quarterly review vanguard target retirement …...beyond the glide path 15 12-month return...

1

Q U A R T E R L Y R E V I E W

VanguardTarget Retirement Funds and TrustsJune 30, 2020

For institutional and sophisticated investors only. Not for public distribution.

22

Q U A R T E R L Y S P O T L I G H T

Executive summary 3

When the best surprise is no surprise 4

T D F I N D U S T R Y A N D M A R K E T O V E R V I E W

Industry growth and market share 7

Market environment 8

V A N G U A R D F U N D C O N S T R U C T I O N A N D P E R F O R M A N C E

Vanguard fund oversight and glide path 9

Vanguard fund performance and attribution 11

C O M P E T I T O R F U N D C O N S T R U C T I O N A N D P E R F O R M A N C E

Beyond the glide path 15

12-month return attribution 17

A P P E N D I X

Absolute performance results 19

C O N T E N TS Edition 25



The first half of 2020 was one of the most economically erratic periods we’ve experienced in a long time. By the end

of March, investors had watched large portions of their portfolios evaporate in one of the worst first quarters on record,

driven by COVID-19 uncertainty. By the end of June, U.S. stocks had finished their best quarter in 20 years. Clients

in Vanguard Target Retirement Funds benefited by staying the course and sticking to their long-term retirement plans.

As of June 30, net inflows reached $16 billion.

Performance of funds underlying Vanguard Target Retirement Funds in the first half of 2020

In this edition, on page 4, we provide a review of how Vanguard Target Retirement Funds helped limit

unwanted surprises during this volatile period by maintaining a well-diversified approach to portfolio construction

and ensuring that asset allocations across the glide path stayed close to their targets to the benefit of clients’

long-term retirement plans.

Also in this edition, on pages 15-16, we provide an updated look into target-date fund (TDF) portfolio construction beyond

the glide path. This section features comparisons across asset allocation, home bias, and select sub-asset characteristics

for the major TDF providers.

We hope you find our spotlight pieces to be informative. As always, we remain open to ideas for improving our Quarterly

Review, including suggestions for future articles.

Vanguard quarterly review: A 2020 midyear assessment

Join us on Thursday, August 6, from 11 a.m.–12 noon, Eastern time, for a live webinar featuring insights from our newest

editions of Vanguard Index Funds Quarterly Review and Vanguard Target Retirement Funds and Trusts Quarterly Review.

Members of Vanguard Index Strategies and Investment Solutions teams will join us to discuss a number of timely topics,

including why a clear understanding of fixed income investments and smart target-date fund asset allocations were critical

in the tumultuous first half of 2020. To register click here.

Executive summary

Source: Vanguard, Institutional share class as of June 30, 2020.

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at www.institutional.vanguard.com. Standard performance of the funds can be located on page 22 of the Quarterly Review.

Fund name (inception date) 1Q 2020 2Q 2020

Calendar

year-to-date

Vanguard Total Bond Market Index Fund (09/18/1995) 3.28% 2.98% 6.36%

Vanguard Total International Bond Index Fund (05/31/2013) 0.16% 2.20% 2.36%

Vanguard Total Stock Market Index Fund (07/07/1997) –20.86% 22.10% –3.38%

Vanguard Total International Stock Index Fund (11/29/2010) –24.31% 18.12% –10.59%


https://event.on24.com/wcc/r/2502079/7CA2BA914420A4EDBE7E01FDD6DA8615?&partnerref=idxexsum

44


1 Morningstar and Vanguard data.2 How America Saves 2020, Vanguard.3 CRSP U.S. Total Market Index.4 FTSE Global All Cap, ex-US Index.* As of March 31, 2020.

Two giant forces collided in the first quarter of 2020, creating

a significant test for the target-date fund industry. The first

was the substantial growth in TDF assets since the last major

downturn, in 2008. As of March 31, 2020, TDF industry

assets totaled $1.92 trillion, up from $182 billion in 2008.1

About 78% of Vanguard plan participants now own a TDF,

and 54% have a TDF as their sole holding.2 Now a major

force in the retirement market, TDFs ran directly into another

big force, this year’s extraordinary market volatility.

When the best surprise is no surprise

In the first quarter, U.S. stocks fell more than 20%.3 International stocks dropped 24%,4 while U.S. interest rates reached record

lows, all over a fraction of the time it took for markets to reach similar levels in 2008. Then, just as investors braced for a prolonged

downturn, equity markets rebounded over the second quarter.

From a performance standpoint, we never like to see negative returns. But we also recognize that over a full investment life cycle,

we will encounter periods of market turbulence like the one at the beginning of 2020. What we do want to limit during periods like

this are surprises, and that is exactly what the Target Retirement Funds did during this volatile time. The Target Retirement Funds

performed as expected given the asset allocation of each TDF vintage across the glide path. While this tumult revealed

weaknesses in certain asset classes commonly used in TDFs, it also highlighted the merits of a straightforward approach to

portfolio diversification. That is a reassuring result for plan sponsors and investors. It’s a classic case of the best surprise being no

surprise at all.

At Vanguard, we build our funds for this kind of steady performance. Founded in 1975 and committed to helping give investors the

best chance for investment success, Vanguard has worked its way through so many bouts of market volatility that we even have a

term for it: “Vanguard weather,” periods of financial turbulence when Vanguard’s disciplined, low-cost, and long-term approach

serves investors well. During the Vanguard weather that struck in the first half of this year:

Vanguard’s diversification strategy limited downside volatility.

Our portfolio managers maintained targeted TDF asset allocations despite wild volatility.

Clients stayed the course and stuck to their long-term retirement plans.


5


Exhibit 5.1 Asset class performance in first quarter 2020Vanguard’s approach to diversification weathered

the test

Vanguard Target Retirement Funds aim to take a

straightforward approach to diversification. The equity

allocation of each fund is meant to enhance long-term returns

while the fixed income allocation is meant to provide ballast

and downside protection. Each of the Target Retirement

Funds’ underlying building blocks are designed to provide

high-quality, broad-based exposure to the global equity and

fixed income markets and work in tandem to provide effective

market diversification that can balance out the many risks

investors will face over their investment life cycle.

Bull markets tend to have the ability to mask portfolio

construction issues, so a period like the first quarter of 2020

exposes whether investors were truly diversified and whether

underlying asset classes are performing as designed. Across

the TDF industry, allocations to high-yield bonds and

commodities and overweighting REITs are commonly used to

try to enhance diversification. Through our TDF-related

research efforts, Vanguard has deliberately decided not to

include these exposures for a variety of reasons at this time.

Take high-yield bonds as an example—this asset class acts

as a bit of a hybrid exposure that may outperform

investment-grade bonds during bull markets but also

correlates more closely to equities than investment-grade

bonds do. As a result, high-yield bonds are likely to

underperform at the exact moment that investors need their

bond allocation to provide downside protection.

During the first quarter of 2020, each of the previously

mentioned asset classes provided some level of surprise

relative to what you would typically expect from a diversifying

asset class in a multiasset portfolio, with high-yield bonds, as

measured by Exhibit 5.1.


Plan sponsors can help fulfill their fiduciary responsibilities by

monitoring whether an asset manager’s diversification

strategies are achieving their intended goals, especially as

TDFs continue to make up a growing portion of overall plan

assets.

Vanguard Target Retirement Funds’ allocations

stayed on target despite the wild market swings

This year’s volatility—primarily in late February through early

April—saw intraday valuation swings of unprecedented

magnitude in both equity and fixed income markets, presenting

never-before-seen challenges. Yet during this extremely

volatile period, Vanguard Target Retirement Funds did not

deviate significantly from the target asset allocation across the

glide path. Looking at the broader TDF industry, however,

these results varied by provider, partly driven by the

capabilities of the associated investment management teams,

as well as by differences in rebalancing methodologies. The

frequency of rebalancing a TDF—and its benchmark—can

affect how closely a TDF maintains its asset allocation during

periods of heightened volatility.

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

Notes: U.S. investment-grade bonds represented by Bloomberg Barclays U.S. Aggregate Bond Index; Non-U.S. investment-grade bonds (hedged) represented by

Bloomberg Barclays Global Agg ex U.S. Float Adj RIC Cap Index Hedged; U.S. Corporate High Yield Index represented by Bloomberg Barclays U.S. Corporate High Yield

Index; Commodities Index represented by Bloomberg Commodity Index; U.S. REIT Index represented by MSCI U.S. REIT Index.

5

0

-5

-10

-15

-20

-25

-30

Source: Vanguard, 2020.


66


5 Vanguard, 2020.6 Brinson, Gary P., L. Randolph Hood, and Gilbert L. Beebower, 1986. “Determinants of Portfolio Performance.” Financial Analysts Journal 42(4): 39–48.7 Vanguard, 2020.

Extreme market moves can cause portfolios to drift

dramatically from the target asset allocation if they are not

rebalanced consistently. To illustrate the effect of rebalancing

frequency, let’s examine a hypothetical 50% global stock and

50% global bond portfolio. During the volatile month of

March, a portfolio that was rebalanced daily maintained asset

class weights near the 50% global stock and 50% global

bond target allocations. If the same portfolio were rebalanced

monthly, steep equity declines would have driven the global

stock allocation as low as 43% and the global bond allocation

as high as 57% during the month, a significant deviation from

the target asset allocations.5

The asset allocations of Vanguard Target Retirement Funds

are designed for long time horizons, which inevitably include

periods of market uncertainty. Given that more than 90% of a

portfolio’s long-term return variability is driven by its strategic

asset allocation,6 significant deviations from target allocations

may harm long-term returns, which is why Vanguard

constructs and manages our TDFs to hew closely to stated

investment objectives. Our disciplined, sensible approach to

rebalancing also can give investors the confidence that their

retirement plan will perform as expected, with consistent

asset mixes based on age and planned retirement date.

Reliable performance helps Vanguard investors

stay the course

Performance that was in line with expectations and that

yielded no surprises also contributed to Target Retirement

Fund investors staying the course in the first quarter.

Through our analysis of investor trading behaviors, we saw

that roughly 99.6% of the dollars in Vanguard Target

Retirement Funds stayed put throughout March 2020.7

Knowing what to expect can help investors avoid behavioral

errors, such as panic-selling at an inopportune time.

Importantly, these investors were also able to participate in

the rebound that occurred in May and June.


Looking ahead

The first half of 2020 was filled with uncertainty and featured

some of the most unpredictable markets ever witnessed. But it

also provided a valuable opportunity for plan sponsors to

assess their TDF providers and determine if they are providing

the experience sponsors expect, which is especially important

now that tens of millions of investors rely on TDFs as a growing

portion of their retirement savings.

Since their inception in 2003, Vanguard Target Retirement

Funds have endured multiple market downturns, most notably

in 2008 and again in the first half of this year. Through each

of these periods they have performed as designed, with the

asset allocation reducing downside risk across the glide path.

We were also encouraged to see that TDF investors were able

to stick to their long-term plans and not abandon them in the

face of this latest round of volatility. We’re always on the

lookout for new fronts of Vanguard weather so that we can

continue to guide our TDF investors through them and help

them to achieve retirement readiness.



According to data from Morningstar combined with Vanguard’s funds and trusts data, industry assets exceeded

$2 trillion in assets as of the end of second quarter 2020. Vanguard continued to lead the industry in cash flow

and assets under management, receiving an estimated 32 cents of every dollar invested in a target-date fund

over the last 12 months.

The industry’s top providers—Vanguard, Fidelity, BlackRock, T. Rowe Price, JPMorgan, American Funds, and State

Street—hold a cumulative 86% share of all industry assets, or more than $1.95 trillion as of June 30, 2020.

We estimate that as of the end of June, the target-date fund industry experienced a 5.6% organic growth rate over

the past 12 months.*

Industry growth and market share

Sources: Vanguard, Morningstar, as of June 30, 2020. Public company data also used prior to 2020.* Organic growth measured as current period’s net new flows divided by prior period’s ending assets.

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

2001 2005 2009 2013 2017

Bil

lio

ns

2020

13%

4%

14%

4%

-4%

7%

15%

9%

26%

12%

4%13%

9%

38%

32%

AUM1-year

cash flow

Vanguard Fidelity T. Rowe Price BlackRock

JPMorgan American Funds State Street Other

Exhibit 7.1 Growth of target-date fund industry assets and market share


8


8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

3Q

2019

4Q

2019

1Q

2020

2Q

2020

REIT EMB EMB CRSP REIT REIT HYB FTSE IAGG IAGG EMB REIT AGG CRSP

28.5 8.8 18.3 33.6 30.4 2.5 17.1 27.4 3.2 30.8 7.7 9.3 3.1 22.1

CRSP REIT REIT FTSE CRSP IAGG CRSP CRSP CASH REIT IAGG CRSP CASH FTSE

17.3 8.7 17.8 15.6 12.6 1.3 12.7 21.2 1.9 25.8 3.1 9.0 0.4 17.1

COM AGG FTSE HYB IAGG EMB COM EMB STPS FTSE AGG COM IAGG REIT

16.8 7.8 17.6 7.4 9.1 1.3 11.4 9.2 0.6 21.8 2.3 4.0 0.2 11.7

HYB HYB CRSP REIT EMB AGG EMB HYB AGG HYB HYB HYB STPS EMB

15.1 5.0 16.2 2.5 7.1 0.5 9.2 7.5 0.0 14.3 1.3 2.6 –0.7 10.8

FTSE STPS HYB IAGG AGG CRSP REIT REIT HYB EMB CRSP EMB EMB HYB

13.0 4.5 15.8 1.3 6.0 0.4 8.6 5.1 –2.1 14.1 1.1 2.0 –11.4 10.2

EMB IAGG IAGG CASH HYB CASH IAGG AGG EMB AGG EMB STPS HYB COM

12.1 4.0 7.3 0.1 2.5 0.0 4.9 3.5 –3.9 8.7 0.8 1.1 –12.7 5.0

AGG CRSP AGG STPS CASH STPS FTSE IAGG REIT IAGG CASH CASH CRSP AGG

6.5 1.1 4.2 –1.6 0.0 0.0 4.7 2.6 –4.6 8.1 0.6 0.5 –20.9 2.9

STPS CASH STPS AGG STPS FTSE STPS STPS CRSP COM STPS AGG COM STPS

3.3 0.1 2.4 –2.0 –1.1 –4.3 2.8 0.9 –5.2 5.4 0.3 0.2 –23.5 2.6

IAGG COM CASH EMB FTSE HYB AGG CASH COM STPS FTSE REIT FTSE IAGG

3.2 –13.3 0.1 –6.3 –3.4 –4.5 2.6 0.8 –13.0 4.9 –1.7 –0.8 –24.0 2.3

CASH FTSE COM COM COM COM CASH COM FTSE CASH COM IAGG REIT CASH

0.1 –14.2 –1.1 –9.5 –17.0 –24.7 0.3 0.7 –14.6 2.3 –2.4 –1.2 –27.0 0.1

Market environment

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular

investment, as you cannot invest directly in an index.

Sources: Vanguard, Bloomberg Barclays Live, and Morningstar, as of June 30, 2020.* MSCI U.S. Broad Market Index used as a proxy for 10-year returns.

** Back-tested data provided by Bloomberg Barclays for periods prior to 2013.

Average annualized return

Index returns

Three

months

One

year

Three

years

Five

years

Ten

years

Target

Retirement

Fund

building

blocks

CRSP CRSP U.S. Total Market Index* 22.1 6.5 10.0 10.0 13.7

FTSE FTSE Global All Cap ex U.S. Index 17.1 –4.4 1.1 2.4 5.3

AGG Bloomberg Barclays U.S. Aggregate Bond Index 2.9 8.7 5.3 4.3 3.8

IAGG Bloomberg Barclays Global Agg ex U.S. Float Adj RIC Cap Index Hedged** 2.3 4.3 5.2 4.7 4.3

STPS Bloomberg Barclays U.S. 0–5 Year TIPS Index 2.6 3.4 2.7 2.0 1.7

Other

indexes

CASH 3-Month T-Bill 0.1 1.6 1.7 1.1 0.6

HYB Bloomberg Barclays U.S. Corporate High Yield Index 10.2 0.0 3.3 4.8 6.7

EMB Bloomberg Barclays Emerging Markets Sovereign Index USD 10.8 1.0 3.6 5.1 6.0

REIT MSCI U.S. REIT Index 11.7 –12.9 0.1 4.1 9.1

COM Bloomberg Commodity Index 5.0 –18.4 –7.7 –8.7 –6.4

Exhibit 8.1 Index returns ranked by performance



The Strategic Asset Allocation (SAA) Committee has overall responsibility for the investment methodology of the Single Fund

and Advised Solutions. The purpose of the SAA Committee is to conduct an ongoing review and analysis of the investment

methodology of Vanguard’s Single Fund and Advised Solutions across the globe with the aim of a consistent global

investment methodology that incorporates local market considerations.

As depicted in the above chart, the SAA Committee is responsible for the ongoing oversight and decision-making for Vanguard’s

single-fund solutions.

The primary research groups that support the committee’s oversight and research agenda are the Investment Strategy Group

(portfolio construction experts), Strategic Retirement Consulting (plan design experts), and the Center for Investor Research

(investor behavior experts).

Any changes to the Target Retirement Funds are ultimately approved by the SAA Committee, chaired by our global chief

economist, Joe Davis; the Global Investment Committee, chaired by our CEO, Tim Buckley; and Vanguard’s board of directors.

Effectively, this oversight structure translates into stability in terms of both philosophy and execution.

Process

SAA members

• Joe Davis, Ph.D.

Global Chief Economist (Chair)

• Greg Davis, CFA (ex-officio)

Global Chief Investment Officer

• Matthew Brancato, CFA, CPA

Head of Institutional Investor Services

• Manish Nagar

Head of Risk Management Group

• Roger Aliaga-Díaz, Ph.D.

Head of Vanguard Capital Markets Model®

• Francis Kinniry, CFA

Head of Portfolio Construction

• Paul Jakubowski

Global Head of Fixed Income Indexing

Head of Investments, Europe

• James Martielli, CFA

Head of Investment Solutions

• Daniel Reyes, CFA

Head of Investments, Asia-Pacific

• Rodney Comegys

Head of Equity Index Group

• Kaitlyn Caughlin, CFP

Head of Portfolio Review Department

SAA Committee

Ongoing oversight and

decision-making

Experts in portfolio

construction, plan design,

and investor behavior

Senior management

Review and approval

Portfolio managers are responsible for ongoing monitoring and rebalancing

Strategic Asset Allocation Committee

As of June 30, 2020.

Purpose


10


Gradual changes since inception

2003:• Vanguard launched the Target

Retirement Funds utilizing the following

building blocks: Total Stock Market

Index Fund, European Stock Index

Fund, Pacific Stock Index Fund, Total

Bond Market Index Fund, Inflation-

Protected Securities Fund, and Prime

Money Market Fund.

• Expense ratio: 22 bps

2006:• Increased equity allocation across the glide

path by approximately 10%.

• Added exposure to Vanguard Emerging

Markets Index Fund.

• Expanded the target-date suite of funds to

include target retirement dates every five

years versus the initial funds, which targeted

one retirement date every ten years.

• Expense ratio: 21 bps

2013:• Vanguard added a 20% nominal bond allocation to the

Vanguard Total International Bond Index Fund

(currency hedged).

• Replaced the full market Inflation-Protected Fund with

the Short-Term Inflation-Protected Securities Index

Fund.

• Eliminated the Prime Money Market Fund, reallocating

the proceeds to other fixed income components.

• Expense ratio: 16–18 bps

2010:• Increased underlying

international equity allocation

from 20% to 30% of total equity.

• Replaced the three underlying

international equity index funds

(Europe, Pacific, and Emerging

Markets) with Vanguard Total

International Stock Index Fund.


2015:• Lowered costs by 13% for the

overall Target Retirement

Funds/Trusts franchise.

• Launched the 10 bps Institutional

Target Retirement Funds.

• Increased international allocations

by 10% in stocks and bonds to

60%/40% (U.S./ex-U.S.) for

stocks and 70%/30% for bonds.


Evolution of Vanguard’s glide-path design

* Target date is the year stated in the fund name. Target Retirement Fund allocations are based on a projected retirement age of 65.

Exhibit 10.1 The glide path today



Fund performance through June 30, 2020

The performance data shown represents past performance. Past performance is no guarantee of future results. Investment returns and principal

value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher

than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance. Some

funds assess purchase, redemption, and/or account maintenance fees. The performance data shown do not reflect deduction of these fees. If they

did, performance would be lower. Details on these fees and adjusted performance figures can be found in the fund detail section.

Sources: Vanguard and Morningstar, as of June 30, 2020.

Portfolio/Benchmark 3 months 1 year 3 years 5 years 10 years

Since

inception

Inception

date

Vanguard Target Retirement Income Fund

Investor Shares 7.84 5.69 5.39 4.93 5.84 5.30 10/27/2003

Institutional Shares 7.95 5.87 5.47 5.00 — 4.92 6/26/2015

Trust I 7.88 5.79 5.47 5.01 5.92 5.16 6/22/2007

Target Retirement Income Composite Index 7.95 6.26 5.71 5.18 6.04 — —

Vanguard Target Retirement 2015 Fund

Investor Shares 8.90 5.45 5.78 5.47 7.55 6.11 10/27/2003


Trust I 8.88 5.56 5.83 5.54 7.63 5.16 6/28/2007

Target Retirement 2015 Composite Index 8.95 6.07 6.12 5.74 7.75 — —


Investor Shares 11.40 5.06 6.09 5.96 8.31 6.19 6/7/2006


Trust I 11.42 5.16 6.17 6.05 8.40 5.40 6/22/2007



Investor Shares 13.20 4.82 6.33 6.29 8.88 6.67 10/27/2003


Trust I 13.23 4.95 6.44 6.40 8.97 5.45 6/28/2007



Investor Shares 14.58 4.40 6.42 6.47 9.37 6.48 6/7/2006


Trust I 14.59 4.53 6.51 6.57 9.47 5.47 6/28/2007



Investor Shares 15.90 3.90 6.45 6.62 9.84 7.18 10/27/2003


Trust I 15.95 4.06 6.56 6.74 9.94 5.60 6/28/2007


Vanguard Target Retirement Fund and Trust performance



12


Fund performance through June 30, 2020

Portfolio/Benchmark 3 months 1 year 3 years 5 years 10 years

Since

inception

Inception

date


Investor Shares 17.29 3.46 6.50 6.76 10.08 6.77 6/7/2006


Trust I 17.31 3.58 6.59 6.86 10.18 5.80 6/28/2007



Investor Shares 18.70 2.97 6.41 6.79 10.10 7.52 10/27/2003


Trust I 18.63 3.06 6.49 6.88 10.19 5.78 6/28/2007



Investor Shares 18.67 3.02 6.42 6.79 10.10 6.81 6/7/2006


Trust I 18.68 3.09 6.50 6.87 10.20 5.83 6/28/2007



Investor Shares 18.64 2.95 6.40 6.77 — 9.55 8/18/2010


Trust I 18.65 3.07 6.50 6.87 — 9.07 10/5/2010



Investor Shares 18.61 2.95 6.39 6.76 — 9.16 1/19/2012


Trust I 18.67 3.13 6.53 6.88 — 8.73 3/1/2012

Target Retirement 2060 Composite Index 18.49 3.52 6.79 7.10 — — —


Investor Shares 18.59 2.84 — — — 6.17 7/12/2017

Institutional Shares 18.64 2.82 — — — 6.27 7/12/2017

Trust I 18.73 3.13 — — — 7.39 7/21/2017

Target Retirement 2065 Composite Index 18.49 3.52 6.79 — — — —

Vanguard Target Retirement Fund and Trust performance (continued)


The performance data shown represents past performance. Past performance is no guarantee of future results. Investment returns and principal

value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher

than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance. Some

funds assess purchase, redemption, and/or account maintenance fees. The performance data shown do not reflect deduction of these fees. If they

did, performance would be lower. Details on these fees and adjusted performance figures can be found in the fund detail section.




Underlying fund performance contribution

Past performance is not a guarantee of future results.


Total Stock Market Index Total International Stock Index Total Bond Market II Index

Total International Bond Index Short-Term Inflation-Protected Securities Index Cash

Total return

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Income

Exhibit 13.1 12-month return contribution by underlying funds

0%

1%

2%

3%

4%

5%

6%

7%

8%

2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Income

Exhibit 13.2 3-year return contribution by underlying funds


14


-100

-80

-60

-40

-20

0

20

40

2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Income

Basis

poin

ts

Excess return attribution

-50

-40

-30

-20

-10

0

10

2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Income

Basis

poin

ts

Allocation impact Out/underperformance due to differences in the strategic asset allocation of the funds versus their

benchmarks. These differences can be particularly notable at times of significant market volatility, as portfolio

managers work to balance transaction costs against a daily rebalanced benchmark.

Cash impact Out/underperformance due to a cash balance in the fund yielding a return different from the benchmark. When

they exist at all, balances are generally small.

Expense ratio Underperformance attributable to the subtraction of expenses from fund returns.

Fair-value pricing Out/underperformance due to the adjustment of the prices of non-U.S. equities for changes in their fair value

that occur after the close of their local market but before the net asset value is calculated for each U.S. mutual

fund as of 4 p.m., Eastern time. This impact generally evens out over longer periods of performance.

Residual Out/underperformance due to factors outside of those captured above.

Underlying fund tracking

differences ex-FV

Out/underperformance of the underlying portfolios versus their relative benchmarks. Figure is shown after

controlling for fair-value pricing, but is inclusive of pricing difference driven by Bloomberg Barclays’ (BB)

indexes pricing at 3 p.m., Eastern time, versus mutual funds pricing at 4 p.m., as well as transaction costs

associated with rebalancing the fund-of-funds portfolio. Note that BB has announced plans to move index

pricing to 4 p.m., Eastern time, to be implemented in 2020.

Total net excess return Indicates the total amount fund returns were higher or lower than benchmark returns. Calculated as the sum of

the individual impacts of each of the six above drivers of benchmark-relative excess return.

Exhibit 14.1 12-month return attribution

Exhibit 14.2 3-year return attribution





Vanguard Target Retirement 2050

American Funds 2050 Target Date Retirement

BlackRock LifePath® Index 2050

Fidelity Freedom® Index 2050

State Street Target Retirement 2050

T. Rowe Price Retirement 2050

Additional characteristics

Glide path Strategy Notable exposures

Through Index —

Through Active —

To Index REIT OW, Commodities1

Through Index Long duration

Through Index Long duration

Through Active —

Asset allocation








Global market capitalization2






2050 vintage: Beyond the glide path

91%

91%

99%

90%

91%

94%

9%

9%

10%

9%

6%

U.S. Non-U.S.

64%

39%

83%

94%

94%

100%

65%

36%

61%

17%

6%

6%

0%

35%

60%

56%

67%

57%

61%

60%

65%

40%

44%

33%

43%

39%

40%

35%

Sources: Morningstar data, based on most recent holdings disclosure for each fund included in the calculation. As-of dates may vary depending on the timing and frequency of data madeavailable to Morningstar. Data as of June 30, 2020.1 Commodity exposure is present in CIT product only. Mutual fund product does not include commodity exposure. 2 Global market capitalization calculated using FTSE All Country Equity Index and Bloomberg Barclays Global Aggregate Bond Index.Note: Due to spacing issues, data labels below 8% are not displayed. Due to rounding, may not total to 100%. There may be other material differences between products that must be considered prior to investing.

Large-cap Small-/Mid-cap Investment-grade High-yield TIPS

U.S. Non-U.S.

Exhibit 15.1 Industry peer group asset allocation comparison

Equity Fixed income

U.S./Non-U.S. allocationEquity Fixed income

Sub-asset class allocationEquity Fixed income

100%

97%

100%

100%

100%

81%

0%

18%

75%

84%

74%

80%

68%

75%

25%

16%

26%

20%

32%

25%


16


Vanguard Target Retirement Income

American Funds Income Target Date Retirement

BlackRock LifePath® Index Income

Fidelity Freedom® Index Income

State Street Target Retirement Income

T. Rowe Price Retirement 2005*

Additional characteristics

Glide path Strategy Notable exposures

Through Index S-T TIPs

Through Active —

To Index Commodities1

Through Index Long, Ultrashort durations

Through Index I-T TIPs, REIT OW

Through Active —

Asset allocation








Global market capitalization2






Income vintage: Beyond the glide path

31%

41%

42%

23%

38%

39%

69%

59%

58%

77%

62%

61%

U.S. Non-U.S.

73%

39%

87%

93%

94%

95%

69%

27%

61%

13%

7%

6%

5%

31%

59%

56%

70%

66%

61%

63%

66%

41%

44%

30%

34%

39%

37%

34%

Sources: Morningstar data, based on most recent holdings disclosure for each fund included in the calculation. As-of dates may vary depending on the timing and frequency of data madeavailable to Morningstar. Data as of June 30, 2020.1 Commodity exposure is present in CIT product only. Mutual fund product does not include commodity exposure. 2 Global market capitalization calculated using FTSE All Country Equity Index and Bloomberg Barclays Global Aggregate Bond Index.* No explicit income vintage in lineup. 2005 represents the most conservative asset allocation, as a proxy.Note: Due to spacing issues, data labels below 8% are not displayed. Due to rounding, may not total to 100%. There may be other material differences between products that must be considered prior to investing.

Large-cap Small-/Mid-cap Investment-grade High-yield TIPS

U.S. Non-U.S.

Exhibit 16.1 Industry peer group asset allocation comparison

Equity Fixed income

U.S./Non-U.S. allocationEquity Fixed income

Sub-asset class allocationEquity Fixed income

84%

81%

92%

90%

71%

66%

11%

12%

22%

16%

8%

8%

10%

17%

12%

75%

91%

69%

80%

69%

75%

25%

9%

31%

20%

31%

25%



-1.79

0.56

0.14

2.10

2.53

-3

-2

-1

0

1

2

3

4

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

• BlackRock’s underperformance relative to Vanguard was driven primarily by a higher strategic allocation to equities

and REITs.

• Fidelity’s marginal outperformance was driven by a strategic tilt toward long-duration Treasuries.

• T. Rowe Price’s marginal outperformance was driven by a larger U.S. equity allocation relative to Vanguard.

• State Street’s strategic allocation to long-duration Treasuries led to outperformance over the period.

• American Funds’ performance benefitted from active-management decisions within the equity portion of the portfolio.

12-month return attribution

Un

de

rpe

rfo

rma

nce

rela

tive

to

Va

ng

ua

rd

(bp

s)

Ou

tpe

rfo

rma

nce

rela

tive

to V

an

gu

ard

(bp

s)

U.S. equity Foreign equity Total relative return

U.S. fixed income Foreign fixed income

BlackRock 2050 Fidelity 2050 T. Rowe Price 2050 State Street 2050 American Funds 2050

Element Description

Equity allocation (EA) Vintage allocation to asset classes and sub-asset allocation to U.S. vs. non-U.S.

Fixed income allocation (FIA)

Equity manager selection (EMS) Benchmark construction differences (cap and/or style tilts), securities lending, fair-value pricing,

building block expense ratiosFixed income manager selection (FIMS)

Other Compounding effect (residual) due to nondaily holdings availability

Total excess return The sum of the above relative performance differences between Vanguard Target Retirement Fund

and competitors’ similar vintage

Exhibit 17.1 Relative to top five industry 2050 funds




18


0.440.82

-1.87

-1.01

-2.20

-5

-4

-3

-2

-1

0

1

2

3

4

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

• BlackRock’s marginal outperformance was driven primarily by a larger U.S. fixed income allocation relative to Vanguard.

• Fidelity’s more conservative glide path aided performance during the period.

• T. Rowe Price’s performance was negatively impacted by active-management decisions within the fixed income portion

of the portfolio.

• State Street’s underperformance was driven primarily by credit tilts within the fixed income portion of the portfolio.

• American Funds’ underperformance was driven by poor active-management decisions in both the equity and fixed

income portions of the portfolio.

12-month return attribution (continued)

Un

de

rpe

rfo

rma

nce

rela

tive

to

Va

ng

ua

rd

(bp

s)

Ou

tpe

rfo

rma

nce

rela

tive

to V

an

gu

ard

(bp

s)

BlackRock Income Fidelity Income T. Rowe Price Income State Street Income American Funds Income


2005 Fund is used as a proxy for T. Rowe Price; 2010 for American Funds, as they have no terminal fund.Sources: Morningstar and Vanguard calculations; data as of June 30, 2020.

U.S. equity Foreign equity Total relative return

U.S. fixed income Foreign fixed income

Element Description

Equity allocation (EA) Vintage allocation to asset classes and sub-asset allocation to U.S. vs. non-U.S.

Fixed income allocation (FIA)

Equity manager selection (EMS) Benchmark construction differences (cap and/or style tilts), securities lending, fair-value pricing,

building block expense ratiosFixed income manager selection (FIMS)

Other Compounding effect (residual) due to nondaily holdings availability

Total excess return The sum of the above relative performance differences between Vanguard Target Retirement Fund

and competitors’ similar vintage

Exhibit 18.1 Relative to top five industry income funds


A P P E N D I X

3 months

Year

to date 1 year 3 years 5 years 10 years

Since

inception

Inception

date

Fund

Vanguard Target Retirement Income Fund 7.84 1.46 5.69 5.39 4.93 5.84 5.30 10/27/2003

Target Retirement Income Composite Index 7.95 1.95 6.26 5.71 5.18 6.04 — —

Lipper Target Consrv Funds Average 8.33 -0.50 3.35 4.27 4.12 4.98 — —

Fidelity Freedom Income 6.38 1.36 4.93 4.53 4.29 4.60 4.80 10/17/1996

Fidelity Freedom Index Income Investor 5.31 3.12 6.51 5.29 4.41 4.22 4.19 10/2/2009

T. Rowe Price Retirement 2005 11.24 -0.29 4.42 5.12 5.12 6.68 5.65 2/27/2004

American Funds 2010 Trgt Date Retire R5 8.28 -0.09 4.59 5.15 5.33 7.17 4.91 2/1/2007

BlackRock LifePath Index Retire K 9.72 1.39 6.50 6.00 5.53 — 5.58 5/31/2011

State Street Target Retirement K 8.85 0.36 4.68 5.11 4.71 — 4.41 9/30/2014

JPMorgan SmartRetirement Income R5 9.24 -1.06 3.01 4.37 4.28 5.76 5.02 5/15/2006

TIAA-CREF Lifecycle Retire Income Instl 10.71 0.00 4.70 5.42 5.27 6.79 5.02 11/30/2007

Principal LifeTime Strategic Inc Instl 8.30 2.10 5.72 5.10 4.50 5.51 4.60 3/1/2001

Wells Fargo Target Today R6 7.92 0.50 4.56 4.71 3.86 3.95 4.17 6/30/2004

Vanguard Target Retirement 2015 Fund 8.90 0.79 5.45 5.78 5.47 7.55 6.11 10/27/2003

Target Retirement 2015 Composite Index 8.95 1.28 6.07 6.12 5.74 7.75 — —

Lipper Target 2015 Funds Average 10.20 -0.73 4.02 4.97 4.81 6.26 — —

Fidelity Freedom 2015 10.89 -0.73 4.77 5.49 5.60 7.17 5.80 11/6/2003

Fidelity Freedom Index 2015 Investor 9.68 0.81 6.08 6.43 5.89 6.94 6.73 10/2/2009



TIAA-CREF Lifecycle 2015 Institutional 11.62 -0.41 4.66 5.69 5.62 7.84 5.36 1/17/2007

Principal LifeTime 2015 Institutional 11.02 0.43 5.16 5.70 5.26 7.60 5.15 2/29/2008

Wells Fargo Target 2015 R6 8.59 -0.32 4.08 4.83 4.32 5.06 3.88 6/29/2007

Vanguard Target Retirement 2020 Fund 11.40 -0.58 5.06 6.09 5.96 8.31 6.19 6/7/2006

Target Retirement 2020 Composite Index 11.45 0.00 5.76 6.48 6.26 8.58 — —



Fidelity Freedom Index 2020 Investor 11.16 -0.02 5.72 6.63 6.17 7.49 7.23 10/2/2009


American Funds 2020 Trgt Date Retire R5 9.76 — 5.27 6.00 6.05 8.57 5.48 2/1/2007

State Street Target Retirement 2020 K 11.23 -0.88 4.44 5.89 5.76 — 5.51 9/30/2014

JPMorgan SmartRetirement 2020 R5 9.67 -1.36 3.13 4.87 4.93 7.73 5.76 5/15/2006


Principal LifeTime 2020 Institutional 12.48 -0.59 4.69 5.93 5.55 8.18 5.80 3/1/2001


Average annualized return as of June 30, 2020

Appendix: Absolute performance results

The performance data shown represent past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance. Some funds assess purchase, redemption, and/or account maintenance fees. The performance data shown do not reflect deduction of these fees. If they did, performance would be lower. Details on these fees and adjusted performance figures can be found in the fund detail section.

Data from Vanguard and Morningstar.


20

A P P E N D I X

3 months

Year


Since

inception

Inception

date

Fund


Target Retirement 2025 Composite Index 13.22 -0.87 5.56 6.75 6.61 9.16 — —





American Funds 2025 Trgt Date Retire R5 12.03 0.56 6.63 6.96 6.84 9.78 6.14 2/1/2007



BlackRock LifePath Index 2025 K 11.83 -0.76 5.29 6.29 6.15 — 6.44 5/31/2011



































A P P E N D I X

3 months

Year


Since

inception

Inception

date

Fund













Wells Fargo Target 2040 R6 15.20 -6.97 -0.51 4.59 5.27 8.75 6.38 6/30/2004
































22

A P P E N D I X

3 months

Year


Since

inception

Inception

date

Fund

Vanguard Target Retirement 2055 Fund 18.64 -4.95 2.95 6.40 6.77 — 9.55 8/18/2010


Lipper Target 2055+ Funds Average 18.37 -5.77 1.72 5.77 6.16 9.27 — —

Fidelity Freedom 2055 19.19 -5.56 3.03 5.88 6.55 — 7.45 6/1/2011

Fidelity Freedom Index 2055 Investor 18.07 -4.53 3.56 7.09 7.20 — 7.64 6/1/2011



JPMorgan SmartRetirement 2055 R5 18.09 -7.10 0.48 5.02 5.56 — 8.53 1/31/2012

TIAA-CREF Lifecycle 2055 Institutional 20.51 -4.97 3.07 6.50 6.92 — 7.88 4/29/2011




Wells Fargo Target 2055 R6 16.58 -8.49 -1.81 4.29 5.25 — 6.80 7/1/2011

Vanguard Target Retirement 2060 Fund 18.61 -4.95 2.95 6.39 6.76 — 9.16 1/19/2012

Target Retirement 2060 Composite Index 18.49 -4.58 3.52 6.79 7.10 — — —


Fidelity Freedom 2060 19.05 -5.62 3.00 5.85 6.52 — 6.73 8/5/2014

Fidelity Freedom Index 2060 Investor 18.06 -4.60 3.52 7.09 7.19 — 6.94 8/5/2014

T. Rowe Price Retirement 2060 20.18 -4.33 3.07 6.56 7.09 — 6.57 6/23/2014

American Funds 2060 Trgt Date Retire R5 19.15 -1.83 6.62 8.54 8.40 — 8.15 3/27/2015

JPMorgan SmartRetirement 2060 R5 17.96 -7.22 0.26 5.03 — — 7.11 8/31/2016

TIAA-CREF Lifecycle 2060 Institutional 20.68 -5.04 3.03 6.52 6.97 — 7.07 9/26/2014

BlackRock LifePath Index 2060 K 19.21 -7.10 1.27 6.20 — — 10.23 2/29/2016


Principal LifeTime 2060 Institutional 20.12 -6.06 1.83 6.43 6.32 — 8.14 3/1/2013

Wells Fargo Target 2060 R6 16.68 -8.37 -1.66 4.31 5.38 — 5.37 6/30/2015

Vanguard Target Retirement 2065 Fund 18.59 -5.03 2.84 — — — 6.17 7/12/2017

Target Retirement 2065 Composite Index 18.49 -4.58 3.52 6.79 — — — —


Fidelity Freedom®

2065 19.09 -5.61 2.90 — — — 2.87 6/28/2019

Fidelity Freedom®

Index 2065 Investor 18.11 -4.54 3.65 — — — 3.62 6/28/2019

Principal LifeTime 2065 Institutional 20.50 -5.98 1.85 — — — 5.73 9/6/2017



3

months

Year

to date

1

year

3

years

5

years

10

years

Since

inception

Inception

date

Fund

Vanguard Total Bond Market Index Fund Institutional Shares 2.98 6.36 8.98 5.36 4.33 3.79 5.27 09/18/1995

Vanguard Total International Bond Index Fund Institutional Shares 2.20 2.36 4.08 5.01 4.46 — 4.25 05/31/2013

Vanguard Total Stock Market Index Fund Institutional Shares 22.10 -3.38 6.47 10.04 10.03 13.74 7.76 07/07/1997

Vanguard Total International Stock Index Fund Institutional Shares 18.12 -10.59 -4.07 1.12 2.45 — 3.74 11/29/2010



22 For institutional and sophisticated investors only. Not for public distribution.

Notes


24

Notes


Important information

For more information, visit institutional.vanguard.com for Vanguard funds and for non-Vanguard funds offered through Vanguard Brokerage

Services® to obtain a prospectus, or if available, a summary prospectus. Visit our website, or contact your broker to obtain a prospectus for

Vanguard ETF® Shares. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus;

read and consider it carefully before investing.

All investing is subject to risk, including the possible loss of the money you invest.

Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the

target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive

investments to more conservative ones based on its target date. An investment in the target-date fund is not guaranteed at any time, including on or

after the target date.

Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks or bonds issued by non-U.S. companies are subject

to risks including country/regional risk and currency risk. Foreign investing involves additional risks, including currency fluctuations and political

uncertainty. Bonds of companies in emerging markets are generally more risky than bonds of companies in developed countries.

U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations.

Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest.

Diversification does not ensure a profit or protect against a loss in a declining market.

Vanguard Target Retirement Trusts are not mutual funds. They are collective trusts available only to tax-qualified plans and their eligible participants.

Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing. The collective trust

mandates are managed by Vanguard Fiduciary Trust Company, a subsidiary of The Vanguard Group, Inc.

The Prime Money Market Fund is only available to retail investors (natural persons). You could lose money by investing in the fund. Although the fund

seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon the sale of your

shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or

other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial

support to the fund at any time.

Morningstar data © 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content

providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. All

investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

London Stock Exchange Group companies include FTSE International Limited ("FTSE"), Frank Russell Company ("Russell"), MTS Next Limited

("MTS"), and FTSE TMX Global Debt Capital Markets Inc. ("FTSE TMX"). All rights reserved. "FTSE®", "Russell®", "MTS®", "FTSE TMX®" and "FTSE

Russell" and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group

companies and are used by FTSE, MTS, FTSE TMX and Russell under license. All information is provided for information purposes only. No

responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of

this publication. Neither the London Stock Exchange Group companies nor any of its licensors make any claim, prediction, warranty or representation

whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indexes or the fitness or suitability of the Indexes

for any particular purpose to which they might be put.

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such

funds or securities. The prospectus or the Statement of Additional Information contains a more detailed description of the limited relationship MSCI

has with Vanguard and any related funds.

The Dow Jones UBS Commodity IndexSM is a product of Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC (“CME"), and

has been licensed for use. "Dow Jones®, Dow Jones UBS Commodity IndexSM and "Dow Jones Indexes" are service marks of Dow Jones Trademark

Holdings, LLC ("Dow Jones”) [have been licensed to CME] and have been [sub]licensed for use for certain purposes by The Vanguard Group, Inc.

The Vanguard Group Inc.'s Vanguard Fund(s) based on the Dow Jones UBS Commodity IndexSM are not sponsored, endorsed, sold or promoted by

Dow Jones, CME or their respective affiliates and Dow Jones, CME and their respective affiliates make no representation regarding the advisability of

investing in such product(s).

Center for Research in Security Prices, LLC (CRSP®) and its third-party suppliers have exclusive proprietary rights in the CRSP® Index Data, which

has been licensed for use by Vanguard but is and shall remain valuable intellectual property owned by, and/or licensed to, CRSP®. The Vanguard

Funds are not sponsored, endorsed, sold or promoted by CRSP®, The University of Chicago, or The University of Chicago Booth School of Business

and neither CRSP®, The University of Chicago, or The University of Chicago Booth School of Business, make any representation regarding the

advisability of investing in the Vanguard Funds.

Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in

the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide

you with a given level of income.

Past performance is not a guarantee of future returns.


26

BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. BARCLAYS® is a trademark and service mark of Barclays Bank Plc,

used under license. Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited ("BISL") (collectively, "Bloomberg"), or

Bloomberg's licensors own all proprietary rights in the Bloomberg Barclays Indices.

The products are not sponsored, endorsed, issued, sold or promoted by “Bloomberg or Barclays”. Bloomberg and Barclays make no representation

or warranty, express or implied, to the owners or purchasers of the products or any member of the public regarding the advisability of investing in

securities generally or in the products particularly or the ability of the Bloomberg Barclays Indices to track general bond market performance. Neither

Bloomberg nor Barclays has passed on the legality or suitability of the products with respect to any person or entity. Bloomberg’s only relationship to

Vanguard and the products are the licensing of the Bloomberg Barclays Indices which are determined, composed and calculated by BISL without

regard to Vanguard or the products or any owners or purchasers of the products. Bloomberg has no obligation to take the needs of the products or

the owners of the products into consideration in determining, composing or calculating the Bloomberg Barclays Indices. Neither Bloomberg nor

Barclays is responsible for and has not participated in the determination of the timing of, prices at, or quantities of the products to be issued. Neither

Bloomberg nor Barclays has any obligation or liability in connection with the administration, marketing or trading of the products.

Target Income Composite Index: An index derived by applying the fund’s target asset allocation to the results of the following benchmarks: for

international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2,

2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23,

2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global

All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and the

Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Bloomberg Barclays U.S. Treasury Inflation Protected Securities

Index through June 2, 2013, and the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for short-term

reserves, the Citigroup Three-Month Treasury Bill Index through June 2, 2013; for international bonds, the Bloomberg Barclays Global Aggregate ex-

USD Float Adjusted RIC Capped Index; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones

Wilshire 5000 Index) through April 22, 2005, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total Market Index

thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2015 Composite Index: An index derived by applying the fund’s target asset allocation to the results of the following benchmarks: for


2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23,

2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global

All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and the

Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities

Index through June 2, 2013, and the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for

international bonds, the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index; and for U.S. stocks, the Dow Jones U.S.

Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005, the MSCI U.S. Broad Market Index through

June 2, 2013, and the CRSP U.S. Total Market Index thereafter.

Target 2020, 2030, 2040, and 2050 Composite Indexes: Indexes derived by applying the fund’s target asset allocation to the results of the following

benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index

through June 2, 2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through

August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the

FTSE Global All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and

the Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Bloomberg Barclays Global Aggregate ex-USD

Float Adjusted RIC Capped Index; and for U.S. stocks, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total Market

Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2025, 2035, and 2045 Composite Indexes: Indexes derived by applying the fund’s target asset allocation to the results of the following

benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index

through June 2, 2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through

August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the

FTSE Global All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and

the Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Bloomberg Barclays Global Aggregate ex-USD

Float Adjusted RIC Capped Index; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire

5000 Index) through April 22, 2005, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total Market Index thereafter.

International stock benchmark returns are adjusted for withholding taxes.



2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the MSCI Emerging Markets Index through December 15,

2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg

Barclays U.S. Aggregate Float Adjusted Index; for international bonds, the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC

Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total

Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.





international stocks of developed markets, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex U.S. Index

thereafter; for emerging market stocks, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex U.S. Index

thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Float Adjusted Index; for international bonds, the Bloomberg Barclays Global

Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI U.S. Broad Market Index through

June 2, 2013, and the CRSP U.S. Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2065 Composite Index: An index derived by applying the fund’s target asset allocation to the results of the following benchmarks: the FTSE

Global All Cap ex U.S. Index for international stocks, the Bloomberg Barclays U.S. Aggregate Float Adjusted Index for U.S. bonds, the Bloomberg

Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index for international bonds, and the CRSP U.S. Total Market Index for U.S. stocks.

International stock benchmark returns are adjusted for withholding taxes.

VIGM, S.A. de C.V. Asesor en Inversiones Independiente (“Vanguard Mexico”) registration number: 30119-001-(14831)-19/09/2018. The registration of Vanguard Mexico before the Comisión Nacional Bancaria y de Valores (“CNBV”) as an Asesor en Inversiones Independiente is not a certification of Vanguard Mexico’s compliance with regulation applicable to Advisory Investment Services (Servicios de Inversión Asesorados) nor a certification on the accuracy of the information provided herein. The supervision scope of the CNBV is limited to Advisory Investment Services only and not all services provided by Vanguard Mexico.

This material is solely for informational purposes and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any security, nor shall any such shares be offered or sold to any person, in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. Reliance upon information in this material is at the sole discretion of the reader.

Securities information provided in this document must be reviewed together with the offering information of each of the securities which may be found on Vanguard’s website: https://www.vanguardmexico.com/web/cf/mexicoinstitutional/en/home or www.vanguard.com

Vanguard Mexico may recommend products of The Vanguard Group Inc. and its affiliates and such affiliates and their clients may maintain positions in the securities recommended by Vanguard Mexico.

ETF Shares can be bought and sold only through a broker and cannot be redeemed with the issuing fund other than in very large aggregations. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing. The market price of ETF Shares may be more or less than net asset value.

All investments are subject to risk, including the possible loss of the money you invest. Investments in bond funds are subject to interest rate, credit, and inflation risk. Governmental backing of securities apply only to the underlying securities and does not prevent share-price fluctuations. High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings. There is no guarantee that any forecasts made will come to pass. Past performance is no guarantee of future results.

Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility. Stocks of companies are subject to national and regional political and economic risks and to the risk of currency fluctuations, these risks are especially high in emerging markets. Changes in exchange rates may have an adverse effect on the value, price or income of a fund.

The information contained in this material derived from third-party sources is deemed reliable, however Vanguard Mexico and The Vanguard Group Inc. are not responsible and do not guarantee the completeness or accuracy of such information.

This document should not be considered as an investment recommendation, a recommendation can only be provided by Vanguard Mexico upon completion of the relevant profiling and legal processes.

This document is for educational purposes only and does not take into consideration your background and specific circumstances nor any other investment profiling circumstances that could be material for taking an investment decision. We recommend to obtain professional advice based on your individual circumstances before taking an investment decision.


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