Vanguardfi Wellesley Income Fund - Vanguard Advisors

Vanguard? Wellesley? Income Fund

Vanguard?

Product Summary Balanced allocation: 60%?65% bonds, 35%?40% stocks. Seeks long-term growth of income, a high and sustainable level of current income, along with moderate long-term capital appreciation. Intermediate duration, investment-grade fixed income securities. Equities with strong income orientation. Fundamental research approach.

Vanguard Style View: Conservative Allocation Portfolio emphasizing large- and mid-capitalization value stocks.

Investment style Value Blend Growth Large

Mid

Small

Market capitalization

Quality

Diversified portfolio of intermediate-term, investment-grade bonds.

Duration Short Medium Long

Trsy/ Agcy

Inv Grd Corp Below Inv Grd

Central tendency Expected range of fund holdings

Quarterly Commentary

Financial markets traced a rocky path to solid gains over the first quarter of 2023. They rose sharply early on amid signs of moderating inflation, declining energy prices, and solid labor markets despite layoffs in the U.S. tech sector. Then, strong economic data and slowing progress on the inflation front raised concerns that central banks would need to significantly raise interest rates--a shift in outlook that contributed to financial markets giving back some ground. The sudden shuttering of two U.S. regional banks and turmoil in the European banking sector, however, sparked further volatility and a flight to less risky assets, including bonds. Stocks finished higher, with Europe and the United States showing more strength than Asia and emerging markets. Overall, U.S. bonds saw their yields finish lower and their prices higher for the quarter ended March 31. The yield for the bellwether 10-year U.S. Treasury, for example, declined from 3.87% to 3.47%. The broad U.S. investment-grade bond market gained about 3% (as measured by the Bloomberg U.S. Aggregate Float Adjusted Index). For the quarter, Vanguard Wellesley Income Fund underperformed its benchmark, the Wellesley Income Composite Index (+1.53%), and the average return of its peers (+3.28%). The fund's equity portion underperformed its benchmark, the FTSE High Dividend Yield Index (?1.80%). The portfolio experienced a drag from the energy sector (?4.3%), driven primarily by overweights to ConocoPhillips (?15%) and EOG Resources (?10%). Allocation and selection tailwinds in information technology (+12.0%) helped to offset negative performance.

The fund's fixed income component outperformed its benchmark, the Bloomberg U.S. Credit A or Better Bond Index (+3.35%). Strong selection in industrials, utilities, and financials contributed to returns while yield curve positioning and an underweight to credit spread duration detracted. For the 12 months ended March 31, the fund underperformed its composite benchmark (?4.05%) but outperformed its peer average (?5.70%). The fund's equity portion underperformed its benchmark (?2.85%), with poor selection in energy (+15.7%) and health care (?0.6%) proving to be the largest detractors. The fund's fixed income portion underperformed its bond benchmark (?5.12%) for the period, primarily driven by allocation headwinds in asset-backed securities and mortgage-backed securities. Notes: Company returns may differ if a security was held in the portfolio for less than the full period. Changes in yields may reflect rounding.

People and Process Vanguard Wellesley Income Fund seeks long-term growth of income, a high and sustainable level of current income, and moderate long-term capital appreciation by investing in high-quality bonds and stocks. The fund seeks to provide an attractive and stable income stream that increases over time, with moderate capital appreciation and moderate risk. Asset allocation changes are made gradually in response to changes in relative valuations.

As of March 31, 2023

Vanguard Wellesley? Income Fund

Fixed Income Component: May invest in short-, intermediate, and long-term investment-grade corporate bonds, while seeking to maintain an aggregate intermediate duration. Also can invest in U.S. Treasury, government, agency, and mortgage-backed securities. The fund advisor adds value through active management, such as adjusting sector weightings in response to market opportunities. Equity Component: Focuses on large-company value stocks with above-average dividends and potential for income growth. Using fundamental research, the advisor typically invests in fewer than 100 stocks, generally with low price/earnings and price/book ratios, and stable or improving fundamentals.

Wellington Management Company LLP Founded in 1928, Wellington Management Company LLP, Boston, Massachusetts, is among the nation's oldest and most respected institutional investment managers. The firm has advised Vanguard Wellesley Income Fund since 1970. Investment Manager Biographies Loren L. Moran, CFA, Senior Managing Director. Portfolio manager. Advised the fund since 2017. Worked in investment management since 2006. B.S., Georgetown University. Matthew C. Hand, CFA, Managing Director. Portfolio manager. Advised the fund since 2021. Worked in investment management since 2004. B.A., University of Pennsylvania.

Total Returns

Wellesley Income Fund Investor Shares (7/1/1970) Admiral Shares (5/14/2001)

Wellesley Income Composite Index Mixed-Asset Target Allocation Conservative Funds Average

Expense Ratio

0.23% 0.16

--

--

Quarter

1.31% 1.35 1.53

3.28

Year to Date

1.31% 1.35 1.53

3.28

1 Year

-4.43% -4.35 -4.05

-5.70

3 Years

5.41% 5.48 4.92

4.42

5 Years

4.74% 4.82 4.06

2.31

10 Years

5.34% 5.42 4.94

3.05

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 performance. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include the reinvestment of all dividends and any capital gains distributions. All returns are net of expenses. Note: Wellesley Income Composite Index: Weighted 65% bonds and 35% stocks. For bonds: Lehman U.S. Long Credit AA or Better Bond Index through March 31, 2000, and Bloomberg U.S. Credit A or Better Bond Index thereafter. For stocks: 26% S&P 500/Barra Value Index and 9% S&P Utilities Index through June 30, 1996, when the utilities component was split into the S&P Utilities Index (4.5%) and the S&P Telephone Index (4.5%); as of January 1, 2002, the S&P Telephone Index was replaced by the S&P Integrated Telecommunication Services Index; as of July 1, 2006, the S&P 500/Barra Value Index was replaced by the S&P 500/Citigroup Value Index; as of August 1, 2007, the three stock indexes were replaced by the FTSE High Dividend Yield Index. Average fund returns are derived from data provided by Lipper, a Thomson Reuters Company. Admiral class shareholders are required to maintain specific minimum balances and meet other special criteria.

As of March 31, 2023

Vanguard Wellesley? Income Fund

Quarterly Returns: Investor Shares

Year 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013

1st Quarter 1.31% -3.59 1.05 -7.42 6.76 -2.46 2.20 3.77 1.27 2.63 3.99

2nd Quarter --

-6.68% 3.98 8.44 3.62 0.32 2.28 3.72 -1.68 3.21 -0.53

3rd Quarter --

-5.24% 0.26 2.31 2.75 2.38 2.26 1.06 -0.84 -0.30 1.76

4th Quarter --

6.68% 3.01 5.58 2.40 -2.75 3.09 -0.63 2.58 2.33 3.73

Wellesley Income Fund

-- -9.05% 8.50 8.45 16.39 -2.57 10.20 8.08 1.28 8.07 9.19

FTSE High Dividend Yield Index -- -9.60% 7.55 7.02 16.08 -2.79 9.06 8.44 0.79 9.33 8.44

Year-End

Assets (Millions) $10,208

10,400 12,785 12,837 13,224 11,567 14,074 13,936 11,941 12,324 11,363

Quarterly Returns: Admiral Shares

Year 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013

1st Quarter 1.35% -3.59 1.04 -7.41 6.76 -2.44 2.21 3.80 1.26 2.66 4.02

2nd Quarter --

-6.66% 4.00 8.47 3.64 0.33 2.28 3.71 -1.64 3.23 -0.51

3rd Quarter --

-5.23% 0.27 2.32 2.78 2.42 2.28 1.10 -0.81 -0.28 1.76

4th Quarter --

6.69% 3.04 5.62 2.41 -2.74 3.11 -0.62 2.58 2.34 3.75

Wellesley Income Fund

-- -9.01% 8.57 8.54 16.47 -2.49 10.26 8.16 1.35 8.15 9.27

FTSE High Dividend Yield Index -- -9.60% 7.55 7.02 16.08 -2.79 9.06 8.44 0.79 9.33 8.44

Year-End

Assets (Millions) $46,335

46,708 55,582 50,758 46,561 38,661 41,898 35,749 28,825 28,051 23,803

As of March 31, 2023

Vanguard Wellesley? Income Fund

Fund Facts

Fund Number Ticker Newspaper Listing CUSIP Number Assets (millions)

(Total $56,543) Inception Expense Ratio

(as of 1/2023)

Fund Asset Allocation

Stocks Bonds Short-term reserves Total

Equity Characteristics

Number of stocks Median market cap Average market cap Price/earnings ratio Price/book ratio Return on equity Earnings growth rate Equity yield (dividend) Foreign holdings Short-term reserves Turnover rate (fiscal year end)

Investor Shares 0027 VWINX Wellsl

921938106 $10,208

7/1/1970

0.23%

Admiral Shares

0527 VWIAX WellslAdml 921938205 $46,335

5/14/2001

0.16%

% of Total Net Assets

37.2% 62.3

0.6 100.0 %

Wellesley Income Fund

68 $103.5 Billion $135.9 Billion

14.7x 2.7x

16.9% 9.9% 3.3% 4.0% 0.0%

58.1%

FTSE High Dividend Yield Index

461 $127.7 Billion

-- 14.4x

2.5x 15.7% 12.3%

3.2% 0.0%

-- --

Volatility Measures

R-Squared

Beta

Wellesley Income Composite Index DJ US Total Stock Mkt Float Adj Idx

0.99

0.99

0.82

0.44

R-squared and beta are calculated from trailing 36-month fund returns relative to the associated benchmark.

Ten Largest Stocks

% of Total Net Assets

Pfizer Inc.

3.9 %

JPMorgan Chase & Co.

3.6

Merck & Co. Inc.

3.1

Home Depot Inc.

3.1

EOG Resources Inc.

3.0

ConocoPhillips

2.9

Johnson & Johnson

2.9

Cisco Systems Inc.

2.3

Morgan Stanley

2.2

Unilever

2.0

Top Ten as % of Common Stock

29.0 %

Top Ten as % of Total Net Assets

10.8 %

The holdings listed exclude any temporary cash investments and equity index products.

Distribution by Credit Quality

% of Portfolio

U.S. Government

19.7%

Aaa

3.5

Aa

11.5

A

46.3

Baa

18.9

Ba

0.0

B

0.0

Not Rated

0.1

Total

100.0%

Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). "NR" is used to classify securities for which a rating is not available. NR securities may include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under "U.S. Government." Credit-quality ratings for each issue are obtained from Bloomberg using ratings derived from Moody's Investors Service (Moody's), Fitch Ratings (Fitch), and Standard & Poor's (S&P). When ratings from all three agencies are available, the median rating is used. When ratings are available from two of the agencies, the lower rating is used. When one rating is available, that rating is used.

As of March 31, 2023

Vanguard Wellesley? Income Fund

Sector Diversification (% of Stocks)

Wellesley Income Fund

FTSE High Dividend Yield Index

Overweight/ Underweight

Communication Services

1.6%

3.9%

-2.3

Consumer Discretionary

5.4

6.7

-1.3

Consumer Staples

13.4

14.8

-1.4

Energy

9.9

10.7

-0.8

Financials

17.7

19.3

-1.6

Health Care

17.1

13.8

3.3

Industrials

9.7

11.8

-2.1

Information Technology

9.8

8.8

1.0

Materials

3.9

2.7

1.2

Other

0.0

0.0

0.0

Real Estate

3.4

0.0

3.4

Utilities

8.1

7.5

0.6

Total

100.0%

100.0%

Sector categories are based on the Global Industry Classification Standard (GICS), except for the Other category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.

Fixed Income Characteristics

Number of bonds Average effective maturity Average duration

Distribution by Issuer

Asset-Backed Commercial Mortgage-Backed Finance Foreign Government Mortgage-Backed Industrial Treasury/Agency Utilities Other Total

Wellesley Income Fund

1,262 10.4 years

7.0 years

Bloomberg Credit

A or Better Index 4,335

10.3 years 6.8 years

% of Portfolio 1.5% 0.4

31.0 2.3 0.8

28.3 19.2

9.6 6.9 100.0%

Distribution by Effective Maturity

Under 1 Year 1 to 2 Years 2 to 3 Years 3 to 4 Years 4 to 5 Years 5 to 6 Years 6 to 7 Years 7 to 8 Years 8 to 9 Years 9 to 10 Years 10 to 11 Years 11 to 12 Years 12 to 15 Years 15 to 20 Years 20 to 30 Years Over 30 Years Total

% of Portfolio

4.7 % 11.4 %

9.6 % 9.4 % 9.5 % 4.9 % 4.6 % 3.9 % 3.1 % 6.3 % 2.0 % 0.8 % 3.3 % 8.5 % 15.3 % 2.7 %

100.0 %

As of March 31, 2023

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