Vanguard California Tax-Exempt Bond ETF (VTEC US) – Portfolio Construction Methodology

The underlying S&P California AMT-Free Municipal Bond Index provides market value-weighted exposure to investment-grade municipal bonds issued by the State of California and its political subdivisions, with interest exempt from U.S. federal and California state income taxes and not subject to federal alternative minimum tax. Eligible bonds are USD-denominated general obligation or revenue issues rated at least BBB−/Baa3, drawn from the investment-grade S&P National AMT-Free Municipal Bond Index. Each bond must be part of an original offering of at least 100 million USD and maintain at least 25 million USD current par outstanding to enter and remain in the index. The index spans a broad maturity spectrum of standard fixed-rate issues, and investability is shaped primarily by the credit and size screens. Constituents are reconstituted and reweighted monthly, so changes in issue size, credit quality, refundings, and new issuance drive turnover and relative weights.

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