N-CSR 1 fixedincome_final.htm VANGUARD FIXED INCOME SECURITIES FUND fixedincome_final.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-02368

Name of Registrant: Vanguard Fixed Income Securities Funds
Address of Registrant:
P.O. Box 2600
Valley Forge, PA 19482

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

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

Date of fiscal year end: January 31

Date of reporting period: February 1, 2013 – January 31, 2014

Item 1: Reports to Shareholders


Annual Report | January 31, 2014

Vanguard U.S. Government Bond Funds


 

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.

Contents  
Your Fund’s Total Returns. 1
Chairman’s Letter. 4
Advisors’ Report. 11
Short-Term Treasury Fund. 16
Short-Term Federal Fund. 30
Intermediate-Term Treasury Fund. 47
GNMA Fund. 61
Long-Term Treasury Fund. 79
About Your Fund’s Expenses. 94
Glossary. 97

 

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the
risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas.
This one is a replica based on an 18th-century British vessel. The HMS Vanguard, another ship of that era, served as the
flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.

 

Your Fund’s Total Returns        
 
 
 
 
Fiscal Year Ended January 31, 2014        
 
  30-Day SEC Income Capital Total
  Yield Returns Returns Returns
Vanguard Short-Term Treasury Fund        
Investor Shares 0.34% 0.36% -0.08% 0.28%
Admiral™ Shares 0.44 0.46 -0.08 0.38
Barclays U.S. 1–5 Year Treasury Bond Index       0.38
Short-Term U.S. Treasury Funds Average       -0.40
Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
Vanguard Short-Term Federal Fund        
Investor Shares 0.63% 0.54% -0.32% 0.22%
Admiral Shares 0.73 0.65 -0.32 0.33
Barclays U.S. 1–5 Year Government Bond Index       0.40
Short-Intermediate U.S. Government Funds        
Average       -0.69
Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
Vanguard Intermediate-Term Treasury Fund        
Investor Shares 1.59% 1.47% -2.21% -0.74%
Admiral Shares 1.69 1.57 -2.21 -0.64
Barclays U.S. 5–10 Year Treasury Bond Index       -1.47
General U.S. Treasury Funds Average       -2.13
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
Vanguard GNMA Fund        
Investor Shares 2.67% 2.28% -1.94% 0.34%
Admiral Shares 2.77 2.38 -1.94 0.44
Barclays U.S. GNMA Bond Index       0.25
GNMA Funds Average       -0.60
GNMA Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.      

 

Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

1

 

Your Fund’s Total Returns        
 
 
 
 
Fiscal Year Ended January 31, 2014        
 
  30-Day SEC Income Capital Total
  Yield Returns Returns Returns
Vanguard Long-Term Treasury Fund        
Investor Shares 3.37% 2.97% -7.42% -4.45%
Admiral Shares 3.47 3.06 -7.42 -4.36
Barclays U.S. Long Treasury Bond Index       -4.49
General U.S. Treasury Funds Average       -2.13
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    

 

Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

2

 

Your Fund’s Performance at a Glance    
 
 
 
 
January 31, 2013, Through January 31, 2014        
      Distributions Per Share
  Starting Ending Income Capital
  Share Price Share Price Dividends Gains
Vanguard Short-Term Treasury Fund        
Investor Shares $10.73 $10.71 $0.039 $0.011
Admiral Shares 10.73 10.71 0.050 0.011
Vanguard Short-Term Federal Fund        
Investor Shares $10.78 $10.74 $0.058 $0.006
Admiral Shares 10.78 10.74 0.069 0.006
Vanguard Intermediate-Term Treasury Fund        
Investor Shares $11.60 $11.29 $0.170 $0.054
Admiral Shares 11.60 11.29 0.181 0.054
Vanguard GNMA Fund        
Investor Shares $10.83 $10.61 $0.244 $0.010
Admiral Shares 10.83 10.61 0.255 0.010
Vanguard Long-Term Treasury Fund        
Investor Shares $12.61 $11.55 $0.374 $0.123
Admiral Shares 12.61 11.55 0.386 0.123

 

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Chairman’s Letter

Dear Shareholder,

The broad taxable bond market posted a barely positive return during the fiscal year ended January 31, 2014, as bond prices sagged and yields rose for much of the period. As you would expect, this market environment directly affected the performance of the Vanguard U.S. Government Bond Funds.

Their returns ranged from mildly positive for the shortest-term funds and the GNMA Fund to negative for the Intermediate-Term and Long-Term Treasury Funds. The funds’ returns were in line with, or ahead of, their benchmark indexes. Aside from the Long-Term Treasury Fund, they outpaced the average returns of their peer groups. Yields rose over the year for each of the funds.

Much of what turned out to be a volatile year for bonds reflected investors’ anticipation that the Federal Reserve would scale back its economic stimulus program, a change expected to produce lower bond prices. Speculation about when the Fed would start “tapering” ran rampant for much of the year and fueled widespread bond sales. To be sure, bonds’ difficult year pales in comparison to a bad year for stocks, and bonds continue to offer the compelling portfolio characteristic of serving to cushion stocks’ volatility.

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Before moving on to discuss the markets, I want to mention an important transition at Vanguard. We announced in November that Robert F. Auwaerter, principal and head of Vanguard Fixed Income Group, intends to retire in March 2014. At the conclusion of this letter, I’ll have more to say about Bob’s important contributions to Vanguard in his 32-year career, and I’ll introduce his successor, Gregory Davis.

Bond returns were flat or worse as the Fed pondered its strategy

The broad U.S. taxable bond market returned –2.02% for the 2013 calendar year—its first negative calendar-year result since 1999 and its worst calendar-year performance since 1994. A pickup in returns in January—a result of a flight to quality into Treasury securities arising from worries about emerging markets—moved bonds’ returns for the fiscal year ended January 31 into slightly positive territory with a return of 0.12%. The fiscal-year return for municipal bonds, at –1.07%, also represented an improvement.

The yield of the benchmark 10-year Treasury note generally increased during the period, eclipsing 3.00% at times, and finished at about 2.70%. (Bond prices and yields move in opposite directions.)

The Fed’s possible plans for phasing out its bond-buying program, which had rattled investors since May, finally became a reality in mid-December. The central bank announced that it would decrease its $85 billion in monthly purchases of Treasury and mortgage-backed securities

Market Barometer      
    Average Annual Total Returns
    Periods Ended January 31, 2014
  One Three Five
  Year Years Years
Bonds      
Barclays U.S. Aggregate Bond Index (Broad taxable      
market) 0.12% 3.73% 4.93%
Barclays Municipal Bond Index (Broad tax-exempt market) -1.07 5.76 5.54
Citigroup Three-Month U.S. Treasury Bill Index 0.05 0.06 0.09
 
Stocks      
Russell 1000 Index (Large-caps) 22.23% 14.14% 19.84%
Russell 2000 Index (Small-caps) 27.03 14.69 22.26
Russell 3000 Index (Broad U.S. market) 22.60 14.18 20.03
FTSE All-World ex US Index (International) 5.78 3.37 14.38
 
CPI      
Consumer Price Index 1.58% 2.03% 2.07%

 

5

 

by $10 billion a month, beginning in January. The bond-buying program, known as “quantitative easing,” is aimed at lowering longer-term interest rates. In a parallel program focused on short-term rates, the Fed maintained its target of 0%–0.25% for short-term interest rates, tightly restricting returns from money market funds and savings accounts.

International bond markets, as measured by the Barclays Global Aggregate Index ex USD, returned –1.24%.

U.S. stocks had found a groove before January’s volatility set in

U.S. stocks delivered generous returns in 2013, then slid over the first month of the new year. Despite that late reversal, the broad stock market produced an impressive gain of nearly 23% for the 12 months ended January 31. Strong corporate earnings growth and investors’ willingness to pay for those earnings drove the rise, with support from the Fed’s stimulative bond-buying program.

Overall, international stocks advanced about 6% in the period, but not all markets rose. The developed markets of Europe and the Pacific region posted gains. But, in January, concerns about China’s weaker economy, political uncertainties, and the impact of the Fed’s tapering hurt stocks and currencies in various emerging-market countries. While worries about the outlook for emerging markets bolstered demand for Treasuries (and the resulting lower yields), they also underlay much of January’s decline in U.S. stocks.

Expense Ratios      
Your Fund Compared With Its Peer Group      
  Investor Admiral Peer Group
  Shares Shares Average
Short-Term Treasury Fund 0.20% 0.10% 0.60%
Short-Term Federal Fund 0.20 0.10 0.93
Intermediate-Term Treasury Fund 0.20 0.10 0.46
GNMA Fund 0.21 0.11 0.96
Long-Term Treasury Fund 0.20 0.10 0.46

 

The fund expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the funds’ expense ratios were: for the Short-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Short-Term Federal Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Intermediate-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the GNMA Fund, 0.21% for Investor Shares and 0.11% for Admiral Shares; and for the Long-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares. Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2013.

Peer groups: For the Short-Term Treasury Fund, Short-Term U.S. Treasury Funds; for the Short-Term Federal Fund, Short-Intermediate U.S. Government Funds; for the Intermediate-Term Treasury Fund, General U.S. Treasury Funds; for the GNMA Fund, GNMA Funds; and for the Long-Term Treasury Fund, General U.S. Treasury Funds.

6

 

For 2014, Vanguard Chief Economist Joe Davis and his team are guarded in their outlook for global stock returns, and their forecast for the bond market remains muted. Although Joe readily acknowledges that such forecasts are accompanied by uncertainty, he writes, “We believe that a long-term, strategic approach with a balanced, diversified, low-cost portfolio can remain a high-value proposition in the decade ahead.” (You can read more about our expectations for bond and stock returns in Vanguard’s Economic and Investment Outlook, available at vanguard.com/research.)

Total Returns  
Ten Years Ended January 31, 2014  
  Average
  Annual Return
Short-Term Treasury Fund Investor Shares 2.79%
Barclays U.S. 1–5 Year Treasury Bond Index 3.11
Short-Term U.S. Treasury Funds Average 2.30
Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
Short-Term Federal Fund Investor Shares 3.16%
Barclays U.S. 1–5 Year Government Bond Index 3.16
Short-Intermediate U.S. Government Funds Average 2.74
Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
Intermediate-Term Treasury Fund Investor Shares 4.69%
Barclays U.S. 5–10 Year Treasury Bond Index 5.11
General U.S. Treasury Funds Average 4.84
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
GNMA Fund Investor Shares 4.72%
Barclays U.S. GNMA Bond Index 4.82
GNMA Funds Average 4.16
GNMA Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
Long-Term Treasury Fund Investor Shares 6.11%
Barclays U.S. Long Treasury Bond Index 6.33
General U.S. Treasury Funds Average 4.84
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  

 

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

7

 

Fed by fears of the “taper,” rising yields hampered returns

As usual, the funds’ portfolio managers took advantage of opportunities within the bond market segments that they focus on. In doing so, they widened their reach slightly and selectively. From spring to early fall, for example, the Treasury funds temporarily added Treasury Inflation-Protected Securities to their portfolios, and the GNMA Fund added some non-GNMA government mortgage-backed securities and federal agency bonds to its holdings. (In a move primarily aimed at increasing liquidity, the GNMA Fund also markedly increased the proportion of “to-be-announced” securities, which represent agreements to buy mortgage-backed securities.)

But the overwhelming story in the past fiscal year was the interplay of yields and bond prices. As we’ve suggested, these are like a see saw: When one goes up, the other goes down. Yields had climbed and prices declined while “taper talk” was in the air for much of the year, reinforced by strengthening economic conditions. Near the fiscal year-end, as we’ve noted, the yields of assets viewed as “safe,” such as Treasury securities, did drop somewhat as investors grew more risk-averse, an outgrowth of worries about the outlook for emerging markets. But the modest, late recovery in bond prices did little to alter 12-month returns.

Yields    
  30-Day SEC Yields on
  January 31, January 31,
Bond Fund (Investor Shares) 2013 2014
Short-Term Treasury 0.13% 0.34%
Short-Term Federal 0.27 0.63
Intermediate-Term Treasury 0.75 1.59
GNMA 2.05 2.67
Long-Term Treasury 2.65 3.37

 

8

 

The sensitivity of bond prices to yield changes is measured by duration, which is stated in years. Longer-maturity bonds, with their longer durations, are the most sensitive to yield fluctuations; additionally, the longer-term bond segment is where the Fed’s buying and tapering policies were targeted. That is why, among the Government Bond Funds, the Long-Term Treasury Fund (duration of 15.1 years) had the worst return, –4.45% for Investor Shares.

The funds’ interest income helped counter the impact of sagging bond prices. For the Short-Term Treasury, Short-Term Federal, and GNMA Funds, interest income fully offset the declines in their holdings’ prices. For the Intermediate-Term and Long-Term Treasury Funds, however, the cushioning effect of income wasn’t enough to overcome the negative returns resulting from price drops. You can see the contribution of each fund’s price (capital) and income returns to its overall return in the table on page 1.

The advisors have guided the funds skillfully through difficult times

Over the span of a decade, the advisors to the Government Bond Funds—Vanguard Fixed Income Group and Wellington Management Company—have generally captured the returns of their markets.

In most cases, the Vanguard funds have outpaced the average returns of peer-group funds, as you can see in the table on page 7.

The advisors have successfully guided the funds through a wide range of difficult economic circumstances, from the financial crisis and accompanying severe recession to the latest fiscal year’s challenges, which produced the lowest returns for the Government Bond Funds in years.

Bob Auwaerter’s retirement marks the end of a remarkable era

In mid-September 2008, about two weeks after I succeeded Jack Brennan as Vanguard’s chief executive officer, Lehman Brothers went bankrupt, igniting the nation’s worst financial crisis in 70 years. It was, to put it mildly, an extremely challenging time. Through it all, I was able to depend on Bob Auwaerter’s strong command of the Fixed Income Group, which persevered under these treacherous conditions. Although that was a difficult period for Vanguard and the industry, it was far from the only time I was grateful to have Bob at the helm of our bond group.

Bob, who joined Vanguard in 1981, was a member of the original three-person Fixed Income Group, headed by Ian MacKinnon. Over the years, he held various leadership roles in the department, and he eventually succeeded Ian as its head in 2003. He earned a reputation at Vanguard and within the industry as an extremely dedicated, honest, and insightful decision-maker and leader.

The Fixed Income Group that Bob helped start had total assets of about $1.3 billion in seven funds. He tracked his positions in the two funds he managed then on index

9

 

cards stored in a small metal box. Thirty-two years later, the 120-person group oversees $750 billion, which represents nearly one-third of Vanguard’s assets under management.

On behalf of our clients, I thank Bob for more than three decades of exemplary service and wish him the best in his retirement.

We’re fortunate that Greg Davis will become the head of the Fixed Income Group. Greg currently serves as chief investment officer for the Asia-Pacific region and as a director of Vanguard Investments Australia. He joined Vanguard in 1999 and had been head of bond indexing and a senior portfolio manager

in the Fixed Income Group. Greg is an eminently qualified successor and has a strong commitment to the Vanguard way of investing. I couldn’t be more confident in his ability to lead the Fixed Income Group and its deep and talented team.

As always, thank you for investing with Vanguard.

Sincerely,


F. William McNabb III
Chairman and Chief Executive Officer
February 12, 2014

10

 

Advisors’ Report

For the Short-, Intermediate-, and
Long-Term Treasury Funds and the
Short-Term Federal Fund

For the 12 months ended January 31, 2014, returns for the U.S. Government Bond Funds managed by Vanguard’s Fixed Income Group ranged from –4.45% for Investor Shares of the Long-Term Treasury Fund to 0.38% for Admiral Shares of the Short-Term Treasury Fund. The funds’ returns were in line with or ahead of their benchmarks’ returns. All but the Long-Term Treasury Fund posted results well ahead of their peer-group averages.

The investment environment

The past 12 months were challenging for fixed income investors. The yield of 10-year Treasuries fell sharply in early May, to 1.63%, before reversing course and climbing to 3.00% in September on the prospect that the Federal Reserve would begin to reduce the scale of its quantitative easing (QE) program. That program entails massive monthly bond purchases aimed at pumping money into the economy. (Bond prices and yields move in opposite directions.)

The market anticipated that the Fed would modestly taper its purchases in September, but that did not happen. Instead, citing aggressive tightening conditions in financial markets, the Fed chose to maintain the pace of QE.

The Fed’s reluctance to begin tapering was influenced by the rapid pace of interest rate increases, especially for home mortgages, in the summer of 2013. Rather than risk contributing further to the disruption in interest rates, the Fed chose to provide additional “forward guidance.” Like QE, forward guidance is one of the newer tools that central bankers have been using to foster economic growth; it simply means letting the public know what the bankers’ actions are likely to be. In this case, the Fed linked the possibility of a shift in its bond-buying to the need for substantial improvement in the outlook for the labor market.

Yields of U.S. Treasury Bonds    
  January 31, January 31,
Maturity 2013 2014
2 years 0.26% 0.35%
3 years 0.40 0.70
5 years 0.88 1.51
10 years 1.99 2.70
30 years 3.17 3.64
Source: Vanguard.    

 

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Interest rates declined on the news. Ten-year rates pulled back to 2.50% in October. But a string of favorable economic reports—showing strong consumer demand, a pickup in business investment, strong payroll growth, and a declining unemployment rate—pushed 10-year Treasury yields back to 3.00% in December. Strong improvement in the labor market was what the Fed was looking for, so it came as no surprise when the central bank announced in December that it would begin tapering early in 2014. Since then, emerging-market volatility has led to a “flight to quality,” boosting demand for Treasury securities and depressing their yields. The 10-year Treasury note closed the fiscal year at 2.70%.

Management of the funds

In the management of our three conventional Treasury funds, our trading strategies took advantage of the sharp differences in yields that emerged during the year between the shortest- and longest-duration bonds. These opportunities arose because the shortest rates stayed anchored close to zero, a result of Fed policy in place since 2008, while longer rates began rising during the year.

In the spring, we added Treasury Inflation-Protected Securities to our usual portfolio of conventional Treasury securities after their prices had fallen to very attractive levels; we sold our position in the fall.

The investment environment for the Short-Term Federal Fund continues to be characterized by stable and rich valuations in the agency debt market. Through careful security selection, we concentrated our investments in longer-maturity agency debt because spreads there were a bit more generous than among shorter-maturity issues. The portfolio also includes callable issues, which we will purchase on an opportunistic basis to enhance yield.

The outlook

Looking ahead, we see encouraging prospects for the economy. While the payroll tax hike and sharp cuts to government spending weighed on economic growth during 2013, we expect the fiscal drag to be far smaller in 2014. Home prices rebounded strongly last year, and we expect them to continue to rise. Gains in the stock market should help support consumption, and the jobs market should steadily improve. However, we are still looking for a pickup in spending by businesses on new capital projects and improvements.

The Fed’s next steps regarding quantitative easing will also affect the 2014 outlook. The Fed began scaling back its bond purchases in January but has stressed that its plans are “data-dependent.”

We don’t anticipate a significant shift in Fed policy, at least in the immediate future. We expect the Fed will continue to trim its bond purchases over the course of 2014

12

 

and will continue its policy of providing forward guidance as it works toward the transition to a policy of monetary tightening.

Kenneth E. Volpert, CFA
Principal and Head of Taxable Bond Group

David R. Glocke, Principal

Ronald M. Reardon, Principal

Vanguard Fixed Income Group

February 19, 2014

For the GNMA Fund

For the 12 months ended January 31, Vanguard GNMA Fund returned 0.34% for Investor Shares and 0.44% for Admiral Shares. The fund outperformed its benchmark index (+0.25%) as well as the average return of its peer group (–0.60%).

Investment environment

The Federal Reserve’s unconventional policy measures remained among the biggest influences on the market during the year. The Fed’s quantitative easing (QE) push and signs of gradual global economic recovery encouraged financial markets early on. In the spring, however, investors grew concerned about a possible pullback in Fed stimulus. The Fed signaled a readiness to begin tapering the central bank’s bond purchases sooner than expected, and to end them altogether by mid-2014 if the economy strengthened sufficiently.

The prospect of reduced bond-buying by the Fed sent yields sharply higher during May and June, and credit spreads widened in sympathy. Interest rates and credit spreads recovered after the Fed, in September, once again surprised the markets by deciding not to taper its purchases yet because the economy was not growing as fast as it had hoped. Among the obstacles to growth were the federal government’s sequestration spending cuts and the debt-ceiling wrangling in Congress.

Through its forward guidance, the Fed continued to reinforce the message that short rates were likely to stay locked down for an extended period, and this finally seemed to resonate with the market during the fourth calendar quarter. So, when the Federal Open Market Committee, the Fed’s policymaking arm, announced that it would begin tapering its bond-buying program in January, the market took the news rather well, with Treasury yields increasing only modestly immediately after the announcement.

The Fed decided to cut its monthly purchases by $10 billion, split evenly between Treasuries and agency mortgage-backed securities (MBS). It also signaled that purchases could continue until late 2014, much longer than anticipated.

The modest cut in purchases alleviated much uncertainty in the markets, and, as expected, the Fed continued to taper at the same pace after its January 2014 meeting.

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As a group, agency mortgage-backed securities posted total returns of 0.63% in the fund’s fiscal year, outperforming Treasuries of equivalent duration by 0.91 percentage point as measured by the Barclays MBS Fixed Rate Index. MBS performed poorly in the spring of 2013, when investors were jolted by the Fed’s talk of reducing its QE purchases. However, the central bank’s subsequent actions and the “measured taper” announced in December were received positively.

GNMA mortgages were even more volatile at times than the broader mortgage market. However, GNMAs ended the reporting period on a positive note due to renewed interest. Demand also picked up from banks for collateralized mortgage obligations (CMOs), a special type of mortgage-backed bond that use GNMAs as backing.

Fund successes

The fund outperformed the benchmark index during the period. Coupon positioning among 30-year GNMAs, particularly an underweighting of 3% coupon GNMAs, was the primary contributor to relative performance. The fund’s duration and yield-curve positioning had a modestly positive effect.

Fund shortfalls

The main hindrance to relative results during the period was the fund’s allocation to a group of securities that are not in the benchmark: 30-year conventional MBS issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Low-coupon securities in particular suffered from strong selling pressure in the May–June period, as MBS investors reallocated portfolios toward higher-coupon securities. These securities help reduce a portfolio’s interest rate sensitivity because the faster prepayments on these higher-rate mortgages make them less sensitive to raising interest rates, as we saw in the spring.

Fund positioning

We are cautious on the MBS sector from a tactical perspective as we review varying factors. The Fed’s MBS purchases will continue to shrink as it tapers its QE program, but its forward guidance has kept rates from rising. This has kept us near thresholds where we could see an increase in mortgage origination. All of this threatens the strong supply-demand dynamic in place for the past few months, as the Fed’s bond-buying program boosted demand for MBS and kept MBS spreads tight. Longer-term, as the Fed carries out its monetary policy exit strategy, risks include a continued increase in volatility and a flatter yield curve, produced by its uncapping of short-term interest rates. However, we are optimistic on the supply dynamics of owning agency MBS over Treasuries, based on what we expect will be continued growth in Treasury supply against a stable, or shrinking, agency MBS market. Given this long-term bias, we would view any significant widening of MBS spreads as an opportunity to increase allocations. Our current positioning is

14

 

skewed toward middle- and higher-coupon MBS, which we believe offer more attractive return potential.

GNMA prepayment risk remains relatively low, given tighter mortgage underwriting standards and higher refinancing costs, particularly for lower-quality borrowers. These borrowers have lower credit scores and higher loan-to-value ratios, which makes refinancing their mortgages more difficult. We continue to avoid securities backed by borrowers with strong credit, as these homeowners are likelier to refinance and pay back their mortgage loans, thereby reducing the income generated for the fund and its shareholders.

As we head into 2014, we believe that more of the bond market’s returns will be driven by income than by capital appreciation. In our view, GNMAs are priced close to fair value given current market conditions, but we believe that the MBS sector will continue to be attractive to investors seeking high-quality assets with excellent liquidity. As with virtually all bond funds, however, this one is exposed to interest rate risk and, because bond yields and prices move inversely, the potential for loss of principal exists if and when interest rates rise. We continue to monitor macroeconomic conditions and the pace of Fed tapering to manage this risk and, over the long term, we believe that GNMAs’ yield advantage over Treasuries still offers compelling opportunities.

Michael F. Garrett Senior Vice President and Fixed Income Portfolio Manager Wellington Management Company, llp February 14, 2014

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Short-Term Treasury Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor Admiral
  Shares Shares
Ticker Symbol VFISX VFIRX
Expense Ratio1 0.20% 0.10%
30-Day SEC Yield 0.34% 0.44%
 
Financial Attributes      
 
    Barclays Barclays
    1–5 Year Aggregate
    Treasury Bond
  Fund Index Index
Number of Bonds 81 143 8,727
Yield to Maturity      
(before expenses) 0.5% 0.6% 2.3%
Average Coupon 1.2% 1.6% 3.3%
Average Duration 2.2 years 2.6 years 5.5 years
Average Effective      
Maturity 2.3 years 2.7 years 7.6 years
Short-Term      
Reserves -0.3%
 
 
Sector Diversification (% of portfolio)  
Treasury/Agency     100.0%

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  1–5 Year Aggregate
  Treasury Bond
  Index Index
R-Squared 0.93 0.63
Beta 0.74 0.25

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year -0.3%
1 - 3 Years 81.4
3 - 5 Years 18.5
5 - 7 Years 0.4

 

Distribution by Credit Quality (% of portfolio)
U.S. Government 100.0%
For information about these ratings, see the Glossary entry for Credit Quality.
 

 

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

16

 

Short-Term Treasury Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Short-Term Treasury Fund Investor        
Shares 0.28% 1.46% 2.79% $13,163
Barclays U.S. 1–5 Year Treasury Bond        
••••••••        
Index 0.38 1.81 3.11 13,586
 
– – – – Short-Term U.S. Treasury Funds        
 
Average -0.40 1.02 2.30 12,554
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
Short-Term U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  

 

        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Short-Term Treasury Fund Admiral Shares 0.38% 1.57% 2.91% $66,595
Barclays U.S. 1–5 Year Treasury Bond Index 0.38 1.81 3.11 67,928
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

17

 

Short-Term Treasury Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        1–5 Year
        Treasury
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 2.64% -1.79% 0.85% 0.95%
2006 3.20 -1.34 1.86 1.46
2007 4.30 -0.48 3.82 3.83
2008 4.58 5.26 9.84 10.35
2009 2.70 1.79 4.49 5.84
2010 1.60 0.90 2.50 1.95
2011 1.09 0.83 1.92 2.94
2012 0.68 1.56 2.24 3.38
2013 0.41 -0.02 0.39 0.45
2014 0.36 -0.08 0.28 0.38

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 10/28/1991 -0.10% 1.38% 2.16% 0.62% 2.78%
Admiral Shares 2/13/2001 0.00 1.49 2.28 0.62 2.90

 

18

 

Short-Term Treasury Fund

Financial Statements

Statement of Net Assets
As of January 31, 2014

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

      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
U.S. Government and Agency Obligations (99.7%)        
U.S. Government Securities (99.7%)        
United States Treasury Note/Bond 0.250% 2/15/15 100,000 100,094
United States Treasury Note/Bond 0.250% 2/28/15 225,000 225,211
United States Treasury Note/Bond 2.375% 2/28/15 93,000 95,180
United States Treasury Note/Bond 0.375% 4/15/15 414,000 415,035
United States Treasury Note/Bond 0.125% 4/30/15 110,000 109,932
United States Treasury Note/Bond 2.500% 4/30/15 20,000 20,575
United States Treasury Note/Bond 0.250% 5/15/15 110,000 110,103
United States Treasury Note/Bond 4.125% 5/15/15 163,000 171,176
United States Treasury Note/Bond 2.125% 5/31/15 80,000 82,038
United States Treasury Note/Bond 0.375% 6/15/15 131,000 131,327
United States Treasury Note/Bond 0.250% 7/31/15 150,000 150,093
United States Treasury Note/Bond 1.750% 7/31/15 60,000 61,360
United States Treasury Note/Bond 4.250% 8/15/15 15,000 15,926
United States Treasury Note/Bond 0.375% 8/31/15 100,000 100,219
United States Treasury Note/Bond 1.250% 8/31/15 171,000 173,726
United States Treasury Note/Bond 0.250% 9/30/15 160,000 160,026
United States Treasury Note/Bond 1.250% 9/30/15 27,000 27,443
United States Treasury Note/Bond 0.250% 10/15/15 48,000 47,992
United States Treasury Note/Bond 0.250% 10/31/15 157,000 156,951
United States Treasury Note/Bond 1.250% 10/31/15 257,000 261,377
United States Treasury Note/Bond 0.250% 11/30/15 8,000 7,996
United States Treasury Note/Bond 1.375% 11/30/15 5,000 5,098
United States Treasury Note/Bond 0.250% 12/31/15 152,000 151,857
United States Treasury Note/Bond 2.125% 12/31/15 25,000 25,860
United States Treasury Note/Bond 0.375% 1/31/16 35,000 35,027
United States Treasury Note/Bond 2.000% 1/31/16 222,000 229,353
United States Treasury Note/Bond 4.500% 2/15/16 106,000 114,944
United States Treasury Note/Bond 2.125% 2/29/16 137,000 141,988
United States Treasury Note/Bond 2.625% 2/29/16 112,000 117,233
United States Treasury Note/Bond 0.250% 4/15/16 83,000 82,728
United States Treasury Note/Bond 2.000% 4/30/16 132,000 136,641
United States Treasury Note/Bond 2.625% 4/30/16 67,000 70,298
United States Treasury Note/Bond 0.250% 5/15/16 139,000 138,436
United States Treasury Note/Bond 0.500% 6/15/16 130,000 130,122
United States Treasury Note/Bond 1.500% 6/30/16 16,000 16,390
United States Treasury Note/Bond 3.250% 6/30/16 25,000 26,660
United States Treasury Note/Bond 0.625% 7/15/16 100,000 100,328
United States Treasury Note/Bond 1.500% 7/31/16 20,000 20,491

 

19

 

Short-Term Treasury Fund        
 
 
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  United States Treasury Note/Bond 0.625% 8/15/16 86,000 86,215
  United States Treasury Note/Bond 4.875% 8/15/16 30,000 33,281
  United States Treasury Note/Bond 1.000% 8/31/16 90,000 91,055
  United States Treasury Note/Bond 3.000% 8/31/16 51,000 54,219
  United States Treasury Note/Bond 0.875% 9/15/16 77,000 77,650
  United States Treasury Note/Bond 1.000% 9/30/16 52,000 52,577
  United States Treasury Note/Bond 3.000% 9/30/16 43,000 45,755
  United States Treasury Note/Bond 0.625% 10/15/16 51,000 51,064
  United States Treasury Note/Bond 1.000% 10/31/16 9,000 9,093
  United States Treasury Note/Bond 0.625% 11/15/16 139,000 139,065
  United States Treasury Note/Bond 7.500% 11/15/16 20,000 23,784
  United States Treasury Note/Bond 0.875% 11/30/16 115,000 115,773
  United States Treasury Note/Bond 0.625% 12/15/16 140,000 139,957
  United States Treasury Note/Bond 0.875% 12/31/16 55,000 55,318
  United States Treasury Note/Bond 0.750% 1/15/17 125,000 125,292
  United States Treasury Note/Bond 0.875% 1/31/17 110,000 110,516
  United States Treasury Note/Bond 1.000% 3/31/17 35,000 35,230
  United States Treasury Note/Bond 3.250% 3/31/17 9,000 9,692
  United States Treasury Note/Bond 0.875% 4/30/17 155,000 155,242
  United States Treasury Note/Bond 0.625% 5/31/17 55,000 54,570
  United States Treasury Note/Bond 2.500% 6/30/17 40,000 42,138
  United States Treasury Note/Bond 0.500% 7/31/17 25,000 24,625
  United States Treasury Note/Bond 2.375% 7/31/17 8,000 8,392
  United States Treasury Note/Bond 1.875% 9/30/17 70,000 72,176
  United States Treasury Note/Bond 0.750% 10/31/17 45,000 44,515
  United States Treasury Note/Bond 0.625% 11/30/17 111,000 109,110
  United States Treasury Note/Bond 0.750% 12/31/17 141,000 139,061
  United States Treasury Note/Bond 0.875% 1/31/18 50,000 49,476
  United States Treasury Note/Bond 0.625% 4/30/18 46,000 44,850
  United States Treasury Note/Bond 1.000% 5/31/18 38,000 37,572
  United States Treasury Note/Bond 1.375% 6/30/18 9,817 9,848
  United States Treasury Note/Bond 2.375% 6/30/18 8,000 8,375
  United States Treasury Note/Bond 1.375% 7/31/18 12,000 12,026
  United States Treasury Note/Bond 2.250% 7/31/18 7,000 7,287
  United States Treasury Note/Bond 1.500% 8/31/18 37,000 37,231
1 United States Treasury Note/Bond 1.250% 10/31/18 76,000 75,418
  United States Treasury Note/Bond 1.750% 10/31/18 35,000 35,558
  United States Treasury Note/Bond 1.250% 11/30/18 25,000 24,770
  United States Treasury Note/Bond 1.500% 12/31/18 52,000 52,065
  United States Treasury Note/Bond 1.500% 1/31/19 24,000 24,007
          6,491,082
Conventional Mortgage-Backed Securities (0.0%)        
2,3 Fannie Mae Pool 7.000% 11/1/15–3/1/16 158 166
2,3 Freddie Mac Gold Pool 6.000% 5/1/18–4/1/28 290 321
2,3 Freddie Mac Gold Pool 7.000% 9/1/15–1/1/16 53 53
          540
Total U.S. Government and Agency Obligations (Cost $6,479,181)   6,491,622
 
        Shares  
Temporary Cash Investment (0.5%)        
Money Market Fund (0.5%)        
4 Vanguard Market Liquidity Fund        
  (Cost $29,808) 0.130%   29,808,220 29,808
Total Investments (100.2%) (Cost $6,508,989)       6,521,430

 

20

 

Short-Term Treasury Fund      
 
 
 
      Market
  Expiration   Value
  Date Contracts ($000)
Liability for Options Written (0.0%)      
Call Options on 10-year U.S. Treasury Note      
Futures Contracts, Strike Price 124.50 2/21/14 206 (303)
Call Options on 10-year U.S. Treasury Note      
Futures Contracts, Strike Price 125.50 2/21/14 209 (160)
Put Options on 10-year U.S. Treasury Note      
Futures Contracts, Strike Price 122.50 2/21/14 415 (13)
Total Liability for Options Written (Premiums received $267)     (476)
Other Assets and Liabilities (-0.2%)      
Other Assets     163,090
Other Liabilities     (172,595)
      (9,505)
Net Assets (100%)     6,511,449
 
 
At January 31, 2014, net assets consisted of:      
      Amount
      ($000)
Paid-in Capital     6,497,814
Undistributed Net Investment Income    
Accumulated Net Realized Gains     1,941
Unrealized Appreciation (Depreciation)      
Investment Securities     12,441
Futures Contracts     (538)
Options on Futures Contracts     (209)
Net Assets     6,511,449
 
 
Investor Shares—Net Assets      
Applicable to 107,524,799 outstanding $.001 par value shares of      
beneficial interest (unlimited authorization)     1,151,129
Net Asset Value Per Share—Investor Shares     $10.71
 
 
Admiral Shares—Net Assets      
Applicable to 500,696,311 outstanding $.001 par value shares of      
beneficial interest (unlimited authorization)     5,360,320
Net Asset Value Per Share—Admiral Shares     $10.71

 

See Note A in Notes to Financial Statements.
1 Securities with a value of $3,007,000 have been segregated as initial margin for open futures contracts.
2 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
3 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. See accompanying Notes, which are an integral part of the Financial Statements.

21

 

Short-Term Treasury Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Interest1 35,752
Total Income 35,752
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 589
Management and Administrative—Investor Shares 2,009
Management and Administrative—Admiral Shares 3,200
Marketing and Distribution—Investor Shares 359
Marketing and Distribution—Admiral Shares 1,239
Custodian Fees 72
Auditing Fees 32
Shareholders’ Reports—Investor Shares 66
Shareholders’ Reports—Admiral Shares 37
Trustees’ Fees and Expenses 6
Total Expenses 7,609
Net Investment Income 28,143
Realized Net Gain (Loss)  
Investment Securities Sold 11,348
Futures Contracts (488)
Options on Futures Contracts (202)
Realized Net Gain (Loss) 10,658
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (15,491)
Futures Contracts (193)
Options on Futures Contracts (219)
Change in Unrealized Appreciation (Depreciation) (15,903)
Net Increase (Decrease) in Net Assets Resulting from Operations 22,898
1 Interest income from an affiliated company of the fund was $7,000.  

 

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

22

 

Short-Term Treasury Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 28,143 31,281
Realized Net Gain (Loss) 10,658 39,452
Change in Unrealized Appreciation (Depreciation) (15,903) (43,895)
Net Increase (Decrease) in Net Assets Resulting from Operations 22,898 26,838
Distributions    
Net Investment Income    
Investor Shares (4,697) (6,758)
Admiral Shares (23,446) (24,523)
Realized Capital Gain1    
Investor Shares (1,209) (11,161)
Admiral Shares (5,521) (34,953)
Total Distributions (34,873) (77,395)
Capital Share Transactions    
Investor Shares (293,888) (305,299)
Admiral Shares 490,529 137,798
Net Increase (Decrease) from Capital Share Transactions 196,641 (167,501)
Total Increase (Decrease) 184,666 (218,058)
Net Assets    
Beginning of Period 6,326,783 6,544,841
End of Period 6,511,449 6,326,783

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $1,224,000 and $28,998,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

23

 

Short-Term Treasury Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.73 $10.81 $10.70 $10.81 $10.89
Investment Operations          
Net Investment Income .039 .044 .071 .116 .175
Net Realized and Unrealized Gain (Loss)          
on Investments (.009) (.002) .167 .089 .092
Total from Investment Operations .030 .042 . 238 .205 .267
Distributions          
Dividends from Net Investment Income (. 039) (. 044) (. 071) (.116) (.170)
Distributions from Realized Capital Gains (.011) (.078) (.057) (.199) (.177)
Total Distributions (. 050) (.122) (.128) (.315) (.347)
Net Asset Value, End of Period $10.71 $10.73 $10.81 $10.70 $10.81
 
Total Return1 0.28% 0.39% 2.24% 1.92% 2.50%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $1,151 $1,448 $1,765 $1,874 $2,343
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.22% 0.22%
Ratio of Net Investment Income to          
Average Net Assets 0.37% 0.41% 0.66% 1.07% 1.62%
Portfolio Turnover Rate 80% 176%2 302%2 124% 130%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Includes 63% and 120% attributable to mortgage-dollar-roll activity in 2013 and 2012, respectively.

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

24

 

Short-Term Treasury Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.73 $10.81 $10.70 $10.81 $10.89
Investment Operations          
Net Investment Income .050 .055 .082 .129 .187
Net Realized and Unrealized Gain (Loss)          
on Investments (.009) (.002) .167 .089 .092
Total from Investment Operations .041 .053 . 249 . 218 .279
Distributions          
Dividends from Net Investment Income (. 050) (. 055) (. 082) (.129) (.182)
Distributions from Realized Capital Gains (.011) (.078) (.057) (.199) (.177)
Total Distributions (. 061) (.133) (.139) (. 328) (.359)
Net Asset Value, End of Period $10.71 $10.73 $10.81 $10.70 $10.81
 
Total Return 0.38% 0.49% 2.34% 2.05% 2.60%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $5,360 $4,879 $4,779 $4,690 $4,031
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.12%
Ratio of Net Investment Income to          
Average Net Assets 0.47% 0.51% 0.76% 1.19% 1.72%
Portfolio Turnover Rate 80% 176%1 302%1 124% 130%
1 Includes 63% and 120% attributable to mortgage-dollar-roll activity in 2013 and 2012, respectively.    

 

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

25

 

Short-Term Treasury Fund

Notes to Financial Statements

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

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 3% and 2% of net assets, respectively, based on quarterly average aggregate settlement values.

26

 

Short-Term Treasury Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written each represented less than 1% of net assets, based on quarterly average market values.

3. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral. The fund had no open repurchase agreements at January 31, 2014.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

5. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

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

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $720,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.29% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

27

 

Short-Term Treasury Fund

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 6,491,622
Temporary Cash Investments 29,808
Futures Contracts—Assets1 59
Futures Contracts—Liabilities1 (249)
Liability for Options Written (476)
Total 29,142 6,491,622
1 Represents variation margin on the last day of the reporting period.      

 

D. At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
10-Year U.S. Treasury Note March 2014 (416) (52,312) (538)

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $1,506,000 from accumulated net realized gains to paid-in capital.

For tax purposes, at January 31, 2014, the fund had $2,406,000 of long-term capital gains available for distribution.

28

 

Short-Term Treasury Fund

At January 31, 2014, the cost of investment securities for tax purposes was $6,510,239,000. Net unrealized appreciation of investment securities for tax purposes was $11,191,000, consisting of unrealized gains of $17,997,000 on securities that had risen in value since their purchase and $6,806,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $5,330,960,000 of investment securities and sold $5,052,074,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2014.

        Premiums
    Number of Received
Options     Contracts ($000)
Balance at January 31, 2013     342 228
Options written     2,707 1,163
Options expired    
Options closed     (2,219) (1,124)
Options exercised    
Options open at January 31, 2014     830 267
 
G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 321,386 30,008 442,194 41,013
Issued in Lieu of Cash Distributions 5,396 504 16,294 1,515
Redeemed (620,670) (57,964) (763,787) (70,867)
Net Increase (Decrease)—Investor Shares (293,888) (27,452) (305,299) (28,339)
Admiral Shares        
Issued 2,112,804 197,333 1,629,078 151,160
Issued in Lieu of Cash Distributions 25,544 2,385 54,615 5,078
Redeemed (1,647,819) (153,935) (1,545,895) (143,468)
Net Increase (Decrease)—Admiral Shares 490,529 45,783 137,798 12,770

 

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

29

 

Short-Term Federal Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor Admiral
  Shares Shares
Ticker Symbol VSGBX VSGDX
Expense Ratio1 0.20% 0.10%
30-Day SEC Yield 0.63% 0.73%
 
Financial Attributes      
 
    Barclays Barclays
    1–5 Year Aggregate
    Gov’t Bond
  Fund Index Index
Number of Bonds 92 660 8,727
Yield to Maturity      
(before expenses) 0.8% 0.7% 2.3%
Average Coupon 1.5% 1.7% 3.3%
Average Duration 2.4 years 2.6 years 5.5 years
Average Effective      
Maturity 2.8 years 2.7 years 7.6 years
Short-Term      
Reserves -4.4%
 
 
Sector Diversification (% of portfolio)  
Government Mortgage-Backed   14.8%
Treasury/Agency     85.2

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  1–5 Year Aggregate
  Gov’t Bond
  Index Index
R-Squared 0.91 0.78
Beta 0.92 0.33

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 0.2%
1 - 3 Years 55.7
3 - 5 Years 37.1
5 - 7 Years 6.9
7 - 10 Years 0.1

 

Distribution by Credit Quality (% of portfolio)
U.S. Government 100.0%
For information about these ratings, see the Glossary entry for
Credit Quality.  

 

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

30

 

Short-Term Federal Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Short-Term Federal Fund Investor        
Shares 0.22% 2.11% 3.16% $13,643
Barclays U.S. 1–5 Year Government        
••••••••        
Bond Index 0.40 1.90 3.16 13,644
 
– – – – Short-Intermediate U.S. Government        
 
Funds Average -0.69 2.27 2.74 13,109
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
Short-Intermediate U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  

 

        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Short-Term Federal Fund Admiral Shares 0.33% 2.21% 3.26% $68,897
Barclays U.S. 1–5 Year Government Bond        
Index 0.40 1.90 3.16 68,220
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

31

 

Short-Term Federal Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        1–5 Year
        Gov’t
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 2.76% -1.78% 0.98% 1.15%
2006 3.31 -1.35 1.96 1.63
2007 4.19 0.10 4.29 4.04
2008 4.77 4.48 9.25 9.86
2009 3.94 0.84 4.78 5.66
2010 2.39 1.62 4.01 2.56
2011 1.53 0.97 2.50 2.84
2012 1.00 2.09 3.09 3.26
2013 0.56 0.20 0.76 0.51
2014 0.54 -0.32 0.22 0.40

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 12/31/1987 -0.35% 1.97% 2.51% 0.65% 3.16%
Admiral Shares 2/12/2001 -0.25 2.07 2.61 0.65 3.26

 

32

 

Short-Term Federal Fund

Financial Statements

Statement of Net Assets
As of January 31, 2014

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

        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
U.S. Government and Agency Obligations (98.5%)        
U.S. Government Securities (14.5%)        
  United States Treasury Note/Bond 0.250% 3/31/15 70,500 70,566
  United States Treasury Note/Bond 0.375% 4/15/15 28,543 28,614
  United States Treasury Note/Bond 4.125% 5/15/15 11,750 12,339
  United States Treasury Note/Bond 0.250% 8/15/15 33,920 33,936
  United States Treasury Note/Bond 0.250% 9/15/15 6,000 6,001
  United States Treasury Note/Bond 2.250% 3/31/16 17,618 18,320
  United States Treasury Note/Bond 1.750% 5/31/16 3,775 3,888
  United States Treasury Note/Bond 0.625% 10/15/16 100,000 100,125
  United States Treasury Note/Bond 0.875% 11/30/16 56,750 57,131
  United States Treasury Note/Bond 0.750% 1/15/17 109,250 109,506
  United States Treasury Note/Bond 0.875% 1/31/17 196,750 197,673
1 United States Treasury Note/Bond 0.875% 4/30/17 29,424 29,470
  United States Treasury Note/Bond 0.625% 5/31/17 3,305 3,279
  United States Treasury Note/Bond 0.750% 3/31/18 5,600 5,497
  United States Treasury Note/Bond 0.625% 4/30/18 61,453 59,916
  United States Treasury Note/Bond 1.500% 1/31/19 21,750 21,757
  United States Treasury Note/Bond 2.125% 1/31/21 3,250 3,250
          761,268
Agency Bonds and Notes (73.8%)        
2 Federal Home Loan Banks 2.750% 12/12/14 14,000 14,310
2 Federal Home Loan Banks 0.250% 1/16/15 77,925 77,980
2 Federal Home Loan Banks 0.250% 2/20/15 5,000 5,000
2 Federal Home Loan Banks 2.750% 3/13/15 70,000 71,865
2 Federal Home Loan Banks 0.375% 8/28/15 39,000 39,043
2 Federal Home Loan Banks 1.750% 9/11/15 21,000 21,458
2 Federal Home Loan Banks 2.875% 9/11/15 24,000 24,959
2 Federal Home Loan Banks 0.375% 2/19/16 18,750 18,727
3 Federal Home Loan Mortgage Corp. 1.000% 7/30/14 1,750 1,758
3 Federal Home Loan Mortgage Corp. 0.750% 11/25/14 29,250 29,389
3 Federal Home Loan Mortgage Corp. 0.625% 12/29/14 36,825 36,978
3,4 Federal Home Loan Mortgage Corp. 0.500% 9/25/15 35,075 35,182
3,4 Federal Home Loan Mortgage Corp. 1.000% 3/14/16 31,025 31,054
3,4 Federal Home Loan Mortgage Corp. 0.600% 3/28/16 173,960 174,003
3 Federal Home Loan Mortgage Corp. 0.500% 5/13/16 38,000 38,030
3,4 Federal Home Loan Mortgage Corp. 0.700% 9/27/16 25,000 24,958
3 Federal Home Loan Mortgage Corp. 0.875% 10/14/16 129,900 130,612
3 Federal Home Loan Mortgage Corp. 0.875% 2/22/17 193,000 193,380

 

33

 

Short-Term Federal Fund        
 
 
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
3 Federal Home Loan Mortgage Corp. 1.000% 3/8/17 6,500 6,534
3 Federal Home Loan Mortgage Corp. 1.000% 6/29/17 85,000 84,973
3 Federal Home Loan Mortgage Corp. 1.000% 7/28/17 67,500 67,386
3 Federal Home Loan Mortgage Corp. 0.750% 1/12/18 98,500 96,823
3,4 Federal Home Loan Mortgage Corp. 1.200% 3/20/18 67,000 66,142
3,4 Federal Home Loan Mortgage Corp. 1.050% 4/25/18 57,000 55,763
3 Federal National Mortgage Assn. 0.375% 3/16/15 100,000 100,122
3 Federal National Mortgage Assn. 0.500% 7/2/15 263,350 264,182
3 Federal National Mortgage Assn. 2.375% 7/28/15 185,000 190,700
3 Federal National Mortgage Assn. 0.500% 9/28/15 235,750 236,467
3 Federal National Mortgage Assn. 1.625% 10/26/15 146,500 149,730
3,4 Federal National Mortgage Assn. 0.500% 1/29/16 127,000 127,090
3,4 Federal National Mortgage Assn. 0.550% 2/12/16 50,000 50,005
3,4 Federal National Mortgage Assn. 0.580% 2/26/16 167,300 167,345
3 Federal National Mortgage Assn. 0.500% 3/30/16 202,250 202,400
3 Federal National Mortgage Assn. 2.375% 4/11/16 85,250 88,752
3,4 Federal National Mortgage Assn. 0.750% 9/27/16 82,600 82,570
3,4 Federal National Mortgage Assn. 0.625% 10/25/16 100,000 99,526
3,4 Federal National Mortgage Assn. 1.000% 2/13/17 73,445 73,460
3 Federal National Mortgage Assn. 5.000% 2/13/17 6,000 6,750
3 Federal National Mortgage Assn. 5.000% 5/11/17 33,000 37,239
3,4 Federal National Mortgage Assn. 1.000% 8/14/17 35,000 34,800
3,4 Federal National Mortgage Assn. 1.070% 9/27/17 27,000 26,783
3 Federal National Mortgage Assn. 0.875% 10/26/17 73,500 72,579
3,4 Federal National Mortgage Assn. 1.000% 11/28/17 20,500 20,296
3 Federal National Mortgage Assn. 0.875% 2/8/18 44,000 43,282
3,4 Federal National Mortgage Assn. 1.200% 2/22/18 24,750 24,504
3,4 Federal National Mortgage Assn. 1.150% 2/28/18 80,000 78,865
3,4 Federal National Mortgage Assn. 1.200% 2/28/18 33,000 32,765
3,4 Federal National Mortgage Assn. 1.200% 2/28/18 50,000 49,409
3,4 Federal National Mortgage Assn. 1.000% 4/30/18 2,128 2,078
3,4 Federal National Mortgage Assn. 1.030% 5/21/18 40,000 39,199
3,4 Federal National Mortgage Assn. 1.250% 9/27/18 10,000 9,859
3 Federal National Mortgage Assn. 1.625% 11/27/18 21,750 21,761
3 Federal National Mortgage Assn. 1.875% 2/19/19 85,000 85,743
3 Federal National Mortgage Assn. 0.000% 10/9/19 130,000 112,817
          3,877,385
Conventional Mortgage-Backed Securities (10.2%)        
3,4 Fannie Mae Pool 2.000% 10/1/27–2/1/29 12,845 12,578
3,4,5 Fannie Mae Pool 2.500% 12/1/27–2/1/29 76,375 76,709
3,4,5 Fannie Mae Pool 3.000% 12/1/20–2/1/29 73,681 76,038
3,4,5 Fannie Mae Pool 3.500% 8/1/24–2/1/29 53,764 56,795
3,4 Fannie Mae Pool 4.000% 3/1/14–2/1/44 44,994 48,108
3,4 Fannie Mae Pool 4.500% 7/1/14–10/1/25 28,118 30,170
3,4,5 Fannie Mae Pool 5.000% 5/1/14–2/1/29 23,333 25,010
3,4,5 Fannie Mae Pool 5.500% 5/1/14–2/1/29 12,856 13,788
3,4 Fannie Mae Pool 6.000% 4/1/14–5/1/24 1,129 1,218
3,4 Fannie Mae Pool 6.500% 8/1/16–9/1/16 1,866 1,967
3,4 Fannie Mae Pool 7.500% 3/1/15–8/1/15 24 25
3,4 Fannie Mae Pool 8.000% 10/1/14–9/1/15 183 187
3,4 Freddie Mac Gold Pool 2.000% 5/1/28–9/1/28 10,837 10,593
3,4 Freddie Mac Gold Pool 2.500% 6/1/22–8/1/28 43,428 43,673
3,4,5 Freddie Mac Gold Pool 3.000% 2/1/29 45,000 46,378
3,4,5 Freddie Mac Gold Pool 3.500% 6/1/21–2/1/29 34,400 36,183
3,4 Freddie Mac Gold Pool 4.000% 1/1/15–9/1/26 24,599 26,227

 

34

 

Short-Term Federal Fund        
 
 
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
3,4 Freddie Mac Gold Pool 4.500% 5/1/18–9/1/26 17,466 18,687
3,4 Freddie Mac Gold Pool 5.000% 4/1/14–6/1/25 9,965 10,709
3,4 Freddie Mac Gold Pool 5.500% 8/1/14–9/1/21 368 388
3,4 Freddie Mac Gold Pool 6.000% 10/1/18 139 145
        535,576
Total U.S. Government and Agency Obligations (Cost $5,171,458)   5,174,229
 
      Shares  
Temporary Cash Investment (7.4%)        
Money Market Fund (7.4%)        
6 Vanguard Market Liquidity Fund        
(Cost $389,662) 0.130%   389,662,197 389,662
Total Investments (105.9%) (Cost $5,561,120)       5,563,891
 
    Expiration    
    Date Contracts  
Liability for Options Written (0.0%)        
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price $124.50   2/21/14 166 (244)
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price $125.50   2/21/14 167 (128)
Put Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price $122.50   2/21/14 333 (10)
Total Liability for Options Written (Premiums received $215)     (382)
Other Assets and Liabilities (-5.9%)        
Other Assets       61,198
Other Liabilities       (368,620)
        (307,422)
Net Assets (100%)       5,256,087
 
 
At January 31, 2014, net assets consisted of:        
        Amount
        ($000)
Paid-in Capital       5,263,868
Undistributed Net Investment Income      
Accumulated Net Realized Losses       (9,764)
Unrealized Appreciation (Depreciation)        
Investment Securities       2,771
Futures Contracts       (621)
Options on Futures Contracts       (167)
Net Assets       5,256,087

 

35

 

Short-Term Federal Fund  
 
 
 
  Amount
  ($000)
Investor Shares—Net Assets  
Applicable to 97,936,893 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 1,051,398
Net Asset Value Per Share—Investor Shares $10.74
 
Admiral Shares—Net Assets  
Applicable to 391,663,479 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 4,204,689
Net Asset Value Per Share—Admiral Shares $10.74

 

See Note A in Notes to Financial Statements.
1 Securities with a value of $5,120,000 have been segregated as initial margin for open futures contracts.
2 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
3 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
4 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.
5 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of January 31, 2014.
6 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 accompany Notes, which are an integral part of the Financial Statements.

36

 

Short-Term Federal Fund  
 
 
 
Statement of Assets and Liabilities  
As of January 31, 2014  
 
  Amount
  ($000)
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers 5,174,229
Affiliated Vanguard Funds 389,662
Total Investment in Securities 5,563,891
Receivables for Investment Securities Sold 45,263
Other Assets 15,935
Total Assets 5,625,089
Liabilities  
Payables for Investment Securities Purchased 354,577
Option Contracts Written 382
Other Liabilities 14,043
Total Liabilities 369,002
Net Assets 5,256,087

 

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

37

 

Short-Term Federal Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Interest1 40,602
Total Income 40,602
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 523
Management and Administrative—Investor Shares 2,391
Management and Administrative—Admiral Shares 2,435
Marketing and Distribution—Investor Shares 460
Marketing and Distribution—Admiral Shares 1,017
Custodian Fees 118
Auditing Fees 34
Shareholders’ Reports—Investor Shares 40
Shareholders’ Reports—Admiral Shares 18
Trustees’ Fees and Expenses 5
Total Expenses 7,041
Net Investment Income 33,561
Realized Net Gain (Loss)  
Investment Securities Sold (9,135)
Futures Contracts 481
Options on Futures Contracts (180)
Realized Net Gain (Loss) (8,834)
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (9,893)
Futures Contracts (678)
Options on Futures Contracts (176)
Change in Unrealized Appreciation (Depreciation) (10,747)
Net Increase (Decrease) in Net Assets Resulting from Operations 13,980
1 Interest income from an affiliated company of the fund was $113,000.  

 

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

38

 

Short-Term Federal Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 33,561 35,915
Realized Net Gain (Loss) (8,834) 60,928
Change in Unrealized Appreciation (Depreciation) (10,747) (50,894)
Net Increase (Decrease) in Net Assets Resulting from Operations 13,980 45,949
Distributions    
Net Investment Income    
Investor Shares (8,218) (11,919)
Admiral Shares (25,343) (23,996)
Realized Capital Gain1    
Investor Shares (1,032) (25,183)
Admiral Shares (2,115) (44,423)
Total Distributions (36,708) (105,521)
Capital Share Transactions    
Investor Shares (825,235) (376,391)
Admiral Shares 427,949 349,598
Net Increase (Decrease) from Capital Share Transactions (397,286) (26,793)
Total Increase (Decrease) (420,014) (86,365)
Net Assets    
Beginning of Period 5,676,101 5,762,466
End of Period 5,256,087 5,676,101

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $1,049,000 and $50,615,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

39

 

Short-Term Federal Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.78 $10.89 $10.77 $10.81 $10.81
Investment Operations          
Net Investment Income . 058 .061 .106 .163 .253
Net Realized and Unrealized Gain (Loss)          
on Investments (.034) .022 .225 .104 .174
Total from Investment Operations .024 .083 .331 .267 .427
Distributions          
Dividends from Net Investment Income (.058) (. 061) (.106) (.163) (. 253)
Distributions from Realized Capital Gains (. 006) (.132) (.105) (.144) (.174)
Total Distributions (. 064) (.193) (. 211) (. 307) (.427)
Net Asset Value, End of Period $10.74 $10.78 $10.89 $10.77 $10.81
 
Total Return1 0.22% 0.76% 3.09% 2.50% 4.01%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $1,051 $1,884 $2,282 $2,465 $2,542
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.22% 0.22%
Ratio of Net Investment Income to          
Average Net Assets 0.54% 0.56% 0.97% 1.49% 2.29%
Portfolio Turnover Rate 418%2 436%2 411%2 211%2 370%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Includes 87%, 139%, 149%, and 16% attributable to mortgage-dollar-roll activity.

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

40

 

Short-Term Federal Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.78 $10.89 $10.77 $10.81 $10.81
Investment Operations          
Net Investment Income . 069 . 071 .117 .176 .264
Net Realized and Unrealized Gain (Loss)          
on Investments (.034) .022 .225 .104 .174
Total from Investment Operations .035 .093 . 342 . 280 .438
Distributions          
Dividends from Net Investment Income (.069) (.071) (.117) (.176) (. 264)
Distributions from Realized Capital Gains (. 006) (.132) (.105) (.144) (.174)
Total Distributions (.075) (. 203) (. 222) (. 320) (. 438)
Net Asset Value, End of Period $10.74 $10.78 $10.89 $10.77 $10.81
 
Total Return 0.33% 0.86% 3.20% 2.62% 4.12%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $4,205 $3,792 $3,481 $3,419 $2,751
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.12%
Ratio of Net Investment Income to          
Average Net Assets 0.64% 0.66% 1.07% 1.61% 2.39%
Portfolio Turnover Rate 418%1 436%1 411%1 211%1 370%
1 Includes 87%, 139%, 149%, and 16% attributable to mortgage-dollar-roll activity.      

 

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

41

 

Short-Term Federal Fund

Notes to Financial Statements

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

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate 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 futures gains (losses).

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 12% and 9% of net assets, respectively, based on quarterly average aggregate settlement values.

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Short-Term Federal Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written each represented less than 1% of net assets, based on quarterly average market values.

3. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for settlement at a future date. The fund may enter into TBA sells to reduce its exposure to the mortgage-backed securities market or in order to dispose of mortgage-backed securities it owns under delayed-delivery arrangements. For TBA purchases, the fund maintains cash or short-term investments until settlement date in an amount sufficient to meet the purchase price.

4. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are typically invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities sold, and is compensated by interest earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities. The primary risk associated with mortgage dollar rolls is that a counterparty will default on its obligations. This risk is mitigated by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counterparties, and monitoring exposure to each counterparty.

5. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral. The fund had no open repurchase agreements at January 31, 2014.

6. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

7. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

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Short-Term Federal Fund

8. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

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

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $580,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.23% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 5,174,229
Temporary Cash Investments 389,662
Futures Contracts—Assets1 161
Futures Contracts—Liabilities1 (756)
Liability for Options Written (382)
Total 388,685 5,174,229
1 Represents variation margin on the last day of the reporting period.      

 

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Short-Term Federal Fund

D. At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
2-Year U.S. Treasury Note March 2014 3,018 664,573 479
5-Year U.S. Treasury Note March 2014 (3,187) (384,432) (430)
10-Year U.S. Treasury Note March 2014 (717) (90,163) (590)
30-Year U.S. Treasury Bond March 2014 (21) (2,805) (86)
Ultra Long U.S. Treasury Bond March 2014 1 144 6
        (621)

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

For tax purposes, at January 31, 2014, the fund had available capital losses totaling $9,541,000 that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2014, the cost of investment securities for tax purposes was $5,561,906,000. Net unrealized appreciation of investment securities for tax purposes was $1,985,000, consisting of unrealized gains of $12,624,000 on securities that had risen in value since their purchase and $10,639,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $17,705,022,000 of investment securities and sold $18,305,865,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2014:

    Premiums
  Number of Received
Options Contracts ($000)
Balance at January 31, 2013 308 206
Options written 2,353 1,016
Options expired
Options closed (1,995) (1,007)
Options exercised
Options open at January 31, 2014 666 215

 

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Short-Term Federal Fund

G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 324,424 30,197 573,060 52,754
Issued in Lieu of Cash Distributions 8,470 789 34,055 3,148
Redeemed (1,158,129) (107,862) (983,506) (90,627)
Net Increase (Decrease)—Investor Shares (825,235) (76,876) (376,391) (34,725)
Admiral Shares        
Issued 1,918,315 178,720 1,591,410 146,547
Issued in Lieu of Cash Distributions 23,765 2,213 60,955 5,633
Redeemed (1,514,131) (141,098) (1,302,767) (119,969)
Net Increase (Decrease) —Admiral Shares 427,949 39,835 349,598 32,211

 

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

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Intermediate-Term Treasury Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor Admiral
  Shares Shares
Ticker Symbol VFITX VFIUX
Expense Ratio1 0.20% 0.10%
30-Day SEC Yield 1.59% 1.69%
 
Financial Attributes      
 
    Barclays Barclays
    5–10 Year Aggregate
    Treasury Bond
  Fund Index Index
Number of Bonds 61 57 8,727
Yield to Maturity      
(before expenses) 1.6% 2.1% 2.3%
Average Coupon 1.8% 2.4% 3.3%
Average Duration 5.2 years 6.6 years 5.5 years
Average Effective      
Maturity 5.6 years 7.1 years 7.6 years
Short-Term      
Reserves 0.4%
 
 
Sector Diversification (% of portfolio)  
Treasury/Agency     100.0%

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  5–10 Year Aggregate
  Treasury Bond
  Index Index
R-Squared 0.97 0.86
Beta 0.74 1.21

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 0.4%
1 - 3 Years 0.3
3 - 5 Years 49.7
5 - 7 Years 28.7
7 - 10 Years 20.9

 

Distribution by Credit Quality (% of portfolio)

U.S. Government 100.0%

For information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

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Intermediate-Term Treasury Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Intermediate-Term Treasury Fund        
Investor Shares -0.74% 3.73% 4.69% $15,814
Barclays U.S. 5–10 Year Treasury Bond        
••••••••        
Index -1.47 4.08 5.11 16,461
 
 
– – – – General U.S. Treasury Funds Average -2.13 3.83 4.84 16,035
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    

 

        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Intermediate-Term Treasury Fund Admiral        
Shares -0.64% 3.84% 4.82% $80,092
Barclays U.S. 5–10 Year Treasury Bond Index -1.47 4.08 5.11 82,304
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

48

 

Intermediate-Term Treasury Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        5–10 Year
        Treasury
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 4.48% -1.34% 3.14% 3.61%
2006 4.55 -3.14 1.41 1.05
2007 4.69 -1.47 3.22 3.04
2008 4.98 8.70 13.68 14.13
2009 3.88 3.41 7.29 9.48
2010 3.10 -0.39 2.71 0.47
2011 2.70 2.89 5.59 6.69
2012 2.11 8.25 10.36 13.95
2013 1.34 -0.24 1.10 1.46
2014 1.47 -2.21 -0.74 -1.47

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 10/28/1991 -3.09% 2.89% 3.34% 1.26% 4.60%
Admiral Shares 2/12/2001 -2.99 3.00 3.48 1.26 4.74

 

49

 

Intermediate-Term Treasury Fund

Financial Statements

Statement of Net Assets
As of January 31, 2014

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

      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
U.S. Government and Agency Obligations (99.3%)        
U.S. Government Securities (99.3%)        
United States Treasury Note/Bond 0.375% 1/31/16 15,000 15,012
United States Treasury Note/Bond 0.875% 2/28/17 31,000 31,116
United States Treasury Note/Bond 3.000% 2/28/17 29,000 30,976
United States Treasury Note/Bond 3.250% 3/31/17 20,000 21,538
United States Treasury Note/Bond 0.625% 5/31/17 31,000 30,758
United States Treasury Note/Bond 2.750% 5/31/17 199,000 211,282
United States Treasury Note/Bond 2.500% 6/30/17 53,000 55,832
United States Treasury Note/Bond 0.500% 7/31/17 26,000 25,610
United States Treasury Note/Bond 2.375% 7/31/17 68,000 71,336
United States Treasury Note/Bond 1.875% 8/31/17 172,000 177,483
United States Treasury Note/Bond 0.625% 9/30/17 116,000 114,405
United States Treasury Note/Bond 1.875% 9/30/17 231,000 238,182
United States Treasury Note/Bond 0.750% 10/31/17 15,000 14,838
United States Treasury Note/Bond 1.875% 10/31/17 140,000 144,332
United States Treasury Note/Bond 0.750% 12/31/17 5,000 4,931
United States Treasury Note/Bond 0.875% 1/31/18 56,000 55,414
United States Treasury Note/Bond 2.625% 1/31/18 43,000 45,526
United States Treasury Note/Bond 0.750% 2/28/18 82,000 80,616
United States Treasury Note/Bond 0.750% 3/31/18 10,000 9,816
United States Treasury Note/Bond 0.625% 4/30/18 42,000 40,950
United States Treasury Note/Bond 1.000% 5/31/18 32,000 31,640
United States Treasury Note/Bond 1.375% 6/30/18 8,838 8,866
United States Treasury Note/Bond 2.375% 6/30/18 119,500 125,102
United States Treasury Note/Bond 2.250% 7/31/18 329,000 342,469
United States Treasury Note/Bond 1.500% 8/31/18 53,500 53,834
United States Treasury Note/Bond 1.375% 9/30/18 253,000 252,803
United States Treasury Note/Bond 1.375% 11/30/18 63,000 62,843
United States Treasury Note/Bond 1.375% 12/31/18 10,000 9,959
United States Treasury Note/Bond 1.500% 12/31/18 233,000 233,291
United States Treasury Note/Bond 1.250% 1/31/19 61,000 60,275
United States Treasury Note/Bond 1.500% 1/31/19 37,000 37,011
United States Treasury Note/Bond 1.375% 2/28/19 15,000 14,888
United States Treasury Note/Bond 1.500% 3/31/19 96,000 95,701
United States Treasury Note/Bond 1.250% 4/30/19 45,000 44,213
United States Treasury Note/Bond 1.000% 6/30/19 20,000 19,309
United States Treasury Note/Bond 0.875% 7/31/19 60,000 57,440
United States Treasury Note/Bond 1.000% 8/31/19 24,000 23,074

 

50

 

Intermediate-Term Treasury Fund        
 
 
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
United States Treasury Note/Bond 1.000% 9/30/19 94,000 90,240
United States Treasury Note/Bond 1.125% 12/31/19 111,000 106,664
United States Treasury Note/Bond 1.250% 2/29/20 24,000 23,134
United States Treasury Note/Bond 1.125% 3/31/20 26,000 24,822
United States Treasury Note/Bond 1.125% 4/30/20 11,000 10,479
United States Treasury Note/Bond 1.375% 5/31/20 8,000 7,726
United States Treasury Note/Bond 1.875% 6/30/20 6,000 5,967
United States Treasury Note/Bond 2.625% 8/15/20 98,500 102,363
United States Treasury Note/Bond 2.125% 8/31/20 13,000 13,087
United States Treasury Note/Bond 2.000% 9/30/20 3,500 3,491
United States Treasury Note/Bond 1.750% 10/31/20 80,000 78,387
1 United States Treasury Note/Bond 2.625% 11/15/20 601,000 623,165
United States Treasury Note/Bond 2.000% 11/30/20 12,500 12,430
United States Treasury Note/Bond 2.125% 8/15/21 142,500 141,209
United States Treasury Note/Bond 2.000% 11/15/21 108,500 106,041
United States Treasury Note/Bond 2.000% 2/15/22 111,000 107,930
United States Treasury Note/Bond 1.750% 5/15/22 63,000 59,771
United States Treasury Note/Bond 1.625% 8/15/22 72,000 67,208
United States Treasury Note/Bond 1.625% 11/15/22 170,000 157,835
United States Treasury Note/Bond 2.000% 2/15/23 100,000 95,484
United States Treasury Note/Bond 1.750% 5/15/23 280,100 260,275
United States Treasury Note/Bond 2.500% 8/15/23 45,400 44,925
United States Treasury Note/Bond 2.750% 11/15/23 16,000 16,137
        5,051,441
Conventional Mortgage-Backed Securities (0.0%)        
2,3 Freddie Mac Gold Pool 7.000% 5/1/15–3/1/16 61 64
Total U.S. Government and Agency Obligations (Cost $5,027,655)   5,051,505
 
      Shares  
Temporary Cash Investment (0.5%)        
4Money Market Fund (0.5%)        
Vanguard Market Liquidity Fund        
(Cost $24,819) 0.130%   24,819,102 24,819
Total Investments (99.8%) (Cost $5,052,474)       5,076,324
 
    Expiration    
    Date Contracts  
Liability for Options Written (0.0%)        
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 124.50   2/21/14 159 (234)
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 125.50   2/21/14 161 (123)
Put Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 122.50   2/21/14 320 (10)
Total Liability for Options Written (Premiums received $206)     (367)
Other Assets and Liabilities (0.2%)        
Other Assets       96,724
Other Liabilities       (84,104)
        12,620
Net Assets (100%)       5,088,577

 

51

 

Intermediate-Term Treasury Fund  
 
 
 
At January 31, 2014, net assets consisted of:  
  Amount
  ($000)
Paid-in Capital 5,054,480
Undistributed Net Investment Income
Accumulated Net Realized Gains 10,815
Unrealized Appreciation (Depreciation)  
Investment Securities 23,850
Futures Contracts (407)
Options on Futures Contracts (161)
Net Assets 5,088,577
 
 
Investor Shares—Net Assets  
Applicable to 130,120,996 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 1,469,308
Net Asset Value Per Share—Investor Shares $11.29
 
 
Admiral Shares—Net Assets  
Applicable to 320,520,221 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 3,619,269
Net Asset Value Per Share—Admiral Shares $11.29

 

See Note A in Notes to Financial Statements.
1 Securities with a value of $2,367,000 have been segregated as initial margin for open futures contracts.
2 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
3 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.

52

 

Intermediate-Term Treasury Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Interest1 93,502
Total Income 93,502
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 537
Management and Administrative—Investor Shares 2,623
Management and Administrative—Admiral Shares 2,572
Marketing and Distribution—Investor Shares 477
Marketing and Distribution—Admiral Shares 842
Custodian Fees 66
Auditing Fees 34
Shareholders’ Reports—Investor Shares 45
Shareholders’ Reports—Admiral Shares 21
Trustees’ Fees and Expenses 6
Total Expenses 7,223
Net Investment Income 86,279
Realized Net Gain (Loss)  
Investment Securities Sold 37,300
Futures Contracts (545)
Options on Futures Contracts (188)
Realized Net Gain (Loss) 36,567
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (167,486)
Futures Contracts (23)
Options on Futures Contracts (171)
Change in Unrealized Appreciation (Depreciation) (167,680)
Net Increase (Decrease) in Net Assets Resulting from Operations (44,834)
1 Interest income from an affiliated company of the fund was $9,000.  

 

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

53

 

Intermediate-Term Treasury Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 86,279 88,910
Realized Net Gain (Loss) 36,567 74,596
Change in Unrealized Appreciation (Depreciation) (167,680) (89,318)
Net Increase (Decrease) in Net Assets Resulting from Operations (44,834) 74,188
Distributions    
Net Investment Income    
Investor Shares (24,769) (29,937)
Admiral Shares (61,510) (58,973)
Realized Capital Gain1    
Investor Shares (7,344) (28,688)
Admiral Shares (17,593) (52,996)
Total Distributions (111,216) (170,594)
Capital Share Transactions    
Investor Shares (384,585) (450,758)
Admiral Shares (384,439) 61,210
Net Increase (Decrease) from Capital Share Transactions (769,024) (389,548)
Total Increase (Decrease) (925,074) (485,954)
Net Assets    
Beginning of Period 6,013,651 6,499,605
End of Period 5,088,577 6,013,651

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $0 and $52,317,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

54

 

Intermediate-Term Treasury Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $11.60 $11.78 $11.34 $11.28 $11.78
Investment Operations          
Net Investment Income .170 .156 .226 .299 .356
Net Realized and Unrealized Gain (Loss)          
on Investments (.256) (.028) .931 .323 (.050)
Total from Investment Operations (.086) .128 1.157 .622 .306
Distributions          
Dividends from Net Investment Income (.170) (.156) (.226) (.299) (.354)
Distributions from Realized Capital Gains (.054) (.152) (.491) (.263) (.452)
Total Distributions (.224) (.308) (.717) (.562) (.806)
Net Asset Value, End of Period $11.29 $11.60 $11.78 $11.34 $11.28
 
Total Return1 -0.74% 1.10% 10.36% 5.59% 2.71%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $1,469 $1,902 $2,385 $2,259 $2,420
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.22% 0.25%
Ratio of Net Investment Income to          
Average Net Assets 1.48% 1.33% 1.92% 2.58% 3.08%
Portfolio Turnover Rate 42% 117%2 273%2 80% 109%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Includes 64% and 119% attributable to mortgage-dollar-roll activity in 2013 and 2012, respectively.

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

55

 

Intermediate-Term Treasury Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $11.60 $11.78 $11.34 $11.28 $11.78
Investment Operations          
Net Investment Income .181 .168 .237 .313 .371
Net Realized and Unrealized Gain (Loss)          
on Investments (.256) (.028) .931 .323 (.050)
Total from Investment Operations (.075) .140 1.168 .636 .321
Distributions          
Dividends from Net Investment Income (.181) (.168) (.237) (.313) (.369)
Distributions from Realized Capital Gains (.054) (.152) (.491) (.263) (.452)
Total Distributions (.235) (.320) (.728) (.576) (.821)
Net Asset Value, End of Period $11.29 $11.60 $11.78 $11.34 $11.28
 
Total Return -0.64% 1.20% 10.47% 5.72% 2.84%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $3,619 $4,112 $4,115 $4,101 $3,556
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.12%
Ratio of Net Investment Income to          
Average Net Assets 1.58% 1.43% 2.02% 2.70% 3.21%
Portfolio Turnover Rate 42% 117%1 273%1 80% 109%
1 Includes 64% and 119% attributable to mortgage-dollar-roll activity in 2013 and 2012, respectively.    

 

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

56

 

Intermediate-Term Treasury Fund

Notes to Financial Statements

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

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 3% and 2% of net assets, respectively, based on quarterly average aggregate settlement values.

57

 

Intermediate-Term Treasury Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written each represented less than 1% of net assets, based on quarterly average market values.

3. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral. The fund had no open repurchase agreements at January 31, 2014.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

5. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

6. Other: Interest income includes distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

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

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $557,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.22% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

58

 

Intermediate-Term Treasury Fund

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 5,051,505
Temporary Cash Investments 24,819
Futures Contracts—Assets1 64
Futures Contracts—Liabilities1 (230)
Liability for Options Written (367)
Total 24,286 5,051,505
1 Represents variation margin on the last day of the reporting period.      

 

D. At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
10-Year U. S. Treasury Note March 2014 (320) (40,240) (407)

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $4,889,000 from accumulated net realized gains to paid-in capital.

For tax purposes, at January 31, 2014, the fund had $11,972,000 of long-term capital gains available for distribution.

59

 

Intermediate-Term Treasury Fund

At January 31, 2014, the cost of investment securities for tax purposes was $5,054,199,000. Net unrealized appreciation of investment securities for tax purposes was $22,125,000, consisting of unrealized gains of $76,390,000 on securities that had risen in value since their purchase and $54,265,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $2,310,604,000 of investment securities and sold $3,055,772,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2014.

        Premiums
    Number of Received
Options     Contracts ($000)
Balance at January 31, 2013     328 219
Options written     2,402 1,037
Options expired    
Options closed     (2,090) (1,050)
Options exercised    
Options open at January 31, 2014     640 206
 
G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 289,640 25,287 521,578 44,439
Issued in Lieu of Cash Distributions 29,371 2,579 50,997 4,368
Redeemed (703,596) (61,697) (1,023,333) (87,273)
Net Increase (Decrease)—Investor Shares (384,585) (33,831) (450,758) (38,466)
Admiral Shares        
Issued 749,650 65,584 993,351 84,642
Issued in Lieu of Cash Distributions 65,491 5,753 97,448 8,345
Redeemed (1,199,580) (105,270) (1,029,589) (87,732)
Net Increase (Decrease) —Admiral Shares (384,439) (33,933) 61,210 5,255

 

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

60

 

GNMA Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor Admiral
  Shares Shares
Ticker Symbol VFIIX VFIJX
Expense Ratio1 0.21% 0.11%
30-Day SEC Yield 2.67% 2.77%
 
Financial Attributes      
      Barclays
    Barclays  Aggregate
    GNMA Bond
  Fund Index Index
Number of Bonds 36 143 8,727
Yield to Maturity      
(before expenses) 3.2% 2.6% 2.3%
Average Coupon 3.7% 4.0% 3.3%
Average Duration 5.8 years 5.7 years 5.5 years
Average Effective      
Maturity 8.3 years 8.4 years 7.6 years
Short-Term      
Reserves 1.0%

 

Number of Bonds: Issues are mortgage pools grouped by coupon.

Sector Diversification (% of portfolio)  
Government Mortgage-Backed 99.9%
Treasury/Agency 0.1

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
    Barclays
  Barclays Aggregate
  GNMA Bond
  Index Index
R-Squared 0.97 0.78
Beta 1.05 0.90

 

Distribution by Credit Quality (% of portfolio)
U.S. Government 100.0%
For information about these ratings, see the Glossary entry for
Credit Quality.  
 
 
Distribution by Coupon (% of portfolio)  
Below 5.0% 74.3%
5.0% to 6.0% 17.9
6.0% to 7.0% 7.0
7.0% and Above 0.8

 

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.21% for Investor Shares and 0.11% for Admiral Shares.

61

 

GNMA Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


    Average Annual Total Returns  
    Periods Ended January 31, 2014  
          Final Value
    One Five Ten of a $10,000
    Year Years Years Investment
  GNMA Fund Investor Shares 0.34% 4.39% 4.72% $15,857
•••••••• Barclays U.S. GNMA Bond Index 0.25 4.38 4.82 16,013
 
– – – – GNMA Funds Average -0.60 4.24 4.16 15,028
  Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
GNMA Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
 
          Final Value
    One Five Ten of a $50,000
    Year Years Years Investment
GNMA Fund Admiral Shares 0.44% 4.50% 4.82% $80,068
Barclays U.S. GNMA Bond Index 0.25 4.38 4.82 80,067
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

62

 

GNMA Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        GNMA
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 4.69% -0.38% 4.31% 4.42%
2006 4.69 -1.81 2.88 2.96
2007 5.20 -1.26 3.94 4.27
2008 5.51 3.05 8.56 8.80
2009 5.08 0.57 5.65 5.98
2010 3.94 2.87 6.81 6.78
2011 3.42 2.29 5.71 5.33
2012 3.41 4.55 7.96 8.21
2013 2.61 -1.26 1.35 1.54
2014 2.28 -1.94 0.34 0.25

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 6/27/1980 -2.22% 3.95% 4.09% 0.48% 4.57%
Admiral Shares 2/12/2001 -2.13 4.06 4.19 0.48 4.67

 

63

 

GNMA Fund

Financial Statements

Statement of Net Assets
As of January 31, 2014

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

        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
U.S. Government and Agency Obligations (99.1%)        
Conventional Mortgage-Backed Securities (97.7%)        
1,2,3 Fannie Mae Pool 2.500% 2/1/44 354,100 328,980
1,2 Fannie Mae Pool 2.950% 5/1/28 17,797 16,776
1,2,3 Fannie Mae Pool 3.000% 2/1/44 638,700 620,740
1,2 Fannie Mae Pool 3.360% 11/1/23 12,471 12,571
1,2 Fannie Mae Pool 3.460% 9/1/23 133,822 136,965
1,2,3 Fannie Mae Pool 3.500% 6/1/42–2/1/44 467,529 474,360
1,2 Fannie Mae Pool 3.640% 1/1/24 4,400 4,467
1,2 Fannie Mae Pool 3.665% 1/1/24 38,550 39,303
1,2 Fannie Mae Pool 3.680% 1/1/24 3,492 3,563
1,2 Fannie Mae Pool 3.690% 10/1/42 1,868 1,791
1,2 Fannie Mae Pool 3.740% 8/1/23 15,500 15,886
1,2 Fannie Mae Pool 3.750% 7/1/25 4,800 4,900
1,2 Fannie Mae Pool 3.755% 8/1/25 7,311 7,479
1,2 Fannie Mae Pool 3.790% 8/1/25 2,629 2,700
1,2 Fannie Mae Pool 3.820% 11/1/25 11,333 11,630
1,2 Fannie Mae Pool 3.870% 10/1/25 16,167 16,689
1,2 Fannie Mae Pool 3.910% 11/1/25 13,000 13,371
1,2 Fannie Mae Pool 3.930% 11/1/25 6,000 6,183
1,2 Fannie Mae Pool 3.940% 8/1/25 12,333 12,781
1,2 Fannie Mae Pool 3.990% 9/1/25 9,834 10,024
1,2 Fannie Mae Pool 4.060% 9/1/25–10/1/28 21,748 22,757
1,2 Fannie Mae Pool 4.140% 2/1/29 3,089 3,142
1,2 Fannie Mae Pool 4.150% 10/1/28 11,841 12,319
1,2 Fannie Mae Pool 4.250% 10/1/28–9/1/33 4,985 5,213
1,2 Fannie Mae Pool 4.380% 10/1/28 10,120 10,689
1,2 Fannie Mae Pool 4.400% 8/1/28 2,305 2,439
1,2 Fannie Mae Pool 5.000% 11/1/40–4/1/41 21,248 23,360
1,2 Fannie Mae Pool 5.180% 2/1/26 3,089 3,464
1,2 Fannie Mae Pool 6.000% 7/1/22 16 18
1,2,3 Freddie Mac Gold Pool 3.000% 4/1/42–2/1/44 2,429,803 2,358,686
1,2 Freddie Mac Gold Pool 3.500% 3/1/42–10/1/42 298,133 302,014
1 Ginnie Mae I Pool 2.500% 11/15/42–12/1/43 165,523 157,308
1,3 Ginnie Mae I Pool 3.000% 11/15/41–2/1/44 1,514,097 1,502,189
1 Ginnie Mae I Pool 3.500% 8/15/39–2/1/44 1,249,389 1,288,766
1 Ginnie Mae I Pool 3.750% 7/15/42 6,932 7,253
1 Ginnie Mae I Pool 3.875% 5/15/42–6/15/42 12,413 12,987
1 Ginnie Mae I Pool 4.000% 6/15/19–2/1/44 1,935,844 2,061,469

 

64

 

GNMA Fund        
 
 
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
1 Ginnie Mae I Pool 4.500% 5/15/19–2/1/44 2,248,268 2,446,783
1 Ginnie Mae I Pool 5.000% 1/15/30–2/1/44 1,991,252 2,193,270
1 Ginnie Mae I Pool 5.500% 2/15/14–2/1/44 1,277,851 1,417,245
1 Ginnie Mae I Pool 6.000% 10/15/16–6/15/41 830,451 919,689
1 Ginnie Mae I Pool 6.500% 3/15/14–7/15/40 641,409 709,105
1 Ginnie Mae I Pool 7.000% 11/15/31–11/15/36 113,840 130,385
1 Ginnie Mae I Pool 7.250% 1/15/27–2/15/27 74 76
1 Ginnie Mae I Pool 7.500% 10/15/31 43,838 50,381
1 Ginnie Mae I Pool 7.750% 2/15/27 29 30
1 Ginnie Mae I Pool 8.000% 8/15/31 18,880 21,815
1 Ginnie Mae I Pool 8.500% 5/15/16–6/15/28 3,901 4,080
1 Ginnie Mae I Pool 9.000% 4/15/16–5/15/21 1,911 1,981
1 Ginnie Mae I Pool 9.250% 9/15/16–7/15/17 8 8
1 Ginnie Mae I Pool 9.500% 3/15/16–8/15/21 1,295 1,354
1 Ginnie Mae I Pool 10.000% 2/15/16–7/15/19 31 32
1 Ginnie Mae I Pool 11.000% 2/15/18 3 3
1 Ginnie Mae II Pool 2.500% 4/20/43 34,219 32,500
1 Ginnie Mae II Pool 3.000% 1/20/42–5/20/42 54,300 53,926
1,3 Ginnie Mae II Pool 3.500% 4/20/42–2/1/44 2,300,513 2,368,932
1,3 Ginnie Mae II Pool 4.000% 6/20/39–2/1/44 2,632,667 2,797,220
1,3 Ginnie Mae II Pool 4.500% 12/20/32–2/1/44 2,119,297 2,304,434
1 Ginnie Mae II Pool 5.000% 10/20/32–7/20/42 874,758 965,536
1 Ginnie Mae II Pool 5.500% 1/20/34–7/20/40 97,394 107,618
1 Ginnie Mae II Pool 6.000% 4/20/28–8/20/40 138,136 154,143
1 Ginnie Mae II Pool 6.500% 4/20/37–3/20/41 3,642 4,051
1 Ginnie Mae II Pool 7.000% 10/20/25–5/20/38 410 441
1 Ginnie Mae II Pool 7.500% 6/20/25–8/20/25 252 285
1 Ginnie Mae II Pool 8.000% 12/20/15–4/20/16 17 17
1 Ginnie Mae II Pool 8.500% 4/20/16–1/20/17 192 199
1 Ginnie Mae II Pool 9.000% 6/20/16–9/20/16 49 54
1 Ginnie Mae II Pool 10.000% 11/20/15–8/20/18 15 17
1 Ginnie Mae II Pool 11.000% 7/20/14–2/20/16 2 2
1 Ginnie Mae II Pool 11.250% 9/20/15–2/20/16 14 14
1 Ginnie Mae II Pool 11.500% 9/20/15–11/20/15 2 2
1 Ginnie Mae II Pool 12.000% 6/20/14–12/20/15 7 6
1 Ginnie Mae II Pool 12.500% 6/20/14–7/20/15 1 1
1 Ginnie Mae II Pool 13.500% 9/20/14–10/20/14 1 1
          26,200,868
Nonconventional Mortgage-Backed Securities (1.4%)      
1,2 Fannie Mae REMICS 3.000% 11/25/42–6/25/43 70,350 55,699
1,2 Fannie Mae REMICS 3.500% 7/25/43 18,216 16,374
1,2 Fannie Mae REMICS 6.000% 10/25/28–9/25/32 11,605 12,982
1,2 Freddie Mac REMICS 3.000% 8/15/42–3/15/43 108,843 90,727
1,2 Freddie Mac REMICS 6.000% 4/15/28–11/15/32 36,439 40,815
1,4 Ginnie Mae REMICS 0.357% 2/20/37 9,649 9,571
1 Ginnie Mae REMICS 2.500% 8/16/42–11/20/43 32,321 25,652
1 Ginnie Mae REMICS 3.000% 3/20/43 10,692 9,553
1 Ginnie Mae REMICS 3.500% 7/20/43 23,327 23,010
1 Ginnie Mae REMICS 4.500% 6/20/39 10,892 11,595
1 Ginnie Mae REMICS 5.000% 6/16/37 35,467 38,882
1 Ginnie Mae REMICS 5.500% 1/20/33–8/16/36 30,686 34,424
1 Ginnie Mae REMICS 6.500% 4/20/31 2,919 3,356
          372,640
Total U.S. Government and Agency Obligations (Cost $26,081,018)   26,573,508

 

65

 

GNMA Fund        
 
 
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Temporary Cash Investments (13.4%)        
Repurchase Agreements (4.6%)        
Bank of America Securities, LLC        
(Dated 1/31/14, Repurchase Value $17,200,000,        
collateralized by Federal Home Loan Mortgage        
Corp. 4.000%, 3/1/43, with a value of        
$17,544,000) 0.020% 2/3/14 17,200 17,200
Bank of Montreal        
(Dated 1/31/14, Repurchase Value $50,000,000,        
collateralized by Federal National Mortgage Assn.        
2.500%–3.500%, 11/1/27–8/1/33, with a value of        
$51,514,000) 0.030% 2/3/14 50,000 50,000
Bank of Montreal        
(Dated 1/31/14, Repurchase Value $50,000,000,        
collateralized by U.S. Treasury Note/Bond        
1.375%–1.500%, 1/31/19–5/31/20, with a value        
of $51,000,000) 0.020% 2/3/14 50,000 50,000
Barclays Capital Inc.        
(Dated 1/31/14, Repurchase Value $7,700,000,        
collateralized by U.S. Treasury Note/Bond        
0.750%, 6/30/17, with a value of $7,854,000) 0.020% 2/3/14 7,700 7,700
Citigroup Global Markets Inc.        
(Dated 1/31/14, Repurchase Value $212,700,000,        
collateralized by U.S. Treasury Note/Bond        
1.000%–7.625%, 11/30/15–2/15/31, and        
Federal Home Loan Mortgage Corp. 0.000%,        
1/26/15, with a value of $216,954,000) 0.020% 2/3/14 212,700 212,700
Credit Suisse Securities (USA), LLC        
(Dated 1/31/14, Repurchase Value $4,300,000,        
collateralized by U.S. Treasury Note/Bond        
3.000%, 8/31/16, with a value of $4,387,000) 0.010% 2/3/14 4,300 4,300
HSBC Bank USA        
(Dated 1/31/14, Repurchase Value $69,100,000,        
collateralized by Federal National Mortgage Assn.        
2.500%–4.500%, 11/1/27–1/1/41, with a value of        
$70,486,000) 0.020% 2/3/14 69,100 69,100
HSBC Bank USA        
(Dated 1/31/14, Repurchase Value $175,000,000,        
collateralized by Federal National Mortgage Assn.        
2.500%–4.500%, 11/1/27–6/1/42, with a value of        
$178,504,000) 0.020% 2/3/14 175,000 175,000
RBC Capital Markets LLC        
(Dated 1/31/14, Repurchase Value $60,000,000,        
collateralized by Federal National Mortgage Assn.        
3.500%, 8/1/42, with a value of $61,200,000) 0.020% 2/3/14 60,000 60,000
RBS Securities, Inc.        
(Dated 1/31/14, Repurchase Value $469,501,000,        
collateralized by U.S. Treasury Note/Bond        
0.250%–3.125%, 9/15/15–10/31/20, with a value        
of $478,890,000) 0.020% 2/3/14 469,500 469,500

 

66

 

GNMA Fund        
 
 
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
TD Securities (USA) LLC        
(Dated 1/31/14, Repurchase Value $122,000,000,      
collateralized by Federal Farm Credit Bank        
0.136%–0.190%, 9/22/15–9/12/16,        
Federal Home Loan Bank 0.000%, 1/10/17,      
Federal Home Loan Mortgage Corp.        
0.500%–5.500%, 5/13/16–12/1/43, and        
Federal National Mortgage Assn.        
0.500%–4.000%, 7/2/15–2/1/42, with a value      
of $124,472,000) 0.030% 2/3/14 122,000 122,000
        1,237,500
U.S. Government and Agency Obligations (8.8%)      
United States Treasury Bill 0.025%–0.030% 3/6/14 850,000 849,978
United States Treasury Bill 0.030%–0.031% 4/17/14 1,500,000 1,499,910
        2,349,888
Total Temporary Cash Investments (Cost $3,587,384)     3,587,388
Total Investments (112.5%) (Cost $29,668,402)     30,160,896
Other Assets and Liabilities (-12.5%)        
Other Assets5       2,896,423
Liabilities       (6,244,763)
        (3,348,340)
Net Assets (100%)       26,812,556
 
 
At January 31, 2014, net assets consisted of:        
        Amount
        ($000)
Paid-in Capital       26,613,411
Undistributed Net Investment Income      
Accumulated Net Realized Losses       (303,474)
Unrealized Appreciation (Depreciation)        
Investment Securities       492,494
Futures Contracts       10,125
Net Assets       26,812,556
 
 
Investor Shares—Net Assets        
Applicable to 898,455,211 outstanding $.001 par value shares of      
beneficial interest (unlimited authorization)       9,535,396
Net Asset Value Per Share—Investor Shares       $10.61

 

67

 

GNMA Fund  
 
 
 
  Amount
  ($000)
Admiral Shares—Net Assets  
Applicable to 1,627,908,741 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 17,277,160
Net Asset Value Per Share—Admiral Shares $10.61

 

See Note A in Notes to Financial Statements.
1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments.
2 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
3 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of January 31, 2014.
4 Adjustable-rate security.
5 Cash of $6,837,000 has been segregated as initial margin for open futures contracts.
REMICS—Real Estate Mortgage Investment Conduits.
See accompanying Notes, which are an integral part of the Financial Statements.

68

 

GNMA Fund  
 
 
 
Statement of Assets and Liabilities  
As of January 31, 2014  
 
  Amount
  ($000)
Assets  
Investments in Securities, at Value 30,160,896
Receivables for Investment Securities Sold 2,756,626
Other Assets 139,797
Total Assets 33,057,319
Liabilities  
Payables for Investment Securities Purchased 6,148,053
Other Liabilities 96,710
Total Liabilities 6,244,763
Net Assets 26,812,556

 

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

69

 

GNMA Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Interest 807,898
Total Income 807,898
Expenses  
Investment Advisory Fees—Note B 3,017
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 19,184
Management and Administrative—Admiral Shares 15,699
Marketing and Distribution—Investor Shares 2,742
Marketing and Distribution—Admiral Shares 4,324
Custodian Fees 1,308
Auditing Fees 32
Shareholders’ Reports—Investor Shares 294
Shareholders’ Reports—Admiral Shares 123
Trustees’ Fees and Expenses 70
Total Expenses 46,793
Net Investment Income 761,105
Realized Net Gain (Loss)  
Investment Securities Sold (206,810)
Futures Contracts (44,016)
Realized Net Gain (Loss) (250,826)
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (620,075)
Futures Contracts 11,784
Change in Unrealized Appreciation (Depreciation) (608,291)
Net Increase (Decrease) in Net Assets Resulting from Operations (98,012)

 

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

70

 

GNMA Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 761,105 1,053,577
Realized Net Gain (Loss) (250,826) 423,815
Change in Unrealized Appreciation (Depreciation) (608,291) (900,172)
Net Increase (Decrease) in Net Assets Resulting from Operations (98,012) 577,220
Distributions    
Net Investment Income    
Investor Shares (259,379) (383,317)
Admiral Shares (501,726) (670,260)
Realized Capital Gain1    
Investor Shares (12,113) (157,942)
Admiral Shares (22,747) (277,544)
Total Distributions (795,965) (1,489,063)
Capital Share Transactions    
Investor Shares (3,898,916) (1,084,661)
Admiral Shares (7,266,306) 1,910,789
Net Increase (Decrease) from Capital Share Transactions (11,165,222) 826,128
Total Increase (Decrease) (12,059,199) (85,715)
Net Assets    
Beginning of Period 38,871,755 38,957,470
End of Period 26,812,556 38,871,755

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $6,972,000 and $262,409,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

71

 

GNMA Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.83 $11.09 $10.73 $10.76 $10.53
Investment Operations          
Net Investment Income . 244 . 288 .353 .359 .402
Net Realized and Unrealized Gain (Loss)          
on Investments (.210) (.139) .488 .245 .302
Total from Investment Operations .034 .149 .841 .604 .704
Distributions          
Dividends from Net Investment Income (.244) (.288) (. 353) (. 359) (. 402)
Distributions from Realized Capital Gains (. 010) (.121) (.128) (.275) (.072)
Total Distributions (. 254) (. 409) (. 481) (. 634) (. 474)
Net Asset Value, End of Period $10.61 $10.83 $11.09 $10.73 $10.76
 
Total Return1 0.34% 1.35% 7.96% 5.71% 6.81%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $9,535 $13,745 $15,151 $14,384 $17,800
Ratio of Total Expenses to Average Net Assets 0.21% 0.21% 0.21% 0.23% 0.23%
Ratio of Net Investment Income to          
Average Net Assets 2.31% 2.59% 3.25% 3.26% 3.71%
Portfolio Turnover Rate2 167% 130% 189% 386% 272%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Includes 149%, 82%, 147%, 207%, and 114% attributable to mortgage-dollar-roll activity.

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

72

 

GNMA Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.83 $11.09 $10.73 $10.76 $10.53
Investment Operations          
Net Investment Income .255 .299 .364 .372 .413
Net Realized and Unrealized Gain (Loss)          
on Investments (.210) (.139) .488 .245 .302
Total from Investment Operations .045 .160 .852 .617 .715
Distributions          
Dividends from Net Investment Income (. 255) (. 299) (. 364) (. 372) (. 413)
Distributions from Realized Capital Gains (. 010) (.121) (.128) (.275) (.072)
Total Distributions (. 265) (. 420) (. 492) (. 647) (.485)
Net Asset Value, End of Period $10.61 $10.83 $11.09 $10.73 $10.76
 
Total Return 0.44% 1.45% 8.07% 5.84% 6.92%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $17,277 $25,127 $23,806 $21,612 $18,457
Ratio of Total Expenses to Average Net Assets 0.11% 0.11% 0.11% 0.11% 0.13%
Ratio of Net Investment Income to          
Average Net Assets 2.41% 2.69% 3.35% 3.38% 3.81%
Portfolio Turnover Rate1 167% 130% 189% 386% 272%
1 Includes 149%, 82%, 147%, 207%, and 114% attributable to mortgage-dollar-roll activity.      

 

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

73

 

GNMA Fund

Notes to Financial Statements

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

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate 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 futures gains (losses).

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 5% and less than 1% of net assets, respectively, based on quarterly average aggregate settlement values.

3. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for settlement at a future date. The fund may enter into TBA sells to reduce its exposure to the mortgage-backed securities market or in order to dispose of mortgage-backed securities it owns under delayed-delivery arrangements. For TBA purchases, the fund maintains cash or short-term investments until settlement date in an amount sufficient to meet the purchase price.

74

 

GNMA Fund

4. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are typically invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities sold, and is compensated by interest earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund has also entered into mortgage-dollar-roll transactions in which the fund buys mortgage-backed securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell similar securities in the future at a predetermined price. The securities bought in mortgage-dollar-roll transactions are used to cover an open TBA sell position. The fund continues to earn interest on mortgage-backed security pools already held and receives a lower price on the securities to be sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities. The primary risk associated with mortgage dollar rolls is that a counterparty will default on its obligations. This risk is mitigated by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counterparties, and monitoring exposure to each counterparty.

5. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

6. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

7. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

8. Other: Interest income is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

75

 

GNMA Fund

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

B. Wellington Management Company, LLP, provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the year ended January 31, 2014, the investment advisory fee represented an effective annual rate of 0.01% of the fund’s average net assets.

C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $2,964,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 1.19% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 26,573,508
Temporary Cash Investments 3,587,388
Futures Contracts—Assets1 1,265
Futures Contracts—Liabilities1 (319)
Total 946 30,160,896
1 Represents variation margin on the last day of the reporting period.      

 

76

 

GNMA Fund

E. At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
5-Year U.S. Treasury Note March 2014 8,224 992,020 10,411
10-Year U.S. Treasury Note March 2014 (1,073) (134,930) (801)
30-Year U.S. Treasury Bond March 2014 141 18,837 515
        10,125

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

F. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

For tax purposes, at January 31, 2014, the fund had available capital losses totaling $281,908,000 that may be carried forward indefinitely to offset future net capital gains.

At January 31, 2014, the cost of investment securities for tax purposes was $29,678,663,000. Net unrealized appreciation of investment securities for tax purposes was $482,233,000, consisting of unrealized gains of $655,273,000 on securities that had risen in value since their purchase and $173,040,000 in unrealized losses on securities that had fallen in value since their purchase.

G. During the year ended January 31, 2014, the fund purchased $53,497,440,000 of investment securities and sold $64,430,057,000 of investment securities, other than temporary cash investments.

77

 

GNMA Fund

H. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 1,264,943 117,783 3,293,362 299,020
Issued in Lieu of Cash Distributions 243,253 22,899 481,213 43,736
Redeemed (5,407,112) (510,950) (4,859,236) (440,593)
Net Increase (Decrease)—Investor Shares (3,898,916) (370,268) (1,084,661) (97,837)
Admiral Shares        
Issued 2,486,904 233,395 6,162,379 558,114
Issued in Lieu of Cash Distributions 399,816 37,629 747,975 68,001
Redeemed (10,153,026) (962,409) (4,999,565) (453,956)
Net Increase (Decrease) —Admiral Shares (7,266,306) (691,385) 1,910,789 172,159

 

I. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

78

 

Long-Term Treasury Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor   Admiral
  Shares   Shares
Ticker Symbol VUSTX   VUSUX
Expense Ratio1 0.20%   0.10%
30-Day SEC Yield 3.37%   3.47%
 
Financial Attributes    
 
  Barclays Barclays
    Long  Aggregate
  Treasury Bond
  Fund Index Index
Number of Bonds 25 40 8,727
Yield to Maturity      
(before expenses) 3.4% 3.5% 2.3%
Average Coupon 3.7% 4.0% 3.3%
Average Duration 15.1 years  16.3 years 5.5 years
Average Effective      
Maturity 24.3 years  24.8 years 7.6 years
Short-Term      
Reserves 0.6%
 
 
Sector Diversification (% of portfolio)  
Treasury/Agency     100.0%

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  Long Aggregate
  Treasury Bond
  Index Index
R-Squared 0.99 0.64
Beta 1.01 3.63

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 0.6%
7 - 10 Years 2.8
10 - 20 Years 17.7
20 - 30 Years 78.9

 

Distribution by Credit Quality (% of portfolio)
U.S. Government 100.0%
For information about these ratings, see the Glossary entry for
Credit Quality.  

 

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

79

 

Long-Term Treasury Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Long-Term Treasury Fund Investor        
Shares -4.45% 5.29% 6.11% $18,101
Barclays U.S. Long Treasury Bond        
••••••••        
Index -4.49 5.27 6.33 18,477
 
 
– – – – General U.S. Treasury Funds Average -2.13 3.83 4.84 16,035
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
General U.S. Treasury Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
 
 
        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Long-Term Treasury Fund Admiral Shares -4.36% 5.40% 6.25% $91,677
Barclays U.S. Long Treasury Bond Index -4.49 5.27 6.33 92,384
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

80

 

Long-Term Treasury Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        Long
        Treasury
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 5.27% 2.74% 8.01% 8.56%
2006 4.84 -1.86 2.98 2.93
2007 4.92 -3.12 1.80 2.00
2008 5.27 7.82 13.09 13.58
2009 4.57 4.68 9.25 10.38
2010 3.98 -5.33 -1.35 -2.19
2011 4.03 -0.45 3.58 4.29
2012 4.13 28.40 32.53 32.74
2013 2.73 -2.73 0.00 -0.02
2014 2.97 -7.42 -4.45 -4.49

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 5/19/1986 -13.03% 2.19% 4.25% 1.40% 5.65%
Admiral Shares 2/12/2001 -12.94 2.31 4.39 1.40 5.79

 

81

 

Long-Term Treasury Fund

Financial Statements

Statement of Net Assets
As of January 31, 2014

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

        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
U.S. Government and Agency Obligations (98.2%)        
U.S. Government Securities (98.2%)        
  United States Treasury Note/Bond 2.750% 11/15/23 71,000 71,610
1 United States Treasury Note/Bond 6.000% 2/15/26 62,900 82,832
  United States Treasury Note/Bond 5.500% 8/15/28 4,000 5,118
  United States Treasury Note/Bond 5.250% 11/15/28 51,250 64,094
  United States Treasury Note/Bond 5.250% 2/15/29 112,200 140,408
  United States Treasury Note/Bond 6.125% 8/15/29 10,000 13,647
  United States Treasury Note/Bond 5.375% 2/15/31 111,500 142,528
  United States Treasury Note/Bond 4.500% 2/15/36 84,900 99,173
  United States Treasury Note/Bond 3.500% 2/15/39 154,000 153,470
  United States Treasury Note/Bond 4.250% 5/15/39 61,200 68,869
  United States Treasury Note/Bond 4.375% 11/15/39 148,600 170,472
  United States Treasury Note/Bond 4.625% 2/15/40 71,550 85,268
  United States Treasury Note/Bond 4.375% 5/15/40 109,449 125,592
  United States Treasury Note/Bond 3.875% 8/15/40 253,000 267,823
  United States Treasury Note/Bond 4.250% 11/15/40 43,500 48,951
  United States Treasury Note/Bond 3.750% 8/15/41 80,000 82,700
  United States Treasury Note/Bond 3.125% 11/15/41 37,250 34,223
  United States Treasury Note/Bond 3.125% 2/15/42 125,000 114,668
  United States Treasury Note/Bond 3.000% 5/15/42 103,700 92,650
  United States Treasury Note/Bond 2.750% 8/15/42 210,850 178,299
  United States Treasury Note/Bond 2.750% 11/15/42 322,700 272,278
  United States Treasury Note/Bond 3.125% 2/15/43 103,700 94,578
  United States Treasury Note/Bond 2.875% 5/15/43 123,797 106,988
  United States Treasury Note/Bond 3.750% 11/15/43 12,100 12,421
          2,528,660
Conventional Mortgage-Backed Securities (0.0%)        
2,3 Fannie Mae Pool 6.000% 2/1/26–11/1/28 40 44
Total U.S. Government and Agency Obligations (Cost $2,472,723)   2,528,704
 
        Shares  
Temporary Cash Investment (0.8%)        
Money Market Fund (0.8%)        
4 Vanguard Market Liquidity Fund        
  (Cost $19,809) 0.130%   19,808,821 19,809
Total Investments (99.0%) (Cost $2,492,532)       2,548,513

 

82

 

Long-Term Treasury Fund      
 
 
 
      Market
      Value
  Expiration Contracts ($000)
Liability for Options Written (0.0%)      
Call Options on 10-year U.S. Treasury Note      
Futures Contracts, Strike Price 125.50 2/21/14 80 (61)
Call Options on 10-year U.S. Treasury Note      
Futures Contracts, Strike Price 124.50 2/21/14 78 (114)
Put Options on 10-year U.S. Treasury Note      
Futures Contracts, Strike Price 122.50 2/21/14 158 (5)
Total Liability for Options Written (Premiums Received $101)     (180)
Other Assets and Liabilities (1.0%)      
Other Assets     37,283
Other Liabilities     (10,092)
      27,191
Net Assets (100%)     2,575,524
 
 
At January 31, 2014, net assets consisted of:      
      Amount
      ($000)
Paid-in Capital     2,529,069
Undistributed Net Investment Income    
Accumulated Net Realized Losses     (9,234)
Unrealized Appreciation (Depreciation)      
Investment Securities     55,981
Futures Contracts     (213)
Options on Futures Contracts     (79)
Net Assets     2,575,524
 
 
Investor Shares—Net Assets      
Applicable to 87,651,400 outstanding $.001 par value shares of      
beneficial interest (unlimited authorization)     1,012,685
Net Asset Value Per Share—Investor Shares     $11.55
 
 
Admiral Shares—Net Assets      
Applicable to 135,268,378 outstanding $.001 par value shares of      
beneficial interest (unlimited authorization)     1,562,839
Net Asset Value Per Share—Admiral Shares     $11.55

 

• See Note A in Notes to Financial Statements.
1 Securities with a value of $1,339,000 have been segregated as initial margin for open futures contracts.
2 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
3 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompany Notes, which are an integral part of the Financial Statements.

83

 

Long-Term Treasury Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Interest1 97,726
Total Income 97,726
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 292
Management and Administrative—Investor Shares 1,823
Management and Administrative—Admiral Shares 1,091
Marketing and Distribution—Investor Shares 310
Marketing and Distribution—Admiral Shares 439
Custodian Fees 40
Auditing Fees 31
Shareholders’ Reports—Investor Shares 37
Shareholders’ Reports—Admiral Shares 17
Trustees’ Fees and Expenses 3
Total Expenses 4,083
Net Investment Income 93,643
Realized Net Gain (Loss)  
Investment Securities Sold 30,334
Futures Contracts (2,224)
Options on Futures Contracts (102)
Realized Net Gain (Loss) 28,008
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (277,065)
Futures Contracts (51)
Options on Futures Contracts (85)
Change in Unrealized Appreciation (Depreciation) (277,201)
Net Increase (Decrease) in Net Assets Resulting from Operations (155,550)
1 Interest income from an affiliated company of the fund was $8,000.  

 

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

84

 

Long-Term Treasury Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 93,643 105,008
Realized Net Gain (Loss) 28,008 81,626
Change in Unrealized Appreciation (Depreciation) (277,201) (192,027)
Net Increase (Decrease) in Net Assets Resulting from Operations (155,550) (5,393)
Distributions    
Net Investment Income    
Investor Shares (36,369) (43,251)
Admiral Shares (57,274) (61,757)
Realized Capital Gain1    
Investor Shares (11,456) (39,999)
Admiral Shares (17,337) (55,840)
Total Distributions (122,436) (200,847)
Capital Share Transactions    
Investor Shares (227,010) (189,622)
Admiral Shares (331,808) (12,203)
Net Increase (Decrease) from Capital Share Transactions (558,818) (201,825)
Total Increase (Decrease) (836,804) (408,065)
Net Assets    
Beginning of Period 3,412,328 3,820,393
End of Period 2,575,524 3,412,328

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $0 and $41,971,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

85

 

Long-Term Treasury Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $12.61 $13.32 $10.77 $11.15 $12.21
Investment Operations          
Net Investment Income . 374 .369 .382 .462 .475
Net Realized and Unrealized Gain (Loss)          
on Investments (. 937) (.361) 3.058 (. 046) (. 623)
Total from Investment Operations (.563) .008 3.440 .416 (.148)
Distributions          
Dividends from Net Investment Income (.374) (. 369) (. 382) (. 462) (. 474)
Distributions from Realized Capital Gains (.123) (. 349) (. 508) (. 334) (. 438)
Total Distributions (.497) (.718) (.890) (.796) (.912)
Net Asset Value, End of Period $11.55 $12.61 $13.32 $10.77 $11.15
 
Total Return1 -4.45% 0.00% 32.53% 3.58% -1.35%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $1,013 $1,349 $1,621 $1,244 $1,446
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.22% 0.25%
Ratio of Net Investment Income to          
Average Net Assets 3.14% 2.78% 3.14% 3.98% 4.12%
Portfolio Turnover Rate 44% 105%2 229%2 52% 77%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Includes 61% and 119% attributable to mortgage-dollar-roll activity in 2013 and 2012, respectively.

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

86

 

Long-Term Treasury Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $12.61 $13.32 $10.77 $11.15 $12.21
Investment Operations          
Net Investment Income . 386 .382 .395 .476 .490
Net Realized and Unrealized Gain (Loss)          
on Investments (. 937) (.361) 3.058 (. 046) (. 623)
Total from Investment Operations (.551) .021 3.453 .430 (.133)
Distributions          
Dividends from Net Investment Income (.386) (. 382) (. 395) (. 476) (.489)
Distributions from Realized Capital Gains (.123) (. 349) (. 508) (. 334) (. 438)
Total Distributions (.509) (.731) (.903) (.810) (.927)
Net Asset Value, End of Period $11.55 $12.61 $13.32 $10.77 $11.15
 
Total Return -4.36% 0.10% 32.66% 3.71% -1.23%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $1,563 $2,063 $2,199 $1,567 $1,245
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.12%
Ratio of Net Investment Income to          
Average Net Assets 3.24% 2.88% 3.24% 4.10% 4.25%
Portfolio Turnover Rate 44% 105%1 229%1 52% 77%
1 Includes 61% and 119% attributable to mortgage-dollar-roll activity in 2013 and 2012, respectively.    

 

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

87

 

Long-Term Treasury Fund

Notes to Financial Statements

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

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 3% and 2% of net assets, respectively, based on quarterly average aggregate settlement values.

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Long-Term Treasury Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written each represented less than 1% of net assets based on quarterly average market values.

3. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral. The fund had no open repurchase agreements at January 31, 2014.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

5. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

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

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $270,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.11% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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Long-Term Treasury Fund

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 2,528,704
Temporary Cash Investments 19,809
Futures Contracts—Assets1 21
Futures Contracts—Liabilities1 (93)
Liability for Options Written (180)
Total 19,557 2,528,704
1 Represents variation margin on the last day of the reporting period.      

 

D. At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
10-Year U.S. Treasury Note March 2014 (166) (20,875) (213)

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $14,646,000 from accumulated net realized gains to paid-in capital.

Capital gains required to be distributed in December 2013 included gains realized through October 31, 2013; subsequently the fund realized losses of $7,343,000 which are deferred and will be treated as realized for tax purposes in 2014.

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Long-Term Treasury Fund

At January 31, 2014, the cost of investment securities for tax purposes was $2,494,716,000. Net unrealized appreciation of investment securities for tax purposes was $53,797,000, consisting of unrealized gains of $141,080,000 on securities that had risen in value since their purchase and $87,283,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $1,268,899,000 of investment securities and sold $1,858,696,000 of investment securities, other than temporary cash investments.

The following table summarizes the fund’s options written during the year ended January 31, 2014.

        Premiums
    Number of Received
Options     Contracts ($000)
Balance at January 31, 2013     190 127
Options written     1,285 556
Options expired    
Options closed     (1,159) (582)
Options exercised    
Options open at January 31, 2014     316 101
 
G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 204,038 16,954 397,040 29,677
Issued in Lieu of Cash Distributions 45,077 3,825 78,833 6,045
Redeemed (476,125) (40,104) (665,495) (50,476)
Net Increase (Decrease)—Investor Shares (227,010) (19,325) (189,622) (14,754)
Admiral Shares        
Issued 336,917 28,303 688,926 51,642
Issued in Lieu of Cash Distributions 63,156 5,357 100,113 7,673
Redeemed (731,881) (62,043) (801,242) (60,845)
Net Increase (Decrease)—Admiral Shares (331,808) (28,383) (12,203) (1,503)

 

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

91

 

Report of Independent Registered Public Accounting Firm

To the Trustees of Vanguard Fixed Income Securities Funds and the Shareholders of Vanguard Short-Term Treasury Fund, Vanguard Short-Term Federal Fund, Vanguard Intermediate-Term Treasury Fund, Vanguard GNMA Fund and Vanguard Long-Term Treasury Fund: In our opinion, the accompanying statements of net assets and the statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Short-Term Treasury Fund, Vanguard Short-Term Federal Fund, Vanguard Intermediate-Term Treasury Fund, Vanguard GNMA Fund and Vanguard Long-Term Treasury Fund (constituting separate portfolios of Vanguard Fixed Income Securities Funds, hereafter referred to as the “Funds”) at January 31, 2014, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at January 31, 2014 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 13, 2014

Special 2013 tax information (unaudited) for Vanguard Short-Term Treasury Fund

This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of the Internal Revenue Code.

The fund distributed $6,805,000 as capital gain dividends (from net long-term capital gains) to shareholders during the fiscal year.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund are qualified short-term capital gains.

For nonresident alien shareholders, 100% of income dividends are interest-related dividends.

92

 

Special 2013 tax information (unaudited) for Vanguard Short-Term Federal Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of the
Internal Revenue Code.
The fund distributed $2,098,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the
fund are qualified short-term capital gains.
For nonresident alien shareholders, 96.1% of income dividends are interest-related dividends.

 

Special 2013 tax information (unaudited) for Vanguard Intermediate-Term Treasury Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of the
Internal Revenue Code.
The fund distributed $29,826,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 99.9% of income dividends are interest-related dividends.

 

Special 2013 tax information (unaudited) for Vanguard GNMA Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of the
Internal Revenue Code.
The fund distributed $27,888,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund
are qualified short-term capital gains.
For nonresident alien shareholders, 100% of income dividends are interest-related dividends.

 

Special 2013 tax information (unaudited) for Vanguard Long-Term Treasury Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of the
Internal Revenue Code.
The fund distributed $43,440,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 100% of income dividends are interest-related dividends.

 

93

 

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.

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Six Months Ended January 31, 2014      
  Beginning Ending Expenses
  Account Value Account Value Paid During
  7/31/2013 1/31/2014 Period
Based on Actual Fund Return      
Short-Term Treasury Fund      
Investor Shares $1,000.00 $1,004.89 $1.01
Admiral Shares 1,000.00 1,005.40 0.51
Short-Term Federal Fund      
Investor Shares $1,000.00 $1,006.76 $1.01
Admiral Shares 1,000.00 1,007.27 0.51
Intermediate-Term Treasury Fund      
Investor Shares $1,000.00 $1,009.37 $1.01
Admiral Shares 1,000.00 1,009.87 0.51
GNMA Fund      
Investor Shares $1,000.00 $1,028.84 $1.07
Admiral Shares 1,000.00 1,029.36 0.56
Long-Term Treasury Fund      
Investor Shares $1,000.00 $1,020.70 $1.02
Admiral Shares 1,000.00 1,021.21 0.51

 

95

 

Six Months Ended January 31, 2014      
  Beginning Ending Expenses
  Account Value Account Value Paid During
  7/31/2013 1/31/2014 Period
Based on Hypothetical 5% Yearly Return      
Short-Term Treasury Fund      
Investor Shares $1,000.00 $1,024.20 $1.02
Admiral Shares 1,000.00 1,024.70 0.51
Short-Term Federal Fund      
Investor Shares $1,000.00 $1,024.20 $1.02
Admiral Shares 1,000.00 1,024.70 0.51
Intermediate-Term Treasury Fund      
Investor Shares $1,000.00 $1,024.20 $1.02
Admiral Shares 1,000.00 1,024.70 0.51
GNMA Fund      
Investor Shares $1,000.00 $1,024.15 $1.07
Admiral Shares 1,000.00 1,024.65 0.56
Long-Term Treasury Fund      
Investor Shares $1,000.00 $1,024.20 $1.02
Admiral Shares 1,000.00 1,024.70 0.51

 

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Short-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Short-Term Federal Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Intermediate-Term Treasury Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the GNMA Fund, 0.21% for Investor Shares and 0.11% for Admiral Shares; and for the Long-Term Treasury Fund, 0.20% for Investor Shares and 0.10% 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.

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Glossary

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

Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.

Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.

Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.

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

Credit Quality. Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). “Not Rated” is used to classify securities for which a rating is not available. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under “U.S. Government.” For this report, credit-quality ratings are obtained from Moody’s and S&P, and the higher rating for each issue is used.

Distribution by Coupon. A breakdown of the securities in a fund according to coupon rate—the interest rate that an issuer promises to pay, expressed as an annual percentage of face value. Securities with unusually high coupon rates may be subject to call risk, the possibility that they will be redeemed (or “called”) early by the issuer.

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

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

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

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

Yield to Maturity. The rate of return an investor would receive if the fixed income securities held by a fund were held to their maturity dates.

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The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 180 Vanguard funds.

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

InterestedTrustee1 and Delphi Automotive LLP (automotive components);
  Senior Advisor at New Mountain Capital.
F. William McNabb III  
Born 1957. Trustee Since July 2009. Chairman of the Amy Gutmann
Board. Principal Occupation(s) During the Past Five Born 1949. Trustee Since June 2006. Principal
Years: Chairman of the Board of The Vanguard Group, Occupation(s) During the Past Five Years: President of
Inc., and of each of the investment companies served the University of Pennsylvania; Christopher H. Browne
by The Vanguard Group, since January 2010; Director Distinguished Professor of Political Science, School of
of The Vanguard Group since 2008; Chief Executive Arts and Sciences, and Professor of Communication,
Officer and President of The Vanguard Group, and of Annenberg School for Communication, with secondary
each of the investment companies served by The faculty appointments in the Department of Philosophy,
Vanguard Group, since 2008; Director of Vanguard School of Arts and Sciences, and at the Graduate
Marketing Corporation; Managing Director of The School of Education, University of Pennsylvania;
Vanguard Group (1995–2008). Trustee of the National Constitution Center; Chair
  of the Presidential Commission for the Study of
  Bioethical Issues.
 
IndependentTrustees  
  JoAnn Heffernan Heisen
Emerson U. Fullwood Born 1950. Trustee Since July 1998. Principal
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years: Corporate
Occupation(s) During the Past Five Years: Executive Vice President and Chief Global Diversity Officer
Chief Staff and Marketing Officer for North America (retired 2008) and Member of the Executive
and Corporate Vice President (retired 2008) of Xerox Committee (1997–2008) of Johnson & Johnson
Corporation (document management products and (pharmaceuticals/medical devices/consumer
services); Executive in Residence and 2010 products); Director of Skytop Lodge Corporation
Distinguished Minett Professor at the Rochester (hotels), the University Medical Center at Princeton,
Institute of Technology; Director of SPX Corporation the Robert Wood Johnson Foundation, and the Center
(multi-industry manufacturing), the United Way of for Talent Innovation; Member of the Advisory Board
Rochester, Amerigroup Corporation (managed health of the Maxwell School of Citizenship and Public Affairs
care), the University of Rochester Medical Center, at Syracuse University.
Monroe Community College Foundation, and North  
Carolina A&T University. F. Joseph Loughrey
  Born 1949. Trustee Since October 2009. Principal
Rajiv L. Gupta Occupation(s) During the Past Five Years: President
Born 1945. Trustee Since December 2001.2 and Chief Operating Officer (retired 2009) of Cummins
Principal Occupation(s) During the Past Five Years: Inc. (industrial machinery); Chairman of the Board
Chairman and Chief Executive Officer (retired 2009) of Hillenbrand, Inc. (specialized consumer services),
and President (2006–2008) of Rohm and Haas Co. and of Oxfam America; Director of SKF AB (industrial
(chemicals); Director of Tyco International, Ltd. machinery), Hyster-Yale Materials Handling, Inc.
(diversified manufacturing and services), Hewlett- (forklift trucks), the Lumina Foundation for Education,
Packard Co. (electronic computer manufacturing),  

 

 

and the V Foundation for Cancer Research; Member Executive Officers  
of the Advisory Council for the College of Arts and    
Letters and of the Advisory Board to the Kellogg Glenn Booraem  
Institute for International Studies, both at the Born 1967. Controller Since July 2010. Principal
University of Notre Dame. Occupation(s) During the Past Five Years: Principal
  of The Vanguard Group, Inc.; Controller of each of
Mark Loughridge the investment companies served by The Vanguard
Born 1953. Trustee Since March 2012. Principal Group; Assistant Controller of each of the investment
Occupation(s) During the Past Five Years: Senior Vice companies served by The Vanguard Group (2001–2010).
President and Chief Financial Officer (retired 2013)    
at IBM (information technology services); Fiduciary Thomas J. Higgins  
Member of IBM’s Retirement Plan Committee (2004– Born 1957. Chief Financial Officer Since September
2013); Member of the Council on Chicago Booth. 2008. Principal Occupation(s) During the Past Five
  Years: Principal of The Vanguard Group, Inc.; Chief
Scott C. Malpass Financial Officer of each of the investment companies
Born 1962. Trustee Since March 2012. Principal served by The Vanguard Group; Treasurer of each of
Occupation(s) During the Past Five Years: Chief the investment companies served by The Vanguard
Investment Officer and Vice President at the University Group (1998–2008).  
of Notre Dame; Assistant Professor of Finance at the    
Mendoza College of Business at Notre Dame; Member Kathryn J. Hyatt  
of the Notre Dame 403(b) Investment Committee; Born 1955. Treasurer Since November 2008. Principal
Board Member of TIFF Advisory Services, Inc. Occupation(s) During the Past Five Years: Principal of
(investment advisor); Member of the Investment The Vanguard Group, Inc.; Treasurer of each of the
Advisory Committees of the Financial Industry investment companies served by The Vanguard
Regulatory Authority (FINRA) and of Major League Group; Assistant Treasurer of each of the investment
Baseball. companies served by The Vanguard Group (1988–2008).
 
André F. Perold Heidi Stam  
Born 1952. Trustee Since December 2004. Principal Born 1956. Secretary Since July 2005. Principal
Occupation(s) During the Past Five Years: George Occupation(s) During the Past Five Years: Managing
Gund Professor of Finance and Banking, Emeritus Director of The Vanguard Group, Inc.; General Counsel
at the Harvard Business School (retired 2011); of The Vanguard Group; Secretary of The Vanguard
Chief Investment Officer and Managing Partner of Group and of each of the investment companies
HighVista Strategies LLC (private investment firm); served by The Vanguard Group; Director and Senior
Director of Rand Merchant Bank; Overseer of the Vice President of Vanguard Marketing Corporation.
Museum of Fine Arts Boston.    
  Vanguard Senior ManagementTeam
Alfred M. Rankin, Jr.    
Born 1941. Trustee Since January 1993. Principal Mortimer J. Buckley Chris D. McIsaac
Occupation(s) During the Past Five Years: Chairman, Kathleen C. Gubanich Michael S. Miller
President, and Chief Executive Officer of NACCO Paul A. Heller James M. Norris
Industries, Inc. (housewares/lignite), and of Hyster- Martha G. King Glenn W. Reed
Yale Materials Handling, Inc. (forklift trucks); Chairman John T. Marcante  
of the Board of University Hospitals of Cleveland.    
 
Peter F. Volanakis Chairman Emeritus and Senior Advisor
Born 1955. Trustee Since July 2009. Principal    
Occupation(s) During the Past Five Years: President John J. Brennan  
and Chief Operating Officer (retired 2010) of Corning Chairman, 1996–2009  
Incorporated (communications equipment); Trustee of Chief Executive Officer and President, 1996–2008
Colby-Sawyer College; Member of the Advisory Board    
of the Norris Cotton Cancer Center and of the Advisory Founder  
Board of the Parthenon Group (strategy consulting).    
  John C. Bogle  
  Chairman and Chief Executive Officer, 1974–1996

 

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

 

 

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

 

Connect with Vanguard® > vanguard.com

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With Hearing Impairment > 800-749-7273  
 
This material may be used in conjunction  
with the offering of shares of any Vanguard  
fund only if preceded or accompanied by  
the fund’s current prospectus.  
 
All comparative mutual fund data are from Lipper, a  
Thomson Reuters Company, or Morningstar, Inc., unless  
otherwise noted.  
 
You can obtain a free copy of Vanguard’s proxy voting  
guidelines by visiting vanguard.com/proxyreporting or by  
calling Vanguard at 800-662-2739. The guidelines are  
also available from the SEC’s website, sec.gov. In  
addition, you may obtain a free report on how your fund  
voted the proxies for securities it owned during the 12  
months ended June 30. To get the report, visit either  
vanguard.com/proxyreporting or sec.gov.  
 
You can review and copy information about your fund at  
the SEC’s Public Reference Room in Washington, D.C. To  
find out more about this public service, call the SEC at  
202-551-8090. Information about your fund is also  
available on the SEC’s website, and you can receive  
copies of this information, for a fee, by sending a  
request in either of two ways: via e-mail addressed to  
publicinfo@sec.gov or via regular mail addressed to the  
Public Reference Section, Securities and Exchange  
Commission, Washington, DC 20549-1520.  
 
  © 2014 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
 
  Q320 032014

 


Annual Report | January 31, 2014

Vanguard Corporate Bond Funds


 

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.

Contents  
Your Fund’s Total Returns. 1
Chairman’s Letter. 2
Advisors’ Report. 10
Short-Term Investment-Grade Fund. 16
Intermediate-Term Investment-Grade Fund. 44
Long-Term Investment-Grade Fund. 71
High-Yield Corporate Fund. 92
About Your Fund’s Expenses. 111
Trustees Approve Advisory Arrangement. 113
Glossary. 115

 

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas.
This one is a replica based on an 18th-century British vessel. The HMS Vanguard, another ship of that era, served as the flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.

 

Your Fund’s Total Returns        
 
 
 
 
Fiscal Year Ended January 31, 2014        
 
  30-Day SEC Income Capital Total
  Yield Returns Returns Returns
Vanguard Short-Term Investment-Grade Fund        
Investor Shares 1.56% 1.82% -0.36% 1.46%
Admiral™ Shares 1.66 1.92 -0.36 1.56
Institutional Shares 1.69 1.95 -0.36 1.59
Barclays U.S. 1–5 Year Credit Bond Index       1.78
1–5 Year Investment-Grade Debt Funds Average       0.66
1–5 Year Investment-Grade Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
Vanguard Intermediate-Term Investment-Grade Fund        
Investor Shares 2.81% 3.16% -2.31% 0.85%
Admiral Shares 2.91 3.26 -2.31 0.95
Barclays U.S. 5–10 Year Credit Bond Index       0.53
Spliced Core Bond Funds Average       0.02
For a benchmark description, see the Glossary.        
Spliced Core Bond Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
Vanguard Long-Term Investment-Grade Fund        
Investor Shares 4.51% 4.64% -5.05% -0.41%
Admiral Shares 4.61 4.74 -5.05 -0.31
Barclays U.S. Long Credit A or Better Bond Index       -1.10
Corporate A-Rated Debt Funds Average       0.60
Corporate A-Rated Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
Vanguard High-Yield Corporate Fund        
Investor Shares 4.25% 5.84% -1.31% 4.53%
Admiral Shares 4.35 5.95 -1.31 4.64
Barclays U.S. Corporate High Yield Bond Index       6.77
High Yield Funds Average       5.89
High Yield Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    

 

Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements. Institutional Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria.

1

 


Chairman’s Letter

Dear Shareholder,

Domestic stocks made strong gains during the 12 months ended January 31, 2014, as investors became more confident about the health of the economy. But the broad U.S. taxable bond market was virtually flat. Concerns about when the Federal Reserve might begin to reduce its massive bond-buying program contributed to a rise in yields.

Because bond yields and prices move in opposite directions, U.S. investment-grade bonds as a whole experienced price declines over the fiscal year. Vanguard Long-Term Investment-Grade Fund returned –0.41%; the income that its holdings generated was not enough to offset their steep drop in price. The three other funds managed to finish in positive territory: Vanguard Short-Term Investment-Grade Fund returned 1.46%, Vanguard Intermediate-Term Investment-Grade Fund 0.85%, and Vanguard High-Yield Corporate Fund 4.53%. (Returns noted are for Investor Shares.)

All three investment-grade funds performed roughly in line with or ahead of their benchmark indexes. The Short- and Intermediate-Term Investment-Grade Funds also outperformed their peer groups, but the Long-Term Investment-Grade Fund did not. The High-Yield Corporate Fund lagged its comparative standards.

Falling bond prices pushed the funds’ 30-day SEC yields higher. Compared with a year earlier, Investor Shares of the High-Yield Corporate Fund on

2

 

January 31, 2014, were up 1 basis point (one-hundredth of one percentage point); at the other end of the spectrum, those of the Intermediate-Term Investment-Grade Fund were up 72 basis points.

Before moving on to discuss the markets, I want to mention an important transition at Vanguard. We announced in November that Robert F. Auwaerter, principal and head of Vanguard Fixed Income Group, intends to retire in March 2014. At the conclusion of this letter, I’ll have more to say about Bob’s important contributions to Vanguard during his 32-year career and I’ll introduce his successor, Gregory Davis.

Bond returns were flat as the Fed firmed its strategy

Bond yields moved higher over the 12-month period largely on the outlook for reduced monetary support from the Fed, which ultimately began trimming its bond purchases in January. The broad U.S. taxable bond market returned 0.12%. Credit concerns about issuers including Detroit and Puerto Rico weighed on municipal bonds, which returned –1.07%.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned –1.24%. The Fed’s continued target of 0%–0.25% for short-term interest rates tightly restricted returns of money market funds and savings accounts.

Market Barometer      
    Average Annual Total Returns
    Periods Ended January 31, 2014
  One Three Five
  Year Years Years
Bonds      
Barclays U.S. Aggregate Bond Index (Broad taxable      
market) 0.12% 3.73% 4.93%
Barclays Municipal Bond Index (Broad tax-exempt market) -1.07 5.76 5.54
Citigroup Three-Month U.S. Treasury Bill Index 0.05 0.06 0.09
 
Stocks      
Russell 1000 Index (Large-caps) 22.23% 14.14% 19.84%
Russell 2000 Index (Small-caps) 27.03 14.69 22.26
Russell 3000 Index (Broad U.S. market) 22.60 14.18 20.03
FTSE All-World ex US Index (International) 5.78 3.37 14.38
 
CPI      
Consumer Price Index 1.58% 2.03% 2.07%

 

3

 

U.S. stocks found a groove before January volatility set in

U.S. stocks delivered generous returns in 2013, then slid over the first month of the new year. For the 12 months ended January 31, they produced impressive gains of nearly 23% despite the late reversal.

Strong corporate earnings growth and investors’ willingness to pay for those earnings drove stock markets, which were also buoyed by the Federal Reserve’s easy monetary policy. Nevertheless, equities declined over the period’s final month as investors worried about recent economic developments at home and abroad.

Overall, international stocks advanced about 6% for the 12 months. The developed markets of Europe and the Pacific region posted gains, but concerns about China’s weaker economy hurt stocks and currencies in various emerging-market countries.

For 2014, Vanguard Chief Economist Joe Davis and his team are guarded in their outlook for global stock returns, and their forecast for the bond market remains muted. Although Joe readily acknowledges that such forecasts are accompanied by uncertainty, he writes, “We believe that a long-term, strategic approach with a balanced, diversified, low-cost portfolio can remain a high-value proposition in

Expense Ratios        
Your Fund Compared With Its Peer Group        
  Investor Admiral Institutional Peer Group
  Shares Shares Shares Average
Short-Term Investment-Grade Fund 0.20% 0.10% 0.07% 0.81%
Intermediate-Term Investment-Grade        
Fund 0.20 0.10 0.83
Long-Term Investment-Grade Fund 0.22 0.12 0.93
High-Yield Corporate Fund 0.23 0.13 1.12

 

The fund expense ratios shown are from the prospectus dated February 7, 2014 (May 30, 2013, for High-Yield Corporate Investor and Admiral Shares and Short-Term Investment-Grade Institutional Shares), and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the funds’ expense ratios were: for the Short-Term Investment-Grade Fund, 0.20% for Investor Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Intermediate-Term Investment-Grade Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Long-Term Investment-Grade Fund, 0.22% for Investor Shares and 0.12% for Admiral Shares; and for the High-Yield Corporate Fund, 0.23% for Investor Shares and 0.13% for Admiral Shares. Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2013.

Peer groups: For the Short-Term Investment-Grade Fund, 1–5 Year Investment-Grade Debt Funds; for the Intermediate-Term Investment-Grade Fund, Core Bond Funds; for the Long-Term Investment-Grade Fund, Corporate A-Rated Debt Funds; and for the High-Yield Corporate Fund, High Yield Funds.

4

 

the decade ahead.” (You can read more about our expectations for bond and stock returns in Vanguard’s Economic and Investment Outlook, available at vanguard.com/research.)

Income from the funds’ holdings tempered falling bond prices

The prospect of the Fed’s scaling back its bond-buying sent interest rates higher and bond prices lower, especially for longer-dated and higher-rated securities. Treasuries returned –0.63% for the 12 months. Investment-grade bonds fared

Total Returns  
Ten Years Ended January 31, 2014  
  Average
  Annual Return
Short-Term Investment-Grade Fund Investor Shares 3.63%
Barclays U.S. 1–5 Year Credit Bond Index 4.16
1–5 Year Investment-Grade Debt Funds Average 2.62
1–5 Year Investment-Grade Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
Intermediate-Term Investment-Grade Fund Investor Shares 5.35%
Barclays U.S. 5–10 Year Credit Bond Index 5.77
Spliced Core Bond Funds Average 4.05
For a benchmark description, see the Glossary.  
Spliced Core Bond Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
Long-Term Investment-Grade Fund Investor Shares 6.61%
Barclays U.S. Long Credit A or Better Bond Index 6.23
Corporate A-Rated Debt Funds Average 4.22
Corporate A-Rated Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
High-Yield Corporate Fund Investor Shares 6.83%
Barclays U.S. Corporate High Yield Bond Index 8.49
High Yield Funds Average 6.62
High Yield Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  

 

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

5

 

better, returning 0.51%; their higher coupons provided more of a cushion from falling prices. Corporate issuers also saw greater investor appetite as economic growth picked up, leading their yield spreads versus Treasuries to narrow.

The shorter durations of the Short-Term and Intermediate-Term Investment-Grade Funds compared with their benchmarks added to relative returns. (Duration measures the sensitivity of bond prices to interest rate movements.) The funds’ holdings among financial issuers contributed as well. Regulatory changes and improving balance sheets in this sector helped financials outperform industrials and utilities. Although their holdings in higher-rated bonds detracted, both funds finished roughly in line with their benchmarks and ahead of their peers.

A slightly shorter duration and a larger allocation to financials and lower-rated bonds helped the Long-Term Investment-Grade Fund outpace its benchmark. The fund’s return, however, lagged the average for its peer group, which includes some funds that hold shorter-term bonds.

High-yield corporate bonds performed significantly better than their investment-grade counterparts. However, the High-Yield Corporate Fund’s longer duration and higher-rated holdings, which have served it well under other market conditions, contributed to a

Yields    
    30-Day SEC
  Yields on January 31,
Bond Fund 2013 2014
Short-Term Investment-Grade    
Investor Shares 1.10% 1.56%
Admiral Shares 1.20 1.66
Institutional Shares 1.23 1.69
Intermediate-Term Investment-Grade    
Investor Shares 2.09% 2.81%
Admiral Shares 2.19 2.91
Long-Term Investment-Grade    
Investor Shares 4.12% 4.51%
Admiral Shares 4.22 4.61
High-Yield Corporate    
Investor Shares 4.24% 4.25%
Admiral Shares 4.34 4.35

 

6

 

subpar showing compared with its benchmark. It lagged its peer group as well.

A longer-term lens provides better perspective on performance

Thankfully for bond investors, returns have not always been so low. Even including this year’s poor results, the average annual returns for Investor Shares for the ten years ended January 31, 2014, were 3.63% for the Short-Term Investment-Grade Fund, 5.35% for the Intermediate-Term Investment-Grade Fund, 6.61% for the Long-Term Investment-Grade Fund, and 6.83% for the High-Yield Corporate Fund.

Although only the Long-Term Investment-Grade Fund surpassed its benchmark for the decade, low expense ratios helped Investor Shares of all four funds outpace their peer groups.

An anniversary, a reopening, and an additional advisor

December 2013 marked the 35th anniversary of Vanguard High-Yield Corporate Fund. Since its launch, the fund has been managed by Wellington Management Company, whose stewardship has guided it through innumerable market highs and lows. The result—an annualized return of 8.81% for Investor Shares from inception through January 31, 2014—held fast to the fund’s aim of producing consistent income, relying on its own in-depth, company-by-company credit research to minimize defaults and principal loss. Other Vanguard hallmarks—diversification, low costs, and a focus on the long term—have helped as well.

Also in December, the High-Yield Corporate Fund reopened to new investors. It had closed in May 2012 because of concerns that continued asset growth could impede the advisor’s ability to implement its investment strategies and produce competitive returns. But as cash flow into the fund subsided and market conditions evolved, we decided to reopen it.

A third December development added a second advisor to the Long-Term Investment-Grade Fund. Vanguard Fixed Income Group will manage part of the assets that had been managed solely by Wellington Management Company since the fund’s 1973 inception. We believe that a fund with multiple managers can benefit from the resulting diversity of thought and investment ideas. Although this is the first time we’re using this approach in one of our bond funds, more than a dozen of our actively managed U.S.-domiciled equity funds have multiple advisors.

Bob Auwaerter’s retirement ends a remarkable era

In mid-September 2008, about two weeks after I succeeded Jack Brennan as Vanguard’s chief executive officer, Lehman Brothers went bankrupt, igniting the nation’s worst financial crisis in 70 years. It was, to put it mildly, an extremely challenging time. Through it all, I was able to depend on Bob Auwaerter’s strong command of the Fixed Income Group, which persevered under those treacherous conditions. Although that was a difficult period for Vanguard and the industry, it was far from the only time I was grateful to have Bob at the helm of our bond group.

7

 

Bob, who joined Vanguard in 1981, was an original member of the three-person Fixed Income Group headed by Ian MacKinnon. Over the years, he held various leadership roles in the department, eventually succeeding Ian as its head in 2003.

He earned a reputation at Vanguard and within the industry as an extremely dedicated, honest, and insightful decision-maker and leader.

The Fixed Income Group that Bob helped start began with total assets of about $1.3 billion in seven funds. Bob tracked his positions in the two funds he managed on index cards stored in a small metal box. Thirty-two years later, the 120-person group oversees $750 billion, constituting nearly one-third of Vanguard’s assets under management.

On behalf of our clients, I thank Bob for more than three decades of exemplary service and wish him the best in his retirement.

We’re fortunate that Greg Davis will become the head of the Fixed Income Group. Greg currently serves as chief investment officer for the Asia-Pacific region and as a director of Vanguard Investments Australia. He joined Vanguard in 1999 and also has been head of bond indexing and a senior portfolio manager in the Fixed Income Group. Greg is an eminently qualified successor with a strong commitment to the Vanguard way of investing. I couldn’t be more confident in his ability to lead the Fixed Income Group and its deep and talented team.

As always, thank you for investing with Vanguard.

Sincerely,


F. William McNabb III
Chairman and Chief Executive Officer
February 14, 2014

8

 

Your Fund’s Performance at a Glance      
January 31, 2013, Through January 31, 2014      
      Distributions Per Share
  Starting Ending Income Capital
  Share Price Share Price Dividends Gains
Vanguard Short-Term Investment-Grade Fund      
Investor Shares $10.82 $10.74 $0.194 $0.041
Admiral Shares 10.82 10.74 0.205 0.041
Institutional Shares 10.82 10.74 0.208 0.041
Vanguard Intermediate-Term Investment-Grade      
Fund        
Investor Shares $10.24 $9.81 $0.317 $0.195
Admiral Shares 10.24 9.81 0.327 0.195
Vanguard Long-Term Investment-Grade Fund      
Investor Shares $10.65 $10.02 $0.481 $0.093
Admiral Shares 10.65 10.02 0.492 0.093
Vanguard High-Yield Corporate Fund      
Investor Shares $6.12 $6.04 $0.348 $0.000
Admiral Shares 6.12 6.04 0.354 0.000

 

9

 

Advisors’ Report

Vanguard Fixed Income Group For the Short-Term, Intermediate-Term, and Long-Term Investment-Grade Funds

In the months before the Federal Reserve began tapering its stimulative bond-buying program in January, speculation about the timing and potential impact of the move weighed on the bond market. The prospect of “letting up a bit on the gas pedal,” to use the words of then-Fed Chairman Ben Bernanke, put pressure on the yields of higher-rated and longer-dated bonds in particular.

For the 12 months ended January 31, 2014, the Short-Term Investment-Grade Fund returned 1.46% for Investor Shares, 1.56% for Admiral Shares, and 1.59% for Institutional Shares, nearly matching the return of its benchmark index. The Intermediate-Term Investment-Grade Fund returned 0.85% for Investor Shares and 0.95% for Admiral Shares, exceeding its benchmark’s result. Both funds outpaced their peer groups by at least 80 basis points.

We joined Wellington Management Company as a second advisor to the Long-Term Investment-Grade Fund in December 2013. Because we managed only a small portion of the fund’s assets for less than two months, please see Wellington’s section later in this report for details about that fund’s performance.

The investment environment

Global stocks and bonds followed very different trajectories over the period. Fairly modest improvements in the economies of the United States and some of the largest other developed countries were enough to push their stock market returns into the double digits. Concerns about U.S. fiscal and monetary policy, flare-ups in the European debt crisis, geopolitical tensions, and some weakness in China’s economy—an important driver of global growth—presented challenges at times. However, with plenty of support from their central banks, the U.S. economy expanded at a faster clip, the Eurozone pulled out of recession, and Japan seemed to possibly be shaking off decades of lackluster growth.

Global bonds, in contrast, ended in slightly negative territory. Interest rates around the world headed higher in anticipation of the Fed’s dial-back of its stimulus program. The bonds of emerging-market countries most dependent on foreign investment were among the hardest hit.

The U.S. bond market

In 2013, the Fed bought roughly $1 trillion in assets—about $40 billion per month of mortgage bonds to support the housing market and about $45 billion per month of U.S. Treasuries to hold down borrowing costs for households and businesses. Although the bond market was expecting the Fed to begin tapering these unprecedented asset purchases at some point, uncertainty as to when and at what pace that might happen contributed to a rise in yields. The suspense ended in December with the announcement that gradual decreases totaling about $10 billion per month would begin in January.

10

 

Yields, however, unexpectedly reversed direction in the new year. Contributing factors included more clarity about the Fed’s bond-buying exit strategy, investors’ rebalancing of their portfolios after a strong year for stocks, and turmoil in emerging markets, which boosted demand for less risky assets.

The yield of the 10-year Treasury note climbed from 1.99% at the start of the fiscal year to 2.97% by the end of December before easing back to 2.70% at the end of January. The 30-year Treasury bond closed the period 47 basis points higher, at 3.64%. Short-term Treasury yields showed less movement. The 2-year note, for example, finished a modest 9 basis points higher, at 0.35%.

Because bond yields and prices move inversely, a drop in the market value of Treasuries put the Barclays U.S. Treasury Index return at –0.63% for the 12 months. Investment-grade bonds did better: The Barclays U.S. Credit Index returned 0.51%. More income from higher yields helped offset the fall in prices. Healthy corporate earnings and balance sheets along with low default rates contributed as well.

Issuance remained elevated but was easily absorbed by the market. In fact, demand for investment-grade bonds pushed down their average yield over Treasuries to 115 basis points at the end of the 12 months, compared with 127 basis points a year earlier.

Management of the short-term and intermediate-term funds

To give the funds some protection in the event of rising interest rates, we keep the durations of their portfolios shorter than those of their benchmark indexes. Although that positioning has worked to the funds’ disadvantage in the past when rates were falling, it added to their relative returns this time. At the end of the period, the short-term fund’s duration was 2.3 years, compared with 2.8 for its benchmark. Duration was 5.1 years for the intermediate-term fund and 6.4 for its benchmark.

Although well-diversified, the funds benefited from a tilt to financials at the expense of industrials. Balance sheet improvements since the 2008–2009 financial crisis, along with more recent regulatory pressure on banks to take less risk, helped rekindle investor interest in the debt of financial issuers. In contrast, the likelihood of an upturn in mergers and acquisitions among industrial issuers weighed on demand for their bonds. Security selection, notably among new and less liquid issues, added to the funds’ returns.

On the downside, our holdings in Treasuries and, to a lesser extent, asset-backed securities provided liquidity to both funds but were a drag on returns as they underperformed their corporate counterparts.

11

 

Looking forward, financials continue to offer value in our opinion even considering their strong run relative to industrials and utilities. We enter the new fiscal year with plenty of liquidity by holding bonds that we can sell easily without affecting the core positioning of the fund. Especially during volatile periods, this should give us enough “dry powder” to add to performance by buying bonds that we believe the market may be undervaluing.

Robert F. Auwaerter, Principal Head of Fixed Income Group Gregory S. Nassour, CFA, Principal Co-Head of Investment-Grade Portfolio Management Kenneth E. Volpert, CFA, Principal Head of Taxable Bond Group February 21, 2014

Wellington Management Company, llp For the Long-Term Investment-Grade Fund

For the fiscal year, Vanguard Long-Term Investment-Grade Fund returned –0.41% for Investor Shares, outpacing its benchmark, the Barclays U.S. Long Credit A or Better Bond Index, by roughly 70 basis points, or 0.7%. Because the portion of the fund that we manage invests primarily in corporate bonds with maturities of 10 to 30 years, its returns are affected by the direction of interest rates and by economic conditions that bear upon issuers’ creditworthiness.

The investment environment

The fiscal year ended January 31, 2014, was challenging for fixed income—especially longer-duration bonds, which are most sensitive to changes in interest rates. As rates increased and the Treasury yield curve steepened, bond prices fell.

Ever-changing expectations about when the Federal Reserve would begin to withdraw its stimulus were one of the biggest influences on the fixed income market for much of the year.

The Fed’s forward guidance reinforced the message that short-term rates would most likely remain low for an extended period, a concept that finally seemed to resonate with the market.

When the Fed announced it would begin tapering its bond-buying program in January, the market took the news rather well, and Treasury yields increased only slightly in response to it. The Fed decided to begin by cutting its monthly purchases by $10 billion, split evenly between Treasuries and agency mortgage-backed securities. It also signaled that purchases might continue until late 2014, much longer than the market had anticipated. The Fed’s statements ended months of uncertainty.

12

 

The portfolio’s successes

Security selection primarily drove relative outperformance of the portfolio.

Our choices in banking bonds were strong, and the portfolio had a greater-than-market exposure to these issuers during the period. To a lesser extent, security selection in and an overweight allocation to the insurance industry proved favorable as well. Selections in taxable municipals also contributed.

The portfolio’s shortfalls

The portfolio delivered slightly negative total returns (–0.41%) but managed to outpace its benchmark index. Although its long duration gives it few truly comparable peers, the portfolio lagged the average 0.60% return of its designated peer group of corporate A-rated debt funds.

Our yield curve and spread duration positioning detracted from relative returns, partly offsetting contributions elsewhere.

The portfolio’s positioning

We still view the corporate bond market favorably based on strong corporate fundamentals and low default expectations. We believe that spreads—the incremental yields over duration-equivalent Treasuries—are approaching fair value and could tighten modestly, which would benefit holders of corporate bonds.

We expect the economy to maintain its growth trajectory. Less fiscal drag should allow slightly faster GDP growth in 2014 versus 2013. Further improvement in the U.S. housing and labor markets could boost consumer spending. Emerging-market economies, largely dependent on sustained U.S. growth, remain vulnerable to capital outflows and currency weakness. Despite the Fed’s tapering, its monetary policy and those of central banks in Europe and Japan remain supportive, providing ample liquidity to the financial system.

Corporate fundamentals have begun to deteriorate slightly, and we expect top-line growth to be minimal. Although leverage ratios have increased somewhat, cash balances remain high, and companies may therefore face pressure from activist shareholders. Stockholder-friendly activities, including mergers and acquisitions, leveraged buyouts, and dividend increases, have picked up and are likely to accelerate in 2014.

Financial regulation has challenged the corporate bond market’s liquidity, but this has improved as volatility has declined. Heavy new issuance volumes have given companies the opportunity to lock in low financing rates and reduce borrowing costs. Corporate pension plans’ demand for long corporate bonds has increased after a noticeable improvement in funded ratios last year and a rise in plan sponsors’ “de-risking” as part of liability-driven investment programs.

The timing, pace, and magnitude of any further upturns in interest rates will determine the performance of fixed income markets in future years and may well contribute to negative total returns.

13

 

However, many of the forces remain that kept yields low in recent years—easy monetary policies, subdued inflation, and global recession fears.

The portfolio‘s position in long-term investment-grade bonds should help provide income stability. The major risks are, of course, a further rise in long-term rates, a widening in corporate bond risk premiums, or both.

The portfolio generally purchases bonds of large, well-established companies with stable operating histories. We do not own foreign bonds denominated in non-U.S. currencies.

Lucius T. Hill III, Senior Vice President and Fixed Income Portfolio Manager February 14, 2014

Wellington Management Company, llp For the High-Yield Corporate Fund

For the 12 months ended January 31, 2014, Vanguard High-Yield Corporate Fund returned 4.53% for Investor Shares. Its benchmark, the Barclays U.S. Corporate High Yield Bond Index, returned 6.77%.

The investment environment

Two contrasting factors drove the performance of the high-yield market. The Federal Reserve hinted in May at a reduction in the pace of its asset purchases, then in December announced it would start the process in January. This led the 10-year Treasury yield to rise (it stood at 2.70% on January 31, 2014, compared with 1.99% 12 months earlier) and weighed on bond prices (which move inversely to interest rates). At the same time, the steadily if slowly improving economy helped high-yield bond issuers as credit spreads tightened over the year, offsetting the effects of rising rates.

Lower-quality bonds significantly outperformed those of higher quality. Lower-quality bonds, which typically carry higher coupons, earned more income during the period, and this mitigated the downward price pressure created by rising rates. The spread of the high-yield market (a comparison of the yields of high-yield bonds and Treasury bonds) narrowed from 477 basis points on January 31, 2013, to 404 as of January 31, 2014.

Credit fundamentals across the high-yield market remained generally positive. Ratings actions and default forecasts were benign and balance sheets were in good shape. The ratio of credit agency downgrades to upgrades has been steady for two years, at about 1.0x, as has the portion of the high-yield market—less than 20%—that comprises bonds rated Caa and below. These two measures confirm that the market’s underlying credit quality is still strong.

The 12-month default rate was 2.5% as of January, according to Moody’s Investors Service, which forecasts a similar rate for 2014—well below the long-term average. By and large, high-yield issuers maintained solid gross margins and interest coverage ratios (a measure of a company’s ability to make its debt payments) and enjoyed

14

 

healthy credit profiles in 2013. We believe most will be able to sustain these profiles in 2014 as GDP keeps growing.

The new-issue calendar stayed robust: U.S. high-yield markets raised $325.4 billion in 2013, similar to the record level reached in 2012. Issuance remained largely of high quality. More than 80% of new-issue proceeds were rated B or better, and the majority of gross proceeds were earmarked for refinancing purposes, a creditor-friendly trend solidly in place since 2009.

Issuers generally continued to exercise restraint in their borrowing behavior. At the margin, though, we have begun to see an increase in somewhat more aggressive shareholder-friendly activity. This trend is still in the early stages, and we do not expect it to meaningfully affect markets for some time.

The fund’s successes

Compared with its benchmark, the fund benefited from its relative weightings in the technology sector and from credit selection in the wireless and utilities sectors.

The fund’s shortfalls

The fund’s holdings in cash and in higher-quality, more rate-sensitive bonds hurt relative returns, as did its longer duration positioning. Performance also suffered because of relative weightings in the cable sector and credit selection in financials, technology, and media.

The fund’s positioning

The fund remains consistent in its investment objective and strategy and maintains a significant exposure to relatively higher-quality names in the high-yield market. We believe these issuers have more consistent businesses and more predictable cash flows than those at the lower end of the spectrum.

We prefer higher-quality credits in an effort to minimize defaults and provide stable income. We continue to diversify the fund’s holdings by issuer and industry while deemphasizing non-cash-paying securities, preferred stocks, and equity-linked securities such as convertibles because of their potential for volatility.

Michael L. Hong, CFA, Vice President and Fixed Income Portfolio Manager February 12, 2014

15

 

Short-Term Investment-Grade Fund

Fund Profile    
As of January 31, 2014    
 
Share-Class Characteristics    
  Investor Admiral Institutional
  Shares Shares Shares
Ticker Symbol VFSTX VFSUX VFSIX
Expense Ratio1 0.20% 0.10% 0.07%
30-Day SEC Yield 1.56% 1.66% 1.69%
Financial Attributes    
 
    Barclays Barclays
    1–5 Year Aggregate
    Credit Bond
  Fund Index Index
Number of Bonds 1,919 2,139 8,727
Yield to Maturity      
(before expenses) 1.4% 1.4% 2.3%
Average Coupon 3.2% 3.5% 3.3%
Average Duration 2.3 years 2.8 years 5.5 years
Average Effective      
Maturity 3.2 years 3.0 years 7.6 years
Short-Term      
Reserves 0.6%
 
 
Sector Diversification (% of portfolio)  
Asset-Backed     11.9%
Commercial Mortgage-Backed   7.2
Finance     26.3
Foreign     9.0
Government Mortgage-Backed   0.1
Industrial     28.6
Treasury/Agency     9.9
Utilities     5.0
Other     2.0

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  1–5 Year Aggregate
  Credit Bond
  Index Index
R-Squared 0.94 0.36
Beta 0.75 0.31

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 8.0%
1 - 3 Years 44.0
3 - 5 Years 37.4
5 - 7 Years 6.6
7 - 10 Years 3.7
20 - 30 Years 0.1
Over 30 Years 0.2

 

Distribution by Credit Quality (% of portfolio)

U.S. Government 9.2%
Aaa 16.1
Aa 15.6
A 33.0
Baa 23.6
Ba 0.3
Ca 0.1
Not Rated 2.1

 

For information about these ratings, see the Glossary entry for Credit Quality.


1 The expense ratios shown are from the prospectus dated February 7, 2014 (May 30, 2013, for Institutional Shares), and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.20% for Investor Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares.

16

 

Short-Term Investment-Grade Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Short-Term Investment-Grade Fund        
Investor Shares 1.46% 4.96% 3.63% $14,279
Barclays U.S. 1–5 Year Credit Bond        
••••••••        
Index 1.78 5.41 4.16 15,036
 
– – – – 1–5 Year Investment-Grade Debt Funds        
 
Average 0.66 4.02 2.62 12,957
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
 
1–5 Year Investment-Grade Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  

 

        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Short-Term Investment-Grade Fund Admiral        
Shares 1.56% 5.07% 3.73% $72,124
Barclays U.S. 1–5 Year Credit Bond Index 1.78 5.41 4.16 75,180
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

17

 

Short-Term Investment-Grade Fund        
 
 
 
    Average Annual Total Returns  
  Periods Ended January 31, 2014  
        Final Value
  One Five Ten of a $5,000,000
  Year Years Years Investment
Short-Term Investment-Grade Fund        
Institutional Shares 1.59% 5.10% 3.77% $7,236,406
Barclays U.S. 1–5 Year Credit Bond Index 1.78 5.41 4.16 7,517,967
 
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 7,851,614
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        1–5 Year
        Credit
    Investor Shares Index
Fiscal Year Income Returns  Capital Returns Total Returns Total Returns
2005 3.38% -1.67% 1.71% 1.94%
2006 3.66 -1.22 2.44 1.52
2007 4.58 0.38 4.96 4.74
2008 5.08 2.09 7.17 7.86
2009 4.48 -8.83 -4.35 -1.17
2010 4.37 9.07 13.44 12.92
2011 3.39 0.99 4.38 4.78
2012 2.75 -0.29 2.46 3.93
2013 2.21 1.27 3.48 3.98
2014 1.82 -0.36 1.46 1.78

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 10/29/1982 0.97% 5.23% 3.58% 0.03% 3.61%
Admiral Shares 2/12/2001 1.07 5.34 3.69 0.03 3.72
Institutional Shares 9/30/1997 1.10 5.38 3.72 0.03 3.75

 

18

 

Short-Term Investment-Grade Fund

Financial Statements

Statement of Net Assets—Investments Summary
As of January 31, 2014

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the complete listing of the fund’s holdings is available electronically on vanguard.com and on the Securities and Exchange Commission’s website (sec.gov), or you can have it mailed to you without charge by calling 800-662-7447. For the first and third fiscal quarters, the fund files the lists with the SEC on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

          Face Market Percentage
        Maturity Amount Value of Net
      Coupon Date ($000) ($000) Assets
U.S. Government and Agency Obligations        
U.S. Government Securities          
  United States Treasury Note/Bond 0.750% 1/15/17 914,250 916,389 1.9%
  United States Treasury Note/Bond 0.375% 3/15/15 904,000 906,115 1.9%
  United States Treasury Note/Bond 1.500% 1/31/19 868,750 869,019 1.8%
  United States Treasury Note/Bond 0.625% 4/30/18 592,610 577,795 1.2%
1 United States Treasury Note/Bond 0.375% 6/15/15 357,021 357,914 0.7%
  United States Treasury Note/Bond 2.500% 3/31/15 280,000 287,526 0.6%
  United States Treasury Note/Bond 0.375% 4/15/15 187,712 188,181 0.4%
2 United States Treasury Note/Bond 1.000% 8/31/19 188,000 180,745 0.4%
  United States Treasury Note/Bond 0.250% 5/15/15 147,635 147,774 0.3%
2,3 United States Treasury            
  Note/Bond 0.250%–2.125% 5/31/15–3/31/18 282,418 282,420 0.6%
            4,713,878 9.8%
 
Conventional Mortgage-Backed Securities †     6,882 0.0%
 
Nonconventional Mortgage-Backed Securities †     35,280 0.1%
Total U.S. Government and Agency Obligations (Cost $4,752,186)   4,756,040 9.9%
Asset-Backed/Commercial Mortgage-Backed Securities      
4,5 American Express Issuance          
  Trust II 2013-1   0.440% 2/15/19 131,000 130,448 0.3%
4 Banc of America Commercial          
  Mortgage Trust 2006-5 5.415% 9/10/47 44,227 48,377 0.1%
4 Banc of America Commercial          
  Mortgage Trust 2006-6 5.347% 10/10/45 44,878 49,150 0.1%
4 Banc of America Commercial          
  Mortgage Trust 2007-2  5.584%–5.635% 4/10/49 67,398 74,604 0.2%
4 Banc of America Commercial          
  Mortgage Trust 2008-1 6.171% 2/10/51 96,979 107,848 0.2%
4 Banc of America Commercial          
  Mortgage Trust 2008-1 6.215% 2/10/51 6,835 7,803 0.0%

 

19

 

Short-Term Investment-Grade Fund          
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
4,6 Banc of America Funding          
  2006-H Trust 2.803% 9/20/46 29,417 23,457 0.0%
4 Banc of America Mortgage          
  2003-F Trust 2.797% 7/25/33 1,724 1,739 0.0%
4 Bank of America Mortgage          
  2002-J Trust 3.565% 9/25/32 23 23 0.0%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2005-PWR9 4.943% 9/11/42 13,370 14,074 0.0%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2006-PWR13 5.533% 9/11/41 23,738 25,986 0.1%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2007-PWR16 5.706% 6/11/40 21,611 24,278 0.1%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2007-PWR17 5.650% 6/11/50 133,063 147,893 0.3%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2007-TOP28 5.710% 9/11/42 41,871 47,222 0.1%
4,5,7 BMW Floorplan Master Owner          
  Trust 2012-1A 0.560% 9/15/17 93,500 93,705 0.2%
4,5 Capital One Multi-asset Execution          
  Trust 2007-A2 0.240% 12/16/19 110,725 109,875 0.2%
4,5 Chase Issuance Trust 2007-C1 0.620% 4/15/19 30,600 30,240 0.1%
4,5 Chase Issuance Trust 2012-A10 0.420% 12/16/19 117,000 116,627 0.2%
4,7 Citibank Omni Master Trust          
  2009-A13 5.350% 8/15/18 64,154 65,810 0.1%
4,5,7 Citibank Omni Master Trust          
  2009-A14A 2.910% 8/15/18 65,116 65,933 0.1%
4,7 Citibank Omni Master Trust          
  2009-A17 4.900% 11/15/18 91,937 95,026 0.2%
4,6 Citigroup Mortgage Loan Trust          
  2007-AR8 2.756% 7/25/37 1,649 1,462 0.0%
4 Discover Card Execution Note          
  Trust 2012-A6 1.670% 1/18/22 114,300 110,989 0.2%
4,7 Ford Credit Auto Lease          
  Trust 2012-B 1.100% 12/15/15 10,050 10,086 0.0%
4 Ford Credit Auto Lease          
  Trust 2013-A 0.780%–1.280% 4/15/16–6/15/16 45,330 45,400 0.1%
4 Ford Credit Auto Owner          
  Trust 2010-A 3.220% 3/15/16 6,040 6,139 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-A 1.150%–1.360% 7/15/18–10/15/18 12,200 12,189 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-B 1.110%–1.820%  10/15/18–11/15/19 17,930 18,986 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-C 1.680%–2.500% 11/15/18–1/15/20 13,700 13,873 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-D 1.540%–1.720% 3/15/19–7/15/19 25,200 25,248 0.1%
4,5,7 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2010-3 1.860%–4.990% 2/15/17 72,338 75,068 0.2%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2012-2 1.920% 1/15/19 26,800 27,356 0.1%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2012-4 0.940%–1.390% 9/15/16 40,300 40,569 0.1%

 

20

 

Short-Term Investment-Grade Fund          
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
4 Ford Credit Floorplan Master          
  Owner Trust A Series 2012-5 1.490% 9/15/19 116,300 122,630 0.3%
4 Ford Credit Floorplan Master          
  Owner Trust A Series          
  2012-5 1.690%–2.140% 9/15/19 15,850 16,970 0.0%
4 Ford Credit Floorplan Master          
  Owner Trust A Series          
  2013-1 1.370%–1.820% 1/15/18 35,359 36,407 0.1%
4 Ford Credit Floorplan Master          
  Owner Trust A Series          
  2013-3 1.740% 6/15/17 7,529 7,713 0.0%
4 Ford Credit Floorplan Master          
  Owner Trust A Series          
  2013-4 2.100%–2.790% 6/15/20 15,460 15,967 0.0%
4,5 GE Capital Credit Card Master          
  Note Trust Series 2011-2 1.160% 5/15/19 50,270 50,335 0.1%
4 GE Capital Credit Card Master          
  Note Trust Series 2012-2 2.220% 1/15/22 72,000 72,042 0.1%
4 GE Capital Credit Card Master          
  Note Trust Series 2012-6 1.360% 8/17/20 90,140 89,131 0.2%
4,5 GE Dealer Floorplan Master          
  Note Trust Series 2012-1 0.727% 2/20/17 33,825 34,116 0.1%
4,5 GE Dealer Floorplan Master          
  Note Trust Series 2012-2 0.907% 4/22/19 48,100 50,763 0.1%
4,5 GE Dealer Floorplan Master          
  Note Trust Series 2012-4 0.597% 10/20/17 25,000 25,353 0.1%
4,7 Golden Credit Card Trust 2012-2A 1.770% 1/15/19 83,300 84,687 0.2%
4,5,7 Golden Credit Card Trust 2012-3A 0.610% 7/17/17 60,000 60,019 0.1%
4,5,7 Golden Credit Card Trust 2013-1A 0.410% 2/15/18 39,200 39,142 0.1%
4 GS Mortgage Securities Trust          
  2006-GG6 5.553% 4/10/38 26,869 28,837 0.1%
4,7 GS Mortgage Securities Trust          
  2010-C2 5.225% 12/10/43 3,530 3,796 0.0%
4,7 GS Mortgage Securities Trust          
  2011-GC3 5.543% 3/10/44 2,280 2,486 0.0%
4,7 GS Mortgage Securities Trust          
  2012-ALOHA 3.551% 4/10/34 25,305 25,357 0.1%
4,7 GS Mortgage Securities Trust          
  2012-BWTR 2.954% 11/5/34 27,725 26,264 0.1%
4,7 GS Mortgage Securities Trust          
  2012-GC6 4.948% 1/10/45 1,000 1,090 0.0%
4 GS Mortgage Securities Trust          
  2013-GC13 4.039% 7/10/46 22,170 22,654 0.0%
4 GS Mortgage Securities Trust          
  2013-GCJ12 3.135%–3.777% 6/10/46 24,670 23,807 0.0%
4 GS Mortgage Securities Trust          
  2013-GCJ14 2.995%–4.243% 8/10/46 79,722 83,334 0.2%
4 Merrill Lynch Mortgage          
  Investors Trust MLMI          
  Series 2003-A2 1.846% 2/25/33 2,965 2,955 0.0%
4 Merrill Lynch Mortgage          
  Investors Trust MLMI          
  Series 2003-A4 2.641% 7/25/33 872 878 0.0%
4 Merrill Lynch Mortgage          
  Trust 2006-C2 5.739% 8/12/43 11,857 13,012 0.0%

 

21

 

Short-Term Investment-Grade Fund          
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
4 Merrill Lynch Mortgage          
  Trust 2008-C1 5.690% 2/12/51 11,590 12,979 0.0%
4 ML-CFC Commercial Mortgage          
  Trust 2006-2 5.876% 6/12/46 27,669 30,345 0.1%
4 ML-CFC Commercial Mortgage          
  Trust 2007-6 5.331% 3/12/51 8,739 8,750 0.0%
4 Morgan Stanley Capital I          
  Trust 2006-HQ9 5.728% 7/12/44 79,217 86,733 0.2%
4 Morgan Stanley Capital I          
  Trust 2006-IQ12 5.319% 12/15/43 35,339 38,685 0.1%
4 Morgan Stanley Capital I          
  Trust 2007-IQ15 5.908% 6/11/49 37,670 42,168 0.1%
4 Morgan Stanley Capital I          
  Trust 2007-IQ16 5.688% 12/12/49 81,589 90,188 0.2%
4 Morgan Stanley Capital I          
  Trust 2012-C4 3.244%–3.773% 3/15/45 5,643 5,669 0.0%
4,7 Morgan Stanley Capital I          
  Trust 2012-STAR 3.201% 8/5/34 17,045 16,568 0.0%
4,7 Rental Car Finance Corp.          
  2011-1A 2.510% 2/25/16 87,600 88,476 0.2%
4 Royal Bank of Canada 1.200% 9/19/18 31,200 31,036 0.1%
4,5 SLM Student Loan Trust 2005-5 0.339% 4/25/25 59,867 59,570 0.1%
4,5 SLM Student Loan Trust 2005-9 0.359% 1/27/25 26,343 26,224 0.1%
4,5 SLM Student Loan Trust 2006-5 0.349% 1/25/27 24,500 24,052 0.1%
4,5 SLM Student Loan Trust 2006-6 0.349% 10/27/25 36,300 35,374 0.1%
4,5 SLM Student Loan Trust 2007-1 0.329% 1/26/26 66,950 64,616 0.1%
4,5,7 SLM Student Loan Trust          
  2011-A 1.160%–4.370% 10/15/24–4/17/28 25,511 26,388 0.1%
4,7 SLM Student Loan Trust          
  2011-B 3.740% 2/15/29 60,000 64,268 0.1%
4,5,7 SLM Student Loan Trust          
  2011-C 1.560%–4.540% 12/15/23–10/17/44 37,916 39,965 0.1%
4,5 SLM Student Loan Trust          
  2012-6 0.438% 9/25/19 34,620 34,527 0.1%
4,5,7 SLM Student Loan Trust          
  2012-B 1.260%–3.480% 12/15/21–10/15/30 21,964 22,700 0.0%
4,5,7 SLM Student Loan Trust          
  2012-E 0.910% 10/16/23 19,665 19,685 0.0%
4,5,7 SLM Student Loan Trust          
  2013-1 1.210%–2.500% 5/17/27–3/15/47 32,000 31,109 0.1%
4,5 SLM Student Loan Trust          
  2013-6 0.808% 6/26/28 19,400 19,489 0.0%
4,7 SLM Student Loan Trust          
  2013-B 1.850%–3.000% 6/17/30–5/16/44 21,250 20,483 0.0%
4,7 SLM Student Loan Trust          
  2013-C 3.500% 6/15/44 5,860 5,693 0.0%
4,5 SLM Student Loan Trust          
  2014-1 0.799% 2/26/29 10,900 10,900 0.0%
7 Asset-Backed/Commercial          
  Mortgage-Backed Securities—Other †     5,693,560 11.8%
Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $9,210,743) 9,257,428 19.2%

 

22

 

Short-Term Investment-Grade Fund        
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
Corporate Bonds          
Finance          
Banking          
Bank of America Corp. 1.500%–6.500% 4/1/15–1/15/19 389,029 415,428 0.9%
Bank of America NA 1.125%–6.100% 11/14/16–6/15/17 79,289 81,396 0.2%
Bank One Corp. 4.900% 4/30/15 14,615 15,364 0.0%
BBVA US Senior SAU 4.664% 10/9/15 128,791 135,151 0.3%
Bear Stearns Cos. LLC 5.300%–7.250% 10/30/15–2/1/18 91,716 104,261 0.2%
BNP Paribas SA 3.600% 2/23/16 84,830 89,514 0.2%
Citigroup Inc. 3.953% 6/15/16 86,180 91,812 0.2%
Citigroup Inc. 1.250%–6.375% 8/12/14–9/26/18 389,829 406,567 0.9%
Cooperatieve Centrale          
Raiffeisen-Boerenleenbank BA 2.250% 1/14/19 125,080 125,118 0.3%
Countrywide Financial Corp. 6.250% 5/15/16 37,914 41,878 0.1%
Deutsche Bank AG 6.000% 9/1/17 98,047 112,796 0.2%
Goldman Sachs Group Inc. 2.625% 1/31/19 145,500 145,635 0.3%
Goldman Sachs Group Inc. 2.375%–6.250% 10/1/14–7/19/18 385,475 417,844 0.9%
HSBC USA Inc. 2.375% 2/13/15 95,532 97,386 0.2%
Intesa Sanpaolo SPA 2.375% 1/13/17 117,250 117,147 0.2%
JPMorgan Chase & Co. 3.150% 7/5/16 98,646 103,215 0.2%
5 JPMorgan Chase & Co. 1.100%–6.300% 3/15/14–4/23/19 510,207 534,477 1.1%
JPMorgan Chase Bank NA 5.875%–6.000% 6/13/16–10/1/17 44,567 50,746 0.1%
Merrill Lynch & Co. Inc. 5.000%–6.875% 7/15/14–4/25/18 145,156 159,357 0.3%
Morgan Stanley 2.125%–6.625% 4/1/14–1/24/19 464,577 496,461 1.0%
Royal Bank of Canada 0.800%–2.875% 3/13/15–7/27/18 279,539 287,223 0.6%
Royal Bank of Scotland plc 4.375% 3/16/16 103,125 110,086 0.2%
UBS AG 5.750% 4/25/18 105,985 122,120 0.3%
UBS AG 5.875% 12/20/17 95,375 109,589 0.2%
7 Banking—Other †       5,267,000 10.9%
Brokerage †       117,995 0.2%
Finance Companies          
4 General Electric          
Capital Corp. 1.000%–6.375% 9/15/14–11/15/67 498,827 526,534 1.1%
SLM Corp. 6.250% 1/25/16 101,274 108,904 0.2%
SLM Corp. 3.875%–6.000% 9/10/15–9/25/17 123,640 129,546 0.3%
Finance Companies—Other †       208,114 0.4%
Insurance          
American International Group Inc.  5.850% 1/16/18 98,511 113,388 0.3%
7 Insurance—Other †       1,017,299 2.1%
Other Finance †       60,327 0.1%
7 Real Estate Investment Trusts †     519,909 1.1%
        12,439,587 25.8%
Industrial          
7 Basic Industry †       957,330 2.0%
Capital Goods          
General Electric Co. 5.250% 12/6/17 92,550 105,329 0.2%
General Electric Co. 0.850% 10/9/15 18,420 18,528 0.0%
7 Capital Goods—Other †       1,276,236 2.7%
Communication          
America Movil SAB de CV 2.375% 9/8/16 92,560 95,027 0.2%
AT&T Inc. 5.500% 2/1/18 80,904 91,930 0.2%
AT&T Inc. 0.875%–5.600% 9/15/14–11/27/18 438,405 447,902 0.9%
BellSouth Corp. 5.200% 9/15/14 30,175 31,070 0.1%
Verizon Communications Inc. 3.650% 9/14/18 118,285 125,688 0.2%

 

23

 

Short-Term Investment-Grade Fund        
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
7 Communication—Other †       1,781,783 3.7%
Consumer Cyclical          
Ford Motor Credit Co. LLC 5.000% 5/15/18 82,715 91,785 0.2%
Ford Motor Credit Co. LLC 2.500%–8.000% 1/15/15–8/15/17 353,024 384,994 0.8%
7 Consumer Cyclical—Other †       1,529,087 3.2%
Consumer Noncyclical          
Actavis Inc. 1.875% 10/1/17 91,065 91,081 0.2%
7 Consumer Noncyclical—Other †     3,278,430 6.8%
Energy          
Occidental Petroleum Corp. 1.750% 2/15/17 93,490 95,578 0.2%
Transocean Inc. 5.050% 12/15/16 79,340 87,199 0.2%
7 Energy—Other †       1,527,386 3.2%
Other Industrial †       5,265 0.0%
Technology          
Hewlett-Packard Co. 3.000% 9/15/16 89,140 93,018 0.2%
Intel Corp. 1.350% 12/15/17 142,272 141,901 0.3%
7 Technology—Other †       821,703 1.7%
Transportation          
4 AFC X Ltd. 3.500% 3/31/15 133,000 133,665 0.3%
7 Transportation—Other †       412,272 0.8%
        13,624,187 28.3%
Utilities          
7 Electric †       1,901,395 4.0%
7 Natural Gas †       440,192 0.9%
Other Utility †       10,668 0.0%
        2,352,255 4.9%
Total Corporate Bonds (Cost $28,094,631)     28,416,029 59.0%
Sovereign Bonds (U.S. Dollar-Denominated)        
Province of Ontario 2.300% 5/10/16 116,525 120,496 0.2%
Province of Ontario 0.950%–5.450% 6/16/14–6/29/22 386,762 395,488 0.8%
Republic of Turkey 7.000% 9/26/16 128,345 140,666 0.3%
4 Russian Federation 7.500% 3/31/30 76,880 88,605 0.2%
VTB Bank OJSC Via VTB Capital SA 6.000% 4/12/17 100,450 106,859 0.2%
7 Sovereign Bonds          
(U.S. Dollar-Denominated)—Other †     3,407,381 7.1%
Total Sovereign Bonds (Cost $4,225,913)     4,259,495 8.8%
Taxable Municipal Bonds (Cost $293,169) †     298,420 0.6%
7Tax-Exempt Municipal Bonds (Cost $455,694) †     471,930 1.0%
Convertible Preferred Stocks (Cost $28,924) †     1 0.0%

 

24

 

Short-Term Investment-Grade Fund        
 
 
        Market Percentage
        Value of Net
  Coupon   Shares ($000) Assets
Temporary Cash Investment          
Money Market Fund          
8 Vanguard Market Liquidity Fund          
(Cost $631,523) 0.130%   631,522,655 631,523 1.3%
Total Investments (Cost $47,692,783)     48,090,866 99.8%
 
    Expiration      
    Date Contracts    
Liability for Options Written (0.0%)        
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 125.50 2/21/14 1,526 (1,168) 0.0%
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 124.50 2/21/14 1,502 (2,206) 0.0%
Put Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 122.50 2/21/14 3,028 (95) 0.0%
Total Liability for Options Written (Premiums Received $1,947)   (3,469) 0.0%
Other Assets and Liabilities          
Other Assets       1,425,563 3.0%
Other Liabilities       (1,326,482) (2.8%)
        99,081 0.2%
Net Assets       48,186,478 100.0%

 

25

 

Short-Term Investment-Grade Fund  
 
 
 
At January 31, 2014, net assets consisted of:  
  Amount
  ($000)
Paid-in Capital 47,792,379
Undistributed Net Investment Income
Accumulated Net Realized Gains 20,083
Unrealized Appreciation (Depreciation)  
Investment Securities 398,083
Futures Contracts (29,905)
Options on Futures Contracts (1,522)
Swap Contracts 7,360
Net Assets 48,186,478
 
 
Investor Shares—Net Assets  
Applicable to 1,094,139,480 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 11,751,827
Net Asset Value Per Share—Investor Shares $10.74
 
 
Admiral Shares—Net Assets  
Applicable to 2,758,879,203 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 29,632,302
Net Asset Value Per Share—Admiral Shares $10.74
 
 
Institutional Shares—Net Assets  
Applicable to 633,324,722 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 6,802,349
Net Asset Value Per Share—Institutional Shares $10.74

 


See Note A in Notes to Financial Statements
Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.
1 Securities with a value of $4,495,000 have been segregated as collateral for open over-the-counter swap contracts.
2 Securities with a value of $60,758,000 have been segregated as initial margin for open futures contracts. 
3 Securities with a value of $4,768,000 have been segregated as initial margin for open cleared swap contracts.
4 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.
5 Adjustable- rate security.
6 Security made only partial principal and/or interest payments during the period ended January 31, 2014.
7 Certain of the fund's securities are 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 January 31, 2014, the aggregate value of these securities was $5,489,662,000, representing 11.4% of net assets. 
8 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. 

26

 

Short-Term Investment-Grade Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Dividends 244
Interest1 908,031
Total Income 908,275
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 4,175
Management and Administrative—Investor Shares 19,085
Management and Administrative—Admiral Shares 18,169
Management and Administrative—Institutional Shares 2,101
Marketing and Distribution—Investor Shares 2,966
Marketing and Distribution—Admiral Shares 6,290
Marketing and Distribution—Institutional Shares 1,438
Custodian Fees 514
Auditing Fees 41
Shareholders’ Reports—Investor Shares 300
Shareholders’ Reports—Admiral Shares 163
Shareholders’ Reports—Institutional Shares 6
Trustees’ Fees and Expenses 41
Total Expenses 55,289
Net Investment Income 852,986
Realized Net Gain (Loss)  
Investment Securities Sold 125,248
Futures Contracts 13,246
Swaptions and Options on Futures Contracts (4,055)
Swap Contracts 11,571
Realized Net Gain (Loss) 146,010
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (267,800)
Futures Contracts (34,702)
Options on Futures Contracts (1,590)
Swap Contracts (3,360)
Change in Unrealized Appreciation (Depreciation) (307,452)
Net Increase (Decrease) in Net Assets Resulting from Operations 691,544
1 Interest income from an affiliated company of the fund was $1,129,000.  
 
 
 
See accompanying Notes, which are an integral part of the Financial Statements.  

 

27

 

Short-Term Investment-Grade Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 852,986 888,531
Realized Net Gain (Loss) 146,010 461,663
Change in Unrealized Appreciation (Depreciation) (307,452) 65,902
Net Increase (Decrease) in Net Assets Resulting from Operations 691,544 1,416,096
Distributions    
Net Investment Income    
Investor Shares (213,557) (281,124)
Admiral Shares (526,306) (542,070)
Institutional Shares (115,303) (77,429)
Realized Capital Gain1    
Investor Shares (45,348) (51,666)
Admiral Shares (105,560) (107,562)
Institutional Shares (21,598) (19,257)
Total Distributions (1,027,672) (1,079,108)
Capital Share Transactions    
Investor Shares (321,974) (1,343,110)
Admiral Shares 3,986,902 3,337,084
Institutional Shares 2,174,537 2,780,698
Net Increase (Decrease) from Capital Share Transactions 5,839,465 4,774,672
Total Increase (Decrease) 5,503,337 5,111,660
Net Assets    
Beginning of Period 42,683,141 37,571,481
End of Period 48,186,478 42,683,141

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $20,269,000 and $54,322,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

28

 

Short-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.82 $10.73 $10.80 $10.70 $9.81
Investment Operations          
Net Investment Income .194 .231 .269 .330 .387
Net Realized and Unrealized Gain (Loss)          
on Investments (.039) .139 (.008) .132 .907
Total from Investment Operations .155 .370 .261 .462 1.294
Distributions          
Dividends from Net Investment Income (.194) (. 234) (. 292) (. 356) (. 404)
Distributions from Realized Capital Gains (. 041) (. 046) (. 039) (. 006)
Total Distributions (.235) (.280) (. 331) (. 362) (. 404)
Net Asset Value, End of Period $10.74 $10.82 $10.73 $10.80 $10.70
 
Total Return1 1.46% 3.48% 2.46% 4.38% 13.44%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $11,752 $12,166 $13,394 $15,249 $15,115
Ratio of Total Expenses to          
Average Net Assets 0.20% 0.20% 0.20% 0.22% 0.24%
Ratio of Net Investment Income to          
Average Net Assets 1.81% 2.13% 2.52% 3.05% 3.66%
Portfolio Turnover Rate 122% 80% 47%2 48% 59%2

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

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

29

 

Short-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.82 $10.73 $10.80 $10.70 $9.81
Investment Operations          
Net Investment Income .205 .242 .279 .342 .400
Net Realized and Unrealized Gain (Loss)          
on Investments (.039) .139 (.008) .132 .907
Total from Investment Operations .166 .381 .271 .474 1.307
Distributions          
Dividends from Net Investment Income (. 205) (. 245) (. 302) (. 368) (.417)
Distributions from Realized Capital Gains (. 041) (. 046) (. 039) (. 006)
Total Distributions (. 246) (. 291) (. 341) (. 374) (. 417)
Net Asset Value, End of Period $10.74 $10.82 $10.73 $10.80 $10.70
 
Total Return 1.56% 3.59% 2.55% 4.49% 13.58%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $29,632 $25,845 $22,313 $21,337 $16,973
Ratio of Total Expenses to          
Average Net Assets 0.10% 0.10% 0.11% 0.11% 0.12%
Ratio of Net Investment Income to          
Average Net Assets 1.91% 2.23% 2.61% 3.16% 3.78%
Portfolio Turnover Rate 122% 80% 47%1 48% 59%1

 

1 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

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

30

 

Short-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Institutional Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.82 $10.73 $10.80 $10.70 $9.81
Investment Operations          
Net Investment Income . 208 .245 .283 .346 .404
Net Realized and Unrealized Gain (Loss)          
on Investments (.039) .139 (.008) .132 .907
Total from Investment Operations .169 .384 .275 .478 1.311
Distributions          
Dividends from Net Investment Income (.208) (.248) (. 306) (. 372) (. 421)
Distributions from Realized Capital Gains (. 041) (. 046) (. 039) (. 006)
Total Distributions (. 249) (. 294) (. 345) (. 378) (.421)
Net Asset Value, End of Period $10.74 $10.82 $10.73 $10.80 $10.70
 
Total Return 1.59% 3.62% 2.60% 4.53% 13.62%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $6,802 $4,672 $1,864 $1,387 $1,840
Ratio of Total Expenses to          
Average Net Assets 0.07% 0.07% 0.07% 0.07% 0.09%
Ratio of Net Investment Income to          
Average Net Assets 1.94% 2.26% 2.65% 3.20% 3.81%
Portfolio Turnover Rate 122% 80% 47%1 48% 59%1

 

1 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

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

31

 

Short-Term Investment-Grade Fund

Notes to Financial Statements

Vanguard Short-Term Investment-Grade Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers three classes of shares: Investor Shares, Admiral Shares, and Institutional Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria.

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

32

 

Short-Term Investment-Grade Fund

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 3% and 7% of net assets, respectively, based on quarterly average aggregate settlement values.

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written each represented less than 1% of net assets, based on quarterly average market values.

3. Swaptions: The fund enters into swaptions to adjust the fund’s sensitivity to interest rates. The fund may purchase a swaption from a counterparty whereby the fund has the right to enter into an interest rate swap in which the fund will pay a fixed rate and receive a floating rate, each applied to a notional amount. The fund may also sell a swaption to a counterparty whereby the fund grants the counterparty the right to enter into an interest rate swap in which the fund will pay a floating rate and receive a fixed rate, each applied to a notional amount.

Swaptions are valued based on market quotations received from independent pricing services or recognized dealers. The premium paid for a purchased swaption is recorded as an asset in the Statement of Net Assets and is subsequently adjusted daily based on the current market value of the swaption. The premium received for a written swaption is recorded as an asset with an equal liability in the Statement of Net Assets and is subsequently adjusted daily based on the current market value of the swaption. Fluctuations in the value of swaptions are recorded as unrealized appreciation (depreciation) until expired, closed, or exercised, at which time realized gains (losses) are recognized.

The primary risk associated with purchasing swaptions is that interest rates move in such a way that the swaption is out-of-the money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with selling swaptions is that interest rates move in such a way that the swaption is in-the-money, the counterparty exercises the swaption and the resulting interest rate swap results in a negative cash-flow to the fund in an amount greater than the premium received. A risk associated with all types of swaptions is the possibility that a counterparty may default on its obligations under the swaption contract. The fund’s’s maximum amount subject to counterparty risk is the unrealized appreciation on the swaption contract. The fund mitigates its counterparty risk by only entering into swaptions with a diverse group of pre-qualified 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 event of a counterparty’s default (including bankruptcy), the fund may terminate any swaption 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 swaption 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 Statement of Net Assets. The value of

33

 

Short-Term Investment-Grade Fund

collateral received or pledged is compared daily to the value of the swaption 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.

During the year ended January 31, 2014, the fund’s average value of swaptions purchased and swaptions written each represented less than 1% of net assets, based on quarterly average market values.

4. 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 an amount that is a fixed percentage rate applied to a notional amount. In return, the counterparty agrees to pay a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount.

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded 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.

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 pre-qualified 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 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

34

 

Short-Term Investment-Grade Fund

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 Statement of Net Assets. 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 fund also enters into centrally cleared interest rate and credit default swaps to achieve the same objectives specified with respect to the equivalent over-the-counter swaps but with less counterparty risk because a regulated clearinghouse is the counterparty instead of the clearing broker or executing broker. 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. To further mitigate counterparty risk, the fund trades with a diverse group of pre-qualified executing brokers; monitors the financial strength of its clearing brokers, executing brokers and clearinghouse; and has entered into agreements with its clearing brokers and executing brokers.

During the year ended January 31, 2014, the fund’s average amounts of credit protection sold and credit protection purchased each represented 1% of net assets, based on quarterly average notional amounts. The average total amount of interest rate swaps represented 5% of net assets, based on quarterly average notional amounts.

5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

6. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

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

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

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its

35

 

Short-Term Investment-Grade Fund

net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $5,244,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 2.10% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 4,756,040
Asset-Backed/Commercial Mortgage-Backed Securities 9,174,133 83,295
Corporate Bonds 28,264,827 151,202
Sovereign Bonds 4,259,495
Taxable Municipal Bonds 298,420
Tax-Exempt Municipal Bonds 471,930
Convertible Preferred Stocks 1
Temporary Cash Investments 631,523
Futures Contracts—Assets1 1,734
Futures Contracts—Liabilities1 (9,715)
Liability for Options Written (3,469)
Swap Contracts—Assets 1511 14,128
Swap Contracts—Liabilities (6)1 (8,305)
Total 620,218 47,230,669 234,497
1 Represents variation margin on the last day of the reporting period.      

 

D. At January 31, 2014, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

  Interest Rate Credit  
  Contracts Contracts Total
Statement of Net Assets Caption ($000) ($000) ($000)
Other Assets 11,165 4,848 16,013
Other Liabilities (13,190) (8,305) (21,495)

 

36

 

Short-Term Investment-Grade Fund

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the year ended January 31, 2014, were:

  Interest Rate Credit  
  Contracts Contracts Total
Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)
Futures Contracts 13,246 13,246
Swaptions and Options on Futures Contracts (4,055) (4,055)
Swap Contracts 8,414 3,157 11,571
Realized Net Gain (Loss) on Derivatives 17,605 3,157 20,762
 
Change in Unrealized Appreciation (Depreciation) on Derivatives    
Futures Contracts (34,702) (34,702)
Options on Futures Contracts (1,590) (1,590)
Swap Contracts 5,939 (9,299) (3,360)
Change in Unrealized Appreciation (Depreciation)      
on Derivatives (30,353) (9,299) (39,652)

 

At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
5-Year U.S. Treasury Note March 2014 (26,092) (3,147,348) (11,992)
2-Year U.S. Treasury Note March 2014 10,058 2,214,803 1,735
10-Year U.S. Treasury Note March 2014 (6,527) (820,770) (6,892)
30-Year U.S. Treasury Bond March 2014 (2,897) (387,021) (9,562)
Ultra Long U.S. Treasury Bond March 2014 (706) (101,532) (3,194)
        (29,905)

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

37

 

Short-Term Investment-Grade Fund            
 
 
 
 
At January 31, 2014, the fund had the following open swap contracts:    
 
Credit Default Swaps            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
Termination   Amount (Paid) (Paid) (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Credit Protection Sold/Moody’s Rating            
Altria Group Inc./Baa1 12/20/16 BOANA 9,740 51 1.000 254
Altria Group Inc./Baa1 12/20/16 JPMC 9,740 43 1.000 246
Altria Group Inc./Baa1 12/20/18 MSCS 20,000 (443) 1.000 32
AT&T Inc./A3 12/20/18 DBAG 20,000 (205) 1.000 55
Bank of America Corp./Baa2 12/20/17 MSCS 16,900 491 1.000 651
BHP Billiton Finance Ltd./A1 12/20/18 DBAG 20,000 (252) 1.000 52
Boeing Co./A2 9/20/18 GSCM 4,885 (83) 1.000 74
BP plc/A2 12/20/18 DBAG 20,000 (281) 1.000 172
Danaher Corp./A2 12/20/18 MSCS 20,000 (578) 1.000 (3)
Deere & Co./A2 12/20/18 DBAG 20,000 (627) 1.000 23
Energy Transfer Partners LP/Baa3 6/20/17 BOANA 14,630 578 1.000 783
Energy Transfer Partners LP/ Baa3 9/20/18 JPMC 7,820 31 1.000 55
Energy Transfer Partners LP/ Baa3 9/20/18 JPMC 8,310 33 1.000 58
Federation of Malaysia/A3 3/20/19 DBAG 24,400 69 1.000 (277)
Federation of Malaysia/A3 3/20/19 JPMC 9,600 60 1.000 (76)
Federation of Malaysia/A3 3/20/19 JPMC 19,500 113 1.000 (162)
Federation of Malaysia/A3 3/20/19 MSCS 9,800 52 1.000 (87)
Federative Republic of Brazil/A3 3/20/19 GSCM 18,800 761 1.000 (184)
Ford Motor Company/Baa3 12/20/18 JPMC 20,000 (3,430) 5.000 101
Goldman Sachs Group Inc./Baa1 12/20/17 MSCS 9,760 306 1.000 358
Hartford Financial Services            
Group Inc./Baa3 3/20/18 GSCM 9,750 20 1.000 164
Kinder Morgan Energy            
Partners LP/Baa2 6/20/18 CSFBI 10,300 (127) 1.000 (49)
Kinder Morgan Energy            
Partners LP/Baa2 9/20/18 CSFBI 8,310 (44) 1.000 2
Kingdom of Belgium/Aa3 9/20/17 RBS 3,800 129 1.000 218
Kohls Corp./Baa1 6/20/18 JPMC 5,380 96 1.000 8
Kohls Corp./Baa1 9/20/18 BOANA 5,380 93 1.000 (30)
National Rural Utilities Cooperative            
Finance Corp./A2 12/20/17 CSFBI 3,900 (40) 1.000 48
National Rural Utilities Cooperative            
Finance Corp./A2 12/20/17 CSFBI 19,520 (210) 1.000 228
Republic of Chile/Aa3 3/20/19 BARC 12,800 (125) 1.000 (65)
Republic of Indonesia/Baa3 12/20/18 GSCM 7,700 453 1.000 13

 

38

 

Short-Term Investment-Grade Fund          
 
 
 
 
Credit Default Swaps (continued)            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
  Termination   Amount (Paid) (Paid) (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Republic of Indonesia/Baa3 3/20/19 DBAG 9,800 625 1.000 (1)
Republic of Indonesia/Baa3 3/20/19 BOANA 9,800 629 1.000 4
Republic of Indonesia/Baa3 3/20/19 JPMC 15,400 837 1.000 (146)
Rio Tinto Ltd./A3 12/20/18 DBAG 20,000 101 1.000 102
Royal Bank of Scotland plc/A3 3/20/17 GSCM 9,750 (102) 3.000 543
Royal Bank of Scotland plc/A3 12/20/18 BOANA 19,540 421 1.000 199
Russian Federation/Baa1 3/20/19 DBAG 9,800 299 1.000 (173)
Russian Federation/Baa1 3/20/19 BARC 16,600 584 1.000 (216)
Russian Federation/Baa1 3/20/19 GSCM 22,400 671 1.000 (408)
Russian Federation/Baa1 3/20/19 GSCM 19,500 586 1.000 (369)
TJX Cos Inc./A3 12/20/18 MSCS 20,000 (607) 1.000 (31)
United Parcel Service Inc./Aa3 12/20/18 BNPSW 20,000 (715) 1.000 11
Wal-Mart Stores Inc./Aa2 12/20/18 MSCS 20,000 (705) 1.000 25
Wesfarmers Ltd./A3 12/20/18 DBAG 20,000 (262) 1.000 121
      623,315     2,323
 
Credit Protection Purchased            
Aetna Inc. 12/20/18 JPMC 16,475 460 (1.000) (37)
Baker Hughes Inc. 12/20/18 MSCS 16,475 263 (1.000) (161)
Bank of America Corp. 12/20/14 BARC 9,700 (17) (1.000) (82)
Bank of America Corp. 12/20/14 BARC 6,700 (13) (1.000) (58)
Bank of America Corp. 12/20/14 DBAG 6,700 (14) (1.000) (59)
Citigroup Inc. 6/20/14 BOANA 34,200 (125) (5.000) (764)
Computer Sciences Corp. 9/20/15 MSCS 7,315 456 (5.000) (118)
Computer Sciences Corp. 9/20/15 BARC 7,315 454 (5.000) (121)
Dow Chemical Company 12/20/18 GSCM 16,475 76 (1.000) (142)
El Du Pont De Nemours & Co. 9/20/18 CSFBI 6,865 165 (1.000) (41)
El Du Pont De Nemours & Co. 9/20/18 BNPSW 5,200 117 (1.000) (39)
El Du Pont De Nemours & Co. 9/20/18 DBAG 5,200 117 (1.000) (39)
El Du Pont De Nemours & Co. 9/20/18 BARC 5,200 117 (1.000) (39)
El Du Pont De Nemours & Co. 9/20/18 GSCM 5,200 119 (1.000) (36)
Encana Corp. 12/20/18 CSFBI 16,475 (263) (1.000) (285)
Federal Express Corp. 12/20/18 GSCM 21,640 325 (1.000) (70)
Federative Republic of Brazil 12/20/15 BOANA 3,500 (16) (1.000) (17)
Halliburton Company 12/20/18 BOANA 16,475 468 (1.000) (59)
Hillshire Brands Co. 12/20/18 BOANA 16,475 (46) (1.000) (202)

 

39

 

Short-Term Investment-Grade Fund          
 
 
 
 
Credit Default Swaps (continued)            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
  Termination   Amount (Paid) (Paid) (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Home Depot Inc. 12/20/18 GSCM 16,475 492 (1.000) (92)
McKesson Corp. 3/20/19 JPMC 18,210 648 (1.000) 29
McKesson Corp. 3/20/19 JPMC 18,210 663 (1.000) 44
Morgan Stanley 9/20/15 BARC 11,000 (199) (1.000) (300)
Norfolk Southern Corp. 12/20/18 GSCM 16,475 533 (1.000) (76)
Plains All American Pipeline LP 3/20/18 CSFBI 19,520 31 (1.000) (403)
Plains All American Pipeline LP 6/20/18 CSFBI 9,790 29 (1.000) (178)
PPG Industries Inc. 3/20/18 GSCM 24,400 333 (1.000) (358)
Republic of Austria 9/20/17 BNPSW 3,800 (67) (1.000) (165)
Republic of Colombia 12/20/18 GSCM 9,800 (117) (1.000) (6)
Republic of Korea 9/20/18 JPMC 7,800 66 (1.000) (78)
Republic of Panama 3/20/19 MSCS 19,500 (146) (1.000) 75
Republic of Turkey 3/20/19 GSCM 9,800 (660) (1.000) 70
Republic of Turkey 3/20/19 BARC 8,800 (625) (1.000) 30
Safeway Inc. 12/20/18 CSFBI 16,475 (1,035) (1.000) (357)
Sherwin-Williams Company 12/20/18 JPMC 16,475 239 (1.000) (178)
Skandinaviska Enskilda Banken AB 6/20/18 BOANA 11,160 34 (1.000) (141)
Time Warner Cable Inc. 12/20/18 DBAG 16,475 (918) (1.000) (351)
Toyota Mortor Corp. 12/20/18 BOANA 16,475 373 (1.000) (208)
United Mexican States 12/20/15 BOANA 3,500 (20) (1.000) (56)
United Mexican States 12/20/18 DBAG 4,900 (30) (1.000) (25)
United Mexican States 12/20/18 GSCM 18,800 (45) (1.000) (29)
United Mexican States 12/20/18 GSCM 21,400 (70) (1.000) (52)
Valero Energy Corp. 12/20/18 DBAG 16,475 (281) (1.000) (407)
Walt Disney Company 12/20/18 GSCM 16,475 597 (1.000) (68)
Wells Fargo 3/20/15 GSCM 10,660 (20) (1.000) (131)
            (5,780)
            (3,457)

 

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 BARC—Barclays Bank plc. BNPSW—BNP Paribas.

BOANA—Bank of America, N.A. CSFBI—Credit Suisse First Boston International. DBAG—Deutsche Bank AG.

GSCM—Goldman Sachs Bank USA. JPMC—JP Morgan Chase Bank. MSCS—Morgan Stanley Capital Services LLC. RBS—The Royal Bank of Scotland plc.

40

 

Short-Term Investment-Grade Fund        
 
 
 
 
Centrally Cleared Interest Rate Swaps        
      Fixed Floating  
      Interest Rate Interest Rate Unrealized
    Notional Received Received Appreciation
    Amount (Paid) (Paid)   (Depreciation)
Termination Date   ($000) (%) (%) ($000)
7/15/14   200,000 (0.181) 0.1651 (19)
3/15/15   25,000 0.326 (0.165)1 31
6/15/15   120,000 0.443 (0.165)1 275
2/15/16   150,000 0.700 (0.165)1 911
3/15/16   150,000 0.579 (0.165)1 479
6/15/16   100,000 0.446 (0.165)2 (140)
          1,537
 
Over-the-Counter Interest Rate Swaps        
      Fixed Floating  
      Interest Rate Interest Rate Unrealized
    Notional Received Received Appreciation
    Amount (Paid) (Paid)  (Depreciation)
Termination Date Counterparty3 ($000) (%) (%) ($000)
3/15/14 WFC 9,750 0.519 (0.243)2 4
10/14/14 WFC 21,100 1.861 (0.242)2 236
2/7/15 BARC 150,000 0.335 (0.165)1 186
4/1/15 BNPSW 5,855 0.407 (0.247)2 7
8/7/15 CSFBI 100,000 0.414 (0.165)1 211
11/7/15 BOANA 195,000 0.374 (0.165)1 166
11/7/15 BOANA 155,000 0.375 (0.165)1 135
6/1/16 GSCM 125 0.555 (0.239)2
6/1/16 WFC 9,500 2.910 (0.239)2 519
6/1/16 WFC 6,075 0.566 (0.239)2 1
11/7/17 BOANA 163,000 (0.716) 0.1651 2,094
11/7/17 BOANA 162,000 (0.723) 0.1651 2,043
2/7/18 BARC 150,000 (0.957) 0.1651 1,228
2/7/19 WFC 150,000 (1.220) 0.1651 2,450
          9,280

 

1 Based on 1-month London Interbank Offered Rate (LIBOR) as of the most recent payment date.
2 Based on 3-month London Interbank Offered Rate (LIBOR) as of the most recent payment date.
3 BARC—Barclays Bank plc.
BNPSW—BNP Paribas
BOANA—Bank of America, N.A.
CSFBI—Credit Suisse First Boston International.
GSCM—Goldman Sachs Bank USA.
WFC—Wells Fargo Bank N.A.

41

 

Short-Term Investment-Grade Fund

At January 31, 2014, counterparties had deposited in segregated accounts securities and cash with a value of $11,560,000 in connection with open swap contracts. In the event of default or bankruptcy by a counterparty, the fund may sell or retain the securities, however such action may be subject to legal proceedings.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $20,840,000 from accumulated net realized gains to paid-in capital.

Realized and unrealized gains (losses) on certain of the fund’s swap contracts are treated as ordinary income (loss) for tax purposes; the effect on the fund’s income dividends to shareholders is offset by a change in principal return. Realized gains of $2,180,000 on swap contracts have been reclassified from accumulated net realized gains to undistributed net investment income.

For tax purposes, at January 31, 2014, the fund had $14,980,000 of long-term capital gains available for distribution.

At January 31, 2014, the cost of investment securities for tax purposes was $47,826,001,000. Net unrealized appreciation of investment securities for tax purposes was $264,865,000, consisting of unrealized gains of $596,157,000 on securities that had risen in value since their purchase and $331,292,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $23,351,553,000 of investment securities and sold $18,336,367,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $33,037,897,000 and $33,637,947,000, respectively.

The following table summarizes the fund’s options on futures and swaptions contracts written during the year ended January 31, 2014:

  Options on Futures Contracts Swaptions Contracts
    Premiums Number of Premiums
  Number of Received Contracts Received
Options Contracts (000) (000) (000)
Balance at January 31, 2013 2,306 1,540
Options written 19,193 8,246 157,000 709
Options expired
Options closed (15,443) (7,839) (157,000) (709)
Options exercised
Options open at January 31, 2014 6,056 1,947

 

42

 

Short-Term Investment-Grade Fund

G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 3,868,741 360,149 4,390,751 406,734
Issued in Lieu of Cash Distributions 228,696 21,281 290,603 26,896
Redeemed (4,419,411) (411,358) (6,024,464) (557,746)
Net Increase (Decrease)—Investor Shares (321,974) (29,928) (1,343,110) (124,116)
Admiral Shares        
Issued 13,713,113 1,276,586 11,638,041 1,077,146
Issued in Lieu of Cash Distributions 497,417 46,292 515,789 47,722
Redeemed (10,223,628) (951,976) (8,816,746) (816,214)
Net Increase (Decrease) —Admiral Shares 3,986,902 370,902 3,337,084 308,654
Institutional Shares        
Issued 4,773,317 444,189 3,920,877 363,450
Issued in Lieu of Cash Distributions 114,786 10,684 87,988 8,133
Redeemed (2,713,566) (253,224) (1,228,167) (113,649)
Net Increase (Decrease) —Institutional Shares 2,174,537 201,649 2,780,698 257,934

 

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

43

 

Intermediate-Term Investment-Grade Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor Admiral
  Shares Shares
Ticker Symbol VFICX VFIDX
Expense Ratio1 0.20% 0.10%
30-Day SEC Yield 2.81% 2.91%
 
Financial Attributes      
 
    Barclays Barclays
    5–10 Year Aggregate
    Credit Bond
  Fund Index Index
Number of Bonds 1,761 1,760 8,727
Yield to Maturity      
(before expenses) 2.7% 3.4% 2.3%
Average Coupon 3.9% 4.4% 3.3%
Average Duration 5.1 years 6.4 years 5.5 years
Average Effective      
Maturity 6.3 years 7.3 years 7.6 years
Short-Term      
Reserves 2.6%
 
 
Sector Diversification (% of portfolio)  
Asset-Backed     6.8%
Commercial Mortgage-Backed   5.0
Finance     28.3
Foreign     3.9
Industrial     42.7
Treasury/Agency     4.2
Utilities     7.7
Other     1.4
The agency and mortgage-backed securities sectors may include
issues from government-sponsored enterprises; such issues are
generally not backed by the full faith and credit of the U.S.
government.      

 

Volatility Measures    
  Barclays Barclays
  5–10 Year Aggregate
  Credit Bond
  Index Index
R-Squared 0.98 0.71
Beta 0.83 1.19

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 3.7%
1 - 3 Years 9.8
3 - 5 Years 17.8
5 - 7 Years 26.2
7 - 10 Years 41.2
10 - 20 Years 0.7
20 - 30 Years 0.2
Over 30 Years 0.4

 

Distribution by Credit Quality (% of portfolio)

U.S. Government 5.9%
Aaa 10.5
Aa 15.4
A 47.8
Baa 19.1
Ba 0.4
Not Rated 0.9

 

For information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.20% for Investor Shares and 0.10% for Admiral Shares.

44

 

Intermediate-Term Investment-Grade Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Intermediate-Term Investment-Grade        
Fund Investor Shares 0.85% 8.82% 5.35% $16,846
Barclays U.S. 5–10 Year Credit Bond        
••••••••        
Index 0.53 9.49 5.77 17,527
 
 
– – – – Spliced Barclays Core U.S. Bond Aggregate Funds Bond Average Index 0.02 0.12 6.48 4.93 4.05 4.62 14,871 15,703
For a benchmark description, see the Glossary.        
Spliced Core Bond Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
 
        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Intermediate-Term Investment-Grade Fund        
Admiral Shares 0.95% 8.94% 5.47% $85,136
Barclays U.S. 5–10 Year Credit Bond Index 0.53 9.49 5.77 87,634
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

45

 

Intermediate-Term Investment-Grade Fund      
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        5–10 Year
        Credit
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 4.78% -0.54% 4.24% 5.40%
2006 4.66 -3.30 1.36 0.63
2007 5.17 -0.72 4.45 4.43
2008 5.41 2.80 8.21 6.87
2009 4.98 -12.54 -7.56 -5.91
2010 6.06 14.05 20.11 20.79
2011 4.98 3.66 8.64 9.09
2012 4.56 4.62 9.18 10.37
2013 3.64 2.56 6.20 7.63
2014 3.16 -2.31 0.85 0.53

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 11/1/1993 -1.37% 8.52% 4.74% 0.54% 5.28%
Admiral Shares 2/12/2001 -1.27 8.64 4.85 0.54 5.39

 

46

 

Intermediate-Term Investment-Grade Fund

Financial Statements

Statement of Net Assets—Investments Summary

As of January 31, 2014

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the complete listing of the fund’s holdings is available electronically on vanguard.com and on the Securities and Exchange Commission’s website (sec.gov), or you can have it mailed to you without charge by calling 800-662-7447. For the first and third fiscal quarters, the fund files the lists with the SEC on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
U.S. Government and Agency Obligations        
U.S. Government Securities          
  United States Treasury Note/Bond 0.750% 1/15/17 535,000 536,252 3.2%
1 United States Treasury Note/Bond 0.625% 4/30/18 133,378 130,043 0.8%
1,2,3 United States Treasury          
  Note/Bond 0.750%–3.625% 4/30/16–8/15/19 31,375 31,808 0.2%
          698,103 4.2%
Nonconventional Mortgage-Backed Securities †     710 0.0%
Total U.S. Government and Agency Obligations (Cost $695,475)   698,813 4.2%
Asset-Backed/Commercial Mortgage-Backed Securities      
4,5 Ally Master Owner Trust          
  Series 2010-4 1.230% 8/15/17 39,470 39,819 0.3%
4 Banc of America Commercial          
  Mortgage Trust 2006-4 5.634% 7/10/46 24,950 27,067 0.2%
4 Banc of America Commercial          
  Mortgage Trust 2006-5 5.415% 9/10/47 4,021 4,398 0.0%
4 Banc of America Commercial          
  Mortgage Trust 2006-6 5.347% 10/10/45 4,391 4,809 0.0%
4 Banc of America Commercial          
  Mortgage Trust 2007-2 5.584%–5.635% 4/10/49 16,179 17,951 0.1%
4 Banc of America Commercial          
  Mortgage Trust 2008-1 6.171%–6.215% 2/10/51 34,339 38,919 0.2%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2005-PWR7 4.945% 2/11/41 393 393 0.0%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2005-PWR9 4.943% 9/11/42 1,320 1,389 0.0%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2006-PWR13 5.533% 9/11/41 2,391 2,618 0.0%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2007-PWR16 5.706% 6/11/40 22,140 24,872 0.2%
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2007-PWR17 5.650% 6/11/50 12,223 13,586 0.1%

 

47

 

Intermediate-Term Investment-Grade Fund        
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
4 Bear Stearns Commercial Mortgage          
  Securities Trust 2007-TOP28 5.710% 9/11/42 3,863 4,356 0.0%
4,5 Chase Issuance Trust 2007-C1 0.620% 4/15/19 6,100 6,028 0.0%
4,5 Chase Issuance Trust 2012-A10 0.420% 12/16/19 6,000 5,981 0.0%
4,6 Citibank Omni Master Trust          
  2009-A13 5.350% 8/15/18 13,931 14,290 0.1%
4,5,6 Citibank Omni Master Trust          
  2009-A14A 2.910% 8/15/18 1,825 1,848 0.0%
4,6 Citibank Omni Master Trust          
  2009-A17 4.900% 11/15/18 43,447 44,907 0.3%
4 Discover Card Execution Note          
  Trust 2012-A6 1.670% 1/18/22 40,000 38,841 0.2%
4,6 Ford Credit Auto Lease          
  Trust 2012-B 1.100% 12/15/15 2,200 2,208 0.0%
4 Ford Credit Auto Lease          
  Trust 2013-A 0.780%–1.280% 4/15/16–6/15/16 8,850 8,864 0.1%
4 Ford Credit Auto Owner          
  Trust 2010-A 2.930%–3.220% 11/15/15–3/15/16 2,210 2,251 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-A 1.150%–1.360% 7/15/18–10/15/18 2,750 2,747 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-B 1.110%–1.820% 10/15/18–11/15/19 3,100 3,285 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-C 1.680%–2.500% 11/15/18–1/15/20 5,500 5,569 0.0%
4 Ford Credit Auto Owner          
  Trust 2013-D 1.540%–1.720% 3/15/19–7/15/19 5,690 5,701 0.0%
4,6 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2010-3 4.990% 2/15/17 8,785 9,254 0.1%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2012-2 1.920% 1/15/19 2,000 2,041 0.0%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2012-4 0.940%–1.390% 9/15/16 8,700 8,758 0.1%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2012-5 1.490%–2.140% 9/15/19 27,500 29,054 0.2%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2013-1 1.370%–1.820% 1/15/18 7,800 8,031 0.1%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2013-3 1.740% 6/15/17 820 840 0.0%
4 Ford Credit Floorplan          
  Master Owner Trust A          
  Series 2013-4 2.100%–2.790% 6/15/20 1,680 1,735 0.0%
4,5 GE Capital Credit Card          
  Master Note Trust          
  Series 2011-2 1.160% 5/15/19 10,800 10,814 0.1%
4 GE Capital Credit Card          
  Master Note Trust          
  Series 2012-2 2.220% 1/15/22 30,000 30,017 0.2%
4 GE Capital Credit Card          
  Master Note Trust          
  Series 2012-6 1.360% 8/17/20 2,300 2,274 0.0%

 

48

 

Intermediate-Term Investment-Grade Fund        
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
4,5 GE Dealer Floorplan Master          
  Note Trust Series 2012-2 0.907% 4/22/19 13,000 13,720 0.1%
4,5 GE Dealer Floorplan Master          
  Note Trust Series 2012-4 0.597% 10/20/17 10,000 10,141 0.1%
4 GS Mortgage Securities          
  Trust 2006-GG6 5.506%–5.553% 4/10/38 14,305 15,272 0.1%
4,6 GS Mortgage Securities          
  Trust 2010-C2 5.225% 12/10/43 1,370 1,473 0.0%
4,6 GS Mortgage Securities          
  Trust 2011-GC3 5.543% 3/10/44 2,650 2,890 0.0%
4,6 GS Mortgage Securities          
  Trust 2012-ALOHA 3.551% 4/10/34 4,100 4,108 0.0%
4,6 GS Mortgage Securities          
  Trust 2012-BWTR 2.954% 11/5/34 6,450 6,110 0.0%
4,6 GS Mortgage Securities          
  Trust 2012-GC6 4.948% 1/10/45 1,025 1,117 0.0%
4 GS Mortgage Securities          
  Trust 2013-GCJ12 3.135%–3.777% 6/10/46 5,250 5,068 0.0%
4 GS Mortgage Securities          
  Trust 2013-GCJ14 2.995%–3.817% 8/10/46 2,800 2,907 0.0%
4 Merrill Lynch Mortgage          
  Trust 2006-C2 5.739% 8/12/43 806 885 0.0%
4 Merrill Lynch Mortgage          
  Trust 2008-C1 5.690% 2/12/51 16,140 18,074 0.1%
4 ML-CFC Commercial          
  Mortgage Trust 2006-2 5.876% 6/12/46 2,785 3,055 0.0%
4 Morgan Stanley Capital I          
  Trust 2006-HQ9 5.728% 7/12/44 6,571 7,195 0.1%
4 Morgan Stanley Capital I          
  Trust 2006-IQ12 5.319% 12/15/43 3,638 3,982 0.0%
4 Morgan Stanley Capital I          
  Trust 2007-IQ15 5.908% 6/11/49 7,580 8,485 0.1%
4 Morgan Stanley Capital I          
  Trust 2007-IQ16 5.688% 12/12/49 7,234 7,996 0.1%
4 Morgan Stanley Capital I          
  Trust 2012-C4 3.773% 3/15/45 2,440 2,474 0.0%
4,6 Morgan Stanley Capital I          
  Trust 2012-STAR 3.201% 8/5/34 6,000 5,832 0.0%
6 Asset-Backed/Commercial Mortgage-Backed Securities—Other †   1,371,538 8.2%
Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $1,875,836) 1,917,837 11.5%
Corporate Bonds          
Finance          
  Banking          
  Associates Corp. of          
  North America 6.950% 11/1/18 8,855 10,639 0.1%
  Bank of America Corp. 2.000%–7.625% 8/1/16–1/22/24 168,027 181,281 1.1%
  Bank of America NA 5.300%–6.100% 3/15/17–6/15/17 13,877 15,542 0.1%
  Barclays Bank plc 6.750% 5/22/19 28,530 34,631 0.2%
  Bear Stearns Cos. LLC 6.400% 10/2/17 5,500 6,398 0.0%
  BNP Paribas SA 5.000% 1/15/21 73,350 80,557 0.5%
  BNP Paribas SA 3.250% 3/3/23 34,735 33,126 0.2%
  Citigroup Inc. 4.500% 1/14/22 38,500 40,794 0.2%
  Citigroup Inc. 5.375% 8/9/20 31,422 35,581 0.2%
  Citigroup Inc. 3.375%–8.500% 8/15/17–9/13/25 89,308 99,084 0.6%

 

49

 

Intermediate-Term Investment-Grade Fund        
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
Cooperatieve Centrale          
Raiffeisen-Boerenleenbank BA 4.625% 12/1/23 70,232 71,033 0.4%
Cooperatieve Centrale          
Raiffeisen-Boerenleenbank BA 3.950% 11/9/22 47,080 46,190 0.3%
Cooperatieve Centrale          
Raiffeisen-Boerenleenbank BA 3.875% 2/8/22 44,100 45,031 0.3%
Cooperatieve Centrale          
Raiffeisen-Boerenleenbank          
BA 2.250%–4.500% 1/14/19–1/11/21 21,744 23,215 0.1%
Goldman Sachs Group Inc. 2.625% 1/31/19 41,500 41,539 0.3%
Goldman Sachs Group Inc. 5.250% 7/27/21 37,857 41,299 0.2%
Goldman Sachs Group Inc. 5.750% 1/24/22 32,535 36,815 0.2%
Goldman Sachs Group Inc. 2.375%–7.500% 9/1/17–1/22/23 78,035 88,168 0.5%
HSBC Bank USA NA 4.875% 8/24/20 39,478 42,864 0.3%
HSBC Bank USA NA 6.000% 8/9/17 5,055 5,767 0.0%
HSBC Holdings plc 5.100% 4/5/21 51,948 58,118 0.3%
HSBC Holdings plc 4.000% 3/30/22 26,100 27,029 0.2%
HSBC USA Inc. 5.000% 9/27/20 8,158 8,871 0.1%
JPMorgan Chase & Co. 1.625%–6.300% 6/27/17–1/25/23 189,941 201,738 1.2%
JPMorgan Chase Bank NA 6.000% 7/5/17–10/1/17 16,880 19,357 0.1%
Lloyds Bank plc 6.375% 1/21/21 38,592 46,775 0.3%
Merrill Lynch & Co. Inc. 6.400%–6.875% 8/28/17–11/15/18 18,770 22,095 0.1%
Morgan Stanley 2.125%–7.300% 1/9/17–2/25/23 134,285 151,474 0.9%
Royal Bank of Scotland plc 6.125% 1/11/21 29,500 34,428 0.2%
Royal Bank of Scotland plc 5.625% 8/24/20 29,026 33,040 0.2%
UBS AG 4.875% 8/4/20 51,600 57,747 0.3%
US Bancorp 2.950% 7/15/22 35,200 33,498 0.2%
Wachovia Bank NA 6.000% 11/15/17 8,000 9,269 0.1%
Wachovia Corp. 5.625%–5.750% 10/15/16–2/1/18 23,305 26,577 0.2%
Wells Fargo & Co. 3.450% 2/13/23 36,700 35,239 0.2%
Wells Fargo & Co. 2.150%–5.625% 12/11/17–8/15/23 91,751 95,993 0.6%
Westpac Banking Corp. 4.875% 11/19/19 32,795 36,736 0.2%
6 Banking—Other †       1,047,422 6.3%
Brokerage †       203,240 1.2%
Finance Companies          
General Electric Capital Corp. 4.650% 10/17/21 35,847 39,344 0.2%
4 General Electric          
Capital Corp. 2.300%–6.375% 2/15/17–11/15/67 145,896 161,390 1.0%
HSBC Finance Corp. 6.676% 1/15/21 89,189 103,655 0.6%
Finance Companies—Other †       32,622 0.2%
Insurance          
UnitedHealth Group Inc. 2.875% 3/15/22 34,316 33,286 0.2%
6 Insurance—Other †       714,988 4.3%
Other Finance          
IntercontinentalExchange Group Inc. 4.000% 10/15/23 34,330 35,275 0.2%
Other Finance—Other †       24,435 0.2%
Real Estate Investment Trusts          
Simon Property Group LP 5.650% 2/1/20 31,200 36,308 0.2%
6 Real Estate Investment Trusts—Other †     317,082 1.9%
        4,626,585 27.7%
Industrial          
6 Basic Industry †       580,044 3.5%
Capital Goods          
General Electric Co. 2.700% 10/9/22 40,000 38,320 0.2%
General Electric Co. 5.250% 12/6/17 12,925 14,710 0.1%

 

50

 

Intermediate-Term Investment-Grade Fund        
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
United Technologies Corp. 3.100% 6/1/22 64,930 64,695 0.4%
6 Capital Goods—Other †       781,635 4.7%
Communication          
America Movil SAB de CV 3.125% 7/16/22 39,300 36,691 0.2%
America Movil SAB de CV 5.000% 3/30/20 32,500 35,512 0.2%
AT&T Inc. 3.000% 2/15/22 48,396 45,998 0.3%
6 Communication—Other †       781,393 4.7%
Consumer Cyclical          
Ford Motor Credit Co. LLC 3.000%–8.125% 6/12/17–8/6/23 83,699 94,584 0.6%
Wal-Mart Stores Inc. 2.550% 4/11/23 57,500 53,804 0.3%
6 Consumer Cyclical—Other †       644,097 3.8%
Consumer Noncyclical          
Anheuser-Busch Cos. LLC 5.000%–5.600% 3/1/17–3/1/19 8,600 9,693 0.1%
Anheuser-Busch InBev          
Finance Inc. 2.625%–3.700% 1/17/23–2/1/24 25,375 25,047 0.2%
Anheuser-Busch InBev          
Worldwide Inc. 5.375% 1/15/20 42,085 48,847 0.3%
Anheuser-Busch InBev          
Worldwide Inc. 2.500% 7/15/22 44,177 41,749 0.2%
Anheuser-Busch InBev          
Worldwide Inc. 5.000%–7.750% 11/15/14–4/15/20 61,470 73,425 0.4%
Coca-Cola Co. 3.300% 9/1/21 34,245 35,336 0.2%
Koninklijke Philips NV 3.750% 3/15/22 32,849 33,894 0.2%
St. Jude Medical Inc. 3.250% 4/15/23 37,138 36,015 0.2%
6 Consumer Noncyclical—Other †       1,614,564 9.7%
Energy          
BP Capital Markets plc 3.245% 5/6/22 35,000 34,489 0.2%
BP Capital Markets plc 4.500% 10/1/20 30,500 33,427 0.2%
BP Capital Markets plc 1.375%–4.750% 11/6/17–5/10/23 114,128 114,423 0.7%
Chevron Corp. 3.191% 6/24/23 37,083 36,701 0.2%
Chevron Corp. 2.355% 12/5/22 39,000 36,483 0.2%
Shell International Finance BV 2.375% 8/21/22 39,609 37,043 0.2%
6 Energy—Other †       684,015 4.1%
Other Industrial †       1,604 0.0%
Technology          
Apple Inc. 2.400% 5/3/23 78,300 71,666 0.4%
Intel Corp. 3.300% 10/1/21 44,900 45,662 0.3%
Intel Corp. 2.700% 12/15/22 38,000 35,897 0.2%
6 Technology—Other †       553,733 3.3%
Transportation          
United Parcel Service Inc. 3.125% 1/15/21 34,200 35,116 0.2%
6 Transportation—Other †       166,211 1.0%
        6,976,523 41.7%
Utilities          
6 Electric †       1,053,118 6.3%
6 Natural Gas †       194,290 1.2%
        1,247,408 7.5%
Total Corporate Bonds (Cost $12,501,122)     12,850,516 76.9%
6Sovereign Bonds (U.S. Dollar-Denominated) (Cost $638,065) †   636,355 3.8%
Taxable Municipal Bonds (Cost $53,255) †     54,731 0.3%
6Tax-Exempt Municipal Bonds (Cost $167,550) †     173,771 1.0%
Convertible Preferred Stocks (Cost $8,571) †     0.0%

 

51

 

Intermediate-Term Investment-Grade Fund        
 
 
        Market Percentage
        Value of Net
  Coupon   Shares ($000) Assets
Temporary Cash Investment          
Money Market Fund          
7 Vanguard Market Liquidity          
Fund (Cost $136,125) 0.130%   136,124,532 136,125 0.8%
Total Investments (Cost $16,075,999)     16,468,148 98.5%
 
    Expiration      
    Date Contracts    
Liabiliy for Options Written (0.0%)          
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 124.50 2/21/14 524 (770) 0.0%
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 125.50 2/21/14 532 (407) 0.0%
Put Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 122.50 2/21/14 1,056 (33) 0.0%
Total Liability for Options Written (Premiums Received $679)   (1,210) 0.0%
Other Assets and Liabilities          
Other Assets       400,880 2.4%
Other Liabilities       (150,488) (0.9%)
        250,392 1.5%
Net Assets       16,717,330 100.0%

 

52

 

Intermediate-Term Investment-Grade Fund  
 
 
 
At January 31, 2014, net assets consisted of:  
  Amount
  ($000)
Paid-in Capital 16,321,351
Undistributed Net Investment Income
Accumulated Net Realized Gains 1,922
Unrealized Appreciation (Depreciation)  
Investment Securities 392,149
Futures Contracts (6,113)
Options on Futures Contracts (531)
Swap Contracts 8,552
Net Assets 16,717,330
 
 
Investor Shares—Net Assets  
Applicable to 315,940,344 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 3,099,194
Net Asset Value Per Share—Investor Shares $9.81
 
 
Admiral Shares—Net Assets  
Applicable to 1,388,274,833 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 13,618,136
Net Asset Value Per Share—Admiral Shares $9.81

 

See Note A in Notes to Financial Statements.
† Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.
1 Securities with a value of $14,303,000 have been segregated as initial margin for open futures contracts.
2 Securities with a value of $813,000 have been segregated as collateral for open over-the-counter swap contracts.
3 Securities with a value of $552,000 have been segregated as initial margin for open cleared swap contracts.
4 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.
5 Adjustable-rate security.
6 Certain of the fund’s securities are 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 January 31, 2014, the aggregate value of these securities was $1,163,085,000, representing 7.0% of net assets.
7 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.

53

 

Intermediate-Term Investment-Grade Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Dividends 71
Interest1 590,098
Total Income 590,169
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 1,712
Management and Administrative—Investor Shares 6,158
Management and Administrative—Admiral Shares 9,263
Marketing and Distribution—Investor Shares 1,146
Marketing and Distribution—Admiral Shares 2,946
Custodian Fees 220
Auditing Fees 41
Shareholders’ Reports—Investor Shares 106
Shareholders’ Reports—Admiral Shares 87
Trustees’ Fees and Expenses 17
Total Expenses 21,696
Net Investment Income 568,473
Realized Net Gain (Loss)  
Investment Securities Sold 243,487
Futures Contracts 16,856
Swaptions and Options on Futures Contracts (1,595)
Swap Contracts 12,093
Realized Net Gain (Loss) 270,841
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (699,207)
Futures Contracts (4,743)
Options on Futures Contracts (562)
Swap Contracts (19,617)
Change in Unrealized Appreciation (Depreciation) (724,129)
Net Increase (Decrease) in Net Assets Resulting from Operations 115,185
1 Interest income from an affiliated company of the fund was $326,000.  

 

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

54

 

Intermediate-Term Investment-Grade Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 568,473 633,986
Realized Net Gain (Loss) 270,841 497,697
Change in Unrealized Appreciation (Depreciation) (724,129) (46,737)
Net Increase (Decrease) in Net Assets Resulting from Operations 115,185 1,084,946
Distributions    
Net Investment Income    
Investor Shares (124,861) (174,913)
Admiral Shares (453,908) (471,180)
Realized Capital Gain1    
Investor Shares (75,049) (95,277)
Admiral Shares (270,895) (269,094)
Total Distributions (924,713) (1,010,464)
Capital Share Transactions    
Investor Shares (1,592,771) 15,503
Admiral Shares (346,346) 3,127,849
Net Increase (Decrease) from Capital Share Transactions (1,939,117) 3,143,352
Total Increase (Decrease) (2,748,645) 3,217,834
Net Assets    
Beginning of Period 19,465,975 16,248,141
End of Period 16,717,330 19,465,975

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $22,569,000 and $83,279,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

55

 

Intermediate-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.24 $10.18 $9.94 $9.81 $8.64
Investment Operations          
Net Investment Income . 311 . 354 . 418 .458 .468
Net Realized and Unrealized Gain (Loss)          
on Investments (.229) .266 .463 .372 1.220
Total from Investment Operations .082 .620 .881 .830 1.688
Distributions          
Dividends from Net Investment Income (.317) (. 360) (. 428) (.473) (. 478)
Distributions from Realized Capital Gains (.195) (. 200) (. 213) (. 227) (.040)
Total Distributions (. 512) (. 560) (. 641) (.700) (.518)
Net Asset Value, End of Period $9.81 $10.24 $10.18 $9.94 $9.81
 
Total Return1 0.85% 6.20% 9.18% 8.64% 20.11%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $3,099 $4,884 $4,837 $4,645 $5,489
Ratio of Total Expenses to          
Average Net Assets 0.20% 0.20% 0.20% 0.22% 0.24%
Ratio of Net Investment Income to          
Average Net Assets 3.12% 3.41% 4.17% 4.56% 5.05%
Portfolio Turnover Rate 100% 62% 49% 39% 69%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

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

56

 

Intermediate-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.24 $10.18 $9.94 $9.81 $8.64
Investment Operations          
Net Investment Income . 321 . 364 . 428 .470 .480
Net Realized and Unrealized Gain (Loss)          
on Investments (.229) .266 .463 .372 1.220
Total from Investment Operations .092 .630 .891 . 842 1.700
Distributions          
Dividends from Net Investment Income (.327) (.370) (.438) (.485) (. 490)
Distributions from Realized Capital Gains (.195) (. 200) (. 213) (. 227) (.040)
Total Distributions (.522) (.570) (. 651) (.712) (.530)
Net Asset Value, End of Period $9.81 $10.24 $10.18 $9.94 $9.81
 
Total Return 0.95% 6.30% 9.29% 8.77% 20.26%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $13,618 $14,582 $11,411 $9,717 $8,601
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.11%
Ratio of Net Investment Income to          
Average Net Assets 3.22% 3.51% 4.27% 4.68% 5.18%
Portfolio Turnover Rate 100% 62% 49% 39% 69%

 

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

57

 

Intermediate-Term Investment-Grade Fund

Notes to Financial Statements

Vanguard Intermediate-Term Investment-Grade Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

58

 

Intermediate-Term Investment-Grade Fund

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 8% and 6% of net assets, respectively, based on quarterly average aggregate settlement values.

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written each represented less than 1% of net assets, based on quarterly average market values.

3. Swaptions: The fund enters into swaptions to adjust the fund’s sensitivity to interest rates. The fund may purchase a swaption from a counterparty whereby the fund has the right to enter into an interest rate swap in which the fund will pay a fixed rate and receive a floating rate, each applied to a notional amount. The fund may also sell a swaption to a counterparty whereby the fund grants the counterparty the right to enter into an interest rate swap in which the fund will pay a floating rate and receive a fixed rate, each applied to a notional amount.

Swaptions are valued based on market quotations received from independent pricing services or recognized dealers. The premium paid for a purchased swaption is recorded as an asset in the Statement of Net Assets and is subsequently adjusted daily based on the current market value of the swaption. The premium received for a written swaption is recorded as an asset with an equal liability in the Statement of Net Assets and is subsequently adjusted daily based on the current market value of the swaption. Fluctuations in the value of swaptions are recorded as unrealized appreciation (depreciation) until expired, closed, or exercised, at which time realized gains (losses) are recognized.

The primary risk associated with purchasing swaptions is that interest rates move in such a way that the swaption is out-of-the money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with selling swaptions is that interest rates move in such a way that the swaption is in-the-money, the counterparty exercises the swaption and the resulting interest rate swap results in a negative cash-flow to the fund in an amount greater than the premium received. A risk associated with all types of swaptions is the possibility that a counterparty may default on its obligations under the swaption contract. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swaption contract. The fund mitigates its counterparty risk by only entering into swaptions with a diverse group of pre-qualified 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 event of a counterparty’s default (including bankruptcy), the fund may terminate any swaption 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 swaption 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 Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swaption 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.

59

 

Intermediate-Term Investment-Grade Fund

During the year ended January 31, 2014, the fund’s average value of swaptions purchased and swaptions written each represented less than 1% of net assets, based on quarterly average market values.

4. 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 an amount that is a fixed percentage rate applied to a notional amount. In return, the counterparty agrees to pay a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount.

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded 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.

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 counter-party risk by entering into swaps only with a diverse group of pre-qualified 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 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

60

 

Intermediate-Term Investment-Grade Fund

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 Statement of Net Assets. 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 fund also enters into centrally cleared interest rate and credit default swaps to achieve the same objectives specified with respect to the equivalent over-the-counter swaps but with less counterparty risk because a regulated clearinghouse is the counterparty instead of the clearing broker or executing broker. 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. To further mitigate counterparty risk, the fund trades with a diverse group of pre-qualified executing brokers; monitors the financial strength of its clearing brokers, executing brokers and clearinghouse; and has entered into agreements with its clearing brokers and executing brokers.

During the year ended January 31, 2014, the average amounts of credit protection sold and credit protection purchased each represented 1% of net assets, based on quarterly average notional amounts. The average amounts of interest rate swaps represented 4% of net assets, based on quarterly average notional amounts.

5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

6. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

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

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

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital

61

 

Intermediate-Term Investment-Grade Fund

of $1,826,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.73% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 698,813
Asset-Backed/Commercial Mortgage-Backed Securities 1,903,745 14,092
Corporate Bonds 12,845,242 5,274
Sovereign Bonds 636,355
Taxable Municipal Bonds 54,731
Tax-Exempt Municipal Bonds 173,771
Convertible Preferred Stocks
Preferred Stocks
Temporary Cash Investments 136,125
Futures Contracts—Assets1 1,053
Futures Contracts—Liabilities1 (2,981)
Swap Contracts—Assets 341 12,534
Swap Contracts—Liabilities (3,989)
Liability for Option Contracts Written (1,210)
Total 133,021 16,321,202 19,366
1 Represents variation margin on the last day of the reporting period.      

 

D. At January 31, 2014, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

  Interest Rate Credit  
  Contracts Contracts Total
Statement of Net Assets Caption ($000) ($000) ($000)
Other Assets 12,618 1,003 13,621
Other Liabilities (5,099) (3,081) (8,180)

 

62

 

Intermediate-Term Investment-Grade Fund

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the year ended January 31, 2014, were:

  Interest Rate Credit  
  Contracts Contracts Total
Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)
Futures Contracts 16,856 16,856
Options on Futures Contracts (1,595) (1,595)
Swaptions and Swap Contracts 14,965 (2,872) 12,093
Realized Net Gain (Loss) on Derivatives 30,226 (2,872) 27,354
 
Change in Unrealized Appreciation (Depreciation) on Derivatives    
Futures Contracts (4,743) (4,743)
Options on Futures Contracts (562) (562)
Swap Contracts (17,258) (2,359) (19,617)
Change in Unrealized Appreciation (Depreciation)      
on Derivatives (22,563) (2,359) (24,922)

 

At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
10-Year U.S. Treasury Note March 2014 (8,177) (1,028,258) (6,903)
5-Year U.S. Treasury Note March 2014 6,151 741,964 1,778
2-Year U.S. Treasury Note March 2014 1,839 404,954 435
Ultra Long U.S. Treasury Bond March 2014 (289) (41,562) (1,400)
30-Year U.S. Treasury Bond March 2014 236 31,528 (23)
        (6,113)

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

63

 

Intermediate-Term Investment-Grade Fund          
 
 
 
 
At January 31, 2014, the fund had the following open swap contracts:    
 
Credit Default Swaps            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
  Termination   Amount (Paid) (Paid) (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Credit Protection Sold/Moody’s Rating          
Altria Group Inc./Baa1 12/20/18 MSCS 10,000 (221) 1.000 16
AT&T/A3 12/20/18 DBAG 10,000 (103) 1.000 28
Bank of America Corp./Baa2 12/20/17 MSCS 7,680 223 1.000 296
Belgium (Kingdom of)/Aa3 9/20/17 RBS 1,200 41 1.000 69
BHP Billiton Finance/A1 12/20/18 DBAG 10,000 (126) 1.000 26
BP plc/A2 12/20/18 DBAG 10,000 (140) 1.000 86
Federative Republic of Brazil/Baa2 3/20/19 GSCM 5,800 235 1.000 (57)
Republic of Chile/Aa3 3/20/19 BARC 2,000 (20) 1.000 (10)
Danaher Corporation 12/20/18 MSCS 10,000 (289) 1.000 (1)
Deere & Co./A2 12/20/18 DBAG 10,000 (313) 1.000 12
Energy Transfer Partners LP/Baa3 9/20/18 JPMC 1,500 6 1.000 10
Ford Motor Company/Baa3 12/20/18 JPMC 10,000 (1,715) 5.000 50
Indonesia (Republic of)/Baa3 12/20/18 GSCM 2,125 125 1.000 4
Indonesia (Republic of)/Baa4 3/20/19 JPMC 4,250 231 1.000 (41)
Kinder Morgan Energy            
Partners LP/Baa2 9/20/18 CSFBI 1,500 (8) 1.000
Kinder Morgan Energy            
Partners LP/Baa2 6/20/18 CSFBI 4,450 (55) 1.000 (21)
Kohls Corp./Baa1 9/20/18 BOANA 4,500 78 1.000 (25)
Kohls Corp./Baa2 6/20/18 JPMC 4,500 80 1.000 7
Malaysia (Federation of)/A3 3/20/19 DBAG 5,000 14 1.000 (57)
Rio Tinto Ltd./A3 12/20/18 DBAG 10,000 51 1.000 51
Russian Federation/Baa1 3/20/19 BARC 3,000 105 1.000 (39)
TJX Companies Inc./A3 12/20/18 MSCS 10,000 (304) 1.000 (15)
United Parcel Service of Inc./Aa3 12/20/18 BNPSW 10,000 (358) 1.000 5
Wal-Mart Stores Inc./Aa2 12/20/18 MSCS 10,000 (353) 1.000 12
Wesfarmers Ltd./A3 12/20/18 DBAG 10,000 (131) 1.000 61
        (2,947)   467

 

64

 

Intermediate-Term Investment-Grade Fund          
 
 
 
 
Credit Default Swaps (continued)            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
  Termination   Amount (Paid) (Paid) (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Credit Protection Purchased            
Aetna Inc. 12/20/18 JPMC 8,225 230 (1.000) (18)
Austria (Republic of) 9/20/17 BNPSW 1,200 (21) (1.000) (52)
Baker Hughes Inc. 12/20/18 MSCS 8,225 131 (1.000) (81)
Bank of America Corp. 12/20/14 DBAG 3,130 (7) (1.000) (28)
Bank of America Corp. 12/20/14 BARC 3,130 (7) (1.000) (28)
Federative Republic of Brazil 12/20/15 BOANA 1,500 (7) (1.000) (7)
Capital One Financial Corp. 6/20/18 DBAG 25,000 74 (1.000) (403)
Deven Energy Corp. 9/20/18 BARC 7,000 28 (1.000) (70)
Dow Chemical Company (The) 12/20/18 GSCM 8,225 38 (1.000) (71)
EI Du Pont De Nemours & Co. 9/20/18 GSCM 2,250 52 (1.000) (16)
EI Du Pont De Nemours & Co. 9/20/18 BARC 2,250 50 (1.000) (17)
EI Du Pont De Nemours & Co. 9/20/18 BNPSW 2,250 50 (1.000) (17)
EI Du Pont De Nemours & Co. 9/20/18 CSFBI 2,970 71 (1.000) (18)
EI Du Pont De Nemours & Co. 9/20/18 DBAG 2,250 50 (1.000) (17)
Encana Corp. 12/20/18 CSFBI 8,225 252 (1.000) 241
Federal Express Corp. 12/20/18 GSCM 7,840 118 (1.000) (25)
Halliburton Company 12/20/18 BOANA 8,225 234 (1.000) (30)
Hillshire Brands Co. 12/20/18 BOANA 8,225 (23) (1.000) (101)
Home Depot Inc. 12/20/18 GSCM 8,225 (137) (1.000) (429)
Korea (Republic of) 9/20/18 JPMC 2,000 17 (1.000) (20)
McKesson Corp. 3/20/19 JPMC 6,360 226 (1.000) 10
McKesson Corp. 3/20/19 JPMC 6,360 232 (1.000) 15
Mexico (United Mexican State) 12/20/15 BOANA 1,500 (9) (1.000) (24)
Mexico (United Mexican State) 12/20/18 GSCM 5,800 (14) (1.000) (9)
Mexico (United Mexican State) 12/20/18 GSCM 3,100 (10) (1.000) (7)
Morgan Stanley 9/20/15 BARC 4,400 (80) (1.000) (120)
Norfolk Southern Corporation 12/20/18 GSCM 8,225 266 (1.000) (38)
Safeway Inc. 12/20/18 CSFBI 8,225 (517) (1.000) (178)
Sherwin-Williams Company (The) 12/20/18 JPMC 8,225 119 (1.000) (89)
Skandinaviska Enskida Banken AB 6/20/18 BOANA 4,880 15 (1.000) (62)
Time Warner Cable Inc. 12/20/18 DBAG 8,225 (458) (1.000) (175)
Toyota Motor Corp. 12/20/18 BOANA 8,225 187 (1.000) (103)
Turkey (Republic of) 3/20/19 BARC 1,000 (71) (1.000) 4

 

65

 

Intermediate-Term Investment-Grade Fund          
 
 
 
 
Credit Default Swaps (continued)            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
  Termination   Amount (Paid) (Paid) (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Valero Energy Corp. 12/20/18 DBAG 8,225 (140) (1.000) (203)
Walt Disney Company (The) 12/20/18 GSCM 8,225 298 (1.000) (34)
Wellpoint Inc. 12/20/17 CSFBI 10,000 (30) (1.000) (271)
Wells Fargo & Company 3/20/15 GSCM 4,400 (8) (1.000) (54)
            (2,545)
            (2,078)
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 BARC—Barclays Bank plc.
BNPSW—BNP Paribas.
BOANA—Bank of America, N.A.
CSFBI—Credit Suisse First Boston International.
DBAG—Deutsche Bank AG.
GSCM—Goldman Sachs Bank USA.
MSCS—Morgan Stanley.
JPMC—JP Morgan Chase Bank.
RBS—Royal Bank of Scotland Group.

Centrally Cleared Interest Rate Swaps        
    Fixed Floating  
    Interest Rate Interest Rate Unrealized
  Notional Received Received Appreciation
  Amount (Paid) (Paid) (Depreciation)
Termination Date ($000) (%) (%) ($000)
12/17/15 1,330 0.359 (0.159)2
12/17/15 3,610 0.377 (0.159)2 2
5/22/16 3,800 0.546 (0.238)3 (1)
12/10/16 8,355 0.656 (0.161)2 (9)
1/15/17 3,050 0.770 (0.198)3 4
5/1/18 3,400 1.214 (0.170)2 (5)
1/25/23 4,500 2.560 (0.158)2 (2)
3/25/23 1,150 0.156 (0.208)2 18
        7

 

66

 

Intermediate-Term Investment-Grade Fund        
 
 
 
 
Interest Rate Swaps          
      Fixed Floating  
      Interest Rate Interest Rate Unrealized
    Notional Received Received Appreciation
    Amount (Paid) (Paid)   (Depreciation)
Termination Date Counterparty1 ($000) (%) (%) ($000)
2/14/14 WFC 21,200 1.022 (0.160)2 7
2/25/14 WFC 1,090 0.201 (0.155)2 1
3/6/14 GSCM 18,138 2.448 (0.168)2 40
5/15/14 GSCM 1,000 1.528 (0.160)2 4
5/16/14 WFC 8,640 1.083 (0.238)3 21
6/15/14 WFC 1,200 1.150 (0.160)2 4
6/15/14 WFC 4,400 2.338 (0.160)2 35
6/15/14 WFC 40 2.577 (0.160)2 0
8/15/14 JPMC 1,825 1.501 (0.160)2 13
10/15/14 WFC 6,455 1.130 (0.160)2 42
12/15/14 GSCM 1,463 0.553 (0.160)2 4
1/25/15 BARC 6,400 0.313 (0.158)2 7
2/17/15 GSCM 14,170 2.555 (0.238)3 335
3/24/15 GSCM 1,520 2.910 (0.158)2 47
7/15/15 CSFBI 12,100 0.393 (0.160)2 23
8/15/15 GSCM 53,730 1.5875 (0.160)2 1,080
10/20/15 BOANA 10,000 0.390 (0.157)2 13
10/21/15 WFC 18,475 1.485 (0.237)3 349
2/15/16 BOANA 4,000 0.450 (0.160)2 4
2/15/16 GSCM 9,000 0.448 (0.160)2 10
2/15/16 WFC 9,000 0.450 (0.160)2 10
2/22/16 BNPSW 1,951 0.522 (0.238)3 3
5/16/16 GSCM 5,400 0.451 (0.159)2 (2)
5/16/16 GSCM 10,800 0.434 (0.160)2 (10)
5/19/16 WFC 4,081 1.454 (0.238)3 50
6/15/16 BOANA 7,947 0.299 (0.160)2 2
10/25/16 WFC 15,200 1.714 (0.239)3 416
1/15/17 BARC 1,130 2.971 (0.160)2 75
2/15/17 BARC 1,490 3.180 (0.160)2 109
2/15/17 BARC 1,145 2.287 (0.160)2 53
2/15/17 BOANA 12,650 1.875 (0.160)2 425
2/15/17 GSCM 365 3.433 (0.160)2 29
2/15/17 WFC 625 3.373 (0.160)2 49
2/15/17 WFC 950 2.407 (0.160)2 47
2/15/17 WFC 5,700 2.407 (0.160)2 283
2/15/17 WFC 400 0.714 (0.160)2 (1)

 

67

 

Intermediate-Term Investment-Grade Fund        
 
 
 
 
Interest Rate Swaps (continued)          
      Fixed Floating  
      Interest Rate Interest Rate Unrealized
    Notional Received Received Appreciation
    Amount (Paid) (Paid)  (Depreciation)
Termination Date Counterparty1 ($000) (%) (%) ($000)
4/20/17 GSCM 13,000 0.960 (0.157)2 52
5/5/17 BOANA 4,555 0.876 (0.160)2 4
9/15/17 BARC 5,400 3.363 (0.160)2 457
9/15/17 BOANA 5,910 0.755 (0.160)2 (53)
9/15/17 GSCM 4,850 3.520 (0.160)2 438
9/15/17 GSCM 7,295 2.533 (0.160)2 400
9/15/17 WFC 1,100 2.345 (0.160)2 53
10/16/17 WFC 7,000 0.750 (0.159)2 (74)
12/15/17 GSCM 6,000 0.788 (0.160)2 (72)
2/15/18 BARC 18,000 0.923 (0.160)2 (179)
3/15/18 BOANA 13,000 0.944 (0.160)2 (174)
5/24/18 BNPSW 10,000 0.984 (0.158)2 (125)
8/15/18 BNPSW 5,400 0.715 (0.160)2 (54)
3/15/19 GSCM 4,990 1.399 (0.160)2 (46)
4/25/19 WFC 11,550 2.053 (0.236)3 349
4/25/19 WFC 5,500 2.756 (0.239)3 249
4/25/20 GSCM 4,365 2.794 (0.239)3 201
4/25/20 JPMC 28,610 3.024 (0.239)3 1,720
4/1/21 WFC 5,891 0.965 (0.170)2 (118)
6/25/21 GSCM 5,720 3.143 (0.246)3 378
10/25/21 WFC 6,500 3.328 (0.239)3 492
11/25/22 BARC 17,900 2.758 (0.238)3 884
11/25/22 UBSAG 3,348 2.491 (0.238)3 114
1/25/23 WFC 3,000 3.144 (0.239)3 187
7/25/23 BARC 24,625 3.483 (0.239)3 1,963
          10,623
1 BARC—Barclays Bank plc.          
BNPSW—BNP Paribas.          
BOANA—Bank of America, N.A.          
CSFBI—Credit Suisse First Boston International.        
GSCM—Goldman Sachs Bank USA.          
JPMC—JP Morgan Chase Bank.          
UBSAG—UBS AG.          
WFC—Wells Fargo Bank N.A.          
2 Based on one-month London InterBank Offered Rate (LIBOR) as of the most recent payment date.    
3 Based on three-month London InterBank Offered Rate (LIBOR) as of the most recent payment date.    

 

68

 

Intermediate-Term Investment-Grade Fund

At January 31, 2014, counterparties had deposited in segregated accounts securities with a value of $15,981,000 in connection with open swap contracts. In the event of default or bankruptcy by a counterparty, the fund may sell or retain the securities, however such action may be subject to legal proceedings.

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $63,796,000 from accumulated net realized gains to paid-in capital.

Realized and unrealized gains (losses) on certain of the fund’s swap contracts are treated as ordinary income (loss) for tax purposes; the effect on the fund’s income dividends to shareholders is offset by a change in principal return. Realized gains of $10,296,000 on swap contracts have been reclassified from accumulated net realized gains to undistributed net investment income.

For tax purposes, at January 31, 2014, the fund had long-term capital gains of $13,777,000 available for distribution.

At January 31, 2014, the cost of investment securities for tax purposes was $16,094,498,000. Net unrealized appreciation of investment securities for tax purposes was $373,650,000, consisting of unrealized gains of $613,080,000 on securities that had risen in value since their purchase and $239,430,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $7,432,136,000 of investment securities and sold $8,848,076,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $9,795,382,000 and $10,666,776,000, respectively.

The following table summarizes the fund’s options on futures and swaptions written during the year ended January 31, 2014:

  Options on Futures Contracts Swaptions Contracts
    Premiums Number of Premiums
  Number of Received Contracts Received
Options Contracts ($000) (000) ($000)
Balance at January 31, 2013 1,064 710
Options written 7,783 3,356 59,400 267
Options expired
Options closed (6,735) (3,387) (59,400) (267)
Options exercised
Options open at January 31, 2014 2,112 679

 

69

 

Intermediate-Term Investment-Grade Fund

G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 909,326 90,920 2,020,863 196,624
Issued in Lieu of Cash Distributions 164,142 16,498 214,777 20,876
Redeemed (2,666,239) (268,637) (2,220,137) (215,583)
Net Increase (Decrease)—Investor Shares (1,592,771) (161,219) 15,503 1,917
Admiral Shares        
Issued 4,427,560 445,175 5,232,696 507,523
Issued in Lieu of Cash Distributions 583,238 58,730 598,470 58,119
Redeemed (5,357,144) (540,101) (2,703,317) (262,314)
Net Increase (Decrease) —Admiral Shares (346,346) (36,196) 3,127,849 303,328

 

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

70

 

Long-Term Investment-Grade Fund

Fund Profile    
As of January 31, 2014    
 
Share-Class Characteristics    
  Investor   Admiral
  Shares   Shares
Ticker Symbol VWESX   VWETX
Expense Ratio1 0.22%   0.12%
30-Day SEC Yield 4.51%   4.61%
 
Financial Attributes    
 
  Barclays  
    Long Barclays
    Credit  Aggregate
  A/Better Bond
  Fund Index Index
Number of Bonds 594 1,003 8,727
Yield to Maturity      
(before expenses) 4.7% 4.7% 2.3%
Average Coupon 5.3% 5.7% 3.3%
Average Duration 12.7 years  13.5 years 5.5 years
Average Effective      
Maturity 23.0 years  23.7 years 7.6 years
Short-Term      
Reserves 3.5%
 
 
Sector Diversification (% of portfolio)  
Finance     22.2%
Foreign     2.2
Industrial     40.7
Treasury/Agency     3.0
Utilities     14.7
Other     17.2

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  Long Credit Aggregate
  A/Better Bond
  Index Index
R-Squared 0.99 0.79
Beta 1.00 2.74

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 3.6%
1 - 3 Years 0.5
3 - 5 Years 0.1
5 - 7 Years 0.1
7 - 10 Years 2.0
10 - 20 Years 20.1
20 - 30 Years 69.6
Over 30 Years 4.0

 

Distribution by Credit Quality (% of portfolio)

U.S. Government 4.8%
Aaa 2.7
Aa 26.3
A 53.5
Baa 11.1
Not Rated 1.6

 

For information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus


1 The expense ratios shown are from the prospectus dated February 7, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.22% for Investor Shares and 0.12% for Admiral Shares.

71

 

Long-Term Investment-Grade Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Long-Term Investment-Grade Fund        
Investor Shares -0.41% 10.36% 6.61% $18,972
Barclays U.S. Long Credit A or Better        
••••••••        
Bond Index -1.10 10.11 6.23 18,298
 
 
– – – – Corporate A-Rated Debt Funds Average 0.60 7.10 4.22 15,125
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 15,703
 
Corporate A-Rated Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
 
        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Long-Term Investment-Grade Fund Admiral        
Shares -0.31% 10.48% 6.73% $95,920
Barclays U.S. Long Credit A or Better Bond        
Index -1.10 10.11 6.23 91,492
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

72

 

Long-Term Investment-Grade Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        Long Credit
        A/Better
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 5.94% 3.83% 9.77% 10.05%
2006 5.27 -4.00 1.27 1.32
2007 5.74 -2.35 3.39 3.63
2008 5.85 -1.42 4.43 3.70
2009 5.75 -9.20 -3.45 -5.66
2010 6.91 10.38 17.29 17.13
2011 5.79 1.22 7.01 7.22
2012 6.29 15.68 21.97 22.56
2013 4.86 2.53 7.39 6.35
2014 4.64 -5.05 -0.41 -1.10

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 7/9/1973 -5.87% 8.20% 5.69% 0.68% 6.37%
Admiral Shares 2/12/2001 -5.77 8.32 5.81 0.68 6.49

 

73

 

Long-Term Investment-Grade Fund

Financial Statements

Statement of Net Assets—Investments Summary

As of January 31, 2014

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the complete listing of the fund’s holdings is available electronically on vanguard.com and on the Securities and Exchange Commission’s website (sec.gov), or you can have it mailed to you without charge by calling 800-662-7447. For the first and third fiscal quarters, the fund files the lists with the SEC on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
U.S. Government and Agency Obligations        
U.S. Government Securities1          
1,2,3 United States Treasury Note/Bond 4.500% 2/15/36 269,125 314,370 2.2%
  United States Treasury Note/Bond 3.750% 11/15/43 5,447 5,592 0.0%
  U.S. Government Securities—Other †       25,749 0.2%
          345,711 2.4%
 
Agency Notes †       53,728 0.4%
Total U.S. Government and Agency Obligations (Cost $412,799)   399,439 2.8%
Corporate Bonds          
Finance          
  Banking          
  Bank One Corp. 7.625%–8.000% 7/15/25–4/29/27 81,819 105,636 0.7%
  Citigroup Inc. 6.625% 6/15/32 56,285 63,640 0.4%
  Citigroup Inc. 3.500%–8.125% 5/15/23–11/7/43 169,900 186,820 1.3%
  Goldman Sachs Group Inc. 6.450% 5/1/36 53,500 57,487 0.4%
  Goldman Sachs Group Inc. 6.125%–6.750% 2/15/33–2/1/41 120,880 137,178 1.0%
  HSBC Bank USA NA 5.625%–5.875% 11/1/34–8/15/35 83,475 92,208 0.7%
  HSBC Holdings plc 6.800% 6/1/38 93,749 115,417 0.8%
  HSBC Holdings plc 6.500%–7.625% 5/17/32–9/15/37 69,800 85,432 0.6%
  JPMorgan Chase & Co. 6.400% 5/15/38 90,000 109,681 0.8%
  JPMorgan Chase & Co. 3.375%–5.625% 5/1/23–8/16/43 92,805 97,774 0.7%
  Morgan Stanley 7.250% 4/1/32 45,450 57,834 0.4%
  Wachovia Corp. 5.500%–6.605% 10/1/25–8/1/35 53,955 60,771 0.4%
4 Wells Fargo & Co. 5.606% 1/15/44 153,488 163,692 1.2%
  Wells Fargo & Co. 4.125%–5.375% 8/15/23–11/2/43 25,881 26,471 0.2%
4 Banking—Other †       387,692 2.7%
4 Brokerage †       26,138 0.2%
  Finance Companies          
  General Electric Capital Corp. 6.750% 3/15/32 127,220 159,930 1.1%
  General Electric Capital Corp. 5.875% 1/14/38 124,290 143,648 1.0%
  General Electric Capital Corp. 6.875% 1/10/39 62,270 80,008 0.6%

 

74

 

Long-Term Investment-Grade Fund        
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
5 General Electric          
Capital Corp. 5.300%–7.500% 2/11/21–12/29/49 21,875 25,512 0.2%
Insurance          
Berkshire Hathaway Inc. 4.500% 2/11/43 44,777 42,578 0.3%
4 Nationwide Mutual Insurance Co.  9.375% 8/15/39 43,446 63,494 0.5%
UnitedHealth Group Inc. 5.800% 3/15/36 50,236 57,887 0.4%
UnitedHealth Group Inc. 3.950%–6.875% 6/15/37–10/15/42 116,099 129,650 0.9%
4 Insurance—Other †       495,940 3.5%
Real Estate Investment Trusts †     13,941 0.1%
        2,986,459 21.1%
Industrial          
Basic Industry †       96,112 0.7%
Capital Goods          
General Electric Co. 4.125% 10/9/42 14,925 13,968 0.1%
United Technologies Corp. 4.500% 6/1/42 87,180 87,789 0.6%
United Technologies Corp. 6.125% 7/15/38 45,475 56,943 0.4%
United Technologies Corp. 5.700%–7.500% 9/15/29–4/15/40 47,905 59,811 0.4%
4 Capital Goods—Other †       266,478 1.9%
Communication          
Alltel Corp. 6.800%–7.875% 5/1/29–7/1/32 26,859 35,696 0.2%
AT&T Inc. 5.350% 9/1/40 151,161 151,241 1.1%
AT&T Inc. 4.350% 6/15/45 90,058 77,212 0.5%
AT&T Inc. 4.300% 12/15/42 76,705 65,871 0.5%
AT&T Inc. 5.550%–6.500% 9/1/37–8/15/41 17,630 18,771 0.1%
Comcast Corp. 4.250%–7.050% 1/15/33–1/15/43 183,749 207,802 1.5%
NBCUniversal Media LLC 4.450%–6.400% 4/30/40–1/15/43 43,210 41,987 0.3%
Orange SA 8.750% 3/1/31 39,675 56,956 0.4%
Verizon Communications Inc. 6.550% 9/15/43 54,925 66,101 0.5%
Verizon          
Communications Inc. 5.850%–7.750% 12/1/30–4/1/39 143,182 170,896 1.2%
Verizon Maryland LLC 5.125% 6/15/33 12,000 11,867 0.1%
4 Communication—Other †       292,401 2.1%
Consumer Cyclical          
Home Depot Inc. 4.875% 2/15/44 60,800 63,854 0.5%
Wal-Mart Stores Inc. 6.200% 4/15/38 83,350 103,026 0.7%
Wal-Mart Stores Inc. 5.625% 4/15/41 75,432 88,584 0.6%
Wal-Mart Stores Inc. 7.550% 2/15/30 51,000 70,739 0.5%
Wal-Mart Stores Inc. 4.000%–6.500% 9/1/35–10/2/43 131,314 146,794 1.0%
4 Consumer Cyclical—Other †       489,851 3.5%
Consumer Noncyclical          
Anheuser-Busch InBev          
Worldwide Inc. 8.200% 1/15/39 42,025 63,780 0.4%
AstraZeneca plc 6.450% 9/15/37 68,080 84,893 0.6%
GlaxoSmithKline Capital Inc. 6.375% 5/15/38 55,905 70,937 0.5%
Merck & Co. Inc. 6.550% 9/15/37 43,715 56,846 0.4%
Merck & Co. Inc. 3.600%–6.500% 12/1/33–5/18/43 46,545 54,396 0.4%
Merck Sharp &          
Dohme Corp. 5.750%–5.850% 11/15/36–6/30/39 34,920 41,737 0.3%
Pfizer Inc. 7.200% 3/15/39 60,817 83,808 0.6%
Pfizer Inc. 4.300% 6/15/43 15,300 14,960 0.1%
Pharmacia Corp. 6.750% 12/15/27 28,000 35,615 0.3%
4 Roche Holdings Inc. 7.000% 3/1/39 47,905 65,922 0.5%
Wyeth LLC 5.950% 4/1/37 72,150 87,499 0.6%
4 Consumer Noncyclical—Other †     1,065,501 7.5%

 

75

 

Long-Term Investment-Grade Fund        
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
Energy          
Apache Corp. 4.750% 4/15/43 68,960 68,461 0.5%
Burlington Resources Finance Co. 7.400% 12/1/31 25,000 34,439 0.2%
ConocoPhillips 6.500% 2/1/39 68,735 88,794 0.6%
ConocoPhillips 5.900%–7.000% 3/30/29–10/15/32 33,450 41,266 0.3%
Shell International Finance BV 6.375% 12/15/38 52,060 66,151 0.5%
Tosco Corp. 7.800%–8.125% 1/1/27–2/15/30 35,000 49,297 0.3%
4 Energy—Other †       106,274 0.8%
4 Other Industrial †       58,928 0.4%
Technology †       345,193 2.5%
Transportation          
Burlington Northern          
Santa Fe LLC 4.375%–6.875% 12/1/27–9/1/43 58,092 61,988 0.4%
4 Transportation—Other †       94,454 0.7%
        5,481,889 38.8%
Utilities          
Electric          
Duke Energy Carolinas LLC 6.100% 6/1/37 52,400 62,673 0.4%
Duke Energy Carolinas LLC 4.000%–6.450% 10/15/32–9/30/42 84,772 84,334 0.6%
Duke Energy Corp. 3.950% 10/15/23 5,920 6,037 0.0%
Duke Energy Florida Inc. 5.650%–6.750% 2/1/28–4/1/40 34,235 40,609 0.3%
Duke Energy Indiana Inc. 4.200%–6.450% 8/15/38–7/15/43 54,675 60,204 0.4%
Duke Energy Progress Inc. 4.100%–5.700% 4/1/35–3/15/43 22,500 22,971 0.2%
MidAmerican Energy Co. 4.800%–5.800% 10/15/36–9/15/43 35,000 37,606 0.3%
MidAmerican Energy          
Holdings Co. 5.950%–6.125% 4/1/36–5/15/37 28,950 33,983 0.2%
National Rural Utilities          
Cooperative Finance Corp. 8.000% 3/1/32 57,250 79,597 0.6%
Nevada Power Co. 5.375%–6.650% 4/1/36–9/15/40 24,760 28,835 0.2%
Pacific Gas & Electric Co. 5.125%–6.350% 3/1/34–11/15/43 121,789 143,470 1.0%
PacifiCorp 4.100%–6.350% 8/1/36–2/1/42 101,985 120,236 0.8%
Progress Energy Inc. 7.750% 3/1/31 6,055 8,115 0.1%
Virginia Electric & Power Co. 6.000% 5/15/37 57,330 69,129 0.5%
4 Electric—Other †       1,023,429 7.2%
Natural Gas          
TransCanada PipeLines Ltd. 7.625% 1/15/39 50,300 68,948 0.5%
4 Natural Gas—Other †       84,664 0.6%
        1,974,840 13.9%
Total Corporate Bonds (Cost $9,550,826)     10,443,188 73.8%
4Sovereign Bonds (U.S. Dollar-Denominated) (Cost $303,984) †   294,196 2.1%
Taxable Municipal Bonds          
American Municipal Power Ohio Inc.        
Revenue (Prairie State Energy          
Campus Project) 6.270% 2/15/50 59,240 64,653 0.5%
Bay Area Toll Authority California          
Toll Bridge Revenue          
(San Francisco Bay Area) 6.918% 4/1/40 50,115 64,062 0.5%
California GO 7.300% 10/1/39 109,045 146,633 1.0%
California GO 7.600% 11/1/40 74,320 104,757 0.7%
California GO 7.550% 4/1/39 61,550 85,891 0.6%
California GO 6.509%–7.625% 4/1/34–3/1/40 91,110 116,918 0.8%
Illinois GO 5.100% 6/1/33 166,920 161,665 1.1%
Los Angeles CA Unified          
School District GO 6.758% 7/1/34 64,235 82,602 0.6%

 

76

 

Long-Term Investment-Grade Fund          
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
6 New Jersey Economic          
  Development Authority Revenue          
  (State Pension Funding) 7.425% 2/15/29 50,002 61,939 0.4%
  New Jersey Turnpike          
  Authority Revenue 7.102% 1/1/41 67,555 91,638 0.7%
  New Jersey Turnpike          
  Authority Revenue 7.414% 1/1/40 57,834 81,067 0.6%
  New York Metropolitan          
  Transportation Authority Revenue          
  (Dedicated Tax Fund) 7.336% 11/15/39 65,755 90,387 0.6%
  Port Authority of New York &          
  New Jersey Revenue 4.458%–6.040% 12/1/29–10/1/62 143,660 150,875 1.1%
2 President & Fellows of          
  Harvard College          
  Massachusetts GO 6.300% 10/1/37 60,993 67,778 0.5%
  Taxable Municipal Bonds—Other †       944,562 6.7%
Total Taxable Municipal Bonds (Cost $2,110,175)     2,315,427 16.4%
 
        Shares    
Temporary Cash Investments          
Money Market Fund          
7 Vanguard Market Liquidity Fund 0.130%   220,938,440 220,938 1.6%
 
        Face    
        Amount    
        ($000)    
Repurchase Agreements          
  Bank of America Securities, LLC          
  (Dated 1/31/14, Repurchase Value          
  $118,400,000, collateralized by          
  Federal National Mortgage Assn.          
  2.500%–4.000%, 11/1/20–6/1/43,          
  Federal Home Loan Mortgage Corp.          
  3.010%, 12/1/40; with a value of          
  $120,773,000) 0.020% 2/3/14 118,400 118,400 0.8%
  Barclays Capital Inc. (Dated 1/31/14,          
  Repurchase Value $105,700,000,          
  collateralized by U.S. Treasury          
  Note/Bond 0.625%, 5/31/17; with          
  a value of $107,814,000) 0.020% 2/3/14 105,700 105,700 0.8%
  Citigroup Global Markets Inc.          
  (Dated 1/31/14, Repurchase Value          
  $24,200,000, collateralized by          
  U.S. Treasury Note/Bond 0.625%,          
  7/15/16; with a value of          
  $24,684,000) 0.020% 2/3/14 24,200 24,200 0.2%
          248,300 1.8%
U.S. Government and Agency Obligations        
  United States Treasury Bill 0.091% 6/5/14 20,000 19,998 0.1%
Total Temporary Cash Investments (Cost $489,232)   489,236 3.5%
Total Investments (Cost $12,867,016)       13,941,486 98.6%

 

77

 

Long-Term Investment-Grade Fund        
 
 
 
      Market Percentage
  Expiration   Value of Net
  Date Contracts ($000) Assets
Liability for Options Written        
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 124.50 2/21/14 42 (62) 0.0%
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 125.50 2/21/14 43 (33) 0.0%
Put Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 122.50 2/21/14 85 (3) 0.0%
Total Liability for Options Written (Premiums Received $55)   (98) 0.0%
Other Assets and Liabilities        
Other Assets8     282,639 2.0%
Other Liabilities     (86,171) (0.6%)
      196,468 1.4%
Net Assets     14,137,856 100.0%

 

78

 

Long-Term Investment-Grade Fund  
 
 
 
At January 31, 2014, net assets consisted of:  
  Amount
  ($000)
Paid-in Capital 13,026,522
Undistributed Net Investment Income
Accumulated Net Realized Gains 2,446
Unrealized Appreciation (Depreciation)  
Investment Securities 1,074,470
Futures Contracts 11,772
Options on Futures Contracts (43)
Swap Contracts 22,689
Net Assets 14,137,856
 
 
Investor Shares—Net Assets  
Applicable to 410,263,428 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 4,111,611
Net Asset Value Per Share—Investor Shares $10.02
 
 
Admiral Shares—Net Assets  
Applicable to 1,000,435,641 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 10,026,245
Net Asset Value Per Share—Admiral Shares $10.02

 

See Note A in Notes to Financial Statements.
† Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.
1 Securities with a value of $6,157,000 have been segregated as collateral for open over-the-counter swap contracts.
2 Securities with a value of $6,939,000 have been segregated as initial margin for open futures contracts.
3 Securities with a value of $23,946,000 have been segregated as initial margin for open cleared swap contracts.
4 Certain of the fund’s securities are 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 January 31, 2014, the aggregate value of these securities was $1,011,084,000, representing 7.2% of net assets.
5 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.
6 Scheduled principal and interest payments are guaranteed by National Public Finance Guarantee Corp.
7 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
8 Cash of $8,566,000 has been segregated as initial margin for open futures contracts.
GO—General Obligation Bond.
See accompanying Notes, which are an integral part of the Financial Statements.

79

 

Long-Term Investment-Grade Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Interest1 640,888
Total Income 640,888
Expenses  
Investment Advisory Fees—Note B 2,384
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 7,318
Management and Administrative—Admiral Shares 6,848
Marketing and Distribution—Investor Shares 820
Marketing and Distribution—Admiral Shares 2,082
Custodian Fees 95
Auditing Fees 36
Shareholders’ Reports—Investor Shares 57
Shareholders’ Reports—Admiral Shares 30
Trustees’ Fees and Expenses 26
Total Expenses 19,696
Net Investment Income 621,192
Realized Net Gain (Loss)  
Investment Securities Sold 99,745
Futures Contracts (7,679)
Swap Contracts 17,259
Realized Net Gain (Loss) 109,325
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (737,781)
Futures Contracts 11,772
Options on Futures Contracts (43)
Swap Contracts 14,598
Change in Unrealized Appreciation (Depreciation) (711,454)
Net Increase (Decrease) in Net Assets Resulting from Operations 19,063
1 Interest income from an affiliated company of the fund was $32,000.  

 

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

80

 

Long-Term Investment-Grade Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 621,192 587,164
Realized Net Gain (Loss) 109,325 190,353
Change in Unrealized Appreciation (Depreciation) (711,454) 92,218
Net Increase (Decrease) in Net Assets Resulting from Operations 19,063 869,735
Distributions    
Net Investment Income    
Investor Shares (196,604) (205,549)
Admiral Shares (441,891) (391,179)
Realized Capital Gain1    
Investor Shares (38,058) (47,712)
Admiral Shares (85,332) (94,518)
Total Distributions (761,885) (738,958)
Capital Share Transactions    
Investor Shares (63,600) 23,343
Admiral Shares 1,404,136 1,932,737
Net Increase (Decrease) from Capital Share Transactions 1,340,536 1,956,080
Total Increase (Decrease) 597,714 2,086,857
Net Assets    
Beginning of Period 13,540,142 11,453,285
End of Period 14,137,856 13,540,142

 

1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $0 and $12,656,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

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

81

 

Long-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.65 $10.50 $9.15 $9.04 $8.19
Investment Operations          
Net Investment Income .469 .491 .515 .516 .517
Net Realized and Unrealized Gain (Loss)          
on Investments (. 525) . 274 1.439 .117 .857
Total from Investment Operations (.056) .765 1.954 .633 1.374
Distributions          
Dividends from Net Investment Income (.481) (. 499) (. 521) (. 523) (. 524)
Distributions from Realized Capital Gains (. 093) (.116) (. 083)
Total Distributions (.574) (. 615) (. 604) (. 523) (. 524)
Net Asset Value, End of Period $10.02 $10.65 $10.50 $9.15 $9.04
 
Total Return1 -0.41% 7.39% 21.97% 7.01% 17.29%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $4,112 $4,429 $4,340 $3,770 $4,082
Ratio of Total Expenses to          
Average Net Assets 0.22% 0.22% 0.22% 0.24% 0.26%
Ratio of Net Investment Income to          
Average Net Assets 4.64% 4.57% 5.25% 5.53% 6.01%
Portfolio Turnover Rate 26% 21% 29% 19% 21%

 

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

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

82

 

Long-Term Investment-Grade Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $10.65 $10.50 $9.15 $9.04 $8.19
Investment Operations          
Net Investment Income . 480 .502 .525 .528 .528
Net Realized and Unrealized Gain (Loss)          
on Investments (. 525) . 274 1.439 .117 .857
Total from Investment Operations (.045) .776 1.964 .645 1.385
Distributions          
Dividends from Net Investment Income (. 492) (. 510) (. 531) (. 535) (. 535)
Distributions from Realized Capital Gains (. 093) (.116) (. 083)
Total Distributions (.585) (. 626) (. 614) (. 535) (. 535)
Net Asset Value, End of Period $10.02 $10.65 $10.50 $9.15 $9.04
 
Total Return -0.31% 7.49% 22.09% 7.14% 17.44%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $10,026 $9,112 $7,113 $5,340 $4,155
Ratio of Total Expenses to          
Average Net Assets 0.12% 0.12% 0.12% 0.12% 0.13%
Ratio of Net Investment Income to          
Average Net Assets 4.74% 4.67% 5.35% 5.65% 6.14%
Portfolio Turnover Rate 26% 21% 29% 19% 21%

 

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

83

 

Long-Term Investment-Grade Fund

Notes to Financial Statements

Vanguard Long-Term Investment-Grade Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Futures and Options: The fund uses futures contracts and options on 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. The primary risk associated with purchasing options is that interest rates move in such a way that the option is out-of-the-money, the position is worthless at expiration, and the fund loses the premium paid. The primary risk associated with writing options is that interest rates move in such a way that the option is in-the-money, the counterparty exercises the option, and the fund loses an amount equal to the market value of the option written less the premium received. Counterparty risk involving futures and exchange-traded options is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures and options 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the year ended January 31, 2014, the fund’s average investments in long and short futures contracts represented 1% and less than 1% of net assets, respectively, based on quarterly average aggregate settlement values.

84

 

Long-Term Investment-Grade Fund

Options on futures contracts are also valued at their quoted daily settlement prices. The premium paid for a purchased option is recorded 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 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 year ended January 31, 2014, the fund’s average value of options purchased and options written represented 0% and less than 1% of net assets, respectively, based on quarterly average market values.

3. 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 an amount that is a fixed percentage rate applied to a notional amount. In return, the counterparty agrees to pay a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount.

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded 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.

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 pre-qualified counterparties,

85

 

Long-Term Investment-Grade Fund

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 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 Statement of Net Assets. 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 fund also enters into centrally cleared interest rate and credit default swaps to achieve the same objectives specified with respect to the equivalent over-the-counter swaps but with less counterparty risk because a regulated clearinghouse is the counterparty instead of the clearing broker or executing broker. 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. To further mitigate counterparty risk, the fund trades with a diverse group of pre-qualified executing brokers; monitors the financial strength of its clearing brokers, executing brokers and clearinghouse; and has entered into agreements with its clearing brokers and executing brokers.

During the year ended January 31, 2014, the fund’s average amounts of credit protection sold and credit protection purchased represented 11% and less than 1% of net assets, respectively, based on quarterly average notional amounts. The average total amount of interest rate swaps represented less than 1% of net assets, based on quarterly average notional amounts.

4. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

86

 

Long-Term Investment-Grade Fund

6. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

7. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

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. Wellington Management Company, llp, provides investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor.

Beginning in December 2013, the Vanguard Group provides investment advisory services to a portion of the fund on an at-cost basis. The fund paid no Vanguard advisory fees for the period ended January 31, 2014.

For the year ended January 31, 2014, the aggregate investment advisory fee represented an effective annual basic rate of 0.02% of the fund’s average net assets.

C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $1,490,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.60% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

87

 

Long-Term Investment-Grade Fund

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 399,439
Corporate Bonds 10,443,188
Sovereign Bonds 294,196
Taxable Municipal Bonds 2,315,427
Temporary Cash Investments 220,938 268,298
Futures Contracts—Assets1 1,482
Futures Contracts—Liabilities1 (360)
Option Contracts Written (98)
Swap Contracts—Assets 4281 25,806
Swap Contracts—Liabilities (581)1
Total 221,809 13,746,354
1 Represents variation margin on the last day of the reporting period.      

 

E. At January 31, 2014, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

  Interest Rate Credit  
  Contracts Contracts Total
Statement of Net Assets Caption ($000) ($000) ($000)
Other Assets 1,910 25,806 27,716
Other Liabilities (977) (62) (1,039)

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the year ended January 31, 2014, were:

  Interest Rate Credit  
  Contracts Contracts Total
Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)
Futures Contracts (7,679) (7,679)
Options on Futures Contracts
Swap Contracts (100) 17,359 17,259
Realized Net Gain (Loss) on Derivatives (7,779) 17,359 9,580
 
Change in Unrealized Appreciation (Depreciation) on Derivatives    
Futures Contracts 11,772 11,772
Options on Futures Contracts (43) (43)
Swap Contracts (164) 14,762 14,598
Change in Unrealized Appreciation (Depreciation)      
on Derivatives 11,565 14,762 26,327

 

88

 

Long-Term Investment-Grade Fund

At January 31, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
30-Year U.S. Treasury Bond March 2014 3,461 462,368 6,858
Ultra Long U.S. Treasury Bond March 2014 1,492 214,568 5,260
10-Year U.S. Treasury Note March 2014 (272) (34,204) (311)
2-Year U.S. Treasury Note March 2014 (143) (31,489) (12)
5-Year U.S. Treasury Note March 2014 (203) (24,487) (23)
        11,772

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

At January 31, 2014, the fund had the following open swap contracts:    
 
Credit Default Swaps            
        Remaining    
        Up-Front Periodic  
        Premium Premium Unrealized
      Notional Received Received Appreciation
  Termination   Amount (Paid) (Paid)   (Depreciation)
Reference Entity Date Counterparty1 ($000) ($000) (%) ($000)
Credit Protection Sold/Moody’s Rating          
CDX–IG11–10yr/Baa22 12/20/18 GSI 198,400 2,207 1.400% 7,578
CDX–IG14–10yr/Baa23 6/20/20 BOANA 100,000 105 1.000% 699
CDX–IG16–10yr/Baa24 6/20/21 GSI 200,000 3,100 1.000% 2,963
CDX–IG18–10yr/Baa25 6/20/22 GSI 50,000 1,175 1.000% 854
CDX–IG19–10yr/Baa26 12/20/22 DBAG 200,000 5,898 1.000% 3,924
CDX–IG19–10yr/Baa26 12/20/22 BOANA 200,000 5,955 1.000% 3,980
CDX–IG19–10yr/Baa26 12/20/22 BOANA 300,000 8,769 1.000% 5,808
      1,248,400     25,806

 

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 BOANA—Bank of America, N.A. DBAG—Deutsche Bank AG.

GSI—Goldman Sachs International.

2 Investment Grade Corporate Credit Default Swap Index—Version 11. 3 Investment Grade Corporate Credit Default Swap Index—Version 14. 4 Investment Grade Corporate Credit Default Swap Index—Version 16. 5 Investment Grade Corporate Credit Default Swap Index—Version 18. 6 Investment Grade Corporate Credit Default Swap Index—Version 19.

89

 

Long-Term Investment-Grade Fund        
 
 
 
 
Centrally Cleared Credit Default Swap        
      Remaining    
      Up-Front Periodic  
      Premium Premium Unrealized
    Notional Received Received Appreciation
  Termination Amount (Paid) (Paid) (Depreciation)
Reference Entity Date ($000) ($000) (%) ($000)
Credit Protection Sold/Moody’s Rating        
CDX—IG21—V1/Aa31 12/20/18 1,176,000 (12,937) 1.000 (2,953)
1 Investment Grade Corporate Credit Default Swap Index—Version 21.      
 
Centrally Cleared Interest Rate Swaps        
      Fixed Floating  
      Interest Rate Interest Rate Unrealized
    Notional Received Received Appreciation
    Amount (Paid) (Paid) (Depreciation)
Termination Date   ($000) (%) (%) ($000)
12/20/33   83,600 (3.678) 0.2451 (2,720)
12/20/43   57,200 3.830 (0.245)1 2,556
          (164)
1 Based on 3-month London Interbank Offered Rate (LIBOR) as of the most recent payment date.    

 

At January 31, 2014, counterparties had deposited in segregated accounts securities with a value of $5,085,000 in connection with open swap contracts.

F. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $18,409,000 from accumulated net realized gains to paid-in capital.

Realized and unrealized gains (losses) on certain of the fund’s swap contracts are treated as ordinary income (loss) for tax purposes; the effect on the fund’s income dividends to shareholders is offset by a change in principal return. Realized gains of $17,303,000 on swap contracts have been reclassified from accumulated net realized gains to undistributed net investment income.

For tax purposes, at January 31, 2014, the fund had $18,804,000 of long-term capital gains available for distribution.

At January 31, 2014, the cost of investment securities for tax purposes was $12,871,645,000. Net unrealized appreciation of investment securities for tax purposes was $1,069,841,000, consisting of unrealized gains of $1,279,578,000 on securities that had risen in value since their purchase and $209,737,000 in unrealized losses on securities that had fallen in value since their purchase.

90

 

Long-Term Investment-Grade Fund

G. During the year ended January 31, 2014, the fund purchased $3,220,751,000 of investment securities and sold $2,427,972,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $1,028,611,000 and $934,278,000, respectively.

The following table summarizes the fund’s options on futures written during the year ended January 31, 2014:

        Premiums
    Number of Received
Options     Contracts ($000)
Balance at January 31, 2013    
Options written     170 55
Options expired    
Options closed    
Options exercised    
Options open at January 31, 2014     170 55
 
H. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 705,599 70,148 1,097,775 102,417
Issued in Lieu of Cash Distributions 224,141 22,241 239,661 22,290
Redeemed (993,340) (97,908) (1,314,093) (122,082)
Net Increase (Decrease)—Investor Shares (63,600) (5,519) 23,343 2,625
Admiral Shares        
Issued 3,026,893 306,789 3,167,227 293,288
Issued in Lieu of Cash Distributions 426,925 42,385 407,610 37,842
Redeemed (2,049,682) (204,196) (1,642,100) (152,787)
Net Increase (Decrease)—Admiral Shares 1,404,136 144,978 1,932,737 178,343

 

I. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

91

 

High-Yield Corporate Fund

Fund Profile
As of January 31, 2014

Share-Class Characteristics    
  Investor Admiral
  Shares Shares
Ticker Symbol VWEHX VWEAX
Expense Ratio1 0.23% 0.13%
30-Day SEC Yield 4.25% 4.35%
 
Financial Attributes      
 
    Barclays  Barclays
    Corporate  Aggregate
    High Yield Bond
  Fund Index Index
Number of Bonds 365 2,131 8,727
Yield to Maturity      
(before expenses) 5.0% 6.3% 2.3%
Average Coupon 6.5% 7.3% 3.3%
Average Duration 4.1 years 4.2 years 5.5 years
Average Effective      
Maturity 4.8 years 4.8 years 7.6 years
Short-Term      
Reserves 1.9%
 
 
Sector Diversification (% of portfolio)  
Basic Industry     4.6%
Capital Goods     8.4
Communication     24.6
Consumer Cyclical     11.6
Consumer Non-Cyclical   10.7
Energy     4.8
Finance     16.8
Industrial Other     0.7
Technology     9.1
Transportation     1.2
Treasury/Agency     1.1
Utilities     6.4

 

The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

Volatility Measures    
  Barclays Barclays
  Corporate Aggregate
  High Yield Bond
  Index Index
R-Squared 0.97 0.09
Beta 0.89 0.60

 

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Distribution by Effective Maturity  
(% of portfolio)  
Under 1 Year 3.2%
1 - 5 Years 25.1
5 - 10 Years 66.7
10 - 20 Years 3.4
20 - 30 Years 1.2
Over 30 Years 0.4

 

Distribution by Credit Quality (% of portfolio)

U.S. Government 1.1%
Baa 7.3
Ba 56.7
B 29.0
Caa 5.4
C 0.5

 

For information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus


1 The expense ratios shown are from the prospectus dated May 30, 2013, and represent estimated costs for the current fiscal year. For the fiscal year ended January 31, 2014, the expense ratios were 0.23% for Investor Shares and 0.13% for Admiral Shares.

92

 

High-Yield Corporate Fund

Performance Summary

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

Cumulative Performance: January 31, 2004, Through January 31, 2014
Initial Investment of $10,000


  Average Annual Total Returns  
  Periods Ended January 31, 2014  
 
        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
High-Yield Corporate Fund Investor        
Shares 4.53% 13.78% 6.83% $19,360
Barclays U.S. Corporate High Yield        
••••••••        
Bond Index 6.77 17.72 8.49 22,585
 
 
 
– – – – High Barclays Yield U. Funds S. Aggregate Average Bond Index 5.89 0.12 14.92 4.93 6.62 4.62 18,978 15,703
 
High Yield Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.    
 
 
        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
High-Yield Corporate Fund Admiral Shares 4.64% 13.90% 6.95% $97,926
Barclays U.S. Corporate High Yield Bond        
Index 6.77 17.72 8.49 112,923
 
Barclays U.S. Aggregate Bond Index 0.12 4.93 4.62 78,516

 

See Financial Highlights for dividend and capital gains information.

93

 

High-Yield Corporate Fund        
 
 
 
Fiscal-Year Total Returns (%): January 31, 2004, Through January 31, 2014  
        Barclays
        Corporate
        High Yield
      Investor Shares Index
Fiscal Year Income Returns Capital Returns Total Returns Total Returns
2005 7.50% -0.16% 7.34% 8.90%
2006 7.02 -3.13 3.89 4.51
2007 7.41 0.48 7.89 11.32
2008 7.13 -6.43 0.70 -0.60
2009 6.83 -23.02 -16.19 -20.67
2010 10.36 22.32 32.68 51.15
2011 8.23 5.47 13.70 16.19
2012 7.35 0.69 8.04 5.83
2013 6.76 5.15 11.91 13.91
2014 5.84 -1.31 4.53 6.77

 

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.

            Ten Years
  Inception Date One Year Five Years Income Capital Total
Investor Shares 12/27/1978 4.54% 14.89% 7.42% -0.56% 6.86%
Admiral Shares 11/12/2001 4.64 15.02 7.54 -0.56 6.98

 

94

 

High-Yield Corporate Fund

Financial Statements

Statement of Net Assets—Investments Summary

As of January 31, 2014

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the complete listing of the fund’s holdings is available electronically on vanguard.com and on the Securities and Exchange Commission’s website (sec.gov), or you can have it mailed to you without charge by calling 800-662-7447. For the first and third fiscal quarters, the fund files the lists with the SEC on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
U.S. Government and Agency Obligations        
U.S. Government Securities          
  United States Treasury Note/Bond 2.250% 5/31/14 92,825 93,464 0.6%
  United States Treasury Note/Bond 4.250% 8/15/15 75,000 79,629 0.5%
Total U.S. Government and Agency Obligations (Cost $170,701)   173,093 1.1%
Asset-Backed/Commercial Mortgage-Backed Securities (Cost $41,111) †   40,149 0.2%
Corporate Bonds          
Finance          
  Banking          
  Ally Financial Inc. 8.000% 3/15/20 75,950 90,760 0.5%
1 Barclays Bank plc 6.050% 12/4/17 81,759 92,180 0.6%
  Royal Bank of Scotland Group plc 6.125% 12/15/22 113,600 116,808 0.7%
  UBS AG 7.625% 8/17/22 80,150 92,454 0.6%
1 Banking—Other †       149,537 0.9%
  Finance Companies          
2 Air Lease Corp. 5.625% 4/1/17 125,330 137,550 0.9%
  Air Lease Corp. 4.750% 3/1/20 63,582 65,489 0.4%
1 CIT Group Inc. 6.625% 4/1/18 120,655 134,832 0.8%
  CIT Group Inc. 5.250% 3/15/18 102,005 108,635 0.7%
  CIT Group Inc. 5.375% 5/15/20 98,370 104,026 0.6%
  CIT Group Inc. 5.000% 8/15/22 98,135 97,767 0.6%
1 CIT Group Inc. 5.500% 2/15/19 78,830 83,954 0.5%
  CIT Group Inc. 4.250% 8/15/17 48,445 50,383 0.3%
1 International Lease          
  Finance Corp. 3.875%–8.750% 5/15/16–1/15/22 415,168 457,893 2.8%
  SLM Corp. 5.500% 1/15/19 79,080 80,918 0.5%
  SLM Corp. 5.500%–8.450% 1/25/16–1/25/23 186,635 202,545 1.2%
1 Finance Companies—Other †       94,521 0.6%
  Insurance          
3 Hartford Financial Services          
  Group Inc. 8.125% 6/15/38 94,960 110,628 0.7%
1 Insurance—Other †       202,056 1.2%

 

95

 

High-Yield Corporate Fund          
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
  Other Finance          
4 Telenet Finance III          
  Luxembourg SCA 6.625% 2/15/21 3,700 5,412 0.0%
4 Telenet Finance          
  Luxembourg SCA 6.375% 11/15/20 10,145 14,714 0.1%
4 Telenet Finance V          
  Luxembourg SCA 6.250%–6.750% 8/15/22–8/15/24 34,744 50,563 0.3%
  Real Estate Investment Trusts †     41,735 0.3%
          2,585,360 15.8%
Industrial          
1 Basic Industry †       706,683 4.3%
  Capital Goods          
  B/E Aerospace Inc. 5.250% 4/1/22 104,885 105,672 0.6%
  Case New Holland Inc. 7.875% 12/1/17 91,500 107,055 0.7%
  CNH Capital LLC 3.625%–6.250% 11/1/15–4/15/18 89,785 94,750 0.6%
1 Capital Goods—Other †       978,405 6.0%
  Communication          
  CSC Holdings LLC 7.625% 7/15/18 79,045 90,309 0.5%
  DISH DBS Corp. 6.750% 6/1/21 133,715 142,741 0.9%
  DISH DBS Corp. 4.625%–7.875% 7/15/17–3/15/23 106,940 107,902 0.7%
  Hughes Satellite          
  Systems Corp. 6.500% 6/15/19 88,991 96,555 0.6%
  Intelsat Jackson          
  Holdings SA 7.250% 10/15/20 164,947 178,761 1.1%
  Intelsat Jackson          
  Holdings SA 7.250% 4/1/19 85,330 91,730 0.6%
1 Intelsat Jackson          
  Holdings SA 5.500%–8.500% 11/1/19–8/1/23 116,165 119,013 0.7%
  Liberty Interactive LLC 8.250% 2/1/30 97,840 104,689 0.6%
  Liberty Interactive LLC 8.500% 7/15/29 31,878 33,791 0.2%
  MetroPCS Wireless Inc. 6.625% 11/15/20 75,800 80,158 0.5%
  MetroPCS Wireless Inc. 7.875% 9/1/18 55,420 59,161 0.4%
  Quebecor Media Inc. 5.750% 1/15/23 84,210 82,031 0.5%
  Quebecor Media Inc. 7.750% 3/15/16 26,840 27,041 0.2%
1 Softbank Corp. 4.500% 4/15/20 159,095 156,013 0.9%
1 Sprint Corp. 7.250% 9/15/21 95,745 103,165 0.6%
1 Sprint Corp. 7.875% 9/15/23 89,370 95,402 0.6%
1 Sprint Corp. 7.125% 6/15/24 30,930 31,162 0.2%
1 Sprint Nextel Corp. 7.000% 3/1/20 135,830 153,148 0.9%
1 Sprint Nextel Corp. 9.000% 11/15/18 92,545 111,748 0.7%
1 T-Mobile USA Inc. 5.250%–6.836% 9/1/18–1/15/24 237,870 249,051 1.5%
2,5 Tribune Company Bank Loan 4.000% 12/27/20 117,504 117,308 0.7%
1,4 Unitymedia Hessen GmbH &          
  Co. KG / Unitymedia          
  NRW GmbH 5.500%–5.750% 9/15/22–4/15/23 86,780 103,257 0.6%
1,4 Unitymedia KabelBW GmbH 9.500% 3/15/21 20,000 31,234 0.2%
1 UPCB Finance III Ltd. 6.625% 7/1/20 83,121 87,894 0.5%
1 UPCB Finance V Ltd. 7.250% 11/15/21 40,995 44,582 0.3%
1 UPCB Finance VI Ltd. 6.875% 1/15/22 42,036 44,968 0.3%
  Videotron Ltd. 5.000% 7/15/22 82,242 80,597 0.5%
  Videotron Ltd. 9.125% 4/15/18 11,880 12,415 0.1%
  Virgin Media Finance plc 8.375% 10/15/19 14,560 15,725 0.1%
1 Virgin Media Secured          
  Finance plc 5.375% 4/15/21 29,130 29,057 0.2%
1 Communication—Other †       1,087,765 6.6%

 

96

 

High-Yield Corporate Fund          
 
 
 
        Face Market Percentage
      Maturity Amount Value of Net
    Coupon Date ($000) ($000) Assets
  Consumer Cyclical          
1 General Motors Co. 4.875% 10/2/23 16,585 16,875 0.1%
1 General Motors          
  Financial Co. Inc. 4.750% 8/15/17 97,350 102,948 0.6%
1 General Motors          
  Financial Co. Inc. 3.250%–6.750% 5/15/18–5/15/23 73,815 79,464 0.5%
2,5 Hilton Worldwide Finance          
  LLC Bank Loan 3.750% 10/26/20 81,388 81,915 0.5%
1 QVC Inc. 7.500% 10/1/19 66,400 71,380 0.4%
  Wynn Las Vegas LLC /          
  Wynn Las Vegas Capital Corp. 7.750% 8/15/20 73,000 81,030 0.5%
1 Consumer Cyclical—Other †       1,347,233 8.3%
  Consumer Noncyclical          
1 Capsugel SA 7.000% 5/15/19 7,590 7,796 0.1%
1 CHS/Community Health          
  Systems Inc. 5.125%–7.125% 8/15/18–8/1/21 101,480 106,681 0.7%
1 FWCT-2 Escrow Corp. 6.875% 2/1/22 67,380 69,149 0.4%
  HCA Holdings Inc. 6.250% 2/15/21 25,540 27,136 0.2%
  HCA Inc. 6.500% 2/15/20 127,050 140,073 0.9%
  HCA Inc. 4.750%–8.500% 2/15/16–6/15/25 181,180 186,923 1.1%
1 IMS Health Inc. 12.500% 3/1/18 76,475 88,902 0.5%
  Party City Holdings Inc. 8.875% 8/1/20 88,580 98,545 0.6%
  Tenet Healthcare Corp. 4.375% 10/1/21 106,480 102,221 0.6%
  Tenet Healthcare Corp. 4.500%–9.250% 2/1/15–4/1/22 122,947 127,786 0.8%
1 Consumer Noncyclical—Other †       689,451 4.2%
  Energy          
  Concho Resources Inc. 5.500% 10/1/22 88,070 89,611 0.5%
1 Energy—Other †       649,054 4.0%
  Other Industrial          
  CBRE Services Inc. 5.000% 3/15/23 83,320 79,779 0.5%
1 Other Industrial—Other †       23,645 0.1%
  Technology          
1 First Data Corp. 8.250% 1/15/21 77,840 82,705 0.5%
1 First Data Corp. 4.158%–12.625% 9/24/14–8/15/21 252,462 269,331 1.6%
2,5 Freescale Semiconductor          
  Inc. Bank Loan 5.000% 3/1/20 92,920 93,713 0.6%
  SunGard Data Systems Inc. 7.625% 11/15/20 98,546 108,400 0.7%
  SunGard Data Systems Inc. 6.625%–7.375% 11/15/18–11/1/19 92,420 97,622 0.6%
1 Technology—Other †       744,665 4.5%
  Transportation          
  Hertz Corp. 6.750% 4/15/19 82,360 87,508 0.6%
  Hertz Corp. 4.250%–7.375% 4/1/18–1/15/21 74,735 80,481 0.5%
  Transportation—Other †       20,514 0.1%
          11,613,474 71.0%
Utilities          
  Electric          
  AES Corp. 7.750%–8.000% 10/15/15–6/1/20 90,904 104,113 0.6%
  DPL Inc. 7.250% 10/15/21 104,495 103,972 0.6%
  DPL Inc. 6.500% 10/15/16 14,550 15,641 0.1%
1 IPALCO Enterprises Inc. 5.000¬–7.25% 4/1/16–5/1/18 26,495 28,462 0.2%
1 Electric—Other †       143,733 0.9%
  Natural Gas          
  El Paso LLC 6.500%–7.750% 6/15/17–1/15/32 155,600 171,809 1.1%
  Energy Transfer Equity LP 7.500% 10/15/20 76,385 86,124 0.5%

 

97

 

High-Yield Corporate Fund          
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
1 Kinder Morgan          
Finance Co. LLC 6.000% 1/15/18 45,785 50,020 0.3%
1 Kinder Morgan Inc. 5.000%–5.625% 2/15/21–11/15/23  81,295 80,118 0.5%
Natural Gas—Other †       194,897 1.2%
        978,889 6.0%
Total Corporate Bonds (Cost $14,384,344)     15,177,723 92.8%
 
      Shares    
Preferred Stocks          
Citigroup Capital XIII Pfd. 7.875%   5,301,250 143,664 0.9%
GMAC Capital Trust I Pfd. 8.125%   4,743,200 130,059 0.8%
Hartford Financial Services          
Group Inc. Pfd. 7.875%   3,307,200 95,776 0.6%
Total Preferred Stocks (Cost $343,115)       369,499 2.3%
Other † (Cost $27,348)       549 0.0%
Temporary Cash Investments          
 
      Face    
      Amount    
      ($000)    
Repurchase Agreements          
Bank of America Securities, LLC          
(Dated 1/31/14, Repurchase Value          
$76,700,000, collateralized by          
Federal National Mortgage Assn.          
2.406%–3.036%, 3/1/41–1/1/44,          
with a value of $78,234,000) 0.020% 2/3/14 76,700 76,700 0.5%
RBC Capital Markets LLC          
(Dated 1/31/14, Repurchase Value          
$47,100,000, collateralized by          
Federal Home Loan Mortgage Corp.          
3.500%, 9/1/42, and Federal National        
Mortgage Assn. 2.506%–3.500%,          
7/1/43–11/1/43, with a value of          
$48,042,000) 0.020% 2/3/14 47,100 47,100 0.3%
Deutsche Bank Securities, Inc.          
(Dated 1/31/14, Repurchase Value          
$ 99,200,000, collateralized by          
Federal Home Loan Mortgage Corp.          
4.000%–7.000%, 4/1/23–11/1/43,          
Federal National Mortgage Assn.          
3.000%–6.500%, 4/1/26–11/1/43,          
and Government National Mortgage          
Assn. 4.000%, 10/20/43, with a          
value of $101,184,000) 0.030% 2/3/14 99,200 99,200 0.6%

 

98

 

High-Yield Corporate Fund          
 
 
 
      Face Market Percentage
    Maturity Amount Value of Net
  Coupon Date ($000) ($000) Assets
TD Securities (USA) LLC          
(Dated 1/31/14, Repurchase Value        
$87,800,000, collateralized by          
Federal Farm Credit Bank          
0.136%–0.188%, 9/22/15–4/6/16,        
and Federal Home Loan Bank 0%,        
1/10/17, with a value          
of $89,628,000) 0.030% 2/3/14 87,800 87,800 0.5%
Total Temporary Cash Investments (Cost $310,800)     310,800 1.9%
Total Investments (Cost $15,277,419)     16,071,813 98.3%
Other Assets and Liabilities          
Other Assets       346,641 2.1%
Liabilities       (62,358) (0.4%)
        284,283 1.7%
Net Assets       16,356,096 100.0%

 

99

 

High-Yield Corporate Fund  
 
 
 
At January 31, 2014, net assets consisted of:  
  Amount
  ($000)
Paid-in Capital 15,855,893
Undistributed Net Investment Income
Accumulated Net Realized Losses (296,397)
Unrealized Appreciation (Depreciation)  
Investment Securities 794,394
Forward Currency Contracts 2,225
Foreign Currencies (19)
Net Assets 16,356,096
 
 
Investor Shares—Net Assets  
Applicable to 727,267,157 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 4,394,133
Net Asset Value Per Share—Investor Shares $6.04
 
 
Admiral Shares—Net Assets  
Applicable to 1,979,808,762 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 11,961,963
Net Asset Value Per Share—Admiral Shares $6.04

 

See Note A in Notes to Financial Statements.

† Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.

1 Certain of the fund’s securities are 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 January 31, 2014, the aggregate value of these securities was $4,627,683,000, representing 28.3% of net assets.

2 Adjustable-rate security.

3 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.

4 Face amount denominated in Euro.

5 Certain of the fund’s securities are senior, secured, high-yield floating-rate loans. These loans are debt obligations issued by public and private companies and are comparable to high-yield bonds from a ratings and leverage perspective. At January 31, 2014, the aggregate value of these securities was $582,546,000, representing 3.6% of net assets.

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

100

 

High-Yield Corporate Fund  
 
 
Statement of Operations  
 
  Year Ended
  January 31, 2014
  ($000)
Investment Income  
Income  
Dividends 24,320
Interest 983,795
Total Income 1,008,115
Expenses  
Investment Advisory Fees—Note B 5,312
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 8,283
Management and Administrative—Admiral Shares 9,571
Marketing and Distribution—Investor Shares 1,157
Marketing and Distribution—Admiral Shares 2,209
Custodian Fees 133
Auditing Fees 36
Shareholders’ Reports—Investor Shares 181
Shareholders’ Reports—Admiral Shares 76
Trustees’ Fees and Expenses 35
Total Expenses 26,993
Net Investment Income 981,122
Realized Net Gain (Loss)  
Investment Securities Sold 287,524
Foreign Currencies and Forward Currency Contracts (3,043)
Realized Net Gain (Loss) 284,481
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (535,765)
Foreign Currencies and Forward Currency Contracts 2,206
Change in Unrealized Appreciation (Depreciation) (533,559)
Net Increase (Decrease) in Net Assets Resulting from Operations 732,044

 

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

101

 

High-Yield Corporate Fund    
 
 
Statement of Changes in Net Assets    
 
  Year Ended January 31,
  2014 2013
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 981,122 1,103,141
Realized Net Gain (Loss) 284,481 362,214
Change in Unrealized Appreciation (Depreciation) (533,559) 516,419
Net Increase (Decrease) in Net Assets Resulting from Operations 732,044 1,981,774
Distributions    
Net Investment Income    
Investor Shares (278,622) (363,650)
Admiral Shares (702,547) (740,281)
Realized Capital Gain    
Investor Shares
Admiral Shares
Total Distributions (981,169) (1,103,931)
Capital Share Transactions    
Investor Shares (1,137,737) (154,558)
Admiral Shares (576,254) 2,045,013
Net Increase (Decrease) from Capital Share Transactions (1,713,991) 1,890,455
Total Increase (Decrease) (1,963,116) 2,768,298
Net Assets    
Beginning of Period 18,319,212 15,550,914
End of Period 16,356,096 18,319,212

 

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

102

 

High-Yield Corporate Fund          
 
 
Financial Highlights          
 
 
Investor Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $6.12 $5.82 $5.78 $5.48 $4.48
Investment Operations          
Net Investment Income . 348 .372 .405 .422 .409
Net Realized and Unrealized Gain (Loss)          
on Investments (.080) .300 .040 .300 1.000
Total from Investment Operations .268 .672 .445 .722 1.409
Distributions          
Dividends from Net Investment Income (.348) (.372) (. 405) (. 422) (. 409)
Distributions from Realized Capital Gains
Total Distributions (.348) (.372) (. 405) (. 422) (. 409)
Net Asset Value, End of Period $6.04 $6.12 $5.82 $5.78 $5.48
 
Total Return1 4.53% 11.91% 8.04% 13.70% 32.68%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $4,394 $5,607 $5,476 $4,909 $5,730
Ratio of Total Expenses to          
Average Net Assets 0.23% 0.23% 0.23% 0.25% 0.28%
Ratio of Net Investment Income to          
Average Net Assets 5.76% 6.25% 7.04% 7.59% 8.15%
Portfolio Turnover Rate 28% 30% 26% 38% 32%

 

1 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.

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

103

 

High-Yield Corporate Fund          
 
 
Financial Highlights          
 
 
Admiral Shares          
 
For a Share Outstanding     Year Ended January 31,
Throughout Each Period 2014 2013 2012 2011 2010
Net Asset Value, Beginning of Period $6.12 $5.82 $5.78 $5.48 $4.48
Investment Operations          
Net Investment Income . 354 . 378 .411 .429 .415
Net Realized and Unrealized Gain (Loss)          
on Investments (.080) .300 .040 .300 1.000
Total from Investment Operations .274 .678 .451 .729 1.415
Distributions          
Dividends from Net Investment Income (.354) (.378) (. 411) (. 429) (. 415)
Distributions from Realized Capital Gains
Total Distributions (.354) (.378) (. 411) (. 429) (. 415)
Net Asset Value, End of Period $6.04 $6.12 $5.82 $5.78 $5.48
 
Total Return 4.64% 12.02% 8.15% 13.84% 32.84%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $11,962 $12,713 $10,075 $8,320 $5,868
Ratio of Total Expenses to          
Average Net Assets 0.13% 0.13% 0.13% 0.13% 0.15%
Ratio of Net Investment Income to          
Average Net Assets 5.86% 6.35% 7.14% 7.71% 8.28%
Portfolio Turnover Rate 28% 30% 26% 38% 32%

 

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

104

 

High-Yield Corporate Fund

Notes to Financial Statements

Vanguard High-Yield Corporate Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

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

1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. 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. 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. 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 assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral

105

 

High-Yield Corporate Fund

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 aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized forward currency contract gains (losses).

During the year ended January 31, 2014, the portfolio’s average investment in forward currency contracts represented less than 1% of net assets, based on quarterly average notional amounts.

4. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2011–2014), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

6. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-dividend date.

7. Other: Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

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. Wellington Management Company, LLP, provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the year ended January 31, 2014, the investment advisory fee represented an effective annual rate of 0.03% of the fund’s average net assets.

106

 

High-Yield Corporate Fund

C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At January 31, 2014, the fund had contributed capital of $1,792,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.72% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of January 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations 173,093
Asset-Backed/Commercial Mortgage-Backed Securities 40,149
Corporate Bonds 15,177,723
Preferred Stocks 369,499
Other 549
Temporary Cash Investments 310,800
Forward Currency Contract–Assets 2,225
Total 16,073,489 549

 

At January 31, 2014, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts is treated as realized gain (loss) for tax purposes.

            Unrealized
  Contract         Appreciation
  Settlement     Contract Amount (000) (Depreciation)
Counterparty Date   Receive   Deliver ($000)
MS 3/19/14 USD 160,114 EUR 117,067 2,225
MS—Morgan Stanley Capital Services Inc.            

 

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High-Yield Corporate Fund

E. Capital gain distributions are determined on a tax basis and may differ from realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when gains or losses are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future.

During the year ended January 31, 2014, the fund realized net foreign currency gains of $47,000, which increased distributable net income for tax purposes; accordingly, such gains have been reclassified from accumulated net realized losses to undistributed net investment income.

For tax purposes, the fund used capital loss carryforwards of $287,752,000 to offset taxable capital gains realized during the year ended January 31, 2014. At January 31, 2014, the fund had available capital losses totaling $290,627,000 to offset future net capital gains. Of this amount, $289,533,000 is subject to expiration on January 31, 2018. Capital losses of $1,094,000 realized beginning in fiscal 2012 may be carried forward indefinitely under the Regulated Investment Company Modernization Act of 2010, but must be used before any expiring loss carryforward.

At January 31, 2014, the cost of investment securities for tax purposes was $15,277,419,000. Net unrealized appreciation of investment securities for tax purposes was $794,394,000, consisting of unrealized gains of $887,467,000 on securities that had risen in value since their purchase and $93,073,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended January 31, 2014, the fund purchased $4,406,463,000 of investment securities and sold $6,167,238,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $0 and $56,900,000, respectively.

G. Capital share transactions for each class of shares were:      
      Year Ended January 31,
    2014   2013
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 588,134 97,033 1,420,740 239,862
Issued in Lieu of Cash Distributions 233,593 38,673 300,334 50,422
Redeemed1 (1,959,464) (324,562) (1,875,632) (314,590)
Net Increase (Decrease)—Investor Shares (1,137,737) (188,856) (154,558) (24,306)
Admiral Shares        
Issued 2,467,113 407,705 3,530,253 593,997
Issued in Lieu of Cash Distributions 471,381 78,064 499,854 83,790
Redeemed1 (3,514,748) (583,197) (1,985,094) (330,812)
Net Increase (Decrease) —Admiral Shares (576,254) (97,428) 2,045,013 346,975

 

1 Net of redemption fees for fiscal 2013 of $807,000 (fund total). Effective May 23, 2012, the redemption fee was eliminated.

H. Management has determined that no material events or transactions occurred subsequent to January 31, 2014, that would require recognition or disclosure in these financial statements.

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Report of Independent Registered Public Accounting Firm

To the Trustees of Vanguard Fixed Income Securities Funds and the Shareholders of Vanguard Short-Term Investment-Grade Fund, Vanguard Intermediate-Term Investment-Grade Fund, Vanguard Long-Term Investment-Grade Fund and High-Yield Corporate Fund: In our opinion, the accompanying statements of net assets—investments summary and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Short-Term Investment-Grade Fund, Vanguard Intermediate-Term Investment-Grade Fund, Vanguard Long-Term Investment-Grade Fund and High-Yield Corporate Fund (constituting separate portfolios of Vanguard Fixed Income Securities Funds, hereafter referred to as the “Funds”) at January 31, 2014, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at January 31, 2014 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 17, 2014

109

 

Special 2013 tax information (unaudited) for Vanguard Short-Term Investment-Grade Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of
the Internal Revenue Code.
The fund distributed $174,607,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the
fund are qualified short-term capital gains.
For nonresident alien shareholders, 69.6% of income dividends are interest-related dividends.

 

Special 2013 tax information (unaudited) for Vanguard Intermediate-Term
Investment-Grade Fund
 
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of
the Internal Revenue Code.
The fund distributed $388,207,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the
fund are qualified short-term capital gains.
For nonresident alien shareholders, 75.8% of income dividends are interest-related dividends.

 

Special 2013 tax information (unaudited) for Vanguard Long-Term Investment-Grade Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of
the Internal Revenue Code.
The fund distributed $141,798,000 as capital gain dividends (from net long-term capital gains) to
shareholders during the fiscal year.
For nonresident alien shareholders, 69.3% of income dividends are interest-related dividends.

 

Special 2013 tax information (unaudited) for Vanguard High-Yield Corporate Fund
This information for the fiscal year ended January 31, 2014, is included pursuant to provisions of
the Internal Revenue Code.
For nonresident alien shareholders, 76.7% of income dividends are interest-related dividends.

 

110

 

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.

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Six Months Ended January 31, 2014      
  Beginning Ending Expenses
  Account Value Account Value Paid During
  7/31/2013 1/31/2014 Period
Based on Actual Fund Return      
Short-Term Investment-Grade Fund      
Investor Shares $1,000.00 $1,016.24 $1.02
Admiral Shares 1,000.00 1,016.76 0.51
Institutional Shares 1,000.00 1,016.91 0.36
Intermediate-Term Investment-Grade Fund      
Investor Shares $1,000.00 $1,025.92 $1.02
Admiral Shares 1,000.00 1,026.44 0.51
Long-Term Investment-Grade Fund      
Investor Shares $1,000.00 $1,044.83 $1.13
Admiral Shares 1,000.00 1,045.35 0.62
High-Yield Corporate Fund      
Investor Shares $1,000.00 $1,037.89 $1.18
Admiral Shares 1,000.00 1,038.41 0.67
Based on Hypothetical 5% Yearly Return      
Short-Term Investment-Grade Fund      
Investor Shares $1,000.00 $1,024.20 $1.02
Admiral Shares 1,000.00 1,024.70 0.51
Institutional Shares 1,000.00 1,024.85 0.36
Intermediate-Term Investment-Grade Fund      
Investor Shares $1,000.00 $1,024.20 $1.02
Admiral Shares 1,000.00 1,024.70 0.51
Long-Term Investment-Grade Fund      
Investor Shares $1,000.00 $1,024.10 $1.12
Admiral Shares 1,000.00 1,024.60 0.61
High-Yield Corporate Fund      
Investor Shares $1,000.00 $1,024.05 $1.17
Admiral Shares 1,000.00 1,024.55 0.66

 

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Short-Term Investment-Grade Fund, 0.20% for Investor Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Intermediate-Term Investment-Grade Fund, 0.20% for Investor Shares and 0.10% for Admiral Shares; for the Long-Term Investment-Grade Fund, 0.22% for Investor Shares and 0.12% for Admiral Shares; for the High-Yield Corporate Fund, 0.23% for Investor Shares and 0.13% 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.

112

 

Trustees Approve Advisory Arrangement

The board of trustees of Vanguard Long-Term Investment-Grade Fund has approved the addition of The Vanguard Group, Inc. (Vanguard), through its Fixed Income Group, to the Fund’s investment advisory team. Wellington Management Company, LLP (Wellington Management), will continue as the Fund’s lead advisor and manage most of the Fund. The board previously renewed the investment advisory arrangement between the Fund and Wellington Management.

The board also previously renewed the investment advisory arrangements between Vanguard Short-Term and Intermediate-Term Investment-Grade Funds and Vanguard, which serves as the investment advisor for the funds. In addition, the board previously renewed the investment advisory arrangements between Vanguard High-Yield Corporate Fund and the fund’s advisor, Wellington Management. Please see the funds’ semiannual report dated July 31, 2013, for more information about the board’s approval of the arrangements with Vanguard and Wellington Management.

The board decided to engage Vanguard as an advisor to the Long-Term Investment-Grade Fund based upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services

The board considered the quality of the advisor’s investment management services, and took into account the organizational depth and stability of the advisor. The board noted that Vanguard has been managing investments for more than three 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 the advisor’s experience, stability, depth, and performance, among other factors, warranted approval of the advisory arrangement.

Investment performance

The board considered the investment performance of the Fixed Income Group’s active strategies employed in the Intermediate-Term Investment-Grade Fund and noted that this portfolio is managed in a manner substantially similar to the strategy that Vanguard will employ when managing assets for the Long-Term Investment-Grade Fund. The board concluded that although the Intermediate-Term Investment-Grade Fund has a shorter duration than the Long-Term Investment-Grade Fund, both funds invest in high-quality fixed income securities. The Fixed Income Group has produced strong performance for the Intermediate-Term Fund, especially since the inception of a risk-controlled management structure.

Cost

The board considered the at-cost advisory expenses to be paid by the fund to Vanguard. The board noted that, after the addition of Vanguard, the fund’s advisory fees and expenses as well as the expense ratio would be expected to remain significantly below those of the fund’s peer group. Information about the Long-Term Investment-Grade Fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements sections, which also include information about the advisory expenses.

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

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The benefit of economies of scale

The board concluded that the Long-Term Investment-Grade Fund’s at-cost arrangement with Vanguard ensures that the funds will realize economies of scale as they grow, with the cost to shareholders declining as fund assets increase.

The board will consider whether to renew the advisory arrangement again at its annual review of the Long-Term Investment-Grade Fund’s advisory arrangements.

114

 

Glossary

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

Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.

Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.

Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.

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

Credit Quality. Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). “Not Rated” is used to classify securities for which a rating is not available. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under “U.S. Government.” For this report, credit-quality ratings are obtained from Moody’s and S&P, and the higher rating for each issue is used.

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

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

115

 

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

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

Yield to Maturity. The rate of return an investor would receive if the fixed income securities held by a fund were held to their maturity dates.

Benchmark Information

Spliced Core Bond Funds Average: Intermediate Investment-Grade Debt Funds Average through August 31, 2013; Core Bond Funds Average thereafter.

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The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 180 Vanguard funds.

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

InterestedTrustee1 and Delphi Automotive LLP (automotive components);
  Senior Advisor at New Mountain Capital.
F. William McNabb III  
Born 1957. Trustee Since July 2009. Chairman of the Amy Gutmann
Board. Principal Occupation(s) During the Past Five Born 1949. Trustee Since June 2006. Principal
Years: Chairman of the Board of The Vanguard Group, Occupation(s) During the Past Five Years: President of
Inc., and of each of the investment companies served the University of Pennsylvania; Christopher H. Browne
by The Vanguard Group, since January 2010; Director Distinguished Professor of Political Science, School of
of The Vanguard Group since 2008; Chief Executive Arts and Sciences, and Professor of Communication,
Officer and President of The Vanguard Group, and of Annenberg School for Communication, with secondary
each of the investment companies served by The faculty appointments in the Department of Philosophy,
Vanguard Group, since 2008; Director of Vanguard School of Arts and Sciences, and at the Graduate
Marketing Corporation; Managing Director of The School of Education, University of Pennsylvania;
Vanguard Group (1995–2008). Trustee of the National Constitution Center; Chair
  of the Presidential Commission for the Study of
  Bioethical Issues.
IndependentTrustees  
  JoAnn Heffernan Heisen
Emerson U. Fullwood Born 1950. Trustee Since July 1998. Principal
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years: Corporate
Occupation(s) During the Past Five Years: Executive Vice President and Chief Global Diversity Officer
Chief Staff and Marketing Officer for North America (retired 2008) and Member of the Executive
and Corporate Vice President (retired 2008) of Xerox Committee (1997–2008) of Johnson & Johnson
Corporation (document management products and (pharmaceuticals/medical devices/consumer
services); Executive in Residence and 2010 products); Director of Skytop Lodge Corporation
Distinguished Minett Professor at the Rochester (hotels), the University Medical Center at Princeton,
Institute of Technology; Director of SPX Corporation the Robert Wood Johnson Foundation, and the Center
(multi-industry manufacturing), the United Way of for Talent Innovation; Member of the Advisory Board
Rochester, Amerigroup Corporation (managed health of the Maxwell School of Citizenship and Public Affairs
care), the University of Rochester Medical Center, at Syracuse University.
Monroe Community College Foundation, and North  
Carolina A&T University.
F. Joseph Loughrey
  Born 1949. Trustee Since October 2009. Principal
Rajiv L. Gupta Occupation(s) During the Past Five Years: President
Born 1945. Trustee Since December 2001.2 and Chief Operating Officer (retired 2009) of Cummins
Principal Occupation(s) During the Past Five Years: Inc. (industrial machinery); Chairman of the Board
Chairman and Chief Executive Officer (retired 2009) of Hillenbrand, Inc. (specialized consumer services),
and President (2006–2008) of Rohm and Haas Co. and of Oxfam America; Director of SKF AB (industrial
(chemicals); Director of Tyco International, Ltd. machinery), Hyster-Yale Materials Handling, Inc.
(diversified manufacturing and services), Hewlett- (forklift trucks), the Lumina Foundation for Education,
Packard Co. (electronic computer manufacturing),  

 

 

and the V Foundation for Cancer Research; Member Executive Officers  
of the Advisory Council for the College of Arts and    
Letters and of the Advisory Board to the Kellogg Glenn Booraem  
Institute for International Studies, both at the Born 1967. Controller Since July 2010. Principal
University of Notre Dame. Occupation(s) During the Past Five Years: Principal
  of The Vanguard Group, Inc.; Controller of each of
Mark Loughridge the investment companies served by The Vanguard
Born 1953. Trustee Since March 2012. Principal Group; Assistant Controller of each of the investment
Occupation(s) During the Past Five Years: Senior Vice companies served by The Vanguard Group (2001–2010).
President and Chief Financial Officer (retired 2013)    
at IBM (information technology services); Fiduciary Thomas J. Higgins  
Member of IBM’s Retirement Plan Committee (2004– Born 1957. Chief Financial Officer Since September
2013); Member of the Council on Chicago Booth. 2008. Principal Occupation(s) During the Past Five
  Years: Principal of The Vanguard Group, Inc.; Chief
Scott C. Malpass Financial Officer of each of the investment companies
Born 1962. Trustee Since March 2012. Principal served by The Vanguard Group; Treasurer of each of
Occupation(s) During the Past Five Years: Chief the investment companies served by The Vanguard
Investment Officer and Vice President at the University Group (1998–2008).  
of Notre Dame; Assistant Professor of Finance at the    
Mendoza College of Business at Notre Dame; Member Kathryn J. Hyatt  
of the Notre Dame 403(b) Investment Committee; Born 1955. Treasurer Since November 2008. Principal
Board Member of TIFF Advisory Services, Inc. Occupation(s) During the Past Five Years: Principal of
(investment advisor); Member of the Investment The Vanguard Group, Inc.; Treasurer of each of the
Advisory Committees of the Financial Industry investment companies served by The Vanguard
Regulatory Authority (FINRA) and of Major League Group; Assistant Treasurer of each of the investment
Baseball. companies served by The Vanguard Group (1988–2008).
 
André F. Perold Heidi Stam  
Born 1952. Trustee Since December 2004. Principal Born 1956. Secretary Since July 2005. Principal
Occupation(s) During the Past Five Years: George Occupation(s) During the Past Five Years: Managing
Gund Professor of Finance and Banking, Emeritus Director of The Vanguard Group, Inc.; General Counsel
at the Harvard Business School (retired 2011); of The Vanguard Group; Secretary of The Vanguard
Chief Investment Officer and Managing Partner of Group and of each of the investment companies
HighVista Strategies LLC (private investment firm); served by The Vanguard Group; Director and Senior
Director of Rand Merchant Bank; Overseer of the Vice President of Vanguard Marketing Corporation.
Museum of Fine Arts Boston.    
  Vanguard Senior ManagementTeam
Alfred M. Rankin, Jr.    
Born 1941. Trustee Since January 1993. Principal Mortimer J. Buckley Chris D. McIsaac
Occupation(s) During the Past Five Years: Chairman, Kathleen C. Gubanich Michael S. Miller
President, and Chief Executive Officer of NACCO Paul A. Heller James M. Norris
Industries, Inc. (housewares/lignite), and of Hyster- Martha G. King Glenn W. Reed
Yale Materials Handling, Inc. (forklift trucks); Chairman John T. Marcante  
of the Board of University Hospitals of Cleveland.    
 
Peter F. Volanakis Chairman Emeritus and Senior Advisor
Born 1955. Trustee Since July 2009. Principal    
Occupation(s) During the Past Five Years: President John J. Brennan  
and Chief Operating Officer (retired 2010) of Corning Chairman, 1996–2009  
Incorporated (communications equipment); Trustee of Chief Executive Officer and President, 1996–2008
Colby-Sawyer College; Member of the Advisory Board    
of the Norris Cotton Cancer Center and of the Advisory Founder  
Board of the Parthenon Group (strategy consulting).    
  John C. Bogle  
  Chairman and Chief Executive Officer, 1974–1996

 

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

 

 

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

 

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This material may be used in conjunction  
with the offering of shares of any Vanguard  
fund only if preceded or accompanied by  
the fund’s current prospectus.  
 
All comparative mutual fund data are from Lipper, a  
Thomson Reuters Company, or Morningstar, Inc., unless  
otherwise noted.  
 
You can obtain a free copy of Vanguard’s proxy voting  
guidelines by visiting vanguard.com/proxyreporting or by  
calling Vanguard at 800-662-2739. The guidelines are  
also available from the SEC’s website, sec.gov. In  
addition, you may obtain a free report on how your fund  
voted the proxies for securities it owned during the 12  
months ended June 30. To get the report, visit either  
vanguard.com/proxyreporting or sec.gov.  
 
You can review and copy information about your fund at  
the SEC’s Public Reference Room in Washington, D.C. To  
find out more about this public service, call the SEC at  
202-551-8090. Information about your fund is also  
available on the SEC’s website, and you can receive  
copies of this information, for a fee, by sending a  
request in either of two ways: via e-mail addressed to  
publicinfo@sec.gov or via regular mail addressed to the  
Public Reference Section, Securities and Exchange  
Commission, Washington, DC 20549-1520.  
 
  © 2014 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
 
  Q390 032014

 


Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.

Item 3: Audit Committee Financial Expert. The following members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts serving on its Audit Committee, and to be independent: Rajiv L. Gupta, Amy Gutmann, JoAnn Heffernan Heisen, F. Joseph Loughrey, Mark Loughridge, Scott C. Malpass, André F. Perold, and Alfred M. Rankin, Jr.

Item 4: Principal Accountant Fees and Services.

(a) Audit Fees.

Audit Fees of the Registrant

Fiscal Year Ended January 31, 2014: $317,000
Fiscal Year Ended January 31, 2013: $316,000

Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.

Fiscal Year Ended January 31, 2014: $5,714,113
Fiscal Year Ended January 31, 2013: $4,809,780

Includes fees billed in connection with audits of the Registrant and other registered investment companies in the Vanguard complex. Also includes fees billed in connection with audits of The Vanguard Group, Inc. and Vanguard Marketing Corporation for Fiscal Year Ended January 31, 2014.

(b) Audit-Related Fees.

Fiscal Year Ended January 31, 2014: $1,552,950
Fiscal Year Ended January 31, 2013: $1,812,565

Includes fees billed in connection with assurance and related services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

(c) Tax Fees.

Fiscal Year Ended January 31, 2014: $110,000
Fiscal Year Ended January 31, 2013: $490,518

Includes fees billed in connection with tax compliance, planning, and advice services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation. Also includes fees billed in connection with certain tax services related to audits of the Registrant and other registered investment companies in the Vanguard complex for Fiscal Year Ended January 31, 2013.

(d) All Other Fees.

Fiscal Year Ended January 31, 2014: $132,000
Fiscal Year Ended January 31, 2013: $16,000

 

Includes fees billed for services related to tax reported information provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

(e) (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.

     In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Chairman of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.

     The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., or other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant.

     (2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.

(g) Aggregate Non-Audit Fees.

Fiscal Year Ended January 31, 2014: $242,000
Fiscal Year Ended January 31, 2013: $506,518

Includes fees billed for non-audit services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

(h) For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.

Item 5: Audit Committee of Listed Registrants.

Not Applicable.

Item 6: Investments.


Vanguard® Short-Term Investment-Grade Fund
Schedule of Investments
January 31, 2014

        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
 
U.S. Government and Agency Obligations (9.9%)        
U.S. Government Securities (9.8%)        
  United States Treasury Note/Bond 0.375% 3/15/15 904,000 906,115
  United States Treasury Note/Bond 2.500% 3/31/15 280,000 287,526
  United States Treasury Note/Bond 0.375% 4/15/15 187,712 188,181
  United States Treasury Note/Bond 0.250% 5/15/15 147,635 147,774
1,2 United States Treasury Note/Bond 2.125% 5/31/15 40,000 41,019
3 United States Treasury Note/Bond 0.375% 6/15/15 357,021 357,914
  United States Treasury Note/Bond 0.250% 7/15/15 63,800 63,840
  United States Treasury Note/Bond 1.250% 8/31/15 363 369
  United States Treasury Note/Bond 0.250% 9/15/15 47,750 47,758
  United States Treasury Note/Bond 0.875% 11/30/16 29,750 29,950
  United States Treasury Note/Bond 0.750% 1/15/17 914,250 916,389
  United States Treasury Note/Bond 0.625% 5/31/17 55,255 54,823
  United States Treasury Note/Bond 0.750% 3/31/18 45,500 44,661
  United States Treasury Note/Bond 0.625% 4/30/18 592,610 577,795
  United States Treasury Note/Bond 1.500% 1/31/19 868,750 869,019
1 United States Treasury Note/Bond 1.000% 8/31/19 188,000 180,745
          4,713,878
Conventional Mortgage-Backed Securities (0.0%)        
4,5 Fannie Mae Pool 6.000% 12/1/16–5/1/17 2,768 2,975
4,5 Fannie Mae Pool 6.500% 9/1/16 2,122 2,243
4,5 Fannie Mae Pool 7.500% 3/1/15 2 2
4,5 Freddie Mac Gold Pool 6.000% 3/1/17–4/1/17 1,582 1,662
          6,882
Nonconventional Mortgage-Backed Securities (0.1%)        
4,5,6 Fannie Mae Pool 2.125% 12/1/32 662 682
4,5,6 Fannie Mae Pool 2.250% 6/1/33 4,838 5,073
4,5,6 Fannie Mae Pool 2.310% 7/1/32 651 698
4,5,6 Fannie Mae Pool 2.335% 5/1/33 3,790 4,052
4,5,6 Fannie Mae Pool 2.340% 9/1/32 85 91
4,5,6 Fannie Mae Pool 2.375% 9/1/32 362 385
4,5,6 Fannie Mae Pool 2.414% 8/1/33 2,456 2,631
4,5,6 Fannie Mae Pool 2.420% 8/1/33 1,423 1,457
4,5,6 Fannie Mae Pool 2.531% 2/1/37 1,768 1,867
4,5,6 Fannie Mae Pool 2.535% 8/1/33 1,792 1,844
4,5,6 Fannie Mae Pool 2.550% 7/1/33 4,601 4,761
4,5,6 Fannie Mae Pool 2.564% 8/1/37 692 729
4,5,6 Fannie Mae Pool 2.692% 5/1/33 957 1,029
4,5,6 Freddie Mac Non Gold Pool 2.375% 8/1/32 2,115 2,233
4,5,6 Freddie Mac Non Gold Pool 2.379% 9/1/32 400 440
4,5,6 Freddie Mac Non Gold Pool 2.474% 8/1/37 2,803 2,973
4,5,6 Freddie Mac Non Gold Pool 2.518% 9/1/32 1,041 1,072
4,5,6 Freddie Mac Non Gold Pool 2.586% 10/1/32 659 707
4,5,6 Freddie Mac Non Gold Pool 2.589% 8/1/33 1,223 1,311
4,5,6 Freddie Mac Non Gold Pool 2.776% 1/1/33 648 709
4,5,6 Freddie Mac Non Gold Pool 2.836% 2/1/33 516 536
 
          35,280
 
Total U.S. Government and Agency Obligations (Cost $4,752,186)       4,756,040
 
Asset-Backed/Commercial Mortgage-Backed Securities (19.2%)        
4 Ally Auto Receivables Trust 2010-2 2.090% 5/15/15 7,834 7,853
4,7 Ally Auto Receivables Trust 2010-3 2.690% 2/15/17 18,850 18,955
4 Ally Auto Receivables Trust 2011-1 2.230% 3/15/16 48,023 48,434
4 Ally Auto Receivables Trust 2012-1 1.210% 7/15/16 14,300 14,417
4 Ally Auto Receivables Trust 2012-SN1 0.700% 12/21/15 11,450 11,455
4 Ally Auto Receivables Trust 2013-SN1 0.900% 5/22/17 24,150 24,170
4,7 Ally Master Owner Trust Series 2010-2 4.250% 4/15/17 2,600 2,711
4,7 Ally Master Owner Trust Series 2010-2 4.590% 4/15/17 15,500 16,038
4,6 Ally Master Owner Trust Series 2010-4 1.230% 8/15/17 58,280 58,795
4,6,7 Ally Master Owner Trust Series 2010-4 1.710% 8/15/17 39,172 39,673
4,6,7 Ally Master Owner Trust Series 2010-4 2.110% 8/15/17 29,770 30,287

 

1

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 Ally Master Owner Trust Series 2012-3 1.210% 6/15/17 39,400 39,642
4 Ally Master Owner Trust Series 2012-5 1.540% 9/15/19 78,820 78,892
4,6 Ally Master Owner Trust Series 2014-1 0.000% 1/15/19 15,000 15,000
4 Ally Master Owner Trust Series 2014-1 1.290% 1/15/19 16,000 15,996
4,6 American Express Credit Account Secured Note Trust        
  2012-4 0.710% 5/15/20 27,755 27,615
4,6 American Express Issuance Trust II 2013-1 0.440% 2/15/19 131,000 130,448
4,7 Americold 2010 LLC Trust Series 2010-ART 4.954% 1/14/29 16,990 18,773
4,7 Americold 2010 LLC Trust Series 2010-ART 6.811% 1/14/29 11,185 12,840
4 AmeriCredit Automobile Receivables Trust 2012-1 1.230% 9/8/16 7,035 7,052
4 AmeriCredit Automobile Receivables Trust 2013-1 1.570% 1/8/19 3,200 3,162
4 AmeriCredit Automobile Receivables Trust 2013-2 1.790% 3/8/19 14,600 14,599
4 AmeriCredit Automobile Receivables Trust 2013-3 2.380% 6/10/19 16,100 16,289
4 AmeriCredit Automobile Receivables Trust 2013-3 3.000% 7/8/19 20,500 20,696
4 AmeriCredit Automobile Receivables Trust 2013-4 2.720% 9/9/19 3,460 3,523
4 AmeriCredit Automobile Receivables Trust 2013-4 3.310% 10/8/19 4,660 4,779
4 AmeriCredit Automobile Receivables Trust 2013-5 2.290% 11/8/19 6,375 6,411
4 AmeriCredit Automobile Receivables Trust 2013-5 2.860% 12/8/19 7,170 7,190
4,6,7 Arkle Master Issuer plc Series 2010-1 1.488% 5/17/60 26,540 26,768
4,6,7 Arran Residential Mortgages Funding 2010-1 plc 1.638% 5/16/47 15,533 15,701
4,6,7 Arran Residential Mortgages Funding 2011-1 plc 1.688% 11/19/47 27,264 27,585
7 Australia & New Zealand Banking Group Ltd. 2.400% 11/23/16 12,950 13,433
4,7 Aventura Mall Trust 2013-AVM 3.743% 12/5/32 13,300 13,867
4,6 BA Credit Card Trust 2007-A4 0.200% 11/15/19 36,370 35,987
4,7 BAMLL Commercial Mortgage Securities Trust 2012-        
  PARK 2.959% 12/10/30 4,900 4,704
4 Banc of America Commercial Mortgage Trust 2006-5 5.415% 9/10/47 44,227 48,377
4 Banc of America Commercial Mortgage Trust 2006-6 5.347% 10/10/45 44,878 49,150
4 Banc of America Commercial Mortgage Trust 2007-2 5.584% 4/10/49 43,864 48,451
4 Banc of America Commercial Mortgage Trust 2007-2 5.635% 4/10/49 23,534 26,153
4 Banc of America Commercial Mortgage Trust 2008-1 6.171% 2/10/51 96,979 107,848
4 Banc of America Commercial Mortgage Trust 2008-1 6.215% 2/10/51 6,835 7,803
4,8 Banc of America Funding 2006-H Trust 2.803% 9/20/46 29,417 23,457
4 Banc of America Mortgage 2003-F Trust 2.797% 7/25/33 1,724 1,739
4 Bank of America Mortgage 2002-J Trust 3.565% 9/25/32 23 23
4,6,7 Bank of America Student Loan Trust 2010-1A 1.039% 2/25/43 35,108 35,331
7 Bank of Nova Scotia 1.750% 3/22/17 2,927 2,992
4,6 Bank One Issuance Trust Series 2004-C2 0.960% 2/15/17 6,600 6,603
4,7 Beacon Container Finance LLC 2012-1A 3.720% 9/20/27 15,468 15,511
4,8 Bear Stearns ARM Trust 2006-4 2.511% 10/25/36 38,440 29,955
4,8 Bear Stearns ARM Trust 2007-3 2.642% 5/25/47 29,228 23,445
4 Bear Stearns Commercial Mortgage Securities Trust        
  2005-PWR9 4.943% 9/11/42 13,370 14,074
4 Bear Stearns Commercial Mortgage Securities Trust        
  2006-PWR13 5.533% 9/11/41 23,738 25,986
4 Bear Stearns Commercial Mortgage Securities Trust        
  2007-PWR16 5.706% 6/11/40 21,611 24,278
4 Bear Stearns Commercial Mortgage Securities Trust        
  2007-PWR17 5.650% 6/11/50 133,063 147,893
4 Bear Stearns Commercial Mortgage Securities Trust        
  2007-TOP28 5.710% 9/11/42 41,871 47,222
4,6,7 BMW Floorplan Master Owner Trust 2012-1A 0.560% 9/15/17 93,500 93,705
4,6 Brazos Higher Education Authority Inc. Series 2005-3 0.446% 6/25/26 15,150 14,613
4,6 Brazos Higher Education Authority Inc. Series 2010-1 1.138% 5/25/29 34,467 34,818
4,6 Brazos Higher Education Authority Inc. Series 2011-1 1.038% 2/25/30 47,407 47,740
4,7 CAL Funding II Ltd. Series 2012-1A 3.470% 10/25/27 8,138 8,085
4,7 CAL Funding II Ltd. Series 2013-1A 3.350% 3/27/28 14,758 14,633
4 Capital Auto Receivables Asset Trust 2013-1 0.970% 1/22/18 18,000 17,912
4 Capital Auto Receivables Asset Trust 2013-1 1.290% 4/20/18 5,600 5,575
4 Capital Auto Receivables Asset Trust 2013-1 1.740% 10/22/18 5,420 5,407
4 Capital Auto Receivables Asset Trust 2013-3 3.690% 2/20/19 13,400 13,767
4 Capital Auto Receivables Asset Trust 2013-4 1.470% 7/20/18 22,475 22,500
4 Capital Auto Receivables Asset Trust 2013-4 2.060% 10/22/18 15,230 15,266
4 Capital Auto Receivables Asset Trust 2013-4 2.670% 2/20/19 13,625 13,650

 

2

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 Capital Auto Receivables Asset Trust 2013-4 3.220% 5/20/19 11,935 11,965
4 Capital Auto Receivables Asset Trust 2014-1 1.690% 10/22/18 12,200 12,244
4 Capital Auto Receivables Asset Trust 2014-1 2.220% 1/22/19 6,200 6,227
4 Capital Auto Receivables Asset Trust 2014-1 2.840% 4/22/19 4,900 4,925
4 Capital Auto Receivables Asset Trust 2014-1 3.390% 7/22/19 4,100 4,122
4,6 Capital One Multi-asset Execution Trust 2004-C2 1.210% 12/15/16 2,940 2,940
4,6 Capital One Multi-asset Execution Trust 2006-A11 0.250% 6/17/19 12,195 12,126
4,6 Capital One Multi-asset Execution Trust 2007-A1 0.210% 11/15/19 27,690 27,474
4,6 Capital One Multi-asset Execution Trust 2007-A2 0.240% 12/16/19 110,725 109,875
4,6 Capital One Multi-asset Execution Trust 2007-A5 0.200% 7/15/20 33,485 33,106
4,6,7 Cards II Trust 2012-4A 0.610% 9/15/17 27,040 27,063
4 CarMax Auto Owner Trust 2010-2 2.040% 10/15/15 17,741 17,822
4 CarMax Auto Owner Trust 2013-3 1.910% 3/15/19 5,940 6,103
4 CarMax Auto Owner Trust 2013-3 2.850% 2/18/20 3,630 3,691
4 CD 2007-CD4 Commercial Mortgage Trust 5.205% 12/11/49 1,507 1,505
4 CenterPoint Energy Transition Bond Co. IV LLC 2012-1 2.161% 10/15/21 21,400 21,492
4,7 CFCRE Commercial Mortgage Trust 2011-C1 5.545% 4/15/44 3,100 3,427
4,7 CFCRE Commercial Mortgage Trust 2011-C2 5.559% 12/15/47 14,930 16,435
4,6 Chase Issuance Trust 2007-C1 0.620% 4/15/19 30,600 30,240
4,6 Chase Issuance Trust 2012-A10 0.420% 12/16/19 117,000 116,627
4 CHL Mortgage Pass-Through Trust 2003-HYB3 2.671% 11/19/33 1,871 1,788
4,8 CHL Mortgage Pass-Through Trust 2006-HYB1 2.480% 3/20/36 16,404 12,801
4,8 CHL Mortgage Pass-Through Trust 2007-HYB2 2.703% 2/25/47 19,297 15,495
4,7 Chrysler Capital Auto Receivables Trust 2013-AA 1.830% 3/15/19 3,985 3,989
4,7 Chrysler Capital Auto Receivables Trust 2013-AA 2.280% 7/15/19 4,785 4,789
4,7 Chrysler Capital Auto Receivables Trust 2013-AA 2.930% 8/17/20 5,185 5,189
4,7 CIT Equipment Collateral 2012-VT1 1.100% 8/22/16 14,985 15,003
4,7 CIT Equipment Collateral 2013-VT1 1.130% 7/20/20 13,700 13,725
4,6 Citibank Credit Card Issuance Trust 2005-C2 0.628% 3/24/17 4,380 4,370
4,6 Citibank Credit Card Issuance Trust 2006-A7 0.303% 12/17/18 31,075 30,832
4 Citibank Credit Card Issuance Trust 2007-A8 5.650% 9/20/19 24,075 27,658
4,6 Citibank Credit Card Issuance Trust 2008-A7 1.532% 5/20/20 61,200 63,785
4,7 Citibank Omni Master Trust 2009-A13 5.350% 8/15/18 64,154 65,810
4,6,7 Citibank Omni Master Trust 2009-A14A 2.910% 8/15/18 65,116 65,933
4,7 Citibank Omni Master Trust 2009-A17 4.900% 11/15/18 91,937 95,026
4 Citigroup Commercial Mortgage Trust 2012-GC8 3.024% 9/10/45 5,980 5,830
4,7 Citigroup Commercial Mortgage Trust 2012-GC8 3.683% 9/10/45 2,100 2,101
4 Citigroup Commercial Mortgage Trust 2013-GC11 1.987% 4/10/46 4,885 4,886
4 Citigroup Commercial Mortgage Trust 2013-GC11 3.093% 4/10/46 6,100 5,873
4 Citigroup Commercial Mortgage Trust 2013-GC15 3.161% 9/10/46 33,878 35,366
4 Citigroup Commercial Mortgage Trust 2013-GC15 3.942% 9/10/46 7,270 7,672
4,8 Citigroup Mortgage Loan Trust 2007-AR8 2.756% 7/25/37 1,649 1,462
4,7 CKE Restaurant Holdings Inc. 2013-1A 4.474% 3/20/43 11,618 11,778
4,7 CLI Funding V LLC 2013-1A 2.830% 3/18/28 24,235 23,691
4 CNH Equipment Trust 2010-B 1.740% 1/17/17 33,442 33,576
4 CNH Equipment Trust 2010-C 1.750% 5/16/16 36,305 36,481
4 CNH Equipment Trust 2011-B 1.290% 9/15/17 3,200 3,228
4 COBALT CMBS Commercial Mortgage Trust 2007-C2 5.484% 4/15/47 24,288 26,777
4 COMM 2006-C8 Mortgage Trust 5.292% 12/10/46 67,234 73,692
4 COMM 2006-C8 Mortgage Trust 5.306% 12/10/46 36,900 40,346
4 COMM 2007-C9 Mortgage Trust 5.800% 12/10/49 25,210 28,508
4 COMM 2007-C9 Mortgage Trust 5.800% 12/10/49 910 913
4 COMM 2012-CCRE2 Mortgage Trust 3.147% 8/15/45 2,925 2,877
4 COMM 2012-CCRE2 Mortgage Trust 3.791% 8/15/45 4,100 4,125
4 COMM 2012-CCRE3 Mortgage Trust 2.822% 10/15/45 7,520 7,211
4 COMM 2012-CCRE4 Mortgage Trust 2.853% 10/15/45 5,955 5,705
4 COMM 2012-CCRE5 Mortgage Trust 2.771% 12/10/45 2,640 2,508
4 COMM 2013-CCRE11 Mortgage Trust 4.258% 10/10/46 30,255 31,767
4 COMM 2013-CCRE12 Mortgage Trust 3.623% 10/10/46 14,650 15,143
4 COMM 2013-CCRE12 Mortgage Trust 4.046% 10/10/46 6,830 7,026
4 COMM 2013-CCRE13 Mortgage Trust 4.194% 10/10/46 25,210 26,400
4 COMM 2013-CCRE13 Mortgage Trust 4.757% 10/10/46 8,240 8,198
4 COMM 2013-CCRE13 Mortgage Trust 4.757% 10/10/46 4,517 4,656
4 COMM 2013-CCRE8 Mortgage Trust 3.612% 6/10/46 22,465 22,603

 

3

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 COMM 2013-CCRE9 Mortgage Trust 4.237% 7/10/45 19,500 20,678
4,7 COMM 2013-CCRE9 Mortgage Trust 4.261% 7/10/45 11,250 11,579
4 COMM 2013-CCRE9 Mortgage Trust 2.972% 8/10/46 20,750 21,491
4 COMM 2013-CCRE9 Mortgage Trust 3.795% 8/10/46 9,520 9,944
4 COMM 2013-LC13 Mortgage Trust 3.009% 8/10/46 32,400 33,590
4,7 COMM 2013-LC13 Mortgage Trust 3.774% 8/10/46 10,688 11,162
4 COMM 2013-LC13 Mortgage Trust 4.205% 8/10/46 11,725 12,293
4,7 COMM 2013-LC13 Mortgage Trust 4.557% 8/10/46 18,565 19,508
4 COMM 2013-LC6 Mortgage Trust 2.941% 1/10/46 4,100 3,931
4,7 COMM 2013-SFS Mortgage Trust 2.987% 4/12/35 5,490 5,200
4 COMM 2014-CCRE14 Mortgage Trust 3.147% 2/10/47 7,670 7,982
4 COMM 2014-CCRE14 Mortgage Trust 3.743% 2/10/47 5,375 5,618
4 COMM 2014-CCRE14 Mortgage Trust 4.236% 2/10/47 10,110 10,619
4 Commercial Mortgage Trust 2005-GG5 5.224% 4/10/37 9,600 10,080
4 Commercial Mortgage Trust 2006-GG7 5.820% 7/10/38 33,980 36,976
7 Commonwealth Bank of Australia 2.250% 3/16/17 50,220 51,890
7 Commonwealth Bank of Australia 1.875% 12/11/18 30,550 30,482
4 Credit Suisse Commercial Mortgage Trust Series 2006-        
  C3 5.791% 6/15/38 19,591 21,300
4 Credit Suisse Commercial Mortgage Trust Series 2007-        
  C1 5.361% 2/15/40 21,440 22,879
4 Credit Suisse Commercial Mortgage Trust Series 2008-        
  C1 6.039% 2/15/41 58,855 64,764
4,7 Cronos Containers Program Ltd. 2012-2A 3.810% 9/18/27 15,340 15,493
4,6 Discover Card Execution Note Trust 2012-A4 0.530% 11/15/19 52,825 52,924
4 Discover Card Execution Note Trust 2012-A6 1.670% 1/18/22 114,300 110,989
4,6 Discover Card Execution Note Trust 2013-A1 0.460% 8/17/20 74,900 74,594
7 DNB Boligkreditt AS 1.450% 3/21/18 20,580 20,340
4,7 Enterprise Fleet Financing LLC Series 2011-2 1.430% 10/20/16 2,272 2,278
4,7 Enterprise Fleet Financing LLC Series 2011-2 1.900% 10/20/16 12,300 12,411
4,7 Enterprise Fleet Financing LLC Series 2011-3 2.100% 5/20/17 12,201 12,341
4,7 Enterprise Fleet Financing LLC Series 2012-2 0.720% 4/20/18 23,173 23,173
4,7 Enterprise Fleet Financing LLC Series 2012-2 0.930% 4/20/18 10,300 10,300
4 First Horizon Mortgage Pass-Through Trust 2006-AR3 2.046% 11/25/36 14,028 11,739
8 First Horizon Mortgage Pass-Through Trust 2006-AR4 2.549% 1/25/37 30,533 27,153
4,7 Ford Credit Auto Lease Trust 2012-B 1.100% 12/15/15 10,050 10,086
4 Ford Credit Auto Lease Trust 2013-A 0.780% 4/15/16 13,500 13,521
4 Ford Credit Auto Lease Trust 2013-A 1.010% 5/15/16 18,050 18,093
4 Ford Credit Auto Lease Trust 2013-A 1.280% 6/15/16 13,780 13,786
4 Ford Credit Auto Owner Trust 2010-A 3.220% 3/15/16 6,040 6,139
4 Ford Credit Auto Owner Trust 2013-A 1.150% 7/15/18 8,200 8,192
4 Ford Credit Auto Owner Trust 2013-A 1.360% 10/15/18 4,000 3,997
4 Ford Credit Auto Owner Trust 2013-B 1.110% 10/15/18 10,460 10,953
4 Ford Credit Auto Owner Trust 2013-B 1.320% 1/15/19 4,130 4,384
4 Ford Credit Auto Owner Trust 2013-B 1.820% 11/15/19 3,340 3,649
4 Ford Credit Auto Owner Trust 2013-C 1.680% 11/15/18 4,900 4,944
4 Ford Credit Auto Owner Trust 2013-C 1.910% 3/15/19 4,250 4,319
4 Ford Credit Auto Owner Trust 2013-C 2.500% 1/15/20 4,550 4,610
4 Ford Credit Auto Owner Trust 2013-D 1.540% 3/15/19 12,400 12,421
4 Ford Credit Auto Owner Trust 2013-D 1.720% 7/15/19 12,800 12,827
4,6,7 Ford Credit Floorplan Master Owner Trust A Series        
  2010-3 1.860% 2/15/17 28,982 29,587
4,7 Ford Credit Floorplan Master Owner Trust A Series        
  2010-3 4.200% 2/15/17 22,356 23,360
4,7 Ford Credit Floorplan Master Owner Trust A Series        
  2010-3 4.990% 2/15/17 21,000 22,121
4 Ford Credit Floorplan Master Owner Trust A Series        
  2012-2 1.920% 1/15/19 26,800 27,356
4 Ford Credit Floorplan Master Owner Trust A Series        
  2012-4 0.940% 9/15/16 12,100 12,113
4 Ford Credit Floorplan Master Owner Trust A Series        
  2012-4 1.390% 9/15/16 28,200 28,456
4 Ford Credit Floorplan Master Owner Trust A Series        
  2012-5 1.490% 9/15/19 116,300 122,630

 

4

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 Ford Credit Floorplan Master Owner Trust A Series        
  2012-5 1.690% 9/15/19 7,200 7,644
4 Ford Credit Floorplan Master Owner Trust A Series        
  2012-5 2.140% 9/15/19 8,650 9,326
4 Ford Credit Floorplan Master Owner Trust A Series        
  2013-1 1.370% 1/15/18 25,699 26,398
4 Ford Credit Floorplan Master Owner Trust A Series        
  2013-1 1.820% 1/15/18 9,660 10,009
4 Ford Credit Floorplan Master Owner Trust A Series        
  2013-3 1.740% 6/15/17 7,529 7,713
4 Ford Credit Floorplan Master Owner Trust A Series        
  2013-4 2.100% 6/15/20 6,180 6,751
4 Ford Credit Floorplan Master Owner Trust A Series        
  2013-4 2.290% 6/15/20 6,630 6,568
4 Ford Credit Floorplan Master Owner Trust A Series        
  2013-4 2.790% 6/15/20 2,650 2,648
4,7 FRS I LLC 2013-1A 1.800% 4/15/43 6,518 6,477
4,7 FRS I LLC 2013-1A 3.080% 4/15/43 29,242 28,756
4,6 GE Capital Credit Card Master Note Trust Series 2011-2 1.160% 5/15/19 50,270 50,335
4 GE Capital Credit Card Master Note Trust Series 2012-2 2.220% 1/15/22 72,000 72,042
4 GE Capital Credit Card Master Note Trust Series 2012-6 1.360% 8/17/20 90,140 89,131
4,6 GE Dealer Floorplan Master Note Trust Series 2012-1 0.727% 2/20/17 33,825 34,116
4,6 GE Dealer Floorplan Master Note Trust Series 2012-2 0.907% 4/22/19 48,100 50,763
4,6 GE Dealer Floorplan Master Note Trust Series 2012-4 0.597% 10/20/17 25,000 25,353
4 GMACM Mortgage Loan Trust 2005-AR6 2.925% 11/19/35 5,698 5,483
4,7 Golden Credit Card Trust 2012-2A 1.770% 1/15/19 83,300 84,687
4,6,7 Golden Credit Card Trust 2012-3A 0.610% 7/17/17 60,000 60,019
4,6,7 Golden Credit Card Trust 2013-1A 0.410% 2/15/18 39,200 39,142
4,6 Granite Master Issuer plc Series 2007-1 0.297% 12/20/54 6,570 6,499
4,6 Granite Master Issuer plc Series 2007-2 0.239% 12/17/54 2,207 2,181
4,7 Great America Leasing Receivables 2011-1 2.340% 4/15/16 12,266 12,365
4,7 Great America Leasing Receivables 2013-1 1.160% 5/15/18 11,500 11,847
4 GS Mortgage Securities Trust 2006-GG6 5.553% 4/10/38 26,869 28,837
4,7 GS Mortgage Securities Trust 2010-C2 5.225% 12/10/43 3,530 3,796
4,7 GS Mortgage Securities Trust 2011-GC3 5.543% 3/10/44 2,280 2,486
4,7 GS Mortgage Securities Trust 2012-ALOHA 3.551% 4/10/34 25,305 25,357
4,7 GS Mortgage Securities Trust 2012-BWTR 2.954% 11/5/34 27,725 26,264
4,7 GS Mortgage Securities Trust 2012-GC6 4.948% 1/10/45 1,000 1,090
4 GS Mortgage Securities Trust 2013-GC13 4.039% 7/10/46 22,170 22,654
4 GS Mortgage Securities Trust 2013-GCJ12 3.135% 6/10/46 16,420 15,906
4 GS Mortgage Securities Trust 2013-GCJ12 3.777% 6/10/46 8,250 7,901
4 GS Mortgage Securities Trust 2013-GCJ14 2.995% 8/10/46 22,530 23,296
4 GS Mortgage Securities Trust 2013-GCJ14 3.817% 8/10/46 8,192 8,594
4 GS Mortgage Securities Trust 2013-GCJ14 4.243% 8/10/46 49,000 51,444
4 Harley-Davidson Motorcycle Trust 2010-1 1.530% 9/15/15 2,192 2,197
4 Harley-Davidson Motorcycle Trust 2013-1 0.870% 7/15/19 18,350 19,093
4,7 Hertz Vehicle Financing LLC 2009-2A 5.290% 3/25/16 15,250 15,916
4,7 Hertz Vehicle Financing LLC 2010-1A 3.740% 2/25/17 52,150 54,771
4,7 Hertz Vehicle Financing LLC 2011-1A 3.290% 3/25/18 41,500 43,654
4,7 Hertz Vehicle Financing LLC 2013-1A 1.830% 8/25/19 80,200 78,796
4,7 Hilton USA Trust 2013-HLT 2.662% 11/5/30 15,740 15,848
4,7 Hilton USA Trust 2013-HLT 3.367% 11/5/30 16,365 16,563
4,7 Hilton USA Trust 2013-HLT 3.714% 11/5/30 7,365 7,479
4,6,7 Holmes Master Issuer plc 2011-3A 1.789% 10/15/54 11,611 11,717
4,7 Hyundai Auto Lease Securitization Trust 2013-A 0.770% 10/17/16 9,952 9,951
4 Hyundai Auto Receivables Trust 2012-B 1.950% 10/15/18 8,100 8,278
4 Hyundai Auto Receivables Trust 2013-B 1.450% 2/15/19 5,840 5,838
4 Hyundai Auto Receivables Trust 2013-B 2.480% 9/16/19 9,850 9,846
4 Hyundai Auto Receivables Trust 2013-C 2.480% 3/15/19 6,500 6,667
4 Hyundai Auto Receivables Trust 2013-C 3.090% 1/15/20 5,470 5,631
4 Hyundai Auto Receivables Trust 2014-A 2.020% 8/15/19 8,350 8,348

 

5

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 Hyundai Auto Receivables Trust 2014-A 2.530% 7/15/20 5,710 5,708
4,6,7 Hyundai Floorplan Master Owner Trust Series 2013-1 0.510% 5/15/18 20,000 20,038
4,6,7 Hyundai Floorplan Master Owner Trust Series 2013-1 0.810% 5/15/18 8,950 8,911
4,7 Icon Brands Holdings LLC 2012-1 4.229% 1/25/43 18,135 18,129
6 Illinois Student Assistance Commission Series 2010-1 1.289% 4/25/22 26,524 26,911
4,6,7 Invitation Homes 2013-SFR1 Trust 1.309% 12/17/30 24,435 24,451
4,7 Irvine Core Office Trust 2013-IRV 2.068% 5/15/48 5,422 5,238
4,7 Irvine Core Office Trust 2013-IRV 3.173% 5/15/48 14,450 13,896
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2005-LDP1 4.625% 3/15/46 979 973
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2006-LDP6 5.471% 4/15/43 47,901 51,795
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2006-LDP7 5.873% 4/15/45 36,171 39,627
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-C1 5.716% 2/15/51 4,880 5,378
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-CIBC20 5.746% 2/12/51 44,526 49,824
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-LDP10 5.439% 1/15/49 39,612 43,782
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-LDP11 5.798% 6/15/49 20,355 20,432
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-LDP12 5.850% 2/15/51 33,944 38,229
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2009-IWST 5.633% 12/5/27 6,185 7,044
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C1 4.608% 6/15/43 2,300 2,505
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 3.616% 11/15/43 3,300 3,502
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 4.070% 11/15/43 3,140 3,324
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 5.508% 11/15/43 7,100 7,605
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 5.508% 11/15/43 6,225 6,815
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C3 4.388% 2/15/46 17,600 19,210
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C3 4.717% 2/15/46 26,091 28,583
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C3 5.360% 2/15/46 2,930 3,215
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C5 5.314% 8/15/46 4,100 4,631
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2012-C8 2.829% 10/15/45 2,950 2,831
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2012-C8 3.424% 10/15/45 4,030 3,949
4,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2012-HSBC 3.093% 7/5/32 5,850 5,705
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C13 3.994% 1/15/46 14,110 14,609
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 3.674% 12/15/46 9,630 9,991
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 4.166% 12/15/46 9,700 10,136
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 4.517% 12/15/46 14,600 15,292
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 4.944% 12/15/46 21,150 22,082
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 5.008% 12/15/46 9,770 9,966
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-LC11 1.855% 4/15/46 4,885 4,864

 

6

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-LC11 2.960% 4/15/46 11,321 10,838
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C12 3.664% 7/15/45 17,080 17,243
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C12 4.026% 7/15/45 7,520 7,676
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C14 3.019% 8/15/46 16,407 17,024
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C14 3.761% 8/15/46 17,400 18,233
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 2.977% 11/15/45 24,290 25,164
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 3.659% 11/15/45 4,050 4,199
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 4.131% 11/15/45 27,200 28,363
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 4.927% 11/15/45 17,820 18,521
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 5.081% 11/15/45 13,360 13,804
4 JPMBB Commercial Mortgage Securities Trust 2013-        
  C17 4.199% 1/15/47 10,820 11,325
4,6 Kentucky Higher Education Student Loan Corp. 2013-2 0.770% 9/1/28 14,750 14,599
4,6,7 Kildare Securities Ltd. 2007-1A 0.361% 12/10/43 9,391 9,283
4,6,7 Lanark Master Issuer plc 2012-2A 1.638% 12/22/54 30,403 30,859
4,6,7 Lanark Master Issuer plc 2013-1A 0.738% 12/22/54 16,925 16,871
4 LB-UBS Commercial Mortgage Trust 2006-C3 5.641% 3/15/39 66,662 72,093
4 LB-UBS Commercial Mortgage Trust 2006-C6 5.342% 9/15/39 33,177 36,243
4 LB-UBS Commercial Mortgage Trust 2006-C7 5.347% 11/15/38 9,765 10,696
4 LB-UBS Commercial Mortgage Trust 2007-C7 5.866% 9/15/45 27,368 30,887
4,7 Macquarie Equipment Funding Trust 2011-A 1.910% 4/20/17 7,133 7,141
4,7 Macquarie Equipment Funding Trust 2012-A 0.850% 10/22/18 13,647 13,677
4,7 Madison Avenue Trust 2013-650M 3.843% 10/12/32 12,460 12,968
4,7 Master Credit Card Trust 2012-2A 1.970% 4/21/17 4,000 4,002
4,7 Master Credit Card Trust 2013-3A 2.280% 1/22/18 4,319 4,271
4 MASTR Adjustable Rate Mortgages Trust 2004-3 2.222% 4/25/34 2,000 1,893
4,6 MBNA Credit Card Master Note Trust 2004-A3 0.420% 8/16/21 17,800 17,618
4,6 MBNA Credit Card Master Note Trust 2004-C2 1.060% 11/15/16 39,715 39,766
4,7 Mercedes-Benz Master Owner Trust 2012-A 0.790% 11/15/17 51,700 51,700
4 Merrill Lynch Mortgage Investors Trust MLMI Series        
  2003-A2 1.846% 2/25/33 2,965 2,955
4 Merrill Lynch Mortgage Investors Trust MLMI Series        
  2003-A4 2.641% 7/25/33 872 878
4 Merrill Lynch Mortgage Trust 2006-C2 5.739% 8/12/43 11,857 13,012
4 Merrill Lynch Mortgage Trust 2008-C1 5.690% 2/12/51 11,590 12,979
4 ML-CFC Commercial Mortgage Trust 2006-2 5.876% 6/12/46 27,669 30,345
4 ML-CFC Commercial Mortgage Trust 2007-6 5.331% 3/12/51 8,739 8,750
4,7 MMAF Equipment Finance LLC 2009-A 3.510% 1/15/30 13,463 13,725
4,7 MMAF Equipment Finance LLC 2011-A 2.100% 7/15/17 24,275 24,725
4,7 MMAF Equipment Finance LLC 2011-A 3.040% 8/15/28 27,800 29,169
4,7 MMAF Equipment Finance LLC 2012-A 1.980% 6/10/32 13,800 13,994
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-C5 3.176% 8/15/45 5,870 5,778
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-C5 3.792% 8/15/45 2,000 2,014
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-C6 2.858% 11/15/45 5,700 5,460
4,7 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-CKSV 3.277% 10/15/30 21,775 20,571
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C10 4.083% 7/15/46 24,600 25,474
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C11 3.085% 8/15/46 22,200 23,091

 

7

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C11 4.219% 8/15/46 30,315 31,862
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C12 3.824% 10/15/46 8,080 8,480
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C7 2.918% 2/15/46 6,400 6,132
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C7 3.214% 2/15/46 2,940 2,791
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C9 3.102% 5/15/46 9,080 8,736
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2014-C14 4.064% 1/15/47 16,600 17,098
4 Morgan Stanley Bank of America Merrill Lynch Trust        
  2014-C14 4.384% 1/15/47 17,500 18,024
4 Morgan Stanley Capital I Trust 2006-HQ9 5.728% 7/12/44 79,217 86,733
4 Morgan Stanley Capital I Trust 2006-IQ12 5.319% 12/15/43 35,339 38,685
4 Morgan Stanley Capital I Trust 2007-IQ15 5.908% 6/11/49 37,670 42,168
4 Morgan Stanley Capital I Trust 2007-IQ16 5.688% 12/12/49 81,589 90,188
4 Morgan Stanley Capital I Trust 2012-C4 3.244% 3/15/45 3,143 3,134
4 Morgan Stanley Capital I Trust 2012-C4 3.773% 3/15/45 2,500 2,535
4,7 Morgan Stanley Capital I Trust 2012-STAR 3.201% 8/5/34 17,045 16,568
4 Morgan Stanley Mortgage Loan Trust 2006-8AR 2.184% 6/25/36 14,106 12,941
4,6,7 Motor 2012 plc 0.659% 2/25/20 5,014 5,014
4,7 Motor 2012 plc 1.286% 2/25/20 12,030 12,063
7 National Australia Bank Ltd. 2.000% 6/20/17 30,200 30,866
4,6,7 Navistar Financial Dealer Note Master Owner Trust        
  Series 2013-1 0.828% 1/25/18 28,900 28,945
4 Nissan Auto Lease Trust 2013-A 0.740% 10/15/18 15,750 15,742
4,6 Nissan Master Owner Trust Receivables Series 2012-A 0.630% 5/15/17 51,950 52,122
4,6 Nissan Master Owner Trust Receivables Series 2013-A 0.460% 2/15/18 39,200 39,141
7 Norddeutsche Landesbank Girozentrale 2.000% 2/5/19 24,250 24,177
6 North Carolina State Education Assistance Authority        
  2011-1 1.139% 1/26/26 36,317 36,499
4,6 North Carolina State Education Assistance Authority        
  2011-2 1.039% 7/25/25 5,420 5,426
4,7 OBP Depositor LLC Trust 2010-OBP 4.646% 7/15/45 10,065 11,040
4,7 Rental Car Finance Corp. 2011-1A 2.510% 2/25/16 87,600 88,476
4,8 RFMSI Series 2006-SA2 Trust 3.626% 8/25/36 27,517 24,151
4,8 RFMSI Series 2006-SA3 Trust 3.649% 9/25/36 10,234 9,277
4 Royal Bank of Canada 1.200% 9/19/18 31,200 31,036
4 Santander Drive Auto Receivables Trust 2013-1 1.760% 1/15/19 4,810 4,805
4 Santander Drive Auto Receivables Trust 2013-2 1.330% 3/15/18 6,000 6,041
4 Santander Drive Auto Receivables Trust 2013-2 1.950% 3/15/19 24,200 24,354
4 Santander Drive Auto Receivables Trust 2013-4 1.590% 10/15/18 12,155 12,185
4 Santander Drive Auto Receivables Trust 2013-4 2.360% 4/15/20 11,345 11,394
4 Santander Drive Auto Receivables Trust 2013-5 1.550% 10/15/18 19,985 20,001
4 Santander Drive Auto Receivables Trust 2013-5 2.250% 6/17/19 12,790 12,905
4,6,7 Silverstone Master Issuer plc 2010-1A 1.736% 1/21/55 30,740 31,298
4,6 SLM Student Loan Trust 2005-5 0.339% 4/25/25 59,867 59,570
4,6 SLM Student Loan Trust 2005-9 0.359% 1/27/25 26,343 26,224
4,6 SLM Student Loan Trust 2006-5 0.349% 1/25/27 24,500 24,052
4,6 SLM Student Loan Trust 2006-6 0.349% 10/27/25 36,300 35,374
4,6 SLM Student Loan Trust 2007-1 0.329% 1/26/26 66,950 64,616
4,6,7 SLM Student Loan Trust 2011-A 1.160% 10/15/24 13,311 13,312
4,7 SLM Student Loan Trust 2011-A 4.370% 4/17/28 12,200 13,076
4,7 SLM Student Loan Trust 2011-B 3.740% 2/15/29 60,000 64,268
4,6,7 SLM Student Loan Trust 2011-C 1.560% 12/15/23 15,716 15,843
4,7 SLM Student Loan Trust 2011-C 4.540% 10/17/44 22,200 24,122
4,6 SLM Student Loan Trust 2012-6 0.438% 9/25/19 34,620 34,527
4,6,7 SLM Student Loan Trust 2012-B 1.260% 12/15/21 6,764 6,781
4,7 SLM Student Loan Trust 2012-B 3.480% 10/15/30 15,200 15,919
4,6,7 SLM Student Loan Trust 2012-E 0.910% 10/16/23 19,665 19,685
4,6,7 SLM Student Loan Trust 2013-1 1.210% 5/17/27 24,000 23,627
4,7 SLM Student Loan Trust 2013-1 2.500% 3/15/47 8,000 7,482

 

8

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4,6 SLM Student Loan Trust 2013-6 0.808% 6/26/28 19,400 19,489
4,7 SLM Student Loan Trust 2013-B 1.850% 6/17/30 14,750 14,320
4,7 SLM Student Loan Trust 2013-B 3.000% 5/16/44 6,500 6,163
4,7 SLM Student Loan Trust 2013-C 3.500% 6/15/44 5,860 5,693
4,6 SLM Student Loan Trust 2014-1 0.799% 2/26/29 10,900 10,900
4,7 SMART ABS Series 2011-1US Trust 2.520% 11/14/16 34,772 35,096
4,7 SMART ABS Series 2011-2US Trust 2.310% 4/14/17 26,850 27,199
4 SMART ABS Series 2012-4US Trust 0.970% 3/14/17 26,200 26,184
4 SMART ABS Series 2012-4US Trust 1.250% 8/14/18 9,100 9,027
4 SMART ABS Series 2013-1US Trust 1.050% 10/14/18 18,500 18,308
4,7 Sonic Capital LLC 2011-1A 5.438% 5/20/41 13,792 14,707
4,6 South Carolina Student Loan Corp. Revenue 2010-1 1.239% 7/25/25 30,100 30,409
7 SpareBank 1 Boligkreditt AS 1.250% 5/2/18 11,250 11,033
4,7 SpareBank 1 Boligkreditt AS 1.750% 11/15/20 24,490 23,734
7 Stadshypotek AB 1.250% 5/23/18 12,815 12,580
7 Swedbank Hypotek AB 1.375% 3/28/18 14,200 14,087
4,7 Textainer Marine Containers Ltd. 2011-1A 4.700% 6/15/26 12,460 12,464
4,6,7 Trade Maps_2013-1A 0.861% 12/10/18 29,820 29,864
4,6,7 Trade Maps_2013-1A 1.411% 12/10/18 5,640 5,666
4,6,7 Trade Maps_2013-1A 2.411% 12/10/18 3,095 3,121
4 UBS Commercial Mortgage Trust 2012-C1 4.171% 5/10/45 1,250 1,282
4,7 UBS-BAMLL Trust 2012-WRM 3.663% 6/10/30 24,595 24,185
4 UBS-Barclays Commercial Mortgage Trust 2012-C4 2.850% 12/10/45 8,915 8,471
4,7 VNO 2012-6AVE Mortgage Trust 2.996% 11/15/30 10,700 10,217
4,7 VNO 2013-PENN Mortgage Trust 3.808% 12/13/29 11,130 11,654
4,7 VNO 2013-PENN Mortgage Trust 3.947% 12/13/29 3,270 3,349
4,7 VNO 2013-PENN Mortgage Trust 3.947% 12/13/29 2,450 2,481
4,6,7 Volkswagen Credit Auto Master Owner Trust 2011-1A 0.837% 9/20/16 25,870 26,051
4,7 Volvo Financial Equipment LLC Series 2012-1 2.380% 9/16/19 5,400 5,494
4 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C27 5.765% 7/15/45 8,494 9,166
4 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C28 5.559% 10/15/48 43,771 48,115
4 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C28 5.572% 10/15/48 46,760 51,153
4 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C29 5.297% 11/15/48 36,364 39,911
4 Wachovia Bank Commercial Mortgage Trust Series        
  2007-C33 5.922% 2/15/51 46,766 51,510
4 Wachovia Bank Commercial Mortgage Trust Series        
  2007-C34 5.569% 5/15/46 15,930 15,898
4 WaMu Mortgage Pass-Through Certificates Series        
  2002-AR18 2.496% 1/25/33 302 310
4 WaMu Mortgage Pass-Through Certificates Series        
  2003-AR7 2.300% 8/25/33 1,800 1,807
4 WaMu Mortgage Pass-Through Certificates Series        
  2003-AR9 2.421% 9/25/33 2,454 2,507
4 Wells Fargo Commercial Mortgage Trust 2012-LC5 2.918% 10/15/45 19,257 18,573
4 Wells Fargo Commercial Mortgage Trust 2012-LC5 3.539% 10/15/45 1,650 1,624
4 Wells Fargo Commercial Mortgage Trust 2013-LC12 3.928% 7/15/46 8,075 8,502
4 Wells Fargo Commercial Mortgage Trust 2013-LC12 4.218% 7/15/46 12,700 13,341
4 Wells Fargo Commercial Mortgage Trust 2013-LC12 4.304% 7/15/46 4,906 5,106
4,8 Wells Fargo Mortgage Backed Securities 2006-AR14        
  Trust 2.621% 10/25/36 25,349 22,176
7 Westpac Banking Corp. 1.375% 7/17/15 6,480 6,559
7 Westpac Banking Corp. 1.850% 11/26/18 27,865 27,758
4,7 Westpac Banking Corp. 1.250% 12/14/18 13,436 13,329
4,7 WFRBS Commercial Mortgage Trust 2011-C3 4.375% 3/15/44 11,545 12,476
4 WFRBS Commercial Mortgage Trust 2012-C10 2.875% 12/15/45 8,855 8,455
4 WFRBS Commercial Mortgage Trust 2012-C7 3.431% 6/15/45 11,630 11,715
4 WFRBS Commercial Mortgage Trust 2012-C7 4.090% 6/15/45 5,056 5,215
4 WFRBS Commercial Mortgage Trust 2012-C8 3.001% 8/15/45 4,400 4,274
4 WFRBS Commercial Mortgage Trust 2012-C9 2.870% 11/15/45 8,360 8,023
4 WFRBS Commercial Mortgage Trust 2012-C9 3.388% 11/15/45 2,860 2,796

 

9

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4 WFRBS Commercial Mortgage Trust 2013-C13 3.345% 5/15/45 2,230 2,157
4 WFRBS Commercial Mortgage Trust 2013-C15 2.900% 8/15/46 7,986 8,239
4 WFRBS Commercial Mortgage Trust 2013-C15 3.720% 8/15/46 22,490 23,495
4 WFRBS Commercial Mortgage Trust 2013-C16 4.415% 9/15/46 14,650 15,590
4 WFRBS Commercial Mortgage Trust 2013-C17 3.558% 12/15/46 3,500 3,600
4 WFRBS Commercial Mortgage Trust 2013-C17 4.023% 12/15/46 9,770 10,094
4 WFRBS Commercial Mortgage Trust 2013-C18 3.027% 12/15/46 8,940 9,266
4 WFRBS Commercial Mortgage Trust 2013-C18 3.676% 12/15/46 6,710 6,945
4 WFRBS Commercial Mortgage Trust 2013-C18 4.162% 12/15/46 25,260 26,349
4 WFRBS Commercial Mortgage Trust 2013-C18 4.676% 12/15/46 5,775 5,911
4 World Financial Network Credit Card Master Note Trust        
  Series 2013-A 1.610% 12/15/21 19,000 18,737
4 World Omni Automobile Lease Securitization Trust        
  2011-A 1.780% 9/15/16 3,518 3,523
4,6,7 World Omni Master Owner Trust 2013-1 0.510% 2/15/18 18,000 18,007
 
Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $9,210,743)     9,257,428
 
Corporate Bonds (59.0%)        
Finance (25.8%)        
  Banking (20.0%)        
  Abbey National Treasury Services plc 4.000% 4/27/16 35,320 37,579
  Abbey National Treasury Services plc 3.050% 8/23/18 59,595 61,611
7 ABN AMRO Bank NV 2.500% 10/30/18 32,235 32,416
  American Express Centurion Bank 0.875% 11/13/15 4,915 4,937
  American Express Centurion Bank 6.000% 9/13/17 47,600 54,982
  American Express Co. 6.150% 8/28/17 17,853 20,663
  American Express Co. 7.000% 3/19/18 22,315 26,734
  American Express Credit Corp. 1.750% 6/12/15 12,035 12,213
  American Express Credit Corp. 2.750% 9/15/15 55,697 57,514
  American Express Credit Corp. 2.800% 9/19/16 56,420 58,923
  American Express Credit Corp. 2.375% 3/24/17 31,210 32,257
  Amsouth Bank 5.200% 4/1/15 9,770 10,183
  Associated Banc-Corp 1.875% 3/12/14 43,900 43,911
  Australia & New Zealand Banking Group Ltd. 0.900% 2/12/16 19,500 19,525
7 Australia & New Zealand Banking Group Ltd. 3.250% 3/1/16 28,325 29,703
  Australia & New Zealand Banking Group Ltd. 1.875% 10/6/17 54,192 54,844
  Australia & New Zealand Banking Group Ltd. 1.450% 5/15/18 16,600 16,311
  Australia & New Zealand Banking Group, Ltd. 1.250% 1/10/17 19,050 19,112
7 Banco Votorantim SA 5.250% 2/11/16 11,720 12,116
  Bancolombia SA 4.250% 1/12/16 7,820 8,106
  Bank of America Corp. 4.500% 4/1/15 69,150 72,087
  Bank of America Corp. 3.700% 9/1/15 5,960 6,217
  Bank of America Corp. 1.500% 10/9/15 24,365 24,588
  Bank of America Corp. 3.625% 3/17/16 32,105 33,824
  Bank of America Corp. 3.750% 7/12/16 6,350 6,733
  Bank of America Corp. 6.500% 8/1/16 63,503 71,398
  Bank of America Corp. 5.420% 3/15/17 21,197 23,346
  Bank of America Corp. 6.000% 9/1/17 27,184 31,077
  Bank of America Corp. 5.750% 12/1/17 35,235 40,046
  Bank of America Corp. 2.000% 1/11/18 30,590 30,597
  Bank of America Corp. 5.650% 5/1/18 12,850 14,649
  Bank of America Corp. 2.600% 1/15/19 60,540 60,866
  Bank of America NA 1.125% 11/14/16 63,100 63,247
  Bank of America NA 5.300% 3/15/17 9,760 10,827
  Bank of America NA 6.100% 6/15/17 6,429 7,322
  Bank of Montreal 0.800% 11/6/15 19,500 19,599
  Bank of Montreal 2.500% 1/11/17 77,815 81,251
  Bank of Montreal 1.400% 9/11/17 41,205 41,119
  Bank of Montreal 1.450% 4/9/18 48,550 47,881
  Bank of New York Mellon Corp. 4.950% 3/15/15 41,945 43,943
  Bank of New York Mellon Corp. 2.300% 7/28/16 28,134 29,091
  Bank of New York Mellon Corp. 2.400% 1/17/17 28,950 30,065
  Bank of New York Mellon Corp. 1.969% 6/20/17 8,300 8,497

 

10

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Bank of Nova Scotia 2.050% 10/7/15 14,680 15,089
  Bank of Nova Scotia 0.750% 10/9/15 29,360 29,479
  Bank of Nova Scotia 2.900% 3/29/16 44,024 46,031
  Bank of Nova Scotia 1.375% 7/15/16 39,040 39,531
  Bank of Nova Scotia 2.550% 1/12/17 70,625 73,723
  Bank of Nova Scotia 1.375% 12/18/17 31,425 31,185
  Bank of Nova Scotia 1.450% 4/25/18 7,100 6,998
  Bank of Nova Scotia 2.050% 10/30/18 61,970 61,987
  Bank One Corp. 4.900% 4/30/15 14,615 15,364
7 Banque Federative du Credit Mutuel SA 2.500% 10/29/18 29,855 29,731
  Barclays Bank plc 2.750% 2/23/15 24,275 24,841
  Barclays Bank plc 5.000% 9/22/16 51,875 57,140
  BB&T Corp. 5.200% 12/23/15 21,527 23,205
  BB&T Corp. 3.200% 3/15/16 44,240 46,259
  BB&T Corp. 2.150% 3/22/17 59,751 61,305
  BB&T Corp. 4.900% 6/30/17 9,750 10,716
  BB&T Corp. 1.600% 8/15/17 21,460 21,519
  BB&T Corp. 2.050% 6/19/18 18,058 18,093
  BBVA US Senior SAU 4.664% 10/9/15 128,791 135,151
  Bear Stearns Cos. LLC 5.300% 10/30/15 22,345 24,007
  Bear Stearns Cos. LLC 5.550% 1/22/17 24,450 27,295
  Bear Stearns Cos. LLC 6.400% 10/2/17 23,120 26,896
  Bear Stearns Cos. LLC 7.250% 2/1/18 21,801 26,063
  BNP Paribas SA 3.600% 2/23/16 84,830 89,514
  BNP Paribas SA 2.375% 9/14/17 41,140 42,128
  BNP Paribas SA 2.700% 8/20/18 62,206 63,344
  BNP Paribas SA 2.400% 12/12/18 57,725 57,847
  BNY Mellon NA 4.750% 12/15/14 22,530 23,400
  BPCE SA 2.500% 12/10/18 79,420 79,515
  Branch Banking & Trust Co. 5.625% 9/15/16 9,510 10,591
  Branch Banking & Trust Co. 1.050% 12/1/16 11,350 11,347
  Canadian Imperial Bank of Commerce 1.350% 7/18/16 23,460 23,746
  Canadian Imperial Bank of Commerce 1.550% 1/23/18 27,065 26,855
  Capital One Bank USA NA 1.150% 11/21/16 11,720 11,717
  Capital One Bank USA NA 2.150% 11/21/18 14,650 14,648
  Capital One Financial Corp. 2.150% 3/23/15 26,325 26,743
  Capital One Financial Corp. 6.150% 9/1/16 4,335 4,865
  Capital One NA 1.500% 3/22/18 60,395 59,692
  Citigroup Inc. 6.375% 8/12/14 6,559 6,755
  Citigroup Inc. 5.000% 9/15/14 18,920 19,412
  Citigroup Inc. 5.500% 10/15/14 7,763 8,031
  Citigroup Inc. 6.010% 1/15/15 18,183 19,071
  Citigroup Inc. 4.875% 5/7/15 9,728 10,192
  Citigroup Inc. 4.700% 5/29/15 18,762 19,691
  Citigroup Inc. 4.587% 12/15/15 12,700 13,531
  Citigroup Inc. 5.300% 1/7/16 7,315 7,908
  Citigroup Inc. 1.250% 1/15/16 31,735 31,870
  Citigroup Inc. 1.300% 4/1/16 13,670 13,728
  Citigroup Inc. 3.953% 6/15/16 86,180 91,812
  Citigroup Inc. 5.850% 8/2/16 17,290 19,263
  Citigroup Inc. 1.300% 11/15/16 68,200 68,164
  Citigroup Inc. 4.450% 1/10/17 24,385 26,425
  Citigroup Inc. 6.125% 11/21/17 53,745 61,955
  Citigroup Inc. 1.750% 5/1/18 30,064 29,503
  Citigroup Inc. 2.500% 9/26/18 50,810 51,068
4,7,9 Colonial BancGroup Inc. 7.114% 5/29/49 25,100 3
  Comerica Bank 5.700% 6/1/14 17,530 17,817
  Comerica Bank 5.750% 11/21/16 17,000 19,144
  Comerica Bank 5.200% 8/22/17 6,825 7,631
  Commonwealth Bank of Australia 1.250% 9/18/15 33,150 33,510
7 Commonwealth Bank of Australia 3.250% 3/17/16 30,600 32,120
  Commonwealth Bank of Australia 1.900% 9/18/17 19,280 19,526
  Commonwealth Bank of Australia 2.500% 9/20/18 49,315 50,369
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 3.375% 1/19/17 48,023 51,284

 

11

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 2.250% 1/14/19 125,080 125,118
Countrywide Financial Corp. 6.250% 5/15/16 37,914 41,878
Credit Suisse 3.500% 3/23/15 42,440 43,848
Credit Suisse USA Inc. 4.875% 1/15/15 17,953 18,682
Credit Suisse USA Inc. 5.125% 8/15/15 45,875 48,955
Credit Suisse USA Inc. 5.375% 3/2/16 16,725 18,278
7 Danske Bank A/S 3.875% 4/14/16 34,600 36,614
Deutsche Bank AG 3.875% 8/18/14 8,280 8,429
Deutsche Bank AG 3.250% 1/11/16 38,861 40,687
Deutsche Bank AG 6.000% 9/1/17 98,047 112,796
Deutsche Bank Financial LLC 5.375% 3/2/15 13,539 14,148
Fifth Third Bank 0.900% 2/26/16 24,395 24,460
Fifth Third Bank 1.450% 2/28/18 24,470 24,161
First Horizon National Corp. 5.375% 12/15/15 31,966 34,280
Goldman Sachs Group Inc. 5.000% 10/1/14 15,515 15,949
Goldman Sachs Group Inc. 5.125% 1/15/15 43,833 45,609
Goldman Sachs Group Inc. 3.300% 5/3/15 5,489 5,657
Goldman Sachs Group Inc. 3.700% 8/1/15 50,131 52,187
Goldman Sachs Group Inc. 5.350% 1/15/16 35,777 38,680
Goldman Sachs Group Inc. 3.625% 2/7/16 18,645 19,550
Goldman Sachs Group Inc. 5.625% 1/15/17 37,115 41,000
Goldman Sachs Group Inc. 6.250% 9/1/17 56,605 64,838
Goldman Sachs Group Inc. 5.950% 1/18/18 52,780 60,054
Goldman Sachs Group Inc. 2.375% 1/22/18 26,380 26,561
Goldman Sachs Group Inc. 6.150% 4/1/18 28,555 32,797
Goldman Sachs Group Inc. 2.900% 7/19/18 14,650 14,962
Goldman Sachs Group Inc. 2.625% 1/31/19 145,500 145,635
7 HBOS plc 6.750% 5/21/18 14,645 16,668
7 HSBC Bank plc 1.500% 5/15/18 17,965 17,718
HSBC Bank USA NA 6.000% 8/9/17 10,110 11,534
HSBC USA Inc. 2.375% 2/13/15 95,532 97,386
HSBC USA Inc. 1.625% 1/16/18 64,365 64,173
HSBC USA Inc. 2.625% 9/24/18 32,245 33,027
HSBC USA Inc. 5.000% 9/27/20 7,815 8,498
Huntington Bancshares Inc. 2.600% 8/2/18 43,955 44,546
Huntington National Bank 1.300% 11/20/16 9,760 9,816
Intesa Sanpaolo SPA 3.125% 1/15/16 73,200 74,726
Intesa Sanpaolo SPA 2.375% 1/13/17 117,250 117,147
Intesa Sanpaolo SPA 3.875% 1/16/18 55,390 56,883
Intesa Sanpaolo SPA 3.875% 1/15/19 29,350 29,814
JPMorgan Chase & Co. 4.875% 3/15/14 34,090 34,261
JPMorgan Chase & Co. 5.125% 9/15/14 26,719 27,450
JPMorgan Chase & Co. 3.700% 1/20/15 44,237 45,580
JPMorgan Chase & Co. 4.750% 3/1/15 24,510 25,574
JPMorgan Chase & Co. 1.875% 3/20/15 18,110 18,344
JPMorgan Chase & Co. 3.400% 6/24/15 29,295 30,368
6 JPMorgan Chase & Co. 1.450% 9/1/15 10,570 10,541
JPMorgan Chase & Co. 5.150% 10/1/15 9,850 10,469
JPMorgan Chase & Co. 1.100% 10/15/15 35,298 35,405
JPMorgan Chase & Co. 2.600% 1/15/16 38,787 40,025
JPMorgan Chase & Co. 3.450% 3/1/16 79,480 83,481
JPMorgan Chase & Co. 3.150% 7/5/16 98,646 103,215
JPMorgan Chase & Co. 2.000% 8/15/17 19,385 19,630
JPMorgan Chase & Co. 6.000% 1/15/18 71,913 82,819
JPMorgan Chase & Co. 1.800% 1/25/18 27,820 27,763
JPMorgan Chase & Co. 1.625% 5/15/18 8,780 8,655
JPMorgan Chase & Co. 2.350% 1/28/19 16,200 16,167
JPMorgan Chase & Co. 6.300% 4/23/19 15,163 17,945
JPMorgan Chase Bank NA 5.875% 6/13/16 9,750 10,810
JPMorgan Chase Bank NA 6.000% 7/5/17 8,592 9,841
JPMorgan Chase Bank NA 6.000% 10/1/17 26,225 30,095
KeyBank NA 1.650% 2/1/18 33,300 33,079
Lloyds Bank plc 4.875% 1/21/16 41,852 45,082
Lloyds Bank plc 4.200% 3/28/17 50,690 55,149

 

12

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Lloyds Bank plc 2.300% 11/27/18 57,410 57,713
7 Lloyds Bank plc 6.500% 9/14/20 24,910 28,535
7 Macquarie Bank Ltd. 2.000% 8/15/16 42,070 42,626
Manufacturers & Traders Trust Co. 1.250% 1/30/17 9,750 9,762
Manufacturers & Traders Trust Co. 6.625% 12/4/17 39,089 45,471
Manufacturers & Traders Trust Co. 1.450% 3/7/18 24,395 24,038
Manufacturers & Traders Trust Co. 2.300% 1/30/19 43,530 43,625
4 Manufacturers & Traders Trust Co. 5.629% 12/1/21 9,755 10,138
Mellon Funding Corp. 5.000% 12/1/14 6,100 6,329
Merrill Lynch & Co. Inc. 5.450% 7/15/14 29,825 30,428
Merrill Lynch & Co. Inc. 5.000% 1/15/15 28,828 29,965
Merrill Lynch & Co. Inc. 6.050% 5/16/16 33,472 36,834
Merrill Lynch & Co. Inc. 5.700% 5/2/17 6,525 7,279
Merrill Lynch & Co. Inc. 6.400% 8/28/17 14,597 16,894
Merrill Lynch & Co. Inc. 6.875% 4/25/18 31,909 37,957
Morgan Stanley 4.750% 4/1/14 53,100 53,442
Morgan Stanley 4.200% 11/20/14 24,140 24,815
Morgan Stanley 4.100% 1/26/15 36,900 38,062
Morgan Stanley 6.000% 4/28/15 29,560 31,400
Morgan Stanley 4.000% 7/24/15 16,600 17,335
Morgan Stanley 5.375% 10/15/15 26,120 28,021
Morgan Stanley 3.450% 11/2/15 9,750 10,141
Morgan Stanley 3.800% 4/29/16 39,075 41,263
Morgan Stanley 5.750% 10/18/16 19,595 21,793
Morgan Stanley 5.450% 1/9/17 60,452 67,322
Morgan Stanley 5.550% 4/27/17 19,495 21,784
Morgan Stanley 6.250% 8/28/17 8,765 10,089
Morgan Stanley 5.950% 12/28/17 43,105 49,301
Morgan Stanley 6.625% 4/1/18 22,950 26,888
Morgan Stanley 2.125% 4/25/18 11,720 11,702
Morgan Stanley 2.500% 1/24/19 43,250 43,103
National Australia Bank Ltd. 2.000% 3/9/15 9,930 10,108
National Australia Bank Ltd. 1.600% 8/7/15 9,750 9,885
National Australia Bank Ltd. 1.300% 7/25/16 58,600 59,207
National Australia Bank Ltd. 2.750% 3/9/17 19,460 20,309
National Australia Bank Ltd. 2.300% 7/25/18 21,800 22,150
National Bank of Canada 1.500% 6/26/15 3,900 3,954
National Bank of Canada 1.450% 11/7/17 2,425 2,393
National City Bank 5.250% 12/15/16 14,250 15,826
National City Bank 5.800% 6/7/17 14,625 16,604
National City Corp. 6.875% 5/15/19 8,085 9,720
PNC Bank NA 0.800% 1/28/16 26,345 26,402
PNC Bank NA 5.250% 1/15/17 27,935 30,967
PNC Bank NA 1.125% 1/27/17 46,690 46,670
PNC Bank NA 4.875% 9/21/17 14,135 15,681
PNC Bank NA 6.000% 12/7/17 4,885 5,619
PNC Bank NA 6.875% 4/1/18 4,197 4,977
PNC Bank NA 2.200% 1/28/19 35,825 35,920
PNC Funding Corp. 5.400% 6/10/14 6,820 6,938
PNC Funding Corp. 3.625% 2/8/15 4,885 5,036
PNC Funding Corp. 4.250% 9/21/15 23,385 24,672
PNC Funding Corp. 5.625% 2/1/17 4,380 4,883
Regions Bank 7.500% 5/15/18 38,405 45,405
Regions Financial Corp. 5.750% 6/15/15 33,764 35,803
Regions Financial Corp. 2.000% 5/15/18 27,350 26,794
Royal Bank of Canada 1.150% 3/13/15 19,324 19,514
Royal Bank of Canada 0.800% 10/30/15 34,200 34,456
Royal Bank of Canada 2.625% 12/15/15 4,380 4,548
Royal Bank of Canada 2.875% 4/19/16 73,300 76,638
Royal Bank of Canada 2.300% 7/20/16 66,735 69,187
Royal Bank of Canada 2.200% 7/27/18 81,600 82,880
Royal Bank of Scotland Group plc 4.700% 7/3/18 5,368 5,579
Royal Bank of Scotland Group plc 6.400% 10/21/19 18,055 21,024
Royal Bank of Scotland NV 4.650% 6/4/18 21,450 22,237

 

13

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Royal Bank of Scotland plc 4.875% 3/16/15 23,159 24,210
Royal Bank of Scotland plc 3.950% 9/21/15 43,868 45,933
Royal Bank of Scotland plc 4.375% 3/16/16 103,125 110,086
Santander Bank NA 8.750% 5/30/18 33,955 41,081
Santander Holdings USA Inc. 3.000% 9/24/15 30,401 31,143
Santander Holdings USA Inc. 4.625% 4/19/16 61,904 66,155
Santander Holdings USA Inc. 3.450% 8/27/18 10,745 11,145
7 Societe Generale SA 3.100% 9/14/15 3,900 4,035
7 Societe Generale SA 3.500% 1/15/16 12,600 13,261
Societe Generale SA 2.750% 10/12/17 52,650 54,452
Societe Generale SA 2.625% 10/1/18 57,025 57,905
7 Societe Generale SA 5.000% 1/17/24 3,570 3,556
SouthTrust Corp. 5.800% 6/15/14 25,467 25,953
State Street Bank & Trust Co. 5.300% 1/15/16 7,261 7,883
State Street Corp. 5.375% 4/30/17 19,520 21,750
6 SunTrust Bank 0.547% 4/1/15 5,855 5,834
SunTrust Banks Inc. 3.500% 1/20/17 12,711 13,474
SunTrust Banks Inc. 6.000% 9/11/17 8,795 10,054
Svenska Handelsbanken AB 2.500% 1/25/19 81,515 82,179
Toronto-Dominion Bank 2.500% 7/14/16 23,796 24,767
UBS AG 3.875% 1/15/15 19,873 20,521
UBS AG 5.875% 12/20/17 95,375 109,589
UBS AG 5.750% 4/25/18 105,985 122,120
Union Bank NA 5.950% 5/11/16 53,730 59,650
Union Bank NA 3.000% 6/6/16 56,590 59,305
Union Bank NA 1.500% 9/26/16 25,125 25,472
Union Bank NA 2.125% 6/16/17 29,740 30,308
Union Bank NA 2.625% 9/26/18 34,030 34,947
US Bancorp 1.650% 5/15/17 11,840 12,011
US Bank NA 1.100% 1/30/17 19,000 19,056
4 US Bank NA 3.778% 4/29/20 36,995 38,321
Wachovia Bank NA 4.875% 2/1/15 11,750 12,245
Wachovia Bank NA 5.000% 8/15/15 9,750 10,383
Wachovia Bank NA 5.600% 3/15/16 26,540 29,119
Wachovia Bank NA 6.000% 11/15/17 44,673 51,761
Wachovia Corp. 4.875% 2/15/14 13,305 13,321
Wachovia Corp. 5.250% 8/1/14 41,415 42,368
Wachovia Corp. 5.625% 10/15/16 34,080 38,134
Wachovia Corp. 5.750% 6/15/17 11,940 13,618
Wachovia Corp. 5.750% 2/1/18 35,115 40,587
9 Washington Mutual Bank / Debt not acquired by        
JPMorgan 6.875% 6/15/11 21,983 2
Wells Fargo & Co. 3.676% 6/15/16 53,334 56,851
Wells Fargo & Co. 5.625% 12/11/17 19,840 22,794
Wells Fargo Bank NA 4.750% 2/9/15 11,265 11,719
Westpac Banking Corp. 1.125% 9/25/15 26,500 26,785
Westpac Banking Corp. 3.000% 12/9/15 33,150 34,641
Westpac Banking Corp. 0.950% 1/12/16 19,500 19,598
Westpac Banking Corp. 1.050% 11/25/16 24,635 24,665
Westpac Banking Corp. 2.000% 8/14/17 54,800 55,764
Westpac Banking Corp. 1.600% 1/12/18 37,355 37,279
Westpac Banking Corp. 2.250% 7/30/18 20,830 21,139
Westpac Banking Corp. 2.250% 1/17/19 42,930 42,983
Zions Bancorporation 5.500% 11/16/15 819 868
Brokerage (0.2%)        
Ameriprise Financial Inc. 5.650% 11/15/15 3,374 3,658
4 Ameriprise Financial Inc. 7.518% 6/1/66 6,634 7,364
Charles Schwab Corp. 0.850% 12/4/15 14,650 14,700
Franklin Resources Inc. 1.375% 9/15/17 15,270 15,113
Jefferies Group LLC 5.125% 4/13/18 12,335 13,398
9 Lehman Brothers Holdings E-Capital Trust I 3.589% 8/19/65 9,410 1
Nomura Holdings Inc. 4.125% 1/19/16 9,770 10,315
Nomura Holdings Inc. 2.000% 9/13/16 53,029 53,446

 

14

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Finance Companies (2.0%)        
Air Lease Corp. 5.625% 4/1/17 29,290 32,146
Air Lease Corp. 3.375% 1/15/19 21,895 21,895
General Electric Capital Corp. 4.750% 9/15/14 10,000 10,263
General Electric Capital Corp. 3.750% 11/14/14 33,995 34,899
General Electric Capital Corp. 2.150% 1/9/15 140 142
General Electric Capital Corp. 3.500% 6/29/15 19,406 20,203
General Electric Capital Corp. 1.625% 7/2/15 24,395 24,773
General Electric Capital Corp. 4.375% 9/21/15 9,264 9,806
General Electric Capital Corp. 2.250% 11/9/15 18,790 19,349
General Electric Capital Corp. 1.000% 12/11/15 6,830 6,884
General Electric Capital Corp. 5.000% 1/8/16 22,905 24,808
General Electric Capital Corp. 2.950% 5/9/16 39,930 41,777
General Electric Capital Corp. 1.500% 7/12/16 38,920 39,539
General Electric Capital Corp. 3.350% 10/17/16 46,380 49,341
General Electric Capital Corp. 2.900% 1/9/17 41,905 44,060
General Electric Capital Corp. 5.400% 2/15/17 28,300 31,779
General Electric Capital Corp. 2.300% 4/27/17 37,327 38,516
General Electric Capital Corp. 5.625% 9/15/17 15,615 17,835
General Electric Capital Corp. 5.625% 5/1/18 43,595 50,306
General Electric Capital Corp. 2.300% 1/14/19 54,020 54,540
4 General Electric Capital Corp. 6.375% 11/15/67 7,110 7,714
HSBC Finance Corp. 5.250% 4/15/15 19,525 20,587
HSBC Finance Corp. 5.000% 6/30/15 44,605 47,142
HSBC Finance Corp. 5.500% 1/19/16 63,490 68,945
6 HSBC Finance Corp. 0.669% 6/1/16 17,450 17,399
SLM Corp. 3.875% 9/10/15 63,420 65,260
SLM Corp. 6.250% 1/25/16 101,274 108,904
SLM Corp. 6.000% 1/25/17 40,700 44,123
SLM Corp. 4.625% 9/25/17 19,520 20,163
Insurance (2.4%)        
ACE INA Holdings Inc. 5.700% 2/15/17 10,847 12,167
Alleghany Corp. 5.625% 9/15/20 8,890 9,894
Allied World Assurance Co. Ltd. 7.500% 8/1/16 28,180 32,311
Allied World Assurance Co. Ltd. 5.500% 11/15/20 2,075 2,329
American Financial Group Inc. 9.875% 6/15/19 4,885 6,374
American International Group Inc. 3.000% 3/20/15 44,095 45,270
American International Group Inc. 2.375% 8/24/15 9,750 9,932
American International Group Inc. 5.050% 10/1/15 29,335 31,386
American International Group Inc. 4.875% 9/15/16 37,809 41,504
American International Group Inc. 5.600% 10/18/16 9,770 10,871
American International Group Inc. 3.800% 3/22/17 24,465 26,211
American International Group Inc. 5.450% 5/18/17 18,175 20,338
American International Group Inc. 5.850% 1/16/18 98,511 113,388
American International Group Inc. 8.250% 8/15/18 52,933 66,471
Assurant Inc. 2.500% 3/15/18 29,300 29,239
Axis Capital Holdings Ltd. 5.750% 12/1/14 40,440 42,095
Axis Specialty Finance LLC 5.875% 6/1/20 2,440 2,767
Berkshire Hathaway Finance Corp. 1.600% 5/15/17 11,715 11,896
Berkshire Hathaway Finance Corp. 5.400% 5/15/18 24,144 27,918
Berkshire Hathaway Inc. 3.200% 2/11/15 8,860 9,116
Berkshire Hathaway Inc. 2.200% 8/15/16 4,850 5,028
Berkshire Hathaway Inc. 1.900% 1/31/17 11,515 11,833
Chubb Corp. 5.750% 5/15/18 5,793 6,722
4 Chubb Corp. 6.375% 3/29/67 4,850 5,335
Cigna Corp. 2.750% 11/15/16 9,600 10,013
CNA Financial Corp. 5.850% 12/15/14 10,130 10,568
CNA Financial Corp. 6.500% 8/15/16 20,495 23,093
CNA Financial Corp. 7.350% 11/15/19 3,900 4,779
Genworth Holdings Inc. 6.515% 5/22/18 17,918 20,600
Genworth Holdings Inc. 7.700% 6/15/20 3,080 3,744
Hartford Financial Services Group Inc. 4.000% 3/30/15 8,400 8,708
Hartford Financial Services Group Inc. 4.000% 10/15/17 4,985 5,386

 

15

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Manulife Financial Corp. 3.400% 9/17/15 14,620 15,208
Marsh & McLennan Cos. Inc. 2.550% 10/15/18 9,875 9,983
7 MassMutual Global Funding II 3.125% 4/14/16 11,920 12,473
7 MassMutual Global Funding II 2.500% 10/17/22 8,475 7,838
MetLife Inc. 6.750% 6/1/16 40,950 46,341
MetLife Inc. 1.756% 12/15/17 14,600 14,669
MetLife Inc. 6.817% 8/15/18 13,300 16,039
7 Metropolitan Life Global Funding I 1.500% 1/10/18 29,350 29,058
7 Pacific LifeCorp 6.000% 2/10/20 10,854 12,394
PartnerRe Finance A LLC 6.875% 6/1/18 20,530 23,809
Principal Financial Group Inc. 1.850% 11/15/17 15,600 15,589
7 Principal Life Global Funding I 5.050% 3/15/15 7,750 8,114
7 Principal Life Global Funding II 2.250% 10/15/18 11,725 11,770
Progressive Corp. 6.700% 6/15/67 9,760 10,590
Prudential Financial Inc. 6.200% 1/15/15 11,465 12,064
Prudential Financial Inc. 4.750% 9/17/15 19,450 20,682
Prudential Financial Inc. 3.000% 5/12/16 11,725 12,291
Reinsurance Group of America Inc. 5.625% 3/15/17 12,900 14,337
Reinsurance Group of America Inc. 6.450% 11/15/19 15,073 17,583
Transatlantic Holdings Inc. 5.750% 12/14/15 34,220 37,073
Travelers Cos. Inc. 5.800% 5/15/18 11,600 13,391
7 UnumProvident Finance Co. plc 6.850% 11/15/15 19,425 21,145
WellPoint Inc. 5.250% 1/15/16 9,985 10,806
WellPoint Inc. 5.875% 6/15/17 10,500 11,889
WellPoint Inc. 2.300% 7/15/18 9,750 9,814
XL Group plc 5.250% 9/15/14 42,514 43,615
XLIT Ltd. 2.300% 12/15/18 4,875 4,836
Other Finance (0.1%)        
NYSE Euronext 2.000% 10/5/17 39,800 40,422
ORIX Corp. 3.750% 3/9/17 19,000 19,905
Real Estate Investment Trusts (1.1%)        
BioMed Realty LP 3.850% 4/15/16 4,800 5,019
Boston Properties LP 3.700% 11/15/18 4,900 5,217
Brandywine Operating Partnership LP 5.400% 11/1/14 4,850 5,005
Brandywine Operating Partnership LP 5.700% 5/1/17 15,486 17,125
Brandywine Operating Partnership LP 4.950% 4/15/18 16,400 17,844
DDR Corp. 7.500% 4/1/17 405 472
DDR Corp. 4.750% 4/15/18 19,480 21,244
DDR Corp. 7.500% 7/15/18 2,500 2,992
Digital Realty Trust LP 4.500% 7/15/15 6,350 6,605
Duke Realty LP 7.375% 2/15/15 4,875 5,197
Duke Realty LP 5.950% 2/15/17 9,620 10,725
Duke Realty LP 6.500% 1/15/18 3,470 3,992
Duke Realty LP 6.750% 3/15/20 5,260 6,160
7 Goodman Funding Pty Ltd. 6.375% 11/12/20 19,140 21,783
HCP Inc. 6.000% 1/30/17 9,750 10,987
HCP Inc. 5.625% 5/1/17 1,270 1,418
HCP Inc. 6.700% 1/30/18 44,125 51,657
Health Care REIT Inc. 3.625% 3/15/16 8,088 8,534
Health Care REIT Inc. 4.700% 9/15/17 14,620 15,973
Health Care REIT Inc. 2.250% 3/15/18 4,875 4,899
Health Care REIT Inc. 4.125% 4/1/19 23,730 25,213
Healthcare Realty Trust Inc. 6.500% 1/17/17 1,000 1,123
Highwoods Realty LP 5.850% 3/15/17 4,425 4,929
Kilroy Realty LP 4.800% 7/15/18 20,030 21,725
Kimco Realty Corp. 5.783% 3/15/16 15,783 17,297
Kimco Realty Corp. 4.300% 2/1/18 17,705 19,207
Liberty Property LP 4.750% 10/1/20 1,600 1,708
ProLogis LP 4.500% 8/15/17 7,300 7,911
ProLogis LP 6.625% 5/15/18 15,120 17,801
ProLogis LP 2.750% 2/15/19 9,815 9,878
Realty Income Corp. 2.000% 1/31/18 4,870 4,821
Realty Income Corp. 6.750% 8/15/19 5,985 7,092

 

16

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Regency Centers LP 5.875% 6/15/17 13,675 15,285
Senior Housing Properties Trust 4.300% 1/15/16 11,460 12,033
Simon Property Group LP 5.100% 6/15/15 9,225 9,787
Simon Property Group LP 6.100% 5/1/16 5,820 6,426
Simon Property Group LP 2.800% 1/30/17 22,815 23,835
Simon Property Group LP 5.875% 3/1/17 9,180 10,349
Simon Property Group LP 2.150% 9/15/17 1,572 1,612
7 Simon Property Group LP 1.500% 2/1/18 4,850 4,753
Simon Property Group LP 6.125% 5/30/18 15,635 18,416
Simon Property Group LP 2.200% 2/1/19 24,375 24,359
Simon Property Group LP 5.650% 2/1/20 1,405 1,635
Ventas Realty LP / Ventas Capital Corp. 2.000% 2/15/18 29,870 29,866
        12,439,587
Industrial (28.3%)        
Basic Industry (2.0%)        
Air Products & Chemicals Inc. 2.000% 8/2/16 10,920 11,196
Air Products & Chemicals Inc. 1.200% 10/15/17 11,225 11,125
Airgas Inc. 1.650% 2/15/18 17,792 17,604
Barrick Gold Corp. 6.950% 4/1/19 19,670 22,972
Barrick North America Finance LLC 6.800% 9/15/18 11,410 13,337
BHP Billiton Finance USA Ltd. 1.875% 11/21/16 23,480 24,087
BHP Billiton Finance USA Ltd. 1.625% 2/24/17 68,645 69,774
BHP Billiton Finance USA Ltd. 5.400% 3/29/17 30,292 34,177
BHP Billiton Finance USA Ltd. 2.050% 9/30/18 13,920 14,054
BHP Billiton Finance USA Ltd. 6.500% 4/1/19 14,119 17,083
CF Industries Inc. 6.875% 5/1/18 38,450 44,794
Eastman Chemical Co. 2.400% 6/1/17 20,804 21,320
EI du Pont de Nemours & Co. 6.000% 7/15/18 27,383 32,052
Freeport-McMoRan Copper & Gold Inc. 1.400% 2/13/15 9,745 9,802
Freeport-McMoRan Copper & Gold Inc. 2.375% 3/15/18 26,415 26,437
Goldcorp Inc. 2.125% 3/15/18 14,640 14,515
Nucor Corp. 5.750% 12/1/17 8,790 10,088
Nucor Corp. 5.850% 6/1/18 24,788 28,527
Plains Exploration & Production Co. 6.125% 6/15/19 20,453 22,345
Plains Exploration & Production Co. 6.500% 11/15/20 28,650 31,372
Plains Exploration & Production Co. 6.625% 5/1/21 3,600 3,942
Plains Exploration & Production Co. 6.750% 2/1/22 9,915 10,869
Plains Exploration & Production Co. 6.875% 2/15/23 17,000 18,785
Potash Corp. of Saskatchewan Inc. 3.250% 12/1/17 19,684 20,933
Rio Tinto Finance USA Ltd. 8.950% 5/1/14 44,445 45,331
Rio Tinto Finance USA Ltd. 2.500% 5/20/16 19,228 19,922
Rio Tinto Finance USA Ltd. 6.500% 7/15/18 19,540 23,240
Rio Tinto Finance USA plc 1.375% 6/17/16 38,045 38,408
Rio Tinto Finance USA plc 2.000% 3/22/17 40,230 41,171
Rio Tinto Finance USA plc 1.625% 8/21/17 60,437 60,580
Rio Tinto Finance USA plc 2.250% 12/14/18 42,710 42,894
Teck Resources Ltd. 3.150% 1/15/17 12,405 13,040
Teck Resources Ltd. 3.850% 8/15/17 8,395 8,969
Teck Resources Ltd. 2.500% 2/1/18 11,230 11,374
Teck Resources Ltd. 3.000% 3/1/19 2,380 2,437
Vale Canada Ltd. 5.700% 10/15/15 14,655 15,763
Vale Overseas Ltd. 6.250% 1/11/16 22,625 24,497
Vale Overseas Ltd. 6.250% 1/23/17 34,195 37,958
Vale Overseas Ltd. 5.625% 9/15/19 4,425 4,811
7 Xstrata Finance Canada Ltd. 2.050% 10/23/15 29,280 29,607
7 Xstrata Finance Canada Ltd. 3.600% 1/15/17 5,835 6,138
Capital Goods (2.9%)        
7 ABB Treasury Center USA Inc. 2.500% 6/15/16 14,650 15,148
Bemis Co. Inc. 5.650% 8/1/14 10,130 10,378
Boeing Capital Corp. 2.125% 8/15/16 17,810 18,431
Boeing Capital Corp. 2.900% 8/15/18 15,939 16,759
Boeing Capital Corp. 4.700% 10/27/19 7,200 8,175
Boeing Co. 3.500% 2/15/15 25,710 26,546

 

17

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Boeing Co. 0.950% 5/15/18 25,805 25,089
Caterpillar Financial Services Corp. 6.125% 2/17/14 24,280 24,324
Caterpillar Financial Services Corp. 1.650% 4/1/14 26,625 26,683
Caterpillar Financial Services Corp. 4.750% 2/17/15 11,900 12,442
Caterpillar Financial Services Corp. 1.100% 5/29/15 17,910 18,082
Caterpillar Financial Services Corp. 2.750% 6/24/15 9,250 9,545
Caterpillar Financial Services Corp. 2.650% 4/1/16 5,625 5,853
Caterpillar Financial Services Corp. 2.050% 8/1/16 24,750 25,511
Caterpillar Financial Services Corp. 1.625% 6/1/17 4,885 4,933
Caterpillar Financial Services Corp. 1.250% 11/6/17 11,950 11,876
Caterpillar Inc. 1.500% 6/26/17 9,750 9,796
CNH Capital LLC 3.250% 2/1/17 24,430 24,766
Crane Co. 2.750% 12/15/18 12,615 12,768
CRH America Inc. 4.125% 1/15/16 38,050 40,145
CRH America Inc. 6.000% 9/30/16 4,900 5,478
CRH America Inc. 8.125% 7/15/18 19,860 24,660
Danaher Corp. 1.300% 6/23/14 13,300 13,351
Danaher Corp. 2.300% 6/23/16 23,758 24,632
7 Embraer Overseas Ltd. 5.696% 9/16/23 10,379 10,414
Emerson Electric Co. 4.125% 4/15/15 9,220 9,624
Emerson Electric Co. 5.375% 10/15/17 9,760 11,213
Emerson Electric Co. 5.250% 10/15/18 4,880 5,603
Emerson Electric Co. 5.000% 4/15/19 1,465 1,668
General Dynamics Corp. 1.375% 1/15/15 10,550 10,659
General Dynamics Corp. 2.250% 7/15/16 5,637 5,846
General Dynamics Corp. 1.000% 11/15/17 69,160 68,096
General Electric Co. 0.850% 10/9/15 18,420 18,528
General Electric Co. 5.250% 12/6/17 92,550 105,329
Harsco Corp. 2.700% 10/15/15 10,192 10,307
Honeywell International Inc. 5.300% 3/1/18 4,710 5,400
Honeywell International Inc. 5.000% 2/15/19 22,275 25,384
Illinois Tool Works Inc. 5.150% 4/1/14 18,725 18,860
7 Ingersoll-Rand Global Holding Co. Ltd. 2.875% 1/15/19 17,860 17,960
John Deere Capital Corp. 1.250% 12/2/14 12,160 12,241
John Deere Capital Corp. 2.950% 3/9/15 32,950 33,882
John Deere Capital Corp. 0.875% 4/17/15 4,875 4,900
John Deere Capital Corp. 0.950% 6/29/15 16,575 16,712
John Deere Capital Corp. 0.750% 1/22/16 22,900 22,981
John Deere Capital Corp. 2.250% 6/7/16 28,375 29,394
John Deere Capital Corp. 1.850% 9/15/16 37,815 38,810
John Deere Capital Corp. 1.050% 10/11/16 11,000 11,055
John Deere Capital Corp. 1.050% 12/15/16 13,020 13,072
John Deere Capital Corp. 2.000% 1/13/17 12,680 13,039
John Deere Capital Corp. 1.400% 3/15/17 19,490 19,704
John Deere Capital Corp. 2.800% 9/18/17 6,570 6,908
John Deere Capital Corp. 1.200% 10/10/17 35,105 35,043
John Deere Capital Corp. 1.300% 3/12/18 19,525 19,367
John Deere Capital Corp. 5.350% 4/3/18 14,635 16,751
John Deere Capital Corp. 5.750% 9/10/18 4,880 5,712
John Deere Capital Corp. 1.950% 12/13/18 14,640 14,685
L-3 Communications Corp. 3.950% 11/15/16 11,560 12,338
Lockheed Martin Corp. 2.125% 9/15/16 21,600 22,282
Lockheed Martin Corp. 4.250% 11/15/19 19,250 21,037
Mohawk Industries Inc. 6.125% 1/15/16 16,586 18,027
Precision Castparts Corp. 0.700% 12/20/15 18,045 18,099
Precision Castparts Corp. 1.250% 1/15/18 62,205 61,439
Raytheon Co. 6.750% 3/15/18 7,360 8,777
Republic Services Inc. 3.800% 5/15/18 5,686 6,108
Republic Services Inc. 5.500% 9/15/19 4,880 5,567
Roper Industries Inc. 1.850% 11/15/17 9,760 9,806
Roper Industries Inc. 2.050% 10/1/18 9,590 9,487
7 Schneider Electric SA 2.950% 9/27/22 5,850 5,591
United Technologies Corp. 4.875% 5/1/15 3,700 3,907
United Technologies Corp. 1.800% 6/1/17 74,200 75,841

 

18

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
United Technologies Corp. 5.375% 12/15/17 25,080 28,784
United Technologies Corp. 4.500% 4/15/20 2,600 2,899
Waste Management Inc. 6.375% 3/11/15 12,647 13,426
Waste Management Inc. 2.600% 9/1/16 8,200 8,524
Waste Management Inc. 6.100% 3/15/18 11,725 13,636
Communication (5.3%)        
21st Century Fox America Inc. 7.250% 5/18/18 7,205 8,780
America Movil SAB de CV 5.750% 1/15/15 12,225 12,788
America Movil SAB de CV 3.625% 3/30/15 48,771 50,296
America Movil SAB de CV 2.375% 9/8/16 92,560 95,027
America Movil SAB de CV 5.625% 11/15/17 29,869 33,611
American Tower Corp. 4.625% 4/1/15 18,589 19,394
American Tower Corp. 4.500% 1/15/18 4,875 5,321
American Tower Corp. 3.400% 2/15/19 29,320 30,316
AT&T Inc. 5.100% 9/15/14 25,478 26,202
AT&T Inc. 0.875% 2/13/15 11,750 11,795
AT&T Inc. 2.500% 8/15/15 61,005 62,643
AT&T Inc. 0.900% 2/12/16 13,600 13,606
AT&T Inc. 2.950% 5/15/16 54,630 57,011
AT&T Inc. 2.400% 8/15/16 75,441 77,918
AT&T Inc. 1.600% 2/15/17 44,038 44,443
AT&T Inc. 1.700% 6/1/17 80,110 80,914
AT&T Inc. 1.400% 12/1/17 24,400 24,157
AT&T Inc. 5.500% 2/1/18 80,904 91,930
AT&T Inc. 5.600% 5/15/18 6,038 6,953
AT&T Inc. 2.375% 11/27/18 41,915 42,260
BellSouth Corp. 5.200% 9/15/14 30,175 31,070
7 British Sky Broadcasting Group plc 6.100% 2/15/18 6,010 6,838
7 British Sky Broadcasting Group plc 9.500% 11/15/18 17,349 22,745
7 BSKYB Finance UK plc 5.625% 10/15/15 3,484 3,757
CBS Corp. 1.950% 7/1/17 22,671 22,941
CBS Corp. 4.625% 5/15/18 2,690 2,961
Cellco Partnership / Verizon Wireless Capital LLC 8.500% 11/15/18 48,484 62,203
Comcast Cable Communications LLC 8.875% 5/1/17 30,900 38,089
Comcast Corp. 5.850% 11/15/15 13,578 14,814
Comcast Corp. 5.900% 3/15/16 24,515 27,073
Comcast Corp. 6.500% 1/15/17 23,260 26,787
Comcast Corp. 6.300% 11/15/17 9,605 11,230
Comcast Corp. 5.875% 2/15/18 5,207 6,036
Comcast Corp. 5.700% 5/15/18 5,780 6,693
COX Communications Inc. 5.450% 12/15/14 6,667 6,947
7 Deutsche Telekom International Finance BV 3.125% 4/11/16 38,016 39,650
7 Deutsche Telekom International Finance BV 2.250% 3/6/17 7,075 7,244
Deutsche Telekom International Finance BV 6.750% 8/20/18 6,819 8,178
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 4.750% 10/1/14 10,232 10,510
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 3.550% 3/15/15 41,275 42,598
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 3.125% 2/15/16 18,420 19,200
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 3.500% 3/1/16 26,685 28,022
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 2.400% 3/15/17 42,268 43,342
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 1.750% 1/15/18 33,075 32,796
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 5.875% 10/1/19 2,930 3,363
Discovery Communications LLC 3.700% 6/1/15 47,177 49,043
Embarq Corp. 7.082% 6/1/16 18,952 21,399
Interpublic Group of Cos. Inc. 6.250% 11/15/14 14,650 15,236
NBCUniversal Media LLC 3.650% 4/30/15 11,585 12,027
NBCUniversal Media LLC 2.875% 4/1/16 52,680 54,885
Omnicom Group Inc. 5.900% 4/15/16 34,830 38,453
Orange SA 2.125% 9/16/15 14,288 14,564
Orange SA 2.750% 9/14/16 6,840 7,107
Orange SA 2.750% 2/6/19 18,380 18,469
Qwest Corp. 7.500% 10/1/14 9,033 9,415
Qwest Corp. 6.500% 6/1/17 9,653 10,916
Rogers Communications Inc. 7.500% 3/15/15 5,299 5,701

 

19

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Rogers Communications Inc. 6.800% 8/15/18 21,658 26,050
TCI Communications Inc. 8.750% 8/1/15 9,860 11,029
Telecom Italia Capital SA 6.999% 6/4/18 19,948 22,410
Telefonica Emisiones SAU 4.949% 1/15/15 14,284 14,809
Telefonica Emisiones SAU 3.992% 2/16/16 47,895 50,445
Telefonica Emisiones SAU 6.421% 6/20/16 19,420 21,629
Telefonica Emisiones SAU 6.221% 7/3/17 13,337 15,248
Telefonica Emisiones SAU 3.192% 4/27/18 46,837 48,236
Telefonos de Mexico SAB de CV 5.500% 1/27/15 9,775 10,202
Thomson Reuters Corp. 0.875% 5/23/16 13,012 12,943
Thomson Reuters Corp. 1.300% 2/23/17 21,480 21,435
Thomson Reuters Corp. 6.500% 7/15/18 11,625 13,632
Time Warner Cable Inc. 3.500% 2/1/15 22,325 22,900
Time Warner Cable Inc. 5.850% 5/1/17 17,610 19,336
Time Warner Cable Inc. 6.750% 7/1/18 6,850 7,744
Verizon Communications Inc. 0.700% 11/2/15 24,520 24,478
Verizon Communications Inc. 5.550% 2/15/16 59,437 64,916
Verizon Communications Inc. 3.000% 4/1/16 5,120 5,341
Verizon Communications Inc. 2.500% 9/15/16 65,545 67,850
Verizon Communications Inc. 2.000% 11/1/16 40,761 41,671
Verizon Communications Inc. 5.500% 4/1/17 3,700 4,162
Verizon Communications Inc. 1.100% 11/1/17 18,344 18,032
Verizon Communications Inc. 5.500% 2/15/18 27,608 31,325
Verizon Communications Inc. 6.100% 4/15/18 26,345 30,619
Verizon Communications Inc. 3.650% 9/14/18 118,285 125,688
Vodafone Group plc 4.150% 6/10/14 9,221 9,343
Vodafone Group plc 5.375% 1/30/15 6,890 7,217
Vodafone Group plc 0.900% 2/19/16 17,788 17,806
Vodafone Group plc 5.750% 3/15/16 13,871 15,238
Vodafone Group plc 2.875% 3/16/16 47,325 49,197
Vodafone Group plc 5.625% 2/27/17 38,412 43,258
Vodafone Group plc 1.625% 3/20/17 42,641 43,064
Vodafone Group plc 1.250% 9/26/17 45,023 44,674
Vodafone Group plc 1.500% 2/19/18 9,575 9,444
WPP Finance UK 8.000% 9/15/14 23,355 24,362
Consumer Cyclical (4.2%)        
American Honda Finance Corp. 1.125% 10/7/16 20,030 20,149
American Honda Finance Corp. 2.125% 10/10/18 19,540 19,865
AutoZone Inc. 5.750% 1/15/15 11,270 11,813
AutoZone Inc. 5.500% 11/15/15 6,275 6,799
AutoZone Inc. 7.125% 8/1/18 33,707 40,568
Brinker International Inc. 2.600% 5/15/18 26,410 26,438
CVS Caremark Corp. 2.250% 12/5/18 48,820 49,192
7 Daimler Finance North America LLC 2.950% 1/11/17 16,915 17,681
7 Daimler Finance North America LLC 2.400% 4/10/17 9,740 10,021
7 Daimler Finance North America LLC 2.375% 8/1/18 38,500 39,012
Dollar General Corp. 4.125% 7/15/17 19,825 21,365
Dollar General Corp. 1.875% 4/15/18 9,965 9,878
7 Experian Finance plc 2.375% 6/15/17 35,430 35,620
Ford Motor Credit Co. LLC 3.875% 1/15/15 9,770 10,061
Ford Motor Credit Co. LLC 7.000% 4/15/15 51,889 55,595
Ford Motor Credit Co. LLC 2.750% 5/15/15 33,161 33,968
Ford Motor Credit Co. LLC 5.625% 9/15/15 4,878 5,231
Ford Motor Credit Co. LLC 2.500% 1/15/16 17,080 17,556
Ford Motor Credit Co. LLC 4.207% 4/15/16 44,245 47,118
Ford Motor Credit Co. LLC 3.984% 6/15/16 45,205 48,006
Ford Motor Credit Co. LLC 8.000% 12/15/16 55,625 65,542
Ford Motor Credit Co. LLC 4.250% 2/3/17 9,755 10,493
Ford Motor Credit Co. LLC 3.000% 6/12/17 24,125 25,087
Ford Motor Credit Co. LLC 6.625% 8/15/17 57,291 66,337
Ford Motor Credit Co. LLC 5.000% 5/15/18 82,715 91,785
7 General Motors Co. 3.500% 10/2/18 18,000 18,360
7 Harley-Davidson Financial Services Inc. 1.150% 9/15/15 34,600 34,700

 

20

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
7 Harley-Davidson Financial Services Inc. 3.875% 3/15/16 14,418 15,241
7 Harley-Davidson Financial Services Inc. 2.700% 3/15/17 16,147 16,624
7 Harley-Davidson Funding Corp. 5.750% 12/15/14 20,635 21,510
7 Hyundai Capital America 3.750% 4/6/16 10,980 11,462
7 Hyundai Capital America 4.000% 6/8/17 10,900 11,532
7 Hyundai Capital Services Inc. 4.375% 7/27/16 16,060 17,108
7 Kia Motors Corp. 3.625% 6/14/16 26,624 27,801
Lowe's Cos. Inc. 1.625% 4/15/17 39,934 40,616
Lowe's Cos. Inc. 6.100% 9/15/17 12,690 14,551
Macy's Retail Holdings Inc. 7.875% 7/15/15 15,245 16,749
Macy's Retail Holdings Inc. 5.900% 12/1/16 41,084 46,097
Macy's Retail Holdings Inc. 7.450% 7/15/17 42,319 49,881
Marriott International Inc. 6.375% 6/15/17 6,872 7,849
Marriott International Inc. 3.000% 3/1/19 9,760 10,013
Nordstrom Inc. 6.250% 1/15/18 21,650 25,281
PACCAR Financial Corp. 1.550% 9/29/14 16,740 16,881
PACCAR Financial Corp. 0.750% 8/14/15 12,680 12,748
PACCAR Financial Corp. 1.600% 3/15/17 17,566 17,603
Staples Inc. 2.750% 1/12/18 7,800 8,013
Starbucks Corp. 2.000% 12/5/18 18,550 18,615
TJX Cos. Inc. 4.200% 8/15/15 8,150 8,591
TJX Cos. Inc. 6.950% 4/15/19 13,700 16,634
Toll Brothers Finance Corp. 5.150% 5/15/15 16,010 16,820
Toyota Motor Credit Corp. 2.000% 9/15/16 9,734 10,023
Toyota Motor Credit Corp. 2.050% 1/12/17 27,380 28,170
Toyota Motor Credit Corp. 1.750% 5/22/17 35,429 36,058
Toyota Motor Credit Corp. 2.000% 10/24/18 20,510 20,682
Toyota Motor Credit Corp. 2.100% 1/17/19 19,530 19,637
Viacom Inc. 6.250% 4/30/16 13,025 14,533
Viacom Inc. 2.500% 12/15/16 9,880 10,252
Viacom Inc. 6.125% 10/5/17 10,695 12,416
Viacom Inc. 2.500% 9/1/18 31,395 32,031
Viacom Inc. 5.625% 9/15/19 3,195 3,667
7 Volkswagen International Finance NV 1.875% 4/1/14 49,860 49,985
7 Volkswagen International Finance NV 2.375% 3/22/17 14,620 15,039
7 Volkswagen International Finance NV 1.600% 11/20/17 19,600 19,629
7 Volkswagen International Finance NV 2.125% 11/20/18 19,575 19,665
Wal-Mart Stores Inc. 1.625% 4/15/14 15,640 15,681
Wal-Mart Stores Inc. 2.875% 4/1/15 11,815 12,164
Wal-Mart Stores Inc. 1.500% 10/25/15 38,550 39,244
Wal-Mart Stores Inc. 0.600% 4/11/16 18,555 18,583
Wal-Mart Stores Inc. 2.800% 4/15/16 17,098 17,955
Wal-Mart Stores Inc. 5.375% 4/5/17 20,315 23,095
Wal-Mart Stores Inc. 5.800% 2/15/18 2,940 3,428
Wal-Mart Stores Inc. 1.125% 4/11/18 69,000 67,724
Wal-Mart Stores Inc. 1.950% 12/15/18 25,525 25,745
Wal-Mart Stores Inc. 3.625% 7/8/20 19,805 21,091
Walgreen Co. 1.000% 3/13/15 30,701 30,836
Walgreen Co. 1.800% 9/15/17 32,596 32,893
Walgreen Co. 5.250% 1/15/19 33,595 38,263
7 Wesfarmers Ltd. 2.983% 5/18/16 27,055 28,184
7 Wesfarmers Ltd. 1.874% 3/20/18 13,660 13,553
Wyndham Worldwide Corp. 2.950% 3/1/17 7,800 8,072
Wyndham Worldwide Corp. 2.500% 3/1/18 6,835 6,921
Yum! Brands Inc. 6.250% 4/15/16 18,560 20,597
Yum! Brands Inc. 6.250% 3/15/18 3,096 3,590
Consumer Noncyclical (7.0%)        
AbbVie Inc. 1.750% 11/6/17 60,700 60,906
AbbVie Inc. 2.000% 11/6/18 23,420 23,311
Actavis Inc. 1.875% 10/1/17 91,065 91,081
Allergan Inc. 5.750% 4/1/16 15,530 17,180
Allergan Inc. 1.350% 3/15/18 7,800 7,670
Altria Group Inc. 4.125% 9/11/15 48,357 50,988

 

21

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Altria Group Inc. 9.250% 8/6/19 5,344 7,115
AmerisourceBergen Corp. 5.875% 9/15/15 9,228 9,989
Amgen Inc. 1.875% 11/15/14 31,270 31,611
Amgen Inc. 2.300% 6/15/16 46,620 48,131
Amgen Inc. 2.500% 11/15/16 7,150 7,407
Amgen Inc. 2.125% 5/15/17 76,690 78,715
Amgen Inc. 5.850% 6/1/17 23,715 27,187
Amgen Inc. 6.150% 6/1/18 4,525 5,319
Anheuser-Busch Cos. LLC 5.000% 1/15/15 7,480 7,797
Anheuser-Busch Cos. LLC 5.050% 10/15/16 4,875 5,408
Anheuser-Busch Cos. LLC 5.500% 1/15/18 8,650 9,908
Anheuser-Busch InBev Finance Inc. 0.800% 1/15/16 46,393 46,465
Anheuser-Busch InBev Finance Inc. 1.250% 1/17/18 26,840 26,519
Anheuser-Busch InBev Finance Inc. 2.150% 2/1/19 68,385 68,826
Anheuser-Busch InBev Worldwide Inc. 5.375% 11/15/14 28,675 29,755
Anheuser-Busch InBev Worldwide Inc. 4.125% 1/15/15 23,605 24,412
Anheuser-Busch InBev Worldwide Inc. 3.625% 4/15/15 19,495 20,227
Anheuser-Busch InBev Worldwide Inc. 0.800% 7/15/15 19,647 19,735
Anheuser-Busch InBev Worldwide Inc. 2.875% 2/15/16 46,615 48,769
Anheuser-Busch InBev Worldwide Inc. 1.375% 7/15/17 68,292 68,267
Anheuser-Busch InBev Worldwide Inc. 7.750% 1/15/19 9,750 12,249
Avon Products Inc. 4.600% 3/15/20 3,900 3,940
Baxter International Inc. 0.950% 6/1/16 5,860 5,883
Baxter International Inc. 5.375% 6/1/18 9,745 11,168
Baxter International Inc. 1.850% 6/15/18 13,345 13,365
Biogen Idec Inc. 6.875% 3/1/18 4,880 5,797
Boston Scientific Corp. 6.250% 11/15/15 10,150 11,094
Boston Scientific Corp. 6.400% 6/15/16 20,447 22,900
Boston Scientific Corp. 2.650% 10/1/18 9,760 9,900
Bottling Group LLC 5.500% 4/1/16 32,044 35,351
Brown-Forman Corp. 1.000% 1/15/18 5,480 5,381
Cardinal Health Inc. 1.900% 6/15/17 6,830 6,924
Cardinal Health Inc. 1.700% 3/15/18 20,540 20,529
CareFusion Corp. 5.125% 8/1/14 13,970 14,269
Catholic Health Initiatives Colorado GO 2.600% 8/1/18 2,900 2,940
Celgene Corp. 2.450% 10/15/15 14,610 15,028
Celgene Corp. 1.900% 8/15/17 6,835 6,912
Celgene Corp. 2.300% 8/15/18 14,950 15,115
Church & Dwight Co. Inc. 3.350% 12/15/15 9,760 10,191
Clorox Co. 5.950% 10/15/17 4,880 5,633
Coca-Cola Co. 1.150% 4/1/18 14,755 14,540
Coca-Cola Femsa SAB de CV 2.375% 11/26/18 18,500 18,479
ConAgra Foods Inc. 1.300% 1/25/16 24,490 24,667
ConAgra Foods Inc. 5.819% 6/15/17 4,880 5,549
ConAgra Foods Inc. 1.900% 1/25/18 64,935 64,828
ConAgra Foods Inc. 2.100% 3/15/18 3,550 3,551
ConAgra Foods Inc. 7.000% 4/15/19 5,000 6,040
Constellation Brands Inc. 3.750% 5/1/21 5,130 4,925
Constellation Brands Inc. 4.250% 5/1/23 5,130 4,822
Covidien International Finance SA 1.350% 5/29/15 19,185 19,367
Covidien International Finance SA 2.800% 6/15/15 14,040 14,453
Covidien International Finance SA 6.000% 10/15/17 38,565 44,499
CR Bard Inc. 2.875% 1/15/16 22,350 23,309
CR Bard Inc. 1.375% 1/15/18 13,115 12,858
Delhaize Group SA 6.500% 6/15/17 13,054 14,727
Diageo Capital plc 1.500% 5/11/17 23,785 23,871
Diageo Capital plc 1.125% 4/29/18 7,115 6,956
Dr Pepper Snapple Group Inc. 2.900% 1/15/16 7,800 8,095
Dr Pepper Snapple Group Inc. 6.820% 5/1/18 16,295 19,359
Dr Pepper Snapple Group Inc. 2.600% 1/15/19 3,060 3,124
Edwards Lifesciences Corp. 2.875% 10/15/18 24,400 24,701
Express Scripts Holding Co. 2.100% 2/12/15 29,220 29,656
Express Scripts Holding Co. 3.125% 5/15/16 43,300 45,267
Express Scripts Holding Co. 3.500% 11/15/16 32,230 34,213

 

22

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Express Scripts Holding Co. 2.650% 2/15/17 55,846 57,875
Genentech Inc. 4.750% 7/15/15 15,730 16,703
General Mills Inc. 0.875% 1/29/16 10,175 10,202
General Mills Inc. 5.700% 2/15/17 5,600 6,335
Gilead Sciences Inc. 2.400% 12/1/14 35,880 36,429
Gilead Sciences Inc. 3.050% 12/1/16 37,210 39,338
GlaxoSmithKline Capital Inc. 5.650% 5/15/18 16,600 19,329
GlaxoSmithKline Capital plc 1.500% 5/8/17 39,865 40,246
7 Hawk Acquisition Sub Inc. 4.250% 10/15/20 4,780 4,660
Ingredion Inc. 1.800% 9/25/17 5,855 5,774
Kellogg Co. 1.750% 5/17/17 10,240 10,341
Koninklijke Philips NV 5.750% 3/11/18 47,850 55,403
Kraft Foods Group Inc. 2.250% 6/5/17 75,630 77,791
Kraft Foods Group Inc. 6.125% 8/23/18 19,120 22,458
Kroger Co. 1.200% 10/17/16 6,840 6,867
Kroger Co. 2.200% 1/15/17 6,895 7,076
Kroger Co. 6.800% 12/15/18 5,950 7,177
Kroger Co. 2.300% 1/15/19 14,650 14,641
Life Technologies Corp. 4.400% 3/1/15 14,600 15,181
Lorillard Tobacco Co. 3.500% 8/4/16 30,285 31,956
Lorillard Tobacco Co. 2.300% 8/21/17 18,520 18,907
McKesson Corp. 6.500% 2/15/14 12,970 12,991
McKesson Corp. 0.950% 12/4/15 23,400 23,443
McKesson Corp. 3.250% 3/1/16 16,079 16,812
McKesson Corp. 5.700% 3/1/17 5,675 6,355
Mead Johnson Nutrition Co. 3.500% 11/1/14 14,000 14,286
Medco Health Solutions Inc. 2.750% 9/15/15 8,774 9,037
Medco Health Solutions Inc. 7.125% 3/15/18 32,695 39,056
Merck & Co. Inc. 2.250% 1/15/16 34,988 36,234
Merck & Co. Inc. 0.700% 5/18/16 7,820 7,831
Merck & Co. Inc. 1.300% 5/18/18 23,400 23,011
Merck Sharp & Dohme Corp. 4.750% 3/1/15 6,100 6,382
Mondelez International Inc. 6.750% 2/19/14 24,400 24,463
Mondelez International Inc. 4.125% 2/9/16 44,285 47,052
7 Mylan Inc. 1.800% 6/24/16 31,375 31,861
Mylan Inc. 1.350% 11/29/16 9,345 9,361
7 Mylan Inc. 2.600% 6/24/18 56,410 57,198
Mylan Inc. 2.550% 3/28/19 4,890 4,880
Nabisco Inc. 7.550% 6/15/15 14,640 15,983
Newell Rubbermaid Inc. 2.050% 12/1/17 12,540 12,600
Novartis Capital Corp. 4.125% 2/10/14 31,775 31,791
PepsiCo Inc. 3.100% 1/15/15 13,475 13,827
PepsiCo Inc. 0.700% 2/26/16 14,650 14,653
PepsiCo Inc. 2.500% 5/10/16 21,805 22,675
PepsiCo Inc. 1.250% 8/13/17 13,550 13,541
7 Pernod Ricard SA 2.950% 1/15/17 58,895 61,439
7 Pernod Ricard SA 4.450% 1/15/22 2,925 3,034
7 Perrigo Co. plc 1.300% 11/8/16 14,645 14,651
7 Perrigo Co. plc 2.300% 11/8/18 14,645 14,662
Pfizer Inc. 5.350% 3/15/15 12,870 13,561
Pharmacia Corp. 6.500% 12/1/18 8,300 10,127
Philip Morris International Inc. 6.875% 3/17/14 18,431 18,572
Philip Morris International Inc. 2.500% 5/16/16 20,635 21,441
Philip Morris International Inc. 1.125% 8/21/17 4,975 4,940
Philip Morris International Inc. 5.650% 5/16/18 19,490 22,530
Procter & Gamble Co. 4.850% 12/15/15 2,925 3,158
Procter & Gamble Co. 4.700% 2/15/19 4,880 5,572
Reynolds American Inc. 1.050% 10/30/15 6,840 6,872
Reynolds American Inc. 6.750% 6/15/17 10,880 12,648
7 Roche Holdings Inc. 6.000% 3/1/19 18,975 22,474
Sanofi 1.200% 9/30/14 39,700 39,931
Sanofi 2.625% 3/29/16 55,635 58,002
Sanofi 1.250% 4/10/18 60,430 59,353
St. Jude Medical Inc. 2.500% 1/15/16 19,505 20,041

 

23

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Stryker Corp. 3.000% 1/15/15 13,600 13,940
Stryker Corp. 1.300% 4/1/18 23,550 23,189
Sutter Health California GO 1.090% 8/15/53 10,000 9,906
7 Takeda Pharmaceutical Co. Ltd. 1.031% 3/17/15 33,060 33,209
7 Takeda Pharmaceutical Co. Ltd. 1.625% 3/17/17 33,074 32,991
Teva Pharmaceutical Finance Co. BV 2.400% 11/10/16 38,780 40,193
Teva Pharmaceutical Finance II BV / Teva        
Pharmaceutical Finance III LLC 3.000% 6/15/15 45,900 47,328
Teva Pharmaceutical Finance IV LLC 2.250% 3/18/20 15,365 14,673
Thermo Fisher Scientific Inc. 5.000% 6/1/15 2,330 2,462
Thermo Fisher Scientific Inc. 3.200% 3/1/16 19,490 20,404
Thermo Fisher Scientific Inc. 2.250% 8/15/16 13,695 14,080
Thermo Fisher Scientific Inc. 1.300% 2/1/17 16,600 16,600
Thermo Fisher Scientific Inc. 2.400% 2/1/19 10,740 10,753
Tyson Foods Inc. 6.600% 4/1/16 38,530 43,009
Whirlpool Corp. 6.500% 6/15/16 2,950 3,286
Wyeth LLC 5.500% 2/15/16 9,745 10,719
Wyeth LLC 5.450% 4/1/17 3,270 3,705
Zoetis Inc. 1.150% 2/1/16 30,805 30,963
Zoetis Inc. 1.875% 2/1/18 35,915 35,958
Energy (3.6%)        
Anadarko Petroleum Corp. 5.950% 9/15/16 74,940 83,591
Anadarko Petroleum Corp. 6.375% 9/15/17 36,742 42,329
Apache Corp. 5.625% 1/15/17 8,675 9,793
Apache Corp. 1.750% 4/15/17 14,405 14,634
BP Capital Markets plc 3.875% 3/10/15 28,945 30,052
BP Capital Markets plc 3.125% 10/1/15 37,918 39,531
BP Capital Markets plc 0.700% 11/6/15 23,840 23,923
BP Capital Markets plc 3.200% 3/11/16 77,518 81,619
BP Capital Markets plc 2.248% 11/1/16 37,575 38,891
BP Capital Markets plc 1.846% 5/5/17 41,475 42,273
BP Capital Markets plc 1.375% 11/6/17 19,000 18,934
BP Capital Markets plc 1.375% 5/10/18 35,175 34,630
BP Capital Markets plc 2.241% 9/26/18 21,575 21,907
Canadian Natural Resources Ltd. 4.900% 12/1/14 10,974 11,373
Canadian Natural Resources Ltd. 5.700% 5/15/17 24,826 28,209
Chevron Corp. 1.104% 12/5/17 13,700 13,544
Chevron Corp. 1.718% 6/24/18 29,300 29,454
ConocoPhillips Canada Funding Co. I 5.625% 10/15/16 34,080 38,464
Ensco plc 3.250% 3/15/16 62,101 65,013
7 GS Caltex Corp. 5.500% 8/25/14 3,910 3,992
7 GS Caltex Corp. 5.500% 10/15/15 14,165 15,128
Marathon Oil Corp. 0.900% 11/1/15 52,110 52,290
Marathon Oil Corp. 5.900% 3/15/18 23,330 26,880
7 Nabors Industries Inc. 2.350% 9/15/16 16,600 16,939
Nabors Industries Inc. 6.150% 2/15/18 19,540 22,189
Noble Holding International Ltd. 3.450% 8/1/15 7,581 7,858
Noble Holding International Ltd. 3.050% 3/1/16 16,130 16,646
Occidental Petroleum Corp. 2.500% 2/1/16 19,750 20,471
Occidental Petroleum Corp. 4.125% 6/1/16 8,344 8,991
Occidental Petroleum Corp. 1.750% 2/15/17 93,490 95,578
Occidental Petroleum Corp. 1.500% 2/15/18 24,670 24,523
Petro-Canada 6.050% 5/15/18 4,885 5,691
Phillips 66 2.950% 5/1/17 42,140 44,106
Pioneer Natural Resources Co. 6.650% 3/15/17 4,880 5,617
Pioneer Natural Resources Co. 6.875% 5/1/18 4,425 5,239
Shell International Finance BV 5.200% 3/22/17 14,225 15,909
Shell International Finance BV 1.125% 8/21/17 6,900 6,873
Shell International Finance BV 1.900% 8/10/18 9,775 9,884
Shell International Finance BV 2.000% 11/15/18 15,675 15,851
Southwestern Energy Co. 7.500% 2/1/18 14,700 17,530
Suncor Energy Inc. 6.100% 6/1/18 33,389 39,009
Total Capital Canada Ltd. 1.450% 1/15/18 43,977 44,072

 

24

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Total Capital International SA 0.750% 1/25/16 21,000 21,113
Total Capital International SA 1.500% 2/17/17 38,115 38,619
Total Capital International SA 1.550% 6/28/17 42,522 42,965
Total Capital International SA 2.125% 1/10/19 64,000 64,574
Total Capital SA 3.000% 6/24/15 7,241 7,501
Total Capital SA 3.125% 10/2/15 36,504 38,130
Total Capital SA 2.300% 3/15/16 34,038 35,180
Total Capital SA 2.125% 8/10/18 11,627 11,804
Transocean Inc. 4.950% 11/15/15 48,220 51,488
Transocean Inc. 5.050% 12/15/16 79,340 87,199
Transocean Inc. 2.500% 10/15/17 63,592 64,469
Transocean Inc. 6.000% 3/15/18 19,535 22,024
Valero Energy Corp. 6.125% 6/15/17 9,010 10,317
Weatherford International LLC 6.350% 6/15/17 13,005 14,776
Weatherford International Ltd. 5.500% 2/15/16 9,760 10,574
Other Industrial (0.0%)        
Smithsonian Institute Washington DC GO 3.434% 9/1/23 5,250 5,265
 
Technology (2.2%)        
Affiliated Computer Services Inc. 5.200% 6/1/15 9,750 10,293
Agilent Technologies Inc. 5.500% 9/14/15 7,149 7,683
Agilent Technologies Inc. 6.500% 11/1/17 9,500 11,044
Altera Corp. 1.750% 5/15/17 7,375 7,424
Altera Corp. 2.500% 11/15/18 38,180 38,655
Amphenol Corp. 4.750% 11/15/14 19,500 20,131
Apple Inc. 1.000% 5/3/18 29,410 28,708
Applied Materials Inc. 2.650% 6/15/16 9,800 10,188
Baidu Inc. 2.250% 11/28/17 6,850 6,843
Baidu Inc. 3.250% 8/6/18 31,200 31,465
Computer Sciences Corp. 2.500% 9/15/15 14,630 14,982
Computer Sciences Corp. 6.500% 3/15/18 21,220 24,793
Corning Inc. 1.450% 11/15/17 14,675 14,697
EMC Corp. 1.875% 6/1/18 72,410 72,534
Fiserv Inc. 3.125% 6/15/16 3,225 3,378
Fiserv Inc. 6.800% 11/20/17 3,900 4,561
Hewlett-Packard Co. 2.350% 3/15/15 7,930 8,042
Hewlett-Packard Co. 2.125% 9/13/15 14,010 14,281
Hewlett-Packard Co. 2.200% 12/1/15 10,232 10,459
Hewlett-Packard Co. 2.650% 6/1/16 55,413 57,235
Hewlett-Packard Co. 3.000% 9/15/16 89,140 93,018
Hewlett-Packard Co. 3.300% 12/9/16 24,852 26,150
Hewlett-Packard Co. 5.400% 3/1/17 12,791 14,275
Hewlett-Packard Co. 2.600% 9/15/17 49,670 51,077
Hewlett-Packard Co. 2.750% 1/14/19 28,000 28,111
Intel Corp. 1.950% 10/1/16 7,780 8,011
Intel Corp. 1.350% 12/15/17 142,272 141,901
International Business Machines Corp. 0.875% 10/31/14 10,865 10,918
International Business Machines Corp. 1.950% 7/22/16 33,175 34,154
International Business Machines Corp. 1.250% 2/6/17 19,600 19,710
International Business Machines Corp. 5.700% 9/14/17 11,650 13,399
International Business Machines Corp. 1.250% 2/8/18 9,700 9,605
Microsoft Corp. 0.875% 11/15/17 9,620 9,487
Motorola Solutions Inc. 6.000% 11/15/17 4,773 5,491
Oracle Corp. 1.200% 10/15/17 51,725 51,391
Oracle Corp. 5.750% 4/15/18 12,700 14,777
7 Seagate HDD Cayman 3.750% 11/15/18 14,000 14,315
Tyco Electronics Group SA 2.375% 12/17/18 14,650 14,651
Xerox Corp. 4.250% 2/15/15 20,250 20,962
Xerox Corp. 6.400% 3/15/16 9,325 10,327
Xerox Corp. 6.750% 2/1/17 18,525 21,054
Xerox Corp. 2.950% 3/15/17 8,810 9,153
Xerox Corp. 6.350% 5/15/18 16,640 19,493
Xerox Corp. 5.625% 12/15/19 15,675 17,796

 

25

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Transportation (1.1%)        
4 AFC X Ltd. 3.500% 3/31/15 133,000 133,665
4,7 American Airlines 2013-2 Class A Pass Through Trust 3.596% 11/1/19 36,329 36,692
  Burlington Northern Santa Fe LLC 4.875% 1/15/15 5,380 5,600
  Canadian Pacific Railway Co. 6.500% 5/15/18 14,710 17,349
  Canadian Pacific Railway Co. 7.250% 5/15/19 2,925 3,594
  Canadian Pacific Railway Ltd. 4.500% 1/15/22 6,810 7,289
4 Continental Airlines 1997-4 Class A Pass Through Trust 6.900% 7/2/19 6,285 6,804
4 Continental Airlines 1998-1 Class A Pass Through Trust 6.648% 3/15/19 3,523 3,730
4 Continental Airlines 2000-1 Class A-1 Pass Through        
  Trust 8.048% 11/1/20 6,069 6,918
4 Continental Airlines 2005-ERJ1 Pass Through Trust 9.798% 4/1/21 5,527 6,246
4 Continental Airlines 2012-2 Class B Pass Through Trust 5.500% 4/29/22 3,375 3,493
  CSX Corp. 6.250% 4/1/15 11,557 12,305
  CSX Corp. 6.250% 3/15/18 10,895 12,754
4,10 Delta Air Lines 2002-1 Class G-1 Pass Through Trust 6.718% 7/2/24 4,788 5,446
4 Delta Air Lines 2010-1 Class A Pass Through Trust 6.200% 1/2/20 12,635 14,182
4 Delta Air Lines 2012-1 Class A Pass Through Trust 4.750% 11/7/21 2,846 3,073
7 ERAC USA Finance LLC 5.600% 5/1/15 10,245 10,837
7 ERAC USA Finance LLC 1.400% 4/15/16 8,775 8,823
7 ERAC USA Finance LLC 6.375% 10/15/17 11,170 12,980
7 ERAC USA Finance LLC 2.800% 11/1/18 16,645 17,066
4 Hawaiian Airlines 2013-1 Class A Pass Through        
  Certificates 3.900% 1/15/26 8,040 7,658
  JB Hunt Transport Services Inc. 3.375% 9/15/15 11,790 12,208
4,6,10 JetBlue Airways 2004-1 G-2 Pass Through Trust 0.663% 9/15/15 19,025 18,923
4,6,10 JetBlue Airways 2004-2 G-2 Pass Through Trust 0.691% 5/15/18 9,655 9,305
  Kansas City Southern de Mexico SA de CV 2.350% 5/15/20 4,880 4,664
  Norfolk Southern Corp. 5.257% 9/17/14 12,315 12,681
7 Penske Truck Leasing Co. Lp / PTL Finance Corp. 2.500% 7/11/14 15,000 15,119
  Ryder System Inc. 5.850% 3/1/14 5,150 5,170
  Ryder System Inc. 7.200% 9/1/15 10,820 11,866
  Ryder System Inc. 3.600% 3/1/16 25,775 26,940
  Ryder System Inc. 5.850% 11/1/16 8,440 9,366
  Ryder System Inc. 2.500% 3/1/17 12,635 13,009
  Ryder System Inc. 2.450% 11/15/18 5,850 5,875
4 Southwest Airlines Co. 2007-1 Pass Through Trust 6.150% 2/1/24 2,136 2,456
  United Continental Holdings Inc. 6.375% 6/1/18 6,335 6,652
  United Parcel Service Inc. 1.125% 10/1/17 12,850 12,820
  United Parcel Service Inc. 5.500% 1/15/18 14,239 16,410
  United Parcel Service Inc. 5.125% 4/1/19 22,560 25,969
          13,624,187
Utilities (4.9%)        
  Electric (4.0%)        
  Ameren Illinois Co. 6.125% 11/15/17 6,810 7,924
  Ameren Illinois Co. 6.250% 4/1/18 4,690 5,399
  American Electric Power Co. Inc. 1.650% 12/15/17 35,350 35,049
  Appalachian Power Co. 5.000% 6/1/17 5,605 6,145
  Arizona Public Service Co. 5.800% 6/30/14 8,050 8,218
  Arizona Public Service Co. 4.650% 5/15/15 5,850 6,133
  Arizona Public Service Co. 6.250% 8/1/16 4,027 4,547
  Baltimore Gas & Electric Co. 5.900% 10/1/16 6,810 7,627
  CenterPoint Energy Inc. 5.950% 2/1/17 21,490 24,268
  CenterPoint Energy Inc. 6.500% 5/1/18 7,270 8,543
  CMS Energy Corp. 4.250% 9/30/15 22,075 23,160
  CMS Energy Corp. 6.550% 7/17/17 2,685 3,111
  CMS Energy Corp. 5.050% 2/15/18 45,575 50,679
  Commonwealth Edison Co. 4.700% 4/15/15 2,807 2,942
  Commonwealth Edison Co. 5.950% 8/15/16 33,402 37,609
  Commonwealth Edison Co. 1.950% 9/1/16 31,705 32,477

 

26

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Commonwealth Edison Co. 6.150% 9/15/17 26,386 30,612
  Commonwealth Edison Co. 5.800% 3/15/18 33,975 39,346
  Commonwealth Edison Co. 2.150% 1/15/19 6,840 6,877
  Consumers Energy Co. 5.500% 8/15/16 4,530 5,050
  Consumers Energy Co. 5.150% 2/15/17 14,095 15,741
  Consumers Energy Co. 5.650% 9/15/18 12,700 14,809
  Consumers Energy Co. 6.125% 3/15/19 25,262 30,133
  Consumers Energy Co. 6.700% 9/15/19 9,625 11,829
  DTE Electric Co. 5.600% 6/15/18 3,420 3,914
  Duke Energy Carolinas LLC 5.300% 10/1/15 10,750 11,589
  Duke Energy Carolinas LLC 1.750% 12/15/16 6,950 7,131
  Duke Energy Carolinas LLC 5.100% 4/15/18 25,322 28,789
  Duke Energy Carolinas LLC 7.000% 11/15/18 31,297 38,435
  Duke Energy Corp. 3.350% 4/1/15 4,875 5,026
  Duke Energy Corp. 1.625% 8/15/17 12,560 12,605
  Duke Energy Corp. 2.100% 6/15/18 10,490 10,567
  Duke Energy Corp. 6.250% 6/15/18 17,390 20,340
  Duke Energy Corp. 5.050% 9/15/19 12,700 14,362
  Duke Energy Florida Inc. 0.650% 11/15/15 7,390 7,411
  Duke Energy Florida Inc. 5.100% 12/1/15 43,735 47,330
  Duke Energy Florida Inc. 5.800% 9/15/17 11,462 13,045
  Duke Energy Florida Inc. 5.650% 6/15/18 21,500 24,933
  Duke Energy Progress Inc. 5.150% 4/1/15 4,900 5,160
  Duke Energy Progress Inc. 5.250% 12/15/15 14,870 16,165
  Duke Energy Progress Inc. 5.300% 1/15/19 10,410 12,007
7 EDP Finance BV 5.250% 1/14/21 17,860 18,275
  Entergy Corp. 3.625% 9/15/15 18,420 19,101
  Entergy Corp. 4.700% 1/15/17 11,695 12,597
  Entergy Louisiana LLC 1.875% 12/15/14 10,350 10,469
  Exelon Corp. 4.900% 6/15/15 9,760 10,273
  Exelon Generation Co. LLC 6.200% 10/1/17 16,105 18,343
  FirstEnergy Corp. 2.750% 3/15/18 22,430 22,496
  FirstEnergy Corp. 4.250% 3/15/23 7,140 6,945
4,7 FPL Energy Marcus Hook LP 7.590% 7/10/18 16,779 17,534
  Georgia Power Co. 3.000% 4/15/16 6,885 7,209
  Georgia Power Co. 5.700% 6/1/17 5,285 6,065
7 Iberdrola Finance Ireland Ltd. 3.800% 9/11/14 55,952 56,893
  LG&E & KU Energy LLC 2.125% 11/15/15 34,635 35,246
  Louisville Gas & Electric Co. 1.625% 11/15/15 5,040 5,139
  MidAmerican Energy Co. 4.650% 10/1/14 4,880 5,018
  MidAmerican Energy Co. 5.950% 7/15/17 14,170 16,377
  MidAmerican Energy Co. 5.300% 3/15/18 29,560 33,662
  MidAmerican Energy Holdings Co. 5.000% 2/15/14 3,000 3,004
7 MidAmerican Energy Holdings Co. 1.100% 5/15/17 50,750 50,653
  MidAmerican Energy Holdings Co. 5.750% 4/1/18 44,956 51,832
7 MidAmerican Energy Holdings Co. 2.000% 11/15/18 29,040 28,943
  National Rural Utilities Cooperative Finance Corp. 4.750% 3/1/14 10,035 10,068
  National Rural Utilities Cooperative Finance Corp. 1.000% 2/2/15 7,795 7,840
  National Rural Utilities Cooperative Finance Corp. 1.900% 11/1/15 12,270 12,561
  National Rural Utilities Cooperative Finance Corp. 3.050% 3/1/16 7,800 8,177
  National Rural Utilities Cooperative Finance Corp. 5.450% 4/10/17 3,900 4,395
  National Rural Utilities Cooperative Finance Corp. 5.450% 2/1/18 32,768 37,320
  National Rural Utilities Cooperative Finance Corp. 2.150% 2/1/19 22,800 22,915
  National Rural Utilities Cooperative Finance Corp. 2.350% 6/15/20 8,400 8,262
  Nevada Power Co. 5.875% 1/15/15 35,470 37,226
  Nevada Power Co. 6.500% 5/15/18 26,805 31,928
  Nevada Power Co. 6.500% 8/1/18 7,401 8,837
  NextEra Energy Capital Holdings Inc. 1.200% 6/1/15 40,895 41,078
  NextEra Energy Capital Holdings Inc. 2.600% 9/1/15 29,535 30,402
  NextEra Energy Capital Holdings Inc. 7.875% 12/15/15 14,650 16,505
4 NextEra Energy Capital Holdings Inc. 6.350% 10/1/66 5,895 5,836
7 Niagara Mohawk Power Corp. 3.553% 10/1/14 4,830 4,910
  Northeast Utilities 1.450% 5/1/18 21,490 21,112
  Northern States Power Co. 5.250% 3/1/18 2,890 3,292

 

27

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
NSTAR Electric Co. 5.625% 11/15/17 2,000 2,301
Ohio Power Co. 6.000% 6/1/16 9,838 10,979
Pacific Gas & Electric Co. 5.625% 11/30/17 45,304 51,907
PacifiCorp 5.650% 7/15/18 18,826 21,888
Pennsylvania Electric Co. 6.050% 9/1/17 5,445 6,119
PG&E Corp. 5.750% 4/1/14 52,933 53,348
PPL Capital Funding Inc. 1.900% 6/1/18 13,915 13,850
Public Service Co. of Colorado 5.500% 4/1/14 6,825 6,880
Public Service Co. of Colorado 5.800% 8/1/18 9,680 11,318
Public Service Co. of New Mexico 7.950% 5/15/18 8,700 10,442
Public Service Electric & Gas Co. 5.000% 8/15/14 9,500 9,737
Public Service Electric & Gas Co. 2.700% 5/1/15 13,500 13,875
Public Service Electric & Gas Co. 5.300% 5/1/18 2,930 3,363
Public Service Electric & Gas Co. 2.300% 9/15/18 28,815 29,471
Sierra Pacific Power Co. 6.000% 5/15/16 16,060 17,945
South Carolina Electric & Gas Co. 6.500% 11/1/18 8,450 10,189
Southern California Edison Co. 5.500% 8/15/18 5,295 6,150
Southwestern Electric Power Co. 5.550% 1/15/17 2,010 2,214
Southwestern Electric Power Co. 5.875% 3/1/18 10,080 11,484
Tampa Electric Co. 6.100% 5/15/18 21,670 25,369
TECO Finance Inc. 4.000% 3/15/16 14,045 14,884
TECO Finance Inc. 6.572% 11/1/17 10,008 11,621
7 Trans-Allegheny Interstate Line Co. 4.000% 1/15/15 53,650 55,278
Union Electric Co. 6.400% 6/15/17 12,271 14,239
4 Wisconsin Energy Corp. 6.250% 5/15/67 5,460 5,590
Xcel Energy Inc. 0.750% 5/9/16 35,312 35,179
Natural Gas (0.9%)        
Atmos Energy Corp. 4.950% 10/15/14 6,260 6,445
7 Centrica plc 4.000% 10/16/23 5,950 5,962
Colorado Interstate Gas Co. LLC 6.800% 11/15/15 39,762 43,786
7 Dominion Gas Holdings LLC 3.550% 11/1/23 9,770 9,691
El Paso Natural Gas Co. LLC 5.950% 4/15/17 10,300 11,618
El Paso Pipeline Partners Operating Co. LLC 4.100% 11/15/15 38,508 40,483
Enbridge Energy Partners LP 5.350% 12/15/14 2,440 2,538
4 Enbridge Energy Partners LP 8.050% 10/1/77 1,860 2,092
Energy Transfer Partners LP 5.950% 2/1/15 9,842 10,341
Energy Transfer Partners LP 6.125% 2/15/17 19,583 22,025
Energy Transfer Partners LP 6.700% 7/1/18 32,999 38,635
Energy Transfer Partners LP 4.150% 10/1/20 11,725 12,081
Kinder Morgan Energy Partners LP 5.625% 2/15/15 8,770 9,202
Kinder Morgan Energy Partners LP 3.500% 3/1/16 25,785 27,066
Kinder Morgan Energy Partners LP 6.000% 2/1/17 15,835 17,861
Kinder Morgan Energy Partners LP 5.950% 2/15/18 9,440 10,819
Kinder Morgan Energy Partners LP 2.650% 2/1/19 12,600 12,586
Magellan Midstream Partners LP 6.450% 6/1/14 3,650 3,720
Nisource Finance Corp. 6.400% 3/15/18 13,190 15,393
ONEOK Partners LP 3.200% 9/15/18 9,770 10,164
Sempra Energy 6.500% 6/1/16 33,254 37,401
Sempra Energy 2.300% 4/1/17 36,630 37,679
Sempra Energy 6.150% 6/15/18 13,585 15,870
Southern California Gas Co. 5.500% 3/15/14 7,979 8,026
7 Southern Natural Gas Co. LLC 5.900% 4/1/17 11,470 12,902
Spectra Energy Partners LP 2.950% 9/25/18 9,770 10,090
4 TransCanada PipeLines Ltd. 6.350% 5/15/67 5,550 5,716
Other Utility (0.0%)        
American Water Capital Corp. 6.085% 10/15/17 9,357 10,668
 
        2,352,255
 
Total Corporate Bonds (Cost $28,094,631)       28,416,029
 
Sovereign Bonds (U.S. Dollar-Denominated) (8.8%)        
7 Abu Dhabi National Energy Co. 4.750% 9/15/14 11,700 11,963
Abu Dhabi National Energy Co. 4.125% 3/13/17 4,077 4,328

 

28

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
7 Abu Dhabi National Energy Co. 2.500% 1/12/18 1,000 1,003
7 ADCB Finance Cayman Ltd. 4.750% 10/8/14 5,000 5,108
7 Banco de Costa Rica 5.250% 8/12/18 4,800 4,758
7 Banco del Estado de Chile 2.000% 11/9/17 6,200 6,134
7 Banco del Estado de Chile 3.875% 2/8/22 2,000 1,950
7 Banco do Brasil SA 4.500% 1/22/15 8,500 8,729
  Banco do Brasil SA 3.875% 1/23/17 11,085 11,287
7 Banco do Nordeste do Brasil SA 3.625% 11/9/15 2,000 2,032
7 Banco Latinoamericano de Comercio Exterior SA 3.750% 4/4/17 18,100 18,428
7 Banco Nacional de Desenvolvimento Economico e        
  Social 3.375% 9/26/16 6,400 6,494
7 Bank Nederlandse Gemeenten 1.375% 3/23/15 14,600 14,778
7 Bank Nederlandse Gemeenten 2.500% 1/23/23 2,450 2,319
7 Bermuda 4.138% 1/3/23 6,000 5,737
7 Bermuda 4.854% 2/6/24 5,800 5,747
7 Caisse d'Amortissement de la Dette Sociale 1.750% 2/24/15 4,850 4,922
7 Caisse d'Amortissement de la Dette Sociale 1.125% 1/30/17 22,000 22,090
7 Caisse d'Amortissement de la Dette Sociale 1.375% 1/29/18 4,875 4,828
7 Caixa Economica Federal 2.375% 11/6/17 12,375 11,382
7 Centrais Eletricas Brasileiras SA 7.750% 11/30/15 2,250 2,456
7 Central American Bank for Economic Integration 5.375% 9/24/14 7,000 7,182
7 CNOOC Finance 2012 Ltd. 3.875% 5/2/22 1,800 1,753
  CNOOC Finance 2013 Ltd. 1.750% 5/9/18 4,000 3,943
7 CNPC General Capital Ltd. 1.450% 4/16/16 2,000 2,002
7 CNPC General Capital Ltd. 2.750% 4/19/17 4,875 4,972
7 CNPC HK Overseas Capital Ltd. 3.125% 4/28/16 5,000 5,180
  Corp. Andina de Fomento 3.750% 1/15/16 69,219 72,411
  Corp. Andina de Fomento 5.750% 1/12/17 8,900 9,809
7 Corp. Financiera de Desarrollo SA 4.750% 2/8/22 4,825 4,778
7 Corp. Nacional del Cobre de Chile 4.750% 10/15/14 2,460 2,525
7 Corp. Nacional del Cobre de Chile 7.500% 1/15/19 5,700 6,872
7 Corp. Nacional del Cobre de Chile 3.875% 11/3/21 15,796 15,698
  Corp. Nacional del Cobre de Chile 3.875% 11/3/21 2,800 2,780
7 Corp. Nacional del Cobre de Chile 3.000% 7/17/22 6,025 5,551
7 Corp. Nacional del Cobre de Chile 4.500% 8/13/23 15,600 16,061
  Development Bank of Japan Inc. 2.875% 4/20/15 5,000 5,150
11 Development Bank of Japan Inc. 2.750% 3/15/16 6,900 7,205
11 Development Bank of Japan Inc. 5.125% 2/1/17 4,800 5,376
7 Development Bank of Kazakhstan JSC 5.500% 12/20/15 2,762 2,915
  Development Bank of Kazakhstan JSC 5.500% 12/20/15 310 327
7 Development Bank of Kazakhstan JSC 4.125% 12/10/22 3,000 2,693
7,12 Dexia Credit Local SA 2.750% 4/29/14 25,300 25,437
7,12 Dexia Credit Local SA 1.250% 10/18/16 12,700 12,759
7 Electricite de France 1.150% 1/20/17 58,610 58,577
7 Electricite de France 2.150% 1/22/19 34,190 33,945
7 Electricite de France 6.000% 1/22/14 1,610 1,723
7 Emirate of Abu Dhabi 5.500% 4/8/14 14,390 14,501
4,7 ENA Norte Trust 4.950% 4/25/28 1,873 1,812
  European Investment Bank 2.875% 1/15/15 19,500 19,991
  European Investment Bank 2.750% 3/23/15 8,750 9,000
  European Investment Bank 1.125% 4/15/15 30,000 30,314
  European Investment Bank 1.625% 9/1/15 9,725 9,926
  European Investment Bank 2.500% 5/16/16 5,000 5,217
7 Export-Import Bank of Korea 5.250% 2/10/14 2,550 2,552
  Export-Import Bank of Korea 5.875% 1/14/15 60,100 62,988
  Export-Import Bank of Korea 5.125% 3/16/15 9,600 10,041
  Export-Import Bank of Korea 4.125% 9/9/15 33,625 35,351
  Export-Import Bank of Korea 3.750% 10/20/16 18,695 19,876
  Export-Import Bank of Korea 4.000% 1/11/17 31,600 33,919
  Export-Import Bank of Korea 2.875% 9/17/18 11,700 11,879
  Export-Import Bank of Korea 4.000% 1/29/21 2,000 2,087
7 Federation of Malaysia 2.991% 7/6/16 4,875 5,067
  Federative Republic of Brazil 7.875% 3/7/15 23,825 25,522
  Federative Republic of Brazil 6.000% 1/17/17 25,195 27,866

 

29

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
4 Federative Republic of Brazil 8.000% 1/15/18 28,400 31,609
Federative Republic of Brazil 2.625% 1/5/23 9,100 7,771
7 Gazprom OAO Via Gaz Capital SA 5.092% 11/29/15 42,520 45,263
7 Hrvatska Elektroprivreda 6.000% 11/9/17 2,925 2,990
Hydro-Quebec 2.000% 6/30/16 21,750 22,397
7 Industrial Bank of Korea 7.125% 4/23/14 6,700 6,792
IPIC GMTN Ltd. 3.125% 11/15/15 9,750 10,093
7 IPIC GMTN Ltd. 3.750% 3/1/17 2,850 3,011
11 Japan Bank for International Cooperation 2.875% 2/2/15 30,500 31,270
11 Japan Bank for International Cooperation 1.875% 9/24/15 60,350 61,770
11 Japan Bank for International Cooperation 2.500% 1/21/16 19,500 20,231
11 Japan Bank for International Cooperation 2.500% 5/18/16 22,000 22,867
11 Japan Bank for International Cooperation 2.250% 7/13/16 34,090 35,372
11 Japan Bank for International Cooperation 1.750% 7/31/18 26,800 26,879
11 Japan Bank for International Cooperation 1.750% 11/13/18 26,000 26,031
11 Japan Finance Organization for Municipalities 4.625% 4/21/15 8,900 9,340
11 Japan Finance Organization for Municipalities 4.000% 1/13/21 9,750 10,632
7 KazMunaiGaz Finance Sub BV 11.750% 1/23/15 4,400 4,809
KazMunayGas National Co. JSC 9.125% 7/2/18 42,601 50,802
7 Kingdom of Spain 4.000% 3/6/18 33,800 35,421
7 Kommunalbanken AS 2.375% 1/19/16 5,875 6,055
7 Kommunalbanken AS 0.875% 10/3/16 9,775 9,767
7 Kommunalbanken AS 1.125% 5/23/18 31,300 30,718
7 Kommunalbanken AS 2.125% 3/15/19 14,000 14,152
Korea Development Bank 4.375% 8/10/15 15,460 16,236
Korea Development Bank 1.000% 1/22/16 4,800 4,787
Korea Development Bank 3.250% 3/9/16 25,060 26,108
Korea Development Bank 4.000% 9/9/16 4,000 4,262
Korea Development Bank 3.875% 5/4/17 24,125 25,649
Korea Development Bank 3.500% 8/22/17 22,675 23,865
Korea Development Bank 1.500% 1/22/18 5,850 5,709
7 Korea Electric Power Corp. 3.000% 10/5/15 10,800 11,090
7 Korea Expressway Corp. 5.125% 5/20/15 3,900 4,075
7 Korea Expressway Corp. 1.875% 10/22/17 1,000 987
Korea Finance Corp. 3.250% 9/20/16 9,800 10,250
Korea Finance Corp. 2.250% 8/7/17 7,725 7,755
7 Korea Gas Corp. 6.000% 7/15/14 4,500 4,604
7 Korea Hydro & Nuclear Power Co. Ltd. 6.250% 6/17/14 2,782 2,835
7 Korea Hydro & Nuclear Power Co. Ltd. 3.125% 9/16/15 4,900 5,047
7 Korea National Oil Corp. 2.875% 11/9/15 2,900 2,975
7 Korea National Oil Corp. 4.000% 10/27/16 19,201 20,471
7 Korea Resources Corp. 2.125% 5/2/18 4,675 4,573
7 Korea Western Power Co. Ltd. 2.875% 10/10/18 7,800 7,877
13 Landwirtschaftliche Rentenbank 3.125% 7/15/15 7,000 7,267
7 MDC-GMTN B.V. 5.750% 5/6/14 4,100 4,150
7 MDC-GMTN B.V. 3.750% 4/20/16 6,000 6,313
7 National Agricultural Cooperative Federation 5.000% 9/30/14 10,000 10,271
North American Development Bank 2.300% 10/10/18 3,675 3,660
North American Development Bank 2.400% 10/26/22 2,700 2,494
14 Oesterreichische Kontrollbank AG 4.500% 3/9/15 6,300 6,591
14 Oesterreichische Kontrollbank AG 1.750% 10/5/15 59,400 60,759
14 Oesterreichische Kontrollbank AG 2.000% 6/3/16 24,350 25,112
Pemex Project Funding Master Trust 5.750% 3/1/18 53,990 59,656
7 Perusahaan Penerbit SBSN Indonesia 4.000% 11/21/18 4,800 4,752
Petrobras Global Finance BV 3.000% 1/15/19 8,150 7,681
Petrobras International Finance Co. 7.750% 9/15/14 9,725 10,041
Petrobras International Finance Co. 2.875% 2/6/15 4,500 4,557
Petrobras International Finance Co. 3.875% 1/27/16 50,320 51,635
Petrobras International Finance Co. 6.125% 10/6/16 32,725 35,314
Petrobras International Finance Co. 3.500% 2/6/17 35,075 35,452
Petrobras International Finance Co. 5.875% 3/1/18 72,388 76,921
Petrobras International Finance Co. 5.750% 1/20/20 3,445 3,552
Petroleos Mexicanos 4.875% 3/15/15 47,902 49,878
Petroleos Mexicanos 8.000% 5/3/19 6,700 8,071

 

30

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Petroleos Mexicanos 6.000% 3/5/20 9,800 10,777
4,7 Petroleum Co. of Trinidad & Tobago Ltd. 6.000% 5/8/22 2,036 2,158
7 Petronas Capital Ltd. 5.250% 8/12/19 15,840 17,597
  Petronas Global Sukuk Ltd. 4.250% 8/12/14 7,600 7,732
  Province of Manitoba 2.625% 7/15/15 7,875 8,125
  Province of Manitoba 1.300% 4/3/17 32,225 32,576
  Province of New Brunswick 2.750% 6/15/18 975 1,024
  Province of Nova Scotia 2.375% 7/21/15 43,820 45,048
  Province of Ontario 4.100% 6/16/14 9,450 9,582
  Province of Ontario 2.950% 2/5/15 10,000 10,268
  Province of Ontario 0.950% 5/26/15 36,025 36,303
  Province of Ontario 2.700% 6/16/15 82,595 85,190
  Province of Ontario 1.875% 9/15/15 62,047 63,507
  Province of Ontario 4.750% 1/19/16 19,750 21,318
  Province of Ontario 5.450% 4/27/16 5,000 5,523
  Province of Ontario 2.300% 5/10/16 116,525 120,496
  Province of Ontario 1.000% 7/22/16 16,425 16,489
  Province of Ontario 1.600% 9/21/16 83,150 84,727
  Province of Ontario 1.100% 10/25/17 33,395 33,166
  Province of Ontario 1.200% 2/14/18 5,200 5,151
  Province of Ontario 3.000% 7/16/18 15,905 16,834
  Province of Ontario 2.450% 6/29/22 7,820 7,430
  PTT Public Co. Ltd. 3.375% 10/25/22 3,000 2,697
7,15 Qatari Diar Finance QSC 3.500% 7/21/15 2,725 2,816
7 Qtel International Finance Ltd. 6.500% 6/10/14 4,500 4,580
7 Qtel International Finance Ltd. 3.375% 10/14/16 9,025 9,417
7 Qtel International Finance Ltd. 3.250% 2/21/23 4,925 4,505
7 Qtel International Finance Ltd. 3.875% 1/31/28 1,800 1,606
  Quebec 4.875% 5/5/14 1,950 1,970
  Quebec 4.600% 5/26/15 9,750 10,296
  Quebec 5.000% 3/1/16 9,750 10,641
  Quebec 5.125% 11/14/16 11,000 12,268
  Quebec 3.500% 7/29/20 4,750 5,005
  Quebec 2.750% 8/25/21 26,285 26,090
  Quebec 2.625% 2/13/23 5,150 4,869
4,7 Ras Laffan Liquefied Natural Gas Co. Ltd. II 5.298% 9/30/20 6,882 7,372
7 Ras Laffan Liquefied Natural Gas Co. Ltd. III 5.500% 9/30/14 8,275 8,493
7 Republic of Austria 1.750% 6/17/16 9,750 10,008
  Republic of Chile 3.250% 9/14/21 9,575 9,518
  Republic of Chile 2.250% 10/30/22 3,000 2,691
  Republic of Colombia 8.250% 12/22/14 60,341 64,035
  Republic of Colombia 7.375% 1/27/17 23,205 26,755
  Republic of Colombia 7.375% 3/18/19 29,255 34,901
4 Republic of Colombia 5.625% 2/26/44 11,700 11,630
  Republic of Hungary 5.750% 11/22/23 6,550 6,525
7 Republic of Iceland 4.875% 6/16/16 3,900 4,070
7 Republic of Indonesia 10.375% 5/4/14 9,750 9,843
7 Republic of Indonesia 6.875% 3/9/17 13,497 15,150
  Republic of Indonesia 6.875% 3/9/17 4,900 5,489
  Republic of Indonesia 6.875% 1/17/18 9,800 10,937
  Republic of Indonesia 3.750% 4/25/22 9,800 8,823
7 Republic of Indonesia 6.625% 2/17/37 5,150 5,111
  Republic of Italy 3.125% 1/26/15 49,075 50,189
  Republic of Italy 4.750% 1/25/16 71,845 76,802
  Republic of Italy 5.250% 9/20/16 59,950 65,256
  Republic of Italy 5.375% 6/12/17 29,625 32,845
  Republic of Korea 5.750% 4/16/14 17,050 17,225
  Republic of Korea 4.875% 9/22/14 8,585 8,816
  Republic of Korea 5.125% 12/7/16 9,750 10,793
7 Republic of Latvia 5.250% 2/22/17 2,000 2,179
7 Republic of Latvia 2.750% 1/12/20 4,000 3,809
  Republic of Panama 7.250% 3/15/15 4,305 4,593
  Republic of Panama 5.200% 1/30/20 61,625 66,827
  Republic of Peru 9.875% 2/6/15 33,200 36,206

 

31

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Republic of Peru 8.375% 5/3/16 3,628 4,154
  Republic of Phillippines 4.200% 1/21/24 1,715 1,732
  Republic of Poland 3.875% 7/16/15 36,080 37,704
  Republic of Poland 5.000% 3/23/22 4,825 5,150
  Republic of Poland 4.000% 1/22/24 4,600 4,530
7 Republic of Romania 4.375% 8/22/23 3,800 3,611
7 Republic of Romania 4.875% 1/22/24 7,300 7,201
7 Republic of Serbia 5.250% 11/21/17 1,000 1,014
7 Republic of Serbia 5.875% 12/3/18 9,925 10,123
7 Republic of Slovakia 4.375% 5/21/22 5,500 5,731
  Republic of South Africa 6.500% 6/2/14 6,900 7,005
  Republic of South Africa 5.500% 3/9/20 5,875 6,214
  Republic of Turkey 7.000% 9/26/16 128,345 140,666
  Republic of Turkey 3.250% 3/23/23 9,760 8,018
7 Rosneft Finance SA 6.625% 3/20/17 5,900 6,549
7 Rosneft Finance SA 7.875% 3/13/18 11,700 13,364
  Rosneft Finance SA 7.875% 3/13/18 5,310 6,067
  Russian Federation 3.625% 4/29/15 5,400 5,575
  Russian Federation 4.875% 9/16/23 9,800 9,832
4,7 Russian Federation 7.500% 3/31/30 14,765 17,024
4 Russian Federation 7.500% 3/31/30 76,880 88,605
  SABIC Capital II BV 2.625% 10/3/18 9,600 9,492
  Sberbank of Russia Via SB Capital SA 5.499% 7/7/15 19,500 20,548
  Sberbank of Russia Via SB Capital SA 5.400% 3/24/17 17,600 18,723
7 Sinopec Group Overseas Development 2012 Ltd. 2.750% 5/17/17 5,775 5,896
7 Sinopec Group Overseas Development 2013 Ltd. 4.375% 10/17/23 20,200 19,870
  State of Israel 5.125% 3/1/14 8,925 8,952
  State of Israel 5.500% 11/9/16 4,875 5,435
  State of Israel 4.000% 6/30/22 1,900 1,988
  State of Israel 3.150% 6/30/23 6,000 5,763
7 State of Qatar 5.150% 4/9/14 3,200 3,216
7 State of Qatar 4.000% 1/20/15 12,700 13,113
7 State of Qatar 3.125% 1/20/17 8,000 8,400
  Statoil ASA 1.800% 11/23/16 5,900 6,041
  Statoil ASA 3.125% 8/17/17 8,956 9,517
  Statoil ASA 1.200% 1/17/18 5,150 5,077
  Statoil ASA 2.900% 11/8/20 10,000 10,130
  Statoil ASA 3.150% 1/23/22 2,000 2,007
  Svensk Exportkredit AB 1.750% 10/20/15 56,450 57,711
  Svensk Exportkredit AB 2.125% 7/13/16 24,400 25,224
  Svensk Exportkredit AB 1.750% 5/30/17 4,900 5,010
7 TDIC Finance Ltd. 6.500% 7/2/14 7,275 7,457
7 Temasek Financial I Ltd. 4.300% 10/25/19 7,250 8,013
7 Temasek Financial I Ltd. 2.375% 1/23/23 5,000 4,611
7 Transnet SOC Ltd. 4.500% 2/10/16 4,400 4,597
7 Turkiye Halk Bankasi AS 4.875% 7/19/17 1,800 1,768
  United Mexican States 5.875% 2/17/14 26,724 26,769
  United Mexican States 3.500% 1/21/21 44,800 44,669
  United Mexican States 5.750% 10/12/10 13,800 12,530
  Vnesheconombank Via VEB Finance plc 5.375% 2/13/17 14,985 15,716
  Vnesheconombank Via VEB Finance plc 5.450% 11/22/17 10,700 11,289
  VTB Bank OJSC Via VTB Capital SA 6.000% 4/12/17 100,450 106,859
  VTB Bank OJSC Via VTB Capital SA 6.875% 5/29/18 34,190 37,233
 
Total Sovereign Bonds (Cost $4,225,913)       4,259,495
 
Taxable Municipal Bonds (0.6%)        
  California Department of Water Resources Water        
  System Revenue (Central Valley Project) 1.871% 12/1/19 9,800 9,573
  California GO 5.250% 4/1/14 4,850 4,890
  California GO 5.950% 3/1/18 26,110 30,058
  California GO 6.200% 10/1/19 13,650 16,290
  Colorado Housing & Finance Authority Employment        
  Compensation Special Assessment Revenue 1.600% 5/15/16 14,600 14,940

 

32

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Florida Hurricane Catastrophe Fund Finance Corp.        
Revenue 1.298% 7/1/16 7,800 7,917
Florida Hurricane Catastrophe Fund Finance Corp.        
Revenue 2.107% 7/1/18 5,350 5,314
George Washington University District of Columbia GO 3.485% 9/15/22 4,800 4,704
Harris County TX Toll Road Revenue 1.361% 8/15/17 9,750 9,761
Illinois GO 4.511% 3/1/15 7,780 8,098
Illinois GO 4.961% 3/1/16 25,550 27,598
Illinois GO 5.365% 3/1/17 16,540 18,178
JobsOhio Beverage System Statewide Liquor Profits        
Revenue 1.570% 1/1/17 2,000 2,028
JobsOhio Beverage System Statewide Liquor Profits        
Revenue 2.217% 1/1/19 1,850 1,823
Louisiana Local Government Environmental Facilities &        
Community Development Authority Revenue 2010-        
EGSL 3.220% 2/1/21 29,250 30,626
Louisiana Local Government Environmental Facilities &        
Community Development Authority Revenue 2010-        
ELL 3.450% 2/1/22 13,800 14,656
6 Mississippi GO (Nissan North America, Inc. Project) 0.870% 11/1/17 12,180 12,213
6 New Mexico Educational Assistance Foundation 2013-1 0.870% 1/2/25 30,705 30,565
6 South Carolina Public Service Authority Revenue 1.045% 6/1/15 20,000 20,075
University of California Revenue 2.054% 5/15/18 3,400 3,461
University of California Revenue 1.745% 5/15/19 6,250 6,151
6 University of California Revenue 0.750% 7/1/41 19,500 19,501
 
Total Taxable Municipal Bonds (Cost $293,169)       298,420
 
Tax-Exempt Municipal Bonds (1.0%)        
Arizona Transportation Board Highway Revenue 5.000% 7/1/36 4,320 4,651
Arizona Transportation Board Highway Revenue 5.000% 7/1/37 8,825 9,476
Arizona Transportation Board Highway Revenue 5.000% 7/1/38 5,430 5,807
Bay Area Toll Authority California Toll Bridge Revenue        
(San Francisco Bay Area) 5.000% 4/1/43 4,120 4,286
Calhoun County TX Navigation Industrial Development        
Authority Port Revenue (BP plc) VRDO 0.090% 2/7/14 10,000 10,000
California GO 5.000% 4/1/43 8,010 8,381
16 California Housing Finance Agency Multifamily Housing        
Revenue VRDO 0.050% 2/7/14 14,235 14,235
Cary NC Combined Enterprise System Revenue 5.000% 12/1/42 6,730 7,289
Contra Costa CA Community College District GO 5.000% 8/1/38 5,035 5,393
District of Columbia Water & Sewer Authority Public        
Utility Revenue 5.000% 10/1/37 11,365 12,224
Houston TX Community College System GO 5.000% 2/15/43 7,180 7,664
Houston TX Utility System Revenue 5.000% 11/15/38 3,435 3,690
Los Angeles CA Department of Water & Power        
Revenue 5.000% 7/1/37 4,215 4,520
Los Angeles CA Department of Water & Power        
Revenue 5.000% 7/1/43 11,150 11,850
Los Angeles CA Wastewater System Revenue 5.000% 6/1/35 10,320 11,184
7 Louisiana Public Facilities Authority Dock & Wharf        
Revenue (Impala Warehousing LLC Project) 6.500% 7/1/36 6,700 6,220
Massachusetts GO 5.000% 8/1/37 17,695 19,034
Massachusetts GO 5.000% 8/1/41 35,390 37,782
Massachusetts School Building Authority Dedicated        
Sales Tax Revenue 5.000% 5/15/38 8,845 9,561
Massachusetts School Building Authority Dedicated        
Sales Tax Revenue 5.000% 10/15/41 8,490 9,019
Massachusetts School Building Authority Dedicated        
Sales Tax Revenue 5.000% 5/15/43 5,960 6,370
New York City NY GO 5.000% 3/1/37 3,535 3,760
New York City NY Industrial Development Agency        
Special Facility Revenue (American Airlines Inc. John        
F. Kennedy International Airport Project) 7.500% 8/1/16 8,685 9,227

 

33

 

Vanguard® Short-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.000% 6/15/44 10,300 10,678
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.000% 6/15/45 6,865 7,180
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.000% 6/15/47 13,730 14,333
New York City NY Transitional Finance Authority Future        
Tax Revenue 5.000% 2/1/42 11,480 12,091
New York City NY Transitional Finance Authority Future        
Tax Revenue 5.000% 5/1/42 10,165 10,774
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.000% 2/15/42 7,095 7,454
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.000% 3/15/42 10,640 11,183
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.000% 2/15/43 3,540 3,732
New York State Environmental Facilities Corp. Revenue        
(State Revolving Funds) 5.000% 11/15/38 9,715 10,517
San Antonio TX Water Revenue 5.000% 5/15/40 17,880 19,182
San Diego CA Community College District GO 5.000% 8/1/43 23,825 25,344
St. Louis MO Metropolitan Sewer District Wastewater        
System Revenue 5.000% 5/1/42 17,955 19,323
University of California Revenue 5.000% 5/15/36 5,430 5,882
University of California Revenue 5.000% 5/15/39 10,720 11,518
University of Colorado Enterprise System Revenue 5.000% 6/1/37 5,060 5,430
University of Virginia Revenue 5.000% 6/1/43 10,590 11,554
University of Washington Revenue 5.000% 7/1/41 17,940 19,292
Washington GO 5.000% 8/1/37 20,051 21,772
Washington GO 5.000% 8/1/38 21,310 23,068
 
Total Tax-Exempt Municipal Bonds (Cost $455,694)       471,930
 
 
      Shares  
 
Convertible Preferred Stocks (0.0%)        
9 Lehman Brothers Holdings Inc. Pfd. (Cost $28,924) 7.250%   29,160 1
 
Temporary Cash Investment (1.3%)        
Money Market Fund (1.3%)        
17 Vanguard Market Liquidity Fund (Cost $631,523) 0.130%   631,522,655 631,523
 
Total Investments (99.8%) (Cost $47,692,783)       48,090,866
 
    Expiration    
    Date Contracts  
 
Liability for Options Written (0.0%)        
Call Options on 10-year U.S. Treasury Note Futures        
Contracts, Strike Price 125.50   2/21/14 1,526 (1,168)
Call Options on 10-year U.S. Treasury Note Futures        
Contracts, Strike Price 124.50   2/21/14 1,502 (2,206)
Put Options on 10-year U.S. Treasury Note Futures        
 
Contracts, Strike Price 122.50   2/21/14 3,028 (95)
Total Liability for Options Written (Premiums Received $1,947)       (3,469)
 
Other Assets and Liabilities—Net (0.2%)       99,081
Net Assets (100%)       48,186,478

 

1 Securities with a value of $60,758,000 have been segregated as initial margin for open futures contracts.
2 Securities with a value of $4,768,000 have been segregated as initial margin for open cleared swap contracts.
3 Securities with a value of $4,495,000 have been segregated as collateral for open over-the-counter swap contracts.
4 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.

34

 

Vanguard® Short-Term Investment-Grade Fund
Schedule of Investments
January 31, 2014

5 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
6 Adjustable-rate security.
7 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 January 31, 2014, the aggregate value of these securities was $5,489,662,000, representing 11.4% of net assets.
8 Security made only partial principal and/or interest payments during the period ended January 31, 2014.
9 Non-income-producing security--security in default.
10 Scheduled principal and interest payments are guaranteed by Municipal Bond Insurance Association.
11 Guaranteed by the Government of Japan.
12 Guaranteed by multiple countries.
13 Guaranteed by the Federal Republic of Germany.
14 Guaranteed by the Republic of Austria.
15 Guaranteed by the State of Qatar.
16 Scheduled principal and interest payments are guaranteed by bank letter of credit.
17 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
GO—General Obligation Bond.
REIT—Real Estate Investment Trust.
VRDO—Variable Rate Demand Obligation.

35

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
 
U.S. Government and Agency Obligations (4.2%)        
U.S. Government Securities (4.2%)        
1,2 United States Treasury Note/Bond 2.625% 4/30/16 4,700 4,931
  United States Treasury Note/Bond 0.750% 1/15/17 535,000 536,252
  United States Treasury Note/Bond 0.750% 3/31/18 15,750 15,460
1 United States Treasury Note/Bond 0.625% 4/30/18 133,378 130,043
1 United States Treasury Note/Bond 2.750% 2/15/19 6,395 6,781
  United States Treasury Note/Bond 1.250% 4/30/19 3,000 2,948
1,3 United States Treasury Note/Bond 3.625% 8/15/19 1,530 1,688
          698,103
Nonconventional Mortgage-Backed Securities (0.0%)        
4,5,6 Freddie Mac Non Gold Pool 2.375% 8/1/32 497 516
4,5,6 Freddie Mac Non Gold Pool 2.518% 9/1/32 188 194
 
          710
 
Total U.S. Government and Agency Obligations (Cost $695,475)       698,813
 
Asset-Backed/Commercial Mortgage-Backed Securities (11.5%)        
5,7 Ally Auto Receivables Trust 2010-3 2.690% 2/15/17 3,250 3,268
5 Ally Auto Receivables Trust 2012-1 1.210% 7/15/16 5,550 5,595
5 Ally Auto Receivables Trust 2012-SN1 0.700% 12/21/15 2,500 2,501
5 Ally Auto Receivables Trust 2013-SN1 0.900% 5/22/17 4,000 4,003
5,7 Ally Master Owner Trust Series 2010-2 4.250% 4/15/17 1,035 1,079
5,7 Ally Master Owner Trust Series 2010-2 4.590% 4/15/17 3,280 3,394
4,5 Ally Master Owner Trust Series 2010-4 1.230% 8/15/17 39,470 39,819
4,5,7 Ally Master Owner Trust Series 2010-4 1.710% 8/15/17 8,100 8,204
4,5,7 Ally Master Owner Trust Series 2010-4 2.110% 8/15/17 6,160 6,267
5 Ally Master Owner Trust Series 2012-3 1.210% 6/15/17 10,900 10,967
5 Ally Master Owner Trust Series 2012-5 1.540% 9/15/19 120 120
4,5 Ally Master Owner Trust Series 2014-1 0.000% 1/15/19 3,050 3,050
5 Ally Master Owner Trust Series 2014-1 1.290% 1/15/19 3,500 3,499
4,5,7 American Express Credit Account Secured Note Trust        
  2004-2 0.830% 12/15/16 1,000 1,000
4,5 American Express Credit Account Secured Note Trust        
  2012-4 0.710% 5/15/20 7,000 6,965
4,5 American Express Issuance Trust II 2013-1 0.440% 2/15/19 13,000 12,945
5,7 Americold 2010 LLC Trust Series 2010-ART 4.954% 1/14/29 6,000 6,630
5,7 Americold 2010 LLC Trust Series 2010-ART 6.811% 1/14/29 3,540 4,064
5 AmeriCredit Automobile Receivables Trust 2013-1 1.570% 1/8/19 720 711
5 AmeriCredit Automobile Receivables Trust 2013-2 1.790% 3/8/19 3,100 3,100
5 AmeriCredit Automobile Receivables Trust 2013-3 2.380% 6/10/19 1,500 1,518
5 AmeriCredit Automobile Receivables Trust 2013-3 3.000% 7/8/19 2,500 2,524
5 AmeriCredit Automobile Receivables Trust 2013-4 2.720% 9/9/19 1,660 1,690
5 AmeriCredit Automobile Receivables Trust 2013-4 3.310% 10/8/19 2,230 2,287
5 AmeriCredit Automobile Receivables Trust 2013-5 2.290% 11/8/19 1,470 1,478
5 AmeriCredit Automobile Receivables Trust 2013-5 2.860% 12/8/19 1,655 1,660
4,5,7 Arkle Master Issuer plc Series 2010-1 1.488% 5/17/60 14,170 14,292
4,5,7 Arran Residential Mortgages Funding 2010-1 plc 1.638% 5/16/47 6,502 6,572
4,5,7 Arran Residential Mortgages Funding 2011-1 plc 1.688% 11/19/47 4,998 5,057
5,7 Aventura Mall Trust 2013-AVM 3.743% 12/5/32 1,100 1,147
5,7 BAMLL Commercial Mortgage Securities Trust 2012-        
  PARK 2.959% 12/10/30 4,975 4,776
5 Banc of America Commercial Mortgage Trust 2006-4 5.634% 7/10/46 24,950 27,067
5 Banc of America Commercial Mortgage Trust 2006-5 5.415% 9/10/47 4,021 4,398
5 Banc of America Commercial Mortgage Trust 2006-6 5.347% 10/10/45 4,391 4,809
5 Banc of America Commercial Mortgage Trust 2007-2 5.584% 4/10/49 4,292 4,741
5 Banc of America Commercial Mortgage Trust 2007-2 5.635% 4/10/49 11,887 13,210
5 Banc of America Commercial Mortgage Trust 2008-1 6.171% 2/10/51 9,527 10,595
5 Banc of America Commercial Mortgage Trust 2008-1 6.215% 2/10/51 24,812 28,324
4,5,7 Bank of America Student Loan Trust 2010-1A 1.039% 2/25/43 14,242 14,333
4,5 Bank One Issuance Trust Series 2004-C2 0.960% 2/15/17 1,200 1,201
5,7 Beacon Container Finance LLC 2012-1A 3.720% 9/20/27 3,259 3,268
5 Bear Stearns Commercial Mortgage Securities Trust        
  2005-PWR7 4.945% 2/11/41 393 393

 

36

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
5 Bear Stearns Commercial Mortgage Securities Trust        
  2005-PWR9 4.943% 9/11/42 1,320 1,389
5 Bear Stearns Commercial Mortgage Securities Trust        
  2006-PWR13 5.533% 9/11/41 2,391 2,618
5 Bear Stearns Commercial Mortgage Securities Trust        
  2007-PWR16 5.706% 6/11/40 22,140 24,872
5 Bear Stearns Commercial Mortgage Securities Trust        
  2007-PWR17 5.650% 6/11/50 12,223 13,586
5 Bear Stearns Commercial Mortgage Securities Trust        
  2007-TOP28 5.710% 9/11/42 3,863 4,356
4,5 Brazos Higher Education Authority Inc. Series 2005-3 0.446% 6/25/26 5,720 5,517
4,5 Brazos Higher Education Authority Inc. Series 2010-1 1.138% 5/25/29 2,896 2,926
4,5 Brazos Higher Education Authority Inc. Series 2011-1 1.038% 2/25/30 17,533 17,656
5,7 CAL Funding II Ltd. Series 2012-1A 3.470% 10/25/27 2,188 2,173
5,7 CAL Funding II Ltd. Series 2013-1A 3.350% 3/27/28 3,254 3,226
5 Capital Auto Receivables Asset Trust 2013-1 0.970% 1/22/18 6,550 6,518
5 Capital Auto Receivables Asset Trust 2013-1 1.290% 4/20/18 1,550 1,543
5 Capital Auto Receivables Asset Trust 2013-1 1.740% 10/22/18 1,700 1,696
5 Capital Auto Receivables Asset Trust 2013-3 3.690% 2/20/19 6,485 6,662
5 Capital Auto Receivables Asset Trust 2013-4 1.470% 7/20/18 5,020 5,026
5 Capital Auto Receivables Asset Trust 2013-4 2.060% 10/22/18 3,400 3,408
5 Capital Auto Receivables Asset Trust 2013-4 2.670% 2/20/19 3,045 3,050
5 Capital Auto Receivables Asset Trust 2013-4 3.220% 5/20/19 1,775 1,779
5 Capital Auto Receivables Asset Trust 2014-1 1.690% 10/22/18 2,500 2,509
5 Capital Auto Receivables Asset Trust 2014-1 2.220% 1/22/19 650 653
5 Capital Auto Receivables Asset Trust 2014-1 2.840% 4/22/19 1,000 1,005
5 Capital Auto Receivables Asset Trust 2014-1 3.390% 7/22/19 800 804
4,5 Capital One Multi-asset Execution Trust 2004-C2 1.210% 12/15/16 1,988 1,988
4,5 Capital One Multi-asset Execution Trust 2007-A1 0.210% 11/15/19 1,130 1,121
4,5 Capital One Multi-asset Execution Trust 2007-A2 0.240% 12/16/19 17,225 17,093
4,5 Capital One Multi-asset Execution Trust 2007-A5 0.200% 7/15/20 18,644 18,433
4,5,7 Cards II Trust 2012-4A 0.610% 9/15/17 5,910 5,915
5 Carmax Auto Owner Trust 2013-3 1.910% 3/15/19 2,920 3,000
5 Carmax Auto Owner Trust 2013-3 2.850% 2/18/20 1,785 1,815
5 CenterPoint Energy Transition Bond Co. IV LLC 2012-1 2.161% 10/15/21 9,100 9,139
5,7 CFCRE Commercial Mortgage Trust 2011-C1 5.545% 4/15/44 2,900 3,206
5,7 CFCRE Commercial Mortgage Trust 2011-C2 5.559% 12/15/47 5,260 5,790
4,5 Chase Issuance Trust 2007-C1 0.620% 4/15/19 6,100 6,028
4,5 Chase Issuance Trust 2012-A10 0.420% 12/16/19 6,000 5,981
5,7 Chrysler Capital Auto Receivables Trust 2013-AA 1.830% 3/15/19 915 916
5,7 Chrysler Capital Auto Receivables Trust 2013-AA 2.280% 7/15/19 1,100 1,101
5,7 Chrysler Capital Auto Receivables Trust 2013-AA 2.930% 8/17/20 1,190 1,191
5,7 CIT Equipment Collateral 2013-VT1 1.130% 7/20/20 3,145 3,151
4,5 Citibank Credit Card Issuance Trust 2005-C2 0.628% 3/24/17 1,520 1,517
4,5 Citibank Credit Card Issuance Trust 2008-A7 1.532% 5/20/20 11,800 12,298
4,5 Citibank Credit Card Issuance Trust 2013-A2 0.438% 5/26/20 10,000 9,952
5,7 Citibank Omni Master Trust 2009-A13 5.350% 8/15/18 13,931 14,290
4,5,7 Citibank Omni Master Trust 2009-A14A 2.910% 8/15/18 1,825 1,848
5,7 Citibank Omni Master Trust 2009-A17 4.900% 11/15/18 43,447 44,907
5 Citigroup Commercial Mortgage Trust 2006-C5 5.431% 10/15/49 6,650 7,260
5 Citigroup Commercial Mortgage Trust 2012-GC8 3.024% 9/10/45 5,770 5,625
5,7 Citigroup Commercial Mortgage Trust 2012-GC8 3.683% 9/10/45 2,017 2,018
5 Citigroup Commercial Mortgage Trust 2013-GC11 3.093% 4/10/46 5,650 5,440
5 Citigroup Commercial Mortgage Trust 2013-GC15 3.161% 9/10/46 3,300 3,445
5 Citigroup Commercial Mortgage Trust 2013-GC15 3.942% 9/10/46 700 739
5,7 CKE Restaurant Holdings Inc. 2013-1A 4.474% 3/20/43 2,684 2,721
5,7 CLI Funding V LLC 2013-1A 2.830% 3/18/28 5,410 5,289
5 COMM 2006-C8 Mortgage Trust 5.292% 12/10/46 5,522 6,053
5 COMM 2006-C8 Mortgage Trust 5.306% 12/10/46 16,000 17,494
5 COMM 2007-C9 Mortgage Trust 5.800% 12/10/49 268 269
5 COMM 2007-C9 Mortgage Trust 5.800% 12/10/49 3,620 4,094
5 COMM 2012-CCRE2 Mortgage Trust 3.147% 8/15/45 2,700 2,656
5 COMM 2012-CCRE2 Mortgage Trust 3.791% 8/15/45 3,900 3,924
5 COMM 2012-CCRE3 Mortgage Trust 2.822% 10/15/45 2,855 2,738

 

37

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
5 COMM 2012-CCRE4 Mortgage Trust 2.853% 10/15/45 5,750 5,508
5 COMM 2012-CCRE5 Mortgage Trust 2.771% 12/10/45 2,700 2,565
5 COMM 2013-CCRE12 Mortgage Trust 3.623% 10/10/46 1,400 1,447
5 COMM 2013-CCRE13 Mortgage Trust 4.194% 10/10/46 6,375 6,676
5 COMM 2013-CCRE13 Mortgage Trust 4.757% 10/10/46 855 881
5 COMM 2013-CCRE13 Mortgage Trust 4.757% 10/10/46 1,560 1,552
5 COMM 2013-CCRE8 Mortgage Trust 3.612% 6/10/46 5,000 5,031
5 COMM 2013-CCRE9 Mortgage Trust 2.972% 8/10/46 1,700 1,761
5 COMM 2013-CCRE9 Mortgage Trust 3.795% 8/10/46 800 836
5 COMM 2013-LC13 Mortgage Trust 3.009% 8/10/46 3,180 3,297
5,7 COMM 2013-LC13 Mortgage Trust 3.774% 8/10/46 1,050 1,097
5 COMM 2013-LC6 Mortgage Trust 2.941% 1/10/46 3,800 3,644
5,7 COMM 2013-SFS Mortgage Trust 2.987% 4/12/35 6,500 6,156
5 COMM 2014-CCRE14 Mortgage Trust 3.147% 2/10/47 2,890 3,007
5 COMM 2014-CCRE14 Mortgage Trust 3.743% 2/10/47 1,520 1,589
5 COMM 2014-CCRE14 Mortgage Trust 4.236% 2/10/47 2,540 2,668
5 Commercial Mortgage Trust 2005-GG5 5.224% 4/10/37 8,150 8,557
5 Commercial Mortgage Trust 2006-GG7 5.820% 7/10/38 24,531 26,694
7 Commonwealth Bank of Australia 2.250% 3/16/17 10,450 10,797
7 Commonwealth Bank of Australia 1.875% 12/11/18 3,350 3,342
5 Credit Suisse Commercial Mortgage Trust Series 2006-        
  C3 5.791% 6/15/38 747 812
5 Credit Suisse Commercial Mortgage Trust Series 2007-        
  C1 5.361% 2/15/40 2,094 2,234
5 Credit Suisse Commercial Mortgage Trust Series 2008-        
  C1 6.039% 2/15/41 5,274 5,803
5,7 Cronos Containers Program Ltd. 2012-2A 3.810% 9/18/27 3,337 3,370
4,5 Discover Card Execution Note Trust 2012-A4 0.530% 11/15/19 4,555 4,564
5 Discover Card Execution Note Trust 2012-A6 1.670% 1/18/22 40,000 38,841
4,5 Discover Card Execution Note Trust 2013-A1 0.460% 8/17/20 18,000 17,927
7 DNB Boligkreditt AS 1.450% 3/21/18 3,300 3,262
5,7 Enterprise Fleet Financing LLC Series 2011-3 2.100% 5/20/17 5,242 5,302
5,7 Enterprise Fleet Financing LLC Series 2012-2 0.720% 4/20/18 5,002 5,002
5,7 Enterprise Fleet Financing LLC Series 2012-2 0.930% 4/20/18 2,200 2,200
5,7 Ford Credit Auto Lease Trust 2012-B 1.100% 12/15/15 2,200 2,208
5 Ford Credit Auto Lease Trust 2013-A 0.780% 4/15/16 1,800 1,803
5 Ford Credit Auto Lease Trust 2013-A 1.010% 5/15/16 4,000 4,010
5 Ford Credit Auto Lease Trust 2013-A 1.280% 6/15/16 3,050 3,051
5 Ford Credit Auto Owner Trust 2010-A 2.930% 11/15/15 1,000 1,021
5 Ford Credit Auto Owner Trust 2010-A 3.220% 3/15/16 1,210 1,230
5 Ford Credit Auto Owner Trust 2013-A 1.150% 7/15/18 1,850 1,848
5 Ford Credit Auto Owner Trust 2013-A 1.360% 10/15/18 900 899
5 Ford Credit Auto Owner Trust 2013-B 1.110% 10/15/18 1,700 1,780
5 Ford Credit Auto Owner Trust 2013-B 1.320% 1/15/19 800 849
5 Ford Credit Auto Owner Trust 2013-B 1.820% 11/15/19 600 656
5 Ford Credit Auto Owner Trust 2013-C 1.680% 11/15/18 2,000 2,018
5 Ford Credit Auto Owner Trust 2013-C 1.910% 3/15/19 1,650 1,677
5 Ford Credit Auto Owner Trust 2013-C 2.500% 1/15/20 1,850 1,874
5 Ford Credit Auto Owner Trust 2013-D 1.540% 3/15/19 2,800 2,805
5 Ford Credit Auto Owner Trust 2013-D 1.720% 7/15/19 2,890 2,896
5,7 Ford Credit Floorplan Master Owner Trust A Series        
  2010-3 4.990% 2/15/17 8,785 9,254
5 Ford Credit Floorplan Master Owner Trust A Series        
  2012-2 1.920% 1/15/19 2,000 2,041
5 Ford Credit Floorplan Master Owner Trust A Series        
  2012-4 0.940% 9/15/16 2,600 2,603
5 Ford Credit Floorplan Master Owner Trust A Series        
  2012-4 1.390% 9/15/16 6,100 6,155
5 Ford Credit Floorplan Master Owner Trust A Series        
  2012-5 1.490% 9/15/19 24,000 25,306
5 Ford Credit Floorplan Master Owner Trust A Series        
  2012-5 1.690% 9/15/19 1,600 1,699
5 Ford Credit Floorplan Master Owner Trust A Series        
  2012-5 2.140% 9/15/19 1,900 2,049

 

38

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
5 Ford Credit Floorplan Master Owner Trust A Series        
  2013-1 1.370% 1/15/18 5,700 5,855
5 Ford Credit Floorplan Master Owner Trust A Series        
  2013-1 1.820% 1/15/18 2,100 2,176
5 Ford Credit Floorplan Master Owner Trust A Series        
  2013-3 1.740% 6/15/17 820 840
5 Ford Credit Floorplan Master Owner Trust A Series        
  2013-4 2.100% 6/15/20 670 732
5 Ford Credit Floorplan Master Owner Trust A Series        
  2013-4 2.290% 6/15/20 720 713
5 Ford Credit Floorplan Master Owner Trust A Series        
  2013-4 2.790% 6/15/20 290 290
5,7 FRS I LLC 2013-1A 1.800% 4/15/43 1,427 1,418
5,7 FRS I LLC 2013-1A 3.080% 4/15/43 6,243 6,140
4,5 GE Capital Credit Card Master Note Trust Series 2011-2 1.160% 5/15/19 10,800 10,814
5 GE Capital Credit Card Master Note Trust Series 2012-2 2.220% 1/15/22 30,000 30,017
5 GE Capital Credit Card Master Note Trust Series 2012-6 1.360% 8/17/20 2,300 2,274
4,5 GE Dealer Floorplan Master Note Trust Series 2012-2 0.907% 4/22/19 13,000 13,720
4,5 GE Dealer Floorplan Master Note Trust Series 2012-4 0.597% 10/20/17 10,000 10,141
5,7 Golden Credit Card Trust 2012-2A 1.770% 1/15/19 18,000 18,300
4,5,7 Golden Credit Card Trust 2012-3A 0.610% 7/17/17 12,100 12,104
4,5,7 Golden Credit Card Trust 2013-1A 0.410% 2/15/18 9,000 8,987
5,7 Great America Leasing Receivables 2011-1 2.340% 4/15/16 942 950
5,7 Great America Leasing Receivables 2013-1 1.160% 5/15/18 2,500 2,575
5 GS Mortgage Securities Trust 2006-GG6 5.506% 4/10/38 1,092 1,091
5 GS Mortgage Securities Trust 2006-GG6 5.553% 4/10/38 13,213 14,181
5,7 GS Mortgage Securities Trust 2010-C2 5.225% 12/10/43 1,370 1,473
5,7 GS Mortgage Securities Trust 2011-GC3 5.543% 3/10/44 2,650 2,890
5,7 GS Mortgage Securities Trust 2012-ALOHA 3.551% 4/10/34 4,100 4,108
5,7 GS Mortgage Securities Trust 2012-BWTR 2.954% 11/5/34 6,450 6,110
5,7 GS Mortgage Securities Trust 2012-GC6 4.948% 1/10/45 1,025 1,117
5 GS Mortgage Securities Trust 2013-GCJ12 3.135% 6/10/46 3,700 3,584
5 GS Mortgage Securities Trust 2013-GCJ12 3.777% 6/10/46 1,550 1,484
5 GS Mortgage Securities Trust 2013-GCJ14 2.995% 8/10/46 2,000 2,068
5 GS Mortgage Securities Trust 2013-GCJ14 3.817% 8/10/46 800 839
5 Harley-Davidson Motorcycle Trust 2013-1 0.870% 7/15/19 3,500 3,642
5,7 Hertz Vehicle Financing LLC 2010-1A 3.740% 2/25/17 7,930 8,328
5,7 Hertz Vehicle Financing LLC 2011-1A 3.290% 3/25/18 7,500 7,889
5,7 Hertz Vehicle Financing LLC 2013-1A 1.830% 8/25/19 17,800 17,488
5,7 Hilton USA Trust 2013-HLT 2.662% 11/5/30 3,120 3,141
5,7 Hilton USA Trust 2013-HLT 3.367% 11/5/30 3,240 3,279
5,7 Hilton USA Trust 2013-HLT 3.714% 11/5/30 1,455 1,478
5,7 Hyundai Auto Lease Securitization Trust 2013-A 0.770% 10/17/16 2,000 2,000
5 Hyundai Auto Receivables Trust 2012-B 1.950% 10/15/18 1,700 1,737
5 Hyundai Auto Receivables Trust 2013-B 1.450% 2/15/19 1,000 1,000
5 Hyundai Auto Receivables Trust 2013-B 2.480% 9/16/19 1,200 1,200
5 Hyundai Auto Receivables Trust 2013-C 2.480% 3/15/19 2,350 2,410
5 Hyundai Auto Receivables Trust 2013-C 3.090% 1/15/20 1,900 1,956
5 Hyundai Auto Receivables Trust 2014-A 2.020% 8/15/19 1,700 1,700
5 Hyundai Auto Receivables Trust 2014-A 2.530% 7/15/20 1,150 1,150
4,5,7 Hyundai Floorplan Master Owner Trust Series 2013-1 0.510% 5/15/18 4,000 4,008
4,5,7 Hyundai Floorplan Master Owner Trust Series 2013-1 0.810% 5/15/18 1,400 1,394
5,7 Icon Brands Holdings LLC 2012-1 4.229% 1/25/43 4,650 4,648
4 Illinois Student Assistance Commission Series 2010-1 1.289% 4/25/22 10,723 10,879
4,5,7 Invitation Homes 2013-SFR1 Trust 1.309% 12/17/30 4,933 4,936
5,7 Irvine Core Office Trust 2013-IRV 2.068% 5/15/48 5,846 5,648
5,7 Irvine Core Office Trust 2013-IRV 3.173% 5/15/48 6,000 5,770
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2006-LDP6 5.471% 4/15/43 4,803 5,193
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2006-LDP6 5.475% 4/15/43 19,249 20,757

 

39

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2006-LDP7 5.873% 4/15/45 3,662 4,012
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-C1 5.716% 2/15/51 25,084 27,644
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-CIBC20 5.746% 2/12/51 4,486 5,020
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-LDP10 5.439% 1/15/49 3,294 3,641
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2007-LDP12 5.850% 2/15/51 2,849 3,208
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C1 4.608% 6/15/43 10,030 10,925
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 3.616% 11/15/43 1,250 1,326
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 4.070% 11/15/43 1,175 1,244
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 5.508% 11/15/43 2,313 2,532
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2010-C2 5.508% 11/15/43 2,730 2,924
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C3 4.388% 2/15/46 6,550 7,149
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C3 4.717% 2/15/46 4,990 5,467
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C3 5.360% 2/15/46 3,170 3,478
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2011-C5 5.314% 8/15/46 4,000 4,518
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2012-C8 2.829% 10/15/45 2,800 2,687
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2012-C8 3.424% 10/15/45 4,070 3,988
5,7 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2012-HSBC 3.093% 7/5/32 5,900 5,754
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 3.674% 12/15/46 980 1,017
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 4.944% 12/15/46 2,135 2,229
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-C16 5.008% 12/15/46 960 979
5 JP Morgan Chase Commercial Mortgage Securities        
  Trust 2013-LC11 2.960% 4/15/46 5,378 5,149
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C12 3.664% 7/15/45 5,000 5,048
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C12 4.026% 7/15/45 5,000 5,104
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C14 3.019% 8/15/46 1,300 1,349
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C14 3.761% 8/15/46 1,400 1,467
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 2.977% 11/15/45 2,300 2,383
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 3.659% 11/15/45 400 415
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 4.927% 11/15/45 1,750 1,819
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C15 5.081% 11/15/45 1,300 1,343
5 JPMBB Commercial Mortgage Securities Trust 2013-        
  C17 4.199% 1/15/47 2,720 2,847
4,5 Kentucky Higher Education Student Loan Corp. 2013-2 0.770% 9/1/28 3,400 3,365
4,5,7 Lanark Master Issuer plc 2012-2A 1.638% 12/22/54 2,008 2,038
4,5,7 Lanark Master Issuer plc 2013-1A 0.738% 12/22/54 3,800 3,788
5 LB-UBS Commercial Mortgage Trust 2006-C3 5.641% 3/15/39 6,935 7,500

 

40

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
5 LB-UBS Commercial Mortgage Trust 2006-C6 5.342% 9/15/39 3,470 3,790
5 LB-UBS Commercial Mortgage Trust 2006-C7 5.347% 11/15/38 25,211 27,614
5 LB-UBS Commercial Mortgage Trust 2007-C7 5.866% 9/15/45 15,875 17,915
5,7 Macquarie Equipment Funding Trust 2012-A 0.850% 10/22/18 8,570 8,589
5,7 Madison Avenue Trust 2013-650M 3.843% 10/12/32 1,245 1,296
5,7 Master Credit Card Trust 2012-2A 1.970% 4/21/17 1,400 1,401
5,7 Master Credit Card Trust 2013-3A 2.280% 1/22/18 2,100 2,077
4,5 MBNA Credit Card Master Note Trust 2004-A3 0.420% 8/16/21 4,990 4,939
4,5 MBNA Credit Card Master Note Trust 2004-C2 1.060% 11/15/16 16,655 16,676
5,7 Mercedes-Benz Master Owner Trust 2012-A 0.790% 11/15/17 15,000 15,000
5 Merrill Lynch Mortgage Trust 2006-C2 5.739% 8/12/43 806 885
5 Merrill Lynch Mortgage Trust 2008-C1 5.690% 2/12/51 16,140 18,074
5 ML-CFC Commercial Mortgage Trust 2006-2 5.876% 6/12/46 2,785 3,055
5,7 MMAF Equipment Finance LLC 2012-A 1.980% 6/10/32 2,880 2,921
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-C5 3.176% 8/15/45 5,395 5,311
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-C5 3.792% 8/15/45 2,050 2,064
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-C6 2.858% 11/15/45 5,740 5,499
5,7 Morgan Stanley Bank of America Merrill Lynch Trust        
  2012-CKSV 3.277% 10/15/30 6,000 5,668
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C11 3.085% 8/15/46 1,800 1,872
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C12 3.824% 10/15/46 810 850
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C7 2.918% 2/15/46 2,470 2,366
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C7 3.214% 2/15/46 2,000 1,899
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2013-C9 3.102% 5/15/46 5,710 5,494
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2014-C14 4.064% 1/15/47 2,300 2,369
5 Morgan Stanley Bank of America Merrill Lynch Trust        
  2014-C14 4.384% 1/15/47 1,600 1,648
5 Morgan Stanley Capital I Trust 2006-HQ9 5.728% 7/12/44 6,571 7,195
5 Morgan Stanley Capital I Trust 2006-IQ12 5.319% 12/15/43 3,638 3,982
5 Morgan Stanley Capital I Trust 2007-IQ15 5.908% 6/11/49 7,580 8,485
5 Morgan Stanley Capital I Trust 2007-IQ16 5.688% 12/12/49 7,234 7,996
5 Morgan Stanley Capital I Trust 2012-C4 3.773% 3/15/45 2,440 2,474
5,7 Morgan Stanley Capital I Trust 2012-STAR 3.201% 8/5/34 6,000 5,832
4,5,7 Motor 2012 plc 0.659% 2/25/20 1,090 1,090
5,7 Motor 2012 plc 1.286% 2/25/20 2,615 2,622
7 National Australia Bank Ltd. 2.000% 6/20/17 6,600 6,746
4,5,7 Navistar Financial Dealer Note Master Owner Trust        
  Series 2013-1 0.828% 1/25/18 6,400 6,410
5 Nissan Auto Lease Trust 2013-A 0.740% 10/15/18 2,000 1,999
4,5 Nissan Master Owner Trust Receivables Series 2013-A 0.460% 2/15/18 9,000 8,986
7 Norddeutsche Landesbank Girozentrale 2.000% 2/5/19 5,500 5,483
4 North Carolina State Education Assistance Authority        
  2011-1 1.139% 1/26/26 5,384 5,411
5 Royal Bank of Canada 1.200% 9/19/18 5,750 5,720
5 Santander Drive Auto Receivables Trust 2013-1 1.760% 1/15/19 1,070 1,069
5 Santander Drive Auto Receivables Trust 2013-2 1.330% 3/15/18 1,350 1,359
5 Santander Drive Auto Receivables Trust 2013-2 1.950% 3/15/19 5,500 5,535
5 Santander Drive Auto Receivables Trust 2013-4 1.590% 10/15/18 2,555 2,561
5 Santander Drive Auto Receivables Trust 2013-4 2.360% 4/15/20 2,385 2,395
5 Santander Drive Auto Receivables Trust 2013-5 1.550% 10/15/18 4,395 4,399
5 Santander Drive Auto Receivables Trust 2013-5 2.250% 6/17/19 2,780 2,805
4,5,7 Silverstone Master Issuer plc 2010-1A 1.736% 1/21/55 18,475 18,810
4,5 SLM Student Loan Trust 2005-5 0.339% 4/25/25 4,298 4,276
4,5 SLM Student Loan Trust 2006-5 0.349% 1/25/27 3,000 2,945
4,5 SLM Student Loan Trust 2006-6 0.349% 10/27/25 6,500 6,334

 

41

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
4,5 SLM Student Loan Trust 2007-1 0.329% 1/26/26 24,625 23,767
5,7 SLM Student Loan Trust 2011-A 4.370% 4/17/28 1,700 1,822
5,7 SLM Student Loan Trust 2011-B 3.740% 2/15/29 10,500 11,247
4,5,7 SLM Student Loan Trust 2011-C 1.560% 12/15/23 2,512 2,532
5,7 SLM Student Loan Trust 2011-C 4.540% 10/17/44 5,450 5,922
4,5,7 SLM Student Loan Trust 2012-B 1.260% 12/15/21 1,989 1,994
5,7 SLM Student Loan Trust 2012-B 3.480% 10/15/30 4,550 4,765
4,5,7 SLM Student Loan Trust 2012-E 0.910% 10/16/23 8,932 8,942
4,5,7 SLM Student Loan Trust 2013-1 1.210% 5/17/27 5,400 5,316
5,7 SLM Student Loan Trust 2013-1 2.500% 3/15/47 1,800 1,683
4,5 SLM Student Loan Trust 2013-6 0.808% 6/26/28 4,500 4,521
5,7 SLM Student Loan Trust 2013-B 1.850% 6/17/30 3,000 2,913
5,7 SLM Student Loan Trust 2013-B 3.000% 5/16/44 1,400 1,327
5,7 SLM Student Loan Trust 2013-C 3.500% 6/15/44 2,000 1,943
4,5 SLM Student Loan Trust 2014-1 0.799% 2/26/29 1,150 1,150
5,7 SMART ABS Series 2011-1US Trust 2.520% 11/14/16 4,110 4,148
5,7 SMART ABS Series 2011-2US Trust 2.310% 4/14/17 1,750 1,773
5 SMART ABS Series 2012-4US Trust 0.970% 3/14/17 5,700 5,696
5 SMART ABS Series 2012-4US Trust 1.250% 8/14/18 2,000 1,984
5 SMART ABS Series 2013-1US Trust 1.050% 10/14/18 4,200 4,156
5,7 Sonic Capital LLC 2011-1A 5.438% 5/20/41 3,156 3,365
4,5 South Carolina Student Loan Corp. Revenue 2010-1 1.239% 7/25/25 11,550 11,669
7 SpareBank 1 Boligkreditt AS 1.250% 5/2/18 2,000 1,961
5,7 SpareBank 1 Boligkreditt AS 1.750% 11/15/20 10,400 10,079
7 Stadshypotek AB 1.250% 5/23/18 1,930 1,895
5,7 Textainer Marine Containers Ltd. 2011-1A 4.700% 6/15/26 2,077 2,077
4,5,7 Trade Maps_2013-1A 0.861% 12/10/18 6,460 6,470
4,5,7 Trade Maps_2013-1A 1.411% 12/10/18 1,225 1,231
4,5,7 Trade Maps_2013-1A 2.411% 12/10/18 670 676
5 UBS Commercial Mortgage Trust 2012-C1 4.171% 5/10/45 1,200 1,231
5,7 UBS-BAMLL Trust 2012-WRM 3.663% 6/10/30 6,000 5,900
5 UBS-Barclays Commercial Mortgage Trust 2012-C4 2.850% 12/10/45 5,055 4,803
5,7 VNO 2012-6AVE Mortgage Trust 2.996% 11/15/30 8,000 7,639
5,7 VNO 2013-PENN Mortgage Trust 3.808% 12/13/29 1,100 1,152
5,7 VNO 2013-PENN Mortgage Trust 3.947% 12/13/29 650 666
5,7 VNO 2013-PENN Mortgage Trust 3.947% 12/13/29 490 496
5,7 Volvo Financial Equipment LLC Series 2012-1 2.380% 9/16/19 1,200 1,221
5 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C27 5.765% 7/15/45 11,258 12,149
5 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C28 5.559% 10/15/48 4,528 4,978
5 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C28 5.572% 10/15/48 25,425 27,814
5 Wachovia Bank Commercial Mortgage Trust Series        
  2006-C29 5.297% 11/15/48 3,667 4,024
5 Wachovia Bank Commercial Mortgage Trust Series        
  2007-C33 5.922% 2/15/51 4,346 4,787
5 Wachovia Bank Commercial Mortgage Trust Series        
  2007-C34 5.569% 5/15/46 4,817 4,808
5 Wells Fargo Commercial Mortgage Trust 2012-LC5 2.918% 10/15/45 3,950 3,810
5 Wells Fargo Commercial Mortgage Trust 2012-LC5 3.539% 10/15/45 1,610 1,584
5 Wells Fargo Commercial Mortgage Trust 2013-LC12 3.928% 7/15/46 750 790
7 Westpac Banking Corp. 1.850% 11/26/18 6,285 6,261
5,7 Westpac Banking Corp. 1.250% 12/14/18 2,450 2,430
5,7 WFRBS Commercial Mortgage Trust 2011-C3 4.375% 3/15/44 5,450 5,890
5 WFRBS Commercial Mortgage Trust 2012-C10 2.875% 12/15/45 4,930 4,708
5 WFRBS Commercial Mortgage Trust 2012-C7 3.431% 6/15/45 5,400 5,439
5 WFRBS Commercial Mortgage Trust 2012-C7 4.090% 6/15/45 4,170 4,301
5 WFRBS Commercial Mortgage Trust 2012-C8 3.001% 8/15/45 3,300 3,205
5 WFRBS Commercial Mortgage Trust 2012-C9 2.870% 11/15/45 5,650 5,422
5 WFRBS Commercial Mortgage Trust 2012-C9 3.388% 11/15/45 2,870 2,805
5 WFRBS Commercial Mortgage Trust 2013-C13 3.345% 5/15/45 2,220 2,147
5 WFRBS Commercial Mortgage Trust 2013-C15 2.900% 8/15/46 600 619
5 WFRBS Commercial Mortgage Trust 2013-C15 3.720% 8/15/46 1,900 1,985

 

42

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
5 WFRBS Commercial Mortgage Trust 2013-C17 3.558% 12/15/46 357 367
5 WFRBS Commercial Mortgage Trust 2013-C18 3.027% 12/15/46 3,365 3,488
5 WFRBS Commercial Mortgage Trust 2013-C18 3.676% 12/15/46 1,895 1,961
5 WFRBS Commercial Mortgage Trust 2013-C18 4.162% 12/15/46 6,340 6,613
5 WFRBS Commercial Mortgage Trust 2013-C18 4.676% 12/15/46 1,085 1,111
5 World Financial Network Credit Card Master Note Trust        
  Series 2013-A 1.610% 12/15/21 4,000 3,945
4,5,7 World Omni Master Owner Trust 2013-1 0.510% 2/15/18 4,000 4,002
 
Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $1,875,836)     1,917,837
 
Corporate Bonds (76.9%)        
Finance (27.7%)        
  Banking (17.5%)        
  Abbey National Treasury Services plc 3.050% 8/23/18 3,950 4,084
  AgriBank FCB 9.125% 7/15/19 5,000 6,434
  American Express Bank FSB 6.000% 9/13/17 4,250 4,909
  American Express Centurion Bank 5.950% 6/12/17 10,000 11,436
  American Express Centurion Bank 6.000% 9/13/17 5,060 5,845
  American Express Co. 5.500% 9/12/16 6,070 6,742
  American Express Co. 6.150% 8/28/17 17,000 19,676
  American Express Co. 7.000% 3/19/18 12,000 14,376
  American Express Co. 2.650% 12/2/22 18,679 17,660
  American Express Credit Corp. 2.800% 9/19/16 2,700 2,820
  Associates Corp. of North America 6.950% 11/1/18 8,855 10,639
  Australia & New Zealand Banking Group Ltd. 1.875% 10/6/17 8,000 8,096
7 Australia & New Zealand Banking Group Ltd. 4.875% 1/12/21 6,817 7,527
7 Banco de Credito del Peru 4.250% 4/1/23 5,000 4,609
  Bank of America Corp. 6.500% 8/1/16 6,375 7,168
  Bank of America Corp. 6.000% 9/1/17 1,750 2,001
  Bank of America Corp. 5.750% 12/1/17 4,000 4,546
  Bank of America Corp. 2.000% 1/11/18 7,500 7,502
  Bank of America Corp. 5.650% 5/1/18 4,500 5,130
  Bank of America Corp. 2.600% 1/15/19 9,000 9,048
  Bank of America Corp. 7.625% 6/1/19 13,000 16,100
  Bank of America Corp. 5.625% 7/1/20 19,340 22,020
  Bank of America Corp. 5.875% 1/5/21 16,010 18,445
  Bank of America Corp. 5.000% 5/13/21 15,285 16,746
  Bank of America Corp. 5.700% 1/24/22 17,000 19,366
  Bank of America Corp. 3.300% 1/11/23 29,267 27,954
  Bank of America Corp. 4.125% 1/22/24 25,000 25,255
  Bank of America NA 5.300% 3/15/17 8,877 9,847
  Bank of America NA 6.100% 6/15/17 5,000 5,695
  Bank of Montreal 1.400% 9/11/17 1,970 1,966
  Bank of Montreal 1.450% 4/9/18 5,800 5,720
  Bank of Montreal 2.375% 1/25/19 5,000 5,068
  Bank of Montreal 2.550% 11/6/22 30,000 28,106
  Bank of New York Mellon Corp. 5.500% 12/1/17 5,465 6,217
  Bank of New York Mellon Corp. 5.450% 5/15/19 6,580 7,628
  Bank of New York Mellon Corp. 4.600% 1/15/20 14,300 15,888
  Bank of New York Mellon Corp. 4.150% 2/1/21 9,000 9,749
  Bank of New York Mellon Corp. 3.550% 9/23/21 2,040 2,113
  Bank of New York Mellon Corp. 3.950% 11/18/25 10,000 10,189
  Bank of Nova Scotia 2.050% 10/30/18 26,275 26,282
  Bank of Nova Scotia 4.375% 1/13/21 8,500 9,379
7 Banque Federative du Credit Mutuel SA 2.500% 10/29/18 10,800 10,755
  Barclays Bank plc 6.750% 5/22/19 28,530 34,631
  Barclays Bank plc 5.125% 1/8/20 18,125 20,492
  BB&T Corp. 4.900% 6/30/17 5,300 5,825
  BB&T Corp. 6.850% 4/30/19 5,714 7,007
  BB&T Corp. 5.250% 11/1/19 12,000 13,614
  BB&T Corp. 3.950% 3/22/22 7,500 7,668
  Bear Stearns Cos. LLC 6.400% 10/2/17 5,500 6,398
  BNP Paribas SA 2.700% 8/20/18 4,000 4,073

 

43

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  BNP Paribas SA 2.400% 12/12/18 7,000 7,015
  BNP Paribas SA 5.000% 1/15/21 73,350 80,557
  BNP Paribas SA 3.250% 3/3/23 34,735 33,126
  BPCE SA 2.500% 12/10/18 14,875 14,893
  Capital One NA 1.500% 3/22/18 7,000 6,918
  Citigroup Inc. 6.000% 8/15/17 3,000 3,427
  Citigroup Inc. 6.125% 11/21/17 12,491 14,399
  Citigroup Inc. 6.125% 5/15/18 15,000 17,422
  Citigroup Inc. 8.500% 5/22/19 19,317 24,863
  Citigroup Inc. 5.375% 8/9/20 31,422 35,581
  Citigroup Inc. 4.500% 1/14/22 38,500 40,794
  Citigroup Inc. 3.375% 3/1/23 18,500 17,669
  Citigroup Inc. 3.875% 10/25/23 12,000 11,814
  Citigroup Inc. 5.500% 9/13/25 9,000 9,490
5,7,8 Colonial BancGroup Inc. 7.114% 5/29/49 17,340 2
7 Commerzbank AG 8.125% 9/19/23 19,000 20,853
  Commonwealth Bank of Australia 1.900% 9/18/17 7,750 7,849
  Commonwealth Bank of Australia 2.500% 9/20/18 7,000 7,150
7 Commonwealth Bank of Australia 5.000% 3/19/20 11,560 12,924
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 2.250% 1/14/19 4,000 4,001
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 4.500% 1/11/21 17,744 19,214
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 3.875% 2/8/22 44,100 45,031
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 3.950% 11/9/22 47,080 46,190
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 4.625% 12/1/23 70,232 71,033
  Credit Suisse 6.000% 2/15/18 3,692 4,287
  Credit Suisse 5.300% 8/13/19 24,588 28,032
  Credit Suisse 4.375% 8/5/20 14,000 15,221
  Discover Bank 7.000% 4/15/20 3,665 4,335
  First Niagara Financial Group Inc. 6.750% 3/19/20 4,720 5,473
  First Niagara Financial Group Inc. 7.250% 12/15/21 14,217 16,874
  FirstMerit Corp. 4.350% 2/4/23 9,000 9,054
  Goldman Sachs Group Inc. 6.250% 9/1/17 3,000 3,436
  Goldman Sachs Group Inc. 5.950% 1/18/18 3,880 4,415
  Goldman Sachs Group Inc. 2.375% 1/22/18 3,000 3,020
  Goldman Sachs Group Inc. 6.150% 4/1/18 10,225 11,744
  Goldman Sachs Group Inc. 2.900% 7/19/18 1,055 1,077
  Goldman Sachs Group Inc. 2.625% 1/31/19 41,500 41,539
  Goldman Sachs Group Inc. 7.500% 2/15/19 15,000 18,266
  Goldman Sachs Group Inc. 5.375% 3/15/20 17,155 19,167
  Goldman Sachs Group Inc. 6.000% 6/15/20 16,420 18,951
  Goldman Sachs Group Inc. 5.250% 7/27/21 37,857 41,299
  Goldman Sachs Group Inc. 5.750% 1/24/22 32,535 36,815
  Goldman Sachs Group Inc. 3.625% 1/22/23 8,300 8,092
  HSBC Bank USA NA 6.000% 8/9/17 5,055 5,767
  HSBC Bank USA NA 4.875% 8/24/20 39,478 42,864
  HSBC Holdings plc 5.100% 4/5/21 51,948 58,118
  HSBC Holdings plc 4.000% 3/30/22 26,100 27,029
  HSBC USA Inc. 5.000% 9/27/20 8,158 8,871
  Intesa Sanpaolo SPA 3.875% 1/16/18 16,591 17,038
  Intesa Sanpaolo SPA 3.875% 1/15/19 17,000 17,269
  Intesa Sanpaolo SPA 5.250% 1/12/24 6,000 6,113
  JPMorgan Chase & Co. 6.125% 6/27/17 3,000 3,427
  JPMorgan Chase & Co. 6.000% 1/15/18 6,000 6,910
  JPMorgan Chase & Co. 1.800% 1/25/18 8,100 8,083
  JPMorgan Chase & Co. 1.625% 5/15/18 3,395 3,347
  JPMorgan Chase & Co. 2.350% 1/28/19 3,500 3,493
  JPMorgan Chase & Co. 6.300% 4/23/19 10,650 12,604
  JPMorgan Chase & Co. 4.950% 3/25/20 21,496 24,004
  JPMorgan Chase & Co. 4.400% 7/22/20 18,510 19,973
  JPMorgan Chase & Co. 4.250% 10/15/20 20,480 21,850
  JPMorgan Chase & Co. 4.625% 5/10/21 22,450 24,357
  JPMorgan Chase & Co. 4.350% 8/15/21 14,235 15,146
  JPMorgan Chase & Co. 4.500% 1/24/22 25,000 26,601
  JPMorgan Chase & Co. 3.250% 9/23/22 23,500 22,725

 

44

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
JPMorgan Chase & Co. 3.200% 1/25/23 9,625 9,218
JPMorgan Chase Bank NA 6.000% 7/5/17 6,500 7,445
JPMorgan Chase Bank NA 6.000% 10/1/17 10,380 11,912
KeyBank NA 1.650% 2/1/18 4,000 3,973
Lloyds Bank plc 2.300% 11/27/18 2,250 2,262
7 Lloyds Bank plc 6.500% 9/14/20 8,170 9,359
Lloyds Bank plc 6.375% 1/21/21 38,592 46,775
Manufacturers & Traders Trust Co. 6.625% 12/4/17 8,555 9,952
Manufacturers & Traders Trust Co. 2.300% 1/30/19 7,500 7,516
Merrill Lynch & Co. Inc. 6.400% 8/28/17 7,850 9,085
Merrill Lynch & Co. Inc. 6.875% 4/25/18 8,123 9,663
Merrill Lynch & Co. Inc. 6.875% 11/15/18 2,797 3,347
Morgan Stanley 5.450% 1/9/17 3,000 3,341
Morgan Stanley 5.550% 4/27/17 2,300 2,570
Morgan Stanley 5.950% 12/28/17 2,000 2,287
Morgan Stanley 6.625% 4/1/18 5,700 6,678
Morgan Stanley 2.125% 4/25/18 3,000 2,995
Morgan Stanley 2.500% 1/24/19 5,650 5,631
Morgan Stanley 7.300% 5/13/19 15,000 18,333
Morgan Stanley 5.625% 9/23/19 20,500 23,414
Morgan Stanley 5.500% 1/26/20 20,535 23,140
Morgan Stanley 5.500% 7/24/20 12,000 13,509
Morgan Stanley 5.750% 1/25/21 24,000 27,332
Morgan Stanley 5.500% 7/28/21 13,600 15,339
Morgan Stanley 3.750% 2/25/23 7,000 6,905
National Australia Bank Ltd. 3.000% 1/20/23 20,190 19,300
Northern Trust Co. 5.850% 11/9/17 7,280 8,217
Northern Trust Co. 6.500% 8/15/18 4,000 4,756
Northern Trust Corp. 3.450% 11/4/20 8,000 8,411
Northern Trust Corp. 3.375% 8/23/21 13,036 13,453
People's United Financial Inc. 3.650% 12/6/22 25,905 25,236
PNC Bank NA 6.000% 12/7/17 4,500 5,176
PNC Bank NA 6.875% 4/1/18 12,085 14,330
PNC Bank NA 2.200% 1/28/19 4,630 4,642
PNC Bank NA 2.700% 11/1/22 32,000 29,880
PNC Bank NA 2.950% 1/30/23 15,000 14,147
PNC Bank NA 3.800% 7/25/23 15,750 15,751
PNC Financial Services Group Inc. 2.854% 11/9/22 2,000 1,909
PNC Funding Corp. 6.700% 6/10/19 12,000 14,592
PNC Funding Corp. 5.125% 2/8/20 18,653 21,253
PNC Funding Corp. 4.375% 8/11/20 23,000 25,240
PNC Funding Corp. 3.300% 3/8/22 14,570 14,570
Regions Bank 7.500% 5/15/18 8,775 10,374
Regions Financial Corp. 2.000% 5/15/18 2,000 1,959
Royal Bank of Canada 2.200% 7/27/18 7,245 7,359
Royal Bank of Scotland Group plc 4.700% 7/3/18 2,000 2,079
Royal Bank of Scotland Group plc 6.100% 6/10/23 5,000 5,118
Royal Bank of Scotland Group plc 6.000% 12/19/23 7,000 7,078
Royal Bank of Scotland NV 4.650% 6/4/18 1,550 1,607
Royal Bank of Scotland plc 5.625% 8/24/20 29,026 33,040
Royal Bank of Scotland plc 6.125% 1/11/21 29,500 34,428
Santander Bank NA 8.750% 5/30/18 5,000 6,049
7 Societe Generale SA 5.000% 1/17/24 16,230 16,167
State Street Corp. 1.350% 5/15/18 3,000 2,937
State Street Corp. 4.375% 3/7/21 22,340 24,816
State Street Corp. 3.100% 5/15/23 20,125 19,078
State Street Corp. 3.700% 11/20/23 18,720 18,873
Sumitomo Mitsui Banking Corp. 3.200% 7/18/22 13,500 13,255
Sumitomo Mitsui Banking Corp. 3.950% 7/19/23 3,700 3,800
Svenska Handelsbanken AB 2.500% 1/25/19 6,995 7,052
UBS AG 5.875% 12/20/17 13,050 14,995
UBS AG 4.875% 8/4/20 51,600 57,747
Union Bank NA 5.950% 5/11/16 1,131 1,256
Union Bank NA 2.125% 6/16/17 3,695 3,766

 

45

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
UnionBanCal Corp. 3.500% 6/18/22 21,891 22,050
US Bancorp 4.125% 5/24/21 24,013 25,904
US Bancorp 3.000% 3/15/22 18,724 18,459
US Bancorp 2.950% 7/15/22 35,200 33,498
US Bancorp 3.700% 1/30/24 7,000 7,059
5 US Bank NA 3.778% 4/29/20 6,395 6,624
Wachovia Bank NA 6.000% 11/15/17 8,000 9,269
Wachovia Corp. 5.625% 10/15/16 8,000 8,952
Wachovia Corp. 5.750% 6/15/17 4,280 4,882
Wachovia Corp. 5.750% 2/1/18 11,025 12,743
8 Washington Mutual Bank / Debt not acquired by        
JPMorgan 5.500% 1/15/13 6,147 1
8 Washington Mutual Bank / Debt not acquired by        
JPMorgan 5.650% 8/15/14 7,500 1
8 Washington Mutual Bank / Debt not acquired by        
JPMorgan 5.125% 1/15/15 9,000 1
Wells Fargo & Co. 5.625% 12/11/17 11,400 13,097
Wells Fargo & Co. 2.150% 1/15/19 18,636 18,676
Wells Fargo & Co. 4.600% 4/1/21 22,443 24,710
Wells Fargo & Co. 3.500% 3/8/22 23,772 24,040
Wells Fargo & Co. 3.450% 2/13/23 36,700 35,239
Wells Fargo & Co. 4.125% 8/15/23 15,500 15,470
Westpac Banking Corp. 1.600% 1/12/18 3,390 3,383
Westpac Banking Corp. 2.250% 7/30/18 9,010 9,144
Westpac Banking Corp. 4.875% 11/19/19 32,795 36,736
Brokerage (1.2%)        
Ameriprise Financial Inc. 7.300% 6/28/19 6,200 7,721
Ameriprise Financial Inc. 5.300% 3/15/20 26,570 30,416
Ameriprise Financial Inc. 4.000% 10/15/23 14,000 14,293
BlackRock Inc. 4.250% 5/24/21 27,250 29,469
BlackRock Inc. 3.375% 6/1/22 12,000 12,170
Charles Schwab Corp. 6.375% 9/1/17 6,000 6,925
Charles Schwab Corp. 2.200% 7/25/18 1,300 1,315
Charles Schwab Corp. 4.450% 7/22/20 6,500 7,161
Charles Schwab Corp. 3.225% 9/1/22 15,000 14,818
Franklin Resources Inc. 4.625% 5/20/20 7,550 8,329
Franklin Resources Inc. 2.800% 9/15/22 11,000 10,551
Invesco Finance plc 3.125% 11/30/22 22,485 21,684
Invesco Finance plc 4.000% 1/30/24 23,500 23,924
Jefferies Group LLC 6.875% 4/15/21 8,000 9,247
Jefferies Group LLC 5.125% 1/20/23 5,000 5,213
8 Lehman Brothers Holdings Inc. 6.500% 7/19/17 20,000 4
Finance Companies (2.0%)        
Air Lease Corp. 3.375% 1/15/19 8,000 8,000
General Electric Capital Corp. 5.400% 2/15/17 2,760 3,099
General Electric Capital Corp. 2.300% 4/27/17 2,000 2,064
General Electric Capital Corp. 5.625% 9/15/17 6,192 7,072
General Electric Capital Corp. 5.625% 5/1/18 12,975 14,972
General Electric Capital Corp. 2.300% 1/14/19 3,710 3,746
General Electric Capital Corp. 6.000% 8/7/19 12,900 15,279
General Electric Capital Corp. 5.500% 1/8/20 20,772 24,006
General Electric Capital Corp. 5.550% 5/4/20 4,000 4,638
General Electric Capital Corp. 4.375% 9/16/20 24,250 26,520
General Electric Capital Corp. 4.625% 1/7/21 17,692 19,489
General Electric Capital Corp. 5.300% 2/11/21 13,500 15,179
General Electric Capital Corp. 4.650% 10/17/21 35,847 39,344
General Electric Capital Corp. 3.150% 9/7/22 17,145 16,766
General Electric Capital Corp. 3.100% 1/9/23 1,000 965
5 General Electric Capital Corp. 6.375% 11/15/67 7,000 7,595
HSBC Finance Corp. 6.676% 1/15/21 89,189 103,655
SLM Corp. 6.250% 1/25/16 9,000 9,678
SLM Corp. 6.000% 1/25/17 9,020 9,779
SLM Corp. 4.625% 9/25/17 5,000 5,165

 

46

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Insurance (4.5%)        
ACE INA Holdings Inc. 2.700% 3/13/23 11,195 10,494
Aetna Inc. 6.500% 9/15/18 10,318 12,291
Aetna Inc. 3.950% 9/1/20 12,000 12,783
Aetna Inc. 2.750% 11/15/22 24,000 22,563
Aflac Inc. 8.500% 5/15/19 9,940 12,881
Aflac Inc. 4.000% 2/15/22 5,000 5,199
Aflac Inc. 3.625% 6/15/23 16,000 15,868
Alleghany Corp. 4.950% 6/27/22 2,586 2,765
Allied World Assurance Co. Ltd. 5.500% 11/15/20 2,000 2,245
Allstate Corp. 3.150% 6/15/23 10,000 9,793
5 Allstate Corp. 5.750% 8/15/53 5,000 5,063
Alterra Finance LLC 6.250% 9/30/20 8,000 9,181
American Financial Group Inc. 9.875% 6/15/19 10,000 13,049
American International Group Inc. 5.850% 1/16/18 14,174 16,315
American International Group Inc. 8.250% 8/15/18 19,700 24,738
American International Group Inc. 3.375% 8/15/20 3,000 3,059
American International Group Inc. 6.400% 12/15/20 15,000 17,881
American International Group Inc. 4.875% 6/1/22 4,650 5,070
Aspen Insurance Holdings Ltd. 4.650% 11/15/23 13,000 13,245
Axis Specialty Finance LLC 5.875% 6/1/20 21,240 24,086
Berkshire Hathaway Finance Corp. 4.250% 1/15/21 12,000 13,084
Berkshire Hathaway Finance Corp. 3.000% 5/15/22 11,360 11,237
Berkshire Hathaway Inc. 3.750% 8/15/21 20,000 21,005
Berkshire Hathaway Inc. 3.400% 1/31/22 7,706 7,901
5 Chubb Corp. 6.375% 3/29/67 4,900 5,390
Cigna Corp. 4.500% 3/15/21 5,000 5,397
Cigna Corp. 4.000% 2/15/22 10,645 11,030
CNA Financial Corp. 5.875% 8/15/20 5,000 5,797
Coventry Health Care Inc. 5.450% 6/15/21 5,000 5,649
Genworth Holdings Inc. 7.700% 6/15/20 3,000 3,647
Genworth Holdings Inc. 7.200% 2/15/21 3,000 3,515
Genworth Holdings Inc. 7.625% 9/24/21 5,000 6,054
Genworth Holdings Inc. 4.900% 8/15/23 3,000 3,043
Genworth Holdings Inc. 4.800% 2/15/24 6,000 5,996
Hartford Financial Services Group Inc. 5.125% 4/15/22 2,880 3,179
Humana Inc. 3.150% 12/1/22 1,000 950
Infinity Property & Casualty Corp. 5.000% 9/19/22 10,547 10,852
7 Jackson National Life Global Funding 4.700% 6/1/18 2,500 2,654
Lincoln National Corp. 4.200% 3/15/22 2,000 2,087
Loews Corp. 2.625% 5/15/23 8,000 7,324
Manulife Financial Corp. 4.900% 9/17/20 24,150 26,364
Marsh & McLennan Cos. Inc. 4.050% 10/15/23 5,000 5,064
7 MassMutual Global Funding II 2.500% 10/17/22 4,000 3,699
MetLife Inc. 7.717% 2/15/19 9,439 11,831
MetLife Inc. 4.750% 2/8/21 25,000 27,664
MetLife Inc. 3.048% 12/15/22 7,000 6,729
MetLife Inc. 4.368% 9/15/23 31,430 32,785
7 Metropolitan Life Global Funding I 3.000% 1/10/23 3,500 3,354
7 Nationwide Financial Services Inc. 5.375% 3/25/21 9,938 10,844
OneBeacon US Holdings Inc. 4.600% 11/9/22 4,000 4,014
7 Pacific LifeCorp 6.000% 2/10/20 9,800 11,191
PartnerRe Finance A LLC 6.875% 6/1/18 3,857 4,473
PartnerRe Finance B LLC 5.500% 6/1/20 16,550 18,478
Principal Financial Group Inc. 8.875% 5/15/19 11,195 14,437
ProAssurance Corp. 5.300% 11/15/23 5,000 5,277
Progressive Corp. 3.750% 8/23/21 13,250 13,936
Progressive Corp. 6.700% 6/15/67 6,500 7,052
5 Prudential Financial Inc. 5.875% 9/15/42 6,000 6,143
5 Prudential Financial Inc. 5.625% 6/15/43 7,875 7,875
5 Prudential Financial Inc. 5.200% 3/15/44 2,500 2,406
Reinsurance Group of America Inc. 5.000% 6/1/21 5,000 5,374
Reinsurance Group of America Inc. 4.700% 9/15/23 3,000 3,136

 

47

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Swiss Re Solutions Holding Corp. 6.450% 3/1/19 11,250 13,050
7 Swiss Re Treasury US Corp. 2.875% 12/6/22 2,000 1,891
Torchmark Corp. 9.250% 6/15/19 3,000 3,892
Travelers Cos. Inc. 5.800% 5/15/18 2,328 2,687
Travelers Cos. Inc. 5.900% 6/2/19 3,000 3,548
Travelers Cos. Inc. 3.900% 11/1/20 4,405 4,716
Trinity Acquisition plc 4.625% 8/15/23 3,000 3,059
UnitedHealth Group Inc. 3.875% 10/15/20 14,000 14,936
UnitedHealth Group Inc. 4.700% 2/15/21 13,000 14,435
UnitedHealth Group Inc. 3.375% 11/15/21 8,000 8,107
UnitedHealth Group Inc. 2.875% 3/15/22 34,316 33,286
UnitedHealth Group Inc. 2.750% 2/15/23 12,000 11,309
UnitedHealth Group Inc. 2.875% 3/15/23 14,000 13,354
WellPoint Inc. 4.350% 8/15/20 2,000 2,155
WellPoint Inc. 3.700% 8/15/21 8,090 8,229
WR Berkley Corp. 4.625% 3/15/22 2,977 3,134
Other Finance (0.4%)        
CME Group Inc. 3.000% 9/15/22 10,805 10,548
IntercontinentalExchange Group Inc. 4.000% 10/15/23 34,330 35,275
NYSE Euronext 2.000% 10/5/17 8,000 8,125
ORIX Corp. 3.750% 3/9/17 5,500 5,762
Real Estate Investment Trusts (2.1%)        
American Campus Communities Operating Partnership        
LP 3.750% 4/15/23 2,000 1,898
BioMed Realty LP 4.250% 7/15/22 9,082 8,987
Boston Properties LP 3.850% 2/1/23 6,373 6,364
Brandywine Operating Partnership LP 4.950% 4/15/18 5,000 5,440
Brandywine Operating Partnership LP 3.950% 2/15/23 2,000 1,947
Camden Property Trust 4.875% 6/15/23 5,000 5,359
Corporate Office Properties LP 3.600% 5/15/23 14,525 13,490
DDR Corp. 7.500% 4/1/17 1,750 2,037
DDR Corp. 4.750% 4/15/18 3,000 3,272
DDR Corp. 7.875% 9/1/20 5,000 6,243
Duke Realty LP 6.500% 1/15/18 5 6
Duke Realty LP 4.375% 6/15/22 11,838 11,941
Federal Realty Investment Trust 3.000% 8/1/22 13,924 13,457
7 Goodman Funding Pty Ltd. 6.375% 4/15/21 2,400 2,729
7 Goodman Funding Pty Ltd. 6.000% 3/22/22 5,000 5,506
HCP Inc. 2.625% 2/1/20 7,000 6,781
HCP Inc. 5.375% 2/1/21 11,600 12,893
HCP Inc. 3.150% 8/1/22 2,000 1,886
HCP Inc. 4.250% 11/15/23 3,000 3,031
Health Care REIT Inc. 6.125% 4/15/20 5,000 5,751
Health Care REIT Inc. 4.950% 1/15/21 8,000 8,613
Health Care REIT Inc. 3.750% 3/15/23 5,000 4,839
Healthcare Realty Trust Inc. 5.750% 1/15/21 5,000 5,513
Healthcare Realty Trust Inc. 3.750% 4/15/23 7,000 6,644
Healthcare Trust of America Holdings LP 3.700% 4/15/23 13,030 12,394
Highwoods Realty LP 3.625% 1/15/23 11,065 10,429
Kilroy Realty LP 6.625% 6/1/20 7,470 8,796
Kilroy Realty LP 3.800% 1/15/23 5,736 5,525
Liberty Property LP 4.750% 10/1/20 9,565 10,208
Liberty Property LP 4.400% 2/15/24 4,000 4,023
Mid-America Apartments LP 4.300% 10/15/23 2,000 1,995
Realty Income Corp. 3.250% 10/15/22 12,000 11,302
Senior Housing Properties Trust 6.750% 12/15/21 4,000 4,485
Simon Property Group LP 10.350% 4/1/19 10,815 14,757
Simon Property Group LP 5.650% 2/1/20 31,200 36,308
Simon Property Group LP 4.375% 3/1/21 26,594 28,838
Simon Property Group LP 4.125% 12/1/21 20,822 22,071
Simon Property Group LP 3.375% 3/15/22 7,000 6,978
Simon Property Group LP 2.750% 2/1/23 8,500 7,993
Simon Property Group LP 3.750% 2/1/24 8,000 8,007

 

48

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
UDR Inc. 4.625% 1/10/22 3,455 3,641
Ventas Realty LP / Ventas Capital Corp. 4.750% 6/1/21 3,000 3,208
Ventas Realty LP / Ventas Capital Corp. 4.250% 3/1/22 3,000 3,074
Ventas Realty LP / Ventas Capital Corp. 3.250% 8/15/22 5,000 4,731
        4,626,585
Industrial (41.7%)        
Basic Industry (3.5%)        
Air Products & Chemicals Inc. 4.375% 8/21/19 7,325 8,082
Air Products & Chemicals Inc. 3.000% 11/3/21 10,235 10,116
Barrick Gold Corp. 3.850% 4/1/22 18,500 17,313
Barrick Gold Corp. 4.100% 5/1/23 5,000 4,628
Barrick North America Finance LLC 4.400% 5/30/21 11,930 11,783
Barrick PD Australia Finance Pty Ltd. 4.950% 1/15/20 1,062 1,114
BHP Billiton Finance USA Ltd. 1.625% 2/24/17 4,122 4,190
BHP Billiton Finance USA Ltd. 5.400% 3/29/17 5,555 6,267
BHP Billiton Finance USA Ltd. 3.250% 11/21/21 29,030 29,633
BHP Billiton Finance USA Ltd. 2.875% 2/24/22 30,050 29,425
BHP Billiton Finance USA Ltd. 3.850% 9/30/23 27,500 28,079
Celulosa Arauco y Constitucion SA 5.000% 1/21/21 3,500 3,546
Celulosa Arauco y Constitucion SA 4.750% 1/11/22 4,000 3,932
CF Industries Inc. 7.125% 5/1/20 3,480 4,124
CF Industries Inc. 3.450% 6/1/23 5,685 5,300
Dow Chemical Co. 4.125% 11/15/21 5,250 5,454
Dow Chemical Co. 3.000% 11/15/22 4,000 3,777
Eastman Chemical Co. 4.500% 1/15/21 8,139 8,591
EI du Pont de Nemours & Co. 4.625% 1/15/20 19,618 21,709
EI du Pont de Nemours & Co. 3.625% 1/15/21 13,635 14,209
EI du Pont de Nemours & Co. 4.250% 4/1/21 4,000 4,325
EI du Pont de Nemours & Co. 2.800% 2/15/23 12,225 11,504
Freeport-McMoRan Copper & Gold Inc. 3.100% 3/15/20 4,300 4,235
Freeport-McMoRan Copper & Gold Inc. 3.550% 3/1/22 13,000 12,427
Freeport-McMoRan Copper & Gold Inc. 3.875% 3/15/23 16,000 15,294
Goldcorp Inc. 3.700% 3/15/23 4,000 3,690
LyondellBasell Industries NV 5.000% 4/15/19 8,000 8,900
LyondellBasell Industries NV 6.000% 11/15/21 5,000 5,800
Nucor Corp. 4.125% 9/15/22 19,250 19,635
Plains Exploration & Production Co. 6.125% 6/15/19 2,105 2,300
Plains Exploration & Production Co. 6.500% 11/15/20 8,945 9,795
Plains Exploration & Production Co. 6.625% 5/1/21 4,000 4,380
Plains Exploration & Production Co. 6.750% 2/1/22 7,615 8,348
Plains Exploration & Production Co. 6.875% 2/15/23 7,600 8,398
Potash Corp. of Saskatchewan Inc. 6.500% 5/15/19 7,410 8,845
Potash Corp. of Saskatchewan Inc. 4.875% 3/30/20 3,110 3,487
Praxair Inc. 4.500% 8/15/19 3,000 3,363
Praxair Inc. 4.050% 3/15/21 8,000 8,540
Praxair Inc. 3.000% 9/1/21 16,915 16,847
Praxair Inc. 2.450% 2/15/22 11,215 10,632
Rio Tinto Finance USA Ltd. 9.000% 5/1/19 13,000 17,092
Rio Tinto Finance USA Ltd. 3.500% 11/2/20 19,000 19,466
Rio Tinto Finance USA Ltd. 4.125% 5/20/21 26,935 28,508
Rio Tinto Finance USA Ltd. 3.750% 9/20/21 22,820 23,523
Rio Tinto Finance USA plc 2.250% 12/14/18 7,500 7,532
Rio Tinto Finance USA plc 3.500% 3/22/22 25,000 24,826
Rio Tinto Finance USA plc 2.875% 8/21/22 10,000 9,429
Syngenta Finance NV 3.125% 3/28/22 8,895 8,741
Teck Resources Ltd. 3.000% 3/1/19 2,000 2,048
Teck Resources Ltd. 4.500% 1/15/21 2,000 2,068
Teck Resources Ltd. 3.750% 2/1/23 5,000 4,757
Vale Overseas Ltd. 5.625% 9/15/19 18,000 19,570
Vale Overseas Ltd. 4.625% 9/15/20 5,000 5,139
Vale Overseas Ltd. 4.375% 1/11/22 10,500 10,165
7 Xstrata Finance Canada Ltd. 4.950% 11/15/21 5,000 5,163

 

49

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Capital Goods (5.4%)        
ABB Finance USA Inc. 2.875% 5/8/22 5,000 4,848
7 ABB Treasury Center USA Inc. 4.000% 6/15/21 7,000 7,379
Acuity Brands Lighting Inc. 6.000% 12/15/19 10,000 10,984
Boeing Capital Corp. 2.900% 8/15/18 6,907 7,262
Boeing Capital Corp. 4.700% 10/27/19 4,032 4,578
Boeing Co. 3.750% 11/20/16 3,300 3,570
Boeing Co. 0.950% 5/15/18 9,985 9,708
Boeing Co. 6.000% 3/15/19 2,750 3,281
Boeing Co. 4.875% 2/15/20 21,680 24,592
Caterpillar Financial Services Corp. 5.500% 3/15/16 2,000 2,186
Caterpillar Financial Services Corp. 1.250% 11/6/17 775 770
Caterpillar Financial Services Corp. 5.450% 4/15/18 14,406 16,481
Caterpillar Financial Services Corp. 7.150% 2/15/19 14,000 17,346
Caterpillar Inc. 7.900% 12/15/18 10,215 13,019
Caterpillar Inc. 3.900% 5/27/21 6,000 6,377
Crane Co. 4.450% 12/15/23 2,000 2,056
CRH America Inc. 6.000% 9/30/16 18,126 20,265
Danaher Corp. 2.300% 6/23/16 9,350 9,694
Danaher Corp. 5.400% 3/1/19 2,535 2,934
Danaher Corp. 3.900% 6/23/21 19,577 20,803
Deere & Co. 4.375% 10/16/19 11,850 13,194
Deere & Co. 2.600% 6/8/22 25,000 23,999
Dover Corp. 4.300% 3/1/21 7,000 7,576
7 EADS Finance BV 2.700% 4/17/23 18,000 17,012
7 Embraer Overseas Ltd. 5.696% 9/16/23 7,025 7,048
Embraer SA 5.150% 6/15/22 8,000 8,003
Emerson Electric Co. 4.875% 10/15/19 4,000 4,553
Emerson Electric Co. 2.625% 2/15/23 17,990 17,364
Flowserve Corp. 3.500% 9/15/22 5,000 4,862
General Dynamics Corp. 1.000% 11/15/17 4,075 4,012
General Dynamics Corp. 3.875% 7/15/21 23,155 24,546
General Dynamics Corp. 2.250% 11/15/22 20,000 18,469
General Electric Co. 5.250% 12/6/17 12,925 14,710
General Electric Co. 2.700% 10/9/22 40,000 38,320
Harsco Corp. 5.750% 5/15/18 7,065 7,539
Honeywell International Inc. 5.300% 3/1/18 9,772 11,203
Honeywell International Inc. 5.000% 2/15/19 7,409 8,443
Honeywell International Inc. 4.250% 3/1/21 22,075 24,235
Honeywell International Inc. 3.350% 12/1/23 7,500 7,550
Illinois Tool Works Inc. 6.250% 4/1/19 9,950 11,918
Illinois Tool Works Inc. 3.375% 9/15/21 5,000 5,127
7 Ingersoll-Rand Global Holding Co. Ltd. 4.250% 6/15/23 7,000 7,119
John Deere Capital Corp. 2.000% 1/13/17 9,500 9,769
John Deere Capital Corp. 1.200% 10/10/17 1,250 1,248
John Deere Capital Corp. 5.350% 4/3/18 3,000 3,434
John Deere Capital Corp. 5.750% 9/10/18 8,000 9,364
John Deere Capital Corp. 2.250% 4/17/19 8,400 8,477
John Deere Capital Corp. 1.700% 1/15/20 7,000 6,744
John Deere Capital Corp. 3.900% 7/12/21 12,180 12,931
John Deere Capital Corp. 3.150% 10/15/21 8,050 8,160
John Deere Capital Corp. 2.750% 3/15/22 12,800 12,481
John Deere Capital Corp. 2.800% 1/27/23 4,000 3,846
L-3 Communications Corp. 5.200% 10/15/19 8,500 9,358
L-3 Communications Corp. 4.750% 7/15/20 4,000 4,257
Lockheed Martin Corp. 7.650% 5/1/16 5,000 5,771
Lockheed Martin Corp. 4.250% 11/15/19 22,810 24,927
Lockheed Martin Corp. 3.350% 9/15/21 18,817 19,172
Mohawk Industries Inc. 3.850% 2/1/23 15,000 14,699
Owens Corning 6.500% 12/1/16 2,102 2,330
Owens Corning 9.000% 6/15/19 1,179 1,460
Precision Castparts Corp. 1.250% 1/15/18 12,735 12,578
Precision Castparts Corp. 2.500% 1/15/23 22,000 20,598

 

50

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Raytheon Co. 6.400% 12/15/18 5,725 6,850
Raytheon Co. 4.400% 2/15/20 5,845 6,444
Raytheon Co. 3.125% 10/15/20 17,285 17,685
Raytheon Co. 2.500% 12/15/22 23,300 21,759
Republic Services Inc. 5.500% 9/15/19 7,400 8,442
Republic Services Inc. 5.000% 3/1/20 4,400 4,900
Republic Services Inc. 5.250% 11/15/21 4,000 4,473
Republic Services Inc. 3.550% 6/1/22 3,000 2,983
Rockwell Automation Inc. 5.650% 12/1/17 5,000 5,649
Rockwell Collins Inc. 3.100% 11/15/21 4,000 3,986
Rockwell Collins Inc. 3.700% 12/15/23 6,250 6,369
Roper Industries Inc. 2.050% 10/1/18 3,175 3,141
Roper Industries Inc. 6.250% 9/1/19 2,700 3,144
Roper Industries Inc. 3.125% 11/15/22 3,000 2,844
7 Schneider Electric SA 2.950% 9/27/22 15,000 14,335
Stanley Black & Decker Inc. 2.900% 11/1/22 7,000 6,763
United Technologies Corp. 1.800% 6/1/17 4,000 4,088
United Technologies Corp. 5.375% 12/15/17 3,005 3,449
United Technologies Corp. 6.125% 2/1/19 5,500 6,571
United Technologies Corp. 4.500% 4/15/20 20,500 22,859
United Technologies Corp. 3.100% 6/1/22 64,930 64,695
Waste Management Inc. 7.375% 3/11/19 4,250 5,231
Waste Management Inc. 2.900% 9/15/22 6,500 6,161
Communication (5.4%)        
21st Century Fox America Inc. 6.900% 3/1/19 7,000 8,498
21st Century Fox America Inc. 3.000% 9/15/22 6,000 5,761
America Movil SAB de CV 5.000% 10/16/19 12,000 13,283
America Movil SAB de CV 5.000% 3/30/20 32,500 35,512
America Movil SAB de CV 3.125% 7/16/22 39,300 36,691
American Tower Corp. 4.500% 1/15/18 10,000 10,914
American Tower Corp. 3.500% 1/31/23 7,000 6,601
American Tower Corp. 5.000% 2/15/24 5,000 5,258
AT&T Inc. 5.500% 2/1/18 22,085 25,095
AT&T Inc. 2.375% 11/27/18 4,000 4,033
AT&T Inc. 5.800% 2/15/19 27,849 32,361
AT&T Inc. 4.450% 5/15/21 22,500 24,102
AT&T Inc. 3.875% 8/15/21 25,729 26,449
AT&T Inc. 3.000% 2/15/22 48,396 45,998
AT&T Inc. 2.625% 12/1/22 9,000 8,182
7 British Sky Broadcasting Group plc 6.100% 2/15/18 4,470 5,086
7 British Sky Broadcasting Group plc 9.500% 11/15/18 9,640 12,638
7 British Sky Broadcasting Group plc 3.125% 11/26/22 5,000 4,782
CBS Corp. 8.875% 5/15/19 3,458 4,483
CBS Corp. 4.300% 2/15/21 3,000 3,160
CBS Corp. 3.375% 3/1/22 3,000 2,937
CC Holdings GS V LLC / Crown Castle GS III Corp. 3.849% 4/15/23 2,185 2,104
Cellco Partnership / Verizon Wireless Capital LLC 8.500% 11/15/18 25,000 32,074
Comcast Cable Communications LLC 8.875% 5/1/17 3,400 4,191
Comcast Corp. 5.700% 5/15/18 2,767 3,204
Comcast Corp. 5.700% 7/1/19 12,568 14,677
Comcast Corp. 5.150% 3/1/20 23,720 26,921
Comcast Corp. 3.125% 7/15/22 26,126 25,528
Comcast Corp. 2.850% 1/15/23 4,487 4,248
7 Deutsche Telekom International Finance BV 2.250% 3/6/17 7,395 7,572
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 5.200% 3/15/20 7,500 8,259
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 4.600% 2/15/21 9,375 9,869
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 5.000% 3/1/21 10,637 11,436
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 3.800% 3/15/22 8,800 8,578
Discovery Communications LLC 4.375% 6/15/21 5,000 5,295
Discovery Communications LLC 3.300% 5/15/22 5,000 4,865
Interpublic Group of Cos. Inc. 3.750% 2/15/23 16,000 15,546
Moody's Corp. 4.500% 9/1/22 16,700 17,179
NBCUniversal Media LLC 5.150% 4/30/20 27,060 30,570

 

51

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
NBCUniversal Media LLC 4.375% 4/1/21 28,600 30,753
NBCUniversal Media LLC 2.875% 1/15/23 10,000 9,450
Omnicom Group Inc. 4.450% 8/15/20 14,200 15,366
Orange SA 2.750% 2/6/19 6,200 6,230
Orange SA 4.125% 9/14/21 6,400 6,579
Qwest Corp. 6.750% 12/1/21 12,628 14,113
Telefonica Emisiones SAU 5.877% 7/15/19 9,000 10,208
Telefonica Emisiones SAU 5.134% 4/27/20 9,000 9,751
Telefonica Emisiones SAU 5.462% 2/16/21 9,000 9,771
Telefonica Emisiones SAU 4.570% 4/27/23 3,000 3,031
Thomson Reuters Corp. 4.300% 11/23/23 12,000 12,241
Time Warner Cable Inc. 5.850% 5/1/17 2,000 2,196
Time Warner Cable Inc. 6.750% 7/1/18 6,000 6,783
Time Warner Cable Inc. 8.250% 4/1/19 15,000 17,733
Time Warner Cable Inc. 5.000% 2/1/20 8,363 8,610
Verizon Communications Inc. 5.500% 4/1/17 1,200 1,350
Verizon Communications Inc. 5.500% 2/15/18 5,825 6,609
Verizon Communications Inc. 6.100% 4/15/18 3,640 4,230
Verizon Communications Inc. 8.750% 11/1/18 15,594 20,082
Verizon Communications Inc. 6.350% 4/1/19 8,806 10,463
Verizon Communications Inc. 4.600% 4/1/21 18,000 19,445
Verizon Communications Inc. 3.500% 11/1/21 10,971 11,053
Verizon Communications Inc. 2.450% 11/1/22 7,200 6,523
Verizon Communications Inc. 5.150% 9/15/23 25,000 27,213
Vodafone Group plc 1.250% 9/26/17 8,200 8,136
Vodafone Group plc 1.500% 2/19/18 11,750 11,589
Vodafone Group plc 5.450% 6/10/19 6,000 6,896
Vodafone Group plc 4.375% 3/16/21 4,500 4,858
Vodafone Group plc 2.500% 9/26/22 23,885 21,815
Vodafone Group plc 2.950% 2/19/23 15,000 14,110
WPP Finance 2010 4.750% 11/21/21 5,000 5,335
WPP Finance 2010 3.625% 9/7/22 3,172 3,132
Consumer Cyclical (4.7%)        
American Honda Finance Corp. 2.125% 10/10/18 7,500 7,625
AutoZone Inc. 4.000% 11/15/20 7,000 7,376
AutoZone Inc. 3.700% 4/15/22 3,000 3,002
AutoZone Inc. 2.875% 1/15/23 8,500 7,927
Brinker International Inc. 3.875% 5/15/23 13,000 12,062
Cummins Inc. 3.650% 10/1/23 7,500 7,629
CVS Caremark Corp. 4.000% 12/5/23 17,500 17,930
7 Daimler Finance North America LLC 2.375% 8/1/18 17,325 17,555
7 Daimler Finance North America LLC 3.875% 9/15/21 3,506 3,662
Darden Restaurants Inc. 4.500% 10/15/21 1,700 1,686
Darden Restaurants Inc. 3.350% 11/1/22 1,600 1,429
Dollar General Corp. 3.250% 4/15/23 8,500 7,865
eBay Inc. 2.600% 7/15/22 10,000 9,326
Ford Motor Credit Co. LLC 3.000% 6/12/17 5,250 5,459
Ford Motor Credit Co. LLC 6.625% 8/15/17 13,056 15,118
Ford Motor Credit Co. LLC 5.000% 5/15/18 17,348 19,250
Ford Motor Credit Co. LLC 8.125% 1/15/20 5,500 6,948
Ford Motor Credit Co. LLC 5.750% 2/1/21 19,545 22,187
Ford Motor Credit Co. LLC 5.875% 8/2/21 18,000 20,542
Ford Motor Credit Co. LLC 4.375% 8/6/23 5,000 5,080
Gap Inc. 5.950% 4/12/21 25,000 27,886
7 General Motors Co. 3.500% 10/2/18 6,570 6,701
7 Harley-Davidson Financial Services Inc. 2.700% 3/15/17 3,618 3,725
7 Harley-Davidson Funding Corp. 6.800% 6/15/18 11,725 13,725
Home Depot Inc. 2.700% 4/1/23 14,625 13,804
Host Hotels & Resorts LP 3.750% 10/15/23 10,000 9,562
7 Hyundai Capital America 3.750% 4/6/16 1,740 1,816
7 Hyundai Capital America 4.000% 6/8/17 4,798 5,076
7 Hyundai Capital Services Inc. 6.000% 5/5/15 3,000 3,183
7 Hyundai Capital Services Inc. 4.375% 7/27/16 2,160 2,301

 

52

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
7 Kia Motors Corp. 3.625% 6/14/16 3,200 3,342
Lowe's Cos. Inc. 4.625% 4/15/20 9,750 10,882
Lowe's Cos. Inc. 3.750% 4/15/21 5,950 6,296
Lowe's Cos. Inc. 3.800% 11/15/21 11,650 12,375
Lowe's Cos. Inc. 3.120% 4/15/22 24,000 24,087
Lowe's Cos. Inc. 3.875% 9/15/23 7,000 7,265
Macy's Retail Holdings Inc. 3.875% 1/15/22 6,000 6,134
Macy's Retail Holdings Inc. 2.875% 2/15/23 12,500 11,606
Macy's Retail Holdings Inc. 4.375% 9/1/23 1,500 1,552
Marriott International Inc. 6.375% 6/15/17 3,040 3,472
Marriott International Inc. 3.000% 3/1/19 2,500 2,565
Marriott International Inc. 3.250% 9/15/22 3,500 3,367
McDonald's Corp. 3.625% 5/20/21 4,500 4,771
McDonald's Corp. 2.625% 1/15/22 9,000 8,801
NIKE Inc. 2.250% 5/1/23 6,200 5,723
Nordstrom Inc. 4.750% 5/1/20 15,000 16,696
Nordstrom Inc. 4.000% 10/15/21 7,500 7,922
NVR Inc. 3.950% 9/15/22 10,000 9,757
O'Reilly Automotive Inc. 4.625% 9/15/21 7,000 7,388
O'Reilly Automotive Inc. 3.850% 6/15/23 7,000 6,924
PACCAR Financial Corp. 1.600% 3/15/17 2,500 2,505
Staples Inc. 2.750% 1/12/18 7,000 7,191
Starbucks Corp. 2.000% 12/5/18 2,000 2,007
Starbucks Corp. 3.850% 10/1/23 12,000 12,332
Target Corp. 2.900% 1/15/22 4,500 4,403
Time Warner Inc. 4.875% 3/15/20 5,000 5,542
Time Warner Inc. 4.750% 3/29/21 6,500 7,126
Time Warner Inc. 4.000% 1/15/22 5,000 5,158
TJX Cos. Inc. 6.950% 4/15/19 15,663 19,018
TJX Cos. Inc. 2.500% 5/15/23 13,000 12,106
Toyota Motor Credit Corp. 4.500% 6/17/20 9,000 10,012
Toyota Motor Credit Corp. 4.250% 1/11/21 5,155 5,674
Toyota Motor Credit Corp. 3.400% 9/15/21 12,460 12,883
Toyota Motor Credit Corp. 3.300% 1/12/22 16,000 16,349
Toyota Motor Credit Corp. 2.625% 1/10/23 6,000 5,716
VF Corp. 3.500% 9/1/21 9,255 9,441
Viacom Inc. 3.125% 6/15/22 4,365 4,186
Viacom Inc. 4.250% 9/1/23 15,000 15,392
7 Volkswagen International Finance NV 2.125% 11/20/18 6,955 6,987
7 Volkswagen International Finance NV 4.000% 8/12/20 7,500 8,045
Wal-Mart Stores Inc. 3.625% 7/8/20 5,515 5,873
Wal-Mart Stores Inc. 3.250% 10/25/20 28,195 29,277
Wal-Mart Stores Inc. 4.250% 4/15/21 19,824 21,685
Wal-Mart Stores Inc. 2.550% 4/11/23 57,500 53,804
Walgreen Co. 5.250% 1/15/19 4,125 4,698
Walgreen Co. 3.100% 9/15/22 19,000 18,261
Walt Disney Co. 2.750% 8/16/21 11,500 11,469
Walt Disney Co. 2.550% 2/15/22 3,000 2,900
Walt Disney Co. 2.350% 12/1/22 10,000 9,373
7 Wesfarmers Ltd. 1.874% 3/20/18 6,000 5,953
Wyndham Worldwide Corp. 5.625% 3/1/21 2,500 2,734
Wyndham Worldwide Corp. 4.250% 3/1/22 4,000 4,066
Wyndham Worldwide Corp. 3.900% 3/1/23 2,000 1,957
Consumer Noncyclical (11.5%)        
AbbVie Inc. 2.900% 11/6/22 25,000 23,969
Actavis Inc. 1.875% 10/1/17 5,000 5,001
Actavis Inc. 3.250% 10/1/22 15,000 14,247
Allergan Inc. 5.750% 4/1/16 12,000 13,275
Allergan Inc. 3.375% 9/15/20 9,000 9,347
Allergan Inc. 2.800% 3/15/23 5,000 4,752
Altria Group Inc. 9.700% 11/10/18 13,654 18,214
Altria Group Inc. 9.250% 8/6/19 8,014 10,670
Altria Group Inc. 4.750% 5/5/21 11,800 12,895

 

53

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Altria Group Inc. 2.850% 8/9/22 10,000 9,378
AmerisourceBergen Corp. 5.875% 9/15/15 3,000 3,247
AmerisourceBergen Corp. 4.875% 11/15/19 6,270 7,105
AmerisourceBergen Corp. 3.500% 11/15/21 10,000 10,282
Amgen Inc. 2.125% 5/15/17 5,300 5,440
Amgen Inc. 5.850% 6/1/17 3,460 3,967
Amgen Inc. 6.150% 6/1/18 5,000 5,877
Amgen Inc. 5.700% 2/1/19 8,080 9,416
Amgen Inc. 3.450% 10/1/20 8,750 9,080
Amgen Inc. 3.625% 5/15/22 12,000 12,176
Anheuser-Busch Cos. LLC 5.600% 3/1/17 5,375 6,049
Anheuser-Busch Cos. LLC 5.500% 1/15/18 80 92
Anheuser-Busch Cos. LLC 5.000% 3/1/19 3,145 3,552
Anheuser-Busch InBev Finance Inc. 2.625% 1/17/23 10,375 9,821
Anheuser-Busch InBev Finance Inc. 3.700% 2/1/24 15,000 15,226
Anheuser-Busch InBev Worldwide Inc. 5.375% 11/15/14 6,100 6,330
Anheuser-Busch InBev Worldwide Inc. 7.750% 1/15/19 18,570 23,330
Anheuser-Busch InBev Worldwide Inc. 6.875% 11/15/19 18,514 22,954
Anheuser-Busch InBev Worldwide Inc. 5.375% 1/15/20 42,085 48,847
Anheuser-Busch InBev Worldwide Inc. 5.000% 4/15/20 18,286 20,811
Anheuser-Busch InBev Worldwide Inc. 2.500% 7/15/22 44,177 41,749
Archer-Daniels-Midland Co. 5.450% 3/15/18 6,388 7,310
Archer-Daniels-Midland Co. 4.479% 3/1/21 13,750 14,892
Avon Products Inc. 4.600% 3/15/20 3,350 3,385
Avon Products Inc. 5.000% 3/15/23 2,500 2,419
7 BAT International Finance plc 9.500% 11/15/18 4,000 5,296
Baxter International Inc. 5.375% 6/1/18 2,000 2,292
Baxter International Inc. 4.500% 8/15/19 2,000 2,230
Baxter International Inc. 4.250% 3/15/20 3,000 3,317
Baxter International Inc. 2.400% 8/15/22 10,965 10,276
Baxter International Inc. 3.200% 6/15/23 7,670 7,518
Becton Dickinson & Co. 5.000% 5/15/19 4,700 5,321
Becton Dickinson & Co. 3.250% 11/12/20 14,704 15,225
Becton Dickinson & Co. 3.125% 11/8/21 5,025 5,068
Boston Scientific Corp. 6.000% 1/15/20 6,500 7,553
Boston Scientific Corp. 4.125% 10/1/23 2,000 2,028
Bottling Group LLC 5.125% 1/15/19 10,275 11,720
Bristol-Myers Squibb Co. 2.000% 8/1/22 8,200 7,451
Brown-Forman Corp. 1.000% 1/15/18 930 913
Brown-Forman Corp. 2.250% 1/15/23 4,350 3,945
Cardinal Health Inc. 4.625% 12/15/20 6,352 6,966
Cardinal Health Inc. 3.200% 3/15/23 2,500 2,404
Catholic Health Initiatives Colorado GO 2.950% 11/1/22 1,500 1,410
Catholic Health Initiatives Colorado GO 4.200% 8/1/23 2,000 2,033
Celgene Corp. 3.950% 10/15/20 5,762 6,098
Celgene Corp. 3.250% 8/15/22 7,000 6,852
Clorox Co. 3.800% 11/15/21 5,000 5,184
Clorox Co. 3.050% 9/15/22 3,000 2,877
Coca-Cola Co. 4.875% 3/15/19 9,200 10,453
Coca-Cola Co. 3.150% 11/15/20 17,950 18,567
Coca-Cola Co. 3.300% 9/1/21 34,245 35,336
Coca-Cola Co. 3.200% 11/1/23 8,000 7,862
Coca-Cola Femsa SAB de CV 2.375% 11/26/18 3,095 3,091
Coca-Cola Femsa SAB de CV 4.625% 2/15/20 5,000 5,464
Coca-Cola Femsa SAB de CV 3.875% 11/26/23 12,500 12,403
Colgate-Palmolive Co. 2.300% 5/3/22 8,000 7,594
Colgate-Palmolive Co. 2.100% 5/1/23 10,000 9,104
ConAgra Foods Inc. 7.000% 4/15/19 3,200 3,865
ConAgra Foods Inc. 3.250% 9/15/22 5,000 4,850
ConAgra Foods Inc. 3.200% 1/25/23 15,000 14,256
Constellation Brands Inc. 3.750% 5/1/21 4,250 4,080
Constellation Brands Inc. 4.250% 5/1/23 2,250 2,115
Covidien International Finance SA 4.200% 6/15/20 5,000 5,401
Covidien International Finance SA 3.200% 6/15/22 13,500 13,402

 

54

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Covidien International Finance SA 2.950% 6/15/23 25,330 24,013
CR Bard Inc. 4.400% 1/15/21 13,000 13,965
Delhaize Group SA 6.500% 6/15/17 5,880 6,634
Delhaize Group SA 4.125% 4/10/19 5,000 5,214
DENTSPLY International Inc. 4.125% 8/15/21 1,900 1,949
Diageo Capital plc 4.828% 7/15/20 12,989 14,660
Diageo Capital plc 2.625% 4/29/23 15,000 14,029
Diageo Investment Corp. 2.875% 5/11/22 16,000 15,602
Dr Pepper Snapple Group Inc. 2.600% 1/15/19 5,000 5,104
Dr Pepper Snapple Group Inc. 2.000% 1/15/20 2,500 2,395
Dr Pepper Snapple Group Inc. 2.700% 11/15/22 3,000 2,816
Estee Lauder Cos. Inc. 2.350% 8/15/22 5,000 4,682
Express Scripts Holding Co. 2.650% 2/15/17 5,500 5,700
Express Scripts Holding Co. 7.250% 6/15/19 3,000 3,698
Express Scripts Holding Co. 4.750% 11/15/21 13,625 14,757
Express Scripts Holding Co. 3.900% 2/15/22 8,000 8,189
Flowers Foods Inc. 4.375% 4/1/22 2,000 2,025
General Mills Inc. 5.650% 2/15/19 3,000 3,521
General Mills Inc. 3.150% 12/15/21 8,000 8,078
Genzyme Corp. 5.000% 6/15/20 15,349 17,589
Gilead Sciences Inc. 4.500% 4/1/21 7,996 8,779
Gilead Sciences Inc. 4.400% 12/1/21 14,050 15,239
GlaxoSmithKline Capital Inc. 5.650% 5/15/18 7,400 8,616
GlaxoSmithKline Capital Inc. 2.800% 3/18/23 12,000 11,458
GlaxoSmithKline Capital plc 2.850% 5/8/22 24,000 23,412
Hasbro Inc. 6.300% 9/15/17 5,000 5,751
7 Hawk Acquisition Sub Inc. 4.250% 10/15/20 2,100 2,047
Hershey Co. 4.850% 8/15/15 5,000 5,335
Hershey Co. 4.125% 12/1/20 4,125 4,569
Hormel Foods Corp. 4.125% 4/15/21 3,350 3,572
Kaiser Foundation Hospitals 3.500% 4/1/22 5,765 5,645
Kellogg Co. 1.750% 5/17/17 1,500 1,515
Kimberly-Clark Corp. 6.125% 8/1/17 8,449 9,873
Kimberly-Clark Corp. 7.500% 11/1/18 10,000 12,555
Kimberly-Clark Corp. 3.625% 8/1/20 3,300 3,529
Koninklijke Philips NV 3.750% 3/15/22 32,849 33,894
Kraft Foods Group Inc. 2.250% 6/5/17 3,980 4,094
Kraft Foods Group Inc. 6.125% 8/23/18 6,000 7,047
Kraft Foods Group Inc. 3.500% 6/6/22 17,600 17,651
Kroger Co. 2.200% 1/15/17 2,920 2,997
Kroger Co. 3.300% 1/15/21 5,500 5,534
Kroger Co. 3.400% 4/15/22 3,000 2,966
Kroger Co. 3.850% 8/1/23 5,000 5,000
Life Technologies Corp. 6.000% 3/1/20 5,000 5,844
Lorillard Tobacco Co. 3.500% 8/4/16 3,100 3,271
Lorillard Tobacco Co. 2.300% 8/21/17 4,000 4,084
Lorillard Tobacco Co. 8.125% 6/23/19 6,000 7,473
Lorillard Tobacco Co. 6.875% 5/1/20 15,815 18,624
McKesson Corp. 7.500% 2/15/19 6,100 7,489
McKesson Corp. 4.750% 3/1/21 3,420 3,744
McKesson Corp. 2.700% 12/15/22 8,469 7,895
McKesson Corp. 2.850% 3/15/23 5,000 4,696
Medco Health Solutions Inc. 7.125% 3/15/18 5,185 6,194
Medtronic Inc. 4.450% 3/15/20 10,000 11,084
Medtronic Inc. 4.125% 3/15/21 8,558 9,170
Medtronic Inc. 3.125% 3/15/22 7,000 7,003
Medtronic Inc. 2.750% 4/1/23 20,000 18,924
Merck & Co. Inc. 6.000% 9/15/17 5,000 5,821
Merck & Co. Inc. 3.875% 1/15/21 16,450 17,645
Merck & Co. Inc. 2.400% 9/15/22 5,950 5,599
Merck & Co. Inc. 2.800% 5/18/23 22,500 21,450
Merck Sharp & Dohme Corp. 5.000% 6/30/19 10,000 11,472
Mondelez International Inc. 4.000% 2/1/24 6,000 6,059
7 Mylan Inc. 2.600% 6/24/18 5,940 6,023

 

55

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Mylan Inc. 2.550% 3/28/19 3,500 3,493
7 Mylan Inc. 3.125% 1/15/23 11,325 10,586
Mylan Inc. 4.200% 11/29/23 5,800 5,837
Newell Rubbermaid Inc. 2.050% 12/1/17 2,180 2,190
Newell Rubbermaid Inc. 4.700% 8/15/20 5,000 5,407
Novartis Capital Corp. 4.400% 4/24/20 15,000 16,538
Novartis Capital Corp. 2.400% 9/21/22 14,555 13,673
Novartis Securities Investment Ltd. 5.125% 2/10/19 27,894 31,913
PepsiCo Inc. 5.000% 6/1/18 16,500 18,764
PepsiCo Inc. 7.900% 11/1/18 14,000 17,728
PepsiCo Inc. 4.500% 1/15/20 13,800 15,442
PepsiCo Inc. 3.125% 11/1/20 14,500 14,829
PepsiCo Inc. 3.000% 8/25/21 17,990 18,100
PepsiCo Inc. 2.750% 3/5/22 13,860 13,448
PerkinElmer Inc. 5.000% 11/15/21 8,000 8,448
7 Pernod Ricard SA 5.750% 4/7/21 2,250 2,531
7 Pernod Ricard SA 4.450% 1/15/22 5,000 5,186
7 Pernod Ricard SA 4.250% 7/15/22 5,000 5,125
Pfizer Inc. 4.650% 3/1/18 6,000 6,723
Pfizer Inc. 6.200% 3/15/19 24,000 28,663
Pharmacia Corp. 6.500% 12/1/18 6,045 7,375
Philip Morris International Inc. 6.875% 3/17/14 2,750 2,771
Philip Morris International Inc. 2.500% 5/16/16 4,250 4,416
Philip Morris International Inc. 4.500% 3/26/20 11,750 13,028
Philip Morris International Inc. 4.125% 5/17/21 4,000 4,255
Philip Morris International Inc. 2.900% 11/15/21 10,500 10,306
Philip Morris International Inc. 2.500% 8/22/22 13,425 12,488
Philip Morris International Inc. 2.625% 3/6/23 2,000 1,852
Philip Morris International Inc. 3.600% 11/15/23 5,000 4,955
Procter & Gamble Co. 4.700% 2/15/19 21,200 24,205
Procter & Gamble Co. 2.300% 2/6/22 9,275 8,893
Quest Diagnostics Inc. 4.750% 1/30/20 2,000 2,148
Quest Diagnostics Inc. 4.700% 4/1/21 4,000 4,198
Reynolds American Inc. 3.250% 11/1/22 5,011 4,729
7 Roche Holdings Inc. 6.000% 3/1/19 17,280 20,466
Sanofi 2.625% 3/29/16 14,860 15,492
Sanofi 1.250% 4/10/18 9,615 9,444
Sanofi 4.000% 3/29/21 23,500 25,206
St. Jude Medical Inc. 3.250% 4/15/23 37,138 36,015
Stryker Corp. 4.375% 1/15/20 10,000 11,063
Sysco Corp. 5.250% 2/12/18 12,000 13,592
Sysco Corp. 2.600% 6/12/22 4,000 3,775
7 Takeda Pharmaceutical Co. Ltd. 1.625% 3/17/17 24,510 24,448
Teva Pharmaceutical Finance Co. BV 3.650% 11/10/21 20,550 20,413
Teva Pharmaceutical Finance Co. BV 2.950% 12/18/22 25,150 23,195
Teva Pharmaceutical Finance IV BV 3.650% 11/10/21 25,535 25,364
Teva Pharmaceutical Finance IV LLC 2.250% 3/18/20 7,000 6,685
Thermo Fisher Scientific Inc. 5.000% 6/1/15 3,100 3,276
Thermo Fisher Scientific Inc. 2.250% 8/15/16 2,840 2,920
Thermo Fisher Scientific Inc. 4.700% 5/1/20 4,400 4,853
Thermo Fisher Scientific Inc. 4.500% 3/1/21 4,100 4,424
Thermo Fisher Scientific Inc. 3.600% 8/15/21 7,625 7,741
Tyson Foods Inc. 4.500% 6/15/22 15,750 16,301
Unilever Capital Corp. 4.800% 2/15/19 1,920 2,179
Unilever Capital Corp. 4.250% 2/10/21 9,300 10,154
Wyeth LLC 5.500% 2/15/16 5,000 5,500
Zoetis Inc. 1.875% 2/1/18 4,000 4,005
Zoetis Inc. 3.250% 2/1/23 10,000 9,629
Energy (5.8%)        
Anadarko Petroleum Corp. 6.375% 9/15/17 10,000 11,521
Apache Corp. 3.625% 2/1/21 11,000 11,530
Apache Corp. 3.250% 4/15/22 19,324 19,421
Baker Hughes Inc. 7.500% 11/15/18 4,845 6,037

 

56

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Baker Hughes Inc. 3.200% 8/15/21 3,720 3,788
BP Capital Markets plc 1.375% 11/6/17 10,500 10,464
BP Capital Markets plc 1.375% 5/10/18 2,000 1,969
BP Capital Markets plc 4.750% 3/10/19 15,350 17,335
BP Capital Markets plc 4.500% 10/1/20 30,500 33,427
BP Capital Markets plc 4.742% 3/11/21 8,748 9,657
BP Capital Markets plc 3.561% 11/1/21 31,470 32,244
BP Capital Markets plc 3.245% 5/6/22 35,000 34,489
BP Capital Markets plc 2.500% 11/6/22 11,500 10,697
BP Capital Markets plc 2.750% 5/10/23 34,560 32,057
Canadian Natural Resources Ltd. 5.700% 5/15/17 3,190 3,625
Canadian Natural Resources Ltd. 3.450% 11/15/21 2,000 2,026
Chevron Corp. 4.950% 3/3/19 3,347 3,835
Chevron Corp. 2.427% 6/24/20 8,000 7,992
Chevron Corp. 2.355% 12/5/22 39,000 36,483
Chevron Corp. 3.191% 6/24/23 37,083 36,701
ConocoPhillips 5.750% 2/1/19 23,935 28,172
ConocoPhillips 6.000% 1/15/20 5,000 5,997
ConocoPhillips Co. 2.400% 12/15/22 10,000 9,417
Continental Resources Inc. 5.000% 9/15/22 7,000 7,210
Continental Resources Inc. 4.500% 4/15/23 6,000 6,150
Devon Energy Corp. 6.300% 1/15/19 5,000 5,924
Diamond Offshore Drilling Inc. 5.875% 5/1/19 5,000 5,841
Diamond Offshore Drilling Inc. 3.450% 11/1/23 6,000 5,902
Ensco plc 4.700% 3/15/21 10,000 10,763
EOG Resources Inc. 5.875% 9/15/17 3,000 3,456
EOG Resources Inc. 5.625% 6/1/19 10,250 11,940
EOG Resources Inc. 4.400% 6/1/20 12,000 13,161
EOG Resources Inc. 4.100% 2/1/21 6,000 6,433
EOG Resources Inc. 2.625% 3/15/23 10,958 10,289
EQT Corp. 8.125% 6/1/19 5,500 6,766
Halliburton Co. 6.150% 9/15/19 12,631 15,137
Halliburton Co. 3.250% 11/15/21 14,800 15,045
Halliburton Co. 3.500% 8/1/23 5,000 4,964
Hess Corp. 8.125% 2/15/19 5,075 6,368
Marathon Oil Corp. 6.000% 10/1/17 7,213 8,294
7 Motiva Enterprises LLC 5.750% 1/15/20 5,000 5,751
Nabors Industries Inc. 5.000% 9/15/20 3,319 3,525
National Oilwell Varco Inc. 2.600% 12/1/22 34,000 32,067
Noble Energy Inc. 8.250% 3/1/19 6,000 7,567
Noble Holding International Ltd. 4.900% 8/1/20 5,000 5,411
Noble Holding International Ltd. 3.950% 3/15/22 1,000 990
Occidental Petroleum Corp. 1.500% 2/15/18 7,500 7,455
Occidental Petroleum Corp. 4.100% 2/1/21 24,525 26,327
Occidental Petroleum Corp. 3.125% 2/15/22 15,080 14,959
Occidental Petroleum Corp. 2.700% 2/15/23 20,604 19,354
Petro-Canada 6.050% 5/15/18 4,000 4,660
Phillips 66 2.950% 5/1/17 4,000 4,187
Phillips 66 4.300% 4/1/22 9,000 9,390
Pioneer Natural Resources Co. 3.950% 7/15/22 5,000 5,079
Pride International Inc. 6.875% 8/15/20 9,178 11,143
Rowan Cos. Inc. 4.875% 6/1/22 5,000 5,111
Schlumberger Investment SA 3.650% 12/1/23 17,000 17,424
Shell International Finance BV 5.200% 3/22/17 2,680 2,997
Shell International Finance BV 4.300% 9/22/19 16,000 17,794
Shell International Finance BV 4.375% 3/25/20 14,035 15,571
Shell International Finance BV 2.375% 8/21/22 39,609 37,043
Shell International Finance BV 2.250% 1/6/23 3,500 3,241
Shell International Finance BV 3.400% 8/12/23 5,000 5,011
Southwestern Energy Co. 7.500% 2/1/18 5,000 5,963
Southwestern Energy Co. 4.100% 3/15/22 5,000 5,104
Suncor Energy Inc. 6.100% 6/1/18 5,000 5,842
Talisman Energy Inc. 7.750% 6/1/19 3,000 3,644
Talisman Energy Inc. 3.750% 2/1/21 3,300 3,274

 

57

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Total Capital Canada Ltd. 1.450% 1/15/18 7,700 7,717
Total Capital Canada Ltd. 2.750% 7/15/23 7,000 6,619
Total Capital International SA 1.550% 6/28/17 2,450 2,476
Total Capital International SA 2.875% 2/17/22 28,500 27,909
Total Capital International SA 2.700% 1/25/23 23,160 21,933
Total Capital International SA 3.750% 4/10/24 10,000 10,152
Total Capital SA 4.450% 6/24/20 25,212 27,903
Total Capital SA 4.125% 1/28/21 12,525 13,505
Transocean Inc. 2.500% 10/15/17 2,380 2,413
Transocean Inc. 6.500% 11/15/20 5,000 5,680
Transocean Inc. 6.375% 12/15/21 18,000 20,062
Transocean Inc. 3.800% 10/15/22 5,000 4,702
Valero Energy Corp. 9.375% 3/15/19 4,200 5,513
Weatherford International Ltd. 6.000% 3/15/18 10,000 11,299
Weatherford International Ltd. 9.625% 3/1/19 3,750 4,865
Weatherford International Ltd. 5.125% 9/15/20 5,000 5,422
Other Industrial (0.0%)        
Smithsonian Institute Washington DC GO 3.434% 9/1/23 1,600 1,604
 
Technology (4.2%)        
Agilent Technologies Inc. 5.000% 7/15/20 11,000 12,042
Altera Corp. 1.750% 5/15/17 3,205 3,226
Altera Corp. 2.500% 11/15/18 10,000 10,124
Altera Corp. 4.100% 11/15/23 4,623 4,623
Apple Inc. 2.400% 5/3/23 78,300 71,666
Applied Materials Inc. 4.300% 6/15/21 13,615 14,517
Baidu Inc. 3.250% 8/6/18 10,100 10,186
Baidu Inc. 3.500% 11/28/22 13,000 11,763
Broadcom Corp. 2.500% 8/15/22 15,000 13,819
Cisco Systems Inc. 4.950% 2/15/19 11,800 13,443
Cisco Systems Inc. 4.450% 1/15/20 25,000 27,803
Corning Inc. 1.450% 11/15/17 5,150 5,158
Corning Inc. 6.625% 5/15/19 5,710 6,948
Corning Inc. 4.250% 8/15/20 9,000 9,879
Corning Inc. 3.700% 11/15/23 15,000 15,247
EMC Corp. 1.875% 6/1/18 6,700 6,711
EMC Corp. 2.650% 6/1/20 21,955 21,976
EMC Corp. 3.375% 6/1/23 15,000 14,805
Equifax Inc. 6.300% 7/1/17 5,000 5,717
Fidelity National Information Services Inc. 3.500% 4/15/23 6,925 6,528
Fiserv Inc. 3.500% 10/1/22 8,000 7,796
Hewlett-Packard Co. 5.400% 3/1/17 2,500 2,790
Hewlett-Packard Co. 5.500% 3/1/18 2,000 2,258
Hewlett-Packard Co. 2.750% 1/14/19 6,250 6,275
Hewlett-Packard Co. 4.300% 6/1/21 20,000 20,480
Hewlett-Packard Co. 4.375% 9/15/21 13,022 13,357
Hewlett-Packard Co. 4.650% 12/9/21 5,000 5,234
Intel Corp. 1.350% 12/15/17 9,000 8,977
Intel Corp. 3.300% 10/1/21 44,900 45,662
Intel Corp. 2.700% 12/15/22 38,000 35,897
International Business Machines Corp. 5.700% 9/14/17 14,601 16,793
International Business Machines Corp. 7.625% 10/15/18 14,500 18,201
International Business Machines Corp. 1.625% 5/15/20 20,000 19,050
International Business Machines Corp. 2.900% 11/1/21 13,000 12,884
International Business Machines Corp. 1.875% 8/1/22 11,000 9,886
Microsoft Corp. 4.200% 6/1/19 3,800 4,227
Microsoft Corp. 3.000% 10/1/20 4,000 4,138
Microsoft Corp. 4.000% 2/8/21 8,000 8,735
Microsoft Corp. 2.125% 11/15/22 13,500 12,456
Microsoft Corp. 2.375% 5/1/23 10,000 9,276
Microsoft Corp. 3.625% 12/15/23 19,000 19,388
Motorola Solutions Inc. 3.750% 5/15/22 7,000 6,946
Oracle Corp. 5.750% 4/15/18 4,160 4,840

 

58

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Oracle Corp. 2.375% 1/15/19 3,250 3,303
  Oracle Corp. 5.000% 7/8/19 14,000 16,007
  Oracle Corp. 3.875% 7/15/20 13,000 14,007
  Oracle Corp. 2.500% 10/15/22 33,000 30,995
  Oracle Corp. 3.625% 7/15/23 14,000 14,140
  Pitney Bowes Inc. 5.750% 9/15/17 4,707 5,246
7 Seagate HDD Cayman 3.750% 11/15/18 5,670 5,798
  Texas Instruments Inc. 2.250% 5/1/23 5,000 4,548
  Tyco Electronics Group SA 6.550% 10/1/17 2,990 3,471
  Verisk Analytics Inc. 4.125% 9/12/22 12,800 12,777
  Xerox Corp. 6.350% 5/15/18 5,000 5,857
  Xerox Corp. 5.625% 12/15/19 8,000 9,082
  Transportation (1.2%)        
5,7 American Airlines 2013-2 Class A Pass Through Trust 4.950% 7/15/24 6,793 7,277
  Burlington Northern Santa Fe LLC 8.125% 4/15/20 5,000 6,408
  Canadian National Railway Co. 2.850% 12/15/21 7,380 7,334
  Canadian Pacific Railway Co. 7.250% 5/15/19 3,375 4,147
  Canadian Pacific Railway Co. 4.450% 3/15/23 2,085 2,218
  Canadian Pacific Railway Ltd. 4.500% 1/15/22 5,325 5,699
5 Continental Airlines 1997-4 Class A Pass Through Trust 6.900% 7/2/19 1,965 2,128
5 Continental Airlines 1998-1 Class A Pass Through Trust 6.648% 3/15/19 455 481
5 Continental Airlines 2000-1 Class A-1 Pass Through        
  Trust 8.048% 11/1/20 1,488 1,697
5 Continental Airlines 2005-ERJ1 Pass Through Trust 9.798% 4/1/21 1,535 1,735
5 Continental Airlines 2009-2 Class A Pass Through Trust 7.250% 5/10/21 4,130 4,760
5 Continental Airlines 2012-2 Class B Pass Through Trust 5.500% 4/29/22 1,550 1,604
  CSX Corp. 7.900% 5/1/17 5,000 5,978
  CSX Corp. 7.375% 2/1/19 3,375 4,181
5,9 Delta Air Lines 2002-1 Class G-1 Pass Through Trust 6.718% 7/2/24 1,996 2,271
5 Delta Air Lines 2007-1 Class A Pass Through Trust 6.821% 2/10/24 2,213 2,540
5 Delta Air Lines 2009-1 Class A Pass Through Trust 7.750% 12/17/19 4,642 5,437
5 Delta Air Lines 2010-1 Class A Pass Through Trust 6.200% 1/2/20 7,819 8,777
5 Delta Air Lines 2012-1 Class A Pass Through Trust 4.750% 11/7/21 3,497 3,776
7 ERAC USA Finance LLC 6.375% 10/15/17 6,370 7,402
7 ERAC USA Finance LLC 5.250% 10/1/20 3,750 4,211
7 ERAC USA Finance LLC 4.500% 8/16/21 5,000 5,336
5 Hawaiian Airlines 2013-1 Class A Pass Through        
  Certificates 3.900% 1/15/26 3,525 3,358
  JB Hunt Transport Services Inc. 3.375% 9/15/15 4,920 5,094
4,5,9 JetBlue Airways 2004-1 G-2 Pass Through Trust 0.663% 9/15/15 2,540 2,526
4,5,9 JetBlue Airways 2004-2 G-2 Pass Through Trust 0.691% 5/15/18 2,465 2,376
  Kansas City Southern de Mexico SA de CV 2.350% 5/15/20 5,000 4,778
  Ryder System Inc. 2.500% 3/1/17 2,000 2,059
  Ryder System Inc. 2.350% 2/26/19 8,120 8,099
5 Southwest Airlines Co. 2007-1 Pass Through Trust 6.150% 2/1/24 3,964 4,558
  United Continental Holdings Inc. 6.375% 6/1/18 2,775 2,914
  United Parcel Service Inc. 5.500% 1/15/18 5,100 5,878
  United Parcel Service Inc. 3.125% 1/15/21 34,200 35,116
  United Parcel Service Inc. 2.450% 10/1/22 30,700 29,174
          6,976,523
Utilities (7.5%)        
  Electric (6.3%)        
  Alabama Power Co. 3.375% 10/1/20 7,000 7,306
  Alabama Power Co. 3.550% 12/1/23 5,750 5,802
  Ameren Illinois Co. 6.125% 11/15/17 1,650 1,920
  Ameren Illinois Co. 2.700% 9/1/22 22,449 21,598
  American Electric Power Co. Inc. 1.650% 12/15/17 4,770 4,729
  Appalachian Power Co. 5.000% 6/1/17 640 702
  Appalachian Power Co. 4.600% 3/30/21 3,000 3,297

 

59

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Arizona Public Service Co. 8.750% 3/1/19 10,850 14,017
  Baltimore Gas & Electric Co. 3.500% 11/15/21 8,925 9,139
  Baltimore Gas & Electric Co. 3.350% 7/1/23 3,000 2,964
  CenterPoint Energy Houston Electric LLC 2.250% 8/1/22 7,330 6,842
  CenterPoint Energy Inc. 5.950% 2/1/17 3,115 3,518
  CenterPoint Energy Inc. 6.500% 5/1/18 2,000 2,350
  CMS Energy Corp. 6.550% 7/17/17 750 869
  CMS Energy Corp. 5.050% 2/15/18 4,730 5,260
  CMS Energy Corp. 8.750% 6/15/19 11,180 14,448
  CMS Energy Corp. 6.250% 2/1/20 3,255 3,826
  Commonwealth Edison Co. 5.950% 8/15/16 5,000 5,630
  Commonwealth Edison Co. 1.950% 9/1/16 2,500 2,561
  Commonwealth Edison Co. 6.150% 9/15/17 1,570 1,821
  Commonwealth Edison Co. 5.800% 3/15/18 4,110 4,760
  Commonwealth Edison Co. 4.000% 8/1/20 19,071 20,687
  Commonwealth Edison Co. 3.400% 9/1/21 5,400 5,542
  Connecticut Light & Power Co. 5.650% 5/1/18 3,100 3,569
  Connecticut Light & Power Co. 5.500% 2/1/19 11,695 13,573
  Connecticut Light & Power Co. 2.500% 1/15/23 18,240 17,186
  Consolidated Edison Co. of New York Inc. 6.650% 4/1/19 11,275 13,693
  Consumers Energy Co. 5.650% 9/15/18 1,000 1,166
  Consumers Energy Co. 6.125% 3/15/19 5,600 6,680
  Consumers Energy Co. 6.700% 9/15/19 6,319 7,766
  Consumers Energy Co. 5.650% 4/15/20 10,683 12,540
  Consumers Energy Co. 2.850% 5/15/22 15,640 15,379
  Consumers Energy Co. 3.375% 8/15/23 3,144 3,153
  DTE Electric Co. 3.450% 10/1/20 7,680 7,984
  DTE Electric Co. 3.900% 6/1/21 14,650 15,610
  DTE Electric Co. 2.650% 6/15/22 1,000 967
  Duke Energy Carolinas LLC 1.750% 12/15/16 2,875 2,950
  Duke Energy Carolinas LLC 7.000% 11/15/18 6,100 7,491
  Duke Energy Carolinas LLC 4.300% 6/15/20 12,915 14,223
  Duke Energy Carolinas LLC 3.900% 6/15/21 8,686 9,342
  Duke Energy Corp. 2.100% 6/15/18 2,445 2,463
  Duke Energy Corp. 6.250% 6/15/18 4,272 4,997
  Duke Energy Florida Inc. 5.650% 6/15/18 6,005 6,964
  Duke Energy Florida Inc. 4.550% 4/1/20 9,645 10,724
  Duke Energy Florida Inc. 3.100% 8/15/21 4,400 4,459
  Duke Energy Indiana Inc. 3.750% 7/15/20 14,270 15,217
  Duke Energy Ohio Inc. 5.450% 4/1/19 5,000 5,784
  Duke Energy Progress Inc. 5.300% 1/15/19 13,177 15,199
  Duke Energy Progress Inc. 3.000% 9/15/21 17,523 17,642
  Duke Energy Progress Inc. 2.800% 5/15/22 10,405 10,216
7 EDP Finance BV 5.250% 1/14/21 6,220 6,365
  Entergy Arkansas Inc. 3.750% 2/15/21 3,770 3,840
  Entergy Gulf States Louisiana LLC 6.000% 5/1/18 1,260 1,460
  Entergy Louisiana LLC 4.800% 5/1/21 12,780 13,834
  Entergy Louisiana LLC 3.300% 12/1/22 6,915 6,759
  Entergy Texas Inc. 7.125% 2/1/19 5,485 6,570
  Exelon Generation Co. LLC 4.000% 10/1/20 4,000 4,057
  Exelon Generation Co. LLC 4.250% 6/15/22 5,000 4,924
  FirstEnergy Corp. 2.750% 3/15/18 7,790 7,813
  FirstEnergy Corp. 4.250% 3/15/23 2,490 2,422
  Florida Power & Light Co. 2.750% 6/1/23 9,200 8,869
5,7 FPL Energy Marcus Hook LP 7.590% 7/10/18 5,045 5,272
  Georgia Power Co. 5.700% 6/1/17 1,185 1,360
  Georgia Power Co. 5.400% 6/1/18 8,000 9,191
  Indiana Michigan Power Co. 7.000% 3/15/19 5,000 6,054
7 Kansas Gas & Electric Co. 6.700% 6/15/19 4,824 5,836
  Kentucky Utilities Co. 3.250% 11/1/20 9,740 10,054
  LG&E & KU Energy LLC 3.750% 11/15/20 13,086 13,518
  LG&E & KU Energy LLC 4.375% 10/1/21 9,785 10,322
  Metropolitan Edison Co. 7.700% 1/15/19 5,000 6,107
  MidAmerican Energy Co. 5.300% 3/15/18 7,997 9,107

 

60

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
MidAmerican Energy Co. 3.700% 9/15/23 5,500 5,634
MidAmerican Energy Holdings Co. 5.750% 4/1/18 8,380 9,662
7 MidAmerican Energy Holdings Co. 2.000% 11/15/18 10,310 10,276
7 MidAmerican Energy Holdings Co. 3.750% 11/15/23 8,000 8,000
National Rural Utilities Cooperative Finance Corp. 4.750% 3/1/14 2,889 2,898
National Rural Utilities Cooperative Finance Corp. 5.450% 4/10/17 7,691 8,667
National Rural Utilities Cooperative Finance Corp. 10.375% 11/1/18 9,980 13,635
National Rural Utilities Cooperative Finance Corp. 2.350% 6/15/20 12,950 12,737
National Rural Utilities Cooperative Finance Corp. 3.050% 2/15/22 12,340 12,288
Nevada Power Co. 6.500% 8/1/18 2,337 2,790
Nevada Power Co. 7.125% 3/15/19 7,350 9,045
NextEra Energy Capital Holdings Inc. 6.000% 3/1/19 8,976 10,315
NextEra Energy Capital Holdings Inc. 4.500% 6/1/21 8,755 9,247
NextEra Energy Capital Holdings Inc. 3.625% 6/15/23 930 904
5 NextEra Energy Capital Holdings Inc. 6.350% 10/1/66 2,850 2,822
7 Niagara Mohawk Power Corp. 2.721% 11/28/22 2,000 1,897
Northeast Utilities 2.800% 5/1/23 2,000 1,872
Northern States Power Co. 2.150% 8/15/22 3,000 2,775
NSTAR Electric Co. 5.625% 11/15/17 3,000 3,452
NSTAR Electric Co. 2.375% 10/15/22 7,700 7,193
NSTAR LLC 4.500% 11/15/19 7,000 7,720
NV Energy Inc. 6.250% 11/15/20 3,920 4,601
Pacific Gas & Electric Co. 3.500% 10/1/20 29,000 30,272
Pacific Gas & Electric Co. 4.250% 5/15/21 15,200 16,331
Pacific Gas & Electric Co. 3.250% 9/15/21 9,250 9,306
Pacific Gas & Electric Co. 2.450% 8/15/22 6,500 6,097
Pacific Gas & Electric Co. 3.250% 6/15/23 6,000 5,811
PacifiCorp 5.500% 1/15/19 11,244 13,046
PacifiCorp 3.850% 6/15/21 20,344 21,603
PacifiCorp 2.950% 2/1/22 5,954 5,871
Pennsylvania Electric Co. 6.050% 9/1/17 1,415 1,590
Potomac Electric Power Co. 3.050% 4/1/22 2,270 2,254
PPL Electric Utilities Corp. 3.000% 9/15/21 15,868 15,987
7 PPL WEM Holdings plc 3.900% 5/1/16 2,875 3,048
7 PPL WEM Holdings plc 5.375% 5/1/21 3,000 3,287
Progress Energy Inc. 3.150% 4/1/22 5,000 4,877
Public Service Co. of Colorado 5.800% 8/1/18 3,280 3,835
Public Service Co. of Colorado 5.125% 6/1/19 2,500 2,862
Public Service Co. of Colorado 3.200% 11/15/20 5,000 5,131
Public Service Co. of Colorado 2.250% 9/15/22 5,000 4,685
Public Service Co. of New Mexico 7.950% 5/15/18 1,398 1,678
Public Service Electric & Gas Co. 3.500% 8/15/20 8,000 8,389
Public Service Electric & Gas Co. 2.375% 5/15/23 10,325 9,567
Puget Energy Inc. 6.500% 12/15/20 17,000 20,094
Puget Energy Inc. 5.625% 7/15/22 7,235 8,115
SCANA Corp. 6.250% 4/1/20 8,500 9,621
SCANA Corp. 4.750% 5/15/21 7,900 8,296
Sierra Pacific Power Co. 6.000% 5/15/16 2,500 2,793
Southern California Edison Co. 3.875% 6/1/21 11,156 11,907
Southern California Edison Co. 3.500% 10/1/23 17,500 17,600
Southwestern Electric Power Co. 5.550% 1/15/17 3,000 3,305
Southwestern Electric Power Co. 6.450% 1/15/19 2,118 2,482
Tampa Electric Co. 5.400% 5/15/21 13,000 14,935
Tampa Electric Co. 2.600% 9/15/22 4,070 3,858
TECO Finance Inc. 5.150% 3/15/20 14,332 16,046
UIL Holdings Corp. 4.625% 10/1/20 7,000 7,318
Union Electric Co. 6.400% 6/15/17 3,000 3,481
Union Electric Co. 6.700% 2/1/19 2,427 2,951
Virginia Electric & Power Co. 5.950% 9/15/17 5,000 5,804
Virginia Electric & Power Co. 5.400% 4/30/18 6,137 7,044
Virginia Electric & Power Co. 5.000% 6/30/19 3,930 4,472
Virginia Electric & Power Co. 3.450% 9/1/22 3,000 3,090
Westar Energy Inc. 5.100% 7/15/20 10,100 11,459
Western Massachusetts Electric Co. 3.500% 9/15/21 10,000 10,270

 

61

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
5 Wisconsin Energy Corp. 6.250% 5/15/67 6,415 6,567
Wisconsin Power & Light Co. 5.000% 7/15/19 4,500 5,103
Xcel Energy Inc. 5.613% 4/1/17 2,079 2,291
Natural Gas (1.2%)        
Atmos Energy Corp. 8.500% 3/15/19 5,000 6,458
Boardwalk Pipelines LP 5.750% 9/15/19 4,935 5,557
Buckeye Partners LP 4.875% 2/1/21 5,000 5,249
CenterPoint Energy Resources Corp. 4.500% 1/15/21 3,000 3,270
7 Centrica plc 4.000% 10/16/23 2,170 2,174
El Paso Natural Gas Co. LLC 5.950% 4/15/17 3,000 3,384
El Paso Pipeline Partners Operating Co. LLC 6.500% 4/1/20 18,295 21,126
El Paso Pipeline Partners Operating Co. LLC 5.000% 10/1/21 5,150 5,469
Enbridge Energy Partners LP 6.500% 4/15/18 1,750 2,052
Enbridge Energy Partners LP 5.200% 3/15/20 2,500 2,757
5 Enbridge Energy Partners LP 8.050% 10/1/77 1,110 1,249
Energy Transfer Partners LP 9.700% 3/15/19 4,432 5,777
Energy Transfer Partners LP 9.000% 4/15/19 2,334 2,976
Energy Transfer Partners LP 4.650% 6/1/21 12,850 13,442
Energy Transfer Partners LP 5.200% 2/1/22 8,000 8,578
5 Enterprise Products Operating LLC 8.375% 8/1/66 3,000 3,334
Kinder Morgan Energy Partners LP 5.950% 2/15/18 1,230 1,410
Kinder Morgan Energy Partners LP 2.650% 2/1/19 2,100 2,098
Kinder Morgan Energy Partners LP 9.000% 2/1/19 5,410 6,920
Kinder Morgan Energy Partners LP 6.850% 2/15/20 8,227 9,855
Kinder Morgan Energy Partners LP 5.800% 3/1/21 5,000 5,665
Kinder Morgan Energy Partners LP 4.150% 3/1/22 7,240 7,349
Nisource Finance Corp. 6.400% 3/15/18 1,463 1,707
Nisource Finance Corp. 6.800% 1/15/19 1,500 1,793
Nisource Finance Corp. 6.125% 3/1/22 5,000 5,753
ONEOK Partners LP 8.625% 3/1/19 2,000 2,540
Sempra Energy 6.500% 6/1/16 13,327 14,989
Sempra Energy 2.300% 4/1/17 1,094 1,125
Sempra Energy 6.150% 6/15/18 5,938 6,937
Sempra Energy 9.800% 2/15/19 4,340 5,779
Sempra Energy 2.875% 10/1/22 7,000 6,601
Sempra Energy 4.050% 12/1/23 2,000 2,026
Sunoco Logistics Partners Operations LP 4.650% 2/15/22 3,485 3,615
5 TransCanada PipeLines Ltd. 6.350% 5/15/67 4,000 4,120
Williams Partners LP 4.500% 11/15/23 11,000 11,156
 
        1,247,408
 
Total Corporate Bonds (Cost $12,501,122)       12,850,516
 
Sovereign Bonds (U.S. Dollar-Denominated) (3.8%)        
7 Abu Dhabi National Energy Co. 6.165% 10/25/17 1,000 1,137
7 Abu Dhabi National Energy Co. 3.625% 1/12/23 1,000 948
7 Aruba 4.625% 9/14/23 1,000 943
Asian Development Bank 1.125% 3/15/17 4,000 4,028
Asian Development Bank 1.875% 10/23/18 3,000 3,048
Banco do Brasil SA 3.875% 10/10/22 1,000 862
7 Banco Latinoamericano de Comercio Exterior SA 3.750% 4/4/17 4,500 4,581
7 Bank Nederlandse Gemeenten 1.375% 9/27/17 1,500 1,494
7 Bank Nederlandse Gemeenten 2.500% 1/23/23 1,000 947
7 Bank of China Hong Kong Ltd. 3.750% 11/8/16 920 966
7 Bermuda 5.603% 7/20/20 2,300 2,486
7 Bermuda 4.138% 1/3/23 2,000 1,912
7 Bermuda 4.854% 2/6/24 1,000 991
7 Caixa Economica Federal 2.375% 11/6/17 3,000 2,759
Canada 0.875% 2/14/17 5,000 5,019
Cayman Islands 5.950% 11/24/19 500 556
7 CEZ AS 4.250% 4/3/22 1,000 1,021
China Development Bank Corp. 5.000% 10/15/15 1,500 1,599
7 CNOOC Finance 2012 Ltd. 3.875% 5/2/22 1,000 974
7 CNPC General Capital Ltd. 3.400% 4/16/23 1,000 918

 

62

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Corp. Andina de Fomento 3.750% 1/15/16 11,500 12,030
7 Corp. Financiera de Desarrollo SA 4.750% 2/8/22 1,400 1,386
7 Corp. Nacional del Cobre de Chile 3.875% 11/3/21 3,000 2,981
  Corp. Nacional del Cobre de Chile 3.875% 11/3/21 1,500 1,490
7 Corp. Nacional del Cobre de Chile 4.500% 8/13/23 1,500 1,544
  Ecopetrol SA 7.375% 9/18/43 1,000 1,077
7 Electricite de France 6.000% 1/22/14 50 53
5,7 ENA Norte Trust 4.950% 4/25/28 1,873 1,812
  European Investment Bank 2.250% 3/15/16 8,000 8,290
  European Investment Bank 2.125% 7/15/16 10,000 10,370
  European Investment Bank 2.875% 9/15/20 20,000 20,615
  European Investment Bank 3.250% 1/29/24 2,000 2,034
  Export-Import Bank of Korea 5.875% 1/14/15 3,000 3,144
  Export-Import Bank of Korea 4.125% 9/9/15 2,000 2,103
  Export-Import Bank of Korea 2.875% 9/17/18 3,000 3,046
  Export-Import Bank of Korea 5.125% 6/29/20 2,000 2,212
  Export-Import Bank of Korea 4.000% 1/29/21 1,000 1,043
  Export-Import Bank of Korea 4.000% 1/14/24 2,000 2,026
  Federative Republic of Brazil 2.625% 1/5/23 16,000 13,664
  FMS Wertmanagement AoeR 1.625% 11/20/18 5,000 4,996
7 Industrial Bank of Korea 7.125% 4/23/14 1,700 1,723
  Inter-American Development Bank 1.375% 10/18/16 3,000 3,048
  Inter-American Development Bank 2.125% 11/9/20 3,100 3,059
  International Finance Corp. 1.000% 4/24/17 6,700 6,711
  International Finance Corp. 1.750% 9/4/18 3,000 3,013
7 IPIC GMTN Ltd. 5.500% 3/1/22 800 880
10 Japan Bank for International Cooperation 2.500% 5/18/16 8,000 8,315
10 Japan Bank for International Cooperation 2.125% 2/7/19 5,000 5,056
7 KazMunayGas National Co. JSC 4.400% 4/30/23 2,000 1,821
11 KFW 0.625% 4/24/15 25,000 25,105
11 KFW 1.250% 2/15/17 4,000 4,041
11 KFW 1.000% 6/11/18 11,750 11,502
11 KFW 2.750% 10/1/20 3,000 3,083
11 KFW 2.625% 1/25/22 9,000 9,023
11 KFW 2.000% 10/4/22 2,000 1,875
7 Kingdom of Spain 4.000% 3/6/18 5,100 5,345
7 Kommunalbanken AS 1.000% 9/26/17 1,500 1,489
  Korea Development Bank 3.875% 5/4/17 5,000 5,316
  Korea Development Bank 1.500% 1/22/18 2,000 1,952
  Korea Finance Corp. 3.250% 9/20/16 1,000 1,046
  Korea Finance Corp. 4.625% 11/16/21 2,000 2,152
7 Korea Western Power Co. Ltd. 3.125% 5/10/17 1,300 1,339
7 Korea Western Power Co. Ltd. 2.875% 10/10/18 2,000 2,020
7 Kowloon-Canton Railway Corp. 5.125% 5/20/19 2,500 2,799
11 Landwirtschaftliche Rentenbank 2.125% 7/15/16 5,000 5,161
11 Landwirtschaftliche Rentenbank 1.375% 10/23/19 2,000 1,936
7 Mega Advance Investments Ltd. 5.000% 5/12/21 2,000 2,056
  Nexen Energy ULC 6.200% 7/30/19 2,000 2,332
  North American Development Bank 2.300% 10/10/18 1,500 1,494
  North American Development Bank 2.400% 10/26/22 1,300 1,201
  Pemex Project Funding Master Trust 5.750% 3/1/18 15,500 17,127
7 Pertamina Persero PT 6.000% 5/3/42 1,000 812
  Petrobras International Finance Co. 5.875% 3/1/18 30,330 32,229
  Petrobras International Finance Co. 5.750% 1/20/20 21,375 22,037
  Petrobras International Finance Co. 5.375% 1/27/21 19,775 19,540
  Petrobras International Finance Co. 6.750% 1/27/41 2,500 2,254
  Petroleos Mexicanos 8.000% 5/3/19 3,200 3,855
  Petroleos Mexicanos 6.000% 3/5/20 7,000 7,698
  Petroleos Mexicanos 5.500% 1/21/21 6,500 6,929
  Petroleos Mexicanos 4.875% 1/24/22 16,000 16,259
  Petroleos Mexicanos 3.500% 1/30/23 2,000 1,815
7 Petronas Capital Ltd. 5.250% 8/12/19 2,000 2,222
  Province of British Columbia 2.650% 9/22/21 1,500 1,501
  Province of Manitoba 1.750% 5/30/19 2,000 1,990

 

63

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Province of New Brunswick 2.750% 6/15/18 2,500 2,627
  Province of Ontario 1.000% 7/22/16 3,575 3,589
  Province of Ontario 3.000% 7/16/18 15,000 15,876
  Province of Ontario 4.000% 10/7/19 4,500 4,941
  PTT Public Co. Ltd. 3.375% 10/25/22 2,000 1,798
7,12 Qatari Diar Finance QSC 3.500% 7/21/15 500 517
7 Qtel International Finance Ltd. 4.750% 2/16/21 1,500 1,583
7 Qtel International Finance Ltd. 3.250% 2/21/23 700 640
  Quebec 2.750% 8/25/21 10,500 10,422
  Quebec 2.625% 2/13/23 5,700 5,389
7 Ras Laffan Liquefied Natural Gas Co. Ltd. III 5.500% 9/30/14 2,725 2,797
  Republic of Chile 3.250% 9/14/21 4,700 4,672
  Republic of Colombia 7.375% 3/18/19 2,000 2,386
  Republic of Colombia 4.375% 7/12/21 10,200 10,394
  Republic of Colombia 6.125% 1/18/41 4,000 4,200
5 Republic of Colombia 5.625% 2/26/44 3,000 2,982
  Republic of Hungary 5.750% 11/22/23 2,350 2,341
7 Republic of Iceland 4.875% 6/16/16 1,000 1,043
7 Republic of Indonesia 6.625% 2/17/37 1,000 993
  Republic of Italy 4.750% 1/25/16 1,000 1,069
  Republic of Italy 5.250% 9/20/16 13,500 14,695
  Republic of Italy 5.375% 6/12/17 7,000 7,761
  Republic of Korea 7.125% 4/16/19 1,500 1,843
7 Republic of Latvia 2.750% 1/12/20 1,000 952
7 Republic of Namibia 5.500% 11/3/21 500 503
  Republic of Panama 5.200% 1/30/20 7,300 7,916
  Republic of Phillippines 4.200% 1/21/24 2,730 2,757
  Republic of Poland 3.875% 7/16/15 3,000 3,135
  Republic of Poland 6.375% 7/15/19 6,000 7,020
  Republic of Poland 5.125% 4/21/21 7,000 7,604
  Republic of Poland 4.000% 1/22/24 3,250 3,201
7 Republic of Romania 4.375% 8/22/23 1,000 950
7 Republic of Romania 4.875% 1/22/24 2,500 2,466
7 Republic of Serbia 5.875% 12/3/18 1,850 1,887
  Republic of South Africa 6.875% 5/27/19 2,000 2,255
  Republic of South Africa 5.500% 3/9/20 4,000 4,231
  Republic of South Africa 5.875% 9/16/25 4,000 4,101
  Republic of Turkey 7.000% 9/26/16 28,200 30,907
  Republic of Turkey 5.625% 3/30/21 2,300 2,304
  Republic of Turkey 3.250% 3/23/23 9,500 7,804
  Republic of Turkey 7.375% 2/5/25 6,500 7,053
5,7 Russian Federation 7.500% 3/31/30 751 866
7 Sinopec Group Overseas Development 2013 Ltd. 4.375% 10/17/23 1,800 1,771
  State of Israel 5.125% 3/26/19 2,550 2,900
  State of Israel 3.150% 6/30/23 2,000 1,921
7 State of Qatar 5.250% 1/20/20 1,000 1,124
  Statoil ASA 2.450% 1/17/23 3,000 2,804
  Statoil ASA 3.950% 5/15/43 1,000 913
  Statoil ASA 4.800% 11/8/43 2,000 2,092
  Svensk Exportkredit AB 1.750% 10/20/15 3,000 3,067
7 TDIC Finance Ltd. 6.500% 7/2/14 2,600 2,665
7 Temasek Financial I Ltd. 2.375% 1/23/23 1,000 922
  United Mexican States 3.500% 1/21/21 4,000 3,988
  United Mexican States 5.550% 1/21/45 7,000 7,058
  United Mexican States 5.750% 10/12/10 5,800 5,266
  VTB Bank OJSC Via VTB Capital SA 6.000% 4/12/17 2,000 2,128
 
Total Sovereign Bonds (Cost $638,065)       636,355
 
Taxable Municipal Bonds (0.3%)        
  California GO 5.750% 3/1/17 2,000 2,246
  Florida Hurricane Catastrophe Fund Finance Corp.        
  Revenue 2.995% 7/1/20 1,250 1,230
  Illinois GO 5.365% 3/1/17 1,000 1,099

 

64

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Illinois GO 5.000% 1/1/23 1,000 1,009
JobsOhio Beverage System Statewide Liquor Profits        
Revenue 2.885% 1/1/21 1,000 981
Johns Hopkins University Maryland GO 5.250% 7/1/19 713 816
Louisiana Local Government Environmental Facilities &        
Community Development Authority Revenue 2010-        
EGSL 3.220% 2/1/21 12,000 12,564
Louisiana Local Government Environmental Facilities &        
Community Development Authority Revenue 2010-        
ELL 3.450% 2/1/22 5,475 5,815
4 Mississippi GO (Nissan North America, Inc. Project) 0.870% 11/1/17 5,520 5,535
4 New Mexico Educational Assistance Foundation 2013-1 0.870% 1/2/25 5,524 5,499
New York City NY Transitional Finance Authority Future        
Tax Revenue 5.125% 2/1/24 1,500 1,695
New York State Dormitory Authority Revenue        
(Employer Assessment) 3.892% 12/1/24 2,000 2,048
Port Authority of New York & New Jersey Revenue 5.859% 12/1/24 2,000 2,396
4 South Carolina Public Service Authority Revenue 1.045% 6/1/15 8,250 8,281
Texas GO 3.682% 8/1/24 2,000 2,046
University of California Revenue 2.054% 5/15/18 500 509
University of California Revenue 2.300% 5/15/21 1,000 962
 
Total Taxable Municipal Bonds (Cost $53,255)       54,731
 
Tax-Exempt Municipal Bonds (1.0%)        
Arizona Transportation Board Highway Revenue 5.000% 7/1/36 1,580 1,701
Arizona Transportation Board Highway Revenue 5.000% 7/1/37 3,275 3,517
Arizona Transportation Board Highway Revenue 5.000% 7/1/38 2,020 2,160
Bay Area Toll Authority California Toll Bridge Revenue        
(San Francisco Bay Area) 5.000% 4/1/43 1,780 1,851
California GO 5.000% 4/1/43 3,465 3,625
Cary NC Combined Enterprise System Revenue 5.000% 12/1/42 2,910 3,152
Contra Costa CA Community College District GO 5.000% 8/1/38 1,845 1,976
District of Columbia Water & Sewer Authority Public        
Utility Revenue 5.000% 10/1/37 4,370 4,700
Houston TX Community College System GO 5.000% 2/15/43 2,650 2,828
Houston TX Utility System Revenue 5.000% 11/15/38 1,490 1,601
Los Angeles CA Department of Water & Power        
Revenue 5.000% 7/1/37 1,630 1,748
Los Angeles CA Department of Water & Power        
Revenue 5.000% 7/1/43 4,340 4,612
Los Angeles CA Wastewater System Revenue 5.000% 6/1/35 3,820 4,140
7 Louisiana Public Facilities Authority Dock & Wharf        
Revenue (Impala Warehousing LLC Project) 6.500% 7/1/36 3,300 3,064
Massachusetts GO 5.000% 8/1/37 6,890 7,411
Massachusetts GO 5.000% 8/1/41 13,775 14,706
Massachusetts School Building Authority Dedicated        
Sales Tax Revenue 5.000% 5/15/38 3,285 3,551
Massachusetts School Building Authority Dedicated        
Sales Tax Revenue 5.000% 10/15/41 3,310 3,516
Massachusetts School Building Authority Dedicated        
Sales Tax Revenue 5.000% 5/15/43 2,320 2,480
New York City NY GO 5.000% 3/1/37 1,380 1,468
New York City NY Industrial Development Agency        
Special Facility Revenue (American Airlines Inc. John        
F. Kennedy International Airport Project) 7.500% 8/1/16 2,565 2,725
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.000% 6/15/44 4,455 4,619
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.000% 6/15/45 2,970 3,106
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.000% 6/15/47 5,940 6,201
New York City NY Transitional Finance Authority Future        
Tax Revenue 5.000% 2/1/42 4,250 4,476

 

65

 

Vanguard® Intermediate-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
New York City NY Transitional Finance Authority Future        
Tax Revenue 5.000% 5/1/42 4,215 4,468
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.000% 2/15/42 2,740 2,879
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.000% 3/15/42 4,110 4,320
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.000% 2/15/43 1,375 1,450
New York State Environmental Facilities Corp. Revenue        
(State Revolving Funds) 5.000% 11/15/38 4,200 4,547
San Antonio TX Water Revenue 5.000% 5/15/40 6,600 7,081
San Diego CA Community College District GO 5.000% 8/1/43 8,965 9,536
St. Louis MO Metropolitan Sewer District Wastewater        
System Revenue 5.000% 5/1/42 6,795 7,312
University of California Revenue 5.000% 5/15/36 2,070 2,242
University of California Revenue 5.000% 5/15/39 4,025 4,325
University of Colorado Enterprise System Revenue 5.000% 6/1/37 1,870 2,007
University of Virginia Revenue 5.000% 6/1/43 3,935 4,293
University of Washington Revenue 5.000% 7/1/41 6,640 7,140
Washington GO 5.000% 8/1/37 7,709 8,371
Washington GO 5.000% 8/1/38 8,190 8,866
 
Total Tax-Exempt Municipal Bonds (Cost $167,550)       173,771
 
 
      Shares  
 
Convertible Preferred Stocks (0.0%)        
8 Lehman Brothers Holdings Inc. Pfd.        
  7.250%      
(Cost $8,571)     8,740
 
Temporary Cash Investment (0.8%)        
Money Market Fund (0.8%)        
13 Vanguard Market Liquidity Fund (Cost $136,125) 0.130%   136,124,532 136,125
Total Investments (98.5%) (Cost $16,075,999)       16,468,148
  Expiration Date   Contracts  
Liability for Options Written (0.0%)        
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 124.50 2/21/14   524 (770)
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 125.50 2/21/14   532 (407)
Call Options on 10-year U.S. Treasury Note        
Futures Contracts, Strike Price 122.50 2/21/14   1,056 (33)
 
Total Liability for Options Written (Premiums received $679)       (1,210)
Other Assets and Other Liabilities—Net (1.5%)       250,392
Net Assets (100%)       16,717,330

 

1 Securities with a value of $14,303,000 have been segregated as initial margin for open futures contracts.
2 Securities with a value of $813,000 have been segregated as collateral for open over-the-counter swap contracts.
3 Securities with a value of $552,000 have been segregated as initial margin for open cleared swap contracts.
4 Adjustable-rate security.
5 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.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
7 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 January 31, 2014, the aggregate value of these securities was $1,163,085,000, representing 7.0% of net assets.

66

 

Vanguard® Intermediate-Term Investment-Grade Fund
Schedule of Investments
January 31, 2014

8 Non-income-producing security--security in default.
9 Scheduled principal and interest payments are guaranteed by Municipal Bond Insurance Association.
10 Guaranteed by the Government of Japan.
11 Guaranteed by the Federal Republic of Germany.
12 Guaranteed by the State of Qatar.
13 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
GO—General Obligation Bond.
REIT—Real Estate Investment Trust.

67

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
 
U.S. Government and Agency Obligations (2.8%)        
U.S. Government Securities (2.4%)        
1,2,3 United States Treasury Note/Bond 4.500% 2/15/36 269,125 314,370
  United States Treasury Note/Bond 3.750% 11/15/43 5,447 5,592
  United States Treasury Strip Principal 0.000% 2/15/36 57,150 25,749
          345,711
Agency Bonds and Notes (0.4%)        
4 Tennessee Valley Authority 5.250% 9/15/39 28,800 32,520
4 Tennessee Valley Authority 3.500% 12/15/42 25,200 21,208
 
          53,728
 
Total U.S. Government and Agency Obligations (Cost $412,799)       399,439
 
Corporate Bonds (73.8%)        
Finance (21.1%)        
  Banking (12.3%)        
  American Express Co. 4.050% 12/3/42 36,806 32,904
  Bank of America Corp. 5.875% 2/7/42 24,230 27,703
  Bank of America Corp. 5.000% 1/21/44 20,375 20,514
  Bank of America NA 6.000% 10/15/36 22,750 26,304
  Bank One Corp. 7.750% 7/15/25 25,000 31,844
  Bank One Corp. 7.625% 10/15/26 25,950 33,115
  Bank One Corp. 8.000% 4/29/27 30,869 40,677
  Citigroup Inc. 3.500% 5/15/23 9,665 8,945
  Citigroup Inc. 3.875% 10/25/23 9,035 8,895
  Citigroup Inc. 6.875% 6/1/25 1,000 1,200
  Citigroup Inc. 6.625% 1/15/28 25,000 29,460
  Citigroup Inc. 6.625% 6/15/32 56,285 63,640
  Citigroup Inc. 6.000% 10/31/33 42,375 45,189
  Citigroup Inc. 6.125% 8/25/36 38,735 41,506
  Citigroup Inc. 8.125% 7/15/39 6,580 9,465
  Citigroup Inc. 5.875% 1/30/42 29,410 33,139
  Citigroup Inc. 6.675% 9/13/43 6,425 7,340
  Citigroup Inc. 4.950% 11/7/43 1,675 1,681
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 3.950% 11/9/22 19,500 19,131
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 4.625% 12/1/23 27,935 28,254
  Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 5.750% 12/1/43 34,730 36,700
5 Deutsche Bank AG 4.296% 5/24/28 18,685 17,094
  Goldman Sachs Group Inc. 6.125% 2/15/33 43,300 49,722
  Goldman Sachs Group Inc. 6.450% 5/1/36 53,500 57,487
  Goldman Sachs Group Inc. 6.750% 10/1/37 51,205 56,601
  Goldman Sachs Group Inc. 6.250% 2/1/41 26,375 30,855
  HSBC Bank USA NA 5.875% 11/1/34 50,700 56,551
  HSBC Bank USA NA 5.625% 8/15/35 32,775 35,657
  HSBC Holdings plc 7.625% 5/17/32 21,200 27,496
  HSBC Holdings plc 6.500% 5/2/36 10,000 11,825
  HSBC Holdings plc 6.500% 9/15/37 38,600 46,111
  HSBC Holdings plc 6.800% 6/1/38 93,749 115,417
  JPMorgan Chase & Co. 3.375% 5/1/23 14,715 13,783
  JPMorgan Chase & Co. 6.400% 5/15/38 90,000 109,681
  JPMorgan Chase & Co. 5.500% 10/15/40 24,415 26,482
  JPMorgan Chase & Co. 5.600% 7/15/41 900 1,001
  JPMorgan Chase & Co. 5.400% 1/6/42 95 102
  JPMorgan Chase & Co. 5.625% 8/16/43 52,680 56,406
  Merrill Lynch & Co. Inc. 6.110% 1/29/37 29,909 32,744
  Merrill Lynch & Co. Inc. 7.750% 5/14/38 20,705 26,817
  Morgan Stanley 4.875% 11/1/22 12,215 12,650
  Morgan Stanley 4.100% 5/22/23 7,905 7,684
  Morgan Stanley 6.250% 8/9/26 11,035 12,926
  Morgan Stanley 7.250% 4/1/32 45,450 57,834
  Morgan Stanley 6.375% 7/24/42 40,570 48,391
6 Societe Generale SA 5.000% 1/17/24 100 100
6 Standard Chartered plc 3.950% 1/11/23 18,520 17,360

 

68

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
6 Standard Chartered plc 5.200% 1/26/24 20,180 20,416
  Wachovia Corp. 6.605% 10/1/25 30,000 35,529
  Wachovia Corp. 5.500% 8/1/35 23,955 25,242
  Wells Fargo & Co. 4.125% 8/15/23 4,800 4,791
  Wells Fargo & Co. 5.375% 11/2/43 21,081 21,680
6 Wells Fargo & Co. 5.606% 1/15/44 153,488 163,692
  Brokerage (0.2%)        
6 FMR LLC 6.450% 11/15/39 18,200 22,011
  Invesco Finance plc 5.375% 11/30/43 2,000 2,107
  Legg Mason Inc. 5.625% 1/15/44 2,000 2,020
  Finance Companies (2.9%)        
  General Electric Capital Corp. 5.300% 2/11/21 1,000 1,124
  General Electric Capital Corp. 6.750% 3/15/32 127,220 159,930
  General Electric Capital Corp. 7.500% 8/21/35 7,000 9,263
  General Electric Capital Corp. 6.150% 8/7/37 3,875 4,604
  General Electric Capital Corp. 5.875% 1/14/38 124,290 143,648
  General Electric Capital Corp. 6.875% 1/10/39 62,270 80,008
5 General Electric Capital Corp. 6.250% 12/29/49 10,000 10,521
  Insurance (5.6%)        
  ACE Capital Trust II 9.700% 4/1/30 9,000 12,960
  ACE INA Holdings Inc. 4.150% 3/13/43 9,000 8,400
  Aetna Inc. 4.125% 11/15/42 26,510 24,408
  Allstate Corp. 4.500% 6/15/43 10,000 9,798
  Arch Capital Group US Inc. 5.144% 11/1/43 14,510 15,329
  AXA Financial Inc. 7.000% 4/1/28 24,910 28,551
  Berkshire Hathaway Inc. 4.500% 2/11/43 44,777 42,578
6 Guardian Life Insurance Co. of America 7.375% 9/30/39 12,375 16,691
6 Jackson National Life Insurance Co. 8.150% 3/15/27 200 256
6 John Hancock Life Insurance Co. 7.375% 2/15/24 30,000 36,494
5,6 Massachusetts Mutual Life Insurance Co. 7.625% 11/15/23 6,000 7,554
6 Massachusetts Mutual Life Insurance Co. 8.875% 6/1/39 24,091 35,990
  MetLife Inc. 6.500% 12/15/32 900 1,109
  MetLife Inc. 4.125% 8/13/42 20,590 18,573
  MetLife Inc. 4.875% 11/13/43 2,049 2,055
6 Metropolitan Life Insurance Co. 7.800% 11/1/25 35,000 44,702
  Munich Re America Corp. 7.450% 12/15/26 8,500 10,880
5 Nationwide Financial Services Inc. 6.750% 5/15/37 1,000 984
6 Nationwide Mutual Insurance Co. 8.250% 12/1/31 6,285 7,976
6 Nationwide Mutual Insurance Co. 9.375% 8/15/39 43,446 63,494
6 New York Life Insurance Co. 5.875% 5/15/33 45,275 51,311
6 Pacific Life Insurance Co. 9.250% 6/15/39 29,145 42,380
5 Progressive Corp. 6.700% 6/15/67 1,051 1,140
  Prudential Financial Inc. 5.750% 7/15/33 11,700 13,085
  Prudential Financial Inc. 6.200% 11/15/40 9,420 11,022
6 Swiss Re Treasury US Corp. 4.250% 12/6/42 12,470 11,303
6 Teachers Insurance & Annuity Association of America 6.850% 12/16/39 22,752 29,392
  Travelers Cos. Inc. 6.750% 6/20/36 5,000 6,537
  Travelers Cos. Inc. 6.250% 6/15/37 1,355 1,699
  UnitedHealth Group Inc. 5.800% 3/15/36 50,236 57,887
  UnitedHealth Group Inc. 6.500% 6/15/37 10,900 13,528
  UnitedHealth Group Inc. 6.625% 11/15/37 12,740 16,108
  UnitedHealth Group Inc. 6.875% 2/15/38 28,722 37,185
  UnitedHealth Group Inc. 5.700% 10/15/40 3,192 3,666
  UnitedHealth Group Inc. 4.625% 11/15/41 33,045 32,783
  UnitedHealth Group Inc. 4.375% 3/15/42 22,500 21,892
  UnitedHealth Group Inc. 3.950% 10/15/42 5,000 4,488
  WellPoint Inc. 6.375% 6/15/37 16,791 20,144
  WellPoint Inc. 4.625% 5/15/42 17,100 16,268
  XL Group plc 6.375% 11/15/24 7,600 8,949

 

69

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Real Estate Investment Trusts (0.1%)        
Simon Property Group LP 6.750% 2/1/40 10,700 13,941
 
        2,986,459
Industrial (38.8%)        
Basic Industry (0.7%)        
Barrick North America Finance LLC 5.700% 5/30/41 1,500 1,355
Barrick North America Finance LLC 5.750% 5/1/43 2,000 1,870
BHP Billiton Finance USA Ltd. 4.125% 2/24/42 15,000 13,982
BHP Billiton Finance USA Ltd. 5.000% 9/30/43 38,000 39,341
Dow Chemical Co. 7.375% 11/1/29 7,550 9,739
Freeport-McMoRan Copper & Gold Inc. 5.450% 3/15/43 3,000 2,875
Rio Tinto Finance USA Ltd. 5.200% 11/2/40 5,290 5,544
Rio Tinto Finance USA plc 4.750% 3/22/42 5,746 5,635
Rio Tinto Finance USA plc 4.125% 8/21/42 17,000 15,139
Teck Resources Ltd. 5.200% 3/1/42 700 632
Capital Goods (3.4%)        
3M Co. 6.375% 2/15/28 23,140 30,016
3M Co. 5.700% 3/15/37 13,500 16,237
Boeing Co. 6.125% 2/15/33 30,065 37,253
Boeing Co. 7.875% 4/15/43 8,000 11,534
Caterpillar Inc. 6.050% 8/15/36 1,500 1,783
Caterpillar Inc. 3.803% 8/15/42 48,608 42,938
Deere & Co. 7.125% 3/3/31 15,000 19,967
Deere & Co. 3.900% 6/9/42 24,860 22,759
General Electric Co. 4.125% 10/9/42 14,925 13,968
Illinois Tool Works Inc. 3.900% 9/1/42 4,850 4,380
Lockheed Martin Corp. 5.500% 11/15/39 5,000 5,549
Lockheed Martin Corp. 4.850% 9/15/41 12,311 12,777
Raytheon Co. 4.700% 12/15/41 18,960 19,479
Rockwell Collins Inc. 4.800% 12/15/43 22,130 23,043
6 Siemens Financieringsmaatschappij NV 6.125% 8/17/26 15,710 18,763
United Technologies Corp. 7.500% 9/15/29 14,755 20,498
United Technologies Corp. 6.125% 7/15/38 45,475 56,943
United Technologies Corp. 5.700% 4/15/40 33,150 39,313
United Technologies Corp. 4.500% 6/1/42 87,180 87,789
Communication (8.5%)        
21st Century Fox America Inc. 6.400% 12/15/35 25,200 29,537
21st Century Fox America Inc. 6.150% 2/15/41 9,300 10,685
21st Century Fox America Inc. 7.900% 12/1/95 10,000 12,038
Alltel Corp. 6.800% 5/1/29 2,697 3,262
Alltel Corp. 7.875% 7/1/32 24,162 32,434
America Movil SAB de CV 6.375% 3/1/35 2,500 2,853
America Movil SAB de CV 6.125% 3/30/40 22,720 24,148
America Movil SAB de CV 4.375% 7/16/42 33,010 27,658
AT&T Inc. 6.500% 9/1/37 6,000 6,869
AT&T Inc. 5.350% 9/1/40 151,161 151,241
AT&T Inc. 5.550% 8/15/41 11,630 11,902
AT&T Inc. 4.300% 12/15/42 76,705 65,871
AT&T Inc. 4.350% 6/15/45 90,058 77,212
6 British Sky Broadcasting Group plc 3.125% 11/26/22 2,410 2,305
CBS Corp. 7.875% 7/30/30 29,050 37,484
Comcast Corp. 4.250% 1/15/33 10,435 9,956
Comcast Corp. 7.050% 3/15/33 9,400 11,962
Comcast Corp. 5.650% 6/15/35 43,414 47,963
Comcast Corp. 6.450% 3/15/37 18,000 21,535
Comcast Corp. 6.950% 8/15/37 27,505 34,804
Comcast Corp. 6.400% 5/15/38 9,735 11,644
Comcast Corp. 6.550% 7/1/39 11,765 14,321
Comcast Corp. 6.400% 3/1/40 18,865 22,577
Comcast Corp. 4.650% 7/15/42 19,770 18,998
Comcast Corp. 4.500% 1/15/43 14,860 14,042
6 COX Communications Inc. 6.450% 12/1/36 9,000 9,727

 

70

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
6 COX Communications Inc. 8.375% 3/1/39 19,110 24,638
Deutsche Telekom International Finance BV 8.750% 6/15/30 17,530 25,124
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 6.350% 3/15/40 2,500 2,674
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 6.000% 8/15/40 1,000 1,021
DIRECTV Holdings LLC / DIRECTV Financing Co. Inc. 5.150% 3/15/42 13,000 11,959
Interpublic Group of Cos. Inc. 3.750% 2/15/23 4,000 3,887
NBCUniversal Media LLC 6.400% 4/30/40 2,050 2,444
NBCUniversal Media LLC 5.950% 4/1/41 6,000 6,797
NBCUniversal Media LLC 4.450% 1/15/43 35,160 32,746
Orange SA 8.750% 3/1/31 39,675 56,956
Telefonica Emisiones SAU 4.570% 4/27/23 2,000 2,021
Telefonica Emisiones SAU 7.045% 6/20/36 3,500 4,010
Thomson Reuters Corp. 5.850% 4/15/40 2,000 2,118
Time Warner Cable Inc. 6.550% 5/1/37 24,590 23,581
Time Warner Cable Inc. 6.750% 6/15/39 2,810 2,751
Time Warner Cable Inc. 5.875% 11/15/40 5,145 4,541
Verizon Communications Inc. 7.750% 12/1/30 20,000 26,135
Verizon Communications Inc. 6.400% 9/15/33 14,000 16,458
Verizon Communications Inc. 5.850% 9/15/35 33,000 36,791
Verizon Communications Inc. 6.400% 2/15/38 41,149 48,155
Verizon Communications Inc. 6.900% 4/15/38 25,808 31,577
Verizon Communications Inc. 7.350% 4/1/39 9,225 11,780
Verizon Communications Inc. 6.550% 9/15/43 54,925 66,101
Verizon Maryland LLC 5.125% 6/15/33 12,000 11,867
Vodafone Group plc 6.150% 2/27/37 15,705 17,682
Vodafone Group plc 4.375% 2/19/43 10,000 8,927
WPP Finance 2010 5.625% 11/15/43 1,000 1,032
Consumer Cyclical (6.8%)        
CVS Caremark Corp. 6.250% 6/1/27 11,035 13,426
CVS Caremark Corp. 5.750% 5/15/41 3,150 3,563
Daimler Finance North America LLC 8.500% 1/18/31 15,319 22,706
Ford Motor Co. 7.450% 7/16/31 10,750 13,522
Ford Motor Co. 4.750% 1/15/43 3,000 2,801
Historic TW Inc. 6.625% 5/15/29 24,775 29,720
Home Depot Inc. 5.875% 12/16/36 39,775 47,622
Home Depot Inc. 5.950% 4/1/41 14,000 16,873
Home Depot Inc. 4.875% 2/15/44 60,800 63,854
Lowe's Cos. Inc. 6.500% 3/15/29 26,010 31,863
Lowe's Cos. Inc. 5.800% 10/15/36 9,300 10,723
Lowe's Cos. Inc. 5.800% 4/15/40 8,000 9,323
Lowe's Cos. Inc. 5.000% 9/15/43 28,690 30,218
Macy's Retail Holdings Inc. 4.300% 2/15/43 3,000 2,707
McDonald's Corp. 6.300% 10/15/37 30,935 39,070
McDonald's Corp. 6.300% 3/1/38 36,635 46,293
McDonald's Corp. 5.700% 2/1/39 27,850 32,806
McDonald's Corp. 3.625% 5/1/43 13,250 11,637
NIKE Inc. 3.625% 5/1/43 16,460 14,605
Nordstrom Inc. 6.950% 3/15/28 750 937
6 Nordstrom Inc. 5.000% 1/15/44 1,000 1,039
Target Corp. 6.500% 10/15/37 22,750 28,016
Target Corp. 7.000% 1/15/38 12,205 15,802
Time Warner Inc. 7.625% 4/15/31 10,000 13,064
Time Warner Inc. 6.500% 11/15/36 10,000 11,684
Viacom Inc. 4.375% 3/15/43 248 219
Wal-Mart Stores Inc. 7.550% 2/15/30 51,000 70,739
Wal-Mart Stores Inc. 5.250% 9/1/35 4,789 5,319
Wal-Mart Stores Inc. 6.500% 8/15/37 42,625 54,365
Wal-Mart Stores Inc. 6.200% 4/15/38 83,350 103,026
Wal-Mart Stores Inc. 5.625% 4/1/40 10,000 11,726
Wal-Mart Stores Inc. 4.875% 7/8/40 20,000 21,229
Wal-Mart Stores Inc. 5.000% 10/25/40 16,855 18,140
Wal-Mart Stores Inc. 5.625% 4/15/41 75,432 88,584
Wal-Mart Stores Inc. 4.000% 4/11/43 21,745 20,134

 

71

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Wal-Mart Stores Inc. 4.750% 10/2/43 15,300 15,881
Walt Disney Co. 3.700% 12/1/42 9,000 8,077
Walt Disney Co. 7.550% 7/15/93 25,900 31,535
Consumer Noncyclical (12.2%)        
Abbott Laboratories 6.000% 4/1/39 17,905 21,721
AbbVie Inc. 4.400% 11/6/42 27,785 26,662
Altria Group Inc. 9.950% 11/10/38 1,608 2,558
Altria Group Inc. 4.250% 8/9/42 15,980 13,959
Altria Group Inc. 5.375% 1/31/44 1,250 1,283
Amgen Inc. 6.375% 6/1/37 28,000 33,719
Amgen Inc. 5.375% 5/15/43 4,850 5,170
Anheuser-Busch Cos. LLC 6.750% 12/15/27 3,500 4,343
Anheuser-Busch Cos. LLC 6.800% 8/20/32 5,000 6,380
Anheuser-Busch Cos. LLC 5.750% 4/1/36 11,460 13,268
Anheuser-Busch InBev Finance Inc. 4.000% 1/17/43 10,000 9,232
Anheuser-Busch InBev Finance Inc. 4.625% 2/1/44 1,000 1,023
Anheuser-Busch InBev Worldwide Inc. 8.200% 1/15/39 42,025 63,780
Anheuser-Busch InBev Worldwide Inc. 8.000% 11/15/39 10,000 14,908
Anheuser-Busch InBev Worldwide Inc. 3.750% 7/15/42 25,140 22,294
Archer-Daniels-Midland Co. 4.535% 3/26/42 33,274 32,696
Archer-Daniels-Midland Co. 4.016% 4/16/43 7,809 7,120
5 Ascension Health Alliance 4.847% 11/15/53 10,040 10,234
AstraZeneca plc 6.450% 9/15/37 68,080 84,893
Baxter International Inc. 3.650% 8/15/42 6,690 5,844
Becton Dickinson & Co. 7.000% 8/1/27 8,300 10,508
Becton Dickinson & Co. 6.700% 8/1/28 5,066 6,305
Bristol-Myers Squibb Co. 3.250% 8/1/42 4,500 3,705
Bristol-Myers Squibb Co. 4.500% 3/1/44 25,000 24,651
6 Cargill Inc. 6.125% 4/19/34 1,880 2,193
6 Cargill Inc. 6.125% 9/15/36 27,045 31,888
6 Cargill Inc. 6.625% 9/15/37 5,000 6,251
6 Cargill Inc. 4.100% 11/1/42 17,300 15,733
5 Catholic Health Initiatives Colorado GO 4.350% 11/1/42 4,000 3,614
City of Hope 5.623% 11/15/43 10,000 10,319
ConAgra Foods Inc. 6.625% 8/15/39 1,500 1,825
ConAgra Foods Inc. 4.650% 1/25/43 1,000 947
Delhaize Group SA 5.700% 10/1/40 3,000 2,977
Diageo Capital plc 3.875% 4/29/43 12,400 11,228
Diageo Investment Corp. 4.250% 5/11/42 5,000 4,796
Dignity Health California GO 4.500% 11/1/42 20,865 17,719
Eli Lilly & Co. 5.500% 3/15/27 16,125 18,844
Eli Lilly & Co. 5.950% 11/15/37 1,000 1,209
Express Scripts Holding Co. 6.125% 11/15/41 1,000 1,174
Gilead Sciences Inc. 5.650% 12/1/41 19,960 23,243
GlaxoSmithKline Capital Inc. 5.375% 4/15/34 20,597 23,396
GlaxoSmithKline Capital Inc. 6.375% 5/15/38 55,905 70,937
GlaxoSmithKline Capital Inc. 4.200% 3/18/43 10,200 9,776
Johnson & Johnson 6.950% 9/1/29 22,457 30,651
Johnson & Johnson 5.950% 8/15/37 1,280 1,596
Johnson & Johnson 4.500% 9/1/40 12,015 12,498
Johnson & Johnson 4.500% 12/5/43 17,500 18,037
Kaiser Foundation Hospitals 4.875% 4/1/42 31,825 32,408
Kellogg Co. 7.450% 4/1/31 21,620 28,427
Kimberly-Clark Corp. 6.625% 8/1/37 5,300 6,945
Kimberly-Clark Corp. 5.300% 3/1/41 12,000 13,604
Koninklijke Philips NV 6.875% 3/11/38 2,000 2,540
Kraft Foods Group Inc. 6.875% 1/26/39 6,750 8,571
Kraft Foods Group Inc. 5.000% 6/4/42 2,500 2,555
5 Mayo Clinic 3.774% 11/15/43 13,095 11,350
Medtronic Inc. 6.500% 3/15/39 21,200 26,878
Medtronic Inc. 4.500% 3/15/42 10,000 9,911
Memorial Sloan-Kettering Cancer Center New York GO 5.000% 7/1/42 26,775 28,000
Memorial Sloan-Kettering Cancer Center New York GO 4.125% 7/1/52 11,285 9,944

 

72

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Merck & Co. Inc. 6.500% 12/1/33 30,320 39,367
Merck & Co. Inc. 6.550% 9/15/37 43,715 56,846
Merck & Co. Inc. 3.600% 9/15/42 4,900 4,268
Merck & Co. Inc. 4.150% 5/18/43 11,325 10,761
Merck Sharp & Dohme Corp. 5.750% 11/15/36 11,000 12,901
Merck Sharp & Dohme Corp. 5.850% 6/30/39 23,920 28,836
Mylan Inc. 5.400% 11/29/43 2,870 2,967
North Shore Long Island Jewish Health Care Inc. Rev. 4.800% 11/1/42 11,015 10,182
North Shore Long Island Jewish Health Care Inc. Rev. 6.150% 11/1/43 25,000 28,548
Pepsi Bottling Group Inc. 7.000% 3/1/29 17,000 22,187
PepsiCo Inc. 5.500% 1/15/40 28,350 31,931
PepsiCo Inc. 4.875% 11/1/40 14,375 14,988
PepsiCo Inc. 4.000% 3/5/42 16,972 15,485
PepsiCo Inc. 3.600% 8/13/42 21,500 18,452
Pfizer Inc. 7.200% 3/15/39 60,817 83,808
Pfizer Inc. 4.300% 6/15/43 15,300 14,960
Pharmacia Corp. 6.750% 12/15/27 28,000 35,615
Philip Morris International Inc. 6.375% 5/16/38 31,340 38,443
Philip Morris International Inc. 4.125% 3/4/43 10,000 9,099
Philip Morris International Inc. 4.875% 11/15/43 31,930 32,684
Procter & Gamble Co. 5.500% 2/1/34 15,000 17,517
Procter & Gamble Co. 5.550% 3/5/37 12,000 14,209
6 Roche Holdings Inc. 7.000% 3/1/39 47,905 65,922
6 SABMiller Holdings Inc. 4.950% 1/15/42 20,000 20,722
6 SC Johnson & Son Inc. 4.000% 5/15/43 15,045 13,859
St. Jude Medical Inc. 4.750% 4/15/43 37,690 37,652
6 Tesco plc 6.150% 11/15/37 24,520 27,946
Wyeth LLC 5.950% 4/1/37 72,150 87,499
Energy (3.2%)        
Apache Corp. 6.000% 1/15/37 2,000 2,336
Apache Corp. 5.100% 9/1/40 5,665 5,922
Apache Corp. 4.750% 4/15/43 68,960 68,461
6 BG Energy Capital plc 5.125% 10/15/41 18,700 20,056
Burlington Resources Finance Co. 7.400% 12/1/31 25,000 34,439
ConocoPhillips 7.000% 3/30/29 13,150 16,987
ConocoPhillips 5.900% 10/15/32 20,300 24,279
ConocoPhillips 6.500% 2/1/39 68,735 88,794
Diamond Offshore Drilling Inc. 4.875% 11/1/43 2,000 1,969
Encana Corp. 6.500% 8/15/34 15,463 17,650
Encana Corp. 5.150% 11/15/41 9,845 9,679
Marathon Oil Corp. 6.600% 10/1/37 8,650 10,729
Shell International Finance BV 6.375% 12/15/38 52,060 66,151
Shell International Finance BV 5.500% 3/25/40 20,455 23,732
Shell International Finance BV 4.550% 8/12/43 11,065 11,180
Tosco Corp. 7.800% 1/1/27 15,000 20,666
Tosco Corp. 8.125% 2/15/30 20,000 28,631
Transocean Inc. 7.500% 4/15/31 500 582
Transocean Inc. 6.800% 3/15/38 1,000 1,106
Transocean Inc. 7.350% 12/15/41 1,100 1,333
Other Industrial (0.4%)        
6 Hutchison Whampoa International 11 Ltd. 4.625% 1/13/22 21,060 21,876
Massachusetts Institute of Technology GO 5.600% 7/1/11 6,000 7,295
5 Northwestern University GO 4.643% 12/1/44 28,215 29,757
Technology (2.5%)        
Apple Inc. 3.850% 5/4/43 42,755 36,668
Cisco Systems Inc. 5.900% 2/15/39 37,500 42,839
Cisco Systems Inc. 5.500% 1/15/40 15,000 16,369
Hewlett-Packard Co. 6.000% 9/15/41 3,500 3,568
HP Enterprise Services LLC 7.450% 10/15/29 3,868 4,659
Intel Corp. 4.800% 10/1/41 24,080 24,241
Intel Corp. 4.250% 12/15/42 9,240 8,578
International Business Machines Corp. 7.000% 10/30/25 30,400 39,441
International Business Machines Corp. 4.000% 6/20/42 24,100 22,049

 

73

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Microsoft Corp. 5.300% 2/8/41 15,000 16,649
Microsoft Corp. 3.750% 5/1/43 10,000 8,792
Oracle Corp. 6.500% 4/15/38 43,833 55,043
Oracle Corp. 6.125% 7/8/39 19,559 23,649
Oracle Corp. 5.375% 7/15/40 38,580 42,648
Transportation (1.1%)        
Burlington Northern Santa Fe LLC 6.875% 12/1/27 15,000 18,584
Burlington Northern Santa Fe LLC 5.750% 5/1/40 2,520 2,881
Burlington Northern Santa Fe LLC 5.400% 6/1/41 9,097 9,870
Burlington Northern Santa Fe LLC 4.950% 9/15/41 6,100 6,252
Burlington Northern Santa Fe LLC 4.400% 3/15/42 10,000 9,436
Burlington Northern Santa Fe LLC 4.375% 9/1/42 10,875 10,215
Burlington Northern Santa Fe LLC 5.150% 9/1/43 4,500 4,750
CSX Corp. 6.220% 4/30/40 11,820 14,038
CSX Corp. 4.750% 5/30/42 1,964 1,956
CSX Corp. 4.400% 3/1/43 29,085 27,462
6 ERAC USA Finance LLC 7.000% 10/15/37 14,621 18,052
5 Hawaiian Airlines 2013-1 Class A Pass Through        
Certificates 3.900% 1/15/26 2,250 2,143
Union Pacific Corp. 4.750% 12/15/43 21,250 21,636
United Parcel Service Inc. 6.200% 1/15/38 4,700 5,932
United Parcel Service Inc. 4.875% 11/15/40 3,000 3,235
        5,481,889
Utilities (13.9%)        
Electric (12.8%)        
Alabama Power Co. 5.700% 2/15/33 12,800 14,828
Alabama Power Co. 6.000% 3/1/39 5,475 6,649
Alabama Power Co. 5.500% 3/15/41 13,015 15,028
Alabama Power Co. 5.200% 6/1/41 15,000 16,753
Appalachian Power Co. 6.700% 8/15/37 40,000 49,003
CenterPoint Energy Houston Electric LLC 3.550% 8/1/42 15,775 13,758
Commonwealth Edison Co. 3.800% 10/1/42 22,805 20,465
Commonwealth Edison Co. 4.600% 8/15/43 12,560 12,960
Commonwealth Edison Co. 4.700% 1/15/44 15,955 16,407
Connecticut Light & Power Co. 6.350% 6/1/36 15,000 18,867
Consolidated Edison Co. of New York Inc. 5.100% 6/15/33 9,330 9,928
Consolidated Edison Co. of New York Inc. 5.850% 3/15/36 10,000 11,947
Consolidated Edison Co. of New York Inc. 6.200% 6/15/36 17,690 21,827
Consolidated Edison Co. of New York Inc. 6.750% 4/1/38 12,990 17,253
Consolidated Edison Co. of New York Inc. 5.500% 12/1/39 6,250 7,245
Consolidated Edison Co. of New York Inc. 5.700% 6/15/40 9,045 10,780
Consolidated Edison Co. of New York Inc. 4.200% 3/15/42 10,250 9,911
Consolidated Edison Co. of New York Inc. 3.950% 3/1/43 16,485 15,310
Duke Energy Carolinas LLC 6.450% 10/15/32 8,200 10,140
Duke Energy Carolinas LLC 6.100% 6/1/37 52,400 62,673
Duke Energy Carolinas LLC 5.300% 2/15/40 5,500 6,257
Duke Energy Carolinas LLC 4.250% 12/15/41 18,000 17,693
Duke Energy Carolinas LLC 4.000% 9/30/42 53,072 50,244
Duke Energy Corp. 3.950% 10/15/23 5,920 6,037
Duke Energy Florida Inc. 6.750% 2/1/28 22,375 26,472
Duke Energy Florida Inc. 5.650% 4/1/40 11,860 14,137
Duke Energy Indiana Inc. 6.350% 8/15/38 4,000 5,088
Duke Energy Indiana Inc. 6.450% 4/1/39 9,100 11,762
Duke Energy Indiana Inc. 4.200% 3/15/42 14,100 13,700
Duke Energy Indiana Inc. 4.900% 7/15/43 27,475 29,654
Duke Energy Progress Inc. 5.700% 4/1/35 7,500 8,601
Duke Energy Progress Inc. 4.100% 3/15/43 15,000 14,370
6 EDP Finance BV 5.250% 1/14/21 500 512
Exelon Generation Co. LLC 4.250% 6/15/22 3,000 2,954
Exelon Generation Co. LLC 6.250% 10/1/39 2,500 2,599
FirstEnergy Corp. 4.250% 3/15/23 1,054 1,025
Florida Power & Light Co. 5.625% 4/1/34 16,275 19,275
Florida Power & Light Co. 5.400% 9/1/35 13,380 15,321

 

74

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Florida Power & Light Co. 6.200% 6/1/36 3,500 4,369
Florida Power & Light Co. 5.690% 3/1/40 7,350 8,817
Florida Power & Light Co. 5.250% 2/1/41 19,780 22,434
Florida Power & Light Co. 4.125% 2/1/42 10,000 9,676
Florida Power & Light Co. 3.800% 12/15/42 26,975 24,731
Georgia Power Co. 5.950% 2/1/39 27,060 31,755
Georgia Power Co. 5.400% 6/1/40 10,100 11,200
Georgia Power Co. 4.750% 9/1/40 9,055 9,060
Georgia Power Co. 4.300% 3/15/42 5,000 4,760
Georgia Power Co. 4.300% 3/15/43 6,588 6,266
5 John Sevier Combined Cycle Generation LLC 4.626% 1/15/42 23,109 23,548
MidAmerican Energy Co. 5.800% 10/15/36 5,000 5,970
MidAmerican Energy Co. 4.800% 9/15/43 30,000 31,636
MidAmerican Energy Holdings Co. 6.125% 4/1/36 18,600 21,921
MidAmerican Energy Holdings Co. 5.950% 5/15/37 10,350 12,062
National Rural Utilities Cooperative Finance Corp. 8.000% 3/1/32 57,250 79,597
Nevada Power Co. 6.650% 4/1/36 6,530 8,317
Nevada Power Co. 5.375% 9/15/40 18,230 20,518
Northern States Power Co. 6.200% 7/1/37 39,400 49,322
Northern States Power Co. 3.400% 8/15/42 8,945 7,608
Oklahoma Gas & Electric Co. 6.500% 4/15/28 12,770 15,219
Oncor Electric Delivery Co. LLC 4.550% 12/1/41 14,915 14,601
Pacific Gas & Electric Co. 6.050% 3/1/34 47,530 56,110
Pacific Gas & Electric Co. 5.800% 3/1/37 8,862 10,163
Pacific Gas & Electric Co. 6.350% 2/15/38 8,192 10,050
Pacific Gas & Electric Co. 6.250% 3/1/39 35,905 43,832
Pacific Gas & Electric Co. 5.400% 1/15/40 19,800 21,720
Pacific Gas & Electric Co. 5.125% 11/15/43 1,500 1,595
PacifiCorp 6.100% 8/1/36 15,000 18,603
PacifiCorp 6.250% 10/15/37 7,815 9,853
PacifiCorp 6.350% 7/15/38 20,000 25,606
PacifiCorp 6.000% 1/15/39 34,100 41,979
PacifiCorp 4.100% 2/1/42 25,070 24,195
Peco Energy Co. 4.800% 10/15/43 24,430 26,226
PPL Electric Utilities Corp. 6.250% 5/15/39 10,075 12,763
Progress Energy Inc. 7.750% 3/1/31 6,055 8,115
PSEG Power LLC 8.625% 4/15/31 26,547 37,534
Public Service Co. of Colorado 3.600% 9/15/42 15,055 13,248
Public Service Electric & Gas Co. 3.650% 9/1/42 23,483 20,964
Puget Sound Energy Inc. 6.724% 6/15/36 10,000 12,970
Puget Sound Energy Inc. 6.274% 3/15/37 4,700 5,823
Puget Sound Energy Inc. 5.795% 3/15/40 18,500 22,074
Puget Sound Energy Inc. 5.764% 7/15/40 4,520 5,441
South Carolina Electric & Gas Co. 6.625% 2/1/32 35,000 45,090
South Carolina Electric & Gas Co. 6.050% 1/15/38 10,600 13,000
South Carolina Electric & Gas Co. 5.450% 2/1/41 3,042 3,535
South Carolina Electric & Gas Co. 4.350% 2/1/42 31,787 31,452
South Carolina Electric & Gas Co. 4.600% 6/15/43 3,330 3,425
Southern California Edison Co. 6.000% 1/15/34 20,095 24,620
Southern California Edison Co. 5.950% 2/1/38 16,100 19,623
Southern California Edison Co. 4.500% 9/1/40 12,000 12,232
Southern California Edison Co. 3.900% 12/1/41 5,425 5,053
Southern California Edison Co. 4.050% 3/15/42 7,625 7,249
Southern California Edison Co. 4.650% 10/1/43 29,800 30,895
Southwestern Public Service Co. 4.500% 8/15/41 25,055 25,428
Tampa Electric Co. 6.150% 5/15/37 35,000 42,952
Virginia Electric & Power Co. 6.000% 5/15/37 57,330 69,129
Virginia Electric & Power Co. 4.650% 8/15/43 9,000 9,255
Wisconsin Public Service Corp. 4.752% 11/1/44 17,500 18,606
Natural Gas (1.1%)        
6 Dominion Gas Holdings LLC 4.800% 11/1/43 4,500 4,567
Energy Transfer Partners LP 6.050% 6/1/41 1,500 1,567
Energy Transfer Partners LP 5.150% 2/1/43 14,325 13,472

 

75

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
5 Enterprise Products Operating LLC 8.375% 8/1/66 2,525 2,806
KeySpan Corp. 5.875% 4/1/33 12,000 13,433
KeySpan Corp. 5.803% 4/1/35 10,000 11,172
Kinder Morgan Energy Partners LP 5.800% 3/15/35 1,350 1,415
Kinder Morgan Energy Partners LP 5.000% 8/15/42 775 727
Southern California Gas Co. 3.750% 9/15/42 12,265 11,224
Texas Eastern Transmission LP 7.000% 7/15/32 15,300 19,052
TransCanada PipeLines Ltd. 6.200% 10/15/37 1,500 1,782
TransCanada PipeLines Ltd. 7.625% 1/15/39 50,300 68,948
TransCanada PipeLines Ltd. 6.100% 6/1/40 2,300 2,726
TransCanada PipeLines Ltd. 5.000% 10/16/43 700 721
 
        1,974,840
 
Total Corporate Bonds (Cost $9,550,826)       10,443,188
 
Sovereign Bonds (U.S. Dollar-Denominated) (2.1%)        
6 CDP Financial Inc. 5.600% 11/25/39 15,000 17,589
6 CNOOC Finance 2011 Ltd. 5.750% 1/26/41 9,620 10,304
6 CNPC HK Overseas Capital Ltd. 5.950% 4/28/41 21,540 23,524
6 Electricite de France 4.875% 1/22/44 22,905 22,442
6 Electricite de France 6.000% 1/22/14 2,280 2,440
6 Electricite de France SA 6.950% 1/26/39 18,040 22,705
Federative Republic of Brazil 2.625% 1/5/23 5,500 4,697
Federative Republic of Brazil 7.125% 1/20/37 1,000 1,123
Federative Republic of Brazil 5.625% 1/7/41 2,000 1,900
Gazprom OAO Via Gaz Capital SA 8.625% 4/28/34 1,500 1,759
Inter-American Development Bank 4.375% 1/24/44 17,735 18,220
Petrobras Global Finance BV 5.625% 5/20/43 2,000 1,583
Petrobras International Finance Co. 6.750% 1/27/41 23,275 20,986
6 Petroleos Mexicanos 6.375% 1/23/45 4,800 4,801
Quebec 7.500% 9/15/29 10,000 13,793
Republic of Colombia 7.375% 3/18/19 2,500 2,983
5 Republic of Colombia 2.625% 3/15/23 3,500 3,047
5 Republic of Colombia 5.625% 2/26/44 5,000 4,970
6 Republic of Indonesia 6.625% 2/17/37 2,000 1,985
6 Republic of Indonesia 6.750% 1/15/44 2,850 2,878
Republic of Panama 9.375% 4/1/29 2,500 3,450
5 Republic of Peru 6.550% 3/14/37 3,000 3,412
Republic of Phillippines 4.200% 1/21/24 5,000 5,050
Republic of Poland 4.000% 1/22/24 1,000 985
Republic of Turkey 6.875% 3/17/36 3,000 3,017
Republic of Turkey 6.000% 1/14/41 1,500 1,334
6 Republic of Romania 6.125% 1/22/44 2,300 2,260
5 Russian Federation 7.500% 3/31/30 7,150 8,240
Statoil ASA 5.100% 8/17/40 12,550 13,697
Statoil ASA 3.950% 5/15/43 6,725 6,140
6 Temasek Financial I Ltd. 3.375% 7/23/42 28,355 22,985
United Mexican States 4.750% 3/8/44 37,526 33,039
United Mexican States 5.550% 1/21/45 5,000 5,042
United Mexican States 5.750% 10/12/10 2,000 1,816
 
Total Sovereign Bonds (Cost $303,984)       294,196
 
Taxable Municipal Bonds (16.4%)        
American Municipal Power Ohio Inc. Revenue (Prairie        
State Energy Campus Project) 6.270% 2/15/50 59,240 64,653
American Municipal Power Ohio Inc. Revenue (Prairie        
State Energy Campus Project) 7.499% 2/15/50 725 916
Bay Area Toll Authority California Toll Bridge Revenue        
(San Francisco Bay Area) 6.793% 4/1/30 17,420 21,086
Bay Area Toll Authority California Toll Bridge Revenue        
(San Francisco Bay Area) 6.918% 4/1/40 50,115 64,062
Bay Area Toll Authority California Toll Bridge Revenue        
(San Francisco Bay Area) 6.263% 4/1/49 25,730 32,955

 

76

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Bay Area Toll Authority California Toll Bridge Revenue        
(San Francisco Bay Area) 7.043% 4/1/50 13,775 18,427
California GO 7.500% 4/1/34 30,655 41,319
California GO 6.509% 4/1/39 28,365 31,212
California GO 7.550% 4/1/39 61,550 85,891
California GO 7.300% 10/1/39 109,045 146,633
California GO 7.350% 11/1/39 1,955 2,630
California GO 7.625% 3/1/40 30,135 41,757
California GO 7.600% 11/1/40 74,320 104,757
California Public Works Board Lease Revenue (Various        
Capital Projects) 8.361% 10/1/34 11,665 14,648
Chicago IL GO 5.432% 1/1/42 14,920 13,213
Chicago IL O'Hare International Airport Revenue 6.395% 1/1/40 15,710 18,118
7 Commonwealth Financing Authority Pennsylvania        
Revenue 5.197% 6/1/26 25,000 26,162
Connecticut GO 5.770% 3/15/25 20,365 24,138
Dallas TX Area Rapid Transit Revenue 5.999% 12/1/44 1,740 2,203
Dallas TX Area Rapid Transit Revenue 5.022% 12/1/48 2,200 2,420
Duke University North Carolina Revenue 5.850% 4/1/37 30,450 37,533
Georgia Municipal Electric Power Authority Revenue 6.637% 4/1/57 39,585 44,028
Grand Parkway Transportation Corp. Texas System Toll        
Revenue 5.184% 10/1/42 14,620 15,745
Houston TX GO 6.290% 3/1/32 25,000 28,877
Illinois GO 5.100% 6/1/33 166,920 161,665
Illinois Toll Highway Authority Revenue 6.184% 1/1/34 18,740 22,667
Illinois Toll Highway Authority Revenue 5.851% 12/1/34 170 199
Los Angeles CA Department of Water & Power        
Revenue 5.716% 7/1/39 4,175 4,786
Los Angeles CA Department of Water & Power        
Revenue 6.008% 7/1/39 11,850 13,856
Los Angeles CA Department of Water & Power        
Revenue 6.574% 7/1/45 30,580 40,311
Los Angeles CA Department of Water & Power        
Revenue 6.603% 7/1/50 4,155 5,431
Los Angeles CA Unified School District GO 5.755% 7/1/29 19,500 22,592
Los Angeles CA Unified School District GO 5.750% 7/1/34 9,090 10,718
Los Angeles CA Unified School District GO 6.758% 7/1/34 64,235 82,602
Los Angeles County CA Metropolitan Transportation        
Authority Sales Tax Revenue 5.735% 6/1/39 15,100 17,180
Mississippi GO 5.539% 10/1/29 14,450 16,595
Missouri Health & Educational Facilities Authority        
Revenue (Washington University) 3.685% 2/15/47 10,000 8,944
8 New Jersey Economic Development Authority        
Revenue (State Pension Funding) 7.425% 2/15/29 50,002 61,939
New Jersey Turnpike Authority Revenue 7.414% 1/1/40 57,834 81,067
New Jersey Turnpike Authority Revenue 7.102% 1/1/41 67,555 91,638
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.724% 6/15/42 12,780 15,157
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.952% 6/15/42 18,210 22,254
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 6.011% 6/15/42 6,980 8,595
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 6.282% 6/15/42 7,225 7,920
New York City NY Municipal Water Finance Authority        
Water & Sewer System Revenue 5.882% 6/15/44 32,580 39,622
New York City NY Transitional Finance Authority Future        
Tax Revenue 5.508% 8/1/37 2,875 3,343
New York Metropolitan Transportation Authority        
Revenue (Dedicated Tax Fund) 7.336% 11/15/39 65,755 90,387
New York Metropolitan Transportation Authority        
Revenue (Dedicated Tax Fund) 6.089% 11/15/40 5,950 7,088
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.289% 3/15/33 7,325 8,194

 

77

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.628% 3/15/39 19,595 22,548
New York State Dormitory Authority Revenue (Personal        
Income Tax) 5.600% 3/15/40 2,000 2,319
New York State GO 5.590% 3/1/35 10,000 11,594
North Texas Tollway Authority System Revenue 6.718% 1/1/49 26,971 34,584
Ohio State University General Receipts Revenue 4.910% 6/1/40 12,300 13,139
Ohio State University General Receipts Revenue 4.800% 6/1/11 31,483 29,470
Oregon GO 5.892% 6/1/27 14,590 17,354
9 Oregon School Boards Association GO 4.759% 6/30/28 10,000 10,952
Port Authority of New York & New Jersey Revenue 6.040% 12/1/29 20,335 24,425
Port Authority of New York & New Jersey Revenue 5.647% 11/1/40 21,245 24,646
Port Authority of New York & New Jersey Revenue 5.647% 11/1/40 13,550 15,356
Port Authority of New York & New Jersey Revenue 4.960% 8/1/46 2,000 2,065
Port Authority of New York & New Jersey Revenue 5.310% 8/1/46 9,260 9,486
Port Authority of New York & New Jersey Revenue 4.926% 10/1/51 42,380 42,833
Port Authority of New York & New Jersey Revenue 4.458% 10/1/62 34,890 32,064
2 President & Fellows of Harvard College Massachusetts        
GO 6.300% 10/1/37 60,993 67,778
Salt River Project Arizona Agricultural Improvement &        
Power District Revenue 4.839% 1/1/41 16,625 17,934
San Antonio TX Electric & Gas Systems Revenue 5.985% 2/1/39 10,450 12,855
San Antonio TX Electric & Gas Systems Revenue 4.427% 2/1/42 13,370 13,373
San Francisco CA City & County Public Utilities        
Commission Water Revenue 6.000% 11/1/40 400 474
San Francisco CA City & County Public Utilities        
Commission Water Revenue 6.950% 11/1/50 13,325 17,461
Texas Transportation Commission Revenue 5.178% 4/1/30 4,090 4,577
Texas Transportation Commission Revenue 4.631% 4/1/33 6,655 7,113
University of California Regents General Revenue 4.601% 5/15/31 11,165 11,759
University of California Regents Medical Center        
Revenue 6.548% 5/15/48 22,225 27,221
University of California Regents Medical Center        
Revenue 6.583% 5/15/49 8,695 10,679
University of California Revenue 5.770% 5/15/43 5,155 6,101
University of California Revenue 4.858% 5/15/12 38,625 35,767
University of Texas System Revenue Financing System        
Revenue 5.262% 7/1/39 12,800 14,563
University of Texas System Revenue Financing System        
Revenue 4.794% 8/15/46 9,915 10,706
Washington GO 5.481% 8/1/39 8,890 10,190
7 Wisconsin GO 5.700% 5/1/26 23,025 25,908
 
Total Taxable Municipal Bonds (Cost $2,110,175)       2,315,427
 
 
      Shares  
 
Temporary Cash Investments (3.5%)        
Money Market Fund (1.6%)        
10 Vanguard Market Liquidity Fund 0.130%   220,938,440 220,938
 
 
      Face  
      Amount  
      ($000)  
Repurchase Agreements (1.8%)        
Bank of America Securities, LLC(Dated 1/31/14,        
Repurchase Value $118,400,000, collateralized by        
Federal National Mortgage Assn. 2.500%-4.000%,        
11/1/20-6/1/43, Federal Home Loan Mortgage Corp.        
3.010%, 12/1/40; with a value of $120,773,000) 0.020% 2/3/14 118,400 118,400

 

78

 

Vanguard® Long-Term Investment-Grade Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Barclays Capital Inc.(Dated 1/31/14, Repurchase Value        
$105,700,000, collateralized by U.S. Treasury        
Note/Bond 0.625%, 5/31/17; with a value of        
$107,814,000) 0.020% 2/3/14 105,700 105,700
Citigroup Global Markets Inc.(Dated 1/31/14,        
Repurchase Value $24,200,000, collateralized by U.S.        
Treasury Note/Bond 0.625%, 7/15/16; with a value of        
$24,684,000) 0.020% 2/3/14 24,200 24,200
        248,300
U.S. Government and Agency Obligations (0.1%)        
United States Treasury Bill 0.091% 6/5/14 20,000 19,998
 
Total Temporary Cash Investments (Cost $489,232)       489,236
 
Total Investments (98.6%) (Cost $12,867,016)       13,941,486
    Expiration Date Contracts  
Liability for Options Written (0.0%)        
Call Options on 10-year U.S. Treasury Note        
      42 (62)
Futures Contracts, Strike Price 124.50   2/21/14    
 
Call Options on 10-year U.S. Treasury Note        
      43 (33)
Futures Contracts, Strike Price 125.50   2/21/14    
 
Put Options on 10-year U.S. Treasury Note        
      85 (3)
Futures Contracts, Strike Price 122.50   2/21/14    
 
Total Liability for Options Written (Premiums received $55)       (98)
 
Other Assets and Liabilities—Net (1.4%) 11       196,468
Net Assets (100%)       14,137,856

 

1 Securities with a value of $6,157,000 have been segregated as collateral for open over-the-counter swap contracts.
2 Securities with a value of $6,939,000 have been segregated as initial margin for open futures contracts.
3 Securities with a value of $23,946,000 have been segregated as initial margin for open cleared swap contracts.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
5 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.
6 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 January 31, 2014, the aggregate value of these securities was $1,011,084,000, representing 7.2% of net assets.
7 Scheduled principal and interest payments are guaranteed by AGM (Assured Guaranty Municipal Corporation).
8 Scheduled principal and interest payments are guaranteed by National Public Finance Guarantee Corp.
9 Scheduled principal and interest payments are guaranteed by AMBAC (Ambac Assurance Corporation).
10 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
11 Cash of $8,566,000 has been segregated as initial margin for open futures contracts.
GO—General Obligation Bond.

79

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
 
U.S. Government and Agency Obligations (1.1%)        
U.S. Government Securities (1.1%)        
  United States Treasury Note/Bond 2.250% 5/31/14 92,825 93,464
  United States Treasury Note/Bond 4.250% 8/15/15 75,000 79,629
 
Total U.S. Government and Agency Obligations (Cost $170,701)       173,093
 
Asset-Backed/Commercial Mortgage-Backed Security (0.2%)        
  Avis Budget Car Rental LLC / Avis Budget Finance Inc.        
  (Cost $41,111) 5.500% 4/1/23 41,126 40,149
 
Corporate Bonds (92.8%)        
Finance (15.8%)        
  Banking (3.3%)        
  Ally Financial Inc. 8.000% 3/15/20 75,950 90,760
  Ally Financial Inc. 7.500% 9/15/20 58,250 68,444
1 Barclays Bank plc 6.050% 12/4/17 81,759 92,180
  Barclays Bank plc 5.140% 10/14/20 24,155 26,105
1 Lloyds Bank plc 6.500% 9/14/20 28,730 32,911
  Royal Bank of Scotland Group plc 6.125% 12/15/22 113,600 116,808
  Royal Bank of Scotland Group plc 6.000% 12/19/23 21,835 22,077
  UBS AG 7.625% 8/17/22 80,150 92,454
  Finance Companies (9.9%)        
2 Air Lease Corp. 5.625% 4/1/17 125,330 137,550
  Air Lease Corp. 4.750% 3/1/20 63,582 65,489
  CIT Group Inc. 4.250% 8/15/17 48,445 50,383
  CIT Group Inc. 5.250% 3/15/18 102,005 108,635
1 CIT Group Inc. 6.625% 4/1/18 120,655 134,832
1 CIT Group Inc. 5.500% 2/15/19 78,830 83,954
  CIT Group Inc. 5.375% 5/15/20 98,370 104,026
  CIT Group Inc. 5.000% 8/15/22 98,135 97,767
  Homer City Generation LP 8.734% 10/1/26 50,856 53,653
  International Lease Finance Corp. 5.750% 5/15/16 19,146 20,510
1 International Lease Finance Corp. 6.750% 9/1/16 32,895 36,431
  International Lease Finance Corp. 8.750% 3/15/17 38,820 45,225
  International Lease Finance Corp. 3.875% 4/15/18 42,475 42,687
1 International Lease Finance Corp. 7.125% 9/1/18 55,210 64,044
  International Lease Finance Corp. 5.875% 4/1/19 46,220 49,571
  International Lease Finance Corp. 6.250% 5/15/19 70,781 76,797
  International Lease Finance Corp. 8.250% 12/15/20 51,121 60,067
  International Lease Finance Corp. 4.625% 4/15/21 29,400 28,077
  International Lease Finance Corp. 8.625% 1/15/22 29,100 34,484
1 Provident Funding Associates LP / PFG Finance Corp. 6.750% 6/15/21 41,490 40,868
  SLM Corp. 6.250% 1/25/16 24,445 26,287
  SLM Corp. 6.000% 1/25/17 13,990 15,167
  SLM Corp. 8.450% 6/15/18 44,100 50,861
  SLM Corp. 5.500% 1/15/19 79,080 80,918
  SLM Corp. 8.000% 3/25/20 58,325 65,111
  SLM Corp. 7.250% 1/25/22 19,145 20,174
  SLM Corp. 5.500% 1/25/23 26,630 24,945
  Insurance (1.9%)        
3 Hartford Financial Services Group Inc. 8.125% 6/15/38 94,960 110,628
3 ING US Inc. 5.650% 5/15/53 37,580 36,077
1 Liberty Mutual Group Inc. 7.800% 3/15/37 58,440 62,823
1,3 MetLife Capital Trust IV 7.875% 12/15/67 46,910 53,947
1,3 MetLife Capital Trust X 9.250% 4/8/68 33,000 42,570
  Unum Group 7.375% 6/15/32 6,295 6,639
  Other Finance (0.4%)        
4 Telenet Finance III Luxembourg SCA 6.625% 2/15/21 3,700 5,412
4 Telenet Finance Luxembourg SCA 6.375% 11/15/20 10,145 14,714
4 Telenet Finance V Luxembourg SCA 6.250% 8/15/22 15,989 23,244
4 Telenet Finance V Luxembourg SCA 6.750% 8/15/24 18,755 27,319

 

80

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Real Estate Investment Trusts (0.3%)        
  Felcor Lodging LP 5.625% 3/1/23 42,805 41,735
 
          2,585,360
Industrial (71.0%)        
  Basic Industry (4.3%)        
2,5 Arch Coal Inc. Bank Loan 6.250% 5/16/18 67,173 66,477
  Ashland Inc. 3.875% 4/15/18 19,130 19,417
1 Axiall Corp. 4.875% 5/15/23 7,245 6,883
  Cascades Inc. 7.750% 12/15/17 32,145 33,431
  Cascades Inc. 7.875% 1/15/20 9,330 9,960
  Celanese US Holdings LLC 6.625% 10/15/18 11,265 11,927
  Celanese US Holdings LLC 5.875% 6/15/21 12,740 13,568
  Chemtura Corp. 5.750% 7/15/21 4,760 4,861
  Cloud Peak Energy Resources LLC / Cloud Peak Energy        
  Finance Corp. 8.250% 12/15/17 18,500 19,332
  Cloud Peak Energy Resources LLC / Cloud Peak Energy        
  Finance Corp. 8.500% 12/15/19 7,570 8,176
  CONSOL Energy Inc. 8.000% 4/1/17 14,945 15,692
  CONSOL Energy Inc. 8.250% 4/1/20 39,305 42,842
1 Eagle Spinco Inc. 4.625% 2/15/21 12,900 12,577
1 FMG Resources August 2006 Pty Ltd. 7.000% 11/1/15 25,483 26,439
1 FMG Resources August 2006 Pty Ltd. 6.375% 2/1/16 9,720 10,036
  Hexion US Finance Corp. 6.625% 4/15/20 68,400 71,136
1 INEOS Finance plc 8.375% 2/15/19 56,035 62,059
1 INEOS Finance plc 7.500% 5/1/20 53,610 58,569
  Novelis Inc. 8.375% 12/15/17 40,790 43,441
  Novelis Inc. 8.750% 12/15/20 48,570 53,913
  Peabody Energy Corp. 7.375% 11/1/16 69,675 78,558
  Peabody Energy Corp. 7.875% 11/1/26 36,300 37,389
  Capital Goods (7.9%)        
1 Ardagh Packaging Finance plc 7.375% 10/15/17 42,300 45,049
1 Ardagh Packaging Finance plc 9.125% 10/15/20 24,775 27,067
1 Ardagh Packaging Finance PLC / Ardagh MP Holdings        
  USA Inc. 7.375% 10/15/17 3,290 3,500
1 Ashtead Capital Inc. 6.500% 7/15/22 28,180 30,153
  B/E Aerospace Inc. 6.875% 10/1/20 37,830 41,329
  B/E Aerospace Inc. 5.250% 4/1/22 104,885 105,672
1 BlueLine Rental Finance Corp. 7.000% 2/1/19 7,640 7,888
1 Building Materials Corp. of America 6.875% 8/15/18 14,580 15,382
1 Building Materials Corp. of America 6.750% 5/1/21 50,565 54,863
  Case New Holland Inc. 7.875% 12/1/17 91,500 107,055
  Clean Harbors Inc. 5.250% 8/1/20 40,606 41,469
  Clean Harbors Inc. 5.125% 6/1/21 11,845 11,845
  CNH Capital LLC 3.875% 11/1/15 11,740 12,063
  CNH Capital LLC 6.250% 11/1/16 43,785 47,999
  CNH Capital LLC 3.625% 4/15/18 34,260 34,688
  Crown Americas LLC / Crown Americas Capital Corp. III 6.250% 2/1/21 38,900 41,915
1 Fibria Overseas Finance Ltd. 7.500% 5/4/20 17,161 18,834
  HD Supply Inc. 8.125% 4/15/19 26,370 29,337
  Huntington Ingalls Industries Inc. 6.875% 3/15/18 30,665 32,965
  Huntington Ingalls Industries Inc. 7.125% 3/15/21 43,475 47,931
  Masco Corp. 6.125% 10/3/16 17,785 19,633
  Masco Corp. 5.850% 3/15/17 9,404 10,371
  Masco Corp. 6.625% 4/15/18 3,895 4,347
  Masco Corp. 7.125% 3/15/20 59,416 68,180
  Masco Corp. 5.950% 3/15/22 24,000 25,500
  Masco Corp. 7.750% 8/1/29 16,486 18,653
  Masco Corp. 6.500% 8/15/32 5,880 5,876
  Owens Corning 9.000% 6/15/19 39,840 49,352
  Owens Corning 7.000% 12/1/36 5,380 6,032

 

81

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Reynolds Group Issuer Inc. / Reynolds Group Issuer        
  LLC / Reynolds Group Issuer Lu 7.125% 4/15/19 63,750 67,416
  TransDigm Inc. 5.500% 10/15/20 35,905 35,501
  United Rentals North America Inc. 5.750% 7/15/18 15,155 16,197
  United Rentals North America Inc. 7.375% 5/15/20 49,275 54,634
  United Rentals North America Inc. 8.250% 2/1/21 3,585 4,024
  United Rentals North America Inc. 7.625% 4/15/22 30,495 34,383
  United Rentals North America Inc. 6.125% 6/15/23 12,545 12,984
  Vulcan Materials Co. 6.400% 11/30/17 18,020 20,588
  Vulcan Materials Co. 7.000% 6/15/18 56,250 65,109
  Vulcan Materials Co. 7.500% 6/15/21 2,485 2,864
  Vulcan Materials Co. 7.150% 11/30/37 7,270 7,234
  Communication (23.0%)        
  CCO Holdings LLC / CCO Holdings Capital Corp. 7.000% 1/15/19 30,985 32,728
  CCO Holdings LLC / CCO Holdings Capital Corp. 8.125% 4/30/20 37,042 40,283
  CCO Holdings LLC / CCO Holdings Capital Corp. 6.500% 4/30/21 18,025 18,791
  CSC Holdings LLC 7.875% 2/15/18 27,180 31,053
  CSC Holdings LLC 7.625% 7/15/18 79,045 90,309
  CSC Holdings LLC 8.625% 2/15/19 10,520 12,308
  CSC Holdings LLC 6.750% 11/15/21 10,914 11,828
  DISH DBS Corp. 4.625% 7/15/17 9,730 10,192
  DISH DBS Corp. 7.875% 9/1/19 11,685 13,336
  DISH DBS Corp. 6.750% 6/1/21 133,715 142,741
  DISH DBS Corp. 5.875% 7/15/22 65,390 65,472
  DISH DBS Corp. 5.000% 3/15/23 20,135 18,902
1 eAccess Ltd. 8.250% 4/1/18 45,540 49,411
  Embarq Corp. 7.995% 6/1/36 23,035 23,911
1 Gannett Co. Inc. 5.125% 10/15/19 16,530 17,088
1 Gannett Co. Inc. 5.125% 7/15/20 64,680 65,003
1 Gannett Co. Inc. 6.375% 10/15/23 48,800 50,142
  Hughes Satellite Systems Corp. 6.500% 6/15/19 88,991 96,555
1 IAC/InterActiveCorp 4.875% 11/30/18 19,725 20,218
  IAC/InterActiveCorp 4.750% 12/15/22 22,085 20,870
1 Inmarsat Finance plc 7.375% 12/1/17 20,655 21,533
  Intelsat Jackson Holdings SA 7.250% 4/1/19 85,330 91,730
  Intelsat Jackson Holdings SA 8.500% 11/1/19 14,265 15,478
  Intelsat Jackson Holdings SA 7.250% 10/15/20 164,947 178,761
  Intelsat Jackson Holdings SA 7.500% 4/1/21 43,900 48,290
1 Intelsat Jackson Holdings SA 5.500% 8/1/23 58,000 55,245
  Lamar Media Corp. 5.875% 2/1/22 17,195 17,840
  Lamar Media Corp. 5.000% 5/1/23 36,840 35,551
2,5 Level 3 Financing, Inc. Bank Loan 4.000% 1/15/20 40,855 41,100
  Liberty Interactive LLC 8.500% 7/15/29 31,878 33,791
  Liberty Interactive LLC 8.250% 2/1/30 97,840 104,689
  MetroPCS Wireless Inc. 7.875% 9/1/18 55,420 59,161
  MetroPCS Wireless Inc. 6.625% 11/15/20 75,800 80,158
  National CineMedia LLC 6.000% 4/15/22 32,455 33,591
1 NBCUniversal Enterprise Inc. 5.250% 12/19/49 62,790 63,104
  Nielsen Finance LLC / Nielsen Finance Co. 7.750% 10/15/18 48,300 51,862
  Quebecor Media Inc. 7.750% 3/15/16 26,840 27,041
  Quebecor Media Inc. 5.750% 1/15/23 84,210 82,031
  Qwest Corp. 6.875% 9/15/33 34,167 33,057
  SBA Communications Corp. 5.625% 10/1/19 37,650 38,779
  SBA Telecommunications Inc. 8.250% 8/15/19 15,173 16,197
  SBA Telecommunications Inc. 5.750% 7/15/20 15,106 15,672
1 Sirius XM Radio Inc. 4.250% 5/15/20 8,595 8,015
1 Sirius XM Radio Inc. 5.250% 8/15/22 39,841 41,036
1 Sirius XM Radio Inc. 4.625% 5/15/23 24,150 21,493
1 Softbank Corp. 4.500% 4/15/20 159,095 156,013
1 Sprint Corp. 7.250% 9/15/21 95,745 103,165
1 Sprint Corp. 7.875% 9/15/23 89,370 95,402
1 Sprint Corp. 7.125% 6/15/24 30,930 31,162
1 Sprint Nextel Corp. 9.000% 11/15/18 92,545 111,748

 

82

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
1 Sprint Nextel Corp. 7.000% 3/1/20 135,830 153,148
  Starz LLC / Starz Finance Corp. 5.000% 9/15/19 30,905 31,794
1 T-Mobile USA Inc. 5.250% 9/1/18 13,725 14,446
  T-Mobile USA Inc. 6.464% 4/28/19 41,835 44,031
  T-Mobile USA Inc. 6.633% 4/28/21 71,475 75,049
  T-Mobile USA Inc. 6.125% 1/15/22 10,000 10,225
  T-Mobile USA Inc. 6.731% 4/28/22 51,165 53,851
  T-Mobile USA Inc. 6.836% 4/28/23 34,920 36,404
  T-Mobile USA Inc. 6.500% 1/15/24 14,750 15,045
2,5 Tribune Company Bank Loan 4.000% 12/27/20 117,504 117,308
1,4 Unitymedia Hessen GmbH & Co. KG / Unitymedia        
  NRW GmbH 5.500% 9/15/22 9,675 13,675
4 Unitymedia Hessen GmbH & Co. KG / Unitymedia        
  NRW GmbH 5.500% 9/15/22 3,057 4,321
1 Unitymedia Hessen GmbH & Co. KG / Unitymedia        
  NRW GmbH 5.500% 1/15/23 46,780 46,897
1,4 Unitymedia Hessen GmbH & Co. KG / Unitymedia        
  NRW GmbH 5.750% 1/15/23 6,820 9,639
4 Unitymedia Hessen GmbH & Co. KG / Unitymedia        
  NRW GmbH 5.750% 1/15/23 3,180 4,494
1,4 Unitymedia Hessen GmbH & Co. KG / Unitymedia        
  NRW GmbH 5.625% 4/15/23 17,268 24,231
1,4 Unitymedia KabelBW GmbH 9.500% 3/15/21 12,400 19,365
4 Unitymedia KabelBW GmbH 9.500% 3/15/21 7,600 11,869
1 UPCB Finance III Ltd. 6.625% 7/1/20 83,121 87,894
1 UPCB Finance V Ltd. 7.250% 11/15/21 40,995 44,582
1 UPCB Finance VI Ltd. 6.875% 1/15/22 42,036 44,968
  Videotron Ltd. 9.125% 4/15/18 11,880 12,415
  Videotron Ltd. 5.000% 7/15/22 82,242 80,597
  Virgin Media Finance plc 8.375% 10/15/19 14,560 15,725
1 Virgin Media Secured Finance plc 5.375% 4/15/21 29,130 29,057
1 Wind Acquisition Finance SA 11.750% 7/15/17 70,775 74,668
  Windstream Holdings Inc. 7.875% 11/1/17 42,820 48,815
  Windstream Holdings Inc. 8.125% 9/1/18 22,355 23,920
  Zayo Group LLC / Zayo Capital Inc. 8.125% 1/1/20 20,870 23,009
  Zayo Group LLC / Zayo Capital Inc. 10.125% 7/1/20 45,970 53,095
  Consumer Cyclical (10.9%)        
1 Activision Blizzard Inc. 5.625% 9/15/21 23,120 24,045
1 ADT Corp. 6.250% 10/15/21 59,125 61,194
  AMC Entertainment Inc. 8.750% 6/1/19 61,485 65,328
  AutoNation Inc. 5.500% 2/1/20 15,796 16,902
1 Carlson Wagonlit BV 6.875% 6/15/19 76,610 79,674
  Chrysler Group LLC / CG Co-Issuer Inc. 8.000% 6/15/19 32,260 35,083
  Cinemark USA Inc. 5.125% 12/15/22 6,030 5,894
1 Continental Rubber of America Corp. 4.500% 9/15/19 58,885 61,829
  Corrections Corp. of America 4.125% 4/1/20 23,805 23,150
  Corrections Corp. of America 4.625% 5/1/23 33,490 31,481
  Delphi Corp. 5.875% 5/15/19 34,727 36,550
  Delphi Corp. 6.125% 5/15/21 12,865 14,184
1 General Motors Co. 4.875% 10/2/23 16,585 16,875
1 General Motors Financial Co. Inc. 4.750% 8/15/17 97,350 102,948
1 General Motors Financial Co. Inc. 3.250% 5/15/18 13,040 13,170
  General Motors Financial Co. Inc. 6.750% 6/1/18 43,795 50,036
1 General Motors Financial Co. Inc. 4.250% 5/15/23 16,980 16,258
  Hanesbrands Inc. 6.375% 12/15/20 33,810 36,853
2,5 Hilton Worldwide Finance LLC Bank Loan 3.750% 10/26/20 81,388 81,915
2,5 Hilton Worldwide Finance LLC Bank Loan 3.750% 10/26/20 29,596 29,787
  Host Hotels & Resorts LP 5.875% 6/15/19 16,470 17,849
2,5 Ion Media Networks Bank Loan 5.000% 12/18/20 37,145 37,447
  L Brands Inc. 8.500% 6/15/19 4,860 5,832
  L Brands Inc. 7.000% 5/1/20 22,210 24,986
  L Brands Inc. 6.625% 4/1/21 42,435 46,254
  L Brands Inc. 5.625% 2/15/22 19,235 19,476

 

83

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Neiman Marcus Group Inc. 7.125% 6/1/28 63,150 62,519
  PVH Corp. 7.375% 5/15/20 28,847 31,443
1 QVC Inc. 7.500% 10/1/19 66,400 71,380
1 Realogy Group LLC 7.625% 1/15/20 53,680 59,987
  Regal Cinemas Corp. 8.625% 7/15/19 62,520 66,818
  Regal Entertainment Group 5.750% 6/15/23 19,200 18,864
  Regal Entertainment Group 5.750% 2/1/25 5,250 5,014
  Rite Aid Corp. 8.000% 8/15/20 29,250 32,687
  Sally Holdings LLC / Sally Capital Inc. 6.875% 11/15/19 44,399 48,839
  Sally Holdings LLC / Sally Capital Inc. 5.750% 6/1/22 23,135 23,482
  Service Corp. International 6.750% 4/1/16 22,998 25,039
  Service Corp. International 7.000% 6/15/17 38,900 43,763
  Service Corp. International 7.625% 10/1/18 35,040 40,296
1 Service Corp. International 5.375% 1/15/22 27,630 27,906
  Tenneco Inc. 7.750% 8/15/18 8,215 8,800
  Tenneco Inc. 6.875% 12/15/20 29,075 31,765
1 TRW Automotive Inc. 7.250% 3/15/17 48,556 55,354
1 TRW Automotive Inc. 4.500% 3/1/21 14,475 14,656
  Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. 7.875% 5/1/20 14,590 16,013
  Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. 7.750% 8/15/20 73,000 81,030
  Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. 5.375% 3/15/22 59,010 60,190
  Consumer Noncyclical (10.1%)        
1 ARAMARK Corp. 5.750% 3/15/20 40,045 41,547
  Biomet Inc. 6.500% 8/1/20 60,850 64,957
  Biomet Inc. 6.500% 10/1/20 75,990 78,840
1 Capsugel SA 7.000% 5/15/19 7,590 7,796
  CHS/Community Health Systems Inc. 5.125% 8/15/18 54,960 58,051
  CHS/Community Health Systems Inc. 7.125% 7/15/20 31,285 33,319
1 CHS/Community Health Systems Inc. 5.125% 8/1/21 15,235 15,311
  Constellation Brands Inc. 7.250% 5/15/17 26,605 30,662
  DaVita HealthCare Partners Inc. 6.625% 11/1/20 36,385 39,114
1 Fresenius Medical Care US Finance II Inc. 5.625% 7/31/19 38,265 40,752
1 Fresenius Medical Care US Finance II Inc. 5.875% 1/31/22 15,090 16,071
1 Fresenius Medical Care US Finance Inc. 6.500% 9/15/18 5,830 6,559
1 Fresenius Medical Care US Finance Inc. 5.750% 2/15/21 47,730 50,832
1 Fresenius US Finance II Inc. 9.000% 7/15/15 27,270 30,202
1 FWCT-2 Escrow Corp. 6.875% 2/1/22 67,380 69,149
  HCA Holdings Inc. 6.250% 2/15/21 25,540 27,136
  HCA Inc. 6.500% 2/15/16 19,860 21,573
  HCA Inc. 8.500% 4/15/19 23,905 25,220
  HCA Inc. 6.500% 2/15/20 127,050 140,073
  HCA Inc. 5.875% 3/15/22 60,405 63,727
  HCA Inc. 4.750% 5/1/23 72,500 71,684
  HCA Inc. 7.690% 6/15/25 4,510 4,719
1 Healthcare Technology Intermediate Inc. 7.375% 9/1/18 19,400 20,079
1 Hypermarcas SA 6.500% 4/20/21 71,815 75,520
1 IMS Health Inc. 12.500% 3/1/18 76,475 88,902
1 IMS Health Inc. 6.000% 11/1/20 16,480 17,551
  LifePoint Hospitals Inc. 6.625% 10/1/20 17,460 18,726
  Party City Holdings Inc. 8.875% 8/1/20 88,580 98,545
1 Salix Pharmaceuticals Ltd. 6.000% 1/15/21 67,325 70,186
  Tenet Healthcare Corp. 9.250% 2/1/15 8,760 9,406
  Tenet Healthcare Corp. 6.250% 11/1/18 40,210 44,432
  Tenet Healthcare Corp. 4.750% 6/1/20 16,875 16,727
  Tenet Healthcare Corp. 4.500% 4/1/21 42,147 40,883
  Tenet Healthcare Corp. 4.375% 10/1/21 106,480 102,221
  Tenet Healthcare Corp. 8.125% 4/1/22 14,955 16,338
2,5 US Foods Inc. Bank Loan 4.500% 3/31/17 46,438 46,757
  WellCare Health Plans Inc. 5.750% 11/15/20 39,515 41,096
  Energy (4.5%)        
1 Antero Resources Finance Corp. 5.375% 11/1/21 22,785 23,070
  Chesapeake Energy Corp. 9.500% 2/15/15 15,900 17,053
  Concho Resources Inc. 7.000% 1/15/21 15,256 16,667

 

84

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Face Market
      Maturity Amount Value
    Coupon Date ($000) ($000)
  Concho Resources Inc. 6.500% 1/15/22 19,940 21,485
  Concho Resources Inc. 5.500% 10/1/22 88,070 89,611
  Continental Resources Inc. 5.000% 9/15/22 44,085 45,408
  Denbury Resources Inc. 8.250% 2/15/20 19,004 20,809
  Denbury Resources Inc. 6.375% 8/15/21 12,445 13,316
  Denbury Resources Inc. 4.625% 7/15/23 29,500 27,214
  EP Energy LLC / EP Energy Finance Inc. 9.375% 5/1/20 66,027 75,931
  EP Energy LLC / Everest Acquisition Finance Inc. 6.875% 5/1/19 15,710 16,908
  Harvest Operations Corp. 6.875% 10/1/17 50,600 54,901
1 MEG Energy Corp. 6.375% 1/30/23 30,650 30,573
1 MEG Energy Corp. 7.000% 3/31/24 48,500 49,349
  Newfield Exploration Co. 6.875% 2/1/20 16,575 17,735
  Newfield Exploration Co. 5.750% 1/30/22 10,890 11,244
  Newfield Exploration Co. 5.625% 7/1/24 13,045 13,029
  Range Resources Corp. 6.750% 8/1/20 13,580 14,632
  Range Resources Corp. 5.750% 6/1/21 44,365 47,027
  Range Resources Corp. 5.000% 8/15/22 19,225 19,033
  Rosetta Resources Inc. 5.875% 6/1/22 40,465 40,161
1 Seadrill Ltd. 5.625% 9/15/17 71,195 73,509
  Other Industrial (0.6%)        
  CBRE Services Inc. 5.000% 3/15/23 83,320 79,779
1 Laredo Petroleum Inc. 5.625% 1/15/22 23,645 23,645
  Technology (8.5%)        
1 Audatex North America Inc. 6.000% 6/15/21 14,680 15,304
1 Audatex North America Inc. 6.125% 11/1/23 13,835 14,285
  Brocade Communications Systems Inc. 6.875% 1/15/20 13,038 13,951
1 Brocade Communications Systems Inc. 4.625% 1/15/23 23,360 21,549
  CDW LLC / CDW Finance Corp. 8.000% 12/15/18 28,178 30,503
  CDW LLC / CDW Finance Corp. 8.500% 4/1/19 8,210 9,031
  Equinix Inc. 4.875% 4/1/20 8,750 8,815
  Equinix Inc. 7.000% 7/15/21 60,830 66,913
  Equinix Inc. 5.375% 4/1/23 37,690 37,030
1 First Data Corp. 7.375% 6/15/19 53,405 57,010
1 First Data Corp. 8.875% 8/15/20 22,379 24,673
1 First Data Corp. 6.750% 11/1/20 54,020 56,721
1 First Data Corp. 8.250% 1/15/21 77,840 82,705
1 First Data Corp. 11.250% 1/15/21 13,190 14,509
  First Data Corp. 12.625% 1/15/21 36,810 42,930
1 First Data Corp. 11.750% 8/15/21 24,225 24,952
2,5 First Data Corp. Bank Loan 4.158% 9/24/14 48,433 48,536
  Flextronics International Ltd. 4.625% 2/15/20 22,975 22,544
  Flextronics International Ltd. 5.000% 2/15/23 42,120 40,909
1 Freescale Semiconductor Inc. 5.000% 5/15/21 33,890 33,636
1 Freescale Semiconductor Inc. 6.000% 1/15/22 22,130 23,015
2,5 Freescale Semiconductor Inc. Bank Loan 5.000% 3/1/20 92,920 93,713
2,5 Infor (US) Inc. Bank Loan 3.750% 4/5/18 19,461 19,506
  Infor US Inc. 11.500% 7/15/18 45,331 52,244
  Infor US Inc. 9.375% 4/1/19 34,141 38,366
  Iron Mountain Inc. 7.750% 10/1/19 34,055 37,801
  Iron Mountain Inc. 8.375% 8/15/21 45,555 48,858
  Iron Mountain Inc. 5.750% 8/15/24 21,880 20,567
  NCR Corp. 4.625% 2/15/21 54,399 53,175
  NCR Corp. 5.000% 7/15/22 16,915 16,450
1 NXP BV / NXP Funding LLC 3.750% 6/1/18 37,440 37,908
1 NXP BV / NXP Funding LLC 5.750% 3/15/23 8,635 8,808
1 Sensata Technologies BV 6.500% 5/15/19 67,739 73,497
  SunGard Data Systems Inc. 7.375% 11/15/18 53,200 56,392
  SunGard Data Systems Inc. 6.625% 11/1/19 39,220 41,230
  SunGard Data Systems Inc. 7.625% 11/15/20 98,546 108,400
  Transportation (1.2%)        
3 Continental Airlines 2007-1 Class B Pass Through Trust 6.903% 4/19/22 19,307 20,514
  Hertz Corp. 4.250% 4/1/18 8,040 8,201

 

85

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
Hertz Corp. 6.750% 4/15/19 82,360 87,508
Hertz Corp. 5.875% 10/15/20 6,205 6,422
Hertz Corp. 7.375% 1/15/21 60,490 65,858
        11,613,474
Utilities (6.0%)        
Electric (2.4%)        
AES Corp. 7.750% 10/15/15 25,158 27,611
AES Corp. 8.000% 10/15/17 45,766 53,375
AES Corp. 8.000% 6/1/20 19,980 23,127
1 Calpine Corp. 7.500% 2/15/21 50,964 55,678
1 Calpine Corp. 6.000% 1/15/22 16,165 16,731
1 Calpine Corp. 7.875% 1/15/23 11,988 13,217
1 Calpine Corp. 5.875% 1/15/24 9,230 9,161
DPL Inc. 6.500% 10/15/16 14,550 15,641
DPL Inc. 7.250% 10/15/21 104,495 103,972
1 EDP Finance BV 5.250% 1/14/21 47,835 48,946
1 IPALCO Enterprises Inc. 7.250% 4/1/16 11,985 13,154
IPALCO Enterprises Inc. 5.000% 5/1/18 14,510 15,308
Natural Gas (3.6%)        
AmeriGas Finance LLC / AmeriGas Finance Corp. 6.750% 5/20/20 25,965 28,302
AmeriGas Finance LLC / AmeriGas Finance Corp. 7.000% 5/20/22 48,660 52,796
El Paso LLC 7.000% 6/15/17 21,395 24,331
El Paso LLC 7.250% 6/1/18 66,150 75,549
El Paso LLC 6.500% 9/15/20 41,765 44,797
El Paso LLC 7.750% 1/15/32 26,290 27,132
Energy Transfer Equity LP 7.500% 10/15/20 76,385 86,124
Ferrellgas LP / Ferrellgas Finance Corp. 6.500% 5/1/21 74,191 76,417
1 Kinder Morgan Finance Co. LLC 6.000% 1/15/18 45,785 50,020
1 Kinder Morgan Inc. 5.000% 2/15/21 32,795 32,467
1 Kinder Morgan Inc. 5.625% 11/15/23 48,500 47,651
MarkWest Energy Partners LP / MarkWest Energy        
Finance Corp. 6.500% 8/15/21 8,533 9,173
MarkWest Energy Partners LP / MarkWest Energy        
Finance Corp. 6.250% 6/15/22 26,425 28,209
 
        978,889
 
Total Corporate Bonds (Cost $14,384,344)       15,177,723
 
 
 
      Shares  
 
Preferred Stocks (2.3%)        
Citigroup Capital XIII Pfd. 7.875%   5,301,250 143,664
GMAC Capital Trust I Pfd. 8.125%   4,743,200 130,059
Hartford Financial Services Group Inc. Pfd. 7.875%   3,307,200 95,776
Total Preferred Stocks (Cost $343,115)       369,499

 

86

 

Vanguard® High-Yield Corporate Fund        
Schedule of Investments        
January 31, 2014        
 
        Market
        Value
      Shares ($000)
 
Other (0.0%)        
 
* MediaNews Group Inc. Warrants Exp. 03/19/2017 (Cost $27,348)     73,622 549
 
Temporary Cash Investments (1.9%)        
 
      Face  
    Maturity Amount  
  Coupon Date ($000)  
Repurchase Agreements (1.9%)        
Bank of America Securities, LLC(Dated 1/31/14,        
Repurchase Value $76,700,000, collateralized by        
Federal National Mortgage Assn. 2.406%-3.036%,        
3/1/41-1/1/44, with a value of $78,234,000) 0.020% 2/3/14 76,700 76,700
Deutsche Bank Securities, Inc.(Dated 1/31/14,        
Repurchase Value $ 99,200,000, collateralized by        
Federal Home Loan Mortgage Corp. 4.000%-7.000%,        
4/1/23-11/1/43, Federal National Mortgage Assn.        
3.000%-6.500%, 4/1/26-11/1/43, and Government        
National Mortgage Assn. 4.000%, 10/20/43, with a        
value of $101,184,000) 0.030% 2/3/14 99,200 99,200
RBC Capital Markets LLC(Dated 1/31/14, Repurchase        
Value $47,100,000, collateralized by Federal Home        
Loan Mortgage Corp. 3.500%,9/1/42, and Federal        
National Mortgage Assn. 2.506%-3.500%, 7/1/43-        
11/1/43, with a value of $48,042,000) 0.020% 2/3/14 47,100 47,100
TD Securities (USA) LLC(Dated 1/31/14, Repurchase        
Value $87,800,000, collateralized by Federal Farm        
Credit Bank 0.136%-0.188%, 9/22/15-4/6/16, and        
Federal Home Loan Bank 0%, 1/10/17, with a value        
of $89,628,000) 0.030% 2/3/14 87,800 87,800
 
        310,800
 
Total Temporary Cash Investments (Cost $310,800)       310,800
 
Total Investments (98.3%) (Cost $15,277,419)       16,071,813
Other Assets and Liabilities—Net (1.7%)       284,283
Net Assets (100%)       16,356,096

 

* Non-income-producing security.
1 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 January 31, 2014, the aggregate value of these securities was $4,627,683,000, representing 28.3% of net assets.
2 Adjustable-rate security.
3 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
4 Face amount denominated in Euro.
5 Security is a senior, secured, high-yield floating-rate loan. These loans are debt obligations issued by public and private companies and are comparable to high-yield bonds from a ratings and leverage perspective. At January 31, 2014, the aggregate value of these securities was $582,546,000, representing 3.6% of net assets.

87

 

© 2014 The Vanguard Group. Inc. All rights reserved.

Vanguard Marketing Corporation, Distributor.

SNA390 032014



Report of Independent Registered Public Accounting Firm

To the Trustees of Vanguard Fixed Income Securities Funds and the Shareholders of Vanguard Short-Term
Investment-Grade Fund, Vanguard Intermediate-Term Investment-Grade Fund, Vanguard Long-Term
Investment-Grade Fund and High-Yield Corporate Fund:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the financial statements of Vanguard Short-Term Investment-Grade Fund, Vanguard Intermediate-
Term Investment-Grade Fund, Vanguard Long-Term Investment-Grade Fund and High-Yield Corporate Fund
(the “Funds") as of January 31, 2014 and for the period then ended and have issued our unqualified report
thereon dated March 17, 2014 (which report and financial statements are included in Item 1 of this Certified
Shareholder Report on Form N-CSR). Our audit included an audit of the Funds' schedules of investments as of
January 31, 2014 appearing in Item 6 of this Form N-CSR. These schedules of investments are the responsibility
of the Funds' management. Our responsibility is to express an opinion on the schedules of investments based on
our audit.

In our opinion, the schedules of investments referred to above, when read in conjunction with the financial
statements of the Funds referred to above, presents fairly, in all material respects, the information set forth
therein.


March 17, 2014

PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1700, 2001 Market Street, Philadelphia, PA 19103-7042
T: (267) 330 3000, F: (267) 330 3300, www.pwc.com/us


Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not Applicable.

Item 8: Portfolio Managers of Closed-End Management Investment Companies.

Not Applicable.

Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not Applicable.

Item 10: Submission of Matters to a Vote of Security Holders.

Not Applicable.

Item 11: Controls and Procedures.

     (a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

     (b) Internal Control Over Financial Reporting. There were no significant changes in Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Item 12: Exhibits.

(a) Code of Ethics.
(b) Certifications.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  VANGUARD FIXED INCOME SECURITIES FUNDS
 
By: /s/ F. WILLIAM MCNABB III*
  F. WILLIAM MCNABB III
  CHIEF EXECUTIVE OFFICER
 
Date: March 19, 2014

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

  VANGUARD FIXED INCOME SECURITIES FUNDS
 
By: /s/ F. WILLIAM MCNABB III*
  F. WILLIAM MCNABB III
  CHIEF EXECUTIVE OFFICER
 
Date: March 19, 2014

 

  VANGUARD FIXED INCOME SECURITIES FUNDS
 
By: /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER
 
Date: March 19, 2014

 

* By: /s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on March 27, 2012 see file Number 2-11444, Incorporated by Reference.