| |
Transaction
Fee on Purchases and Sales |
|
Transaction
Fee on Reinvested Dividends |
|
Transaction
Fee on Conversion to ETF Shares |
|
| |
Management
Fees |
|
12b-1
Distribution Fee |
|
Other
Expenses |
|
Total
Annual Fund Operating Expenses |
|
1
Year |
3
Years |
5
Years |
10
Years |
$ |
$ |
$ |
$ |
|
Total
Return |
Quarter |
|
|
|
|
- |
|
|
1
Year |
5
Years |
10Years |
Vanguard
Short-Term Inflation-Protected Securities Index
Fund
ETF Shares |
|
|
|
Based
on NAV |
|
|
|
Return Before
Taxes |
- |
|
|
Return After
Taxes on Distributions |
- |
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
- |
|
|
Based
on Market Price |
|
|
|
Return Before
Taxes |
- |
|
|
Bloomberg
U.S. 0-5 Year TIPS Index
(reflects no
deduction for fees, expenses, or taxes) |
- |
|
|
Bloomberg
U.S. Aggregate Bond Index
(reflects no
deduction for fees, expenses, or taxes) |
- |
|
|
Plain
Talk About Fund Expenses |
All 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 Short-Term Inflation-Protected Securities
Index Fund
ETF Shares’ expense ratio would be 0.04%, or $0.40 per $1,000
of average
net assets. The average expense ratio for inflation-protected bond
funds in
2021 was 0.62%, or $6.20 per $1,000 of average net assets
(derived
from data provided by Lipper, a Thomson Reuters Company, which
reports on
the fund industry). |
Plain
Talk About Costs of Investing |
Costs
are an important consideration in choosing an ETF. 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. |
Plain
Talk About Inflation-Indexed Securities |
Unlike
a conventional bond, whose issuer makes regular fixed interest
payments
and repays the face value of the bond at maturity, an
inflation-indexed
security (IIS) provides principal and interest payments that
are
adjusted over time to reflect a rise (inflation) or a drop (deflation) in
the
general
price level for goods and services. This adjustment is a key feature of
an
IIS. Even though historically the general price level for goods and
services
has
risen each year, there have been periods when the general price level for
goods
and services has dropped (as measured by the Consumer Price Index
(CPI).
Importantly, for shareholders of U.S. government issued
inflation-indexed
securities, during such a period of deflation, the
U.S.
Treasury has guaranteed that it will repay at least the face value of the
securities.
However, if an IIS is purchased by a fund at a premium, a
deflationary
period could cause the fund to experience a loss. |
Inflation
measurement and adjustment for an IIS have two important
features.
There is a two-month lag between the time that inflation occurs in
the
economy and when it is factored into IIS valuations. This is due to the
time
required to measure and calculate the CPI and for the U.S. Treasury to
adjust
the inflation accrual schedules for an IIS. For example, inflation that
occurs
in January is calculated and announced during February and affects
IIS
valuations throughout the month of March. In addition, the inflation index
used
is the nonseasonally adjusted index. It differs from the CPI that is
reported
by most news organizations, which is statistically smoothed to
overcome
highs and lows observed at different points each year. The use of
the
nonseasonally adjusted index can cause a fund’s income level to
fluctuate.
|
Plain
Talk About Real Returns |
Inflation-indexed
securities are designed to provide a “real rate of return”—a
return
after adjusting for the impact of inflation. Inflation—a rise in the
general
price level—erodes the purchasing power of an investor’s portfolio.
For
example, if an investment provides a “nominal” total return of 5% in a
given
year and inflation is 2% during that period, the inflation-adjusted, or
real,
return is 3%. Investors should be conscious of both the nominal and the
real
returns on their investments. Investors in inflation-indexed bond funds
who
do not reinvest the portion of the income distribution that comes from
inflation
adjustments will not maintain the purchasing power of the
investment
over the long term. This is because interest earned depends on
the
amount of principal invested, and that principal will not grow with
inflation
if the investor does not reinvest the principal adjustment paid out as
part
of a fund’s income
distributions. |
Plain
Talk About Inflation-Indexed Securities and Interest
Rates |
Interest
rates on conventional bonds have two primary components: a “real”
yield
and an increment that reflects investor expectations of future inflation.
By
contrast, interest rates on an IIS are adjusted for inflation and,
therefore,
are
not affected meaningfully by inflation expectations. This leaves only real
interest
rates to influence the price of an IIS. A rise in real interest rates will
cause
the price of an IIS to fall, while a decline in real interest rates will
boost
the price of an IIS. |
Plain
Talk About Inflation-Indexed Securities and Taxes |
Any
increase in principal for an IIS resulting from inflation adjustments is
considered
by the IRS to be taxable income in the year it occurs. For direct
holders
of an IIS, this means that taxes must be paid on principal
adjustments,
even though these amounts are not received until the bond
matures.
By contrast, a mutual fund holding an IIS pays out (to shareholders)
both
interest income and the income attributable to principal adjustments
each
quarter in the form of cash or reinvested shares, and the shareholders
must
pay taxes on the
distributions. |
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. |
Plain
Talk About Distributions |
As
a shareholder, you are entitled to your portion of a fund’s income from
interest
as well as capital gains from the fund’s sale of investments. Income
consists
of interest the fund earns from its 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. |
Plain
Talk About Return of Capital |
Return
of capital is the portion of a distribution representing the return of
your
original investment in a fund. Return of capital reduces your cost basis
in
the fund’s shares and is not taxable to you until your cost basis has been
reduced
to zero. During periods of deflation, the fund’s inflation-indexed
bonds
may experience a downward adjustment in their value. These
downward
adjustments can partially or entirely offset, or more than offset,
the
income earned on the bonds. Under certain circumstances, these
downward
adjustments could require the fund to reclassify a portion of the
income
dividends previously distributed to shareholders as return of capital.
To
reduce the possibility of a reclassification, the fund may determine to
pay
income
dividends less frequently than quarterly in a year, and in some years,
the
fund may not pay any income
dividends. |
Vanguard
Fund |
Inception
Date |
Vanguard
Fund
Number |
CUSIP
Number |
Vanguard
Short-Term Inflation-Protected
Securities
Index
Fund |
|
|
|
ETF
Shares |
10/12/2012 |
3365 |
922020805 |
|
Year Ended September
30, | ||||
For a
Share Outstanding Throughout Each Period |
2022 |
2021 |
2020 |
2019 |
2018 |
Net
Asset Value, Beginning of Period |
$52.56 |
$50.99 |
$49.03 |
$48.34 |
$49.41 |
Investment
Operations |
|
|
|
|
|
Net
Investment Income1 |
3.544 |
2.562 |
.634 |
1.003 |
1.358 |
Net
Realized and Unrealized Gain (Loss) on Investments |
(4.980) |
.195 |
1.677 |
.652 |
(.869) |
Total from
Investment Operations |
(1.436) |
2.757 |
2.311 |
1.655 |
.489 |
Distributions |
|
|
|
|
|
Dividends
from Net Investment Income |
(3.004) |
(1.187) |
(.351) |
(.965) |
(1.559) |
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
— |
Total
Distributions |
(3.004) |
(1.187) |
(.351) |
(.965) |
(1.559) |
Net
Asset Value, End of Period |
$48.12 |
$52.56 |
$50.99 |
$49.03 |
$48.34 |
Total
Return |
-2.92% |
5.48% |
4.74% |
3.46% |
1.01% |
Ratios/Supplemental
Data |
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$19,191 |
$17,203 |
$9,217 |
$6,884 |
$5,453 |
Ratio of
Total Expenses to Average Net Assets |
0.04% |
0.04% |
0.05% |
0.05% |
0.06% |
Ratio of
Net Investment Income to Average Net Assets |
6.98% |
4.95% |
1.27% |
2.07% |
2.81% |
Portfolio
Turnover Rate2 |
26% |
19% |
37% |
26% |
25% |
|
|
1 |
Calculated
based on average shares outstanding. |
2 |
Excludes
the value of portfolio securities received or delivered as a result of
in-kind purchases or redemptions of
the
fund’s capital shares, including ETF Creation
Units. |