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Investment Objective
The Portfolio seeks income consistent with the preservation of principal.
Investment Strategy
The Portfolio invests 100% of its assets in Vanguard® Short-Term Reserves Account, through which the Portfolio indirectly owns funding agreements issued by one or more insurance companies, synthetic investment contracts, as well as shares of Vanguard Federal Money Market Fund. Funding agreements are interest-bearing contracts that are structured to preserve principal and accumulate interest earnings over the life of the investment. These agreements generally pay interest at a fixed rate and have fixed maturity dates that normally range from 2 to 5 years. Investments in new funding agreements are based upon available liquidity in the Portfolio and the competitiveness of the interest rates offered by eligible high-quality issuers and depend on market conditions and trends. Under New York State law, the Trust may invest only in those funding agreements issued by life insurance companies whose general obligations are assigned the highest or second highest rating by two nationally recognized rating services, or by one such rating service in the event that only one such rating service assigns a rating to such obligations, subject to a $350 million limit per issuer. The minimum amount of a funding agreement is usually about $15 million.
After a funding agreement is purchased, additional cash contributions will be used to purchase shares of the Federal Money Market Fund until there is enough cash to purchase another funding agreement. There is a limited universe of high-quality insurance companies and other issuers that issue investments eligible for purchase by the Short-Term Reserves Account. Within this constraint, Vanguard seeks to diversify among eligible issuers and investments. If necessary, the Short-Term Reserves Account may invest all, or a large portion, of its assets in Vanguard Federal Money Market Fund to limit its exposure to any single issuer or to meet normal liquidity needs.
The Federal Money Market Fund invests in high-quality, short-term money market instruments issued by the U.S. government and its agencies and instrumentalities. Although these securities are high-quality, most of the securities held by the Fund are neither guaranteed by the U.S. Treasury nor supported by the full faith and credit of the U.S. government. The Federal Money Market Fund maintains a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less.
The Short-Term Reserves Account has a longer average maturity than money market funds, which should result in higher yields when interest rates are stable or declining. However, because only a portion of the Short-Term Reserves Account's investment matures each year, its yield will change more slowly than that of a money market fund. As a result, when interest rates are rising, the Portfolio's yield may fall below money market funds' yields for an extended time period.
Investment Risks
The Portfolio primarily is subject to income risk. In addition, the Portfolio has low levels of credit risk, manager risk, and derivatives risk.
Funding agreements are backed by the financial strength of the insurance companies that issue the contracts. Every effort is made to select high-quality insurance companies. However, the Portfolio may lose value if an insurance company is unable to make interest or principal payments when due.
Average Annual Returns - Updated Monthly as of
| Name | 1 year | 3 year | 5 year | 10 year | Since Inception |
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**Derived from data provided by Lipper Inc.
Annual Investment Returns
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Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index.
The performance data shown represents past performance. Past performance - especially short-term past performance - is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' units, when sold, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data cited.
Interest Accumulation Portfolio invests in Vanguard Short-Term Reserves Account, which, in turn, invests in Vanguard Federal Money Market Fund. Vanguard Short-Term Reserves Account could lose money by investing in Vanguard Federal Money Market Fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any 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.
