N-CSR/A 1 whitehall_final.htm whitehall_final.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR/A

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-07443

Name of Registrant: Vanguard Whitehall Funds
Address of Registrant: P.O. Box 2600
  Valley Forge, PA 19482
 
Name and address of agent for service: Anne E. Robinson, Esquire
  P.O. Box 876
  Valley Forge, PA 19482
 
Registrant’s telephone number, including area code: (610) 669-1000
 
Date of fiscal year end: October 31  
 
Date of reporting period: November 1, 2016 – October 31, 2017

 

*Explanatory Note
The Registrant is filing this amendment to its Form N-CSR for the period ended October 31, 2017, originally filed with
the Securities and Exchange Commission on December 28, 2017 (Accession Number 0000932471-17-006101) to amend
Item 1 “Reports to Stockholders.” The purpose of this amendment is to supplement the Annual Shareholder Report.

Items 1 (supplemented further herein) through 12(a)(1) to this Form N-CSR are incorporated by reference to the Form N-
CSR filed on EDGAR on December 28, 2017 (Accession Number 0000932471-17-006101).


 

Supplement dated February 21, 2018 to the

Annual Report dated October 31, 2017 (the “Annual Report”)

This Supplement provides new and additional information beyond that contained in the Annual Report listed above and should be read in conjunction with the Annual Report.

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard International Explorer Fund has renewed the fund’s investment advisory arrangements with Schroder Investment Management North America Inc. (Schroder Inc.) and Wellington Management Company LLP (Wellington Management), as well as a sub-advisory arrangement with Schroder Investment Management North America Limited (Schroder Ltd.). The board determined that renewing the fund’s advisory arrangements was in the best interests of the fund and its shareholders.

The board based its decision upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisors and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.

The board, or an investment committee made up of board members, also received information through the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.

In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.

Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services

The board reviewed the quality of the fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of each advisor. The board considered the following: Schroder. Schroders plc, the parent company of Schroder Inc. and Schroder Ltd. (collectively, Schroder), founded in 1804, specializes in global equity and fixed income management. Schroder employs a bottom-up, fundamental research-driven process to select stocks, with a focus on identifying companies with sustainable competitive advantages, attractive earnings growth, and compelling valuations. Stock selection responsibilities are divided among five regional leaders who make up Schroder’s International Small-Cap Committee, which is led by the portfolio manager. The regional team leverages Schroder’s extensive network of local analysts across the globe, as it believes that country factors are more important for smaller companies relative to larger companies.


 

Schroder Inc. has advised the fund since its inception in 1996, and its affiliate Schroder Ltd. has advised a portion of the fund since 2003.

Wellington Management. Wellington Management, founded in 1928, is among the nation’s oldest and most respected institutional investment managers. Wellington Management’s international small-cap team uses a fundamental, research-driven investment process, employing a bottom-up approach that attempts to discover a company’s intrinsic value. In valuing a company, it believes that the same valuation metric should be applied on an industry-by-industry basis. Although the team’s valuation discipline is essential to the process, its philosophy is not biased toward growth or value, as it invests in both extended growth opportunities and neglected or misunderstood companies. The firm has advised a portion of the fund since 2010.

The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.

Investment performance

The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.

Cost

The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.

The board did not consider the profitability of Schroder or Wellington Management in determining whether to approve the advisory fees, because the firms are independent of Vanguard and the advisory fees are the result of arm’s-length negotiations.

The benefit of economies of scale

The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules for Schroder and Wellington Management. The breakpoints reduce the effective rate of the fees as the fund’s assets managed by each firm increase.

The board will consider whether to renew the advisory arrangements again after a one-year period.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

Item 13: Exhibits.

(a) Certifications.


 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  VANGUARD WHITEHALL FUNDS
 
 
BY: /s/ MORTIMER J. BUCKLEY*
  MORTIMER J. BUCKLEY
  CHIEF EXECUTIVE OFFICER
 
Date: February 21, 2018

 

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 WHITEHALL FUNDS
 
 
BY: /s/ MORTIMER J. BUCKLEY*
  MORTIMER J. BUCKLEY
  CHIEF EXECUTIVE OFFICER
 
 
Date: February 21, 2018
 
  VANGUARD WHITEHALL FUNDS
 
 
BY: /s/ THOMAS J. HIGGINS*
THOMAS J. HIGGINS 
  CHIEF FINANCIAL OFFICER

 

Date: February 21, 2018

* By: /s/ Anne E. Robinson

Anne E. Robinson, pursuant to a Power of Attorney filed on January 18, 2018 see file Number 33-32216, Incorporated by Reference.