N-Q 1 malvern_final.htm VANGUARD MALVERN FUNDS malvern_final.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT COMPANY

Investment Company Act file number: 811-05628

Name of Registrant: Vanguard Malvern Funds

Address of Registrant:
P.O. Box 2600
Valley Forge, PA 19482

Name and address of agent for service:
Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482

Date of fiscal year end: September 30

Date of reporting period: June 30, 2013

Item 1: Schedule of Investments

 

Vanguard U.S. Value Fund

Schedule of Investments
As of June 30, 2013

    Market
    Value
  Shares ($000)
Common Stocks (99.4%)1    
Consumer Discretionary (7.4%)    
Comcast Corp. Class A 137,389 5,754
Macy's Inc. 105,500 5,064
Gannett Co. Inc. 206,300 5,046
Ford Motor Co. 296,700 4,590
CBS Corp. Class B 91,287 4,461
* PulteGroup Inc. 224,000 4,249
Dillard's Inc. Class A 42,100 3,451
Walt Disney Co. 54,600 3,448
Brinker International Inc. 86,400 3,407
* TRW Automotive Holdings Corp. 48,000 3,189
* Starz 123,000 2,718
Dana Holding Corp. 136,100 2,621
Whirlpool Corp. 20,100 2,299
Time Warner Inc. 38,700 2,238
Lowe's Cos. Inc. 50,800 2,078
Home Depot Inc. 22,600 1,751
Service Corp. International 71,900 1,296
* Jack in the Box Inc. 32,400 1,273
GameStop Corp. Class A 25,700 1,080
Gap Inc. 18,400 768
Foot Locker Inc. 10,600 372
    61,153
Consumer Staples (6.6%)    
Procter & Gamble Co. 195,769 15,072
CVS Caremark Corp. 137,950 7,888
* Pilgrim's Pride Corp. 335,400 5,011
Kimberly-Clark Corp. 48,200 4,682
JM Smucker Co. 35,500 3,662
Energizer Holdings Inc. 35,700 3,588
Kroger Co. 103,100 3,561
Ingredion Inc. 53,600 3,517
Altria Group Inc. 63,700 2,229
* Dean Foods Co. 204,200 2,046
Kraft Foods Group Inc. 19,500 1,090
Reynolds American Inc. 18,800 909
Safeway Inc. 31,500 745
Mondelez International Inc. Class A 5,068 145
    54,145
Energy (14.4%)    
Exxon Mobil Corp. 426,600 38,543
Chevron Corp. 201,530 23,849
ConocoPhillips 173,490 10,496
Anadarko Petroleum Corp. 91,900 7,897
Phillips 66 122,245 7,202
Marathon Petroleum Corp. 83,268 5,917
Valero Energy Corp. 160,840 5,592
Chesapeake Energy Corp. 251,700 5,130
HollyFrontier Corp. 102,800 4,398

 

 

Tesoro Corp. 82,400 4,311
Western Refining Inc. 132,400 3,717
Occidental Petroleum Corp. 22,000 1,963
    119,015
Financials (29.2%)    
Wells Fargo & Co. 545,423 22,510
JPMorgan Chase & Co. 424,140 22,390
Citigroup Inc. 323,861 15,536
* Berkshire Hathaway Inc. Class B 125,600 14,057
Goldman Sachs Group Inc. 67,917 10,272
Bank of America Corp. 669,076 8,604
US Bancorp 224,100 8,101
Morgan Stanley 309,000 7,549
State Street Corp. 105,400 6,873
Discover Financial Services 133,100 6,341
Allstate Corp. 119,400 5,745
SunTrust Banks Inc. 180,900 5,711
Regions Financial Corp. 598,500 5,704
Ameriprise Financial Inc. 70,200 5,678
Fifth Third Bancorp 312,300 5,637
Lincoln National Corp. 147,200 5,368
XL Group plc Class A 159,900 4,848
Everest Re Group Ltd. 36,900 4,733
PartnerRe Ltd. 51,400 4,655
Axis Capital Holdings Ltd. 101,400 4,642
Travelers Cos. Inc. 55,200 4,412
Platinum Underwriters Holdings Ltd. 72,400 4,143
Aflac Inc. 64,500 3,749
Ventas Inc. 43,600 3,028
CBOE Holdings Inc. 63,600 2,966
Host Hotels & Resorts Inc. 166,300 2,805
Zions Bancorporation 90,900 2,625
Weyerhaeuser Co. 82,200 2,342
Kimco Realty Corp. 103,200 2,212
BioMed Realty Trust Inc. 99,800 2,019
Weingarten Realty Investors 64,400 1,982
* Howard Hughes Corp. 17,500 1,962
Regency Centers Corp. 37,900 1,926
RLJ Lodging Trust 82,600 1,858
EPR Properties 36,400 1,830
CBL & Associates Properties Inc. 84,400 1,808
Lexington Realty Trust 154,300 1,802
Corrections Corp. of America 52,900 1,792
Retail Properties of America Inc. 122,100 1,744
Inland Real Estate Corp. 166,200 1,698
Equity Lifestyle Properties Inc. 21,500 1,690
Omega Healthcare Investors Inc. 51,800 1,607
National Retail Properties Inc. 46,400 1,596
* Popular Inc. 51,100 1,550
Brandywine Realty Trust 112,200 1,517
Nelnet Inc. Class A 38,300 1,382
HCC Insurance Holdings Inc. 30,900 1,332
* American International Group Inc. 28,600 1,278
Simon Property Group Inc. 7,600 1,200
* World Acceptance Corp. 12,500 1,087
General Growth Properties Inc. 53,300 1,059
CapitalSource Inc. 74,300 697

 

 

Ashford Hospitality Trust Inc. 59,300 679
* Sunstone Hotel Investors Inc. 37,700 455
Protective Life Corp. 8,500 326
HCP Inc. 4,900 223
Susquehanna Bancshares Inc. 16,300 209
Prologis Inc. 4,400 166
    241,710
Health Care (11.7%)    
Pfizer Inc. 517,925 14,507
Johnson & Johnson 168,350 14,454
Medtronic Inc. 172,800 8,894
Merck & Co. Inc. 188,101 8,737
Eli Lilly & Co. 151,500 7,442
Cigna Corp. 85,500 6,198
Omnicare Inc. 101,900 4,862
* CareFusion Corp. 126,500 4,661
* Mylan Inc. 139,500 4,329
AbbVie Inc. 102,200 4,225
Becton Dickinson and Co. 42,000 4,151
Baxter International Inc. 58,100 4,025
* Covance Inc. 41,400 3,152
* Charles River Laboratories International Inc. 76,000 3,118
Zimmer Holdings Inc. 31,700 2,376
UnitedHealth Group Inc. 20,900 1,369
Abbott Laboratories 14,400 502
    97,002
Industrials (9.8%)    
General Electric Co. 1,120,340 25,981
Raytheon Co. 93,200 6,162
Northrop Grumman Corp. 73,100 6,053
* Delta Air Lines Inc. 271,400 5,078
L-3 Communications Holdings Inc. 56,900 4,879
Boeing Co. 46,200 4,733
Lockheed Martin Corp. 41,900 4,544
Towers Watson & Co. Class A 51,400 4,212
* Hertz Global Holdings Inc. 159,700 3,960
Textron Inc. 146,100 3,806
Avery Dennison Corp. 81,800 3,498
Fortune Brands Home & Security Inc. 68,700 2,661
Cintas Corp. 47,100 2,145
Flowserve Corp. 24,300 1,312
Manpowergroup Inc. 14,800 811
Crane Co. 10,400 623
* Oshkosh Corp. 16,400 623
    81,081
Information Technology (8.9%)    
Cisco Systems Inc. 512,100 12,449
Hewlett-Packard Co. 351,500 8,717
Intel Corp. 236,600 5,731
Western Digital Corp. 85,700 5,321
Xerox Corp. 557,300 5,055
Symantec Corp. 221,000 4,966
Texas Instruments Inc. 133,200 4,645
Fidelity National Information Services Inc. 98,300 4,211
Computer Sciences Corp. 89,600 3,922
Apple Inc. 9,700 3,842

 

 

  Motorola Solutions Inc.     58,442 3,374
* LSI Corp.     411,800 2,940
  Booz Allen Hamilton Holding Corp.     168,200 2,923
* Freescale Semiconductor Ltd.     176,303 2,389
* Anixter International Inc.     12,900 978
  Maxim Integrated Products Inc.     31,300 870
  Applied Materials Inc.     34,300 511
  CA Inc.     13,600 389
          73,233
Materials (3.0%)        
  International Paper Co.     110,400 4,892
  LyondellBasell Industries NV Class A     69,900 4,631
  Westlake Chemical Corp.     43,300 4,174
  Worthington Industries Inc.     130,400 4,135
  CF Industries Holdings Inc.     20,600 3,533
* Louisiana-Pacific Corp.     235,000 3,476
          24,841
Telecommunication Services (2.5%)        
  AT&T Inc.     589,710 20,876
 
Utilities (5.9%)        
  Edison International     119,400 5,750
  American Electric Power Co. Inc.     119,800 5,365
  DTE Energy Co.     77,600 5,200
  PG&E Corp.     113,000 5,167
  CMS Energy Corp.     177,600 4,825
  Pinnacle West Capital Corp.     84,800 4,704
  UGI Corp.     118,000 4,615
  Ameren Corp.     132,000 4,546
  Portland General Electric Co.     100,200 3,065
  Entergy Corp.     31,300 2,181
  Black Hills Corp.     43,500 2,121
  UNS Energy Corp.     15,000 671
  NV Energy Inc.     19,600 460
  Duke Energy Corp.     2,800 189
          48,859
Total Common Stocks (Cost $709,982)       821,915
          Market
          Value
    Coupon   Shares ($000)
Temporary Cash Investments (0.6%)1        
Money Market Fund (0.6%)        
2 Vanguard Market Liquidity Fund 0.127%   4,560,378 4,560
 
        Face  
      Maturity Amount  
      Date ($000)  
U.S. Government and Agency Obligations (0.0%)        
3,4 Federal Home Loan Bank Discount Notes 0.090% 10/25/13 100 100
4,5 Freddie Mac Discount Notes 0.130% 9/16/13 200 200
          300
Total Temporary Cash Investments (Cost $4,860)       4,860

 

 

Total Investments (100.0%) (Cost $714,842) 826,775
Other Assets and Liabilities-Net (0.0%) 204
Net Assets (100%) 826,979

 

* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund's effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
4 Securities with a value of $300,000 have been segregated as initial margin for open futures contracts.
5 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.

A. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.

B. 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).

The following table summarizes the market value of the fund's investments as of June 30, 2013, based on the inputs used to value them:
  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 821,915 — —
Temporary Cash Investments 4,560 300 —
Futures Contracts—Liabilities1 (22) — —
Total 826,453 300 —
1 Represents variation margin on the last day of the reporting period.

 

C. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio

 

U.S. Value Fund

turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.

Futures contracts are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Schedule of Investments as an asset (liability).

At June 30, 2013, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
        ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
S&P 500 Index September 2013 10 3,998 (91)
E-mini S&P 500 Index September 2013 12 960 5

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

D. At June 30, 2013, the cost of investment securities for tax purposes was $714,842,000. Net unrealized appreciation of investment securities for tax purposes was $111,933,000, consisting of unrealized gains of $122,562,000 on securities that had risen in value since their purchase and $10,629,000 in unrealized losses on securities that had fallen in value since their purchase.

 

Capital Value Fund

Schedule of Investments
As of June 30, 2013

      Market
      Value
    Shares ($000)
Common Stocks (98.9%)    
Consumer Discretionary (11.9%)    
  GameStop Corp. Class A 426,655 17,932
* Fifth & Pacific Cos. Inc. 673,962 15,056
* Tempur Sealy International Inc. 208,970 9,174
* Groupon Inc. 1,009,055 8,577
  Best Buy Co. Inc. 271,503 7,420
* General Motors Co. 215,835 7,190
* Tenneco Inc. 155,375 7,036
  Dana Holding Corp. 337,430 6,499
*,^ Vera Bradley Inc. 297,100 6,435
  Abercrombie & Fitch Co. 104,955 4,749
  Wyndham Worldwide Corp. 75,500 4,321
  GNC Holdings Inc. Class A 95,100 4,204
  Ford Motor Co. 247,600 3,830
  Men's Wearhouse Inc. 95,700 3,622
* Aeropostale Inc. 255,400 3,525
*,1 Allstar Co-Invest LLC Private Placement NA 3,416
  DeVry Inc. 106,715 3,310
  Delphi Automotive plc 59,550 3,019
  Kohl's Corp. 55,400 2,798
*,1 Buck Holdings LP Private Placement NA 1,252
* Sears Hometown and Outlet Stores Inc. 9,125 399
      123,764
Consumer Staples (2.3%)    
  Imperial Tobacco Group plc 244,682 8,484
  Maple Leaf Foods Inc. 485,800 6,758
  Molson Coors Brewing Co. Class B 126,000 6,031
  Archer-Daniels-Midland Co. 75,500 2,560
      23,833
Energy (14.7%)    
* Cobalt International Energy Inc. 1,488,160 39,540
  Pioneer Natural Resources Co. 128,860 18,652
  Halliburton Co. 316,845 13,219
* Southwestern Energy Co. 302,100 11,036
* McDermott International Inc. 1,211,416 9,909
* Karoon Gas Australia Ltd. 2,057,814 9,576
  National Oilwell Varco Inc. 130,900 9,019
  Canadian Natural Resources Ltd. 302,100 8,537
  Anadarko Petroleum Corp. 85,200 7,321
  QEP Resources Inc. 258,200 7,173
* Superior Energy Services Inc. 223,080 5,787
  Baker Hughes Inc. 124,600 5,748
^ Trican Well Service Ltd. 265,300 3,527
* Newfield Exploration Co. 92,500 2,210
  Inpex Corp. 433 1,800
      153,054
Financials (15.9%)    
  Wells Fargo & Co. 444,320 18,337
* E*TRADE Financial Corp. 1,346,920 17,052

 

 

  MetLife Inc. 331,800 15,183
  JPMorgan Chase & Co. 268,100 14,153
* American International Group Inc. 240,200 10,737
  Reinsurance Group of America Inc. Class A 146,200 10,104
  PNC Financial Services Group Inc. 134,000 9,771
  AvalonBay Communities Inc. 66,000 8,904
* IntercontinentalExchange Inc. 42,535 7,561
  Boston Properties Inc. 61,900 6,529
  Julius Baer Group Ltd. 163,741 6,391
  LPL Financial Holdings Inc. 149,800 5,656
  Citigroup Inc. 100,800 4,835
  Hatteras Financial Corp. 178,700 4,403
  Bank of America Corp. 336,300 4,325
  Weyerhaeuser Co. 149,500 4,259
  Unum Group 143,500 4,215
  Principal Financial Group Inc. 111,500 4,176
  Equity Lifestyle Properties Inc. 50,800 3,992
  NASDAQ OMX Group Inc. 84,200 2,761
  Ameriprise Financial Inc. 32,575 2,635
      165,979
Health Care (13.1%)    
  Merck & Co. Inc. 406,900 18,900
* Vertex Pharmaceuticals Inc. 203,385 16,244
  Bristol-Myers Squibb Co. 319,575 14,282
* Hologic Inc. 557,575 10,761
  UnitedHealth Group Inc. 145,100 9,501
*,^ Arena Pharmaceuticals Inc. 1,153,350 8,881
  Roche Holding AG 30,888 7,666
* TherapeuticsMD Inc. 2,415,071 7,318
  Teva Pharmaceutical Industries Ltd. ADR 158,705 6,221
  Pfizer Inc. 220,636 6,180
* Almirall SA 460,756 5,855
* WuXi PharmaTech Cayman Inc. ADR 274,900 5,773
  Aetna Inc. 90,100 5,725
  Medtronic Inc. 97,700 5,029
* AVANIR Pharmaceuticals Inc. 819,100 3,768
  Agilent Technologies Inc. 60,900 2,604
  Zoetis Inc. 69,350 2,142
* Novavax Inc. Warrants Exp. 08/31/2013 401,850 21
      136,871
Industrials (6.5%)    
* Hertz Global Holdings Inc. 290,015 7,192
* Armstrong World Industries Inc. 142,725 6,821
  Knight Transportation Inc. 391,300 6,582
* WESCO International Inc. 93,400 6,347
  United Parcel Service Inc. Class B 71,200 6,157
  KBR Inc. 184,325 5,991
  Textron Inc. 188,430 4,909
* Owens Corning 122,710 4,795
  Dover Corp. 55,500 4,310
* Polypore International Inc. 98,900 3,986
  Knoll Inc. 255,000 3,624
  Boeing Co. 31,500 3,227
  PACCAR Inc. 39,300 2,109
  Toll Holdings Ltd. 395,742 1,915

 

 

* Esterline Technologies Corp. 3,000 217
      68,182
Information Technology (21.3%)    
* SunEdison Inc. 2,832,480 23,141
* Micron Technology Inc. 1,480,105 21,210
*,^ Pandora Media Inc. 686,845 12,638
  Cisco Systems Inc. 501,600 12,194
* Akamai Technologies Inc. 262,605 11,174
* Skyworks Solutions Inc. 510,115 11,166
  EMC Corp. 460,300 10,872
* Yahoo! Inc. 422,305 10,604
* Citrix Systems Inc. 174,325 10,517
* JDS Uniphase Corp. 678,495 9,757
  Samsung Electronics Co. Ltd. 7,760 9,070
  Intel Corp. 309,100 7,486
* Alcatel-Lucent ADR 3,970,715 7,227
* Teradyne Inc. 394,500 6,931
  Activision Blizzard Inc. 477,100 6,804
* GT Advanced Technologies Inc. 1,552,490 6,443
  Apple Inc. 15,820 6,266
  Booz Allen Hamilton Holding Corp. 329,567 5,728
* Juniper Networks Inc. 281,100 5,428
* SanDisk Corp. 83,950 5,129
* VMware Inc. Class A 71,640 4,799
  Western Union Co. 222,900 3,814
* Check Point Software Technologies Ltd. 71,900 3,572
* Zynga Inc. Class A 1,275,570 3,546
* Arrow Electronics Inc. 65,700 2,618
  Harris Corp. 40,000 1,970
* Google Inc. Class A 2,200 1,937
  Seagate Technology plc 7,550 339
      222,380
Materials (7.2%)    
  Barrick Gold Corp. 766,685 12,068
  Cabot Corp. 265,870 9,949
  Methanex Corp. 215,490 9,221
  Norbord Inc. 304,810 8,819
*,^ Molycorp Inc. 1,194,622 7,407
  Reliance Steel & Aluminum Co. 111,200 7,290
* Allied Nevada Gold Corp. 703,852 4,561
  AuRico Gold Inc. 814,400 3,559
  Mosaic Co. 65,700 3,535
* Continental Gold Ltd. 1,098,615 3,447
  Celanese Corp. Class A 59,700 2,674
* SunCoke Energy Inc. 155,680 2,183
* Louisiana-Pacific Corp. 17,305 256
      74,969
Telecommunication Services (1.3%)    
  T-Mobile US Inc. 338,370 8,395
  Vodafone Group plc 1,969,568 5,644
      14,039
Utilities (4.7%)    
  NRG Energy Inc. 649,585 17,344
* Calpine Corp. 543,220 11,533
  Entergy Corp. 126,500 8,814
  Snam SPA 1,234,992 5,623

 

 

Xcel Energy Inc.     183,400 5,198
        48,512
Total Common Stocks (Cost $893,474)       1,031,583
  Coupon      
Temporary Cash Investments (2.7%)        
Money Market Fund (1.4%)        
2,3 Vanguard Market Liquidity Fund 0.127%   14,266,000 14,266
 
      Face  
    Maturity Amount  
    Date ($000)  
Repurchase Agreements (1.3%)        
Credit Suisse Securities (USA), LLC        
(Dated 6/28/13, Repurchase Value        
$11,000,000, collateralized by U.S.        
Treasury Note/Bond 6.750%, 8/15/26, with        
a value of $11,220,000) 0.100% 7/1/13 11,000 11,000
Deutsche Bank Securities, Inc.        
(Dated 6/28/13, Repurchase Value        
$2,700,000, collateralized by Federal        
National Mortgage Assn. 3.000%, 7/1/33,        
with a value of $2,754,000) 0.250% 7/1/13 2,700 2,700
        13,700
Total Temporary Cash Investments (Cost $27,966)       27,966
Total Investments (101.6%) (Cost $921,440)       1,059,549
Other Assets and Liabilities-Net (-1.6%)3       (16,609)
Net Assets (100%)       1,042,940

 

* Non-income-producing security.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $13,436,000.
1 Restricted securities totaling $4,668,000, representing 0.4% of net assets. Shares not applicable for these private placements.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 Includes $14,266,000 of collateral received for securities on loan.
ADR—American Depositary Receipt.

A. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund's pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as

 

Capital Value Fund

furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.

B. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund's pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

C. Repurchase Agreements: The fund may enter into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of pre-qualified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund.

D. 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).

The following table summarizes the market value of the fund's investments as of June 30, 2013, based on the inputs used to value them:
  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 964,869 62,046 4,668
Temporary Cash Investments 14,266 13,700 —
Total 979,135 75,746 4,668

The determination of Level 3 fair value measurements is governed by documented policies and procedures adopted by the board of trustees. The board has designated a pricing review committee, as an agent of the board, to ensure the timely analysis and valuation of Level 3 securities held by the fund in accordance with established policies and procedures. The pricing review committee employs various methods for calibrating valuation approaches, including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity. All valuation decisions made by the pricing review committee are reported to the board on a quarterly basis for review and ratification. The board reviews the adequacy of the fair value measurement policies and procedures in place on an annual basis.

 

Capital Value Fund

The following table summarizes changes in investments valued based on Level 3 inputs during the period ended June 30, 2013. Transfers into or out of Level 3 are recognized based on values as of the date of transfer.

  Investments in
  Common Stocks
Amount Valued Based on Level 3 Inputs ($000)
Balance as of September 30, 2012 14,884
Transfers out of Level 3 (10,715)
Change in Unrealized Appreciation (Depreciation) 499
Balance as of June 30, 2013 4,668

Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2013 was $759,000.
Transfers out of Level 3 include $260,000 from the conversion of private placement shares to common shares with the remainder representing a reduction in the fund’s investment and realized gains from private placement securities.

E. At June 30, 2013, the cost of investment securities for tax purposes was $921,498,000. Net unrealized appreciation of investment securities for tax purposes was $138,051,000, consisting of unrealized gains of $172,353,000 on securities that had risen in value since their purchase and $34,302,000 in unrealized losses on securities that had fallen in value since their purchase.

 

Vanguard Short-Term Inflation-Protected Securities Index Fund

Schedule of Investments
As of June 30, 2013

      Face Market
    Maturity Amount Value
  Coupon Date ($000) ($000)
U.S. Government and Agency Obligations (99.4%)        
U.S. Government Securities (99.4%)        
United States Treasury Inflation Indexed        
Bonds 1.875% 7/15/13 308,178 390,539
United States Treasury Inflation Indexed        
Bonds 2.000% 1/15/14 328,404 418,966
United States Treasury Inflation Indexed        
Bonds 1.250% 4/15/14 235,084 261,809
United States Treasury Inflation Indexed        
Bonds 2.000% 7/15/14 292,836 372,874
United States Treasury Inflation Indexed        
Bonds 1.625% 1/15/15 297,630 376,837
United States Treasury Inflation Indexed        
Bonds 0.500% 4/15/15 327,028 359,614
United States Treasury Inflation Indexed        
Bonds 1.875% 7/15/15 266,964 339,295
United States Treasury Inflation Indexed        
Bonds 2.000% 1/15/16 261,777 329,308
United States Treasury Inflation Indexed        
Bonds 0.125% 4/15/16 592,696 640,285
United States Treasury Inflation Indexed        
Bonds 2.500% 7/15/16 260,894 331,989
United States Treasury Inflation Indexed        
Bonds 2.375% 1/15/17 225,652 288,283
United States Treasury Inflation Indexed        
Bonds 0.125% 4/15/17 679,195 713,272
United States Treasury Inflation Indexed        
Bonds 2.625% 7/15/17 202,180 257,211
United States Treasury Inflation Indexed        
Bonds 1.625% 1/15/18 179,198 217,641
United States Treasury Inflation Indexed        
Bonds 0.125% 4/15/18 246,291 253,985
United States Treasury Inflation Indexed        
Bonds 1.375% 7/15/18 63,275 74,468
Total U.S. Government and Agency Obligations (Cost $5,683,352)     5,626,376
      Shares  
Temporary Cash Investment (0.1%)        
Money Market Fund (0.1%)        
1 Vanguard Market Liquidity Fund        
(Cost $7,542) 0.127%   7,542,000 7,542
Total Investments (99.5%) (Cost $5,690,894)       5,633,918
Other Assets and Liabilities-Net (0.5%)       30,058
Net Assets (100%)       5,663,976

 

 

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.

A. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

B. 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).

The following table summarizes the market value of the fund's investments as of June 30, 2013, based on the inputs used to value them:
  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
U.S. Government and Agency Obligations — 5,626,376 —
Temporary Cash Investments 7,542 — —
Total 7,542 5,626,376 —

 

C. At June 30, 2013, the cost of investment securities for tax purposes was $5,690,894,000. Net unrealized depreciation of investment securities for tax purposes was $56,976,000, consisting of unrealized gains of $117,000 on securities that had risen in value since their purchase and $57,093,000 in unrealized losses on securities that had fallen in value since their purchase.

 

Item 2: Controls and Procedures

(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

(b) Internal Control Over Financial Reporting. During the last fiscal quarter, there was no significant change in the Registrant’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3: Exhibits

(a) Certifications

  VANGUARD MALVERN FUNDS
 
By: /s/ F. WILLIAM MCNABB III*
  F. WILLIAM MCNABB III
  CHIEF EXECUTIVE OFFICER
 
Date: August 20, 2013

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

  VANGUARD MALVERN FUNDS
 
By: /s/ F. WILLIAM MCNABB III*
  F. WILLIAM MCNABB III
  CHIEF EXECUTIVE OFFICER
 
Date: August 20, 2013

 

  VANGUARD MALVERN FUNDS
 
By: /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER
 
Date: August 20, 2013

 

* By:/s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on March 27, 2012 see file Number 2-11444, Incorporated by Reference.