XX
XX, 20XX
Prospectus
Vanguard
U.S. High-Yield Corporate Bond Index ETF
Exchange-traded
fund shares that are not individually redeemable and are listed on XX
Vanguard
U.S. High-Yield Corporate Bond Index ETF Shares (VCHY)
Subject
to Completion
Preliminary
Prospectus
Dated
March 19, 2026
Information
contained in this prospectus is subject to completion or amendment.
A
registration statement for Vanguard U.S. High-Yield Corporate Bond Index ETF has
been filed with the U.S. Securities and Exchange Commission but has not yet
become effective.
Shares
of Vanguard U.S. High-Yield Corporate Bond Index ETF may not be sold, nor may
offers to buy be accepted, prior to the time the registration statement becomes
effective. This communication shall not constitute an offer to sell, nor shall
there be any sale of these securities in any state in which such offer,
solicitation, or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
This
is the Funds initial Prospectus, so it does not contain performance data.
The
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Fund Summary
Investment
Objective
Vanguard
U.S. High-Yield Corporate Bond Index ETF (the Fund) seeks to track the
performance of a U.S. dollar-denominated, below investment-grade corporate bond
index.
Fees
and Expenses
The
following tables describe the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the tables and example below.
Shareholder
Fees
(Fees
paid directly from your investment)
|
Transaction
Fee on Purchases and Sales |
None* |
|
Transaction
Fee on Reinvested Dividends |
None* |
*None through Vanguard (Broker
fees vary)
Annual
Fund Operating Expenses
(Expenses
that you pay each year as a percentage of the value of your investment)
|
Management
Fees |
xxx% |
|
12b-1
Distribution Fee |
None |
|
Other
Expenses |
xxx% |
|
Total
Annual Fund Operating Expenses1 |
xxx% |
1The expense information shown
in the table reflects estimated amounts for the current fiscal year.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Funds operating expenses
remain the same.
This
example does not include the brokerage commissions that you may pay to buy and
sell shares of the Fund.
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or turns over its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Funds performance.
The Fund has no operating history and therefore has no portfolio turnover
information.
Principal
Investment Strategies
The
Fund employs an indexing investment approach designed to track the performance
of the Bloomberg US High Yield $250MM 2% Issuer Capped Index (the Target
Index), which measures the performance of U.S. dollar- denominated, high-yield,
fixed-rate corporate bonds that have an amount outstanding, or par value, of at
least $250 million; are rated high-yield (Ba1/BB+/BB+ or below) using the middle
rating of Moodys, S&P, and Fitch; and have remaining maturities of at least
one year. The Target Index caps the exposure of individual issuers at 2% of the
total market value of the uncapped index. Under normal circumstances, the Fund
invests at least 80% of its net assets, plus the amount of any borrowings for
investment purposes, in the bonds that make up the Target Index.
The
Fund invests by sampling the Target Index, meaning that it holds a range of
securities that, in the aggregate, approximates the full Target Index in terms
of key risk factors and other characteristics. The Fund seeks to maintain a
dollar- weighted average maturity consistent with that of the Target Index. As
of XX, the dollar-weighted average maturity of the Target Index was XX
years.
Principal
Risks
As
with any investment, an investment in the Fund could lose money over any time
period. The Funds share price and total return may fluctuate, potentially
within a wide range. The principal risks of investing in the Fund are summarized
below. Each of the following risks could affect the Funds performance:
General Market Risk.
The markets in which the Fund invests can be affected by a variety of
factors. These factors, which can be real or perceived, may include economic,
market, political, and regulatory conditions and developments as well as local,
regional, or global events such as wars, military conflicts, natural disasters,
and public health issues. In addition, investor sentiment and expectations
regarding these factors can also impact the markets. Different parts of the
market, including different industries and sectors as well as different types of
securities, may react differently to factors that affect the market. These
factors can contribute to market uncertainty, market volatility, and
fluctuations in the value of the Funds investments, thereby resulting in
potential losses to the Fund over short or long periods.
Investing in Bond
Markets. The
Fund may be impacted by the general condition of the bond markets and by factors
that affect bonds and bond issuers. For example, as a general rule, bond prices
and interest rates move in opposite directions. When interest rates rise, bond
prices tend to fall, and when interest rates fall, bond prices tend to go up.
Bond income also is affected by changes in interest rates. Interest rates can
rise or fall for a number of reasons, including, but not limited to, central
bank monetary policy, inflationary or deflationary pressures, and changes in
general market and economic conditions. Changing interest rates, including, but
not limited to, rates that fall below zero, could have unpredictable effects on
the overall market and may expose the bond markets in particular to heightened
volatility and potential illiquidity. The degree to which the Fund is impacted
by certain bond market risks may vary based on factors disclosed in its
principal investment strategies, such as the types of bonds in which it invests
and the overall credit quality, average maturity, and/or average duration of its
bond holdings.
High-Yield Securities. Bonds
rated below investment-grade, also referred to as high-yield securities, are
considered speculative with respect to the issuers ability, or perceptions of
the issuers ability, to make timely principal and interest payments. They are
more volatile, less liquid, and involve greater risk of default than
investment-grade securities. Investing in high-yield securities could result in
a loss of income and/or principal for the Fund.
Interest Rate Risk.
During periods of rising interest rates, bond prices overall may decline,
which could result in a decline in the Funds value. The prices of longer-term
bonds are more sensitive to changes in interest rates than the prices of
shorter-term bonds.
Income
Risk. During
periods of falling interest rates, the Funds income may decline. The income
paid by shorter-term bonds is subject to a higher degree of fluctuation than the
income paid by longer-term bonds.
Credit
Risk. Credit
risk refers to the chance that an issuer will default (fail to meet its credit
obligations) or fail to make payments in a timely manner, which could result in
a loss to the Fund. In addition, negative perceptions of an issuers ability to
make payments can cause the price of a security to decline. While all debt
securities are subject to credit risk to some extent, those with higher credit
quality ratings generally pose less credit risk than those with lower credit
quality ratings.
Bond Liquidity
Risk. If the
Fund is unable to sell a security at an advantageous time or price, its returns
may be reduced. There may be limited trading in the secondary market for certain
debt securities, which could make them more difficult to value or sell. For
example, the market for certain 144A securities may be less active than the
market for publicly traded securities. Investing in such securities may heighten
this risk for the Fund. In addition, liquidity in the corporate bond market may
be impacted by overall market conditions or by a decline in the availability of
credit.
Call Risk.
Certain bonds held by the Fund may be callable. The issuer of a callable
bond has the right to call (redeem) the bond before its maturity date. Calls
on bonds held by the Fund would result in the Fund losing any price
appreciation
above the bonds call price. In addition, because bond calls occur more
frequently during periods of falling interest rates, the Fund likely would be
forced to reinvest the proceeds of any called bonds at a lower interest rate
than that of the called bonds, resulting in a decline in the Funds income and a
potential loss in the value of the Funds investments. Frequent bond calls and
subsequent reinvestments of the proceeds also would increase the Funds turnover
rate.
Extension
Risk. During
periods of rising interest rates, certain bonds held by the Fund may be paid off
substantially more slowly than originally anticipated. As a result, the value of
the bonds may fall, resulting in a decline in the Funds income and a potential
loss in the value of the Funds investments.
Index
Investing. The
Fund is subject to risks associated with index investing. Because the Fund
generally seeks to track the performance of the Target Index regardless of how
the Target Index is performing, the Funds performance may be lower than it
would be if it were actively managed. Additionally, because the Fund does not
hold all of the securities included in the Target Index, it is subject to the
risk that the representative sample of securities selected by the advisor will,
in the aggregate, vary from the investment profile of the full Target Index. The
performance of the Funds investments, in the aggregate, may not match the
investment performance of the Target Index. This risk, known as tracking error
risk, may be heightened during times of increased market volatility or under
other unusual market conditions. The Fund also could be negatively impacted by
changes to the Target Index made by the index provider or by errors made by the
index provider. Any gains, losses, or costs associated with or resulting from an
error made by the index provider will generally be borne by the Fund and, as a
result, the Funds shareholders.
Concentration Risk.
Except as may be necessary to approximate the composition of its Target
Index, the Fund will not concentrate its investments in the securities of
issuers whose principal business activities are in the same industry or group of
industries. If the Target Index becomes concentrated and the Fund needs to
concentrate in the same industry or group of industries, its performance could
be negatively impacted by the industry or industries in which it is
concentrated.
ETF Share
Trading. The
Funds ETF shares are listed for trading on XXXXX and individual investors may
only buy and sell them on the secondary market at market prices. Although it is
expected that the market price of an ETF share typically will approximate its
net asset value (NAV), there may be times when the market price of an ETF share
and its NAV differ significantly. Disruptions to creation and redemption
transactions, the existence of significant market volatility, or potential lack
of an active trading market for ETF shares (including through a trading halt),
as well as other factors, may result in ETF shares trading significantly above
(at a premium) or below (at a discount) the Funds NAV or the intraday value of
the Funds holdings. Thus, you may pay more or less than NAV when you buy ETF
shares on the secondary market, and you may receive more or less than NAV when
you sell those shares.
Authorized
Participants.
Only Authorized Participants may engage in creation or redemption
transactions directly with the Fund. The Fund has a limited number of financial
institutions that may act as Authorized Participants. The Funds Authorized
Participants are not obligated to engage in creation or redemption transactions.
To the extent that the Funds Authorized Participants are unable to or choose
not to proceed with creation and/or redemption transactions with respect to the
Fund and no other Authorized Participants step forward to engage in creation or
redemption transactions with the Fund, the Funds ETF shares may trade at a
discount to NAV and possibly face trading halts and/or delisting.
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Annual
Total Returns
This
is the Funds initial Prospectus, so it does not contain performance data.
Investment
Advisor
The
Vanguard Group, Inc. (Vanguard) through its wholly owned subsidiary, Vanguard
Capital Management (VCM). VCM exercises portfolio management responsibilities
for the Fund.
Portfolio
Managers
Joshua
C. Barrickman, CFA, Principal of Vanguard and Portfolio Manager at VCM. He has
co-managed the Fund since its inception in XX.
Manuel
Hayes, Senior Portfolio Manager at VCM. He has co-managed the Fund since its
inception in XX.
Purchase
and Sale of Fund Shares
ETF
shares may only be bought and sold in the secondary market through a brokerage
firm. The price you pay or receive for ETF shares will be the prevailing market
price, which may be more (premium) or less (discount) than the NAV of the
shares. The brokerage firm may charge you a commission to execute the
transaction. Unless imposed by your brokerage firm, there is no minimum dollar
amount you must invest and no minimum number of shares you must buy. ETF shares
cannot be directly purchased from or redeemed with the Fund, except by certain
authorized broker-dealers. These broker-dealers may purchase and redeem ETF
shares only in large blocks known as creation units, typically in exchange for
baskets of securities.
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase ETF shares (bid) and the lowest
price a seller is willing to accept for ETF shares (ask) when buying or selling
shares
in
the secondary market (bid-ask spread). Recent information, including information
on the Funds NAV, market price, premiums and discounts, and bid-
ask
spreads, is available online at vanguard.com.
Tax
Information
The
Funds distributions may be taxable as ordinary income or capital gains. If you
are investing through a tax-advantaged account, such as an IRA or an
employer-sponsored retirement or savings plan, special tax rules apply. You
should consult your own tax advisor with respect to any particular U.S. or non-
U.S. tax consequences of your investment in the Fund.
Payments
to Financial Intermediaries
The
Fund and its advisor do not pay financial intermediaries for sales of Fund
shares.
More on the Fund
This
Prospectus provides information about Vanguard U.S. High-Yield Corporate Bond
Index ETF, an exchange-traded fund (the Fund). The Fund is a series of
Vanguard Malvern Funds (the Trust). Unlike conventional mutual fund shares,
ETF shares cannot be purchased directly from or redeemed directly with the
issuing fund by an individual investor. Instead, only certain authorized broker-
dealers (Authorized Participants) can purchase and redeem ETF shares directly
from the issuing fund at net asset value. Authorized Participants may purchase
and redeem ETF shares from the issuing fund only in large blocks (creation
units), usually in exchange for baskets of securities. Funds may also issue and
redeem creation units in exchange for solely cash or a combination of cash and
securities. These trades may occur in-kind between Vanguard and the Authorized
Participant. Individual investors can purchase ETF shares on the secondary
market through a broker. Reading this Prospectus will help you decide whether
the Funds ETF shares are the right investment for you.
As
you consider an investment in the Funds ETF shares, you should take into
account your tolerance for fluctuations in the securities markets. The costs of
investing are another important consideration. As a Fund shareholder, you will
pay a proportionate share of the costs of operating the Fund and any transaction
costs incurred when the Fund buys or sells securities, including costs generated
by shareholders of other share classes to the extent the Fund offers more than
one share class. These costs can erode a substantial portion of the gross income
or the capital appreciation the Fund achieves. Even seemingly small differences
can, over time, have a dramatic effect on the Funds performance.
Investment Objective and More on Principal Investment
Strategies
In
this section, you will find more information about the Funds investment
objective and the principal investment strategies and policies that the Fund
uses in pursuit of its investment objective. The Trusts board of trustees (the
Board) oversees the Funds management. The Board may approve changes to the
Funds strategies or policies in the interest of shareholders without
shareholder approval unless the strategy or policy is designated as
fundamental.
Investment
Objective
The
Fund seeks to track the performance of a U.S. dollar-denominated, below
investment-grade corporate bond index.
The
Funds investment objective is not fundamental and may be changed without
shareholder approval.
Implementation
of Investment Objective
To
achieve its investment objective, the Fund employs an indexing, or passive,
investment approach designed to track the performance of its Target Index, the
Bloomberg US High Yield $250MM 2% Issuer Capped Index.
What
are Index Funds?
Index
funds attempt to tracknot outperformthe performance of a specified market
index. An index is a group of securities whose overall performance is used as a
standard to measure the investment performance of a particular market. Some
indexes represent entire markets, such as the U.S. stock market, while others
cover a segment of a market, such as short-term bonds.
One
cannot invest directly in an index. Instead, an index funds advisor will
typically seek to hold all, or substantially all, of the securities that make up
the funds target index (often referred to as replicating an index or a full
replication approach) or a representative sample of the securities that make up
a funds target index (sampling an index).
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus the
amount of any borrowings for investment purposes, in the bonds that make up the
Target Index. Investments in derivatives may be counted toward the Funds 80%
policy to the extent that they provide investment exposure to the securities
included within the policy or to one or more market risk factors associated with
such securities. The Fund may change its 80% policy only upon 60 days notice to
shareholders.
Security
Selection
The
Fund invests by sampling its Target Index. The advisor buys and sells securities
for the Fund for the purpose of tracking the Target Index. Using quantitative
and qualitative methods, the Funds advisor generally selects a representative
sample of securities that approximates the full Target Index in terms of key
risk factors and other characteristics. These factors include duration, cash
flow, credit quality, and callability of the underlying bonds. Because the Fund
does not hold all of the securities included in the Target Index, some of the
securities (and issuers) that are held will likely be overweighted (or
underweighted) compared to the Target Index.
The
Target Index measures the performance of U.S. dollar-denominated, high- yield,
fixed-rate corporate bonds that have an amount outstanding (par value), of at
least $250 million; are rated high-yield (Ba1/BB+/BB+ or below) using the middle
rating of Moodys, S&P, and Fitch; and have remaining maturities of at least
one year. Depending upon the availability of bond ratings, the lower of two
ratings or a single rating may be used. The index provider may use other sources
to determine credit quality if, for example, a bond is unrated. The Target Index
caps the exposure of individual issuers at 2% of the total market value of the
uncapped index.
Security
types eligible for inclusion in the Target Index include callable bonds,
original issue zero coupon bonds, pay-in-kind bonds and toggle notes, and
fixed-rate and fixed-to-float (including fixed-to-variable) securities. The
Target Index includes SEC-registered bonds, bonds that are exempt from SEC
registration at the time of issuance, and restricted securities that are only
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (144A
securities). Certain investment restrictions, such as required minimum or
maximum investment in a particular type of security, are measured at the time
the Fund purchases a security. The market value, credit quality, or other
characteristics of the Funds securities may change after they are purchased,
and this may cause the amount of the Funds assets invested in such securities
to exceed the stated maximum restrictions or fall below the stated minimum
restrictions. If any of these changes occur, the Fund would not be considered to
be in violation of the investment restriction. However, purchases by the Fund
during the time it is above or below the stated restriction, during normal
market conditions, would be in compliance with applicable restrictions.
The
Target Index is rebalanced by the index provider on a monthly basis and is
subject to change over time. Bonds are added to and removed from the Target
Index in connection with the monthly rebalance process.
The
Target Index is owned, calculated, and controlled by the index provider in its
sole discretion. Neither the advisor nor any of its affiliates has discretion to
select Target Index components or change the Target Indexs
methodology.
Additional
Information Regarding the Funds Investments
The
Funds investments are described in more detail below.
What
are Bonds?
Generally
speaking, a bond
represents a debt or loan issued by, for example, a corporation, a
government, or a financial institution. In most instances, the issuer agrees to
pay the bondholder a fixed, variable, or floating rate of interest for a
specified length of time, and to repay the bond in full on a specified maturity date. The income earned by a bond (or
its yield, when
expressed as a percentage of the bonds price) can vary based on its maturity. Longer-term bonds
tend to have higher yields than shorter- term bonds, but are more sensitive to
fluctuations in value. By contrast, shorter-term bonds are less likely to
fluctuate in value, but tend to have lower yields. A bonds duration is a measure of how sensitive
its price is to changes in interest rates. For example, if a bond has a duration
of 2 years, its price would fall by approximately 2% when interest rates rise by
1%. On the other hand, the bonds price would rise by approximately 2% when
interest rates fall by 1%. A bonds credit quality rating is an assessment
of the issuers ability to make timely interest payments and repay the bond in
full on its stated maturity date. The higher a bonds credit quality, the
greater the perceived chance that the issuer will meet its payment obligations
(and vice versa). Investment-grade bonds are those whose credit quality is
considered by independent bond rating agencies, or through independent analysis
conducted by an advisor, to be sufficient to ensure timely payment of principal
and interest under current economic circumstances. Below investment-grade
securities, which include bonds commonly known as junk bonds, have lower
credit quality ratings.
Corporate Bonds
are issued by businesses that want to borrow money for some purpose,
often to develop a new product or service, to expand into a new market, or to
buy another company. As with other types of bonds, the issuer promises to repay
the principal on a specific date and to make interest payments in the meantime.
The amount of interest offered depends both on market conditions and on the
financial health of the corporation issuing the bonds. For example, companies
with lower credit ratings generally need to offer a higher interest rate in
order to obtain buyers for their bonds.
High-Yield Securities are rated
below investment-grade by independent rating agencies. These securities are
issued by corporations or other entities whose ability to pay interest and
principal in a timely manner is considered questionable, which is reflected in
their lower credit quality ratings. High-yield securities typically pay more
interest than equivalent investment-grade securities in order to attract
investors. Some high-yield
securities
are issued by smaller, less-established companies, while others are issued as
part of a corporate restructuring such as an acquisition, a merger, or a
leveraged buyout. Some high-yield securities were once rated investment-grade,
but have since been downgraded due to financial difficulties or other factors
affecting their issuers. By contrast, if an issuers financial condition
improves, its high-yield securities could be upgraded to investment-grade.
144A Securities
are nonpublic securities exempt from registration requirements under Rule
144A of the Securities Act of 1933. The market for 144A securities may be less
active than the market for publicly traded securities.
More on Fund Risks
Investing
in the securities markets can result in a loss of principal. The Fund is subject
to a variety of risks, including the principal risks listed below, that can
impact its net asset value (NAV), performance, and ability to achieve its
investment objective.
More
on Principal Risks
General Market Risk. The
markets in which the Fund invests can be affected by a variety of factors. These
factors, which can be real or perceived, may include economic, market,
political, and regulatory conditions and developments as well as local,
regional, or global events such as wars, military conflicts, natural disasters,
and public health issues. In addition, investor sentiment and expectations
regarding these factors can also impact the markets. Different parts of the
market, including different industries and sectors as well as different types of
securities, may react differently to factors that affect the market. These
factors can contribute to market uncertainty, market volatility, and
fluctuations in the value of the Funds investments, thereby resulting in
potential losses to the Fund over short or long periods.
Investing in Bond Markets.
The Fund may be impacted by the general condition of the bond markets and
by factors that affect bonds and bond issuers. For example, as a general rule,
bond prices and interest rates move in opposite directions. When interest rates
rise, bond prices tend to fall, and when interest rates fall, bond prices tend
to go up. Bond income also is affected by changes in interest rates. Interest
rates can rise or fall for a number of reasons, including, but not limited to,
central bank monetary policy, inflationary or deflationary pressures, and
changes in general market and economic conditions. Changing interest rates,
including, but not limited to, rates that fall below zero, could have
unpredictable effects on the overall market and may expose the bond markets in
particular to heightened volatility and potential illiquidity. The degree to
which the Fund is impacted by the following bond market risks may vary based on
factors disclosed throughout this Prospectus, such as the types of bonds in
which it
invests
and the overall credit quality, average maturity, and/or average duration of its
bond holdings.
High-Yield Securities. Bonds rated below
investment-grade, also referred to as high-yield securities, are considered
speculative with respect to the issuers ability, or perceptions of the issuers
ability, to make timely principal and interest payments. High-yield securities
are more volatile, less liquid, and involve greater risk of default than
investment-grade securities. In addition, issuers of high-yield securities may
have a greater risk of insolvency or bankruptcy than issuers of investment-grade
securities. For example, the market for certain 144A securities may be less
active than the market for publicly traded securities. Investing in such
securities may heighten this risk for the Fund. In addition, liquidity in the
corporate bond market may be impacted by overall market conditions or by a
decline in the availability of credit.
Interest Rate Risk. The
Funds investments in bonds can be sensitive to interest rate changes and may be
affected differently depending on the overall interest rate environment. During
periods of rising interest rates, bond prices overall may decline, which could
result in a decline in the Funds value. The prices of longer- term bonds are
more sensitive to changes in interest rates than the prices of shorter-term
bonds.
Income Risk. During periods
of falling interest rates, the Funds income may decline because the Fund may
have to invest new cash flow and cash from maturing bonds in bonds with lower
yields. The income paid by shorter-term bonds is subject to a higher degree of
fluctuation than the income paid by longer- term bonds.
Credit Risk. Credit risk
refers to the chance that an issuer will default (fail to meet its credit
obligations) or fail to make payments in a timely manner, which could result in
a loss to the Fund. In addition, negative perceptions of an issuers ability to
make payments can cause the price of a security to decline. The Fund could be
impacted by factors negatively impacting the issuers of its corporate bond
holdings. For example, if a company is restructured, there could be a
substantial decline in the credit quality and market value of any bonds issued
by that company. While all debt securities are subject to credit risk to some
extent, those with higher credit quality ratings generally pose less credit risk
than those with lower credit quality ratings.
Bond Liquidity Risk. If the
Fund is unable to sell a security at an advantageous time or price, its returns
may be reduced. There may be limited trading in the secondary market for certain
debt securities, which could make them more difficult to value or sell. For
example, liquidity in the corporate bond market may be impacted by overall
market conditions or by a decline in the availability of credit.
Call Risk. Certain bonds
held by the Fund may be callable. The issuer of a callable bond has the right to
call (redeem) the bond before its maturity date. When a bond is called, the
principal value of the bond is repaid earlier than
anticipated
(prepayment) and the investor (in this case, the Fund) no longer receives the
interest payments that would have been paid up to the expected maturity date. In
addition, bond calls and the resulting prepayments cause the Fund to lose any
price appreciation that would have occurred between the time the bond was called
and its original maturity date.
During
periods of falling interest rates, it benefits issuers to call bonds with high
interest rates. When this occurs, the Fund likely will be forced to reinvest the
proceeds of any called bonds at a lower interest rate than that of the called
bonds, resulting in a decline in the Funds income and a potential loss in the
value of the Funds investments. If the Fund holds multiple callable bonds,
frequent bond calls (as is likely during periods of falling interest rates) and
the Funds subsequent reinvestment of the proceeds also would increase the
Funds turnover rate.
Extension Risk. During
periods of rising interest rates, certain bonds held by the Fund may be paid off
substantially more slowly than originally anticipated. As a result, the value of
the bonds may fall, resulting in a decline in the Funds income and a potential
loss in the value of the Funds investments.
Index Investing. The Fund
is subject to the following risks associated with index investing:
Passive Management. The
Fund seeks to track the performance of its Target Index regardless of how the
Target Index is performing. The advisors use of an indexing, or passive,
approach to select and maintain investments for the Fund means that the advisor
will select investments for the purpose of tracking the Target Index and
generally will not use strategies to reduce negative impacts to the Fund during
periods of market volatility. As a result, the Funds performance may be lower
than it would be if it were actively managed.
Index Sampling Strategy.
Because the Fund does not hold all of the securities included in its Target
Index, it is subject to the risk that the representative sample of securities
selected by the advisor will, in the aggregate, vary from the investment profile
of the full Target Index.
Tracking Error. The
performance of the Funds investments, in the aggregate, may not match the
investment performance of its Target Index. It is important to understand that
an index fund will never perform exactly the same as its target index because,
among other things, an index fund has operating expenses and transaction costs
and its target index does not. Beyond these inherent differences in the
operation of an index fund versus the operation of its target index, there are a
variety of other factors that can cause or result in tracking error. These may
include, but are not limited to:
○
Price differences between the securities held by the index fund and those
included in its target index
○
Cash flows into or out of the index fund
○
The size of the index fund
○
Compliance with new or existing regulatory requirements
○
Portfolio transactions carried out by the index funds advisor to minimize the
distribution of capital gains
○
Changes to the underlying securities that make up the target
index
○
Errors made by the provider of the target index
Tracking
error risk may be heightened during times of increased market volatility or
under other unusual market conditions. An index fund using a sampling strategy
may be more likely to experience tracking error than an index fund using a
replicating strategy.
Index Provider. The Fund
is subject to risks associated with its index provider. The securities that make
up the Target Index and their weighting in the Target Index are determined by
the index provider. The index provider does not provide any warranty or accept
any liability with respect to the quality, accuracy, or completeness of the
Target Index or any data used to compile the Target Index. Under normal
circumstances, the index provider rebalances (updates) the Target Index on a
regular schedule. However, the index provider may also rebalance the Target
Index outside of the regular schedule or delay or cancel a scheduled rebalance,
which could result in added costs for the Fund or cause the Fund to experience
tracking error. The index provider may make errors, and
it
is possible that such errors may not be identified by the index provider for a
period of time or at all. Any gains, losses, or costs associated with or
resulting from an error made by the index provider will generally be borne by
the Fund and, as a result, the Funds shareholders. The Funds advisor does not
provide any warranty or guarantee against any errors made by the index
provider.
Concentration Risk. Except
as may be necessary to approximate the composition of its Target Index, the Fund
will not concentrate its investments in the securities of issuers whose
principal business activities are in the same industry or group of industries.
However, it is possible that the Target Index could become concentrated due to
market conditions or the performance of a single or related group of issuers. If
the Target Index becomes concentrated and the Fund needs to concentrate in the
same industry or group of industries, its performance could be negatively
impacted by the industry or industries in which it is concentrated.
ETF Share Trading. Because
ETF shares trade on the secondary markets, they are subject to the following
risks:
ETF
Shares Trading at Prices Other Than NAV. ETF shares may trade on a national securities
exchange at prices above, below, or at their most recent NAV. The NAV of the
Funds ETF shares, which typically is calculated at the end of each business
day, will generally fluctuate with changes in the market value of the Funds
holdings. The market prices of ETF shares will also fluctuate, in some cases
materially, in accordance with changes in NAV and the intraday value
of
the
Funds holdings, as well as the relative supply of and demand for the ETF shares
on an exchange. Differences between secondary market prices of ETF shares and
the intraday value of the Funds holdings may be due largely to supply and
demand forces in the secondary market, which may not be the same forces as those
influencing prices for securities held by the Fund at a particular time.
Although
it is expected that the market price of an ETF share typically will trade close
to the value of the Funds holdings, market prices are not expected to correlate
exactly to the Funds NAV due to timing reasons, supply and demand imbalances,
and other factors. In addition, disruptions to creations and redemptions;
adverse developments impacting market makers, authorized participants, or other
market participants; or high market volatility may result in the market price of
ETF shares differing significantly from the Funds NAV or the intraday value of
the Funds holdings. As a result of these factors, among others, you may pay
more (premium) or less (discount) than NAV when you buy ETF shares on the
secondary market, and you may receive more or less than NAV when you sell those
shares. These discounts and premiums are likely to be greatest during times of
market disruption or extreme market volatility.
Cost of Buying or Selling
Shares. Individual investors who buy or sell ETF shares through a broker
may incur a brokerage commission or other charges imposed by brokers. In
addition, the market price of ETF shares, like the price of any security on an
exchange, includes a bid-ask spread charged by the market makers or other
participants that trade the particular security. The bid-ask spread is the
difference between the highest price a buyer is willing to pay to purchase ETF
shares (bid) and the lowest price a seller is willing to accept for ETF shares
(ask) when buying or selling shares in the secondary market. The bid-ask spread
of the Funds ETF shares can vary over time based on the Funds trading volume
and market liquidity and may increase if the Funds trading volume, the bid-ask
spread of the Funds underlying securities, or market liquidity decrease. In
times of severe market disruption, including when trading of the Funds holdings
may be halted, the bid-ask spread may increase significantly. This means that
ETF shares may trade at a discount to the Funds NAV, and the discount is likely
to be greatest during significant market volatility.
Short Selling. ETF
shares, similar to shares of other issuers listed on an exchange, may be sold
short. In a short sale, an investor borrows securities from a lender for a fee
and then sells the borrowed securities on the open market with the hope that the
borrowed securities decline in price before the investor has to repurchase the
securities to return them to the lender. Short sales of ETF shares can increase
their volatility and lead to price decreases.
Lack of Active Trading
Market. Although ETF shares are listed on a national securities exchange,
it is possible that an active trading market may not be maintained. Although
this could happen at any time, it is more likely to occur during times of severe
market disruption. If you attempt to sell your ETF shares when an active trading
market is not functioning, you may have to sell at a
significant
discount to NAV. In extreme cases, you may not be able to sell your shares at
all.
Trading Halt. Trading of
ETF shares on an exchange may be halted by the activation of individual or
market-wide trading halts (which halt trading for a specific period of time when
the price of a particular security or overall market prices decline by a
specified percentage). Trading of ETF shares may also be halted if (1) the
shares are delisted from the listing exchange without first being listed on
another exchange or (2) exchange officials determine that such action is
appropriate in the interest of a fair and orderly market or for the protection
of investors. If a trading halt or unanticipated early closing of an exchange
occurs, a shareholder may be unable to purchase or sell ETF shares.
Authorized Participants.
Only Authorized Participants may engage in creation or redemption
transactions directly with the Fund. The Fund has a limited number of financial
institutions that may act as Authorized Participants. The Funds Authorized
Participants are not obligated to engage in creation or redemption transactions.
To the extent that the Funds Authorized Participants are unable to or choose
not to proceed with creation and/or redemption transactions with respect to the
Fund and no other Authorized Participants step forward to engage in creation or
redemption transactions with the Fund, the Funds ETF shares may trade at a
discount to NAV and possibly face trading halts and/or delisting.
Additional
Risks
Geopolitical and Sanctions Risk.
Due to growing dependencies between global economies, geopolitical events
can negatively affect all securities, markets, and economies. It is possible
that events which only impact one geographic area could have negative short- or
long-term effects on markets, issuers, and/or exchanges in the United States and
other countries.
At
times, the United States, other governments, or other supranational bodies
(e.g., the United Nations) may impose sanctions on countries and/or entities in
response to geopolitical events or other priorities. Compliance with sanctions
could impact the Fund, including the Funds ability to transact in or obtain
exposure to certain foreign securities and assets. Sanctions also could cause
significant losses to the Funds investments and its performance could be
negatively impacted. In lieu of sanctions, companies or specific goods that the
company produces could be subjected to trade embargoes or tariffs, which can
also affect securities markets and create volatility. So long as sanctions do
not prohibit investment in the company or issuer, the Fund typically also would
not be prohibited from investing in the affected company or issuer.
Potential
Redemption Activity Impacts. The
Vanguard funds can be negatively impacted by certain large redemptions. These
redemptions could occur due to a single shareholder or multiple shareholders
deciding to sell a large quantity of shares of a fund or a share class of the
fund. Large redemptions
can
occur for many reasons, either as a result of actions taken by the Vanguard
funds or their advisors, or as a result of events unrelated to actions taken by
the Vanguard funds or their advisors. Actions taken by the Vanguard funds or
their advisors could include, but are not limited to, changes to a funds
advisor(s), changes to a funds portfolio manager(s), changes to the composition
of a funds portfolio, and/or other product changes or launches that, for
example, result in shareholders redeeming shares of one fund to purchase shares
of another fund or investment vehicle. For a fund of funds, actions taken by the
Vanguard funds or their advisors could include a withdrawal from an underlying
fund or a change in the allocation to underlying funds. Events unrelated to
actions taken by the Vanguard funds or their advisors could include shareholders
selling out of a fund in response to market movements or regulatory changes.
A
large redemption could adversely affect a funds liquidity and NAV. For example,
a large redemption could require a funds manager to sell portfolio holdings at
unplanned or inopportune times. The managers sale of these holdings, which is a
taxable event, could require the fund to distribute any corresponding capital
gains or other taxable income to the funds remaining shareholders; see Dividends, Distributions, and
Taxes in the Investing in Vanguard ETF®
Shares section
for additional information. The increased trading activity could also increase
underlying costs for the fund due to commissions paid by the fund.
Investing in Derivatives.
Investing in derivatives may present risks different from, and/or greater
than, those associated with investing directly in stocks, bonds, or other types
of investments. Derivatives could expose the Fund to increased volatility and/or
significant loss. Certain derivatives have an inherent leverage component,
providing the Fund exposure to a sizable position in an underlying asset with a
relatively small upfront investment at the time the Fund enters into the
derivatives position. For these derivatives, an adverse change in the value or
price of the underlying asset could result in a loss substantially greater than
the amount invested in the derivative itself. Some derivatives require the Fund
to enter into a contract with a counterparty. If the counterparty is unable or
unwilling to fulfill its contractual obligation, the Fund may experience a loss.
A liquid market may not always exist for the Funds derivatives positions. The
Fund may be unable to sell or otherwise exit its derivatives position at desired
times or prices, which could also result in a loss to the Fund. Some
derivatives, particularly OTC derivatives, can be complex and often are valued
subjectively. Valuation may be more difficult in times of market turmoil since
many investors and market makers may be reluctant to purchase complex
instruments or quote prices for them. Improper valuations can result in
increased cash payment requirements to counterparties or a loss of value to the
Fund.
Derivatives
may not perform as intended, which may result in losses to the Fund. For
example, derivatives used for hedging or as a substitute for a portfolio
instrument may not provide the expected benefits, particularly during
adverse
market
conditions. The use of derivatives is also subject to legal risk, which includes
the risk of loss resulting from insufficient or unenforceable contractual
documentation, insufficient capacity or authority of the Funds counterparty,
and operational risk, which includes documentation or settlement issues, system
failures, inadequate controls, and human error.
Other Investment Policies
In
addition to employing its principal investment strategies, the Fund may use the
following other investment strategies and types of investments in order to
achieve its investment objective.
Substitute
Index
The
Fund reserves the right to substitute a different index for the index it
currently tracks if the current index is discontinued, if the Funds agreement
with the provider of its Target Index is terminated, or for any other reason
determined in good faith by the Board. In any such instance, the substitute
index would represent the same market segment as the Target Index.
Other
Types of Investments
Subject
to a 20% limit, the Fund may purchase investments that are not included in its
Target Index, such as those described below or smaller public issues or
medium-term notes not included in the Target Index because of the small size of
the issue. The Fund also may hold bonds that were included in the Target Index
when acquired but subsequently were removed. The vast majority of such
investments will have characteristics and risks similar to the bonds included in
the Funds Target Index.
The
Fund may invest up to 15% of its assets in illiquid securities. Illiquid
securities are investments that the Fund reasonably expects cannot be sold or
disposed of in current market conditions in seven calendar days or less without
the sale or disposition significantly changing the market value of the
investment. Restricted securities are illiquid securities that have not been
publicly issued and legally can be resold only to qualified buyers. From time to
time, the Board may determine that particular restricted securities are not
illiquid, in which case the Fund may purchase such securities without limit.
The
Fund may invest in derivatives such as fixed income futures contracts, fixed
income options (including options on swaps), interest rate swaps, total return
swaps, credit default swaps, or other derivatives. The Fund may invest in
derivatives only if the expected risks and rewards of the derivatives are
consistent with the investment objective, policies, strategies, and risks of the
Fund as disclosed in this Prospectus. In particular, derivatives will be used
only when they may help the advisor accomplish one or more of the following:
Invest in eligible asset classes
with greater efficiency and lower cost than is possible through direct
investment.
Add value when these instruments
are favorably priced.
Adjust sensitivity to changes in
interest rates.
Adjust the overall credit risk
of the portfolio or actively overweight or underweight credit risk to specific
bond issuers.
For
example, the Fund may invest in U.S. Treasury futures for either cash management
purposes or to add value when such instruments are favorably priced, and may
enter into a currency swap or foreign currency exchange forward contract to sell
or buy an amount of foreign currency to which it does not have exposure.
The
Fund may invest a small portion of its assets in fixed income futures, which are
a type of derivative, and/or shares of exchange-traded funds (ETFs). These fixed
income futures and ETFs typically provide returns similar to those of the bonds
listed in the index, or in a subset of the index, the Fund seeks to track. The
Fund may purchase futures or ETFs when doing so will reduce the Funds
transaction costs, facilitate cash management, mitigate risk, or have the
potential to add value because the instruments are favorably priced. Vanguard
receives no additional revenue from Fund assets invested in ETF shares of other
Vanguard funds. Fund assets invested in ETF shares of other Vanguard funds are
excluded when allocating to the Fund its share of the costs of Vanguard
operations.
Cash
Management
The
Funds daily cash balance may be invested in one or more Vanguard CMT Funds,
which are used as cash management vehicles for the Vanguard funds. When
investing in a CMT Fund, the Fund bears its proportionate share of the expenses
of the CMT Fund in which it invests. Vanguard receives no additional revenue
from Fund assets invested in a CMT Fund.
Temporary
Defensive Measures
The
Fund may temporarily depart from its normal investment policies and strategies
when the advisor believes that doing so is in the Funds best interest, so long
as the strategy or policy employed is consistent with the Funds investment
objective. For instance, the Fund may invest beyond its normal limits in
derivatives or exchange-traded funds that are consistent with the Funds
investment objective when those instruments are favorably priced or provide
needed liquidity, as might be the case when the Fund receives large cash flows
that it cannot prudently invest immediately.
Portfolio Holdings
Please
consult the Funds Statement of Additional Information
or Vanguards website for a description of the policies and procedures
that govern disclosure of the Funds portfolio holdings.
Management and Distribution of the Fund
The
Fund is a member of The Vanguard Group, Inc. (Vanguard), a family of over 200
funds. All of the funds that are members of Vanguard (other than funds of funds)
share in the expenses associated with administrative services and business
operations, such as personnel, office space, and equipment.
Vanguard
Marketing Corporation provides marketing services to the funds. Although fund
shareholders do not pay sales commissions or 12b-1 distribution fees, each fund
(other than a fund of funds) or each share class of a fund (in the case of a
fund with multiple share classes) pays its allocated share of the Vanguard
funds marketing costs.
How
is Vanguards Corporate Structure Unique?
Vanguard
is owned jointly by the funds it oversees and thus indirectly by the
shareholders in those funds. Most other mutual funds are operated by management
companies that are owned by third partieseither public or private
stockholdersand not by the funds they serve.
Investment
Advisor
The
Vanguard Group, Inc., P.O. Box 2600, Valley Forge, PA 19482, which began
operations in 1975, serves as advisor to the Fund through Vanguard Capital
Management (VCM). VCM exercises portfolio management responsibilities for the
Fund. As of XX, 20XX, Vanguard served as advisor for approximately $XX trillion
in assets. Vanguard, through VCM, provides investment advisory services to the
Fund pursuant to the Funds Service Agreement and an intercompany service
agreement between Vanguard and VCM, subject to the supervision and oversight of
the trustees and officers of the Fund.
VCM,
P.O. Box 2600, Valley Forge, PA 19482, is a wholly owned subsidiary of Vanguard
and was established in 2025.
The
Fund reserves the right to utilize a multimanager approach in the future. Under
the terms of an SEC exemption, the Board may, without prior approval from
shareholders, change the terms of an advisory agreement with a third-party
investment advisor or hire a new third-party investment advisoreither as a
replacement for an existing advisor or as an additional advisor. Any significant
change in the Funds advisory arrangement will be communicated to shareholders
in writing. As Vanguard is the Funds sponsor and overall manager, Vanguard,
through VCM, may provide investment advisory services to the Fund under certain
circumstances. Vanguard may also recommend to the Board that an advisor be
hired, terminated, or replaced or that the terms of an existing advisory
agreement be revised. The Fund has filed an application seeking an SEC exemption
with respect to investment advisors that are wholly owned subsidiaries of
Vanguard. If the exemption is granted, the Fund may rely on the new SEC
relief.
A
discussion regarding the basis for the Board's approval of the Fund's investment
advisory arrangement will be available in the Fund's Form N-CSR filed with the
SEC and in the applicable Financial Statements and Other Information document
available on the Fund's website following the Funds commencement of
operations.
The
managers primarily responsible for the day-to-day management of the Fund
are:
Joshua C. Barrickman, CFA,
Principal of Vanguard, Portfolio Manager at VCM, and co-head of Vanguards Fixed
Income Indexing Americas. He has been with Vanguard since 1998, has worked in
investment management since 1999, has managed investment portfolios since 2005,
and has co-managed the Fund since its inception in XX. Education: B.S., Ohio
Northern University; M.B.A., Lehigh University.
Manuel Hayes, Senior
Portfolio Manager at VCM. He has been with Vanguard since 2025, has worked in
investment management since 2005, has managed investment portfolios since 2007,
and has co-managed the Fund since its inception in XX. Education: B.A.,
University of California, Berkeley.
The
Funds Statement of
Additional Information provides information about each portfolio
managers compensation, other accounts under management, and ownership of shares
of the Fund.
Investing in Vanguard ETF®
Shares
The
Funds ETF shares are listed for trading on xxxxxx. You can buy and sell ETF
shares on the secondary market in the same way you buy and sell any other
exchange-traded securitythrough a broker. Your broker may charge a commission
to execute a transaction. Unless imposed by your broker, there is no minimum
dollar amount you must invest and no minimum number of ETF shares you must
buy.
Your
ownership of ETF shares will be shown on the records of the broker through which
you hold the shares. Vanguard will not have any record of your ownership. Your
account information will be maintained by your broker, which will provide you
with account statements, confirmations of your purchases and sales of ETF
shares, and tax information. Your broker also will be responsible for ensuring
that you receive income and capital gains distributions, as well as shareholder
reports and other communications from the fund whose ETF shares you own. You
will receive other services (e.g., dividend reinvestment and average cost
information) only if your broker offers these services.
Redemption
of ETF Shares by Authorized Participants
Unlike
conventional (i.e., not exchange-traded) mutual fund shares, ETF shares cannot
be purchased directly from or redeemed directly with the issuing fund by an
individual investor. Instead, only Authorized Participants can purchase and
redeem ETF shares directly from the issuing fund. Authorized Participants may
purchase and redeem ETF shares from the issuing fund only in large blocks
(creation units), usually in exchange for baskets of securities. Funds may also
issue and redeem creation units in exchange for solely cash or a combination of
cash and securities. These trades may occur in-kind between Vanguard and the
Authorized Participant. If cash is used to meet redemptions, the Fund typically
obtains such cash through positive cash flows or the sale of Fund holdings
consistent with the Funds investment objective and strategy.
Under
certain circumstances, including under stressed market conditions, the Fund may
borrow money (subject to certain regulatory conditions and if available under
board-approved procedures) through an interfund lending facility; through a bank
line-of-credit, including a joint committed credit facility; or through an
uncommitted line-of-credit from Vanguard in order to meet redemption
requests.
Pricing of Fund Shares
ETF
shares may only be bought and sold in the secondary market. The price you pay or
receive for the ETF shares will be the prevailing market price, which may be
more or less than the Funds NAV. Your transaction will be priced at the NAV
only if you purchase or redeem your ETF shares in creation unit blocks
(an
option
available only to certain authorized broker-dealers). NAV is typically
calculated as of the close of regular trading on the New York Stock Exchange
(NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for
business (a business day). In the rare event the NYSE experiences unanticipated
disruptions and is unavailable at the close of the trading day, NAVs will be
calculated as of the close of regular trading on the Nasdaq (or another
alternate exchange if the Nasdaq is unavailable, as determined at Vanguards
discretion), generally 4 p.m., Eastern time. The time selected for NAV
calculation in this rare event generally shall also serve as the conclusion of
the trading day. On U.S. holidays or other days when the NYSE is closed, the NAV
is not calculated, and the Vanguard funds do not sell or redeem shares. However,
on those days the value of a funds assets may be affected to the extent that
the fund holds securities that change in value on those days (such as foreign
securities that trade on foreign markets that are open).
If
a fund only has one share class, the NAV per share is computed by dividing the
total assets, minus liabilities, of a fund by the number of fund shares
outstanding. If a fund has more than one share class, each share class has its
own NAV, which is computed by dividing the total assets, minus liabilities,
allocated to the share class by the number of fund shares outstanding for that
class. The value of securities and other investments held by the Vanguard funds
is determined pursuant to the valuation policies and procedures adopted by the
Vanguard funds boards of trustees. Vanguard has been designated as the
valuation designee for the Vanguard funds pursuant to Rule 2a-5 under the
Investment Company Act of 1940, subject to oversight by the Vanguard funds
boards of trustees.
Securities
for which market quotations are readily available are valued at their market
value, based on quotations provided by independent third-party pricing sources.
Such securities are generally valued at their official closing price, the last
reported sales price, or if there were no sales that day, the mean between the
closing bid and asking prices, from the principal exchange or market on which
they are traded. A funds investments in any mutual fund shares, including
institutional money market fund shares, are valued at the NAVs of the mutual
fund shares. A funds investments in any ETF shares or closed-end fund shares
are valued at the market value of those shares.
When
the market quotations are not readily available or do not accurately reflect the
value of a security or other investment, such security or other investment is
priced at fair value, generally based on information provided by independent
third-party pricing services, in accordance with the valuation policies and
procedures adopted by the Vanguard funds boards of trustees. Fair value
represents a good faith determination of the value of a funds investments. The
fair value of a security or other investment is the amount that the owner might
reasonably expect to receive upon the current sale of the security or other
investment. Fair-value pricing may require subjective
determinations.
It is possible that the price determined through fair-value pricing may differ
from the price quoted or published by other sources and may not be the price at
which those investments could have been sold during the period in which the fair
value was used.
Fair-value
pricing may be used in a variety of circumstances. For example, it may be used
if the value of a security or other investment has been materially affected by
events occurring after the close of the principal exchange or market on which
the security is traded but before the funds NAV is calculated. These events
might be company-specific (e.g., earnings report, merger announcement),
country-specific (e.g., significant price movements in U.S. or a foreign
market), or regional/global events (e.g., natural disaster, economic or
political news, interest rate change, act of terrorism). These events could
affect a single security or a large number of securities in a particular market,
and it most commonly occurs with foreign portfolio holdings because many foreign
markets operate at times that do not coincide with those of the major U.S.
markets. Events that could affect the value of the foreign portfolio holdings
may occur between the close of the foreign market and the time a funds NAV is
calculated. The values of any foreign securities held by a fund are converted
into U.S. dollars using an exchange rate obtained from an independent third
party as of the close of regular trading on the NYSE.
In
addition, fair-value pricing may be used if trading in a security is halted and
does not resume before a funds pricing time, a security does not trade in the
course of a day and a fund holds enough of the security that its price could
affect the NAV, or if the trading market on which a security is listed is
suspended or closed and no appropriate alternative trading market is
available.
Fixed
income securities are generally valued based on information furnished by
independent pricing services and are priced at fair value. Pricing services may
use matrix pricing or valuation models that utilize certain inputs and
assumptions to derive values. Pricing services generally value fixed income
securities assuming orderly transactions of an institutional round lot size, but
a fund may hold or transact in such securities in smaller odd lot sizes. Odd
lots may trade at lower prices than institutional round lots.
Failures
by third-party pricing services to carry out their obligations to the Vanguard
funds (e.g., any errors in the data provided by third-party pricing services)
could result in delays in the calculation of the funds NAVs and/or the
inability to calculate the NAVs over extended time periods. The funds may be
unable to recover any losses associated with such failures.
The
Vanguard funds have authorized certain financial intermediaries and their
designees, and may, from time to time, authorize certain funds of funds for
which Vanguard serves as the investment advisor (Vanguard Funds of Funds), to
accept orders to purchase or redeem fund shares on behalf of the Vanguard funds.
In these circumstances, the Vanguard fund will be deemed to receive an
order
when accepted by the authorized financial intermediary, its designee, or one of
the Vanguard Funds of Funds, and the order will be executed using the NAV next
calculated after such acceptance.
Vanguards
website will show the previous days closing NAV and closing market price for a
funds ETF shares. The website also discloses, in the Premium/Discount analysis
section of a funds Price and Performance page, how frequently the fund traded
at a premium or discount to NAV (based on closing NAVs and market prices) and
the magnitudes of such premiums and discounts.
Dividends, Distributions, and Taxes
Fund
Distributions
The
Fund generally distributes to shareholders virtually all of its net income
(interest less expenses) as well as any net short-term or long-term capital
gains realized from the sale of its holdings. The Fund may also make
distributions that are treated as a return of capital. Income dividends
generally are declared monthly and distributed as soon as practicable
thereafter; capital gains distributions, if any, generally occur annually in
December and are distributed as soon as practicable thereafter. In addition, the
Fund may make a supplemental distribution at some other time during the
year.
From
time to time, Vanguard and/or a funds board of trustees may adjust a funds
fees and expenses and/or reduce, refund, reimburse, waive, or otherwise return
to the funds and their shareholders a portion of prior fees and expenses
(collectively, expense adjustments). Fund performance and potentially
shareholder distributions, will reflect such expense adjustments. If you sell
all or part of your investment in a fund before an expense adjustment occurs,
then you will not receive the economic benefit, if any, of such expense
adjustment. An expense adjustment at any given time does not imply or guarantee
that similar or additional expense adjustments will be made in the future.
Reinvestment
of Distributions
In
order to reinvest dividend and capital gains distributions, investors in the
Funds ETF shares must hold their shares at a broker that offers a reinvestment
service. This can be the brokers own service or a service made available by a
third party, such as the brokers outside clearing firm or the Depository Trust
Company (DTC). If a reinvestment service is available, distributions of income
and capital gains can automatically be reinvested in additional whole and
fractional ETF shares of the Fund. If a reinvestment service is not available,
investors will receive their distributions in cash. To determine whether a
reinvestment service is available and whether there is a commission or other
charge for using this service, consult your broker.
As
with all exchange-traded funds, reinvestment of dividend and capital gains
distributions in additional ETF shares will occur two business days or more
after the ex-dividend date (the date when a distribution of dividends or capital
gains is deducted from the price of the Funds shares). The exact number of days
depends on your broker. During that time, the amount of your distribution will
not be invested in the Fund and therefore will not share in the Funds income,
gains, and losses.
Basic
Tax Points
Investors
in taxable accounts should be aware of the following basic federal income tax
points:
Distributions are taxable to you
whether or not you reinvest these amounts in additional Fund shares.
Distributions declared and
recorded in Decemberif paid to you by the end of Januaryare generally
taxable as if received in December.
Any income dividend distribution
or short-term capital gains distribution that you receive is taxable to
you as ordinary income.
Any distribution of net
long-term capital gains is taxable to you as long-term capital gains, no
matter how long you have owned shares in the Fund.
Capital gains distributions can
occur when the Fund sells assets at a gain. Income and capital gains
distributions vary from month to month or year to year, as applicable, as a
result of the Funds investment activities and cash flows, including those due
to redemption activity by Fund shareholders.
Capital gains distributions may
occur if Vanguard, the Fund, or its advisor makes changes that would impact the
Fund directly or indirectly, including changes to the Funds portfolio or
advisors or changes to any other Vanguard fund or product that would involve the
redemption of shares of the Fund and the related sale of the Funds investments.
Such changes could, depending on the timing, result in capital gains
distributions in the current fiscal year, subsequent fiscal year, or
both.
Your cost basis in the Fund will
be decreased by the amount of any return of capital that you receive. This, in
turn, will affect the amount of any capital gain or loss that you realize when
selling your Fund shares.
Return of capital distributions
generally are not taxable to you until your cost basis has been reduced to zero.
If your cost basis is at zero, return of capital distributions will be treated
as capital gains.
A sale of Fund shares is a
taxable event. This means that you may have a capital gain to report as income,
or a capital loss to report as a deduction, when you complete your tax
return.
If you purchase shares before an
ex-dividend date when a fund has realized but not yet distributed income
or capital gains, the purchase price may include the amount of the upcoming
distribution, and you may pay the full price for the shares and later receive a
portion of the purchase price back as a taxable distribution. In such case, you
generally will be taxed upon receipt of such
distribution,
even though the distribution effectively represents a return of a portion of
your purchase price. This is known as buying a dividend.
Individuals,
trusts, and estates whose income exceeds certain threshold amounts are subject
to a 3.8% Medicare contribution tax on net investment income. Net investment
income takes into account distributions paid by the Fund and capital gains from
any sale of Fund shares.
Income
dividends and capital gains distributions that you receive, as well as your
gains or losses from any sale of Fund shares, may be subject to state and local
income taxes.
This
Prospectus provides general tax information only. If you are investing through a
tax-advantaged account, such as an IRA or an employer-sponsored retirement or
savings plan, special tax rules apply. Please consult your own tax advisor for
detailed information about any tax consequences for you.
Frequent Trading Limitations
Unlike
frequent trading of a Vanguard funds conventional share classes, frequent
trading of ETF shares generally does not disrupt portfolio management or
otherwise harm fund shareholders. The vast majority of trading in ETF shares
occurs on the secondary market. Because these trades do not involve the issuing
fund, they do not pose potential harm to the fund or its shareholders. Certain
broker-dealers are authorized to purchase and redeem ETF shares directly with
the issuing fund. Because these trades typically are effected in kind (i.e., for
securities and not for cash), or are assessed a transaction fee when effected in
cash, they do not cause any of the harmful effects to the issuing fund (as
previously noted) that may result from frequent trading. For these reasons, the
boards of trustees of Vanguard funds that issue ETF shares have determined that
it is not necessary to adopt policies and procedures to detect and deter
frequent trading and market-timing of ETF shares.
Additional Information
A
Precautionary Note to Investment Companies. The Funds ETF shares are issued by a registered
investment company, and therefore the acquisition of such shares by other
investment companies and private funds is subject to the restrictions of Section
12(d)(1) of the Investment Company Act of 1940 (the 1940 Act). SEC Rule
12d1-4 under the 1940 Act permits registered
investment companies to invest in other registered investment companies beyond
the limits in Section 12(d)(1), subject to certain conditions, including that
funds with different investment advisors must enter into a fund of funds
investment agreement.
Forum Selection. The Trusts
Bylaws designate Delaware courts as the exclusive forum for certain claims
against or related to the Trust, a trustee, an officer, or other employee of the
Trust, except that, unless the Trust otherwise consents in writing, the U.S.
Federal District Courts are the exclusive forum for the resolution of complaints
under the Securities Act of 1933 or the 1940 Act. These provisions may limit a
shareholders ability to bring a claim in a different forum and may result in
increased shareholder costs in pursuing such a claim.
Shareholder Rights. The
Funds Agreement and Declaration of Trust, as amended, requires a shareholder
bringing a derivative action on behalf of the Trust that is subject to a
pre-suit demand to collectively hold at least 10% of the outstanding shares of
the Trust or at least 10% of the outstanding shares of the series or class to
which the demand relates and to undertake to reimburse the Trust for the expense
of any counsel or advisors used when considering the merits of the demand in the
event that the board of trustees determines not to bring such action. In each
case, these requirements do not apply to claims arising under the federal
securities laws to the extent that any such federal securities laws, rules, or
regulations do not permit such application. The Trusts Bylaws also provide that
shareholders waive the right to trial by jury to the fullest extent permitted by
law.
Joint Committed Credit Facility.
The Fund may participate, along with other funds managed by Vanguard, in
a committed credit facility provided by a syndicate of lenders pursuant to a
credit agreement that may be renewed annually; each Vanguard fund is
individually liable for its borrowings, if any, under the credit facility. The
amount and terms of the committed credit facility are subject to approval by the
Board and renegotiation with the lender syndicate on an annual basis. New funds,
such as Vanguard U.S. High-Yield Corporate Bond Index ETF, will generally be
added to the agreement during the annual renewal process.
Certain
affiliates of the Fund and the advisor may purchase and resell ETF shares
pursuant to this Prospectus.
|
|
Inception |
Vanguard |
CUSIP |
|
Vanguard
Fund |
Date |
Fund
Number |
Number |
|
Vanguard
U.S. High-Yield Corporate |
|
|
|
|
Bond
Index ETF |
|
|
|
Inception
Date means the date on which the assets of a fund (or one of its share classes)
are first invested in accordance with the funds investment objective. For funds
with a subscription period, the inception date is the day after that period
ends. Investment performance is generally measured from the inception date.
CGS
identifiers have been provided by CUSIP Global Services, managed on behalf of
the American Bankers Association by FactSet Research Systems Inc., and are not
for use or dissemination in a manner that would serve as a substitute for any
CUSIP service. The CUSIP Database, © 2026 American Bankers Association. CUSIP
is a registered trademark of the American Bankers Association.
CFA® is a
registered trademark owned by CFA Institute.
Bloomberg® and
Bloomberg US High Yield $250MM 2% Issuer Capped Index (the Index) are service
marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index
Services Limited (BISL), the administrator of the Index (collectively,
Bloomberg), and have been licensed for use for certain purposes by
Vanguard.
Vanguard
U.S. High-Yield Corporate Bond Index ETF (the Fund) is not sponsored,
endorsed, sold or promoted by Bloomberg. Bloomberg does not make any
representation or warranty, express or implied, to the owners of, or
counterparties to, the Fund or any member of the public regarding the
advisability of investing in securities or commodities generally or in the Fund
particularly. The only relationship of Bloomberg to Vanguard is the licensing of
certain trademarks, trade names and service marks and of the Index, which are
determined, composed and calculated by BISL without regard to Vanguard or the
Fund. Bloomberg has no obligation to take the needs of Vanguard or the owners of
the Fund into consideration in determining, composing or calculating the Index.
Bloomberg is not responsible for and has not participated in the determination
of the timing, price, or quantities of the Fund to be issued. Bloomberg shall
not have any obligation or liability, including, without limitation, to
customers of the Fund, in connection with the administration, marketing or
trading of the Fund.
BLOOMBERG
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA
RELATED THERETO AND SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR
INTERRUPTIONS THEREIN. BLOOMBERG DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY VANGUARD, OWNERS OF THE FUND OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA RELATED THERETO. BLOOMBERG DOES
NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE INDEX OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE
FOREGOING, TO THE MAXIMUM EXTENT ALLOWED BY LAW, BLOOMBERG, ITS LICENSORS, AND
ITS AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS, SUPPLIERS, AND VENDORS
SHALL HAVE NO LIABILITY OR RESPONSIBILITY WHATSOEVER FOR ANY INJURY OR
DAMAGESWHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR
OTHERWISEARISING IN CONNECTION WITH THE FUND OR INDEX OR ANY DATA OR VALUES
RELATING THERETOWHETHER ARISING FROM THEIR NEGLIGENCE OR OTHERWISE, EVEN IF
NOTIFIED OF THE POSSIBILITY THEREOF.
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Connect
with Vanguard®> vanguard.com
For
More Information
If
you would like more information about Vanguard U.S High-Yield Corporate Bond
Index ETF, the following documents are available free upon request:
Annual/Semiannual
Reports to Shareholders and Form N-CSR Additional information about the Funds
investments will be available in the Funds annual and semiannual reports to
shareholders and in Form N-CSR. In the annual report, you will find a discussion
of the market conditions and investment strategies that significantly affected
the Funds performance during its last fiscal year. In Form N-CSR, you will find the Funds annual and semiannual
financial statements.
Statement
of Additional Information (SAI) The SAI provides more detailed information about
the Funds ETF shares and is incorporated by reference into (and thus legally a
part of) this Prospectus.
To
obtain a free copy of the latest annual or semiannual report, financial
statements (once available), or the SAI, or to request additional information
about Vanguard ETF shares, please visit https://vgi.vg/fund- literature or
contact us as follows:
Telephone:
866-499-8473; Text telephone for people with hearing impairment:
800-749-7273
Information
Provided by the SEC Reports and
other information about the Fund are available in the EDGAR database on the
SECs website at sec.gov, or you can receive copies of this information, for a
fee, by electronic request at the following email address:
[email protected].
Funds
Investment Company Act file number: 811-05628
©
2026 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing
Corporation, Distributor.
