vanguard or its affiliates were each a record or beneficial owner of the fund, and had combined ownership of 48% of the fund’s net assets. If any of these shareholders were to redeem their investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.
G. Management has determined that no events or transactions occurred subsequent to March 31, 2021, that would require recognition or disclosure in these financial statements.
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard Short-Term Inflation-Protected Securities Index Fund has renewed the fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard), through its Fixed Income Group. The board determined that continuing the fund’s internalized management structure was in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the investment management services provided to the fund since its inception in 2012; it also took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than four decades. The Fixed Income Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the performance of the fund, including any periods of outperformance or underperformance compared with its target index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory expenses were also well below the peer-group average.
The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees.
The benefit of economies of scale
The board concluded that the fund’s arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
Liquidity Risk Management
Vanguard funds (except for the money market funds) have adopted and implemented a written liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940. Rule 22e-4 requires that each fund adopt a program that is reasonably designed to assess and manage the fund’s liquidity risk, which is the risk that the fund could not meet redemption requests without significant dilution of remaining investors’ interests in the fund.
Assessment and management of a fund’s liquidity risk under the Program take into consideration certain factors, such as the fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions, its short- and long-term cash-flow projections during both normal and reasonably foreseeable stressed conditions, and its cash and cash-equivalent holdings and access to other funding sources. As required by the rule, the Program includes policies and procedures for classification of fund portfolio holdings in four liquidity categories, maintaining certain levels of highly liquid investments, and limiting holdings of illiquid investments.
The board of trustees of Vanguard Malvern Funds approved the appointment of liquidity risk management program administrators responsible for administering Vanguard Short-Term Inflation-Protected Securities Index Fund’s Program and for carrying out the specific responsibilities set forth in the Program, including reporting to the board on at least an annual basis regarding the Program’s operation, its adequacy, and the effectiveness of its implementation for the past year (the “Program Administrator Report”). The board has reviewed the Program Administrator Report covering the period from January 1, 2020, through December 31, 2020 (the “Review Period”). The Program Administrator Report stated that during the Review Period the Program operated and was implemented effectively to manage the fund’s liquidity risk.
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Connect with Vanguard® > vanguard.com Fund Information > 800-662-7447 Direct Investor Account Services > 800-662-2739 Institutional Investor Services > 800-523-1036 Text Telephone for People Who Are Deaf or Hard of Hearing > 800-749-7273 This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus. You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, www.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 www.sec.gov. You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov. |
| © 2021 The Vanguard Group, Inc.
All rights reserved. U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; 8,417,623; and 8,626,636.
Vanguard Marketing Corporation, Distributor. Q19672 052021 |
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| Semiannual Report | March 31, 2021 | |
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| Vanguard Emerging Markets Bond Fund |
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| Contents | |
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| About Your Fund’s Expenses | 1 |
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| Financial Statements | 4 |
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| Trustees Approve Advisory Arrangement. | 32 |
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| Liquidity Risk Management | 34 |
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
Six Months Ended March 31, 2021
| Emerging Markets Bond Fund | Beginning
Account Value
9/30/2020 | Ending
Account Value
3/31/2021 | Expenses
Paid During
Period |
| Based on Actual Fund Return | | | |
| Investor Shares | $1,000.00 | $1,023.73 | $3.03 |
| Admiral™ Shares | 1,000.00 | 1,023.80 | 2.27 |
| Based on Hypothetical 5% Yearly Return | | | |
| Investor Shares | $1,000.00 | $1,021.94 | $3.02 |
| Admiral Shares | 1,000.00 | 1,022.69 | 2.27 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.60% for Investor Shares and 0.45% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (182/365).
Emerging Markets Bond Fund
Fund Allocation
As of March 31, 2021
| Mexico | | 9.4 | % |
| Peru | | 5.6 | |
| Turkey | | 5.5 | |
| South Africa | | 4.6 | |
| Brazil | | 4.5 | |
| Ukraine | | 4.2 | |
| Panama | | 4.0 | |
| United States | | 3.9 | |
| Colombia | | 3.6 | |
| Chile | | 3.4 | |
| Dominican Republic | | 2.8 | |
| Azerbaijan | | 2.7 | |
| Uzbekistan | | 2.5 | |
| Ecuador | | 2.5 | |
| Serbia | | 2.4 | |
| Russia | | 2.4 | |
| Cote d’Ivoire | | 2.4 | |
| Kazakhstan | | 2.0 | |
| Romania | | 1.9 | |
| Morocco | | 1.9 | |
| Croatia | | 1.8 | |
| Guatemala | | 1.7 | |
| United Arab Emirates | | 1.7 | |
| Thailand | | 1.4 | |
| Indonesia | | 1.4 | |
| Qatar | | 1.3 | |
| El Salvador | | 1.3 | |
| Paraguay | | 1.3 | |
| Costa Rica | | 1.2 | |
| Egypt | | 1.2 | |
| Oman | | 1.1 | |
| Saudi Arabia | | 1.0 | |
| Bahrain | | 1.0 | |
| Other | | 10.4 | |
The table reflects the fund’s investments, except for short-term investments and derivatives.
Emerging Markets Bond Fund
Financial Statements (unaudited)
Schedule of Investments
As of March 31, 2021
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
| | Coupon | Maturity
Date | Face
Amount
($000) | Market
Value• ($000) |
| Angola (0.3%) | | | | |
| Sovereign Bonds (0.3%) | | | | |
| | Republic of Angola | 9.125% | 11/26/49 | 7,015 | 6,526 |
| Total Angola (Cost $4,907) | | | | 6,526 |
| Argentina (0.5%) | | | | |
| Sovereign Bonds (0.5%) | | | | |
| 1 | Argentine Republic | 1.000% | 7/9/29 | 926 | 330 |
| 1 | Argentine Republic | 0.125% | 7/9/30 | 25,864 | 8,600 |
| 1 | Argentine Republic | 0.125% | 7/9/41 | 700 | 239 |
| Total Argentina (Cost $12,817) | | | | 9,169 |
| Azerbaijan (2.4%) | | | | |
| Sovereign Bonds (2.4%) | | | | |
| | Republic of Azerbaijan | 4.750% | 3/18/24 | 8,000 | 8,674 |
| 1 | Republic of Azerbaijan | 5.125% | 9/1/29 | 2,795 | 3,089 |
| 1 | Republic of Azerbaijan | 3.500% | 9/1/32 | 23,938 | 23,659 |
| 2 | Southern Gas Corridor CJSC | 6.875% | 3/24/26 | 10,815 | 12,797 |
| | State Oil Co. of the Azerbaijan Republic | 6.950% | 3/18/30 | 1,335 | 1,654 |
| Total Azerbaijan (Cost $49,349) | | | | 49,873 |
| Bahrain (0.9%) | | | | |
| Sovereign Bonds (0.9%) | | | | |
| 3 | Kingdom of Bahrain | 4.250% | 1/25/28 | 13,200 | 13,084 |
| | Oil and Gas Holding Co. BSCC | 7.500% | 10/25/27 | 5,000 | 5,538 |
| Total Bahrain (Cost $18,762) | | | | 18,622 |
| Belarus (0.1%) | | | | |
| Sovereign Bonds (0.1%) | | | | |
| | Republic of Belarus | 7.625% | 6/29/27 | 2,200 | 2,254 |
| Total Belarus (Cost $2,138) | | | | 2,254 |
| Bermuda (0.0%) | | | | |
| Sovereign Bonds (0.0%) | | | | |
| 1 | Bermuda | 3.717% | 1/25/27 | 523 | 568 |
| Total Bermuda (Cost $573) | | | | 568 |
Emerging Markets Bond Fund
| | Coupon | Maturity
Date | Face
Amount
($000) | Market
Value•
($000) |
| Brazil (4.1%) | | | | |
| Corporate Bonds (1.0%) | | | | |
| | Amaggi Luxembourg International Sarl | 5.250% | 1/28/28 | 4,375 | 4,484 |
| 3 | Banco BTG Pactual SA/Cayman Islands | 2.750% | 1/11/26 | 6,200 | 5,898 |
| | Embraer Netherlands Finance BV | 5.050% | 6/15/25 | 4,290 | 4,447 |
| | Embraer SA | 5.150% | 6/15/22 | 5,862 | 6,016 |
| | | | | 20,845 |
| Sovereign Bonds (3.1%) | | | | |
| | Federative Republic of Brazil | 2.875% | 6/6/25 | 12,022 | 12,171 |
| | Federative Republic of Brazil | 3.875% | 6/12/30 | 32,873 | 31,832 |
| 1 | Federative Republic of Brazil | 4.750% | 1/14/50 | 7,856 | 7,120 |
| | Petrobras Global Finance BV | 8.750% | 5/23/26 | 9,670 | 12,063 |
| | | | | 63,186 |
| Total Brazil (Cost $86,786) | | | | 84,031 |
| Cameroon (0.1%) | | | | |
| Sovereign Bonds (0.1%) | | | | |
| 1 | Republic of Cameroon | 9.500% | 11/19/25 | 2,500 | 2,716 |
| Total Cameroon (Cost $2,654) | | | | 2,716 |
| Canada (0.6%) | | | | |
| Sovereign Bonds (0.6%) | | | | |
| 3 | Petronas Energy Canada Ltd. | 2.112% | 3/23/28 | 13,125 | 12,971 |
| Total Canada (Cost $13,125) | | | | 12,971 |
| Chile (3.1%) | | | | |
| Corporate Bonds (1.1%) | | | | |
| | Inversiones CMPC SA | 4.750% | 9/15/24 | 1,750 | 1,919 |
| 3 | Inversiones CMPC SA | 3.000% | 4/6/31 | 8,750 | 8,686 |
| 3 | VTR Comunicaciones SPA | 4.375% | 4/15/29 | 10,509 | 10,509 |
| | | | | 21,114 |
| Sovereign Bonds (2.0%) | | | | |
| | Empresa Nacional del Petroleo | 4.375% | 10/30/24 | 5,209 | 5,644 |
| | Empresa Nacional del Petroleo | 3.750% | 8/5/26 | 16,740 | 17,619 |
| 1 | Empresa Nacional del Petroleo | 5.250% | 11/6/29 | 8,420 | 9,397 |
| 1 | Republic of Chile | 3.100% | 1/22/61 | 9,400 | 8,742 |
| | | | | 41,402 |
| Total Chile (Cost $63,728) | | | | 62,516 |
| Colombia (3.3%) | | | | |
| Sovereign Bonds (3.3%) | | | | |
| | Ecopetrol SA | 5.375% | 6/26/26 | 10,120 | 11,297 |
| 1 | Republic of Colombia | 4.500% | 1/28/26 | 6,203 | 6,807 |
| 1 | Republic of Colombia | 4.500% | 3/15/29 | 26,515 | 28,928 |
| | Republic of Colombia | 10.375% | 1/28/33 | 615 | 934 |
| 1 | Republic of Colombia | 3.875% | 2/15/61 | 21,149 | 19,029 |
| Total Colombia (Cost $68,709) | | | | 66,995 |
Emerging Markets Bond Fund
| | Coupon | Maturity
Date | Face
Amount
($000) | Market Value•
($000) |
| Costa Rica (1.1%) | | | | |
| Sovereign Bonds (1.1%) | | | | |
| | Republic of Costa Rica | 4.250% | 1/26/23 | 4,260 | 4,260 |
| | Republic of Costa Rica | 4.375% | 4/30/25 | 6,500 | 6,430 |
| 1 | Republic of Costa Rica | 6.125% | 2/19/31 | 3,890 | 3,928 |
| | Republic of Costa Rica | 7.000% | 4/4/44 | 4,000 | 3,841 |
| | Republic of Costa Rica | 7.158% | 3/12/45 | 4,015 | 3,903 |
| Total Costa Rica (Cost $21,643) | | | | 22,362 |
| Cote d’Ivoire (2.1%) | | | | |
| Sovereign Bonds (2.1%) | | | | |
| 4 | Republic of Cote d’Ivoire | 5.250% | 3/22/30 | 6,000 | 7,262 |
| 3,4 | Republic of Cote d’Ivoire | 4.875% | 1/30/32 | 9,526 | 10,886 |
| 4 | Republic of Cote d’Ivoire | 6.875% | 10/17/40 | 1,715 | 2,106 |
| 3,4 | Republic of Cote d’Ivoire | 6.625% | 3/22/48 | 14,849 | 17,573 |
| 4 | Republic of Cote d’Ivoire | 6.625% | 3/22/48 | 4,800 | 5,681 |
| Total Cote d’Ivoire (Cost $46,471) | | | | 43,508 |
| Croatia (1.6%) | | | | |
| Sovereign Bonds (1.6%) | | | | |
| | Republic of Croatia | 5.500% | 4/4/23 | 8,000 | 8,768 |
| 4 | Republic of Croatia | 1.750% | 3/4/41 | 19,800 | 23,748 |
| Total Croatia (Cost $32,699) | | | | 32,516 |
| Dominican Republic (2.6%) | | | | |
| Sovereign Bonds (2.6%) | | | | |
| | Dominican Republic | 5.500% | 1/27/25 | 26,680 | 29,318 |
| | Dominican Republic | 6.875% | 1/29/26 | 10,000 | 11,612 |
| 3 | Dominican Republic | 5.875% | 1/30/60 | 12,000 | 11,400 |
| Total Dominican Republic (Cost $51,645) | | | | 52,330 |
| Ecuador (2.3%) | | | | |
| Sovereign Bonds (2.3%) | | | | |
| 3 | Republic of Ecuador | 0.000% | 7/31/30 | 13,773 | 5,660 |
| | Republic of Ecuador | 0.000% | 7/31/30 | 49,058 | 20,160 |
| 1,3 | Republic of Ecuador | 0.500% | 7/31/30 | 5,560 | 3,283 |
| 1 | Republic of Ecuador | 0.500% | 7/31/30 | 28,887 | 17,054 |
| Total Ecuador (Cost $51,887) | | | | 46,157 |
| Egypt (1.0%) | | | | |
| Sovereign Bonds (1.0%) | | | | |
| | Arab Republic of Egypt | 8.875% | 5/29/50 | 2,100 | 2,146 |
| 3 | Arab Republic of Egypt | 7.500% | 2/16/61 | 21,335 | 19,227 |
| Total Egypt (Cost $23,464) | | | | 21,373 |
| El Salvador (1.2%) | | | | |
| Sovereign Bonds (1.2%) | | | | |
| | Republic of El Salvador | 8.625% | 2/28/29 | 3,855 | 4,102 |
| | Republic of El Salvador | 7.625% | 2/1/41 | 761 | 736 |
| 1 | Republic of El Salvador | 7.125% | 1/20/50 | 17,450 | 15,716 |
| 1 | Republic of El Salvador | 9.500% | 7/15/52 | 3,050 | 3,255 |
| Total El Salvador (Cost $21,930) | | | | 23,809 |
| Emerging Markets Bond Fund |
| |
| | | | Coupon | | Maturity
Date | | Face
Amount
($000) | | Market
Value•
($000) |
| Gabon (0.8%) |
| Sovereign Bonds (0.8%) |
| 1 | Gabonese Republic | | 6.375% | | 12/12/24 | | 16,583 | | 17,205 |
| Total Gabon (Cost $17,341) | | | | | | | | 17,205 |
| Ghana (0.5%) |
| Sovereign Bonds (0.5%) |
| 1,3 | Repbulic of Ghana | | 8.625% | | 4/7/34 | | 11,000 | | 10,821 |
| Total Ghana (Cost $10,899) | | | | | | | | 10,821 |
| Guatemala (1.6%) |
| Sovereign Bonds (1.6%) |
| | Republic of Guatemala | | 5.750% | | 6/6/22 | | 6,553 | | 6,896 |
| | Republic of Guatemala | | 4.500% | | 5/3/26 | | 9,970 | | 10,796 |
| | Republic of Guatemala | | 4.375% | | 6/5/27 | | 13,200 | | 14,165 |
| Total Guatemala (Cost $31,734) | | | | | | | | 31,857 |
| Honduras (0.2%) |
| Sovereign Bonds (0.2%) |
| | Republic of Honduras | | 6.250% | | 1/19/27 | | 2,850 | | 3,120 |
| Total Honduras (Cost $3,187) | | | | | | | | 3,120 |
| Hungary (0.9%) |
| Sovereign Bonds (0.9%) |
| 4 | Republic of Hungary | | 1.625% | | 4/28/32 | | 6,800 | | 8,515 |
| 4 | Republic of Hungary | | 1.500% | | 11/17/50 | | 8,100 | | 8,946 |
| Total Hungary (Cost $17,879) | | | | | | | | 17,461 |
| India (0.5%) |
| Sovereign Bonds (0.5%) |
| | Export-Import Bank of India | | 3.875% | | 3/12/24 | | 1,200 | | 1,282 |
| | Export-Import Bank of India | | 3.875% | | 2/1/28 | | 8,133 | | 8,675 |
| Total India (Cost $9,909) | | | | | | | | 9,957 |
| Indonesia (1.2%) |
| Sovereign Bonds (1.2%) |
| 3,4 | Perusahaan Listrik Negara PT | | 1.875% | | 11/5/31 | | 4,400 | | 5,101 |
| 5 | Perusahaan Penerbit SBSN Indonesia III | | 4.400% | | 3/1/28 | | 5,600 | | 6,272 |
| | Republic of Indonesia | | 3.500% | | 1/11/28 | | 6,238 | | 6,675 |
| | Republic of Indonesia | | 4.625% | | 4/15/43 | | 4,050 | | 4,494 |
| | Republic of Indonesia | | 3.700% | | 10/30/49 | | 700 | | 711 |
| | Republic of Indonesia | | 4.450% | | 4/15/70 | | 1,595 | | 1,745 |
| Total Indonesia (Cost $24,932) | | | | | | | | 24,998 |
| Israel (0.4%) |
| Sovereign Bonds (0.4%) |
| | State of Israel | | 3.800% | | 5/13/60 | | 7,172 | | 7,705 |
| Total Israel (Cost $8,052) | | | | | | | | 7,705 |
| Jamaica (0.4%) |
| Sovereign Bonds (0.4%) |
| 1 | Jamaica | | 7.625% | | 7/9/25 | | 7,480 | | 8,630 |
| Total Jamaica (Cost $8,563) | | | | | | | | 8,630 |
| Emerging Markets Bond Fund |
| |
| | | | Coupon | | Maturity
Date | | Face
Amount
($000) | | Market
Value•
($000) |
| Jordan (0.2%) |
| Sovereign Bonds (0.2%) |
| | Hashemite Kingdom of Jordan | | 7.375% | | 10/10/47 | | 4,080 | | 4,175 |
| Total Jordan (Cost $4,038) | | | | | | | | 4,175 |
| Kazakhstan (1.9%) |
| Sovereign Bonds (1.9%) |
| | Kazakhstan Temir Zholy Finance BV | | 6.950% | | 7/10/42 | | 4,438 | | 5,949 |
| | KazMunayGas National Co. JSC | | 5.750% | | 4/19/47 | | 9,200 | | 10,917 |
| | KazMunayGas National Co. JSC | | 6.375% | | 10/24/48 | | 13,500 | | 17,146 |
| | KazTransGas JSC | | 4.375% | | 9/26/27 | | 3,450 | | 3,838 |
| Total Kazakhstan (Cost $38,054) | | | | | | | | 37,850 |
| Kenya (0.5%) |
| Sovereign Bonds (0.5%) |
| 1 | Republic of Kenya | | 7.000% | | 5/22/27 | | 6,500 | | 6,919 |
| 1 | Republic of Kenya | | 8.000% | | 5/22/32 | | 3,500 | | 3,728 |
| Total Kenya (Cost $9,914) | | | | | | | | 10,647 |
| Lebanon (0.1%) |
| Sovereign Bonds (0.1%) |
| * | Lebanese Republic | | 8.250% | | 4/12/21 | | 2,430 | | 279 |
| * | Lebanese Republic | | 6.100% | | 10/4/22 | | 2,250 | | 265 |
| * | Lebanese Republic | | 6.650% | | 4/22/24 | | 2,890 | | 344 |
| * | Lebanese Republic | | 7.000% | | 3/20/28 | | 6,310 | | 728 |
| * | Lebanese Republic | | 6.650% | | 2/26/30 | | 4,900 | | 576 |
| * | Lebanese Republic | | 7.150% | | 11/20/31 | | 1,445 | | 169 |
| * | Lebanese Republic | | 8.200% | | 5/17/33 | | 1,445 | | 169 |
| * | Lebanese Republic | | 8.250% | | 5/17/34 | | 1,445 | | 177 |
| Total Lebanon (Cost $8,955) | | | | | | | | 2,707 |
| Luxembourg (0.2%) |
| Corporate Bonds (0.2%) |
| 3 | Amaggi Luxembourg International Sarl | | 5.250% | | 1/28/28 | | 1,750 | | 1,789 |
| 3 | Movida Europe SA | | 5.250% | | 2/8/31 | | 2,183 | | 2,093 |
| Total Luxembourg (Cost $3,980) | | | | | | | | 3,882 |
| Malaysia (0.4%) | | | | | | | | |
| Sovereign Bonds (0.4%) | | | | | | | | |
| | Petronas Capital Ltd. | | 3.500% | | 4/21/30 | | 8,070 | | 8,636 |
| Total Malaysia (Cost $8,916) | | | | | | | | 8,636 |
| Mexico (8.5%) |
| Sovereign Bonds (8.5%) |
| 3 | Comision Federal de Electricidad | | 4.677% | | 2/9/51 | | 4,601 | | 4,278 |
| | Petroleos Mexicanos | | 5.350% | | 2/12/28 | | 3,925 | | 3,817 |
| | Petroleos Mexicanos | | 6.840% | | 1/23/30 | | 19,165 | | 19,452 |
| | Petroleos Mexicanos | | 5.950% | | 1/28/31 | | 6,495 | | 6,239 |
| | Petroleos Mexicanos | | 6.375% | | 1/23/45 | | 5,511 | | 4,650 |
| | Petroleos Mexicanos | | 5.625% | | 1/23/46 | | 1 | | 1 |
| | Petroleos Mexicanos | | 6.750% | | 9/21/47 | | 4,675 | | 3,975 |
| | United Mexican States | | 3.750% | | 1/11/28 | | 17,750 | | 18,951 |
| | United Mexican States | | 4.500% | | 4/22/29 | | 38,933 | | 43,123 |
| 1 | United Mexican States | | 4.750% | | 4/27/32 | | 13,856 | | 15,359 |
| Emerging Markets Bond Fund |
| |
| | | | Coupon | | Maturity
Date | | Face
Amount
($000) | | Market
Value•
($000) |
| 6 | United Mexican States | | 7.750% | | 11/23/34 | | 656,500 | | 33,654 |
| | United Mexican States | | 3.750% | | 4/19/71 | | 15,680 | | 13,602 |
| | United Mexican States | | 5.750% | | 10/12/10 | | 6,500 | | 7,201 |
| Total Mexico (Cost $178,220) | | | | | | | | 174,302 |
| Mongolia (0.2%) |
| Sovereign Bonds (0.2%) |
| 3 | Mongolia | | 5.125% | | 4/7/26 | | 3,020 | | 3,216 |
| Total Mongolia (Cost $2,987) | | | | | | | | 3,216 |
| Morocco (1.7%) |
| Sovereign Bonds (1.7%) |
| 3 | Kingdom of Morocco | | 2.375% | | 12/15/27 | | 8,000 | | 7,730 |
| 3,4 | Kingdom of Morocco | | 2.000% | | 9/30/30 | | 14,650 | | 17,007 |
| 3 | Kingdom of Morocco | | 4.000% | | 12/15/50 | | 11,257 | | 9,977 |
| Total Morocco (Cost $36,079) | | | | | | | | 34,714 |
| North Macedonia (0.2%) |
| Sovereign Bonds (0.2%) |
| 1,3,4 | Republic of North Macedonia | | 1.625% | | 3/10/28 | | 4,365 | | 4,987 |
| Total North Macedonia (Cost $5,184) | | | | | | | | 4,987 |
| Oman (1.0%) |
| Sovereign Bonds (1.0%) |
| | Sultanate of Oman | | 5.375% | | 3/8/27 | | 8,650 | | 8,967 |
| 3 | Sultanate of Oman | | 7.000% | | 1/25/51 | | 12,106 | | 11,939 |
| Total Oman (Cost $20,866) | | | | | | | | 20,906 |
| Pakistan (0.8%) |
| Sovereign Bonds (0.8%) |
| 3 | Pakistan Government International Bond | | 8.875% | | 4/8/51 | | 15,740 | | 16,330 |
| Total Pakistan (Cost $15,740) | | | | | | | | 16,330 |
| Panama (3.6%) |
| Sovereign Bonds (3.6%) |
| 1 | Republic of Panama | | 4.000% | | 9/22/24 | | 15,345 | | 16,688 |
| 1 | Republic of Panama | | 3.750% | | 3/16/25 | | 6,700 | | 7,269 |
| | Republic of Panama | | 7.125% | | 1/29/26 | | 22,125 | | 27,324 |
| | Republic of Panama | | 8.875% | | 9/30/27 | | 2,368 | | 3,265 |
| 1 | Republic of Panama | | 4.500% | | 5/15/47 | | 4,375 | | 4,840 |
| 1 | Republic of Panama | | 3.870% | | 7/23/60 | | 14,950 | | 14,838 |
| Total Panama (Cost $75,710) | | | | | | | | 74,224 |
| Paraguay (1.1%) |
| Sovereign Bonds (1.1%) |
| | Republic of Paraguay | | 4.625% | | 1/25/23 | | 20,912 | | 22,086 |
| | Republic of Paraguay | | 5.000% | | 4/15/26 | | 1,059 | | 1,193 |
| Total Paraguay (Cost $23,248) | | | | | | | | 23,279 |
| Peru (5.1%) |
| Corporate Bonds (0.3%) |
| | Kallpa Generacion SA | | 4.875% | | 5/24/26 | | 2,828 | | 3,094 |
| | Kallpa Generacion SA | | 4.125% | | 8/16/27 | | 1,800 | | 1,921 |
| | | | | | | | | | 5,015 |
| Emerging Markets Bond Fund |
| |
| | | | Coupon | | Maturity Date | | Face
Amount
($000) | | Market
Value•
($000) |
| Sovereign Bonds (4.8%) |
| | Corp Financiera de Desarrollo SA | | 4.750% | | 7/15/25 | | 480 | | 533 |
| 1,3 | Corp Financiera de Desarrollo SA | | 2.400% | | 9/28/27 | | 12,250 | | 12,066 |
| | Fondo MIVIVIENDA SA | | 3.500% | | 1/31/23 | | 11,559 | | 12,029 |
| | Petroleos del Peru SA | | 5.625% | | 6/19/47 | | 17,488 | | 18,374 |
| 3 | Petroleos del Peru SA | | 5.625% | | 6/19/47 | | 8,750 | | 9,177 |
| | Republic of Peru | | 7.350% | | 7/21/25 | | 3,685 | | 4,555 |
| 1 | Republic of Peru | | 2.392% | | 1/23/26 | | 8,210 | | 8,444 |
| 1 | Republic of Peru | | 2.783% | | 1/23/31 | | 33,000 | | 32,999 |
| | | | | | | | | | 98,177 |
| Total Peru (Cost $105,111) | | | | | | | | 103,192 |
| Philippines (0.1%) |
| Sovereign Bonds (0.1%) |
| | Republic of the Philippines | | 3.000% | | 2/1/28 | | 1,200 | | 1,269 |
| Total Philippines (Cost $1,327) | | | | | | | | 1,269 |
| Qatar (1.2%) |
| Sovereign Bonds (1.2%) |
| | State of Qatar | | 3.400% | | 4/16/25 | | 22,586 | | 24,548 |
| Total Qatar (Cost $24,598) | | | | | | | | 24,548 |
| Romania (1.7%) |
| Sovereign Bonds (1.7%) |
| 4 | Republic of Romania | | 2.875% | | 3/11/29 | | 1,200 | | 1,551 |
| 4 | Republic of Romania | | 2.500% | | 2/8/30 | | 9,300 | | 11,599 |
| 4 | Republic of Romania | | 3.624% | | 5/26/30 | | 1,100 | | 1,476 |
| 4 | Republic of Romania | | 4.125% | | 3/11/39 | | 4,780 | | 6,519 |
| 3,4 | Republic of Romania | | 2.625% | | 12/2/40 | | 8,570 | | 9,915 |
| 4 | Republic of Romania | | 2.625% | | 12/2/40 | | 3,201 | | 3,703 |
| Total Romania (Cost $35,465) | | | | | | | | 34,763 |
| Russia (2.1%) |
| Sovereign Bonds (2.1%) |
| | Gazprom PJSC Via Gaz Capital SA | | 5.150% | | 2/11/26 | | 10,466 | | 11,469 |
| 7 | Russian Federation | | 7.050% | | 1/19/28 | | 1,899,225 | | 25,408 |
| 7 | Russian Federation | | 7.650% | | 4/10/30 | | 251,505 | | 3,486 |
| | Russian Federation | | 5.100% | | 3/28/35 | | 3,000 | | 3,463 |
| Total Russia (Cost $45,653) | | | | | | | | 43,826 |
| Saudi Arabia (0.9%) |
| Sovereign Bonds (0.9%) |
| | Kingdom of Saudi Arabia | | 4.000% | | 4/17/25 | | 7,300 | | 8,039 |
| | Kingdom of Saudi Arabia | | 4.500% | | 10/26/46 | | 3,000 | | 3,309 |
| | Kingdom of Saudi Arabia | | 4.625% | | 10/4/47 | | 1,500 | | 1,685 |
| | Saudi Arabian Oil Co. | | 2.875% | | 4/16/24 | | 5,800 | | 6,104 |
| Total Saudi Arabia (Cost $19,534) | | | | | | | | 19,137 |
| Senegal (0.3%) |
| Sovereign Bonds (0.3%) |
| 4 | Republic of Senegal | | 4.750% | | 3/13/28 | | 2,700 | | 3,211 |
| 1 | Republic of Senegal | | 6.750% | | 3/13/48 | | 2,700 | | 2,572 |
| Total Senegal (Cost $6,380) | | | | | | | | 5,783 |
| Emerging Markets Bond Fund |
| |
| | | | Coupon | | Maturity
Date | | Face
Amount
($000) | | Market
Value•
($000) |
| Serbia (2.1%) |
| Sovereign Bonds (2.1%) |
| 3,4 | Republic of Serbia | | 3.125% | | 5/15/27 | | 8,357 | | 10,839 |
| 4 | Republic of Serbia | | 3.125% | | 5/15/27 | | 23,141 | | 30,014 |
| 4 | Republic of Serbia | | 1.500% | | 6/26/29 | | 2,570 | | 3,013 |
| Total Serbia (Cost $42,596) | | | | | | | | 43,866 |
| South Africa (4.2%) |
| Sovereign Bonds (4.2%) |
| | Republic of South Africa | | 5.875% | | 9/16/25 | | 17,365 | | 19,123 |
| | Republic of South Africa | | 4.875% | | 4/14/26 | | 22,660 | | 23,784 |
| 8 | Republic of South Africa | | 10.500% | | 12/21/26 | | 130,545 | | 10,046 |
| | Republic of South Africa | | 4.850% | | 9/27/27 | | 3,000 | | 3,098 |
| | Republic of South Africa | | 5.000% | | 10/12/46 | | 22,937 | | 19,722 |
| | Republic of South Africa | | 5.750% | | 9/30/49 | | 9,808 | | 9,043 |
| Total South Africa (Cost $85,240) | | | | | | | | 84,816 |
| Supranational (0.5%) |
| Sovereign Bonds (0.5%) |
| 3 | African Export-Import Bank | | 3.994% | | 9/21/29 | | 2,000 | | 2,092 |
| | African Export-Import Bank | | 3.994% | | 9/21/29 | | 3,250 | | 3,409 |
| | Banque Ouest Africaine de Developpement | | 5.500% | | 5/6/21 | | 1,000 | | 1,002 |
| | Banque Ouest Africaine de Developpement | | 5.000% | | 7/27/27 | | 500 | | 554 |
| 3 | Banque Ouest Africaine de Developpement | | 4.700% | | 10/22/31 | | 3,000 | | 3,191 |
| | Banque Ouest Africaine de Developpement | | 4.700% | | 10/22/31 | | 400 | | 428 |
| Total Supranational (Cost $10,220) | | | | | | | | 10,676 |
| Thailand (1.3%) |
| Corporate Bonds (1.3%) |
| 3 | GC Treasury Center Co. Ltd. | | 4.300% | | 3/18/51 | | 26,271 | | 26,690 |
| Total Thailand (Cost $25,853) | | | | | | | | 26,690 |
| Trinidad & Tobago (0.3%) |
| Sovereign Bonds (0.3%) |
| | Republic of Trinidad & Tobago | | 4.375% | | 1/16/24 | | 5,695 | | 5,975 |
| Total Trinidad & Tobago (Cost $5,847) | | | | | | | | 5,975 |
| Turkey (5.0%) |
| Sovereign Bonds (5.0%) |
| | Republic of Turkey | | 7.250% | | 12/23/23 | | 4,450 | | 4,583 |
| | Republic of Turkey | | 4.250% | | 3/13/25 | | 14,000 | | 13,014 |
| | Republic of Turkey | | 6.375% | | 10/14/25 | | 10,655 | | 10,482 |
| | Republic of Turkey | | 5.125% | | 2/17/28 | | 4,000 | | 3,610 |
| | Republic of Turkey | | 5.875% | | 6/26/31 | | 59,000 | | 52,657 |
| | Republic of Turkey | | 6.000% | | 1/14/41 | | 4,345 | | 3,620 |
| | Republic of Turkey | | 4.875% | | 4/16/43 | | 9,107 | | 6,935 |
| | Republic of Turkey | | 5.750% | | 5/11/47 | | 7,945 | | 6,438 |
| Total Turkey (Cost $109,988) | | | | | | | | 101,339 |
| Ukraine (3.8%) |
| Sovereign Bonds (3.8%) |
| | Ukraine | | 7.750% | | 9/1/23 | | 3,200 | | 3,452 |
| 9 | Ukraine | | 11.670% | | 11/22/23 | | 43,093 | | 1,518 |
| | Ukraine | | 8.994% | | 2/1/24 | | 14,352 | | 15,940 |
| Emerging Markets Bond Fund |
| |
| | | | Coupon | | Maturity
Date | | Face
Amount
($000) | | Market
Value•
($000) |
| | Ukraine | | 7.750% | | 9/1/25 | | 18,715 | | 20,348 |
| | Ukraine | | 7.750% | | 9/1/26 | | 1,500 | | 1,628 |
| | Ukraine | | 7.750% | | 9/1/27 | | 1,200 | | 1,283 |
| | Ukraine | | 9.750% | | 11/1/28 | | 5,500 | | 6,405 |
| 4 | Ukraine | | 4.375% | | 1/27/30 | | 4,700 | | 5,041 |
| 3 | Ukraine | | 7.253% | | 3/15/33 | | 21,267 | | 21,157 |
| 1 | Ukreximbank Via Biz Finance plc | | 9.750% | | 1/22/25 | | 100 | | 108 |
| Total Ukraine (Cost $76,395) | | | | | | | | 76,880 |
| United Arab Emirates (1.5%) |
| Sovereign Bonds (1.5%) |
| 3 | Emirate of Sharjah United Arab Emirates | | 4.000% | | 7/28/50 | | 5,950 | | 5,209 |
| 3 | Finance Department Government of Sharjah | | 3.625% | | 3/10/33 | | 13,250 | | 13,016 |
| | Finance Department Government of Sharjah | | 4.000% | | 7/28/50 | | 5,860 | | 5,178 |
| | Sharjah Sukuk Program Ltd. | | 3.854% | | 4/3/26 | | 3,735 | | 3,985 |
| | Sharjah Sukuk Program Ltd. | | 2.942% | | 6/10/27 | | 3,600 | | 3,670 |
| Total United Arab Emirates (Cost $33,624) | | | | | | | | 31,058 |
| United States (3.5%) |
| U.S. Government and Agency Obligations (3.5%) |
| 10 | United States Treasury Note/Bond | | 0.250% | | 8/31/25 | | 4,600 | | 4,492 |
| 10 | United States Treasury Note/Bond | | 0.625% | | 8/15/30 | | 31,350 | | 28,411 |
| 10,11 | United States Treasury Note/Bond | | 1.625% | | 11/15/50 | | 32,910 | | 27,449 |
| 10 | United States Treasury Note/Bond | | 1.875% | | 2/15/51 | | 12,200 | | 10,828 |
| Total United States (Cost $77,539) | | | | | | | | 71,180 |
| Uzbekistan (2.3%) |
| Sovereign Bonds (2.3%) |
| | Republic of Uzbekistan | | 4.750% | | 2/20/24 | | 22,549 | | 23,881 |
| | Republic of Uzbekistan | | 5.375% | | 2/20/29 | | 6,150 | | 6,736 |
| 3 | Republic of Uzbekistan | | 3.700% | | 11/25/30 | | 16,648 | | 16,169 |
| Total Uzbekistan (Cost $47,155) | | | | | | | | 46,786 |
| Venezuela (0.0%) |
| Sovereign Bonds (0.0%) |
| * | Bolivarian Republic of Venezuela | | 11.750% | | 10/21/26 | | 640 | | 64 |
| * | Bolivarian Republic of Venezuela | | 7.000% | | 3/31/38 | | 1,500 | | 150 |
| *,1 | Petroleos de Venezuela SA | | 6.000% | | 11/15/26 | | 2,850 | | 125 |
| * | Petroleos de Venezuela SA | | 5.375% | | 4/12/27 | | 462 | | 20 |
| Total Venezuela (Cost $1,360) | | | | | | | | 359 |
| Vietnam (0.3%) |
| Sovereign Bonds (0.3%) |
| | Socialist Republic of Vietnam | | 4.800% | | 11/19/24 | | 4,700 | | 5,261 |
| Total Vietnam (Cost $5,162) | | | | | | | | 5,261 |
| | | | | | | | | | |
| | | | | | | | Shares | | |
| Temporary Cash Investments (9.7%) |
| Money Market Fund (9.7%) |
| 12 | Vanguard Market Liquidity Fund | | 0.081% | | | | 1,986,353 | | 198,635 |
| Total Temporary Cash Investments (Cost $198,625) | | | | | | | | 198,635 |
| Emerging Markets Bond Fund | | | | | |
| | Counterparty | Expiration
Date | Exercise
Price | Notional
Amount
($000) | Market
Value•
($000) |
| Options Purchased (0.1%) | | | | | |
| Foreign Currency Options | | | | | |
| Call Options | | | | | |
| EUR | JPMC | 9/29/21 | USD 1.200 | EUR 87,455 | 979 |
| | | | | | |
| Put Options | | | | | |
| USD | BOANA | 8/19/21 | JPY 102.00 | USD 29,000 | 41 |
| USD | BNPSW | 7/21/22 | JPY 95.100 | USD 10,000 | 41 |
| | | | | | 82 |
| Total Options Purchased (Cost $1,706) | | | | | 1,061 |
| Total Investments (100.2%) (Cost $2,097,052) | | | | | 2,047,005 |
| Other Assets and Liabilities—Net (-0.2%) | | | | | (4,691) |
| Net Assets (100%) | | | | | 2,042,314 |
Cost is in $000.
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security—security in default. |
| 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 | Guaranteed by the Republic of Azerbaijan. |
| 3 | Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2021, the aggregate value of these securities was $343,966,000, representing 16.8% of net assets. |
| 4 | Face amount denominated in euro. |
| 5 | Guaranteed by the Republic of Indonesia. |
| 6 | Face amount denominated in Mexican pesos. |
| 7 | Face amount denominated in Russian rubles. |
| 8 | Face amount denominated in South African rand. |
| 9 | Face amount denominated in Ukrainian hryvnia. |
| 10 | Securities with a value of $5,141,000 have been segregated as collateral for open forward currency contracts and over-the-counter swap contracts. |
| 11 | Securities with a value of $2,407,000 have been segregated as initial margin for open futures contracts. |
| 12 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
Emerging Markets Bond Fund
Derivative Financial Instruments Outstanding as of Period End
| Futures Contracts |
| | | | | ($000) |
| | Expiration | Number of
Long (Short)
Contracts | Notional
Amount | Value and
Unrealized
Appreciation
(Depreciation) |
| Long Futures Contracts | | | | |
| Ultra Long U.S. Treasury Bond | June 2021 | 30 | 5,437 | (224) |
| | | | | |
| Short Futures Contracts | | | | |
| 10-Year U.S. Treasury Note | June 2021 | (619) | (81,050) | 1,500 |
| Ultra 10-Year U.S. Treasury Note | June 2021 | (257) | (36,928) | 1,368 |
| Euro-Bund | June 2021 | (165) | (33,142) | 263 |
| 5-Year U.S. Treasury Note | June 2021 | (155) | (19,127) | 238 |
| Euro-Buxl | June 2021 | (40) | (9,665) | 10 |
| | | | | 3,379 |
| | | | | 3,155 |
| Forward Currency Contracts |
| | Contract
Settlement | Contract Amount (000) | Unrealized
Appreciation | Unrealized
(Depreciation) |
| Counterparty | Date | Receive | | Deliver | ($000) | ($000) |
| BNP Paribas | 4/23/21 | KRW | 37,891,532 | USD | 33,535 | — | (59) |
| BNP Paribas | 4/22/21 | PLN | 115,772 | USD | 29,910 | — | (612) |
| Deutsche Bank AG | 4/23/21 | INR | 1,416,365 | USD | 19,385 | — | (73) |
| Bank of America, N.A. | 4/22/21 | CZK | 423,221 | USD | 19,297 | — | (281) |
| Bank of America, N.A. | 4/22/21 | ILS | 63,415 | USD | 19,266 | — | (294) |
| Goldman Sachs Bank USA | 4/5/21 | BRL | 104,133 | USD | 18,365 | 130 | — |
| Morgan Stanley Capital | | | | | | | |
| Services LLC | 4/22/21 | EUR | 14,525 | USD | 17,328 | — | (286) |
| Citigroup Global Markets Inc. | 4/22/21 | MXN | 295,786 | USD | 14,410 | 27 | — |
| Barclays Bank plc | 4/22/21 | TRY | 106,250 | USD | 13,892 | — | (1,240) |
| BNP Paribas | 4/23/21 | RUB | 889,418 | USD | 11,655 | 73 | — |
| Morgan Stanley Capital | | | | | | | |
| Services LLC | 4/22/21 | MXN | 217,426 | USD | 10,565 | 47 | — |
| Deutsche Bank AG | 4/22/21 | JPY | 917,983 | USD | 8,408 | — | (116) |
| HSBC Bank USA, N.A. | 4/22/21 | EUR | 4,021 | USD | 4,799 | — | (81) |
| Deutsche Bank AG | 4/22/21 | EUR | 1,302 | USD | 1,548 | — | (20) |
| State Street Bank & Trust Co. | 4/22/21 | USD | 267,046 | EUR | 224,363 | 3,814 | — |
| Royal Bank of Canada | 4/22/21 | USD | 59,492 | MXN | 1,237,904 | — | (928) |
| Bank of America, N.A. | 4/22/21 | USD | 37,016 | ZAR | 553,246 | — | (354) |
Emerging Markets Bond Fund
Forward Currency Contracts (continued)
| | Contract
Settlement | Contract Amount (000) | Unrealized
Appreciation | Unrealized
(Depreciation) |
| Counterparty | Date | | Receive | | Deliver | ($000) | ($000) |
| J.P. Morgan Securities LLC | 10/1/21 | USD | 31,881 | EUR | 27,110 | — | (37) |
| Morgan Stanley Capital | | | | | | | |
| Services LLC | 4/5/21 | USD | 18,490 | BRL | 100,444 | 650 | — |
| BNP Paribas | 4/23/21 | USD | 14,565 | CLP | 10,521,028 | — | (41) |
| BNP Paribas | 4/23/21 | USD | 11,975 | RUB | 891,842 | 215 | — |
| BNP Paribas | 7/22/22 | USD | 6,183 | JPY | 622,050 | 525 | — |
| BNP Paribas | 7/22/22 | USD | 3,500 | JPY | 349,895 | 317 | — |
| Morgan Stanley Capital | | | | | | | |
| Services LLC | 4/22/21 | USD | 823 | EUR | 701 | — | — |
| Toronto-Dominion Bank | 4/22/21 | USD | 645 | EUR | 547 | 3 | — |
| Citigroup Global Markets Inc. | 4/22/21 | USD | 296 | EUR | 250 | 2 | — |
| State Street Bank & Trust Co. | 4/22/21 | USD | 49 | HUF | 15,050 | — | — |
| | | | | | | 5,803 | (4,422) |
BRL—Brazilian real.
CLP—Chilean peso.
CZK—Czech koruna.
EUR—euro.
HUF—Hungarian forint.
ILS—Israeli shekel.
INR—Indian rupee.
JPY—Japanese yen.
KRW—Korean won.
MXN—Mexican peso.
PLN—Polish zloty.
RUB—Russian ruble.
TRY—Turkish lira.
USD—U.S. dollar.
ZAR—South African rand.
Emerging Markets Bond Fund
Over-the-Counter Credit Default Swaps
| Reference Entity | Termination
Date | Counterparty | Notional
Amount
($000) | Periodic
Premium
Received
(Paid)1
(%) | Value
($000) | Remaining Up-Front
Premium
Paid
(Received)
($000) | Unrealized Appreciation
($000) | Unrealized
(Depreciation)
($000) |
| Credit Protection Sold/Moody’s Rating | | | | | |
| Petroleos | | | | | | | | |
| Mexicanos/ | | | | | | | | |
| Baa3 | 6/21/21 | MSCS | 18,300 | 1.000 | (31) | (45) | 14 | — |
| Republic of | | | | | | | | |
| Chile/Aa3 | 6/22/26 | CITNA | 8,370 | 1.000 | 176 | 182 | — | (6) |
| Republic of | | | | | | | | |
| Chile/Aa3 | 6/22/26 | MSCS | 12,560 | 1.000 | 263 | 259 | 4 | — |
| Republic of | | | | | | | | |
| Peru/A3 | 6/22/26 | JPMC | 4,620 | 1.000 | 40 | 46 | — | (6) |
| Russian | | | | | | | | |
| Federation/ | | | | | | | | |
| Baa3 | 6/22/26 | CITNA | 8,694 | 1.000 | (46) | (2) | — | (44) |
| | | | | | 402 | 440 | 18 | (56) |
| | | | | | | | | |
| Credit Protection Purchased | | | | | | | | |
| Republic of | | | | | | | | |
| Colombia | 6/22/26 | GSI | 800 | (1.000) | 14 | 10 | 4 | — |
| Republic of | | | | | | | | |
| Colombia | 6/22/26 | MSCS | 24,090 | (1.000) | 406 | 383 | 23 | — |
| Republic of | | | | | | | | |
| Indonesia | 6/22/26 | MSCS | 11,288 | (1.000) | (63) | (70) | 7 | — |
| Republic of | | | | | | | | |
| Philippines | 6/22/26 | BNPSW | 6,360 | (1.000) | (178) | (178) | — | — |
| | | | | | 179 | 145 | 34 | — |
| | | | | | 581 | 585 | 52 | (56) |
The notional amount represents the maximum potential amount the fund could be required to pay as a seller of credit protection if the reference entity was subject to a credit event.
1 Periodic premium received/paid quarterly.
BNPSW—BNP Paribas.
CITNA—Citibank, N.A.
GSI—Goldman Sachs International.
JPMC—JPMorgan Chase Bank, N.A.
MSCS—Morgan Stanley Capital Services LLC.
At March 31, 2021, the counterparties had deposited in segregated accounts securities with a value of $4,225,000 and cash of $1,160,000 in connection with open forward currency contracts and open over-the-counter swap contracts.
Emerging Markets Bond Fund
Over-the-Counter Interest Rate Swaps
| Termination Date | Counterparty | Notional
Amount
($000)1 | Fixed
Interest
Rate
Received
(Paid)2
(%) | Floating
Interest
Rate
Received
(Paid)2,3
(%) | Value
($000) | Remaining
Up-Front
Premium
Paid
(Received)
($000) | Unrealized
Appreciation
($000) | Unrealized
(Depreciation)
($000) |
| 1/2/25 | HSBC | 172,896 | 6.350 | (2.650) | (1,449) | — | — | (1,449) |
| 1/2/25 | HSBC | 161,000 | 7.930 | (2.650) | (39) | — | — | (39) |
| 1/2/25 | HSBC | 153,235 | 7.305 | (2.650) | (559) | — | — | (559) |
| 1/2/25 | HSBC | 43,260 | 6.375 | (2.650) | (356) | — | — | (356) |
| | | | | | (2,403) | — | — | (2,403) |
HSBC—HSBC Bank USA, N.A.
1 Notional amount denominated in Brazilian real.
2 Fixed and floating interest payment received/paid at termination date.
3 Based on 1 Day Overnight Brazil CETIP Interbank Deposit Rate.
See accompanying Notes, which are an integral part of the Financial Statements.
Emerging Markets Bond Fund
Statement of Assets and Liabilities
As of March 31, 2021 |
| ($000s, except shares and per-share amounts) | | Amount |
| Assets | | |
| Investments in Securities, at Value | | |
| Unaffiliated Issuers (Cost $1,898,427) | | 1,848,370 |
| Affiliated Issuers (Cost $198,625) | | 198,635 |
| Total Investments in Securities | | 2,047,005 |
| Investment in Vanguard | | 70 |
| Cash | | 2,190 |
| Foreign Currency, at Value (Cost $88) | | 80 |
| Receivables for Investment Securities Sold | | 24,939 |
| Receivables for Accrued Income | | 19,946 |
| Receivables for Capital Shares Issued | | 7,360 |
| Swap Premiums Paid | | 880 |
| Variation Margin Receivable—Futures Contracts | | 316 |
| Unrealized Appreciation—Forward Currency Contracts | | 5,803 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | | 52 |
| Total Assets | | 2,108,641 |
| Liabilities | | |
| Payables for Investment Securities Purchased | | 56,827 |
| Payables for Capital Shares Redeemed | | 1,584 |
| Payables for Distributions | | 534 |
| Payables to Vanguard | | 206 |
| Swap Premiums Received | | 295 |
| Unrealized Depreciation—Forward Currency Contracts | | 4,422 |
| Unrealized Depreciation—Over-the-Counter Swap Contracts | | 2,459 |
| Total Liabilities | | 66,327 |
| Net Assets | | 2,042,314 |
Emerging Markets Bond Fund
Statement of Assets and Liabilities (continued)
At March 31, 2021, net assets consisted of:
| ($000s, except shares and per-share amounts) | | Amount |
| Paid-in Capital | | 2,062,577 |
| Total Distributable Earnings (Loss) | | (20,263) |
| Net Assets | | 2,042,314 |
| | | |
| Investor Shares—Net Assets | | |
| Applicable to 23,972,240 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | | 279,397 |
| Net Asset Value Per Share—Investor Shares | | $11.66 |
| | | |
| Admiral Shares—Net Assets | | |
| Applicable to 65,006,933 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | | 1,762,917 |
| Net Asset Value Per Share—Admiral Shares | | $27.12 |
See accompanying Notes, which are an integral part of the Financial Statements.
Emerging Markets Bond Fund
Statement of Operations
| | | Six Months Ended
March 31, 2021 |
| | | ($000) |
| Investment Income | | |
| Income | | |
| Interest1 | | 29,254 |
| Total Income | | 29,254 |
| Expenses | | |
| The Vanguard Group—Note B | | |
| Investment Advisory Services | | 68 |
| Management and Administrative—Investor Shares | | 610 |
| Management and Administrative—Admiral Shares | | 2,753 |
| Marketing and Distribution—Investor Shares | | 11 |
| Marketing and Distribution—Admiral Shares | | 32 |
| Custodian Fees | | 27 |
| Shareholders’ Reports—Investor Shares | | 2 |
| Shareholders’ Reports—Admiral Shares | | 8 |
| Trustees’ Fees and Expenses | | — |
| Total Expenses | | 3,511 |
| Net Investment Income | | 25,743 |
| Realized Net Gain (Loss) | | |
| Investment Securities Sold1 | | 24,206 |
| Futures Contracts | | 1,956 |
| Options Purchased | | (350) |
| Swap Contracts | | 3,493 |
| Forward Currency Contracts | | 130 |
| Foreign Currencies | | 2,046 |
| Realized Net Gain (Loss) | | 31,481 |
| Change in Unrealized Appreciation (Depreciation) | | |
| Investment Securities1 | | (52,864) |
| Futures Contracts | | 3,281 |
| Options Purchased | | (457) |
| Swap Contracts | | (2,344) |
| Forward Currency Contracts | | (230) |
| Foreign Currencies | | (41) |
| Change in Unrealized Appreciation (Depreciation) | | (52,655) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | 4,569 |
| 1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $83,000, $0, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
Emerging Markets Bond Fund
Statement of Changes in Net Assets
| | | Six Months Ended
March 31,
2021 | | Year Ended
September 30,
2020 |
| | | ($000) | | ($000) |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net Investment Income | | 25,743 | | 25,964 |
| Realized Net Gain (Loss) | | 31,481 | | 15,072 |
| Change in Unrealized Appreciation (Depreciation) | | (52,655) | | 2,960 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | | 4,569 | | 43,996 |
| Distributions | | | | |
| Investor Shares | | (6,371) | | (4,486) |
| Admiral Shares | | (38,399) | | (26,098) |
| Total Distributions | | (44,770) | | (30,584) |
| Capital Share Transactions | | | | |
| Investor Shares | | 156,191 | | 62,448 |
| Admiral Shares | | 943,276 | | 537,078 |
| Net Increase (Decrease) from Capital Share Transactions | | 1,099,467 | | 599,526 |
| Total Increase (Decrease) | | 1,059,266 | | 612,938 |
| Net Assets | | | | |
| Beginning of Period | | 983,048 | | 370,110 |
| End of Period | | 2,042,314 | | 983,048 |
See accompanying Notes, which are an integral part of the Financial Statements.
Emerging Markets Bond Fund
Financial Highlights
Investor Shares
| For a Share Outstanding | | Six Months
Ended
March 31, | | Year Ended September 30, | | Mar. 10,
20161 to
Sept. 30, |
| Throughout Each Period | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 |
| Net Asset Value, Beginning of Period | | $11.73 | | $11.19 | | $10.36 | | $10.76 | | $11.07 | | $10.00 |
| Investment Operations | | | | | | | | | | | | |
| Net Investment Income | | .1982 | | .4952 | | .5242 | | .4432 | | .5042 | | .286 |
| Net Realized and Unrealized Gain (Loss) | | | | | | | | | | | | |
| on Investments | | .088 | | .655 | | .826 | | (.193) | | .184 | | 1.050 |
| Total from Investment Operations | | .286 | | 1.150 | | 1.350 | | .250 | | .688 | | 1.336 |
| Distributions | | | | | | | | | | | | |
| Dividends from Net Investment Income | | (.207) | | (.400) | | (.520) | | (.439) | | (.514) | | (.266) |
| Distributions from Realized Capital Gains | | (.149) | | (.210) | | — | | (.211) | | (.484) | | — |
| Total Distributions | | (.356) | | (.610) | | (.520) | | (.650) | | (.998) | | (.266) |
| Net Asset Value, End of Period | | $11.66 | | $11.73 | | $11.19 | | $10.36 | | $10.76 | | $11.07 |
| | | | | | | | | | | | | |
| Total Return3 | | 2.37% | | 10.67% | | 13.40% | | 2.39% | | 7.01% | | 13.51% |
| | | | | | | | | | | | | |
| Ratios/Supplemental Data | | | | | | | | | | | | |
| Net Assets, End of Period (Millions) | | $279 | | $129 | | $64 | | $25 | | $12 | | $11 |
| Ratio of Total Expenses to | | | | | | | | | | | | |
| Average Net Assets | | 0.60% | | 0.60% | | 0.60% | | 0.60% | | 0.60% | | 0.60%4 |
Ratio of Net Investment Income to
Average Net Assets | | 3.30% | | 4.40% | | 4.73% | | 4.29% | | 4.79% | | 4.85%4 |
| Portfolio Turnover Rate | | 76% | | 266% | | 272% | | 350% | | 261% | | 153% |
The expense ratio and net investment income ratio for the current period have been annualized.
| 2 | Calculated based on average shares outstanding. |
| 3 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
See accompanying Notes, which are an integral part of the Financial Statements.
Emerging Markets Bond Fund
Financial Highlights
Admiral Shares
| | | Six Months
Ended
March 31, | | Year Ended
September 30 | | Dec. 6,
20171 to
Sept. 30, |
| For a Share Outstanding Throughout Each Period | | 2021 | | 2020 | | 2019 | | 2018 |
| Net Asset Value, Beginning of Period | | $27.30 | | $26.03 | | $24.11 | | $24.80 |
| Investment Operations | | | | | | | | |
| Net Investment Income2 | | .484 | | 1.192 | | 1.228 | | .875 |
| Net Realized and Unrealized Gain (Loss) on Investments | | .184 | | 1.535 | | 1.940 | | (.659) |
| Total from Investment Operations | | .668 | | 2.727 | | 3.168 | | .216 |
| Distributions | | | | | | | | |
| Dividends from Net Investment Income | | (.501) | | (.969) | | (1.248) | | (.906) |
| Distributions from Realized Capital Gains | | (.347) | | (.488) | | — | | — |
| Total Distributions | | (.848) | | (1.457) | | (1.248) | | (.906) |
| Net Asset Value, End of Period | | $27.12 | | $27.30 | | $26.03 | | $24.11 |
| | | | | | | | | |
| Total Return3 | | 2.38% | | 10.89% | | 13.53% | | 0.92% |
| | | | | | | | | |
| Ratios/Supplemental Data | | | | | | | | |
| Net Assets, End of Period (Millions) | | $1,763 | | $854 | | $306 | | $76 |
| Ratio of Total Expenses to Average Net Assets | | 0.45% | | 0.45% | | 0.45% | | 0.45%4 |
| Ratio of Net Investment Income to Average Net Assets | | 3.48% | | 4.54% | | 4.88% | | 4.44%4 |
| Portfolio Turnover Rate | | 76% | | 266% | | 272% | | 350% |
The expense ratio and net investment income ratio for the current period have been annualized.
| 2 | Calculated based on average shares outstanding. |
| 3 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
See accompanying Notes, which are an integral part of the Financial Statements.
Emerging Markets Bond Fund
Notes to Financial Statements
Vanguard Emerging Markets Bond Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.
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 invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. To minimize the currency risk associated with investment in securities denominated in currencies other than the U.S. dollar, the fund attempts to hedge its currency exposures. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Bonds and temporary cash investments 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. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. 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. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and
Emerging Markets Bond Fund
clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any securities pledged as initial margin for open contracts are noted in the Schedule of Investments.
Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities 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 gains (losses) on futures contracts.
During the six months ended March 31, 2021, the fund’s average investments in long and short futures contracts represented 1% and 6% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.
4. Forward Currency Contracts: The fund enters into forward currency contracts to protect the value of securities and related receivables and payables against changes in future foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities 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 gains (losses) on forward currency contracts.
During the six months ended March 31, 2021, the fund’s average investment in forward currency contracts represented 26% of net assets, based on the average of notional amounts at each quarter-end during the period.
5. Options: The fund invests in options on foreign currency, which are transacted over-the-counter (OTC) and not on an exchange. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size, and strike price, the terms
Emerging Markets Bond Fund
of OTC options generally are established through negotiation with the other party to the option contract. Although this type of arrangement allows the purchaser or writer greater flexibility to tailor an option to its needs, OTC options generally involve greater credit risk than exchange-traded options. Credit risk involves the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund mitigates its counterparty risk by entering into options with a diverse group of prequalified counterparties and monitoring their financial strength. The primary risk associated with purchasing options on foreign currency is that the value of the underlying foreign currencies may move in such a way that the option is out-of-the-money (the exercise price of the option exceeds the value of the underlying investment), the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with selling options on foreign currency is that the value of the underlying foreign currencies may move in such a way that the option is in-the-money (the exercise price of the option exceeds the value of the underlying investment), the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received.
Options on foreign currency are valued daily based on market quotations received from independent pricing services or recognized dealers. The premium paid for a purchased option is recorded in the Statement of Assets and Liabilities as an asset that is subsequently adjusted daily to the current market value of the option purchased. The premium received for a written option is recorded in the Statement of Assets and Liabilities as an asset with an equal liability that is subsequently adjusted daily to the current market value of the option written. Fluctuations in the value of the options are recorded as unrealized appreciation (depreciation) until expired, closed, or exercised, at which time realized gains (losses) are recognized.
During the six months ended March 31, 2021, the fund’s average value of investments in options purchased and options written represented less than 1% and 0% of net assets, respectively, based on the average market values at each quarter-end during the period.
6. Swap Contracts: The fund invests in credit default swaps to adjust the overall credit risk of the fund or to actively overweight or underweight credit risk to a specific issuer or group of issuers. The fund may sell credit protection through credit default swaps to simulate investments in long positions that are either unavailable or considered to be less attractively priced in the bond market. The fund may purchase credit protection through credit default swaps to reduce credit exposure to a given issuer or issuers. Under the terms of the swaps, an up-front payment may be exchanged between the seller and buyer. In addition, the seller of the credit protection receives a periodic payment of premium from the buyer that is a fixed percentage applied to a notional amount. If, for example, the reference entity is subject to a credit event (such as bankruptcy, failure to pay, or obligation acceleration) during the term of the swap, the seller agrees to either physically settle or cash settle the swap contract. If the swap is physically settled, the seller agrees to pay the buyer an amount equal to the notional amount and take delivery of a debt instrument of the reference issuer with a par amount equal to such notional amount. If the swap is cash settled, the seller agrees to pay the buyer the difference between the notional amount and the final price for the relevant debt instrument, as determined either in a market auction or pursuant to a pre-agreed-upon valuation procedure.
The fund enters into interest rate swap transactions to adjust the fund’s sensitivity to changes in interest rates and maintain the ability to generate income at prevailing market rates. Under the terms of the swaps, one party pays the other either an amount that is a fixed percentage rate or a floating
Emerging Markets Bond Fund
rate, which is reset periodically based on short-term interest rates, applied to a notional amount. In return, the counterparty agrees to pay a different floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount.
The primary risk associated with selling credit protection is that, upon the occurrence of a defined credit event, the market value of the debt instrument received by the fund (or, in a cash settled swap, the debt instruments used to determine the settlement payment by the fund) will be significantly less than the amount paid by the fund and, in a physically settled swap, the fund may receive an illiquid debt instrument. A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the seller of credit protection is required to take delivery (or, in a cash settled swap, pay the settlement amount determined) upon occurrence of a credit event, periodic payments are made, or the swap terminates, at which time realized gain (loss) is recorded. The net premium to be received or paid by the fund under swap contracts is accrued daily and recorded as realized gain (loss) over the life of the contract.
During the six months ended March 31, 2021, the fund’s average amounts of investments in credit protection sold and credit protection purchased represented 4% and 1% of net assets, respectively, based on the average of notional amounts at each quarter-end during the period. The average amount of investments in interest rate swaps represented 2% of net assets, based on the average of notional amounts at each quarter-end during the period.
7. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.
Emerging Markets Bond Fund
8. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
9. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes, subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread, except that borrowings under the uncommitted credit facility may bear interest based upon an alternative rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the six months ended March 31, 2021, the fund did not utilize the credit facilities or the Interfund Lending Program.
10. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
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. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Emerging Markets Bond Fund
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2021, the fund had contributed to Vanguard capital in the amount of $70,000, representing less than 0.01%of the fund’s net assets and 0.03% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments and derivatives. 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). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund’s investments and derivatives as of March 31, 2021, based on the inputs used to value them:
| | Level 1
($000) | Level 2
($000) | Level 3
($000) | Total
($000) |
| Investments | | | | |
| Assets | | | | |
| U.S. Government and Agency Obligations | — | 71,180 | — | 71,180 |
| Corporate Bonds | — | 77,546 | — | 77,546 |
| Sovereign Bonds | — | 1,698,583 | — | 1,698,583 |
| Temporary Cash Investments | 198,635 | — | — | 198,635 |
| Options Purchased | — | 1,061 | — | 1,061 |
| Total | 198,635 | 1,848,370 | — | 2,047,005 |
| Derivative Financial Instruments | | | | |
| Assets | | | | |
| Futures Contracts1 | 3,379 | — | — | 3,379 |
| Forward Currency Contracts | — | 5,803 | — | 5,803 |
| Swap Contracts | — | 52 | — | 52 |
| Total | 3,379 | 5,855 | — | 9,234 |
| Liabilities | | | | |
| Futures Contracts1 | 224 | — | — | 224 |
| Forward Currency Contracts | — | 4,422 | — | 4,422 |
| Swap Contracts | — | 2,459 | — | 2,459 |
| Total | 224 | 6,881 | — | 7,105 |
| 1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
Emerging Markets Bond Fund
D. At March 31, 2021, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:
| Statement of Assets and Liabilities Caption | Interest Rate
Contracts
($000) | Foreign
Exchange
Contracts
($000) | Credit
Contracts
($000) | Total
($000) |
| Investments in Securities, at Value— Unaffiliated Issuers (Options Purchased) | — | 1,061 | — | 1,061 |
| Swap Premiums Paid | — | — | 880 | 880 |
| Unrealized Appreciation—Futures Contracts1 | 3,379 | — | — | 3,379 |
| Unrealized Appreciation—Forward Currency Contracts | — | 5,803 | — | 5,803 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | — | — | 52 | 52 |
| Total Assets | 3,379 | 6,864 | 932 | 11,175 |
| | | | | |
| Swap Premiums Received | — | — | 295 | 295 |
| Unrealized Depreciation—Futures Contracts1 | 224 | — | — | 224 |
| Unrealized Depreciation—Forward Currency Contracts | — | 4,422 | — | 4,422 |
| Unrealized Depreciation—Over-the-Counter Swap Contracts | 2,403 | — | 56 | 2,459 |
| Total Liabilities | 2,627 | 4,422 | 351 | 7,400 |
| 1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended March 31, 2021, were:
| Realized Net Gain (Loss) on Derivatives | Interest Rate
Contracts
($000) | Foreign
Exchange
Contracts
($000) | Credit
Contracts
($000) | Total
($000) |
| Futures Contracts | 1,956 | — | — | 1,956 |
| Options Purchased | — | (350) | — | (350) |
| Swap Contracts | 1,819 | — | 1,674 | 3,493 |
| Forward Currency Contracts | — | 130 | — | 130 |
| Realized Net Gain (Loss) on Derivatives | 3,775 | (220) | 1,674 | 5,229 |
| | | | | |
| Change in Unrealized Appreciation (Depreciation) on Derivatives | | | | |
| Futures Contracts | 3,281 | — | — | 3,281 |
| Options Purchased | — | (457) | — | (457) |
| Swap Contracts | (2,403) | — | 59 | (2,344) |
| Forward Currency Contracts | — | (230) | — | (230) |
| Change in Unrealized Appreciation (Depreciation)on Derivatives | 878 | (687) | 59 | 250 |
Emerging Markets Bond Fund
E. As of March 31, 2021, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| | Amount
($000) |
| Tax Cost | 2,099,469 |
| Gross Unrealized Appreciation | 34,190 |
| Gross Unrealized Depreciation | (83,940) |
| Net Unrealized Appreciation (Depreciation) | (49,750) |
F. During the six months ended March 31, 2021, the fund purchased $1,765,834,000 of investment securities and sold $917,333,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $128,331,000 and $65,161,000, respectively.
G. Capital share transactions for each class of shares were:
| | Six Months Ended
March 31, 2021 | | Year Ended
September 30, 2020 |
| | Amount
($000) | Shares
(000) | | Amount
($000) | Shares
(000) |
| Investor Shares | | | | | |
| Issued | 203,449 | 16,883 | | 131,566 | 11,514 |
| Issued in Lieu of Cash Distributions | 5,785 | 481 | | 3,762 | 336 |
| Redeemed | (53,043) | (4,425) | | (72,880) | (6,554) |
| Net Increase (Decrease)—Investor Shares | 156,191 | 12,939 | | 62,448 | 5,296 |
| Admiral Shares | | | | | |
| Issued | 1,054,002 | 37,716 | | 788,716 | 29,735 |
| Issued in Lieu of Cash Distributions | 31,353 | 1,121 | | 20,639 | 790 |
| Redeemed | (142,079) | (5,095) | | (272,277) | (11,014) |
| Net Increase (Decrease)—Admiral Shares | 943,276 | 33,742 | | 537,078 | 19,511 |
At March 31, 2021, one shareholder was the record or beneficial owner of 41% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.
H. Management has determined that no events or transactions occurred subsequent to March 31, 2021, that would require recognition or disclosure in these financial statements.
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard Emerging Markets Bond Fund has renewed the fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard), through its Fixed Income Group. The board determined that continuing the fund’s internalized management structure was in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the investment management services provided to the fund since its inception in 2016; it also took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than four decades. The Fixed Income Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered performance of the fund, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory expenses were also well below the peer-group average.
The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees.
The benefit of economies of scale
The board concluded that the fund’s arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
Liquidity Risk Management
Vanguard funds (except for the money market funds) have adopted and implemented a written liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940. Rule 22e-4 requires that each fund adopt a program that is reasonably designed to assess and manage the fund’s liquidity risk, which is the risk that the fund could not meet redemption requests without significant dilution of remaining investors’ interests in the fund.
Assessment and management of a fund’s liquidity risk under the Program take into consideration certain factors, such as the fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions, its short- and long-term cash-flow projections during both normal and reasonably foreseeable stressed conditions, and its cash and cash-equivalent holdings and access to other funding sources. As required by the rule, the Program includes policies and procedures for classification of fund portfolio holdings in four liquidity categories, maintaining certain levels of highly liquid investments, and limiting holdings of illiquid investments.
The board of trustees of Vanguard Malvern Funds approved the appointment of liquidity risk management program administrators responsible for administering Vanguard Emerging Markets Bond Fund’s Program, and for carrying out the specific responsibilities set forth in the Program, including reporting to the board on at least an annual basis regarding the Program’s operation, its adequacy, and the effectiveness of its implementation for the past year (the “Program Administrator Report”). The board has reviewed the Program Administrator Report covering the period from January 1, 2020, through December 31, 2020 (the “Review Period”). The Program Administrator Report stated that during the Review Period the Program operated and was implemented effectively to manage the fund’s liquidity risk.
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Fund Information > 800-662-7447 Direct Investor Account Services > 800-662-2739 Institutional Investor Services > 800-523-1036 Text Telephone for People Who Are Deaf or Hard of Hearing > 800-749-7273 This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus. You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, www.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 www.sec.gov. You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov. |
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