Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of the overall bond market. The Fund is subject to the following risks, which could affect the Funds performance:
Interest rate risk
, which is the chance that bond prices overall will decline because of rising interest rates. Interest rate risk should be moderate for the Fund because it invests in a diverse mix of short-, intermediate-, and long-term bonds.
Income risk
, which is the chance that the Funds income will decline because of falling interest rates. Income risk is generally moderate for intermediate-term bond funds, so investors should expect the Funds monthly income to fluctuate accordingly.
Credit risk,
which is the chance that a bond issuer will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuers ability to make such payments will cause the price of that bond to decline. Credit risk should be low for the Fund because it purchases only bonds that are of investment-grade quality.
Call risk,
which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupons or interest rates before their maturity dates. The Fund would then lose any price appreciation above the bonds call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Funds income. For mortgage-backed securities, this risk is known as
prepayment risk
. Call/prepayment risk should be low for the Fund because it invests only a small portion of its assets in callable bonds and mortgage-backed securities.
Country/regional risk,
which is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by foreign companies, governments, or government agencies. Because the Fund may invest a large portion of its assets in bonds of issuers located in a particular country or region, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Country/ regional risk for the Fund is high.
Nondiversification risk
, which is the chance that the Funds performance may be hurt disproportionately by the poor performance of bonds issued by just a few or even a single issuer. The Fund is considered nondiversified, which means that it may invest a significant percentage of its assets in bonds issued by a small number of issuers. Nondiversification risk for the Fund is high.
Currency hedging risk
, which is the risk that the currency hedging transactions entered into by the Fund may not perfectly offset the Funds foreign currency exposures. The Fund seeks to mimic the performance of foreign bonds without regard to currency exchange rate fluctuations. To accomplish this goal, the Fund attempts to offset, or hedge, its foreign currency exposures by entering into currency
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hedging transactions. However, it generally is not possible to perfectly hedge the Funds foreign currency exposures. The Fund will decline in value if it underhedges a currency that has weakened, or overhedges a currency that has strengthened, relative to the U.S. dollar. In addition, the Fund will incur expenses to hedge its foreign currency exposures. Currency hedging risk for the Fund is low.
Index sampling risk,
which is the chance that the securities selected for the Fund, in the aggregate, will not provide investment performance matching that of the Funds target index. Index sampling risk for the Fund should be low.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Annual Total Returns
The Fund began operations on May 1, 2013, so performance information is not yet available.
Investment Advisor
The Vanguard Group, Inc.
Portfolio Managers
Joshua C. Barrickman, CFA, Principal of Vanguard and head of Vanguards Bond Index Group. He has co-managed the Fund since its inception in May 2013.
Yan Pu, CFA, Portfolio Manager. She has co-managed the Fund since its inception in May 2013.
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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 1110, Valley Forge, PA 19482-1110), or by telephone (800-662-2739). The following table provides the Funds minimum initial and subsequent investment requirements.
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Account Minimums
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Institutional Shares
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To open and maintain an account
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$5 million
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To add to an existing account
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Generally $100 (other than by Automatic Investment
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Plan, which has no established minimum)
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Tax Information
The Funds distributions may be taxable as ordinary income or capital gain.
Payments to Financial Intermediaries
The Fund and its investment advisor do not pay financial intermediaries for sales of Fund shares.
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