Annual Report | August 31, 2015

Vanguard Sector Bond Index Funds

Vanguard Short-Term Government Bond Index Fund

Vanguard Intermediate-Term Government Bond Index Fund

Vanguard Long-Term Government Bond Index Fund

Vanguard Short-Term Corporate Bond Index Fund

Vanguard Intermediate-Term Corporate Bond Index Fund

Vanguard Long-Term Corporate Bond Index Fund

Vanguard Mortgage-Backed Securities Index Fund

 

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.

 

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: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.

 

Intermediate U.S. Government 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. The Vanguard ETF® Shares shown are traded on the Nasdaq exchange and are available only through brokers. The table provides ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

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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. The Vanguard ETF® Shares shown are traded on the Nasdaq exchange and are available only through brokers. The table provides ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

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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. The Vanguard ETF® Shares shown are traded on the Nasdaq exchange and are available only through brokers. The table provides ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.

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Chairman’s Letter

Dear Shareholder,

The 12-month period ended August 31, 2015, was a volatile one for bonds. Uncertainty about when the Federal Reserve might begin raising interest rates weighed on sentiment at times, but a host of other factors contributed to the bumpy ride. They included the unsteady pace of growth at home and abroad, disinflationary pressures from the drop in the price of oil and other commodities, the strength of the U.S. dollar, and seemingly stretched stock market valuations.

Demand for the safety of U.S. Treasuries pushed their yields lower for the most part and sent their prices higher, as bond yields and prices move in opposite directions. Among the seven Vanguard Sector Bond Index Funds covered in this report, returns for the three government bond funds ranged from 0.75% for Vanguard Short-Term Government Bond Index Fund to 4.44% for Vanguard Long-Term Government Bond Index Fund. (Returns and yields cited in this letter are for the funds’ ETF Shares, based on net asset value, except where noted otherwise.) The holdings in Vanguard Mortgage-Backed Securities Index Fund also rose in value, contributing to its result of 2.49%.

In contrast, prices of investment-grade corporate bonds fell over the fiscal year as investors shied away from risk. Vanguard Short-Term Corporate Bond Index Fund,

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which returned 0.96%, and Vanguard Intermediate-Term Corporate Bond Index Fund, which returned 0.32%, earned enough income to offset declines in the prices of their holdings. Their long-term counterpart did not, returning –3.64%.

All but one of the seven funds covered in this report generally performed in line with their benchmark indexes after taking expenses into account. The long-term government fund was the exception; it underperformed largely because of security pricing differences.

On August 31, the 30-day SEC yield was down 5 basis points for the intermediate-term government fund and down 20 basis points for the long-term government fund, compared with a year earlier. (A basis point is one-hundredth of a percentage point.) The yields for the five other funds rose by 12 to 58 basis points.

Results for bonds were muted both at home and abroad
The broad U.S. taxable bond market returned 1.56% for the 12 months, outpacing the broad U.S. stock market.

 

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The yield of the 10-year Treasury note slid from 2.34% at the start of the fiscal year to 1.75% on January 31 before retracing some of its steps to end the period at 2.18%. Longer-term Treasury yields also fell, while very short-term Treasury yields moved a little higher.

Municipal bonds resisted some of the downturns in the bond market better than their taxable counterparts, helping them return 2.52% for the period.

The Fed’s 0%–0.25% target for short-term interest rates continued to restrain returns for money market funds and savings accounts.

 

The fund expense ratios shown are from the prospectus dated December 23, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended August 31, 2015, the funds’ expense ratios were: for the Short-Term Government Bond Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Intermediate-Term Government Bond Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Long-Term Government Bond Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Short-Term Corporate Bond Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; for the Intermediate-Term Corporate Bond Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, 0.07% for Institutional Shares; for the Long-Term Corporate Bond Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares; and for the Mortgage-Backed Securities Index Fund, 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares. Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2014.

Peer groups: For the Short-Term Government Bond Index Fund, Short U.S. Government Funds; for the Intermediate-Term Government Bond Index Fund, Intermediate U.S. Government Funds; for the Long-Term Government Bond Index Fund, General U.S. Government Funds; for the Short-Term Corporate Bond Index Fund, Short-Intermediate Investment-Grade Debt Funds; for the Intermediate-Term Corporate Bond Index Fund, Core Bond Funds; for the Long-Term Corporate Bond Index Fund, Corporate BBB-Rated Debt Funds; for the Mortgage-Backed Securities Index Fund, U.S. Mortgage Funds.

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Limited by the dollar’s strength, international bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned –11.97%. Without this currency effect, international bonds returned about 3%.

August stock market anxiety led to disappointing returns
U.S. stocks generally moved in opposite directions over the two halves of the fiscal year. Ultimately, the ride ended about where it started, with the market returning less than 1%. The broad stock market’s first-half advance of about 6% was followed by a second-half retreat of about –5%.

For U.S. investors, international stocks returned about –12%—a result that would have been a bit better if not for the dollar’s strength against many foreign currencies. China’s troubles buffeted emerging markets, which produced lower returns than the developed markets of Europe and the Pacific region.

Concerns boosted Treasuries but weighed on corporates
With the financial crisis in the rearview mirror and the economy showing more strength toward the end of 2014, the Fed ended its bond-buying program and seemed to edge closer to raising short-term interest rates from the near-zero levels they had been at since late 2008. (Shortly after the close of the reporting period, the Fed announced at its September meeting that it would leave rates unchanged for the time being.)

But amid severe winter weather and a West Coast port strike, growth ground almost to a halt. The oil price slide and the strong U.S. dollar helped push inflation even further below the Fed’s target of 2%.

International developments also muddied the picture, including flare-ups in the Greek debt crisis and repercussions from events in China—notably the

 

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surprise devaluation of China’s currency, the sharp correction in mainland China stock markets, and the downturn in manufacturing. Collectively, these concerns helped fuel demand for Treasuries. All three government bond index funds benefited from rising bond prices; for the

 

 

Notes: Based on an analysis of almost 700,000 Vanguard IRA^® account owners who also have taxable investments at Vanguard and who own at least some bond investments. Data are as of December 31, 2014.

Source: Vanguard.

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intermediate- and long-term government funds, those higher prices accounted for more than one-third of their Admiral and Institutional Share returns.

The Mortgage-Backed Securities Index Fund invests in bonds of pooled mortgages issued by government agencies. Those securities didn’t perform quite as well as their duration-equivalent government counterparts, but price increases contributed materially to their returns as well.

Corporate bonds were a different story. The increase in market volatility made investors less comfortable with the credit risk they had previously taken on in exchange for higher yields. In general, yields of lower-rated investment-grade corporate bonds widened more versus Treasuries than higher-rated corporates. By sector, the bonds of financial institutions held up fairly well, while debt issued by commodity-related companies—especially in the energy, metals, and mining segments—turned in some of the poorest performances.

Prices of the holdings in all three corporate funds declined. Those drops shaved almost 3 percentage points from results for Admiral and Institutional Shares of the intermediate-term corporate fund and close to 8 percentage points for those shares of the long-term corporate fund.

Compared with their peers, five of the seven funds outperformed; the intermediate- and long-term government funds did so by the widest margins. The intermediate- and long-term corporate funds lagged.

These bond funds have built a solid record since inception
For any index fund, success means closely tracking the performance of its target index, which, like all indexes, incurs no expenses. Since their launch on November 19, 2009, all seven funds covered in this report have produced returns in line with those of their benchmarks, thanks to the experience, talent, and index sampling techniques of their advisor, Vanguard Fixed Income Group.

Average annual returns from inception through the latest fiscal year ranged from 0.86% to 7.34% for the government bond index funds and from 3.18% to 7.34% for the corporate bond index funds. For the Mortgage-Backed Securities Index Fund, the average annual return was 3.16%.

When the markets are volatile, maintaining perspective is key
The volatility in the markets, particularly among stocks in the final weeks of August, may have evoked painful memories of previous financial setbacks. And inevitably, that can lead some investors to make rash moves with their portfolios.

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During periods of market adversity, however, it’s more important than ever to keep sight of one of Vanguard’s key principles: Maintain perspective and long-term discipline. Whether you’re investing for yourself or on behalf of clients, your success is affected greatly by how you react—or don’t react—when the markets turn turbulent. (You can read Vanguard’s Principles for Investing Success at vanguard.com/research.)

As I’ve written in the past, the best course for long-term investors generally is to ignore daily market moves and not make decisions based on emotion. This is also a good time to evaluate your portfolio and make sure your asset allocation is aligned with your time horizon, goals, and risk tolerance.

The markets are unpredictable and often confounding. Keeping our long-term plans clearly in focus can be key as we weather these periodic storms.

As always, thank you for investing with Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
September 18, 2015

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Short-Term Government Bond Index Fund

Fund Profile
As of August 31, 2015

 

 

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.

 

 

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

 

 

Credit-quality ratings are obtained from Barclays and are from Moody's, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating for each issue is shown. "Not Rated" is used to classify securities for which a rating is not available. Not rated securities include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. For more information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus

1 The expense ratios shown are from the prospectus dated December 23, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended August 31, 2015, the expense ratios were 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares.

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Short-Term Government Bond Index Fund

Performance Summary

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

Cumulative Performance: November 19, 2009, Through August 31, 2015
Initial Investment of $10,000

 

For a benchmark description, see the Glossary.
Short U.S. Government Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
"Since Inception" performance is calculated from the ETF Shares’ inception date for both the fund and its comparative standards.

See Financial Highlights for dividend and capital gains information.

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"Since Inception" performance is calculated from the Admiral Shares’ inception date for both the fund and its comparative standards.

 

 

"Since Inception" performance is calculated from the Institutional Shares’ inception date for both the fund and its comparative standards.

 

"Since Inception" performance is calculated from the ETF Shares’ inception date for both the fund and its comparative standards.

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Short-Term Government Bond Index Fund

 

Average Annual Total Returns: Periods Ended June 30, 2015
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.

 

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Short-Term Government Bond Index Fund

Financial Statements

Statement of Net Assets
As of August 31, 2015

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).

 

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• See Note A in Notes to Financial Statements.
1 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.
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 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.

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

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1 Signal Shares were renamed Admiral Shares in October 2013.
2 Includes fiscal 2015 and 2014 short-term gain distributions totaling $149,000 and $76,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
3 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $361,000 and $183,000.

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

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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, including ETF Creation Units.

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

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Signal Shares were renamed Admiral Shares in October 2013. Prior periods’ Financial Highlights are for the Signal class.
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.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

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

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1 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction 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, including ETF Creation Units.

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

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Short-Term Government Bond Index Fund

Notes to Financial Statements

Vanguard Short-Term Government Bond Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: ETF Shares, Admiral Shares, and Institutional Shares. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker. 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. investment companies. The fund consistently follows such policies in preparing its financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

2. Federal Income Taxes: The fund intends to 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 (August 31, 2012–2015), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

4. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.06% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate equal to the higher of the federal funds rate or LIBOR reference rate plus an agreed-upon spread.

The fund had no borrowings outstanding at August 31, 2015, or at any time during the period then ended.

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

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

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Short-Term Government Bond Index Fund

expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At August 31, 2015, the fund had contributed to Vanguard capital in the amount of $75,000, representing 0.01% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of August 31, 2015, based on the inputs used to value them:

 

D. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

During the year ended August 31, 2015, the fund realized $661,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

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Short-Term Government Bond Index Fund

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 $175,000 from accumulated net realized gains to paid-in capital.

For tax purposes, at August 31, 2015, the fund had $706,000 of ordinary income and $157,000 of long-term capital gains available for distribution.

At August 31, 2015, the cost of investment securities for tax purposes was $922,963,000. Net unrealized appreciation of investment securities for tax purposes was $503,000, consisting of unrealized gains of $872,000 on securities that had risen in value since their purchase and $369,000 in unrealized losses on securities that had fallen in value since their purchase.

E. During the year ended August 31, 2015, the fund purchased $987,933,000 of investment securities and sold $737,681,000 of investment securities, other than temporary cash investments. Purchases and sales include $375,110,000 and $238,961,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

F. Capital share transactions for each class of shares were:

 

G. Management has determined that no material events or transactions occurred subsequent to August 31, 2015, that would require recognition or disclosure in these financial statements.

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Intermediate-Term Government Bond Index Fund

Fund Profile
As of August 31, 2015

 

 

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.

 

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

 

 

Credit-quality ratings are obtained from Barclays and are from Moody's, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating for each issue is shown. "Not Rated" is used to classify securities for which a rating is not available. Not rated securities include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. For more information about these ratings, see the Glossary entry for Credit Quality.

Investment Focus

1 The expense ratios shown are from the prospectus dated December 23, 2014, and represent estimated costs for the current fiscal year. For the fiscal year ended August 31, 2015, the expense ratios were 0.10% for ETF Shares, 0.10% for Admiral Shares, and 0.07% for Institutional Shares.

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