Semiannual
Report | February
28, 2022
Vanguard
Total Corporate Bond ETF
About Your
Fund’s Expenses
As
a shareholder of the fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund’s
gross income, directly reduce the investment return of the fund.
A
fund’s expenses are expressed as a percentage of its average net assets. The
Total Corporate Bond ETF has no direct expenses, but bears its proportionate
share of the costs for the underlying funds in which it invests. These indirect
expenses make up the acquired fund fees and expenses, also expressed as a
percentage of average net assets. The following examples are intended to help
you understand the ongoing costs (in dollars) of investing in your fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period. The costs were calculated using the acquired fund fees and
expenses for the Total Corporate Bond ETF.
The
accompanying table illustrates your fund’s costs in two ways:
| • | Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period. |
To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your fund under the heading ”Expenses Paid During Period.“
| • | Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. |
Note
that the expenses shown in the table are meant to highlight and help you compare
ongoing costs only. Further, the
expenses do not include any purchase, redemption, or account service fees
described in the fund prospectus. If such fees were applied to your account,
your costs would be higher. Your fund does not carry a “sales load.”
The
calculations assume no shares were bought or sold during the period. Your actual
costs may have been higher or lower, depending on the amount of your investment
and the timing of any purchases or redemptions.
You
can find more information about the fund’s expenses in the Financial Statements
section of this report. For additional information on operating expenses and
other shareholder costs, please refer to your fund’s current
prospectus.
1
| Six Months Ended February 28, 2022 | |||
| Total Corporate Bond ETF | Beginning
Account Value 8/31/2021 |
Ending
Account Value 2/28/2022 |
Expenses
Paid During Period |
| Based on Actual Fund Return | $1,000.00 | $ 941.00 | $0.19 |
| Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,024.60 | 0.20 |
The
calculations are based on acquired fund fees and expenses for the most recent
six-month period. The underlying fundś annualized expense figure for that
period is 0.04%. The dollar amounts shown as ”Expenses Paid” are equal to the
annualized average weighted expense ratio for the underlying funds multiplied by
the average account value over the period, multiplied by the number of days in
the most recent six-month period, then divided by the number of days in the most
recent 12-month period (181/365).
2
Total
Corporate Bond ETF
Underlying
Vanguard Funds
As
of February 28, 2022
| Vanguard Long-Term Corporate Bond ETF | 38.0% |
| Vanguard Short-Term Corporate Bond ETF | 33.8 |
| Vanguard Intermediate-Term Corporate Bond ETF | 28.2 |
The
table reflects the fund's investments, except for short-term
investments.
3
Total
Corporate Bond ETF
Financial
Statements (unaudited)
Schedule
of Investments
As
of February 28, 2022
The
fund files its complete schedule of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal year
as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are
available on the SEC’s website at www.sec.gov.
| Shares | Market
Value• ($000) | |||||
| Investment Companies (100.0%) | ||||||
| U.S. Bond Funds (100.0%) | ||||||
| Vanguard Long-Term Corporate Bond ETF | 2,479,402 | 240,750 | ||||
| Vanguard Short-Term Corporate Bond ETF | 2,691,105 | 214,293 | ||||
| Vanguard Intermediate-Term Corporate Bond ETF | 2,013,163 | 179,111 | ||||
| Total Investment Companies (Cost $681,653) | 634,154 | |||||
| Temporary Cash Investments (0.0%) | ||||||
| Money Market Fund (0.0%) | ||||||
| 1 | Vanguard Market Liquidity Fund, 0.138% (Cost $208) | 2,079 | 208 | |||
| Total Investments (100.0%) (Cost $681,861) | 634,362 | |||||
| Other Assets and Liabilities—Net (0.0%) | (1) | |||||
| Net Assets (100%) | 634,361 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| 1 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
4
Total
Corporate Bond ETF
Statement
of Assets and Liabilities
As
of February 28, 2022
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value—Affiliated Funds (Cost $681,861) | 634,362 |
| Receivables for Investment Securities Sold | 782 |
| Total Assets | 635,144 |
| Liabilities | |
| Payables for Investment Securities Purchased | 783 |
| Total Liabilities | 783 |
| Net Assets | 634,361 |
|
At February 28, 2022, net assets consisted of: |
|
| Paid-in Capital | 682,180 |
| Total Distributable Earnings (Loss) | (47,819) |
| Net Assets | 634,361 |
| Net Assets | |
| Applicable
to 7,370,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
634,361 |
| Net Asset Value Per Share | $86.07 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
5
Total
Corporate Bond ETF
Statement
of Operations
| Six
Months Ended February 28, 2022 | |
| ($000) | |
| Investment Income | |
| Income | |
| Income Distributions Received from Affiliated Funds | 8,123 |
| Net Investment Income—Note B | 8,123 |
| Realized Net Gain (Loss) | |
| Capital Gain Distributions Received from Affiliated Funds | 1,772 |
| Affiliated Funds Sold1 | (1,263) |
| Realized Net Gain (Loss) | 509 |
| Change in Unrealized Appreciation (Depreciation) from Affiliated Funds | (50,376) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (41,744) |
| 1 | Includes ($580,000) of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
6
Total
Corporate Bond ETF
Statement
of Changes in Net Assets
| Six
Months Ended February 28, 2022 |
Year
Ended August 31, 2021 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 8,123 | 17,944 | |
| Realized Net Gain (Loss) | 509 | 10,516 | |
| Change in Unrealized Appreciation (Depreciation) | (50,376) | (18,980) | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (41,744) | 9,480 | |
| Distributions | |||
| Total Distributions | (8,246) | (17,930) | |
| Capital Share Transactions | |||
| Issued | 30,403 | 389,344 | |
| Issued in Lieu of Cash Distributions | — | — | |
| Redeemed | (41,120) | (304,510) | |
| Net Increase (Decrease) from Capital Share Transactions | (10,717) | 84,834 | |
| Total Increase (Decrease) | (60,707) | 76,384 | |
| Net Assets | |||
| Beginning of Period | 695,068 | 618,684 | |
| End of Period | 634,361 | 695,068 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
7
Total
Corporate Bond ETF
Financial
Highlights
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | November 7, 20171 to August 31, 2018 | ||
| 2021 | 2020 | 2019 | |||
| Net Asset Value, Beginning of Period | $92.55 | $92.62 | $89.19 | $81.59 | $85.00 |
| Investment Operations | |||||
| Net Investment Income2 | 1.057 | 2.229 | 2.638 | 2.825 | 2.081 |
| Capital Gain Distributions Received2 | .231 | .053 | — | — | — |
| Net Realized and Unrealized Gain (Loss) on Investments | (6.695) | (.131) | 3.614 | 7.717 | (3.445) |
| Total from Investment Operations | (5.407) | 2.151 | 6.252 | 10.542 | (1.364) |
| Distributions | |||||
| Dividends from Net Investment Income | (1.061) | (2.221) | (2.822) | (2.942) | (2.046) |
| Distributions from Realized Capital Gains | (.012) | — | — | — | — |
| Total Distributions | (1.073) | (2.221) | (2.822) | (2.942) | (2.046) |
| Net Asset Value, End of Period | $86.07 | $92.55 | $92.62 | $89.19 | $81.59 |
| Total Return | -5.90% | 2.37% | 7.18% | 13.29% | -1.60% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $634 | $695 | $619 | $203 | $55 |
| Ratio of Total Expenses to Average Net Assets | — | — | — | — | — 3 |
| Acquired Fund Fees and Expenses | 0.04% | 0.04% | 0.05% | 0.05% | 0.07% 3 |
| Ratio of Net Investment Income to Average Net Assets | 2.36% | 2.43% | 2.94% | 3.38% | 3.10% 3 |
| Portfolio Turnover Rate4 | 5% | 10% | 40% | 12% | 4% |
| The expense ratio, acquired fund fees and expenses, and net investment income ratio for the current period have been annualized. | |||||
| 1 | Inception. |
| 2 | Calculated based on average shares outstanding. |
| 3 | Annualized. |
| 4 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
8
Total
Corporate Bond ETF
Notes
to Financial Statements
Vanguard
Total Corporate Bond ETF is registered under the Investment Company Act of 1940
as an open-end investment company, or mutual fund. The fund seeks to match the
perfomance of its target index by investing in select bond index ETF's. ETF
Shares are listed for trading on Nasdaq; they can be purchased and sold through
a broker. Financial statements and other information about each underlying fund
are available at www.vanguard.com.
Market
disruptions associated with the COVID-19 pandemic have had a global impact, and
uncertainty exists as to the long-term implications. Such disruptions can
adversely affect assets of the fund and thus fund performance.
A. The following significant accounting policies
conform to generally accepted accounting principles for U.S. investment
companies. The fund consistently follows such policies in preparing its
financial statements.
1. Security
Valuation: Underlying ETFs are valued at the latest quoted sales prices or
official closing prices taken from their primary market or, if not traded on the
valuation date, at the mean of the latest quoted bid and asked prices.
Investments in Vanguard Market Liquidity Fund are valued at that fund's net
asset value.
2. Federal
Income Taxes: The fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. The fund’s tax returns are
open to examination by the relevant tax authorities until expiration of the
applicable statute of limitations, which is generally three years after the
filing of the tax return. Management has analyzed the fund’s tax positions taken
for all open federal and state income tax years, and has concluded that no
provision for income tax is required in the fund’s financial statements.
3. Distributions:
Distributions to shareholders are recorded on the ex-dividend date.
Distributions are determined on a tax basis at the fiscal year-end and may
differ from net investment income and realized capital gains for financial
reporting purposes.
4. Credit
Facilities and Interfund Lending Program: The fund and certain other funds
managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion
committed credit facility provided by a syndicate of lenders pursuant to a
credit agreement and an uncommitted credit facility provided by Vanguard. Both
facilities may be renewed annually. Each fund is individually liable for its
borrowings, if any, under the credit facilities. Borrowings may be utilized for
temporary or emergency purposes, subject to the fund’s regulatory and
contractual borrowing restrictions. With respect to the committed credit
facility, the participating funds are charged administrative fees and an annual
commitment fee of 0.10% of the undrawn committed amount of the facility; these
fees are allocated to the funds based on a method approved by the fund’s board
of trustees and borne by the funds in which the fund invests (see Note B). Any
borrowings under either facility bear interest at a rate based upon the higher
of the one-month London Interbank Offered Rate (or an acceptable alternate rate,
if necessary), federal funds effective rate, or overnight bank funding rate plus
an agreed-upon spread, except that borrowings under the uncommitted credit
facility may bear interest based upon an alternative rate agreed to by the fund
and Vanguard.
In
accordance with an exemptive order (the “Order”) from the SEC, the fund may
participate in a joint lending and borrowing program that allows registered
open-end Vanguard funds to borrow money from and lend money to each other for
temporary or emergency purposes (the “Interfund Lending Program”), subject to
compliance with the terms and conditions of the Order, and to the extent
permitted by the fund’s investment objective and investment policies. Interfund
loans and
9
Total
Corporate Bond ETF
borrowings
normally extend overnight, but can have a maximum duration of seven days. Loans
may be called on one business day’s notice. The interest rate to be charged is
governed by the conditions of the Order and internal procedures adopted by the
board of trustees. The board of trustees is responsible for overseeing the
Interfund Lending Program.
For
the six months ended February 28, 2022, the fund did not utilize the credit
facilities or the Interfund Lending Program.
5. Other:
Income and capital gain distributions received are recorded on the ex-dividend
date.
Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold.
B. In accordance with the terms of a Funds’ Service
Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the
fund investment advisory, corporate management, administrative, marketing, and
distribution services at Vanguard’s cost of operations (as defined by the FSA).
These costs of operations are allocated to the fund based on methods and
guidelines approved by the board of trustees. The FSA provides that expenses
otherwise allocable to Vanguard funds-of-funds may be reduced or eliminated to
the extent of savings realized by the underlying Vanguard funds by virtue of
being part of a fund-of-funds. Accordingly, all expenses for services provided
by Vanguard to the fund and all other expenses incurred by the fund during the
period ended February 28, 2022, were borne by the underlying Vanguard funds in
which the fund invests. The fund's trustees and officers are also trustees and
officers, respectively, of the underlying Vanguard funds, as well as directors
and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of
the fund’s investments. These inputs are summarized in three broad levels for
financial statement purposes. The inputs or methodologies used to value
securities are not necessarily an indication of the risk associated with
investing in those securities.
Level
1—Quoted prices in active markets for
identical securities.
Level
2—Other significant observable inputs
(including quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.).
Level
3—Significant unobservable inputs (including
the fund’s own assumptions used to determine the fair value of investments). Any
investments valued with significant unobservable inputs are noted on the
Schedule of Investments.
At
February 28, 2022, 100% of the market value of the fund's investments was
determined based on Level 1 inputs.
D. As of February 28, 2022, gross unrealized
appreciation and depreciation for investments based on cost for U.S. federal
income tax purposes were as follows:
| Amount
($000) | |
| Tax Cost | 682,426 |
| Gross Unrealized Appreciation | 43 |
| Gross Unrealized Depreciation | (48,107) |
| Net Unrealized Appreciation (Depreciation) | (48,064) |
10
Total
Corporate Bond ETF
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at August 31, 2021, the fund had available
capital losses totaling $178,000 that may be carried forward indefinitely to
offset future net capital gains. The fund will use these capital losses to
offset net taxable capital gains, if any, realized during the year ending August
31, 2022; should the fund realize net capital losses for the year, the losses
will be added to the loss carryforward balance above.
E. Capital shares issued and redeemed
were:
| Six
Months Ended February 28, 2022 |
Year
Ended August 31, 2021 | ||
| Shares
(000) |
Shares
(000) | ||
| Issued | 330 | 4,200 | |
| Issued in Lieu of Cash Distributions | — | — | |
| Redeemed | (470) | (3,370) | |
| Net Increase (Decrease) in Shares Outstanding | (140) | 830 |
11
Total
Corporate Bond ETF
F.
Transactions during the period in affiliated
underlying Vanguard funds were as follows:
| Current Period Transactions | ||||||||
| Aug.
31, 2021 Market Value ($000) |
Purchases
at Cost1 ($000) |
Proceeds
from Securities Sold2 ($000) |
Realized
Net Gain (Loss) ($000) |
Change
in Unrealized App. (Dep.) ($000) |
Income
($000) |
Capital
Gain Distributions Received ($000) |
Feb.
28, 2022 Market Value ($000) | |
| Vanguard Intermediate-Term Corporate Bond ETF | 197,418 | 16,878 | 21,252 | (339) | (13,594) | 2,174 | 1,252 | 179,111 |
| Vanguard Long-Term Corporate Bond ETF | 270,620 | 29,629 | 30,419 | (670) | (28,410) | 4,227 | — | 240,750 |
| Vanguard Market Liquidity Fund | 24 | NA 3 | NA 3 | — | — | — | — | 208 |
| Vanguard Short-Term Corporate Bond ETF | 226,998 | 21,137 | 25,216 | (254) | (8,372) | 1,722 | 520 | 214,293 |
| Total | 695,060 | 67,644 | 76,887 | (1,263) | (50,376) | 8,123 | 1,772 | 634,362 |
| 1 | Includes $30,401,000 of portfolio securities received as a result of in-kind purchases of the fund’s capital shares. |
| 2 | Includes $41,113,000 of portfolio securities delivered as a result of in-kind redemptions of the fund’s capital shares. |
| 3 | Not applicable—purchases and sales are for temporary cash investment purposes. |
G. Market disruptions associated with current
geopolitical events have had a global impact, and uncertainty exists as to their
implications. Such disruptions can adversely affect assets and thus performance
of the fund; at this time, an aggregate effect on assets and performance cannot
be reasonably estimated. Management is continuing to monitor these developments
and evaluate impacts they may have on the fund.
Management
has determined that no other events or transactions occurred subsequent to
February 28, 2022, that would require recognition or disclosure in these
financial statements.
12
