Overview

Investment Objective

The Portfolio seeks to provide current income.

Investment Strategy

The Portfolio invests in three Vanguard bond funds and one short-term reserves account, resulting in an allocation of 75% bonds and 25% short-term reserves. The percentages of the Portfolio’s assets allocated to each Fund are:

Vanguard Total Bond Market II Index Fund 34.5%
Vanguard Total International Bond Index Fund 22.5%
Vanguard Short-Term Inflation-Protected Securities Index Fund 18%
Idaho Short-Term Reserves Account 25%

Vanguard Total Bond Market II Index Fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Aggregate Float Adjusted Index (the “Target Index”). The Target Index measures the performance of a wide spectrum of public, investment-grade, taxable bonds in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities—all with maturities of more than 1 year. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the bonds that make up the Target Index and in securities that the advisor determines have substantially identical economic characteristics to the securities that make up the Target Index. The Fund invests by sampling the Target Index, meaning that it holds a range of securities that, in the aggregate, approximates the full Target Index in terms of key risk factors and other characteristics. The Fund maintains a dollar-weighted average maturity consistent with that of the Target Index. As of December 31, 2025, the dollar-weighted average maturity of the Target Index was 8.2 years.

Vanguard Total International Bond Index Fund employs an indexing investment approach designed to track the performance of the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged) (the “Target Index”), a market-value-weighted index that provides a broad-based measure of the global, investment-grade, fixed-rate bond markets. The Target Index includes government, government agency, corporate, and securitized investment-grade bonds of issuers located in developed and emerging markets, all issued in currencies other than the U.S. dollar and with maturities of more than one year. The Target Index is capped to comply with investment company diversification standards of the Internal Revenue Code, but is not designed to satisfy the diversification requirements of the Investment Company Act of 1940. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the bonds that make up the Target Index.

The Fund invests by sampling the Target Index, meaning that it holds a range of securities that, in the aggregate, approximates the full Target Index in terms of key risk factors and other characteristics. The Fund maintains a dollar-weighted average maturity consistent with that of the Target Index. As of October 31, 2025, the dollar-weighted average maturity of the Target Index was 8.6 years. To correlate to the returns of the Target Index (which is U.S.-dollar hedged) and to minimize the currency risk associated with investing in bonds denominated in currencies other than the U.S. dollar, the Fund seeks to hedge its foreign currency exposure. The Fund hedges its foreign currency exposure primarily through the use of foreign currency exchange forward contracts, which are a type of derivative. The Fund may become nondiversified, as defined under the Investment Company Act of 1940, solely as a result of tracking an index. This could occur due to events such as an index rebalance or market movement. A nondiversified fund may invest a greater percentage of its assets in the securities of particular issuers as compared with diversified funds.

Through its investment in Vanguard Short-Term Inflation-Protected Securities Index Fund, the Portfolio indirectly invests in inflation-protected public obligations issued by the U.S. Treasury with remaining maturities of less than five years. The Fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index.

Vanguard Short-Term Reserves Account, through which the Portfolio owns funding agreements issued by one or more insurance companies, synthetic investment contracts (“SICs”), and/or shares of Vanguard Federal Money Market Fund. Funding agreements and SICs are interest-bearing contracts that are structured to preserve principal and accumulate interest earnings over the life of the investment. Funding agreements generally pay interest at a fixed interest rate and have fixed maturity dates that normally range from two to five years. SICs pay a variable interest rate and have an average duration range between two and five years. Investments in either new funding agreements or SICs are based upon available liquidity in the Portfolio and the competitiveness of offered yields, based on market conditions and trends. The Vanguard Short-Term Reserves Account may also invest as little as 2% to 25% of its assets in shares of Vanguard Federal Money Market Fund, to meet normal liquidity needs, to as much as all or a large portion of its assets in this Fund if sufficient investments cannot be obtained from issuers meeting the minimum credit standards and contract terms.

Note – Vanguard Short-Term Reserves Account’s investment in Vanguard Federal Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Vanguard Federal Money Market Fund seeks to preserve the value of the investment at $1 per share, it cannot guarantee that it will do so. It is possible that Vanguard Short-Term Reserves Account may lose money by investing in the fund. Vanguard has no legal obligation to provide financial support to the Fund, and there should be no expectation that the sponsor will provide financial support to the Fund at any time.

Investment Risks

The Portfolio is subject to general market risk, investing in equity markets risk, market capitalization risk, index investing risk, nondiversification risk, concentration risk, information technology sector risk, investing in foreign markets risk, investing in emerging markets risk, currency risk, investments economically tied to China risk, investing in bond markets risk, interest rate risk, income risk, credit risk, bond liquidity risk, call risk, prepayment risk, extension risk, currency hedging risk, and investing in derivatives risk. For a description of these risks, see Part II. Plan Investment Options – Risk Factor Glossary

Average Annual Returns

**Consists of the Spliced Bloomberg Barclays U.S. Aggregate Float Adjusted Index (34.5%), the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged) (22.5%), the Barclays U.S. 0-5 Year Treasury Inflation Protected securities Index (18%), and the FTSE 3-Month Treasury Bill Index (25%). The Spliced Bloomberg Barclays U.S. Aggregate Float Adjusted Index consists of the Barclays U.S. Aggregate Bond Index on December 31, 2009; and the Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter. Effective September 29, 2016, Barclays indexes were rebranded to Bloomberg Barclays indexes.

Annual Investment Returns

Historical Prices

Brand: idaho

Fund ID: 1013018

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