Item 8: Changes in and Disagreements with Accountants for Open-End
Management Investment Companies.
Not applicable.
Item 9: Proxy Disclosures for Open-End Management Investment Companies.
Not applicable.
Item 10: Remuneration Paid to Directors, Officers, and Others of
Open-End Management Investment Companies.
Not applicable. The Trustees’ Fees and Expenses are included in
the financial statements filed under Item 7 of this Form.
Item 11: Statement Regarding Basis for Approval of Investment Advisory
Contracts.
Trustees Approve Advisory Arrangements - Institutional Index Fund
and Institutional Total Stock Market Index Fund
A majority of independent trustees of the board of Vanguard Institutional
Index Fund and Vanguard Institutional Total Stock Market Index Fund (Trustees) renewed the each fund’s investment advisory arrangement
with The Vanguard Group, Inc. (Vanguard), which provides investment advisory services to the fund through its subsidiary, Vanguard
Capital Management LLC (VCM). The trustees determined that continuing the advisory arrangements was in the best interests of each fund
and its shareholders.
The Trustees based their decision upon an evaluation of VCM’s
investment staff, portfolio management process, and performance. This evaluation included information provided by Vanguard’s Oversight
and Manager Search team, which is responsible for fund and advisor oversight and product management.
The Oversight and Manager Search team met regularly with the advisor
and made presentations to the Trustees during the fiscal year that directed the Trustees’ focus to relevant information and topics.
The board, or an investment committee made up of Trustees, also received
information throughout the year during advisor presentations conducted by the Oversight and Manager Search team. For each advisor presentation,
the Trustees were provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s
assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the Trustees received periodic reports throughout the year,
which included information about each fund’s performance relative to its peers and benchmark, as applicable, and updates, as needed,
on the Oversight and Manager Search team’s ongoing assessment of the advisor.
Prior to their meeting, the trustees were provided with a memo and materials
that summarized the information they received over the course of the year. The Trustees considered the factors discussed below, among
others. However, no single factor determined whether to approve the arrangements. Rather, it was the totality of the circumstances that
drove the Trustee’s decisions.
Nature, extent, and quality of services
The Trustees considered the quality of the investment management services
over both the short and long term and took into account the organizational depth and stability of Vanguard and VCM. The Trustees considered
that Vanguard has been managing investments for more than four decades. The Global Equity Index Management team (GE), now within VCM,
adheres to the same sound, disciplined investment management process and has considerable experience, stability and depth. GE has specific
expertise and experience managing large, broad-market U.S. equity index strategies, seeking to minimize transaction costs and tracking
error while opportunistically adding excess returns through sophisticated trading and superior access to corporate actions. Additionally,
GE has significant resources and expertise in global and non-U.S. trading and currency hedging capabilities.
The Trustees concluded that VCM’s experience, stability, depth,
and performance, among other factors, warranted continuation of the advisory arrangements.
Investment performance
The Trustees determined that VCM’s Global Equity Index Management
team, in its management of Vanguard funds, including the funds, has a track record of consistent performance and disciplined investment
processes. The Trustees concluded that the performance was such that the advisory arrangements should continue.
Cost
The Trustees concluded that each fund’s expense ratio was below
the average expense ratio charged by funds in its peer group and that each fund’s advisory expenses were also below the peer-group
average.
The Trustees do not conduct a profitability analysis of Vanguard in
providing investment advisory services through VCM because of Vanguard’s unique structure. Unlike most other mutual fund management
companies, Vanguard is owned by the funds it oversees.
The benefit of economies of scale
The Trustees concluded that each fund’s arrangement with Vanguard,
and services rendered through VCM, ensure that each fund will realize economies of scale as it grows, with the cost to shareholders declining
as fund assets increase.
The Trustees will consider whether to renew the advisory arrangements
again after a one-year period.
Trustees Approve Advisory Arrangements - Ultra-Short Tax-Exempt Bond
ETF and 0-3 Month Treasury Bill ETF
A majority of independent trustees of the board of Vanguard Ultra-Short
Tax-Exempt Bond ETF and Vanguard 0-3 Month Treasury Bill ETF (Trustees) have renewed each fund’s investment advisory arrangement
with The Vanguard Group, Inc. (Vanguard), which provides investment advisory services to each fund through its subsidiary, Vanguard
Capital Management LLC (VCM). The trustees determined that continuing the advisory arrangements was in the best interests of each fund
and its shareholders.
The Trustees based their decisions upon an evaluation of VCM’s
investment staff, portfolio management process, and performance. This evaluation included information provided by Vanguard’s Oversight
and Manager Search team, which is responsible for fund and advisor oversight and product management
The Oversight and Manager Search team met regularly with the advisor
and made presentations to the Trustees during the fiscal year that directed the Trustees’ focus to relevant information and topics.
The board, or an investment committee made up of Trustees, also received
information throughout the year during advisor presentations conducted by the Oversight and Manager Search team. For each advisor presentation,
the Trustees were provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s
assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the Trustees received periodic reports throughout the year,
which included information about the fund’s performance relative to its peers and benchmark, as applicable, and updates, as needed,
on the Oversight and Manager Search team’s ongoing assessment of the advisor.
Prior to their meeting, the trustees were provided with a memo and materials
that summarized the information they received over the course of the year. The Trustees considered the factors discussed below, among
others. However, no single factor determined whether to approve the arrangements. Rather, it was the totality of the circumstances that
drove the Trustee’s decisions.
Nature, extent, and quality of services
The Trustees considered the quality of each fund’s investment
management services over both the short and long term and took into account the organizational depth and stability of Vanguard and VCM.
The Trustees considered that Vanguard has been managing investments for more than four decades. The Fixed Income Group, now within VCM,
adheres to the same sound, disciplined investment management process and has considerable experience, stability and depth. The Fixed Income
Group emphasizes a disciplined and repeatable approach to risk-taking and security selection, with the objective of delivering tight tracking
error and consistent, risk-adjusted alpha.
The Trustees concluded that VCM’s experience, stability, depth,
and performance, among other factors, warranted continuation of the advisory arrangements.
Investment performance
The Trustees determined that VCM’s Fixed Income Group, in its
management of Vanguard funds, including the funds, has a track record of consistent performance and disciplined investment processes.
The Trustees concluded that the performance was such that the advisory arrangements should continue.
Cost
The Trustees concluded that each fund’s expense ratio was below
the average expense ratio charged by funds in its peer group and that each fund’s advisory expenses were also below the peer-group
average.
The Trustees do not conduct a profitability analysis of Vanguard in
providing investment advisory services through VCM because of Vanguard’s unique structure. Unlike most other mutual fund management
companies, Vanguard is owned by the funds it oversees.
The benefit of economies of scale
The Trustees concluded that each fund’s arrangement with Vanguard,
and services rendered through VCM, ensure that each fund will realize economies of scale as it grows, with the cost to shareholders declining
as fund assets increase.
The Trustees will consider whether to renew the advisory arrangements
again after a one-year period.
