Vanguard
High-Yield Corporate Fund
Prospectus
May
25, 2023
Investor
Shares & Admiral™ Shares
Vanguard High-Yield
Corporate Fund Investor Shares (VWEHX)
Vanguard High-Yield Corporate Fund Admiral Shares (VWEAX)
Vanguard High-Yield Corporate Fund Admiral Shares (VWEAX)
This prospectus contains financial data for the Fund through the fiscal year ended January 31, 2023.
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.
(Fees paid directly from your investment)
|
|
Investor
Shares |
Admiral
Shares |
|
Sales Charge
(Load) Imposed on Purchases |
|
|
|
Purchase
Fee |
|
|
|
Sales Charge
(Load) Imposed on Reinvested Dividends |
|
|
|
Redemption
Fee |
|
|
|
Account
Service Fee Per Year
(for certain
fund account balances below $1,000,000) |
$ |
$ |
(Expenses that you pay each year as a percentage of the value of your investment)
|
|
Investor
Shares |
Admiral
Shares |
|
Management
Fees |
% |
|
|
12b-1
Distribution Fee |
|
|
|
Other
Expenses |
% |
|
|
Total Annual
Fund Operating Expenses |
% |
|
1
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Investor
Shares |
$ |
$ |
$ |
$ |
|
Admiral
Shares |
$ |
$ |
$ |
$ |
2
3
1 The year-to-date return as
of the most recent calendar quarter, which ended on March 31, 2023, was
3.17%.
|
|
Total
Return |
Quarter |
|
|
% |
|
|
|
-
% |
|
4
|
|
1
Year |
5
Years |
10
Years |
|
Vanguard
High-Yield Corporate Fund Investor Shares |
|
|
|
|
Return Before
Taxes |
-
% |
% |
% |
|
Return After
Taxes on Distributions |
- |
|
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
- |
|
|
|
Vanguard
High-Yield Corporate Fund Admiral Shares |
|
|
|
|
Return Before
Taxes |
-
% |
% |
% |
|
Bloomberg
U.S. Corporate High Yield Bond Index
(reflects no
deduction for fees, expenses, or taxes) |
-
% |
% |
% |
|
High-Yield
Corporate Composite Index
(reflects no
deduction for fees, expenses, or taxes) |
- |
|
|
Investment
Advisors
Wellington Management Company LLP
(Wellington Management)
The Vanguard Group, Inc. (Vanguard)
The Vanguard Group, Inc. (Vanguard)
Portfolio Managers
Michael L. Hong, CFA, Senior
Managing Director and Fixed Income Portfolio Manager of Wellington Management.
He has managed the Fund since 2008 and co-managed a portion of the Fund
since 2022.
Elizabeth H. Shortsleeve, Senior
Managing Director and Fixed Income Portfolio Manager of Wellington Management.
She has co-managed a portion of the Fund since 2022.
Michael Chang, CFA, Portfolio
Manager at Vanguard. He has co-managed a portion of the Fund since
2022.
5
Purchase
and Sale of Fund Shares
You may purchase or
redeem shares online through our website (vanguard.com), by mail (The
Vanguard Group, P.O. Box 982901, El Paso, TX 79998-2901), or by telephone
(800-662-2739). The minimum investment amount required to open and maintain a
Fund account for Investor Shares or Admiral Shares is $3,000 or $50,000,
respectively. The minimum investment amount required to add to an existing Fund
account is generally $1. Financial intermediaries, institutional clients, and
Vanguard-advised clients should contact Vanguard for information on special
eligibility rules that may apply to them regarding Admiral Shares. If you are
investing through an intermediary, please contact that firm directly for more
information regarding your eligibility. If you are investing through an
employer-sponsored retirement or savings plan, your plan administrator or your
benefits office can provide you with detailed information on how you can invest
through your plan.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gain. 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.
Payments
to Financial Intermediaries
The Fund and its investment
advisors do not pay financial intermediaries for sales of Fund
shares.
6
More
on the Fund
This prospectus
describes the principal risks you would face as a Fund shareholder. It is
important to keep in mind one of the main principles of investing: generally,
the higher the risk of losing money, the higher the potential reward. The
reverse, also, is generally true: the lower the risk, the lower the potential
reward. As you consider an investment in any mutual fund, you should take into
account your personal tolerance for fluctuations in the securities markets. Look
for this
symbol throughout
the prospectus. It is used to mark detailed information about the more
significant risks that you would confront as a Fund shareholder. To highlight
terms and concepts important to mutual fund investors, we have provided Plain
Talk® explanations along
the way. Reading the prospectus will help you decide whether the Fund is the
right investment for you. We suggest that you keep this prospectus for future
reference.
symbol throughout
the prospectus. It is used to mark detailed information about the more
significant risks that you would confront as a Fund shareholder. To highlight
terms and concepts important to mutual fund investors, we have provided Plain
Talk® explanations along
the way. Reading the prospectus will help you decide whether the Fund is the
right investment for you. We suggest that you keep this prospectus for future
reference.Share
Class Overview
The Fund offers two
separate classes of shares: Investor Shares and Admiral Shares.
Both share classes
offered by the Fund have the same investment objective, strategies, and
policies. However, different share classes have different expenses; as a result,
their investment returns will differ.
|
Plain
Talk About Fund Expenses |
|
All mutual
funds have operating expenses. These expenses, which are
deducted
from a fund’s gross income, are expressed as a percentage of the
net assets
of the fund. Assuming that operating expenses remain as stated
in the
Fees and Expenses section, Vanguard High-Yield Corporate Fund’s
expense
ratios would be as follows: for Investor Shares, 0.23%, or $2.30 per
$1,000 of
average net assets; for Admiral Shares, 0.13%, or $1.30 per
$1,000 of
average net assets. The average expense ratio for high yield funds
in 2022
was 0.95%, or $9.50 per $1,000 of average net assets (derived from
data
provided by Lipper, a Thomson Reuters Company, which reports on the
mutual
fund industry). |
7
|
Plain
Talk About Costs of Investing |
|
Costs
are an important consideration in choosing a mutual fund. That is
because
you, as a shareholder, pay a proportionate share of the costs of
operating
a fund and any transaction costs incurred when the fund buys or
sells
securities. These costs can erode a substantial portion of the gross
income
or the capital appreciation a fund achieves. Even seemingly small
differences
in expenses can, over time, have a dramatic effect on a
fund’s
performance. |
The following
sections explain the principal investment strategies and policies that the Fund
uses in pursuit of its investment objective. The Fund's board of trustees, which
oversees the Fund's management, may change investment strategies or policies in
the interest of shareholders without a shareholder vote, unless those strategies
or policies are designated as fundamental. Note that the Fund’s investment
objective is not fundamental and may be changed without a shareholder vote. The
Fund may change its 80% policy only upon 60 days’ notice to
shareholders.
Market
Exposure
The Fund invests
primarily in a diversified group of high-yielding, higher-risk corporate
bonds—commonly known as “junk bonds”—with medium- and lower-range credit quality
ratings. The Fund also invests in fixed and floating rate loans of medium- to
lower-range credit quality. The Fund’s high-yield bonds and loans mostly have
short- and intermediate-term maturities. As a result of this investment
strategy, the Fund is subject to certain risks.
8
|
Plain
Talk About High-Yield Bonds |
|
High-yield
bonds, or “junk bonds,” are issued by companies or other entities
whose
ability to pay interest and principal on the debt in a timely manner is
considered
questionable. Such bonds are rated “below investment-grade” by
independent
rating agencies and are considered speculative. Because they
have
greater credit risk than investment-grade bonds, similar maturity
high-yield
bonds typically must pay more interest to attract investors. Some
high-yield
bonds are issued by smaller, less-seasoned companies, while
others
are issued as part of a corporate restructuring, such as an acquisition,
a
merger, or a leveraged buyout. Some high-yield bonds were once rated as
investment-grade
but have been downgraded to junk bond status because of
financial
difficulties experienced by their issuers. Conversely, an issuer’s
improving
financial condition may result in an upgrading of its junk bonds to
investment-grade
status. |
Because
of its significant investments in junk bonds and loans, the Fund is subject to
high credit risk, which is the chance that a bond or loan issuer will fail to
pay interest or principal in a timely manner or that negative perceptions of the
issuer’s ability to make such payments will cause the price of that bond or loan
to decline.
For more
information about credit risk, see Security
Selection.
The
Fund is subject to interest rate risk, which is the chance that bond or loan
prices overall will decline because of rising interest rates. Interest rate risk
should be moderate for the Fund because it invests primarily in short and
intermediate-term bonds, whose prices are less sensitive to interest rate
changes than are the prices of long-term bonds.
Although fixed
income securities (commonly referred to as bonds) are often thought to be less
risky than stocks, there have been periods when bond prices have fallen
significantly because of rising interest rates. For instance, prices of
long-term bonds fell by almost 48% between December 1976 and September
1981.
To illustrate the
relationship between bond prices and interest rates, the following table shows
the effect of a 1% and a 2% change (both up and down) in interest rates on the
values of three noncallable bonds (i.e., bonds that cannot be redeemed by the
issuer) of different maturities, each with a face value of $1,000.
9
How
Interest Rate Changes Affect the Value of a $1,000 Bond1
|
Type
of Bond (Maturity) |
After
a 1%
Increase |
After
a 1%
Decrease |
After
a 2%
Increase |
After
a 2%
Decrease |
|
Short-Term
(2.5 years) |
$977 |
$1,024 |
$954 |
$1,049 |
|
Intermediate-Term
(10 years) |
922 |
1,086 |
851 |
1,180 |
|
Long-Term
(20 years) |
874 |
1,150 |
769 |
1,328 |
1 Assuming a
4% coupon rate.
These figures are
for illustration only; you should not regard them as an indication of future
performance of the bond market as a whole or the Fund in particular.
|
Plain
Talk About Bonds and Interest Rates |
|
As
a rule, when interest rates rise, bond prices fall. The opposite is also
true:
Bond
prices go up when interest rates fall. Why do bond prices and interest
rates
move in opposite directions? Let’s assume that you hold a bond
offering
a 4% yield. A year later, interest rates are on the rise and bonds of
comparable
quality and maturity are offered with a 5% yield. With
higher-yielding
bonds available, you would have trouble selling your 4% bond
for
the price you paid—you would probably have to lower your asking price.
On
the other hand, if interest rates were falling and 3% bonds were being
offered,
you should be able to sell your 4% bond for more than you
paid. |
Changes in interest
rates can affect bond income as well as bond
prices.
The
Fund is subject to income risk, which is the chance that the Fund’s income will
decline because of falling interest rates. A fund‘s income declines when
interest rates fall because the fund then must invest new cash flow and cash
from maturing bonds in lower-yielding bonds. Income risk should be moderate to
high for the Fund, so investors should expect the Fund‘s monthly income to
fluctuate accordingly.
10
|
Plain
Talk About Bond Maturities |
|
A
bond is issued with a specific maturity date—the date when the issuer
must
pay back the bond’s principal (face value). Bond maturities range from
less
than 1 year to more than 30 years. Typically, the longer a bond’s
maturity,
the
more price risk you, as a bond investor, will face as interest rates
rise—but
also the higher the potential yield you could receive. Longer-term
bonds
are generally more suitable for investors willing to take a greater risk
of
price fluctuations to get higher and more stable interest income.
Shorter-term
bond investors should be willing to accept lower yields and
greater
income variability in return for less fluctuation in the value of their
investment.
The stated maturity of a bond may differ from the effective
maturity
of a bond, which takes into consideration that an action such as a
call
or refunding may cause bonds to be repaid before their stated
maturity
dates. |
Although falling
interest rates tend to strengthen bond prices, they can cause other problems for
bond fund investors—bond calls and prepayments.
The
Fund is subject to call risk, which is the chance that during periods of falling
interest rates, issuers of callable bonds may call (redeem) securities with
higher coupon rates or interest rates before their maturity dates. The Fund
would then lose any price appreciation above the bond’s call price and would be
forced to reinvest the unanticipated proceeds at lower interest rates, resulting
in a decline in the Fund’s income. Such redemptions and subsequent reinvestments
would also increase the Fund’s portfolio turnover rate. Call risk should be high
for the Fund because of the high percentage of callable
bonds.
The
Fund is subject to extension risk, which is the chance that during periods of
rising interest rates, certain debt securities will be paid off substantially
more slowly than originally anticipated, and the value of those securities may
fall. Extension risk should be low to moderate for the Fund.
11
|
Plain
Talk About Callable Bonds |
|
Although
bonds are issued with clearly defined maturities, in some cases the
bond
issuer has a right to call in (redeem) the bond earlier than its maturity
date.
When a bond is called, the bondholder may have to replace it with
another
bond with a lower yield than the original bond. One way for bond
investors
to protect themselves against call risk is to purchase a bond early
in
its lifetime, long before its call date. Another way is to buy bonds with
lower
coupon rates or interest rates, which make them less likely to
be
called. |
Market disruptions
can adversely affect local and global markets as well as normal market
conditions and operations. Any such disruptions could have an adverse impact on
the value of the Fund's investments and Fund performance.
Security
Selection
The Fund uses multiple investment
advisors. Each advisor independently selects and maintains a portfolio of
investments for the Fund.
Wellington Management uses a
process that combines bottom-up fundamental research with top-down strategy,
comprehensive risk management, and a long-term investment horizon. The portfolio
managers establish sector allocation, duration, and risk guidelines and use
Wellington Management’s in-house fixed income credit analysts for bottom-up
analysis and security recommendations. The analysis focuses on the nature of a
company’s business, its strategy, and the quality of its management to identify
companies whose prospects are stable or improving and whose bonds offer an
attractive yield. Companies with improving prospects are normally more
attractive because they offer better assurance of debt repayment and greater
potential for capital appreciation. Final buy/sell decisions are made by the
portfolio managers based on relative valuation and fundamental credit
research.
Vanguard’s actively managed fixed
income funds use a portfolio manager-driven process that combines bottom-up
fundamental research with top-down strategy. Vanguard’s high-yield team
leverages the insights of Vanguard’s Global Rates and Credit teams to develop
the outlook for the high-yield sector, while dedicated portfolio managers,
traders, and credit analysts are responsible for bottom-up analysis and security
recommendations. Security selection decisions are
based on a proprietary assessment of issuers and securities to identify
companies with sustainable cash flows and capital structures and minimize or
avoid excess credit losses and defaults over a market cycle. Risk optimization
measures are present throughout the investment process, and the Fixed Income
Group’s Senior
12
Investment Committee provides
governance and oversight. Securities are bought and sold based on the portfolio
manager’s judgements about a security’s fundamentals, technical
factors, valuation, and contribution to the overall
portfolio while controlling for downside risk.
The
Fund is subject to manager risk, which is the chance that poor security
selection will cause the Fund to underperform relevant benchmarks or other funds
with a similar investment objective.
The Fund invests at
least 80% of its assets in corporate bonds that are rated below Baa by Moody‘s;
have an equivalent rating by any other independent bond rating agency; or, if
unrated, are determined to be of comparable quality by the Fund’s
advisor.
The Fund may not
invest more than 20% of its assets in any of the following, in the aggregate:
bonds that are rated less than B or the equivalent, convertible securities,
preferred stocks, and fixed and floating rate loans of medium- to lower-range
credit quality. The loans in which the Fund may invest will be rated Baa or
below by Moody’s or will have an equivalent rating by any other independent bond
rating agency. If unrated, a loan must be, in the advisor’s opinion, comparable
to those ratings. The Fund’s loans will include secondary assignments of fully
collateralized, unsubordinated, and fixed or floating rate loans made by banks
or other financial institutions to corporations and other entities in connection
with leveraged buyout transactions or other financing transactions.
The Fund may invest
up to 10% of its assets in trust-preferred securities, which are preferred
securities issued by a special purpose trust that holds subordinated debt of the
trust’s corporate parent. The interest received by the trust from the debt
issued by the corporate parent is distributed to the holders of the
trust-preferred securities. A trust-preferred security has characteristics of
both a debt and an equity security and generally will have the same risks as
these types of securities, including market, credit, interest rate, and call
risks. Trust-preferred securities typically are subordinated to the bonds and
other obligations of the parent company and, therefore, may be subject to
greater credit risk than such bonds and obligations.
The Fund may invest
up to 20% of its assets in government securities and/or bonds that are rated Baa
or above by Moody’s; have an equivalent rating by any other independent bond
rating agency; or, if unrated, are determined to be of comparable quality by the
Fund’s advisor. These are commonly referred to as investment-grade
securities.
13
The Fund will only
invest in bonds and loans that, at the time of initial investment, are rated Caa
or above by Moody‘s; have an equivalent rating by any other independent bond
rating agency; or, if unrated, are determined to be of comparable quality by the
Fund’s advisor.
In the past, the
Fund has not invested in non-cash-flow-producing high-yield bonds, such as
zero-coupon bonds (which pay interest only at maturity) or payment-in-kind bonds
(which pay interest in the form of additional securities). Although it has no
present plans to do so, the Fund may invest up to 5% of its assets in such bonds
in the future.
The Fund may invest
in international dollar-denominated bonds, which are denominated in U.S. dollars
and are issued by foreign governments, government agencies, and companies. The
Fund’s ownership of foreign bonds subjects it to country risk, which is the
chance that world events—such as political upheaval, financial troubles, or
natural disasters—will adversely affect the value and/or liquidity of securities
issued by governments, government agencies, and companies in foreign countries.
Because the bond’s value is designated in dollars rather than in the currency of
the issuer’s country, the Fund is not exposed to currency risk; rather, the
issuer assumes the risk, usually to attract U.S. investors.
The Fund may also
invest in foreign currency bonds, which are bonds denominated in the local
currency of a non-U.S. country and issued by foreign governments, government
agencies, and companies. To the extent that the Fund owns foreign currency
bonds, it intends to hedge its foreign currency exposure to those bonds back to
the U.S. dollar. In addition to country risk, the Fund is subject to currency
hedging risk. Currency hedging risk is the risk that the currency hedging
transactions entered into by the Fund may not perfectly offset the Fund’s
foreign currency exposure.
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 Fund’s securities
may change after they are purchased, and this may cause the amount of the Fund’s
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.
14
|
Plain
Talk About Credit Quality |
|
A
bond’s credit quality rating is an assessment of the issuer’s ability to
pay
interest
on the bond and, ultimately, to repay the principal. The lower the
credit
quality, the greater the perceived chance that the bond issuer will
default,
or fail to meet its payment obligations. All things being equal, the
lower
a bond’s credit quality, the higher its yield should be to compensate
investors
for assuming additional risk. |
Bonds
that are rated below Baa by Moody‘s or have an equivalent rating, such as those
held by the Fund, are classified as non-investment-grade. These bonds carry a
high degree of risk and are considered speculative by the major rating
agencies.
Credit quality in the high-yield
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks posed by a particular
high-yield bond. For these reasons, it is the Fund's policy not to rely
primarily on ratings issued by established credit rating agencies but to use
these ratings in conjunction with the advisors’ own independent and ongoing
review of credit quality.
As of January 31, 2023, the Fund’s
holdings had the following credit quality characteristics:
|
Credit
Quality |
Percentage
of Fund’s Net Assets1
|
|
Aaa |
7.9% |
|
Aa |
0.0 |
|
A |
0.1 |
|
Baa |
5.8 |
|
Ba |
43.9 |
|
B |
36.7 |
|
Caa |
3.6 |
|
Ca |
0.0 |
|
C |
0.0 |
|
NR |
2.0 |
1 Due to rounding and/or temporary cash investments, the total percentage may not be equal to 100%.
15
To minimize credit risk, the Fund
normally diversifies its holdings among debt of at least 100 issuers,
representing many industries. As of January 31, 2023, the Fund held debt of 343
issuers. This diversification should lessen the negative impact on the Fund of a
particular issuer’s failure to pay either principal or interest.
The
Fund is subject to liquidity risk, which is the chance that the Fund may not be
able to sell a security in a timely manner at a desired
price.
Corporate bonds are
traded among dealers and brokers that connect buyers with sellers. Liquidity in
the corporate bond market may be challenged depending on overall economic
conditions and credit tightening. There may be little trading in the secondary
market for particular bonds and other debt securities, which may make them more
difficult to value or sell.
Other
Investment Policies and Risks
In addition to
investing in junk bonds, the Fund may make other kinds of investments to achieve
its investment objective.
The Fund may
invest, to a limited extent, in derivatives. Generally speaking, a derivative is
a financial contract whose value is based on the value of a financial asset
(such as a stock, a bond, or a currency), a physical asset (such as gold, oil,
or wheat), a market index, or a reference rate. 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 to 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 attractively 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.
• Hedge foreign
currency exposure.
• Hedge foreign
interest rate exposure.
The Fund's
derivative investments may include fixed income futures contracts; fixed income
options, including options on swaps; currency swaps; foreign currency exchange
forwards; interest rate swaps; total return swaps; credit default swaps; or
other derivatives. Losses (or gains) involving futures contracts
16
can sometimes be
substantial—in part because a relatively small price movement in a futures
contract may result in an immediate and substantial loss (or gain) for a fund.
Similar risks exist for other types of derivatives.
The Fund may enter
into foreign currency exchange forward contracts, which are a type of
derivative. A foreign currency exchange forward contract is an agreement to buy
or sell a currency at a specific price on a specific date, usually 30, 60, or 90
days in the future. In other words, the contract guarantees an exchange rate on
a given date. Advisors of funds that invest in foreign securities can use these
contracts to guard against unfavorable changes in currency exchange rates. These
contracts, however, would not prevent the Fund’s securities from falling in
value as a result of risks other than unfavorable currency exchange
movements.
The Vanguard Group, Inc. (Vanguard)
administers a small portion of the Fund's assets to facilitate cash flows to and
from the Fund's advisors. The Fund may invest these assets in equity futures,
which are a type of derivative, and/or shares of exchange-traded funds (ETFs),
including Vanguard equity ETF Shares. These equity futures and ETFs typically
provide returns similar to those of common stocks. The Fund may also purchase
futures or ETFs when doing so will reduce the Fund's transaction costs 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.
|
Plain
Talk About Derivatives |
|
Derivatives
can take many forms. Some forms of derivatives—such as
exchange-traded
futures and options on securities, commodities, or
indexes—have
been trading on regulated exchanges for decades. These
types
of derivatives are standardized contracts that can easily be bought and
sold
and whose market values are determined and published daily. On the
other
hand, non-exchange-traded derivatives—such as certain swap
agreements
and foreign currency exchange forward contracts—tend to be
more
specialized or complex and may be more difficult to accurately
value.
|
17
Cash
Management
The Fund's daily
cash balance may be invested in Vanguard Market Liquidity Fund and/or Vanguard
Municipal Cash Management Fund (each, a CMT Fund), which are low-cost money
market 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.
Redemption
Requests
Methods used to
meet redemption requests. Under normal circumstances, the
Fund typically expects to meet redemptions with positive cash flows. When this
is not an option, the Fund seeks to maintain its risk exposure by selling a
cross section of the Fund’s holdings to meet redemptions, while also factoring
in transaction costs. Additionally, the Fund may work with larger clients to
implement their redemptions in a manner that is least disruptive to the
portfolio; see “Potentially disruptive redemptions” under Redeeming
Shares in the
Investing With
Vanguard
section.
Under certain
circumstances, including under stressed market conditions, there are additional
tools that the Fund may use in order to meet redemptions, including advancing
the settlement of market trades with counterparties to match investor redemption
payments or delaying settlement of an investor’s transaction to match trade
settlement within regulatory requirements. The Fund may also suspend payment of
redemption proceeds for up to seven days; see “Emergency circumstances” under
Redeeming
Shares
in the Investing
With Vanguard section.
Additionally under these unusual circumstances, 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.
Potential
redemption activity impacts. At times, the Fund may experience
adverse effects when certain large shareholders, or multiple shareholders
comprising significant ownership of the Fund, redeem large amounts of shares of
the Fund. Large redemptions may cause the Fund to sell portfolio securities at
times when it would not otherwise do so. This may result in the Fund
distributing capital gains or other taxable income to non-redeeming
shareholders. Large redemptions may also increase the Fund's transaction costs.
Redemption activity can occur for many reasons, including shareholder reactions
to market movements or other events unrelated to Vanguard’s actions, or when
Vanguard makes product changes that, for example, may result in a shareholder
redeeming shares of the Fund to purchase shares of another similar fund or
investment vehicle. When experiencing large redemptions, the Fund
18
reserves the right to pay all or
part of the redemption in-kind and/or delay payment of the redemption proceeds
for up to seven calendar days; see “Potentially disruptive redemptions” under
Redeeming
Shares in the
Investing With
Vanguard
section.
Temporary
Investment Measures
The Fund may temporarily depart
from its normal investment policies and strategies when an advisor believes that
doing so is in the Fund's best interest, so long as the strategy or policy
employed is consistent with the Fund's investment objective. For instance, the
Fund may invest beyond its normal limits in derivatives or exchange-traded funds
that are consistent with the Fund's investment objective when those instruments
are more favorably priced or provide needed liquidity, as might be the case if
the Fund is transitioning assets from one advisor to another or receives large
cash flows that it cannot prudently invest immediately.
In addition, the
Fund may take temporary defensive positions that are inconsistent with its
normal investment policies and strategies—for instance, by allocating
substantial assets to cash equivalent investments, U.S. Treasury securities, or
other less volatile instruments—in response to adverse or unusual market,
economic, political, or other conditions. Such conditions could include a
temporary decline in the availability of corporate bonds rated below Baa by
Moody’s or bonds that have an equivalent rating by any other independent bond
rating agency. In doing so, the Fund may succeed in avoiding losses but may
otherwise fail to achieve its investment objective.
Frequent
Trading or Market-Timing
Background.
Some
investors try to profit from strategies involving frequent trading of mutual
fund shares, such as market-timing. For funds holding foreign securities,
investors may try to take advantage of an anticipated difference between the
price of the fund’s shares and price movements in overseas markets, a practice
also known as time-zone arbitrage. Investors also may try to engage in frequent
trading of funds holding investments such as small-cap stocks and high-yield
bonds. As money is shifted into and out of a fund by a shareholder engaging in
frequent trading, the fund incurs costs for buying and selling securities,
resulting in increased brokerage and administrative costs. These costs are borne
by all fund shareholders,
including the long-term investors who do not generate the costs. In addition,
frequent trading may interfere with an advisor’s ability to efficiently manage
the fund.
Policies
to address frequent trading. The Vanguard funds
(other than money market funds and short-term bond funds, but including Vanguard
Short-Term Inflation-Protected Securities Index Fund) do not knowingly
accommodate
19
frequent trading.
The board of trustees of each Vanguard fund (other than money market funds and
short-term bond funds, but including Vanguard Short-Term Inflation-Protected
Securities Index Fund) has adopted policies and procedures reasonably designed
to detect and discourage frequent trading and, in some cases, to compensate the
fund for the costs associated with it. These policies and procedures do not
apply to ETF Shares because frequent trading in ETF Shares generally does not
disrupt portfolio management or otherwise harm fund shareholders. Although there
is no assurance that Vanguard will be able to detect or prevent frequent trading
or market-timing in all circumstances, the following policies have been adopted
to address these issues:
• Each Vanguard
fund reserves the right to reject any purchase request—including exchanges from
other Vanguard funds—without notice and regardless of size. For example, a
purchase request could be rejected because the investor has a history of
frequent trading or if Vanguard determines that such purchase may negatively
affect a fund’s operation or performance.
• Each Vanguard
fund (other than money market funds and short-term bond funds, but including
Vanguard Short-Term Inflation-Protected Securities Index Fund) generally
prohibits, except as otherwise noted in the Investing
With Vanguard section, an
investor’s purchases or exchanges into a fund account for 30 calendar days after
the investor has redeemed or exchanged out of that fund account.
• Certain Vanguard
funds charge shareholders purchase and/or redemption fees on
transactions.
See the
Investing
With Vanguard section of this
prospectus for further details on Vanguard’s transaction policies.
Each Vanguard fund
(other than retail and government money market funds), in determining its net
asset value, will use fair-value pricing when appropriate, as described in the
Share
Price
section. Fair-value pricing may reduce or eliminate the profitability of certain
frequent-trading strategies.
Do
not invest with Vanguard if you are a market-timer.
A precautionary
note to investment companies: The Fund's are issued by
registered investment companies, 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.
20
Turnover
Rate
Although the Fund
generally seeks to invest for the long term, it may sell securities regardless
of how long they have been held. The Financial
Highlights
section of this
prospectus shows historical turnover rates for the Fund. A turnover rate of
100%, for example, would mean that the Fund had sold and replaced securities
valued at 100% of its net assets within a one-year period. In general, the
greater the turnover rate, the greater the impact transaction costs will have on
a fund’s return. Also, funds with high turnover rates may be more likely to
generate capital gains, including short-term capital gains, that must be
distributed to shareholders and will be taxable to shareholders investing
through a taxable account.
The
Fund and Vanguard
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.
|
Plain
Talk About Vanguard’s Unique Corporate Structure |
|
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 parties—either public or
private
stockholders—and not by the funds they
serve. |
Investment
Advisors
Wellington
Management Company LLP, 280 Congress Street, Boston, MA 02210, a Delaware
limited liability partnership, is an investment counseling firm that provides
investment services to investment companies, employee benefit plans, endowments,
foundations, and other institutions. Wellington Management and its predecessor
organizations have provided investment advisory services for over 80 years.
Wellington Management is owned by the
21
partners of Wellington Management
Group LLP, a Massachusetts limited liability partnership. As of January 31,
2023, Wellington Management and its investment advisory affiliates had
investment management authority with respect to approximately $1.2 trillion in
client assets.
The Fund pays Wellington Management
a fee, which is paid quarterly and is a percentage of average daily net assets
under management during the most recent fiscal quarter. The fee has breakpoints,
which means that the percentage declines as assets go up.
The Vanguard Group, Inc., P.O. Box
2600, Valley Forge, PA 19482, which began operations in 1975, serves as advisor
to the Fund through its Fixed Income Group. As of January 31, 2023, Vanguard
served as advisor for approximately $6.3 trillion in assets. Vanguard provides
investment advisory services to the Fund pursuant to the Funds’ Service
Agreement and subject to the supervision and oversight of the trustees and
officers of the Fund.
For the fiscal year ended January
31, 2023, the advisory fee represented an effective annual rate of 0.03% of the
Fund’s average net assets.
Although the Fund is managed in
part by Vanguard and in part by Wellington Management, the Fund reserves the
right to utilize a different manager approach in the future. Under the terms of
an SEC exemption, the Fund's board of trustees 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 advisor—either as a
replacement for an existing advisor or as an additional advisor. Any significant
change in the Fund's advisory arrangements will be communicated to shareholders
in writing. As the Fund's sponsor and overall manager, Vanguard may provide
investment advisory services to the Fund at any time. Vanguard may also
recommend to the board of trustees 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 a similar 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.
For a discussion of
why the board of trustees approved the Fund's investment advisory agreement, see
the most recent semiannual report to shareholders covering the fiscal period
ended July 31.
The managers primarily responsible
for the day-to-day management of the Fund are:
22
Michael L.
Hong, CFA, Senior
Managing Director and Fixed Income Portfolio Manager of Wellington Management.
He has worked in investment management since 1997, has managed the Fund since 2008,
and has co-managed a portion of the Fund since 2022. Education: A.B., Harvard
College.
Elizabeth H.
Shortsleeve, Senior
Managing Director and Fixed Income Portfolio Manager of Wellington Management.
She has worked in investment management since 2007 and has co-managed a portion
of the Fund since 2022. Education: B.A., Georgetown University; M.B.A.,
Dartmouth College.
Michael
Chang, CFA, Portfolio
Manager at Vanguard. He has been with Vanguard since 2017, has worked in
investment management since 2002, has managed investment portfolios since 2011,
and has co-managed a portion of the Fund since 2022. Education: B. Com.,
University of British Columbia.
The Fund's Statement of
Additional Information
provides information about each portfolio manager’s compensation,
other accounts under management, and ownership of shares of the
Fund.
Dividends,
Capital Gains, and Taxes
Fund
Distributions
The Fund
distributes to shareholders virtually all of its net income (interest and
dividends less expenses) as well as any net short-term or long-term capital
gains realized from the sale of its holdings. From time to time, the Fund may
also make distributions that are treated as a return of capital. Income
dividends generally are declared daily and distributed monthly; capital gains
distributions, if any, generally occur annually in December. In addition, the
Fund may occasionally make a supplemental distribution at some other time during
the year.
You can receive
distributions of income or capital gains in cash, or you can have them
automatically reinvested in more shares of the Fund. However, if you are
investing through an employer-sponsored retirement or savings plan, your
distributions will be automatically reinvested in additional Fund
shares.
23
|
Plain
Talk About Distributions |
|
As
a shareholder, you are entitled to your portion of a fund’s income from
interest
and dividends as well as capital gains from the fund’s sale of
investments.
Income consists of both the dividends that the fund earns from
any
stock holdings and the interest it receives from any money market and
bond
investments. Capital gains are realized whenever the fund sells
securities
for higher prices than it paid for them. These capital gains are
either
short-term or long-term, depending on whether the fund held the
securities
for one year or less or for more than one
year. |
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 in December—if paid to you by the end of January—are 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 may vary considerably from year to year as a result of the Fund's
normal investment activities and cash flows.
• 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 or exchanging 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 or
exchange 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.
• Any conversion
between classes of shares of the same fund is a nontaxable
event.
By contrast, an exchange between classes of shares of different funds is a
taxable event.
24
• Vanguard (or your
intermediary) will send you a statement each year showing the tax status of all
of your distributions.
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 or exchange of Fund shares.
Income dividends
and capital gains distributions that you receive, as well as your gains or
losses from any sale or exchange of Fund shares, may be subject to state and
local income taxes. Depending on your state’s rules, however, any dividends
attributable to interest earned on direct obligations of the
U.S. government may be exempt from state and local taxes. Vanguard will notify
you each year how much, if any, of your dividends may qualify for this
exemption.
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 tax advisor for
detailed information about any tax consequences for you.
General
Information
Backup
withholding. By law, Vanguard
must withhold 24% of any taxable distributions or redemptions from your account
if you do not:
• Provide your
correct taxpayer identification number.
• Certify that the
taxpayer identification number is correct.
• Confirm that you
are not subject to backup withholding.
Similarly, Vanguard
(or your intermediary) must withhold taxes from your account if the IRS
instructs us to do so.
Foreign
investors. Vanguard funds
offered for sale in the United States (Vanguard U.S. funds), including the Fund
offered in this prospectus, are not widely available outside the United States.
Non-U.S. investors should be aware that U.S. withholding and estate taxes and
certain U.S. tax reporting requirements may apply to any investments in Vanguard
U.S. funds. Foreign investors should visit the non-U.S. investors page on our
website at vanguard.com for information on
Vanguard’s non-U.S. products.
Invalid
addresses. If an income
dividend distribution or capital gains distribution check mailed to your address
of record is returned as undeliverable, Vanguard will automatically reinvest the
distribution and all future distributions until you provide us with a valid
mailing address. Reinvestments will receive the net asset value calculated on
the date of the reinvestment.
25
Share
Price
Share price, also
known as net
asset value (NAV), is
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 Vanguard’s
discretion), generally 4 p.m., Eastern time. 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. On U.S.
holidays or other days when the NYSE is closed, the NAV is not calculated, and
the Fund does not sell or redeem shares. However, on those days the value of the
Fund’s 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).
Debt securities
held by a Vanguard fund are valued based on information furnished by an
independent pricing service or market quotations. When a fund determines that
pricing-service information or market quotations either are not readily
available or do not accurately reflect the value of a security, the security is
priced at its fair
value
(the amount that the owner might reasonably expect to receive upon the current
sale of the security).
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. The values of any mutual fund shares, including
institutional money market fund shares, held by a fund are based on the NAVs of
the shares. The values of any ETF shares or closed-end fund shares held by a
fund are based on the market value of the shares.
A fund also may use
fair-value pricing on bond market holidays when the fund is open for business
(such as Columbus Day and Veterans Day). Fair-value prices are determined by
Vanguard according to procedures adopted by the board of trustees. When
fair-value pricing is employed, the prices of securities used by a fund to
calculate the NAV may differ from quoted or published prices for the same
securities.
The Fund has 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 buy or sell fund shares
on its behalf. The Fund will be deemed to receive an
26
order when accepted by the
financial intermediary, its designee, or one of the Vanguard Funds of Funds, and
the order will receive the NAV next computed by the Fund after such
acceptance.
Vanguard fund share
prices are published daily on our website at vanguard.com/prices.
27
Financial
Highlights
Financial
highlights information is intended to help you understand a fund’s performance
for the past five years (or, if shorter, its period of operations). Certain
information reflects financial results for a single fund share. Total return
represents the rate that an investor would have earned or lost each period on an
investment in a fund or share class (assuming reinvestment of all
distributions). This information has been obtained from the financial statements
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, whose report, along with fund financial statements, is included
in a fund’s most recent annual report to shareholders. You may obtain a free
copy of a fund’s latest annual or semiannual report, which is available upon
request.
Vanguard
High-Yield Corporate Fund Investor Shares
|
|
Year Ended January
31, | ||||
|
For a
Share Outstanding Throughout Each Period |
2023 |
2022 |
2021 |
2020 |
2019 |
|
Net
Asset Value, Beginning of Period |
$5.77 |
$5.96 |
$5.94 |
$5.67 |
$5.91 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
.261 |
.238 |
.259 |
.302 |
.317 |
|
Net
Realized and Unrealized Gain (Loss) on Investments |
(.462) |
(.185) |
.034 |
.278 |
(.230) |
|
Total from
Investment Operations |
(.201) |
.053 |
.293 |
.580 |
.087 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(.269) |
(.243) |
(.273) |
(.310) |
(.327) |
|
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
— |
|
Total
Distributions |
(.269) |
(.243) |
(.273) |
(.310) |
(.327) |
|
Net
Asset Value, End of Period |
$5.30 |
$5.77 |
$5.96 |
$5.94 |
$5.67 |
|
Total
Return2 |
-3.37% |
0.84% |
5.22% |
10.45% |
1.61% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$3,041 |
$3,612 |
$3,877 |
$4,102 |
$3,557 |
|
Ratio of
Total Expenses to Average Net Assets |
0.23%3 |
0.23% |
0.23% |
0.23% |
0.23% |
|
Ratio of
Net Investment Income to Average Net Assets |
4.90% |
4.00% |
4.51% |
5.16% |
5.55% |
|
Portfolio
Turnover Rate |
36% |
31% |
38% |
28% |
21% |
|
|
|
|
1 |
Calculated
based on average shares outstanding. |
|
2 |
Total
returns do not include account service fees that may have applied in the
periods shown. Fund prospectuses
provide
information about any applicable account service
fees. |
|
3 |
The
ratio of expenses to average net assets for the period net of reduction
from custody fee offset arrangements
was
0.23%. |
28
Vanguard
High-Yield Corporate Fund Admiral Shares
|
|
Year Ended January
31, | ||||
|
For a
Share Outstanding Throughout Each Period |
2023 |
2022 |
2021 |
2020 |
2019 |
|
Net
Asset Value, Beginning of Period |
$5.77 |
$5.96 |
$5.94 |
$5.67 |
$5.91 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
.266 |
.244 |
.265 |
.308 |
.323 |
|
Net
Realized and Unrealized Gain (Loss) on Investments |
(.462) |
(.185) |
.033 |
.278 |
(.230) |
|
Total from
Investment Operations |
(.196) |
.059 |
.298 |
.586 |
.093 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(.274) |
(.249) |
(.278) |
(.316) |
(.333) |
|
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
— |
|
Total
Distributions |
(.274) |
(.249) |
(.278) |
(.316) |
(.333) |
|
Net
Asset Value, End of Period |
$5.30 |
$5.77 |
$5.96 |
$5.94 |
$5.67 |
|
Total
Return2 |
-3.27% |
0.94% |
5.32% |
10.55% |
1.71% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$20,573 |
$25,011 |
$24,798 |
$22,701 |
$19,285 |
|
Ratio of
Total Expenses to Average Net Assets |
0.13%3 |
0.13% |
0.13% |
0.13% |
0.13% |
|
Ratio of
Net Investment Income to Average Net Assets |
5.00% |
4.10% |
4.60% |
5.26% |
5.65% |
|
Portfolio
Turnover Rate |
36% |
31% |
38% |
28% |
21% |
|
|
|
|
1 |
Calculated
based on average shares outstanding. |
|
2 |
Total
returns do not include account service fees that may have applied in the
periods shown. Fund prospectuses
provide
information about any applicable account service
fees. |
|
3 |
The
ratio of expenses to average net assets for the period net of reduction
from custody fee offset arrangements
was
0.13%. |
29
Investing
With Vanguard
This section of the
prospectus explains the basics of doing business with Vanguard. Vanguard fund
shares can be held directly with Vanguard or indirectly through an intermediary,
such as a bank, a broker, or an investment advisor. If you hold Vanguard fund
shares directly with Vanguard, you should carefully read each topic within this
section that pertains to your relationship with Vanguard. If you hold Vanguard
fund shares indirectly through an intermediary (including shares held in a
brokerage account through Vanguard Brokerage Services®), please see
Investing
With Vanguard Through Other Firms, and also refer to
your account agreement with the intermediary for information about transacting
in that account. If you hold Vanguard fund shares through an employer-sponsored
retirement or savings plan, please see Employer-Sponsored
Plans.
Vanguard reserves the right to change the following policies without notice.
Please call or check online for current information. See Contacting
Vanguard.
For Vanguard fund
shares held directly with Vanguard, each fund you hold in an account is a
separate “fund account.” For example, if you hold three funds in a nonretirement
account titled in your own name, two funds in a nonretirement account titled
jointly with your spouse, and one fund in an individual retirement account, you
have six fund accounts—and this is true even if you hold the same fund in
multiple accounts. Note that each reference to “you” in this prospectus applies
to any one or more registered account owners or persons authorized to transact
on your account.
Purchasing
Shares
Vanguard reserves
the right, without notice, to increase or decrease the minimum amount required
to open, convert shares to, or maintain a fund account or to add to an existing
fund account.
Investment minimums
may differ for certain categories of investors.
Account
Minimums for Investor Shares
To
open and maintain an account.
$3,000.
To
add to an existing account. Generally
$1.
Account
Minimums for Admiral Shares
To
open and maintain an account. $50,000. If you
request Admiral Shares when you open a new account but the investment amount
does not meet the account minimum for Admiral Shares, your investment will be
placed in Investor Shares of the Fund. Financial intermediaries, institutional
clients, and Vanguard-advised clients should contact Vanguard for information on
special
30
eligibility rules
that may apply to them regarding Admiral Shares. If you are investing through an
intermediary, please contact that firm directly for more information regarding
your eligibility.
To
add to an existing account. Generally
$1.
How
to Initiate a Purchase Request
Be sure to check
Exchanging
Shares, Frequent-Trading Limitations, and Other
Rules You Should Know before placing
your purchase request.
Online. You may open
certain types of accounts, request a purchase of shares, and request an exchange
through our website or our mobile application if your account is eligible and
you are registered for online access.
By
telephone. You may call
Vanguard to begin the account registration process or request that the
account-opening forms be sent to you. You may also call Vanguard to request a
purchase of shares in your account or to request an exchange. See Contacting
Vanguard.
By
mail.
You may send Vanguard your account registration form and check to open a new
fund account. To add to an existing fund account, you may send your check with
an Invest-by-Mail form (from a transaction confirmation or your account
statement) or with a deposit slip (available online).
How
to Pay for a Purchase
By
electronic bank transfer. You may purchase
shares of a Vanguard fund through an electronic transfer of money from a bank
account. To establish the electronic bank transfer service on an account, you
must designate the bank account online, complete a form, or fill out the
appropriate section of your account registration form. After the service is set
up on your account, you can purchase shares by electronic bank transfer on a
regular schedule (Automatic Investment Plan), if eligible, or upon request. Your
purchase request can be initiated online (if you are registered for online
access), by telephone, or by mail.
By
wire.
Wiring instructions vary for different types of purchases. Please call Vanguard
for instructions and policies on purchasing shares by wire. See Contacting
Vanguard.
By
check.
You may make initial or additional purchases to your fund account by sending a
check with a deposit slip or by utilizing our mobile application if your account
is eligible and you are registered for online access. Also see How
to Initiate a Purchase Request. Make your check
payable to Vanguard and include the appropriate fund number (e.g., Vanguard—xx).
For a list of Fund numbers (for share classes in this prospectus), see
Additional
Information.
31
By
exchange. You may purchase
shares of a Vanguard fund using the proceeds from the simultaneous redemption of
shares of another Vanguard fund. You may initiate an exchange online (if you are
registered for online access), by telephone, or by mail with an exchange form.
See Exchanging
Shares.
Trade
Date
The trade date for
any purchase request received in good order will depend on the day and time
Vanguard receives your request, the manner in which you are paying, and the type
of fund you are purchasing. Your purchase will be executed using the NAV as
calculated on the trade date. NAVs are calculated only on days that the NYSE is
open for trading (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
Vanguard’s discretion), generally 4 p.m., Eastern time. The time selected for
NAV calculation in this rare event shall also serve as the conclusion of the
trading day. See Share
Price.
For purchases by
check into all funds
other than money market funds and for purchases by exchange, wire, or electronic
bank transfer into all funds: If
the purchase request is received by Vanguard on a business day before the close
of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date
for the purchase will be the same day. If the purchase request is received on a
business day after the close of regular trading on the NYSE, or on a nonbusiness
day, the trade date for the purchase will be the next business day.
For purchases by
check into money market
funds: If the purchase request is received by Vanguard on a business day before
the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the
trade date for the purchase will be the next business day. If the purchase
request is received on a business day after the close of regular trading on the
NYSE, or on a nonbusiness day, the trade date for the purchase will be the
second business day following the day Vanguard receives the purchase request.
Because money market instruments must be purchased with federal funds and it
takes a money market mutual fund one business day to convert check proceeds into
federal funds, the trade date for the purchase will be one business day later
than for other funds.
If applicable, orders by Vanguard
Funds of Funds will be treated as received by the Fund at the same time that
corresponding orders are received in proper form by the Vanguard Funds of
Funds.
If your purchase
request is not accurate and complete, it may be rejected. See Other
Rules You Should Know—Good Order.
32
For further
information about purchase transactions, consult our website at vanguard.com or see
Contacting
Vanguard.
Earning
Dividends
You generally begin
earning dividends on the business day following your trade date. When buying
money market fund shares through a federal funds wire on a business day,
however, you generally can begin earning dividends immediately by making a
purchase request by telephone to Vanguard before 10:45 a.m., Eastern time (2
p.m., Eastern time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30
p.m., Eastern time, for Vanguard Federal Money Market Fund).
Other
Purchase Rules You Should Know
Admiral
Shares. Admiral Shares
generally are not
available for
SIMPLE IRAs and Vanguard Individual 401(k) Plans.
Check
purchases. All purchase
checks must be written in U.S. dollars, be drawn on a U.S. bank, and be
accompanied by good order instructions. Vanguard does not accept cash,
traveler’s checks, starter checks, or money orders. In addition, Vanguard may
refuse checks that are not made payable to Vanguard.
New
accounts. We are required by
law to obtain from you certain personal information that we will use to verify
your identity. If you do not provide the information, we may not be able to open
your account. If we are unable to verify your identity, Vanguard reserves the
right, without notice, to close your account or take such other steps as we deem
reasonable. Certain types of accounts may require additional
documentation.
Refused
or rejected purchase requests. Vanguard reserves
the right to stop selling fund shares or to reject any purchase request at any
time and without notice, including, but not limited to, purchases requested by
exchange from another Vanguard fund. This also includes the right to reject any
purchase request because the investor has a history of frequent trading or
because the purchase may negatively affect a fund’s operation or
performance.
Large
purchases. Call Vanguard
before attempting to invest a large dollar amount.
No
cancellations. Vanguard will not
accept your request to cancel any purchase request once processing has begun.
Please be careful when placing a purchase request.
33
Converting
Shares
When a conversion
occurs, you receive shares of one class in place of shares of another class of
the same fund. At the time of conversion, the dollar value of the “new” shares
you receive equals the dollar value of the “old” shares that were converted. In
other words, the conversion has no effect on the value of your investment in the
fund at the time of the conversion. However, the number of shares you own after
the conversion may be greater than or less than the number of shares you owned
before the conversion, depending on the NAVs of the two share
classes.
Vanguard will not
accept your request to cancel any self-directed conversion request once
processing has begun. Please be careful when placing a conversion
request.
A conversion
between share classes of the same fund is a nontaxable
event.
Trade
Date
The trade date for
any conversion request received in good order will depend on the day and time
Vanguard receives your request. Your conversion will be executed using the NAVs
of the different share classes on the trade date. NAVs are calculated only on
days that the NYSE is open for trading (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 Vanguard’s discretion), generally 4 p.m., Eastern time. The time
selected for NAV calculation in this rare event shall also serve as the
conclusion of the trading day. See Share
Price.
For a conversion
request received by Vanguard on a business day before the close of regular
trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the
same day. For a conversion request received on a business day after the close of
regular trading on the NYSE, or on a nonbusiness day, the trade date will be the
next business day. See Other
Rules You Should Know.
Conversions
From Investor Shares to Admiral Shares
Self-directed
conversions. If your account
balance in the Fund is at least $50,000, you may ask Vanguard to convert your
Investor Shares to Admiral Shares at any time. You may request a conversion
through our website (if you are registered for online access), by telephone, or
by mail. Financial intermediaries, institutional clients, and Vanguard-advised
clients should contact Vanguard for
34
information on
special eligibility rules that may apply to them regarding Admiral Shares. See
Contacting
Vanguard. If you are
investing through an intermediary, please contact that firm directly for more
information regarding your eligibility.
Automatic
conversions. Vanguard conducts periodic reviews of account balances and may, if
your account balance in the Fund exceeds $50,000, automatically convert your
Investor Shares to Admiral Shares. You will be notified before an automatic
conversion occurs and will have an opportunity to instruct Vanguard not to
effect the conversion. Financial intermediaries, institutional clients, and
Vanguard-advised clients should contact Vanguard for information on special
eligibility rules that may apply to them regarding Admiral Shares. If you are
investing through an intermediary, please contact that firm directly for more
information regarding your eligibility.
Mandatory
Conversions to Investor Shares
If an account no
longer meets the balance requirements for Admiral Shares Vanguard may
automatically convert the shares in the account to Investor Shares. A decline in
the account balance because of market movement may result in such a conversion.
Vanguard will notify the investor in writing before any mandatory conversion
occurs.
Redeeming
Shares
How
to Initiate a Redemption Request
Be sure to check
Exchanging
Shares, Frequent-Trading Limitations, and Other
Rules You Should Know before placing
your redemption request.
Online. You may request a
redemption of shares or request an exchange through our website or our mobile
application if your account is eligible and you are registered for online
access.
By
telephone. You may call
Vanguard to request a redemption of shares or an exchange. See Contacting
Vanguard.
By
mail.
You may send a form (available online) to Vanguard to redeem from a fund account
or to make an exchange.
How
to Receive Redemption Proceeds
By
electronic bank transfer. You may have the
proceeds of a fund redemption sent directly to a designated bank account. To
establish the electronic bank transfer service on an account, you must designate
a bank account online, complete a form, or fill out the appropriate section of
your account registration form. After the service is set up on your account, you
can redeem shares by
35
electronic bank
transfer on a regular schedule (Automatic Withdrawal Plan), if eligible, or upon
request. Your redemption request can be initiated online (if you are registered
for online access), by telephone, or by mail.
By
wire.
To receive your proceeds by wire, you may instruct Vanguard to wire your
redemption proceeds ($100 minimum) to a previously designated bank account. To
establish the wire redemption service, you generally must designate a bank
account online, complete a form, or fill out the appropriate section of your
account registration form.
Please note that
Vanguard charges a $10 wire fee for outgoing wire redemptions. The fee is
assessed in addition to, rather than being withheld from, redemption proceeds
and is paid directly to the fund in which you invest. For example, if you redeem
$100 via a wire, you will receive the full $100, and the $10 fee will be
assessed to your fund account through an additional redemption of fund shares.
If you redeem your entire fund account, your redemption proceeds will be reduced
by the amount of the fee. The wire fee does not apply to accounts held by
Flagship and Flagship Select clients; accounts held through intermediaries,
including Vanguard Brokerage Services; or accounts held by institutional
clients.
By
exchange. You may have the
proceeds of a Vanguard fund redemption invested directly in shares of another
Vanguard fund. You may initiate an exchange online (if you are registered for
online access), by telephone, or by mail. See Exchanging
Shares.
By
check.
If you have not chosen another redemption method, Vanguard will mail you a
redemption check, generally payable to all registered account owners, normally
within two business days of your trade date, and generally to the address of
record.
Trade
Date
The trade date for
any redemption request received in good order will depend on the day and time
Vanguard receives your request and the manner in which you are redeeming. Your
redemption will be executed using the NAV as calculated on the trade date. NAVs
are calculated only on days that the NYSE is open for trading (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 Vanguard’s discretion), generally 4
p.m., Eastern time. The time selected for NAV calculation in this rare event
shall also serve as the conclusion of the trading day. See Share
Price.
36
For redemptions by
check,
exchange, or wire: If the redemption
request is received by Vanguard on a business day before the close of regular
trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the
same day. If the redemption request is received on a business day after the
close of regular trading on the NYSE, or on a nonbusiness day, the trade date
will be the next business day.
• Note on timing of
wire redemptions from money market funds: For telephone requests received by
Vanguard on a business day before 10:45 a.m., Eastern time (2 p.m., Eastern
time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30 p.m., Eastern
time, for Vanguard Federal Money Market Fund), the redemption proceeds generally
will leave Vanguard by the close of business the same day. For telephone
requests received by Vanguard on a business day after those cut-off times, or on
a nonbusiness day, and for all requests other than by telephone, the redemption
proceeds generally will leave Vanguard by the close of business on the next
business day.
• Note on timing of
wire redemptions from all other funds: For requests received by Vanguard on a
business day before the close of regular trading on the NYSE (generally 4 p.m.,
Eastern time), the redemption proceeds generally will leave Vanguard by the
close of business on the next business day. For requests received by Vanguard on
a business day after the close of regular trading on the NYSE, or on a
nonbusiness day, the redemption proceeds generally will leave Vanguard by the
close of business on the second business day after Vanguard receives the
request.
For redemptions by
electronic
bank transfer: If the redemption
request is received by Vanguard on a business day before the close of regular
trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the
same day. If the redemption request is received on a business day after the
close of regular trading on the NYSE, or on a nonbusiness day, the trade date
will be the next business day.
If your redemption
request is not accurate and complete, it may be rejected. If we are unable to
send your redemption proceeds by wire or electronic bank transfer because the
receiving institution rejects the transfer, Vanguard will make additional
efforts to complete your transaction. If Vanguard is still unable to complete
the transaction, we may send the proceeds of the redemption to you by check,
generally payable to all registered account owners, or use your proceeds to
purchase new shares of the fund from which you sold shares for the purpose of
the wire or electronic bank transfer transaction. See Other
Rules You Should Know—Good Order.
37
If your redemption
request is received in good order, we typically expect that redemption proceeds
will be paid by the Fund within one business day of the trade date; however, in
certain circumstances, investors may experience a longer settlement period at
the time of the transaction. For further information, see “Potentially
disruptive redemptions” and “Emergency circumstances.”
For further
information about redemption transactions, consult our website at vanguard.com or see
Contacting
Vanguard.
Earning
Dividends
You generally will
continue earning dividends until the first business day following your
redemption or exchange trade date.
Other
Redemption Rules You Should Know
Documentation
for certain accounts. Special
documentation may be required to redeem from certain types of accounts, such as
trust, corporate, nonprofit, or retirement accounts. Please call us before attempting to
redeem from these types of accounts.
Potentially
disruptive redemptions. Vanguard reserves
the right to pay all or part of a redemption in kind—that is, in the form of
securities—if we reasonably believe that a cash redemption would negatively
affect the fund’s operation or performance or that the shareholder may be
engaged in market-timing or frequent trading. Under these circumstances,
Vanguard also reserves the right to delay payment of the redemption proceeds for
up to seven calendar days. By calling us before you attempt to
redeem a large dollar amount, you may avoid in-kind or delayed payment of your
redemption. Please see Frequent-Trading
Limitations for information
about Vanguard’s policies to limit frequent trading.
Recently
purchased shares. Although you can
redeem shares at any time, proceeds may not be made available to you until the
fund collects payment for your purchase. This may take up to seven calendar days
for shares purchased by check or by electronic bank transfer. If you have
written a check on a fund in an account with checkwriting privileges, that check
may be rejected if your fund account does not have a sufficient available
balance.
Share
certificates. Share certificates
are no longer issued for Vanguard funds. Shares currently held in certificates
cannot be redeemed, exchanged, converted, or transferred (reregistered) until
you return the certificates (unsigned) to Vanguard by registered mail. For the
correct address, see Contacting
Vanguard.
Address
change. If you change your
address online or by telephone, there may be up to a 14-day restriction
(starting on the business day after your address is changed) on your ability to
request check redemptions online and by telephone.
38
You can request a
redemption in writing (using a form available online) at any time. Confirmations
of address changes are sent to both the old and new addresses.
Payment
to a different person or address. At your request,
we can make your redemption check payable, or wire your redemption proceeds, to
a different person or send it to a different address. However, this generally
requires the written consent of all registered account owners and may require
additional documentation, such as a signature guarantee or a notarized
signature. You may obtain a signature guarantee from some commercial or savings
banks, credit unions, trust companies, or member firms of a U.S. stock
exchange.
No
cancellations. Vanguard will not
accept your request to cancel any redemption request once processing has begun.
Please be careful when placing a redemption request.
Emergency
circumstances. Vanguard funds can
postpone payment of redemption proceeds for up to seven calendar days. In
addition, Vanguard funds can suspend redemptions and/or postpone payments of
redemption proceeds beyond seven calendar days at times when the NYSE is closed
or during emergency circumstances, as determined by the SEC.
Exchanging
Shares
An exchange occurs
when you use the proceeds from the redemption of shares of one Vanguard fund to
simultaneously purchase shares of a different Vanguard fund. You can make
exchange requests online (if you are registered for online access), by
telephone, or by mail. See Purchasing
Shares
and
Redeeming Shares.
If the NYSE is open
for regular trading (generally until 4 p.m., Eastern time, on a business day) at
the time an exchange request is received in good order, the trade date generally
will be the same day. See Other
Rules You Should Know—Good Order for additional
information on all transaction requests.
Vanguard will not
accept your request to cancel any exchange request once processing has begun.
Please be careful when placing an exchange request.
Call Vanguard
before attempting to exchange a large dollar amount. By calling us before you attempt to
exchange a large dollar amount, you may avoid delayed or rejected
transactions.
39
Please note that
Vanguard reserves the right, without notice, to revise or terminate the exchange
privilege, limit the amount of any exchange, or reject an exchange, at any time,
for any reason. See Frequent-Trading
Limitations for additional
restrictions on exchanges.
Frequent-Trading
Limitations
Because excessive
transactions can disrupt management of a fund and increase the fund’s costs for
all shareholders, the board of trustees of each Vanguard fund places certain
limits on frequent trading in the funds. Each Vanguard fund (other than money
market funds and short-term bond funds, but including Vanguard Short-Term
Inflation-Protected Securities Index Fund) limits an investor’s purchases or
exchanges into a fund account for 30 calendar days after the investor has
redeemed or exchanged out of that fund account. ETF Shares are not subject to
these frequent-trading limits.
For Vanguard
Retirement Investment Program pooled plans, the limitations apply to exchanges
made online or by telephone.
These
frequent-trading limitations do
not
apply to the following:
• Purchases of
shares with reinvested dividend or capital gains distributions.
• Transactions through Vanguard’s
Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service,
Automatic Withdrawal Plan, Required Minimum Distribution Service, Vanguard Small
Business Online®, and certain transactions through
intermediaries relating to systematic trades and required minimum
distributions.
• Discretionary transactions
through Vanguard Personal Advisor Services®, Vanguard Institutional Advisory
Services®, Vanguard Digital Advisor™, and
discretionary (advisor-directed) transactions through certain
intermediaries.
• Redemptions of
shares to pay fund or account fees.
• Redemptions of
shares to remove excess shareholder contributions to certain types of retirement
accounts (including, but not limited to, IRAs and Vanguard Individual 401(k)
Plans).
• Transfers and
reregistrations of shares within the same fund.
• Purchases of
shares by asset transfer or direct rollover.
• Conversions of
shares from one share class to another in the same fund.
• Checkwriting
redemptions.
• Section 529
college savings plans.
40
• Certain approved
institutional portfolios and asset allocation programs, as well as trades made
by funds or trusts managed by Vanguard or its affiliates that invest in other
Vanguard funds. (Please note that shareholders of Vanguard’s
funds of funds are subject to the
limitations.)
For participants in
employer-sponsored defined contribution plans,* the frequent-trading limitations
do
not
apply to:
• Purchases of
shares with participant payroll or employer contributions or loan
repayments.
• Purchases of
shares with reinvested dividend or capital gains distributions.
• Distributions,
loans, and in-service withdrawals from a plan.
• Redemptions of
shares as part of a plan termination or at the direction of the
plan.
• Transactions
executed through the Vanguard Managed Account Program.
• Redemptions of
shares to pay fund or account fees.
• Share or asset
transfers or rollovers.
• Reregistrations
of shares.
• Conversions of
shares from one share class to another in the same fund.
• Exchange requests
submitted by written request to Vanguard. (Exchange requests submitted by fax,
if otherwise permitted,
are
subject to the limitations.)
* The following
Vanguard fund accounts are subject to the frequent-trading limitations:
SEP-IRAs, SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, and
Vanguard Individual 401(k) Plans.
Accounts
Held by Institutions (Other Than Defined Contribution Plans)
Vanguard will
systematically monitor for frequent trading in institutional clients’ accounts.
If we detect suspicious trading activity, we will investigate and take
appropriate action, which may include applying to a client’s accounts the 30-day
policy previously described, prohibiting a client’s purchases of fund shares,
and/or revoking the client’s exchange privilege.
Accounts
Held by Intermediaries
When intermediaries
establish accounts in Vanguard funds for the benefit of their clients, we cannot
always monitor the trading activity of the individual clients. However, we
review trading activity at the intermediary (omnibus) level, and if we detect
suspicious activity, we will investigate and take appropriate action. If
necessary, Vanguard may prohibit additional purchases of fund shares
41
by an intermediary,
including for the benefit of certain of the intermediary’s clients.
Intermediaries also may monitor their clients’ trading activities with respect
to Vanguard funds.
For those Vanguard
funds that charge purchase and/or redemption fees, intermediaries will be asked
to assess these fees on client accounts and remit these fees to the funds. The
application of purchase and redemption fees and frequent-trading limitations may
vary among intermediaries. There are no assurances that Vanguard will
successfully identify all intermediaries or that intermediaries will properly
assess purchase and redemption fees or administer frequent-trading limitations.
If you invest with Vanguard through an intermediary, please read that firm’s
materials carefully to learn of any other rules or fees that may
apply.
Other
Rules You Should Know
Prospectus
and Shareholder Report Mailings
When two or more
shareholders have the same last name and address, just one summary prospectus
(or prospectus) and/or shareholder report may be sent in an attempt to eliminate
the unnecessary expense of duplicate mailings. You may request individual
prospectuses and reports by contacting our Client Services Department in
writing, by telephone, or online. See Contacting
Vanguard.
Vanguard.com
Registration. If you are a
registered user of vanguard.com, you can review
your account holdings; buy, sell, or exchange shares of most Vanguard funds; and
perform most other transactions through our website. You must register for this
service online.
Electronic
delivery. Vanguard can
deliver your account statements, transaction confirmations, prospectuses,
certain tax forms, and shareholder reports electronically. If you are a
registered user of vanguard.com, you can consent
to the electronic delivery of these documents by logging on and changing your
mailing preferences under “Account Maintenance.” You can revoke your electronic
consent at any time through our website, and we will begin to send paper copies
of these documents within 30 days of receiving your revocation.
Telephone
Transactions
Automatic. When we set up
your account, we will automatically enable you to do business with us by
telephone, unless
you instruct us otherwise in writing.
42
Proof
of a caller’s authority. We reserve the
right to refuse a telephone request if the caller is unable to provide the
requested information or if we reasonably believe that the caller is not an
individual authorized to act on the account. Before we allow a caller to act on
an account, we may request the following information:
• Authorization to
act on the account (as the account owner or by legal documentation or other
means).
• Account
registration and address.
• Fund name and
account number, if applicable.
• Other information
relating to the caller, the account owner, or the account.
Good
Order
We reserve the
right to reject any transaction instructions that are not in “good order.” Good
order generally means that your instructions:
• Are provided by
the person(s) authorized in accordance with Vanguard’s policies and procedures
to access the account and request transactions.
• Include the fund
name and account number.
• Include the
amount of the transaction (stated in dollars, shares, or
percentage).
Written
instructions also must generally be provided on a Vanguard form and
include:
• Signature(s) and
date from the authorized person(s).
• Signature
guarantees or notarized signatures, if required for the type of transaction.
(Call Vanguard for specific requirements.)
• Any supporting
documentation that may be required.
Good order
requirements may vary among types of accounts and transactions. For more
information, consult our website at vanguard.com or see
Contacting
Vanguard.
Vanguard reserves
the right, without notice, to revise the requirements for good
order.
Future
Trade-Date Requests
Vanguard does not
accept requests to hold a purchase, conversion, redemption, or exchange
transaction for a future date. All such requests will receive trade dates as
previously described in Purchasing
Shares, Converting Shares, Redeeming Shares, and Exchanging
Shares. Vanguard reserves
the right to return future-dated purchase checks.
43
Accounts
With More Than One Owner
If an account has
more than one owner or authorized person, Vanguard generally will accept
instructions from any one owner or authorized person.
Responsibility
for Fraud
You should take
precautions to protect yourself from fraud. Keep your account-related
information private, and review any account confirmations, statements, or other
information that we provide to you as soon as you receive them. Let us know
immediately if you discover unauthorized activity or see something on your
account that you do not understand or that looks unusual.
Vanguard will not
be responsible for losses that result from transactions by a person who we
reasonably believe is authorized to act on your account.
Uncashed
Checks
Please cash your
distribution or redemption checks promptly. Vanguard will not pay interest on
uncashed checks. Vanguard may be required to transfer assets related to uncashed
checks to a state under the state’s abandoned property law.
Dormant
Accounts
If your account has
no activity in it for a period of time, Vanguard may be required to transfer it
to a state under the state’s abandoned property law, subject to potential
federal or state withholding taxes.
Unusual
Circumstances
If you experience
difficulty contacting Vanguard online or by telephone, you can send us your
transaction request on a Vanguard form by regular or express mail.
Investing
With Vanguard Through Other Firms
You may purchase or
sell shares of most Vanguard funds through a financial intermediary, such as a
bank, a broker, or an investment advisor. Please consult your financial
intermediary to determine which, if any, shares are available through that firm
and to learn about other rules that may apply. Your financial intermediary can
provide you with account information and any required tax forms. You may be
required to pay a commission on purchases of mutual fund shares made through a
financial intermediary.
Please see
Frequent-Trading
Limitations—Accounts Held by Intermediaries for information
about the assessment of any purchase or redemption fees and the monitoring of
frequent trading for accounts held by intermediaries.
44
Account
Service Fee
Vanguard may charge a $20 account
service fee on fund accounts that have a balance below $1,000,000 for any
reason, including market fluctuation. The account service fee may be applied to
both retirement and nonretirement fund accounts and
may be assessed on fund accounts in all Vanguard funds, regardless of the
account minimum. The fee, which will be collected by redeeming fund shares in
the amount of $20, will be deducted from fund accounts subject to the fee once
per calendar year.
Certain account
types have alternative fee structures, including SIMPLE IRAs, Vanguard
Retirement Investment Program pooled plans, and Vanguard Individual 401(k)
Plans.
Low-Balance
Accounts
The Fund reserves
the right to liquidate a fund account whose balance falls below the account
minimum for any reason, including market fluctuation. This liquidation policy
applies to nonretirement fund accounts and accounts that are held through
intermediaries. Any such liquidation will be preceded by written notice to the
investor.
Right
to Change Policies
In addition to the
rights expressly stated elsewhere in this prospectus, Vanguard reserves the
right, without notice, to (1) alter, add, or discontinue any conditions of
purchase (including eligibility requirements), redemption, exchange, conversion,
service, or privilege at any time and (2) alter, impose, discontinue, or waive
any purchase fee, redemption fee, account service fee, or other fee charged to a
shareholder or a group of shareholders. Changes may affect any or all investors.
These actions will be taken when, at the sole discretion of Vanguard management,
Vanguard believes they are in the best interest of a fund.
Account
Restrictions
Vanguard reserves
the right to: (1) redeem all or a portion of a fund/account to meet a legal
obligation, including tax withholding, tax lien, garnishment order, or other
obligation imposed on your account by a court or government agency; (2) redeem
shares, close an account, or suspend account privileges, features, or options in
the case of threatening conduct or activity; (3) redeem shares, close an
account, or suspend account privileges, features, or options if Vanguard
believes or suspects that not doing so could result in a suspicious, fraudulent,
or illegal transaction; (4) place restrictions on the ability to redeem any or
all shares in an account if it is required to do so by a court or government
agency; (5) place restrictions on the ability to redeem any or all shares in an
account if Vanguard believes that doing so will prevent fraud, financial
exploitation or abuse, or to
45
protect vulnerable
investors; (6) freeze any account and/or suspend account services if Vanguard
has received reasonable notice of a dispute regarding the assets in an account,
including notice of a dispute between the registered or beneficial account
owners; and (7) freeze any account and/or suspend account services upon initial
notification to Vanguard of the death of an account owner.
Share
Classes
Vanguard reserves
the right, without notice, to change the eligibility requirements of its share
classes, including the types of clients who are eligible to purchase each share
class.
Shareholder
Rights
The Fund's Agreement and
Declaration of Trust, as amended, requires a shareholder bringing a derivative
action on behalf of Vanguard Fixed Income Securities Funds 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.
Fund
and Account Updates
Confirmation
Statements
We will send (or
provide through our website, whichever you prefer) a confirmation of your trade
date and the amount of your transaction when you buy, sell, exchange, or convert
shares. However, we will not send confirmations reflecting only checkwriting
redemptions or the reinvestment of dividend or capital gains distributions. For
any month in which you had a checkwriting redemption, a Checkwriting Activity
Statement will be sent to you itemizing the checkwriting redemptions for that
month. Promptly review each confirmation statement that we provide to you. It is
important that you contact Vanguard immediately with any questions you may have
about any transaction reflected on a confirmation statement, or Vanguard will
consider the transaction properly processed.
46
Portfolio
Summaries
We will send (or
provide through our website, whichever you prefer) quarterly portfolio summaries
to help you keep track of your accounts throughout the year. Each summary shows
the market value of your account at the close of the statement period, as well
as all distributions, purchases, redemptions, exchanges, transfers, and
conversions for the current calendar quarter (or month). Promptly review each
summary that we provide to you. It is important that you contact Vanguard
immediately with any questions you may have about any transaction reflected on
the summary, or Vanguard will consider the transaction properly
processed.
Tax
Information Statements
For most accounts,
Vanguard (or your intermediary) is required to provide annual tax forms to
assist you in preparing your income tax returns. These forms are generally
available for each calendar year early in the following year. Registered users
of vanguard.com can also view
certain forms through our website. Vanguard (or your intermediary) may also
provide you with additional tax-related documentation. For more information,
consult our website at vanguard.com or see Contacting
Vanguard.
Annual
and Semiannual Reports
We will send (or
provide through our website, whichever you prefer) reports about Vanguard
High-Yield Corporate Fund twice a year, in March and September. These reports
include overviews of the financial markets and provide the following specific
Fund information:
• Performance
assessments and comparisons with industry benchmarks.
• Financial
statements with listings of Fund holdings.
Portfolio
Holdings
Please consult the
Fund's Statement
of Additional Information or our website for
a description of the policies and procedures that govern disclosure of the
Fund’s portfolio holdings.
Employer-Sponsored
Plans
Your plan
administrator or your employee benefits office can provide you with detailed
information on how to participate in your plan and how to elect the Fund as an
investment option.
• If you have any
questions about the Fund or Vanguard, including those about the Fund’s
investment objective, strategies, or risks, contact Vanguard Participant
Services toll-free at 800-523-1188 or visit our website at vanguard.com.
47
• If you have
questions about your account, contact your plan administrator or the
organization that provides recordkeeping services for your plan.
• Be sure to
carefully read each topic that pertains to your transactions with
Vanguard.
Vanguard reserves
the right to change its policies without notice to shareholders.
Transactions
Processing times
for your transaction requests may differ among recordkeepers or among
transaction and funding types. Your plan’s recordkeeper (which may also be
Vanguard) will determine the necessary processing time frames for your
transaction requests prior to submission to the Fund. Consult your recordkeeper
or plan administrator for more information.
If Vanguard is
serving as your plan recordkeeper and if your transaction involves one or more
investments with an early cut-off time for processing or another trading
restriction, your entire transaction will be subject to the restriction when the
trade date for your transaction is determined.
48
Contacting
Vanguard
|
Web |
|
|
Vanguard.com |
For
the most complete source of Vanguard news
For
fund, account, and service information
For
most account transactions
For
literature requests
24
hours a day, 7 days a week |
|
Phone | |
|
Investor
Information 800-662-7447
(Text
telephone for people with
hearing
impairment at 800-749-7273) |
For fund and
service information
For
literature requests |
|
Client
Services 800-662-2739
(Text
telephone for people with
hearing
impairment at 800-749-7273) |
For account
information
For most
account transactions |
|
Participant
Services 800-523-1188
(Text
telephone for people with
hearing
impairment at 800-749-7273) |
For
information and services for participants in
employer-sponsored
plans |
|
Institutional
Division
888-809-8102 |
For
information and services for large institutional
investors |
|
Financial
Advisor and Intermediary
Sales Support
800-997-2798 |
For
information and services for financial intermediaries
including
financial advisors, broker-dealers, trust
institutions,
and insurance companies |
|
Financial
Advisory and Intermediary
Trading
Support 800-669-0498 |
For account
information and trading support for
financial
intermediaries including financial advisors,
broker-dealers,
trust institutions, and insurance
companies |
Additional
Information
The Fund's Bylaws
require, unless the Trust otherwise consents in writing, that the U.S. Federal
District Courts be the sole and exclusive forum for the resolution of complaints
under the Securities Act of 1933. This provision may limit a shareholder’s
ability to bring a claim in a different forum and may result in increased
shareholder costs in pursuing such a claim.
|
Vanguard
Fund |
Inception
Date |
Newspaper
Abbreviation |
Vanguard
Fund
Number |
CUSIP
Number |
|
Vanguard
High-Yield Corporate Fund | ||||
|
Investor
Shares |
12/27/1978 |
HYCor |
29 |
922031208 |
|
Admiral
Shares |
11/12/2001 |
HYCorpAdml |
529 |
922031760 |
CGS identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor’s Financial Services, LLC, and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, ©2023 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.
49
CFA® is a
registered trademark owned by CFA Institute.
”Bloomberg®” and the Bloomberg U.S.
Corporate High Yield Bond Index and High-Yield Corporate Composite Index (“the
Indices” or “Bloomberg Indices”) are service marks of Bloomberg Finance L.P. and
its affiliates, including Bloomberg Index Services Limited (“BISL”), the
administrator of the Indices (collectively, “Bloomberg”), and have been licensed
for use for certain purposes by Vanguard.
Vanguard High-Yield Corporate
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 Vanguard High-Yield Corporate Fund or any member of the public
regarding the advisability of investing in securities generally or in Vanguard
High-Yield Corporate Fund particularly. The only relationship of Bloomberg to
Vanguard is the licensing of certain trademarks, trade names and service marks
and of the Bloomberg U.S. Corporate High Yield Bond Index and High-Yield
Corporate Composite Index, which is determined, composed and calculated by BISL
without regard to Vanguard or Vanguard High-Yield Corporate Fund. Bloomberg has
no obligation to take the needs of Vanguard or the owners of Vanguard High-Yield
Corporate Fund into consideration in determining, composing or calculating the
Bloomberg U.S. Corporate High Yield Bond Index and High-Yield Corporate
Composite Index. Bloomberg is not responsible for and has not participated in
the determination of the timing of, prices at, or quantities of
Vanguard
High-Yield
Corporate Fund to be issued. Bloomberg shall not have any obligation or
liability, including, without limitation, to Vanguard High-Yield Corporate Fund
customers, in connection with the administration, marketing or trading of
Vanguard High-Yield Corporate Fund.
BLOOMBERG DOES NOT GUARANTEE
THE ACCURACY AND/OR THE COMPLETENESS OF THE BLOOMBERG U.S. CORPORATE HIGH YIELD
BOND INDEX AND HIGH-YIELD CORPORATE COMPOSITE 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 VANGUARD HIGH-YIELD CORPORATE FUND OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE BLOOMBERG U.S. CORPORATE HIGH YIELD BOND
INDEX AND HIGH-YIELD CORPORATE COMPOSITE 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 BLOOMBERG U.S. CORPORATE HIGH YIELD BOND INDEX AND
HIGH-YIELD CORPORATE COMPOSITE 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 DAMAGES—WHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE OR OTHERWISE—ARISING IN CONNECTION WITH VANGUARD HIGH-YIELD CORPORATE
FUND OR BLOOMBERG U.S. CORPORATE HIGH YIELD BOND INDEX AND HIGH-YIELD CORPORATE
COMPOSITE INDEX OR ANY DATA OR VALUES RELATING THERETO—WHETHER ARISING FROM
THEIR NEGLIGENCE OR OTHERWISE, EVEN IF NOTIFIED OF THE POSSIBILITY
THEREOF.
50
Glossary
of Investment Terms
Average
Maturity. The average length
of time until bonds held by a fund reach maturity and are repaid. In general,
the longer the average maturity, the more a fund's share price fluctuates in
response to changes in market interest rates. In calculating average maturity, a
fund uses a bond’s maturity or, if applicable, an earlier date on which the
advisor believes it is likely that a maturity-shortening device (such as a call,
put, refunding, prepayment, or redemption provision or an adjustable coupon
rate) will cause the bond to be repaid.
Bloomberg
U.S. Corporate High Yield Bond Index. An index that
includes primarily corporate bonds with credit ratings at or below Ba1 (Moody's)
or BB+ (Standard & Poor’s); these issues are considered below
investment-grade.
Bond. A debt security
(IOU) issued by a corporation, a government, or a government agency in exchange
for the money the bondholder lends it. In most instances, the issuer agrees to
pay back the loan by a specific date and generally to make regular interest
payments until that date.
Capital
Gains Distributions. Payments to mutual
fund shareholders of gains realized on securities that a fund has sold at a
profit, minus any realized losses.
Cash
Equivalent Investments. Cash deposits,
short-term bank deposits, and money market instruments that include U.S.
Treasury bills and notes, bank certificates of deposit (CDs), repurchase
agreements, commercial paper, and banker’s acceptances.
Corporate
Bond.
An IOU issued by a business that wants to borrow money. As with other types of
bonds, the issuer promises to repay the borrowed money by a specific date and
generally to make interest payments in the meantime.
Coupon
Rate.
The interest rate paid by the issuer of a debt security until its maturity. It
is expressed as an annual percentage of the face value of the
security.
Dividend
Distributions. Payments to mutual
fund shareholders of income from interest or dividends generated by a fund's
investments.
Expense
Ratio.
A fund's total annual operating expenses expressed as a percentage of the fund's
average net assets. The expense ratio includes management and administrative
expenses, but it does not include the transaction costs of buying and selling
portfolio securities.
Face
Value.
The amount to be paid at a bond’s maturity; also known as the par value or
principal.
51
Fixed
Income Security. An investment,
such as a bond, representing a debt that must be repaid by a specified date, and
on which the borrower may pay a fixed, variable, or floating rate of
interest.
Inception
Date.
The date on which the assets of a fund (or one of its share classes) are first
invested in accordance with the fund's investment objective. For funds with a
subscription period, the inception date is the day after that period ends.
Investment performance is generally measured from the inception
date.
Investment-Grade
Bond.
A debt security whose credit quality is considered by independent bond rating
agencies, or through independent analysis conducted by a fund's advisor, to be
sufficient to ensure timely payment of principal and interest under current
economic circumstances. Debt securities rated in one of the four highest rating
categories are considered investment-grade. Other debt securities may be
considered by an advisor to be investment-grade.
Joint
Committed Credit Facility. The Fund
participates, 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 Fund's board of
trustees and renegotiation with the lender syndicate on an annual
basis.
Mutual
Fund.
An investment company that pools the money of many people and invests it in a
variety of securities in an effort to achieve a specific objective over
time.
New
York Stock Exchange (NYSE). A stock exchange
based in New York City that is open for regular trading on business days, Monday
through Friday, from 9:30 a.m. to 4 p.m., Eastern time.
Non-Investment-Grade
Bond.
A debt security whose credit quality is considered by independent bond rating
agencies, or through independent analysis conducted by a fund's advisor, to be
below investment-grade. These high-risk corporate bonds have a credit quality
rating equivalent to or below Moody’s Ba or Standard & Poor’s BB and are
commonly referred to as “junk bonds.”
Principal. The face value of
a debt instrument or the amount of money put into an investment.
52
Return
of Capital. A return of
capital occurs when a fund's distributions exceed its earnings in a fiscal year.
A return of capital is a return of all or part of your original investment or
amounts paid in excess of your original investment in a fund. In general, a
return of capital reduces your cost basis in a fund's shares and is not taxable
to you until your cost basis has been reduced to zero.
Securities. Stocks, bonds,
money market instruments, and other investments.
Total
Return. A percentage
change, over a specified time period, in a mutual fund's net asset value,
assuming the reinvestment of all distributions of dividends and capital
gains.
Volatility. The fluctuations
in value of a mutual fund or other security. The greater a fund's volatility,
the wider the fluctuations in its returns.
Yield. Income (interest
or dividends) earned by an investment, expressed as a percentage of the
investment’s price.
Connect
with Vanguard®
˃
vanguard.com
For
More Information
If you would
like more information about Vanguard High-Yield Corporate Fund, the following
documents are available free upon request:
Annual/Semiannual
Reports to Shareholders
Additional
information about the Fund's investments is available in the Fund's annual and
semiannual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
Statement
of Additional Information (SAI)
The SAI
provides more detailed information about the Fund and is incorporated by
reference into (and thus legally a part of) this prospectus.
To receive a
free copy of the latest annual or semiannual report or the SAI, or to request
additional information about the Fund or other Vanguard funds, please visit
vanguard.com
or contact us
as follows:
If
you are an individual investor:
Telephone: 800-662-7447; Text telephone for people with hearing impairment: 800-749-7273
Telephone: 800-662-7447; Text telephone for people with hearing impairment: 800-749-7273
If
you are a participant in an employer-sponsored plan:
Telephone: 800-523-1188; Text telephone for people
with hearing impairment: 800-749-7273
Telephone: 800-523-1188; Text telephone for people
with hearing impairment: 800-749-7273
If you are a
current Vanguard shareholder and would like information about your account,
account transactions, and/or account statements, please call:
Client
Services Department
Telephone: 800-662-2739; Text telephone for people with hearing impairment: 800-749-7273
Telephone: 800-662-2739; 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
SEC’s 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].
Fund's
Investment Company Act file number: 811-02368
© 2023 The
Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
P 029 052023
Vanguard Marketing Corporation, Distributor.
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